SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): July 9, 1999
SAC TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Minnesota 1-13463 41-1741861
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(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification No.)
incorporation)
4444 West 76th Street, Suite 600
Edina, MN 55435
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(Address of principal executive office)
Registrant's telephone number, including area code: (612) 835-7708
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N/A
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
SAC Technologies, Inc. (the "Company") and The Shaar Fund Limited, a
private international investment fund (the "Fund") completed a private financing
transaction on July 9, 1999 which yielded gross proceeds to the Company of
$875,000. Pursuant to a Securities Purchase Agreement between the parties, the
Fund purchased 13,125 shares of the Company's newly designated Series A 9%
Convertible Preferred Stock (the "Series A Shares") together with five year
warrants (the "Warrants") to purchase 131,250 shares of common stock, $.01 par
value per share ("Common Stock"). The Company is obligated to file a
registration statement with the United States Securities and Exchange Commission
(the "Commission") permitting the public resale of the shares of Common Stock
issuable upon conversion or exercise, as applicable, of the Series A Shares and
Warrants. In connection with this financing, the Fund forever released the
Company from the event of default resulting from the Company's shares being
delisted from the NASDAQ SmallCap Market. Below is a more detailed description
of the material components of this financing transaction.
Series A Shares
The Board of Directors of the Company authorized the issuance of 13,125
shares of Preferred Stock to be designated as "Series A 9% Convertible Preferred
Stock". The Series A Shares have a liquidation preference of $100 per share
payable prior to and in preference to the Company's Common Stock. The Series A
Shares were sold at an approximate 33% discount to the $100 per share
liquidation preference per share for an aggregate purchase price of $875,000.
The Series A Shares provide for a cumulative dividend at the rate of 9%
per annum payable in arrears semi-annually on June 15 and December 15. At the
option of the Company, the dividends are payable in cash or shares of restricted
Common Stock. The restricted Common Stock issued in payment of such dividends is
issuable at the Conversion Price (as defined below) in effect on the date the
dividend is paid.
The Series A Preferred Shares are convertible at the option of the
holder into shares of restricted Common Stock at a Conversion Price equal to the
lesser of (i) 110% of the closing bid price of the Company's Common Stock on
July 8, 1999; and (ii) 78% of the average of the closing bid prices of the
Company's Common Stock as reported on the OTC Electronic Bulletin Board during
the five trading days immediately preceding the date of conversion. The
Conversion Price is subject to adjustment in the event that the Company issues
any options or other convertible securities without consideration or for
consideration per share less than the Effective Conversion Price in effect on
the date of issuance. The Effective Conversion Price is equal to the Conversion
Price in effect on such date multiplied by .67 (representing the original issue
discount applicable to the Series A Shares). The number of shares issuable upon
conversion of the Series A Shares, in payment of dividends thereon or exercise
of the Warrants is limited such that the Company has no obligation to issue such
shares to the extent that such issuance would result in the holder of such
Series A Shares being deemed the beneficial owner of in excess of 9.99% of the
Company's outstanding shares of Common Stock.
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The Company has the right to redeem the Series A Shares in whole or in
part at $100 per Series A Share so long as (i) the Company's Common Stock is
eligible for quotation and trading on the OTC Electronic Bulletin Board, a
national securities exchange or the NASDAQ Stock Market; and (ii) the shares of
Common Stock issuable upon conversion of the Series A Shares are subject to an
effective registration statement permitting their resale under the Securities
Act of 1933, as amended (the "Securities Act"). Other than provided by
applicable law, holders of the Series A Shares have no voting rights.
Warrants
In connection with issuance of the Series A Shares, the Company issued
Warrants to the Fund to purchase 131,250 shares of Common Stock at an exercise
price equal to 110% of the average closing bid prices of the Company's common
stock during the five (5) trading days ending July 8, 1999). The Warrants have a
term of five (5) years and are immediately exercisable. The exercise price and
number of shares issuable upon exercise of the Warrants are subject to
proportional adjustment in the event of a stock split, stock dividend,
reclassification, recapitalization, merger or consolidation effecting the
Company's Common Stock. The exercise of the Warrants is limited such that the
Company has no obligation to issue any shares upon any exercise to the extent
that any exercise would result in the holder of the Warrants being the
beneficial owner of in excess of 9.99% of the Company's outstanding shares of
Common Stock.
Registration Rights Agreement
The Company also entered into a registration rights agreement with the
Fund which requires the Company to file a registration statement covering the
public resale of the Common Stock issuable upon conversion or exercise, as
applicable, of the Series A Shares and Warrants by no later September 7, 1999
and have such registration statement declared effective by no later than
December 6, 1999. In the event that the Company either fails to file the
registration statement or have such registration statement declared effective by
the dates set forth above, it is subject to a fine equal to two percent (2%) of
the liquidation preference of the Series A Shares outstanding on such date. In
the event that the Company fails to have such registration statement filed or
declared effective within thirty (30) days after the dates set forth above, it
is subject to an additional fine equal to three percent (3%) of the liquidation
preference of all Series A Shares outstanding on such date and an additional
three percent (3%) of such liquidation preference for each thirty (30) day
period thereafter.
Waiver of Event of Default
The Fund is the holder of the Company's outstanding Subordinated 5%
Convertible Debenture (the "Debenture") in the outstanding principal amount of
approximately $1,500,000. On or about May 24, 1999, the Company's Common Stock
was delisted from trading on the NASDAQ SmallCap Market. The delisting
constituted an event of default under the Debenture which provided the Fund with
the right to accelerate all outstanding indebtedness due under the Debenture. On
or about May 27, 1999, the Fund waived its right under the Debenture to
accelerate such indebtedness as a result of the Company's shares being delisted
from the NASDAQ Stock Market for a period of thirty (30) days. In connection
with this financing, the
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Fund permanently waived the event of default and any and all right it has to
accelerate the outstanding indebtedness due under the Debenture as a result of
the Company's shares being delisted from the NASDAQ SmallCap Stock Market.
ITEM 7. EXHIBITS
Exhibit Description
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3.4 Certificate of Designation of Series A 9% Convertible
Preferred Stock
10.20 Registration Rights Agreement by and between the
Registrant and The Shaar Fund Ltd. dated July 9, 1999
10.21 Securities Purchase Agreement by and between the Registrant
and The Shaar Fund Ltd. dated July 9, 1999
10.22 Form of Warrant granted to The Shaar Fund Ltd.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: July 22, 1999 SAC TECHNOLOGIES, INC.
BY:/s/Barry M. Wendt
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Barry M. Wendt
Chief Executive Officer
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EXHIBIT INDEX
Exhibit Description
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3.4 Certificate of Designation
10.20 Registration Rights Agreement by and between the Registrant
and The Shaar Fund Ltd. dated July 9, 1999
10.21 Securities Purchase Agreement by and between the Registrant
and The Shaar Fund dated July 9, 1999
10.22 Form of Warrant granted to The Shaar Fund.
EXHIBIT 3.4
CERTIFICATE OF DESIGNATION
The undersigned officer of SAC Technologies, Inc., a Minnesota
corporation (the "Corporation" or "Company") does hereby certify that the
following resolution was adopted by the Board of Directors of the Corporation in
accordance with Minnesota Statutes Chapter 302A.239 on June 30, 1999:
WHEREAS, the Articles of Incorporation of the Company presently
authorize the issuance of 5,000,000 shares of Preferred Stock, $.01 par value
per share, in one or more series upon terms and conditions that are to be
designated by the Board of Directors; and
WHEREAS, in order to accommodate a business purpose deemed proper by
the Board of Directors, the Board of Directors does hereby seek to provide for
the designation of a segment of the Company's Preferred Stock as "Series A 9%
Convertible Preferred Stock;" and
WHEREAS, the terms, conditions, voting rights, preferences, limitations
and special rights of the Series A 9% Convertible Preferred Stock in their
entirety are as provided herein.
NOW, THEREFORE, be it:
RESOLVED, that a series of the class of authorized Preferred Stock,
$.01 par value per share, of the Company hereinafter designated "Series A 9%
Convertible Preferred Stock," be hereby created, and that the designation and
amount thereof and the voting powers, preferences and relative, participating
and other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
Section 1. Designation and Amount.
The shares of such series shall be designated as the "Series A 9%
Convertible Preferred Stock " (the "Series A Shares") and the number of shares
initially constituting such series shall be 13,125 which may be issued in whole
or fractional shares.
Section 2. Dividends and Distributions.
(a) The holders of Series A Shares shall be entitled to receive
dividends at a rate of nine percent (9%) per annum of the liquidation preference
of $100 per share (the "Liquidation Preference"), which shall be fully
cumulative, prior and in preference to any declaration or payment of any
dividend payable other than in shares of common stock, $.01 par value per share,
of the Company (the "Common Stock") or other distribution on the Common Stock of
the Company. If the dividends on the Series A Shares cannot legally be paid in
full, dividends shall be paid, to the maximum permissible extent, to the holders
of the Series A Shares, PARRI PASSU. The dividends on the Series A Shares shall
accrue from the date of issuance of each share and shall be payable
semi-annually on June 15 and December 15 of each year (each a "Dividend Date")
commencing on December 15, 1999, except that if any such date is a Saturday,
Sunday or legal holiday (a "Non-Business Day") then such dividend shall be
payable on the next day that is not a Saturday,
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Sunday or legal holiday on which banks in the State of Minnesota are permitted
to be closed (a "Business Day") to holders of record as they appear on the stock
books of the Company on the applicable record date, which shall be not more than
60 nor less than 10 days preceding the payment date for such dividends, as fixed
by the Board of Directors (the "Record Date"). The dividends on the Series A
Shares shall be payable only when, as and if declared by the Board of Directors
out of funds legally available therefor. The dividends shall, at the option of
the Corporation, either (1) be payable in cash; or (2) in shares of Common Stock
(the "Series A Payments-in-Kind") in accordance with Section 2 (b) below. In the
absence of an election by the Board of Directors within 10 days of each Dividend
Date to pay dividends in cash, the dividends shall be payable in shares of
Common Stock. The amount of dividends payable for any period that is shorter or
longer than 30 days shall be computed on the basis of a 360-day year of twelve
30-day months. All accrued but unpaid dividends shall accrue interest after each
Dividend Date at a rate of nine percent (9%) per annum (compounded on a
semi-annual basis) from each Dividend Date, computed on the basis of a 360-day
year of twelve 30-day months.
(b) Series A Payments-in-Kind shall be payable as of the Dividend Date
of each period for which the election is made, except that if such date is a
Non-Business Day then such Series A Payment-in-Kind shall be payable as of the
next Business Day to holders of record as they appear on the stock books of the
Company on the applicable Record Date. Each Series A Payment-in-Kind shall be
equal in amount to that number of shares of Common Stock obtained by dividing
the aggregate cash dividends payable with respect to the Series A Shares on any
such Dividend Date by the "Conversion Price" (as defined below) in effect on the
Dividend Date rounded to the closest whole share of Common Stock. Certificates
representing the shares of Common Stock issuable in payment of any Series A
Payment-in-Kind shall be delivered to each holder entitled to receive such
Series A Payment-in-Kind (in appropriate denominations) on the Dividend Date. If
a Series A Payment-in-Kind is not made in compliance with the terms hereof, the
Corporation shall be obligated to pay the cash dividends under the procedures in
the previous paragraph.
(c) The holders of Series A Shares shall not be entitled to receive any
dividends or other distributions except as provided in this Certificate of
Designation of Series A Shares.
Section 3. Voting Rights.
Except as provided by applicable law, the holders of the Series A
Shares shall have no voting rights.
Section 4. Liquidation, Dissolution, Winding Up or Certain Mergers or
Consolidations.
If the Company shall adopt a plan of liquidation or of dissolution, or
commence a voluntary case under the federal bankruptcy laws or any other
applicable state or federal bankruptcy, insolvency or similar law, or consent to
the entry of an order for relief in any involuntary case under such law or to
the appointment of a receiver, liquidator, assignee, custodian, trustee or
sequestrator (or similar official) of the Company or of any substantial part of
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its property, or make an assignment for the benefit of its creditors, or admit
in writing its inability to pay its debts generally as they become due and on
account of such event the Company shall liquidate, dissolve or wind up, or upon
any other liquidation, dissolution or winding up of the Company, or engage in a
merger, plan of reorganization or consolidation in which the Company is not the
surviving entity, then and in that event, no distribution shall be made to the
holders of shares of capital stock, unless, prior thereto, the holders of the
Series A Shares shall have first received an amount in cash or equivalent value
in securities or other consideration equal to the Liquidation Preference
thereof. If upon any liquidation, dissolution, winding up, merger, plan of
reorganization or consolidation, the amount so payable or distributable does not
equal or exceed the Liquidation Preference of the Series A Shares, then, and in
that event, the amount of cash so payable, and amount of securities or other
consideration so distributable, shall be shared ratably among the holders of the
Series A Shares. For the purposes hereof, the term "Liquidation Preference"
shall mean $100 per share with respect to each of the Series A Shares, plus any
and all accrued unpaid dividends thereon.
Section 5. Conversion.
(a) Right To Convert:
(i) Subject to the provisions for adjustment hereinafter set forth
and the limitation of the number of shares of Common Stock issuable upon
conversion set forth Section 5(a)(ii) below, commencing upon issuance, each
Series A Share shall be convertible in the manner hereinafter set forth into
fully paid and nonassessable shares of Common Stock, at the option of the holder
thereof, at any time at the principal office of the Company or any transfer
agent for the Series A Shares, into the number of fully paid and nonassessable
shares of Common Stock which results from dividing the "Conversion Price" (as
defined below) into the Liquidation Preference. The "Conversion Price" shall be
equal to the lower of (1) the "Initial Conversion Price" (as defined below) and
(2) 78% of the "Market Price" (as defined below) of the Common Stock as of a
"Conversion Date" (as defined below). Upon conversion, all accrued or declared
but unpaid dividends (including any interest accrued thereon calculated as of
the Conversion Date (as defined below)) on the Series A Shares being converted
shall either be paid in cash, to the extent permitted by applicable law or, at
the option of the Company in shares of Common Stock. The market price per share
of Common Stock (the "Market Price") shall be the average of the closing bid
prices per share of Common Stock during the five (5) trading days immediately
preceding a "Conversion Date", as such closing bid prices are reported on the
OTC Electronic Bulletin Board; provided, however, if there is no closing bid
price reported on any day during such five (5) day period, in lieu of the
closing bid price for such day, the last sales price per share as reported on
the OTC Electronic Bulletin Board for such day shall be utilized in such
calculation and provided further, if there is no sale reported for any such day,
the fair market value of a share of Common Stock on such day as determined in
good faith by the Board of Directors of the Company, or in the event the Common
Stock is listed on NASDAQ or a stock exchange, the Market Price shall be the
average of the closing bid prices per share of Common Stock during the five (5)
trading days immediately preceding a "Conversion Date" on NASDAQ or such
exchange, as reported in the Wall Street Journal. The "Initial Conversion Price"
of the Series A Shares shall be equal to 110% of the closing bid price of the
Common Stock as reported on the OTC Electronic Bulletin Board on the trading day
prior to the "Series A Initial Issuance Date" (as defined below). The conversion
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date (the "Conversion Date") shall be any date on which a notice of conversion
executed by Holder setting forth the number of Series A Shares being converted
is received via facsimile or hard copy by the Corporation at its principal
executive offices.
(ii) Notwithstanding anything contained herein to the contrary, in
no event (except while there is outstanding a tender offer for any or all of the
shares of the Company's Common Stock) shall any holder of any Series A Shares be
entitled to convert Series A Shares, or shall the Company have the obligation to
issue shares upon such conversion or make a Series A Payment-in-Kind, to the
extent that, after such conversion or payment the sum of (A) the number of
shares of Common Stock beneficially owned by such holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unconverted portion of the Series A Shares or
unexercised portion of any warrants or other securities convertible into shares
of Common Stock of the Company beneficially owned by such holder), and (B) the
number of shares of Common Stock issuable upon the conversion of the Series A
Shares with respect to which the determination of this proviso is being made,
would result in beneficial ownership by such holder and its affiliates of more
than 9.99% of the outstanding shares of Common Stock (after taking into account
the shares to be issued to such Holder upon such conversion). For purposes of
the proviso to the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), except as otherwise provided in clause (A) of
such sentence.
(b) Adjustments to Conversion Price:
(i) The following definitions shall apply for purposes of this
Section:
(A) "Options" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(B) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities convertible into or exchangeable for
Common Stock.
(C) "Additional Shares of Common Stock" shall mean all shares
of Common Stock issued (or, pursuant to Section 5(b)(iii), deemed to be issued)
by the Company after the Series A Original Issue Date (as defined below), other
than shares of Common Stock issued or issuable:
(i) upon conversion of Series A Shares;
(ii) in a transaction described in Section 5(b)(vi);
(iii) pursuant to a stock grant, option plan or purchase
plan, other employee stock incentive program or agreement approved by the Board
of Directors;
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(iv) pursuant to the terms of any stock grant, option,
warrant, employment agreement or other written obligation, agreement or
commitment to which the Company was a party as of the Series A Original Issue
Date (as defined below) and which was disclosed in the Company's filings with
the Securities and Exchange Commission; or
(v) by way of dividend or other distribution on shares of
Common Stock excluded from the definition of Additional Shares of Common Stock
by the foregoing clauses (i), (ii), (iii) or (iv).
(D) "Series A Original Issue Date" shall mean the date on which
the first Series A Share was issued.
(ii) No Adjustment of Conversion Price: No adjustment in the
Conversion Price shall be made in respect of the issuance of Additional Shares
of Common Stock unless the consideration per share for an Additional Share of
Common Stock issued or deemed to be issued by the Company is issued for
consideration less than the "Effective Conversion Price" in effect on the date
of such issuance. The effective conversion price (the "Effective Conversion
Price") on any date shall be equal to that number obtained by multiplying the
Conversion Price in effect on such date by .67.
(iii) Deemed Issue of Additional Shares of Common Stock:
(A) Options and Convertible Securities: In the event
the Company at any time or from time to time after the Series A Original Issue
Date shall issue any Options or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities entitled to
receive any such Options or Convertible Securities, then the maximum number of
shares of Common Stock issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the exercise of such
Options and conversion or exchange of such Convertible Securities shall be
deemed to be Additional Shares of Common Stock issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the close of
business on such record date, provided that Additional Shares of Common Stock
shall not be deemed to have been issued unless the consideration per share
(determined pursuant to Section 5(b)(v) hereof) of such Additional Shares of
Common Stock would be less than the Effective Conversion Price in effect on the
date of and immediately prior to such issue, or such record date, as the case
may be, and provided further that in any such case in which Additional Shares of
Common Stock are deemed to be issued:
(i) except as provided in Section 5(b)(iii)(A)(ii) hereof,
no further adjustment in the Conversion Price shall be made upon the subsequent
issue of Convertible Securities or shares of Common Stock upon the exercise of
such Options or conversion or exchange of such Convertible Securities;
(ii) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any change in the
consideration payable to the Company, or change in the number of shares of
Common Stock issuable, upon the exercise,
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conversion or exchange thereof (other than under or by reason of provisions
designed to protect against dilution), the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with respect
thereto) and any subsequent adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be recomputed to reflect such increase
or decrease insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities; and
(iii) no readjustment pursuant to clause (ii) above shall
have the effect of increasing the Conversion Price to an amount which exceeds
the lower of (1) the Conversion Price on the original adjustment date or (2) the
Conversion Price that would have resulted from any issuance of Additional Shares
of Common Stock between the original adjustment date and such readjustment date.
(iv) Adjustment of Conversion Rate Upon Issuance of Additional
Shares of Common Stock: In the event the Company shall issue Additional Shares
of Common Stock without consideration or for a consideration per share less than
the Effective Conversion Price in effect on the date of and immediately prior to
such issue, then and in each such event the Conversion Price shall be reduced to
a price (calculated to the nearest cent) determined by multiplying such
Conversion Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issue plus the
number of shares of Common Stock which the aggregate consideration received by
the Company for the total number of Additional Shares of Common Stock so issued
would purchase at the Effective Conversion Price; and the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such issue plus the number of such Additional Shares of Common Stock so issued.
(v) Determination of Consideration. For purposes of this Section,
the consideration received by the Company for the issuance of any Additional
Shares of Common Stock shall be computed as follows:
(A) Cash and Property: Such consideration shall:
(i) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Company;
(ii) insofar as it consists of property other than cash, be
computed at the fair value thereof at the time of such issue, as determined by
the Board of Directors in the good faith exercise of its reasonable business
judgment; and
(iii) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the Company
for consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (i) and (ii) above, as determined by
the Board of Directors in the good faith exercise of its reasonable business
judgment.
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(B) Options and Convertible Securities. The consideration per
share received by the Company for Additional Shares of Common Stock deemed to
have been issued pursuant to Section 5(b)(iii)(A), relating to Options and
Convertible Securities, shall be determined by dividing
(i) the total amount, if any, received or receivable by the
Company as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Company upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(ii) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(vi) Other Adjustments.
(A) Subdivisions, Combinations, or Consolidations of Common
Stock: In the event the outstanding shares of Common Stock shall be subdivided,
combined or consolidated, by stock split, stock dividend, combination or like
event, into a greater or lesser number of shares of Common Stock, the Conversion
Price in effect immediately prior to such subdivision, combination,
consolidation or stock dividend shall, concurrently with the effectiveness of
such subdivision, combination or consolidation, be proportionately adjusted.
(B) Reclassifications: In the case, at any time after the date
hereof, of any capital reorganization or any reclassification of the stock of
the Company (other than as a result of a stock dividend or subdivision, split-up
or combination of shares), or the consolidation or merger of the Company with or
into another person (other than a consolidation or Merger (i) in which the
Company is the continuing entity and which does not result in any change in the
Common Stock or (ii) which is treated as a liquidation pursuant to Section 4
hereof), the Series A Shares shall, after such reorganization, reclassification,
consolidation or merger be convertible into the kind and number of shares of
stock or other securities or property of the Company or otherwise to which such
holder would have been entitled if immediately prior to such reorganization,
reclassification, consolidation or merger such holder had converted its Series A
Shares into Common Stock. The provisions of this Section 5(b)(vi) shall
similarly apply to successive reorganizations, reclassifications, consolidations
or mergers.
(c) Fractional Shares. In lieu of any fractional shares to which the
holder of a Series A Share would otherwise be entitled upon conversion, the
Company shall pay cash equal to such
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fraction multiplied by the fair market value of one share of Common Stock as
determined by the Board of Directors in the good faith exercise of its
reasonable business judgment.
(d) Miscellaneous:
(i) All calculations under this Section 5 shall be made to the
nearest cent or to the nearest one hundredth (1/100) of a share, as the
case may be.
(ii) The holders of at least 50% of the outstanding Series A
Shares shall have the right to challenge any determination by the Board
of Directors of fair market value pursuant to this Section 5, in which
case such determination of fair market value shall be made by an
independent appraiser selected jointly by the Board of Directors and
the challenging parties, the cost of such appraisal to be borne equally
by the Company and the challenging parties.
(iii) No adjustment in the Conversion Price need be made if
such adjustment would result in a change in such Conversion Price of
less than $0.01. Any adjustment of less than $0.01 which is not made
shall be carried forward and shall be made at the time of and together
with any subsequent adjustment which, on a cumulative basis, amounts to
an adjustment of $0.01 or more in the Conversion Rate.
(e) No Impairment. The Company will not, through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 5 and in the taking of all
such action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series A Shares against impairment.
(f) Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
Series A Shares, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding Series A Shares.
If at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding Series
A Shares, the Company will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose.
Section 6. Reports as to Adjustments.
Whenever the Conversion Price or the type of securities, cash or other
property into which the Series A Shares may be converted is adjusted as provided
in Section 5 hereof, the Company shall promptly mail to the holders of record of
the outstanding Series A Shares at their respective addresses as the same shall
appear in the Company's stock records, a notice stating that the Conversion
Price has been adjusted and setting forth the new number of shares of Common
Stock
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(or describing the new stock, securities, cash or other property) into which
each Series A Share is convertible as a result of such adjustment, a brief
statement of the facts requiring such adjustment and the computation thereof and
when such adjustment became effective.
Section 7. Redemption.
(a) All or any portion of the Series A Shares may be redeemed upon
payment in cash or other immediately available funds of $100 per Series A Share,
plus accrued and unpaid dividends thereon through the "Redemption Date" (as
defined below) (the "Redemption Price"), at any time by the Company at its sole
discretion upon thirty (30) days' written notice to the holders of the Series A
Shares provided that: (i) the Company's shares of Common Stock shall be eligible
for quotation and trading on the OTC Electronic Bulletin Board, on a national
securities exchange, the NASDAQ National Market System or the NASDAQ SmallCap
Market on the "Redemption Date" (as defined below); and (ii) the shares of
Common Stock issuable upon conversion of the Series A Shares shall be subject to
an effective registration statement permitting their resale under the Securities
Act of 1933, as amended. In the event that the Company redeems less than all of
the outstanding Series A Shares it shall redeem such shares pro rata among all
holders of the Series A Shares.
(b) Any notice of redemption ("Redemption Notice") given by the Company
with respect to the Series A Shares shall be delivered by mail, first class
postage prepaid, to each holder of record (at the close of business on the
business day preceding the day on which notice is given) of the Series A Shares,
at the address last shown on the records of the Company for such holder or given
by the holder to the Company, for the purpose of notifying such holder of the
redemption to be effected. The Redemption Notice shall specify a date (the
"Redemption Date") not earlier than 30 days after the mailing of the Redemption
Notice on which the Series A Shares then outstanding shall be redeemed and the
place at which payment may be obtained. The Redemption Notice shall call upon
each holder of Series A Shares to either (i) surrender to the Company, in the
manner and at the place designated, such holder's certificate or certificates
representing the Series A Shares to be redeemed or (ii) convert the Series A
Shares into Common Stock prior to the Redemption Date in accordance with the
provisions of Section 5 above. If the Company elects to redeem shares pursuant
to this Section 7 and defaults or fails to perform its redemption obligations
pursuant to this Section 7 in connection therewith, the holders of the Series A
Shares shall then have the absolute right to convert such Series A Shares into
Common Stock in accordance with the provisions of Section 5.
(c) On the Redemption Date, the Company shall pay by cash or wire
transfer of immediately available funds to an escrow agent (the "Escrow Agent")
an amount equal to the aggregate Redemption Price for all Series A Shares
subject to such redemption. the Escrow Agent shall distribute to each person
whose name appears on the certificate or certificates of the Series A Shares
that (i) shall not have been converted pursuant to Section 5 hereof and (ii)
shall have been surrendered to the Escrow Agent in the manner and at the place
designated in the Redemption Notice, the Redemption Price, and thereupon each
surrendered certificate shall be canceled.
- 9 -
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(d) From and after the Redemption Date, unless there shall have been a
default in payment of the Redemption Price, all rights of the holders of the
Series A Shares subject to the Redemption Notice (except the right to receive
the Redemption Price subsequent to the Redemption Date upon surrender of their
certificate or certificates) shall cease with respect to such shares, and such
shares shall not thereafter be transferred on the books of the Company or be
deemed to be outstanding for any purpose whatsoever.
Section 8. Reacquired Shares.
Any Series A Shares converted, purchased or otherwise acquired by the
Company in any manner whatsoever shall be retired and canceled promptly after
the acquisition thereof, and, if necessary to provide for the lawful purchase of
such shares, the capital represented by such shares shall be reduced in
accordance with the Minnesota Business Corporation Act. All such shares shall
upon their cancellation become authorized but unissued shares of Preferred
Stock, $.01 par value, of the Company and may be reissued as part of another
series of Preferred Stock, $.01 par value, of the Company.
Section 9. Filing.
This Certificate of Designation shall be filed with the Secretary of
State of the State of Minnesota in accordance with the Minnesota Business
Corporation Act.
I certify that I am authorized to execute this statement and I further
certify that I understand that by signing this statement, I am subject to the
penalties of perjury as set forth in Section 609.48 as if I had signed this
statement under oath.
SAC TECHNOLOGIES, INC.
/s/ Barry M. Wendt
------------------------------------------
Barry M. Wendt, Chief Executive Officer
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EXHIBIT 10.20
ANNEX IV
TO
SECURITIES PURCHASE
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of July 9, 1999 (this
"Agreement"), is made by and between SAC TECHNOLOGIES, INC., a Minnesota
corporation, with headquarters located at 4444 West 76th Street, Suite 600,
Edina, MN 55435 (the "Company"), and the entity named on a signature page hereto
(the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement, dated as of July 9, 1999, between the Initial
Investor and the Company (the "Securities Purchase Agreement"; terms not
otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement), the Company has agreed to issue and sell to the
Initial Investor shares of Series A 9% Convertible Preferred Stock of the
Company having an aggregate liquidation preference of $1,312,500 (the "Preferred
Stock"); and
WHEREAS, the Company has agreed to issue the Warrants to the Initial
Investor in connection with the issuance of the Preferred Stock; and
WHEREAS, the Preferred Stock is convertible into shares of Common
Stock (the "Conversion Shares"; which term, for purposes of this Agreement,
shall include shares of Common Stock of the Company issuable in lieu of accrued
dividends on conversion as contemplated by the Preferred Stock) upon the terms
and subject to the conditions contained in the Preferred Stock, and the Warrants
may be exercised for the purchase of shares of Common Stock (the "Warrant
Shares") upon the terms and conditions of the Warrants; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Conversion Shares and the Warrant Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
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1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Investor" means the Initial Investor and any permitted
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof and who holds Preferred Stock,
Warrants or Registrable Securities.
(b) "Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business and affairs of
the Company; or (ii) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by the
Board of Directors of the Company that the registration statement would be
materially misleading absent the inclusion of such information.
(c) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(d) "Registrable Securities" means the Conversion Shares and the
Warrant Shares.
(e) "Registration Statement" means a registration statement of the
Company under the Securities Act.
(f) "Required Effective Date" means the relevant Initial Required
Effective Date or Increased Required Effective Date (as those terms are defined
below).
2. REGISTRATION.
(a) MANDATORY REGISTRATION.
(i) The Company shall prepare and file with the SEC, as soon as
possible after the Closing Date but no later than sixty (60) days after the
Closing Date (the "Required Filing Date"), either a Registration Statement on
Form S-3 or SB-2 or an amendment to an existing Registration Statement, in
either event registering for resale by the Investor a sufficient number of
shares of Common Stock for the Initial Investors to sell the Registrable
Securities (or such lesser number as may be required by the SEC, but in no event
less than the number of shares (A) into which the Preferred Stock and all
dividends thereon through the second anniversary of the
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Closing Date would be convertible at the time of filing of such Registration
Statement (assuming for such purposes that the Conversion Rate were one dollar
and that all shares of Preferred Stock had been eligible to be converted, and
had been converted, into Conversion Shares in accordance with their terms,
whether or not such issuance, accrual of dividends, eligibility or conversion
had in fact occurred as of such date) and (B) which would be issued upon
exercise of all of the Warrants at the time of filing of the Registration
Statement (assuming for such purposes that the Warrants had been eligible to be
exercised for the maximum number of shares contemplated thereby and had been
exercised in accordance with their terms, whether or not such issuance,
eligibility or exercise had in fact occurred as of such date). The Registration
Statement (W) shall include only the Registrable Securities; and (X) shall also
state that, in accordance with Rule 416 and 457 under the Securities Act, it
also covers such indeterminate number of additional shares of Common Stock as
may become issuable upon conversion of the Preferred Stock and the exercise of
the Warrants to prevent dilution resulting from stock splits, or stock
dividends. The Company will use its reasonable best efforts to cause such
Registration Statement to be declared effective on a date (the "Initial Required
Effective Date") which no later than is the earlier of (Y) five (5) days after
notice by the SEC that it may be declared effective or (Z) one hundred fifty
(150) days after the Closing Date.
(ii) If at any time (an "Increased Registered Shares Date"), the
number of shares of Common Stock represented by the Registrable Shares, issued
or to be issued as contemplated by the Transaction Agreements, exceeds the
aggregate number of shares of Common Stock then registered, the Company shall,
within ten (10) business days after receipt of a written notice from any
Investor, either (X) amend the Registration Statement filed by the Company
pursuant to the preceding provisions of this Section 2, if such Registration
Statement has not been declared effective by the SEC at that time, to register
such Registrable Shares, computed, (1)with respect to Shares previously issued,
as the number of shares actually issued, and (2) with respect to Shares not yet
issued, utilizing a Conversion Rate (as defined in the Certificate of
Designations) which is the lower of the Conversion Rate then applicable or the
Conversion Rate contemplated by the immediately preceding subparagraph (i), or
(Y) if such Registration Statement has been declared effective by the SEC at
that time, file with the SEC an additional Registration Statement on Form S-3 or
other appropriate registration statement form (an "Additional Registration
Statement") to register the shares of Common Stock represented by the
Registrable Shares, computed as contemplated by the immediately preceding
subparagraph (i), that exceed the aggregate number of shares of Common Stock
already registered. The Company will use its reasonable best efforts to cause
such Registration Statement to be declared effective on a date (each, an
"Increased Required Effective Date") which is no later than (Q) with respect to
a Registration Statement under clause (X) of this subparagraph (ii), the Initial
Required Effective Date and (R) with respect to an Additional Registration
Statement, the earlier of (I) five (5) days after notice by the SEC that it may
be declared effective or (II) thirty (30) days after the Increased Registered
Shares Date.
(b) PAYMENTS BY THE COMPANY.
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(i) If the Registration Statement covering the Registrable
Securities is not filed in proper form with the SEC by the Required Filing Date,
the Company will make payment to the Initial Investor in such amounts and at
such times as shall be determined pursuant to this Section 2(b).
(ii) If the Registration Statement covering the Registrable
Securities is not effective by the relevant Required Effective Date or if the
Investor is restricted from making sales of Registrable Securities covered by a
previously effective Registration Statement at any time (the date such
restriction commences, a "Restricted Sale Date") after the Effective Date other
than during a Permitted Suspension Period (as defined below), then the Company
will make payments to the Initial Investor in such amounts and at such times as
shall be determined pursuant to this Section 2(b).
(iii) The amount (the "Periodic Amount") to be paid by the
Company to the Initial Investor shall be determined as of each Computation Date
(as defined below) and such amount shall be equal to the Periodic Amount
Percentage (as defined below) of the liquidation preference for all the
Preferred Stock (the "Liquidation Preference") for the period from the date
following the relevant Required Filing Date, Required Effective Date or
Restricted Sale Date, as the case may be, to the first relevant Computation
Date, and thereafter to each subsequent Computation Date. The "Periodic Amount
Percentage" means (A) two percent (2%) of the Liquidation Preference for the
period from the date following the relevant Required Filing Date, Required
Effective Date or Restricted Sale Date, as the case may be, to the first
relevant Computation Date, and (B) three percent (3%) of such Liquidation
Preference of all Preferred Stock to each Computation Date thereafter. Anything
in the preceding provisions of this paragraph (iii) to the contrary
notwithstanding, after the Effective Date the Liquidation Preference shall be
deemed to refer to the sum of (X) the liquidation preference of all shares of
Preferred Stock not yet converted and (Y) the Held Shares Value (as defined
below). The "Held Shares Value" means, for shares acquired by the Investor upon
a conversion within the thirty (30) days preceding the Restricted Sale Date, but
not yet sold by the Investor, the liquidation preference of the Preferred Stock
converted into such Conversion Shares; provided, however, that if the Investor
effected more than one conversion during such thirty (30) day period and sold
less than all of such shares, the sold shares shall be deemed to be derived
first from the conversions in the sequence of such conversions (that is, for
example, until the number of shares from the first of such conversions have been
sold, all shares shall be deemed to be from the first conversion; thereafter,
from the second conversion until all such shares are sold). By way of
illustration and not in limitation of the foregoing, if the Registration
Statement is timely filed but is not declared effective until one hundred
ninety-five (195) days after the Initial Closing Date, the Periodic Amount will
aggregate five (5%) of the Liquidation Preference (2% for days 151-180, plus 3%
for days 181-195).
(iv) Each Periodic Amount will be payable by the Company in cash
or other immediately available funds to the Investor monthly, without requiring
demand therefor by the Investor.
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(v) The parties acknowledge that the damages which may be
incurred by the Investor if the Registration Statement is not filed by the
Required Filing Date or if the Registration Statement has not been declared
effective by a Required Effective Date, including if the right to sell
Registrable Securities under a previously effective Registration Statement is
suspended, may be difficult to ascertain. The parties agree that the Periodic
Amounts represent a reasonable estimate on the part of the parties, as of the
date of this Agreement, of the amount of such damages.
(vi) Notwithstanding the foregoing, the amounts payable by the
Company pursuant to this provision shall not be payable to the extent any delay
in the effectiveness of the Registration Statement occurs because of an act of,
or a failure to act or to act timely by the Initial Investor or its counsel, or
in the event all of the Registrable Securities may be sold pursuant to Rule 144
or another available exemption under the Act.
(vii) "Computation Date" means (A) the date which is the earlier
of (1) thirty (30) days after the Required Filing Date, any relevant Required
Effective Date or a Restricted Sale Date, as the case may be, or (2) the date
after the Required Filing Date, such Required Effective Date or Restricted Sale
Date on which the Registration Statement is filed (with respect to payments due
as contemplated by Section 2(b)(i) hereof) or is declared effective or has its
restrictions removed (with respect to payments due as contemplated by Section
2(b)(ii) hereof), as the case may be, and (B) each date which is the earlier of
(1) thirty (30) days after the previous Computation Date or (2) the date after
the previous Computation Date on which the Registration Statement is filed (with
respect to payments due as contemplated by Section 2(b)(i) hereof) or is
declared effective or has its restrictions removed (with respect to payments due
as contemplated by Section 2(b)(ii) hereof), as the case may be.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration
of the Registrable Securities, the Company shall do each of the following.
(a) Prepare promptly, and file with the SEC by the Required Filing
Date a Registration Statement with respect to not less than the number of
Registrable Securities provided in Section 2(a) above, and thereafter use its
reasonable best efforts to cause such Registration Statement relating to
Registrable Securities to become effective by the Required Effective Date and
keep the Registration Statement effective at all times during the period (the
"Registration Period") continuing until the earliest of (i) the date that is two
(2) years after the last day of the calendar month following the month in which
the Effective Date occurs, (ii) the date when the Investors may sell all
Registrable Securities under Rule 144 without volume or other restrictions or
limits or (iii) the date the Investors no longer own any of the Registrable
Securities, which Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state 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;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in
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connection with the Registration Statement as may be necessary to keep the
Registration Statement effective at all times during the Registration Period,
and, during the Registration Period, comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities of
the Company covered by the Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statement;
(c) The Company shall permit a single firm of counsel designated by
the Initial Investors to review the Registration Statement and all amendments
and supplements thereto a reasonable period of time (but not less than three (3)
business days) prior to their filing with the SEC, and not file any document in
a form to which such counsel reasonably objects.
(d) Notify each Investor, such Investor's legal counsel identified
to the Company (which, until further notice, shall be deemed to be Krieger &
Prager, ATTN: Samuel Krieger, Esq.; each, an "Investor's Counsel"), and any
managing underwriters immediately (and, in the case of (i)(A) below, not less
than five (5) days prior to such filing) and (if requested by any such Person)
confirm such notice in writing no later than one (1) business day following the
day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed; (B) whenever
the SEC notifies the Company whether there will be a "review" of such
Registration Statement; (C) whenever the Company receives (or a representative
of the Company receives on its behalf) any oral or written comments from the SEC
in respect of a Registration Statement (copies or, in the case of oral comments,
summaries of such comments shall be promptly furnished by the Company to the
Investors); and (D) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the SEC or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations or warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (vi) of the occurrence of any event that to the
best knowledge of the Company makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it 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.
(e) Furnish to each Investor and such Investor's Counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one
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(1) copy of the Registration Statement, each preliminary prospectus and
prospectus, and each amendment or supplement thereto, and (ii) such number of
copies of a prospectus, and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(f) As promptly as practicable after becoming aware thereof, notify
each Investor of the happening of any event of which the Company has knowledge,
as a result of which the prospectus included in the Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a 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, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement or other appropriate filing with the SEC
to correct such untrue statement or omission, and deliver a number of copies of
such supplement or amendment to each Investor as such Investor may reasonably
request;
(g) As promptly as practicable after becoming aware thereof, notify
each Investor who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance by the SEC
of a Notice of Effectiveness or any notice of effectiveness or any stop order or
other suspension of the effectiveness of the Registration Statement at the
earliest possible time;
(h) Notwithstanding the foregoing, if at any time or from time to
time after the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing of the existence of a Potential Material
Event, the Investors shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of notice with respect to a Potential
Material Event until such Investor receives written notice from the Company that
such Potential Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event; provided, however, that the
Company may not so suspend the right to such holders of Registrable Securities
during the periods the Registration Statement is required to be in effect other
than during a Permitted Suspension Period. The term "Permitted Suspension
Period" means one or more suspension periods during any consecutive 12-month
period which suspension periods, in the aggregate, do not exceed fifty (50)
days, provided, however, that no one such suspension period shall either (i) be
for more than twenty (20) days or (ii) begin less than ten (10) business days
after the last day of the preceding suspension (whether or not such last day was
during or after a Permitted Suspension Period).
(i) Use its reasonable efforts to secure and maintain the
designation of all the Registrable Securities covered by the Registration
Statement on the "OTC Bulletin Board Market" of the National Association of
Securities Dealers Automated Quotations System ("NASDAQ") within the meaning of
Rule 11Aa2-1 of the SEC under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the quotation of the Registrable Securities on The
NASDAQ Bulletin Board Market; and, without limiting the generality of the
foregoing, to arrange
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for at least two market makers to register with the National Association of
Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities;
(j) Provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
(k) Cooperate with the Investors to facilitate the timely
preparation and delivery of certificates for the Registrable Securities to be
offered pursuant to the Registration Statement and enable such certificates for
the Registrable Securities to be in such denominations or amounts as the case
may be, as the Investors may reasonably request, and, within three (3) business
days after a Registration Statement which includes Registrable Securities is
ordered effective by the SEC, the Company shall deliver, and shall cause legal
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an appropriate
instruction and opinion of such counsel; and
(l) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the registration
of the Registrable Securities, the Investors shall have the following
obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. At
least ten (10) days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information") if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. If at least two (2) business
days prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor;
(b) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), above, such Investor will
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immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until such
Investor's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(e) or 3(f) and, if so directed by the Company, such
Investor shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a certificate of destruction) all copies in such
Investor's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.
5. EXPENSES OF REGISTRATION. (a) All reasonable expenses (other than
underwriting discounts and commissions of the Investor) incurred in connection
with registrations, filings or qualifications pursuant to Section 3, but
including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company and a fee for a single counsel for the Investors not exceeding, in
the aggregate for all Investors, $2,500, shall be borne by the Company.
(b) Neither the Company nor any of its subsidiaries has, as of the
date hereof, nor shall the Company nor any of its subsidiaries, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Investors in this Agreement
or otherwise conflicts with the provisions hereof. Neither the Company nor any
of its subsidiaries has previously entered into any agreement granting any
registration rights with respect to any of its securities to any Person, other
than the Registration Rights granted to the Initial Investor or its affiliates
and approximately 400,000 shares underlying Warrants and Options previously
granted. Without limiting the generality of the foregoing, without the written
consent of the Investors holding a majority of the Registrable Securities, the
Company shall not grant to any person the right to request the Company to
register any securities of the Company under the Securities Act unless the
rights so granted are subject in all respects to the prior rights in full of the
Investors set forth herein, and are not otherwise in conflict or inconsistent
with the provisions of this Agreement and the other Transaction Agreements. This
provision shall not preclude the Company from granting piggyback registration
rights to any person to register the public resale of shares in any Registration
Statement filed after the effective date of any Registration Statement filed
hereunder.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act (each, an "Indemnified Person" or
"Indemnified Party"), against any losses, claims, damages, liabilities or
expenses (joint or several) incurred (collectively, "Claims") to which any of
them may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective
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amendment thereof, or any prospectus included therein: (i) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereof or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to clause (b) of this Section 6, the Company shall
reimburse the Investors, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a) shall not (I) apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of any
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (II) be available to the extent such Claim is based on a failure of
the Investor to deliver or cause to be delivered the prospectus made available
by the Company; or (III) apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Each Investor will indemnify
the Company and its officers, directors and agents (each, an "Indemnified
Person" or "Indemnified Party") against any claims arising out of or based upon
a Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company, by or on behalf of such Investor, expressly
for use in connection with the preparation of the Registration Statement,
subject to such limitations and conditions as are applicable to the
Indemnification provided by the Company to this Section 6. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
(b) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be. In case any such action is brought against any Indemnified Person
or Indemnified Party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be
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entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, assume the defense thereof,
subject to the provisions herein stated and after notice from the indemnifying
party to such Indemnified Person or Indemnified Party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
Indemnified Person or Indemnified Party under this Section 6 for any legal or
other reasonable out-of-pocket expenses subsequently incurred by such
Indemnified Person or Indemnified Party in connection with the defense thereof
other than reasonable costs of investigation, unless the indemnifying party
shall not pursue the action of its final conclusion. The Indemnified Person or
Indemnified Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and reasonable
out-of-pocket expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the Indemnified Person or
Indemnified Party. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available to
the Investors the benefits of Rule 144 promulgated under the Securities Act or
any other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
(a) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act,
or, if the provisions of Rule 144(c)(2) are applicable, ensure that the
standards contemplated by Rule 144(c) to permit sales by the Investors under
said Rule 144 are satisfied at all times; and
(b) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied
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with the reporting requirements of Rule 144, the Securities Act and the Exchange
Act, (ii) a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company and (iii) such
other information as may be reasonably requested to permit the Investors to sell
such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of the Registrable
Securities (or all or any portion of any unconverted Preferred Stock or
unexercised Warrant) only if: (a) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws, and (d) at or before the time the Company received the written notice
contemplated by clause (b) of this sentence the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained herein.
In the event of any delay in filing or effectiveness of the Registration
Statement as a result of such assignment, the Company shall not be liable for
any damages arising from such delay, or the payments set forth in Section 2(c)
hereof arising from such delay.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold an sixty-seven (67%) percent interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be
given in the manner contemplated by the Agreement, (i) if to the Company or to
the Initial Investor, to their respective address contemplated by the Agreement,
and (iii) if to any other Investor, at such address as such Investor shall have
provided in writing to the Company, or at such other address as each such party
furnishes by notice given in accordance with this Section 11(b).
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<PAGE>
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on FORUM NON COVENIENS, to the bringing of any such proceeding in such
jurisdictions. To the extent determined by such court, the Company shall
reimburse the Buyer for any reasonable legal fees and disbursements incurred by
the Buyer in enforcement of or protection of any of its rights under this
Agreement.
(e) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
(j) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof. This Agreement may be amended only by an instrument in writing signed by
the party to be charged with enforcement thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written. COMPANY: SAC TECHNOLOGIES, INC.
By:
-------------------------------------
Name:
Title:
INITIAL INVESTOR:
THE SHAAR FUND LTD.
By:
-------------------------------------
Name:
Title:
EXHIBIT 10.21
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of
acceptance set forth below, is entered into by and between SAC TECHNOLOGIES,
INC., a Minnesota corporation, with headquarters located at 4444 West 76th
Street, Suite 600, Edina, MN 55435 (the "Company"), and the entity named on a
signature page hereto (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and/or
Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, shares of Series A 9% Convertible Preferred
Stock, par value $0.01 per share, of the Company (the "Convertible Preferred
Stock") which which will be convertible into shares of Common Stock, $0.01 par
value per share, of the Company (the "Common Stock"), upon the terms and subject
to the conditions of such Convertible Preferred Stock, together with the
Warrants (as defined below) exercisable for the purchase of shares of Common
Stock, and subject to acceptance of this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. PURCHASE.
(i) The undersigned hereby agrees to purchase from the Company
shares of the Convertible Preferred Stock having a liquidation preference in the
amount set forth on the Buyer's signature page of this Agreement (the "Preferred
Stock"), out of a total offering of Convertible Preferred Stock having a
liquidation preference of $1,312,500, and having the terms and conditions set
forth in the Certificate of Designations of the Series A 9% Convertible
Preferred Stock of the Company attached hereto as ANNEX I (the "Certificate of
Designations"), and Warrants to purchase 131,250 shares of Common Stock in the
form attached hereto as Annex VI.
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(ii) The purchase price to be paid by the Purchaser for the
Preferred Stock and Warrants (the "Purchase Price") shall be equal to the amount
set forth on the Buyer's signature page of this Agreement specified, and shall
be payable in United States Dollars.
b. CERTAIN DEFINITIONS. As used herein, each of the following terms
has the meaning set forth below, unless the context otherwise requires:
(i) "Securities" means the Preferred Stock, the Warrants and the
Common Stock issuable (x) upon the conversion of the Preferred Stock or in lieu
of dividends payable thereon or (y) upon the exercise of the Warrants.
(ii) "Closing Date" means the date of the closing of the purchase
and sale of the Preferred Stock, as provided herein.
(iii) "Effective Date" means the effective date of the Registration
Statement covering the Registrable Securities (as those terms are defined in the
Registration Rights Agreement defined below).
(iv) "Market Price of the Common Stock" means the average closing
price of the Common Stock for the five (5) trading days ending on the trading
day immediately before the relevant date indicated in the relevant provision
hereof (unless a different relevant period is specified in the relevant
provision), as reported by Bloomberg, LP or, if not so reported, as reported on
the over-the-counter market.
(v) "Initial Market Price" means the Market Price of the Common
Stock as of the Closing Date.
(vi) "Current Market Price" means the Market Price of the Common
Stock as of the relevant Conversion Date (as defined below).
(vii) "Converted Shares" means the shares of Common Stock issuable
upon conversion of the Preferred Stock or in lieu of dividends payable thereon.
(viii) "Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrants.
(ix) "Shares" means the shares of Common Stock representing any or
all of the Converted Shares and the Warrant Shares.
c. FORM OF PAYMENT; DELIVERY OF CERTIFICATES.
(i) The Buyer shall pay the Purchase Price by delivering (a)
$775,000 in immediately available good funds in United States Dollars (the "Cash
Purchase Price") and (b) that certain promissory note, dated June 11, 1999 (the
"June Note"), issued by the Company to
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<PAGE>
the Buyer in the principal amount of $100,000 to the escrow agent (the "Escrow
Agent") identified in the Joint Escrow Instructions attached hereto as ANNEX II
(the "Joint Escrow Instructions") on the date prior to the Closing Date.
(ii) No later than the Closing Date, but in any event promptly
following payment by the Buyer to the Escrow Agent of the Purchase Price, the
Company shall deliver one or more certificates representing the Preferred Stock
and the Warrants to be issued hereunder, each duly executed on behalf of the
Company and issued in the name of the Buyer (collectively, the "Certificates")
to the Escrow Agent.
(iii) By signing this Agreement, each of the Buyer and the Company,
subject to acceptance by the Escrow Agent, agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.
d. METHOD OF PAYMENT. Payment into escrow of the Cash Purchase Price
shall be made by wire transfer of funds to:
Bank of New York
350 Fifth Avenue
New York, New York 10001
ABA# 021000018
For credit to the account of Krieger & Prager, Esqs.
Account No.: [To be provided by Krieger & Prager]
Re: SAC Technologies Transaction
Not later than 5:00 p.m., New York time, on the date which is one (1) New York
Stock Exchange trading days after the Company shall have accepted this Agreement
and returned a signed counterpart of this Agreement to the Escrow Agent by
facsimile, the Buyer shall deposit with the Escrow Agent the Purchase Price in
currently available funds. Time is of the essence with respect to such payment,
and failure by the Buyer to make such payment, shall allow the Company to cancel
this Agreement.
e. ESCROW PROPERTY. The Purchase Price and the Certificates
delivered to the Escrow Agent as contemplated by Sections 1(c) and (d) hereof
are referred to as the "Escrow Property."
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
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<PAGE>
a. Without limiting Buyer's right to sell the Common Stock pursuant
to the Registration Statement, the Buyer is purchasing the Preferred Stock and
the Warrants and will be acquiring the Shares for its own account for investment
only and not with a view towards the public sale or distribution thereof and not
with a view to or for sale in connection with any distribution thereof.
b. The Buyer is (i) an "accredited investor" as that term is defined
in Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), (ii) experienced in making investments of the kind described in
this Agreement and the related documents, (iii) able, by reason of the business
and financial experience of its officers and professional advisors (who are not
affiliated with or compensated in any way by the Company or any of its
affiliates or selling agents), to protect its own interests in connection with
the transactions described in this Agreement, and the related documents, and
(iv) able to afford the entire loss of its investment in the Securities.
c. All subsequent offers and sales of the Preferred Stock and the
Shares by the Buyer shall be made pursuant to registration of the Shares under
the 1933 Act or pursuant to an exemption from registration.
d. The Buyer understands that the Securities are being issued in a
private placement and are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
e. The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Securities and the offer of the
Shares which have been requested by the Buyer, including ANNEX V hereto. The
Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and have received complete and satisfactory answers to
any such inquiries. Without limiting the generality of the foregoing, the Buyer
has also had the opportunity to obtain and to review the Company's (1) Annual
Report on Form 10-KSB/A for the fiscal year ended December 31, 1998, (2)
Quarterly Report on Form 10-QSB for the fiscal quarter ended March 31, 1999, and
(3) Current Report on Form 8-K dated May 25, 1999 (the "Company's SEC
Documents").
f. The Buyer understands that its investment in the Securities
involves a high degree of risk.
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<PAGE>
g. The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.
h. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
i. The Buyer acknowledges that, with respect to the offering of the
Securities, no general solicitation or general advertising (including
communications published in any newspaper, magazine or other broadcast medium)
has been received by the Buyer and no public solicitation or advertisement has
been made to the Buyer.
j. There is no investment banker, broker, finder or other similar
intermediary which has been retained by, or is authorized by, the Buyer or any
affiliate of the Buyer to act on behalf of the Buyer, who or which might be
entitled to any fee or commission from the Company in connection with the
purchase and sale of the Securities.
3. COMPANY REPRESENTATIONS, ETC. The Company represents and warrants
to the Buyer as of the date hereof and as of the Closing Date that, except as
otherwise provided in ANNEX V hereto:
a. CONCERNING THE PREFERRED STOCK AND THE SHARES. The Preferred
Stock has been duly authorized, and when issued and paid for in accordance with
the terms of this Agreement, will be duly and validly issued, fully paid and
non-assessable and will not subject the holder thereof to personal liability
solely by reason of acquiring the Preferred Stock hereunder. There are no
preemptive rights of any stockholder of the Company, as such, to acquire the
Preferred Stock, the Warrants or the Shares.
b. REPORTING COMPANY STATUS. 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 to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or financial condition or results of operation of the Company. The Company has
registered its Common Stock pursuant to Section 12 of the 1934 Act, and the
Common Stock is quoted and traded on The NASDAQ/Bulletin Board Market. The
Company has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for such listing, and the Company has
maintained all requirements for the continuation of such quotation.
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<PAGE>
c. AUTHORIZED SHARES. The authorized capital stock of the Company
consists of (i) 20,000,000 shares of Common Stock, $0.01 par value per share, of
which approximately 8,599,751 shares have been issued and are outstanding as of
the date hereof and (ii) 5,000,000 shares of Preferred Stock, par value $0.01
per share, none of which have been issued as of the date hereof. All issued and
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable. The Company has sufficient authorized and
unissued shares of Common Stock as may be necessary to effect the issuance of
the Shares. The Shares have been duly authorized and, when issued upon
conversion of, or as dividends on, the Preferred Stock or upon exercise of the
Warrants, and paid for in accordance with its respective terms, will be duly and
validly issued, fully paid and non-assessable and will not subject the holder
thereof to personal liability by reason of being such holder.
d. SECURITIES PURCHASE AGREEMENT; REGISTRATION RIGHTS AGREEMENT AND
STOCK. This Agreement and the Registration Rights Agreement, the form of which
is attached hereto as ANNEX IV (the "Registration Rights Agreement"), and the
transactions contemplated thereby, have been duly and validly authorized by the
Company. This Agreement has been duly executed and delivered by the Company and
this Agreement is, and the Warrants and the Registration Rights Agreement, when
executed and delivered by the Company, will be, valid and binding agreements of
the Company enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally; and, when issued and paid for in accordance with the terms of
this Agreement, the Preferred Stock will be duly and validly authorized and,
when executed and delivered on behalf of the Company in accordance with this
Agreement, will be a valid and binding obligation of the Company in accordance
with its terms, subject to general principles of equity and to bankruptcy,
insolvency, moratorium, or other similar laws affecting the enforcement of
creditors' rights generally.
e. NON-CONTRAVENTION. The execution and delivery of this Agreement
and the Registration Rights Agreement by the Company, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Registration Rights Agreement, and the
Preferred Stock do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under (i)
the articles of incorporation or by-laws of the Company, each as currently in
effect, (ii) any indenture, mortgage, deed of trust, or other material agreement
or instrument to which the Company is a party or by which it or any of its
properties or assets are bound, including any listing agreement for the Common
Stock except as herein set forth, or (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or order
of any court, United States federal or state regulatory body, administrative
agency, or other governmental body having jurisdiction over the Company or any
of its properties or assets, except such conflict, breach or default which would
not have a material adverse effect on the business, operations or financial
condition or results of operations of the Company or on the transactions
contemplated herein.
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<PAGE>
f. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
g. SEC FILINGS. None of the Company's SEC Documents contained, at
the time they were filed, any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements made therein in light of the circumstances under which they were
made, not misleading. The Company has since May 1, 1998 timely filed all
requisite forms, reports and exhibits thereto with the SEC.
h. ABSENCE OF CERTAIN CHANGES. Since December 31, 1998, there has
been no material adverse change and no material adverse development in the
business, properties, operations, financial condition, or results of operations
of the Company, except as disclosed in the Company's SEC Documents. Since
December 31, 1998, except as disclosed in the Company's SEC Documents, the
Company has not (i) incurred or become subject to any material liabilities
(absolute or contingent) except liabilities incurred in the ordinary course of
business consistent with past practices; (ii) discharged or satisfied any
material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to stockholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, except
in the ordinary course of business consistent with past practices; (v) suffered
any substantial losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment.
i. FULL DISCLOSURE. There is no fact known to the Company (other
than general economic conditions known to the public generally or as disclosed
in the Company's SEC Documents) that has not been disclosed in writing to the
Buyer that (i) would reasonably be expected by the Company to have a material
adverse effect on the business, operations or financial condition of the Company
or results of operations of the Company taken as a whole, (ii) would reasonably
be expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to this Agreement or any of the agreements
contemplated hereby (collectively, including this Agreement, the "Transaction
Agreements"), or (iii) would reasonably be expected by the Company to materially
and adversely affect the value of the rights granted to the Buyer in the
Transaction Agreements.
j. ABSENCE OF LITIGATION. Except as set forth in the Company's SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court,
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<PAGE>
public board or body pending or, to the knowledge of the Company, threatened
against the Company, wherein an unfavorable decision, ruling or finding would
have a material adverse effect on the properties, business, operations or
financial condition, or results of operation of the Company or the transactions
contemplated by any of the Transaction Agreements or which would adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, any of the Transaction Agreements.
k. ABSENCE OF EVENTS OF DEFAULT. The Company is not in default in
the performance or observance of any material obligation, agreement, covenant or
condition contained in any material indenture, mortgage, deed of trust or other
material instrument or agreement to which it is a party or by which it or its
property is bound. Except as set forth in Section 3(e) hereof, no Event of
Default (or its equivalent term), as defined in the respective agreement to
which the Company is a party, and no event which, with the giving of notice or
the passage of time or both, would become an Event of Default (or its equivalent
term) (as so defined in such agreement), has occurred and is continuing, which
would have a material adverse effect on the business, operations or the
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole.
l. PRIOR ISSUES. Except as disclosed in the SEC Documents, during
the twelve (12) months preceding the date hereof, the Company has not issued any
convertible securities.
m. NO UNDISCLOSED LIABILITIES OR EVENTS. The Company has no
liabilities or obligations other than those disclosed in the Company's SEC
Documents or those incurred in the ordinary course of the Company's business
since December 31, 1998, and which individually or in the aggregate, do not or
would not have a material adverse effect on the properties, business,
operations, financial condition or results of operations of the Company. No
event or circumstances has occurred or exists with respect to the Company or its
properties, business, operations, financial condition, or results of operations,
which, under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed. There are no proposals currently under
consideration or currently anticipated to be under consideration by the Board of
Directors or the executive officers of the Company which proposal would (x)
change the certificate of incorporation or other charter document or by-laws of
the Company, each as currently in effect, with or without shareholder approval,
which change would reduce or otherwise adversely affect the rights and powers of
the shareholders of the Common Stock or (y) materially or substantially change
the business, assets or capital of the Company.
n. NO INTEGRATED OFFERING. Neither the Company nor any of its
affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since May 1, 1998, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under Rule
506 of Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
8
<PAGE>
o. DILUTION. The number of Shares issuable upon conversion of the
Preferred Stock and the exercise of the Warrants may increase substantially in
certain circumstances, including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines prior to the
conversion of the Preferred Stock. The Company's executive officers and
directors have studied and fully understand the nature of the Securities being
sold hereby and recognize that they have a potential dilutive effect. The board
of directors of the Company has concluded, in its good faith business judgment,
that such issuance is in the best interests of the Company. The Company
specifically acknowledges that its obligation to issue the Shares upon
conversion of the Preferred Stock and upon exercise of the Warrants is binding
upon the Company and enforceable regardless of the dilution such issuance may
have on the ownership interests of other shareholders of the Company.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the
Preferred Stock and the Warrants have not been and are not being registered
under the provisions of the 1933 Act and, except as provided in the Registration
Rights Agreement, the Shares have not been and are not being registered under
the 1933 Act, and may not be transferred unless (A) subsequently registered
thereunder or (B) the Buyer shall have delivered to the Company an opinion of
counsel, reasonably satisfactory in form, scope and substance to the Company, to
the effect that the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; (2) any sale of the
Securities made in reliance on Rule 144 promulgated under the 1933 Act may be
made only in accordance with the terms of said Rule and further, if said Rule is
not applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.
b. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that the
Preferred Stock and the Warrants, and, until such time as the Common Stock has
been registered under the 1933 Act as contemplated by the Registration Rights
Agreement and sold in accordance with an effective Registration Statement,
certificates and other instruments representing any of the Securities shall bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES OR AN OPINION OF
9
<PAGE>
COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION
THAT SUCH REGISTRATION IS NOT REQUIRED.
c. FILINGS. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Securities to the Buyer under any
United States laws and regulations applicable to the Company, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Buyer promptly after such filing.
d. REPORTING STATUS. So long as the Buyer beneficially owns any of
the Securities, the Company shall file all reports required to be filed with the
SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination. The Company will take all reasonable action under its control to
obtain and to continue the quotation and trading of its Common Stock (including,
without limitation, all Registrable Securities) on The NASDAQ/Bulletin Board
Market and will comply in all material respects with the Company's reporting,
filing and other obligations under the by-laws or rules of the National
Association of Securities Dealers, Inc. ("NASD") or The NASDAQ/Bulletin Board
Market.
e. USE OF PROCEEDS. The Company will use the proceeds from the sale
of the Preferred Stock (excluding amounts paid by the Company for legal fees,
and escrow fees in connection with the sale of the Preferred Stock) for internal
working capital purposes, and, unless specifically consented to in advance in
each instance by the Buyer, the Company shall not, directly or indirectly, use
such proceeds for any loan to or investment in any other corporation,
partnership enterprise or other person or for the repayment of any outstanding
loan by the Company to any other party.
f. AVAILABLE SHARES. The Company shall have at all times authorized
and reserved for issuance, free from preemptive rights, shares of Common Stock
sufficient to yield two hundred percent (200%) of the number of shares of Common
Stock issuable (i) at conversion as may be required to satisfy the conversion
rights of the Buyer pursuant to the terms and conditions of the Certificate of
Designations or to represent payment of dividends on the Preferred Stock and
(ii) upon exercise as may be required to satisfy the exercise rights of the
Buyer pursuant to the terms and conditions of the Warrants.
g. WARRANTS. The Company agrees to issue to the Buyer on the Closing
Date transferable, divisible warrants (the "Warrants") for the purchase of ten
thousand (10,000) shares of Common Stock for each $100,000 of liquidation
preference of the Preferred Stock. The Warrants shall bear an exercise price
equal to one hundred ten percent (110%) of the Initial Market Price. The
Warrants will expire on the last day of the calendar month in which the fifth
anniversary of the Closing Date occurs. The Warrants shall be in the form
annexed hereto as ANNEX VI, together with (x) registration rights as provided in
the Registration Rights Agreement and (y) piggy-back registration rights after
the effectiveness of the Registration Statement expires, as contemplated by the
Warrants.
10
<PAGE>
h. LIMITATION ON ISSUANCE OF SHARES. If at any time (the "Limited
Availability Date") the number of outstanding but unissued shares of Common
Stock of the Company is less than seventy-five percent (75%) of the number of
shares contemplated by Section 4(f) hereof, the Company shall take all steps,
including but not necessarily limited to, obtaining board authorization, holding
an annual or special shareholders' meeting, issuing a proxy statement, having a
vote of shareholders and filing an amendment to the Company's charter documents,
necessary to increase the authorized shares of Common Stock of the Company so
that the provisions of said Section 4(f) shall be satisfied, except that the
percentage shall be 250%.
j. RIGHT OF FIRST REFUSAL. (i) The Company covenants and agrees that
if during the period from the date hereof through and including the date which
is two hundred seventy (270) days after the Effective Date, the Company offers
to enter into any transaction (a "New Transaction") for the sale of New Common
Stock, the Company shall notify the Buyer in writing of all of the terms of such
offer (a "New Transaction Offer"). The Buyer shall have the right (the "Right of
First Refusal"), exercisable by written notice given to the Company by the close
of business on the fifth business day after the Buyer's receipt of the New
Transaction Offer (the "Right of First Refusal Expiration Date"), to participate
in all or any part of the New Transaction Offer on the terms so specified. If
and to the extent the Buyer elects to participate in the New Transaction, the
Buyer shall be obligated to do on the same terms as provided in the New
Transaction on the date which is the earlier of the date specified in the New
Transaction or ten (10) business days after the Right of First Refusal
Expiration Date.
(ii) If, and only if, the Buyer does not exercise the Right of First
Refusal in full, the Company may consummate the remaining portion of the New
Transaction with any New Investor on the terms specified in the New Transaction
Offer within thirty (30) days of the Right of First Refusal Expiration Date.
(iii) If the terms of the New Transaction to be consummated with
such other party differ from the terms specified in the New Transaction Offer so
that the terms are more economically beneficial in any respect to the New
Investor, the Company shall give the Buyer a New Transaction Offer relating to
the terms of the New Transaction, as so changed, and the Buyer's Right of First
Refusal and the preceding terms of this paragraph (j) shall apply with respect
to such changed terms.
k. SHORT SALES. The Buyer and its affiliates shall not engage in
short sales of the Company's Common Stock; provided, however, that the Buyer or
its affiliates may enter into any short sale of other hedging or similar
arrangement it deems appropriate with respect to that number of shares of Common
Stock equal to the number of the Converted Shares covered by a particular Notice
of Conversion, commencing on the day the Buyer delivers such Notice of
Conversion (as contemplated by Section 5 hereof), and terminating on the
Delivery Date with respect to such Converted Shares or later date that such
Converted Shares are delivered to Buyer.
5. TRANSFER AGENT INSTRUCTIONS.
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<PAGE>
a. Promptly following the delivery by the Buyer of the Purchase
Price in accordance with Section 1(c) hereof, the Company will irrevocably
instruct its transfer agent to issue Common Stock from time to time upon
conversion of the Preferred Stock in such amounts as specified from time to time
by the Company to the transfer agent, bearing the restrictive legend specified
in Section 4(b) of this Agreement prior to registration of, and sale of the
Shares under the 1933 Act, registered in the name of the Buyer or its nominee
and in such denominations to be specified by the Buyer in connection with each
conversion of the Preferred Stock. The Company warrants that no instruction
inconsistent with the instructions referred to in this Section 5 and the stop
transfer instructions to give effect to Section 4(a) hereof prior to
registration and sale of the Shares under the 1933 Act will be given by the
Company to the transfer agent with respect to the Shares and that the Shares
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement, the Registration Rights
Agreement, and applicable law. Nothing in this Section shall affect in any way
the Buyer's obligations and agreement to comply with all applicable securities
laws upon resale of the Securities. If the Buyer provides the Company with an
opinion of counsel reasonably satisfactory to the Company that registration of a
resale by the Buyer of any of the Securities in accordance with clause (1)(B) of
Section 4(a) of this Agreement is not required under the 1933 Act, the Company
shall (except as provided in clause (2) of Section 4(a) of this Agreement)
permit the transfer of the Securities and, in the case of the Converted Shares
or the Warrant Shares, as the case may be, promptly instruct the Company's
transfer agent to issue one or more certificates for Common Stock in accordance
with such opinion of counsel in such name and in such denominations as specified
by the Buyer.
b. (i) The Company will permit the Buyer to exercise its right to
convert the Preferred Stock by telecopying or delivering an executed and
completed Notice of Conversion, setting forth the Conversion Date (as defined
below) and the number of Converted Shares issuable upon such conversion
calculated in accordance with the Certificate of Designations, to the Company
and delivering, within five (5) business days thereafter, the original Preferred
Stock being converted to the Company by express courier, with a copy to the
transfer agent.
(ii) The term "Conversion Date" means, with respect to any
conversion elected by the holder of the Preferred Stock, the date specified in
the Notice of Conversion, provided the copy of the Notice of Conversion is
telecopied to or otherwise delivered to the Company in accordance with the
provisions hereof so that it is received by the Company on or before such
specified date.
(iii) The Company will transmit the certificates representing the
Converted Shares issuable upon conversion of any Preferred Stock (together with,
unless otherwise instructed by the Buyer, one or more certificates representing
the Preferred Stock not being so converted if the certificates submitted in
connection with such conversion represented more shares than then being
converted) to the Buyer at the address specified in the Notice of Conversion
(which may be the Buyer's address for notices as contemplated by Section 11
hereof or a different address) via recognized express or overnight courier, by
electronic transfer or otherwise, within three (3) business days (such third
business day, the "Delivery Date") after (A)
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<PAGE>
the business day on which the Company has received both of the Notice of
Conversion prepared in accordance with Section 5(b)(i) (by facsimile or other
delivery) and the original Preferred Stock being converted (and if the same are
not delivered to the Company on the same date, the date of delivery of the
second of such items) or (B) the date a dividend payment on the Preferred Stock
which the Company has elected to pay by the issuance of Common Stock, as
contemplated by the Preferred Stock, was due.
c. The Company understands that a delay in the issuance of the
Shares of Common Stock beyond the Delivery Date could result in economic loss to
the Buyer. As compensation to the Buyer for such loss, the Company agrees to pay
late payments to the Buyer for late issuance of Shares upon conversion in
accordance with the following schedule (where "No. Business Days Late" is
defined as the number of business days beyond two (2) business days from the
Delivery Date):
Late Payment For Each $10,000
of Liquidation Preference or Dividend
No. Business Days Late Amount Being Converted
---------------------- -------------------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Furthermore, in addition to any equitable remedies
which may be available to the Buyer, in the event that the Company fails for any
reason to effect delivery of such shares of Common Stock within two (2) business
days after the Delivery Date, the Buyer will be entitled to revoke the relevant
Notice of Conversion by delivering a notice to such effect to the Company
whereupon the Company and the Buyer shall each be restored to their respective
positions immediately prior to delivery of such Notice of Conversion.
d. If, by the relevant Delivery Date, the Company fails for any
reason to deliver the Shares to be issued upon conversion of Preferred Stock,
and after such Delivery Date, the holder of the Preferred Stock being converted
(a "Converting Holder") purchases, in an
13
<PAGE>
arm's-length open market transaction or otherwise, shares of Common Stock (the
"Covering Shares") in order to make delivery in satisfaction of a sale of Common
Stock by the Converting Holder (the "Sold Shares"), which delivery such
Converting Holder anticipated to make using the Shares to be issued upon such
conversion (a "Buy-In"), the Company shall pay to the Converting Holder, in
addition to all other amounts contemplated in Section 5(c), and not in lieu
thereof, the Buy-In Adjustment Amount (as defined below). The "Buy-In Adjustment
Amount" is the amount equal to the excess, if any, of (x) the Converting
Holder's total purchase price (including brokerage commissions, if any) for the
Covering Shares over (y) the net proceeds (after brokerage commissions, if any)
received by the Converting Holder from the sale of the Sold Shares. The Company
shall pay the Buy-In Adjustment Amount to the Converting Holder in immediately
available funds immediately upon demand by the Converting Holder. By way of
illustration and not in limitation of the foregoing, if the Converting Holder
purchases shares of Common Stock having a total purchase price (including
brokerage commissions) of $11,000 to cover a Buy-In with respect to shares of
Common Stock it sold for net proceeds of $10,000, the Buy-In Adjustment Amount
which Company will be required to pay to the Converting Holder will be $1,000.
e. In lieu of delivering physical certificates representing the
Common Stock issuable upon conversion, provided the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of the Buyer and its compliance with the
provisions contained in this paragraph, so long as the certificates therefor do
not bear a legend and the Buyer thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Buyer by crediting the account of Buyer's
Prime Broker with DTC through its Deposit Withdrawal Agent Commission system.
f. If, at any time (i) the Company challenges, disputes or denies
the right of a holder of Preferred Stock to effect a conversion of the Preferred
Stock into Common Stock or otherwise dishonors or rejects any Conversion Notice
delivered in accordance with the terms of this Agreement or the Certificate of
Designations or any exercise of any Warrant in accordance with its terms
("Warrant Exercise"), or (ii) any third party who is not and has never been an
Affiliate of such holder commences any lawsuit or proceeding or otherwise
asserts any claim before any court or public or governmental authority, which
lawsuit, proceeding or claim seeks to challenge, deny, enjoin, limit, modify,
delay or dispute the right of such holder to effect the conversion of the
Preferred Stock into Common Stock, and the Company refuses to honor any such
Conversion Notice or Warrant Exercise, then such holder shall have the right, by
written notice to the Company, to require the Company to promptly redeem the
Preferred Stock for cash at a redemption price (the "Mandatory Purchase Amount")
equal to (x) one hundred twenty-two percent (122%) of the liquidation preference
of the unconverted Preferred Stock held by such holder plus (y) all accrued but
unpaid dividends on the Preferred Stock through the date of payment of the
Mandatory Purchase Amount. Under any of the circumstances set forth above, the
Company shall be responsible for the payment of all costs and expenses of such
holder, including, but not necessarily limited to, reasonable legal fees and
expenses, as and when incurred
14
<PAGE>
in connection with such holder's disputing any such action or pursuing such
holder's rights hereunder (in addition to any other rights such holder may have
hereunder or otherwise). The Mandatory Purchase Amount will be payable to such
holder in cash within five (5) business days from the date such holder gives the
Company written notice that it is exercising its rights under this paragraph.
g. The holder of any Preferred Stock shall be entitled to exercise
its conversion privilege with respect to the Preferred Stock notwithstanding the
commencement of any case under 11 U.S.C. ss.101 et seq. (the "Bankruptcy Code").
In the event the Company is a debtor under the Bankruptcy Code, the Company
hereby waives, to the fullest extent permitted, any rights to relief it may have
under 11 U.S.C. ss.362 in respect of such holder's conversion privilege. The
Company hereby waives, to the fullest extent permitted, any rights to relief it
may have under 11 U.S.C. ss.362 in respect of the conversion of the Preferred
Stock. The Company agrees, without cost or expense to such holder, to take or to
consent to any and all action necessary to effectuate relief under 11 U.S.C.
ss.362.
h. The Company will authorize its transfer agent to give information
relating to the Company directly to the Buyer or the Buyer's representatives
upon the request of the Buyer or any such representative. The Company will
provide the Buyer with a copy of the authorization so given to the transfer
agent.
6. CLOSING DATE.
a. The Closing Date shall occur on the date which is the first NYSE
trading day after each of the conditions contemplated by Sections 7 and 8 hereof
shall have either been satisfied or been waived by the party in whose favor such
conditions run.
b. The closing of the purchase and issuance of Preferred Stock shall
occur on the Closing Date at the offices of the Escrow Agent and shall take
place no later than 3:00 P.M., New York time, on such day or such other time as
is mutually agreed upon by the Company and the Buyer.
c. Notwithstanding anything to the contrary contained herein, the
Escrow Agent will be authorized to release the Escrow Funds to the Company and
to others and to release the other Escrow Property on the Closing Date upon
satisfaction of the conditions set forth in Sections 7 and 8 hereof and as
provided in the Joint Escrow Instructions.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the
Preferred Stock and the Warrants to the Buyer pursuant to this Agreement on the
Closing Date is conditioned upon:
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<PAGE>
a. The execution and delivery of this Agreement and the Registration
Rights Agreement by the Buyer;
b. Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the Cash Purchase Price and of the June
Note in accordance with this Agreement;
c. The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement, each as if made on such
date, and the performance by the Buyer on or before such date of all covenants
and agreements of the Buyer required to be performed on or before such date; and
d. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
e. The Buyer shall have executed and delivered those certain waiver
letters attached hereto as ANNEX VII and ANNEX VIII.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Preferred Stock on the Closing Date is conditioned upon:
a. The execution and delivery of this Agreement and the Registration
Rights Agreement by the Company;
b. Delivery by the Company to the Escrow Agent of the Certificates
in accordance with this Agreement;
c. The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement. each
as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date;
d. On the Closing Date, the Buyer shall have received an opinion of
counsel for the Company, dated such date, in form, scope and substance
reasonably satisfactory to the Buyer, substantially to the effect set forth in
ANNEX III attached hereto;
e. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained; and
16
<PAGE>
g. From and after the date hereof to and including the Closing Date,
the trading of the Common Stock shall not have been suspended by the SEC or the
NASD and trading in securities generally on the New York Stock Exchange or The
NASDAQ/Bulletin Board Market shall not have been suspended or limited, nor shall
minimum prices been established for securities traded on The NASDAQ/Bulletin
Board Market, nor shall there be any outbreak or escalation of hostilities
involving the United States or any material adverse change in any financial
market that in either case in the reasonable judgment of the Buyer makes it
impracticable or inadvisable to purchase the Preferred Stock.
9. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York for contracts to be wholly performed in
such state and without giving effect to the principles thereof regarding the
conflict of laws, except to the extent that the Minnesota Business Corporation
Act would apply to the internal corporate governance of the Company. Each of the
parties consents to the jurisdiction of the federal courts whose districts
encompass any part of the City of New York or the state courts of the State of
New York sitting in the City of New York in connection with any dispute arising
under this Agreement and hereby waives, to the maximum extent permitted by law,
any objection, including any objection based on FORUM NON CONVENIENS, to the
bringing of any such proceeding in such jurisdictions. To the extent determined
by such court, the Company shall reimburse the Buyer for any reasonable legal
fees and disbursements incurred by the Buyer in enforcement of or protection of
any of its rights under any of the Transaction Agreements.
b. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
c. This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties hereto.
d. All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
e. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto.
f. This Agreement may be signed in one or more counterparts, each of
which shall be deemed an original.
g. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.
17
<PAGE>
h. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
i. This Agreement may be amended only by an instrument in writing
signed by the party to be charged with enforcement thereof.
j. This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof.
10. NOTICES. Any notice required or permitted hereunder shall be
given in writing (unless otherwise specified herein) and shall be deemed
effectively given on the earliest of
(a) the date delivered, if delivered by personal delivery as against
written receipt therefor or by confirmed facsimile transmission,
(b) the seventh business day after deposit, postage prepaid, in the
United States Postal Service by registered or certified mail, or
(c) the third business day after mailing by international express
courier, with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: SAC TECHNOLOGIES, INC.
At its address at the head of this Agreement
Attn: Barry M. Wendt, CEO
Telephone No.: (612) 835-7080
Telecopier No.: (612) 835-6620
and with a copy to:
Buchanan Ingersoll Professional Corporation
Eleven Penn Center, 14th Floor
1835 Market Street
Philadelphia, PA 19103-2895
Attn: Vincent A. Vietti, Esq.
Telephone No.: (215) 665-3860
Telecopier No.: (215) 665-8760
BUYER: At the address set forth on the signature page of this Agreement.
with a copy to:
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<PAGE>
Krieger & Prager, Esqs.
319 Fifth Avenue
Attn: Samuel Krieger, Esq.
New York, New York 10016
Telephone No.: (212) 689-3322
Telecopier No.: (212) 213-2077
ESCROW AGENT: Krieger & Prager, Esqs.
319 Fifth Avenue
Attn: Samuel Krieger, Esq.
New York, New York 10016
Telephone No.: (212) 689-3322
Telecopier No.: (212) 213-2077
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and
the Buyer's representations and warranties herein shall survive the execution
and delivery of this Agreement and the delivery of the Certificates and the
Warrants and the payment of the Purchase Price, and shall inure to the benefit
of the Buyer and the Company and their respective successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Buyer by one of its officers thereunto duly authorized as of the date set forth
below.
LIQUIDATION PREFERENCE OF PREFERRED STOCK $ 1,312,500.00
---------------------
AMOUNT AND PURCHASE PRICE OF PREFERRED STOCK
AND WARRANTS: $ 875,000.00
---------------------
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this 9th day of July, 1999.
THE SHAAR FUND LTD.
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Address Printed Name of Subscriber
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By:
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Telecopier No. (Signature of Authorized Person)
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Printed Name and Title
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Jurisdiction of Incorporation
or Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
SAC TECHNOLOGIES, INC.
By:
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Title:
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Date: July 9, 1999
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20
EXHIBIT 10.22
ANNEX VI
TO
SECURITIES PURCHASE AGREEMENT
[PROTOTYPE FOR EACH ISSUANCE]
FORM OF WARRANT
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED UNLESS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT, A "NO ACTION" LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH
RESPECT TO SUCH TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE
SECURITIES AND EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
SAC TECHNOLOGIES, INC.
COMMON STOCK PURCHASE WARRANT
1. Issuance; Certain Definitions.
In consideration of good and valuable consideration, the receipt
of which is hereby acknowledged by SAC TECHNOLOGIES, INC., a Minnesota
corporation (the "Company"), THE SHAAR FUND LTD. or registered assigns (the
"Holder") is hereby granted the right to purchase at any time until 5:00 P.M.,
New York City time, on June 30, 2004 (the "Expiration Date"), One Hundred
Thirty-One Thousand Two Hundred Fifty (131,250) fully paid and nonassessable
shares of the Company's Common Stock, par value $0.01 per share (the "Common
Stock") at an initial exercise price per share (the "Exercise Price") of
$1.196, (1) subject to further adjustment as set forth herein. This Warrant
is being issued pursuant to the terms of that certain Securities Purchase
Agreement, dated as of July 9, 1999 (the "Securities Purchase Agreement"), to
which the Company and Holder (or Holder's predecessor in interest) are parties.
2. Exercise of Warrants.
2.1 General. This Warrant is exercisable in whole or in part at
any time and from time to time at the Exercise Price per share of Common Stock
payable hereunder, payable in cash or by certified or official bank check. Upon
surrender of this Warrant Certificate with the annexed Notice of Exercise Form
duly executed (which Notice of Exercise Form may be submitted either by delivery
to the Company or by facsimile transmission as provided in Section 8
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(1) Price to be filled in equal to110% of average closing bid price of
Common Stock for 5 trading days ending on date before Closing Date.
<PAGE>
hereof), together with payment of the Exercise Price for the shares of
Common Stock purchased, the Holder shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased.
2.2 Limitation on Exercise. Notwithstanding the provisions of
this Warrant, the Securities Purchase Agreement or of the other Transaction
Agreements (as defined in the Securities Purchase Agreement), in no event
(except (i) with respect to an automatic conversion, if any, of the Preferred
Stock as provided in its Certificate of Designations, (ii) as specifically
provided in this Warrant as an exception to this provision, or (iii) while there
is outstanding a tender offer for any or all of the shares of the Company's
Common Stock) shall the Holder be entitled to exercise this Warrant, or shall
the Company have the obligation to issue shares upon such exercise of all or any
portion of this Warrant, to the extent that, after such exercise the sum of (1)
the number of shares of Common Stock beneficially owned by the Holder and its
affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unconverted portion of the Preferred Stock or
unexercised portion of the Warrants), and (2) the number of shares of Common
Stock issuable upon the exercise of the Warrants with respect to which the
determination of this proviso is being made, would result in beneficial
ownership by the Holder and its affiliates of more than 9.99% of the outstanding
shares of Common Stock (after taking into account the shares to be issued to the
Holder upon such exercise). For purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), except as otherwise provided in clause (1) of such sentence. The Holder,
by its acceptance of this Warrant, further agrees that if the Holder transfers
or assigns any of the Warrants to a party who or which would not be considered
such an affiliate, such assignment shall be made subject to the transferee's or
assignee's specific agreement to be bound by the provisions of this Section 2.2
as if such transferee or assignee were the original Holder hereof.
3. Reservation of Shares. The Company hereby agrees that at all
times during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) receipt of
reasonably satisfactory indemnification, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
a new Warrant of like tenor and date and any such lost, stolen, destroyed or
mutilated Warrant shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder
2
<PAGE>
are limited to those expressed in this Warrant and are not enforceable against
the Company except to the extent set forth herein.
6. Protection Against Dilution.
6.1 Adjustment Mechanism. If an adjustment of the Exercise Price
is required pursuant to this Section 6, the Holder shall be entitled to purchase
such number of shares of Common Stock as will cause (i) the total number of
shares of Common Stock Holder is entitled to purchase pursuant to this Warrant
after such adjustment, multiplied by (ii) the adjusted Exercise Price per share,
to equal (iii) the dollar amount of the total number of shares of Common Stock
Holder is entitled to purchase before adjustment multiplied by the total
Exercise Price before adjustment.
6.2 Capital Adjustments. In case of any stock split or reverse
stock split, stock dividend, reclassification of the Common Stock,
recapitalization, merger or consolidation, or like capital adjustment affecting
the Common Stock of the Company (each, an "Adjustment"), the Exercise Price in
effect at the time of the effective date for such Adjustment shall be
proportionally adjusted so that the Holder of this Warrant exercised after such
date shall be entitled to receive the aggregate number and kind of shares which,
if this Warrant had been exercised by such Holder immediately prior to such
date, the Holder would have owned upon such exercise and been entitled to
received upon such Adjustment (and for such purposes the Holder shall, to the
extent relevant, be deemed to have exercised this Warrant immediately prior to
the record date or the effective date, as the case may, for the Adjustment). For
example, if the Company declares a 2:1 stock dividend or stock split and the
Exercise Price immediately prior to the record date for such Adjustment was
$5.00 per share, the adjusted Exercise Price immediately after the Adjustment
would be $2.50 per share. Such adjustment may be made successively if there is
more than one Adjustment. In all other respects the provisions of this Section
shall be applied in a fair, equitable and reasonable manner so as to give
effect, as nearly as may be, to the purposes hereof. A rights offering to
stockholders shall be deemed a stock dividend to the extent of the bargain
purchase element of the rights.
6.3 Adjustment for Spin Off. If, for any reason, prior to the
exercise of this Warrant in full, the Company spins off or otherwise divests
itself of a part of its business or operations or disposes all or of a part of
its assets in a transaction (the "Spin Off") in which the Company does not
receive compensation for such business, operations or assets, but causes
securities of another entity (the "Spin Off Securities") to be issued to
security holders of the Company, then the Company shall cause (i) to be reserved
Spin Off Securities equal to the number thereof which would have been issued to
the Holder had all of the Holder's unexercised Warrants outstanding on the
record date (the "Record Date") for determining the amount and number of Spin
Off Securities to be issued to security holders of the Company (the "Outstanding
Warrants") been exercised as of the close of business on the trading day
immediately before the Record Date (the "Reserved Spin Off Shares"), and (ii) to
be issued to the Holder on the exercise of all or any of the Outstanding
Warrants, such amount of the Reserved Spin Off Shares equal to
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<PAGE>
(x) the Reserved Spin Off Shares multiplied by (y) a fraction, of which (I) the
numerator is the amount of the Outstanding Warrants then being exercised, and
(II) the denominator is the amount of the Outstanding Warrants.
7. Transfer to Comply with the Securities Act; Registration Rights.
7.1 Transfer. This Warrant has not been registered under the
Securities Act of 1933, as amended, (the "Act") and has been issued to the
Holder for investment and not with a view to the distribution of either the
Warrant or the Warrant Shares. Neither this Warrant nor any of the Warrant
Shares or any other security issued or issuable upon exercise of this Warrant
may be sold, transferred, pledged or hypothecated in the absence of an effective
registration statement under the Act relating to such security or an opinion of
counsel satisfactory to the Company that registration is not required under the
Act. Each certificate for the Warrant, the Warrant Shares and any other security
issued or issuable upon exercise of this Warrant shall contain a legend on the
face thereof, in form and substance satisfactory to counsel for the Company,
setting forth the restrictions on transfer contained in this Section.
7.2 Registration Rights. (a) Reference is made to the
Registration Rights Agreement (as that term is defined in the Securities
Purchase Agreement). The Company's obligations under the Registration Rights
Agreement and the other terms and conditions thereof with respect to the Warrant
Shares, including, but not necessarily limited to, the Company's commitment to
file a registration statement including the Warrant Shares, to have the
registration of the Warrant Shares completed and effective, and to maintain such
registration, are incorporated herein by reference.
(b) In addition to the registration rights referred to in the
preceding provisions of Section 7.2(a), effective after the expiration of the
effectiveness of the Registration Statement as contemplated by the Registration
Rights Agreement, the Holder shall have demand piggy-back registration rights
with respect to the Warrant Shares then held by the Holder or then subject to
issuance upon exercise of this Warrant (collectively, the "Remaining Warrant
Shares"), subject to the conditions set forth below. If, at any time after the
Registration Statement has ceased to be effective, the Company participates
(whether voluntarily or by reason of an obligation to a third party) in the
registration of any shares of the Company's stock, the Company shall give
written notice thereof to the Holder and the Holder shall have the right,
exercisable within ten (10) business days after receipt of such notice, to
demand inclusion of all or a portion of the Holder's Remaining Warrant Shares in
such registration statement. If the Holder exercises such election, the
Remaining Warrant Shares so designated shall be included in the registration
statement at no cost or expense to the Holder (other than any costs or
commissions which would be borne by the Holder under the terms of the
Registration Rights Agreement). The Holder's rights under this Section 7.2 are
subject to the following conditions: if there is a managing underwriter of the
offering of shares referred to in the registration statement and such managing
underwriter advises the Company in writing that the number of shares proposed to
be included in the offering will have an adverse effect on its ability to
successfully conclude the offering and, as a result, the number of shares to be
included in the offering is to be reduced, the number of Remaining Warrant
Shares of the Holder which were to be included in the registration (before
4
<PAGE>
such reduction) will be reduced pro rata with the number of shares included for
all other parties whose shares are being registered.
8. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage pre-paid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission,
or, if mailed, two days after the date of deposit in the United States mails, as
follows:
(i) if to the Company, to:
SAC TECHNOLOGIES, INC.
4444 West 76th Street, Suite 600
Edina, MN 55435
Attn: Barry M. Wendt, CEO
Telephone No.: (612) 835-7080
Telecopier No.: (612) 835-6620
with a copy to:
Buchanan Ingersoll Professional Corporation
Eleven Penn Center, 14th Floor
1835 Market Street
Philadelphia, PA 19103-2895
Attn: Vincent A. Vietti, Esq.
Telephone No.: (215) 665-3860
Telecopier No.: (215) 665-8760
(ii) if to the Holder, to:
The Shaar Fund Ltd.
c/o CITCO FUND SERVICES (CURACAO) N.V.
Kaya Flamboyan 9
Curacao
Netherlands Antilles
(Tel: 599-9-732-2222)
(Fax: 599-9-732-2225)
with a copy to:
Levinson Capital Mangement
One World Trade Center
New York, New York 10048
ATT: Sam Levinson
5
<PAGE>
Tel: (212) 943-9100
Fax: (212) 432-7771
with a copy to:
Krieger & Prager, Esqs.
319 Fifth Avenue
New York, New York 10016
Telephone No.: (212) 689-3322
Telecopier No.: (212) 213-2077
Any party may, by notice given in accordance with this Section to the other
parties, designate another address or person for receipt of notices hereunder.
9. Supplements and Amendments; Whole Agreement. This Warrant may be
amended or supplemented only by an instrument in writing signed by the parties
hereto. This Warrant contains the full understanding of the parties hereto with
respect to the subject matter hereof and thereof and there are no
representations, warranties, agreements or understandings other than expressly
contained herein and therein.
10. Governing Law. This Warrant shall be deemed to be a contract
made under the laws of the State of New York and for all purposes shall be
governed by and construed in accordance with the laws of such State applicable
to contracts to be made and performed entirely within such State. Each of the
parties consents to the jurisdiction of the federal courts whose districts
encompass any part of the City of New York or the state courts of the State of
New York sitting in the City of New York in connection with any dispute arising
under this Warrant and hereby waives, to the maximum extent permitted by law,
any objection, including any objection based ON FORUM NON CONVENIENS, to the
bringing of any such proceeding in such jurisdictions. To the extent determined
by such court, the Company shall reimburse the Holder for any reasonable legal
fees and disbursements incurred by the Buyer in enforcement of or protection of
any of its rights under this Warrant.
11. Counterparts. This Warrant may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
12. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
the 9th day of July 1999.
SAC TECHNOLOGIES, INC.
6
<PAGE>
By:
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Name:
Its:
Attest:
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Name:
Title:
7
<PAGE>
NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant Certificate dated as of __________, 1999, to purchase
__________ shares of the Common Stock, par value $0.01 per share, of SAC
TECHNOLOGIES, INC. and tenders herewith payment in accordance with Section 1 of
said Common Stock Purchase Warrant.
Please deliver the stock certificate to:
Dated:
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By:
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[ ] CASH: $
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