Exhibit 1
STOCK PURCHASE AGREEMENT
This Agreement is made this 22nd day of March, 1996 by and between
Xxxxxx X. Xxxx, Xx. ("Purchaser") and WTC Industries, Inc., a Delaware
corporation (the "Company").
Whereas, Purchaser is a director and significant stockholder of the
Company;
Whereas, the Company is currently indebted to Purchaser in the
principal amount of $1,200,000 for loans which the Purchaser has extended to the
Company to permit it to make payroll and make critical payments to certain
vendors;
Whereas, the Company faces a critical need for working capital to fund
its continued operations, and the Purchaser is willing to provide such capital
to the Company on the terms of this Agreement;
Now, therefore, the parties agree as follows:
1. Sale and Purchase of Shares. Effective as of the date of this
Agreement, the Company hereby sells to Purchaser, and the Purchaser hereby
purchases, (a) 2,400,000 shares (the "Shares") of the Company's common stock,
and (b) a five year warrant in the form attached hereto as Exhibit A (the
"Warrant") to purchase 2,400,000 shares (the "Warrant Shares") of Company common
stock for an exercise price of $2.00 per share (the Shares and the Warrant being
collectively referred to herein as the "Securities").
2. Purchase Price. In consideration for the Securities, the Purchaser
hereby agrees to pay the Company a purchase price of $3,000,000 (the "Purchase
Price") consisting of the following:
(a) the sum of $1,200,000 by conversion to Company common
stock, as of the date of this Agreement, of $1,200,000 of the Company's
indebtedness to the Purchaser as of March 13, 1996 and Purchaser's full release
of his security interest in certain of the Company's assets;
(b) the sum of $400,000, which was advanced to the Company by
the Purchaser on March 14, 1996 in anticipation of this Agreement;
(c) the sum of $500,000, which is being paid to the Company in
cash upon the execution of this Agreement; and
(d) the delivery by the Purchaser to the Company of the
Purchaser's Promissory Note in the principal amount of $900,000 in the form
attached hereto as Exhibit B (the "Note") requiring three installment payments
of $300,000 each on April 15, May 15 and June 15, 1996.
3. Company Representations and Warranties. The Company represents and
warrants to the Purchaser that the Shares being issued and sold to the Purchaser
are, and any Warrant Shares issued and sold to the Purchaser upon any exercise
of the Warrant and payment for the Warrant Shares will be, duly authorized,
validly issued, and non-assessable shares of the Company's common stock.
4. Purchaser Representations and Warranties. The Purchaser represents
and warrants to the Company that:
(a) He is an "accredited investor" as defined in Rule 501(a)
of Regulation D promulgated under the Securities Act of 1933, as amended (the
"Act"), has such knowledge and experience in financial and business matters as
is necessary to evaluate the merits and risks involved in purchasing the
Securities. He has been given access to full and complete information concerning
the Company and has utilized such access to his satisfaction to obtain such
information as he desires concerning the Company and the Securities.
(b) He understands that the Shares and the Warrant have not
been, and any Warrant Shares issued upon exercise of the Warrant will not have
been, registered under the Act or applicable state securities laws and may be
resold or otherwise transferred only pursuant to registration under the Act and
such state laws or an opinion of legal counsel acceptable to the Company that
such registration is not required.
(c) He is purchasing the Shares and the Warrants, and any
Warrant Shares issued upon exercise of the Warrant, for investment and for his
own account without the intention of reselling or redistributing the same.
5. Closing Contingencies. The Purchaser's entry into this Agreement and
purchase of the Securities is subject to the conditions precedent that:
(a) The Purchaser shall have purchased, simultaneous with the
purchase under this Agreement, 1,600,000 shares of Company common stock from Xxx
X. Xxxxxxxxx on terms acceptable to the Purchaser.
(b) The other members of the Company's board of directors and
its officers shall have offered, in a form acceptable to the Purchaser, their
resignations from their positions, subject to acceptance of any such
resignations as the Purchaser determines to accept.
(c) The Company's board of directors shall have received an
opinion from an investment banking firm acceptable to the board of directors
(exclusive of the Purchaser) that the Company's sale of the Securities to the
Purchaser is fair from a financial point of view to the Company and its
shareholders other than the Purchaser.
(d) The Company shall have entered into an agreement with Xxx
X. Xxxxxxxxx concerning payment of his accrued unpaid salary and other rights to
payments from the Company which is acceptable to the Purchaser.
6. Board of Directors Representation. The Company agrees that, for so
long as Purchaser is the beneficial owner of at least a majority of the
Company's outstanding shares of common stock, it will make its best efforts to
cause the nomination and election to the Company's board of directors of the
Purchaser and one other person nominated by the Purchaser. The parties agree
that nothing in this Agreement shall limit the right of the Purchaser to seek,
in the event he wishes to do so, greater representation on the Company's board
of directors.
7. Registration Rights.
(a) Piggyback Registration Rights. If, at any time prior to
the date which is two years after the expiration date of the Warrant, the
Company shall propose to file any Registration Statement (except for any
registration on Forms X-0, X-0 or any other similarly inappropriate form) under
the Act covering a public offering of the Company's common stock, it will notify
the holder(s) of the Shares and any Warrant Shares (each, a "Holder") at least
30 days prior to each such filing and include in such Registration Statement (to
the extent permitted by applicable regulation) all or a portion of the Shares or
the Warrant Shares to the extent requested by any Holder. Notwithstanding the
foregoing, the number of Shares and Warrant Shares proposed to be registered
thereby on behalf of Holders shall be reduced pro rata with any other selling
shareholder (other than the Company) upon the good faith request of the managing
underwriter of such offering. If the Registration Statement filed pursuant to
such 30 day notice has not become effective within six months following the date
such notice is given to the Holders, the Company must again notify such Holders
in the manner provided above.
(b) Limited Demand Registration Right. If, at any time prior
to the date which is two years after the expiration date of the Warrant, the
Company is eligible to file a Registration Statement under the Act on Form S-3
(or its equivalent), then if the Holders of 50% or more of the Shares and
Warrant Shares purchased or purchasable under the Warrant (which have not
previously been registered and sold) shall request in writing the registration
for their benefit of such Shares or Warrant Shares on Form S-3 (or its
equivalent), then the Company shall promptly use its best efforts to effect the
registration under the Act of all such Shares and Warrant Shares which such
Holders have requested be so registered.
(c) Expenses. All filing fees and expenses of any of the
registrations referred to in this Section 6, except the fees of counsel to the
Holders and any underwriting commissions or fees, shall be borne by the Company.
(d) Miscellaneous. The Company will maintain the effectiveness
of any Registration Statement filed by the Company for an least nine months
following its effective date. To the extent permissible under the Act and
controlling precedent thereunder, the Company and the Holders of Shares or
Warrant Shares covered by such Registration Statement shall provide cross
indemnification to each other in customary scope covering the accuracy and
completeness of the information furnished by each. In connection with each such
Registration Statement the Company will provide to each Holder of Shares or
Warrant Shares covered by such Registration Statement a copy of the opinion of
the Company's legal counsel covering such matters as are customarily covered by
such opinions relating to such registrations.
8. Miscellaneous. This Agreement shall be governed by the laws of the
State of Minnesota. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
In Witness Whereof, the parties have executed this Agreement as of the
date first written above.
WTC INDUSTRIES, INC.
By /s/ Xxx Xxxxxxxxx /s/ Xxxxxx X. Xxxx, Xx.
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Its Chief Executive Officer Xxxxxx X. Xxxx, Xx.
By /s/ Xxxx Xxxxxxx
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Its Chief Financial Officer
Warrant No. A-1
COMMON STOCK WARRANT
To Purchase 2,400,000
Shares of Common Stock of
WTC INDUSTRIES, INC.
March 22, 1996
THIS CERTIFIES THAT, for good and valuable consideration, the receipt
of which is hereby acknowledged, Xxxxxx X. Xxxx, Xx. is entitled to subscribe
for and purchase from WTC Industries, Inc., a Delaware corporation, (herein
called the "Company"), at any time after the date hereof to and including March
21, 2001, 2,400,000 fully paid and nonassessable shares of the Company's common
stock at the following price: $2.00 per share.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise. The rights represented by this Warrant may be exercised by
the holder hereof, in whole or in part (but not as to a fractional share of
common stock), by written notice of exercise delivered to the Company twenty
(20) days prior to the intended date of exercise and by the surrender of this
Warrant (properly endorsed if required) at the principal office of the Company
and upon payment to it by certified or cashier's check of the purchase price for
such shares.
2. Issuance of Shares. The Company agrees that the shares purchased
hereby shall be and are deemed to be issued to the record holder hereof as of
the close of business on the date on which this Warrant shall have been
surrendered and the payment made for such shares as aforesaid. Subject to the
provisions of the next succeeding paragraph, certificates for the shares of
stock so purchased shall be delivered to the holder hereof within a reasonable
time, not exceeding ten (10) days after the rights represented by this Warrant
shall have been so exercised, and, unless this Warrant has expired, a new
Warrant representing the number of shares, if any, with respect to which this
Warrant shall not then have been exercised shall also be delivered to the holder
hereof within such time.
Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for shares of stock upon exercise of this
Warrant, except in accordance with the provisions, and subject to the
limitations, set forth in the paragraphs below.
3. Covenants of Company. The Company covenants and agrees that all
shares which may be issued upon the exercise of the rights represented by this
Warrant will, upon issuance, be duly authorized and issued, fully paid,
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and without limiting the generality of the foregoing, the Company
covenants and agrees that it will from time to time take all such action as may
be required to assure that the par value per share of the common stock is at all
times equal to or less than the then effective purchase price per share of the
common stock issuable pursuant to this Warrant. The Company further covenants
and agrees that during the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of issue or transfer upon exercise of the subscription
rights evidenced by this Warrant, a sufficient number of shares of its common
stock to provide for the exercise of the rights represented by this Warrant.
4. Anti-dilution Adjustments. The above provisions are, however,
subject to the following:
(a) In case the Company shall at any time hereafter subdivide or
combine the outstanding shares of common stock or declare a dividend payable in
common stock, the exercise price of this Warrant in effect immediately prior to
the subdivision, combination or record date for such dividend payable in common
stock shall forthwith be proportionately increased, in the case of combination,
or decreased, in the case of subdivision or dividend payable in common stock,
and each share of common stock purchasable upon exercise of the warrant shall be
changed to the number determined by dividing the then current exercise price by
the exercise price as adjusted after the subdivision, combination, or dividend
payable in common stock.
(b) No fractional shares of common stock are to be issued upon the
exercise of the Warrant, but the Company shall pay a cash adjustment in respect
of any fraction of a share which would otherwise be issuable in an amount equal
to the same fraction of the market price per share of common stock on the day of
exercise as determined in good faith by the Company.
(c) If any merger, capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets to
another corporation shall be effected in such a way that holders of common stock
shall be entitled to receive stock, securities or assets with respect to or in
exchange for common stock then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder hereof shall hereafter have the right to
purchase and receive upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of the shares of the common stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of such common stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case appropriate
provisions shall be made with respect to the rights and interests of the holder
of this Warrant to the end that the provisions hereof (including without
limitation provisions for adjustments of the warrant purchase price and of the
number of shares purchasable upon the exercise of this Warrant) shall thereafter
be applicable, as nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger or sale, unless prior to
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger, or the corporation purchasing such
assets, shall assume by written instrument executed and mailed to the registered
holder hereof at the last address of such holder appearing on the books of the
Company, the obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions such holder
may be entitled to purchase.
(d) Upon any adjustment of the warrant purchase price, then and in each
such case, the Company shall give written notice thereof, by first class mail,
postage prepaid, addressed to the registered holder of this Warrant at the
address of such holder as shown on the books of the Company, which notice shall
state the warrant purchase price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
5. Common Stock. As used herein, the term "common stock" shall mean and
include the Company's presently authorized shares of common stock and shall also
include any capital stock of any class of the Company hereafter authorized which
shall not be limited to a fixed sum or percentage in respect of the rights of
the holders thereof to participate in dividends or in the distribution of assets
upon the voluntary or involuntary liquidation, dissolution or winding up of the
Company.
6. No Voting Rights. This Warrant shall not entitle the holder hereof
to any voting rights or other rights as a stockholder of the Company.
7. Transfer of Warrant or Resale of Shares. The holder acknowledges
that it has obtained this Warrant for investment and not with the intention of
making any resale or distribution. The holder further acknowledges (a) that
neither this Warrant nor any of the shares of common stock obtainable under it
have been registered under the Securities Act of 1933 or any state securities
statute, and (b) that neither this Warrant nor any shares of common stock
obtained under it may be transferred without such registration or an opinion of
legal counsel acceptable to the Company that such transfer may be made without
such registration. The holder of this Warrant, by acceptance hereof, agrees to
give written notice to the Company before transferring this Warrant, or
transferring any common stock issued upon the exercise hereof, of such holder's
intention to do so, describing briefly the manner of any proposed transfer and
accompanied by an opinion of legal counsel, in form and substance satisfactory
to the Company, that the transfer may lawfully be made. Promptly upon receiving
such written notice and opinion, the Company shall present copies thereof to the
Company's legal counsel and to counsel to the original purchaser of this
Warrant. If in the opinion of each such counsel the proposed transfer may be
effected without registration or qualification under any Federal or State law,
the Company, as promptly as practicable, shall notify such holder of such
opinion, whereupon such holder shall be entitled to transfer this Warrant or to
dispose of shares of common stock received upon the previous exercise of this
Warrant, provided that an appropriate legend may be endorsed on this Warrant or
the certificates for such shares respecting restrictions upon transfer thereof
necessary or advisable in the opinion of the Company's legal counsel to prevent
further transfers which would be in violation of the Securities Act of 1933.
If in the opinion of either of the counsel referred to in this
paragraph 7 hereof, the proposed transfer or disposition of shares described in
the written notice given pursuant to this paragraph 7 may not be effected
without registration or qualification of this Warrant or the shares of common
stock issued on the exercise hereof, the Company shall promptly give written
notice thereof to the holder hereof, and such holder will limit its activities
in respect to such as, in the opinion of both such counsel, are permitted by
law.
IN WITNESS WHEREOF, WTC Industries, Inc. has caused this Warrant to be
signed by its duly authorized officers and dated March 22, 1996.
WTC INDUSTRIES, INC.
By
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Chief Executive Officer
EXHIBIT B
PROMISSORY NOTE
$900,000 March 22, 1996
For Value Received, Xxxxxx X. Xxxx, Xx. (the "Debtor") hereby promises
to pay to the order of WTC Industries, Inc. at its office in Minneapolis,
Minnesota or such other address as the holder hereof may specify, in lawful
money of the United States of America, the principal sum of Nine Hundred
Thousand Dollars ($900,000), without interest.
The indebtedness evidenced by this note shall be repaid in three
installments of $300,000 each which shall be due and payable on each of April
15, May 15 and June 15, 1996.
The Debtor shall have the right to prepay this Note, in whole or in
part, without premium or penalty.
The Debtor hereby waives presentment, notice of nonpayment, protest and
notice of protest, and agrees to pay all costs of collection (including
reasonable attorney's fees) of the holder of this Note in the event the Debtor
defaults in making any payment due hereunder, and such costs of collection shall
be owed whether or not suit is instituted. This Note shall be governed by the
laws of the State of Minnesota.
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Xxxxxx X. Xxxx, Xx.
