EXHIBIT 3
TELIDENT, INC.
STOCK PURCHASE AGREEMENT
July 23, 1997
FAMCO III LIMITED LIABILITY COMPANY
000 Xxxxx Xxxxxxx 000
Xx. Xxxxx Xxxx, Xxxxxxxxx 00000
Gentlemen:
In consideration of the agreement of FAMCO III LIMITED LIABILITY COMPANY
(the "Purchaser") to purchase the Preferred Shares and the Warrants (both as
hereinafter defined), as provided for herein, the undersigned Telident, Inc., a
Minnesota corporation (the "Company"), hereby agrees with the Purchaser as
follows:
1. AUTHORIZATION OF SECURITIES. The Company proposes to (i) authorize,
issue and sell to Purchaser 1,111,111 series II convertible preferred shares, to
be issued pursuant to and be entitled to the benefits of the provisions of a
certificate of designation (the "Certificate of Designation") substantially as
set forth in Exhibit 1 hereto (the "Preferred Shares"), and (ii) authorize and
issue to Purchaser 1,250,000 warrants to purchase shares of common stock of the
Company, $.02 par value ("Common Stock") substantially in the form of Exhibit 2
hereto (the "Warrants").
The term "Preferred Shares" as used herein shall mean the series II
convertible preferred shares issued to the Purchaser, and all preferred shares
of the Company issued in exchange or substitution therefor. The Preferred
Shares shall be convertible into shares of the Company's Common Stock (such
shares of Common Stock into which the Preferred Shares are convertible and all
shares of Common Stock of the Company issued in exchange or substitution
therefor being hereinafter sometimes referred to as the "Conversion Stock"), all
as set forth in the Certificate of Designation. The Preferred Shares shall be
subject in all respects to all of the provisions of the Certificate of
Designation.
The term "Warrants" as used herein shall mean the warrants issued to
Purchaser, and all warrants issued in exchange or substitution therefor. The
term "Warrant Stock" as used herein shall mean the shares of Common Stock
issuable upon exercise of the Warrants and all shares of Common Stock issued in
exchange or substitution therefor.
2. SALE AND PURCHASE OF SECURITIES. Subject to the terms and
conditions hereof, the Company agrees to sell to the Purchaser, and the
Purchaser agrees to purchase from the Company, the Preferred Shares at a
purchase price of $1.125 per share (the "Per Share Purchase Price"). In
addition, Purchaser shall receive 1,250,000 Warrants exercisable at a price per
share of $1.41 (the "Warrant Exercise Price"). The aggregate purchase price for
the Preferred Shares and the Warrants shall be $1,250,000.00 (the "Aggregate
Purchase Price").
3. CLOSING. The sale to, and purchase by, the Purchaser of the
Preferred Shares and the Warrants (the "Closing") shall occur at the offices of
Xxxxxx and Xxxxxx, 0000 XXX Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx, at the hour of 10:00
A.M., Minneapolis time on July 23, 1997, or such other day as the Purchaser and
the Company shall agree upon (the "Closing Date").
At the Closing, the Company will deliver to the Purchaser stock
certificates representing the Preferred Shares and the Warrants against
confirmation of receipt of the Aggregate Purchase Price by wire transfer into
the escrow account to be held in accordance with the terms of that certain
Escrow Agreement dated July 23, 1997 to be entered into by and among the
Company, the Purchaser, and Manchester Companies, Inc. (the "Escrow Agreement").
4. RESTRICTION ON TRANSFER OF SECURITIES.
4.1 RESTRICTIONS. The Preferred Shares and the Conversion
Stock, and the Warrants and the Warrant Stock, are transferable only (a) if
registered under the Securities Act of 1933, as amended (the "Securities Act"),
(b) pursuant to Rule 144 (or any similar rule then in effect) adopted under the
Securities Act, if such rule is available, and (c) pursuant to any other legally
available exemption from registration.
4.2 (a) LEGEND. Each certificate representing Preferred Shares
and each of the Warrants shall be endorsed with the following legend:
The securities evidenced hereby may not be transferred without (i) the
opinion of counsel satisfactory to the Company that such transfer may be
lawfully made without registration under the Federal Securities Act of 1933
and all applicable state securities laws or (ii) such registration.
Upon the conversion of any Preferred Shares or upon the exercise of any Warrant,
unless the Company receives an opinion of counsel from the holder of such a
security satisfactory to the Company to the effect that a sale, transfer,
assignment, pledge or distribution of the Conversion Stock or Warrant Stock
issuable upon such conversion or exercise may be made without registration, or
unless such Conversion Stock or Warrant Stock is being disposed of pursuant to
registration under the Securities Act and any applicable state act, the same
legend shall be endorsed on the certificate evidencing such Conversion Stock or
Warrant Stock.
(b) STOP TRANSFER ORDER. A stop transfer order shall be placed
with the Company's transfer agent preventing transfer of any of the securities
referred to in paragraph (a) above pending compliance with the conditions set
forth in any such legend.
4.3 REMOVAL OF LEGEND. Any legend endorsed on a certificate or
instrument evidencing a security pursuant to Section 4.2 hereof shall be
removed, and the
Company shall issue a certificate or instrument without such legend to the
holder of such security, (a) in accordance with Section 4.2(a) hereof, (b) if
such security is being disposed of pursuant to registration under the Securities
Act and any applicable state acts or pursuant to Rule 144 or any similar rule
then in effect, or (c) if such holder provides the Company with an opinion of
counsel satisfactory to the Company to the effect that a sale, transfer,
assignment, offer, pledge or distribution for value of such security may be made
without registration and that such legend is not required to satisfy the
applicable exemption from registration.
4.4 REGISTER OF SECURITIES. The Company or its duly appointed
agent shall maintain a separate register for the Preferred Shares and the
Warrants in which it shall register the issuance and transfer of all Preferred
Shares and Warrants. All transfers of Preferred Shares and Warrants shall be
recorded on the register maintained by the Company or its agent, and the Company
shall be entitled to regard the registered holder of such securities as the
actual owner of the securities so registered until the Company or its agent is
required to record a transfer of such securities on its register. The Company
or its agent shall be required to record any such transfer when it receives (a)
the security to be transferred duly and properly endorsed by the registered
holder thereof or by its attorney duly authorized in writing, and (b) the
opinion of counsel referred to in Sections 4.2 and 4.3 hereof or evidence of
compliance with the registration provisions referred to in those Sections.
5. REPRESENTATIONS AND WARRANTIES BY COMPANY. Except as disclosed in
Exhibit 4 hereto, the Company represents and warrants to the Purchaser that:
5.1 ORGANIZATION, STANDING ETC. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Minnesota, and has the requisite corporate power and authority to own
its properties and to carry on its business in all material respects as it is
now being conducted. The Company has no subsidiaries. The Company has the
requisite corporate power and authority to issue the Preferred Shares, the
Conversion Stock, the Warrant Stock and the Warrants, and to otherwise perform
its obligations under this Agreement and the Warrants. The copies of the
Articles of Incorporation and Bylaws of the Company delivered to the Purchaser
or its agents prior to the execution of this Agreement are true and complete
copies of the duly and legally adopted Articles of Incorporation and Bylaws of
the Company in effect as of the date of this Agreement. The Company does not
have any direct or indirect equity interest in any other firm, corporation,
partnership, joint venture association or other business organization.
5.2 QUALIFICATION. The Company is duly qualified or licensed as
a foreign corporation in good standing in each jurisdiction wherein the nature
of its activities or of its properties owned or leased makes such qualification
or licensing necessary and failure to be so qualified or licensed would have a
material adverse impact on its business.
5.3 CORPORATE ACTS AND PROCEEDINGS. This Agreement has been
duly authorized by all necessary corporate action on behalf of the Company, and
will be duly executed and delivered by authorized officers of the Company. All
corporate action
necessary for the authorization, creation, issuance and delivery of the
Preferred Shares and the Conversion Stock, and the execution and delivery of the
Warrants, has been taken on the part of the Company, or will be taken by the
Company on or prior to the Closing Date. This Agreement is, and, upon approval
of the Company's Amended Articles as set forth in Section 8.8, each of the
Warrants when executed and delivered pursuant to the terms of this Agreement
will be, a valid and binding agreement of the Company enforceable in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting the enforcement of creditors' rights generally, and except for
judicial limitations on the enforcement of the remedy of specific enforcement
and other equitable remedies.
5.4 FINANCIAL STATEMENTS. The unaudited balance sheet at March
31, 1997, together with the related statements of operations, stockholders'
equity and cash flow for the quarter then ended contained in the Company's
10-QSB Report filed with the Securities and Exchange Commission (the
"Commission") for the fiscal quarter ending March 31, 1997, and the audited
balance sheet at June 30, 1996, together with the related statements of
operations, stockholders' equity and cash flow for the year then ended,
contained in the Company's 10-KSB Report filed with the Commission for the
fiscal year ending June 30, 1996, to the knowledge of the Company, (i) are in
accordance with the books and records of the Company, (ii) present fairly the
financial condition of the Company at March 31, 1997, and June 30, 1996,
respectively, and the results of its operations for the periods therein
specified, and (iii) have, in all material respects, been prepared in accordance
with generally accepted accounting principles applied on a basis consistent with
prior accounting periods. Specifically, but not by way of limitation, each
balance sheet or notes thereto disclose all of the debts, liabilities and
obligations of any nature (whether absolute, accrued or contingent and whether
due or to become due) of the Company as of their respective dates which,
individually or in the aggregate, are material and which in accordance with
generally accepted accounting principles would be required to be disclosed in
such balance sheet, and the omission of which would, in the aggregate, have a
material adverse impact on the Company. The March 31, 1997, balance sheet
includes appropriate reserves for all taxes and other liabilities accrued at
such date but not yet payable.
5.5 TAX RETURNS AND AUDITS. All required federal, state and
local tax returns or appropriate extension requests of the Company have been
filed, and, to the knowledge of the Company, all federal, state and local taxes
required to be paid with respect to such returns have been paid or due provision
for the payment thereof has been made. The Company is not delinquent in the
payment of any such tax or in the payment of any assessment or governmental
charge. The Company has not received notice of any tax deficiency proposed or
assessed against it, and has not executed any waiver of any statute of
limitations on the assessment or collection of any tax. None of the Company's
tax returns has been audited by governmental authorities in a manner to bring
such audits to the Company's attention. To the knowledge of the Company, the
Company does not have any tax liabilities except those reflected in the
financial statements contained in its most recent 10-QSB Report filed with the
Commission for the period ending on March 31, 1997, and those incurred in the
ordinary course of business since March 31, 1997.
5.6 CHANGES, DIVIDENDS, ETC. Except for the transactions
contemplated by this Agreement, since March 31, 1997, the Company has not: (a)
incurred any debts, obligations or liabilities, absolute, accrued or contingent
and whether due or to become due, except current liabilities incurred in the
ordinary course of business, which (individually or in the aggregate) will not
materially and adversely affect the business, properties or prospects of the
Company; (b) paid any obligation or liability other than, or discharged or
satisfied any liens or encumbrances other than those securing, current
liabilities, in each case in the ordinary course of business; (c) declared or
made any payment or distribution to its stockholders as such, or purchased or
redeemed any of its shares of capital stock or other securities, or obligated
itself to do so; (d) mortgaged, pledged or subjected to lien, charge, security
interest or other encumbrance any of its assets, tangible or intangible, except
in the ordinary course of business; (e) sold, transferred or leased any of its
assets except in the ordinary course of business; (f) increased the compensation
payable to any of its officers or other employees, consultants or
representatives by greater than $10,000; (g) cancelled or compromised any debt
or claim, or waived or released any right of material value; (h) suffered any
physical damage, destruction or loss (whether or not covered by insurance)
materially and adversely affecting the properties, business or prospects of the
Company; (i) entered into any transaction other than in the ordinary course of
business; (j) issued or sold any shares of capital stock or other securities or
granted any options, warrants or other purchase rights with respect thereto; (k)
made any acquisition or disposition of any material assets or become involved in
any other material transaction, other than for fair value in the ordinary course
of business; or (l) agreed to do any of the foregoing other than pursuant
hereto. There has been no material adverse change in the financial condition,
operations, results of operations or business of the Company since March 31,
1997.
5.7 TITLE TO PROPERTIES AND ENCUMBRANCES. The Company has good
and marketable title to all its owned properties and assets, and the properties
and assets used in the conduct of its business, except for property disposed of
in the ordinary course of business since March 31, 1997, which properties and
assets are not subject to any mortgage, pledge, lease, lien charge, security
interest, encumbrance or restriction, except Permitted Liens (as hereinafter
defined). "Permitted Liens" shall mean (a) liens for taxes and assessments or
governmental charges or levies not at the time due or in respect of which the
validity thereof shall currently be contested in good faith by appropriate
proceedings; and (b) liens in respect of pledges or deposits under worker's
compensation laws or similar legislation, carriers', warehousemen's, mechanics',
laborers' and materialmen's, landlord's and statutory and similar liens, if the
obligations secured by such liens are not then delinquent or are being contested
in good faith, and liens and encumbrances incidental to the conduct of the
business of the Company or any subsidiary which were not incurred in connection
with the borrowing of money or the obtaining of advances or credits and which do
not in the aggregate materially detract from the value of its property or
materially impair the use thereof in the operation of its business.
5.8 LITIGATION; GOVERNMENTAL PROCEEDINGS. There are no legal
actions, suits, arbitrations or other legal, administrative or governmental
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company, its properties, assets or business. The Company
is not in default with respect to any judgment, order or decree of any court or
any governmental agency or instrumentality.
5.9 COMPLIANCE WITH APPLICABLE LAWS AND OTHER INSTRUMENTS. To
the knowledge of the Company, the business and operations of the Company have
been and are being conducted in accordance with all applicable laws, rules and
regulations of all governmental authorities. To the knowledge of the Company
neither the execution nor delivery of, nor the performance of or compliance
with, this Agreement nor the consummation of the transactions contemplated
hereby will conflict with, or, with or without the giving of notice or passage
of time, result in any breach of, or constitute a default under, or result in
the imposition of any lien or encumbrance upon any asset or property of the
Company pursuant to, any applicable law, administrative regulation or judgment,
order or decree of any court or governmental body, any agreement or other
instrument to which the Company is a party or by which it or any of its
properties, assets or rights is bound or affected, and will not violate the
Articles of Incorporation or Bylaws of the Company. The Company is not in
violation of its Articles of Incorporation or its Bylaws nor, to the knowledge
of the Company, in violation of, or in default under, any lien, indenture,
mortgage, lease, agreement, instrument, commitment or arrangement in any
material respect. To the knowledge of the Company all parties having material
contractual arrangements with the Company are in substantial compliance
therewith and none are in material default in any respect thereunder.
5.10 PREFERRED SHARES AND CONVERSION STOCK; WARRANT STOCK. The
Preferred Shares, when issued and paid for pursuant to the terms of this
Agreement, will be duly authorized, validly issued and outstanding, fully paid,
nonassessable and free and clear of all pledges, liens, encumbrances and
restrictions, except as set forth in Section 4 hereof, and the shares of
Conversion Stock issuable upon conversion of the Preferred Shares have been
reserved for issuance, and when issued upon conversion will be duly authorized,
validly issued and outstanding, fully paid, nonassessable and free and clear of
all pledges, liens, encumbrances and restrictions, except as set forth in
Section 4 hereof. Upon approval of the Company's Amended Articles as set forth
in Section 8.8, the shares of Warrant Stock issuable upon exercise of the
Warrants will be reserved for issuance, and when issued upon exercise of the
Warrants will be duly authorized, validly issued and outstanding, fully paid,
nonassessable and free and clear of all pledges, liens, encumbrances and
restrictions, except as set forth in Section 4 hereof. The certificates
representing the Preferred Shares to be delivered by the Company hereunder, and
the certificates representing the Conversion Stock and Warrant Stock to be
delivered upon the conversion of the Preferred Shares or exercise of the
Warrants, will be genuine, and the Company has no knowledge of any fact which
would impair the validity thereof.
5.11 GOVERNMENTAL CONSENTS. Based in part upon the
representations and warranties contained in Section 6.1 hereof, no consent,
authorization, approval, permit or order of or filing with any governmental or
regulatory authority is required under current laws and regulations in
connection with the execution and delivery of this Agreement or the Warrants or
the offer, issuance, sale or delivery of the Preferred Shares or the offer of
the Conversion Stock or the Warrant Stock other than the qualification thereof,
if required, under applicable state securities laws, which qualification has
been or will be effected as a condition of these sales. Under the circumstances
contemplated hereby, the offer, issuance, sale and delivery of the Preferred
Shares, the Warrants, the Conversion Stock and the
Warrant Stock will not under current laws and regulations require compliance
with the prospectus delivery or registration requirements of the Securities Act.
5.12 CAPITAL STOCK. The authorized capital stock of the Company
consists of 12,500,000 shares, of which 10,000,000 are designated as common
shares, with a par value of $.02 per share (the "Common Stock"), and 2,500,000
are designated as preferred shares, with a par value of $.02 per share
("Preferred Stock"). Of the 2,500,000 shares of authorized Preferred Stock,
250,000 shares are designated Series I Convertible Preferred Stock ("Series I
Preferred Stock"). In addition, the Company has 675,000 shares of Common Stock
reserved for issuance under its 1988 Stock Option Plan (the "Plan"). All
outstanding shares of Common Stock and Series I Preferred Stock have been duly
authorized and validly issued and are fully paid and nonassessable. Schedule
5.12A sets forth the Company's currently outstanding, reserved, and committed
capital stock, options, shares reserved for issuance under the Plan, warrants,
and the Company's 10% Convertible Debentures issued in September 1992 and
originally due October 1, 1995, and 10% Series B Debentures issued May 1993 and
originally due May 1, 1996 (collectively, the "Debentures"). Except as set
forth in Schedule 5.12A the Company has no outstanding securities convertible
into or exchangeable for Common Stock or Preferred Stock, no contracts, rights,
options, warrants or other agreements or commitments to purchase or otherwise
acquire any shares of its capital stock or securities convertible into or
exchangeable therefor, or any shares reserved for issuance under stock option,
employee benefit or other plans or otherwise. Except as provided in the
Certificate of Designation or otherwise required by law, all shares of capital
stock of the Company vote as a single class on all matters submitted to the
Company's shareholders. Schedule 5.12B sets forth the Company's outstanding,
reserved, and committed capital stock, options, shares reserved for issuance
under the Plan, warrants, and Debentures after the Closing.
5.13 NO BROKERS OR FINDERS. No person, firm or corporation has
or will have, as a result of any act or omission of the Company, any right,
interest or valid claim against or upon the Company or any Purchaser for any
commission, fee or other compensation as a finder or broker, or in any similar
capacity, in connection with the transactions contemplated by this Agreement.
The Company will defend and indemnify and hold the Purchaser harmless against
any and all liability with respect to any such commission, fee or other
compensation which may be payable or determined to be payable in connection with
the transactions contemplated by this Agreement.
5.14 REGISTRATION RIGHTS. Other than under this Agreement, the
Company has not agreed to register any of its authorized or outstanding
securities under the Securities Act.
5.15 REGISTRATION STATEMENT. To the knowledge of the Company,
there exist no facts or circumstances that would inhibit or delay the
preparation and filing of a registration statement on Form S-3 with respect to
the Preferred Shares, the Conversion Stock and the Warrant Stock.
5.16 NASDAQ. The Company's Common Stock is listed on The Nasdaq
SmallCap Market and the Company will use all reasonable efforts to cause the
Common Stock to continue to be so listed.
5.17 SEC REPORTS. The Company has delivered to the Purchaser
certain documents set forth on Schedule 5.17A which it has filed with the
Commission. The Company has timely filed all forms, reports, statements
(including proxy statements) and schedules with the Commission required to be
filed pursuant to the Securities and Exchange Act of 1934 (the "Exchange Act")
or other federal securities laws (the "SEC Reports"). The SEC Reports complied
in all material respects with all applicable requirements of the Exchange Act or
other federal securities laws and did not (as of their respective filing dates),
to the knowledge of the Company, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. The audited and unaudited consolidated
financial statements of the Company included (or incorporated by reference) in
the SEC Reports have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis and fairly present the
financial position of the Company as of the dates thereof and the results of its
operations and changes in financial position for the periods then ended,
subject, in the case of the unaudited financial statements, to normal year-end
audit adjustments. The Company has registration statements on file with the
Commission which are set forth on Schedule 5.17B.
5.18 DISCLOSURE. The Company has not knowingly withheld from the
Purchaser any material facts relating to the assets, business, operations,
financial condition or prospects of the Company. No representation or warranty
in this Agreement or in any certificate, schedule, statement or other document
furnished or to be furnished to the Purchaser pursuant hereto or in connection
with the transactions contemplated hereby, contains or will contain, to the
knowledge of the Company, any untrue statement of a material fact or omits or
will omit to state any material fact required to be stated herein or therein or
necessary to make the statements herein or therein not misleading.
5.19 CONSENTS. All consents, permits and waivers necessary for
the Company to perform its obligations under this Agreement have been obtained
and any necessary filings have been made, except for the filing of the
Certificate of Designation which shall be filed and effective prior to the
Closing.
5.20 ANTI-DILUTION SHARES. The issuance of the Preferred Shares,
the Conversion Stock, the Warrants and the Warrant Stock will not result in the
issuance of any additional shares of the capital stock of the Company or any
triggering of any other rights of first refusal or anti-dilution, preemptive or
similar rights contained in any options, warrants, debentures or other
agreements or commitments of the Company. All rights of first refusal,
anti-dilution or similar rights with respect to the issuance of the Preferred
Shares, the Warrants, the Conversion Stock and the Warrant Stock have been
validly waived.
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER. The Purchaser
represents and warrants that:
6.1 INVESTMENT INTENT. The Preferred Shares being acquired by
the Purchaser hereunder are being purchased, and the Conversion Stock and the
Warrant Stock acquired by the Purchaser upon conversion of such Preferred Shares
or exercise of the Warrants will be acquired, for the Purchaser's own account
and not with the view to, or for resale in connection with, any distribution or
public offering thereof within the meaning of the Securities Act. The Purchaser
understands that the Preferred Shares and the Conversion Stock, and the Warrants
and the Warrant Stock, have not been registered under the Securities Act or any
applicable state laws by reason of their issuance or contemplated issuance in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act and such laws, and that the reliance of the Company upon this
exemption is predicated in part upon this representation and warranty. The
Purchaser further understands that the Preferred Shares and Conversion Stock,
and the Warrants and the Warrant Stock, may not be transferred or resold without
(a) registration under the Securities Act and any applicable state securities
laws, or (b) an exemption from the requirements of the Securities Act and
applicable state securities laws.
The Purchaser understands that an exemption from such registration
is not presently available pursuant to Rule 144 promulgated under the Securities
Act, and that in any event the Purchaser may not sell any securities pursuant to
Rule 144 prior to the expiration of a one-year period after the Purchaser has
acquired the securities.
6.2 LOCATION OF PRINCIPAL OFFICE AND ACCESS TO COMPANY RECORDS.
The state in which the Purchaser's principal office is located is set forth in
Section 14 of this Agreement. The Purchaser has and has had access to all of
the Company's material books and records, and access to the Company's executive
officers has been provided to the Purchaser or to the Purchaser's qualified
agents.
6.3 ACTS AND PROCEEDINGS. This Agreement has been duly
authorized by all necessary action on the part of the Purchaser, has been duly
executed and delivered by the Purchaser, and is a valid and binding agreement
upon the part of the Purchaser.
6.4 NO BROKERS OR FINDERS. No person, firm or corporation has
or will have, as a result of any act or omission by the Purchaser, any right,
interest or valid claim against the Company for any commission, fee or other
compensation as a finder or broker, or in any similar capacity, in connection
with the transactions contemplated by this Agreement. The Purchaser will defend
and indemnify and hold the Company harmless against any and all liability with
respect to any such commission, fee or other compensation which may be payable
or determined to be payable as a result of the actions of the Purchaser in
connection with the transactions contemplated by this Agreement.
7. CONDITIONS OF PURCHASER'S OBLIGATION. The obligation to purchase
and pay for the Preferred Shares and the Warrants which the Purchaser has agreed
to purchase on the Closing Date is subject to the fulfillment, or waiver by the
Purchaser, prior to or on the Closing Date of the following conditions.
7.1 NO ERRORS, ETC. The representations and warranties of the
Company under this Agreement shall be true in all material respects as of the
Closing Date with the same effect as though made on and as of the Closing Date.
7.2 COMPLIANCE WITH AGREEMENT. The Company shall have performed
and complied with all agreements or conditions required by this Agreement to be
performed and complied with by it prior to or as of the Closing Date.
7.3 CERTIFICATE OF OFFICER. The Company shall have delivered to
the Purchaser a certificate, dated as of the Closing Date, executed by the
President of the Company and certifying to the satisfaction of the conditions
specified in Sections 7.1, 7.2, 7.5, 7.7, 7.8 and 7.9 hereof.
7.4 OPINION OF COMPANY'S COUNSEL. The Company shall have
delivered to the Purchaser an opinion of Xxxxxx and Xxxxxx, P.A., counsel for
the Company, dated as of the Closing Date, to the effect that:
(a) The Company is a duly and validly organized and existing
corporation in good standing under the laws of the State of
Minnesota; has the corporate power and authority to enter into this
Agreement and the Warrants, to issue and sell the Preferred Shares
and the Warrants as contemplated by this Agreement, and to carry out
the provisions of this Agreement; and has the corporate power and
authority to own and hold its properties owned and leased and to
carry on the business in which it is engaged.
(b) This Agreement and the Warrants have been duly authorized,
executed and delivered by the Company. This Agreement and the
Warrants are legal, valid and binding agreements of the Company
enforceable in accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the enforcement
of creditors' rights generally, and except for judicial limitations
on the enforcement of the remedy of specific performance and other
equitable remedies; provided, however, that the issuance of the
Warrant Stock is subject to the approval of the Company's Amended
Articles as set forth in Section 8.8 hereof and the filing thereof
with the Minnesota Secretary of State in the manner prescribed by
law.
(c) The Certificate of Designation, substantially in the form
set forth as Exhibit 1 hereto, has been duly adopted by all
necessary corporate action, and has been duly filed with the
Secretary of State of the State of Minnesota (no other or additional
filing or recording being necessary in order to perfect the rights
and privileges of the holders of the Preferred Shares).
(d) The Preferred Shares are entitled to the rights, preferences
and provisions of the Certificate of Designation, subject to any
limitations contained therein.
(e) The Preferred Shares have been duly authorized, validly
issued and delivered by the Company and are fully paid and
nonassessable. The Conversion Stock issuable upon conversion of the
Preferred Shares has been reserved for issuance, and when issued
upon conversion will be fully paid and nonassessable.
(f) All corporate proceedings required by law or by the
provisions of this Agreement to be taken by the Board of Directors
and the stockholders of the Company on or prior to the Closing Date
in connection with the execution and delivery of this Agreement and
the Warrants have been duly and validly taken.
7.5 QUALIFICATION UNDER STATE SECURITIES LAWS. All
registrations, qualifications, permits or approvals required under applicable
state securities laws for the lawful execution and delivery of this Agreement
and the Warrants and the offer, sale, issuance and delivery of the Preferred
Shares and the Warrants shall have been obtained.
7.6 PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings and actions taken in connection with the transactions contemplated
hereby and all certificates, opinions, agreements, instruments and documents
mentioned herein or incident to any such transaction shall be satisfactory in
form and substance to the Purchaser and its counsel.
7.7 RESIGNATIONS. One of the two shareholders currently holding
Series I Preferred Stock of the Company shall have resigned from the board of
directors of the Company.
7.8 CONVERSION. The holders of the Debentures with an aggregate
principal amount outstanding of not less than $835,000 (the "Converted
Debentures") shall have converted their debentures into common stock and
warrants such that Schedule 5.12(A) accurately reflects the capital structure of
the Company at the time of the Closing.
7.9 CONSENTS AND WAIVERS. The Company shall have obtained any
and all authorizations, consents, permits and waivers and made any filings,
including, without limitation, any filings with Nasdaq, necessary or appropriate
for consummation of the transactions contemplated by this Agreement.
7.10 SERIES II PREFERRED STOCK CERTIFICATE OF DESIGNATION. The
Company shall have filed with the Minnesota Secretary of State the Certificate
of Designation and such Certificate of Designation shall have become effective.
8. COVENANTS. The Company covenants and agrees that:
8.1 CORPORATE EXISTENCE. The Company will maintain its
corporate existence in good standing, and comply with all applicable laws and
regulations of the United States or of any state or states thereof or of any
political subdivision thereof and of any governmental authority where failure to
so comply would have a material adverse impact on the Company or its business or
operations.
8.2 BOOKS OF ACCOUNT AND RESERVES. The Company will keep books
of record and account in which full, true and correct entries are made of all of
its and their respective dealings, business and affairs, in accordance with
generally accepted accounting principles. The Company will employ certified
public accountants selected by the Board of Directors of the Company who are
"independent" within the meaning of the accounting regulations of the
Commission, and have annual audits made by such independent public accountants
in the course of which such accountants shall make such examinations, in
accordance with generally accepted auditing standards, as will enable them to
give such reports or opinions with respect to the financial statements of the
Company as will satisfy the requirements of the Commission in effect at such
time with respect to certificates and opinions of accountants.
8.3 FURNISHING OF FINANCIAL STATEMENTS AND INFORMATION. The
Company will deliver to Purchaser:
(a) all of the Company's 10-QSB Reports as soon as practicable
after the filing of such Reports with the Commission;
(b) all of the Company's 10-KSB Reports as soon as practicable
after the filing of such Reports with the Commission;
(c) as soon as practicable after the submission thereof to the
Company, copies of all reports and recommendations submitted by
independent public accountants in connection with any annual or
interim audit of the accounts of the Company or any of its
subsidiaries made by such accountants;
(d) as soon as practicable after the transmission thereof,
copies of all reports, proxy statements, registration statements and
notifications filed by it with the Commission pursuant to any act
administered by the Commission or furnished to stockholders of the
Company or to any national securities exchange or Nasdaq and, as
soon as practicable after the release thereof, copies of all press
releases and other information publicly distributed by the Company;
and
(e) as soon as practicable, such other financial data relating
to the business, affairs and financial condition of the Company and
any subsidiaries as is available to the Company and as from time to
time the Purchaser may reasonably request.
8.4 APPLICATION OF PROCEEDS. Unless otherwise approved by the
Purchaser, the Aggregate Purchase Price shall be used to pay in full certain of
the Debentures (the outstanding principal amount of which is approximately
$158,000.00), and the remaining proceeds shall be used for working capital
purposes and expenses related to this transaction. Notwithstanding the
foregoing, the Aggregate Purchase Price shall be held subject to the terms of
the Escrow Agreement.
8.5 FILING OF REPORTS. The Company will file timely all SEC
Reports with the Commission required to be filed pursuant to the Exchange Act or
other federal securities laws. The SEC Reports shall comply in all material
respects with all applicable requirements of the Exchange Act and will not (as
of their respective filing dates) contain any untrue statement of a material
fact or, to the knowledge of the Company, omit to state a material fact required
to be stated therein or necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
8.6 RESERVATION OF SHARES; AUTHORIZED SHARES. Subject to the
approval and filing of the Company's Amended Articles as set forth in Section
8.8, the Company shall, from and at all times after the Closing, maintain a
reserve of authorized shares of Common Stock sufficient to cover the Conversion
Stock and the Warrant Stock. The Company's Board of Directors shall approve an
increase in the Company's authorized shares of Common Stock in a sufficient
number to cover the issuance of Warrant Stock, the issuance of shares of Common
Stock upon the exercise, conversion or exchange of any options, warrants,
securities or rights convertible or exchangeable for shares of Common Stock and
any issuance of shares of Common Stock pursuant to any other rights, commitments
or agreements (collectively, the "Committed Shares"), all (except for the
Conversion Stock and Warrant Stock) as set forth in Schedule 5.12A. The
Company's Board of Directors shall use its best efforts to obtain shareholder
approval of such increase at its next meeting of shareholders, which meeting
shall be held no later than September 30, 1997.
8.7 NASDAQ REQUIREMENTS. The Company shall use its best efforts
to continue to meet the requirements for the listing of its Common Stock on The
Nasdaq SmallCap Market.
8.8 SHAREHOLDER MEETING. The Company's Board of Directors shall
(a) call and hold a special shareholder meeting on or before September 30, 1997,
in order to approve an amendment to the Company's Articles of Incorporation to
increase the total number of authorized shares of capital stock to be sufficient
to cover the Committed Shares (the "Amended Articles"), and (b) if approved,
promptly file the Amended Articles with the Minnesota Secretary of State. The
Company shall promptly notify the Purchaser of the approval and filing of the
Amended Articles, or the disapproval thereof.
8.9 SERIES II PREFERRED STOCK CERTIFICATE OF DESIGNATION. The
Company shall file prior to the Closing, but not later than July 23, 1997, with
the Minnesota Secretary of State the Certificate of Designation and take such
action to cause the Certificate of Designation to become effective.
8.10 WAIVER OF PREEMPTIVE RIGHTS. The Company shall use its best
efforts to obtain on or before September 30, 1997 a waiver of the preemptive
rights provisions from each of the holders of the outstanding 10% Series B
Convertible Debentures issued by the Company in connection with its May 1993
offering.
9. THE PREFERRED SHARES.
9.1 CONVERSION OF PREFERRED SHARES. For a period of one (1)
year from the Closing Date, the Purchaser may, at its option, at any time and
from time to time, convert the Preferred Shares into Conversion Stock at the
rate and upon the terms and conditions and subject to the adjustments set forth
in the Certificate of Designation.
9.2 STOCK FULLY PAID: RESERVATION OF SHARES. Subject to the
approval and filing of the Company's Amended Articles as set forth in Section
8.8, the Company covenants and agrees that all Conversion Stock that may be
issued upon conversion of the Preferred Shares will, upon issuance in accordance
with the terms of the Certificate of Designation, be fully paid and
nonassessable, and that the issuance thereof shall not give rise to any
preemptive rights on the part of any person. The Company further covenants and
agrees that the Company will at all times have authorized and reserved a
sufficient number of shares of its Common Stock for the purpose of issue upon
the conversion of the Preferred Shares.
9.3 ADJUSTMENT OF NUMBER OF SHARES. The number of shares of
Conversion Stock shall be subject to adjustment from time to time as set forth
in the Certificate of Designation.
10. THE WARRANTS.
10.1 EXERCISE OF WARRANTS. For a period of two (2) years from
the Closing Date, the Purchaser may, at its option, at any time and from time to
time, exercise the Warrants, or any portion thereof, upon the terms and
conditions and subject to the adjustments set forth in the Warrants.
10.2 STOCK FULLY PAID; RESERVATION OF SHARES. The Company
covenants and agrees that all Warrant Stock that may be issued upon the exercise
of the Warrants will, upon issuance in accordance with the terms of the
Warrants, be fully paid and nonassessable, and that the issuance thereof shall
not give rise to any preemptive rights on the part of any person.
10.3 ADJUSTMENT OF NUMBER OF SHARES AND PURCHASE PRICE. The
number of shares of Warrant Stock and the Purchase Price with respect to the
Warrants shall be subject to adjustment from time to time as set forth in the
Warrants.
11. REGISTRATION OF STOCK.
11.1 REQUIRED REGISTRATION. If the Company receives a written
request from record holders of 75% of the Preferred Shares not theretofore
registered under the Securities Act and sold, the Company shall prepare and file
one registration statement under the Securities Act (the "Resale Registration
Statement") covering all of the shares of Conversion Stock and Warrant Stock
(collectively, the "Registrable Securities") purchased at the Closing and shall
use its best efforts (i) to cause such Resale Registration Statement to be
declared effective by the Commission for such Registrable Securities as soon as
practicable thereafter and (ii) to keep the Resale Registration Statement
continuously effective until the earliest of (x) the date on which the Purchaser
no longer holds any Registrable Securities registered under the Resale
Registration Statement or (y) the third anniversary of the effective date of the
Resale Registration Statement, or such earlier date at which Rule 144(k) under
the Securities Act (or any successor rule thereto) enables each holder of
Registrable Securities to sell all of its Registrable Securities without
restriction under the Securities Act. The registration statement shall be filed
with the Commission not later than thirty days after receipt of such written
request.
11.2 INCIDENTAL REGISTRATION. Each time the Company shall
determine to proceed with the actual preparation and filing of a registration
statement under the Securities Act in connection with the proposed offer and
sale for cash of any of its securities by it or any of its security holders
(other than a registration statement on a form that does not permit the
inclusion of shares by its security holders), the Company will promptly give
written notice of its determination to all record holders of Purchased Stock (as
hereinafter defined) not theretofore registered under the Securities Act and
sold. Upon the written request of a record holder of any shares of Purchased
Stock given within 30 days after receipt of any such notice from the Company,
the Company will, except as herein provided, cause all the shares of Conversion
Stock and Warrant Stock, the Purchaser or record holders of which have so
requested registration thereof, to be included in such registration statement,
all to the extent requisite to permit the sale or other disposition by the
prospective seller or sellers of the Conversion Stock or Warrant Stock to be so
registered; provided, however, that nothing herein shall prevent the Company
from, at any time, abandoning or delaying any such registration initiated by it;
provided further, however, that if the Company determines not to proceed with a
registration after the registration statement has been filed with the Commission
and the Company's decision not to proceed is primarily based upon the
anticipated public offering price of the securities to be sold by the Company,
the Company shall promptly complete the registration for the benefit of those
selling security holders who wish to proceed with a public offering of their
securities at the Company's expense. If any registration pursuant to this
Section 11.2 shall be underwritten in whole or in part, the Company may require
that the Conversion Stock or Warrant Stock requested for inclusion pursuant to
this Section 11.2 be included in the underwriting on the same terms and
conditions as the securities otherwise being sold through the underwriters. In
the event that the Conversion Stock or Warrant Stock requested for inclusion
pursuant to this Section 11.2 would constitute more than 25 % of the total
number of shares to be included in a proposed underwritten public offering, and
if in the good faith judgment of the managing underwriter of such public
offering the inclusion of all of the Conversion Stock or Warrant Stock
originally covered by a request for registration would reduce the number of
shares to be offered by the Company or interfere with the successful marketing
of the shares of stock offered by the Company, the number of shares of
Conversion Stock and Warrant Stock otherwise to be included in the underwritten
public offering may be reduced pro rata (by number of shares) among the holders
thereof requesting such registration, provided, however, that after any such
required reduction the Conversion Stock and Warrant Stock to be included in such
offering shall constitute at least 25% of the total number of shares to be
included in such offering. "Purchased Stock" shall mean the Preferred Shares,
the Conversion Stock, the Warrants, the Warrant Stock, and the stock or other
securities of the Company issued in a stock split or reclassification of, or a
stock dividend or other
distribution on or in substitution or exchange for, or otherwise in connection
with, any of the foregoing securities, or in a merger or consolidation involving
the Company or a sale of all or substantially all of the Company's assets.
11.3 REGISTRATION PROCEDURES. If and whenever the Company is
required by the provisions of Section 11.1 or 11.2 hereof to effect the
registration of Registrable Securities under the Securities Act, the Company
will:
(a) prepare and file with the Commission a registration
statement (a "Registration Statement") with respect to such Registrable
Securities, and use its best efforts to cause such Registration Statement
to become and remain effective for such period as may be reasonably
necessary to effect the sale of such securities, not to exceed three years
in the case of a registration pursuant to Section 11.1 and nine months in
the case of a registration pursuant to Section 11.2 (subject to extension
as set forth in the last paragraph of this Section 11.3);
(b) prepare and file with the Commission such amendments to such
Registration Statement and supplements to such Registration Statement and
the Prospectus contained therein (a "Prospectus") as may be necessary to
keep such Registration Statement effective for such period as may be
reasonably necessary to effect the sale of such securities, not to exceed
three years in the case of a registration pursuant to Section 11.1 and nine
months in the case of a registration pursuant to Section 11.2, and to
comply with the provision of the Securities Act (subject to extension as
set forth in the last paragraph of this Section 11.3);
(c) use its best efforts to register and qualify the securities
covered by such Registration Statement under such state securities or blue
sky laws of such jurisdictions as such participating holders may reasonably
request in writing within 20 days following the original filing of such
Registration Statement, except that the Company shall not for any purpose
be required to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified;
(d) notify the security holders participating in such
registration, promptly after it shall receive notice thereof, of the time
when such Registration Statement has become effective or a supplement to
any Prospectus forming a part of such Registration Statement has been
filed;
(e) notify such holders promptly of any request by the
Commission for the amending or supplementing of such Registration Statement
or Prospectus or for additional information;
(f) prepare and promptly file with the Commission and promptly
notify such holders of the filing of such amendment or supplement to such
Registration Statement or Prospectus as may be necessary to correct any
statements or omissions if, at the time when a Prospectus relating to such
securities is required to be delivered under the Securities Act, any event
shall have occurred as the result of which any such Prospectus or any other
prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were
made, not misleading;
(g) advise such holders, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement or
the initiation or threatening of any proceeding for that purpose and
promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued;
(h) advise such holders (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed and, with respect to
a Registration Statement or any post-effective amendment, when the same has
become effective, (ii) of any request by the Commission or any state
securities authority for amendments and supplements to a Registration
Statement and Prospectus or for additional information after the
Registration Statement has become effective, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of a Registration
Statement, (iv) of the issuance by any state securities commission or other
regulatory authority of any order suspending the qualification or exemption
from qualification of any of the Registrable Securities under state
securities or "blue sky" laws, and (v) of the happening of any event which
makes any statement made in a Registration Statement or related Prospectus
untrue or which requires the making of any changes in such Registration
Statement or Prospectus so that they will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. As soon as
practicable following expiration of the Suspension Period (as defined
below), the Company shall prepare and file with the Commission and furnish
a supplement or amendment to such Prospectus so that, as thereafter
deliverable to the purchasers of such Registrable Securities, such
Prospectus will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading;
(i) furnish to such holders such number of copies of a
Prospectus, including a preliminary Prospectus, in conformity with the
requirements of the Securities Act, and such other documents, as they may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by them that are included in such
registration; and
(j) in the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering.
Upon receipt of any notice (a "Suspension Notice") by a holder from
the Company of the happening of any event of the kind described in Section
11.3(h), a holder shall forthwith discontinue disposition of the Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 11.3(h) or until the holder is advised in writing (the
"Advice") by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings which are incorporated
by reference in the Prospectus, and, if so directed by the Company, will, or
will request any broker-dealer acting as holder's agent to, deliver to the
Company (at the Company expense) all copies, other than permanent file copies
then in the holder's or broker-dealer's possession, of the Prospectus covering
such Registrable Securities current at the time of receipt of such notice;
PROVIDED, HOWEVER, that in no event shall the period from the date on which the
holder receives a Suspension Notice to the date on which the holder receives
either the Advice or copies of the supplemented or amended Prospectus
contemplated by Section 11.3(h), and any additional or supplemental filings
incorporated therein by reference (the "Suspension Period"), exceed 60 days.
11.4 EXPENSES. Except as provided in Section 11.2 or this
Section 11.4, with respect to the registration pursuant to Section 11.1 hereof
and with respect to each inclusion of shares of Conversion Stock and Warrant
Stock in a Registration Statement pursuant to Section 11.2 hereof, the Company
shall bear all fees, costs and expenses except expenses of counsel and
accountants for the selling securities holders.
11.5 INDEMNIFICATION. In the event that any Conversion Stock or
Warrant Stock is included in a Registration Statement under Section 11.1 or 11.2
hereof:
(a) The Company will indemnify and hold harmless each holder of
Registrable Securities which are included in a Registration Statement
pursuant to the provisions of this Section 11, its directors and officers,
and any underwriter (as defined in the Securities Act) for such holder and
each person, if any, who controls such holder or such underwriter within
the meaning of the Securities Act, from and against, and will reimburse
such holder and each such underwriter and controlling person with respect
to, any and all loss, damage, liability, cost and expense to which such
holder or any such underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in such
Registration Statement, any Prospectus contained therein or any amendment
or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however,
that the Company will not be liable in any such case to the extent that any
such loss, damage, liability, cost or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by such holder,
such underwriter or such controlling person in writing specifically for use
in the preparation thereof.
(b) Each holder of Registrable Securities which are included in
a Registration Statement pursuant to the provisions of this Section 11 will
indemnify and hold harmless the Company, its directors and officers, any
controlling person and any underwriter from and against, and will reimburse
the Company, its directors and officers, any controlling person and any
underwriter with respect to, any and all loss, damage, liability, cost or
expense to which the Company or any controlling person and/or any
underwriter may become subject under the Securities Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are caused
by any untrue or alleged untrue statement of any material fact contained in
such Registration Statement, any Prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading, in each case
to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was so made in
reliance upon and in strict conformity with written information furnished
by such holder specifically for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (a) or (b) of this Section 11.5 of notice of
the commencement of any action involving the subject matter of the
foregoing indemnity provisions such indemnified party will, if a claim
thereof is to be made against the indemnifying party pursuant to the
provisions of said paragraph (a) or (b), promptly notify the indemnifying
party of the commencement thereof; but the omission to so notify the
indemnifying party will relieve such indemnifying party of liability, but
only to the extent that such indemnifying party is prejudiced with respect
to a specific claim. In case such action is brought against any
indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party, provided, however, if the
defendants in any action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those
available to the indemnifying party, or if there is a conflict of interest
which would prevent counsel for the indemnifying party from also
representing the indemnified party, the indemnified party or parties shall
have the right to select separate
counsel to participate in the defense of such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party
pursuant to the provisions of said paragraph (a) or (b) for any legal or
other expense subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation,
unless (i) the indemnified party shall have employed counsel in accordance
with the proviso of the preceding sentence, (ii) the indemnifying party
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after the notice
of the commencement of the action, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party.
(d) if the indemnification provided for in paragraph (a) or (b)
of this Section 11.5 shall be unavailable to hold harmless an indemnified
party in respect of any loss, damage, liability, cost or expense under the
Securities Act, then, and in each such case, the indemnifying party, in
lieu of indemnifying such indemnified party hereunder, shall contribute to
the amount paid or payable by such indemnified party as a result of such
loss, damage, liability, cost or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
statement or omissions that resulted in such loss, damage, liability, cost
or expense as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or
by the indemnified party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission; PROVIDED that in no event shall any contribution under this
subsection (d) by any holder exceed the gross proceeds from the offering
received by such indemnifying party. No person of entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person or entity
who was not guilty of such fraudulent misrepresentation.
(e) The obligations of the Company and the holders under this
Section 11.5 will survive the completion of any offering of Registrable
Securities in a Registration Statement, and otherwise.
12. GENERAL INDEMNITY. The Company will indemnify and hold harmless the
Purchaser, and its respective officers, directors, general partners, employees,
agents and affiliates, from and against any and all claims, liabilities, losses,
damages and expenses (including reasonable attorneys' fees) incurred by any of
such indemnified parties in any way relating to, arising out of or resulting
from (i) the breach of any of the representations or warranties made by the
Company in this Agreement and (ii) the breach or the failure of
performance by the Company of any of its covenants or agreements to be performed
under this Agreement.
13. CHANGES, WAIVERS, ETC. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by a
statement in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
14. NOTICES. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and
(a) if to the Purchaser, addressed to the Purchaser, 000 Xxxxx
Xxxxxxx 000, Xx. Xxxxx Xxxx, Xxxxxxxxx 00000, or to such other address as
such holder may specify by written notice to the Company, or
(b) if to the Company, addressed to the Company, Xxx Xxxx Xxxxxx
XX, Xxxxx 00, Xxxxxxxxxxx, Xxxxxxxxx 00000, attention President, or to such
other address as the Company may specify by written notice to the
Purchaser, and
(c) such notices and other communications shall for all purposes
of this Agreement be treated as being effective or having been given upon:
personal delivery; five (5) days after deposit in the United States Mail,
certified or registered (return receipt requested); one (1) business day
after deposit with a nationally recognized overnight courier (prepaid) or
one (1) business day after transmission by facsimile and receipt of
confirmation of receipt by sender.
15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement for a period of two (2) years.
16. PARTIES IN INTEREST. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto, whether so expressed or
not, and, in particular, shall inure to the benefit of and be enforceable by the
holder or holders at the time of any of the Purchased Stock.
17. HEADINGS. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
18. CHOICE OF LAW. It is the intention of the parties that the laws of
Minnesota shall govern the validity of this Agreement, the construction of its
terms and the interpretation of the rights and duties of the parties.
19. COUNTERPARTS. This Agreement may be executed concurrently in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. FURTHER INSTRUMENTS. From time to time, each party hereto will
execute and deliver such instruments and documents as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
21. INTEGRATION; ENTIRE AGREEMENT. This Agreement, including and
incorporating all schedules and exhibits attached hereto, constitutes and
contains the entire agreement and understanding of the parties regarding the
subject matter of this Agreement and supersedes in its entirety any and all
prior agreements, whether written or oral, among the parties with respect to the
subject matter hereof.
22. SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full force and effect
to the fullest extent permitted by law.
23. AMENDED ARTICLES. The Purchaser covenants and agrees to vote in
favor of the Amended Articles at the shareholders' meeting to occur on or before
September 30, 1997.
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
undersigned, whereupon this letter shall become a binding contract among you and
the undersigned.
Very truly yours,
TELIDENT, INC.
/s/ W. Xxxxxx XxXxxxxxxx
--------------------------------------
W. Xxxxxx XxXxxxxxxx, President and Chief
Executive Officer
The foregoing Agreement is hereby
accepted as of the date first above
written.
FAMCO III LIMITED LIABILITY COMPANY
By Its Manager: Family Financial Strategies, Inc.
/s/ Xxxx Xxxxxx
------------------------
Xxxx Xxxxxx, President
SCHEDULE 5.12A
CURRENTLY OUTSTANDING, RESERVED AND COMMITTED SECURITIES
CAPITAL STOCK OUTSTANDING, RESERVED OR UNDERLYING
SHARES ON A FULLY DILUTED BASIS
Common Stock...........................................................6,948,526
Series I Preferred Stock............................................... 150,000
Subtotal.......................................................... 7,098,526
STOCK OPTIONS AND PLAN RESERVES
Stock Options issued pursuant to 1988 Stock Option Plan (the "Plan").....390,730
Remaining Shares reserved under the Plan.................................284,270
-------
Subtotal............................................................ 675,000
WARRANTS
Warrant dated October 1995 issued to Okabena Partnership K...............150,000
Warrants dated January 1996 issued to holders of 10% Series B
Convertible Debentures issued in May 1993..................................4,046
Warrants dated May 1996 issued to parties providing bridge financing.....125,000
Warrants dated May 1996 issued to holders of 10% Series B
Convertible Debentures issued in May 1993.................................51,625
Warrant dated June 1996 issued to Xx. Xxxxxxxx............................50,000
Warrant dated August 1996 issued to X.X. Xxxxxxxx........................115,000
Warrants dated July 1997 issued to former holders of 10% Convertible
Debentures dated October 1992, and originally due October 1, 1995,
and 10% Series B Convertible Debentures dated May 1993, and
originally due May 1, 1996...............................................389,900
-------
Subtotal............................................................ 885,571
DEBENTURES
10% Convertible Debentures dated October 1992, and originally
due October 1, 1995, and 10% Series B Convertible Debentures
dated May 1993, and originally due May 1, 1996,
all of which mature July 15, 1997
and the cumulative face value of which is $158,000........................39,899
------
Subtotal............................................................. 39,899
TOTAL..................................................................8,698,996
---------
---------
SCHEDULE 5.12B
OUTSTANDING, RESERVED AND COMMITTED SECURITIES AFTER CLOSING
CAPITAL STOCK OUTSTANDING, RESERVED OR UNDERLYING
SHARES ON A FULLY DILUTED BASIS
Common Stock...........................................................6,948,526
Series I Preferred Stock............................................... 150,000
Series II Preferred Stock..............................................1,111,111
Subtotal.......................................................... 8,209,637
STOCK OPTIONS AND PLAN RESERVES
Stock Options issued pursuant to 1988 Stock Option Plan (the "Plan").....390,730
Remaining Shares reserved under the Plan.................................284,270
-------
Subtotal............................................................ 675,000
WARRANTS
Warrant dated October 1995 issued to Okabena Partnership K...............166,205
Warrants dated January 1996 issued to holders of 10% Series B
Convertible Debentures issued in May 1993..................................4,046
Warrants dated May 1996 issued to parties providing bridge financing.....125,000
Warrants dated May 1996 issued to holders of 10% Series B
Convertible Debentures issued in May 1993.................................51,625
Warrant dated June 1996 issued to Xx. Xxxxxxxx............................50,000
Warrant dated August 1996 issued to X.X. Xxxxxxxx........................115,000
Warrants dated July 1997 issued to former holders of 10% Convertible
Debentures dated October 1992, and originally due October 1, 1995,
and 10% Series B Convertible Debentures dated May 1993, and
originally due May 1, 1996...............................................389,900
Warrants dated July 1997 to Family Financial Strategies................1,250,000
---------
Subtotal.......................................................... 2,151,776
DEBENTURES
10% Convertible Debentures dated October 1992, and originally
due October 1, 1995, and 10% Series B Convertible Debentures
dated May 1993, and originally due May 1, 1996,
all of which mature July 15, 1997
and the cumulative face value of which is $158,000........................44,134
------
Subtotal............................................................. 44,134
TOTAL SHARES OUTSTANDING OR RESERVED..................................11,080,547
----------
----------
TOTAL SHARES AUTHORIZED............................................. 12,500,000
Total Shares of Common Stock Outstanding or Reserved.............. 9,819,436
Total Authorized Shares of Common Stock.......................... 10,000,000
----------
SCHEDULE 5.17A
SEC REPORTS
The Company has delivered to each Purchaser copies of the following documents:
1. Prospectus, dated May 14, 1997, relating to the sale of 1,004,008
shares of Common Stock by certain Selling Shareholders;
2. Report on Form 10-QSB for the quarter ended March 31, 1997 filed
with the Commission on April 28, 1997; and
3. Report on Form 10-KSB for the year ended June 30, 1996, filed with
the Commission on September 27, 1996.
4. Definitive Schedule 14A (proxy materials), filed with the Commission
on October 2, 1996.
5. The Company's 1996 Annual Report to Shareholders.
SCHEDULE 5.17B
REGISTRATION STATEMENTS ON FILE WITH THE COMMISSION
The Company currently has the following registration statements on file with the
Commission:
1. Final Prospectus, dated May 14, 1997 (Registration No. 333-99054);
2. Post-Effective Amendment No. 1 to Registration Statement on Form
SB-2 on Form S-3, filed with the Commission on May 1, 1997
(Registration No. 333-99054);
3. Final Prospectus, dated August 13, 1996 (Registration No. 33-04311);
4. Pre-Effective Amendment to Registration Statement on Form SB-2
(Registration No. 33-04311), filed with the Commission on August 8,
1996;
5. Pre-Effective Amendment to Registration Statement on Form SB-2
(Registration No. 33-04311), filed with the Commission on May 22,
1996;
6. Final Prospectus, dated April 16, 1996 (Registration No. 333-01804);
7. Pre-Effective Amendment to Registration Statement on Form SB-2
(Registration No. 333-01804), filed with the Commission on April 4,
1996;
8. Pre-Effective Amendment to Registration Statement on Form SB-2
(Registration No. 333-01804), filed with the Commission on February
29, 1996;
9. Final Prospectus, dated January 26, 1996 (Registration No.
33-99054);
10. Pre-Effective Amendment to Registration Statement on Form SB-2
(Registration No. 33-99054), filed with the Commission on January
16, 1996;
11. Pre-Effective Amendment to Registration Statement on Form SB-2
(Registration No. 33-99054), filed with the Commission on December
27, 1995;
12. Pre-Effective Amendment to Registration Statement on Form SB-2
(Registration No. 33-99054), filed with the Commission on November
7, 1995.
13. Final Prospectus, dated November 25, 1991 (Registration No.
33-41513);
14. Pre-Effective Amendment to Registration Statement on Form S-1
(Registration No. 33-41513), filed with the Commission on November
25, 1991;
15. Pre-Effective Amendment to Registration Statement on Form S-1
(Registration No. 33-41513), filed with the Commission on November
18, 1991;
16. Pre-Effective Amendment to Registration Statement on Form S-1
(Registration No. 33-41513), filed with the Commission on October
15, 1991;
17. Pre-Effective Amendment to Registration Statement on Form S-1
(Registration No. 33-41513), filed with the Commission on July 1,
1991;
18. Post-Effective Amendment No. 2 to Registration Statement on Form
S-18 (Registration No. 33-25922), filed with the Commission May 21,
1991;
19. Post-Effective Amendment No. 1 to Registration Statement on Form
S-18 (Registration No. 33-25922), filed with the Commission May 21,
1991;
20. Final Prospectus, dated July 10, 1989 (Registration No. 33-25922);
21. Pre-Effective Amendment to Registration Statement on Form S-18
(Registration No. 33-25922), filed with the Commission on May 23,
1989;
22. Pre-Effective Amendment to Registration Statement on Form S-18
(Registration No. 33-25922), filed with the Commission on May 22,
1989;
23. Pre-Effective Amendment to Registration Statement on Form S-18
(Registration No. 33-25922), filed with the Commission on March 29,
1989;
24. Pre-Effective Amendment to Registration Statement on Form S-18
(Registration No. 33-25922), filed with the Commission on December
22, 1988;
EXHIBIT 1
TELIDENT, INC.
CERTIFICATE OF DESIGNATION
OF SERIES II CONVERTIBLE PREFERRED STOCK
I, the undersigned, as Secretary of Telident, Inc., a Minnesota corporation
(the "Corporation"), do hereby certify that the Board of Directors of the
Corporation unanimously resolved, on July 23, 1997, to establish a class of
Preferred Stock as permitted in Article III of the Corporation's Articles of
Incorporation, as amended, in accordance with the following resolutions:
RESOLVED, that the officers of the Corporation be, and they hereby are,
authorized and directed to issue 1,111,111 shares of the Corporation's
Preferred Stock and Warrants to purchase 1,250,000 shares of Common Stock
of the Corporation to the Purchaser identified in that certain Stock
Purchase Agreement dated July 23, 1997 by and among the Corporation and the
Purchaser named therein (the "Stock Purchase Agreement"), in consideration
for which the Purchaser shall pay the Corporation $1,250,000.00, such
amount to be paid by wire transfer concurrently with the issuance of the
Corporation's stock certificates representing said shares and warrants.
FURTHER RESOLVED, that such shares of Preferred Stock shall be referred to
as the Series II Convertible Preferred Stock of the Corporation (the
"Series II Preferred Stock") and shall have the following relative rights
and preferences:
ARTICLE 24.
TERMS OF THE SERIES II CONVERTIBLE PREFERRED STOCK:
24.1 VOTING PRIVILEGES.
(a) GENERAL. Each holder of Series II Preferred Stock shall have that
number of votes on all matters submitted to the stockholders that is equal to
the number of shares of Common Stock into which such holder's shares of Series
II Preferred Stock are then convertible, as hereinafter provided. Except as
provided herein or as otherwise required by agreement or law, all shares of
capital stock of the Corporation shall vote as a single class on all matters
submitted to the stockholders.
(b) NO CUMULATIVE VOTING. No holder of shares of Series II Preferred
Stock of the Corporation shall have any cumulative voting rights.
(c) MERGERS, CONSOLIDATIONS AND DISPOSITIONS OF ASSETS. Without the
affirmative vote or written consent of a majority of the holders (acting
together as a class) of the shares of Series II Preferred Stock at the time
outstanding, the Corporation shall not enter into any agreement or
understanding to (i) merge or consolidate the Corporation into or with
another corporation, (ii) merge or consolidate any other corporation into or
with the Corporation, (iii) effectuate a plan of exchange between the
Corporation and any other corporation, or (iv) sell, transfer or dispose of
all or substantially all of the assets of the Corporation; (v) amend the
Certificate; and (vi) issue any shares of the Corporation's capital stock
which have rights and preferences greater than those of the Series II
Preferred Stock.
24.2 DIVIDENDS.
In the event any dividend or distribution is declared or made with respect
to outstanding shares of Common Stock or series I convertible preferred stock, a
comparable dividend or distribution must be simultaneously declared or made with
respect to the outstanding shares of Series II Preferred Stock. In the event
any dividend or distribution is declared or made with respect to the Common
Stock, each holder of shares of Series II Preferred Stock shall be paid such
comparable dividend or receive such comparable distribution on the basis of the
number of shares of Common Stock into which such holder's shares of such Series
II Preferred Stock are then convertible, as hereinafter provided. All rights of
the holders of the Series II Preferred Stock to receive dividends shall be equal
to the rights of series I convertible preferred stock of the Corporation.
Dividends on shares of capital stock of the Corporation shall be payable
only out of funds legally available therefor.
24.3 OTHER TERMS OF THE SERIES II PREFERRED STOCK.
(a) LIQUIDATION PREFERENCE. In the event of an involuntary or voluntary
liquidation or dissolution of the Corporation at any time, the holders of shares
of Series II Preferred Stock shall be entitled to receive out of the assets of
the Corporation an amount equal to the Per Share Purchase Price (appropriately
adjusted to reflect stock splits, stock dividends, reorganizations,
consolidations and similar changes hereafter effected), plus dividends unpaid
and accumulated or accrued thereon. In the event of either an involuntary or a
voluntary liquidation or dissolution of the Corporation payment shall be made to
the holders of shares of Series II Preferred Stock in the amounts herein fixed
before any payment shall be made or any assets distributed to the holders of the
Common Stock or any other class of shares of the Corporation ranking junior to
the Series II Preferred Stock with respect to payment upon dissolution or
liquidation of the Corporation. If upon any liquidation or dissolution of the
Corporation the assets available for distribution shall be insufficient to pay
the holders of all outstanding shares of Series II Preferred Stock the full
amounts to which they respectively shall be entitled, the holders of such shares
shall share pro rata in any such distribution in proportion to the full amounts
to which such holders would otherwise be entitled.
Nothing hereinabove set forth shall affect in any way the right of each
holder of shares of Series II Preferred Stock to convert such shares at any time
and from time to time in accordance with subparagraph (2) below.
(b) CONVERSION RIGHT. For one (1) year after the Closing Date as set
forth in the Stock Purchase Agreement, at the option of the holders thereof, all
or any portion of the shares of Series II Preferred Stock shall be convertible
into Common Stock of the Corporation as set forth herein, at the office of the
Corporation (or at such other office or offices, if any, as the Board of
Directors may designate). A holder shall provide the Corporation with written
notice of its intent to convert (the "Conversion Notice"), such notice to be
effective upon receipt by the Corporation. Upon any such conversion, each share
of Series II Preferred Stock shall be converted into that number of fully paid
and nonassessable shares (calculated as to each conversion to the nearest
1/100th of a share) of Common Stock of the Corporation as follows: (x) if the
Average Price, as defined herein, is equal to or greater than the Per Share
Purchase Price, then each share of Series II Preferred Stock shall be converted
into one (1) share of Common Stock; and (y) if the Average Price is less than
the Per Share Purchase Price, then each share of Series II Preferred Stock shall
be converted into that number of shares of Common Stock equal to (i) the Per
Share Purchase Price, divided by (ii) eighty percent (80%) of the Average Price.
The "Average Price" is the average of the middle between the bid price and the
ask price per share for shares of Common Stock of the Corporation, for the ten
(10) trading days immediately prior to the date on which the Corporation
receives the Conversion Notice. The following provisions shall govern such
right of conversion:
a. In order to convert shares of Series II Preferred Stock into shares
of Common Stock of the Corporation, the holder thereof shall
surrender at any office hereinabove mentioned the certificate or
certificates therefor, duly endorsed to the Corporation or in blank,
and give written notice to the Corporation at such office that such
holder elects to convert such shares. Shares of Series II Preferred
Stock shall be deemed to have been converted immediately prior to
the close of business on the day of the surrender of such shares for
conversion as herein provided, and the person entitled to receive
the shares of Common Stock of the Corporation issuable upon such
conversion shall be treated for all purposes as the record holder of
such shares of Common Stock at such time. As promptly as
practicable after the conversion date, the Corporation shall issue
and deliver or cause to be issued and delivered at such office a
certificate or certificates for the number of shares of Common Stock
of the Corporation issuable upon such conversion.
b. Except for (i) options to purchase shares of Common Stock pursuant
to the Corporation's 1988 Stock Option Plan adopted by the
Corporation which are outstanding as of the date hereof and except
for shares of Common Stock issued upon the exercise of such options
granted pursuant to such plan, and (ii) shares of Common Stock
issued upon conversion of the Series II Preferred Stock or exercise
of the Warrants issued to the holders of the Series II Preferred
Stock pursuant to the Stock Purchase Agreement or other warrants or
rights to purchase the securities of the Corporation outstanding as
of the
date hereof, if and whenever the Corporation shall issue or sell any
additional shares of its Common Stock for a consideration per share
less than the Conversion Price, as defined herein, in effect
immediately prior to the time of such issue or sale then, forthwith
upon such issue or sale, the Conversion Price shall be reduced to
such lesser price. The "Conversion Price" is the Per Share Purchase
Price, as the same may be adjusted from time to time in certain
instances as provided herein.
Upon each adjustment of the Conversion Price, each holder of
Series II Preferred Stock shall thereafter be entitled to convert,
at the Conversion Price resulting from such adjustment, such Series
II Preferred Stock into the number of shares of Common Stock
obtained by multiplying the Conversion Price in effect immediately
prior to such adjustment by the number of shares into which the
Series II Preferred Stock is convertible pursuant hereto immediately
prior to such adjustment and dividing the product thereof by the
Conversion Price resulting from such adjustment.
For the purposes of this subparagraph (b), the following
provisions (1) to (3), inclusive, shall also be applicable:
(1) In case at any time the Corporation shall grant (whether
directly or by assumption in a merger or otherwise) any
rights to subscribe for or to purchase, or any options for
the purchase of, (a) Common Stock or (b) any obligations or
any shares of stock of the Corporation which are convertible
into, or exchangeable for, Common Stock (any of such
obligations or shares of stock being hereinafter called
"Convertible Securities") whether or not such rights or
options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the
price per share for which Common Stock is issuable upon the
exercise of such rights or options or upon conversion or
exchange of such Convertible Securities (determined by
dividing (x) the total amount, if any, received or receivable
by the Corporation as consideration for the granting of such
rights or options, plus the minimum aggregate amount of
additional consideration payable to the Corporation upon the
exercise of such rights or options, plus, in the case of such
rights or options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if
any, payable upon the issue of such Convertible Securities
and upon the conversion or exchange thereof, by (y) the
total maximum number of shares of Common Stock issuable upon
the exercise of such rights or options or upon the
conversion or exchange of all such Convertible Securities
issuable upon the exercise of such rights or options) shall
be less than the Conversion Price in effect immediately
prior to the time of the granting of such rights or options,
then the total maximum number of shares of Common Stock
issuable upon the exercise of such rights or options or upon
conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of
such rights or options shall (as of the date of granting of
such rights or options) be deemed to be outstanding and to
have been issued for such price per share. No further
adjustments of the Conversion Price shall be made upon the
actual issue of such Common Stock or of such Convertible
Securities upon exercise of such rights or options or upon
the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities.
(2) In case the Corporation shall issue or sell (whether
directly or by assumption in a merger or otherwise) any
Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable,
and the price per share for which Common Stock is issuable
upon such conversion or exchange (determined by dividing (x)
the total amount received or receivable by the Corporation
as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (y) the total maximum
number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities)
shall be less than the Conversion Price in effect
immediately prior to the time of such issue or sale, then
the total maximum number of shares of Common Stock issuable
upon conversion or exchange of all such Convertible
Securities shall (as of the date of the issue or sale of
such Convertible Securities) be deemed to be outstanding and
to have been issued for such price per share, provided that
if any such issue or sale of such Convertible Securities is
made upon exercise of any rights to subscribe for or to
purchase or any option to purchase any such Convertible
Securities for which adjustments of the Conversion Price
have been or are to be made pursuant to other provisions of
this subparagraph (c), no further adjustment of the
Conversion Price shall be made by reason of such issue or
sale.
(3) In case any shares of Common Stock or Convertible Securities
or any rights or options to purchase any such Common Stock
or Convertible Securities shall be issued or sold for cash,
the consideration received therefor shall be deemed to be
the amount received by the Corporation therefor, without
deducting therefrom any expenses incurred or any
underwriting commissions, discounts or concessions paid or
allowed by the Corporation in connection therewith. In case
any shares of Common Stock or Convertible Securities or any
rights or options to purchase any such Common Stock or
Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the
consideration other than cash received by the Corporation
shall be deemed to be the fair value of such consideration
as determined by the Board of Directors of the Corporation,
without deducting therefrom any expenses incurred or
any underwriting commissions, discounts or concessions
paid or allowed by the Corporation in
connection therewith. In case any shares of Common Stock or
Convertible Securities or any rights or options to purchase
such Common Stock or Convertible Securities shall be issued
in connection with any merger or consolidation in which the
Corporation is the surviving corporation, the amount of
consideration therefor shall be deemed to be the fair value
as determined by the Board of Directors of the Corporation
of such portion of the assets and business of the
non-surviving corporation or corporations as such Board
shall determine to be attributable to such Common Stock,
Convertible Securities, rights or options, as the case may
be. In the event of any consolidation or merger of the
Corporation in which the Corporation is not the surviving
corporation or in the event of any sale of all or
substantially all of the assets of the Corporation for stock
or other securities of any other corporation, the
Corporation shall be deemed to have issued a number of
shares of its Common Stock for stock or securities of the
other corporation computed on the basis of the actual
exchange ratio on which the transaction was predicated and
for a consideration equal to the fair market value on the
date of such transaction of such stock or securities of the
other corporation, and if any such calculation results in
adjustment of the Conversion Price, the determination of the
number of shares of Common Stock issuable upon conversion
immediately prior to such merger, conversion or sale, for
purposes of subparagraph (g) below, shall be made after
giving effect to such adjustment of the Conversion Price.
c. In case the Corporation shall (i) declare a dividend upon the Common
Stock payable in Common Stock (other than a dividend declared to
effect a subdivision of the outstanding shares of Common Stock, as
described in subparagraph (d) below) or Convertible Securities, or
in any rights or options to purchase Common Stock or Convertible
Securities, or (ii) declare any other dividend or make any other
distribution upon the Common Stock payable otherwise than out of
earnings or earned surplus, then thereafter each holder of shares of
Series II Preferred Stock upon the conversion thereof will be
entitled to receive the number of shares of Common Stock into which
such shares of Series II Preferred Stock have been converted, and,
in addition and without payment therefor, each dividend described in
clause (i) above and each dividend or distribution described in
clause (ii) above which such holder would have received by way of
dividends or distributions if continuously since the issuance of
such shares of Series II Preferred Stock, such holder (i) had been
the record holder of the number of shares of Common Stock then
received, and (ii) had retained all dividends or distributions in
stock or securities (including Common Stock or Convertible
Securities, or in any rights or options to purchase any Common Stock
or Convertible Securities) payable in respect of such Common Stock
or in respect of any stock or securities paid as dividends or
distributions and originating directly or indirectly from such
Common Stock. For the purposes of the foregoing a dividend or
distribution other than in cash shall be considered payable out of
earnings or earned
surplus only to the extent that such earnings or earned surplus are
charged an amount equal to the fair value of such dividend or
distribution as determined by the Board of Directors of the
Corporation.
d. In case the Corporation shall at any time subdivide its outstanding
shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Corporation shall be
combined into a smaller number of shares, the Conversion Price in
effect immediately prior to such combination shall be
proportionately increased.
e. If (i) the purchase price provided for in any right or option
referred to in clause (1) of subparagraph (b), or (ii) the
additional consideration, if any, payable upon the conversion or
exchange of Convertible Securities referred to in clause (1) or
clause (2) of subparagraph (b), or (iii) the rate at which any
Convertible Securities referred to in clause (1) or clause (2) of
subparagraph (c) are convertible into or exchangeable for Common
Stock, shall change at any time (other than under or by reason of
provisions designed to protect against dilution), the Conversion
Price then in effect hereunder shall forthwith be increased or
decreased to such Conversion Price as would have been obtained had
the adjustments made upon the issuance of such rights, options or
Convertible Securities been made upon the basis of (a) the issuance
of the number of shares of Common Stock theretofore actually
delivered upon the exercise of such options or rights or upon the
conversion or exchange of such Convertible Securities, and the total
consideration received therefor, and (b) the issuance at the time of
such change of any such options, rights, or Convertible Securities
then still outstanding for the consideration, if any, received by
the Corporation therefor and to be received on the basis of such
changed price; and on the expiration of any such option or right or
the termination of any such right to convert or exchange such
Convertible Securities, the conversion price then in effect
hereunder shall forthwith be increased to such conversion price as
would have obtained had the adjustments made upon the issuance of
such rights or options or Convertible Securities been made upon the
basis of the issuance of the shares of Common Stock theretofore
actually delivered (and the total consideration received therefor)
upon the exercise of such rights or options or upon the conversion or
exchange of such Convertible Securities. If the purchase price
provided for in any right or option referred to in clause (1) of
subparagraph (b), or the rate at which any Convertible Securities
referred to in clause (1) or clause (3) of subparagraph (b) are
convertible into or exchangeable for Common Stock, shall decrease at
any time under or by reason of provisions with respect thereto
designed to protect against dilution, then in case of the delivery
of Common Stock upon the exercise of any such right or option or
upon conversion or exchange of any such Convertible Security, the
conversion price then in effect hereunder shall forthwith be
decreased to such conversion price as would have obtained had the
adjustments made upon the issuance of such
right, option or Convertible Security been made upon the basis of
the issuance of (and the total consideration received for) the shares
of Common Stock delivered as aforesaid.
f. If any capital reorganization or reclassification of the capital
stock of the Corporation, or consolidation or merger of the
Corporation 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 holders of
Series II Preferred Stock shall thereafter have the right to receive
upon the basis and upon the terms and conditions specified herein
and in lieu of the shares of the Common Stock of the Corporation
immediately theretofore receivable upon the conversion of Series II
Preferred Stock, 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 receivable upon the
conversion of Series II Preferred Stock had such reorganization,
reclassification, consolidation, merger or sale not taken place,
plus all dividends unpaid and accumulated or accrued thereon to the
date of such reorganization, reclassification, consolidation, merger
or sale, and in any such case appropriate provision shall be made
with respect to the rights and interests of the holders of Series II
Preferred Stock to the end that the provisions hereof (including
without limitation provisions for adjustments of the Conversion
Price and of the number of shares receivable upon the conversion of
Series II Preferred Stock) shall thereafter be applicable, as nearly
as may be in relation to any shares of stock, securities or assets
thereafter receivable upon the conversion of Series II Preferred
Stock. The Corporation shall not effect any such consolidation,
merger or sale, unless prior to the consummation thereof the
successor corporation (if other than the Corporation) resulting from
such consolidation or merger or the corporation purchasing such
assets shall assume by written instrument executed and mailed to the
registered holders of Series II Preferred Stock, at the last
addresses of such holders appearing on the books of the Corporation,
the obligation to deliver to such holders such shares of stock,
securities or assets as, in accordance with the foregoing
provisions, such holders may be entitled to receive.
g. In case at any time:
(1) the Corporation shall declare any cash dividend on its
Common Stock at a rate in excess of the rate of the last
cash dividend theretofore paid;
(2) the Corporation shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than
regular cash dividends) to the holders of its Common Stock;
(3) the Corporation shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock
of any class or other rights;
(4) there shall be any capital reorganization, or
reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with, or sale of
all or substantially all of its assets to, another
corporation; or
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give
written notice, by first-class mail, postage prepaid, addressed to
the registered holders of Series II Preferred Stock at the addresses
of such holders as shown on the books of the Corporation, of the
date on which (a) the books of the Corporation shall close or a
record shall be taken for such dividend, distribution or
subscription rights, or (b) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up
shall take place, as the case may be. Such notice shall also
specify the date as of which the holders of Common Stock of record
shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding up, as the case may be. Such written notice
shall be given at least 20 days prior to the action in question and
not less than 20 days prior to the record date or the date on which
the Corporation's transfer books are closed in respect thereto.
h. If any event occurs as to which in the opinion of the Board of
Directors of the Corporation the other provisions of this paragraph
(2) are not strictly applicable or if strictly applicable would not
fairly protect the rights of the holders of Series II Preferred
Stock in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make an adjustment in
the application of such provisions, in accordance with such
essential intent and principles, so as to protect such rights as
aforesaid.
i. The Series II Preferred Stock may be converted into Common Stock
only during the period prior to July 23, 1998.
j. As used in this paragraph (2) the term "Common Stock" shall mean and
include the Corporation's presently authorized Common Stock and
shall also include any capital stock of any class of the Corporation
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 Corporation; provided
that the shares receivable pursuant to conversion of shares of
Series II Preferred Stock shall include shares designated as Common
Stock of the Corporation as of the date of issuance of such shares
of Series II Preferred Stock, or, in case of any reclassification of
the outstanding shares thereof, the stock, securities or assets
provided for in subparagraph (g) above.
k. No fractional shares of Common Stock shall be issued upon
conversion, but, instead of any fraction of a share which would
otherwise be issuable, the Corporation shall pay a cash adjustment
in respect of such fraction in an amount equal to the same fraction
of the Market Price per share of Common Stock as of the close of
business on the day of conversion. "Market Price" shall mean if the
Common Stock is traded on a securities exchange or on The NASDAQ
SmallCap Market, the closing price of the Common Stock on such
exchange or The NASDAQ SmallCap Market, or, if the Common Stock is
otherwise traded in the over-the-counter market, the closing price,
in each case averaged over a period of 20 consecutive business days
prior to the date as of which "Market Price" is being determined.
If at any time the Common Stock is not traded on an exchange or The
NASDAQ SmallCap Market, or otherwise traded in the over-the-counter
market, the "Market Price" shall be deemed to be the higher of (i)
the book value thereof as determined by any firm of independent
public accountants of recognized standing selected by the Board of
Directors of the Corporation as of the last day of any month ending
within 60 days preceding the date as of which the determination is
to be made, or (ii) the fair value thereof determined in good faith
by the Board of Directors of the Corporation as of a date which is
within 15 days of the date as of which the determination is to be
made.
l. The holders of the Series II Preferred Stock shall be entitled to
the registration rights provided for in Section 11 of the Stock
Purchase Agreement.
(c) DEFINITION. All capitalized terms not otherwise defined herein
shall have the definition ascribed to them in the Stock Purchase Agreement.
FURTHER RESOLVED, that W. Xxxxxx XxXxxxxxxx, President of the Corporation,
be, and hereby is, authorized and directed to make and execute a
Certificate of Designation embracing the foregoing resolutions and to cause
such Certificate of Designation to be filed with the office of the
Secretary of State of the State of Minnesota.
IN WITNESS WHEREOF, this Certificate of Designation is hereby executed on
behalf of the Corporation by Xxxxx X. Xxxxxx, its Secretary, this 23rd day of
July, 1997, pursuant to Chapter 302A, Minnesota Statutes.
TELIDENT, INC.
By /s/ Xxxxx X. Xxxxxx
-------------------------------------------
Xxxxx X. Xxxxxx, Secretary
EXHIBIT 2
WARRANT
TO SUBSCRIBE FOR AND PURCHASE COMMON STOCK OF
TELIDENT, INC.
DATED
JULY 23, 1997
THIS CERTIFIES THAT, for value received, FAMCO III LIMITED LIABILITY
COMPANY (the "Holder") or registered permitted assigns is entitled to purchase
from TELIDENT, INC., (the "Corporation"), a corporation organized and existing
under the laws of the State of Minnesota, at the purchase price per share
specified below (subject to adjustment as noted below) at any time or from time
to time from and after the date hereof to and including the Termination Date (as
hereinafter defined) 1,250,000 fully paid and nonassessable shares of the
Corporation's Common Stock, par value $0.02 per share (the "Warrant Stock")
(subject to adjustment as noted below). This Warrant has been issued in
connection with the purchase from the Corporation of series II convertible
preferred shares of the Corporation (the "Series II Preferred Stock") pursuant
to a Stock Purchase Agreement dated July 23, 1997 (the "Purchase Agreement"), by
and between the Corporation and the Holder. For purposes of this Warrant,
"Termination Date" shall mean 5:00 P.M. Minneapolis time on the second
anniversary hereof unless extended as provided herein. All capitalized terms
not otherwise defined herein shall have the meaning ascribed to them in the
Purchase Agreement.
The purchase price of the Warrant Stock upon exercise of the Warrant
shall be $1.41 per share (the "Purchase Price"). The Purchase Price shall be
subject to adjustment as provided below.
The Holder may sell, transfer, assign or otherwise dispose of any of
its rights or obligations hereunder in accordance with applicable securities
laws.
This Warrant is subject to the following provisions, terms and
conditions:
1. This Warrant may be exercised by the Holder hereof, in whole or
in part, by written notice of exercise delivered to the Corporation thirty (30)
days prior to the intended date of exercise along with the surrender of this
Warrant (properly endorsed if required) at the principal office of the
Corporation and upon payment to it by wire transfer of the Purchase Price for
the number of shares of Warrant Stock which the Holder elects to purchase. The
Corporation agrees that the shares so purchased shall be and are deemed to be
issued to the Holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such shares as aforesaid. Subject to the provisions of the
next succeeding paragraph, certificates for the Warrant Stock so purchased shall
be delivered to the Holder hereof within a reasonable time, not exceeding 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.
2. The Corporation shall have the right to require the Holder to
exercise this Warrant in full (the "Call"), upon the Corporation's giving
written notice to the Holder (the "Call Notice"). The Call may be exercised at
the option of the Corporation at any time if the bid price of the average
Corporation's Common Stock on The NASDAQ SmallCap Market (or such other market
or exchange as such Common Stock may be traded) has equaled or exceeded $1.97
per share for a period of at least ten (10) consecutive trading days immediately
prior to the Call Notice. Upon receipt of such Call Notice, the Holder (i)
shall surrender this Warrant to the Corporation together with payment of the
Purchase Price for the Warrant Stock to be purchased on or before the fifteenth
day following the Corporation's giving of the Call Notice to the Holder, or (ii)
shall decline to exercise the Warrant whereupon the Warrant shall immediately
terminate. If Holder fails to purchase all of the Warrant Stock within such
fifteen (15) day period, the Holder shall be deemed to have declined to exercise
and the Warrant shall immediately terminate.
3. The Corporation covenants and agrees that, upon and after
approval of the Corporation's Amended Articles as defined and set forth in
Section 8.8 of the Purchase Agreement, the Warrant Stock will, upon issuance, be
duly authorized and issued, fully paid and nonassessable. The Corporation
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Corporation will, upon and
after approval of the Corporation's Amended Articles as defined and set forth in
Section 8.8 of the Purchase Agreement, at all times have authorized and reserved
for the purpose of issue or transfer upon exercise of the rights evidenced by
this Warrant, a sufficient number of shares of Warrant Stock to provide for the
exercise of the rights represented by this Warrant. In the event the
shareholders do not approve the Amended Articles in accordance with Section 8.8
of the Purchase Agreement and the Purchaser thereafter seeks to exercise the
Warrant, to the extent that the Warrant Stock is not available for exercise, the
Corporation shall pay to the Purchaser for each share of Warrant Stock that is
not available an amount which is equal to the fair market value of a share of
the Common Stock (determined by the closing bid price of the Common Stock on the
date that the Purchaser provides the Corporation with notice of its intent to
exercise) minus the Purchase Price.
4. The above provisions are, however, subject to the following:
(a) The Purchase Price shall, from and after the date of issuance of
this Warrant, be subject to adjustment from time to time as hereinafter
provided. Upon each adjustment of the Purchase Price, the Holder of this
Warrant shall thereafter be entitled to purchase, at the Purchase Price
resulting from such adjustment, the number of shares obtained by multiplying the
Purchase Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Purchase Price resulting from such
adjustment.
(b) Except for (i) options to purchase shares of Common Stock
pursuant to the Corporation's 1988 Stock Option Plan adopted by the Corporation
which are outstanding as of the date hereof and except for shares of Common
Stock issued upon the exercise of such options granted pursuant to such plan and
(ii) shares of Common Stock issued upon conversion of the Series II Preferred
Stock or exercise of this Warrant or other warrants or rights to purchase the
securities of the Corporation outstanding as of the date hereof, if and whenever
the Corporation shall issue or sell any additional shares of its Common Stock
for a consideration per share less than the Purchase Price in effect immediately
prior to the time of such issue or sale, then, forthwith upon such issue or
sale, the Purchase Price shall be reduced to such lesser price as is determined
by multiplying the Purchase Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the sum of the number of shares of
Common Stock outstanding immediately prior to the issuance or sale of such
additional shares and the number of shares of Common Stock which the aggregate
consideration received (determined in accordance with this paragraph 4) for the
issuance or sale of such additional shares would purchase at the Purchase Price
then in effect, and the denominator of which shall be the number of shares of
Common Stock outstanding immediately after the issuance or sale of such
additional shares.
(c) For the purposes of paragraph (b), the following provisions (i)
to (iii), inclusive, shall also be applicable:
(i) In case at any time the Corporation shall grant (whether directly
or by assumption in a merger or otherwise) any rights to subscribe for or
to purchase, or any options for the purchase of, (aa) Common Stock or
(bb) any obligations or any shares of stock of the Corporation which are
convertible into or exchangeable for Common Stock (any of such obligations
or shares of stock being hereinafter called "Convertible Securities")
whether or not such rights or options or the right to convert or exchange
any such Convertible Securities are immediately exercisable, and the price
per share for which Common Stock is issuable upon the exercise of such
rights or options or upon conversion or exchange of such Convertible
Securities (determined by dividing (cc) the total amount, if any, received
or receivable by the Corporation as consideration for the granting of such
rights or options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon the exercise of such rights
or options, plus, in the case of such rights or options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (dd) the total
maximum number of shares of Common Stock issuable upon the exercise of such
rights or options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such rights or
options) shall be less than the Purchase Price in effect immediately prior
to the time of the granting of such rights or options on the date of such
grant, then the total maximum number of shares of Common Stock issuable
upon the exercise of such rights or options or upon conversion or exchange
of the total maximum amount of such Convertible Securities issuable upon
the exercise of such rights or options shall (as of the date of granting of
such rights or options) be deemed to be outstanding and to have been issued
for such price per share. No further adjustments of the Purchase Price
shall be made upon the actual issue of such
Common Stock or of such Convertible Securities upon exercise of such rights
or options or upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities.
(ii) In case the Corporation shall issue or sell (whether directly or
by assumption in a merger or otherwise) any Convertible Securities, whether
or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable
upon such conversion or exchange (determined by dividing (aa) the total
amount received or receivable by the Corporation as consideration for the
issue or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Corporation upon
the conversion or exchange thereof, by (bb) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities) shall be less than the Purchase Price in effect
immediately prior to the time of such issue or sale, then the total maximum
number of shares of Common Stock issuable upon conversion or exchange of
all such Convertible Securities shall (as of the date of the issue or sale
of such Convertible Securities) be deemed to be outstanding and to have
been issued for such price per share, provided that if any such issue or
sale of such Convertible Securities is made upon exercise of any rights to
subscribe for or to purchase or any option to purchase any such Convertible
Securities for which adjustments of the Purchase Price have been or are to
be made pursuant to other provisions of this paragraph (c), no further
adjustment of the Purchase Price shall be made by reason of such issue or
sale.
(iii) In case any shares of Common Stock or Convertible Securities or
any rights or options to purchase any such Common Stock or Convertible
Securities shall be issued or sold for cash, the consideration received
therefor shall be deemed to be the amount received by the Corporation
therefor, without deduction therefrom of any expenses incurred or any
underwriting commissions, discounts or concessions paid or allowed by the
Corporation in connection therewith. In case any shares of Common Stock or
Convertible Securities or any rights or options to purchase any such Common
Stock or Convertible Securities shall be issued or sold for a consideration
other than cash, the amount of the consideration other than cash received
by the Corporation shall be deemed to be the fair value of such
consideration as determined by the Board of Directors of the Corporation,
without deducting therefrom any expenses incurred or any underwriting
commissions, discounts or concessions paid or allowed by the Corporation in
connection therewith. In case any shares of Common Stock or Convertible
Securities or any rights or options to purchase such Common Stock or
Convertible Securities shall be issued in connection with any merger or
consolidation in which the Corporation is the surviving corporation, the
amount of consideration therefor shall be deemed to be the fair value as
determined by the Board of Directors of the Corporation of such portion of
the assets and business of the non-surviving corporation or corporations as
such Board shall determine to be attributable to such Common Stock,
Convertible Securities, rights or options, as the case may be. In the
event of any consolidation or merger of the Corporation in which the
Corporation is not the surviving corporation or in the event of any sale of
all or substantially all of the assets of the Corporation for stock or
other securities of
any other corporation, the Corporation shall be deemed to have issued a
number of shares of its Common Stock for stock or securities of the other
corporation computed on the basis of the actual exchange ratio on which the
transaction was predicated and for a consideration equal to the fair market
value on the date of such transaction of such stock or securities of the
other corporation, and if any such calculation results in adjustment of the
Purchase Price, the determination of the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such merger,
conversion or sale, for purposes of paragraph (g) below, shall be made
after giving effect to such adjustment of the Purchase Price.
(d) In case the Corporation shall (i) declare a dividend upon the
Common Stock payable in Common Stock (other than a dividend declared to effect a
subdivision of the outstanding shares of Common Stock, as described in
paragraph (e) below) or Convertible Securities, or in any rights or options to
purchase Common Stock or Convertible Securities, or (ii) declare any other
dividend or make any other distribution upon the Common Stock payable otherwise
than out of earnings or earned surplus, then thereafter the Holder of this
Warrant upon the exercise hereof will be entitled to receive the number of
shares of Warrant Stock to which Holder shall be entitled upon such exercise,
and, in addition and without further payment therefor, each dividend described
in clause (i) above and each dividend or distribution described in clause (ii)
above which Holder would have received by way of dividends or distributions if
continuously since the issuance of this Warrant, Holder (i) had been the record
Holder of the number of shares of Warrant Stock then received, and (ii) had
retained all dividends or distributions in stock or securities (including Common
Stock or Convertible Securities, or in any rights or options to purchase any
Common Stock or Convertible Securities) payable in respect of such Warrant Stock
or in respect of any stock or securities paid as dividends or distributions and
originating directly or indirectly from such Warrant Stock. For the purposes of
the foregoing, a dividend or distribution other than in cash shall be considered
payable out of earnings or earned surplus only to the extent that such earnings
or earned surplus are charged an amount equal to the fair value of such dividend
or distribution as determined by the Board of Directors of the Corporation.
(e) In case the Corporation shall at any time subdivide its
outstanding shares of Common Stock into a greater number of shares, the Purchase
Price in effect immediately prior to such subdivision shall be proportionately
reduced, and conversely, in case the outstanding shares of Common Stock of the
Corporation shall be combined into a smaller number of shares, the Purchase
Price in effect immediately prior to such combination shall be proportionately
increased.
(f) If (i) the purchase price provided for in any right or option
referred to in clause (i) of paragraph (c), or (ii) the additional
consideration, if any, payable upon the conversion or exchange of Convertible
Securities referred to in clause (i) or clause (ii) of paragraph (c), or
(iii) the rate at which any Convertible Securities referred to in clause (i) or
clause (ii) of paragraph (c) are convertible into or exchangeable for Common
Stock shall change at any time (other than under or by reason of provisions
designed to protect against dilution), the Purchase Price then in effect shall
forthwith be increased or decreased to such Purchase Price which would have been
obtained had the adjustments made upon the
issuance of such rights, options or Convertible Securities been made upon the
basis of (i) the issuance of the number of shares of Common Stock theretofore
actually delivered upon the exercise of such options or rights or upon the
conversion or exchange of such Convertible Securities, and the total
consideration received therefor, and (ii) the issuance at the time of such
change of any such options, rights or Convertible Securities then still
outstanding for the consideration, if any, received by the Corporation therefor
and to be received on the basis of such changed price; and on the expiration of
any such option or right or the termination of any such right to convert or
exchange such Convertible Securities, the Purchase Price then in effect
hereunder shall forthwith be increased to such Purchase Price which would have
obtained had the adjustments made upon the issuance of such rights or options or
Convertible Securities been made upon the basis of the issuance of the shares of
Common Stock theretofore actually delivered (and the total consideration
received therefor) upon the exercise of such rights or options or upon the
conversion or exchange of such Convertible Securities. If the purchase price
provided for in any such right or option referred to in clause (i) of
paragraph (c) or the rate at which any Convertible Securities referred to in
clause (i) or clause (ii) of paragraph (c) are convertible into or exchangeable
for Common Stock shall decrease at any time under or by reason of provisions
with respect thereto designed to protect against dilution, then in case of the
delivery of Common Stock upon the exercise of any such right or option or upon
conversion or exchange of any such Convertible Security, the Purchase Price then
in effect hereunder shall forthwith be decreased to such Purchase Price as would
have obtained had the adjustments made upon the issuance of such right, option
or Convertible Securities been made upon the basis of the issuance of (and the
total consideration received for) the shares of Common Stock delivered as
aforesaid.
(g) If any capital reorganization or reclassification of the capital
stock of the Corporation, or consolidation or merger of the Corporation 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 the 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 thereafter 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 Warrant Stock of the
Corporation 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
provision 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 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 Corporation
shall not effect any such consolidation, merger or sale, unless prior to the
consummation thereof the successor corporation (if other than the Corporation)
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
Holder appearing on the books of the Corporation, the obligation to deliver to
Holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, the Holder may be entitled to purchase.
(h) In case any time:
(1) the Corporation shall declare any cash dividend on its
Common Stock or preferred stock at a rate in excess of the rate of the last
cash dividend theretofore paid;
(2) the Corporation shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than regular cash
dividends) to the Holders of its Common Stock or preferred stock;
(3) the Corporation shall offer for subscription pro rata to the
Holders of its Common Stock or preferred stock any additional shares of
stock of any class or other rights;
(4) there shall be any capital reorganization, or
reclassification of the capital stock of the Corporation, or consolidation
or merger of the Corporation with, or sale of all or substantially all of
its assets to, another corporation; or
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give written
notice, by first-class mail, postage prepaid, addressed to the registered Holder
of this Warrant at the address of the Holder as shown on the books of the
Corporation, of the date on which (aa) the books of the Corporation shall close
or a record shall be taken for such dividend, distribution or subscription
rights, or (bb) such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up shall take place, as the case may
be. Such notice shall also specify the date as of which the holders of Common
Stock of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the case
may be. Such written notice shall be given at least 20 days prior to the action
in question and not less than 20 days prior to the record date or the date on
which the Corporation's transfer books are closed in respect thereto.
(i) If any event occurs as to which in the opinion of the Board of
Directors of the Corporation the other provisions of this paragraph 4 are not
strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the Holder of this Warrant or of Warrant Stock in accordance
with the essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such provisions,
in accordance with such essential intent and principles, so as to protect such
purchase rights as aforesaid.
(j) No fractional shares of Warrant Stock shall be issued upon the
exercise of this Warrant, but, instead of any fraction of a share which would
otherwise be issuable, the Corporation shall pay a cash adjustment (which may be
effected as a reduction of the amount to be paid by the Holder hereof upon such
exercise) in respect of such fraction in an amount equal to the same fraction of
the Market Price per share of Common Stock as of the close of business on the
date of the notice required by paragraph 1 above. "Market Price" shall mean, if
the Common Stock is traded on a securities exchange or on The NASDAQ SmallCap
Market, the closing price of the Common Stock on such exchange or the NASDAQ
SmallCap Market, or, if the Common Stock is otherwise traded in the
over-the-counter market, the closing price, in each case averaged over a period
of 20 consecutive business days prior to the date as of which "Market Price" is
being determined. If at any time the Common Stock is not traded on an exchange
or The NASDAQ SmallCap Market, or otherwise traded in the over-the-counter
market, the "Market Price" shall be deemed to be the higher of (i) the book
value thereof as determined by any firm of independent public accountants of
recognized standing selected by the Board of Directors of the Corporation as of
the last day of any month ending within 60 days preceding the date as of which
the determination is to be made, or (ii) the fair value thereof determined in
good faith by the Board of Directors of the Corporation as of a date which is
within 15 days of the date as of which the determination is to be made.
5. As used herein, the term "Common Stock" shall include the
Corporation's presently authorized Common Stock and shall also include any
capital stock of any class of the Corporation 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
Corporation; provided that the shares purchasable pursuant to this Warrant shall
include shares designated as Common Stock of the Corporation on the date of
original issue of this Warrant or, in the case of any reclassification of the
outstanding shares thereof, the stock, securities or assets provided for in
paragraph 4(g) above.
6. So long as this Warrant remains outstanding, the Corporation will
not issue any additional capital stock of any class preferred as to dividends or
as to the distribution of assets upon voluntary or involuntary liquidation,
dissolution or winding up, unless the rights of the Holders thereof shall be
limited to a fixed sum or percentage of par, liquidation or redemption value in
respect of participation in dividends and in the distribution of such assets.
7. This Warrant shall not entitle the Holder hereof to any voting
rights or other rights as a stockholder of the Corporation.
8. The Holder of this Warrant, by acceptance hereof, agrees to give
written notice to the Corporation before transferring this Warrant or
transferring any unregistered Warrant Stock issuable or issued upon the exercise
hereof of Holder's intention to do so, describing briefly the manner of any
proposed transfer of this Warrant or Holder's
intention as to the disposition to be made of shares of Common Stock issuable or
issued upon the exercise hereof. Holder shall also provide the Corporation with
an opinion of counsel satisfactory to the Corporation to the effect that the
proposed transfer of this Warrant or disposition of unregistered shares may be
effected without registration or qualification (under any Federal or State law)
of this Warrant or the shares of Common Stock issuable or issued upon the
exercise hereof. Upon receipt of such written notice and opinion by the
Corporation, Holder shall be entitled to transfer this Warrant, or to exercise
this Warrant in accordance with its terms and dispose of the shares received
upon such exercise or to dispose of shares of Common Stock received upon the
previous exercise of this Warrant, provided that an appropriate legend
respecting the aforesaid restrictions on transfer and disposition may be
endorsed on this Warrant or the certificates for such shares. The Holder and
any assignee of the Holder shall be entitled to the registration rights provided
in Section 11 of the Purchase Agreement.
9. Subject to the provisions of paragraph 8 hereof, this Warrant and
all rights hereunder are transferable, in whole or in part, by the Holder hereof
in person or by duly authorized attorney, upon surrender at the principal office
of the Corporation of this Warrant properly endorsed. Each taker and holder of
this Warrant, by taking or holding the same, consents and agrees that the bearer
of this Warrant, when endorsed, may be treated by the Corporation and all other
persons dealing with this Warrant as the absolute owner hereof for any purpose
and as the person entitled to exercise the rights represented by this Warrant,
or to the transfer hereof on the books of the Corporation, any notice to the
contrary notwithstanding; but until such transfer on such books, the Corporation
may treat the registered Holder hereof as the owner for all purposes.
10. This Warrant is exchangeable, upon the surrender hereof by the
Holder hereof at the principal office of the Corporation, for new Warrants of
like tenor representing in the aggregate the right to subscribe for and purchase
the number of shares which may be subscribed for and purchased hereunder, each
of such new Warrants to represent the right to subscribe for and purchase such
number of shares as shall be designated by said Holder hereof at the time of
such surrender.
11. The Holder of this Warrant and of the Warrant Stock issuable or
issued upon the exercise hereof shall be entitled to the registration rights set
forth in Section 11 of the Purchase Agreement.
12. The obligations contained herein shall inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
13. All questions concerning this Warrant will be governed and
interpreted and enforced in accordance with the internal law of the State of
Minnesota.
14. Any notice required to be given to the Corporation under the
terms of this Warrant shall be in writing and addressed to the Secretary of the
Corporation at Xxx Xxxx Xxxxxx, X.X., Xxxxx 00, Xxxxxxxxxxx, Xxxxxxxxx 00000.
Any notice required to be given to the Holder shall be in writing and addressed
to the Holder at 000 Xxxxx Xxxxxxx 000, Xxxxx 000, Xx. Xxxxx Xxxx, Xxxxxxxxx
00000, or such other address as it may designate in
writing from time to time. All notices shall be deemed to have been given or
delivered upon: personal delivery; five (5) days after deposit in the United
States Mail, certified or registered (return receipt requested); one (1)
business day after deposit with a nationally recognized overnight courier
(prepaid) or one (1) business day after transmission by facsimile and receipt of
confirmation of receipt by sender.
IN WITNESS WHEREOF, the Corporation and the Holder have caused this
Warrant to be signed by their duly authorized officers as of July 23, 1997.
TELIDENT, INC.
/s/ W. Xxxxxx XxXxxxxxxx
--------------------------------------------------
W. Xxxxxx XxXxxxxxxx, President and Chief
Executive Officer
FAMCO III LIMITED LIABILITY COMPANY
By Its Manager: Family Financial Strategies, Inc.
/s/ Xxxx Xxxxxx
--------------------------------------------------
Xxxx Xxxxxx, President
RESTRICTION ON TRANSFER
The securities evidenced hereby may not be transferred without (i) an
opinion of counsel reasonably satisfactory to the Corporation that such transfer
may be lawfully made without registration under the Federal Securities Act of
1933 and all applicable state securities laws or (ii) such registration.
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY UPON ASSIGNMENT)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
this Warrant, and appoints
to transfer this Warrant on the books of the Corporation with the full power of
substitution in the premises.
Dated:
In the presence of:
----------------------------------------------
(Signature must conform in all respects to the
name of the Holder as specified on the face of
this Warrant without alteration, enlargement or
any change whatsoever)
SUBSCRIPTION FORM
To Be Executed by the Holder of This Warrant if Holder
Desires to Exercise This Warrant in Whole or in Part:
To: Telident, Inc. (the "Corporation")
The undersigned ________________________________
Please insert Social Security or other
identifying number of Subscriber:
_______________________
hereby irrevocably elects to exercise the right of purchase represented by this
Warrant for, and to purchase thereunder, _________ shares of the Common Stock
provided for therein and tenders payment herewith to the order of the
Corporation in the amount of $_______, such payment being made as provided on
the face of this Warrant.
The undersigned requests that certificates for such shares of Common
Stock be issued as follows:
Name:__________________________________________________
Address:_______________________________________________
Deliver to:____________________________________________
Address: _____________________________________________
and, if such number of shares of Common Stock shall not be all the shares of
Common Stock purchasable hereunder, that a new Warrant for the balance remaining
of the shares of Common Stock purchasable under this Warrant be registered in
the name of, and delivered to, the undersigned at the address stated above.
Dated: ___________
Signature
----------------------------------------
Note: The signature on this
Subscription Form must correspond with
the name as written upon the face of
this Warrant in every particular,
without alteration or enlargement or any
change whatever.
EXHIBIT 3
ESCROW AGREEMENT
This Agreement is entered into this 23rd day of July, 1997, by and among
Telident, Inc. (the "Issuer"), FAMCO III LIMITED LIABILITY COMPANY (the
"Purchaser"), and Manchester Companies, Inc. (the "Escrow Agent").
WHEREAS, the Issuer has undertaken to offer and sell to the Purchaser in a
private placement transaction shares of its series II convertible preferred
stock and warrants to purchase shares of its common stock (together the
"Securities"), pursuant to the terms of a Stock Purchase Agreement, dated July
23, 1997 by and between the Issuer and the Purchaser (the "Purchase Agreement");
and
WHEREAS, as a condition of entering into the Purchase Agreement, the
Purchaser requires and the Issuer agrees to provide for the escrow of all
proceeds from the sale of the Securities; and
WHEREAS, the Issuer, the Purchaser and the Escrow Agent desire to enter
into an agreement with respect to the escrow of such proceeds.
NOW, THEREFORE, in consideration of the premises and agreements set forth
herein, the parties hereto agree as follows:
1. PROCEEDS TO BE PLACED IN ESCROW. The Aggregate Purchaser Price shall
be delivered to the Escrow Agent within one (1) business day following the
Closing, and shall be retained in escrow by the Escrow Agent in an account which
allows the Escrow Agent to individually account for funds received and any
interest earned on such funds (the "Escrow Account").
2. INVESTMENT OF PROCEEDS. All funds held by the Escrow Agent pursuant
to this Agreement shall constitute trust property for the purposes for which
they are held. The Escrow Agent shall invest all funds received from the Issuer
in an interest bearing account.
3. DISBURSEMENT OF FUNDS. Upon the receipt by the Escrow Agent of
written certification from the Issuer that the Issuer continues to be listed on
The NASDAQ SmallCap Market as of August 14, 1997 (the "Disbursement
Requirement"), the Escrow Agent shall thereafter remit all of the funds held in
escrow (or such lesser amount as the Issuer shall specify) to the Issuer. In
any case, the Issuer shall provide written notification to the Escrow Agent,
prior to the expiration of the Term of Escrow (as defined in Section 4 hereof),
instructing the Escrow Agent as to the manner of disbursement of the funds held
in the Escrow Account. If the Disbursement Requirement has not been met during
the Term of Escrow, then, within a reasonable time, but in no event more than
five (5) business days after the last day of the Term of Escrow, the Escrow
Agent shall refund to the Purchaser at the address shown in Section 7 the
Aggregate Purchase Price, and shall then notify the Issuer in writing of such
refund. Upon such refund, the Purchaser shall return to
the Issuer any and all Warrants and certificates representing Preferred Shares
delivered to the Purchaser by the Issuer at the Closing. Any interest earned on
the funds deposited with the Escrow Agent shall be applied toward any fees
charged by the Escrow Agent for services provided hereunder, and any balance of
such interest earned shall be transmitted to the Purchaser.
4. TERM OF ESCROW. The term of this escrow agreement (the "Term of
Escrow") shall commence as of the date of this Agreement and terminate at 11:59
p.m. on August 14, 1997. Upon termination hereof, whether after extension or
otherwise, the Escrow Agent shall disburse the funds in the Escrow Account to
the Purchaser in the manner and upon the terms directed in Section 3 hereof.
The Issuer may abandon the sale of the Securities and terminate this Agreement
any time prior to the above date. The receipt by the Escrow Agent of a copy of a
resolution of the Issuer's Board of Directors authorizing said abandonment, duly
attested to by the Chief Executive Officer of the Issuer, shall be treated as if
the Disbursement Requirement was not met during the Term of Escrow, and the
Escrow Agent shall be authorized to refund to the Purchaser any monies received
therefrom in the manner provided in Section 3 above.
5. DUTY AND LIABILITY OF THE ESCROW AGENT; INDEMNIFICATION. The sole
duty of the Escrow Agent, other than as herein specified, shall be to receive
the Aggregate Purchase Price and hold it subject to release, in accordance
herewith, and the Escrow Agent shall be under no duty to determine whether the
Issuer is complying with requirements of this Agreement in tendering to the
Escrow Agent the Aggregate Purchase Price. The Escrow Agent may conclusively
rely upon and shall be protected in acting upon any statement, certificate,
notice, request, consent, order or other document believed by it to be genuine
and to have been signed or presented by the Issuer. The Escrow Agent shall have
no duty or liability to verify any such statement, certificate, notice, request,
consent, order or other document, and its sole responsibility shall be to act
only as expressly set forth in this Agreement. The Escrow Agent shall be under
no obligation to institute or defend any action, suit or proceeding in
connection with this Agreement unless first indemnified to its satisfaction.
The Issuer and the Purchaser, jointly and severally, hereby indemnify and hold
harmless the Escrow Agent from and against any and all loss, liability, cost,
damage and expense, including, without limitation, reasonable attorneys' fees,
which the Escrow Agent may suffer or incur by reason of any action, claim or
proceeding brought against the Escrow Agent arising out of or relating in any
way to this Agreement or any transaction to which this Agreement relates unless
such action, claim or proceeding is the result of the willful misconduct of the
Escrow Agent. The Escrow Agent may consult counsel in respect of any question
arising under this Agreement and the Escrow Agent shall not be liable for any
action taken or omitted in good faith upon advice of such counsel.
6. BINDING AGREEMENT AND SUBSTITUTION OF ESCROW AGENT. The terms and
conditions of this Agreement shall be binding on the assigns, creditors or
transferees, or successors in interest, whether by operation of law or
otherwise, of the parties hereto. If, for any reason, the Escrow Agent named
herein should be unable or unwilling to continue as such Escrow Agent, then the
Issuer may substitute another escrow agent.
7. NOTICES. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given (a) on the date of service if served personally on the party to whom
notice is to be given, (b) on the day of transmission if sent by facsimile
transmission to the facsimile number given below, and telephonic confirmation of
receipt is obtained promptly after completion of transmission, (c) on the day
after delivery to Federal Express or similar overnight courier or the Express
Mail service maintained by the U.S. Postal Service, or (d) 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 the party as follows:
If to the Issuer:
Telident, Inc.
Attention: W. Xxxxxx XxXxxxxxxx
Xxx Xxxx Xxxxxx, Xxxxx 00
Xxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
If to Purchaser:
FAMCO III LIMITED LIABILITY COMPANY
000 Xxxxx Xxxxxxx 000
Xxxxx 000
Xx. Xxxxx Xxxx, Xxxxxxxxx 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
If to the Escrow Agent:
Manchester Companies, Inc.
3650 IDS Center
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Any party may change its address for purposes of this paragraph by giving
the other party written notice of the new address in the manner set forth above.
8. AMENDMENTS; WAIVERS. This Agreement may only be amended or modified,
and any of the terms, covenants, representations, warranties, or conditions
hereof may only be waived, by a written instrument executed by the parties
hereto, or in the case of a waiver, executed by the party waiving compliance.
Any waiver by any party of any condition, or of the breach of any provision,
term, covenant, representation or warranty contained in this Agreement, in any
one or more instances, shall not be deemed to be nor construed as
further or continuing waiver of any such condition, or of the breach of any
other provision, term, covenant, representation, or warranty of this Agreement.
9. DEFINED TERMS. Any terms not defined herein shall have the meaning
set forth in the Purchase Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
Telident, Inc.
/s/ W. Xxxxxx XxXxxxxxxx
----------------------------------------
W. Xxxxxx XxXxxxxxxx, President and
Chief Executive Officer
FAMCO III LIMITED LIABILITY COMPANY
By Its Manager: Family Financial
Strategies, Inc.
/s/ Xxxx Xxxxxx
----------------------------------------
Xxxx Xxxxxx, President
Manchester Companies, Inc.
/s/ Xxxx X. Xxxxxxxx
----------------------------------------
Xxxx X. Xxxxxxxx, President
EXHIBIT 4
REPRESENTATIONS AND WARRANTIES OF COMPANY
i. REPRESENTATION 5.2. The Company is in the process of qualifying as
a foreign corporation in the State of Illinois.
ii. REPRESENTATION 5.6(a). The Company has a line of credit facility
with Norwest Bank Minnesota, N.A. This line of credit is secured by the
Company's inventory and accounts receivable.
iii. REPRESENTATION 5.6(f). In conjunction with her recent promotion to
controller of the Company, Xxxxxxx Xxxxxx'x annual salary increased from $35,000
to $52,000.
iv. REPRESENTATION 5.6(j). On May 6, 1997, the Company's Board of
Directors authorized the issuance of options to purchase, in the aggregate,
125,000 shares of the Company's common stock ("Common Stock"). These options
(i) are to be granted to employees of the Company, (ii) are exercisable at $1.00
per share of Common Stock, (iii) vest to the extent of 20% of the shares of
Common Stock subject to each option per year, and (iv) terminate on May 6, 2004.
In addition, on April 1, 1997, the Company's Board of Directors authorized the
issuance to Mr. W. Xxxxxx XxXxxxxxxx, the President and Chief Executive Officer
of the Company, of an option to purchase, in the aggregate, 75,000 shares of
Common Stock. This option is exercisable at $1.125 per share of Common Stock,
vests to the extent of 20% of the shares of Common Stock subject to such option
per year, and terminates on April 1, 2004. All of the foregoing options were
issued under the Plan.
v. REPRESENTATION 5.14. The following documents contain registration
rights provisions:
(1) 10% Series B Convertible Debenture issued by the Company in
connection with its May 1993 offering;
(2) Exercise, Conversion, Subscription and Purchase Agreement,
dated October 12, 1995, by and between the Company and Okabena
Partnership K ("Okabena");
(3) Warrant issued by the Company in connection with its April
1996 bridge financing; and
(4) Warrant issued by the Company to X.X. Xxxxxxxx & Co. in
connection with its August 1996 public offering.
vi. REPRESENTATION 5.16. The Company has received a letter from Nasdaq,
dated June 3, 1997, which provides that the Company's common stock will be
delisted on June 10, 1997. The Company has appealed this decision.
vii. REPRESENTATION 5.20. The following securities contain anti-dilution
provisions, and the holders of those securities have not waived the rights they
have pursuant to such provisions.
a. Series C Warrant to purchase 150,000 shares of Common Stock,
exercisable at $4.00 per share of such stock, issued by the Company
to Okabena in October 1995. Okabena will not waive the
anti-dilution provisions contained in this warrant.
b. 10% Series B Convertible Debenture issued by the Company in
connection with its May 1993 offering. Such anti-dilution
provisions will not be waived by holders of other than the Redeemed
Debentures.
viii. REPRESENTATION 5.20. The 10% Series B Convertible Debentures issued
by the Company in connection with its May 1993 offering contain preemptive
rights provisions.
