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): March 9, 1999 (February 26,
1999)
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
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Item 5. Other Events
General
_______________
On February 17, 1999, the Board of Directors of Sheldahl, Inc., a
Minnesota corporation (the "Company"), ratified and approved a private
placement of its newly created Series E 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 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 of $7,210,000 occurred on February 26, 1999, with an
additional $1,350,000 funded on March 8, 1999.
Preferred Stock
_______________
The Company sold an aggregate of 8,560 shares of the Preferred Stock to
the Investors for an aggregate purchase price of $8,560,000, pursuant to the
Convertible Preferred Stock Purchase Agreement among the Company and the
Investors (the "Agreement").
The Preferred Stock is entitled to 5% dividends, payable annually, 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
$6.25 per share. The Conversion Price is subject to adjustment for certain
dilution and market price events.
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 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 85,600 at an exercise price of $7.8125 per
share. The Warrants are exercisable for a period of five years. 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
(i) upon conversion of shares of the Preferred Stock, (ii) as accrued dividends
on the Preferred Stock, and (iii) upon exercise of the Warrants. The
Company is obligated to file a shelf Registration Statement within twenty-
five (25) days of February 26, 1999 on Form S-3.
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.
Bank Covenant Released
_______________
As previously reported, under the Company's Credit and Security Agreement,
the Company was required to raise additional equity capital of $5 million by
February 26, 1999 and another $5 million of equity capital by August 30, 1999.
The Company's lenders have agreed that, with the receipt and verification of
net proceeds in the amount of $8,000,000 from the Series E Preferred Stock,
the Company will have satisfied these requirements.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
Exhibit 4.1 Convertible Preferred Stock Purchase Agreement among the
Company, and the Investors (Series E)
Exhibit 4.2 Certificate of Designation, Preferences and Rights of Series E
Convertible Preferred Stock
Exhibit 4.3 Form of Warrant
Exhibit 4.4 Registration Rights Agreement
Exhibit 4.5 Letter re: Credit and Security Agreement
Exhibit 4.6 Press Release
Exhibit 4.7 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-Finance
Dated: March 9, 1999
<PAGE>
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
This Convertible Preferred Stock Purchase Agreement (the "Agreement"),
dated as of February 8, 1999, among Sheldahl, Inc., a Minnesota corporation
(the "Company"), and the individuals and entities listed on Exhibit A hereto
(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 E Convertible
Preferred Stock, par value $1.00 per share (the "Series E Preferred").
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, the Company and the Purchasers agree as follows:
PURCHASE AND SALE OF PREFERRED SHARES
1.1 Purchase and Sale.
(a) Subject to the terms and conditions set forth herein, at the
Closing (as defined below), the Company shall issue and sell to the
Purchasers and the Purchasers, severally and not jointly, shall purchase up
to 10,000 shares of Series E Preferred (the "Shares").
(b) The Shares shall have the respective rights, preferences and
privileges set forth in the Certificate of Designation attached hereto as
Exhibit B (the "Certificate of Designation"), which shall be filed on or
prior to the Closing Date (as defined below) by the Company with the
Secretary of State of Minnesota. The Shares, the Warrants (as defined in
Section 3.2) 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 Closing.
(a) The Closing of the purchase and sale of the Shares (the
"Closing") shall take place at the offices of Lindquist & Vennum P.L.L.P.,
4200 IDS Center, 80 South 8th Street, Minneapolis, Minnesota on February 26,
1999. The date of the Closing is hereinafter referred to as the "Closing
Date."
(b) At the Closing, the Company shall deliver (A) to each Purchaser,
a stock certificate registered in the name of such Purchaser for such number
of Shares set forth opposite such Purchaser's name on Exhibit A; (B) to each
Purchaser, a Warrant to purchase that number of shares of Common Stock of the
Company set forth opposite such Purchaser's name on Exhibit A; and (C) all
other documents, instruments and writings required to have been delivered at
or prior to the Closing by the Company to Purchasers pursuant to this
Agreement. At the Closing, each Purchaser shall deliver to the Company the
purchase price set forth opposite such Purchaser's name on Exhibit A by wire
transfer of same day funds.
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. 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.
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by this Agreement, the Certificate of Designation,
the Registration Rights Agreement (defined in Section 4.1(h)) and the
Warrants (the "Transaction Documents") and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of each
Transaction Document 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. Each Transaction Document 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.
(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 of the Company are
entitled to preemptive or similar rights, nor is any holder of the Common
Stock of the Company entitled to preemptive or similar rights. Except as
disclosed in Schedule 2.1(c), there are no outstanding options, warrants 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 of
the Company, or contracts, commitments, understandings, or arrangements by
which the Company is bound to issue additional shares of the Company's Common
Stock, or securities or rights convertible or exchangeable into shares of the
Company's Common Stock.
(d) Issuance of Shares and Warrants. The Shares and the Warrants are
duly authorized and, when issued in accordance with the terms hereof, the
Certificate of Designation or the Warrants, as the case may be, shall be
validly issued, fully paid and non-assessable. As of the Closing Date, 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
its Common Stock to enable it to perform its obligations under this
Agreement, the Warrants and the Certificate of Designation with respect to
the number of Shares and Warrants issued and outstanding at such Closing
Date. 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 non-assessable, free and clear of all
liens, claims, encumbrances or defects of any kind (collectively, "Liens"),
except as set forth in any required legends thereon.
(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; 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 (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 Section 2.2 to be accurate; or (y) a violation of any federal and
state securities laws requiring filings with such authorities and the
delivery of certain information pursuant to Rule 502(b)(1) promulgated under
the Securities Act of 1933, as amended (the "Securities Act"), and
applicable state securities laws, to the 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 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 on the results of operations, assets
or financial condition of the Company and its subsidiaries, taken as a whole
(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 Certificate of
Designation with respect to the Shares with the Secretary of State of
Minnesota; (ii) the filing of the Underlying Securities Registration
Statement(s) (as defined in the Registration Rights Agreement) with the
Securities and Exchange Commission (the "Commission"); (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 Section 2.2 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 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 (together with
the consents, waivers, authorizations, orders, notices and filings referred
to in Schedule 2.1(f), the "Required Approvals").
(g) Litigation; Proceedings. 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 reasonably
be expected to, individually or in the aggregate, have a Material Adverse
Effect.
(h) No Default or Violation. 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) SEC Documents. The Company has filed all reports required to be
filed by it under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including, pursuant to Section 13(a) or 15(d) thereof, for
the three years preceding the date hereof (the foregoing materials being
collectively referred to herein as the "SEC Documents"), 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. 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 November 30, 1998,
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.
2.2 Representations and Warranties of the Purchasers. Each
Purchaser, 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 or an individual, in each case, with the requisite power and
authority to enter into and to consummate the transactions contemplated by
the Transaction Documents to which it is a party and otherwise to carry out
its obligations hereunder and 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 the
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 Closing
Date, 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 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, properties, 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. No Purchaser is an Affiliate or Associate (as
such terms are defined in Rule 12b-2 under the Exchange Act) of any other
Purchaser or is acting in concert with any other Purchaser. 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, partnership agreement or other governing instrument,
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. Except for Schedule 13D and Form 4
filings by Molex Incorporated, 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 respect or adversely impair such Purchaser's ability to perform fully on
a timely basis its obligations under the Transaction Documents.
(l) Beneficial Ownership of Sheldahl Stock. At and after the
Closing, no Purchaser shall be a Beneficial Owner of fifteen percent (15%) or
more of outstanding shares of the Company's Common Stock. For purposes of
this Section 2.2(l), "Beneficial Owner" shall have the meaning set forth in
Section 1(d) of the Rights Agreement dated June 16, 1996, as amended
effective July 25, 1998, by and between the Company and Norwest Bank
Minnesota, N.A., as the same may be amended or modified from time to time
(the "Rights Agreement"). Each Purchaser has been provided, upon its
request, with a copy of such definition and has had an opportunity to review
it with such Purchaser's legal counsel. Each Purchaser 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. Notwithstanding the foregoing, for purposes of Molex
Incorporated, such references above to fifteen percent (15%) shall be deemed
to refer to twenty-two percent (22%).
(m) Residency. Each Purchaser is a resident of the state set forth
opposite its name on Exhibit A attached hereto.
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions.
(a) 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] 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
interpretation and pronouncements issued by the staff of the Commission).
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 The Warrants. At the Closing, the Company shall issue and
deliver Common Stock purchase warrants (the "Warrants") entitling the
Purchasers to purchase, on the terms and conditions set forth in Exhibit C
hereto, an aggregate of 10 shares of Common Stock for each share of Series E
Preferred Stock at a price per share equal to 125% of the Conversion Price
(as defined in the Certificate of Designation attached hereto as Exhibit B)
(the "Warrant Exercise Price"). Each Purchaser shall receive that number of
Warrants as is set forth opposite the Purchaser's name on Exhibit A.
3.3 Use Of Proceeds. The Company shall use the Net Proceeds from the
placement of the Shares and Warrants to enhance the Company's capital
structure, provide capital liquidity and repay debt.
ARTICLE IV
CONDITIONS
4.1 Conditions Precedent to the Obligation of the Purchasers to
Purchase the Series E Shares. The obligation of each Purchaser hereunder to
acquire and pay for the Shares and the Warrants is subject to the
satisfaction or waiver by such Purchaser, at or before the Closing, of each
of the following conditions:
(a) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company contained herein shall be true
and correct in all material respects as of the date when made and as of the
Closing Date, as though made on and as of such date;
(b) 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
Closing Date;
(c) 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;
(d) 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);
(e) Legal Opinion. The Company shall have delivered to such
Purchaser an opinion of outside legal counsel to the Company as to the
matters attached hereto as Exhibit D and dated the Closing Date;
(f) Required Approvals. All Required Approvals shall have been
obtained;
(g) Delivery of Stock Certificates and Warrants. The Company shall
have delivered to such Purchaser or such Purchaser's designee the stock
certificate(s) representing the Shares being purchased at the Closing and the
Warrants to be received by each Purchaser, registered in the name of such
Purchaser, each in form satisfactory to such Purchaser;
(h) Registration Rights Agreement. The Company and the Purchasers
shall have entered into the Registration Rights Agreement in the form of
Exhibit E.
4.2 Conditions Precedent to the Company's Obligations. The
obligations of the Company hereunder are subject to the following conditions:
(a) Accuracy of the Representations and Warranties of Purchasers.
The representations and warranties of the Purchasers contained herein shall
be true and correct in all material respects as of the date when made and as
of the Closing Date, as though made on and as of such date;
(b) Performance by the Purchasers. The Purchasers 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 Purchasers at or prior to the
Closing Date;
(c) 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;
(d) Required Approvals. All Required Approvals shall have been
obtained;
(e) Payment of Purchase Price. Each Purchaser shall have paid the
purchase price set forth opposite the Purchaser's name on Exhibit A.
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. 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
Certificate of Designation (when filed) and the Warrants referenced in
Section 3.2, contains the entire understanding of the parties with respect to
the subject matter hereof and supersedes 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 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) 663-8326 or
(507) 663-8435
With copies to: Lindquist & Vennum P.L.L.P.
4200 IDS Center
80 South Eighth Street
Minneapolis MN 55402
Attn: Charles P. Moorse, Esq.
Fax: (612) 371-3207
If to a Purchaser: To the address set forth on Exhibit A
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
5.4 Amendment; 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 Minnesota
without regard to the principles of conflicts of law thereof.
5.9 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 binding with respect to each Purchaser on
the date the acceptance form hereto is executed and delivered by such
Purchaser and with respect to the Company on the date executed and delivered
by the Company, 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.
5.10 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.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its authorized representative and each Purchaser has caused this
Agreement to be executed by signing in counterpart the acceptance form
attached to this Agreement.
COMPANY:
SHELDAHL, INC.
By____________________________
John V. McManus
Its Vice President - Finance
<PAGE>
ACCEPTANCE
The undersigned hereby accepts the terms and conditions set forth in the
Convertible Preferred Stock Purchase Agreement, dated February 8, 1999, among
Sheldahl, Inc., a Minnesota corporation (the "Company") and certain Purchasers
listed in Exhibit A thereto as the terms and conditions applicable to the
purchase of Shares of Series E Convertible Preferred Stock of the Company
by the undersigned. By execution of this Acceptance, the undersigned
hereby makes each of the representations contained in Section 2.2 of the
Convertible Preferred Stock Purchase Agreement.
PURCHASER:
By: ________________________________
Title: _______________________________
Dated: February 8, 1999
<PAGE>
EXHIBIT A
Schedule of Purchasers
Share
Purchaser Purchase Purchase # of # of State of
Name & Address Amount Price Shares Warrants Residence
<PAGE>
SCHEDULE 2.1(c)
Capitalization
Common Stock authorized: 50,000,000 shares, $.25 par value
Preferred Stock authorized: 500,000 shares, $1.00 par value
* Common Stock outstanding
as of February 8, 1999: 11,152,560 shares, $.25 par value
* Series B Convertible Preferred Stock
outstanding as of February 8, 1999: 167 shares
* Series D Convertible Preferred Stock
outstanding as of February 8, 1999: 32,917 shares
* Warrants outstanding
as of February 8, 1999: 496,982 warrants
* Options outstanding
as of February 8, 1999: 1,589,946 options
1. Rights granted under the Rights Agreement dated June 16, 1996 and
amended July 25, 1998 between Sheldahl, Inc. and Norwest Bank
Minnesota, N.A. (150,000 shares of Series A Junior Participating
Preferred Stock reserved for issuance, subject to increase as provided
therein).
2. Additional options may be granted to employees and directors of the
Company under the Company's Stock Option Plans and Employee Stock
Purchase Plan.
3. Agreement Relating to Sheldahl dated November 18, 1998 between the
Company and Molex, Incorporated providing Molex with certain rights to
participate in future stock or debt offerings by the Company, including
the Series E Preferred Stock under this Agreement.
<PAGE>
SCHEDULE 2.1(f)
Required Approvals
1. Consent required of Norwest Bank Minnesota, N.A., Harris Trust and
Savings Bank, NBD Bank, and The CIT Group under Amended and Restated
Credit and Security Agreement with respect to payment of cash
dividends.
2. Consent required of Northern Life Insurance Company under Note
Purchase Agreement dated August 31, 1995 with respect to payment of
cash dividends.
3. See Item 3 of Schedule 2.1(c) incorporated herein by reference.
<PAGE>
EXHIBIT B
SHELDAHL, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF SERIES E
CONVERTIBLE PREFERRED STOCK
Pursuant to Section 302A.401 of the Minnesota Business Corporation Act:
I, the undersigned officer 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
February 17, 1999 adopted the following resolution creating a series of
10,000 shares of preferred stock designated as Series E 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 E
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 E Convertible Preferred Stock (the
"Series E Preferred Stock"), and the number of shares so designated shall be
10,000 (which shall not be subject to increase without the prior written
consent of the holders of a majority of the shares of Series E Preferred
Stock then outstanding). Each share of Series E 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) The holders of Series E Preferred Stock shall be entitled
to receive, annually on February 27 of each year, 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 6) or at the option
of the Company, in cash, provided such payment shall not be made unless and
until all accrued and unpaid dividends on the Company's Series B Preferred
Stock (the "Series B Preferred Stock") and on the Company's Series D
Preferred Stock (the "Series D Preferred Stock") previously issued by the
Company for all past dividend periods shall have been paid and all conversion
notices related thereto have been honored to the date of such payment.
Dividends on the Series E Preferred Stock shall be calculated on the basis of
a 360-day year, shall accrue daily commencing with the Original Issue Date
(as defined in Section 6), 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 Series E 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.
(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 Series E Preferred Stock if:
(i) 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 Series E
Preferred Stock then outstanding; or
(ii) 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")).
(c) So long as any Series E 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, as amended 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 6), 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 Series E
Preferred Stock for all past dividend periods shall have been paid.
Section 3. Voting Rights. Except as otherwise provided herein
and as otherwise required by law, the Series E Preferred Stock shall have no
voting rights. However, so long as any shares of Series E 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 Series E
Preferred Stock then outstanding, alter or change adversely the powers,
preferences or rights given to the Series E Preferred Stock; (b) alter or
amend this Certificate of Designation in a manner adverse to the holders of
Series E 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 Series E Preferred
Stock, except for the Series B Preferred Stock and the Series D Preferred
Stock; (d) amend its articles of incorporation, bylaws or other charter
documents so as to affect adversely any rights of any holders of Series E
Preferred Stock; (e) increase the authorized number of shares of Series E
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 Series E 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 Series E Preferred Stock an amount equal to the
Stated Value plus all accrued but unpaid dividends per share, whether
declared or not, after payment of all amounts due the holders of Series B
Preferred Stock and Series D Preferred Stock but 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 after
payment of all amounts due the holders of the Series B Preferred Stock and
Series D Preferred Stock, then the entire assets to be distributed to the
holders of Series E Preferred Stock shall be distributed among the holders of
Series E 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
Series E Preferred Stock.
Section 5. Conversion.
(a) (i) Each share of Series E Preferred Stock is convertible
by the holder thereof into shares of Common Stock at the Conversion Ratio (as
defined in Section 6) 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
Series E 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 sent to the Company's transfer agent and the
Company's counsel. Each Holder Conversion Notice shall specify the number of
shares of Series E 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). If
the holder is converting less than all shares of Series E 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) If, at any time after six months following the
Original Issue Date, (A) the Per Share Market Value is greater than 200% 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 10 days notice
provided thereafter, require the conversion of all but not less than all of
the then outstanding and unconverted shares of Series E Preferred Stock at
the Conversion Ratio calculated on the Company Conversion Date (as defined
below) by delivering to the holders a notice in the form attached hereto as
Exhibit B (the "Company Conversion Notice"). 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 10th 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
11th day after the Company Conversion Notice is deemed delivered pursuant to
Section 5(h). Nothing contained herein shall limit a holder's right to
convert any or all of the Series E Preferred Stock held by it prior to the
Company Conversion Date.
(iii) All, but not less than all, of the then outstanding
and unconverted shares of Series E Preferred Stock shall automatically be
converted at the Conversion Ratio on the date of the closing of a Public
Offering (as defined in Section 6) or such date as directed by the managing
underwriter (the "Public Offering Conversion Date"). Nothing contained
herein shall limit a holder's right to convert any or all of the Series E
Preferred Stock held by it prior to the Public Offering conversion Date. The
Company shall deliver a Company Conversion Notice to the holders of Series E
Preferred Stock not less than five business days prior to the filing of any
registration statement in connection with such Public Offering.
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."
(b) Not later than ten Business Days after the Conversion Date and
receipt by the Company of an original share certificate representing the
shares of Series E 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 Series E Preferred Stock; (ii) one or more
certificates representing the number of shares of Series E 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 Series E Preferred Stock until certificates
evidencing such shares of Series E Preferred Stock are either delivered for
conversion to the Company or the transfer agent for the Series E Preferred
Stock or Common Stock, or the holder of such Series E 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.
(c) (i) The conversion price for each share of Series E
Preferred Stock (the "Conversion Price") on any Conversion Date shall be
$6.25 (the "Initial Conversion Price"), as adjusted from time to time as
provided in this Section 5(c).
(ii) If the Company, at any time while any shares of
Series E 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
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 reclassification.
(iii) If the Company, at any time while any shares of
Series E 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 Series E
Preferred Stock are outstanding, shall distribute to all holders of Common
Stock (and not to holders of Series E 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 Series E
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 Series E 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 Series E 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 Series E 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 Series E
Preferred Stock then outstanding shall 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 Series E 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 Series E Preferred Stock could have
been converted immediately prior to such reclassification, consolidation,
merger, sale, transfer or share exchange would have been entitled. 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 Series E
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.
(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 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 Series E Preferred Stock, and shall cause to
be mailed to the holders of Series E Preferred Stock at their last addresses
as they shall appear upon the stock books of the Company, at least 20
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.
(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 Series E Preferred Stock and payment of dividends on
Series E 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 Series E Preferred Stock, not less than such number of
shares of Common Stock as shall, upon the conversion of all outstanding
shares of Series E 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 Series E 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 Series E 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 Series E 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 Series E 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
Series E 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.
(Central 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 sent 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. Definitions. For the purposes hereof, the following terms
shall have the following meanings:
"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 Minnesota 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 Series E 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 Series B, Series D and Series E Preferred Stock) of the
Company.
"Original Issue Date" means the date of the first issuance of any
shares of the Series E Preferred Stock regardless of the number of transfers
of any particular shares of Series E 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 under which the gross cash proceeds to the Company (after
underwriting discounts, commissions and fees) are at least $25 million and in
which the offering price in such public offering is not less than 200% of the
Conversion Price.
"Purchase Agreement" means the Convertible Preferred Stock Purchase
Agreement, dated as of the February 8, 1999, among the Company and the
original holders of the Series E 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 Series E 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 Series E Preferred Stock including dividends thereon.
IN WITNESS WHEREOF, I have executed and subscribed this Certificate and
do affirm the foregoing as true under the penalties of perjury this 26th day
of February, 1999.
SHELDAHL, INC.
By:____________________________
John V. McManus
Its: Vice President-Finance
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder in order to Convert Shares of Series
E Preferred Stock)
The undersigned hereby elects to convert the number of shares of Series E
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 Series E 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 E 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>
EXHIBIT C
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 No. E-__ Dated February 26, 1999
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
$7.8125 per share (as adjusted from time to time as provided in Section 7,
the "Exercise Price"), at any time and from time to time from and after the
date hereof and through and including February 25, 2004 (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. Holder may not transfer
this Warrant or any portion thereof unless such transfer represents the right
to purchase at least 10,000 Warrant Shares or such lesser amount as
constitutes the entire 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 exchange.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the registered Holder
on any business day before 5:00 p.m., Minneapolis time, at any time and from
time to time on or after the date hereof to and including the Expiration
Date. At 5:00 p.m., Minneapolis 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), 5 and 9, 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 via wire transfer 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 five
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 may be exercisable in whole or in part
provided a partial exercise shall require a minimum exercise of Warrants to
purchase at least 25,000 Warrant Shares.
4. 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.
5. 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.
6. 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. 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.
7. 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 7. Upon each such adjustment of
the Exercise Price pursuant to this Section 7, 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 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 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 7(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 7(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 turn 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 7, 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 7 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 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 20 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.
8. Payment of Exercise Price. The Holder shall pay the Exercise
Price in the manner provided in Section 3(b).
9. 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
9, 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.
10. 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: (i) if to the Company, to
Sheldahl, Inc., 1150 Sheldahl Road, Northfield, MN 55057-9444, Attention:
Vice President, Finance, or to facsimile no. (507) 663-8326 or (507) 663-
8435; 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 10.
11. 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.
12. 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 12(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 Minnesota
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.
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: John V. McManus
Title: Vice President - Finance
<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 via wire transfer 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.
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>
FORM OF ASSIGNMENT
[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>
EXHIBIT E
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of February 26, 1999, among Sheldahl, Inc., a Minnesota
corporation (the "Company"), and the individuals and entities listed on
Exhibit A to the Purchase Agreement, as defined below (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(j).
"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 Minnesota 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 with respect to the Registration Statement
to be filed with respect to the Series E Shares and the Warrants, the earlier
of (i) the 90th day following the Closing Date or (ii) five days after a no-
review decision of the Commission.
"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 the 25th day following the 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 E 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, with respect to the Registration
Statement to be filed after the Closing, the shares of Common Stock issuable
upon (i) conversion of the Series E Shares; (ii) exercise of the Series E
Warrants issued by the Company to the Purchasers; and (iii) payment of
dividends in respect of such Preferred Stock.
"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 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.
2. Shelf Registration. On or prior to the 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 two 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").
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 the
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.
(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 Securities 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:
(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) 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 (v) 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 qualifications
(or exemption from qualification) of any of the Registrable Securities for
sale in any jurisdiction, as soon as reasonably practicable.
(e) Furnish to each Holder, 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.
(f) Promptly deliver to each Holder, without charge, as many
copies of the Prospectus or Prospectuses (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 in
connection with the offering and sale of the Registrable Securities covered
by such Prospectus and any amendment or supplement thereto.
(g) Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling Holders
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 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.
(h) Upon the occurrence of any event contemplated by Section
3(c)(v), 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.
(i) 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.
(j) The Company may require each selling Holder to furnish to
the Company such information, including information regarding the
distribution of such Registrable Securities, as 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 and any other
requirements of the Securities Act 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) or
3(c)(v), 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(h), or until it is advised
in writing (the "Advice') by the Company that the use of the applicable
Prospectus 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. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be
borne by the Company, 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; (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 holders of a majority of the Registrable
Securities included in the Registration Statement but not including printing
expenses of a financial printer; (iii) messenger, telephone and delivery
expenses incurred by the Company; (iv) fees and disbursements of counsel for
the Company; (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. The
Holders shall bear the expenses and fees of any legal counsel retained by
them.
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, 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, reasonable 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
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. 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 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.
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 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 Indemnified
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.
(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) 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. 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.
(c) 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. (Minneapolis 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. (Minneapolis time) on any date and earlier
than 11:59 p.m. (Minneapolis 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) 663-8326 or
(507) 663-8435
With copies to: Lindquist & Vennum P.L.L.P.
4200 IDS Center
80 South Eighth Street
Minneapolis MN 55402
Attn: Charles P. Moorse, Esq.
Fax: (612) 371-3207
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(d) Successors and Assigns. This Agreement shall more to the
benefit of and be binding upon the successors and permitted assigns of each
of the parties and shall more 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.
(e) 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.
(f) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when executed and delivered 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.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Minnesota, without
regard to principles of conflicts of law.
(h) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(i) 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.
(j) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(k) 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.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
SHELDAHL, INC.
By:_______________________________
Name: John V. McManus
Title: Vice President - Finance
PURCHASER
________________________________
<PAGE>
March 5, 1999
Via Fax
Sheldahl, Inc.
John McManus
V.P. Finance
Dear Mr. McManus;
The bank group has voted to approve Sheldahl's request to satisfy the
requirement specified in section 8.1(q) of the First Amendment To Credit And
Security Agreement provided that Sheldahl raises $8MM of Net Equity Proceeds
on or before March 8, 1999. As a further condition to this satisfaction,
Sheldahl agrees to provide documentary evidence of the amount of New Equity
Proceeds raised at the agent's request.
If you have any questions, please contact me at 612-673-8590.
Norwest Bank Minnesota, Inc.
Sincerely,
/s/ Terry Jackson
Vice President
<PAGE>
FOR IMMEDIATE RELEASE Contacts: John McManus
March 1, 1999 VP Finance, Sheldahl
507/663-8337
Sheldahl, Inc.
1150 Sheldahl Road
Northfield, MN 55057 Elin Raymond
The Sage Group
612/321-9897
SHELDAHL COMPLETES $7.2 MILLION PRIVATE PLACEMENT
Workforce reductions announced; will result in annual cost savings of
$2.4 million
Northfield, MN -- Sheldahl, Inc. (Nasdaq: SHEL), today announced that it
had completed a private placement of $7.2 million in preferred stock. The new
Series E preferred shares are convertible at $6.25 per common share at the
option of shareholders, most of whom are current stockholders and/or members
of Sheldahl's Board.
Edward L. Lundstrom, Sheldahl's President and Chief Executive Officer,
said, "The new equity placement enhances our financial stability, provides
additional liquidity, and ensures that we are in compliance with an existing
bank covenant. Further," he added, "the investment displays the confidence
the investor group has in Sheldahl's strategic plan and in the Company's
ability to achieve its goals."
BUSINESS EFFICIENCIES SUPPORT WORKFORCE REDUCTIONS
______________________________________________________
Sheldahl also announced that it had reduced its salaried workforce,
mainly related to its core businesses, by 12 percent, or approximately 40
employees. This move will result in annual cost savings of $2.4 million, and
will begin to take effect in the Company's third quarter. Half of the
reduction was accomplished through an early retirement program made available
to long-term employees. The Company will take a $3.1 million charge in its
second quarter related to the action.
Commenting on the reduction, Lundstrom stated, "As a result of last
year's restructuring, we have been able to significantly reduce costs and
enhance our competitiveness. This has enabled us to provide the same
responsive service to our customers with fewer employees."
SHELDAHL SEES FLAT FIRST HALF, GROWTH IN SECOND HALF
____________________________________________________
Lundstrom noted that, as expected, the Company's second quarter sales
will be comparable to those of the previous two quarters, but concluded, "We
expect sales growth in the range of 10 to 12 percent in the second half."
Sheldahl is a leading producers 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; Detroit, Michigan; Britton, South Dakota; Toronto,
Ontario, Canada; and Chihuahua, Chi., Mexico. Its sales offices are located
in Hong Kong, China; Singapore; and Mainz, Germany. 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>
FOR IMMEDIATE RELEASE
March 8, 1999
Sheldahl, Inc. Contacts: John McManus
1150 Sheldahl Road VP Finance, Sheldahl
Northfield, MN 55057 507/663-8337
Elin Raymond
The Sage Group
612/321-9897
SHELDAHL RECEIVES $1.4 MILLION IN ADDITIONAL FUNDING
Series E Convertible Preferred Stock Offering Completed
Northfield, MN - Sheldahl, Inc. (Nasdaq: SHEL), today announced an
additional $1.4 million of funds received from the private placement of the
Company's Series E Preferred completing this transaction. The Company's
lenders have agreed that the receipt and verification of the net proceeds
from this private placement, which exceed $8.0 million, satisfy the
requirement under the Company's Credit and Security Agreement with its
lenders. The agreement had required the Company to raise additional equity
capital of $5.0 million by February 26, 1999, and another $5.0 million of
equity capital by August 30, 1999.
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; Detroit, Michigan; Britton, South Dakota; Toronto,
Ontario, Canada; and Chihuahua, Chi., Mexico. Its sales offices are located
in Hong Kong, China; Singapore; and Mainz, Germany. 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>
