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
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 Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, 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
10
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
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
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
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
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
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
Company: Nanopierce Technologies, Inc.
000 Xxxxxxxxxxx Xxxxxx, Xxxxx #0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxx, President
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Xxxxx Xxxx LLP
000 Xxxxxxxxxxx
Xxxxxx, Xxxxx #0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
Purchaser: Equinox Investors LLC
c\o WEC Asset Management LLC
Xxx Xxxxx Xxxxx Xxxxxx, Xxxxx #0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
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
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
IN WITNESS WHEREOF, this Securities Purchase Agreement has been duly
executed by each of the undersigned.
NANOPIERCE TECHNOLOGIES, INC.
By: /s/ Xxxx X. Xxxxxxxxx
--------------------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
EQUINOX INVESTORS LLC
By: WEC Asset Management LLC,
Manager
By: /s/ Xxxxxx X. Xxxx
--------------------------------------------
Name: Xxxxxx X. Xxxx
Title: Managing Director
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
SCHEDULE 3(b)
CAPITALIZATION, DERIVATIVE SECURITIES
AND REGISTRATION RIGHTS
CAPITALIZATION STRUCTURE
JANUARY 4, 1999
Restricted Restricted Convertible Restricted
---------- ---------- ----------- ----------
Shares Warrants Finance Promissory Management & Fully
------ -------- ------- ---------- ------------ -----
Warrants Notes/(3)/ Employee Options Diluted
-------- --------- ---------------- -------
33,155,585 1,327,500/(1)/ 10,000,000/(2)/ 325,000 4,925,000 49,613,085
(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)
Xxxx & Xxxxx Xxxxxxxxx 1,883,058
Option 2,000,000
Xx. Xxxxxxx X. Xxxxxxx 110,000(r)
Option 750,000
Xx. Xxxxxxx X. Xxxxxx
Option 325,000
Xxxxxx X. Xxxxxxxx 2,987(f)
16,593(r)
Option 100,000
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
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
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, 0000
Xxx Xxxx, Xxx Xxxx
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 Xxx Xxxxx
Xxxxx Xxxxxx, Xxxxx #0000, Xxx Xxxx, Xxx Xxxx 00000 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.
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
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.
3
(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
4
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.
5
(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
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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
6
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
7
(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;
8
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.
9
(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.
10
"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
11
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
12
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
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.
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxx, President
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to: Xxxxx Xxxx LLP
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
Registered Holder: Equinox Investors LLC
c\o WEC Asset Management LLC
Xxx Xxxxx Xxxxx Xxxxxx, Xxxxx #0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
14
With a copy to: Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
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
IN WITNESS WHEREOF, the Company has caused this Debenture to be executed as
of the date first written above.
NANOPIERCE TECHNOLOGIES, INC.
By:______________________________________
Name: Xxxx X. Xxxxxxxxx
Title: President
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___________________________________________________
DELIVERY INSTRUCTIONS
To be completed ONLY if Certificates are to be mailed to persons other
than the Registered Holder.
Name_____________________________________________
(Please Print)
Address__________________________________________
Signature________________________________________
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:________________________________________
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.
"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
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
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
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
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
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
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
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
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
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
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
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
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
provided in this Warrant, such office to be initially located at 000 Xxxxxxxxxxx
Xxxxxx, Xxxxx #0000, Xxxxxx, Xxxxxxxx 00000, fax (000) 000-0000, 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.
000 Xxxxxxxxxxx Xxxxxx, Xxxxx #0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxx, President
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to: Xxxxx Xxxx LLP
000 Xxxxxxxxxxx Xxxxxx, Xxxxx #0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
15
(2) if to the Purchaser to:
Equinox Investors LLC
WEC Asset Management LLC
Xxx Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
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
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
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: Xxxx X. Xxxxxxxxx
Title: President
Attest:
By:______________________
Name: Xxxxxx X. Xxxxxxxx
Title: Secretary
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.
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.
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 Xxx Xxxxx Xxxxx Xxxxxx, Xxxxx #0000, Xxx Xxxx, Xxx Xxxx 00000, 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".
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
2
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
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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.
3
(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 Xxxx X. Xxxxxxxxx, Xx. Xxxxxxx X. Xxxxxxx or Xx.
Xxxxxxx X. Xxxxxx 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.
4
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
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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.
5
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
6
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
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
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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
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.]
9
IN WITNESS WHEREOF, the undersigned have executed
this Conditional Warrant as of January 11, 2000.
NANOPIERCE TECHNOLOGIES, INC.
By:____________________________
Name: Xxxx X. Xxxxxxxxx
Title: President
ACKNOWLEDGED AND AGREED:
EQUINOX INVESTORS LLC
By: WEC ASSET MANAGEMENT LLC, Manager
By:_________________________
Name: Xxxxxx X. Xxxx
Title: Managing Director
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 $.0001 per share
for each one million dollars in principal amount of Debentures purchased
hereunder (minus any such Debentures and Stock Purchase Warrants previously
purchased) pursuant to the terms of the Conditional Warrant).
Date of Conditional
Exercise Notice:__________________ Conditional Closing Date:__________________
Principal amount Number of
of Debentures:____________________ Stock Purchase Warrants:___________________
We hereby consent to this Conditional Exercise Notice and deem it effective:
EQUINOX INVESTORS LLC NANOPIERCE TECHNOLOGIES, INC.
By: WEC Asset Management LLC, Manager
By:_____________________ By:__________________________________
Name: Xxxxxx X. Xxxx Name: Xxxx X. Xxxxxxxxx
Title: Managing Director Title: President
Annex B
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FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right,
represented by this Conditional Warrant, to purchase [_____] Additional
Debentures and Additional Warrants to purchase [____] shares of Common Stock and
herewith tenders in payment for such securities a certified or official bank
check payable in immediately available U.S. dollars to the order of NANOPIERCE
TECHNOLOGIES, INC., in the amount of [$________], 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)
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)
EXHIBIT D
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[FORM OF OPINION OF XXXXX XXXX LLP]
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:
(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
2
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).
3
(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
4
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
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
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
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
(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
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
10
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
11
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
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.
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxx, President
Tel: (000) 000-0000
Fax: (000) 000-0000
13
with a copy to: Xxxxx Xxxx LLP
000 Xxxxxxxxxxx Xxxxxx, Xxxxx #0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
Purchaser: Equinox Investors LLC
c\o WEC Asset Management LLC
Xxx Xxxxx Xxxxx Xxxxxx, Xxxxx #0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to: Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxx, Esq.
---------
Tel: (000) 000-0000
Fax: (000) 000-0000
(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
(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
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed.
NANOPIERCE TECHNOLOGIES, INC.
By:_______________________________
Name: Xxxx X. Xxxxxxxxx
Title: President
EQUINOX INVESTORS LLC
By: WEC Asset Management LLC, Manager
By:_______________________________
Name: Xxxxxx X. Xxxx
Title: Managing Director
