EXHIBIT 7.e
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PREFERRED STOCK
PURCHASE AGREEMENT
between
FIELDWORKS, INCORPORATED,
a Minnesota corporation
and
INDUSTRIAL-WORKS HOLDING CORPORATION,
a Delaware limited liability company
Dated as of March 31, 2000
TABLE OF CONTENTS
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Page
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ARTICLE I AUTHORIZATION, ISSUANCE AND SALE OF SECURITIES.................... 1
Section 1.1 Authorization................................................. 1
Section 1.2 The Series C Shares........................................... 1
Section 1.3 The Conversion Shares......................................... 1
Section 1.4 Purchase and Sale............................................. 1
Section 1.5 Closing....................................................... 1
Section 1.6 Use of Proceeds............................................... 2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................... 2
Section 2.1 Organization, Qualifications and Corporate Power.............. 2
Section 2.2 Authorization of Agreements................................... 2
Section 2.3 Validity...................................................... 3
Section 2.4 Authorized Capital Stock...................................... 3
Section 2.5 Third-Party Approvals......................................... 4
Section 2.6 SEC Filings................................................... 5
Section 2.7 Offering of the Series C Shares and Warrant................... 5
Section 2.8 Brokers....................................................... 5
Section 2.9 Disclosure.................................................... 5
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS....... 5
Section 3.1 Representations............................................... 5
ARTICLE IV CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS................... 6
Section 4.1 Conditions to Obligations of the Purchaser.................... 6
ARTICLE V COVENANTS OF THE COMPANY.......................................... 7
Section 5.1 Rights Offering............................................... 7
Section 5.2 SEC Filings................................................... 8
Section 5.3 Financial Statements, Reports, Etc............................ 8
Section 5.4 Reserve for Conversion Shares................................. 9
Section 5.5 Corporate Existence........................................... 9
Section 5.6 Inspection, Consultation and Advice........................... 9
Section 5.7 Board of Directors............................................ 10
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Section 5.8 Compliance with Laws.......................................... 10
Section 5.9 Keeping of Records and Books of Account....................... 10
Section 5.10 Protective Provisions......................................... 10
Section 5.11 Publication Matters........................................... 12
ARTICLE VI MISCELLANEOUS..................................................... 12
Section 6.1 Expenses...................................................... 12
Section 6.2 Termination................................................... 12
Section 6.3 Survival of Agreements........................................ 12
Section 6.4 Brokerage..................................................... 13
Section 6.5 Parties in Interest........................................... 13
Section 6.6 Notices....................................................... 13
Section 6.7 Governing Law; Jury Trial Waiver.............................. 14
Section 6.8 Injunctive Relief............................................. 14
Section 6.9 Assignment.................................................... 14
Section 6.10 Limitation of Liability....................................... 15
Section 6.11 Entire Agreement.............................................. 15
Section 6.12 Counterparts.................................................. 15
Section 6.13 Amendments.................................................... 15
Section 6.14 Severability.................................................. 15
Section 6.15 Titles and Subtitles.......................................... 15
Section 6.16 Certain Defined Terms......................................... 15
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INDEX TO EXHIBITS
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EXHIBIT A Form of Certificate of Designation for Series C Convertible
Participating Preferred Stock
EXHIBIT B Form of Opinion of Counsel to Company
EXHIBIT C Registration Rights
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") dated as of March 31,
2000 by and among Fieldworks, Incorporated, a Minnesota corporation (the
"Company"), and Industrial-Works Holding Co., LLC, a Delaware limited liability
company ("Purchaser"). Section 6.16 lists certain defined terms used in this
Agreement.
WHEREAS, on the terms and subject to the conditions set forth herein, the
Company wishes to issue and sell to Purchaser newly issued shares ("Series C
Shares") of the authorized but unissued Series C Convertible Participating
Preferred Stock of the Company (the "Series C Preferred Stock");
WHEREAS, the Purchaser wishes to purchase the Series C Preferred Stock on
the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I
AUTHORIZATION, ISSUANCE AND SALE OF SECURITIES
SECTION 1.1 Authorization. The Company has authorized and reserved for
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issuance 500,000 shares of Series C Preferred Stock, upon the terms and
conditions described herein, and has authorized and reserved 500,000 shares of
the Company's Common Stock for issuance upon conversion of the Series C Shares.
SECTION 1.2 The Series C Shares. The Series C Shares shall be issued
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pursuant to, and shall be vested with the rights and preferences, and subject to
the limitations set forth in the Certificate of Designation of the Series C
Convertible Participating Preferred Stock (the "Series C Certificate") attached
hereto as Exhibit A.
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SECTION 1.3 The Conversion Shares. The shares of the Company's Common
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Stock issued or issuable upon conversion of the Series C Shares (the "Conversion
Shares") will be entitled to the registration rights provisions attached as
Exhibit C to this Agreement.
SECTION 1.4 Purchase and Sale. Subject to the terms and conditions of this
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Agreement, the Company agrees to issue and sell to Purchaser and Purchaser
agrees to purchase from the Company, 500,000 shares of Series C Preferred Stock
for a purchase price of two dollars ($2.00) per share.
SECTION 1.5 Closing. Subject to the terms and conditions of this
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Agreement, the closing shall take place at the offices of Paul, Hastings,
Xxxxxxxx & Xxxxxx LLP, 17th Floor, 000 Xxxx Xxxxxx Xxxxx, Xxxxx Xxxx, Xxxxxxxxxx
00000 on March __, 2000 or at such other place, time and date as Company and
Purchaser may direct (the "Closing Date"). At the Closing, Company will deliver
to Purchaser the Series C Shares, registered in Purchaser's name, and
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Purchaser shall transfer the Purchase Price to the account of the Company by
wire transfer of immediately available funds.
SECTION 1.6 Use of Proceeds. The Company shall use such proceeds for
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acquisitions and for general working capital.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser that, except as set
forth in the Disclosure Schedules attached hereto (which Disclosure Schedules
make explicit reference to the particular representation or warranty as to which
exception is taken, which in each case shall constitute the sole representation
and warranty as to which such exception shall apply):
SECTION 2.1 Organization, Qualifications and Corporate Power.
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(a) The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of its state of incorporation and is duly
licensed or qualified to transact business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification, except for such jurisdictions, if any,
in which the failure to be so qualified or in good standing would not,
individually or in the aggregate, have a Material Adverse Effect. The Company
has the corporate power and authority to own and hold its properties and to
carry on its business as now conducted and as proposed to be conducted, as
described in the Company's draft Annual Report on Form 10-K for the year ended
January 2, 2000 (the "Annual Report"), and the Company has the corporate power
and authority to execute, deliver and perform its obligations under this
Agreement, and all other documents to be delivered in connection with any of
them (the "Transaction Documents"), and to issue, sell and deliver the Series C
Shares and to issue and deliver the Conversion Shares.
(b) The Company does not (i) own of record or beneficially, directly or
indirectly, (A) any shares of capital stock or securities convertible into
capital stock of any other corporation or (B) any participating or limited
liability company interest in any partnership, joint venture, limited liability
company or other non-corporate business enterprise or (ii) control, directly or
indirectly, any other entity.
(c) The Articles of Incorporation of the Company (the "Articles of
Incorporation") and the Bylaws of the Company (the "Bylaws") are in full force
and effect as of the date hereof in the forms attached to, or incorporated by
reference in, the Annual Report.
SECTION 2.2 Authorization of Agreements.
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(a) The execution and delivery by the Company of this Agreement and all
other Transaction Documents, the performance by the Company of its obligations
hereunder and thereunder, the issuance, sale and delivery of the Series C
Shares, and the issuance and delivery of the Conversion Shares have been duly
authorized by all requisite corporate action and do not violate any provision of
law, any order of any court or other agency of government, the Articles
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of Incorporation or the Bylaws, or any provision of any indenture, agreement or
other instrument to which the Company, or any of its properties or assets is
bound, or conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company.
(b) The Series C Certificate and this Agreement have been duly approved by
the Board of Directors of the Company. The Series C Shares have been duly
authorized and, when issued in accordance with this Agreement and the Series C
Certificate, will be validly issued, fully paid and nonassessable shares of
Series C Preferred Stock, with no personal liability attaching to the ownership
thereof, and will be free and clear of all liens, charges, restrictions, claims
and encumbrances imposed by or through the Company except as set forth in this
Agreement and the Series C Certificate. The Conversion Shares have been duly
reserved for issuance upon conversion of the Series C Shares, and, when so
issued, will be duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock not subject to, or issued in violation of, any purchase
option, right of first refusal, pre-emptive right, subscription right or any
similar right under any provision of the Minnesota Business Corporation Act (the
"MBCA"), the Articles of Incorporation or Bylaws, or any contract to which the
Company is a party or is otherwise bound, with no personal liability attaching
to the ownership thereof and will be free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through the Company except
as set forth in this Agreement and the Series C Certificate. Neither the
issuance, sale or delivery of the Series C Shares, nor the issuance or delivery
of the Conversion Shares is subject to, or in violation of, any purchase option,
right of first refusal, pre-emptive right, subscription right or any similar
right under any provision of the MBCA, the Articles of Incorporation or Bylaws,
or any contract to which the Company is a party or is otherwise bound, or of any
other right in favor of any Person that has not been effectively waived.
SECTION 2.3 Validity. This Agreement has been duly executed and
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delivered by the Company and constitutes a legal, valid and binding obligation
of the Company, enforceable in accordance with its terms, and each other
Transaction Document when executed and delivered in accordance with this
Agreement will constitute a legal, valid and binding obligation of the Company,
enforceable in accordance with its terms (subject in each case, as to the
enforcement of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium and similar laws affecting the rights of creditors generally, and as
to the remedy of specific performance and other forms of injunctive relief,
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought).
SECTION 2.4 Authorized Capital Stock. The authorized capital stock of the
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Company consists of (i) 30,000,000 shares of Common Stock and (ii) 5,000,000
shares of preferred stock, of which 4,250,000 shares have been designated Series
B Preferred Stock (Series B Preferred Stock) and of which 500,000 shares have
been designated Series C Preferred Stock. 8,894,426 shares of Common Stock are
validly issued and outstanding, fully paid and nonassessable with no personal
liability attaching to the ownership thereof, _________ shares of Common Stock
are reserved for issuance upon exercise of outstanding options and warrants, and
another _______ shares have been reserved for issuance under the 1994 Long-Term
Incentive and Stock Option Plan and the 1996 Directors' Stock Option Plan,
4,250,000 shares Series B
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Preferred Stock have been issued and no Series C Shares shall have been issued.
The designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of each class and series of authorized capital stock of
the Company are as set forth in the Articles of Incorporation, and all such
designations, powers, preferences, rights, qualifications, limitations and
restrictions are valid, binding and enforceable and in accordance with all
applicable laws. Except as contemplated by this Agreement or set forth in the
Annual Report, including the financial statements made a part thereof, (i) no
Person owns of record or is known to the Company to own beneficially any share
of Common Stock, (ii) no subscription, warrant, option, convertible security, or
other right (contingent or other) to purchase or otherwise acquire equity
securities of the Company is authorized or outstanding, (iii) there is no
commitment by the Company to issue shares, subscriptions, warrants, options,
convertible equity or debt securities, or other such rights or to distribute to
holders of any of its equity or debt securities any evidence of indebtedness or
asset and (iv) there are no options, warrants, rights, convertible or
exchangeable securities, "phantom" stock rights, stock appreciation rights,
stock-based performance units, commitments, contracts, arrangements or
undertakings of any kind to which the Company is a party or by which it is bound
(x) obligating the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other equity interests
in, or any security convertible into, or exercisable for or exchangeable for,
any capital stock of or other equity interest in, the Company, (y) obligating
the Company to issue, grant, extend or enter into any such option, warrant,
call, right, security, commitment, contract, arrangement or undertaking, or (z)
that give any person the right to receive any economic benefit or right similar
to or derived from the economic benefits and rights occurring to holders of
Common Stock. Except as provided for in the Articles of Incorporation or as set
forth in the Annual Report, the Company has no obligation (contingent or other)
to purchase, redeem or otherwise acquire any of its securities or any interest
therein or to pay any dividend or make any other distribution in respect
thereof. Except as set forth in the Annual Report, or as expressly contemplated
by the terms of this Agreement, there are no voting trusts or agreements,
shareholders' agreements, pledge agreements, buy-sell agreements, rights of
first refusal, preemptive rights or proxies relating to any securities of the
Company whether or not the Company is a party thereto. All of the outstanding
securities of the Company were issued in compliance with all applicable federal
and state securities laws.
SECTION 2.5 Third-Party Approvals. No registration or filing with, or
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consent or approval of or other action by any third party, is or will be
necessary for the valid execution, delivery and performance by the Company of
the Transaction Documents, the issuance, sale and delivery of the Warrant or of
the Series C Shares on the Closing Date, or, or upon exercise of conversion
rights, the issuance and delivery of the Conversion Shares, other than (i)
filings pursuant to state securities laws (all of which filings have been made
by the Company, other than those which are required to be made after the Closing
and which will be duly made on a timely basis) in connection with the sale of
the Series C Shares, and (ii) with respect to the registration rights granted in
this Agreement, the registration of the shares covered thereby with the United
States Securities and Exchange Commission (the "SEC") and filings pursuant to
state securities laws.
SECTION 2.6 SEC Filings. The Company has filed, on a timely basis, all
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filings required to be made by it with the SEC. The Company's Annual Report will
be filed in substantially the form of the draft given to Purchaser.
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SECTION 2.7 Offering of the Series C Shares and Warrant. Neither the
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Company nor any Person authorized or employed by the Company as agent, broker,
dealer or otherwise in connection with the offering or sale of the Series C
Shares, the Warrant or any security of the Company similar to the Series C
Shares or the Warrant has offered the Series C Shares or the Warrant or any such
similar security for sale to, or solicited any offer to buy the Series C Shares,
the Warrant or any such similar security from, or otherwise approached or
negotiated with respect thereto with, any Person or Persons, and neither the
Company nor any Person acting on its behalf has taken or will take any other
action (including, without limitation, any offer, issuance or sale of any
security of the Company under circumstances which might require the integration
of such security with the Series C Shares or the Warrant under the Securities
Act of 1933 (the "Securities Act") or the rules and regulations of the
Commission thereunder), in either case so as to subject the offering, issuance
or sale of the Series C Shares or the Warrant to the registration provisions of
the Securities Act.
SECTION 2.8 Brokers. The Company has no contract, arrangement or
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understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement except for fees due Glenmount, LLC
under its Management Services Agreement.
SECTION 2.9 Disclosure. Neither this Agreement nor the Annual Report
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contains an untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein not misleading.
None of the statements, documents, certificates or other items prepared or
supplied by the Company with respect to the transactions contemplated hereby
contains an untrue statement of a material fact or omits a material fact
necessary to make the statements contained therein not misleading. There is no
fact which the Company has not disclosed to Purchaser in writing and of which
the Company is aware which materially and adversely affects or could be
reasonably expected to materially and adversely affect the business, prospects,
financial condition, operations, property or affairs of the Company. Any
financial projections and other estimates provided to Purchaser were prepared by
the Company based on assumptions of fact and opinion as to future events which
the Company, at the date of the issuance of such projections and estimates,
believed to be reasonable. As of the date hereof, no facts have come to the
attention of the Company which would, in its opinion, require the Company to
revise or amplify the assumptions underlying such projections and other
estimates or the conclusions derived therefrom.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS
SECTION 3.1 Representations. Purchaser represents and warrants to the
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Company that:
(a) it is wholly owned by Glenmount International, L.P., which is a
partnership which was not organized for the specific purpose of acquiring the
Series C Shares;
(b) it has sufficient knowledge and experience in investing to be able to
evaluate the risks and merits of its investment in the Company, and it is
able financially to bear the risks thereof;
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(c) it has had an opportunity to discuss the Company's business,
management and financial affairs with the Company's management;
(d) the Series C Shares and the Conversion Shares are being acquired for
Purchaser's own account for the purpose of investment and not with a view to or
for sale in connection with any distribution thereof;
(e) Purchaser is a limited liability company, duly formed, validly
existing and in good standing under the laws of its state of formation and has
the power and authority to execute, deliver and perform this Agreement;
(f) the execution and delivery by Purchaser of this Agreement, and the
performance by the Purchaser of its obligations hereunder, have been duly
authorized by all requisite corporate action; and
(g) Purchaser has duly executed and delivered this Agreement and it
constitutes its legal, valid and binding obligation, enforceable in accordance
with its terms (subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws affecting
the rights of creditors generally and as the remedy of specific performance and
other forms of injunctive relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought).
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS
SECTION 4.1 Conditions to Obligations of the Purchaser. The obligation of
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Purchaser to purchase and pay for the Series C Shares to be purchased by it on
the Closing Date hereunder is, at its option, subject to the satisfaction, on or
before the Closing Date of the following conditions:
(a) Director Approval. The Company shall have obtained approval of this
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Agreement and the transactions contemplated hereby, from its directors.
(b) Rights Offering. The Board of Directors of the Company shall have
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approved and directed the rights offering contemplated by Section 5.1 of this
Agreement.
(c) Opinion of the Company's Counsel. Purchaser shall have received from
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Xxxxxx & Xxxxxxx, counsel for the Company, an opinion dated the Closing Date, in
the form attached as Exhibit B hereto.
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(d) Representations and Warranties to be True and Correct on Date
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Hereof. The representations and warranties of the Company contained in
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Article II shall have been true, complete and correct on the date of this
Agreement and the Chief Executive Officer and Chief Financial Officer of the
Company shall have certified to such effect the Purchaser in writing.
(e) Performance. The Company shall have performed and complied with all
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agreements contained herein required to be performed or complied with by it
prior to or at the Closing Date and the Chief Executive Officer and Chief
Financial Officer of the Company shall
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have certified to the Purchaser in writing to such effect and to the further
effect that all of the conditions set forth in this Article IV have been
satisfied.
(f) All Proceedings to be Satisfactory. All corporate and other
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proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchaser, and Purchaser shall have
received all such counterpart originals or certified or other copies of such
documents as it reasonably may request.
(g) Terms of Series C Shares. The Board of Directors of the Company shall
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have adopted the Series C Certificate in substantially the form attached as
Exhibit A hereto and such Certificate shall have been filed with the Minnesota
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Secretary of State and have become effective.
(h) Third-Party Approvals. All Persons having any right to consent to or
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approve the issuance of the Series C Shares, or the Conversion Shares, shall
have delivered such consents or approvals in writing. All Persons having any
preemptive, first refusal or other rights with respect to the issuance of the
Series C Shares, the Conversion Shares, shall have irrevocably waived the same
in writing.
(i) Fees and Expenses. The Company shall have paid fees and expenses due
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pursuant to Section 6.01 hereof incurred prior to the Closing and the closing
fee due to Glenmount, LLC.
(j) Directors and Officers Liability Insurance. The Company shall have
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maintained in effect directors' and officers' liability insurance coverage, on
customary terms and conditions (including coverage for liabilities arising
before the date of taking office to the extent arising from such person's status
as a prospective member of the Board of Directors), ensuring an aggregate of at
least $5,000,000 in such liability insurance coverage.
All such documents shall be reasonably satisfactory in form and substance
to the Purchaser.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Purchasers that:
SECTION 5.1 Rights Offering. The Company shall as promptly as feasible
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commence an offering to its existing shareholders of rights to purchase one
share of Common Stock at a price of $2.00 per share for every three shares of
Common Stock held on the record date for such offering, and shall cause such
offering to expire on or before June 30, 2000 or on such other date as the
Company and the Purchaser shall mutually agree.
SECTION 5.2 SEC Filings. The Company shall at all times file all reports
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required to be filed by it under the Securities Act or the Exchange Act, and
shall take such further action as Purchaser may reasonably request, all to the
extent required from time to time, to allow Purchaser to sell the Conversion
Shares without registration under the Securities Act within the
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limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC. Upon the request of Purchaser, the
Company shall deliver to Purchaser (i) a certificate from the President, Chief
Executive Officer or Chief Financial Officer stating that the Company has
complied with all such requirements; (ii) copies of the Company's most recent
quarterly or annual report; and (iii) all such other reports and/or documents as
Purchaser may reasonably request to avail itself of Rule 144, 144A or any other
SEC regulation allowing it to sell the Conversion Shares without registration.
SECTION 5.3 Financial Statements, Reports, Etc. Until the Closing, and
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thereafter, so long as the any Series C Shares are outstanding, Purchaser shall
be entitled to receive the following information:
(a) within ninety (90) days after the end of each fiscal year of the
Company, a balance sheet of the Company, as of the end of such fiscal year and
the related consolidated statements of income, shareholders' equity and cash
flows for the fiscal year then ended, prepared in accordance with GAAP and
certified by a "Big Five" firm of independent public accountants of recognized
national standing selected by the Board of Directors of the Company (the "Annual
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Audited Financial Statements");
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(b) within twenty-one (21) days after the end of each accounting month of
the Company within each fiscal year, a balance sheet of the Company and the
related statements of income, shareholders' equity and cash flows, unaudited but
prepared in accordance with GAAP and certified by the Chief Financial Officer of
the Company, or, if there is no Chief Financial Officer, the Chief Executive
Officer, such consolidated balance sheet to be as of the end of such month and
such consolidated statements of income, shareholders' equity and cash flows to
be for such month and for the period from the beginning of the fiscal year to
the end of such month, in each case with comparative statements for the prior
fiscal year and with respect to the then-applicable budget;
(c) at the time of delivery of each financial statement pursuant to
Section 5.3(b), a certificate executed by the Chief Financial Officer of the
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Company or, if there is no Chief Financial Officer, the Chief Executive Officer,
stating that such officer has reviewed this Agreement, and the terms of the
Series C Preferred Stock contained in the Articles of Incorporation and has no
knowledge of any default by the Company in the performance or observance of any
of the provisions of this Agreement, the terms of the Warrant, or the terms of
the Series C Preferred Stock contained in the Articles of Incorporation or, if
such officer has such knowledge, specifying such default and the nature thereof;
(d) within thirty (30) days after the end of each quarter, a quarterly
management narrative report explaining all significant variances from forecasts
and all significant current developments in staffing, marketing, sales and
operations;
(e) no later than thirty (30) days prior to the start of each fiscal year,
consolidated capital and operating expense budgets, cash flow projections and
income and loss projections for the Company in respect of such fiscal year, all
itemized in reasonable detail and prepared on a monthly basis, and, promptly
after preparation, any revisions to any of the foregoing;
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(f) promptly following receipt by the Company, each audit response letter,
accountant's management letter and other written report submitted to the Company
by its independent public accountants in connection with an annual or interim
audit of the books of the Company;
(g) promptly after the commencement thereof, notice of all actions, suits,
claims, proceedings, investigations and inquiries involving the Company that
could materially adversely affect the Company;
(h) promptly upon sending, making available or filing the same, all press
releases, reports and financial statements that the Company sends or makes
available to its shareholders or files with the SEC; and
(i) promptly, from time to time, such other material information regarding
the business, prospects, financial condition, operations, property or affairs of
the Company as Purchaser reasonably may request.
SECTION 5.4 Reserve for Conversion Shares. The Company shall at all times
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reserve and keep available out of its authorized but unissued shares of Common
Stock, for the purpose of effecting the conversion of the Series C Shares and
otherwise complying with the terms of this Agreement, such number of its duly
authorized shares of Common Stock as shall be sufficient to effect the
conversion of the Series C Shares from time to time outstanding, or otherwise to
comply with the terms of this Agreement. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of the Series C Shares or otherwise to comply with the terms of
this Agreement, the Company will immediately take such corporate action as may
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purposes. The Company
will obtain all authorizations, consents, approvals or other actions by or make
any filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon conversion of the Series C Shares, which conversion may be
made by Purchaser at any time.
SECTION 5.5 Corporate Existence. The Company shall maintain its
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respective corporate existence, rights and franchises in full force and effect.
SECTION 5.6 Inspection, Consultation and Advice. The Company shall permit
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Purchaser and such Persons as Purchaser may designate, to visit and inspect, at
Purchaser's expense, any of the properties of the Company, examine its books and
take copies and extracts therefrom, discuss the affairs, finances and accounts
of the Company with their officers, employees and public accountants (and the
Company hereby authorizes said accountants to discuss with such Purchaser and
such designees such affairs, finances and accounts), and consult with and advise
the management of the Company as to its affairs, finances and accounts, all at
reasonable times and upon reasonable notice. In addition, and without limiting
the foregoing, Company shall permit Purchaser to conduct such environmental
investigations of Company facilities as Purchaser deems appropriate, including
"Phase II" review.
SECTION 5.7 Board of Directors.
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(a) So long as the any Series C Shares remain outstanding, the holders of
the Series C Shares shall have the right to designate one observer to attend, at
Company expense, all meetings of directors of the Company, unless the holders of
the Series B Preferred Stock hold at least fifty percent (50%) of the Series C
Shares.
SECTION 5.8 Compliance with Laws. The Company shall conduct its business
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in compliance with all Applicable Laws.
SECTION 5.9 Keeping of Records and Books of Account. The Company shall
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keep adequate records and books of account, in which complete entries will be
made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company, and in which, for each fiscal year, all proper
reserves for depreciation, depletion, obsolescence, amortization, taxes, bad
debts and other purposes in connection with its business shall be made.
SECTION 5.10 Protective Provisions. The Company shall not take any of the
---------------------
following actions without the prior affirmative written consent of Purchaser or,
following the Closing, of the holders of at least two-thirds (2/3) of the Series
C Shares:
(a) alter, change or amend (by merger or otherwise) any of the rights,
preferences or privileges of the Series C Preferred Stock;
(b) other than as required by the terms of the Series B Preferred Stock,
amend, restate, alter, modify or repeal (by merger or otherwise) its Articles of
Incorporation or Bylaws, including, without limitation, amending, restating,
modifying or repealing (by merger or otherwise) (i) any certificate of
designation or preferences (as in effect from time to time) relating to any
series of Preferred Stock or (ii) any of the rights, preferences and privileges
of any other class of Capital Stock or the terms or provisions of any option or
Convertible Security;
(c) (i) create, authorize or issue Senior Securities, Parity Securities,
Supervoting Securities or shares of any such class or series; (ii) create,
authorize or issue any securities (including Convertible Securities) convertible
into, or exercisable, redeemable or exchangeable for, shares of Senior
Securities, Parity Securities or Supervoting Securities; (iii) increase or
decrease the authorized number of shares of Series C Preferred Stock; or (iv)
increase or decrease the authorized number of shares of any class or series of
Senior Securities, Parity Securities, Supervoting Securities or shares of any
such class or series;
(d) (i) initiate or suffer to exist any Liquidation Event with respect to
the Company, (ii) enter into any merger or consolidation with any other Person
that results in the holders of the Company's Capital Stock immediately prior to
such transaction owning less than fifty percent (50%) of the voting power of the
successor entity's Capital Stock after such transaction or (iii) otherwise
discontinue or dispose of more than ten percent (10%) of the assets of the
business of the Company, taken as a whole;
(e) initiate or suffer to exist any recapitalization of the Company, or
reclassify any authorized Capital Stock of the Company into any other class or
series of Capital Stock of the Company;
10
(f) redeem any shares of Capital Stock;
(g) acquire, in one or a series of transactions, any equity ownership
interest, by way of merger or otherwise, in any Person, or any asset or assets
of any Person, where the aggregate consideration payable in connection with such
acquisition (including, without limitation, cash consideration, the fair market
value of any securities and the net present value of any deferred consideration)
is at least $1,000,000, or (ii) make any capital expenditures in excess of
$500,000 individually or $1,000,000 for any fiscal year;
(h) make any material change in the nature of its business as conducted on
the Closing Date, or fail to conduct its business in the ordinary course
consistent with past practice;
(i) sell, transfer, convey, lease or dispose of, outside the ordinary
course of business, any material assets or properties of the Company, whether
now or hereafter acquired, in any transaction or transactions that call for
payments in excess of $500,000;
(j) establish or purchase any Subsidiary;
(k) enter into any agreements, transactions or leases not in the ordinary
course of the Company's business as conducted on the Closing Date that call for
payments in excess of $250,000;
(l) incur any new or additional Indebtedness which exceeds $500,000
provided that this clause (l) shall not prohibit the extension, renewal,
amendment or refinancing (including refinancings with other lenders) of the
Company's existing credit facility with Spectrum Commercial Services, a Division
of Lyon Financial Services, Inc. on terms no more restrictive than those
contained in the General Credit and Security Agreement dated November 19, 1998,
as amended on August 20, 1999 (except interest rate "spreads" may increase by no
more than 50 basis points over prime and principal amounts advanced against
accounts receivable or inventory (but no other amounts of principal) may
increase or decrease provided that advance rates are no greater than those
currently in effect); and
(m) except for transactions on customary and reasonable terms, enter into
any transaction with (i) any Affiliate of the Company, (ii) any employee of the
Company, (iii) any holder of more than five percent (5%) of the outstanding
capital stock of any class or series of Capital Stock of the Company, (iv) any
member of the immediate family of any Person set forth in clauses (i), (ii) and
(iii) above, or (v) any corporation, partnership, trust or other entity in which
any Person set forth in clauses (i), (ii), (iii) or (iv) above, or member of the
family of any such Person, is a director, officer, trustee, partner or holder of
more than five percent (5%) of the outstanding capital stock thereof. For
purposes of this Agreement, the members of the "immediate family" of any Person
shall consist of the spouse, parents, children, siblings, mothers- and fathers-
in-law, sons-and daughters-in-law, and brothers- and sisters-in-law of such
Person.
SECTION 5.11 Publication Matters. The Company shall not use the name or
-------------------
logo of Purchaser or any of its Affiliates in connection with any press releases
or advertisements without the prior written consent of Purchaser and the prior
written approval by Purchaser of the form
11
and content of any such press release or advertisement. The Company consents to
the publication by Purchaser or any of its Affiliates of a tombstone or similar
advertising material relating to the transactions contemplated by this
Agreement, which may include the Company's name, business description and size
of investment. In addition, the Company agrees that Purchaser and its Affiliates
may use the Company's name and logo on websites among a list of representative
investments and may provide the Company's name and appropriate individual
contacts to companies for the purpose of securing supplier discounts or other
similar benefits for the Company.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Expenses. The Company shall pay all reasonable out-of
--------
-pocket diligence expenses and outside legal and consulting fees and expenses of
Purchaser incurred in connection with investigating, negotiating or documenting
the transactions contemplated hereby (whether such fees and expenses are
incurred prior to or after the Closing Date).
SECTION 6.2 Termination. This Agreement may be terminated:
------------
(a) at any time by mutual agreement of the parties;
(b) by Purchaser by written notice to the Company if all conditions to
closing have not been satisfied prior to April 6, 2000;
(c) by either party following a material breach by the other party to this
Agreement, provided that if such breach is curable, this Agreement may only be
terminated if, after ten (10) business days' notice, the party in breach has not
either cured such breach or commenced diligent efforts to cure such breach.
Termination of this Agreement shall not waive any party of liability for
breaches of this Agreement which occurred prior to termination.
SECTION 6.3 Survival of Agreements. All covenants, agreements,
----------------------
representations and warranties made in the Transaction Documents or any
certificate or instrument delivered to Purchaser pursuant to or in connection
with the Transaction Documents shall survive the execution and delivery of the
Transaction Documents, the issuance, sale and delivery of the Series C Shares,
and the issuance and delivery of the Conversion Shares, and all statements
contained in any certificate or other instrument delivered by the Company
hereunder or thereunder or in connection herewith or therewith shall be deemed
to constitute representations and warranties made by the Company.
SECTION 6.4 Brokerage. Each party hereto will indemnify and hold
---------
harmless the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
12
SECTION 6.5 Parties in Interest. All representations, covenants and
-------------------
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants and agreements
benefiting Purchaser shall inure to the benefit of any and all subsequent
holders from time to time of Series C Shares, the Warrants, Conversion Shares or
the Warrant Shares.
SECTION 6.6 Notices. All notices, requests, consents and other
-------
communications hereunder shall be in writing and shall be delivered in Person,
mailed by certified or registered mail, return receipt requested, delivered by
overnight courier, or sent by telecopier or telex, addressed as follows:
(a) if to the Company,
Fieldworks, Incorporated
0000 Xxxxxxx Xxxxx
Xxxx Xxxxxxx, Xxxxxxxxx
Attention: Xxxxx Xxxxxxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx & Whitney LLP
Pillsbury Center
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
Facsimile: (000) 000-0000
(b) if to Purchaser:
Industrial Works Holding Co., LLC
c/o Glenmount International, L.P.
00000 Xxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
13
SECTION 6.7 Governing Law; Jury Trial Waiver. This Agreement shall be
--------------------------------
construed, interpreted and the rights of the parties determined in accordance
with the laws of the State of California without regard to the conflict of law
principles thereof; except with respect to matters of law concerning the
internal corporate affairs of any corporate entity which is a party to or the
subject of this Agreement and as to those matters, the law of the jurisdiction
under which the respective entity derives its powers shall govern. The parties
irrevocably elect as the sole judicial forum for the adjudication of any matters
arising under or in connection with this Agreement, the Transaction Documents
and the transactions contemplated hereby and thereby, and consent to the
jurisdiction of, the courts located in Orange County, California, and waive any
and all objections to such jurisdiction or venue that they may have. The parties
hereby waive any right to have trial by jury in any action, suit or proceeding
brought to enforce or defend any rights or remedies arising under or in
connection with this Agreement, whether grounded in tort, contract or otherwise.
SECTION 6.8 Injunctive Relief. The parties hereto acknowledge and agree
-----------------
that irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and shall be entitled to enforce specifically the provisions of this
Agreement in any court of the United States or any state thereof having
jurisdiction, in addition to any other remedy to which the parties may be
entitled under this Agreement or at law or in equity.
SECTION 6.9 Assignment.
----------
(a) Neither this Agreement nor any of the rights or obligations hereunder
may be assigned by the Company without the prior written consent of Purchaser.
(b) Purchaser may, without the consent of the Company, sell, transfer, or
otherwise any of the Series C Shares purchased by Purchaser hereunder or the
Conversion Shares and the rights and obligations of Purchaser hereunder, to any
of its Affiliates or to an Accredited Investor, provided, however, that such
-------- -------
Person shall not have any rights under this Agreement unless it executes a
counterpart of this Agreement in connection with such transfer.
(c) Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, and no other person shall have any right, benefit or obligation
hereunder.
SECTION 6.10 Limitation of Liability. In no event shall (a) any
-----------------------
Affiliate of Purchaser, or (b) any direct or indirect member, shareholder,
officer, director, limited partner, employee or any other representative of
Purchaser or any Affiliate of Purchaser, be personally liable for any obligation
of Purchaser under this Agreement.
SECTION 6.11 Entire Agreement. This Agreement, including any Schedules
----------------
and the Exhibits hereto, constitutes the sole and entire agreement of the
parties with respect to the subject matter hereof. All Schedules and Exhibits
hereto are hereby incorporated herein by reference.
14
SECTION 6.12 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 6.13 Amendments. This Agreement may not be amended or modified
----------
without the written consent of the Company and Purchaser.
SECTION 6.14 Severability. If any provision of this Agreement shall be
------------
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
SECTION 6.15 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
SECTION 6.16 Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Affiliate" means, with respect to a specified Person, (a) any other person
---------
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person, (b) any other Person that owns,
directly or indirectly, five percent (5%) or more of such specified person's
Capital Stock, (c) any employee or director of such specified Person, (d) any
member of the family of any Person specified in clauses (a), (b), and (c), or
(e) any corporation, limited liability company, partnership, trust or other
entity in which any Person set forth in clauses (a), (b), (c) or (d) above, or
member of the family of any such Person, is a director, officer, trustee,
partner or holder of more than five percent (5%) of the outstanding Capital
Stock thereof. For the purposes of this definition, "control," when used with
-------
respect to any specified person, means the power to direct the management and
policies of such person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
-----------
"controlled" have meanings correlative to the foregoing. All limited partners
----------
in Glenmount International, L.P. shall be considered Purchaser's Affiliates.
"Agreement" has the meaning set forth in the preamble hereto.
---------
"Applicable Law" means any statute, law, rule or regulation or any
--------------
judgment, order, writ, injunction, decree or financial assessment (subject, in
the case of financial assessments, to the exhaustion of appeals) of any
Governmental Entity to which a specified Person or its properties or assets, or
its officers, directors, employees, consultants or agents (in their capacities
as such) is subject, including, without limitation, all such statutes, laws,
rules, regulations, judgments, orders, writs, injunctions, decrees and financial
assessments relating to, without limitation, energy regulation, public utility
regulation, securities regulation, consumer protection, equal opportunity,
health care industry regulation, public health and safety, motor vehicle safety
or standards, third party reimbursement, environmental protection, fire, zoning,
building and occupational safety and health matters and laws respecting
employment practices, employee documentation, terms and conditions of employment
and wages and hours.
15
"Capital Stock" means (i) in the case of a corporation, corporate stock,
-------------
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Change of Control" shall be deemed to have occurred upon (i) the
-----------------
consummation of a tender for or purchase of more than fifty percent (50%) of the
Company's Common Stock by a third party, in a single transaction or series of
related transactions, (ii) a merger, consolidation or sale of all or
substantially all of the assets of the Company such that the shareholders of the
Company immediately prior to the consummation of such transaction own less than
fifty percent (50%) of the voting securities of the surviving entity immediately
after the transaction or transactions, in a single transaction or series of
related transactions, or (iii) the sale or transfer of more than twenty-five
percent (25%) of the shares of Capital Stock of the Company, in a single
transaction or series of related transactions.
"Closing" has the meaning set forth in Section 1.5 hereof.
------- -----------
"Closing Date" has the meaning set forth in Section 1.5 hereof.
------------ -----------
"Code" means the Internal Revenue Code.
----
"Common Stock" has the meaning set forth in the preamble hereto.
------------
"Company" has the meaning set forth in the preamble hereto.
-------
"Conversion Shares" has the meaning set forth in Section 1.3 hereof.
----------------- -----------
"Convertible Security" means any stock or security that is directly or
--------------------
indirectly convertible into or exchangeable for or exercisable for Capital
Stock, including without limitation, the shares of Series B Stock, the Series C
Shares, existing Warrants and any other option, warrant or exchangeable debt
security.
"Governmental Entity" means any court or tribunal in any jurisdiction
-------------------
(domestic or foreign) or any federal, state or local public, governmental or
regulatory body, agency, department, commission, board, bureau or other
authority or instrumentality (domestic or foreign).
"Knowledge" or "known" means, with respect to any Person, the actual
--------- -----
knowledge of such Person, after reasonable inquiry; provided, that a Person
--------
shall be deemed to have actual knowledge of the contents of all books and
records with respect to which such Person has reasonable access; provided,
--------
further, and without limiting the generality of the foregoing, with respect to
-------
any Person that is a corporation actual knowledge shall be deemed to include the
actual knowledge of all principal employees of any such Person (including
without limitation each director, the Chief Executive Officer, President, Chief
Financial Officer and all Vice Presidents of such Person).
16
"Liquidation Event" means, with respect to any Person, any of the following
-----------------
events: (i) the commencement by such Person of a voluntary case under the
bankruptcy laws of the United States, as now or hereafter in effect, or the
commencement of an involuntary case against such Person with respect to which
the petition shall not be controverted within fifteen (15) days, or be dismissed
within sixty (60) days, after commencement thereof; (ii) the appointment of a
custodian for, or the taking charge by a custodian of, all or substantially all
of the property of such Person; (iii) the commencement by such Person of any
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to such Person; (iv)
the commencement against such Person of any proceeding set forth in the
preceding clause (iii), which is not controverted within ten (10) days thereof
and dismissed within sixty (60) days after the commencement thereof; (v) the
adjudication of such Person insolvent or bankrupt, or the adoption by such
Person of a plan of liquidation, (vi) the occurrence of any Change of Control
with respect to such Person or (vii) the filing of a certificate of dissolution
in respect of the Company with the Secretary of State of the State of Minnesota;
in any of cases (i) through (vi) above, in a single transaction or series of
related transactions.
"Parity Securities" means any class or series of capital stock which ranks
-----------------
on a parity with the Series C Preferred Stock as to dividend distributions or
distributions upon the liquidation, winding up and dissolution of the Company.
"Person" shall mean an individual, corporation, trust, partnership, joint
------
venture, unincorporated organization, government agency or any agency or
political subdivision thereof, or other entity.
"Purchaser" has the meaning set forth in the preamble hereto, but in the
---------
event Purchaser distributes Series C Shares, it shall mean any holder of Series
C Shares.
"SEC" has the meaning set forth in Section 2.5 hereof.
--- -----------
"Senior Securities" means any class or series of capital stock which ranks
-----------------
senior to the Series C Preferred Stock as to dividend distributions or
distributions upon the liquidation, winding up and dissolution of the Company.
"Series C Preferred Stock" has the meaning set forth in the Recitals
------------------------
hereto.
"Series C Shares" has the meaning set forth in the Recitals hereto.
---------------
"Supervoting Securities" means any class or series of the Company's Capital
----------------------
Stock the holders of which have the right to cast more than one vote per share
and/or have the right to elect one or more members of the Board of Directors,
voting as a class or series.
"Transaction Documents" has the meaning set forth in Section 2.1(a) hereof.
--------------------- --------------
* * * * *
(Signatures on following page)
17
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the Company and Purchaser have executed this Securities
Purchase Agreement as of the day and year first above written.
COMPANY: FIELDWORKS, INC.,
a Minnesota corporation
By:
---------------------------
Name: Xxxxx Xxxxxxxxxxx
-----------------------
Title: Chief Financial Officer
PURCHASER: INDUSTRIAL-WORKS HOLDING CO.,LLC
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: President
18
EXHIBIT A
Form of Certificate of Designation for Series C Convertible Participating
Preferred Stock
CERTIFICATE OF DESIGNATION OF
SERIES OF PREFERRED STOCK
FIELDWORKS, INCORPORATED
STATEMENT OF DESIGNATION
OF
RIGHTS, PREFERENCES AND LIMITATIONS
OF
SERIES C CONVERTIBLE PARTICIPATING PREFERRED STOCK
The undersigned hereby certifies that the following resolutions
establishing the Series C Convertible Participating Preferred Stock of
Fieldworks, Incorporated, a Minnesota corporation (the "Company"), pursuant to
Section 302A.401 of the Minnesota Business Corporation Act were duly adopted by
the Board of Directors of the Company on March __, 2000:
WHEREAS, the Board of Directors believes that it is in the best interests
of the Company to create a class of preferred stock designated as the Series C
Convertible Participating Preferred Stock.
RESOLVED, that the Resolution Establishing the Series, Setting Forth the
Designation and Fixing the Relative Rights and Preferences of Series C
Convertible Participating Preferred Stock, attached hereto as Exhibit A, is
---------
hereby adopted.
FURTHER RESOLVED, that the officers of the Company are authorized and
directed to prepare, execute, acknowledge and file such Certificate of
Designation with the Secretary of State of Minnesota.
IN WITNESS WHEREOF, the undersigned, the President and Chief Executive
Officer of the Company, being duly authorized on behalf of the corporation, has
executed this document the ___ day of _____________, _____.
FIELDWORKS, INCORPORATED
By:
-----------------
Xxxxx Xxxxxxxxxxx
-----------------
Chief Financial Officer
-1-
Exhibit A
---------
FIELDWORKS, INCORPORATED
RESOLUTION ESTABLISHING THE SERIES,
SETTING FORTH THE DESIGNATION AND FIXING
THE RELATIVE RIGHTS AND PREFERENCES OF
SERIES C CONVERTIBLE PARTICIPATING PREFERRED STOCK
Pursuant to the powers expressly granted to the Board of Directors of
Fieldworks, Incorporated, a Minnesota corporation (the "Company"), by the
provisions of the Articles of Incorporation of the Company and Chapter 302A of
the Minnesota Business Corporation Act, the Board of Directors of the Company
duly established by written action of the Board of Directors a series of shares
consisting of 500,000 shares, with the designation of the series and the
relative rights and preferences of the series as follows:
1. Designation. The designation of the series of shares is Series C
-----------
Convertible Participating Preferred Stock (the "Series C Shares") and the number
of shares of such series is 500,000.
2. Dividends. Dividends shall be payable on the Series C Shares out of
---------
funds legally available for the declaration of dividends only if and when
declared by the Board of Directors. In no event shall any dividend be paid or
declared, nor shall any distribution be made, on the Common Stock, unless the
holders of the Series C Shares shall have consented thereto and shall
participate in such dividend on a pro rata basis with the holders of Common
Stock, counting the Series C Shares on an as-if-converted basis.
3. Liquidation Preference. In the event of any liquidation, the holders of
----------------------
the Series C Shares then outstanding shall be entitled to receive out of the
assets of the Company, after distribution of all amounts due the holders of the
Company's Series B Convertible Participating Preferred Stock ("Series B
Preferred Stock"), but prior and in preference to any distribution of any of the
assets or surplus funds of the Company to the holders of the Common Stock or any
other class of shares of preferred stock of the Company ranking junior to the
Series C Shares with respect to payments upon Liquidation (such preferred stock
hereinafter called "Junior Liquidation Stock"), and junior to any such
distribution to the holders of any class of shares of the Company ranking senior
to the Series C Shares in such respect, an amount equal to $2.00 per share plus
any accrued and unpaid dividends thereon for each Series C Share (the "preferred
amount"). Following any distribution of assets or surplus funds of the Company
to the holders of any outstanding series of Junior Liquidation Stock, the
remainder of any such assets or, surplus funds shall be distributed to the
holders of the Common Stock and any other series of preferred stock entitled to
participate in distributions of assets or surplus funds upon liquidation until
each holder shall have received an amount per share equal to the preferred
amount. Thereafter, any remaining assets or funds shall
-1-
be distributed pro rata to the holders of the Common Stock, the holders of any
other series of preferred stock having a right to participate, and the holders
of the Series C Preferred Stock, counting Series C Shares on an as-if-converted
basis. If upon the occurrence of any Liquidation, the assets and funds of the
Company available for the distribution to its shareholders shall be insufficient
to pay the holders of the Series C Shares the full preferred amount to which
they shall be entitled, the holders of the Series C Shares shall share ratably
in any distribution of such assets and surplus funds available to the Series C
Shares in proportion to the Series C Shares held by them.
4. Voting Rights. Each holder of record of Series C Shares shall be
-------------
entitled to notice of and to attend all meetings of the shareholders of the
Company and shall be entitled at each such meeting to a number of votes for each
Series C Share held equal to the number of shares of Common Stock into which
each share of Series C Shares is then convertible. Each holder of Common Stock
shall have one vote on all matters submitted to the shareholders for each share
of Common Stock standing in the name of such holder on the books of the Company.
Except as otherwise provided in this Section 4, and except as otherwise required
by agreement or law, the holders of the Series C Shares and the holders of
Common Stock of the Company shall vote as a single class on all matters
submitted to the shareholders.
5. Protective Provisions. The Company shall not take any of the following
---------------------
actions without the prior affirmative written consent of the holders of at least
two-thirds (2/3) of the Series C Shares:
(a) alter, change or amend (by merger or otherwise) any of the rights,
preferences or privileges of the Series C Shares;
(b) other than as provided in Section 5(c) of the Certificate of
Designation of Rights, Preferences and Limitations of the Company's Series
B Preferred Stock, amend, restate, alter, modify or repeal (by merger or
otherwise) the Articles of Incorporation or the Bylaws of the Company,
including, without limitation, amending, restating, modifying or repealing
(by merger or otherwise) (i) any certificate of designation or preferences
(as in effect from time to time) relating to any series of preferred stock
or (ii) any of the rights, preferences and privileges of any other class of
capital stock, or the terms or provisions of any option or convertible
security;
-2-
(c) (i) create, authorize or issue any securities or shares of any
such class or series of securities which rank senior to or on parity with
the Series C Shares; (ii) create, authorize or issue any securities or
shares of any such class or series of securities the holders of which have
the right to cast more than one vote per share, and/or have the right,
voting as a class or series, to elect one or more members of the Board of
Directors; (iii) create, authorize or issue any securities or shares of any
such class or series of securities convertible into, or exercisable,
redeemable or exchangeable for, shares of any of the foregoing; (iv)
increase or decrease the authorized number of shares of any of the
foregoing; or (v) increase or decrease the authorized number of Series C
Shares;
(d) (i) initiate or suffer to exist any Liquidation Event with respect
to the Company, (ii) enter into any merger or consolidation with any other
Person that results in the holders of the Company's capital stock
immediately prior to such transaction owning less than fifty percent (50%)
of the voting power of the successor entity's capital stock after such
transaction or (iii) otherwise discontinue or dispose of more than ten
percent (10%) of the assets of the business of the Company, taken as a
whole. For purposes of this Section 5, "Liquidation Event" shall mean any
of the following events: (i) the commencement by the Company of a
voluntary case under the bankruptcy laws of the United States, as now or
hereafter in effect, or the commencement of an involuntary case against the
Company, which petition shall not be opposed within fifteen (15) days or be
dismissed within sixty (60) days after commencement thereof; (ii) the
appointment of a custodian for, or the taking charge by a custodian of, all
or substantially all of the property of the Company; (iii) the commencement
by the Company or on its behalf or with its consent of any proceeding under
any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect; (iv) the commencement by anyone without
the Company's consent of any proceeding of the type set forth in the
preceding clause (iii) which is not controverted within fifteen (15) days
thereof and dismissed within sixty (60) days after the commencement
thereof; (v) the adjudication of the Company as insolvent or bankrupt, or
the adoption by the Company of a plan of liquidation, (vi) the occurrence
of any Change of Control; or (vii) the filing of a certificate of
dissolution on behalf of the Company with the Secretary of State of the
State of Minnesota; in any of cases (i) through (vi) above, in a single
transaction or series of related transactions. For purposes of this
Section 5(d), a "Change of Control" shall be deemed to have occurred upon
(i) the consummation of a tender for or purchase of more than fifty percent
(50%) of the Company's Common Stock by a third party other than the holder
of a majority of the Series C Stock, in a single transaction or series of
related transactions, or (ii) any other transaction such that the
shareholders of the Company immediately prior to the consummation of such
transaction possess
-3-
less than fifty percent (50%) of the voting securities of the surviving or
continuing entity immediately after the transaction, in a single
transaction or a series of related transactions unless such transactions
have been approved by the vote of all directors elected or designated by
the holders of the Series B Preferred Stock.
(e) initiate or suffer to exist any recapitalization of the Company,
or reclassify any authorized capital stock of the Company into any other
class or series of Capital Stock of the Company;
(f) redeem any shares of the Company's capital stock;
(g) (i) acquire, in one or a series of transactions, any equity
ownership interest, by way of merger or otherwise, in any Person, or any
asset or assets of any Person, where the aggregate consideration payable in
connection with such acquisition (including, without limitation, cash
consideration, the fair market value of any securities and the net present
value of any deferred consideration) is at least $1,000,000, or (ii) make
any capital expenditures in excess of $500,000 individually or $1,000,000
for any fiscal year;
(h) change the number of directors of the Company to a number other
than seven (7), or, under the circumstances in Section 5(c) of the Series B
Preferred Stock's Certificate of Designation of Rights, Preferences and
Limitations, nine (9), or the manner in which the directors are selected,
except as set forth in Section 5(c) of the Series B Preferred Stock's
Certificate of Designation of Rights, Preferences and Limitations;
(i) make any material change in the nature of its business as
conducted on the date the Series C Shares are issued, or fail to conduct
its business in the ordinary course consistent with past practice;
(j) sell, transfer, convey, lease or dispose of, outside the ordinary
course of business, any material assets or properties of the Company,
whether now or hereafter acquired, in any transaction or transactions that
call for payments in excess of $500,000;
(k) establish or purchase any subsidiary;
(l) enter into any agreements, transactions or leases not in the
ordinary course of the Company's business as conducted on the date hereof
that call for payments in excess of $250,000;
-4-
(m) incur any new or additional indebtedness which exceeds $500,000,
provided that this clause (m) shall not prohibit the extension, renewal,
amendment or refinancing (including refinancings with other lenders) of the
Company's existing credit facility with Spectrum Commercial Services, a
division of Lyon Financial Services, Inc. on terms no more restrictive than
those contained in the General Credit and Security Agreement dated November
19, 1998 as amended on August 20,1999, (except that interest rate "spreads"
may increase by no more than 50 basis points over prime and principal
amounts advanced against accounts receivable or inventory (but no other
amounts of principal) may increase or decrease provided that advance rates
are no greater than those currently in effect); or
(n) except for transactions on customary and reasonable terms, enter
into any transaction with (i) any Affiliate of the Company, (ii) any
employee of the Company, (iii) any holder of more than five percent (5%) of
the outstanding capital stock of any class or series of capital stock of
the Company, (iv) any member of the immediate family of any Person set
forth in clauses (i), (ii) and (iii) above, or (v) any corporation,
partnership, trust or other entity in which any Person set forth in clauses
(i), (ii), (iii) or (iv) above, or member of the family of any such Person,
is a director, officer, trustee, partner or holder of more than five
percent (5%) of the outstanding capital stock thereof. For purposes of
this Agreement, the members of the "immediate family" of any Person shall
consist of the spouse, parents, children, siblings, mothers- and fathers-
in-law, sons- and daughters-in-law, and brothers- and sisters-in-law of
such Person.
6. Conversion Rights.
-----------------
(a) At Option of Holders. Holders of Series C Shares may, at their
--------------------
option, upon surrender of the certificates therefor, convert any or all of their
Series C Shares into fully paid and nonassessable shares of Common Stock at any
time. The right of holders of Series C Shares to convert their shares shall be
exercised by surrendering for such purpose to the Company or any transfer agent
for the Series C Shares, and at such other office or offices, if any, as the
Board of Directors may designate, certificates representing the Series C Shares
to be converted, duly endorsed in blank or accompanied by proper instruments of
transfer. Upon the surrender of certificates representing the Series C Shares to
be converted, the person converting such shares shall be deemed to be the holder
of record of the Common Stock (and such other securities and property as the
holders of Series C Shares may be entitled to upon the conversion thereof, as
hereinafter provided) issuable upon such conversion, and all rights with respect
to the Series C Shares surrendered shall forthwith terminate except the right to
receive the Common Stock or other securities, cash or other assets receivable
upon such conversion as herein provided.
-5-
(b) Conversion Rate/Conversion Price. In addition to the adjustments
--------------------------------
required by Section 6(e), 6(f) and 6(g), the conversion of Series C Shares into
Common Stock shall be governed by the following: Series C Shares shall be
convertible into that number of fully paid and nonassessable shares of Common
Stock (calculated as to each conversion to the nearest 1/100th of a share) as
shall be determined by multiplying the "Conversion Rate," determined as
hereinafter provided, in effect at the time of conversion by the product of (i)
the number of shares of Series C Shares to be converted and (ii) the "Initial
Conversion Price" applicable to the shares of Series C Shares being converted
(as hereinafter defined) and dividing the product of such multiplication by the
"Conversion Price" applicable to the Series C Shares being converted, determined
as hereinafter provided, in effect at the time of conversion and making any
adjustments required by Section 6(e) hereof. The Conversion Rate shall initially
be one and shall be adjusted from time to time as provided in Section 6(e) (such
conversion rate, as so adjusted from time to time, being referred to herein as
the "Conversion Rate"). The "Initial Conversion Price" for the Series C Shares
shall be the price per Series C Share paid to the Company upon the issuance
thereof. The conversion price for Series C Shares shall initially be equal to
the Initial Conversion Price and shall be adjusted from time to time as provided
in Sections 6(f) and (g) (the conversion price for Series C Shares, as so
adjusted from time to time, being herein referred to as the "Conversion Price"
applicable to such Series C Shares).
(c) Reservation of Shares. A number of shares of authorized but
---------------------
unissued Common Stock of the Company sufficient to provide for the conversion of
all of the Series C Shares outstanding upon the basis herein provided
("Conversion Common Stock") shall at all times be reserved by the Company, free
from preemptive rights, for such conversion. If the Company shall issue any
securities or make any change in its capital structure that would change the
number of shares of Common Stock into which each Series C Share shall be
convertible as herein provided, the Company shall at the same time also make
proper provision so that thereafter there shall be a sufficient number of
additional shares of capital stock authorized and reserved, free from preemptive
rights, for conversion of the outstanding Series C Shares on the new basis. The
Company shall comply with all securities laws regulating the offer and delivery
of shares of Common Stock upon conversion of Series C Shares and shall list such
shares on any national securities exchange on which the Common Stock is listed
or have such shares admitted for quotation on the Nasdaq National or Small Cap
Market if the Common Stock is admitted for quotation thereon.
(d) Fractional Shares. No fractional shares of Common Stock shall be
-----------------
issued upon the conversion of Series C Shares but, in lieu of any fraction of a
share of Common Stock that would otherwise be issuable in respect of the
aggregate number of such shares surrendered for conversion at one time by the
same holder, the Company shall pay in cash an amount equal to the product of (a)
the "Closing Price" (as defined in the next sentence) of a share of Common Stock
on the last trading day before the relevant conversion
-6-
date and (b) such fraction of a share. The "Closing Price" for each day shall be
the last reported sale price regular way or, in case no sale takes place on such
day, the average of the closing bid and asked prices regular way on such day, in
either case as reported on the New York Stock Exchange Composite Tape, or, if
the Common Stock is not listed or admitted to trading on such Exchange, on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading, or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, on the Nasdaq National or Small Cap
Market, or, if the Common Stock is not admitted for quotation on the Nasdaq
National or Small Cap Market, the average of the high bid and low asked prices
on such day as recorded by the National Association of Securities Dealers, Inc.
through Nasdaq, or, if the National Association of Securities Dealers, Inc.
through Nasdaq shall not have reported any bid and asked prices for the Common
Stock on such day, the average of the bid and asked prices for such day as
furnished by any New York Stock Exchange member firm selected from time to time
by the Company for such purpose, or, if no such bid and asked prices can be
obtained from any such firm, the fair market value of one share of the Common
Stock on such day as determined in good faith by the Board of Directors of the
Company.
(e) Conversion Rate Adjustments. Subject to Section 6(g) hereof, if
---------------------------
the Company shall (A) subdivide its outstanding Common Stock into a greater
number of shares, (B) combine the shares of its outstanding Common Stock into a
smaller number of shares or (C) declare a dividend upon its shares of Common
Stock payable in shares of Common Stock, then in each such case the Conversion
Rate in effect immediately prior thereto shall be proportionately adjusted so
that the holder of any shares of any Series C Shares thereafter surrendered for
conversion shall be entitled to receive, to the extent permitted by applicable
law, the number and kind of shares of capital stock of the Company that such
holder would have owned or have been entitled to receive after the happening of
such event had such Series C Shares been converted immediately prior to the
record date for such event (or if no record date is established in connection
with such event, the effective date for such action). An adjustment pursuant to
this Section 6(e) shall become effective immediately after the record date in
the case of a stock dividend or distribution, or immediately after the effective
date in the case of a subdivision, combination or reclassification.
(f) Initial, One-Time Conversion Price Adjustment. The Company
---------------------------------------------
contemplates a registered offering of rights to purchase common stock to its
shareholders. If the purchase price of such offering is less than $2.00 per
share, the Conversion Price shall be adjusted to such purchase price. If the
Company abandons, or shall not have completed such registered offering to its
existing shareholders of rights to purchase Common Stock resulting in gross
proceeds equal to or exceeding $5,000,000 on or before June 30, 2000, the
Conversion Price shall be reduced to One Dollar ($1.00) per share, effective as
of March 31, 2000, and any transactions subsequent to March 31, 2000 shall, for
purposes of Section 6(g), be evaluated using that adjusted Conversion Price.
-7-
(g) Continuing Conversion Price Adjustments. With respect to Series C
---------------------------------------
Shares, if and whenever the Company shall issue or sell any shares of its Common
Stock or any securities convertible into or exercisable or exchangeable for
shares of Common Stock ("Convertible Securities") for a consideration per share
(in the case of the sale of any Convertible Securities, the amount, if any,
payable for such Convertible Security and upon the exercise or conversion
thereof (and/or upon the exercise or conversion of the securities receivable
upon such exercise or conversion) for each share of Common Stock receivable
thereby shall be included in determining such consideration per share) less than
the Conversion Price applicable to the Series C Shares, in effect immediately
prior to the time of such issuance or sale, then, forthwith upon such issuance
or sale, such higher Conversion Price(s) for the Series C Shares shall be
reduced to a price (calculated to the nearest tenth of a cent) determined by
dividing (x) an amount equal to the sum of (A) the number of shares of Common
Stock outstanding immediately prior to such issuance or sale multiplied by such
higher Conversion Price plus (B) the aggregate consideration, if any, received
----
or receivable by the Company for the shares of Common Stock issued or issuable
upon the exercise of any issued Convertible Security (and/or upon the exercise
or conversion of the security receivable upon such exercise or conversion), by
(y) an amount equal to the sum of (A) the number of shares of Common Stock
outstanding immediately prior to such issuance or sale plus (C) the number of
----
shares of Common Stock thus issued or sold or receivable upon the exercise or
conversion of the Convertible Securities (or the securities receivable upon the
exercise or conversion of such Securities). If any Convertible Securities taken
into account in any such adjustment of a Conversion Price subsequently expire
without exercise, such Conversion Price shall be recomputed to eliminate the
effect of such expired Convertible Securities. However, no adjustment pursuant
to this Section 6(g) shall be required upon the issuance of shares of Common
Stock upon conversion of any shares of preferred stock, including the Series C
Shares, outstanding prior to such issuance or sale or upon the exercise of
options available under the 1996 Directors Stock Option Plan or the 1999 Long-
term Incentive Plan of the Company as in effect prior to November 1, 1999.
(h) Consolidations, Mergers, Sales of Assets, Reclassifications and
---------------------------------------------------------------
Certain Dividends. In case of any (A) consolidation or merger of the Company
-----------------
with any other company (other than the merger of a subsidiary of the Company
into the Company in a transaction in which the Company is the surviving
corporation and the outstanding shares of capital stock of the Company are not
exchanged for or converted into any other securities, cash or other property),
(B) sale or transfer of all or substantially all of the assets of the Company
for cash, securities or other property, (C) any share exchange pursuant to which
all of the outstanding shares of Common Stock are converted into other
securities or property, or (D) issuance of any shares of the Company's capital
stock in connection with a reclassification of the Common Stock, the Company
shall, prior to or at the time of such transaction, make appropriate provision
or cause appropriate provision to be made so that the
-8-
holders of each Series C Share then outstanding shall have the right thereafter
to receive the kind and amount of shares of stock and other securities and
property receivable upon such consolidation, merger, sale, transfer, share
exchange or reclassification by a holder of the number of shares of Common Stock
into which such Series C Shares could have been converted immediately prior to
the effective date of such consolidation, merger, sale, transfer, share exchange
or reclassification. If in connection with any such consolidation, merger, sale,
transfer, share exchange or reclassification, each holder of Common Stock is
entitled to elect to receive either securities, cash or other assets upon
completion of such transaction, the Company shall provide or cause to be
provided to each holder of Series C Shares the right to elect the securities,
cash or other assets into which the Series C Shares held by such holder shall be
convertible after completion of any such transaction on the same terms and
subject to the same conditions applicable to holders of the Common Stock
(including, without limitation, notice of the right to elect, limitations on the
period in which such election shall be made and the effect of failing to
exercise the election).
(i) Rounding. All calculations hereunder, unless otherwise specified,
--------
shall be made to the nearest cent or to the nearest 1/100th of a share, as the
case may be.
(j) Notices. Whenever the Conversion Rate or a Conversion Price is
-------
adjusted as herein provided, the Company shall give prompt notice by mail to the
holders of the outstanding Series C Shares of such adjustment, which notice
shall set forth the adjustment and the new Conversion Rate or Conversion Price.
Notwithstanding the foregoing, failure by the Company to give such notice or a
defect in such notice shall not affect the binding nature of such corporate
action of the Company.
(k) Common Stock Defined. As used herein, the term "Common Stock"
--------------------
shall mean and include the presently authorized Common Stock of the Company and
shall also include any capital stock of any class of the Company (other than the
Series C Shares) hereafter authorized which shall have the right to vote on all
matters submitted to the shareholders of the Company and shall not be limited to
a fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the occurrence of
any Liquidation Event of the Company.
7. Preemptive Rights. If Company offers to sell its common stock,
-----------------
securities convertible into common stock, or any other debt (excluding debt
securities issued to banks or other financial institutions) or equity securities
other than the issuance of options or shares to employees, directors and
consultants which have been approved by the directors elected by the Series B
Preferred Stock (the "Additional Securities") it will first offer to the holders
of the Series C Shares, or, if applicable, Conversion Common Stock the right to
purchase a portion of the Additional Securities such that such holders'
aggregate percentage ownership of the Company on a fully diluted basis
("Purchasers' Percentage") will be unchanged. The
-9-
offer shall set forth the number of shares to be sold, the price, and material
terms and conditions.
The right of the holders to purchase in the aggregate Additional Securities up
to but not more than the Purchaser's Percentage may be exercised as follows:
(a) the Company shall provide each holder with written notice of the
number of securities to be issued and the cash price therefor;
(b) each holder shall have the right to purchase that percentage of
such securities equal to the ratio that the number of shares of Conversion
Common Stock held by such holder bears to the total number of shares of
Conversion Common Stock held by all holders;
(c) second, if not all holders elect to purchase their pro rata share,
then as to the excess of the amount of Purchaser's Percentage over the shares
taken by holders electing to purchase their pro rata part (such excess to be
referred to as the "Unsubscribed Shares"), the holders who do so elect shall be
offered the right to acquire pro rata among themselves based on their holdings
of Conversion Common Stock; and
(d) if after such offer, any of the Unsubscribed Shares remain unsold,
as to such unsold Unsubscribed Shares, as the holders who agreed to purchase
their pro rata part of the Unsubscribed Shares may agree, all within thirty (30)
days of notice by the Company of such proposed issuance.
The Company may, within thirty (30) days, sell the remaining
securities not to be purchased by the holders to third parties on the terms and
conditions set forth in the offer delivered to holders, and the holders shall be
required to deliver the consideration to Company for the securities being
purchased by the holders at the same time such third parties are required to
deliver their consideration to Company.
Notwithstanding anything in this Section 7 to the contrary, the
holders' rights under this Section 7 shall not apply to (i) the securities of
the Company outstanding immediately prior to the issuance of the initial Series
C Shares; (ii) shares of common stock issued in connection with any stock split,
stock dividends or recapitalization of Company or upon conversion of the Series
C Shares; (iii) any borrowings, direct or indirect from financial institutions
by the Company, whether or not presently authorized, evidenced by any type of
debt instrument with no equity features; (iv) securities issued pursuant to an
effective registration statement filed with the SEC in connection with a
registered public offering; (v) equity securities issued to a financial
institution in connection with any lease financing or debt financing of the
Company approved by a two-thirds (2/3) vote of the Board of
-10-
Directors; or (vi) any transaction in which all directors of the Company elect
for this Section 7 not to apply.
-11-
EXHIBIT B
Form of Opinion of Counsel to Company
EXHIBIT B
FORM OF OPINION (COMPANY'S COUNSEL)
-----------------------------------
1. Company is duly incorporated, validly existing and in good
standing under the laws of the State of Minnesota with corporate power and
authority to conduct its business as it is presently conducted, to own and lease
its properties and assets and to execute and deliver the Transaction Documents
[to be the Securities Purchase Agreement (the "Agreement") and all documents
required thereby] and perform its obligations thereunder.
2. Company is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which (i) such qualification is
necessary under applicable law as a result of its conduct of business and (ii)
the failure to be so qualified would have a Material Adverse Effect.
3. Each of the Transaction Documents has been duly authorized,
executed and delivered by Company and is a valid and binding obligation of
Company, enforceable against Company in accordance with its terms.
4. The Company has taken action to reserve 500,000 shares of Common
Stock for future issuance in connection with the conversion of the Series C
Stock. Assuming the representations and warranties made by the Purchaser in the
Agreement are true and correct, (i) the offer and sale of the Series C Stock to
Purchaser pursuant to the terms of the Agreement are exempt from the
registration requirements of the Securities Exchange Act of 1933 (the
"Securities Act"), and (ii) the issuance to Purchaser of the shares of Common
Stock upon the conversion of the Series C Stock, in accordance with the terms of
the Agreement, will be exempt from such registration and qualification
requirements.
5. Neither the execution and delivery by Company of the Transaction
Documents nor the performance of its obligations thereunder will (a) result in
the violation of (i) any federal or Minnesota statute or regulation applicable
to Company or (ii) any order or decree known to us of any court or governmental
authority binding upon Company or its property, (b) conflict with Company's
Articles of Incorporation or Bylaws or (c) result in a default or in creation of
a lien under any indenture, loan agreement or other agreement known to us by
which Company is bound.
6. No registration with or approval by any federal or state
governmental agency is required of Company in connection with the execution and
delivery or the performance of the Transaction Documents to which it is a party.
7. The authorized capital stock of Company consists of 30,000,000
shares of Common Stock, $0.001 par value per share ("Common Stock"), of which
8,894,426 shares are issued and outstanding, and 5,000,000 shares of preferred
stock, $0.001 par value per share, of which 4,250,000 shares have been
designated Series B Convertible Participating Preferred Stock, and 500,000
shares have been designated Series C Convertible Participating Preferred Stock
(the "Series C Stock").
8. The Series C Stock has been validly authorized, and the delivery
by Company to Purchaser at Closing of the certificates representing the Series C
Stock, upon payment in accordance with the Purchase Agreement, conveys and
transfers to Purchaser, good, complete and marketable title to all Series C
Stock, free and clear of restrictions or conditions to transfer or assignment
and free and clear of all defects of title or Encumbrances. The offer and sale
of the Series C Stock to the Purchaser pursuant to the terms of the Agreement
are exempt from the registration requirements of the Securities Act, and the
Series C Stock has been issued in compliance with the securities laws of the
State of Minnesota and all other applicable state securities laws.
9. The Company has taken action to reserve 500,000 shares of Common
Stock for future issuance in connection with the conversion of the Series C
Stock. Assuming the representations and warranties made by the Purchaser in
the Agreement are true and correct, the issuance to Purchaser of Common Stock in
connection with such conversion will be exempt from the registration and
qualification requirements of the Securities Act.
EXHIBIT C
TO
STOCK PURCHASE AGREEMENT
Registration Rights
-------------------
1. Definitions. As used in this Exhibit A, the following terms shall
-----------
have the following respective meanings:
"Company" means FieldWorks, Incorporated, a Minnesota corporation.
"Common Stock Equivalents" shall mean, with respect to any Eligible
Holder as of any applicable date of determination, a sum equal to (i) the number
of shares of Common Stock owned by such Eligible Holder as of such date of
determination plus (ii) with respect to the Warrant owned by such Eligible
Holder, the number of shares of Common Stock issued or issuable upon exercise of
such Warrant as of the date of determination (in each case, whether or not such
Series B Preferred Stock or Warrant is so converted or exercised).
"Eligible Holders" means each of Industrial-Works Holding Co., LLC and
any Person to whom it transfers any Registrable Securities, or any of their
respective Permitted Transferees.
"Holder" means (i) any person owning of record Registrable Securities
that have not been sold to the public or (ii) any transferee of record of such
Registrable Securities in accordance with Section 7 of the Warrant.
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"Registrable Securities" means (i) Common Stock of the Company issued
or issuable upon conversion of the Company's Series C Convertible Participating
Preferred Stock, and (ii) any Common Stock of the Company issued as (or issuable
upon the conversion of any other security which is issued as) a dividend or
other distribution with respect to, or in exchange for or in replacement of,
such above-described securities. Notwithstanding the foregoing, Registrable
Securities shall not include any securities sold by a person to the public
either pursuant to a registration statement or Rule 144, or sold in a private
transaction in which the transferor's rights under this Exhibit A is are not
---------
assigned.
"Registrable Securities then outstanding" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (i) are then issued and
outstanding or (ii) are issuable pursuant to then exercisable or convertible
securities.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"SEC" or "Commission" means the United States Securities and Exchange
Commission.
"Stock Purchase Agreement" shall mean the Agreement dated March ___,
2000 between the Company and Industrial Works Holding Co., LLC.
2. Demand Registrations
--------------------
(a) Required Threshold.
------------------
Any Eligible Holder owning at least One Hundred Thousand (100,000)
Common Stock Equivalents (as such number may be equitably adjusted from time to
time to reflect any stock split, stock dividend, recapitalization,
reclassification, consolidation or the like) may request (such Person, the
"Initiating Holder") that the Company file a Registration Statement under the
Securities Act on an appropriate form with respect to at least fifty percent
(50%) of the Registrable Securities owned by such Initiating Holder (which form
shall be available for the sale of the Registrable Securities in accordance with
the intended method or methods of distribution thereof and shall include all
financial statements required by the SEC to be filed herewith) covering the
shares of Registrable Securities that are the subject of such request and the
Company shall file such a Registration Statement.
(b) Number of Demand Registrations.
------------------------------
The Company shall be obligated to prepare, file and cause to become
effective pursuant to this Section 2 only one (1) Registration Statement in the
aggregate pursuant to Section 2(a) above for the Eligible Holders; provided,
however, that a Registration Statement shall not be counted as the Demand
Registration hereunder unless it becomes effective and is maintained effective
in accordance with the requirements specified in Section 6(a); provided,
further, that if there is an underwriter's cutback pursuant to Section 2(e) with
respect to the request for registration initiated by an Eligible Holder, such
requested registration shall not be deemed to be the Demand Registration.
C-2
(c) Deferral by Company.
-------------------
Notwithstanding anything in this Section 2 to the contrary, the
Company shall not be obligated to prepare, file and cause to become effective
pursuant to this Section 2 a Registration Statement if within five (5) days of
receipt of a request for a Demand Registration the Company furnishes to the
Initiating Holder a certificate signed by the Chief Executive Officer of the
Company that, in the good faith judgment of the Board of Directors, it would be
detrimental in any material respect to the Company and its shareholders for the
Company to comply with the Demand Registration, and it is therefore essential to
defer the filing of the Registration Statement relating thereto. Any such
deferral shall be for a period of not more than six (6) months after the
Company's receipt of the Initiating Holder's written request for registration
pursuant to this Section 2; provided, however, that the Company may not exercise
this right more than once with respect to the Demand Registration and that any
requested registration deferred, and not ultimately effected, by the Company
pursuant to the provisions of this Section 2(c) shall thereafter not be deemed
to be the Demand Registration for purposes of the Section 2(a) above.
(d) Participation.
-------------
The Company shall promptly give written notice to all other Eligible
Holders upon receipt of a request for a Demand Registration pursuant to Section
2(a) above. Such other Eligible Holders may, by written notice to the Company
and the Initiating Holder, within thirty (30) business days of the Company's
notice, elect to join in a request for a Demand Registration pursuant to Section
2(a) above, with respect to any number of shares of Registrable Securities owned
by such Eligible Holder. The Registrable Securities of the other Eligible
Holders being offered in such Demand Registration shall be treated pari passu
with the Registrable Securities being offered by the Initiating Holder for all
purposes including "underwriter's cutbacks" under subsection (e) of this Section
and any such request by an Eligible Holder shall not be treated as either a
request by such Eligible Holder for a Piggyback Registration under Section 3 or
as a request by such Eligible Holder for a Demand Registration under this
Section 2. The Company shall include in such Demand Registration such shares of
Registrable Securities for which it has received written requests to register
such shares within thirty (30) days after such written notice has been given,
provided that all the Registrable Securities for which the Initiating Holder and
the other Eligible Holders have requested registration shall be covered by such
registration statement before any other securities are included.
In addition, the Company shall promptly give written notice to all
eligible Holders upon receipt of a request for a demand registration by any
Person (such Person, the "Initiating Person") pursuant to any other registration
rights agreement with the Company (whether such other registration rights
agreement is entered into before or after the date hereof). Each Eligible
Holder may, by written notice to the Company, within
C-3
thirty (30) business days of the Company's notice, elect to request a Demand
Registration pursuant to Section 2(a) above, with respect to any shares of
Registrable Securities owned by such Eligible Holder. The Registrable Securities
of the Eligible Holders being offered in such Demand Registration shall be
treated pari passu with the registrable securities being offered by the
Initiating Person (unless such Initiating Person is a holder of Series B
Preferred Stock, Warrants issued to Industrial Works Holding Co., LLC, or Common
Stock obtained on exercise or conversion thereof, in which case the securities
proposed to be registered by such Initiating Person should be given priority)
for all purposes including "underwriter's cutbacks" and any such request by an
Eligible Holder shall not be treated as either a request by such Eligible Holder
for a Piggyback Registration under Section 3 or as a request by such Eligible
Holder for a Demand Registration under this Section 2. The Company shall include
in such demand registration such shares of Registrable Securities for which it
has received written requests to register such shares within thirty (30) days
after such written notice has been given, provided that all the Registrable
Securities for which the Initiating Person and the Eligible Holders have
requested registration shall be covered by such registration statement before
any other securities are included.
(e) Underwriter's Cutback.
---------------------
If the public offering of Registrable Securities is to be underwritten
and, in the good faith judgment of the managing underwriter, the inclusion of
all the Registrable Securities requested to be registered hereunder would
interfere with the successful marketing of such shares of Registrable
Securities, the number of shares of Registrable Securities to be included shall
be reduced and the number of shares to be included in the underwriting or
registration shall be allocated first among the Eligible Holders pro rata upon
the basis of the number of shares of Registrable Securities sought to be offered
by the Eligible Holders pursuant to such Demand Registration and any remainder
shall be allocated among the Company and the other persons entitled to
incidental registrations pro rata upon the basis of the number of shares of
Registrable Securities sought to be registered thereby. If a person who has
requested inclusion in such Demand Registration does not agree to the terms of
any such underwriting, such person shall be excluded therefrom by written notice
from the Company, the underwriter or the Initiating Holder, and the securities
owned by such person(s) shall be withdrawn from registration (the "Withdrawn
Securities").
If there are any Withdrawn Securities as a result of an Underwriter's
Cutback, then the Company shall offer to those persons who have retained rights
to include securities in the Demand Registration the right to include additional
securities in the registration in an aggregate amount equal to the number of
Withdrawn Securities that would have been included in the Demand Registration
after giving effect to the Underwriter's Cutback had such securities not been
withdrawn, with such shares to be
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allocated among such persons in accordance with the allocation of rights set
forth in this paragraph (e).
(f) Managing Underwriter.
--------------------
The managing underwriter or underwriters of any Underwritten Offering
covered by a Demand Registration shall be selected by a majority in interest of
the Eligible Holders participating in such Underwritten Offering and shall be
reasonably acceptable to the Company. The right of any other Holders joining in
a request for registration as provided in Section 2(d) above to registration
pursuant to this Section 2 shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable Securities
in the underwriting on the same terms as those of the Initiating Holder (unless
otherwise mutually agreed by a majority in interest of the Eligible Holders
participating in such registration and such Holder with respect to such
participation and inclusion).
3. Piggyback Registrations
-----------------------
(a) Participation.
-------------
Each time the Company decides to file a Registration Statement under
the Securities Act (other than registrations on Forms S-4 or S-8 or any
successor form thereto, and other than a Demand Registration or a demand
registration by an Initiating Person) covering the offer and sale by it or any
of its security holders of any of its securities for money, the Company shall
give written notice thereof to all Eligible Holders. The Company shall include
in such Registration Statement such shares of Registrable Securities for which
it has received a written request from any Eligible Holder to register such
shares within twenty (20) days after such written notice has been given. If the
Registration Statement is to cover an Underwritten Offering, such Registrable
Securities shall be included in the underwriting on the same terms and
conditions as the securities otherwise being sold through the underwriters.
(b) Underwriter's Cutback.
---------------------
Subject to the requirements of Section 12 hereof, if in the good faith
judgment of the managing underwriter of such offering the inclusion of all of
the shares of Registrable Securities and any other Common Stock requested to be
registered would interfere with the successful marketing of such shares, then
the number of shares of Registrable Securities and other Common Stock to be
included in the offering shall be reduced, with the participation in such
offering to be in the following order of priority: (1) first, the shares of
Common Stock which the Company proposes to sell for its own account, (2) second,
the shares of holders exercising rights given to holders of Series B Preferred
Stock or holders of Warrants issued to Industrial-Works Holding Co., LLC, (3)
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third, the shares of Registrable Securities of all Eligible Holders requested to
be included, and (4) fourth, any other shares of Common Stock requested to be
included. Any necessary allocation among the Holders of shares within each of
the foregoing groups shall be pro rata among such Holders requesting such
registration based upon the number of shares of Common Stock and Registrable
Securities owned by such Holders.
(c) Company Control.
---------------
The Company may decline to file a Registration Statement after giving
notice to Eligible Holders pursuant to Section 3(a) above, or withdraw a
Registration Statement after filing and after such notice, but prior to the
effectiveness thereof; provided that the Company shall promptly notify each
Eligible Holder in writing of any such action and provided further that the
Company shall bear all expenses incurred by each Eligible Holder or otherwise in
connection with such withdrawn Registration Statement.
4. Registration on Form S-3
------------------------
(a) Right to Request Registrations on Form S-3.
------------------------------------------
At any time the Company is qualified for the use of Form S-3, in
addition to the rights contained in the foregoing provisions of this Agreement,
the Eligible Holders shall have the right to request registrations on Form S-3
or any comparable or successor form. Each such request shall be in writing and
shall state the anticipated number of shares of Registrable Securities to be
disposed of and the anticipated gross proceeds of such shares, and the intended
methods of disposition of such shares by such Eligible Holder or Eligible
Holders, including whether such resales are to be made on a delayed or
continuous basis pursuant to Rule 415. The Company shall not be obligated to
effect any registration pursuant to this Section 4 if (i) the Eligible Holders
propose to sell Registrable Securities representing less than fifteen percent
(15% ) of the shares of the Registrable Securities then held by all Eligible
Holders or (ii) the circumstances described in Section 2(c) shall apply (but
subject to the limitations set forth therein).
(b) Application of Certain Provisions.
---------------------------------
If the registration is for an Underwritten Offering, the provisions of
Sections 2(d) and 2(f) hereof shall also apply to such registration, except the
Company may not include any shares for its own account.
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5. Hold-back Agreements
--------------------
(a) By Holders of Registrable Securities.
------------------------------------
Upon the written request of the managing underwriter of any
Underwritten Offering of the Company's securities, a Holder of Registrable
Securities shall not sell or otherwise dispose of any Registrable Securities
(other than those included in such registration) without the prior written
consent of such managing underwriter for a period (not to exceed thirty (30)
days before the effective date and one hundred twenty (120) days thereafter)
that such managing underwriter reasonably determines is necessary in order to
effect the Underwritten Offering; provided that each of the officers and
directors of the Company, and each Holder of more than one percent (1%) of the
Common Stock of the Company, shall have entered into substantially similar
holdback agreements with such managing underwriter covering at least the same
period.
(b) By the Company and Others.
-------------------------
The Company agrees:
(1) not to effect any public or private sale or distribution of
any of its equity securities during the 30-day period prior to, and
during the 120-day period after, the effective date of each
Underwritten Offering made pursuant to a Demand Registration or a
Piggyback Registration, if so requested in writing by the managing
underwriter (except as part of such Underwritten Offering, pursuant to
registrations on Forms S-4 or S-8 or any successor forms thereto), and
(2) not to issue any Equity Securities other than for sale in a
registered public offering unless each of the Persons to which such
securities are issued has entered a written agreement binding on its
transferees not to effect any public sale or distribution of such
securities during such 130-day period, including without limitation a
sale pursuant to Rule 144 under the Securities Act (except as part of
such Underwritten Registration, if and to the extent permitted
hereunder).
6. Registration Procedures
-----------------------
If and whenever the Company is required to register Registrable
Securities pursuant to this Agreement, the Company will use all commercially
reasonable efforts to effect such registration to permit the sale of such
Registrable Securities in accordance with the intended plan of distribution
thereof and will as expeditiously as practicable:
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(a) prepare and file with the SEC as soon as practicable a
Registration Statement with respect to such Registrable Securities and use all
commercially reasonable efforts to cause such Registration Statement to become
effective and remain continuously effective until the date that is the earlier
to occur of (i) the date six months from the date such Registration Statement
was declared effective, and (ii) the date the last of the Registrable Securities
covered by such Registration Statement have been sold, provided that before
filing a Registration Statement or Prospectus or any amendments or supplements
thereto, the Company shall furnish to Holders of Registrable Securities covered
by such Registration Statement and the underwriters, if any, draft copies of all
such documents proposed to be filed, which documents will be subject to the
review of each Eligible Holder and such underwriters, and the Company shall not
file any Registration Statement or amendment thereto or any Prospectus or any
supplement thereto to which the Eligible Holders or the underwriters, if any,
shall reasonably object;
(b) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement, and such supplements to the
Prospectus, as may be requested by any underwriter of Registrable Securities or
as may be required by the rules, regulations or instructions applicable to the
registration form used by the Company or by the Securities Act or rules and
regulations thereunder to keep the Registration Statement effective until all
Registrable Securities covered by such Registration Statement are sold in
accordance with the intended plan of distribution set forth in such Registration
Statement or supplement to the Prospectus;
(c) promptly notify the selling Holders of Registrable Securities and
the managing underwriter, if any, and (if requested by any such Person) confirm
such advice in writing,
(1) when the Prospectus or any supplement or post-effective
amendment has been filed, and, with respect to the Registration
Statement or any post-effective amendment, when the same has become
effective,
(2) of any request by the SEC for amendments or supplements to
the Registration Statement or the Prospectus or for additional
information,
(3) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose,
(4) if at any time the representations and warranties of the
Company contemplated by clause (1) of paragraph (o) below cease to be
accurate in all material respects,
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(5) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and
(6) of the existence of any fact which results in the
Registration Statement, the Prospectus or any document incorporated
therein by reference containing a misstatement;
(d) make all commercially reasonable efforts to obtain the withdrawal
of any order suspending the effectiveness of the Registration Statement at the
earliest practicable time;
(e) unless the Company objects in writing on reasonable grounds, if
requested by the managing underwriter or any Eligible Holder holding more than
twenty-five percent (25%) of the Registrable Securities then outstanding, as
promptly as practicable incorporate in a supplement or post-effective amendment
such information as the managing underwriter and such Eligible Holder agree
should be included therein relating to the sale of the Registrable Securities,
including, without limitation, information with respect to the number of shares
of Registrable Securities being sold to underwriters, the purchase price being
paid therefor by such underwriters and with respect to any other terms of the
Underwritten Offering of the Registrable Securities to be sold in such offering;
and make all required filings of such supplement or post-effective amendment as
soon as notified of the matters to be incorporated in such supplement or post-
effective amendment;
(f) only with respect to Demand Registrations, promptly prior to the
filing of any document which is to be incorporated by reference into the
Registration Statement or the Prospectus (after initial filing of the
Registration Statement) provide copies of such document to counsel to each of
the Eligible Holders and to the managing underwriter, if any, and make the
Company's representatives available for discussion of such document and make
such changes in such document prior to the filing thereof as counsel for each
Eligible Holder or underwriters may reasonably request;
(g) furnish to each selling Holder of Registrable Securities and the
managing underwriter, without charge, at least one signed copy of the
Registration Statement and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(h) deliver to each Eligible Holder and the underwriters, if any,
without charge, as many copies of each Prospectus (and each preliminary
prospectus) as such Persons may reasonably request (the Company hereby
consenting to the use of each
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such Prospectus (or preliminary prospectus) by each of the selling Holders of
Registrable Securities and the underwriters, if any, in connection with the
offering and sale of the Registrable Securities covered by such Prospectus (or
preliminary prospectus));
(i) prior to any public offering of Registrable Securities, use all
commercially reasonable efforts to register or qualify or cooperate with the
selling Holders of Registrable Securities, the underwriters, if any, and their
respective counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions as such underwriters may designate in writing and do
anything else necessary or advisable to enable from a legal perspective the
disposition in such jurisdictions of the Registrable Securities covered by the
Registration Statement; provided that the Company shall not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process in any such jurisdiction where it is not then so subject;
(j) cooperate with the selling Holders of Registrable Securities and
the managing underwriter, if any, to facilitate the timely preparation and
delivery of certificates not bearing any restrictive legends representing the
Registrable Securities to be sold and cause such Registrable Securities to be in
such denominations and registered in such names as the managing underwriter may
request at least three business days prior to any sale of Registrable Securities
to the underwriters;
(k) use all commercially reasonable efforts to cause the Registrable
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof or the underwriters, if any, to
consummate the disposition of such Registrable Securities;
(l) if the Registration Statement or the Prospectus contains a
misstatement, prepare a supplement or post-effective amendment to the
Registration Statement or the related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities, the Prospectus will
not contain a misstatement;
(m) use all commercially reasonable efforts to cause all Registrable
Securities covered by the Registration Statement to be listed on any national
securities exchange on which the Company's securities are listed or authorized
for quotation on Nasdaq, if requested by any Eligible Holder or the managing
underwriter, if any; provided, however, that the payment of any required listing
or other fee shall always be deemed to be "commercially reasonable" for purposes
of this Section 6(m);
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(n) provide a CUSIP number for all Registrable Securities not later
than the effective date of the Registration Statement;
(o) enter into such agreements (including an underwriting agreement)
and do anything else reasonably necessary or advisable in order to expedite or
facilitate the disposition of such Registrable Securities, and in such
connection, whether or not the registration is an Underwritten Registration:
(1) make such representations and warranties to the Holders of
such Registrable Securities and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to holders and
underwriters, respectively, in similar Underwritten Offerings;
(2) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriter, if any, and each
Eligible Holder) addressed to each selling Holder and the underwriter,
if any, covering the matters customarily covered in opinions delivered
to holders and underwriters, respectively, in similar Underwritten
Offerings and such other matters as may be reasonably requested by any
Eligible Holder or such underwriters;
(3) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the
selling Holders of Registrable Securities and the underwriters, if
any, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters to holders and
underwriters, respectively, in connection with similar Underwritten
Offerings;
(4) if an underwriting agreement is entered into, cause the same
to include customary indemnification and contribution provisions and
procedures with respect to such underwriters; and
(5) deliver such documents and certificates as may be reasonably
requested by any Eligible Holder and the managing underwriter, if any,
to evidence compliance with clause (1) above and with any customary
conditions contained in the underwriting agreement or other agreement
entered into by the Company.
The above shall be done at each closing under such underwriting or similar
agreement or as and to the extent otherwise reasonably requested by any Eligible
Holder;
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(p) make available for inspection by representatives of any Eligible
Holder, any underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney or accountant retained by the sellers
or any such underwriter, all financial and other records and 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 seller or underwriter in connection with the Registration; provided that
any records, information or documents that are designated by the Company in
writing as confidential shall be kept confidential by such Persons unless
disclosure of such records, information or documents is required by court or
administrative order; and
(q) otherwise use all commercially reasonable efforts to comply with
all applicable rules and regulations of the SEC relating to such Registration,
and make generally available to its security holders earnings statements
satisfying the provisions of Section 12(a) of the Securities Act, no later than
forty-five (45) days after the end of any 12-month period (or ninety (90) days,
if such period is a fiscal year) commencing at the end of any fiscal quarter in
which Registrable Securities are sold to underwriters in an Underwritten
Offering, or, if not sold to underwriters in such an offering, beginning with
the first month of the Company's first fiscal quarter commencing after the
effective date of the Registration Statement, which statements shall cover said
12-month period.
7. Registration Expenses
---------------------
(a) Demand Registrations and S-3 Registrations.
------------------------------------------
The Company shall bear all Expenses incurred in connection with any
Demand Registrations, S-3 Registrations or any Registrations which do not become
or are not maintained effective in accordance with the requirements specified in
Section 6(a), including expenses and fees of one counsel for all Holders.
Notwithstanding the foregoing, the Underwriters' Commissions related or
attributable to Registrable Securities sold or incurred in connection with a
Demand Registration or S-3 Registration that becomes effective shall be shared
by the Holders of the Registrable Securities whose Registrable Securities are
included in such Registration, pro rata, in accordance with the aggregate amount
of Registrable Securities sold by such Holders.
(b) Piggyback Registrations.
-----------------------
The Company shall bear all Registration Expenses incurred in
connection with any Piggyback Registrations, including expenses and fees of one
counsel for all Holders, except that each Holder of the Registrable Securities
whose Registrable Securities are included in such Registration shall pay its pro
rata share of the Underwriters' Commissions related or attributable to
Registrable Securities sold or
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incurred in such Registration, in accordance with the amount of Registrable
Securities sold by all such Holders.
(c) Company Expenses.
----------------
The Company also will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with any listing of the
securities to be registered on a securities exchange, and the fees and expenses
of any Person, including special experts, retained by the Company.
8. Termination of Registration Rights. A Holder's registration rights
----------------------------------
under this Exhibit A shall terminate and be of no further force and effect one
---------
year following the issuance of the Warrant if all the Registrable Securities
held by and issuable to such Holder may be sold under Rule 144 during any ninety
(90) day period.
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