FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 33-19598-D
NANOPIERCE TECHNOLOGIES, INC.
-----------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 84-0992908
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
370 Seventeenth Street, Suite 3580
Denver, Colorado 80202
(Address of principal executive offices)
Issuer's telephone number: (303) 592-1010
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--
As of February 1, 2000 there were 34,453,791 shares of the registrant's
sole class of common stock outstanding.
Transitional Small Business Disclosure Format Yes No X
--
<PAGE>
NANOPIERCE TECHNOLOGIES, INC.
INDEX
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
PAGE
----
Condensed Balance Sheet
December 31, 1999 F-2
Condensed Statements of Operations
Three months and six months ended
December 31, 1999 and 1998 F-3
Condensed Statements of Comprehensive Income(Loss)
Three months and six months ended
December 31, 1999 and 1998 F-4
Condensed Statements of Stockholders' Equity
Six months ended December 31, 1999 F-5
Condensed Statements of Cash Flows
Six months ended December 31, 1999 and 1998 F-7
Notes to Financial Statements
Six months ended December 31, 1999 and 1998 F-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 1
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 4
ITEM 2. CHANGES IN SECURITIES 5
ITEM 6. EXHIBITS 5
SIGNATURES 7
LIST OF EXHIBITS 8
F-1
<PAGE>
NANOPIERCE TECHNOLOGIES, INC.
Condensed Balance Sheet
December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
- ------
<S> <C>
Current assets:
Cash $ 94,873
Prepaid expenses, advances and deposits 21,597
---------
Total current assets 116,470
---------
Notes receivable 54,100
Marketable securities 1,894
Intellectual property rights, net of accumulated
amortization of $184,315 815,685
---------
$ 988,149
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Notes payable:
Related party $ 112,599
Other 331,762
Accounts payable and accrued expenses:
Related parties 13,993
Other 270,610
---------
Total current liabilities 728,964
---------
Stockholders' equity:
Preferred stock, $.0001 par value 5,000,000
shares authorized:
Series A; no shares issued and outstanding
Series B: maximum of 75,000 shares issuable; no
shares issued and outstanding
Series C: maximum of 700,000 shares issuable; no
shares issued and outstanding
Common stock, $.0001 par value; 100,000,000 shares
authorized, 33,023,186 shares issued and outstanding 3,302
Additional paid-in capital 6,465,328
Accumulated other comprehensive income 1,894
Deficit (6,087,474)
Receivable from Intercell Corporation ( 123,865)
---------
Total stockholders' equity 259,185
---------
$ 988,149
========
<FN>
See notes to the financial statements
</TABLE>
F-2
<PAGE>
NANOPIERCE TECHNOLOGIES, INC.
Condensed Statements of Operations
Three and Six Months Ended December 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
------------------ ----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ - - - -
General and administrative:
Related parties - 58,000 - 105,000
Other 831,986 239,039 1,086,875 739,265
--------- -------- --------- --------
Loss from operations ( 831,986) ( 297,039) (1,086,875) ( 844,265)
Other income (expenses):
Interest income 230 - 432 346
Interest expense:
Related party ( 2,942) ( 1,323) ( 7,486) ( 4,654)
Other ( 6,500) ( 1,260) ( 8,630) ( 2,522)
--------- -------- --------- --------
( 9,212) ( 2,583) ( 15,684) ( 6,830)
--------- -------- --------- --------
Net loss ( 841,198) ( 299,622) (1,102,559) ( 851,095)
Series A and B preferred
stock dividends - ( 45,313) - ( 90,626)
--------- -------- --------- --------
Net loss applicable to
common shareholders $( 841,198) ( 344,935) (1,102,559) ( 941,721)
========= ======== ========= ========
Net loss per share, basic
and diluted, applicable
to common shareholders $( .03) ( .03) ( .04) ( .07)
========= ======== ========= ========
Weighted average number
of common shares
outstanding 31,518,037 12,901,297 30,949,261 12,776,637
========== ========== ========== ==========
<FN>
See notes to the financial statements
</TABLE>
F-3
<PAGE>
NANOPIERCE TECHNOLOGIES, INC.
Condensed Statements of Comprehensive Income(Loss)
Three and Six Months Ended December 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
------------------ ----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss ( 841,198) ( 299,622) (1,102,559) ( 851,095)
Unrealized gain on
securities 1,420 - 946 -
--------- -------- --------- --------
Comprehensive income(loss) $( 839,778) ( 299,622) (1,101,613) ( 851,095)
========= ======== ========= ========
<FN>
See notes to the financial statements
</TABLE>
F-4
<PAGE>
NANOPIERCE TECHNOLOGIES, INC.
Condensed Statements of Stockholders' Equity
Six Months Ended December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Accumulated other
Common stock Additional comprehensive
Shares Amount paid-in capital income
------ ------ --------------- ------
<S> <C> <C> <C> <C>
Balance,
July 1, 1999 29,734,614 $2,973 5,452,255 948
Common Stock issued
for services 985,125 99 276,851 -
Common stock issued
as collateral on
note payable 500,000 50 ( 50) -
Common stock issued
for cash 1,237,513 124 282,626 -
Common stock issued
for note payable,
accrued interest and
accounts payable
due officers 565,934 56 152,746 -
Warrants issued in
connection with
notes payable and
financing - - 300,900 -
Increase in receivable
from Intercell - - - -
Net loss - - - -
Other comprehensive
income-change in
unrealized gain on
securities - - - 946
Comprehensive
income(loss) - - - -
---------- ----- --------- ------
Balances,
December 31, 1999 33,023,186 $3,302 6,465,328 1,894
========== ===== ========= ======
(Continued)
</TABLE>
F-5
<PAGE>
NANOPIERCE TECHNOLOGIES, INC.
Condensed Statements of Stockholders' Equity
Six Months Ended December 31, 1999
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
Receivable Total
Accumulated from stockholders'
deficit Intercell equity
------- --------- ------
<S> <C> <C> <C>
Balance,
July 1, 1999 (4,984,915) ( 69,182) 402,079
Common Stock issued
for services - - 276,950
Common stock issued
as collateral on
note payable - - -
Common stock issued
for cash - - 282,750
Common stock issued
for note payable,
accrued interest and
accounts payable
due officers - - 152,802
Warrants issued in
connection with
notes payable and
financing - - 300,900
Increase in receivable
from Intercell - ( 54,683) ( 54,683)
Net loss (1,102,559) - (1,102,559)
Other comprehensive
income-change in
unrealized gain on
securities - - 946
Comprehensive
income(loss) - - -
--------- ------- ---------
Balances,
December 31, 1999 (6,087,474) (123,865) 259,185
========= ======= =========
<FN>
See notes to the financial statements
</TABLE>
F-6
<PAGE>
NANOPIERCE TECHNOLOGIES, INC.
Condensed Statements of Cash Flows
Six Months Ended December 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,102,559) ( 851,095)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Amortization expense 50,000 50,000
Amortization of discount on note receivable - ( 346)
Expenses incurred in exchange for
common stock and warrants 636,050 311,516
Changes in operating assets and liabilities:
(Increase) decrease in prepaid expenses,
advances and deposits ( 9,906) ( 13,599)
Increase (decrease) in accounts payable
and accrued expenses:
Related parties 9,978 ( 34,538)
Other 68,666 ( 25,574)
Increase in receivables from Intercell ( 54,683) -
--------- --------
Total adjustments 700,105 287,459
--------- --------
Net cash used in operating activities ( 402,454) ( 563,636)
--------- --------
Cash flows from investing activities:
Increase in note receivable ( 44,100) -
Payments received on notes receivable - 1,250
--------- --------
Net cash provided by investing activities ( 44,100) 1,250
--------- --------
Cash flows from financing activities:
Proceeds from notes payable and warrants:
Related party 9,787 -
Other 248,249 -
Payments on note payable - ( 97,500)
Proceeds from issuance of Series B
preferred stock - 660,000
Proceeds from issuance of common stock 282,750 -
--------- --------
Net cash provided by financing activities 540,786 562,500
--------- --------
Net increase in cash 94,232 114
Cash, beginning of period 641 11
--------- --------
Cash, end of period $ 94,873 125
========= ========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 3,553 -
========= ========
</TABLE>
(Continued)
F-7
<PAGE>
NANOPIERCE TECHNOLOGIES, INC.
Condensed Statements of Cash Flows
Six Months Ended December 31, 1999 and 1998
(Unaudited)
(Continued)
Supplemental disclosure of noncash investing and financing activities:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Conversion of note payable - related party
to common stock $94,602 -
<FN>
See notes to the financial statements
</TABLE>
F-8
<PAGE>
NANOPIERCE TECHNOLOGIES, INC.
Notes to Financial Statements
Six Months Ended December 31, 1999 and 1998
(Unaudited)
1. Business, organization and summary of significant accounting policies:
- ---------------------------------------------------------------------------
Presentation of Interim Information:
In the opinion of the management of Nanopierce Technologies, Inc. (the Company),
the accompanying unaudited financial statements include all material
adjustments, including all normal recurring adjustments, considered necessary to
present fairly the financial position of the Company as of December 31, 1999,
the Company's results of operations for the six months and three months ended
December 31, 1999 and 1998, and the Company's cash flows for the six months
ended December 31, 1999 and 1998. The financial statements and notes are
presented as permitted by Form 10-QSB, and do not contain certain information
included in the Company's last Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1999. It is the Company's opinion that, when the interim
statements are read in conjunction with the June 30, 1999 Annual Report on Form
10-KSB, the disclosures are adequate to make the information presented not
misleading. Interim results are not necessarily indicative of results for a
full year or any future period.
The Company's financial statements for the period ended December 31, 1999 have
been prepared on a going concern basis, which contemplates the realization of
assets and the settlement of liabilities and commitments in the normal course of
business. For the six months ended December 31, 1999, the Company reported a
net loss of $1,102,559 and a deficit of $6,087,474. The Company has not
recognized any revenues from its PI technology and the Company has experienced
difficulty and uncertainty in meeting its liquidity needs. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of assets or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.
To address its current cash flow concerns, in January, 2000 the Company issued
$1,500,000 principal amount of the Company's 6% Convertible debentures and
warrants to purchase 150,000 shares of the Company's common stock for an
aggregate purchase price of $1,500,000 (See Note 6 for additional information.)
The Company is in additional discussions with investment bankers and financial
institutions attempting to raise additional funds to support current and future
operations. This includes attempting to raise additional working capital
through the sale of additional capital stock or through the issuance of debt.
Currently, the Company does not have a revolving loan agreement with any
financial institution, nor can the Company provide any assurance that it will be
able to enter into any such agreement in the future, or be able to raise funds
through a further issuance of debt or equity in the Company.
The Company believes that if additional financing can be completed, adequate
funding may then be available to support operations for the next twelve months.
The Company also believes that sales of its products and technology license
rights may provide sufficient funds to meet the Company's capital requirements.
F-9
<PAGE>
NANOPIERCE TECHNOLOGIES, INC.
Notes to Financial Statements (Continued)
Six Months Ended December 31, 1999 and 1998
(Unaudited)
Business:
The Company is engaged in the design, development and licensing of products
using its intellectual property, the PI Technology. The PI Technology consists
of patents, pending patent applications, patent applications in preparation,
trade secrets, trade names, and trademarks. The PI Technology improves
electrical, thermal and mechanical characteristics of electronic products. The
Company has designated and is commercializing its PI Technology as the
Nanopierce Connection System (NCS) and markets the PI Technology to companies in
various industries for a wide range of applications. On November 30, 1999, a
Court Order of Declaratory Judgment gave the Company incontestable and exclusive
ownership of all patents, patent applications, licenses, trade names,
trademarks, etc. relating to the PI Technology. The Company has not recognized
any receivables or royalty revenue through December 31, 1999, since in the
November 30, 1999 Court Order, the Court granted the original inventor of the
technology all accrued and future royalty payments from the licenses which were
outstanding as of September 3, 1996. The intellectual property is being
amortized to expense using the straight-line method over 10 years.
Business Risk:
The Company is subject to risks and uncertainties common to technology-based
companies, including rapid technological change, dependence on principle
products and third party technology, new product introductions and other
activities of competitors, dependence on key personnel, and limited operating
history.
Use of estimates in the financial statements:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
F-10
<PAGE>
NANOPIERCE TECHNOLOGIES, INC.
Notes to Financial Statements (Continued)
Six Months Ended December 31, 1999 and 1998
(Unaudited)
Loss per share:
SFAS No. 128, Earnings per Share, requires dual presentation of basic and
diluted earnings or loss per share (EPS) with a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings of the entity.
Loss per share of common stock is computed based on the average number of common
shares outstanding during the year. Stock options, warrants, convertible debt
and convertible preferred stock are not considered in the calculation, as the
impact of the potential common shares (16,737,500 shares at December 31, 1999
and 15,924,687 shares at December 31, 1998) would be to decrease loss per share.
Therefore, diluted loss per share is equivalent to basic loss per share.
Reclassification:
Certain amounts reported in the 1998 financial statements have been reclassified
to conform with the 1999 presentation.
2. Receivable from Intercell:
- ------------------------------
At December 31, 1999, the Company has a $123,865 receivable from Intercell
Corporation, a 33 percent shareholder of the Company, which is collateralized by
common stock of the Company owned by Intercell. Intercell has advised the
Company that it does not currently have the funds to repay the receivable.
Therefore, this receivable balance is classified as a reduction of shareholders'
equity at December 31, 1999.
3. Notes payable:
- -----------------
During the six months ended December 31, 1999, the Company issued unsecured
promissory notes in the amount of $102,500. The notes are due in one year and
bear interest at ten percent. The Company issued detached warrants on 717,500
shares of common stock in connection with the unsecured promissory notes. The
warrants are exercisable at $0.40 per share. The exercise price represents
market price on the date of issuance. The detached warrants were valued at
$10,900 using the Black-Scholes pricing model and the resulting discount on the
note of $10,900 is being amortized to interest expense over one year.
During the six months ended December 31, 1999, the Company issued $130,000 of
promissory notes convertible at $0.40 per share into common stock of the
Company. The conversion price represents the market price of common stock on
the date of issuance of the notes. The notes are due in May, 2000 and bear
interest of eight to ten percent.
F-11
<PAGE>
NANOPIERCE TECHNOLOGIES, INC.
Notes to Financial Statements (Continued)
Six Months Ended December 31, 1999 and 1998
(Unaudited)
4. Common stock, stock options and warrants:
- ---------------------------------------------
In the month of October 1999, the Company increased its authorized common stock,
$.0001 par value from 45,000,000 shares to 100,000,000 shares.
During the six months ended December 31, 1999, the Company issued 985,125 shares
of common stock to third parties in exchange for services valued at $276,950
based on the quoted market price of the Company's common stock on the date the
services were performed.
During the six months ended December 31, 1999, the Company issued 1,237,513
shares of common stock to accredited investors for $282,750. In October, the
Company also issued 565,934 shares to two officers for partial payment on a note
payable in the amount of $94,602, accrued interest of $2,171 and accounts
payable of $56,029. The accounts payable includes $36,116 due to an officer for
the Company's usage of a judgment against the original inventor of the PI
Technology. The Company used the judgment held by the officer in the settlement
of the litigation. The $36,116 approximated the officer's basis in the
judgment.
In September, 1999 the Company issued 500,000 shares of it's common stock as
collateral on a $50,000 loan. The shares will be returned to the Company if the
loan is paid in full by its due date in March, 2000.
During the six months ended December 31, 1999, the Company granted stock options
on 350,000 shares of common stock at $0.40 to $0.45 per share to a director and
employee. The option prices represents the market price on date of grant. The
stock options expire in the year 2009.
The Company issued warrants to acquire 717,500 shares of common stock at $0.40
per share in connection with $102,500 of unsecured promissory notes issued
during the six months ended December 31, 1999 as described in Note 3. The
warrants may be exercised for a three-year period. The detached warrants were
valued at $10,900 and that amount is being amortized over one year to interest
expense. Also during the six months ended December 31, 1999, the Company issued
promissory notes in the amount of $130,000 which are convertible at $0.40 per
share into 325,000 shares of common stock of the Company, and the Company issued
warrants to two entities for services in assisting the Company to obtain
financing. The warrants cover 10,000,000 shares of common stock, are
exercisable at $0.51 per share and expire on December 10, 2004. The exercise
price represents the market price of common stock on the date of issuance of the
warrants. The warrants were valued at $290,000 using the Black-Scholes pricing
model and that amount was charged to general and administrative expense.
F-12
<PAGE>
NANOPIERCE TECHNOLOGIES, INC.
Notes to Financial Statements (Continued)
Six Months Ended December 31, 1999 and 1998
(Unaudited)
5. License Agreements:
- -----------------------
The Company has license agreements with third parties, which allow the third
parties to utilize defined aspects of the intellectual property rights in return
for royalty fees. All but two license agreements are idle. Royalties and
maintenance payments from the two license agreements have been held in an escrow
account, outside of the Company's control, pending the resolution of certain
legal issues. On November 30, 1999, the Company obtained a Court Order of
Declaratory Judgment that it has incontestable and exclusive ownership of all
patents, patent applications, licenses, trade names, trademarks, trade secrets
and other intellectual properties relating to the PI Technology. As part of the
Court Order, the original inventor of the technology is to receive all accrued
and future royalty payments from the license agreements which were outstanding
as of September 3, 1996. The Company also granted to the original inventor of
the technology a two-year, royalty bearing, non-exclusive license to use the PI
Technology for certain specified applications. The Company has not recorded any
receivables or revenues associated with the accrued royalty payments on licenses
which were outstanding as of September 3, 1996. The Company believes that the
resolution of this litigation will not have a material adverse impact on either
results of operations, financial position, or cash flows.
6. Subsequent Event:
- ----------------------
In January, 2000, the Company issued $1,500,000 principal amount of the
company's 6% convertible debentures and warrants to purchase 150,000 shares of
the Company's common stock for an aggregate purchase price of $1,500,000. The
Company also issued, for the aggregate purchase price of $100, a conditional
warrant pursuant to which the purchaser can purchase and the Company shall issue
and sell up to an additional $2,500,000 of the Company's convertible debentures
and additional warrants to purchase 250,000 shares of common stock. The
debentures are due on January 10, 2002. The conditional warrant expires
June 12, 2000. The convertible debentures are convertible at the lessor of
$2.915 or 80% of the average of the three lowest daily closing bid prices
during the 30 trading days immediately preceding the date on which the holder
elects to convert the debentures. The warrants to purchase common stock are at
a purchase price of $2.915 per share. The "in the money" conversion terms of
these instruments at the date of issuance resulted in a beneficial conversion
amount of approximately $375,000. The intrinsic value of the beneficial
conversion feature will be allocated to additional paid-in capital and is to be
amortized from the date of issuance through the date the securities are first
convertible. The convertible debentures place certain restrictions on the
Company including the Company's ability to issue additional shares. The Company
is required to file a registration statement within 45 days to register the
shares issuable under the debentures and warrants.
In January 2000, stock options on 1,050,000 shares were exercised using a
cashless exercise. The stock option holders received 973,207 shares and paid
for these shares with the remaining 76,793 common shares.
In January 2000, convertible notes in the amount of $130,000 were converted at
$0.40 per share into 325,000 shares of restricted common stock.
F-13
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
The statements contained in this Form 10-QSB, if not historical, are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, and involve risks and uncertainties that could
otherwise, or other expectations described in such forward-looking statements.
Any forward-looking statement or statements speak only as of the date on which
such statements were made, and the Company undertakes no obligation to update
any forward-looking statement to reflect events or circumstances after the date
on which such statements are made or reflect the occurrence of unanticipated
events. Therefore, forward-looking statements should not be relied upon as
prediction of actual future results.
The independent auditors' report on the Company's financial statements for
the year ended June 30, 1999 included a "going concern" explanatory paragraph,
meaning the auditors have expressed substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to the
factors prompting the explanatory paragraph are discussed below and also in
Note 2 of the audited financial statements contained in the Company's Annual
Report on Form 10-KSB for the fiscal year ended June 30, 1999.
Results of operations
- ---------------------
The Company had no revenues for the three and six months ended December 31,
1999 and 1998.
General and administrative expenses increased to $831,986 for the three
months ended December 31, 1999 and to $1,086,875 for the six months ended
December 31, 1999, from $297,039 for the three months ended December 31, 1998
and $844,265 for the six months ended December 31, 1998. This increase is due
in part to the following: (a) financing costs, including commissions, of
$373,050 in the three months ended December 31, 1999 incurred in connection with
the various financing arrangements described below (there were no similar costs
in the 1998 period); (b) accounting and audit fees increased from $28,057 in the
1998 period to $52,030 in the 1999 period; (c) payroll expense increased from
$121,437 in the 1998 period to $185,000 in the 1999 period as the result of
additional employees; (d) expense of $36,116 associated with the usage of a
Judgment obtained from an officer in the settlement of the DiFrancesco
Litigation; and (e) a general increase in most expenditures as a result of an
increase in marketing activities. Legal expenses decreased by 33% ($46,650)
from $139,349 for the six months ended December 31, 1998 to $92,699 for the six
months ended December 31, 1999. Public relations expenses decreased by 48%
($157,963) from $326,866 for the six months ended December 31, 1998 to
approximately $168,903 for the six months ended December 31, 1999. Interest
expense increased from the 1998 periods to the 1999 periods (an increase of
$6,629 for the three month periods and $8,854 for the six month periods) as a
result of the additional debt of the Company.
The Company experienced net losses of $841,198 and $1,102,559 for the three
months ended and the six months ended December 31, 1999, respectively, compared
to net losses of $299,622 and $851,095 for the three months ended and six months
ended December 31, 1998.
Liquidity and financial condition
- ---------------------------------
The Company has a working capital deficit of $612,494 at December 31, 1999
compared to a working capital deficit of $474,554 at June 30, 1999.
1
<PAGE>
The Company's liabilities increased to $728,964 at December 31, 1999
compared to $486,886 at June 30, 1999. The increase was due in part to a
$248,249 increase in notes payable issued to secure finances for operations over
the six month period ended December 31, 1999. A $130,577 Promissory Note
payable to the President and CEO of the Company was partially paid, including
interest, through the issuance of 358,420 shares of the Company's common stock.
The Company's current operations are not generating positive cash flow. In
order to meet operating needs, the Company entered into the following financial
arrangements in the six months ended December 31, 1999: (a) $282,750 was raised
through the issuance of 1,237,513 shares of the Company's common stock; (b)
$102,500 through the issuance of Promissory Notes with detached warrants
exercisable for 577,500 shares of the Company's common stock; (c) $130,000
through the issuance of promissory notes convertible at $0.40 per share into
common stock of the Company; (d) in December 1999, a third party agreed to
purchase from the Company up to $1,000,000 of previously unissued, restricted
common shares, in $50,000 increments, at the lesser of $1.00 per share or 77.5%
of the lowest closing bid price of the common stock during the five trading days
immediately preceding the conversion date; and (e) in January, 2000, the Company
issued $1,500,000 principal amount of the Company's 6% convertible debentures
and warrants to purchase 150,000 shares of the Company's common stock for an
aggregate purchase price of $1,500,000. The Company also issued, for the
aggregate purchase price of $100, a conditional warrant pursuant to which the
purchaser can purchase and the company shall issue and sell up to an additional
$2,500,000 of the Company's convertible debentures and additional warrants to
purchase 250,000 shares of common stock. The Company believes that completion
of the sale of the additional $2,500,000 of convertible debentures will provide
the Company with an adequate amount of cash reserves to fund the Company's plan
of operations for the ensuing twelve months.
The Company, in the Spring of 1999, signed various agreements with
companies both overseas and in the States. The agreements are to apply the
Company's NCS (Nanopierce Connection System) technology to various products,
mainly in the smart card/smart label industry. Management is pursuing the
development of further similar agreements both nationally and internationally
with companies not only in the smart card/smart label industry, but other
industries, as well. Further, the Company is working to advance the agreements
already in place.
The Company is continuing to look for additional financing through the
marketing of its NCS through the pursuit of licensing, joint venture,
co-manufacturing or other similar arrangement with industry partners. The
failure to secure such a relationship will result in the Company requiring
substantial additional capital and resources to bring its NCS to market. To the
extent the Company's operations are not sufficient to fund the Company's capital
requirements, the Company may enter into a revolving loan agreement with a
financial institution or attempt to raise capital through the sale of additional
capital stock or through the issuance of debt. At the present time, the Company
does not have a revolving loan agreement with any financial institution nor can
the Company provide any assurance that it will be able to enter into any such
agreement in the future or be able to raise funds through the further issuance
of debt or equity in the Company. Under the Company's Securities Purchase
Agreement dated January 2000, the Company may not sell any additional shares,
with limited exceptions, until 270 days after a registration statement has been
declared effective. The Company continues to evaluate additional merger and
acquisition opportunities.
2
<PAGE>
Loss per share of common stock is computed based on the weighted average
number of common shares outstanding during the year. Stock options, warrants
and convertible preferred stock are not considered in the calculation, as the
impact of the potential common shares would be to decrease loss per share.
Therefore, diluted loss per share is equivalent to basic loss per share.
Recently issued accounting pronouncement:
- ----------------------------------------
In June 1998, the Financial Accounting Standard Board (FASB) issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. This
statement, as amended by SFAS No. 137, is effective for fiscal years beginning
after June 15, 2000. Currently, the Company does not have any derivative
financial instruments and does not participate in hedging activities; therefore,
management believes that SFAS No. 133 will not impact the Company's financial
statements.
3
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
The Company has license agreements with third parties, which allow the
third parties to utilize defined aspects of the intellectual property rights in
return for royalty fees. All but two license agreements are idle. Royalties
and maintenance payments from the two license agreements have been held in an
escrow account, outside the Company's control, pending the resolution of certain
issues. On November 30, 1999, the Company obtained a Court Order of Declaratory
Judgment that it has incontestable and exclusive ownership of all patents,
patent applications, licenses, trade names, trademarks, trade secrets and other
intellectual properties relating to the PI Technology. As part of the Court
Order, the original inventor of the technology is to receive all accrued and
future royalty payments from the licenses which were outstanding as of September
3, 1996. The Company also granted to the original inventor of the technology a
two-year, royalty bearing, non-exclusive license to use the PI Technology for
certain specified applications. The Company believes that the ultimate
disposition of legal matters will not have a material adverse impact on results
of operations, financial position, or cash flows.
Item 2 - Changes in Securities
The Company made the following unregistered sales of its securities from
September 30, 1999, to December 31, 1999.
<TABLE>
<CAPTION>
Date Title of Amount of
of Sale Securities Securities Consideration Purchaser
- -------- ---------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
10/18/99 Common Stock 455,934 Loan, Interest and Paul H. Metzinger
Other Advances
10/18/99 Common Stock 110,000 Compensation Due Dr. Herbert J. Neuhaus
10/26/99 Warrant to Acquire
Common Stock 140,000 Financing Gemini Investments
10/26/99 Warrant to Acquire
Common Stock 105,000 Financing SLK Joint Venture$
10/27/99 Warrant to Acquire
Common Stock 525,000 Financing Dennis Ferraro
10/27/99 Warrant to Acquire
Common Stock 70,000 Financing Kelly Pitts
10/27/99 Warrant to Acquire
Common Stock 70,000 Financing Dennis McGuire
10/29/99 Common Stock 40,000 Services Thompson & Lowe, P.C.
11/01/99 Stock Option 300,000 Service of Dr. Michael Wernie
Employee
11/03/99 Common Stock 105,125 Financing Stanley Richards
Commissions
11/08/99 Warrant to Acquire
Common Stock 140,000 Financing Rodney Hock
11/22/99 Warrant to Acquire
Common Stock 70,000 Financing Larry Pisciotta
</TABLE>
4
<PAGE>
Item 2 - Changes in Securities (Continued)
<TABLE>
<CAPTION>
Date Title of Amount of
of Sale Securities Securities Consideration Purchaser
- -------- ---------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
12/10/99 Stock Option 50,000 Service of K. Knight-McConnell
Employee
12/10/99 Warrant to Acquire 5,000,000 Financing Standard Financial
Common Stock Commissions Group
12/10/99 Warrant to Acquire 5,000,000 Financing Gemini Investments
Common Stock Commissions
12/17/99 Warrant to Acquire
Common Stock 70,000 Financing Dennis McGuire
12/31/99 Common Stock 680,000 Services Standard Financial
Group
12/31/99 Common Stock 252,558 $50,000 Gemini Investments
12/31/99 Common Stock 252,558 $50,000 Gemini Investments
12/31/99 Common Stock 85,000 $29,750 Gemini Investments
12/31/99 Common Stock 132,397 $50,000 Tannaz
</TABLE>
Exemptions from Registration Claimed
All of the sales by the Company of its unregistered securities were made by
the Company in reliance upon Section 4(2) of the Act. All of the individuals
and/or entities listed above that purchased the unregistered securities were all
known to the Company and its management, through pre-existing business
relationships, as long standing business associates, friends, and employees.
All purchasers were provided access to all material information, which they
requested, and all information necessary to verify such information and were
afforded access to management of the Company in connection with their purchases.
All purchasers of the unregistered securities acquired such securities for
investment and not with a view toward distribution, acknowledging such intent to
the Company. All certificates or agreements representing such securities that
were issued contained restrictive legends, prohibiting further transfer of the
certificates or agreements representing such securities, without such securities
either being first registered or otherwise exempt from registration in any
further resale or disposition.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit 10.01 Employment Agreement between Nanopierce Technologies, Inc.
and Dr. Herbert J. Neuhaus, dated January 1, 2000
Exhibit 10.02 Employment Agreement between Nanopierce Technologies, Inc.
and Kristi J. Kampmann
Exhibit 10.03 Unsecured Corporate Promissory Note between Nanopierce
Technologies, Inc. and Jeffrey Ploen in the amount of
$25,000 dated 12/22/99
Exhibit 10.04 Unsecured Corporate Promissory Note between Nanopierce
Technologies, Inc. and Jeffrey Ploen in the amount of
$25,000 dated 12/22/99
5
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.(Continued)
Exhibit 10.05 Unsecured Corporate Promissory Note between Nanopierce
Technologies, Inc. and Growth Venture$, Inc. Pension Plan
& Trust in the amount of $80,000 dated 12/23/99
Exhibit 10.06 Warrant to Purchase Common Stock of Nanopierce
Technologies, Inc. between Nanopierce Technologies, Inc.
and Dennis Ferraro in the amount of 52,500 shares dated
10/27/99
Exhibit 10.07 Warrant to Purchase Common Stock of Nanopierce
Technologies, Inc. between Nanopierce Technologies, Inc.
and Gemini Investments, Ltd. in the amount of 140,000
shares dated 10/26/99
Exhibit 10.08 Warrant to Purchase Common Stock of Nanopierce
Technologies, Inc. between Nanopierce Technologies, Inc.
and Gemini Investments, Ltd. in the amount of 5,000,000
shares dated 12/10/99
Exhibit 10.09 Warrant to Purchase Common Stock of Nanopierce
Technologies, Inc. between Nanopierce Technologies, Inc.
and Rodney Hock in the amount of 140,000 shares dated
11/08/99
Exhibit 10.10 Warrant to Purchase Common Stock of Nanopierce
Technologies, Inc. between Nanopierce Technologies, Inc.
and Dennis McGuire in the amount of 70,000 shares dated
10/27/99
Exhibit 10.11 Warrant to Purchase Common Stock of Nanopierce
Technologies, Inc. between Nanopierce Technologies, Inc.
and Dennis McGuire in the amount of 70,000 shares dated
12/17/99
Exhibit 10.12 Warrant to Purchase Common Stock of Nanopierce
Technologies, Inc. between Nanopierce Technologies, Inc.
and Kelly S. Pitts in the amount of 70,000 shares dated
10/27/99
Exhibit 10.13 Warrant to Purchase Common Stock of Nanopierce
Technologies, Inc. between Nanopierce Technologies, Inc.
and Larry F. Pisciotta in the amount of 70,000 shares
dated 11/22/99
Exhibit 10.14 Warrant to Purchase Common Stock of Nanopierce
Technologies, Inc. between Nanopierce Technologies, Inc.
and SLK Joint Venture in the amount of 105,000 shares
dated 10/22/99
Exhibit 10.15 Warrant to Purchase Common Stock of Nanopierce
Technologies, Inc. between Nanopierce Technologies, Inc.
and Standard Financial Group, Ltd. in the amount of
5,000,000 shares dated 12/10/99
Exhibit 11 Computation on net loss per share
Exhibit 27 Financial Data Schedule
(b) Reports:
None
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NANOPIERCE TECHNOLOGIES, INC.
(Registrant)
February 11, 2000 /s/ Paul H. Metzinger
----------------------------------
Paul H. Metzinger, President & CEO
February 11, 2000 /s/ Kristi J. Kampmann
-----------------------------------
Kristi J. Kampmann, Chief Financial
Officer
7
<PAGE>
LIST OF EXHIBITS
PAGE
----
Exhibit 10.01 Employment Agreement between Nanopierce Technologies, Inc. 8
and Dr. Herbert J. Neuhaus, dated January 1, 2000
Exhibit 10.02 Employment Agreement between Nanopierce Technologies, Inc. 21
and Kristi J. Kampmann
Exhibit 10.03 Unsecured Corporate Promissory Note between Nanopierce 34
Technologies, Inc. and Jeffrey Ploen in the amount of
$25,000 dated 12/22/99
Exhibit 10.04 Unsecured Corporate Promissory Note between Nanopierce 36
Technologies, Inc. and Jeffrey Ploen in the amount of
$25,000 dated 12/22/99
Exhibit 10.05 Unsecured Corporate Promissory Note between Nanopierce 38
Technologies, Inc. and Growth Venture$, Inc. Pension
Plan & Trust in the amount of $80,000 dated 12/23/99
Exhibit 10.06 Warrant to Purchase Common Stock of Nanopierce 40
Technologies, Inc. between Nanopierce Technologies, Inc.
and Dennis Ferraro in the mount of 52,500 shares dated
10/27/99
Exhibit 10.07 Warrant to Purchase Common Stock of Nanopierce 48
Technologies, Inc. between Nanopierce Technologies, Inc.
and Gemini Investments, Ltd. in the amount of 140,000
shares dated 10/26/99
Exhibit 10.08 Warrant to Purchase Common Stock of Nanopierce 56
Technologies, Inc. between Nanopierce Technologies, Inc.
and Gemini Investments, Ltd. in the amount of 5,000,000
shares dated 12/10/99
Exhibit 10.09 Warrant to Purchase Common Stock of Nanopierce 64
Technologies, Inc. between Nanopierce Technologies, Inc.
and Rodney Hock in the amount of 140,000 shares
dated 11/08/99
Exhibit 10.10 Warrant to Purchase Common Stock of Nanopierce 72
Technologies, Inc. between Nanopierce Technologies, Inc.
and Dennis McGuire in the amount of 70,000 shares
dated 10/27/99
Exhibit 10.11 Warrant to Purchase Common Stock of Nanopierce 80
Technologies, Inc. between Nanopierce Technologies, Inc.
and Dennis McGuire in the amount of 70,000 shares
dated 12/17/99
Exhibit 10.12 Warrant to Purchase Common Stock of Nanopierce 88
Technologies, Inc. between Nanopierce Technologies, Inc.
and Kelly S. Pitts in the amount of 70,000 shares
dated 10/27/99
Exhibit 10.13 Warrant to Purchase Common Stock of Nanopierce 96
Technologies, Inc. between Nanopierce Technologies, Inc.
and Larry F. Pisciotta in the amount of 70,000 shares
dated 11/22/99
Exhibit 10.14 Warrant to Purchase Common Stock of Nanopierce 104
Technologies, Inc. between Nanopierce Technologies, Inc.
and SLK Joint Venture in the amount of 105,000 shares
dated 10/22/99
Exhibit 10.15 Warrant to Purchase Common Stock of Nanopierce 112
Technologies, Inc. between Nanopierce Technologies, Inc.
and Standard Financial Group, Ltd. in the amount of
5,000,000 shares dated 12/10/99
Exhibit 11 Computation of Net Loss Per Share 120
Exhibit 27 Financial Data Schedule 121
8
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made and entered into as of January
1, 2000, by and between Nanopierce Technologies, Inc. (the "Corporation"), a
Nevada corporation, and Dr. Herbert J. Neuhaus, an individual with his principal
business address at 370 Seventeenth Street, Suite 3580, Denver, Colorado 80202
(the "Executive");
1. Employment and Term.
- -------------------------
(a) Employment. The Company hereby employs Executive and Executive hereby
accepts such employment, in the capacity of Executive Vice President of
Technology and Marketing of the Corporation to act in accordance with the terms
and conditions hereinafter set forth.
(b) Term. Executive's employment hereunder shall be for an initial term
of four years (the "Initial Term") commencing on January 1, 2000 (the "Effective
Date") and terminating on December 31, 2003, subject to the extension or earlier
expiration of the Initial Term as provided in this Agreement. Within forty-five
(45) days of December 31, 2003 the Corporation's Board of Directors (the
"Board") shall review Executive's performance under this Agreement and, in its
sole discretion, renew the Agreement for a term of one year (a "Renewal Term")
commencing on the first day immediately following the Expiration Date (as
defined below). The board shall provide Executive written notice of its
decision to renew or not renew this Agreement at least 30 days prior to the date
of this Agreement expires under the Initial Term of any Renewal Term (the
"Expiration Date"). If the Board fails to provide Executive with such written
notice, within the time period set forth above, the Agreement shall terminate on
the Expiration Date of the Initial Term or Renewal Term, as the case may be.
Whenever the word "Term" is used in this Agreement is shall refer to either the
Initial Term or the Renewal Term, as the case may be.
(c) Location of Employment. Effective upon the date of this Agreement,
and through the Initial Term the Corporation shall maintain an office for
Executive at 370 Seventeenth Street, Suite 3580, Denver, Colorado 80202, or such
other location upon which the Corporation and Executive shall mutually agree at
which location Executive shall carry out his duties.
2. Duties.
- ----------
(a) During the period of employment as provided in Paragraph 1(b) hereof,
Executive shall serve as Executive Vice President of Technology and Marketing of
the Corporation, and shall have all powers and duties consistent with such
position subject to the direction of the Board. Such duties shall include,
without limitation, the following:
(i) Executive Vice President of Technology & Marketing. The primary
duties and responsibilities of the Executive Vice President of Technology and
Marketing consist of the following: the development and implementation of an
overall strategy and business plan for the Corporation with particular emphasis
focused upon the identification and acquisition of additional businesses;
primary responsibility for all aspects of the implementation of the
Corporation's technologies; responsibility for the development and
implementation of a marketing plan for the Corporation's technologies; and such
further responsibilities as are delegated to Executive by the President and
Chief Executive Officer of the Corporation.
9
<PAGE>
(b) Executive shall devote substantially his entire professional time,
attention and energy exclusively to the business and affairs of the Corporation
and its subsidiaries, as its business and affairs now exist and as they
hereafter may be changed, and shall not during the term of his employment
hereunder be engaged in any other business activity whether or not such business
activity is pursued for gain or profit. The foregoing shall not be construed as
preventing Executive from (a) managing his personal investments or investing his
assets in such form or manner as will not require any significant services on
his part in the operation of the affairs of the businesses or entities in which
such investments are made, provided Executive shall not invest in any business
competitive with the Corporation and its affiliates, except those companies
whose securities are listed on a national securities exchange or quoted daily in
the Over-the-Counter Market listing of the The Wall Street Journal; or (B)
preclude Executive from continuing to serve on the board of directors of any
business corporation or any charitable organization on which he now serves and
which has been disclosed to the Corporation in writing or, subject to the prior
approval of the Board, from accepting employment to additional board of
directors, provided that such activities do not materially interfere with the
performance of Executive's duties hereunder.
(c) Executive further agrees that during the term of his employment
under this Agreement he will engage in no business or other activities, directly
or indirectly, which are or may be competitive with or which might place him in
a competing position to that of the Corporation and its affiliates without
obtaining the prior written consent of the Board, including, without limitation,
the solicitation or acceptance of consulting work from clients of the
Corporation and its affiliates for whom he has performed services by virtue of
this Agreement or who he has met in connection with his employment under this
Agreement.
3. Compensation.
- ----------------
(a) Base Salary. For services performed by Executive for the Corporation
pursuant to this Agreement during the first year January 1, 2000 to December 31,
2000, the Corporation shall pay Executive a base salary at the rate of
$165,000.00 per year (the "Base Salary"), payable in accordance with the
Corporation's normal payroll practices but in no event less than once a month.
Any compensation paid to Executive under any additional compensation or
incentive plan of the Corporation, or that may be otherwise authorized from time
to time by the Board, shall be in addition to the base salary to which Executive
shall be entitled under this Agreement.
(b) Salary Adjustments. The Corporation shall pay Executive the following
base annual salary for each of the remaining three years of the Initial Term as
follows:
January 1, 2000 to December 31, 2000 $165,000
January 1, 2001 to December 31, 2001 $181,500
January 1, 2002 to December 31, 2002 $200,000
January 1, 2003 to December 31, 2003 $220,500
(c) Tax Withholding. The Corporation shall provide for the withholding of
any taxes required to be withheld by federal, state and local law with respect
to any payment in cash, shares of capital stock or other property made by or on
behalf of the corporation to or for the benefit of Executive under this
Agreement or otherwise. The Corporation may, at its option: (I) withhold such
taxes from any cash payments owing to the Corporation to Executive, including
any payments owing under any other provision of this Agreement, (ii) require
Executive to pay to the Corporation in cash such amount as may be required to
satisfy such withholding obligations or (iii) make other satisfactory
arrangements with Executive to satisfy such withholding obligations.
10
<PAGE>
4. Benefits.
- ------------
In addition to the base Salary, Executive shall also be entitled to the
following:
(a) Participation in Benefit Plans. Executive shall be entitled to
participate in the various retirement, welfare, fringe benefit, group long-term
disability plans and other executive perquisite plans, programs and arrangements
of the Corporation available for senior executive level officers of the
Corporation. Executive and his dependents, at Executive's request shall be
enrolled in the Corporation's health, life, disability and other insurance plans
and programs immediately upon his commencement of employment hereunder.
(b) Vacation and Sick Leave. Executive shall be entitled to two weeks of
vacation during each calendar year during which this Agreement is in effect, or
such greater period as the Board may approve, and to paid holidays given by the
Corporation to its domestic employees generally, without reduction in salary or
other benefits. Executive shall also be entitled to sick leave according to the
sick leave policy, which the Corporation may adopt from time to time.
(c) Basic Stock Option. Executive shall be eligible for grants of stock
options in accordance with the Corporation's 1998 Stock Option Plan or such
other stock option plan developed by the Board.
(d) Expenses. The Corporation shall reimburse Executive, upon proper
accounting, for reasonable business expenses and disbursements incurred by him
in the course of the performance of his duties under this Agreement and in
accordance with the Corporation's policies as in effect from time to time.
(e) Proration of Benefits. Any payments or benefits hereunder, in any year
during which Executive is employed by the Corporation for less than the entire
year shall, unless otherwise provided in the applicable plan or arrangement, be
prorated in accordance with the number of days in such year during which
Executive is employed by the Corporation.
5. Indemnification and Insurance.
- -----------------------------------
Executive shall be entitled to the maximum indemnification provided by the
Bylaws and the Articles of Incorporation of the Corporation for officers and
employees of the Corporation. Executive's rights under this Paragraph shall
continue without time limit so long as he may be subject to any such liability,
whether or not the Term of employment has ended. The Corporation shall obtain
and maintain, in effect, officers and directors liability insurance in an amount
not less than $1,000,000 without time limit so long as Executive may be subject
to any such liability, whether or not the Term of employment has ended.
6. Representations and Warranties of Executive.
- ---------------------------------------------------
Executive hereby represents and warrants to the Corporation that (a) Executive's
execution and delivery of this Agreement and his performance of his duties and
obligations hereunder will not conflict with, or cause a default under, or give
any party a right to damages under, or to terminate, any other agreement to
which Executive is a party or by which he is bound, and (b) there are no
agreements or understandings that would make unlawful Executive's execution or
delivery of this Agreement or his employment hereunder.
11
<PAGE>
7. Representations and Warranties of the Corporation. The Corporation hereby
- -------------------------------------------------------
represents and warrants to Executive as follows:
(a) The Corporation is duly organized and established as a corporation
under the laws of the State of Nevada and has all requisite power and authority
to enter into this agreement and to perform its obligations hereunder. The
consummation of the transactions contemplated by this Agreement will neither
violate nor be in conflict with any agreement or instrument to which the
Corporation is a party or by which it is bound.
(b) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby have been duly and validly authorized by all
requisite corporate action on the part of the Corporation and are valid, legal
and binding obligations of the Corporation, enforceable in accordance with their
terms except as may be limited by the laws of general application relating to
bankruptcy, insolvency, moratorium or other similar laws relating to or
affecting the enforcement or creditors' rights, and rules of law governing
specific performance, injunctive relief or other equitable remedies.
8. Termination.
- ---------------
(a) Cause. The Corporation may terminate Executive's employment at any
time for Cause (as defined herein), by reason of Disability (as defined herein),
or without Cause; provided, however, that for any reason constituting Cause,
Executive is given (x) reasonable notice ("Notice of Termination for Cause")
setting forth the reasons for the Corporation's intention to terminate for Cause
and the effective date of such termination (which effective date may be the date
of such notice), (y) an opportunity for Executive, together with his counsel, to
be heard before the Board within two weeks of such notice and (z) within five
(5) business days after Executive's hearing before the Board, written notice to
Executive from the Board of its good faith determination that the reasons
specified in the Notice of Termination for Cause constitute Cause under this
Paragraph 8(a), and that Executive's employment is terminated effective as of
the date specified in the Notice of Termination for Cause. Executive's rights
to receive his salary and benefits hereunder shall not be affected during the
period between the receipt of the Notice of Termination for Cause and the
determination, if any, by the Board that the reasons specified in such notice
constituted Cause. For purposes of this Agreement, "Cause" means:
(i) Executive commits a breach of any material term of this
Agreement, or any material obligation of the Corporation, and such breach
constitutes gross negligence or willful misconduct and, if such breach is
capable of being cured, Executive Fails to cure such breach within 30 days of
notice of such breach;
(ii) Executive is convicted of, or pleads guilty or nolo contendere to
a felony;
(iii) Executive's commission of any act that would cause any license of
the Corporation or its subsidiaries or affiliates to be revoked, suspended, or
not be renewed after proper application;
(iv) gross negligence in the performance of Executive's duties and
responsibilities;
(v) refusal of Executive to follow proper and achievable written
direction of the Board, provided that this shall not be Cause if Executive in
good faith believes the direction to be illegal, unethical or immoral and so
notifies the Board;
12
<PAGE>
(vi) material fraud or dishonesty with regard to the Corporation
(other than good faith expense account disputes); or
(vii) continuous refusal to attempt to perform Executive's
responsibilities and duties after written notice.
(b) Good Reason. Executive may terminate his employment at any time for
any of the following reasons (each of which is referred to herein as "Good
Reason") by giving the Corporation notice of the effective date of such
termination (which effective date may be the date of such notice):
(i) the Corporation commits a breach of any material term of this
Agreement and, if such breach is capable of being cured, the Corporation fails
to cure such breach within 30 days of receipt of notice of such breach; or
(ii) a material change of position, duties or the assignments of
duties materially inconsistent with Executive's position as Executive Officer of
the Corporation.
(c) Change in Control. Executive may, at his option, terminate his
employment upon a "Change in Control." For purposes of this Agreement, "Change
of Control" shall mean:
(i) the obtaining by any party of fifty percent (50%) of more of the
voting shares of the Corporation pursuant to a "tender offer" for such shares as
provided under Rule 14d-2 promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or any subsequent comparable federal rule or
regulation governing tender offers; or
(ii) individuals who were members of the Board immediately prior to
any particular meeting of the Corporation's shareholders which involves a
contest for the election of directors fail to constitute a majority of the
members of the Board following such election; or
(iii) the Corporation's executing an agreement concerning the sale of
substantially all of its assets to a purchaser which is not a subsidiary; or
(vi) the Corporation's adoption of a plan of dissolution or
liquidation;
(v) the Corporation's executing an agreement concerning a merger of
consolidation involving the Corporation in which the Corporation is not the
surviving corporation or if, immediately following such merger or consolidation,
less than fifty percent (50%) of the surviving corporation's outstanding voting
stock is held by persons who are stockholders of the Corporation immediately
prior to such merger of consolidation.
(d) Executive's Rights to Terminate. Executive may, at his option,
terminate his employment hereunder for any reason upon 60 days' prior written
notice to the Corporation.
(e) Death. This Agreement shall terminate automatically upon Executive's
death.
13
<PAGE>
(f) Disability. The term "Disability" as used in connection with
termination of the employment of Executive shall mean the inability of Executive
to substantially perform his material duties hereunder due to physical or mental
disablement which continues for a period of six (6) consecutive months, during
the term of employment (during which six (6) month period Executive's salary and
benefits shall continue) as determined by an independent qualified physician
mutually acceptable to the Corporation and Executive (or his personal
representative). Notwithstanding the above, in the event of Disability,
Executive shall be entitled to participate in and be covered by the
Corporation's group health plan until Executive is able to obtain health
insurance on substantially the same terms and conditions as provided in the
Corporation's group health plan; provided, however, that if the Corporation's
group health plan does not allow Executive and his dependents to continue
coverage, then the Corporation and Executive agree to negotiate a mutually
satisfactory alternative to provide Executive with the benefits intended by this
Paragraph 8(f).
(g) Without Cause. The Corporation may, at its option, terminate
Executive's employment without Cause at any time upon written notice to
Executive.
(h) Date of Termination. For purposes of this Agreement, the term "Date of
Termination" shall mean the date that any party gives notice, through action or
otherwise, that it intends to terminate this Agreement pursuant to the terms
hereof or the date, if any, specified by the terminating party in such notice as
the effective date of termination; provided, however, with respect to
termination for Cause, the Date of Termination shall be the date of receipt by
Executive of written notice form the Board as required by Paragraph 8(a) hereof.
In addition, where Executive gives notice to terminate this Agreement and the
effective date of termination is other than the date the Corporation receives
notice of termination, the Corporation reserves the right to accelerate the
Termination Date to the date Executive notified the Corporation of his intent to
terminate this Agreement.
9. Obligations of the Corporation Upon Termination.
- --------------------------------------------------------
(a) Without cause or for Good Reason. If the Corporation shall terminate
Executive's employment without Cause or if Executive shall terminate his
employment for Good Reason, this Agreement shall terminate without further
obligation to Executive hereunder, other that the obligation (i) to continue to
pay Executive in accordance with the Corporation's normal payroll payment
procedures his Base Salary from the Date of Termination at the rate in effect on
the Date of Termination through the next anniversary of the Effective Date; and
(ii) to continue to provide Executive with the benefits set forth in Paragraph
4(a) through the next anniversary of the Effective Date.
(b) Voluntary. If Executive terminates his employment for other than Good
Reason (a "Voluntary Termination"), this Agreement shall terminate without
further obligation to Executive hereunder, other than the obligation (i) to
continue to pay Executive in accordance with the Corporation's normal payroll
payment procedures his Base Salary through the Date of Termination at the rate
in effect on the Date Termination; and (ii) to continue to provide Executive
with benefits of the type described in Paragraph 4(a) through the day preceding
the Date of Termination.
(c) Cause. If Executive's employment shall be terminated by the
Corporation for "Cause" the Corporation shall continue to pay Executive his Base
Salary through the Date of Termination at the rate in effect upon the Date of
Termination. Thereafter, the Corporation shall have no further obligation to
Executive.
14
<PAGE>
(d) Death. If Executive's employment is terminated by reason of
Executive's death, the corporation shall pay to Executive's heirs or estate, the
Base Salary at the rate in effect on the day preceding death through the next
anniversary of the Effective Date, in one lump sum, payable within sixty days of
the date of death.
(e) Disability. If Executive's employment is terminated by reason of
Disability, the Corporation shall (i) continue in accordance with the
Corporation's normal payroll payment procedures to pay Executive his Base Salary
form the Date of Termination at the rate in effect on the Date of Termination,
through the next anniversary of the Effective Date; provided, however, that if
an event or condition is determined to be the cause of Disability, by an
independent qualified physician acceptable to Executive and the Corporation, and
such event or condition occurs at any time in the last six months of the Term,
then the Corporation shall continue to pay Executive his Base Salary in
accordance with the Corporation's normal payroll procedures for a period of Six
(6) months beyond the Term; and (ii) continue to provide Executive with benefits
of the type described in Paragraph 4(a) through the next anniversary of the
Effective Date; provided, however, that if the Corporation's group health plan
does not allow Executive and his dependents to continue coverage, then the
Corporation and Executive agree to negotiate a mutually satisfactory alternative
to provide Executive with the benefits intended by this Paragraph 9(e).
(f) Change of Control. If Executive terminates his employment within 90
days following a Change of Control, the Corporation shall (i) continue in
accordance with the Corporation's normal payroll payment procedures to pay
Executive his Base Salary at the rate in effect on the Date of Termination
through the next anniversary of the Effective Date; and (ii) continue to provide
Executive with benefits of the type described in Paragraph 4(a) through the day
preceding the Date of Termination.
10. Non-Competition.
- --------------------
Executive acknowledges and recognizes the highly competitive nature of the
Corporation and its affiliates and Executive accordingly covenants and agrees,
that at all times for a period of twelve (12) consecutive months subsequent to
the end of the Term or the Date of Termination, whichever occurs earlier, as
follows:
(a) Executive will not directly or indirectly own, manage, operate,
finance, join control or participate in the ownership, management, organization
, financing or control of, or be connected as an officer, director, employee,
partner, principal, agent, representative, consultant or otherwise with any
business or enterprise engaged in a business the same as or substantially
similar to the business of the Corporation and its affiliates except as a holder
of fewer that 5% of the outstanding shares or other equity interests of a
company whose shares or other equity interests are registered under Section 12
of the Exchange Act.
(b) Executive will not directly or indirectly induce any employee of the
Corporation or any of its affiliates to engage in any activity in which
Executive is prohibited from engaging by subparagraph (a) above or to terminate
their employment with the corporation or any of its affiliates, and will not
directly or indirectly employ or offer employment to any person who was employed
by the Corporation or any of its affiliates unless such person shall have been
terminated without cause or ceased to be employed by any such entity for a
period of at least 12 months.
15
<PAGE>
(c) Executive will not use or permit his name to be used in connection with
any business or enterprise engaged in the business the same as or similar to
Corporation or its affiliates or any other business engaged in by Corporation or
any of its affiliates.
(d) Executive will not use the name of the Corporation or any name similar
thereto, but nothing in this clause shall be deemed, by implication, to
authorize or permit use of such name after expiration of such period.
(e) Executive will not make any statement or take any action intended to
impair the goodwill or the business reputation of the Corporation or any of is
affiliates, or to be otherwise detrimental to the interests of the Corporation
or any of its affiliates, including any action or statement intended, directly
or indirectly, to benefit a competitor of the Corporation or any of its
affiliates, except as may be required by applicable law or by a local, state or
federal regulatory agency.
(f) Executive will not (a) disclose any customer lists or any part thereof
to any person, firm, corporation, association or other entity for any reason or
purpose whatsoever; (b) assist in obtaining any of the Corporation's customers
for any other similar business; (c) encourage any customer to terminate, change
or modify its relationship with the Corporation; or (d) solicit or divert or
attempt to solicit or divert the Corporation's customers.
(g) The Corporation shall have the right, subject to applicable law, to
inform any other third party that the Corporation reasonably believes to be, or
to be contemplating participating with Executive or receiving from Executive
properties of the Corporation in violation of this Agreement and of the rights
of the Corporation hereunder, and that participation by any such third party
with Executive in activities in violation of this Paragraph 10 may give rise to
claims by the Corporation against such third party;
(h) Executive and the Corporation agree that in light of the specialized
nature of the industry and the national-customer base of the Corporation's
business, that the restrictions set forth in this Paragraph 10 shall apply to
Executive within the territory of the United States of America. It is expressly
understood and agreed that although Executive and the Corporation consider the
restriction contained in the Paragraph 10 to be reasonable, if a final judicial
determination is made by a court of competent jurisdiction that the time or
territory or any other restriction contained in this Agreement is an
unenforceable restriction against Executive, the provisions of this Agreement
shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum intent as such court may
judicially determine or indicate to be enforceable. Alternatively, if any court
of competent jurisdiction finds that any restriction contained in this Agreement
is unenforceable, and such restriction cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein; provided, however that the provisions of
this Paragraph 10 shall not apply if Executive is terminated without Cause or
Executive terminates for Good Reason.
(i) The failure of Executive to abide by the provisions of this
Paragraph 10 shall be deemed a material breach of this Agreement. The primary
purpose of the covenant not to compete is the Corporation's legitimate interest
in protecting its economic welfare and business goodwill. The Corporation and
the Executive further agree that this covenant shall in no way be construed as a
mere limitation on competition nor shall it be construed as a restraint on
Executive's right to engage in a common calling.
16
<PAGE>
11. Proprietary Information.
- -----------------------------
Executive agrees that at all times during the Term of this Agreement and after
Executive is no longer employed by the Corporation, Executive shall not use for
his personal benefit, or disclose, communicate or divulge to, or use for the
direct or indirect benefit on any person, firm, association or company other
than the Corporation, any Proprietary Information. "Proprietary Information"
means information relating to the properties, prospects, products, services or
operations of the Corporation or any direct or indirect affiliate thereof that
is not generally known, is proprietary to the Corporation or such affiliate and
is made known to Executive or learned or acquired by Executive while in the
employ of the Corporation, including, by way of illustration, but not
limitation, information concerning trade secrets, processes, structures,
formulae, data and know-how, improvements, inventions, product concepts,
techniques, marketing plans, strategies, forecasts, customer lists and
information about the Corporation's employees and/or consultants (including,
without limitation, the compensation, job responsibility and job performance of
such employees and/or consultants). However, Proprietary Information shall not
include (i) at the time of disclosure to Executive such information that was in
the public domain or later entered the public domain other than as result of a
beach of an obligation herein; or (ii) subsequent to disclosure to Executive,
Executive received such information form a third party under no obligation to
maintain such information in confidence, and the third party came into
possession of such information other than as a result of a breach of an
obligation herein. All materials or articles of information of any kind
furnished to Executive by the Corporation or developed by Executive in the
course of his employment thereunder are and shall remain the sole property of
the Corporation; and if the Corporation requests the return of such information
at any time during, upon or after the termination of Executive's employment
hereunder, Executive shall immediately deliver the same to the Corporation.
12. Ownership of Proprietary Information.
- --------------------------------------------
Executive agrees that all Proprietary Information shall be the sole property of
the Corporation and its assigns, and the Corporation and its assigns shall be
the sole owner of all licenses and other rights in connection with such
proprietary Information. At all times during the Term of this Agreement and
after Executive is no longer employed by the Corporation, Executive will keep
the strictest confidence and trust all Proprietary Information and will not use
or disclose such Proprietary Information, or anything relating to such
information, without the prior written consent of the Corporation, except as
many be necessary in the ordinary course of performing his duties under this
Agreement.
13. Documents and Other Property.
- ------------------------------------
All materials or articles of information of any kind furnished to Executive in
the course of his employment hereunder are and shall remain the sole property of
the Corporation; and if the Corporation requests the return of such information
at any time during, upon or after the termination of Executive's employment
hereunder, Executive shall immediately deliver the same to the Corporation.
Executive will not, without the prior written consent of the Corporation, retain
any documents, data or property, or any reproduction thereof of any description,
belonging to the Corporation or pertaining to any Proprietary Information.
17
<PAGE>
14. Third-Party Information.
- -----------------------------
The Corporation from time to time receives from third parties confidential or
proprietary information subject to a duty on the Corporation's part to maintain
the confidentiality of such information and to use it only for certain limited
purposes ("Third-party Information"). At all times, until after the later of
(a) the Expiration Date, (b) the fifth anniversary of the Date of Termination or
(c) the period of time the Corporation must maintain the Third-Party Information
as confidential, Executive will hold Third-Party Information in the strictest
confidence and will not disclose or use Third-Party Information except as
permitted by the agreement between the Corporation and such third party.
15. Intellectual Property.
- ---------------------------
Any and all improvements, inventions, designs, ideas, works of authorship,
copyrightable works, discoveries, trademarks, copyrights, trade secrets,
formulae, processes, techniques, know-how, and data, whether or not patentable
(collectively "Products"), made or conceived or reduced to practice or learned
by Executive, either along or jointly with others, during the period of
Executive's employment (whether or not during normal working hours) that are
related to or useful in the actual or anticipated business of the Corporation,
or result from tasks assigned Executive by the Corporation or result from
Executive's use of premises or equipment owned, leased, or contracted for by the
Corporation (a) during the period of this Agreement, or (b) within a period of
one year after the Date of Termination, which may be directly or indirectly
useful in, or relate to, the business of the Corporation, shall be promptly and
fully disclosed by Executive to the Board and, if such intellectual property was
made, developed or created pursuant to Executive's employment hereunder, such
intellectual property shall be the Corporation's exclusive property as against
Executive, and Executive shall promptly deliver to an appropriate representative
of the Corporation as designated by the Board all papers, drawings, models, data
and other material relating to any invention made, developed or created by him
as aforesaid. Executive shall, at the request of the Corporation and without
any payment therefor, execute any documents necessary or advisable in the
opinion of the Corporation's counsel or direct issuance of patents or copyrights
to the Corporation with respect to such Products as are to be the Corporation's
exclusive property as against Executive or to vest in the Corporation title to
such Products as against executive. The expense of securing any such patent or
copyright shall be borne by the Corporation. Executive shall be compensated, in
accordance with the Corporation's "Creative Awards" standard policy, for all
Products created or developed by the Executive either prior to his employment
(if delivered to the Corporation) or during the term of his Employment.
16. Equitable Relief.
- ----------------------
Executive acknowledges that, in view of the nature of the business in which the
Corporation is engaged, the restrictions contained in paragraphs 10 through 15,
inclusive (the "Restrictions") are reasonable and necessary in order to protect
the legitimate interest of the Corporation, and that any violation thereof would
result in irreparable injuries to the Corporation, and Executive therefor
further acknowledges that, if Executive violates, or threatens to violate, any
of the Restrictions, the Corporation shall be entitled to obtain from any court
of competent jurisdiction, without the posting of any bond or other security,
preliminary and permanent injunctive relief as well as damages and an equitable
accounting of all earnings, profits and other benefits arising from such
violation, which rights shall be cumulative and in addition to any other rights
or remedies in law or equity to which the Corporation may be entitled.
18
<PAGE>
17. Binding Effect.
- --------------------
This Agreement shall be binding upon and inure to the benefit of the heirs and
representatives of Executive and the successors and assigns of the Corporation.
The Corporation shall require any successor (whether direct or indirect, by
purchase, merger, reorganization, consolidation, acquisition of property or
stock, liquidation or otherwise) to all or a significant portion of its assets,
by agreement in form and substance satisfactory to Executive, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform this Agreement if no
such succession had taken place. Regardless whether such agreement is executed,
this Agreement shall be binding upon any successor of the Corporation in
accordance with the operation of law and such successor shall be deemed the
"Corporation," for purposes of this Agreement.
18. Notices.
- ------------
All notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered by hand or
mailed within the continental United States by first-class certified mail,
return receipt requested, postage prepaid, addressed as follows:
(a) if to the Board or the Corporation, to:
Nanopierce Technologies, Inc.
370 Seventeenth Street, Suite 3580
Denver, Colorado 80202
Attention: President
(b) if to Executive:
Herbert J. Neuhaus
770 Maroonglen Court
Colorado Springs, Colorado 80906
Such addresses may be changed by written notice sent to the other party at the
last recorded address of that party.
19. Arbitration of All Disputes.
- -----------------------------------
(a) Any controversy or claim arising out of or relating to this Agreement
or the breach thereof (including the arbitrability of any controversy or claim),
shall be settled by arbitration in the City of Denver in accordance with the
laws of the State of Colorado by three arbitrators, one of whom shall be
appointed by the Corporation, one by Executive and the third of whom shall be
appointed by the first two arbitrators. If the first two arbitrators cannot
agree on the appointment of a third arbitrator, then the third arbitrator shall
be appointed by the American Arbitration Association. The arbitration shall be
conducted in accordance with the rules of the American Arbitration Association,
except with respect to the selection of arbitrators which shall be as provided
in this paragraph 19. The cost of any arbitration proceeding hereunder shall be
borne equally by the Corporation and Executive. The award of the arbitrators
shall be binding upon the parties. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
19
<PAGE>
(b) If it shall be necessary or desirable for Executive to retain legal
counsel and incur other costs and expenses in connection with the enforcement of
any or all of his rights under this Agreement, and provided that Executive
substantially prevails in the enforcement of such rights, the Corporation shall
pay (or Executive shall be entitled to recover from the Corporation, as the case
may be) Executive's reasonable attorneys' fees and costs and expenses in
connection with the enforcement of his rights including the enforcement of any
arbitration award.
20. No Assignment.
- -------------------
Except as otherwise expressly provided herein, this Agreement is not assignable
by any party and no payment to be made hereunder shall be subject to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
other charge.
21. Execution in Counterparts.
- --------------------------------
This Agreement may be executed by parties hereto in two or more counterparts,
each of which shall be deemed to be an original, but all such counterparts shall
constitute one and the same instrument. The facsimile signature of any party to
this Agreement shall be considered an original signature of such person.
22. Jurisdiction and Governing Law.
- --------------------------------------
Jurisdiction over disputes with regard to this Agreement shall be exclusively in
the courts of the State of Colorado, and this Agreement shall be construed and
interpreted in accordance with and governed by the laws of the State of
Colorado, other than the conflict of laws provisions of such laws.
23. Severability.
- -----------------
If any provision of this Agreement shall be adjudged by any court of competent
jurisdiction to be invalid or unenforceable for any reason, such judgment shall
not affect, impair or invalidate the remainder of this Agreement.
24. Entire Agreement.
- ----------------------
This Agreement embodies the entire agreement of the parties hereof, and
supersedes all other oral or written agreements or understandings between them
regarding the subject matter hereof. No change, alteration or modification
hereof may be made except in a writing, signed by each of the parties hereto.
25. Headings Descriptive.
- --------------------------
The headings of the several paragraphs of this Agreement are inserted for
convenience only and shall not in any way affect the meaning or construction of
any of this Agreement.
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
NANOPIERCE TECHNOLOGIES, INC.
By: __________________________________
Paul H. Metzinger, President & CEO
EXECUTIVE
By: _________________________________
Dr. Herbert J. Neuhaus
21
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made and entered into as of January
1, 2000, by and between Nanopierce Technologies, Inc. (the "Corporation"), a
Nevada corporation, and Kristi J. Kampmann, an individual with his principal
business address at 370 Seventeenth Street, Suite 3580, Denver, Colorado 80202
(the "Executive");
1. Employment and Term.
- -------------------------
(a) Employment. The Company hereby employs Executive and Executive hereby
accepts such employment, in the capacity of Chief Financial Officer of the
Corporation to act in accordance with the terms and conditions hereinafter set
forth.
(b) Term. Executive's employment hereunder shall be for an initial term
of one year (the "Initial Term") commencing on January 1, 2000 (the "Effective
Date") and terminating on December 31, 2000, subject to the extension or earlier
expiration of the Initial Term as provided in this Agreement. Within forty-five
(45) days of December 31, 2000 the Corporation's Board of Directors (the
"Board") shall review Executive's performance under this Agreement and, in its
sole discretion, renew the Agreement for a term of one year (a "Renewal Term")
commencing on the first day immediately following the Expiration Date (as
defined below). The board shall provide Executive written notice of its
decision to renew or not renew this Agreement at least 30 days prior to the date
of this Agreement expires under the Initial Term of any Renewal Term (the
"Expiration Date"). If the Board fails to provide Executive with such written
notice, within the time period set forth above, the Agreement shall terminate on
the Expiration Date of the Initial Term or Renewal Term, as the case may be.
Whenever the word "Term" is used in this Agreement is shall refer to either the
Initial Term or the Renewal Term, as the case may be.
(c) Location of Employment. Effective upon the date of this Agreement,
and through the Initial Term the Corporation shall maintain an office for
Executive at 370 Seventeenth Street, Suite 3580, Denver, Colorado 80202, or such
other location upon which the Corporation and Executive shall mutually agree at
which location Executive shall carry out her duties.
2. Duties.
- ----------
(a) During the period of employment as provided in Paragraph 1(b) hereof,
Executive shall serve as Chief Financial Officer of the Corporation, and shall
have all powers and duties consistent with such position subject to the
direction of the Board. Such duties shall include, without limitation, the
following:
22
<PAGE>
(i) Chief Financial Officer. The primary duties and responsibilities
of the Chief Financial Officer consist of the following: to establish overall
financial practices and procedures necessary to maintaining effective accounting
control over all aspects of the Corporation and its subsidiaries. In addition,
the Chief Financial officer will have primary responsibility for the appropriate
management and investment of the corporation's assets, particularly cash, to
maximize the highest possible rate of return. Additional responsibilities will
include dealing primarily with the Corporation's independent auditors, financial
institutions, particularly commercial banks and financial analysts, the
preparation, based upon information obtained from appropriate personnel, of an
annual budget, both consolidated and unconsolidated and additional interim
reports as will permit her to maintain effective control and supervision on a
continuing basis of the Corporation's financial results or operations and
financial status, and such further responsibilities as are delegated to
Executive by the President and Chief Executive Officer of the Corporation.
(b) Executive shall devote substantially her entire professional time,
attention and energy exclusively to the business and affairs of the Corporation
and its subsidiaries, as its business and affairs now exist and as they
hereafter may be changed, and shall not during the term of her employment
hereunder be engaged in any other business activity whether or not such business
activity is pursued for gain or profit. The foregoing shall not be construed as
preventing Executive from (a) managing her personal investments or investing her
assets in such form or manner as will not require any significant services on
her part in the operation of the affairs of the businesses or entities in which
such investments are made, provided Executive shall not invest in any business
competitive with the Corporation and its affiliates, except those companies
whose securities are listed on a national securities exchange or quoted daily in
the Over-the-Counter Market listing of the The Wall Street Journal; or (B)
preclude Executive from continuing to serve on the board of directors of any
business corporation or any charitable organization on which she now serves and
which has been disclosed to the Corporation in writing or, subject to the prior
approval of the Board, from accepting employment to additional board of
directors, provided that such activities do not materially interfere with the
performance of Executive's duties hereunder.
(c) Executive further agrees that during the term of her employment under
this Agreement she will engage in no business or other activities, directly or
indirectly, which are or may be competitive with or which might place her in a
competing position to that of the Corporation and its affiliates without
obtaining the prior written consent of the Board, including, without limitation,
the solicitation or acceptance of consulting work from clients of the
Corporation and its affiliates for whom she has performed services by virtue of
this Agreement or who she has met in connection with her employment under this
Agreement.
3. Compensation.
- ----------------
(a) Base Salary. For services performed by Executive for the Corporation
pursuant to this Agreement during the first year January 1, 2000 to December 31,
2000, the Corporation shall pay Executive a base salary at the rate of
$42,000.00 per year (the "Base Salary"), payable in accordance with the
Corporation's normal payroll practices but in no event less than once a month.
Any compensation paid to Executive under any additional compensation or
incentive plan of the Corporation, or that may be otherwise authorized from time
to time by the Board, shall be in addition to the base salary to which Executive
shall be entitled under this Agreement.
23
<PAGE>
(b) Tax Withholding. The Corporation shall provide for the withholding of
any taxes required to be withheld by federal, state and local law with respect
to any payment in cash, shares of capital stock or other property made by or on
behalf of the corporation to or for the benefit of Executive under this
Agreement or otherwise. The Corporation may, at its option: (I) withhold such
taxes from any cash payments owing to the Corporation to Executive, including
any payments owing under any other provision of this Agreement, (ii) require
Executive to pay to the Corporation in cash such amount as may be required to
satisfy such withholding obligations or (iii) make other satisfactory
arrangements with Executive to satisfy such withholding obligations.
4. Benefits.
- ------------
In addition to the base Salary, Executive shall also be entitled to the
following:
(a) Participation in Benefit Plans. Executive shall be entitled to
participate in the various retirement, welfare, fringe benefit, group long-term
disability plans and other executive perquisite plans, programs and arrangements
of the Corporation available for senior executive level officers of the
Corporation. Executive and her dependents, at Executive's request shall be
enrolled in the Corporation's health, life, disability and other insurance plans
and programs immediately upon her commencement of employment hereunder.
(b) Vacation and Sick Leave. Executive shall be entitled to two weeks of
vacation during each calendar year during which this Agreement is in effect, or
such greater period as the Board may approve, and to paid holidays given by the
Corporation to its domestic employees generally, without reduction in salary or
other benefits. Executive shall also be entitled to sick leave according to the
sick leave policy, which the Corporation may adopt from time to time.
(c) Basic Stock Option. Executive shall be eligible for grants of stock
options in accordance with the Corporation's 1998 Stock Option Plan or such
other stock option plan developed by the Board.
(d) Expenses. The Corporation shall reimburse Executive, upon proper
accounting, for reasonable business expenses and disbursements incurred by her
in the course of the performance of her duties under this Agreement and in
accordance with the Corporation's policies as in effect from time to time.
(e) Proration of Benefits. Any payments or benefits hereunder, in any year
during which Executive is employed by the Corporation for less than the entire
year shall, unless otherwise provided in the applicable plan or arrangement, be
prorated in accordance with the number of days in such year during which
Executive is employed by the Corporation.
5. Indemnification and Insurance.
- -----------------------------------
Executive shall be entitled to the maximum indemnification provided by the
Bylaws and the Articles of Incorporation of the Corporation for officers and
employees of the Corporation. Executive's rights under this Paragraph shall
continue without time limit so long as he may be subject to any such liability,
whether or not the Term of employment has ended. The Corporation shall obtain
and maintain, in effect, officers and directors liability insurance in an amount
not less than $1,000,000 without time limit so long as Executive may be subject
to any such liability, whether or not the Term of employment has ended.
24
<PAGE>
6. Representations and Warranties of Executive.
- ---------------------------------------------------
Executive hereby represents and warrants to the Corporation that (a) Executive's
execution and delivery of this Agreement and her performance of her duties and
obligations hereunder will not conflict with, or cause a default under, or give
any party a right to damages under, or to terminate, any other agreement to
which Executive is a party or by which she is bound, and (b) there are no
agreements or understandings that would make unlawful Executive's execution or
delivery of this Agreement or her employment hereunder.
7. Representations and Warranties of the Corporation. The Corporation hereby
- -------------------------------------------------------
represents and warrants to Executive as follows:
(a) The Corporation is duly organized and established as a corporation
under the laws of the State of Nevada and has all requisite power and authority
to enter into this agreement and to perform its obligations hereunder. The
consummation of the transactions contemplated by this Agreement will neither
violate nor be in conflict with any agreement or instrument to which the
Corporation is a party or by which it is bound.
(b) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby have been duly and validly authorized by all
requisite corporate action on the part of the Corporation and are valid, legal
and binding obligations of the Corporation, enforceable in accordance with their
terms except as may be limited by the laws of general application relating to
bankruptcy, insolvency, moratorium or other similar laws relating to or
affecting the enforcement or creditors' rights, and rules of law governing
specific performance, injunctive relief or other equitable remedies.
8. Termination.
- ---------------
(a) Cause. The Corporation may terminate Executive's employment at any
time for Cause (as defined herein), by reason of Disability (as defined herein),
or without Cause; provided, however, that for any reason constituting Cause,
Executive is given (x) reasonable notice ("Notice of Termination for Cause")
setting forth the reasons for the Corporation's intention to terminate for Cause
and the effective date of such termination (which effective date may be the date
of such notice), (y) an opportunity for Executive, together with her counsel, to
be heard before the Board within two weeks of such notice and (z) within five
(5) business days after Executive's hearing before the Board, written notice to
Executive from the Board of its good faith determination that the reasons
specified in the Notice of Termination for Cause constitute Cause under this
Paragraph 8(a), and that Executive's employment is terminated effective as of
the date specified in the Notice of Termination for Cause. Executive's rights
to receive her salary and benefits hereunder shall not be affected during the
period between the receipt of the Notice of Termination for Cause and the
determination, if any, by the Board that the reasons specified in such notice
constituted Cause. For purposes of this Agreement, "Cause" means:
(i) Executive commits a breach of any material term of this
Agreement, or any material obligation of the Corporation, and such breach
constitutes gross negligence or willful misconduct and, if such breach is
capable of being cured, Executive Fails to cure such breach within 30 days of
notice of such breach;
(ii) Executive is convicted of, or pleads guilty or nolo contendere to
a felony;
25
<PAGE>
(iii) Executive's commission of any act that would cause any license of
the Corporation or its subsidiaries or affiliates to be revoked, suspended, or
not be renewed after proper application;
(iv) gross negligence in the performance of Executive's duties and
responsibilities;
(v) refusal of Executive to follow proper and achievable written
direction of the Board, provided that this shall not be Cause if Executive in
good faith believes the direction to be illegal, unethical or immoral and so
notifies the Board;
(vi) material fraud or dishonesty with regard to the Corporation
(other than good faith expense account disputes); or
(vii) continuous refusal to attempt to perform Executive's
responsibilities and duties after written notice.
(b) Good Reason. Executive may terminate her employment at any time for
any of the following reasons (each of which is referred to herein as "Good
Reason") by giving the Corporation notice of the effective date of such
termination (which effective date may be the date of such notice):
(i) the Corporation commits a breach of any material term of this
Agreement and, if such breach is capable of being cured, the Corporation fails
to cure such breach within 30 days of receipt of notice of such breach; or
(ii) a material change of position, duties or the assignments of
duties materially inconsistent with Executive's position as Executive Officer of
the Corporation.
(c) Change in Control. Executive may, at her option, terminate her
employment upon a "Change in Control." For purposes of this Agreement, "Change
of Control" shall mean:
(i) the obtaining by any party of fifty percent (50%) of more of the
voting shares of the Corporation pursuant to a "tender offer" for such shares as
provided under Rule 14d-2 promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or any subsequent comparable federal rule or
regulation governing tender offers; or
(ii) individuals who were members of the Board immediately prior to
any particular meeting of the Corporation's shareholders which involves a
contest for the election of directors fail to constitute a majority of the
members of the Board following such election; or
(iii) the Corporation's executing an agreement concerning the sale of
substantially all of its assets to a purchaser which is not a subsidiary; or
(vi) the Corporation's adoption of a plan of dissolution or
liquidation;
(v) the Corporation's executing an agreement concerning a merger of
consolidation involving the Corporation in which the Corporation is not the
surviving corporation or if, immediately following such merger or consolidation,
less than fifty percent (50%) of the surviving corporation's outstanding voting
stock is held by persons who are stockholders of the Corporation immediately
prior to such merger of consolidation.
26
<PAGE>
(d) Executive's Rights to Terminate. Executive may, at her option,
terminate her employment hereunder for any reason upon 60 days' prior written
notice to the Corporation.
(e) Death. This Agreement shall terminate automatically upon Executive's
death.
(f) Disability. The term "Disability" as used in connection with
termination of the employment of Executive shall mean the inability of Executive
to substantially perform her material duties hereunder due to physical or mental
disablement which continues for a period of six (6) consecutive months, during
the term of employment (during which six (6) month period Executive's salary and
benefits shall continue) as determined by an independent qualified physician
mutually acceptable to the Corporation and Executive (or her personal
representative). Notwithstanding the above, in the event of Disability,
Executive shall be entitled to participate in and be covered by the
Corporation's group health plan until Executive is able to obtain health
insurance on substantially the same terms and conditions as provided in the
Corporation's group health plan; provided, however, that if the Corporation's
group health plan does not allow Executive and her dependents to continue
coverage, then the Corporation and Executive agree to negotiate a mutually
satisfactory alternative to provide Executive with the benefits intended by this
Paragraph 8(f).
(g) Without Cause. The Corporation may, at its option, terminate
Executive's employment without Cause at any time upon written notice to
Executive.
(h) Date of Termination. For purposes of this Agreement, the term "Date of
Termination" shall mean the date that any party gives notice, through action or
otherwise, that it intends to terminate this Agreement pursuant to the terms
hereof or the date, if any, specified by the terminating party in such notice as
the effective date of termination; provided, however, with respect to
termination for Cause, the Date of Termination shall be the date of receipt by
Executive of written notice form the Board as required by Paragraph 8(a) hereof.
In addition, where Executive gives notice to terminate this Agreement and the
effective date of termination is other than the date the Corporation receives
notice of termination, the Corporation reserves the right to accelerate the
Termination Date to the date Executive notified the Corporation of his intent to
terminate this Agreement.
9. Obligations of the Corporation Upon Termination.
- --------------------------------------------------------
(a) Without cause or for Good Reason. If the Corporation shall terminate
Executive's employment without Cause or if Executive shall terminate her
employment for Good Reason, this Agreement shall terminate without further
obligation to Executive hereunder, other that the obligation (i) to continue to
pay Executive in accordance with the Corporation's normal payroll payment
procedures her Base Salary from the Date of Termination at the rate in effect on
the Date of Termination through the next anniversary of the Effective Date; and
(ii) to continue to provide Executive with the benefits set forth in Paragraph
4(a) through the next anniversary of the Effective Date.
(b) Voluntary. If Executive terminates her employment for other than Good
Reason (a "Voluntary Termination"), this Agreement shall terminate without
further obligation to Executive hereunder, other than the obligation (i) to
continue to pay Executive in accordance with the Corporation's normal payroll
payment procedures her Base Salary through the Date of Termination at the rate
in effect on the Date Termination; and (ii) to continue to provide Executive
with benefits of the type described in Paragraph 4(a) through the day preceding
the Date of Termination.
27
<PAGE>
(c) Cause. If Executive's employment shall be terminated by the
Corporation for "Cause" the Corporation shall continue to pay Executive her Base
Salary through the Date of Termination at the rate in effect upon the Date of
Termination. Thereafter, the Corporation shall have no further obligation to
Executive.
(d) Death. If Executive's employment is terminated by reason of
Executive's death, the corporation shall pay to Executive's heirs or estate, the
Base Salary at the rate in effect on the day preceding death through the next
anniversary of the Effective Date, in one lump sum, payable within sixty days of
the date of death.
(e) Disability. If Executive's employment is terminated by reason of
Disability, the Corporation shall (i) continue in accordance with the
Corporation's normal payroll payment procedures to pay Executive her Base Salary
form the Date of Termination at the rate in effect on the Date of Termination,
through the next anniversary of the Effective Date; provided, however, that if
an event or condition is determined to be the cause of Disability, by an
independent qualified physician acceptable to Executive and the Corporation, and
such event or condition occurs at any time in the last six months of the Term,
then the Corporation shall continue to pay Executive her Base Salary in
accordance with the Corporation's normal payroll procedures for a period of Six
(6) months beyond the Term; and (ii) continue to provide Executive with benefits
of the type described in Paragraph 4(a) through the next anniversary of the
Effective Date; provided, however, that if the Corporation's group health plan
does not allow Executive and her dependents to continue coverage, then the
Corporation and Executive agree to negotiate a mutually satisfactory alternative
to provide Executive with the benefits intended by this Paragraph 9(e).
(f) Change of Control. If Executive terminates her employment within 90
days following a Change of Control, the Corporation shall (i) continue in
accordance with the Corporation's normal payroll payment procedures to pay
Executive her Base Salary at the rate in effect on the Date of Termination
through the next anniversary of the Effective Date; and (ii) continue to provide
Executive with benefits of the type described in Paragraph 4(a) through the day
preceding the Date of Termination.
10. Non-Competition.
- --------------------
Executive acknowledges and recognizes the highly competitive nature of the
Corporation and its affiliates and Executive accordingly covenants and agrees,
that at all times for a period of twelve (12) consecutive months subsequent to
the end of the Term or the Date of Termination, whichever occurs earlier, as
follows:
(a) Executive will not directly or indirectly own, manage, operate,
finance, join control or participate in the ownership, management, organization
, financing or control of, or be connected as an officer, director, employee,
partner, principal, agent, representative, consultant or otherwise with any
business or enterprise engaged in a business the same as or substantially
similar to the business of the Corporation and its affiliates except as a holder
of fewer that 5% of the outstanding shares or other equity interests of a
company whose shares or other equity interests are registered under Section 12
of the Exchange Act.
28
<PAGE>
(b) Executive will not directly or indirectly induce any employee of the
Corporation or any of its affiliates to engage in any activity in which
Executive is prohibited from engaging by subparagraph (a) above or to terminate
their employment with the corporation or any of its affiliates, and will not
directly or indirectly employ or offer employment to any person who was employed
by the Corporation or any of its affiliates unless such person shall have been
terminated without cause or ceased to be employed by any such entity for a
period of at least 12 months.
(c) Executive will not use or permit his name to be used in connection with
any business or enterprise engaged in the business the same as or similar to
Corporation or its affiliates or any other business engaged in by Corporation or
any of its affiliates.
(d) Executive will not use the name of the Corporation or any name similar
thereto, but nothing in this clause shall be deemed, by implication, to
authorize or permit use of such name after expiration of such period.
(e) Executive will not make any statement or take any action intended to
impair the goodwill or the business reputation of the Corporation or any of is
affiliates, or to be otherwise detrimental to the interests of the Corporation
or any of its affiliates, including any action or statement intended, directly
or indirectly, to benefit a competitor of the Corporation or any of its
affiliates, except as may be required by applicable law or by a local, state or
federal regulatory agency.
(f) Executive will not (a) disclose any customer lists or any part thereof
to any person, firm, corporation, association or other entity for any reason or
purpose whatsoever; (b) assist in obtaining any of the Corporation's customers
for any other similar business; (c) encourage any customer to terminate, change
or modify its relationship with the Corporation; or (d) solicit or divert or
attempt to solicit or divert the Corporation's customers.
(g) The Corporation shall have the right, subject to applicable law, to
inform any other third party that the Corporation reasonably believes to be, or
to be contemplating participating with Executive or receiving from Executive
properties of the Corporation in violation of this Agreement and of the rights
of the Corporation hereunder, and that participation by any such third party
with Executive in activities in violation of this Paragraph 10 may give rise to
claims by the Corporation against such third party;
(h) Executive and the Corporation agree that in light of the specialized
nature of the industry and the national-customer base of the Corporation's
business, that the restrictions set forth in this Paragraph 10 shall apply to
Executive within the territory of the United States of America. It is expressly
understood and agreed that although Executive and the Corporation consider the
restriction contained in the Paragraph 10 to be reasonable, if a final judicial
determination is made by a court of competent jurisdiction that the time or
territory or any other restriction contained in this Agreement is an
unenforceable restriction against Executive, the provisions of this Agreement
shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum intent as such court may
judicially determine or indicate to be enforceable. Alternatively, if any court
of competent jurisdiction finds that any restriction contained in this Agreement
is unenforceable, and such restriction cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein; provided, however that the provisions of
this Paragraph 10 shall not apply if Executive is terminated without Cause or
Executive terminates for Good Reason.
29
<PAGE>
(i) The failure of Executive to abide by the provisions of this
Paragraph 10 shall be deemed a material breach of this Agreement. The primary
purpose of the covenant not to compete is the Corporation's legitimate interest
in protecting its economic welfare and business goodwill. The Corporation and
the Executive further agree that this covenant shall in no way be construed as a
mere limitation on competition nor shall it be construed as a restraint on
Executive's right to engage in a common calling.
11. Proprietary Information.
- -----------------------------
Executive agrees that at all times during the Term of this Agreement and after
Executive is no longer employed by the Corporation, Executive shall not use for
his personal benefit, or disclose, communicate or divulge to, or use for the
direct or indirect benefit on any person, firm, association or company other
than the Corporation, any Proprietary Information. "Proprietary Information"
means information relating to the properties, prospects, products, services or
operations of the Corporation or any direct or indirect affiliate thereof that
is not generally known, is proprietary to the Corporation or such affiliate and
is made known to Executive or learned or acquired by Executive while in the
employ of the Corporation, including, by way of illustration, but not
limitation, information concerning trade secrets, processes, structures,
formulae, data and know-how, improvements, inventions, product concepts,
techniques, marketing plans, strategies, forecasts, customer lists and
information about the Corporation's employees and/or consultants (including,
without limitation, the compensation, job responsibility and job performance of
such employees and/or consultants). However, Proprietary Information shall not
include (i) at the time of disclosure to Executive such information that was in
the public domain or later entered the public domain other than as result of a
beach of an obligation herein; or (ii) subsequent to disclosure to Executive,
Executive received such information form a third party under no obligation to
maintain such information in confidence, and the third party came into
possession of such information other than as a result of a breach of an
obligation herein. All materials or articles of information of any kind
furnished to Executive by the Corporation or developed by Executive in the
course of his employment thereunder are and shall remain the sole property of
the Corporation; and if the Corporation requests the return of such information
at any time during, upon or after the termination of Executive's employment
hereunder, Executive shall immediately deliver the same to the Corporation.
12. Ownership of Proprietary Information.
- --------------------------------------------
Executive agrees that all Proprietary Information shall be the sole property of
the Corporation and its assigns, and the Corporation and its assigns shall be
the sole owner of all licenses and other rights in connection with such
proprietary Information. At all times during the Term of this Agreement and
after Executive is no longer employed by the Corporation, Executive will keep
the strictest confidence and trust all Proprietary Information and will not use
or disclose such Proprietary Information, or anything relating to such
information, without the prior written consent of the Corporation, except as
many be necessary in the ordinary course of performing his duties under this
Agreement.
30
<PAGE>
13. Documents and Other Property.
- ------------------------------------
All materials or articles of information of any kind furnished to Executive in
the course of his employment hereunder are and shall remain the sole property of
the Corporation; and if the Corporation requests the return of such information
at any time during, upon or after the termination of Executive's employment
hereunder, Executive shall immediately deliver the same to the Corporation.
Executive will not, without the prior written consent of the Corporation, retain
any documents, data or property, or any reproduction thereof of any description,
belonging to the Corporation or pertaining to any Proprietary Information.
14. Third-Party Information.
- -----------------------------
The Corporation from time to time receives from third parties confidential or
proprietary information subject to a duty on the Corporation's part to maintain
the confidentiality of such information and to use it only for certain limited
purposes ("Third-party Information"). At all times, until after the later of
(a) the Expiration Date, (b) the fifth anniversary of the Date of Termination or
(c) the period of time the Corporation must maintain the Third-Party Information
as confidential, Executive will hold Third-Party Information in the strictest
confidence and will not disclose or use Third-Party Information except as
permitted by the agreement between the Corporation and such third party.
15. Intellectual Property.
- ---------------------------
Any and all improvements, inventions, designs, ideas, works of authorship,
copyrightable works, discoveries, trademarks, copyrights, trade secrets,
formulae, processes, techniques, know-how, and data, whether or not patentable
(collectively "Products"), made or conceived or reduced to practice or learned
by Executive, either along or jointly with others, during the period of
Executive's employment (whether or not during normal working hours) that are
related to or useful in the actual or anticipated business of the Corporation,
or result from tasks assigned Executive by the Corporation or result from
Executive's use of premises or equipment owned, leased, or contracted for by the
Corporation (a) during the period of this Agreement, or (b) within a period of
one year after the Date of Termination, which may be directly or indirectly
useful in, or relate to, the business of the Corporation, shall be promptly and
fully disclosed by Executive to the Board and, if such intellectual property was
made, developed or created pursuant to Executive's employment hereunder, such
intellectual property shall be the Corporation's exclusive property as against
Executive, and Executive shall promptly deliver to an appropriate representative
of the Corporation as designated by the Board all papers, drawings, models, data
and other material relating to any invention made, developed or created by him
as aforesaid. Executive shall, at the request of the Corporation and without
any payment therefor, execute any documents necessary or advisable in the
opinion of the Corporation's counsel or direct issuance of patents or copyrights
to the Corporation with respect to such Products as are to be the Corporation's
exclusive property as against Executive or to vest in the Corporation title to
such Products as against executive. The expense of securing any such patent or
copyright shall be borne by the Corporation. Executive shall be compensated, in
accordance with the Corporation's "Creative Awards" standard policy, for all
Products created or developed by the Executive either prior to his employment
(if delivered to the Corporation) or during the term of his Employment.
31
<PAGE>
16. Equitable Relief.
- ----------------------
Executive acknowledges that, in view of the nature of the business in which the
Corporation is engaged, the restrictions contained in paragraphs 10 through 15,
inclusive (the "Restrictions") are reasonable and necessary in order to protect
the legitimate interest of the Corporation, and that any violation thereof would
result in irreparable injuries to the Corporation, and Executive therefor
further acknowledges that, if Executive violates, or threatens to violate, any
of the Restrictions, the Corporation shall be entitled to obtain from any court
of competent jurisdiction, without the posting of any bond or other security,
preliminary and permanent injunctive relief as well as damages and an equitable
accounting of all earnings, profits and other benefits arising from such
violation, which rights shall be cumulative and in addition to any other rights
or remedies in law or equity to which the Corporation may be entitled.
17. Binding Effect.
- --------------------
This Agreement shall be binding upon and inure to the benefit of the heirs and
representatives of Executive and the successors and assigns of the Corporation.
The Corporation shall require any successor (whether direct or indirect, by
purchase, merger, reorganization, consolidation, acquisition of property or
stock, liquidation or otherwise) to all or a significant portion of its assets,
by agreement in form and substance satisfactory to Executive, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform this Agreement if no
such succession had taken place. Regardless whether such agreement is executed,
this Agreement shall be binding upon any successor of the Corporation in
accordance with the operation of law and such successor shall be deemed the
"Corporation," for purposes of this Agreement.
18. Notices.
- ------------
All notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered by hand or
mailed within the continental United States by first-class certified mail,
return receipt requested, postage prepaid, addressed as follows:
(a) if to the Board or the Corporation, to:
Nanopierce Technologies, Inc.
370 Seventeenth Street, Suite 3580
Denver, Colorado 80202
Attention: President
(b) if to Executive:
Kristi J. Kampmann
370 Seventeenth Street, Suite 3580
Denver, Colorado 80202
Such addresses may be changed by written notice sent to the other party at the
last recorded address of that party.
32
<PAGE>
19. Arbitration of All Disputes.
- -----------------------------------
(a) Any controversy or claim arising out of or relating to this Agreement
or the breach thereof (including the arbitrability of any controversy or claim),
shall be settled by arbitration in the City of Denver in accordance with the
laws of the State of Colorado by three arbitrators, one of whom shall be
appointed by the Corporation, one by Executive and the third of whom shall be
appointed by the first two arbitrators. If the first two arbitrators cannot
agree on the appointment of a third arbitrator, then the third arbitrator shall
be appointed by the American Arbitration Association. The arbitration shall be
conducted in accordance with the rules of the American Arbitration Association,
except with respect to the selection of arbitrators which shall be as provided
in this paragraph 19. The cost of any arbitration proceeding hereunder shall be
borne equally by the Corporation and Executive. The award of the arbitrators
shall be binding upon the parties. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
(b) If it shall be necessary or desirable for Executive to retain legal
counsel and incur other costs and expenses in connection with the enforcement of
any or all of his rights under this Agreement, and provided that Executive
substantially prevails in the enforcement of such rights, the Corporation shall
pay (or Executive shall be entitled to recover from the Corporation, as the case
may be) Executive's reasonable attorneys' fees and costs and expenses in
connection with the enforcement of his rights including the enforcement of any
arbitration award.
20. No Assignment.
- -------------------
Except as otherwise expressly provided herein, this Agreement is not assignable
by any party and no payment to be made hereunder shall be subject to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
other charge.
21. Execution in Counterparts.
- --------------------------------
This Agreement may be executed by parties hereto in two or more counterparts,
each of which shall be deemed to be an original, but all such counterparts shall
constitute one and the same instrument. The facsimile signature of any party to
this Agreement shall be considered an original signature of such person.
22. Jurisdiction and Governing Law.
- --------------------------------------
Jurisdiction over disputes with regard to this Agreement shall be exclusively in
the courts of the State of Colorado, and this Agreement shall be construed and
interpreted in accordance with and governed by the laws of the State of
Colorado, other than the conflict of laws provisions of such laws.
23. Severability.
- -----------------
If any provision of this Agreement shall be adjudged by any court of competent
jurisdiction to be invalid or unenforceable for any reason, such judgment shall
not affect, impair or invalidate the remainder of this Agreement.
33
<PAGE>
24. Entire Agreement.
- ----------------------
This Agreement embodies the entire agreement of the parties hereof, and
supersedes all other oral or written agreements or understandings between them
regarding the subject matter hereof. No change, alteration or modification
hereof may be made except in a writing, signed by each of the parties hereto.
25. Headings Descriptive.
- --------------------------
The headings of the several paragraphs of this Agreement are inserted for
convenience only and shall not in any way affect the meaning or construction of
any of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
NANOPIERCE TECHNOLOGIES, INC.
By: __________________________________
Paul H. Metzinger, President & CEO
EXECUTIVE
By: _________________________________
Kristi J. Kampmann
34
<PAGE>
UNSECURED CORPORATE
PROMISSORY NOTE
$25,000.00
Denver, Colorado
Date: December 22, 1999
FOR VALUE RECEIVED, Nanopierce Technologies, Inc. (hereinafter the
"Undersigned") promises to pay to the order of Jeffrey Ploen, the principal sum
of Twenty-Five Thousand Dollars ($25,000.00) with interest thereon at the rate
of 10% per annum from the date of this Note.
This Note shall, at the option of the Holder hereof; become immediately due
and payable, without notice or demand, upon the happening of any one of the
following specified events:
(1) failure to pay any amount as herein set forth;
(2) in the performance of any obligation to the Holder hereunder;
(3) insolvency (however evidenced) or the commission of an act of
insolvency;
(4) the making of a general assignment for the benefit of creditors; and
(5) the filing of any petition or the commencement of any proceeding by or
against the Undersigned or any endorser or guarantor for any relief under any
bankruptcy or insolvency laws, or any laws relating to the relief of debtors,
readjustment of indebtedness, reorganization, compositions or extensions.
Otherwise this Note shall be due on May 20, 2000.
Holder shall have the right at any time prior to payment, to convert the
principal and interest of this Note into restricted common shares of Nanopierce
Technologies, Inc., at $0.40 per share.
The Undersigned hereby waives presentment, demand for payment, notice of
dishonor and any or all other notices or demands in connection with the
delivery, acceptance, performance, default or enforcement of this Note and
hereby consents to any extensions of time, renewals, releases of any party to
this Note, waivers or modifications that may be granted or consented to by the
Holder in respect of the time of payment or any other provisions of this Note.
Upon default of payment hereunder, the Holder may at Holder's election, unless
Holder has previously exercised Holder's right to make this Note immediately due
and payable, accept payment of all amounts in arrears and, in the event that any
such defaulted payment at the time of such payment is more than ten days in
arrears, the Undersigned further agrees to pay in addition to other amounts due,
a late charge equal to five cents for each dollar of the principal amount so in
arrears. In the event the Holder shall institute any action for the enforcement
or the collection of the monies due on this Note, there shall be immediately due
from the Undersigned, in addition to the unpaid principal, interest and late
charges, all costs and expenses of such action, and an attorney's fee of fifteen
percent of the amount then owing unpaid by the Undersigned.
THE UNDERSIGNED,
NANOPIERCE TECHNOLOGIES, INC.
____________________________________________________
PAUL H. METZIGNER, PRESIDENT & CHIEF EXECUTIVE
OFFICER
35
<PAGE>
The execution and attestation hereof by Paul H. Metzinger, President and Chief
Executive Officer and by Kristi J. Kampmann, Secretary of the Undersigned shall
in and of itself;
(a) constitute notice to all persons that as President & Chief Executive
Officer and Secretary of the Undersigned they have been duly and validly
authorized to execute and attest this Note;
(b) constitute an acknowledgment to all persons that it is their voluntary
act and deed and the act and deed of the Undersigned; and
(c) constitute an acknowledgment to all persons that the signatures of the
President & Chief Executive Officer and of the Secretary of the Undersigned are
the original, manual, true and undeniable signatures of the President & Chief
Executive Officer and Secretary of the Undersigned; that this Note is made and
delivered in the State of Colorado and shall be governed by the laws of the
State of Colorado and that the Undersigned consents to the personal jurisdiction
of the courts of the State of Colorado, for all purposes, in connection with the
enforcement of this Note.
ATTEST: THE UNDERSIGNED
NANOPIERCE TECHNOLOGIES, INC.
By: _________________________________ By: ________________________________
Kristi J. Kampmann, Secretary Paul H. Metzinger, President &
Chief Executive Officer
36
<PAGE>
UNSECURED CORPORATE
PROMISSORY NOTE
$25,000.00
Denver, Colorado
Date: December 22, 1999
FOR VALUE RECEIVED, Nanopierce Technologies, Inc. (hereinafter the
"Undersigned") promises to pay to the order of Jeffrey Ploen, the principal sum
of Twenty-Five Thousand Dollars ($25,000.00) with interest thereon at the rate
of 10% per annum from the date of this Note.
This Note shall, at the option of the Holder hereof; become immediately due and
payable, without notice or demand, upon the happening of any one of the
following specified events:
(1) failure to pay any amount as herein set forth;
(2) in the performance of any obligation to the Holder hereunder;
(3) insolvency (however evidenced) or the commission of an act of
insolvency;
(4) the making of a general assignment for the benefit of creditors; and
(5) the filing of any petition or the commencement of any proceeding by or
against the Undersigned or any endorser or guarantor for any relief under any
bankruptcy or insolvency laws, or any laws relating to the relief of debtors,
readjustment of indebtedness, reorganization, compositions or extensions.
Otherwise this Note shall be due on May 20, 2000.
Holder shall have the right at any time prior to payment, to convert the
principal and interest of this Note into restricted common shares of Nanopierce
Technologies, Inc., at $0.40 per share.
The Undersigned hereby waives presentment, demand for payment, notice of
dishonor and any or all other notices or demands in connection with the
delivery, acceptance, performance, default or enforcement of this Note and
hereby consents to any extensions of time, renewals, releases of any party to
this Note, waivers or modifications that may be granted or consented to by the
Holder in respect of the time of payment or any other provisions of this Note.
Upon default of payment hereunder, the Holder may at Holder's election, unless
Holder has previously exercised Holder's right to make this Note immediately due
and payable, accept payment of all amounts in arrears and, in the event that any
such defaulted payment at the time of such payment is more than ten days in
arrears, the Undersigned further agrees to pay in addition to other amounts due,
a late charge equal to five cents for each dollar of the principal amount so in
arrears. In the event the Holder shall institute any action for the enforcement
or the collection of the monies due on this Note, there shall be immediately due
from the Undersigned, in addition to the unpaid principal, interest and late
charges, all costs and expenses of such action, and an attorney's fee of fifteen
percent of the amount then owing unpaid by the Undersigned.
THE UNDERSIGNED,
NANOPIERCE TECHNOLOGIES, INC.
____________________________________________________
PAUL H. METZIGNER, PRESIDENT & CHIEF EXECUTIVE
OFFICER
37
<PAGE>
The execution and attestation hereof by Paul H. Metzinger, President and Chief
Executive Officer and by Kristi J. Kampmann, Secretary of the Undersigned shall
in and of itself;
(a) constitute notice to all persons that as President & Chief Executive
Officer and Secretary of the Undersigned they have been duly and validly
authorized to execute and attest this Note;
(b) constitute an acknowledgment to all persons that it is their voluntary
act and deed and the act and deed of the Undersigned; and
(c) constitute an acknowledgment to all persons that the signatures of the
President & Chief Executive Officer and of the Secretary of the Undersigned are
the original, manual, true and undeniable signatures of the President & Chief
Executive Officer and Secretary of the Undersigned; that this Note is made and
delivered in the State of Colorado and shall be governed by the laws of the
State of Colorado and that the Undersigned consents to the personal jurisdiction
of the courts of the State of Colorado, for all purposes, in connection with the
enforcement of this Note.
ATTEST: THE UNDERSIGNED
NANOPIERCE TECHNOLOGIES, INC.
By: _________________________________ By: ________________________________
Kristi J. Kampmann, Secretary Paul H. Metzinger, President &
Chief Executive Officer
38
<PAGE>
UNSECURED CORPORATE
PROMISSORY NOTE
$80,000.00
Denver, Colorado
Date: December 23, 1999
FOR VALUE RECEIVED, Nanopierce Technologies, Inc. (hereinafter the
"Undersigned") promises to pay to the order of Growth Venture$, Inc. Pension
Plan & Trust, the principal sum of Eighty Thousand Dollars ($80,000.00) with
interest thereon at the rate of 8% per annum from the date of this Note.
This Note shall, at the option of the Holder hereof; become immediately due and
payable, without notice or demand, upon the happening of any one of the
following specified events:
(1) failure to pay any amount as herein set forth;
(2) in the performance of any obligation to the Holder hereunder;
(3) insolvency (however evidenced) or the commission of an act of
insolvency;
(4) the making of a general assignment for the benefit of creditors; and
(5) the filing of any petition or the commencement of any proceeding by or
against the Undersigned or any endorser or guarantor for any relief under any
bankruptcy or insolvency laws, or any laws relating to the relief of debtors,
readjustment of indebtedness, reorganization, compositions or extensions.
Otherwise this Note shall be due on May 23, 2000.
Holder shall have the right at any time prior to payment, to convert the
principal and interest of this Note into restricted common shares of Nanopierce
Technologies, Inc., at $0.40 per share.
The Undersigned hereby waives presentment, demand for payment, notice of
dishonor and any or all other notices or demands in connection with the
delivery, acceptance, performance, default or enforcement of this Note and
hereby consents to any extensions of time, renewals, releases of any party to
this Note, waivers or modifications that may be granted or consented to by the
Holder in respect of the time of payment or any other provisions of this Note.
Upon default of payment hereunder, the Holder may at Holder's election, unless
Holder has previously exercised Holder's right to make this Note immediately due
and payable, accept payment of all amounts in arrears and, in the event that any
such defaulted payment at the time of such payment is more than ten days in
arrears, the Undersigned further agrees to pay in addition to other amounts due,
a late charge equal to five cents for each dollar of the principal amount so in
arrears. In the event the Holder shall institute any action for the enforcement
or the collection of the monies due on this Note, there shall be immediately due
from the Undersigned, in addition to the unpaid principal, interest and late
charges, all costs and expenses of such action, and an attorney's fee of fifteen
percent of the amount then owing unpaid by the Undersigned.
THE UNDERSIGNED,
NANOPIERCE TECHNOLOGIES, INC.
__________________________________________________
PAUL H. METZIGNER, PRESIDENT & CHIEF EXECUTIVE
OFFICER
39
<PAGE>
The execution and attestation hereof by Paul H. Metzinger, President and Chief
Executive Officer and by Kristi J. Kampmann, Secretary of the Undersigned shall
in and of itself;
(a) constitute notice to all persons that as President & Chief Executive
Officer and Secretary of the Undersigned they have been duly and validly
authorized to execute and attest this Note;
(b) constitute an acknowledgment to all persons that it is their voluntary
act and deed and the act and deed of the Undersigned; and
(c) constitute an acknowledgment to all persons that the signatures of the
President & Chief Executive Officer and of the Secretary of the Undersigned are
the original, manual, true and undeniable signatures of the President & Chief
Executive Officer and Secretary of the Undersigned; that this Note is made and
delivered in the State of Colorado and shall be governed by the laws of the
State of Colorado and that the Undersigned consents to the personal jurisdiction
of the courts of the State of Colorado, for all purposes, in connection with the
enforcement of this Note.
ATTEST: THE UNDERSIGNED
NANOPIERCE TECHNOLOGIES, INC.
By: _________________________________ By: ________________________________
Kristi J. Kampmann, Secretary Paul H. Metzinger, President &
Chief Executive Officer
40
<PAGE>
THIS WARRANT AND THE SECURITIES RECEIVABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
Warrant to Purchase
52,500shares
- ------
WARRANT TO PURCHASE COMMON STOCK
OF
NANOPIERCE TECHNOLOGIES, INC.
THIS CERTIFIES that Dennis Ferraro or any subsequent ("Holder") hereof, has the
right to purchase from NANOPIERCE TECHNOLOGIES, INC., a Nevada corporation (the
"Company"), up to 52,500 fully paid and nonassessable shares of the Company's
Common Stock, no par value ("Common Stock"), subject to adjustment as provided
herein, at a price equal to the Exercise Price as defined in Section 3 below, at
any time beginning on the Date of Issuance and ending at 5:00 p.m., New York,
New York time, on October 27, 2002.
The Holder of this Warrant agrees with the Company that this Warrant is issued
and all rights hereunder shall be held subject to all of the conditions,
limitations and provisions set forth herein.
1. Date of Issuance.
-------------------
This Warrant shall be deemed to be issued on October 27, 1999("Date of
Issuance").
2. Exercise.
--------
(a) Manner of Exercise. On or after the Date of Issuance, this Warrant may
be exercised as to all or any lesser number of full shares of Common Stock
covered hereby upon surrender of this Warrant, with the Exercise Form attached
hereto duly executed, together with the full Exercise Price (as defined in
Section 3) for each share of Common Stock as to which this Warrant is exercised,
at the office of the Company, 370 17th Street, Suite 3580, Denver, Colorado
80202; Attention: President, Telephone No. (303)592-1010, Telecopy No.
(303)592-1054, or at such other office or agency as the Company may designate in
writing, by overnight mail, with an advance copy of the Exercise Form attached
as Exhibit A ("Exercise Form") by facsimile (such surrender and payment of the
Exercise Price hereinafter called the "Exercise of this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the Exercise Form is sent by
facsimile to the Company, provided that the original Warrant and Exercise Form
are received by the Company as soon as practicable thereafter. Alternatively,
the Date of Exercise shall be defined as the date the original Exercise Form is
received by the Company, if Holder has not sent advance notice by facsimile.
41
<PAGE>
(c) Cancellation of Warrant. This Warrant shall be canceled upon its
Exercise, and, as soon as practical after the Date of Exercise, the Holder
hereof shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise, and if this Warrant is not exercised in full, the
Holder shall be entitled to receive a new Warrant or Warrants (containing terms
identical to this Warrant) representing any unexercised portion of this Warrant
in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares of
Common Stock is issued shall, for all purposes, be deemed to have become the
Holder of record of such shares on the Date of Exercise of this Warrant,
irrespective of the date of delivery of such shares of Common Stock. Nothing in
this Warrant shall be construed as conferring upon the Holder hereof any rights
as a shareholder of the Company.
3. Payment of Warrant Exercise Price.
-------------------------------------
The Exercise Price shall be Thirty Cents ($0.30) per share ("Exercise Price").
Payment of the Exercise Price may be made by either of the following, or a
combination thereof, at the election of Holder:
(i) Cash Exercise: cash, certified check or cashiers check or wire
transfer; or
(ii) Cashless Exercise: subject to the last sentence of this Section 3,
surrender of this Warrant at the principal office of the Company together with
notice of cashless election, in which event the Company shall issue Holder a
number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is being
exercised.
A = the Market Price of one (1) share of Common
Stock (for purposes of this Section 3(ii), the "Market Price" shall be defined
as the average closing price of the Common Stock for the five (5) trading days
prior to the Date of Exercise of this Warrant (the "Average Closing Price"), as
reported by the OTC Bulletin Board, or if the Common Stock is not traded on the
OTC Bulletin Board, the Average Closing Price in the over-the-counter market;
provided, however, that if the Common Stock is listed on a stock exchange, the
Market Price shall be the Average Closing Price on such exchange. If the Common
Stock is/was not traded during the five (5) trading days prior to the Date of
Exercise, then the closing price for the last publicly traded day shall be
deemed to be the closing price for any and all (if applicable) days during such
five (5) trading day period.
B = the Exercise Price.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon exercise of this
Warrant in a cashless exercise transaction shall be deemed to have been acquired
at the time this Warrant was issued. Moreover, it is intended, understood and
acknowledged that the holding period for the Common Stock issuable upon exercise
of this Warrant in a cashless exercise transaction shall be deemed to have
commenced on the date this Warrant was issued.
42
<PAGE>
4. Transfer.
--------
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in whole
or in part, in person or by attorney, upon surrender of this Warrant properly
endorsed. This Warrant shall be canceled upon such surrender and, as soon as
practicable thereafter, the person to whom such transfer is made shall be
entitled to receive a new Warrant or Warrants as to the portion of this Warrant
transferred, and the Holder of this Warrant shall be entitled to receive a new
Warrant or Warrants as to the portion hereof retained.
5. Anti-Dilution Adjustments.
--------------------------
(a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then the Holder hereof, upon Exercise of this
Warrant after the record date for the determination of Holders of Common Stock
entitled to receive such dividend, shall be entitled to receive upon Exercise of
this Warrant, in addition to the number of shares of Common Stock as to which
this Warrant is Exercised, such additional shares of Common Stock as such Holder
would have received had this Warrant been Exercised immediately prior to such
record date and the Exercise Price will be proportionately adjusted.
(b) Recapitalization or Reclassification. If the Company shall at any time
effect a recapitalization, reclassification or other similar transaction of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of Common Stock which the Holder hereof shall
be entitled to purchase upon Exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization,
reclassification or similar transaction, and the Exercise Price shall be, in the
case of an increase in the number of shares, proportionally decreased and, in
the case of decrease in the number of shares, proportionally increased. The
Company shall give the Warrant Holder the same notice it provides to holders of
Common Stock of any transaction described in this Section 5(b).
(c) Distributions. If the Company shall at any time distribute to Holders
of Common Stock cash, evidences of indebtedness or other securities or assets
(other than cash dividends or distributions payable out of earned surplus or net
profits for the current or preceding year) then, in any such case, the Holder of
this Warrant shall be entitled to receive, upon exercise of this Warrant, with
respect to each share of Common Stock issuable upon such Exercise, the amount of
cash or evidences of indebtedness or other securities or assets which such
Holder would have been entitled to receive with respect to each such share of
Common Stock as a result of the happening of such event had this Warrant been
Exercised immediately prior to the record date or other date fixing shareholders
to be affected by such event (the "Determination Date") or, in lieu thereof, if
the Board of Directors of the Company should so determine at the time of such
distribution, a reduced Exercise Price determined by multiplying the Exercise
Price on the Determination Date by a fraction, the numerator of which is the
result of such Exercise Price reduced by the value of such distribution
applicable to one share of Common Stock (such value to be determined by the
Board in its discretion) and the denominator of which is such Exercise Price.
43
<PAGE>
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Company shall
be changed into the same or a different number of shares of the same or another
class or classes of stock or securities or other assets of the Company or
another entity or there is a sale of all or substantially all the Company's
assets (a "Corporate Change"), then this Warrant shall be exercisable into such
class and type of securities or other assets as the Holder would have received
had the Holder exercised this Warrant immediately prior to such Corporate
Change; provided, however, that Company may not affect any Corporate Change
unless it first shall have given thirty (30) business days notice to the Holder
hereof of any Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term "Exercise
Price" shall mean the purchase price per share specified in Section 3 of this
Warrant, until the occurrence of an event stated in subsection (a), (b) or (c)
of this Section 5, and thereafter shall mean said price as adjusted from time to
time in accordance with the provisions of said subsection. No such adjustment
under this Section 5 shall be made unless such adjustment would change the
Exercise Price at the time by $.01 or more; provided, however, that all
adjustments not so made shall be deferred and made when the aggregate thereof
would change the Exercise Price at the time by $.01 or more. No adjustment made
pursuant to any provision of this Section 5 shall have the effect of increasing
the Exercise Price. The number of shares of Common Stock subject hereto shall
increase proportionately with each decrease in the Exercise Price.
(f) Adjustments: Additional Shares, Securities or Assets. In the event that
at any time, as a result of an adjustment made pursuant to this Section 5, the
Holder of this Warrant shall, upon Exercise of this Warrant, become entitled to
receive shares and/or other securities or assets (other than Common Stock) then,
wherever appropriate, all references herein to shares of Common Stock shall be
deemed to refer to and include such shares and/or other securities or assets;
and thereafter the number of such shares and/or other securities or assets shall
be subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.
6. Fractional Interests.
---------------------
No fractional shares or scrip representing fractional shares shall be issuable
upon the Exercise of this Warrant, but on Exercise of this Warrant, the Holder
hereof may purchase only a whole number of shares of Common Stock. If, on
Exercise of this Warrant, the Holder hereof would be entitled to a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares of Common
Stock issuable upon conversion shall be the next higher number of shares.
7. Reservation of Shares.
-----------------------
The Company shall at all times reserve for issuance such number of authorized
and unissued shares of Common Stock (or other securities substituted therefor as
herein above provided) as shall be sufficient for Exercise and payment of the
Exercise Price of this Warrant. The Company covenants and agrees that upon
Exercise of this Warrant, all shares of Common Stock issuable upon such Exercise
shall be duly and validly issued, fully paid, nonassessable and not subject to
preemptive rights, rights of first refusal or similar rights of any person or
entity.
44
<PAGE>
8. Restrictions on Transfer.
--------------------------
(a) Registration or Exemption Required. This Warrant has been issued in a
transaction exempt from the registration requirements of the Act by virtue of
Section 4(2). The Warrant and the Common Stock issuable upon exercise of the
Warrant may not be sold except pursuant to an effective registration statement
or an exemption to the registration requirements of the Act and applicable state
laws.
(b) Registration Rights. The Company shall within One Hundred and Twenty
(120) days of the date of this Warrant prepare and file a Registration Statement
with the SEC, no more than once, under the Securities Act of 1933, registering
this Warrant and the shares underlying this Warrant. The Company agrees to use
its best efforts to cause the above filing to become effective, as promptly as
possible.
(c) Assignment. Assuming the conditions of (a) above regarding registration
or exemption have been satisfied, the Holder may sell, transfer, assign, pledge
or otherwise dispose of this Warrant, in whole or in part. Holder shall deliver
a written notice to Company, substantially in the form of the Assignment
attached hereto as Exhibit B, indicating the person or persons to whom the
Warrant shall be assigned and the respective number of warrants to be assigned
to each assignee. The Company shall effect the assignment within ten (10) days,
and shall deliver to the assignee(s) designated by Holder a Warrant or Warrants
of like tenor and terms for the appropriate number of shares.
9. Benefits of this Warrant.
---------------------------
Nothing in this Warrant shall be construed to confer upon any person other than
the Company and the Holder of this Warrant any legal or equitable right, remedy
or claim under this Warrant and this Warrant shall be for the sole and exclusive
benefit of the Company and the Holder of this Warrant.
10. Applicable Law.
---------------
This Warrant is issued under and shall for all purposes be governed by and
construed in accordance with the laws of the state of Nevada, without giving
effect to conflict of law provisions thereof.
11. Loss of Warrant.
-----------------
Upon receipt by the Company of evidence of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
indemnity or security reasonably satisfactory to the Company, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.
12. Notice or Demands.
-------------------
Notices or demands pursuant to this Warrant to be given or made by the Holder of
this Warrant to or on the Company shall be sufficiently given or made if sent by
certified or registered mail, return receipt requested, postage prepaid, and
addressed, until another address is designated in writing by the Company, to
Attention: President, Nanopierce Technologies, Inc., 370 17th Street, Suite
3580, Denver, Colorado 80202, Attention: President, Telephone No. (303)592-1010,
Telecopy No. (303)592-1054.
45
<PAGE>
Notices or demands pursuant to this Warrant to be given or made by the Company
to or on the Holder of this Warrant shall be sufficiently given or made if sent
by certified or registered mail, return receipt requested, postage prepaid, and
addressed, to the address of the Holder set forth in the Company's records,
until another address is designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the 27th day
of October, 1999.
NANOPIERCE TECHNOLGOIES, INC.
By: ________________________________
Print Name: Paul H. Metzinger
Title: President & Chief Executive
Officer
46
<PAGE>
EXHIBIT A
EXERCISE FORM
TO: NANOPIERCE TECHNOLOGIES, INC.
The undersigned hereby irrevocably exercises the right to purchase ____________
of the shares of Common Stock of NANOPIERCE TECHNOLOGIES, INC., a Nevada
corporation (the "Company"), evidenced by the attached Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full, all in
accordance with the conditions and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of Common Stock obtained on exercise of the Warrant, except in accordance
with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be issued
free of any restrictive legend, and a warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant in the name of the Registered
Holder and delivered to the undersigned at the address set forth below:
Dated:
________________________________________________________________________
Signature of Registered Holder
________________________________________________________________________
Name of Registered Holder (Print)
________________________________________________________________________
Non-U.S. Address
47
<PAGE>
EXHIBIT B
ASSIGNMENT
(To be executed by the registered Holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons below named the right to
purchase _______ shares of the Common Stock of NANOPIERCE TECHNOLOGIES, INC.
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint _______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated: ______________________________
Signature
Fill in for new Registration of Warrant:
_________________________________________
Name
_________________________________________
Address
_________________________________________
Please print name and address of assignee
(including zip code number)
_______________________________________________________________________
NOTICE
The signature to the foregoing Exercise Form or Assignment must correspond to
the name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
________________________________________________________________________
48
<PAGE>
THIS WARRANT AND THE SECURITIES RECEIVABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
Warrant to Purchase
140,000shares
- -------
WARRANT TO PURCHASE COMMON STOCK
OF
NANOPIERCE TECHNOLOGIES, INC.
THIS CERTIFIES that Gemini Investments, Ltd. or any subsequent ("Holder")
hereof, has the right to purchase from NANOPIERCE TECHNOLOGIES, INC., a Nevada
corporation (the "Company"), up to 140,000 fully paid and nonassessable shares
of the Company's Common Stock, no par value ("Common Stock"), subject to
adjustment as provided herein, at a price equal to the Exercise Price as defined
in Section 3 below, at any time beginning on the Date of Issuance and ending at
5:00 p.m., New York, New York time, on October 26, 2002.
The Holder of this Warrant agrees with the Company that this Warrant is issued
and all rights hereunder shall be held subject to all of the conditions,
limitations and provisions set forth herein.
1. Date of Issuance.
-------------------
This Warrant shall be deemed to be issued on October 26, 1999("Date of
Issuance").
2. Exercise.
--------
(a) Manner of Exercise. On or after the Date of Issuance, this Warrant may
be exercised as to all or any lesser number of full shares of Common Stock
covered hereby upon surrender of this Warrant, with the Exercise Form attached
hereto duly executed, together with the full Exercise Price (as defined in
Section 3) for each share of Common Stock as to which this Warrant is exercised,
at the office of the Company, 370 17th Street, Suite 3580, Denver, Colorado
80202; Attention: President, Telephone No. (303)592-1010, Telecopy No.
(303)592-1054, or at such other office or agency as the Company may designate in
writing, by overnight mail, with an advance copy of the Exercise Form attached
as Exhibit A ("Exercise Form") by facsimile (such surrender and payment of the
Exercise Price hereinafter called the "Exercise of this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the Exercise Form is sent by
facsimile to the Company, provided that the original Warrant and Exercise Form
are received by the Company as soon as practicable thereafter. Alternatively,
the Date of Exercise shall be defined as the date the original Exercise Form is
received by the Company, if Holder has not sent advance notice by facsimile.
49
<PAGE>
(c) Cancellation of Warrant. This Warrant shall be canceled upon its
Exercise, and, as soon as practical after the Date of Exercise, the Holder
hereof shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise, and if this Warrant is not exercised in full, the
Holder shall be entitled to receive a new Warrant or Warrants (containing terms
identical to this Warrant) representing any unexercised portion of this Warrant
in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares of
Common Stock is issued shall, for all purposes, be deemed to have become the
Holder of record of such shares on the Date of Exercise of this Warrant,
irrespective of the date of delivery of such shares of Common Stock. Nothing in
this Warrant shall be construed as conferring upon the Holder hereof any rights
as a shareholder of the Company.
3. Payment of Warrant Exercise Price.
-------------------------------------
The Exercise Price shall be Thirty Cents ($0.30) per share ("Exercise Price").
Payment of the Exercise Price may be made by either of the following, or a
combination thereof, at the election of Holder:
(i) Cash Exercise: cash, certified check or cashiers check or wire
transfer; or
(ii) Cashless Exercise: subject to the last sentence of this Section 3,
surrender of this Warrant at the principal office of the Company together with
notice of cashless election, in which event the Company shall issue Holder a
number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is being
exercised.
A = the Market Price of one (1) share of Common
Stock (for purposes of this Section 3(ii), the "Market Price" shall be defined
as the average closing price of the Common Stock for the five (5) trading days
prior to the Date of Exercise of this Warrant (the "Average Closing Price"), as
reported by the OTC Bulletin Board, or if the Common Stock is not traded on the
OTC Bulletin Board, the Average Closing Price in the over-the-counter market;
provided, however, that if the Common Stock is listed on a stock exchange, the
Market Price shall be the Average Closing Price on such exchange. If the Common
Stock is/was not traded during the five (5) trading days prior to the Date of
Exercise, then the closing price for the last publicly traded day shall be
deemed to be the closing price for any and all (if applicable) days during such
five (5) trading day period.
B = the Exercise Price.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon exercise of this
Warrant in a cashless exercise transaction shall be deemed to have been acquired
at the time this Warrant was issued. Moreover, it is intended, understood and
acknowledged that the holding period for the Common Stock issuable upon exercise
of this Warrant in a cashless exercise transaction shall be deemed to have
commenced on the date this Warrant was issued.
50
<PAGE>
4. Transfer.
--------
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in whole
or in part, in person or by attorney, upon surrender of this Warrant properly
endorsed. This Warrant shall be canceled upon such surrender and, as soon as
practicable thereafter, the person to whom such transfer is made shall be
entitled to receive a new Warrant or Warrants as to the portion of this Warrant
transferred, and the Holder of this Warrant shall be entitled to receive a new
Warrant or Warrants as to the portion hereof retained.
5. Anti-Dilution Adjustments.
--------------------------
(a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then the Holder hereof, upon Exercise of this
Warrant after the record date for the determination of Holders of Common Stock
entitled to receive such dividend, shall be entitled to receive upon Exercise of
this Warrant, in addition to the number of shares of Common Stock as to which
this Warrant is Exercised, such additional shares of Common Stock as such Holder
would have received had this Warrant been Exercised immediately prior to such
record date and the Exercise Price will be proportionately adjusted.
(b) Recapitalization or Reclassification. If the Company shall at any time
effect a recapitalization, reclassification or other similar transaction of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of Common Stock which the Holder hereof shall
be entitled to purchase upon Exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization,
reclassification or similar transaction, and the Exercise Price shall be, in the
case of an increase in the number of shares, proportionally decreased and, in
the case of decrease in the number of shares, proportionally increased. The
Company shall give the Warrant Holder the same notice it provides to holders of
Common Stock of any transaction described in this Section 5(b).
(c) Distributions. If the Company shall at any time distribute to Holders
of Common Stock cash, evidences of indebtedness or other securities or assets
(other than cash dividends or distributions payable out of earned surplus or net
profits for the current or preceding year) then, in any such case, the Holder of
this Warrant shall be entitled to receive, upon exercise of this Warrant, with
respect to each share of Common Stock issuable upon such Exercise, the amount of
cash or evidences of indebtedness or other securities or assets which such
Holder would have been entitled to receive with respect to each such share of
Common Stock as a result of the happening of such event had this Warrant been
Exercised immediately prior to the record date or other date fixing shareholders
to be affected by such event (the "Determination Date") or, in lieu thereof, if
the Board of Directors of the Company should so determine at the time of such
distribution, a reduced Exercise Price determined by multiplying the Exercise
Price on the Determination Date by a fraction, the numerator of which is the
result of such Exercise Price reduced by the value of such distribution
applicable to one share of Common Stock (such value to be determined by the
Board in its discretion) and the denominator of which is such Exercise Price.
51
<PAGE>
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Company shall
be changed into the same or a different number of shares of the same or another
class or classes of stock or securities or other assets of the Company or
another entity or there is a sale of all or substantially all the Company's
assets (a "Corporate Change"), then this Warrant shall be exercisable into such
class and type of securities or other assets as the Holder would have received
had the Holder exercised this Warrant immediately prior to such Corporate
Change; provided, however, that Company may not affect any Corporate Change
unless it first shall have given thirty (30) business days notice to the Holder
hereof of any Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term "Exercise
Price" shall mean the purchase price per share specified in Section 3 of this
Warrant, until the occurrence of an event stated in subsection (a), (b) or (c)
of this Section 5, and thereafter shall mean said price as adjusted from time to
time in accordance with the provisions of said subsection. No such adjustment
under this Section 5 shall be made unless such adjustment would change the
Exercise Price at the time by $.01 or more; provided, however, that all
adjustments not so made shall be deferred and made when the aggregate thereof
would change the Exercise Price at the time by $.01 or more. No adjustment made
pursuant to any provision of this Section 5 shall have the effect of increasing
the Exercise Price. The number of shares of Common Stock subject hereto shall
increase proportionately with each decrease in the Exercise Price.
(f) Adjustments: Additional Shares, Securities or Assets. In the event that
at any time, as a result of an adjustment made pursuant to this Section 5, the
Holder of this Warrant shall, upon Exercise of this Warrant, become entitled to
receive shares and/or other securities or assets (other than Common Stock) then,
wherever appropriate, all references herein to shares of Common Stock shall be
deemed to refer to and include such shares and/or other securities or assets;
and thereafter the number of such shares and/or other securities or assets shall
be subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.
6. Fractional Interests.
---------------------
No fractional shares or scrip representing fractional shares shall be issuable
upon the Exercise of this Warrant, but on Exercise of this Warrant, the Holder
hereof may purchase only a whole number of shares of Common Stock. If, on
Exercise of this Warrant, the Holder hereof would be entitled to a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares of Common
Stock issuable upon conversion shall be the next higher number of shares.
7. Reservation of Shares.
-----------------------
The Company shall at all times reserve for issuance such number of authorized
and unissued shares of Common Stock (or other securities substituted therefor as
herein above provided) as shall be sufficient for Exercise and payment of the
Exercise Price of this Warrant. The Company covenants and agrees that upon
Exercise of this Warrant, all shares of Common Stock issuable upon such Exercise
shall be duly and validly issued, fully paid, nonassessable and not subject to
preemptive rights, rights of first refusal or similar rights of any person or
entity.
52
<PAGE>
8. Restrictions on Transfer.
--------------------------
(a) Registration or Exemption Required. This Warrant has been issued in a
transaction exempt from the registration requirements of the Act by virtue of
Section 4(2). The Warrant and the Common Stock issuable upon exercise of the
Warrant may not be sold except pursuant to an effective registration statement
or an exemption to the registration requirements of the Act and applicable state
laws.
(b) Registration Rights. The Company shall within One Hundred and Twenty
(120) days of the date of this Warrant prepare and file a Registration Statement
with the SEC, no more than once, under the Securities Act of 1933, registering
this Warrant and the shares underlying this Warrant. The Company agrees to use
its best efforts to cause the above filing to become effective, as promptly as
possible.
(c) Assignment. Assuming the conditions of (a) above regarding registration
or exemption have been satisfied, the Holder may sell, transfer, assign, pledge
or otherwise dispose of this Warrant, in whole or in part. Holder shall deliver
a written notice to Company, substantially in the form of the Assignment
attached hereto as Exhibit B, indicating the person or persons to whom the
Warrant shall be assigned and the respective number of warrants to be assigned
to each assignee. The Company shall effect the assignment within ten (10) days,
and shall deliver to the assignee(s) designated by Holder a Warrant or Warrants
of like tenor and terms for the appropriate number of shares.
9. Benefits of this Warrant.
---------------------------
Nothing in this Warrant shall be construed to confer upon any person other than
the Company and the Holder of this Warrant any legal or equitable right, remedy
or claim under this Warrant and this Warrant shall be for the sole and exclusive
benefit of the Company and the Holder of this Warrant.
10. Applicable Law.
---------------
This Warrant is issued under and shall for all purposes be governed by and
construed in accordance with the laws of the state of Nevada, without giving
effect to conflict of law provisions thereof.
11. Loss of Warrant.
-----------------
Upon receipt by the Company of evidence of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
indemnity or security reasonably satisfactory to the Company, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.
12. Notice or Demands.
-------------------
Notices or demands pursuant to this Warrant to be given or made by the Holder of
this Warrant to or on the Company shall be sufficiently given or made if sent by
certified or registered mail, return receipt requested, postage prepaid, and
addressed, until another address is designated in writing by the Company, to
Attention: President, Nanopierce Technologies, Inc., 370 17th Street, Suite
3580, Denver, Colorado 80202, Attention: President, Telephone No. (303)592-1010,
Telecopy No. (303)592-1054.
53
<PAGE>
Notices or demands pursuant to this Warrant to be given or made by the Company
to or on the Holder of this Warrant shall be sufficiently given or made if sent
by certified or registered mail, return receipt requested, postage prepaid, and
addressed, to the address of the Holder set forth in the Company's records,
until another address is designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the 26th day
of October, 1999.
NANOPIERCE TECHNOLGOIES, INC.
By: ________________________________
Print Name: Paul H. Metzinger
Title: President & Chief Executive
Officer
54
<PAGE>
EXHIBIT A
EXERCISE FORM
TO: NANOPIERCE TECHNOLOGIES, INC.
The undersigned hereby irrevocably exercises the right to purchase ____________
of the shares of Common Stock of NANOPIERCE TECHNOLOGIES, INC., a Nevada
corporation (the "Company"), evidenced by the attached Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full, all in
accordance with the conditions and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of Common Stock obtained on exercise of the Warrant, except in accordance
with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be issued
free of any restrictive legend, and a warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant in the name of the Registered
Holder and delivered to the undersigned at the address set forth below:
Dated:
________________________________________________________________________
Signature of Registered Holder
________________________________________________________________________
Name of Registered Holder (Print)
________________________________________________________________________
Non-U.S. Address
55
<PAGE>
EXHIBIT B
ASSIGNMENT
(To be executed by the registered Holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons below named the right to
purchase _______ shares of the Common Stock of NANOPIERCE TECHNOLOGIES, INC.
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint _______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated: ______________________________
Signature
Fill in for new Registration of Warrant:
_________________________________________
Name
_________________________________________
Address
_________________________________________
Please print name and address of assignee
(including zip code number)
_______________________________________________________________________
NOTICE
The signature to the foregoing Exercise Form or Assignment must correspond to
the name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
________________________________________________________________________
56
<PAGE>
THIS WARRANT AND THE SECURITIES RECEIVABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
Warrant to Purchase
5,000,000 shares
- ---------
WARRANT TO PURCHASE COMMON STOCK
OF
NANOPIERCE TECHNOLOGIES, INC.
THIS CERTIFIES that Gemini Investments, Ltd. or any subsequent ("Holder")
hereof, has the right to purchase from NANOPIERCE TECHNOLOGIES, INC., a Nevada
corporation (the "Company"), up to 5,000,000 fully paid and nonassessable shares
of the Company's Common Stock, no par value ("Common Stock"), subject to
adjustment as provided herein, at a price equal to the Exercise Price as defined
in Section 3 below, at any time beginning on the Date of Issuance and ending at
5:00 p.m., New York, New York time, on December 10, 2004.
The Holder of this Warrant agrees with the Company that this Warrant is issued
and all rights hereunder shall be held subject to all of the conditions,
limitations and provisions set forth herein.
1. Date of Issuance.
-------------------
This Warrant shall be deemed to be issued on December 10, 1999("Date of
Issuance").
2. Exercise.
--------
(a) Manner of Exercise. On or after the Date of Issuance, this Warrant may
be exercised as to all or any lesser number of full shares of Common Stock
covered hereby upon surrender of this Warrant, with the Exercise Form attached
hereto duly executed, together with the full Exercise Price (as defined in
Section 3) for each share of Common Stock as to which this Warrant is exercised,
at the office of the Company, 370 17th Street, Suite 3580, Denver, Colorado
80202; Attention: President, Telephone No. (303)592-1010, Telecopy No.
(303)592-1054, or at such other office or agency as the Company may designate in
writing, by overnight mail, with an advance copy of the Exercise Form attached
as Exhibit A ("Exercise Form") by facsimile (such surrender and payment of the
Exercise Price hereinafter called the "Exercise of this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the Exercise Form is sent by
facsimile to the Company, provided that the original Warrant and Exercise Form
are received by the Company as soon as practicable thereafter. Alternatively,
the Date of Exercise shall be defined as the date the original Exercise Form is
received by the Company, if Holder has not sent advance notice by facsimile.
57
<PAGE>
(c) Cancellation of Warrant. This Warrant shall be canceled upon its
Exercise, and, as soon as practical after the Date of Exercise, the Holder
hereof shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise, and if this Warrant is not exercised in full, the
Holder shall be entitled to receive a new Warrant or Warrants (containing terms
identical to this Warrant) representing any unexercised portion of this Warrant
in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares of
Common Stock is issued shall, for all purposes, be deemed to have become the
Holder of record of such shares on the Date of Exercise of this Warrant,
irrespective of the date of delivery of such shares of Common Stock. Nothing in
this Warrant shall be construed as conferring upon the Holder hereof any rights
as a shareholder of the Company.
3. Payment of Warrant Exercise Price.
-------------------------------------
The Exercise Price shall be Thirty Cents ($0.30) per share ("Exercise Price").
Payment of the Exercise Price may be made by either of the following, or a
combination thereof, at the election of Holder:
(i) Cash Exercise: cash, certified check or cashiers check or wire
transfer; or
(ii) Cashless Exercise: subject to the last sentence of this Section 3,
surrender of this Warrant at the principal office of the Company together with
notice of cashless election, in which event the Company shall issue Holder a
number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is being
exercised.
A = the Market Price of one (1) share of Common
Stock (for purposes of this Section 3(ii), the "Market Price" shall be defined
as the average closing price of the Common Stock for the five (5) trading days
prior to the Date of Exercise of this Warrant (the "Average Closing Price"), as
reported by the OTC Bulletin Board, or if the Common Stock is not traded on the
OTC Bulletin Board, the Average Closing Price in the over-the-counter market;
provided, however, that if the Common Stock is listed on a stock exchange, the
Market Price shall be the Average Closing Price on such exchange. If the Common
Stock is/was not traded during the five (5) trading days prior to the Date of
Exercise, then the closing price for the last publicly traded day shall be
deemed to be the closing price for any and all (if applicable) days during such
five (5) trading day period.
B = the Exercise Price.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon exercise of this
Warrant in a cashless exercise transaction shall be deemed to have been acquired
at the time this Warrant was issued. Moreover, it is intended, understood and
acknowledged that the holding period for the Common Stock issuable upon exercise
of this Warrant in a cashless exercise transaction shall be deemed to have
commenced on the date this Warrant was issued.
58
<PAGE>
NO SUBSEQUENT HOLDER OF THIS WARRANT SHALL HAVE THE RIGHT TO EXERCISE THIS
WARRANT PURSUANT TO THE CASHLESS EXERCISE METHOD SET FORTH IN (ii) ABOVE, UNLESS
THE COMPANY SPECIFICALLY CONSENTS, IN WRITING, TO AN AMENDMENT TO THIS WARRANT
PERMITTING SUCH METHOD OF EXERCISE.
4. Transfer.
--------
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in whole
or in part, in person or by attorney, upon surrender of this Warrant properly
endorsed. This Warrant shall be canceled upon such surrender and, as soon as
practicable thereafter, the person to whom such transfer is made shall be
entitled to receive a new Warrant or Warrants as to the portion of this Warrant
transferred, and the Holder of this Warrant shall be entitled to receive a new
Warrant or Warrants as to the portion hereof retained.
5. Anti-Dilution Adjustments.
--------------------------
(a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then the Holder hereof, upon Exercise of this
Warrant after the record date for the determination of Holders of Common Stock
entitled to receive such dividend, shall be entitled to receive upon Exercise of
this Warrant, in addition to the number of shares of Common Stock as to which
this Warrant is Exercised, such additional shares of Common Stock as such Holder
would have received had this Warrant been Exercised immediately prior to such
record date and the Exercise Price will be proportionately adjusted.
(b) Recapitalization or Reclassification. If the Company shall at any time
effect a recapitalization, reclassification or other similar transaction of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of Common Stock which the Holder hereof shall
be entitled to purchase upon Exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization,
reclassification or similar transaction, and the Exercise Price shall be, in the
case of an increase in the number of shares, proportionally decreased and, in
the case of decrease in the number of shares, proportionally increased. The
Company shall give the Warrant Holder the same notice it provides to holders of
Common Stock of any transaction described in this Section 5(b).
(c) Distributions. If the Company shall at any time distribute to Holders
of Common Stock cash, evidences of indebtedness or other securities or assets
(other than cash dividends or distributions payable out of earned surplus or net
profits for the current or preceding year) then, in any such case, the Holder of
this Warrant shall be entitled to receive, upon exercise of this Warrant, with
respect to each share of Common Stock issuable upon such Exercise, the amount of
cash or evidences of indebtedness or other securities or assets which such
Holder would have been entitled to receive with respect to each such share of
Common Stock as a result of the happening of such event had this Warrant been
Exercised immediately prior to the record date or other date fixing shareholders
to be affected by such event (the "Determination Date") or, in lieu thereof, if
the Board of Directors of the Company should so determine at the time of such
distribution, a reduced Exercise Price determined by multiplying the Exercise
Price on the Determination Date by a fraction, the numerator of which is the
result of such Exercise Price reduced by the value of such distribution
applicable to one share of Common Stock (such value to be determined by the
Board in its discretion) and the denominator of which is such Exercise Price.
59
<PAGE>
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Company shall
be changed into the same or a different number of shares of the same or another
class or classes of stock or securities or other assets of the Company or
another entity or there is a sale of all or substantially all the Company's
assets (a "Corporate Change"), then this Warrant shall be exercisable into such
class and type of securities or other assets as the Holder would have received
had the Holder exercised this Warrant immediately prior to such Corporate
Change; provided, however, that Company may not affect any Corporate Change
unless it first shall have given thirty (30) business days notice to the Holder
hereof of any Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term "Exercise
Price" shall mean the purchase price per share specified in Section 3 of this
Warrant, until the occurrence of an event stated in subsection (a), (b) or (c)
of this Section 5, and thereafter shall mean said price as adjusted from time to
time in accordance with the provisions of said subsection. No such adjustment
under this Section 5 shall be made unless such adjustment would change the
Exercise Price at the time by $.01 or more; provided, however, that all
adjustments not so made shall be deferred and made when the aggregate thereof
would change the Exercise Price at the time by $.01 or more. No adjustment made
pursuant to any provision of this Section 5 shall have the effect of increasing
the Exercise Price. The number of shares of Common Stock subject hereto shall
increase proportionately with each decrease in the Exercise Price.
(f) Adjustments: Additional Shares, Securities or Assets. In the event that
at any time, as a result of an adjustment made pursuant to this Section 5, the
Holder of this Warrant shall, upon Exercise of this Warrant, become entitled to
receive shares and/or other securities or assets (other than Common Stock) then,
wherever appropriate, all references herein to shares of Common Stock shall be
deemed to refer to and include such shares and/or other securities or assets;
and thereafter the number of such shares and/or other securities or assets shall
be subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.
6. Fractional Interests.
---------------------
No fractional shares or scrip representing fractional shares shall be issuable
upon the Exercise of this Warrant, but on Exercise of this Warrant, the Holder
hereof may purchase only a whole number of shares of Common Stock. If, on
Exercise of this Warrant, the Holder hereof would be entitled to a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares of Common
Stock issuable upon conversion shall be the next higher number of shares.
7. Reservation of Shares.
-----------------------
The Company shall at all times reserve for issuance such number of authorized
and unissued shares of Common Stock (or other securities substituted therefor as
herein above provided) as shall be sufficient for Exercise and payment of the
Exercise Price of this Warrant. The Company covenants and agrees that upon
Exercise of this Warrant, all shares of Common Stock issuable upon such Exercise
shall be duly and validly issued, fully paid, nonassessable and not subject to
preemptive rights, rights of first refusal or similar rights of any person or
entity.
60
<PAGE>
8. Restrictions on Transfer.
--------------------------
(a) Registration or Exemption Required. This Warrant has been issued in a
transaction exempt from the registration requirements of the Act by virtue of
Section 4(2). The Warrant and the Common Stock issuable upon exercise of the
Warrant may not be sold except pursuant to an effective registration statement
or an exemption to the registration requirements of the Act and applicable state
laws.
(b) Registration Rights. The Company shall within One Hundred and Twenty
(120) days of the date of this Warrant prepare and file a Registration Statement
with the SEC, no more than once, under the Securities Act of 1933, registering
this Warrant and the shares underlying this Warrant. The Company agrees to use
its best efforts to cause the above filing to become effective, as promptly as
possible.
(c) Assignment. Assuming the conditions of (a) above regarding registration
or exemption have been satisfied, the Holder may sell, transfer, assign, pledge
or otherwise dispose of this Warrant, in whole or in part. Holder shall deliver
a written notice to Company, substantially in the form of the Assignment
attached hereto as Exhibit B, indicating the person or persons to whom the
Warrant shall be assigned and the respective number of warrants to be assigned
to each assignee. The Company shall effect the assignment within ten (10) days,
and shall deliver to the assignee(s) designated by Holder a Warrant or Warrants
of like tenor and terms for the appropriate number of shares.
9. Benefits of this Warrant.
---------------------------
Nothing in this Warrant shall be construed to confer upon any person other than
the Company and the Holder of this Warrant any legal or equitable right, remedy
or claim under this Warrant and this Warrant shall be for the sole and exclusive
benefit of the Company and the Holder of this Warrant.
10. Applicable Law.
---------------
This Warrant is issued under and shall for all purposes be governed by and
construed in accordance with the laws of the state of Nevada, without giving
effect to conflict of law provisions thereof.
11. Loss of Warrant.
-----------------
Upon receipt by the Company of evidence of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
indemnity or security reasonably satisfactory to the Company, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.
12. Notice or Demands.
-------------------
Notices or demands pursuant to this Warrant to be given or made by the Holder of
this Warrant to or on the Company shall be sufficiently given or made if sent by
certified or registered mail, return receipt requested, postage prepaid, and
addressed, until another address is designated in writing by the Company, to
Attention: President, Nanopierce Technologies, Inc., 370 17th Street, Suite
3580, Denver, Colorado 80202, Attention: President, Telephone No. (303)592-1010,
Telecopy No. (303)592-1054.
61
<PAGE>
Notices or demands pursuant to this Warrant to be given or made by the Company
to or on the Holder of this Warrant shall be sufficiently given or made if sent
by certified or registered mail, return receipt requested, postage prepaid, and
addressed, to the address of the Holder set forth in the Company's records,
until another address is designated in writing by Holder.
13. Exercise restrictions.
-----------------------
When and if the Company has its common shares registered pursuant to Section
12(g) of the Securities Act of 1934, the, notwithstanding anything to the
contrary set forth in this Warrant, in no event shall any holder of this Warrant
be entitled to exercise any portion of this Warrant to the extent that such
exercise, upon giving effect to such exercise, would cause the aggregate number
of shares of Common Stock beneficially owned by the Holder and its affiliates to
exceed 9.99% of the outstanding shares of the Common Stock following such
exercise. If any court of competent jurisdiction shall determine that the
foregoing limitation is ineffective to prevent the Holder from being deemed the
beneficial owner of more than 9.9% of the then outstanding shares of Common
Stock, then the Company shall purchase from the Holder such portion of this
Warrant (the "Redemption Portion") as is necessary to cause such Holder to be
deemed the beneficial owner of not more than 9.9% of the then outstanding shares
of Common Stock. Upon such determination by a court of competent jurisdiction
and such redemption by the Company, the Redemption Portion shall immediately and
without further action be deemed returned to the Seller, subject only to payment
in full by the Seller of the Redemption Amount (as defined below) and the Buyer
shall have no interest in or rights under such Redemption Portion other than to
receive cash in the amount of the Redemption Amount. Such redemption shall be
for cash at a redemption price equal to 122.5% of the Exercise Price (the
"Redemption Amount") and shall be paid within three (3) business days after the
redemption described herein is deemed to have occurred as stated herein.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the 10th day
of December, 1999.
NANOPIERCE TECHNOLGOIES, INC.
By: ________________________________
Print Name: Paul H. Metzinger
Title: President & Chief Executive
Officer
62
<PAGE>
EXHIBIT A
EXERCISE FORM
TO: NANOPIERCE TECHNOLOGIES, INC.
The undersigned hereby irrevocably exercises the right to purchase ____________
of the shares of Common Stock of NANOPIERCE TECHNOLOGIES, INC., a Nevada
corporation (the "Company"), evidenced by the attached Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full, all in
accordance with the conditions and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of Common Stock obtained on exercise of the Warrant, except in accordance
with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be issued
free of any restrictive legend, and a warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant in the name of the Registered
Holder and delivered to the undersigned at the address set forth below:
Dated:
________________________________________________________________________
Signature of Registered Holder
________________________________________________________________________
Name of Registered Holder (Print)
________________________________________________________________________
Non-U.S. Address
63
<PAGE>
EXHIBIT B
ASSIGNMENT
(To be executed by the registered Holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons below named the right to
purchase _______ shares of the Common Stock of NANOPIERCE TECHNOLOGIES, INC.
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint _______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated: ______________________________
Signature
Fill in for new Registration of Warrant:
_________________________________________
Name
_________________________________________
Address
_________________________________________
Please print name and address of assignee
(including zip code number)
_______________________________________________________________________
NOTICE
The signature to the foregoing Exercise Form or Assignment must correspond to
the name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
________________________________________________________________________
64
<PAGE>
THIS WARRANT AND THE SECURITIES RECEIVABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
Warrant to Purchase
140,000 shares
- -------
WARRANT TO PURCHASE COMMON STOCK
OF
NANOPIERCE TECHNOLOGIES, INC.
THIS CERTIFIES that Rodney Hock or any subsequent ("Holder") hereof, has the
right to purchase from NANOPIERCE TECHNOLOGIES, INC., a Nevada corporation (the
"Company"), up to 140,000 fully paid and nonassessable shares of the Company's
Common Stock, no par value ("Common Stock"), subject to adjustment as provided
herein, at a price equal to the Exercise Price as defined in Section 3 below, at
any time beginning on the Date of Issuance and ending at 5:00 p.m., New York,
New York time, on November 8, 2002.
The Holder of this Warrant agrees with the Company that this Warrant is issued
and all rights hereunder shall be held subject to all of the conditions,
limitations and provisions set forth herein.
1. Date of Issuance.
-------------------
This Warrant shall be deemed to be issued on November 8, 1999("Date of
Issuance").
2. Exercise.
--------
(a) Manner of Exercise. On or after the Date of Issuance, this Warrant may
be exercised as to all or any lesser number of full shares of Common Stock
covered hereby upon surrender of this Warrant, with the Exercise Form attached
hereto duly executed, together with the full Exercise Price (as defined in
Section 3) for each share of Common Stock as to which this Warrant is exercised,
at the office of the Company, 370 17th Street, Suite 3580, Denver, Colorado
80202; Attention: President, Telephone No. (303)592-1010, Telecopy No.
(303)592-1054, or at such other office or agency as the Company may designate in
writing, by overnight mail, with an advance copy of the Exercise Form attached
as Exhibit A ("Exercise Form") by facsimile (such surrender and payment of the
Exercise Price hereinafter called the "Exercise of this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the Exercise Form is sent by
facsimile to the Company, provided that the original Warrant and Exercise Form
are received by the Company as soon as practicable thereafter. Alternatively,
the Date of Exercise shall be defined as the date the original Exercise Form is
received by the Company, if Holder has not sent advance notice by facsimile.
65
<PAGE>
(c) Cancellation of Warrant. This Warrant shall be canceled upon its
Exercise, and, as soon as practical after the Date of Exercise, the Holder
hereof shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise, and if this Warrant is not exercised in full, the
Holder shall be entitled to receive a new Warrant or Warrants (containing terms
identical to this Warrant) representing any unexercised portion of this Warrant
in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares of
Common Stock is issued shall, for all purposes, be deemed to have become the
Holder of record of such shares on the Date of Exercise of this Warrant,
irrespective of the date of delivery of such shares of Common Stock. Nothing in
this Warrant shall be construed as conferring upon the Holder hereof any rights
as a shareholder of the Company.
3. Payment of Warrant Exercise Price.
-------------------------------------
The Exercise Price shall be Thirty Cents ($0.30) per share ("Exercise Price").
Payment of the Exercise Price may be made by either of the following, or a
combination thereof, at the election of Holder:
(i) Cash Exercise: cash, certified check or cashiers check or wire
transfer; or
(ii) Cashless Exercise: subject to the last sentence of this Section 3,
surrender of this Warrant at the principal office of the Company together with
notice of cashless election, in which event the Company shall issue Holder a
number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is being
exercised.
A = the Market Price of one (1) share of Common
Stock (for purposes of this Section 3(ii), the "Market Price" shall be defined
as the average closing price of the Common Stock for the five (5) trading days
prior to the Date of Exercise of this Warrant (the "Average Closing Price"), as
reported by the OTC Bulletin Board, or if the Common Stock is not traded on the
OTC Bulletin Board, the Average Closing Price in the over-the-counter market;
provided, however, that if the Common Stock is listed on a stock exchange, the
Market Price shall be the Average Closing Price on such exchange. If the Common
Stock is/was not traded during the five (5) trading days prior to the Date of
Exercise, then the closing price for the last publicly traded day shall be
deemed to be the closing price for any and all (if applicable) days during such
five (5) trading day period.
B = the Exercise Price.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon exercise of this
Warrant in a cashless exercise transaction shall be deemed to have been acquired
at the time this Warrant was issued. Moreover, it is intended, understood and
acknowledged that the holding period for the Common Stock issuable upon exercise
of this Warrant in a cashless exercise transaction shall be deemed to have
commenced on the date this Warrant was issued.
66
<PAGE>
4. Transfer.
--------
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in whole
or in part, in person or by attorney, upon surrender of this Warrant properly
endorsed. This Warrant shall be canceled upon such surrender and, as soon as
practicable thereafter, the person to whom such transfer is made shall be
entitled to receive a new Warrant or Warrants as to the portion of this Warrant
transferred, and the Holder of this Warrant shall be entitled to receive a new
Warrant or Warrants as to the portion hereof retained.
5. Anti-Dilution Adjustments.
--------------------------
(a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then the Holder hereof, upon Exercise of this
Warrant after the record date for the determination of Holders of Common Stock
entitled to receive such dividend, shall be entitled to receive upon Exercise of
this Warrant, in addition to the number of shares of Common Stock as to which
this Warrant is Exercised, such additional shares of Common Stock as such Holder
would have received had this Warrant been Exercised immediately prior to such
record date and the Exercise Price will be proportionately adjusted.
(b) Recapitalization or Reclassification. If the Company shall at any time
effect a recapitalization, reclassification or other similar transaction of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of Common Stock which the Holder hereof shall
be entitled to purchase upon Exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization,
reclassification or similar transaction, and the Exercise Price shall be, in the
case of an increase in the number of shares, proportionally decreased and, in
the case of decrease in the number of shares, proportionally increased. The
Company shall give the Warrant Holder the same notice it provides to holders of
Common Stock of any transaction described in this Section 5(b).
(c) Distributions. If the Company shall at any time distribute to Holders
of Common Stock cash, evidences of indebtedness or other securities or assets
(other than cash dividends or distributions payable out of earned surplus or net
profits for the current or preceding year) then, in any such case, the Holder of
this Warrant shall be entitled to receive, upon exercise of this Warrant, with
respect to each share of Common Stock issuable upon such Exercise, the amount of
cash or evidences of indebtedness or other securities or assets which such
Holder would have been entitled to receive with respect to each such share of
Common Stock as a result of the happening of such event had this Warrant been
Exercised immediately prior to the record date or other date fixing shareholders
to be affected by such event (the "Determination Date") or, in lieu thereof, if
the Board of Directors of the Company should so determine at the time of such
distribution, a reduced Exercise Price determined by multiplying the Exercise
Price on the Determination Date by a fraction, the numerator of which is the
result of such Exercise Price reduced by the value of such distribution
applicable to one share of Common Stock (such value to be determined by the
Board in its discretion) and the denominator of which is such Exercise Price.
67
<PAGE>
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Company shall
be changed into the same or a different number of shares of the same or another
class or classes of stock or securities or other assets of the Company or
another entity or there is a sale of all or substantially all the Company's
assets (a "Corporate Change"), then this Warrant shall be exercisable into such
class and type of securities or other assets as the Holder would have received
had the Holder exercised this Warrant immediately prior to such Corporate
Change; provided, however, that Company may not affect any Corporate Change
unless it first shall have given thirty (30) business days notice to the Holder
hereof of any Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term "Exercise
Price" shall mean the purchase price per share specified in Section 3 of this
Warrant, until the occurrence of an event stated in subsection (a), (b) or (c)
of this Section 5, and thereafter shall mean said price as adjusted from time to
time in accordance with the provisions of said subsection. No such adjustment
under this Section 5 shall be made unless such adjustment would change the
Exercise Price at the time by $.01 or more; provided, however, that all
adjustments not so made shall be deferred and made when the aggregate thereof
would change the Exercise Price at the time by $.01 or more. No adjustment made
pursuant to any provision of this Section 5 shall have the effect of increasing
the Exercise Price. The number of shares of Common Stock subject hereto shall
increase proportionately with each decrease in the Exercise Price.
(f) Adjustments: Additional Shares, Securities or Assets. In the event that
at any time, as a result of an adjustment made pursuant to this Section 5, the
Holder of this Warrant shall, upon Exercise of this Warrant, become entitled to
receive shares and/or other securities or assets (other than Common Stock) then,
wherever appropriate, all references herein to shares of Common Stock shall be
deemed to refer to and include such shares and/or other securities or assets;
and thereafter the number of such shares and/or other securities or assets shall
be subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.
6. Fractional Interests.
---------------------
No fractional shares or scrip representing fractional shares shall be issuable
upon the Exercise of this Warrant, but on Exercise of this Warrant, the Holder
hereof may purchase only a whole number of shares of Common Stock. If, on
Exercise of this Warrant, the Holder hereof would be entitled to a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares of Common
Stock issuable upon conversion shall be the next higher number of shares.
7. Reservation of Shares.
-----------------------
The Company shall at all times reserve for issuance such number of authorized
and unissued shares of Common Stock (or other securities substituted therefor as
herein above provided) as shall be sufficient for Exercise and payment of the
Exercise Price of this Warrant. The Company covenants and agrees that upon
Exercise of this Warrant, all shares of Common Stock issuable upon such Exercise
shall be duly and validly issued, fully paid, nonassessable and not subject to
preemptive rights, rights of first refusal or similar rights of any person or
entity.
68
<PAGE>
8. Restrictions on Transfer.
--------------------------
(a) Registration or Exemption Required. This Warrant has been issued in a
transaction exempt from the registration requirements of the Act by virtue of
Section 4(2). The Warrant and the Common Stock issuable upon exercise of the
Warrant may not be sold except pursuant to an effective registration statement
or an exemption to the registration requirements of the Act and applicable state
laws.
(b) Registration Rights. The Company shall within One Hundred and Twenty
(120) days of the date of this Warrant prepare and file a Registration Statement
with the SEC, no more than once, under the Securities Act of 1933, registering
this Warrant and the shares underlying this Warrant. The Company agrees to use
its best efforts to cause the above filing to become effective, as promptly as
possible.
(c) Assignment. Assuming the conditions of (a) above regarding registration
or exemption have been satisfied, the Holder may sell, transfer, assign, pledge
or otherwise dispose of this Warrant, in whole or in part. Holder shall deliver
a written notice to Company, substantially in the form of the Assignment
attached hereto as Exhibit B, indicating the person or persons to whom the
Warrant shall be assigned and the respective number of warrants to be assigned
to each assignee. The Company shall effect the assignment within ten (10) days,
and shall deliver to the assignee(s) designated by Holder a Warrant or Warrants
of like tenor and terms for the appropriate number of shares.
9. Benefits of this Warrant.
---------------------------
Nothing in this Warrant shall be construed to confer upon any person other than
the Company and the Holder of this Warrant any legal or equitable right, remedy
or claim under this Warrant and this Warrant shall be for the sole and exclusive
benefit of the Company and the Holder of this Warrant.
10. Applicable Law.
---------------
This Warrant is issued under and shall for all purposes be governed by and
construed in accordance with the laws of the state of Nevada, without giving
effect to conflict of law provisions thereof.
11. Loss of Warrant.
-----------------
Upon receipt by the Company of evidence of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
indemnity or security reasonably satisfactory to the Company, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.
12. Notice or Demands.
-------------------
Notices or demands pursuant to this Warrant to be given or made by the Holder of
this Warrant to or on the Company shall be sufficiently given or made if sent by
certified or registered mail, return receipt requested, postage prepaid, and
addressed, until another address is designated in writing by the Company, to
Attention: President, Nanopierce Technologies, Inc., 370 17th Street, Suite
3580, Denver, Colorado 80202, Attention: President, Telephone No. (303)592-1010,
Telecopy No. (303)592-1054.
69
<PAGE>
Notices or demands pursuant to this Warrant to be given or made by the Company
to or on the Holder of this Warrant shall be sufficiently given or made if sent
by certified or registered mail, return receipt requested, postage prepaid, and
addressed, to the address of the Holder set forth in the Company's records,
until another address is designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the 8th day
of November, 1999.
NANOPIERCE TECHNOLGOIES, INC.
By: ________________________________
Print Name: Paul H. Metzinger
Title: President & Chief Executive
Officer
70
<PAGE>
EXHIBIT A
EXERCISE FORM
TO: NANOPIERCE TECHNOLOGIES, INC.
The undersigned hereby irrevocably exercises the right to purchase ____________
of the shares of Common Stock of NANOPIERCE TECHNOLOGIES, INC., a Nevada
corporation (the "Company"), evidenced by the attached Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full, all in
accordance with the conditions and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of Common Stock obtained on exercise of the Warrant, except in accordance
with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be issued
free of any restrictive legend, and a warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant in the name of the Registered
Holder and delivered to the undersigned at the address set forth below:
Dated:
________________________________________________________________________
Signature of Registered Holder
________________________________________________________________________
Name of Registered Holder (Print)
________________________________________________________________________
Non-U.S. Address
71
<PAGE>
EXHIBIT B
ASSIGNMENT
(To be executed by the registered Holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons below named the right to
purchase _______ shares of the Common Stock of NANOPIERCE TECHNOLOGIES, INC.
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint _______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated: ______________________________
Signature
Fill in for new Registration of Warrant:
_________________________________________
Name
_________________________________________
Address
_________________________________________
Please print name and address of assignee
(including zip code number)
_______________________________________________________________________
NOTICE
The signature to the foregoing Exercise Form or Assignment must correspond to
the name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
________________________________________________________________________
72
<PAGE>
THIS WARRANT AND THE SECURITIES RECEIVABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
Warrant to Purchase
70,000 shares
- ------
WARRANT TO PURCHASE COMMON STOCK
OF
NANOPIERCE TECHNOLOGIES, INC.
THIS CERTIFIES that Dennis McGuire or any subsequent ("Holder") hereof, has the
right to purchase from NANOPIERCE TECHNOLOGIES, INC., a Nevada corporation (the
"Company"), up to 70,000 fully paid and nonassessable shares of the Company's
Common Stock, no par value ("Common Stock"), subject to adjustment as provided
herein, at a price equal to the Exercise Price as defined in Section 3 below, at
any time beginning on the Date of Issuance and ending at 5:00 p.m., New York,
New York time, on October 27, 2002.
The Holder of this Warrant agrees with the Company that this Warrant is issued
and all rights hereunder shall be held subject to all of the conditions,
limitations and provisions set forth herein.
1. Date of Issuance.
-------------------
This Warrant shall be deemed to be issued on October 27, 1999("Date of
Issuance").
2. Exercise.
--------
(a) Manner of Exercise. On or after the Date of Issuance, this Warrant may
be exercised as to all or any lesser number of full shares of Common Stock
covered hereby upon surrender of this Warrant, with the Exercise Form attached
hereto duly executed, together with the full Exercise Price (as defined in
Section 3) for each share of Common Stock as to which this Warrant is exercised,
at the office of the Company, 370 17th Street, Suite 3580, Denver, Colorado
80202; Attention: President, Telephone No. (303)592-1010, Telecopy No.
(303)592-1054, or at such other office or agency as the Company may designate in
writing, by overnight mail, with an advance copy of the Exercise Form attached
as Exhibit A ("Exercise Form") by facsimile (such surrender and payment of the
Exercise Price hereinafter called the "Exercise of this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the Exercise Form is sent by
facsimile to the Company, provided that the original Warrant and Exercise Form
are received by the Company as soon as practicable thereafter. Alternatively,
the Date of Exercise shall be defined as the date the original Exercise Form is
received by the Company, if Holder has not sent advance notice by facsimile.
73
<PAGE>
(c) Cancellation of Warrant. This Warrant shall be canceled upon its
Exercise, and, as soon as practical after the Date of Exercise, the Holder
hereof shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise, and if this Warrant is not exercised in full, the
Holder shall be entitled to receive a new Warrant or Warrants (containing terms
identical to this Warrant) representing any unexercised portion of this Warrant
in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares of
Common Stock is issued shall, for all purposes, be deemed to have become the
Holder of record of such shares on the Date of Exercise of this Warrant,
irrespective of the date of delivery of such shares of Common Stock. Nothing in
this Warrant shall be construed as conferring upon the Holder hereof any rights
as a shareholder of the Company.
3. Payment of Warrant Exercise Price.
-------------------------------------
The Exercise Price shall be Thirty Cents ($0.30) per share ("Exercise Price").
Payment of the Exercise Price may be made by either of the following, or a
combination thereof, at the election of Holder:
(i) Cash Exercise: cash, certified check or cashiers check or wire
transfer; or
(ii) Cashless Exercise: subject to the last sentence of this Section 3,
surrender of this Warrant at the principal office of the Company together with
notice of cashless election, in which event the Company shall issue Holder a
number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is being
exercised.
A = the Market Price of one (1) share of Common
Stock (for purposes of this Section 3(ii), the "Market Price" shall be defined
as the average closing price of the Common Stock for the five (5) trading days
prior to the Date of Exercise of this Warrant (the "Average Closing Price"), as
reported by the OTC Bulletin Board, or if the Common Stock is not traded on the
OTC Bulletin Board, the Average Closing Price in the over-the-counter market;
provided, however, that if the Common Stock is listed on a stock exchange, the
Market Price shall be the Average Closing Price on such exchange. If the Common
Stock is/was not traded during the five (5) trading days prior to the Date of
Exercise, then the closing price for the last publicly traded day shall be
deemed to be the closing price for any and all (if applicable) days during such
five (5) trading day period.
B = the Exercise Price.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon exercise of this
Warrant in a cashless exercise transaction shall be deemed to have been acquired
at the time this Warrant was issued. Moreover, it is intended, understood and
acknowledged that the holding period for the Common Stock issuable upon exercise
of this Warrant in a cashless exercise transaction shall be deemed to have
commenced on the date this Warrant was issued.
74
<PAGE>
4. Transfer.
--------
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in whole
or in part, in person or by attorney, upon surrender of this Warrant properly
endorsed. This Warrant shall be canceled upon such surrender and, as soon as
practicable thereafter, the person to whom such transfer is made shall be
entitled to receive a new Warrant or Warrants as to the portion of this Warrant
transferred, and the Holder of this Warrant shall be entitled to receive a new
Warrant or Warrants as to the portion hereof retained.
5. Anti-Dilution Adjustments.
--------------------------
(a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then the Holder hereof, upon Exercise of this
Warrant after the record date for the determination of Holders of Common Stock
entitled to receive such dividend, shall be entitled to receive upon Exercise of
this Warrant, in addition to the number of shares of Common Stock as to which
this Warrant is Exercised, such additional shares of Common Stock as such Holder
would have received had this Warrant been Exercised immediately prior to such
record date and the Exercise Price will be proportionately adjusted.
(b) Recapitalization or Reclassification. If the Company shall at any time
effect a recapitalization, reclassification or other similar transaction of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of Common Stock which the Holder hereof shall
be entitled to purchase upon Exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization,
reclassification or similar transaction, and the Exercise Price shall be, in the
case of an increase in the number of shares, proportionally decreased and, in
the case of decrease in the number of shares, proportionally increased. The
Company shall give the Warrant Holder the same notice it provides to holders of
Common Stock of any transaction described in this Section 5(b).
(c) Distributions. If the Company shall at any time distribute to Holders
of Common Stock cash, evidences of indebtedness or other securities or assets
(other than cash dividends or distributions payable out of earned surplus or net
profits for the current or preceding year) then, in any such case, the Holder of
this Warrant shall be entitled to receive, upon exercise of this Warrant, with
respect to each share of Common Stock issuable upon such Exercise, the amount of
cash or evidences of indebtedness or other securities or assets which such
Holder would have been entitled to receive with respect to each such share of
Common Stock as a result of the happening of such event had this Warrant been
Exercised immediately prior to the record date or other date fixing shareholders
to be affected by such event (the "Determination Date") or, in lieu thereof, if
the Board of Directors of the Company should so determine at the time of such
distribution, a reduced Exercise Price determined by multiplying the Exercise
Price on the Determination Date by a fraction, the numerator of which is the
result of such Exercise Price reduced by the value of such distribution
applicable to one share of Common Stock (such value to be determined by the
Board in its discretion) and the denominator of which is such Exercise Price.
75
<PAGE>
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Company shall
be changed into the same or a different number of shares of the same or another
class or classes of stock or securities or other assets of the Company or
another entity or there is a sale of all or substantially all the Company's
assets (a "Corporate Change"), then this Warrant shall be exercisable into such
class and type of securities or other assets as the Holder would have received
had the Holder exercised this Warrant immediately prior to such Corporate
Change; provided, however, that Company may not affect any Corporate Change
unless it first shall have given thirty (30) business days notice to the Holder
hereof of any Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term "Exercise
Price" shall mean the purchase price per share specified in Section 3 of this
Warrant, until the occurrence of an event stated in subsection (a), (b) or (c)
of this Section 5, and thereafter shall mean said price as adjusted from time to
time in accordance with the provisions of said subsection. No such adjustment
under this Section 5 shall be made unless such adjustment would change the
Exercise Price at the time by $.01 or more; provided, however, that all
adjustments not so made shall be deferred and made when the aggregate thereof
would change the Exercise Price at the time by $.01 or more. No adjustment made
pursuant to any provision of this Section 5 shall have the effect of increasing
the Exercise Price. The number of shares of Common Stock subject hereto shall
increase proportionately with each decrease in the Exercise Price.
(f) Adjustments: Additional Shares, Securities or Assets. In the event that
at any time, as a result of an adjustment made pursuant to this Section 5, the
Holder of this Warrant shall, upon Exercise of this Warrant, become entitled to
receive shares and/or other securities or assets (other than Common Stock) then,
wherever appropriate, all references herein to shares of Common Stock shall be
deemed to refer to and include such shares and/or other securities or assets;
and thereafter the number of such shares and/or other securities or assets shall
be subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.
6. Fractional Interests.
---------------------
No fractional shares or scrip representing fractional shares shall be issuable
upon the Exercise of this Warrant, but on Exercise of this Warrant, the Holder
hereof may purchase only a whole number of shares of Common Stock. If, on
Exercise of this Warrant, the Holder hereof would be entitled to a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares of Common
Stock issuable upon conversion shall be the next higher number of shares.
7. Reservation of Shares.
-----------------------
The Company shall at all times reserve for issuance such number of authorized
and unissued shares of Common Stock (or other securities substituted therefor as
herein above provided) as shall be sufficient for Exercise and payment of the
Exercise Price of this Warrant. The Company covenants and agrees that upon
Exercise of this Warrant, all shares of Common Stock issuable upon such Exercise
shall be duly and validly issued, fully paid, nonassessable and not subject to
preemptive rights, rights of first refusal or similar rights of any person or
entity.
76
<PAGE>
8. Restrictions on Transfer.
--------------------------
(a) Registration or Exemption Required. This Warrant has been issued in a
transaction exempt from the registration requirements of the Act by virtue of
Section 4(2). The Warrant and the Common Stock issuable upon exercise of the
Warrant may not be sold except pursuant to an effective registration statement
or an exemption to the registration requirements of the Act and applicable state
laws.
(b) Registration Rights. The Company shall within One Hundred and Twenty
(120) days of the date of this Warrant prepare and file a Registration Statement
with the SEC, no more than once, under the Securities Act of 1933, registering
this Warrant and the shares underlying this Warrant. The Company agrees to use
its best efforts to cause the above filing to become effective, as promptly as
possible.
(c) Assignment. Assuming the conditions of (a) above regarding registration
or exemption have been satisfied, the Holder may sell, transfer, assign, pledge
or otherwise dispose of this Warrant, in whole or in part. Holder shall deliver
a written notice to Company, substantially in the form of the Assignment
attached hereto as Exhibit B, indicating the person or persons to whom the
Warrant shall be assigned and the respective number of warrants to be assigned
to each assignee. The Company shall effect the assignment within ten (10) days,
and shall deliver to the assignee(s) designated by Holder a Warrant or Warrants
of like tenor and terms for the appropriate number of shares.
9. Benefits of this Warrant.
---------------------------
Nothing in this Warrant shall be construed to confer upon any person other than
the Company and the Holder of this Warrant any legal or equitable right, remedy
or claim under this Warrant and this Warrant shall be for the sole and exclusive
benefit of the Company and the Holder of this Warrant.
10. Applicable Law.
---------------
This Warrant is issued under and shall for all purposes be governed by and
construed in accordance with the laws of the state of Nevada, without giving
effect to conflict of law provisions thereof.
11. Loss of Warrant.
-----------------
Upon receipt by the Company of evidence of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
indemnity or security reasonably satisfactory to the Company, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.
12. Notice or Demands.
-------------------
Notices or demands pursuant to this Warrant to be given or made by the Holder of
this Warrant to or on the Company shall be sufficiently given or made if sent by
certified or registered mail, return receipt requested, postage prepaid, and
addressed, until another address is designated in writing by the Company, to
Attention: President, Nanopierce Technologies, Inc., 370 17th Street, Suite
3580, Denver, Colorado 80202, Attention: President, Telephone No. (303)592-1010,
Telecopy No. (303)592-1054.
77
<PAGE>
Notices or demands pursuant to this Warrant to be given or made by the Company
to or on the Holder of this Warrant shall be sufficiently given or made if sent
by certified or registered mail, return receipt requested, postage prepaid, and
addressed, to the address of the Holder set forth in the Company's records,
until another address is designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the 27th day
of October, 1999.
NANOPIERCE TECHNOLGOIES, INC.
By: ________________________________
Print Name: Paul H. Metzinger
Title: President & Chief Executive
Officer
78
<PAGE>
EXHIBIT A
EXERCISE FORM
TO: NANOPIERCE TECHNOLOGIES, INC.
The undersigned hereby irrevocably exercises the right to purchase ____________
of the shares of Common Stock of NANOPIERCE TECHNOLOGIES, INC., a Nevada
corporation (the "Company"), evidenced by the attached Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full, all in
accordance with the conditions and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of Common Stock obtained on exercise of the Warrant, except in accordance
with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be issued
free of any restrictive legend, and a warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant in the name of the Registered
Holder and delivered to the undersigned at the address set forth below:
Dated:
________________________________________________________________________
Signature of Registered Holder
________________________________________________________________________
Name of Registered Holder (Print)
________________________________________________________________________
Non-U.S. Address
79
<PAGE>
EXHIBIT B
ASSIGNMENT
(To be executed by the registered Holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons below named the right to
purchase _______ shares of the Common Stock of NANOPIERCE TECHNOLOGIES, INC.
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint _______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated: ______________________________
Signature
Fill in for new Registration of Warrant:
_________________________________________
Name
_________________________________________
Address
_________________________________________
Please print name and address of assignee
(including zip code number)
_______________________________________________________________________
NOTICE
The signature to the foregoing Exercise Form or Assignment must correspond to
the name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
________________________________________________________________________
80
<PAGE>
THIS WARRANT AND THE SECURITIES RECEIVABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
Warrant to Purchase
70,000 shares
- ------
WARRANT TO PURCHASE COMMON STOCK
OF
NANOPIERCE TECHNOLOGIES, INC.
THIS CERTIFIES that Dennis McGuire or any subsequent ("Holder") hereof, has the
right to purchase from NANOPIERCE TECHNOLOGIES, INC., a Nevada corporation (the
"Company"), up to 70,000 fully paid and nonassessable shares of the Company's
Common Stock, no par value ("Common Stock"), subject to adjustment as provided
herein, at a price equal to the Exercise Price as defined in Section 3 below, at
any time beginning on the Date of Issuance and ending at 5:00 p.m., New York,
New York time, on December 17, 2002.
The Holder of this Warrant agrees with the Company that this Warrant is issued
and all rights hereunder shall be held subject to all of the conditions,
limitations and provisions set forth herein.
1. Date of Issuance.
-------------------
This Warrant shall be deemed to be issued on December 17, 1999("Date of
Issuance").
2. Exercise.
--------
(a) Manner of Exercise. On or after the Date of Issuance, this Warrant may
be exercised as to all or any lesser number of full shares of Common Stock
covered hereby upon surrender of this Warrant, with the Exercise Form attached
hereto duly executed, together with the full Exercise Price (as defined in
Section 3) for each share of Common Stock as to which this Warrant is exercised,
at the office of the Company, 370 17th Street, Suite 3580, Denver, Colorado
80202; Attention: President, Telephone No. (303)592-1010, Telecopy No.
(303)592-1054, or at such other office or agency as the Company may designate in
writing, by overnight mail, with an advance copy of the Exercise Form attached
as Exhibit A ("Exercise Form") by facsimile (such surrender and payment of the
Exercise Price hereinafter called the "Exercise of this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the Exercise Form is sent by
facsimile to the Company, provided that the original Warrant and Exercise Form
are received by the Company as soon as practicable thereafter. Alternatively,
the Date of Exercise shall be defined as the date the original Exercise Form is
received by the Company, if Holder has not sent advance notice by facsimile.
81
<PAGE>
(c) Cancellation of Warrant. This Warrant shall be canceled upon its
Exercise, and, as soon as practical after the Date of Exercise, the Holder
hereof shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise, and if this Warrant is not exercised in full, the
Holder shall be entitled to receive a new Warrant or Warrants (containing terms
identical to this Warrant) representing any unexercised portion of this Warrant
in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares of
Common Stock is issued shall, for all purposes, be deemed to have become the
Holder of record of such shares on the Date of Exercise of this Warrant,
irrespective of the date of delivery of such shares of Common Stock. Nothing in
this Warrant shall be construed as conferring upon the Holder hereof any rights
as a shareholder of the Company.
3. Payment of Warrant Exercise Price.
-------------------------------------
The Exercise Price shall be Thirty Cents ($0.30) per share ("Exercise Price").
Payment of the Exercise Price may be made by either of the following, or a
combination thereof, at the election of Holder:
(i) Cash Exercise: cash, certified check or cashiers check or wire
transfer; or
(ii) Cashless Exercise: subject to the last sentence of this Section 3,
surrender of this Warrant at the principal office of the Company together with
notice of cashless election, in which event the Company shall issue Holder a
number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is being
exercised.
A = the Market Price of one (1) share of Common
Stock (for purposes of this Section 3(ii), the "Market Price" shall be defined
as the average closing price of the Common Stock for the five (5) trading days
prior to the Date of Exercise of this Warrant (the "Average Closing Price"), as
reported by the OTC Bulletin Board, or if the Common Stock is not traded on the
OTC Bulletin Board, the Average Closing Price in the over-the-counter market;
provided, however, that if the Common Stock is listed on a stock exchange, the
Market Price shall be the Average Closing Price on such exchange. If the Common
Stock is/was not traded during the five (5) trading days prior to the Date of
Exercise, then the closing price for the last publicly traded day shall be
deemed to be the closing price for any and all (if applicable) days during such
five (5) trading day period.
B = the Exercise Price.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon exercise of this
Warrant in a cashless exercise transaction shall be deemed to have been acquired
at the time this Warrant was issued. Moreover, it is intended, understood and
acknowledged that the holding period for the Common Stock issuable upon exercise
of this Warrant in a cashless exercise transaction shall be deemed to have
commenced on the date this Warrant was issued.
82
<PAGE>
4. Transfer.
--------
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in whole
or in part, in person or by attorney, upon surrender of this Warrant properly
endorsed. This Warrant shall be canceled upon such surrender and, as soon as
practicable thereafter, the person to whom such transfer is made shall be
entitled to receive a new Warrant or Warrants as to the portion of this Warrant
transferred, and the Holder of this Warrant shall be entitled to receive a new
Warrant or Warrants as to the portion hereof retained.
5. Anti-Dilution Adjustments.
--------------------------
(a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then the Holder hereof, upon Exercise of this
Warrant after the record date for the determination of Holders of Common Stock
entitled to receive such dividend, shall be entitled to receive upon Exercise of
this Warrant, in addition to the number of shares of Common Stock as to which
this Warrant is Exercised, such additional shares of Common Stock as such Holder
would have received had this Warrant been Exercised immediately prior to such
record date and the Exercise Price will be proportionately adjusted.
(b) Recapitalization or Reclassification. If the Company shall at any time
effect a recapitalization, reclassification or other similar transaction of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of Common Stock which the Holder hereof shall
be entitled to purchase upon Exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization,
reclassification or similar transaction, and the Exercise Price shall be, in the
case of an increase in the number of shares, proportionally decreased and, in
the case of decrease in the number of shares, proportionally increased. The
Company shall give the Warrant Holder the same notice it provides to holders of
Common Stock of any transaction described in this Section 5(b).
(c) Distributions. If the Company shall at any time distribute to Holders
of Common Stock cash, evidences of indebtedness or other securities or assets
(other than cash dividends or distributions payable out of earned surplus or net
profits for the current or preceding year) then, in any such case, the Holder of
this Warrant shall be entitled to receive, upon exercise of this Warrant, with
respect to each share of Common Stock issuable upon such Exercise, the amount of
cash or evidences of indebtedness or other securities or assets which such
Holder would have been entitled to receive with respect to each such share of
Common Stock as a result of the happening of such event had this Warrant been
Exercised immediately prior to the record date or other date fixing shareholders
to be affected by such event (the "Determination Date") or, in lieu thereof, if
the Board of Directors of the Company should so determine at the time of such
distribution, a reduced Exercise Price determined by multiplying the Exercise
Price on the Determination Date by a fraction, the numerator of which is the
result of such Exercise Price reduced by the value of such distribution
applicable to one share of Common Stock (such value to be determined by the
Board in its discretion) and the denominator of which is such Exercise Price.
83
<PAGE>
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Company shall
be changed into the same or a different number of shares of the same or another
class or classes of stock or securities or other assets of the Company or
another entity or there is a sale of all or substantially all the Company's
assets (a "Corporate Change"), then this Warrant shall be exercisable into such
class and type of securities or other assets as the Holder would have received
had the Holder exercised this Warrant immediately prior to such Corporate
Change; provided, however, that Company may not affect any Corporate Change
unless it first shall have given thirty (30) business days notice to the Holder
hereof of any Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term "Exercise
Price" shall mean the purchase price per share specified in Section 3 of this
Warrant, until the occurrence of an event stated in subsection (a), (b) or (c)
of this Section 5, and thereafter shall mean said price as adjusted from time to
time in accordance with the provisions of said subsection. No such adjustment
under this Section 5 shall be made unless such adjustment would change the
Exercise Price at the time by $.01 or more; provided, however, that all
adjustments not so made shall be deferred and made when the aggregate thereof
would change the Exercise Price at the time by $.01 or more. No adjustment made
pursuant to any provision of this Section 5 shall have the effect of increasing
the Exercise Price. The number of shares of Common Stock subject hereto shall
increase proportionately with each decrease in the Exercise Price.
(f) Adjustments: Additional Shares, Securities or Assets. In the event that
at any time, as a result of an adjustment made pursuant to this Section 5, the
Holder of this Warrant shall, upon Exercise of this Warrant, become entitled to
receive shares and/or other securities or assets (other than Common Stock) then,
wherever appropriate, all references herein to shares of Common Stock shall be
deemed to refer to and include such shares and/or other securities or assets;
and thereafter the number of such shares and/or other securities or assets shall
be subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.
6. Fractional Interests.
---------------------
No fractional shares or scrip representing fractional shares shall be issuable
upon the Exercise of this Warrant, but on Exercise of this Warrant, the Holder
hereof may purchase only a whole number of shares of Common Stock. If, on
Exercise of this Warrant, the Holder hereof would be entitled to a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares of Common
Stock issuable upon conversion shall be the next higher number of shares.
7. Reservation of Shares.
-----------------------
The Company shall at all times reserve for issuance such number of authorized
and unissued shares of Common Stock (or other securities substituted therefor as
herein above provided) as shall be sufficient for Exercise and payment of the
Exercise Price of this Warrant. The Company covenants and agrees that upon
Exercise of this Warrant, all shares of Common Stock issuable upon such Exercise
shall be duly and validly issued, fully paid, nonassessable and not subject to
preemptive rights, rights of first refusal or similar rights of any person or
entity.
84
<PAGE>
8. Restrictions on Transfer.
--------------------------
(a) Registration or Exemption Required. This Warrant has been issued in a
transaction exempt from the registration requirements of the Act by virtue of
Section 4(2). The Warrant and the Common Stock issuable upon exercise of the
Warrant may not be sold except pursuant to an effective registration statement
or an exemption to the registration requirements of the Act and applicable state
laws.
(b) Registration Rights. The Company shall within One Hundred and Twenty
(120) days of the date of this Warrant prepare and file a Registration Statement
with the SEC, no more than once, under the Securities Act of 1933, registering
this Warrant and the shares underlying this Warrant. The Company agrees to use
its best efforts to cause the above filing to become effective, as promptly as
possible.
(c) Assignment. Assuming the conditions of (a) above regarding registration
or exemption have been satisfied, the Holder may sell, transfer, assign, pledge
or otherwise dispose of this Warrant, in whole or in part. Holder shall deliver
a written notice to Company, substantially in the form of the Assignment
attached hereto as Exhibit B, indicating the person or persons to whom the
Warrant shall be assigned and the respective number of warrants to be assigned
to each assignee. The Company shall effect the assignment within ten (10) days,
and shall deliver to the assignee(s) designated by Holder a Warrant or Warrants
of like tenor and terms for the appropriate number of shares.
9. Benefits of this Warrant.
---------------------------
Nothing in this Warrant shall be construed to confer upon any person other than
the Company and the Holder of this Warrant any legal or equitable right, remedy
or claim under this Warrant and this Warrant shall be for the sole and exclusive
benefit of the Company and the Holder of this Warrant.
10. Applicable Law.
---------------
This Warrant is issued under and shall for all purposes be governed by and
construed in accordance with the laws of the state of Nevada, without giving
effect to conflict of law provisions thereof.
11. Loss of Warrant.
-----------------
Upon receipt by the Company of evidence of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
indemnity or security reasonably satisfactory to the Company, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.
12. Notice or Demands.
-------------------
Notices or demands pursuant to this Warrant to be given or made by the Holder of
this Warrant to or on the Company shall be sufficiently given or made if sent by
certified or registered mail, return receipt requested, postage prepaid, and
addressed, until another address is designated in writing by the Company, to
Attention: President, Nanopierce Technologies, Inc., 370 17th Street, Suite
3580, Denver, Colorado 80202, Attention: President, Telephone No. (303)592-1010,
Telecopy No. (303)592-1054.
85
<PAGE>
Notices or demands pursuant to this Warrant to be given or made by the Company
to or on the Holder of this Warrant shall be sufficiently given or made if sent
by certified or registered mail, return receipt requested, postage prepaid, and
addressed, to the address of the Holder set forth in the Company's records,
until another address is designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the 17h day
of December, 1999.
NANOPIERCE TECHNOLGOIES, INC.
By: ________________________________
Print Name: Paul H. Metzinger
Title: President & Chief Executive
Officer
86
<PAGE>
EXHIBIT A
EXERCISE FORM
TO: NANOPIERCE TECHNOLOGIES, INC.
The undersigned hereby irrevocably exercises the right to purchase ____________
of the shares of Common Stock of NANOPIERCE TECHNOLOGIES, INC., a Nevada
corporation (the "Company"), evidenced by the attached Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full, all in
accordance with the conditions and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of Common Stock obtained on exercise of the Warrant, except in accordance
with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be issued
free of any restrictive legend, and a warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant in the name of the Registered
Holder and delivered to the undersigned at the address set forth below:
Dated:
________________________________________________________________________
Signature of Registered Holder
________________________________________________________________________
Name of Registered Holder (Print)
________________________________________________________________________
Non-U.S. Address
87
<PAGE>
EXHIBIT B
ASSIGNMENT
(To be executed by the registered Holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons below named the right to
purchase _______ shares of the Common Stock of NANOPIERCE TECHNOLOGIES, INC.
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint _______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated: ______________________________
Signature
Fill in for new Registration of Warrant:
_________________________________________
Name
_________________________________________
Address
_________________________________________
Please print name and address of assignee
(including zip code number)
_______________________________________________________________________
NOTICE
The signature to the foregoing Exercise Form or Assignment must correspond to
the name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
________________________________________________________________________
88
<PAGE>
THIS WARRANT AND THE SECURITIES RECEIVABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
Warrant to Purchase
70,000 shares
- ------
WARRANT TO PURCHASE COMMON STOCK
OF
NANOPIERCE TECHNOLOGIES, INC.
THIS CERTIFIES that Kelly S. Pitts or any subsequent ("Holder") hereof, has the
right to purchase from NANOPIERCE TECHNOLOGIES, INC., a Nevada corporation (the
"Company"), up to 70,000 fully paid and nonassessable shares of the Company's
Common Stock, no par value ("Common Stock"), subject to adjustment as provided
herein, at a price equal to the Exercise Price as defined in Section 3 below, at
any time beginning on the Date of Issuance and ending at 5:00 p.m., New York,
New York time, on October 27, 2002.
The Holder of this Warrant agrees with the Company that this Warrant is issued
and all rights hereunder shall be held subject to all of the conditions,
limitations and provisions set forth herein.
1. Date of Issuance.
-------------------
This Warrant shall be deemed to be issued on October 27, 1999("Date of
Issuance").
2. Exercise.
--------
(a) Manner of Exercise. On or after the Date of Issuance, this Warrant may
be exercised as to all or any lesser number of full shares of Common Stock
covered hereby upon surrender of this Warrant, with the Exercise Form attached
hereto duly executed, together with the full Exercise Price (as defined in
Section 3) for each share of Common Stock as to which this Warrant is exercised,
at the office of the Company, 370 17th Street, Suite 3580, Denver, Colorado
80202; Attention: President, Telephone No. (303)592-1010, Telecopy No.
(303)592-1054, or at such other office or agency as the Company may designate in
writing, by overnight mail, with an advance copy of the Exercise Form attached
as Exhibit A ("Exercise Form") by facsimile (such surrender and payment of the
Exercise Price hereinafter called the "Exercise of this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the Exercise Form is sent by
facsimile to the Company, provided that the original Warrant and Exercise Form
are received by the Company as soon as practicable thereafter. Alternatively,
the Date of Exercise shall be defined as the date the original Exercise Form is
received by the Company, if Holder has not sent advance notice by facsimile.
89
<PAGE>
(c) Cancellation of Warrant. This Warrant shall be canceled upon its
Exercise, and, as soon as practical after the Date of Exercise, the Holder
hereof shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise, and if this Warrant is not exercised in full, the
Holder shall be entitled to receive a new Warrant or Warrants (containing terms
identical to this Warrant) representing any unexercised portion of this Warrant
in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares of
Common Stock is issued shall, for all purposes, be deemed to have become the
Holder of record of such shares on the Date of Exercise of this Warrant,
irrespective of the date of delivery of such shares of Common Stock. Nothing in
this Warrant shall be construed as conferring upon the Holder hereof any rights
as a shareholder of the Company.
3. Payment of Warrant Exercise Price.
-------------------------------------
The Exercise Price shall be Thirty Cents ($0.30) per share ("Exercise Price").
Payment of the Exercise Price may be made by either of the following, or a
combination thereof, at the election of Holder:
(i) Cash Exercise: cash, certified check or cashiers check or wire
transfer; or
(ii) Cashless Exercise: subject to the last sentence of this Section 3,
surrender of this Warrant at the principal office of the Company together with
notice of cashless election, in which event the Company shall issue Holder a
number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is being
exercised.
A = the Market Price of one (1) share of Common
Stock (for purposes of this Section 3(ii), the "Market Price" shall be defined
as the average closing price of the Common Stock for the five (5) trading days
prior to the Date of Exercise of this Warrant (the "Average Closing Price"), as
reported by the OTC Bulletin Board, or if the Common Stock is not traded on the
OTC Bulletin Board, the Average Closing Price in the over-the-counter market;
provided, however, that if the Common Stock is listed on a stock exchange, the
Market Price shall be the Average Closing Price on such exchange. If the Common
Stock is/was not traded during the five (5) trading days prior to the Date of
Exercise, then the closing price for the last publicly traded day shall be
deemed to be the closing price for any and all (if applicable) days during such
five (5) trading day period.
B = the Exercise Price.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon exercise of this
Warrant in a cashless exercise transaction shall be deemed to have been acquired
at the time this Warrant was issued. Moreover, it is intended, understood and
acknowledged that the holding period for the Common Stock issuable upon exercise
of this Warrant in a cashless exercise transaction shall be deemed to have
commenced on the date this Warrant was issued.
90
<PAGE>
4. Transfer.
--------
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in whole
or in part, in person or by attorney, upon surrender of this Warrant properly
endorsed. This Warrant shall be canceled upon such surrender and, as soon as
practicable thereafter, the person to whom such transfer is made shall be
entitled to receive a new Warrant or Warrants as to the portion of this Warrant
transferred, and the Holder of this Warrant shall be entitled to receive a new
Warrant or Warrants as to the portion hereof retained.
5. Anti-Dilution Adjustments.
--------------------------
(a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then the Holder hereof, upon Exercise of this
Warrant after the record date for the determination of Holders of Common Stock
entitled to receive such dividend, shall be entitled to receive upon Exercise of
this Warrant, in addition to the number of shares of Common Stock as to which
this Warrant is Exercised, such additional shares of Common Stock as such Holder
would have received had this Warrant been Exercised immediately prior to such
record date and the Exercise Price will be proportionately adjusted.
(b) Recapitalization or Reclassification. If the Company shall at any time
effect a recapitalization, reclassification or other similar transaction of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of Common Stock which the Holder hereof shall
be entitled to purchase upon Exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization,
reclassification or similar transaction, and the Exercise Price shall be, in the
case of an increase in the number of shares, proportionally decreased and, in
the case of decrease in the number of shares, proportionally increased. The
Company shall give the Warrant Holder the same notice it provides to holders of
Common Stock of any transaction described in this Section 5(b).
(c) Distributions. If the Company shall at any time distribute to Holders
of Common Stock cash, evidences of indebtedness or other securities or assets
(other than cash dividends or distributions payable out of earned surplus or net
profits for the current or preceding year) then, in any such case, the Holder of
this Warrant shall be entitled to receive, upon exercise of this Warrant, with
respect to each share of Common Stock issuable upon such Exercise, the amount of
cash or evidences of indebtedness or other securities or assets which such
Holder would have been entitled to receive with respect to each such share of
Common Stock as a result of the happening of such event had this Warrant been
Exercised immediately prior to the record date or other date fixing shareholders
to be affected by such event (the "Determination Date") or, in lieu thereof, if
the Board of Directors of the Company should so determine at the time of such
distribution, a reduced Exercise Price determined by multiplying the Exercise
Price on the Determination Date by a fraction, the numerator of which is the
result of such Exercise Price reduced by the value of such distribution
applicable to one share of Common Stock (such value to be determined by the
Board in its discretion) and the denominator of which is such Exercise Price.
91
<PAGE>
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Company shall
be changed into the same or a different number of shares of the same or another
class or classes of stock or securities or other assets of the Company or
another entity or there is a sale of all or substantially all the Company's
assets (a "Corporate Change"), then this Warrant shall be exercisable into such
class and type of securities or other assets as the Holder would have received
had the Holder exercised this Warrant immediately prior to such Corporate
Change; provided, however, that Company may not affect any Corporate Change
unless it first shall have given thirty (30) business days notice to the Holder
hereof of any Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term "Exercise
Price" shall mean the purchase price per share specified in Section 3 of this
Warrant, until the occurrence of an event stated in subsection (a), (b) or (c)
of this Section 5, and thereafter shall mean said price as adjusted from time to
time in accordance with the provisions of said subsection. No such adjustment
under this Section 5 shall be made unless such adjustment would change the
Exercise Price at the time by $.01 or more; provided, however, that all
adjustments not so made shall be deferred and made when the aggregate thereof
would change the Exercise Price at the time by $.01 or more. No adjustment made
pursuant to any provision of this Section 5 shall have the effect of increasing
the Exercise Price. The number of shares of Common Stock subject hereto shall
increase proportionately with each decrease in the Exercise Price.
(f) Adjustments: Additional Shares, Securities or Assets. In the event that
at any time, as a result of an adjustment made pursuant to this Section 5, the
Holder of this Warrant shall, upon Exercise of this Warrant, become entitled to
receive shares and/or other securities or assets (other than Common Stock) then,
wherever appropriate, all references herein to shares of Common Stock shall be
deemed to refer to and include such shares and/or other securities or assets;
and thereafter the number of such shares and/or other securities or assets shall
be subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.
6. Fractional Interests.
---------------------
No fractional shares or scrip representing fractional shares shall be issuable
upon the Exercise of this Warrant, but on Exercise of this Warrant, the Holder
hereof may purchase only a whole number of shares of Common Stock. If, on
Exercise of this Warrant, the Holder hereof would be entitled to a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares of Common
Stock issuable upon conversion shall be the next higher number of shares.
7. Reservation of Shares.
-----------------------
The Company shall at all times reserve for issuance such number of authorized
and unissued shares of Common Stock (or other securities substituted therefor as
herein above provided) as shall be sufficient for Exercise and payment of the
Exercise Price of this Warrant. The Company covenants and agrees that upon
Exercise of this Warrant, all shares of Common Stock issuable upon such Exercise
shall be duly and validly issued, fully paid, nonassessable and not subject to
preemptive rights, rights of first refusal or similar rights of any person or
entity.
92
<PAGE>
8. Restrictions on Transfer.
--------------------------
(a) Registration or Exemption Required. This Warrant has been issued in a
transaction exempt from the registration requirements of the Act by virtue of
Section 4(2). The Warrant and the Common Stock issuable upon exercise of the
Warrant may not be sold except pursuant to an effective registration statement
or an exemption to the registration requirements of the Act and applicable state
laws.
(b) Registration Rights. The Company shall within One Hundred and Twenty
(120) days of the date of this Warrant prepare and file a Registration Statement
with the SEC, no more than once, under the Securities Act of 1933, registering
this Warrant and the shares underlying this Warrant. The Company agrees to use
its best efforts to cause the above filing to become effective, as promptly as
possible.
(c) Assignment. Assuming the conditions of (a) above regarding registration
or exemption have been satisfied, the Holder may sell, transfer, assign, pledge
or otherwise dispose of this Warrant, in whole or in part. Holder shall deliver
a written notice to Company, substantially in the form of the Assignment
attached hereto as Exhibit B, indicating the person or persons to whom the
Warrant shall be assigned and the respective number of warrants to be assigned
to each assignee. The Company shall effect the assignment within ten (10) days,
and shall deliver to the assignee(s) designated by Holder a Warrant or Warrants
of like tenor and terms for the appropriate number of shares.
9. Benefits of this Warrant.
---------------------------
Nothing in this Warrant shall be construed to confer upon any person other than
the Company and the Holder of this Warrant any legal or equitable right, remedy
or claim under this Warrant and this Warrant shall be for the sole and exclusive
benefit of the Company and the Holder of this Warrant.
10. Applicable Law.
---------------
This Warrant is issued under and shall for all purposes be governed by and
construed in accordance with the laws of the state of Nevada, without giving
effect to conflict of law provisions thereof.
11. Loss of Warrant.
-----------------
Upon receipt by the Company of evidence of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
indemnity or security reasonably satisfactory to the Company, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.
12. Notice or Demands.
-------------------
Notices or demands pursuant to this Warrant to be given or made by the Holder of
this Warrant to or on the Company shall be sufficiently given or made if sent by
certified or registered mail, return receipt requested, postage prepaid, and
addressed, until another address is designated in writing by the Company, to
Attention: President, Nanopierce Technologies, Inc., 370 17th Street, Suite
3580, Denver, Colorado 80202, Attention: President, Telephone No. (303)592-1010,
Telecopy No. (303)592-1054.
93
<PAGE>
Notices or demands pursuant to this Warrant to be given or made by the Company
to or on the Holder of this Warrant shall be sufficiently given or made if sent
by certified or registered mail, return receipt requested, postage prepaid, and
addressed, to the address of the Holder set forth in the Company's records,
until another address is designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the 27h day
of October, 1999.
NANOPIERCE TECHNOLGOIES, INC.
By: ________________________________
Print Name: Paul H. Metzinger
Title: President & Chief Executive
Officer
94
<PAGE>
EXHIBIT A
EXERCISE FORM
TO: NANOPIERCE TECHNOLOGIES, INC.
The undersigned hereby irrevocably exercises the right to purchase ____________
of the shares of Common Stock of NANOPIERCE TECHNOLOGIES, INC., a Nevada
corporation (the "Company"), evidenced by the attached Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full, all in
accordance with the conditions and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of Common Stock obtained on exercise of the Warrant, except in accordance
with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be issued
free of any restrictive legend, and a warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant in the name of the Registered
Holder and delivered to the undersigned at the address set forth below:
Dated:
________________________________________________________________________
Signature of Registered Holder
________________________________________________________________________
Name of Registered Holder (Print)
________________________________________________________________________
Non-U.S. Address
95
<PAGE>
EXHIBIT B
ASSIGNMENT
(To be executed by the registered Holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons below named the right to
purchase _______ shares of the Common Stock of NANOPIERCE TECHNOLOGIES, INC.
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint _______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated: ______________________________
Signature
Fill in for new Registration of Warrant:
_________________________________________
Name
_________________________________________
Address
_________________________________________
Please print name and address of assignee
(including zip code number)
_______________________________________________________________________
NOTICE
The signature to the foregoing Exercise Form or Assignment must correspond to
the name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
________________________________________________________________________
96
<PAGE>
THIS WARRANT AND THE SECURITIES RECEIVABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
Warrant to Purchase
70,000 shares
- ------
WARRANT TO PURCHASE COMMON STOCK
OF
NANOPIERCE TECHNOLOGIES, INC.
THIS CERTIFIES that Larry F. Pisciotta or any subsequent ("Holder") hereof, has
the right to purchase from NANOPIERCE TECHNOLOGIES, INC., a Nevada corporation
(the "Company"), up to 70,000 fully paid and nonassessable shares of the
Company's Common Stock, no par value ("Common Stock"), subject to adjustment as
provided herein, at a price equal to the Exercise Price as defined in Section 3
below, at any time beginning on the Date of Issuance and ending at 5:00 p.m.,
New York, New York time, on November 22, 2002.
The Holder of this Warrant agrees with the Company that this Warrant is issued
and all rights hereunder shall be held subject to all of the conditions,
limitations and provisions set forth herein.
1. Date of Issuance.
-------------------
This Warrant shall be deemed to be issued on November 22, 1999("Date of
Issuance").
2. Exercise.
--------
(a) Manner of Exercise. On or after the Date of Issuance, this Warrant may
be exercised as to all or any lesser number of full shares of Common Stock
covered hereby upon surrender of this Warrant, with the Exercise Form attached
hereto duly executed, together with the full Exercise Price (as defined in
Section 3) for each share of Common Stock as to which this Warrant is exercised,
at the office of the Company, 370 17th Street, Suite 3580, Denver, Colorado
80202; Attention: President, Telephone No. (303)592-1010, Telecopy No.
(303)592-1054, or at such other office or agency as the Company may designate in
writing, by overnight mail, with an advance copy of the Exercise Form attached
as Exhibit A ("Exercise Form") by facsimile (such surrender and payment of the
Exercise Price hereinafter called the "Exercise of this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the Exercise Form is sent by
facsimile to the Company, provided that the original Warrant and Exercise Form
are received by the Company as soon as practicable thereafter. Alternatively,
the Date of Exercise shall be defined as the date the original Exercise Form is
received by the Company, if Holder has not sent advance notice by facsimile.
97
<PAGE>
(c) Cancellation of Warrant. This Warrant shall be canceled upon its
Exercise, and, as soon as practical after the Date of Exercise, the Holder
hereof shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise, and if this Warrant is not exercised in full, the
Holder shall be entitled to receive a new Warrant or Warrants (containing terms
identical to this Warrant) representing any unexercised portion of this Warrant
in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares of
Common Stock is issued shall, for all purposes, be deemed to have become the
Holder of record of such shares on the Date of Exercise of this Warrant,
irrespective of the date of delivery of such shares of Common Stock. Nothing in
this Warrant shall be construed as conferring upon the Holder hereof any rights
as a shareholder of the Company.
3. Payment of Warrant Exercise Price.
-------------------------------------
The Exercise Price shall be Thirty Cents ($0.30) per share ("Exercise Price").
Payment of the Exercise Price may be made by either of the following, or a
combination thereof, at the election of Holder:
(i) Cash Exercise: cash, certified check or cashiers check or wire
transfer; or
(ii) Cashless Exercise: subject to the last sentence of this Section 3,
surrender of this Warrant at the principal office of the Company together with
notice of cashless election, in which event the Company shall issue Holder a
number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is being
exercised.
A = the Market Price of one (1) share of Common
Stock (for purposes of this Section 3(ii), the "Market Price" shall be defined
as the average closing price of the Common Stock for the five (5) trading days
prior to the Date of Exercise of this Warrant (the "Average Closing Price"), as
reported by the OTC Bulletin Board, or if the Common Stock is not traded on the
OTC Bulletin Board, the Average Closing Price in the over-the-counter market;
provided, however, that if the Common Stock is listed on a stock exchange, the
Market Price shall be the Average Closing Price on such exchange. If the Common
Stock is/was not traded during the five (5) trading days prior to the Date of
Exercise, then the closing price for the last publicly traded day shall be
deemed to be the closing price for any and all (if applicable) days during such
five (5) trading day period.
B = the Exercise Price.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon exercise of this
Warrant in a cashless exercise transaction shall be deemed to have been acquired
at the time this Warrant was issued. Moreover, it is intended, understood and
acknowledged that the holding period for the Common Stock issuable upon exercise
of this Warrant in a cashless exercise transaction shall be deemed to have
commenced on the date this Warrant was issued.
98
<PAGE>
4. Transfer.
--------
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in whole
or in part, in person or by attorney, upon surrender of this Warrant properly
endorsed. This Warrant shall be canceled upon such surrender and, as soon as
practicable thereafter, the person to whom such transfer is made shall be
entitled to receive a new Warrant or Warrants as to the portion of this Warrant
transferred, and the Holder of this Warrant shall be entitled to receive a new
Warrant or Warrants as to the portion hereof retained.
5. Anti-Dilution Adjustments.
--------------------------
(a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then the Holder hereof, upon Exercise of this
Warrant after the record date for the determination of Holders of Common Stock
entitled to receive such dividend, shall be entitled to receive upon Exercise of
this Warrant, in addition to the number of shares of Common Stock as to which
this Warrant is Exercised, such additional shares of Common Stock as such Holder
would have received had this Warrant been Exercised immediately prior to such
record date and the Exercise Price will be proportionately adjusted.
(b) Recapitalization or Reclassification. If the Company shall at any time
effect a recapitalization, reclassification or other similar transaction of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of Common Stock which the Holder hereof shall
be entitled to purchase upon Exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization,
reclassification or similar transaction, and the Exercise Price shall be, in the
case of an increase in the number of shares, proportionally decreased and, in
the case of decrease in the number of shares, proportionally increased. The
Company shall give the Warrant Holder the same notice it provides to holders of
Common Stock of any transaction described in this Section 5(b).
(c) Distributions. If the Company shall at any time distribute to Holders
of Common Stock cash, evidences of indebtedness or other securities or assets
(other than cash dividends or distributions payable out of earned surplus or net
profits for the current or preceding year) then, in any such case, the Holder of
this Warrant shall be entitled to receive, upon exercise of this Warrant, with
respect to each share of Common Stock issuable upon such Exercise, the amount of
cash or evidences of indebtedness or other securities or assets which such
Holder would have been entitled to receive with respect to each such share of
Common Stock as a result of the happening of such event had this Warrant been
Exercised immediately prior to the record date or other date fixing shareholders
to be affected by such event (the "Determination Date") or, in lieu thereof, if
the Board of Directors of the Company should so determine at the time of such
distribution, a reduced Exercise Price determined by multiplying the Exercise
Price on the Determination Date by a fraction, the numerator of which is the
result of such Exercise Price reduced by the value of such distribution
applicable to one share of Common Stock (such value to be determined by the
Board in its discretion) and the denominator of which is such Exercise Price.
99
<PAGE>
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Company shall
be changed into the same or a different number of shares of the same or another
class or classes of stock or securities or other assets of the Company or
another entity or there is a sale of all or substantially all the Company's
assets (a "Corporate Change"), then this Warrant shall be exercisable into such
class and type of securities or other assets as the Holder would have received
had the Holder exercised this Warrant immediately prior to such Corporate
Change; provided, however, that Company may not affect any Corporate Change
unless it first shall have given thirty (30) business days notice to the Holder
hereof of any Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term "Exercise
Price" shall mean the purchase price per share specified in Section 3 of this
Warrant, until the occurrence of an event stated in subsection (a), (b) or (c)
of this Section 5, and thereafter shall mean said price as adjusted from time to
time in accordance with the provisions of said subsection. No such adjustment
under this Section 5 shall be made unless such adjustment would change the
Exercise Price at the time by $.01 or more; provided, however, that all
adjustments not so made shall be deferred and made when the aggregate thereof
would change the Exercise Price at the time by $.01 or more. No adjustment made
pursuant to any provision of this Section 5 shall have the effect of increasing
the Exercise Price. The number of shares of Common Stock subject hereto shall
increase proportionately with each decrease in the Exercise Price.
(f) Adjustments: Additional Shares, Securities or Assets. In the event that
at any time, as a result of an adjustment made pursuant to this Section 5, the
Holder of this Warrant shall, upon Exercise of this Warrant, become entitled to
receive shares and/or other securities or assets (other than Common Stock) then,
wherever appropriate, all references herein to shares of Common Stock shall be
deemed to refer to and include such shares and/or other securities or assets;
and thereafter the number of such shares and/or other securities or assets shall
be subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.
6. Fractional Interests.
---------------------
No fractional shares or scrip representing fractional shares shall be issuable
upon the Exercise of this Warrant, but on Exercise of this Warrant, the Holder
hereof may purchase only a whole number of shares of Common Stock. If, on
Exercise of this Warrant, the Holder hereof would be entitled to a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares of Common
Stock issuable upon conversion shall be the next higher number of shares.
7. Reservation of Shares.
-----------------------
The Company shall at all times reserve for issuance such number of authorized
and unissued shares of Common Stock (or other securities substituted therefor as
herein above provided) as shall be sufficient for Exercise and payment of the
Exercise Price of this Warrant. The Company covenants and agrees that upon
Exercise of this Warrant, all shares of Common Stock issuable upon such Exercise
shall be duly and validly issued, fully paid, nonassessable and not subject to
preemptive rights, rights of first refusal or similar rights of any person or
entity.
100
<PAGE>
8. Restrictions on Transfer.
--------------------------
(a) Registration or Exemption Required. This Warrant has been issued in a
transaction exempt from the registration requirements of the Act by virtue of
Section 4(2). The Warrant and the Common Stock issuable upon exercise of the
Warrant may not be sold except pursuant to an effective registration statement
or an exemption to the registration requirements of the Act and applicable state
laws.
(b) Registration Rights. The Company shall within One Hundred and Twenty
(120) days of the date of this Warrant prepare and file a Registration Statement
with the SEC, no more than once, under the Securities Act of 1933, registering
this Warrant and the shares underlying this Warrant. The Company agrees to use
its best efforts to cause the above filing to become effective, as promptly as
possible.
(c) Assignment. Assuming the conditions of (a) above regarding registration
or exemption have been satisfied, the Holder may sell, transfer, assign, pledge
or otherwise dispose of this Warrant, in whole or in part. Holder shall deliver
a written notice to Company, substantially in the form of the Assignment
attached hereto as Exhibit B, indicating the person or persons to whom the
Warrant shall be assigned and the respective number of warrants to be assigned
to each assignee. The Company shall effect the assignment within ten (10) days,
and shall deliver to the assignee(s) designated by Holder a Warrant or Warrants
of like tenor and terms for the appropriate number of shares.
9. Benefits of this Warrant.
---------------------------
Nothing in this Warrant shall be construed to confer upon any person other than
the Company and the Holder of this Warrant any legal or equitable right, remedy
or claim under this Warrant and this Warrant shall be for the sole and exclusive
benefit of the Company and the Holder of this Warrant.
10. Applicable Law.
---------------
This Warrant is issued under and shall for all purposes be governed by and
construed in accordance with the laws of the state of Nevada, without giving
effect to conflict of law provisions thereof.
11. Loss of Warrant.
-----------------
Upon receipt by the Company of evidence of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
indemnity or security reasonably satisfactory to the Company, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.
12. Notice or Demands.
-------------------
Notices or demands pursuant to this Warrant to be given or made by the Holder of
this Warrant to or on the Company shall be sufficiently given or made if sent by
certified or registered mail, return receipt requested, postage prepaid, and
addressed, until another address is designated in writing by the Company, to
Attention: President, Nanopierce Technologies, Inc., 370 17th Street, Suite
3580, Denver, Colorado 80202, Attention: President, Telephone No. (303)592-1010,
Telecopy No. (303)592-1054.
101
<PAGE>
Notices or demands pursuant to this Warrant to be given or made by the Company
to or on the Holder of this Warrant shall be sufficiently given or made if sent
by certified or registered mail, return receipt requested, postage prepaid, and
addressed, to the address of the Holder set forth in the Company's records,
until another address is designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the 22nd day
of November, 1999.
NANOPIERCE TECHNOLGOIES, INC.
By: ________________________________
Print Name: Paul H. Metzinger
Title: President & Chief Executive
Officer
102
<PAGE>
EXHIBIT A
EXERCISE FORM
TO: NANOPIERCE TECHNOLOGIES, INC.
The undersigned hereby irrevocably exercises the right to purchase ____________
of the shares of Common Stock of NANOPIERCE TECHNOLOGIES, INC., a Nevada
corporation (the "Company"), evidenced by the attached Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full, all in
accordance with the conditions and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of Common Stock obtained on exercise of the Warrant, except in accordance
with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be issued
free of any restrictive legend, and a warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant in the name of the Registered
Holder and delivered to the undersigned at the address set forth below:
Dated:
________________________________________________________________________
Signature of Registered Holder
________________________________________________________________________
Name of Registered Holder (Print)
________________________________________________________________________
Non-U.S. Address
103
<PAGE>
EXHIBIT B
ASSIGNMENT
(To be executed by the registered Holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons below named the right to
purchase _______ shares of the Common Stock of NANOPIERCE TECHNOLOGIES, INC.
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint _______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated: ______________________________
Signature
Fill in for new Registration of Warrant:
_________________________________________
Name
_________________________________________
Address
_________________________________________
Please print name and address of assignee
(including zip code number)
_______________________________________________________________________
NOTICE
The signature to the foregoing Exercise Form or Assignment must correspond to
the name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
________________________________________________________________________
104
<PAGE>
THIS WARRANT AND THE SECURITIES RECEIVABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
Warrant to Purchase
105,000 shares
- -------
WARRANT TO PURCHASE COMMON STOCK
OF
NANOPIERCE TECHNOLOGIES, INC.
THIS CERTIFIES that SLK Joint Venture or any subsequent ("Holder") hereof, has
the right to purchase from NANOPIERCE TECHNOLOGIES, INC., a Nevada corporation
(the "Company"), up to 105,000 fully paid and nonassessable shares of the
Company's Common Stock, no par value ("Common Stock"), subject to adjustment as
provided herein, at a price equal to the Exercise Price as defined in Section 3
below, at any time beginning on the Date of Issuance and ending at 5:00 p.m.,
New York, New York time, on October 22, 2002.
The Holder of this Warrant agrees with the Company that this Warrant is issued
and all rights hereunder shall be held subject to all of the conditions,
limitations and provisions set forth herein.
1. Date of Issuance.
-------------------
This Warrant shall be deemed to be issued on October 22, 1999 ("Date of
Issuance").
2. Exercise.
--------
(a) Manner of Exercise. On or after the Date of Issuance, this Warrant may
be exercised as to all or any lesser number of full shares of Common Stock
covered hereby upon surrender of this Warrant, with the Exercise Form attached
hereto duly executed, together with the full Exercise Price (as defined in
Section 3) for each share of Common Stock as to which this Warrant is exercised,
at the office of the Company, 370 17th Street, Suite 3580, Denver, Colorado
80202; Attention: President, Telephone No. (303)592-1010, Telecopy No.
(303)592-1054, or at such other office or agency as the Company may designate in
writing, by overnight mail, with an advance copy of the Exercise Form attached
as Exhibit A ("Exercise Form") by facsimile (such surrender and payment of the
Exercise Price hereinafter called the "Exercise of this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the Exercise Form is sent by
facsimile to the Company, provided that the original Warrant and Exercise Form
are received by the Company as soon as practicable thereafter. Alternatively,
the Date of Exercise shall be defined as the date the original Exercise Form is
received by the Company, if Holder has not sent advance notice by facsimile.
105
<PAGE>
(c) Cancellation of Warrant. This Warrant shall be canceled upon its
Exercise, and, as soon as practical after the Date of Exercise, the Holder
hereof shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise, and if this Warrant is not exercised in full, the
Holder shall be entitled to receive a new Warrant or Warrants (containing terms
identical to this Warrant) representing any unexercised portion of this Warrant
in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares of
Common Stock is issued shall, for all purposes, be deemed to have become the
Holder of record of such shares on the Date of Exercise of this Warrant,
irrespective of the date of delivery of such shares of Common Stock. Nothing in
this Warrant shall be construed as conferring upon the Holder hereof any rights
as a shareholder of the Company.
3. Payment of Warrant Exercise Price.
-------------------------------------
The Exercise Price shall be Thirty Cents ($0.30) per share ("Exercise Price").
Payment of the Exercise Price may be made by either of the following, or a
combination thereof, at the election of Holder:
(i) Cash Exercise: cash, certified check or cashiers check or wire
transfer; or
(ii) Cashless Exercise: subject to the last sentence of this Section 3,
surrender of this Warrant at the principal office of the Company together with
notice of cashless election, in which event the Company shall issue Holder a
number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is being
exercised.
A = the Market Price of one (1) share of Common
Stock (for purposes of this Section 3(ii), the "Market Price" shall be defined
as the average closing price of the Common Stock for the five (5) trading days
prior to the Date of Exercise of this Warrant (the "Average Closing Price"), as
reported by the OTC Bulletin Board, or if the Common Stock is not traded on the
OTC Bulletin Board, the Average Closing Price in the over-the-counter market;
provided, however, that if the Common Stock is listed on a stock exchange, the
Market Price shall be the Average Closing Price on such exchange. If the Common
Stock is/was not traded during the five (5) trading days prior to the Date of
Exercise, then the closing price for the last publicly traded day shall be
deemed to be the closing price for any and all (if applicable) days during such
five (5) trading day period.
B = the Exercise Price.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon exercise of this
Warrant in a cashless exercise transaction shall be deemed to have been acquired
at the time this Warrant was issued. Moreover, it is intended, understood and
acknowledged that the holding period for the Common Stock issuable upon exercise
of this Warrant in a cashless exercise transaction shall be deemed to have
commenced on the date this Warrant was issued.
106
<PAGE>
4. Transfer.
--------
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in whole
or in part, in person or by attorney, upon surrender of this Warrant properly
endorsed. This Warrant shall be canceled upon such surrender and, as soon as
practicable thereafter, the person to whom such transfer is made shall be
entitled to receive a new Warrant or Warrants as to the portion of this Warrant
transferred, and the Holder of this Warrant shall be entitled to receive a new
Warrant or Warrants as to the portion hereof retained.
5. Anti-Dilution Adjustments.
--------------------------
(a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then the Holder hereof, upon Exercise of this
Warrant after the record date for the determination of Holders of Common Stock
entitled to receive such dividend, shall be entitled to receive upon Exercise of
this Warrant, in addition to the number of shares of Common Stock as to which
this Warrant is Exercised, such additional shares of Common Stock as such Holder
would have received had this Warrant been Exercised immediately prior to such
record date and the Exercise Price will be proportionately adjusted.
(b) Recapitalization or Reclassification. If the Company shall at any time
effect a recapitalization, reclassification or other similar transaction of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of Common Stock which the Holder hereof shall
be entitled to purchase upon Exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization,
reclassification or similar transaction, and the Exercise Price shall be, in the
case of an increase in the number of shares, proportionally decreased and, in
the case of decrease in the number of shares, proportionally increased. The
Company shall give the Warrant Holder the same notice it provides to holders of
Common Stock of any transaction described in this Section 5(b).
(c) Distributions. If the Company shall at any time distribute to Holders
of Common Stock cash, evidences of indebtedness or other securities or assets
(other than cash dividends or distributions payable out of earned surplus or net
profits for the current or preceding year) then, in any such case, the Holder of
this Warrant shall be entitled to receive, upon exercise of this Warrant, with
respect to each share of Common Stock issuable upon such Exercise, the amount of
cash or evidences of indebtedness or other securities or assets which such
Holder would have been entitled to receive with respect to each such share of
Common Stock as a result of the happening of such event had this Warrant been
Exercised immediately prior to the record date or other date fixing shareholders
to be affected by such event (the "Determination Date") or, in lieu thereof, if
the Board of Directors of the Company should so determine at the time of such
distribution, a reduced Exercise Price determined by multiplying the Exercise
Price on the Determination Date by a fraction, the numerator of which is the
result of such Exercise Price reduced by the value of such distribution
applicable to one share of Common Stock (such value to be determined by the
Board in its discretion) and the denominator of which is such Exercise Price.
107
<PAGE>
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Company shall
be changed into the same or a different number of shares of the same or another
class or classes of stock or securities or other assets of the Company or
another entity or there is a sale of all or substantially all the Company's
assets (a "Corporate Change"), then this Warrant shall be exercisable into such
class and type of securities or other assets as the Holder would have received
had the Holder exercised this Warrant immediately prior to such Corporate
Change; provided, however, that Company may not affect any Corporate Change
unless it first shall have given thirty (30) business days notice to the Holder
hereof of any Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term "Exercise
Price" shall mean the purchase price per share specified in Section 3 of this
Warrant, until the occurrence of an event stated in subsection (a), (b) or (c)
of this Section 5, and thereafter shall mean said price as adjusted from time to
time in accordance with the provisions of said subsection. No such adjustment
under this Section 5 shall be made unless such adjustment would change the
Exercise Price at the time by $.01 or more; provided, however, that all
adjustments not so made shall be deferred and made when the aggregate thereof
would change the Exercise Price at the time by $.01 or more. No adjustment made
pursuant to any provision of this Section 5 shall have the effect of increasing
the Exercise Price. The number of shares of Common Stock subject hereto shall
increase proportionately with each decrease in the Exercise Price.
(f) Adjustments: Additional Shares, Securities or Assets. In the event that
at any time, as a result of an adjustment made pursuant to this Section 5, the
Holder of this Warrant shall, upon Exercise of this Warrant, become entitled to
receive shares and/or other securities or assets (other than Common Stock) then,
wherever appropriate, all references herein to shares of Common Stock shall be
deemed to refer to and include such shares and/or other securities or assets;
and thereafter the number of such shares and/or other securities or assets shall
be subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.
6. Fractional Interests.
---------------------
No fractional shares or scrip representing fractional shares shall be issuable
upon the Exercise of this Warrant, but on Exercise of this Warrant, the Holder
hereof may purchase only a whole number of shares of Common Stock. If, on
Exercise of this Warrant, the Holder hereof would be entitled to a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares of Common
Stock issuable upon conversion shall be the next higher number of shares.
7. Reservation of Shares.
-----------------------
The Company shall at all times reserve for issuance such number of authorized
and unissued shares of Common Stock (or other securities substituted therefor as
herein above provided) as shall be sufficient for Exercise and payment of the
Exercise Price of this Warrant. The Company covenants and agrees that upon
Exercise of this Warrant, all shares of Common Stock issuable upon such Exercise
shall be duly and validly issued, fully paid, nonassessable and not subject to
preemptive rights, rights of first refusal or similar rights of any person or
entity.
108
<PAGE>
8. Restrictions on Transfer.
--------------------------
(a) Registration or Exemption Required. This Warrant has been issued in a
transaction exempt from the registration requirements of the Act by virtue of
Section 4(2). The Warrant and the Common Stock issuable upon exercise of the
Warrant may not be sold except pursuant to an effective registration statement
or an exemption to the registration requirements of the Act and applicable state
laws.
(b) Registration Rights. The Company shall within One Hundred and Twenty
(120) days of the date of this Warrant prepare and file a Registration Statement
with the SEC, no more than once, under the Securities Act of 1933, registering
this Warrant and the shares underlying this Warrant. The Company agrees to use
its best efforts to cause the above filing to become effective, as promptly as
possible.
(c) Assignment. Assuming the conditions of (a) above regarding registration
or exemption have been satisfied, the Holder may sell, transfer, assign, pledge
or otherwise dispose of this Warrant, in whole or in part. Holder shall deliver
a written notice to Company, substantially in the form of the Assignment
attached hereto as Exhibit B, indicating the person or persons to whom the
Warrant shall be assigned and the respective number of warrants to be assigned
to each assignee. The Company shall effect the assignment within ten (10) days,
and shall deliver to the assignee(s) designated by Holder a Warrant or Warrants
of like tenor and terms for the appropriate number of shares.
9. Benefits of this Warrant.
---------------------------
Nothing in this Warrant shall be construed to confer upon any person other than
the Company and the Holder of this Warrant any legal or equitable right, remedy
or claim under this Warrant and this Warrant shall be for the sole and exclusive
benefit of the Company and the Holder of this Warrant.
10. Applicable Law.
---------------
This Warrant is issued under and shall for all purposes be governed by and
construed in accordance with the laws of the state of Nevada, without giving
effect to conflict of law provisions thereof.
11. Loss of Warrant.
-----------------
Upon receipt by the Company of evidence of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
indemnity or security reasonably satisfactory to the Company, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.
12. Notice or Demands.
-------------------
Notices or demands pursuant to this Warrant to be given or made by the Holder of
this Warrant to or on the Company shall be sufficiently given or made if sent by
certified or registered mail, return receipt requested, postage prepaid, and
addressed, until another address is designated in writing by the Company, to
Attention: President, Nanopierce Technologies, Inc., 370 17th Street, Suite
3580, Denver, Colorado 80202, Attention: President, Telephone No. (303)592-1010,
Telecopy No. (303)592-1054.
109
<PAGE>
Notices or demands pursuant to this Warrant to be given or made by the Company
to or on the Holder of this Warrant shall be sufficiently given or made if sent
by certified or registered mail, return receipt requested, postage prepaid, and
addressed, to the address of the Holder set forth in the Company's records,
until another address is designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the 22nd day
of October, 1999.
NANOPIERCE TECHNOLGOIES, INC.
By: ________________________________
Print Name: Paul H. Metzinger
Title: President & Chief Executive
Officer
110
<PAGE>
EXHIBIT A
EXERCISE FORM
TO: NANOPIERCE TECHNOLOGIES, INC.
The undersigned hereby irrevocably exercises the right to purchase ____________
of the shares of Common Stock of NANOPIERCE TECHNOLOGIES, INC., a Nevada
corporation (the "Company"), evidenced by the attached Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full, all in
accordance with the conditions and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of Common Stock obtained on exercise of the Warrant, except in accordance
with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be issued
free of any restrictive legend, and a warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant in the name of the Registered
Holder and delivered to the undersigned at the address set forth below:
Dated:
________________________________________________________________________
Signature of Registered Holder
________________________________________________________________________
Name of Registered Holder (Print)
________________________________________________________________________
Non-U.S. Address
111
<PAGE>
EXHIBIT B
ASSIGNMENT
(To be executed by the registered Holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons below named the right to
purchase _______ shares of the Common Stock of NANOPIERCE TECHNOLOGIES, INC.
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint _______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated: ______________________________
Signature
Fill in for new Registration of Warrant:
_________________________________________
Name
_________________________________________
Address
_________________________________________
Please print name and address of assignee
(including zip code number)
_______________________________________________________________________
NOTICE
The signature to the foregoing Exercise Form or Assignment must correspond to
the name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
________________________________________________________________________
112
<PAGE>
THIS WARRANT AND THE SECURITIES RECEIVABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
Warrant to Purchase
5,000,000 shares
- ---------
WARRANT TO PURCHASE COMMON STOCK
OF
NANOPIERCE TECHNOLOGIES, INC.
THIS CERTIFIES that Standard Financial Group Ltd. or any subsequent ("Holder")
hereof, has the right to purchase from NANOPIERCE TECHNOLOGIES, INC., a Nevada
corporation (the "Company"), up to 5,000,000 fully paid and nonassessable shares
of the Company's Common Stock, no par value ("Common Stock"), subject to
adjustment as provided herein, at a price equal to the Exercise Price as defined
in Section 3 below, at any time beginning on the Date of Issuance and ending at
5:00 p.m., New York, New York time, on December 10, 2004.
The Holder of this Warrant agrees with the Company that this Warrant is issued
and all rights hereunder shall be held subject to all of the conditions,
limitations and provisions set forth herein.
1. Date of Issuance.
-------------------
This Warrant shall be deemed to be issued on December 10, 1999 ("Date of
Issuance").
2. Exercise.
--------
(a) Manner of Exercise. On or after the Date of Issuance, this Warrant may
be exercised as to all or any lesser number of full shares of Common Stock
covered hereby upon surrender of this Warrant, with the Exercise Form attached
hereto duly executed, together with the full Exercise Price (as defined in
Section 3) for each share of Common Stock as to which this Warrant is exercised,
at the office of the Company, 370 17th Street, Suite 3580, Denver, Colorado
80202; Attention: President, Telephone No. (303)592-1010, Telecopy No.
(303)592-1054, or at such other office or agency as the Company may designate in
writing, by overnight mail, with an advance copy of the Exercise Form attached
as Exhibit A ("Exercise Form") by facsimile (such surrender and payment of the
Exercise Price hereinafter called the "Exercise of this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the Exercise Form is sent by
facsimile to the Company, provided that the original Warrant and Exercise Form
are received by the Company as soon as practicable thereafter. Alternatively,
the Date of Exercise shall be defined as the date the original Exercise Form is
received by the Company, if Holder has not sent advance notice by facsimile.
113
<PAGE>
(c) Cancellation of Warrant. This Warrant shall be canceled upon its
Exercise, and, as soon as practical after the Date of Exercise, the Holder
hereof shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise, and if this Warrant is not exercised in full, the
Holder shall be entitled to receive a new Warrant or Warrants (containing terms
identical to this Warrant) representing any unexercised portion of this Warrant
in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares of
Common Stock is issued shall, for all purposes, be deemed to have become the
Holder of record of such shares on the Date of Exercise of this Warrant,
irrespective of the date of delivery of such shares of Common Stock. Nothing in
this Warrant shall be construed as conferring upon the Holder hereof any rights
as a shareholder of the Company.
3. Payment of Warrant Exercise Price.
-------------------------------------
The Exercise Price shall be Thirty Cents ($0.30) per share ("Exercise Price").
Payment of the Exercise Price may be made by either of the following, or a
combination thereof, at the election of Holder:
(i) Cash Exercise: cash, certified check or cashiers check or wire
transfer; or
(ii) Cashless Exercise: subject to the last sentence of this Section 3,
surrender of this Warrant at the principal office of the Company together with
notice of cashless election, in which event the Company shall issue Holder a
number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is being
exercised.
A = the Market Price of one (1) share of Common
Stock (for purposes of this Section 3(ii), the "Market Price" shall be defined
as the average closing price of the Common Stock for the five (5) trading days
prior to the Date of Exercise of this Warrant (the "Average Closing Price"), as
reported by the OTC Bulletin Board, or if the Common Stock is not traded on the
OTC Bulletin Board, the Average Closing Price in the over-the-counter market;
provided, however, that if the Common Stock is listed on a stock exchange, the
Market Price shall be the Average Closing Price on such exchange. If the Common
Stock is/was not traded during the five (5) trading days prior to the Date of
Exercise, then the closing price for the last publicly traded day shall be
deemed to be the closing price for any and all (if applicable) days during such
five (5) trading day period.
B = the Exercise Price.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon exercise of this
Warrant in a cashless exercise transaction shall be deemed to have been acquired
at the time this Warrant was issued. Moreover, it is intended, understood and
acknowledged that the holding period for the Common Stock issuable upon exercise
of this Warrant in a cashless exercise transaction shall be deemed to have
commenced on the date this Warrant was issued.
114
<PAGE>
NO SUBSEQUENT HOLDER OF THIS WARRANT SHALL HAVE THE RIGHT TO EXERCISE THIS
WARRANT PURSUANT TO THE CASHLESS EXERCISE METHOD SET FORTH IN (ii) ABOVE, UNLESS
THE COMPANY SPECIFICALLY CONSENTS, IN WRITING, TO AN AMENDMENT TO THIS WARRANT
PERMITTING SUCH METHOD OF EXERCISE.
4. Transfer.
--------
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in whole
or in part, in person or by attorney, upon surrender of this Warrant properly
endorsed. This Warrant shall be canceled upon such surrender and, as soon as
practicable thereafter, the person to whom such transfer is made shall be
entitled to receive a new Warrant or Warrants as to the portion of this Warrant
transferred, and the Holder of this Warrant shall be entitled to receive a new
Warrant or Warrants as to the portion hereof retained.
5. Anti-Dilution Adjustments.
--------------------------
(a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then the Holder hereof, upon Exercise of this
Warrant after the record date for the determination of Holders of Common Stock
entitled to receive such dividend, shall be entitled to receive upon Exercise of
this Warrant, in addition to the number of shares of Common Stock as to which
this Warrant is Exercised, such additional shares of Common Stock as such Holder
would have received had this Warrant been Exercised immediately prior to such
record date and the Exercise Price will be proportionately adjusted.
(b) Recapitalization or Reclassification. If the Company shall at any time
effect a recapitalization, reclassification or other similar transaction of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of Common Stock which the Holder hereof shall
be entitled to purchase upon Exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization,
reclassification or similar transaction, and the Exercise Price shall be, in the
case of an increase in the number of shares, proportionally decreased and, in
the case of decrease in the number of shares, proportionally increased. The
Company shall give the Warrant Holder the same notice it provides to holders of
Common Stock of any transaction described in this Section 5(b).
(c) Distributions. If the Company shall at any time distribute to Holders
of Common Stock cash, evidences of indebtedness or other securities or assets
(other than cash dividends or distributions payable out of earned surplus or net
profits for the current or preceding year) then, in any such case, the Holder of
this Warrant shall be entitled to receive, upon exercise of this Warrant, with
respect to each share of Common Stock issuable upon such Exercise, the amount of
cash or evidences of indebtedness or other securities or assets which such
Holder would have been entitled to receive with respect to each such share of
Common Stock as a result of the happening of such event had this Warrant been
Exercised immediately prior to the record date or other date fixing shareholders
to be affected by such event (the "Determination Date") or, in lieu thereof, if
the Board of Directors of the Company should so determine at the time of such
distribution, a reduced Exercise Price determined by multiplying the Exercise
Price on the Determination Date by a fraction, the numerator of which is the
result of such Exercise Price reduced by the value of such distribution
applicable to one share of Common Stock (such value to be determined by the
Board in its discretion) and the denominator of which is such Exercise Price.
115
<PAGE>
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Company shall
be changed into the same or a different number of shares of the same or another
class or classes of stock or securities or other assets of the Company or
another entity or there is a sale of all or substantially all the Company's
assets (a "Corporate Change"), then this Warrant shall be exercisable into such
class and type of securities or other assets as the Holder would have received
had the Holder exercised this Warrant immediately prior to such Corporate
Change; provided, however, that Company may not affect any Corporate Change
unless it first shall have given thirty (30) business days notice to the Holder
hereof of any Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term "Exercise
Price" shall mean the purchase price per share specified in Section 3 of this
Warrant, until the occurrence of an event stated in subsection (a), (b) or (c)
of this Section 5, and thereafter shall mean said price as adjusted from time to
time in accordance with the provisions of said subsection. No such adjustment
under this Section 5 shall be made unless such adjustment would change the
Exercise Price at the time by $.01 or more; provided, however, that all
adjustments not so made shall be deferred and made when the aggregate thereof
would change the Exercise Price at the time by $.01 or more. No adjustment made
pursuant to any provision of this Section 5 shall have the effect of increasing
the Exercise Price. The number of shares of Common Stock subject hereto shall
increase proportionately with each decrease in the Exercise Price.
(f) Adjustments: Additional Shares, Securities or Assets. In the event that
at any time, as a result of an adjustment made pursuant to this Section 5, the
Holder of this Warrant shall, upon Exercise of this Warrant, become entitled to
receive shares and/or other securities or assets (other than Common Stock) then,
wherever appropriate, all references herein to shares of Common Stock shall be
deemed to refer to and include such shares and/or other securities or assets;
and thereafter the number of such shares and/or other securities or assets shall
be subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.
6. Fractional Interests.
---------------------
No fractional shares or scrip representing fractional shares shall be issuable
upon the Exercise of this Warrant, but on Exercise of this Warrant, the Holder
hereof may purchase only a whole number of shares of Common Stock. If, on
Exercise of this Warrant, the Holder hereof would be entitled to a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares of Common
Stock issuable upon conversion shall be the next higher number of shares.
7. Reservation of Shares.
-----------------------
The Company shall at all times reserve for issuance such number of authorized
and unissued shares of Common Stock (or other securities substituted therefor as
herein above provided) as shall be sufficient for Exercise and payment of the
Exercise Price of this Warrant. The Company covenants and agrees that upon
Exercise of this Warrant, all shares of Common Stock issuable upon such Exercise
shall be duly and validly issued, fully paid, nonassessable and not subject to
preemptive rights, rights of first refusal or similar rights of any person or
entity.
116
<PAGE>
8. Restrictions on Transfer.
--------------------------
(a) Registration or Exemption Required. This Warrant has been issued in a
transaction exempt from the registration requirements of the Act by virtue of
Section 4(2). The Warrant and the Common Stock issuable upon exercise of the
Warrant may not be sold except pursuant to an effective registration statement
or an exemption to the registration requirements of the Act and applicable state
laws.
(b) Registration Rights. The Company shall within One Hundred and Twenty
(120) days of the date of this Warrant prepare and file a Registration Statement
with the SEC, no more than once, under the Securities Act of 1933, registering
this Warrant and the shares underlying this Warrant. The Company agrees to use
its best efforts to cause the above filing to become effective, as promptly as
possible.
(c) Assignment. Assuming the conditions of (a) above regarding registration
or exemption have been satisfied, the Holder may sell, transfer, assign, pledge
or otherwise dispose of this Warrant, in whole or in part. Holder shall deliver
a written notice to Company, substantially in the form of the Assignment
attached hereto as Exhibit B, indicating the person or persons to whom the
Warrant shall be assigned and the respective number of warrants to be assigned
to each assignee. The Company shall effect the assignment within ten (10) days,
and shall deliver to the assignee(s) designated by Holder a Warrant or Warrants
of like tenor and terms for the appropriate number of shares.
9. Benefits of this Warrant.
---------------------------
Nothing in this Warrant shall be construed to confer upon any person other than
the Company and the Holder of this Warrant any legal or equitable right, remedy
or claim under this Warrant and this Warrant shall be for the sole and exclusive
benefit of the Company and the Holder of this Warrant.
10. Applicable Law.
---------------
This Warrant is issued under and shall for all purposes be governed by and
construed in accordance with the laws of the state of Nevada, without giving
effect to conflict of law provisions thereof.
11. Loss of Warrant.
-----------------
Upon receipt by the Company of evidence of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
indemnity or security reasonably satisfactory to the Company, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.
12. Notice or Demands.
-------------------
Notices or demands pursuant to this Warrant to be given or made by the Holder of
this Warrant to or on the Company shall be sufficiently given or made if sent by
certified or registered mail, return receipt requested, postage prepaid, and
addressed, until another address is designated in writing by the Company, to
Attention: President, Nanopierce Technologies, Inc., 370 17th Street, Suite
3580, Denver, Colorado 80202, Attention: President, Telephone No. (303)592-1010,
Telecopy No. (303)592-1054.
117
<PAGE>
Notices or demands pursuant to this Warrant to be given or made by the Company
to or on the Holder of this Warrant shall be sufficiently given or made if sent
by certified or registered mail, return receipt requested, postage prepaid, and
addressed, to the address of the Holder set forth in the Company's records,
until another address is designated in writing by Holder.
13. Exercise restrictions.
-----------------------
When and if the Company has its common shares registered pursuant to Section
12(g) of the Securities Act of 1934, the, notwithstanding anything to the
contrary set forth in this Warrant, in no event shall any holder of this Warrant
be entitled to exercise any portion of this Warrant to the extent that such
exercise, upon giving effect to such exercise, would cause the aggregate number
of shares of Common Stock beneficially owned by the Holder and its affiliates to
exceed 9.99% of the outstanding shares of the Common Stock following such
exercise. If any court of competent jurisdiction shall determine that the
foregoing limitation is ineffective to prevent the Holder from being deemed the
beneficial owner of more than 9.9% of the then outstanding shares of Common
Stock, then the Company shall purchase from the Holder such portion of this
Warrant (the "Redemption Portion") as is necessary to cause such Holder to be
deemed the beneficial owner of not more than 9.9% of the then outstanding shares
of Common Stock. Upon such determination by a court of competent jurisdiction
and such redemption by the Company, the Redemption Portion shall immediately and
without further action be deemed returned to the Seller, subject only to payment
in full by the Seller of the Redemption Amount (as defined below) and the Buyer
shall have no interest in or rights under such Redemption Portion other than to
receive cash in the amount of the Redemption Amount. Such redemption shall be
for cash at a redemption price equal to 122.5% of the Exercise Price (the
"Redemption Amount") and shall be paid within three (3) business days after the
redemption described herein is deemed to have occurred as stated herein.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the 10th day
of December, 1999.
NANOPIERCE TECHNOLGOIES, INC.
By: ________________________________
Print Name: Paul H. Metzinger
Title: President & Chief Executive
Officer
118
<PAGE>
EXHIBIT A
EXERCISE FORM
TO: NANOPIERCE TECHNOLOGIES, INC.
The undersigned hereby irrevocably exercises the right to purchase ____________
of the shares of Common Stock of NANOPIERCE TECHNOLOGIES, INC., a Nevada
corporation (the "Company"), evidenced by the attached Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full, all in
accordance with the conditions and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of Common Stock obtained on exercise of the Warrant, except in accordance
with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be issued
free of any restrictive legend, and a warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant in the name of the Registered
Holder and delivered to the undersigned at the address set forth below:
Dated:
________________________________________________________________________
Signature of Registered Holder
________________________________________________________________________
Name of Registered Holder (Print)
________________________________________________________________________
Non-U.S. Address
119
<PAGE>
EXHIBIT B
ASSIGNMENT
(To be executed by the registered Holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons below named the right to
purchase _______ shares of the Common Stock of NANOPIERCE TECHNOLOGIES, INC.
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint _______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated: ______________________________
Signature
Fill in for new Registration of Warrant:
_________________________________________
Name
_________________________________________
Address
_________________________________________
Please print name and address of assignee
(including zip code number)
_______________________________________________________________________
NOTICE
The signature to the foregoing Exercise Form or Assignment must correspond to
the name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
________________________________________________________________________
120
<PAGE>
EXHIBIT 11
NANOPIERCE TECHNOLOGIES, INC.
COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
------------------ ------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss $( 851,198) ( 299,622) (1,102,559) ( 851,095)
Dividends on Series A and B
preferred stock - ( 45,313) - ( 90,626)
--------- --------- --------- ---------
Net loss applicable to common
shareholders $( 84,198) ( 344,935) (1,102,559) ( 941,721)
========= ========= ========= =========
Weighted average number of
common shares outstanding 31,518,037 12,901,297 30,949,261 12,776,637
Common equivalent shares
representing shares issuable
upon exercise of outstanding
options and warrants - - - -
---------- ---------- ---------- ----------
31,518,037 12,901,297 30,949,261 12,776,637
========== ========== ========== ==========
Basic and diluted loss per
share applicable to common
shareholders $( .03) ( .03) ( .04) ( .07)
========= ========= ========= =========
Stock options and warrants are not considered in the calculations as the impact
of the potential common shares (16,737,500 shares at December 31, 1999 and
15,924,687 shares at December 31, 1998) would be to decrease net loss per share.
</TABLE>
121
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<CAPTION>
<S> <C>
<PERIOD-TYPE> FISCAL YEAR END
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 94,873
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 116,470
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 988,149
<CURRENT-LIABILITIES> 728,964
<BONDS> 0
0
0
<COMMON> 3,302
<OTHER-SE> 6,465,328
<TOTAL-LIABILITY-AND-EQUITY> 988,149
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,086,443
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,116
<INCOME-PRETAX> (1,102,559)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,102,559)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,102,559)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
