As
filed
with the Securities and Exchange Commission on December 15, 2006
Registration
No. 333-____
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington
D.C. 20549
FORM
SB-2
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
3DIcon
Corporation
(Name
of
small business issuer in its charter)
|
Oklahoma
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3669
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73-1479206
|
|
(State
or other Jurisdiction
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(Primary
Standard Industrial
|
(I.R.S.
Employer
|
|
of
Incorporation or Organization)
|
Classification
Code Number)
|
Identification
No.)
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7507
S.
Sandusky
Tulsa,
OK
74136
(918)
492-5082
(Address
and telephone number of principal executive offices
and
principal place of business)
John
M.
O’Connor, Esq.
Newton,
O’Connor, Turner & Ketchum
15
W.
Sixth Street, Suite 2700
Tulsa,
Oklahoma 74119
(918)
587-0101
(918)
587-0102 (fax)
(Name,
address and telephone number of agent for service)
Copies
to:
Gregory
Sichenzia, Esq.
Sichenzia
Ross Friedman Ference LLP
1065
Avenue of the Americas, 21st Flr.
New
York,
New York 10018
(212)
930-9700
(212)
930-9725 (fax)
APPROXIMATE
DATE OF PROPOSED SALE TO THE PUBLIC:
From
time
to time after this Registration Statement becomes effective.
If
any
securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If
this
Form is filed to register additional securities for an offering pursuant
to Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. o ________
If
this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the
same
offering. o ________
If
this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the
same
offering. o ________
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box. o ________
CALCULATION
OF REGISTRATION FEE
|
Title
of each class of securities to be registered
|
Amount
to be
registered
(1)
|
Proposed
maximum offering price
per
share
|
Proposed
maximum aggregate
offering
price
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Amount
of
registration
fee
|
|
Common
stock issuable upon conversion of debentures
|
2,840,909
(2)
|
$0.65
(3)
|
$
1,846,590.85
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$197.58
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| (1) |
Includes
shares of our common stock, par value $0.002 per share, which may
be
offered pursuant to this registration statement, which shares are
issuable
upon conversion of convertible debentures held by the selling stockholder.
The amount to be registered includes a good faith estimate of the
number
of shares issuable upon conversion of the debentures. Should the
conversion ratio of our convertible debentures result in our having
insufficient shares, we will not rely upon Rule 416, but will file
a new
registration statement to cover the resale of such additional shares
should that become necessary. In addition, should a decrease in
the
exercise price as a result of an issuance or sale of shares below
the then
current market price, result in our having insufficient shares,
we will
not rely upon Rule 416, but will file a new registration statement
to
cover the resale of such additional shares should that become necessary.
|
| (2) |
Includes
a good faith estimate of the shares underlying convertible debentures
to
account for market fluctuations.
|
| (3) |
Estimated
solely for purposes of calculating the registration fee in accordance
with
Rule 457(c) under the Securities Act of 1933, using the average
of the
high and low price as reported on the Pink Sheets on December 15,
2006,
which was $0.65 per share.
|
The
registrant hereby amends this registration statement on such date or dates
as
may be necessary to delay its effective date until the registrant shall file
a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a),
may determine.
PRELIMINARY
PROSPECTUS SUBJECT TO COMPLETION, DATED December 15, 2006
3DICON
CORPORATION
2,840,909
SHARES OF
COMMON
STOCK
This
prospectus relates to the resale by the selling stockholder of up to 2,840,909
shares of our common stock, underlying a $1.25 million convertible debenture.
The conversion formula for the convertible debenture is the lesser of (i)
$2.00
or (ii) seventy percent of the average of the five lowest volume weighted
average prices during the twenty (20) trading days prior to the conversion.
The
selling stockholder may sell common stock from time to time in the principal
market on which the stock is traded at the prevailing market price or in
negotiated transactions. The selling stockholder may be deemed an underwriter
of
the shares of common stock, which it is offering. We will pay the expenses
of
registering these shares.
Our
common stock is listed on the Pink Sheets under the symbol "TDCP". The last
reported sales price per share of our common stock as reported by the Pink
Sheets on December 4, 2006, was $0.65.
Investing
in these securities involves significant risks. See "Risk Factors" beginning
on
page 5.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this Prospectus
is
truthful or complete. Any representation to the contrary is a criminal
offense.
The
date
of this prospectus is _______, 2006.
The
information in this Prospectus is not complete and may be changed. This
Prospectus is included in the Registration Statement that was filed by 3DIcon
Corporation with the Securities and Exchange Commission. The selling stockholder
may not sell these securities until the registration statement becomes
effective. This Prospectus is not an offer to sell these securities and is
not
soliciting an offer to buy these securities in any state where the sale is
not
permitted.
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4
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5
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13
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13
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17
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18
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24
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24
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25
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25
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26
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26
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26
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31
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31
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31
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32
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32
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F-1
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The
following summary highlights selected information contained in this prospectus.
This summary does not contain all the information you should consider before
investing in the securities. Before making an investment decision, you should
read the entire prospectus carefully, including the "risk factors" section,
the
financial statements and the notes to the financial statements.
3DICON
CORPORATION
3DIcon
Corporation is a development stage company. Our
mission
is to pursue, develop and market full-color, 360-degree person-to-person
holographic technology that is both simple and portable. Through a “sponsored
research agreement” with the University of Oklahoma, we have obtained the
world-wide marketing rights to certain 3D display systems under development
by
the University. The development to date has resulted in the University filing
three provisional patents and one utility patent on its technology. At this
time, we do not own any intellectual property rights in holographic
technologies, and, apart from the sponsored research agreement with the
University of Oklahoma, have no contracts or agreements pending to acquire
such
rights or any other interest in such rights. We plan to market the technology
developed by the University of Oklahoma by targeting various industries,
such as
retail, manufacturing, entertainment, medical, healthcare, and the
military.
We
have
not had any revenues since our inception. For the years ended December 31,
2005
and 2004, we incurred a net loss of $592,811 and $617,875, respectively.
As a
result of our insufficient revenues to fund development and operating expenses,
our auditors in have expressed substantial doubt about our ability to continue
as going concern.
Our
principal offices are located at 7507
S.
Sandusky, Tulsa, Oklahoma 74136,
and our
telephone number is (918)
492-5082.
Our
website is www.3DIcon.net.
We are
an Oklahoma corporation.
|
The
Offering
|
|
|
Common
stock offered by selling stockholder
|
Up
to 2,840,909 shares, underlying a convertible debenture in the
amount of
$1,250,000, based on current market prices and assuming full conversion
of
the convertible debenture (includes a good faith estimate of the
shares
underlying convertible debenture). This number represents approximately
3.0% of our then current outstanding stock.
|
|
Common
stock to be outstanding after the offering
|
Up
to 97,108,565 shares assuming the full conversion of our initial
$1.25 million convertible debenture.
|
|
Use
of proceeds
|
We
will not receive any proceeds from the sale of the common stock.
We have
received gross proceeds of $125,000 and expect to receive additional
gross
proceeds of $1,125,000 in connection with the issuance of the convertible
debenture to the selling stockholder. We plan to use the proceeds
for
research and development, general working capital purposes and
the payment
of professional fees.
|
|
Pink
Sheets Ticker Symbol
|
TDCP
|
The
above
information regarding common stock to be outstanding after the offering is
based
on 94,267,656 shares of common stock outstanding as of November 15, 2006
and
assumes the subsequent conversion of the $1.25 million convertible debentures
by
our selling stockholder.
To
obtain
funding for our ongoing operations, we entered into a Securities Purchase
Agreement with Golden Gate Investors, Inc. (“Golden Gate”) on November 3, 2006,
as amended on December 15, 2006 (the “Purchase Agreement”), for the sale of a 6
¼% convertible debenture of the Company in the principal amount of $1,250,000.
Pursuant to the Purchase Agreement, at such time as the principal balance
of
this debenture is less than $400,000, the Company shall have the right
to
require Golden Gate to purchase a second debenture, also in the principal
amount
of $1,250,000. On November 3, 2006, we also issued to Golden Gate a 6 ¼%
convertible debenture in a principal amount of $100,000 and warrants to
purchase
1,000,000 shares of our common stock at an exercise price of $10.90.
This
prospectus relates to the resale of the common stock underlying the initial
$1.25 million convertible debenture only.
Golden
Gate provided us with $125,000 upon execution of the Purchase Agreement.
Pursuant to the Purchase Agreement, Golden Gate is required to provide
us with
an additional $312,500 upon effectiveness of the registration statement
of which
this prospectus is a part. The balance of $812,500 shall be wired to the
escrow
agent, which is required to release $200,000 on the first day of each month,
beginning with the second month following the effective date of the registration
statement.
The
debentures bear interest at 6 ¼%, and are convertible into our common stock, at
the selling stockholder’s option. The $1.25 million convertible debentures
mature three years from the date of issuance. The $100,000 convertible
debenture
matures five years from the date of issuance. Interest on our 6 ¼% convertible
debentures is payable monthly in cash or, at Golden Gate’s option, in shares of
common stock of the Company valued at the then applicable conversion price.
The
initial $1.25 million convertible debenture is convertible into the number
of
our shares of common stock equal to the dollar amount of the debenture
divided
by the conversion price. The conversion price for the initial $1.25 million
convertible debenture is the lesser of (i) $2.00 or (ii) 70% of the average
of
the five lowest volume weighted average prices during the twenty (20) trading
days prior to the conversion. The conversion price for the second $1.25
million
convertible debenture is the lesser of (i) $2.00 or (ii) 90% of the average
of
the five lowest volume weighted average prices during the twenty (20) trading
days prior to the conversion. The conversion price for the $100,000 convertible
debenture is the lesser of (i) $4.00 or (ii) 80% of the average of the
five
lowest volume weighted average prices during the twenty (20) trading days
prior
to the conversion. Accordingly, there is in fact no limit on the number
of
shares into which the debentures may be converted over time. If Golden
Gate
elects to convert a portion of the debenture and, on the day that the election
is made, the volume weighted average price is below $0.75, 3DIcon shall
have the
right to prepay that portion of the debenture that Golden Gate elected
to
convert, plus any accrued and unpaid interest, at 135% of such
amount.
In
addition, 3DIcon entered into a registration rights agreement with Golden
Gate
pursuant to which the Company agreed to file, within 30 days after the
closing,
the registration statement of which this prospectus is a part covering
the
common stock issuable upon conversion of the initial $1.25 million debenture
only. In the event we fail to meet this schedule and other timetables provided
in the registration rights agreement, liquidated damages and other potential
penalties could be imposed (for example, the discount multiplier of 70%
shall
decrease by three percentage points for each month or partial month occurring
after we fail to meet the timetables provided in the registration rights
agreement). In addition, Golden Gate may demand repayment of one hundred
and
fifteen percent (115%) of the principal amount of the debenture, together
with
all accrued and unpaid interest on the principal amount of the debenture,
in
cash, if we fail to meet the timetables provided in the registration rights
agreement.
In
the
event the Company elects, and Golden Gate fails, to enter into the second
debenture, Golden Gate would be required to pay liquidated damages in the
amount
of $250,000.
See
the
"Selling Stockholders" and "Risk Factors" sections for a complete description
of
the convertible debentures.
This
investment has a high degree of risk. Before you invest you should carefully
consider the risks and uncertainties described below and the other information
in this prospectus. If any of the following risks actually occur, our business,
operating results and financial condition could be harmed and the value of
our
stock could go down. This means you could lose all or a part of your investment.
Risks
Relating to Our Business:
We
have a limited operating history, as well as a history of operating losses.
We
have a
limited operating history. We cannot assure you that we can achieve or sustain
revenue growth or profitability in the future. We have a cumulative net loss
of
$3,174,804 for the period from inception (January 1, 2001) to September 30,
2006. Our
operations are subject to the risks and competition inherent in the
establishment of a business enterprise. Unanticipated problems, expenses,
and
delays are frequently encountered in establishing a new business and marketing
and developing products. These include, but are not limited to, competition,
the
need to develop customers and market expertise, market conditions, sales,
marketing and governmental regulation. Our failure to meet any of these
conditions would have a materially adverse effect upon us and may force us
to
reduce or curtail our operations. Revenues and profits, if any, will depend
upon
various factors. We may not achieve our business objectives and the failure
to
achieve such goals would have an adverse impact on our business.
Currently,
our only significant asset is our sponsored research agreement with the
University of Oklahoma, and our ability to accomplish our business plan relies
entirely on the ability of the University of Oklahoma to successfully develop
a
marketable 3D communications system.
Our
only
significant asset at the present time is our sponsored research agreement
with
the University of Oklahoma. If the University of Oklahoma is not successful
in
developing a portable 3D communications system that we have envisioned in
our
business plan, our ability to generate revenues from marketing of the product
or
products on which our business plan is based will be severely impacted, which
could threaten the very existence of the Company.
Even
if
the University of Oklahoma is successful in developing a portable 3D
communications system, because of the revolutionary nature of such a product
(i.e., no similar product currently exists, and there are numerous unknowns
relating to the product, such as manufacturing costs and operational costs),
there can be no assurance that our marketing plans for the product will be
successful.
Therefore,
the fact that our success depends almost entirely on the efforts of others
to
develop a technologically challenging new product that will be in a form
readily
marketable and acceptable to a given market, and our ability to then
successfully market such product, makes an investment in the Company much
more
risky than a comparable investment in other companies that may have a broad
range of existing, proven products.
We
may not be able to compete successfully.
Although
the 3D imaging and display technology that the University of Oklahoma is
attempting to develop is new, and although at present we are aware of only
a
limited number of companies that have publicly disclosed their attempts to
develop similar technology, we anticipate a number of companies are or will
attempt to develop products that compete or will compete with our products.
Further, even if we are the first to market with a product of this type,
and
even if the technology is protected by patents or otherwise, because of the
vast
market and communications potential of such a product, we anticipate the
market
will be flooded by a variety of competitors (including traditional
communications companies), many of which will offer a range of products in
areas
other than those in which we compete, which may make such competitors more
attractive to prospective customers. In addition, many if not all of our
competitors and potential competitors will initially be larger and have greater
financial resources than we do. Some of the companies with which we may now
be
in competition, or with which we may compete in the future, have or may have
more extensive research, marketing and manufacturing capabilities and
significantly greater technical and personnel resources than we do, even
given
our relationship to the University of Oklahoma, and may be better positioned
to
continue to improve their technology in order to compete in an evolving
industry. Further, technology in this industry may evolve rapidly once an
initially successful product is introduced, making timely product innovations
and use of new technologies essential to our success in the marketplace.
The
introduction by our competitors of products with improved technologies or
features may render any product we initially market obsolete and unmarketable.
If we do not have available to us products that respond to industry changes
in a
timely manner, or if our products do not perform well, our business and
financial condition will be adversely affected.
The
products being developed may not gain market acceptance.
The
products that the University of Oklahoma is currently developing utilize
new
technologies. As with any new technologies, in order for us to be successful,
these technologies must gain market acceptance. Since the products that we
anticipate introducing to the marketplace will exploit or encroach upon markets
that presently utilize or are serviced by products from competing technologies,
meaningful commercial markets may not develop for our products.
In
addition, the
development efforts of the University of Oklahoma on the 3D technology are
subject to unanticipated delays, expenses or technical or other problems,
as
well as the possible insufficiency of funding to complete development. Our
success will depend upon the ultimate products and technologies meeting
acceptable cost and performance criteria, and upon their timely introduction
into the marketplace. The proposed products and technologies may never be
successfully developed, and even if developed, they may not satisfactorily
perform the functions for which they are designed. Additionally, these products
may not meet applicable price or performance objectives. Unanticipated technical
or other problems may occur which would result in increased costs or material
delays in their development or commercialization.
If
we are unable to retain the services of Martin Keating, or if we are unable
to
successfully recruit qualified personnel having experience in our business,
we
may not be able to continue our operations.
Our
success depends to a significant extent upon the continued service of Martin
Keating, our founder, Chief Executive Officer, and a Director. Our success
also
depends on our ability to attract and retain other key executive officers.
Loss
of the services of Mr. Keating could have a material adverse effect on our
growth, revenues, and prospective business. In addition, in order to
successfully implement and manage our business plan, we will be dependent
upon,
among other things, successfully recruiting qualified personnel having
experience in business. Competition for qualified individuals in our industry
is
intense. There can be no assurance that we will be able to find, attract
and
retain existing employees or that we will be able to find, attract and retain
qualified personnel on acceptable terms.
Our
auditors have included a going concern qualification in their opinion which
may
make it more difficult for us to raise capital.
Our
auditors have qualified their opinion on our financial statements because
of
concerns about our ability to continue as a going concern. These concerns
arise
from the fact that we are a development stage organization with insufficient
revenues to fund development and operating expenses. If we are unable to
continue as a going concern, you could lose your entire investment in us.
We
will need significant additional capital, which we may be unable to obtain.
Our
capital requirements in connection with our development activities and
transition to commercial operations have been and will continue to be
significant. We will require substantial additional funds to continue research,
development and testing of our technologies and products, to obtain intellectual
property protection relating to our technologies when appropriate, and to
manufacture and market our products. There can be no assurance that financing
will be available in amounts or on terms acceptable to us, if at
all
As
a result of becoming a reporting company, our expenses will increase
significantly.
As
a
result of becoming a reporting company whose shares are registered pursuant
to
Section 12 of the Securities Act, our ongoing expenses are expected to increase
significantly, including expenses in compensation to our officers, ongoing
public company expenses, including increased legal and accounting expenses
as a
result of our status as a reporting company, expenses incurred in complying
with
the internal controls requirements of the Sarbanes-Oxley Act. Our failure
to
generate sufficient revenue and gross profit could result in reduced profits
or
increased losses as a result of the additional expenses.
Risks
Relating to Our Current Financing Arrangement:
There
are a large number of shares underlying our 6 ¼% convertible debentures, and
warrants that may be available for future sale and the sale of these shares
may
depress the market price of our common stock.
As
of
November 15, 2006, we had approximately 94,267,656 shares
of
common stock issued and outstanding and convertible debentures outstanding
that
may be converted into an estimated 3,044,990 shares of common stock at
current
market prices. The number of shares of common stock issuable upon conversion
of
the outstanding $1.25 million convertible debenture and $100,000 convertible
debenture may increase if the market price of our stock declines. We also
have
outstanding the warrants issued to Golden Gate to purchase 1,000,000 shares
of
common stock at an exercise price of $10.90. Further, when the outstanding
principal balance of our initial $1.25 million debenture issued to Golden
Gate
is less than $400,000, we may require Golden Gate to purchase a second
$1.25
million convertible debenture. The sale of these shares may adversely affect
the
market price of our common stock.
The
continuously adjustable conversion price feature of our convertible debentures
could require us to
issue a substantially greater number of shares, which will cause dilution
to our
existing stockholders.
Our
obligation to issue shares upon conversion of our convertible debentures
is
essentially limitless. The following is an example of the amount of shares
of
our common stock that are issuable, upon conversion of our convertible
debentures (excluding accrued interest), based on market prices 25%, 50%
and 75%
below the market price as of December 1, 2006 of $0.84.
|
Effective
|
Number
|
%
of
|
|||||||||||
|
%
Below
|
Price
Per
|
Conversion
|
of
Shares
|
Outstanding
|
|||||||||
|
Market
|
Share
|
Price
|
Issuable
|
Stock
|
|||||||||
|
25%
|
$
|
0.63
|
$
|
0.50
|
2,500,000
|
2.6
|
%
|
||||||
|
50%
|
$
|
0.42
|
$
|
0.34
|
3,676,470
|
3.8
|
%
|
||||||
|
75%
|
$
|
0.21
|
$
|
0.17
|
7,352,941
|
7.2
|
%
|
||||||
As
illustrated, the number of shares of common stock issuable upon conversion
of
our convertible debentures will increase if the market price of our stock
declines, which will cause dilution to our existing stockholders.
The
continuously adjustable conversion price feature of our 6 ¼% convertible
debentures may encourage investors to make short sales in our common stock,
which could have a depressive effect on the price of our common stock.
So
long
as the market price of our stock is below $2.00, the issuance of shares in
connection with the conversion of the $1.25 million convertible debenture
results in the issuance of shares at an effective 30% discount to the trading
price of the common stock prior to the conversion. Similarly, so long as
the
market price of our stock is below $4.00, the issuance of shares in connection
with the conversion of the $100,000 convertible debenture results in the
issuance of shares at an effective 20% discount to the trading price of the
common stock prior to the conversion. The significant downward pressure on
the
price of the common stock as the selling stockholder converts and sells material
amounts of common stock could encourage short sales by investors. This could
place further downward pressure on the price of the common stock. The selling
stockholder could sell common stock into the market in anticipation of covering
the short sale by converting their securities, which could cause the further
downward pressure on the stock price. In addition, not only the sale of shares
issued upon conversion or exercise of debentures and warrants, but also the
mere
perception that these sales could occur, may adversely affect the market
price
of the common stock.
The
issuance of shares upon conversion of the 6 ¼% convertible debentures and
exercise of outstanding warrants may cause immediate and substantial dilution
to
our existing stockholders.
The
issuance of shares upon conversion of our 6 ¼% convertible debentures and
exercise of warrants may result in substantial dilution to the interests
of
other stockholders since the selling stockholder may ultimately convert and
sell
the full amount issuable on conversion. Although the selling stockholder
may not
convert its convertible debentures and/or exercise their warrants if such
conversion or exercise would cause it to own more than 9.9% of our outstanding
common stock, this restriction does not prevent the selling stockholder from
converting and selling some of their holdings and then converting the rest
of
their holdings. In this way, assuming the market price remains at a level
acceptable to the selling stockholder, the selling stockholder could continue
on
a “conversion-sell-conversion” trend while never holding more than 9.99% of our
common stock. Further, under the convertible debentures there is theoretically
no upper limit on the number of shares that may be issued, which will have
the
effect of further diluting the proportionate equity interest and voting power
of
holders of our common stock, including investors in this offering.
If
we are unable to issue shares of common stock upon conversion of the convertible
debenture as a result of our inability to increase our authorized shares
of
common stock or as a result of any other
reason,
we are required to pay penalties to Golden Gate, redeem the convertible
debenture at 130% and/or compensate Golden Gate for any buy-in that it is
required to make.
If
we are
unable to issue shares of common stock upon conversion of the convertible
debenture as a result of our inability to increase our authorized shares
of
common stock or as a result of any other reason, we are required
to:
| · |
pay
late payments to Golden Gate for late issuance of common stock
upon
conversion of the convertible debenture, in the amount of $100
per
business day after the delivery date for each $10,000 of convertible
debenture principal amount being converted or redeemed.
|
| · |
in
the event we are prohibited from issuing common stock, or fail
to timely
deliver common stock on a delivery date, or upon the occurrence
of an
event of default, then at the election of Golden Gate, we must
pay to
Golden Gate a sum of money determined by multiplying up to the
outstanding
principal amount of the convertible debenture designated by Golden
Gate by
130%, together with accrued but unpaid interest
thereon
|
| · |
if
ten days after the date we are required to deliver common stock
to Golden
Gate pursuant to a conversion, Golden Gate purchases (in an open
market
transaction or otherwise) shares of common stock to deliver in
satisfaction of a sale by Golden Gate of the common stock which
it
anticipated receiving upon such conversion (a "Buy-In"), then we
are
required to pay in cash to Golden Gate the amount by which its
total
purchase price (including brokerage commissions, if any) for the
shares of
common stock so purchased exceeds the aggregate principal and/or
interest
amount of the convertible debenture for which such conversion was
not
timely honored, together with interest thereon at a rate of 15%
per annum,
accruing until such amount and any accrued interest thereon is
paid in
full.
|
In
the
event that we are required to pay penalties to Golden Gate or redeem the
convertible debentures held by Golden Gate, we may be required to curtail
or
cease our operations.
We
may be required to file a subsequent registration statement covering additional
shares.
Based
on
our current market price and the potential decrease in its market price as
a
result of the issuance of shares upon conversion of the convertible debentures,
we have made a good faith estimate as to the amount of shares of common stock
that it is required to register and allocate for conversion of the convertible
debentures. In the event that our stock price decreases, the shares of common
stock we have allocated for conversion of the convertible debentures and
are
registering hereunder will not be adequate. If the shares we have allocated
to
the registration statement are not adequate and we are required to file an
additional registration statement, we may incur substantial costs in connection
with the preparation and filing of such registration statement.
Risks
Relating to Our Common Stock:
Fluctuations
in our operating results and announcements and developments concerning our
business affect our stock price.
Our
quarterly operating results, the number of stockholders desiring to sell
their
shares, changes in general economic conditions and the financial markets,
the
execution of new contracts and the completion of existing agreements and
other
developments affecting us, could cause the market price of our common stock
to
fluctuate substantially.
Our
Common Stock is Subject to the "Penny Stock" Rules of the SEC and the Trading
Market in Our Securities is Limited, Which Makes Transactions in Our Stock
Cumbersome and May Reduce the Value of an Investment in Our Stock.
Our
common stock is quoted on the Pink Sheets under the symbol "TDCP". To date
there
is a limited trading market in our common stock on the Pink Sheets. Failure
to
develop or maintain an active trading market could negatively affect the
value
of our shares and make it difficult for our shareholders to sell their shares
or
recover any part of their investment in us. The market price of our common
stock
may be highly volatile. In addition to the uncertainties relating to our
future
operating performance and the profitability of our operations, factors such
as
variations in our interim financial results, or various, as yet unpredictable
factors, many of which are beyond our control, may have a negative effect
on the
market price of our common stock.
The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes
the
definition of a "penny stock," for the purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions.
For
any transaction involving a penny stock, unless exempt, the rules require:
| · |
that
a broker or dealer approve a person's account for transactions
in penny
stocks; and
|
|
·
|
the
broker or dealer receive from the investor a written agreement
to the
transaction, setting forth the identity and quantity of the penny
stock to
be purchased.
|
In
order
to approve a person's account for transactions in penny stocks, the broker
or
dealer must:
| · |
obtain
financial information and investment experience objectives of the
person;
and
|
|
·
|
make
a reasonable determination that the transactions in penny stocks
are
suitable for that person and the person has sufficient knowledge
and
experience in financial matters to be capable of evaluating the
risks of
transactions in penny stocks.
|
The
broker or dealer must also deliver, prior to any transaction in a penny stock,
a
disclosure schedule prescribed by the Commission relating to the penny stock
market, which, in highlight form:
| · |
sets
forth the basis on which the broker or dealer made the suitability
determination; and
|
| · |
that
the broker or dealer received a signed, written agreement from
the
investor prior to the transaction.
|
Generally,
brokers may be less willing to execute transactions in securities subject
to the
"penny stock" rules. This may make it more difficult for investors to dispose
of
our common stock and cause a decline in the market value of our stock.
Disclosure
also has to be made about the risks of investing in penny stocks in both
public
offerings and in secondary trading and about the commissions payable to both
the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases
of
fraud in penny stock transactions. Finally, monthly statements have to be
sent
disclosing recent price information for the penny stock held in the account
and
information on the limited market in penny stocks.
This
prospectus relates to shares of our common stock that may be offered and
sold
from time to time by the selling stockholder. We will not receive any proceeds
from the sale of shares of common stock in this offering. However, we have
received $125,000 in connection with the issuance of the $1.25 million
convertible debenture to the selling stockholder, and expect to receive the
balance of $1.125 million following effectiveness of the registration statement.
We have used the $125,000 for the general working capital purposes and the
payment of professional fees. We expect to use the additional proceeds for
general working capital purposes.
Our
common stock is quoted on the Pink Sheets under the symbol "TDCP". For the
periods indicated, the following table sets forth the high and low bid prices
per share of common stock. These prices represent inter-dealer quotations
without retail markup, markdown, or commission and may not necessarily represent
actual transactions.
|
Quarter
Ended
|
High
($)
|
Low
($)
|
|||||
|
December
31, 2006 (through
November 20, 2006)
|
1.36
|
0.75
|
|||||
|
September
30, 2006
|
1.73
|
0.90
|
|||||
|
June
30, 2006
|
3.27
|
0.56
|
|||||
|
March
31, 2006
|
0.86
|
0.14
|
|||||
|
December
31, 2005
|
0.33
|
0.014
|
|||||
|
September
30, 2005
|
0.03
|
0.008
|
|||||
|
June
30, 2005
|
0.045
|
0.009
|
|||||
|
March
31, 2005
|
0.18
|
0.031
|
|||||
|
December
31, 2004
|
0.40
|
0.04
|
|||||
|
September
30, 2004
|
0.64
|
0.15
|
|||||
|
June
30, 2004
|
0.64
|
0.03
|
|||||
|
March
31, 2004
|
0.21
|
0.04
|
|||||
Holders
As
of
November 15, 2006, we had approximately 395 active holders of our common
stock.
The number of active record holders was determined from the records of our
transfer agent and does not include beneficial owners of common stock whose
shares are held in the names of various security brokers, dealers, and
registered clearing agencies. The transfer agent of our common stock is
Executive Registrar & Transfer, Inc., 315 South Huron Street, Suite 104,
Englewood, CO 80110.
Corporate
History
3DIcon
Corporation (the Company) was incorporated on August 11, 1995, under the
laws of
the State of Oklahoma as First Keating Corporation. The articles of
incorporation were amended August 1, 2003 to change the name to 3DIcon
Corporation. The initial focus of First Keating Corporation was to market
and
distribute books written by its founder, Martin Keating. During 2001, First
Keating Corporation began to focus on the development of 360-degree holographic
technology. The effective date of this transition is January 1, 2001. The
Company has accounted for this transition as a reorganization and accordingly,
restated its capital accounts as of January 1, 2001. From January 1, 2001,
the
Company's primary activity has been the raising of capital in order to pursue
its goal of becoming a significant participant in the formation and
commercialization of interactive, optical holography for the communications
and
entertainment industries.
General
Overview
3Dicon
Corporation is a development stage company. Our
mission
is to pursue, develop and market full-color, 360-degree person-to-person
3D
holographic technology that is both simple and portable. Through a “sponsored
research agreement” with the University of Oklahoma, we have obtained the
world-wide marketing rights to certain 3D display systems under development
by
the University. The development to date has resulted in the University filing
three provisional patents and one utility patent on its technology. At this
time, we do not own any intellectual property rights in holographic
technologies, and, apart from the sponsored research agreement with the
University of Oklahoma, have no contracts or agreements pending to acquire
such
rights or any other interest in such rights. We plan to market the technology
developed by the University of Oklahoma by targeting various industries,
such as
retail, manufacturing, entertainment, medical, healthcare, and the
military.
Overview
of Development of 3D Technology
Holography
as a means of wavefront, or 3D image, reconstruction was first introduced
by
Dennis Gabor in 1948 when he developed a process for recording the amplitude
and
phase of an optical wavefront. The word “holography” is derived from the Greek
words holos
(whole)
and graphein
(to
write), and Gabor coined the term “hologram” to refer to a “total recording.”
The widespread practice of holography took off in the early 1960s with the
invention of the laser. Since that time, holography has been used in a variety
of applications, many in routine commercial use today. Digital
holography
refers
to the use of digital computers to create holograms, sometimes referred to
as
computer-generated
holograms.
Upon
undertaking this investigation into the use of digital holography as a viable
technology for 3D imaging and visualization, we found that holography is
often
the starting point for technologists seeking to realize practical commercial
systems, but in practice, many solutions involve other approaches such as
stereoscopic and swept-volume techniques.
A
team of
researchers led by Harold Garner at the University of Texas Southwestern
Medical
School at Dallas is working on a HoloTV
project
to develop technology that can deliver 3D moving images for applications
in
medical imaging, “heads up” displays, video games, and air traffic control
display. Current development efforts involve the use of the Digital Micromirror
Device (DMD) from Texas Instruments, as well as eight-layer liquid-crystal
screen. The DMD focuses image points on various locations throughout the
screen
to produce 3D images.
Stereoscopic
techniques are being investigated as a means of achieving 3D imaging and
display. A recent paper by Jang and Javidi describes a technique called 3D
projection integral imaging to create 3D orthoscopic virtual images. The
technique employs a micro-convex-mirror array to convert inputs from 2D image
sensors to 3D images with a viewing angle of over 60o
and has
been successfully demonstrated in the laboratory. Another paper by Choi
et
al
reports
on the construction of a novel full-color autostereoscopic 3D display system
using scaling constraints and phase quantization leveling to reduce the color
dispersion and the phase difference. The system employs
color-dispersion-compensated (CDC) synthetic phase holograms (SPHs) to create
3D
images and video frames that don’t require the use of special glasses for
viewing. While both of these technical approaches have been successfully
demonstrated in a laboratory environment, neither easily lends itself to
the
kind of embodiment envisioned by 3DIcon.
Sato
et
al
report
identify space
projection method
for
producing 3D images using DMDs. This method uses a volumetric screen of water
particles upon which color 3D images can be projected using the combination
of a
white light laser, variable color filter, and DMD. The authors report that
this
so-called electro-holographic display is capable of producing color 3D images
with a large viewing angle. We believe that this approach has merit, but
also
presents barriers to commercial implementation, particularly from a cost
and
size perspective.
Pursuant
to the Sponsored Research Agreement, 3D Display Technology is being developed
in
three phases, as follows:
|
·
|
Phase
I - Swept Volume Displays
|
|
·
|
Phase
II - Static Volumetric Displays (Under
Glass)
|
|
·
|
Phase
III Free-Space Volumetric Displays (Free
Space)
|
The
Phase
I Swept Volume Display is designed to be an inexpensive 3D display system
showing high resolution image generated from a diskette or similar medium.
A
prototype is projected to be available in early 2007. Initial target markets
for
swept volume displays include retail and manufacturing companies.
The
Phase
II technology will employ DMDs using infared lasers to produce 3D images
in
advanced transparent nanotechnology materials, thereby enabling the creation,
transmission and display of high resolution 3D images within a volume space,
surrounded by glass or transparent screen. A prototype demonstration is planned
for Summer 2007. Target markets for static volumetric displays include
interactive entertainment, casino gaming, government, sales, medical and
pharmaceutical development, military, and architectural.
The
Phase
III technology will build upon the Phase II technology so as to eliminate
the
need for an enclosed vessel, thereby enabling the creation, transmission
and
display of high resolution 3D images in free space utilizing a portable system.
Initial research for this system is expected to commence in 2007. There is
currently no estimated prototype date for this technology.
University
of Oklahoma - Tulsa Sponsored Research Agreement
On
April
20, 2004, we entered into a Sponsored Research Agreement entitled "Investigation
of Emerging Digital Holography Technologies" (Phase I) with the University
of
Oklahoma - Tulsa (University), which expired October 19, 2004. We have paid
the
University $14,116 pursuant to this agreement. The purpose of this agreement
was
to conduct a pilot study to investigate digital holography as a candidate
technology for the development of three-dimensional (3D) imaging and
visualization systems. The purpose of the pilot study was to investigate
the
current state-of-the-art research and development activities taking place
in the
field of digital holography, particularly emerging technologies. The scope
of
work for the study encompassed the following tasks:
|
·
|
Literature
review to determine key leading edge research in relevant
areas;
|
|
·
|
Review
of related commercial products to identify technological approaches
and
potential competitors and/or
partners;
|
|
·
|
Preliminary
patent review;
|
|
·
|
Recommendations
for product research and development
directions.
|
On
July
15, 2005, we entered into a Sponsored Research Agreement with the University
(Phase II), which expires January 14, 2007. Under this agreement, the University
will conduct a research project entitled "Investigation of 3-Dimensional
Display
Technologies". 3DIcon has agreed to pay the University $453,584 pursuant
to this
agreement to cover the costs of the research. Either party may terminate
the
agreement at any time by giving 60 days written notice. The goals for this
research are as follows:
|
·
|
To
produce patentable and/or copyrightable intellectual
property;
|
|
·
|
To
produce proof-of-concept technology that demonstrates the viability
of the
intellectual property;
|
|
·
|
To
assess opportunities for manufacturing technological products in
Oklahoma;
|
|
·
|
Investigate
magnetic nanospheres (MNs) for use as a projection
media;
|
|
·
|
Develop
a control platform to actively distribute (MNs) in an unbounded
volumetric
space;
|
|
·
|
Investigate
the doping of MNs with fluorescent materials for light emission
at
different wavelengths, i.e., develop fluorescent MNs
(FMNs);
|
|
·
|
Evaluate
other display medium technologies for potential strategic partnerships;
|
|
·
|
Evaluate
the most appropriate (from a cost-to-benefit standpoint) solid-state
light
sources for projection
applications;
|
|
·
|
Develop
software for displaying ideal 3D
images;
|
|
·
|
Investigate
software interface issues with other image capture
technologies.
|
On
November 1, 2006 the sponsored research agreement was modified to provide
$125,259 additional funding, extend the term of the agreement through March
31,
2007, and revise the payment schedule to combine the July 15, 2005 remaining
balance due of $226,792 with the additional funding into a revised payment
schedule. Under the terms of the agreement, we agreed to pay the combined
remaining obligation of $352,051 in four equal monthly installments of $88,013
on December 31, 2006 through March 31, 2007.
3DIcon
owns all worldwide rights to commercial and government usage of the intellectual
property being developed by the University of Oklahoma. The University of
Oklahoma has applied for the following patents with the U.S. Patent and
Trademark Office:
|
·
|
Utility
patent for Swept Volume Display, filed in September,
2006;
|
|
·
|
Provisional
patent for Colorful Translational Light Surface 3D Display filed
in April,
2006;
|
|
·
|
Provisional
patent for 3D Light Surface Display filed in September,
2006;
|
|
·
|
Provisional
patent for Volumetric Liquid Crystal Display filed in April,
2006.
|
Marketing
and Product Development
3DIcon
currently has no products or services. We envision the sale of products,
the
licensing of University-owned technology, or a combination of thereof beginning
in 2007.
We
have
identified the following potential markets and uses for the technology being
developed by the University of Oklahoma:
|
·
|
Driver
education, simulation and testing;
|
|
·
|
Healthcare
education;
|
|
·
|
Plastic
Surgery;
|
|
·
|
Architectural
plans and virtual structures;
|
|
·
|
Training
programs for pilots;
|
|
·
|
Virtual
live entertainment;
|
|
·
|
Displays
of art for museums;
|
|
·
|
Digital
signage;
|
|
·
|
Fashion
design;
|
|
·
|
Casino
gaming;
|
|
·
|
Homeland
security.
|
Competition
There
are
numerous technologies which are under development to enable the display of
3D
images. The following is a summary of research being conducted and products
under development in the 3D display system marketplace of which we are currently
aware.
Rosen
et
al
report
on a psychophysical comparison of visual perception for a 3D display (the
Perspecta produced by Actuality Systems) and a high-resolution flat-panel
display. The results indicated that the binocular view of Perspecta was similar
or slightly better in performance than the monoscopic view of flat-panel
display, because of its low contrast.
A
collaborative paper from Cambridge University and the MIT Media Lab reports
that
a DMD can be used to launch view-sequential 3D images, leading to the
construction a virtual 3D image. This paper provides further reinforcement
of
the utility of DMD devices for 3D imaging and display applications.
Matsuda
and Kakeya propose a 3D camera system that implements combinational techniques
using hardware and software to capture object images from both eyes of the
viewer. An image captured by only one camera is not sufficient to supply
the
information needed to reconstruct a 3D image back from the viewpoint of a
free
observer. The authors propose the use of a stereo camera which, with the
aid of
3D
position
sensors, can follow the viewer’s motion and send the information back to a
camera system using a computational algorithm. Such an approach might prove
useful in recording images for subsequent display on 3D visualization
systems.
Fujii
and
Tanimoto report the investigation of two types of real-time Ray-Space
acquisition systems. The first system used 16 cameras, all connected via
a PC
cluster, to capture the information for subsequent 3D image display. The
second
system used a single high-speed camera with scanning optics and offered better
performance due to the ability to capture a real-time Ray-Space at video
rates.
The
DepthCubeTM
Technology system consists of a rear projection volumetric computer monitor
that
produces 3D images. Unlike a conventional projection surface, the DepthCube
incorporates an electronically-controlled multiplanar optical element (MOE)
that
allows the formation of 3D volumetric images. The display also incorporates
Texas Instruments’ (TI’s) DLP technology and is capable of 1500 frames per
second. While this is impressive technology for a variety of visualization
applications, it does not represent the kind of technology 3DIcon intends
to
develop.
The
FELIX
Technology display is a technology that uses the swept volume technique,
where a
rotating projection screen sweeps out a volume upon which a 3D image can
be
formed. This FELIX 3D appears to represent a viable technology that would
likely
compete with 3DIcon on some level.
A
related
technology is the SOLID FELIX static volume 3D display which uses a solid
cube
of transparent crystalline material doped with rare earth ions. The rare
earth
ions are capable of producing visible light by a two-frequency upconversion
(frequency-doubling) process when illuminated with intersecting infrared
laser
beams.
The
Perspecta Spatial 3D Technology 3D display presents another example of a
technology that utilizes a rotating projection screen. The display uses three
of
TI’s DMDs to direct red, green, blue light beams onto the rotation screen at
the
appropriate times to form 3D volumetric images. Again, the Perspecta Spatial
3D
display appears to represent a viable technology that would likely compete
with
3DIcon on some level.
The
VR4MAX Technology demonstrates another screen-based approach to 3D
visualization. As in the case of the DepthCube, while VR4MAX is no doubt
useful
for a variety of visualization applications, it does not represent the kind
of
technology 3DIcon wants to develop.
The
FogScreen technology by itself does not represent a 3D display. Rather, it
may
prove to be a viable volumetric screen for space projection implementations.
A
FogScreen unit consists of a water tank, water level controller, water filter,
water fountain, and a number of hydrosonic generators. The unit produces
a dry
fog which can provide a source of small particles off of which light can
be
scattered to display images.
Employees
3DIcon
Corporation has two full-time employees. We have identified the need for
additional personnel, including a marketing manager, a product manager and
a
product development engineer/manager. The marketing manager would lead the
creation of the specifications of what we should build and create all necessary
materials to successfully launch the product including an analysis of
competitive technologies. The responsibilities of the product manager would
include working with the University of Oklahoma and the marketing organization
to develop detailed specifications of the product, maintain the schedule,
and
bring the product to market in a timely fashion. The responsibilities of
the
product development engineer/manager would include seeking out competent
manufacturers, understanding the details of the design, and overseeing
production of a product within the guidelines of manufacturability and
serviceability.
Our
executive offices are located at 7507
S.
Sandusky, Tulsa, Oklahoma 74136.
Our
office space is provided to
us
by one
of our officers at no cost to the Company.
AND
PLAN OF OPERATION
Some
of
the information in this Form SB-2 contains forward-looking statements that
involve substantial risks and uncertainties. You can identify these statements
by forward-looking words such as "may," "will," "expect," "anticipate,"
"believe," "estimate" and "continue," or similar words. You should read
statements that contain these words carefully because they:
|
·
|
discuss
our future expectations;
|
|
·
|
contain
projections of our future results of operations or of our financial
condition; and
|
| · |
state
other "forward-looking" information.
|
We
believe it is important to communicate our expectations. However, there may
be
events in the future that we are not able to accurately predict or over which
we
have no control. Our actual results and the timing of certain events could
differ materially from those anticipated in these forward-looking statements
as
a result of certain factors, including those set forth under "Risk Factors,"
"Business" and elsewhere in this prospectus. See "Risk Factors."
Plan
of Operation
When
we
dissect the requirements for implementing 360o
person-to-person holographic technology, we identify three clear areas of
need:
(1) a means of recording 3D objects as digital holographic data elements;
(2) a
means of transmitting these data elements from one person to another; and,
(3) a
means of reconstructing and displaying the 3D images.
Addressing
the first area of need, the review of patents revealed multiple methods in
the
area of recording 3D objects in digital formats. The practical implementation
of
such methods alone would require significant algorithm and software development
activities. Our current business plan is not to pursue the development of
competing intellectual property in this area, but rather look to establish
strategic partnerships with the assignees or license holders of existing
3D
recording technologies.
The
second area of need involves providing suitable telecommunications (TCOM)
infrastructure to support the bandwidth and quality of service requirements
of
the application, and interfacing the recording and display ends with that
infrastructure. The TCOM infrastructure should be readily available for lease
by
any number of service providers. A key concern will be resolving
interoperability issues that arise when interfacing the holographic technology
(recording and display) with the TCOM technology. The University of Oklahoma
-
Tulsa’s TCOM Interoperability Lab is capable of conducting the interoperability
testing and resolution activities associated with this task.
The
reconstruction and display of 3D images is the area where we see the most
opportunity for 3DIcon to make an impact in the area of intellectual property
creation and product development. The existing products reviewed can generally
be broken down into two broad categories: those that use multi-layer/element
flat-panels to implement 3D displays, and those that implement volumetric
3D
displays. The flat-panel approaches, as previously noted, do not support
3DIcon’s planned embodiment of the technology. However, the application space of
volumetric 3D displays supports 3DIcon’s vision and appears to offer
opportunities for further technology development.
In
particular, we believe an alternate approach to the volumetric display can
be
pursued in which certain media, such as magnetic nanospheres, can be actively
suspended and their position controlled to produce an innovative volumetric
projection screen. In addition, we believe TI’s DLP technology can be
innovatively incorporated to produce full-color, full-motion 3D visualization,
and in harmony with 3DIcon’s vision for product development.
Our
current 12-month operating budget is expected to be approximately $5,000,000,
consisting of the following expenses:
|
·
|
Research
and development expenses pursuant to our Sponsored Research Agreement
with
the University of Oklahoma. This includes development of an initial
demonstrable prototype and a second prototype with Phase II technology;
|
|
·
|
Hiring
additional executive officers.
|
|
·
|
Professional
fees
|
Our
research and development objectives for the 2007 calendar year are as follows.
The work will mainly be done by researchers, students and faculty at the
University of Oklahoma with oversight by 3DIcon personnel.:
I.
Phase
I Swept Volume Display
|
·
|
Provide
2nd
prototype with new 3-color LEDs by June
30;
|
|
·
|
Investigate
alternate image pane technologies (OLEDs) by September 1;
|
|
·
|
If
3-color LED prototype is not satisfactory, develop new prototype
by
December 1
|
II.
Phase
II Static Volumetric Display
|
·
|
Develop
single-color prototype and solve alignment issues;
|
|
·
|
Develop
Software;
|
|
·
|
Develop
multicolor prototype (materials
dependent);
|
|
·
|
Provide
prototype demonstration in the summer of
2007.
|
III.
Nanomaterials - in support of Phase II Static Volume Display
|
·
|
Identify
and synthesize further optical upconversion nanosized
materials;
|
|
·
|
Synthesize
and optimize aerogels;
|
|
·
|
Embed
light-emitting nanoparticles;
|
|
·
|
Test
2-photon materials;
|
|
·
|
Investigate
encapsulating materials;
|
|
·
|
Synthesize
quantum dots, tune, and characterize quantum
dots.
|
IV.
Patents (Intellectual Property)
|
·
|
File
utility patent for Colorful Translational Light Surface 3D Display;
|
|
·
|
File
utility patent for 3D Light Surface
Display;
|
|
·
|
File
utility patent for Volumetric Liquid Crystal
Display;
|
|
·
|
File
communications system patent;
|
V.
Image
Capture
|
·
|
Image
capture survey;
|
|
·
|
Develop
conversion/translation software;
|
|
·
|
Continue
with investigation of integral imaging
techniques.
|
VI.
Phase
III Free Space Volumetric Display
|
·
|
Begin
research and idea generation.
|
Financial
Condition, Liquidity and Capital Resources
As
of
September 30, 2006 we had a total stockholder deficiency of approximately
$732,519, and cash of $192,518. Through the end of September 30 2006, we
have
generated no revenues and have incurred operating losses in every quarter.
We
have a cumulative net loss of $3,174,804 for the period from inception
(January
1, 2001) to September 30, 2006.
Our
independent registered public accountants, in their audit report accompanying
our financial statements for the year ended December 31, 2005, expressed
substantial doubt about our ability to continue as a going concern due
to our
status as a
development stage organization with insufficient revenues to fund development
and operating expenses.
As
of
September 30, 2006, our accounts payable totaled $451,352 and we had a
working
capital deficit of $597,519. Our current cash balance is insufficient to
pay the
current accounts payable. We
will
need to obtain additional capital in order to sustain our operations beyond
December 31, 2006. However, there can be no assurance that that any additional
financing will become available to us, and if available, on terms acceptable
to
us.
On
November 1, 2006, we modified the SRA to provide $125,259 additional funding,
extend the term of the agreement through March 31, 2007, and revise the payment
schedule to combine the July 15, 2005 remaining balance due of $226,792 with
the
additional funding into a revised payment schedule. Under the terms of the
agreement, we agreed to pay the combined remaining obligation of $352,051
in
four equal monthly installments of $88,013 on December 31, 2006 through March
31, 2007.
The
liquidity impact of our outstanding indebtedness is as follows:
Senior
Debenture Payable
On
December 15, 2005, we issued convertible debentures aggregating $160,000
at par
value for cash. The debentures currently have an outstanding principal balance
of $135,000. The debentures bear interest at 8% per annum, and are due no
later
than December 31, 2007. The Company may prepay without penalty all of the
outstanding principal amount and accrued interest. Upon receiving notice
of the
Company's intent to prepay, holders of the debentures may convert the principal
amount due to common stock at the rate of one share of common stock for each
$.05 of principal amount converted. Upon conversion, the Company will pay
all
accrued interest. No fractional shares will be issued upon conversion of
a
debenture.
Unsecured
Debentures Payable
During
the third quarter of 2006 the Company authorized the issuance of unsecured
convertible debentures aggregating $800,000. As of September 30, 2006 the
Company has issued $330,000 of these debentures at par value for cash. The
debentures bear interest at 8% per annum, convertible to common shares at
$0.40
per share and are due no later than March 31, 2007. At the option of the
Company, interest may be paid in cash or Common Stock, valued at the bid
price
on the day immediately prior to the date paid. The debentures are not secured
by
any asset or pledge of the Company or any officer, stockholder or director.
The
Company has agreed to provide, with respect to the common shares issued upon
conversion of the debentures, certain registration rights under the Securities
Act of 1933.
Golden
Gate Debentures
On
November 3, 2006, we issued two 6 ¼% convertible debentures to Golden Gate
Investors, Inc. in an aggregate principal amount of $1,350,000. Of this amount,
Golden Gate has provided us with $225,000. Golden Gate is required to provide
us
with an additional $312,500 upon effectiveness of the registration statement.
The balance of $812,500 shall be wired to the escrow agent, which is required
to
release $200,000 of on the first day of each month, beginning with the second
month following the effective date of the registration statement.
The
$100,000 debenture bears interest at 6 ¼ %, matures five years from the date of
issuance, and is convertible into our common stock, at Golden Gate’s option. The
$100,000 convertible debenture is convertible into the number of our shares
of
common stock equal to the dollar amount of the debenture divided by the
conversion price. The conversion price for the $100,000 convertible debenture
is
the lesser of (i) $4.00, (ii) 80% of the average of the five lowest volume
weighted average prices during the twenty (20) trading days prior to the
conversion (the 80% figure is known as the “Discount
Multiplier”).
Accordingly, there is in fact no limit on the number of shares into which
the
debenture may be converted over time. If Golden Gate elects to convert a
portion
of the debenture and, on the day that the election is made, the volume weighted
average price is below $1.00, 3DIcon shall have the right to prepay that
portion
of
the
debenture that Golden Gate elected to convert, plus any accrued and unpaid
interest, at 135% of such amount. The $1.00 figure shall be adjusted, on
the
date that is one year after the closing date and every six months thereafter
(“Adjustment Dates”), to a price equal to 65% of the average of the current
market prices for the fifteen Trading Days prior to each Adjustment
Date.
In
connection with the $100,000 debenture, we issued to Golden Gate warrants
to
purchase 1,000,000 shares of our common stock at an exercise price of
$10.90.
The
$1.25
million debenture bears interest at 6 ¼ %,
matures three years from the date of issuance, and is convertible into our
common stock, at Golden Gate’s option. The $1.25 million convertible debenture
is convertible into the number of our shares of common stock equal to the
dollar
amount of the debenture divided by the conversion price. The conversion price
for the $1.25 million convertible debenture is the lesser of (i) $2.00, (ii)
70%
of the average of the five lowest volume weighted average prices during the
twenty (20) trading days prior to the conversion (the 70% figure is known
as the
“Discount
Multiplier”).
Accordingly, there is in fact no limit on the number of shares into which
the
$1.25 million debenture may be converted over time. If Golden Gate elects
to
convert a portion of the $1.25 million debenture and, on the day that the
election is made, the volume weighted average price is below $0.75, 3DIcon
shall
have the right to prepay that portion of the debenture that Golden Gate elected
to convert, plus any accrued and unpaid interest, at 135% of such
amount.
Interest
on our at 6 ¼ %
convertible debentures is payable monthly in cash or, at Golden Gate’s option,
in shares of Common Stock of the Company valued at the then applicable
conversion price.
Off
Balance Sheet Arrangements
3DIcon
does not engage in any off balance sheet arrangements that are reasonably
likely
to have a current or future effect on our financial condition, revenues,
results
of operations, liquidity or capital expenditures.
Significant
Accounting Policies
Research
and Development Costs
Statement
of Accounting Standards No. 2, “Accounting for Research and Development Costs,”
requires that all research and development costs be expensed as incurred.
Until
we have developed a commercial product, all costs incurred in connection
with
the Sponsored Research Agreement with the University of Oklahoma, as well
as all
other research and development costs incurred, will be expensed. After a
commercial product has been developed, we will report costs incurred in
producing products for sale as assets, but we will continue to expense costs
incurred for further product research and development activities.
Stock-Based
Compensation
3DIcon
has, since its inception, used its common stock, or warrants to purchase
its
common stock, as a means of compensating our employees and consultants.
Statement of Financial Accounting Standards No. 123(R), “Share Based Payments,”
requires us to estimate the value of securities used for compensation and
to
charge such amounts to expense over the periods benefited. Since we do not
have
a stock option plan, employees have been granted shares of common stock for
services. Such share are valued based on current prices in the over-the-counter
market, discounted for such matters as Rule 144 trading restrictions and
other
factors affecting the lack of marketability of the stock.
Recent
Accounting Pronouncements
In
May
2005, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 154, Accounting
Changes and Error Corrections (SFAS 154),
which replaces APB Opinion No. 20, Accounting
Changes,
and
FASB Statement 3, Reporting
Accounting Changes in Interim Financial Statements.
This
statement changes the requirements for the accounting for and reporting of
a
change in accounting principle, including all voluntary changes in accounting
principles. It also applies to changes required by an accounting pronouncement
in the unusual instance that the pronouncement does not include specific
transition provisions.
This
statement requires voluntary changes in accounting principles be recognized
retrospectively to prior periods' financial statements, rather than recognition
in the net income of the current period. Retrospective application requires
restatements of prior period financial statements as if that accounting
principle had always been used. This statement carries forward without change
the guidance contained in Opinion 20 for reporting the correction of an error
in
previously issued financial statements and a change in accounting estimate.
The
provisions of SFAS No. 154 are effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15,
2005.
In
March
2006, the Financial Accounting Standards Board issued Statement of Accounting
Standards No. 156, Accounting
for Servicing of Financial Assets (SFAS 156),
which amends
SFAS 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities.
SFAS
156 permits, but does not require, an entity to choose either the amortization
method or the fair value measurement method for measuring each class of
separately recognized servicing assets and servicing liabilities. The provisions
of SFAS No. 156 are effective for fiscal years beginning after September
15,
2006. The Company does not expect the adoption of SFAS 156 to have a material
effect on its financial statements and related disclosures.
In
June 2006, the Financial Accounting Standards Board issued FASB
Interpretation No. 48, Accounting
for Uncertainty in Income Taxes - an interpretation of FASB Statement
No. 109 (FIN
48).
This interpretation clarifies the accounting for uncertainty in income taxes
recognized in an enterprise's financial statements in accordance with FASB
Statement No. 109, Accounting
for Income Taxes. FIN
48
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected
to be
taken in a tax return. It also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition. FIN 48 is
effective
for fiscal years beginning after December 15, 2006. The Company does not
expect the adoption of FIN 48 to have a material effect on its financial
statements and related disclosures.
Other
than as set forth below, 3DIcon is not a party to any pending legal proceeding,
nor is its property the subject of a pending legal proceeding, that is not
in
the ordinary course of business or otherwise material to the financial condition
of 3DIcon's business.
On
April
17, 2006, 3DIcon filed an action in the District Court of Tulsa County,
Oklahoma, against Andrew Stack and Lion Capital Holdings, Inc. stating claims
for fraudulent inducement, breach of contract, unjust enrichment, breach
of
fiduciary duty, conversion, violation of the Oklahoma Deceptive Trade Practices
Act and state securities fraud, breach of an accord. According to the
Petition: Stack and his company, Lion Capital Holdings, solicited a contract
with 3DIcon under which the defendants promised to raise capital for 3DIcon,
which they never did; and the Defendants did retain, however, the shares
of
3DIcon stock which were issued for the defendants’ prospective
shareholders.
On
October 4, 2006, 3DIcon amended its Petition to name Joseph Padilla and John
R.
Shrewder as defendants. Claims for civil conspiracy, fraud, deceit,
constructive fraud, accounting, restitution, injunctive relief, constructive
trust, piercing the corporate veil, malpractice and violation of the Oklahoma
Consumer Protection Act were added to the lawsuit.
3DIcon
seeks disgorgement, restitution, actual and punitive damages, attorneys’ fees,
costs, interest, accounting, imposition of a constructive trust and other
injunctive relief from the defendants, as stated in the Petition, as
amended.
There
are
motions pending and the case is in the discovery phase.
The
following table sets forth current information regarding our executive officers,
senior managers and directors:
|
Name
|
Age
|
Position
|
||
|
Martin
Keating
|
65
|
President,
Chief Executive Officer, Director
|
||
|
Philip
Suomu
|
52
|
Director
|
||
|
John
O’Connor
|
52
|
Director
|
||
Martin
Keating has been the President, Chief Executive Officer and a director of
3DIcon
since 1998. Previously, Mr. Keating organized and managed private placement
limited partnerships, ranging from real estate development to motion picture
financing. Mr. Keating was also general counsel and director of investor
relations for CIS Technologies, then a NASDAQ company. Mr. Keating wrote
and
published "The Final Jihad," a terrorist suspense novel. Mr. Keating is an
attorney licensed to practice law in Oklahoma and Texas.
Philip
Suomu has been a director of 3DIcon since October 2006 and its Director of
Technology since May 2005. Mr. Suomo works for 3DIcon on a part-time basis.
Since January, 2001, Mr. Suomu has served as President of PNERC Associates
L.P.,
which provides financial and technical guidance for new business development.
From April 1997 to September 2001, Mr. Suomu held the position of Director
of
Sales for CIENA Communications, which manufactures and markets advanced fiber
optic equipment for the telecommunications industry.
John
O’Connor has been a director of 3DIcon since October 2006. Since 1981, Mr.
O’Connor has practiced law in Oklahoma, concentrating in the areas of corporate
and commercial law. Mr. O’Connor served as President of the law firm of Newton,
O’Connor, Turner & Ketchum from 2001 to 2005 and has served as its Chairman
from 2001 to present.
Employment
Agreements
None.
Audit
Committee
We
do not
have a separately designated standing audit committee.
Code
of Ethics
We
have
not adopted a Code of Ethics and Business Conduct for Officers, Directors
and
Employees that applies to all of our officers, directors and employees.
The
following table sets forth the cash compensation (including cash bonuses)
paid
or accrued by us for our years ended December 31, 2005, 2004 and 2003 to
(i) our
Chief Executive Officer and (ii) our four most highly compensated officers,
other than our Chief Executive Officer, whose total annual salary and bonus
exceeded $100,000.
|
Annual
|
Long-term
|
||||||||||||||||||
|
Compensation
|
Compensation
|
||||||||||||||||||
|
Awards
|
Payouts
|
||||||||||||||||||
|
Securities
|
|||||||||||||||||||
|
Underlying
|
LTIP
|
All
Other
|
|||||||||||||||||
|
Fiscal
|
Salary
|
Bonus
|
Options/
|
Payouts
|
Compensation
|
||||||||||||||
|
Name
and Principal Position
|
Year
|
($)
|
($)
|
SARs
(#)
|
($)
|
($)
|
|||||||||||||
|
Martin
Keating
|
|||||||||||||||||||
|
President
& CEO (1)
|
2005
|
90,000
|
—
|
—
|
—
|
$
|
14,792
|
(1) | |||||||||||
|
2004
|
90,000
|
—
|
—
|
—
|
$
|
1.980
|
(1)
|
||||||||||||
|
2003
|
90,000
|
—
|
—
|
—
|
—
|
||||||||||||||
(1) The
Company issued 7,880,000 and 1,980,000 shares of common stock at various
dates
throughout 2005 and 2004, respectively, to its President and Chief Executive
Officer for services rendered. The shares issued were valued at the closing
price of the stock on or previous to the date of issuance less a 50% discount
due to the restrictive nature of the stock, a 50% discount for lack of
earnings
or sales consistency of the Company, a 50% discount due to the dollar and
share
volume of sales of the Company's securities in the public market, and an
additional 35% discount due to the trading market in which the Company's
securities are sold. The shares issued to directors are valued using the
same
discount structure as the other common stock issued for services transactions,
and ranged from $.0002 to $.0074 during 2005 and $.001 to $.014 during
2004. The
Company recognized $14,792 and $1,980 in compensation expense in 2005 and
2004,
respectively, related to these transactions.
Options Grants in Last Fiscal Year
None.
Aggregate
Option Exercises In Last Fiscal Year and Fiscal Year End Option Values
None.
The
following table indicates beneficial ownership of our common stock as of
November, 2006 by each person or entity known by us to beneficially own more
than 5% of the outstanding shares of our common stock; each of our executive
officers and directors; and all of our executive officers and directors as
a
group. Unless otherwise indicated, the address of each beneficial owner listed
below is c/o 3DIcon Corporation.
|
Number
of Shares
|
Percentage
|
|||||||||
|
Name
of Beneficial Owner
|
Beneficially
Owned
|
Class
of Stock
|
Outstanding
(1)
|
|||||||
|
Martin
Keating
|
38,977,452
|
Common
|
41.3
|
%
|
||||||
|
Philip
Suomu
|
143,600
|
Common
|
*
|
|||||||
|
John
O’Connor (2)
|
210,000
|
Common
|
*
|
|||||||
|
All
directors and executive officers as a group (3 persons)
|
39,331,052
|
4176
|
%
|
|||||||
| * |
less
than 1%
|
| (1) |
Applicable
percentage ownership is based on 94,267,656 shares of common stock
outstanding as of November 15, 2006. Beneficial ownership is determined
in
accordance with the rules of the Securities and Exchange Commission
and
generally includes voting or investment power with respect to securities.
Options to aquire shares of common stock that are currently exercisable
or
exercisable within 60 days of November 15, 2006 are deemed to be
beneficially owned by the person holding such securities for the
purpose
of computing the percentage of ownership of such person, but are
not
treated as outstanding for the purpose of computing the percentage
ownership of any other person.
|
| (2) | Represents (i) 110,000 shares of common stock owned by Mr. O’Connor and (ii) 100,000 shares of common stock owned by the John M. and Lucia D. O’Connor Revocable Living Trust over which Mr. O’Connor has voting and investment control. |
The
securities being offered are shares of common stock. Our authorized capital
includes 250,000,000 shares of common stock, $0.0002 par value per
share.
Holders
of shares of common stock are entitled to one vote per share on all matters
submitted to a vote of the shareholders. Shares of common stock do not have
cumulative voting rights.
Holders
of record of shares of common stock are entitled to receive dividends when
and
if declared by the board of directors. To date, the Company has not paid
cash
dividends. The Company intends to retain any earnings for the operation and
expansion of its business and does not anticipate paying cash dividends in
the
foreseeable future.
Any
future determination as to the payment of cash dividends will depend on future
earnings, results of operations, capital requirements, financial condition
and
such other factors as the board of directors may consider.
Upon
any
liquidation, dissolution or termination of the Company, holders of shares
of
common stock are entitled to receive a pro rata distribution of the assets
of
the Company after liabilities are paid.
Holders
of common stock do not have pre-emptive rights to subscribe for or to purchase
any stock, obligations or other securities of 3DIcon.
The
selling stockholder and any of its pledgees, donees, assignees and other
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which
the
shares are traded or in private transactions. These sales may be at fixed
or
negotiated prices. The selling stockholder may use any one or more of the
following methods when selling shares:
| · |
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits the purchaser;
|
| · |
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal
to
facilitate the transaction;
|
| · |
purchases
by a broker-dealer as principal and resale by the broker-dealer
for its
account;
|
| · |
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
| · |
privately-negotiated
transactions;
|
| · |
broker-dealers
may agree with the selling stockholder to sell a specified number
of such
shares at a stipulated price per
share;
|
| · |
through
the writing of options on the shares
|
| · |
a
combination of any such methods of sale; and
|
| · |
any
other method permitted pursuant to applicable law.
|
The
selling stockholder may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus. The selling stockholder
shall have the sole and absolute discretion not to accept any purchase offer
or
make any sale of shares if they deem the purchase price to be unsatisfactory
at
any particular time.
The
selling stockholder or its pledgees, donees, transferees or other successors
in
interest, may also sell the shares directly to market makers acting as
principals and/or broker-dealers acting as agents for themselves or their
customers. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholder and/or
the
purchasers of shares for whom such broker-dealers may act as agents or to
whom
they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers
and
block purchasers purchasing the shares will do so for their own account and
at
their own risk. It is possible that a selling stockholder will attempt to
sell
shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then market price.
The
selling stockholder cannot assure that all or any of the shares offered in
this
prospectus will be issued to, or sold by, the selling stockholder. The selling
stockholder and any brokers, dealers or agents, upon effecting the sale of
any
of the shares offered in this prospectus, may be deemed to be "underwriters"
as
that term is defined under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, or the rules and regulations
under
such acts. In such event, any commissions received by such broker-dealers
or
agents and any profit on the resale of the shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.
We
are
required to pay all fees and expenses incident to the registration of the
shares, including fees and disbursements of counsel to the selling stockholder,
but excluding brokerage commissions or underwriter discounts.
The
selling stockholder, alternatively, may sell all or any part of the shares
offered in this prospectus through an underwriter. No selling stockholder
has
entered into any agreement with a prospective underwriter and there is no
assurance that any such agreement will be entered into.
The
selling stockholder may pledge its shares to their brokers under the margin
provisions of customer agreements. If a selling stockholder defaults on a
margin
loan, the broker may, from time to time, offer and sell the pledged shares.
The
selling stockholder and any other persons participating in the sale or
distribution of the shares will be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
under
such act, including, without limitation, Regulation M. These provisions may
restrict certain activities of, and limit the timing of purchases and sales
of
any of the shares by, the selling stockholder or any other such person. In
the
event that the selling stockholder is deemed affiliated with purchasers or
distribution participants within the meaning of Regulation M, then the selling
stockholder will not be permitted to engage in short sales of common stock.
Furthermore, under Regulation M, persons engaged in a distribution of securities
are prohibited from simultaneously engaging in market making and certain
other
activities with respect to such securities for a specified period of time
prior
to the commencement of such distributions, subject to specified exceptions
or
exemptions. In regards to short sells, the selling stockholder is contractually
restricted from engaging in short sells. In addition, if such short sale
is
deemed to be a stabilizing activity, then the selling stockholder will not
be
permitted to engage in a short sale of our common stock. All of these
limitations may affect the marketability of the shares.
We
have
agreed to indemnify the selling stockholder, or their transferees or assignees,
against certain liabilities, including liabilities under the Securities Act
of
1933, as amended, or to contribute to payments the selling stockholder or
their
respective pledgees, donees, transferees or other successors in
interest,
may be required to make in respect of such liabilities.
If
the
selling stockholder notifies us that it has a material arrangement with a
broker-dealer for the resale of the common stock, then we would be required
to
amend the registration statement of which this prospectus is a part, and
file a
prospectus supplement to describe the agreements between the selling stockholder
and the broker-dealer.
The
table
below sets forth information concerning the resale of the shares of common
stock
by the selling stockholder. We will not receive any proceeds from the resale
of
the common stock by the selling stockholder. We will receive proceeds from
the
exercise of the warrants. Assuming all the shares registered below are sold
by
the selling stockholder, it will not continue to own any shares of our common
stock.
The
following table also sets forth the name of each person who is offering the
resale of shares of common stock by this prospectus, the number of shares
of
common stock beneficially owned by each person, the number of shares of common
stock that may be sold in this offering and the number of shares of common
stock
each person will own after the offering, assuming they sell all of the shares
offered.
|
Total
|
||||||||||||||||||||||
|
Percentage
|
Percentage
|
|||||||||||||||||||||
|
Total
Shares of
|
of
Common
|
Shares
of
|
Beneficial
|
of
Common
|
||||||||||||||||||
|
Common
Stock
|
Stock,
|
Common
Stock
|
Beneficial
|
Percentage
of
|
Ownership
|
Stock
Owned
|
||||||||||||||||
|
Issuable
Upon
|
Assuming
|
Included
in
|
Ownership
|
Common
Stock
|
After
the
|
After
|
||||||||||||||||
|
Conversion
of
|
Full
|
Prospectus
|
Before
the
|
Owned
Before
|
Offering
|
Offering
|
||||||||||||||||
|
Name
|
Debenture
|
Conversion
|
(1)
|
Offering*
|
Offering*
|
(4)
|
(4)
|
|||||||||||||||
|
Golden
Gate
|
2,840,909(3
|
)
|
3.0
|
%
|
Up
to
|
206,250
|
9.99
|
%
|
—
|
—
|
||||||||||||
|
Investors,
Inc. (2)
|
2,840,909
|
|||||||||||||||||||||
|
|
shares
of
|
|||||||||||||||||||||
|
common
stock
|
||||||||||||||||||||||
| * |
These
columns represents the aggregate maximum number and percentage
of shares
that the selling stockholder can own at one time (and therefore,
offer for
resale at any one time) due to their 9.9% limitation.
|
The
number and percentage of shares beneficially owned is determined in accordance
with Rule 13d-3 of the Securities Exchange Act of 1934, and the information
is
not necessarily indicative of beneficial ownership for any other purpose.
Under
such rule, beneficial ownership includes any shares as to which the selling
stockholder has sole or shared voting power or investment power and also
any
shares, which the selling stockholder has the right to acquire within 60
days.
The actual number of shares of common stock issuable upon the conversion
of the
convertible debentures is subject to adjustment depending on, among other
factors, the future market price of the common stock, and could be materially
less or more than the number estimated in the table.
| (1) |
Includes
a good faith estimate of the shares issuable upon conversion of
the
convertible debenture based on current market prices. Because the
number
of shares of common stock issuable upon conversion of the convertible
debenture is dependent in part upon the market price of the common
stock
prior to a conversion, the actual number of shares of common stock
that
will be issued upon conversion will fluctuate daily and cannot
be
determined at this time. Under the terms of the convertible debenture,
if
the convertible debenture had actually been converted on December
15,
2006,
the conversion price would have been $0.44. The actual number of
shares of
common stock offered in this prospectus, and included in the registration
statement of which this prospectus is a part, includes such additional
number of shares of common stock as may be issued or issuable upon
conversion of the convertible debenture by reason of any stock
split,
stock dividend or similar transaction involving the common stock,
in
accordance with Rule 416 under the Securities Act of 1933. However
the
selling stockholder has contractually agreed to restrict their
ability to
convert their convertible debenture or exercise their warrants
and receive
shares of our common stock such that the number of shares of common
stock
held by them in the aggregate and their affiliates after such conversion
or exercise does not exceed 9.99% of the then issued and outstanding
shares of common stock as determined in accordance with Section
13(d) of
the Exchange Act. Accordingly, the number of shares of common stock
set
forth in the table for the selling stockholder exceeds the number
of
|
shares
of
common stock that the selling stockholder could own beneficially at any given
time through their ownership of the convertible debenture and the warrants.
In
that regard, the beneficial ownership of the common stock by the selling
stockholder set forth in the table is not determined in accordance with Rule
13d-3 under the Securities Exchange Act of 1934, as amended.
| (2) |
The
selling stockholder is an unaffiliated third party. In accordance
with
rule 13d-3 under the Securities Exchange Act of 1934, Norman Lizt
may be
deemed a control person of the shares owned by the selling stockholder.
|
| (3) |
Includes
2,840,909 shares of common stock underlying our $1,250,000 convertible
debenture issued to Golden Gate Investors,
Inc.
|
| (4) |
Assumes
that all securities registered will be sold, which does not represent
all
of the shares of common stock potentially issuable upon conversion
of the
convertible debenture held by Golden Gate at current market prices.
|
Terms
of Convertible Debenture
To
obtain
funding for our ongoing operations, we entered into a Securities Purchase
Agreement with Golden Gate Investors, Inc. (“Golden Gate”) on November 3, 2006,
as amended on December 15, 2006 (the “Purchase Agreement”), for the sale of a 6
¼% convertible debenture of the Company in the principal amount of $1,250,000.
Pursuant to the Purchase Agreement, at such time as the principal balance
of
this debenture is less than $400,000, the Company shall have the right
to
require Golden Gate to purchase a second debenture, also in the principal
amount
of $1,250,000. On November 3, 2006, we also issued to Golden Gate a 6 ¼%
convertible debenture in a principal amount of $100,000 and warrants to
purchase
1,000,000 shares of our common stock at an exercise price of $10.90.
This
prospectus relates to the resale of the common stock underlying the initial
$1.25 million convertible debenture only.
Golden
Gate provided us with $125,000 upon execution of the Purchase Agreement.
Pursuant to the Purchase Agreement, Golden Gate is required to provide
us with
an additional $312,500 upon effectiveness of the registration statement
of which
this prospectus is a part. The balance of $812,500 shall be wired to the
escrow
agent, which is required to release $200,000 on the first day of each month,
beginning with the second month following the effective date of the registration
statement.
The
debentures bear interest at 6 ¼%, and are convertible into our common stock, at
the selling stockholder’s option. The $1.25 million convertible debentures
mature three years from the date of issuance. The $100,000 convertible
debenture
matures five years from the date of issuance. Interest on our 6 ¼% convertible
debentures is payable monthly in cash or, at Golden Gate’s option, in shares of
common stock of the Company valued at the then applicable conversion price.
The
initial $1.25 million convertible debenture is convertible into the number
of
our shares of common stock equal to the dollar amount of the debenture
divided
by the conversion price. The conversion price for the initial $1.25 million
convertible debenture is the lesser of (i) $2.00 or (ii) 70% of the average
of
the five lowest volume weighted average prices during the twenty (20) trading
days prior to the conversion. The conversion price for the second $1.25
million
convertible debenture is the lesser of (i) $2.00 or (ii) 90% of the average
of
the five lowest volume weighted average prices during the twenty (20) trading
days prior to the conversion. The conversion price for the $100,000 convertible
debenture is the lesser of (i) $4.00 or (ii) 80% of the average of the
five
lowest volume weighted average prices during the twenty (20) trading days
prior
to the conversion. Accordingly, there is in fact no limit on the number
of
shares into which the debentures may be converted over time. If Golden
Gate
elects to convert a portion of the debenture and, on the day that the election
is made, the volume weighted average price is below $0.75, 3DIcon shall
have the
right to prepay that portion of the debenture that Golden Gate elected
to
convert, plus any accrued and unpaid interest, at 135% of such
amount.
In
addition, 3DIcon entered into a registration rights agreement with Golden
Gate
pursuant to which the Company agreed to file, within 30 days after the
closing,
the registration statement of which this prospectus is a part covering
the
common stock issuable upon conversion of the initial $1.25 million debenture
only. In the event we fail to meet this schedule and other timetables provided
in the registration rights agreement, liquidated damages and other potential
penalties could be imposed (for example, the discount multiplier of 70%
shall
decrease by three percentage points for each month or partial month occurring
after we fail to meet the timetables provided in the registration rights
agreement). In addition, Golden Gate may demand repayment of one hundred
and
fifteen percent (115%) of the principal amount of the debenture, together
with
all accrued and unpaid interest on the principal amount of the debenture,
in
cash, if we fail to meet the timetables provided in the registration rights
agreement.
In
the
event the Company elects, and Golden Gate fails, to enter into the second
debenture, Golden Gate would be required to pay liquidated damages in the
amount
of $250,000.
Sample
Conversion Calculation
The
conversion price for the initial $1.25 million convertible debentures is
the
lesser of (i) $2.00, (ii) 70% of the average of the five lowest volume
weighted
average prices during the twenty (20) trading days prior to the conversion
For
example, assuming conversion of $50,000 of the $1.25 million convertible
debenture on December 15, 2006, a conversion price of $0.44 per share,
the
number of shares issuable upon conversion would be:
50,000
/$0.60. = 113,636
The
following is an example of the amount of shares of our common stock that
are
issuable, upon conversion of the principal amount of our convertible debentures,
based on market prices 25%, 50% and 75% below the market price, as of December
1, 2006 of $0.84.
|
Effective
|
Number
|
%
of
|
|||||||||||
|
%
Below
|
Price
Per
|
Conversion
|
of
Shares
|
Outstanding
|
|||||||||
|
Market
|
Share
|
Price
|
Issuable
|
Stock
|
|||||||||
|
25%
|
$
|
0.63
|
$
|
0.50
|
2,500,000
|
2.6
|
%
|
||||||
|
50%
|
$
|
0.42
|
$
|
0.34
|
3,676,470
|
3.8
|
%
|
||||||
|
75%
|
$
|
0.21
|
$
|
0.17
|
7,352,941
|
7.2
|
%
|
||||||
As
illustrated, the number of shares of common stock issuable upon conversion
of
our convertible debentures will increase if the market price of our stock
declines, which will cause dilution to our existing stockholders.
Other
than as set forth below, during the last two fiscal years there have not
been
any relationships, transactions, or proposed transactions to which 3DIcon
was or
is to be a party, in which any of the directors, officers, or 5% or greater
stockholders (or any immediate family thereof) had or is to have a direct
or
indirect material interest.
3DIcon
has engaged the law firm of Newton, O’Connor, Turner & Ketchum as its
outside corporate counsel since 2005. John O’Connor, a director of 3DIcon, is
the Chairman of Newton, O’Connor, Turner & Ketchum.
During
2004, the Company issued 25,000,000 additional shares to the Company’s founder,
President and Chief Executive Officer due to the reverse stock split in 2003
and
the corporate reorganization that took place during 2004.
Not
applicable.
Sichenzia
Ross Friedman Ference LLP, New York, New York will issue an opinion with
respect
to the validity of the shares of common stock being offered hereby.
Tullius
Taylor Sartain & Sartain LLP, Independent Registered Public Accountants,
have audited, as set forth in their report thereon appearing elsewhere herein,
our financial statements at December 31, 2005 and 2004 and for the years
then
ended that appear in the prospectus. The financial statements referred to
above
are included in this prospectus with reliance upon the auditors’ opinion based
on their expertise in accounting and auditing.
We
have
filed a registration statement on Form SB-2 under the Securities Act of 1933,
as
amended, relating to the shares of common stock being offered by this
prospectus, and reference is made to such registration statement. This
prospectus constitutes the prospectus of 3DIcon Corporation, filed as part
of
the registration statement, and it does not contain all information in the
registration statement, as certain portions have been omitted in accordance
with
the rules and regulations of the Securities and Exchange Commission.
We
are
subject to the informational requirements of the Securities Exchange Act
of 1934
which requires us to file reports, proxy statements and other information
with
the Securities and Exchange Commission. Such reports, proxy statements and
other
information may be inspected at public reference facilities of the SEC at
100 F
Street N.E., Washington D.C. 20549. Copies of such material can be obtained
from
the Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street
N.W., Washington, D.C. 20549 at prescribed rates. Because we file documents
electronically with the SEC, you may also obtain this information by visiting
the SEC's Internet website at http://www.sec.gov.
3DIcon
CORPORATION
(A
Development Stage Company)
September
30, 2006
(Unaudited)
CONTENTS
|
F-2
|
|
|
F-3
|
|
|
F-4
|
|
|
F-6
|
|
|
F-7
|
|
3DIcon
CORPORATION
(A
Development Stage Company)
September
30, 2006
(Unaudited)
|
Assets
|
||||
|
Current
assets:
|
||||
|
Cash
|
$
|
192,518
|
||
|
Prepaid
expenses
|
1,882
|
|||
|
Total
assets
|
$
|
194,400
|
||
|
Liabilities
and Stockholders' Deficiency
|
||||
|
Current
liabilities:
|
||||
|
Accounts
payable:
|
||||
|
Sponsored
Research Agreement
|
$
|
226,792
|
||
|
Other
trade payables
|
224,560
|
|||
|
Unsecured
debentures payable
|
330,000
|
|||
|
Accrued
interest payable on debentures
|
10,567
|
|||
|
Total
current liabilities
|
791,919
|
|||
|
Senior
debentures payable
|
135,000
|
|||
|
Total
liabilities
|
926,919
|
|||
|
Stockholders'
deficiency:
|
||||
|
Common
stock; $.0002 par, 250,000,000 shares authorized; 94,267,656
shares issued
and outstanding
|
18,854
|
|||
|
Additional
paid-in capital
|
2,423,431
|
|||
|
Deficit
accumulated during development stage
|
(3,174,804
|
)
|
||
|
Total
stockholders' deficiency
|
(732,519
|
)
|
||
|
Total
liabilities and stockholders' deficiency
|
$
|
194,400
|
||
See
notes
to financial statements.
3DIcon
CORPORATION
(A
Development Stage Company)
Nine
Months Ended September 30, 2006 and 2005
and
from
Inception - January 1, 2001 to September 30, 2006
(Unaudited)
|
Nine
Months
Ended
September
30, 2006
|
Nine
Months
Ended
September
30, 2005
|
Inception
to
September
30, 2006
|
||||||||
|
Income
|
||||||||||
|
Sales
|
$
|
—
|
$
|
—
|
$
|
—
|
||||
|
Expenses
|
||||||||||
|
Research
and development
|
240,355
|
500
|
481,538
|
|||||||
|
General
and administrative
|
934,804
|
149,588
|
2,693,266
|
|||||||
|
Total
expenses
|
1,175,159
|
150,088
|
3,174,804
|
|||||||
|
Net
loss
|
$
|
(1,175,159
|
)
|
$
|
(150,088
|
)
|
$
|
(3,174,804
|
)
|
|
|
Loss
per share:
|
||||||||||
|
Basic
|
$
|
(0.014
|
)
|
$
|
(0.003
|
)
|
||||
|
Diluted
|
$
|
(0.014
|
)
|
$
|
(0.003
|
)
|
||||
|
Weighted
average shares outstanding
|
|
85,603,920
|
|
59,466,614
|
||||||
See
notes
to financial statements.
3DIcon
CORPORATION
(A
Development Stage Company)
Nine
Months Ended September 30, 2006
and
from
Inception - January 1, 2001 to September 30, 2006
(Unaudited)
|
Common
Stock
|
Paid-In
|
Deficit
Accumulated During the
Development
|
||||||||||||||
|
Shares
|
Par
Value
|
Capital
|
Stage
|
Total
|
||||||||||||
|
Balance,
January 1, 2001 - as reorganized
|
27,723,750
|
$
|
27,724
|
$
|
193,488
|
$
|
—
|
$
|
221,212
|
|||||||
|
Adjustment
to accrue compensation earned but not recorded
|
—
|
—
|
—
|
(60,000
|
)
|
(60,000
|
)
|
|||||||||
|
Stock
issued for services
|
2,681,310
|
2,681
|
185,450
|
—
|
188,131
|
|||||||||||
|
Stock
issued for cash
|
728,500
|
729
|
72,121
|
—
|
72,850
|
|||||||||||
|
Net
loss for the year
|
—
|
—
|
—
|
(259,221
|
)
|
(259,221
|
)
|
|||||||||
|
Balance,
December 31, 2001
|
31,133,560
|
31,134
|
451,059
|
(319,221
|
)
|
162,972
|
||||||||||
|
Adjustment
to record compensation earned but not recorded
|
—
|
—
|
—
|
(60,000
|
)
|
(60,000
|
)
|
|||||||||
|
Stock
issued for services
|
3,077,000
|
3,077
|
126,371
|
—
|
129,448
|
|||||||||||
|
Stock
issued for cash
|
1,479,000
|
1,479
|
146,421
|
—
|
147,900
|
|||||||||||
|
Net
loss for the year
|
—
|
—
|
—
|
(267,887
|
)
|
(267,887
|
)
|
|||||||||
|
Balance,
December 31, 2002
|
35,689,560
|
35,690
|
723,851
|
(647,108
|
)
|
112,433
|
||||||||||
|
Adjustment
to record compensation earned but not recorded
|
—
|
—
|
—
|
(90,000
|
)
|
(90,000
|
)
|
|||||||||
|
Stock
issued for services
|
15,347,000
|
15,347
|
—
|
—
|
15,347
|
|||||||||||
|
Stock
issued for cash
|
1,380,000
|
1,380
|
33,620
|
—
|
35,000
|
|||||||||||
|
Reverse
split 1:10
|
(47,174,904
|
)
|
—
|
—
|
—
|
—
|
||||||||||
|
Par
value $0.0001 to $0.0002
|
—
|
(51,369
|
)
|
51,369
|
—
|
—
|
||||||||||
|
Net
loss for the year
|
—
|
—
|
—
|
(51,851
|
)
|
(51,851
|
)
|
|||||||||
|
Balance,
December 31, 2003
|
5,241,656
|
1,048
|
808,840
|
(788,959
|
)
|
20,929
|
||||||||||
See
notes
to financial statements.
3DIcon
CORPORATION
(A
Development Stage Company)
STATEMENTS
OF CHANGES IN STOCKHOLDERS’ EQUITY
Nine
Months Ended September 30, 2006
and
from
Inception - January 1, 2001 to September 30, 2006
(Unaudited)
|
Common
Stock
|
Paid-In
|
Deficit
Accumulated During the
Development
|
||||||||||||||
|
Shares
|
Par
Value
|
Capital
|
Stage
|
Total
|
||||||||||||
|
Additional
Founders shares issued
|
25,000,000
|
5,000
|
(5,000
|
)
|
—
|
—
|
||||||||||
|
Stock
issued for services
|
24,036,000
|
4,807
|
71,682
|
—
|
76,489
|
|||||||||||
|
Stock
issued for cash
|
360,000
|
72
|
28,736
|
—
|
28,808
|
|||||||||||
|
Warrants
issued to purchase common stock at $.025
|
—
|
—
|
18,900
|
—
|
18,900
|
|||||||||||
|
Warrants
issued to purchase common stock at $.05
|
—
|
—
|
42,292
|
—
|
42,292
|
|||||||||||
|
Stock
warrants exercised
|
2,100,000
|
420
|
60,580
|
—
|
61,000
|
|||||||||||
|
Net
loss for the year
|
—
|
—
|
—
|
(617,875
|
)
|
(617,875
|
)
|
|||||||||
|
Balance,
December 31, 2004
|
56,737,656
|
11,347
|
1,026,030
|
(1,406,834
|
)
|
(369,457
|
)
|
|||||||||
|
Stock
issued for services
|
5,850,000
|
1,170
|
25,201
|
—
|
26,371
|
|||||||||||
|
Stock
issued to settle liabilities
|
5,000,000
|
1,000
|
99,000
|
—
|
100,000
|
|||||||||||
|
Stock
issued for cash
|
1,100,000
|
220
|
72,080
|
—
|
72,300
|
|||||||||||
|
Warrants
issued to purchase common stock at $.025
|
—
|
—
|
62,300
|
—
|
62,300
|
|||||||||||
|
Warrants
issued to purchase common stock at $.05
|
—
|
—
|
140,400
|
—
|
140,400
|
|||||||||||
|
Stock
warrants exercised
|
5,260,000
|
1,052
|
172,948
|
—
|
174,000
|
|||||||||||
|
Net
loss for the year
|
—
|
—
|
—
|
(592,811
|
)
|
(592,811
|
)
|
|||||||||
|
Balance,
December 31, 2005
|
73,947,656
|
14,789
|
1,597,959
|
(1,999,645
|
)
|
(386,897
|
)
|
|||||||||
|
Stock
issued for services
|
4,700,000
|
940
|
205,597
|
—
|
206,537
|
|||||||||||
|
Debentures
converted
|
3,000,000
|
600
|
(600
|
)
|
—
|
—
|
||||||||||
|
Warrant
exercised
|
1,800,000
|
360
|
88,540
|
—
|
88,900
|
|||||||||||
|
Stock
for cash
|
10,820,000
|
2,165
|
531,935
|
—
|
534,100
|
|||||||||||
|
Net
loss for the period
|
—
|
—
|
—
|
(1,175,159
|
)
|
(1,175,159
|
)
|
|||||||||
|
Balance
September 30, 2006
|
94,267,656
|
$
|
18,854
|
$
|
2,423,431
|
$
|
(3,174,804
|
)
|
$
|
(732,519
|
)
|
|||||
See
notes
to financial statements.
3DIcon
CORPORATION
(A
Development Stage Company)
Nine
Months Ended September 30, 2006 and 2005
and
from
Inception - January 1, 2001 to September 30, 2006
(Unaudited)
|
Nine
Months Ended
September
30, 2006
|
Nine
Months Ended
September
30, 2005
|
Inception
to
September
30, 2006
|
||||||||
|
Cash
Flows from Operating Activities
|
||||||||||
|
Net
loss
|
$
|
(1,175,159
|
)
|
$
|
(150,088
|
)
|
$
|
(3,174,804
|
)
|
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||
|
Stock
issued for services
|
206,537
|
—
|
642,323
|
|||||||
|
Asset
impairments
|
—
|
—
|
292,202
|
|||||||
|
Change
in:
|
||||||||||
|
Prepaid
expenses
|
2,686
|
(765
|
)
|
(765
|
)
|
|||||
|
Accounts
payable and accrued liabilities
|
247,104
|
37,276
|
653,823
|
|||||||
|
Net
cash used in operating activities
|
(718,832
|
)
|
(113,577
|
)
|
(1,587,221
|
)
|
||||
|
Cash
Flows from Financing Activities
|
||||||||||
|
Proceeds
from stock and warrant sales and exercise of warrants
|
473,000
|
107,000
|
1,328,750
|
|||||||
|
Proceeds
from issuance of debentures
|
455,000
|
—
|
615,000
|
|||||||
|
Reduction
in note payable-Officer
|
(164,021
|
)
|
—
|
(164,021
|
)
|
|||||
|
Net
cash provided by financing activities
|
763,979
|
107,000
|
1,779,729
|
|||||||
|
Net
increase (decrease) in cash
|
45,147
|
(6,577
|
)
|
192,508
|
||||||
|
Cash,
beginning of period
|
147,371
|
7,501
|
10
|
|||||||
|
Cash,
end of period
|
$
|
192,518
|
$
|
924
|
$
|
192,518
|
||||
|
Noncash
Financing Activities
|
||||||||||
|
Conversion
of debentures in to common stock
|
$
|
150,000
|
$
|
—
|
$
|
150,000
|
||||
|
Issuance
of stock in settlement of accounts payable
|
—
|
—
|
100,000
|
|||||||
|
$
|
150,000
|
$
|
—
|
$
|
250,000
|
|||||
See
notes
to financial statements.
3DIcon
CORPORATION
(A
Development Stage Company)
September
30, 2006
(Unaudited)
Note
1 - Organization and Operations
Basis
of Presentation
The
accompanying financial statements of 3DIcon Corporation (the “Company”) have
been prepared without audit pursuant to the rules and regulations of the
Securities and Exchange Commission (“SEC”). Certain information and footnote
disclosures normally included in the financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted pursuant to such rules and regulations.
The
Company believes that the disclosures made are adequate to make the information
presented not misleading. These financial statements should be read in
conjunction with the Company's year end audited financial statements and
related
footnotes included in the registration statement on pages F-18
through F-28.
In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial position of the
Company
as of September 30, 2006, and the statements of its operations and accumulated
deficit and cash flows for the nine month periods ended September 30, 2006
and
2005 have been included. The results of operations for interim periods
may not
be indicative of the results which may be realized for the full
year.
Organization
3DIcon
Corporation was incorporated on August 11, 1995, under the laws of the
State of
Oklahoma as First Keating Corporation. The articles of incorporation were
amended August 1, 2003 to change the name to 3DIcon Corporation. The initial
focus of First Keating Corporation was to market and distribute books written
by
its founder, Martin Keating. During 2001, First Keating Corporation began
to
focus on the development of 360-degree holographic technology. The effective
date of this transition is January 1, 2001, and the financial information
presented is from that date through the current period. The Company has
accounted for this transition as a reorganization and accordingly, restated
its
capital accounts as of January 1, 2001. From January 1, 2001, the Company's
primary activity has been the raising of capital in order to pursue its
goal of
becoming a significant participant in the formation and commercialization
of
interactive, optical holography for the communications and entertainment
industries.
The
mission of the Company is to pursue, develop and market full-color, 360-degree
person-to-person holographic technology. Its primary focus is to invest
and
participate in the commercialization of optical holographic technologies
now
planned and/or under development, particularly those employing derivative
broadband, satellite-based systems. At this time, the Company owns no
intellectual property rights in holographic technologies and has no contracts
or
agreements pending to acquire such rights.
3DIcon
CORPORATION
(A
Development Stage Company)
NOTES
TO
FINANCIAL STATEMENTS
September
30, 2006
(Unaudited)
Note
1 - Organization and Operations (continued)
Uncertainties
The
accompanying financial statements have been prepared on a going concern
basis.
The Company is in the development stage and has no source of revenue to
fund the
development of its planned product and to pay operating expenses, resulting
in a
cumulative net loss of $3,174,804 for the period from inception (January
1,
2001) to September 30, 2006. The ability of the Company to continue as
a going
concern during the next year depends on the successful completion of the
Company's capital raising efforts to fund the development of its planned
products. The financial statements do not include any adjustments that
might be
necessary if the Company is unable to continue as a going concern.
Note
2 - Summary of Significant Accounting Policies
Research
and development
Research
and development costs, including payments made to the University of Oklahoma
pursuant to the Sponsored Research Agreement (“SRA”), are expensed as incurred.
(Note 5)
Stock-based
compensation
The
Company accounts for stock-based compensation arrangements for employees
in
accordance with Statement of Accounting Standard (SFAS) No. 123(R), Share-Based
Payments. The
Company recognizes expenses for employee services received in exchange
for stock
based on the grant-date fair value of the shares awarded. The Company accounts
for stock issued to non-employees in accordance with the provisions of
SFAS No.
123, Accounting
for Stock-Based Compensation,
and the
related Emerging Issues Task Force (EITF) Consensuses.
Income
taxes
The
Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards (SFAS) No. 109, Accounting for Income
Taxes.
SFAS
No. 109
requires
the recognition of deferred tax assets and liabilities for the estimated
future
tax consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. In addition, SFAS
No. 109
requires
the recognition of future tax benefits, such as net operating loss
carryforwards, to the extent that realization of such benefits is more
likely
than not. The amount of deferred tax liabilities or assets is calculated
using
tax rates in effect for the year in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets
and
liabilities of a change in tax rate is recognized in income in the period
that
includes the enactment date. Valuation allowances are established when
necessary
to reduce deferred tax assets to the amounts more likely than not to be
realized.
3DIcon
CORPORATION
(A
Development Stage Company)
NOTES
TO
FINANCIAL STATEMENTS
September
30, 2006
(Unaudited)
Note
2 - Summary of Significant Accounting Policies (continued)
In
determining the quarterly provision for income taxes, the Company uses
an annual
effective tax rate based on expected annual income and statutory tax rates.
Significant discreet items are separately recognized in the income tax
provision
in the quarter in which they occur.
Net
income (loss) per common share
The
Company computes net income (loss) per share in accordance with SFAS
No. 128,
Earnings
per Share
and
SEC
Staff Accounting Bulletin No. 98 (“SAB 98”).
Under
the provisions of SFAS
No. 128
and
SAB
98,
basic
net income (loss) per common share is based on the weighted-average outstanding
common shares. Diluted net income (loss) per common share is based on the
weighted-average outstanding shares adjusted for the dilutive effect of
warrants
to purchase common stock and convertible debentures. Due to the Company's
losses, such potentially dilutive securities are antidilutive for all periods
presented. The weighted average number of potentially dilutive shares is
52,925,000 and 26,140,000 for the periods ended September 30, 2006 and
2005,
respectively.
Use
of estimates
The
preparation of financial statements in conformity with U. S. generally
accepted
accounting principles requires management to make estimates and assumptions
that
affect the reported amounts of assets, liabilities, revenues, expenses
and the
disclosure of contingent assets and liabilities. Actual results could differ
from the estimates and assumptions used.
Note
3 - Recent Accounting Pronouncements
In
May
2005, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 154, Accounting
Changes and Error Corrections (SFAS 154),
which replaces APB Opinion No. 20, Accounting
Changes,
and
FASB Statement 3, Reporting
Accounting Changes in Interim Financial Statements.
This
statement changes the requirements for the accounting for and reporting
of a
change in accounting principle, including all voluntary changes in accounting
principles. It also applies to changes required by an accounting pronouncement
in the unusual instance that the pronouncement does not include specific
transition provisions.
3DIcon
CORPORATION
(A
Development Stage Company)
NOTES
TO
FINANCIAL STATEMENTS
September
30, 2006
(Unaudited)
Note
3 - Recent
Accounting Pronouncements (continued)
This
statement requires voluntary changes in accounting principles be recognized
retrospectively to prior periods' financial statements, rather than recognition
in the net income of the current period. Retrospective application requires
restatements of prior period financial statements as if that accounting
principle had always been used. This statement carries forward without
change
the guidance contained in Opinion 20 for reporting the correction of an
error in
previously issued financial statements and a change in accounting estimate.
The
provisions of SFAS No. 154 are effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15,
2005.
In
March
2006, the Financial Accounting Standards Board issued Statement of Accounting
Standards No. 156, Accounting
for Servicing of Financial Assets (SFAS 156),
which amends
SFAS 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities.
SFAS
156 permits, but does not require, an entity to choose either the amortization
method or the fair value measurement method for measuring each class of
separately recognized servicing assets and servicing liabilities. The provisions
of SFAS No. 156 are effective for fiscal years beginning after September
15,
2006. The Company does not expect the adoption of SFAS 156 to have a material
effect on its financial statements and related disclosures.
In
June 2006, the Financial Accounting Standards Board issued FASB
Interpretation No. 48, Accounting
for Uncertainty in Income Taxes - an interpretation of FASB Statement
No. 109 (FIN
48).
This interpretation clarifies the accounting for uncertainty in income
taxes
recognized in an enterprise's financial statements in accordance with FASB
Statement No. 109, Accounting
for Income Taxes. FIN
48
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected
to be
taken in a tax return. It also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition. FIN 48 is effective for fiscal years beginning
after
December 15, 2006. The Company does not expect the adoption of FIN 48 to
have a material effect on its financial statements and related
disclosures.
Note
4 - Fair Value of Financial Instruments
The
following methods and assumptions were used to estimate the fair value
of each
class of financial instrument held by the Company:
Current
assets and current liabilities
- The
carrying value approximates fair value due to the short maturity of these
items.
3DIcon
CORPORATION
(A
Development Stage Company)
NOTES
TO
FINANCIAL STATEMENTS
September
30, 2006
(Unaudited)
Note
4 - Fair Value of Financial Instruments (continued)
Debentures
payable
- The
fair value of the Company's debentures payable has been estimated by the
Company
based upon the liability’s characteristics, including interest rate. The
carrying value approximates fair value.
Note
5 - Commitments and Contingencies
On
April
20, 2004, the Company entered into a Sponsored Research Agreement entitled
"Investigation of Emerging Digital Holography Technologies" (Phase I) with
the
University of Oklahoma - Tulsa (“University”), which expired October 19, 2004.
The Company paid the University $14,116 pursuant to this agreement. On
July 15,
2005, the Company entered into a Sponsored Research Agreement with the
University (Phase II), which expires January 14, 2007. Under this agreement
the
University will conduct a research project entitled "Investigation of
3-Dimensional Display Technologies" and the Company will pay the University
$453,584 payable at various dates from November 10, 2005 through July 15,
2006
to cover the costs of the research. The final payment of $226,792, due
on July
15, 2006, was not paid and the agreement was modified in November 2006
(Note
9).
In
November 2005, the Company signed an agreement with Concordia Financial
Group,
Inc. (“Concordia”) for Concordia to obtain for the Company bridge capital of not
less than $300,000 and additional financing of not less than $3,000,000.
Under
the terms of the agreement the Company is required to pay Concordia a retainer
of $2,000 per month plus direct expenses through June 30, 2006, and a
transaction fee of 5% of the proceeds from bridge capital and 5% of capital
stock.
At
September 30, 2006 and 2005, 17,000,000 shares of common stock are held
by a
third party and are in dispute as to whether or not they are legally issued.
Management contends that the shares were not legally issued and should
be
returned to the Company. However, they are reported as issued and outstanding
at
par value in the accompanying financial statements due to the uncertainty
surrounding resolution of the issue. The Company has filed suit against
the
third party seeking return of the shares and other consideration. The suit
is
pending at September 30, 2006. Legal expenses incurred in connection with
the
suit are $242,835 for the nine months ended September 30, 2006.
See
also
Note 9, Subsequent Events.
3DIcon
CORPORATION
(A
Development Stage Company)
NOTES
TO
FINANCIAL STATEMENTS
September
30, 2006
(Unaudited)
Note
6 - Debentures Payable
Senior
debenture payable
As
of
December 15, 2005, the Company issued convertible debentures aggregating
$160,000 and has issued an additional $125,000 during 2006 at par value
for
cash. The debentures bear interest at 8% per annum, and are due no later
than
December 31, 2007. The Company may prepay without penalty all of the outstanding
principal amount and accrued interest. Upon receiving notice of the Company's
intent to prepay, holders of the debentures may convert the principal amount
due
to common stock at the rate of one share of common stock for each $.05
of
principal amount converted. Upon conversion, the Company will pay all accrued
interest. No fractional shares will be issued upon conversion of a debenture.
During 2006 debentures totaling $150,000 were converted to 3,000,000 shares
of
common stock.
Unsecured
debentures payable
During
the third quarter of 2006 the Company authorized the issuance of unsecured
convertible debentures aggregating $800,000. As of September 30, 2006 the
Company has issued $330,000 of these debentures at par value for cash.
The
debentures bear interest at 8% per annum, convertible to common shares
at $0.40
per share and are due no later than March 31, 2007. At the option of the
Company, interest may be paid in cash or Common Stock, valued at the bid
price
on the day immediately prior to the date paid. The debentures are not secured
by
any asset or pledge of the Company or any officer, stockholder or director.
The
Company has agreed to provide, with respect to the common shares issued
upon
conversion of the debentures, certain registration rights under the Securities
Act of 1933.
Note
7 - Common Stock and Paid-In Capital
At
various dates throughout 2006, 2005 and 2004, the Company sold 200,000,
1,100,000 and 360,000 shares, respectively, of common stock with warrants
attached for $.25 per share pursuant to an exempt offering. Each subscriber
received one share of common stock with two separate warrants to purchase
additional shares of Rule 144 stock as follows: (a) ten times the number
of
shares within one year of the date subscribed at $.025 per share and (b)
another
ten times the number of shares within two years of the date subscribed
at $.05
per share. Warrants not exercised under their terms will be terminated.
The
Company received $50,000, $275,000 and $90,000, respectively, in cash.
At
various dates throughout 2006, 2005 and 2004, the Company issued 4,400,000,
1,740,000 and 340,000 shares, respectively, of its common stock pursuant
to the
exercise of $.05 warrants by non-employees. The Company received $220,000,
$86,000 and $17,000, respectively, in cash.
3DIcon
CORPORATION
(A
Development Stage Company)
NOTES
TO
FINANCIAL STATEMENTS
September
30, 2006
(Unaudited)
Note
7 - Common Stock and Paid-In Capital (continued)
At
various dates throughout 2006, 2005 and 2004, the Company issued 8,020,000,
3,520,000 and 1,760,000, respectively, of its common stock pursuant to
the
exercise of $.025 warrants by non-employees. The Company received $200,500,
$88,000 and $44,000, respectively, in cash.
As
of
September 30, 2006, there are warrants outstanding to purchase 2,780,000
shares
of common stock at $.025 per share expiring at various dates remaining
in 2006;
warrants outstanding to purchase 960,000 shares of common stock at $.05
per
share expiring at various dates remaining in 2006; warrants to purchase
820,000
shares of common stock at $.025 per share expiring in 2007;warrants to
purchase
8,280,000 shares of common stock at $.05 per share expiring in 2007; and
warrants to purchase 1,600,000 shares of common stock at $.05 per share
expiring
at various dates throughout 2008.
Common
stock issued for services
During
2006, 1,100,000 shares of common stock were issued for consulting services
for
which the Company recognized $15,438 of expense.
During
2005, 2,010,000 shares of common stock were issued for consulting services
for
which the Company recognized $2,469 of expense. During 2004, 3,376,000
shares of
common stock were issued for services for consulting which the Company
recognized $26,829 of expenses.
Additionally,
the Company issued 2,700,000, 7,880,000 and 1,980,000 shares of common
stock at
various dates throughout 2006, 2005 and 2004, respectively, to its President
and
Chief Executive Officer for services rendered. The Company issued 900,000,
960,000 and 1,660,000 shares at various dates throughout 2006, 2005 and
2004,
respectively, to its employee for services rendered. The shares are valued
using
the same discount structure as the other common stock transactions and
ranged
from $.01 to $.09 during 2006, $.0004 to $.0074 during 2005 and $.002 to
$.014
during 2004. The Company recognized $191,100, $23,903 and $49,465 in
compensation expense in 2006, 2005 and 2004, respectively, related to these
transactions.
During
2004, the Company issued 25,000,000 additional founders shares due to the
reverse stock split in 2003 and the corporate reorganization that took
place
during 2004. The shares were valued at par value.
The
shares issued were valued at the closing price of the stock on or previous
to
the date of issuance less a 50% discount due to the restrictive nature
of the
stock, a 50% discount for lack of earnings or sales consistency of the
Company,
a 50% discount due to the dollar and share volume of sales of the Company's
securities in the public market, and an additional 35% discount due to
the
trading market in which the Company's securities are sold.
3DIcon
CORPORATION
(A
Development Stage Company)
NOTES
TO
FINANCIAL STATEMENTS
September
30, 2006
(Unaudited)
Note
7 - Common Stock and Paid-In Capital (continued)
Common
stock rights
Holders
of shares of common stock are entitled to one vote per share on all matters
submitted to a vote of the stockholders. Shares of common stock do not
have
cumulative voting rights.
Holders
of record of shares of common stock are entitled to receive dividends when
and
if declared by the board of directors. To date, the Company has not paid
cash
dividends. The Company intends to retain any earnings for the operation
and
expansion of its business and does not anticipate paying cash dividends
in the
foreseeable future. Any future determination as to the payment of cash
dividends
will depend on future earnings, results of operations, capital requirements,
financial condition and such other factors as the board of directors may
consider.
Upon
any
liquidation, dissolution or termination of the Company, holders of shares
of
common stock are entitled to receive a pro rata distribution of the assets
of
the Company after liabilities are paid.
Holders
of common stock do not have pre-emptive rights to subscribe for or to purchase
any stock, obligations or other securities of 3DIcon.
3DIcon
CORPORATION
(A
Development Stage Company)
NOTES
TO
FINANCIAL STATEMENTS
September
30, 2006
(Unaudited)
Note 8
- Income taxes
At
September 30, 2006, the Company had accumulated net operating losses of
approximately $2,700,000 available to reduce future federal and state taxable
income. Unless utilized, the loss carry forward amounts will begin to expire
in
2013.
The
operating loss carryforward, giving rise to deferred tax assets, are reduced
by
a valuation allowance. The Company has established a valuation allowance
for its
deferred tax assets due to the uncertainty of the future utilization of
the loss
carry forward.
The
deferred tax asset consisted of the following:
|
September
30,
2006
|
||||
|
Loss
carry forward amount
|
$
|
2,700,000
|
||
|
Effective
tax rate
|
38
|
%
|
||
|
Deferred
tax asset
|
1,026,000
|
|||
|
Less
valuation allowance
|
(1,026,000
|
)
|
||
|
Deferred
tax asset
|
$
|
-0-
|
||
Note 9
- Subsequent Events
Sponsored
Research Agreement Modification (Note 5)
On
November 1, 2006 the Company and The University of Oklahoma (“University”)
modified the SRA to provide $125,259 additional funding, extend the term
of the
agreement through March 31, 2007, and revise the payment schedule to combine
the
July 15, 2005 remaining balance due of $226,792 with the additional funding
into
a revised payment schedule. Under the terms of the agreement the Company
agreed
to pay the combined remaining obligation of $352,051 in four equal installments
of $88,013 on December 31, 2006 through March 31, 2007.
Securities
Purchase Agreement
To
obtain
funding for the ongoing operations, the Company entered into a Securities
Purchase Agreement with Golden Gate Investors, Inc. (“Golden Gate”) on November
3, 2006, as amended on December 15, 2006 (the “Puchase Agreement”), for the
sale of a 6¼% convertible debenture of the Company in the principal amount of
$1,250,000. Pursuant to the Purchase Agreement, at such time as the principal
balance of
this
debenture is less than $400,000, the Company shall have the right to require
Golden Gate to purchase a second debenture, also in the principal amount
of
$1,250,000. On November 3, 2006, the Company also issued to Golden Gate
a 6¼%
convertible debenture in a principal amount of $100,000 and warrants to
buy
1,000,000 shares of the common stock at an exercise price of $10.90.
The
prospectus, which will be filed, relates to the resale of the common stock
underlying the initial $1.25 million convertible debenture only.
3DIcon
CORPORATION
(A
Development Stage Company)
NOTES
TO
FINANCIAL STATEMENTS
September
30, 2006
(Unaudited)
Note 9
- Subsequent Events
(continued)
Golden
Gate provided the Company with $125,000 upon execution of the Purchase
Agreement. Pursuant to the Purchase Agreement, Golden Gate is required
to
provide the Company with an additional $312,500 upon effectiveness of the
registration statement of which this prospectus is a part. The balance
of
$812,500 shall be wired to the escrow agent, which is required to release
$200,000 of on the first day of each month, beginning with the second month
following the effective date of the registration statement.
The
debentures bear interest at 6¼%, and are convertible into the Company’s
common stock, at the selling stockholder’s option. The
$1.25
million convertible debentures mature three years from the date of issuance.
The
$100,000 convertible debenture matures five years from the date of
issuance. Interest on the 6¼% convertible debentures is payable
monthly in cash or, at Golden Gate’s option, in shares of common stock of the
Company valued at the then applicable conversion price. The initial $1.25
million convertible debenture is convertible into the number of the shares
of
common stock equal to the dollar amount of the debenture divided by the
conversion price. The conversion price for the initial $1.25 million
convertible debenture is the lesser of (i) $2.00, (ii) 70% of the average
of the
five lowest volume weighted average prices during the twenty (20) trading
days
prior to the conversion.
The
conversion price for the second $1.25 million convertible debenture is
the
lesser of (i) $2.00 or (ii) 90% of the average of the five lowest volume
weighted average prices during the twenty (20) trading days prior to the
conversion. The conversion price for the $100,000 convertible debenture
is the
lesser of (i) $4.00 or (ii) 80% of the average of the five lowest volume
weighted average prices during the twenty (20) trading days prior to the
conversion. Accordingly, there is in fact no limit on the number of
shares into which the debenture may be converted over time. If Golden Gate
elects to convert a portion of the debenture and, on the day that the election
is made, the volume weighted average price is below $0.75, the Company
shall
have the right to prepay that portion of the debenture that Golden Gate
elected
to convert, plus any accrued and unpaid interest, at 135% of such
amount.
In
addition, the Company entered into a registration rights agreement with
Golden
Gate pursuant to which the Company agreed to file, within 30 days after
the
closing, the registration statement of which this prospectus is a part
covering
the common stock issuable upon conversion of the initial $1.25 million
debenture
only. In the event the Company fails to meet this schedule and other timetables
provided in the registration rights agreement, liquidated damages and other
potential penalties could be imposed (for example, the discount multiplier
of
70% shall decrease by three percentage points for each month or partial
month
occurring after the Company fails to meet the timetables provided in the
registration rights agreement).
3DIcon
CORPORATION
(A
Development Stage Company)
NOTES
TO
FINANCIAL STATEMENTS
September
30, 2006
(Unaudited)
Note 9
- Subsequent Events (continued)
In
addition, Golden Gate may demand repayment of one hundred and fifteen percent
(115%) of the principal amount of the debenture, together with all accrued
and
unpaid interest on the principal amount of the debenture, in cash, if the
Company fails to meet the timetables provided in the registration rights
agreement.
In
the event the Company elects, and Golden Gate
fails, to enter into the second debenture, Golden Gate would be required
to pay
liquidated damages in the amount of $250,000.
F-17
REPORT
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Stockholders of
3DIcon
Corporation
We
have
audited the accompanying balance sheets of 3DIcon Corporation (a Development
Stage Company) as of December 31, 2005 and 2004, and the related statements
of
income, changes in stockholders' equity and cash flows for the years
then ended
and for the period from January 1, 2001 (inception) to December 31,
2005. These
financial statements are the responsibility of the Company's management.
Our
responsibility is to express an opinion on these financial statements
based on
our audits.
We
conducted our audits in accordance with the standards of the Public
Company
Accounting Oversight Board (United States). Those standards require
that we plan
and perform the audit to obtain reasonable assurance about whether
the financial
statements are free of material misstatement. The Company is not required
to
have, nor were we engaged to perform, an audit of its internal control
over
financial reporting. Our audits included consideration of internal
control over
financial reporting as a basis for designing audit procedures that
are
appropriate in the circumstances, but not for the purpose of expressing
an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes
examining,
on a test basis, evidence supporting the amounts and disclosures in
the
financial statements. An audit also includes assessing the accounting
principles
used and significant estimates made by management, as well as evaluating
the
overall financial statement presentation. We believe that our audits
provide a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly,
in all
material respects, the financial position of 3DIcon Corporation, as
of December
31, 2005 and 2004, and the results of its operations and its cash flows
for the
years then ended and for the period from January 1, 2001 (inception),
to
December 31, 2005, in conformity with accounting principles generally
accepted
in the United States of America.
The
accompanying financial statements have been prepared assuming that
the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements the Company is a development stage organization with insufficient
revenues to fund development and operating expenses. This raises substantial
doubt about the Company's ability to continue as a going concern. Management's
plan in regard to these matters is also described in Note 1. The financial
statements do not include any adjustments that might result from the
outcome of
this uncertainty.
As
discussed in Note 9, the financial statements were restated to accrue
compensation earned, but not recorded from date of reorganization.
We also
audited the adjustment described in Note 9 that was applied to restate
changes
in stockholders' equity for each of the periods from inception to December
31,
2003, and the statements of income and cash flows for the period from
inception
to December 31, 2005. In our opinion, such adjustments are appropriate
and have
been properly applied.
/s/
TULLIUS TAYLOR SARTAIN & SARTAIN LLP
Tulsa,
Oklahoma
February
23, 2006
(A
Development Stage Company)
BALANCE
SHEETS
December
31, 2005 and 2004
|
2005
|
2004
|
||||||
|
Assets
|
|||||||
|
Current
assets:
|
|||||||
|
Cash
|
$
|
147,371
|
$
|
7,502
|
|||
|
Prepaid
expenses
|
3,450
|
-
|
|||||
|
Total
assets
|
$
|
150,821
|
$
|
7,502
|
|||
|
Liabilities
and Stockholders' Deficiency
|
|||||||
|
Current
liabilities:
|
|||||||
|
Accounts
payable
|
$
|
213,696
|
$
|
52,937
|
|||
|
Accrued
liabilities - compensation due founder
|
164,022
|
324,022
|
|||||
|
Total
current liabilities
|
377,718
|
376,959
|
|||||
|
Debentures
payable
|
160,000
|
-
|
|||||
|
Total
liabilities
|
537,718
|
376,959
|
|||||
|
Stockholders'
deficiency:
|
|||||||
|
Common
stock; $.0002 par, 250,000,000 shares authorized; 73,947,656
shares and
56,737,656 shares issued and outstanding at December 31,
2005 and 2004,
respectively
|
14,789
|
11,347
|
|||||
|
Additional
paid-in capital
|
1,597,959
|
1,026,030
|
|||||
|
Deficit
accumulated during development stage
|
(1,999,645
|
)
|
(1,406,834
|
)
|
|||
|
Total
stockholders' deficiency
|
(386,897
|
)
|
(369,457
|
)
|
|||
|
Total
liabilities and stockholders' deficiency
|
$
|
150,821
|
$
|
7,502
|
|||
3DIcon
CORPORATION
(A
Development Stage Company)
STATEMENTS
OF INCOME
Years
ended December 31, 2005 and 2004
and
from
Inception - January 1, 2001 to December 31, 2005
|
2005
|
2004
|
Inception
to
December
31,
2005
|
||||||||
|
Income
|
||||||||||
|
Sales
|
$
|
-
|
$
|
-
|
$
|
-
|
||||
|
Expenses
|
||||||||||
|
Research
and development
|
227,042
|
14,142
|
241,184
|
|||||||
|
General
and administrative
|
365,769
|
603,733
|
1,758,461
|
|||||||
|
Total
expenses
|
592,811
|
617,875
|
1,999,645
|
|||||||
|
Net
loss
|
$
|
(592,811
|
)
|
$
|
(617,875
|
)
|
$
|
(1,999,645
|
)
|
|
|
Loss
per share:
|
||||||||||
|
Basic
|
$
|
.009
|
$
|
.015
|
||||||
|
Diluted
|
$
|
.009
|
$
|
.015
|
||||||
|
Weighted
average shares outstanding
|
63,134,905
|
40,448,694
|
||||||||
3DIcon
CORPORATION
(A
Development Stage Company)
STATEMENT
OF CHANGES IN STOCKHOLDERS' EQUITY
December
31, 2005
|
Deficit
|
||||||||||||||||
|
Accumulated
|
||||||||||||||||
|
Common
Stock
|
During
the
|
|||||||||||||||
|
Shares
|
Par
Value
|
Paid-In
Capital
|
Development
Stage
|
Total
|
||||||||||||
|
Balance,
January 1, 2001 - as reorganized
|
27,723,750
|
$
|
27,724
|
$
|
193,488
|
$
|
-
|
$
|
221,212
|
|||||||
|
Adjustment
to accrue compensation earned but not recorded (Note 6)
|
-
|
-
|
-
|
(60,000
|
)
|
(60,000
|
)
|
|||||||||
|
Stock
issued for services
|
2,681,310
|
2,681
|
185,450
|
-
|
188,131
|
|||||||||||
|
Stock
issued for cash
|
728,500
|
729
|
72,121
|
-
|
72,850
|
|||||||||||
|
Net
loss for the year
|
-
|
-
|
-
|
(259,221
|
)
|
(259,221
|
)
|
|||||||||
|
Balance,
December 31, 2001
|
31,133,560
|
31,134
|
451,059
|
(319,221
|
)
|
162,972
|
||||||||||
|
Adjustment
to record compensation earned but not recorded (Note 6)
|
-
|
-
|
-
|
(60,000
|
)
|
(60,000
|
)
|
|||||||||
|
Stock
issued for services
|
3,077,000
|
3,077
|
126,371
|
-
|
129,448
|
|||||||||||
|
Stock
issued for cash
|
1,479,000
|
1,479
|
146,421
|
-
|
147,900
|
|||||||||||
|
Net
loss for the year
|
-
|
-
|
-
|
(267,887
|
)
|
(267,887
|
)
|
|||||||||
|
Balance,
December 31, 2002
|
35,689,560
|
35,690
|
723,851
|
(647,108
|
)
|
112,433
|
||||||||||
|
Adjustment
to record compensation earned but not recorded (Note 6)
|
-
|
-
|
-
|
(90,000
|
)
|
(90,000
|
)
|
|||||||||
|
Stock
issued for services
|
15,347,000
|
15,347
|
-
|
-
|
15,347
|
|||||||||||
|
Stock
issued for cash
|
1,380,000
|
1,380
|
33,620
|
-
|
35,000
|
|||||||||||
|
Reverse
split 1:10
|
(47,174,904
|
)
|
-
|
-
|
-
|
-
|
||||||||||
|
Par
value $0.0001 to $0.0002
|
-
|
(51,369
|
)
|
51,369
|
-
|
-
|
||||||||||
|
Net
loss for the year
|
-
|
-
|
-
|
(51,851
|
)
|
(51,851
|
)
|
|||||||||
|
Balance,
December 31, 2003
|
5,241,656
|
1,048
|
808,840
|
(788,959
|
)
|
20,929
|
||||||||||
|
Additional
Founders shares issued
|
25,000,000
|
5,000
|
(5,000
|
)
|
-
|
-
|
||||||||||
|
Stock
issued for services
|
24,036,000
|
4,807
|
71,682
|
-
|
76,489
|
|||||||||||
|
Stock
issued for cash
|
360,000
|
72
|
28,736
|
-
|
28,808
|
|||||||||||
|
Warrants
issued to purchase common stock at $.025
|
-
|
-
|
18,900
|
-
|
18,900
|
|||||||||||
|
Warrants
issued to purchase common stock at $.05
|
-
|
-
|
42,292
|
-
|
42,292
|
|||||||||||
|
Stock
warrants exercised
|
2,100,000
|
420
|
60,580
|
-
|
61,000
|
|||||||||||
|
Net
loss for the year
|
-
|
-
|
-
|
(617,875
|
)
|
(617,875
|
)
|
|||||||||
|
Balance,
December 31, 2004
|
56,737,656
|
11,347
|
1,026,030
|
(1,406,834
|
)
|
(369,457
|
)
|
|||||||||
|
Stock
issued for services
|
5,850,000
|
1,170
|
25,201
|
-
|
26,371
|
|||||||||||
|
Stock
issued to settle liabilities
|
5,000,000
|
1,000
|
99,000
|
-
|
100,000
|
|||||||||||
|
Stock
issued for cash
|
1,100,000
|
220
|
72,080
|
-
|
72,300
|
|||||||||||
|
Warrants
issued to purchase common stock at $.025
|
-
|
-
|
62,300
|
-
|
62,300
|
|||||||||||
|
Warrants
issued to purchase common stock at $.05
|
-
|
-
|
140,400
|
-
|
140,400
|
|||||||||||
|
Stock
warrants exercised
|
5,260,000
|
1,052
|
172,948
|
-
|
174,000
|
|||||||||||
|
Net
loss for the year
|
-
|
-
|
-
|
(592,811
|
)
|
(592,811
|
)
|
|||||||||
|
Balance,
December 31, 2005
|
73,947,656
|
$
|
14,789
|
$
|
1,597,959
|
$
|
(1,999,645
|
)
|
$
|
(386,897
|
)
|
|||||
3DIcon
CORPORATION
(A
Development Stage Company)
STATEMENTS
OF CASH FLOWS
Years
ended December 31, 2005 and 2004
and
from
Inception - January 1, 2001 to December 31, 2005
|
2005
|
2004
|
Inception
to
December
31,
2005
|
||||||||
|
Cash
Flows from Operating Activities
|
||||||||||
|
Net
loss
|
$
|
(592,811
|
)
|
$
|
(617,875
|
)
|
$
|
(1,999,645
|
)
|
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||
|
Stock
issued for services
|
26,371
|
76,489
|
435,786
|
|||||||
|
Asset
impairments
|
-
|
301,885
|
292,202
|
|||||||
|
Change
in:
|
||||||||||
|
Prepaid
expenses
|
(3,450
|
)
|
-
|
(3,450
|
)
|
|||||
|
Accounts
payable and accrued liabilities
|
100,759
|
95,959
|
406,718
|
|||||||
|
Net
cash used in operating activities
|
(469,131
|
)
|
(143,542
|
)
|
(868,389
|
)
|
||||
|
Cash
Flows from Financing Activities
|
||||||||||
|
Proceeds
from stock and warrant sales and exercise of warrants
|
449,000
|
151,000
|
855,750
|
|||||||
|
Proceeds
from issuance of debentures
|
160,000
|
-
|
160,000
|
|||||||
|
Net
cash provided by financing activities
|
609,000
|
151,000
|
1,015,750
|
|||||||
|
Net
increase in cash
|
139,869
|
7,458
|
147,361
|
|||||||
|
Cash,
beginning of year
|
7,502
|
44
|
10
|
|||||||
|
Cash,
end of year
|
$
|
147,371
|
$
|
7,502
|
$
|
147,371
|
||||
3DIcon
CORPORATION
(A
Development Stage Company)
NOTES
TO
FINANCIAL STATEMENTS
December
31, 2005 and 2004
Note
1 - Organization and Operations
Organization
3DIcon
Corporation (the Company) was incorporated on August 11, 1995, under
the laws of
the State of Oklahoma as First Keating Corporation. The articles of
incorporation were amended August 1, 2003 to change the name to 3DIcon
Corporation. The initial focus of First Keating Corporation was to
market and
distribute books written by its founder, Martin Keating. During 2001,
First
Keating Corporation began to focus on the development of 360-degree
holographic
technology. The effective date of this transition is January 1, 2001,
and the
financial information presented is from that date through December
31, 2005. The
Company has accounted for this transition as a reorganization and accordingly,
restated its capital accounts as of January 1, 2001. From January 1,
2001, the
Company's primary activity has been the raising of capital in order
to pursue
its goal of becoming a significant participant in the formation and
commercialization of interactive, optical holography for the communications
and
entertainment industries.
The
mission of the Company is to pursue, develop and market full-color,
360-degree
person-to-person holographic technology. Its primary focus is to invest
and
participate in the commercialization of optical holographic technologies
now
planned and/or under development, particularly those employing derivative
broadband, satellite-based systems. At this time, the Company owns
no
intellectual property rights in holographic technologies and has no
contracts or
agreements pending to acquire such rights.
Uncertainties
The
accompanying financial statements have been prepared on a going concern
basis.
The Company is in the development stage and has no source of revenue
to fund the
development of its planned product and to pay operating expenses, resulting
in a
cumulative net loss of $1,999,645 for the period from inception (January
1,
2001) to December 31, 2005, and a net loss of $592,811 and $617,875
for the
years ended December 31, 2005 and 2004, respectively. The ability of
the Company
to continue as a going concern during the next year depends on the
successful
completion of the Company's capital raising efforts to fund the development
of
its planned products. The financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going
concern.
Note
2 - Summary of Significant Accounting Policies
Research
and development
Research
and development costs, including payments made to the University of
Oklahoma
pursuant to the sponsored research agreement (Note 5), are expensed
as incurred.
Stock-based
compensation
The
Company accounts for stock-based compensation arrangements for employees
in
accordance with Statement of Accounting Standard (SFAS) No. 123(R),
Share-Based
Payments. The
Company recognizes expenses for employee services received in exchange
for stock
based on the grant-date fair value of the shares awarded. The Company
accounts
for stock issued to non-employees in accordance with the provisions
of SFAS No.
123, Accounting
for Stock-Based Compensation,
and the
related Emerging Issues Task Force (EITF) Consensuses.
Income
taxes
The
Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards (SFAS) No. 109, Accounting for Income
Taxes.
SFAS
No. 109
requires
the recognition of deferred tax assets and liabilities for the estimated
future
tax consequences attributable to temporary differences between the
financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. In addition, SFAS
No. 109
requires
the recognition of future tax benefits, such as net operating loss
carryforwards, to the extent that realization of such benefits is more
likely
than not. The amount of deferred tax liabilities or assets is calculated
using
tax rates in effect for the year in which those temporary differences
are
expected to be recovered or settled. The effect on deferred tax assets
and
liabilities of a change in tax rate is recognized in income in the
period that
includes the enactment date. Valuation allowances are established when
necessary
to reduce deferred tax assets to the amounts more likely than not to
be
realized.
Net
income (loss) per common share
The
Company computes net income (loss) per share in accordance with SFAS
No. 128,
Earnings
per Share
and
SEC
Staff Accounting Bulletin No. 98 (“SAB 98”).
Under
the provisions of SFAS
No. 128
and
SAB
98,
basic
net income (loss) per common share is based on the weighted-average
outstanding
common shares. Diluted net income (loss) per common share is based
on the
weighted-average outstanding shares adjusted for the dilutive effect
of warrants
to purchase common stock and convertible debentures. Due to the Company’s
losses, such potentially dilutive securities are antidilutive for all
periods
presented. The weighted average number of potentially dilutive shares
is
26,140,000 and 4,360,000 for the years ended December 31, 2005 and
2004,
respectively.
Use
of estimates
The
preparation of financial statements in conformity with U. S. generally
accepted
accounting principles requires management to make estimates and assumptions
that
affect the reported amounts of assets, liabilities, revenues, expenses
and the
disclosure of contingent assets and liabilities. Actual results could
differ
from the estimates and assumptions used.
Note
3 - Recent Accounting Pronouncements
In
May
2005, the Financial Accounting Standards Board issued Statement of
Financial
Accounting Standards No. 154, Accounting
Changes and Error Corrections (SFAS 154),
which replaces APB Opinion No. 20, Accounting
Changes,
and
FASB Statement 3, Reporting
Accounting Changes in Interim Financial Statements.
This
statement changes the requirements for the accounting for and reporting
of a
change in accounting principle, including all voluntary changes in
accounting
principles. It also applies to changes required by an accounting pronouncement
in the unusual instance that the pronouncement does not include specific
transition provisions. This statement requires voluntary changes in
accounting
principles be recognized retrospectively to prior periods' financial
statements,
rather than recognition in the net income of the current period. Retrospective
application requires restatements of prior period financial statements
as if
that accounting principle had always been used. This statement carries
forward
without change the guidance contained in Opinion 20 for reporting the
correction
of an error in previously issued financial statements and a change
in accounting
estimate. The provisions of SFAS No. 154 are effective for accounting
changes and corrections of errors made in fiscal years beginning after
December 15, 2005.
Note
4 - Fair Value of Financial Instruments
The
following methods and assumptions were used to estimate the fair value
of each
class of financial instrument held by the Company:
Current
assets and current liabilities
- The
carrying value approximates fair value due to the short maturity of
these
items.
Debentures
payable
- The
fair value of the Company's debentures payable has been estimated by
the Company
based upon the liability’s characteristics, including interest rate. The
carrying value approximates fair value.
Note
5 - Commitments and Contingencies
On
April
20, 2004, the Company entered into a Sponsored Research Agreement entitled
"Investigation of Emerging Digital Holography Technologies" (Phase
I) with the
University of Oklahoma - Tulsa (University), which expired October
19, 2004. The
Company paid the University $14,116 pursuant to this agreement. On
July 15,
2005, the Company entered into a Sponsored Research Agreement with
the
University (Phase II), which expires January 14, 2007. Under this agreement
the
University will conduct a research project entitled "Investigation
of
3-Dimensional Display Technologies" and the Company will pay the University
$453,584 payable at various dates from November 10, 2005 through July
15, 2006
to cover the costs of the research. Either party may terminate the
agreement at
any time by giving 60 days written notice.
In
November 2005, the Company signed an agreement with Concordia Financial
Group,
Inc. (Concordia) for Concordia to obtain for the Company bridge capital
of not
less than $300,000 and additional financing of not less than $3,000,000.
The
Company will pay Concordia a retainer of $2,000 per month plus direct
expenses
through June 30, 2006, and a transaction fee of 5% of the proceeds
from bridge
capital and 5% of capital stock.
At
December 31, 2005 and 2004, 17,000,000 shares of common stock are held
by a
third party and are in dispute as to whether or not they are legally
issued.
Management contends that the shares were not legally issued and should
be
returned to the Company. However, they are reported as issued and outstanding
at
par value in the accompanying financial statements due to the uncertainty
surrounding resolution of the issue.
Note
6 - Debentures Payable
On
December 15, 2005, the Company issued convertible debentures aggregating
$160,000 at par value for cash. The debentures bear interest at 8%
per annum,
and are due no later than December 31, 2007. The Company may prepay
without
penalty all of the outstanding principal amount and accrued interest.
Upon
receiving notice of the Company's intent to prepay, holders of the
debentures
may convert the principal amount due to common stock at the rate of
one share of
common stock for each $.05 of principal amount converted. Upon conversion,
the
Company will pay all accrued interest. No fractional shares will be
issued upon
conversion of a debenture.
Note
7 - Common Stock and Paid-In Capital
At
various dates throughout 2005 and 2004, the Company sold 1,100,000
and 360,000
shares, respectively, of common stock with warrants attached for $.25
per share
pursuant to an exempt offering. Each subscriber received one share
of common
stock with two separate warrants to purchase additional shares of Rule
144 stock
as follows: (a) ten times the number of shares within one year of the
date
subscribed at $.025 per share and (b) another ten times the number
of shares
within two years of the date subscribed at $.05 per share. Warrants
not
exercised under their terms will be terminated. The Company received
$275,000
and $90,000, respectively, in cash.
At
various dates throughout 2005 and 2004, the Company issued 1,740,000
and 340,000
shares, respectively, of its common stock pursuant to the exercise
of $.05
warrants by non-employees. The Company received $86,000 and $17,000,
respectively, in cash.
At
various dates throughout 2005 and 2004, the Company issued 3,520,000
and
1,760,000, respectively, of its common stock pursuant to the exercise
of $.025
warrants by non-employees. The Company received $88,000 and $44,000,
respectively, in cash.
As
of
December 31, 2005, there are warrants outstanding to purchase 8,900,000
shares
of common stock at $.025 per share expiring at various dates throughout
2006;
warrants outstanding to purchase 3,260,000 of common stock at $.05
per share
expiring at various dates throughout 2006; and warrants to purchase
10,780,000
shares of common stock at $.05 per share expiring in 2007.
Common
stock issued for services
During
2005, 2,010,000 shares of common stock were issued for consulting services
for
which the Company recognized $2,469 of expense. During 2004, 3,376,000
shares of
common stock were issued for services for consulting which the Company
recognized $26,829 of expenses.
Additionally,
the Company issued 7,880,000 and 1,980,000 shares of common stock at
various
dates throughout 2005 and 2004, respectively, to its President and
Chief
Executive Officer for services rendered. The Company issued 960,000
and
1,660,000 shares at various dates throughout 2005 and 2004, respectively,
to its
employee for services rendered. The shares are valued using the same
discount
structure as the other common stock transactions and ranged from $.0004
to
$.0074 during 2005 and $.002 to $.014 during 2004. The Company recognized
$23,903 and $49,465 in compensation expense in 2005 and 2004, respectively,
related to these transactions.
During
2004, the Company issued 25,000,000 additional founders shares due
to the
reverse stock split in 2003 and the corporate reorganization that took
place
during 2004. The shares were valued at par value.
The
shares issued were valued at the closing price of the stock on or previous
to
the date of issuance less a 50% discount due to the restrictive nature
of the
stock, a 50% discount for lack of earnings or sales consistency of
the Company,
a 50% discount due to the dollar and share volume of sales of the Company's
securities in the public market, and an additional 35% discount due
to the
trading market in which the Company's securities are sold.
Common
stock rights
Holders
of shares of common stock are entitled to one vote per share on all
matters
submitted to a vote of the shareholders. Shares of common stock do
not have
cumulative voting rights.
Holders
of record of shares of common stock are entitled to receive dividends
when and
if declared by the board of directors. To date, the Company has not
paid cash
dividends. The Company intends to retain any earnings for the operation
and
expansion of its business and does not anticipate paying cash dividends
in the
foreseeable future.
Any
future determination as to the payment of cash dividends will depend
on future
earnings, results of operations, capital requirements, financial condition
and
such other factors as the board of directors may consider.
Upon
any
liquidation, dissolution or termination of the Company, holders of
shares of
common stock are entitled to receive a pro rata distribution of the
assets of
the Company after liabilities are paid.
Holders
of common stock do not have pre-emptive rights to subscribe for or
to purchase
any stock, obligations or other securities of 3DIcon.
Note
8 - Income taxes
At
December 31, 2005 and 2004, the Company had accumulated net operating
losses of
approximately $1,588,000 and $1,031,000, respectively, available to
reduce
future federal and state taxable income. Unless utilized, the loss
carry forward
amounts will begin to expire in 2013.
The
operating loss carry forward, giving rise to deferred tax assets, are
reduced by
a valuation allowance. The Company has established a valuation allowance
for its
deferred tax assets due to the uncertainty of the future utilization
of the loss
carry forward.
The
deferred tax asset consisted of the following:
|
December
31,
2005
|
December
31,
2004
|
||||||
|
Loss
carry forward amount
|
$
|
1,588,000
|
$
|
1,031,000
|
|||
|
Effective
tax rate
|
38
|
%
|
38
|
%
|
|||
|
Deferred
tax asset
|
603,440
|
391,780
|
|||||
|
Less
valuation allowance
|
(603,440
|
)
|
(391,780
|
)
|
|||
|
Deferred
tax asset
|
$
|
-
|
$
|
-
|
|||
Note
9 - Restatement of Financial Statements
The
Company's President and Chief Executive Officer served without cash
compensation
prior to 2004. During 2004, the Company accrued $210,000 of compensation,
which
related to years prior to 2004. As such, the Company's beginning accumulated
deficit has been adjusted by this amount.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our
bylaws provide that 3DIcon
may indemnify any person who was or
is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, other than
an
action by or in the right of the corporation, by reason of
the
fact that he is or was a director, officer, employee or agent
of
the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses, including attorneys fees, judgments,
fines, and amounts paid in settlement actually and reasonably incurred by
him in
connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of
the
corporation, and, with respect to any criminal action or proceeding, had
no
reasonable cause to believe his conduct was unlawful.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted
by such
director, officer or controlling person in connection with the securities
being
registered, the registrant will, unless in the opinion of its counsel the
matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
ITEM
25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The
following table sets forth an itemization of all estimated expenses, all
of
which we will pay, in connection with the issuance and distribution of the
securities being registered:
NATURE
OF EXPENSE AMOUNT
|
SEC
Registration fee
|
$
|
197.58
|
||
|
Accounting
fees and expenses
|
15,000*
|
|||
|
Legal
fees and expenses
|
50,000*
|
|||
|
TOTAL
|
$
|
65,197.58*
|
||
| * |
Estimated.
|
ITEM
26. RECENT SALES OF UNREGISTERED SECURITIES.
During
2005, 2,010,000 shares of common stock were issued for consulting services
for
which the Company recognized $2,469 of expense. During 2004, 3,376,000 shares
of
common stock were issued for services for consulting which the Company
recognized $26,829 of expenses.
Additionally,
the Company issued 7,880,000 and 1,980,000 shares of common stock at various
dates throughout 2005 and 2004, respectively, to its President and Chief
Executive Officer for services rendered. The Company issued 960,000 and
1,660,000 shares at various dates throughout 2005 and 2004, respectively,
to its
employee for services rendered. The shares are valued using the same discount
structure as the other common stock transactions and ranged from $.0004 to
$.0074 during 2005 and $.002 to $.014 during 2004. The Company recognized
$23,903 and $49,465 in compensation expense in 2005 and 2004, respectively,
related to these transactions.
At
various dates throughout 2005 and 2004, the Company sold 1,100,000 and 360,000
shares, respectively, of common stock with warrants attached for $.25 per
share
pursuant to an exempt offering. Each subscriber received one share of common
stock with two separate warrants to purchase additional shares of Rule 144
stock
as follows: (a) ten times the number of shares within one year of the date
subscribed at $.025 per share and (b) another ten times the number of shares
within two years of the date subscribed at $.05 per share. Warrants not
exercised under their terms will be terminated. The Company received $275,000
and $90,000, respectively, in cash.
At
various dates throughout 2005 and 2004, the Company issued 1,740,000 and
340,000
shares, respectively, of its common stock pursuant to the exercise of $.05
warrants by non-employees. The Company received $86,000 and $17,000,
respectively, in cash.
At
various dates throughout 2005 and 2004, the Company issued 3,520,000 and
1,760,000, respectively, of its common stock pursuant to the exercise of
$.025
warrants by non-employees. The Company received $88,000 and $44,000,
respectively, in cash.
During
2004, the Company issued 25,000,000 additional shares to the Company’s founder,
President and Chief Executive Officer due to the reverse stock split in 2003
and
the corporate reorganization that took place during 2004. The shares were
valued
at par value.
*
All of
the above offerings and sales were deemed to be exempt under rule 506 of
Regulation D and Section 4(2) of the Securities Act of 1933, as amended.
No
advertising or general solicitation was employed in offering the securities.
The
offerings and sales were made to a limited number of persons, all of whom
were
accredited investors, business associates of 3DIcon Corporation or executive
officers of 3DIcon Corporation, and transfer was restricted by 3DIcon
Corporation in accordance with the
requirements
of the Securities Act of 1933. In addition to representations by the
above-referenced persons, we have made independent determinations that all
of
the above-referenced persons were accredited or sophisticated investors,
and
that they were capable of analyzing the merits and risks of their investment,
and that they understood the speculative nature of their investment.
Furthermore, all of the above-referenced persons were provided with access
to
our Securities and Exchange Commission filings.
Except
as
expressly set forth above, the individuals and entities to whom we issued
securities as indicated in this section of the registration statement are
unaffiliated with us.
ITEM
27. EXHIBITS.
The
following exhibits are included as part of this Form SB-2. References to
"the
Company" in this Exhibit
List
mean
3DIcon Corp., an Oklahoma corporation.
| 3.1 |
Certificate
of Incorporation
|
| 3.2 |
Bylaws
|
| 3.3 |
Amended
Certificate of Incorporation
|
| 3.4 |
Amended
Certificate of Incorporation
|
| 3.5 |
Amended
Certificate of Incorporation
|
| 5.1 |
Consent
of Sichenzia Ross Friedman Ference
LLP
|
| 10.1 |
Securities
Purchase Agreement
|
| 10.2 |
Amendment
No. 1 to Securities Purchase Agreement and
Debenture
|
| 10.3 |
Registration
Rights Agreement
|
| 10.4 |
$100,000
convertible debenture
|
| 10.5 |
$1.25
million convertible debenture
|
| 10.6 |
Common
Stock Purchase Warrant
|
|
Sponsored
Research Agreement by and between 3DIcon Corporation and the Board
of
Regents of the University of
Oklahoma
|
|
Sponsored
Research Agreement Modification No. 1 by and between 3DIcon Corporation
and the Board of Regents of the University of
Oklahoma
|
|
Sponsored
Research Agreement Modification No. 2 by and between 3DIcon Corporation
and the Board of Regents of the University of
Oklahoma
|
| 23.1 |
Consent
of Sichenzia Ross Friedman Ference LLP (see Exhibit 5.1)
|
| 23.2 |
Consent
of Tullius Taylor Sartain & Sartain
LLP
|
ITEM
28. UNDERTAKINGS.
The
undersigned registrant hereby undertakes to:
(1)
File,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement to: (i) Include any prospectus required
by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities
Act"); (ii) Reflect in the prospectus any facts or events which, individually
or
together, represent a fundamental change in the information in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume
of
securities offered (if the total dollar value of the securities offered would
not exceed that which was registered) and any deviation from the low or high
end
of the estimated maximum offering range may be reflected in the form of a
prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set forth
in
the "Calculation of Registration Fee" table in the effective registration
statement, and (iii) Include any additional or changed material information
on
the plan of distribution.
(2)
For
determining liability under the Securities Act, treat each post-effective
amendment as a new registration statement of the securities offered, and
the
offering of the securities at that time to be the initial bona fide
offering.
(3)
File
a post-effective amendment to remove from registration any of the securities
that remain unsold at the end of the offering.
(4)
For
determining liability of the undersigned small business issuer under the
Securities Act to any purchaser in the initial distribution of the securities,
the undersigned undertakes that in a primary offering of securities of the
undersigned small business issuer pursuant to this registration statement,
regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means
of
any of the following communications, the undersigned small business issuer
will
be a seller to the purchaser and will be considered to offer or sell such
securities to such purchaser:
(i)
Any
preliminary prospectus or prospectus of the undersigned small business issuer
relating to the offering required to be filed pursuant to Rule 424; (ii)
Any
free writing prospectus relating to the offering prepared by or on behalf
of the
undersigned small business issuer or used or referred to by the undersigned
small business issuer; (iii) The portion of any other free writing prospectus
relating to the offering containing material information about the undersigned
small business issuer or its securities provided by or on behalf of the
undersigned small business issuer; and (iv) Any other communication that
is an
offer in the offering made by the undersigned small business issuer to the
purchaser.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and
is, therefore, unenforceable.
In
the
event that a claim for indemnification against such liabilities (other than
the
payment by the registrant of expenses incurred or paid by a director, officer
or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person
in connection with the securities being registered, the registrant will,
unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
(5)
Each
prospectus filed pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying on Rule
430B
or other than prospectuses filed in reliance on Rule 430A, shall be deemed
to be
part of and included in the registration statement as of the date it is first
used after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to
such
first use, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made
in
any such document immediately prior to such date of first use.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant,
3DIcon Corporation, certifies that it has reasonable grounds to believe that
it
meets all of the requirements for filing on Form SB-2 and has duly caused
this
Registration Statement on Form SB-2 to be signed on its behalf by the
undersigned, thereunto duly authorized.
| 3DICON CORPORATION | |
|
/s/
Martin Keating
|
|
| Name: | Martin Keating |
| Title: |
Chief
Executive Officer
|
| (Principal Executive and Financial Officer) | |
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
on Form SB-2 has been signed below by the following persons in the capacities
and on the dates indicated:
|
SIGNATURE
|
TITLE
|
DATE
|
|||
| By: |
/s/
Martin Keating
|
President,
Chief Executive Officer Director
|
December
15, 2006
|
||
|
Martin
Keating
|
(Principal
Executive and Financial Officer)
|
||||
| By: |
/s/Philip
Suomu
|
Director
|
December
15, 2006
|
||
|
Philip
Suomu
|
|||||
| By: |
/s/John
O’Connor
|
Director
|
December
15, 2006
|
||
|
John
O’Connor
|
|||||
II-5
OFFICE
OF
THE SECRETARY OF STATE
CERTIFICATE
OF INCORPORATION
WHEREAS,
the Certificate of Incorporation of,
FIRST
KEATING CORPORATION
has
been filed in the office of the Secretary of State as provided by the laws
of
the State of Oklahoma.
NOW
THEREFORE, I, the undersigned, Secretary of State of the State of
Oklahoma, by virtue of the powers vested in me by law, do hereby
issue
this certificate evidencing such filing
IN
TESTIMONY WHEREOF, I hereunto set my hand and cause to be affixed the Great
Seal
of the State of Oklahoma,
|
Filed
in the City of Oklahoma City this 11TH
day
of
AUGUST,
1995.
.
|
||
| |
|
|
|
/s/
|
||
|
Secretary of State |
||
|
CERTIFICATE
OF INCORPORATION
|
FILED
|
|
OF
FIRST KEATING CORPORATION |
AUG
11,
1995
|
OKLA:
SECRETARY OF
STATE
TO
THE
OKLAHOMA SECRETARY OF STATE:
The
undersigned incorporators hereby certify as follows:
FIRST:
The name of this Corporation is First Keating Corporation.
SECOND:
The address of the corporation's registered office in
the
State of Oklahoma is 7507 South Sandusky, Tulsa, Tulsa County,
Oklahoma 74136-6107. The name of the corporation's registered,
agent at such address is Martin Keating.
THIRD:
The effective date of incorporation shall be August 11, 1995.
FOURTH:
The duration of the corporation shall be perpetual.
FIFTH:
The purpose of the corporation is to engage in any lawful
act or activity for which corporations may be organized under the
general corporation law of the State of Oklahoma.
SIXTH:
The total number of shares of stock which the corporation
shall have authority to issue is 5,000,000 shares, each of
the
shares having a par value of $. 01, thereby resulting in the corporation
having total authorized capital stock in the amount of $50,000.00
all of which shall be common stock.
SEVENTH:
The name and mailing address of the incorporator is as
follows:
|
NAME
|
MAILING
ADDRESS
|
|
Larry
D. Leonard
|
1516 S. Boston Ave., Suite 316 |
| Tulsa, OK 74119-4019 |
EIGHTH:
To the extent and in the manner provided by the laws of the State of Oklahoma,
the Board of Directors is expressly authorized
to indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed
action, suit or proceeding whether civil, criminal, administrative
or investigative, by reason of the fact that such person
is
or was a director, officer, employee or agent of the Corporation
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another Corporation, partnership,
joint venture, trust or other enterprise,
against
expenses,
including attorneys' fees, judgments, fines and amounts paid
in
settlement actually and reasonably incurred.
NINTH:
The vote of the majority of the holder's of stock and three quarters of the
members of the board of directors shall be required
to approve a sale, lease or exchange of substantially all or
all of
the assets of the corporation, the liquidation of the corporation,
the merger or consolidation of the corporation with another
corporation or the dissolution of the corporation.
THE
UNDERSIGNED for the purpose of forming a corporation under the
laws
of the State of Oklahoma does certify that the facts herein
stated are true, and has accordingly hereunder set their hand this
9th
day of August, 1995.
| "INCORPORATOR" | |
| Larry D. Leonard |
BYLAWS
OF
FIRST
KEATING CORPORATION
ARTICLE
I
OFFICES
The
Registered Office of the Corporation shall be in the City
of
Tulsa, County of Tulsa, State of Oklahoma. The Corporation
may also have offices at such other places, both within
and without the State of Oklahoma, as the Board of Directors
may from time to time determine or the business of the Corporation
may require.
ARTICLE
II
SHAREHOLDERS
Section
1. Meetings
of Shareholders.
All
meetings of the Shareholders
of the Corporation, for any purpose, shall be held at
such
place within or without the State of Oklahoma as shall be designated from
time
to time by the Board of Directors and stated in
the
notice of the meeting.
Section
2. Annual
Meeting.
The
annual meeting of Shareholders
shall be held on the 1st day of August at 10:00 a.m.,
or
at such other date and time as shall be designated from time
to
time by the Board of Directors and stated in the notice of
the
meeting, at which the Shareholders shall elect, by majority
vote, a Board of Directors and transact such other business
as may properly be brought before the meeting.
Section
3. Notice
of
Annual Meeting.
Written
notice of the
annual meeting stating the location, date and hour of the meeting shall be
given
to each Shareholder entitled to vote at such
meeting not less than ten (10) nor more than sixty (60) days before the date
of
the meeting.
Section
4. Special
Meetings.
Special
meetings of the Shareholders,
for any purpose or purposes, unless otherwise prescribed
by statute or by the Certificate of Incorporation, may be
called
by the Chairman of the Board, President or Secretary at the
request in writing of a majority of the Board of Directors, or
at the
request in writing of Shareholder's owning a majority in amount
of
the entire capital stock of the Corporation issued and outstanding
and entitled to vote. Such request shall state the purpose
or purposes of the proposed meeting.
Section
5. Notice
of
Special Meeting.
Written
notice of a special
meeting stating the location, date and hour of the meeting
and the purpose or purposes for which the meeting is called,
shall be given to each Shareholder entitled to vote thereat,
not
less
than ten (10) nor more than sixty (60) days before
the date of the meeting.
Section
6. Closing
of Transfer Books and Fixing Record Date.
The
Officer who has charge of the stock ledger of the Corporation
shall prepare and make, at least ten days before every
annual meeting of Shareholders, a complete list of the Shareholders
entitled to vote at the Meeting, arranged in alphabetical
order, and showing the address of each shareholder and
the
number of shares registered in the name of each Shareholder.
Such list shall be open to the examination of any Shareholder, for any purpose
germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to
the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where
the
meeting is to be held. The list shall also be produced and
kept
at the time and place of the Meeting during the whole time
thereof, and may be inspected by any Shareholder who is present.
Section
7. Limitation
on Business Transacted.
Business
transacted
at any special Meeting of Shareholders shall be limited
to the purposes stated in the notice.
Section
8. Quorum.
The
holders of the majority of the shares
issued and outstanding and entitled to vote thereat, present
in person or represented by proxy, shall constitute a quorum
at
all Meetings of the Shareholders for the transaction of business
except as otherwise provided by statute or by the Certificate
of Incorporation. If, however, such quorum shall not be
present or represented at any Meeting of the Shareholders, the Shareholders
entitled to vote thereat, present in person or represented by proxy, shall
have
power to adjourn the meeting from
time
to time, without notice other than announcement at the meeting, until a quorum
shall be present or represented, At such adjourned
meeting at Which a quorum shall be present or represented,
any business may be transacted which might have been transacted
at the meeting as originally notified. If the adjournment
is for more than thirty days, or if after the adjournment
a new record date is fixed for the adjourned meeting, a
notice
of the adjourned meeting shall be given to each Shareholder
of record entitled to vote at the meeting.
Section
9. Vote
Required.
When a
quorum is present at any meeting,
the vote of the holders of a majority of the stock having
voting power present in person or represented by proxy shall
decide any question brought before such meeting, unless the question
is one upon which, by express provision of the statutes or
of the
Certificate of Incorporation, a different vote is required,
in which case such express provision shall govern and control
the decision of such question.
Section
10. Voting.
Unless
otherwise provided in the Certificate
of Incorporation, each Shareholder shall, at every Meeting
of the Shareholders, be entitled to one vote in person or by
proxy
for each share of the capital stock having voting power held
by
such Shareholder, but no proxy shall be voted on after three
years from its date, unless the proxy provides for a longer period.
Section
11. Action
By
Consent.
Any
action required to be taken
or
which may be taken at any annual or Special Meeting of the Shareholders,
may be
taken without a meeting, without prior notice
and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number1
of
votes
that would be necessary to authorize or take such action at a
meeting
at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action
by
the Shareholders without a meeting by less than unanimous
written consent shall be given to those Shareholders who
have
not consented in writing.
ARTICLE
III
DIRECTORS
Section
1. General
Powers.
The
business of the Corporation shall
be
managed by or under the direction of its Board of Directors
which may exercise all such powers of the Corporation and
do
all such lawful acts and things as are not by statute or by the Certificate
of
Incorporation or by these Bylaws directed or
required to be exercised ox done by the Shareholders.
Section
2. Number
of
Directors.
The
number of Directors which
shall constitute the whole board shall be not less than one nor
more
than seven. The first board shall consist of one (1) Director.
Thereafter, within the limits above specified, the number
of
Directors shall be determined by resolution of the Board
of
Directors or by the Shareholders at an annual or special meeting.
The Directors shall be elected at the Annual Meeting of the
Shareholders, except as provided in Section 3 of this Article,
and each Director elected shall hold office until his successor
is elected and qualified or until removed. Directors need
not
be either Shareholders or residents of the State of Oklahoma.
Section
3. Vacancies
.
Vacancies and newly created directorships
resulting from any increase in the authorized number
of
Directors may be filled by a majority of
the
Directors then
in
office, though less than a quorum, or by a sole remaining Director, and the
Directors so chosen shall hold office until the next
annual election or until their successors are duly elected and
qualified, unless sooner displaced. If there are no Directors
in office, then an election of Directors may be held in the manner provided
by
law.
Section
4. Meetings
of Directors.
The
Board of Directors of
the
Corporation may hold meetings, both regular and special, either
within or without the State of Oklahoma.
Section
5. Annual
Meeting.
Regular
meetings of the Board of Directors may be held at such time and place as
shall
be determined
by the Board of Directors and if so determined, no notice
thereof need be given. At least five (5) days notice of all
regular meetings shall be given stating the time, date and location
of such meeting as well as the business to be conducted thereat.
Section
6. Special
Meetings.
Special
meetings of the board may
be
called by the president on three days' notice to each Director,
either personally or by mail or by telegram. Special meetings
shall be called by the Chairman of the Board, any Vice Chairman of the Board,
the President, any Vice-president or the Secretary
in like manner and on like notice on the written request
of two "Directors unless the board consists of less than three
Directors in which case special meetings shall be called by the
Chairman of the Board, any Vice Chairman of the Board, the President,
any Vice-President or the Secretary in like manner and on
like
notice on the written request of only one Director. Notice
of
such meetings shall state the place, date, hour and business
to be conducted at such meeting.
Section
7. Quorum.
At all
meetings of the board a majority of
the
Directors shall constitute a quorum for the transaction of business
and the act of a majority of the Directors present at any
meeting at which there is a quorum shall be the act of the Board
of
Directors, except as may be otherwise specifically provided
by statute or by the Certificate of Incorporation. If a quorum
shall not be present at any meeting of the Board of Directors,
the Directors present thereat may adjourn the meeting from
time
to time, without notice other than announcement at the meeting,
until a quorum shall be present.
Section
8. Action
Without Meeting.
Unless
otherwise restricted
by the Certificate of Incorporation or these Bylaws, any
action required or permitted to be taken at any meeting of the Board of
Directors or of any Committee thereof may be taken without
a
meeting, if all members of the Board or Committee, as the case may be, consent
thereto in writing, and the writing or writings
are filed with the minutes of proceedings of the Board or
Committee.
Section
9. Participation
In Meeting By Conference Telephone.
Unless
otherwise restricted by the Certificate of Incorporation
or these Bylaws, members of the Board of Directors, or
any
Committee designated by the Board of Director's, may participate
in a meeting of the Board of Directors, or any Committee,
by means of conference telephone or similar communications
equipment by means of which all persons participating
in the meeting can hear each other, and such participation
in a meeting shall constitute presence in person at the
meeting.
Section
10. Committees
of the Board of Directors.
The
Board
of
Directors, by a vote of the majority of all members of the
Board
of Directors, may from time to time designate committees
of the Board of Directors, each committee to consist of
two
(2) or more of the directors, to serve at the pleasure of the Board of
Directors. Any committee so designated may exercise such
power and authority of the Board of Directors as the resolution
so designating the committee shall provide. In the absence
or disqualification of any member of any committee, the member
or
members of the committee present at the meeting and not disqualified
from voting, whether or not he or they constitute a quorum,
may by unanimous vote appoint another member of the Board of
Directors to act at the meeting in the place of the absent or disqualified
member.
Such
committee or committees shall have the name or names as may
be
determined from time to time by resolution adopted by the Board
of
Directors.
Section
11. Conduct
of Business.
Each
committee may determine
the procedural rules for meeting and conducting business
and shall act in accordance therewith, except as otherwise
provided herein or required by law. One-third of the members
shall constitute a quorum unless the committee shall consist
of two (2) members, in which event one (1) member shall constitute
a quorum. All matters shall be determined by a majority
vote of the members present. Action may be taken by any committee
without a meeting if all member's thereof consent thereto
in writing, and the writing or writings are filed with the
minutes of the proceeding of such committee. All committees shall
keep regular minutes of their proceedings and report the same
to
the Board of Directors when required.
Section
12. Executive
Committee.
This
Corporation may have an
Executive Committee composed of directors of this Corporation consisting
of three members appointed by the Board of Directors. This
committee shall be designated the "Executive Committee". Members
of the Executive Committee shall serve until terminated by the Board of
Directors or their position is vacated by death or
resignation. Except as otherwise provided by law, the Executive
Committee shall have and may exercise all powers of the
Board
of Directors and the management of the business and affairs
of the Corporation shall be conducted by the Executive Committee between
meetings of the Board of Directors as if such actions were regularly adopted
and
exercised by the Board of Directors.
Section
13. Salaries
and Expenses of Directors.
Unless
otherwise
restricted by the Certificate of Incorporation or these Bylaws,
the Board of Directors shall have the authority to fix the
compensation of Directors. The Directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting
of the Board of
Directors
or a stated salary as Director. No
such
payment shall preclude any Director from serving the Corporation
in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed
like compensation for attending committee meetings.
Section
14. Removal
of Directors.
Unless
otherwise restricted
by the Certificate of Incorporation or Bylaws, any Director
or the entire Board of Directors may be removed, with or without cause, by
the
holders of a majority of shares entitled to vote at a regular or Special
Meeting
of Shareholders.
ARTICLE
IV
NOTICES
Section
1. Forms
of
Notice.
Whenever, under the provisions of
the
statutes or of the Certificate of Incorporation or of these
Bylaws, notice is required to be given to any Director- or Shareholder,
it shall not be construed to mean personal notice. Such
notice may be given in writing, by mail, addressed to such Director
or Shareholder, at such person's address as it appears on
the
records of the Corporation, with postage thereon prepaid, and such notice
shall
be deemed to be given at the time when the same
shall be deposited in the United States mail. Notice to Directors
may also be given by telegram and, in such case, shall be
deemed
given when delivered to the sending telegram office.
Section
2. Waiver.
Whenever
any notice is required to be given
under the provisions of the statutes or of the Certificate of
Incorporation or of these Bylaws, a waiver thereof in writing,
signed
by
the person or persons entitled to said notice, whether before
or
after the time stated therein, shall be deemed equivalent
thereto,
ARTICLE
V
OFFICERS
Section
1. General.
The
Officers of the Corporation shall be
chosen
by the Board of Directors and shall, at a minimum, consist
of a president and a secretary. The Board of Directors may
also
choose additional officers, including a chairman of the board,
a
vice chairman of the board, one or more vice-presidents, a
treasurer, and one or more assistant secretaries and assistant treasurer's.
Any number of offices may be held by the same person,
unless the Certificate of Incorporation or these Bylaws otherwise
provide.
Section
2. Election
of Officers.
The
Board of Directors at its
first
meeting and after each Annual Meeting of Shareholders shall
choose, at a minimum, a President and a Secretary.
Section
3. Other
Officers.
The
Board of Directors may appoint
such other Officers and agents as it shall deem necessary who
shall
hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time
to
time by the Board.
Section
4. Salaries.
The
salaries of all Officers and agent
of
the Corporation shall be fixed by the Board of Directors.
Section
5. Term
of
Office.
The
Officers of the Corporation shall
hold office until their successors are chosen and qualify. Any
Officer elected or appointed by the Board of Directors may be removed
at any time by the affirmative vote of a majority of the Board
of
Directors. Any vacancy occurring in any office of the Corporation
shall be filled by the Board of Directors.
Section
6. The
Chairman of the Board.
The
Chairman of the Board,
or, in the absence of the Chairman, a Vice Chairman of the Board
of
Directors, if chosen, shall preside at all meetings of the
Board
of Directors, and shall perform such other duties and have
such
other powers as the Board of Director's may from time to time
prescribe.
Section
7. The
President.
The
President shall be the Chief Executive
Officer of the Corporation, shall preside at all meetings
of the Shareholders and the Board of Directors, shall have
general and active management of the business of the Corporation
and shall see that all orders and resolutions of the Board
of
Directors are carried into effect. The President shall execute bonds, mortgages
and other contracts requiring a seal, under the seal of the Corporation,
except
where required or permitted
by law to be otherwise signed and executed and except where
the
signing and execution thereof shall be expressly delegated
by the Board of Directors to some other Officer- or Agent
of
the Corporation.
Section
8. The
Vice-President.
In the
absence of the President
or in the event of the President's inability or refusal to
act,
the Vice-President (or in the event there be more than one
Vice-President, the Vice-presidents in the order designated by
the
Directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting,
shall
have all the powers of and be
subject to all the restrictions upon the President. The Vice-Presidents
shall perform such other duties and have such other powers
as
the Board of Directors may from time to time prescribe.
Section
9. The
Secretary.
The
Secretary shall attend all meetings of the Board of Directors and all meetings
of the Shareholders and record all the proceedings of the meetings of
the
Corporation and of the Board of Directors in a book to be kept
for
that purpose and shall perform like duties for the standing
committees when required. The Secretary shall give, or' cause
to
be given, notice of all meetings of the Shareholders and special
meetings of the Board of Directors, and shall perform such
other duties as may be prescribed by the Board of Directors or
the
President, under whose supervision he shall be. The Secretary shall have
custody
of the corporate seal of the Corporation
and the Secretary, or an Assistant Secretary, shall have
authority to affix the same to any instrument requiring it and
when
so affixed, it may be attested by the Secretary's signature
or by the signature of such Assistant Secretary. The Board
of
Directors may give general authority to any other Officer
to affix the seal of the Corporation and to attest the affixing
by such persons' signature.
Section
10. The
Assistant Secretary.
The
Assistant Secretary,
or if there be more than one, the Assistant Secretaries
in the order determined by the Board of Directors (or if
there
be no such determination, then in the order of their election)
shall, in the absence of the Secretary or in the event of
the
Secretary's inability or refusal to act, perform the duties
and exercise the powers of the Secretary and shall perform such
other duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section
11. The
Treasurer.
The
Treasurer shall have the custody
of the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys and other
valuable effects in the name and to the credit of the Corporation
in such depositories as may be designated, by the Board
of
Directors.
Section
12. Reports.
The
Treasurer shall disburse the funds
of
the Corporation as may be ordered by the Board of Director's,
taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account
of all the Treasurer's transactions as Treasurer and of the
financial condition of the Corporation.
Section
13. Bond.
The
Treasurer, if required by the Board of
Directors, shall give the Corporation a bond (which shall be renewed
at such intervals as the Board requires) in such sum and
with
surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of the Treasurer's
office and for the restoration to the Corporation, in case of the Treasurer's
death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property
of whatever kind in the Treasurer's possession or under the
Treasurer's control belonging to the Corporation.
Section
14. The
Assistant Treasurer.
The
Assistant Treasurer,
or if there shall be more than one, the Assistant Treasurers
in the order determined by the Board of Directors (or if
there
be no such determination, then in the order of their election)
shall, in the absence of the Treasurer or in the event of
the
Treasurer's inability or refusal to act, perform the duties
and exercise the powers of the Treasurer and shall perform such
other duties and have such other powers as the Board of Directors
may from time to time prescribe.
ARTICLE
VI
CERTIFICATES
FOR SHARES; TRANSFER;
RECORD DATE AND REGISTERED SHAREHOLDERS
RECORD DATE AND REGISTERED SHAREHOLDERS
Section
1. Stock
Certificates.
The
shares of the Corporation
shall be represented by a certificate or certificates.
Certificates shall be signed by, or in the name of the
Corporation by, the Chairman or Vice-chairman of the Board of Directors,
or the President or a Vice-President and the Treasurer' or
an
Assistant Treasurer, or the Secretary or an Assistant Secretary
of the Corporation.
Section
2. Facsimile
Signatures.
Any or
all of the signatures
on a certificate may be facsimile. In case any Officer,
Transfer Agent or Registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased
to
be such Officer, Transfer Agent or Registrar before such
certificate is issued, it may be issued by the Corporation with
the
same effect as if such person was such Officer, Transfer Agent
or-
Registrar at the date of issue.
Section
3. Lost
Certificates.
The
Board of Directors may direct
a
new certificate or certificates to be issued in place of any
certificate or1
certificates theretofore issued by the Corporation
alleged to have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming the
certificate of stock to be lost, stolen or destroyed. when authorizing such
issue of a new certificate or certificates or certificated
shares, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed certificate or
certificates, or such person's legal representative, to advertise
the same in such manner as it shall require and/or to give
the
Corporation a bond in such sum as it may direct as indemnity
against any claims that may be made against the Corporation
with respect to the certificate alleged to have been lost,
stolen or destroyed,.
Section
4. Transfer
of Stock.
Subject
to transfer restrictions
permitted by the Oklahoma General Corporation Act and
restrictions on transfer imposed by the Corporation to prevent
possible violations of federal and state securities laws, upon
surrender' to the Corporation or the Transfer' Agent of the Corporation
of a certificate for shares duly endorsed or accompanied
by proper evidence of succession, assignation or authority
to transfer, it shall be the duty of the Corporation to issue
a
new certificate to the person entitled thereto, cancel the
old
certificate and record the transaction upon its books.
Section
5. Fixing
Record Date.
In order
that the Corporation
may determine the Shareholders entitled to notice of or
to
vote at any meeting of Shareholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or- entitled to exercise any
rights in respect of any change, conversion or exchange of stock
or
for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more
than
sixty nor less then ten days before the date of such meeting,
nor more than sixty days prior to any other- action. A determination
of Shareholders of record entitled to notice of or to
vote
at a meeting of Shareholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.
Section
6. Registered
Shareholders.
The
Corporation shall be
entitled to recogni2e the exclusive right of a person registered
on its books as the owner of shares for all purposes, including,
without limitation, the right to receive dividends and to
vote
on all issues submitted to a vote of Shareholders, and shall,
not be bound to recognize any equitable or other- claim to or
interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Oklahoma.
ARTICLE
VII
GENERAL PROVISIONS
Section
1. Dividends.
Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation,
if
any, may be declared by the Board of Directors at
any
regular or special meeting, pursuant to law. Dividends may
be
paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
Section
2. Reserve.
Before
payment of any dividend, there may be set aside out of any funds of the
Corporation available for
dividends such sum or sums as the Directors from time to time,
in
their absolute discretion, think proper as a reserve or reserves
to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for
such
other purpose as the Directors shall think conducive to
the
interest of the Corporation, and the Directors may modify or
abolish any such reserve in the manner in which it was created.
Section
3. Annual
Statement.
The
Board of Directors shall present
at each annual meeting, and at any special meeting of the Shareholders
when called for by vote of the Shareholders, a full and
clear1
statement of the business and condition of the Corporation.
Section
4. Checks
or
Demands for Money.
All
checks or demands
for money and notes of the Corporation shall be signed by such
Officer or Officers or such other person or persons as the Board
of
Directors may from time to time designate.
Section
5. Fiscal
Year.
The
fiscal year of the Corporation shall
be
as set by resolution of the Board of Directors.
Section
6. Seal. The corporate seal shall have inscribed thereon
the name of the Corporation and, may be used by causing it
or a
facsimile thereof to be impressed or affixed or reproduced
or otherwise.
Section
7. Books
of
Account.
The
Corporation's Books of Account
and other records shall be kept at its principal place of business.
ARTICLE
VIII
INDEMNIFICATION
OF OFFICERS. DIRECTORS. EMPLOYEES AND AGENTS
Section
1
. Indemnification:
Actions other than by the Corporation.
The
corporation may indemnify any person who was (or
is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, other than
an
action by or in the right of the corporation, by reason of
the
fact that he is or was a director, officer, employee or agent
of
the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses, including attorneys1
fees,
judgments,
fines, and amounts paid in settlement actually and reasonably incurred by
him in
connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of
the
corporation, and, with respect to any criminal action or proceeding, had
no
reasonable cause to believe his conduct was unlawful. The termination of
any
action, suit or proceeding by judgment, order, settlement, conviction, or
upon a
plea of nolo contender e or its equivalent, shall not, of itself, create
a
presumption
that the person did not act in good faith and in a manner
which he reasonably believed to be in or' not opposed to the best interests
of
the corporation, and, with respect to any criminal action or proceeding,
had
reasonable cause to believe that
his
conduct was unlawful.
Section
2
. Indemnification:
Actions by the Corporation. The
corporation may indemnify any person who was or is a party or
is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure
a
judgment in its favor by reason of the fact that he is or
was a
director', officer, employee or' agent of the corporation, or
is or
was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of
the
corporation and except that no indemnification shall be made
in
respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless
and only to the extent that the court in which such action or
suit
was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the
case,
such person is fairly and reasonably entitled
to indemnity for such expenses which the court shall deem
proper.
Section
3. Expenses
and Attorneys' Fees.
To the
extent that
a
director, officer, employee or agent of the corporation has
been
successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in subsection 8.1 or 8.2 of
this
Article VIII, or in defense of any claim, issue or matter therein,
he may be indemnified against expenses, including attorneys'
fees, actually and reasonably incurred by him in connection
therewith.
Section
4. Authorization
of Indemnification.
Any
indemnification
under the provisions of subsection 8,1 or 8.2 of this
Article VIII, unless ordered by a court, shall be made by the corporation
only
as authorized in the specific case upon a determination
that indemnification of the director, officer-, employee
or agent is proper in the circumstances because he has met
the
applicable standard of conduct set forth in subsection 8.1
or
8.2 of this Article VIII. Such determination shall be made:
(1) by
the
board of directors by a majority vote of a quorum
consisting of directors who were not parties to such action,
suit or proceeding; or
(2) if
such a
quorum is not obtainable, or, even if obtainable
a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion; or
(3) by
the
shareholders.
Section
5. Advance
Indemnification.
Expenses
incurred by
an
officer or director in defending a civil or criminal action,
suit or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director
or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the corporation
as authorized by the provisions of this Article VIII. Such
expenses incurred by other employees and agents may be so paid
upon
such terms and conditions, if any, as the board of directors
deems appropriate.
Section
6. Non-Exclusive
Indemnification.
The
indemnification
provided by or granted pursuant to the other provisions
in this Article VIII shall not be deemed exclusive of any
other
rights to which those seeking indemnification or advancement
of expenses may be entitled under any bylaw, agreement,
vote of shareholders or disinterested directors or otherwise, both as to
action
in his official capacity and as to action
in
another capacity while holding such office.
Section
7. Insurance.
The
corporation shall have power to
purchase and maintain insurance on behalf of any person who is or
was a
director, officer, employee or agent of the corporation, or1
is or
was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity,
or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against
such liability under the provisions of this Article VIII.
Section
8. Constituent
Corporation.
For
purposes of this
Article VIII, references to "the corporation" shall include without
limitation, in addition to this corporation, any constituent
corporation, including any constituent of a constituent,
absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority
to indemnify its directors, officers, and employees or agents,
so that any person who is or was a director, officer, employee
or agent of such constituent corporation, or is or was serving
at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand
in
the same position under1
the
provisions of this Article VIII
with
respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate
existence had continued.
Section
9. Other
Enterprises.
For
purposes of this Article
VIII, references to "other enterprises" shall include without
limitation employee benefit plans; references to "fines" shall
include without limitation any excise taxes assessed on a person with respect
to
an employee benefit plan; and references to
"serving at the request of the corporation" shall include without
limitation any service as a director, officer, employee or
agent
of the corporation which imposes duties on, or involves
services, by such director, officer, employee, or agent with
respect to an employee benefit plan, its participants, or beneficiaries;
and a person who acted in good faith and in a manner
he
reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be
deemed
to have acted in a manner "not opposed to the best interests
of the corporation" as referred to in this Article VIII.
Section
10. Continuation.
The
indemnification and advancement
of expenses provided by, or granted pursuant to this Article VIII shall,
unless
otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit
of the heirs, executors and administrators of such a person,
ARTICLE
IX
AMENDMENTS
AMENDMENTS
Section
1. These Bylaws may be altered, amended or repealed
or new Bylaws may be adopted by the Shareholders or- by the Board of Director's,
when such power is conferred upon the Board
of
Directors by the Certificate of Incorporation at any regular
meeting of the Shareholders or of the Board of Directors or
any
Special Meeting of the Shareholders or of the Board of Directors if notice
of
such alteration, amendment, repeal or adoption
of new Bylaws be contained in the notice of such special meeting.
If the power to adopt, amend or repeal Bylaws is conferred
upon the Board of Directors by the Certificate of Incorporation,
it shall not divest or limit the power of the Shareholders
to adopt, amend or repeal Bylaws.
APPROVED
and RATIFIED this 11th
day of
August, 1995.
|
ATTEST
[seal]
|
||
| Martin Keating, President | ||
| |
|
|
| By: | ||
| Martin Keating,Secretary | ||
OFFICE
OF THE SECRETARY OF STATE
AMENDED
CERTIFICATE OF INCORPORATION
CERTIFICATE OF INCORPORATION
WHEREAS,
the
Amended Certificate of Incorporation of
3D1CON
CORPORATION
has
been filed in the office of the Secretary of State as provided by the laws
of
the State of Oklahoma,
NOW
THEREFORE, I, the
undersigned, Secretary of State oj the State of Oklahoma,
by virtue of the powers vested in me by law, do hereby issue this certificate
evidencing
such filing,
IN
TESTIMONY
WHEREOF, I hereunto
set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
 |
Filed in the city of Oklahoma City
this
31st
day of October. 2003
Secretary
of
State
|
 SOS
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FILED - Oklahoma Secretary of State #1900555617 10/31/2003 07:52 |
 535920032
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AMENDED CERTIFICATE OF INCORPORATION |
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TO:
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OKLAHOMA
SECRETARY OF STATE
2300 N. Lincoln Blvd. Room
101
State
Capitol Building
Oklahoma
City, OK 73105-
4897
(405)
522-4560
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The
undersigned Oklahoma corporation, for the purpose of amending
its certificate of incorporation as provided by Section 1077
of
the Oklahoma General Corporation Act, hereby certifies:
1.
A. The name of the corporation is:
FIRST
KEATING CORPORATION
B.
As amended: The name of the corporation has been changed
to:
3DICON
CORPORATION
The
nThe
name of the registered agent and the street address of the
registered office in the State of Oklahoma is:
Martin
Keating, 7507 South Sandusky, Tulsa, OK 74136
Tulsa County, Oklahoma
Tulsa County, Oklahoma
3.
The duration of the corporation is: PERPETUAL
4.
The aggregate number of the authorized shares, itemized by class,
par value of shares, shares without par value, and series,
if any, within a class is:
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NUMBER
OF SHARES
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SERIES
(if any) |
FAR
VALUE PER SHARE
(Or,
if without par
value,
so state)
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COMMON:
250,000,000
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$0.0002
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PREFERRED:
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5.
Set
forth clearly any and all amendments to the certificate of incorporation which
are desired to be made:
A.
Change
of
name from First Keating Corporation to 3DIcon
Corporation,.
B.
Change
of the number of authorized shares and par value
of
the common voting stock of the corporation from
50,000,000 shares at par value of $.001 to 250,000,000
shares at par value of $.0002.
That
at a
meeting of the Board of Directors, a resolution was
duly
adopted setting forth the foregoing proposed amendment(s)
to the
Certificate of Incorporation of said corporation,
declaring said amendment(s) to be advisable and calling
a
meeting of the shareholders of said corporation for consideration
thereof,.
That
thereafter,, pursuant to said resolution of its Board of
Directors, consent was obtained in writing approving the amendment
to the Certificate of Incorporation as set forth above and
signed by the holders of outstanding stock having not less than the minimum
number of votes which would be necessary to authorize or take the action at
a
meeting at which all shares entitled
to vote thereon were present, and said Consent, has been delivered
to the officer of the corporation having custody of the book in which
proceedings of meetings of shareholders are recorded..
Delivery of the Consent was made by hand and is on file
at
the principal office of the corporation,
IN
WITNESS WHEREOF, said corporation has caused this certificate
to be signed by its President and attested by its Secretary
effective as of the 1st
day of
August, 2003.
 |
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| Martin Keating, President | ||
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ATTEST:
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 |
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Judy
Snider, Secretary
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| TULSA OFFICE |
PHONE
(918) 581-2751
FACSIMILE (918) 581-2776 |
OKLAHOMA
TAX COMMISSION
OCTOBER
23, 2003
Secretary
of State
Room
101,
State Capitol Building
Oklahoma
City OK 7.3105
RE:
FIRST KEATING CORPORATION
Qualification
Date: 8111995
Dear
Secretary:
This
is
to certify that the files of this office show the referenced
Corporation has filed a Franchise Tax return of the fiscal year ending JUNE
30, 2004, and has paid the Franchise Tax as shown by said return
. i •. l :
No certification is made as to any corporate Franchise Taxes which
may be
due but not yet assessed, nor which have been assessed and protested. This
letter may not therefore be accepted for purposes of dissolution or withdrawal,
Sincerely,
OKLAHOMA
TAX COMMISSION
TAXPAYER
ASSISTANCE DIVISION
440
SOUTH HOUSTON - 1ULSA . OKLAHOMA 73127
IT
IS OUR
MISSION TO SERVE THE PEOPLE OF OKI AHOMA BY PROMOTING TAX COMPLIANCE THROUGH
QUALITY SERVICE AND FAIR ADMINIS1RA31ON
QUALITY SERVICE AND FAIR ADMINIS1RA31ON
OFFICE
OF THE SECRETARY OF STATE
RESTATED
CERTIFICATE
OF INCORPORATION
WHEREAS,
the Restated Certificate of Incorporation of
FIRST
KEATING CORPORATION
Has
been filed in the office of the Secretary of State as provided by the laws
of
the State of
Oklahoma.
NOW
THEREFORE, I, the
undersigned, Secretary of State of the State of Oklahoma,
by virtue of the powers vested in me by taw,
do
hereby issue this certificate evidencing
such filing
IN
TESTIMONY WHEREOF, I hereunto
set my hand and cause to be affixed the Great
Seal of the State of Oklahoma
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Filed
in the City of Oklahoma City this 11TH
day
of MAY,
2001.
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| /s/ | ||
|
Secretary of State |
||
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AMENDED
AND RESTATED
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|
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CERTIFICATE
OF INCORPORATION
|
FILED
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OF
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May
11, 2001
|
|
FIRST
KEATING CORPORATION
|
Oklahoma
Secretary
|
|
|
Of
State
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ARTICLE
I
NAME
The
name
of the corporation is First Keating Corporation.
ARTICLE
II
REGISTERED
OFFICE AND AGENT
The
registered office of the corporation in the State of Oklahoma
is located at 7507 South Sandusky, Tulsa, Tulsa County Oklahoma
74136-6107. The corporation's registered agent, at that office
is
Martin Keating.
ARTICLE
III
PURPOSE
The
purpose of the corporation is to engage in any lawful act
or
activity for which corporations may be organized under the Oklahoma
General corporation.
ARTICLE
IV
CAPITALIZATION
The
total
number of shares which this corporation is authorized
to issues is 50,000,000 shares of Common Stock par value
$.001 per share.
The
Board
of Directors shall have the power and authority to issue without shareholder
approval debentures or other securities convertible into, or warrants or
operations to subscribe for or purchase,
authorized shares of Common Stock of the corporation upon such terms and
conditions as shall be determined by action of
the
Board of Directors.
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DECEIVED
MAY
11 2001
OKLAHOMA
SECRETARY OF STATE |
ARTICLE
V
NO
CUMULATIVE VOTING
The
holders of record of the Common Stock shall have one vote
for
each share held of record. Cumulative voting for the election
of directors or otherwise is not permitted.
ARTICLE
VI
NO
PREEMPTIVE RIGHTS
No
holder
of record of Common Stock shall, have a preemptive right
or
be entitled as a matter of right to subscribe for or purchase
any: (i) shares of capital stock of the corporation of any
class
whatsoever; (ii) warrants, options or rights of
the
corporation;
or (iii) securities convertible into, or carrying warrants,
options or rights to subscribe for or purchase, capital stock
of
the corporation of any class whatsoever, whether now or hereafter
authorized.
ARTICLE
VII
BOARD
OF DIRECTORS
The
Board
of Directors shall consist of from one (1) to
seven
(7)
directors who shall serve as directors until the next annual
meeting of shareholders or until their respective successor
is duly elected and qualified. The number of directors may
be
changed from time to time in accordance with the bylaws of the
corporation then in effect. Election of directors at a meeting
of shareholders need not be by written ballot.
ARTICLE
VIII
AMENDMENT
OF BYLAWS
The
Board
of Directors of the corporation is expressly authorized
and empowered to make, alter, amend or repeal the bylaws
of
the corporation and to adopt new bylaws.
ARTICLE
IX
POSSIBLE
CONFLICTS OF INTEREST
No
agreement or transaction involving the corporation or any other corporation,
partnership, proprietorship, trust association or
other
entity in which the corporation owns an interest or
in
which
a
director or officer of the corporation has a financial interest
shall be void or voidable solely for this reason or solely
because any such director or officer is present at or participates
in the approval of such agreement or transaction.
ARTICLE
X
INDEMNIFICATION
To
the
full extent not prohibited by the law as in effect from
time
to time, the corporation shall indemnify any person (and
the
heirs, executors and representatives of such person) who is
or was
a director, officer, employee or agent of the corporation,
or who, at the request of this corporation, is or was
a
director, officer, employee, agent, partner, or trustee, as the
case
may be, of any other corporation, partnership, proprietorship,
trust, association or other entity in which this corporation owns an interest,
against any and all liabilities and reasonable
expenses incurred by such person in connection with or resulting
from any claim, action, suit or proceeding, whether brought
by or in the right of the corporation or otherwise and whether
civil, criminal, administrative or investigative in nature,
and in connection with an appeal relating thereto, in which
such person is a party or is threatened to be made a party by
reason
of serving or having served in any such capacity.
ARTICLE
XI
NO
DIRECTOR LIABILITY IN CERTAIN CASES
To
the
maximum extent permitted by law as in effect from time
to
time, and specifically as of August 11, 1995, no director of
the
corporation shall be liable to the corporation or its shareholders
for monetary damages for breach of any fiduciary duty
as a
director, provided that this provision shall not eliminate
or limit the liability of a director for: (i) any breach
of
the director's duty of loyalty to the corporation or its
shareholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
(iii) unlawful payment of dividends or stock redemptions; or (iv)
any
transaction from which the director derived an improper personal
benefit.
ARTICLE
XII
CERTAIN
COMPROMISES
Whenever
a compromise or arrangement, is proposed between this
corporation and its creditors or any class of them and/or between
this corporation and its shareholders or any class of them,
any
court of equitable jurisdiction within the State of Oklahoma,
on the application in a summary way of this corporation or
of any
creditor or shareholder thereof, or on the application of
any
receiver or receivers appointed for this corporation under the
provisions of Section 1106 of Title 18 of the Oklahoma Statutes
as in effect from time to time or on the application of trustees
in dissolution or of any receiver or receivers appointed for
this
corporation under the provisions of Section 1100 of Title
18
of the Oklahoma Statutes as in effect, from time to time, may
order
a
meeting
of the creditors, and/or of the shareholders or
class
of shareholders of this corporation, as the case may be, to
be
summoned in such manner as the court directs , If a majority
in number representing three-fourths (3/4ths) in value of
the
creditors or class of creditors, and/or of the shareholders
or class of shareholders of this corporation, as the case
may
be, agree to any compromise or arrangement and to any reorganization
of this corporation as a consequence of such compromise
or arrangement, the compromise or arrangement and the reorganization,
if sanctioned by the court to which the application
has been made, shall be binding on all the creditors or
class
of creditors, and/or on all the shareholders or class of shareholders,
of this corporation, as the case may be, and also on
this
corporation.
IN
WITNESS WHEREOF, the corporation has caused this Amended and
Restated Certificate of Incorporation to be signed by its President
and attested by its corporate Secretary this 9th
day of
May,
2001.
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Martin
Keating, President
Martin
Keating, Sole Director
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| ATTEST: |
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| Martin Keating, Secretary | ||
STATE
OF
OKLAHOMA )
)
ss.
COUNTY
Of
TULSA }
I,
a
Notary Public, hereby certify that on the 9th
day of
May,
2001, personally appeared before me, Martin Keating, who after
having been duly sworn, declared that he is President and Sole
Director of First Keating Corporation, that he signed the foregoing
Amended and Restated Certificate of Incorporation as his
free
and voluntary act and deed for and on behalf of that corporation
for the uses and purposes therein stated and that the fact
therein contained are true.
IN
WITNESS WHEREOF, I have hereunto set my hand and seal this
9th
day of
May, 2001.
| Notary Public | ||
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My
commission expires:
1-30-2003
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OKLAHOMA
TAX COMMISSION
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TULSA
OFFICE
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PHONE
(913) 5812399
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FACSIMILE
(913) 581-2087
|
MAY
8,
2001
Secretary
of State
Room
101,
State
Capitol Building
Oklahoma
City OK 73105
RE:
FIRST KEATING CORPORATION
Qualification
Date: AUGUST 11, 1995
Dear
Secretary:
This
is
to certify that the files of this office show the referenced corporation
has
filed
a Franchise Tax return of the fiscal year ending June 30, 2001, and has
paid
the Franchise Tax as shown by said return.
No
certification is made as to any corporate Franchise Taxes which may be due
but
not yet assessed, nor which have been assessed and protested.
This
letter may not therefore be accepted for purposes of dissolution or
withdrawal.
Sincerely,
OKLAHOMA
TAX COMMISSION
TAXPAYER
ASSISTANCE DIVISION
gdstnd
doc
440
South
Houston Fifth Floor Tulsa Oklahoma 7412-8917
IT
IS OUR
MISSION TO SERVE THE PEOPLE OF OKALHOMA BY PROMOTING TAX
COMPLALINCE THROUGH QUALITY SERVICE AND FAIR ADMINISTRATION
COMPLALINCE THROUGH QUALITY SERVICE AND FAIR ADMINISTRATION
OFFICE
OF
THE SECRETARY OF STATS
AMENDED
CERTIFICATE
OF INCORPORATION
WHEREAS,
the Amended Certificate of Incorporation of
FIRST
KEATING CORPORATION
has
been filed in the office of the Secretary of State as provided by the laws
of
the State of
Oklahoma.
NOW
THEREFORE, I, the undersigned, Secretary of State of the State of
Oklahoma,
by virtue of the powers vested in me by law, do hereby issue this certificate
evidencing
such filing.
IN
TESTIMONY WHEREOF, I hereunto set my hand and cause to be affixed the
Great
Seal of the State of Oklahoma.
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Filed
in the City of Oklahoma City this I6TH
day
of SEPTEMBER 1998
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Secretary
of State
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AMENDED
CERTIFICATE
OF INCORPORATION
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FILED
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| PR TNT CLEARLY |
(After
Receipt; of Payment; of
Stock)
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SEP
1 6 1998
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| SOS CORP.. KEY: |
OKLAHOMA
SECRETARY OF
STATE
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FOR
OFFICE USE
ONLY
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PLEASE
NOTE: This form MUST
be filed
with a letter from the Oklahoma Tax Commission stating the franchise tax has
been paid
for
the
current fiscal year. If the authorized capital is increased
in excess of fifty thousand dollars ($50,000.00), the filing fee shall be an
amount
equal to one-tenth of one percent (1/10 of 1%) of such increase.
TO
THE
SECRETARY" OF STATE OP THE STATE OF OKLAHOMA, 101 State Capitol
Bldg., Oklahoma
City, OK
73105:
The
undersigned Oklahoma corporation, for the purpose of amending its certificate
of
incorporation as provided by Section 1077 of the Oklahoma General Corporation
Act, hereby certifies:
1.
A. The
name of the corporation is:
First
Keating Corporation
B.
As
amended: The name of the corporation has been changed to:
2.
A. No
change, as filed X
B.As
amended: The address of the registered office in the State of Oklahoma and
the
name
of
the registered agent at such address is.
| NAME | STREET ADDRESS | CITY | COUNTY | ZIP CODE |
| (P.O.BOXES ARE NOT ACCEPTABLE) |
3.
A. No
Change, as filed__________ X.
B.
As
amended: The duration of the corporation is: ___________
4.
A. No
change, as filed_____X _ .
B.
As
amended: The purpose or purposes for which the corporation is
formed
are:
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RECEIVED
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|||||
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SEP
16 1998
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OKLAHOMA
SECRE WHY OF STATE
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OKLAHOMA
SECRETARY
OF STATE
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5.A.
No
change, as filed _ .
B.
As
amended: The aggregate number of the authorized shares, itemized by class,
par
value
of
shares, shares without par value, and series, if any, within a class
is:
| NUMBER OF SHARES | SERIES | PAR VALUE PER SHARE | |||
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|||||
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Common 50,000,000
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- $.001 --- | |||
| Preferred |
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---- |
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TOTAL
NO.
SHARES: 50,000,000 _______ TOTAL
AUTHORIZED CAPITAL: $50,000.00
That
at a
meeting of the Board of Directors, a resolution was duly adopted setting
forth
the
foregoing proposed amendment(s) to the Certificate of Incorporation of said
corporation,
declaring said amendment(s) to be advisable and calling a meeting of the
shareholders
of said corporation for consideration thereof.
That
thereafter, pursuant to said resolution of its Board of Directors, a meeting
of
the
shareholders of said corporation was duly called and held, at which meeting
the
necessary
number of shares as required by statute were voted in favor of the
amendment(s).
SUCH
AMENDMENT(S) WAS DULY ADOPTED IN ACCORDANCE WITH 18 O.S., 11077.
IN
WITNESS WHEREOF, said corporation has caused this certificate to be signed
by
its President and attested by its Secretary, this 31st
day of
July, 1998.
| Martin Keating, President | ||
| |
|
|
| ATTEST: | ||
| Martin Keating, Secretary | ||
OKLAHOMA
TAX COMMISSION
|
TULSA
OFFICE
|
|
PHONE
(918) 581-2399
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|
|
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FACSIMILE
(918) 581-2087
|
September
9,1998
Secretary
of State
Room
101,
State Capital Building
Oklahoma
City OK 73105
RE:
First
Keating Corporation
Qualification
Date: 08/11/1995
Dear
Secretary:
This
is
to certify that the records of' this office show the referenced corporation
has
filed a Franchise
Tax return of the fiscal year and ending June 30, 1999 and has paid the
Franchise
Tax as shown by said return
No
certification is made as to any corporate Franchise Taxes which may be due
but
not yet
assessed, nor which have been assessed and protested.
This
letter- may not therefore be accepted for purposes of dissolution or
withdrawal.
Sincerely,
OKLAHOMA
TAX COMMISSION
Mary
L.
Robinson TPA
Business
Tax Division
Registration
Section
440
SOUTH
HOUSTON * FIFTH
FLOOR * TULSA •
OKUHOHA
74! 27-89! 7
EXHIBIT
5.1
SICHENZIA
ROSS FRIEDMAN FERENCE LLP
1065
Avenue of the Americas, 21st Flr.
New
York,
NY 10018
Telephone:
(212) 930-9700
Facsimile:
(212) 930-9725
December
15, 2006
VIA
ELECTRONIC TRANSMISSION
Securities
and Exchange Commission
100
F
Street, N.E.
Washington,
DC 20549
RE:
3DIcon Corporation
Form
SB-2 Registration Statement (File No. 333-______)
Ladies
and Gentlemen:
We
refer
to the above-captioned registration statement on Form SB-2 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Act"), filed
by
3DIcon Corporation., an Oklahoma corporation (the "Company"), with the
Securities and Exchange Commission.
We
have
examined the originals, photocopies, certified copies or other evidence of
such
records of the Company, certificates of officers of the Company and public
officials, and other documents as we have deemed relevant and necessary as
a
basis for the opinion hereinafter expressed. In such examination, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as certified copies or photocopies and the authenticity of
the
originals of such latter documents.
Based
on
our examination mentioned above, we are of the opinion that the securities
being
sold pursuant to the Registration Statement are duly authorized and will be,
when issued in the manner described in the Registration Statement, legally
and
validly issued, fully paid and non-assessable.
We
hereby
consent to the filing of this opinion as Exhibit 5.1 to the Registration
Statement and to the reference to our firm under "Legal Matters" in the related
Prospectus. In giving the foregoing consent, we do not hereby admit that we
are
in the category of persons whose consent is required under Section 7 of the
Act,
or the rules and regulations of the Securities and Exchange
Commission.
|
/s/
Sichenzia Ross Friedman Ference LLP
Sichenzia
Ross Friedman Ference LLP
|
SECURITIES
PURCHASE AGREEMENT
Securities
Purchase Agreement dated as of November 3, 2006 (this “Agreement”)
by and
between 3DIcon Corporation, an Oklahoma corporation, with principal executive
offices located at 7507 Sandusky Ave., Tulsa, Oklahoma 74136 (the “Company”),
and
Golden Gate Investors, Inc., a California corporation (“Holder”).
WHEREAS,
Holder desires to purchase from the Company, and the Company desires to issue
and sell to Holder, upon the terms and subject to the conditions of this
Agreement, a Convertible Debenture of the Company in the aggregate principal
amount of $1,250,000 (the “Debenture”);
and
WHEREAS,
upon the terms and subject to the conditions set forth in the Debenture, the
Debenture is convertible into shares of the Company’s Common Stock (the
“Common
Stock”);
and
WHEREAS,
upon the satisfaction of the terms and conditions more specifically set forth
in
this Agreement and upon compliance with the terms of the Debenture, the Holder
has agreed to purchase from the Company, and the Company has agreed to issue
and
sell to Holder, a second Convertible Debenture in the aggregate principal amount
of $1,250,000 (the “Second Debenture”).
NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
| I. |
PURCHASE AND SALE OF
DEBENTURE
|
A. Transaction.
Holder
hereby agrees to purchase from the Company, and the Company has offered and
hereby agrees to issue and sell to Holder in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act of
1933,
as amended (the “Securities
Act”),
the
Debenture.
B. Purchase
Price; Form of Payment.
The
purchase price for the Debenture to be purchased by Holder hereunder shall
be
$1,250,000 (the “Purchase
Price”).
Simultaneously with the execution of this Agreement, Holder shall pay $125,000
of the Purchase Price (the “Initial Purchase Price”) by wire transfer of
immediately available funds to the Company. Simultaneously with the execution
of
this Agreement, the Company shall deliver the Convertible Debenture (which
shall
have been duly authorized, issued and executed I/N/O Holder or, if the Company
otherwise has been notified, I/N/O Holder’s nominee). Upon notification and
verification that the Registration Statement for the Conversion Shares has
been declared
effective by the Securities and Exchange Commission (“Commission”),
and
such shares can legally be issued to Holder (such date, the “Effective Date”),
Holder shall pay the Company as follows: (1) $312,500 of the Purchase Price
by
wire transfer of immediately available funds to the Company and, (2) the balance
of $812,500 by wire to the Escrow Agent. The Escrow Agent shall release (by
wire
transfer to an account designated by the Company) $200,000 of such amount on
the
first day of each month, beginning with the second month following the Effective
Date, and continuing until the full Purchase Price has been paid, provided
that,
at the time that any funds are to be paid by the Escrow Agent to the Company:
(a) the value of the Conversion Shares remaining under the Registration
Statement is at least $400,000 (calculated by multiplying the number of
remaining shares registered under the Registration Statement that are available
for issuance as Conversion Shares by the Volume Weighted Average Prices of
the
stock for the five Trading Days prior to the date that funds are to be released
by the Escrow Agent), and (b) the Company has complied with all of the terms
and
conditions of the Debenture and this Agreement.
|
______________
Initials
|
____________
Initials
|
1
Subject
to the two conditions set forth in subclauses (a) and (b) immediately above,
release of amounts from the Escrow to the Company following the Effective Date
shall be subject to no contingency whatsoever, other than the passage of time.
Further, in the event funds are not required to be disbursed from the Escrow
due
to the existence of the contingency provided in subclause (a) above, the Company
shall not be deemed to be in default under any provision of this Agreement,
the
Debenture or the Registration Rights Agreement by reason of the failure to
have
available for issuance a sufficient number of shares registered under the
Registration Statement for conversion only as to any portion of the Purchase
Price not yet funded or with respect to which an adequate number of Conversion
Shares are available for issuance.
Upon
notification and verification that the Registration Statement for the Conversion
Shares has been declared effective by the Commission (such date, the “Effective
Date”), and such shares can legally be issued to Holder upon payment therefore
in accordance with the terms of this Agreement and the Debenture, the Company
shall, concurrently with the payment to the Escrow Agent of the $812,500
Purchase Price described in the immediately preceding paragraph, deliver that
number of the Company’s registered Common Shares (in 20 certificates of equal
amount) equal to $2,500,000 divided by the average of the closing prices of
the
Company’s Common Shares for the five Trading Days prior to the Effective Date,
registered in the name of Holder, to Sichenzia Ross Friedman Ferrence LLP
(“Escrow Agent”), who shall hold the shares in trust as a joint escrow agent for
the Company and Holder. The delivery of such shares and the balance of the
Purchase Price shall occur no later than five Business Days after the Effective
Date. Such shares may only be released by the Escrow Agent pursuant to valid
Debenture conversions notices submitted by Holder. Any shares not released
to
Holder for Debenture conversions shall be returned to the Company. It is
understood that Holder shall not be considered the owner of the Company Common
Shares held in escrow, and Holder agrees that it will not vote the shares in
escrow or exercise any control whatsoever over such shares until such times
as
the shares are released to Holder by the Escrow Agent.
C. Purchase
of Second Debenture. At
such
time as the Principal Balance of the Debenture is less than $400,000, and
provided the Company is then in compliance with the terms of the Debenture
and
this Agreement, the Company shall sell and the Holder shall purchase the Second
Debenture, with the terms of the Second Debenture and payment of the purchase
price thereof subject to the same terms and conditions of this Agreement, the
Debenture and the Registration Rights Agreement, and when the Second Debenture
is issued, the term “Debenture” as used in this Agreement and the Registration
Rights Agreement shall be deemed to include the Second Debenture in all
respects. The closing of the purchase and sale of the Second Debenture shall
occur within thirty days of the date that the Principal Balance of the Debenture
is less than $400,000. In the event that Holder fails to enter into the Second
Debenture in accordance with the terms of this section, Holder shall pay the
Company liquidated damages of $150,000.
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| II. |
HOLDER’S
REPRESENTATIONS AND
WARRANTIES
|
Holder
represents and warrants to and covenants and agrees with the Company as
follows:
1. Holder
is
purchasing the Debenture and the Common Stock issuable upon conversion or
redemption of the Debenture (the “Conversion
Shares”
and,
collectively with the Debenture, the “Securities”)
for
its own account, for investment purposes only and not with a view towards or
in
connection with the public sale or distribution thereof in violation of the
Securities Act.
2. Holder
(i) is an “accredited investor” within the meaning of Rule 501 of Regulation D
under the Securities Act, (ii) is experienced in making investments of the
kind
contemplated by this Agreement, (iii) is capable, by reason of its business
and
financial experience, of evaluating the relative merits and risks of an
investment in the Securities, and (iv) has had the opportunity to ask questions
of and receive answers from management of the Company, and (v) is able to afford
the loss of its investment in the Securities. Holder is incorporated under
the
laws of the state set forth in the preamble to this Agreement, and Holder’s
principal place of business is located in such state.
3. Holder
understands that the Securities are being offered and sold by the Company in
reliance on an exemption from the registration requirements of the Securities
Act and equivalent state securities and “blue sky” laws, and that the Company is
relying upon the accuracy of, and Holder’s compliance with, Holder’s
representations, warranties and covenants set forth in this Agreement to
determine the availability of such exemption and the eligibility of Holder
to
purchase the Securities;
4. Holder
understands that the Securities have not been approved or disapproved by the
Commission or any state or provincial securities commission.
5. This
Agreement has been duly and validly authorized, executed and delivered by Holder
and is a valid and binding agreement of Holder enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally and except as rights to indemnity and
contribution may be limited by federal or state securities laws or the public
policy underlying such laws.
6. Assuming
the compliance by the Company with the terms of this Agreement, the Debenture
and the Registration Rights Agreement, the Holder will fulfill its obligation
to
purchase the Second Debenture in accordance with the provisions of Section
I.C.
above.
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| III. |
THE
COMPANY’S REPRESENTATIONS
|
The
Company represents and warrants to Holder that:
A. Capitalization.
1. The
authorized capital stock of the Company consists of 250,000,000 shares of Common
Stock and -0- shares of Series A Preferred Stock of which 95,000,000 shares
and
-0- shares, respectively, are issued and outstanding as of the date hereof
and
are fully paid and nonassessable. The amount, exercise, conversion or
subscription price and expiration date for each outstanding option and other
security or agreement to purchase shares of Common Stock is accurately set
forth
on Schedule
III.A.1.
2. The
Conversion Shares have been duly and validly authorized and reserved for
issuance by the Company, and, when issued by the Company upon conversion of
the
Debenture, will be duly and validly issued, fully paid and nonassessable and
will not subject the holder thereof to personal liability by reason of being
such holder.
3. Except
as
disclosed on Schedule III.A.3.,
there
are no preemptive, subscription, “call,” right of first refusal or other similar
rights to acquire any capital stock of the Company or other voting securities
of
the Company that have been issued or granted to any person and no other
obligations of the Company to issue, grant, extend or enter into any security,
option, warrant, “call,” right, commitment, agreement, arrangement or
undertaking with respect to any of their respective capital stock.
B. Organization;
Reporting Company Status.
1. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the state or jurisdiction in which it is incorporated and
is
duly qualified as a foreign corporation in all jurisdictions in which the
failure so to qualify would reasonably be expected to have a material adverse
effect on the business, properties, prospects, condition (financial or
otherwise) or results of operations of the Company or on the consummation of
any
of the transactions contemplated by this Agreement (a “Material
Adverse Effect”).
2. The
Company is currently not subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”).
The
Common Stock is currently traded over the counter via the “pink sheets” through
the Interdealer Trading and Quotation System (“Pink Sheets”) and the Company has
not received any notice regarding, and to its knowledge there is no threat
of,
the termination or discontinuance of the eligibility of the Common Stock for
such trading.
C. Authorization.
The
Company (i) has duly and validly authorized and reserved for issuance shares
of
Common Stock, which is a number sufficient for the conversion of the Debenture
and (ii) at all times from and after the date hereof shall have a sufficient
number of shares of Common Stock duly and validly authorized and reserved for
issuance to satisfy the conversion of the Debenture in full. The Company
understands and acknowledges the potentially dilutive effect on the Common
Stock
of the issuance of the Conversion Shares. The Company further acknowledges
that
its obligation to issue Conversion Shares upon conversion of the Debenture
in
accordance with this Agreement is absolute and unconditional regardless of
the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company and notwithstanding the commencement of any case
under 11 U.S.C. § 101 et
seq.
(the
“Bankruptcy
Code”).
In
the event the Company is a debtor under the Bankruptcy Code, the Company hereby
waives to the fullest extent permitted any rights to relief it may have under
11 U.S.C. § 362 in respect of the conversion of the Debenture. The
Company agrees, without cost or expense to Holder, to take or consent to any
and
all action necessary to effectuate relief under 11 U.S.C.
§ 362.
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D. Authority;
Validity and Enforceability.
The
Company has the requisite corporate power and authority to enter into the
Documents (as such term is hereinafter defined) and to perform all of its
obligations hereunder and thereunder (including the issuance, sale and delivery
to Holder of the Securities). The execution, delivery and performance by the
Company of the Documents and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance
of
the Debenture and the issuance and reservation for issuance of the Conversion
Shares) have been duly and validly authorized by all necessary corporate action
on the part of the Company. Each of the Documents has been duly and validly
executed and delivered by the Company and each Document constitutes a valid
and
binding obligation of the Company enforceable against it in accordance with
its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally and except as rights to indemnity and contribution may be
limited by federal or state securities laws or the public policy underlying
such
laws. The Securities have been duly and validly authorized for issuance by
the
Company and, when executed and delivered by the Company, will be valid and
binding obligations of the Company enforceable against it in accordance with
their respective terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors’
rights and remedies generally. For purposes of this Agreement, the term
“Documents”
means
(i) this Agreement; (ii) the Registration Rights Agreement dated as of even
date
herewith between the Company and Holder; and (iii) the
Debenture.
E. Validity
of Issuance of the Securities.
The
Debenture, the Conversion Shares upon their issuance in accordance with the
Debenture will be validly issued and outstanding, fully paid and nonassessable,
and not subject to any preemptive rights, rights of first refusal, tag-along
rights, drag-along rights or other similar rights.
F. Non-contravention.
The
execution and delivery by the Company of the Documents, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated hereby and thereby do not, and compliance with the provisions
of
this Agreement and other Documents will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration
of
any obligation or loss of a material benefit under, or result in the creation
of
any Lien (as such term is hereinafter defined) upon any of the properties or
assets of the Company or any of its Subsidiaries under, or result in the
termination of, or require that any consent be obtained or any notice be given
with respect to (i) the Articles or Certificate of Incorporation or By-Laws
of
the Company or the comparable charter or organizational documents of any of
its
Subsidiaries, in each case as amended to the date of this Agreement, (ii) any
loan or credit agreement, debenture, bond, mortgage, indenture, lease, contract
or other agreement, instrument or permit applicable to the Company or any of
its
Subsidiaries or their respective properties or assets or (iii) any Law (as
such
term is hereinafter defined) applicable to, or any judgment, decree or order
of
any court or government body having jurisdiction over, the Company or any of
its
Subsidiaries or any of their respective properties or assets.
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G. Approvals.
No
authorization, approval or consent of any court or public or governmental
authority is required to be obtained by the Company for the issuance and sale
of
the Securities to Holder as contemplated by this Agreement, except such
authorizations, approvals and consents as have been obtained by the Company
prior to the date hereof.
H. Full
Disclosure.
There is
no fact known to the Company (other than general economic or industry conditions
known to the public generally) that has not been fully disclosed by the Company
through press releases or otherwise that (i) reasonably could be expected to
have a Material Adverse Effect or (ii) reasonably could be expected to
materially and adversely affect the ability of the Company to perform its
obligations pursuant to the Documents.
I. Absence
of Events of Default.
No
“Event
of Default”
(as
defined in any agreement or instrument to which the Company is a party) and
no
event which, with notice, lapse of time or both, would constitute an Event
of
Default (as so defined), has occurred and is continuing.
J. Securities
Law Matters.
Assuming
the accuracy of the representations and warranties of Holder set forth in
Article II.C, the offer and sale by the Company of the Securities are exempt
from (i) the registration and prospectus delivery requirements of the Securities
Act and the rules and regulations of the Commission thereunder and (ii) the
registration and/or qualification provisions of all applicable state and
provincial securities and “blue sky” laws. The Company shall not directly or
indirectly take, and shall not permit any of its directors, officers or
Affiliates directly or indirectly to take, any action (including, without
limitation, any offering or sale to any person or entity of any security similar
to the Debenture) which will make unavailable the exemption from Securities
Act
registration being relied upon by the Company for the offer and sale to Holder
of the Debenture and the Conversion Shares as contemplated by this Agreement.
No
form of general solicitation or advertising has been used or authorized by
the
Company or any of its officers, directors or Affiliates (as such term is defined
in the Debenture) in connection with the offer or sale of the Debenture (and
the
Conversion Shares) as contemplated by this Agreement or any other agreement
to
which the Company is a party.
K. Registration
Rights.
Except
as set forth on Schedule III.K.,
no
Person has, and as of the Closing (as such term is hereinafter defined), no
Person shall have, any demand, “piggy-back” or other rights to cause the Company
to file any registration statement under the Securities Act relating to any
of
its securities or to participate in any such registration
statement.
L. Interest.
The
timely payment of interest on the Debenture is not prohibited by the Articles
or
Certificate of Incorporation or By-Laws of the Company, in each case as amended
to the date of this Agreement, or any agreement, contract, document or other
undertaking to which the Company is a party.
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M. No
Misrepresentation.
No
representation or warranty of the Company contained in this Agreement or any
of
the other Documents, any schedule, annex or exhibit hereto or thereto or any
agreement, instrument or certificate furnished by the Company to Holder pursuant
to this Agreement contains any 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.
N. Finder’s
Fee.
There is
no finder’s fee, brokerage commission or like payment in connection with the
transactions contemplated by this Agreement for which Holder is liable or
responsible.
| IV. |
CERTAIN
COVENANTS AND
ACKNOWLEDGMENTS
|
A. Filings.
The
Company shall make all necessary Commission Filings and “blue sky” filings
required to be made by the Company in connection with the sale of the Securities
to Holder as required by all applicable laws, and shall provide a copy thereof
to Holder promptly after such filing.
B. Reporting
Status.
In the
event that the Company hereafter becomes subject to the reporting requirements
of the Exchange Act, and so long thereafter as Holder beneficially owns any
of
the Securities, the Company shall thereafter timely file all reports required
to
be filed by it with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act.
C. Listing.
Except
to the extent the Company lists its Common Stock on The New York Stock Exchange,
The American Stock Exchange or The Nasdaq Stock Market, the Company shall use
its best efforts to maintain its listing of the Common Stock in the Pink Sheets.
If the Common Stock is no longer subject to trading in the over the counter
market via the Pink Sheets, the Company will use its best efforts to list the
Common Stock on the most liquid national securities exchange or quotation system
that the Common Stock is qualified to be listed on.
D. Reserved
Conversion Common Stock.
The
Company at all times from and after the date hereof shall have such number
of
shares of Common Stock duly and validly authorized and reserved for issuance
as
shall be sufficient for the conversion in full of the Debenture.
E. Information.
Each of
the parties hereto acknowledges and agrees that Holder shall not be provided
with, nor be given access to, any material non-public information relating
to
the Company.
F. Accounting
and Reserves.
The
Company shall maintain a standard and uniform system of accounting and shall
keep proper books and records and accounts in which full, true, and correct
entries shall be made of its transactions, all in accordance with GAAP applied
on consistent basis through all periods, and shall set aside on such books
for
each fiscal year all such reserves for depreciation, obsolescence, amortization,
bad debts and other purposes in connection with its operations as are required
by such principles so applied.
G. Transactions
with Affiliates.
So long
as the Debenture is outstanding, neither the Company nor any of its Subsidiaries
shall, directly or indirectly, enter into any material transaction or agreement
with any stockholder, officer, director or Affiliate of the Company or family
member of any officer, director or Affiliate of the Company, unless the
transaction or agreement is (i) reviewed and approved by a majority of
Disinterested Directors (as such term is hereinafter defined) and (ii) on
terms no less favorable to the Company or the applicable Subsidiary than those
obtainable from a nonaffiliated person. A “Disinterested
Director”
shall
mean a director of the Company who is not and has not been an officer or
employee of the Company and who is not a member of the family of, controlled
by
or under common control with, any such officer or employee.
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H. Certain
Restrictions.
So long
as the Debenture is outstanding, no dividends shall be declared or paid or
set
apart for payment nor shall any other distribution be declared or made upon
any
capital stock of the Company, nor shall any capital stock of the Company be
redeemed, purchased or otherwise acquired (other than a redemption, purchase
or
other acquisition of shares of Common Stock made for purposes of an employee
incentive or benefit plan (including a stock option plan) of the Company or
pursuant to any of the security agreements listed on Schedule
III.H)
for any
consideration by the Company, directly or indirectly, nor shall any moneys
be
paid to or made available for a sinking fund for the redemption of any Common
Stock.
I. Short
Selling/Volume Limitations. So
long
as the Debenture is outstanding, Holder agrees and covenants on its behalf
and
on behalf of its Affiliates that neither Holder nor its Affiliates shall at
any
time engage in any short sales with respect to the Company’s Common Stock, or
sell put options or similar instruments with respect to the Company’s Common
Stock. The parties acknowledge that Holder on and after the Effective Date
shall
be entitled to sell the Common Stock from each Debenture conversion immediately
upon submission of the applicable Debenture Conversion Notice, and payment
of
the purchase price, to the Company for such Common Stock; provided, however,
that Holder agrees that it shall not sell any volume of Common Stock in excess
of the greater of: (i) 15% of the daily volume of the Company’s common shares
traded on that Trading Day (which volume may include shares of Common Stock
traded by the Holder), or (ii) 15% of the average dollar volume (computed by
multiplying the low price of the Common Stock by the number of shares traded)
for the 20 Trading Days prior to the Closing Date, unless the Company gives
its
prior written permission to sell more shares or the sales price of the Common
Stock received by Holder is above $1.50 per share.
| V. |
ISSUANCE
OF COMMON STOCK
|
A. The
Company undertakes and agrees that no instruction other than the instructions
referred to in this Article V and customary stop transfer instructions prior
to
the registration and sale of the Common Stock pursuant to an effective
Securities Act registration statement shall be given to its transfer agent
for
the Conversion Shares and that the Conversion Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement and applicable
law. Nothing contained in this Section V.A. shall affect in any way Holder’s
obligations and agreement to comply with all applicable securities laws upon
resale of such Common Stock.
B. Holder
shall have the right to convert the Debenture by telecopying an executed and
completed Conversion Notice (as such term is defined in the Debenture) to the
Company. Each date on which a Conversion Notice is telecopied to and received
by
the Company in accordance with the provisions hereof shall be deemed a
Conversion Date (as such term is defined in the Debenture). In the event the
number of registered Common Shares delivered to the Escrow Agent by the Company
pursuant to Section I.B hereof are insufficient to cover an authorized
Conversion by the Holder, the Company shall cause the transfer agent to transmit
the certificates evidencing the Common Stock issuable upon conversion of the
Debenture (together with a new debenture, if any, representing the principal
amount of the Debenture not being so converted) to Holder via express courier,
or if a Registration Statement covering the Common Stock has been declared
effective by the SEC by electronic transfer, within two (2) business days after
receipt by the Company of the Conversion Notice (the “Delivery
Date”).
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C. Upon
the
conversion of the Debenture or part thereof, the Company shall, at its own
cost
and expense, take all necessary action (including the issuance of an opinion
of
counsel) to assure that the Company's transfer agent shall issue stock
certificates in the name of Holder (or its nominee) or such other persons as
designated by Holder and in such denominations to be specified at conversion
representing the number of shares of common stock issuable upon such conversion
or exercise. The Company warrants that the Conversion Shares will be unlegended,
free-trading, and freely transferable, and will not contain a legend restricting
the resale or transferability of the Company Common Stock provided, on the
Conversion Date the Holder (or its nominee) are not Affiliates of the Company
and the Conversion Shares are being sold pursuant to an effective registration
statement covering the Common Stock to be sold or are otherwise exempt from
registration when sold.
D. The
Company understands that, in the event the number of registered Common Shares
delivered to the Escrow Agent by the Company pursuant to Section I.B hereof
are
insufficient to cover an authorized Conversion by the Holder, a delay in the
delivery of the Common Stock in the form required pursuant to this section,
or
the Mandatory Redemption Amount described in Section E hereof, beyond the
Delivery Date or Mandatory Redemption Payment Date (as hereinafter defined)
could result in economic loss to the Holder. As compensation to the Holder
for
such loss, the Company agrees to pay late payments to the Holder for late
issuance of Common Stock in the form required pursuant to Section E hereof
upon
Conversion of the Debenture or late payment of the Mandatory Redemption Amount,
in the amount of $100 per business day after the Delivery Date or Mandatory
Redemption Payment Date, as the case may be, for each $10,000 of Debenture
principal amount being converted or redeemed. The Company shall pay any payments
incurred under this Section in immediately available funds upon demand.
Furthermore, in addition to any other remedies which may be available to the
Holder, in the event that the Company fails for any reason to effect delivery
of
the Common Stock by the Delivery Date or make payment by the Mandatory
Redemption Payment Date, the Holder will be entitled to revoke all or part
of
the relevant Notice of Conversion or rescind all or part of the notice of
Mandatory Redemption by delivery of a notice to such effect to the Company
whereupon the Company and the Holder shall each be restored to their respective
positions immediately prior to the delivery of such notice, except that late
payment charges described above shall be payable through the date notice of
revocation or rescission is given to the Company.
E. In
the
event the Company is prohibited from issuing Common Stock, or upon the
occurrence of an Event of Default (as defined in the Debenture) or for any
reason other than pursuant to the limitations set forth herein, then at the
Holder's election, the Company must pay to the Holder ten (10) business days
after request by the Holder a sum of money determined by multiplying up to
the
then outstanding principal amount of the Debenture designated by the Holder
by
115%, together with accrued but unpaid interest thereon ("Mandatory Redemption
Payment"). The Mandatory Redemption Payment must be received by the Holder
within ten (10) business days after request ("Mandatory Redemption Payment
Date"). Upon receipt of the Mandatory Redemption Payment, the corresponding
Debenture principal and interest will be deemed paid and no longer outstanding.
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F. In
addition to any other rights available to the Holder, if the Company fails
to
deliver to the Holder such Common Stock issuable upon conversion of a Debenture
by the Delivery Date and if ten (10) days after the Delivery Date the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock
to
deliver in satisfaction of a sale by the Holder of the Common Stock which the
Holder anticipated receiving upon such conversion (a "Buy-In"), then the Company
shall pay in cash to the Holder (in addition to any remedies available to or
elected by the Holder) the amount by which (A) the Holder's total purchase
price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the aggregate principal and/or interest amount of the
Debenture for which such conversion was not timely honored, together with
interest thereon at a rate of 15% per annum, accruing until such amount and
any
accrued interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty). For example, if the Holder purchases
shares of Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of $10,000 of Debenture principal
and/or interest, the Company shall be required to pay the Holder $1,000, plus
interest. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In.
G. The
Debenture shall be delivered by the Company to the Holder pursuant to Section
I.B. hereof on a “delivery-against-payment basis” at the Closing.
| VI. |
CLOSING
DATE
|
The
Closing shall occur by the delivery: (i) to the Holder of the certificate
evidencing the Debenture and all other Agreements, and (ii) to the Company
the
Purchase Price.
| VII. |
CONDITIONS
TO THE COMPANY’S
OBLIGATIONS
|
Holder
understands that the Company’s obligation to sell the Debenture on the Closing
Date to Holder pursuant to this Agreement is conditioned upon:
A. Delivery
by Holder to the Company of the Initial Purchase Price;
B. The
accuracy on the Closing Date of the representations and warranties of Holder
contained in this Agreement as if made on the Closing Date (except for
representations and warranties which, by their express terms, speak as of and
relate to a specified date, in which case such accuracy shall be measured as
of
such specified date) and the performance by Holder in all material respects
on
or before the Closing Date of all covenants and agreements of Holder required
to
be performed by it pursuant to this Agreement on or before the Closing Date;
and
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C. There
shall not be in effect any law or order, ruling, judgment or writ of any court
or public or governmental authority restraining, enjoining or otherwise
prohibiting any of the transactions contemplated by this Agreement.
In
the
event Holder fails or refuses to pay the balance of the Purchase Price for
the
Debenture as provided for herein for any reason other than an existing Event
of
Default (as defined in the Debenture) of the Company, the Company shall be
relieved of any and all further obligations hereunder or under the Debenture,
other than the obligation to repay the then outstanding Principal Amount of
the
Debenture, with interest at the stated rate thereon, to Holder within ninety
(90) days after the breach of this Agreement by Holder.
| VIII. |
CONDITIONS
TO HOLDER’S OBLIGATIONS
|
The
Company understands that Holder’s obligation to purchase the Securities on the
Closing Date pursuant to this Agreement is conditioned upon:
A. Delivery
by the Company of the Debenture and the other Agreements (I/N/O Holder or I/N/O
Holder’s nominee);
B. The
accuracy on the Closing Date of the representations and warranties of the
Company contained in this Agreement as if made on the Closing Date (except
for
representations and warranties which, by their express terms, speak as of and
relate to a specified date, in which case such accuracy shall be measured as
of
such specified date) and the performance by the Company in all material respects
on or before the Closing Date of all covenants and agreements of the Company
required to be performed by it pursuant to this Agreement on or before the
Closing Date, all of which shall be confirmed to Holder by delivery of the
certificate of the chief executive officer of the Company to that
effect;
C. There
not
having occurred (i) any general suspension of trading in, or limitation on
prices listed for, the Common Stock on the OTCBB/Pink Sheet, (ii) the
declaration of a banking moratorium or any suspension of payments in respect
of
banks in the United States, (iii) the commencement of a war, armed hostilities
or other international or national calamity directly or indirectly involving
the
United States or any of its territories, protectorates or possessions or
(iv) in the case of the foregoing existing at the date of this Agreement, a
material acceleration or worsening thereof;
D. There
not
having occurred any event or development, and there being in existence no
condition, having or which reasonably and foreseeably could have a Material
Adverse Effect;
E. There
shall not be in effect any Law, order, ruling, judgment or writ of any court
or
public or governmental authority restraining, enjoining or otherwise prohibiting
any of the transactions contemplated by this Agreement;
F. The
Company shall have obtained all consents, approvals or waivers from governmental
authorities and third persons necessary for the execution, delivery and
performance of the Documents and the transactions contemplated thereby, all
without material cost to the Company;
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G. Holder
shall have received such additional documents, certificates, payment,
assignments, transfers and other deliveries as it or its legal counsel may
reasonably request and as are customary to effect a closing of the matters
herein contemplated;
H. Delivery
by the Company of an enforceability opinion (subject to all normal
qualifications and exceptions) from its outside counsel in form and substance
satisfactory to Holder.
| IX. |
SURVIVAL;
INDEMNIFICATION
|
A. The
representations, warranties and covenants made by each of the Company and Holder
in this Agreement, the annexes, schedules and exhibits hereto and in each
instrument, agreement and certificate entered into and delivered by them
pursuant to this Agreement shall survive the Closing and the consummation of
the
transactions contemplated hereby. In the event of a breach or violation of
any
of such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach or violation available to it under the provisions
of this Agreement or otherwise, whether at law or in equity, irrespective of
any
investigation made by or on behalf of such party on or prior to the Closing
Date.
B. The
Company hereby agrees to indemnify and hold harmless Holder, its Affiliates
and
their respective officers, directors, partners and members (collectively, the
“Holder
Indemnitees”)
from
and against any and all losses, claims, damages, judgments, penalties,
liabilities and deficiencies (collectively, “Losses”)
and
agrees to reimburse Holder Indemnitees for all out-of-pocket expenses (including
the fees and expenses of legal counsel), in each case promptly as incurred
by
Holder Indemnitees and to the extent arising out of or in connection
with:
1. any
misrepresentation, omission of fact or breach of any of the Company’s
representations or warranties contained in this Agreement or the other
Documents, or the annexes, schedules or exhibits hereto or thereto or any
instrument, agreement or certificate entered into or delivered by the Company
pursuant to this Agreement or the other Documents;
2. any
failure by the Company to perform in any material respect any of its covenants,
agreements, undertakings or obligations set forth in this Agreement or the
other
Documents or any instrument, certificate or agreement entered into or delivered
by the Company pursuant to this Agreement or the other Documents;
C. Holder
hereby agrees to indemnify and hold harmless the Company, its Affiliates and
their respective officers, directors, partners and members (collectively, the
“Company
Indemnitees”)
from
and against any and all Losses, and agrees to reimburse the Company Indemnitees
for all out-of-pocket expenses (including the fees and expenses of legal
counsel), in each case promptly as incurred by the Company Indemnitees and
to
the extent arising out of or in connection with:
1. any
misrepresentation, omission of fact or breach of any of Holder’s representations
or warranties contained in this Agreement or the other Documents, or the
annexes, schedules or exhibits hereto or thereto or any instrument, agreement
or
certificate entered into or delivered by Holder pursuant to this Agreement
or
the other Documents; or
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2. any
failure by Holder to perform in any material respect any of its covenants,
agreements, undertakings or obligations set forth in this Agreement or the
other
Documents or any instrument, certificate or agreement entered into or delivered
by Holder pursuant to this Agreement or the other Documents.
D. Promptly
after receipt by either party hereto seeking indemnification pursuant to this
Article VIII (an “Indemnified
Party”)
of
written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a “Claim”),
the
Indemnified Party promptly shall notify the party against whom indemnification
pursuant to this Article VIII is being sought (the “Indemnifying
Party”)
of the
commencement thereof, but the omission so to notify the Indemnifying Party
shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party except to the extent that the Indemnifying Party is materially prejudiced
and forfeits substantive rights or defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of
any
Claim by the Indemnifying Party, the Indemnified Party shall have the right
to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (y) the Indemnified Party and the
Indemnifying Party reasonably shall have concluded that representation of the
Indemnified Party and the Indemnifying Party by the same legal counsel would
not
be appropriate due to actual or, as reasonably determined by legal counsel
to
the Indemnified Party, potentially differing interests between such parties
in
the conduct of the defense of such Claim, or if there may be legal defenses
available to the Indemnified Party that are in addition to or disparate from
those available to the Indemnifying Party or (z) the Indemnifying Party
shall have failed to employ legal counsel reasonably satisfactory to the
Indemnified Party within a reasonable period of time after notice of the
commencement of such Claim. If the Indemnified Party employs separate legal
counsel in circumstances other than as described in clauses (x), (y) or (z)
above, the fees, costs and expenses of such legal counsel shall be borne
exclusively by the Indemnified Party. Except as provided above, the Indemnifying
Party shall not, in connection with any Claim in the same jurisdiction, be
liable for the fees and expenses of more than one firm of legal counsel for
the
Indemnified Party (together with appropriate local counsel). The Indemnifying
Party shall not, without the prior written consent of the Indemnified Party
(which consent shall not unreasonably be withheld), settle or compromise any
Claim or consent to the entry of any judgment that does not include an
unconditional release of the Indemnified Party from all liabilities with respect
to such Claim or judgment.
E. In
the
event one party hereunder should have a claim for indemnification that does
not
involve a claim or demand being asserted by a third party, the Indemnified
Party
promptly shall deliver notice of such claim to the Indemnifying Party. If the
Indemnified Party disputes the claim, such dispute shall be resolved by mutual
agreement of the Indemnified Party and the Indemnifying Party or by binding
arbitration conducted in accordance with the procedures and rules of the
American Arbitration Association. Judgment upon any award rendered by any
arbitrators may be entered in any court having competent jurisdiction
thereof.
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| X. |
GOVERNING
LAW
|
This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of California, without regard to the conflicts of law principles
of
such state.
| XI. |
SUBMISSION
TO JURISDICTION
|
Each
of
the parties hereto consents to the exclusive jurisdiction of the federal courts
whose districts encompass any part of the City of San Diego or the state courts
of the State of California sitting in the City of San Diego in connection with
any dispute arising under this Agreement and the other Documents. Each party
hereto hereby irrevocably and unconditionally waives, to the fullest extent
it
may effectively do so, any defense of an inconvenient forum or improper venue
to
the maintenance of such action or proceeding in any such court and any right
of
jurisdiction on account of its place of residence or domicile. Each party hereto
irrevocably and unconditionally consents to the service of any and all process
in any such action or proceeding in such courts by the mailing of copies of
such
process by registered or certified mail (return receipt requested), postage
prepaid, at its address specified in Article XVII. Each party hereto agrees
that
a final judgment which is not subject to further appeal in any such action
or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
| XII. |
WAIVER
OF JURY TRIAL
|
TO
THE FULLEST EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ITS RESPECTIVE RIGHTS TO A
JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT AND OTHER DOCUMENTS. EACH PARTY HERETO (i)
CERTIFIES THAT NEITHER OF THEIR RESPECTIVE REPRESENTATIVES, AGENTS OR ATTORNEYS
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE
EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii) ACKNOWLEDGES
THAT
IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.
| XIII. s |
COUNTERPARTS;
EXECUTION
|
This
Agreement may be executed in counterparts, each of which when so executed and
delivered shall be an original, but both of which counterparts shall together
constitute one and the same instrument. A facsimile transmission of this signed
Agreement shall be legal and binding on both parties hereto.
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| XIV. |
HEADINGS
|
The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
| XV. |
SEVERABILITY
|
In
the
event any one or more of the provisions contained in this Agreement or in the
other Documents should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein or therein shall not in any way be affected or impaired thereby. The
parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions, the economic effect
of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
| XVI. |
ENTIRE
AGREEMENT; REMEDIES, AMENDMENTS AND
WAIVERS
|
This
Agreement and the Documents constitute the entire agreement between the parties
hereto pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of such parties. No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by both parties. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute
a
waiver of any other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly
provided.
| XVII. |
NOTICES
|
Except
as
may be otherwise provided herein, any notice or other communication or delivery
required or permitted hereunder shall be in writing and shall be delivered
personally, or sent by telecopier machine or by a nationally recognized
overnight courier service, and shall be deemed given when so delivered
personally, or by telecopier machine or overnight courier service as
follows:
A.
If
to the
Company, to:
3D
Icon
Corporation
7507
Sandusky Ave.
Tulsa,
Oklahoma 74136
Telephone: 918-492-5082
Facsimile: 918-492-5367
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With
a
copy to:
John
M.
O’Connor
Newton,
O’Connor, Turner & Ketchum
15
W.
Sixth Street, Suite 2700
Tulsa,
Oklahoma 74119
Telephone: 918-587-0101
Facsimile: 918-587-0102
B.
If
to
Holder, to:
Golden
Gate Investors, Inc.
7817
Herschel Avenue, Suite 200
La
Jolla,
California 92037
Telephone: 858-551-8789
Facsimile: 858-551-8779
The
Company or Holder may change the foregoing address by notice given pursuant
to
this Article XVII.
| XVIII. |
CONFIDENTIALITY
|
Each
of
the Company and Holder agrees to keep confidential and not to disclose to or
use
for the benefit of any third party the terms of this Agreement or any other
information which at any time is communicated by the other party as being
confidential without the prior written approval of the other party; provide,
however, that this provision shall not apply to information which, at the time
of disclosure, is already part of the public domain (except by breach of this
Agreement) and information which is required to be disclosed by law (including,
without limitation, pursuant to Item 601(b)(10) of Regulation S-K under the
Securities Act and the Exchange Act).
| XIX. |
ASSIGNMENT
|
This
Agreement shall not be assignable by either of the parties hereto.
IN
WITNESS WHEREOF, the parties hereto have duly caused this Agreement to be
executed and delivered on the date first above written.
| 3DIcon Corporation | Golden Gate Investors, Inc. | ||
| By: /s/ Martin Keating |
By:
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| Title: Chief Executive Officer | Title: Portfolio Manager, Vice President | ||
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COMBINED
AMENDMENT NO. 1
TO
SECURITIES PURCHASE AGREEMENT
AND
DEBENTURE
This
Amendment No. 1 to the Securities Purchase Agreement and the First Debenture,
as
defined below, (this “Amendment”)
is
entered to be effective as of the 15th day of December, 2006, by 3DIcon
Corporation, an Oklahoma corporation, with principal executive offices located
at 7507 Sandusky Ave., Tulsa, Oklahoma 74136 (the “Company”),
and
Golden Gate Investors, Inc., a California corporation (“Holder”).
WHEREAS,
Holder
and the Company desire to amend the terms of the Securities Purchase Agreement
dated as of November 3, 2006 (the “Securities
Purchase Agreement”),
and
the terms of the 6¼% Convertible Debenture dated November 3, 2006 (the
“First
Debenture”)
in
order to clarify the terms and conditions pursuant to which the Company may
elect to sell to Holder, and Holder is obligated to purchase, an additional
debenture in the original principal amount of $1,250,000 (the “Second Debenture”);
ARTICLE
I
AMENDMENTS
TO SECURITIES PURCHASE AGREEMENT
NOW,
THEREFORE,
in
consideration of the above, and for other good and valuable consideration,
the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows.
1.1 All
terms
used herein and not otherwise defined herein shall have the definitions set
forth in the Securities Purchase Agreement and in the First
Debenture.
1.2 Section
I.C. of the Securities Purchase Agreement is hereby amended in its entirety
as
follows:
C. Additional
Investment Right. At
such
time as the Principal Balance of the Debenture is less than $400,000, and
provided the Company is then in compliance with the terms of the Debenture
and
this Agreement, the Company shall have the option to require the Holder to
purchase the Second Debenture, with the terms of the Second Debenture and
payment of the purchase price thereof subject to the same terms and conditions
of this Agreement and the Debenture, except that the Conversion Price in Section
3.1 for the Second Debenture shall be the lesser of: (i) $2.00, or (ii) 90%
of
the average of the five lowest Volume Weighted Average Prices during the twenty
Trading Days prior to GGI’s election to convert. When the Second Debenture is
issued, the term “Debenture” as used in this Agreement shall be deemed to
include the Second Debenture in all respects. The closing of the purchase and
sale of the Second Debenture shall occur within thirty days of the date that
(i)
the Principal Balance of the Debenture is less than $400,000, and (ii) the
Company gives written notice to the Holder exercising the option to require
the
sale of the Second Debenture (“Subsequent Closing Date”). In the event that
Holder fails to fund the Second Debenture in accordance with the terms of this
section, Holder shall pay the Company liquidated damages of $250,000 within
ten
(10) days of the Second Closing Date.
1
1.3 Section
II.6. of the Securities Purchase Agreement is hereby amended in its entirety
as
follows:
Assuming
the compliance by the Company with the terms of this Agreement, as amended,
the
Debenture and the Registration Rights Agreement, the Holder agrees to purchase
the Second Debenture in accordance with the provisions of Section I.C.
above.
1.4 All
other
terms and provisions of the Securities Purchase Agreement in direct conflict
with the amendments specifically set forth herein are hereby amended to conform
to these amendments; and except for these amendments, all other terms and
conditions of the Securities Purchase Agreement shall remain unamended hereby
and in full force and effect.
ARTICLE
II
AMENDMENTS
TO FIRST DEBENTURE
2.1 All
terms
used herein and not otherwise defined herein shall have the definitions set
forth in the First Debenture and in the Securities Purchase
Agreement.
2.2 The
third
sentence of the first paragraph of Section 3.1 of the First Debenture is hereby
deleted and replaced with the following sentence:
The
“Conversion
Price”
shall
be equal to the lesser of: (i) $2.00, or (ii) 70% of the average of the five
lowest Volume Weighted Average Prices during the twenty Trading Days prior
to
Holder’s election to convert (the percentage figure being a “Discount
Multiplier”). The
Company reserves the right to increase the number of Trading Days in clause
(ii)
above, as it deems appropriate.
2.3 All
other
terms and provisions of the First Debenture in direct conflict with the
amendments specifically set forth herein are hereby amended to conform to these
amendments; and except for these amendments, all other terms and conditions
of
the First Debenture shall remain unamended hereby and in full force and
effect.
2
ARTICLE
III
AMENDMENTS
TO BOTH
SECURITIES
PURCHASE AGREEMENT AND TO FIRST DEBENTURE
3.1 Entire
Agreement.
This
Amendment, together with the Securities Purchase Agreement, the First Debenture
and Registration Rights Agreement, embodies the entire agreement and
understanding between the Company and Holder relating to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
3.2 Severability.
If any
provision of this Amendment, or the application of such provisions to any Person
or circumstance, shall be held invalid, the remainder of this Amendment, or
the
application of such provision to Persons or circumstances other than those
to
which it is held invalid, shall not be affected thereby.
3.3 Counterparts.
This
Amendment may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall
be
deemed to be an original, but all of which taken together shall constitute
one
and the same agreement. A facsimile transmission of this signed Amendment shall
be legal and binding on all parties hereto.
[Signature
Page Follows]
3
IN
WITNESS WHEREOF,
the
parties hereto have duly caused this Amendment to be executed and delivered
on
the date first above written.
| 3DIcon Corporation | Golden Gate Investors, Inc. | |
| |
|
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| By: /s/ Martin Keating | By: | /s/ Travis Huff |
|
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| Title: President and C.E.O. |
Title:
Portfolio Manager and
Vice
President
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4
REGISTRATION
RIGHTS AGREEMENT
Registration
Rights Agreement dated as of November 3, 2006 (this “Agreement”)
by and
between 3DIcon Corporation, an Oklahoma corporation, with principal executive
offices located at 7507 Sandusky Ave., Tulsa, Oklahoma 74136 (the “Company”),
and
Golden Gate Investors, Inc. (the “Holder”).
WHEREAS,
upon the terms and subject to the conditions of the Securities Purchase
Agreement dated as of even date herewith, by and between the Holder and the
Company (the “Securities
Purchase Agreement”),
the
Company has agreed to issue and sell to the Holder a Convertible Debenture
(the
“Debenture”)
of the
Company in the aggregate principal amount of $1,250,000 which, upon the terms
of
and subject to the conditions contained therein, is convertible into shares
of
the Company’s Common Stock (the “Common
Stock”)
;
and
WHEREAS,
to induce the Holder to execute and deliver the Securities Purchase Agreement,
the Company has agreed to provide with respect to the Common Stock issued upon
conversion of the Debenture certain registration rights under the Securities
Act;
NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Definitions
(A) As
used
in this Agreement, the following terms shall have the meanings:
(1) “Affiliate”
of any
specified Person means any other Person who directly, or indirectly through
one
or more intermediaries, is in control of, is controlled by, or is under common
control with, such specified Person. For purposes of this definition, control
of
a Person means the power, directly or indirectly, to direct or cause the
direction of the management and policies of such Person whether by contract,
securities ownership or otherwise; and the terms “controlling”
and
“controlled”
have the
respective meanings correlative to the foregoing.
(2) “Closing
Date”
means
the date of this Agreement.
(3) “Commission”
means
the Securities and Exchange Commission.
(4) “Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
of the Commission thereunder, or any similar successor statute.
(5) “Investor”
means
each of the Holder and any transferee or assignee of Registrable Securities
which agrees to become bound by all of the terms and provisions of this
Agreement in accordance with Section 8 hereof.
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(6) “Person”
means
any individual, partnership, corporation, limited liability company, joint
stock
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
(7) “Prospectus”
means
the prospectus (including, without limitation, any preliminary prospectus and
any final prospectus filed pursuant to Rule 424(b) under the Securities Act,
including any prospectus that discloses information previously omitted from
a
prospectus filed as part of an effective registration statement in reliance
on
Rule 430A under the Securities Act) included in the Registration Statement,
as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement and by all other amendments and supplements to such
prospectus, including all material incorporated by reference in such prospectus
and all documents filed after the date of such prospectus by the Company under
the Exchange Act and incorporated by reference therein.
(8) “Public
Offering”
means an
offer registered with the Commission and the appropriate state securities
commissions by the Company of its Common Stock and made pursuant to the
Securities Act.
(9) “Registrable
Securities”
means
the Common Stock issued or issuable (i) upon conversion or redemption of
the Debenture, (ii) pursuant to the terms and provisions of the Debenture
or the Securities Purchase Agreement, (iii) in connection with any
distribution, recapitalization, stock-split, stock adjustment or reorganization
of the Company; provided,
however,
a share
of Common Stock shall cease to be a Registrable Security for purposes of this
Agreement when it no longer is a Restricted Security.
(10) “Registration
Statement”
means a
registration statement of the Company filed on an appropriate form under the
Securities Act providing for the registration of, and the sale on a continuous
or delayed basis by the holders of, all of the Registrable Securities pursuant
to Rule 415 under the Securities Act, including the Prospectus contained therein
and forming a part thereof, any amendments to such registration statement and
supplements to such Prospectus, and all exhibits to and other material
incorporated by reference in such registration statement and
Prospectus.
(11) “Restricted
Security”
means
any share of Common Stock issued upon conversion or redemption of the Debenture
except any such share that (i) has been registered pursuant to an effective
registration statement under the Securities Act and sold in a manner
contemplated by the prospectus included in such registration statement, (ii)
has
been transferred in compliance with the resale provisions of Rule 144 under
the
Securities Act (or any successor provision thereto) or is transferable pursuant
to paragraph (k) of Rule 144 under the Securities Act (or any successor
provision thereto) or (iii) otherwise has been transferred and a new share
of
Common Stock not subject to transfer restrictions under the Securities Act
has
been delivered by or on behalf of the Company.
(12) “Securities
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder, or any similar successor statute.
(B) All
capitalized terms used and not defined herein have the respective meaning
assigned to them in the Securities Purchase Agreement or the
Debenture.
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2. Registration
(A) Filing
and Effectiveness of Registration Statement.
The
Company shall prepare and file with the Commission as soon as practicable a
Registration Statement relating to the offer and sale of the Registrable
Securities and shall use its best efforts to cause the Commission to declare
such Registration Statement effective under the Securities Act as promptly
as
practicable but in no event later than the Deadline (as defined in the
Debenture). The Company shall promptly (and, in any event, no more than 24
hours
after it receives comments from the Commission), notify the Holder when and
if
it receives any comments from the Commission on the Registration Statement
and
promptly forward a copy of such comments, if they are in writing, to the Holder.
At such time after the filing of the Registration Statement pursuant to this
Section 2(A) as the Commission indicates, either orally or in writing, that
it has no further comments with respect to such Registration Statement or that
it is willing to entertain appropriate requests for acceleration of
effectiveness of such Registration Statement, the Company shall promptly, and
in
no event later than two (2) business days after receipt of such indication
from
the Commission, request that the effectiveness of such Registration Statement
be
accelerated within forty-eight (48) hours of the Commission’s receipt of such
request. The Company shall notify the Holder by written notice that such
Registration Statement has been declared effective by the Commission within
24
hours of such declaration by the Commission.
(B) Eligibility
for Use of Form S-3 or an SB-2.
The
Company agrees that at such time as it meets all the requirements for the use
of
a Securities Act Registration Statement on Form S-3 or SB-2, it shall file all
reports and information required to be filed by it with the Commission in a
timely manner and take all such other action so as to maintain such eligibility
for the use of such form.
(C) Additional
Registration Statement.
In the
event the Current Market Price declines to a price per share the result of
which
is that the Company cannot satisfy its conversion obligations to Holder
hereunder, the Company shall, to the extent required by the Securities Act
(because the additional shares were not covered by the Registration Statement
filed pursuant to Section 2(a)), as reasonably determined by the Holder, file
an
additional Registration Statement with the Commission for such additional number
of Registrable Securities as would be issuable upon conversion of the Debenture
(the “Additional
Registrable Securities”)
in
addition to those previously registered. The Company shall use its best efforts
to cause the Commission to declare such Registration Statement effective under
the Securities Act as promptly as practicable but not later than the Deadline.
The Company shall not include any other securities in the Registration Statement
relating to the offer and sale of such Additional Registrable
Securities.
(D) Piggyback
Registration Rights.(i)If
the
Company proposes to register any of its warrants, Common Stock or any other
shares of common stock of the Company under the Securities Act (other than
a
registration (A) on Form S-8 or S-4 or any successor or similar forms,
(B) relating to Common Stock or any other shares of common stock of the
Company issuable upon exercise of employee share options or in connection with
any employee benefit or similar plan of the Company or (C) in connection
with a direct or indirect acquisition by the Company of another Person or any
transaction with respect to which Rule 145 (or any successor provision) under
the Securities Act applies), whether or not for sale for its own account, it
will each such time, give prompt written notice at least 20 days prior to the
anticipated filing date of the registration statement relating to such
registration to each Investor, which notice shall set forth such Investor’s
rights under this Section 2(D) and shall offer such Investor the
opportunity to include in such registration statement such number of Registrable
Securities as such Investor may request. Upon the written request of any
Investor made within 10 days after the receipt of notice from the Company (which
request shall specify the number of Registrable Securities intended to be
disposed of by such Investor), the Company will use its best efforts to effect
the registration under the Securities Act of all Registrable Securities that
the
Company has been so requested to register by each Investor, to the extent
requisite to permit the disposition of the Registrable Securities so to be
registered; provided,
however,
that
(A) if such registration involves a Public Offering, each Investor must
sell its Registrable Securities to any underwriters selected by the Company
with
the consent of such Investor on the same terms and conditions as apply to the
Company and (B) if, at any time after giving written notice of its
intention to register any Registrable Securities pursuant to this Section 2
and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
register such Registrable Securities, the Company shall give written notice
to
each Investor and, thereupon, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration. The Company’s
obligations under this Section 2(D) shall terminate on the date that the
registration statement to be filed in accordance with Section 2(A) is declared
effective by the Commission.
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(ii) If
a
registration pursuant to this Section 2(D) involves a Public Offering and the
managing underwriter thereof advises the Company that, in its view, the number
of shares of Common Stock that the Company and the Investors intend to include
in such registration exceeds the largest number of shares of Common Stock that
can be sold without having an adverse effect on such Public Offering (the
“Maximum
Offering Size”),
the
Company will include in such registration only such number of shares of Common
Stock as does not exceed the Maximum Offering Size, and the number of shares
in
the Maximum Offering Size shall be allocated among the Company, the Investors
and any other sellers of Common Stock in such Public Offering (“Third-Party
Sellers”),
first,
pro rata
among the Investors until all the shares of Common Stock originally proposed
to
be offered for sale by the Investors have been allocated, and second,
pro rata
among the Company and any Third-Party Sellers, in each case on the basis of
the
relative number of shares of Common Stock originally proposed to be offered
for
sale under such registration by each of the Investors, the Company and the
Third-Party Sellers, as the case may be. If as a result of the proration
provisions of this Section 2(D)(ii), any Investor is not entitled to include
all
such Registrable Securities in such registration, such Investor may elect to
withdraw its request to include any Registrable Securities in such registration.
With respect to registrations pursuant to this Section 2(D), the number of
securities required to satisfy any underwriters’ over-allotment option shall be
allocated among the Company, the Investors and any Third Party Seller pro rata
on the basis of the relative number of securities offered for sale under such
registration by each of the Investors, the Company and any such Third Party
Sellers before the exercise of such over-allotment option.
3. Obligations
of the Company
In
connection with the registration of the Registrable Securities, the Company
shall:
(A) Promptly
(i) prepare and file with the Commission such amendments (including
post-effective amendments) to the Registration Statement and supplements to
the
Prospectus as may be necessary to keep the Registration Statement continuously
effective and in compliance with the provisions of the Securities Act applicable
thereto so as to permit the Prospectus forming part thereof to be current and
useable by Investors for resales of the Registrable Securities for a period
of
two (2) years from the date on which the Registration Statement is first
declared effective by the Commission (the “Effective
Time”)
or such
shorter period that will terminate when all the Registrable Securities covered
by the Registration Statement have been sold pursuant thereto in accordance
with
the plan of distribution provided in the Prospectus, transferred pursuant to
Rule 144 under the Securities Act or otherwise transferred in a manner that
results in the delivery of new securities not subject to transfer restrictions
under the Securities Act (the “Registration
Period”)
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;
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(B) During
the Registration Period, comply with the provisions of the Securities Act with
respect to the Registrable Securities of the Company covered by the Registration
Statement until such time as all of such Registrable Securities have been
disposed of in accordance with the intended methods of disposition by the
Investors as set forth in the Prospectus forming part of the Registration
Statement;
(C) (i) 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 (A) draft copies thereof to
one counsel chosen by the Investors and give consideration to include in such
documents all such comments as the Investors’ counsel reasonably may propose and
(B) to the counsel for the Investors a copy of the accountant’s consent
letter to be included in the filing and (ii) furnish to each Investor whose
Registrable Securities are included in the Registration Statement and the
Investor’s legal counsel (A) promptly after the same is prepared and
publicly distributed, filed with the Commission, or received by the Company,
one
copy of the Registration Statement, each Prospectus, and each amendment or
supplement thereto and (B) such number of copies of the Prospectus and all
amendments and supplements thereto and such other documents, as such Investor
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor;
(D) (i) Register
or qualify the Registrable Securities covered by the Registration Statement
under the securities or “blue sky” laws of the State of California,
(ii) prepare and file in such jurisdiction such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at
all
times during the Registration Period, (iii) take all such other lawful
actions as may be necessary to maintain such registrations and qualifications
in
effect at all times during the Registration Period and (iv) take all such
other lawful actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdiction; provided,
however,
that
the Company shall not be required in connection therewith or as a condition
thereto to (A) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(D), (B) subject itself
to general taxation in any such jurisdiction or (C) file a general consent
to
service of process in any such jurisdiction;
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(E) As
promptly as practicable after becoming aware of such event, notify each Investor
of the occurrence of any event, 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, in light of the circumstances under
which they were made, not misleading, and promptly prepare an amendment to
the
Registration Statement and supplement to the Prospectus to correct such untrue
statement or omission, and deliver a number of copies of such supplement and
amendment to each Investor as such Investor may reasonably request;
(F) As
promptly as practicable after becoming aware of such event, notify each Investor
who holds Registrable Securities being sold (or, in the event of an underwritten
offering, the managing underwriters) of the issuance by the Commission 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, rescission or removal of such stop order or other
suspension;
(G) Cause
all
the Registrable Securities covered by the Registration Statement to qualify
for
trading in the over the counter market via the “pink sheets” or otherwise be
listed on the principal national securities exchange, and included in an
inter-dealer quotation system of a registered national securities association,
on or in which securities of the same class or series issued by the Company
are
then listed or included;
(H) Maintain
a transfer agent and registrar, which may be a single entity, for the
Registrable Securities not later than the effective date of the Registration
Statement;
(I) Cooperate
with the Investors who hold Registrable Securities being offered 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 Investors reasonably may request and
registered in such names as the Investor may request; and, within three (3)
business 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 Investors whose Registrable
Securities are included in such registration statement) an appropriate
instruction and, to the extent necessary, an opinion of such
counsel;
(J) Take
all
such other lawful actions reasonably necessary to expedite and facilitate the
disposition by the Investors of their Registrable Securities in accordance
with
the intended methods therefor provided in the Prospectus which are customary
under the circumstances;
(K) Make
generally available to its security holders as soon as practicable, but in
any
event not later than three (3) months after (i) the effective date (as defined
in Rule 158(c) under the Securities Act) of the Registration Statement and
(ii)
the effective date of each post-effective amendment to the Registration
Statement, as the case may be, an earnings statement of the Company and its
subsidiaries complying with Section 11 (a) of the Securities Act and the rules
and regulations of the Commission thereunder (including, at the option of the
Company, Rule 158);
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(L) 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;
(M) (i) Make
reasonably available for inspection by counsel to the Investors, any underwriter
participating in any disposition pursuant to the Registration Statement, and
any
attorney, accountant or other agent retained by such underwriter all relevant
financial and other records, pertinent corporate documents and properties of
the
Company and its subsidiaries, and (ii) cause the Company’s officers,
directors and employees to supply all information reasonably requested by 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
nonpublic information shall be kept confidential by such Investors and any
such
underwriter, attorney, accountant or agent (pursuant to an appropriate
confidentiality agreement in the case of any such holder 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 Investors
and the other parties entitled thereto by one firm of counsel designated by
and
on behalf of the majority in interest of Investors and other
parties;
(N) In
connection with any underwritten offering, make such representations and
warranties to the Investors participating in such underwritten offering and
to
the managers, in form, substance and scope as are customarily made by the
Company to underwriters in secondary underwritten offerings;
(O) In
connection with any underwritten offering, obtain opinions of counsel to the
Company (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managers) addressed to the underwriters, covering
such matters as are customarily covered in opinions requested in secondary
underwritten offerings (it being agreed that the matters to be covered by such
opinions shall include, without limitation, as of the date of the opinion and
as
of the Effective Time of the Registration Statement or most recent
post-effective amendment thereto, as the case may be, the absence, to such
counsel’s knowledge, from the Registration Statement and the Prospectus,
including any documents incorporated by reference therein, of an untrue
statement of a material fact or the omission of a material fact required to
be
stated therein or necessary to make the statements therein (in the case of
the
Prospectus, in light of the circumstances under which they were made) not
misleading, subject to customary limitations);
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(P) In
connection with any underwritten offering, obtain “cold comfort” letters and
updates thereof from the independent public accountants of the Company (and,
if
necessary, from the independent public accountants of any subsidiary of the
Company or of any business acquired by the Company, in each case for which
financial statements and financial data are, or are required to be, included
in
the Registration Statement), addressed to each underwriter participating in
such
underwritten offering (if such underwriter has provided such letter,
representations or documentation, if any, required for such cold comfort letter
to be so addressed), in customary form and covering matters of the type
customarily covered in “cold comfort” letters in connection with secondary
underwritten offerings;
(Q) In
connection with any underwritten offering, deliver such documents and
certificates as may be reasonably required by the managers, if any,
and
(R) In
the
event that any broker-dealer registered under the Exchange Act shall be an
“Affiliate”
(as
defined in Rule 2729(b)(1) of the rules and regulations of the National
Association of Securities Dealers, Inc. (the “NASD
Rules”)
(or any
successor provision thereto)) of the Company or has a “conflict
of interest”
(as
defined in Rule 2720(b)(7) of the NASD Rules (or any successor provision
thereto)) and such broker-dealer shall underwrite, participate as a member
of an
underwriting syndicate or selling group or assist in the distribution of any
Registrable Securities covered by the Registration Statement, whether as a
holder of such Registrable Securities or as an underwriter, a placement or
sales
agent or a broker or dealer in respect thereof, or otherwise, the Company shall
assist such broker-dealer in complying with the requirements of the NASD Rules,
including, without limitation, by (A) engaging a “qualified
independent underwriter”
(as
defined in Rule 2720(b)(15) of the NASD Rules (or any successor provision
thereto)) to participate in the preparation of the Registration Statement
relating to such Registrable Securities, to exercise usual standards of due
diligence in respect thereof and to recommend the public offering price of
such
Registrable Securities, (B) indemnifying such qualified independent
underwriter to the extent of the indemnification of underwriters provided in
Section 6 hereof and (C) providing such information to such broker-dealer
as may be required in order for such broker-dealer to comply with the
requirements of the NASD Rules.
4. Obligations
of the Investors
In
connection with the registration of the Registrable Securities, the Investors
shall have the following obligations:
(A) It
shall
be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held
by it
and the intended method of disposition of the Registrable Securities held by
it
as shall be reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such registration
as the Company may reasonably request;
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(B) Each
Investor by its acceptance of the Registrable Securities agrees to cooperate
with the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of its election to exclude all of its Registrable Securities from
the
Registration Statement; and
(C) Each
Investor agrees that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in Section 3(E) or 3(F), it shall
immediately discontinue its disposition of Registrable Securities pursuant
to
the Registration Statement covering such Registrable Securities until such
Investor’s receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(E) and, if so directed by the Company, such Investor
shall deliver to the Company (at the expense of the Company) or destroy (and
deliver to the Company a certificate of destruction) all copies in such
Investor’s possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice.
5. Expenses
of Registration
All
expenses, other than underwriting discounts and commissions, incurred in
connection with registrations, filings or qualifications pursuant to Section
3,
but including, without limitation, all registration, listing, and qualifications
fees, printing and engraving fees, accounting fees, and the fees and
disbursements of counsel for the Company shall be borne by the
Company.
6. Indemnification
and Contribution
(A) Indemnification
by the Company. The
Company shall indemnify and hold harmless each Investor (each such person being
sometimes hereinafter referred to as an “Indemnified
Person”)
from
and against any losses, claims, damages or liabilities, joint or several, to
which such Indemnified 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 an untrue statement of a
material fact contained in any Registration Statement or an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, not misleading, or arise out of or
are
based upon an untrue statement of a material fact contained in any Prospectus
or
an omission or alleged omission to state therein a 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 the Company hereby
agrees to reimburse such Indemnified Person for all reasonable legal and other
expenses incurred by them in connection with investigating or defending any
such
action or claim as and when such expenses are incurred; provided,
however,
that
the Company shall not be liable to any such Indemnified Person in any such
case
to the extent that any such loss, claim, damage or liability arises out of
or is
based upon (i) an untrue statement or alleged untrue statement made in, or
an
omission or alleged omission from, such Registration Statement or Prospectus
in
reliance upon and in conformity with written information furnished to the
Company by such Indemnified Person expressly for use therein or (ii) in the
case
of the occurrence of an event of the type specified in Section 3(E), the use
by
the Indemnified Person of an outdated or defective Prospectus after the Company
has provided to such Indemnified Person an updated Prospectus correcting the
untrue statement or alleged untrue statement or omission or alleged omission
giving rise to such loss, claim, damage or liability.
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(B) Indemnification
by Investors.Each
Investor shall severally indemnify and hold harmless the Company from and
against any losses, claims, damages or liabilities, joint or several, to which
the Company 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 an untrue statement of a material fact provided
by such Investor that is contained in any Registration Statement, or arise
out
of an omission or alleged omission by such Investor to state therein a material
fact concerning or known to such Investor that is required to be stated therein
or is necessary to make the statements therein, not misleading, or arise out
of
or are based upon an untrue statement of a material fact provided by such
Investor contained in any Prospectus, or arise out of an omission or alleged
omission or alleged omission by such Investor to state therein a material fact
concerning or known to such Investor that is 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 the Investor hereby agrees
to
reimburse the Company for all reasonable legal and other expenses incurred
by it
in connection with investigating or defending any such action or claim as and
when such expenses are incurred; provided, however, that no Investor shall
be
liable to the Company 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 made in, or an omission or alleged omission from,
such
Registration Statement or Prospectus in reliance upon and in conformity with
written information furnished by the Company or another Investor expressly
for
use therein.
(C) Notice
of Claims, etc.
Promptly
after receipt by a party seeking indemnification pursuant to this Section 6
(an “Indemnified
Party”)
of
written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a “Claim”),
the
Indemnified Party promptly shall notify the party against whom indemnification
pursuant to this Section 6 is being sought (the “Indemnifying
Party”)
of the
commencement thereof; but the omission to so notify the Indemnifying Party
shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is materially prejudiced
and forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of
any
Claim by the Indemnifying Party, the Indemnified Party shall have the right
to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees, costs
and expenses, (y) the Indemnified Party and the Indemnifying Party shall
reasonably have concluded that representation of the Indemnified Party by the
Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available
to
the Indemnifying Party or (z) the Indemnifying Party shall have failed to employ
legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If
the
Indemnified Party employs separate legal counsel in circumstances other than
as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of
such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than
one
firm of counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnified Party shall not, without the prior written consent
of
the Indemnifying Party (which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any judgment that
does
not include an unconditional release of the Indemnifying Party from all
liabilities with respect to such Claim or judgment.
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(D) Contribution.
If the
indemnification provided for in this Section 6 is unavailable to or insufficient
to hold harmless an Indemnified Person under subsection (A) above in respect
of
any losses, claims, damages or liabilities (or actions in respect thereof)
referred to therein, then each Indemnifying Party shall contribute to the amount
paid or payable by such Indemnified Party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as
is
appropriate to reflect the relative fault of the Indemnifying Party and the
Indemnified Party in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations. The relative fault
of
such Indemnifying Party and Indemnified Party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by such Indemnifying Party or by such Indemnified Party,
and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The parties hereto
agree that it would not be just and equitable if contribution pursuant to this
Section 6(D) were determined by pro rata allocation (even if the Investors
or
any underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to in this Section 6(D). 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 shall be deemed to include any legal or
other
fees or 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. The obligations of the Investors
and any underwriters in this Section 6(D) to contribute shall be several in
proportion to the percentage of Registrable Securities registered or
underwritten, as the case may be, by them and not joint.
(E) Notwithstanding
any other provision of this Section 6, in no event shall any (i) Investor be
required to undertake liability to any person under this Section 6 for any
amounts in excess of the dollar amount of the proceeds to be received by such
Investor from the sale of such Investor’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.
(F) The
obligations of the Company under this Section 6 shall be in addition to any
liability which the Company may otherwise have to any Indemnified Person and
the
obligations of any Indemnified Person under this Section 6 shall be in addition
to any liability which such Indemnified Person may otherwise have to the
Company. The remedies provided in this Section 6 are not exclusive and shall
not
limit any rights or remedies which may otherwise be available to an indemnified
party at law or in equity.
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7. Rule
144
With
a
view to making available to the Investors 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 Investors to sell securities of the Company to the
public without registration (“Rule
144”),
the
Company agrees to use its best efforts to:
(1) comply
with the provisions of paragraph (c) (1) of Rule 144 and
(2) 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
Investor, make available other information as required by, and so long as
necessary to permit sales of, its Registrable Securities pursuant to
Rule 144.
8. Assignment
The
rights to have the Company register Registrable Securities pursuant to this
Agreement shall be automatically assigned by the Investors to any permitted
transferee of all or any portion of such Registrable Securities (or all or
any
portion of the Debenture of the Company which is convertible into such
securities) only if (a) the Investor agrees in writing with the transferee
or
assignee to assign such rights, and a copy of such agreement is furnished to
the
Company within a reasonable time after such assignment, (b) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (i) the name and address of such transferee or assignee and
(ii) the securities with respect to which such registration rights are being
transferred or assigned, (c) immediately following such transfer or assignment,
the securities so transferred or assigned to the transferee or assignee
constitute Restricted Securities and (d) at or before the time the Company
received the written notice contemplated by clause (b) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all
of
the provisions contained herein.
9. Amendment
and Waiver
Any
provision of this Agreement may be amended and the observance thereof may be
waived (either generally or in a particular instance and either retroactively
or
prospectively), only with the written consent of the Company and Investors
who
hold a majority-in-interest of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 9 shall be binding upon each
Investor and the Company.
10. Changes
in Common Stock
If,
and
as often as, there are any changes in the Common Stock by way of stock split,
stock dividend, reverse split, combination or reclassification, or through
merger, consolidation, reorganization or recapitalization, or by any other
means, appropriate adjustment shall be made in the provisions hereof, as may
be
required, so that the rights and privileges granted hereby shall continue with
respect to the Common Stock as so changed.
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11. Miscellaneous
(A) A
person
or entity shall be deemed to be a holder of Registrable Securities whenever
such
person or entity owns of record such Registrable Securities. If the Company
receives conflicting instructions, notices or elections from two or more persons
or entities with respect to the same Registrable Securities, the Company shall
act upon the basis of instructions, notice or election received from the
registered owner of such Registrable Securities.
(B) If,
after
the date hereof and prior to the Commission declaring the Registration Statement
to be filed pursuant to Section 2(a) effective under the Securities Act, the
Company grants to any Person any registration rights with respect to any Company
securities which are more favorable to such other Person than those provided
in
this Agreement, then the Company forthwith shall grant (by means of an amendment
to this Agreement or otherwise) identical registration rights to all Investors
hereunder.
(C) Except
as
may be otherwise provided herein, any notice or other communication or delivery
required or permitted hereunder shall be in writing and shall be delivered
personally, or sent by telecopier machine or by a nationally recognized
overnight courier service, and shall be deemed given when so delivered
personally, or by telecopier machine or overnight courier service as
follows:
| (1) | If to the Company, to: |
|
3DIcon
Corporation
7507
Sandusky Ave.
Tulsa,
Oklahoma 74136
Telephone: 918-492-5082
Facsimile: 918-492-5367
|
|
| With a copy to: | |
|
John
M. O’Connor, Esq.
Newton,
O’Connor, Turner & Ketchum
15
W. Sixth Street, Suite 2700
Tulsa,
Oklahoma 74119
Telephone:
918-587-0101
Facsimile: 918-587-0102
|
|
| (2) | If to the Investor, to: |
|
Golden
Gate Investors, Inc.
7817
Herschel Avenue, Suite 200
La
Jolla, California 92037
Telephone: 858-551-8789
Facsimile: 858-551-8779
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13
(3) If
to any
other Investor, at such address as such Investor shall have provided in writing
to the Company.
The
Company, the Holder or any Investor may change the foregoing address by notice
given pursuant to this Section 11(C).
(D) Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as
a
waiver thereof.
(E) This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of California. Each of the parties consents to the jurisdiction of
the
federal courts whose districts encompass any part of the City of San Diego
or
the state courts of the State of California sitting in the City of San Diego
in
connection with any dispute arising under this Agreement and hereby waives,
to
the maximum extent permitted by law, any objection including any objection
based
on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions.
(F) Should
any party hereto employ an attorney for the purpose of enforcing or construing
this Agreement, or any judgment based on this Agreement, in any legal proceeding
whatsoever, including insolvency, bankruptcy, arbitration, declaratory relief
or
other litigation, the prevailing party shall be entitled to receive from the
other party or parties thereto reimbursement for all reasonable attorneys'
fees
and all reasonable costs, including but not limited to service of process,
filing fees, court and court reporter costs, investigative costs, expert witness
fees, and the cost of any bonds, whether taxable or not, and that such
reimbursement shall be included in any judgment or final order issued in that
proceeding. The "prevailing party" means the party determined by the court
to
most nearly prevail and not necessarily the one in whose favor a judgment is
rendered.
(G) 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.
(H) 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 conflicts with the provisions hereof. The Company
is not currently a party to any agreement granting any registration rights
with
respect to any of its securities to any person which conflicts with the
Company’s obligations hereunder or gives any other party the right to include
any securities in any Registration Statement filed pursuant hereto, except
for
such rights and conflicts as have been irrevocably waived. Without limiting
the
generality of the foregoing, without the written consent of the holders of
a
majority in interest of the Registrable Securities, the Company shall not grant
to any person the right to request it to register any of its securities under
the Securities Act unless the rights so granted are subject in all respect
to
the prior rights of the holders of Registrable Securities set forth herein,
and
are not otherwise in conflict or inconsistent with the provisions of this
Agreement. The restrictions on the Company’s rights to grant registration rights
under this paragraph shall terminate on the date the Registration Statement
to
be filed pursuant to Section 2(A) is declared effective by the
Commission.
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14
(I) This
Agreement, the Securities Purchase Agreement, and the Debenture, of even date
herewith among the Company and the Holder constitute the entire agreement among
the parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. These Agreements supersede all prior agreements and
undertakings among the parties hereto with respect to the subject matter
hereof.
(J) Subject
to the requirements of Section 8 hereof, this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto.
(K) All
pronouns and any variations thereof refer to the masculine, feminine or neuter,
singular or plural, as the context may require.
(L) The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning thereof.
(M) This
Agreement may be executed in counterparts, each of which shall be deemed an
original but both of which shall constitute one and the same agreement. A
facsimile transmission of this signed Agreement shall be legal and binding
on
the parties hereto.
IN
WITNESS WHEREOF, the parties hereto have duly caused this Agreement to be
executed and delivered on the date first above written.
| 3DIcon Corporation | ||
| |
|
|
| By: | /s/ Martin Keating | |
|
Name: Martin
Keating
Title:
Chief Executive Officer
|
||
|
Golden
Gate Investors, Inc.
|
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| |
|
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| By: | /s/ Travis Huff | |
|
Name:
Travis Huff
Title:
Portfolio Manager, Vice President
|
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15
THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE, AND IS BEING
OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF
THE SECURITIES ACT AND SUCH LAWS. THIS SECURITY MAY NOT BE SOLD OR TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE
SECURITIES ACT OR SUCH OTHER LAWS.
6
¼ % CONVERTIBLE DEBENTURE
Company:
3DIcon
Corporation
Company
Address: 7507
Sandusky Ave., Tulsa, Oklahoma 74136
Closing
Date: November
3, 2006
Maturity
Date: November
3, 2011
Principal
Amount:
$100,000
3DIcon
Corporation, an Oklahoma corporation, and any successor or resulting corporation
by way of merger, consolidation, sale or exchange of all or substantially
all of
the assets or otherwise (the “Company”),
for
value received, hereby promises to pay to the Holder (as such term is
hereinafter defined), or such other Person (as such term is hereinafter defined)
upon order of the Holder, on the Maturity Date, the Principal Amount (as
such
term is hereinafter defined), as such sum may be adjusted pursuant to Article
3,
and to pay interest thereon from the Closing Date, on each Conversion Date,
at
the rate of six and one-quarter percent (6 ¼ %) per annum (the “Debenture
Interest Rate”).
All
interest payable on the Principal Amount of this Debenture shall be calculated
on the basis of a 360-day year for the actual number of days elapsed. Payment
of
interest on this Debenture shall be in cash or, at the option of the Holder,
in
shares of Common Stock of the Company valued at the then applicable Conversion
Price (as defined herein). This Debenture may not be prepaid without the
written
consent of the Holder.
ARTICLE
1
DEFINITIONS
SECTION
1.1 Definitions.
The
terms defined in this Article whenever used in this Debenture have the following
respective meanings:
(i) “Affiliate”
has the
meaning ascribed to such term in Rule 12b-2 under the Securities Exchange
Act of
1934, as amended.
(ii) “Bankruptcy
Code”
means
the United States Bankruptcy Code of 1986, as amended (11 U.S.C. §§ 101
et.
seq.).
(iii) “Business
Day”
means a
day other than Saturday, Sunday or any day on which banks located in the
State
of California are authorized or obligated to close.
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(iv) “Capital
Shares”
means
the Common Stock and any other shares of any other class or series of capital
stock, whether now or hereafter authorized and however designated, which
have
the right to participate in the distribution of earnings and assets (upon
dissolution, liquidation or winding-up) of the Company.
(v) “Common
Shares”
or
“Common
Stock”
means
shares of the Company’s Common Stock.
(vi) “Common
Stock Issued at Conversion”,
means
the Common Stock deliverable upon conversion of this Debenture, including
all
securities of any other class or series into which this Debenture may hereafter
be convertible, whether now or hereafter created and however
designated.
(vii) “Conversion”
or“conversion”
means
the repayment by the Company of the Principal Amount of this Debenture (and,
to
the extent the Holder elects as permitted by Section 3.1, accrued and unpaid
interest thereon) by the delivery of Common Stock on the terms provided in
Section 3.2, and “convert,” “converted,” “convertible”
and like
words shall have a corresponding meaning.
(viii) “Conversion
Date”
means
any day on which all or any portion of the Principal Amount of this Debenture
is
converted in accordance with the provisions hereof.
(ix) “Conversion
Notice”
means a
written notice of conversion substantially in the form annexed hereto as
Exhibit
A.
(x) “Conversion
Price”
on any
date of determination means the applicable price for the conversion of this
Debenture into Common Shares on such day as set forth in Section
3.1(a).
(xi) “Current
Market Price”
on any
date of determination means the closing price of a Common Share on such day
as
reported in the “pink sheets” through the Interdealer Trading and Quotation
System; provided that, if such security is not traded on the over the counter
market via the pink sheets, then as reported on the NASDAQ OTCBB Exchange;
provided
that,
if
such security is not listed or admitted to trading on the NASDAQ OTCBB, as
reported on the principal national security exchange or quotation system
on
which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange
or
quotation system, the closing bid price of such security on the over-the-counter
market on the day in question as reported by Bloomberg LP or a similar generally
accepted reporting service, as the case may be.
(xii) “Debenture”
or
“Debentures”
means
this Convertible Debenture of the Company or such other convertible debenture(s)
exchanged therefor as provided in Section 2.1.
(xiii) “Discount
Multiplier”
has
the
meaning set forth in Section 3.1(a).
(xiv) “Event
of Default”
has the
meaning set forth in Section 6.1.
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(xv) “Holder”
means
Golden Gate Investors, Inc., any successor thereto, or any Person to whom
this
Debenture is subsequently transferred in accordance with the provisions
hereof.
(xvi) “Interest
Payment Due Date”
has the
meaning set forth in the opening paragraph of this Debenture.
(xvii) “Market
Disruption Event”
means
any event that results in a material suspension or limitation of trading
of the
Common Shares.
(xviii) “Market
Price”
per
Common Share means the lowest price of the Common Shares during any Trading
Day
as reported in the “pink sheets” through the Interdealer Trading and Quotation
System; provided, if such security is not traded on the over the counter
market
via the pink sheets, then the lowest price on the NASDAQ OTCBB; provided
further,
that, if
such security is not listed or admitted to trading on the NASDAQ OTCBB, as
reported on the principal national security exchange or quotation system
on
which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange
or
quotation system, the lowest price of the Common Shares during any Trading
Day
on the over-the-counter market as reported by Bloomberg LP or a similar
generally accepted reporting service, as the case may be.
(xix) “Maximum
Rate”
has the
meaning set forth in Section 6.4.
(xx) “Outstanding”
when
used with reference to Common Shares or Capital Shares (collectively,
“Shares”)
means,
on any date of determination, all issued and outstanding Shares, and includes
all such Shares issuable in respect of outstanding scrip or any certificates
representing fractional interests in such Shares; provided,
however,
that
any such Shares directly or indirectly owned or held by or for the account
of
the Company or any Subsidiary of the Company shall not be deemed “Outstanding”
for
purposes hereof.
(xxi) “Person”
means an
individual, a corporation, a partnership, an association, a limited liability
company, an unincorporated business organization, a trust or other entity
or
organization, and any government or political subdivision or any agency or
instrumentality thereof.
(xxii) “Principal
Amount”
means,
for any date of calculation, the principal sum set forth in the first paragraph
of this Debenture (but only such principal amount as to which the Holder
has (a)
actually advanced, and (b) not theretofore furnished a Conversion Notice
in
compliance with Section 3.2).
(xxiii) “SEC”
means
the United States Securities and Exchange Commission.
(xxiv) “Securities
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations of
the SEC
thereunder, all as in effect at the time.
(xxv) “Subsidiary”
means
any entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are owned directly or indirectly by the
Company.
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(xxvi) “Trading
Day”
means
any day on which (i) purchases and sales of securities on the principal national
security exchange or quotation system on which the Common Shares are traded
are
reported thereon, or, if not quoted or listed or admitted to trading on any
national securities exchange or quotation system, as reported by Bloomberg
LP or
a similar generally accepted reporting service, as the case may be, (ii)
at
least one bid for the trading of Common Shares is reported and (iii) no Market
Disruption Event occurs.
(xxvii) “Volume
Weighted Average Price” per
Common Share means the volume weighted average price of the Common Shares
during
any Trading Day as reported on the NASDAQ OTCBB; provided
that, if
such security is not listed or admitted to trading on the NASDAQ OTCBB, as
reported on the principal national security exchange or quotation system
on
which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange
or
quotation system, the volume weighted average price of the Common Shares
during
any Trading Day on the over-the-counter market as reported by Bloomberg LP
or a
similar generally accepted reporting service, as the case may be.
(xxviii) “Warrant” means
that certain Warrant to Purchase Common Stock of even date with this Debenture
issued by the Company to the Holder, pursuant to which the Holder has the
right
to purchase up to 1,000,000 shares of Common Stock in accordance with the
provisions thereof.
All
references to “cash” or “$” herein means currency of the United States of
America.
ARTICLE
2
EXCHANGES,
TRANSFER AND REPAYMENT
SECTION
2.1 Registration
of Transfer of Debentures.
This
Debenture, when presented for registration of transfer, shall (if so required
by
the Company) be duly endorsed, or be accompanied by a written instrument
of
transfer in form reasonably satisfactory to the Company duly executed, by
the
Holder duly authorized in writing.
SECTION
2.2 Loss,
Theft, Destruction of Debenture.
Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of this Debenture and, in the case of any such loss, theft
or
destruction, upon receipt of indemnity or security reasonably satisfactory
to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Debenture, the Company shall make, issue and deliver,
in
lieu of such lost, stolen, destroyed or mutilated Debenture, a new Debenture
of
like tenor and unpaid Principal Amount dated as of the date hereof (which
shall
accrue interest from the most recent Interest Payment Due Date on which an
interest payment was made in full). This Debenture shall be held and owned
upon
the express condition that the provisions of this Section 2.2 are exclusive
with
respect to the replacement of a mutilated, destroyed, lost or stolen Debenture
and shall preclude any and all other rights and remedies notwithstanding
any law
or statute existing or hereafter enacted to the contrary with respect to
the
replacement of negotiable instruments or other securities without the surrender
thereof.
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4
SECTION
2.3 Who
Deemed Absolute Owner.
The
Company may deem the Person in whose name this Debenture shall be registered
upon the registry books of the Company to be, and may treat it as, the absolute
owner of this Debenture (whether or not this Debenture shall be overdue)
for the
purpose of receiving payment of or on account of the Principal Amount of
this
Debenture, for the conversion of this Debenture and for all other purposes,
and
the Company shall not be affected by any notice to the contrary. All such
payments and such conversions shall be valid and effectual to satisfy and
discharge the liability upon this Debenture to the extent of the sum or sums
so
paid or the conversion or conversions so made.
SECTION
2.4 Repayment
at Maturity.
At the
Maturity Date, the Company shall repay the outstanding Principal Amount of
this
Debenture in whole in cash, together with all accrued and unpaid interest
thereon, in cash, to the Maturity Date.
SECTION
2.5 Redemption. At
anytime after the outstanding Principal Amount of the Debenture is less than
$50,000, the Company may redeem this Debenture in whole in cash for the
outstanding Principal Amount plus accrued and unpaid interest.
ARTICLE
3
CONVERSION
OF DEBENTURE
SECTION
3.1 Conversion;
Conversion Price; Valuation Event.
Subject
to the limitations set forth in Section 3.5, at the option of the Holder,
this
Debenture may be converted, either in whole or in part, up to the full Principal
Amount hereof into Common Shares (calculated as to each such conversion to
the
nearest 1/100th of a share), at any time and from time to time on any Business
Day, subject to compliance with Section 3.2. The number of Common Shares
into
which this Debenture may be converted is equal to the dollar amount of the
Debenture being converted multiplied by one hundred ten, minus the product
of
the Conversion Price multiplied by ten times the dollar amount of the Debenture
being converted, and the entire foregoing result shall be divided by the
Conversion Price. The “Conversion
Price”
shall be
equal to the lesser of: (i) $4.00, or (ii) 80% of the average of the five
lowest
Volume Weighted Average Prices during the twenty Trading Days prior to Holder’s
election to convert (the percentage figure being a “Discount
Multiplier”).
The
Company reserves the right to increase the number of Trading Days in clause
(ii)
above, as it deems appropriate.
If
the
Holder elects to convert a portion of the Debenture and, on the day that
the
election is made, the Volume Weighted Average Price is below $1.00, the Company
shall have the right to prepay that portion of the Debenture that Holder
elected
to convert, plus any accrued and unpaid interest, at 135% of such amount.
In the
event that the Company elects to prepay that portion of the Debenture, Holder
shall have the right to withdraw its Conversion Notice. If, at anytime during
the month, the Volume Weighted Average Price is below $1.00, Holder shall
not be
obligated to convert any portion of the Debenture during that month. The
$1.00
figure shall be adjusted, on the date that is one year after the Closing
Date
and every six months thereafter (“Adjustment Dates”), to a price equal to 65% of
the average of the Current Market Prices for the fifteen Trading Days prior
to
each Adjustment Date.
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In
accordance with the terms of the Warrant, at any time that the Holder elects
to
convert a portion of this Debenture, then the Holder will be deemed to have
elected to exercise an identical percentage of the Warrant and to pay the
Exercise Price (as defined in the Warrant) to the Company in connection with
such exercise.
Beginning
one year from the Closing Date, Holder shall submit Debenture conversion
notices
and related Warrant exercise notices in an amount such that Holder receives
a
total of 1% of the Outstanding shares of the Company every calendar quarter
for
a period of one year, provided that Holder is able to sell the shares under
Rule
144. Beginning two years from the Closing Date, Holder shall convert $3,000
of
the Debenture and exercise 30,000 Warrant Shares each calendar month, provided
that Holder is able to sell the underlying Common Stock under Rule 144(k).
If
Holder converts more than such minimum amounts, the excess shall be credited
against the next period’s minimum. In the event Holder does not convert and
exercise the minimum amounts set forth in the first two sentences of this
paragraph, the Company’s remedy shall be limited to Holder not being entitled to
collect interest on this Debenture for that calendar quarter or calendar
month,
as applicable.
SECTION
3.2 Exercise
of Conversion Privilege.
(a)
Conversion of this Debenture may be exercised on any Business Day by the
Holder
by telecopying an executed and completed Conversion Notice to the Company.
Each
date on which a Conversion Notice is telecopied to the Company in accordance
with the provisions of this Section 3.2 shall constitute a Conversion Date.
The
Company shall convert this Debenture and issue the Common Stock Issued at
Conversion in the manner provided below in this Section 3.2, and all voting
and
other rights associated with the beneficial ownership of the Common Stock
Issued
at Conversion shall vest with the Holder, effective as of the Conversion
Date at
the time specified in the Conversion Notice. The Conversion Notice also shall
state the name or names (with addresses) of the persons who are to become
the
holders of the Common Stock Issued at Conversion in connection with such
conversion. As promptly as practicable after the receipt of the Conversion
Notice as aforesaid, but in any event not more than two (2) Business Days
after
the Company’s receipt of such Conversion Notice, the Company shall (i) issue the
Common Stock Issued at Conversion in accordance with the provisions of this
Article 3 and (ii) cause to be mailed for delivery by overnight courier (x)
a
certificate or certificate(s) representing the number of Common Shares to
which
the Holder is entitled by virtue of such conversion, (y) cash, as provided
in
Section 3.3, in respect of any fraction of a Common Share deliverable upon
such
conversion and (z) cash or shares of Common Stock, as applicable, representing
the amount of accrued and unpaid interest on this Debenture as of the Conversion
Date. Such conversion shall be deemed to have been effected at the time at
which
the Conversion Notice indicates, and at such time the rights of the Holder
of
this Debenture, as such (except if and to the extent that any Principal Amount
thereof remains unconverted), shall cease and the Person and Persons in whose
name or names the Common Stock Issued at Conversion shall be issuable shall
be
deemed to have become the holder or holders of record of the Common Shares
represented thereby, and all voting and other rights associated with the
beneficial ownership of such Common Shares shall at such time vest with such
Person or Persons. The Conversion Notice shall constitute a contract between
the
Holder and the Company, whereby the Holder shall be deemed to subscribe for
the
number of Common Shares which it will be entitled to receive upon such
conversion and, in payment and satisfaction of such subscription (and for
any
cash adjustment to which it is entitled pursuant to Section 3.4), to surrender
this Debenture and to release the Company from all liability thereon (except
if
and to the extent that any Principal Amount thereof remains unconverted).
No
cash payment aggregating less than $1.00 shall be required to be given unless
specifically requested by the Holder.
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(b) If,
at
any time after the date of this Debenture, (i) the Company wrongfully
challenges, disputes or denies the right of the Holder hereof to effect the
conversion of this Debenture into Common Shares or otherwise wrongfully
dishonors or rejects any Conversion Notice delivered in accordance with this
Section 3.2 or (ii) any third party who is not and has never been an Affiliate
of the Holder commences any lawsuit or legal proceeding or otherwise asserts
any
claim before any court or public or governmental authority which seeks to
challenge, deny, enjoin, limit, modify, delay or dispute the right of the
Holder
hereof to effect the conversion of this Debenture into Common Shares, then
the
Holder shall have the right, but not the obligation, by written notice to
the
Company, to require the Company to promptly redeem this Debenture for cash
at
one hundred and thirty-five (135%) of the Principal Amount thereof, together
with all accrued and unpaid interest thereon to the date of redemption. Under
any of the circumstances set forth above, the Company shall be responsible
for
the payment of all costs and expenses of the Holder, including reasonable
legal
fees and expenses, as and when incurred in defending itself in any such action
or pursuing its rights hereunder (in addition to any other rights of the
Holder).
(c) To
the
fullest extent permitted by law, the Holder shall be entitled to exercise
its
conversion privilege notwithstanding the commencement of any case under the
Bankruptcy Code. In the event the Company is a debtor under the Bankruptcy
Code,
the Company hereby waives to the fullest extent permitted any rights to relief
it may have under 11 U.S.C. § 362 in respect of the Holder’s conversion
privilege. The Company hereby waives to the fullest extent permitted any
rights
to relief it may have under 11 U.S.C. § 362 in respect of the conversion of this
Debenture. The Company agrees, without cost or expense to the Holder, to
take or
consent to any and all action necessary to effectuate relief under 11 U.S.C.
§
362.
SECTION
3.3 Fractional
Shares.
No
fractional Common Shares or scrip representing fractional Common Shares shall
be
delivered upon conversion of this Debenture. Instead of any fractional Common
Shares which otherwise would be delivered upon conversion of this Debenture,
the
Company shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction multiplied by the Current Market Price on the
Conversion Date. No cash payment of less than $1.00 shall be required to
be
given unless specifically requested by the Holder.
SECTION
3.4 Adjustments.
The
Conversion Price and the number of shares deliverable upon conversion of
this
Debenture are subject to adjustment from time to time as follows:
(i) Reclassification,
Etc.
In case
the Company shall reorganize its capital, reclassify its capital stock,
consolidate or merge with or into another Person (where the Company is not
the
survivor or where there is a change in or distribution with respect to the
Common Stock of the Company), sell, convey, transfer or otherwise dispose
of all
or substantially all its property, assets or business to another Person,
or
effectuate a transaction or series of related transactions in which more
than
fifty percent (50%) of the voting power of the Company is disposed of (each,
a
“Fundamental
Corporate Change”)
and,
pursuant to the terms of such Fundamental Corporate Change, 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 the Holder of this Debenture shall have the right thereafter, at its
sole
option, to (x) receive 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 as is receivable upon or as a result of such
Fundamental Corporate Change by a holder of the number of shares of Common
Stock
into which the outstanding portion of this Debenture may be converted at
the
Conversion Price applicable immediately prior to such Fundamental Corporate
Change or (y) require the Company, or such successor, resulting or
purchasing corporation, as the case may be, to, without benefit of any
additional consideration therefor, execute and deliver to the Holder a debenture
with substantial identical rights, privileges, powers, restrictions and other
terms as this Debenture in an amount equal to the amount outstanding under
this
Debenture immediately prior to such Fundamental Corporate Change. For purposes
hereof, “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 prepayment 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
shall similarly apply to successive Fundamental Corporate Changes.
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SECTION
3.5 Certain
Conversion Limits.
So
long
as any of the Principal Amount of this Debenture is outstanding, the Holder
shall not have the right, and the Company shall not have the obligation,
to
convert any portion of this Debenture if, following a Conversion Notice from
the
Holder, the result would be that the Holder would be deemed the beneficial
owner
of more than 9.99% of the then Outstanding shares of Common Stock. Further,
for
a period of one year after the Closing Date, if and to the extent that, on
any
date, the mere holding by the Holder of this Debenture (regardless of the
actual
conversion of any portion thereof) would result in the Holder’s being deemed the
beneficial owner of
more
than 9.99% of the then Outstanding shares of Common Stock, then in addition
to
the Holder having no right, and the Company having no obligation, to convert
any
portion of this Debenture as shall cause such Holder to be deemed the beneficial
owner of more than 9.99% of the then Outstanding shares of Common Stock,
if any
court of competent jurisdiction shall determine that the foregoing limitation
is
ineffective to prevent the Holder, by mere ownership of the Debenture, from
being deemed the beneficial owner of more than 9.99% of the then Outstanding
shares of Common Stock, then the Company shall prepay such portion of this
Debenture as shall cause such Holder not to be deemed the beneficial owner
of
more than 9.99% of the then Outstanding shares of Common Stock. Upon such
determination by a court of competent jurisdiction, the Holder shall have
no
interest in or rights under such portion of the Debenture. Any and all interest
paid on or prior to the date of such determination shall be deemed interest
paid
on the remaining portion of this Debenture held by the Holder.
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SECTION
3.6 Surrender
of Debentures.
Upon
any redemption of this Debenture pursuant to Sections 3.2, 3.5 or 6.2, or
upon
maturity pursuant to Section 2.4, the Holder shall either deliver this Debenture
by hand to the Company at its principal executive offices or surrender the
same
to the Company at such address by nationally recognized overnight courier.
Payment of the redemption price or the amount due on maturity specified in
Section 2.4, shall be made by the Company to the Holder against receipt of
this
Debenture (as provided in this Section 3.5) by wire transfer of immediately
available funds to such account(s) as the Holder shall specify by written
notice
to the Company. If payment of such redemption price is not made in full by
the
redemption date, or the amount due on maturity is not paid in full by the
Maturity Date, the Holder shall again have the right to convert this Debenture
as provided in Article 3 hereof or to declare an Event of Default.
ARTICLE
4
STATUS;
RESTRICTIONS ON TRANSFER
SECTION
4.1 Status
of Debenture.
This
Debenture constitutes a legal, valid and binding obligation of the Company,
enforceable in accordance with its terms subject, as to enforceability, to
general principles of equity and to principles of bankruptcy, insolvency,
reorganization and other similar laws of general applicability relating to
or
affecting creditors’ rights and remedies generally.
SECTION
4.2 Restrictions
on Transfer.
This
Debenture, and any Common Shares deliverable upon the conversion hereof,
have
not been registered under the Securities Act. The Holder by accepting this
Debenture agrees that this Debenture and the shares of Common Stock to be
acquired as interest on and upon conversion of this Debenture may not be
assigned or otherwise transferred unless and until (i) the Company has received
an opinion of counsel for the Company that this Debenture or such shares
may be
sold pursuant to an exemption from registration under the Securities Act
or (ii)
a registration statement relating to this Debenture or such shares has been
filed by the Company and declared effective by the SEC.
Each
certificate for shares of Common Stock deliverable hereunder shall bear a
legend
as follows unless and until such securities have been sold pursuant to an
effective registration statement under the Securities Act:
“The
securities represented by this certificate have not been registered under
the
Securities Act of 1933, as amended (the “Securities Act”). The securities may
not be offered for sale, sold or otherwise transferred except (i) pursuant
to an
effective registration statement under the Securities Act or (ii) pursuant
to an
exemption from registration under the Securities Act in respect of which
the
issuer of this certificate has received an opinion of counsel satisfactory
to
the issuer of this certificate to such effect. Copies of the agreement covering
both the purchase of the securities and restrictions on their transfer may
be
obtained at no cost by written request made by the holder of record of this
certificate to the Secretary of the issuer of this certificate at the principal
executive offices of the issuer of this certificate.”
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ARTICLE
5
COVENANTS
SECTION
5.1 Conversion.
The
Company shall cause the transfer agent, not later than two (2) Business Days
after the Conversion Date, to issue and deliver to the Holder the requisite
shares of Common Stock Issued at Conversion. The Company acknowledges and
agrees
that it will obtain, at the Company’s expense, any necessary Rule 144 and Rule
144(k) legal opinions so that Holder may sell the Common Stock Issued at
Conversion under Rule 144 or Rule 144(k) beginning one or two years from
the
Closing Date, as applicable.
SECTION
5.2 Notice
of Default.
If any
one or more events occur which constitute or which, with notice, lapse of
time,
or both, would constitute an Event of Default, the Company shall forthwith
give
notice to the Holder, specifying the nature and status of the Event of Default
or such other event(s), as the case may be.
SECTION
5.3 Payment
of Obligations.
So long
as this Debenture shall be outstanding, the Company shall pay, extend, or
discharge at or before maturity, all its respective material obligations
and
liabilities, including, without limitation, tax liabilities, except where
the
same may be contested in good faith by appropriate proceedings.
SECTION
5.4 Compliance
with Laws.
So long
as this Debenture shall be outstanding, the Company shall comply with all
applicable laws, ordinances, rules, regulations and requirements of governmental
authorities, except for such noncompliance which would not have a material
adverse effect on the business, properties, prospects, condition (financial
or
otherwise) or results of operations of the Company and the
Subsidiaries.
SECTION
5.5 Inspection
of Property, Books and Records.
So long
as this Debenture shall be outstanding, the Company shall keep proper books
of
record and account in which full, true and correct entries shall be made
of all
material dealings and transactions in relation to its business and activities
and shall permit representatives of the Holder at the Holder’s expense to visit
and inspect any of its respective properties, to examine and make abstracts
from
any of its respective books and records, not reasonably deemed confidential
by
the Company, and to discuss its respective affairs, finances and accounts
with
its respective officers and independent public accountants, all at such
reasonable times and as often as may reasonably be desired.
SECTION
5.6 Right
of First Refusal on Other Financing. In
the
event that, following the date on which the Company’s registration statement to
be filed pursuant to a Registration Rights Agreement between the Company
and
Holder of even date herewith (which Registration Rights Agreement is not
associated with this Debenture), the Company obtains a commitment for any
other
financing (either debt, equity, or a combination thereof) which is to close
during the term of this Debenture, Holder shall be entitled to a right of
first
refusal to enable it to, at Holder’s option, match the terms of the other
financing. The Company shall deliver to Holder, at least 10 days prior to
the
proposed closing date of such transaction, written notice describing the
proposed transaction, including the terms and conditions thereof, and providing
Holder an option during the 10 day period following delivery of such notice
to
either provide the financing being offered in such transaction on the same
terms
as contemplated by such transaction, or to add additional principal to this
Debenture, in the amount of such other financing, on the same terms and
conditions as this Debenture.
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ARTICLE
6
EVENTS
OF DEFAULT; REMEDIES
SECTION
6.1 Events
of Default.
“Event
of Default”
wherever
used herein means any one of the following events:
(i) the
Company shall default in the payment of principal of or interest on this
Debenture as and when the same shall be due and payable and, in the case
of an
interest payment default, such default shall continue for five (5) Business
Days
after the date such interest payment was due, or the Company shall fail to
perform or observe any other covenant, agreement, term, provision, undertaking
or commitment under this Debenture or the Warrants and such default shall
continue for a period of ten (10) Business Days after the delivery to the
Company of written notice that the Company is in default hereunder or
thereunder;
(ii) any
of
the representations or warranties made by the Company or in any certificate
or
financial or other written statements heretofore or hereafter furnished by
or on
behalf of the Company in connection with the execution and delivery of this
Debenture or the Warrants shall be false or misleading in a material respect
on
the Closing Date;
(iii) under
the
laws of any jurisdiction not otherwise covered by clauses (iv) and (v) below,
the Company or any Subsidiary (A) becomes insolvent or generally not able
to pay
its debts as they become due, (B) admits in writing its inability to pay
its
debts generally or makes a general assignment for the benefit of creditors,
(C)
institutes or has instituted against it any proceeding seeking (x) to adjudicate
it a bankrupt or insolvent, (y) liquidation, winding-up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency, reorganization or relief
of
debtors including any plan of compromise or arrangement or other corporate
proceeding involving or affecting its creditors or (z) the entry of an order
for
relief or the appointment of a receiver, trustee or other similar person
for it
or for any substantial part of its properties and assets, and in the case
of any
such official proceeding instituted against it (but not instituted by it),
either the proceeding remains undismissed or unstayed for a period of sixty
(60)
calendar days, or any of the actions sought in such proceeding (including
the
entry of an order for relief against it or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial
part
of its properties and assets) occurs or (D) takes any corporate action to
authorize any of the above actions;
(iv) the
entry
of a decree or order by a court having jurisdiction in the premises adjudging
the Company or any Subsidiary a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company under the Bankruptcy Code or any other
applicable Federal or state law, or appointing a receiver, liquidator, assignee,
trustee or sequestrator (or other similar official) of the Company or of
any
substantial part of its property, or ordering the winding-up or liquidation
of
its affairs, and any such decree or order continues and is unstayed and in
effect for a period of sixty (60) calendar days;
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(v) the
institution by the Company or any Subsidiary of proceedings to be adjudicated
a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy
or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under the Bankruptcy Code or
any
other applicable federal or state law, or the consent by it to the filing
of any
such petition or to the appointment of a receiver, liquidator, assignee,
trustee
or sequestrator (or other similar official) of the Company or of any substantial
part of its property, or the making by it of an assignment for the benefit
of
creditors, or the admission by it in writing of its inability to pay its
debts
generally as and when they become due, or the taking of corporate action
by the
Company in furtherance of any such action;
(vi) a
final
judgment or final judgments for the payment of money shall have been entered
by
any court or courts of competent jurisdiction against the Company and remains
undischarged for a period (during which execution shall be effectively stayed)
of thirty (30) days, provided
that the
aggregate amount of all such judgments at any time outstanding (to the extent
not paid or to be paid, as evidenced by a written communication to that effect
from the applicable insurer, by insurance) exceeds One Hundred Thousand Dollars
($100,000);
(vii) it
becomes unlawful for the Company to perform or comply with its obligations
under
this Debenture or the Conversion Warrant in any respect;
(viii) the
Common Shares shall no longer be traded in the over the counter market via
the
pink sheets, or not otherwise be listed for trading on the NASDAQ OTCBB (the
“Trading
Market”
or, to
the extent the Company becomes eligible to list its Common Stock on any other
national security exchange or quotation system, upon official notice of listing
on any such exchange or system, as the case may be, it shall be the “Trading
Market”)
or
suspended from trading on the Trading Market, and shall not be reinstated,
relisted or such suspension lifted, as the case may be, within five (5) days
or;
(ix) the
Company shall default (giving effect to any applicable grace period) in the
payment of principal or interest as and when the same shall become due and
payable, under any indebtedness, individually or in the aggregate, of more
than
One Hundred Thousand Dollars ($100,000);
SECTION
6.2 Acceleration
of Maturity; Rescission and Annulment.
If an
Event of Default occurs and is continuing, then and in every such case the
Holder may, by a notice in writing to the Company, rescind any outstanding
Conversion Notice and declare that all amounts owing or otherwise outstanding
under this Debenture are immediately due and payable and upon any such
declaration this Debenture shall become immediately due and payable in cash
at a
price of one hundred and thirty-five percent (135%) of the Principal Amount
thereof, together with all accrued and unpaid interest thereon to the date
of
payment; provided,
however,
in the
case of any Event of Default described in clauses (iii), (iv), (v) or (vii)
of
Section 6.1, such amount automatically shall become immediately due and payable
without the necessity of any notice or declaration as aforesaid.
SECTION
6.3 Late
Payment Penalty.
If any
portion of the principal of or interest on this Debenture shall not be paid
within ten (10) days of when it is due, the Discount Multiplier under this
Debenture shall decrease by one percentage point (1%) for all conversions
of
this Debenture thereafter.
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SECTION
6.4 Maximum
Interest Rate. Notwithstanding
anything herein to the contrary, if at any time the applicable interest rate
as
provided for herein shall exceed the maximum lawful rate which may be contracted
for, charged, taken or received by the Holder in accordance with any applicable
law (the “Maximum
Rate”),
the
rate of interest applicable to this Debenture shall be limited to the Maximum
Rate. To the greatest extent permitted under applicable law, the Company
hereby
waives and agrees not to allege or claim that any provisions of this Note
could
give rise to or result in any actual or potential violation of any applicable
usury laws.
SECTION
6.5 Remedies
Not Waived.
No
course of dealing between the Company and the Holder or any delay in exercising
any rights hereunder shall operate as a waiver by the Holder.
SECTION
6.6 Remedies. The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to the Holder, by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that
the
remedy at law for a breach of its obligations under this Debenture will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Debenture, that the Holder shall be entitled
to all other available remedies at law or in equity, and in addition to the
penalties assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Debenture and to enforce specifically
the terms and provisions thereof, without the necessity of showing economic
loss
and without any bond or other security being required.
SECTION
6.7 Payment
of Certain Amounts. Whenever
pursuant to this Debenture the Company is required to pay an amount in excess
of
the Principal Amount plus accrued and unpaid interest, the Company and the
Holder agree that the actual damages to the Holder from the receipt of cash
payment on this Debenture may be difficult to determine and the amount to
be so
paid by the Company represents stipulated damages and not a penalty and is
intended to compensate the Holder in part for loss of the opportunity to
convert
this Debenture and to earn a return from the sale of shares of Common Stock
acquired upon conversion of this Debenture at a price in excess of that price
paid for such shares pursuant to this Debenture. The Company and the Holder
hereby agree that such amount of stipulated damages is not disproportionate
to
the possible loss to the Holder from the receipt of a cash payment without
the
opportunity to convert this Debenture into shares of Common Stock.
ARTICLE
7
MISCELLANEOUS
SECTION
7.1 Notice
of Certain Events.
In the
case of the occurrence of any event described in Section 3.4 of this Debenture,
the Company shall cause to be mailed to the Holder of this Debenture at its
last
address as it appears in the Company’s security registry, at least twenty (20)
days prior to the applicable record, effective or expiration date hereinafter
specified (or, if such twenty (20) days’ notice is not possible, at the earliest
possible date prior to any such record, effective or expiration date), a
notice
thereof, including, if applicable, a statement of the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective, and the date as
of
which it is expected that holders of record of Common Stock will be entitled
to
exchange their shares for securities, cash or other property deliverable
upon
such reclassification, consolidation, merger, sale transfer, dissolution,
liquidation or winding-up.
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SECTION
7.2 Register.
The
Company shall keep at its principal office a register in which the Company
shall
provide for the registration of this Debenture. Upon any transfer of this
Debenture in accordance with Articles 2 and 4 hereof, the Company shall register
such transfer on the Debenture register.
SECTION
7.3 Withholding.
To the
extent required by applicable law, the Company may withhold amounts for or
on
account of any taxes imposed or levied by or on behalf of any taxing authority
in the United States having jurisdiction over the Company from any payments
made
pursuant to this Debenture.
SECTION
7.4 Transmittal
of Notices.
Except
as may be otherwise provided herein, any notice or other communication or
delivery required or permitted hereunder shall be in writing and shall be
delivered personally, or sent by telecopier machine or by a nationally
recognized overnight courier service, and shall be deemed given when so
delivered personally, or by telecopier machine or overnight courier service
as
follows:
| (1) |
If
to the Company, to:
|
3DIcon
Corporation
7507
Sandusky Ave.
Tulsa,
Oklahoma 74136
Telephone: 918-492-5082
Facsimile: 918-492-5367
With
a
copy to:
John
M.
O’Connor, Esq.
Newton,
O’Connor, Turner & Ketchum
15
W.
Sixth Street, Suite 2700
Tulsa,
Oklahoma 74119
Telephone: 918-587-0101
Facsimile: 918-587-0102
|
(2)
|
If
to the Holder, to:
|
Golden
Gate Investors, Inc.
7817
Herschel Avenue, Suite 200
La
Jolla,
California 92037
Telephone: 858-551-8789
Facsimile: 858-551-8779
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Each
of
the Holder or the Company may change the foregoing address by notice given
pursuant to this Section 7.4.
SECTION
7.5 Attorneys’
Fees.
Should
any party hereto employ an attorney for the purpose of enforcing or construing
this Debenture, or any judgment based on this Debenture, in any legal proceeding
whatsoever, including insolvency, bankruptcy, arbitration, declaratory relief
or
other litigation, the prevailing party shall be entitled to receive from
the
other party or parties thereto reimbursement for all reasonable attorneys'
fees
and all reasonable costs, including but not limited to service of process,
filing fees, court and court reporter costs, investigative costs, expert
witness
fees, and the cost of any bonds, whether taxable or not, and that such
reimbursement shall be included in any judgment or final order issued in
that
proceeding. The "prevailing party" means the party determined by the court
to
most nearly prevail and not necessarily the one in whose favor a judgment
is
rendered.
SECTION
7.6 Governing
Law.
This
Debenture shall be governed by, and construed in accordance with, the laws
of
the State of California (without giving effect to conflicts of laws principles).
With respect to any suit, action or proceedings relating to this Debenture,
the
Company irrevocably submits to the exclusive jurisdiction of the courts of
the
State of California sitting in San Diego and the United States District Court
located in the City of San Diego and hereby waives, to the fullest extent
permitted by applicable law, any claim that any such suit, action or proceeding
has been brought in an inconvenient forum. Subject to applicable law, the
Company agrees that final judgment against it in any legal action or proceeding
arising out of or relating to this Debenture shall be conclusive and may
be
enforced in any other jurisdiction within or outside the United States by
suit
on the judgment, a certified copy of which judgment shall be conclusive evidence
thereof and the amount of its indebtedness, or by such other means provided
by
law.
SECTION
7.7 Waiver
of Jury Trial.
To the
fullest extent permitted by law, each of the parties hereto hereby knowingly,
voluntarily and intentionally waives its respective rights to a jury trial
of
any claim or cause of action based upon or arising out of this Debenture
or any
other document or any dealings between them relating to the subject matter
of
this Debenture and other documents. Each party hereto (i) certifies that
neither
of their respective representatives, agents or attorneys has represented,
expressly or otherwise, that such party would not, in the event of litigation,
seek to enforce the foregoing waivers and (ii) acknowledges that it has been
induced to enter into this Debenture by, among other things, the mutual waivers
and certifications herein.
SECTION
7.8 Headings.
The
headings of the Articles and Sections of this Debenture are inserted for
convenience only and do not constitute a part of this Debenture.
SECTION
7.9 Payment
Dates.
Whenever any payment hereunder shall be due on a day other than a Business
Day,
such payment shall be made on the next succeeding Business Day.
SECTION
7.10 Binding
Effect.
Each
Holder by accepting this Debenture agrees to be bound by and comply with
the
terms and provisions of this Debenture.
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SECTION
7.11 No
Stockholder Rights.
Except
as otherwise provided herein, this Debenture shall not entitle the Holder
to any
of the rights of a stockholder of the Company, including, without limitation,
the right to vote, to receive dividends and other distributions, or to receive
any notice of, or to attend, meetings of stockholders or any other proceedings
of the Company, unless and to the extent converted into shares of Common
Stock
in accordance with the terms hereof.
SECTION
7.12 Facsimile
Execution.
Facsimile execution shall be deemed originals.
IN
WITNESS WHEREOF, the Company has caused this Debenture to be signed by its
duly
authorized officer on the date of this Debenture.
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Corporation
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| By: | /s/ Martin Keating | |
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| Title: | Chief Executive Officer | |
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EXHIBIT A
DEBENTURE
CONVERSION NOTICE
TO: 3DIcon
Corporation
The
undersigned owner of this Convertible Debenture due November ___, 2011 (the
“Debenture”)
issued
by 3DIcon Corporation (the “Company”)
hereby
irrevocably exercises its option to convert $__________ Principal Amount
of the
Debenture into shares of Common Stock in accordance with the terms of the
Debenture. The undersigned hereby instructs the Company to convert the portion
of the Debenture specified above into shares of Common Stock Issued at
Conversion in accordance with the provisions of Article 3 of the Debenture.
The
undersigned directs that the Common Stock and certificates therefor deliverable
upon conversion, the Debenture reissued in the Principal Amount not being
surrendered for conversion hereby, [the check or shares of Common Stock in
payment of the accrued and unpaid interest thereon to the date of this Notice,]
together with any check in payment for fractional Common Stock, be registered
in
the name of and/or delivered to the undersigned unless a different name has
been
indicated below. All capitalized terms used and not defined herein have the
respective meanings assigned to them in the Debenture. The conversion pursuant
hereto shall be deemed to have been effected at the date and time specified
below, and at such time the rights of the undersigned as a Holder of the
Principal Amount of the Debenture set forth above shall cease and the Person
or
Persons in whose name or names the Common Stock Issued at Conversion shall
be
registered shall be deemed to have become the holder or holders of record
of the
Common Shares represented thereby and all voting and other rights associated
with the beneficial ownership of such Common Shares shall at such time vest
with
such Person or Persons.
Date
and
time: __________________
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By:
Title:
|
Fill
in
for registration of Debenture:
Please
print name and address
(including
ZIP code number):
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A-1
WARRANT
TO PURCHASE COMMON STOCK
THIS
WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE BEEN ACQUIRED FOR INVESTMENT
AND
NOT FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF
1933, AS AMENDED AND NEITHER THE WARRANT NOR THE SHARES MAY BE SOLD, PLEDGED,
OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH
ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THIS WARRANT
MUST BE SURRENDERED TO THE COMPANY OR ITS TRANSFER AGENT AS A CONDITION
PRECEDENT TO THE SALE, PLEDGE OR OTHER TRANSFER OF ANY INTEREST IN THIS WARRANT
OR THE SHARES ISSUABLE HEREUNDER.
Issuer:
3DIcon Corporation
Class
of
Stock: Common Stock
Issue
Date: November 3, 2006
Expiration
Date: November 3, 2011
THIS
WARRANT TO PURCHASE COMMON STOCK is
being
issued by 3DIcon Corporation, an Oklahoma corporation (the “Company”), to Golden
Gate Investors, Inc. (“Holder”).
ARTICLE
1
DESCRIPTION
OF WARRANTS
1.1 Warrants.The
Company hereby grants to Holder the right to purchase 1,000,000 shares of the
Company’s Common Stock (the “Shares” or “Warrant Shares”) at a price per share
equal to the Exercise Price set forth in section 2.4 below. The Company is
simultaneously issuing to Holder a 6.25% Convertible Debenture in the original
principal amount of $100,000 (the “Debenture”). Whenever Holder exercises its
conversion privileges under the Debenture, Holder will simultaneously exercise
a
percentage of this Warrant that is equal to the percentage of the Debenture
being converted. The date that the Holder issues a Conversion Notice under
the
Debenture is hereafter referred to as the “Conversion Date.” Defined terms not
defined herein shall have the meanings ascribed to them in the Debenture.
Beginning
one year from the Issue Date, Holder shall submit Debenture conversion notices
and related Warrant exercise notices in an amount such that Holder receives
a
total of 1% of the outstanding shares of the Company every calendar quarter
for
a period of one year, provided that Holder is able to sell the shares under
Rule
144. Beginning two years from the Closing Date, Holder shall convert $3,000
of
the Debenture and exercise 30,000 Warrant Shares each calendar month, provided
that Holder is able to sell the shares under Rule 144(k). If Holder converts
more that such minimum amounts, the excess shall be credited against the next
period’s minimum. In the event Holder does not convert and exercise the minimum
amounts set forth in the first two sentences of this paragraph, the Company’s
remedy shall be limited to Holder not being entitled to collect interest on
the
Debenture for that calendar quarter or calendar month, as
applicable.
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1.2 Expiration
of Warrants. This
Warrant shall expire and Holder shall no longer be able to purchase the Warrant
Shares on the earlier of: (a) the Expiration Date, or (b) the redemption of
the
Debenture by the Company in accordance with Section 2.5 of the
Debenture.
ARTICLE
2
EXERCISE
2.1 Method
of Exercise.
Holder
may exercise this Warrant by delivering a duly executed Warrant Notice of
Exercise in substantially the form attached as Appendix
1
to the
principal office of the Company.
2.2 Delivery
of Certificate and New Warrant.
As
promptly as practicable after the receipt of the Warrant Notice of Exercise,
but
in any event not more than two (2) Business Days after the Company’s receipt of
the Warrant Notice of Exercise, the Company shall issue the Shares and cause
to
be mailed for delivery by overnight courier to Holder a certificate representing
the Shares acquired and, if this Warrant has not been fully exercised and has
not expired, a new Warrant substantially in the form of this Warrant
representing the right to acquire the portion of the Shares not so acquired.
2.3 Replacement
of Warrants.
On
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or
destruction, on delivery of an indemnity agreement reasonably satisfactory
in
form and amount to the Company or, in the case of mutilation, or surrender
and
cancellation of this Warrant, the Company at its expense shall execute and
deliver, in lieu of this Warrant, a new warrant of like tenor.
2.4 Exercise
Price.
The
Exercise Price of this Warrant shall be $10.90 per Share.
2.5 Certain
Exercise Limits. For
a
period of one year after the Closing Date, if and to the extent that, on any
date, the holding by the Holder of this Warrant would result in the Holder’s
being deemed the beneficial owner of more than 9.99% of the then Outstanding
shares of Common Stock, then the Holder shall not have the right, and the
Company shall not have the obligation, to exercise any portion of this Warrant
as shall cause Holder to be deemed the beneficial owner of more than 9.99%
of
the then Outstanding shares of Common Stock.
ARTICLE
3
ADJUSTMENT
TO THE SHARES
The
number of Shares purchasable upon the exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time upon the occurrence
of
certain events, as follows:
3.1 Reclassification.
In case
of any reclassification or change of outstanding securities of the class
issuable upon exercise of this Warrant then, and in any such case, the Holder,
upon the exercise hereof at any time after the consummation of such
reclassification or change, shall be entitled to receive in lieu of each Share
theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and/or property received upon such
reclassification or change by a holder of one Share. The provisions of this
Section 3.1 shall similarly apply to successive reclassifications or
changes.
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3.2 Subdivision
or Combination of Shares.
If the
Company at any time while this Warrant remains outstanding and unexpired shall
subdivide or combine its Shares, the Exercise Price shall be proportionately
decreased in the case of a subdivision or increased in the case of a
combination.
3.3 Stock
Dividends.
If the
Company, at any time while this Warrant is outstanding shall pay a dividend
with
respect to its Shares payable in Shares, or make any other distribution of
Shares with respect to Shares (except any distribution specifically provided
for
in Section 3.1 and Section 3.2 above), then the Exercise Price shall be
adjusted, effective from and after the date of determination of shareholders
entitled to received such dividend or distribution, to that price determined
by
multiplying the Exercise Price in effect immediately prior to such date of
determination by a fraction, (a) the numerator of which shall be the total
number of Shares outstanding immediately prior to such dividend or distribution,
and (b) the denominator of which shall be the total number of Shares outstanding
immediately after such dividend or distribution.
3.4 Non-Cash
Dividends.
If the
Company at any time while this Warrant is outstanding shall pay a dividend
with
respect to Shares payable in securities other than Shares or other non-cash
property, or make any other distribution of such securities or property with
respect to Shares (except any distribution specifically provided for in Section
3.1 and Section 3.2 above), then this Warrant shall represent the right to
acquire upon exercise of this Warrant such securities or property which a holder
of Shares would have been entitled to receive upon such dividend or
distribution, without the payment by the Holder of any additional consideration
for such securities or property.
3.5 Effect
of Reorganization and Asset Sales.
If any
(i) reorganization or reclassification of the Common Stock (ii) consolidation
or
merger of the Company with or into another corporation, or (iii) sale or all
or
substantially all of the Company’s operating assets to another corporation
followed by a liquidation of the Company (any such transaction shall be referred
to herein as an “Event”), is effected in such a way that holders of common Stock
are entitled to receive securities and/or assets as a result of their Common
Stock ownership, the Holder, upon exercise of this Warrant, shall be entitled
to
receive such shares of stock securities or assets which the Holder would have
received had it fully exercised this Warrant on or prior the record date for
such Event. The Company shall not merge into or consolidate with another
corporation or sell all of its assets to another corporation for a consideration
consisting primarily of securities of such corporation, unless the successor
or
acquiring corporation, as the case may be, shall expressly assume the due and
punctual observance and performance of each and every covenant and condition
of
this Warrant to be performed or observed by the Company and all of the
obligations and liabilities hereunder, subject to such modification as shall
be
necessary to provide for adjustments which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 2. The foregoing
provisions shall similarly apply to successive mergers, consolidations or sales
of assets.
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3.6 Adjustment
of Number of Shares.
Upon
each adjustment in the Exercise Price, the number of Shares shall be adjusted,
to the nearest whole share, to the product obtained by multiplying the number
of
Shares, purchasable immediately prior to such adjustment by a fraction, the
numerator of which shall be the Exercise Price immediately prior to such
adjustment and the denominator of which shall be the Exercise Price immediately
thereafter.
3.7 No
Impairment.
The
Company shall not, by amendment of its articles of incorporation or through
a
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 to be observed or performed under
this Warrant by the Company, but shall at all times in good faith assist in
carrying out all of the provisions of this Warrant and in taking all such action
as may be reasonably necessary or appropriate to protect Holder’s rights
hereunder against impairment. If the Company takes any action affecting its
Common Stock other than as described above that adversely affects Holder’s
rights under this Warrant, the Exercise Price shall be adjusted downward and
the
number of Shares issuable upon exercise of this Warrant shall be adjusted upward
in such a manner that the aggregate Exercise Price of this Warrant is
unchanged.
3.8 Fractional
Shares.
No
fractional Shares shall be issuable upon the exercise of this Warrant, and
the
number of Shares to be issued shall be rounded down to the nearest whole
Share.
3.9 Certificate
as to Adjustments.
Upon
any adjustment of the Exercise Price, the Company, at its expense, shall compute
such adjustment and furnish Holder with a certificate of its Chief Financial
Officer setting forth such adjustment and the facts upon which such adjustment
is based. The Company shall, upon written request, furnish Holder a certificate
setting forth the Exercise Price in effect upon the date thereof and the series
of adjustments leading to such Exercise Price.
3.10 No
Rights of Shareholders.
This
Warrant does not entitle Holder to any voting rights or any other rights as
a
shareholder of the Company prior to the exercise of Holder’s right to purchase
Shares as provided herein.
ARTICLE
4
REPRESENTATIONS
AND COVENANTS OF THE COMPANY
4.1 Representations
and Warranties.
The
Company hereby represents and warrants to Holder that all Shares which may
be
issued upon the exercise of the purchase right represented by this Warrant,
shall, upon issuance, be duly authorized, validly issued, fully paid and
nonasessable, and free of any liens and encumbrances.
4.2 Notice
of Certain Events.
If the
Company proposes at any time (a) to declare any dividend or distribution
upon its Common Stock, whether in cash, property, stock, or other securities
and
whether or not a regular cash dividend; (b) to offer for subscription pro rata
to the holders of any class or series of its stock any additional shares of
stock of any class or series or other rights; (c) to effect any reclassification
or recapitalization of Common Stock; or (d) to merge or consolidate with or
into
any other corporation, or sell, lease, license, or convey all or substantially
all of its assets, or to liquidate, dissolve or wind up, then, in connection
with each such event, the Company shall give Holder (1) at least 20 days prior
written notice of the date on which a record will be taken for such dividend,
distribution, or subscription rights (and specifying the date on which the
holders of Common Stock will be entitled thereto) or for determining rights
to
vote, if any, in respect of the matters referred to in (c) and (d) above; and
(2) in the case of the matters referred to in (c) and (d) above at least 20
days
prior written notice of the date when the same will take place (and specifying
the date on which the holders of Common Stock will be entitled to exchange
their
Common Stock for securities or other property deliverable upon the occurrence
of
such event).
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4.3 Information
Rights.
So long
as Holder holds this Warrant and/or any of the Shares, the Company shall deliver
to Holder (a) promptly after mailing, copies of all notices or other written
communications to the shareholders of the Company, (b) within ninety (90)
days of their availability, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing,
and
(c) within forty-five (45) days after the end of each fiscal quarter or
each fiscal year, the Company’s quarterly, unaudited financial
statements.
4.4 Reservation
of Warrant Shares.
The
Company has reserved and will keep available, out of the authorized and unissued
shares of Common Stock, the full number of shares sufficient to provide for
the
exercise of the rights of purchase represented by this Warrant.
ARTICLE
5
REPRESENTATIONS
AND COVENANTS OF THE HOLDER
5.1 Private
Issue.
Holder
understands (i) that the Shares issuable upon exercise of Holder’s rights
contained in the Warrant are not registered under the Act or qualified under
applicable state securities laws on the ground that the issuance contemplated
by
the Warrant will be exempt from the registration and qualifications requirements
thereof, and (ii) that the Company’s reliance on such exemption is predicated on
Holder’s representations set forth in this Article 5.
5.2 Financial
Risk.
Holder
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of its investment and has the ability
to bear the economic risks of its investment.
5.3 Risk
of No Registration.
Holder
understands that if the Company does not register with the Securities and
Exchange Commission pursuant to Section 12 of the Act, or file reports pursuant
to Section 15(d), of the Securities Exchange Act of 1934 (the “1934 Act”), or if
a registration statement covering the securities under the Act is not in effect
when it desires to sell (i) the right to purchase Shares pursuant to the
Warrant, or (ii) the Shares issuable upon exercise of the right to purchase,
it
may be required to hold such securities for an indefinite period.
5.4 Accredited
Investor.
Holder
is an “accredited investor,” as such term is defined in Regulation D promulgated
pursuant to the Act.
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ARTICLE
6
MISCELLANEOUS
6.1 Term.
This
Warrant is exercisable, in whole or in part, at any time and from time to time
on or after the Issue Date and on or before the Expiration Date set forth
above.
6.2 Compliance
with Securities Laws on Transfer.
This
Warrant may not be transferred or assigned in whole or in part without
compliance with applicable federal and state securities laws by the transferor
and the transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, as reasonably requested by the Company). The Company shall not require
Holder to provide an opinion of counsel if the transfer is to an affiliate
of
Holder.
6.3 Transfer
Procedure.
Holder
shall have the right without the consent of the Company to transfer or assign
in
whole or in part this Warrant and the Shares issuable upon exercise of this
Warrant. Holder agrees that unless there is in effect a registration statement
under the Act covering the proposed transfer of all or part of this Warrant,
prior to any such proposed transfer the Holder shall give written notice thereof
to the Company (a “Transfer Notice”). Each Transfer Notice shall describe the
manner and circumstances of the proposed transfer in reasonable detail and,
if
the company so requests, shall be accompanied by an opinion of legal counsel,
in
a form reasonably satisfactory to the Company, to the effect that the proposed
transfer may be effected without registration under the Act; provided that
the
Company will not require opinions of counsel for transactions involving
transfers to affiliates or pursuant to Rule 144 promulgated by the
Securities and Exchange Commission under the act, except in unusual
circumstances.
6.4 Notices,
etc.
All
notices and other communications required or permitted hereunder shall be in
writing and shall be delivered personally, or sent by telecopier machine or
by a
nationally recognized overnight courier service, and shall be deemed given
when
so delivered personally, or by telecopier machine or overnight courier service
as follows:
If
to the
Company, to:
3DIcon
Corporation
7507
Sandusky Ave.
Tulsa,
Oklahoma 74136
Telephone: 918-492-5082
Facsimile: 918-492-5367
With
a
copy to:
John
M.
O’Connor, Esq.
Newton,
O’Connor, Turner & Ketchum
15
W.
Sixth Street, Suite 2700
Tulsa,
Oklahoma 74119
Telephone: 918-587-0101
Facsimile: 918-587-0102
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If
to the
Holder, to:
Golden
Gate Investors, Inc.
7817
Herschel Avenue, Suite 200
La
Jolla,
CA 92037
Telephone: 858-551-8789
Facsimile: 858-551-8779
or
at
such other address as the Company shall have furnished to the Holder. Each
such
notice or other communication shall for all purposes of this agreement be
treated as effective or having been given when delivered if delivered
personally, or, if sent by mail, at the earlier of its receipt or five days
after the same has been deposited in a regularly maintained receptacle for
the
deposit of the United States mail, addressed and mailed as
aforesaid.
6.5 Counterparts.
This
agreement may be executed in any number of counterparts, each of which shall
be
enforceable against the parties actually executing such counterparts, and all
of
which together shall constitute one instrument. Facsimile execution shall be
deemed originals.
6.6 Waiver.
This
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought.
6.7 Attorneys
Fees.
In the
event of any dispute between the parties concerning the terms and provisions
of
this Warrant, the party prevailing in such dispute shall be entitled to collect
from the other party all costs incurred in such dispute, including reasonable
attorneys fees.
6.8 Governing
Law; Jurisdiction.
This
Warrant shall be governed by and construed in accordance with the laws of the
State of California, without giving effect to its principles regarding conflicts
of law. Each of the parties hereto consents to the jurisdiction of the federal
courts whose districts encompass any part of the City of San Diego or the state
courts of the State of California sitting in the City of San Diego in connection
with any dispute arising under this Warrant and hereby waives, to the maximum
extent permitted by law, any objection including any objection based on forum
non conveniens, to the bringing of any such proceeding in such
jurisdictions.
6.9 Remedies. The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to the Holder, by vitiating the intent and purpose of the
transactions hereby. Accordingly, the Company acknowledges that the remedy
at
law for a breach of its obligations under this Warrant will be inadequate and
agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Warrant, that the Holder shall be entitled, in addition
to
all other available remedies at law or in equity, and in addition to the
penalties assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Warrant and to enforce specifically
the
terms and provisions hereof, without the necessity of showing economic loss
and
without any bond or other security being required.
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IN
WITNESS WHEREOF, the parties hereto have duly caused this Warrant to Purchase
Common Stock to be executed and delivered on the date first above
written.
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APPENDIX
1
WARRANT
NOTICE OF EXERCISE
1. The
undersigned hereby elects to purchase _____ shares of the Common Stock of
3DIcon Corporation pursuant to the terms of the Warrant to Purchase Common
Stock
issued to Golden Gate Investors, Inc. on November ___, 2006.
2. Please
issue a certificate or certificates representing said shares in the name of
the
undersigned or in such other name as is specified below:
Golden
Gate Investors, Inc.
7817
Herschel Ave., Suite 200
La
Jolla,
California 92037
3. The
undersigned makes the representations and covenants set forth in Article 5
of the Warrant to Purchase Common Stock.
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THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE, AND IS BEING
OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF
THE SECURITIES ACT AND SUCH LAWS. THIS SECURITY MAY NOT BE SOLD OR TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE
SECURITIES ACT OR SUCH OTHER LAWS.
6
¼ % CONVERTIBLE DEBENTURE
Company:
3DIcon
Corporation
Company
Address: 7507
Sandusky Ave., Tulsa, Oklahoma 74136
Closing
Date: November
3, 2006
Maturity
Date: November
3, 2009
Principal
Amount:
$1,250,000
First
Payment Due Date: January
15, 2007
3DIcon
Corporation, an Oklahoma corporation, and any successor or resulting corporation
by way of merger, consolidation, sale or exchange of all or substantially
all of
the assets or otherwise (the “Company”),
for
value received, hereby promises to pay to the Holder (as such term is
hereinafter defined), or such other Person (as such term is hereinafter defined)
upon order of the Holder, on the Maturity Date, the Principal Amount (as
such
term is hereinafter defined), as such sum may be adjusted pursuant to Article
3,
and to pay interest thereon from the Closing Date, monthly in arrears, on
the
15th
day of
each month (each an “Interest
Payment Due Date”
and
collectively, the “Interest
Payment Due Dates”),
commencing on the First Payment Due Date, at the rate of six and one-quarter
percent (6 ¼ %) per annum (the “Debenture
Interest Rate”),
until
the Principal Amount of this Debenture has been paid in full. All interest
payable on the Principal Amount of this Debenture shall be calculated on
the
basis of a 360-day year for the actual number of days elapsed. Payment of
interest on this Debenture shall be in cash or, at the option of the Holder,
in
shares of Common Stock of the Company valued at the then applicable Conversion
Price (as defined herein). This Debenture may not be prepaid without the
written
consent of the Holder.
ARTICLE
1
DEFINITIONS
SECTION
1.1 Definitions.
The
terms defined in this Article whenever used in this Debenture have the following
respective meanings:
(i) “Affiliate”
has the
meaning ascribed to such term in Rule 12b-2 under the Securities Exchange
Act of
1934, as amended.
(ii) “Bankruptcy
Code”
means
the United States Bankruptcy Code of 1986, as amended (11 U.S.C. §§ 101
et.
seq.).
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(iii) “Business
Day”
means a
day other than Saturday, Sunday or any day on which banks located in the
State
of California are authorized or obligated to close.
(iv) “Capital
Shares”
means
the Common Stock and any other shares of any other class or series of capital
stock, whether now or hereafter authorized and however designated, which
have
the right to participate in the distribution of earnings and assets (upon
dissolution, liquidation or winding-up) of the Company.
(v) “Common
Shares”
or
“Common
Stock”
means
shares of the Company’s Common Stock.
(vi) “Common
Stock Issued at Conversion”,
means
the Common Stock deliverable upon conversion of this Debenture, including
all
securities of any other class or series into which this Debenture may hereafter
be convertible, whether now or hereafter created and however
designated.
(vii) “Conversion”
or
“conversion”
means
the repayment by the Company of the Principal Amount of this Debenture (and,
to
the extent the Holder elects as permitted by Section 3.1, accrued and unpaid
interest thereon) by the delivery of Common Stock on the terms provided in
Section 3.2, and “convert,” “converted,” “convertible”
and like
words shall have a corresponding meaning.
(viii) “Conversion
Date”
means
any day on which all or any portion of the Principal Amount of this Debenture
is
converted in accordance with the provisions hereof.
(ix) “Conversion
Notice”
means a
written notice of conversion substantially in the form annexed hereto as
Exhibit
A.
(x) “Conversion
Price”
on any
date of determination means the applicable price for the conversion of this
Debenture into Common Shares on such day as set forth in Section
3.1(a).
(xi) “Current
Market Price”
on any
date of determination means the closing price of a Common Share on such day
as
reported on the “pink sheets” through the Interdealer Trading and Quotation
System; provided that, if such security is not traded on the over the counter
market via the pink sheets, then as reported on the NASDAQ OTCBB Exchange;
provided
that,
if
such security is not traded on the over the counter market via the pink sheets,
then as reported on the NASDAQ OTCBB, or if not so traded on the OTCBB, then
as
reported on the principal national security exchange or quotation system
on
which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange
or
quotation system, the closing bid price of such security on the over-the-counter
market on the day in question as reported by Bloomberg LP or a similar generally
accepted reporting service, as the case may be.
(xii) “Deadline”
means
the date that is the 90th day from the Closing Date, provided, however, the
Deadline shall be extended by such time as is necessary for the Company to
respond to comments by the SEC, so long as the Company files the appropriate
registration statement within 30 days of the Closing Date and thereafter
responds to all SEC comments within 10 Business Days of receipt thereof,
and
provided, further, that such 10 Business Day period shall be extended to
a date
that is the second Business Day following the receipt by the Company of
information necessary to formulate such response to the SEC in the event
such
information must be provided by the Holder or an Affiliate of the Holder,
and
such information is not provided to the Company on or before eight Business
Days
from the original receipt of the SEC comments.
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(xiii) “Debenture”
or
“Debentures”
means
this Convertible Debenture of the Company or such other convertible debenture(s)
exchanged therefor as provided in Section 2.1.
(xiv) “Discount
Multiplier”
has
the
meaning set forth in Section 3.1(a).
(xv) “Event
of Default”
has the
meaning set forth in Section 6.1.
(xvi) “Holder”
means
Golden Gate Investors, Inc., any successor thereto, or any Person to whom
this
Debenture is subsequently transferred in accordance with the provisions
hereof.
(xvii) “Interest
Payment Due Date”
has the
meaning set forth in the opening paragraph of this Debenture.
(xviii) “Market
Disruption Event”
means
any event that results in a material suspension or limitation of trading
of the
Common Shares.
(xix) “Market
Price”
per
Common Share means the closing price of the Common Shares on any Trading
Day as
reported in the “pink sheets” through the Interdealer Trading Quotation System;
provided, if such security is not traded on the over the counter market via
the
pink sheets, then the closing price on the NASDAQ OTCBB; provided
further, that,
if
such security is not listed or admitted to trading on the NASDAQ OTCBB, as
reported on the principal national security exchange or quotation system
on
which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange
or
quotation system, the lowest price of the Common Shares during any Trading
Day
on the over-the-counter market as reported by Bloomberg LP or a similar
generally accepted reporting service, as the case may be.
(xx) “Maximum
Rate”
has the
meaning set forth in Section 6.4.
(xxi) “Outstanding”
when
used with reference to Common Shares or Capital Shares (collectively,
“Shares”)
means,
on any date of determination, all issued and outstanding Shares, and includes
all such Shares issuable in respect of outstanding scrip or any certificates
representing fractional interests in such Shares; provided,
however,
that
any such Shares directly or indirectly owned or held by or for the account
of
the Company or any Subsidiary of the Company shall not be deemed “Outstanding”
for
purposes hereof.
(xxii) “Person”
means an
individual, a corporation, a partnership, an association, a limited liability
company, an unincorporated business organization, a trust or other entity
or
organization, and any government or political subdivision or any agency or
instrumentality thereof.
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(xxiii) “Principal
Amount”
means,
for any date of calculation, the principal sum set forth in the first paragraph
of this Debenture; provided (1) “Principal Amount” shall include only so much of
the amount which the Holder has actually advanced pursuant to the Securities
Purchase Agreement and which has actually been advanced to the Company out
of
the Escrow, and (2) “Principal Amount” shall not include any amount of the
Debenture with respect to which Holder has at the time furnished a Conversion
Notice in compliance with Section 3.2. Notwithstanding anything herein or
in the
Securities Purchase Agreement to the contrary, Holder shall never be entitled
to
convert any portion of the Debenture with respect to which Holder has not
yet
paid the Purchase Price and such portion of the Purchase Price has been released
to the Company from the Escrow, in accordance with the terms of the Securities
Purchase Agreement.
(xxiv) “Registration
Rights Agreement”
means
that certain Registration Rights Agreement of even date herewith by and between
the Company and Holder, as the same may be amended from time to
time.
(xxv) “SEC”
means
the United States Securities and Exchange Commission.
(xxvi) “Securities
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations of
the SEC
thereunder, all as in effect at the time.
(xxvii) “Securities
Purchase Agreement”
means
that certain Securities Purchase Agreement of even date herewith by and among
the Company and Holder, as the same may be amended from time to
time.
(xxviii) “Subsidiary”
means
any entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are owned directly or indirectly by the
Company.
(xxix) “Trading
Day”
means
any day on which (i) purchases and sales of securities on the principal national
security exchange or quotation system on which the Common Shares are traded
are
reported thereon, or, if not quoted or listed or admitted to trading on any
national securities exchange or quotation system, as reported by Bloomberg
LP or
a similar generally accepted reporting service, as the case may be, (ii)
at
least one bid for the trading of Common Shares is reported and (iii) no Market
Disruption Event occurs.
(xxx) “Volume
Weighted Average Price” per
Common Share means the volume weighted average price of the Common Shares
during
any Trading Day as reported on the NASDAQ OTCBB; provided
that, if
such security is not listed or admitted to trading on the NASDAQ OTCBB, as
reported on the principal national security exchange or quotation system
on
which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange
or
quotation system, the volume weighted average price of the Common Shares
during
any Trading Day on the over-the-counter market as reported by Bloomberg LP
or a
similar generally accepted reporting service, as the case may be.
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All
references to “cash” or “$” herein means currency of the United States of
America.
ARTICLE
2
EXCHANGES,
TRANSFER AND REPAYMENT
SECTION
2.1 Registration
of Transfer of Debentures.
This
Debenture, when presented for registration of transfer, shall (if so required
by
the Company) be duly endorsed, or be accompanied by a written instrument
of
transfer in form reasonably satisfactory to the Company duly executed, by
the
Holder duly authorized in writing.
SECTION
2.2 Loss,
Theft, Destruction of Debenture.
Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of this Debenture and, in the case of any such loss, theft
or
destruction, upon receipt of indemnity or security reasonably satisfactory
to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Debenture, the Company shall make, issue and deliver,
in
lieu of such lost, stolen, destroyed or mutilated Debenture, a new Debenture
of
like tenor and unpaid Principal Amount dated as of the date hereof (which
shall
accrue interest from the most recent Interest Payment Due Date on which an
interest payment was made in full). This Debenture shall be held and owned
upon
the express condition that the provisions of this Section 2.2 are exclusive
with
respect to the replacement of a mutilated, destroyed, lost or stolen Debenture
and shall preclude any and all other rights and remedies notwithstanding
any law
or statute existing or hereafter enacted to the contrary with respect to
the
replacement of negotiable instruments or other securities without the surrender
thereof.
SECTION
2.3 Who
Deemed Absolute Owner.
The
Company may deem the Person in whose name this Debenture shall be registered
upon the registry books of the Company to be, and may treat it as, the absolute
owner of this Debenture (whether or not this Debenture shall be overdue)
for the
purpose of receiving payment of or on account of the Principal Amount of
this
Debenture, for the conversion of this Debenture and for all other purposes,
and
the Company shall not be affected by any notice to the contrary. All such
payments and such conversions shall be valid and effectual to satisfy and
discharge the liability upon this Debenture to the extent of the sum or sums
so
paid or the conversion or conversions so made.
SECTION
2.4 Repayment
at Maturity.
At the
Maturity Date, the Company shall repay the outstanding Principal Amount of
this
Debenture in whole in cash, together with all accrued and unpaid interest
thereon, in cash, to the Maturity Date.
ARTICLE
3
CONVERSION
OF DEBENTURE
SECTION
3.1 Conversion;
Conversion Price; Valuation Event.
(a)
Subject to the limitations set forth in Section 3.5 hereof, and further subject
to the limitations on the obligation to either release funds from the Escrow
or
issue Conversion Shares pursuant to Section I.B of the Securities Purchase
Agreement, at the option of the Holder, this Debenture may be converted,
either
in whole or in part, up to the full Principal Amount hereof into Common Shares
(calculated as to each such conversion to the nearest 1/100th of a share),
at
any time and from time to time on any Business Day, subject to compliance
with
Section 3.2. The number of Common Shares into which this Debenture may be
converted is equal to the dollar amount of the Debenture being converted
divided
by the Conversion Price. The “Conversion
Price”
shall be
equal to the lesser of (i) $2.00, or (ii) 80% of the average of the five
lowest
Volume Weighted Average Prices during the twenty Trading Days prior to Holder’s
election to convert (the percentage figure being a “Discount
Multiplier”);
provided,
that in
the event the Registration Statement has not been declared effective by the
SEC
by the Deadline then the applicable Discount Multiplier shall decrease by
three
percentage points for each month or partial month occurring after the Deadline
that the Registration Statement is not effective or, if the Registration
Statement has theretofore been declared effective but is not thereafter
effective, then the applicable Discount Multiplier shall decrease by three
percentage points for each week or partial week occurring after the Deadline
that the Registration Statement is not effective. In addition, if the
Registration Statement has theretofore been declared effective but is not
thereafter effective, Holder, at its option, shall be entitled to the Conversion
Price on the date that the Registration Statement is no longer effective,
for a
period beginning on the date that the Registration Statement is declared
effective and continuing for the number of days that a Registration Statement
was not effective. The Company reserves the right to increase the number
of
Trading Days in clause (ii) above, as it deems appropriate.
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If
the
Holder elects to convert a portion of the Debenture and, on the day that
the
election is made, the Volume Weighted Average Price is below $0.75, the Company
shall have the right to prepay that portion of the Debenture that Holder
elected
to convert, plus any accrued and unpaid interest, at 135% of such amount.
In the
event that the Company elects to prepay that portion of the Debenture, Holder
shall have the right to withdraw its Conversion Notice. If, at anytime during
the month, the Volume Weighted Average Price is below $0.75, Holder shall
not be
obligated to convert any portion of the Debenture during that month.
(b) Notwithstanding
the provisions of Section 3.1(a), in the event the Company’s Registration
Statement has not been declared effective by the Deadline or, if the
Registration Statement has theretofore been declared effective but is not
thereafter effective, the following will also apply in addition to any damages
incurred by the Holder as a result thereof:
(i) The
Holder may demand repayment of one hundred and fifteen percent (115%) of
the
Principal Amount of the Debenture, together with all accrued and unpaid interest
on the Principal Amount of the Debenture, in cash, at any time after the
Deadline but prior to the Company’s Registration Statement being declared
effective by the SEC or during the period that the Company’s Registration
Statement is not effective, such repayment to be made within three (3) business
days of such demand. In the event that the Debenture is so accelerated, in
addition to the repayment of one hundred and fifteen percent (115%) of the
Principal Amount together with accrued interest as aforesaid, the Company
shall
immediately issue and pay, as the case may be, to the Holder 25,000 Shares
of
Common Stock and $15,000 for each thirty (30) day period, or portion thereof,
during which the Principal Amount, including interest thereon, remains unpaid
following demand, with the monthly payment amount to increase to $20,000
for
each thirty (30) day period, or portion thereof, after the first ninety (90)
day
period;
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(ii) If
the
SEC indicates that the Company’s Registration Statement will be declared
effective upon request by the Company, and the Company does not, within 3
business days of the SEC indication, request that the Registration Statement
become effective, the amounts set forth in subsection (i) above shall
double.
SECTION
3.2 Exercise
of Conversion Privilege.
(a)
Conversion of this Debenture may be exercised on any Business Day by the
Holder
by telecopying an executed and completed Conversion Notice to the Company.
Each
date on which a Conversion Notice is telecopied to the Company in accordance
with the provisions of this Section 3.2 shall constitute a Conversion Date.
The
Company shall convert this Debenture and issue the Common Stock Issued at
Conversion in the manner provided below in this Section 3.2, and all voting
and
other rights associated with the beneficial ownership of the Common Stock
Issued
at Conversion shall vest with the Holder, effective as of the Conversion
Date at
the time specified in the Conversion Notice. The Conversion Notice also shall
state the name or names (with addresses) of the persons who are to become
the
holders of the Common Stock Issued at Conversion in connection with such
conversion. As promptly as practicable after the receipt of the Conversion
Notice as aforesaid, but in any event not more than two (2) Business Days
after
the Company’s receipt of such Conversion Notice, the Company shall (i) issue the
Common Stock Issued at Conversion in accordance with the provisions of this
Article 3 and (ii) cause to be mailed for delivery by overnight courier,
or if a
Registration Statement covering the Common Stock has been declared effective
by
the SEC cause to be electronically transferred, to Holder (x) a certificate
or
certificate(s) representing the number of Common Shares to which the Holder
is
entitled by virtue of such conversion, (y) cash, as provided in Section 3.3,
in
respect of any fraction of a Common Share deliverable upon such conversion
and
(z) cash or shares of Common Stock, as applicable, representing the amount
of
accrued and unpaid interest on this Debenture as of the Conversion Date.
Such
conversion shall be deemed to have been effected as of the Conversion Date,
and
at such time the rights of the Holder of this Debenture, as such (except
if and
to the extent that any Principal Amount thereof remains unconverted), shall
cease and the Person and Persons in whose name or names the Common Stock
issued
at Conversion shall be issuable shall be deemed to have become the holder
or
holders of record of the Common Shares represented thereby, and all voting
and
other rights associated with the beneficial ownership of such Common Shares
shall at such time vest with such Person or Persons. The Conversion Notice
shall
constitute a contract between the Holder and the Company, whereby the Holder
shall be deemed to subscribe for the number of Common Shares which it will
be
entitled to receive upon such conversion and, in payment and satisfaction
of
such subscription (and for any cash adjustment to which it is entitled pursuant
to Section 3.4), to surrender this Debenture and to release the Company from
all
liability thereon (except if and to the extent that any Principal Amount
thereof
remains unconverted). No cash payment aggregating less than $1.00 shall be
required to be given unless specifically requested by the Holder.
(b) If,
at
any time after the date of this Debenture, (i) the Company wrongfully
challenges, disputes or denies the right of the Holder hereof to effect the
conversion of this Debenture into Common Shares or otherwise wrongfully
dishonors or rejects any Conversion Notice delivered in accordance with this
Section 3.2 or (ii) any third party who is not and has never been an Affiliate
of the Holder commences any lawsuit or legal proceeding or otherwise asserts
any
claim before any court or public or governmental authority which seeks to
challenge, deny, enjoin, limit, modify, delay or dispute the right of the
Holder
hereof to effect the conversion of this Debenture into Common Shares, then
the
Holder shall have the right, but not the obligation, by written notice to
the
Company, to require the Company to promptly redeem this Debenture for cash
at
one hundred and thirty-five (135%) of the Principal Amount thereof, together
with all accrued and unpaid interest thereon to the date of redemption. Under
any of the circumstances set forth above, the Company shall be responsible
for
the payment of all costs and expenses of the Holder, including reasonable
legal
fees and expenses, as and when incurred in defending itself in any such action
or pursuing its rights hereunder (in addition to any other rights of the
Holder).
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(c) To
the
fullest extent permitted by law, the Holder shall be entitled to exercise
its
conversion privilege notwithstanding the commencement of any case under the
Bankruptcy Code. In the event the Company is a debtor under the Bankruptcy
Code,
the Company hereby waives to the fullest extent permitted any rights to relief
it may have under 11 U.S.C. § 362 in respect of the Holder’s conversion
privilege. The Company hereby waives to the fullest extent permitted any
rights
to relief it may have under 11 U.S.C. § 362 in respect of the conversion of this
Debenture. The Company agrees, without cost or expense to the Holder, to
take or
consent to any and all action necessary to effectuate relief under 11 U.S.C.
§
362.
SECTION
3.3 Fractional
Shares.
No
fractional Common Shares or scrip representing fractional Common Shares shall
be
delivered upon conversion of this Debenture. Instead of any fractional Common
Shares which otherwise would be delivered upon conversion of this Debenture,
the
Company shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction multiplied by the Current Market Price on the
Conversion Date. No cash payment of less than $1.00 shall be required to
be
given unless specifically requested by the Holder.
SECTION
3.4 Adjustments.
The
Conversion Price and the number of shares deliverable upon conversion of
this
Debenture are subject to adjustment from time to time as follows:
(i) Reclassification,
Etc.
In case
the Company shall reorganize its capital, reclassify its capital stock,
consolidate or merge with or into another Person (where the Company is not
the
survivor or where there is a change in or distribution with respect to the
Common Stock of the Company), sell, convey, transfer or otherwise dispose
of all
or substantially all its property, assets or business to another Person,
or
effectuate a transaction or series of related transactions in which more
than
fifty percent (50%) of the voting power of the Company is disposed of (each,
a
“Fundamental
Corporate Change”)
and,
pursuant to the terms of such Fundamental Corporate Change, 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 the Holder of this Debenture shall have the right thereafter, at its
sole
option, to (x) receive 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 as is receivable upon or as a result of such
Fundamental Corporate Change by a holder of the number of shares of Common
Stock
into which the outstanding portion of this Debenture may be converted at
the
Conversion Price applicable immediately prior to such Fundamental Corporate
Change or (y) require the Company, or such successor, resulting or
purchasing corporation, as the case may be, to, without benefit of any
additional consideration therefor, execute and deliver to the Holder a debenture
with substantial identical rights, privileges, powers, restrictions and other
terms as this Debenture in an amount equal to the amount outstanding under
this
Debenture immediately prior to such Fundamental Corporate Change. For purposes
hereof, “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 prepayment 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
shall similarly apply to successive Fundamental Corporate Changes.
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SECTION
3.5 Certain
Conversion Limits.
So
long
as any of the Principal Amount of this Debenture is outstanding, the Holder
shall not have the right, and the Company shall not have the obligation,
to
convert any portion of this Debenture if, following a Conversion Notice from
the
Holder, the result would be that the Holder would be deemed the beneficial
owner
of more than 9.99% of the then Outstanding shares of Common Stock. Further,
for
a period of one year after the Closing Date, if and to the extent that, on
any
date, the mere holding by the Holder of this Debenture (regardless of the
actual
conversion of any portion thereof) would result in the Holder’s being deemed the
beneficial owner of
more
than 9.99% of the then Outstanding shares of Common Stock, then in addition
to
the Holder having no right, and the Company having no obligation, to convert
any
portion of this Debenture as shall cause such Holder to be deemed the beneficial
owner of more than 9.99% of the then Outstanding shares of Common Stock if
any
court of competent jurisdiction shall determine that the foregoing limitation
is
ineffective to prevent the Holder, by mere ownership of the Debenture, from
being deemed the beneficial owner of more than 9.99% of the then Outstanding
shares of Common Stock, then the Company shall prepay such portion of this
Debenture as shall cause such Holder not to be deemed the beneficial owner
of
more than 9.99% of the then Outstanding shares of Common Stock. Upon such
determination by a court of competent jurisdiction, the Holder shall have
no
interest in or rights under such portion of the Debenture. Any and all interest
paid on or prior to the date of such determination shall be deemed interest
paid
on the remaining portion of this Debenture held by the Holder.
SECTION
3.6 Surrender
of Debentures.
Upon
any redemption of this Debenture pursuant to Sections 3.2, 3.5 or 6.2, or
upon
maturity pursuant to Section 2.4, the Holder shall either deliver this Debenture
by hand to the Company at its principal executive offices or surrender the
same
to the Company at such address by nationally recognized overnight courier.
Payment of the redemption price or the amount due on maturity specified in
Section 2.4, shall be made by the Company to the Holder against receipt of
this
Debenture (as provided in this Section 3.5) by wire transfer of immediately
available funds to such account(s) as the Holder shall specify by written
notice
to the Company. If payment of such redemption price is not made in full by
the
redemption date, or the amount due on maturity is not paid in full by the
Maturity Date, the Holder shall again have the right to convert this Debenture
as provided in Article 3 hereof or to declare an Event of Default.
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ARTICLE
4
STATUS;
RESTRICTIONS ON TRANSFER
SECTION
4.1 Status
of Debenture.
This
Debenture constitutes a legal, valid and binding obligation of the Company,
enforceable in accordance with its terms subject, as to enforceability, to
general principles of equity and to principles of bankruptcy, insolvency,
reorganization and other similar laws of general applicability relating to
or
affecting creditors’ rights and remedies generally.
SECTION
4.2 Restrictions
on Transfer.
This
Debenture, and any Common Shares deliverable upon the conversion hereof,
have
not been registered under the Securities Act. The Holder by accepting this
Debenture agrees that this Debenture and the shares of Common Stock to be
acquired as interest on and upon conversion of this Debenture may not be
assigned or otherwise transferred unless and until (i) the Company has received
an opinion of counsel for the Company that this Debenture or such shares
may be
sold pursuant to an exemption from registration under the Securities Act
or (ii)
a registration statement relating to this Debenture or such shares has been
filed by the Company and declared effective by the SEC.
Each
certificate for shares of Common Stock deliverable hereunder shall bear a
legend
as follows unless and until such securities have been sold pursuant to an
effective registration statement under the Securities Act:
“The
securities represented by this certificate have not been registered under
the
Securities Act of 1933, as amended (the “Securities Act”). The securities may
not be offered for sale, sold or otherwise transferred except (i) pursuant
to an
effective registration statement under the Securities Act or (ii) pursuant
to an
exemption from registration under the Securities Act in respect of which
the
issuer of this certificate has received an opinion of counsel satisfactory
to
the issuer of this certificate to such effect. The securities are further
subject to the terms of a Securities Purchase Agreement dated November ___,
2006, copies of which may be obtained at no cost by written request made
by the
holder of record of this certificate to the Secretary of the issuer of this
certificate at the principal executive offices of the issuer of this
certificate.”
ARTICLE
5
COVENANTS
SECTION
5.1 Conversion.
The
Company shall cause the transfer agent, not later than two (2) Business Days
after the Conversion Date, to issue and deliver to the Holder the requisite
shares of Common Stock Issued at Conversion. Such delivery shall be by
electronic transfer if a Registration Statement covering the Common Stock
has
been declared effective by the SEC.
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SECTION
5.2 Notice
of Default.
If any
one or more events occur which constitute or which, with notice, lapse of
time,
or both, would constitute an Event of Default, the Company shall forthwith
give
notice to the Holder, specifying the nature and status of the Event of Default
or such other event(s), as the case may be.
SECTION
5.3 Payment
of Obligations.
So long
as this Debenture shall be outstanding, the Company shall pay, extend, or
discharge at or before maturity, all its respective material obligations
and
liabilities, including, without limitation, tax liabilities, except where
the
same may be contested in good faith by appropriate proceedings.
SECTION
5.4 Compliance
with Laws.
So long
as this Debenture shall be outstanding, the Company shall comply with all
applicable laws, ordinances, rules, regulations and requirements of governmental
authorities, except for such noncompliance which would not have a material
adverse effect on the business, properties, prospects, condition (financial
or
otherwise) or results of operations of the Company and the
Subsidiaries.
SECTION
5.5 Inspection
of Property, Books and Records.
So long
as this Debenture shall be outstanding, the Company shall keep proper books
of
record and account in which full, true and correct entries shall be made
of all
material dealings and transactions in relation to its business and activities
and shall permit representatives of the Holder at the Holder’s expense to visit
and inspect any of its respective properties, to examine and make abstracts
from
any of its respective books and records, not reasonably deemed confidential
by
the Company, and to discuss its respective affairs, finances and accounts
with
its respective officers and independent public accountants, all at such
reasonable times and as often as may reasonably be desired.
SECTION
5.6 Right
of First Refusal on Other Financing. Subsequent
to the date on which the Company’s registration statement filed pursuant to the
Registration Rights Agreement becomes effective with the SEC, in the event
that
the Company obtains a commitment for any other financing (either debt, equity,
or a combination thereof) which is to close during the term of this Debenture,
Holder shall be entitled to a right of first refusal to enable it to, at
Holder’s option, match the terms of the other financing. The Company shall
deliver to Holder, at least 10 days prior to the proposed closing date of
such
transaction, written notice describing the proposed transaction, including
the
terms and conditions thereof, and providing Holder an option during the 10
day
period following delivery of such notice to provide the financing being offered
in such transaction on the same terms as contemplated by such
transaction.
ARTICLE
6
EVENTS
OF DEFAULT; REMEDIES
SECTION
6.1 Events
of Default.
“Event
of Default”
wherever
used herein means any one of the following events:
(i) the
Company shall default in the payment of principal of or interest on this
Debenture as and when the same shall be due and payable and, in the case
of an
interest payment default, such default shall continue for five (5) Business
Days
after the date such interest payment was due, or the Company shall fail to
perform or observe any other covenant, agreement, term, provision, undertaking
or commitment under this Debenture, the Securities Purchase Agreement or
the
Registration Rights Agreement and such default shall continue for a period
of
ten (10) Business Days after the delivery to the Company of written notice
that
the Company is in default hereunder or thereunder;
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(ii) any
of
the representations or warranties made by the Company herein, in the Securities
Purchase Agreement, the Registration Rights Agreement or in any certificate
or
financial or other written statements heretofore or hereafter furnished by
or on
behalf of the Company in connection with the execution and delivery of this
Debenture, the Securities Purchase Agreement or the Registration Rights
Agreement shall be false or misleading in a material respect on the Closing
Date;
(iii) under
the
laws of any jurisdiction not otherwise covered by clauses (iv) and (v) below,
the Company or any Subsidiary (A) becomes insolvent or generally not able
to pay
its debts as they become due, (B) admits in writing its inability to pay
its
debts generally or makes a general assignment for the benefit of creditors,
(C)
institutes or has instituted against it any proceeding seeking (x) to adjudicate
it a bankrupt or insolvent, (y) liquidation, winding-up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency, reorganization or relief
of
debtors including any plan of compromise or arrangement or other corporate
proceeding involving or affecting its creditors or (z) the entry of an order
for
relief or the appointment of a receiver, trustee or other similar person
for it
or for any substantial part of its properties and assets, and in the case
of any
such official proceeding instituted against it (but not instituted by it),
either the proceeding remains undismissed or unstayed for a period of sixty
(60)
calendar days, or any of the actions sought in such proceeding (including
the
entry of an order for relief against it or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial
part
of its properties and assets) occurs or (D) takes any corporate action to
authorize any of the above actions;
(iv) the
entry
of a decree or order by a court having jurisdiction in the premises adjudging
the Company or any Subsidiary a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company under the Bankruptcy Code or any other
applicable Federal or state law, or appointing a receiver, liquidator, assignee,
trustee or sequestrator (or other similar official) of the Company or of
any
substantial part of its property, or ordering the winding-up or liquidation
of
its affairs, and any such decree or order continues and is unstayed and in
effect for a period of sixty (60) calendar days;
(v) the
institution by the Company or any Subsidiary of proceedings to be adjudicated
a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy
or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under the Bankruptcy Code or
any
other applicable federal or state law, or the consent by it to the filing
of any
such petition or to the appointment of a receiver, liquidator, assignee,
trustee
or sequestrator (or other similar official) of the Company or of any substantial
part of its property, or the making by it of an assignment for the benefit
of
creditors, or the admission by it in writing of its inability to pay its
debts
generally as and when they become due, or the taking of corporate action
by the
Company in furtherance of any such action;
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12
(vi) a
final
judgment or final judgments for the payment of money shall have been entered
by
any court or courts of competent jurisdiction against the Company and remains
undischarged for a period (during which execution shall be effectively stayed)
of thirty (30) days, provided
that the
aggregate amount of all such judgments at any time outstanding (to the extent
not paid or to be paid, as evidenced by a written communication to that effect
from the applicable insurer, by insurance) exceeds One Hundred Thousand Dollars
($100,000);
(vii) it
becomes unlawful for the Company to perform or comply with its obligations
under
this Debenture, the Securities Purchase Agreement or the Registration Rights
Agreement in any respect;
(viii) the
Common Shares shall no longer be traded in the over the counter market via
the
Pink Sheets or not otherwise be listed for trading on the NASDAQ OTCBB (the
“Trading
Market”
or, to
the extent the Company becomes eligible to list its Common Stock on any other
national security exchange or quotation system, upon official notice of listing
on any such exchange or system, as the case may be, it shall be the “Trading
Market”)
or
suspended from trading on the Trading Market, and shall not be reinstated,
relisted or such suspension lifted, as the case may be, within five (5) days
or;
(ix) the
Company shall default (giving effect to any applicable grace period) in the
payment of principal or interest as and when the same shall become due and
payable, under any indebtedness, individually or in the aggregate, of more
than
One Hundred Thousand Dollars ($100,000);
SECTION
6.2 Acceleration
of Maturity; Rescission and Annulment.
If an
Event of Default occurs and is continuing, then and in every such case the
Holder may, by a notice in writing to the Company, rescind any outstanding
Conversion Notice and declare that all amounts owing or otherwise outstanding
under this Debenture are immediately due and payable and upon any such
declaration this Debenture shall become immediately due and payable in cash
at a
price of one hundred and thirty-five percent (135%) of the Principal Amount
thereof, together with all accrued and unpaid interest thereon to the date
of
payment; provided,
however,
in the
case of any Event of Default described in clauses (iii), (iv), (v) or (vii)
of
Section 6.1, such amount automatically shall become immediately due and payable
without the necessity of any notice or declaration as aforesaid.
SECTION
6.3 Late
Payment Penalty.
If any
portion of the principal of or interest on this Debenture shall not be paid
within ten (10) days of when it is due, the Discount Multiplier under this
Debenture shall decrease by one percentage point (1%) for all conversions
of
this Debenture thereafter.
SECTION
6.4 Maximum
Interest Rate. Notwithstanding
anything herein to the contrary, if at any time the applicable interest rate
as
provided for herein shall exceed the maximum lawful rate which may be contracted
for, charged, taken or received by the Holder in accordance with any applicable
law (the “Maximum
Rate”),
the
rate of interest applicable to this Debenture shall be limited to the Maximum
Rate. To the greatest extent permitted under applicable law, the Company
hereby
waives and agrees not to allege or claim that any provisions of this Note
could
give rise to or result in any actual or potential violation of any applicable
usury laws.
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13
SECTION
6.5 Remedies
Not Waived.
No
course of dealing between the Company and the Holder or any delay in exercising
any rights hereunder shall operate as a waiver by the Holder.
SECTION
6.6 Remedies. The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to the Holder, by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that
the
remedy at law for a breach of its obligations under this Debenture will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Debenture, that the Holder shall be entitled
to all other available remedies at law or in equity, and in addition to the
penalties assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Debenture and to enforce specifically
the terms and provisions thereof, without the necessity of showing economic
loss
and without any bond or other security being required.
SECTION
6.7 Payment
of Certain Amounts. Whenever
pursuant to this Debenture the Company is required to pay an amount in excess
of
the Principal Amount plus accrued and unpaid interest, the Company and the
Holder agree that the actual damages to the Holder from the receipt of cash
payment on this Debenture may be difficult to determine and the amount to
be so
paid by the Company represents stipulated damages and not a penalty and is
intended to compensate the Holder in part for loss of the opportunity to
convert
this Debenture and to earn a return from the sale of shares of Common Stock
acquired upon conversion of this Debenture at a price in excess of that price
paid for such shares pursuant to this Debenture. The Company and the Holder
hereby agree that such amount of stipulated damages is not disproportionate
to
the possible loss to the Holder from the receipt of a cash payment without
the
opportunity to convert this Debenture into shares of Common Stock.
ARTICLE
7
MISCELLANEOUS
SECTION
7.1 Notice
of Certain Events.
In the
case of the occurrence of any event described in Section 3.4 of this Debenture,
the Company shall cause to be mailed to the Holder of this Debenture at its
last
address as it appears in the Company’s security registry, at least twenty (20)
days prior to the applicable record, effective or expiration date hereinafter
specified (or, if such twenty (20) days’ notice is not possible, at the earliest
possible date prior to any such record, effective or expiration date), a
notice
thereof, including, if applicable, a statement of the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective, and the date as
of
which it is expected that holders of record of Common Stock will be entitled
to
exchange their shares for securities, cash or other property deliverable
upon
such reclassification, consolidation, merger, sale transfer, dissolution,
liquidation or winding-up.
SECTION
7.2 Register.
The
Company shall keep at its principal office a register in which the Company
shall
provide for the registration of this Debenture. Upon any transfer of this
Debenture in accordance with Articles 2 and 4 hereof, the Company shall register
such transfer on the Debenture register.
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14
SECTION
7.3 Withholding.
To the
extent required by applicable law, the Company may withhold amounts for or
on
account of any taxes imposed or levied by or on behalf of any taxing authority
in the United States having jurisdiction over the Company from any payments
made
pursuant to this Debenture.
SECTION
7.4 Transmittal
of Notices.
Except
as may be otherwise provided herein, any notice or other communication or
delivery required or permitted hereunder shall be in writing and shall be
delivered personally, or sent by telecopier machine or by a nationally
recognized overnight courier service, and shall be deemed given when so
delivered personally, or by telecopier machine or overnight courier service
as
follows:
(1)
If
to the
Company, to:
3DIcon
Corporation
7507
Sandusky Ave.
Tulsa,
Oklahoma 74136
Telephone: 918-492-5082
Facsimile: 918-492-5367
With
a
copy to:
John
M.
O’Connor, Esq.
Newton,
O’Connor, Turner & Ketchum
15
W.
Sixth Street, Suite 2700
Tulsa,
Oklahoma 74119
Telephone: 918-587-0101
Facsimile:
918-587-0102
(2)
If
to the
Holder, to:
Golden
Gate Investors, Inc.
7817
Herschel Avenue, Suite 200
La
Jolla,
California 92037
Telephone: 858-551-8789
Facsimile: 858-551-8779
Each
of
the Holder or the Company may change the foregoing address by notice given
pursuant to this Section 7.4.
SECTION
7.5 Attorneys’
Fees.
Should
any party hereto employ an attorney for the purpose of enforcing or construing
this Debenture, or any judgment based on this Debenture, in any legal proceeding
whatsoever, including insolvency, bankruptcy, arbitration, declaratory relief
or
other litigation, the prevailing party shall be entitled to receive from
the
other party or parties thereto reimbursement for all reasonable attorneys'
fees
and all reasonable costs, including but not limited to service of process,
filing fees, court and court reporter costs, investigative costs, expert
witness
fees, and the cost of any bonds, whether taxable or not, and that such
reimbursement shall be included in any judgment or final order issued in
that
proceeding. The "prevailing party" means the party determined by the court
to
most nearly prevail and not necessarily the one in whose favor a judgment
is
rendered.
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15
SECTION
7.6 Governing
Law.
This
Debenture shall be governed by, and construed in accordance with, the laws
of
the State of California (without giving effect to conflicts of laws principles).
With respect to any suit, action or proceedings relating to this Debenture,
the
Company irrevocably submits to the exclusive jurisdiction of the courts of
the
State of California sitting in San Diego and the United States District Court
located in the City of San Diego and hereby waives, to the fullest extent
permitted by applicable law, any claim that any such suit, action or proceeding
has been brought in an inconvenient forum. Subject to applicable law, the
Company agrees that final judgment against it in any legal action or proceeding
arising out of or relating to this Debenture shall be conclusive and may
be
enforced in any other jurisdiction within or outside the United States by
suit
on the judgment, a certified copy of which judgment shall be conclusive evidence
thereof and the amount of its indebtedness, or by such other means provided
by
law.
SECTION
7.7 Waiver
of Jury Trial.
To the
fullest extent permitted by law, each of the parties hereto hereby knowingly,
voluntarily and intentionally waives its respective rights to a jury trial
of
any claim or cause of action based upon or arising out of this Debenture
or any
other document or any dealings between them relating to the subject matter
of
this Debenture and other documents. Each party hereto (i) certifies that
neither
of their respective representatives, agents or attorneys has represented,
expressly or otherwise, that such party would not, in the event of litigation,
seek to enforce the foregoing waivers and (ii) acknowledges that it has been
induced to enter into this Debenture by, among other things, the mutual waivers
and certifications herein.
SECTION
7.8 Headings.
The
headings of the Articles and Sections of this Debenture are inserted for
convenience only and do not constitute a part of this Debenture.
SECTION
7.9 Payment
Dates.
Whenever any payment hereunder shall be due on a day other than a Business
Day,
such payment shall be made on the next succeeding Business Day.
SECTION
7.10 Binding
Effect.
Each
Holder by accepting this Debenture agrees to be bound by and comply with
the
terms and provisions of this Debenture.
SECTION
7.11 No
Stockholder Rights.
Except
as otherwise provided herein, this Debenture shall not entitle the Holder
to any
of the rights of a stockholder of the Company, including, without limitation,
the right to vote, to receive dividends and other distributions, or to receive
any notice of, or to attend, meetings of stockholders or any other proceedings
of the Company, unless and to the extent converted into shares of Common
Stock
in accordance with the terms hereof.
SECTION
7.12 Facsimile
Execution.
Facsimile execution shall be deemed originals.
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16
IN
WITNESS WHEREOF, the Company has caused this Debenture to be signed by its
duly
authorized officer on the date of this Debenture.
|
3DIcon
Corporation
|
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| |
|
|
| By: | /s/ Martin Keating | |
|
Title: Chief Executive Officer |
||
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17
EXHIBIT A
DEBENTURE
CONVERSION NOTICE
TO: 3DIcon
Corporation
The
undersigned owner of this Convertible Debenture due November ___, 2009 (the
“Debenture”)
issued
by 3DIcon Corporation (the “Company”)
hereby
irrevocably exercises its option to convert $__________ Principal Amount
of the
Debenture into shares of Common Stock in accordance with the terms of the
Debenture. The undersigned hereby instructs the Company to convert the portion
of the Debenture specified above into shares of Common Stock Issued at
Conversion in accordance with the provisions of Article 3 of the Debenture.
The
undersigned directs that the Common Stock and certificates therefor deliverable
upon conversion, the Debenture reissued in the Principal Amount not being
surrendered for conversion hereby, [the check or shares of Common Stock in
payment of the accrued and unpaid interest thereon to the date of this Notice,]
together with any check in payment for fractional Common Stock, be registered
in
the name of and/or delivered to the undersigned unless a different name has
been
indicated below. All capitalized terms used and not defined herein have the
respective meanings assigned to them in the Debenture. The conversion pursuant
hereto shall be deemed to have been effected at the date and time specified
below, and at such time the rights of the undersigned as a Holder of the
Principal Amount of the Debenture set forth above shall cease and the Person
or
Persons in whose name or names the Common Stock Issued at Conversion shall
be
registered shall be deemed to have become the holder or holders of record
of the
Common Shares represented thereby and all voting and other rights associated
with the beneficial ownership of such Common Shares shall at such time vest
with
such Person or Persons.
In
the
event that, at the time this Conversion Notice is received by the Company,
there
is not then in effect a registration statement on file with the Securities
and
Exchange Commission covering the Common Stock issued upon Conversion, then
the
undersigned hereby reaffirms all representations contained in Section II
of the
Securities Purchase Agreement dated October ___, 2006 as if such representations
were made on the date hereof.
Date
and
time: __________________
______________________________
By:
___________________________
Title:
_________________________
Fill
in
for registration of Debenture:
Please
print name and address
(including
ZIP code number):
______________________________
______________________________
______________________________
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A-1
SPONSORED
RESEARCH AGREEMENT FY06-ORA3-06
THIS
AGREEMENT is entered into by and between the Board of Regents of the University
of Oklahoma,
an educational agency of the State of Oklahoma (hereinafter referred to as
"University") and 3DICON Corporation, an Oklahoma corporation with principal
offices at P O Box 470941, Tulsa, OK 74147-0941
(hereinafter referred to as "Sponsor").
WITNESSETH
WHEREAS,
the research program contemplated by this Agreement is of mutual interest and
benefit to
University and to Sponsor, will further the instructional and research
objectives of University in a manner
consistent with its status as a non-profit, state, educational institution,
and
may derive benefits for both
Sponsor and University through the advancement of knowledge through discovery
and the creation of
new
technologies;
NOW,
THEREFORE, in consideration of the mutual promises contained herein and other
good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
parties agree to the following:
SECTION
1. DEFINITIONS
1.1
"Confidential/Proprietary Information" shall mean any and all proprietary
knowledge, know-how, practices,
processes, or other information related to the Project disclosed or submitted
in
writing or in other tangible form to either party by the other and which is
conspicuously marked "Confidential" or similar
proprietary legend.
1.2
"Invention" shall mean any invention, discovery, improvement, enhancement,
concept, product, or
idea
made during the Project whether or not patentable or copyrightable, including
but not limited to processes,
machines, methods, computer software, formulas, and know-how directly relating
thereto An Invention
is "made during the Project" if it arises from work performed pursuant to the
Project conducted under this Agreement and is made during the Period of
Performance.
l.3
"Joint Invention" shall mean all Inventions made jointly by one or more
employees of University and
by
one or more employees of Sponsor during the Period of Performance and the
Project.
1.4
"Period of Performance" is the term of this Agreement as set forth in Section
3
below, unless earlier
terminated as provided for in Section 5.
1.5
"Project" shall mean the research project entitled Investigation of
3-Dimensional Display Technologies
as described in Appendix A, under the direction of James Sluss Jr. as Principal
Investigator.
1.6
"Sponsor Invention" shall mean individually and collectively all Inventions
conceived and/or made
solely by one or more, employees of Sponsor during the Period of Performance
and
the Project.
1.7
"University Invention" shall mean individually and collectively all Inventions
conceived and/or made
solely by one or1
more
employees of University during the Period of Performance and the
Project.
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8
SECTION
2. RESEARCH WORK
2.1 University
does not guarantee specific research results but will exercise good faith
efforts to perform
the Project substantially in accordance with the terms and conditions of this
Agreement Sponsor understands
that University's primary mission is education and advancement of knowledge
and
consequently
the Project will be designed to carry out that mission
2.2 The
manner of performance of the Project shall be determined solely by the Principal
Investigator.
In the event the Principal Investigator becomes unable 01 unwilling to continue
the Project and
a
mutually acceptable substitute is not available, either party shall have the
option to terminate the Project.
2.3 Sponsor
agrees that, if funds are exhausted prior to completion of the research,
University will, at
the
option of Sponsor, submit a final report of accomplishments or provide an
estimate of additional funds
required to complete the Project and will continue the research if such funds
are provided by Sponsor
On a calendar quarterly basis, University shall provide Sponsor a report of
the
status of the use of
funds
on the Project.
2.4
University shall be free to continue research, and Sponsor shall not gain any
rights via
this
Agreement to other research. University does represent that no research shall
be
done in direct competition
with the Project provided herein.
2.5
The
Principal Investigator shall furnish Sponsor periodic (not less frequently
than
quarterly) letter reports
summarizing progress on the Project The Principal Investigator shall prepare
and
submit, on behalf
of
University, a final report to the Sponsor within ninety (90) days of the
termination of this Agreement
2.6
In
the event of termination of the Project under section 2.2 or section 2.3 or
section 5 below, the University
shall provide an option to Sponsor to the research developed under this
Agreement to the date of
termination in accordance with Section 8.3 Such option shall be negotiated
in
accordance with Section
8.3.
SECTION
3. PERIOD OF PERFORMANCE
3.1
The
Period of Performance will be: July 15, 2005 through January 14, 2007.
SECTION
4. COSTS, BILLINGS AND OTHER SUPPORT
4.1
Unless this agreement or the project is terminated before the expiration of
the
Period of Performance,
for the services, reports, and other items to be delivered hereunder Sponsor
shall pay University
a fixed price in the amount of Four Hundred Fifty-Three Thousand Five Hundred
Eighty Four Dollars
and no cents ($453,584 00). Upon execution of this contract, Sponsor shall
pay
University Five Hundred
Dollars and 00/00 cents ($500.00). Within ninety days of the execution of this
contract, Sponsor shall
pay
University Seventy-Five Thousand and Ninety-Seven Dollars and 33/00 cents
($75,097 33) The
remaining portion or Three Hundred Seventy-Seven Thousand Nine Hundred
Eighty-Six Dollars and 67/00
cents ($377,98667) shall be due and payable without interest to the University
of Oklahoma as follows:
on October 15, 2005: $75,597.33; on January 15, 2006: $75,597.33; on April
15,
2006: the balance
of $226,792 01, The University agrees to incur expenses primarily in accordance
with the cost estimate
included in Appendix
B ("Budget"),
which by reference is made a part hereof for all purposes If
Sponsor terminates this Agreement prior to the expiration of the Period of
Performance, it shall pay all amounts
due and owning the University through the date of termination including all
non-cancelable commitments
for equipment; provided, that any equipment Sponsor has financed as of the
date
of termination
shall be transferred to Sponsor.
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4.2
The
University agrees to incur1
expenses
substantially in accordance with the cost estimate included
in Appendix B ("Budget"), incorporated herein by reference., University reserves
the right to re-budget
funds as necessary for completion of the Project. Any proposed rebudget greater
than 25% shall be
reported to Sponsor.
4 3
If this
Agreement is terminated by University or Sponsor before the end of the eighteen
month period,
Sponsor shall retain title to any equipment purchased with funds provided by
Sponsor under this Agreement
Title to equipment furnished by Sponsor to University, if any, shall remain
with
the Sponsor, The
costs
of transporting, installing and servicing any equipment used herein, whether
the
property of University
or Sponsor, shall be allowable under this Agreement.
SECTIONS
5. TERMINATION
5.1
Either
party may terminate this Agreement at any time by giving not less than sixty
(60) days prior
written notice to the other. In the event of early termination, Sponsor agrees
that University shall be reimbursed
the fixed price of this agreement on a pro-rated scale to the date of the
termination
5.2
In
the
event that either party shall commit any breach of or default in any of the
terms or conditions
of this Agreement, and also shall fail to remedy the default or breach within
ninety (90) days after
receipt of written notice thereof from the other party, the party giving notice
may, at its option and in addition
to any other remedies which it may have at law or in equity, terminate this
Agreement by sending
written notice of termination in accordance with Section 10 to the defaulting
party and the termination
shall be effective as of the date of the receipt of the notice.
5.3
Termination of this Agreement by either party for any reason shall not affect
the rights and obli-gations
of the parties accrued prior to the effective date of termination of this
Agreement, except insofar as
Sponsor's breach of contract for failure to make payments under Section 4 shall
cause Sponsor to forfeit
its rights under Section 8 The rights and duties of Sections 6,8, 9 and 11
of
this Agreement shall survive termination
SECTION
6. PUBLICITY
6.1
Neither party to this Agreement may use the name or mark of the other nor the
name(s) of the other's
employees in news releases, publicity, advertising, or product promotion without
the prior written permission
of' the other.
SECTION
7. PUBLICATION
7.1 Subject
to confidentiality provisions, University and Sponsor shall have the right
at
its discretion to
release non-proprietary information or to publish any material resulting from
the Project The party proposing
to publish will furnish a copy of any proposed publication to the other party
for its review at least thirty (30) days in advance of submission for
publication. University shall not publish any material or
information designated by Sponsor, in its sole discretion, as confidential
or
proprietary Publication of specific
results may be delayed for a limited period, not to exceed sixty (60) days,
to
protect any patentable
subject matter and remove Sponsor Proprietary Information contained in the
publication.
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3 of
8
Sponsor
agrees to limit disclosure of such copies to its employees solely for the
puiposes of review and comment
unless otherwise agreed in writing by University No unreasonable delay shall
be
imposed on the
filing, defense or publication of any student thesis or dissertation University
shall give Sponsor the option of being acknowledged in such publication for
its
sponsorship of the Project
SECTION
8. INTELLECTUAL PROPERTY
8.1
Any
University Invention shall belong to University and any Sponsor Invention shall
belong to Sponsor;
provided however, subject to confidentiality provisions, University is hereby
granted a royalty-free, nonexclusive and nontransferable right and license
to
Sponsor Inventions for non-commercial, educational and research purposes. Any
Joint Invention shall belong to University and Sponsor, jointly University
shall execute a non-disclosure agreement covering Inventions, as may be required
by Sponsor
8.2
University will provide Sponsor with a written disclosure of any University
Invention or Joint Invention
promptly upon its being reported to the University by the Principal Investigator
Sponsor1
will
provide
University with a written disclosure of any Sponsor Invention or Joint Invention
promptly upon its
being
reported to Sponsor by a Sponsor investigator Sponsor shall execute a
non-disclosure agreement
covering Inventions, as may be required by the University; provided, that such
non-disclosure agreement
shall not impede the commercial use and exploitation of Invention licensed
to
Sponsor under this contract
8.3
University hereby giants to Sponsor an option to negotiate an exclusive license
to a University Invention
and University rights in a Joint Invention. The terms and conditions of the
license shall be as set
forth
on the Exclusive License Agreement attached to this Agreement as Appendix
C, except
that the royalty
to be paid University on a license for which Sponsor exercises its option shall
be determined by the
parties at the time of exercise The royalty shall be within the range of
royalties set forth on Appendix
C Each
option shall be exercised as follows:
(a) Sponsor
shall exercise its option to negotiate a license agreement for any such
Inventions within
sixty (60) days of Sponsor's receipt of University's written disclosure of
the
Invention to Sponsor
by University.
(b) Sponsor
shall exercise its option by executing the attached License Agreement,
inserting Sponsor's
offer as to the royalty amount and delivering it to University.
(c) Sponsor
and University shall negotiate the royalty applicable to the license in good
faith for a
period
that shall not exceed one hundred eighty (180) days from University's notice
of
disclosure
to Sponsor, or such other period of time agreeable to both patties,
(d) In
the
event that Sponsor and University fail to reach an agreement on the amount
of
the royalty
during that period of time, the University shall have the right to dispose
of
the Invention, at
its
sole and exclusive discretion with no further obligation to
Sponsor,
SECTION
.9. CONFIDENTIALITY
91
Each
party shall be responsible for the protection of Confidential/Proprietary
Information disclosed
between the parties in the performance of the work described in Appendix A.
A
separate Confidentiality Agreement will be executed between the parties and
incorporated into this Agreement through written modification to this
Agreement.
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8
SECTION
10. NOTICES
10
1
Notices, invoices, communications and payments shall be submitted to the offices
identified
below Contractual notices and communications hereunder shall be deemed made
as
of the
date
of mailing if given by overnight courier service or by registered, certified
or
first class mail,
postage prepaid, and addressed to the party to receive such notice or
communication at the address(es)
given below, or such other address as may hereafter be designated by notice
in
writing
| Name: | Martin Keating 3DICON | |||
| Address: | Corporation PO, Box 470941 Tulsa, OK 74147- | |||
| City, State, ZIP Code: | 0941 (918) 492-5082 | |||
| Phone/Fax: | mkauthor@aol. com | (918) 492-5367 | ||
|
e-mail:
|
||||
|
John
M O'Connor, Esq.
|
||||
| with a simultaneous copy to | 15 W. 6th Street, Suite 2700 | |||
|
Tulsa,
OK 74119-5423
(919)587-0101
joconnor@newtonoconnor.com
|
(918)587-0102 | |||
| Name: | Martin Keating | |||
| Address: | 3DICON Corporation | |||
| P., O Box 470941 | ||||
| City, State, ZIP Code: |
Tulsa, OK 7414 7-0941
(918) 492-5082
|
|||
| Phone/Fax: | (918) 492-5367 | |||
|
e-mail:
|
mkautb.or@aol .com | |||
| with a simultaneous copy to | ||||
|
Philip
W Suomu
P.O..
Box 191677
Dallas,
TX 75219
tel.
214-528-5244
cell
214-675-7365
psuomu@rrisn.com
|
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Name:
|
Suzanne
Turek
|
|
||
|
Address:
|
Post
Award Financial Services
731
Elm Avenue, Ste 134 :
|
|
||
|
City,
State, ZIP Code
|
Norman,
OK 73019
|
|
||
|
Phone/Fax:
|
(405)
325-4979
|
(405)
325-0165
|
||
|
e-mail:
|
sturek@ou.edu
|
|
|
Name:
|
|
Gayle
Parker
|
|
|
|
Address:
|
|
Office
of' Research Services 731 Elm Avenue, Ste 134
|
|
|
|
City,
State, ZIP Code:
|
|
Norman,
OK 73019
|
|
|
|
Phone/Fax:
|
|
(405)
325-6061
|
|
(405)
325-6029
|
|
e-mail:
|
|
gparker@ou.edu
|
|
|
|
Name:
|
Dr,
James Sluss Ir,
|
|
||
|
Address:
|
School
of Electrical & Computer Engineering - CEC 219 202
W, Boyd Street
|
|
||
|
City,
State, ZIP Code:
|
Norman,
OK 73019
|
|
||
|
Phone/Fax:
|
(918)
660-3254
|
(
)
|
||
|
e-mail:
|
sluss@ou.edu
|
|
SECTION
11. GENERAL TERMS AND CONDITIONS
11.1
This
Agreement may not be assigned by either party in whole or in part without the
prior written permission of the non-assigning party.
11.2
This
Agreement shall be governed by the laws of the State of Oklahoma, without giving
force and effect to its choice of law provisions. Any legal action in connection
with this Agreement shall be filed in a court of competent jurisdiction in
the
State of Okalahoma, to which jurisdiction and venue spponsor expressly
agrees.
11.3
Should the parties to this Agreement be unable to resolve between themselves
any
dispute arising from any of the provisions within this Agreement, each party
shall have recourse under the law, In the event
that either party commences action in law or equity to enforce any provision
of
this Agreement, the losing
party shall pay to the prevailing party, reasonable attorneys' fees and expert
witness fees fixed by the court.
11.4
If
any provision(s) of this Agreement shall be held invalid, illegal, or
unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Page
6 of
8
11.5
This
Agreement, including Appendices A, B and C, constitutes the entire agreement
and
understanding
between the parties and supersedes all prior and/or contemporaneous discussions,
representations,
or agreements, whether written or oral, of the parties relating to the work
to
be performed
This Agreement may be extended, renewed or otherwise amended at any time,
but
only by the
mutual written agreement of the parties.
11.6 This
Agreement may be executed in several counterparts, each of which shall be
deemed
the original,
but all of which shall constitute one and the same instrument.
11.7 The
parties agree that this Agreement shall be binding upon their respective
successors, assigns or transferees
of any nature, if assignment and/or transfer is permitted in accordance with
the
terms of this Agreement.
11.8 Sponsor
agrees that it shall comply with the export control laws and regulations
of the
United States
of
America Sponsor shall be responsible for obtaining all information regarding
such regulations that
is
necessary for Sponsor to comply with such regulations, Sponsor agrees that
it
will comply with all other applicable laws, orders and regulations relating
to
the use and/or transfer of deliverables specified in Appendix
A and that it will not at any time take any action which would cause University
to be in violation
of any such laws, orders and regulations.
11.9
In
the performance of all services hereunder, the parties shall be deemed to
be and
shall be independent
contractors and, as such, neither shall be entitled to any benefits applicable
to employees of the
other. Neither party is authorized or empowered to act for the other for
any
purpose and shall not on behalf
of
the other enter into any contract, warranty, and/or representation as to
any
matter. Neither shall be
bound
by the acts or conduct of the other.
11.10 Sponsor
shall indemnify, defend, and hold University, its Regents, officers, agents,
students, and employees
harmless from and against liability for any and all claims, demands, damages,
liabilities, fines, penalties,
losses, expenses, costs, and fees of any nature (e.g., attorneys' fees)
including, but not limited to, bodily injury, death, personal injury, illness,
product liability, and property damage arising from Sponsor's use of information
or materials received from University, by Sponsor or its officers, servants,
agents, or of any third patty acting on behalf of or under authorization
from
Sponsor including without limitation, use of products,
developed or made arising out of or in connection with this Agreement.
University will give Sponsor
notice of any claim it receives within ten (10) business days of receipt
of a
claim by University.
11.11 University
agrees to be responsible for its own negligent acts and omissions and those
of
its employees
and agents in accordance with the Oklahoma Governmental Tort Claims Act,
51 OS
1991 151,
et
seq,,
as
amended.
11.12 The
parties recognize that Inventions or' other proprietary information may arise
from research sponsored
in whole or in part by governmental agencies and shall be governed by the
provisions of applicable
law.
11.13 As
applicable, the provisions of Executive Order 11246, as amended by EO 11375
and
EO 11141 and
as
supplemented in Department of Labor regulations (41 CFR Part 60 et seq )
are
incorporated into this
Agreement and must be included in any subcontracts awarded involving this
Agreement The parties represent
that all services are provided without discrimination on the basis of race,
color, religion, national
origin, disability, sex, or veteran's status; they do not maintain nor provide
for their employees any
segregated facilities, nor will the parties permit their employees to perform
their services at any location where segregated facilities are maintained.
In
addition, the parties agree to comply with Section 504
of'
the Rehabilitation Act and the Vietnam Era Veteran's Assistance Act of 1974,
38
US C §4212.
Page
7 of
8
11.14
The
terms of this Agreement shall not be binding upon any of the parties hereto
until it has been properly
executed on behalf of each party to the Agreement in the spaces provided
below.
It is then effective
as of the starting date of the period of performance.
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed in
duplicate by their duly
authorized representatives on the dates set forth below.
|
3DICON
CORPORATION
|
THE
BOARD OF REGENTS OF THE
|
|
UNIVERSITY
OF OKLAHOMA
|
|
|
BY:
Martin Keating
|
BY:
Susan Wyatt Sedwick
|
|
TITLE:
President
|
TITLE:
Associate Vice President for Research
|
|
DATE:
July 15, 2005
|
DATE:
7/13/05
|
|
READ
AND UNDERSTOOD:
|
|
|
BY:
James J. Sluss, Jr.
|
DATE:
7/17/05
|
Appendix
A
Investigation
of 3-Uimensional Display Technologies
A
Phase
II Proposal to:
3D
Icon
Corporation Attn:
Martin Keating
P.O.
Box
470941
TuIsa,
OK
74147-0941
Phone:
918=492-5082
FAX:
918-492-5367
Submitted
by:
James
J
Sluss, Jr., Piamode K Venna and Monte P Tull
School
of
Electrical &
Computer
Engineering
University
of Oklahoma
December
2, 2004
Introduction
The
University of Oklahoma - Tulsa and 3D Icon Corporation entered into a Sponsored
Research
Agreement on April 20,2004, to carry out a project entitled "Investigation
of
Emerging Digital Holography Technologies " The tasks for this "Phase I" project
were:
· Literature
review to determine key leading edge research in relevant
areas
·
Review
of
related commercial products to identify technological approaches and
potential
competitors and/or partners
· Preliminary
patent review
· Recommendations
for product research and development directions
Based
on
our performance of these tasks, we strongly believe that opportunities exist
to
carry out research and development activities that can lead to new intellectual
property and
technology, Thus, we are proposing the following "Phase II" project
Phase
II - Goals
· To
produce patentable and/or copyrightable intellectual property
·
To
produce proof-of-concept technology that demonstrates the viability of
the
intellectual
property.
· To
assess
opportunities for manufacturing technological products in
Oklahoma,
Phase
II - Proposed Statement of Work
Investigate
magnetic nanospheres (MNs) for use as a projection media.
· What
is
the most appropriate size?
· Different
sizes for different wavelengths?
· What
is
the optimal density, i.e.., # of particles per unit volume?
·
What
is
the most effective means of controlling their distribution in an unbounded
volumetric
space?
· Ate
off-the-shelf MNs sufficient, or do we require custom MNs?
Develop
a control platform to actively distribute {MNs) in an unbounded volumetric
space
·
Design
and fabricate prototype hardware
· Design
and develop control software
· Evaluate
for manufacturability
· Evaluate
for reliability.
Investigate
the doping of MNs with fluorescent materials for light emission at different
wavelengths,
i.e., develop fluorescent MNs (FMNs)
· Which
dopants should be used?
· What
are
the optimal dopant concentrations?
· Can
these
FMNs be produced in-house?
·
If
so, is there an opportunity for OU-3DIcon to develop a small-scale manufacturing
facility and establish pre-eminence as a supplier?
Evaluate
other display medium technologies for potential strategic partner
ships
|
·
|
If
other technologies (e g,,, Fog Screen) can be obtained, evaluate
their
performance for the targeted
application,
|
Evaluate
the most appropriate (from a cost-to-benefit standpoint) .solid-state light
sources
for projection applications
· Brightness
· Output
wavelength - possibly matched to key absorption window of
FMNs
· Footprint
(size)
Investigate
the use of TI's DLP technology to actively steer optical beams for 3D image
formation.
· Design
and fabricate a proof-of-concept sub-system using DLP
technology,
· Design
and fabricate hardware Design and develop control software
Develop
software for displaying ideal 3D images
Investigate
software interface issues with other image capture
technologies.
Phase
II
- Budget Justification
The
largest portion of the proposed 18-month budget will go toward personnel
salaries and
fringe benefits, Drs. Sluss and Tull are both budgeted for three summer months
of full-time
support, two each during the first summer and one each during the second
summer
of
the project Dr. Verma is budgeted for two half months of summer support,
one
half-month per summer. A full-time research associate is budgeted to work with
Drs. Sluss
and
Verma in Tulsa for 18 months, A half-time graduate research assistant is
budgeted
to work with Dr. Tull in Norman for 18 months.
We
are
budgeting $65k for equipment, plus $45k for materials and supplies, to fabricate
and
test
a prototype display. We are budgeting $8k for travel, potentially to vendor
sites and/or
trade shows.
Phase
II - Proposed Project Timeline
|
Tasks
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
9
|
10
|
11
|
12
|
13
|
14
|
15
|
16
|
17
|
18
|
|
Procure
DLP equipment
|
||||||||||||||||||
|
Training
|
||||||||||||||||||
|
Simulation
(3-D coordinates)
|
||||||||||||||||||
|
Programming/debugging
|
||||||||||||||||||
|
1-color
control
|
||||||||||||||||||
|
2-color
control
|
||||||||||||||||||
|
3-color
control
|
||||||||||||||||||
|
Investigate
projection media
|
||||||||||||||||||
|
Design
control system
|
||||||||||||||||||
|
Procure
equipment
|
||||||||||||||||||
|
Fabricate
control system
|
||||||||||||||||||
|
Integrate
with DLP
|
||||||||||||||||||
|
Construction
of prototype
|
||||||||||||||||||
|
Testing/performance
analysis
|
||||||||||||||||||
|
Intellectual
property documentation
|
||||||||||||||||||
|
Engineering
documentation
|
Appendix
B
DETAIL
BUDGET
CUMULATIVE
|
A.
SENIOR PERSONNEL
|
SPONSOR
REQUEST
|
|
OU
COST
SHARE
|
|
TOTAL
|
|||||
|
1.
Principal
Investigator
James
J. Sluss, Jr.
|
$
|
32,986
|
$
|
32,986
|
||||||
|
2.
Co-Principal
Investigator
Pramode
K. Verma
|
$
|
11,791
|
$
|
11,791
|
||||||
|
3.
Co-Principal
Invesigator
Monte
P. Tull
|
$
|
23,150
|
$
|
23,150
|
||||||
|
4.
|
||||||||||
|
5.
|
||||||||||
|
6.
(
) TOTAL SENIOR PERSONNEL (1-5)
|
$
|
67,927
|
$
|
67,927
|
||||||
|
B.
OTHER PERSONNEL
|
||||||||||
|
1.
(
) POST DOCTORAL ASSOCIATES
|
||||||||||
|
2.
(
1 ) OTHER PROFESSIONALS (TECHNICIAN, PROGRAMMER, ETC.) Hakki
Refai
|
$
|
61,000
|
$
|
61,000
|
||||||
|
3.
(
) PROJECT SECRETARIAL/CLERICAL
|
||||||||||
|
4.
( ) GRADUATE STUDENTS Erik Petrick - Ph.D. Student @ .05 FTE x 18
mos.
|
$
|
29,280
|
$
|
29,280
|
||||||
|
5.
(
) UNDERGRADUATE STUDENTS
|
||||||||||
|
6.
( ) OTHER
|
||||||||||
|
TOTAL
SALARIES AND WAGES (A+B)
|
$
|
158,207
|
$
|
158,207
|
||||||
|
A. FRINGE
BENEFITS
|
$
|
49,167
|
$
|
49,167
|
||||||
|
TOTAL
SALARIES WAGES AND FRINGE BENEFITS (A+B+C)
|
$
|
207,374
|
$
|
207,374
|
||||||
|
B. PERMANENT
EQUIPMENT
DMD
Discover Kit
(2) DMD
boards
High-speed
PC
Optical
Mounting HW
|
||||||||||
|
TOTAL
PERMANENT EQUIPMENT
|
$
|
65,000
|
$
|
65,000
|
||||||
|
E.
TRAVEL** 1 DOMESTIC:
2
FOREIGN
|
$
|
8,000
|
$
|
8,000
|
||||||
|
F.
PARTICIPANT SUPPORT COSTS
1.
STIPENDS 3.
SUBSISTENCE
2.
TRAVEL 4.
OTHER
|
||||||||||
|
G.
OTHER DIRECT COSTS
|
||||||||||
|
1
MATERIALS AND SUPPLIES
|
$
|
45,000
|
$
|
45,000
|
||||||
|
2.
PUBLICATION COSTS/DOCUMENTATION DISSEMINATION
|
||||||||||
|
3.
CONSULTANT SERVICES
|
||||||||||
|
4.
COMPUTER (ADPE) SERVICES
|
||||||||||
|
5.
SUBCONTRACTS
|
||||||||||
|
6.
TUITION
|
$
|
3,230
|
$
|
6,139
|
$
|
9,370
|
||||
|
7.
OTHER
|
||||||||||
|
TOTAL
OTHER DIRECT COSTS
|
$
|
28,320
|
$
|
6,139
|
$
|
54,370
|
||||
|
H.
TOTAL DIRECT COSTS (A THROUGH G)
|
$
|
328,604
|
$
|
6,139
|
$
|
334,744
|
||||
|
I.
INDIRECT COSTS: Base
=
$260,374
|
$
|
124,980
|
$
|
124,980
|
||||||
|
J.
TOTAL
PROJECT COSTS
|
$
|
453,584
|
$
|
6,139
|
||||||
*Travel
expenses will be reimbursed at federal rates, state rates or specified rates,
as
appropriate
—
Revised
(06/28/2002)
Appendix
C
EXCLUSIVE
PATENT LICENSE AGREEMENT
FOR
VALUABLE CONSIDERATION, this
AGREEMENT is entered by and between the Board
of
Regents of the University of Oklahoma, a public corporation of the State of
Oklahoma having
offices in Norman, Oklahoma ("UNIVERSITY"), and 3DICON Corporation, a
corporation of the
State
of Oklahoma, having offices at P., O Box 470941, Tulsa, OK 74147-0941
("LICENSEE"), effective
as of _______ ("EFFECTIVE
DATE"):
ARTICLE
1 -BACKGROUND
1.1
Except as specifically provided in this Agreement, UNIVERSITY is the owner
of
the entire light, title, and interest in the inventions described and claimed
in
the UNIVERSITY disclosure documents
("INVENTIONS"), patent applications or continuations and/or divisions thereof,
foreign equivalent applications, and United States and/or foreign patents
issuing on any of the foregoing, as well
as
all reissues and temporal extensions thereof (hereinafter collectively referred
to as "PATENT RIGHTS") all as set forth in Exhibit
A,
attached hereto and incorporated herein, PATENT RIGHTS shall
also include IMPROVEMENTS (defined hereafter) and as provided in Article
8;
and
1.2
WHEREAS, LICENSEE engaged UNIVERSITY to perform two sponsored research projects
regarding
the INVENTIONS pursuant to agreements numbered___ and
_____ (the"SRAs");
and
1.3
WHEREAS, LICENSEE and UNIVERSITY desire to enter this Agreement whereby
UNIVERSITY
giants to LICENSEE an exclusive license to all commercial uses of the
INVENTIONS
and PATENT RIGHTS; and
1.4
WHEREAS, UNIVERSITY and LICENSEE have taken the necessary actions to obtain
authorization
to enter this Agreement.
NOW
THEREFORE, FOR VALUABLE
CONSIDERATION,
the
receipt and sufficiency of
which
are acknowledged by the patties, UNIVERSITY and LICENSEE agree as
follows:
ARTICLE
2 - DEFINITIONS
Terms
in
this Agreement (other than names of parties and Article headings) which are
set
forth in upper case letters shall have the meanings established for such terms
in the following paragraphs of
this
Article 2 unless expressly set forth elsewhere herein.
2.1
"ACCOUNTING PERIOD" shall mean each calendar quarter period ending March 31,
June
30,
September 30, and December131
of
each calendar year
2.2
"FIELD" means the field of digital holography, including the capture of an
image, the transmission
of the image, and the projection or other recreation or display of the
image.
Deleted
2.3
Page
1 of
23
2.4 "IMPROVEMENT(S)"
means any modification by UNIVERSITY or .jointly by UNIVERSITY
and LICENSEE of the LICENSED PRODUCT(S), provided such modified product,
if
unlicensed, would infringe one or more claims covered under and/or included
in
PATENT RIGHTS;
and further provided, IMPROVEMENTS made by UNIVERSITY as referred to in
this
Agreement
are specifically limited to IMPROVEMENTS in the FIELD made by employees of
the
UMVERSITY
pursuant to a research agreement funded by LICENSEE, as long as UNIVERSITY
first
offered LICENSEE, and LICENSEE rejected, a right of first refusal on any SRA
(or
similar research
contract) offered to UNIVERSITY relating thereto or an exclusive license
covering the improvement,
on the terms set forth in this Agreement
2.5 "LICENSED
PRODUCT(S)" shall mean any product or part thereof, the manufacture, use,
sale,
offer to sell, importation, distribution, service or transfer of
which:
(a) is
covered by a valid claim of an issued, unexpired U S or1
foreign
patent(s) directed to
the
PATENT RIGHTS; or
(b) is
covered by any claim prosecuted in a pending U.S or foreign patent application
directed
to the PATENT RIGHTS; or
(c) incorporates
any INVENTIONS or IMPROVEMENTS; or
(d) incorporates
any LICENSED TECHNOLOGY received from UNIVERSITY; or
(e) incorporates
any joint TECHNOLOGY IMPROVEMENTS; or
(f) is
derived from , includes or incorporates another LICENSED PRODUCT
2.6 "LICENSED
TECHNOLOGY" shall mean existing, technical information, pertinent to the
development
of the INVENTIONS, owned by UNIVERSITY as of the EFFECTIVE DATE, that was
developed
and/or invented by UNIVERSITY under, or in the course of performance of, the
SRAs, and
which
the UNIVERSITY is contractually and legally free to transfer.
2.7 "LICENSEE
IMPROVEMENT" shall have the meaning set forth in Paragraph
8,3,
below.
2.8 "MINIMUM
ROYALTY" shall have the meaning set forth in Paragraph
5.3,
below.
2.9
-**"NET
SELLING PRICE" shall mean, except as set for in Paragraph
2.9.4,
the
amount LICENSEE
billed or invoiced on sales, leases or other transfers of LICENSED PRODUCT(S),
less sales
taxes, shipping and/or insurance if these are separately itemized on the bill
or
invoice and collected
by LICENSEE LICENSED PRODUCT(S) shall be deemed to be sold or leased when the
LICENSEE
invoices for such LICENSED PRODUCT(S); provided, that upon expiration of all
PATENT
RIGHTS covering LICENSED PRODUCT(S) or upon any termination of the last to
expire patent
and/or copyright, all shipments made on or prior to the day of such expiration
or termination which
have not been billed out prior thereto shall be considered as sold (and
therefore subject to royalty) .
Page
2 of
23
29.1
All
taxes, fees or other payments of any matter or kind whatsoever imposed by any
governmental
authority in connection with the sale, lease or other disposition of LICENSED
PRODUCT(S) or otherwise in connection with this Agreement shall be paid by
LICENSEE
29.2
In
no event shall the NET SELLING PRICE, as used to determine the PATENT
ROYALTY,
be less than those charged to outside concerns buying similar merchandise in
similar amounts and under similar conditions.
29.3
Where LICENSED PRODUCT(S) are not sold, but are otherwise disposed of other
than
for
promotional purposes, the NET SELLING PRICE of such products for the purposes
of
computing royalties shall be the selling price at which LICENSED PRODUCT(S)
of
similar
kind and quality, sold in similar quantities, are then currently being offered
for sale by LICENSEE
or other manufacturers . Where such products are not currently sold or offered
for
sale
by LICENSEE or other manufacturers, then the NET SELLING PRICE, for the
purpose
of computing royalties, shall be LICENSEE'S cost of manufacture, determined
by
LICENSEE'S
customary accounting procedures, plus two hundred and fifty percent (250%)
of
the
cost of manufacture.
29.4
If a
LICENSED PRODUCT is sold in combination with an ACTIVE COMPONENT(s)
not otherwise claimed in the PATENT RIGHTS and LICENSEE does not pay
a
royalty for such component that will result in a reduced royalty pursuant to
Paragraph 5.4
then
the
NET SELLING PRICE, for purposes of determining the ROYALTY on the LICENSED
PRODUCT in the combination, will be calculated by multiplying the NET
SELLING
PRICE of the combination by the fraction A/(A+B), where A is the invoice price
of
the
LICENSED PRODUCT, if sold separately, and B is the total invoice price of any
other ACTIVE
COMPONENT(S) in the combination if sold separately, If the LICENSED PRODUCT
and the ACTIVE COMPONENT(S) in the combination are not sold separately,
the
NET
SELLING PRICE, for' purposes of determining the ROYALTY on the LICENSED
PRODUCT,
will be calculated by multiplying the NET SELLING PRICE of the combination
by
the
fraction determined by mutual agreement of the parties, that reflects the
relative contribution
in value that the LICENSED PRODUCT contained in the combination makes to
the
total
value of such combination to the end user.
2.10
"ROYALTY" shall have the meaning set forth in Paragraph
5.1.
2.11
"SUBLICENSE ROYALTY" shall have the meaning set forth in Paragraph
5.2.
2.12
"TECHNOLOGY IMPROVEMENTS" means any modification or discovery or invention
by
UNIVERSITY
or jointly by UNIVERSITY and LICENSEE which is based on or derived from or
uses
or
arises out of any LICENSED TECHNOLOGY TECHNOLOGY IMPROVEMENTS mayor may
not
be IMPROVEMENTS Provided, TECHNOLOGY IMPROVEMENTS made by UNIVERSITY
as referred to in this Agreement are specifically limited to TECHNOLOGY
IMPROVEMENTS
in the FIELD made by employees of UNIVERSITY or jointly by UNIVERSITY and
LICENSEE,, In the event any TECHNOLOGY IMPROVEMENT also constitutes an IMPROVEMENT,
as defined herein, the provisions herein relating to TECHNOLOGY IMPROVEMENTS
shall control with respect to the ownership of such TECHNOLOGY IMPROVEMENTS
and with respect to ownership and control over any patent applications covering
any
such
TECHNOLOGY IMPROVEMENTS.
Page
3 of
23
2.13 "UNIVERSITY
IMPROVEMENT" shall have the meaning set forth in Paragraphs
2.4, above
and
8.2, below.
ARTICLE
3 - GRANT AND
NONDISCLOSURE
3.1 UNIVERSITY
hereby giants to LICENSEE and LICENSEE accepts, subject to the terms and
conditions
hereof, an exclusive license to exploit for all commercial purposes at all
stages and in all manners, including without limitation, to make, manufacture,
practice, develop, improve, enhance, market,
use, service, sell, offer to sell, lease, import, export, distribute, sublicense
or otherwise transfer
anywhere and everywhere in the world LICENSED PRODUCT(S), PATENT RIGHTS,
INVENTIONS, IMPROVEMENTS, TECHNOLOGY IMPROVEMENTS and LICENSED TECHNOLOGY
(collectively, the "LICENSED RIGHTS") subject to LICENSEE'S obligations under
state and federal law, including, but not limited to federal export control
laws.
3.2
In
granting this exclusive license, UNIVERSITY represents to LICENSEE that no
rights hereby
licensed have been or must or shall be granted to any third party, governmental
entity or international
organization by federal 01 state law or regulation or by any agreement to which
UNIVERSITY
is a party; and UNIVERSITY has no obligations regarding the licensed technology
under
agreements or otherwise with other sponsors of research.
3.3
The
exclusive license granted in Paragraph
3.1 is
subject to a reserved, non-exclusive license
in UNIVERSITY to use LICENSED PRODUCT(S) and/or the LICENSED TECHNOLOGY
for
educational, research and public service purposes including, subject to
confidentiality provisions in
this
Agreement, publication of research results to share PATENT RIGHTS and/or
LICENSED TECHNOLOGY
with other educational and non-profit institutions for non-commercial,
educational and
research purposes
3.4 Except
only to the extent, if any, necessarily inherent in the manufacture, marketing,
sale, lease
01
other1
transfer, including sublicensing of LICENSED PRODUCT(S) or' the sale, lease
or
transfer
of its rights under the license or the sale of LICENSEE, LICENSEE agrees not
to
publish, disclose
or cause to be published or disclosed to others (in whole or in part), all
or
any portion of the PATENT
RIGHTS and LICENSED TECHNOLOGY without first obtaining written permission of
UNIVERSITY,
which permission shall not be unreasonably withheld
3.5
As
long
as Pramode Verma, Ph.. D, or James Sluss, Jr.,, Ph D is employed by UNIVERSITY,
it
shall
be conclusively presumed that any patentable invention conceived of by Pramode
Verma, Ph D,
or
James Sluss, Ph, D was conceived of in his capacity as an employee of UNIVERSITY
and shall
be
promptly disclosed to and exclusively owned by UNIVERSITY regardless of the
circumstances
surrounding the conception and/or reduction to practice, and shall be subject
to
this Agreement.
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3.6 Prior
to
entering into this Agreement, LICENSEE and UNIVERSITY entered into a
confidentiality
agreement attached hereto as Exhibit B and made a part hereof Therein LICENSEE
promised
to keep certain information confidential in exchange for receiving a disclosure
of such information
from UNIVERSITY, Pursuant to that agreement, UNIVERSITY has disclosed and will
disclose
to LICENSEE all information in the possession, custody or control of UNIVERSITY
or its agents
or
attorneys relating to the PATENT RIGHTS. Nothing in this Agreement shall be
construed in
any
way for any reason to void or cancel that prior1
confidentiality agreement, which remains in full
force and effect; provided, that the terms of this Agreement shall control
in
the event of a conflict between the terms of this Agreement and the terms of
the
referenced confidentiality agreement,
ARTICLE
4 - SUBLICENSING
4.1
LICENSEE shall have the right to sublicense all or any part of the rights and
licenses granted herein
for such periods of time as LICENSEE deems in its best interest and sublicensees
shall have the
right
to further sublicense the same, Any sublicense granted by LICENSEE or its
sublicensee shall
be
subject to the terms and conditions of 'this Agreement and shall contain an
express provision to
that
effect, No sublicense shall relieve LICENSEE of any of LICENSEE'S obligations
under this Agreement
unless UNIVERSITY consents in writing to such release.
4.2
At
the time of granting any sublicense, LICENSEE shall provide UNIVERSITY a signed
photocopy
of LICENSEE'S written agreement with the sublicensee, and LICENSEE promptly
shall upon
request by UNIVERSITY furnish UNIVERSITY with copies of all accounting and
notices between
LICENSEE and such sublicensee during the entire life of the
sublicense.
4.3
In
the event the rights and licenses granted herein are terminated in accordance
with this Agreement,
LICENSEE immediately shall assign to UNIVERSITY any and all sublicenses and
sublicensees
immediately shall begin paying all monies or other consideration due LICENSEE
under the
sublicense to UNIVERSITY upon notice to such sublicensees from UNIVERSITY and
LICENSEE
shall include a provision to this effect in any sublicense granted by
LICENSEE.
4.4
If
LICENSEE grants a sublicense to any third party owned, in whole or in part,
by
LICENSEE,
or owned, in whole or in part, by an entity which owns LICENSEE, in whole or
in
part, then
any
such sublicense shall be on terms such that UNIVERSITY receives the ROYALTY,
as
provided
in Article 5 below, or the SUBLICENSE ROYALTY, whichever is
greater.
ARTICLE
5 - ROYALTIES AND PAYMENT
5.1 Except
as
set forth in Paragraph 5.5, LICENSEE shall pay, within thirty (30) days of
the
end of
each
ACCOUNTING PERIOD in which LICENSEE receives a payment on which a royalty is
due
during
each license year this Agreement is in effect, to UNIVERSITY a patent royalty
("ROYALTY")
equal to [the parties shall negotiate in good faith the royally in the range
between one-half
and
three]
percent
(.5% - 3%) of the NET SELLING PRICE of all LICENSED PRODUCT(S).
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5.2 LICENSEE
shall pay, within thirty (30) days of the end of each ACCOUNTING PERIOD in
which
LICENSEE receives a payment on which a royalty is due during each license year
this Agreement is in effect, to UNIVERSITY a royalty ("SUBLICENSE ROYALTY")
equal to [the patties
shall negotiate in good faith the royalty in the range between twenty-five
and fifty] percent
(25%
-
50%) of LICENSEE'S GROSS RECEIPTS from the sale, lease or other transfer by
LICENSEE'S
sublicensee of LICENSED PRODUCT(S) during the first two years of the sublicense
and
thereafter equal to [the paities shall negotiate in good faith the royalty
in
the range between twenty
and
twenty-five]
percent
(20% - 25%) of LICENSEE'S GROSS RECEIPTS from the sale, lease
or
other transfer by LICENSEE'S sublicensee of LICENSED PRODUCT(S); provided that,
LICENSEE
shall not pay both a ROYALTY and a SUBLICENSEE ROYALTY from the sale, lease
or
other
transfer of the same LICENSED PRODUCT.
5.3
In
the
event the sum of all ROYALTIES plus all expenses paid by LICENSEE under
Paragraph
10,2 hereof during any year of the term of this License does not equal Two
Thousand, Five
Hundred Dollars ($2,500), LICENSEE shall, within thirty (30) days following
the
end of such license year, pay to UNIVERSITY an amount which is the difference
between the amounts paid by LICENSEE
and Two Thousand, Five Hundred Dollars ($2,500) The first "license year" shall
commence on the EFFECTIVE DATE and conclude on the fist anniversary of the
EFFECTIVE DATE.
5.4
In
the event that, (a) once LICENSED PRODUCT(S) have been produced and sold, leased
or otherwise
transferred for value by or for LICENSEE or one or more SUBLICENSEES for a
continuous
period of not less than two years; and (b) the sale, lease or other transfer
of
LICENSED PRODUCT(S)
shall cease for a continuous period of not less than twelve consecutive calendar
months during the term of this Agreement for reasons under LICENSEE'S direct
control; and (c) LICENSEE
shall have received consideration in exchange for such cessation: and (d) no
royalties other
than the minimum annual royalty referenced in paragraph 53 above have been
received by UNIVERSITY
during such cessation, then LICENSEE shall pay to UNIVERSITY a ROYALTY
equal
to
fifteen percent (15%) of the amount received by LICENSEE in exchange
for1
such
cessation in
full
satisfaction of all obligations of LICENSEE due UNIVERSITY for the balance
of
the term of this
Agreement In the event that, upon the occurrence of the conditions listed in
this Paragraph
5.4(a)
through (d), and while the LICENSED PRODUCT still maintains, in the opinion
of
LICENSEE,
commercial marketability, LICENSEE does not receive any amount of money in
exchange for such cessation, then LICENSEE shall pay to UNIVERSITY a ROYALTY
equal to $350,000.00
in full satisfaction of all obligations of LICENSEE due UNIVERSITY for the
balance of
the
term of this Agreement.
5.5
Notwithstanding the foregoing, if LICENSEE (and/or appertaining sublicensees,
as
the case may
be)
must obtain from any third party any licenses and/or sublicenses for patent
rights in order to practice
the PATENT RIGHTS or in order to develop, make, have made, use, import, offer
for sale, sell,
lease, import, export or provide LICENSED PRODUCTS, and/or if any claim is
made
against LICENSEE
and/or its sublicensees alleging that the practice of the PATENT RIGHTS
infringes any third
party patent, then the ROYALTY payable by LICENSEE and/or its sublicensees
under
Paragraph 5.1
(or
Paragraph
5.2,
as the
case may be) shall be reduced to an amount determined by multiplying
the ROYALTY amount by a fraction, the numerator of which is the ROYALTY
payment
(prior to any reduction) and the denominator of which is the sum of: (a) the
ROYALTY payment
(prior to any reduction) and (b) the other royalties and/or payments incurred
by
LICENSEE and/or
sublicensees.
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5.6 In
the
event all issued patents included in PATENT RIGHTS licensed hereunder expire,
LICENSEE
no longer shall be obligated to pay ROYALTIES Further, if UNIVERSITY does not
obtain
an
issued United States patent containing claims covering aspects of the LICENSED
PRODUCT(S)
within five (5) years from the EFFECTIVE DATE of this Agreement, then
LICENSEE
shall not owe ROYALTIES thereafter to UNTVERSITY unless and until UNTVERSITY
receives
an issued United States patent containing claims covering the LICENSED
PRODUCT(S).
5.7 All
payments due hereunder are expressed in and shall be paid in United States
of
America Currency.
5.8 LICENSEE
shall pay simple interest on any amounts not paid when due hereunder at two
(2)
points
above the minimum APR (Applicable Federal Rate) for mid-term loans, as published
by the IRS
for
the month in which the amount was due. Such interest shall be calculated on
the
unpaid principal
balance thereof from the first date on which the payment of such monies was
due
through the
date
of actual payment.
ARTICLE
6 - ROYALTY REPORTS
6.1 Upon
the
first sale, lease or other transfer for consideration of LICENSED PRODUCT(S)
by
either
LICENSEE or any sublicensee (whichever shall occur first), LICENSEE shall
promptly provide UNIVERSITY with written notice thereof To enable UNTVERSITY
to
verify royalty amounts
due it pursuant to this Agreement, thereafter, LICENSEE shall render to
UNIVERSITY, with
each
of its royalty payments hereunder, a written report separately setting forth
the
number of LICENSED
PRODUCT(S) sold, leased or otherwise transferred by LICENSEE and any
sublicensee, the
exchange rates used, and the Net Selling Price billed or invoiced by LICENSEE
in
connection with
the
sale, lease or other transfer of any LICENSED PRODUCT(S) during the preceding
ACCOUNTING
PERIOD and upon which royalty payments are payable as provided in Article
5
All
such
reports shall be certified by a knowledgeable officer of LICENSEE to be correct,
to the best of the
officer's subjective knowledge, If no sales, leases or other transfers
for1
consideration of LICENSED
PRODUCTS have been made during any ACCOUNTING PERIOD which commences
after
the
first ROYALTY was paid, then a statement to this effect shall be submitted
to
UNIVERSITY
in accordance with reporting requirements of this Agreement
6.2 LICENSEE
shall submit a written report to UNIVERSITY, within twenty (20) days after
the
date
of
any termination of this Agreement, stating the number of LICENSED PRODUCT(S)
sold, leased
or' otherwise transferred by LICENSEE and any sublicensee, the exchange rates
used, and the Net Selling Price billed or invoiced by LICENSEE in connection
with the sale, lease or other transfer of
any
LICENSED PRODUCT(S) not previously due or reported to UNIVERSITY.
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23
ARTICLE
7 - ACCOUNTING AND CONFIDENTIALITY OF FINANCIAL
RECORDS
7.1 LICENSEE
shall utilize its best efforts to maintain accurate records of LICENSED
PRODUCTS
sold, leased or otherwise transferred hereunder, in a central location,
sufficient to enable
UNIVERSITY to determine the monies payable to UNIVERSITY by LICENSEE under
the
terms
of
this Agreement, Such records shall be retained for at least five (5) years
following the ACCOUNTING
PERIOD for which said records are required to be made LICENSEE shall make
such
records available for inspection by UNIVERSITY and/or individuals authorized
by
UNIVERSITY
upon reasonable notice at any reasonable time during normal business hours
to
the extent
necessary for UNIVERSITY to determine payments due under the terms of this
AGREEMENT,
but not for more than one three week period during any calendar year. LICENSEE
shall
permit UNIVERSITY or individuals authorized by UNIVERSITY to copy all or
portions of such
records at UNIVERSITY'S expense
7.2 UNIVERSITY
agrees that such records, and the information UNIVERSITY obtains from
LICENSEE
therefrom or related thereto, are proprietary property of LICENSEE and are
confidential, UNIVERSITY
agrees that neither it nor its employees or agents shall disclose such records
or information
to any person or entity for1
any
reason or use such records or information for any purpose other
than UNIVERSITY'S determination of the payments due hereunder or as required
to
be disclosed
by operation of law, The violation of the terms of this Article 1,2
shall
cause irreparable harm
to
LICENSEE which harm cannot be remedied by money damages and that LICENSEE shall
be
entitled to injunctive relief in the event of an alleged breach of this
provision without placing a bond
or
other security and without proving the likelihood of success on the merits
of
any underlying claim.
The covenants of this Article 7,2 shall survive the termination of this
Agreement
7.3
In the
event such examination discloses a deficiency in the monies paid to UNIVERSITY,
LICENSEE
immediately shall pay to UNIVERSITY such deficiency, together with interest
thereon as
provided in this Agreement and, in addition, shall reimburse UNIVERSITY for
the
reasonable cost
of
such examination if: (a) such examination and (b) any subsequent examination
conducted by LICENSEE
both show an underpayment in excess often percent ( 1 0%) of the amounts
actually due for
the
ACCOUNTING PERIOD in question
7.4 LICENSEE
shall pay interest on any amounts payable pursuant to Paragraph
7.2,
at two
(2) points
above the minimum APR for mid-term loans, as published by the IRS for the month
in which the
amount was due, rather than the rate set forth in Paragraph
5.7.
Such
interest shall be calculated from
the
dates on which the payment of such monies are due through the date of actual
payment.
ARTICLE
8 - IMPROVEMENTS
8.1 UNIVERSITY
and LICENSEE each shall disclose to the other any IMPROVEMENT (patentable
or non-patentable and or copyrightable or non-copyrightable); provided,
UNIVERSITY and
LICENSEE shall maintain the confidentiality of each other's IMPROVEMENTS that
are disclosed
in writing, marked "CONFIDENTIAL" and not made public byway of 'a written
document
8.2 Subject
to Paragraph 8.9, IMPROVEMENTS (patentable and non-patentable and/or
copyrightable or non-copyrightable) in the LICENSED PRODUCT and TECHNOLOGY
IMPROVEMENTS
(patentable and non-patentable and/oi copyrightable or non-copyrightable) made
solely
by
UNIVERSITY shall be owned by UNIVERSITY and shall come under and be subject
to
the
terms
of this Agreement with no increase 01 decrease in the royalty rate payable
to
UNIVERSITY hereunder.
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23
8.3 IMPROVEMENTS
(patentable and non-patentable and/or copyrightable or non-copyrightable)
in
the
LICENSED PRODUCT and TECHNOLOGY IMPROVEMENTS (patentable and non-patentable
and/or copyrightable or non-copyrightable) made solely by LICENSEE, or by
LICENSEE jointly
with others not including UNIVERSITY, shall be owned by LICENSEE and shall
not
come under
or
be subject to the terms of this Agreement and no royalty or fee shall payable
to
UNIVERSITY
in connection therewith.
8.4 IMPROVEMENTS
(patentable and non-patentable and/oi copyrightable or non-copyiightable)
in
the
LICENSED PRODUCT or TECHNOLOGY IMPROVEMENTS (patentable and non-patentable
and/or copyrightable or non-copyrightable) made by UNIVERSITY and LICENSEE
jointly
shall be owned by UNIVERSITY and LICENSEE jointly and shall come under and
be
subject to
the
terms of this Agreement with no increase or decrease in the royalty rates
payable to UNIVERSITY
hereunder, Not less than thirty (30) days before UNIVERSITY engages, or enters
a
contract to engage, in research or product development in the Field alone or
with persons or entities other than LICENSEE during the term of this Agreement
and for a period of three years thereafter, UNIVERSITY
shall notify LICENSEE of the proposed research, product development or contact
and
LICENSEE shall have the option to sponsor the research or product development
or
to enter the contract
on terms equivalent to those offered to the other person or entity. In the
event
an IMPROVEMENT
is developed by UNIVERSITY, alone or with others, during the term of this
Agreement
and for a period of three year's thereafter, LICENSEE shall have the option
to
license the same
under the terms of this Agreement.
8.5 UNIVERSITY
may or may not file any patent application(s) in the United States Patent and
Trademark Office and/or in any foreign country covering any aspect of any
UNIVERSITY IMPROVEMENT
and/or any TECHNOLOGY IMPROVEMENT made by UNIVERSITY in the sole
and
exclusive discretion of UNIVERSITY and at UNIVERSITY'S expense; provided that
LICENSEE
shall have the option to file any patent application(s) in the United States
Patent and Trademark
Office and/or in any foreign country relating thereto, if UNIVERSITY elects
not
to so file, and UNIVERSITY shall cooperate fully in LICENSEE'S application
process. UNIVERSITY shall
own
and shall have full control over the filing, prosecution, issuance and/or
maintenance of any and
all
UNIVERSITY IMPROVEMENT patent applications regardless of who pays the expenses;
provided
that LICENSEE shall have the option to perform any such services in the event
UNIVERSITY
fails or neglects to do so.
8.6
LICENSEE may or may not file any patent application in the United States Patent
and Trademark
Office and/or1
in any
foreign country covering any aspect of any LICENSEE IMPROVEMENT
in the sole and exclusive discretion of LICENSEE and at LICENSEE'S expense
LICENSEE
shall own and shall have full control over the filing, prosecution, issuance
and/or maintenance
of any and all LICENSEE IMPROVEMENT patent applications.
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8.7 UNIVERSITY
and LICENSEE shall confer with respect to the filing of any patent application(s)
in the United States Patent and Trademark Office and/or in any foreign country
covering
any aspect of any IMPROVEMENT and/or any TECHNOLOGY IMPROVEMENT made
by
LICENSEE and UNIVERSITY jointly and/or any TECHNOLOGY IMPROVEMENT made
solely
by
LICENSEE The party who pays for the filing, prosecution and maintenance of
any
such IMPROVEMENT
patent application shall control the filing, prosecution, issuance and/or
maintenance
of same.
8.8 UNIVERSITY
and LICENSEE each agree to keep the other fully informed with respect to all
their
respective IMPROVEMENT and/or TECHNOLOGY IMPROVEMENT patent applications,
including
but not by way of limitation, providing copies (subject to reasonable
requirements of confidentiality)
of all pertinent documents, and UNIVERSITY and LICENSEE each agree to
cooperate
with the other in prosecution of any and all such applications.
8.9 In
the
event LICENSEE employs any employee of UNIVERSITY as an employee of or
consultant
to LICENSEE from time-to-time, any IMPROVEMENT and/or any TECHNOLOGY
IMPROVEMENT made by such UNIVERSITY employee, alone or with others,
in his capacity as a consultant to or employee of LICENSEE, shall be exclusively
owned
by
UNIVERSITY regardless of the circumstances surrounding the conception and/or
reduction
to practice and such IMPROVEMENTS shall come under and be subject to the
terms
of
this Agreement without any increase or1
decrease
in royalty rates payable to UNIVERSITY
hereunder.
ARTICLE
9-DUE DILIGENCE
9.1
LICENSEE
agrees to conduct a thorough, vigorous and diligent program to commercially
exploit
the PATENT RIGHTS and LICENSED TECHNOLOGY so that public use shall result
therefrom.
Accordingly, LICENSEE shall exercise its best efforts to effect introduction
and
acceptance
of LICENSED PRODUCT(S) into the commercial market as soon as commercially
reasonable.
ARTICLE
10 - PROSECUTION AND MAINTENANCE OF PATENTS
10.1
UNIVERSITY
shall apply for, prosecute, maintain, and own all PATENT RIGHTS in the
United
States and foreign countries; provided however, LICENSEE shall have reasonable
opportunities
to designate countries in which it desires UNIVERSITY to file, at LICENSEE'S
expense,
patent applications and to otherwise advise UNIVERSITY. UNIVERSITY may file
any
patent application not so designated by LICENSEE, at UNIVERSITY'S expense and
LICENSEE shall have the option to reimburse UNIVERSITY for such expense and
shall thereupon have the rights
and obligations with respect thereto as are set forth in this Agreement,
LICENSEE shall cooperate
with UNIVERSITY in applying for, prosecuting and maintaining said PATENT RIGHTS
and
UNIVERSITY shall inform LICENSEE thereabout in a timely manner
10.2
Except for those applications and/or inventions which LICENSEE elects not to
file or pay for and
UNIVERSITY elects to file and pay for as set forth in Paragraph
9.1,
LICENSEE shall pay all fees
and
expenses, including without limitation attorney fees, incurred by UNIVERSITY
in
connection
with the filing, prosecution, issuance and/or maintenance of any United States
or foreign patent
applications included in the PATENT RIGHTS, whether such fees and costs were
incurred before or after the EFFECTIVE DATE of this Agreement. Upon execution
of
this Agreement, LICENSEE
shall reimburse UNIVERSITY for all reasonable expenses UNIVERSITY has incurred
for
the
preparation, filing, prosecution and maintenance of PATENT RIGHTS, Thereafter,
UNIVERSITY
shall submit an invoice to LICENSEE documenting the patent-related costs
incurred but unpaid to date in each such invoice LICENSEE shall be pay such
invoice within thirty (30) days of
receipt. All applications for which LICENSEE pays all part of the related
expenses shall additionally
come under this license agreement.
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ARTICLE
11 - PROSECUTION OF INFRINGERS AND DEFENSE OF ACTIONS
11.1
Except as set forth in Paragraph 10,1.2, with respect to any PATENT RIGHTS
that
are licensed
to LICENSEE pursuant to this Agreement, LICENSEE shall have the right to
prosecute in its
own
name and at its own expense any infringement of such patent Both parties agree
to promptly notify
the other of each infringement of such patents of which a party is or becomes
aware. Before LICENSEE
commences an action with respect to any infringement of such patents, LICENSEE
shall seek
and
consider1
the
views of UNIVERSITY.
11.1.1 If
LICENSEE elects to commence an action as described above, UNIVERSITY may,
at
its
sole and exclusive discretion, elect but is not required to join as a party
in
that action Regardless
of whether UNIVERSITY elects to join as a party, UNIVERSITY shall reasonably
cooperate with LICENSEE in connection with any such action.
11.1.2
If
UNIVERSITY elects to pay one-half of the costs of prosecuting or defending
the
action,
including without limitation the reasonable attorneys' fees incurred, therein
by
LICENSEE,
whether or not UNIVERSITY is joined as a party, UNIVERSITY may jointly
control
the action with LICENSEE.
11.2
If
LICENSEE elects to prosecute or defend an action as described above, and
UNIVERSITY does
not
pay its one-half share of the costs, including attorneys' fees, LICENSEE may
deduct from its
royalty payments to UNIVERSITY with respect to the patent(s) subject to suit,
50% of LICENSEE'S
reasonable, documented, out-of-pocket expenses and costs of such action,
including reasonable attorneys' fees paid to outside counsel. If LICENSEE'S
expenses and costs exceed the amount
of
royalties deducted by LICENSEE for the particular calendar year in question,
LICENSEE may
to
that extent reduce the royalties due to UNIVERSITY from LICENSEE in' succeeding
calendar
years LICENSEE may so deduct until LICENSEE shall have recovered its reasonable,
documented, out-of-pocket expenses and costs of such action, including
reasonable attorneys' fees paid
to
outside counsel.
11.3 No
settlement, consent judgment or other voluntary final disposition of the suit
which results in
a
judgment against UNIVERSITY may be entered without the prior written consent
of
UNIVERSITY,
which consent shall not be unreasonably withheld.
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11.4 Recoveries
or reimbursements from actions referenced in this Article
10
shall
first be applied to
reimburse LICENSEE and then UNIVERSITY for their litigation costs not deducted
from loyalties
and then to reimburse UNIVERSITY for royalties deducted by LICENSEE pursuant
to
Paragraph
10,2 Any remaining recoveries 01 reimbursements, including without limitation
any enhanced
damages awarded by the courts, shall be shared equally by LICENSEE and
UNIVERSITY.
11.5 If
LICENSEE elects not to exercise its right to prosecute an infringement of the
PATENT RIGHTS
pursuant to this Article 10, IJNIVERSITY may do so at its own expense,
controlling such action
and any recoveries or reimbursements shall be applied in accordance with
Paragraph
10.4,
except
that UNIVERSITY shall be reimbursed first and LICENSEE second LICENSEE shall
cooperate
fully with UNIVERSITY in connection with any such action.
11.6
If
a
declaratory judgment action is brought naming LICENSEE as a defendant and
alleging invalidity
of any of the PATENT RIGHTS, UNIVERSITY may elect but is not required to take
over the
sole
defense of the action at its own expense. LICENSEE shall cooperate fully with
UNIVERSITY
in connection with any such action,
11.7
If
LICENSEE commences an action and UNIVERSITY is a legally indispensable party,
UNIVERSITY
shall have the right to irrevocably assign to LICENSEE all of UNIVERSITY'S
right, title
and
interest in each patent/patent application covering aspects of the LICENSED
PRODUCTS owned
by
UNIVERSITY and the subject of such action (subject to obligations to the
government and others
having rights in such patent/patent application). Upon such assignment, any
action by LICENSEE on that patent/patent application shall thereafter be brought
or continue without UNIVERSITY
as a party, Notwithstanding any such assignment and regardless of its status
as
an indispensable party, UNIVERSITY shall cooperate with LICENSEE in connection
with any such action, Furthermore, if any patent/patent application is assigned
to LICENSEE by UNIVERSITY pursuant to this Paragraph 10.7, such assignment
shall
require LICENSEE to continue to meet all of its obligations under this Agreement
as if the assigned patent or patent applications were still licensed
to LICENSEE and owned by UNIVERSITY, If this license is terminated thereafter
for any reason,
then the patent(s) assigned pursuant to this Paragraph
10.7
shall be
assigned to UNIVERSITY
by LICENSEE.
ARTICLE
12 - WARRANTY DISCLAIMERS: DISGORGEMENT
12.1
UNIVERSITY MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF
ANY
KIND, EITHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION:
(a) that
the
manufacture, use, sale and/or other disposition of LICENSED PRODUCT(S)
will
be
free from infringement of any patents or copyrights owned by third parties;
will
have any
value
or will be commercially successful to LICENSEE; will work; will be efficacious;
OR
THAT
THE LICENSED PRODUCT(S) IS MERCHANTABLE OR WILL BE FIT AND/OR
BE
USEFUL FOR ANY PARTICULAR PURPOSE; or
(b) that
any
licensed patent is valid, or that the use of PATENT RIGHTS and/or LICENSED
TECHNOLOGY in connection with the manufacture, use, sale, offer to sell,
import,
distribution or other disposal of LICENSED PRODUCT(S) does not infringe upon
any
patent or other rights not vested in UNIVERSITY.
Page
12 of
23
12.2 Nothing
in this Agreement shall be construed as a representation or warranty on the
part
of UNIVERSITY
as to the scope of any PATENT RIGHTS 01 any patent that may issue
therefrom.
12.3
UNIVERSITY
may furnish information related to the PATENT RIGHTS and/or LICENSED
TECHNOLOGY
to LICENSEE, but neither UNIVERSITY nor anyone acting on behalf of UNIVERSITY
shall be liable for damages arising out of or resulting from anything made
available to LICENSEE
pursuant to this Agreement or the use thereof UNIVERSITY shall have no
responsibility
for the ability of LICENSEE to use such information, the quality or performance
of the LICENSED
PRODUCT(S) produced therefrom by LICENSEE, or its sublicensees, or the claims
of
third parties arising from the use of such information UNIVERSITY shall have
no
responsibility for the
usefulness of such information, the quality or performance of the LICENSED
PRODUCT(S) produced
therefiom by LICENSEE, its sublicensees, permitted assignees, or the claims
of
third parties arising from the use of such information.
12.4 Nothing
in this Agreement shall be construed as a representation, warranty or obligation
on the
part
of UNIVERSITY to provide any technical information or assistance of any nature
or kind whatsoever
for' any reason, except only to the extent as might be specifically provided
herein.
12.5 LICENSEE
and its sublicensees shall make no statements, representations or warranties
whatsoever
to any third parties that are inconsistent with the provisions of this
Article
11.5 LICENSEE
shall include the terms of this Article 11 in any sublicense granted or
permitted assignment
made by LICENSEE.
12.6 Despite
any term or limitation in this Agreement to the contrary, in the event LICENSEE
is ordered
by a court or arbitrator to pay damages to any person or entity as a consequence
of a successful
challenge to a PATENT RIGHT and/or LICENSED TECHNOLOGY and/or LICENSED
PRODUCT
and such order is not appealed 01 is affirmed, LICENSEE shall be entitled to
repayment from
UNIVERSITY of
the
ROYALTIES paid by LICENSEE to UNIVERSITY relating to the sale, lease
01
other transfer of LICENSED PRODUCT(S) or LICENSED TECHNOLOGY using the
challenged
rights or interests.
ARTICLE
13 - RIGHT TO ENTER
13.1 UNIVERSITY
represents that UNIVERSITY has the right and authority to enter into this
Agreement;
to grant the rights and licenses granted herein; and to bind UNIVERSITY to
the
teims and
obligations set forth herein.
13.2 LICENSEE
represents and warrants that LICENSEE has the right and authority to enter
into
this
Agreement; to grant the rights granted herein; and to bind LICENSEE to the
terms
and obligations
set forth herein.
Page
13 of
23
ARTICLE
14 - COMPLIANCE WITH LAWS
14.1
LICENSEE and UNIVERSITY agree to comply with all applicable laws and regulations
relating
to the performance of their respective obligations hereunder.
14.2 Without
narrowing the broad application of Article 13,1, it is understood and
acknowledged that
the
transfer of certain commodities and technical data is subject to United States
laws and regulations
controlling the export of such commodities and technical data including, without
limitation,
the International Traffic in Arms Regulations (ITAR) and all Export
Administration Regulations
of the United States Department of Commerce These laws and regulations, among
other things,
may prohibit or require a license for' the export of certain types of technical
data to certain specified
countries, LICENSEE hereby agree and by entering into this Agreement give
written assurance
it will comply with all United States and foreign laws and regulations
controlling the export
of
commodities and technical data, that it will be solely responsible for any
violation of any such
laws
and regulations by LICENSEE, and that it will indemnify, defend and hold
UNIVERSITY harmless
from any liability in the event of any legal action of any nature occasioned
by
such violation.
14.3 UNIVERSITY
represents to LICENSEE that the PATENT RIGHTS were not developed, in
whole
or
in part, with federal assistance, and that US, Code, Title 35, Chapter 18,
Patent
Rights in Inventions,
Made with Federal Assistance, (as
may
be amended or supplemented) and related regulations
do not apply to the PATENT RIGHTS or other rights licensed by UNIVERSITY
hereunder.
ARTICLE
15 - LIABILITY
15.1 Subject
to the provisions in Paragraph 11,6, LICENSEE shall indemnify, defend and
forever hold
UNIVERSITY, its current and former Regents, officers, and employees, harmless
from and against
liability for any and all claims, demands, damages, losses, costs and expenses
(e g.., attorneys' fees),
fines, penalties and judgments of any kind or nature whatsoever (collectively
"Damages"), including without limitation, Damages for bodily injury, death,
personal injury, illness, property damage
and/or products liability directly or indirectly arising out of, resulting
from
or in any way connected with (i) the non-UNIVERSITY use of LICENSED PRODUCT(S)
and/or PATENT RIGHTS
and/or LICENSED TECHNOLOGY, (ii) the non-UNIVERSITY development, manufacture,
sale, offer to sell, import, distribution, sublicensing, transfer or other
disposition, advertising
and promotion of LICENSED PRODUCT(S) and/or PATENT RIGHTS and/or LICENSED
TECHNOLOGY, (iii) the non-UNIVERSITY operation of LICENSEE'S business
and/or
otherwise relating to LICENSEE'S performance under this Agreement or that of
its
customers,
distributors, sublicensees, or other transferees, and (iv) any breach of any
obligation, covenant, representation and/or warranty of LICENSEE hereunder,
LICENSEE shall promptly notify
UNIVERSITY of any such claim,
15.2
The
liability of UNIVERSITY for breach of this Agreement shall not, in the
aggregate, exceed
LICENSEE' S payments under this Agreement.
Page
14 of
23
15.3 LICENSEE
shall insert into all of its sublicenses, provisions making this Article 14
expressly applicable
to its sublicensees.
15.4
TO
THE EXTENT PERMITTED BY STATE LAW, NEITHER UNIVERSITY NOR LICENSEE
OR ANY SUBLICENSEE SHALL BE LIABLE TO THE OTHER PARTY FOR INDIRECT,
SPECIAL, INCIDENTAL AND/OR CONSEQUENTIAL DAMAGES, WHETHER ARISING
IN TOP.T, CONTRACT, PRODUCT LIABILITY, BREACH OF STATUTORY DUTY OR
OTHERWISE, UNDER ANY CIRCUMSTANCES EVEN IF ONE PARTY HAS NOTIFIED THE
OTHER
PARTY OF THE POSSIBILITY OF ANY SUCH DAMAGES.
ARTICLE
16 - INSURANCE
16.1
Without
limiting LICENSEE'S indemnity obligations under, Paragraph 14.1, LICENSEE
shall
purchase and maintain in effect commercial general liability insurance in
amounts not less than One
Million Dollars ($1,000,000.00) per incident and Three Million Dollars
($3,000,000.00) annual aggregate
and naming the UNIVERSITY as an additional insured, Such insurance shall provide
(i) product
liability coverage coveting all claims with respect to LICENSED PRODUCT(S)
and
(ii) broad
form contractual liability coverage for LICENSEE'S indemnification under this
Agreement Such policy(s) shall be written by such company(s) as UNTVERSITY
shall
approve and shall be licensed
to do business in Oklahoma, Any carrier' providing coverage shall have a minimum
"Best" rating
of
"A-, VII."
16.2 LICENSEE
shall furnish a certificate of such insurance to UNIVERSITY on or before the
date
of
first sale, lease or other transfer of LICENSED PRODUCT(S) (and annually
thereafter) Certificates
must: provide for thirty (30) days' advance written notice to UNIVERSITY of
any
cancellation,
non-renewal or material change in such insurance; state that IMTVERSITY has
been
endorsed
as an additional Insured under the policy(s); and include a provision that
the
coverage will be
primary to and will not participate with, nor will be excess over any valid
and
collectable insurance
or program of self-insurance carried or maintained by UNIVERSITY., Upon request
by IJNIVERSITY,
LICENSEE shall provide a full and complete copy of any and all insurance
policies required
under this Agreement and/or a certified accounting of any and all claims made
and/or paid against
each and all such policies of insurance.
16.3 LICENSEE
shall maintain such commercial general liability insurance during the period
that any
product, process, or service, relating to or developed pursuant to this
Agreement is being sold, leased
or
otherwise transferred by LICENSEE 01 by a sublicensee and for a reasonable
period of time thereafter
which in no event shall be less than five (5) years.
ARTICLE
17 - PUBLICATION
Subject
to confidentiality provisions and except to the extent LICENSEE is required
by
securities laws
to
make certain disclosures, UNIVERSITY and LICENSEE shall each have the right
at
its discretion
to release non-proprietary information or to publish any material resulting
from
the Project.,
The party proposing to publish will furnish a copy of any proposed publication
to the other party for its review at least thirty (30) days in advance of
submission for publication UNIVERSITY shall
not
publish any material or information designated by LICENSEE, in its sole
discretion, as confidential
or proprietary Publication of specific results maybe delayed for a limited
period, not to exceed sixty (60) days, to protect any patentable subject matter
and remove LICENSEE Proprietary Information
contained in the publication No unreasonable delay shall be imposed on the
filing, defense
or publication of any student thesis or dissertation. UNIVERSITY shall give
LICENSEE the option
of
being acknowledged in such publication for its sponsorship of the
Project.
Page
15 of
23
ARTICLE
18 - USE OF NAMES AND LOGOS
Each
party specifically agrees that no public use of whatever nature will be made
of
the name, employees,
trademarks, or any logo of the other party without the express, prior written
permission of
such
party, such permission to be given or withheld in the sole and exclusive
discretion of the such
party.
ARTICLE
19 - TERMINATION
19.1 This
LICENSE may be terminated at any time by mutual written agreement of the
parties.
19.2 hi
the
event of default of this LICENSE or any other agreement between the parties,
the
nondefaulting
party may terminate this Agreement as follows:
(a) The
nondefaulting party shall give the defaulting party notice that sets forth
a
detailed statement
of the default.
(b) The
defaulting party shall have a cure period of thirty (30) days from the effective
date
of
notice in which to cute the default.
(c) If
the
default is not cured within the cure period, the nondefaulting party may
terminate
the rights and licenses granted in this Agreement and/or terminate any other
agreement
between the nondefaulting party and the defaulting party by sending notice
of
termination
to the defaulting party.
19.3 Termination
of the rights and licenses granted in this Agreement for any cause shall not
release
LICENSEE from the obligation to pay ROYALTIES on monies received by LICENSEE
on
or
before
the date of termination.
19.4 In
the
event the rights and licenses granted to LICENSEE by the terms of this Agreement
are terminated
for any reason , LICENSEE shall execute any and all instruments the UNIVERSITY
deems
necessary and desirable, if any, to re-vest said rights and licenses in
UNTVERS1TY Furthermore,
LICENSEE immediately shall cease making, using, selling or otherwise disposing
of any
product or service based on, in whole or in part, or incorporating, in whole
or
in part, or using, in whole
or
in part, any PATENT RIGHTS or LICENSED TECHNOLOGY, including without
limitation
products or services based on LICENSED PRODUCTS, and LICENSEE immediately
shall
cease making, using, selling or otherwise disposing of any LICENSED PRODUCT(S)
In the event
the
termination is disputed by LICENSEE, then the actions called for in this
Paragraph 19.4 shall
not
be required unless and until the dispute is resolved in favour of UNIVERSITY
by
the parties.
Page
16 of
23
19.5
The
termination of this Agreement and/or the termination of the rights and licenses
granted in this
Agreement or words of similar import means only that the rights and licenses
granted in Article
3
(Grant
and Disclosure), Article
4
(Sublicensing), and the provisions of Article 10 (Prosecution and
Maintenance of Patents) are terminated, and all other provisions of this
Agreement shall survive any
such
termination; provided, the provisions of Article
5
(Royalties and Payment), Article
6 (Royalty
Reports) and Article
7
(Accounting) shall survive only with respect to any monies or' other
consideration
accrued or accruable prior to termination and reports required thereby; and
provided further
and as set forth therein, the provisions of Article
8
shall
survive only to the extent necessary: (i)
to
effect LICENSEE'S disclosure and confidentiality requirements under Paragraphs 8.1
and
8.8;
(ii) to
effect joint ownership in IMPROVEMENTS made by LICENSEE and UNIVERSITY jointly
and to preserve the options and rights granted LICENSEE under Paragraph 8.4
prior to or after
termination; (iii) to effect ownership in UNIVERSITY in TECHNOLOGY IMPROVEMENTS
made
by
LICENSEE and UNIVERSITY jointly under Paragraph
8.5
prior to
or after termination as provided
in that section; and, (iv) to effect the rights and licenses in UNIVERSITY
to
LICENSEE IMPROVEMENTS
pursuant to and as provided in Paragraph
8.7.
ARTICLE
20 - MARKING
LICENSEE
agrees to mark all LICENSED PRODUCT(S) sold or otherwise disposed of by it
under
the
license granted in this Agreement with the word "Patent No. __ " if patent(s)
has/have issued and "Patent Pending" during the period of pending claims and
to
so require its sublicensees.
ARTICLE
21 - NOTICES
21.1
All
notices, requests, demands and other communications required or permitted to
be
delivered
hereunder shall be in writing, Such notices, requests, demands and other
communications shall
be
deemed to have been given three business days after being deposited in the
United States mail, postage prepaid, certified or registered mail, return
receipt requested, addressed as follows:
|
UNIVERSITY:
|
Office
of Technology Development
|
|
The
University of Oklahoma One
|
|
|
Partners
Place, Suite 1510 350
|
|
|
David
L Boren Blvd Norman,
|
|
|
OK
73072-7264 (405)
325-3800
|
|
|
with
a copy to
|
Page
17 of
23
|
LICENSEE:
|
Matin
Keating
|
|
3DICON
Corporation
|
|
|
P.,
O,. Box 470941
|
|
|
Tulsa,
OK 74147-0941
|
|
|
(918)
492-5082
|
|
|
mkauthor
@aol.com
|
|
|
with
a copy to:
|
John
MO' Connoi
|
|
15
W, 6th
Street Suite 2700
|
|
|
Tulsa,
OK 74119
|
|
|
Fax
no,: (918)587-0102
|
|
|
joconnor@newtonoconnor.com,
|
21.2
Written
notice shall be effective as of the date of receipt, if a business day, or
otherwise on the
next
business day thereafter, Further, either party may change its address for notice
by giving the other
party written notice of the new address
ARTICLE
22 - GENERAL MATTERS
22.1
Choice
of Law.
THE
CONSTRUCTION, INTERPRETATION AND ENFORCEMENT
OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
OKLAHOMA.
22.2
Injunctive
Relief.
ANY
LAWSUIT OR REQUEST FOR IN.TUNCTIVE RELIEF IN CONNECTION
WITH THIS AGREEMENT SHALL BE FILED IN A COURT OF COMPETENT JURISDICTION IN
THE
STATE OF OKLAHOMA, TO WHICH JURISDICTION
AND VENUE THE PARTIES EXPRESSLY AGREE.
22.3
The
parties agree that this Agreement shall be binding upon their respective
successors, assigns
or transferees of any and every nature, if assignment and/or transfer is
permitted by the e specific
terms of this Agreement.
22.4 If
any
part of this Agreement is ever ruled to be invalid, illegal, or unenforceable
by
a court or ther
body
of competent jurisdiction, the remainder of this Agreement shall continue in
full force and effect
and shall be deemed modified to the minimum extent necessary to make it
enforceable; Provided
however:
(a) The
effect of the ruling in question shall be strictly limited to the jurisdiction
of the body
making the ruling; and,
(b) If
the
ruling in question is subsequently overruled or obviated by Legislative,
judicial or
other
action, the severed provision(s) of this Agreement shall be returned to furl
force and effectiveness
22.5 Entire
Agreement.
This
Agreement, along with the SRAs and the confidentiality agreement
referenced in Paragraph
3.6,
constitute the entire agreement of the parties with respect to the subject
matter hereof and replaces and supersedes all prior agreements, understandings
and negotiations of the parties, whether written or oral. The parties each
represent that no promises, representations or inducements have been made
by the
other party with respect to the subject matter of this Agreement except as
specifically and expressly set forth herein or in the SRAs or the
confidentiality agreement. This Agreement may not be changed, altered, modified
or amended except by an agreement in writing identified as an amendment hereto
and signed by LICENSEE and UNIVERSITY.
Page
18 of
23
22.6 Waiver.
No
waiver shall be deemed to be made by any party of any right under this Agreement
unless the waiver is in writing signed by that party. Each waiver, if any,
shall
be a waiver only with respect to the specific instance involved. No waiver
shall
impair the rights of the waiving party or the obligations of the other party
in
any other respect at any other time.
22.7
Execution.
The
terms of this Agreement shall be binding upon either of the parties until it
has
been properly executed on behalf of each party to the Agreement in the spaces
provided below. It is then effective as of the EFFECTIVE DATE. This Agreement
may be executed in several counterparts, each of which shall be deemed the
original, but all of which shall constitute one and the same instrument.
Further, the parties may sign a telefaxed copy of this Agreement and any such
telefaxed copy shall be deemed to be an original and no objection shall be
made
to the introduction into evidence of any telefaxed copy on the grounds related
to the telefaxed copy not being an original. Executed originals shall be
forwarded to the other parties promptly.
22.8 No
Partnership, Joint Venture or Agency.
Nothing
in this Agreement shall be construed to make either party the legal
representative, agent, partner or joint venturer of the other party, nor shall
either party have the right or authority to assume, create or incur any
liability or any obligation of any kind, either express or implied, in the
name
of or on behalf of the other party.
22.9 Attorneys’
Fees and Costs.
In the
event an action is brought by a party to this Agreement seeking to enforce
any
provision hereof, the prevailing party in such action shall be entitled to
recover its reasonable attorneys’ fees and costs, including fees paid to expert
witnesses, from the other party in such action.
WHEREFOR,
the parties have signed this Agreement as provided below.
|
THE
BOARD OF REGENTS OF THE
|
LICENSEE | |
|
UNIVERSITY
OF OKLAHOMA
|
||
| |
|
|
| By: | By: | |
|
W.
Arthur Porter, Ph.D., University Vice
|
|
|
| President for Technology Development | Name: | |
|
|
||
|
|
||
| Date: | Date: | |
|
|
|
|
Page
19 of
23
ADDENDUM
Dr
______ acknowledges
that he/she has been given a copy of the foregoing Agreement, has read
and
understands it and that he/she desires the UNIVERSITY to enter into said
Agreement. Dr., ______ acknowledges
his/her duties to abet the transfer of the LICENSED TECHNOLOGY to LICENSEE
and agrees to co-operate and do all things reasonably necessary to effect the
purposes for which
this Agreement was entered into between the parties.
| ACKNOWLEDGED AND AGREED: | ||
| |
|
|
| By: | By: | |
|
|
|
|
| Date: | Date: | |
|
|
||
EXHIBIT
A
LICENSED
PATENT RIGHTS
Page
20 of
23
EXHIBIT
B
CONFIDENTIALITY
AGREEMENT
This
Agreement is entered into by and between __________________ ,
maintaining its corporate
office at __________________ ,
referred to as ("COMPANY"), and the Board of Regents
of the University of Oklahoma by and through The Office of Technology
Development, maintaining
its office at 660 Parrington Oval, Evans Hall, Room 201, Norman, Oklahoma,
73019-0628,
referred to as ("UNTVERSITY"), effective on the date when executed by the last
patty hereto to
sign
below.
WTTNESSETH
WHEREAS,
UNIVERSITY possesses certain valuable and confidential information and data
relating
to ________________________ ("INFORMATION");
and
WHEREAS,
such INFORMATION is considered by UNIVERSITY to be confidential and to
constitute a valuable asset; and
WHEREAS,
UNIVERSITY is willing to disclose such information to COMPANY for the purpose
of
evaluating
said INFORMATION to determine its
interest
in licensing said INFORMATION,
NOWTHEREFORE,
the parties agree as follows:
| 1. |
After
execution of this Agreement, UNIVERSITY shall disclose to COMPANY
certain
INFORMATION
and COMPANY shall accept and hold such INFORMATION in confidence
for five (5) years from the effective date of this Agreement. All
INFORMATION
shall be labeled "CGNFIDENTIAL", or if communicated orally, confirmed
in writing within thirty (30) days of such oral communication as
being
"CONFIDENTIAL.''
|
| 2. |
Without
prior written consent of UNIVERSITY, COMPANY shall neither disclose
to any
third party not permit any third party to have access to any INFORMATION
nor use such INFORMATION
for any purpose other than as set forth in tins Agreement COMPANY
shall
disclose INFORMATION only to those of' its employees who have a need
to
know for the
purposes stated above and shall require from those employees obligations
of confidentiality,
non-disclosure and non-use consistent
herewith.
|
| 3. |
The
aforementioned confidentiality obligations assumed by COMPANY shall
not
apply to any
INFORMATION that COMPANY can clearly demonstrate fells within any
of the
following
categories:
|
Page
21 of
23
| (a) |
Information
which was in the public domain prior to disclosure by the UNIVERSITY
or which subsequently conies into the public domain through no
Emit of COMPANY, in either case as evidenced by documents which
were
generally published prior to such disclosure;
or,
|
|
(b)
|
Information that COMPANY
can demonstrate
by means of presently existing prior
written records to have been already known or within COMPANY'S
legitimate
possession; or
|
|
(c)
|
Information
received in good faith by COMPANY from a third party that was lawfully
in possession of the information and had the unrestricted light
to
disclose
the same; or,
|
| (d) |
Information
that COMPANY can demonstrate by means of written records to have
been independently developed by the COMPANY without the aid, application
or use of the UNIVERSITY'S confidential information by person(s)
who have not had access to the UNIVERSITY'S
confidential
|
information;
or,
| (e) |
Information
that is required to be disclosed by operation of
law.
|
| 4. |
For
purposes of keeping INFORMATION confidential, COMPANY shall use
efforts at
least commensurate
with those employed by COMPANY for the protection of its own confidential
information.
|
| 5. |
UNIVERSITY
does not make any representation or warranty regarding the accuracy
or
completeness
of the INFORMATION.
|
| 6. |
Except
as specifically provided in tins Agreement, no license or any oilier
right
to use the INFORMATION
is granted,. The disclosure of INFORMATION by UNIVERSITY to COMPANY
shall not result in any obligation on the part of either party to
enter
into any further
agreement relating to the INFORMATION or to undertake any other obligation
not set
forth in a written agreement signed by both
parties.
|
| 7. |
INFORMATION
furnished by UNIVERSITY to COMPANY shall remain UNIVERSITY'S property
unless otherwise agreed as provided herein, and any documents furnished
to
COMPANY
by UNIVERSITY or any excerpts, notes or copies made therefrom containing
such
INFORMATION shall be promptly returned to UNIVERSITY within one hundred
and twenty (120) days from the effective date of this Agreement or
within
any extension period granted
in writing by UNIVERSITY
|
| 8. |
Neither
party shall be entitled to assign its
rights
hereunder without the express written consent
of the other party.
|
| 9. |
This
Agreement contains the entire understanding between the parties with
respect to the matters
contemplated herein and supersedes all previous written and oral
negotiations, commitments,
and understandings. This Agreement cannot be altered or otherwise
amended
except
pursuant to an instrument in wilting signed by each of the patties
and
making reference
to this Agreement. This Agreement shall inure to the benefit of and
be
binding upon
the parties and their agents, successors, employees and permitted
assigns.
|
Page
22 of
23
| 10. |
A
valid waiver of any term or condition of this Agreement must be in
writing
and shall not be
deemed or construed to be a waiver of' such term or condition for
the
future, or of any subsequent
breach.
|
| 11. |
If
any court of competent jurisdiction holds any part of this Agreement
to be
invalid or unenforceable,
such holding shall in no way affect the validity of the remainder
of this
Agreement.
|
| 12. |
A
facsimile signature by any party to this Agreement shall be deemed
sufficient to indicate acceptance
of the terms and obligations of the
same.
|
| 13. |
The
validity and effect of 'this Agreement shall be governed, construed,
and
enforced in accordance
with the laws of the State of Oklahoma, United States of America,
without
regard
or giving force and effect to the principles of conflicts of laws
of
Oklahoma or any other
state, Any action to interpret or enforce this agreement shall be
brought
in the District Court
for Cleveland County, Oklahoma or the United States District Court
for the
Western District
of Oklahoma, as appropriate.
|
| 14. |
The
undersigned warrant and represent that they are duly authorized to
execute
this Agreement
and legally bind their respective parties to its terms and conditions
and
when fully
executed this Agreement constitutes the legal, valid, and binding
obligation of me parties.
|
WHEREFOEE,
the parties hereto have caused this Agreement to be executed by their duly
authorized
representatives as of the date first written above.
| COMPANY | THE BOARD OF REGENTS OF THEUNIVERSITY OF OKLAHOMA | |||
| By: .„ | By: | |||
|
Dan
G. Davis
Executive
Director
|
|
|||
| Title: | _____________: _____________ | Title: | Office of Technology Development | |
| Date: | ______________ | Date: | _____________ | |
Page
23 of
23
SPONSORED
RESEARCH AGREEMENT FY06-
ORA3-06
MODIFICATION NO, 1
The
Sponsored Research Agreement (hereinafter referred to as "SRA Agreement")
dated
July 15, 2005, between the Board of Regents of the University of Oklahoma,
an
education agency of the State of Oklahoma, (hereinafter referred
to as "University") and 3DICON Corporation, an Oklahoma corporation with
principal offices at P O Box
470941, Tulsa, Oklahoma 74147-0941, (hereinafter referred to as "Sponsor")
is
hereby amended as follows:
SECTION
4. COSTS, BILLINGS AND OTHER SUPPORT
4.1
Unless this Agreement or the Project is terminated before the expiration
of the
Period of Performance,
for the services, reports, and other items to be delivered hereunder Sponsor
shall pay University
a fixed price in the amount of Four Hundred Fifty-Three Thousand Five Hundred
Eighty-Four
Dollars and 00/00 cents ($453,584.00) without interest, as follows: upon
execution of this contract,
Sponsor shall pay University Five Hundred Dollars and 00/00 cents ($500 00);
on
or before November
10, 2005, Sponsor shall pay University Seventy-Five Thousand and Ninety-Seven
Dollars and
33/00
cents ($75,097.33); on or before January 15, 2006, Sponsor shall pay University
Seventy-Five Thousand
Five Hundred Ninety-Seven Dollars and 33/00 cents ($75,597.33); on or before
April 15, 2006, Sponsor shall pay University Seventy-Five Thousand Five Hundred
Ninety-Seven Dollars and 33/00
cents ($75,597.33); on or before July 15, 2006, Sponsor shall pay University
the
balance of Two Hundred
Twenty-Six Thousand Seven Hundred Ninety-Two Dollars and 01/00 cents
($226,792.01). The University
agrees to incur expenses primarily in accordance with the cost estimate included
in Appendix B ("Budget"), which by reference is made a part hereof for all
purposes, If Sponsor terminates
this Agreement prior to the expiration of the Period of Performance, it shall
pay all amounts due
and
owing the University through the date of termination including all
non-cancelable commitments for
equipment; provided, that any equipment Sponsor has financed as of the date
of
termination shall be transferred
to Sponsor
SECTION
9. CONFIDENTIALITY
9,1
A
separate confidentiality agreement has been executed between the parties
and
incorporated into
this
Agreement and attached to this Modification as Exhibit A.
Except
as
amended by this Modification, all other terms and conditions of the SRA
Agreement remain unchanged.
Parties
have agreed by mutual consent to the modifications listed above and have
so
indicated through the execution of this agreement.
| 3DICON CORPORATION | THE BOARD OF REGENTS OF THE UNIVRSITY OF OKLAHOMA | ||
| BY: Martin Keating |
BY:
Andrea Deaton
|
||
| TITLE: President | TITLE: Director, Office of Research Services | ||
| DATE: Nov. 1, 2005 | DATE: 10/27/05 | ||
| READ AND UNDERSTOOD; | |||
|
By:
James J. Sluss, Jr.
|
EXHIBIT
A
CONFIDENTIALITY
AND RESTRICTED USE AGREEMENT
THIS
AGREEMENT is entered by the Board of Regents of the University of' Oklahoma,
an
educational agency of the State of Oklahoma (hereinafter referenced as
"University") and 3Dicon
Corporation, an Oklahoma corporation with principal offices at P.O Box 470941,
Tulsa, Oklahoma
74147-0941 (hereinafter referenced as "Sponsor"), to be effective on the
date
when executed by the last party to sign this Agreement.
WITNESSETH:
WHEREAS,
the
Parties possess certain valuable and confidential information, data,
knowledge,
know-how, practices, processes, and other information relating to the Project
referenced
in Section 15 of the SRA Agreement entered by the parties to be effective
on
September
29, 2005, (hereinafter collectively referenced as "INFORMATION");
and
WHEREAS,
such
INFORMATION is considered by the Parties to be confidential and to constitute
valuable assets; and
WHEREAS,
the
Parties are willing to disclose such INFORMATION to each other for the
purpose of allowing the parties to perform their respective obligations and
exercise their rights
under said SRA Agreement.
NOW
THEREFORE, the
Parties agree as follows:
| 1. |
After
execution of this Agreement, the Parties shall mutually disclose
to each
other certain
INFORMATION and the Parties shall accept and hold such INFORMATION
in
the
strictest confidence All INFORMATION shall be labelled "CONFIDENTIAL",
or
if
communicated orally, confirmed in writing within thirty (30) days
of such
oral communication
as being "CONFIDENTIAL."
|
| 2. |
Without
prior written consent, the Parties shall neither disclose to any
third
party nor permit
any thud party to have access to any INFORMATION, nor use such
INFORMATION
for any purpose other than as set forth in this Agreement or in
the
SRA
Agreement.
|
| 3. |
Each
Party shall disclose INFORMATION only to those of its employees
who have a
need to know for the purposes stated above and shall require from
those
employees written
agreements of confidentiality, non-disclosure and non-use consistent
herewith, Such
agreements shall be available for inspection by the other party
upon
request. The agreements
shall expressly provide that the restrictions therein remain in
effect
even after
the cessation of the employee's employment with one of the
parties.
|
Page
1
of 3
| 4. |
The
aforementioned confidentiality obligations assumed by the Parties
shall
not apply to any INFORMATION that the Parties can clearly demonstrate
falls within any of the following
categories:
|
| (a) |
Information
which was in the public domain prior to disclosure by the Parties,
as
evidenced by documents which were generally published prior to such
disclosure; or,
|
| (b) |
Information
that a party can demonstrate by means of written records generated
before the parties commenced negotiations of the first SRA
executed
by them was already known by the party;
or
|
| (c) |
Information
that the Patties can demonstrate by means of written records to
have been independently developed by the Parties without the aid,
application
or use of the Parties' confidential information, by person(s) who
have not had access to the Parties' confidential information;
or
|
| (d) |
Information
that is required to be disclosed by operation of
law
|
| 5. |
For
purposes of keeping INFORMATION confidential, the Parties shall
use
efforts at least
commensurate with those employed by the Parties for the protection
of
their own confidential
and highly valuable
information,
|
| 6. |
The
Parties do not make any representation or warranty regarding the
accuracy
or completeness
of the INFORMATION
|
| 7. |
Except
as specifically provided in this Agreement, no license or any other
right
to use the
INFORMATION is granted The disclosure of INFORMATION by the Parties
to
each
other shall not result in any obligation on the part of either
party to
enter into any further
agreement relating to the INFORMATION or to undertake any other
obligation
not
set forth in a written agreement signed by both
parties
|
| 8. |
INFORMATION
furnished by the Parties to each other shall remain the property
of the
party
providing the information unless otherwise agreed as provided herein,
and
any documents
furnished by the Patties to each other or any excerpts, notes or
copies
made therefrom
containing such INFORMATION shall be promptly returned to the party
providing the excerpts, notes or copies made therefrom, within
thirty days
from the date of
the requested return of such INFORMATION by the party which provided
the
same or
within any extension period granted in writing by the
Parties..
|
| 9. |
Neither
party shall be entitled to assign its rights or obligations hereunder
without the express
written consent of the other party,
|
| 10. |
Sponsor
has agreed to comply with the export control laws and regulations
of the
United States
of America in accordance with Section 11.8 of the SRA Agreement
University
additionally
agrees to comply with the provisions of Section 11.8 of the SRA
Agreement.
Disclosing Party shall provide the Receiving Party with sufficient
and
appropriate information (including export control classification
number
(ECCNs)) to allow
the Receiving Party to properly comply with the
regulations,
|
Page 2
of 3
| 11 |
This
Agreement contains the entire understanding between the parties
with
respect to the matters
contemplated herein and supersedes all previous written and oral
negotiations, commitments,
and understandings This Agreement cannot be altered or otherwise
amended
except pursuant to an instrument in writing signed by each of the
patties
and making
reference to this Agreement. This Agreement shall inure to the
benefit of
and be binding
upon the parties and their agents, successors, employees and permitted
assigns
|
| 12 |
A
valid waiver of any term or condition of this Agreement must be
in writing
and shall not
be deemed or construed to be a waiver of such term or condition
for the
future, or of any
subsequent breach.
|
| 13 |
If
any court of competent jurisdiction holds any part of this Agreement
to be
invalid or unenforceable,
such holding shall in no way affect the validity of the remainder
of this
Agreement.
|
| 14 |
A
facsimile signature by any party to this Agreement shall be deemed
sufficient to indicate
acceptance of' the terms and obligations of' the
same.
|
| 15 |
The
validity and effect of this Agreement shall be governed, construed,
and
enforced in accordance
with the laws of the State of Oklahoma, United States of America,
without
regard or giving force and effect to the principles of conflicts
of laws
of Oklahoma or any
other state. Any action to interpret or enforce this agreement
shall be
brought in Oklahoma,
|
| 16 |
The
undersigned warrant and represent that they are duly authorized
to execute
this Agreement
and legally bind their respective parties to its terms and conditions
and
when fully
executed this Agreement constitutes the legal, valid, and binding
obligation of the parties
|
WHEREPORE,
the parties hereto have caused this Agreement to be executed by their duly
authorized representatives as of the date first written above.
| 3DICON CORPORATION |
THE
BOARD OF REGENTS OF THE
UNIVERSITY
OF OKLAHOMA
|
||||
| |
|
|
|||
 |
 |
||||
| Date: Nov. 1, 2005 |
Executive
Director, Office
of
Technology
Development
Date:
10/12/05
|
 |
|||
Page 3
of 3
SPONSORED
RESEARCH AGREEMENT FY06-ORA3-06
MODIFICATION
NO. 2
For
Valuable Consideration, the receipt and sufficiency of which are acknowledged
by
the parties,
the Sponsored Research Agreement (hereinafter referred to as "SRA Agreement")
dated
July 15, 2005, between the Board of Regents of the University of Oklahoma,
an
education
agency of the State of Oklahoma, (hereinafter referred to as "University")
and
3DICON
Corporation, an Oklahoma corporation with principal offices at P O Box 470941,
Tulsa,
Oklahoma 74147-0941, (hereinafter referred to as "Sponsor"), as amended by
Modification
No 1, is hereby further amended as follows:
SECTION
3. PERIOD OF PERFORMANCE
3.1
The
Period of Performance will be: July 15, 2005 through March 31,
2007.
SECTION
4. COSTS, BILLINGS AND OTHER SUPPORT
4.1
Unless this Agreement or the Project is terminated before the expiration of
the
Period of
Performance, for the services, reports, and other items to be delivered
hereunder Sponsor shall
pay
University a fixed price in the amount of Five
Hundred Seventy-Eight Thousand Eight
Hundred Forty-Three Dollars and 00/00 cents ($578,843.00)
without interest, as follows: upon execution of this contract, Sponsor shall
pay
University Five Hundred Dollars and
00/00
cents ($500.00); on or before November 10, 2005, Sponsor shall pay University
Seventy-Five Thousand and Ninety-Seven Dollars and 33/00 cents ($75,097.33);
on
or before January
15, 2006, Sponsor shall pay University Seventy-Five Thousand Five Hundred
Ninety-Seven
Dollars and 33/00 cents ($75,597.33); on or before April 15, 2006, Sponsor
shall
pay
University Seventy-Five Thousand Five Hundred Ninety-Seven Dollars and 3.3/00
cents ($75,597.33); and on or before each of the following dates: December
31,
2006, January .31, 2007, February 28, 2007 and March 31, 2007, Sponsor shall
pay
University the sum of Eighty-Eight
Thousand Twelve Dollars and 76/100 cents ($88,012.76), University agrees to
incur
expenses primarily in accordance with the cost estimate included in First
Supplement to
Appendix B ("Budget"),
a copy of which is attached to this Modification No, 2, which by reference
is made a part hereof for all purposes. If Sponsor terminates this Agreement
prior to the
expiration of the Period of Performance, it shall pay all amounts due and owing
the University
through the date of termination including all non-cancel able commitments for
equipment;
provided, that any equipment Sponsor has financed as of the date of termination
shall be transferred to Sponsor
Appendix
A
is
amended to add the terms and provisions attached to this Modification No. 2
and
identified as "First Supplement to Appendix A".
Except
as
amended by this Modification and by Modification No, 1, all other terms and
conditions
of the SRA Agreement remain unchanged.
Parties
have agreed by mutual consent to the modifications listed above and have so
indicated through
the execution of this agreement.
| 3DICON CORPORATION |
THE
BOARD OF REGENTS OF THE
UNIVERSITY OF OKLAHOMA |
||
 |
BY: |
 |
|
| TITLE: | Services | ||
| DATE: |  |
||
READ
AND UNDERSTOOD:
First
Supplement to Appendix A.
Investigation
of 3-Bimensional Display Technologies
A
Proposal for Supplemental Funds to:
3D
Icon
Corporation Attn; Martin Keating
P.O.
Box
470941
Tulsa,
OK
74147-0941
Phone:
918-492-5082
FAX:
918-492-5367
Submitted
by:
James
J,
Sluss, Jr., Pramode K, Verma and Monte P.. Tull
School
of
Electrical & Compute: Engineering
University
of Oklahoma
August
30, 2006
Proposal
for Supplemental Funds
Project
Title; Investigation of 3 -Dimensional Display Technologies
Sponsor:
3DIcon Corporation
OU
Projects: 125573300
Project
Period: 7/15/05-I/14/07
Supplement:
9/1/06-1/14/07
Summary
OU
is
currently pursuing research under an established Sponsored Research Agreement
with 3DIcon Corporation in the area of 3-dimensional display technologies,
The
goals of this
research ate: to produce patentable and/or copyrightable intellectual property;
to produce
proof- of-concept technology that demonstrates the viability of the intellectual
property;
and, to assess opportunities for manufacturing technological products in
Oklahoma.
To date, three provisional patent applications have been submitted as a result
of the research, as well as the preparation of a full utility patent application
that is near to submission.
With
the
consent and direction of the sponsor, the OU team has begun to pursue the
development of fluorescent nanoparticles by engaging with Dr. Gerard Newman
and
Dr Martina Dreyer of 'the School of Chemical, Biological, and Materials
Engineering Early laboratory
results on the synthesis of these new nanopaiticles are encouraging However,
supplemental
funds are required to support the ongoing participation of our new research
collaborators
for both salaries and project materials.
In
addition, again with the consent and direction of the sponsor, the OU team
has
begun the
fabrication of two prototype swept-volume displays that are the topic of an
invention disclosure
filed with the OU Office of Technology Development and of the
soon-to-be-filed
utility patent application, A portion of the supplemental funds will go toward
the support
of the prototype fabrication activities.
Budget
Justification
The
bulk
of the budget for this supplemental request goes to support the salaries, fringe
and IDC for Dr., Gerard Newman, Dr, Martina Dreyer, and Dr., Hakki Refai, Dr
Refai's salary was initially covered by the original project budget, but a
portion of budgeted salary
funds were reallocated to allow us to bring Dr Dreyer onto the project at the
beginning of the summer - thus the need to replenish sufficient funds to see
our
commitment
to Dr. Refai through to the end of 2006. The remaining request of $11,623 for
equipment will go toward fabrication of the swept-volume display
prototypes,
Please
note: it is not an improper deduction to reduce an employee's accrued vacation,
personal
or other forms of paid time off for full or partial day absences for personal
reasons,
sickness or disability.
(Note
to Employer: This should not appear if the employer does not have a bonajlde
sickness
or disability policy that provides for wage replacement
benefits)
To
Report Concerns or Obtain More Information
If
you
have questions about deductions from your pay, please immediately contact
Human
Resources If you believe you have been subject to any improper deductions or
your
pay
does not accurately reflect your hours worked, you should immediately report
the
matter to your supervisor, If the supervisor is unavailable or if you believe
it
would be
inappropriate to contact that person (or if you have not received a prompt
and
fully acceptable
reply), you should immediately contact [Identify
Contact Name},
the
Director
of Human Resources at [Identify,
Contact Phone Number], [Identify Contact Name
and Phone Number],
or any
other supervisor in the company with whom you feel comfortable.
If you are unsure of whom to contact if you have not received a satisfactory
response
within five business days after1
reporting the incidents please immediately contact
[Identify
Contact Name and Phone Number].,
Every
report will be fully investigated and corrective action will be taken where
appropriate,
up to and including discharge for any employee(s) who violates this policy.,
In
addition, the Company will not allow any form of retaliation against individuals
who report alleged violations of this policy or: who cooperate in the Company's
investigation of
such
reports Retaliation is unacceptable, and any form of retaliation in violation
of
this
policy will result in disciplinary action, up to and including
discharge.
First
Supplement to Appendix B
DETAIL BUDGET Year 1
DETAIL BUDGET Year 1
|
"Travel
expenses will be reimbursed at federal rates, state rates, or specified
rates, as appropriate
|
Revised
5/10/2005
|
EXHIBIT
23.2
CONSENT
OF INDEPENDENT REGISTERED
PUBLIC
ACCOUNTING FIRM
We
consent to the use in this Registration Statement on Form SB-2 of 3DIcon
Corporation of our report dated February 23, 2006, relating to our audits of
the
financial statements appearing in the Prospectus, which is part of this
Registration Statement. Our report dated February 23, 2006 relating to the
financial statements includes an emphasis paragraph relating to an uncertainty
as to the Company's ability to continue as a going concern. We also consent
to
the reference to our firm under the captions "Experts" in such
Prospectus.
/s/
TULLIUS TAYLOR SARTAIN & SARTAIN LLP
Tulsa,
Oklahoma
December
15, 2006