EXHIBIT 4.3
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), is made as of July
23, 1998, by and between Nanopierce Technologies, Inc., a corporation organized
under the laws of the State of Nevada, U.S.A., with headquarters located at 000
Xxxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx (the "Company") and the buyer
set forth on the execution page hereof (the "Buyer").
RECITALS
A. The Company and the Buyer are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by the
provisions of Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act");
B. The Buyer desires to purchase from the Company, and the Company desires
to sell to the Buyer, for the amounts and upon the terms and conditions stated
in this Agreement, in a closing or closings (each a "Closing") as herein
described, certain shares of the Company's preferred stock as listed in Recitals
B(i) and B(ii) immediately below, along with certain warrants of the Company as
listed in Recital B(iii) below.
(i) At the first Closing (the "First Closing"), 50,000 shares of the
Company's Series B Convertible Preferred Stock (the "Series B
Shares"), which may be converted into common stock of the
Company, $.0001 par value per share ("Common Stock"), upon the
terms hereof and upon the terms of the Articles of Amendment to
Articles of Incorporation - Certificate of Designations,
Preferences, Limitations and Relative Rights of Series B
Convertible Preferred Stock of Nanopierce Technologies, Inc.,
attached hereto as Exhibit A (the "Series B Articles"). At the
second Closing (the "Second Closing"), 50,000 Series B Shares;
and at the third Closing (the "Third Closing"), 50,000 Series B
Shares. The price per Series B Share is US$10.00. The aggregate
number of Series B Shares to be issued and sold by the Company is
150,000 Series B Shares, for an aggregate purchase price of Xxx
Xxxxxxx Xxxx Xxxxxxx Xxxxxxxx Xxxxxx Xxxxxx Dollars
($1,500,000.00).
(ii) At each additional Closing (if any) (each, an
"Additional Closing") as further described in Section 4(1) below,
shares of the Company's Series C Convertible Preferred Stock (the
"Series C Shares"), which may be converted into Common Stock upon
the terms hereof and upon the terms of the Articles of Amendment
to Articles of Incorporation - Certificate of Designations,
Preferences, Limitations and Relative Rights of Series C
Convertible Preferred Stock of Nanopierce Technologies, Inc.,
attached hereto as Exhibit B (the "Series C Articles"). The price
per Series C Share is US$10.00. The minimum number of Series C
Shares to
be issued and sold by the company is two hundred fifty thousand
Series C Shares, and the maximum number of Series C Shares to be
issued and sold by the Company is seven hundred thousand Series C
Shares, all in accordance with the terms hereof.
(iii) At each Closing, as additional consideration for
Buyer's purchase of the Preferred Shares (defined below) a
warrant (each a "Warrant" and collectively the "Warrants") to
purchase Common Stock at a purchase price equal to one hundred
twenty-five percent (125%) of the closing bid price for the
Common Stock on the date of such Closing, which Warrants must be
exercised if at all within three (3) years after the date of
issuance. The Warrants shall be substantially in the form
attached hereto as Exhibit E. The number of shares into which
each Warrant shall be exercisable shall be equal to the number of
Preferred Shares purchased at such Closing.
The Common Stock into which the Series B Shares and the Series C Shares may
(in accordance with the terms of the Series B Articles and the Series C
Articles, respectively) be convertible shall be collectively referred to herein
as the "Conversion Shares." The Common Stock received upon exercise of the
Warrants shall be referred to as the "Warrant Shares." Certain shares of Common
Stock may (at the Company's option as described in the Series B Articles or the
Series C Articles, as applicable) be issued to the Buyer in payment of dividends
(the "Dividend Shares"). Together the Series B Shares and the Series C Shares
may be referred to herein as the "Preferred Shares." The Preferred Shares, the
Conversion Shares, the Warrant Shares and the Dividend Shares (if any) may be
collectively referred to herein as the "Securities." Together the Series B
Articles and the Series C Articles may be referred to herein as the "Articles of
Amendment."
C. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
(the "Registration Rights Agreement") substantially in the form of Exhibit C
attached hereto pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
AGREEMENTS
NOW, THEREFORE, in consideration of their respective promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by the parties, the Company and the Buyer hereby
agree as follows:
1. PURCHASE AND SALE OF SECURITIES.
a. Purchase. The Buyer hereby agrees to purchase from the Company, and
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the Company agrees to sell to the Buyer, (I) 50,000 Series B Shares at the First
Closing, (II) 50,000 Series B Shares at the Second Closing, and (III) 50,000
Series B Shares at the Third Closing; and at each Additional Closing, the number
of Series C Shares described in Section 4(1) below. The
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purchase price for the Preferred Shares purchased at each Closing shall be as
specified in Recitals B(i) and B(ii) above (with respect to each Closing, the
"Purchase Price").
b. The Closings. The date of the First Closing shall be July 23, 1998;
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the date of the Second Closing shall be the date which is one calendar month
after the date of the First Closing; the date of the Third Closing shall be the
date which is one calendar month after the date of the Second Closing; and the
date of each Additional Closing (if any) shall be as specified in Section 4(l)
below, or, in each case on such earlier or later date as is mutually agreed to
in writing by the Company and the Buyer. The Purchase Price for the Securities
being purchased at each Closing shall be delivered to the Escrow Agent (as
defined in the Escrow Agreement substantially in the form of Exhibit D attached
hereto (the "Escrow Agreement")) on behalf of the Company on or before the date
specified herein for such Closing. At each Closing, the Company shall deliver
certificates representing the Preferred Shares and the Warrants being sold at
such Closing, duly issued and executed by the authorized officers on behalf of
the Company, to the Escrow Agent (as defined in the Escrow Agreement) on behalf
of the Buyer.
c. Form of Payment. The Buyer shall pay the Purchase Price for the
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Preferred Shares and Warrants purchased at each Closing by wire transfer of
immediately available funds in United States Dollars, to be deposited into the
Escrow Account as defined in the Escrow Agreement, against delivery to the
Escrow Agent of duly executed Preferred Shares and Warrants being purchased by
the Buyer hereunder at such Closing. The Escrow Agent shall be responsible for
delivery of the Purchase Price to the Company and the Preferred Shares to the
Buyer in accordance with the terms of the Escrow Agreement and with the
instructions of the said parties.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
The Buyer understands, agrees with, and represents and warrants to the
Company with respect to its purchase hereunder, that:
a. Investment Purposes; Compliance With 1933 Act. The Buyer is purchasing
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the Securities for its own account for investment only and not with a view
towards, or in connection with, the public sale or distribution thereof, except
pursuant to sales registered under or exempt from the 0000 Xxx. The Buyer is
not purchasing the Securities for the purpose of covering short sale positions
in the Common Stock established on or prior to the date of the relevant Closing.
The Buyer agrees to offer, sell or otherwise transfer the Securities only (i) in
accordance with the terms of this Agreement and the Articles of Amendment, as
applicable, and (ii) pursuant to registration under the 1933 Act or to an
exemption from registration under the 1933 Act and any other applicable
securities laws. The Buyer does not by its representations contained in this
Section 2(a) agree to hold the Securities for any minimum or other specific term
and reserves the right to dispose of the Securities at any time pursuant to a
registration statement or in accordance with an exemption from registration
under the 1933 Act, in all cases in accordance with applicable state and federal
securities laws. The Buyer understands that it shall be a condition to the
issuance of the Conversion Shares, the Warrant Shares and the Dividend Shares
(if any) that the Conversion Shares, the Warrant Shares and the Dividend Shares
(if any) be and are subject to the representations set forth in this Section
2(a).
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b. Accredited Investor Status. The Buyer is an "accredited investor" as
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that term is defined in Rule 501 (a) of Regulation D. The Buyer has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of an investment made pursuant to this
Agreement. The Buyer is aware that it may be required to bear the economic risk
of an investment made pursuant to this Agreement for an indefinite period of
time, and is able to bear such risk for an indefinite period.
c. Reliance on Exemptions. The Buyer understands the Securities are being
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offered and sold to it in reliance on specific exemptions from the registration
requirements of the applicable United States federal and state securities laws
and that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, acknowledgments,
understandings, agreements and covenants of the Buyer set forth herein in order
to determine the availability of such exemptions and the eligibility of the
Buyer to acquire the Securities.
d. Information. The Buyer and its advisors, if any, have been furnished
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with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities which
have been requested by the Buyer, and specifically (but without limitation) the
Company's 1997 Form 10-K as filed with the SEC for the fiscal year ended June
30, 1997 (the "1997 10-K"). The Buyer and its advisors, if any, have been
afforded the opportunity to ask all such questions of the Company as they have
in their discretion deemed advisable. The Buyer understands that its investment
in the Securities involves a high degree of risk. The Buyer has sought such
accounting, legal and tax advice as it has considered necessary to an informed
investment decision with respect to the investment made pursuant to this
Agreement.
e. No Government Review. The Buyer understands that no United States
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federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities, nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. The Buyer understands that: (i) except as provided
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in the Registration Rights Agreement, the Securities have not been and are not
being registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless either (a) subsequently
registered thereunder or (b) the Buyer shall have delivered to the Company an
opinion by counsel reasonably satisfactory to the Company, in form, scope and
substance reasonably satisfactory to the Company, to the effect that the
securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, (ii) any sale of
such securities made in reliance on Rule 144 (as hereafter defined) may be made
only in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of such securities under circumstances in which the
seller (or the person though whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 0000 Xxx) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder, and (iii) neither the Company nor any other person is under any
obligation to register such securities under the 1933 Act or any state
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securities laws or to comply with the terms and conditions of any exemption
thereunder (in each case, other than pursuant to this Agreement or the
Registration Rights Agreement).
g. Legend. The Buyer understands that the Preferred Shares, and until
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such time as the Conversion Shares, the Warrant Shares and the Dividend Shares
(if any) (collectively, the "Registrable Securities"), have been registered
under the 1933 Act as contemplated by the Registration Rights Agreement or
otherwise may be sold by the Buyer pursuant to Rule 144 (as amended, or any
applicable rule which operates to replace said Rule) promulgated under the 1933
Act ("Rule 144"), the stock certificates representing the Registrable Securities
will bear a restrictive legend (the "Legend") in substantially the following
form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE LAWS.
The Legend shall be removed and the Company will issue certificates without
the Legend to the holder of the applicable Preferred Shares or any Registrable
Securities upon which the Legend is stamped, in accordance with Section 5(b).
h. Authorization; Enforcement. This Agreement, the Registration Rights
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Agreement and the Escrow Agreement have been duly and validly authorized,
executed and delivered by the Buyer and are each and collectively valid and
binding agreements of the Buyer enforceable in accordance with their terms,
subject as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium, and other similar laws affecting the enforcement of
creditors' rights generally. Buyer (and Buyer's counsel) has examined this
Agreement and is satisfied in its sole discretion that this Agreement and the
accompanying Exhibits, Schedules and the Addenda, if any, are in accordance with
Regulation D and are effective to accomplish the purposes set forth herein and
therein.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company understands, agrees with, and represents and warrants to the
Buyer that:
a. Organization and Qualification: Reporting Company Status. The Company
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and its subsidiaries are corporations duly organized and existing in good
standing under the laws of the respective jurisdictions in which they are
incorporated, except as would not have a Material Adverse Effect (as defined
below), and have the requisite corporate power to own their properties and to
carry on their business as now being conducted. Each of the Company and its
subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in
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every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary and where the failure so to qualify would have a
Material Adverse Effect. "Material Adverse Effect" means any material adverse
effect on the operations, properties or financial condition of the Company and
its subsidiaries taken as a whole. The Company has registered its Common Stock
pursuant to Section 12 of the 1934 Act, and the Common Stock is eligible for
trading on the OTC Bulletin Board Market. The Company has received no notice,
either written or oral, with respect to the continued eligibility of the Common
Stock for such eligibility for trading, and the Company has maintained all
applicable requirements for the continuation of such eligibility for trading,
and the Company does not reasonably anticipate that the Common Stock will be
declared ineligible to trade on the OTC Bulletin Board Market for the
foreseeable future. Seller shall use its best efforts to continue to keep its
stock eligible for trading on the OTC Bulletin Board Market or a comparable
stock market or exchange. The Company has complied with all applicable
requirements (if any) of the National Association of Securities Dealers and the
OTC Bulletin Board Market with respect to the issuance of the Securities.
b. Authorization; Enforcement. (i) The Company has the requisite
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corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement and the Escrow Agreement, to issue and sell the
Preferred Shares and all of the Registrable Securities in accordance with the
terms hereof, and to perform its obligations under the Series B Articles and the
Series C Articles in accordance with the requirements of the same, (ii) the
execution, delivery and performance of this Agreement, the Registration Rights
Agreement and the Escrow Agreement by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly authorized by
the Company's Board of Directors and no further consent or authorization of the
Company, its Board of Directors, or its stockholders is required, (iii) this
Agreement, the Registration Rights Agreement, the Escrow Agreement and, on the
date of the applicable Closing, the Preferred Shares and Warrants sold at such
Closing, have been duly and validly authorized, executed and delivered by the
Company, (iv) the Series B Articles and the Series C Articles have been duly
authorized by the Company's Board of Directors to be filed with the Secretary of
State for the State of Nevada, and the Series B Articles and the Series C
Articles will be filed with the Secretary of State for the State of Nevada prior
to the date of the First Closing, and (v) this Agreement, the Registration
Rights Agreement and the Escrow Agreement constitute the valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting, generally, the enforcement of creditors'
rights and remedies or by other equitable principles of general application. The
Company (and its legal counsel) has examined this Agreement and is satisfied in
its sole discretion that this Agreement and the accompanying Exhibits, Schedules
and the Addenda, if any, are in accordance with Regulation D and are effective
to accomplish the purposes set forth herein and therein.
c. Capitalization. As of June 30, 1998, the authorized capital stock of
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the Company consists of 45,000,000 shares of Common Stock of which 12,175,000
shares were issued and outstanding; as of June 30, 1998, the authorized
preferred stock of the Company consists of 5,000,000 shares, of which 100 shares
were issued and outstanding. As of June 30, 1998, the Company has authorized one
class of common stock, and one class of preferred stock. All of such outstanding
shares have been validly issued and are fully paid and nonassessable. Except as
disclosed in the 1997 10-K or otherwise in writing to the Buyer, no shares of
Common Stock or
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Preferred Stock are subject to preemptive rights or any other similar rights or
any liens or encumbrances. Except as disclosed in Schedule 3(c) attached, no
shares of Common Stock or Preferred Stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances. Except as disclosed in
Schedule 3(c), as of the effective date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, or arrangements by which the Company or any of its subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or any of its subsidiaries, (ii) there are no outstanding debt securities, and
(iii) there are no agreements or arrangements under which the Company or any of
its subsidiaries is obligated to register the sale of any of its or their
securities under the 1933 Act (except as provided herein and in the Registration
Rights Agreement). If requested by the Buyer, the Company has furnished to the
Buyer, and the Buyer acknowledges receipt of same by its signature hereafter,
true and correct copies of the Company's Certificate of Incorporation, as
amended, as in effect on the date hereof ("Certificate of Incorporation"), and
the Company's Bylaws, as in effect on the date hereof (the "Bylaws").
d. Issuance of Securities. The Series B Shares, the Series C Shares and
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the Registrable Securities are all duly authorized and reserved for issuance,
and in all cases upon issuance shall be validly issued, fully paid and non-
assessable, free from all taxes, liens and charges with respect to the issue
thereof, and will not be subject to preemptive rights or other similar rights of
stockholders of the Company.
e. Acknowledgment Regarding Buyer's Purchase of the Securities. The
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Company acknowledges and agrees that the Buyer is not acting as financial
advisor to or fiduciary of the Company (or in any similar capacity with respect
to this Agreement or the transactions contemplated hereby), that this Agreement
and the transactions contemplated hereby, and the relationship between the Buyer
and the Company, are and will be considered "arms-length" notwithstanding any
other or prior agreements or nexus between the Buyer and the Company, whether or
not disclosed, and that any statement made by the Buyer, or any of its
representatives or agents, in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation, is merely
incidental to the Buyer's purchase of the Securities and has not been relied
upon in any way by the Company, its officers or directors. The Company further
represents to the Buyer that the Company's decision to enter into this Agreement
and the transactions contemplated hereby have been based solely upon an
independent evaluation by the Company, its officers and directors.
f. No Integrated Offering. Neither the Company, nor any of its
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affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances which would prevent the parties hereto from
consummating the transactions contemplated hereby pursuant to an exemption from
registration under the 1933 Act and specifically in accordance with the
provisions of Regulation D. The transactions contemplated hereby are exempt from
the registration requirements of the 1933 Act, assuming the accuracy of the
representations and warranties contained herein of the Buyer.
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g. No Conflicts. The execution, delivery and performance of this
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Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the Certificate of
Incorporation or Bylaws or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries is bound
or affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). Neither the Company nor any of its
subsidiaries is in violation of its Certificate of Incorporation or other
organizational documents, and neither the Company nor any of its/subsidiaries is
in default (and no event has occurred which, with notice or lapse of time or
both, would put the Company or any of its subsidiaries in default) under, nor
has there occurred any event giving others (with notice or lapse of time or
both) any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, except for possible defaults or rights as would not, in
the aggregate or individually, have a Material Adverse Effect. The business of
the Company and its subsidiaries is not being conducted, and shall not be
conducted so long as the Buyer owns any of the Securities, in violation of any
law, ordinance or regulation of any governmental entity, except for possible
violations which neither singly or in the aggregate would have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement, the Registration Rights Agreement or the Escrow Agreement in
accordance with the terms hereof and thereof, or to perform its obligations with
respect to the Preferred Shares exactly as described in the applicable Articles
of Amendment.
h. SEC Documents; Financial Statements. Since at least June 1, 1997, the
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Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules hereto and documents (other than
exhibits) incorporated by reference therein, being hereinafter referred to as
the "SEC Documents"). The Company has delivered to the Buyer as requested by the
Buyer true and complete copies of the SEC Documents, except for exhibits,
schedules and incorporated documents. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in
8
accordance with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyer (including the
information referred to in Section 2(d) of this Agreement) contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading. Except as set forth in the
financial statements of the Company included in the SEC Documents, the Company
has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to the date of such financial
statements and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in such financial statements, in each case of clause
(i) and (ii) next above which, individually or in the aggregate, are not
material to the financial condition, business, operations, properties, operating
results or prospects of the Company. The SEC Documents contain a complete and
accurate list of all material undischarged written and oral contracts,
agreements, leases or other instruments to which the Company or any subsidiary
is a party or by which the Company or any subsidiary is subject (each a
"Contract"), if any. None of the Company, its subsidiaries or, to the best of
the Company's knowledge, any of the other parties thereto, is in breach or
violation of any Contract, which breach or violation would have a Material
Adverse Effect. No event, occurrence or condition exists which, with the lapse
of time, the giving of notice, or both, or the happening of any further event or
condition, would become a default by the Company or its subsidiaries thereunder
which would have a Material Adverse Effect.
i. Absence of Certain Changes. Except as disclosed in the Company's 1997
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10-K, since July 1, 1997, there has been no material adverse change and no
material adverse development in the business, properties, operation, financial
condition, results of operations or prospects of the Company. The Company has
not taken any steps, and does not currently have any reasonable expectation of
taking any steps, to seek protection pursuant to any bankruptcy law nor does the
Company have any knowledge that its creditors intend to initiate involuntary
bankruptcy proceedings. The Company shall, at least until Buyer no longer holds
any of the Securities, maintain its corporate existence in good standing and
shall pay all taxes when due except for taxes it reasonably disputes.
j. Absence of Litigation. Except as set forth in the 1997 10-K or
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disclosed in Schedule 3(j) attached, 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, threatened against or affecting the
Company, wherein an unfavorable decision, ruling or finding would have a
Material Adverse Effect or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the documents contemplated herein.
k. Foreign Corrupt Practices. Neither the Company nor any of its
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subsidiaries, nor any officer, director or other person acting on behalf of the
Company or any subsidiary has, in
9
the course of his actions for or on behalf of the Company, used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity, made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
l. Acknowledgment of Dilution. The number of Conversion Shares issuable
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upon conversion of the Preferred Shares may increase substantially in certain
circumstances, including the circumstance wherein the trading price of the
Common Stock declines. The Company's executive officers and directors have
studied and fully understand the nature of the securities being sold hereunder
and recognize they have a potential dilutive effect. The board of directors of
the Company has concluded in its good faith business judgment that such issuance
is in the best interests of the Company. The Company acknowledges that its
obligation to issue Conversion Shares upon conversion of the Preferred Shares
and Warrant Shares upon exercise of the Warrants is binding upon it and
enforceable regardless of the dilution that such issuance may have on the
ownership interests of other stockholders.
m. Eligibility to File Registration Statement. The Company is currently
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eligible to file a registration statement with the SEC on Form S-3 under the
1933 Act.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts timely to satisfy
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each of the conditions to be satisfied by it as provided in Sections 6 and 7 of
this Agreement.
b. Securities Laws. The Company agrees to timely file a Form D (and any
---------------
equivalent form required by applicable state law) with respect to the Securities
if and as required under Regulation D and applicable state securities laws and
to provide a copy thereof to the Buyer promptly after such filing. The Company
shall, on or before the date of the First Closing, the Second Closing, the Third
Closing and on or before the date of each Additional Closing, as applicable,
take such action as is necessary to sell the Securities being sold to the Buyer
at each such Closing under applicable securities laws of the United States, and
shall if specifically so requested provide evidence of any such action so taken
to the Buyer on or prior to the First Closing date, the Second Closing date, the
Third Closing date or each Additional Closing date, as applicable.
c. Reporting Status. So long as the Buyer beneficially owns any of the
----------------
Securities, the Company shall file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations hereunder would permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the sale of
---------------
the Securities to pay off certain outstanding obligations of the Company and for
the Company's internal working capital purposes, including costs and expenses of
the Company's business operations, and to the extent deemed advisable by the
Company, for the purchase of new
10
technologies for use by the Company and its subsidiaries, and for the purchase
of additional subsidiaries and the development and marketing of their
technologies.
e. Financial Information. At the request of the Buyer, until such time as
---------------------
the Buyer no longer beneficially owns or is entitled to purchase Preferred
Shares, the Company agrees to send the following reports to the Buyer: (i)
after filing with the SEC, a copy of each of its Annual Reports on Form 10-K,
its quarterly Reports on Form 10-Q, and any reports filed on Form 8-K; and (ii)
as soon as practicable after release thereof, copies of all press releases
issued by the Company or any of its subsidiaries.
f. Reservation of Shares. The Company shall at all times have authorized,
---------------------
and reserved for the purpose of issuance, a sufficient number of shares of
Common Stock to provide for the issuance of all of the Conversion Shares and the
Dividend Shares (if any). Prior to complete conversion of the Preferred Shares,
the Company shall not reduce the number of shares reserved for issuance
hereunder without the written consent of the Buyer except for a reduction
proportionate to a reverse stock split effected for a business purpose other
than affecting the requirements of this Section, which reverse stock split
affects all shares of Common Stock equally.
g. Listing. Upon the First Closing, the Second Closing, the Third Closing
-------
and upon each Additional Closing, the Company shall promptly secure the listing
of the Registrable Securities then underlying the Preferred Shares purchased by
the Buyer upon each national securities exchange or automated quotation system,
if any, upon which shares of Common Stock are then listed (subject to official
notice of issuance) and shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of shares of Registrable Securities from
time to time issued under the terms of this Agreement and the Registration
Rights Agreement. If at the relevant time the Company's Common Stock trades on
the OTC Bulletin Board Market, then the Company shall take any steps necessary
to ensure that the Registrable Securities are eligible to trade on the OTC
Bulletin Board Market. The Company shall at all times comply in all respects
with the Company's reporting, filing and other obligations under the by-laws or
rules of the National Association of Securities Dealers and the OTC Bulletin
Board Market (and such other national exchange on which the Common Stock may be
listed, as applicable), if any.
h. Prospectus Delivery Requirement. The Buyer understands that the 1933
-------------------------------
Act requires delivery of a prospectus relating to the Common Stock in connection
with any sale thereof pursuant to a registration statement under the 1933 Act
covering any resale by the Buyer of the Common Stock being sold, and the Buyer
shall comply with any applicable prospectus delivery requirements of the 1933
Act in connection with any such sale. The Company shall deliver a copy of the
required prospectus to the Buyer immediately upon registration of the
Registrable Securities.
i. (Intentionally Omitted).
j. Intentional Acts or Omissions. Neither party shall intentionally
-----------------------------
perform any act which if performed, or omit to perform any act which if omitted
to be performed, would prevent or excuse the performance of this Agreement or
any of the transactions contemplated hereby.
11
k. No Shorting. As a material inducement for the Company to enter into
-----------
this Agreement, the Buyer represents that it has not as of the date hereof, and
covenants on behalf of itself and its affiliates that neither Buyer nor any
affiliate of Buyer will at any time in which the Buyer or any affiliate of the
Buyer beneficially owns any of the Securities, engage in any short sales of, or
hedging or arbitrage transactions with respect to, the Common Stock, or sell
"put" options or similar instruments with respect to the Common Stock.
1. Purchase of Series C Shares. Until the date which is twenty-four (24)
---------------------------
months from the date hereof, the Buyer agrees to purchase, and the Company
agrees to sell, in accordance with and subject to the terms of this Agreement
and the Series C Articles, a minimum of 250,000 Series C Shares and, at the
Company's option, up to a maximum of 700,000 Series C Shares, in each case in a
series of tranches, each of which tranches shall be for the purchase and sale of
a minimum of 25,000 Series C Shares and a maximum of 50,000 Series C Shares in
any given tranche.
No such tranche shall be closed before the date which is thirty (30) days
after the date on which the registration statement contemplated by the
Registration Rights Agreement and covering all of the Registrable Securities is
declared effective by the SEC and the Registrable Securities may thus be freely
sold by Buyer without restriction, and Buyer has been so informed in writing
(and any prospectus needed to sell such Registrable Securities has been
delivered to Buyer). The Series C Shares to be issued in each such tranche shall
be issued and sold upon the terms and conditions of this Agreement and the
Series C Articles. The obligations of the Company to sell and the Buyer to
purchase Series C Shares at each Additional Closing (each of which Additional
Closings (other than the first) shall occur no less than thirty (30) days after
the date of the previous Additional Closing), shall be contingent upon
satisfaction of the following conditions:
(i) The Company shall give the Buyer and the Escrow Agent ten (10) days
prior written notice of its intent to sell Series C Shares;
(ii) On the date of each Additional Closing:
(a) The registration statement required to be filed under the
Registration Rights Agreement has been declared effective by the
SEC and is as of such date still effective with respect to (i)
all Conversion Shares into which the Preferred Shares may be
convertible, (ii) all Warrant Shares receivable upon exercise of
the Warrants, and (iii) any Dividend Shares to be issued in
payment of dividends, such that all such Conversion Shares,
Warrant Shares and Dividend Shares applicable to such Additional
Closing may be freely traded on the OTC Bulletin Board Market by
Buyer at any time after receipt thereof.
(b) Each of the representations and warranties of each of the parties
contained in this Agreement, the Registration Rights Agreement
and the Escrow Agreement (the "Transaction Documents") shall be
true and correct in all material respects as if made on the date
of such Additional Closing, and each of the parties shall have
performed all of its obligations under the
12
Transaction Documents required to be performed by it prior to
the date of such Additional Closing.
(c) For the purchase and sale of 25,000 Series C Shares, the average
daily dollar volume for the Common Stock (that is, the last trade
price for the Common Stock for a given trading day multiplied by
that day's trading volume) for the previous sixty (60) trading
days must equal or exceed US$60,000 per trading day. For the
purchase and sale of more than 25,000 Series C Shares, the
average daily dollar volume for the Common Stock for the previous
sixty (60) trading days must equal or exceed US$75,000 per
trading day, and the average daily trading volume for the Common
Stock must equal or exceed 25,000 shares per day for the previous
thirty (30) days.
(d) The average daily share price for the Common Stock for the ten
(10) trading days prior thereto, must equal or exceed $1.75 per
share.
(e) The number of shares issuable upon conversion of the Series C
Shares then being purchased, together with the shares of Common
Stock issued prior thereto pursuant to the Transaction Documents
and the Articles of Amendment, shall not exceed twenty percent
(20%) of the outstanding shares of the Company's Common Stock.
This condition shall be waived by the Buyer should the Company
obtain any required shareholder or other consent to the issuance
of more than twenty percent (20%) of the outstanding shares of
the Company's Common Stock prior to such Additional Closing. This
condition shall not apply if not mandated by the rules and
regulations of the NASD at such time.
(f) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority
over the matters contemplated hereby which restricts or prohibits
the consummation of any of the transactions contemplated by the
Transaction Documents or the Articles of Amendment.
If the Company does not sell to the Buyer, within the twenty-four (24)
month period specified in this Section 4(l), at least the minimum number of
Series C Shares and the corresponding number of Warrants to have been sold
pursuant to this Section 4(l), other than as a result of a breach of this
Agreement by the Buyer, then unless the Buyer agrees in writing to extend the
time in which the Company may sell Series C Shares to the Buyer, the Company
shall issue to the Buyer a warrant (a "Penalty Warrant") to purchase a number of
shares of Common Stock equal to the minimum number of Series C Shares to have
been sold less the number of Series C Shares actually sold to the Buyer. The
Penalty Warrant shall be exercisable if at all within three (3) years after
issuance at a price per share of Common Stock equal to the closing bid price of
the Common Stock on the date of the First Closing. The Penalty Warrant shall
contain both demand and "piggyback" registration rights. Thus, for example, if
-----------
the Buyer
13
purchased 150,000 Series B Shares (or 100% of those offered for sale, so that
there is no other buyer in the transaction), and if the closing bid price for
the Common Stock on the date of the First Closing were US$2.00, and if the
Company at the end of the period which is twenty-four (24) months after the date
of the First Closing shall have sold the Buyer only 100,000 Series C Shares,
then the Company shall issue a Penalty Warrant with an exercise price per share
of US$2.00 for 150,000 shares of Common Stock (the minimum number of Series C
Shares to have been sold to the Buyer would have been 250,000, so 250,000 less
100,000 equals 150,000). No Penalty Warrant shall be issued if the reason the
Company did not sell the minimum number of Series C Shares was due to a breach
of this Agreement by Buyer.
Conversely, if the Buyer does not purchase all 150,000 of the Series B
Shares to be purchased by it under and in accordance with this Agreement, or
does not purchase its pro-rata portion of the Series C Shares offered for sale
by the Company (other than for a breach of this Agreement by the Company, or as
the result of the death or legal incapacity of the Buyer) when such Series C
Shares are so offered for sale in accordance with the terms of this Agreement,
then at such time as the Buyer refuses to purchase such Series B Shares or
Series C Shares being offered for sale, unless waived by the Company, all
Warrants previously issued to the Buyer, to the extent not already exercised by
the Buyer, shall be null and void.
m. Restriction on Below Market Issuance of Securities. Until the date
--------------------------------------------------
which is twenty-four (24) months from the date hereof, the Company shall not
issue or agree to issue {other than (i) to the Buyer or other buyers pursuant to
the transactions contemplated herein, (ii) pursuant to any employee stock option
plan or employee stock purchase plan of the Company in effect on June 30, 1998,
(iii) pursuant to any existing (as of the date of this Agreement) security,
option, warrant, scrip, call or commitment or right, or (iv) with the consent of
the Buyer, not to be unreasonably withheld} any equity securities of the Company
(or any security convertible into or exercisable or exchangeable, directly or
indirectly, for equity securities of the Company) or debt securities of the
Company if such securities are issued at a price (or provide for a conversion,
exercise or exchange price) which may be less than the current market price for
the Common Stock on the date of issuance (in the case of Common Stock) or the
date of conversion, exercise or exchange (in the case of securities convertible
into or exercisable or exchangeable, directly or indirectly, for Common Stock).
Except as provided with respect to the transactions contemplated herein and in
subsections (i), (ii), (iii), or (iv) above of this Section 4(m), the Company
shall not grant any additional so-called "registration rights."
5. LEGEND AND TRANSFER INSTRUCTIONS.
a. Transfer Agent Instructions. The Company shall instruct its transfer
---------------------------
agent to issue certificates, registered in the name of the Buyer or its nominee,
for the Conversion Shares, the Warrant Shares and the Dividend Shares (if any)
in accordance with the terms of the applicable Articles of Amendment and in such
amounts as specified from time to time by the Buyer to the Company, upon
conversion of the Preferred Shares and exercise of the Warrants. All such
certificates shall bear the restrictive legend specified in Section 2(g) of this
Agreement only to the extent required by applicable law and as specified in the
Transaction Documents. The Company warrants that no instruction other than such
instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof in the case of the Conversion Shares and the
Dividend Shares (if any) prior to the registration of same under the 1933 Act,
will
14
be given by the Company to its transfer agent and that the Conversion Shares,
the Warrant Shares and the Dividend Shares (if any) shall otherwise be freely
transferable on the books and records of the Company as and to the extent
permitted by applicable law and provided by this Agreement and the Registration
Rights Agreement. Nothing in this Section shall affect in any way the Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of the Conversion Shares, the Warrant Shares and/or the Dividend Shares
(if any). If the Buyer (x) provides the Company with an opinion of counsel
reasonably satisfactory to the Company, that is reasonably satisfactory in form,
substance and scope to the Company, that registration by the Buyer of the
Preferred Shares, the Conversion Shares, the Warrant Shares and/or the Dividend
Shares (if any) is not required under the 1933 Act, or (y) transfers Securities
to an affiliate which is an accredited investor (in accordance with the
provisions of this Agreement) or in compliance with Rule 144, then in either
instance the Company shall permit the said transfer, and if applicable promptly
(and in all events within two (2) trading days after receipt by the Company of
each of the original documents and things to be delivered by the Buyer to effect
a conversion of the applicable Preferred Shares) instruct its transfer agent to
issue one or more certificates in such name and in such denominations as
specified by the Buyer.
b. Removal of Legends. The Legend shall be removed and the Company shall
------------------
issue a certificate without such Legend to the holder of any Security upon which
it is stamped, and a certificate for a security shall be originally issued
without the Legend, if, unless otherwise required by state securities laws, (x)
the sale of such Security is registered under the 1933 Act, or (y) such holder
provides the Company with an opinion by counsel reasonably satisfactory to the
Company, that is in form, substance and scope reasonably satisfactory to the
Company, to the effect that a public sale or transfer of such Security may be
made without registration under the 1933 Act or (z) such holder provides the
Company with assurances reasonably satisfactory to the Company and its counsel,
that such Security can be sold pursuant to Rule 144. The Buyer agrees that its
sale of all Securities, including those represented by a certificate(s) from
which the Legend has been removed, or which were originally issued without the
Legend, shall be made only pursuant to an effective registration statement (and
to deliver a prospectus in connection with such sale) or in compliance with an
exemption from the registration requirements of the 1933 Act. In the event the
Legend is removed from any Security or any Security is issued without the Legend
and thereafter the effectiveness of a registration statement covering the sales
of such Security is suspended or the Company determines that a supplement or
amendment thereto is required by applicable securities laws, then upon
reasonable advance notice to the holder of such Security, the Company shall be
entitled to require that the Legend be placed upon any such Security which
cannot then be sold pursuant to an effective registration statement or Rule 144
or with respect to which the opinion referred to in clause (y) next above has
not been rendered, which Legend shall be removed when such Security may be sold
pursuant to an effective registration statement or Rule 144 (or such holder
provides the opinion with respect thereto described in clause (y) next above.
c. Conversion of Preferred Shares. The Buyer shall have the right to
------------------------------
convert the Preferred Shares sold hereunder by delivering via facsimile an
executed and completed Notice of Conversion (as defined in the Articles of
Amendment) to the Company and delivering within two (2) business days thereafter
the original Notice of Conversion and the certificate representing the Preferred
Shares being converted by express courier to the Company. Each date on which a
Notice of Conversion is telecopied to the Company in accordance with the
provisions hereof
15
shall be deemed a "Conversion Date," unless the original Notice of Conversion is
received more than two (2) business days after the facsimile Notice of
Conversion, in which case the Conversion Date shall be the date on which such
original Notice of Conversion is delivered to the Company. The Company will
transmit a certificate or certificates (collectively the "Certificate")
representing the shares of Common Stock issuable upon conversion of any
Preferred Shares converted pursuant to such Notice of Conversion (along with a
replacement certificate representing the number of Preferred Shares not so
converted) to the Buyer via express courier, within three (3) business days
after the relevant Conversion Date (the third business day after the relevant
Conversion Date shall be referred to hereinafter as the "Deadline"). With the
mutual agreement of the Company and the Buyer, the Company or a third party may
(until and unless the Buyer in a particular instance requests otherwise) hold
the Preferred Shares in trust, such that, to effect a conversion of the
Preferred Shares, the Buyer shall deliver to the Company via facsimile and
express courier only the original Notice of Conversion as described in this
Section and the Company and the Buyer shall keep a record of the number of
Preferred Shares so converted. If either the Company or a third party holds the
certificates representing the Preferred Shares in trust as described in the
preceding sentence, the Company will deliver the Certificates directly to the
Buyer via express courier on or before the Deadline.
d. Injunctive Relief for Breach. The Company acknowledges that the remedy
----------------------------
at law for a breach of its obligations under Sections 5(a), 5(b) and 5(c) above
will cause irreparable harm to the Buyer by vitiating the intent and purpose of
the transactions contemplated hereby. Accordingly the Company agrees that the
remedy at law for a breach of its obligations under such Sections would be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of such Sections, the Buyer shall be entitled, in
addition to all other remedies at law or in equity (including without limitation
those remedies specified in Section 5(e) below), to an injunction restraining
any breach and requiring immediate issuance and transfer, without the necessity
of showing economic loss and without any bond or other security being required.
e. Liquidated Damages for Non-Delivery of Certificates. In addition to the
---------------------------------------------------
provisions of Section 5(d) above, the Company understands and agrees that a
delay in the issuance of the Certificates beyond the Deadline could result in
economic loss and other damages to the Buyer. As partial compensation to the
Buyer for such loss, the Company agrees to pay liquidated damages (and which the
Company acknowledges is not a penalty) to the Buyer for issuance and delivery of
the Certificates after the Deadline, in accordance with the following schedule
(where "No. Business Days Late" is defined as the number of business days beyond
seven (7) business days from the relevant Conversion Date):
16
No. Business Days Late Liquidated Damages
---------------------- ------------------
(in US$)
1 $100
2 $200
3 $200
4 $300
5 $300
6 $400
7 $400
8 $500
9 $500
10 $500
11+ $750 + $250 for
each Business Day Late
beyond 11 days
The Company shall pay the Buyer any liquidated damages incurred as called
for under this Section 5(e) by certified or cashier's check upon the earlier of
(i) issuance of the Certificates to the Buyer or (ii) each monthly anniversary
of the receipt by the Company of the Buyer's Notice of Conversion. Nothing
herein shall limit the Buyer's right to pursue actual damages for the Company's
failure to issue and deliver the Certificates to the Buyer in accordance with
the terms of this Agreement or for breach by the Company of this Agreement.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to sell Preferred Shares at the
applicable Closing is subject to the satisfaction, on or before the date of the
applicable Closing as described herein, of each of the following conditions,
provided that these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion:
a. The parties shall have executed this Agreement, the Registration Rights
Agreement and the Escrow Agreement, and the parties shall have delivered the
respective documents or signature pages thereof (via facsimile or otherwise as
permitted in the Escrow Agreement) to the Escrow Agent.
b. The Buyer shall have delivered to the Escrow Agent on behalf of the
Company the Purchase Price in full for the Series B Shares purchased at the
First Closing, the Second Closing or the Third Closing, or the Purchase Price in
full for the Series C Shares being purchased at each Additional Closing, as
applicable, by wire transfer of immediately available funds pursuant to the
wiring instructions provided by the Escrow Agent.
c. The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date made and as of the date of the
applicable Closing as though made at that time (except for representations and
warranties that speak as of a specific date), and the Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
17
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Buyer at or prior to the date of the applicable Closing.
d. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self regulatory
organization having authority over the matters contemplated hereby which
restricts or prohibits the consummation of any of the transactions contemplated
herein.
e. Neither Buyer nor any affiliate of Buyer shall have (I) taken any short
position in the Common Stock, nor (II) entered any hedging or arbitrage
transactions with respect to the Common Stock, nor (III) sold "put" options or
similar instruments with respect to the Common Stock
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer to purchase Preferred Shares is subject to the
satisfaction, on or before the date of the applicable Closing, of each of the
following conditions, provided that these conditions are for the sole benefit of
the Buyer and may be waived by the Buyer at any time in its sole discretion:
a. The Series B Articles and the Series C Articles shall have been duly
authorized and filed with the Secretary of State of the state of Nevada; the
parties shall have executed this Agreement, the Registration Rights Agreement
and the Escrow Agreement, and the parties shall have delivered the respective
documents or signature pages thereof (via facsimile or otherwise as permitted in
the Escrow Agreement), to the Escrow Agent on behalf of each other.
b. The representations and warranties of the Company shall be true and
correct in all material respects as of the date made and as of the date of the
applicable Closing as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the date of the applicable
Closing. The Buyer may require (by written request at least five (5) days prior
to the applicable Closing) a certificate, executed by the Chief Executive
Officer of the Company, dated as of the date of such Closing, to the foregoing
effect and as to such other matters as may be reasonably requested by the Buyer.
c. With respect to each Closing called for herein, the Company shall have
issued and have duly executed by the authorized officers of the Company, and
delivered to the Escrow Agent on behalf of the Buyer, the original Preferred
Shares being sold at such Closing.
d. The Common Stock shall be authorized for quotation on the OTC Bulletin
Board Market and trading in the Common Stock on such market shall not have been
suspended by the SEC or other relevant regulatory agency.
e. The Company shall not have received, as of the date of the applicable
Closing, from the National Association of Securities Dealers or any other
relevant regulatory agency, any
18
written or oral communication as to its actual or potential ineligibility for
the Common Stock to continue trading on the OTC Bulletin Board Market.
f. With respect to each Additional Closing, the conditions for closing
listed in Section 4(1) above shall have been met by the Company, including
without limitation the condition that the Common Stock into which the Series C
Shares then being sold is convertible, the Warrant Shares receivable upon
exercise of the Warrants then being sold, and the Common Stock representing any
Dividend Shares to be issued in payment of dividends (if any), have all been
registered with the SEC pursuant to the registration statement required under
the Registration Rights Agreement, and such registration statement is still
effective as of the date of such Additional Closing.
g. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self regulatory
organization having authority over the matters contemplated hereby which
restricts or prohibits the consummation of any of the transactions contemplated
herein.
h. The Escrow Agent shall have received on behalf of the Buyer the opinion
of Company counsel, dated as of the date of the First Closing, in the form
attached hereto as Exhibit F.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and interpreted in
-------------
accordance with the laws of the State of Delaware without regard to the
principles of conflict of laws. In the event of any litigation regarding the
interpretation or application of this Agreement, the parties irrevocably consent
to jurisdiction in any of the state or federal courts located in the State of
Delaware and waive their respective rights to object to venue in any such court,
regardless of the convenience or inconvenience thereof to any party. Service of
process in any civil action relating to or arising out of this Agreement
(including also all Exhibits or Addenda hereto) or the transaction(s)
contemplated herein may be accomplished in any manner provided by law. The
parties hereto agree that a final, non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
b. Counterparts. This Agreement may be executed in two or more identical
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
signature pages from such counterparts have been delivered to the Escrow Agent
on behalf of the other party. In the event any signature page is delivered by
facsimile transmission (which the parties agree is an acceptable form of
delivery), the party using such means of delivery shall cause three (3)
additional originally executed signature pages to be physically delivered to the
Escrow Agent on behalf of the other party within two (2) business days after the
execution and delivery hereof.
c. Headings; Gender, Etc. The headings of this Agreement are for
----------------------
convenience of reference and shall not form a part of, or affect the
interpretation of this Agreement. As used
19
herein, the masculine shall refer to the feminine and neuter, the feminine to
the masculine and neuter, and the neuter to the masculine and feminine, as the
context may require. As used herein, unless the context clearly requires
otherwise, the words "herein," "hereunder" and "hereby," shall refer to this
entire Agreement and not only to the Section or paragraph in which such word
appears. If any date specified herein falls upon a Saturday, Sunday or public or
legal holidays, the date shall be construed to mean the next business day
following such Saturday, Sunday or public or legal holiday. For purposes of this
Agreement, a "business day" is any day other than a Saturday, Sunday or public
or legal holiday.
d. Severability. 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 in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the instruments
----------------------------
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be given under the terms
-------
of this Agreement shall be sent by U.S. Mail or delivered personally or by
courier or via facsimile (if via facsimile, to be followed within three (3)
business days by an original of the notice document via U.S. Mail or courier)
and shall be effective five (5) days after being placed in the mail, if mailed,
certified or registered, return receipt requested, or upon receipt, if delivered
personally or by courier or by facsimile, in each case properly addressed to the
party to receive the same. The addresses for such communications shall be:
If to the Company: Nanopierce Technologies, Inc.
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Telephone: (000) 000.0000
Facsimile: (000) 000.0000
Attention: Xx. Xxxxxxx Xxxxxxx, President & CEO
If to the Buyer, at the address on the signature page of this Agreement. Each
party shall provide written notice to the other party of any change in address.
g. Successors and Assigns. This Agreement shall be binding upon and inure
----------------------
to the benefit of the parties and their respective successors and assigns.
Neither the Company nor the Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other (which
consent shall not be unreasonably withheld), and in any event any assignee of
the Buyer shall be an accredited investor (as defined in Regulation D), in the
written opinion of counsel who is reasonably satisfactory to Seller and in form,
substance and scope reasonably satisfactory to the Seller. Notwithstanding the
foregoing, if applicable, any of the entities constituting the Buyer (if greater
than one (1) entity) may assign its rights hereunder
20
to any of its "affiliates," as that term is defined under the 1934 Act, without
the consent of the Company; provided, however, that any such assignment shall
not release such assigning entity from its obligations hereunder unless such
obligations are assumed by such affiliate and the Company has prior to such
assignment and assumption consented in writing to the same; and no such
assignment shall be made unless it is made in accordance with any applicable
securities laws of any applicable jurisdiction. Any request for an assignment
made hereunder by the Buyer shall be accompanied by an opinion by counsel
reasonably satisfactory to the Company, that is in form, substance and scope
reasonably satisfactory to the Company, that such assignment is proper under
applicable law.
h. No Third Party Beneficiaries. This Agreement is intended for the
----------------------------
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. Unless this Agreement is terminated under Section 8(1), the
--------
representations and warranties of the Company and the Buyer contained in
Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5 and
8 shall survive the final Closing of the purchase and sale of Securities
purchased and sold hereby for a period of twelve (12) months after such final
Closing.
j. Publicity. The Company and the Buyer shall have the right to review
---------
before issuance by the other, any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without prior consultation with or approval of
the Buyer, to make any press release or other public disclosure with respect to
such transactions as is required by applicable law and regulations.
k. Further Assurance. Each party shall do and perform, or cause to be
-----------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the First Closing shall not have
-----------
occurred on or before ten (10) business days from the date hereof, this
Agreement shall terminate at the close of business on such date. Neither party
may unilaterally terminate this Agreement after the First Closing for any reason
other than a material breach of this Agreement by the non-terminating party.
Such termination shall not be the sole remedy for a breach of this Agreement by
the non-terminating party, and each party shall retain all of its rights
hereunder at law or in equity. Notwithstanding anything herein to the contrary,
a party whose breach of a covenant or representation and warranty or failure to
satisfy a condition prevented the First Closing or an Additional Closing shall
not be entitled to terminate this Agreement.
m. Remedies. No provision of this Agreement providing for any specific
--------
remedy to a party shall be construed to limit such party to the specific remedy
described, and any other remedy that would otherwise be available to such party
at law or in equity shall be so available.
21
Nothing in this Agreement shall limit any rights a party may have with any
applicable federal or state securities laws with respect to the transactions
contemplated hereby.
IN WITNESS WHEREOF, the Buyer and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
[SIGNATURE PAGE FOLLOWS]
22
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT DATED
JULY 23, 1998]
COMPANY:
NANOPIERCE TECHNOLOGIES, INC.
By:___________________________________________
Xx. Xxxxxxx Xxxxxxx, President and CEO
Attest: ____________________________
____________________________ Secretary
BUYER:
______________________________________________
Mr. Y. L. Xxxxxx
BUYER'S ADDRESS:
259 Batai Ungarin
Jerusalem, ISRAEL
Telephone: 000 000 0 000 0000
Facsimile: 011 972 2 582 7883
Cellular: 000 000 00 000 000
Copy to: Portfolio Investment Strategies Corp.
0 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxx Xxxx 00000
ATTN: XX. XXXXX XXXXXXXX
Telephone: 000.000.0000
Facsimile: 914.774.7275
23
SECURITIES PURCHASE AGREEMENT
Exhibits
Exhibit A Series B Articles
Exhibit B Series C Articles
Exhibit C Registration Rights Agreement
Exhibit D Escrow Agreement
Exhibit E Warrant to Purchase Common Stock
Exhibit F Opinion of Counsel for Nanopierce Technologies, Inc.
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