<PAGE> 1
As filed with the Securities and Exchange Commission on May 19, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BOREALIS TECHNOLOGY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 88-0238203
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
4070 SILVER SAGE DRIVE
CARSON CITY, NEVADA 89701
(702) 888-3200
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
PATRICK GRADY
PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN
BOREALIS TECHNOLOGY CORPORATION
4070 SILVER SAGE DRIVE
CARSON CITY, NEVADA 89701
(702) 888-3200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
Copy to:
STEVEN E. BOCHNER
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
(650) 493-9300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement become effective.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the 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]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===========================================================================================
PROPOSED PROPOSED
TITLE OF MAXIMUM MAXIMUM
EACH CLASS OF OFFERING AGGREGATE AMOUNT OF,
SECURITIES TO AMOUNT TO BE PRICE OFFERING REGISTRATION
BE REGISTERED REGISTERED PER SHARE(1) PRICE(1) FEE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
no par value........... 1,501,500 shares(2) $2.1875 $3,284,531.25 $968.94
===========================================================================================
</TABLE>
(1) Estimated solely for purposes of calculation of the registration fee
based on the average of the high and low prices of the Registrant's
Common Stock on the Nasdaq SmallCap Market on May 15, 1998.
(2) No sales of securities will be conducted by Registrant. Registrant
will, however, pay expenses of the offering, which are expected to
total approximately $9297.39.
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.
<PAGE> 2
PROSPECTUS
1,501,500 SHARES
BOREALIS TECHNOLOGY CORPORATION
COMMON STOCK
($0.001 PAR VALUE PER SHARE)
This Prospectus relates to 1,501,500 shares (the "Shares") of Common
Stock, $0.001 par value per share (the "Common Stock"), of Borealis Technology
Corporation, a Delaware corporation (the "Company"). The Shares may be offered
by certain shareholders of the Company (the "Selling Shareholder") from time to
time in transactions on the Nasdaq SmallCap Market, in privately negotiated
transactions or otherwise at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to such market prices or at
negotiated prices. 500,500 of the Shares are issuable upon exercise of certain
warrants held by the Selling Shareholders (the "Warrants"). The Shares and the
Warrants were issued or will be issued in a private placement transaction exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to Section 4(2) thereof (the "Private
Offering"). See "Selling Shareholder" and "Plan of Distribution."
The Company will receive no part of the proceeds of sales made hereunder.
All expenses of registration incurred in connection with this offering are being
borne by the Company, but all selling and other expenses incurred by the Selling
Shareholder will be borne by such Selling Shareholder. The Company and the
Selling Shareholder have each agreed to indemnify the other against certain
liabilities, including certain liabilities under the Securities Act.
The Common Stock is traded on the Nasdaq SmallCap Market under the symbol
"BRLS." On May 15, 1998, the closing price of the Common Stock on the Nasdaq
SmallCap Market was $2.125.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
The Selling Shareholders and any broker executing selling orders on behalf
of the Selling Shareholders may be deemed to be underwriters within the meaning
of the Securities Act. Commissions received by any such broker may be deemed to
be underwriting commissions under the Securities Act.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is May 18, 1998.
<PAGE> 3
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY SELLING SHAREHOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THE
SHARES BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON
TO MAKE SUCH OFFER, SOLICITATION OR SALE. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the Public
Reference Room of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the Commission's regional offices at Seven World Trade Center, 13th
Floor, New York, New York, 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding issuers such as the Company that file electronically with the
Commission at www.sec.gov.
The Company has filed with the Commission a Registration Statement (which
term shall include all amendments, exhibits and schedules thereto) on Form S-3
under the Securities Act, with respect to the Shares offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission, and to which reference is hereby made. Statements
made in this Prospectus as to the contents of any document referred to are not
necessarily complete. With respect to each such document filed as an exhibit to
the Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. The Registration Statement may be
inspected at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W. Washington, D.C. 20549, at prescribed
rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this Prospectus the
following documents and information heretofore filed with the Commission:
(1) the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1997;
(2) the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1998; and
(3) the description of the Company's Common Stock offered hereby
contained in the Company's Registration Statement on Form 8-A
dated June 11, 1996
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act, after the date of this Prospectus and prior to
the filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in this Prospectus and
to be part hereof from the date of filing such documents. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for all purposes to the extent that a statement contained
in this Prospectus or in any other subsequently filed documents which also is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement contained herein shall be deemed to be modified or
superseded for all purposes to the extent that a statement contained in a
subsequently filed document which is deemed to be incorporated by reference
herein modifies or supersedes such statement.
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The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus is delivered, upon written or oral request of any
such person, a copy of any and all of the information that has been or may be
incorporated by reference in this Prospectus, other than exhibits to such
documents. Requests for such copies should be directed to the Company at 4070
Silver Sage Drive, Carson City, Nevada 89701, Attn: Chief Financial Officer The
Company's telephone number at that location is (702) 888-3200.
THE COMPANY
The Company is a provider of enterprise-wide software solutions for the
customer relationship management market. In April 1997, the Company began
selling Arsenal, an advanced software solution for the customer relationship
management market, which enables businesses to automate customer interaction
processes and information exchanges between thousands of mobile users and
central information systems containing enterprise-wide customer databases.
Borealis believes Arsenal overcomes the limitations of other commercially
available solutions by providing pre-built applications and rapid implementation
capabilities combined with customization and scalability features of custom
solutions.
The Company was incorporated in the State of Nevada in June 1988 and
reincorporated in the State of Delaware prior to the completion of its initial
public offering in June 1996. The Company's headquarters are located at 4070
Silver Sage Drive, Carson City, Nevada 89701, and its phone number is (702)
888-3200. The Common Stock of the Company is traded on the Nasdaq SmallCap
Market under the symbol BRLS.
RISK FACTORS
In addition to the other information contained in or incorporated by reference
in this Prospectus, each prospective investor should carefully consider the
following factors in evaluating the Company and its business before purchasing
the shares of Common Stock offered hereby. No investor should purchase such
shares unless such investor can afford a complete loss of his or her investment.
This Prospectus contains or incorporates by reference certain forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those anticipated in these forward looking
statements as a result of certain factors, including those set forth in the
following risk factors and elsewhere in this Prospectus or the documents
incorporated by reference herein.
GOING CONCERN ASSUMPTION; FUTURE CAPITAL NEEDS UNCERTAIN; NO ASSURANCE OF FUTURE
FINANCING
The Company's cash and short-term investments as of May 15, 1998 totaled
approximately $50,000. In light of its cash position and historical cash
requirements, in the event the Company does not obtain funding in the very near
future, the Company will likely cease operations. In the absence of receiving
additional funding, the Company anticipates that its existing capital resources
and cash generated from operations, if any, will be sufficient to meet the
Company's cash requirements only for the next few weeks at its anticipated level
of operations. The Company's future capital requirements will depend upon
numerous factors, including the amount of revenues generated from operations,
the cost of the Company's sales and marketing activities and the progress of the
Company's research and development activities, none of which can be predicted
with certainty. The Company intends to seek additional funding during the next
twelve months and will most likely seek additional funding after such time.
There can be no assurance that any additional financing will be available on
acceptable terms, or at all, when required by the Company. Moreover, if
additional financing is not available, the Company could be required to reduce
or suspend its operations, seek an acquisition partner or sell securities on
terms that may be highly dilutive or otherwise disadvantageous to investors. The
Company has experienced in the past, and may continue to experience, operational
difficulties and delays in its product development due to working capital
constraints. Any such difficulties or delays have a material adverse effect on
the Company's business, financial condition and results of operations.
The Company's independent auditors' report on the Company's financial
statements at December 31, 1997 and for the years ended December 31, 1996 and
1997 contains an explanatory paragraph indicating that the Company had recurring
operating losses that raise substantial doubt about its ability to continue as a
going concern. In addition, the Company had an accumulated deficit of
$14,152,719 at December 31, 1997. The Company may require substantial additional
funds in the future,
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and there can be no assurance that any independent auditors' report on the
Company's future financial statements will not include a similar explanatory
paragraph if the Company is unable to raise sufficient funds or generate
sufficient cash from operations to cover the cost of its operations. The
existence of the explanatory paragraph may materially adversely affect the
Company's relationship with prospective customers, third party integrators and
suppliers, and therefore could have a material adverse effect on the Company's
business, financial condition and results of operations.
EXPECTED ILLIQUIDITY OF TRADING MARKET; PENNY STOCK
The Company's shares of Common Stock are quoted on the Nasdaq SmallCap
Market. As of March 31, 1998, the Company was out of compliance with the
standards for continued listing on the Nasdaq SmallCap Market. As a result, the
Company's shares of Common Stock will be subject to removal from the Nasdaq
SmallCap Market if the Company is unable to obtain additional financing or
generate sufficient revenue in the next several weeks to satisfy listing
requirements. The Nasdaq SmallCap Market has indicated to the Company that the
Company's Common Stock will be delisted effective with the close of business on
Thursday, May 21, 1998, although the Company intends to seek a hearing from the
Nasdaq SmallCap Market concerning the delisting. If the Company is delisted,
trading, if any, in the Common Stock would be conducted in the over-the-counter
market on an electronic bulletin board established for securities that do not
meet the Nasdaq SmallCap Market Listing requirements, or in what are commonly
referred to as the "pink sheets." As a result, an investor would find it more
difficult to dispose of, or to obtain accurate quotations as to the price of the
Company's Common Stock. In addition, if the Company's Common Stock were removed
from the Nasdaq SmallCap Market, the Common Stock would be subject to so-called
"penny stock" rules that impose additional sales practice and market making
requirements on broker-dealers who sell and/or make a market in such securities.
Consequently, removal from the Nasdaq SmallCap Market could affect the ability
or willingness of broker-dealers to sell and/or make a market in the Common
Stock and the ability of purchasers of the Company's Common Stock to sell their
securities in the secondary market.
COMPLETE DEPENDENCE ON RECENT PRODUCT INTRODUCTION
The Company derives substantially all of its revenues from the sale of
licenses and maintenance contracts for Arsenal. Consequently, the Company is
entirely dependent on the market acceptance of Arsenal. Unless and until Arsenal
receives market acceptance, the Company will have no material source of revenue.
There can be no assurance that Arsenal will achieve market acceptance. The
Company's ability to effectuate market acceptance and sales of Arsenal will be
substantially dependent on the hiring and training of additional personnel, and
there can be no assurance that the Company will be able to successfully hire and
train such personnel. Market acceptance of Arsenal will require the Company to
successfully hire and retain sales personnel in a timely manner, of which there
can be no assurance. Any such failure will have a material adverse effect on the
Company's business, financial condition and results of operations. Failure of
Arsenal to achieve significant market acceptance will have a material adverse
effect on the Company's business, financial condition and results of operations.
RECENT HIRES OF KEY EXECUTIVES; NEED TO FILL KEY EXECUTIVE POSITION; DEPENDENCE
ON LIMITED NUMBER OF KEY PERSONNEL
The Company's Chairman of the Board assumed the positions of President and
Chief Executive Officer following the resignation of the Company's then
President and Chief Executive Officer in March 1998. The Company's future
success substantially depends on the efforts of certain of its officers and key
technical and other employees, many of whom have only recently joined the
Company. In particular, the Company's Senior Vice President of World Wide Sales
and Services and its Vice President of Business Development joined the Company
in November 1997 and the Company's Vice President of Engineering joined the
Company in February 1998. Additionally, the Company is currently seeking to hire
a Vice President of Marketing. The Company's future success will require it to
recruit additional key personnel, including additional sales and marketing
personnel. The Company has not entered into employment agreements nor does it
have key man life insurance. The Company believes that its future success
depends on its ability to attract, retain and motivate highly skilled employees,
who are in great demand. There can be no assurance that the Company will be
successful in doing so.
DEPENDENCE ON THIRD PARTY INTEGRATORS
Software products that address the customer relationship management needs
of medium- to large-size businesses are typically highly complex and require
significant customization that often results in an extensive implementation
process. The Company's strategy for implementing Arsenal is dependent on the
utilization of third-party integrators to install, customize and service it.
Consequently, third-party integrators are required to undergo substantial amount
of training to be able to apply the Company's products to the varied needs of
the Company's current and prospective customers. There can be no assurance that
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<PAGE> 6
the Company will be able to attract and retain personnel necessary to train such
integrators. In addition, there can be no assurance that the Company's training
will be sufficient or that such integrators will be able to provide the level or
quality of service required to meet the needs of the Company's current and
prospective customers. The Company will likely be dependent on third-party
integrators to complete certain postdelivery obligations prior to the Company's
recognition of revenue. Any failure of such integrators to complete such
obligations could prevent the Company from recognizing revenue and the failure
to so recognize revenue could have a material adverse effect on the Company's
business, financial condition and results of operations. If the Company is
unable to maintain effective, long-term relationships with these integrators, or
if such integrators fail to meet the needs of the Company's current and
prospective customers in a timely fashion, or at all, such failure would result
in a loss of, or delay in, market acceptance of sales and could result in
increased product support costs and an injury to the Company's reputation, which
would have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company has not and does not plan to enter into or maintain exclusive
relationships with third-party integrators and, consequently, such integrators
may have existing relationships with, or may undertake new relationships with,
the Company's direct competitors. There can be no assurance that such
integrators will promote Arsenal effectively, or at all. The failure of the
Company to provide sufficient incentive for such integrators may materially and
adversely affect the Company's sales of Arsenal which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
RECENT LOSSES; QUARTERLY FLUCTUATIONS IN PERFORMANCE
The Company has experienced significant operating losses in each of the
years beginning with 1994 and expects to incur significant operating losses for
the foreseeable future. The Company's sole product, Arsenal, is designed for the
customer relationship management market. As a result, the Company will derive
substantially all of its revenues from the sales of licenses and maintenance
contracts for Arsenal. There can be no assurance that Arsenal will ever achieve
significant market acceptance or that the Company will ever achieve
profitability.
The Company's operating and other expenses are relatively fixed in the
short term. As a result, variation in the timing of revenues will cause
significant variations in quarterly operating results. Notwithstanding the
difficulty in forecasting future sales, the Company generally must undertake its
development, sales and marketing activities and other commitments months in
advance. Accordingly, any shortfall in revenues in a given quarter may
materially adversely affect the Company's business, financial condition and
results of operations due to the inability to adjust expenses during the quarter
to match the level of revenues for the quarter. Once commitments for such
expenditures are undertaken, the Company may be unable to reduce them quickly if
revenue is less than expected. In addition, the Company's sales expectations are
based entirely on its internal estimates of future demand. Due to these and
other factors, the Company believes that quarter-to-quarter comparisons of its
results of operations are not necessarily meaningful and should not be relied
upon as indications of future performance.
Operating results may fluctuate as a result of many factors, including
volume and timing of orders received, the extent to which the Company is
required to establish and support a third-party integrator channel or hire
additional sale personnel to supplement such channel, announcements by the
Company and its competitors, the timing of commercial introduction of
enhancements to Arsenal, if any, or competitive products, the impact of price
competition on the Company's average selling prices, and the level of research
and development required to complete any future product enhancements. Almost all
of these factors are beyond the Company's control. In addition, due to the short
product life cycles that characterize the customer resource management software
market, the Company's failure to introduce any Arsenal enhancements in a timely
manner could have a material adverse effect on the Company's business, financial
condition and results of operations.
RAPID TECHNOLOGICAL CHANGE; RISK OF PRODUCT DELAYS OR DEFECTS
The customer relationship management software market is characterized by
ongoing technological developments, frequent new product announcements and
introductions, evolving industry standards and changing customer requirements.
The introduction of products embodying new technologies and the emergence of new
industry standards and practices can render existing products obsolete and
unmarketable. The Company's future success depends in large part upon its
ability to obtain market acceptance of Arsenal, develop enhancements to Arsenal
to address the changing requirements of its customers, educate third-party
integrators regarding Arsenal and anticipate or respond to technological
advances, competitive products and emerging industry standards in a timely,
cost-effective manner. There can be no assurance that the Company will be
successful in marketing
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<PAGE> 7
and supporting Arsenal or enhancements to Arsenal, if any, or will not
experience difficulties that could delay or prevent the successful marketing and
support of these products, or that Arsenal and any such product enhancements
will adequately meet the requirements of the marketplace and achieve any
significant degree of commercial acceptance. The Company has in the past
experienced delays in product development, including significant delays in the
development of Arsenal. Delays in enhancements to Arsenal, if any, may result in
customer dissatisfaction and delay or loss of product and maintenance revenues.
In addition, there can be no assurance that Arsenal or other future products
will meet the requirements of the marketplace or will conform to industry
standards and requirements. Any delays in the development or introduction of
enhancements to Arsenal or failure to respond to market requirements could have
a material adverse effect on the Company's business, financial condition and
results of operations.
Software products such as Arsenal often contain errors or "bugs" that can
adversely affect the performance of the product or damage a user's data. There
can be no assurance that, despite testing by the Company and by potential
customers, errors will not be found in Arsenal, or any new versions of Arsenal,
resulting in a loss, of, or delay in, market acceptance and sales, diversion of
development resources, injury to the Company's reputation, or increased service
and warranty costs, any of which could have a material adverse effect on the
Company's business, financial condition and results of operations.
COMPETITION
The customer relationship management software market is
highly-competitive, highly-fragmented and characterized by rapid technology
change, frequent new product introductions, short product life cycles and
evolving industry standards, and is expected in the future, to be characterized
by significant price erosion over the life of a product. Within specific ranges
of functionality, the Company experiences competition from many sources,
including: (i) companies that directly address the customer relationship
management market; (ii) third party integrators that design, develop and
implement custom customer relationship management solutions; (iii) the internal
information technology departments of potential customers that develop
proprietary applications; and (iv) pre-packaged products, including Personal
Information Managers ("PIMs"). In addition, the Company may experience
competition from additional companies to the extent such companies enter the
market, such as "groupware" vendors, LAN-based application development tools
vendors, remote LANaccess communication vendors and communications and systems
management software vendors. Among the Company's potential competitors are also
a number of large hardware and software companies that may develop or acquire
products that compete in the market.
Currently and potential competitors have established and may establish
cooperative relationships with third parties to increase the ability of their
products to address the needs of the Company's current and prospective
customers. Accordingly, it is possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. Many of the
Company's current and potential competitors have significantly greater
financial, technical, marketing, name recognition and other resources than the
Company. As a result, they may be able to respond more quickly to new or
emerging technologies and to changes in customer requirements, or to devote
greater resources to the development, promotion and sale of their products than
can the Company. There can be no assurance that the Company will be able to
compete successfully against current or future competitors or that competitive
pressures will not materially adversely affect the Company's business, financial
condition and results of operations.
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SELLING STOCKHOLDERS
The following table sets forth the name of each Selling Stockholder and
the number of Shares being offered hereby. Upon completion of the offering,
assuming all Shares being offered are sold, except as set forth below, each
Selling Stockholder will not own any shares of Common Stock. The Shares are
being registered to permit secondary trading of the Shares, and the Selling
Stockholders may offer Shares for resale from time to time. See "Plan of
Distribution."
The Shares being offered by the Selling Stockholders were acquired from
the Company in a transaction exempt from the registration requirements of the
Securities Act provided by Section 4(2) thereof pursuant to a Unit Purchase
Agreement (the "Unit Purchase Agreement") or a Warrant by and between the
Company and the Selling Stockholders.
Each Selling Stockholder that purchased Common Stock pursuant to the Unit
Purchase Agreement represented to the Company that it was acquiring the Shares
for investment and not with the present intention of distributing such Shares.
In lieu of granting the Selling Shareholders demand registration rights, the
Company has filed with the Commission, under the Act, a Registration Statement
on Form S-3, of which this Prospectus forms a part, with respect to the resale
of the Shares.
<TABLE>
<CAPTION>
Shares
Beneficially Owned
Prior to Offering(1) Number of
------------------- Shares Being
Shareholders Number Percent Offered
------------ ------ ------- -------
<S> <C> <C> <C>
John Webley 738,000(2) 12.10% 600,000(2)
The Peter W.J. Stonebridge Revocable Trust U.A.D 400,000(3) 6.67% 300,000(3)
10/17/95
Peter B. Pitsker and Polly D. Pitsker Revocable Living 209,731(4) 3.52% 45,000(5)
Trust Dated September 11, 1985
Ed Esber 146,777(6) 2.47% 75,000(7)
Richard Timmins 120,000(8) 2.04% 120,000(8)
James R. Perkins 80,000(9) 1.36% 60,000(9)
Steven Sheck 60,000(10) 1.02% 60,000(10)
Michael D'Eath 46,631(11) * 15,000(12)
Barry John Houlihan & Heather Valma Houlihan 30,000(13) * 30,000(13)
Charles McLaughlin 30,000(14) * 30,000(14)
Deborah Salzman 30,000(15) * 30,000(15)
Robert W. Wiedenhorn 30,000(16) * 30,000(16)
David R. and Theresa W. Hebrank 29,500(17) * 22,500(17)
Daniel Pereyra 26,500(18) * 15,000(18)
Phillip F. Frink Jr. Trustee First Washington Corp. PSP 24,000(19) * 24,000(19)
DTD 7/1/84 FBO Phillip F. Frink Jr
Wallace G. Dempsey 16,000(20) * 15,000(20)
Paul Caruso and Barbara Caruso, JTWROS 15,000(21) * 15,000(21)
David R. Bouchard 15,000(22) * 15,000(23)
TOTAL 2,047,139(24) 31.30% 1,501,500(25)
</TABLE>
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- --------------------
(1) Based on 5,899,148 Shares issued and outstanding as of May 15, 1998.
Individual ownership numbers are based upon representations made to the
Company by each Selling Shareholder, unless otherwise indicated.
(2) Includes 200,000 Shares issuable upon exercise of Warrants; based on
information provided in the Form 13D filed by Mr. Webley on March 18,
1998.
(3) Includes 100,000 Shares issuable upon exercise of Warrants; based on
information provided in the Form 13D filed by Mr. Stonebridge on March 18,
1998.
(4) Includes 17,000 Shares issuable upon exercise of Warrants and 42,441
Shares issuable upon exercise of Stock Options within 60 days of the date
of this Prospectus.
(5) Includes 15,000 Shares issuable upon exercise of Warrants. Peter Pitsker
has served as a Director and as interim President of the Company.
(6) Includes 25,000 Shares issuable upon exercise of Warrants and 17,777
shares issuable upon exercise of stock options within 60 days of the date
of this Prospectus. Mr. Esber is currently a Director of the Company.
(7) Includes 25,000 Shares issuable upon exercise of Warrants.
(8) Includes 40,000 Shares issuable upon exercise of Warrants.
(9) Includes 20,000 Shares issuable upon exercise of Warrants.
(10) Includes 20,000 Shares issuable upon exercise of Warrants.
(11) Includes 5,000 Shares issuable upon exercise of Warrants and 28,631 Shares
issuable upon exercise of Stock Options within 60 days of the date of this
Prospectus. Mr. D'Eath holds options to purchase an additional 100,000
Shares not exercisable within 60 days of this Prospectus. Mr. D'Eath is
currently the Vice President of Business Development and Product Marketing
of the Company.
(12) Includes 5,000 Shares issuable upon exercise of Warrants.
(13) Includes 10,000 Shares issuable upon exercise of Warrants.
(14) Includes 10,000 Shares issuable upon exercise of Warrants.
(15) Includes 10,000 Shares issuable upon exercise of Warrants.
(16) Includes 10,000 Shares issuable upon exercise of Warrants.
(17) Includes 7,500 Shares issuable upon exercise of Warrants.
(18) Includes 5,000 Shares issuable upon exercise of Warrants.
(19) Includes 8,000 Shares issuable upon exercise of Warrants.
(20) Includes 5,000 Shares issuable upon exercise of Warrants.
(21) Includes 5,000 Shares issuable upon exercise of Warrants.
(22) Includes 5,000 Shares issuable upon exercise of Warrants. Mr. Bouchard
holds options to purchase 200,000 Shares not exercisable within 60 days of
this Prospectus. Mr. Bouchard is currently the Senior Vice President of
Worldwide Sales and Services of the Company.
(23) Includes 5,000 Shares issuable upon exercise of Warrants.
(24) Includes 552,500] Shares issuable upon exercise of Warrants and 88,849
Shares issuable upon exercise of Stock Options within 60 days of the date
of this Prospectus.
(25) Includes 500,500 Shares issuable upon exercise of Warrants.
PLAN OF DISTRIBUTION
The Company has been advised by each Selling Stockholder that it or its
donees or transferees intend to sell all or a portion of the Shares offered
hereby from time to time on the Nasdaq SmallCap Market, in privately negotiated
transactions or otherwise, and that sales will be made at fixed prices that may
be changed, at market prices prevailing at the times of such sales, at prices
related to such market prices or at negotiated prices. Such Selling Stockholder
or its donees or transferees may also make private sales directly or through a
broker or brokers, who may act as agent or as principal. In connection with any
sales, such Selling Stockholder or its donees or transferees and any brokers
participating in such sales may be deemed to be underwriters within the meaning
of the Securities Act. The Company will receive no part of the proceeds of sales
made hereunder.
Any broker-dealer participating in such transactions as agent may receive
commissions from a Selling Stockholder or its donees or transferees (and, if
they act as agent for the purchaser of such Shares, from such purchaser).
Brokerage fees may be
-8-
<PAGE> 10
paid by the Selling Stockholder or its donees or transferees, which may be in
excess of usual and customary brokerage fees. Broker-dealers may agree with a
Selling Stockholder or its donees or transferees to sell a specified number of
Shares at a stipulated price, and, to the extent such a broker-dealer is unable
to do so acting as agent for a Selling Stockholder or its donees or transferees,
to purchase as principal any unsold Shares at the price required to fulfill the
broker-dealer's commitment to such Selling Stockholders or its donees or
transferees. Broker-dealers who acquire Shares as principal may thereafter
resell such Shares from time to time in transactions (which may involve crosses
and block transactions and which may involve sales to and through other
broker-dealers, including transactions of the nature described above) on the
Nasdaq SmallCap Market in negotiated transactions or otherwise at market prices
prevailing at the time of sale or at negotiated prices, and in connection with
such resales may pay to or receive from the purchasers of such Shares
commissions computed as described above.
The Company and each Selling Stockholder have agreed to indemnify each other
against certain liabilities, including certain liabilities under the Securities
Act.
Any Shares covered by this Prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under that Rule rather than
pursuant to this Prospectus.
There can be no assurance that any Selling Stockholder will sell any or all
of the Shares offered by it hereunder.
EXPERTS
The financial statements of Borealis Technology Corporation at December 31,
1997 and 1996, and for each of the two years in the period ended December 31,
1997, incorporated by reference in this Prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein (which contains an explanatory paragraph
describing conditions that raise substantial doubt about the Company's ability
to continue as a going concern as described in Note 1 to the financial
statements) and incorporated herein by reference. Such financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
Counsel for the Company, Wilson Sonsini Goodrich & Rosati, Professional
Corporation, 650 Page Mill Road, Palo Alto, California 94304-1050, has rendered
an opinion to the effect that the Common Stock offered hereby is duly and
validly issued, fully paid and nonassessable.
-9-
<PAGE> 11
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.*
<TABLE>
<S> <C>
SEC Registration Fee $968.94
Nasdaq listing fee $828.45
Accountant's fees and expenses $2,500.00
Legal fees and expenses $3,000.00
Miscellaneous $2,000.00
---------
Total $9297.39
=======
</TABLE>
* Represents expenses relating to the distribution by the Selling Stockholder
pursuant to the Prospectus prepared in accordance with the requirements of
Form S-3. These expenses will be borne by the Company on behalf of the
Selling Stockholder. All amounts are estimates except for the SEC
Registration Fee and the Nasdaq listing fee.
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act. The Registrant's Certificate of
Incorporation and Bylaws provide that the Registrant shall indemnify its
directors and officers to the fullest extent permitted by Delaware law,
including circumstances in which indemnification is otherwise discretionary
under Delaware law.
The Registrant currently carries indemnity insurance pursuant to which its
directors and officers are insured under certain circumstances against certain
liabilities or losses, including liabilities under the Securities Act. The
Registrant has entered into indemnity agreements with certain directors and
executive officers. These agreements, among other things, indemnify the
directors and executive officers for certain expenses (including attorneys'
fees), judgments, fines, and settlement payments incurred by such persons in any
action, including any action by or in the right of the Registrant, in connection
with the good faith performance of their duties as a director or officer. The
indemnification agreements also provide for the advance payment by the
Registrant of defense expenses incurred by the director or officer; however, the
affected director or officer must undertake to repay such amounts advanced if it
is ultimately determined that such director or officer is not entitled to be
indemnified.
At present, there is no pending litigation involving a director or officer
of the Registrant in which indemnification is required or permitted, and the
Registrant is not aware of any threatened litigation or proceeding that may
result in a claim for such indemnification.
Item 16. Exhibits.
Exhibit
Number
------
5.1 Opinion of Wilson Sonsini Goodrich & Rosati
10.1 Form of Unit Purchase Agreement
10.2 Form of Warrant to Purchase Shares of Common Stock
II-1
<PAGE> 12
23.1 Consent of independent auditors
23.2 Consent of Wilson Sonsini Goodrich & Rosati (included in Exhibit
5.1)
24.1 Power of Attorney (contained on Page II-3)
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be an initial bona
fide offering thereof.
(c) 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 California General Corporations Code, the
Certificate of Incorporation of the Registrant, the Bylaws of the Registrant,
Indemnification Agreements entered into between the Registrant and it officers
and directors, 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 the
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 the such issue.
II-2
<PAGE> 13
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirement for filing on Form S-3 and has duly caused the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Carson, State of Nevada, on this 18th day of May,
1998.
BOREALIS TECHNOLOGY CORPORATION
By: /s/ Patrick Grady
----------------------------------------
Patrick Grady
President, Chief Executive Officer and Chairman
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints, jointly and severally, Patrick Grady and
Elizabeth Gasper, and each one of them, individually and without the other, his
or her attorney-in-fact, each with full power of substitution, for him or her in
any and all capacities, to sign any and all amendments to this Registration
Statement on Form S-3, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
or her substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated.
Signature Title
--------- -----
/s/ Patrick Grady President, Chief Executive Officer and Chairman
- -----------------------
Patrick Grady
/s/ Elizabeth Gasper Chief Financial Officer (principal financial and
- ----------------------- accounting officer)
Elizabeth Gasper
Director
- -----------------------
Ed Esber
/s/ Curtis Faith Director
- -----------------------
Curtis Faith
/s/ Joseph Marengi Director
- -----------------------
Joseph Marengi
Director
- -----------------------
Peter Pitsker
II-3
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
------ ----------- -------------
<S> <C> <C>
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation II-5
10.1 Form of Unit Purchase Agreement II-6
10.2 Form of Warrant to Purchase Shares of Common Stock II-16
23.1 Consent of Independent Auditors II-19
23.2 Consent of Counsel (included in Exhibit 5.1) II-5
24.1 Power of Attorney (included in the signature page hereof) II-3
</TABLE>
<PAGE> 1
Exhibit 5.1
May 18, 1998
Borealis Technology Corporation
4070 Silver Sage Drive
Carson City, Nevada 89701
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 (the "Registration
Statement") to be filed by you with the Securities and Exchange Commission on or
about May 18, 1998 in connection with the registration for resale under the
Securities Act of 1933, as amended, of 1,501,500 previously issued and
outstanding shares of your Common Stock (the "Shares"). As your legal counsel,
we have also reviewed the proceedings taken in connection with the issuance of
the Shares.
It is our opinion that the Shares are validly issued, fully paid and
nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including any Prospectus constituting a part thereof,
and any amendments thereto.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
/s/ Wilson Sonsini Goodrich & Rosati
II-5
<PAGE> 1
Exhibit 10.1
UNIT PURCHASE AGREEMENT
Borealis Technology Corporation
4070 Silver Sage Drive
Carson City, NV 89701
Ladies & Gentlemen:
The undersigned,_____________ (the "Purchaser"), hereby confirms its
agreement with you as follows:
1. This Unit Purchase Agreement (the "Agreement") is made as of _________,
1998 between Borealis Technology Corporation, a Delaware corporation (the
"Company"), and the Purchaser.
2. The Company has authorized the sale and issuance of units up to an
amount whose aggregate purchase price shall not exceed $2,426,010 (the "Units"),
each Unit consisting of two (2) shares (the "Shares") of Common Stock of the
Company and one warrant (a "Warrant") to purchase one (1) share of Common Stock
of the Company.
3. The purchase price per Unit (the "Price per Unit") will be $5.00. The
Company and the Purchaser agree that the Purchaser will purchase and the Company
will sell, at such Price per Unit, the number of Units whose aggregate purchase
price equals $____________ pursuant to the Terms and Conditions for Purchase of
Units attached hereto as Annex I and incorporated herein by reference as if
fully set forth herein. Unless otherwise requested by the Purchaser,
certificates representing the Shares and the Warrants purchased by the Purchaser
will be registered in the Purchaser's name and address as set forth below.
Please confirm that the foregoing correctly sets forth the agreement
between us by signing in the space provided below for that purpose.
_____________________________________
PURCHASER
By:__________________________________
Title:_______________________________
Address:_____________________________
_____________________________________
Tax ID No.:__________________________
AGREED AND ACCEPTED:
_________________________________
BOREALIS TECHNOLOGY CORPORATION
By:______________________________
Title:___________________________
II-6
<PAGE> 2
ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF UNITS
1. Authorization and Sale of Units
1.1 Authorization. The Company has authorized the sale and issuance of
units up to an amount whose aggregate purchase price shall not exceed $2,426,010
(the "Units"), each Unit consisting of two (2) shares of Common Stock of the
Company (the "Shares") and one warrant to purchase one (1) share of Common Stock
of the Company (a "Warrant"), pursuant to the Unit Purchase Agreement to which
this Annex I is attached (the "Agreement"). The shares of Common Stock of the
Company to be issued upon exercise of the Warrants are hereinafter referred to
as the "Warrant Shares".
1.2 Sale of Units. Subject to the terms and conditions of the
Agreement, the Company agrees to issue and sell to each Purchaser and each
Purchaser severally agrees to purchase from the Company the number of Units set
forth in the Agreement.
2. Closing Dates; Delivery
2.1 Closings. The first closing of the purchase and sale of the Units
hereunder (the "First Closing") shall be conditioned upon receipt of capital
contributions from investors of at least $200,000 (the "Minimum Condition"). The
First Closing shall be held immediately following the satisfaction of the
Minimum Condition at the offices of Wilson, Sonsini, Goodrich & Rosati, P.C.,
650 Page Mill Road, Palo Alto, California, or at such other time and place as
shall be mutually agreed upon by the Company and the Purchasers purchasing a
majority of the units at the First Closing. The Company may at its option
schedule additional closings of the purchase and sale of up to the balance of
the Units not sold at the First Closing (the "Subsequent Closings," each,
together with the First Closing, referred to herein as a "Closing") on such date
or dates as the Company may determine.
2.2 Delivery. At each Closing, the Company will deliver to each
Purchaser (a) a certificate, registered in the Purchaser's name and address as
shown in the Agreement, representing the number of Shares to be purchased by the
Purchaser and (b) a Warrant certificate, substantially in the form attached
hereto as Exhibit A, representing the Warrant to be purchased by such Purchaser.
Such delivery shall be against payment therefor by wire transfer of the
aggregate purchase price of the Units set forth in the Agreement to an escrow
account established by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, escrow agent for the Company (the "Escrow Agent"). All payments
received by the Escrow Agent prior to each date of Closing (each a "Closing
Date") shall be held in a trust account for the benefit of the Purchasers
pending such Closing.
3. Representations and Warranties of the Company
The Company represents and warrants to the Purchasers as of the date of
the Agreement as follows:
3.1 Organization; Standing; Qualification to Do Business. The Company
is a corporation duly organized and validly existing under, and by virtue of,
the laws of the State of Delaware and is in good standing as a domestic
corporation under the laws of said state. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the ownership or leasing of its properties or the conduct of its
business requires such qualification, except where the failure to be so
qualified or be in good standing is not reasonably likely to have a material
adverse effect on the Company.
3.2 Corporate Power; Authorization. The Company has all requisite legal
and corporate power and has taken all requisite corporate action to execute and
deliver the Agreement, to sell and issue the Units and to carry out and perform
all of its obligations under the Agreement. The Agreement constitutes the legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms, except (a) as rights to indemnification and contribution hereunder may be
limited by applicable law, equitable principles or public policy, (b) as limited
by applicable bankruptcy, insolvency,
II-7
<PAGE> 3
reorganization or similar laws relating to or affecting the enforcement of
creditors' rights generally and (c) as limited by equitable principles
generally. To the Company's knowledge, the execution and delivery of the
Agreement does not, and the performance of the Agreement and the compliance with
the provisions hereof and the issuance, sale and delivery of the Units by the
Company will not materially conflict with, or result in a material breach or
violation of the terms, conditions or provisions of, or constitute a material
default under the Certificate of Incorporation or Bylaws of the Company or any
statute, law, rule or regulation to which the Company or any of its properties
is subject.
3.3 Issuance and Delivery of the Shares, Warrants and Warrant Shares.
The Shares and the Warrants, when issued in compliance with the provisions of
the Agreement, and the Warrant Shares, when issued in compliance with the
Agreement and the Warrants, will be validly issued, fully paid and
nonassessable.
3.4 Private Placement Offering Memorandum; SEC Documents; Financial
Statements. The Company has filed in a timely manner all documents that the
Company was required to file with the Securities and Exchange Commission (the
"SEC") under Sections 13, 14(a) and 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), during the 12 months preceding the date
of the Agreement. As of their respective filing dates, all documents filed by
the Company with the SEC (the "SEC Documents") complied in all material respects
with the requirements of the Exchange Act or the Securities Act of 1933, as
amended (the "Securities Act"), as applicable. Neither the Agreement nor any of
the SEC Documents as of their respective dates included an untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
SEC Documents (the "Financial Statements") comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto. The Financial Statements have
been prepared in accordance with generally accepted accounting principles
consistently applied and fairly present the consolidated financial position of
the Company and any subsidiaries at the dates thereof and the consolidated
results of their operations and consolidated cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal, recurring
adjustments).
3.5 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
the Agreement, except for (a) compliance with the securities and blue sky laws
in the states in which Units are offered and/or sold, (b) the filing of a
registration statement and any amendments thereto with the SEC as contemplated
by Section 7.1 of the Agreement and (c) the filing of a Notification Form For
the Listing of Additional Shares with The Nasdaq Stock Market and a Form 10-C
with the SEC.
3.6 No Material Adverse Change. Except as otherwise disclosed herein or
in the Company's Private Placement Offering Memorandum prepared on November 18,
1997 (such Private Placement Offering Memorandum, including all exhibits
thereto, being hereinafter referred to as the "Memorandum"), since September 30,
1997, there has not been (a) any changes in the assets, liabilities, financial
condition, business prospects or operations of the Company which, individually
and in the aggregate, have had a material adverse effect on the Company or (b)
any declaration or payment of any dividend or other distribution of assets of
the Company.
3.7 Litigation. Except as set forth in the Memorandum, there are no
actions, suits, proceedings or investigations pending or, to the best of the
Company's knowledge, threatened against the Company or any of its properties
before or by any court or arbitrator or any governmental body, agency or
official that (a) might have a material adverse effect on the Company and its
subsidiaries considered as one enterprise or (b) might impair the ability of the
Company to perform in any material respect its obligations under the Agreement.
3.8 Private Placement. Assuming the accuracy of the representations and
warranties of the Purchasers, and compliance by the Purchasers of all of their
covenants and agreements contained in the Agreement, the offer, sale and
issuance by the Company of the Units to the Purchasers as contemplated in the
Agreement constitute transactions exempt from the registration requirements of
Section 5 of the Securities Act.
II-8
<PAGE> 4
4. Representations, Warranties and Covenants of the Purchasers
Each Purchaser hereby severally represents and warrants, and covenants
and agrees with, to the Company, as of the Closing Date, as follows:
4.1 Authorization. Purchaser has all requisite legal and corporate or
other power and capacity and has taken all requisite corporate or other action
to execute and deliver the Agreement, to purchase the Units to be purchased by
it and to carry out and perform all of its obligations under the Agreement. The
Agreement constitutes the legal, valid and binding obligation of the Purchaser,
enforceable in accordance with its terms, except (a) as rights to
indemnification and contribution hereunder may be limited by applicable law,
equitable principles or public policy, (b) as limited by applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting the
enforcement of creditors' rights generally and (c) as limited by equitable
principles generally.
4.2 Investment Experience. Purchaser is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Purchaser is aware of the
Company's business affairs and financial condition and has had access to and has
acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Units. Purchaser has such business and
financial experience as is required to give it the capacity to protect its own
interests in connection with the purchase of the Units. Purchaser is not a
"broker" or a "dealer" as defined in the Exchange Act and is not an "affiliate"
of the Company as defined in the Securities Act.
4.3 Investment Intent. Purchaser is purchasing the Units for its own
account as principal, for investment purposes only, and not with a present view
to, or for, resale, distribution or fractionalization thereof, in whole or in
part, within the meaning of the Securities Act. Purchaser understands that its
acquisition of the Units has not been registered under the Securities Act or
registered or qualified under any state securities law in reliance on specific
exemptions therefrom, which exemptions may depend upon, among other things, the
bona fide nature of Purchaser's investment intent as expressed herein. Purchaser
has, in connection with its decision to purchase the number of Units set forth
in the Agreement, relied solely upon the representations and warranties of the
Company contained herein. Purchaser will not, directly or indirectly, offer,
sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) any of the Shares, Warrants
or Warrant Shares except in compliance with the Securities Act and the rules and
regulations promulgated thereunder.
4.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the Shares, the Warrants and the Warrant
Shares may not be resold or otherwise transferred except in a transaction
registered under the Securities Act or unless an exemption from such
registration is available. Purchaser understands that the certificates
evidencing the Shares and the Warrant Shares, and the Warrants, will be
imprinted with a legend that prohibits the transfer of the Shares, the Warrants
or the Warrant Shares unless (a) such transaction is registered or such
registration is not required, and (b) if the transfer is pursuant to an
exemption from registration other than Rule 144 under the Securities Act, and if
the Company shall so request in writing, an opinion reasonably satisfactory to
the Company of counsel reasonably satisfactory to the Company is obtained to the
effect that the transaction is so exempt.
4.5 Restriction on Sales, Short Sales and Hedging Transactions.
Purchaser will not, prior to the effectiveness of the Registration Statement,
sell, offer to sell, solicit offers to buy, dispose of, loan, pledge, or grant
any right with respect to (collectively, a "Disposition"), the Common Stock of
the Company, nor will Purchaser engage in any hedging or other transaction which
is designed to or could reasonably be expected to lead to or result in a
Disposition of Common Stock of the Company by the Purchaser or any other person
or entity. Such prohibited hedging or other transactions would include without
limitation effecting any short sale or having in effect any short position
(whether or not such sale or position is against the box and regardless of when
such position was entered into) or any purchase, sale or grant of any right
(including without limitation any put or call option) with respect to the Common
Stock of the Company or with respect to any security (other than a broad-based
market basket or index) that includes, relates to or derives any significant
part of its value from the Common Stock of the Company.
4.6 No Legal, Tax or Investment Advice. Purchaser understands that
nothing in the Memorandum, the Agreement or any other materials presented to
Purchaser in connection with the purchase and sale of the Units constitutes
II-9
<PAGE> 5
legal, tax or investment advice. Purchaser has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Units.
5. Conditions to Closing of Purchasers
Each Purchaser's obligation to purchase the Units at the Closing is, at
the option of such Purchaser, subject to the fulfillment or waiver as of the
Closing Date of the following conditions:
5.1 Representations and Warranties. The representations and warranties
made by the Company in Section 3 hereof shall be true and correct in all
material respects when made and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of the Closing Date.
5.2 Covenants. All covenants, agreements and conditions contained in
the Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all respects.
5.3 Blue Sky. The Company shall have obtained all necessary blue sky
law permits and qualifications, or secured exemptions therefrom, required by any
state or foreign or other jurisdiction for the offer and sale of the Units.
5.4 Minimum Purchase. The Company shall have received executed
Agreements with respect to not fewer than the number of Units whose aggregate
purchase price is equal to $200,000.
6. Conditions to Closing of Company
The Company's obligation to sell and issue the Units at the Closing is,
at the option of the Company, subject to the fulfillment or waiver of the
following conditions:
6.1 Representations and Warranties. The representations and warranties
made by each Purchaser in Section 4 hereof shall be true and correct in all
material respects when made and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of the Closing Date.
6.2 Covenants. All covenants, agreements and conditions contained in
the Agreement to be performed by the Purchasers on or prior to the Closing Date
shall have been performed or complied with in all material respects.
6.3 Blue Sky. The Company shall have obtained all necessary blue sky
law permits and qualifications, or secured exemptions therefrom, required by any
state or foreign or other jurisdiction for the offer and sale of the Units.
6.4 Minimum Purchase. The Company shall have received executed
Agreements with respect to not fewer than the number of Units whose aggregate
purchase price is equal to $200,000.
7. Affirmative Covenants
The Company and the Purchasers hereby respectively covenant and agree
as follows:
7.1 Registration Requirements.
(a) The Company shall use its commercially reasonable efforts to
secure the effectiveness, not later than the date which is 90 days following the
last Closing hereunder, of a registration statement on Form S-3 filed
with the SEC under the Securities Act (the "Registration Statement") to register
the resale of the Shares and the Warrant Shares (collectively, the "Registerable
Securities").
(b) The Company shall pay all Registration Expenses (as defined
below) in connection with any registration, qualification or compliance
hereunder, and each Purchaser shall pay all Selling Expenses (as defined below)
and other expenses that are not Registration Expenses relating to the
Registerable Securities resold by such Purchaser.
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"Registration Expenses" shall mean all expenses, except for Selling Expenses,
incurred by the Company in complying with the registration provisions herein
described, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
for the Company, blue sky fees and expenses and the expense of any special
audits incident to or required by any such registration. "Selling Expenses"
shall mean all selling commissions, underwriting fees and stock transfer taxes
applicable to the Registerable Securities and all fees and disbursements of
counsel for any Purchaser.
(c) In connection with the registration effected by the Company
pursuant to these registration provisions, the Company will use its commercially
reasonable efforts to: (i) keep such registration effective until the earlier of
(A) the second anniversary of the First Closing, (B) such date as all of the
Registerable Securities have been resold or (C) such time as all of the
Registerable Securities held by the Purchasers can be sold within a given
three-month period without compliance with the registration requirements of the
Securities Act pursuant to Rule 144 promulgated thereunder ("Rule 144"); (ii)
prepare and file with the SEC such amendments and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by the
Registration Statement; (iii) furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as a Purchaser from time to time may reasonably request; (iv) cause
the Shares and the Warrant Shares to be listed on each securities exchange and
quoted on each quotation service on which similar securities issued by the
Company are then listed or quoted; (v) provide a transfer agent and registrar
for all securities registered pursuant to the Registration Statement; (vi)
otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC; and (vii) file the documents required of the Company and
otherwise use its commercially reasonable efforts to maintain requisite blue sky
clearance in (X) all jurisdictions in which any of the Units are originally sold
and (Y) all other states specified in writing by a Purchaser, provided, however,
that the Company shall not be required to qualify to do business or consent to
service of process in any state in which it is not now so qualified or has not
so consented.
(d) If any Purchaser shall propose to sell any Registerable
Securities pursuant to the Registration Statement, it shall notify the Company
of its intent to do so at least three (3) full business days prior to such sale.
Such notice shall be deemed to constitute a representation that any written
information previously supplied by such Purchaser (including without limitation
the information referred to in Section 8.4 hereof) is accurate as of the date of
such notice. At any time within such three (3) business-day period, the Company
may require that such Purchaser delay such sale of any Registerable Securities
pursuant to the Registration Statement for an initial period not to exceed sixty
(60) days; provided, however, that in order to exercise this right, the Company
must deliver a certificate in writing to the Purchaser to the effect that a
delay in such sale is necessary because a sale pursuant to such Registration
Statement in its then-current form would not be in the best interests of the
Company and its shareholders due to disclosure obligations of the Company.
Notwithstanding the foregoing, the Company shall not be entitled to exercise its
right to delay a sale more than three (3) times in any calendar year. Each
Purchaser hereby covenants and agrees that it will not sell any Registerable
Securities pursuant to the Registration Statement during the periods the
Registration Statement is withdrawn as set forth in this Section 7.1(d).
7.2 Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Purchaser from and against any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) to which such Purchaser may become
subject (under the Securities Act or otherwise) insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of, or are based upon, any untrue statement of a material fact or omission to
state a material fact in the Registration Statement on the effective date
thereof, or arise out of any failure by the Company to fulfill any undertaking
included in the Registration Statement, and the Company will, as incurred,
reimburse such Purchaser for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that the Company shall not be liable in any such case
to the extent that such loss, claim, damage or liability arises out of, or is
based upon (i) an untrue statement or omission in such Registration Statement in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Purchaser specifically for use in preparation of
the Registration Statement, (ii) the failure of such Purchaser to comply with
the covenants and agreements contained in Sections 7.1(d), 8.3 or 8.4 hereof, or
(iii) an untrue statement or omission in any prospectus that is corrected in
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<PAGE> 7
any subsequent prospectus, or supplement or amendment thereto, that was
delivered to the Purchaser prior to the pertinent sale or sales by the
Purchaser.
(b) Each Purchaser, severally and not jointly, agrees to indemnify
and hold harmless the Company from and against any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) to which the Company
may become subject (under the Securities Act or otherwise) insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon (i) an untrue statement of a material
fact or omission to state a material fact in the Registration Statement in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Purchaser specifically for use in preparation of
the Registration Statement, (ii) the failure of such Purchaser to comply with
the covenants and agreements contained in Sections 7.1(d), 8.3 or 8.4 hereof, or
(iii) an untrue statement or omission in any prospectus that is corrected in any
subsequent prospectus, or supplement or amendment thereto, that was delivered to
the Purchaser prior to the pertinent sale or sales by the Purchaser, and each
Purchaser, severally and not jointly, will, as incurred, reimburse the Company
for any legal or other expenses reasonably incurred in investigating, defending
or preparing to defend any such action, proceeding or claim.
(c) Promptly after receipt by any indemnified person of a notice of
a claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 7.2, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been notified thereof,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to the indemnified person. After notice from the
indemnifying person to such indemnified person of the indemnifying person's
election to assume the defense thereof, the indemnifying person shall not be
liable to such indemnified person for any legal expenses subsequently incurred
by such indemnified person in connection with the defense thereof.
(d) If the indemnification provided for in this Section 7.2 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as 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 Company on the one hand and the Purchasers on the
other 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 shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or a Purchaser on the other and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Purchasers agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro rata
allocation (even if the Purchasers were treated as one entity for such purpose)
or by any other method of allocation which does not take into account the
equitable considerations referred to above in this subsection (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 in this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Purchasers' obligations in this subsection (d) to
contribute are several in proportion to their respective sales of Shares or
Warrant Shares, as the case may be, to which such loss relates and not joint.
8. Restrictions on Transferability of Shares, Warrants and Warrant
Shares; Compliance with Securities Act
8.1 Restrictions on Transferability. The Shares, the Warrants and the
Warrant Shares shall not be transferable in the absence of registration under
the Securities Act or an exemption therefrom or in the absence of compliance
with any term of the Agreement. The Company shall be entitled to give stop
transfer instructions to its transfer agent with respect to the Shares, the
Warrants and the Warrant Shares in order to enforce the foregoing restrictions.
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<PAGE> 8
8.2 Restrictive Legend. Each certificate representing the Shares, the
Warrants and the Warrant Shares shall bear substantially the following legends
(in addition to any legends required under applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
ADDITIONALLY, THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS SPECIFIED IN A UNIT
PURCHASE AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL PURCHASER, AND
NO TRANSFER OF SECURITIES SHALL BE VALID OR EFFECTIVE ABSENT COMPLIANCE
WITH SUCH RESTRICTIONS. ALL SUBSEQUENT HOLDERS OF THIS CERTIFICATE WILL
HAVE AGREED TO BE BOUND BY CERTAIN OF THE TERMS OF THE AGREEMENT,
INCLUDING SECTIONS 7.1, 8.3 AND 8.4 OF THE AGREEMENT. A COPY OF THE
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
REGISTERED HOLDER OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY.
8.3 Transfer of Shares, Warrants and Warrant Shares. Each Purchaser
hereby covenants with the Company not to make any sale of the Shares, the
Warrants or the Warrant Shares except either (a) a sale of Shares or Warrant
Shares in accordance with the Registration Statement, in which case the
Purchaser covenants to comply with the requirement of delivering a current
prospectus, (b) a sale of Shares, Warrants or Warrant Shares in accordance with
Rule 144, in which case the Purchaser covenants to comply with Rule 144, or (c)
subject to such conditions as the Company in its sole discretion shall impose,
in accordance with another exemption from the registration requirements of the
Securities Act. Each Purchaser further acknowledges and agrees that such Shares,
Warrants and Warrant Shares are not transferable on the books of the Company
unless the certificate submitted to the Company's transfer agent evidencing such
Shares, Warrants or Warrant Shares is accompanied by such additional
certification, documentation or information as the Company in its sole
discretion shall require in order to effect such sale in accordance with the
Registration Statement, Rule 144 or such other exemption from the registration
requirements of the Securities Act. The legend set forth in Section 8.2 will be
removed from a certificate representing Shares, Warrants or Warrant Shares
following and in connection with any sale of Shares, Warrants or Warrant Shares,
as the case may be, pursuant to subsection (a) or (b) hereof but not in
connection with any sale of Shares, Warrants or Warrant Shares, as the case may
be, pursuant to subsection (c) or (d) hereof.
8.4 Purchaser Information. Each Purchaser covenants that it will
promptly furnish to the Company such information, including information
regarding such Purchaser, the Registerable Securities held by such Purchaser,
and the distribution proposed, as the Company shall reasonably request in
writing to enable the Company to comply with the provisions hereof in connection
with any registration, qualification or compliance referred to in this
Agreement.
9. Miscellaneous
9.1 Waivers and Amendments. The terms of the Agreement may be waived or
amended with the written consent of the Company and the record holders of more
than 50% of the Shares then outstanding and held by Purchasers (including, for
purposes of such calculation, outstanding Warrant Shares and shares of Common
Stock issuable upon exercise of outstanding Warrants), the terms of the
Agreement may be waived or amended and any such amendment or waiver shall be
binding upon the Company and all holders of Shares, Warrants or Warrant Shares.
9.2 Broker's Fee. Each Purchaser acknowledges that the Company intends
to pay a fee and issue warrants to H.J. Meyers & Co., Inc. or certain dealers
selected by it ("H.J. Meyers") in respect of the sale of the Units to the
Purchasers as described in the Memorandum. Each of the parties hereto hereby
represents that, on the basis of any actions and agreements by it, there are no
other brokers or finders entitled to compensation in connection with the sale of
the Units to the Purchasers.
9.3 Governing Law. The Agreement shall be governed in all respects by
and construed in accordance with the laws of the State of Delaware without
regard to conflicts of laws principles.
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<PAGE> 9
9.4 Survival. The representations, warranties, covenants and agreements
made in the Agreement shall survive any investigation made by the Company or the
Purchasers and shall survive the Closing.
9.5 Successors and Assigns. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties to the Agreement, provided, however, that the
provisions hereof shall not inure to the benefit of subsequent holders of
Shares, Warrants or Warrant Shares purchasing pursuant to Section 8.3(a) or
8.3(b). Notwithstanding the foregoing, no Purchaser shall assign the Agreement
without the prior written consent of the Company.
9.6 Entire Agreement. The Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof.
9.7 Indemnification of Escrow Agent. The Company and each of the
Purchasers jointly and severally agree to indemnify and hold harmless Wilson,
Sonsini, Goodrich & Rosati, Professional Corporation and all partners,
employees, agents and affiliates thereof ("WSG&R") against any and all losses,
claims, damages, liabilities, costs, expenses and disbursements (including fees
and expenses of counsel) (collectively, "Losses") arising out of or in
connection with WSG&R's services hereunder. Each of the Company and the
Purchasers further agree that WSG&R shall not have any liability whatsoever
(whether direct or indirect, in contract or tort or otherwise) to the Company or
any Purchaser (or any party claiming through either of them) arising out of or
in connection with its services hereunder. The Company and the Purchasers
further agree that WSG&R shall be entitled to rely on their respective
representations, warranties, covenants and agreements herein and pursuant
hereto. The Company and the Purchasers acknowledge and agree that WSG&R is an
intended third-party beneficiary of this Section 9.7.
9.8 Notices, etc. All notices and other communications required or
permitted under the Agreement shall be in writing and may be delivered in
person, by telecopy, overnight delivery service or United States mail, addressed
to the Company or the Purchasers, as the case may be, at their respective
addresses set forth in the Agreement, or at such other address as the Company or
the Purchasers shall have furnished to the other party in writing. All notices
and other communications shall be effective upon the earlier of (a) actual
receipt thereof by the person to whom notice is directed or (b) (i) in the case
of notices and communications sent by personal delivery or telecopy, the time
such notice or communication arrives at the applicable address or is
successfully sent to the applicable telecopy number, (ii) in the case of notices
and communications sent by overnight delivery service, at noon (local time) on
the second business day following the day such notice or communication is sent,
and (iii) in the case of notices and communications sent by United States mail,
five days after such notice or communication is deposited in the United States
mail.
9.9 Severability of the Agreement. If any provision of the Agreement
shall be judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
9.10 Counterparts. The Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
9.11 Further Assurances. Each party to the Agreement shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as the other party hereto may reasonably request in order to carry
out the intent and accomplish the purposes of the Agreement and the consummation
of the transactions contemplated hereby.
9.12 Termination. In the event that the First Closing shall not have
occurred on or before January 31, 1998, the Agreement shall terminate at the
close of business on such date.
9.13 Expenses. The Company and each such Purchaser shall bear its own
expenses incurred on its behalf with respect to the Agreement and the
transactions contemplated hereby, including fees of legal counsel.
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<PAGE> 10
9.14 Currency. All references to "dollars" or "$" in the Agreement
shall be deemed to refer to United States dollars.
II-15
<PAGE> 1
Exhibit 10.2
THIS WARRANT AND THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED PURSUANT TO
THE EXERCISE OF THIS WARRANT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE COMPANY
RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH
SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT UNLESS SOLD PURSUANT TO RULE 144 PROMULGATED UNDER SAID
ACT.
BOREALIS TECHNOLOGY CORPORATION
WARRANT TO PURCHASE SHARES OF COMMON STOCK
This Warrant is being issued to ____________ (the "Holder") in
connection with the Unit Purchase Agreement dated ___________ between the Holder
and Borealis Technology Corporation, a Delaware corporation (the "Company").
This Warrant entitles the Holder to subscribe for and purchase up to _______
shares (the "Maximum Number of Shares") of fully paid and nonassessable Common
Stock of the Company (the "Shares") (as adjusted pursuant to Section 3 hereof)
at the price of $5.00 per share (the "Exercise Price") (as adjusted pursuant to
Section 3 hereof) subject to the provisions and upon the terms and conditions
hereinafter set forth.
10. Method of Exercise; Payment; Issuance of New Warrant. This Warrant
may be exercised by the Holder hereof at any time on or prior to December 18,
2000. Exercise shall be made, in whole or in part, by the surrender of this
Warrant (with the notice of exercise form attached hereto as Exhibit A duly
executed) at the principal office of the Company and by the payment to the
Company of an amount equal to the Exercise Price multiplied by the number of
Shares being purchased, which amount may be paid in cash or by check. In the
event of any exercise of the rights represented by this Warrant, certificates
for the Shares so purchased shall be delivered to the Holder hereof within a
reasonable time and, unless this Warrant has been fully exercised or expired, a
new Warrant representing that portion of the Shares, if any, with respect to
which this Warrant shall not then have been exercised, shall also be issued to
the Holder within such reasonable time.
11. Stock Fully Paid; Reservation of Shares. All of the Shares issuable
upon the exercise of the rights represented by this Warrant will, upon issuance
and receipt of the Exercise Price therefor, be fully paid and nonassessable.
During the period within which the rights represented by this Warrant may be
exercised, the Company shall at all times have authorized and reserved for
issuance sufficient shares of its Common Stock to provide for the exercise of
the rights represented by this Warrant.
12. Adjustment of Exercise Price and Number of Shares. Subject to the
provisions of Section 1 hereof, the number and kind of securities purchasable
upon the exercise of this Warrant and the Exercise Price therefor shall be
subject to adjustment from time to time upon the occurrence of certain events,
as follows:
a. In the event the Company shall at any time subdivide the
outstanding shares of Common Stock, or shall issue a stock dividend on its
outstanding Common Stock, the number of Shares issuable upon exercise of this
Warrant immediately prior to such subdivision or to the issuance of such stock
dividend shall be proportionately increased, and the Exercise Price shall be
proportionately decreased, and in the event the Company shall at any time
combine the outstanding shares of Common Stock, the number of shares issuable
upon exercise of this Warrant immediately prior to such combination shall be
proportionately decreased, and the Exercise Price will be proportionately
increased, effective at the close of business on the date of such subdivision,
stock dividend or combination, as the case may be.
b. If the Company is recapitalized through the subdivision or
combination of its outstanding shares of Common Stock into a larger or smaller
number of shares, the number of shares of Common Stock for which this Warrant
may be exercised shall be increased or reduced in the same proportion as the
increase or decrease in the outstanding shares of
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<PAGE> 2
Common Stock and the then applicable Exercise Price shall be adjusted by
multiplying such number of shares of Common Stock purchasable upon exercise
hereof immediately prior to such subdivision or combination and the denominator
of which shall be the number of shares of Common Stock purchasable immediately
following such subdivision or combination.
c. Whenever the number of shares shall be adjusted as required by
the provisions of this Section 3, the Company forthwith shall file in the
custody of its secretary or an assistant secretary, at its principal office, an
Officer's Certificate showing the adjusted number of shares and setting forth in
reasonable detail the circumstances requiring the adjustment. Each such
Officer's Certificate shall be made available at all reasonable times during
reasonable hours for inspection by the Holder.
13. Fractional Shares. No fractional Shares will be issued in
connection with an exercise hereunder, but in lieu of such fractional Shares the
Company shall make a cash payment therefor upon the basis of the Exercise Price
then in effect.
14. Redemption Rights.
a. In the event that either (i) the average last sale price of the
Company's Common Stock as quoted on the Nasdaq SmallCap Market (or such other
automatic quotation system, over-the-counter market or exchange upon which the
Company's Common Stock may then be traded) over a period of 20 consecutive
trading days shall be equal to or greater than $9.00 per share (as equitably
adjusted for stock splits and the like) or (ii) the Company shall receive the
prior written consent of H.J. Meyers & Co., Inc. or any successor in interest
thereto (the "Sales Agent"), in its sole discretion, then the Company may, in
its sole discretion, notify the Holder in writing of its intention to redeem
this Warrant (the "Redemption Notice"). Notwithstanding anything herein to the
contrary, if the Redemption Notice is delivered pursuant to subsection (i) of
the preceding sentence, the Redemption Notice shall be void and of no force
unless sent by the Company to the Holder no later than fifteen days after the
last of the 20 trading days referred to in such subsection (i). The Redemption
Notice shall set forth (i) the date upon which the Company shall redeem this
Warrant (the "Redemption Date") which date shall be no earlier than thirty days
following the date the Company sends the Redemption Notice and (ii) the place at
which payment may be obtained.
b. On the Redemption Date, the Holder shall surrender to the
Company this Warrant (unless earlier exercised in full) in the manner and at the
place designated in the Redemption Notice, and thereupon, $0.05 shall be payable
to the order of the Holder and this Warrant shall be canceled. From and after
5:00 p.m., Nevada time, on the day immediately preceding the Redemption Date,
all rights of the Holder hereunder (other than rights to receive payment
pursuant to this Section 5) shall cease, and this Warrant shall not thereafter
be transferred on the books of the Company or be deemed to be outstanding for
any purpose whatsoever.
c. The Holder acknowledges that the Sales Agent is under no
obligation to grant or withhold its consent to a redemption of the Warrants
under any circumstances, regardless of the potential effect of such potential
redemption on the Company, the stockholders of the Company or the Holder. The
Holder further acknowledges that if the Company seeks to exercise its right to
redeem this Warrant at a time that is not advantageous to the Holder that there
can be no assurance that the Sales Agent will withhold its consent to such
exercise.
15. Transfer, Exchange, Assignment or Loss of Warrant.
a. This Warrant may not be assigned or transferred except as
provided in this Section 6 and in accordance with and subject to the provisions
of the Securities Act of 1933, as amended, and the Rules and Regulations
promulgated thereunder (said Act and such Rules and Regulations being
hereinafter collectively referred to as the "Act"). Any purported transfer or
assignment made other than in accordance with this Section 6 shall be null and
void and of no force and effect.
b. Prior to any transfer of this Warrant, other than in an offering
registered under the Act, the Holder shall notify the Company of its intention
to effect such transfer, indicating the circumstances of the proposed transfer
and upon request furnish the Company with an opinion of counsel, in form and
substance reasonably satisfactory to counsel for the Company, to the effect that
the proposed transfer may be made without registration under the Act or
qualification under any applicable state securities law.
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<PAGE> 3
c. Each certificate for Shares or for any other security issued or
issuable upon exercise of this Warrant shall contain a legend substantially to
the following effect:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH
SECURITIES MAY NOT BE TRANSFERRED UNLESS A REGISTRATION
STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER OR IN
THE OPINION OF COUNSEL, SUCH TRANSFER MAY BE MADE PURSUANT TO
RULE 144 OR REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER
FOR SUCH TRANSFER TO COMPLY WITH THE ACT."
d. Any assignment permitted hereunder shall be made by surrender of
this Warrant to the Company at its principal office with the Assignment Form
attached hereto as Exhibit B duly executed. In such event the Company shall,
without charge for any issuance or transfer tax or other cost incurred by the
Company with respect to such transfer, execute and deliver a new Warrant in the
name of the assignee named in such instrument of assignment and this Warrant
shall promptly be canceled. This Warrant may be divided or combined with other
warrants which carry the same rights upon presentation thereof at the principal
office of the Company together with a written notice signed by the Holder
thereof, specifying the names and denominations in which new warrants are to be
issued.
e. Upon receipt by the Company of evidence satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and of indemnity
satisfactory to it, and upon surrender and cancellation of this Warrant, if
mutilated, the Company will execute and deliver a new Warrant of like tenor and
date and any such lost, stolen, or destroyed Warrant shall thereupon become
void.
16. Rights of Shareholders. No holder of this Warrant shall be
entitled, as a Warrant holder, to vote or receive dividends or be deemed the
holder of Common Stock or any other securities of the Company which may at any
time be issuable on the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the holder of this Warrant, as
such, any of the rights of a shareholder of the Company or any right to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of stock, change
of par value or change of stock to no par value, consideration, merger,
conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have been
exercised and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
17. Notices, Etc. All notices and other communications from the Company
to the Holder shall be mailed by first class registered or certified mail,
postage prepaid, sent by facsimile or delivered personally by hand or by a
nationally recognized courier addressed to the Holder at the address last shown
on the records of the Company for the Holder. All such notices and other written
communications shall be effective on the earlier of the date of mailing,
confirmed facsimile transfer, delivery to the Holder or delivery to a nationally
recognized courier.
18. Governing Law, Headings. This Warrant is being delivered in the
State of Delaware and shall be construed and enforced in accordance with and
governed by the laws of such State. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any of the
terms hereof.
Issued this ___________, 1998.
BOREALIS TECHNOLOGY CORPORATION
By:____________________________
Name:____________________________
Title:____________________________
ACCEPTED AND AGREED
By:_______________________________
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<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Borealis Technology
Corporation for the registration of 1,501,500 shares of its common stock and to
the incorporation by reference therein of our report dated January 16, 1998,
with respect to the financial statements of Borealis Technology Corporation
included in its Annual Report (Form 10-KSB) for the year ended December 31,
1997, filed with the Securities and Exchange Commission.
/s/Ernst & Young LLP
Reno, Nevada
May 15, 1998
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