<PAGE>
As filed with the Securities and Exchange Commission on February 25, 2000
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
_______________
NANOPIERCE TECHNOLOGIES, INC.
(Exact name of registrant 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
(303) 592-1010
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Paul H. Metzinger
President and Chief Executive Officer
Nanopierce Technologies, Inc.
370 Seventeenth Street, Suite 3580
Denver, Colorado
(303) 592-1010
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With copies sent to:
Robert J. Ahrenholz, Esq.
Joshua M. Kerstein, Esq.
Kutak Rock LLP
717 Seventeenth Street, Suite 2900
Denver, Colorado 80202
(303) 297-2400
Approximate date of commencement of the proposed sale to the public: From
time to time after this Registration Statement becomes effective.
_______________
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of each class Amount maximum maximum Amount of
of securities to to be offering price aggregate offering registration
be registered registered per share(1) price(1) fee(2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Warrants(3) 430,000 $2.915 $1,253,450 $ 331
- -------------------------------------------------------------------------------------------==================
Common stock underlying 430,000 -- -- --
warrants(4)
- -------------------------------------------------------------------------------------------==================
Common stock underlying 6% 1,029,160 $2.915 $1,500,000 $ 396
convertible debentures
- -------------------------------------------------------------------------------------------==================
Common stock underlying the 1,715,266 $2.915 $2,500,000 $ 660
conditional warrant to
purchase $2,500,000 principal
amount of 6% convertible
debentures(5)
- -------------------------------------------------------------------------------------------==================
Total -- -- $5,253,550 $1,387
=============================================================================================================
</TABLE>
____________
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Registration fee calculations are based on the filing fee of $264 per
$1,000,000 of securities registered.
(3) Includes 250,000 warrants that are exercisable upon exercise of the
conditional warrant. Registration fee is calculated pursuant to Rule 457(g)
based on the exercise price of the warrants at the time of the filing of this
registration statement. Pursuant to Rule 416, this registration statement also
covers the shares of common stock as may be issuable pursuant to the anti-
dilution provisions of the warrants. Pursuant to Rule 457(g), no separate
registration fee is payable with respect to the common stock underlying the
exercise of the warrants.
(4) Pursuant to Rules 457(i) and 457(g), no separate registration fee is
payable with respect to the common stock underlying the warrants. Pursuant to
Rule 416, this registration statement also covers the shares of common stock as
may be issuable pursuant to the anti-dilution provisions of the warrants.
(5) Pursuant to Rule 416, this registration statement also covers the shares of
common stock as may be issuable pursuant to the anti-dilution provisions of the
debentures. Pursuant to Rule 457(g), no separate registration fee is payable
with respect to the common stock underlying the conversion of the debentures
into common stock.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment that specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933, as amended or until this registration statement
shall become effective on such date as the commission, acting pursuant to
section 8(a), may determine.
<PAGE>
The information in this prospectus is not complete and may be changed. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. We may not sell these securities until that
registration statement becomes effective. This prospectus is not an offer to
sell securities and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
Subject to completion, dated February 25, 2000
PROSPECTUS
NANOPIERCE TECHNOLOGIES, INC.
-----------------------------
370 Seventeenth Street, Suite 3580
Denver, Colorado 80202
3,174,426 shares of common stock
430,000 common stock purchase warrants
The sellers: All of the securities offered by this prospectus are offered
from time to time by the selling security holders identified
in this prospectus.
Market for
securities: Our common stock is traded on the over-the-counter market and
is quoted on the OTC Bulletin Board under the symbol "NPCT."
The common stock is also traded on the Third Market Segment
of the Frankfurt Stock Exchange under the symbol "NPI." There
is no market for the warrants offered by this prospectus and
you should not expect one to be established in the future.
Investing in the common stock or the warrants involves a high degree of
risk. See "RISK FACTORS" beginning on page 5.
The shares of common stock offered by this prospectus represent about
5.97% of our issued and outstanding common stock as of
February 1, 2000, assuming that, as of that date, all of our
outstanding convertible securities are exercised and
converted into common stock, the warrants in this offering
are converted into common stock and all of our outstanding
convertible debentures are converted into the maximum number
of shares provided by the debenture. On February 24, 2000,
the last reported sale price of the common stock was $5.50
per share. See "DESCRIPTION OF THE SECURITIES--Common Stock."
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved any of these securities
or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this prospectus is __________ __, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
FORWARD-LOOKING STATEMENTS........................ 1
PROSPECTUS SUMMARY................................ 2
RISK FACTORS...................................... 5
USE OF PROCEEDS................................... 12
THE COMPANY....................................... 13
DESCRIPTION OF SECURITIES......................... 22
SELLING SECURITY HOLDERS.......................... 25
PLAN OF DISTRIBUTION.............................. 25
EXPERTS........................................... 27
AVAILABLE INFORMATION............................. 27
ADDITIONAL INFORMATION............................ 27
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE... 27
</TABLE>
FORWARD-LOOKING STATEMENTS
This prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities and
Exchange Act of 1934. We base these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to risks, uncertainties, and assumptions about our
company, including:
. the rate of market development and acceptance of the interconnect
technology in the industry within which we are concentrating our
business activities;
. the limited revenues and significant operating losses generated to date;
. the possibility of significant ongoing capital requirements and our
ability to secure financing as and when necessary;
. our ability to compete successfully with the other providers of
interconnect technologies;
. our ability to retain the services of our key management, and to attract
new members of the management team; and
. our ability to obtain and retain appropriate patent, copyright and
trademark protection of our intellectual properties and any of our
products.
You should only rely on the information contained in this prospectus. We
have not authorized any person to provide you with different information. If
anyone provides you with different or inconsistent information, you should not
rely on it. We are not making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.
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<PAGE>
PROSPECTUS SUMMARY
The following summary highlights certain information contained throughout
this prospectus. It is not complete and may not contain all of the information
that you should consider before investing in the securities offered by this
prospectus. To understand this offering fully, you should read this entire
prospectus carefully, including the risk factors.
The Company
We were incorporated on June 22, 1996 as Sunlight Systems, Ltd, a Nevada
corporation. Our corporate offices are located at 370 - 17th Street, Suite
3580, Denver, Colorado 80202, and our telephone number is (303) 592-1010. Our
common stock is traded on the over-the-counter market and is quoted on the OTC
Bulletin Board under the symbol "NPCT." Our common stock also is traded on the
Third Market Segment of the Frankfurt Stock Exchange under the symbol "NPI."
On February 26, 1998, we changed our name to Nanopierce Technologies, Inc.
and we acquired the intellectual property rights related to our patented
Particle Interconnect Technology (the "particle technology") from Particle
Interconnect Corporation, a Colorado Corporation, a wholly owned subsidiary of
Intercell Corporation, also a Colorado Corporation and our affiliate. We
acquired the particle technology to pursue a more focused, strategic application
and development of the particle technology. We have designated and are
commercializing our particle technology as the Nanopierce Connection System (the
"connection system").
Our particle technology is protected by 10 patents, two pending patent
applications and two patent disclosure documents that are currently in
preparation, all of which we now own. The particle technology is based on
modifying a contact surface by depositing on that surface metal-coated
microscopic particles. Generally, the patents and patent applications relate to
hard particles coated with a conductive material such as copper or nickel which
are deposited onto a foundation such as a printed circuit board, a thin plate
onto which electronic components are placed, a socket, connector or conductor to
make electrical connections with what we believe is superior conductivity. See
"THE COMPANY - The particle technology."
Our market strategy is to offer the connection system in products, services
and technology packages into market segments and commercial applications in
which the connection system either has a significant cost advantage or is
enabling, in that it enables electronic manufacturers to successfully produce
products that may not be otherwise possible. We intend to adopt and have begun
to implement a three-part approach to commercialize our particle technology.
The first part of our strategy is to generate royalty revenues by forming
strategic relationships with, or licensing the particle technology to,
established companies in the markets in which the connection system is
applicable. The second part of our strategy is to establish joint ventures with
established industry participants. The third part of our strategy is to
organize operating subsidiaries that produce components or systems utilizing the
connection system. See "THE COMPANY."
The Offering
This offering includes:
. warrants to purchase 430,000 shares of our common stock and
. 3,174,426 shares of our common stock that will be issued upon the
exercise of all of the warrants and conversion of all of our 6%
convertible debentures into common stock. The warrants and
convertible debentures include those that may be issued upon
exercise of a
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<PAGE>
conditional warrant purchased by Equinox Investors
LLC described elsewhere in this prospectus.
Warrants
The warrants offered include 150,000 warrants issued to Equinox Investors
LLC, 30,000 warrants issued to EBI Securities Corporation and 250,000 warrants
to be issued to Equinox Investors LLC upon the exercise of the conditional
warrant purchased by Equinox Investors LLC.
Common Stock
The 3,174,426 shares of common stock offered in this prospectus includes:
. 180,000 shares of common stock issued upon on the exercise of the
warrants;
. 514,580 shares of common stock issued upon the conversion of
$1,500,000 of our 6% convertible debentures based upon the price of
our common stock on February 24, 2000 and up to an additional
1,372,213 shares of common stock issuable upon conversion of our 6%
convertible debentures if the price of our common stock declines
below that price;
. 250,000 shares of common stock based on the exercise of the
warrants to be issued under the conditional warrant purchased by
Equinox Investors LLC;
. 857,633 shares of common stock based on the exercise of the
conditional warrant purchased by Equinox Investors LLC to purchase
$2,500,000 of our 6% convertible debentures and the conversion of
these debentures into common shares at a conversion price of $2.915
per share as described more fully in this prospectus. We are not
offering the debentures in this prospectus.
Use of Proceeds
We have received $1,500,100 in proceeds from the sale of convertible
debentures, warrants to purchase shares of common stock and a conditional
warrant to Equinox Investors LLC. We expect to receive an additional $3,753,450
in proceeds if:
. the conditional warrant purchased by Equinox Investors LLC is
exercised;
. the warrants for 150,000 shares of common stock previously sold to
Equinox Investors LLC are exercised at an exercise price of $2.915
per share;
. the additional 6% debentures in principal amount of $2,500,000 are
purchased by Equinox Investors LLC;
. additional warrants to purchase 250,000 shares of common stock are
issued to Equinox Investors LLC pursuant to the conditional warrant
and are exercised at an exercise price of $2.915 per share; and
. the warrants for 30,000 shares of common stock previously sold to
EBI Securities Corporation are exercised at an exercise price of
$2.915 per share.
We cannot assure you that the conditional warrant or any of the warrants
will be exercised or that the additional debentures will be purchased. We will
not receive any proceeds from the conversion of the debentures into common
shares.
We have used or we expect to use the proceeds from the sale of the
convertible debentures, the warrants and the conditional warrant to fund
operations, production, marketing, sales and, possibly, to
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<PAGE>
acquire other technologies. We intend to use the proceeds from the exercise of
the warrants or the additional debentures for working capital purposes. See "USE
OF PROCEEDS."
Risk Factors
Your investment in the warrants and the common stock offered in this
prospectus involves a high degree of risk. See "RISK FACTORS" on page 5.
4
<PAGE>
RISK FACTORS
When deciding whether or not to purchase the warrants or common stock
offered in this prospectus, you should carefully consider the risks and
uncertainties described below and the other information in this prospectus. If
any of the following risks or uncertainties actually occurs, our business,
financial condition and operating results would likely suffer. In that event,
you could lose all or part of the money you paid to buy our common stock or our
warrants.
We have a limited operating history
Our operating history that is relevant to our new business plan is limited,
and we have limited experience or business history marketing the particle
technology and no experience licensing any products that use the particle
technology. We cannot assure you that products using the particle technology
will ever be brought to the market, even if we hire experienced personnel and go
through the product testing process.
Our revenues depend on bringing the particle technology to the marketplace
We do not anticipate generating revenues until products utilizing the
particle technology are developed, marketed, manufactured and brought to the
marketplace. We anticipate that developing our particle technology and products
will be expensive. The costs that we expect to incur include application
engineering expenses, marketing costs and other general and administrative
expenses. Even if we successfully develop the particle technology, we may be
unable to compete successfully in the marketplace, or the development of the
technology may not generate enough revenue to offset our operating costs.
We have a history of losses because our operating expenses exceed our revenues
We recently have incurred increased operating expenses without a
corresponding increase in revenues. We reported a net loss of $487,092,
$1,137,334 and $3,139,439 for the fiscal years ended June 30, 1997, 1998 and
1999. Of the net loss in 1999, approximately $2,056,275 was attributable to
non-cash transactions involving the issuance of stock for services or in lieu of
interest payments. As of December 31, 1999, our total indebtedness was
$728,964. As of December, 31, 1999 our 33% shareholder, Intercell Corporation,
owed us $123,865. We do not know when Intercell Corporation will be able to pay
us these funds.
We may not be able to continue as a going concern
Our independent auditors' report of our financial statements as of June
30, 1999 includes an explanatory paragraph expressing substantial doubt about
our ability to continue as a going concern. If we are unable to secure
significant additional financing, we may be obligated to seek protection under
the bankruptcy laws and our shareholders may loose their investment.
We do not expect to pay dividends in the foreseeable future
We have never paid cash dividends on our common stock. We do not
expect to pay cash dividends on our common stock at any time in the foreseeable
future. The future payment of dividends directly depends upon our future
earnings, capital requirements, financial requirements and other factors that
our board of directors will consider. Since we do not anticipate paying cash
dividends on our
5
<PAGE>
common stock, return on your investment, if any, will depend solely on an
increase, if any, in the market value of our common stock.
We only have informal joint ventures or partnerships in place and cannot
guarantee that any formal or additional agreements will be entered into in the
future
We believe that our long-term profitability and growth depends on entering
into licensing or joint venture relationships with various manufacturers to
develop and market products using the particle technology. We have recently
entered into some informal agreements but have not entered into any formal
agreements to date. We cannot assure you that any additional informal
agreements will ever be entered into, or that any formal agreements that we
enter into in the future will be profitable. Our business could be negatively
impacted if we fail to enter into formal agreements or more informal
arrangements. See "THE COMPANY--Sales and Marketing Strategy--Strategic
Alliances."
Our inability to establish a market presence with our particle technology could
cause consumers to use alternative technologies
We believe that it is important to establish a market presence for our
particle technology within the next two years. Any delay in establishing the
particle technology could cause prospective customers to use alternative
technologies. To achieve a market presence, we have begun negotiating to enter
into joint ventures, licensing or other similar arrangements with one or more
manufacturers. However, we cannot assure you that these attempts will be
successful. Any loss of our potential customers to alternative technologies
could adversely affect our business and financial condition.
We may be unable to meet our ongoing needs for additional capital
We cannot accurately predict how much money we will need to implement our
strategic business plan or to continue operations. Our future capital
requirements, the likelihood that we can obtain money and the terms of any
financing will be influenced by many different factors, including:
. our revenues,
. the status of competing products in the marketplace,
. our performance in the marketplace,
. our overall financial condition,
. our business prospects,
. the perception of our growth potential by the public,
including potential lenders,
. our ability to enter into joint venture or
licensing relationships to achieve a market presence and
. our progress in developing, marketing and selling the particle
technology.
While we are confident, based on recent discussions, that we will be able
to obtain adequate financing in a timely fashion, if we cannot obtain adequate
financing or if the terms on which we are able to acquire financing are
unfavorable, our business and financial condition could be negatively affected.
We may have to delay, scale back or eliminate some or all of our development and
manufacturing programs, if any. We may also have to go to third parties to seek
financing, and in exchange, we may have to give up rights to some of our
technologies, patents, potential products or other assets.
6
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We cannot guarantee the quality, performance or reliability of our products
We have no prior experience in taking technology to the manufacturing or
production stage. We plan to have licensees or co-joint venturers manufacture
products using the particle technology. We expect that the customers of these
products will demand quality, performance and reliability. We cannot assure you
that our future licensees or co-joint venturers will be able to meet the quality
control standards that may be established by equipment manufacturers and other
customers of products utilizing the particle technology.
There may be insufficient demand for our particle technology
We must convince our potential customers that the particle technology is
technologically sound and can be manufactured efficiently and cost-effectively
before connector manufacturers and electronic equipment manufacturers will be
willing to use our technology. To create this consumer demand, we have to
successfully market and sell our new technology. Even after these efforts, our
particle technology may not be viewed by consumers as an improvement over
existing technologies and may not achieve commercial acceptance.
We may be unable to hire and retain key personnel
Our future success depends in part on the continued contributions of our
key technical and senior management personnel. Our success also depends on our
ability to attract and retain additional qualified technical personnel with
experience in manufacturing and personnel with experience in marketing. We may
be unable to attract or retain these necessary personnel. If we fail to attract
or retain skilled employees, or if a key employee fails to perform in his or her
current position, we may be adversely affected.
We may be unable to successfully compete in the marketplace
The interconnect market is highly competitive. We will compete with
suppliers of other interconnect technologies such as Thomas and Betts, Alpha
Metals and major electronic technology manufacturing leaders such as Philips,
Siemens and IBM. We are disadvantaged competing against these competitors in
several different areas, including:
. financial resources;
. technological resources;
. manufacturing capabilities;
. diversity of revenue sources and business opportunities;
. personnel and human resources; and
. research and development capabilities.
Our larger competitors have long-term advantages over us in research and
new product development and have a greater ability to withstand periodic
downturns in the interconnect market because they have diverse product lines
that can provide revenue even when there is a downturn in the interconnect
market.
We are also in competition with new technologies and products that have not
yet been developed. Our ability to compete successfully depends in part on our
capability to upgrade our products and quality
7
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control procedures and to adapt to technological changes and advances in the
electronics industry. To compete, we must make sure that products that are
introduced with our technology remain compatible with evolving generations of
electronic components and manufacturing equipment. We cannot assure you that we
will be successful in these endeavors.
Changes in technology could render our particle technology obsolete
The interconnect market is subject to rapid technology changes. New
products are introduced, old products are enhanced and others become obsolete.
The entire interconnect market may be replaced by a newer form of technology.
To be competitive in this quickly evolving market, we must develop, market and
sell our products on a timely and cost-effective basis. We also must respond to
the ever changing requirements and demands of our customers. Our success in
developing new or enhanced technologies depends on successful new product
selection and integration of our particle technology into products. Our success
will also depend on how quickly competitors can design and develop competing
products and technologies. We cannot assure that we will be successful in
selecting, developing, and marketing new technologies or that errors or flaws in
the new technologies will not prevent or delay market acceptance. If we cannot
introduce technologies and products that satisfy market demands in a timely
manner, we may be negatively affected.
We may be unable to obtain and retain appropriate patent, copyright and
trademark protection of our products
We protect our intellectual property rights through patents, trademarks,
trade names, trade secrets and a variety of other measures. However, these
measures may be inadequate to protect our intellectual property or other
proprietary information.
. Trade secrets may become known by third parties. Our trade secrets or
proprietary technology may become known or be independently developed
by competitors.
. Rights to patents and trade secrets may be invalidated. Disputes may
arise with third parties over the ownership of our intellectual
property rights. Patents may be invalidated, circumvented or
challenged, and the rights granted under those patents that provide us
with a competitive advantage may be nullified.
. Problems with future patent applications. Pending or future patent
applications may not be approved, or the scope of the granted patent
may be less than the coverage sought.
. Infringement claims by third parties. Infringement, invalidity, right
to use or ownership claims by third parties or claims for
indemnification may be asserted by third parties in the future. If
any claims or actions are asserted against us, we can attempt to
obtain a license for that third party's intellectual property rights.
However, the third party may not provide a license under reasonable
terms, or may not provide us with a license at all.
. Third parties may develop similar products. Competitors may develop
similar products, duplicate our products or may design around the
patents that are owned by us.
. Laws in other countries may insufficiently protect intellectual
property rights abroad. Foreign intellectual property laws may not
adequately protect our intellectual
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property rights abroad. Our failure to protect these rights could
adversely affect our business and financial condition.
. Litigation may be required to protect intellectual property rights.
Litigation may be necessary to protect our intellectual property
rights and trade secrets, to determine the validity of and scope of
the rights of third parties or to defend against claims of
infringement or invalidity by third parties. Such litigation could be
expensive, would divert resources and management's time from our sales
and marketing efforts, and could have a materially adverse effect on
our business, financial condition and results of operations and on our
ability to enter into joint ventures or partnerships with others.
License rights to particle technology may limit our ability to compete
Before we acquired the patents, patent applications and licenses from the
original owners of the particle technology, the inventor of the particle
technology granted five companies exclusive and non-exclusive licenses to use
the patents and patent applications relating to the particle technology. At
this time, only two of the five licensees are using our technology and none of
these licenses relate to either smart card or smart label technology. These
licenses restrict us as follows:
. Exclusive licenses prevent us from competing against the exclusive
licenses. We cannot compete in the fields in which exclusive licenses
have been granted. An exclusive license was granted in the field of
sockets for use in the automated handling and testing of integrated
circuits, a type of semiconductor in which a number of transistors and
other elements are combined to form a more complicated circuit .
. Non-exclusive licenses allow licensees to compete against us in
certain areas. The licensees with non-exclusive licenses can compete
directly with us or our other future licensees. Non-exclusive licenses
have been granted to use the particle technology for electrically
conductive components, laminate-based and metal-based products and
semiconductor products. If the present licensees decide to compete
with us or our future licensees, this competition could adversely
affect our business.
No market exists for the warrants
No public market exists to trade the warrants offered in this prospectus
and we do not intend to have the warrants listed on any national securities
exchange or quoted through the NASDAQ automated quotation system. We cannot
assure you that there will be a market to sell the warrants, or the price at
which holders would be able to sell their warrants. The price that holders
would be able to obtain depends on many factors, including our operating results
and the market for similar securities. See "DESCRIPTION OF SECURITIES -
Warrants."
State Blue Sky Laws may prevent sales of securities
Before we or any seller can sell any securities to a purchaser, state
securities laws require that the securities be registered or qualified for sale
in the state where the purchaser resides, or else fall within an exemption from
registration. We will not issue common stock to persons who want to convert
their debentures into common shares, or allow persons to exercise their
warrants, unless the debentures, the warrants, and underlying common stock are
registered or fall under an exemption from registration in the state in which
the purchaser resides. We will not knowingly sell the securities to purchasers
in jurisdictions in which the securities are not registered or otherwise
qualified for sale or exempt. However, there is a risk that purchasers may buy
the securities in the after-market or may move to jurisdictions in
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which the securities are not registered, qualified, or exempt. We cannot
guarantee that any purchaser will be able to effect any required registration or
qualification. See "DESCRIPTION OF SECURITIES - Warrants."
Federal laws may prevent conversion of debentures and exercise of warrants
For the warrants to be exercisable, and for the debentures, that are not
offered in this prospectus, to be convertible into common stock, that is offered
in this prospectus, we must maintain a current registration statement on file
with the SEC. This can be done by filing post-effective amendments to this
registration statement or by filing a new registration statement to reflect the
exercise of debentures and warrants. We have agreed to use our best efforts to
file and maintain a current registration statement with the SEC relating to the
warrants and underlying shares of common stock to the warrants and to the
debentures included in this prospectus. However, we cannot assure you that the
securities covered by this prospectus will continue to be registered. The value
of the warrants could be adversely affected at some point in the future if there
is no effective registration statement to cover the warrants. See "DESCRIPTION
OF SECURITIES."
This offering and the sale of securities by current security holders could cause
dilution of existing holders of the common stock by decreasing the price of our
common stock
The market price of the common stock could be adversely affected by sales
of substantial amounts of common stock in the public market after this offering,
by the perception that those types of sales could occur or by the fact or
perception of events which would have a dilutive effect on the market for the
common stock. As of February 1, 2000, we had 34,453,791 shares of our common
stock outstanding. After this offering, we could have up to an additional
3,174,426 shares of common stock outstanding, or 9.21%, of the issued and
outstanding stock as of February 1, 2000. If all of our outstanding convertible
securities were also converted into common stock, we would increase our
outstanding common stock in an amount of up to 35.15%, and we could have up to
53,130,717 shares of common stock outstanding. Future transactions with other
investors could further depress the price of our common stock because of
additional dilution. See "DESCRIPTION OF SECURITIES."
Common stock price could be effected by the ability of holders of our common
stock to sell their stock
The market price of the our common will be influenced by the ability of
common stock holders to sell their stock.
. Freely Transferable Shares. Of the 34,453,791 shares of our common
stock that were outstanding as of February 1, 2000, approximately
16,349,834 shares currently are freely transferable and constitute the
"float" in the public market for the common stock. Of the 37,628,217
shares of our common stock that could be outstanding after this
offering, the "float" in the public market for the common stock would
remain at 16,349,834 shares.
. Restricted Shares. Of the 34,453,791 shares of our common stock that
were outstanding as of February 1, 2000, approximately 18,103,957
shares currently are "restricted" or "control" securities within the
meaning of Rule 144 under the Securities Act. Of the 37,628,217
shares of our common stock that could be outstanding after this
offering, up to 21,278,383 shares of the common stock would be
"restricted" or "control" securities. These restricted securities
cannot be sold unless they are registered under the Securities Act, or
unless an exemption from registration is otherwise available,
including
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the exemption that is contained in Rule 144. Under Rule 144, a person
that is holding our common stock can sell shares based generally on
certain limitations as described below.
. Affiliates. Any "affiliate," as that term is defined under the
Securities Act, who has beneficially owned our common stock for at
least a year, can sell shares of our common stock subject to the
following volume limitation: in any three-month period, the
affiliate cannot sell more shares of our common stock than the
greater of 1% of the then outstanding shares of common stock or
the average weekly trading volume of the then outstanding shares
of common stock during the four calendar weeks preceding the sale.
. Non-affiliates. A person who is not deemed our "affiliate" who
has beneficially owned shares of our common stock for at least a
year can sell shares of our common stock subject to the same
volume limitation described above. Alternatively, a person who is
not our "affiliate" who has beneficially owned shares of our
common stock for at least two years can sell shares of our common
stock without regard to this volume limitation. See "DESCRIPTION
OF SECURITIES," and "PLAN OF DISTRIBUTION. "
We could issue preferred stock that could adversely effect the rights of the
common stock holders
We are authorized to issue up to 5,000,000 shares of our preferred stock,
$.0001 par value per share. Our articles of incorporation gives our board of
directors the authority to issue preferred stock without approval of our
stockholders. We may issue preferred stock to finance our operations. We may
authorize the issuance of our preferred stock in one or more series. In
addition, we may set several of the terms of the preferred stock, including:
. dividend and liquidation preferences,
. voting rights,
. conversion privileges,
. redemption terms, and
. other privileges and rights of the shares of each authorized series.
The issuance of large blocks of preferred stock could have a dilutive
effect on our existing shareholders and it can negatively impact our existing
stockholders' liquidation preferences. In addition, while we include preferred
stock in our capitalization to improve our financial flexibility, we could
possibly issue or preferred stock to third parties as a method of discouraging,
delaying or preventing a change in control in our present management.
The resale of our common stock by you may be limited because of its low price
which could make it more difficult for broker/dealers to sell our common stock
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a penny stock. Regulations enacted by the SEC
generally define a penny stock as an equity security that has a market price of
less than $5.00 per share, subject to some exceptions. Unless an exception
applies, a disclosure
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schedule explaining the penny stock market and the risks associated with
investing in penny stocks must be delivered before any transaction in penny
stock can occur.
In addition, if our securities are not quoted on NASDAQ or if they do not
meet an exception to the penny stock regulations cited above, trading in our
securities would be covered by Rule 15g-9 promulgated under the Securities
Exchange Act of 1934. Under this rule, broker/dealers who recommend penny
stocks to persons that are not established customers or accredited investors
must make a special determination in writing for the purchaser that the
investment is suitable, and must also obtain the purchaser's written agreement
to a transaction before the sale.
The regulations could limit the ability of broker/dealers to sell our
securities and thus the ability of purchasers of our securities to sell their
securities in the secondary market if our common stock has a market price of
less than $5.00 per share.
USE OF PROCEEDS
Under the terms of the Securities Purchase Agreement (the "Securities and
Purchase Agreement") between us and Equinox Investors LLC, dated as of January
11, 2000, for an aggregate purchase price of $1,500,100, we sold to Equinox
Investors LLC:
. warrants to purchase 150,000 shares of common stock (the "initial
Equinox warrants"),
. 6% debentures in the principal amount of $1,500,000 (the "initial
Equinox debentures") and
. a conditional warrant (the "conditional warrant") to purchase
. 6% convertible debentures in the principal amount of up to
$2,500,000 (the "additional Equinox debentures") and
. warrants to purchase up to 250,000 shares of common stock
(the "additional Equinox warrants").
Together, the initial Equinox debentures and the additional Equinox debentures
are referred to as the "Equinox debentures" and the initial Equinox warrants and
the additional Equinox warrants are collectively referred to as the "Equinox
warrants."
In exchange for arranging the sale of securities to Equinox Investors LLC
under the Securities Purchase Agreement, we issued to EBI Securities Corporation
warrants to purchase 30,000 shares of common stock (the "EBI warrants").
We expect to collect up to a total of $5,253,450 if all the securities
issued by us are converted or exercised as described in this prospectus. The
proceeds that we expect to collect includes the $1,500,100 that we have already
received from the offering of initial Equinox warrants, the initial Equinox
debentures and the conditional warrant and an additional $3,753,450 in proceeds
that we will receive if the following conditions are met:
. The conditions to exercising the conditional warrant that are as
specified in the conditional warrant are met,
. The 150,000 initial Equinox warrants are exercised at an exercise
price of $2.915 per share;
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. All of the additional Equinox debentures in principal amount of
$2,500,000 are purchased;
. All of the additional Equinox warrants to purchase 250,000 shares of
common stock are issued to Equinox Investors LLC pursuant to the
conditional warrant and are exercised at an exercise price of $2.915
per share; and
. All 30,000 of the EBI warrants are exercised at an exercise price of
$2.915 per share.
We have used or we intend to use the proceeds from the sale of the initial
Equinox warrants, the initial Equinox debentures and the conditional warrant to
fund operations, to expand production, marketing and sales and possibly to
acquire other technologies. We expect to use substantially all of the proceeds
received from the sale of the additional Equinox debentures and the exercise of
the additional Equinox warrants and the EBI warrants, for general working
capital purposes. However, no assurance can be given that any of the Equinox
debentures will be purchased or that proceeds will be generated from the
exercise of the Equinox warrants or the EBI warrants.
We will not receive any proceeds from the conversion of the Equinox
debentures into common stock. To the extent they are resold by Equinox Investors
LLC, we will not receive any proceeds from the resale of the Equinox warrants or
from the sale of common stock issuable upon the exercise of the Equinox warrants
or the conversion of any of the Equinox debentures into common stock. We will
not receive any proceeds from the sales, if any, of any shares of common stock
or the EBI warrants by EBI Securities Corporation. See "DESCRIPTION OF
SECURITIES - Warrants."
THE COMPANY
We were incorporated on June 22, 1996 as Sunlight Systems, Ltd., a Nevada
corporation. Our corporate offices are located at 370 - Seventeenth Street,
Suite 3580, Denver, Colorado 80202, and our telephone number is (303) 592-1010.
Our common stock is traded on the over-the-counter market and is quoted on the
OTC Bulletin Board under the symbol "NPCT." Our common stock is also traded on
the Third Market Segment of the Frankfurt Stock Exchange under the symbol "NPI."
Overview
We were incorporated as Sunlight Systems, Ltd. From June 22, 1996 through
November 1996, we were engaged in limited activities as a dealer and distributor
of sun tunnels. This business, however, was discontinued and substantially all
assets were sold in November of 1996. From that time until February 1998, we
were generally inactive and reported no significant operating revenues.
On February 26, 1998, we changed our name to Nanopierce Technologies, Inc.
and we acquired the intellectual property rights related to our patented
Particle Interconnect Technology (the "particle technology") from Particle
Interconnect Corporation, a Colorado Corporation, a wholly owned subsidiary of
Intercell Corporation, a Colorado Corporation and our affiliate. In exchange
for the assets of Particle Interconnect Corporation, we issued 7,250,000 shares
of our common stock and 100 shares of our Series A Preferred Stock, convertible
into 7,250,000 shares of common stock to Intercell Corporation. We acquired the
particle technology to pursue a more focused, strategic application and
development of the particle technology.
The particle technology--Nanopierce Connection System
Our particle technology is protected by 10 patents, two patent applications
and two patent disclosure documents that are currently in preparation, all of
which we now own. The particle technology
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can be used to make highly reliable electrical connection without the need for
soldering or traditional connector methods. The particle technology is based on
modifying a contact surface by depositing on that surface metal-coated
microscopic particles. Generally, the patents and patent applications relate to
hard particles coated with a conductive material such as copper or nickel which
are deposited onto a foundation such as a printed circuit board, a socket,
connector or conductor to make electrical connections with what we believe is
superior conductivity. The particle technology can be used on many different
bases, whether flexible, rigid, metallic or non-metallic.
The particle technology begins with metallized, treated diamonds or other
hard particles, which have been closely screened to a specified size. The
particles are tightly classified in sizes ranging from 5 microns to 125 microns,
depending upon the product application. These electrically conductive particles
are attached onto contact sites using standard printed circuit board
manufacturing processes. The embedded particles create a surface with many
points that provide numerous parallel electrical paths by allowing electricity
to penetrate through an oxide, which is a non-conductive material, without
requiring the wiping action of conventional contacts. Wiping action refers to
the mechanical removal of oxides by sliding or rubbing the contact surfaces
together. We believe that our non-wiping, oxide penetrating particle technology
is capable of penetrating surface contamination and oils to create an effective
and reliable electrical contact.
The particles concentrate any contact force that is applied into a very
small area or point. This concentration of contact force gives the particle the
pressure, the force per square unit area, required to pierce oxides and other
contaminants on most surfaces without requiring large amounts of force on the
connector contact. The particle technology allows reliable connections to be
made with as little as 10 grams of force per contact. This low level of force
is sufficient to drive the particles through any oxides on an electrical contact
surface, such as an input/output pad on an individual integrated circuit which
is attached to a supporting surface. Moreover, the particles do insignificant
damage to the mating surface. This provides a long service life in which many
reconnections are possible because there is very little degradation of the
contact surface.
These particles can be applied to a variety of "substrates," which are
foundations that provide a supporting surface, which can be flexible, rigid,
metallic or non-metallic in nature.
We have designated our particle technology in commercial settings as the
Nanopierce Connection System (the "connection system").
Sales and Marketing Strategy
Our market strategy is to offer the connection system in products, services
and technology packages in those market segments and commercial applications in
which the connection system has a significant cost advantage or is enabling, in
that it enables electronic manufacturers to successfully produce products that
may not be otherwise possible. This strategy has, until recently, taken longer
than expected due to litigation which has been resolved in our favor. See "--
Legal Proceedings."
We intend to adopt and have begun to implement a three-part approach to
commercialize our particle technology. The first part of our strategy is to
generate royalty revenues by forming strategic relationships with, or licensing
the particle technology to, established companies in the markets in which we
plan to compete and which generally have high entry barriers, including markets
with entrenched competitors or foreign laws that effectively prohibit
competition. We believe that the licensing of our technology to major industry
partners will increase the speed at which particle technology is implemented and
adopted and will also help to establish "brand" recognition for the particle
technology.
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The second part of our strategy is to establish joint ventures with
established industry participants. This strategy is designed to tap into
existing markets and to establish leadership in markets requiring special skills
or high capital investment. We have begun negotiations to establish these joint
ventures. See "-Strategic Alliances" herein.
The third part of our strategy is to organize two operating subsidiaries
that produce components or systems utilizing the connection system in new market
segments which have few or no established competitors and in which we believe we
may be able to dominate with our technology. This strategy is designed to
permit us to become one of the first to act within the emerging markets that are
created by newly available technology advances or improvements. Also, we
believe that we can capture additional value by controlling production in
segments that have low capital requirements. We recently organized one
operating subsidiary (as described below) to produce smart labels, which has low
capital requirements and at the current time has no entrenched competitors. The
second subsidiary that we propose to organize would apply our technology to
"semiconductor wafers," that would eliminate the need for wire bond connections
between the semiconductor and the system. The capital requirements for this
second subsidiary would be very low and would involve technology that we believe
would be completely new to the worldwide industry.
Implementation Plan
We also intend to implement our sales and marketing strategy through
various proposed divisions in addition to the subsidiaries described above.
Technology Division
The "technology division" will include an application development team that
will play a role analogous to corporate research and development or engineering
by developing new applications for internal and external customers. This team
also will allocate a portion of its resources for technology enhancement.
Business Development Division
Initially, the "business development division" will support all departments
conducting revenue generating activities with sales and marketing. Later, the
smart label subisdiary that was recently organized and the proposed
semiconductor wafer subsidiary will each assume responsibility for its own
marketing, while the business development division will continue to represent
the technology transfer division (as defined below) to the industry. The
business development division will also monitor the industry for acquisition and
other strategic growth opportunities.
Technology Transfer Division
The "technology transfer division" represents a department which will
conduct revenue generating activities based on commercial use of the connection
system outside our company through licensees and other strategic partners. This
division will support our licensees and partners with the installation of the
connection system and the related training and support. Personnel for these
activities will be drawn from the technology division, but costs that are
directly associated with technology transfer activities will be charged to this
division.
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Operating Subsidiaries
On January 19, 2000, we incorporated a wholly owned subsidiary, NanoPierce
Card Technologies GmbH, a German corporation in Munich, Germany. The subsidiary
was formed to focus all of our business activities relating to the emerging
smart card and smart label markets, and to better capitalize on our expectations
of these applications, including the licensing of our technology.
We also propose to organize a second subsidiary that would apply our
technology to "semiconductor wafers." This would eliminate the need for wire
bond connections between the semiconductor and the system.
These operating subsidiaries would each act as independent divisions which
will conduct revenue generating activities. Both of the subsidiaries would
support a minimal level of technology and engineering effort and will rely on
the technology transfer division for technology and engineering efforts. This
allocation strategy will minimize redundant technology development efforts among
divisions.
Smart Cards and Smart Labels
Commencing in January 1999, we successfully introduced our technology to
applications in the manufacturing of smart cards. Of particular significance to
manufacturers of contactless smart cards is the desire to obtain a secure,
efficient connection between the microprocessor chip and the radio antenna in
what are known as dual interface smart cards and contactless smart cards.
Smart cards are plastic, flexible credit-card size devices embedded with a
powerful microchip, designed to store and process information. Reliable
connections in flexible applications are crucial to the card's operation. Smart
cards are used as phone cards, health cards, identification cards, pay
television cards, meter cards, bank cards, transportation tickets, access
control cards and automatic dispenser cards. Contactless smart cards collect
the energy to operate from a radio frequency emitted by a fixed or handheld
reader device; therefore, they do not need a battery.
A smart label is a paper thin identification label with a programmable
integrated circuit inside and an antenna connected to it. The smart label
communicates through radio frequency signals with a fixed position or hand held
reader or writer over distances up to one meter. Smart labels collect the
energy to operate from a radio frequency field emitted by a fixed or handheld
reader device; therefore, they do not need a battery. The "substrate," or the
foundation that provides a supporting surface, for a smart label is paper or
plastic yielding a paper-thin flexible label, which can be self-adhesive and can
be printed on. Uses for contactless smart labels include:
. labels applied to shipping or courier parcels;
. airline baggage tags;
. retail labels applied directly by the manufacturer to the product,
identifying the manufacturer, product type, production lot and a
digital signature to prove genuineness;
. labels for inventory control; and
. labels for rental services, such as libraries and video stores.
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We believe that the market for smart cards and smart labels is poised for
explosive growth. However, the lack of a cost-effective and reliable system for
electrical connection of the microchip to the contact plate or antenna is a
critical bottleneck holding the industry back. The industry cannot satisfy the
market demands for cost-effective and reliable contactless smart cards and smart
labels with the current technologies. We believe that the particle technology
in the connection system may be the solution for the industry.
We believe that we are strategically positioned to become a major
participant in the large and growing smart card and smart label market. Current
technologies cannot satisfy the cost and reliability demands of this market.
The connection system can meet the cost and reliability demands because (a) it
provides single-step, low-cost manufacturing procedures; (b) it provides
reliable connection on flexible substrates; and (c) it is thin enough to be used
in the manufacturing of smart labels. Moreover, none of the outstanding
licenses that have been granted with respect to the connection system relate to
either smart card or smart label technology.
Strategic Alliances
In the Spring of 1999, we implemented our strategic business plan by
forming strategic alliances intended to result in joint ventures to develop
applications for our technology in the smart card and smart label industry. In
that regard, we have successfully concluded three strategic alliances with
participants in the industry and have also entered into four other informal
agreements or discussions, each as described below. No assurances can be given
to you that any of these agreements will generate revenues for us or will be
profitable to us.
MULTITAPE GMBH & CO., KG AGREEMENT
- ----------------------------------
On April 15, 1999, we entered into an application development agreement
with Multitape, GmbH & Co., KG, of Paderborn, Germany to develop an application
of the particle technology on chip module substrate tapes manufactured by
Multitape. Multitape is a major supplier of chip module substrate tapes to
numerous card manufacturers, including most all of the largest card
manufacturers in the world, and continues to supply us with these tapes for
testing with our technology. Should the ongoing tests of the technology on the
substrate tapes and in various electronic applications prove successful to our
satisfaction and to the satisfaction of Multitape, we have agreed with Multitape
to enter into a more formal arrangement to commercialize the opportunity. As a
result of our recent business developments including the completion of a
financing, we anticipate that our business activities with Multitape will
increase.
MEINEN, ZEIGEL & CO. AGREEMENT
- ------------------------------
On May 17, 1999, we entered into a technology cooperation agreement with
Meinen, Zeigel & Co. ("Meinen"), a company based in Munich, Germany, to develop
applications of our technology for dual interface smart card modules and the
qualification and industrialization of a chip module embedding process on Meinen
equipment. Meinen is a developer, manufacturer and supplier of equipment used
in the production of smart cards. Many of the world's largest smart card
manufacturers utilize Meinen equipment to produce standard smart cards,
contactless smart cards and dual interface cards. When we entered into this
technology cooperation agreement with Meinen, we expected that Meinen would
design new equipment based around the new manufacturing process enabled by
adoption of our technology, which would allow them to design less expensive,
more efficient, higher output, simpler production equipment. Due to internal
corporate changes in Meinen, however, currently we are unable to predict if
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we will be able to enter into a formal joint venture agreement with Meinen to
further implement the commercial exploitation of our technology.
ORGA KARTENSYSTEMES, GMBH AGREEMENT
- -----------------------------------
On June 11, 1999, we entered into a technology development agreement with
ORGA Kartensystemes, GmbH ("ORGA"), of Flintbek, Germany, one of the world's
largest smart card manufacturers. ORGA is working with us to apply the
connection system to the design and manufacture of dual interface smart cards,
particularly the connection between antenna and chip modules. We are still in
the process of meeting the testing and qualification standards of ORGA. If the
testing and qualification standards are met, we anticipate that we will enter
into a formal joint venture or direct licensing of ORGA relating to this
application of our technology.
CIREXX CORPORATION AGREEMENT
- ----------------------------
In addition to the three agreements described above, we have also entered
into an agreement-in-principle to form a joint venture or limited liability
partnership with Cirexx Corporation located in Santa Clara, California. Cirexx
Corporation is a world leader in the quick turn prototype design and production
manufacturer of high technology, digital, radio frequency and analog flexible
circuits and mixed technologies.
The proposed joint venture or limited liability partnership will be
organized to commercially exploit the connection system in all applications for
which an exclusive license to others has not been issued. We are in the process
of developing a joint marketing plan to address anticipated consumer demand for
the connection technology in Cirexx products and processes and the equipment
modifications and other technical working arrangements that must be made in
order for Cirexx Corporation to be able to market and apply the connection
technology from their facilities.
SCHLUMBERGER SYSTEMES, S.A.
- ---------------------------
We have entered into a confidential disclosure agreement with Schlumberger
Systemes, S.A. effective July 8, 1999. We are currently in the process of
exchanging information with Schlumberger Systemes, S.A. relating to the
application of our technology to dual interface smart cards and other
applications.
TAIKO DENKI, LTD. PROPOSAL
- --------------------------
In addition to the strategic alliances described above, we are in
discussions with other companies in the smart card industry relating to possible
application of our technology to their product lines. Further, we are expanding
the scope of our strategic business activities to now embrace potential
applications of the connection system in the connector market. For example, we
are currently in discussions with Taiko Denki, Ltd. ("Taiko"), one of Japan's
leading connector manufacturers relating to the application of our technology to
the connector products of Taiko. We have submitted a formal proposal to Taiko
relating to the formation of a strategic business relationship. No assurances
can be given that any proposal will be adopted.
Research and Development
To date, we have not incurred any significant amount on research and
development costs and we do not intend to incur any material research and
development costs during the next fiscal year. We hope
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to avoid incurring substantial research and development cash requirements by
entering into joint ventures with others for the development of future products
utilizing the particle technology.
Financing
In addition to the financing described in this prospectus, we recently
entered into a letter agreement dated February 14, 2000, with Ladenburg Thalmann
& Co. Inc., in which they would act as agent for up to $30 million in additional
financing on a best-efforts basis over a period of up to 24 months. We cannot
give you any assurances that this financing will be successfully completed.
Competition
Competition in the electronic connector market is fierce. The principal
competitive factors are product quality, performance, price and service. While
we are unaware of any competitors using hard particles as an interconnect
material, we and our licensees face competition from well established firms with
other interconnect technologies. However, most of these competitors apply their
technologies to very narrow markets or applications and most have had only
limited success in mass commercialization of their technologies.
We will face competition from the development of existing and future
competing technologies. There currently exist approximately 28 different
technologies that can be used to create interconnect solutions, including:
. soldering, which uses an easily melted metal alloy to form a permanent
joint between two parts;
. wire bonding, which uses a wire connection created by applying heat and
pressure;
. dendrite crystals, a pointed crystal used to make connections by IBM;
. gold dot technology, which is connection technologies that use gold
bumps;
. elastomers, which uses rubber-like synthetic materials; and
. conductive adhesives, which glues two metal surfaces together to form an
electrical connection.
These technologies currently are produced by materials and chemical suppliers,
flexible and rigid printed circuit board manufacturers, as well as electronics
manufacturers who produce their own materials and interconnect systems. Many of
these competitors have substantially greater financial and other resources than
we do. We believe that each existing technology currently has unacceptable
limitations with regard to electrical and mechanical performance,
manufacturability or cost as compared to the particle technology. However,
there are no assurances that our particle technology can successfully compete
with current or future technologies.
Intellectual Property
We will rely on a combination of patents, patent applications, trademarks,
copyrights and trade secrets to establish and protect our proprietary rights in
the particle technology. As previously described, we currently own ten U.S.
patents, which expire from February 14, 2006 to October 15, 2013, two pending
patent applications, two patent applications in preparation and other
intellectual property relating to the particle technology.
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Before our acquisition of the particle technology, Louis DiFrancesco, the
inventor of the particle technology or the companies controlled by him granted
the following exclusive and nonexclusive licenses to pursue the patents and
patent applications relating to the particle technology:
. an exclusive license to Exatron Automatic Test Equipment Inc.
("Exatron") for use in the field of sockets in the automated handling
and testing of integrated circuits and some non-exclusive rights;
. an exclusive license, that has since been terminated, to MicroModule
Systems, Inc. for use in the field of some Multi-Chip Module thin film
bases, except attached or associated products including integrated
circuits, socket, lids, heat sinks, housings and printed circuit boards;
. a non-exclusive license to Johnson-Matthey Semiconductor Packagings,
Inc. ("Johnson-Matthey") for use in the field of laminate-based base
products;
. a non-exclusive license to Multiflex, Inc. for use in the field of the
laminate-based bases and metal bases; and
. a non-exclusive license to Myers Consulting, Inc. for use in the field
of laminate-based bases, metal bases, and wafer or semiconductor
products.
These licenses have indefinite terms and, provided that the conditions specified
in the licenses are met, can be terminated by either party by written notice.
We retain the right to exclude all other companies from using our patented
technology without a license. We may license other companies as we choose,
provided the licenses are consistent with the exclusive licenses previously
granted and other licensing restrictions that may appear in the prior licenses.
None of these licenses apply to smart cards or to smart labels.
All but the Exatron and Johnson-Matthey license agreements have been idle
since their acquisition by us and, as a result, have not produced any royalty
fees for us. Royalties under the Exatron agreement are being held and will
continue to be held in an escrow account, and maintenance payments on one
license are being held in a reserve account, outside of our control, until
various legal issues are resolved. Louis DiFrancesco has the right and the
obligation to pursue any royalties due under the Johnson-Matthey license
agreement and, to the extent that he has been unable to obtain judgment and
payment from Johnson-Matthey on royalties for a six month period that has
already expired, we are obligated to guarantee any unpaid royalty balance and
retain a right to pursue Johnson-Matthey for the unpaid balance. We have not
been advised whether Mr. DiFrancesco has obtained any royalty payments from
Johnson-Matthey and we estimate that the total amount of our guarantee to Mr.
DiFrancesco could be as much as approximately $170,000. See "--Legal
Proceedings."
In addition, a two-year non-exclusive license has been issued to Louis
DiFrancesco. Pursuant to the license, Mr. DiFrancesco is entitled to produce
all sockets for all customers (except for sockets used in the automated handling
and testing of integrated circuits) as well as layer to layer interconnections
for one confidential customer. The license expires two years from its date of
issuance, and is renewable for an additional two year period and will continue
to be renewable for two year periods so long as a minimum payment of $25,000 on
royalties from actual application of the technology are paid. See "--Legal
Proceedings."
In December 1998, MicroModule Systems, Inc. terminated all of its business
operations and sold its assets to an industry associate. As a result of this,
we have terminated the license of MicroModule Systems, Inc.
There can be no assurance that patents will be issued from any of the
pending applications, or that any claims allowed from existing or pending
patents will be sufficiently broad enough to protect our
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particle technology. While we intend to vigorously protect our intellectual
property rights, there can be no assurance that any patents held by us will not
be challenged, invalidated or circumvented, or that the rights granted
thereunder will provide competitive advantages to us. Litigation may be
necessary to enforce our patents, patent applications, trade secrets, licenses
and other intellectual property rights, to determine the validity and scope of
the proprietary rights of others or to defend against claims of infringement.
This type of litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on our business and results
of operations regardless of the final outcome of the litigation. Despite our
efforts to maintain and safeguard our proprietary rights, there can be no
assurances that we will be successful in doing so or that our competitors will
not independently develop or patent technologies that are substantially
equivalent or superior to our technologies.
The semiconductor and interconnect industries are characterized by
uncertain and conflicting intellectual property claims. We have in the past and
may in the future become aware of the intellectual property rights of others
that we may be infringing, although we do not believe that we are infringing any
third-party proprietary rights at this time. To the extent that we deem it
necessary, we may license the right to use technologies that are patented by
others in products that they manufacture. There can be no assurance we will not
in the future be notified that we are infringing other patent or intellectual
property rights of third parties. In the event of infringement, there can be no
assurance that a license to the technology in question could be obtained on
commercially reasonable terms, if at all, that litigation will not occur or that
the outcome of this litigation will not be adverse to us. The failure to obtain
necessary licenses or other rights, the occurrence of litigation arising out of
infringement claims or an adverse outcome from infringement litigation could
have a material adverse effect on our business. In any event, patent litigation
is expensive, and our operating results could be materially adversely affected
by any infringement litigation, regardless of its outcome.
We intend to protect our trade secrets and proprietary technology, in part,
through confidentiality and non-competition agreements. There can be no
assurance that these agreements will not be breached, that we will have adequate
remedies for any breach, or that our trade secrets will not otherwise become
known to or independently developed by others.
In addition, the laws of some foreign countries do not offer protection of
our proprietary rights to the same extent as do the laws of the United States.
Government Regulation
We believe that we are in substantial compliance with all material federal
and state laws and regulations governing our limited operations. Compliance
with federal and state environmental laws and regulations did not have a
material effect on our capital expenditures, earnings or competitive position
during the year ended June 30, 1999 or the fiscal quarters ended September 30,
1999 and December 31, 1999.
Employees
As of December 31, 1999, we had five employees. All four key employees
have signed employment agreements with us. In January of 2000, our newly formed
subsidiary, Nanopierce Card Technologies, had one new employee, Karl Heinz Kuhn
and had another employee, Michael Kober, scheduled to begin work in March of
2000. We anticipate that we will enter into employment agreements
21
<PAGE>
with both of those individuals. None of our employees are represented by a labor
union or are subject to a collective bargaining agreement. We believe that our
relations with our employees are excellent.
Legal Proceedings
We were involved in litigation with Louis DiFrancesco, the inventor of the
particle technology, relating to ownership of our intellectual property and the
rights as to who should receive royalty payments from licenses. We negotiated a
settlement to that litigation and, based on a declaratory judgment entered on
November 30, 1999, we own all of the right, title and interest to the
intellectual property that was under litigation. Mr. DiFrancesco is entitled to
royalty payments, maintenance fees and other amounts from the licensees relating
to the patents that were outstanding as of September 3, 1996 and is granted a
license to produce sockets and for layer to layer interconnections for one
customer as described more fully above under "--Intellectual Property."
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 100,000,000 shares of common
stock, $.0001 par value per share, and 5,000,000 shares of our preferred stock,
$.0001 par value per share. As of February 1, 2000, we had 34,453,791 shares of
common stock and no shares of preferred stock issued and outstanding. We have
outstanding warrants to purchase 11,757,500 shares of common stock, options to
purchase 3,875,000 shares of common stock and debentures which, if converted,
would total 1,372,213 shares of common stock and up to an additional 1,372,213
shares of common stock may be issuable upon the change in conversion rate on the
convertible debentures based on a decrease in the price of our common stock.
These numbers include the warrants and the convertible debentures that were sold
to Equinox Investors LLC that are described below, as well as the warrants that
were sold to EBI Securities Corporation. Overall, we would have a total of
53,130,717 shares of common stock issued and outstanding if all of our
outstanding convertible securities are exercised and converted into common
stock.
Common Stock
Each share of common stock is entitled to one vote on each matter submitted
to a vote of the stockholders and is equal to each other share with respect to
voting, liquidation and dividend rights. Holders of the common stock are
entitled to receive the dividends, if any, as may be declared by the Board of
Directors out of assets legally available therefor and to receive net assets in
liquidation after payment of all amounts due to creditors and any liquidation
preference due to preferred stockholders. Holders of the common stock have no
conversion rights and are not entitled to any preemptive or subscription rights.
The common stock is not subject to redemption or any further calls or
assessments. The common stock does not have cumulative voting rights in the
election of directors.
The transfer agent for the common stock is Corporate Stock Transfer, Inc.,
3200 South Cherry Creek Drive, Suite 430, Denver, Colorado 80209.
Dividend Policy
While there currently are no restrictions prohibiting us from paying
dividends to our stockholders, we have not paid any cash dividends on our common
stock, in the past and does not anticipate paying any dividends in the
foreseeable future. Earnings, if any, are expected to be retained to fund our
future operations. There can be no assurance that we will pay dividends at any
time in the future.
22
<PAGE>
Price Range of Common Stock
The common stock presently is traded on the over-the-counter market on the
OTC Bulletin Board maintained by the National Association of Securities Dealers,
Inc. ("NASD"). The NASDAQ symbol for the common stock is "NPCT." The common
stock is also traded on the Third Market Segment of the Frankfurt Stock Exchange
under the symbol "NPI."
The following table sets forth the range of high and low bid quotations for
the common stock of each full quarterly period during the last three fiscal
quarters, rounded to the nearest penny. The quotations were obtained from
information published by the NASD and reflect interdealer prices, without retail
mark-up, mark-down or commissions and may not represent actual transactions. The
average of the closing bid and asked prices for the common stock was $5.60 on
February 24, 2000.
<TABLE>
<CAPTION>
2000 Fiscal Year High Low
- ----------------------------------------------- ---------------------------- --------------------------
<S> <C> <C>
December 31, 1999 $2.25 $1.81
September 30, 1999 $0.41 $0.34
June 30, 1999 $0.44 $0.42
</TABLE>
While a limited market did exist for the common stock under our former
names of Mendell-Denver Corporation and Sunlight Systems, Ltd., it was so
insignificant in volume that it was not representative of a true market or a
realistic market valuation of the common stock. Accordingly, any information
relating to former market activity is deemed immaterial and has not been
included herein. This information can be obtained from the NASD by anyone
interested in this type of historical data.
As of February 1, 2000, there were 135 holders of record of our 34,453,791
outstanding shares of common stock. Based upon information provided to us by
persons holding securities for the benefit of others, it is estimated that we
have in excess of 1,000 beneficial owners of our common stock as of February 1,
2000.
Warrants
For a complete description of the terms and conditions of the Equinox
warrants and the EBI warrants that are offered in this prospectus, as well as
the conditional warrant, please refer to the Equinox warrants, the EBI warrants
and the conditional warrant which are all filed as exhibits to the registration
statement. The descriptions of the Equinox warrants, the EBI warrants and the
conditional warrant in this prospectus that follow are qualified in their
entirety by reference to those exhibits.
Equinox Warrants
The initial Equinox warrants offered by Equinox Investors LLC entitle the
holder to purchase up to 150,000 shares of our common stock at an exercise price
of $2.915 per share at any time commencing on January 11, 2000, and ending at
5:00 p.m. Eastern Time on January 10, 2003.
Assuming the conditional warrant is exercised, the additional Equinox
warrants entitle the holder to purchase up to 250,000 shares of our common stock
at an exercise price of $2.915 per share from the time the conditional warrant
is exercised, and ending at 5:00 p.m. Eastern Time on January 10, 2003.
23
<PAGE>
The exercise price and number of shares of common stock or other securities
issuable upon exercise of the Equinox warrants is subject to adjustment in some
circumstances, including in the event of a stock dividend, recapitalization,
reorganization, merger or consolidation or our distribution to the holders of
common stock of cash, evidences of our indebtedness or other of our securities
or assets, other than cash dividends or distributions payable out of earned
surplus or net profits for the current or preceding year.
EBI Warrants
The EBI warrants offered by EBI Securities Corporation entitle the holders
to purchase up to 30,000 shares of our common stock at an exercise price of
$2.915 per share at any time commencing on January 11, 2000 and ending at
5:00p.m. Eastern Time on January 10, 2003.
Currently there exists no public market for any warrants and no assurances
can be given that a public market will develop in the future. See "RISK FACTORS
- - No market exists for warrants."
Conditional Warrant
The conditional warrant specifies that, from January 11, 2000 until June
11, 2000, upon the occurrence of various conditions that are specified in the
conditional warrant, including conditions regarding trading volume and price of
the common stock and a registration statement that includes the common stock
underlying the conditional warrant, we can demand the holder to purchase up to
$2,500,000 principal amount of the additional debentures and for each $1,000,000
of additional debentures to be purchased, to purchase 100,000 in additional
warrants. The holder of the conditional warrant does not have the right to
exercise the conditional warrant unless we demand the exercise and the
conditions that are specified in the conditional warrant are met.
Equinox Debentures
The Equinox debentures sold to Equinox Investors LLC under the Securities
Purchase Agreement are not offered in this prospectus. For a complete
description of the terms and conditions of the Equinox debentures, please refer
to the Equinox debentures which are filed as exhibits to the registration
statement. The description of the Equinox debentures in this prospectus is
qualified in its entirety by reference to those exhibits.
Each of the initial Equinox debentures held by the holder entitles the
holder to convert their initial Equinox debentures into shares of our common
stock at a conversion rate that is equal to the quotient obtained by dividing
the principal amount of the initial Equinox debentures by the lesser of (a)
$2.915 and (b) the product obtained by multiplying 0.80 by the average of the
three lowest daily closing bid prices during the 30 trading days immediately
preceding the date on which notice of conversion is provided.
If the conditional warrant is exercised, the additional Equinox debentures
held by the holder entitle the holder to convert the additional Equinox
debentures into common stock at a conversion rate that is the same as provided
for in the initial Equinox debentures.
As of February 1, 2000, if all $1,500,000 of the initial Equinox debentures
and all $2,500,000 of the additional Equinox debentures were converted into
common stock, the holders of those securities would be entitled to 1,372,213
shares of common stock and up to an additional 1,372,213 shares of common stock
if the conversion ratio of the debentures changes as a result of a decrease in
the price of our common stock.
24
<PAGE>
SELLING SECURITY HOLDERS
The securities offered in this prospectus are being sold for the account of
selling security holders based on the Securities Purchase Agreement. The
following table sets forth:
(a) the names of the selling holders,
(b) the nature of any position or other material relationship, if any,
which the selling holders have or have had with us, our predecessors or
affiliates during the past three years,
(c) the number of shares of common stock, and the number of warrants and
conditional warrants currently beneficially owned by the selling
holders,
(d) the amount of common stock and warrants offered by the selling holders
and
(e) the amount and, if 1% or more, the percentage of shares of common stock
and warrants that will be beneficially owned by the selling holders
after completion of the offering, assuming the sale of all of the
shares and warrants, respectively, as shown in (d) above.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Material
relationship
with Amount of
Selling Nanopierce Amount of common common stock/
stockholder/ within the stock/warrants owned Amount of common warrants owned
warrant holder last 3 years before offering stock(1)/warrants offered after offering(2)
<S> <C> <C> <C> <C>
Equinox None 0/400,000 1,772,213/400,000 0/0
Investors LLC
EBI Securities None 0/30,000 30,000/30,000 0/0
Corporation
</TABLE>
(1) Assumes that the conditional warrant purchased by Equinox Investors LLC is
exercised and that all Equinox debentures, Equinox warrants and EBI warrants are
exercised and converted into shares of common stock at a conversion price and an
exercise price of $2.915 per share. However, if the conversion ratio changes
because of a decrease in the price of our common stock, the 1,772,213 shares of
common stock may increase to as many as 3,144,426 shares of common stock.
(2) Assumes that all of the shares and warrants being offered in this prospectus
are sold by the selling holders and that all convertible debentures are fully
converted into common stock. There is no assurance that the selling holders
will sell any or all of their shares or warrants offered in this prospectus.
PLAN OF DISTRIBUTION
Of the securities offered in this prospectus, the Equinox warrants have
been sold to Equinox Investors LLC based on the terms of the Securities Purchase
Agreement and the EBI warrants have been sold to EBI Securities Corporation.
The Equinox warrants, the EBI warrants and the shares of common stock issuable
upon conversion or exercise of the Equinox warrants, the EBI warrants and the
Equinox debentures, may be resold based on this prospectus.
We have been advised by the selling holders that they may sell or transfer
all or a portion of the common stock and warrants offered in this prospectus
from time to time to third parties (including purchasers) directly or by or
through brokers, dealers, agents or underwriters, who may receive compensation
in the form of underwriting discounts, concessions or commissions from the
selling holders
25
<PAGE>
and/or from purchasers of the common stock or warrants for whom they may act as
agent. These sales and transfers of the common stock, and where applicable the
warrants, may be effected from time to time in one or more transactions on the
OTC Bulletin Board, in the over-the-counter market, in negotiated transactions
or otherwise, at a fixed price or prices, which may be changed, at market prices
prevailing at the time of sale, at negotiated prices, or without consideration,
or by any other legally available means. Any or all of the shares of common
stock and warrants may be sold or transferred from time to time by means of :
. a block trade in which the broker or dealer so engaged will attempt to
sell the common stock or warrants as agent but may position and resell a
portion of the block as principal to facilitate the transaction;
. purchases by a broker or dealer as principal and resale by that broker
or dealer for its account based on this prospectus;
. ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
. the writing of options on the common stock or warrants;
. pledges as collateral to secure loans, credit or other financing
arrangements and any subsequent foreclosure, if any, thereunder;
. gifts, donations and contributions; and
. any other legally available means.
To the extent required, the number of shares of common stock or warrants to
be sold or transferred, the purchase price, the name of any agent, broker,
dealer or underwriter and any applicable discounts or commissions and any other
required information with respect to a particular offer will be shown in an
accompanying prospectus supplement. The aggregate proceeds to the selling
holders from the sale of the common stock or warrants will be the purchase price
of that common stock or warrants less any commissions. This prospectus also
may be used, with our prior written consent, by donees and pledgees of the
selling holders.
If necessary to comply with state securities laws, the common stock and
warrants will be sold only through registered or licensed brokers or dealers.
In addition, the common stock and warrants may not be sold unless they have been
registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied with.
See "RISK FACTORS - State Blue Sky Laws may prevent sales of securities" and "-
Federal laws may prevent conversion of debentures and exercise of warrants."
The selling holders and any brokers, dealers, agents or underwriters that
participate in the distribution of the common stock and warrants may be deemed
to be "underwriters" within the meaning of the Securities Act, in which event
any discounts, concessions and commissions received by those brokers, dealers,
agents or underwriters and any profit on the resale of the common stock and
warrants purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
No underwriter, broker, dealer or agent has been engaged by us in
connection with the distribution of the common stock or warrants.
Any common stock and warrants covered by this prospectus which qualify for
sale based on Rule 144 under the Securities Act may be sold under Rule 144
rather than based on this prospectus. There is no assurance that Equinox
Investors LLC or EBI Securities Corporation will sell any or all of the
26
<PAGE>
common stock or warrants. Equinox Investors LLC or EBI Securities Corporation
may transfer, devise or gift common stock and warrants by other means not
described herein.
We will pay all of the expenses incident to the registration of the common
stock and warrants, other than underwriting discounts and selling commissions,
if any.
We have agreed to indemnify the selling security holders against some of
the liabilities under the Securities Act arising from this prospectus or the
registration statement of which it is a part.
EXPERTS
Our financial statements incorporated herein by reference have been so
incorporated in reliance upon the report of Gelfond Hochstadt Pangburn & Co.,
independent certified public accountants, which expresses an unqualified opinion
and includes an explanatory paragraph relating to our ability to continue as a
going concern, given upon their authority as experts in auditing and accounting.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Exchange Act and,
therefore, we file reports and other information with the SEC. Those reports
and other information can be obtained at or from:
. the SEC's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549, information about which can be obtained by
calling the SEC at 1-800-SEC-0330;
. the SEC's New York regional office at Seven World Trade Center,
13th Floor, New York, New York 10048;
. the SEC's Chicago regional office at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and
. the Internet site maintained by the SEC at http://www.sec.gov,
which contains reports, proxy and information statements and other
information regarding us and other registrants that file
electronically with the SEC.
Some locations may charge prescribed or modest fees for copies.
ADDITIONAL INFORMATION
This prospectus is part of a registration statement on Form S-3 that we
have filed with the SEC. This prospectus is only a part of that registration
statement, and does contain all of the information that is included in the
registration statement, several sections of which are not included at all in
this prospectus. The statements contained in this prospectus, including
statements as to the contents of any contract or other document, are not
necessarily complete. You should refer to the registration statement and to an
actual copy of the contract or document filed as an exhibit to the registration
statement for more complete information. The registration statement may be
obtained from the SEC through one of the methods described above in "AVAILABLE
INFORMATION."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The
27
<PAGE>
information that is incorporated by reference is an important part of this
prospectus, and information that we file later with the SEC will automatically
update and supersede this information. We incorporate by reference the documents
listed below and any future filings made with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until we sell all of
the securities offered by this prospectus, or after the date of this initial
registration statement and before the effectiveness of the registration
statement.
. Annual Report on Form 10-KSB for the fiscal year ended June 30, 1999
that was filed with the SEC on September 28, 1999;
. Quarterly Report on Form 10-QSB for the quarter ended September 30, 1999
that was filed with the SEC on November 12, 1999;
. Quarterly Report on Form 10-QSB for the quarter ended December 31, 1999
that was filed with the SEC on February 11, 2000.
On request we will provide at no cost to each person, including any beneficial
owner, who receives a copy of this prospectus, a copy of any or all of the
documents incorporated in this prospectus by reference. We will not provide
exhibits to any of such documents, however, unless such exhibits are
specifically incorporated by reference into those documents.
28
<PAGE>
- --------------------------------------------------------------------------------
The only sources of information given to you by us about your investment
decision are this prospectus and any documents referred to in this prospectus.
We did not authorize anyone to give you any other information about your
investment decision.
This prospectus is not an offer to sell securities and is not meant to
induce the sale of securities if it would violate state law. If the persons who
are trying to offer the securities for sale, or the persons who receive those
offers for sale are prohibited from doing so under state law, this prospectus is
not meant to induce sale of the securities described in this prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
FORWARD-LOOKING STATEMENTS............................................. 1
PROSPECTUS SUMMARY..................................................... 2
RISK FACTORS........................................................... 5
USE OF PROCEEDS........................................................ 12
THE COMPANY............................................................ 13
DESCRIPTION OF SECURITIES.............................................. 22
SELLING SECURITY HOLDERS............................................... 25
PLAN OF DISTRIBUTION................................................... 25
EXPERTS................................................................ 27
AVAILABLE INFORMATION.................................................. 27
ADDITIONAL INFORMATION................................................. 27
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE................................................. 27
</TABLE>
3,174,426 shares of common stock
430,000 common stock purchase
warrants
NANOPIERCE
TECHNOLOGIES, INC.
COMMON STOCK
AND
COMMON STOCK PURCHASE WARRANTS
_____________________
PROSPECTUS
_____________________
________ __, 2000
===============================================================================
<PAGE>
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other The following are the estimated expenses in connection
Expenses of with the registration and distribution of the shares
Issuance and and warrants:
Distribution.
Securities and Exchange Commission
Registration Fee $1,387
Printing and Engraving Expenses 10,000*
Accounting Fees and Expenses 15,000*
Legal Fees and Expenses 35,000*
Miscellaneous 0*
Total $61,387*
_______________
*Estimated.
Item 15. Article VII of the registrant's Articles of
Indemnification of Incorporation, as amended, provides that the registrant
Directors and shall indemnify its directors, officers, employees and
Officers. agents to the maximum extent and in accordance with the
provisions of the Nevada General Corporation Law, as in
effect from time to time. Sections 78.7502 and 78.751 of
the Nevada General Corporation Law provide generally and in
pertinent part that a Nevada corporation may indemnify its
directors and officers against expenses, judgements, fines
and settlements actually and reasonably incurred by them in
connection with any civil suit or action or any
administrative or investigative proceeding, except actions
by or in the right of the corporation, if, in connection
with the matters in issue, they acted in good faith and in
a manner they reasonably believed to be in, or not opposed
to, the best interests of the corporation, and in
connection with any criminal suit or proceeding, if in
connection with the matters in issue, they had no
reasonable cause to believe their conduct was unlawful.
Section 78.7502 further provides that in connection with
the defense or settlement of any action by or in the right
of the corporation, a Nevada corporation may indemnify its
directors and officers against expenses actually and
reasonably incurred by them in connection therewith,
provided that they acted in good faith and in a manner they
reasonably believed to be in, or not opposed to, the best
interests of the corporation. Section 78.751 permits a
Nevada corporation to grant its directors and officers
additional rights of indemnification through bylaw
provisions and otherwise and Section 78.752 permits a
Nevada corporation to purchase indemnity insurance or make
other financial arrangements on behalf of its directors and
officers.
Article VIII of the registrant's Articles of
Incorporation provides that directors shall not be liable
to the registrant or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for
liability arising from (a) any breach of the director's
loyalty to the registrant or its stockholders, (b) acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (c) any
transaction from which the director receives an improper
personal benefit, or (d) any other act expressly proscribed
or for which directors are otherwise liable under the
Nevada General Corporation Law. See Item 17 "Undertakings"
herein.
II-1
<PAGE>
Item 16. (a) Exhibits. The following is a complete list of
Exhibits and Exhibits filed as part of this registration statement.
Financial Exhibit numbers correspond to the numbers in the exhibit
Statement table of Item 601 of Regulation S-K.
Schedules.
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
2.00 Agreement dated February 26, 1998, by and among the registrant, Particle Interconnect
Corporation and Intercell Corporation (incorporated by reference to Exhibit 2.01 to the
registrant's Current Report on Form 8-K, dated February 26, 1998, filed on March 12, 1998)
3.01 The Articles of Incorporation of registrant (incorporated by reference to Exhibit 4.01 to
the registrant's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1998, filed
on October 8, 1998)
3.02 Amendment to the Articles of Incorporation of registrant (incorporated by reference to
Exhibit 4.02 to the registrant's Annual Report on Form 10-KSB for the fiscal year ended June
30, 1998, filed on October 8, 1998)
*3.03 Amendment to the Articles of Incorporation of registrant
*4.01 Debentures issued to Equinox Investors LLC (Form of Debenture included as Exhibit A to
Exhibit 10.01)
*4.02 Warrant issued to Equinox Investors LLC (Form of Warrant included as Exhibit B to Exhibit
10.01)
*4.03 Conditional Warrant issued to Equinox Investors LLC (Form of Conditional Warrant included as
Exhibit C to Exhibit 10.01)
*4.04 Warrant issued to EBI Securities Corporation
*5.00 Opinion from Kutak Rock LLP
*10.01 Securities Purchase Agreement between the registrant and Equinox Investors LLC, dated as of
January 11, 2000
*10.02 Registration Rights Agreement between the registrant and Equinox Investors LLC, dated as of
January 11, 2000 (Form of Agreement included as Exhibit E to Exhibit 10.01)
*10.03 Letter Agreement dated February 14 by and between the registrant and Ladenburg Thalmann
& Co., Inc.
*23.01 Consent of Gelfond Hochstadt Pangburn & Co.
*23.02 Consent of Kutak Rock LLP (included in Exhibit 5.00)
*24.00 Power of Attorney (included on page II-5 of the registration statement)
</TABLE>
________________
*Filed herewith.
Item 17. Undertakings.
(a) The undersigned registrant will:
(i) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(1) include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(2) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and Notwithstanding the
forgoing, any increase or decrease in volume of securities offered (if
II-2
<PAGE>
the total dollar value of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospects filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in the volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(3) include any additional or changed material information on the
plan of distribution.
(ii) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(iii) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act of 1934, as amended (the "Exchange Act") (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Denver, State of Colorado, on February 25, 2000.
NANOPIERCE TECHNOLOGIES, INC.
By /s/ Paul H. Metzinger
---------------------------------------
Paul H. Metzinger, President, Chief
Executive Officer and Director
II-4
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Paul H. Metzinger and Herbert J. Neuhaus, and
each of them, his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign any or all amendments (including post-effective
amendments) to the Registration Statement on Form S-3 and file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto such attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, to all intents and
purposes and as full as they might or could do in person, hereby ratifying and
confirming all that such attorney-in-fact and agent, or his substitute, lawfully
may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form S-3 is signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Paul H. Metzinger President, Chief Executive February 25, 2000
- -------------------------------------------- Officer and Director
Paul H. Metzinger (Principal Executive
Officer)
/s/ Herbert J. Neuhaus Director February 25, 2000
- --------------------------------------------
Herbert J. Neuhaus
/s/ Kristi J. Kampmann Chief Financial Officer February 25, 2000
- -------------------------------------------- (Principal Accounting
Kristi J. Kampmann Officer)
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
2.00 Agreement dated February 26, 1998, by and among the registrant,
Particle Interconnect Corporation and Intercell Corporation
(incorporated by reference to Exhibit 2.01 to the registrant's
Current Report on Form 8-K, dated February 26, 1998, filed on
March 12, 1998)
3.01 The Articles of Incorporation of registrant (incorporated by
reference to Exhibit 4.01 to the registrant's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1998, filed on
October 8, 1998)
3.02 Amendment to the Articles of Incorporation of registrant
(incorporated by reference to Exhibit 4.02 to the registrant's
Annual Report on Form 10-KSB for the fiscal year ended June 30,
1998, filed on October 8, 1998)
*3.03 Amendment to Articles of Incorporation of registrant
*4.01 Debenture issued to Equinox Investors LLC (form of Debenture
included as Exhibit A to Exhibit 10.01)
*4.02 Warrant issued to Equinox Investors LLC (form of Warrant
included as Exhibit B to Exhibit 10.01)
*4.03 Conditional Warrant issued to Equinox Investors LLC (form of
Conditional Warrant included as Exhibit C to Exhibit 10.01)
*4.04 Warrant issued to EBI Securities Corporation
*5.00 Opinion from Kutak Rock LLP
*10.01 Securities Purchase Agreement between the registrant and Equinox
Investors LLC, dated as of January 11, 2000
*10.02 Registration Rights Agreement between the registrant and Equinox
Investors LLC, dated as of January 11, 2000 (form of Agreement
included as Exhibit E to Exhibit 10.01)
*10.03 Letter Agreement dated February 14, 2000 by and between the
registrant and Ladenburg Thalmann & Co., Inc.
*23.01 Consent of Gelfond Hochstadt Pangburn & Co.
*23.02 Consent of Kutak Rock LLP (included in Exhibit 5.00)
*24.00 Power of Attorney (included on page II-5 of the registration
statement)
___________________
*Filed herewith.
<PAGE>
EXHIBIT 3.03
CERTIFICATE OF CHANGE IN NUMBER
OF
AUTHORIZED SHARES OF CLASS AND SERIES
Pursuant to the provisions of Section 78.207 of the Nevada General Corporation
Law, Nanopierce Technologies, Inc., the Undersigned Corporation certifies that
the following Resolutions were adapted and authorized by its Board of Directors
on October 15, 1999:
(a) The current number of authorized shares and the par value, if any, of
each class and series, if any, of shares before the change is as follows:
Authorized
Class Number of Shares Par Value
----------------- ---------------- ---------
Common 45,000,000 $0.0001
Preferred 5,000,000 $0.0001
(b) The number of authorized shares and the par value, if any, of each
class and series, if any, of shares after the change is as follows:
Authorized
Class Number of Shares Par Value
----------------- ---------------- ---------
Common 100,000,000 $0.0001
Preferred 5,000,000 $0.0001
(c) The number of shares of each affected class and series, if any, to be
issued after the change in exchange for each issued share of the same class or
series, is as follows:
NONE
(d) The provisions, if any, for the issuance of fractional shares, or for
the payment of money or the issuance of scrip to stockholders otherwise entitled
to a fraction of a share and the percentage of outstanding shares affected
thereby, is as follows:
NONE
(e) That any required approval of the stock holders has been obtained:
(f) The Change shall be effective upon filing the certificate.
<PAGE>
The undersigned officers hereby verify that these Resolutions have been properly
adopted by the Undersigned Corporation and that the statements contained herein
are true.
Dated: October 26, 1999
NANOPIERCE TECHNOLOGIES, INC.
By: /s/ Paul H. Metzinger
--------------------------------
Paul H. Metzinger, President
By: /s/ Kristi J. Kampmann
---------------------------------
Kristi J. Kampmann, Secretary
STATE OF COLORADO }
} ss.
COUNTY OF DENVER }
I, Amy J. Fisher, a Notary Public, hereby certify that on October 26, 1999,
-------------- --
personally appeared before me, both Paul H. Metzinger and Kristi J. Kampmann,
being the President and the Secretary of Nanopierce Technologies, Inc.
respectively, and who being by me first duly sworn declared that they are the
persons who signed the foregoing and that the statements therein contained are
true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal on the date
hereinbefore mentioned,
My commission expires: 9/22/02
-------
(S E A L)
/s/ Amy J. Fisher
-----------------
Notary Public
2
<PAGE>
EXHIBIT 4.04
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
30,000 shares
- ------
Warrant to Purchase Common Stock
of
NANOPIERCE TECHNOLOGIES, INC.
THIS CERTIFIES that EBI Securities Corporation or any subsequent ("Holder")
hereof, has the right to purchase from NANOPIERCE TECHNOLOGIES, INC., a Nevada
corporation (the "Company"), up to 30,000 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 January 10, 2003.
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 January 11, 2000 ("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
<PAGE>
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.
(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 Two Dollars and Ninety-One and Half Cents
($2.915) 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.
<PAGE>
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.
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
<PAGE>
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.
(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 exerciseable 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.
<PAGE>
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.
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
<PAGE>
receipt requested, postage prepaid, and addressed, until another address is
designated in writing by the Company, to Attention: President, Nanopierce
Technologies, Inc., 370 17/th/ Street, Suite 3580, Denver, Colorado 80202,
Attention: President, Telephone No. (303)592-1010, Telecopy No. (303)592-1054.
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
11th day of January, 2000.
NANOPIERCE TECHNOLOGIES, INC.
By: /s/ Paul H. Metzinger
-----------------------------------
Print Name: Paul H. Metzinger
Title: President & Chief Executive Officer
<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
<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.
________________________________________________________________________
<PAGE>
EXHIBIT 5.00 ATLANTA
KANSAS CITY
KUTAK ROCK LLP LINCOLN
LITTLE ROCK
SUITE 2900 NEW YORK
717 SEVENTEENTH STREET NEWPORT BEACH
OKLAHOMA CITY
DENVER, COLORADO 80202-3329 OMAHA
PASADENA
303-297-2400 PITTSBURG
FACSIMILE 303-292-7799 RICHMOND
SCOTTSDALE
http://www.kutakrock.com WASHINGTON
February 25, 2000
Nanopierce Technologies, Inc.
370 - Seventeenth Street, Suite 3580
Denver, Colorado 80202
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to Nanopierce Technologies, Inc., a Nevada
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of up to 1,802,213 shares of
common stock, $.0001 par value per share (the "Common Stock"), warrants to
purchase 180,000 shares of Common Stock (the "Initial Warrants"), approximately
514,580 shares of Common Stock upon the conversion of $1,500,000 of the
Company's 6% Convertible Debentures, (the "Initial Debentures"), a conditional
warrant (the "Conditional Warrant") for warrants to purchase 250,000 shares of
common stock (the "Additional Warrants") and 857,633 shares of common stock upon
the conversion of $2,500,000 in principal amount of its 6% convertible
debentures (the "Additional Debentures"), which may be sold from time to time by
the selling stockholders and warrant holders identified in the Company's
registration statement on Form S-3 filed with the Securities and Exchange
Commission ("SEC") on or about February 25, 2000. Such registration statement
and the related prospectus on file with the SEC at the time such registration
statement becomes effective (including financial statements and schedules,
exhibits and all other documents filed as a part thereof or incorporated
therein) are herein called, respectively, the "Registration Statement" and the
"Prospectus." The Initial Warrants, the Additional Warrants, the Conditional
Warrant and the Common Stock issuable upon the exercise and conversion of the
Initial Warrants, the Additional Warrants, the Conditional Warrant, the Initial
Debentures and the Additional Debentures are collectively referred to herein as
the "Offered Securities."
In connection with this opinion, we have made such investigations and
examined such records, including the Company's Articles of Incorporation, Bylaws
and corporate minutes as we deemed necessary to the performance of our services
and to render this opinion. We have also examined and are familiar with the
originals or copies, certified or otherwise identified to our satisfaction, of
such other documents, corporate records and other instruments as we have deemed
necessary for the preparation of this opinion. In expressing this opinion, we
have relied, as to any questions of fact upon which our opinion is predicated,
upon representations and certificates of the officers of the Company.
<PAGE>
In giving this opinion, we assumed:
(a) the genuineness of all signatures and the authenticity and
completeness of all documents submitted to us as originals;
(b) the conformity to originals and the authenticity of all documents
supplied to us as certified, photocopied, conformed or facsimile copies and
the authenticity and completeness of the originals of any such documents;
and
(c) the proper, genuine and due execution and delivery of all
documents by all parties to them and that there has been no breach of the
terms thereof.
Based upon the foregoing and subject to the qualifications set forth above,
and assuming (i) that the Registration Statement has become effective under the
Act; (ii) that all required actions are taken and conditions satisfied with
respect to the issuance of certain Offered Securities as specified in the
Prospectus; and (iii) consideration is received for such Offered Securities, we
are of the opinion that the Offered Securities when sold will be legally issued,
fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and the use of our name in the Registration Statement. In giving such
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Act or the Rules and
Regulations of the SEC promulgated pursuant thereto.
Very truly yours,
/s/ Kutak Rock LLP
----------------------
Kutak Rock LLP
<PAGE>
EXHIBIT 10.01
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of January 11, 2000, is
entered into by and between Nanopierce Technologies, Inc., a Nevada corporation
(the "Company"), and Equinox Investors LLC, a Delaware limited liability company
(the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemptions from registration provided by
Regulation D ("Regulation D") promulgated by the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), or by Section 4(2) of the Securities Act; and
WHEREAS, the Purchaser wishes to purchase, and the Company wishes to issue,
upon the terms and subject to the conditions of this Agreement, one million five
hundred thousand dollars ($1,500,000) principal amount of the Company's 6%
Convertible Debentures (the "Initial Debentures") and warrants (the "Initial
Warrants") to purchase one hundred and fifty thousand (150,000) shares of the
Company's common stock, par value $.0001 per share (the "Common Stock") for the
aggregate purchase price of one million five hundred thousand dollars
($1,500,000). The Initial Debentures are convertible, at the holder's option,
into the Company's Common Stock, on the terms set forth therein, and the Initial
Warrants may be exercised for the purchase of Common Stock, on the terms set
forth therein.
WHEREAS, the Purchaser wishes to purchase, and the Company wishes to issue
and sell, for an aggregate purchase price of one hundred dollars ($100), a
conditional warrant (the "Conditional Warrant"), pursuant to which the Purchaser
shall purchase and the Company shall issue and sell up to an additional (i) two
million five hundred thousand dollars ($2,500,000) principal amount of the
Company's 6% Convertible Debentures (the "Additional Debentures," together with
the Initial Debenture, collectively the "Debentures") and (ii) warrants (the
"Additional Warrants," together with the Initial Warrants, collectively the
"Warrants") to purchase up to an additional two hundred fifty thousand (250,000)
shares of Common Stock, for an aggregate purchase price of up to two million
five hundred thousand dollars ($2,500,000).
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE
a. Purchase of Debentures and Warrants. On the Initial Closing Date
(as defined herein), the Purchaser hereby agrees to purchase from the Company
(i) the Initial Debentures in the principal amount of one million five hundred
thousand dollars ($1,500,000), which shall be issued in substantially the form
attached hereto as Exhibit A; (ii) the Initial Warrants to purchase one hundred
and fifty thousand (150,000) shares of Common Stock, which
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shall be issued in substantially the form attached hereto as Exhibit B and (iii)
a Conditional Warrant which shall be issued in substantially the form attached
hereto as Exhibit C to purchase (a) Additional Debentures in the principal
amount of up to two million five hundred thousand dollars ($2,500,000), which,
if issued, shall be issued in substantially the form attached hereto as Exhibit
A; and (b) Additional Warrants to purchase two hundred fifty thousand (250,000)
shares of Common Stock, which, if issued, shall be issued in substantially the
form attached hereto as Exhibit B. The aggregate purchase price for the Initial
Debentures, the Initial Warrants and the Conditional Warrant (collectively, the
"Initial Securities") shall be one million five hundred thousand one hundred
dollars ($1,500,100) and shall be payable in same day funds.
b. Closing. The Initial Securities to be purchased by the Purchaser
hereunder, shall be delivered by or on behalf of the Company for the account of
the Purchaser in definitive form, and in such denominations and registered in
such names as the Purchaser or its representative, if any, may request upon
notice to the Company, against payment by the Purchaser or on its behalf of the
purchase price therefor by wire transfer to an account of the Company, all at
the offices of Pryor Cashman Sherman & Flynn LLP, 410 Park Avenue, New York, New
York 10022, at 9:30 a.m., New York time on the initial closing date (the
"Initial Closing Date") is January 11, 2000, or at such other time and date as
the Purchaser or its representative, if any, and the Company may agree upon in
writing. The closing date(s) for the Purchaser of the Additional Debentures and
Additional Warrants are to be determined as set forth in the Conditional
Warrant.
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Purchaser represents and warrants to, and covenants and agrees
with, the Company as follows:
a. The Purchaser and each of its equity owners is (i) experienced in
making investments of the kind described in this Agreement and the related
documents, (ii) able, by reason of the business and financial experience of its
management, to protect its own interests in connection with the transactions
described in this Agreement and the related documents, and (iii) able to afford
the entire loss of its investment in the Initial Securities.
b. All subsequent offers and sales of the Debentures, the Warrants,
and the Common Stock issuable upon conversion or exercise of, or in lieu of
interest payments on the Debentures or the Warrants, shall be made pursuant to
an effective registration statement under the Securities Act or pursuant to an
applicable exemption from such registration.
c. The Purchaser understands that the Initial Securities are being
offered and sold to it in reliance upon exemptions from the registration
requirements of the United States federal securities laws, and that the Company
is relying upon the truth and accuracy of the Purchaser's representations and
warranties, and the Purchaser's compliance with its agreements, each as set
forth herein, in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the Initial Securities.
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d. The Purchaser: (i) has been provided with sufficient information
with respect to the business of the Company and such documents relating to the
Company as the Purchaser has requested and Purchaser has carefully reviewed the
same including, without limitation, the Company's Form 10-Q for the quarter
ended September 30, 1999 filed with the Securities and Exchange Commission ("the
Commission"), (ii) has been provided with such additional information with
respect to the Company and its business and financial condition as the
Purchaser, or the Purchaser's agent or attorney, has requested, and (iii) has
had access to management of the Company and the opportunity to discuss the
information provided by management of the Company and any questions that the
Purchaser has had with respect thereto have been answered to the full
satisfaction of the Purchaser.
e. The Purchaser has the requisite corporate power and authority to
enter into this Agreement and the registration rights agreement, dated the date
hereof, between the Company and the Purchaser (the "Registration Rights
Agreement") attached hereto as Exhibit E, and the transactions contemplated
hereby and thereby, have been duly and validly authorized by the Purchaser; and
such agreements, when executed and delivered by each of the Purchaser and the
Company will each be a valid and binding agreement of the Purchaser, enforceable
in accordance with their respective terms, except to the extent that enforcement
of each such agreement may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or hereafter in
effect relating to creditors' rights generally and to general principles of
equity.
3. REPRESENTATIONS OF THE COMPANY
The Company represents and warrants to the Purchaser that:
a. Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada. The
Company does not have any subsidiaries. The Company is duly qualified as a
foreign corporation in all jurisdictions in which the failure to so qualify
would have a material adverse effect on the Company and its subsidiaries taken
as a whole.
b. Capitalization. On the date hereof, the authorized capital of the
Company consists of 100,000,000 shares of Common Stock, par value $.0001 per
share, of which 33,155,585 are issued and outstanding and 5,000,000 shares of
preferred stock, par value $.0001 per share of which no shares are issued and
outstanding. Schedule 3(b) sets forth all of the options, warrants and
convertible securities of the Company, and any other rights to acquire
securities of the Company (collectively, the "Derivative Securities") which are
outstanding on the date hereof, including in each case (i) the name and class of
such Derivative Securities, (ii) the issue date of such Derivative Securities,
(iii) the number of shares of Common Stock of the Company into which such
Derivative Securities are convertible as of the date hereof, (iv) the conversion
or exercise price or prices of such Derivative Securities as of the date hereof,
(v) the expiration date of any conversion or exercise rights held by the owners
of such Derivative Securities and (vi) any registration rights associated with
such Derivative Securities or outstanding Common Stock.
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c. Concerning the Common Stock, the Initial Debentures, the Initial
Warrants and if the Conditional Warrant shall be exercised, the Additional
Debentures and Additional Warrants. The Common Stock issuable upon (i)
conversion of, or in lieu of interest payments on, the Initial Debentures, and
upon exercise of the Initial Warrants and (ii) if the Conditional Warrant is
exercised, conversion of or in lieu of interest payments on, the Additional
Debentures and upon exercise of the Additional Warrants, when issued, shall be
duly and validly issued, fully paid and non-assessable, and will not subject the
holder thereof to personal liability by reason of being such a holder. There are
no preemptive rights of any stockholder of the Company, as such, to acquire any
of the Initial Securities, or the Common Stock issuable to the Purchaser
pursuant to the terms of the Debentures and the Warrants.
d. Reporting Company Status. The Common Stock is not registered
under Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Company has duly filed all materials and documents required
to be filed pursuant to all reporting obligations under either Section 13(a) or
15(d) of the Exchange Act, if any, prior to the offer and sale of the Initial
Securities. The Common Stock is listed and traded on the OTC Bulletin Board, and
the Company is not aware of any pending or contemplated action or proceeding of
any kind to suspend the trading of the Common Stock.
e. Authorized Shares. The Company has legally available a sufficient
number of authorized and unissued shares of Common Stock as may be necessary to
effect (i) the conversion of the Initial Debentures and the exercise of the
Warrants, and (ii) if the Conditional Warrant is exercised, conversion of or in
lieu of interest payments on, the Additional Debentures and upon exercise of the
Additional Warrants. The Company understands and acknowledges the potentially
dilutive effect to the Common Stock of the issuance of shares of Common Stock
upon (i) conversion of the Initial Debentures and the exercise of the Initial
Warrants and (ii) if the Conditional Warrant is exercised, the conversion of the
Additional Debentures and the exercise of the Additional Warrants. The Company
further acknowledges that its obligation to issue shares of Common Stock upon
(i) conversion of the Initial Debentures and upon exercise of the Initial
Warrants and (ii) if the Conditional Warrants is exercised, the conversion of
the Additional Debentures and the exercise of the Additional Warrants is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the Company and
notwithstanding the commencement of any case under 11 U.S.C. (S) 101 et seq.
(the "Bankruptcy Code"). In the event the Company becomes a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted any
rights to relief it may have under 11 U.S.C. (S) 362 in respect of the
conversion of the Debentures and the exercise of the Warrants. The Company
agrees, without cost or expense to the Purchaser, to take or consent to any and
all action necessary to effectuate relief under 11 U.S.C. (S) 362.
f. Legality. The Company has the requisite corporate power and
authority to enter into this Agreement and to issue and deliver the Initial
Debentures, the Initial Warrants, the Conditional Warrant and the Common Stock
issuable upon (i) conversion of, or in lieu of interest payments on, the Initial
Debentures and the exercise of the Initial Warrants and (ii) if the Conditional
Warrant is exercised, the conversion of the Additional Debentures and the
exercise of the Additional Warrants.
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g. Transaction Agreements. This Agreement, the Registration Rights
Agreement, the Conditional Warrant, the Debentures and the Warrants
(collectively, the "Primary Documents"), and the transactions contemplated
hereby and thereby, have been duly and validly authorized by the Company; this
Agreement has been duly executed and delivered by the Company and this Agreement
is, and the Primary Documents, if and when executed and delivered by the
Company, will each be, a legal, valid and binding agreement of the Company,
enforceable in accordance with their respective terms, except to the extent that
enforcement of each of the Primary Documents may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws now or hereafter in effect relating to creditors' rights generally and to
general principles of equity.
h. Non-contravention. The execution and delivery of this Agreement
and each of the other Primary Documents, and the consummation by the Company of
the other transactions contemplated by this Agreement and each of the other
Primary Documents, does not and will not conflict with or result in a breach by
the Company of any of the terms or provisions of, or constitute a default under,
the Articles of Incorporation or By-laws of the Company, or any material
indenture, mortgage, deed of trust or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which they or any of their
properties or assets are bound, or any existing applicable law, rule, or
regulation or any applicable decree, judgment or order of any court or United
States federal or state regulatory body, administrative agency, or any other
governmental body having jurisdiction over the Company, or its subsidiaries.
Except as set forth on Schedule 3(h), neither the filing of the registration
statement required to be filed by the Company pursuant to the Registration
Rights Agreement nor the offering or sale of the Initial Debentures, the Initial
Warrants or the Conditional Warrant as contemplated by this Agreement and if the
Conditional Warrant is exercised the Additional Debentures and Additional
Warrants and the Common Stock into which all such securities may be converted or
exercised, as applicable, gives rise to any rights, other than those which have
been waived or satisfied on or prior to the Initial Closing Date, for or
relating to the registration of any shares of the Common Stock.
i. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the entry into or the performance of this Agreement and the
other Primary Documents.
j. SEC Filings. None of the reports or documents filed by the
Company with the Commission (the "SEC Documents") contained, at the time they
were filed, any untrue statement of a material fact or omitted to state any
material fact required to be stated therein, or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
k. Stabilization. Neither the Company, nor any of its affiliates,
has taken or may take, directly or indirectly, any action designed to cause or
result in, or which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the shares of
Common Stock.
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l. Absence of Certain Changes. Except as disclosed in the Company's
SEC Documents and since June 30, 1999, there has been no material adverse change
nor any material adverse development in the business, properties, operations,
financial condition, prospects, outstanding securities or results of operations
of the Company.
m. Full Disclosure. There is no fact known to the Company (other
than general economic conditions known to the public generally) that has not
been disclosed in writing to the Purchaser (i) that could reasonably be expected
to have a material adverse effect upon the condition (financial or otherwise) or
the earnings, business affairs, properties or assets of the Company or (ii) that
could reasonably be expected to materially and adversely affect the ability of
the Company to perform the obligations set forth in the Primary Documents. The
representations and warranties of the Company set forth in this Agreement (and
the schedules hereto) do not contain any untrue statement of a material fact or
omit any material fact necessary to make the statements contained herein, in
light of the circumstances under which they were made, not misleading.
n. Title to Properties; Liens and Encumbrances. The Company has good
and marketable title to all of its material properties and assets, both real and
personal, and has good title to all its leasehold interests, in each case
subject only to mortgages, pledges, liens, security interests, conditional sale
agreements, encumbrances or charges created in the ordinary course of business.
o. Patents and Other Proprietary Rights. The Company has sufficient
title and ownership of all patents, trademarks, service marks, trade names,
copyrights, trade secrets, information, proprietary rights and processes
necessary for the conduct of its business as now conducted and as proposed to be
conducted, and such business does not and would not conflict with or constitute
an infringement on the rights of others.
p. Permits. The Company has all franchises, permits, licenses and
any similar authority necessary for the conduct of its business as now
conducted, the lack of which would materially and adversely affect the business
or financial condition of the Company. The Company is not in default in any
respect under any of such franchises, permits, licenses or similar authority.
q. Absence of Litigation. Except as disclosed in the Company's SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body pending or, to the knowledge of the
Company or any of its subsidiaries, threatened against or affecting the Company
or any of its subsidiaries, in which an unfavorable decision, ruling or finding
would have a material adverse effect on the properties, business, condition
(financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole, or the transactions contemplated by the Primary
Documents, or which would adversely affect the validity or enforceability of, or
the authority or ability of the Company to perform its obligations under, the
Primary Documents.
r. No Default. Each of the Company and its subsidiaries is not in
default in the performance or observance of any obligation, covenant or
condition contained in any
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indenture, mortgage, deed of trust or other instrument or agreement to which it
is a party or by which it or its property may be bound.
s. Transactions with Affiliates. Except as disclosed in the
Company's public filings with the Commission, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors or affiliates that, had they existed on June 30, 1999, would
have been required to be disclosed in the Company's 1999 Annual Report to
stockholders.
t. Employment Matters. The Company is in compliance in all material
respects with all presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company would have any liability; the Company has not incurred and
does not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.
u. Insurance. The Company maintains property and casualty, general
liability, personal injury and other similar types of insurance with financially
sound and reputable insurers that is adequate, consistent with industry
standards and the Company's historical claims experience. The Company has not
received notice from, and has no knowledge of any threat by, any insurer (that
has issued any insurance policy to the Company) that such insurer intends to
deny coverage under or cancel, discontinue or not renew any insurance policy
covering the Company, or any of its subsidiaries, presently in force.
v. Taxes. All applicable tax returns required to be filed by the
Company and each of its subsidiaries have been prepared and filed in compliance
with all applicable laws, or, if not yet filed, have been granted extensions of
the filing dates which extensions have not expired, and all taxes, assessments,
fees and other governmental charges upon the Company, its subsidiaries, or upon
any of their respective properties, income or franchises, shown in such returns
and on assessments received by the Company or its subsidiaries to be due and
payable have been paid, or adequate reserves therefor have been set up if any of
such taxes are being contested in good faith; or if any of such tax returns have
not been filed or if any such taxes have not been paid or so reserved for, the
failure to so file or to pay would not in the aggregate have a material adverse
effect on the business or financial condition of the Company and its
subsidiaries, taken as a whole.
w. Foreign Corrupt Practices Act. Neither the Company nor any of its
directors, officers or other employees has (i) used any Company funds for any
unlawful contribution, endorsement, gift, entertainment or other unlawful
expense relating to any political activity; (ii) made any direct or indirect
unlawful payment of Company funds to any foreign or domestic government official
or employee; (iii) violated or is in violation of any provision of the
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Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other similar payment to any
person. The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
x. Investment Company Act. The Company is not conducting, and does
not intend to conduct, its business in a manner which would cause it to become,
an "investment company," as defined in Section 3(a) of the Investment Company
Act of 1940, as amended.
y. Agent Fees. Except for $150,000 and 30,000 Warrants which shall
be paid by the Company to EBI Securities Corporation, the Company has not
incurred any liability for any finder's or brokerage fees or agent's commissions
in connection with the offer and sale of the transactions contemplated by this
Agreement.
z. Private Offering. Subject to the accuracy of the Purchaser's
representations and warranties set forth in Section 2 hereof, the offer, sale
and issuance of (i) the Initial Securities (ii) if the Conditional Warrant is
exercised, the issuance of the Additional Debentures and the Additional Warrants
and (iii) the issuance of Common Stock upon conversion or exercise of any of the
above indicated securities are exempt from the registration requirements of the
Securities Act. The Company agrees that neither the Company nor anyone acting on
its behalf will offer any of the Debentures, the Warrants, or any similar
securities for issuance or sale, or solicit any offer to acquire any of the same
from anyone so as to render the issuance and sale of such securities subject to
the registration requirements of the Securities Act. The Company has not offered
or sold the Securities by any form of general solicitation or general
advertising, as such terms are used in Rule 502(c) under the Securities Act.
aa. Year 2000 Processing. The computer systems used by the Company
and its subsidiaries (the "Systems"), both hardware and software, are in good
working order. The Company has taken steps that are reasonable to ensure that
the occurrence of the year 2000 will not materially and adversely affect the
Systems of the Company, its subsidiaries, or their business, and no material
expenditures in excess of currently budgeted items will be required in order to
cause such Systems to operate properly following the change of the year 1999 to
2000. The Company and its subsidiaries have resolved or are in the process of
resolving any issues discovered as a result of year 2000 inquires or compliance
testing or otherwise known to the Company.
bb. Environmental Matters. Neither the Company and its subsidiaries, nor
any predecessor in interest nor, to the Company's knowledge, after due inquiry,
any other person has ever caused or permitted any Hazardous Material (as defined
below) to be released, treated or disposed of on, at, under or within any real
property owned, leased or operated by the Company and its subsidiaries or any
predecessor in interest, and no such real property has ever been used (either by
the Company and its subsidiaries, any predecessor in interest or, to the
Company's
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knowledge, after due inquiry, by any other person) as a treatment, storage or
disposal site for any Hazardous Material. The Company has no liabilities with
respect to Hazardous Materials, and to the knowledge of the Company, after due
inquiry, no facts or circumstances exist which could give rise to liabilities
with respect to Hazardous Materials, which could have any reasonable likelihood
of having a material adverse effect on the Company. For purposes of this
Agreement "Hazardous Materials" shall mean (i) any pollutants or contaminations,
(ii) any asbestos or insulation or other material composed of or containing
asbestos and (iii) any petroleum product and any hazardous, toxic or dangerous
waste, substance or material defined as such in, or for purposes of, the
Comprehensive Environmental Response, Compensation and Liability Act, any so-
called "Superfund" or "Superlien" law, or (iv) any other applicable federal,
state, local or other statute, law, ordinance, code, rule, regulation, order or
decree concerning the protection of human health or the environment or otherwise
regulating, relating to, or imposing liability or standards of conduct
concerning, any hazardous, toxic or dangerous waste, substance or material, as
now or at any time hereafter in effect.
cc. Intellectual Property. Except as set forth in the SEC Documents, to
the best of the Company's knowledge, each of the Company and its subsidiaries
owns or possesses adequate rights to use all material patents, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names and
copyrights which are described in the SEC Documents; except as set forth in the
SEC Documents, the Company has not received any notice of, and has no knowledge
of, any infringement of or conflict with asserted rights of the Company by
others with respect to any patent, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names and copyrights which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business of the Company and its subsidiaries, taken as a
whole, as presently conducted; and, except as set forth in the SEC Documents,
the Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with the asserted rights of others with respect to
any patent, patent rights, inventions, trade secrets, know-how, trademarks,
service marks, trade names and copyrights which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would have a material
adverse effect on the condition (financial or otherwise), earnings, operations,
or business of the Company and its subsidiaries, taken as a whole, as presently
conducted.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Purchaser acknowledges that, except as
provided in the Registration Rights Agreement, (i) neither (A) the Initial
Debentures, the Initial Warrants, nor the Common Stock issuable upon conversion
of, or in lieu of interest payments on, the Initial Debentures or upon exercise
of the Initial Warrants, nor (B) if the Conditional Warrant is exercised, the
Additional Debentures, the Additional Warrants or the Common Stock issuable upon
conversion of or in lieu of interest on the Additional Debentures or upon
exercise of the Additional Warrants (collectively, the "Additional Securities"
and, together with the Initial Securities, collectively, the "Securities") have
been, and are not being, registered under the Securities Act, and the Securities
may not be transferred unless they are (1) subsequently registered thereunder or
(2) they are transferred pursuant to an exemption from such registration; and
(ii) any sale of the Initial Debentures, the Initial Warrants, the Conditional
Warrant or the Common Stock issuable upon conversion or exchange thereof made in
reliance upon Rule 144
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under the Securities Act may be made only in accordance with the terms of said
Rule and further, if said Rule is not applicable, any resale of the Securities
under circumstances in which the seller, or the person through whom the sale is
made, may be deemed to be an underwriter, as that term is used in the Securities
Act, may require compliance with another exemption under the Securities Act and
the rules and regulations of the Commission thereunder. The provisions of
Section 4(a) and 4(b) hereof, together with the rights of the Purchaser under
this Agreement and the other Primary Documents, shall be binding upon any
subsequent transferee of the Debentures and the Warrants.
b. Restrictive Legend. The Purchaser acknowledges and agrees that,
until such time as the Securities or the Common Stock issuable upon conversion
or exchange thereof shall have been registered under the Securities Act or the
Purchaser demonstrates to the reasonable satisfaction of the Company and its
counsel that such registration shall no longer be required, such Securities or
the Common Stock issuable upon conversion or exchange thereof may be subject to
a stop-transfer order placed against the transfer of such Securities, and such
Securities shall bear a restrictive legend in substantially the following form:
THESE SECURITIES (INCLUDING ANY UNDERLYING SECURITIES)
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL OR
OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION SHALL NO LONGER BE REQUIRED.
c. Filings. The Company undertakes and agrees that it will make all
required filings in connection with the sale of the Securities or the Common
Stock issuable upon conversion or exchange thereof to the Purchaser as required
by United States laws and regulations, or by any domestic securities exchange or
trading market, including, qualifying the shares of Common Stock issuable upon
conversion of the Debentures and upon exercise of the Warrants for trading on
the OTC Bulletin Board or the filing of a listing application with NASDAQ to
list all of the shares of Common Stock issuable upon conversion of the
Debentures and upon the exercise of the Warrants, as applicable, and if
applicable, the filing of a notice on Form D (at such time and in such manner as
required by the rules and regulations of the Commission), and to provide copies
thereof to the Purchaser promptly after such filing or filings.
d. Reporting Status. So long as the Purchaser beneficially owns any
of the Securities, the Company shall timely file all reports required to be
filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act
and shall not terminate its status as an issuer required to file reports under
the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would permit such termination.
e. State Securities Filings. The Company shall from time to time
promptly take such action as the Purchaser or any of its representatives, if
applicable, may reasonably
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request to qualify the Securities or the Common Stock issuable upon conversion
or exchange thereof for offering and sale under the securities laws (other than
United States federal securities laws) of the jurisdictions in the United States
as shall be so identified to the Company, and to comply with such laws so as to
permit the continuance of sales therein, provided that in connection therewith,
the Company shall not be required to qualify as a foreign corporation or to file
a general consent to the service of process in any jurisdiction.
f. Use of Proceeds. The Company will use all of the net proceeds
from the issuance of the Securities for technology application developments and
working capital.
g. Reservation of Common Stock. The Company will at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to provide for the conversion of the Initial Debentures
and the exercise of the Initial Warrants and if the Conditional Warrant is
exercised, for the conversion of the Additional Debentures and the exercise of
the Additional Warrants. The Company will use its best efforts at all times to
maintain a number of shares of Common Stock so reserved for issuance that is no
less than the sum of (i) two (2) times the sum of (x) the maximum number of
shares of Common Stock that could be issuable upon the conversion of the Initial
Debentures and (y) the maximum number of shares of Common Stock that could be
issuable upon conversion of the Additional Debentures and (ii) the sum of the
number of shares of Common Stock that could be issuable upon exercise in full of
the Initial Warrants and the Additional Warrants, in each case without regard to
whether the Conditional Warrant shall have been exercised.
h. Sales of Additional Shares. The Company shall not, directly or
indirectly, without the prior written consent of the Purchaser, offer, sell,
offer to sell, contract to sell or otherwise dispose of any of its securities or
any security or other instrument convertible into or exchangeable for shares of
its capital stock (each a "Capital Issuance Event"), in each case, for a period
beginning on the date hereof and ending two hundred seventy (270) days after the
Registration Statement (as defined in the Registration Rights Agreement) is
declared effective by the Commission (the "Lock-Up Period"), except that the
Company may (i) issue securities for the aggregate consideration of at least $15
million in connection with a bona fide, firm commitment, underwritten public
offering under the Securities Act; (ii) may issue shares of Common Stock which
are issued in connection with a bona fide transaction involving the acquisition
of another business entity or segment of any such entity by the Company by
merger, asset, purchase, stock purchase or otherwise; and (iii) may issue common
Stock in connection with a stock split, stock dividend or similar
recapitalization of the Company which affects all holders of the Company's
Common Stock on an equivalent basis, in each case, without the prior written
consent of the Purchaser. Upon the occurrence of a Capital Issuance Event in
violation of this Section 4h, at the option of the Purchaser, the Company shall
redeem the Debentures at a redemption price of one hundred twenty percent (120%)
of the principal amount hereof plus accrued and unpaid interest thereon. The
Company shall give the Purchaser five (5) days prior written notice of the
occurrence of a Capital Issuance Event in violation of this Section 4h. In
addition, the Company agrees that it will not cause any shares of its capital
stock that are issued in connection with a transaction of the type contemplated
by clause (ii) (or upon the conversion or exercise of other securities that are
issued in connection with such transaction) or that were issued in connection
with financing, acquisition or other transaction that occurred prior or
subsequent to the date of this Agreement to be covered by a registration
statement that is filed
11
<PAGE>
with the Commission or declared effective by the Commission prior to the time
that the Debentures and the Warrants and Common Stock issuable upon conversion
or exercise thereof are covered by a registration statement filed by the Company
pursuant to its obligations under the Registration Rights Agreement has been
effective under the Securities Act for a period of at least one hundred eighty
(180) days during which one hundred eighty (180) day period the Company has not
notified the Purchaser that such registration statement or the prospectus
included in such registration statement includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
i. Right of First Refusal. Subject to Section 4(h), if during the
eighteen (18) month period following the Initial Closing Date the Company shall
desire to sell, offer to sell, contract to sell or otherwise dispose of any
securities or any security or other instrument convertible into or exchangeable
for shares of Common Stock (collectively, the "Offered Securities") to a
prospective investor (the "Prospective Investor"), the Company shall notify (the
"Offer Notice") the Purchaser in accordance with Section 10 hereof of the terms
(the "Third Party Terms") on which the Company proposes to sell, contract to
sell or otherwise dispose of the Offered Securities to the Prospective Investor.
If, within the five (5) day period following the Purchaser's receipt of the
Offer Notice, the Purchaser delivers a written notice (the "Acceptance Notice")
to the Company stating its desire to purchase all or any portion of the Offered
Securities on the Third Party Terms, the Company shall be required to sell the
Offered Securities (or any portion thereof so desired by the Purchaser) to the
Purchaser at the price and on the terms set forth in the Offer Notice and the
Company shall not be permitted to sell such Offered Securities to the
Prospective Investor. If the Purchaser does not deliver an Acceptance Notice to
the Company in such five (5) day period, then for a period of sixty (60) days
following the date of the Offer Notice the Company may sell the Offered
Securities to the Prospective Investor on the terms set forth in the Offer
Notice.
j. Stockholder Approval. If required in accordance with Nasdaq Rule
4310 or 4460, the Company agrees to use its best efforts (including obtaining
any vote of its stockholders required by applicable law or NASDAQ rules) to
authorize and approve the issuance of the Common Stock issuable upon conversion
of the Debentures and exercise of Warrants, to the extent that such conversion
or issuance results in the issuance of 20% or more of the Company's outstanding
Common Stock; provided, however, that the failure to obtain any such stockholder
approval shall not limit any of Purchaser's rights hereunder or pursuant to any
Primary Documents.
k. Ownership. At no time shall the Purchaser (including its
officers, directors and affiliates) maintain in the aggregate beneficial
ownership (as defined for purposes of Section 16 of the Securities Exchange Act
of 1934, as amended) of shares of Common Stock in excess of 4.999% of the
Company's outstanding Common Stock unless the Purchaser gives the Company at
least sixty-one days notice that it intends to increase its ownership position.
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company warrants that no instruction, other than the
instructions referred to in this Section 5 and stop transfer instructions to
give effect to Sections 4(a) and 4(b)
12
<PAGE>
hereof prior to the registration and sale of the Securities in the manner
contemplated by the Registration Rights Agreement, will be given by the Company
to the transfer agent and that the shares of Common Stock issuable upon
conversion of, or in lieu of interest payments on the Debentures or upon
exercise of the Warrants shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement, the
Registration Rights Agreement and applicable law. Nothing in this Section shall
affect in any way the Purchaser's obligations and agreement to comply with all
applicable securities laws upon resale of the Securities. If the Purchaser
provides the Company with an opinion of counsel reasonably satisfactory (as to
both the identity of such counsel and the content of such opinion) to the
Company and its counsel that registration of a resale by the Purchaser of any of
the Securities in accordance with clause (1)(B) of Section 4(a) of this
Agreement is not required under the Securities Act, the Company shall permit the
transfer of the Securities and, in the case of the Common Stock, promptly
instruct the Company's transfer agent to issue one or more certificates for
Common Stock without legend in such names and in such denominations as specified
by the Purchaser.
b. The Company will permit the Purchaser to exercise its right to
convert the Debentures or to exercise the Warrants by faxing an executed and
completed Notice of Conversion or Form of Election to Purchase, as applicable,
to the Company, and delivering within three (3) business days thereafter, the
original Notice of Conversion (and the related original Debentures) or Form of
Election to Purchase (and the related original Warrants) to the Company by hand
delivery or by express courier, duly endorsed. Each date on which a Notice of
Conversion or Form of Election to Purchase is faxed to the Company in accordance
with the provisions hereof shall be deemed a "Conversion Date." The Company will
transmit the certificates representing the Common Stock issuable upon conversion
of any Debenture or upon exercise of any Warrants (together with the Debentures
not so converted, or the Warrants not so exercised) or upon conversion of the
Debentures and exercise of the Warrants to the Purchaser via express courier as
soon as practicable, but in all events no later than three (3) business days in
the case of conversion of the Debentures, or five (5) business days in the case
of the exercise of any Warrant after the Conversion Date (the "Delivery Date").
For purposes of this Agreement, any conversion of the Debentures or the exercise
of the Warrants shall be deemed to have been made immediately prior to the close
of business on the Conversion Date.
c. In lieu of delivering physical certificates representing the
Common Stock issuable upon the conversion of the Debentures or the exercise of
the Warrants, provided the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program, on
the written request of the Purchaser, who shall have previously instructed the
Purchaser's prime broker to confirm such request to the Company's transfer
agent, the Company shall cause its transfer agent to electronically transmit
such Common Stock to the Purchaser by crediting the account of the Purchaser's
prime broker with DTC through its Deposit Withdrawal Agent Commission ("DWAC")
system no later than the applicable Delivery Date.
d. The Company understands that a delay in the issuance of Common
Stock beyond the applicable Delivery Date could result in an economic loss to
the Purchaser. As compensation to the Purchaser for such loss, the Company
agrees to pay to the Purchaser for late issuance of Common Stock upon conversion
of, or in lieu of interest payments on, the
13
<PAGE>
Debentures or upon exercise of the Warrants the sum of $2,500 per day for each
$100,000 in aggregate principal amount of Debentures that are being converted or
for any or all shares of Common Stock purchased upon the exercise of the
Warrants. The Company shall pay any payments that are payable to the Purchaser
pursuant to this Section 5 in immediately available funds upon demand. Nothing
herein shall limit the Purchaser's right to pursue actual damages for the
Company's failure to so issue and deliver Common Stock to the Purchaser.
Furthermore, in addition to any other remedies which may be available to the
Purchaser, in the event that the Company fails for any reason to effect delivery
of such Common Stock within five (5) business days after the relevant Delivery
Date, the Purchaser will be entitled to revoke the relevant Notice of Conversion
or Form of Election to Purchase by delivering a notice to such effect to the
Company, whereupon the Company and the Purchaser shall each be restored to their
respective positions immediately prior to delivery of such Notice of Conversion
or Form of Election to Purchase. For purposes of this Section 5, "business day"
shall mean any day in which the financial markets of New York are officially
open for the conduct of business therein.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO ISSUE THE INITIAL SECURITIES.
Purchaser understands that the Company's obligation to issue the Initial
Securities on the Initial Closing Date to Purchaser pursuant to this Agreement
is conditioned upon:
a. The accuracy on the Initial Closing Date of the representations
and warranties of Purchaser contained in this Agreement as if made on the
Initial Closing Date and the performance by Purchaser on or before the Initial
Closing Date of all covenants and agreements of Purchaser required to be
performed on or before the Initial Closing Date;
b. The absence or inapplicability of any and all laws, rules or
regulations prohibiting or restricting the transactions contemplated hereby, or
requiring any consent or approval which shall not have been obtained.
7. CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE THE INITIAL
SECURITIES.
The Company understands that Purchaser's obligation to purchase the Initial
Securities on the Initial Closing Date is conditioned upon:
a. The accuracy on the Initial Closing Date of the representations
and warranties of the Company contained in this Agreement as if made on the
Initial Closing Date, and the performance by the Company on or before the
Initial Closing Date of all covenants and agreements of the Company required to
be performed on or before the Initial Closing Date;
b. On the Initial Closing Date, the Purchaser shall have received
(i) the Initial Debentures, in substantially the form of Exhibit A hereto, (ii)
the Initial Warrants, in substantially the form of Exhibit B hereto, and (iii)
the Conditional Warrant, in substantially the form of Exhibit C hereto.
14
<PAGE>
c. On the Initial Closing Date, the Purchaser shall have received an
opinion of counsel for the Company, dated the Initial Closing Date, in form,
scope and substance reasonably satisfactory to Purchaser, to the effect set
forth in Exhibit D attached hereto;
d. On the Initial Closing Date the Company shall have executed and
delivered a signed counterpart to the Registration Rights Agreement, in form,
scope and substance reasonably satisfactory to Purchaser, to the effect set
forth in Exhibit E attached hereto;
e. On the Initial Closing Date, the Purchaser shall have received a
certificate executed by (i) the President or the Chairman of the Company and
(ii) the Chief Financial Officer of the Company, stating that all of the
representations and warranties of the Company set forth in this Agreement are
accurate as of the Initial Closing Date and that the Company has performed all
of its covenants and agreements required to be performed under this Agreement on
or before the Initial Closing Date;
f. On the Initial Closing Date, the Purchaser shall have received
from the Company such other certificates and documents as it or its
representatives, if applicable, shall reasonably request, and all proceedings
taken by the Company in connection with the Primary Documents contemplated by
this Agreement and the other Primary Documents and all documents and papers
relating to such Primary Documents shall be satisfactory to the Purchaser;
g. On or prior to the Initial Closing Date, there shall not have
occurred any of the following: (i) a suspension or material limitation in the
trading of securities generally on the New York Stock Exchange, Nasdaq National
Market, Nasdaq SmallCap or OTC Bulletin Board; (ii) a general moratorium on
commercial banking activities in New York declared by the applicable banking
authorities; (iii) the outbreak or escalation of hostilities involving the
United States, or the declaration by the United States of a national emergency
or war; or (iv) a change in international, political, financial or economic
conditions, if the effect of any such event, in the reasonable judgment of the
Purchaser, makes it impracticable or inadvisable to proceed with the purchase of
the Securities on the terms and in the manner contemplated in this Agreement and
in the other Primary Documents.
h. The Company shall have delivered to the Purchaser reimbursement
of the Purchaser's out-of-pocket costs and expenses incurred in connection with
the transactions contemplated by this Agreement (including fees and
disbursements of the Purchaser's legal counsel).
8. EXPENSES.
The Company covenants and agrees with the Purchaser that the Company
will pay or cause to be paid the following: (a) the fees, disbursements and
expenses of the Purchaser and Purchaser's counsel in connection with the
issuance of the Securities payable on the Initial Closing Date, (b) all expenses
in connection with registration or qualification of the Securities for offering
and sale under state securities laws as provided in Section 4(f) hereof, and (c)
all other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section,
including the fees and disbursements of the
15
<PAGE>
Company's counsel, accountants and other professional advisors, if any. If the
Company fails to satisfy its obligations or to satisfy any condition set forth
in this Agreement, as a result of which the Securities are not delivered to the
Purchaser on the terms and conditions set forth herein, the Company shall
reimburse the Purchaser for any out-of-pocket expenses reasonably incurred in
making preparations for the purchase, sale and delivery of the Securities not so
delivered.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company and the Purchaser shall
survive the execution and delivery of this Agreement and the delivery of the
Debentures and the Warrants.
10. GOVERNING LAW; MISCELLANEOUS
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York, without regard to principles of conflict of
laws. Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the City of New York or the state courts
of the State of New York sitting in the City of New York in connection with any
dispute arising under this Agreement or any of the transactions contemplated
hereby, and hereby waives, to the maximum extent permitted by law, any
objection, including any objections based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions. This Agreement may be
signed in one or more counterparts, each of which shall be deemed an original.
The headings of this Agreement are for convenience of reference only and shall
not form part of, or affect the interpretation of this Agreement. This
Agreement and each of the Primary Documents have been entered into freely by
each of the parties, following consultation with their respective counsel, and
shall be interpreted fairly in accordance with its respective terms, without any
construction in favor of or against either party. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or unenforceability of this
Agreement in any other jurisdiction. This Agreement shall inure to the benefit
of, and be binding upon the successors and assigns of each of the parties
hereto, including any transferees of the Securities. This Agreement may be
amended only by an instrument in writing signed by the party to be charged with
enforcement. This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof.
11. NOTICES.
Any notice required or permitted hereunder shall be given in writing
(unless otherwise specified herein) and shall be effective upon personal
delivery, via facsimile (upon receipt of confirmation of error-free
transmission) or two business days following deposit of such notice with an
internationally recognized courier service, with postage prepaid and addressed
to each of the other parties thereunto entitled at the following addresses, or
at such other addresses as a party may designate by five days advance written
notice to each of the other parties hereto.
16
<PAGE>
Company: Nanopierce Technologies, Inc.
370 Seventeenth Street, Suite #3290
Denver, Colorado 80202
Attention: Paul H. Metzinger, President
Tel: (303) 592-1010
Fax: (303) 592-1054
With a copy to:
Kutak Rock LLP
717 Seventeenth
Street, Suite #2900
Denver, Colorado 80202
Attention: Robert Ahrenholz, Esq.
Tel: (303) 297-2400
Fax: (303) 292-7799
Purchaser: Equinox Investors LLC
c\o WEC Asset Management LLC
One World Trade Center, Suite #4563
New York, New York 10048
Attention: Daniel J. Saks
Tel: (212) 775-9299
Fax: (212) 775-9311
With a copy to:
Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022
Attention: Mark Saks, Esq.
Tel: (212) 326-0140
Fax: (212) 326-0806
12. INDEMNIFICATION.
The Company agrees to indemnify the Purchaser and each officer,
director, employee, agent, partner, stockholder, member and affiliate of the
Purchaser (collectively, the "Indemnified Parties") for, and hold each
Indemnified Party harmless from and against: (i) any and all damages, losses,
claims and other liabilities of any and every kind, including, without
limitation, judgments and costs of settlement, and (ii) any and all reasonable
out-of-pocket costs and expenses of any and every kind, including, without
limitation, reasonable fees and disbursements of counsel for such Indemnified
Parties (all of which expenses periodically shall be reimbursed as incurred), in
each case, arising out of or suffered or incurred in connection with any of the
following: (a) any misrepresentation or any breach of any warranty made by the
Company herein or in any of the other Primary Documents, (b) any breach or non-
fulfillment of
17
<PAGE>
any covenant or agreement made by the Company herein or in any of the other
Primary Documents and (c) any claim relating to or arising out of a violation of
applicable federal or state securities laws by the Company in connection with
the sale or issuance of the Initial Shares, Additional Shares, Initial Warrants,
Additional Warrants or Conditional Warrant by the Company to the Purchaser
(collectively, the "Indemnified Liabilities"). To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE TO FOLLOW]
18
<PAGE>
IN WITNESS WHEREOF, this Securities Purchase Agreement has been duly
executed by each of the undersigned.
NANOPIERCE TECHNOLOGIES, INC.
By: /s/ Paul H. Metzinger
--------------------------------------------
Name: Paul H. Metzinger
Title: President and Chief Executive Officer
EQUINOX INVESTORS LLC
By: WEC Asset Management LLC,
Manager
By: /s/ Daniel J. Saks
--------------------------------------------
Name: Daniel J. Saks
Title: Managing Director
<PAGE>
EXHIBIT INDEX
EXHIBIT A FORM OF DEBENTURE
EXHIBIT B FORM OF WARRANT
EXHIBIT C FORM OF CONDITIONAL WARRANT
EXHIBIT D FORM OF OPINION OF COUNSEL TO COMPANY
EXHIBIT E FORM OF REGISTRATION RIGHTS AGREEMENT
SCHEDULE INDEX
SCHEDULE 3(b) CAPITALIZATION, DERIVATIVE SECURITIES AND
REGISTRATION RIGHTS
SCHEDULE 3(h) NON-CONTRAVENTION
<PAGE>
SCHEDULE 3(b)
CAPITALIZATION, DERIVATIVE SECURITIES
AND REGISTRATION RIGHTS
CAPITALIZATION STRUCTURE
JANUARY 4, 1999
<TABLE>
<CAPTION>
Restricted Restricted Convertible Restricted
---------- ---------- ----------- ----------
Shares Warrants Finance Promissory Management & Fully
------ -------- ------- ---------- ------------ -----
Warrants Notes/(3)/ Employee Options Diluted
-------- --------- ---------------- -------
<S> <C> <C> <C> <C> <C>
33,155,585 1,327,500/(1)/ 10,000,000/(2)/ 325,000 4,925,000 49,613,085
</TABLE>
(1) Issued to small investors, include piggyback registration rights or demand
registration rights.
(2) Two warrants, each in the amount of 5,000,000 shares, issued 12/10/99, to
two entities, exercisable at $0.51 per share, that include piggyback
registration rights. Expires 12/10/04.
(3) Promissory Note for $80,000 convertible at $0.40 per share into restricted
stock and two Promissory Notes for $25,000 each convertible at $0.40 per
share into restricted stock. No registration rights.
FLOAT
Issued and Outstanding: 33,155,585
Free Trading: 16,349,834
Restricted: 16,805,751
Ownership of Affiliates:
Intercell Corporation 10,847,550(r)
Paul & Cheri Metzinger 1,883,058
Option 2,000,000
Dr. Herbert J. Neuhaus 110,000(r)
Option 750,000
Dr. Michael E. Wernle
Option 325,000
Kristi J. Kampmann 2,987(f)
16,593(r)
Option 100,000
<PAGE>
Warrants
No. of Issue Exp.
Shares Date Date Price
- -------------------------------------------------
50,000 9/9/98 9/9/00 $ 0.50
5,000,000 12/10/99 12/10/04 $ 0.51
5,000,000 12/10/99 12/10/04 $ 0.51
52,500 10/27/99 10/27/02 $ 0.30
70,000 1/4/00 1/4/03 $ 1.50
140,000 10/26/99 10/26/02 $ 0.30
300,000 2/24/98 2/24/03 $ 0.25
140,000 11/8/98 11/8/02 $ 0.30
70,000 10/27/99 10/27/02 $ 0.30
70,000 12/17/99 12/17/02 $ 0.30
70,000 1/4/00 1/4/03 $ 1.50
70,000 11/22/99 11/22/02 $ 0.30
70,000 10/27/99 10/27/02 $ 0.30
105,000 10/26/99 10/26/02 $ 0.30
70,000 7/23/98 7/23/03 $ 2.8125
50,000 7/23/98 7/23/01 $3.28125
11,327,500
REGISTRATION RIGHTS
Piggyback registration rights or demand registration rights have been
granted to the holders of the warrants listed above. Pursuant to waivers
executed by each warrant holder except as specified in Schedule 3(h) hereto,
these warrants will not be a part of the Registration Statement to be filled in
connection with this financing.
2
<PAGE>
SCHEDULE 3(h)
NON-CONTRAVENTION
No waiver has been obtained with respect to the registration rights associated
with the warrants listed below.
Warrants
No. of Issue Exp.
Shares Date Date Price
- --------------------------------------------------
50,000 9/9/98 9/9/00 $ 0.50
70,000 7/23/98 7/23/03 $2.8125
<PAGE>
EXHIBIT A
---------
FORM OF DEBENTURE
No. 1
THESE SECURITIES (INCLUDING ANY UNDERLYING SECURITIES) HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN
OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION SHALL NO LONGER BE REQUIRED.
NANOPIERCE TECHNOLOGIES, INC.
6% CONVERTIBLE DEBENTURE
$500,000 January 11, 2000
New York, New York
1. Consideration. FOR VALUE RECEIVED, NANOPIERCE TECHNOLOGIES, INC.
a Nevada corporation (the "undersigned" or the "Company"), hereby promises to
pay to the order of Equinox Investors LLC, at its offices located at One World
Trade Center, Suite #4563, New York, New York 10048 or at such other place as
the holder hereof (the "holder" or the "Registered Holder") shall designate to
the undersigned in writing, in lawful money of the United States of America or
in New York Clearing House Funds, the principal amount of Five Hundred Thousand
Dollars ($500,000) on the Maturity Date (as defined below). This Debenture is
one of three (3) Debentures issued to the Registered Holder on the date hereof
in the aggregate principal amount of one million five hundred thousand dollars
($1,500,000). The undersigned promises to pay the said principal sum in
accordance with the terms of this Debenture (as defined below). Capitalized
terms used but not defined herein shall have the meanings set forth in the
Securities Purchase Agreement (as defined below), including the Exhibits
thereto.
2. Payment. On January 10, 2002 (the "Maturity Date") the
undersigned shall pay the holder all unpaid principal and interest, if any, on
this Debenture. At the Company's option, any interest payment required to be
paid on this Debenture may be made in the form of the issuance to the holder of
the Company's common stock, par value $.0001 per share (the "Common Stock"),
with the number of shares of such Common Stock to be payable in lieu of such
interest payments to be determined in accordance with the provisions of Section
6, as if such interest payment were a portion of the principal amount of the
Debenture to be converted into Common Stock.
<PAGE>
Principal and interest shall be payable at the most recent address as
the Registered Holder shall have designated to the Company in writing. No
payment of the principal of this Debenture may be made prior to the Maturity
Date by the Company without the consent of the Registered Holder, except as
otherwise provided herein.
3. Overdue Interest Payments. Interest on the indebtedness evidenced
by this Debenture after default or maturity accelerated or otherwise shall be
due and payable at the rate of ten percent (10%) per annum, subject to the
limitations of applicable law.
4. Holidays. If this Debenture or any installment hereof becomes due
and payable on a Saturday, Sunday or public holiday under the laws of the State
of New York, the due date hereof shall be extended to the next succeeding
business day and interest shall be payable at the rate of six (6%) percent per
annum during such extension. All payments received by the holder shall be
applied first to the payment of all accrued interest payable hereunder.
5. Issuance of Debentures. This Debenture has been issued by the
Company pursuant to the authorization of the Board of Directors of the Company
(the "Board") and issued pursuant to a Securities Purchase Agreement, dated as
of January 11, 2000, by and between the Company and the Purchaser identified
therein (the "Securities Purchase Agreement"). Pursuant to the Securities
Purchase Agreement, the Company issued one million five hundred thousand dollars
($1,500,000) principal amount of the Debentures and warrants to purchase one
hundred fifty thousand (150,000) shares of the Company's Common Stock. The
Securities Purchase Agreement contains certain additional terms that are binding
upon the Company and each Registered Holder of the Debentures. A copy of the
Securities Purchase Agreement may be obtained by any registered holder of the
Debentures from the Company upon written request. This Debenture, and the other
6% Convertible Debentures due in 2001 that have been or will be issued by the
Company pursuant to the terms of the Securities Purchase Agreement, together
with any debentures that may be issued from time to time in replacement thereof,
whether pursuant to transfer and assignment, partial conversion thereof or
otherwise, are collectively referred to herein as the "Debentures."
6. Conversion. (a) Subject to and in compliance with the provisions
hereof, the holder shall have the right to convert all or a portion of the
outstanding principal amount of this Debenture into such number of shares of
Common Stock (the shares of Common Stock issuable upon conversion of, and
issuable in lieu of interest payments on, this Debenture, if any, are
hereinafter referred to as the "Conversion Shares") as shall equal the quotient
obtained by dividing (x) the principal amount of this Debenture to be converted
by (y) the Applicable Conversion Price (as hereinafter defined) and by surrender
of this Debenture, such surrender to be made in the manner provided herein.
(b) For purposes hereof, the term "Applicable Conversion Price"
shall mean the lesser of: (i) two dollars and ninety one and one half cents
($2.915) (the "Fixed Price") and (ii) the product obtained by multiplying (x)
the Average Lowest Closing Price (as hereinafter defined) by (y) 0.80.
2
<PAGE>
For purposes hereof, the "Average Lowest Closing Price" with respect
to any conversion elected to be made by the holder shall be the average of the
three (3) lowest daily closing bid prices (each such price is referred to
individually as a "Floating Reference Price" and, collectively, as the "Floating
Reference Prices") during the thirty (30) trading days immediately preceding the
date on which the holder gives the Company a written notice of the holder's
election to convert outstanding principal of this Debenture (the "Notice Date").
The closing bid price on any trading day shall be (a) if the Common Stock is
then listed or quoted on either the NASD Bulletin Board, the NASDAQ SmallCap
Market or the NASDAQ National Market, the reported closing bid price for the
Common Stock as reported by Bloomberg, L.P. ("Bloomberg") or The Wall Street
Journal (the "Journal") or on such day (or, if not so reported, as otherwise
reported by The NASDAQ Small Cap Market, NASDAQ National Market or the NASD
Bulletin Board, as the case may be), (b) if the Common Stock is listed on either
the American Stock Exchange or New York Stock Exchange, the closing bid price
for the Common Stock on such exchange on such day as reported by Bloomberg or
the Journal or (c) if neither (a) nor (b) apply but the Common Stock is quoted
in the over-the-counter market, another recognized exchange, or on the pink
sheets, the last reported bid price thereof on such date. If the prices of the
Common Stock cannot be calculated on such date on any of the foregoing bases,
such prices on such date shall be the fair market value as mutually determined
by the Company and the Registered Holder for which the calculation is required
in order to determine the Applicable Conversion Price; provided, however, that
-------- -------
if the Company and the Registered Holder are unable to mutually determine the
fair market value, such fair market value shall be determined by a nationally
recognized investment banking firm or firm of independent chartered accountants
of recognized standing (which firm may be the firm that regularly examines the
financial statements of the Company) (an "Appraiser") selected in good faith by
the Board and holders of a majority in interest of the Debentures. "Trading day"
shall mean any day on which the Company's Common Stock is traded for any period
on the principal securities exchange or other securities market on which the
Common Stock is then being traded.
(c) If, during any period following January 11, 2000 (the "Original
Issue Date"), as a result of the occurrence of any of the events set forth in
Section 3(f) or 3(g) of the Registration Rights Agreement, dated as of January
11, 2000, by and between the Company and the Purchaser set forth therein (the
"Registration Rights Agreement"), the Purchaser set forth therein is not able to
sell shares of Common Stock issuable upon conversion of, or in lieu of interest
payments on, this Debenture pursuant to a registration statement filed pursuant
to such agreement, the Registered Holder shall have the right, for any purpose
under this Debenture during such period and thereafter, to designate as the
Applicable Conversion Price any Conversion Price that would have been applicable
during such period had the Registered Holder delivered a Notice of Conversion
with respect to any portion of this Debenture. "Conversion Date" shall have the
meaning given such term in Section 5(b) of the Securities Purchase Agreement.
(d) The Registered Holder shall convert this Debenture in accordance
with Section 5(b) of the Securities Purchase Agreement. If the Company fails to
deliver to the holder a certificate or certificates for shares of Common Stock
in the period set forth in the Securities Purchase Agreement, the Company shall
make certain payments to the holder in accordance with Section 5(d) of the
Securities Purchase Agreement.
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(e) If the entire outstanding principal amount of this Debenture
is not converted, the Company shall also issue and deliver to such holder a new
Debenture of like tenor in the principal amount equal to the principal which was
not converted and dated the Original Issue Date. Each conversion shall be deemed
to have been effected immediately prior to the close of business on the date on
which a Notice of Conversion shall have been delivered as aforesaid, and the
person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become the holder or holders of record of the shares represented thereby at
such time on such date.
(f) All shares of Common Stock delivered upon conversion of, or
in lieu of interest payments on, this Debenture will, upon delivery, be duly
authorized, validly issued and fully paid and nonassessable.
(g) No fractional shares of Common Stock shall be issued upon
conversion of, or in lieu of interest payments on, this Debenture. Instead of
any fractional share of Common Stock which would otherwise be deliverable upon
the conversion of, or in lieu of interest payments on, the principal of this
Debenture, the Company shall pay to the holder an amount in cash (computed to
the nearest cent) equal to the Average Closing Price multiplied by the fraction
of a share of Common Stock represented by such fractional interest.
(h) The issuance of certificates for shares of Common Stock upon
any conversion of, or in lieu of interest payments on, this Debenture shall be
made without charge to the payee hereof for any tax or other expense in respect
to the issuance of such certificates, all of which taxes and expenses shall be
paid by the Company, and such certificates shall be issued only in the name of
the registered holder of this Debenture.
(i) Notwithstanding anything herein to the contrary, at no time
shall the Registered Holder (including its officers, directors and affiliates)
maintain in the aggregate beneficial ownership (as defined for purposes of
Section 16 of the Securities Exchange Act of 1934, as amended) of shares of
Common Stock in excess of 4.999% of the Company's outstanding Common Stock and
accordingly, the Registered Holder may only convert this Debenture up to the
point where its aggregate beneficial ownership (as defined for purposes of
Section 16 of the Securities Exchange Act of 1934, as amended) of shares of
Common Stock is equal to or less than 4.999% of the Company's outstanding Common
Stock.
7. Redemption by Company. (a) If, after the Original Issue Date,
there shall occur a Change in Control of the Company (as defined below), then,
at the option of the Registered Holder, the Company shall, on the effective date
of and subject to the consummation of such Change in Control, redeem this
Debenture for cash from the Registered Holder at a redemption price equal to one
hundred twenty five percent (125%) of the aggregate principal and accrued
interest outstanding under this Debenture. Nothing in this subsection shall
limit the Registered Holder's right to convert this Debenture on or prior to
such Change in Control. For purposes hereof, a "Change in Control" shall be
deemed to have occurred if (A) any person or group (as defined for purposes of
Regulation 13D of the Securities Exchange Act of 1934, as
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amended (the "Exchange Act")) shall have become the beneficial owner or owners
of more than fifty percent (50%) of the outstanding voting stock of the Company;
(B) there shall have occurred a merger or consolidation in which the Company or
an affiliate of the Company is not the survivor or in which holders of the
Common Stock of the Company shall have become entitled to receive cash,
securities of the Company other than voting common stock or securities of any
other person; (C) at any time persons constituting the Existing Board of
Directors cease for any reason whatsoever to constitute at least a majority of
the members of the Board of Directors of the Company; or (D) there shall have
occurred a sale of all or substantially all the assets of the Company. For
purposes hereof, the term "Existing Board of Directors" shall mean the persons
constituting the Board of Directors of the Company on the date hereof, together
with each new director whose election, or nomination for election by the
Company's stockholders is approved by a vote of the majority of the members of
the Existing Board of Directors who are in office immediately prior to the
election or nomination of such director.
(b) In the event that the Company is subject to NASDAQ Rule 4310
or 4460, if prior to the time the stockholders of the Company shall have
approved the transactions contemplated by the Securities Purchase Agreement as
provided in clause (B) below, the number of shares of Common Stock issued (i)
upon conversion of the Debentures and (ii) in lieu of interest payments on the
Debentures, if any, (collectively, the "Conversion Shares"), shall be equal to
or more than 19.9% of the number of the shares of capital stock outstanding on
the Initial Closing Date (a "Redemption Event"), the Company shall have the
option to (A) redeem the outstanding principal amount of this Debenture at the
redemption price of one hundred twenty-five percent (125%) of the principal
amount hereof plus accrued interest on this Debenture, if any, or (B) call a
special meeting of its stockholders for the purpose of approving the
transactions contemplated by the Securities Purchase Agreement, including the
issuance of the Debentures and Warrants on the terms set forth therein, together
with any other approvals that shall be required so as to cause the transactions
contemplated by the Securities Purchase Agreement to remain in compliance with
the Rules and Regulations of Nasdaq (including Rule 4460 of NASDAQ's Non-
Qualitative Designation Criteria on the occurrence of a Redemption Event; such
approvals are referred to herein as the "Required Approvals"). The Company shall
determine within five (5) business days following the occurrence of any
Redemption Event which of such actions it shall take, and shall promptly furnish
notice to the Purchaser as to such determination, including, if applicable, a
notice of redemption. If the Company does not make a determination within such
five (5) day period, this Debenture shall be redeemed the first business day
following the end of such five (5) day period, if any, at the redemption price
of one hundred twenty-five percent (125%) of the principal amount hereof plus
accrued interest on the Debenture, if any.
(c) If, to obtain the Required Approvals, the Company elects to
call a special meeting of its stockholders pursuant to Section 6(b) herein, the
Company shall obtain such Required Approvals within thirty (30) days of the
distribution of the notice described in such Section (such thirty (30) day
period is referred to herein as an "Approval Period"). If such approval is not
obtained within the Approval Period, this Debenture shall be redeemed on the
first business day following the Approval Period at the redemption price of one
hundred twenty-five percent (125%) of the principal amount hereof plus accrued
interest on the Debenture, if any.
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(d) If the Company fails to have a registration statement
effective within one hundred fifty (150) days of the date of the Stock Purchase
Agreement, at the option of the Purchaser, the Company shall redeem these
Debentures at a redemption price of one hundred twenty-five percent (125%) of
the principal amount hereof plus accrued and unpaid interest thereon, if any.
(e) If the Company shall be required to redeem the Debentures
pursuant to any of the terms or conditions set forth in this Section 7, the
Company shall remit the redemption price to the Registered Holder thereof
immediately upon such redemption.
8. Covenants.
(a) The Company will pay all taxes, assessments and governmental
charges lawfully levied or assessed upon it, its property and any part thereof,
and upon its income for profits, and any part thereof, before the same shall
become delinquent; and will duly observe, and conform to, all lawful
requirements of any governmental authority relative to any of its property, and
all covenants, terms and conditions upon or under which any of its property is
held; provided that nothing in this Section shall require the Company to observe
or conform to any requirement of governmental authority so long as the validity
thereof shall be contested in good faith by appropriate proceedings or to pay
any such tax, assessment or governmental charges so long as the validity thereof
shall be contested in good faith by appropriate proceedings and adequate
reserves with respect thereto shall have been set aside on the books of the
Company.
(b) Subject to the other provisions of this Debenture, the
Company at all times will maintain its corporate existence and right to carry on
its business and will duly procure all necessary renewals and extensions thereof
and use its best efforts to maintain, preserve and renew all of its rights,
powers, privileges and franchises; provided, however, that nothing herein
-------- -------
contained shall be construed to prevent the Company from ceasing or omitting to
exercise any rights, powers, privileges or franchises which, in the judgment of
the Board, can no longer be profitably exercised, nor to prevent the
consolidation, merger or liquidation of any subsidiary or subsidiaries of the
Company with or into the Company.
(c) The Company will at no time close its stock transfer books
against the transfer of any shares of Common Stock issued or issuable upon the
conversion of, or in lieu of interest payments on, the Debentures, in any manner
which interferes with the timely conversion of such Debentures.
(d) As used in this Debenture, the term "Common Stock" shall
include all stock of any class or classes (however designated) of the Company,
authorized on or after the date hereof, the holders of which shall have the
right, without limitation as to amount, either to all or to a share of the
balance of current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference, and the
holders of which shall ordinarily be entitled to vote for the election of the
directors of the Company. The Company shall not, without the prior written
consent of the Registered Holder of this Debenture, issue any shares of its
capital stock, other than as permitted by Section 4(i) of the Securities
Purchase
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Agreement, in exchange for Debentures as provided hereunder or upon exercise of
the Warrants in accordance with the terms thereof.
(e) The Company will not, by amendment of its Articles of
Incorporation or By-laws or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder or
pursuant to the Securities Purchase Agreement by the Company, and will at all
times assist in good faith in the carrying out of all the provisions of this
Debenture and the Securities Purchase Agreement and in the taking of all such
action as may be necessary or appropriate in order to protect the conversion
rights of the Registered Holders of the Debentures against impairment.
(f) In the event of any taking by the Company of a record of the
holders of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash dividend) or
other distribution, any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities or property, or to
receive any other right, the Company shall mail to each Registered Holder of the
Debentures, at least ten (10) days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
9. Limitation on Certain Corporate Acts. The Company hereby
covenants and agrees that upon any consolidation or merger or upon the transfer
of all or substantially all of the property or assets of the Company, the due
and punctual payment of the principal and interest on all the Debentures
according to their tenor and the due and punctual performance and observance of
all the terms, covenants and conditions of the Debentures and the Securities
Purchase Agreement to be kept and performed by the Company shall be expressly
assumed by the corporation formed by such consolidation, or into which the
Company shall have merged or by the purchaser of such property or assets; and
such assumption shall be an express condition of such merger or consolidation
agreement or agreement for the transfer of property or assets.
10. Events of Default. In case one or more of the following events of
default shall have occurred:
(a) default in the due and punctual payment of interest upon or
principal of any of the Debentures as and when the same becomes due and payable
either at maturity or otherwise; or
(b) failure to deliver the shares of Common Stock required to be
delivered upon conversion of, or in lieu of interest payments on, the Debentures
in the manner and at the time required by Section 5 of the Securities Purchase
Agreement; or
(c) failure of the Company to have authorized the number of
shares of Common Stock issuable upon conversion of, or in lieu of interest
payments on, the Debentures, or exercise of the Warrants; or
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(d) failure on the part of the Company to duly observe or
perform any of its other covenants or agreements contained in, or to cure any
material breach in a material representation or covenant contained in the
Securities Purchase Agreement, the Debentures or the Registration Rights
Agreement for a period of ten (10) days after the date on which written notice
of such failure or breach requiring the same to be remedied has been given by a
Registered Holder to the Company; or
(e) a decree or order by a court having jurisdiction has been
entered adjudging the Company (or any Material Subsidiary (as herein after
defined)) bankrupt or insolvent, or approving a petition seeking reorganization
of the Company (or any Material Subsidiary) under any applicable bankruptcy law
and such decree or order has continued undischarged or unstayed for a period of
thirty (30) days; or a decree or order of a court having jurisdiction for the
appointment of a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of the Company (or any Material Subsidiary) or of all or
substantially all of its property, or for the winding-up or liquidation of its
affairs, has been entered, and has remained in force undischarged or unstayed
for a period of thirty (30) days; or
(f) the Company (or any Material Subsidiary) institutes
proceedings to be adjudicated a voluntary bankrupt, or consents to the filing of
a bankruptcy proceeding against it, or files a petition or answer or consent
seeking reorganization under applicable law, or consents to the filing of any
such petition or to the appointment of a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of it or of all or substantially all of its
property, or makes an assignment for the benefit of creditors, or admits in
writing its inability to pay its debts generally as they become due; or if the
Company (or any Material Subsidiary) shall suffer any writ of attachment or
execution or any similar process to be issued or levied against it or any
significant part of its property which is not released, stayed, bonded or
vacated within thirty (30) days after its issue or levy; or if the Company (or
any Material Subsidiary) takes corporate action in furtherance of any of the
aforesaid purposes or conditions; or
(g) if any default shall occur under any indenture, mortgage,
agreement, instrument or commitment evidencing or under which there is at the
time outstanding any indebtedness of the Company (or a Material Subsidiary), in
excess of $50,000, or which results in such indebtedness, in an aggregate amount
(with other defaulted indebtedness) in excess of $50,000 becoming due and
payable prior to its due date and if such indenture or instrument so requires,
the holder or holders thereof (or a trustee on their behalf) shall have declared
such indebtedness due and payable; or
(h) if any of the Company or its subsidiaries shall default in
the observance or performance of any material term or provision of a material
agreement to which it is a party or by which it is bound, and such default is
not waived or cured within the applicable grace period; or
(i) if a final judgment which, either alone or together with
other outstanding final judgments against the Company and its subsidiaries,
exceeds an aggregate of $50,000 shall be rendered against the Company (or any
Material Subsidiary) and such judgment shall have continued undischarged or
unstayed for thirty (30) days after entry thereof;
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then, in each and every such case other than those specified in clauses (e) and
(f) above, so long as such event of default has not been remedied and unless the
principal of all the Debentures has already become due and payable, the holder
of this Debenture, by notice in writing to the Company, may declare the
principal of this Debenture and the interest accrued thereon, if not already due
and payable, to be due and payable immediately, and upon any such declaration
the same shall become and shall be immediately due and payable, anything herein
contained to the contrary notwithstanding and, upon the occurrence of the events
specified in clauses (e) and (f) above, such principal and interest shall
automatically become and shall be due and payable immediately without any action
on the part of any holder of Debentures, anything herein contained to the
contrary notwithstanding.
For purposes of this Section 10, "Material Subsidiary" means any
subsidiary with respect to which the Company has directly or indirectly
invested, loaned, advanced or guaranteed the obligations of, an aggregate amount
exceeding fifteen percent (15%) of the Company's gross assets, or the Company's
proportionate share of the assets or net income of which (based on the
subsidiary's most recent financial statements) exceed fifteen percent (15%) of
the Company's gross assets or net income, respectively, or the gross revenues of
which exceed fifteen percent (15%) of the gross revenues of the Company based
upon the most recent financial statements of such subsidiary and the Company.
11. Transferability. This Debenture is transferable, in whole or in
part, only in accordance with the terms of Section 5 of the Securities Purchase
Agreement. The Registered Holder may submit a written request, in person or by
his duly authorized attorney, for a transfer of this Debenture on the register
of the Company maintained at its principal offices. The Company may deem and
treat the person in whose name this Debenture is registered as the absolute
owner hereof, for the purpose of receiving payment of the principal thereof and
interest hereon, whether or not the same shall be overdue, and for all other
purposes whatsoever, including but without limitation, the giving of any written
notices required hereunder, and the Company shall not be affected by any notice
to the contrary
12. Stock Splits; Dividends; Adjustments; Reorganizations.
(a) If the Company, at any time after the Original Issue Date,
(i) shall pay a stock dividend or otherwise make a distribution or distributions
on any equity securities (including investments or securities convertible into
or exchangeable for such equity securities) in shares of Common Stock, (ii)
issue any securities payable in shares of Common Stock, (iii) subdivide the
outstanding shares of Common Stock into a larger number of shares, (iv) combine
outstanding shares of Common Stock into a smaller number of shares, the Fixed
Price and each Floating Reference Price prior to the date of any such occurrence
(collectively, the "Reference Prices") shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding
before such event and of which the denominator shall be the number of shares of
Common Stock outstanding after such event. Any adjustment made pursuant to this
Section 12(a) shall become effective immediately after the record date for the
determination of shareholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of
an issuance, a subdivision or a combination.
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(b) In the event that the Company, at any time after the
Original Issue Date, issues or sells any Common Stock or securities which are
convertible into or exchangeable for its Common Stock or any convertible or
exchangeable securities, or any warrants or other rights to subscribe for or to
purchase or any options for the purchase of its Common Stock or any such
convertible or exchangeable securities (other than shares or options issued
pursuant to the Company's employee or director option plans or shares issued
upon exercise of options, warrants or rights outstanding on the date of the
Securities Purchase Agreement and listed in the Company's most recent periodic
report filed under the Exchange Act) at an effective purchase price per share
which is less than the Fixed Price then in effect, then the Fixed Price in
effect immediately prior to such issue or sale shall be reduced effective
concurrently with such issue or sale to an amount determined by multiplying such
Fixed Price then in effect by a fraction, (x) the numerator of which shall be
the sum of (1) the number of shares of Common Stock outstanding immediately
prior to such issue or sale, plus (2) the number of shares of Common Stock which
the aggregate consideration received by the Company for such additional shares
would purchase at such Fixed Price then in effect; and (y) the denominator of
which shall be the number of shares of Common Stock of the Company outstanding
immediately after such issue or sale.
For the purposes of the foregoing adjustment, in the case of the
issuance of any convertible or exchangeable securities, warrants, options or
other rights to subscribe for or to purchase or exchange for, shares of Common
Stock ("Exchangeable Securities"), the maximum number of shares of Common Stock
issuable upon exercise, conversion or exchange of such Exchangeable Securities
shall be deemed to be outstanding, provided that no further adjustment shall be
made upon the actual issuance of Common Stock upon exercise, exchange or
conversion of such Exchangeable Securities.
(c) If the Company, at any time after the Original Issue Date,
shall distribute to all holders of Shares of Common Stock evidences of its
indebtedness or assets or rights or warrants to subscribe for or purchase any
security (excluding those referred to in Section 12(b) above) then in each such
case the Fixed Price thereafter shall be determined by multiplying the Fixed
Price in effect immediately prior to the record date fixed for determination of
shareholders entitled to receive such distribution by a fraction of which the
denominator shall be the Market Price for Shares of Common Stock (as defined
below) determined as of the record date mentioned above, and of which the
numerator shall be such Market Price for Shares of Common Stock on such record
date less the then fair market value at such record date of the portion of such
assets or evidences of indebtedness so distributed applicable to one outstanding
share of Common Stock as determined by the Board in good faith; provided,
however that in the event of a distribution exceeding twenty-five percent (25%)
of the net assets of the Company, such fair market value shall be determined by
an Appraiser selected in good faith by the Board and holders of a majority in
interest of the Debentures. In either case the adjustments shall be described in
a statement provided to all holders of Debentures of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one outstanding share of Common Stock. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date mentioned above.
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"Market Price for Shares of Common Stock" shall mean the price of
one share of Common Stock determined as follows:
(i) If the Common Stock is then listed or quoted on either
the NASD Bulletin Board, the NASDAQ SmallCap Market or the NASDAQ National
Market, the reported closing bid price for the Common Stock as reported by
Bloomberg or the Journal on such day (or, if not so reported, as otherwise
reported by The NASDAQ Small Cap Market, NASDAQ National Market or the NASD
Bulletin Board, as the case may be);
(ii) If the Common Stock is listed on the New York Stock
Exchange or the American Stock Exchange, the closing bid price for the Common
Stock on such exchange on such day as reported by Bloomberg or the Journal;
(iii) If neither (i) nor (ii) apply but the Common Stock is
quoted in the over-the-counter market, another recognized exchange or on the
pink sheets, the last reported bid price thereof on such date; and
(iv) If neither clause (i), (ii) or (iii) above applies,
the market value as determined by a nationally recognized investment banking
firm or other nationally recognized financial advisor retained by the Company
for such purpose, taking into consideration, among other factors, the earnings
history, book value and prospects for the Company, and the prices at which
shares of Common Stock recently have been traded. Such determination shall be
conclusive and binding on all persons.
(d) (1) In the event that at any time or from time to time after
the Original Issue Date, the Common Stock issuable upon the conversion of, or in
lieu of interest payments on, the Debentures is changed into the same or a
different number of shares of any class or classes of stock, whether by merger,
consolidation, recapitalization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend or reorganization
provided for elsewhere in this Paragraph 12), then and as a condition to each
such event provision shall be made in a manner reasonably acceptable to the
holders of Debentures so that each holder of Debentures shall have the right
thereafter to convert such Debenture into, and to receive in lieu of interest
payments, the kind of stock receivable upon such recapitalization,
reclassification or other change by holders of shares of Common Stock, all
subject to further adjustment as provided herein. In such event, the formulae
set forth herein for conversion and redemption shall be equitably adjusted to
reflect such change in number of shares or, if shares of a new class of stock
are issued, to reflect the market price of the class or classes of stock
(applying the same factors used in determining the Fixed Price) issued in
connection with the above described transaction.
(2) If at any time or from time to time after the Initial
Closing Date there is a capital reorganization of the Common Stock, including by
way of a sale of all or substantially all of the assets of the Company (other
than a recapitalization, subdivision, combination, reclassification or exchange
of shares provided for elsewhere in this Paragraph 12), then, as a part of and a
condition to such reorganization, provision shall be made in a manner reasonably
acceptable to the holders of the Debentures so that the holders of the
Debentures shall
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thereafter be entitled to receive upon conversion of, or in lieu of interest
payments on, the Debentures the number of shares of stock or other securities or
property to which a holder of the number of shares of Common Stock deliverable
upon conversion, or in lieu of interest payments on, the Debentures would have
been entitled on such capital reorganization. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Paragraph
12 with respect to the rights of the holders of the Debentures after the
reorganization to the end that the provisions of this Paragraph 12 shall be
applicable after that event and be as nearly equivalent as may be practicable,
including, by way of illustration and not limitation, by equitably adjusting the
formulae set forth herein for conversion and redemption to reflect the market
price of the securities or property (applying the same factors used in
determining the Market Price for Shares of Common Stock) issued in connection
with the above described transaction.
(e) If at any time during the period ending twelve (12)
months after the Original Issue Date, the Company sells or agrees to sell
(including pursuant to a letter of intent, term sheet, or similar means) shares
of Common Stock or securities or options convertible into, exercisable for, or
exchangeable for, shares of Common Stock (other than (i) a sale pursuant to a
bona fide registered public offering of shares of Common Stock by the Company
conducted on the basis of a firm commitment underwriting raising at least
$10,000,000 and (ii) shares or options issued pursuant to the Company's
employee, director or consultant stock option plans) then, if the effective or
maximum sales price of the shares of Common Stock with respect to such
transaction (including the effective or maximum conversion exercise or exchange
price) ("Other Price") is less than the Fixed Price of the Debentures at such
time, the Company, at the option of a holder exercised by written notice to the
Company, shall adjust the Fixed Price applicable to the Debentures of such
holder not yet converted in form and substance reasonably satisfactory to such
holder of Debentures so that the conversion price applicable to those Debentures
shall, in no event, be greater, after giving effect to all other adjustments
contained therein, than the Other Price.
(f) Whenever any element of the Applicable Conversion Price
is adjusted pursuant to Section 12(a), (b), (c), (d) or (e), the Company shall
promptly mail to each holder of the Debentures, a notice setting forth the
Applicable Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.
(g) In the event of any taking by the Company of a record
date of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, any security or right convertible or exchangeable into or
entitling the holder thereof to receive additional shares of Common Stock, or
any right to subscribe for, purchase or otherwise acquire any shares of stock of
any class or any other securities or property, or to receive any other right,
the Company, shall deliver to each holder of Debentures at least thirty (30)
days prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend, distribution,
security or right and the amount and character of such dividend, distribution,
security or right.
13. Remedies Cumulative. The rights, powers and remedies given
to the payee under this Debenture shall be in addition to all rights, powers and
remedies given to it by
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virtue of the Securities Purchase Agreement, any document or instrument executed
in connection therewith, or any statute or rule of law.
14. Non-Waiver. Any forbearance, failure or delay by the payee in
exercising any right, power or remedy under this Debenture, the Securities
Purchase Agreement, any documents or instruments executed in connection
therewith or otherwise available to the payee shall not be deemed to be a waiver
of such right, power or remedy, nor shall any single or partial exercise of any
right, power or remedy preclude the further exercise thereof.
15. Modifications and Waivers. No modification or waiver of any
provision of this Debenture, the Securities Purchase Agreement or any documents
or instruments executed in connection therewith shall be effective unless it
shall be in writing and signed by the payee, and any such modification or waiver
shall apply only in the specific instance for which given.
16. Attorney's Fees. If this Debenture shall not be paid when due
and shall be placed by the Registered Holder hereof in the hands of an attorney
for collection, through legal proceedings or otherwise, or if this Debenture
shall not be converted into shares of Common Stock on the Conversion Date,
subject to the provisions of Section 6 hereof, and an action is brought by the
Registered Holder with respect thereto, the Company shall pay attorney's fees to
the Registered Holder hereof, together with reasonable costs and expenses of
collection or enforcement incurred in connection with any such action.
17. Enforcement; Specific Performance. (a) In case any one or more
Events of Default shall occur and be continuing, a Registered Holder of a
Debenture then outstanding may proceed to protect and enforce the rights of such
holder by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law. Each holder
agrees that it will give written notice to the other holders prior to
instituting any such action.
(b) The Company expressly agrees that each Registered Holder may
not have adequate remedies at law if the Company does not perform its
obligations under this Debenture. Upon a breach of the terms or covenants of
this Debenture by the Company, the Registered Holder shall, each in addition to
all other remedies, be entitled to obtain injunctive relief, and an order for
specific performance of the Company's obligations hereunder.
18. Governing Law. This Debenture and the rights and obligations of
the parties hereto, shall be governed, construed and interpreted according to
the laws of the State of New York. The Company agrees that any final judgment
after exhaustion of all appeals or the expiration of time to appeal in any such
action or proceeding shall be conclusive and binding, and may be enforced in any
federal or state court in the United States by suit on the judgment or in any
other manner provided by law. Nothing contained in this Debenture shall affect
or limit the right of the Registered Holder to serve any process or notice or
motion or other application in any other manner permitted by law, or limit or
affect the right of the Registered Holder to bring any action or proceeding
against the Company or any of its property in the courts of any other
jurisdiction. The Company hereby consents to the jurisdiction of the federal
courts whose
13
<PAGE>
districts encompass any part of the City of New York or the state courts of the
State of New York sitting in the City of New York in connection with any dispute
arising under this Debenture, and hereby waives, to the maximum extent permitted
by law, any objection, including any objections based on forum non conveniens,
to the bringing of any such proceeding in such jurisdictions.
19. Payee Defined. The term "payee" as used herein shall be deemed
to include the payee and its successors, endorsees and assigns.
20. Waiver of Presentment, etc. The undersigned hereby waives
presentment, demand for payment, protest, notice of protest and notice of non-
payment hereof.
21. Headings. The headings contained in this Debenture are for
reference purposes only and shall not affect the meaning of interpretation of
this Debenture.
22. Notices. Any notice to any party required or permitted hereunder
shall be given in writing (unless otherwise specified herein) and shall be
effective upon personal delivery, via facsimile (upon receipt of confirmation of
error-free transmission) or two business days following deposit of such notice
with an internationally recognized courier service, with postage prepaid and
addressed to such party at the address set forth in the first paragraph of this
Agreement with a copy to the Company at the address set forth below, and to the
other parties thereunto entitled at the following addresses, or at such other
addresses as a party may designate by five days advance written notice to each
of the other parties hereto.
Company: Nanopierce Technologies, Inc.
370 Seventeenth Street, Suite 3290
Denver, Colorado 80202
Attention: Paul H. Metzinger, President
Tel: (303) 592-1010
Fax: (303) 592-1054
With a copy to: Kutak Rock LLP
717 Seventeenth Street, Suite 2900
Denver, Colorado 80202
Attention: Robert Ahrenholz, Esq.
Tel: (303) 297-2400
Fax: (303) 292-7799
Registered Holder: Equinox Investors LLC
c\o WEC Asset Management LLC
One World Trade Center, Suite #4563
New York, New York 10048
Attention: Daniel J. Saks
Tel: (212) 775-9299
Fax: (212) 775-9311
14
<PAGE>
With a copy to: Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022
Attention: Mark Saks, Esq.
Tel: (212) 326-0140
Fax: (212) 326-0806
23. Amendments and Modification. Changes in or additions to this
Debenture may be made, and compliance with any covenant or condition herein set
forth may be omitted only if the Company shall obtain the written consent from
the Registered Holder of this Debenture.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK, SIGNATURE PAGE TO FOLLOW]
15
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Debenture to be executed as
of the date first written above.
NANOPIERCE TECHNOLOGIES, INC.
By:______________________________________
Name: Paul H. Metzinger
Title: President
<PAGE>
NOTICE OF CONVERSION
The conversion form appearing below should only be executed by the
Registered Holder desiring to convert all or part of the principal amount of the
Debenture attached hereto.
CONVERSION FORM
Date: ____________________________________________
TO: NANOPIERCE TECHNOLOGIES, INC.
The undersigned hereby exercises the conversion privilege upon the
terms and conditions set forth in the attached Debenture, to the extent of the
maximum number of shares of Common Stock issuable pursuant to the terms of
Section 6 of the Debenture, and accordingly, authorizes the Company to apply
$__________ principal amount of the attached Debenture to payment in full for
such shares of Common Stock. Please register such shares and make delivery
thereof as follows:
Registered in the Name of (Giving First or Middle Name in Full)
Name______________________________________________________
(Please Print)
Address___________________________________________________
<PAGE>
DELIVERY INSTRUCTIONS
To be completed ONLY if Certificates are to be mailed to persons other
than the Registered Holder.
Name_____________________________________________
(Please Print)
Address__________________________________________
Signature________________________________________
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfer
unto _______________________________________________________ the within
Debenture and all rights thereunder, hereby irrevocably authorizing the Company
to transfer said Debenture on the books of the Company, with full power of
substitution in the premises.
Dated:_____________________________________________
Signature:_________________________________________
Print Name:________________________________________
<PAGE>
EXHIBIT B
---------
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND
REGULATIONS THEREUNDER OR ANY STATE SECURITIES LAWS OR THE PROVISIONS OF THIS
WARRANT.
No. of Shares of Common Stock: 150,000
WARRANT
To Purchase Common Stock of
NANOPIERCE TECHNOLOGIES, INC.
THIS IS TO CERTIFY THAT Equinox Investors LLC, a Delaware limited
liability company, or its registered assigns, is entitled, at any time from the
Warrant Issuance Date (as hereinafter defined) to the Expiration Date (as
hereinafter defined), to purchase from Nanopierce Technologies, Inc., a Nevada
corporation (the "Company"), one hundred fifty thousand (150,000) shares of
Common Stock (as hereinafter defined and subject to adjustment as provided
herein), in whole or in part, including fractional parts, at a purchase price
per share equal to two dollars and ninety one and one half cents ($2.915)
(subject to any adjustments made to such amount pursuant to Section 4 hereto) on
the terms and conditions and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
-----------
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Initial Closing Date, other than Warrant
Stock.
"Book Value" shall mean, in respect of any share of Common Stock on
any date herein specified, the consolidated book value of the Company as of the
last day of any month immediately preceding such date, divided by the number of
Fully Diluted Outstanding shares of Common Stock as determined in accordance
with GAAP (assuming the payment of the exercise prices for such shares) by a
firm of independent certified public accountants of recognized national standing
selected by the Company and reasonably acceptable to the Holder.
"Business Day" shall mean any day that is not a Saturday or Sunday or
a day on which banks are required or permitted to be closed in the State of New
York.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
<PAGE>
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, par value $.0001 per share, of the Company as
constituted on the Initial Closing Date, and any capital stock into which such
Common Stock may thereafter be changed, and shall also include (i) capital stock
of the Company of any other class (regardless of how denominated) issued to the
holders of shares of Common Stock upon any reclassification thereof which is
also not preferred as to dividends or assets over any other class of stock of
the Company and which is not subject to redemption and (ii) shares of common
stock of any successor or acquiring corporation received by or distributed to
the holders of Common Stock of the Company in the circumstances contemplated by
Section 4.4.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for shares of
Common Stock, either immediately or upon the occurrence of a specified date or a
specified event.
"Current Warrant Price" shall mean, two dollars ninety one and one
half cents ($2.915) subject to any adjustments to such amount made in accordance
with Section 4 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"Expiration Date" shall mean January 10, 2003.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all shares
of Common Stock issuable in respect of this Warrant, outstanding on such date,
and other options or warrants to purchase, or securities convertible into,
including without limitation the shares of Common Stock outstanding on such date
which would be deemed outstanding in accordance with GAAP for purposes of
determining book value or net income per share.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
"Holder" shall mean the Person in whose name the Warrant or Warrant
Stock set forth herein is registered on the books of the Company maintained for
such purpose.
"Initial Closing Date" shall have the meaning set forth in the
Securities Purchase Agreement.
"Market Price" per Common Share means the average of the closing bid
prices of the Common Shares as reported on the National Association of
Securities Dealers Automated Quotation System for the National Market,
("NASDAQ") or, if such security is not listed or admitted to trading on the
NASDAQ, on the principal national security exchange or quotation system on which
such security is quoted or listed or admitted to trading, or, if not quoted or
listed or admitted to trading on any national securities exchange or quotation
system, the closing bid price of such security on the over-the-counter market on
the day in question as reported by the
2
<PAGE>
National Association of Security Dealers, Inc., or a similar generally accepted
reporting service, as the case may be, for the five (5) trading days immediately
preceding the date of determination.
"Other Property" shall have the meaning set forth in Section 4.4.
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or any subsidiary thereof, and shall include all shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated a date even herewith by and between the Company and Equinox
Investors LLC, as it may be amended from time to time.
"Restricted Common Stock" shall mean shares of Common Stock which are,
or which upon their issuance on the exercise of this Warrant would be, evidenced
by a certificate bearing the restrictive legend set forth in Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement dated as of a date even herewith by and between the Company and
Equinox Investors LLC, as it may be amended from time to time.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Warrant Issuance Date" shall mean any date on which Warrants are
issued pursuant to the Securities Purchase Agreement.
"Warrants" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any thereof. All
Warrants shall at all times be identical as to terms and conditions and date,
except as to the number of shares of Common Stock for which they may be
exercised.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
holders of the Warrants upon the exercise thereof.
3
<PAGE>
2. EXERCISE OF WARRANT
-------------------
2.1. Manner of Exercise. From and after the Warrant Issuance Date
------------------
and until 5:00 P.M., New York City time, on the Expiration Date, Holder may
exercise this Warrant, on any Business Day, for all or any part of the number of
shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at the office or agency designated by the Company
pursuant to Section 12, (i) a written notice of Holder's election to exercise
this Warrant, which notice shall specify the number of shares of Common Stock to
be purchased, (ii) payment by cash, check or bank draft payable to the Company
of the Warrant Price in cash or by wire transfer or cashier's check drawn on a
United States bank or by the Holder's surrender of Warrant Stock (or the right
to receive such number of shares) having an aggregate Market Price equal to the
Warrant Price for all shares then being purchased and (iii) this Warrant. Such
notice shall be substantially in the form of the subscription form appearing at
the end of this Warrant as Exhibit A, duly executed by Holder or its agent or
---------
attorney. Upon receipt of the items referred to in clauses (i), (ii) and (iii)
above, of receipt of such notice the Company shall, as promptly as practicable,
and in any event within three (3) Business Days, execute or cause to be executed
and deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered shall
be, to the extent possible, in such denomination or denominations as Holder
shall request in the notice and shall be registered in the name of Holder or,
subject to Section 9, such other name as shall be designated in the notice.
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and Holder or any other Person
so designated to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the Warrant has been
exercised by payment to the Company of the Warrant Price. If this Warrant shall
have been exercised in part, the Company shall, at the time of delivery of the
certificate or certificates representing Warrant Stock, deliver to Holder a new
Warrant evidencing the rights of Holder to purchase the unpurchased shares of
Common Stock called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.
The Holder shall be entitled to exercise the Warrant notwithstanding
the commencement of any case under 11 U.S.C. (S) 101 et seq. (the "Bankruptcy
-- ----
Code"). In the event the Company is a debtor under the Bankruptcy Code, the
Company hereby waives to the fullest extent permitted any rights to relief it
may have under 11 U.S.C. (S) 362 in respect of the Holder's exercise right. The
Company hereby waives to the fullest extent permitted any rights to relief it
may have under 11 U.S.C. (S) 362 in respect of the exercise of the Warrant. The
Company agrees, without cost or expense to the Holder, to take or consent to any
and all action necessary to effectuate relief under 11 U.S.C. (S) 362.
2.2. Payment of Taxes and Charges. All shares of Common Stock
----------------------------
issuable upon the exercise of this Warrant pursuant to the terms hereof shall be
validly issued, fully paid and nonassessable, and without any preemptive rights.
The Company shall pay all expenses in
4
<PAGE>
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issue or delivery thereof.
2.3. Fractional Shares. The Company shall not be required to issue a
-----------------
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Market Price per share
of Common Stock on the relevant exercise date.
2.4. Continued Validity. A holder of shares of Common Stock issued
------------------
upon the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the Securities Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 9, 10 and
14 of this Warrant. The Company will, at the time of exercise of this Warrant,
in whole or in part, upon the request of Holder, acknowledge in writing, in form
reasonably satisfactory to Holder, its continuing obligation to afford Holder
all such rights; provided, however, that if Holder shall fail to make any such
-------- -------
request, such failure shall not affect the continuing obligation of the Company
to afford to Holder all such rights.
2.5. Right to Convert Warrant. The Holder shall have the right to
------------------------
convert, in whole or in part, this Warrant (the "Conversion Right") at any time
prior to the expiration of the Exercise Period, into shares of Common Stock in
accordance with this Section 2.5. Upon exercise of the Conversion Right, the
Company shall deliver to the Holder (without payment by the Holder of the
Warrant Price) that number of shares of Common Stock equal to the quotient
obtained by dividing (x) the value of the portion of this Warrant being
converted at the time the Conversion Right is exercised (determined by
subtracting the Warrant Price for the portion of this Warrant being converted
(in effect immediately prior to the exercise of the Conversion Right) from the
amount obtained by multiplying the number of shares of Common Stock issuable
upon the whole or partial exercise of this Warrant, as the case may be, by the
Market Price immediately prior to the exercise of the Conversion Right) by (y)
the Market Price of one share of Common Stock immediately prior to the exercise
of the Conversion Right.
The Conversion Right may be exercised by the Holder, at any time or
from time to time, prior to its expiration, on any business day by delivering a
written notice (the "Conversion Notice") to the Company at the offices of the
Company, exercising the Conversion Right and specifying (i) the total number of
shares of Common Stock the Holder will purchase pursuant to the conversion and
(ii) a place and date not less than two (2) nor more than twenty (20) Business
Days from the date of the Conversion Notice for the closing of such purchase.
At any closing under this Section 2.5, (i) the Holder will surrender
this Warrant and (ii) the Company will deliver to the Holder a certificate or
certificates for the number of shares of Common Stock issuable upon such
conversion. If this Warrant shall have been converted only in part, the Company
shall, at the time of delivery of said stock certificate or certificates,
deliver to the Holder a new Warrant evidencing the rights of the Holder to
purchase the remaining shares of Common Stock called for by this Warrant, which
new Warrant shall in all other respects be identical to this Warrant, or, at the
request of the Holder, appropriate
5
<PAGE>
notation may be made on this Warrant and the same returned to the Holder. The
Company shall pay all expenses, taxes and other charges payable in connection
with the preparation, issue and delivery of such stock certificates and new
Warrants, except that, in case such stock certificates and/or new Warrants shall
be registered in a name or names other than the name of the Holder, funds
sufficient to pay all stock transfer taxes that are payable upon the issuance of
such stock certificates or new Warrants shall be paid by the Holder at the time
of delivering the notice of exercise mentioned above.
3. TRANSFER, DIVISION AND COMBINATION
----------------------------------
3.1. Transfer. Subject to compliance with Sections 9, transfer of
--------
this Warrant and all rights hereunder, in whole or in part, shall be registered
on the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Company referred to in Section 2.1
or the office or agency designated by the Company pursuant to Section 12,
together with a written assignment of this Warrant substantially in the form of
Exhibit B hereto duly executed by Holder or its agent or attorney. Upon such
- ---------
surrender, the Company shall, subject to Section 9, execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination specified in such instrument of assignment, and shall issue to the
assignor a new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be cancelled. A Warrant, if properly assigned
in compliance with Section 9, may be exercised by a new Holder for the purchase
of shares of Common Stock without having a new Warrant issued.
3.2. Division and Combination. Subject to Section 9, this Warrant
------------------------
may be divided or combined with other Warrants upon presentation hereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Holder or its agent or attorney. Subject to compliance with Section
3.1 and with Section 9, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
3.3. Expenses. The Company shall prepare, issue and deliver at its
--------
own expense the new Warrant or Warrants under this Section 3.
3.4. Maintenance of Books. The Company agrees to maintain, at its
--------------------
aforesaid office or agency, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
-----------
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant, shall be subject to adjustment from time to time as set forth in
this Section 4. The Company shall give Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 at the time of
such event.
6
<PAGE>
4.1. Stock Dividends, Subdivisions and Combinations. If at any time
----------------------------------------------
the Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
4.2. Certain Other Distributions.
---------------------------
(a) If at any time prior to the Expiration Date the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive any dividend or other distribution of:
(i) cash,
(ii) any evidences of its indebtedness, any shares of
its stock or any other securities or property of any nature
whatsoever (other than cash, Convertible Securities or Additional
Shares of Common Stock), or
(iii) any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its
stock or any other securities or property of any nature
whatsoever (other than cash, Convertible Securities or Additional
Shares of Common Stock),
then Holder shall be entitled to receive such dividend or distribution as if
Holder had exercised the Warrant. A reclassification of the Common Stock (other
than a change in par value, or from par value to no par value or from no par
value to par value) into shares of Common Stock and shares of any other class of
stock shall be deemed a distribution by the Company to the holders of its Common
Stock of such shares of such other class of stock within the meaning of this
Section 4.2 and, if the outstanding shares of Common Stock shall be changed into
a larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall
7
<PAGE>
be deemed a subdivision or combination, as the case may be, of the outstanding
shares of Common Stock within the meaning of Section 4.1.
(b) In case the Company shall issue any Common Stock or any
rights, options or warrants to all holders of record of its Common Stock
entitling all holders to subscribe for or purchase shares of Common Stock at a
price per share less than the Market Price per share of the Common Stock on the
date fixed for such issue, the Current Warrant Price in effect immediately prior
to the close of business on the date fixed for such determination shall be
reduced to the amount determined by multiplying such Current Warrant Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the close of business on the date fixed for
such determination plus the number of shares of Common Stock which the aggregate
of the offering price of the total number of shares of Common Stock so offered
for subscription or purchase would purchase at such Market Price and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduced amount to become effective immediately
after the close of business on the date fixed for such determination. For the
purposes of this clause (b), (i) the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the Company
and (ii) in the case of any rights, options or warrants which expire by their
terms not more than 60 days after the date of issue, sale, grant or assumption
thereof, no adjustment of the Current Warrant Price shall be made until the
expiration or exercise of all rights, options or warrants, whereupon such
adjustment shall be made in the manner provided in this clause (b), but only
with respect to the shares of Common Stock actually issued pursuant thereto.
Such adjustment shall be made successively whenever any event specified above
shall occur. In the event that any or all rights, options or warrants covered by
this clause (b) are not so issued or expire or terminate before being exercised,
the Current Warrant Price then in effect shall be appropriately readjusted.
4.3. Other Provisions Applicable to Adjustments under this Section.
-------------------------------------------------------------
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) When Adjustments to Be Made. The adjustments required by
---------------------------
this Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(b) Fractional Interests. In computing adjustments under this
--------------------
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(c) When Adjustment Not Required. If the Company shall take a
----------------------------
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution,
8
<PAGE>
subscription or purchase rights, then thereafter no adjustment shall be required
by reason of the taking of such record and any such adjustment previously made
in respect thereof shall be rescinded and annulled.
(d) Challenge to Good Faith Determination. Whenever the Board
-------------------------------------
of Directors of the Company shall be required to make a determination in good
faith of the fair value of any item under this Section 4, such determination may
be challenged in good faith by the Holder, and any dispute shall be resolved by
an investment banking firm of recognized national standing selected by the
Holder and reasonably acceptable to the Company.
4.4. Reorganization, Reclassification, Merger, Consolidation or
----------------------------------------------------------
Disposition of Assets. In case the Company shall reorganize its capital,
- ---------------------
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of the Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate, subject to the Holder's consent, in order to provide for
adjustments of shares of Common Stock for which this Warrant is exercisable
which shall be as nearly equivalent as practicable to the adjustments provided
for in this Section 4. For purposes of this Section 4.4, "common stock of the
successor or acquiring corporation" shall include stock of such corporation of
any class which is not preferred as to dividends or assets over any other class
of stock of such corporation and which is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section 4.4 shall similarly
apply to successive reorganizations, reclassifications, mergers, consolidations
or disposition of assets.
4.5. Other Action Affecting Common Stock. In case at any time or
-----------------------------------
from time to time the Company shall take any action in respect of its Common
Stock, other than any action taken in the ordinary course of the Company's
business or any action described in this Section 4, which would have a material
adverse effect upon the rights of the Holder, the number of shares of Common
Stock and/or the purchase price thereof shall be adjusted in such manner as may
be
9
<PAGE>
equitable in the circumstances, as determined in good faith by an investment
bank selected by Holder.
4.6. Certain Limitations. Notwithstanding anything herein to the
-------------------
contrary, the Company agrees not to enter into any transaction which, by reason
of any adjustment hereunder, would cause the Current Warrant Price to be less
than the par value per share of Common Stock.
4.7. No Voting Rights. This Warrant shall not entitle its Holder to
----------------
any voting rights or other rights as a shareholder of the Company.
5. NOTICES TO HOLDER
-----------------
5.1. Notice of Adjustments. Whenever the number of shares of Common
---------------------
Stock for which this Warrant is exercisable, or whenever the price at which a
share of such Common Stock may be purchased upon exercise of the Warrants, shall
be adjusted pursuant to Section 4, the Company shall forthwith prepare a
certificate to be executed by an executive officer of the Company setting forth,
in reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated, specifying the number of shares of Common Stock
for which this Warrant is exercisable and (if such adjustment was made pursuant
to Section 4.4 or 4.5) describing the number and kind of any other shares of
stock or Other Property for which this Warrant is exercisable, and any change in
the purchase price or prices thereof, after giving effect to such adjustment or
change. The Company shall promptly cause a signed copy of such certificate to
be delivered to the Holder in accordance with Section 14.2. The Company shall
keep at its office or agency designated pursuant to Section 12 copies of all
such certificates and cause the same to be available for inspection at said
office during normal business hours by the Holder, its representatives, or any
prospective purchaser of a Warrant designated by the Holder.
5.2. Notice of Corporate Action. If at any time
--------------------------
(a) the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least thirty (30) Business Days' prior written notice of the date on which a
record date shall be selected for such dividend, distribution or right or for
determining rights to vote in respect of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution,
10
<PAGE>
liquidation or winding up, and (ii) in the case of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up, at least thirty (30) Business Days'
prior written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause also shall specify (i) the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, the date on which the holders of Common Stock shall be entitled to any
such dividend, distribution or right, and the amount and character thereof, and
(ii) the date on which any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up is to take place and the time, if any such time is to be fixed, as of which
the holders of Common Stock shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Holder at the last address of Holder
appearing on the books of the Company and delivered in accordance with Section
14.2.
6. NO IMPAIRMENT
-------------
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, and (c) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form reasonably
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK
---------------------------------------------
From and after the Initial Closing Date, the Company shall at all
times reserve and keep available for issue upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise of
any Warrant and payment therefor in accordance with the terms of such Warrant,
shall be duly and validly issued and fully paid and nonassessable, and not
subject to preemptive rights.
11
<PAGE>
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and non-assessable shares of such Common Stock at
such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
--------------------------------------------------
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of a record of such holders, the Company will in each such
case take such a record as of the close of business on a Business Day. The
Company will not at any time close its stock transfer books or Warrant transfer
books so as to result in preventing or delaying the exercise or transfer of any
Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
-------------------------------
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
9.1. Restrictive Legend. The Holder by accepting this Warrant and
------------------
any Warrant Stock agrees that this Warrant and the Warrant Stock issuable upon
exercise hereof may not be assigned or otherwise transferred unless and until
(i) the Company has received an opinion of counsel for the Holder that such
securities may be sold pursuant to an exemption from registration under the
Securities Act or (ii) a registration statement relating to such securities has
been filed by the Company and declared effective by the Commission.
(a) Each certificate for Warrant Stock issuable hereunder shall
bear a legend substantially worded as follows unless such securities have
been sold pursuant to an effective registration statement under the
Securities Act:
"The securities represented by this certificate have not
been registered under the Securities Act of 1933, as amended (the
"Act") or any state securities laws. The securities may not be
offered for sale, sold, assigned, offered, transferred or
otherwise distributed for value except (i) pursuant to an
effective registration statement under the Act or any state
securities laws or (ii) pursuant to an exemption from
registration or prospectus
12
<PAGE>
delivery requirements under the Act or any state securities laws
in respect of which the Company has received an opinion of
counsel satisfactory to the Company to such effect. Copies of the
agreement covering both the purchase of the securities and
restricting their transfer may be obtained at no cost by written
request made by the holder of record of this certificate to the
Secretary of the Company at the principal executive offices of
the Company."
(b) Except as otherwise provided in this Section 9, the
Warrant shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"This Warrant and the securities represented hereby
have not been registered under the Securities Act of 1933, as
amended, or any state securities laws and may not be transferred
in violation of such Act, the rules and regulations thereunder or
any state securities laws or the provisions of this Warrant."
9.2. Notice of Proposed Transfers. Prior to any Transfer or
-----------------------------
attempted Transfer of any Warrants or any shares of Restricted Common Stock, the
Holder shall give five (5) days' prior written notice (a "Transfer Notice") to
the Company of Holder's intention to effect such Transfer, describing the manner
and circumstances of the proposed Transfer, and obtain from counsel to Holder an
opinion that the proposed Transfer of such Warrants or such Restricted Common
Stock may be effected without registration under the Securities Act or state
securities laws. After the Company's receipt of the Transfer Notice and
opinion, such Holder shall thereupon be entitled to Transfer such Warrants or
such Restricted Common Stock, in accordance with the terms of the Transfer
Notice. Each certificate, if any, evidencing such shares of Restricted Common
Stock issued upon such Transfer and the Warrant issued upon such Transfer shall
bear the restrictive legends set forth in Section 9.1, unless in the opinion of
such counsel such legend is not required in order to ensure compliance with the
Securities Act.
9.3. Required Registration. Pursuant to the terms and conditions set
----------------------
forth in the Registration Rights Agreement, the Company shall prepare and file
with the Commission not later than the forty-fifth (45th) day after the Initial
Closing Date, a Registration Statement relating to the offer and sale of the
Common Stock issuable upon exercise of the Warrants and shall use its best
efforts to cause the Commission to declare such Registration Statement effective
in accordance with the terms set forth in Section 2(a) of the Registration
Rights Agreement.
9.4. Termination of Restrictions. Notwithstanding the foregoing
---------------------------
provisions of Section 9, the restrictions imposed by this Section upon the
transferability of the Warrants, the Warrant Stock and the Restricted Common
Stock (or Common Stock issuable upon the exercise of the Warrants) and the
legend requirements of Section 9.1 shall terminate as to any particular Warrant
or share of Warrant Stock or Restricted Common Stock (or Common Stock issuable
upon the exercise of the Warrants) (i) when and so long as such security shall
have been effectively registered under the Securities Act and applicable state
securities laws and disposed
13
<PAGE>
of pursuant thereto or (ii) when the Company shall have received an opinion of
counsel that such shares may be transferred without registration thereof under
the Securities Act and applicable state securities laws. Whenever the
restrictions imposed by Section 9 shall terminate as to this Warrant, as
hereinabove provided, the Holder hereof shall be entitled to receive from the
Company upon written request of the Holder, at the expense of the Company, a new
Warrant bearing the following legend in place of the restrictive legend set
forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN
WARRANT CONTAINED IN SECTION 9 HEREOF TERMINATED ON ________,
20__, AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions imposed
by this Section shall terminate as to any share of Restricted Common Stock, as
hereinabove provided, the holder thereof shall be entitled to receive from the
Company, at the Company's expense, a new certificate representing such Common
Stock not bearing the restrictive legends set forth in Section 9.1.
9.5. Listing on Securities Exchange. If the Company shall list any
------------------------------
shares of Common Stock on any securities exchange, it will, at its expense, list
thereon, maintain and, when necessary, increase such listing of, all shares of
Common Stock issued or, to the extent permissible under the applicable
securities exchange rules, issuable upon the exercise of this Warrant so long as
any shares of Common Stock shall be so listed during the Exercise Period.
10. SUPPLYING INFORMATION
---------------------
The Company shall cooperate with Holder in supplying such information
as may be reasonably necessary for Holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
------------------
Upon receipt by the Company from Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that the written agreement of the Holder shall be sufficient
indemnity), and in case of mutilation upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant of like tenor
to Holder; provided, in the case of mutilation, no indemnity shall be required
--------
if this Warrant in identifiable form is surrendered to the Company for
cancellation.
12. OFFICE OF THE COMPANY
---------------------
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the Warrants may be presented for exercise, registration of
transfer, division or combination as
14
<PAGE>
provided in this Warrant, such office to be initially located at 370 Seventeenth
Street, Suite #3290, Denver, Colorado 80202, fax (303) 592-1010, provided,
however, that the Company shall provide prior written notice to Holder of a
change in address no less than thirty (30) days prior to such change.
13. LIMITATION OF LIABILITY
-----------------------
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of Holder for the
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
14. MISCELLANEOUS
-------------
14.1. Nonwaiver and Expenses. No course of dealing or any delay or
----------------------
failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or remedies,
notwithstanding all rights hereunder terminate on the Expiration Date. If the
Company fails to make, when due, any payments provided for hereunder, or fails
to comply with any other provision of this Warrant, the Company shall pay to
Holder such amounts as shall be sufficient to cover any direct and indirect
losses, damages, costs and expenses including, but not limited to, reasonable
attorneys' fees, including those of appellate proceedings, incurred by Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing any of its
rights, powers or remedies hereunder.
14.2. Notice Generally. Except as may be otherwise provided herein,
----------------
any notice or other communication or delivery required or permitted hereunder
shall be in writing and shall be delivered personally or sent by certified mail,
postage prepaid, or by a nationally recognized overnight courier service, and
shall be deemed given when so delivered personally or by overnight courier
service, or, if mailed, three (3) days after the date of deposit in the United
States mails, as follows:
(1) if to the Company, to:
Nanopierce Technologies, Inc.
370 Seventeenth Street, Suite #3290
Denver, Colorado 80202
Attention: Paul H. Metzinger, President
Tel: (303) 592-1010
Fax: (303) 592-1054
with a copy to: Kutak Rock LLP
717 Seventeenth Street, Suite #2900
Denver, Colorado 80202
Attention: Robert Ahrenholz, Esq.
Tel: (303) 297-2400
Fax: (303) 292-7799
15
<PAGE>
(2) if to the Purchaser to:
Equinox Investors LLC
WEC Asset Management LLC
One World Trade Center, Suite 4563
New York, New York 10048
Attention: Daniel J. Saks
Tel: (212) 775-9299
Fax: (212) 775-9311
with a copy to:
Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022
Attention: Mark Saks, Esq.
Tel: (212) 326-0140
Fax: (212) 326-0806
The Company or the Holder may change the foregoing address by notice given
pursuant to this Section 14.2.
14.3. Indemnification. The Company agrees to indemnify and hold
---------------
harmless Holder from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses
and disbursements of any kind which may be imposed upon, incurred by or asserted
against Holder in any manner relating to or arising out of any failure by the
Company to perform or observe in any respect any of its covenants, agreements,
undertakings or obligations set forth in this Warrant.
14.4. Remedies. Holder in addition to being entitled to exercise all
--------
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Warrant and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
14.5. Successors and Assigns. Subject to the provisions of Sections
----------------------
3.1 and 9, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and assigns of Holder. The provisions of this Warrant are intended to be for
the benefit of all Holders from time to time of this Warrant and, with respect
to Section 9 hereof, holders of Warrant Stock, and shall be enforceable by any
such Holder or holder of Warrant Stock.
14.6. Amendment. This Warrant and all other Warrants may be modified
---------
or amended or the provisions hereof waived only with the prior written consent
of the Company and the Holder.
16
<PAGE>
14.7. Severability. Wherever possible, each provision of this
------------
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.8. Headings. The headings used in this Warrant are for the
---------
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
14.9. Governing Law. This Warrant shall be governed by the laws of
-------------
the State of New York, without regard to the provisions thereof relating to
conflict of laws. The Company consents to the jurisdiction of the federal courts
whose districts encompass any part of the City of New York or the state courts
of the State of New York sitting in the City of New York in connection with any
dispute arising under this Warrant or any of the transactions contemplated
hereby, and hereby waives, to the maximum extent permitted by law, any
objection, including any objections based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE TO FOLLOW.]
17
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: January 11, 2000
NANOPIERCE TECHNOLOGIES, INC.
By:___________________________
Name: Paul H. Metzinger
Title: President
Attest:
By:______________________
Name: Kristi J. Kampmann
Title: Secretary
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises this
Warrant for the purchase of ______ Shares of Common Stock of Nanopierce
Technologies, Inc., and herewith makes payment therefor in cash or by check or
bank draft made payable to the Company, all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered to
_____________ whose address is _________________ and, if such shares of Common
Stock shall not include all of the shares of Common Stock issuable as provided
in this Warrant, that a new Warrant of like tenor and date for the balance of
the shares of Common Stock issuable hereunder be delivered to the undersigned.
_______________________________
(Name of Registered Owner)
_______________________________
(Signature of Registered Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of
---------------------------- ----------------
Common Stock
------------
and does hereby irrevocably constitute and appoint _______ ________________
attorney-in-fact to register such transfer on the books of Nanopierce
Technologies, Inc., maintained for the purpose, with full power of substitution
in the premises.
Dated:__________________ Print Name:___________________
Signature:____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the
name as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE>
EXHIBIT C
---------
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER
HEREOF TO THE COMPANY OF AN OPINION OF COUNSEL STATING THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS THEN AVAILABLE.
NANOPIERCE TECHNOLOGIES, INC.
CONDITIONAL WARRANT TO PURCHASE 6%
CONVERTIBLE DEBENTURES
AND WARRANTS TO PURCHASE COMMON STOCK
The Transferability of this Conditional Warrant
Is Restricted as Provided in Section 2.
Void after June 11, 2000 Right to Purchase up to $2,500,000 principal
amount of 6% Convertible Debentures and Warrants
to Purchase 250,000 Shares of
Common Stock
PREAMBLE
Nanopierce Technologies, Inc. (the "Company"), a Nevada corporation,
hereby certifies that, for value received, Equinox Investors LLC, whose address
is One World Trade Center, Suite #4563, New York, New York 10048, or its
registered assigns (hereinafter, the "Registered Holder"), is, subject to the
terms set forth herein, entitled to and shall purchase from the Company at any
time or from time to time beginning on the date hereof and ending at 5:00 P.M.
New York time, on the date six (6) months from the date hereof (the "Expiration
Time") up to (i) two million five hundred thousand dollars ($2,500,000) of the
Company's 6% Convertible Debentures (the "Additional Debentures") substantially
in the form of Exhibit A to the Securities Purchase Agreement (as defined below)
---------
and (ii) warrants (the "Additional Warrants") to purchase one hundred thousand
(100,000) shares of common stock, par value $.0001 per share (the "Common
Stock") for each one million dollars in principal amount of Additional
Debentures purchased hereunder. For purposes of this warrant (the "Conditional
Warrant") the aggregate price paid by the Registered Holder for the Additional
Debentures and the Additional Warrants, as applicable, is referred to herein as
the "Purchase Price".
<PAGE>
Subject to the terms set forth herein from time to time, beginning
five (5) days after the date on which the registration statement covering the
Securities is declared effective by the Commission and ending at the Expiration
Time and provided that (i) the average daily trading volume of the Common Stock
on the OTC Bulletin Board, the NASDAQ SmallCap Market, the Nasdaq National
Market, The New York Stock Exchange, Inc. or The American Stock Exchange, Inc.,
as applicable, is equal to or greater than five hundred thousand (500,000)
shares per day during the fifteen (15) trading days prior to the Conditional
Closing Date and (ii) the Closing Bid Price on the date of delivery of the
Conditional Exercise Notice is greater than four dollars ($4.00) per share, at
the election of the Company upon delivery of a Conditional Exercise Notice to
the Registered Holder, the Registered Holder shall, at any time or from time to
time before the Expiration Time, be required to exercise this Conditional
Warrant and purchase up to two million five hundred thousand dollars
($2,500,000) of Additional Debentures and Additional Warrants to purchase up to
two hundred fifty thousand (250,000) shares of Common Stock (minus any such
Additional Debentures and Additional Warrants previously purchased hereunder),
at the Purchase Price; provided, that, the Registered Holder shall not be
required to exercise and purchase any such shares if at any time from and after
the delivery to the Registered Holder of the Conditional Exercise Notice through
the Conditional Closing Date (the "Interim Period") if any of the Closing
Conditions (as defined below) shall not have been satisfied.
This Warrant is the Conditional Warrant (the "Conditional Warrant") to
purchase up to $2,500,000 of Additional Debentures and Additional Warrants to
purchase up to two hundred fifty thousand (250,000) shares of Common Stock
issued pursuant to the Securities Purchase Agreement (the "Securities Purchase
Agreement"), dated as of January 11, 2000, by and between the Company and
Equinox Investors LLC. The Securities Purchase Agreement contains certain
additional terms that are binding upon the Company and each Registered Holder of
this Conditional Warrant. A copy of the Securities Purchase Agreement,
including the Exhibits thereto, may be obtained by any Registered Holder of the
Conditional Warrant from the Company upon written request. Capitalized terms
used but not defined herein shall have the meanings set forth in the Securities
Purchase Agreement.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Closing Bid Price" shall mean the on any trading day,
which shall be (i) if the Common Stock is then listed or quoted on either the
NASD Bulletin Board, the NASDAQ SmallCap Market or the NASDAQ National Market,
the reported closing bid price for the Common Stock as reported by Bloomberg
L.P. or The Wall Street Journal or on such day (or, if not so reported, as
otherwise reported by The NASDAQ Small Cap Market, NASDAQ National Market or the
NASD Bulletin Board, as the case may be), (ii) if the Common Stock is listed on
either the American Stock Exchange or New York Stock Exchange, the closing bid
price for the Common Stock on such exchange on such day as reported by Bloomberg
or the Journal or (iii) if neither (i) nor (ii) apply but the Common Stock is
quoted in the over-the-counter market, another recognized exchange, or on the
pink sheets, the last reported bid price thereof on such date. If the prices of
the Common Stock cannot be calculated on such date on any of the foregoing
bases, such prices on such date shall be the fair market value as mutually
determined by the Company and the Registered Holder for which the calculation is
required in order to determine the Applicable Conversion Price; provided,
however, that if the Company and
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<PAGE>
the Registered Holder are unable to mutually determine the fair market value,
such fair market value shall be determined by a nationally recognized investment
banking firm or firm of independent chartered accountants of recognized standing
(which firm may be the firm that regularly examines the financial statements of
the Company) selected in good faith by the Board and holders of a majority in
interest of the Debentures.
(b) the term "Closing Conditions" shall have the meaning set forth in
Section 5 hereof.
(c) The term "Company" includes any corporation which shall succeed to or
assume the obligations of the Company hereunder.
(d) The term "Common Stock" includes all shares of any class or classes
(however designated) of the Company, authorized on or after the date hereof, the
holders of which shall have the right, without limitation as to amount, either
to all or to a share of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any shares
entitled to preference, and the holders of which shall ordinarily be entitled to
vote for the election of directors of the Company (even though the right so to
vote has been suspended by the happening of a contingency).
(e) The term the "Conditional Exercise Notice" shall mean a written notice
in the form of Annex A delivered not less than ten (10) business days nor more
-------
than twenty (20) business days prior to the Conditional Closing Date which sets
forth the Additional Debentures and the number of shares of Common Stock
purchasable pursuant to the Additional Warrant.
(f) The term the "Conditional Closing Date" shall mean the date specified
in a duly delivered Conditional Exercise Notice.
(g) Interim Period shall mean the period of time from and after the
delivery to the Registered Holder of the Conditional Exercise Note through the
Conditional Closing Date.
(h) The term "Major Transaction" shall be deemed to have occurred at such
time as any of the following events: (i) the consolidation, merger or other
business combination of the Company with or into another person (other than (A)
pursuant to migratory merger effected solely for the purpose of changing the
jurisdiction of incorporation of the Company, or (B) a consolidation, merger or
other business combination in which the Company is the surviving entity and
holders of the Company's voting power immediately prior to the transaction
continue after the transaction to hold, directly or indirectly, the voting power
necessary to elect a majority of the members of the board of directors of the
Company; (ii) the sale or transfer of all or substantially all of the Company's
assets; or (iii) consummation of a purchase, tender or exchange offer made to
the holders of more than thirty percent (30%) of the outstanding shares of
Common Stock.
(i) The term "Material Adverse Change" means any change, event, result or
happening involving, directly or indirectly, the Company or any of its
subsidiaries resulting in a material adverse effect on the business, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole.
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(j) The term "Other Securities" refers to any class of shares (other than
Common Stock) and other securities of the Company or any other person (corporate
or otherwise) which the holder of this Conditional Warrant at any time shall be
entitled to receive, or shall have received, upon the exercise of the
Conditional Warrant, in lieu of or in addition to the Additional Debentures and
Additional Warrants, or which at any time shall be issuable or shall have been
issued in exchange for or in replacement of the Additional Debentures or
Additional Warrants or Other Securities.
(k) The term "Triggering Event" shall be deemed to have occurred at such
time as any of the following events: (i) the failure of the Initial Registration
Statement to be declared effective by the Securities and Exchange Commission on
or prior to the Effectiveness Deadline; (ii) while the Initial Registration
Statement is required to be maintained effective pursuant to the terms of the
Registration Rights Agreement, the effectiveness of the Initial Registration
Statement lapses for any reason (including, without limitation, the issuance of
a stop order) or is unavailable to the holder of the Additional Debentures for
sale of the Registrable Securities (as defined in the Registration Rights
Agreement) in accordance with the terms of the Registration Rights Agreement,
and such lapse or unavailability continues for a period of five (5) consecutive
trading days, provided that the cause of such lapse or unavailability is not due
to factors solely within the control of such holders of Registrable Securities;
(iii) the suspension from listing or the failure of the Common Stock to be
listed on the OTC Bulletin Board, the Nasdaq SmallCap Market, the Nasdaq
National Market, The New York Stock Exchange, Inc. or The American Stock
Exchange, Inc. for a period of five (5) consecutive days; (iv) the Company's
notice to any holder of Debentures, including by way of public announcement, at
any time, of its intention not to comply with proper requests for conversion of
Debentures into shares of Common Stock; (v) if the Closing Bid Price for the
Common Stock shall be less than four dollars ($4.00) per share at any time
during the Interim Period; (vi) the Company's stockholders shall not have
authorized and approved the transactions contemplated by the Securities Purchase
Agreement and this Warrant in accordance with applicable law; (vii) a material
breach by the Company of any representation, warranty, covenant or other term or
condition of the Securities Purchase Agreement, the Registration Rights
Agreement, this Conditional Warrant or any other agreement, document,
certificate or other instrument delivered in connection with the transactions
contemplated thereby or hereby; (viii) if the average daily trading volume of
the Common Stock on the OTC Bulletin Board, the Nasdaq SmallCap Market, the
Nasdaq National Market, The New York Stock Exchange, Inc. or The American Stock
Exchange, Inc., as applicable, is less than five hundred thousand (500,000)
shares per day during the fifteen (15) trading days prior to the Conditional
Closing Date; or ; or (ix) if Paul H. Metzinger, Dr. Herbert J. Neuhaus or Dr.
Michael E. Wernle are no longer employed by the Company in the position which
they served the Company on the Initial Closing Date.
1. Registration Rights.
The rights of the holder of this Conditional Warrant to register the
shares of Common Stock issuable upon conversion of the Additional Debentures
purchasable hereunder and the shares of Common Stock issuable upon exercise of
the Additional Warrants purchasable hereunder shall be as stated in the
Registration Rights Agreement, which agreement is Exhibit E to the Securities
---------
Purchase Agreement.
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<PAGE>
2. Restricted Stock.
If, at the time of any transfer or exchange of this Conditional
Warrant or any Additional Debentures or Additional Warrants issuable upon
exercise of this Conditional Warrant (other than a transfer or exchange not
involving a change in the beneficial ownership of this Conditional Warrant or
any Additional Debentures or Additional Warrants, as applicable), such
Conditional Warrant, such Additional Debentures or such Additional Warrants
shall not be registered under the Securities Act, and the Company's obligation
to transfer such Conditional Warrant, such Additional Debentures or such
Additional Warrants shall be subject to the provisions of Section 4 of the
Securities Purchase Agreement.
3. Exercise of Conditional Warrant and Issuance of Additional Debentures and
Additional Warrants.
3.1. Exercise in Full. The holder of this Conditional Warrant may,
----------------
and shall on the Conditional Closing Date, provided the Conditional Exercise
Notice is given and the Closing Conditions are satisfied as required below,
exercise this Conditional Warrant in full by surrendering this Conditional
Warrant, with the form of Election to Purchase Annex B at the end hereof duly
-------
executed by such holder, to the Company in the manner set forth in Section 11 of
the Securities Purchase Agreement. The surrendered Conditional Warrant shall be
accompanied by payment, in cash or by certified or official bank check payable
to the order of the Company, in the amount equal to two million five hundred
thousand dollars ($2,500,000).
3.2. Partial Exercise. This Warrant may, and shall on the Conditional
----------------
Closing Date provided, the Conditional Exercise Notice is given and the Closing
Conditions are satisfied as required above, be exercised in part by surrender of
this Conditional Warrant in the manner provided in Subsection 3.1, except that
the exercise price shall be equal to the aggregate principal amount of the
Company's Debentures as shall be designated by the Company in the Conditional
Exercise Notice. On any such partial exercise, subject to the provisions of
Section 2 hereof, the Company, at its expense, will forthwith issue and deliver
to or upon the order of the Registered Holder hereof a new Conditional Warrant
or Conditional Warrants of like tenor, in the name of the Registered Holder
hereof or as such Registered Holder may request, calling in the aggregate on the
face or faces thereof for the Additional Debentures and Additional Warrants
equal to the number of shares of Additional Debentures and Additional Warrants
called for on the face of this Conditional Warrant minus the number of such
shares designated by the Company in the applicable Conditional Exercise Notice.
3.3. Company Acknowledgment. The Company will, at the time of the
----------------------
exercise, exchange or transfer of this Conditional Warrant, upon the request of
the Registered Holder hereof, acknowledge in writing its continuing obligation
to afford to such Registered Holder or transferee any rights (including, without
limitation, any right to registration of the Company's shares of Common Stock)
to which such Registered Holder or transferee shall continue to be entitled
after such exercise, exchange or transfer in accordance with the provisions of
this Conditional Warrant, provided that if the Registered Holder of this
Conditional Warrant shall fail to make any such request, such failure shall not
affect the continuing obligation of the Company to afford to such Registered
Holder or transferee any such rights.
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<PAGE>
3.4. Conditional Warrant to Purchase Common Stock. Within three (3)
--------------------------------------------
Business Days of any exercise of this Conditional Warrant, the Company shall
issue to the Registered Holder a Warrant substantially in the form of Exhibit B
to the Securities Purchase Agreement to purchase such number of shares of Common
Stock as shall equal the product of (x) .1 and (y) the Purchase Price paid by
the Registered Holder pursuant to any exercise of this Conditional Warrant.
4. Delivery of Share Certificates upon Exercise. Following the exercise of
this Conditional Warrant in full or in part, within the time periods and in the
manner provided by Section 5(b) of the Securities Purchase Agreement, the
Company, at its expense (including the payment by it of any applicable issue
taxes), will cause to be issued in the name of and delivered to the Registered
Holder hereof, or as such Registered Holder (upon payment by such Registered
Holder of any applicable transfer taxes) may direct, a Debenture substantially
in the form of Exhibit A to the Securities Purchase Agreement to which such
Registered Holder shall be entitled on such exercise.
5. Closing Conditions. Notwithstanding anything herein to the contrary, the
Company shall not be permitted to deliver a Conditional Exercise Notice, nor
shall the Registered Holder be required to exercise and purchase on a
Conditional Closing Date any Additional Debentures and Additional Warrants
unless in either case each of the following conditions is satisfied: (i) the
Initial Registration Statement shall have been declared effective and shall
remain effective at all times during the applicable Interim Period and thereupon
as otherwise set forth in the Securities Purchase Agreement; (ii) the Closing
Bid Price for the Common Stock shall not be less than four dollars ($4.00) per
share; (iii) during the period beginning on the original issue date of this
Conditional Warrant and ending on and including the applicable Conditional
Closing Date, there shall not have occurred (A) a public announcement of a Major
Corporate Event which has not been abandoned or terminated, (B) a Triggering
Event or (C) a Material Adverse Change; (iv) at all times during the period
beginning on the original issue date of this Conditional Warrant and ending on
and including the applicable Conditional Closing Date, the Common Stock shall
have been designated on the NASDAQ OTC Bulletin Board, the Nasdaq SmallCap
Market or National Market System and shall not have been suspended from trading
thereon and the Company shall not have been notified of any pending or
threatened proceeding or other action to delist or suspend the Common Stock from
so trading; (v) the Company's Articles of Incorporation shall be in full force
and effect and shall not have been amended since the original issue date of this
Conditional Warrant; (vi) the representations and warranties of the Company in
the Securities Purchase Agreement shall be true and correct as of the date when
made and as of the applicable Conditional Closing Date as though made at that
time (except for representations and Conditional Warranties that speak as of a
specific date) and the Company shall have performed, satisfied and complied with
the covenants, agreements and conditions required by the Primary Documents to be
performed, satisfied or complied with by the Company at or prior to the
applicable Conditional Closing Date (and the Registered Holder of this
Conditional Warrant shall have received a certificate, executed by the Chief
Executive Officer of the Company, dated as of the applicable Conditional Closing
Date, to the foregoing effect and as to such other matters as may be reasonably
requested by such holder); (vii) the average daily trading volume of the Common
Stock on the OTC Bulletin Board, the Nasdaq SmallCap Market, the Nasdaq National
Market, The New York Stock Exchange, Inc. or The American Stock Exchange, Inc.,
as applicable, is equal to or greater than five hundred thousand (500,000)
shares per day during the fifteen (15) trading days prior to the Conditional
Closing Date and (viii) as of
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<PAGE>
the applicable Conditional Closing Date, the Company shall have reserved out of
its authorized and unissued Common Stock, the sum of (i) two (2) times the sum
of (x) maximum number of shares of Common Stock that could be issuable upon the
conversion of the Initial Debentures and (y) the maximum number that could be
issuable upon conversion of the Additional Debentures and (ii) the sum of the
number of shares of Common Stock issuable upon exercise in full of the Initial
Warrants and the Additional Warrants, in each case without regard to whether the
Conditional Warrant shall have been exercised solely for the purpose of
effecting the conversion of Additional Debentures and Exercise of the Additional
Warrants, as applicable.
6. No Dilution or Impairment. The Company will not, by amendment of its
Articles of Incorporation or By-laws, or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of the Conditional Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
holders of the Conditional Warrants, as specified herein and in the Securities
Purchase Agreement, against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not increase the par value of
any Shares receivable on the exercise of the Conditional Warrant above the
amount payable therefor on such exercise, and (b) will not effect a subdivision
or split up of shares or similar transaction with respect to any class of the
Common Stock without effecting an equivalent transaction with respect to all
other classes of Common Stock.
7. Notice of Record Date. In case of:
(a) any taking by the Company of a record of the holders of any class
of its securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of all
or substantially all the assets of the Company to or consolidation or merger of
the Company with or any voluntary or involuntary dissolution, liquidation or
winding up of the Company, or
(c) events shall have occurred resulting in the voluntary or
involuntary dissolution, liquidation or winding up of the Company, then and in
each such event the Company will mail or cause to be mailed to each holder of a
Conditional Warrant a notice specifying (i) the date on which any record is to
be taken for the purpose of any such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or right, (ii)
the date on which any such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding up is to
take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange their
Common Stock (or Other Securities) for securities or other property deliverable
on such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up, and (iii) the
amount and character of any stock or other securities, or rights or options with
respect thereto, proposed to be issued or granted, the date of such proposed
7
<PAGE>
issue or grant and the persons or class of persons to whom such proposed issue
or grant is to be offered or made. Such notice shall be mailed at least thirty
(30) days prior to the date specified in such notice on which any such action is
to be taken.
8. Exchange of Conditional Warrants. On surrender for exchange of any
Conditional Warrant, properly endorsed, to the Company, the Company, at its
expense, will issue and deliver to or (subject to Section 2) on the order of the
holder thereof a new Conditional Warrant or Conditional Warrants of like tenor,
in the name of such holder or as such holder may direct, calling in the
aggregate on the face or faces thereof for the Additional Debentures and
Additional Warrants called for on the face or faces of the Conditional Warrant
or Conditional Warrants so surrendered.
9. Replacement of Conditional Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Conditional Warrant and, in the case of any such loss, theft or destruction of
any Conditional Warrant, on delivery of an indemnity agreement or security
reasonably satisfactory in form and amount to the Company or, in the case of any
such mutilation, on surrender and cancellation of such Conditional Warrant, the
Company, at its expense, will execute and deliver, in lieu thereof, a new
Conditional Warrant of like tenor.
10. Conditional Warrant Agent. The Company may, by written notice to each
holder of a Conditional Warrant, appoint an agent having an office in New York,
New York, for the purpose of issuing Additional Debentures and Additional
Warrants on the exercise of the Conditional Warrants pursuant to Section 3,
exchanging Conditional Warrants pursuant to Section 8, and replacing Conditional
Warrants pursuant to Section 9, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.
11. Remedies. The Company and the holder stipulate that the remedies at law of
the Company and holder of this Conditional Warrant in the event of any default
or threatened default by the Company and the holder in the performance of or
compliance with any of the terms of this Conditional Warrant are not and will
not be adequate, and that such terms may be specifically enforced by a decree
for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
12. Negotiability, Etc. This Conditional Warrant is issued upon the following
terms, to all of which each Registered Holder or owner hereof by the taking
hereof consents and agrees:
(a) subject to the terms of Section 4 of the Securities Purchase
Agreement, title to this Conditional Warrant may be transferred by endorsement
(by the Registered Holder hereof executing the form of assignment in the form of
Annex C at the end hereof) and delivery in the same manner as in the case of a
- -------
negotiable instrument transferable by endorsement and delivery;
(b) any person in possession of this Conditional Warrant properly
endorsed is authorized to represent himself as absolute owner hereof and is
empowered to transfer absolute title hereto by endorsement and delivery hereof
to a bona fide purchaser hereof for value; each
8
<PAGE>
prior taker or owner waives and renounces all of his equities or rights in this
Conditional Warrant in favor of each such bona fide purchaser, and each such
bona fide purchaser shall acquire absolute title hereto and to all rights
represented hereby; and
(c) until this Conditional Warrant is transferred on the books of the
Company, the Company may treat the Registered Holder hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the contrary.
13. Notices. All notices and other communications from the Company to the
Registered Holder of this Conditional Warrant shall be given in writing (unless
otherwise specified herein) and shall be effective upon personal delivery, via
facsimile (upon receipt of confirmation of error-free transmission and mailing a
copy of such confirmation postage prepaid by certified mail return receipt
requested) or two business days following deposit of such notice with an
internationally recognized courier service, with postage prepaid and addressed,
to such address as may have been furnished to the Company in writing by such
Registered Holder or, until any such Registered Holder furnishes to the Company
an address, then to, and at the address of, the last Registered Holder of this
Conditional Warrant who has so furnished an address to the Company.
14. Miscellaneous. This Conditional Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. This Conditional Warrant is being delivered in the
State of New York and, except for provisions with respect to internal corporate
matters of the Company which shall be governed by the corporate laws of the
State of Nevada, shall be construed and enforced in accordance with and governed
by the laws of the State of New York, without regard to principles of conflict
of laws. Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the City of New York or the state courts
of the State of New York sitting in the City of New York in connection with any
dispute arising under this Agreement or any of the transactions contemplated
hereby, and hereby waives, to the maximum extent permitted by law, any
objection, including any objections based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions. The headings in this
Conditional Warrant are for purposes of reference only, and shall not limit or
otherwise affect any of the terms hereof. All nouns and pronouns used herein
shall be deemed to refer to the masculine, feminine or neuter, as the identity
of the person or persons to whom reference is made herein may require.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE TO FOLLOW.]
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed
this Conditional Warrant as of January 11, 2000.
NANOPIERCE TECHNOLOGIES, INC.
By:____________________________
Name: Paul H. Metzinger
Title: President
ACKNOWLEDGED AND AGREED:
EQUINOX INVESTORS LLC
By: WEC ASSET MANAGEMENT LLC, Manager
By:_________________________
Name: Daniel J. Saks
Title: Managing Director
<PAGE>
Annex A
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CONDITIONAL EXERCISE NOTICE
TO THE CONDITIONAL WARRANT TO
PURCHASE 6% CONVERTIBLE DEBENTURES AND
WARRANTS TO PURCHASE COMMON STOCK
Subject and pursuant to the Conditional Warrant to Purchase 6% Convertible
Debentures and Warrants to Purchase Common Stock dated January 11, 2000, by and
between Nanopierce Technologies, Inc. (the "Company") and Equinox Investors LLC
(the "Registered Holder"), the [Company hereby requires that the Registered
Holder thereof to exercise said Conditional Warrant and purchase][Registered
Holder hereby requires the Company to sell to the Registered Holder]
_______________ (up to (i) two million five hundred thousand dollars
($2,500,000) of the Company's 6% Convertible Debentures (the "Debentures") and
(ii) stock purchase warrants (the "Stock Purchase Warrants") to purchase one
hundred thousand (100,000) shares of common stock, par value $.0001 per share
for each one million dollars in principal amount of Debentures purchased
hereunder (minus any such Debentures and Stock Purchase Warrants previously
purchased) pursuant to the terms of the Conditional Warrant).
Date of Conditional
Exercise Notice:__________________ Conditional Closing Date:__________________
Principal amount Number of
of Debentures:____________________ Stock Purchase Warrants:___________________
We hereby consent to this Conditional Exercise Notice and deem it effective:
EQUINOX INVESTORS LLC NANOPIERCE TECHNOLOGIES, INC.
By: WEC Asset Management LLC, Manager
By:_____________________ By:__________________________________
Name: Daniel J. Saks Name: Paul H. Metzinger
Title: Managing Director Title: President
<PAGE>
Annex B
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FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right,
represented by this Conditional Warrant, to purchase [_____] Additional
Debentures and Additional Warrants to purchase [____] shares of Common Stock and
herewith tenders in payment for such securities a certified or official bank
check payable in immediately available U.S. dollars to the order of NANOPIERCE
TECHNOLOGIES, INC., in the amount of [$________], all in accordance with the
terms hereof. The undersigned requests that a Debenture and Warrant be
registered in the name of _________________________, whose address is
_________________________________ and that such stock certificates and warrants
be delivered to ___________________________, whose address is _________________.
Dated:
Name: ______________________________________
Signature: _________________________________
(Signature must conform in all respects to the name of the Registered
Holder, as specified on the face of the Conditional Warrant.)
___________________________________
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
Annex C
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FORM OF ASSIGNMENT
(To be executed by the Registered Holder if such Holder desires to transfer the
Conditional Warrant.)
FOR VALUE RECEIVED, ____________________
hereby sells, assigns and transfers unto
____________________________________________
(Please print name and address of transferee)
this Conditional Warrant, together with all right, title and interest therein,
and does so hereby irrevocably constitute and appoint _____________________
Attorney, to transfer the within Conditional Warrant on the books of the within-
named Company, with full power of substitution.
Dated:
Name: ______________________________________
Signature: _________________________________
(Signature must conform in all respects to the name of the Registered
Holder, as specified on the face of the Conditional Warrant.)
_________________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
<PAGE>
EXHIBIT D
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[FORM OF OPINION OF KUTAK ROCK LLP]
<PAGE>
EXHIBIT E
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FORM OF REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of January 11, 2000 (this
"Agreement"), is entered into by and between NANOPIERCE TECHNOLOGIES, INC., a
Nevada corporation (the "Company") and Equinox Investors LLC, a Delaware limited
liability company (the "Purchaser").
W I T N E S S E T H:
WHEREAS, pursuant to a Securities Purchase Agreement, dated as of January
11, 2000, by and between the Purchaser and the Company (the "Securities Purchase
Agreement"), the Company has agreed to issue and sell to the Purchaser (i) one
million five hundred thousand dollars ($1,500,000) principal amount of the
Company's 6% Convertible Debentures due January 10, 2002 (the "Initial
Debentures"); (ii) three year Warrants to purchase one hundred fifty thousand
(150,000) shares of common stock, par value $.0001 per share (the "Common
Stock") of the Company (the "Initial Warrants"); a Conditional Warrant to
purchase up to an additional two million five hundred thousand dollars
($2,500,000) principal amount of the Company's 6% Convertible Debentures (the
"Additional Debentures," together with the Initial Debentures, the "Debentures")
and warrants to purchase up to two hundred fifty thousand (250,000) shares of
Common Stock (the "Additional Warrants," and, together with the Initial
Warrants, the "Warrants". The Debentures and Warrants are collectively referred
to herein as the "Securities".
WHEREAS, pursuant to the terms of the Debentures and the Warrants, (i) upon
the conversion of, or in lieu of interest payments on the Debentures and (ii)
upon exercise of the Warrants, the Company will issue to the Purchaser shares of
the Company's Common Stock (the shares of Common Stock issued or issuable to the
Purchaser upon the conversion of the Debentures and/or upon the exercise of the
Warrants are collectively referred to herein as the "Shares"); and
WHEREAS, to induce the Purchaser to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended (the "Securities Act"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchaser
hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have
the following meanings:
<PAGE>
(i) "Minimum Conversion Shares" on any date means a number of shares equal
to at least the sum of: (x) two (2) times the number of shares of Common Stock
that are issuable upon conversion of the Debentures on such date, without regard
to any limitation on any holder's ability to convert the Debentures and (y) the
number of shares of Common Stock issuable upon exercise of the Warrants.
(ii) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing one or more Registration Statement
or Statements in compliance with the Securities Act and pursuant to Rule 415
under the Securities Act or any successor rule providing for offering securities
on a continuous basis ("Rule 415"), and the declaration or ordering of
effectiveness of such Registration Statement by the Securities and Exchange
Commission (the "Commission").
(iii) "Registrable Securities" means collectively, the Shares and the
Warrants.
(iv) "Registration Statement" means a registration statement of the
Company under the Securities Act.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings set forth in the Securities Purchase Agreement, the Debentures or
the Warrants, as the case may be.
2. REGISTRATION.
(a) Mandatory Registration. The Company shall prepare and, as soon as
practicable, but in no event later than forty-five (45) days after the Initial
Closing Date (the "Required Filing Date"), file with the Commission a
Registration Statement on Form SB-2, or an amendment to any pending Registration
Statement on Form SB-2 of the Company, covering resales of (a) the Warrants and
(b) the Minimum Conversion Shares on the filing date. In the event that Form SB-
2 is unavailable for such a registration, the Company shall use such other form
as is available for such a registration. Such Registration Statement or amended
Registration Statement, as the case may be, shall in accordance with Rule 416
under the Securities Act, state that it also covers such indeterminate number of
additional Shares as may become issuable upon conversion of the Debentures and
exercise of the Warrants (i) to prevent dilution resulting from stock splits,
stock dividends or similar transactions and (ii) to the extent consistent with
the interpretations of the Commission of such rule at such time, resulting from
any adjustment in the applicable Conversion Price of such Debentures or the
Current Warrant Price of such Warrants. If on any date, the Minimum Conversion
Shares exceed the total number of Shares so registered, the Company shall (i) if
such Registration Statement has not been declared effective by the Commission at
that time, amend the Registration Statement filed by the Company pursuant to the
preceding portions of this paragraph, to register all of such Minimum Conversion
Shares, or (ii) if such Registration Statement has been declared effective by
the Commission at that time, file with the Commission an additional Registration
Statement on SB-2 (or, in the event that Form SB-2 is unavailable for such a
registration, on such other form as is available) to register all of such
Minimum Conversion Shares that have not already been so registered. The Company
shall use its best efforts to cause any such Registration Statement or
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amended Registration Statement, as the case may be, to become effective within
the earliest to occur of (i) ninety (90) days following the Initial Closing
Date; (ii) if the Commission elects not to conduct a review of the Registration
Statement, the date which is three (3) business days after the date upon which
either the Company or its counsel is so notified, whether orally or in writing;
or (iii) if the Registration Statement is reviewed by the Commission, the
earlier of (x) ninety (90) days following the Initial Closing Date or (y) the
date which is three (3) business days after the date upon which the Company or
its counsel is notified by the Commission, whether orally or in writing, that
the Commission has no further comments with respect to the Registration
Statement, or that the Registration Statement may be declared effective. The
earliest of such dates is referred to herein as the "Required Effective Date."
Notwithstanding the use of the terms "Required Filing Date" and "Required
Effective Date" herein, the Company shall at all times use its best efforts to
file each required Registration Statement or amendment to a Registration
Statement as soon as possible after the Initial Closing Date or after the date
the Company becomes obligated to file such Registration Statement or amendment,
as the case may be, and to cause each such Registration Statement or amendment
to become effective as soon as possible thereafter. No securities of the Company
other than the Registrable Securities shall be included in any such Registration
Statement. The Company shall keep each Registration Statement effective pursuant
to Rule 415 at all times until such date as is the earlier of (i) the date on
which all of the Registrable Securities have been sold and (ii) the date on
which the Registrable Securities (in the opinion of counsel to the Purchaser)
may be immediately sold without restriction (including without limitation as to
volume by each holder thereof) without registration under the Securities Act
(the "Registration Period").
(b) Payments by the Company.
(i) (A) If the Registration Statement covering the Registrable
Securities is not filed in proper form with the Commission on or prior to the
Required Filing Date, (B) if the Registration Statement covering the Registrable
Securities is not effective on or prior to the Required Effective Date, (C) if
the number of Shares qualified for trading on the OTC Bulletin Board NASDAQ
SmallCap Stock Market or reserved by the Company for issuance shall be
insufficient for issuance upon the conversion of the outstanding Debentures and
the exercise of the Warrants, or (D) upon the occurrence of a Blackout Event (as
described in Section 3(f) or Section 3(g) below) (each of the events described
in clauses (A) through (D) of this paragraph are referred to herein as a
"Registration Default"), the Company will make payments to the Purchaser in such
amounts and at such times as shall be determined pursuant to this Section 2(b).
(ii) The amount (the "Periodic Amount") to be paid by the Company to
the Purchaser as of each thirty (30) day period during which a Registration
Default shall be in effect (each such period, a "Default Period") shall be equal
to (x) with respect to the first Default Period, one percent (1%) of the
Purchase Price paid by the Purchaser and (y) thereafter for any other Default
Period, two percent (2%) of the Purchase Price; provided that, with respect to
--------
any Default Period during which the relevant Registration Defaults shall have
been cured, the Periodic Amount shall be pro rated for the number of days during
--- -----
such period during which the Registration Defaults were pending; and provided,
--------
however, that the payment of such Periodic Amounts shall not relieve the Company
from its continuing obligations to register the Warrants and Shares pursuant to
Section 2(a).
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(iii) Each Periodic Amount shall be payable by the Company, in
cash or other immediately available funds, to the Purchaser on the last day of
each month during which a Registration Default occurred or was continuing,
without demand therefor by the Purchaser. If the Company shall not remit the
Periodic Amounts payable to the Purchaser as set forth in paragraph (ii) above,
the Company will pay the Purchaser reasonable costs of collection, including
attorneys' fees, in addition to the Periodic Amounts.
(iv) The parties acknowledge that the damages which may be
incurred by the Purchaser if the Registration Statement is not filed by the
Required Filing Date, if the Registration Statement has not been declared
effective by the Required Effective Date, if an insufficient number of shares of
Common Stock shall be qualified for trading or reserved for issuance, or if the
provisions of Section 3(f) or 3(g) become applicable, may be difficult to
ascertain. The parties agree that the Periodic Amount represents a reasonable
estimate on the part of the parties, as of the date of this Agreement, of the
amount of such damages.
(c) Piggyback Registration. (i) If at any time or from time to time, the
Company shall determine to register any of its securities, for its own account
or the account of any of its shareholders, other than a Registration Statement
relating solely to employee share option plans or pursuant to an acquisition
transaction on Form S-4, the Company will:
(A) provide to the Purchaser written notice thereof as soon as
practicable prior to filing the Registration Statement; and
(B) include in such Registration Statement and in any underwriting
involved therein, all of the Registrable Securities specified in a
written request by the Purchaser made within fifteen (15) days after
receipt of such written notice from the Company.
(ii) If the Registration is for a registered public offering
involving an underwriting, the Company shall so advise the Purchaser as a part
of the written notice given pursuant to this Section. In such event, the rights
of the Purchaser hereunder shall include participation in such underwriting and
the inclusion of the Registrable Securities in the underwriting to the extent
provided herein. To the extent that the Purchaser proposes to distribute its
securities through such underwriting, the Purchaser shall (together with the
Company and any other securityholders of the Company distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of this
Section, if the managing underwriter of such underwriting determines that
marketing factors require a limitation of the number of shares to be offered in
connection with such underwriting, the managing underwriter may limit the number
of Registrable Securities to be included in the Registration and underwriting
(provided, however, that (a) the Registrable Securities shall not be excluded
- --------- -------
from such underwritten offering prior to the exclusion of any securities held by
officers and directors of the Company or their affiliates, (b) the Registrable
Securities shall be entitled to at least the same priority in an underwritten
offering as any securities included in such offering by any of the Company's
other existing securityholders, and (c) the Company shall not enter into any
agreement that would provide any securityholder with priority in connection with
an underwritten offering greater than the priority granted to the
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<PAGE>
Purchaser hereunder). The Company shall so advise any of its other
securityholders who are distributing their securities through such underwriting
pursuant to their respective piggyback registration rights, and the number of
shares of Registrable Securities and other securities that may be included in
the registration and underwriting shall be allocated among the Purchaser and all
other securityholders of the Company in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities held by the Purchaser and such
other securityholders at the time of the filing of the registration statement.
If the Purchaser disapproves of the terms of any such underwriting, it may elect
to withdraw therefrom by written notice to the Company. Any Registrable
Securities so excluded or withdrawn from such underwriting shall be withdrawn
from such Registration.
(d) Eligibility for Form SB-2. The Company represents and warrants that it
meets all of the requirements for the use of Form SB-2 for the Registration of
the sale by the Purchaser and any transferee who purchases the Registrable
Securities, and the Company shall file all reports required to be filed by the
Company with the Commission in a timely manner, and shall take such other
actions as may be necessary to maintain such eligibility for the use of Form SB-
2.
(e) Priority in Filing. The Company covenants that beginning on the
Initial Closing Date and ending on the date that is one hundred and eighty (180)
days after the Registration Statement filed pursuant to Section 2(a) of this
Agreement becomes effective (provided that if, after the effective date of such
--------
Registration Statement, the Purchaser shall be unable to sell Registrable
Securities pursuant to such Registration Statement for any number of days, the
provisions of this Section 2(e) shall apply for an additional number of days
equal to the number of days during which any Purchaser is unable to sell
Registrable Securities pursuant to such Registration Statement), the Company
will not file any Registration Statement, other than a Registration Statement
required by Section 2(a) hereof, without the written consent of the Purchaser.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall do each of the following:
(a) Prepare and file with the Commission the Registration Statements
required by Section 2 of this Agreement and such amendments (including post-
effective amendments) and supplements to the Registration Statements and the
prospectuses used in connection with such Registration Statements, each in such
form as to which the Purchaser and its counsel shall not have objected, as may
be necessary to keep the Registration Statements effective at all times during
the Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all of the
Registrable Securities of the Company covered by the Registration Statements
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statements;
(b) Furnish to the Purchaser and its legal counsel identified to the
Company, promptly after the same is prepared and publicly distributed, filed
with the Commission, or
5
<PAGE>
received by the Company, a copy of the Registration Statement, each preliminary
prospectus, each final prospectus, and all amendments and supplements thereto
and such other documents, as the Purchaser may reasonably request in order to
facilitate the disposition of its Registrable Securities;
(c) Furnish to the Purchaser and its counsel copies of any
correspondence between the Company and the Commission with respect to any
Registration Statement or amendment or supplement thereto filed pursuant to this
Agreement;
(d) Use all reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statements under such other
securities or blue sky laws of such jurisdictions as the Purchaser may
reasonably request, (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times during the Registration Period, (iii) take such other actions as may be
necessary to maintain such registrations and qualifications in effect at all
times during the Registration Period and (iv) take all other actions reasonably
necessary or advisable to qualify the Registrable Securities for sale in such
jurisdictions, provided that in connection therewith, the Company shall not be
required to qualify as a foreign corporation or to file a general consent to the
service of process in any jurisdiction;
(e) Qualify such securities for trading on the Nasdaq OTC Bulletin
Board and list such securities on all the other national securities exchanges on
which any securities of the Company are then listed, and file any filings
required by Nasdaq and/or such other exchanges;
(f) As promptly as practicable after becoming aware thereof, notify
the Purchaser of any need to suspend use of the prospectus included in the
Registration Statement, including as a result of the occurrence of any event, as
a result of which the prospectus included in any Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and to use its best efforts to promptly prepare a supplement or
amendment to such Registration Statement or other appropriate filing with the
Commission to allow the resumption of the use of such prospectus and to deliver
a number of copies of such supplement or amendment to the Purchaser as the
Purchaser may reasonably request;
(g) As promptly as practicable after becoming aware of such event,
notify the Purchaser (or, in the event of an underwritten offering, the managing
underwriters) of the issuance by the Commission or any stop order or other
suspension of the effectiveness of any Registration Statement at the earliest
possible time, and to use its best efforts to promptly obtain the withdrawal of
such stop order or other suspension of effectiveness (the occurrence of any of
the events described in paragraphs (f) and (g) of this Section 3 is referred to
herein as a "Blackout Event");
(h) During the period commencing upon (i) the Purchaser's receipt of
a notification pursuant to Section 3(f) above or (ii) the entry of a stop order
or other suspension of the effectiveness of the Registration Statement described
in Section 3(g) above, and ending at
6
<PAGE>
such time as (x) the Company shall have completed the applicable filings (and if
applicable, such filings shall have been declared effective) and shall have
delivered to the Purchaser the documents required pursuant to Section 3(f) above
or (y) such stop order or other suspension of the effectiveness of the
Registration Statement shall have been removed, the Company shall be liable to
remit the payments required to be paid to the Purchaser pursuant to Section 2(b)
above;
(i) Suspend the use of any prospectus used in connection with any
Registration Statement only in the event, and for such period of time as, such a
suspension is required by the rules and regulations of the Commission;
(j) Enter into such customary agreements for secondary offerings
(including a customary underwriting agreement with the underwriter or
underwriters, if any) and take all such other actions reasonably requested by
the Purchaser in connection therewith in order to expedite or facilitate the
disposition of such Registrable Securities. Whether or not an underwriting
agreement is entered into and whether or not the Registrable Securities are to
be sold in an underwritten offering the Company shall:
(i) make such representations and warranties to the Purchaser and
the underwriter or underwriters, if any, in form, substance and scope as
are customarily made by issuers to selling stockholders and underwriters in
secondary offerings;
(ii) cause to be delivered to the sellers of Registrable Securities
and the underwriter or underwriters, if any, opinions of independent
counsel to the Company (which counsel and opinions shall be reasonably
satisfactory in form, scope and substance to Purchaser and the
underwriter(s), if any, and their counsel), (A) on and dated as of the
effective day of the applicable Registration Statement (and in the case of
an underwritten offering, dated the date of delivery of any Registrable
Securities sold pursuant thereto) stating that (x) such Registration
Statement complies in all material respects with the requirements of the
Securities Act and the rules and regulations of the Commission thereunder,
(y) such Registration Statement does not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and (z)
the documents incorporated by reference in the prospectus accompanying such
Registration Statement, at the time they were filed with the Commission or
as amended, complied in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules and regulations thereunder and, when read together with the other
information in such prospectus, do not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and (B)
within fifteen (15) days following the filing of the Company's Annual
Report on Form 10-K for each fiscal year thereafter, an opinion of
independent counsel to the Company, updating the opinion referred to in
clause (A) of this paragraph;
(iii) cause to be delivered, immediately prior to the effectiveness of
the applicable Registration Statement (and, in the case of an underwritten
offering, at the time of delivery of any Registrable Securities sold
pursuant thereto), and at the beginning of each fiscal year following a
year during which the Company's independent certified
7
<PAGE>
public accountants shall have reviewed any of the Company's books or
records, a "comfort" letter from the Company's independent certified public
accountants addressed to the Purchaser and each underwriter, if any,
stating that such accountants are independent public accountants within the
meaning of the Securities Act and the applicable published rules and
regulations thereunder, and otherwise in customary form and covering such
financial and accounting matters as are customarily covered by letters of
the independent certified public accountants delivered in connection with
secondary offerings; such accountants shall have undertaken in each such
letter to update the same during each such fiscal year in which such books
or records are being reviewed so that each such letter shall remain
current, correct and complete throughout such fiscal year; and each such
letter and update thereof, if any, shall be reasonably satisfactory to the
Purchaser;
(iv) if an underwriting agreement is entered into, the same shall
include customary indemnification and contribution provisions to and from
the underwriters and procedures for secondary underwritten offerings;
(v) deliver such documents and certificates as may be reasonably
requested by any purchaser of the Registrable Securities being sold or the
managing underwriter or underwriters, if any, to evidence compliance with
clause (i) above and with any customary conditions contained in the
underwriting agreement, if any; and
(vi) deliver to Purchaser on the effective day of the applicable
Registration Statement (and, in the case of an underwritten offering, on
the date of delivery of any Registrable Securities sold pursuant thereto),
and at the beginning of each fiscal quarter thereafter, a certificate in
form and substance as shall be reasonably satisfactory to Purchaser,
executed by an executive officer of the Company and to the effect that all
the representations and warranties of the Company contained in the
Securities Purchase Agreement are still true and correct except as
disclosed in such certificate; the Company shall, as to each such
certificate delivered at the beginning of each fiscal quarter, update or
cause to be updated each such certificate during such quarter so that it
shall remain current, complete and correct throughout such quarter; and
such updates received by Purchaser during such quarter, if any, shall have
been reasonably satisfactory to Purchaser.
(k) Make available for inspection by Purchaser, its
representative(s), any underwriter participating in any disposition pursuant to
a Registration Statement, and any attorney or accountant retained by the
Purchaser or underwriter, all financial and other records customary for purposes
of Purchaser's and underwriters' due diligence examination of the Company and
review of any Registration Statement, all filings made with the Commission
subsequent to the Closing, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such representative, underwriter,
attorney or accountant in connection with such Registration Statement, provided
that such parties agree to keep such information confidential;
8
<PAGE>
(l) Cooperate with the Purchaser to facilitate the timely preparation
and delivery of certificates for the Registrable Securities to be offered
pursuant to any Registration Statement and to enable such certificates for the
Registrable Securities to be in such denominations or amounts, as the case may
be, as the Purchaser may reasonably request, and registered in such names as the
Purchaser may request; and, within three (3) business days after a Registration
Statement which includes Registrable Securities is ordered effective by the
Commission, the Company shall deliver, and shall cause legal counsel selected by
the Company to deliver, to the transfer agent for the Registrable Securities
(with copies to the Purchaser) an appropriate instruction and opinion of such
counsel; and
(m) Permit counsel to Purchaser to review the Registration Statement
and all amendments and supplements thereto within a reasonable period of time
(but not less than five (5) business days) prior to each filing, and to
incorporate those changes, if provided to the Company or its counsel within such
five (5) business day period, suggested by such counsel.
4. OBLIGATIONS OF THE PURCHASER.
In connection with the registration of the Registrable Securities, the
Purchaser shall have the following obligations:
(a) Furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of the
Registrable Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities. The intended method or methods of
disposition and/or sale (Plan of Distribution) of the Registrable Securities as
so provided by the participating Purchaser shall be included without alteration
in any Registration Statement covering the Registrable Securities and shall not
be changed without written consent of the Purchaser. At least five (5) business
days prior to the first anticipated filing date of any Registration Statement,
the Company shall notify the Purchaser of the information the Company requires
from the Purchaser if the Purchaser elects to have any of its Registrable
Securities included in such Registration Statement; and
(b) The Purchaser agrees that, upon receipt of any notice from the
Company of the happening of any Blackout Event of the kind described in Section
3(f) or 3(g) above, it will immediately discontinue disposition of its
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such copies of the supplemented or amended
prospectus contemplated by Section 3(f) or 3(g) shall be furnished to the
Purchaser.
5. EXPENSES OF REGISTRATION.
Other than underwriting discounts and commissions, all expenses incurred in
connection with registrations, filings or qualifications pursuant to this
Agreement, including, without limitation, all registration, listing, and
qualification fees, printing and accounting fees, and the fees and disbursements
of counsel for the Company, and the fees of one counsel to the Purchaser with
respect to each Registration Statement filed pursuant hereto, shall be borne by
the Company.
9
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6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
(a) The Company will indemnify and hold harmless the Purchaser, each
of its officers, shareholders, members, directors and partners, and each person,
if any, who controls the Purchaser within the meaning of the Securities Act or
the Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances in which they were made, not misleading, (ii) any untrue or
alleged statement of a material fact contained in any preliminary prospectus if
used prior to the effective date of such Registration Statement, or contained in
the final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the Commission) or the omission or
alleged omission to state therein any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state or foreign securities law or
any rule or regulation under the Securities Act, the Exchange Act or any state
or foreign securities law (the matters in foregoing clauses (i) through (iii)
being, collectively, "Violations"). The Company shall, subject to the provisions
of Section 6(b) below, reimburse each Purchaser, promptly as such expenses are
incurred and are due and payable, for any legal and other costs, expenses and
disbursements in giving testimony or furnishing documents in response to a
subpoena or otherwise, including without limitation, the costs, expenses and
disbursements, as and when incurred, of investigating, preparing or defending
any such action, suit, proceeding or investigation (whether or not in connection
with litigation in which the Purchaser is a party), incurred by it in connection
with the investigation or defense of any such Claim. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(a) shall not (i) apply to any Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof supplement thereto; (ii) with respect to
any preliminary prospectus, inure to the benefit of any such person from whom
the person asserting any such Claim purchased the Registrable Securities that
are the subject thereof (or to the benefit of any person controlling such
person) if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the final prospectus, as then amended or
supplemented, if such final prospectus was timely made available by the Company
pursuant to Section 3(b) hereof; (iii) be available to the extent that such
Claim is based upon a failure of the Purchaser to deliver or to cause to be
delivered the prospectus made available by the Company, if such prospectus was
timely made available by the Company pursuant to Section 3(b) hereof; or (iv)
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in
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full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Purchaser pursuant to Section 9. The Purchaser will indemnify
the Company and its officers and directors against any Claims arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company, by or on behalf of the
Purchaser, expressly for use in connection with the preparation of the
Registration Statement, subject to such limitations and conditions as are
applicable to the Indemnification provided by the Company in this Section 6.
(b) Promptly after receipt by an Indemnified Person under this
Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and to the
extent that the indemnifying party so desires, jointly with any other
indemnifying party similarly notified, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person; provided, however, that an Indemnified Person shall have the right to
-------- -------
retain its own counsel with the reasonable fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person and any other party
represented by such counsel in such proceeding. In such event, the Company shall
pay for only one separate legal counsel for the Purchaser, and such legal
counsel shall be selected by the Purchaser. The failure to deliver written
notice to an indemnifying party within a reasonable time after the commencement
of any such action shall not relieve such indemnifying party of any liability to
the Indemnified Person under this Section 6, except to the extent that the
indemnifying party is materially prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
(c) No indemnifying party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Person of an unconditional and irrevocable release from all
liability in respect of such claim or litigation.
(d) Notwithstanding the foregoing, to the extent that any provisions
relating to indemnification or contribution contained in the underwriting
agreements entered into among the Company, the underwriters and the Purchaser in
connection with an underwritten public offering are in conflict with the
foregoing provisions, the provisions in such underwriting agreements shall be
controlling as to the Registrable Securities included in the public offering;
provided, however, that if, as a result of this Section 6(d), any Purchaser, its
- -------- -------
officers, shareholders, members, directors, partners or any person controlling
such Purchaser is or are held liable with respect to any Claim for which they
would be entitled to indemnification hereunder but for this Section 6(d) in an
amount which exceeds the aggregate proceeds received by such Purchaser from the
sale of Registrable Securities included in a registration pursuant to such
underwriting
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Agreement (the "Excess Liability"), the Company shall reimburse such Purchaser
for such Excess Liability.
7 CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited under applicable law, the indemnifying party agrees to
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage, liability or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the Indemnified Person on the other hand in connection with the
statements or omissions which resulted in such Claim, as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
and the Indemnified Person shall be determined by reference to, among other
things, whether the untrue statement of a material fact or the omission to state
a material fact on which such Claim is based relates to information supplied by
the indemnifying party or by the Indemnified Person, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. Notwithstanding the forgoing, (a) no seller of
Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
such fraudulent misrepresentation and (b) contribution by any seller of
Registrable Securities shall be limited in amount to the net proceeds received
by such seller from the sale of such Registrable Securities. The Company and the
Purchaser agree that it would not be just and equitable if contribution pursuant
to this Section 7 were determined by pro rata allocation (even if the Purchaser
--- ----
and any other party were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable considerations
referred to in this Section.
8 REPORTS UNDER EXCHANGE ACT.
With a view to making available to the Purchaser the benefits of Rule
144 promulgated under the Securities Act or any other similar rule or regulation
of the Commission that may at any time permit the Purchaser to sell securities
of the Company to the public without registration ("Rule 144"), the Company
agrees to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144;
(ii) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(iii) furnish to the Purchaser, so long as Purchaser owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of the Securities
Act and the Exchange Act, (ii) a copy of the most recent annual or periodic
report of the Company and such other reports and documents so filed by the
Company and (iii) such other information as may be reasonably requested to
permit such Purchaser to sell such securities pursuant to Rule 144 without
registration.
12
<PAGE>
9 ASSIGNMENT OF THE REGISTRATION RIGHTS.
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assigned by any Purchaser to
any transferee of all or any portion of the Securities or Shares held by such
Purchaser if: (a) such Purchaser agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment; (b) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (i) the name and address of such transferee or assignee and
(ii) the Securities or Shares with respect to which such registration rights are
being transferred or assigned; (c) at or before the time the Company receives
the written notice contemplated by clause (b) of this sentence, the transferee
or assignee agrees in writing with the Company to be bound by all of the
provisions contained herein; and (d) the transferee of the relevant Securities
or Shares complies with the restrictions on the Purchaser set forth in Section 4
of the Securities Purchase Agreement.
10 AMENDMENT OF REGISTRATION RIGHTS.
Any provision of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and holders of 75% of the Registrable Securities from time to time. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon the Purchaser and the Company.
11 MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of the
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be effective upon personal
delivery, via facsimile (upon receipt of confirmation of error-free
transmission) or two business days following deposit of such notice with an
internationally recognized courier service, with postage prepaid and addressed
to each of the other parties thereunto entitled at the following addresses, or
at such other addresses as a party may designate by five days advance written
notice to each of the other parties hereto.
Company: Nanopierce Technologies, Inc.
370 Seventeenth Street, Suite 3290
Denver, Colorado 80202
Attention: Paul H. Metzinger, President
Tel: (303) 592-1010
Fax: (303) 592-1054
13
<PAGE>
with a copy to: Kutak Rock LLP
717 Seventeenth Street, Suite #2900
Denver, Colorado 80202
Attention: Robert Ahrenholz, Esq.
Tel: (303) 297-2400
Fax: (303) 292-7799
Purchaser: Equinox Investors LLC
c\o WEC Asset Management LLC
One World Trade Center, Suite #4563
New York, New York 10048
Attention: Daniel J. Saks
Tel: (212) 775-9299
Fax: (212) 775-9311
with a copy to: Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022
Attention: Mark Saks, Esq.
---------
Tel: (212) 326-0140
Fax: (212) 326-0806
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York, except for provisions with respect to
internal corporate matters of the Company which shall be governed by the
corporate laws of the State of Nevada. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. This Agreement has been entered into
freely by each of the parties, following consultation with their respective
counsel, and shall be interpreted fairly in accordance with its terms, without
any construction in favor of or against either party. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such validity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
14
<PAGE>
(e) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth, or referred to
herein and in the other Primary Documents. This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The Company acknowledges that any failure by the Company to
perform its obligations under Section 2(a), or any delay in such performance
could result in direct damages to the Purchaser, and the Company agrees that, in
addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct damages caused by
any such failure or delay.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK, SIGNATURE PAGE TO FOLLOW]
15
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed.
NANOPIERCE TECHNOLOGIES, INC.
By:_______________________________
Name: Paul H. Metzinger
Title: President
EQUINOX INVESTORS LLC
By: WEC Asset Management LLC, Manager
By:_______________________________
Name: Daniel J. Saks
Title: Managing Director
<PAGE>
EXHIBIT 10.3
[LADENBURG THALMANN LETTERHEAD]
February 14, 2000
Paul H. Metzinger
President,Chief Executive Officer
Nanopierce Technologies, Inc.
370-17th Street, Suite 3580
Denver, CO 80202
Dear Mr. Metzinger:
The purpose of this letter agreement (the "Agreement") is to set forth the terms
and conditions pursuant to which Ladenburg Thalmann & Co. Inc. ("LTCO") shall
serve as exclusive placement agent in connection with the proposed offering (the
"Offering") of securities (the "Securities") of Nanopierce Technologies, Inc.
(the "Company"). The gross proceeds from the Offering will be up to
$30,000,000. All references to dollars shall be to U.S. dollars. The terms of
such Offering and the Securities shall be substantially in the form set forth in
Exhibit D hereto, which exhibit is incorporated by reference herein.
Upon the terms and subject to the conditions of this Agreement, the parties
hereto agree as follows:
1. Appointment. (a) Subject to the terms and conditions of this Agreement
------------
hereinafter set forth, the Company hereby retains LTCO, and LTCO hereby agrees
to act as the Company's exclusive placement agent and financial advisor in
connection with the Offering, effective as of the date hereof. The Company
expressly acknowledges and agrees that LTCO's obligations hereunder are on a
reasonable best efforts basis only and that the execution of this Agreement does
not constitute a commitment by LTCO to purchase the Securities and does not
ensure the successful placement of the Securities or any portion thereof or the
success of LTCO with respect to securing any other financing on behalf of the
Company.
(b) Except as set forth below in this Section 1, during the effectiveness
of this Agreement, neither the Company nor any of its subsidiaries or affiliates
shall, directly or indirectly, through any officer, director, employee, agent or
otherwise (including, without limitation, through any placement agent, broker,
investment banker, attorney or accountant retained by the Company or any of its
<PAGE>
subsidiaries or affiliates), solicit, initiate or encourage the submission of
any proposal or offer (an "Investment Proposal") from any person or entity
(including any of such person's or entity's officers, directors, employees,
agents and other representatives) relating to any issuance of the Company's or
any of its subsidiaries' equity securities (including debt securities with any
equity feature) or relating to any other transaction having a similar effect or
result on the Company's or any of its subsidiaries' capitalization, or
participate in any discussions or negotiations regarding, or furnish to any
other person or entity any information with respect to, or otherwise cooperate
in any way with, or assist or participate in, facilitate or encourage any effort
or attempt by any other person or entity to do or seek to do any of the
foregoing. The Company shall immediately cease and cause to be terminated any
and all contacts, discussions and negotiations with third parties regarding any
Investment Proposal. The Company shall promptly notify LTCO if any such
Investment Proposal, or any inquiry or contact with any person or entity with
respect thereto, is made. The Company shall not provide or release any
information with respect to this Agreement or the Offering except as required by
law.
2. Fees and Compensation. In consideration of the services rendered by
----------------------
LTCO in connection with the Offering, the Company agrees to pay LTCO the
following fees and other compensation:
(a) 1) a commitment fee payable immediately upon the initial closing
equal to 1% of the total draw down commitment amount; and
2) an additional fee payable upon the initial and each
subsequent closing equal to 7% of the amount drawn down by
the Company at each such closing.
(b) $35,000 non-accountable expense allowance ($17,500 shall be paid
upon execution of this Letter Agreement by the Company and the
balance of $17,500 upon the initial closing).
(c) 8% Warrant Coverage.
(d) All amounts payable hereunder shall be paid to LTCO out of an
attorney escrow account at the closing or by such other means
acceptable to LTCO.
(e) Should LTCO provide a qualified institutional investor acceptable
to the Company and such investor is willing to invest at
substantially the same terms outlined in the term sheet marked
Exhibit D and the Company were to terminate the Agreement after
February 8, 2000 or prior to March 7, 2002 (the "Termination
Date"), for reasons other than a breach of this Agreement by
LTCO, the Company will pay $200,000 to LTCO as a "break-up" fee.
3. Terms of Retention. (a) Unless extended or terminated in writing
-------------------
by the parties hereto in accordance with the provisions hereof, this Agreement
shall remain in effect until the Termination Date of March 7, 2002.
(b) Notwithstanding anything herein to the contrary, the obligation to pay
the Fees and Compensation and Expenses described in Section 2, if any, and
paragraphs 2, 6, and 8 of Exhibit A and all of Exhibit B and Exhibit C attached
hereto, each of which exhibits is incorporated herein by reference, shall
survive
2
<PAGE>
any termination or expiration of the Agreement. It is expressly understood and
agreed by the parties hereto that any private financing of equity or debt or
other capital raising activity of the Company within 24 months of the
termination or expiration of this Agreement, with any investors or lenders to
whom the Company was introduced by LTCO or who was contacted by LTCO while this
Agreement was in effect and disclosed to the Company in writing, shall result in
such fees and compensation due and payable by the Company to LTCO under the same
terms of Section 2 above. Upon completion of the Offering, any future
renegotiating, restructuring, revision or other amendment of such Offering by
and between the Company and the investors in such Offering shall be deemed to be
a new financing and shall result in additional fees and compensation due and
payable by the Company to LTCO under the terms of Section 2 above.
4. Right of First Refusal. Upon completion of the Offering, LTCO shall
-----------------------
have an irrevocable right of first refusal for a period of one year to provide
all private financing arrangements for the Company (other than conventional
banking arrangements, borrowing and commercial debt financing and discrete
unrelated transactions of not more than $250,000 where no investment banking fee
is being paid). LTCO shall exercise such right in writing within five (5)
business days of receipt of a written term sheet describing such proposed
transaction in reasonable detail.
5. Information. The Company recognizes and confirms that in completing
------------
its engagement hereunder, LTCO will be using and relying on publicly available
information and on data, material and other information furnished to LTCO by the
Company or the Company's affiliates and agents. It is understood and agreed
that in performing under this engagement, LTCO will rely upon the accuracy and
completeness of, and is not assuming any responsibility for independent
verification of, such publicly available information and the other information
so furnished.
6. Offers and Sales Only to Institutional Accredited Investors.
-----------------------------------------------------------
Offers and sales of the Securities will be made only to qualified institutional
buyers (as defined in Rule 144A) and to "accredited investors" as defined in
Rule 501(a) promulgated under the Securities Act of 1933, as amended (the
"Securities Act").
7. No General Solicitation. The Securities will be offered only by
-----------------------
approaching prospective purchasers on an individual basis. No general
solicitation or general advertising in any form will be used in connection with
the offering of the Securities.
8. Miscellaneous. This Agreement constitutes the entire understanding
--------------
and agreement between the parties with respect to its subject matter and there
are no agreements or understandings with respect to the subject matter hereof
which are not contained in this Agreement. This Agreement may be modified only
in writing signed by the party to be charged hereunder.
3
<PAGE>
If the foregoing correctly sets forth our agreement, please confirm
this by signing and returning to us the duplicate copy of this letter.
We appreciate this opportunity to be of service and are looking
forward to working with you on this matter.
Very truly yours,
LADENBURG THALMANN & CO. INC.
By: David Burns
-----------
Name: David Burns
Title: EVP
Agreed to and accepted
as of the date first written above:
NANOPIERCE TECHNOLOGIES, INC.
By: /s/ Paul H. Metzinger
---------------------
Name: Paul H. Metzinger
Title: President & CEO
4
<PAGE>
EXHIBIT A
---------
STANDARD TERMS AND CONDITIONS
1. The Company shall promptly provide LTCO with all relevant information about
the Company (to the extent available to the Company in the case of parties
other than the Company) that shall be reasonably requested or required by
LTCO, which information shall be accurate in all material respects at the
time furnished.
2. LTCO shall keep all information obtained from the Company strictly
confidential except: (a) information which is otherwise publicly
available, or previously known to, or obtained by LTCO independently of
the Company and without breach of LTCO's agreement with the Company; (b)
LTCO may disclose such information to its employees and attorneys, and to
its other advisors and financial sources on a need to know basis only and
shall ensure that all such employees, attorneys, advisors and financial
sources will keep such information strictly confidential; and (c) pursuant
to any order of a court of competent jurisdiction or other governmental
body or as may otherwise be required by law.
3. The Company recognizes that in order for LTCO to perform properly its
obligations in a professional manner, it is necessary that LTCO be informed
of and, to the extent practicable, participate in meetings and discussions
between the Company and any third party relating to the matters covered by
the terms of LTCO's engagement.
4. The Company agrees that any report or opinion, oral or written, delivered
to it by LTCO is prepared solely for its confidential use and shall not be
reproduced, summarized, or referred to in any public document or given or
otherwise divulged to any other person without LTCO's prior written
consent, except as may be required by applicable law or regulation.
5. No fee payable to LTCO pursuant to any other agreement with the Company or
payable by the Company to any agent, lender or investor shall reduce or
otherwise affect any fee payable by the Company to LTCO hereunder.
6. The Company represents and warrants that: (a) it has full right, power and
authority to enter into this Agreement and to perform all of its
obligations hereunder; (b) this Agreement has been duly authorized and
executed and constitutes a valid and binding agreement of the Company
enforceable in accordance with its terms; and (c) the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby does not conflict with or result in a breach of (i) the
Company's certificate of incorporation or by-laws or (ii) any agreement to
which the Company is a party or by which any of its property or assets is
bound.
5
<PAGE>
EXHIBIT A (CONTINUED)
---------------------
7. Nothing contained in this Agreement shall be construed to place LTCO and
the Company in the relationship of partners or joint venturers. Neither
LTCO nor the Company shall represent itself as the agent or legal
representative of the other for any purpose whatsoever nor shall either
have the power to obligate or bind the other in any manner whatsoever.
LTCO, in performing its services hereunder, shall at all times be an
independent contractor.
8. This Agreement has been and is made solely for the benefit of LTCO and the
Company and each of the persons, agents, employees, officers, directors and
controlling persons referred to in Exhibit B and their respective heirs,
executors, personal representatives, successors and assigns, and nothing
contained in this Agreement shall confer any rights upon, nor shall this
Agreement be construed to create any rights in, any person who is not party
to such Agreement, other than as set forth in this paragraph.
9. The rights and obligations of either party under this Agreement may not be
assigned without the prior written consent of the other party hereto and
any other purported assignment shall be null and void.
10. All communications hereunder, except as may be otherwise specifically
provided herein, shall be in writing and shall be mailed, hand delivered,
or sent via facsimile and confirmed by letter, to the party to whom it is
addressed at the following addresses or such other address as such party
may advise the other in writing:
To the Company:
Paul H. Metzinger
Nanopierce Technologies, Inc.
370 - 17th Street, Suite 3580
Denver, CO 80202
Telephone: (303) 592-1010
Facsimile: (303) 592-1054
To LTCO:
Ladenburg Thalmann & Co. Inc.
590 Madison Avenue
New York, NY 10022
Attention: David B. Boris
Telephone: (212) 409-2000
Facsimile: (212) 409-2169
All notices hereunder shall be effective upon receipt by the party to which it
is addressed.
6
<PAGE>
EXHIBIT B
---------
INDEMNIFICATION
The Company agrees that it shall indemnify and hold harmless, LTCO, its
stockholders, directors, officers, employees, agents, affiliates and controlling
persons within the meaning of Section 20 of the Securities Exchange Act of 1934
and Section 15 of the Securities Act of 1933, each as amended (any and all of
whom are referred to as an "Indemnified Party"), from and against any and all
losses, claims, damages, liabilities, or expenses, and all actions in respect
thereof (including, but not limited to, all legal or other expenses reasonably
incurred by an Indemnified Party in connection with the investigation,
preparation, defense or settlement of any claim, action or proceeding, whether
or not resulting in any liability), incurred by an Indemnified Party: (a)
arising out of, or in connection with, any actions taken or omitted to be taken
by the Company, its affiliates, employees or agents, or any untrue statement or
alleged untrue statement of a material fact contained in any of the financial or
other information furnished to LTCO by or on behalf of the Company or the
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; or (b) with respect to, caused by, or
otherwise arising out of any transaction contemplated by the Agreement or LTCO's
performing the services contemplated hereunder; provided, however, the Company
-------- -------
will not be liable under clause (b) hereof to the extent, and only to the
extent, that any loss, claim, damage, liability or expense is finally
judicially determined to have resulted primarily from LTCO's gross negligence or
bad faith in performing such services.
If the indemnification provided for herein is conclusively determined (by an
entry of final judgment by a court of competent jurisdiction and the expiration
of the time or denial of the right to appeal) to be unavailable or insufficient
to hold any Indemnified Party harmless in respect to any losses, claims,
damages, liabilities or expenses referred to therein, then the Company shall
contribute to the amounts paid or payable by such Indemnified Party in such
proportion as is appropriate and equitable under all circumstances taking into
account the relative benefits received by the Company on the one hand and LTCO
on the other, from the transaction or proposed transaction under the Agreement
or, if allocation on that basis is not permitted under applicable law, in such
proportion as is appropriate to reflect not only the relative benefits received
by the Company on the one hand and LTCO on the other, but also the relative
fault of the Company and LTCO; provided, however, in no event shall the
-------- -------
aggregate contribution of LTCO and/or any Indemnified Party be in excess of net
compensation actually received by LTCO and/or such Indemnified Party pursuant to
this Agreement.
The Company shall not settle or compromise or consent to the entry of any
judgment in or otherwise seek to terminate any pending or threatened action,
claim, suit or proceeding in which any Indemnified Party is or could be a party
and as to which indemnification or contribution could have been sought by such
Indemnified Party hereunder (whether or not such Indemnified Party is a party
thereto), unless such consent or termination includes an express unconditional
release of such Indemnified Party, reasonably satisfactory in form and substance
to such
7
<PAGE>
Indemnified Party, from all losses, claims, damages, liabilities or expenses
arising out of such action, claim, suit or proceeding.
The foregoing indemnification and contribution provisions are not in lieu of,
but in addition to, any rights which any Indemnified Party may have at common
law hereunder or otherwise, and shall remain in full force and effect following
the expiration or termination of LTCO's engagement and shall be binding on any
successors or assigns of the Company and successors or assigns to all or
substantially all of the Company's business or assets.
8
<PAGE>
EXHIBIT C
---------
JURISDICTION
The Company hereby irrevocably: (a) submits to the jurisdiction of any court
of the State of New York or any federal court sitting in the State of New York
for the purposes of any suit, action or other proceeding arising out of the
Agreement between the Company and LTCO which is brought by or against the
Company or LTCO; (b) agrees that all claims in respect of any suit, action or
proceeding may be heard and determined in any such court; and (c) to the extent
that the Company has acquired, or hereafter may acquire, any immunity from
jurisdiction of any such court or from any legal process therein, the Company
hereby waives, to the fullest extent permitted by law, such immunity.
The Company waives, and the Company agrees not to assert in any such suit,
action or proceeding, in each case, to the fullest extent permitted by
applicable law, any claim that: (a) the Company is not personally subject to the
jurisdiction of any such court; (b) the Company is immune from any legal process
(whether through service or notice, attachment prior to judgment, attachment in
the aid of execution, execution or otherwise) with respect to it or its
property; (c) any such suit, action or proceeding is brought in an inconvenient
forum; (d) the venue of any such suit, action or proceeding is improper; or (e)
this Agreement may not be enforced in or by any such court.
Any process against the Company in, or in connection with, any suit, action or
proceeding filed in the United States District Court for the Southern District
of New York or any other court of the State of New York, arising out of or
relating to this Agreement or any transaction or agreement contemplated hereby,
may be served personally, or by first class mail or overnight courier (with the
same effect as though served upon the Company personally) addressed to the
Company at the address set forth in the Agreement between the Company and LTCO.
Nothing in these provisions shall affect any party's right to serve process in
any manner permitted by law or limit its rights to bring a proceeding in the
competent courts of any jurisdiction or jurisdictions or to enforce in any
lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.
This Agreement shall be governed by and construed in accordance with the laws
of the State of New York, without regard to conflicts of law principles.
9
<PAGE>
EXHIBIT 23.01
CONSENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference into this Registration
Statement on Form S-3 of our report dated September 15, 1999 (which expresses an
unqualified opinion and includes an explanatory paragraph relating to the
Company's ability to continue as a going concern), which appears on page F-2 of
the Annual Report on Form 10-KSB of Nanopierce Technologies, Inc. for the year
ended June 30, 1999 and to the reference to our Firm under the caption "Experts"
in the Prospectus.
/S/ Gelfond Hochstadt Pangburn & Co.
- ------------------------------------
Gelfond Hochstadt Pangburn & Co.
Denver, Colorado
February 24, 2000
