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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 13, 1998
REGISTRATION NO. 333-_________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BOREALIS TECHNOLOGY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 88-0238203
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
9790 GATEWAY DRIVE, SUITE 200
RENO, NEVADA 89511
(702) 856-7600
(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
9790 GATEWAY DRIVE, SUITE 200
RENO, NEVADA 89511
(702) 856-7600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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COPY TO:
STEVEN E. BOCHNER
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
(650) 493-9300
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being 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]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE PROPOSED PROPOSED MAXIMUM AMOUNT OF
REGISTERED REGISTERED(1) MAXIMUM PRICE AGGREGATE REGISTRATION
PER SHARE(2) OFFERING PRICE(2) FEE(3)
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<S> <C> <C> <C> <C>
Common Stock, $0.001 par value................ 18,575,490 shares $0.3907 $7,257,443.94 $2,017.56
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</TABLE>
(1) Includes 15,664,990 shares issuable upon conversion of Series A-1
Preferred Stock of the Company and 117,500 shares issuable upon exercise
of warrants, all of which shares of Common Stock may be offered pursuant
to this Registration Statement. For purposes of estimating the number of
shares of Common Stock to be included in this Registration Statement,
the Company calculated 200% of the number of shares of Common Stock that
would be issuable upon conversion of the Company's Series A-1 Preferred
Stock if such Preferred Stock was converted on November 12, 1998 (based
on a conversion price equal to 80% of the average of the closing prices
for the Company's Common Stock on the previous five trading days). In
addition to the shares set forth in the table, pursuant to Rule 416
under the Securities Act of 1933, as amended, this Registration
Statement also covers an indeterminate number of additional shares of
Common Stock as may become issuable upon conversion of or in respect of
the Company's Series A-1 Preferred Stock, as such number may be adjusted
as a result of stock splits, stock dividends and antidilution provisions
(including floating rate conversion prices).
(2) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c), based on the average of the high and low sales
prices of the Registrant's Common Stock on November 11, 1998, as
reported by the NASD OTC Bulletin Board.
(3) No sales of securities will be conducted by Registrant. Registrant will,
however, pay expenses of the offering, which are expected to total
approximately $13,517.
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.
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<PAGE> 2
18,575,490 SHARES
BOREALIS TECHNOLOGY CORPORATION
COMMON STOCK
This Prospectus relates to 18,575,490 shares of common stock (plus an
indeterminate number of additional shares of common stock relating to certain
antidilution rights of preferred stock) of Borealis Technology Corporation.
These shares are all being offered by stockholders of Borealis, not by Borealis
directly. These stockholders of Borealis may offer these shares from time to
time in transactions on the NASD OTC Bulletin Board (or any other exchange or
automated quotation system in which our common stock may then be listed) or in
privately negotiated transactions. These sales may take place at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at other negotiated prices. 15,664,990 of the shares may be issuable
upon conversion of 2,350 shares of Series A-1 convertible preferred stock and
117,500 of the shares are issuable upon exercise of warrants. The Shares were
issued or will be issued in private placement transactions exempt from the
registration requirements of the Securities Act of 1933, as amended, under
Section 4(2) of that act. See "Selling Stockholders" beginning on page 9 and
"Plan of Distribution" beginning on page 10.
We will not receive any of the proceeds from the sale of the shares by
the selling stockholders. We will, however, pay all expenses incurred in
registering the shares, but each selling stockholder will be responsible for all
selling and other expenses incurred by him or her. Borealis and the selling
stockholders have each agreed to indemnify each other against certain
liabilities, including certain liabilities under the Securities Act.
Our common stock is quoted on the NASD OTC Bulletin Board under the
symbol "BRLS." On November 11, 1998, the closing price of the common stock on
the NASD OTC Bulletin Board was $0.3438.
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INVESTING IN BOREALIS COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 4.
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The selling stockholders and any broker executing selling orders on
behalf of the selling stockholders 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.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR
THAT WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IS NOT A SOLICITATION OF AN OFFER TO BUY THESES SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION CONTAINED IN
THIS PROSPECTUS MAY BE CHANGED AND MAY NOT BE CORRECT AT ANY TIME AFTER NOVEMBER
13, 1998.
<PAGE> 3
WHERE YOU CAN FIND MORE INFORMATION
Borealis Technology Corporation ("Borealis") files annual, quarterly
and special reports, proxy statements and other information with the Securities
and Exchange Commission (the "Commission"). You can inspect and copy the
Registration Statement on Form S-3 of which this Prospectus is a part, as well
as reports, proxy statements and other information filed by Borealis, at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the following regional offices of the
Commission: Seven World Trade Center, Suite 1300, New York, New York, 10048, and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of these
materials can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 upon payment of the prescribed
fees. Please call the Commission at 1-800-SEC-0330 for further information
regarding the operations of its public reference rooms. The Commission also
maintains a World Wide Web site at http:\\www.sec.gov that contains reports,
proxy and information statements, and other information regarding registrants
(like Borealis) that file electronically with the Commission.
Borealis 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 of 1933, as amended (the "Securities Act"), which this
Prospectus is a part. 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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows this Prospectus to "incorporate by reference"
certain other information that Borealis files with them, which means that we can
disclose important information to you by referring to those documents. The
information incorporated by reference is an important part of this Prospectus,
and information that we file later with the Commission will automatically update
and replace this information. We incorporate by reference the documents listed
below and any future filings made by us with the Commission under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act until we have sold all of the
securities that we have registered.
(1) Our Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997.
(2) Our Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1998, June 30, 1998 and September 30, 1998.
(3) Our Current Reports on Form 8-K filed on September 29, 1998.
(4) The description of our common stock offered hereby contained in
the Company's Registration Statement on Form 8-A dated June 11,
1996.
If you make a request for such information in writing or by telephone,
we will provide you without charge, a copy of any or all of the information
incorporated by reference in the registration statement of which this Prospectus
is a part. Requests for such information should be in writing to 9790 Gateway
Drive, Suite 200, Reno, Nevada 89511, Attn: Chief Financial Officer or by
telephone at (702) 856-7600.
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FORWARD-LOOKING STATEMENTS
We have made-forward-looking statements in this Prospectus (and in the
documents that are incorporated by reference) that are subject to risks and
uncertainties. Forward-looking statements include information concerning
possible or assumed future results of our operations. Also, when we use such
words as "believes," "expects," "anticipates" or similar expressions, we are
making forward-looking statements. You should note that an investment in our
securities involves certain risks and uncertainties that could affect our future
financial results. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in "Risk Factors" and elsewhere in this Prospectus.
BOREALIS
Businesses more and more have realized that collecting, retaining,
analyzing and disseminating customer information quickly and efficiently
throughout their organizations is important to attracting new and retaining
existing customers. At most companies, the closest point of contact between the
customer and the vendor is through field personnel--mobile employees--who
historically have been the least connected to the flow of customer information.
We provide a software solution, called "Arsenal", that allows businesses to
receive critical customer information from various contact points, including
field personnel, and to disseminate that critical customer information across
the business enterprise to all users. Using our Arsenal software, field
personnel can input critical customer information they gather into laptop
computers and "synchronize" the new data with a central information system for
distribution to other users. Corporate users in turn can distribute new customer
information to the field with Arsenal to provide field personnel with up-to-date
customer information. Arsenal allows any change in information to be quickly
synchronized and distributed across the business enterprise, allowing businesses
to better leverage their customer relationships.
Borealis 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. Our headquarters are located at 9790 Gateway
Drive, Suite 200, Reno, Nevada 89511, and our phone number is (702) 856-7600.
Our common stock is quoted on the NASD OTC Bulletin Board under
the symbol BRLS.
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RISK FACTORS
You should carefully consider the risks described below before making
an investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations.
If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected. In
such case, the trading price of our common stock could decline, and you may lose
all or part of your investment.
This prospectus also contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
prospectus.
GOING CONCERN ASSUMPTION; UNCERTAIN FUTURE CAPITAL NEEDS; NO ASSURANCE OF FUTURE
FINANCING
Our cash and short-term investments totaled approximately $450,000 as
of November 10, 1998. We will likely be forced to cease operations if we do not
obtain additional funding in the very near future. Without additional funding,
we expect that we will be able to continue operations at our current level only
for the next few weeks.
Our future capital requirements depend on numerous factors, including
the amount of revenues we generate from operations, the cost of our sales and
marketing activities and the progress of our research and development
activities. None of these factors can be predicted with certainty. We are
currently seeking funding, and will most likely seek additional funding within
the next twelve months. We cannot assure you that funding will be available on
acceptable terms, or at all, when it is required. If additional funding is not
available when needed, we could be forced to reduce or suspend our operations,
seek an acquisition partner or sell securities on terms that may be highly
dilutive or otherwise disadvantageous to investors. We have experienced in the
past, and may continue to experience, operational difficulties and delays in our
product development due to working capital constraints. Any such difficulties
may materially adversely affect our business, financial condition and results of
operations.
Our independent auditors' reports on our financial statements at
December 31, 1997 and for the years ended December 31, 1996 and 1997 contain an
explanatory paragraph indicating that the we had recurring operating losses that
raise substantial doubt about our ability to continue as a going concern. In
addition, we had an accumulated deficit of $20,911,856 at September 30, 1998. We
will likely require substantial additional funding in the future, and our
independent auditors' report on our future financial statements may include a
similar explanatory paragraph if we are unable to raise sufficient funds or
generate sufficient cash from operations to cover our cost of operations. This
explanatory paragraph may materially adversely affect our relationships with
prospective customers, third-party integrators and suppliers, and therefore may
materially adversely affect our business, financial condition and results of
operations.
ILLIQUIDITY OF TRADING MARKET; PENNY STOCK
Shares of our common stock are quoted on the NASD OTC Bulletin Board
system. This over-the-counter market on an electronic bulletin board generally
supports quotations for securities of companies that do not meet the Nasdaq
SmallCap Market listing requirements. As a result, investors may find it more
difficult to dispose of, or to obtain accurate price quotations of, our common
stock than they would if our common stock were quoted on the Nasdaq SmallCap
Market. In addition, quotation on the NASD OTC Bulletin Board depends on the
willingness of broker-dealers to make a market in our common stock. We cannot
assure you that our common stock will continue to be so quoted or that there
will continue to be a market for buying and selling of our common stock.
Furthermore, if our net tangible assets fall below $2 million in our next
audited financial
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statements, or we otherwise fail to meet certain criteria of the Commission, our
common stock will become 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. Such rules may discourage the
ability or willingness of broker-dealers to sell and/or make a market in our
common stock.
COMPLETE DEPENDENCE ON RECENT PRODUCT INTRODUCTION
We derive substantially all of our revenues from the sale of licenses
and maintenance contracts for Arsenal. Consequently, we are entirely dependent
on the market acceptance of Arsenal. Unless and until Arsenal receives market
acceptance, we will have no material source of revenue. We cannot assure you
that Arsenal will achieve market acceptance, and if it does not, our business,
financial condition and results of operations will be materially adversely
affected. Arsenal's market acceptance and sales are substantially dependent on a
number of factors, including the success of our sales and marketing efforts and
the hiring and training of additional personnel. We cannot assure you that we
will successfully hire and retain key personnel in a timely manner. Our failure
to do so will materially adversely affect our business, financial condition and
results of operations.
RISK OF DILUTION BY HOLDERS OF PREFERRED STOCK
In September 1998, we issued and sold 2,350 shares of Series A-1
Preferred stock in a private placement financing. Each of these shares of
preferred stock is convertible into such number of shares of common stock as is
determined by dividing $1000.00 by the "Conversion Price" at the time of
conversion. The Conversion Price is equal to 80% of the lesser of (i) the
average of the closing prices for our common stock on the previous five trading
days prior to conversion and (ii) $2.50. For example, if the average of the
closing prices of our common stock for the previous five days was $1.00, then
one share of preferred stock would convert into 1,250 shares of common stock
($1000 divided by ($1.00 times .80)). Because of this "anti-dilution" conversion
feature, the holders of preferred stock may have the ability to substantially
dilute the ownership of the holders of common stock, particularly if the market
price of the common stock decreases significantly due to sales of common stock,
including sales of common stock that was obtained upon conversion of preferred
stock.
RECENT HIRES OF KEY EXECUTIVES; NEED TO FILL KEY EXECUTIVE POSITION; DEPENDENCE
ON LIMITED NUMBER OF KEY PERSONNEL
Our Chairman of the Board assumed the positions of President and Chief
Executive Officer following the resignation of our then President and Chief
Executive Officer in March 1998. Our 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 us. In particular, our Vice President of
Engineering joined us in February 1998. Additionally, we are currently seeking
to hire a Vice President of Marketing. We have not entered into any employment
agreements nor do we have key man life insurance. We believe that our success
depends on our ability to recruit, retain and motivate additional key skilled
personnel, who are in great demand, including additional sales and marketing
personnel. We cannot assure you that we 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. Our strategy for implementing Arsenal depends on the use
of third-party integrators to install, customize and service it. Consequently,
third-party integrators must undergo substantial amounts of training to be able
to apply our products to the varied needs of our current and prospective
customers. We cannot assure you that we will be able to attract and retain the
personnel necessary to train such integrators. In addition, we cannot assure you
that our 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 our
current and prospective customers. We will likely depend
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on third-party integrators to complete certain post-delivery obligations prior
to our recognition of revenue. If such integrators fail to complete such
obligations, we may be prevented from recognizing revenue, which could
materially adversely affect our business, financial condition and results of
operations. If we are unable to maintain effective, long-term relationships with
these integrators, or if such integrators fail to meet the needs of our current
and prospective customers in a timely fashion, we could experience a loss of, or
delay in, market acceptance of our products, an increase in product support
costs and an injury to our reputation, any of which could materially adversely
affect our business, financial condition and results of operations.
We do not, and do not plan to, enter into or maintain exclusive
relationships with third-party integrators. Consequently, such integrators may
have existing relationships with, or may undertake new relationships with, our
direct competitors. Such integrators may not promote Arsenal effectively, or at
all. If we fail to provide sufficient incentive for such integrators, sales of
Arsenal could be adversely affected, which could materially adversely affect our
business, financial condition and results of operations.
RECENT LOSSES; QUARTERLY FLUCTUATIONS IN PERFORMANCE
We have experienced significant operating losses in each of the years
beginning with 1994 and expect to incur significant operating losses for the
foreseeable future. We derive substantially all of our revenues from the sales
of licenses and maintenance contracts for Arsenal, our sole product. Arsenal may
never achieve significant market acceptance and we may never achieve
profitability.
Our 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, we must undertake our development, sales and marketing
activities and other commitments months in advance. Accordingly, any shortfall
in revenues in a given quarter may materially adversely affect our business,
financial condition and results of operations due to the inability to adjust our
expenses during the quarter to match the level of revenues for the quarter. Once
commitments for such expenditures are undertaken, we may be unable to reduce
them quickly if revenue is less than expected. In addition, our sales
expectations are based entirely on our internal estimates of future demand. Due
to these and other factors, we believes that quarter-to-quarter comparisons of
our results of operations are not necessarily meaningful and should not be
relied upon as indications of future performance.
Our operating results may fluctuate as a result of many factors,
including, without limitation:
- volume and timing of orders received;
- the extent to which we are required to establish and support a
third-party integrator channel or hire additional sales
personnel to supplement such channel;
- announcements by us and our competitors;
- the timing of commercial introduction of enhancements to
Arsenal, if any;
- the timing of commercial introduction of competitive products;
- the impact of price competition on our average selling prices;
and
- the level of research and development required to complete any
future product enhancements.
Many of these factors are beyond our control. In addition, due to the
short product life cycles that characterize the customer relationship management
software market, our failure to introduce any Arsenal enhancements in a timely
manner could materially adversely affect our 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
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<PAGE> 8
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. Our success depends in large part upon our
ability to obtain market acceptance of Arsenal, develop enhancements to Arsenal
to address the changing requirements of our 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. We may not be successful in marketing and supporting
Arsenal or enhancements to Arsenal, if any, and we may experience difficulties
that could delay or prevent the successful marketing and support of these
products. Arsenal and any such product enhancements may not adequately meet the
requirements of the marketplace nor achieve any significant degree of commercial
acceptance. We have experienced delays in the past 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, Arsenal or other
future enhancements may not meet the requirements of the marketplace or 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 materially adversely affect our 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.
Despite testing by our technical staff and by potential customers, errors may be
found in Arsenal, or any new versions of Arsenal, which could result in (i) a
loss of, or delay in, market acceptance and sales, (ii) diversion of development
resources, (iii) injury to our reputation or (iv) increased service and warranty
costs. Any of the foregoing could materially adversely affect our 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. In the future, the market is expected to be
characterized by significant price erosion over the life of a product. Within
specific ranges of product functionality, we experience 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. In addition, we may experience competition from
additional companies who may enter the market, such as "groupware" vendors,
LAN-based application development tools vendors, remote LANaccess communication
vendors and communications and systems management software vendors. Potential
competitors also include a number of large hardware and software companies that
may develop or acquire products that compete in our market.
Current and potential competitors have established and may continue to
establish cooperative relationships with third parties to increase the ability
of their products to address the needs of our current and prospective customers.
Accordingly, new competitors or alliances among competitors may emerge and
rapidly acquire significant market share. Many of our current and potential
competitors have significantly greater financial, technical, marketing, name
recognition and other resources than we do. 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 we. We may not be able to compete successfully
against current or future competitors, and competitive pressures may materially
adversely affect our business, financial condition and results of operations.
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IMPACT OF YEAR 2000
Many computer systems were not designed to handle any dates beyond the
year 1999, and therefore computer hardware and software will need to be modified
prior to the year 2000 in order to remain functional. Borealis has completed a
Year 2000 compliance review for all Arsenal products released through September
30, 1998. We do not anticipate that addressing the year 2000 problem for Arsenal
products will have a material impact on operations or financial results. To
date, costs incurred in remediating identified Year 2000 issues have not been
material.
Despite design review and ongoing testing, Arsenal products may
contain undetected errors or defects associated with Year 2000 date handling.
Known or unknown errors or defects in Arsenal products could result in: (i)
delay or loss of revenue; (ii) diversion of development resources; (iii) damage
to reputation; and (iv) increased service and warranty costs.
Year 2000 issues may also affect the computer systems used internally
by us to manage and operate our business. We have completed a Year 2000
compliance review of its internal systems and are not aware of any material
costs or operational issues associated with Year 2000 issues affecting internal
systems. To date we have not incurred and do not believe that we will incur
significant operating expenses or be required to invest heavily in computer
systems improvements to be Year 2000 compliant. However, we may experience
significant unanticipated problems and costs caused by undetected errors or
defects in internal systems. The worst-case scenario if such problems occur
would be the inability to ship products and record revenue.
We do not currently have any information concerning the Year 2000
compliance status of our customers or prospective customers. If current or
future customers fail to achieve Year 2000 compliance or if they divert
technology expenditures (especially technology expenditures that were reserved
for software and services) to address Year 2000 compliance issues, our business,
results of operations or financial condition could be materially adversely
affected.
We have funded our Year 2000 activities from available cash and have
not separately accounted for these costs in the past. To date, these costs have
not been material. We may incur additional costs for administrative, customer
support, internal IT and product engineering activities to address ongoing
internal and product-related Year 2000 issues. In addition, we may experience
problems and costs with Year 2000 compliance that could materially adversely
affect our business, results of operations, and financial condition. We have not
yet fully developed a contingency plan to address situations that may result if
we are unable to achieve Year 2000 readiness of critical operations. The cost of
developing and implementing such a plan may itself be material. Finally, we are
also subject to external forces that might generally affect industry and
commerce, such as utility or transportation company Year 2000 compliance
failures and related service interruptions.
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SELLING STOCKHOLDERS
The following table lists the Borealis stockholders selling pursuant to
this Prospectus (the "Selling Stockholders") and the number of shares of
Borealis's Common Stock that each owned or had the right to acquire as of
November 10, 1998. Because the Selling Stockholders may offer all or some of the
shares of Borealis Common Stock to be sold pursuant to this Prospectus (the
"Shares") which they hold, and because there are currently no agreements,
arrangements or understandings with respect to the sale of any of the Shares, no
estimate can be given as to the amount of Shares that will be held by Selling
Stockholders after completion of this offering. 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, or
were issued upon conversion of Series A-1 Preferred Stock or upon the exercise
of warrants acquired, from the Company in transactions exempt from the
registration requirements of the Securities Act provided by Section 4(2) thereof
pursuant to a Common Stock Purchase Agreement (the "Common Stock Purchase
Agreement"), a Series A-1 Preferred Stock Purchase Agreement (the "Preferred
Stock Purchase Agreement") or a Warrant by and between Borealis and the Selling
Stockholder (a "Warrant"). These transactions occurred between June 3, 1998 and
September 30, 1998. Each Selling Stockholder represented to the Company that,
and the Company had reasonable basis to believe that, such Selling Stockholder
was an accredited investor as defined under Regulation D promulgated under the
Securities Act in connection with the transactions.
Each Selling Stockholder that purchased Shares of the Company pursuant
to the Agreements further 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 Stockholders 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 NUMBER OF
BENEFICIALLY OWNED SHARES
PRIOR TO OFFERING(1) BEING(2)
----------------------------- ------------------
STOCKHOLDERS NUMBER PERCENT OFFERED
------------ ------------ ------- ------------------
<S> <C> <C> <C>
RBB Bank Aktiengesellschaft 6,448,722(3) 42.37% 6,448,722
John W. Webley 1,544,666(4) 17.60% 800,000
The Peter W.J. Stonebridge 1995 Revocable Trust U.A.D 1,156,666(5) 13.23% 750,000
10/17/95
Patrick W. Grady 1,121,854(6) 12.38% 680,000
The Mendez 1992 Trust, dated 10/14/92 633,654(7) 6.85% 633,654
Richard Timmins 452,436(8) 4.98% 322,436
Richard J. Povey 329,436(9) 3.62% 322,436
The Peter Pitsker Limited Partnership, dated 12/3/96 268,142(10) 3.06% 100,000
Trust A of the Sulzer Family Trust of 1995, dated 5/1/95, as 200,000 2.28% 200,000
amended
Storm Ventures Fund I, LLC 100,000 1.14% 100,000
Michael J. D'Eath 86,714(11) 0.99% 13,000
</TABLE>
-9-
<PAGE> 11
- ---------------
(1) Based on 8,770,305 shares of Common Stock issued and outstanding as of
November 10, 1998. Individual ownership numbers are based upon
representations made to the Company by each Selling Stockholder, unless
otherwise indicated. For the purpose of computing the percentage of
ownership of each individual Stockholder, the number of shares of Common
Stock includes the number of shares issuable upon (i) conversion of the
Preferred Stock (based on a conversion price equal to 80% of the average
of the closing prices for the Common Stock on the five consecutive
trading dates ending November 10, 1998), (ii) exercise of the warrants
to purchase shares of Common Stock, and (iii) exercise of the options
that are presently exercisable or exercisable within 60 days of November
10, 1998, but such shares are not treated as outstanding for the purpose
of computing the percentage of any other person.
(2) Assumes conversion of each selling stockholder's shares of preferred
stock, if any, into shares of common stock.
(3) Includes 100,000 shares issuable upon exercise of warrants; 6,348,722
shares issuable upon conversion of Preferred Stock. RBB Bank holds the
shares as an agent on behalf of more than 40 independent non-U.S.
accredited investors, each of whom beneficially owns less than 5.0% of
the outstanding shares of common stock of the Company.
(4) Includes 200,000 shares issuable upon exercise of warrants; 6,666 shares
issuable upon exercise of outstanding options which are presently
exercisable or will become exercisable within 60 days of November 10,
1998. Mr. Webley is a Director of the Company.
(5) Includes 100,000 shares issuable upon exercise of warrants; 6,666 shares
issuable upon exercise of outstanding options which are presently
exercisable or will become exercisable within 60 days of November 10,
1998. Mr. Stonebridge is a Director of the Company.
(6) Includes 117,410 shares issuable upon exercise of warrants; 324,444
shares issuable upon exercise of outstanding options which are presently
exercisable or will become exercisable within 60 days of November 10,
1998. Mr. Grady is the President, Chief Executive Officer and Chairman
of the Company.
(7) Includes 7,500 shares issuable upon exercise of warrants; 476,154 shares
issuable upon conversion of Preferred Stock.
(8) Includes 45,000 shares issuable upon exercise of warrants; 317,436
shares issuable upon conversion of Preferred Stock.
(9) Includes 5000 shares issuable upon exercise of warrants; 317,436 shares
issuable upon conversion of Preferred Stock.
(10) Consists of an aggregate of 251,142 shares, and 17,000 shares issuable
upon exercise of warrants, held by The Peter Pitsker Limited Partnership
and the Peter B. Pitsker and Polly D. Pitsker Revocable Living Trust
Dated September 11, 1985. Mr. Pitsker previously served as a Director
and as interim President of the Company.
(11) Includes 5,000 shares issuable upon exercise of warrants; 27,083 shares
issuable upon exercise of outstanding options which are presently
exercisable or will become exercisable within 60 days of November 10,
1998. Mr. D'Eath is the Vice President of Business Development and
Product Marketing of the Company.
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 NASD OTC Bulletin Board (or any other exchange
or automated quotation system in which our Common Stock may then be listed), 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.
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 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 NASD OTC Bulletin Board, 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.
-10-
<PAGE> 12
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.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock
by the Selling Shareholders.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Company's Certificate of Incorporation and Bylaws provide that the
Company 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 Company 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 Company 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.
In addition, the Company and each Selling Stockholder have agreed to
indemnify each other against certain liabilities, including certain liabilities
under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
EXPERTS
The financial statements of Borealis Technology Corporation appearing
in the Company's Annual Report (Form 10-KSB) for the year ended December 31,
1997 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.
11
<PAGE> 13
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
<TABLE>
<S> <C>
SEC Registration Fee............................... $2,017.56
Accountant's Fees and Expenses..................... $3,500.00
Legal Fees and Expenses............................ $6,000.00
Miscellaneous...................................... $2,000.00
---------
Total.............................................. $13,517.56
==========
</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.
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.
II-1
<PAGE> 14
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
2.1(1) Agreement and Plan of Merger between Borealis Corporation, a
Nevada corporation, and Borealis Technology Corporation, a
Delaware corporation, dated June 7, 1996
4.1 Certificate of Designation of Series A-1 Preferred Stock of
the Registrant
4.2(2) Form of Common Stock Purchase Agreement by and between
Registrant and certain investors for June-August private
placement
4.3 Form of Preferred Stock Purchase Agreement by and between
Registrant and certain investors for September 1998 private
placement
4.4 Form of Common Stock Warrant issued in September 1998 private
placement
4.5(1) Specimen Certificate of Registrant's Common Stock
4.6(1) Form of Warrant to Wilson Sonsini Goodrich & Rosati
4.7(1) Form of Warrant issued to H.J. Meyers & Co., Inc. in
connection with the Registrant's initial public offering
4.8(1) Registrant's Contingent Rights Plan
4.9(3) Form of Warrant issued to H.J. Meyers & Co., Inc. in
connection with the Registrant's July 1997 public offering
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
23.1 Consent of Independent Auditors
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1)
24.1 Power of Attorney (included on page II-4)
</TABLE>
-------------------
(1) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form SB-2 which became effective on June 20,
1996.
(2) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form 10-QSB filed August 13, 1998.
(3) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form SB-2 which became effective on July 21,
1997.
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.
II-2
<PAGE> 15
(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-3
<PAGE> 16
SIGNATURES
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 Reno, State of Nevada, on this 13th day of November,
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 From S-3, and to file the same, with the exhibits thereto and other
documents in connection therewith, with the Securities and 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.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Patrick Grady President, Chief Executive Officer and Chairman
- ---------------------------------
Patrick Grady
/s/ Elizabeth Gasper Chief Financial Officer (principal financial and accounting
- --------------------------------- officer)
Elizabeth Gasper
/s/ Ed Esber Director
- ---------------------------------
Ed Esber
/s/ Joseph Marengi Director
- ---------------------------------
Joseph Marengi
Director
- ---------------------------------
Peter Stonebridge
/s/ John Webley Director
- ---------------------------------
John Webley
/s/ Elizabeth Gasper Attorney-in-Fact
- ---------------------------------
Elizabeth Gasper
</TABLE>
II-4
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
2.1(1) Agreement and Plan of Merger between Borealis Corporation, a
Nevada corporation, and Borealis Technology Corporation, a
Delaware corporation, dated June 7, 1996
4.1 Certificate of Designation of Series A-1 Preferred Stock of
the Registrant
4.2(2) Form of Common Stock Purchase Agreement by and between
Registrant and certain investors for June-August private
placement
4.3 Form of Preferred Stock Purchase Agreement by and between
Registrant and certain investors for September 1998 private
placement
4.4 Form of Common Stock Warrant issued in September 1998 private
placement
4.5(1) Specimen Certificate of Registrant's Common Stock
4.6(1) Form of Warrant to Wilson Sonsini Goodrich & Rosati
4.7(1) Form of Warrant issued to H.J. Meyers & Co., Inc. in
connection with the Registrant's initial public offering
4.8(1) Registrant's Contingent Rights Plan
4.9(3) Form of Warrant issued to H.J. Meyers & Co., Inc. in
connection with the Registrant's July 1997 public offering
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
23.1 Consent of Independent Auditors
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1)
24.1 Power of Attorney (included on Page II-4)
</TABLE>
- -------------------
(1) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form SB-2 which became effective on June 20,
1996.
(2) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form 10-QSB filed August 13, 1998.
(3) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form SB-2 which became effective on July 21,
1997.
<PAGE> 1
EXHIBIT 4.1
CERTIFICATE OF DESIGNATIONS OF RIGHTS,
PREFERENCES AND PRIVILEGES OF
SERIES A-1 PREFERRED STOCK
OF BOREALIS TECHNOLOGY CORPORATION
The undersigned, Patrick Grady and Elizabeth Gasper do hereby certify:
1. That they are the duly elected and acting President and Secretary,
respectively, of Borealis Technology Corporation, a Delaware corporation (the
"CORPORATION").
2. That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the said Corporation, the said Board of
Directors has adopted the following resolution creating a series of 10,000
shares of Preferred Stock designated as Series A-1 Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation by the Restated Certificate of Incorporation, the Board of
Directors does hereby provide for the issue of a series of Preferred Stock of
the Corporation and does hereby fix and herein state and express the
designations, powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions of such series of Preferred Stock
as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "SERIES A-1 PREFERRED STOCK." The Series A-1 Preferred Stock shall
have a par value of $0.01 per share, and the number of shares constituting such
series shall be 10,000.
Section 2. Dividends and Distributions.
(a) The holders of shares of Series A-1 Preferred Stock shall be
entitled to receive when, as and if declared by the Board of Directors out of
funds legally available for the purpose, dividends payable in cash on the last
day of January, April, July and October in each year (each such date being
referred to herein as a "QUARTERLY DIVIDEND PAYMENT DATE"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A-1 Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the aggregate per share amount of all
cash dividends declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A-1 Preferred Stock.
(b) The Corporation shall declare a dividend or distribution on the
Series A-1 Preferred Stock as provided in paragraph (a) above immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock).
(c) Dividends shall begin to accrue on outstanding shares of Series
A-1 Preferred Stock from the Quarterly Dividend Payment Date next preceding the
date of issue of such shares of
1
<PAGE> 2
Series A-1 Preferred Stock, unless the date of issue of such shares is prior to
the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series
A-1 Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A-1
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A-1 Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
Section 3. Voting Rights. Except as otherwise provided herein or required
by law, the holders of shares of Series A-1 Preferred Stock shall have no right
to vote on any matter. So long as any shares of Series A-1 Preferred Stock
(appropriately adjusted for stock splits and the like) shall be outstanding, the
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of a majority of the outstanding shares of the Series A-1
Preferred Stock: (a) issue or authorize shares of any class or series of stock
having a preference or priority as to dividends or assets which is superior to
the preferences or priorities of the Series A-1 Preferred Stock; (b) amend or
repeal any provision of, or add any provision to, the Corporation's Certificate
of Incorporation if such action would materially and adversely alter or change
the preferences, rights, privileges or powers of, or the restrictions provided
for the benefit of, the Series A-1 Preferred Stock or (c) increase the number of
shares of Series A-1 Preferred Stock authorized hereby.
Section 4. Conversion.
(a) Each holder of Series A-1 Preferred Stock may, at its option
after the earlier or (i) 90 days after the Closing or (ii) after the
Registration Statement has been declared effective, convert any or all of its
shares of Series A-1 Preferred Stock into Common Stock as follows (an "Optional
Conversion"). Each share of Series A-1 Preferred Stock shall be convertible into
such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the Stated Value thereof by the then effective Conversion
Price (as defined below). The "Conversion Price shall be the lesser of (i) 80%
of the Market Price (as defined herein)(the "Variable Conversion Price") and
(ii) $2.50 (the "Fixed Conversion Price"). "Market Price" shall mean the average
of the Closing bid prices of the Common Stock on the Nasdaq Stock Market or on
the principal securities exchange or other market on which the Common Stock is
then being traded (in each case, as reported by Bloomberg), for the five (5)
consecutive Trading Days ending on the last Trading Day prior to the date of
conversion, which shall be the date that the Notice of Conversion is sent by a
holder to the Corporation and received by the Corporation via facsimile or other
means.
(b) Each share of outstanding Series A-1 Preferred Stock shall,
without any action by the holders thereof, automatically convert into shares of
the Corporation's Common Stock pursuant
2
<PAGE> 3
to the terms of subparagraph (a) hereof immediately prior to the occurrence of a
merger or consolidation of the Corporation with any other corporation, other
than a merger or consolidation which would result in the voting securities of
the Corporation outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Corporation or such surviving entity
outstanding immediately after such merger or consolidation, or the approval by
the stockholders of the Corporation of a plan of complete liquidation of the
Corporation or of an agreement for the sale or disposition by the Corporation of
all or substantially all the Corporation's assets.
(c) Upon conversion, all declared and unpaid dividends on the Series
A-1 Preferred Stock shall be paid, to the extent funds are legally available
therefor, either in cash or in shares of Common Stock, at the election of the
Corporation, wherein the shares of Common Stock shall be valued at the
Conversion Price.
(d) No fractional shares of Common Stock shall be issued upon
conversion of Series A-1 Preferred Stock. In lieu of any fractional shares to
which the holder would otherwise be entitled (after aggregating all shares of
Series A-1 Preferred Stock held by such holder such that the maximum number of
whole shares of Common Stock is issued to such holder upon conversion), the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price. Before any holder of Series A-1 Preferred Stock
shall be entitled to voluntarily convert the same into full shares of Common
Stock and to receive certificates therefor, he shall surrender the certificate
or certificates therefor, duly endorsed, at the office of the Corporation or of
any transfer agent for the Series A-1 Preferred Stock, and shall give written
notice to the Corporation at such office that he elects to convert the same,
provided, however, that in the event of an automatic conversion pursuant to
subparagraph (b) hereof, the outstanding shares of Series A-1 Preferred Stock
shall be converted automatically without any further action by the holders of
such shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent, and provided further that
the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such automatic conversion unless the
certificates evidencing such shares of Series A-1 Preferred Stock are either
delivered to the Corporation or its transfer agent as provided above, or the
holder notifies the Corporation or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificates.
(e) The Corporation shall, as soon as practicable after such
delivery, or after such agreement and indemnification, issue and deliver at such
office to such holder of Series A-1 Preferred Stock, a certificate or
certificates for the number of shares of Common Stock to which he shall be
entitled as aforesaid and a check payable to the holder in the amount of any
cash amounts payable as the result of a conversion into fractional shares of
Common Stock. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Series A-1 Preferred Stock to be converted, or, in the case of automatic
conversion, immediately prior to the event triggering such conversion, and the
person or persons entitled to receive
3
<PAGE> 4
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock on
such date.
Section 5. Reacquired Shares. Any shares of Series A-1 Preferred Stock
converted, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the conversion or
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance
set forth herein and, in the Corporation's Certificate of Incorporation, as then
amended.
Section 6. Liquidation, Dissolution or Winding Up.
(a) In the event of any dissolution, liquidation or winding up of
the Corporation, whether voluntary or involuntary, before any distribution or
payment is made to or upon any shares of Common Stock, from the available net
assets of the Corporation, the holders of Series A-1 Preferred Stock shall
receive, pari passu, for each share of such stock then held, property or cash in
an amount equal to the sum of (i) $1000.00 per share of Series A-1 Preferred
Stock (as originally issued and appropriately adjusted for stock splits and the
like) plus (ii) all declared but unpaid dividends thereon, if any, through the
date of such payment. If upon any dissolution, liquidation or winding up of the
Corporation, the net assets available for distribution to the Corporation's
stockholders pursuant to this subparagraph (a) shall be insufficient to permit
payment to the holders of Series A-1 Preferred Stock of the amount distributable
as aforesaid, the entire net assets of the Corporation to be so distributed
shall be distributed to the holders of Series A-1 Preferred Stock, and as among
such holders, in proportion to the number of shares of Series A-1 Preferred
Stock held by each.
(b) Upon any such liquidation, dissolution or winding up, after the
holders of Series A-1 Preferred Stock shall have been paid in full the amount to
which they shall be entitled pursuant to subparagraph (a) above, from the
remaining net assets of the Corporation, the holders of Common Stock shall
receive, pari passu, for each share of such stock then held, property or cash in
an amount equal to the sum of (i) 50% of the Conversion Price as of the date of
such distribution plus (ii) all declared but unpaid dividends thereon, if any,
through the date of such payment. If upon any dissolution, liquidation or
winding up of the Corporation, and following the distribution set forth in
subparagraph (a) hereof, the remaining net assets available for distribution to
the Corporation's stockholders pursuant to this subparagraph (b) shall be
insufficient to permit payment to the holders of Common Stock of the amount
distributable as aforesaid, the entire remaining net assets of the Corporation
to be so distributed shall be distributed to the holders of Common Stock, and as
among such holders, in proportion to the number of shares of Common Stock held
by each.
(c) Upon any such liquidation, dissolution or winding up, after the
holders of Series A-1 Preferred Stock and Common Stock shall have been paid in
full the amounts to which they shall be entitled pursuant to subparagraphs (a)
and (b) above, the holders of Common Stock and Series A-1 Preferred Stock shall
receive the remaining net assets of the Corporation available for distribution
pro
4
<PAGE> 5
rata in proportion to the number of shares of Common Stock held by them or
issuable to them upon conversion of Series A-1 Preferred Stock as of the date
five days prior to such distribution.
Section 7. No Redemption. The shares of Series A Preferred Stock shall not
be redeemable.
Section 8. Fractional Shares. Series A-1 Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A-1 Preferred Stock.
RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of this Corporation be, and they hereby
are, authorized and directed to prepare and file a Certificate of Designation of
Rights, Preferences and Privileges in accordance with the foregoing resolution
and the provisions of Delaware law and to take such actions as they may deem
necessary or appropriate to carry out the intent of the foregoing resolution."
We further declare under penalty of perjury that the matters set forth in
the foregoing Certificate of Designation are true and correct of our own
knowledge.
Executed at _______________ on ____________ ____, 1998.
--------------------------------------------
Patrick Grady, President
--------------------------------------------
Elizabeth Gasper, Secretary
5
<PAGE> 1
EXHIBIT 4.3
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
Borealis Technology Corporation
4070 Silver Sage Drive
Carson City, NV 89701
Ladies and Gentlemen:
The undersigned (the "Purchaser"), hereby confirms its agreement with you
as follows:
1. This Preferred Stock and Warrant Purchase Agreement (the "Agreement")
is made as of the date set forth below between Borealis Technology Corporation,
a Delaware corporation (the "Company"), and the Purchaser.
2. The Company has authorized the sale and issuance of shares of its
Series A Preferred Stock up to an amount whose aggregate purchase price shall
not exceed $10,000,000 (the "Shares").
3. The purchase price per Share (the "Price per Share") will be $1000.00.
The Company and the Purchaser agree that the Purchaser will purchase and the
Company will sell, at such Price per Share, the number of Shares whose aggregate
purchase price equals the amount set forth below and a Warrant to purchase 50
shares of the Company's Common Stock for each Share purchased hereunder pursuant
to the Terms and Conditions for Purchase of Shares 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
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.:
---------------------------------
Number of Shares Purchased:
-----------------
Warrant Shares:
-----------------------------
Aggregate Purchase Price
(@$1000/Share):$
------------------
AGREED AND ACCEPTED:
- -----------------------------------
BOREALIS TECHNOLOGY CORPORATION
By:
----------------------------
Title:
----------------------------
Date:
----------------------------
<PAGE> 2
ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF SHARES
1. Authorization and Sale of Shares and Warrants
1.1 Authorization. The Company has authorized the sale and issuance of
shares of its Series A Preferred Stock, $0.01 par value, up to an amount whose
aggregate purchase price shall not exceed $10,000,000 (the "Shares") and
warrants to purchase up to 500,000 Shares of Common Stock in the form attached
hereto as Exhibit B (the "Warrants"), pursuant to the Preferred Stock and
Warrant Purchase Agreement to which this Annex I is attached (the "Agreement").
1.2 Filing of Certificate of Designations. Prior to the First Closing (as
defined below), the Company will file with the Delaware Secretary of State an
Amended and Restated Certificate of Designations (the "Certificate of
Designations") designating the rights, preferences, restrictions and limitations
of the Shares, in substantially the form attached hereto as Exhibit A.
1.3 Sale of Shares and Warrants. 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 Shares set
forth in the Agreement. In addition, each Purchaser shall receive a Warrant to
purchase up to 50 Shares of Common Stock for each Share purchased hereunder. The
Warrants shall be exercisable until September __, 2000 and shall have a purchase
price of $1.50 per Share.
2. Closing Dates; Delivery
2.1 Closings. The first closing of the purchase and sale of the Shares and
Warrants hereunder (the "First Closing") shall be held at a time and on a date
reasonably designated by the Company at the offices of Wilson, Sonsini, Goodrich
& Rosati, P.C., 650 Page Mill Road, Palo Alto, California, or at such other
place as shall be mutually agreed upon by the Company and the Purchasers
purchasing a majority of the Shares 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 Shares 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
certificates, registered in the Purchaser's name and address as shown in this
Agreement, representing the number of Shares and the Warrants to be purchased by
the Purchaser. Such delivery shall be against payment therefor by wire transfer
of the aggregate purchase price of the Shares and Warrants 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
<PAGE> 3
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
corporate power and has taken all requisite corporate action to execute and
deliver the Agreement, to sell and issue the Shares 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, 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
Shares 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.
3.3 Issuance and Delivery of the Shares. The Shares, when issued in
compliance with the provisions of the Agreement, and the shares of Common Stock
issuable upon conversion of the Shares (the "Conversion Shares") and the Shares
of Common Stock issuable upon exercise of the Warrants, when issued in
compliance with the Agreement, the Warrant and the Certificate of Designations,
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. The SEC Documents, when read
together, do not include an untrue statement of a material fact or omit 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 or state 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 Shares 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 the Certificate of
Designations with the Delaware Secretary of State.
3.6 No Material Adverse Change. Except as otherwise disclosed herein or in
the Company's Private Placement Offering Memorandum prepared on or about August
20, 1998 (such Private Placement Offering Memorandum, including all exhibits
thereto, being hereinafter referred to as the "Memorandum"), since August
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<PAGE> 4
20, 1998, 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 or the SEC
Documents, and except for matters relating to the Nasdaq SmallCap Market, there
are no actions, suits, proceedings or investigations pending against the Company
or any of its properties before or by any court or arbitrator or any
governmental body, agency or official that (a) would reasonably be expected to
have a material adverse effect on the Company and its subsidiaries considered as
one enterprise or (b) would reasonably be expected to 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 Shares to the Purchasers as contemplated in the
Agreement constitute transactions exempt from the registration requirements of
Section 5 of the Securities Act.
3.9 Dilutive Effect. The Company understands and acknowledges that the
number of Conversion Shares issuable upon conversion of the Shares will increase
in certain circumstances. The Company further acknowledges that its obligation
to issue Conversion Shares upon conversion of the Shares in accordance with this
Agreement is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other stockholders of the
Company.
3.10 Reservation of Stock Issuable Upon Conversion. The Company shall take
all action necessary to at all times have authorized and reserved for the
purpose of issuance, the number of shares of Common Stock needed to provide for
the issuance of the Conversion Shares upon the conversion of all outstanding
Shares. If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all then outstanding
Shares, the Company will take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose. Should a conversion not be
possible for 30 days because there are not enough shares authorized then the
Company shall pay to the Purchaser as liquidated damages for such failure and
not as a penalty, two (2%) percent of the Purchase Price of the then outstanding
Shares for the first thirty (30) day period, and three (3%) percent of the
Purchase Price of the then outstanding Shares for every thirty (30) days
thereafter until the appropriate number of Shares has been authorized and
reserved.
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 Shares 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.
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<PAGE> 5
4.2 Investment Experience. RBB Bank represents and warrants that it does
not buy any of the shares itself but only acts as investment advisor for more
than 40 independent, accredited non US investors, who are the beneficial owners
of the shares but whose identity cannot be disclosed due to Austrian bank
secrecy laws. RBB Bank represents that no Investor will ever beneficially own
more than 4.9% of the outstanding common shares of the Company. RBB Bank has the
authority from each Investor to enter into this agreement and the term Investor
shall always refer to the individual investor. RBB Bank does not have voting
control or power of disposition over securities owned by the Investors and no
Investor is an affiliate of another Investor. RBB Bank warrants that all
investors are accredited investors as that term is defined in the Rule 501(a)
under the Securities Act. RBB Bank 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 Shares. RBB Bank 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 Shares.
4.3 Investment Intent. RBB Bank represents and warrants for itself and
each investor represented by RBB Bank that each such investor is purchasing the
Shares 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. Each
such investor understands that its acquisition of the Shares has not been
registered under the Securities Act or registered, qualified under any state
securities law in reliance on specific exemptions therefrom and has not been
registered or qualified under any foreign securities laws, which exemptions may
depend upon, among other things, the bona fide nature of each such investor's
investment intent as expressed herein. RBB Bank represents and warrants that
each investor represented by RBB Bank has, in connection with its decision to
purchase the number of Shares set forth in the Agreement, relied solely upon the
representations and warranties of the Company contained herein. Each such
investor 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 or Conversion 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 and the Conversion 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 Conversion
Shares will be imprinted with a legend that prohibits the transfer of the Shares
or the Conversion 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 Shares, the Conversion
Shares or any other shares of 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 any such
securities 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 any such securities 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 any such
securities.
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<PAGE> 6
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 Shares constitutes 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 Shares.
5. Conditions to Closing of Purchasers
Each Purchaser's obligation to purchase the Shares 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 Shares.
6. Conditions to Closing of Company
The Company's obligation to sell and issue the Shares 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 Shares.
7. Affirmative Covenants
The Company and the Purchasers hereby respectively covenant and agree as
follows:
7.1 Registration Requirements.
-5-
<PAGE> 7
(a) The Company shall use its best efforts to file, within
forty-five (45) days after the Closing Date, a registration statement on Form
S-3 (or such other form as may be appropriate) with the SEC under the Securities
Act (the "Registration Statement") to register the resale of the Conversion
Shares (collectively, the "Registerable Securities"). The Company shall use its
best efforts to cause the Registration Statement to be declared effective by the
SEC within 105 days of the Closing Date. The number of shares designated in the
Registration Statement or any amendment thereto, to be registered, shall be two
hundred percent (200%) of the number of Securities that would be required if all
the Registrable Securities were issued on the day before the filing of the
Registration Statement, plus 100,000 shares of Common Stock.
(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. "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 Conversion 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 Shares 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) In the event the Registration Statement to be filed by the
Company pursuant to Section 7.1(a) above is not filed with the Commission within
forty-five (45) days from the Closing Date and/or the Registration Statement is
not declared effective by the Commission within one hundred five (105) days from
the Closing, then the Company will pay Purchaser (pro rated on a daily basis),
as liquidated damages for such failure and not as a penalty, two (2%) percent of
the Purchase Price of the then outstanding Securities for the first thirty (30)
day period that such filing and/or effectiveness is delayed, and three (3%)
percent of the Purchase Price of the then outstanding Securities for every
thirty (30) days thereafter until the Registration Statement has been filed
and/or declared effective. Such payment of the liquidated damages shall be made
to the Purchaser in cash,
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<PAGE> 8
immediately upon demand, provided, however, that the payment of such liquidated
damages shall not relieve the Company from its obligations to register the
Securities pursuant to this Section.
If the Company does not remit the damages to the Purchaser as
set forth above, the Company will pay the Purchaser's reasonable costs of
collection, including attorneys fees, in addition to the liquidated damages. The
registration of the Securities pursuant to this provision shall not affect or
limit Purchaser's other rights or remedies as set forth in this Agreement.
(e) During the effectiveness of the Registration Statement, the
Company may require that Purchasers delay sales of any Registerable Securities
pursuant to the Registration Statement for an 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 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,
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<PAGE> 9
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 Registrable
Securities to which such loss relates and not joint.
8. Restrictions on Transferability of Shares and Conversion Shares;
Compliance with Securities Act
8.1 Restrictions on Transferability. The Shares and the Conversion 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 and the Conversion Shares in
order to enforce the foregoing restrictions.
8.2 Restrictive Legend. Each certificate representing the Shares and the
Conversion Shares shall bear substantially the following legends (in addition to
any legends required under applicable state securities laws):
-8-
<PAGE> 10
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.
8.3 Transfer of Shares and Conversion Shares. Each Purchaser hereby
covenants with the Company not to make any sale of the Shares or the Conversion
Shares except either (a) a sale of Conversion 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, or
Conversion 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 and Conversion Shares
are not transferable on the books of the Company unless the certificate
submitted to the Company's transfer agent evidencing such Shares or Conversion
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.
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 Conversion Shares issued or issuable upon conversion of the
Shares, 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
or Conversion Shares.
9.2 Broker's Fee. Each Purchaser acknowledges that the Company intends to
pay a fee to Salomon Smith Barney, Inc. or certain dealers selected by it in
respect of the sale of the Shares 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 Shares 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.
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
or Conversion Shares purchasing pursuant to Section 8.3. 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
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<PAGE> 11
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 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.
9.13 Currency. All references to "dollars" or "$" in the Agreement shall
be deemed to refer to United States dollars.
* * *
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<PAGE> 12
EXHIBIT A
FORM OF CERTIFICATE OF DESIGNATIONS
<PAGE> 1
EXHIBIT 4.4
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 OR 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 Preferred Stock and Warrant Purchase Agreement dated
_____________, 1998 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 $1.50 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.
1. Method of Exercise; Payment; Issuance of New Warrant. This Warrant
may be exercised by the Holder hereof at any time on or prior to ___________,
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.
2. 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.
3. 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
<PAGE> 2
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 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.
4. 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.
5. 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.
(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
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<PAGE> 3
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)ab 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.
6. 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.
7. 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.
8. 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.
-4-
<PAGE> 4
Issued this ________, 1998.
BOREALIS TECHNOLOGY CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
ACCEPTED AND AGREED
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
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<PAGE> 5
EXHIBIT A
NOTICE OF EXERCISE
TO: Borealis Technology Corporation
4070 Silver Sage Drive
Carson City, NV 89701
Attn: Chief Financial Officer
The undersigned hereby elects to purchase __________ shares of Common
Stock of Borealis Technology Corporation pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
Name:
------------------------------
Address:
---------------------------
The undersigned hereby represents and warrants that the aforesaid
shares of Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or, for resale in connection with the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Date:
-------------------------------
<PAGE> 6
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, ______________________________ hereby sells,
assigns and transfers to _______________________________________________________
(Name and Address) the right to purchase Shares represented by this Warrant to
the extent of __________ shares of Common Stock and does hereby irrevocably
constitute and appoint ______________________________________
____________________, attorney, to transfer the same on the books of the Company
with full power of substitution in the premises.
Dated: __________, ____
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE> 1
EXHIBIT 5.1
[WILSON SONSINI GOODRICH & ROSATI LETTERHEAD]
November 13, 1998
Borealis Technology Corporation
9790 Gateway Drive, Suite 200
Reno, NV 89511
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 November 13, 1998 in connection with the registration for resale under
the Securities Act of 1933, as amended, of 18,575,490 shares of your Common
Stock (plus an indeterminate number of additional shares of common stock
relating to certain anti-dilution rights of preferred 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
<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 18,575,490 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
November 13, 1998
