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Exhibit 10.36
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated
as of March 31, 1999, is between THE TESSERACT GROUP, INC., a Minnesota
corporation ("Company"), and PIONEER VENTURE FUND, L.L.C., a Delaware limited
liability company ("Buyer").
RECITALS
A. Company has issued, in favor of Buyer, that certain 12%
Note Due April 2, 1999, in the aggregate principal amount of $848,822.65 (the
"Interim Note"), of which $50,000 was paid on April 2, 1999.
B. In substitution for the Interim Note and to raise
additional capital for general corporate purposes Company has authorized an
issue of not more than ten (10) of its 12% Convertible Notes due September 30,
1999, in a maximum aggregate principal amount of $5,000,000.
C. Company has also authorized the issuance of warrants to
purchase an aggregate of 400,000 shares of its common stock at $3.00 per share.
D. Company wishes to issue to Buyer and Buyer wishes to
purchase from Company such convertible notes and one or more of such warrants,
all upon the terms and subject to the conditions of this Agreement.
NOW THEREFORE, in consideration of the above premises and of
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
AGREEMENT
ARTICLE 1.
DEFINITIONS AND INTERPRETATION
1.1 GENERAL DEFINITIONS. In this Agreement, the following
terms have the meanings specified or referred to in this Section 1.1 and shall
be equally applicable to both the singular and plural forms.
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"AFFILIATE" means, with respect to any Person, any other
Person which directly or indirectly controls, is controlled by or is under
common control with such Person; provided that Buyer shall not be deemed an
Affiliate of Company.
"ANCILLARY AGREEMENTS" means the Convertible Notes, the
Warrants, the Registration Rights Agreement and all other agreements,
instruments and documents being or to be executed and delivered to Buyer under
this Agreement or in connection herewith.
"BUYER" means Pioneer Venture Fund, L.L.C.
"BUYER GROUP MEMBER" means Buyer and any Affiliates of Buyer
and their respective successors and assigns hereunder or under any Convertible
Note or Warrant, each of which shall be an "accredited investor" as such term is
defined in Rule 501(a) promulgated under the Securities Act.
"CHANGE OF CONTROL" means either of the following: (a) any
person or group of persons (within the meaning of the Exchange Act) shall have
acquired, whether by merger or otherwise, beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the
issued and outstanding shares of capital stock of Company having the right to
vote for the election of directors of Company under ordinary circumstances; (b)
any sale by Company, other than in the ordinary course of business, of 50% or
more of the assets or properties of Company in one transaction or a series of
related transactions; or (c) during any period of twelve consecutive calendar
months, individuals who at the beginning of such period constituted the board of
directors of Company (together with any new directors whose election by the
board of directors of Company or whose nomination for election by the
stockholders of Company was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose elections or nomination for election was previously so
approved) cease for any reason other than death or disability to constitute a
majority of the directors then in office
"CLOSING" means any closing of an issuance by Company of
Convertible Notes and the purchase of such Convertible Notes by Buyer.
"CLOSING DATE" has the meaning set forth in Section 2.2.
"COMMON STOCK" means (i) the common stock, $0.01 par value per
share, of Company, and (ii) shares of capital stock of Company issued in respect
of or in exchange for shares of such Common Stock in connection with any stock
dividend or distribution, stock split-up, recapitalization, recombination or
exchange by Company generally of shares of such Common Stock.
"CONVERSION PRICE" shall mean the price per share of Common
Stock equal to the lesser of (a) $1.00 and (b) the Current Market Price as of
any date of determination.
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"CONVERTIBLE NOTE" means one or more of Company's 12%
Convertible Notes due September 30, 1999, each in the form of Exhibit A attached
hereto.
"COURT ORDER" means any judgment, order, award or decree of
any foreign, federal, state, local or other court or tribunal and any award in
any arbitration proceeding.
"CURRENT MARKET PRICE" means the lowest sale price for Common
Stock reported on the Nasdaq National Market during the 30 trading days prior to
any date of determination.
"DEFAULT" means any event which, with the passage of time or
notice or both, would, unless cured or waived, become an Event of Default.
"EVENT OF DEFAULT" has the meaning set forth in Section 7.3.
"EXCESS PROCEEDS OF ISSUANCE OF STOCK OR INDEBTEDNESS" shall
mean cash proceeds received by Company at any time after the date hereof on
account of the issuance of (i) Common Stock (other than upon (A) the exercise of
a Warrant, (B) the conversion of a Convertible Note or (C) the exercise of stock
options or warrants reflected in Section 3.2 or issued to employees, officers or
directors of Company after the date hereof) or (ii) Indebtedness incurred to
provide working capital or for general corporate purposes, in each case net of
all transaction costs and underwriters' discounts with respect thereto.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any successor statute.
"EXPENSES" means any and all expenses incurred in connection
with investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder (including court filing
fees, court costs, arbitration fees or costs, witness fees, and reasonable fees
and disbursements of legal counsel, investigators, expert witnesses,
consultants, accountants and other professionals).
"EXTENDED MATURITY DATE" means March 31, 2000.
"GOVERNMENTAL BODY" means any federal, state, local or other
governmental authority or regulatory body.
"HOLDER" means the holder of any Convertible Note or Warrant.
"INDEBTEDNESS" of any Person shall mean all indebtedness of
such Person for borrowed money or for the deferred purchase price of any asset
or property of Company, payment for which is deferred six (6) months or more,
but excluding obligations to trade
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creditors incurred in the ordinary course of business that are not overdue by
more than six (6) months unless being contested in good faith
"LOSSES" means any and all losses, costs, obligations,
liabilities, settlement payments, awards, judgments, fines, penalties, damages,
expenses, deficiencies or other charges.
"MATERIAL ADVERSE EFFECT" means any condition, circumstance,
change or effect (or any development that, insofar as can be reasonably
foreseen, would result in any condition, circumstance, change or effect) that is
materially adverse to the assets, business, financial condition, results of
operations or prospects of Company.
"MATERIAL AGREEMENTS" means those leases, contracts and other
agreements to which Company is a party or to which Company or any of its
properties or assets are bound (a) that are "material contracts" as defined in
Item 601(b)(10) of Regulation S-K under the Securities Act and the Exchange Act
or (b) the breach or termination of which would have a Material Adverse Effect.
"MATURITY DATE" means September 30, 1999.
"PERSON" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
company, bank, trust company, land trust, business trust or other organization,
whether or not a legal entity, and any Governmental Body.
"PRINCIPAL AMOUNT" means, as of any date of determination and
with respect to any Convertible Note, the then outstanding principal amount of
such Convertible Note.
"REGISTRATION RIGHTS AGREEMENT" means that certain
Registration Rights Agreement, dated as of the date hereof, between Buyer and
Company.
"REQUIREMENTS OF LAW" means any foreign, federal, state and
local laws, statutes, regulations, rules, codes or ordinances enacted, adopted,
issued or promulgated by any Governmental Body (including those pertaining to
electrical, environmental and occupational safety and health requirements) or
common law.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
or any successor statute.
"SUBSIDIARIES" means any corporation, partnership, limited
liability company, joint venture or other entity in which Company either (a)
owns, or at any relevant time owned, directly or indirectly, 50% or more of the
outstanding voting securities or equity interests or (b) is a general partner.
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"TERMINATION DATE" means the date as of which all obligations
of Company then due and owing under this Agreement and all Ancillary Agreements
have been paid in full and all Warrants have been exercised or have expired
pursuant to their terms.
"WARRANT" means one or more warrants to purchase, at $3.00 per
share, shares of Common Stock, each in the form of Exhibit B attached hereto
1.2 INTERPRETATION.
(a) References to a Person are also references to its
assigns and successors in interest (by means of merger, consolidation
or sale of all or substantially all the assets or properties of such
Person or otherwise, as the case may be).
(b) References to a document are to it as amended,
waived and otherwise modified from time to time and references to a
statute or other governmental rule are to it as amended and otherwise
modified from time to time (and references to any provision thereof
shall include references to any successor provision).
(c) References to Sections or to Schedules or
Exhibits are to sections hereof or schedules or exhibits hereto, unless
the context otherwise requires. The Schedules and Exhibits referred to
herein shall be construed with and as an integral part of this
Agreement to the same extent as if they were set forth verbatim herein.
Titles to Articles and headings of Sections are inserted for
convenience of reference only and shall not be deemed a part of or to
affect meaning or interpretation of this Agreement.
(d) References herein to the knowledge of a party or
matters or information known to a party mean the actual knowledge or
conscious awareness of the executive officers and directors of such
party.
(e) The definitions set forth herein are equally
applicable both to the singular and plural forms and the feminine,
masculine and neuter forms of the terms defined.
(f) The term "including" and correlative terms shall
be deemed to be followed by "without limitation" whether or not
followed by such words or words of like import and the word "or" is not
exclusive.
(g) The term "hereof" and similar terms refer to this
Agreement as a whole.
(h) The "date of" any notice or request given
pursuant to this Agreement shall be determined in accordance with
Section 10.4.
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ARTICLE 2.
PURCHASE AND SALE OF SECURITIES; CLOSING
2.1 PURCHASE AND SALE OF CONVERTIBLE NOTES. Upon the terms and
subject to the conditions of this Agreement, on each Closing Date from the date
hereof until the Maturity Date, Company shall issue, sell, convey and deliver to
Buyer, and Buyer shall purchase from Company, one or more Convertible Notes in
an aggregate Principal Amount of up to $5,000,000. The Convertible Notes shall
initially be due and payable on September 30, 1999; provided, that if the
Principal Amount of a Convertible Note and accrued but unpaid interest thereon
is not repaid on or prior to the Maturity Date, the date for repayment of the
Principal Amount of such Convertible Note, together with accrued and unpaid
interest thereon, shall be automatically extended to March 31, 2000, upon the
delivery to Buyer of the Warrants described in Section 6.4 hereof.
2.2 CLOSING DATE. Each Closing shall take place upon the
satisfaction of the conditions precedent applicable thereto set forth in Section
2.6 hereof, on a date to be determined by mutual agreement between Company and
Buyer, at the offices of Sidley & Austin, 000 Xxxx Xxxxx Xxxxxx, Xxx Xxxxxxx,
Xxxxxxxxxx 00000, or at such other place as shall be agreed upon by Buyer and
Company. The date on which any Closing is actually held is sometimes referred to
herein as a "Closing Date."
2.3 INITIAL CLOSING.
(a) Subject to fulfillment or waiver of the
conditions set forth in Section 2.6(b), at the initial Closing Buyer
shall deliver all of the following:
(i) The Initial Note, marked "Canceled."
(ii) The certificate contemplated by
Section 2.6(a)(iii), duly executed by the President or any
Vice President of Buyer.
(iii) This Agreement and the Registration
Rights Agreement, duly executed by Buyer.
(b) Subject to fulfillment or waiver of the
conditions set forth in Section 2.6(a), at the initial Closing Company
shall deliver to Buyer all of the following:
(i) This Agreement and the Registration
Rights Agreement, duly executed by Company;
(ii) The certificates contemplated by
Sections 2.6(b)(i) and 2.6(b)(ii), duly executed by Company;
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(iii) A signature and incumbency
certificate of the officers of Company executing any
Convertible Note, Warrant or other Ancillary Agreement to be
delivered by Company at such Closing, certified as of such
Closing Date by Company's corporate secretary or an assistant
secretary as being true, accurate, correct and complete;
(iv) A Convertible Note in the aggregate
Principal Amount of $798,822.65 duly executed by Company and
registered in the name of Buyer;
(v) The facility fee of (A) $50,000 in
immediately available funds, which is 1% of the maximum
aggregate Principal Amount of all Convertible Notes and which
was paid on April 2, 1999 in partial payment of the Interim
Note, and (B) a Warrant, duly executed by Company, to purchase
150,000 shares of Common Stock; and
(vi) A duly executed original of an
opinion of Faegre & Xxxxxx LLP, counsel to Company, dated the
initial Closing Date, in form satisfactory to Buyer.
2.4 BUYER'S DELIVERIES. Subject to fulfillment or waiver of
the conditions set forth in Section 2.6(b), at each subsequent Closing Buyer
shall deliver all of the following:
(a) The cash consideration for the Convertible Notes
to be issued at such Closing, payable by wire transfer of immediately
available funds in the manner and to the accounts set forth on Schedule
2.4(a).
(b) The certificate contemplated by Section
2.6(a)(iii), duly executed by the President or any Vice President of
Buyer.
2.5 COMPANY'S DELIVERIES. Subject to fulfillment or waiver of
the conditions set forth in Section 2.6(a), at each subsequent Closing Company
shall deliver to Buyer all of the following:
(a) The certificates contemplated by Sections
2.6(b)(i) and 2.6(b)(ii), duly executed by Company;
(b) A signature and incumbency certificate of the
officers of Company executing any Convertible Note, Warrant or other
Ancillary Agreement to be delivered by Company at such Closing (other
than officers who are listed on a certificate previously delivered
pursuant to Section 2.3(b)(iii)), certified as of such Closing Date by
Company's corporate secretary or an assistant secretary as being true,
accurate, correct and complete;
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(c) If applicable, one or more Warrants duly executed
by Company; and
(d) A Convertible Note in an aggregate Principal
Amount (together with all Convertible Notes then outstanding) not
exceeding $5,000,000, duly registered in the name of Buyer.
2.6 CONDITIONS TO OBLIGATIONS AT CLOSING.
(a) The obligations of Company to issue and sell the
Convertible Notes on any Closing Date pursuant to this Agreement shall,
at the option of Company, be subject to the satisfaction of the
following conditions: (i) there shall have been no material breach by
Buyer, on or prior to such Closing Date, in the performance of any of
its covenants and agreements herein; (ii) each of the representations
and warranties of Buyer contained or referred to in this Agreement
shall be true and correct in all material respects on such Closing Date
as though made on such Closing Date, except for changes therein
specifically permitted by this Agreement or resulting from any
transaction expressly consented to in writing by Company or any
transaction contemplated by this Agreement; and (iii) there shall have
been delivered to Company a certificate to such effect, dated such
Closing Date and signed on behalf of Buyer by the President or any Vice
President of Buyer, in addition to the other deliveries specified in
Section 2.4.
(b) The obligations of Buyer to purchase Convertible
Notes on any Closing Date pursuant to this Agreement shall, at the
option of Buyer, be subject to the satisfaction of the following
conditions:
(i) (A) There shall have been no material
breach by Company, on or prior to such Closing Date, in the
performance of any of its covenants and agreements herein or
in any Ancillary Agreement; (B) each of the representations
and warranties of Company contained or referred to herein or
therein shall be true and correct in all material respects on
such Closing Date as though made on such Closing Date, except
for changes specifically permitted by this Agreement or
resulting from any transaction expressly consented to in
writing by Buyer or any transaction permitted by Article 6;
(C) as of such Closing Date and after giving effect to such
Closing, no more than ten (10) Convertible Notes shall have
been issued and the aggregate Principal Amount of all
Convertible Notes shall not exceed $5,000,000; (D) after
giving effect to such Closing, no Default or Event of Default
under any Convertible Note shall have occurred and be
continuing; and (E) there shall have been delivered to Buyer a
certificate to such effect, dated such Closing Date, signed by
Company, in addition to the other deliveries specified in
Section 2.5.
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(ii) Between the date hereof and such
Closing Date, there shall have been (A) no material adverse
change in the assets, business, operations, liabilities,
profits or condition (financial or otherwise) of Company and
(B) no material damage to the assets or properties of Company
by fire, flood, casualty, act of God or the public enemy or
other cause, regardless of insurance coverage for such damage;
and there shall have been delivered to Buyer a certificate to
such effect, dated such Closing Date and signed by Company.
ARTICLE 3.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPANY
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, Company represents and warrants
to Buyer and covenants as follows:
3.1 AUTHORITY OF COMPANY.
(a) Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Minnesota.
Company is duly qualified to transact business as a foreign corporation
and is in good standing in each jurisdiction in which the failure so to
qualify would have a Material Adverse Effect. Company has full power
and authority to own or lease and to operate and use its properties and
assets and to carry on its business as now conducted and as proposed to
be conducted.
(b) Company has full power and authority to execute,
deliver and perform this Agreement and all of the Ancillary Agreements
to which it is a party. The execution, delivery and performance of this
Agreement and the Ancillary Agreements by Company have been duly
authorized and approved by Company's board of directors and do not
require any further authorization or consent of Company or its
stockholders. This Agreement, when executed and delivered, is and will
have been duly authorized, executed and delivered by Company and is and
will be the legal, valid and binding obligation of Company enforceable
in accordance with its terms, and each of the Ancillary Agreements to
which Company is a party will, when executed and delivered, have been
duly authorized by Company and, upon execution and delivery by Company,
is and will be a legal, valid and binding obligation of Company
enforceable in accordance with its terms.
(c) Neither the execution and delivery of this
Agreement or any of the Ancillary Agreements by Company or the
consummation of any of the transactions contemplated hereby or thereby
by Company, nor compliance with or fulfillment of the terms, conditions
and provisions hereof or thereof, will (i) conflict with, result in a
breach of the terms, conditions or provisions of, or constitute a
default, an event of default or an
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event creating rights of acceleration, termination or cancellation or a
loss of rights under, or result in the creation or imposition of any
encumbrance upon any of the assets or properties of Company under (A)
the charter or Bylaws of Company, (B) any note, instrument, Material
Agreement, mortgage, lease, license, franchise, permit or other
authorization, right, restriction or obligation to which Company or is
a party or to which any of the assets or properties of Company is
subject or by which Company is bound, (C) any Court Order to which
Company is a party or to which any of the assets or properties of
Company is subject or by which Company is bound, or (D) any
Requirements of Law affecting Company or its assets or properties; or
(ii) require the approval, consent, authorization or act of, or the
making by Company of any declaration, filing or registration with, any
Person.
3.2 CAPITAL STRUCTURE OF COMPANY. As of the date hereof, the
authorized capital stock of Company consists of 25,000,000 shares of Common
Stock, of which 9,580,331 shares are issued and outstanding as of the date
hereof, together with options to purchase 1,729,506 shares of Common Stock and
warrants to purchase 300,742 shares of Common Stock; and 5,000,000 shares of
preferred stock, of which 200,000 have been designated as Series A Senior
Participating Preferred Shares and none of which are issued and outstanding.
Except for this Agreement and the Ancillary Agreements or as disclosed herein or
therein, there are no agreements, arrangements, options, warrants, calls, rights
or commitments of any character relating to the issuance, sale, purchase or
redemption of any shares of capital stock of Company, other than those disclosed
in Company's periodic filings under the Exchange Act and stock options granted
to employees, officers and directors. No holder of Common Stock has any
preemptive, stock purchase or other rights to acquire Common Stock. All of the
outstanding shares of Common Stock are validly issued, fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights.
3.3 FINANCIAL STATEMENTS. Company has made available to Buyer
its audited financial statements (balance sheet and profit and loss statement,
statement of stockholders' equity and statement of changes in financial
position) for the two most recent fiscal years and its unaudited financial
statements (balance sheet and profit and loss statement) for all fiscal quarters
since the end of the last fiscal year. Such financial statements have been
prepared in conformity with generally accepted accounting principles
consistently applied, and present fairly the financial position and results of
operations of Company as of their respective dates and for the respective
periods covered thereby. Except as set forth in the financial statements,
Company has no liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to December 31, 1998, and
(ii) obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles to
be reflected in the financial statements, which, in both cases, individually or
in the aggregate, are not material to the financial condition or operating
results of Company. Except as disclosed in the financial statements, Company is
not a guarantor or indemnitor of any Indebtedness of any other person, firm or
corporation. Company maintains
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and will continue to maintain a standard system of accounting established and
administered in accordance with generally accepted accounting principles.
3.4 NO VIOLATION, LITIGATION OR REGULATORY ACTION. Except as
previously disclosed to Buyer:
(a) there are no material lawsuits, claims, suits,
proceedings or investigations pending or, to the knowledge of Company,
threatened against or affecting Company which, if determined adversely
to Company, would have a Material Adverse Effect nor, to the knowledge
of Company, is there any basis for any of the same, and there are no
material lawsuits, suits or proceedings pending in which Company is the
plaintiff or claimant which, if determined adversely to Company, would
have a Material Adverse Effect;
(b) there is no material action, suit or proceeding
pending or, to the knowledge of Company, threatened which questions the
legality or propriety of the transactions contemplated by this
Agreement and which, if determined adversely to Company, would have a
Material Adverse Effect; and
(c) to the knowledge of Company, no legislative or
regulatory proposal or other proposal for the change in any
Requirements of Law or the interpretation thereof has been adopted or
is pending which could reasonably be expected to have a Material
Adverse Effect.
3.5 COMPLIANCE WITH LAWS. Company is in compliance with all
federal, state, local and foreign statutes, laws, ordinances, regulations,
rules, judgments, orders and decrees applicable to it or its respective assets,
properties, business or operations (including, without limitation, environmental
and health and safety laws and U.S. customs laws and regulations), other than
noncompliance which in the aggregate would not reasonably be expected to have a
Material Adverse Effect. There does not exist any valid basis for any claims of
default under or violation of any such statute, law, ordinance regulation, rule,
judgment, order or decree which, if determined adversely to Company, would have
a Material Adverse Effect.
3.6 CUSIP NUMBERS. Company shall obtain CUSIP numbers for the
Convertible Notes and the Warrant within twenty (20) days after the date hereof.
3.7 PUBLIC TRADING OF COMMON STOCK. At all times from and
after the date hereof and until the Termination Date, Common Stock shall be
listed on a national securities exchange or admitted for trading on the Nasdaq
National Market.
3.8 NO FINDER. Neither Company nor any Person acting on its
behalf has paid or become obligated to pay any fee or commission to any broker,
finder or intermediary for or on account of the transactions contemplated by
this Agreement.
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3.9 DISCLOSURE. None of the representations or warranties of
Company contained in this Agreement and none of the other information or
documents furnished to Buyer or any of its representatives by Company or its
representatives pursuant to the terms of this Agreement, is false or misleading
in any material respect or omits to state a fact herein or therein necessary to
make the statements herein or therein not misleading in any material respect.
All material information which has been made available to the board of directors
of Company and is required, under applicable Requirements of Law, to be
disclosed to the public has been so disclosed either in press releases issued by
Company or in filings by Company with the Securities and Exchange Commission.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Company to enter into this Agreement and
to consummate the transactions contemplated hereby, Buyer hereby represents and
warrants to Company and agrees as follows:
4.1 ORGANIZATION. Buyer is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full power and authority to own or lease and to operate and use
its properties and assets and to carry on its business as now conducted or
proposed to be conducted.
4.2 AUTHORITY. Buyer has full power and authority to execute,
deliver and perform this Agreement and all of the Ancillary Agreements. The
execution, delivery and performance of this Agreement and the Ancillary
Agreements by Buyer have been duly authorized and approved, and do not require
any further authorization or consent of the governing body, or the partners of
Buyer. This Agreement has been duly authorized, executed and delivered by Buyer
and is the legal, valid and binding agreement of Buyer enforceable in accordance
with its terms, and each of the Ancillary Agreements has been duly authorized by
Buyer and upon execution and delivery by Buyer will be a legal, valid and
binding obligation of Buyer enforceable in accordance with its terms.
4.3 NO LITIGATION. There is no action, suit or proceeding
pending or, to the knowledge of Buyer, threatened which questions the legality
or propriety of the transactions contemplated by this Agreement.
4.4 NO FINDER. Neither Buyer nor any Person acting on its
behalf has paid or become obligated to pay any fee or commission to any broker,
finder or intermediary for or on account of the transactions contemplated by
this Agreement.
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4.5 DISCLOSURE. None of the representations or warranties of
Buyer contained herein, and none of the other information or documents furnished
to Company by Buyer or its representatives pursuant to the terms of this
Agreement, is false or misleading in any material respect or omits to state a
fact herein or therein necessary to make the statements herein or therein not
misleading in any material respect.
4.6 INVESTMENT REPRESENTATION. The Convertible Notes and
Warrants are being acquired by Buyer for its own account for investment, and not
with a view to the sale or distribution of any part thereof without registration
under the Securities Act or pursuant to an applicable exemption therefrom.
ARTICLE 5.
CONVERSION OF THE CONVERTIBLE NOTES
5.1 CONVERSION PRIVILEGE. If any portion of the Principal
Amount of a Convertible Note and accrued but unpaid interest thereon remains
unpaid for more than fifteen (15) days after such amount becomes due and payable
(whether upon the maturity thereof , by acceleration or otherwise), Buyer shall
have the right, at Buyer's option, to convert, in accordance with the terms of
the Convertible Notes and this Article 5, all or any part of the Principal
Amount of such Convertible Note and accrued but unpaid interest thereon into
shares of Common Stock.
5.2 CONVERSION PROCEDURE; CONVERSION PRICE; FRACTIONAL SHARES.
(a) Each Convertible Note shall be convertible at the
principal executive office of Company, into fully paid and
nonassessable shares (calculated to the nearest 1/100th of a share) of
Common Stock. The Convertible Notes will be converted into shares of
Common Stock at the Conversion Price therefor; provided that until any
shareholder approval required by Section 6.5 is obtained, no more than
1,500,000 shares of Common Stock may be issued upon conversion of
Convertible Notes. Company may, but shall not be required to, in
connection with any conversion of Convertible Notes, issue a fraction
of a share of Common Stock and, if Company shall determine not to issue
any such fraction, Company shall make a cash payment (calculated to the
nearest cent) equal to such fraction multiplied by the Conversion
Price.
(b) Before any Holder of a Convertible Note shall be
entitled to convert such Convertible Note into Common Stock, such
Holder shall surrender such Convertible Note duly endorsed or assigned
to Company or in blank, at Company's principal executive office,
accompanied by written notice of conversion stating that the Holder
elects to convert such Convertible Note or, if less than the entire
Principal Amount thereof and accrued but unpaid interest thereon is to
be converted, the portion thereof to be converted, and shall state in
writing therein the Principal Amount of
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Convertible Notes and accrued but unpaid interest thereon to be
converted and the name or names (with addresses) in which Holder wishes
the certificate or certificates for Common Stock to be issued;
provided, however, that no Convertible Note or portion thereof shall be
accepted for conversion unless the Principal Amount of such Convertible
Note and accrued but unpaid interest thereon or such portion, when
added to the Principal Amount of all other Convertible Notes and
accrued but unpaid interest thereon or portions thereof then being
surrendered by the Holder thereof for conversion, exceeds the then
effective Conversion Price with respect thereto. If more than one
Convertible Note shall be surrendered for conversion at one time by the
same Holder, the number of shares of Common Stock which shall be
deliverable upon conversion shall be computed on the basis of the
aggregate Principal Amount of the Convertible Notes (or specified
portions thereof to the extent permitted thereby) so surrendered.
Subject to the next succeeding sentence, Company will, as soon as
practicable thereafter, issue and deliver at such office to such
Holder, or to such Holder's nominee or nominees, certificates for the
number of shares of Common Stock to which Holder shall be entitled as
aforesaid, together, subject to the last sentence of Section 5.2(a)
above, with cash in lieu of any fraction of a share to which Holder
would otherwise be entitled, should Company elect not to issue
fractional shares. Company shall not be required to deliver
certificates for shares of Common Stock while the stock transfer books
for such stock are duly closed for any purpose, but certificates for
shares of Common Stock shall be issued and delivered as soon as
practicable after the opening of such books. A Convertible Note shall
be deemed to have been converted as of the close of business on the
date of the surrender of such Convertible Note for conversion as
provided above and at such time the rights of the Holder of such
Convertible Note as Holder shall cease; the Person or Persons entitled
to receive the Common Stock issuable upon such conversion shall be
treated for all purposes as the Holder or Holders of record of such
Common Stock immediately prior to the close of business on such date.
In case any Convertible Note shall be surrendered for partial
conversion, Company shall execute and deliver to or upon the written
order of the Holder of the Convertible Note so surrendered, without
charge to such Holder (subject to the provisions of Section 5.8) a new
Convertible Note or Convertible Notes in authorized denominations in an
aggregate Principal Amount equal to the unconverted portion of the
surrendered Convertible Note.
5.3 ADJUSTMENT OF CONVERSION PRICE FOR COMMON STOCK. The
Conversion Price with respect to any Convertible Note shall be adjusted from
time to time as follows:
(a) In case Company shall, at any time or from time
to time while any of such Convertible Notes are outstanding, (i) pay a
dividend in shares of its Common Stock to holders of Common Stock, (ii)
combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock, (iii) subdivide its outstanding shares of
Common Stock into a greater number of shares of Common Stock or (iv)
make a distribution in shares of Common Stock to holders of Common
Stock, then the Conversion Price in effect immediately before such
action shall be adjusted so that the
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Holders of such Convertible Notes, upon conversion thereof into Common
Stock immediately following such event, shall be entitled to receive
the kind and amount of shares of capital stock of Company which they
would have owned or been entitled to receive upon or by reason of such
event if such Convertible Notes had been converted immediately before
the record date (or, if no record date, the effective date) for such
event. An adjustment made pursuant to this Section 5.3(a) shall become
effective retroactively immediately after the record date in the case
of a dividend or distribution and shall become effective retroactively
immediately after the effective date in the case of a subdivision or
combination. For the purposes of this Section 5.3(a), each Holder of
Convertible Notes shall be deemed to have failed to exercise any right
to elect the kind or amount of securities receivable upon the payment
of any such dividend, subdivision, combination or distribution
(provided that if the kind or amount of securities receivable upon such
dividend, subdivision, combination or distribution is not the same for
each nonelecting share, then the kind and amount of securities or other
property receivable upon such dividend, subdivision, combination or
distribution for each nonelecting share shall be deemed to be the kind
and amount so receivable per share by a plurality of the nonelecting
shares).
(b) In case Company shall, at any time or from time
to time while any of such Convertible Notes are outstanding, issue
rights or warrants to all holders of shares of its Common Stock
entitling them (for a period expiring within 45 days after the record
date for such issuance) to subscribe for or purchase shares of Common
Stock (or securities convertible into shares of Common Stock) at a
price per share less than the Current Market Price of the Common Stock
at such record date (treating the price per share of the securities
convertible into Common Stock as equal to (x) the sum of (i) the price
for a unit of the security convertible into Common Stock and (ii) any
additional consideration initially payable upon the conversion of such
security into Common Stock divided by (y) the number of shares of
Common Stock initially underlying such convertible security), the
Conversion Price with respect to such Convertible Notes shall be
adjusted so that it shall equal the price determined by dividing the
Conversion Price in effect immediately prior to the date of issuance of
such rights or warrants by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding on the date of
issuance of such rights or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase (or into
which the convertible securities so offered are initially convertible),
and the denominator of which shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants
plus the number of shares or securities which the aggregate offering
price of the total number of shares or securities so offered for
subscription or purchase (or the aggregate purchase price of the
convertible securities so offered plus the aggregate amount of any
additional consideration initially payable upon conversion of such
securities into Common Stock) would purchase at such Current Market
Price of the Common Stock. Such adjustment shall become effective
retroactively immediately after
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the record date for the determination of stockholders entitled to
receive such rights or warrants.
(c) In case Company shall, at any time or from time
to time while any of such Convertible Notes are outstanding, distribute
to all holders of shares of its Common Stock (including any such
distribution made in connection with a consolidation or merger in which
Company is the continuing corporation and the Common Stock is not
changed or exchanged) cash, evidences of its Indebtedness, securities
or assets (excluding (i) regular periodic cash dividends in amounts, if
any, determined from time to time by the board of directors, (ii)
dividends payable in shares of Common Stock for which adjustment is
made under Section 5.3(a) or (iii) rights or warrants to subscribe for
or purchase securities of Company (excluding those referred to in
Section 5.3(b))), then in each such case the Conversion Price with
respect to such Convertible Notes shall be adjusted so that it shall
equal the price determined by dividing the Conversion Price in effect
immediately prior to the date of such distribution by a fraction, the
numerator of which shall be the Current Market Price of the Common
Stock on the record date referred to below, and the denominator of
which shall be such Current Market Price of the Common Stock less the
then fair market value (as determined by the board of directors of
Company, whose determination shall be conclusive) of the portion of the
cash or assets or evidences of Indebtedness or securities so
distributed or of such subscription rights or warrants applicable to
one share of Common Stock (provided that such denominator shall never
be less than 1.0); provided, however, that no adjustment shall be made
with respect to any distribution of rights to purchase securities of
Company if a Holder of Convertible Notes would otherwise be entitled to
receive such rights upon conversion at any time of such Convertible
Notes into Common Stock unless such rights are subsequently redeemed by
Company, in which case such redemption shall be treated for purposes of
this Section 5.3(c) as a dividend on the Common Stock. Such adjustment
shall become effective retroactively immediately after the record date
for the determination of stockholders entitled to receive such
distribution; and in the event that such distribution is not so made,
the Conversion Price shall again be adjusted to the Conversion Price
which would then be in effect if such record date had not been fixed.
(d) In any case in which this Section 5.3 shall
require that any adjustment be made effective as of or retroactively
immediately following a record date, Company may elect to defer (but
only for five (5) trading days following the filing of the statement
referred to in Section 5.5) issuing to the Holder of any Convertible
Notes converted after such record date the shares of Common Stock and
other capital stock of Company issuable upon such conversion over and
above the shares of Common Stock and other capital stock of Company
issuable upon such conversion on the basis of the Conversion Price
prior to adjustment; provided, however, that Company shall deliver to
such Holder a due xxxx or other appropriate instrument evidencing such
Holder's right to receive such additional shares upon the occurrence of
the event requiring such adjustment.
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(e) All calculations under this Section 5.3 shall be
made to the nearest cent or one-hundredth of a share or security, with
one-half cent and 0.005 of a share, respectively, being rounded upward.
Notwithstanding any other provision of this Section 5.3, Company shall
not be required to make any adjustment of the Conversion Price unless
such adjustment would require an increase or decrease of at least 1% of
such price. Any lesser adjustment shall be carried forward and shall be
made at the time of and together with the next subsequent adjustment
which, together with any adjustment or adjustments so carried forward,
shall amount to an increase or decrease of at least 1% in such price.
Any adjustments under this Section 5.3 shall be made successively
whenever an event requiring such an adjustment occurs.
(f) In the event that at any time, as a result of an
adjustment made pursuant to this Section 5.3, the Holder of any
Convertible Note thereafter surrendered for conversion shall become
entitled to receive any shares of capital stock of Company other than
shares of Common Stock into which the Convertible Notes originally were
convertible, the Conversion Price of such other shares so receivable
upon conversion of any such Convertible Note shall be subject to
adjustment from time to tine in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to Common
Stock contained in Sections 5.3(a) through 5.3(e) hereof, and the
provision of Sections 5.1 through 5.8 with respect to the Common Stock
shall apply on like or similar terms to any such other shares and the
determination of the board of directors as to any such adjustment shall
be conclusive.
(g) No adjustment shall be made pursuant to this
Section 5.3 (i) if the effect thereof would be to reduce the Conversion
Price below the par value (if any) of the Common Stock or (ii) subject
to Section 5.3(d) hereof, with respect to any Convertible Note that is
converted prior to the time such adjustment otherwise would be made.
5.4 CONSOLIDATION, SALE OF ASSETS OR MERGER OF COMPANY. In
case of either (a) any consolidation or merger to which Company is a party,
other than a merger or consolidation in which Company is the surviving or
continuing corporation and which does not result in a reclassification of,
cancellation of or change (other than a change in par value or from par value to
no par value or from no par value to par value, as a result of a subdivision or
combination) in, outstanding shares of Common Stock or (b) any sale or
conveyance of all or substantially all of the properties and assets of Company
to another Person, then each Convertible Note then outstanding shall be
convertible from and after such merger, consolidation, sale or conveyance of
property and assets into the kind and amount of shares of stock or other
securities and property (including cash) receivable upon such consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
into which such Convertible Notes would have been converted immediately prior to
such consolidation, merger, sale or conveyance, subject to adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article 5 (and assuming such holder of
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Common Stock failed to exercise his rights of election, if any, as to the kind
or amount of securities, cash or other property (including cash) receivable upon
such consolidation, merger, sale or conveyance (provided that, if the kind or
amount of securities, cash or other property (including cash) receivable upon
such consolidation, merger, sale or conveyance is not the same for each
nonelecting share, then the kind and amount of securities, cash or other
property (including cash) receivable upon such consolidation, merger, sale or
conveyance for each nonelecting share shall be deemed to be the kind and amount
so receivable per share by a plurality of the nonelecting shares or
securities)). Company shall not enter into any of the transactions referred to
in Sections 5.4(a) or 5.4(b) unless effective provision shall be made so as to
give effect to the provisions set forth in this Section 5.4. The provisions of
this Section 5.4 shall apply similarly to successive consolidations, mergers,
sales or conveyances.
5.5 NOTICE OF ADJUSTMENT OF CONVERSION PRICE. Whenever an
adjustment in the Conversion Price with respect to Convertible Notes is
required, Company shall compute the adjusted Conversion Price in accordance with
Section 5.4 and forthwith deliver to the Holder a certificate of the chief
financial officer of Company, stating the adjusted Conversion Price determined
as provided herein and setting forth in reasonable detail such facts as shall be
necessary to show the reason for and the manner of computing such adjustment,
such certificate to be conclusive evidence that the adjustment is correct.
5.6 NOTICE IN CERTAIN EVENTS. In case:
(a) Company shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than exclusively in
cash;
(b) Company shall authorize the granting to the
holders of its Common Stock of rights, options or warrants to subscribe
for or purchase any shares of capital stock of any class or of any
other rights (other than grants to employees, officers or directors of
Company pursuant to plans approved by the Board of Directors of
Company);
(c) of any reclassification of the capital stock of
Company (other than a subdivision or combination of its outstanding
Common Stock), or of any consolidation or merger to which Company is a
party and for which approval of any stockholders of Company is
required, or of the sale or transfer of all or substantially all of the
assets or properties of Company;
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of Company;
(e) Company or any Subsidiary shall commence a tender
offer for all or a portion of Company's outstanding Common Stock (or
shall amend any such tender offer);
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(f) of a consolidation or merger to which Company is
a party and for which approval of any stockholders of Company is
required, or of the sale or conveyance to another Person or entity or
group of Persons or entities acting in concert as a partnership,
limited partnership, syndicate or other group (within the meaning of
Rule 13d-3 under the Exchange Act) of all or substantially all of the
property and assets of Company; or
(g) of any action triggering an adjustment of the
Conversion Price pursuant to this Article 5;
then, in each case, Company shall cause to be mailed, first class postage
prepaid, to the Holders of record of applicable Convertible Notes, at least
fifteen (15) days prior to the applicable date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of any
dividend distribution or grant of rights, options or warrants triggering an
adjustment to the Conversion Price pursuant to this Article 5, or, if a record
is not to be taken, the date as of which the holders of record of Common Stock
entitled to such dividend distribution, rights, options or warrants are to be
determined, or (y) the date on which any reclassification, consolidation,
merger, sale, conveyance, dissolution, liquidation, tender offer or winding up
triggering an adjustment to the Conversion Price pursuant to this Article 5 is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their Common
Stock for securities, tender offer or other property deliverable upon such
reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation, cash or winding up.
Failure to give such notice or any defect therein shall not
affect the legality or validity of the proceedings described in this Section
5.6.
5.7 COMPANY TO RESERVE STOCK. Company shall at all times
reserve and keep available, free from preemptive rights, out of its authorized
but unissued shares of Common Stock, for the purpose of effecting the conversion
of the Convertible Notes, such number of its duly authorized shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
applicable outstanding Convertible Notes into such Common Stock at any time
(assuming that, at the time of the computation of such number of shares or
Convertible Notes, all such Convertible Notes would be held by a single Holder);
provided, however, that nothing contained herein shall preclude Company from
satisfying its obligations in respect of the conversion of the Convertible Notes
by delivery of purchased shares of Common Stock which are held in the treasury
of Company. Company shall from time to time, in accordance with the laws of the
State of Minnesota, use its best efforts to cause the authorized amount of the
Common Stock to be increased if the aggregate of the authorized amount of the
Common Stock remaining unissued and the issued shares of such Common Stock in
its treasury (other than any such shares reserved for issuance in any other
connection) shall not be sufficient to permit the conversion of all Convertible
Notes.
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5.8 TAXES ON CONVERSION. Company shall pay any and all
documentary, stamp or similar issue or transfer taxes that may be payable in
respect of the issue or delivery of shares of Common Stock on conversion of
Convertible Notes pursuant hereto. Company shall not, however, be required to
pay any such tax which may be payable in respect of any transfer involved in the
issue or delivery of shares of Common Stock or the portion, if any, of the
Convertible Notes which are not so converted in a name other than that in which
the Convertible Notes so converted were registered, and no such issue or
delivery shall be made unless and until the Person requesting such issue has
paid to Company the amount of such tax or has established to the satisfaction of
Company that such tax has been paid.
5.9 CORPORATE ACTION REGARDING PAR VALUE OF COMMON STOCK.
Before taking any action which would cause an adjustment reducing the applicable
Conversion Price below the then par value (if any) of the shares of Common Stock
deliverable upon conversion of the Convertible Notes, Company will take any
corporate action which may, in the opinion of its counsel, be necessary in order
that Company may validly and legally issue fully paid and nonassessable shares
of Common Stock at such adjusted Conversion Price.
ARTICLE 60
ADDITIONAL AGREEMENTS
6.1 RESERVATION OF COMMON STOCK. From the date hereof until
the Termination Date, Company shall reserve and shall refrain from issuing that
number of shares of its Common Stock that are to be delivered upon conversion of
the Convertible Notes and exercise of Warrants.
6.2 COMPLIANCE WITH LAWS. Company shall comply with all
federal, state, local and foreign laws, rules and regulations applicable to it
and to its property, assets and operations, including securities laws, rules and
regulations, and any reports required to be filed thereunder, other than
noncompliance which in the aggregate would not reasonably be expected to have a
Material Adverse Effect.
6.3 FURTHER ASSURANCES. Each of the parties hereto shall
execute all such further instruments and documents and take all such further
action as any other party hereto may reasonably require or as may otherwise be
necessary in order to effectuate the terms and purposes of this Agreement and
the transactions contemplated hereby.
6.4 WARRANTS. If the Principal Amount of any Convertible Note
and accrued but unpaid interest thereon is not repaid on or prior to the
Maturity Date, Company shall deliver to Buyer a Warrant (exercisable up to
September 30, 2004) to purchase an aggregate of 250,000 shares of Common Stock
(as such number of shares may be adjusted, in substantially the manner
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set forth in the Warrant, for any reclassification, merger, subdivision,
combination, dividend, offering, distribution or other issuance of Common
Stock), in consideration of the extension of the maturity of such Convertible
Note as set forth in Section 2.1 hereof.
6.5 SHAREHOLDER APPROVAL. Company shall use its best efforts
to obtain approval from its shareholders for the issuance of all Note Shares
which are or may become issuable hereunder or under the Convertible Notes, to
the extent such approval is necessary to permit the admission of the Note Shares
for quotation on the Nasdaq National Market. The Company shall seek approval
from the shareholders at its next regularly scheduled shareholder meeting and in
any event on or before December 31, 1999. If such shareholder approval is not
obtained on or before the date (the "Approval Deadline") which is the earlier of
December 31, 1999 and the date on which any of the Convertible Notes becomes
convertible into Common Stock, then on and after the Approval Deadline (a) the
rate of interest applicable to each Convertible Note shall be 18% and (b) two
additional directors, each designated by Holders holding at least 50% of the
then aggregate Principal Amount, shall be added to the Board of Directors of the
Company.
ARTICLE 70
PREPAYMENT OF THE CONVERTIBLE NOTES; EVENTS OF DEFAULT
7.1 OPTIONAL PREPAYMENT BY COMPANY. Company may at any time on
at least five (5) days' prior written notice to Buyer voluntarily prepay all or
part of any or all Convertible Notes. Each notice of partial prepayment shall
designate the Convertible Note to which such prepayment is to be applied.
7.2 MANDATORY PREPAYMENT BY COMPANY. Within two (2) business
days after Company's receipt of any Excess Proceeds of Issuance of Stock or
Indebtedness, Company shall make or cause to be made a mandatory prepayment of
all Convertible Notes, pro rata in proportion to the Principal Amount of each
Convertible Note, in an amount equal to one hundred percent (100%) of such
Excess Proceeds of Issuance of Stock or Indebtedness.
7.3 EVENTS OF DEFAULT. The occurrence of any one or more of
the following events (regardless of the reason therefor) shall constitute an
"Event of Default" hereunder:
(a) Company (i) fails to make any payment of
principal of, or interest on, or fees owing in respect of, any of the
Convertible Notes when due and payable, or (ii) fails to pay or
reimburse any Holder for any expense reimbursable hereunder or under
any other Ancillary Agreement following Buyer's demand for such
reimbursement or payment of expenses.
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(b) Company shall fail or neglect to perform, keep or
observe any of the covenants to be performed by Company under this
Agreement or any of the Ancillary Agreements, unless such failure or
neglect is cured within five (5) days of Buyer's giving notice to
Company.
(c) A default or breach shall occur under any other
agreement, document or instrument to which Company is a party which is
not cured within any applicable grace period, and such default or
breach (i) involves the failure to make any payment when due in respect
of any Indebtedness (other than Indebtedness with respect to the
Convertible Notes) the outstanding principal amount of which exceeds
$2,000,000 in the aggregate, or (ii) causes, or permits any holder of
such Indebtedness or a trustee to cause, any such Indebtedness to
become due prior to its stated maturity, regardless of whether such
default is waived, or such right is exercised, by such holder or
trustee.
(d) Any representation or warranty herein or in any
Ancillary Agreement is untrue or incorrect in any material respect as
of the date when made or deemed made.
(e) Any Change of Control shall occur.
(f) An involuntary case shall be commenced against
Company and the petition shall not be dismissed, stayed, bonded or
discharged within sixty (60) days after commencement of the case; or a
court having jurisdiction in the premises shall enter a decree or order
for relief in respect of Company in an involuntary case, under any
applicable bankruptcy, insolvency or other similar law now or
hereinafter in effect; or any other similar relief shall be granted
under any applicable Requirements of Law; or the board of directors of
Company (or any committee thereof) adopts any resolution or otherwise
authorizes any action to approve any of the foregoing.
(g) A decree or order of a court having jurisdiction
in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers
over Company or over all or a substantial part of the assets or
properties of Company shall be entered; or an interim receiver, trustee
or other custodian of Company or of all or a substantial part of the
assets or properties of Company shall be appointed or a warrant of
attachment, execution or similar process against any substantial part
of the assets or properties of Company shall be issued and any such
event shall not be stayed, dismissed, bonded or discharged within sixty
(60) days after entry, appointment or issuance; or the board of
directors of Company (or any committee thereof) adopts any resolution
or otherwise authorizes any action to approve any of the foregoing.
(h) Company shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or shall consent to
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the entry of an order for relief in an involuntary case, or to the
conversion of an involuntary case to a voluntary case, under any such
law, or shall consent to the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial part of
the assets or properties of Company; or Company shall make any
assignment for the benefit of creditors or shall be unable or fail, or
admit in writing its inability, to pay its debts as such debts become
due.
(i) Any money judgment (other than a money judgment
covered by insurance as to which the insurance company has acknowledged
coverage), writ or warrant of attachment, or similar process against
Company or any of its assets or properties involving in any case an
amount in excess of $2,000,000 is entered and shall remain
undischarged, unvacated, unbonded or unstayed for a period of sixty
(60) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder.
(j) Any order, judgment or decree shall be entered
against Company decreeing its involuntary dissolution or split up and
such order shall remain undischarged and unstayed for a period in
excess of sixty (60) days; or Company shall otherwise dissolve or cease
to exist except as specifically permitted by this Agreement.
An Event of Default shall be deemed "continuing" with respect
to any Convertible Note until cured or waived in writing by the Holder thereof.
7.4 REMEDIES. If any Event of Default shall have occurred and
be continuing, Buyer may, (a) upon written notice to Company, declare all or any
portion of the Convertible Notes to be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
expressly waived by Company; (b) terminate any obligation it may have to
purchase Convertible Notes; and/or (c) exercise any other rights and remedies
provided to Buyer under this Agreement or any of the Ancillary Agreements and/or
at law or equity.
7.5 WAIVERS BY COMPANY. Except as otherwise provided for in
this Agreement or by applicable law, Company waives presentment, demand and
protest and notice of presentment, dishonor, notice of intent to accelerate,
notice of acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of all commercial paper, contract
rights, documents and instruments at any time held by any Holder on which
Company may in any way be liable, and hereby ratifies and confirms whatever
Buyer may do in this regard.
ARTICLE 80
INDEMNIFICATION
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8.1 INDEMNIFICATION BY COMPANY. Company agrees to indemnify
and hold harmless each Buyer Group Member from and against (a) any and all
Losses and Expenses incurred by such Buyer Group Member in connection with or
arising from (i) the breach of (A) any warranty made by Company herein, pursuant
to any Ancillary Agreement or pursuant to any certificate of Company referred to
herein or (B) any covenant made by Company herein or in any Ancillary Agreement,
or (ii) the failure of Company to comply with, perform or observe any other
term, provision or condition contained in this Agreement or in any Ancillary
Agreement and (b) any reasonable expenses incurred in connection with
investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder, including, without
limitation, court filing fees, court costs, arbitration fees or costs, witness
fees, and reasonable fees and disbursements of legal counsel, investigators,
expert witnesses, accountants and other professionals in connection therewith.
8.2 INDEMNIFICATION BY BUYER. Buyer agrees to indemnify and
hold harmless Company from and against (a) any and all Losses and Expenses
incurred by Company in connection with or arising from (i) the breach of (A) any
warranty made by Buyer herein or pursuant to any certificate of Buyer referred
to herein or (B) any covenant made by Buyer herein, or (ii) the failure of Buyer
(or any Buyer Group Member) to comply with, perform or observe any other term,
provision or condition contained in this Agreement or in any Ancillary Agreement
and (b) any reasonable expenses incurred in connection with investigating,
defending or asserting any claim, action, suit or proceeding incident to any
matter indemnified against hereunder, including, without limitation, court
filing fees, court costs, arbitration fees or costs, witness fees, and
reasonable fees and disbursements of legal counsel, investigators, expert
witnesses, accountants and other professionals in connection therewith.
8.3 REMEDIES. The remedies of the parties provided for in this
Article 8 shall be cumulative and shall not preclude the assertion by any party
of any other rights such party may have under this Agreement, any Ancillary
Agreement, applicable law or otherwise.
ARTICLE 90
TERMINATION
9.1 TERMINATION. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement may be terminated at any time prior to
the Termination Date:
(a) by the mutual consent of Buyer and Company;
(b) by Buyer in the event of any material breach by Company of
any of its agreements, representations or warranties contained herein
and the failure of Company to cure such breach within seven days after
receipt of notice from Buyer requesting such breach to be cured; or
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(c) by Company in the event of any material breach by Buyer of
any of its agreements, representations or warranties contained herein
and the failure of Buyer to cure such breach within seven days after
receipt of notice from Company requesting such breach to be cured.
9.2 NOTICE OF TERMINATION. Any party desiring to terminate
this Agreement pursuant to Section 9.1 shall give notice of such termination to
the other party to this Agreement.
9.3 EFFECT OF TERMINATION. In the event that this Agreement
shall be terminated pursuant to this Article 9, all further obligations of the
parties under this Agreement (other than under Articles 5, 6, 7 and 8) shall be
terminated without further liability of any party to the other, provided that
nothing herein shall relieve any party from liability for its willful breach of
this Agreement.
ARTICLE 100
GENERAL PROVISIONS
10.1 ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
Exhibits and Schedules referred to herein and the documents delivered pursuant
hereto contain the entire understanding of the parties hereto with regard to the
subject matter contained herein or therein, and supersede all prior agreements,
understandings or letters of intent between or among any of the parties hereto.
This Agreement shall not be amended, modified or supplemented except by a
written instrument signed by an authorized representative of each of the parties
hereto.
10.2 WAIVERS. Any term or provision of this Agreement may be
waived, or the time for its performance may be extended, by each party entitled
to the benefit thereof. Any such waiver shall be validly and sufficiently given
for the purposes of this Agreement if, as to any party, it is in writing signed
by an authorized representative of such party. No waiver of any terms or
conditions of this Agreement shall operate as a waiver of any other breach of
such terms and conditions or any other term or condition, nor shall any failure
or delay on the part of the parties or any of them in exercising any right,
power or privilege hereunder, nor any course of dealing between the parties or
any of them operate as a waiver of any such right, power or privilege nor shall
any single or partial exercise of any such right, power or privilege preclude
the simultaneous or later exercise of any other right, power or privilege. The
rights and remedies herein expressly provided are cumulative and are not
exclusive of any rights or remedies which the parties or any of them would
otherwise have. No notice to or demand on Company or any other party hereto
shall in any case entitle such party to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the other
parties or any of them to take any other or further action in any circumstances
without notice or demand.
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10.3 SUCCESSORS AND ASSIGNS.
(a) The rights of Company under this Agreement shall
not be assignable except as provided herein. The rights of Buyer
hereunder may be assigned at any time, without the consent of Company,
conditioned on the assignee's assumption in writing of all of Buyer's
obligations hereunder and the delivery by such assignee of a
certificate containing representations and warranties similar to those
made by Buyer herein.
(b) This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their successors and permitted
assigns. The successors and permitted assigns hereunder shall include
without limitation, in the case of Buyer, any permitted assignee as
well as the successors in interest to such permitted assignee (whether
by merger, liquidation (including successive mergers or liquidations)
or otherwise). Nothing herein expressed or implied is intended to
confer upon any Person, other than the parties hereto or their
respective permitted assigns, successors, heirs and legal
representatives, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
10.4 NOTICES. Unless otherwise specifically provided herein,
all communications under this Agreement shall be in writing and shall be deemed
to have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given, (ii) on the day of transmission if sent by
facsimile transmission to the number given below, and telephonic confirmation of
receipt is obtained promptly after completion of transmission, (iii) on the day
after delivery to Federal Express or similar overnight courier, or (iv) on the
fifth day after mailing, if mailed to the party to whom notice is to be given,
by first class mail, registered or certified, postage prepaid, and properly
addressed, return receipt requested, to each such Holder at its address as shown
on the books of Company or to Company at the address indicated therefor; and in
such case, shall be addressed as follows:
If to Buyer, to:
Pioneer Venture Fund, L.L.C.
0000 Xxxxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxxx Xxxxxxxx
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with a copy to:
Sidley & Austin
000 Xxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
If to Company, to:
The TesseracT Group, Inc.
0000 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxx
with a copy to:
Faegre & Xxxxxx
2200 Norwest Center
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
or to such other address as such party may indicate by a notice delivered to the
other party hereto.
10.5 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which shall be an original, and all of
which shall together constitute one and the same instrument. All signatures need
not be on the same counterpart.
10.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
10.7 SPECIFIC PERFORMANCE; INJUNCTION. Each of the parties
hereto acknowledges that in the event of a breach by any of them of any material
provision of this Agreement, the aggrieved party may be without an adequate
remedy at law. Each of the parties therefore agrees that in the event of such a
breach hereof the aggrieved party may elect to institute and prosecute
proceedings in any court of competent jurisdiction to enforce specific
performance or to enjoin the continuing breach hereof. By seeking or obtaining
any such relief, the aggrieved party shall not be precluded from seeking or
obtaining any other relief to which it may be entitled.
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10.8 SEVERABILITY. In the event that any portion of this
Agreement shall be held to be invalid or unenforceable to any extent, such
portion shall be enforced to the fullest lawful extent and the remaining parts
hereof shall nevertheless continue to be valid and enforceable as though the
invalid portions were not a part hereof. If any time period set forth herein is
held by a court of competent jurisdiction to be unenforceable, a different time
period that is determined by the court to be more reasonable shall replace the
unenforceable time period.
10.9 SURVIVAL OF OBLIGATIONS. All representations, warranties,
covenants, agreements and obligations contained in this Agreement shall survive
the consummation of the transactions contemplated by this Agreement.
[Signature pages follow.]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed the day and year first above written.
BUYER: PIONEER VENTURE FUND, L.L.C.,
A DELAWARE LIMITED LIABILITY COMPANY
By: ___________________________
Name:
Title:
COMPANY: THE TESSERACT GROUP, INC.,
A MINNESOTA CORPORATION
By: ___________________________
Xxxx X. Xxxxx
Chief Executive Officer
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