EXHIBIT 10.28
LIFE TIME FITNESS, INC.
AMENDMENT NO. 1 TO SERIES D STOCK PURCHASE AGREEMENT
The undersigned, constituting the holders of a majority of the
Purchased Stock (as defined in the Stock Purchase Agreement referred to below)
of LIFE TIME FITNESS, Inc., a Minnesota corporation (the "Company"), do hereby
agree as of the 17th day of September, 2001, as follows:
WHEREAS, the Company has heretofore entered into a Stock Purchase
Agreement, dated July 16, 2001 (the "Series D Stock Purchase Agreement"), with
the purchasers listed on Schedule A thereto pursuant to which the Company sold
shares of its Series D Preferred Stock (capitalized terms which are not
otherwise defined herein shall have the respective meanings attributed to them
in the Series D Stock Purchase Agreement); and
WHEREAS, Section 14 of the Series D Stock Purchase Agreement permits
the holders of a majority of the Purchased Stock then owned by the Purchasers to
enter into a supplementary agreement for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of the Series D
Stock Purchase Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. Amendment. The reference to "60 days" in the second paragraph
of Section 3 of the Series D Stock Purchase Agreement shall be replaced with a
reference to "90 days".
2. Amendment Limited. Except as amended hereby, each of the
provisions of the Series D Stock Purchase Agreement shall remain in full force
and effect and this Amendment No. 1 shall not constitute a modification,
acceptance or waiver of any other provision of the Series D Stock Purchase
Agreement except as provided herein.
3. Counterparts. This
Amendment No. 1 may be
executed concurrently 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.
[SIGNATURE PAGES FOLLOW]
1
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
as of the date set forth above.
APAX EXCELSIOR VI, L.P. PATRICOF PRIVATE INVESTMENT CLUB
III, L.P.
By: Apax Excelsior VI Partners, L.P., By: Apax Excelsior VI Partners, L.P.,
its General Partner its General Partner
By: Patricof & Co. Managers, Inc., By: Patricof & Co. Managers, Inc.,
its General Partner its General Partner
By: _____________________________ By: _____________________________
Name: Xxxxx X. Xxxxxx Name: Xxxxx X. Xxxxxx
Title: Vice President Title: Vice President
APAX EXCELSIOR VI-A C.V., L.P. NORWEST EQUITY PARTNERS V, LP
A MINNESOTA LIMITED PARTNERSHIP
By: Apax Excelsior VI Partners, L.P.,
its General Partner By: ITASCA LBO V, LLP
Its: General Partner
By: Patricof & Co. Managers, Inc.,
its General Partner
By____________________________
By: _____________________________ Its__________________________
Name: Xxxxx X. Xxxxxx
Title: Vice President
APAX EXCELSIOR VI-B C.V., L.P. NORWEST EQUITY PARTNERS VII, LP
A MINNESOTA LIMITED PARTNERSHIP
By: Apax Excelsior VI Partners, L.P.,
its General Partner By: ITASCA LBO VII, LLP
Its: General Partner
By: Patricof & Co. Managers, Inc.,
its General Partner
By____________________________
By: _____________________________ Its__________________________
Name: Xxxxx X. Xxxxxx
Title: Vice President
[AMENDMENT NO. 1 TO SERIES D STOCK PURCHASE AGREEMENT]
2
Agreed and Acknowledged:
LIFE TIME FITNESS, INC.
By__________________________________
Its_________________________________
[AMENDMENT NO. 1 TO SERIES D STOCK PURCHASE AGREEMENT]
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LIFE TIME FITNESS, INC.
(FORMERLY FCA, LTD.)
================================================================================
STOCK PURCHASE AGREEMENT
================================================================================
JULY 19, 2001
TABLE OF CONTENTS
PAGE
----
1. Authorization of Securities........................................................ 1
2. Sale and Purchase of Securities.................................................... 1
3. Closing............................................................................ 1
4. Restriction on Transfer of Securities.............................................. 2
4.1. Restrictions.............................................................. 2
4.2. Legend.................................................................... 2
4.3. Removal of Legend......................................................... 3
4.4. Register of Securities.................................................... 3
5. Representations and Warranties by Company.......................................... 3
5.1. Organization, Standing, etc............................................... 3
5.2. Qualification............................................................. 4
5.3. Financial Statements...................................................... 4
5.4. Tax Returns and Audits.................................................... 4
5.5. Changes, Dividends, etc................................................... 5
5.6. Title to Properties and Encumbrances...................................... 5
5.7. Litigation; Governmental Proceedings...................................... 5
5.8. Compliance with Applicable Laws and Other Instruments..................... 5
5.9. Preferred Shares and Conversion Stock..................................... 6
5.10. Securities Laws........................................................... 6
5.11. Capital Stock............................................................. 6
5.12. Contracts................................................................. 7
5.13. Corporate Acts and Proceedings............................................ 8
5.14. Insurance Coverage........................................................ 8
5.15. No Brokers or Finders..................................................... 8
5.16. Conflicts of Interest..................................................... 8
5.17. Licenses.................................................................. 9
5.18. Registration Rights....................................................... 9
5.19. Retirement Plans.......................................................... 9
5.20. Environmental and Safety Laws............................................. 9
5.21. Employees................................................................. 10
5.22. Absence of Restrictive Agreements......................................... 11
5.23. Application of Proceeds................................................... 11
5.24. Amendment of Series A, Series B and Series C Certificates................. 11
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5.25. Disclosure................................................................ 11
6. Representations and Warranties of Purchasers....................................... 11
6.1. Investment Intent......................................................... 11
6.2. Location of Principal Office and Qualification as Accredited Investor..... 12
6.3. Acts and Proceedings...................................................... 12
6.4. No Brokers or Finders..................................................... 12
7A. Conditions of Each Purchaser's Obligation.......................................... 12
7A.1. No Errors, etc............................................................ 12
7A.2. Compliance with Agreement................................................. 12
7A.3. Certificate of Officers................................................... 13
7A.4. Opinion of Company's Counsel.............................................. 13
7A.5. No Event of Default....................................................... 16
7A.6. Qualification Under State Securities Laws................................. 16
7A.7. Proceedings and Documents................................................. 16
7A.8. Shareholders Agreement.................................................... 16
7A.9. Antares Consent........................................................... 16
7A.10. Third Amendment of 1996 Agreement and Waiver.............................. 16
7A.11. Second Amendment of 1998 Agreement and Waiver............................. 16
7A.12. First Amendment of 2000 Agreement and Waiver.............................. 16
7A.13. Amended and Restated Series A Certificate................................. 16
7A.14. Amended and Restated Series B Certificate................................. 17
7A.15. Amended and Restated Series C Certificate................................. 17
7A.16. Dissenters' Rights........................................................ 17
7B. Conditions of Company's Obligation................................................. 17
7B.1. No Errors, etc............................................................ 17
7B.2. Payment of Purchase Price................................................. 17
8. Affirmative Covenants.............................................................. 17
8.1. Corporate Existence....................................................... 17
8.2. Books of Account and Reserves............................................. 17
8.3. Furnishing of Financial Statements and Information........................ 18
8.4. Inspection................................................................ 19
8.5. Preparation and Approval of Budgets....................................... 20
8.6. Payment of Taxes and Maintenance of Properties............................ 20
8.7. Insurance................................................................. 20
8.8. Payment of Indebtedness and Discharge of Obligations...................... 21
8.9. Directors' and Shareholders' Meetings..................................... 21
8.10. Application of Proceeds................................................... 22
8.11. Retirement Plans.......................................................... 22
8.12. Filing of Reports......................................................... 22
8.13. Patents and Other Intangible Rights....................................... 22
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8.14. Insurance on Life of Xxxxxx Xxxxxx........................................ 23
8.15. Rule 144A................................................................. 23
8.16. Right of First Refusal.................................................... 23
8.17. Conversion Stock Fully Paid; Reservation of Shares........................ 24
8.18. Form D Filing; Blue Sky Law Filings....................................... 24
9. Negative Covenants................................................................. 24
9.1. Dividends on or Redemption of Junior Stock................................ 25
9.2. Future Registration Rights................................................ 25
9.3. Other Matters Requiring Prior Approval of Purchasers...................... 25
9.4. Approval of Board Super-Majority.......................................... 27
10. Registration of Stock.............................................................. 27
10.1. Required Registration..................................................... 27
10.2. Incidental Registration................................................... 28
10.3. Reduction of Offering..................................................... 29
10.4. Registration Procedures................................................... 30
10.5. Expenses.................................................................. 31
10.6. Indemnification........................................................... 32
11. Default............................................................................ 34
11.1. Events of Default......................................................... 34
11.2. Remedies Upon Events of Default........................................... 35
11.3. Notice of Defaults........................................................ 36
11.4. Suits for Enforcement..................................................... 36
11.5. Remedies Cumulative....................................................... 36
11.6. Remedies not Waived....................................................... 36
12. Termination of Certain Covenants................................................... 36
13. Definitions........................................................................ 36
13.1. "Additional Shares of Common Stock"....................................... 37
13.2. "Amended and Restated Series A Certificate"............................... 37
13.3. "Amended and Restated Series B Certificate"............................... 37
13.4. "Amended and Restated Series C Certificate"............................... 37
13.5. "Common Stock"............................................................ 37
13.6. "Conversion Price"........................................................ 37
13.7. "Conversion Stock"........................................................ 37
13.8. "Convertible Securities".................................................. 37
13.9. "Indebtedness for Borrowed Money"......................................... 37
13.10. "Third Amendment to 1996 Agreement and Waiver"............................ 37
13.11. "Second Amendment to 1998 Agreement and Waiver"........................... 38
13.12. "First Amendment to 2000 Agreement and Waiver"............................ 38
13.13. "Junior Stock"............................................................ 38
iii
13.14. "Permitted Liens"......................................................... 38
13.15. "Preferred Shares"........................................................ 38
13.16. "Preferred Stock"......................................................... 38
13.17. "Purchased Stock"......................................................... 38
13.18. "Securities".............................................................. 39
13.19. "Senior Indebtedness"..................................................... 39
13.20. "Series A Conversion Stock"............................................... 39
13.21. "Series B Conversion Stock"............................................... 39
13.22. "Series C Conversion Stock"............................................... 39
13.23. "Subsidiary".............................................................. 39
14. Consents; Waivers and Amendments................................................... 39
15. Voting Agreement................................................................... 40
16. Changes, Waivers, etc.............................................................. 40
17. Payment of Fees and Expenses of Purchasers......................................... 40
18. Understanding Among Purchasers..................................................... 40
19. Notices............................................................................ 41
20. Survival of Representations and Warranties, etc.................................... 41
21. Parties in Interest................................................................ 41
22. Headings........................................................................... 41
23. Choice of Law...................................................................... 41
24. Waiver of Jury Trial............................................................... 42
25. Counterparts....................................................................... 42
Schedule A Purchasers
Schedule B Holders of at least 4% of the outstanding shares of the Company's
capital stock
iv
Exhibit 1 -- Certificate of Designation of Rights and Preferences of
Series D Preferred Stock
Exhibit 2 -- Exception Schedule
Exhibit 3 -- Financial Statements
Exhibit 4 -- Intentionally Omitted
Exhibit 5 -- Form of Shareholders Agreement
Exhibit 6 -- Intentionally Omitted
Exhibit 7 -- Third Amendment of 1996 Agreement and Waiver
Exhibit 8 -- Second Amendment of 1998 Agreement and Waiver
Exhibit 9 -- First Amendment of 2000 Agreement and Waiver
Exhibit 10 -- Amended and Restated Series A Certificate
Exhibit 11 -- Amended and Restated Series B Certificate
Exhibit 12 -- Amended and Restated Series C Certificate
Exhibit 13 -- Quarterly Financial Summary
Exhibit 14 -- Consent and Waiver of Antares Leveraged Capital Corp.
v
LIFE TIME FITNESS, INC.
STOCK PURCHASE AGREEMENT
July 19, 2001
To Each of the Persons Named in
Schedule A to this Agreement
(the "Purchasers")
Ladies and Gentlemen:
In consideration of the agreement of the Purchasers to purchase the
Preferred Shares (as hereinafter defined), as provided for herein, the
undersigned LIFE TIME FITNESS, Inc. (formerly known as FCA, Ltd.), a Minnesota
corporation (the "Company"), hereby agrees with each of the Purchasers as
follows:
1. Authorization of Securities. The Company proposes to
authorize, issue and sell an aggregate of up to 2,000,000 shares of series D
convertible preferred stock of the Company (the "Series D Preferred Stock"), to
be issued pursuant to and be entitled to the benefits of a Certificate of
Designation of Rights and Preferences (the "Certificate") containing the terms
set forth in Exhibit 1 hereto. The term "Preferred Shares" as used herein shall
mean the shares of Series D Preferred Stock set forth in Schedule A hereto and
all preferred shares of the Company issued in exchange or substitution therefor.
2. Sale and Purchase of Securities. Subject to the terms and
conditions hereof, the Company agrees to sell to each Purchaser, and each
Purchaser agrees to purchase from the Company, the number of Preferred Shares
set forth opposite such Purchaser's name in Schedule A hereto, at the purchase
price set forth opposite such Purchaser's name in Schedule A hereto.
3. Closing. The closing of the sale to, and purchase by, the
Purchasers of the Preferred Shares (the "Closing") shall occur at the offices of
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP, 405 Lexington Avenue, New York, New York,
at the hour of 10:00 A.M., New York time,
on July 19, 2001 or on such other day or at such other time or place as the
Purchasers and the Company shall agree upon (the "Closing Date").
At the Closing, the Company will deliver to the Purchasers certificates
representing the Preferred Shares being purchased by the Purchasers, registered
in their respective names as stated in Schedule A hereto (or in the names of
their respective nominees as may be specified to the Company at least 48 hours
prior to the Closing Date), against delivery to the Company of the amounts set
forth after their respective names in Schedule A hereto by wire transfer,
certified check or cancellation of indebtedness in payment of the total purchase
price of the Preferred Shares being purchased by the Purchasers. Each of the
Purchasers acknowledges and agrees that during the period commencing with the
Closing Date and ending 60 days thereafter, the Company may sell an additional
number of Preferred Shares, not to exceed the difference between 2,000,000 and
the number of Preferred Shares issued on the Closing Date, to additional
purchasers, which purchasers shall be approved by the Series C Preferred Stock
and Series D Preferred Stock then outstanding (acting together as a class),
which approval shall not be unreasonably withheld, on the same terms as the sale
of the Preferred Shares to the Purchasers on the Closing Date, upon execution of
counterparts of this Agreement by such additional purchasers who shall thereupon
become bound by and entitled to the benefits of this Agreement. Such additional
purchasers shall, by executing counterparts of this Agreement, become Purchasers
for all purposes of this Agreement, and Schedule A hereto shall be deemed to be
appropriately amended. The Preferred Shares thus sold to such additional
purchasers shall be deemed to be Preferred Shares and Purchased Stock as such
terms are defined in this Agreement. The sale of such additional securities may
be subject to such conditions as are consistent with those set forth in Section
7 hereof and are agreed to among the Company and such additional purchasers.
4. Restriction on Transfer of Securities.
4.1. Restrictions. The Preferred Shares and the shares of Common
Stock into which the Preferred Shares are convertible and all shares of Common
Stock of the Company issued in exchange or substitution therefor (the
"Conversion Stock") are "restricted securities" as defined under the Securities
Act of 1933, as amended (the "Securities Act"), and the rules and regulations
promulgated thereunder and may be transferred only pursuant to (a) a
registration statement covering the sale of such securities that has been
declared effective under the Securities Act, (b) Rule 144 (or any similar rule
then in effect) adopted under the Securities Act, if such rule is available, and
(c) subject to the conditions elsewhere specified in this Section 4, any other
legally available means of transfer.
4.2. Legend.
(a) Each certificate representing Preferred Shares shall be
endorsed with the following legend:
"The securities evidenced hereby may not be transferred
without (i) the opinion of counsel satisfactory to the Company
that such transfer may be lawfully made
2
without registration under the Federal Securities Act of 1933
and all applicable state securities laws or (ii) such
registration."
Upon the conversion of any Preferred Shares, unless the Company
receives an opinion of counsel from the holder of such a security
satisfactory to the Company to the effect that a sale, transfer,
assignment, pledge or distribution of the Conversion Stock issuable
upon such conversion or exercise may be made without registration, or
unless such Conversion Stock is being disposed of pursuant to
registration under the Securities Act and any applicable state act, the
same legend shall be endorsed on the certificate evidencing such
Conversion Stock.
(b) Stop Transfer Order. A stop transfer order shall be placed
with the Company's transfer agent preventing transfer of any
of the securities referred to in paragraph (a) above pending
compliance with the conditions set forth in any such legend
(except as otherwise provided in paragraph (a) above).
4.3. Removal of Legend. Any legend endorsed on a certificate or
instrument evidencing a security pursuant to Section 4.2 hereof shall be
removed, and the Company shall issue a certificate or instrument without such
legend to the holder of such security, (a) if such security is being disposed of
pursuant to a registration statement covering the sale of such security that has
been declared effective under the Securities Act and any applicable state acts
or pursuant to Rule 144 or any similar rule then in effect, or (b) if such
holder provides the Company with an opinion of counsel satisfactory to the
Company to the effect that a sale, transfer, assignment, offer, pledge or
distribution for value of such security may be made without registration and
that such legend is not required to satisfy the applicable exemption from
registration.
4.4. Register of Securities. The Company or its duly appointed
agent shall maintain a separate register for the Preferred Shares in which it
shall register the issuance and transfer of all Preferred Shares. All transfers
of Preferred Shares shall be recorded on the register maintained by the Company
or its agent, and the Company shall be entitled to regard the registered holder
of such securities as the actual owner of the securities so registered until the
Company or its agent is required to record a transfer of such securities on its
register. The Company or its agent shall be required to record any such transfer
when it receives (a) the security to be transferred duly and properly endorsed
by the registered holder thereof or by its attorney duly authorized in writing,
and (b) the opinion of counsel referred to in Sections 4.2 and 4.3 hereof or
evidence of compliance with the registration provisions referred to in those
Sections.
5. Representations and Warranties by Company. Except as disclosed
in Exhibit 2 hereto, the Company represents and warrants to the Purchasers that:
5.1. Organization, Standing, etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota, and has the requisite corporate power and authority to own its
properties and to carry on its business in all material respects as it is now
being conducted. The Company has the requisite corporate power and authority to
issue the Preferred Shares and the Conversion Stock, and to otherwise perform
3
its obligations under this Agreement. The copies of the articles of
incorporation of the Company, including certificates of designation for
preferred stock (the "Articles of Incorporation"), and bylaws of the Company
(the "Bylaws") delivered to the Purchasers or their agents prior to the
execution of this Agreement are true and complete copies of the duly and legally
adopted Articles of Incorporation and Bylaws in effect as of the date of this
Agreement.
5.2. Qualification. The Company is duly qualified or licensed as a
foreign corporation in good standing in each jurisdiction wherein the nature of
its activities or of its properties owned or leased makes such qualification or
licensing necessary and failure to be so qualified or licensed would have a
material adverse impact on its business.
5.3. Financial Statements. Attached hereto as Exhibit 3 are (a)
consolidated balance sheets as of December 31, 1999 and December 31, 2000,
together with the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three fiscal years ended December 31,
2000, and the report thereon of Xxxxxx Xxxxxxxx LLP, independent public
accountants, and (b) an unaudited consolidated balance sheet as of May 31, 2001
(the "Balance Sheet Date"), and the related consolidated statements of
operations and cash flow for the five months then ended, prepared by the
Company. Such financial statements (i) are in accordance with the books and
records of the Company, (ii) present fairly the financial condition of the
Company at December 31, 2000 and at the Balance Sheet Date and the results of
its operations for the periods therein specified, and (iii) have, in all
material respects, been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior accounting
periods, subject, with respect to the unaudited statements, to year-end
adjustments which, in the aggregate, are not material. Specifically, but not by
way of limitation, the balance sheets or notes thereto disclose all of the
debts, liabilities and obligations of any nature (whether absolute, accrued or
contingent and whether due or to become due) of the Company at December 31, 2000
or at the Balance Sheet Date, as applicable, which, individually or in the
aggregate, are material and which in accordance with generally accepted
accounting principles would be required to be disclosed in such balance sheets,
and the omission of which would, in the aggregate, have a material adverse
impact on the Company. The balance sheets include appropriate reserves for all
taxes and other liabilities accrued at each such date but not yet payable.
5.4. Tax Returns and Audits. All required federal, state and local
tax returns or appropriate extension requests of the Company have been filed,
and all federal, state and local taxes required to be paid with respect to such
returns have been paid or due provision for the payment thereof has been made.
The Company is not delinquent in the payment of any such tax or in the payment
of any assessment or governmental charge. The Company has not received notice of
any tax deficiency proposed or assessed against it, and has not executed any
waiver of any statute of limitations on the assessment or collection of any tax.
None of the Company's tax returns has been audited by governmental authorities
in a manner to bring such audits to the Company's attention. The Company does
not have any tax liabilities except those reflected in Exhibit 3 hereto and
those incurred in the ordinary course of business since the Balance Sheet Date.
4
5.5. Changes, Dividends, etc. Except for the transactions
contemplated by this Agreement, since the Balance Sheet Date the Company has
not: (a) incurred any debts, obligations or liabilities, absolute, accrued or
contingent and whether due or to become due, except current liabilities incurred
in the ordinary course of business, which (individually or in the aggregate)
will not materially and adversely affect the business, properties or prospects
of the Company; (b) paid any obligation or liability other than, or discharged
or satisfied any liens or encumbrances other than those securing, current
liabilities, in each case in the ordinary course of business; (c) declared or
made any payment or distribution to its shareholders as such, or purchased or
redeemed any of its shares of capital stock or other securities, or obligated
itself to do so; (d) mortgaged, pledged or subjected to lien, charge, security
interest or other encumbrance any of its assets, tangible or intangible, except
in the ordinary course of business; (e) sold, transferred or leased any of its
assets except in the ordinary course of business; (f) cancelled or compromised
any debt or claim, or waived or released any right of material value; (g)
suffered any physical damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting the properties, business or
prospects of the Company; (h) entered into any transaction other than in the
ordinary course of business; (i) encountered any labor difficulties or labor
union organizing activities; (j) issued or sold any shares of capital stock or
other securities or granted any options, warrants or other purchase rights with
respect thereto other than as contemplated by this Agreement; (k) made any
acquisition or disposition of any material assets or become involved in any
other material transaction, other than for fair value in the ordinary course of
business; (l) increased the compensation payable, or to become payable, to any
of its directors or employees, or made any bonus payment or similar arrangement
with any directors or employees or increased the scope or nature of any fringe
benefits provided for its employees or directors; or (m) agreed to do any of the
foregoing other than pursuant hereto. There has been no material adverse change
in the financial condition, operations, results of operations or business of the
Company since the Balance Sheet Date.
5.6. Title to Properties and Encumbrances. The Company has good and
marketable title to all its owned properties and assets, including without
limitation the properties and assets reflected in Exhibit 3 hereto and the
properties and assets used in the conduct of its business, except for property
disposed of in the ordinary course of business since the Balance Sheet Date,
which properties and assets are not subject to any mortgage, pledge, lease,
lien, charge, security interest, encumbrance or restriction, except (a) those
which are shown and described in Exhibit 3 hereto or the notes thereto, and (b)
Permitted Liens (as hereinafter defined).
5.7. Litigation; Governmental Proceedings. There are no legal
actions, suits, arbitrations or other legal, administrative or governmental
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company, its properties, assets or business, and the
Company is not aware of any facts which are likely to result in or form the
basis for any such action, suit or other proceeding. The Company is not in
default with respect to any judgment, order or decree of any court or any
governmental agency or instrumentality. The Company has not been threatened with
any action or proceeding under any building or zoning ordinance, law or
regulation.
5.8. Compliance with Applicable Laws and Other Instruments. The
business and operations of the Company have been and are being conducted in
accordance with all applicable
5
laws, rules and regulations of all governmental authorities except where
noncompliance with such laws, rules and regulations would not have a material
adverse effect on the business, financial condition or results of operations of
the Company. Neither the execution nor delivery of, nor the performance of or
compliance with, this Agreement nor the consummation of the transactions
contemplated hereby will conflict with, or, with or without the giving of notice
or passage of time, result in any breach of, or constitute a default under, or
result in the imposition of any lien or encumbrance upon any asset or property
of the Company pursuant to, any applicable law, administrative regulation or
judgment, order or decree of any court or governmental body, any agreement or
other instrument to which the Company is a party or by which it or any of its
properties, assets or rights is bound or affected, and will not violate the
Articles of Incorporation or Bylaws. The Company is not in violation of, or in
default under, any lien, indenture, mortgage, lease, agreement, instrument,
commitment or arrangement where such violation or default would have a material
adverse effect on the business, financial condition or results of operation of
the Company, nor in violation of its Articles of Incorporation or its Bylaws.
5.9. Preferred Shares and Conversion Stock. The Preferred Shares
when issued and paid for pursuant to the terms of this Agreement, will be duly
authorized, validly issued and outstanding, fully paid, nonassessable and free
and clear of all pledges, liens, encumbrances and restrictions, except as set
forth in Section 4 hereof, and the shares of Conversion Stock issuable upon
conversion of the Preferred Shares have been reserved for issuance based upon
the initial Conversion Price (as hereinafter defined) of the Preferred Shares
and when issued upon conversion will be duly authorized, validly issued and
outstanding, fully paid, nonassessable and free and clear of all pledges, liens,
encumbrances and restrictions, except as set forth in Section 4 hereof and
except for pledges, liens, encumbrances and restrictions created by the
Purchasers. The certificates representing the Preferred Shares to be delivered
by the Company hereunder, and the certificates representing the Conversion Stock
to be delivered upon the conversion of the Preferred Shares, will be genuine,
and the Company has no knowledge of any fact which would impair the validity
thereof.
5.10. Securities Laws. Based in part upon the representations and
warranties contained in Section 6 hereof, no consent, authorization, approval,
permit or order of or filing with any governmental or regulatory authority is
required under current laws and regulations in connection with the execution and
delivery of this Agreement or the offer, issuance, sale or delivery of the
Preferred Shares or the offer of the Conversion Stock other than the filing of a
notice on Form D by the Company with the Securities and Exchange Commission (the
"Commission") and any filings that may be required under any applicable state
securities laws. The Company has not, directly or through an agent, offered the
Preferred Shares, the Conversion Stock or any similar securities for sale to, or
solicited any offers to acquire such securities from, persons other than the
Purchasers and other accredited investors. Under the circumstances contemplated
hereby, the offer, issuance, sale and delivery of the Preferred Shares and the
offer of the Conversion Stock will not under current laws and regulations
require compliance with the prospectus delivery or registration requirements of
the Securities Act.
5.11. Capital Stock. The authorized capital stock of the Company
consists of 50,000,000 common shares, of which 13,260,491 shares are issued and
outstanding and
6
10,000,000 shares of preferred stock, 5,979,243 of which are issued and
outstanding, consisting of 479,243 shares of Series A Convertible Preferred
Stock (the "Series A Preferred Stock"), 1,000,000 shares of Series B Convertible
Preferred Stock (the "Series B Preferred Stock") and 4,500,000 shares of Series
C Convertible Preferred Stock (the "Series C Preferred Stock"). All of the
outstanding shares of capital stock of the Company were duly authorized and
validly issued and are fully paid and nonassessable. There are no outstanding
subscriptions, options, warrants, calls, contracts, demands, commitments,
Convertible Securities (as hereinafter defined) or other agreements or
arrangements of any character or nature whatever, except for the outstanding
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and as otherwise disclosed in Exhibit 2 hereto or as contemplated by this
Agreement, under which the Company is or may be obligated to issue capital stock
or other securities of any kind representing an ownership interest or contingent
ownership interest in the Company. Neither the offer nor the issuance or sale of
the Preferred Shares or the Conversion Stock, constitutes an event under any
anti-dilution provisions of any securities issued or issuable by the Company or
any agreements with respect to the issuance of securities by the Company, which
will either increase the number of shares issuable pursuant to such provisions
or decrease the consideration per share to be received by the Company pursuant
to such provisions. No holder of any security of the Company is entitled to any
preemptive or similar rights to purchase securities from the Company except as
otherwise contemplated by this Agreement, the Stock Purchase Agreement dated
August 16, 2000 among the Company and the Purchasers named therein (as the same
may be amended, restated or otherwise modified including by the First Amendment
to 2000 Agreement and Waiver (as hereinafter defined), the "2000 Agreement"),
the Stock Purchase Agreement dated December 8, 1998 among the Company and the
Purchasers named therein (as the same may be amended, restated or otherwise
modified including by the First Amendment to 1998 Agreement and Waiver (as
defined in the 2000 Agreement) and the Second Amendment to 1998 Agreement and
Waiver (as hereinafter defined), the "1998 Agreement") or the Stock Purchase
Agreement dated May 7, 1996 among the Company and the Purchasers named therein
(as the same may be amended, restated or otherwise modified, including by the
First Amendment to 1996 Agreement and Waiver (as defined in the 1998 Agreement),
the Second Amendment to 1996 Agreement and Waiver (as defined in the 2000
Agreement) and the Third Amendment to 1996 Agreement and Waiver (as hereinafter
defined), the "1996 Agreement"). All outstanding securities of the Company have
been issued in full compliance with an exemption or exemptions from the
registration and prospectus delivery requirements of the Securities Act and from
the registration and qualification requirements of all applicable state
securities laws.
5.12. Contracts. The Company has substantially performed all
obligations required to be performed by it to date and is not in default in any
respect under any of the contracts, agreements, leases, documents, commitments
or other arrangements to which it is a party or by which it is otherwise bound
except where such default would not have a material adverse effect on the
business, financial condition or results of operation of the Company. All
instruments referred to above are in effect and enforceable against the Company
according to their respective terms (except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the enforcement of creditors' rights generally, and except for
judicial limitations on the enforcement of the remedy of specific performance
and other equitable remedies), and there is not under any of such instruments
any
7
existing material default or event of default or event, in each case on the part
of the Company, which, with notice or lapse of time or both, would constitute an
event of default thereunder. To the Company's knowledge, all third parties
having material contractual arrangements with the Company are in substantial
compliance therewith and the Company is not aware of any material default in any
respect thereunder by any such third party to such contractual arrangements. All
plans or arrangements listed pursuant to clause (d) above are fully funded to
the extent that such funding is required by generally accepted accounting
principles.
5.13. Corporate Acts and Proceedings. This Agreement, the First
Amendment to 2000 Agreement and Waiver, the First Amendment to 1998 Agreement
and Waiver, the Second Amendment to 1998 Agreement and Waiver, the First
Amendment to 1996 Agreement and Waiver, the Second Amendment to 1996 Agreement
and Waiver and the Third Amendment to 1996 Agreement and Waiver have been duly
authorized by all necessary corporate action on behalf of the Company, and have
been duly executed and delivered by authorized officers of the Company. All
corporate action necessary for the authorization, creation, issuance and
delivery of the Preferred Shares and the Conversion Stock has been taken on the
part of the Company, or will be taken by the Company on or prior to the Closing
Date. This Agreement, the First Amendment to 2000 Agreement and Waiver, the
First Amendment to 1998 Agreement and Waiver, the Second Amendment to 1998
Agreement and Waiver, the First Amendment to the 1996 Agreement and Waiver, the
Second Amendment to 1996 Agreement and Waiver and the Third Amendment to 1996
Agreement and Waiver, are valid and binding agreements of the Company
enforceable against the Company in accordance with their terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally, and except for judicial limitations on the enforcement of the
remedy of specific enforcement and other equitable remedies.
5.14. Insurance Coverage. There are in full force policies of
insurance issued by insurers of recognized responsibility insuring the Company,
its properties and business against such losses and risks, and in such amounts,
as in the Company's best judgment, after advice from its insurance broker, are
acceptable for the nature and extent of its business and the Company's
resources.
5.15. No Brokers or Finders. No person, firm or corporation has or
will have, as a result of any act or omission of the Company, any right,
interest or valid claim against or upon the Company or any Purchaser for any
commission, fee or other compensation as a finder or broker, or in any similar
capacity, in connection with the transactions contemplated by this Agreement.
The Company will indemnify and hold each Purchaser harmless against any and all
liability with respect to any such commission, fee or other compensation which
may be payable or determined to be payable in connection with the transactions
contemplated by this Agreement.
5.16. Conflicts of Interest. No officer or director of the Company
or any affiliate (as such term is defined in Rule 405 under the Securities Act)
of any such person or, to the Company's knowledge, no shareholder or any
affiliate of any such person, has any direct or indirect interest (a) in any
entity which does business with the Company, or (b) in any property, asset or
right which is used by the Company in the conduct of its business, or (c) in any
8
contractual relationship with the Company other than as an employee. For the
purpose of this Section 5.16, there shall be disregarded any interest which
arises solely from the ownership of less than a 1% equity interest in a
corporation whose stock is regularly traded on any national securities exchange
or in the over-the-counter market.
5.17. Licenses. The Company possesses from the appropriate agency,
commission, board and government body and authority, whether state, local or
federal, all licenses, permits, authorizations, approvals, franchises and rights
which (a) are necessary for it to engage in the business currently conducted by
it, and (b) if not possessed by the Company would have a material adverse effect
on the business, financial condition or results of operations of the Company.
The Company has no knowledge that would lead it to believe that it will not be
able to obtain all licenses, permits, authorizations, approvals, franchises and
rights that may be required for any business the Company proposes to conduct.
5.18. Registration Rights. Other than under this Agreement, the 2000
Agreement, the 1998 Agreement and the 1996 Agreement, the Company has not agreed
to register any of its authorized or outstanding securities under the Securities
Act.
5.19. Retirement Plans. The Company does not have any retirement
plan in which any employees of the Company participate that is subject to any
provisions of the Employee Retirement Income Security Act of 1974, as amended,
and of the regulations adopted pursuant thereto ("ERISA").
5.20. Environmental and Safety Laws. For purposes of this Agreement,
(i) "Environmental Law" means the Comprehensive
Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section 9601 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901
et seq., the Federal Water Pollution Control Act, 33
U.S.C. Section 1201 et seq., the Clean Water Act, 33
U.S.C. Section 1321 et seq., the Clean Air Act, 42
U.S.C. Section 7401 et seq., and any other federal,
state, local or other governmental statute,
regulation, law or ordinance dealing with the
protection of human health, natural resources or the
environment;
(ii) "Hazardous Substance" means any pollutant,
contaminant, hazardous substance or waste, solid
waste, petroleum or any fraction thereof, or any
other chemical, substance or material listed or
identified in or regulated by any Environmental Law;
(iii) "RCRA Hazardous Waste" means a hazardous waste, as
that term is defined in and pursuant to the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901
et seq.; and
(iv) "Real Estate" means the real property owned or leased
by the Company at any time.
9
(a) To the Company's knowledge, no Hazardous Substances have ever
been buried, spilled, leaked, discharged, emitted, generated,
stored, used or released, and no Hazardous Substances are now
present, in, on, or under the Real Estate except for
immaterial quantities stored or used by the Company in the
ordinary course of its business and in accordance with all
applicable Environmental Laws.
(b) To the Company's knowledge, the Real Estate is not being used,
and the Real Estate has never been used, in connection with
the business of manufacturing, storing or transporting
Hazardous Substances, and no RCRA Hazardous Wastes have been
treated, stored or disposed of on the Real Estate.
(c) To the Company's knowledge, there are not now and never have
been any underground or aboveground storage tanks or other
containment facilities of any kind on the Real Estate which
contain or ever did contain any Hazardous Substances.
(d) The Real Estate is not and never has been listed on the
National Priorities List, the Comprehensive Environmental
Response, Compensation and Liability Information System or any
similar federal, state or local list, schedule, log, inventory
or database.
(e) The Company has delivered to the Purchasers, to the extent
requested by the Purchasers, true and complete copies of all
material reports, authorizations, permits, licenses,
disclosures and other documents in its possession, custody or
control describing or relating in any way to the Real Estate
which describe, mention or discuss the status thereof with
respect to any Environmental Law.
(f) To the best knowledge of the Company, there are not and there
never have been any requests, notices, investigations, claims,
demands, actions, suits or other legal or administrative
proceedings relating in any way to the Company or the Real
Estate, alleging liability under, violation of or
noncompliance with, any Environmental Law or any license,
permit or other authorization issued pursuant thereto. No such
matter is threatened or impending, nor does there exist any
substantial basis therefor.
(g) The Company operates, and at all times has operated, the
business in accordance with all applicable Environmental Laws,
and all licenses, permits and other authorizations required
pursuant to any Environmental Law and necessary for the lawful
and efficient operation of the business are in the Company's
possession and are in full force and effect. To the knowledge
of the Company, there is no threat that any such permit,
license or other authorization will be withdrawn, terminated,
not renewed, or otherwise materially limited or changed.
5.21. Employees. To the Company's knowledge, no officer of the
Company or employee of the Company whose annual compensation is in excess of
$100,000 has any plans to terminate his or her employment with the Company. The
Company has complied in all material
10
respects with all laws relating to the employment of labor, including provisions
relating to wages, hours, equal opportunity, collective bargaining and payment
of Social Security and other taxes, and the Company has not encountered any
material labor difficulties. The Company does not know of any worker's
compensation liabilities, except those reflected in Exhibit 3 hereto.
5.22. Absence of Restrictive Agreements. To the Company's knowledge,
no employee of the Company is subject to any secrecy or non-competition
agreement or any agreement or restriction of any kind that would impede in any
way the ability of such employee to carry out fully all activities of such
employee in furtherance of the business of the Company.
5.23. Application of Proceeds. The proceeds from the issuance and
sale of Preferred Shares pursuant to this Agreement will be used to fund working
capital and other general corporate purposes.
5.24. Amendment of Series A, Series B and Series C Certificates. At
the Closing, the Amended and Restated Series A Certificate in the form annexed
hereto as Exhibit 10, the Amended and Restated Series B Certificate in the form
annexed hereto as Exhibit 11 and the Amended Series C Certificate in the form
annexed hereto as Exhibit 12 shall be effective.
5.25. Disclosure. The Company has not knowingly withheld from the
Purchasers any material facts relating to the assets, business, operations,
financial condition or prospects of the Company. No representation or warranty
in this Agreement or in any certificate or schedule furnished or to be furnished
to any Purchaser pursuant hereto contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact required to
be stated herein or therein or necessary to make the statements herein or
therein not misleading.
6. Representations and Warranties of Purchasers. Each of the
Purchasers severally represents and warrants for itself that:
6.1. Investment Intent. The Preferred Shares being acquired by such
Purchaser hereunder are being purchased, and the Conversion Stock acquired by
such Purchaser upon conversion of such Preferred Shares will be acquired, for
such Purchaser's own account and not with the view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the Securities Act. Such Purchaser understands that the Preferred Shares and
the Conversion Stock, have not been registered under the Securities Act or any
applicable state laws by reason of their issuance or contemplated issuance in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act and such state laws, and that the reliance of the Company and
others upon this exemption is predicated in part upon this representation and
warranty. Such Purchaser further understands that the Preferred Shares and the
Conversion Stock may not be transferred or resold without (a) registration under
the Securities Act and any applicable state securities laws, or (b) an exemption
from the requirements of the Securities Act and applicable state securities
laws.
Such Purchaser understands that an exemption from such registration is
not currently available pursuant to Rule 144 promulgated under the Securities
Act by the Commission and that in any event such Purchaser may not sell any
securities pursuant to Rule 144 prior to the
11
expiration of a one-year period after such Purchaser has acquired the
securities. Such Purchaser understands that any sales pursuant to Rule 144 may
only be made in full compliance with the provisions of Rule 144.
6.2. Location of Principal Office and Qualification as Accredited
Investor. The state in which such Purchaser's principal office (or domicile, if
such Purchaser is an individual) is set forth in such Purchaser's address in
Schedule A hereto. Such Purchaser qualifies as an accredited investor within the
meaning of Rule 501 under the Securities Act for the reasons specified on such
Purchaser's Certification attached to this Agreement. Such Purchaser has such
knowledge and experience in financial and business matters that such Purchaser
is capable of evaluating the merits and risks of the investment to be made
hereunder by such Purchaser. Such Purchaser has and has had access to all of the
Company's material books and records and access to the Company's executive
officers has been provided to such Purchaser or to such Purchaser's qualified
agents.
6.3. Acts and Proceedings. This Agreement has been duly authorized
by all necessary action on the part of such Purchaser, has been duly executed
and delivered by such Purchaser, and is a valid and binding agreement upon the
part of such Purchaser enforceable against such Purchaser in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, reorganization, or other similar laws affecting
enforcement of creditors' rights generally, and except for judicial limitations
on the enforcement of the remedy of specific enforcement and other equitable
remedies.
6.4. No Brokers or Finders. No person, firm or corporation has or
will have, as a result of any act or omission by such Purchaser, any right,
interest or valid claim against the Company for any commission, fee or other
compensation as a finder or broker, or in any similar capacity, in connection
with the transactions contemplated by this Agreement. Such Purchaser will
indemnify and hold the Company harmless against any and all liability with
respect to any such commission, fee or other compensation which may be payable
or determined to be payable as a result of the actions of such Purchaser in
connection with the transactions contemplated by this Agreement.
7A. Conditions of Each Purchaser's Obligation. The obligation to
purchase and pay for the Preferred Shares which each Purchaser has agreed to
purchase on the Closing Date is subject to the fulfillment prior to or on the
Closing Date of the following conditions. In the event that any such condition
is not satisfied to the satisfaction of each Purchaser, then no Purchaser shall
be obligated to proceed with the purchase of such Preferred Shares.
7A.1. No Errors, etc. The representations and warranties of
the Company under this Agreement shall be true in all material respects as of
the Closing Date with the same effect as though made on and as of the Closing
Date.
7A.2. Compliance with Agreement. The Company shall have
performed and complied with all agreements or conditions required by this
Agreement to be performed or complied with by it prior to or as of the Closing
Date.
12
7A.3. Certificate of Officers. The Company shall have
delivered to the Purchasers a certificate, dated the Closing Date, executed by
the President and the senior financial officer of the Company and certifying to
the satisfaction of the conditions specified in Sections 7A.1, 7A.2 and 7A.5
hereof.
7A.4. Opinion of Company's Counsel. The Company shall have
delivered to each of the Purchasers an opinion or opinions of Faegre & Xxxxxx
LLP, special counsel for the Company, dated the Closing Date, to the effect
that:
(a) The Company is duly incorporated, validly existing and in good
standing under the laws of the State of Minnesota with the
corporate power to enter into this Agreement, the First
Amendment to 2000 Agreement and Waiver, the First Amendment to
1998 Agreement and Waiver, the Second Amendment to 1998
Agreement and Waiver; the First Amendment to 1996 Agreement
and Waiver, the Second Amendment to 1996 Agreement and Waiver,
the Third Amendment to 1996 Agreement and Waiver and the
Shareholders Agreement (as defined in Section 7A.8 herein), to
issue and sell the Preferred Shares and the Conversion Stock
as contemplated by this Agreement, to carry out the provisions
of this Agreement, the First Amendment to 2000 Agreement and
Waiver, the First Amendment to 1998 Agreement and Waiver, the
Second Amendment to 1998 Agreement and Waiver, the First
Amendment to 1996 Agreement and Waiver, the Second Amendment
to 1996 Agreement and Waiver, the Third Amendment to 1996
Agreement and Waiver and the Shareholders Agreement and to
conduct any lawful business activity; and qualified to do
business as a foreign corporation in good standing in any
state or jurisdiction wherein the nature of its activities or
of its properties owned or leased makes such qualification
necessary and failure to be so qualified would have a material
adverse effect upon the Company.
(b) This Agreement(1), the First Amendment to 2000 Agreement, the
First Amendment to 1998 Agreement and Waiver, the Second
Amendment to 1998 Agreement, the First Amendment to 1996
Agreement and Waiver, the Second Amendment to 1996 Agreement
and Waiver, the Third Amendment to 1996 Agreement and Waiver
and the Shareholders Agreement (as defined in Section 7A.8
herein) have been duly authorized by all requisite corporate
action, executed and delivered by the Company, and are valid
and binding agreements of the Company enforceable in
accordance with their respective terms.
(c) The Certificate, the Amended and Restated Series A Certificate
(as hereinafter defined), the Amended and Restated Series B
Certificate (as hereinafter defined) and the Amended and
Restated Series C Certificate (as hereinafter defined) have
been duly adopted by all necessary corporate action and have
been duly filed with the Secretary of State of the State of
Minnesota (no other or additional filing or
------------
(1) For this purpose, counsel may assume that the laws of Minnesota and New York
are the same.
13
recording being necessary in order to create the Series D
Preferred Stock or to amend the terms of the Series A
Preferred Stock, the Series B Preferred Stock or the Series C
Preferred Stock). No holder of capital stock of the Company
has dissenters' rights under Chapter 302A of the Minnesota
Statutes in connection with the adoption and filing of the
Certificate, the Amended and Restated Series A Certificate,
the Amended and Restated Series B Certificate or the Amended
and Restated Series C Certificate, except for the holders of
Series A Preferred Stock, Series B Preferred Stock and Series
C Preferred Stock and all such holders have waived any such
rights by failing to give notice of such holders' intent to
dissent from the adoption of the Amended and Restated Series A
Certificate, the Amended and Restated Series B Certificate or
the Amended and Restated Series C Certificate, as the case may
be.
(d) The Preferred Shares are entitled to the rights, preferences
and provisions of the Certificate. The Series A Preferred
Stock is entitled to the rights, preferences and provisions of
the Amended and Restated Series A Certificate. The Series B
Preferred Stock is entitled to the rights, preferences and
provisions of the Amended and Restated Series B Certificate.
The Series C Preferred Stock is entitled to the rights,
preferences and provisions of the Amended and Restated Series
C Certificate. The Preferred Shares are entitled to the
benefits of this Agreement applicable thereto.
(e) The Preferred Shares are duly authorized and validly issued,
fully paid and nonassessable. The certificates for the
Preferred Shares are in valid and sufficient form.
(f) The shares initially issuable upon conversion of the Preferred
Shares have been duly authorized and reserved for issuance and
when issued upon such conversion in accordance with the terms
and conditions of the Preferred Shares will be duly
authorized, validly issued, fully paid and nonassessable.
(g) The Company is authorized by its Articles of Incorporation to
issue 60,000,000 shares of capital stock, of which 50,000,000
shares have been designated Common Stock, 958,487 shares have
been designated Series A Preferred Stock, 1,000,000 shares are
designated Series B Preferred Stock, 4,500,000 shares are
designated Series C Preferred Stock, 2,000,000 shares are
designated Series D Preferred Stock and 1,541,513 shares are
undesignated as to rights and preferences. The outstanding
shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and
nonassessable. Such counsel have no knowledge of any
outstanding securities convertible into common shares of the
Company or outstanding options, warrants or other rights to
acquire securities of the Company, other than (i) the
Preferred Shares, (ii) options and warrants disclosed in
Exhibit 2 to this Agreement, (iii) the outstanding shares of
Series A Preferred Stock, (iv) the outstanding shares of
Series B Preferred Stock and (v) the outstanding shares of
Series C Preferred Stock. Such counsel have no knowledge of
any contracts, agreements, leases,
14
documents, commitments or arrangements (except the 2000
Agreement, the 1998 Agreement and the 1996 Agreement) that
grant or create any right with respect to the registration of
any securities of the Company under the Securities Act or
creates any obligation on the part of the Company to purchase
or redeem any outstanding shares of capital stock of the
Company.
(h) To such counsel's knowledge, except as provided in the 1996
Agreement, the 1998 Agreement and the 2000 Agreement, no
security holder of the Company is entitled to preemptive or
similar rights to subscribe for or to purchase any shares of
capital stock of the Company in connection with the
transactions contemplated hereby, nor will any security holder
of the Company be entitled to any such rights as a result of
the execution or delivery of this Agreement or the issuance of
the Preferred Shares or the Conversion Stock.
(i) Assuming the accuracy of the representations of the Purchasers
set forth in Section 6 hereof, the Company has obtained the
approval or consent of all governmental agencies or bodies
required to be obtained by it for the valid offer, issuance
and sale of the Preferred Shares and the offer of the
Conversion Stock to the Purchasers through conversion by them
of the Preferred Shares. The execution, delivery and
performance of this Agreement, the First Amendment to 2000
Agreement and Waiver, the First Amendment to 1998 Agreement
and Waiver, the Second Amendment to 1998 Agreement and Waiver,
the First Amendment to 1996 Agreement and Waiver, the Second
Amendment to 1996 Agreement and Waiver, the Third Amendment to
1996 Agreement and Waiver and the Shareholders Agreement, the
offer, issuance and sale of the Preferred Shares and the
Conversion Stock, and the consummation of the transactions
contemplated by this Agreement will not result in any breach
or violation of the terms or provisions of, or constitute a
default under, the Articles of Incorporation or the Bylaws or
a violation of any contract, agreement, lease, document,
commitment or arrangement known to such counsel or any
judgment, decree or order known to such counsel and applicable
to the Company or to such counsel's knowledge any statute,
rule or regulation of the United States or the State of
Minnesota or any governmental authority or regulatory body
thereof.
(j) Assuming the accuracy of the representations of the Purchasers
set forth in Section 6 hereof, the offer, sale, issuance and
delivery of the Preferred Shares, and the offer of the
Conversion Stock to the Purchasers through conversion by them
of the Preferred Shares under the circumstances contemplated
by the Certificate and this Agreement, are exempt from the
registration and prospectus delivery requirements of the
Securities Act, and all registrations, qualifications, permits
and approvals required under applicable state securities laws
for the lawful offer, sale, issuance and delivery of the
Preferred Shares and the Conversion Stock have been obtained,
other than the filing of a notice on Form D by the Company
with the Commission which may be made subsequent to such
offer, sale, issuance and delivery and any filings that may be
required to be made subsequent to the Closing under any
applicable state securities laws.
15
(k) Other than as disclosed on Exhibit 2 to this Agreement, such
counsel have no knowledge of any litigation, proceeding or
governmental investigation pending or threatened against the
Company, its key management employees in their capacity as
employees, properties or business.
7A.5. No Event of Default. There shall exist at the time of
Closing no condition or event which would constitute an Event of Default (as
hereinafter defined) or which, after notice or lapse of time or both, would
constitute an Event of Default.
7A.6. Qualification Under State Securities Laws. All
registrations, qualifications, permits and approvals required under applicable
state securities laws for the lawful execution and delivery of this Agreement
and the offer, sale, issuance and delivery of the Preferred Shares and the offer
of the Conversion Stock shall have been obtained, other than the filing of any
Form D's with the Commission and such other filings that are required to be made
subsequent to the Closing under any applicable state securities laws that the
Company has agreed to make under this Agreement.
7A.7. Proceedings and Documents. All corporate and other
proceedings and actions taken in connection with the transactions contemplated
hereby and all certificates, opinions, agreements, instruments and documents
mentioned herein or incident to any such transaction shall be satisfactory in
form and substance to the Purchasers and their special counsel.
7A.8. Shareholders Agreement. The parties listed on Schedule B
annexed hereto shall have entered into an Amended and Restated Shareholders
Agreement (the "Shareholders Agreement") substantially in the form of Exhibit 5
hereto.
7A.9. Antares Consent. Antares Leveraged Capital Corp. shall
have executed a Consent and Waiver substantially in the form of Exhibit 14
hereto.
7A.10. Third Amendment of 1996 Agreement and Waiver. The 1996
Agreement shall have been amended and the rights of first refusal granted
pursuant thereto shall have been waived as set forth in Exhibit 7 hereto.
7A.11. Second Amendment of 1998 Agreement and Waiver. The 1998
Agreement shall have been amended and the rights of first refusal granted
pursuant thereto shall have been waived as set forth in Exhibit 8 hereto.
7A.12. First Amendment of 2000 Agreement and Waiver. The 2000
Agreement shall have been amended and the rights of first refusal granted
pursuant thereto shall have been waived as set forth in Exhibit 9 hereto.
7A.13. Amended and Restated Series A Certificate. The
Statement of Designation of Rights, Preferences and Limitations of Series A
Convertible Preferred Stock shall have been amended as set forth in Exhibit 10
hereto.
16
7A.14. Amended and Restated Series B Certificate. The
Statement of Designation of Rights, Preferences and Limitations of Series B
Convertible Preferred Stock shall have been amended as set forth in Exhibit 11
hereto.
7A.15. Amended and Restated Series C Certificate. The
Statement of Designation of Rights, Preferences and Limitations of Series C
Convertible Preferred Stock shall have been amended as set forth in Exhibit 12
hereto.
7A.16. Dissenters' Rights. No shareholder of the Company shall
have exercised dissenters' rights under the Minnesota Business Corporation Act
in connection with the adoption and filing of the Certificates, the Amended and
Restated Series A Certificate, the Amended and Restated Series B Certificate or
the Amended and Restated Series C Certificate.
7B. Conditions of Company's Obligation. The obligation of the Company
to issue and sell the Preferred Shares pursuant to the terms of this Agreement
is subject to the fulfillment prior to or on the Closing Date of the following
conditions.
7B.1. No Errors, etc. The representations and warranties of
each Purchaser under this Agreement shall be true in all material respects as of
the Closing Date with the same effect as though made on and as of the Closing
Date.
7B.2. Payment of Purchase Price. The Purchasers shall have
each paid the purchase price set forth opposite each such Purchaser's name in
Schedule A hereto.
8. Affirmative Covenants. Subject to the provisions of Section 12
hereof, the Company covenants and agrees that:
8.1. Corporate Existence. The Company will maintain, and will cause
each Subsidiary (as hereinafter defined) to maintain, its corporate existence in
good standing and comply with all applicable laws and regulations of the United
States or of any state or states thereof or of any political subdivision thereof
and of any governmental authority where failure to so comply would have a
material adverse impact on the Company or its business or operations.
8.2. Books of Account and Reserves. The Company will, and will
cause each of its Subsidiaries to, keep books of record and account in which
full, true and correct entries are made of all of its and their respective
dealings, business and affairs, in accordance with generally accepted accounting
principles. The Company will employ certified public accountants selected by the
Board of Directors of the Company who are "independent" within the meaning of
the accounting regulations of the Commission and who are one of the so-called
"Big Five" accounting firms, and have annual audits made by such independent
public accountants in the course of which such accountants shall make such
examinations, in accordance with generally accepted auditing standards, as will
enable them to give such reports or opinions with respect to the financial
statements of the Company and its Subsidiaries as will satisfy the requirements
of the Commission in effect at such time with respect to certificates and
opinions of accountants. Such certified public accountants must be approved by
the holders of a majority of the Preferred Shares, provided, that such holders
approve the firm of Xxxxxx Xxxxxxxx LLP.
17
8.3. Furnishing of Financial Statements and Information. The
Company will deliver to each Purchaser:
(a) as soon as practicable, but in any event within 30 days after
the close of each month, copies of (i) (A) the balance sheet
of the Company as of the end of such month, (B) statements of
operations of the Company for such month, and (C) statements
of cash flows of the Company for such month setting forth in
each case in comparative form the corresponding figures for
the preceding month and for the Budget (as such term is
defined in Section 8.5 hereof), for the year to date and for
the comparable periods in the preceding year, all in
reasonable detail, prepared in accordance with GAAP
consistently applied throughout the periods involved and
certified as being correct and complete and fairly presenting
the results of operations of the Company for the month
indicated, subject to year-end audit adjustment, by the Chief
Financial Officer of the Company;
(b) as soon as practicable, but in any event within 30 days after
the end of each fiscal quarter, a quarterly financial summary
in the form attached hereto as Exhibit 13 completed and signed
by the Chief Financial Officer of the Company;
(c) as soon as practicable, but in any event within 120 days after
the end of each fiscal year, copies of (i) the balance sheet
of the Company as of the end of such fiscal year, (ii)
statements of operations of the Company for such fiscal year,
and (iii) statements of cash flows of the Company for such
fiscal year, setting forth in each case in comparative form
the corresponding figures of the previous annual period, all
in reasonable detail, prepared in accordance with GAAP
consistently applied throughout the periods involved and
certified, without qualification, by a firm of independent
certified public accountants of recognized national standing
approved by the holders of a majority of the Preferred Shares,
provided, that such holders approve the firm of Xxxxxx
Xxxxxxxx LLP;
(d) concurrently with the delivery of any financial statements
referred to in paragraphs (a), (b) and (c) of this Section
8.3, current schedules of Indebtedness for Borrowed Money and
Senior Indebtedness, as these terms are hereinafter defined,
together with a certificate of the Chief Financial Officer and
the principal accounting officer of the Company to the effect
that such schedules are accurate and correct and that there
exists no condition or event which constitutes an event of
default with respect to any indebtedness of the Company, or,
if any such condition or event exists, specify the nature and
period of existence thereof and what action the Company is
taking or proposes to take with respect thereto;
(e) concurrently with the delivery in each year of the financial
statements referred to in paragraph (c) of this Section 8.3, a
statement and report signed by the independent public
accountants who certified such financial statements to the
effect that they have read this Agreement and that in the
course of the audit upon which their certificate was based
they became aware of no condition or event which constituted
an Event of Default or which, after notice or lapse of time or
18
both, would constitute an Event of Default or if such
accountants did become aware of any such condition or event,
specifying the nature and period of existence thereof;
(f) promptly after the submission thereof to the Company, copies
of all reports and recommendations submitted by independent
public accountants in connection with any annual or interim
audit of the accounts of the Company or any of its
Subsidiaries made by such accountants;
(g) promptly upon transmission thereof, copies of all reports,
proxy statements and other communications furnished to
shareholders of the Company;
(h) with reasonable promptness, such other financial data relating
to the business, affairs and financial condition of the
Company and any Subsidiaries as is available to the Company
and as from time to time the Purchasers may reasonably
request;
(i) at least 30 days prior to the earlier of (i) the execution of
any agreement relating to any merger or consolidation of the
Company or any of its Subsidiaries with another corporation,
or a plan of exchange involving the outstanding capital stock
of the Company or any of its Subsidiaries, or the sale,
transfer or other disposition of all or substantially all of
the property, assets or business of the Company or any of its
Subsidiaries to another corporation, or (ii) the holding of
any meeting of the shareholders of the Company for the purpose
of approving such action, provide written notice of the terms
and conditions of such proposed merger, consolidation, plan of
exchange, sale, transfer or other disposition; and
(j) within 10 days after the Company learns in writing of the
commencement or threatened commencement of any material suit,
legal or equitable, or of any material administrative,
arbitration or other proceeding against the Company, any of
its Subsidiaries or their respective businesses, assets or
properties, written notice of the nature and extent of such
suit or proceeding.
8.4. Inspection. The Company will permit each Purchaser and any of
its partners, officers or employees, or any outside representatives designated
by such Purchaser and reasonably satisfactory to the Company, to visit and
inspect at such Purchaser's expense any of the properties of the Company or its
Subsidiaries, including their books and records (and to make photocopies thereof
or make extracts therefrom), and to discuss their affairs, finances, and
accounts with their officers, lawyers and accountants, except with respect to
trade secrets and similar confidential information, which need not be disclosed,
all to such reasonable extent and at such reasonable times and intervals as such
Purchaser may reasonably request. Except as otherwise required by laws or
regulations applicable to a Purchaser, the Purchasers shall maintain, and shall
require their representatives to maintain, all information obtained pursuant to
Section 8.3 hereof, this Section 8.4 and Section 8.5 hereof on a confidential
basis.
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8.5. Preparation and Approval of Budgets. At least one month prior
to the beginning of each fiscal year of the Company, the Company shall prepare
and submit to its Board of Directors, for its review and approval, a proposed
annual operating budget and strategic plan for the Company for the succeeding
fiscal year, containing forecasts of profit and loss and cash flow with monthly
breakdowns and management's reasonably estimated projections of indebtedness and
commitments for the succeeding fiscal year (the "Budget"), in such detail as the
Board of Directors may reasonably request. Each Budget shall be modified as
often as is necessary in the judgment of the Board of Directors to reflect
changes required as a result of operating results and other events that occur,
or may be reasonably expected to occur, during the year covered by the Budget,
and copies of each such modification shall be submitted to the Board of
Directors. The Company will, simultaneously with the submission thereof to the
Board of Directors, deliver a copy of each such Budget and modification thereof
to each Purchaser.
8.6. Payment of Taxes and Maintenance of Properties. The Company
will, and will cause each Subsidiary to:
(a) pay and discharge promptly, or cause to be paid and discharged
promptly when due and payable, all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or upon any of its properties, as
well as all material claims of any kind (including claims for labor, material
and supplies) which, if unpaid, might by law become a lien or charge upon its
property; provided, however, that neither the Company nor any Subsidiary shall
be required to pay any such tax, assessment, charge, levy or claim if the
amount, applicability or validity thereof shall currently be contested in good
faith by appropriate proceedings and if the Company or such Subsidiary as the
case may be shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting principles) deemed adequate by it with
respect thereto; and
(b) maintain and keep, or cause to be maintained and kept, its
properties in good repair, working order and condition, and from time to time
make, or cause to be made, all repairs and renewals and replacements which in
the opinion of the Company are necessary and proper so that the business carried
on in connection therewith may be properly and advantageously conducted at all
times; the Company will maintain or cause to be maintained back-up copies of all
valuable papers and software.
8.7. Insurance. The Company will, and will cause each Subsidiary
to, obtain and maintain in force such property damage, public liability,
business interruption, worker's compensation, indemnity bonds and other types of
insurance as the Company's executive officers, after consultation with an
accredited insurance broker, shall determine to be necessary or appropriate to
protect the Company from the insurable hazards or risks associated with the
conduct of the Company's business. The Company's executive officers shall
periodically report to the Board of Directors on the status of such insurance
coverage.
All insurance shall be maintained in at least such amounts and to such
extent as shall be determined to be reasonable by the Board of Directors; and
all such insurance shall be effected
20
and maintained in force under a policy or policies issued by insurers of
recognized responsibility, except that the Company or any Subsidiary may effect
worker's compensation or similar insurance in respect of operations in any state
or other jurisdiction either through an insurance fund operated by such state or
other jurisdiction or by causing to be maintained a system or systems of
self-insurance which is in accord with applicable laws.
8.8. Payment of Indebtedness and Discharge of Obligations. The
Company will, and will cause each Subsidiary to, pay or cause to be paid the
principal of and interest and premium, if any, on all Indebtedness for Borrowed
Money heretofore or hereafter incurred or assumed by it when and as the same
shall become due and payable, unless such Indebtedness for Borrowed Money is
renewed or extended. The Company will, and will cause each Subsidiary to,
faithfully observe, perform and discharge all of the material covenants,
conditions and obligations which are imposed on it by any and all indentures and
other agreements securing or evidencing such Indebtedness for Borrowed Money or
pursuant to which such Indebtedness for Borrowed Money is issued, and will not
permit the continuance of any act or omission which is or under the provisions
thereof may be declared to be a material default thereunder, unless such default
is waived pursuant to the provisions thereof. Neither the Company nor any
Subsidiary shall be required to make any payment or to take any other action by
reason of this Section 8.8 at any time while it shall be currently contesting in
good faith by appropriate proceedings its obligations to make such payment or to
take such action provided that the Company or such Subsidiary, as the case may
be, shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting principles) deemed adequate by it with
respect thereto.
8.9. Directors' and Shareholders' Meetings. The holders of the
Preferred Shares shall have the right to elect directors of the Company as set
forth in the Certificate.
The Company shall reimburse such holders of Preferred Shares for the
reasonable out-of-pocket expenses incurred by them or the directors elected by
them pursuant to the Certificate in connection with the attending of meetings by
their director designees or carrying out any other duties by such director
designees that may be specified by the Board of Directors; shall pay such
director designees the same directors' fees paid to the other investor-designee
non-employee directors (other than Xxxx X. Xxxx) of the Company (it being
understood that the Company's stock option plan may provide for stock option
grants to only those non-employee directors who, together with their affiliates,
do not own more than one percent of outstanding capital stock of the Company);
and shall maintain as part of its Articles of Incorporation or Bylaws a
provision for the indemnification of its directors to the full extent permitted
by law.
The Company agrees, as a general practice, to hold a meeting of its
Board of Directors at least once every three months, and during each year to
hold its annual meeting of shareholders on or approximately on the date provided
in its Bylaws.
The Company shall ensure that its Board of Directors maintains an Audit
Committee and a Compensation Committee. The director elected by the holders of
the Series C Preferred Stock and Series D Preferred Stock, exclusively and
voting together as a class (pursuant to subparagraph (2)(b)(iv) of the
Certificate) shall serve on the Audit Committee and the Compensation Committee.
21
The Company shall allow one observer designated by Norwest Equity
Partners VII, LP and one observer designated by APAX Excelsior VI, L.P. to
attend all meetings of the Company's Board of Directors in a nonvoting capacity,
and in connection therewith, the Company shall give such observer copies of all
notices, minutes, consents and other materials, financial or otherwise, which
the Company provides to its Board of Directors.
The Company shall provide for indemnification of the members of the
Company's Board of Directors to the maximum extent permitted by law. No later
than the Closing Date, the Company shall have obtained, and shall maintain in
full force and effect, a directors and officers insurance policy with respect to
its directors and officers (such policy to have such terms and conditions as are
reasonable and customary).
8.10. Application of Proceeds. Unless otherwise approved by the
Purchasers, the net proceeds received by the Company from the sale of the
Preferred Shares shall be used substantially for working capital purposes.
Pending use of the proceeds in the business, they shall be deposited in a bank
or banks having deposits of $150,000,000 or more, invested in money market
mutual funds having assets of $500,000,000 or more, or invested in securities
issued or guaranteed by the United States Government.
8.11. Retirement Plans. The Company will cause each retirement plan
of the Company or any of its Subsidiaries in which any employees of the Company
or of any of its Subsidiaries participate that is subject to the provisions of
ERISA and the documents and instruments governing each such plan to be conformed
to when necessary, and to be administered in a manner consistent with, those
provisions of ERISA which may, from time to time, become effective and operative
with respect to such plans; if requested by the Purchasers in writing from time
to time, furnish to the Purchasers a copy of any annual report with respect to
each such plan that the Company files with the Secretary of Labor pursuant to
ERISA; and at such time as such insurance shall be available at rates deemed
commercially reasonable by the Company, maintain insurance against the
contingent liability against the net worth of the Company imposed in respect of
each such plan by the provisions of ERISA.
8.12. Filing of Reports. The Company will, from and after such time
as it has securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, or has securities registered pursuant to the
Securities Act, and until such time as the Purchasers are eligible to sell their
Preferred Shares pursuant to Rule 144(k) (or any successor rule) or until such
earlier time as the Purchasers have sold such Preferred Shares, make timely
filing of such reports as are required to be filed by it with the Commission so
that Rule 144 under the Securities Act or any successor provision thereto will
be available to the Purchasers.
8.13. Patents and Other Intangible Rights. The Company will apply
for, or obtain assignments of, or licenses to use, all patents, trademarks,
trademark rights, trade names, trade name rights and copyrights which in the
opinion of a prudent and experienced businessman operating in the industry in
which the Company is operating are desirable or necessary for the conduct and
protection of the business of the Company.
22
8.14. Insurance on Life of Xxxxxx Xxxxxx. The Company will maintain
for its benefit, or the benefit of the Company's lenders, life insurance under a
policy or policies issued by insurers of recognized standing in the amount of at
least $5,000,000 on the life of Xxxxxx Xxxxxx, to the extent Mr. Akradi is
insurable and so long as he is an employee of the Company. Such policy or
policies shall name the Company as the beneficiary thereunder, and shall be in
addition to any policy or policies maintained by the Company to fund potential
stock repurchase obligations of the Company.
8.15. Rule 144A. The Company agrees that, upon the request of any
holder of Preferred Shares or Conversion Stock, or any prospective purchaser of
Preferred Shares or Conversion Stock, the Company shall promptly provide (but in
any case within 15 days of a request) to such holder or potential purchaser the
following information: (a) a brief statement of the nature of the business of
the Company and its Subsidiaries and the products and services they offer; (b)
the Company's most recent consolidated balance sheets and statement of
operations and statement of shareholders' equity and similar financial
statements for such part of the two preceding fiscal years prior to such request
as the Company has been in operation (such financial information shall be
audited, to the extent reasonably available); and (c) such other information
about the Company, its Subsidiaries and their business, financial condition and
results of operations as the requesting person shall request in order to comply
with Rule 144A promulgated under the Securities Act and the antifraud provisions
of the federal and state securities laws.
The Company hereby represents and warrants to any such requesting
person that the information provided by the Company pursuant to this Section
8.15 will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
8.16. Right of First Refusal. In the event the Company desires to
sell additional shares of any capital stock of the Company or any warrants,
securities convertible into capital stock of the Company or other rights to
subscribe for or to purchase any capital stock of the Company, other than (a)
shares of Common Stock sold to the public pursuant to a registration statement
filed under the Securities Act, if such offering is underwritten on a firm
commitment basis, (b) shares of Common Stock awarded or issued upon the exercise
of options granted pursuant to employee and consultant benefit plans adopted by
the Company, and the grant of such options themselves, provided that the
aggregate number of shares thus awarded and issued and issuable pursuant to the
exercise of all such options shall not be in excess of 1,242,000 (appropriately
adjusted to reflect stock splits, stock dividends, reorganizations,
consolidations and similar changes hereafter effected), (c) shares of Common
Stock issued upon conversion of the Preferred Stock or the Warrants (as defined
in the 1998 Agreement), (d) dividends payable in Common Stock and (e) warrants
issued in connection with bona fide financing transactions (including, without
limitation, equipment financing arrangements and bank lines of credit) with
conventional institutional lenders entered into in the ordinary course of their
business and shares of Common Stock issued upon exercise of such warrants
(provided that the aggregate number of shares thus issued on exercise and
covered by unexercised warrants shall not be in excess of 600,000 (appropriately
adjusted to reflect stock splits, stock dividends, reorganizations,
consolidations and similar changes hereafter effected)) (all such capital stock,
warrants, securities convertible into capital stock and other rights, other than
securities referred to in (a), (b), (c), (d) and (e)
23
above, being hereinafter sometimes collectively referred to as "Additional
Securities"), to a third party purchaser or purchasers, it shall provide written
notice thereof to each Purchaser and offer such Purchaser the opportunity to
purchase its pro rata share of such proposed sale for a period of 45 days
following its notice. If a Purchaser elects to accept such offer in whole or in
part, such Purchaser shall so accept by written notice to the Company given
within such 45-day period, provided, that, the closing of the sale of such
Additional Securities to such Purchaser is simultaneously held with the closing
of all Additional Securities proposed to be sold. If a Purchaser fails to accept
such offer in whole or in part within such 45-day period, any of such Additional
Securities not purchased by such Purchaser pursuant to such offer may be sold to
the third party purchaser or purchasers but only on the same terms and
conditions as those set forth in the Company's original notice of intention to
sell, provided, that, the closing of the sale of such Additional Securities to
such third party purchaser or purchasers takes place within a period of 45 days
following the expiration of the 45-day period afforded to the Purchasers
hereunder.
For purposes of the previous paragraph, a Purchaser's "pro rata share"
is the number of shares of Additional Securities (rounded to the nearest whole
share) as is equal to the product of (a)(i) the number of shares of Common Stock
issued, or issuable upon the exercise or conversion of rights, options or other
convertible securities without the payment of any additional cash consideration
or with the payment of a nominal cash consideration, as the case may be
(collectively, "Fully Paid Securities"), to such Purchaser immediately prior to
the issuance of the Additional Securities proposed to be sold divided by (ii)
the total number of Fully Paid Securities issued or issuable by the Company
immediately prior to the issuance of the Additional Securities, multiplied by
(b) the entire amount of Additional Securities proposed to be sold.
8.17. Conversion Stock Fully Paid; Reservation of Shares. The
Company covenants and agrees that all Conversion Stock that may be issued upon
conversion of the Preferred Shares will, upon issuance in accordance with the
terms of the Certificate, be fully paid and nonassessable, and that the issuance
thereof shall not give rise to any preemptive rights on the part of any person.
The Company further covenants and agrees that the Company will at all times have
authorized and reserved a sufficient number of shares of its Common Stock for
the purpose of issue upon the conversion of the Preferred Shares.
8.18. Form D Filing; Blue Sky Law Filings. The Company covenants and
agrees to file with the Commission, not later than 15 days after the Closing,
five copies of a notice on Form D under the Securities Act (one of which will be
manually signed by a person duly authorized by the Company); to otherwise comply
with the requirements of Rule 503 under the Securities Act; and to furnish
promptly to each Purchaser upon request evidence of each such required timely
filing (including a copy thereof). The Company covenants and agrees to timely
make any filings that may be required to be made subsequent to the Closing under
any applicable state securities laws, and to furnish promptly to each Purchaser
upon request evidence of each such required timely filing (including a copy
thereof).
9. Negative Covenants. Subject to the provisions of Section 12
hereof, the Company will be limited and restricted as follows:
24
9.1. Dividends on or Redemption of Junior Stock. Without the prior
approval of the holders of a majority of the Series C Preferred Stock and Series
D Preferred Stock, voting together as a class, the Company will not declare or
pay any dividend or make any other distribution on any shares of Junior Stock
(as hereinafter defined), or purchase, redeem or otherwise acquire for any
consideration (other than in exchange for or out of the net cash proceeds of the
contemporaneous issue or sale of other shares of Junior Stock or debt securities
convertible into other shares of Junior Stock), or set aside a sinking fund or
other fund for the redemption or repurchase of any shares of Junior Stock or any
warrants, rights or options to purchase shares of Junior Stock.
9.2. Future Registration Rights. Except for any registration
expressly permitted by Section 10 hereof, the 2000 Agreement, the 1998 Agreement
and the 1996 Agreement, the Company will not, without the prior approval of the
holders of a majority of the Series C Preferred Stock and Series D Preferred
Stock, voting together as a class, agree with the holders of any securities
issued or to be issued by the Company to register such securities under the
Securities Act nor will it grant any incidental registration rights.
9.3. Other Matters Requiring Prior Approval of Purchasers. The
Company will not without the prior approval of the holders of a majority of the
Series C Preferred Stock and Series D Preferred Stock, voting together as a
class:
(a) guarantee, endorse or otherwise be or become contingently
liable, or permit any Subsidiary to guarantee, endorse or
otherwise become contingently liable, in connection with the
obligations, securities or dividends of any person, firm,
association or corporation, other than the Company or any of
its Subsidiaries, except that the Company and any Subsidiary
may endorse negotiable instruments for collection in the
ordinary course of business;
(b) make or permit any Subsidiary to make loans or advances to any
person (including without limitation to any officer, director
or shareholder of the Company or any Subsidiary), firm,
association or corporation, except loans and advances to the
Company and its wholly-owned Subsidiaries and advances to
suppliers and employees made in the ordinary course of
business (provided that the outstanding balance of loans and
advances to employees of the Company or any Subsidiary shall
not at any time exceed $250,000 in the aggregate or $50,000
for any one individual or members of his family);
(c) pay, or permit any Subsidiary to pay, compensation, whether by
way of salaries, bonuses, participations in pension or profit
sharing plans, fees under management contracts or for
professional services or fringe benefits to any officer in
excess of amounts fixed by the Board of Directors of the
Company prior to any payment to such officer;
(d) effect a merger or consolidation of the Company with another
entity (other than a merger effected solely for the purpose of
changing the state of incorporation of the Company to the
State of Delaware);
25
(e) sell all, or substantially all, of the assets of the Company;
(f) materially alter the rights, preferences or privileges of the
shares of Series C Preferred Stock or Series D Preferred
Stock;
(g) increase or decrease the number of authorized shares of Series
C Preferred Stock or Series D Preferred Stock or reissue any
shares of Series C Preferred Stock or Series D Preferred Stock
reacquired by the Company by reason of a conversion or
otherwise;
(h) issue, or permit any Subsidiary to issue, new Senior
Indebtedness in an amount equal to or greater than $30,000,000
in any single transaction or a series of related transactions
(however, the financing of separate projects under a single
financing facility shall not be deemed a "series of related
transactions"), provided, that the replacement of existing
Senior Indebtedness on substantially similar terms shall not
constitute new Senior Indebtedness for this purpose;
(i) increase, or permit any Subsidiary to increase, existing
Senior Indebtedness by an amount equal to or greater than
$30,000,000 in any single transaction or a series of related
transactions (however, the financing of separate projects
under a single financing facility shall not be deemed a
"series of related transactions");
(j) borrow, or permit any Subsidiary to borrow, an amount equal to
or greater than $30,000,000 to finance the development of any
single Company project;
(k) approve, or permit any Subsidiary to make, capital
expenditures in an amount equal to or greater than $30,000,000
in connection with any single Company project;
(l) increase the number of persons eligible to serve on its Board
of Directors;
(m) create a new Subsidiary;
(n) except for securities excepted from the definition of
Additional Securities by clauses (a), (b), (c), (d) and (e) of
the first paragraph of Section 8.16 hereof, issue any
additional capital stock of the Company or securities
convertible into any such capital stock;
(o) reclassify capital stock of the Company or securities
convertible into any such capital stock;
(p) pay dividends to the holders of any shares of the Company's
capital stock;
(q) redeem capital stock of the Company or securities convertible
into any such capital stock;
26
(r) purchase or invest, or permit any Subsidiary to purchase or
invest, in the stock, obligations or assets of any other
person, firm or corporation, other than a wholly-owned
Subsidiary;
(s) amend its By-Laws or Articles of Incorporation so as to
materially and adversely alter any existing provision relating
to Series C Preferred Stock or Series D Preferred Stock or the
holders thereof, whether such amendment is by merger,
consolidation, recapitalization or otherwise, or waive any of
the rights granted to the holders of the Series C Preferred
Stock or Series D Preferred Stock granted by the Articles of
Incorporation;
(t) make any material change in the nature of its business as
carried on at the date of this Agreement; or
(u) enter into any agreement binding upon the Company to take any
such actions.
9.4. Approval of Board Super-Majority. The Company will not,
without the prior approval of five (5) of the members of its Board of Directors,
authorize the issuance of Senior Indebtedness in the amount greater than
$10,000,000 or approve capital expenditures in the amount greater than
$10,000,000.
10. Registration of Stock.
10.1. Required Registration. If, at any time after the expiration of
any lock-up period requested by any underwriter in connection with the closing
of the first public offering by the Company of shares of Common Stock (to the
extent such lock-up period is no longer than 180 days following such closing),
and until such time as all holders of the Purchased Stock are able to sell all
of the Purchased Stock owned by such holders pursuant to Rule 144(k) under the
Securities Act (or any successor rule), the Company shall receive a written
request therefor from any record holder or holders of an aggregate of a majority
of the shares of Purchased Stock not theretofore registered under the Securities
Act and sold, the Company shall prepare and file a registration statement under
the Securities Act covering the shares of Purchased Stock which are the subject
of such request and shall use its best efforts to cause a registration statement
filed under the Securities Act in connection with such offering to become
effective. In addition, upon the receipt of such request, the Company shall
promptly give written notice to all other record holders of shares of Purchased
Stock not theretofore registered under the Securities Act and sold that such
registration is to be effected. The Company shall include in such registration
statement such shares of Purchased Stock for which it has received written
requests to register by such other record holders within 30 days after the date
of the Company's written notice to such other record holders. The Company shall
be obligated to prepare, file and cause to become effective only two
registration statements (other than on Form S-3 or any successor form
promulgated by the Commission ("Form S-3")) pursuant to this Section 10.1, and
to pay the expenses associated with such registration statements;
notwithstanding the foregoing, the record holder or holders of an aggregate of a
majority of the shares of Purchased Stock not theretofore registered under the
Securities Act and sold may require, pursuant to this Section 10.1, the Company
to file, and to pay the expenses associated with, any number of registration
statements on Form S-3 (or any
27
successor form), if such form is then available for use by the Company and such
record holder or holders. In the event that the holders of a majority of the
Purchased Stock for which registration has been requested pursuant to this
Section 10.1 determine for any reason not to proceed with a registration at any
time before a registration statement has been declared effective by the
Commission, and such registration statement, if theretofore filed with the
Commission, is withdrawn with respect to the Purchased Stock covered thereby,
and the holders of such Purchased Stock agree to bear their own expenses
incurred in connection therewith and to reimburse the Company for the expenses
incurred by it attributable to the registration of such Purchased Stock, then
the holders of such Purchased Stock shall not be deemed to have exercised their
right to require the Company to register Purchased Stock pursuant to this
Section 10.1.
Notwithstanding the foregoing, the Company may delay initiating the
preparation and filing of a registration statement on Form S-3 pursuant to the
preceding paragraph for a period not to exceed 90 days if in the good faith
judgment of the Company's principal investment banker such delay is necessary in
order not to affect in a significant and adverse manner equity financing efforts
then being undertaken by the Company.
If, at the time any written request for registration is received by the
Company pursuant to this Section 10.1, the Company has determined to proceed
with the actual preparation and filing of a registration statement under the
Securities Act in connection with the proposed offer and sale for cash of any of
its securities by it or any of its security holders, such written request shall
be deemed to have been given pursuant to Section 10.2 hereof rather than this
Section 10.1, and the rights of the holders of Purchased Stock covered by such
written request shall be governed by Section 10.2 hereof.
10.2. Incidental Registration. Each time the Company shall determine
to proceed with the actual preparation and filing of a registration statement
under the Securities Act in connection with the proposed offer and sale for cash
of any of its securities by it or any of its security holders (other than
registration statements on forms that do not permit the inclusion of shares by
the Company's security holders), the Company will give written notice of its
determination to all record holders of Purchased Stock not theretofore
registered under the Securities Act and sold. Upon the written request of a
record holder of any shares of Purchased Stock given within 30 days after the
date of any such notice from the Company, the Company will, except as herein
provided, cause all such shares of Purchased Stock, the record holders of which
have so requested registration thereof, to be included in such registration
statement, all to the extent requisite to permit the sale or other disposition
by the prospective seller or sellers of the Purchased Stock to be so registered;
provided, however, that nothing herein shall prevent the Company from, at any
time, abandoning or delaying any such registration initiated by it; provided
further, however, that if the Company determines not to proceed with a
registration after the registration statement has been filed with the Commission
and the Company's decision not to proceed is primarily based upon the
anticipated public offering price of the securities to be sold by the Company,
the Company shall promptly complete the registration for the benefit of those
selling security holders who wish to proceed with a public offering of their
securities and who bear all expenses in excess of $25,000 incurred by the
Company as the result of such registration after the Company has decided not to
proceed. If any registration pursuant to this Section 10.2 shall be underwritten
in whole or in part, the Company may require, subject to
28
Section 10.3 hereof, that the Purchased Stock requested for inclusion pursuant
to this Section 10.2 be included in the underwriting on the same terms and
conditions as the securities otherwise being sold through the underwriters.
10.3. Reduction of Offering.
(a) Required Registration. The Company may include in a required
registration pursuant to Section 10.1 hereof securities other
than the Purchased Stock on the same terms and conditions as
the Purchased Stock to be included therein; provided, however,
that (i) if the managing underwriter or underwriters of any
underwritten offering described in Section 10.1 herein have
informed the Company in writing that it is their opinion that
the total number of shares of Purchased Stock, and other
securities of the Company which the holders of such
securities, the Company and any other persons desiring to
participate in such registration intend to include in such
offering is such as to materially and adversely affect the
success of such offering, then the number of shares to be
offered for the account of the Company and for the account of
all such other persons (other than the holders of Purchased
Stock) participating in such registration shall be reduced or
limited pro rata in proportion to the respective number of
shares requested to be registered to the extent necessary to
reduce the total number of shares requested to be included in
such offering to the number of shares, if any, recommended by
such managing underwriter or underwriters, (ii) if, in the
event that following a reduction or limitation pursuant to the
preceding clause (i) of all the securities which the Company
and such other persons intended to include in such offering,
the managing underwriter or underwriters inform the Company in
writing that the total number of shares of Purchased Stock
which the holders thereof intend to include in such offering
is such as to materially and adversely affect the success of
such offering, then the number of shares to be offered for the
account of the holders of Purchased Stock participating in
such offering shall be reduced or limited pro rata in
proportion to their respective total number of shares owned by
such holders, to the extent necessary to reduce the total
number of shares requested to be included in such offering to
the number of shares, if any, recommended by such managing
underwriter or underwriters and (iii) if the offering is not
underwritten, no other person, including the Company, shall be
permitted to offer securities under any such required
registration unless the holders of a majority of the Purchased
Stock participating in the offering consent to the inclusion
of such shares therein.
(b) Incidental Registration. Notwithstanding anything contained
herein, if the managing underwriter or underwriters of any
underwritten offering described in Section 10.2 herein have
informed, in writing, the holders of the Company's securities
requesting inclusion in such offering that it is their opinion
that the total number of shares which the Company, such
holders and any other persons desiring to participate in such
registration intend to include in such offering is such as to
materially and adversely affect the success of such offering,
then, the number of shares to be offered shall be reduced or
limited in the following order
29
of priority: first, the number of shares to be offered by
holders of securities of the Company, other than the
Securities, to the extent necessary to reduce the total number
of shares as recommended by such managing underwriter or
underwriters; and second, if further reduction or limitation
is required, the number of shares to be offered by the holders
of the Securities shall be reduced or limited on a pro rata
basis in proportion to the relative number of Securities owned
by such holders of Securities participating in the
registration to the extent necessary to reduce the total
number of shares as recommended by such managing underwriter
or underwriters.
10.4. Registration Procedures. If and whenever the Company is
required by the provisions of Section 10.1 or 10.2 hereof to effect the
registration of shares of Purchased Stock under the Securities Act, the Company
will:
(a) prepare and file with the Commission a registration statement
with respect to such securities, and use its best efforts to
cause such registration statement to become and remain
effective for such period as may be reasonably necessary to
effect the sale of such securities, not to exceed nine months;
(b) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus
contained therein as may be necessary to keep such
registration statement effective for such period as may be
reasonably necessary to effect the sale of such securities,
not to exceed nine months;
(c) furnish to the security holders participating in such
registration and to the underwriters of the securities being
registered such reasonable number of copies of the
registration statement, preliminary prospectus, final
prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public offering
of such securities;
(d) use its best efforts to register or qualify the securities
covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such
participating holders may reasonably request in writing within
20 days following the original filing of such registration
statement, except that the Company shall not for any purpose
be required to execute a general consent to service of process
or to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified;
(e) notify the security holders participating in such
registration, promptly after it shall receive notice thereof,
of the time when such registration statement has become
effective or a supplement to any prospectus forming a part of
such registration statement has been filed;
30
(f) notify such holders promptly of any request by the Commission
for the amending or supplementing of such registration
statement or prospectus or for additional information;
(g) prepare and file with the Commission, promptly upon the
request of any such holders, any amendments or supplements to
such registration statement or prospectus which, in the
opinion of counsel for such holders (and concurred in by
counsel for the Company), is required under the Securities Act
or the rules and regulations thereunder in connection with the
distribution of the Purchased Stock by such holder;
(h) prepare and promptly file with the Commission and promptly
notify such holders of the filing of such amendment or
supplement to such registration statement or prospectus as may
be necessary to correct any statements or omissions if, at the
time when a prospectus relating to such securities is required
to be delivered under the Securities Act, any event shall have
occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of
the circumstances in which they were made, not misleading;
(i) advise such holders, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by
the Commission suspending the effectiveness of such
registration statement or the initiation or threatening of any
proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued; and
(j) at the request of any such holder, furnish: (i) an opinion,
dated as of the closing date, of the counsel representing the
Company for the purposes of such registration, addressed to
the underwriters, if any, and to the holder or holders making
such request, covering such matters as such underwriters and
holder or holders may reasonably request; and (ii) letters
dated as of the effective date of the registration statement
and as of the closing date, from the independent certified
public accountants of the Company, addressed to the
underwriters, if any, and to the holder or holders making such
request, covering such matters as such underwriters and holder
or holders may reasonably request.
10.5. Expenses. With respect to each registration, including
registrations pursuant to Form S-3 (or any successor form), requested pursuant
to Section 10.1 hereof (except as otherwise provided in such Section with
respect to registrations voluntarily terminated at the request of the requesting
security holders) and with respect to each inclusion of shares of Purchased
Stock in a registration statement pursuant to Section 10.2 hereof (except as
otherwise provided in Section 10.2 with respect to registrations initiated by
the Company but with respect to which the Company has determined not to
proceed), the Company shall bear the following fees, costs and expenses: all
registration, filing and NASD fees, printing expenses, fees and
31
disbursements of counsel and accountants for the Company, fees and disbursements
of one law firm acting as counsel to the selling security holders, fees and
disbursements of counsel for the underwriter or underwriters of such securities
(if the Company and/or selling security holders are required to bear such fees
and disbursements), all internal Company expenses, all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered are to be
registered or qualified, and the premiums and other costs of policies of
insurance against liability (if any) arising out of such public offering. Fees
and disbursements of accountants for the selling security holders, underwriting
discounts and commissions and transfer taxes relating to the shares of Purchased
Stock included in the offering by the selling security holders, and any other
expenses incurred by the selling security holders not expressly included above,
shall be borne by the selling security holders.
10.6. Indemnification. In the event that any Purchased Stock is
included in a registration statement under Section 10.1 or 10.2 hereof:
(a) The Company will indemnify and hold harmless each holder of
shares of Purchased Stock which are included in a registration
statement pursuant to the provisions of this Section 10, its
directors and officers, and any underwriter (as defined in the
Securities Act) for such holder and each person, if any, who
controls such holder or such underwriter within the meaning of
the Securities Act, from and against, and will reimburse such
holder and each such underwriter and controlling person with
respect to, any and all loss, damage, liability, cost and
expense to which such holder or any such underwriter or
controlling person may become subject under the Securities Act
or otherwise, insofar as such losses, damages, liabilities,
costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in
such registration statement, any prospectus contained therein
or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in
which they were made, not misleading; provided, however, that
the Company will not be liable in any such case to the extent
that any such loss, damage, liability, cost or expense arises
out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in
conformity with information furnished by such holder, such
underwriter or such controlling person in writing specifically
for use in the preparation thereof.
(b) Each holder of shares of Purchased Stock which are included in
a registration pursuant to the provisions of this Section 10
will indemnify and hold harmless the Company, its directors
and officers, any underwriter and each person, if any, who
controls the Company or such underwriter from and against, and
will reimburse the Company, its directors and officers, any
underwriter and each person, if any, who controls the Company
or such underwriter with respect to, any and all loss, damage,
liability, cost or expense to which the Company or any
underwriter and each person, if any, who controls the Company
or such underwriter may become
32
subject under the Securities Act or otherwise, insofar as such
losses, damages, liabilities, costs or expenses are caused by
any untrue or alleged untrue statement of any material fact
contained in such registration statement, any prospectus
contained therein or any amendment or supplement thereto, or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not
misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was so made in reliance upon
and in strict conformity with written information furnished by
such holder specifically for use in the preparation thereof,
provided, however, that such holder of shares of Purchased
Stock shall not be liable in any such case to the extent that
prior to the filing of any such registration statement or
prospectus or amendment thereof or supplement thereto, such
holder of shares of Purchased Stock has furnished in writing
to the Company information expressly for use in such
registration statement or prospectus or amendment thereof or
supplement thereto which corrected or made not misleading
information previously furnished to the Company. In no event
shall the liability of any selling holder of shares of
Purchased Stock hereunder be greater in amount than the dollar
amount of the proceeds received by such selling holder of
shares of Purchased Stock upon the sale of the shares of
Purchased Stock giving rise to such indemnification
obligation.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this Section 10.5 of
notice of the commencement of any action involving the subject
matter of the foregoing indemnity provisions such indemnified
party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of said
paragraph (a) or (b), promptly notify the indemnifying party
of the commencement thereof; but the omission to so notify the
indemnifying party will not relieve it from any liability
which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any
indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party shall have
the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, provided, however, if
the defendants in any action include both the indemnified
party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties
which are different from or additional to those available to
the indemnifying party, or if there is a conflict of interest
which would prevent counsel for the indemnifying party from
also representing the indemnified party, the indemnified party
or parties shall have the right to select separate counsel to
participate in the defense of such action on behalf of such
indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party pursuant to the
provisions of said paragraph (a) or
33
(b) for any legal or other expense subsequently incurred by
such indemnified party in connection with the defense thereof
other than reasonable costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance
with the proviso of the preceding sentence, (ii) the
indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of
the commencement of the action, or (iii) the indemnifying
party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party.
11. Default.
11.1. Events of Default. Each of the following events shall be an
event of default (an "Event of Default") for purposes of this Agreement:
(a) if the Company or any Subsidiary becomes insolvent or
bankrupt, or admits in writing its inability to pay its debts
as they mature, or makes an assignment for the benefit of
creditors, or ceases doing business as a going concern (except
that a Subsidiary may cease to do business if approved in
advance by the Board of Directors of the Company), or the
Company or any Subsidiary applies for or consents to the
appointment of a trustee or receiver for the Company or any
Subsidiary, or for the major part of the property of either;
or
(b) if a trustee or receiver is appointed for the Company or any
Subsidiary or for the major part of the property of either and
the order of such appointment is not discharged, vacated or
stayed within 30 days after such appointment; or
(c) if any judgment, writ or warrant of attachment or of any
similar process in an amount in excess of $50,000 shall be
entered or filed against the Company or any Subsidiary or
against any of the property or assets of either and remains
unpaid, unvacated, unbonded or unstayed for a period of 30
days; or
(d) if an order for relief shall be entered in any Federal
bankruptcy proceeding in which the Company or any Subsidiary
is the debtor; or if bankruptcy, reorganization, arrangement,
insolvency, or liquidation proceedings, or other proceedings
for relief under any bankruptcy or similar law or laws for the
relief of debtors, are instituted by or against the Company or
any Subsidiary and, if instituted against the Company or any
Subsidiary, are consented to or, if contested by the Company
or the Subsidiary, are not dismissed by the adverse parties or
by an order, decree or judgment within 30 days after such
institution; or
(e) if the Company or any Subsidiary shall default in any material
respect in the due and punctual performance of any covenant or
agreement in any note, bond, indenture, loan agreement, note
agreement, mortgage, security agreement or other instrument
evidencing or related to Indebtedness for Borrowed Money, and
such
34
default shall continue for more than the period of notice
and/or grace, if any, therein specified and shall not have
been waived; or
(f) if any representation or warranty made by or on behalf of the
Company in this Agreement or in any certificate or schedule
furnished pursuant hereto shall prove to have been untrue or
incorrect in any material respect as of the date of this
Agreement or as of the Closing Date and (ii) if any report,
certificate, financial statement or financial schedule or
other instrument prepared by the Company or any officer of the
Company furnished or delivered under or pursuant to this
Agreement after the Closing Date hereunder shall prove to be
untrue or incorrect in any material respect as of the date it
was made, furnished or delivered; or
(g) if default shall be made in the Company's obligation to redeem
the Preferred Stock (as hereinafter defined), as required to
be redeemed as of a particular date specified in the
applicable Certificate of Designation, whether or not funds
are legally available therefor, provided, however, that it
shall not be an Event of Default if the Company's failure to
so redeem the Preferred Stock results from the failure of the
holders of Preferred Stock entitled to vote on or consent to
such redemption to give their consent to the redemption and
the Company otherwise has funds legally available to redeem
the Preferred Stock; or
(h) if default shall be made in the due and punctual performance
or observance of any other term contained in this Agreement,
and such default shall have continued for a period of 15 days
after written notice thereof to the Company by the holder of
any Preferred Stock.
11.2. Remedies Upon Events of Default. Upon the occurrence of an
Event of Default of the type specified in (i) paragraphs (a), (b), (c), (d),
(e), (g) or (h) of Section 11.1, and (ii) paragraph (f) of Section 11.1 if the
representation or warranty at issue was made with reckless disregard for the
truth or falsity thereof, and so long as such Event of Default continues
unremedied, then, unless such Event of Default shall have been waived by the
holders of a majority of the Series C Preferred Stock and Series D Preferred
Stock then outstanding, voting together as a class, the holders (acting together
as a class) of a majority of the Series C Preferred Stock and Series D Preferred
Stock may require the Company immediately to redeem all Series C Preferred Stock
and Series D Preferred Stock then outstanding as provided in Section 4(b) of the
Certificate and thereupon the Company shall be obligated to redeem all Series C
Preferred Stock and Series D Preferred Stock then outstanding. Upon the
occurrence of any Event of Default hereunder, unless such Event of Default shall
have been waived by the holders of at least sixty percent of the outstanding
shares of each of the Series A Preferred Stock and Series B Preferred Stock and
by the holders of a majority of the Series C Preferred Stock and Series D
Preferred Stock then outstanding, voting together as a class, the Board of
Directors shall be reconstituted as provided in Section 5 of the Shareholders
Agreement and subparagraph (2)(c) of the Certificate, the Amended and Restated
Series A Certificate, the Amended and Restated Series B Certificate or the
Amended and Restated Series C Certificate, as the case may be.
35
11.3. Notice of Defaults. When, to its knowledge, any Event of
Default has occurred or exists, the Company agrees to give written notice within
three business days of such Event of Default to the holders of all outstanding
Preferred Shares. If the holder of any Preferred Shares shall give any notice or
take any other actions in respect of a claimed Event of Default, the Company
will forthwith give written notice thereof to all other holders of Preferred
Shares at the time outstanding, describing such notice or action and the nature
of the claimed Event of Default.
11.4. Suits for Enforcement. In case any one or more Events of
Default shall have occurred and be continuing, unless such Events of Default
shall have been waived in the manner provided in Section 11.2 hereof, the
holders of a majority of the Preferred Shares may proceed to protect and enforce
their rights under Section 11 by suit in equity or action at law. It is agreed
that in the event of such action such holders of Preferred Shares shall be
entitled to receive all reasonable fees, costs and expenses incurred, including
without limitation such reasonable fees and expenses of attorneys (whether or
not litigation is commenced) and reasonable fees, costs and expenses of appeals.
11.5. Remedies Cumulative. No right, power or remedy conferred upon
any holder of Preferred Shares shall be exclusive, and each such right, power or
remedy shall be cumulative and in addition to every other right, power or
remedy, whether conferred hereby or by any such security or now or hereafter
available at law or in equity or by statute or otherwise.
11.6. Remedies not Waived. No course of dealing between the Company
and any Purchaser or the holder of any Preferred Shares, and no delay in
exercising any right, power or remedy conferred hereby or by any such security
or now or hereafter existing at law or in equity or by statute or otherwise,
shall operate as a waiver of or otherwise prejudice any such right, power or
remedy; provided, however, that this Section 11.6 shall not be construed or
applied so as to negate the provisions and intent of any statute which is
otherwise applicable.
12. Termination of Certain Covenants. The obligations of the
Company under Sections 8 and 9 hereof and the obligations of the Purchasers
under Section 15 hereof, other than its obligations under Section 8.12 hereof,
shall, notwithstanding any provisions hereof apparently to the contrary,
terminate and shall be of no further force or effect from and after the date on
which the Company completes a public offering of shares of Common Stock under
circumstances that would result in the mandatory conversion of the Preferred
Shares into Conversion Stock as set forth in the Certificate.
13. Definitions. Unless the context otherwise requires, the terms
defined in this Section 13 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms herein defined. All accounting terms defined below shall,
except as otherwise expressly provided, be determined by reference to the
Company's books of account and in conformity with generally accepted accounting
principles as applied to such books of account in the opinion of the independent
certified public accountants selected by the Board of Directors of the Company
as required under the provisions of Section 8.2 hereof.
36
13.1. "Additional Shares of Common Stock" shall mean all shares of
Common Stock of the Company issued by the Company on or after the Closing Date,
except the Conversion Stock, shares of Common Stock issued upon conversion of
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
and shares of Common Stock issued upon exercise of the Warrants (as defined in
the 1998 Agreement).
13.2. "Amended and Restated Series A Certificate" shall mean the
Amendment and Restatement of Statement of Designation of Rights, Preferences and
Limitations of Series A Convertible Preferred Stock that is approved and adopted
in substantially the form set forth in Exhibit 10 hereto.
13.3. "Amended and Restated Series B Certificate" shall mean the
Amendment and Restatement of Statement of Designation of Rights, Preferences and
Limitations of Series B Convertible Preferred Stock that is approved and adopted
in substantially the form set forth in Exhibit 11 hereto.
13.4. "Amended and Restated Series C Certificate" shall mean the
Amendment and Restatement of Statement of Designation of Rights, Preferences and
Limitations of Series C Convertible Preferred Stock that is approved and adopted
in substantially the form set forth in Exhibit 12 hereto.
13.5. "Common Stock" shall mean the Company's authorized common
shares, any additional common shares which may be authorized in the future by
the Company, and any stock into which such common shares may hereafter be
changed, and shall also include stock of the Company of any other class which is
not preferred as to dividends or as to distributions of assets on liquidation,
dissolution or winding up of the Company over any other class of stock of the
Company, and which is not subject to redemption.
13.6. "Conversion Price" shall mean such price at which the
Preferred Shares are convertible into Common Stock pursuant to the Certificate.
13.7. "Conversion Stock" shall mean the shares of Common Stock into
which the Preferred Shares are convertible and all shares of Common Stock of the
Company issued in exchange or substitution therefor.
13.8. "Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities which are at any time directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.
13.9. "Indebtedness for Borrowed Money" shall include only
indebtedness of the Company and its Subsidiaries incurred as the result of a
direct borrowing of money and shall not include any other indebtedness
including, but not limited to, indebtedness incurred with respect to trade
accounts.
13.10. "Third Amendment to 1996 Agreement and Waiver" shall mean that
amendment entered into between the Company and the Purchasers under the 1996
Agreement and that
37
waiver by such Purchasers of their preemptive rights in substantially the form
set forth in Exhibit 7 hereto.
13.11. "Second Amendment to 1998 Agreement and Waiver" shall mean
that amendment entered into between the Company and the Purchasers under the
1998 Agreement and that waiver by such Purchasers of their preemptive rights in
substantially the form set forth in Exhibit 8 hereto.
13.12. "First Amendment to 2000 Agreement and Waiver" shall mean that
amendment entered into between the Company and the Purchasers under the 2000
Agreement and that wavier by such Purchasers of their preemptive rights in
substantially the form set forth in Exhibit 9 hereto.
13.13. "Junior Stock" shall mean Series A Preferred Stock, Series B
Preferred Stock, Common Stock and all other shares of stock of any other class
of the Company at any time created and issued ranking junior to the Preferred
Shares with respect to the right to receive dividends and/or the right to the
distribution of assets upon liquidation, dissolution or winding up of the
Company.
13.14. "Permitted Liens" shall mean (a) liens for taxes and
assessments or governmental charges or levies not at the time due or in respect
of which the validity thereof shall currently be contested in good faith by
appropriate proceedings; and (b) liens in respect of pledges or deposits under
worker's compensation laws or similar legislation, carriers', warehousemen's,
mechanics', laborers' and materialmen's, landlord's and statutory and similar
liens, if the obligations secured by such liens are not then delinquent or are
being contested in good faith, and liens and encumbrances incidental to the
conduct of the business of the Company or any Subsidiary which were not incurred
in connection with the borrowing of money or the obtaining of advances or
credits and which do not in the aggregate materially detract from the value of
its property or materially impair the use thereof in the operation of its
business.
13.15. "Preferred Shares" shall mean the shares of Series D Preferred
Stock set forth in Schedule A hereto and all preferred shares of the Company
issued in exchange or substitution therefor.
13.16. "Preferred Stock" shall mean the shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and the Preferred
Shares.
13.17. "Purchased Stock" shall mean the Preferred Shares and the
Conversion Stock, and the stock or other securities of the Company issued in a
stock split or reclassification of, or a stock dividend or other distribution on
or in substitution or exchange for, or otherwise in connection with, any of the
foregoing securities, or in a merger or consolidation involving the Company or a
sale of all or substantially all of the Company's assets. Solely for the
purposes of Section 10 of this Agreement, "Purchased Stock" shall also include
the Series C Preferred Stock and the Series C Conversion Stock, and the stock or
other securities of the Company issued in a stock split or reclassification of,
or a stock dividend or other distribution on or in substitution or exchange for,
or otherwise in connection with, any of the foregoing securities, or in a merger
or
38
consolidation involving the Company or a sale of all or substantially all of the
Company's assets. Nothing in this Section 13.17 shall be deemed to require the
Company to register any Preferred Shares or Series C Preferred Stock, it being
understood that the registration rights granted by Section 10 hereof relate only
to shares of Common Stock and securities issued in substitution or exchange
therefor.
13.18. "Securities" shall mean the Preferred Shares, the Conversion
Stock, the Series A Preferred Stock, the Series A Conversion Stock, the Series B
Preferred Stock, the Series B Conversion Stock, the Series C Preferred Stock,
the Series C Conversion Stock, the Warrants (as defined in the 1998 Agreement),
the Warrant Stock (as defined in the 1998 Agreement) and any stock or other
securities of the Company issued in a stock split or reclassification of, or a
stock dividend or other distribution on or in substitution or exchange for, or
otherwise in connection with, any of the foregoing securities, or in a merger or
consolidation involving the Company or a sale of all or substantially all of the
Company's assets.
13.19. "Senior Indebtedness" shall mean (a) the principal of all
Indebtedness for Borrowed Money of the Company and its Subsidiaries, (b) the
present value of net minimum lease payments of all leases under which the
Company or any of its Subsidiaries is the lessee and which are required to be
capitalized under generally accepted accounting principles, (c) the principal of
all indebtedness of the Company or any of its Subsidiaries under installment
purchase agreements and purchase money obligations other than trade accounts,
and (d) the principal of all indebtedness of the Company or any of its
Subsidiaries to the owners of any real property leased by the Company for
leasehold improvements financed by such owners to the extent disclosed on the
Company's balance sheets.
13.20. "Series A Conversion Stock" shall mean the shares of Common
Stock into which the Series A Preferred Stock are convertible and all shares of
Common Stock of the Company issued in exchange or substitution therefor.
13.21. "Series B Conversion Stock" shall mean the shares of Common
Stock into which the Series B Preferred Stock are convertible and all shares of
Common Stock of the Company issued in exchange or substitution therefor.
13.22. "Series C Conversion Stock" shall mean the shares of Common
Stock into which the Series C Preferred Stock are convertible and all shares of
Common Stock of the Company issued in exchange or substitution therefor.
13.23. "Subsidiary" shall mean any corporation, association or other
business entity more than a majority (by number of votes) of the voting stock of
which is owned or controlled, directly or indirectly, by the Company or by one
or more of its Subsidiaries or both.
14. Consents; Waivers and Amendments. Except as otherwise
specifically provided herein, in each case in which approval of the Purchasers
is required by the terms of this Agreement, such requirement shall be satisfied
by a vote or the written consent of Purchasers under this Agreement owning a
majority of the shares of Purchased Stock then owned by such Purchasers. With
the written consent of Purchasers owning a majority of the shares of Purchased
39
Stock then owned by the Purchasers, the obligations of the Company under this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), and with the same approval the Company may
enter into a supplementary agreement for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this Agreement
or of any supplemental agreement or modifying in any manner the rights and
obligations of the holders of the Preferred Shares and of the Company; provided,
however, that any waiver, consent or agreement of amendment, modification or
supplement relating to Sections 9.1, 9.2, 9.3 or 10 shall require the written
consent of the holders of a majority of the Series C Preferred Stock and Series
D Preferred Stock, voting together as a class. Written notice of any such
waiver, consent or agreement of amendment, modification or supplement shall be
given to the record holders of the Preferred Shares who have not previously
consented thereto in writing.
15. Voting Agreement. Each of the Purchasers individually agrees
to vote all of the shares of Purchased Stock owned by such Purchaser in favor of
the election of Xxxxxx Xxxxxx to the Board of Directors of the Company so long
as he is Chief Executive Officer of the Company, provided, that such vote by the
Purchasers shall not constitute Mr. Akradi as the director elected exclusively
by the holders of the Series C Preferred Stock and Series D Preferred Stock
pursuant to Section 2(b)(iv) of the Certificate and provided further, that, he
may be removed from the Board of Directors pursuant to Section 2(c) of the
Certificate.
16. Changes, Waivers, etc. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only by a statement in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought, except to the extent
provided in Section 14 hereof.
17. Payment of Fees and Expenses of Purchasers. Upon the
consummation of the sale of the Preferred Shares anticipated by this Agreement
or upon failure by the Company to consummate such sales, the Company will pay
the reasonable fees and out-of-pocket expenses of (i) Xxxxxxx Berlin Shereff
Xxxxxxxx, LLP for their services as special counsel to the affiliates of APAX
Excelsior and Patricof Private Investment Club in connection with the
transactions herein contemplated; provided, however, that such payment
obligation shall not exceed $25,000 and (ii) Xxxxxxxxx & Xxxxxx P.L.L.P. for
their services as special counsel to the affiliates of Norwest Equity Partners
in connection with the transactions herein contemplated; provided, however, that
such payment obligation shall not exceed $4,000. The Company will also pay (a)
all fees and expenses incurred by the Purchasers with respect to any amendments
or waivers requested by the Company (whether or not the same become effective)
under or in respect of this Agreement or the agreements contemplated hereby, and
(b) all fees and expenses incurred by the Purchasers with respect to the
enforcement of the rights granted under this Agreement or the agreements
contemplated hereby.
18. Understanding Among Purchasers. The determination by each of
the Purchasers to purchase Preferred Shares pursuant to this Agreement has been
made by such Purchaser independently of the other Purchasers, and independently
of any statements or opinions as to the advisability of such purchase or as to
the properties, business, prospects or condition (financial or otherwise) of the
Company which may have been made or given by the other Purchasers or by
40
any agent or employee of the other Purchasers. In addition, it is acknowledged
by each of the Purchasers that the other Purchasers have not acted as such
Purchaser's agent in connection with making its investment hereunder and that
the other Purchasers will not be acting as such Purchaser's agent in connection
with monitoring such Purchaser's investment hereunder.
19. Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
(i) hand delivered, (ii) mailed first-class postage prepaid, registered or
certified mail, (iii) delivered by overnight delivery service of recognized
reputation, or (iv) delivered by telefacsimile,
(a) if to any holder of any Purchased Stock, addressed to such
holder at its address as shown on the books of the Company, or
at such other address as such holder may specify by written
notice to the Company, or
(b) if to the Company, addressed to the Company, 0000 Xxxx Xxxx
Xxxxxxx, Xxxx Xxxxxxx, Xxxxxxxxx 00000, attention Chief
Financial Officer, (952-947-0099) or to such other address as
the Company may specify by written notice to the
Purchasers,(c) and such notices and other communications shall
for all purposes of this Agreement be treated as being
effective or having been given (w) upon delivery, if delivered
personally, (x) five days after deposit, if sent by mail, (y)
the day after delivery to an overnight delivery service, or
(z) upon receipt of electronic confirmation of receipt, if
delivered by telefacsimile.
20. Survival of Representations and Warranties, etc. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement, any investigation at any time made by the Purchasers
or on their behalf, and the sale and purchase of the Preferred Shares and
payment therefor. All statements contained in any certificate or schedule
delivered by or on behalf of the Company pursuant hereto (other than legal
opinions) shall constitute representations and warranties by the Company
hereunder.
21. Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto, whether so
expressed or not, and, in particular, shall be binding upon, inure to the
benefit of and be enforceable by and against the holder or holders at the time
of any of the Purchased Stock, provided that if such holder or holders is not a
Purchaser, such holder or holders acquired such Purchased Stock in compliance
with Section 4 of this Agreement.
22. Headings. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
23. Choice of Law. It is the intention of the parties that the
laws of New York, other than the choice of law provisions thereof, shall govern
the validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties.
41
24. Waiver of Jury Trial. Each party hereto acknowledges and
agrees that any controversy which may arise under this Agreement is likely to
involve complicated and difficult issues, and therefore each party hereto hereby
irrevocably and unconditionally waives any right such party may have to a trial
by jury in respect or any litigation directly or indirectly arising out of or
relating to this Agreement, or the breach, termination or validity of this
Agreement, or the transactions contemplated by this Agreement. Each party hereto
certifies and acknowledges that (i) no representative, agent or attorney of any
other party hereto has represented, expressly or otherwise, that such other
party hereto would not, in the event of litigation, seek to enforce the
foregoing waiver, (ii) each such party hereto understands and has considered the
implications of this waiver, (iii) each such party hereto makes this waiver
voluntarily, and (iv) each such party hereto has been induced to enter into this
Agreement by, among other things, the mutual waivers and certifications in this
Section 24.
25. Counterparts. This Agreement may be executed concurrently 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.
42
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
undersigned, whereupon this letter shall become a binding contract among you and
the undersigned.
Very truly yours,
LIFE TIME FITNESS, INC.
By__________________________________
Its__________________________________
[SERIES C STOCK PURCHASE AGREEMENT]
The foregoing Agreement is hereby accepted as of the date first above written.
APAX EXCELSIOR VI, L.P.
By: Apax Excelsior VI Partners, L.P.,
its General Partner
By: Patricof & Co. Managers, Inc.,
its General Partner
By: ___________________________________
Name: Xxxxx X. Xxxxxx
Title: Vice President
[SERIES C STOCK PURCHASE AGREEMENT]
PATRICOF PRIVATE INVESTMENT CLUB III, L.P.
By: Apax Excelsior VI Partners, L.P.,
its General Partner
By: Patricof & Co. Managers, Inc.,
its General Partner
By: ___________________________________
Name: Xxxxx X. Xxxxxx
Title: Vice President
[SERIES C STOCK PURCHASE AGREEMENT]
APAX EXCELSIOR VI-A C.V. L.P.
By: Apax Excelsior VI Partners, L.P.,
its General Partner
By: Patricof & Co. Managers, Inc.,
its General Partner
By: __________________________________
Name: Xxxxx X. Xxxxxx
Title: Vice President
[SERIES C STOCK PURCHASE AGREEMENT]
APAX EXCELSIOR VI-B C.V. L.P.
By: Apax Excelsior VI Partners, L.P.,
its General Partner
By: Patricof & Co. Managers, Inc.,
its General Partner
By: _____________________________
Name: Xxxxx X. Xxxxxx
Title: Vice President
[SERIES C STOCK PURCHASE AGREEMENT]
NORWEST EQUITY PARTNERS VII, LP
A MINNESOTA LIMITED PARTNERSHIP
By: ITASCA LBO VII, LLP
Its: General Partner
By____________________________
Its_________________________
[SERIES C STOCK PURCHASE AGREEMENT]
_______________________________
Xxxxxx Xxxxxx
[SERIES C STOCK PURCHASE AGREEMENT]
[NAMES OF ADDITIONAL PURCHASERS]
[SERIES C STOCK PURCHASE AGREEMENT]
PURCHASER CERTIFICATION
The undersigned, in connection with the Stock Purchase Agreement dated
July 19, 2001 among LIFE TIME FITNESS, Inc. (the "Company") and certain
Purchasers listed in Schedule A thereto, hereby makes each of the
representations contained in Section 6 of such Stock Purchase Agreement. The
undersigned further represents either (a) that he/she/it qualifies as an
"accredited investor", as that term is used in Regulation D promulgated under
the Securities Act of 1933 (the "Act"), because (check one):
(1)_____ it is a bank as defined in Section 3(a)(2) of the Act, or a
savings and loan association or other institution as defined in
Section 3(a)(5) of the Act, whether acting in its individual or
fiduciary capacity; a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934; an insurance
company as defined in Section 2(13) of the Act; an investment
company registered under the Investment Company Act of 1940 or a
business development company as defined in Section 2(a)(48) of
that act; a Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958; a plan established and
maintained by a state, its political subdivisions, or any
instrumentality of a state or its subdivisions, for the benefit of
its employees, if such plan has total assets in excess of
$5,000,000; an employee benefit plan within the meaning of Title I
of the Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such act, which is either a bank, savings and
loan association, insurance company or registered investment
adviser, or if the employee benefit plan has total assets in
excess of $5,000,000 or, if a self-directed plan, with investment
decisions made solely by persons that are accredited investors;
(2) _____ it is a private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
(3) _____ it is an organization described in Section 501(c)(3) of the
Internal Revenue Code, a corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
(4) _____ he or she is a director or executive officer of the Company;
(5) _____ he or she is an individual who has an individual net worth,
or joint net worth with his or her spouse, in excess of $1,000,000;
(6) _____ he or she is an individual who had an income in excess of
$200,000 in each of the two most recent years or joint income with his or her
spouse in excess of $300,000 in each of those years and who reasonably expects
an income in excess of the same level in the current year;
(7) _____ it is a trust with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii) under the Act; or
(8) _____ it is an entity, all of whose equity owners are accredited
investors.
APAX EXCELSIOR VI, L.P.
By: Apax Excelsior VI Partners, L.P.,
its General Partner
By: Patricof & Co. Managers, Inc.,
its General Partner
By: ___________________________________
Name: Xxxxx X. Xxxxxx
Title: Vice President
2
PURCHASER CERTIFICATION
The undersigned, in connection with the Stock Purchase Agreement dated
July 19, 2001 among LIFE TIME FITNESS, Inc. (the "Company") and certain
Purchasers listed in Schedule A thereto, hereby makes each of the
representations contained in Section 6 of such Stock Purchase Agreement. The
undersigned further represents either (a) that he/she/it qualifies as an
"accredited investor", as that term is used in Regulation D promulgated under
the Securities Act of 1933 (the "Act"), because (check one):
(1) _____ it is a bank as defined in Section 3(a)(2) of the Act, or a
savings and loan association or other institution as defined in Section 3(a)(5)
of the Act, whether acting in its individual or fiduciary capacity; a broker or
dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934;
an insurance company as defined in Section 2(13) of the Act; an investment
company registered under the Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of that act; a Small Business
Investment Company licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act of 1958; a plan
established and maintained by a state, its political subdivisions, or any
instrumentality of a state or its subdivisions, for the benefit of its
employees, if such plan has total assets in excess of $5,000,000; an employee
benefit plan within the meaning of Title I of the Employee Retirement Income
Security Act of 1974, if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such act, which is either a bank, savings and loan
association, insurance company or registered investment adviser, or if the
employee benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons that are
accredited investors;
(2) _____ it is a private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
(3) _____ it is an organization described in Section 501(c)(3) of the
Internal Revenue Code, a corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
(4) _____ he or she is a director or executive officer of the Company;
(5) _____ he or she is an individual who has an individual net worth,
or joint net worth with his or her spouse, in excess of $1,000,000;
(6) _____ he or she is an individual who had an income in excess of
$200,000 in each of the two most recent years or joint income with his or her
spouse in excess of $300,000 in each of those years and who reasonably expects
an income in excess of the same level in the current year;
(7) _____ it is a trust with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii) under the Act; or
(8) _____ it is an entity, all of whose equity owners are accredited
investors.
PATRICOF PRIVATE INVESTMENT CLUB III, L.P.
By: Apax Excelsior VI Partners, L.P.,
its General Partner
By: Patricof & Co. Managers, Inc.,
its General Partner
By: _______________________________________
Name: Xxxxx X. Xxxxxx
Title: Vice President
2
PURCHASER CERTIFICATION
The undersigned, in connection with the Stock Purchase Agreement dated
July 19, 2001 among LIFE TIME FITNESS, Inc. (the "Company") and certain
Purchasers listed in Schedule A thereto, hereby makes each of the
representations contained in Section 6 of such Stock Purchase Agreement. The
undersigned further represents either (a) that he/she/it qualifies as an
"accredited investor", as that term is used in Regulation D promulgated under
the Securities Act of 1933 (the "Act"), because (check one):
(1) _____ it is a bank as defined in Section 3(a)(2) of the Act, or a
savings and loan association or other institution as defined in
Section 3(a)(5) of the Act, whether acting in its individual or
fiduciary capacity; a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934; an insurance
company as defined in Section 2(13) of the Act; an investment
company registered under the Investment Company Act of 1940 or a
business development company as defined in Section 2(a)(48) of
that act; a Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958; a plan established and
maintained by a state, its political subdivisions, or any
instrumentality of a state or its subdivisions, for the benefit of
its employees, if such plan has total assets in excess of
$5,000,000; an employee benefit plan within the meaning of Title I
of the Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such act, which is either a bank, savings and
loan association, insurance company or registered investment
adviser, or if the employee benefit plan has total assets in
excess of $5,000,000 or, if a self-directed plan, with investment
decisions made solely by persons that are accredited investors;
(2) _____ it is a private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
(3) _____ it is an organization described in Section 501(c)(3) of the
Internal Revenue Code, a corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
(4) _____ he or she is a director or executive officer of the Company;
(5) _____ he or she is an individual who has an individual net worth,
or joint net worth with his or her spouse, in excess of $1,000,000;
(6) _____ he or she is an individual who had an income in excess of
$200,000 in each of the two most recent years or joint income with his or her
spouse in excess of $300,000 in each of those years and who reasonably expects
an income in excess of the same level in the current year;
(7) _____ it is a trust with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii) under the Act; or
(8) _____ it is an entity, all of whose equity owners are accredited
investors.
APAX EXCELSIOR VI-A C.V. L.P.
By: Apax Excelsior VI Partners, L.P.,
its General Partner
By: Patricof & Co. Managers, Inc.,
its General Partner
By: __________________________________
Name: Xxxxx X. Xxxxxx
Title: Vice President
2
PURCHASER CERTIFICATION
The undersigned, in connection with the Stock Purchase Agreement dated
July 19, 2001 among LIFE TIME FITNESS, Inc. (the "Company") and certain
Purchasers listed in Schedule A thereto, hereby makes each of the
representations contained in Section 6 of such Stock Purchase Agreement. The
undersigned further represents either (a) that he/she/it qualifies as an
"accredited investor", as that term is used in Regulation D promulgated under
the Securities Act of 1933 (the "Act"), because (check one):
(1) _____ it is a bank as defined in Section 3(a)(2) of the Act, or a
savings and loan association or other institution as defined in
Section 3(a)(5) of the Act, whether acting in its individual or
fiduciary capacity; a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934; an insurance
company as defined in Section 2(13) of the Act; an investment
company registered under the Investment Company Act of 1940 or a
business development company as defined in Section 2(a)(48) of
that act; a Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958; a plan established and
maintained by a state, its political subdivisions, or any
instrumentality of a state or its subdivisions, for the benefit of
its employees, if such plan has total assets in excess of
$5,000,000; an employee benefit plan within the meaning of Title I
of the Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such act, which is either a bank, savings and
loan association, insurance company or registered investment
adviser, or if the employee benefit plan has total assets in
excess of $5,000,000 or, if a self-directed plan, with investment
decisions made solely by persons that are accredited investors;
(2) _____ it is a private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
(3) _____ it is an organization described in Section 501(c)(3) of the
Internal Revenue Code, a corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
(4) _____ he or she is a director or executive officer of the Company;
(5) _____ he or she is an individual who has an individual net worth,
or joint net worth with his or her spouse, in excess of $1,000,000;
(6) _____ he or she is an individual who had an income in excess of
$200,000 in each of the two most recent years or joint income with his or her
spouse in excess of $300,000 in each of those years and who reasonably expects
an income in excess of the same level in the current year;
(7) _____ it is a trust with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii) under the Act; or
(8) _____ it is an entity, all of whose equity owners are accredited
investors.
APAX EXCELSIOR VI-B C.V. L.P.
By: Apax Excelsior VI Partners, L.P.,
its General Partner
By: Patricof & Co. Managers, Inc.,
its General Partner
By: _____________________________
Name: Xxxxx X. Xxxxxx
Title: Vice President
2
PURCHASER CERTIFICATION
The undersigned, in connection with the Stock Purchase Agreement dated
July 19, 2001 among LIFE TIME FITNESS, Inc. (the "Company") and certain
Purchasers listed in Schedule A thereto, hereby makes each of the
representations contained in Section 6 of such Stock Purchase Agreement. The
undersigned further represents either (a) that he/she/it qualifies as an
"accredited investor", as that term is used in Regulation D promulgated under
the Securities Act of 1933 (the "Act"), because (check one):
(1) _____ it is a bank as defined in Section 3(a)(2) of the Act, or a
savings and loan association or other institution as defined in
Section 3(a)(5) of the Act, whether acting in its individual or
fiduciary capacity; a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934; an insurance
company as defined in Section 2(13) of the Act; an investment
company registered under the Investment Company Act of 1940 or a
business development company as defined in Section 2(a)(48) of
that act; a Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958; a plan established and
maintained by a state, its political subdivisions, or any
instrumentality of a state or its subdivisions, for the benefit of
its employees, if such plan has total assets in excess of
$5,000,000; an employee benefit plan within the meaning of Title I
of the Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such act, which is either a bank, savings and
loan association, insurance company or registered investment
adviser, or if the employee benefit plan has total assets in
excess of $5,000,000 or, if a self-directed plan, with investment
decisions made solely by persons that are accredited investors;
(2) _____ it is a private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
(3) _____ it is an organization described in Section 501(c)(3) of the
Internal Revenue Code, a corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
(4) _____ he or she is a director or executive officer of the Company;
(5) _____ he or she is an individual who has an individual net worth,
or joint net worth with his or her spouse, in excess of $1,000,000;
(6) _____ he or she is an individual who had an income in excess of
$200,000 in each of the two most recent years or joint income with his or her
spouse in excess of $300,000 in each of those years and who reasonably expects
an income in excess of the same level in the current year;
(7) _____ it is a trust with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii) under the Act; or
(8) _____ it is an entity, all of whose equity owners are accredited
investors.
NORWEST EQUITY PARTNERS VII, LP
A MINNESOTA LIMITED PARTNERSHIP
By: ITASCA LBO VII, LLP
Its: General Partner
By____________________________
Its__________________________
2
[CERTIFICATES OF ADDITIONAL PURCHASERS]
SCHEDULE A
Number of Preferred Aggregate
Names and Addresses of Purchasers Shares to be Purchased Purchase Price
---------------------------------------------------------------------------------------
APAX Excelsior VI, L.P. [ ] [$ ]
--------- -----------
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Patricof Private Investment Club III, L.P. [ ] [$ ]
--------- -----------
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
---------------------------------------------------------------------------------------
APAX Excelsior VI-A C.V. L.P. [ ] [$ ]
--------- -----------
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
---------------------------------------------------------------------------------------
APAX Excelsior VI-B C.V. L.P. [ ] [$ ]
--------- -----------
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
---------------------------------------------------------------------------------------
Norwest Equity Partners VII, LP [ ] [$ ]
--------- -----------
3600 IDS Center
00 Xxxxx 0xx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
---------------------------------------------------------------------------------------
[Xxxxxx Xxxxxx & other common] [ ] [$ ]
--------- -----------
---------------------------------------------------------------------------------------
[Other unaffiliated investors] [ ] [$ ]
--------- -----------
--------------------------------------------------------------------------------------
TOTAL 2,000,000 $20,000,000
SCHEDULE B
Norwest Equity Partners V, LP
Norwest Equity Partners VI, LP
Norwest Equity Partners VII, LP
APAX Excelsior VI, L.P.
Patricof Private Investment Club III, L.P.
APAX Excelsior VI-A C.V. L.P.
APAX Excelsior VI-A C.V. L.P.
Xxxxxx Xxxxxx
Xxxxxx Xxxxxxxxxxx, F.T. Weyerhauser and X.X. Xxxxxxxxxxx XX, Trustees under
Trust Agreement dated June 13, 1958 FBO W. Xxxx Xxxxxxxx
X.X. Xxxxxxxx and X.X. Xxxxxxxx, Trustees U/A dated 10/30/95 with W. Xxxx
Xxxxxxxx
WWF & Co.
