EXHIBIT 10.28
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") dated as of November
20, 1999 by and among Fieldworks, Incorporated, a Minnesota corporation (the
"Company"), and Industrial-Works Holding Corp., a Delaware corporation
("Purchaser"). Section 6.17 lists certain defined terms used in this Agreement.
WHEREAS, on the terms and subject to the conditions set forth herein, the
Company wishes to issue and sell to Purchaser newly issued shares ("Series B
Shares") of the authorized but unissued Series B Convertible Participating
Preferred Stock of the Company (the "Series B Preferred Stock"), and a warrant
to purchase 500,000 shares of the Common Stock, $.001 par value per share
("Common Stock") of the Company (the "Warrant");
WHEREAS, the Purchaser wishes to purchase the Series B Shares and the
Warrant on the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I
AUTHORIZATION, ISSUANCE AND SALE OF SECURITIES
SECTION 1.01 Authorization. The Company has authorized and reserved for
issuance 4,250,000 shares of Series B Preferred Stock, upon the terms and
conditions described herein, and has authorized and reserved 4,250,000 shares of
the Company's Common Stock for issuance upon conversion of the Series B Shares.
The Company has authorized and reserved 500,000 shares of the Company's Common
Stock for issuance upon exercise of the Warrant, and will reserve 250,000 shares
of the Company's Common Stock for issuance upon the exercise of the Breakup
Warrant, if the Breakup Warrant is issued.
SECTION 1.02 The Series B Shares. The Series B Shares shall be issued
pursuant to, and shall be vested with the rights and preferences, and subject to
the limitations set forth in the Certificate of Designation of the Series B
Convertible Participating Preferred Stock (the "Series B Certificate") attached
hereto as Exhibit A.
SECTION 1.03 The Warrant. The Warrant and the Warrant Shares shall be
issued pursuant to, and shall be vested with the rights and subject to the
limits of the Warrant to Purchase Shares of Common Stock attached hereto as
Exhibit B.
SECTION 1.04 The Conversion Shares and Warrant Shares. The shares of the
Company's Common Stock issued or issuable upon conversion of the Series B Shares
(the "Conversion Shares") and the shares of the Company's Common Stock issued or
issuable upon exercise of the Warrant, or the Breakup Warrant (the "Warrant
Shares") will be entitled to the registration rights provisions attached as
Exhibit A to the Warrant.
SECTION 1.05 Purchase and Sale. Subject to the terms and conditions of this
Agreement, the Company agrees to issue and sell to Purchaser and Purchaser
agrees to purchase from the Company, 4,250,000 shares of Series B Preferred
Stock for a purchase price of one dollar ($1.00) per share.
Subject to the terms and conditions of this Agreement, the Company agrees
to issue and sell to Purchaser and Purchaser agrees to purchase from the Company
a warrant to purchase 500,000 shares of the Company's Common Stock in
consideration for Purchaser's investment in the Series B Shares. If any rule,
law or regulation requires an allocation of a portion of the Purchase Price to
the Warrants, $100 shall be so allocated.
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SECTION 1.06 Closing. Subject to the terms and conditions of this Agreement,
the closing shall take place at the offices of Paul, Hastings, Xxxxxxxx &
Xxxxxx LLP, 17th Floor, 000 Xxxx Xxxxxx Xxxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000 on
January 19, 2000 or at such other place, time and date as Company and Purchaser
may direct (the "Closing Date"). At the Closing, Company will deliver to
Purchaser the Warrant and the Series B Shares, registered in Purchaser's name,
and Purchaser shall transfer the Purchase Price to the account of the Company
by wire transfer of immediately available funds.
SECTION 1.07 Use of Proceeds. The Company shall use such proceeds for
acquisitions and for general working capital.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser that, except as set
forth in the Disclosure Schedules attached hereto (which Disclosure Schedules
make explicit reference to the particular representation or warranty as to
which exception is taken, which in each case shall constitute the sole
representation and warranty as to which such exception shall apply):
SECTION 2.01 Organization, Qualifications and Corporate Power.
(a) The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of its state of incorporation and is duly licensed
or qualified to transact business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of the business transacted by
it or the character of the properties owned or leased by it requires such
licensing or qualification, except for such jurisdictions, if any, in which the
failure to be so qualified or in good standing would not, individually or in
the aggregate, have a Material Adverse Effect. The Company has the corporate
power and authority to own and hold its properties and to carry on its business
as now conducted and as proposed to be conducted, as described in the Company's
Annual Report on Form 10-K for the year ended January 3, 1999 (the "Annual
Report"), and the Company has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement, the Warrant, the
Breakup Warrant, and all other documents to be delivered in connection with any
of them (the "Transaction Documents"), and to issue, sell and deliver the
Series B Shares and to issue and deliver the Warrant Shares, or the Conversion
Shares.
(b) The Company does not (i) own of record or beneficially, directly or
indirectly, (A) any shares of capital stock or securities convertible into
capital stock of any other corporation or (B) any participating or limited
liability company interest in any partnership, joint venture, limited liability
company or other non-corporate business enterprise or (ii) control, directly or
indirectly, any other entity.
(c) The Articles of Incorporation of the Company (the "Articles of
Incorporation") and the Bylaws of the Company (the "Bylaws") are in full force
and effect as of the date hereof in the forms attached to, or incorporated by
reference in, the Annual Report.
SECTION 2.02 Authorization of Agreements.
(a) The execution and delivery by the Company of this Agreement, the
Warrant, the Breakup Warrant, and all other Transaction Documents, the
performance by the Company of its obligations hereunder and thereunder, the
issuance, sale and delivery of the Series B Shares, the Warrant, and the
Breakup Warrant, if issued, and the issuance and delivery of the Conversion
Shares and the Warrant Shares have been duly authorized by all requisite
corporate action and do not violate any provision of law, any order of any
court or other agency of government, the Articles of Incorporation or the
Bylaws, or any provision of any indenture, agreement or other instrument to
which the Company, or any of its properties or assets is bound, or conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any such
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indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company.
(b) The Series B Certificate, the Warrant, and the Breakup Warrant have been
duly approved by the Board of Directors of the Company. The Series B Shares
have been duly authorized and, when issued in accordance with this Agreement
and the Series B Certificate, will be validly issued, fully paid and
nonassessable shares of Series B Preferred Stock, with no personal liability
attaching to the ownership thereof, and will be free and clear of all liens,
charges, restrictions, claims and encumbrances imposed by or through the
Company except as set forth in this Agreement and the Series B Certificate. The
Conversion Shares and the Warrant Shares have been duly reserved for issuance
upon conversion of the Series B Shares and the exercise of the Warrant or the
Breakup Warrant, respectively, and, when so issued, will be duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock not subject
to, or issued in violation of, any purchase option, right of first refusal,
pre-emptive right, subscription right or any similar right under any provision
of the Minnesota Business Corporation Act (the "MBCA"), the Articles of
Incorporation or Bylaws, or any contract to which the Company is a party or is
otherwise bound, with no personal liability attaching to the ownership thereof
and will be free and clear of all liens, charges, restrictions, claims and
encumbrances imposed by or through the Company except as set forth in this
Agreement, the Series B Certificate, the Warrant, or the Breakup Warrant.
Neither the issuance, sale or delivery of the Series B Shares, the Warrant or
the Breakup Warrant nor the issuance or delivery of the Conversion Shares or
the Warrant Shares is subject to, or in violation of, any purchase option,
right of first refusal, pre-emptive right, subscription right or any similar
right under any provision of the MBCA, the Articles of Incorporation or Bylaws,
or any contract to which the Company is a party or is otherwise bound, or of
any other right in favor of any Person that has not been effectively waived.
SECTION 2.03 Validity. This Agreement has been duly executed and delivered
by the Company and constitutes a legal, valid and binding obligation of the
Company, enforceable in accordance with its terms, and each other Transaction
Document when executed and delivered in accordance with this Agreement will
constitute a legal, valid and binding obligation of the Company, enforceable in
accordance with its terms (subject in each case, as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting the rights of creditors generally, and as to the remedy
of specific performance and other forms of injunctive relief, subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought).
SECTION 2.04 Authorized Capital Stock. The authorized capital stock of the
Company consists of (i) 30,000,000 shares of Common Stock and (ii) 5,000,000
shares of preferred stock, of which 4,250,000 shares have been designated
Series B Preferred Stock. 8,894,426 shares of Common Stock are validly issued
and outstanding, fully paid and nonassessable with no personal liability
attaching to the ownership thereof, 3,893,604 shares of Common Stock are
reserved for issuance upon exercise of outstanding options and warrants, and
another 793,777 shares have been reserved for issuance under the 1994 Long-Term
Incentive and Stock Option Plan and the 1996 Directors' Stock Option Plan, and
no Series B Shares shall have been issued. The shareholders of record, and
holders by name or by category of subscriptions, warrants, options, convertible
debt or equity securities, and other rights (contingent or other) to purchase
or otherwise acquire equity securities of the Company, and the number of shares
of Common Stock and the number of such subscriptions, warrants, options,
convertible securities, and other such rights held by each, are as set forth on
Schedule 2.04. Schedule 2.04 also identifies, to the extent known to the
Company, all the beneficial owners of such securities, to the extent the record
holders are not the beneficial owners of such securities. The designations,
powers, preferences, rights, qualifications, limitations and restrictions in
respect of each class and series of authorized capital stock of the Company are
as set forth in the Articles of Incorporation, and all such designations,
powers, preferences, rights, qualifications, limitations and restrictions are
valid, binding and enforceable and in accordance with all applicable laws.
Except as contemplated by this Agreement or set forth in the attached Schedule
2.04, (i) no Person owns of record or is known to the Company to own
beneficially any share of Common Stock, (ii) no subscription, warrant, option,
convertible security, or other right (contingent or other) to
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purchase or otherwise acquire equity securities of the Company is authorized or
outstanding, (iii) there is no commitment by the Company to issue shares,
subscriptions, warrants, options, convertible equity or debt securities, or
other such rights or to distribute to holders of any of its equity or debt
securities any evidence of indebtedness or asset and (iv) there are no options,
warrants, rights, convertible or exchangeable securities, "phantom" stock
rights, stock appreciation rights, stock-based performance units, commitments,
contracts, arrangements or undertakings of any kind to which the Company is a
party or by which it is bound (x) obligating the Company to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other equity interests in, or any security convertible into, or
exercisable for or exchangeable for, any capital stock of or other equity
interest in, the Company, (y) obligating the Company to issue, grant, extend or
enter into any such option, warrant, call, right, security, commitment,
contract, arrangement or undertaking, or (z) that give any person the right to
receive any economic benefit or right similar to or derived from the economic
benefits and rights occurring to holders of Common Stock. Except as provided
for in the Articles of Incorporation or as set forth in the attached Schedule
2.04, the Company has no obligation (contingent or other) to purchase, redeem
or otherwise acquire any of its securities or any interest therein or to pay
any dividend or make any other distribution in respect thereof. Except as set
forth on Schedule 2.04 and in the Series B Certificate, or as expressly
contemplated by the terms of this Agreement, there are no voting trusts or
agreements, shareholders' agreements, pledge agreements, buy-sell agreements,
rights of first refusal, preemptive rights or proxies relating to any
securities of the Company whether or not the Company is a party thereto. All of
the outstanding securities of the Company were issued in compliance with all
applicable federal and state securities laws.
SECTION 2.05 Third-Party Approvals. No registration or filing with, or
consent or approval of or other action by any third party, is or will be
necessary for the valid execution, delivery and performance by the Company of
the Transaction Documents, the issuance, sale and delivery of the Warrant or of
the Series B Shares on the Closing Date, or, if issued, the Breakup Warrant,
or, upon exercise or conversion thereof, the issuance and delivery of the
Warrant Shares and the Conversion Shares, other than (i) filings pursuant to
state securities laws (all of which filings have been made by the Company,
other than those which are required to be made after the Closing and which will
be duly made on a timely basis) in connection with the sale of the Series B
Shares, the Warrant and the Breakup Warrant, if issued, and (ii) with respect
to the registration rights granted in the Warrant or the Breakup Warrant, the
registration of the shares covered thereby with the United States Securities
and Exchange Commission (the "SEC") and filings pursuant to state securities
laws.
SECTION 2.06 SEC Filings. The Company has filed, on a timely basis, all
filings required to be made by it with the SEC.
SECTION 2.07 Litigation. Except as set forth on Schedule 2.07, as of the
date hereof there is no action, suit, claim, proceeding or investigation
pending or, to the best of the Company's knowledge, threatened against or
affecting the Company. The Company is not subject to any order, writ,
injunction or decree entered in any lawsuit or proceeding. The Company has no
knowledge of any facts or circumstances that might give rise to any of the
foregoing.
SECTION 2.08 Material Agreements and Liabilities; Financial Statements.
(a) Schedule 2.08(a) contains a complete list of the Company's Material
Agreements, obligations and Liabilities (whether absolute, accrued or
contingent). "Material Agreements" shall mean all agreements to which the
Company is a party or by which the Company is bound that are material to the
conduct and operations of its business and properties, including without
limitation any agreements (i) which are not terminable upon less than thirty
(30) days' notice, (ii) which provide for payments to or by the Company in
excess of $100,000 annually (except for purchase orders and customer orders
entered in the ordinary course of business), (iii) which obligate the Company
to share, license or develop any product or technology (except those which
would not have a Material Adverse Effect), (iv) which involve transactions or
proposed transactions between the Company, on the one hand, and any Affiliate
of the Company, on the other hand, (v) which are debt financing agreements
(excluding equipment leases which in the aggregate do not obligate the
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Company for payments in excess of $50,000), (vi) pursuant to which the Company
has issued or proposes to issue any Capital Stock or Convertible Securities or
(vii) pursuant to which the Company has granted registration rights pertaining
to any securities to any Person. "Liability" or "Liabilities" means, with
respect to any Person, any liability or obligation of such Person of any kind,
character or description, whether known or unknown, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated, secured or unsecured, joint
or several, due or to become due, vested or unvested, executory, determined,
determinable or otherwise and whether or not the same is required to be accrued
on the financial statements of such Person. The Company has in all material
respects performed, and is now performing in all material respects, its
obligations under, and is not in default (or by the lapse of time and/or the
giving of notice would otherwise be in default) in respect of, any of the
Material Agreements. To the Company's knowledge, none of the other parties to
the Material Agreements are in default thereunder. Each of the Material
Agreements is in full force and effect and is a valid and enforceable
obligation against the Company and, to the Company's knowledge, the other party
or parties thereto, in accordance with its terms.
(b) The audited balance sheet of the Company as of January 3, 1999, the
unaudited balance sheet of the Company for the nine-month period ended October
3, 1999, the audited statement of income and cash flow of the Company for the
fiscal year ended January 3, 1999 and unaudited statement of income and cash
flow of the Company for the nine-month period ended October 3, 1999
(collectively, the "Financial Statements") are set forth on Schedule 2.08(b) or
in the Annual Report. The Financial Statements have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods indicated and
with each other (except that the unaudited Financial Statements may not contain
all footnotes required by GAAP) and fairly present the financial condition of
the Company and the results of operations as of such dates and for such periods
indicated. Except as reflected in the Financial Statements, the Company is not
a guarantor or indemnitor of any Indebtedness or Liability of any other Person.
The Company maintains a standard system of accounting established and
administered in accordance with GAAP. The general ledger, accounts receivable,
accounts payable, bank reconciliations and payroll records of the Company have
been maintained in all material respects in the ordinary course and contain a
materially correct and complete record of the matters typically contained in
records of such nature.
(c) The Company has not received any management letters or other letters
from the Company's independent auditing firm(s) relating to the results of
operations, financial statements or internal controls of the Company insofar as
the same may pertain to the business or assets of the Company which it has not
disclosed to Purchaser.
SECTION 2.09 Inventory.
To the Company's knowledge, and subject to the inventory reserves described
in Schedule 2.09, each item of inventory of the Company, whether reflected on
the Company's balance sheet or subsequently acquired, is (a) free of any
material defect or deficiency, (b) in good, usable and currently marketable
condition in the ordinary course of the business of the Company (subject, in
the case of raw materials and work-in-process, to the completion of the
production process) and (c) properly reflected in the books and records of the
Company at the lesser of cost and fair market value, all as determined in
accordance with GAAP. All inventory reflected on the Company's balance sheets
conforms to the Company's published specifications and to any additional
requirements of the intended purchaser, in the case of items identified to a
particular order. Except as set forth in Schedule 2.09, since January 3, 1999,
there have not been any write-downs of the value of, or establishment of any
reserves against, any inventory of the Company.
SECTION 2.10 Absence of Certain Changes.
(a) Except as disclosed in the Company's filings pursuant to the Securities
Exchange Act of 1934 (the "Exchange Act"; the "Exchange Act Filings") or as set
forth in the Financial Statements, since January 3, 1999, there has not been
any change to the financial condition of the Company that would have a Material
Adverse Effect on the Company or on the business or prospects of the Company,
and, except as specifically
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reflected in the Financial Statements or in the Exchange Act filings, the
Company has not (i) declared or paid any dividends, or authorized or made any
distribution upon or with respect to any class or series of its capital stock;
(ii) made capital expenditures or commitments therefor exceeding (excluding
purchases of tooling in an aggregate amount not exceeding $800,000) $50,000
individually or $250,000 in the aggregate; (iii) made any loans or advances to
any Person exceeding $15,000 individually or $30,000 in the aggregate or
guaranteed the obligations of any Person; (iv) sold, exchanged or otherwise
disposed of any of its assets or rights exceeding $50,000 individually or
$100,000 in the aggregate; (v) incurred any material change in the assets,
liabilities, financial condition, operating results or business of the Company
from that reflected in the Financial Statements; (vi) suffered any damage,
destruction or loss, whether or not covered by insurance, that had or would
have a Material Adverse Effect on the Company; (vii) waived a right or a debt
owed to it exceeding $15,000 individually or $30,000 in the aggregate; (viii)
agreed to or made any material change or amendment to any Material Agreement;
(ix) permitted or allowed any of its assets to be subjected to any material
encumbrance; (x) written up or down the value of any inventory, notes or
accounts receivable or other assets in any material respect; (xi) licensed,
sold, transferred, pledged, modified, disclosed, disposed of or permitted to
lapse any right to the use of any Intellectual Property; (xii) made any change
in any method of accounting or accounting practice or any change in
depreciation or amortization policies or rates previously adopted; (xiii) paid,
lent or advanced any amount to, sold, transferred or leased any assets to or
entered into any Material Agreement or material arrangement with any of its
Affiliates or entered into any agreement or arrangement whatsoever with any of
its Affiliates, except for directors' fees, travel expense advances and
employment compensation to officers; or (xiv) incurred or suffered any other
event or condition of any character that could reasonably be expected to have a
Material Adverse Effect on the Company.
(b) Schedule 2.10(b) sets forth a list of the ten (10) most highly
compensated employees and officers of the Company for the fiscal year ended
January 3, 1999, and a list of the ten (10) most highly compensated employees
and officers of the Company for the current fiscal year (on an annualized
basis), in each case based on total compensation paid to each such employee or
officer, and in each case setting forth such annual (or annualized) total
compensation for such employee or officer.
SECTION 2.11 Proprietary Information of Third Parties. No third party has
claimed or, to the Company's knowledge, has reason to claim that any Person
employed by or affiliated with the Company has (a) violated or may be violating
any of the terms or conditions of his or her employment, non-competition or
non-disclosure agreement with such third party, (b) disclosed or may be
disclosing or utilized or may be utilizing any trade secret or proprietary
information or documentation of such third party or (c) interfered or may be
interfering in the employment relationship between such third party and any of
its present or former employees. No third party has requested information from
the Company which suggests that such a claim might be contemplated. To the
Company's knowledge, no Person employed by or affiliated with the Company has
employed or proposes to employ any trade secret or any information or
documentation proprietary to any former employer, except as licensed or
otherwise authorized or permitted to do so, and no Person employed by or
affiliated with the Company has violated any confidential relationship which
such Person may have had with any third party, in connection with the
development, manufacture or sale of any product or proposed product or the
development or sale of any service or proposed service of the Company, and the
Company has no reason to believe there will be any such employment or
violation. None of the execution or delivery of this Agreement, or the carrying
on of the business of the Company, or the conduct or proposed conduct of the
business of the Company will conflict with or result in a breach of the terms,
conditions or provisions of or constitute a default under any contract,
covenant or instrument under which any such Person is obligated.
SECTION 2.12 Patents, Trademarks, Copyrights, Etc. The Annual Report sets
forth a list and brief description of all domestic and foreign patents, patent
rights, patent applications, trademarks, trademark applications, service marks,
service xxxx applications, trade names, domain names and copyrights, and all
applications for such which are in the process of being prepared, owned by or
registered in the name of the Company, or of which the Company is a licensor or
licensee, or in which the Company has any right, and in each case a brief
description of the nature of such right. The Company owns or possesses adequate
licenses or other rights to use all patents, patent applications, trademarks,
trademark applications, service marks, service
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xxxx applications, trade names, domain names, copyrights, manufacturing
processes, formulae, trade secrets, customer lists and know how (collectively,
"Intellectual Property") used in or necessary to the conduct of its business as
conducted and as proposed to be conducted, and no claim is pending or, to the
best of the Company's knowledge, threatened on the ground that the operations
of the Company infringe upon or conflict with the asserted rights of any other
Person under any Intellectual Property, and to the best of the Company's
knowledge, there is no basis for any such claim (whether or not pending or
threatened). No claim is pending or, to the best of the Company's knowledge,
threatened on the ground that any such Intellectual Property owned or licensed
by the Company, or which the Company otherwise has the right to use, is invalid
or unenforceable by the Company and there is no basis for any such claim
(whether or not pending or threatened). To the best of the Company's knowledge,
all technical information developed by and belonging to the Company which has
not been patented has been kept confidential, except for instances of non-
compliance which would not have a Material Adverse Effect.
SECTION 2.13 Compliance with Laws.
(a) The Company is in compliance with all Applicable Laws, except for
instances of non-compliance which would not have a Material Adverse Effect. The
Company has not received any notice of, nor does the Company have any knowledge
of, any material violation (or of any investigation, inspection, audit or other
proceeding by any governmental entity involving allegations of any material
violation) of any Applicable Law involving or related to the Company which has
not been dismissed or otherwise disposed of. The Company has not received
notice and does not otherwise have any knowledge that the Company is charged
with, threatened with or under investigation with respect to, any violation of
any Applicable Law, and has no knowledge of any proposed change in any
Applicable Law that would have a material adverse effect on the Company. The
Company has not received any opinion or memorandum or legal advice from legal
counsel to the effect that it is exposed, from a legal standpoint, to any
liability that may be material to its business, prospects, financial condition,
operations, property or affairs. There is no existing law, rule, regulation or
order, and the Company is not aware of any proposed law, rule, regulation or
order, whether federal, state, county or local, that would prohibit the Company
from, or otherwise materially adversely affect the Company in, conducting its
business in any jurisdiction in which it proposes to conduct business.
(b) The Company has, and, to the Company's knowledge after due inquiry, all
professional employees or agents of the Company have, all licenses, franchises,
permits, accreditations, authorizations, and other approvals from all
Governmental Entities ("Approvals") necessary for or used in the conduct of, or
relating to the operation of, the business of the Company and the occupancy and
operation, for its present uses, of the real and personal property which the
Company owns or leases. The Company is not in material violation of any such
Approval or any terms or conditions thereof. All such Approvals are in full
force and effect, have been issued to and fully paid for by the holder thereof
and no notice or warning from any Governmental Entity with respect to the
suspension, revocation or termination of any Approval has been, to the
knowledge of the Company, threatened by any Governmental Entity or issued or
given to the Company. No such Approvals will in any way be affected, terminate
or lapse by reason of the consummation of all or any portion of the
transactions contemplated by this Agreement.
SECTION 2.14 Certain Other Agreements. Except as contemplated or otherwise
set forth or disclosed by this Agreement, the Company has no legal obligation,
absolute or contingent, to any other Person to sell any Capital Stock, material
assets or the business of the Company or to effect any merger, consolidation,
liquidation, dissolution, recapitalization or other reorganization of the
Company or to enter into any agreement with respect thereto.
SECTION 2.15 Offering of the Series B Shares Warrant. Neither the Company
nor any Person authorized or employed by the Company as agent, broker, dealer
or otherwise in connection with the offering or sale of the Series B Shares,
the Warrant or any security of the Company similar to the Series B Shares or
the Warrant has offered the Series B Shares or the Warrant or any such similar
security for sale to, or solicited any offer to buy the Series B Shares, the
Warrant or any such similar security from, or otherwise approached or
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negotiated with respect thereto with, any Person or Persons, and neither the
Company nor any Person acting on its behalf has taken or will take any other
action (including, without limitation, any offer, issuance or sale of any
security of the Company under circumstances which might require the integration
of such security with the Series B Shares or the Warrant under the Securities
Act of 1933 (the "Securities Act") or the rules and regulations of the
Commission thereunder), in either case so as to subject the offering, issuance
or sale of the Series B Shares or the Warrant to the registration provisions of
the Securities Act.
SECTION 2.16 Brokers. The Company has no contract, arrangement or
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
SECTION 2.17 Officers. Schedule 2.17 sets forth the names of the officers of
the Company, together with the title or job classification of each such Person
and the total compensation anticipated to be paid to each such Person by the
Company in calendar year 1999. Except as set forth on Schedule 2.17, no
employee of the Company has an employment agreement or understanding, whether
oral or written, with the Company.
SECTION 2.18 Employees. Except as disclosed to Purchaser on Schedule 2.18,
each of the officers of the Company, each key employee and each other employee
now employed by the Company who has access to confidential information of the
Company has executed an appropriate nondisclosure agreement in customary form,
and such agreements are in full force and effect. No officer or key employee of
the Company has advised the Company (orally or in writing) that he or she
intends to terminate employment with the Company. The Company has never had any
employees represented by collective bargaining agreements. The Company is
currently in compliance with all Applicable Laws relating to the employment of
labor, including provisions relating to employment practices, terms and
conditions of employment, wages, hours, equal opportunity, collective
bargaining and the payment of Social Security and other taxes, and with ERISA.
There is no unfair labor practice charge or complaint against the Company
pending before the National Labor Relations Board or any other governmental
agency arising out of the activities of the Company of which the Company has
received notice or of which the Company has knowledge, and the Company has no
knowledge of any facts or information which would give rise thereto. There is
no labor strike or labor disturbance pending or, to the knowledge of the
Company, threatened against the Company. No collective bargaining
representation petition is pending or, to the knowledge of the Company,
threatened against the Company.
SECTION 2.19 Year 2000. The disclosure under the heading "Year 2000" in the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 3,
1999 (the "99Q3 Quarterly Report") is complete and accurate in all material
respects. The Company has no reasons to believe that it will incur expenses
after the date hereof in an amount in excess of $100,000 in the aggregate as a
result of problems commonly referred to as "Year 2000" software problems with
respect to the products, internal computer systems, non-computer operations or
productions processes of the Company or its vendors, business partners or
customers.
SECTION 2.20 Taxes. The Company has filed, or caused to be filed, on a
timely basis all tax returns (including payroll, unemployment and other taxes
related to its employees and independent contractors) required to be filed with
any federal or state governmental body and all material tax returns required to
be filed with any local or municipal governmental body, all such tax returns
are true, correct and complete in all material respects and the Company, has
paid or caused to be paid all taxes, levies, assessments, tariffs, duties or
other fees and any interest and penalties thereon ("Taxes") imposed, assessed
or collected by any governmental body that may have become due and payable
pursuant to those tax returns or otherwise. No such federal, state, local or
municipal tax returns have ever been audited by the Internal Revenue Service,
state or other authorities (except for an audit of state sales and use tax
returns). No deficiency assessment with respect to or proposed adjustment of
any of the Company's Federal, state, municipal or local tax returns has
occurred or, to the Company's knowledge, is threatened (except for a deficiency
assessment following the most recent audit of sales and use tax returns, which
the Company has fully satisfied). There has been no tax lien imposed by any
governmental body outstanding against the business or the Company's assets or
properties, except liens for current taxes not yet due. The reserve for Taxes
on the balance sheet in the Financial Statements is fully adequate to cover all
liabilities for Taxes with respect to periods ending on or before the Closing
Date. The transactions contemplated by this Agreement will not, assuming
compliance by parties to all Transaction
8
Documents with the terms thereof, cause or result in a limitation on the
Company's net operating losses pursuant to Section 382 of the Code.
SECTION 2.21 ERISA. "Employee Benefit Plans" means (i) all of the Company's
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and (ii) all other employee
benefit arrangements or payroll practice, including employment agreements,
stock option plans, severance agreements, board of directors' and executive
compensation arrangements, incentive programs or arrangements, sick leave,
severance pay policies, salary continuation for disability, consulting
arrangements, workers' compensation, retirement, deferred compensation, bonus,
stock purchase, hospitalization, medical insurance, life insurance, tuition
reimbursement or scholarship programs, plans providing benefits or payments in
the event of a change of control, change in ownership, or sale of a substantial
portion of the Company's assets, maintained by the Company (including ERISA
Affiliates as defined below) or to which the Company or an ERISA Affiliate has
contributed or is or was obligated to make payments, in each case with respect
to any current or former employee or director of the Company or an ERISA
Affiliate. The Company has no employee pension benefit plans (as defined in
Section 3(2) of ERISA) ("Employee Pension Plans"). The Company, including its
ERISA Affiliates, does not and has never maintained or participated in, been
obligated to make contributions to, and does not have and has had no liability
with respect to, any Employee Benefit Plan which is: (i) subject to Title IV of
ERISA or the minimum funding requirements of Section 412 of the Code or Section
302 of ERISA, (ii) a "multi-employer plan" (as defined in Section 3(37) of
ERISA), (iii) a "multiple employer plan" (as defined in Section 4063 or 4064 of
ERISA), or (iv) a funded vacation pay plan. The Company and its ERISA
Affiliates have, with respect to each Employee Benefit Plan, complied in all
material aspects with all applicable laws, and the lawful terms of such plans.
No employee of the Company nor any fiduciary with respect to the Employee
Benefit Plans has issued or distributed any written communication to any
present or former employee of the Company regarding the effect the transactions
contemplated by this Agreement may have on any Employee Benefit Plan or other
employee-related practice, policy, or arrangement. There shall be no payment,
accrual of additional benefits, acceleration of payments, vesting or term
extension of any benefit under any Employee Benefit Plan or any agreement or
arrangement solely by reason of entering into or in connection with the
transactions contemplated by this Agreement. No Employee Benefit Plan has
participated in, engaged in or been a party to any non-exempt prohibited
transaction as described under the Code or ERISA, and neither the Company nor
any of its ERISA Affiliates has had asserted against them any claim for taxes
under Chapter 43 of Subtitle D of the Code and Section 5000 of the Code, or for
penalties under ERISA Section 502(c), (i) or (l), with respect to any Employee
Benefit Plan nor, to the knowledge of the Company, is there a basis for any
such claim. No officer, director or employee of the Company has committed a
material breach of any responsibility or obligation imposed upon fiduciaries by
Title I of ERISA with respect to any Employee Benefit Plan. Other than routine
claims for benefits, there is no claim pending or, to the knowledge of the
Company, threatened, involving any Employee Benefit Plan by any Person against
such plan, the Company or any of its ERISA Affiliates. There is no pending or,
to the knowledge of the Company, threatened, proceeding involving any Employee
Benefit Plan before any governmental agency. In accordance with applicable law
and the terms of such plan, each Employee Benefit Plan can be amended or
terminated at any time, without consent from any other party. With respect to
the Employee Benefit Plans, individually and in the aggregate, no event has
occurred, and to the knowledge of the Company, there exists no condition or set
of circumstances in connection with which the Company could be subject to any
liability that is reasonably likely to have a Material Adverse Effect. For
purposes of this Agreement, an "ERISA Affiliate" is any entity, whether or not
incorporated, deemed to be under common control or affiliated with the Company
under Section 414.
SECTION 2.22 Environmental Matters.
(a) To the best knowledge of the Company, the Company: (i) is, and within
the period of all applicable statutes of limitation has been, in compliance
with all applicable Environmental Laws; (ii) holds all Environmental Permits
(each of which is in full force and effect) required for any of its current
operations or for any property owned, leased or otherwise operated by it; and
(iii) is, and within the period of all applicable
9
statutes of limitation has been, in compliance with all of its Environmental
Permits. The Company reasonably believes that each of its Environmental Permits
currently in effect will be renewed effective prior to the expiration of such
Environmental Permit.
(b) The Company has not received any notice of alleged, actual or potential
responsibility for, or any inquiry or investigation regarding, any
Environmental Condition. The Company has not received any notice of any other
claim, demand or action by any individual or entity alleging any actual or
threatened injury or damage to any person, property, natural resource or the
environment arising from or relating to any Release or threatened Release of
any Hazardous Materials at, on, under, in, to or from any Facility or any
former Facilities, or in connection with any operations or activities of the
Company.
(c) The Company has not entered into or agreed to and is not subject to any
consent decree, order or settlement or other agreement in any judicial,
administrative, arbitral or other similar forum relating to compliance with or
Liability under any Environmental Law.
(d) To the best knowledge of the Company, Hazardous Materials have not been
transported, disposed of, emitted, discharged or otherwise Released or
threatened to be Released to or at any real property presently or formerly
owned or leased by the Company, which Hazardous Materials are reasonably
expected to (i) give rise to a material Liability of the Company under any
applicable Environmental Law, (ii) interfere with the Company's continued
operations or (iii) materially impair the fair salable value of any real
property owned or leased by the Company.
(e) The Company has not assumed or retained, by contract or, to the
knowledge of the Company, by operation of law in connection with the sale or
transfer of any assets or business, Liabilities arising from or associated with
or otherwise in connection with such assets or business of any kind, fixed or
contingent, known or not known, under any applicable Environmental Law. The
Company is not required to make any material capital or other expenditures to
comply with any Environmental Law nor to the knowledge of the Company is there
any reasonable basis on which any Governmental Entity could take any action
that would require any such capital expenditures.
(f) No environmental audits or assessments which have been conducted in
respect of any Facility or any former Facility within the past five (5) years,
by the Company, or any attorney, environmental consultant or engineer or other
Person engaged by the Company for such purpose.
SECTION 2.23 Affiliate Transactions. Except for regular salary payments,
warrants, rights, options and fringe benefits under an individual's
compensation package with the Company, none of the officers, directors,
employees or other Affiliates of the Company, nor any member of the family of
such a person, is a party to any agreement, understanding, Indebtedness or
proposed transaction with the Company or, to the Company's knowledge, is
directly interested in any Material Agreement with the Company. The Company has
not guaranteed or assumed any obligations of its officers, directors, employees
or other Affiliates or members of any of their families. To the Company's
knowledge, other than as contemplated by this Agreement, none of the officers,
directors, or other Affiliates of the Company nor any member of their families
has any direct or indirect ownership interest in any Person (other than a less
than 5% ownership interest in a publicly traded company) with which the Company
has a business relationship or with any Person that competes with the Company.
To the Company's knowledge without any duty of inquiry, no employees nor any
member of their families has any direct or indirect ownership interest in any
Person with which the Company has a business relationship or that competes with
the Company.
SECTION 2.24 Insurance. To the best knowledge of the Company, each insurance
policy held by or for the benefit of the Company is in full force and effect.
The Company carries, and will continue to carry, insurance with reputable
insurers with respect to such of its properties and businesses, in such amounts
and against such risks as is adequate for its business and as is customarily
maintained by other entities of similar size engaged in similar businesses.
None of such insurance was obtained through the use of materially false or
10
misleading information or the failure to provide the insurer with all material
information requested in order to evaluate the liabilities and risks insured.
The Company has not received any notice of cancellation or non-renewal of any
insurance policies or binders.
SECTION 2.25 Tangible Assets.
(a) The Company has good and valid title to or valid and subsisting
leasehold interests in all fixtures and equipment having original cost or fair
market value in excess of $25,000, including all such fixtures and equipment
reflected in the Company's most recent balance sheet included in the Financial
Statements and all such fixtures and equipment purchased or otherwise acquired
by the Company since the date of such balance sheet. None of such fixtures and
equipment is subject to any encumbrance except for encumbrances incurred in the
ordinary course of business or which, individually or in the aggregate, are not
substantial in amount and do not materially detract from the value of the
property or assets of the Company or interfere with the present use of such
property or assets.
(b) The buildings and fixtures and equipment owned by the Company are in
good operating condition and repair (except for ordinary wear and tear), with
no material defects, are sufficient for the operation of the business of the
Company as presently conducted and are in conformity, in all material respects,
with all Applicable Laws relating thereto currently in effect.
SECTION 2.26 Customer Relations. "Material Customer" means any Person from
whom the Company has recognized revenue in excess of $100,000 since January 1,
1997 or to whom the Company has any obligation to complete work or honor any
contractual warranty or has any obligation or Liabilities. Except as set forth
in Schedule 2.26, since January 1, 1997, no Material Customer has canceled or
terminated any purchase order, purchase contract or Material Agreement or
notified the Company in writing or orally of its intent to cancel or terminate
purchase order, purchase contract or any Material Agreement or materially alter
the amount of business that it transacts with the Company. Ryder has not
terminated, deferred or delayed (i) any programs that are likely to affect the
Company's projected product sales for any quarterly period from the date of
this Agreement through December 31, 2000 or (ii) any joint development project
now in progress or previously proposed.
SECTION 2.27 Books and Records. The Company has made and kept (and given
Purchaser access to) books and records and accounts, which, in reasonable
detail, accurately and fairly reflect the activities of the Company. The minute
books of the Company previously made available to Purchaser accurately and
adequately reflect all material action previously taken by the shareholders,
the Board of Directors and committees of the Board of Directors of the Company.
SECTION 2.28 Warranties. The Company's warranty terms are as described on
Schedule 2.28 to this Agreement. The reserve for warranty claims on the
Company's most recent quarterly balance sheet dated October 3, 1999, reflects
the Company's historical and anticipated warranty expense accurately and in
accordance with GAAP.
SECTION 2.29 Outsourcing. Company anticipates that its present vendors will
be able to ship the products known as the FW8000, FW5000 and FW2000 in
commercial quantities sufficient to meet projected demand no later than
February 28, 2000, at a cost to the Company which does not exceed the costs
previously disclosed to Purchaser.
SECTION 2.30 Disclosure. Neither this Agreement, nor any Schedule or Exhibit
to this Agreement, contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained herein or therein not
misleading. None of the statements, documents, certificates or other items
prepared or supplied by the Company with respect to the transactions
contemplated hereby contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein not
misleading. There is no fact which the Company has not disclosed to Purchaser
in writing and of which the
11
Company is aware which materially and adversely affects or could be reasonably
expected to materially and adversely affect the business, prospects, financial
condition, operations, property or affairs of the Company. The financial
projections and other estimates provided to Purchaser were prepared by the
Company based on assumptions of fact and opinion as to future events which the
Company, at the date of the issuance of such projections and estimates,
believed to be reasonable. As of the date hereof, no facts have come to the
attention of the Company which would, in its opinion, require the Company to
revise or amplify the assumptions underlying such projections and other
estimates or the conclusions derived therefrom.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS
SECTION 3.01 Representations. Purchaser represents and warrants to the
Company that:
(a) it is wholly owned by Glenmount International, L.P., which is a
partnership which was not organized for the specific purpose of acquiring the
Series B Shares or the Warrant;
(b) it has sufficient knowledge and experience in investing to be able to
evaluate the risks and merits of its investment in the Company, and it is able
financially to bear the risks thereof;
(c) it has had an opportunity to discuss the Company's business, management
and financial affairs with the Company's management;
(d) the Series B Shares, the Warrant, the Breakup Warrant (if issued), and
the Conversion Shares and Warrant Shares are being acquired for Purchaser's own
account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof;
(e) Purchaser is a corporation, duly formed, validly existing and in good
standing under the laws of its state of formation and has the power and
authority to execute, deliver and perform this Agreement;
(f) the execution and delivery by Purchaser of this Agreement, and the
performance by the Purchaser of its obligations hereunder, have been duly
authorized by all requisite corporate action; and
(g) Purchaser has duly executed and delivered this Agreement and it
constitutes its legal, valid and binding obligation, enforceable in accordance
with its terms (subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws affecting
the rights of creditors generally and as the remedy of specific performance and
other forms of injunctive relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be
brought).
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS
SECTION 4.01 Conditions to Obligations of the Purchaser. The obligation of
Purchaser to purchase and pay for the Series B Shares to be purchased by it on
the Closing Date hereunder is, at its option, subject to the satisfaction, on
or before the Closing Date of the following conditions:
(a) Shareholder Approval. The Company shall have obtained approval of this
Agreement and the transactions contemplated hereby, including any actions
necessary to increase the number of directors, from its Shareholders.
(b) Warrant. The Company shall have executed and delivered the Warrant,
substantially in the form of Exhibit B hereto.
(c) Management Services Agreement. The Company shall have executed and
delivered, at the same time this Agreement is delivered, a Management Services
Agreement with Purchaser in the form of Exhibit C hereto (the "Management
Services Agreement") and Company shall not be in default on any monthly payment
to Purchaser pursuant to such Management Services Agreement.
12
(d) Voting Agreement and Transfer Restrictions. The Company shall have
executed and delivered, and each of its current officers and directors and
their respective Affiliates and all other parties listed on Schedule 4.01(d)
(owning an aggregate of not less than 1,700,000 shares of Common Stock) shall
have executed and delivered within five (5) business days of the execution of
this Agreement, an agreement in substantially the form attached hereto as
Exhibit D, pursuant to which each such officer, director or Affiliate agrees on
behalf of himself, herself or itself, (i) to vote his or her or its outstanding
shares in support of the transactions contemplated by this Agreement, (ii) to
vote his or her or its outstanding shares in favor of Purchaser's nominees to
the Board of Directors for a period of three (3) years following the Closing,
(iii) to refrain from transferring any shares of the Company prior to March 20,
2000, and (iv) to refrain from exercising or transferring any existing options
or warrants prior to March 20, 2000.
(e) Board of Directors. The Company shall have taken all necessary actions
and obtained all needed resignations so that, immediately following the
Closing, the Company's Board of Directors consists of Xxxxx Xxxxxxxx, Xxxxx
Xxxx, Xxxx Xxxxxx, Xxxxxx X. X. Xxxxxx, Xxxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxx
and one other person selected by the Company and reasonably acceptable to
Purchaser (to be agreed upon in within ten (10) business days following the
execution of this Agreement). If any such person becomes unavailable prior to
the Closing, Purchaser and Company shall agree upon a replacement (except that
Company may not object to Purchaser's nominee to replace Xxxxxxx Xxxxxxx,
Xxxxxx X.X. Xxxxxx or Xxxxxxx X. Xxxxx).
(f) Opinion of the Company's Counsel. Purchaser shall have received from
Xxxxxx & Whitney, counsel for the Company, an opinion dated the Closing Date,
in the form attached as Exhibit E hereto.
(g) Representations and Warranties to be True and Correct on Date Hereof.
The representations and warranties of the Company contained in Article II shall
have been true, complete and correct on the date of this Agreement and the
Chief Executive Officer and Chief Financial Officer of the Company shall have
certified to such effect the Purchaser in writing.
(h) Performance. The Company shall have performed and complied with all
agreements contained herein required to be performed or complied with by it
prior to or at the Closing Date and the Chief Executive Officer and Chief
Financial Officer of the Company shall have certified to the Purchaser in
writing to such effect and to the further effect that all of the conditions set
forth in this Article IV have been satisfied.
(i) All Proceedings to be Satisfactory. All corporate and other proceedings
to be taken by the Company in connection with the transactions contemplated
hereby and all documents incident thereto shall be reasonably satisfactory in
form and substance to the Purchaser, and Purchaser shall have received all such
counterpart originals or certified or other copies of such documents as it
reasonably may request.
(j) Supporting Documents. Purchaser shall have received a copy of:
(i) (A) the Articles of Incorporation, certified as of a recent date by
the Secretary of State of the State of Minnesota, and (B) a certificate of
the Secretary of State of the State of Minnesota dated as of a recent date
as to the due incorporation and good standing of the Company, the payment
of all applicable taxes by the Company and listing all documents of the
Company on file with said Secretary; and
(ii) such additional supporting documents and other information with
respect to the operations and affairs of the Company as Purchaser
reasonably may request.
(k) Terms of Series B Shares. The Board of Directors of the Company shall
have adopted the Series B Certificate in substantially the form attached as
Exhibit A hereto and such Certificate shall have been filed with the Minnesota
Secretary of State and have become effective.
(l) Third-Party Approvals. All Persons having any right to consent to or
approve the issuance of the Series B Shares, the Warrant, the Conversion
Shares, or the Warrant Shares shall have delivered such consents
13
or approvals in writing. All Persons having any preemptive, first refusal or
other rights with respect to the issuance of the Series B Shares, the
Conversion Shares, or the Warrant Shares shall have irrevocably waived the same
in writing.
(m) No Material Adverse Change. No Material Adverse Change, as defined in
Section 6.17, in the reasonable judgment of the Purchaser, shall have occurred
in the Company's business, financial condition, prospects or results of
operations since October 3, 1999.
(n) Expenses. The Company shall have paid fees and expenses due pursuant to
Section 6.01 hereof incurred prior to the Closing (subject to the limitation
set forth in such Section 6.01).
(o) Directors and Officers Liability Insurance. The Company shall have
maintained in effect directors' and officers' liability insurance coverage, on
customary terms and conditions (including coverage for liabilities arising
before the date of taking office to the extent arising from such person's
status as a prospective member of the Board of Directors), ensuring an
aggregate of at least $5,000,000 in such liability insurance coverage.
All such documents shall be reasonably satisfactory in form and substance to
the Purchaser.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Purchasers that:
SECTION 5.01 Stockholder Meeting; Voting Agreement and Transfer
Restrictions.
(a) The Company agrees to promptly submit this Agreement and the
transactions contemplated hereby to the Company's stockholders for approval in
compliance with the MBCA and the policies of the NASDAQ Stock Market and to use
best efforts to obtain such approval on or before January 31, 2000.
(b) The Company will execute and deliver and shall use its best efforts to
cause each of its current officers and directors and their respective
Affiliates listed on Schedule 4.01(d) (owning an aggregate of not less than
1,700,000 shares of Common Stock) to execute and deliver, within five (5)
business days of the execution of this Agreement, an agreement in substantially
the form attached hereto as Exhibit D, pursuant to which each such officer and
director agrees on behalf of himself, herself or itself and each of his, her or
its Affiliates, (i) to vote his, her or its outstanding shares in support of
the transactions contemplated in this Agreement, (ii) to vote his, her or its
outstanding shares in favor of Purchaser's nominees to the Board of Directors
for a period of three (3) years following the Closing of the transactions
contemplated by this Agreement, (iii) to refrain from transferring any shares
of the Company prior to March 20, 2000, and (iv) to refrain from exercising or
transferring any existing options or warrants prior to March 20, 2000. Company
will not issue or redeem any Capital Stock or security convertible into Capital
Stock prior to March 20, 2000, except as contemplated by this Agreement.
SECTION 5.02 SEC Filings. The Company shall at all times file all reports
required to be filed by it under the Securities Act or the Exchange Act, and
shall take such further action as Purchaser may reasonably request, all to the
extent required from time to time, to allow Purchaser to sell the Conversion
Shares and the Warrant Shares without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the SEC. Upon the request of
Purchaser, the Company shall deliver to Purchaser (i) a certificate from the
President, Chief Executive Officer or Chief Financial Officer stating that the
Company has complied with all such requirements; (ii) copies of the Company's
most recent quarterly or annual report; and (iii) all such other reports and/or
documents as Purchaser may reasonably request to avail itself of Rule 144, 144A
or any other SEC regulation allowing it to sell the Conversion Shares or the
Warrant Shares without registration.
14
SECTION 5.03 Financial Statements, Reports, Etc. Until the Closing, and
thereafter, so long as the Warrant or any Series B Shares are outstanding,
Purchaser shall be entitled to receive the following information:
(a) within ninety (90) days after the end of each fiscal year of the
Company, a balance sheet of the Company, as of the end of such fiscal year and
the related consolidated statements of income, shareholders' equity and cash
flows for the fiscal year then ended, prepared in accordance with GAAP and
certified by a "Big Five" firm of independent public accountants of recognized
national standing selected by the Board of Directors of the Company (the
"Annual Audited Financial Statements");
(b) within twenty-one (21) days after the end of each accounting month of
the Company within each fiscal year, a balance sheet of the Company and the
related statements of income, shareholders' equity and cash flows, unaudited
but prepared in accordance with GAAP and certified by the Chief Financial
Officer of the Company, or, if there is no Chief Financial Officer, the Chief
Executive Officer, such consolidated balance sheet to be as of the end of such
month and such consolidated statements of income, shareholders' equity and cash
flows to be for such month and for the period from the beginning of the fiscal
year to the end of such month, in each case with comparative statements for the
prior fiscal year and with respect to the then-applicable budget;
(c) at the time of delivery of each financial statement pursuant to Section
5.03(b), a certificate executed by the Chief Financial Officer of the Company
or, if there is no Chief Financial Officer, the Chief Executive Officer,
stating that such officer has reviewed this Agreement, the terms of the
Warrant, and the terms of the Series B Preferred Stock contained in the
Articles of Incorporation and has no knowledge of any default by the Company in
the performance or observance of any of the provisions of this Agreement, the
terms of the Warrant, or the terms of the Series B Preferred Stock contained in
the Articles of Incorporation or, if such officer has such knowledge,
specifying such default and the nature thereof;
(d) within thirty (30) days after the end of each quarter, a quarterly
management narrative report explaining all significant variances from forecasts
and all significant current developments in staffing, marketing, sales and
operations;
(e) no later than thirty (30) days prior to the start of each fiscal year,
consolidated capital and operating expense budgets, cash flow projections and
income and loss projections for the Company in respect of such fiscal year, all
itemized in reasonable detail and prepared on a monthly basis, and, promptly
after preparation, any revisions to any of the foregoing;
(f) promptly following receipt by the Company, each audit response letter,
accountant's management letter and other written report submitted to the
Company by its independent public accountants in connection with an annual or
interim audit of the books of the Company;
(g) promptly after the commencement thereof, notice of all actions, suits,
claims, proceedings, investigations and inquiries of the type described in
Section 2.07 involving the Company that could materially adversely affect the
Company;
(h) promptly upon sending, making available or filing the same, all press
releases, reports and financial statements that the Company sends or makes
available to its shareholders or files with the SEC; and
(i) promptly, from time to time, such other material information regarding
the business, prospects, financial condition, operations, property or affairs
of the Company as Purchaser reasonably may request.
SECTION 5.04 Reserve for Conversion Shares. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, for the purpose of effecting the conversion of the Series B Shares and
otherwise complying with the terms of this Agreement, such number of its duly
authorized shares of Common Stock as shall be sufficient to effect the
conversion of the Series B
15
Shares from time to time outstanding, or otherwise to comply with the terms of
this Agreement. If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of the Series B
Shares or otherwise to comply with the terms of this Agreement, the Company
will immediately take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes. The Company will obtain all
authorizations, consents, approvals or other actions by or make any filing with
any court or administrative body that may be required under applicable state
securities laws in connection with the issuance of shares of Common Stock upon
conversion of the Series B Shares, which conversion may be made by Purchaser at
any time.
SECTION 5.05 Reserve for Warrant Shares. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, for the purpose of effecting the exercise of the Warrant and the Breakup
Warrant and otherwise complying with the terms of this Agreement, such number
of its duly authorized shares of Common Stock as shall be sufficient to effect
the exercise of the Warrant and the Breakup Warrant, or otherwise to comply
with the terms of this Agreement. If at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the exercise
of the Warrant or the Breakup Warrant or otherwise to comply with the terms of
this Agreement, the Company will immediately take such corporate action as may
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purposes. The Company
will obtain all authorizations, consents, approvals or other actions by or make
any filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon exercise of the Warrant, which exercise may be made by
Purchaser at any time.
SECTION 5.06 Corporate Existence. The Company shall maintain its respective
corporate existence, rights and franchises in full force and effect.
SECTION 5.07 Properties, Business, Insurance.
(a) The Company shall maintain as to its properties and businesses, with
financially sound and reputable insurers, insurance against such casualties and
contingencies and of such types and in such amounts as is customary for
companies similarly situated, which insurance shall be at all times adequate
and sufficient for the business of the Company, as reasonably determined by the
Board of Directors. Without limiting the foregoing, the Company shall at all
times maintain general liability insurance in an amount not less than
$7,000,000. The Company shall not cause or permit any assignment or change in
beneficiary and shall not borrow against any such policy. If requested by
Purchaser, the Company will add one designee of Purchaser as a notice party for
each such policy and shall request that the issuer of each policy provide such
designee with ten (10) days' notice before such policy is terminated (for
failure to pay premiums or otherwise) or assigned or before any change is made
in the beneficiary thereof.
(b) Without limiting its obligations pursuant to Section 5.07(a), the
Company shall maintain so long as the Warrant or any shares of the Series B
Shares remain outstanding, directors' and officers' liability insurance the
Warrant or coverage, on customary terms and conditions (including coverage for
liabilities arising before the date of taking office to the extent arising from
such person's status as a prospective member of the Board of Directors),
providing an aggregate of at least $5,000,000 in such liability insurance
coverage. The Company shall at all times maintain provisions in its Bylaws and
Articles of Incorporation indemnifying all directors against liability and
absolving all directors from liability to the maximum extent permitted under
the laws of the State of Minnesota.
SECTION 5.08 Inspection, Consultation and Advice. The Company shall permit
Purchaser and such Persons as Purchaser may designate, to visit and inspect, at
Purchaser's expense, any of the properties of the Company, examine its books
and take copies and extracts therefrom, discuss the affairs, finances and
accounts of the Company with their officers, employees and public accountants
(and the Company hereby authorizes said accountants to discuss with such
Purchaser and such designees such affairs, finances and accounts), and consult
with and advise the management of the Company as to its affairs, finances and
accounts, all at reasonable times
16
and upon reasonable notice. In addition, and without limiting the foregoing,
Company shall permit Purchaser to conduct such environmental investigations of
Company facilities as Purchaser deems appropriate, including "Phase II" review.
SECTION 5.09 No Solicitation; Restrictive Agreements Prohibited.
(a) The Company shall not seek, initiate or encourage any agreement,
transaction or discussions which would be a Competing Proposal as defined in
Section 6.02.
(b) The Company shall not become a party to any agreement which, by its
terms, restricts the Company's performance of its obligations under the
Transaction Documents.
SECTION 5.10 Fees and Expenses of Directors. The Company shall promptly
reimburse in full each director of the Company who is not an employee of the
Company for all of his or her reasonable out-of-pocket expenses, including, but
not limited to, travel expenses, incurred in attending each meeting of the
Board of Directors of the Company or any committee thereof and any other
meetings attended at the request of the Company and pay any fees paid to
directors therefor.
SECTION 5.11 Board of Directors.
(a) Other than as provided in paragraphs (b) and (c) below, the number of
directors of the Company shall be fixed at seven (7).
(b) So long as the Warrant or any Series B Shares remain outstanding, the
holders of the Series B Shares shall have the right to designate three (3)
directors of the Company, and shall have the right pursuant to paragraph (c)
below to designate two (2) additional directors of the Company (each such
director, a "Series B Director"). The holders of the Series B Shares, voting
together as a class, shall have the exclusive right to (i) terminate any Series
B Director during his or her term of office, with or without cause; and (ii) to
fill any vacancy among the Series B Directors.
(c) The holders of the Warrant and the Series B Shares shall have the right
to compel the Company to take all necessary action to increase the number of
directors from seven (7) to nine (9), and the right to appoint two (2)
additional directors to fill the vacancies created by such increase, upon the
occurrence of any one or more of the circumstances described in Section 5(c) of
the Series B Certificate attached as Exhibit A to this Agreement.
(d) If, within six months following the election of additional directors by
the holders of the Series B Shares pursuant to clause (c) above, the Series B
Shares shall not have been converted to Company Common Stock, the right of the
Series B Shares to elect an additional two directors shall expire, but the
right to elect three directors shall remain in effect.
SECTION 5.12 Compliance with Laws. The Company shall conduct its business in
compliance with all Applicable Laws.
SECTION 5.13 Keeping of Records and Books of Account. The Company shall keep
adequate records and books of account, in which complete entries will be made
in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company, and in which, for each fiscal year, all proper
reserves for depreciation, depletion, obsolescence, amortization, taxes, bad
debts and other purposes in connection with its business shall be made.
SECTION 5.14 Protective Provisions. The Company shall not take any of the
following actions without the prior affirmative written consent of Purchaser
or, following the Closing, of the holders of the Warrant and holders of at
least two-thirds (2/3) of the Series B Shares:
17
(a) alter, change or amend (by merger or otherwise) any of the rights,
preferences or privileges of the Series B Preferred Stock;
(b) alter, change or amend any of the terms of the Warrant;
(c) other than as provided in Section 5.11(c) hereof, amend, restate, alter,
modify or repeal (by merger or otherwise) its Articles of Incorporation or
Bylaws, including, without limitation, amending, restating, modifying or
repealing (by merger or otherwise) (i) any certificate of designation or
preferences (as in effect from time to time) relating to any series of
Preferred Stock or (ii) any of the rights, preferences and privileges of any
other class of Capital Stock or the terms or provisions of any option or
Convertible Security;
(d) (i) create, authorize or issue Senior Securities, Parity Securities,
Supervoting Securities or shares of any such class or series; (ii) create,
authorize or issue any securities (including Convertible Securities)
convertible into, or exercisable, redeemable or exchangeable for, shares of
Senior Securities, Parity Securities or Supervoting Securities; (iii) increase
or decrease the authorized number of shares of Series B Preferred Stock; or
(iv) increase or decrease the authorized number of shares of any class or
series of Senior Securities, Parity Securities, Supervoting Securities or
shares of any such class or series;
(e) (i) initiate or suffer to exist any Liquidation Event with respect to
the Company, (ii) enter into any merger or consolidation with any other Person
that results in the holders of the Company's Capital Stock immediately prior to
such transaction owning less than fifty percent (50%) of the voting power of
the successor entity's Capital Stock after such transaction or (iii) otherwise
discontinue or dispose of more than ten percent (10%) of the assets of the
business of the Company, taken as a whole;
(f) initiate or suffer to exist any recapitalization of the Company, or
reclassify any authorized Capital Stock of the Company into any other class or
series of Capital Stock of the Company;
(g) redeem any shares of Capital Stock;
(h) acquire, in one or a series of transactions, any equity ownership
interest, by way of merger or otherwise, in any Person, or any asset or assets
of any Person, where the aggregate consideration payable in connection with
such acquisition (including, without limitation, cash consideration, the fair
market value of any securities and the net present value of any deferred
consideration) is at least $1,000,000, or (ii) make any capital expenditures in
excess of $500,000 individually or $1,000,000 for any fiscal year;
(i) change the number of directors of the Company to a number other than
seven (7) or the manner in which the directors are selected, except as set
forth in Section 5.11(c) hereof;
(j) make any material change in the nature of its business as conducted on
the Closing Date, or fail to conduct its business in the ordinary course
consistent with past practice;
(k) sell, transfer, convey, lease or dispose of, outside the ordinary course
of business, any material assets or properties of the Company, whether now or
hereafter acquired, in any transaction or transactions that call for payments
in excess of $500,000;
(l) establish or purchase any Subsidiary;
(m) enter into any agreements, transactions or leases not in the ordinary
course of the Company's business as conducted on the Closing Date that call for
payments in excess of $250,000;
(n) incur any new or additional Indebtedness which exceeds $500,000 provided
that this clause (n) shall not prohibit the extension, renewal, amendment or
refinancing (including refinancings with other lenders) of the Company's
existing credit facility with Spectrum Commercial Services, a Division of Lyon
Financial Services, Inc. on terms no more restrictive than those contained in
the General Credit and Security Agreement dated November 19, 1998, as amended
on August 20, 1999 (except interest rate "spreads" may increase by no more
18
than 50 basis points over prime and principal amounts advanced against accounts
receivable or inventory (but no other amounts of principal) may increase or
decrease provided that advance rates are no greater than those currently in
effect).
(o) other than as set forth in an annual compensation plan approved by the
Series B Directors, increase management compensation with respect to any Person
in an amount greater than ten percent (10%) in any single fiscal year
(including without limitation by issuance of warrants, options or other
contingent compensation); or hire any new employee whose annual compensation
exceeds $125,000; or
(p) except for transactions on customary and reasonable terms, enter into
any transaction with (i) any Affiliate of the Company, (ii) any employee of the
Company, (iii) any holder of more than five percent (5%) of the outstanding
capital stock of any class or series of Capital Stock of the Company, (iv) any
member of the immediate family of any Person set forth in clauses (i), (ii) and
(iii) above, or (v) any corporation, partnership, trust or other entity in
which any Person set forth in clauses (i), (ii), (iii) or (iv) above, or member
of the family of any such Person, is a director, officer, trustee, partner or
holder of more than five percent (5%) of the outstanding capital stock thereof.
For purposes of this Agreement, the members of the "immediate family" of any
Person shall consist of the spouse, parents, children, siblings, mothers- and
fathers-in-law, sons-and daughters-in-law, and brothers- and sisters-in-law of
such Person.
SECTION 5.15 Publication Matters. The Company shall not use the name or logo
of Purchaser or any of its Affiliates in connection with any press releases or
advertisements without the prior written consent of Purchaser and the prior
written approval by Purchaser of the form and content of any such press release
or advertisement. The Company consents to the publication by Purchaser or any
of its Affiliates of a tombstone or similar advertising material relating to
the transactions contemplated by this Agreement, which may include the
Company's name, business description and size of investment. In addition, the
Company agrees that Purchaser and its Affiliates may use the Company's name and
logo on websites among a list of representative investments and may provide the
Company's name and appropriate individual contacts to companies for the purpose
of securing supplier discounts or other similar benefits for the Company.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01 Expenses. The Company shall pay all reasonable out-of-pocket
due diligence expenses and outside legal and consulting fees and expenses of
Purchaser incurred in connection with investigating, negotiating or documenting
the transactions contemplated hereby (whether such fees and expenses are
incurred prior to or after the Closing Date), provided that the payment for
such expenses shall be limited to $50,000 except as otherwise provided in
Section 6.03.
SECTION 6.02 Breakup Fee. (a) If any person (other than Purchaser or any of
its Affiliates) shall have made, proposed, communicated or disclosed a proposal
for an acquisition of the Company or its assets or business, or a combination
with the Company, or a financing transaction proposal as an alternative to the
transactions contemplated by this Agreement (a "Competing Proposal") in a
manner which is or becomes public and this Agreement is terminated following
such proposal, then the Company shall, simultaneously with termination of this
Agreement, pay to Purchaser a fee (the "Breakup Fee") in the amount of $500,000
or, if greater, 2.5% of the value of the Company established by a proposed
transaction, if, following the announcement or proposal of a transaction, this
Agreement is terminated. If (in the absence of a Competing Proposal) the
stockholders do not approve the transactions contemplated by this Agreement,
the Company shall pay to Purchaser the $100,000 required pursuant to the terms
of the Management Services Agreement (the "Consulting Fee") and shall issue to
Purchaser a warrant (the "Breakup Warrant") for 250,000 shares at the purchase
price of $1.00 per share, which will be exercisable immediately and will expire
if not exercised within five years, and will otherwise have the terms and
conditions set forth on Exhibit F. The Consulting Fee shall be paid by wire
transfer of immediately available funds.
19
(b) The Company agrees that the agreement contained in Section 6.02(a) above
is an integral part of the transactions contemplated by this Agreement and that
the Consulting Fee constitutes liquidated damages and not a penalty. If Company
fails to promptly pay to Purchaser any amount due under such Section 6.02(a),
Company shall pay the costs and expenses (including reasonable legal fees and
expenses) in connection with any action, including the filing of any lawsuit or
other legal action, taken to collect payment thereof, together with interest on
the amount of any unpaid amount at the annual rate of four percent (4%) above
the publicly announced prime rate of Citibank, N.A. (or, if lower, the maximum
rate permitted by law) from the date such amount was required to be paid to the
date of payment.
(c) The Company agrees to reserve 250,000 shares of its Common Stock for
issuance in connection with the exercise of the Breakup Warrant, if the Breakup
Warrant is issued. The obligation to reserve shares in connection with the
Breakup Warrant shall survive termination of this Agreement pursuant to Section
6.03, below, and shall remain binding upon the Company.
(d) Except as provided otherwise in paragraphs (a) and (b) above and in
Section 6.01, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses, except that Company shall pay all costs and expenses (i) in
connection with obtaining shareholder approval for this Agreement and the
transactions contemplated hereby, including printing and mailing the proxy
statement and (ii) of obtaining any consents of any third party.
SECTION 6.03 Termination. This Agreement may be terminated:
(a) at any time by mutual agreement of the parties;
(b) by Purchaser by written notice to the Company if all conditions to
closing have not been satisfied prior to February 11, 2000;
(c) by the Company following a proposal of the type described in Section
6.02(a), by written notice to Purchaser; or
(d) by either party following a material breach by the other party to this
Agreement, provided that if such breach is curable, this Agreement may only be
terminated if, after ten (10) business days' notice, the party in breach has
not either cured such breach or commenced diligent efforts to cure such breach.
Termination of this Agreement shall not waive any party of liability for
breaches of this Agreement which occurred prior to termination. If this
Agreement is terminated by Purchaser pursuant to subsection (b) of this Section
6.03, the limitation on expenses payable pursuant to Section 6.01 shall be
$85,000.
SECTION 6.04 Survival of Agreements. All covenants, agreements,
representations and warranties made in the Transaction Documents or any
certificate or instrument delivered to Purchaser pursuant to or in connection
with the Transaction Documents shall survive the execution and delivery of the
Transaction Documents, the issuance, sale and delivery of the Series B Shares,
the issuance and delivery of the Warrants, and the issuance and delivery of the
Conversion Shares and the Warrant Shares, and all statements contained in any
certificate or other instrument delivered by the Company hereunder or
thereunder or in connection herewith or therewith shall be deemed to constitute
representations and warranties made by the Company.
SECTION 6.05 Brokerage. Each party hereto will indemnify and hold harmless
the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
SECTION 6.06 Parties in Interest. All representations, covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting the
generality of the
20
foregoing, all representations, covenants and agreements benefiting Purchaser
shall inure to the benefit of any and all subsequent holders from time to time
of Series B Shares, the Warrants, Conversion Shares or the Warrant Shares.
SECTION 6.07 Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in Person,
mailed by certified or registered mail, return receipt requested, delivered by
overnight courier, or sent by telecopier or telex, addressed as follows:
(a) if to the Company,
Fieldworks, Incorporated
0000 Xxxxxxx Xxxxx
Xxxx Xxxxxxx, Xxxxxxxxx
Attention: Xxxxx Xxxxxxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx & Whitney LLP
Pillsbury Center
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
Facsimile: (000) 000-0000
(b) if to Purchaser:
Industrial Works Holding Corp.
c/o Glenmount International, L.P.
00000 Xxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
SECTION 6.08 Governing Law; Jury Trial Waiver. This Agreement shall be
construed, interpreted and the rights of the parties determined in accordance
with the laws of the State of California without regard to the conflict of law
principles thereof; except with respect to matters of law concerning the
internal corporate affairs of any corporate entity which is a party to or the
subject of this Agreement and as to those matters, the law of the jurisdiction
under which the respective entity derives its powers shall govern. The parties
irrevocably elect as the sole judicial forum for the adjudication of any
matters arising under or in connection with this Agreement, the Transaction
Documents and the transactions contemplated hereby and thereby, and consent to
the jurisdiction of, the courts located in Orange County, California, and waive
any and all objections to such jurisdiction or venue that they may have. The
parties hereby waive any right to have trial by jury in any action,
21
suit or proceeding brought to enforce or defend any rights or remedies arising
under or in connection with this Agreement, whether grounded in tort, contract
or otherwise.
SECTION 6.09 Injunctive Relief. The parties hereto acknowledge and agree
that irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and shall be entitled to enforce specifically the provisions of this
Agreement in any court of the United States or any state thereof having
jurisdiction, in addition to any other remedy to which the parties may be
entitled under this Agreement or at law or in equity.
SECTION 6.10 Assignment.
(a) Neither this Agreement nor any of the rights or obligations hereunder
may be assigned by the Company without the prior written consent of Purchaser.
(b) Purchaser may, without the consent of the Company, sell, transfer, or
otherwise convey the Warrant, any Breakup Warrant or any of the Series B Shares
purchased by Purchaser hereunder or the Conversion Shares or Warrant Shares,
and the rights and obligations of Purchaser hereunder, to any of its Affiliates
or to an Accredited Investor, provided, however, that such Person (except for a
transferee of the Breakup Warrant) shall not have any rights under this
Agreement unless it executes a counterpart of this Agreement in connection with
such transfer.
(c) Subject to the foregoing, this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, and no other person shall have any right, benefit or obligation
hereunder.
SECTION 6.11 Limitation of Liability. In no event shall (a) any Affiliate of
Purchaser, or (b) any direct or indirect member, shareholder, officer,
director, limited partner, employee or any other representative of Purchaser or
any Affiliate of Purchaser, be personally liable for any obligation of
Purchaser under this Agreement.
SECTION 6.12 Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto, constitutes the sole and entire agreement of the parties with
respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
SECTION 6.13 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 6.14 Amendments. This Agreement may not be amended or modified
without the written consent of the Company and Purchaser.
SECTION 6.15 Severability. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
SECTION 6.16 Titles and Subtitles. The titles and subtitles used in this
Agreement are for convenience only and are not to be considered in construing
or interpreting any term or provision of this Agreement.
SECTION 6.17 Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Affiliate" means, with respect to a specified Person, (a) any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person, (b) any other Person
22
that owns, directly or indirectly, five percent (5%) or more of such specified
person's Capital Stock, (c) any employee or director of such specified Person,
(d) any member of the family of any Person specified in clauses (a), (b), and
(c), or (e) any corporation, limited liability company, partnership, trust or
other entity in which any Person set forth in clauses (a), (b), (c) or (d)
above, or member of the family of any such Person, is a director, officer,
trustee, partner or holder of more than five percent (5%) of the outstanding
Capital Stock thereof. For the purposes of this definition, "control," when
used with respect to any specified person, means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. All
limited partners in Glenmount International, L.P. shall be considered
Purchaser's Affiliates.
"Agreement" has the meaning set forth in the preamble hereto.
"Applicable Law" means any statute, law, rule or regulation or any judgment,
order, writ, injunction, decree or financial assessment (subject, in the case
of financial assessments, to the exhaustion of appeals) of any Governmental
Entity to which a specified Person or its properties or assets, or its
officers, directors, employees, consultants or agents (in their capacities as
such) is subject, including, without limitation, all such statutes, laws,
rules, regulations, judgments, orders, writs, injunctions, decrees and
financial assessments relating to, without limitation, energy regulation,
public utility regulation, securities regulation, consumer protection, equal
opportunity, health care industry regulation, public health and safety, motor
vehicle safety or standards, third party reimbursement, environmental
protection, fire, zoning, building and occupational safety and health matters
and laws respecting employment practices, employee documentation, terms and
conditions of employment and wages and hours.
"Approvals" has the meaning set forth in Section 2.13(b) hereof.
"Breakup Warrant" means a Warrant in the form of Exhibit F.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Change of Control" shall be deemed to have occurred upon (i) the
consummation of a tender for or purchase of more than fifty percent (50%) of
the Company's Common Stock by a third party, in a single transaction or series
of related transactions, (ii) a merger, consolidation or sale of all or
substantially all of the assets of the Company such that the shareholders of
the Company immediately prior to the consummation of such transaction own less
than fifty percent (50%) of the voting securities of the surviving entity
immediately after the transaction or transactions, in a single transaction or
series of related transactions, or (iii) the sale or transfer of more than
twenty-five percent (25%) of the shares of Capital Stock of the Company, in a
single transaction or series of related transactions.
"Closing" has the meaning set forth in Section 1.06 hereof.
"Closing Date" has the meaning set forth in Section 1.06 hereof.
"Code" means the Internal Revenue Code.
"Common Stock" has the meaning set forth in the preamble hereto.
"Company" has the meaning set forth in the preamble hereto.
"Consulting Fee" has the meaning set forth on Section 6.02 hereof.
23
"Conversion Shares" has the meaning set forth in Section 1.04 hereof.
"Convertible Security" means any stock or security that is directly or
indirectly convertible into or exchangeable for or exercisable for Capital
Stock, including without limitation, the Series B Shares, the Warrant and any
other option, warrant or exchangeable debt security.
"Employee Benefit Plans" has the meaning set forth in Section 2.21 hereof.
"Employee Pension Plans" has the meaning set forth in Section 2.21 hereof.
"Environmental Condition" means the Release or threatened Release of any
Hazardous Material (whether or not upon a Facility or any former Facility or
other property and whether or not such Release constituted at the time thereof
a violation of any Environmental Law) as a result of which the Company has or
would reasonably be expected to become liable to any Person or by reason of
which any Facility, any former Facility or any of the assets of the Company may
suffer or be subjected to any encumbrances.
"Environmental Laws" means any and all foreign, federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
legally binding decrees or other requirements of any Governmental Entity
(including, without limitation, common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of the environment or
of human health relating to exposure of any kind of Hazardous Materials, as
have been, are now or may at any time hereafter be in effect.
"Environmental Permits" means any and all permits, licenses, registrations,
notifications, exemptions and any other authorizations required under any
Environmental Law.
"ERISA" has the meaning set forth in Section 2.21 hereof.
"ERISA Affiliate" has the meaning set forth in Section 2.21 hereof.
"Facility" or "Facilities" means one or more of the offices and buildings
and all other real property and related facilities which are owned, leased or
operated by the Company.
"Financial Statements" has the meaning set forth in Section 2.08(b) hereof.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, as in effect from time to time.
"Governmental Entity" means any court or tribunal in any jurisdiction
(domestic or foreign) or any federal, state or local public, governmental or
regulatory body, agency, department, commission, board, bureau or other
authority or instrumentality (domestic or foreign).
"Hazardous Materials" means any hazardous substance, gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products,
polychlorinated biphenyls, ureaformaldehyde insulation, asbestos or asbestos-
containing materials, pollutants, contaminants, radioactivity and any other
materials or substances of any kind, whether solid, liquid or gas, and whether
or not any such substance is defined as hazardous under any Environmental Law,
that is regulated pursuant to any Environmental Law or that could give rise to
liability under any Environmental Law.
"Indebtedness" means, as to any Person, (a) all indebtedness of such Person
for borrowed money or for the deferred purchase price of property or services
(including, without limitation, reimbursement and all other obligations with
respect to surety bonds, letters of credit and bankers' acceptances, whether or
not matured, but not including obligations to trade creditors incurred in the
ordinary course of business), (b) all obligations evidences by notes, bonds,
debentures or similar instruments, (c) all indebtedness created or arising
under any
24
conditional sale or other title retention agreements with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (d) all obligations of such Person that are required
to be classified and accounted for as capital lease obligations under GAAP, (e)
all indebtedness of any other Person guaranteed, directly or indirectly, by
such Person, and (f) all Indebtedness referred to in clauses (a), (b), (c),
(d), and (e) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien upon or
in property (including, without limitation, accounts and contract rights) owned
by such Person, even though such Person has not assumed or become liable for
the payment of such Indebtedness.
"Intellectual Property" has the meaning set forth in Section 2.12 hereof.
"Knowledge" or "known" means, with respect to any Person, the actual
knowledge of such Person, after reasonable inquiry; provided, that a Person
shall be deemed to have actual knowledge of the contents of all books and
records with respect to which such Person has reasonable access; provided,
further, and without limiting the generality of the foregoing, with respect to
any Person that is a corporation actual knowledge shall be deemed to include
the actual knowledge of all principal employees of any such Person (including
without limitation each director, the Chief Executive Officer, President, Chief
Financial Officer and all Vice Presidents of such Person).
"Liability" has the meaning set forth in Section 2.08 hereof.
"Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment,
conditional sale agreement, deposit arrangement, security interest,
encumbrance, lien (statutory or other), preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever in
respect of any property of a Person, whether granted voluntarily or imposed by
law, and includes the interest of a lessor under a capital lease or under any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement or similar notice naming
the owner of such property as debtor, under the Uniform Commercial Code or
other comparable law of any jurisdiction.
"Liquidation Event" means, with respect to any Person, any of the following
events: (i) the commencement by such Person of a voluntary case under the
bankruptcy laws of the United States, as now or hereafter in effect, or the
commencement of an involuntary case against such Person with respect to which
the petition shall not be controverted within fifteen (15) days, or be
dismissed within sixty (60) days, after commencement thereof; (ii) the
appointment of a custodian for, or the taking charge by a custodian of, all or
substantially all of the property of such Person; (iii) the commencement by
such Person of any proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar
law of any jurisdiction whether now or hereafter in effect relating to such
Person; (iv) the commencement against such Person of any proceeding set forth
in the preceding clause (iii), which is not controverted within ten (10) days
thereof and dismissed within sixty (60) days after the commencement thereof;
(v) the adjudication of such Person insolvent or bankrupt, or the adoption by
such Person of a plan of liquidation, (vi) the occurrence of any Change of
Control with respect to such Person or (vii) the filing of a certificate of
dissolution in respect of the Company with the Secretary of State of the State
of Minnesota; in any of cases (i) through (vi) above, in a single transaction
or series of related transactions.
"Material Adverse Change" shall mean, with respect to the Company (a) the
failure of the company to generate revenues of at least $5,000,000 in the
fourth fiscal quarter of 1999; (b) Company Operating Losses in excess of
$1,250,000 in the fourth fiscal quarter of 1999; (c) a material breach by the
Company of any contract with Ryder; (d) any acceleration of the indebtedness
under Company's existing subordinated notes; (e) the filing of any bankruptcy
proceeding with the consent of the Company or the filing against the Company of
an involuntary bankruptcy or insolvency petition; (f) any litigation against
the Company or formal, written threat of litigation against the Company
involving an amount in excess of $1,000,000; (g) any litigation filed against
the Company seeking to enjoin, or obtain damages for, the infringement of the
intellectual property or patent
25
rights to any third party, or (h) binding, accepted and credit- approved orders
for fewer than 50 units of the Series 5000 on normal terms and conditions
(including delivery within 60 days and price not less than expected price
previously disclosed to Purchaser) are received by the Company in connection
with the Ryder RCRC Program prior to December 31, 1999.
"Material Adverse Effect" means, with respect to the Company, any effect or
change, as the case may be, that individually or in the aggregate is material
and adverse to the business, financial condition, results of operations or
prospects of the Company.
"Material Agreements" has the meaning set forth in Section 2.08 hereof.
"Parity Securities" means any class or series of capital stock which ranks
on a parity with the Series B Preferred Stock as to dividend distributions or
distributions upon the liquidation, winding up and dissolution of the Company.
"Operating Losses" shall mean, for any period, the amount of operating
losses for such period, if any, determined in accordance with generally
accepted accounting principles applied in a manner consistent with the
application of such principles in periods prior to 1999, provided that the
impact of any expenses directly attributable to the Management Services
Agreement or revenues or expenses directly attributable to (a) any reversal of
prior inventory, warranty or other reserves, (b) any sale of assets (other than
inventory in the ordinary course), and (c) any business acquired by the Company
after the date hereof through merger, acquisition of securities, acquisition of
assets or otherwise, in each case, shall be excluded from the determination of
operating losses pursuant to this sentence.
"Person" shall mean an individual, corporation, trust, partnership, joint
venture, unincorporated organization, government agency or any agency or
political subdivision thereof, or other entity.
"Purchaser" has the meaning set forth in the preamble hereto, but in the
event Purchaser distributes Series B Shares, it shall mean any holder of Series
B Shares.
"Release" means and includes any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment or the workplace of any Hazardous Materials, and
otherwise as defined in any Environmental Law.
"SEC" has the meaning set forth in Section 2.05 hereof.
"Senior Securities" means any class or series of capital stock which ranks
senior to the Series B Preferred Stock as to dividend distributions or
distributions upon the liquidation, winding up and dissolution of the Company.
"Series B Preferred Stock" has the meaning set forth in the Recitals hereto.
"Series B Shares" has the meaning set forth in the Recitals hereto.
"Supervoting Securities" means any class or series of the Company's Capital
Stock the holders of which have the right to cast more than one vote per share
and/or have the right to elect one or more members of the Board of Directors,
voting as a class or series.
"Taxes" has the meaning set forth in Section 2.20 hereof.
"Transaction Documents" has the meaning set forth in Section 2.01(a) hereof.
"Warrant" has the meaning set forth in the Recitals hereto.
"Warrant Shares" has the meaning set forth in Section 1.04 hereof.
* * * * *
(Signatures on following page)
26
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the Company and Purchaser have executed this Securities
Purchase Agreement as of the day and year first above written.
COMPANY: FIELDWORKS, INC., a Minnesota
corporation
By: _________/s/ Xxxxx X. Mell__________
Name: Xxxxx X. Xxxx
Title: President & CEO
PURCHASER: INDUSTRIAL-WORKS HOLDING CORP., a
Delaware corporation
By: ______ /s/ Xxxxxxx X. Johnson_______
Name: Xxxxxxx X. Xxxxxxx Title:
President
27
