SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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): September 9, 1997 (August
28, 1997)
Sheldahl, Inc.
(Exact name of Registrant as specified in its charter)
Minnesota 0-45 41-0758073
(State or other jurisdiction Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
1150 Sheldahl Road
Northfield, Minnesota 55057
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (507) 663-8000
<PAGE>
Item 5. Other Events.
General
_______
On August 19, 1997, the Board of Directors of Sheldahl, Inc., a
Minnesota corporation (the "Company"), authorized a private placement of its
newly created Series B Convertible Preferred Stock, $1.00 par value per share,
and Warrants (the "Warrants") to purchase shares of the Company's Common
Stock, $.25 par value per share (the "Preferred Stock"), to a group of five
accredited investors (the "Investors"). The Board also authorized granting
the Investors certain registration rights with regard to the shares of Common
Stock underlying the Preferred Stock and the Warrants. The closing of the
private placement occurred on August 29, 1997.
Preferred Stock
_______________
The Company sold an aggregate of 15,000 shares of the Preferred Stock to
the Investors for an aggregate purchase price of $15,000,000, pursuant to the
Convertible Preferred Stock Purchase Agreement among the Company and the
Investors (the "Agreement"). Pursuant to the terms of the Agreement, the
Company has the right, subject to the satisfaction of certain conditions, to
require the Investors to purchase shares of Series C Convertible Preferred
Stock, par value $1.00 per share, with terms identical to the Preferred Stock
("Series C Preferred Stock"), for an aggregate additional purchase price of
up to $15,000,000. If the Company exercises its right to sell any shares of
the Series C Preferred Stock, it may not sell less than $1,000,000 worth of
the Series C Preferred Stock.
The Preferred Stock is entitled to 5% dividends, payable upon
conversion, in shares of Common Stock or cash, at the option of the Company.
The Preferred Stock is convertible into shares of the Company's Common Stock
at any time. Each holder of Preferred Stock is entitled to convert each share
of Preferred Stock into that number of shares of Common Stock that equals
$1,000 plus accrued dividends divided by the Conversion Price. The Conversion
Price is (1) the lesser of 110% of the average per share market value of the
Company's Common Stock for five (5) business days immediately preceding August
28, 1997, or (2) 101% of the average of the five lowest consecutive per share
market values during the thirty (30) business days immediately preceding the
conversion date. The Conversion Price is subject to adjustment for certain
dilution and market price events.
Under certain circumstances, when the Company's Common Stock trades at
less than $20 per share for ten (10) consecutive business days, the conversion
rights of the holders of the Preferred Stock are limited pursuant to the
Agreement.
The Company may require holders of Preferred Stock to convert to Common
Stock provided that the Company's Common Stock trades at certain pre-set price
levels. The Company may also redeem the Preferred Stock under certain
circumstances. The Company is obligated to redeem the Preferred Stock, at the
option of the holders, in the event the Company defaults under certain
obligations which are part of the terms of the Preferred Stock.
Pursuant to the terms of the Agreement, the Company's Chief Executive
Officer and Vice President, Finance have executed a lock-up agreement,
pursuant to which each of them committed not to sell more than 10% of the
shares of the Company's Common Stock beneficially owned by him for a period of
forty-five (45) days following August 29, 1997, and for the forty-five (45)
day period following any closing for the Series C Preferred Stock. The Lock
Up period expires prior to the end of the 45-day period if a registration
statement covering the Preferred Stock and Warrants or Series C Preferred, as
the case may be, is declared effective. The Lock-Up Agreements exclude the
exercise and sale of shares issued to the officers under the Company's stock
option or similar plans.
The Agreement between the Company and the Investors, and the Certificate
of Designation for the Preferred Stock, are incorporated herein by reference
as Exhibits 4.1 and 4.2 hereto. The foregoing description of the Agreement
and the Preferred Stock does not purport to be complete and is qualified in
its entirety by reference to such exhibits.
Warrant
_______
In connection with the issuance of the Preferred Stock, the Company also
granted to each Investor a Warrant to purchase shares of the Company's Common
Stock. The aggregate amount of shares of Common Stock the Company is
obligated to issue under the Warrants is 67,812 at an exercise price of $27.65
per share. The form of Warrant issued by the Company to the Investors is
incorporated herein by reference as Exhibit 4.3 hereto.
Registration Rights
___________________
The Company granted the Investors certain registration rights. The
registration rights cover all shares of Common Stock issuable to the Investors
upon conversion of the Preferred Stock, whether Series B or Series C, and upon
exercise of the Warrants. The Company is obligated to file a shelf
Registration Statement within twenty-five (25) days of August 29, 1997 on Form
S-3. If the Company issues to the Investors any Series C Preferred Stock, the
Company is obligated to file an additional shelf Registration Statement within
twenty-five (25) days of the closing date for the sale of such Series C
Preferred Stock.
The Registration Rights Agreement between the Company and the Investors
specifying the terms of the registration rights is incorporated herein by
reference as Exhibit 4.4 hereto. The foregoing description of the
Registration Rights does not purport to be complete and is qualified in its
entirety by reference to such Exhibit.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
Exhibit 4.1. Convertible Preferred Stock Purchase Agreement among
the Company, Southbrook International Investments, Ltd., HBK
Cayman L.P., HBK Offshore Fund Ltd., HBK Investments L.P.,
Proprietary Convertible Investment Group, Inc. and Brown
Simpson Strategic Growth Fund, L.P.
Exhibit 4.2. Certificate of Designation, Preferences and Rights of
Series B Convertible Preferred Stock.
Exhibit 4.3. Form of Warrant.
Exhibit 4.4. Registration Rights Agreement among the Company,
Southbrook International Investments, Ltd., HBK Cayman L.P.,
HBK Offshore Fund Ltd., HBK Investments L.P., Proprietary
Convertible Investment Group, Inc. and Brown Simpson
Strategic Growth Fund, L.P.
Exhibit 4.5. Press Release
<PAGE>
SIGNATURE
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.
Sheldahl, Inc.
By /s/ John V. McManus
John V. McManus, Vice President
Dated: September 9, 1997
<PAGE>
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"), dated
as of August 27, 1997, among Sheldahl, Inc., a Minnesota corporation (the
"Company"), Southbrook International Investments, Ltd., a British Virgin
Islands corporation ("Southbrook"), HBK Cayman L.P., a Cayman Islands exempt
limited partnership ("HBK Cayman"), HBK Offshore Fund Ltd., a Cayman Islands
exempt company ("HBK Offshore"), HBK Investments L.P., as investment manager
for HBK Cayman and HBK Offshore, Proprietary Convertible Investment Group,
Inc., a Delaware corporation ("PCIG"), and Brown Simpson Strategic Growth
Fund, L.P., a New York limited partnership ("Brown Simpson"). Southbrook, HBK
Cayman, HBK Offshore, PCIG and Brown Simpson are sometimes referred to herein
as a "Purchaser" and collectively as the "Purchasers".
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers and the
Purchasers desire to acquire shares of the Company's Series B Convertible
Preferred Stock, par value $1.00 per share (the "Series B Preferred"), and the
Company's Series C Convertible Preferred Stock, par value $1.00 per share (the
"Series C Preferred") (the Series B Preferred and Series C Preferred are
collectively referred to as the "Preferred Stock" and shares of Preferred
Stock issued and sold in accordance with this Agreement are referred to as the
"Shares");
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, the Company and the Purchasers agree as follows:
I. ARTICLE
PURCHASE AND SALE OF PREFERRED SHARES
1.1 Purchase and Sale. Subject to the terms and conditions set
forth herein, at the closings described in this Article I, the Company shall
issue and sell to the Purchasers and the Purchasers, severally and not
jointly, shall purchase (i) 15,000 shares of Series B Preferred (the "Series B
Shares") and (ii) up to 15,000 shares of Series C Preferred (the "Series C
Shares").
(b) The Series B Preferred shall have the respective rights,
preferences and privileges set forth in Exhibit A attached hereto (the "Series
B Terms"), which shall be incorporated by reference herein and shall be
incorporated into a Certificate of Designation to be approved by the
Purchasers and filed on or prior to the Series B Closing Date (as defined
below) by the Company with the Secretary of State of Minnesota (the "Series B
Designation"). The Series C Preferred, if and when issued, shall have
respective rights, preferences and privileges identical to the Series B Terms,
mutatis mutandis, and shall rank pari passu with the Series B Preferred with
regard to dividends, liquidation, voting rights and any other preferential
rights designated therein, except that the Conversion Price (as defined below)
for conversion of the Series B Preferred and Series C Preferred shall be
determined separately at the Original Issue Date (as defined below) applicable
to each series.
The Series C Preferred shall be authorized pursuant to a Certificate of
Designation to be prepared by the Company, subject to the approval of the
Purchaser, and filed on or prior to the Series C Closing Date (as defined
below) by the Company with the Secretary of State of Minnesota (such
Certificate of Designation, together with the Series B Designation, are
referred to as the "Certificates of Designation").
For purposes of this Agreement, "Business Day," "Conversion Price,"
"Conversion Ratio," "Original Issue Date," "Conversion Date" and "Per Share
Market Value" shall have the meanings set forth in the Series B Terms. The
Shares, the Warrants (as defined in Section 3.17) and the Underlying Shares
(as defined in Section 2.1(d)) are sometimes collectively referred to herein
as the "Securities."
1.2 Purchase Price. The purchase price per Share shall be
$1,000.
1.3 The Closings.
(a) The Series B Closing. Subject to the terms and
conditions set forth in this Agreement, the Company shall sell and issue to
the Purchasers and the Purchasers shall severally purchase the Series B Shares
for an aggregate purchase price of $15,000,000. The closing of the purchase
and sale of the Series B Shares (the "Series B Closing") shall take place at
the offices of Robinson Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of
the Americas, New York, New York 10104 ("Robinson Silverman"), immediately
following the execution hereof or such later date as the parties shall agree.
The date of the Series B Closing is hereinafter referred to as the "Series B
Closing Date."
(ii) At the Series B Closing, (a) the Company shall
deliver (A) to Southbrook (1) one or more stock certificates representing
4,967 Series B Shares and the Southbrook Warrant (as defined in Section 3.17),
each registered in the name of Southbrook, (2) the legal opinion of Lindquist
& Vennum P.L.L.P., in the form attached hereto as Exhibit D (the "Series B
Opinion") and (3) all other documents, instruments and writings required to
have been delivered at or prior to the Series B Closing by the Company to
Southbrook pursuant to this Agreement; (B) to HBK Cayman (1) one or more stock
certificates representing 2,483 Series B Shares and the HBK Cayman Warrant (as
defined in Section 3.17), each registered in the name of HBK Cayman, (2) the
Series B Opinion and (3) all other documents, instruments and writings
required to have been delivered at or prior to the Series B Closing by the
Company to HBK Cayman pursuant to this Agreement; (C) to HBK Offshore (1) one
or more stock certificates representing 2,483 Series B Shares and the HBK
Offshore Warrant (as defined in Section 3.17), each registered in the name of
HBK Offshore, (2) the Series B Opinion and (3) all other documents,
instruments and writings required to have been delivered at or prior to the
Series B Closing by the Company to HBK Offshore pursuant to this Agreement;
(D) to PCIG (1) one or more stock certificates representing 4,967 Series B
Shares and the PCIG Warrant (as defined in Section 3.17), each registered in
the name of PCIG, (2) the Series B Opinion and (3) all other documents,
instruments and writings required to have been delivered at or prior to the
Series B Closing by the Company to PCIG pursuant to this Agreement; and (E) to
Brown Simpson (1) one or more stock certificates representing 100 Series B
Shares and the Brown Simpson Warrant (as defined in Section 3.17), each
registered in the name of Brown Simpson, (2) the Series B Opinion and (3) all
other documents, instruments and writings required to have been delivered at
or prior to the Series B Closing by the Company to Brown Simpson pursuant to
this Agreement, and (b) each Purchaser shall deliver to the Company (1) the
purchase price for the Series B Shares being purchased by it at the Series B
Closing, determined in accordance with Section 1.2, in United States dollars
in immediately available funds by wire transfer to an account designated in
writing by the Company for such purpose prior to the Series B Closing Date,
and (2) all documents, instruments and writings required to have been
delivered at or prior to the Series B Closing by such Purchaser pursuant to
this Agreement.
(b) The Series C Closing. (i) Subject to the terms and
conditions set forth in this Agreement, the Company shall have the right to
deliver a written notice to the Purchasers (a "Subsequent Financing Notice")
requiring the Purchasers to purchase such number of Series C Shares as the
Company may designate in such notice, each Purchaser being obligated (subject
to the terms and conditions hereof) to purchase such portion of such Series C
Shares as equals such Purchaser's pro rata portion of the purchase price for
the Series B Shares issued and sold at the Series B Closing. The Company may
not deliver a Subsequent Financing Notice that covers (i) less than 1,000
Series C Shares, (ii) more than 15,000 Series C Shares or (iii) a number of
Series C Shares so that the purchase price therefor (determined in accordance
with Section 1.2) would, when aggregated with the total purchase price paid
for the Series B Shares and the gross proceeds of any sales of Company
securities by or on behalf of the Company between the date of this Agreement
and the Series C Closing Date in placements to Persons (as defined in Section
2.1(c)) whose primary business purpose is not to engage (directly or
indirectly) in the investment in or sale of securities (a "Strategic Partner")
and which investment has a common bona fide commercial purpose for the Company
and such Strategic Partner (a "Strategic Placement"), exceed $40,000,000 (or
such higher amount as may be acceptable to the Purchasers). If the Company
has received, and not rejected, a written proposal from a Strategic Partner
between the date which is 15 days prior to the date of delivery of a
Subsequent Financing Notice and the Series C Closing Date, then the proposed
gross proceeds of such placement will count towards the calculation set forth
in clause (iii) of the immediately preceding sentence and the number of Series
C Shares that the Purchasers would otherwise have been required to purchase at
the Series C Closing Date as a result of such Subsequent Financing Notice will
be reduced accordingly. The Company may deliver a Subsequent Financing Notice
no earlier than the later of (i) expiration of the 90th Business Day after the
date that a registration statement (an "Underlying Securities Registration
Statement") contemplated by the Registration Rights Agreement, dated the date
hereof, among the Purchasers and the Company substantially in the form of
Exhibit B attached hereto (the "Registration Rights Agreement") covering,
among other things, the shares of Common Stock issuable upon conversion of and
payment of dividends on the Series B Shares and the shares of Common Stock
issuable upon exercise of the Warrants has been declared effective by the
Securities and Exchange Commission (the "Commission") (provided, that Business
Days during which any Purchaser (or its successors, permitted assigns or other
successors in interest) is not permitted to resell securities under such
Underlying Securities Registration Statement shall be added to such 90
Business Day period) and (ii) 120 days following the Series B Closing Date,
and may deliver a Subsequent Financing Notice no later than 270 days following
the Series B Closing Date (provided, that at the request of the Company, up to
90 days of the 90 Business Days that may be added to the period above in this
sentence may be added to such 270 day period for an absolute expiration date
of up to 360 days from the Series B Closing) (such date, the "Series C Closing
Expiration Date"). The closing of the purchase and sale of the Series C
Shares (the "Series C Closing") shall take place at the offices of Robinson
Silverman on such date as specified by the Company in the Subsequent Financing
Notice (which date may not be prior to the 30th day after receipt by the
Purchasers of the Subsequent Financing Notice); provided that in no case shall
the Series C Closing take place unless and until the conditions listed in
Section 4.1 have been satisfied or waived by the appropriate party. The date
of the Series C Closing is hereinafter referred to as the "Series C Closing
Date." Notwithstanding anything to the contrary contained herein, the Company
may, by written notice to each Purchaser provided prior to the Series C
Closing Date, revoke such Subsequent Financing Notice in the event that the
Per Share Market Value decreases below $12.00 or the average daily trading
volume during the period of 10 Business Days immediately prior to the Series C
Closing Date of the Common Stock on the Nasdaq National Market, The New York
Stock Exchange ("NYSE") or The American Stock Exchange ("AMEX"), as
applicable, shall be less than 10,000 shares.
(ii) At the Series C Closing, (a) the Company shall deliver
(A) to each Purchaser (1) a pro rata portion of the Series C Shares
(determined by reference to the amount of Series B Shares issued and sold at
the Series B Closing) to be issued and sold thereat (or such other amount upon
which the parties may agree), registered in the name of such Purchaser, (2)
the legal opinion referenced in Section 4.1(k), substantially in the form
attached hereto as Exhibit D, and (3) all other documents, instruments and
writings required to have been delivered at or prior to the Series C Closing
by the Company to the Purchasers pursuant to this Agreement; and (b) each
Purchaser shall deliver to the Company (1) the purchase price for the Series C
Shares being purchased by it at the Series C Closing in United States dollars
in immediately available funds by wire transfer to an account designated in
writing by the Company for such purpose on or prior to the Series C Closing
Date and (2) all documents, instruments and writings required to have been
delivered at or prior to the Series C Closing by such Purchaser pursuant to
this Agreement. In the event that a Purchaser ("Defaulting Purchaser") fails
to purchase Series C Shares in accordance with this Section 1.3(b)(ii) despite
the performance by the Company of its obligations under this Section and the
satisfaction by the Company of the conditions set forth in Article IV, the
Company shall notify the Purchasers other than the Defaulting Purchaser (such
Purchasers, the "Non-Defaulting Purchasers") of such failure whereupon each
Non-Defaulting Purchaser shall have the option, exercisable within five (5)
Business Days from the later of the date such Non-Defaulting Purchaser
receives notice of such option and the Series C Closing Date, to purchase up
to its pro rata share of the remaining Series C Shares, determined by
reference to the number of Series B Shares purchased by each Non-Defaulting
Purchaser at the Series B Closing and the total number of Series B Shares
issued by the Company at the Series B Closing. If the Non-Defaulting
Purchasers do not elect to purchase the remaining Series C Shares, the Company
may then assign a Defaulting Purchaser's rights hereunder to acquire Series C
Shares to a third party without further obligation on the part of the
Defaulting Purchaser to purchase Series C Shares, provided, however, that if
the Company has not satisfied its obligations under this Section or the
conditions set forth in Section 4.1, such third party shall be reasonably
acceptable to the Non-Defaulting Purchasers. Failure by any Purchaser to buy
Series C Shares shall not affect the Company's obligations with respect to the
Series B Shares acquired by such Purchaser, which shall remain unaffected
thereby and shall not affect the Non-Defaulting Purchasers obligations to
purchase Series C Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties to the
Purchasers:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing under
the laws of the State of Minnesota, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. The Company has no subsidiaries other than
as set forth in Schedule 2.1(a) (collectively the "Subsidiaries"). Each of
the Subsidiaries is a corporation, duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the full corporate power and authority to
own and use its properties and assets and to carry on its business as
currently conducted. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not reasonably be
expected to, individually or in the aggregate, (x) adversely affect the
legality, validity or enforceability of any of this Agreement, the
Certificates of Designation, the Registration Rights Agreement and the
Warrants (the "Transaction Documents") in any material respect, (y) have or
result in a material adverse effect on the results of operations, assets,
prospects, or financial condition of the Company and the Subsidiaries, taken
as a whole, or (z) adversely impair the Company's ability to perform fully on
a timely basis its obligations under the Transaction Documents (any one of
(x), (y) and (z), being a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company (including any required approval thereof by the Board of
Directors of the Company and by the stockholders of the Company) and no
further action is required by the Company, except that the Certificate of
Designation of the Preferred Stock, which must be filed and recorded in
accordance with the laws of the State of Minnesota, will be so filed and
recorded by the Company on or prior to the applicable Closing Date. Each of
the Transaction Documents has been duly executed by the Company and when
delivered or filed in accordance with the terms hereof will constitute the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of,
creditors' rights and remedies or by other equitable principles of general
application. Neither the Company nor any Subsidiary is in violation of any of
the provisions of its respective certificate of incorporation, articles, by-
laws or other charter documents.
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company is set forth in Schedule 2.1(c). Except as
specifically disclosed in Schedule 2.1(c), no shares of Common Stock are
entitled to preemptive or similar rights, nor is any holder of the Common
Stock entitled to preemptive or similar rights, or any rights to receive
Common Stock at a price which is less than the current market price thereof,
arising out of any agreement or understanding with the Company by virtue of
any of the Transaction Documents or the transactions contemplated thereby.
Except as disclosed in Schedule 2.1(c), there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or, except as a result of the purchase and sale of the
Shares and Warrants hereunder, securities, rights or obligations convertible
into or exchangeable for, or giving any person any right to subscribe for or
acquire any shares of Common Stock, or contracts, commitments, understandings,
or arrangements by which the Company or any Subsidiary is or may become bound
to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. To the knowledge of
the Company, except as specifically disclosed in the SEC Documents (as defined
below), as contained in any Schedule 13D or 13G filed by a Person with the
Commission or Schedule 2.1(c), no Person beneficially owns (as determined
pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), or has the right to acquire by agreement
with or by obligation binding upon the Company beneficial ownership of more
than 5% of the Common Stock. A "Person" means an individual or corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
(d) Issuance of Shares and Warrants. The Shares and the
Warrants are duly authorized, and when issued in accordance with the terms
hereof, shall be validly issued, fully paid and nonassessable. As of the
Series B Closing Date and Series C Closing Date, as the case may be, the
Company will have, and, at all times while any Shares or any Warrants are
outstanding, will maintain, an adequate reserve of duly authorized shares of
Common Stock to enable it to perform its obligations under this Agreement, the
Warrants and the Certificates of Designation with respect to the number of
Shares and Warrants issued and outstanding at such Closing Date and in no
circumstances shall such reserved and available shares of Common Stock be less
than the sum of (i) 150% of the number of shares of Common Stock which would
be issuable upon conversion of the Shares issued pursuant to the terms hereof
with respect to the number of Shares issued and outstanding at such Closing
Date were such conversion effected on the Original Issue Date for such Shares,
(ii) the number of shares of Common Stock which would be issuable upon payment
of dividends on the Shares, assuming each Share is outstanding for the full
three year term and (iii) the number of shares of Common Stock which would be
issuable upon exercise in full of the Warrants. The shares of Common Stock
issuable upon conversion of the Shares and exercise of the Warrants and which
may be issued as payment of dividends on the Shares are collectively referred
to herein as the "Underlying Shares". When issued in accordance with the
terms hereof, the Certificate of Designation or the Warrants, as the case may
be, the Underlying Shares will be duly authorized, validly issued, fully paid
(except that Underlying Shares issued upon exercise of Warrants shall be fully
paid upon delivery of the applicable exercise price therefor) and
nonassessable, free and clear of all liens, claims, encumbrances or defects of
any kind (collectively, "Liens").
(e) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company
of the transactions contemplated thereby do not and will not (i) conflict with
or violate any provision of its Articles of Incorporation or bylaws (each as
amended through the date hereof) or (ii) subject to obtaining the consents
referred to in Section 2.1(f), conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company
is a party, or (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company is subject (including Federal and
state securities laws and regulations) (other than (x) a violation of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), as a result of a failure of the representations and warranties of the
Purchasers set forth in the first sentence of Section 2.2(h) to be accurate or
(y) information the Company would be required pursuant to Rule 502(b)(1)
promulgated under the Securities Act to deliver to Purchasers who are deemed
not to be accredited investors as a result of a failure of the representations
and warranties of the Purchasers set forth in Section 2.2(c) to be accurate),
or by which any property or asset of the Company is bound or affected, except
in the case of each of clauses (ii) and (iii), such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as could
not reasonably be expected to individually or in the aggregate have or result
in a Material Adverse Effect. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
authority, except for violations which could not reasonably be expected to
individually or in the aggregate have or result in a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically set forth in
Schedule 2.1(f) and assuming that the representations and warranties of the
Purchasers contained in Section 2.2 are true and correct in all respects, the
Company is not required to obtain any consent, waiver, authorization or order
of, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other person in connection
with the execution, delivery and performance by the Company of the Transaction
Documents, except for (i) the filings of the Certificates of Designation with
respect to the Shares with the Secretary of State of Minnesota, which filings
shall be effected prior to the Series B Closing Date and the Series C Closing
Date, as appropriate, (ii) the filing of the Underlying Securities
Registration Statement(s) with the Commission, which shall be filed in the
time periods set forth in the Registration Rights Agreement, (iii) the
application(s) or any letter(s) acceptable to and approved by the National
Association of Securities Dealers, Inc. ("NASD") for the designation of the
Underlying Shares for trading on the Nasdaq National Market (and with any
other national securities exchange or market on which the Common Stock is then
listed), (iv) any filings, notices or registrations under applicable Federal
or state securities laws and any filing that may be required under the HSR Act
as a result of a failure of the representations and warranties of the
Purchasers set forth in the first sentence of Section 2.2(h) to be accurate,
and (v) other than, in all other cases, where the failure to obtain such
consent, waiver, authorization or order, or to give or make such notice or
filing, would not materially impair or delay the ability of the Company to
effect the Series B Closing or the Series C Closing and to deliver to the
Purchasers the Shares (and, upon conversion of the Shares and exercise of
Warrants, the Underlying Shares) in the manner contemplated hereby and by the
Registration Rights Agreement free and clear of all Liens (together with the
consents, waivers, authorizations, orders, notices and filings referred to in
Schedule 2.1(f), the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed
in Schedule 2.1(g), there is no action, suit, notice of violation, proceeding
or investigation pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its properties before or by any
court, governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) which could, individually or in the
aggregate, have a Material Adverse Effect.
(h) No Default or Violation. Except as set forth in Schedule
2.1(h), neither the Company nor any Subsidiary (i) is in default under or in
violation of any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound or (ii) is in violation of any order of any court, arbitrator or
governmental body, except as could not reasonably be expected to, in any such
case (individually or in the aggregate) have or result in a Material Adverse
Effect.
(i) Schedules. The Schedules to this Agreement furnished by or
on behalf of the Company do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(j) Private Offering. Neither the Company nor any Person
authorized to act on its behalf has taken or will take any action which might
subject the offering, issuance or sale of the Securities to the Purchasers to
the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"). The Company will not be deemed to have breached the
representation and warranty contained in this Section as a result of any
solicitation efforts that may have been taken by Brown Simpson or its
Affiliates.
(k) SEC Documents. The Company has filed all reports required
to be filed by it under the Exchange Act, including pursuant to Section 13(a)
or 15(d) thereof, for the three years preceding the date hereof (or such
shorter period as the Company was required by law to file such material) (the
foregoing materials being collectively referred to herein as the "SEC
Documents" and, together with the Confidential Information Memorandum prepared
by the Company in connection with the placement of the Securities (which
Confidential Information Memorandum does not contain any nonpublic
information) and the Schedules to this Agreement furnished by or on behalf of
the Company, the "Disclosure Materials") on a timely basis, or has received a
valid extension of such time of filing and has filed any such SEC Documents
prior to the expiration of any such extension. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of
the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All material agreements to which the Company is a party or by
which the property or assets of the Company is subject have been filed as
exhibits to the SEC Documents in accordance with applicable law; neither the
Company nor any of its subsidiaries is in breach of any such agreement filed
as an exhibit to the SEC Documents where such breach could reasonably be
expected to have or result in a Material Adverse Effect. The financial
statements of the Company included in the SEC Documents comply in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved, except as may be
otherwise indicated in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
as of and for the dates thereof and the results of operations and cash flows
for the periods then ended, subject, in the case of unaudited statements, to
normal year-end audit adjustments. Since the date of the financial statements
included in the Company's last filed Quarterly Report on Form 10-Q for the
quarter ended May 30, 1997, there has been no event, occurrence or development
that has had a Material Adverse Effect which has not been specifically
disclosed to the Purchasers by the Company. The Company last filed audited
financial statements with the Commission in connection with the filing of its
Annual Report on Form 10-K for the Company's fiscal year ending August 30,
1996, and has not received any comments from the Commission in respect
thereof.
(l) Seniority. No class of equity securities of the Company is
senior to the Shares in right of payment, whether upon liquidation,
dissolution or otherwise.
(m) Investment Company. The Company is not, and is not
controlled by or under common control with an affiliate (an "Affiliate") of,
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
(n) Certain Fees. Except for fees and expenses payable to Dain
Bosworth Incorporated, no fees or commissions will be payable by the Company
to any broker, financial advisor, finder, investment banker or bank with
respect to the transactions contemplated by this Agreement (such fees,
commissions or similar compensation payable by the Company, "Fees"); provided,
that, Fees shall not be deemed to include (x) such amounts as may be payable
by the Company to Brown Simpson or its Affiliates (as such term is defined
under Rule 405 promulgated under the Securities Act) pursuant to the
engagement letter between the Company and Brown Simpson Asset Management, LLC
in connection with the transactions contemplated hereby or (y) fees or
commissions to the extent due to a Person in accordance with a written
agreement between such Person and a Purchaser. The Purchasers shall have no
obligation with respect to any Fees or with respect to any claims made by or
on behalf of other Persons for any Fees. The Company shall indemnify and hold
harmless each of the Purchasers, its employees, officers, directors, agents,
and partners, and each of their respective Affiliates, from and against all
claims, losses, damages, costs (including the costs of preparation and
attorney's fees) and expenses suffered in respect of any such claimed or
existing Fees.
(o) Solicitation Materials. The Company has not (i) distributed
any offering materials in connection with the offering and sale of the
Securities other than the Disclosure Materials or (ii) solicited any offer to
buy or sell the Securities by means of any form of general solicitation or
advertising. The Disclosure Materials do not contain any untrue statement of
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
under which they were made, not misleading.
(p) Form S-3 Eligibility. The Company is eligible to register
securities for resale with the Commission on Form S-3 under the Securities
Act.
(q) Exclusivity. Except as provided in Section 1.3(b)(ii), the
Company shall not issue and sell the Preferred Stock to any Person other than
the Purchasers.
(r Listing and Maintenance Requirements Compliance. The
Company has not in the two years preceding the date hereof received notice
(written or oral) from any stock exchange or market on which the Common Stock
is or has been listed (or on which it has been quoted) to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such exchange or market.
(s) Patents and Trademarks. To the Company's knowledge, (i) the
Company has, or has rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights and
licenses (collectively, the "Intellectual Property Rights") which are
necessary for use in connection with its business as presently conducted and
which the failure to do so would have a Material Adverse Effect and (ii) there
is no existing infringement by another Person of any of the Intellectual
Property Rights which are necessary for use in connection with the Company's
business as presently conducted, which infringement would have a Material
Adverse Effect.
(t) Acknowledgement of Dilution. The Company acknowledges that
the issuance of the Underlying Shares upon (i) conversion of the Shares and
dividends thereon in accordance with the Certificates of Designation and (ii)
exercise of the Warrants may result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market
conditions. The Company further acknowledges that its obligation to issue
Underlying Shares upon (x) conversion of the Shares and dividends thereon in
accordance with the Certificates of Designation and (y) upon exercise of the
Warrants is unconditional and absolute regardless of the effect of any such
dilution.
(u) Registration Rights; Rights of Participation. Except for
such rights as may be granted in any Strategic Placement, the Company has not
granted or agreed to grant to any Person registration rights (including
"piggy-back" registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority which have
not been satisfied.
(v) Environmental Matters. To the Company's knowledge, the
Company has obtained all permits, licenses and other authorizations which are
required under federal, state and local laws relating to pollution or
protection of the environment, including laws related to emissions,
discharges, releases or threatened releases of pollutants, contaminants or
hazardous or toxic materials or wastes into ambient air, surface water, ground
water or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants or hazardous or toxic materials or wastes
("Environmental Laws"), except for any failures to obtain such permits,
licenses or authorizations which would not, individually or in the aggregate,
have a Material Adverse Effect. To the Company's knowledge, the Company is in
compliance with all terms and conditions of such required permits, licenses
and authorizations and is also in full compliance with all other limitations,
restrictions, conditions and requirements contained in the Environmental Laws
or contained in any plan, order, judgment, decree or notice, except for any
non-compliance which could not be reasonably expected to individually or in
the aggregate have or result in a Material Adverse Effect. The Company is not
aware of, nor has the Company received notice of, any events, conditions,
circumstances, actions or plans which may interfere with or prevent continued
compliance or which would give rise to any liability under any Environmental
Laws or the common law, except for any liability which could not be reasonably
expected to individually or in the aggregate have or result in a Material
Adverse Effect.
(w) Shareholder Rights Plan. The Company acknowledges that,
except as to each Purchaser (severally and not jointly) to the extent a court
or other governmental authority of competent jurisdiction determines in a
final and non-appealable ruling that the representation and warranty of such
Purchaser set forth in the first sentence of Section 2.2(h) was inaccurate in
any material respect when made, no Purchaser shall be deemed, individually or
collectively, to be an Acquiring Person (as defined below) solely as a result
of the Purchasers' acquisition of Securities (including the right to acquire
Underlying Shares at the Conversion Price prevailing on the applicable
Original Issue Date) on the Series B Closing Date and/or Series C Closing
Date. "Acquiring Person" shall have the meaning set forth in the Shareholder
Rights Agreement, dated as of June 16, 1996, between the Company and Norwest
Bank Minnesota, N.A. (such agreement, as amended, supplemented or otherwise
modified from time to time after the date hereof, the "Rights Agreement").
The Company shall not amend the Rights Agreement in a manner which would
result in any Purchaser becoming an Acquiring Person thereunder as a result of
the acquisition of Securities (including the right to acquire Underlying
Shares) on the Series B Closing Date and/or Series C Closing Date.
2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Purchaser is a corporation
duly incorporated or a limited partnership duly formed, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
formation with the requisite power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents to which
its is a party and otherwise to carry out its obligations thereunder. The
purchase by such Purchaser of Securities hereunder has been duly authorized by
all necessary action on the part of such Purchaser. Each of this Agreement
and the Registration Rights Agreement has been duly executed and delivered by
such Purchaser and constitutes the valid and legally binding obligation of
such Purchaser, enforceable against such Purchaser in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity.
(b) Investment Intent. Such Purchaser is acquiring the
Securities for its own account for investment purposes only and not with a
view to or for distributing or reselling such Securities or any part thereof
or interest therein, without prejudice, however, to such Purchaser's right,
subject to the provisions of this Agreement and the Registration Rights
Agreement, at all times to sell or otherwise dispose of all or any part of
such Securities pursuant to an effective registration statement under the
Securities Act and in compliance with applicable State securities laws or
under an exemption from such registration.
(c) Purchaser Status. At the time such Purchaser was offered
the Shares and the Warrants, it was, and at the date hereof, it is, and at
each Closing Date, it will be, an "accredited investor" as defined in Rule
501(a)(1), (2), (3) or (4) under the Securities Act.
(d) Experience of Purchaser. Such Purchaser either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has
so evaluated the merits and risks of such investment to its satisfaction.
(e) Ability of Purchaser to Bear Risk of Investment. On the
Series B Closing Date and Series C Closing Date, if applicable, such Purchaser
is able to bear the economic risk of an investment in the Securities and is
able to afford a complete loss of such investment.
(f) Access to Information. Each Purchaser acknowledges receipt
of the Disclosure Materials and further acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and
to receive answers from, representatives of the Company concerning the terms
and conditions of the offering of the Securities, and the merits and risks of
investing in the Securities; (ii) access to information about the Company and
the Company's financial condition, results of operations, business, proper-
ties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information
which the Company possesses or can acquire without unreasonable effort or
expense that is necessary to make an informed investment decision with respect
to its investment.
(g) Reliance. Each Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to the Purchaser without
registration under the Securities Act in a private placement that is exempt
from the registration provisions of the Securities Act under Section 4(2) of
the Securities Act or Regulation D promulgated thereunder and (ii) the
availability of such exemption depends in part on, and the Company will rely
upon the accuracy and truthfulness of, the foregoing representations and such
Purchaser hereby consents to such reliance.
(h) No Affiliation. Except for HBK Cayman and HBK Offshore, no
Purchaser is an Affiliate of any other Purchaser or is acting in concert with
any other Purchaser. Except as a result of transfers of Securities which may
be made in accordance with the terms hereof, no Purchaser beneficially owns
(as determined pursuant to Rule 13d-3 under the Exchange Act) any Securities
of any other Purchaser.
(i) No Conflicts. The execution, delivery and performance of
the Transaction Documents by such Purchaser and the consummation by such
Purchaser of the transactions contemplated thereby do not and will not (i)
conflict with or violate any provision of its certificate or articles of
incorporation, bylaws or partnership agreement, as applicable (each as amended
through the date hereof), or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which such Purchaser is subject (including
foreign, federal and state securities laws and regulations).
(j) Consents and Approvals. Such Purchaser is not required to
obtain any consent, waiver, authorization or order of, or make any filing or
registration with, any court or other foreign, federal, state, local or other
governmental authority or other person in connection with the execution,
delivery and performance by such Purchaser of the Transaction Documents.
(k) Litigation; Proceedings. There is no action, suit, notice
of violation, proceeding or investigation pending, or to the knowledge of such
Purchaser, threatened against or affecting such Purchaser before or by any
court, governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) which would adversely affect the legality,
validity or enforceability of any of the Transaction Documents in any material
respect or adversely impair such Purchaser's ability to perform fully on a
timely basis its obligations under the Transaction Documents.
(l) Rights Agreement. Each Purchaser acknowledges receipt of
the Rights Agreement (without any amendments, supplements or modifications
thereto), and is familiar with its terms and the obligations imposed on the
Company and the restrictions imposed on its shareholders by such Rights
Agreement. Each Purchaser further acknowledges that the transactions
contemplated by the Transaction Documents shall not be deemed to have received
any required approval under the terms of such Rights Agreement.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
I. ARTICLE
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. If any Purchaser should decide to
dispose of any of the Securities held by it, such Purchaser understands and
agrees that it may do so only pursuant to an effective registration statement
under the Securities Act, to the Company or pursuant to an available exemption
from the registration requirements of the Securities Act. In connection with
any transfer of any Securities other than pursuant to an effective
registration statement or to the Company or to an Affiliate of such Purchaser
or pursuant to Rule 144 under the Securities Act ("Rule 144"), the Company may
require the transferor thereof to provide to the Company a written opinion of
counsel experienced in the area of United States securities laws selected by
the transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred securities under the Securities Act.
(b) Each Purchaser agrees to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Securities:
[NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE]] [THE SECURITIES REPRESENTED
HEREBY] HAVE [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
[FOR SHARES ONLY] THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND CONVERSION SET FORTH IN
A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, DATED AS OF AUGUST 27,
1997, EXECUTED BY THE ORIGINAL HOLDER HEREOF. A COPY OF THAT AGREEMENT
IS ON FILE AT THE PRINCIPAL OFFICE OF SHELDAHL, INC.
[FOR SHARES ONLY] SHELDAHL, INC. WILL FURNISH WITHOUT CHARGE TO
EACH SHAREHOLDER WHO SO REQUESTS A STATEMENT OF THE POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER
SPECIAL RIGHTS OF THE CLASS OF STOCK OR SERIES THEREOF TO WHICH THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE A PART AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
RIGHTS.
The Underlying Shares issuable upon conversion of Shares and
exercise of the Warrants, as the case may be, shall not contain the legend set
forth above (or any other legend other than those that identify the existence
of the Rights Agreement) if the conversion of such Shares or exercise of the
Warrants, as the case may be, occurs at any time while the Underlying
Securities Registration Statement is effective under the Securities Act or in
the event there is not an effective Underlying Securities Registration
Statement at such time, if the Underlying Shares have been sold pursuant to
Rule 144, or if in the written opinion of counsel to the Company experienced
in the area of United States securities laws such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission).
The Company agrees that it will provide each Purchaser, upon request, with a
certificate or certificates representing Underlying Shares, free from such
legend at such time as such legend is no longer required hereunder. Subject
to its obligations contained in Section 3.3, the Company makes no
representation, warranty or agreement as to the availability of any exemption
from registration under the Securities Act with respect to any resale of any
Securities.
3.2 Stop Transfer Instruction. The Company may not make any notation
on its records or give instructions to any transfer agent of the Company which
expand the scope of the restrictions on transfer set forth in Section 3.1.
3.3 Furnishing of Information. For a period of three years after the
Original Issue Date, or such shorter period as any Purchaser owns any
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act and to promptly furnish such Purchasers,
upon written request therefor, with true and complete copies of all such
filings. If the Company is not at the time required to file reports pursuant
to such sections, it will prepare and furnish to such Purchasers and make
publicly available in accordance with Rule 144(c) promulgated under the
Securities Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be included
in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as
any other information required thereby, in the time period that such filings
would have been required to have been made under the Exchange Act.
3.4 Copies and Use of Disclosure Materials. The Company shall furnish
each Purchaser, without charge, as many copies of the Disclosure Materials,
and any amendments or supplements thereto, as such Purchaser may reasonably
request. The Company consents to the use of the SEC Documents, the
Transaction Documents and the schedules and exhibits to this Agreement, and
any amendments and supplements thereto, by the Purchasers in connection with
resales of the Securities other than pursuant to an effective registration
statement.
3.5 Blue Sky Laws. In accordance with the Registration Rights
Agreement, the Company shall qualify the Underlying Shares under the
securities or Blue Sky laws of such jurisdictions as each Purchaser may
request and shall continue such qualification at all times through the third
anniversary of the last Closing Date; provided, however, that neither the
Company nor its Subsidiaries shall be required in connection therewith to
qualify as a foreign corporation where they are not now so qualified or to
take any action that would subject the Company to general service of process
in any such jurisdiction where it is not then so subject or subject the
Company to any material tax in any such jurisdiction where it is not then so
subject.
3.6 Integration. The Company shall not and shall use its best efforts
to ensure that no Affiliate of the Company shall sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to any Purchaser.
3.7 Certain Agreements. So long as any Shares are outstanding, the
Company shall not and shall cause its Subsidiaries not to, without the
affirmative vote of all of the holders of all of the Shares then outstanding,
(i) alter or change adversely the powers, preferences or rights given to the
Shares; (ii) alter or amend its Certificates of Designation in a manner
adverse to the holders of the Shares; (iii) authorize or create any class of
stock ranking as to dividends or distribution of assets upon a liquidation or
otherwise senior to or pari passu with the Shares; (iv) amend its articles of
incorporation, bylaws or other charter documents so as to adversely affect any
rights of any Purchaser; (v) increase the authorized number of Shares or (vi)
enter into any agreement with respect to any of the foregoing.
3.8 Purchaser Ownership of Common Stock. No Purchaser may convert
Shares hereunder or under the terms of the Certificates of Designation or
acquire shares of Common Stock upon exercise of the Warrants, to the extent
that such conversion or exercise would result in the Purchaser beneficially
owning (for purposes of Rule 13d-3 under the Exchange Act) more than 4.999% of
the outstanding shares of the Common Stock; provided, however, that if ten
(10) days shall have elapsed since any Purchaser has declared a default by the
Company under any Transaction Document and such default shall not have been
cured to such Purchaser's satisfaction prior to the expiration of such ten-day
period, the provisions of this Section shall be null and void ab initio as to
all Purchasers. Notwithstanding anything to the contrary contained herein,
the provisions of this Section shall have no effect on the Company's
obligation to issue shares of Common Stock to the Purchasers upon receipt or
delivery of any conversion or exercise notice. The terms and conditions of
this Section shall not apply to any conversion of Shares at the option of the
Company pursuant to Section 5(a)(ii) of the Series B Terms.
3.9 Listing and Reservation of Underlying Shares. The Company shall
(i) not later than ten (10) Business Days following the applicable Closing
Date prepare and file with the NASD (or with the NYSE or AMEX if the Common
Stock is then listed on such exchange) an additional shares listing
application or a letter acceptable to the NASD, NYSE or AMEX, as the case may
be, covering and requesting the designation or listing of at least [ ]
Underlying Shares of Common Stock on the Nasdaq National Market, the NYSE or
the AMEX, (ii) take all steps necessary to cause the Underlying Shares to be
approved for quotation on the Nasdaq National Market (or listing on the NYSE
or AMEX) as soon as possible thereafter, and (iii) provide to Robinson
Silverman at the address for notice set forth in Section 5.3 evidence of such
action, and the Company shall take all reasonable steps to maintain the
designation or listing of its Common Stock on the Nasdaq National Market, the
NYSE or the AMEX, as the case may be.
(b) The Company shall reserve for issuance upon conversion of
the Shares, for payment of dividends thereupon in shares of Common Stock
pursuant to the terms of the Certificates of Designation, and upon exercise of
the Warrants in accordance with their terms the number of shares to be listed
on the Nasdaq National Market (or with the NYSE or the AMEX if the Common
Stock is then listed on such exchange) as set forth in Section 3.9(a). Shares
of Common Stock reserved for issuance upon the conversion of the Shares as set
forth in Section 3.9(a) shall be allocated pro rata to each of the Purchasers
in accordance with the amount of Shares issued and delivered to such Purchaser
at the Series B Closing or the Series C Closing, as applicable.
3.10 Conversion Procedures. Exhibit E attached hereto sets forth the
procedures with respect to the conversion of the Preferred Stock, including
the forms of conversion notice to be provided upon conversion, instructions as
to the procedures for conversion, the form of legal opinion, if necessary,
that shall be rendered by the Company to the Company's transfer agent and such
other information and instructions as may be reasonably necessary to enable
the Purchaser to exercise its right of conversion smoothly and expeditiously.
3.11 Purchaser's Rights if Trading in Common Stock is Suspended or
Delisted. If at any time prior to the earlier to occur of (a) the third
anniversary of the Series B Closing Date or the Series C Closing Date,
whichever is later, and (b) the date on which no Purchaser owns any
Securities, trading in the shares of the Common Stock is suspended or such
shares are no longer designated for quotation or listed on the Nasdaq National
Market or the NYSE or the AMEX (other than as a result of the suspension of
trading in securities on such market or exchange generally or temporary
suspensions pending the release of material information) for more than three
(3) Business Days, at the option of any Purchaser exercisable by written
notice to the Company delivered after such suspension, termination of
designation or delisting and prior to the complete cure thereof, the Company
shall redeem all Shares and Underlying Shares then held by such Purchaser, in
cash, at an aggregate purchase price equal to the sum of (I) the number of
Shares then held by such Purchaser multiplied by the product of (1) the
highest average Per Share Market Value for any five (5) consecutive Business
Days during the period commencing on the date of such notice and ending on the
date one day before the payment of the redemption price calculated under this
Section is paid in full by the Company and (2) the Conversion Ratio on the
date of the repurchase notice, (II) the aggregate of all accrued but unpaid
dividends payable in respect of all Shares to be redeemed, (III) the number of
Underlying Shares then held by such Purchaser multiplied by the average Per
Share Market Value for the five (5) Business Days immediately preceding (A)
the date of the notice or (B) the date of payment in full by the Company of
the redemption price calculated under this Section, whichever is greater, and
(IV) interest on the amounts set forth in (I) - (III) above accruing from the
30th day after such notice until the repurchase price under this Section is
paid in full at the rate of 12% per annum; provided, however, that the
interest accrued on the amounts set forth in (I) - (III) above shall be
decreased by the difference, if any, between the redemption price when due and
the redemption price when paid (net of the interest). The Company shall
provide written notice of any redemption demand made pursuant to this Section
to each other holder of Securities within 24 hours of its receipt thereof.
3.12 No Violation of Applicable Law. Notwithstanding any provision of
this Agreement to the contrary, if the redemption of Shares or Underlying
Shares otherwise required under this Agreement or the Registration Rights
Agreement would be prohibited by the relevant provisions of the Minnesota
Business Corporation Act, such redemption shall be effected as soon as it is
permitted under such law; provided, however, that interest payable by the
Company with respect to any such redemption shall continue to accrue in
accordance with Section 3.11.
3.13 Conversion Restrictions. If during the period between (a) the
Series B Closing Date and the 270th day after the Series B Closing Date and
(b) the Series C Closing Date and the 270th day after the Series C Closing
Date, the average Per Share Market Value for any ten (10) consecutive Business
Days is less than $20 (a "Market Threshold Event"), then the following shall
apply to the Purchasers' conversion rights: (i) each Purchaser shall be
permitted to convert only up to 50% of the Shares held by such Purchaser
(measured on the date of the Market Threshold Event) during the 30-day period
immediately following such Market Threshold Event; (ii) if for the last ten
(10) consecutive Business Days of the 30-day period contemplated in clause (i)
of this Section the Per Share Market Value is less than $20, then each
Purchaser shall be permitted to convert only up to 50% of the Shares then held
by such Purchaser during the period from the 31st day to the 60th day after
the original Market Threshold Event; (iii) if the Company tenders a Subsequent
Financing Notice, the restrictions contained in clause (i) of this Section
shall be the only conversion restrictions which may be imposed on the
Purchasers in respect of the Series B Shares pursuant to this Section; (iv)
the restrictions contained in this Section shall be of no force or effect as
to any Purchaser who holds $1,000,000 or less of Shares at the time of or
after any Market Threshold Event; and (v) not more than two (2) Market
Threshold Events per tranche shall be permitted to impose restrictions to the
conversions rights of the Purchasers.
3.14 Notice of Breaches. Each of the Company and each Purchaser
shall give prompt written notice to the other of any breach of any
representation, warranty or other agreement contained in this Agreement or in
the Registration Rights Agreement, as well as any events or occurrences
arising after the date hereof and prior to, with respect to the Series B
Closing, the Series B Closing Date and with respect to the Series C Closing,
the Series C Closing Date, which would be reasonably likely to cause any
representation or warranty or other agreement of such party, as the case may
be, contained herein to be incorrect or breached as of such Closing Date.
However, no disclosure by either party pursuant to this Section 3.14 shall be
deemed to cure any breach of any representation, warranty or other agreement
contained herein or in the Registration Rights Agreement.
(b) Notwithstanding the generality of Section 3.14(a), the
Company shall promptly notify each Purchaser of any notice or claim (written
or oral) that it receives from any lender of the Company to the effect that
the consummation of the transactions contemplated hereby and by the
Registration Rights Agreement violates or would violate any written agreement
or understanding between such lender and the Company, and the Company shall
promptly furnish by facsimile to the holders of the Shares a copy of any
written statement in support of or relating to such claim or notice.
(c) The default by any Purchaser of any of its obligations,
representations or warranties under any Transaction Document shall not be
imputed to, and shall have no effect upon, any other Purchaser or affect the
Company's obligations under the Transaction Documents to any Non-Defaulting
Purchaser.
3.15 Conversion Obligations of the Company. The Company covenants to
convert Shares and to deliver Underlying Shares in accordance with the terms
and conditions and time periods set forth in the respective Certificates of
Designation, and to deliver Underlying Shares upon exercise of Warrants in
accordance with the terms and conditions and time periods set forth in the
Warrants.
3.16 Subsequent Registrations. Other than Underlying Shares and other
"Registrable Securities" (as defined in the Registration Rights Agreement) to
be registered in accordance with the Registration Rights Agreement, the
Company shall not, for a period of not less than 45 Business Days after the
date that an Underlying Securities Registration Statement covering the
Securities contemplated by the Series B Closing and 45 Business Days after the
date that an Underlying Securities Registration Statement covering the Secur-
ities contemplated by the Series C Closing, if applicable, is declared
effective by the Commission, without the prior written consent of Purchasers,
(i) issue or sell any of its or any of its Affiliates' equity or equity-
equivalent securities pursuant to Regulation S promulgated under the
Securities Act, or (ii) go effective on any resale registration statement
registering for resale any securities of the Company other than any securities
registered for resale in connection with a Strategic Placement. Any Business
Days during which any Purchaser (or its successors, permitted assigns or other
successors in interest) is not permitted to resell securities under such
Underlying Securities Registration Statement shall be added to the 45 Business
Day period for the purposes of (i) and (ii) above.
3.17 The Warrants. At the Series B Closing the Company shall issue and
deliver (i) to Southbrook, a Common Stock purchase warrant (the "Southbrook
Warrant") entitling Southbrook to purchase, on the terms and conditions set
forth therein, 22,453 shares of Common Stock at a price per share equal to the
Warrant Exercise Price (as defined below); (ii) to HBK Cayman, a Common Stock
purchase warrant (the "HBK Cayman Warrant") entitling HBK Cayman to purchase,
on the terms and conditions set forth therein, 11,227 shares of Common Stock
at a price per share equal to the Warrant Exercise Price; (iii) to HBK
Offshore, a Common Stock purchase warrant (the "HBK Offshore Warrant")
entitling HBK Offshore to purchase, on the terms and conditions set forth
therein, 11,227 shares of Common Stock at an exercise price per share equal to
the Warrant Exercise Price; (iv) to PCIG, a Common Stock purchase warrant (the
"PCIG Warrant") entitling PCIG to purchase, on the terms and conditions set
forth therein, 22,453 shares of Common Stock at a price per share equal to the
Warrant Exercise Price; and (v) to Brown Simpson, a Common Stock purchase
warrant (the "Brown Simpson Warrant," and together with the Southbrook
Warrant, the HBK Cayman Warrant, the HBK Offshore Warrant and the PCIG
Warrant, the "Warrants") entitling Brown Simpson to purchase, on the terms and
conditions set forth therein, 452 shares of Common Stock at a price per share
equal to the Warrant Exercise Price. The "Warrant Exercise Price" shall be
equal to 120% of the Per Share Market Value for the five (5) Business Days
immediately preceding the Series B Closing Date.
3.18 Regulation 13D Limitation. The Shares and the Underlying Shares
may not be transferred via "off-market" trades, without the prior written
consent of the Company, to Persons who beneficially own (as determined under
Rule 13d-3 of the Exchange Act) 5% or greater of the Common Stock on the date
of such proposed transfer.
3.19 Use of Proceeds. The Company shall use the net proceeds from the
placement of the Shares and Warrants for working capital and business
expansion purposes.
3.20 Press Release. The Company shall issue a press release within two
Business Days of the Series B Closing Date and the Series C Closing Date
relating to the issue and sale of the Securities to the Purchasers which press
release shall be approved by each party to this Agreement prior to the
issuance thereof.
3.21 Key Management Lock-up. Each of the Chief Executive Officer and
the Vice President, Finance of the Company shall execute and deliver a Lock-up
Agreement, in the form attached hereto as Exhibit F, pursuant to which each
such Person commits not to sell more than 10% of the shares of Common Stock
beneficially owned by him (other than shares of Common Stock issued to such
Person pursuant to a Company stock option plan) during (a) the period from the
Series B Closing Date to the earlier to occur of (x) the date that an
Underlying Securities Registration Statement covering the Securities
contemplated by the Series B Closing is declared effective by the Commission
and (y) October 15, 1997; and (b) the period from the Series C Closing Date,
if any, to the earlier to occur of (x) the date that an Underlying Securities
Registration Statement covering the Securities contemplated by the Series C
Closing is declared effective by the Commission and (y) the 46th day after the
Series C Closing date, if any.
ARTICLE IV
CONDITIONS
4.1 Conditions Precedent to the Obligation of the Purchasers to
Purchase the Series C Shares. The obligation of each Purchaser hereunder to
acquire and pay for the Series C Shares is subject to the satisfaction or
waiver by such Purchaser, at or before the Series C Closing, of each of the
following conditions:
(a) Series B Closing. The Series B Closing shall have occurred;
(b) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company contained herein and in the
Registration Rights Agreement shall be true and correct in all material
respects as of the date when made and as of the Series C Closing Date, as
though made on and as of such date;
(c) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the Series
C Closing Date;
(d) Underlying Securities Registration Statements. The
Underlying Securities Registration Statement with respect to the Underlying
Shares issuable on conversion of all outstanding Series B Shares including
dividends thereon and exercise of the Warrants shall have been declared
effective under the Securities Act by the Commission, and such Underlying
Securities Registration Statement shall have remained effective at all times
thereafter, including the 60 Business Days prior to the date of the Subsequent
Financing Notice and shall not be subject to any stop order and no stop order
shall be pending or threatened as of the Series C Closing Date;
(e) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement relating
to the issuance or conversion of any of the Shares or exercise of any of the
Warrants;
(f) No Suspensions of Trading in Common Stock. The trading in
the Common Stock shall not have been suspended by the Commission or on the
Nasdaq National Market (except for any suspension of trading of limited
duration solely to permit dissemination of material information regarding the
Company or any suspension of trading of securities generally);
(g) Listing of Common Stock. The Common Stock shall have been
at all times between the Series B Closing Date and the Series C Closing Date,
and on the Series C Closing Date shall be, designated for quotation on the
Nasdaq National Market;
(h) Change of Control. No Change of Control in the Company
shall have occurred. "Change of Control" means the occurrence of any of (i)
an acquisition after the date hereof by any Person or "group" (as described in
Rule 13d-5(b) promulgated under the Exchange Act) of more than 40% of the
voting securities of the Company, (ii) a replacement of more than one-half of
the members of the Company's board of directors which is not approved by those
individuals who are members of the board of directors on the date hereof in
one or a series of related transactions, (iii) the merger of the Company with
or into another entity in which the Company is not the surviving entity or the
consolidation or sale of all or substantially all of the assets of the Company
in one or a series of related transactions or (iv) the execution by the
Company of an agreement to which the Company is a party or by which it is
bound, providing for any of the events set forth above in (i), (ii) or (iii);
(i) Market Price of Common Stock. The average Per Share Market
Value for any five (5) consecutive Business Days during the period between the
Series B Closing Date and the Series C Closing Date shall not have been less
than $12.00 per share, subject to adjustment in the event of any stock splits;
and prior to each of the date of a Subsequent Financing Notice and the Series
C Closing Date, the Company shall have filed reports with the Commission
disclosing all information and events occurring prior to such dates that the
Company would be required to disclose in a report on Form 8-K under the
Exchange Act (without regard to the timing of filing requirements under such
form);
(j) Liquidity. The average daily trading volume of the Common
Stock on the Nasdaq National Market, the NYSE or the AMEX, as applicable,
during the period of thirty Business Days immediately prior to the Series C
Closing Date shall be no less than 10,000 shares;
(k) Legal Opinion. The Company shall have delivered to such
Purchaser an opinion of outside legal counsel to the Company in substantially
the form attached hereto as Exhibit D and dated the Series C Closing Date;
(l) Required Approvals. All Required Approvals shall have been
obtained;
(m) Shares of Common Stock. On or prior to the Series C Closing
Date, the Company shall have reserved for issuance to the Purchasers 150% of
the number of Underlying Shares which would be issuable upon conversion in
full of the Series C Shares assuming such conversion occurred on the Original
Issue Date for such Shares;
(n) Delivery of Stock Certificates. The Company shall have
delivered to such Purchaser or such Purchaser's designee the stock
certificate(s) representing the Shares being purchased at the Series C
Closing, registered in the name of such Purchaser, each in form satisfactory
to such Purchaser;
(o) Performance of Conversion/Exercise Obligations. The Company
shall have (a) delivered Underlying Shares upon conversion, if any, of Shares
and otherwise performed its obligations in accordance with the terms,
conditions and timing requirements of the Series B Designation and (b) shall
have delivered Underlying Shares upon exercise, if any, of the Warrants and
otherwise performed its obligations in accordance with the terms of the
Warrants;
(p) Stock Market Regulations. The issuance of the Underlying
Shares issuable upon conversion of and as payment of dividends in respect of
the Series C Shares indicated in the Subsequent Financing Notice would not, as
at the date of the Subsequent Financing Notice or the Series C Closing Date
result in a violation of, as applicable, Rule 4460(i) (or similar or
replacement provision) under the rules of the Nasdaq Stock Market, Section 713
of part 7 (or similar or replacement provision) under the rules of the
American Stock Exchange or Section 312.03(c) (or similar or replacement
provision) of the NYSE Listed Company Manual.
(q) Form S-3 Eligibility. The Company shall be eligible to
register securities for resale with the Commission on Form S-3 under the
Securities Act.
ARTICLE V
MISCELLANEOUS
5.1 Fees and Expenses. Each party shall pay the fees and expenses of
its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement, except as set forth in
the Registration Rights Agreement. The Company shall pay all stamp and other
taxes and duties levied in connection with the issuance of the Shares pursuant
hereto. Each Purchaser shall be responsible for such Purchaser's own tax
liability that may arise as a result of the investment hereunder or the
transactions contemplated by this Agreement.
5.2 Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto, the Registration Rights Agreement, the
Certificates of Designation (each when filed), the Warrants and the Lock-up
Agreements referenced in Section 3.21 contain the entire understanding of the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters.
5.3 Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be deemed to have been
received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if delivered
on a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered on
a business day after during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses
for such communications shall be:
If to the Company: Sheldahl, Inc.
1150 Sheldahl Road
Northfield, MN 55057-9444
Attn: John V. McManus
Fax: (507) 663-8435 or
(507) 663-8545
With copies to: Lindquist & Vennum P.L.L.P.
4200 IDS Center
80 South Eighth Street
Attn: Robert E. Tunheim, Esq.
Fax: (612) 371-3207
If to Southbrook: Southbrook International Investments, Ltd.
c/o Trippoak Advisors, Inc.
630 Fifth Avenue, Suite 2000
New York, New York 10111
Attn: Robert L. Miller
Fax: (212) 332-3256
If to HBK Cayman: HBK Cayman L.P.
c/o HBK Investments L.P.
777 Main Street, Suite 2750
Fort Worth, TX 76102
Facsimile No.: (817) 870-6177
Attn: David C. Haley and
Michael Reese
If to HBK Offshore: HBK Offshore Fund Ltd.
c/o HBK Investments L.P.
777 Main Street, Suite 2750
Fort Worth, TX 76102
Facsimile No.: (817) 870-6177
Attn: David C. Haley and
Michael Reese
If to PCIG: Proprietary Convertible Investment
Group, Inc.
c/o Credit Suisse First Boston Corporation
11 Madison Avenue-Third Floor
New York, NY 10010
Facsimile No.: (212) 325-6519
Attn: Al Weine
If to Brown Simpson: Brown Simpson Strategic Growth Fund L.P.
152 West 57th Street, 40th Floor
New York, NY 10019
Facsimile No.: (212) 247-1329
Attn: James R. Simpson
With copies to: Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Attn: Eric L. Cohen
Fax: (212) 541-4630
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
5.4 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by both the Company and each Purchaser; or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver
of any other provision, condition or requirement hereof, nor shall any delay
or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter.
5.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted
assigns. Neither the Company nor any Purchaser may assign this Agreement or
any rights or obligations hereunder without the prior written consent of the
other. Notwithstanding anything to the contrary contained herein, each
Purchaser may assign its rights hereunder in connection with any sale or
transfer of such Purchaser's Securities to any Affiliate of such Purchaser as
long as the transferee Affiliate agrees in writing to be bound by the
applicable provisions of this Agreement, in which case the term "Purchaser"
shall be deemed to refer to such transferee as though such transferee were an
original signatory thereto.
5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
5.8 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof.
5.9 Survival. The agreements, covenants, representations and
warranties contained in Sections 2.1(b), 2.1(d), 2.1(e), 2.1(f), 2.1(i),
2.1(k), 2.1(t), 2.1(w), 3.1, 3.2, 3.3, 3.4, 3.5, 3.9, 3.11, 3.12, 3.14 and
this Article V, shall survive each Closing hereunder for a period of three
years, notwithstanding any earlier delivery and conversion of the Shares or
exercise of the Warrants. The remainder of the agreements, covenants,
representations and warranties contained in this Agreement shall survive until
the earlier to occur of (x) three years from the applicable Closing Date and
(y) the conversion in full of the Shares. This Section shall have no force or
effect on the obligations of the parties under the other Transaction
Documents.
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission, such signature shall create a valid
and binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof.
5.11 Publicity. The Company and each Purchaser shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other party with prior notice of such public statement. Other
than in an Underlying Securities Registration Statement and in a report on
Form 8-K under the Exchange Act, the Company shall not publicly or otherwise
disclose the names of any of the Purchasers without each such Purchaser's
prior written consent.
5.12 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
5.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each
Purchaser will be entitled to specific performance of the obligations of the
Company under the Transaction Documents. Each of the Company and the
Purchasers (severally and not jointly) agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.14 Independent Nature of Purchasers' Obligations and Rights. Except
as otherwise provided herein, the obligations of each Purchaser hereunder are
several and not joint with the obligations of the other Purchasers hereunder,
and no Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser hereunder. Nothing contained herein or in
any other agreement or document delivered at any Closing, and no action taken
by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Purchasers are in any way acting
in concert with respect to such obligations or the transactions contemplated
by this Agreement. Each Purchaser shall be entitled to protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.
5.15 No Reliance. Each party acknowledges that (i) it has such
knowledge in business and financial matters as to be fully capable of
evaluating the Transaction Documents and the transactions contemplated
thereby, (ii) it is not relying on any advice or representation of any other
Person, including the other parties to this Agreement, in connection with
entering into any Transaction Document or such transactions (other than the
representations made in this Agreement, the Disclosure Materials, the SEC
Documents or the other Transaction Documents), (iii) it has not received from
any Person, including the other parties to this Agreement, any assurance or
guarantee as to the merits (whether legal, regulatory, tax, financial or
otherwise) of entering into any Transaction Document or the performance of its
obligations thereunder, and (iv) it has consulted with its own legal,
regulatory, tax, business, investment, financial and accounting advisors to
the extent that it has deemed necessary, and has entered into each Transaction
Document based on its own independent judgment and on the advice of its
advisors as it has deemed necessary, and not on any view (whether written or
oral) expressed by any other Person, including the other parties to this
Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized persons as of the date
first indicated above.
Company:
SHELDAHL, INC.
By:
Name:
Title:
Purchasers:
SOUTHBROOK INTERNATIONAL INVESTMENTS,
LTD.
By:
Name:
Title:
HBK CAYMAN L.P.
By:
Name:
Title:
HBK OFFSHORE FUND, LTD.
By:
Name:
Title:
HBK INVESTMENTS L.P.
By:
Name:
Title:
PROPRIETARY CONVERTIBLE INVESTMENT
GROUP, INC.
By:
Name:
Title:
BROWN SIMPSON STRATEGIC GROWTH FUND, L.P.
By:
Name:
Title:
<PAGE>
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Among
SHELDAHL, INC.,
SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD.,
HBK CAYMAN L.P.,
HBK OFFSHORE FUND LTD.,
HBK INVESTMENTS L.P.,
PROPRIETARY CONVERTIBLE INVESTMENT GROUP, INC.
and
BROWN SIMPSON STRATEGIC GROWTH FUND, L.P.
August 27, 1997
<PAGE>
SHELDAHL, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF SERIES B
CONVERTIBLE PREFERRED STOCK
Pursuant to Section 302A.401 of the Minnesota Business Corporation
Act:
We, James E. Donaghy, Chief Executive Officer, and John V.
McManus, Vice President, of Sheldahl, Inc., a Minnesota corporation (the
"Company"), in accordance with the provisions of Section 302A.401, DO
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by the Articles of Incorporation of the Company, the Board of
Directors on August 19, 1997 adopted the following resolution creating a
series of Fifteen Thousand (15,000) shares of preferred stock designated
as Series B Convertible Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Company in accordance with the provisions of its
Articles of Incorporation, a series of preferred stock known as the
Series B Convertible Preferred Stock be, and hereby is, created and that
the designation and amount thereof and the rights and preferences of the
shares of such preferred stock are as follows:
Section 1. Designation, Amount and Par Value. The series of
preferred stock shall be designated as the Series B Convertible
Preferred Stock (the "Preferred Stock"), and the number of shares so
designated shall be 15,000 (which shall not be subject to increase
without the prior written consent of the holders of a majority of the
shares of Preferred Stock then outstanding). Each share of Preferred
Stock shall have a par value of $1.00 per share and a stated value of
$1,000 per share (the "Stated Value").
Section 2. Dividends.
(a) Holders of Preferred Stock shall be entitled to receive, on
the applicable Conversion Date (as hereinafter defined), in arrears,
each a "Dividend Payment Date," dividends on the Preferred Stock at the
rate per share (as a percentage of the Stated Value per share) equal to
5% per annum, payable, in shares of Common Stock (as defined in Section
9) or at (subject to the terms and conditions set fort herein) the
option of the Company, in cash as provided below. Dividends on the
Preferred Stock shall be calculated on the basis of a 360-day year,
shall accrue daily commencing the Original Issue Date (as defined in
Section 9), and shall be deemed to accrue on such date whether or not
declared and whether or not there are profits, surplus or other funds of
the Company legally available for the payment of dividends. The party
that holds the Preferred Stock on the applicable Dividend Payment Date
for any dividend payment will be entitled to receive such dividend
payment and any other accrued and unpaid dividends which accrued prior
to such Dividend Payment Date. Payment of dividends on the Preferred
Stock is further subject to the provisions of Section 5(c)(i). In order
for the Company to exercise its right to pay dividends in cash on a
Dividend Payment Date, the Company shall provide each holder notice of
its intention to pay dividends in cash in the time required by Section
5(c) upon receipt of a Conversion Notice prior to such Dividend Payment
Date which election shall remain in effect until later rescinded by
notice to such effect by the Company to the holders. If any such holder
shall deliver a Holder Conversion Notice (as defined in Section 5(a)(i)
hereof) within 5 days after such notice is delivered by the Company,
such Holder shall be entitled to receive payment of dividends in shares
of Common Stock.
(b) Notwithstanding anything to the contrary contained herein,
the Company may not issue shares of Common Stock in payment of dividends
(and must deliver cash in respect thereof) on the Preferred Stock if:
(i) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as
treasury stock, is either insufficient to issue such dividends to be
paid in shares of Common Stock or the Company has not duly reserved for
issuance in respect of such dividends a sufficient number of shares of
Common Stock;
(ii) the shares of Common Stock to be issued in respect of
such dividends are not registered for resale pursuant to an effective
registration statement that names the recipient of such dividend as a
selling stockholder thereunder and may not be sold without volume
restrictions pursuant to Rule 144 promulgated under the Securities Act
of 1933, as amended (the "Securities Act"), as determined by counsel to
the Company pursuant to a written opinion letter, addressed to the
Company's transfer agent in form and substance acceptable to the holders
of a majority of the shares of Preferred Stock then outstanding;
(iii) the shares of Common Stock to be issued in respect of
such dividends are not designated for quotation on the Nasdaq National
Market (or listed for trading on The New York Stock Exchange (the
"NYSE") or the American Stock Exchange (the "AMEX"));
(iv) the Company has failed to timely satisfy its
obligations pursuant to any Conversion Notice (as defined in Section
5(a)(iii)); or
(v) if the issuance of such shares would result in the
recipient thereof owning in excess of 14.99% of the issued and
outstanding shares of Common Stock.
(c) So long as any Preferred Stock shall remain outstanding,
except with respect to the redemption or exchange of "rights" under the
Rights Agreement, dated as of June 16, 1996, between the Company and
Norwest Bank Minnesota, N.A. (the "Rights Agreement") and the Series A
Junior Participating Stock reserved for issuance in connection
therewith, neither the Company nor any subsidiary thereof shall redeem,
purchase or otherwise acquire directly or indirectly any Junior
Securities (as defined in Section 9), nor shall the Company directly or
indirectly pay or declare any dividend or make any distribution (other
than a dividend or distribution described in Section 5) upon, nor shall
any distribution be made in respect of, any Junior Securities, nor shall
any monies be set aside for or applied to the purchase or redemption
(through a sinking fund or otherwise) of any Junior Securities unless
all accrued and unpaid dividends on the Preferred Stock for all past
dividend periods shall have been paid and all Conversion Notices shall
have been honored to date.
Section 3. Voting Rights. Except as otherwise provided herein
and as otherwise required by law, the Preferred Stock shall have no
voting rights. However, so long as any shares of Preferred Stock are
outstanding, the Company shall not and shall cause its subsidiaries not
to, without the affirmative vote of all of the holders of the Preferred
Stock then outstanding, alter or change adversely the powers,
preferences or rights given to the Preferred Stock, (b) alter or amend
this Certificate of Designation in a manner adverse to the holders of
Preferred Stock, (c) authorize or create any class of stock ranking as
to dividends or distribution of assets upon a Liquidation (as defined in
Section 4) or otherwise senior to or pari passu with the Preferred
Stock, except for any series of Preferred Stock issued and sold in
accordance with the Purchase Agreement (as defined in Section 9), (d)
amend its articles of incorporation, bylaws or other charter documents
so as to affect adversely any rights of any holders of Preferred Stock,
(e) increase the authorized number of shares of Preferred Stock or (f)
enter into any agreement with respect to the foregoing.
Section 4. Liquidation. Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a
"Liquidation"), the holders of Preferred Stock shall be entitled to
receive out of the assets of the Company, whether such assets are
capital or surplus, for each share of Preferred Stock an amount equal to
the Stated Value plus all accrued but unpaid dividends per share,
whether declared or not, before any distribution or payment shall be
made to the holders of any Junior Securities, and if the assets of the
Company shall be insufficient to pay in full such amounts, then the
entire assets to be distributed to the holders of Preferred Stock shall
be distributed among the holders of Preferred Stock ratably in
accordance with the respective amounts that would be payable on such
shares if all amounts payable thereon were paid in full. A sale,
conveyance or disposition of all or substantially all of the assets of
the Company or the effectuation by the Company of a transaction or
series of related transactions in which more than 50% of the voting
power of the Company is disposed of, or a consolidation or merger of the
Company with or into any other company or companies shall not be treated
as a Liquidation, but instead shall be subject to the provisions of
Section 5. The Company shall mail written notice of any such
Liquidation, not less than 30 days prior to the payment date stated
therein, to each record holder of Preferred Stock.
Section 4. Conversion.
(a)(i) Each share of Preferred Stock is convertible by the
holder thereof into shares of Common Stock (subject to reduction
pursuant to Sections 5(a)(iv), 5(a)(v) and 5(a)(vi) hereof and Section
3.8 of the Purchase Agreement) at the Conversion Ratio (as defined in
Section 9) at the option of the holder in whole or in part at any time
after the Original Issue Date. The holder shall effect conversions by
surrendering the certificate or certificates representing the shares of
Preferred Stock to be converted to the Company, together with the form
of conversion notice attached hereto as Exhibit A (the "Holder
Conversion Notice"), a copy of which, notwithstanding anything herein to
the contrary, shall also be promptly (but not later than 12 hours
thereafter) sent to the Company's transfer agent and the Company's
counsel. Each Holder Conversion Notice shall specify the number of
shares of Preferred Stock to be converted and the date on which such
conversion is to be effected, which date may not be prior to the date on
which the holder delivers such Conversion Notice by facsimile (the
"Holder Conversion Date"). If no Holder Conversion Date is specified in
a Holder Conversion Notice, the Holder Conversion Date shall be the date
that the Holder Conversion Notice is deemed delivered pursuant to
Section 5(h). Subject to Sections 5(a)(iv), 5(a)(v), 5(a)(vi) and 5(b)
hereof and Section 3.8 of the Purchase Agreement, each Holder Conversion
Notice, once given, shall be irrevocable. If the holder is converting
less than all shares of Preferred Stock represented by the certificate
or certificates tendered by the holder with the Holder Conversion
Notice, or if a conversion hereunder cannot be effected in full for any
reason, the Company shall promptly deliver to such holder (in the manner
and within the time set forth in Section 5(b)) a certificate for such
number of shares as have not been converted.
(ii) Commencing on the 180th day after the Original Issue
Date, if (A) the Per Share Market Value is greater than 185% of the
Initial Conversion Price (as defined in Section 5(c)) for at least 30
consecutive Business Days and (B) the average daily trading volume of
the Common Stock on the Nasdaq National Market for such 30 consecutive
Business Days exceeds 50,000 shares (as adjusted for stock splits,
reverse stock splits and stock dividends), then the Company may, upon 30
days notice provided thereafter, require the conversion of all but not
less than all of the then outstanding and unconverted shares of
Preferred Stock at the Conversion Ratio calculated on the Company
Conversion Date (as defined below) (subject to reduction pursuant to
Section 5(a)(iv) hereof and subject to reduction at the Company's option
to prevent any Holder or group (as described in Rule 13d-5(b) of the
Exchange Act) of Holders of Common Stock acquired upon conversion from
becoming an "Acquiring Person" under the terms of the Rights Agreement
but not subject to reduction pursuant to Sections 5(a)(v) or 5(a)(vi)
hereof or Section 3.8 of the Purchase Agreement) by delivering to the
holders a notice in the form attached hereto as Exhibit B (the "Company
Conversion Notice"), provided, that, no such conversion shall be
permitted unless at the time of the delivery of the Company Conversion
Notice and on the Company Conversion Date (as defined below), (a) an
Underlying Shares Registration Statement, pursuant to the Registration
Rights Agreement, covering the resale of the shares of Common Stock
issuable upon such conversion is effective, (b) the shares of Common
Stock issuable upon such conversion are designated for quotation or
listed for trading on the Nasdaq National Market, the NYSE or the AMEX
and, (c) the Company has duly reserved for issuance the shares of Common
Stock issuable upon such conversion. Each Company Conversion Notice
under this Section shall specify the date on which such conversion is to
be effected, which date may not be prior to the 30th day after the
Company delivers such Company Conversion Notice by facsimile (the
"Company Conversion Date"). If no Company Conversion Date is specified
in a Company Conversion Notice given under this Section, the Company
Conversion Date shall be the 31st day after the Company Conversion
Notice is deemed delivered pursuant to Section 5(h). Any conversion
pursuant to this Section 5(a)(ii) shall be subject to Section 5(b) with
respect to the consequences of the Company's failure to deliver shares
of Common Stock in respect of a conversion under this Section. Nothing
contained herein shall limit a holder's right to convert any or all of
the Preferred Stock held by it prior to the Company Conversion Date.
(iii) The Company may, upon delivery of a Company
Conversion Notice to the holders of Preferred Stock given not less than
15 Business Days prior to the filing of any registration statement in
connection with a Public Offering (as defined in Section 9) require the
conversion of all but not less than all of the then outstanding and
unconverted shares of Preferred Stock at the Conversion Ratio (subject
to reduction pursuant to Section 5(a)(iv) hereof and subject to
reduction at the Company's option in the event that any Holder or group
of Holders of Common Stock would otherwise have acquired upon conversion
such number of shares of Common Stock so as to become an "Acquiring
Person" under the terms of the Rights Agreement but not subject to
reduction pursuant to Sections 5(a)(v) or 5(a)(vi) hereof or Section 3.8
of the Purchase Agreement), provided, that this right may not be
exercised by the Company unless at the time of the delivery of the
Company Conversion Notice and on the applicable Public Offering
Conversion Date (as defined below), (a) an Underlying Shares
Registration Statement covering the resale of the shares of Common Stock
issuable upon such conversion and not covered by the registration
statement to be filed in the Public Offering is effective, (b) the
shares of Common Stock issuable upon such conversion are designated for
quotation or listed for trading on the Nasdaq National Market, the NYSE
or the AMEX, and, (c) the Company has duly reserved for issuance the
shares of Common Stock issuable upon such conversion. The date on which
such conversion is to be effected shall be the date of the closing of
such Public Offering or such date as directed by the managing
underwriter (provided such day may not be more than seven (7) Business
Days from the date of notice) (the "Public Offering Conversion Date").
Any conversion pursuant to this Section 5(a)(iii) shall be subject to
Section 5(b) with respect to the consequences of the Company's failure
to deliver shares of Common Stock in respect of a conversion under this
Section. If the Public Offering is not closed in the time and under
terms required by this Section, each holder shall have the right to
require the Company to void, ab initio, the conversion conducted
hereunder and to reissue the number of shares of Preferred Stock as
tendered for conversion in the time period required for issuance of
shares pursuant to Section 5(b). Nothing contained herein shall limit a
holder's right to convert any or all of the Preferred Stock held by it
prior to the Public Offering Conversion Date.
A Holder Conversion Date, a Company Conversion Date and a
Public Offering Conversion Date are sometimes referred to herein as a
"Conversion Date" and a Holder Conversion Notice and a Company
Conversion Notice are sometimes referred to as a "Conversion Notice."
(iv) Certain Shareholder Approval. If on the Conversion
Date applicable to any conversion, (A) the Common Stock is then
designated for quotation or listed for trading on the Nasdaq National
Market, the NYSE or the AMEX or if rules similar to Rule 4460(i)
promulgated under the rules of the Nasdaq Stock Market are deemed to
apply to the Nasdaq SmallCap Market and the Company's Common Stock is
then listed for trading on such market, (B) the Conversion Price then in
effect is such that the aggregate number of shares of Common Stock that
would then be issuable upon conversion of all outstanding shares of
Preferred Stock, together with any shares of Common Stock previously
issued upon conversion of Preferred Stock and in respect of payment of
dividends hereunder, would equal or exceed 20% of the number of shares
of Common Stock outstanding on the Original Issue Date (the "Issuable
Maximum"), and (C) the Company has not previously obtained Shareholder
Approval (as defined below), then the Company shall issue to any holder
so requesting conversion of Preferred Stock its pro rata portion of the
Issuable Maximum in the same ratio that the number of shares of
Preferred Stock held by such holder bears to all shares of Preferred
Stock then outstanding and, with respect to any shares of Common Stock
that otherwise would have been issuable to such holder in respect of the
Conversion Notice at issue or in respect of payment of dividends
hereunder in excess of such holder's pro rata portion of the Issuable
Maximum, the holder shall have the option to require the Company to
either (1) as promptly as possible, but in no event later than 60 days
after such Conversion Date, convene a meeting of the holders of the
Common Stock and use its best efforts to obtain Shareholder Approval or
(2) redeem, from funds legally available therefor at the time of such
redemption, the balance of the Preferred Stock subject to such
Conversion Notice at a price per share equal to the product of (i) the
highest average Per Share Market Value for any five (5) consecutive
Business Days during the period commencing on the Conversion Date and
ending on the date such redemption price is paid in full by the Company,
and (ii) the Conversion Ratio calculated on the Conversion Date;
provided, however, that if the holder has requested that the Company
obtain Shareholder Approval under clause (1) above and the Company fails
for any reason to obtain such Shareholder Approval within the time
period set forth in clause (1) above, the Company shall be obligated to
redeem the Preferred Stock not converted as a result of the provisions
of this Section in accordance with the provisions of clause (2) above,
and in such case the interest contemplated by the immediately succeeding
sentence shall be deemed to accrue from the Conversion Date. If the
holder has requested that the Company redeem shares of Preferred Stock
pursuant to this Section and the Company fails for any reason to pay the
redemption price under clause (2) above within seven days after the
Conversion Date, the Company will pay interest on such redemption price
at a rate of 12% per annum to the converting holder of Preferred Stock,
accruing from the Conversion Date until the redemption price plus any
accrued interest thereon is paid in full. The entire redemption price,
including interest thereon, shall be paid in cash. "Shareholder
Approval" means the approval by a majority of the total votes entitled
to vote thereon, in person or by proxy, at a meeting of the shareholders
of the Company held in accordance with the Company's Articles of
Incorporation and by-laws, of the issuance by the Company of shares of
Common Stock exceeding the Issuable Maximum as a consequence of the
conversion of Preferred Stock into Common Stock at a price less than the
greater of the book or market value on the Original Issue Date as and to
the extent required pursuant to Rule 4460(i) of the Nasdaq Stock Market,
NYSE Listed Company Manual Section 312.03(c) or Rule 713 of the American
Stock Exchange (or any successor or replacement provision thereof), as
applicable.
(v) If the average Per Share Market Value for the five (5)
Business Days immediately preceding any Conversion Date exceeds 160% of
the average Per Share Market Value for the five (5) Business Days
immediately preceding the Original Issue Date, the number of shares of
Common Stock issuable on such Conversion Date shall be adjusted as
follows:
Number of shares = P
_________
(X + Y/2)
X = The average Per Share Market Value for the five (5)
Business Days immediately preceding the Original Issue Date.
P = Aggregate Stated Value of the Preferred Stock to be
converted.
Y = Dollar amount by which the average of the Per Share
Market Value for the five (5) Business Days immediately
preceding the Conversion Date exceeds 160% of the average of
the Per Share Market Value for the five (5) Business Days
immediately preceding the Original Issue Date.
(vi) In no event shall a holder be permitted to
convert any shares of Preferred Stock in excess of the number of such
shares, upon the conversion of which, (x) the number of shares of Common
Stock beneficially owned by such holder (other than shares of Common
Stock issuable upon conversion of such shares of Preferred Stock or
which would otherwise be deemed beneficially owned except for being
subject to a limitation on conversion or exercise analogous to the
limitation contained in this paragraph 5(a)(vi)), plus (y) the number of
shares of Common Stock issuable upon the conversion of such shares of
Preferred Stock, would be equal to or exceed (z) 4.999% of the number of
shares of Common Stock then issued and outstanding. As used herein,
beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and the rules
thereunder. To the extent that the limitation contained in this
paragraph 5(a)(vi) applies, the determination of whether shares of
Preferred Stock are convertible (in relation to other securities owned
by a holder) and of which shares of Preferred Stock are convertible
shall be in the sole discretion of such holder, and the submission of
shares of Preferred Stock for conversion shall be deemed to be such
holder's determination of whether such shares of Preferred Stock are
convertible (in relation to other securities owned by a holder) and of
which shares of Preferred Stock are convertible, subject to such
aggregate percentage limitation, and the Company shall have no
obligation whatsoever to verify or confirm the accuracy of such
determination. This paragraph may be amended (i) in order to clarify an
ambiguity or otherwise to give effect to such limitation, by the Board
of Directors of the Company and the holders of two-thirds (2/3) of the
shares of Preferred Stock then outstanding and (ii) for any other
reason, with the further consent of the holders of a majority of the
shares of Common Stock then outstanding, to the extent permitted by
applicable law and subject to the rights and preferences of any
securities ranking senior thereto. Nothing contained in this Section
5(a)(vi) shall be deemed to restrict the right of a holder to convert
such shares of Preferred Stock at such time as such conversion will not
violate the provisions of this paragraph.
(b) Not later than two Business Days after receipt by the
Company of a properly completed and duly executed Conversion Notice and
an original share certificate representing the shares of Preferred Stock
to be converted, the Company will deliver to the holder (i) a
certificate or certificates which shall be free of restrictive legends
and trading restrictions (other than those required by Section 3.1(b) of
the Purchase Agreement or as may be required by the Rights Agreement)
representing the number of shares of Common Stock being acquired upon
the conversion of shares of Preferred Stock (subject to reduction
pursuant to Sections 5(a)(iv) and 5(a)(v) hereof and Section 3.8 of the
Purchase Agreement and subject to reduction at the Company's option to
prevent any Holder or group of Holders of Common Stock acquired upon
conversion from becoming an "Acquiring Person" under the terms of the
Rights Agreement), (ii) one or more certificates representing the number
of shares of Preferred Stock not converted, (iii) a bank check in the
amount of accrued and unpaid dividends (if the Company has elected or is
required hereunder to pay accrued dividends in cash) and (iv) if the
Company has elected and is permitted hereunder to pay accrued dividends
in shares of Common Stock, certificates, which shall be free of
restrictive legends and trading restrictions (other than those required
by the Purchase Agreement or as may be required by the Company's Rights
Agreement), representing such number of shares of Common Stock as equals
such dividend divided by the Conversion Price on the Conversion Date;
provided, however, that the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon
conversion of any shares of Preferred Stock (and the liquidated damages
that may otherwise have accrued during such period shall be deemed not
to accrue until certificates evidencing such shares of Preferred Stock
are either delivered for conversion to the Company or any transfer agent
for the Preferred Stock or Common Stock, or the holder of such Preferred
Stock notifies the Company that such certificates have been lost, stolen
or destroyed and provides a bond (or other adequate security) reasonably
satisfactory to the Company to indemnify the Company from any loss
incurred by it in connection therewith. The Company shall, upon request
of the holder, use its best efforts to deliver any certificate or
certificates required to be delivered by the Company under this Section
electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions. If in
the case of any Conversion Notice such certificate or certificates,
including for purposes hereof, any shares of Common Stock to be issued
on the Conversion Date on account of accrued but unpaid dividends
hereunder, are not delivered to or as directed by the applicable holder
by the second Business Day after receipt by the Company of a properly
completed and duly executed Conversion Notice and an original share
certificate representing the shares of Preferred Stock to be converted,
the holder shall be entitled by written notice to the Company at any
time on or before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the Company shall
immediately return the certificates representing the shares of Preferred
Stock tendered for conversion. If the Company fails to deliver to the
holder such certificate or certificates pursuant to this Section,
including for purposes hereof, any shares of Common Stock to be issued
on the Conversion Date on account of accrued but unpaid dividends
hereunder, prior to the fourth Business Day after the Conversion Date,
the Company shall pay to such holder, in cash, as liquidated damages and
not as a penalty, $2,500 for each day after such fourth Business Day
until such certificates are delivered. If the Company fails to deliver
to the holder such certificate or certificates pursuant to this Section
prior to the 15th Business Day after the Conversion Date, the Company
shall, at the holder's option (i) redeem, from funds legally available
therefor at the time of such redemption, such number of shares of
Preferred Stock then held by such holder, as requested by such holder,
and (ii) pay all accrued but unpaid dividends on account of the
Preferred Stock for which the Company shall have failed to issue Common
Stock certificates hereunder, in cash. The redemption price for each
share of Preferred Stock shall be equal to the sum of (A) all accrued
but unpaid dividends on such share, plus (B) the highest average Per
Share Market Value for any five (5) consecutive Business Days during the
period commencing on the Conversion Date and ending on the date the
payment of such redemption price is paid in full by the Company,
multiplied by, the Conversion Ratio calculated on the Conversion Date.
If the holder has requested that the Company redeem shares of Preferred
Stock pursuant to this Section and the Company fails for any reason to
pay the redemption price above within seven days after such notice is
deemed delivered pursuant to Section 5(h), the Company will pay interest
on the redemption price at a rate of 12% per annum, in cash to such
holder, accruing from such seventh day until the redemption price and
any accrued interest thereon is paid in full. Nothing herein shall
limit a holder's right to pursue actual damages for the Company's
failure to deliver certificates representing shares of Common upon
conversion within the period specified herein (including, without
limitation, damages relating to any purchase of shares of Common Stock
by such holder to make delivery on a sale effected in anticipation of
receiving certificates representing shares of Common Stock upon
conversion, such damages to be in an amount equal to (A) the aggregate
amount paid by such holder for the shares of Common Stock so purchased
minus (B) the aggregate amount of net proceeds, if any, received by such
holder from the sale of the shares of Common Stock issued by the Company
pursuant to such conversion), and such holder shall have the right to
pursue all remedies available to it at law or in equity (including,
without limitation, a decree of specific performance and/or injunctive
relief). If there is a dispute between a converting holder and the
Company as to the number of shares of Common Stock issuable in respect
of a Conversion Notice for which the party not tendering the applicable
Conversion Notice notifies the tendering party prior to the second
Business Day after the date such Conversion Notice is deemed delivered
hereunder, the Company shall, at its sole expense, request the Company's
independent public accountants to resolve the dispute, and for the first
four Business Days after notice of such a dispute is delivered no
penalties shall be deemed to accrue hereunder. The decision of the
Company's independent public accountants on the disputed issue shall be
final absent manifest error. The Company shall remain obligated,
however, to issue on a timely basis shares not in dispute.
(c)(i) The conversion price for each share of Preferred Stock
(the "Conversion Price") on any Conversion Date shall be the lesser of
(1) 110% of the average Per Share Market Value for the five (5) Business
Days immediately preceding the Original Issue Date (the "Initial
Conversion Price") or (2) 101% of the average of the five (5) lowest
consecutive Per Share Market Values during the 30 Business Days
immediately preceding the Conversion Date; provided that, (a) if the
Underlying Shares Registration Statement is not filed on or prior to the
25th day after the Original Issue Date, or (b) the Company fails to file
with the Commission a request for acceleration in accordance with Rule
12d1-2 promulgated under the Securities Exchange Act of 1934, as
amended, within five (5) days of the date that the Company is notified
(orally or in writing, whichever is earlier) by the Commission that an
Underlying Shares Registration Statement will not be "reviewed," or not
subject to further review or (c) if the Underlying Shares Registration
Statement is not declared effective by the Commission on or prior to the
90th day after the Original Issue Date, or (d) if such Underlying Shares
Registration Statement is filed with and declared effective by the
Commission but thereafter ceases to be effective as to all Registrable
Securities (as such term is defined in the Registration Rights
Agreement) at any time prior to the expiration of the "Effectiveness
Period" (as such term as defined in the Registration Rights Agreement),
without being succeeded within 10 Business Days by a subsequent
Underlying Shares Registration Statement filed with the Commission with
the Company using its best efforts to get it declared effective by the
Commission or (e) if trading in the Common Stock shall be suspended for
any reason for more than three (3) Business Days (other than as a result
of the suspension of trading in securities on such market or exchange
generally or temporary suspensions pending the release of material
information), or (f) if the Company fails to honor a conversion request
after receipt of a properly completed and duly executed Conversion
Notice and an original share certificate representing the shares of
Preferred Stock to be converted, or (g) the Common Stock is no longer
designated for quotation or listed on the Nasdaq National Market, the
NYSE or the AMEX other than a delisting solely in connection with the
Company having less than two market makers (any such failure being
referred to as an "Event," and for purposes of clauses (a), (c), (f) and
(g) the date on which such Event occurs, or for purposes of clause (b)
the date on which such five (5) days period is exceeded, or for purposes
of clause (d) the date which such 10 Business Day-period is exceeded, or
for purposes of clause (e) the date on which such three (3) Business Day
period is exceeded, being referred to as "Event Date"), the Conversion
Price shall be decreased by 1.5% each month (i.e., the Conversion Price
would decrease by 1.5% as of the Event Date and additional 1.5% as of
each monthly anniversary of the Event Date) until the earlier to occur
of the second month anniversary after the Event Date and such time as
the applicable Event is cured. Commencing the second month anniversary
after the Event Date, the Company shall pay to the holders of the
Preferred Stock $25,000 (each holder being entitled to receive such
portion of such amount as equals its pro rata portion of the Preferred
Stock then outstanding) in cash as liquidated damages, and not as a
penalty on the first day of each monthly anniversary of the Event Date
until such time as the applicable Event, is cured. Any decrease in the
Conversion Price pursuant to this Section shall continue notwithstanding
the fact that the Event causing such decrease has been subsequently
cured. The provisions of this Section are not exclusive and shall in no
way limit the Company's obligations under the Registration Rights
Agreement.
(ii) If the Company, at any time while any shares of Preferred
Stock are outstanding, (a) shall pay a stock dividend or otherwise make
a distribution or distributions on shares of its Junior Securities
payable in shares of Common Stock, (b) subdivide outstanding shares of
Common Stock into a larger number of shares, (c) combine outstanding
shares of Common Stock into a smaller number of shares, or (d) issue by
reclassification of shares of Common Stock any shares of capital stock
of the Company, the Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding before such event and of
which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this
Section 5(c)(ii) shall become effective immediately after the record
date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after
the effective date in the case of a subdivision, combination or
re-classification.
(iii) If the Company, at any time while any shares of Preferred
Stock are outstanding, shall issue rights or warrants to all holders of
Common Stock entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the Per Share Market Value
of Common Stock at the record date mentioned below, the Conversion Price
shall be multiplied by a fraction, of which the denominator shall be the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding on the date
of issuance of such rights or warrants plus the number of shares which
the aggregate offering price of the total number of shares so offered
would purchase at such Per Share Market Value. Such adjustment shall be
made whenever such rights or warrants are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants. However, upon
the expiration of any right or warrant to purchase Common Stock the
issuance of which resulted in an adjustment in the Conversion Price
pursuant to this Section 5(c)(iii), if any such right or warrant shall
expire and shall not have been exercised, the Conversion Price shall
immediately upon such expiration be recomputed and effective immediately
upon such expiration be increased to the price which it would have been
(but reflecting any other adjustments in the Conversion Price made
pursuant to the provisions of this Section 5 after the issuance of such
rights or warrants) had the adjustment of the Conversion Price made upon
the issuance of such rights or warrants been made on the basis of
offering for subscription or purchase only that number of shares of
Common Stock actually purchased upon the exercise of such rights or
warrants actually exercised.
(iv) If the Company, at any time while shares of Preferred Stock
are outstanding, shall distribute to all holders of Common Stock (and
not to holders of Preferred Stock) evidences of its indebtedness or
assets or rights or warrants to subscribe for or purchase any security
(excluding those referred to in Sections 5(c)(ii) and (iii) above), then
in each such case the Conversion Price at which each share of Preferred
Stock shall thereafter be convertible shall be determined by multiplying
the Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Per
Share Market Value of Common Stock determined as of the record date
mentioned above, and of which the numerator shall be such Per Share
Market Value of the Common Stock on such record date less the then fair
market value at such record date of the portion of such assets or
evidence of indebtedness so distributed applicable to one outstanding
share of Common Stock as determined by the Board of Directors in good
faith; provided, however, that in the event of a distribution exceeding
ten percent (10%) of the net assets of the Company, such fair market
value shall be determined by a nationally recognized or major regional
investment banking firm or firm of independent certified public
accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) (an "Appraiser")
selected in good faith by the holders of a majority in interest of the
shares of Preferred Stock then outstanding and reasonably acceptable to
the Company. In either case the adjustments shall be described in a
statement provided to the holders of Preferred Stock of the portion of
assets or evidences of indebtedness so distributed or such subscription
rights applicable to one share of Common Stock. Such adjustment shall
be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
(v) All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(vi) Whenever the Conversion Price is adjusted pursuant to
Section 5(c)(ii),(iii) or (iv), the Company shall promptly mail to each
holder of Preferred Stock, a notice setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
(vii) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person
pursuant to which the Company will not be the surviving entity, the sale
or transfer of all or substantially all of the assets of the Company or
any compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property, the holders of the
Preferred Stock then outstanding shall have the right thereafter to, at
their option, (A) convert such shares only into the shares of stock and
other securities, cash and property receivable upon or deemed to be held
by holders of Common Stock following such reclassification,
consolidation, merger, sale, transfer or share exchange, and the holders
of the Preferred Stock shall be entitled upon such event to receive such
amount of securities, cash or property as the shares of the Common Stock
of the Company into which such shares of Preferred Stock could have been
converted immediately prior to such reclassification, consolidation,
merger, sale, transfer or share exchange would have been entitled or (B)
require the Company to redeem, from funds legally available therefor at
the time of such redemption, its shares of Preferred Stock at a price
per share equal to the Stated Value of such shares plus all accrued and
unpaid dividends on such shares. The entire redemption price shall be
paid in cash, and the terms of payment of such redemption price shall be
subject to the provisions set forth in Section 6(b). The terms of any
such consolidation, merger, sale, transfer or share exchange shall
include such terms so as to continue to give to the holder of Preferred
Stock the right to receive the securities, cash or property set forth in
this Section 5(c)(vii) upon any conversion or redemption following such
consolidation, merger, sale, transfer or share exchange. This provision
shall similarly apply to successive reclassifications, consolidations,
mergers, sales, transfers or share exchanges. Notwithstanding the
foregoing, in the event the Company's independent public accountants
issue an unqualified opinion to the Company that clause (B) above would
not allow the subject transaction to be accounted for as a "pooling of
interests," the option under clause (B) shall not be available with
respect to such transaction.
(viii) If:
A. the Company shall declare a dividend (or
any other distribution) on its Common
Stock; or
B. the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
C. the Company shall authorize the granting
to all holders of the Common Stock rights
or warrants to subscribe for or purchase
any shares of capital stock of any class
or of any rights; or
D. the approval of any stockholders of the
Company shall be required in connection
with any reclassification of the Common
Stock of the Company, any consolidation or
merger to which the Company is a party,
any sale or transfer of all or
substantially all of the assets of the
Company, or any compulsory share of
exchange whereby the Common Stock is
converted into other securities, cash or
property; or
E. the Company shall authorize the voluntary
or involuntary dissolution, liquidation or
winding up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency
maintained for the purpose of conversion of Preferred Stock, and shall
cause to be mailed to the holders of Preferred Stock at their last
addresses as they shall appear upon the stock books of the Company, at
least 30 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record
is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the
date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to
become effective or close, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale,
transfer or share exchange; provided, however, that the failure to mail
such notice or any defect therein or in the mailing thereof shall not
affect the validity of the corporate action required to be specified in
such notice. Holders are entitled to convert shares of Preferred Stock
during the 30-day period commencing the date of such notice to the
effective date of the event triggering such notice, notwithstanding the
occurrence of a Market Threshold Event.
(d) The Company will at all times reserve and keep available out
of its authorized and unissued Common Stock solely for the purpose of
issuance upon conversion of Preferred Stock and payment of dividends on
Preferred Stock, each as herein provided, free from preemptive rights or
any other actual or contingent purchase rights of persons other than the
holders of Preferred Stock, not less than such number of shares of
Common Stock as shall (subject to any additional requirements of the
Company as to reservation of such shares set forth in the Purchase
Agreement) be issuable (taking into account the adjustments and
restrictions of Section 5(c)) upon the conversion of all outstanding
shares of Preferred Stock and payment of dividends hereunder. All
shares of Common Stock that shall be so issuable shall, upon issue, be
duly authorized, validly issued and fully paid, nonassessable and freely
tradeable (except as may be required pursuant to Section 3.1(b) of the
Purchase Agreement).
(e) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of
Common Stock, but may if otherwise permitted, make a cash payment in
respect of any final fraction of a share based on the Per Share Market
Value at such time. If the Company elects not, or is unable, to make
such a cash payment, the holder of a share of Preferred Stock shall be
entitled to receive, in lieu of the final fraction of a share, one whole
share of Common Stock.
(f) The issuance of certificates for shares of Common Stock on
conversion of Preferred Stock shall be made without charge to the
holders thereof for any documentary stamp or similar taxes that may be
payable in respect of the issue or delivery of such certificates,
provided that the Company shall not be required to pay any tax that may
be payable in respect of any transfer involved in the issuance and
delivery of any such certificate upon conversion in a name other than
that of the holder of such shares of Preferred Stock so converted and
the Company shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance thereof
shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been
paid.
(g) Shares of Preferred Stock converted into Common Stock shall
be canceled and shall have the status of authorized but unissued shares
of undesignated stock.
(h) Any and all notices or other communications or deliveries to
be provided by the holders of the Preferred Stock hereunder shall be in
writing and delivered personally, by facsimile, sent by a nationally
recognized overnight courier service or sent by certified or registered
mail, postage prepaid, addressed to the attention of the Chief Executive
Officer of the Company at the facsimile telephone number or address of
the principal place of business of the Company as set forth in the
Purchase Agreement. Any and all notices or other communications or
deliveries to be provided by the Company hereunder shall be in writing
and delivered personally, by facsimile, sent by a nationally recognized
overnight courier service or sent by certified or registered mail,
postage prepaid, addressed to each holder of Preferred Stock at the
facsimile telephone number or address of such holder appearing on the
books of the Company, or if no such facsimile telephone number or
address appears, at the principal place of business of the holder. Any
notice or other communication or deliveries hereunder shall be deemed
given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 11:59 p.m. (Eastern
Time) on such date of transmission, (ii) four days after deposit in the
United States mails, (iii) the Business Day following the date of
mailing, if send by nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required to
be given.
Section 6. Optional Redemption.
(a) If after the Original Issue Date the closing price of the
Common Stock on the Nasdaq National Market is equal to or less than $18
per share for fifteen (15) consecutive Business Days, then the Company
shall have the option, upon 30 days notice to each holder, to redeem
from funds legally available therefor all or any portion of the then
outstanding and unconverted shares of Preferred Stock at a price per
share equal to the "Optional Redemption Price" (as defined in Section
9). All redeemed shares of Preferred Stock shall cease to be
outstanding and shall have the status of authorized but undesignated
stock, but may not be reissued as Preferred Stock. The entire Optional
Redemption Price shall be paid in cash. The holders of the Preferred
Stock shall have the right to tender, and the Company shall honor,
Holder Conversion Notices for shares of Preferred Stock, including
shares subject to the notice of redemption described in this Section, at
any time through the 29th day after receipt of such notice of
redemption.
(b) If any portion of the Optional Redemption Price is not paid
by the Company within five (5) calendar days after the date due,
interest shall accrue thereon at the rate of 15% per annum until such
Optional Redemption Price plus all such interest is paid in full (which
amount shall be paid as liquidated damages and not as a penalty). In
addition, if any portion of the Optional Redemption Price remains unpaid
for more than 5 (five) calendar days after the date due, the holder of
the Preferred Stock subject to such redemption may elect, by written
notice to the Company, to either (i) demand conversion in accordance
with the formula and the time frame therefor set forth in Section 5 of
all of the shares of Preferred Stock for which such Optional Redemption
Price, plus accrued liquidated damages thereof, has not been paid in
full (the "Unpaid Redemption Shares"), in which event the Per Share
Market Price for such shares shall be the lower of the Per Share Market
Price calculated on the date such redemption price was originally due
and the Per Share Market Price as of the holder's written demand for
conversion, or (ii) invalidate ab initio such redemption,
notwithstanding anything herein contained to the contrary. If the
holder elects option (i) above, the Company shall within three (3)
Business Days of its receipt of such election deliver to the holder the
shares of Common Stock issuable upon conversion of the Unpaid Redemption
Shares subject to such holder conversion demand and otherwise perform
its obligations hereunder with respect thereto; or, if the Holder elects
option (ii) above, the Company shall promptly, and in any event not
later than three (3) Business Days from receipt of holder's notice of
such election, return to the holder all of the Unpaid Redemption Shares.
Section 7. Conversion Restrictions. Notwithstanding anything
contained to the contrary herein, if during the period between (a) the
Original Issue Date and the 270th day after the Original Issue Date or
(b) the Series C Closing Date (as defined in the Purchase Agreement) and
the 270th day after the Series C Closing Date, the average Per Share
Market Value for any ten (10) consecutive Business Days is less than $20
(such event being referred to herein as a "Market Threshold Event"),
then the following shall apply to the conversion rights of the holders
of Preferred Stock: (i) each such holder shall be permitted to convert
only up to fifty percent (50%) of the shares of Preferred Stock and
Series C Preferred Stock (as defined in the Purchase Agreement) held by
such holder (measured on the date of the Market Threshold Event) during
the 30-day period immediately following such Market Threshold Event;
(ii) if for the last ten (10) consecutive Business Days of the 30-day
period contemplated in clause (i) of this Section, the Per Share Market
Value is less than $20, then each such holder shall be permitted to
convert only up to fifty percent (50%) of the number of shares of
Preferred Stock and Series C Preferred Stock (as defined in the Purchase
Agreement) then held by such holder during the period from the 31st day
to the 60th day after the original Market Threshold Event; (iii) if the
Company tenders a Subsequent Financing Notice (as defined in the
Purchase Agreement), the restrictions contained in clause (i) of this
Section shall be the only conversion restrictions under this Section 7
which may be imposed on the holders of Preferred Stock; (iv) the
restrictions contained in this Section shall be of no force or effect as
to any holder who holds an aggregate of $1,000,000 or less of the
Preferred Stock and the Series C Preferred Stock (as defined in the
Purchase Agreement) at the time of or after any Market Threshold Event;
and (v) not more than two (2) Market Threshold Events shall be permitted
to impose restrictions to the conversion rights of the holders of the
Preferred Stock.
Section 8. Regulation 13D Limitation. Notwithstanding anything
contained to the contrary herein, the Preferred Stock may not be
transferred via "off-market" trades, without the prior written consent
of the Company, to persons who the transferring holder believes
beneficially own (as determined under Rule 13d-3 of the Exchange Act) 5%
or greater of the Common Stock on the date of such proposed transfer.
Section 9. Definitions. For the purposes hereof, the following
terms shall have the following meanings:
"Applicable Percentage" means 115% plus the product of (i)
2.5% and (ii) the number of 30-day periods elapsed from the date that is
six months from the Original Issue Date.
"Business Day" means any day except a day on which the
Nasdaq National Market, the NYSE or the AMEX, as applicable, if the
Common Stock is listed for trading or quoted thereon at such time, is
closed, and if the Common Stock is not listed for trading or quoted on
any of the Nasdaq National Market, the NYSE or the AMEX at such time,
then "Business Day" shall mean any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking
institutions in the State of New York generally are authorized or
required by law or other government actions to close.
"Common Stock" means the common stock, $.25 par value per
share, of the Company and stock of any other class into which such
shares may hereafter have been reclassified or changed.
"Conversion Ratio" with respect to a share of Preferred
Stock means, at any time, a fraction, of which the numerator is the
Stated Value of such share plus accrued but unpaid dividends (including
any accrued but unpaid interest thereon) but only to the extent not paid
in cash in accordance with the terms hereof, and of which the
denominator is the Conversion Price at such time.
"Junior Securities" means the Common Stock and all equity
securities (other than the Preferred Stock) of the Company.
"Optional Redemption Price" for each share of Preferred
Stock which may be redeemed in accordance with Section 6 means, for the
first six months following the Original Issue Date, the sum of (i) 115%
of the Stated Value and (ii) all accrued and unpaid dividends in respect
of such share. Thereafter, the Optional Redemption Price shall mean the
sum of (i) the product of (A) the Applicable Percentage and (B) the
Stated Value and (ii) all accrued and unpaid dividends in respect of
such share.
"Original Issue Date" means the date of the first issuance
of any shares of the Preferred Stock regardless of the number of
transfers of any particular shares of Preferred Stock and regardless of
the number of certificates which may be issued to evidence such
Preferred Stock.
"Per Share Market Value" means on any particular date (a)
the closing bid price per share of the Common Stock on such date on the
Nasdaq National Market or other stock exchange or quotation system on
which the Common Stock is then listed or quoted or if there is no such
price on such date, then the closing bid price on such exchange or
quotation system on the date nearest preceding such date, or (b) if the
Common Stock is not listed or quoted then on the Nasdaq National Market
or any stock exchange or quotation system, the closing bid price for a
share of Common Stock in the over-the-counter market, as reported by the
Nasdaq Stock Market, Bloomberg, L.P. or in the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its
functions of reporting prices) at the close of business on such date, or
(c) if the Common Stock is not then reported by the National Quotation
Bureau Incorporated (or similar organization or agency succeeding to its
functions of reporting prices), then the average of the "Pink Sheet"
quotes for the relevant conversion period, as determined in good faith
by the holder, or (d) if the Common Stock is not then publicly traded
the fair market value of a share of Common Stock as determined by an
Appraiser mutually acceptable to the holders and the Company.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"Public Offering" means a firm commitment underwritten
public offering of Common Stock (A) at an offering price per share to
the public of at least 185% of the Initial Conversion Price, (B) under
which the net cash proceeds to the Company will exceed $20,000,000, and
(C) under which each holder is provided with the opportunity to resell
as a Selling Stockholder at least 75% of the shares of Common Stock as
are issuable upon a conversion under Section 5(a)(iii) which shall not
be subject to any underwriter or Company cutbacks.
"Purchase Agreement" means the Convertible Preferred Stock
Purchase Agreement, dated as of the Original Issue Date, among the
Company and the original holders of the Preferred Stock.
"Registration Rights Agreement" means the Registration
Rights Agreement, dated the Original Issue Date, by and among the
Company and the original holders of Preferred Stock.
"Underlying Shares" means the shares of Common Stock into
which the Shares are convertible in accordance with the terms hereof and
the Purchase Agreement.
"Underlying Shares Registration Statement" means an
Underlying Shares Registration Statement, pursuant to the Registration
Rights Agreement, covering among other things the resale of the shares
of Common Stock issuable upon conversion of the Preferred Stock
including dividends thereon.
<PAGE>
IN WITNESS WHEREOF, we have executed and subscribed this
Certificate and do affirm the foregoing as true under the penalties of
perjury this ______ day of August, 1997.
______________________________ ______________________________
Chief Executive Officer Vice President
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder in order to Convert shares of
Preferred Stock)
The undersigned hereby elects to convert the number of shares of Series
B Convertible Preferred Stock indicated below, into the number of shares
of Common Stock, par value $.25 per share (the "Common Stock"), of
Sheldahl, Inc. (the "Company") indicated below, as of the date written
below. If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance therewith.
No fee will be charged to the holder for any conversion, except for such
transfer taxes, if any.
Conversion calculations:
Date to Effect Conversion
Number of shares of Preferred Stock
to be Converted
Number of shares of Common Stock
to be Issued
Applicable Conversion Price
Signature
Name
Address
<PAGE>
EXHIBIT B
NOTICE OF CONVERSION AT
THE ELECTION OF THE COMPANY
Sheldahl, Inc. (the "Company") hereby represents and warrants that the
conditions precedent to a company conversion pursuant to [Section
5(a)(ii)] [Section 5(a)(iii)] have been satisfied and therefore hereby
notifies the addressee hereof that the Company hereby elects to exercise
its right to convert [ ] shares of its Series B Convertible Preferred
Stock (the "Preferred Stock") held by the Holder into shares of Common
Stock, par value $.25 per share (the "Common Stock") of the Company
according to the terms hereof, as of the date written below. No fee
will be charged to the Holder for any conversion hereunder, except for
such transfer taxes, if any which may be incurred by the Company if
shares are to be issued in the name of a person other than the person to
whom this notice is addressed.
Conversion calculations:
Date to effect Conversion
Number of shares of Preferred Stock to be
Converted
Number of shares of Common Stock
to be Issued
Applicable Conversion Price
Name of Holder
Address of Holder
<PAGE>
CERTIFICATE OF
ARTICLES OF CORRECTION FILED TO CORRECT
CERTAIN ERROR IN THE CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS OF SERIES B
CONVERTIBLE PREFERRED STOCK
Sheldahl, Inc., a corporation organized and existing under
and by virtue of the laws of the State of Minnesota,
DOES HEREBY CERTIFY:
1. The name of the corporation is Sheldahl, Inc.
2. That a Certificate of Designations , Preferences and
Rights of Series B Convertible Preferred Stock (the "Certificate of
Designations") was filed by the Secretary of State of Minnesota on
August 26, 1997, and the Certificate of Designations requires correction
as permitted by Section 5.16 of the Minnesota Statutes.
3. The inaccuracy or defect of the Certificate of
Designations to be corrected is as follows:
Sixth (6th) sentence of Section 5(b) of the Certificate of
Designations, which used to read as follows:
"The redemption price shall be equal to the sum of (A) of the
aggregate of all accrued but unpaid dividends, plus (B) the
aggregate Stated Value of Preferred Stock then held by such holder
multiplied by (1) the highest average Per Share Market Value for
any five (5) consecutive Business Days during the period
commencing on the Conversion Date and ending on the date the
payment of such redemption price is paid in full by the Company,
divided by, (2) the Conversion Ratio calculated on the Conversion
Date:"
shall hereby be replaced and corrected to read as follows:
"The redemption price for each share of Preferred Stock shall be
equal to the sum of (A) all accrued but unpaid dividends on
such shares, plus (B) the highest average Per Share Market Value
for any five (5) consecutive Business Days during the period
commencing on the Conversion Date and ending on the date the
payment of such redemption price is paid in full by the Company,
multiplied by, the Conversion Ratio calculated on the Conversion
Date."
<PAGE>
NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE
STATE SECURITIES OR BLUE SKY LAWS.
SHELDAHL, INC.
WARRANT
Warrant No. [____] Dated August 25, 1997
Sheldahl, Inc., a corporation organized and existing under the
laws of the State of Minnesota (the "Company"), hereby certifies that,
for value received, [___________________], or its registered assigns
("Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company up to a total of [________] shares of Common
Stock, par value $.25 per share (the "Common Stock"), of the Company
(each such share, a "Warrant Share" and all such shares, the "Warrant
Shares") at an exercise price equal to $[_______] per share (as
adjusted from time to time as provided in Section 8, the "Exercise
Price"), at any time and from time to time from and after the date
hereof and through and including August [__], 2000 (the "Expiration
Date"), and subject to the following terms and conditions:
1. Registration of Warrant. The Company shall register this
Warrant, upon records to be maintained by the Company for that purpose
(the "Warrant Register"), in the name of the record Holder hereof from
time to time. The Company may deem and treat the registered Holder of
this Warrant as the absolute owner hereof for the purpose of any
exercise hereof or any distribution to the Holder, and for all other
purposes, and the Company shall not be affected by notice to the
contrary.
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any portion
of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed,
to the Company at the office specified in or pursuant to Section 3(b).
Upon any such registration or transfer, a new warrant to purchase Common
Stock, in substantially the form of this Warrant (any such new warrant,
a "New Warrant"), evidencing the portion of this Warrant so transferred
shall be issued to the transferee and a New Warrant evidencing the
remaining portion of this Warrant not so transferred, if any, shall be
issued to the transferring Holder. The acceptance of the New Warrant by
the transferee thereof shall be deemed the acceptance of such transferee
of all of the rights and obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender
hereof by the Holder to the office of the Company specified in or
pursuant to Section 3(b) for one or more New Warrants, evidencing in the
aggregate the right to purchase the number of Warrant Shares which may
then be purchased hereunder. Any such New Warrant will be dated the
date of such exchange.
1. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the registered
Holder on any business day before 5:30 P.M., New York time, at any time
and from time to time on or after the date hereof to and including the
Expiration Date. At 5:30 P.M., New York time on the Expiration Date,
the portion of this Warrant not exercised prior thereto shall be and
become void and of no value. This Warrant may not be redeemed by the
Company.
(b) Subject to Sections 2(b), 6 and 11, upon surrender of
this Warrant, with the Form of Election to Purchase attached hereto duly
completed and signed, to the Company at its office at 1150 Sheldahl
Road, Northfield, MN 55057-9444, Attention: Vice President, Finance, or
at such other address as the Company may specify in writing to the then
registered Holder, and upon payment of the Exercise Price multiplied by
the number of Warrant Shares that the Holder intends to purchase
hereunder, in lawful money of the United States of America, in cash or
by certified or official bank check or checks, all as specified by the
Holder in the Form of Election to Purchase, the Company shall promptly
(but in no event later than 3 business days after the Date of Exercise
(as defined herein)) issue or cause to be issued and cause to be
delivered to or upon the written order of the Holder and in such name or
names as the Holder may designate, a certificate for the Warrant Shares
issuable upon such exercise, free of restrictive legends other than as
required by the Convertible Preferred Stock Purchase Agreement of even
date herewith between the Holder and the Company. Any person so
designated by the Holder to receive Warrant Shares shall be deemed to
have become holder of record of such Warrant Shares as of the Date of
Exercise of this Warrant.
A "Date of Exercise" means the date on which the
Company shall have received (i) this Warrant (or any New Warrant, as
applicable), with the Form of Election to Purchase attached hereto (or
attached to such New Warrant) appropriately completed and duly signed,
and (ii) payment of the Exercise Price for the number of Warrant Shares
so indicated by the holder hereof to be purchased.
(c) This Warrant shall be exercisable only in its
entirety.
4. Piggyback Registration Rights. During the term of this
Warrant, the Company may not file any registration statement with the
Securities and Exchange Commission (other than registration statements
of the Company filed on Form S-8 or Form S-4, each as promulgated under
the Securities Act of 1933, as amended, pursuant to which the Company is
registering securities pursuant to a Company employee benefit plan or
pursuant to a merger, acquisition or similar transaction including
supplements thereto, but not additionally filed registration statements
in respect of such securities) at any time when there is not an
effective registration statement covering the resale of the Warrant
Shares and naming the Holder as a selling stockholder thereunder, unless
the Company provides the Holder with not less than 20 days notice to
each of the Holder and Robinson Silverman Peace Aronsohn & Berman LLP,
attention Eric L. Cohen, notice of its intention to file such
registration statement and provides the Holder the option to include any
or all of the applicable Warrant Shares therein. The piggyback
registration rights granted to the Holder pursuant to this Section shall
continue until all of the Holder's Warrant Shares have been sold in
accordance with an effective registration statement or upon the
expiration of this Warrant. The Company will pay all registration
expenses in connection therewith.
5. Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the issuance of Warrant Shares upon the
exercise of this Warrant; provided, however, that the Company shall not
be required to pay any tax which may be payable in respect of any
transfer involved in the registration of any certificates for Warrant
Shares or Warrants in a name other than that of the Holder, and the
Company shall not be required to issue or cause to be issued or deliver
or cause to be delivered the certificates for Warrant Shares unless or
until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid. The Holder
shall be responsible for all other tax liability that may arise as a
result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in
exchange and substitution for and upon cancellation hereof, or in lieu
of and substitution for this Warrant, a New Warrant, but only upon
receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction and indemnity, if reasonably satisfactory to it.
Applicants for a New Warrant under such circumstances shall also comply
with such other reasonable regulations and procedures and pay such other
reasonable charges as the Company may prescribe.
7. Reservation of Warrant Shares. The Company covenants that
it will at all times reserve and keep available out of the aggregate of
its authorized but unissued Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as
herein provided, the number of Warrant Shares which are then issuable
and deliverable upon the exercise of this entire Warrant, free from
preemptive rights or any other actual contingent purchase rights of
persons other than the Holders (taking into account the adjustments and
restrictions of Section 8). The Company covenants that all Warrant
Shares that shall be so issuable and deliverable shall, upon issuance
and the payment of the applicable Exercise Price in accordance with the
terms hereof, be duly and validly authorized, issued and fully paid and
nonassessable.
8. Certain Adjustments. The Exercise Price and number of
Warrant Shares issuable upon exercise of this Warrant are subject to
adjustment from time to time as set forth in this Section 8. Upon each
such adjustment of the Exercise Price pursuant to this Section 8, the
Holder shall thereafter prior to the Expiration Date be entitled to
purchase, at the Exercise Price resulting from such adjustment, the
number of Warrant Shares obtained by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant
Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price
resulting from such adjustment.
(a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock (as defined
below) or on any other class of capital stock (and not the Common Stock)
payable in shares of Common Stock, (ii) subdivide outstanding shares of
Common Stock into a larger number of shares, or (iii) combine
outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding after such event. Any adjustment
made pursuant to this Section shall become effective immediately after
the record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision or
combination, and shall apply to successive subdivisions and
combinations.
(b) In case of any reclassification of the Common Stock,
any consolidation or merger of the Company with or into another person,
the sale or transfer of all or substantially all of the assets of the
Company in which the consideration therefor is equity or equity
equivalent securities or any compulsory share exchange pursuant to which
the Common Stock is converted into other securities or property, then
the Holder shall have the right thereafter to exercise this Warrant only
into the shares of stock and other securities and property receivable
upon or deemed to be held by holders of Common Stock following such
reclassification, consolidation, merger, sale, transfer or share
exchange, and the Holder shall be entitled upon such event to receive
such amount of securities or property equal to the amount of Warrant
Shares such Holder would have been entitled to had such Holder exercised
this Warrant immediately prior to such reclassification, consolidation,
merger, sale, transfer or share exchange. The terms of any such
consolidation, merger, sale, transfer or share exchange shall include
such terms so as to continue to give to the Holder the right to receive
the securities or property set forth in this Section 8(b) upon any
exercise following any such reclassification, consolidation, merger,
sale, transfer or share exchange.
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to
holders of this Warrant) evidences of its indebtedness or assets or
rights or warrants to subscribe for or purchase any security (excluding
those referred to in Sections 8(a), (b) and (d)), then in each such case
the Exercise Price shall be determined by multiplying the Exercise Price
in effect immediately prior to the record date fixed for determination
of stockholders entitled to receive such distribution by a fraction of
which the denominator shall be the Exercise Price determined as of the
record date mentioned above, and of which the numerator shall be such
Exercise Price on such record date less the then fair market value at
such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of
Common Stock as determined by a nationally recognized or major regional
investment banking firm or firm of independent certified public
accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) (an "Appraiser")
mutually selected in good faith by the holders of a majority in interest
of the Warrants then outstanding and the Company. Any determination
made by the Appraiser shall be final.
(d) If, at any time while this Warrant is outstanding, the
Company shall issue or cause to be issued rights or warrants to acquire
or otherwise sell or distribute shares of Common Stock to all holders of
Common Stock for a consideration per share less than the Exercise Price
then in effect, then, forthwith upon such issue or sale, the Exercise
Price shall be reduced to the price (calculated to the nearest cent)
determined by dividing (i) an amount equal to the sum of (A) the number
of shares of Common Stock outstanding immediately prior to such issue or
sale multiplied by the Exercise Price, and (B) the consideration, if
any, received or receivable by the Company upon such issue or sale by
(ii) the total number of shares of Common Stock outstanding immediately
after such issue or sale.
(e) For the purposes of this Section 8, the following
clauses shall also be applicable:
(i) Record Date. In case the Company shall
take a record of the holders of its Common Stock for the purpose of
entitling them (A) to receive a dividend or other distribution payable
in Common Stock or in securities convertible or exchangeable into shares
of Common Stock, or (B) to subscribe for or purchase Common Stock or
securities convertible or exchangeable into shares of Common Stock, then
such record date shall be deemed to be the date of the issue or sale of
the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or
the date of the granting of such right of subscription or purchase, as
the case may be.
(ii) Treasury Shares. The number of shares of
Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition
of any such shares shall be considered an issue or sale of Common Stock.
(f) All calculations under this Section 8 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
(g) If:
(i) the Company shall declare a dividend
(or any other distribution) on its
Common Stock; or
(ii) the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
(iii) the Company shall authorize the
granting to all holders of the
Common Stock rights or warrants to
subscribe for or purchase any shares
of capital stock of any class or of
any rights; or
(iv) the approval of any stockholders of
the Company shall be required in
connection with any reclassification
of the Common Stock of the Company,
any consolidation or merger to which
the Company is a party, any sale or
transfer of all or substantially all
of the assets of the Company, or any
compulsory share exchange whereby
the Common Stock is converted into
other securities, cash or property;
or
(v) the Company shall authorize the
voluntary dissolution, liquidation
or winding up of the affairs of the
Company,
then the Company shall cause to be mailed to each Holder at their last
addresses as they shall appear upon the Warrant Register, at least 30
calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record
is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the
date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to
become effective or close, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up;
provided, however, that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
9. Payment of Exercise Price. The Holder may pay the Exercise
Price in cash or, in the event that a registration statement covering
the resale of the Warrant Shares and naming the holder thereof as a
selling stockholder thereunder is not effective for the resale of the
Warrant Shares at any time during the term of this Warrant, pursuant to
a cashless exercise, as follows:
(a) Cash Exercise. The Holder shall deliver
immediately available funds;
(b) Cashless Exercise. The Holder shall surrender
this Warrant to the Company together with a notice of cashless exercise,
in which event the Company shall issue to the Holder the number of
Warrant Shares determined as follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued to
the Holder.
Y = the number of Warrant Shares with respect to
which this Warrant is being exercised.
A = the average of the closing sale prices of
the Common Stock for the five (5) Trading Days
immediately prior to (but not including) the
Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is
intended, understood and acknowledged that the Warrant Shares issued in
a cashless exercise transaction shall be deemed to have been acquired by
the Holder, and the holding period for the Warrant Shares shall be
deemed to have been commenced, on the issue date.
10. Fractional Shares. The Company shall not be required to
issue or cause to be issued fractional Warrant Shares on the exercise of
this Warrant. The number of full Warrant Shares which shall be issuable
upon the exercise of this Warrant shall be computed on the basis of the
aggregate number of Warrant Shares purchasable on exercise of this
Warrant so presented. If any fraction of a Warrant Share would, except
for the provisions of this Section 10, be issuable on the exercise of
this Warrant, the Company shall, at its option, (i) pay an amount in
cash equal to the Exercise Price multiplied by such fraction or (ii)
round the number of Warrant Shares issuable, up to the next whole
number.
11. Notices. Any and all notices or other communications or
deliveries hereunder shall be in writing and shall be deemed given and
effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section, (ii) the business day
following the date of mailing, if sent by nationally recognized
overnight courier service, or (iii) upon actual receipt by the party to
whom such notice is required to be given. The addresses for such
communications shall be: (1) if to the Company, to Sheldahl, Inc., 1150
Sheldahl Road, Northfield, MN 55057-9444, Attention: Vice President,
Finance, or to facsimile no. (507) 663-8435 or (507) 663-8545 or (ii) if
to the Holder, to the Holder at the address or facsimile number
appearing on the Warrant Register or such other address or facsimile
number as the Holder may provide to the Company in accordance with this
Section 11.
12. Warrant Agent.
(a) The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days' notice to the Holder, the Company may
appoint a new warrant agent.
(b) Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a
party or any corporation to which the Company or any new warrant agent
transfers substantially all of its corporate trust or shareholders
services business shall be a successor warrant agent under this Warrant
without any further act. Any such successor warrant agent shall
promptly cause notice of its succession as warrant agent to be mailed
(by first class mail, postage prepaid) to the Holder at the Holder's
last address as shown on the Warrant Register.
13. Miscellaneous.
(a) This Warrant shall be binding on and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns. This Warrant may be amended only in writing signed
by the Company and the Holder.
(b) Subject to Section 13(a), above, nothing in this
Warrant shall be construed to give to any person or corporation other
than the Company and the Holder any legal or equitable right, remedy or
cause under this Warrant; this Warrant shall be for the sole and
exclusive benefit of the Company and the Holder.
(c) This Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or
affect any of the provisions hereof.
(e) In case any one or more of the provisions of this
Warrant shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Warrant
shall not in any way be affected or impaired thereby and the parties
will attempt in good faith to agree upon a valid and enforceable
provision which shall be a commercially reasonable substitute therefor,
and upon so agreeing, shall incorporate such substitute provision in
this Warrant.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to
be duly executed by its authorized officer as of the date first
indicated above.
SHELDAHL, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares
of Common Stock under the foregoing Warrant)
To Sheldahl, Inc.:
In accordance with the Warrant enclosed with this Form of Election
to Purchase, the undersigned hereby irrevocably elects to purchase
_____________ shares of Common Stock ("Common Stock"), par value $.25
per share, of Sheldahl, Inc. and encloses herewith $________ in cash or
certified or official bank check or checks, which sum represents the
aggregate Exercise Price (as defined in the Warrant) for the number of
shares of Common Stock to which this Form of Election to Purchase
relates, together with any applicable taxes payable by the undersigned
pursuant to the Warrant.
Check box if this Form of Election to Purchase is to be
utilized for a "cashless exercise under the Warrant."
The undersigned requests that certificates for the shares of
Common Stock issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY
OR TAX IDENTIFICATION NUMBER
(Please print name and address)
<PAGE>
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ________________________________ the right represented by
the within Warrant to purchase ____________ shares of Common Stock of
Sheldahl, Inc. to which the within Warrant relates and appoints
________________ attorney to transfer said right on the books of
Sheldahl, Inc. with full power of substitution in the premises.
Dated:
_______________, ____
_______________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant)
_______________________________________
Address of Transferee
_______________________________________
_______________________________________
In the presence of:
__________________________
<PAGE>
COMMON STOCK WARRANT
CASHLESS EXERCISE FORM
Sheldahl, Inc.
1150 Sheldahl Road
Northfield, MN 55057
Attn: Vice President-Finance
The undersigned Holder of the attached Warrant hereby irrevocably
elects to exercise the Warrant pursuant to the cashless exercise
provisions of Section 9 of the Warrant. Capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in the Warrant.
The undersigned herewith encloses the Warrant.
The number of shares issuable to the Holder upon the cashless
exercise equals _____________, calculated as follows (Warrant Holder to
complete):
X = Y (A-B)/A
[Warrant Holder to complete]
X = _________ = the number of shares of Common Stock of the
Company to be issued pursuant to cashless
exercise
Y = _________ = the number of shares with respect to which the
Warrant is being exercised
A = $_________ = the average of the closing sale prices of the
Company's Common Stock for the five (5) Trading
Days immediately prior to (but not including)
the Date of Exercise
B = $_________ = the Exercise Price
Instructions for Registering The Securities
On The Stock Transfer Books Of The Company
Name: ___________________________________
Federal Tax Identification or
Social Security Number: ___________________________________
Address: ___________________________________
___________________________________
<PAGE>
If this exercise of the Warrant is not an exercise in full, then
the undersigned Holder hereby requests that a new Warrant of like tenor
(exercisable for the balance of the shares of Common Stock underlying
this Warrant) be issued and delivered to the undersigned Holder at the
address on the warrant register of the Company.
Dated: ________________ _________________________________________
(Name of Registered Holder - Please Print)
By:_______________________________________
(Signature of Registered Holder or of
Duly Authorized Signatory)
Title:____________________________________
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of August 27, 1997, among Sheldahl, Inc., a Minnesota
corporation (the "Company"), Southbrook International Investments, Ltd., a
corporation existing under the laws of the British Virgin Islands
("Southbrook"), HBK Cayman L.P., a Cayman Islands exempt limited partnership
("HBK Cayman"), HBK Offshore Fund Ltd., a Cayman Islands exempt company ("HBK
Offshore"), HBK Investments L.P., as investment manager for HBK Cayman and HBK
Offshore, Proprietary Convertible Investment Group, Inc., a Delaware
corporation ("PCIG") and Brown Simpson Strategic Growth Fund, LP, a New York
limited partnership ("Brown Simpson"). Southbrook, HBK Cayman, HBK Offshore,
PCIG and Brown Simpson are each referred to herein as a "Purchaser" and
collectively as the "Purchasers".
This Agreement is made pursuant to the Convertible Preferred Stock
Purchase Agreement, dated as of the date hereof among the Company and the
Purchasers (the "Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein shall have
the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 3(o).
"Affiliate" means, with respect to any Person, any other Person
that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control,"
when used with respect to any Person, means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities,
by contract or otherwise; and the terms of "affiliated," "controlling" and
"controlled" have meanings correlative to the foregoing.
"Business Day" means any day except a day on which the Nasdaq
National Market, the NYSE or the AMEX, as applicable, if the Common Stock is
listed for trading or quoted thereon at such time, is closed, and if the
Common Stock is not listed for trading or quoted on any of the Nasdaq National
Market, the NYSE or the AMEX at such time, then "Business Day" shall mean any
day except Saturday, Sunday and any day which shall be a legal holiday or a
day on which banking institutions in the State of New York generally are
authorized or required by law or other government actions to close.
"Closing Date" shall have the meaning set forth in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value $.25
per share.
"Effectiveness Date" means (i) with respect to the Registration
Statement to be filed with respect to the Series B Shares and the Warrants,
the 90th day following the Series B Closing Date and (ii) with respect to the
Registration Statement to be filed with respect to the Series C Shares, the
90th day following the Series C Closing Date.
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means (i) with respect to the shares of Common Stock
issuable upon conversion of the Series B Shares and exercise of the Warrants,
the 25th day following the Series B Closing Date and (ii) with respect to the
shares of Common Stock issuable upon conversion of the Series C Shares, the
25th day following the Series C Closing Date.
"Holder" or "Holders" means the holder or holders, as the case may
be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section
5(c).
"Indemnifying Party" shall have the meaning set forth in Section
5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Preferred Stock" means the shares of Series B and Series C
Preferred Stock, par value $1.00 per share, of the Company issued to the
Purchasers pursuant to the Purchase Agreement.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference
in such Prospectus.
"Registrable Securities" means (a) with respect to the
Registration Statement to be filed after the Series B Closing, the shares of
Common Stock issuable upon (i) conversion of the Series B Shares, (ii)
exercise of the Series B Warrants issued by the Company to the Purchasers and
(iii) payment of dividends in respect of such Preferred Stock and (b) with
respect to the Registration Statement to be filed after the Series C Closing
Date, the shares of Common Stock issuable upon (i) conversion of the Series C
Shares and (ii) payment of dividends with respect to such Preferred Shares;
provided, however that in order to account for the fact that the number of
shares of Common Stock that are issuable upon conversion of shares of
Preferred Stock is determined in part upon the market price of the Common
Stock at the time of conversion, in the case of each of (a) and (b),
Registrable Securities shall include (but not be limited to) a number of
shares of Common Stock equal to no less than the sum of (1) 1.5 times the
number of shares of Common Stock into which the applicable series of Preferred
Stock are convertible, assuming such conversion occurred on the Original Issue
Date for each tranche of Preferred Stock, (2) the number of shares of Common
Stock issuable on payment of dividends on such Preferred Shares during the
three-year period after the applicable Closing Date and (3) the number of
shares of Common Stock issuable upon exercise in full of the Warrants
described herein, or such other number of shares of Common Stock as agreed to
by the parties to the Purchase Agreement. Notwithstanding anything herein
contained to the contrary, if the actual number of shares of Common Stock into
which the shares of Preferred Stock are convertible exceeds 150% of the number
of shares of Common Stock into which the particular series of Preferred Stock
are convertible based upon a computation as at a particular Closing Date, the
term "Registrable Securities" shall be deemed to include such additional
shares of Common Stock. If an additional Registration Statement is required
to be filed because the actual number of shares of Common Stock into which the
Preferred Stock is convertible, plus shares issuable upon payment of dividends
as described above and shares issuable upon exercise of the Warrants exceeds
the number of shares of Common Stock initially registered in respect of any
particular tranche of Preferred Stock based upon the computation on a
particular Closing Date, the Company shall have 15 Business Days to file such
additional Registration Statement; provided, however, that if the number of
shares of Common Stock initially registered on a Registration Statement should
fall below 135% of the actual number of shares of Common Stock into which the
Preferred Stock are convertible at any time, any Holder may deliver a notice
to the Company requiring the Company to file such additional Registration
Statement within 15 Business Days so as to cover 150% of the actual number of
shares of Common Stock into which the Preferred Stock are convertible.
"Registration Statement" means the registration statements
contemplated by Section 2(a) (and any additional Registration Statements
contemplated in the definition of Registrable Securities), including (in each
case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means any special counsel to the Holders, for
which the Holders will be reimbursed by the Company pursuant to Section 4.
"Underwritten Registration or Underwritten Offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
2. Shelf Registration
(a) On or prior to each applicable Filing Date the Company shall
prepare and file with the Commission a "Shelf" Registration Statement covering
all Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-3 (or if
the Company is not then eligible to register for resale the Registrable
Securities on Form S-3, in which case such registration shall be on another
appropriate form in accordance herewith which form shall be reasonably
acceptable to the Holders). The Company shall (i) not permit any securities
other than the Registrable Securities to be included in the Registration
Statement and (ii) use its commercially reasonable efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event prior to the
Effectiveness Date, and to keep such Registration Statement continuously
effective under the Securities Act until the date which is three years after
the date that such Registration Statement is declared effective by the
Commission or such earlier date when all Registrable Securities covered by
such Registration Statement have been sold or may be sold without volume
restrictions pursuant to Rule 144 as determined by the counsel to the Company
pursuant to a written opinion letter, addressed to the Company's transfer
agent to such effect (the "Effectiveness Period"); provided, however, that the
Company shall not be deemed to have used its commercially reasonable efforts
to keep the Registration Statement effective during the Effectiveness Period
if it voluntarily takes any action that would result in the Holders not being
able to sell the Registrable Securities covered by such Registration Statement
during the Effectiveness Period, unless such action is required under
applicable law or the Company has filed a post-effective amendment to the
Registration Statement and the Commission has not declared it effective.
(b) If the Holders of a majority of the Registrable Securities
so elect, an offering of Registrable Securities pursuant to the Registration
Statement may be effected in the form of an Underwritten Offering. The
Company will not be required to effect more than one Underwritten Offering
under this Agreement and shall not be required to effect an Underwritten
Offering unless at the time of a written request of the Holders electing an
Underwritten Offering the average daily trading volume of the Common Stock on
the Nasdaq National Market (or any other market or quotation system on which
the Company's Common Stock is then quoted or listed) during the period of 60
days immediately prior to such request shall be less than 5,000 shares. In
such event, and if the managing underwriters advise the Company and such
Holders in writing that in their opinion the amount of Registrable Securities
proposed to be sold in such Underwritten Offering exceeds the amount of
Registrable Securities which can be sold in such Underwritten Offering, there
shall be included in such Underwritten Offering the amount of such Registrable
Securities which in the opinion of such managing underwriters can be sold, and
such amount shall be allocated pro rata among the Holders proposing to sell
Registrable Securities in such Underwritten Offering. In the event the Board
of Directors determines in good faith that the filing of or declaration of
effectiveness of an Underwritten Offering should be delayed, the Company may
delay the filing of or declaration of effectiveness of the Underwritten
Offering for up to 90 days. The Board of Directors shall provide written
notice to the Holders electing the Underwritten Offering of this decision to
delay the Underwritten Offering.
(c) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the managing underwriter that will administer the
offering will be selected by the Company upon consultation with the Holders
included in such offering which selection shall be made within 45 days.
Notwithstanding the foregoing, (i) if such selection is not made within 45
days or (ii) if the anticipated costs to the Holders in connection with a
selection by the Company under the immediately preceding sentence shall exceed
6.5% of such Underwritten Offering and the Company does not agree in a written
agreement between the Company, the Holders and the managing underwriter to pay
such excess costs, then the managing underwriter shall be selected by the
Holders upon consultation with the Company. No Holder may participate in any
Underwritten Offering hereunder unless such Person (i) agrees to sell its
Registrable Securities on the basis provided in any underwriting agreements
approved by the Persons entitled hereunder to approve such arrangements and
(ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required under the
terms of such arrangements.
3. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to each
applicable Filing Date, a Registration Statement on Form S-3 (or if the
Company is not then eligible to register for resale the Registrable Securities
on Form S-3, in which case such registration shall be on another appropriate
form in accordance herewith which Form shall be reasonably acceptable to the
Holders) in accordance with the method or methods of distribution thereof as
specified by the Holders, and cause the Registration Statement to become
effective and remain effective as provided herein; provided, however, that not
less than five (5) Business Days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall (i) furnish to the
Holders, their Special Counsel and any managing underwriters, copies of all
such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the
review of such Holders, their Special Counsel and such managing underwriters,
and (ii) cause its officers and directors, counsel and independent certified
public accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel to such Holders and such
underwriters, to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file the Registration Statement or any
such Prospectus or any amendments or supplements thereto to which the Holders
of a majority of the Registrable Securities, their Special Counsel, or any
managing underwriters, shall reasonably object in writing within three (3)
Business Days of their receipt thereof, in which case the failure of the
Company to file the Registration Statement by the applicable Filing Date shall
not be deemed a breach of the Company's obligations under this Agreement or
the Purchase Agreement unless the changes requested by the Holders are, in the
opinion of the Holders, required under applicable federal laws or are required
to clarify disclosure as to the transactions contemplated by the Purchase
Agreement, the Holders' plan of distribution of Registrable Securities or
relating to information about the Holders as selling stockholders.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended or supplemented by
any required Prospectus supplement, and as so supplemented or amended to be
filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; (iii) respond as promptly as practicable
to any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and promptly provide the Holders true and
complete copies of all correspondence from and to the Commission relating to
the Registration Statement; and (iv) comply with the provisions of the Securi-
ties Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by
the Holders thereof set forth in the Registration Statement as so amended or
in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold,
their Special 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) when the Commission notifies the
Company whether there will be a "review" of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement and
(C) with respect to the Registration Statement or any post-effective
amendment, when the same has become effective; (ii) of any request by the
Commission 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 Commission 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 and 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 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.
(d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, as soon as reasonably practicable.
(e) If requested by any managing underwriter or the Holders of a
majority in interest of the Registrable Securities to be sold in connection
with an Underwritten Offering, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement such
information as such managing underwriters and such Holders reasonably agree
should be included therein and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as practicable
after the Company has received notification of the matters to be incorporated
in such Prospectus supplement or post-effective amendment; provided, however,
that the Company shall not be required to take any action pursuant to this
Section 3(e) that would, in the opinion of counsel for the Company, violate
applicable law or be materially detrimental to the business prospects of the
Company.
(f) Furnish to each Holder, their Special Counsel and any
managing underwriters, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested by
such Person (including those previously furnished or incorporated by
reference) promptly after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special Counsel, and
any underwriters, without charge, as many copies of the Prospectus or Prospec-
tuses (including each form of prospectus) and each amendment or supplement
thereto as such Persons may reasonably request; and the Company hereby
consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders and any underwriters in connection with
the offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling Holders,
any underwriters and their Special Counsel in connection with the registration
or qualification (or exemption from such registration or qualification) of
such Registrable Securities for offer and sale under the securities or Blue
Sky laws of such jurisdictions within the United States as any Holder or
underwriter requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by a Registration Statement; provided, however, that the Company shall
not be required to qualify generally to do business in any jurisdiction where
it is not then so qualified or to take any action that would subject it to
general service of process in any such jurisdiction where it is not then so
subject or subject the Company to any material tax in any such jurisdiction
where it is not then so subject.
(i) Cooperate with the Holders and any managing underwriters to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold pursuant to a Registration Statement, which
certificates shall be free of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such
names as any such managing underwriters or Holders may request at least two
Business Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as practicable, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an 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 under which they were made,
not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on The Nasdaq National
Market and any other securities exchange, quotation system, market or over-
the-counter bulletin board, if any, on which similar securities issued by the
Company are then listed as and when required pursuant to the Purchase
Agreement.
(l) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in Underwritten
Offerings) and take all such other actions in connection therewith (including
those reasonably requested by any managing underwriters and the Holders of a
majority of the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities, and whether or not
an underwriting agreement is entered into, (i) make such representations and
warranties to such Holders and such underwriters as are customarily made by
issuers to underwriters in underwritten public offerings, and confirm the same
if and when requested; (ii) in the case of an Underwritten Offering obtain and
deliver copies thereof to the managing underwriters, if any, of opinions of
counsel to the Company and updates thereof addressed to each such underwriter,
in form, scope and substance reasonably satisfactory to any such managing
underwriters and Special Counsel to the selling Holders covering the matters
customarily covered in opinions requested in Underwritten Offerings and such
other matters as may be reasonably requested by such Special Counsel and
underwriters; (iii) immediately prior to the effectiveness of the Registration
Statement, and, in the case of an Underwritten Offering, at the time of
delivery of any Registrable Securities sold pursuant thereto, obtain and
deliver copies to the Holders and the managing underwriters, if any, of "cold
comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent certified
public accountants of any subsidiary of the Company or of any business
acquired by the Company for which financial statements and financial data is,
or is required to be, included in the Registration Statement), addressed to
each selling Holder and each of the underwriters, if any, in form and
substance as are customary in connection with Underwritten Offerings; (iv) if
an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to the selling
Holders and the underwriters, if any, than those set forth in Section 6 (or
such other provisions and procedures acceptable to the managing underwriters,
if any, and holders of a majority of Registrable Securities participating in
such Underwritten Offering; and (v) deliver such documents and certificates as
may be reasonably requested by the Holders of a majority of the Registrable
Securities being sold, their Special Counsel and any managing underwriters to
evidence the continued validity of the representations and warranties made
pursuant to clause 3(l)(i) above and to evidence compliance with any customary
conditions contained in the underwriting agreement or other agreement entered
into by the Company.
(m) Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any
disposition of Registrable Securities, and any attorney or accountant retained
by such selling Holders or underwriters, at the offices where normally kept,
during reasonable business hours, all financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries, and
cause the officers, directors, agents and employees of the Company and its
subsidiaries to supply all information in each case reasonably requested by
any such Holder, representative, underwriter, attorney or accountant in
connection with the Registration Statement; provided, that the Company shall
have the right to require the Holders or managing underwriter, if any, to
execute a mutually acceptable confidentiality agreement.
(n) Comply with all applicable rules and regulations of the
Commission and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 not later than 45 days after the end of any 12-month period (or
90 days after the end of any 12-month period if such period is a fiscal year)
(i) commencing at the end of any fiscal quarter in which Registrable
Securities are sold to underwriters in a firm commitment or best efforts
Underwritten Offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which
statement shall cover said 12-month period, or such shorter periods as is
consistent with the requirements of Rule 158.
(o) The Company may require each selling Holder to furnish to
the Company such information, including information regarding the distribution
of such Registrable Securities, as the Company and the Holders agree is
required by law to be disclosed in the Registration Statement and the Company
may exclude from such registration the Registrable Securities of any such
Holder who fails to furnish such information within a reasonable time after
receiving such request. The failure by the Company to file the Registration
Statement by the Filing Date, to cause it to become effective by the
Effectiveness Date or to maintain its effectiveness for the Effectiveness
Period, if due solely to the breach of a Holder's obligations under this
Section, shall not be deemed a breach of the Company's obligations to such
Holder under this Agreement or the Purchase Agreement. The rights of Holders
that timely supply such information shall not be affected by the preceding
sentence and the Company shall remain obligated hereunder to file, and cause
and maintain the effectiveness of the Registration Statement on behalf of such
Holders.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder
shall have the right to require (if such reference to such Holder by name or
otherwise is not required by the Securities Act or any similar Federal statute
then in force) the deletion of the reference to such Holder in any amendment
or supplement to the Registration Statement filed or prepared subsequent to
the time that such reference ceases to be required.
Each Purchaser covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) the Purchaser and its officers, directors or Affiliates,
if any, will comply with the prospectus delivery requirements of the
Securities Act as applicable to them in connection with sales of Registrable
Securities pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence
of any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv),
3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of
such Registrable Securities under the Registration Statement until such
Holder's receipt of the copies of the supplemented Prospectus and/or amended
Registration Statement contemplated by Section 3(j), or until it is advised in
writing (the "Advice") by the Company that the use of the applicable Pro-
spectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement.
4. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall, except as and to the
extent specified in Section 4(b), be borne by the Company whether or not
pursuant to an Underwritten Offering and whether or not the Registration
Statement is filed or becomes effective and whether or not any Registrable
Securities are sold pursuant to the Registration Statement. The fees and
expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses (A) with respect to filings required to be made
with The Nasdaq National Market and each other securities exchange or market
on which Registrable Securities are required hereunder to be listed and (B) in
compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of Special Counsel for the Holders in
connection with Blue Sky qualifications of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as the managing underwriters, if any, or
the Holders of a majority of Registrable Securities may reasonably
designate)), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing
prospectuses if the printing of prospectuses is requested by the managing
underwriters, if any, or by the holders of a majority of the Registrable
Securities included in the Registration Statement but not including printing
expenses of a financial printer other than in an Underwritten Offering unless
such financial printer is retained at the option of the Company), (iii)
messenger, telephone and delivery expenses incurred by the Company, (iv) fees
and disbursements of counsel for the Company and Special Counsel for the
Holders, in the case of the Special Counsel, to a maximum amount of $2,000 per
registration statement required to be filed pursuant to this Agreement (which
include fees incurred under clause (B) above), (v) Securities Act liability
insurance, if the Company so desires such insurance, and (vi) fees and
expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement. In addition,
the Company shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as required
hereunder.
(b) If the Holders require an Underwritten Offering pursuant to
the terms hereof, the Company shall be responsible for all costs, fees and
expenses in connection therewith, except for the fees and disbursements of the
Underwriters (including any underwriting commissions and discounts) and their
legal counsel and accountants (which shall be borne by the Holders).
Therefore, in such circumstances the Holder shall bear the expenses of the
fees and disbursements of any legal counsel or accounting firm retained by the
underwriters in connection with such Underwritten Offering and the costs of
any determination (but not filing) by the underwriters of the eligibility of
the Registrable Securities for investment under the applicable state
securities laws. By way of illustration which is not intended to diminish
from the provisions of Section 4(a), the Holders shall not be responsible for,
and the Company shall be required to pay the fees or disbursements incurred by
the Company (including by its legal counsel and accountants) in connection
with, the preparation and filing of a Registration Statement and related
Prospectus for such offering, the maintenance of such Registration Statement
in accordance with the terms hereof, the listing of the Registrable Securities
in accordance with the requirements hereof, and printing expenses incurred to
comply with the requirements hereof.
5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents (including any underwriters
retained by such Holder in connection with the offer and sale of Registrable
Securities), brokers (including brokers who offer and sell Registrable
Securities as principal as a result of a pledge or any failure to perform
under a margin call of Common Stock), investment advisors and employees of
each of them, each Person who controls any such Holder (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
costs of preparation and attorneys' fees) and expenses (collectively,
"Losses"), as incurred, arising out of or relating to any untrue or alleged
untrue statement of a material fact contained in the Registration Statement,
any Prospectus or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein (in the case of any Prospectus or
form of prospectus or supplement thereto, in light of the circumstances under
which they were made) not misleading, except to the extent, but only to the
extent, that such untrue statements or omissions are based solely upon
information regarding such Holder furnished in writing to the Company by such
Holder expressly for use therein, which information was reasonably relied on
by the Company for use therein or to the extent that such information relates
to such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form
of Prospectus or in any amendment or supplement thereto. The Company shall
notify the Holders promptly of the institution, threat or assertion of any
Proceeding of which the Company is aware in connection with the transactions
contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, the directors,
officers, agents and employees, each Person who controls the Company (within
the meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling
Persons, to the fullest extent permitted by applicable law, from and against
all Losses (as determined by a court of competent jurisdiction in a final
judgment not subject to appeal or review) arising solely out of or based
solely upon any untrue statement of a material fact contained in the
Registration Statement, any Prospectus, or any form of prospectus, or arising
solely out of or based solely upon any omission of a material fact required to
be stated therein or necessary to make the statements therein not misleading
to the extent, but only to the extent, that such untrue statement or omission
is contained in any information so furnished in writing by such Holder to the
Company specifically for inclusion in the Registration Statement or such
Prospectus and that such information was reasonably relied upon by the Company
for use in the Registration Statement, such Prospectus or such form of
prospectus or to the extent that such information relates to such Holder or
such Holder's proposed method of distribution of Registrable Securities and
was reviewed and expressly approved in writing by such Holder expressly for
use in the Registration Statement, such Prospectus or such form of Prospectus.
In no event shall the liability of any selling Holder hereunder be greater in
amount than the dollar amount of the net proceeds received by such Holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity
hereunder (an "Indemnified Party"), such Indemnified Party promptly shall
notify the Person from whom indemnity is sought (the "Indemnifying Party") in
writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses incurred in connection with
defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that
it shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure
shall have proximately and materially adversely prejudiced the Indemnifying
Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such Indem-
nified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall
have failed promptly to assume the defense of such Proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel that a
conflict of interest is likely to exist if the same counsel were to represent
such Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party); provided that
if more than one Indemnified Party is seeking indemnification with respect to
the same Proceeding, the Indemnifying Party shall not be required to pay for
more than one separate counsel for all such Indemnified Parties as a group.
The Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within 20 Business Days of written notice thereof to the Indem-
nifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) Contribution. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or
refusal of a governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses, as well as any
other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action, statement or omission. The amount paid or payable by a party as
a result of any Losses shall be deemed to include, subject to the limitations
set forth in Section 5(c), any reasonable attorneys' or other reasonable fees
or expenses incurred by such party in connection with any Proceeding to the
extent such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), the Purchaser
shall not be required to contribute, in the aggregate, any amount in excess of
the amount by which the proceeds actually received by the Purchaser from the
sale of the Registrable Securities subject to the Proceeding exceeds the
amount of any damages that the Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may
have to the Indemnified Parties.
6. Rule 144
The Company shall file the reports required to be filed by it
under the Securities Act and the Exchange Act in a timely manner and, if at
any time the Company is not required to file such reports, they will, upon the
request of any Holder, make publicly available other information so long as
necessary to permit sales of its securities pursuant to Rule 144. The Company
further covenants that it will take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable
such Holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144;
provided, however, that the Company shall not be obligated to provide an
opinion to any Holder regarding the sale of Registrable Securities pursuant to
exemptions provided by Rule 144. Upon the request of any Holder, the Company
shall deliver to such Holder a written certification of a duly authorized
officer as to whether it has complied with such requirements.
7. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
The Company and each Holder agree that monetary damages would not provide
adequate compensation for any losses incurred by reason of a breach by it of
any of the provisions of this Agreement and hereby further agrees that, in the
event of any action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of
its subsidiaries has, as of the date hereof, nor shall the Company or 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 Holders in this Agreement or otherwise conflicts with the
provisions hereof; provided that the Company may grant registration rights in
any Strategic Placement that are no more favorable to the holders of such
rights than those granted hereunder. 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 which
have not expired without extension thereof. Without limiting the generality
of the foregoing, without the written consent of the Holders of a majority of
the then outstanding Registrable Securities, the Company, except with respect
to rights granted with respect to any Strategic Placement, shall not for a
period of 45 Business Days after the Effective Date 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 Holders set forth herein, and (both prior to
and after such 45 Business Days) are not otherwise in conflict or inconsistent
with the provisions of this Agreement.
(c) No Piggyback on Registrations. Neither the Company nor any
of its security holders (other than the Holders in such capacity pursuant
hereto) may include securities of the Company in the Registration Statement
other than the Registrable Securities, and the Company shall not provide any
such right to any of its securityholders in the Registration Statement.
(d) Piggy-Back Registrations. If at any time when there is not
an effective Registration Statement the Company shall determine to prepare and
file with the Commission a registration statement during the Effectiveness
Period relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities, other than on Form
S-4 or Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection
with any acquisition of any entity or business or equity securities issuable
in connection with stock option or other employee benefit plans, the Company
shall send to each holder of Registrable Securities written notice of such
determination and, if within twenty (20) days after receipt of such notice,
any such holder shall so request in writing, the Company shall include in such
registration statement all or any part of the Registrable Securities such
holder requests to be registered, except that if, in connection with any
Underwritten Offering for the account of the Company the managing underwriter
thereof shall impose a limitation on the number of shares of Common Stock
which may be included in the registration statement because, in such
underwriter's judgment, such limitation is necessary to effect an orderly
public distribution of securities covered thereby, then the Company shall be
obligated to include in such registration statement only such limited portion
of the Registrable Securities for which such Holder has requested inclusion
hereunder as the underwriters can accommodate. Any exclusion of Registrable
Securities shall be made pro rata among the Holders seeking to include
Registrable Securities, in proportion to the number of Registrable Securities
sought to be included by such Holders.
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the
Company and the Holders of at least two-thirds of the then outstanding
Registrable Securities; provided, however, that, for the purposes of this
sentence, Registrable Securities that are owned, directly or indirectly, by
the Company, or an Affiliate of the Company are not deemed outstanding.
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders and that does not directly or indirectly affect the rights
of other Holders may be given by Holders of at least a majority of the
Registrable Securities to which such waiver or consent relates; provided,
however, that the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the immediately
preceding sentence.
(f) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section prior to 4:30 p.m.
(New York City time) on a Business Day, (ii) the Business Day after the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in the Purchase Agreement later than
4:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New
York City time) on such date, (iii) the Business Day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be given.
If to the Company: Sheldahl, Inc.
1150 Sheldahl Road
Northfield, MN 55057-9444
Attn: John V. McManus
Fax: (507) 663-8435 or
(507) 663-8545
With copies to: Lindquist & Vennum P.L.L.P.
4200 IDS Center
80 South Eighth Street
Attn: Robert E. Tunheim, Esq.
Fax: (612) 371-3207
If to Southbrook: Southbrook International
Investments, Ltd.
c/o Trippoak Advisors, Inc.
630 Fifth Avenue, Suite 2000
New York, New York 10111
Attn: Robert L. Miller
Fax: (212) 332-3256
If to HBK Cayman: HBK Cayman L.P.
c/o HBK Investments L.P.
777 Main Street, Suite 2750
Fort Worth, TX 76102
Facsimile No.: (817) 870-6177
Attn: David C. Haley and
Michael Reese
If to HBK Offshore: HBK Offshore Fund Ltd.
c/o HBK Investments L.P.
777 Main Street, Suite 2750
Fort Worth, TX 76102
Facsimile No.: (817) 870-6177
Attn: David C. Haley and
Michael Reese
If to PCIG: Proprietary Convertible Investment
Group, Inc.
11 Madison Avenue - 3rd Floor
New York, NY 10010
Facsimile No.: (212) 325-6519
Attn: Al Weine
If to Brown Simpson: Brown Simpson Strategic Growth Fund
L.P.
152 West 57th Street
40th Floor
New York, NY 10019
Facsimile No.: (212) 247-1329
Attn: Matthew C. Brown
With copies to Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Attn: Eric L. Cohen
Fax: (212) 541-4630
If to any other Person who is then the registered Holder:
To the address of such Holder as it
appears in the stock transfer books
of the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may
not assign its rights or obligations hereunder without the prior written
consent of each Holder. Each Purchaser may assign its rights hereunder in the
manner and to the Persons as permitted under the Purchase Agreement.
(h) Assignment of Registration Rights. The rights of each
Purchaser hereunder, including the right to have the Company register for
resale Registrable Securities in accordance with the terms of this Agreement,
shall be automatically assignable by the Purchaser to any assignee or
transferee of all or a portion of the shares of Preferred Stock, the Warrants
or the Registrable Securities if: (i) the Purchaser 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, (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee
or assignee, and (b) the securities with respect to which such registration
rights are being transferred or assigned, (iii) following such transfer or
assignment the further disposition of such securities by the transferee or
assignees is restricted under the Securities Act and applicable state
securities laws to the extent required by the Purchase Agreement, (iv) at or
before the time the Company receives the written notice contemplated by clause
(ii) of this Section, the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions of this Agreement, and (v) such
transfer shall have been made in accordance with the applicable requirements
of the Purchase Agreement. The rights to assignment shall apply to the
Purchaser's (and to subsequent) successors and assigns.
(i) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(j) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of law.
(k) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would
have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
(m) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(n) Shares Held by The Company and its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company
or its Affiliates (other than the Purchasers or transferees or successors or
assigns thereof if such Persons are deemed to be Affiliates solely by reason
of their holdings of such Registrable Securities) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
SHELDAHL, INC.
By:____________________________________
Name:
Title:
SOUTHBROOK INTERNATIONAL
INVESTMENTS, LTD.
By:____________________________________
Name:
Title:
HBK CAYMAN L.P.
By:____________________________________
Name:
Title:
HBK OFFSHORE FUND, LTD.
By:____________________________________
Name:
Title:
HBK INVESTMENTS L.P.
By:____________________________________
Name:
Title:
PROPRIETARY CONVERTIBLE
INVESTMENT GROUP, INC.
By:____________________________________
Name:
Title:
BROWN SIMPSON STRATEGIC
GROWTH FUND, L.P.
By:____________________________________
Name:
Title:
<PAGE>
FOR IMMEDIATE RELEASE Contacts: John McManus
Vice President, Finance
August 29 1997 507/663-8337
[email protected]
Sheldahl, Inc.
1150 Sheldahl Road Elin Raymond
Northfield, MN 55057 The Sage Group
612/321-9897
[email protected]
SHELDAHL ANNOUNCES $30 MILLION EQUITY FINANCING COMMITMENT
Northfield, MN -- Sheldahl, Inc. (NASDAQ: SHEL), today announced that it
has received a $30 million financing commitment. Under the terms of the
financing, Sheldahl received proceeds from a $15 million private placement in
the form of 5% convertible preferred stock. The investor group also committed
to provide additional financing of up to $15 million at Sheldahl's option,
subject to certain conditions. Principal investors include Southbrook
International Investments, Ltd.; HBK Investments, LP; Brown Simpson Strategic
Growth Fund, LP; and an affiliate of Credit Suisse First Boston. Brown
Simpson Asset Management LLC served as advisor to the investors in connection
with the transaction. Dain Bosworth Incorporated acted as placement agent and
financial advisor to Sheldahl.
Stated James E. Donaghy, Sheldahl's President and Chief Executive
Officer, "This financing gives Sheldahl increased financial strength as it
develops its new Novacladr-based chip-carrier business serving the
datacommunications (computing and telecommunications) market."
The conversion price, initially set at 110% of the market price of the
company's common stock, is determined by using a formula based on Sheldahl's
stock price at the time of conversion. The convertible preferred shares will
accrue dividends at 5%, payable in cash or common stock. The investors also
received three-year warrants to purchase up to 67,812 shares of the company's
common stock at $27.65 per share. Sheldahl will file a registration statement
for the necessary shares of common stock underlying the convertible preferred
stock and warrants.
Sheldahl is a leading producer of high-density substrates, high-quality
flexible printed circuitry, and flexible laminates, primarily for sale to the
automotive electronics and datacommunications markets. The Company, which is
headquartered in Northfield, Minnesota, has operations in Northfield;
Longmont, Colorado; Britton and Aberdeen, South Dakota; and Detroit, Michigan.
Sheldahl's common stock trades on the Nasdaq National Market tier of the
Nasdaq Stock Market under the symbol: SHEL. Sheldahl news and information can
be found on the World Wide Web at http://www.sheldahl.com.
Statements contained here, other than historical data, may be forward-looking
and subject to risks and uncertainties including, but not limited to, those
set forth in the Company's annual report, 10K, 10Q, and other SEC filings.
<PAGE>
