<PAGE>
As filed with the Securities and Exchange Commission on February 21, 1997
Registration No. 333-18335
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
Amendment No. 1
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
FIELDWORKS, INCORPORATED
(Exact name of registrant as specified in its charter)
----------------
Minnesota 3571 41-1731723
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
Fieldworks, Incorporated
9961 Valley View Road
Eden Prairie, Minnesota 55344
(612) 947-0856
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Gary J. Beeman, Chief Executive Officer and Treasurer
Fieldworks, Incorporated
9961 Valley View Road
Eden Prairie, Minnesota 55344
(612) 947-0856
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
COPIES TO:
Kenneth L. Cutler, Esq. Timothy M. Heaney, Esq.
R. Kirkland Cozine, Esq. William K. Sjostrom, Esq.
Dorsey & Whitney LLP Fredrikson & Byron, P.A.
220 South Sixth Street 900 Second Avenue South
Minneapolis, Minnesota 55402-1498 Minneapolis, Minnesota 55402
(612) 340-2600 (612) 347-7000
----------------
Approximate date of commencement of proposed sale to the public: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON
A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, CHECK THE FOLLOWING BOX: [_]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING
BOX AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING: [_]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIEST EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Proposed
Title of each Proposed maximum maximum Amount of
class of securities amount to be offering price aggregate registration
to be registered registered(1) per unit(2) offering price(2) fee(3)
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<S> <C> <C> <C> <C>
COMMON STOCK, $.001 PAR 2,127,500 SHARES $7.50 $15,956,250 $6,361
VALUE.................
</TABLE>
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(1) INCLUDING 277,500 SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF AN
OPTION PURSUANT TO WHICH THE UNDERWRITERS MAY PURCHASE SHARES TO COVER
OVER-ALLOTMENTS, IF ANY.
(2) ESTIMATED SOLELY FOR THE PURPOSES OF CALCULATING THE REGISTRATION FEE
PURSUANT TO RULE 457.
(3) OF THIS AMOUNT, $6,099 WAS PAID UPON FILING OF THE COMPANY'S INITIAL
REGISTRATION STATEMENT. SUCH PRIOR FEE WAS BASED ON THE PRIOR PROPOSED
AMOUNT TO BE REGISTERED OF 2,012,500 SHARES AND THE PRIOR PROPOSED MAXIMUM
OFFERING PRICE PER SHARE OF $10.00. THE ADDITIONAL $262 REGISTRATION FEE
IS BASED ON THE ADDITIONAL 115,000 SHARES BEING REGISTERED AT A PROPOSED
MAXIMUM OFFERING PRICE PER SHARE OF $7.50.
----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 21, 1997
1,850,000 SHARES
LOGO
COMMON STOCK
All of the 1,850,000 shares of Common Stock offered hereby are being issued and
sold by FieldWorks, Incorporated ("FieldWorks" or the "Company"). Prior to this
offering, there has been no public market for the Common Stock of the Company.
It is currently estimated that the initial public offering price will be $7.50
per share. See "Underwriting" for a discussion of the factors to be considered
in determining the initial public offering price. The Company has applied for
quotation of the Common Stock on the Nasdaq National Market System under the
symbol "FWRX."
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH
DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING
ON PAGE 7 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(/1/) COMPANY(/2/)
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<S> <C> <C> <C>
Per Share.................................. $ $ $
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Total(/3/)................................. $ $ $
</TABLE>
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- --------------------------------------------------------------------------------
(1) The Company has agreed to pay the Representative a non-accountable expense
allowance of two percent of the total Price to Public, to sell to the
Representative a four-year warrant to purchase 185,000 shares of Common
Stock at 120% of the Price to Public and to indemnify the Underwriters
against certain liabilities. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $ ,
including printing costs, filing fees, legal and accounting fees and the
two percent non-accountable expense allowance referred to above.
(3) Assumes no exercise of the 30-day option the Company has granted to the
Underwriters to purchase up to 277,500 additional shares of Common Stock
solely to cover over-allotments, if any. If the Underwriters exercise this
option in full, the Price to Public will total $ , the Underwriting
Discount will total $ and the Proceeds to Company will total $ . See
"Underwriting."
--------------------
The shares of Common Stock are offered by the several Underwriters when, as and
if delivered to and accepted by the Underwriters and are subject to various
prior conditions, including their right to reject any order in whole or in
part. It is expected that delivery of the certificates representing such shares
will be made against payment therefor at the offices of R. J. Steichen &
Company on or about , 1997, in Minneapolis, Minnesota.
RJSTEICHEN&CO
The date of this Prospectus is , 1997
<PAGE>
INSIDE FRONT COVER
[Company "fieldworks, inc." logo.]
FieldWorks, Incorporated designs, manufactures, markets and supports
portable rugged computing platforms and computer system solutions for use in
demanding field environments.
[Photograph of open Company computer.]
Agriculture
Communications
Construction
Engineering
Field Sales
Field Service
Industrial Control
Instrumentation
Logistics
Manufacturing
Telemedicine
Military
Public Safety
Transportation
Utilities
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
FieldWorks (TM) and Field WorkStation (TM) are trademarks of the Company.
This Prospectus also includes trade names, trademarks and registered
trademarks of companies other than the Company.
2
<PAGE>
INSIDE PAGES OF GATEFOLD COVER
Computer Platforms for the field. FieldWorks computer platforms meet four
design criteria that address the needs of field professionals . . .
Rugged
Meet stringent military standards and operate in extreme temperatures,
shock, vibration and moisture.
Expandable
Accomodate current and future needs of users by allowing the integration of
application-specific technology.
Upgradeable
Allow for easy replacement of standard component parts and major subsystems,
including processors, screens, disk drives, memory and keyboards.
Customizable
Adapt to customers' unique needs and specifications.
Rugged field applications
Face it--computers don't just sit on desks any more. Today, many field
professionals take their computers outside the office to service equipment or
implement complex computer systems. Ideally, these professionals would like to
have one tool that addresses all their needs and can withstand outside
environments. Enter FieldWorks platforms--designed to house a variety of tools
needed in one rugged package. FieldWorks makes the "toolbox" that accomodates
communications technologies, data acquisition hardware and test
instrumentation for real-time information transfer and efficient problem-
solving. FieldWorks addresses the specialized needs of those professionals who
demand rugged, expandable, upgradeable and customizable computer platforms.
[Photograph of maintenance worker wearing hardhat and using flashlight with
open FieldWorks computing platform.]
Utilities, mining crews, telecommunications test crews and field service
fleets utilize rugged computers as electronic toolboxes to expedite
installation, repair and troubleshooting tasks.
[Photograph of soldier in camaflouge uniform standing in front of muddy tank
with open FieldWorks computing platform.]
Militaries use rugged computers as operations, communications and training
devices.
[Photograph of open FieldWorks computing platform on top of police car hood.]
Rugged computers with special software and hardware help law enforcement
officers collect fingerprints and background information from a centralized
database.
[Two photographs of technicians, one in front of truck cab and one leaning
over interior of a motor, both with open FieldWorks computing platforms.]
Service bay applications in automotive, trucking and heavy equipment
maintenance require rugged computer platforms to provide wireless on-line
links, parts inventories and electronic technical manuals.
<PAGE>
[Photograph of technician examining interior of an aircraft engine with open
FieldWorks computing platform.]
Commercial and business aircraft maintenance groups use rugged computers to
interface with onboard aircraft computers to troubleshoot and diagnose
communication data problems within the aircraft.
[Photograph of technician wearing hardhat and testing outside electricity or
telephone control box with open FieldWorks computing platform.]
Field service engineers and technicians require rugged systems that include
all communications, troubleshooting aids and test equipment in one
lightweight, rugged package.
[Photograph of technician wearing hospital clothing in front of television
monitor and open FieldWorks computing platform.]
Medical and telemedicine applications require high reliability and precision
for applications from instrumentation and monitoring to remote video
conferencing.
<PAGE>
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified in
its entirety by, the more detailed information, including "Risk Factors" and
the Consolidated Financial Statements and Notes thereto, appearing elsewhere in
this Prospectus. Unless otherwise indicated, all information in this
Prospectus, including financial information and share and per share data, (i)
assumes no exercise of the Underwriters' over-allotment option and (ii) gives
effect to the automatic conversion of all outstanding Preferred Stock into
Common Stock upon the consummation of this offering. See "Capitalization,"
"Description of Capital Stock" and "Underwriting."
THE COMPANY
FieldWorks, Incorporated ("FieldWorks" or the "Company") designs,
manufactures, markets and supports portable rugged computing platforms and
computer system solutions for use in demanding field environments. In addition
to providing the full range of computer features, performance and functionality
typically found in high-end desktop computers, the Company's portable computing
platforms have been designed to meet rigorous military standards for ruggedness
and to function despite exposure to extreme temperature, mechanical shock,
vibration and moisture. The Company's computing platforms are expandable
through multiple expansion slots to provide a flexible electronic "toolbox"
that can integrate all of a user's application-specific, multi-media and
communications needs into one portable, rugged device. The Company's products
have been designed with a modular system configuration that allows a user to
easily upgrade the central processing unit ("CPU") or any of the other
technological components without purchasing a new computer. Further, the
Company has the ability to customize its computing platforms to meet the unique
needs of its customers.
The worldwide market for portable personal computers is expanding rapidly,
and Frost & Sullivan has predicted that it may reach nearly $80 billion in
annual sales by 2001. Within this market, the market for mobile computing and
field force automation products is predicted to be one of the fastest growing
sectors over the next decade, with annual growth predicted at as much as 35% or
more. According to International Data Corp. ("IDC") estimates, the rugged
portable computer market is currently over $500 million and is expected to grow
by more than 50% over the next three years. Organizations are increasingly
seeking to computerize field personnel, and industries such as
telecommunications, utilities, farming, law enforcement, the military and
transportation have recognized the need for computerization and automation in
the field. However, the effectiveness of these efforts has often been limited
by the nature of the products that have been available. Consumer portable
personal computers frequently become inoperable under field conditions, are
typically available only with a standard set of features that cannot be
expanded or customized to meet the specialized needs of field users, and are
not designed to be upgraded. Similarly, custom-designed portable personal
computers are expensive, generally limited in their applications and often
unable to withstand conditions typically present in the field, while mobile
single-purpose diagnostic and data collection instruments generally have little
independent computing capability.
The Company's products have been designed to accomodate the demands of a wide
variety of users who are looking for mobile computing platforms that are rugged
and expandable, easily upgraded as technology changes and that can be
customized to meet the specialized needs of field force users. The Company
targets those markets that require portable computing platforms that can
perform multiple functions, including diagnostics, data acquisition and
electronic testing and monitoring, and simultaneously provide communications
and computer capability even under adverse conditions in the field. FieldWorks
rugged computing platforms are in use in a variety of market applications,
including: electronic toolboxes for telecommunications test crews to simplify
and expedite installation, repair and troubleshooting tasks; data collection
and transmission for in-flight commercial airplane testing; collection and
analysis of Global Positioning System ("GPS") geographical information and
agricultural data to aid in the selection of crops, chemicals and farming
methods; diagnostic
3
<PAGE>
system analysis and wireless communication for use with trucking fleets; and
video surveillance and monitoring for law enforcement purposes. The Company
believes that its rugged computing technology has enabled its customers to
create new applications that improve the productivity of their field personnel
and believes further that additional markets and customers will develop as more
businesses recognize the benefits of providing field personnel with effective,
sophisticated computing power.
The Company's objective is to be the leading designer, manufacturer and
marketer of rugged computing platforms and computer system solutions. The
Company's strategy is to: (i) penetrate key vertical markets, (ii) expand
strategic OEM relationships, (iii) establish relationships with large-volume,
repeat customers, (iv) develop new products and enhance existing products and
(v) establish product recognition.
The Company shipped its first commercial product, the 7000 Series Field
WorkStation rugged laptop computing platform, which is now offered in a range
of models, in June 1994. In June 1996, the Company commercially introduced its
5000 Series Field WorkStation rugged notebook computing platform to meet the
needs of customers who require a smaller, more lightweight toolbox but do not
require the full expansion capability of the 7000 Series. The Company is
currently developing additional series of computing platforms designed to
address broader customer preferences for products with varying degrees of
expandability, size and price, all of which provide the ruggedness, processing
power and ease of upgrade that characterize the Company's current products.
The Company assembles its products to its customers' specifications as orders
are received, which enables the Company to provide each customer with a
computing platform that satisfies its specific requirements.
The Company was incorporated under the laws of the State of Minnesota in
October 1992. The Company's executive offices are located at 9961 Valley View
Road, Eden Prairie, Minnesota 55344, and its telephone number is (612) 947-
0856.
RISK FACTORS
Prospective purchasers should carefully consider the information set forth
under "Risk Factors" before purchasing any of the shares of Common Stock
offered hereby.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the
Company..................... 1,850,000 shares
Common Stock to be
outstanding after this
offering.................... 8,230,736 shares(/1/)
Use of Proceeds.............. For repayment of outstanding indebtedness (in-
cluding amounts owed to affiliates of the Compa-
ny); capital expenditures; and working capital
and other general corporate purposes.
Proposed Nasdaq National Mar-
ket System Symbol........... FWRX
</TABLE>
- -----------------
(1) Based on the number of shares of Common Stock outstanding as of January 5,
1997, adjusted to reflect the automatic conversion of all of the Company's
outstanding Series A Convertible Preferred Stock into 500,000 shares of
Common Stock. Excludes: (a) 778,400 shares of Common Stock issuable upon
exercise of outstanding options at a weighted average exercise price of
$3.40 per share, (b) 594,745 shares of Common Stock issuable upon exercise
of outstanding warrants at a weighted average exercise price of $4.72 per
share and (c) up to 166,667 shares of Common Stock issuable within 30 days
of the effective date of the registration statement of which this
Prospectus is a part upon conversion (at a conversion price equal to 80% of
an assumed initial public offering price of $7.50) of up to an aggregate of
$1,000,000 of the principal amount of certain outstanding Promissory Notes.
See "Capitalization" and "Description of Capital Stock."
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PERIOD
FROM
INCEPTION
(OCTOBER 2, YEARS ENDED YEAR
1992) TO DECEMBER 31, ENDED
DECEMBER 31, ----------------------- JANUARY 5,
1992 1993 1994 1995 1997
------------ ------ ------- ------ ----------
<S> <C> <C> <C> <C> <C>
SELECTED CONSOLIDATED STATE-
MENTS OF OPERATIONS DATA:
Net sales................... $ -- $ -- $ 2,742 $8,242 $ 13,111
Cost of sales............... -- -- 1,978 4,980 8,311
----- ------ ------- ------ --------
Gross profit................ -- -- 764 3,262 4,800
----- ------ ------- ------ --------
Operating expenses:
Sales and marketing......... -- 36 904 1,523 3,235
General and administrative.. -- 160 762 1,169 2,232
Research and development.... -- 289 765 948 1,896
----- ------ ------- ------ --------
Total operating expenses... 485 2,431 3,640 7,363
----- ------ ------- ------ --------
Operating loss.............. -- (485) (1,667) (378) (2,563)
Interest expense and other,
net........................ -- -- (21) (69) (356)
----- ------ ------- ------ --------
Net loss from continuing op-
erations................... -- (485) (1,688) (447) (2,919)
Loss from discontinued oper-
ation(/1/)................. -- -- -- (180) (377)
----- ------ ------- ------ --------
Net loss.................... $ -- $ (485) $(1,688) $ (627) $ (3,296)
===== ====== ======= ====== ========
Pro forma net loss per com-
mon share(/2/):
Net loss per common share
from continuing opera-
tions...................... $ -- $ (.15) $ (.30) $ (.07) $ (.44)
Loss per common share from
discontinued opera-
tion(/1/).................. -- -- -- (.03) (.06)
----- ------ ------- ------ --------
Net loss per common share... $ -- $ (.15) $ (.30) $ (.10) $ (.50)
===== ====== ======= ====== ========
Weighted average common
shares outstanding......... 3,061 3,126 5,563 6,265 6,576
===== ====== ======= ====== ========
</TABLE>
<TABLE>
<CAPTION>
JANUARY 5, 1997
-------------------------
ACTUAL AS ADJUSTED(/3/)
------- ----------------
<S> <C> <C>
SELECTED CONSOLIDATED BALANCE SHEET DATA:
Cash................................................ $ 2,132 $ 8,038
Working capital..................................... 1,042 12,975
Total assets........................................ 9,906 15,812
Long-term debt and capital lease obligations, less
current portion.................................... 67 67
Total debt.......................................... 6,150 124
Accumulated deficit(/4/)............................ (6,303) (6,628)
Total shareholders' equity.......................... 1,813 13,745
</TABLE>
- -----------------
(1) In November 1996, the Company's Board of Directors approved the
distribution of all of the issued and outstanding shares of the common
stock of the Company's wholly-owned subsidiary, Paragon Technology, Inc.
("Paragon"), as a dividend to shareholders of record of the Company as of
November 15, 1996. Paragon's results of operations for the years ended
December 31, 1995 and January 5, 1997, as well as the estimated loss from
disposition, have been presented as a discontinued operation in the above
Statements of Operations Data. See "Recent Events--Dividend of Shares of
Paragon Technology, Inc."
(2) Computed on the basis described for pro forma net loss per common share in
Note 2 of Notes to Consolidated Financial Statements.
(3) Adjusted to reflect (a) the sale of 1,850,000 shares of Common Stock
offered hereby at an assumed public offering price of $7.50 per share and
the application of the estimated net proceeds therefrom and (b) the
automatic conversion of all outstanding Preferred Stock into Common Stock
upon the consummation of this offering. See "Use of Proceeds" and
"Capitalization."
(4) Reflects the write-off of debt issuance costs totaling $325,000 incurred in
conjunction with bridge financing.
6
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock offered hereby is speculative
and involves a high degree of risk. In evaluating an investment in the shares
of Common Stock offered by this Prospectus, prospective investors should
carefully consider the following factors, in addition to the other information
in this Prospectus. The discussion in this Prospectus contains certain
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from those discussed herein. Factors
that could cause or contribute to such differences include, but are not
limited to, those discussed in "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and "Business," as
well as those discussed elsewhere in this Prospectus.
UNCERTAINTY OF MARKET ACCEPTANCE
The market for rugged computing platforms is a relatively new, limited
sector of the portable computer market. The Company's success will depend upon
increasing the market acceptance of its two current series of products, which
are both heavier and more expensive than most consumer portable personal
computers. There can be no assurance that the Company's products will gain
widespread acceptance or that the Company will generate sufficient sales to
allow the Company to attain profitable operations. In addition, the failure of
the rugged computing platform market to expand would have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Business--Strategy" and "--Markets and Customers."
LIMITED OPERATING HISTORY; HISTORY OF OPERATING LOSSES; UNCERTAINTY OF FUTURE
PROFITABILITY
The Company was incorporated in October 1992 and shipped its first
commercial product in June 1994. The Company has incurred operating losses in
each year since inception and, at January 5, 1997, had an accumulated deficit
of approximately $6.3 million. Net losses for the years ended December 31,
1993, 1994, 1995 and January 5, 1997, were approximately $0.5 million, $1.7
million, $0.6 million and $3.3 million, respectively. Future operating results
will depend on many factors, including the growth of the rugged computing
platform market, demand for the Company's products, the level of product and
price competition, the Company's ability to develop and market new products,
general economic conditions and other factors. There can be no assurance that
the Company will achieve or sustain profitability in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business--Strategy" and "--Markets and Customers."
COMPETITION
The Company believes that it currently occupies a niche in the portable
computer market with its rugged computing platforms. The Company currently
faces direct competition in this market niche from companies producing
portable computers intended for field use such as Amrel Technology, Inc.,
Badger Computers (a unit of Group Financial Partners, Inc.), Dolch Computer
Systems, Getac Corporation, Husky Computers Inc., Itronix Corporation, Kontron
Elektronik Corporation (a subsidiary of Kontron Elektronik GmbH) and Panasonic
Personal Computer Company. To the extent FieldWorks and its direct competitors
expand and develop this market niche, other manufacturers may turn their
attention to this niche and begin to produce products directly competitive
with those offered by the Company. The Company's computing platforms also face
indirect competition from a variety of different companies and products,
including consumer portable personal computers, customized portable personal
computers and single-purpose diagnostic and data collection instruments.
Both the portable computer industry and the diagnostic and data collection
instrument industry are intensely competitive. Many of the companies that
produce or may produce devices that compete, directly or indirectly, with the
Company's products have substantially greater financial, technological and
marketing resources than the Company. There can be no assurance that the
Company will be able to compete effectively against current or future
competitors, or that such competitors will not succeed in adapting more
rapidly and effectively to changes in technology or in the market or in
developing or marketing products that will be more widely accepted. See
"Business--Competition."
7
<PAGE>
RISK OF TECHNOLOGICAL OBSOLESCENCE
Both the computer industry and the diagnostic and data collection instrument
industry are characterized by rapid technological change, including changes in
customer requirements, frequent new product introductions and enhancements,
and evolving industry standards. The Company's success will depend in part on
its ability to keep pace with technological developments and emerging industry
standards and to respond to customer requirements by enhancing its current
products and developing and introducing new products. Failure to anticipate or
respond rapidly to advances in technology and to adapt the Company's products
appropriately could have a material adverse effect on the success of the
Company's products and thus on the Company's business, financial condition and
results of operations. Similarly, failure to institute and maintain effective
policies intended to prevent the building of an inventory of parts that have
become obsolete will require the Company to write off portions of such
inventory as was done in 1995 and 1996. Any significant future write-offs
could have an adverse effect on the Company's financial condition.
Technological advances may also increase the level of competition in the
rugged computing platform market. See "Recent Events" and "Business--
Competition."
RISKS ASSOCIATED WITH MANAGING GROWTH
If the Company is to grow successfully, it must increase its manufacturing
output and capacity significantly. The anticipated growth of the Company's
operations will place significant strain not only on the manufacturing
resources of the Company, but also on the Company's management, sales and
marketing, operating and financial systems and resources. If such growth
occurs, the Company may encounter difficulties, including problems involving
lower than projected production rates, disrupted quality control and
assurance, decreased product reliability, increased manufacturing costs,
difficulties in maintaining internal accounting controls, malfunctioning of
existing and new equipment, insufficient or untimely component supplies and
shortages of personnel. There can be no assurance that the Company will be
able successfully to plan for or manage increased production and marketing of
its products. The failure to do so could have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
anticipates that, at projected sales growth levels, it will be required to
move into expanded production and administrative facilities by mid-1997, and
has begun to search for such new facilities. While the Company currently
anticipates that it will be able to lease appropriate expansion space for its
manufacturing operations as necessary, there can be no assurance that such
facilities will be available when needed on acceptable terms, if at all. In
addition, in the process of moving its operations, the Company may encounter
difficulties that could impair the Company's operations, including, among
others, delays in occupying the new facilities, cost overruns, malfunctioning
of new or moved equipment, production inefficiencies due to facility design or
lack of familiarity with the new facilities, disrupted quality control and
assurance as a result of the move and resulting decreased product reliability.
Any such difficulties could have an adverse effect on the Company's business,
financial condition and results of operations. See "Recent Events,"
"Business--Manufacturing," "--Backlog" and "--Facilities."
RISKS ASSOCIATED WITH DEVELOPING SALES CHANNELS
The Company is engaged in building its sales organization and refining its
sales strategies. Failure to develop this sales organization sufficiently or
to implement appropriate sales strategies in a timely manner could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company distributes a substantial portion of its products through
independent sales representatives and distributors. The Company also sells its
products to OEMs, value added resellers ("VARs") and systems integrators. The
success of the Company is dependent in large part upon the performance of
these resellers, many of whom may also carry competitive products, and on its
ability to attract new resellers. The Company operates pursuant to written
agreements, most of which may be terminated by the reseller on 30 days'
written notice with or without cause. The loss of any of the Company's major
resellers or a failure to make acceptable arrangements with resellers in new
markets could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Markets and
Customers" and "--Sales and Marketing."
DEPENDENCE ON THIRD-PARTY MANUFACTURERS
Although the Company performs some mechanical subassembly and all final
assembly of its products, the Company relies on sub-contract manufacturers to
produce a number of subassemblies. Utilization of sub-contract
8
<PAGE>
manufacturers results in dependence on the timely delivery of high quality
products from these manufacturers and may leave the Company with less
flexibility and control over the manufacturing process than if it conducted
all of these operations internally. There can be no assurance that the timely
delivery of quality subassemblies will not be interrupted. Any interruption in
the timely supply of quality subassemblies would have a material adverse
effect on the Company's ability to deliver its products until acceptable
arrangements could be made with a qualified alternative subassembly
manufacturer. There can be no assurance that the Company would be able to
reach an arrangement with such a manufacturer at acceptable prices and
adequate quality levels on a timely basis. If the Company were unable to do
so, such an interruption would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--
Manufacturing."
DEPENDENCE ON AVAILABILITY OF COMPONENTS
The Company's rugged computing platforms employ a number of components not
generally used in off the shelf personal computers, such as special hard disk
drives, CD-ROM drives, floppy disk drives, displays and power supplies. There
can be no assurance that such components will continue to be produced.
Further, a number of components contained in the Company's products are single
sourced. While the Company believes that there are other companies that could
provide these components, changing suppliers can create uncertainty and be
costly and time-consuming. In the event that the Company could not obtain
adequate or timely quantities of necessary components from its current
suppliers, there can be no assurance that the Company would be able to
identify or access alternative sources of such components within a reasonable
period of time, on acceptable terms, or at all. Some of the Company's current
vendors use tools that have been designed for and are the property of the
Company; if the Company were required to change suppliers for these
components, it would need either to move the necessary tools or to obtain new
tools, either of which could entail significant cost and delay. Moreover, the
Company's buying power may be limited by its small size, and the Company may
receive less favorable allocations and other terms such as price, timing or
other factors than larger companies buying from the same suppliers. The
unavailability of adequate quantities, the inability to develop alternative
sources, a reduction or interruption in supply or a significant increase in
the price of components could have a material adverse effect on the Company's
ability to manufacture and market its products. See "Business--Manufacturing."
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's operating results may vary significantly from quarter to
quarter due to such factors as changes in customer buying patterns, the timing
of the announcement and introduction of new products by the Company or its
competitors, the tactics of the Company's competitors, technological
developments affecting the rugged computing platform market, and the overall
strength of the economy. The Company has experienced some seasonality in
orders for its products, with relatively fewer orders received in the first
quarter of the year, a decline in European orders in the summer, and a rise in
orders in the last quarter. In addition, the Company has experienced long
sales cycles in connection with sales to many of its customers, especially
those that are government agencies or large corporations, and also believes
that such customers may place orders that are disproportionate in size
compared to the Company's other orders. Furthermore, a decision by a customer
to return a large order, or a decision by a customer to return a smaller order
that had been customized such that it could not easily be resold, could have
an adverse impact on the Company's results in any quarter, as occurred in 1995
and 1996. All of these factors, along with the uncertainties associated with
the introduction of any new product or product enhancement, in gauging
ultimate customer demand, and in predicting general trends in the market for
the Company's products, may limit management's ability to plan for production
and to forecast quarterly results of operations accurately. The Company's
operating results for any particular quarter are not necessarily indicative of
results that the Company may achieve for any subsequent quarter or full year.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
DEPENDENCE ON INTELLECTUAL PROPERTY
The Company's success will depend in part on its ability to protect its
proprietary rights and to operate without infringing on the proprietary rights
of third parties. As of the date of this Prospectus, no patents have been
issued to the Company. The Company has filed two U.S. patent applications
covering various aspects of its 7000 Series Field WorkStation laptop computing
platforms and its 5000 Series Field WorkStation notebook computing platforms
and the technology incorporated in such platforms, and the Company may apply
for additional patents in the future. There can be no assurance that any of
the Company's current or future patent
9
<PAGE>
applications will result in issued patents, that the scope of the claims in
any patents issued to the Company will prevent competitors from introducing
competitive products or that any patents issued to the Company would be
enforceable if challenged. In addition, even if patents for which the Company
has applied or applies in the future are ultimately issued, other parties may
hold or receive patents that contain claims covering other technology included
in the Company's current or future products that could hinder or prevent the
sale of the Company's products or require the Company to obtain licenses to
such technology, which might not be available on acceptable terms or at all.
In addition to patents, the Company intends to rely upon unpatented trade
secrets and know-how and on the expertise of its employees. Although the
Company believes that it has in the past taken, and intends in the future to
take, appropriate steps to protect its unpatented proprietary rights,
including requiring that its employees and third parties granted access to the
Company's proprietary technology enter into confidentiality agreements with
the Company, there can be no assurance that these measures will be sufficient
to protect the Company's rights against third parties. Likewise, there can be
no assurance that others will not independently develop or otherwise acquire
unpatented technologies or products similar or superior to those of the
Company.
The Company claims trademark rights in four marks used in connection with
its products in the United States and filed for registration of such
trademarks in June 1996. The U.S. Patent and Trademark Office (the "PTO") has
not determined the registrability of the trademarks. United States trademark
rights are acquired by use rather than by registration, and there can be no
assurance that others do not have conflicting or superior rights to the
Company's trademarks. The Company is aware that there are third parties that
have claimed or may claim superior rights, in certain territories in the
United States, to the use of certain of the marks in which the Company claims
rights; there can thus be no assurance that no third party will contest the
Company's right to use or register its trademarks. In addition, the PTO can
deny registration to trademarks that it determines are "merely descriptive" or
"generic." There can thus be no assurance that any of the trademarks covered
by the Company's applications for registration will be found registrable, that
registrations will issue, or that the Company can support the cost of defense
of its trademarks.
The Company licenses from third parties certain software that it includes in
its products. If any such licenses were terminated, the Company could be
required to license similar software from other third parties; there can be no
assurance that the Company could do so in a timely fashion, on acceptable
terms, or at all.
The high technology area frequently features disputes over intellectual
property. The Company may in the future be required to defend its intellectual
property rights against infringement, duplication, discovery and
misappropriation by third parties or to defend itself against third-party
claims of infringement. Likewise, disputes may arise in the future with
respect to ownership of technology developed by employees who were previously
employed by other companies. Any such litigation or disputes could result in
substantial costs to, and a diversion of effort by, the Company. An adverse
determination could subject the Company to significant liabilities to third
parties, require the Company to seek licenses from or pay royalties to third
parties or require the Company to develop appropriate alternative technology.
There can be no assurance that any such licenses would be available on
acceptable terms or at all, or that the Company could develop alternate
technology at an acceptable price or at all. Any of these events could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Intellectual Property."
NEED TO ATTRACT AND RETAIN KEY PERSONNEL
The success of the Company is dependent on its ability to attract and retain
personnel needed for its business. The Company's personnel needs include
highly trained personnel for such areas as management, sales and engineering,
including Gary J. Beeman and Robert C. Szymborski, the Company's co-founders
and currently the President and Chief Executive Officer, and Executive Vice
President and Chief Technical Officer, respectively, of the Company. Qualified
individuals in such areas are in high demand and are often subject to
competing employment opportunities. In addition, as the Company increases its
production and sales levels, it will need to attract and retain additional
qualified skilled and unskilled workers for its manufacturing and related
operations. In recent years there has been great demand for qualified skilled
and unskilled employees in the
10
<PAGE>
Minneapolis area, where the Company's manufacturing operations are located.
There can be no assurance that the Company will be successful in attracting
and retaining the personnel needed for its business. Any failure to do so
would adversely affect the Company's business, financial condition and results
of operations. See "Business--Employees."
RISKS ASSOCIATED WITH INTERNATIONAL SALES
In the year ended January 5, 1997, international sales of the Company's
products represented approximately 24% of the Company's net sales.
International sales are subject to inherent risks, including longer payment
cycles, greater difficulty or delay in accounts receivable collection, U.S.
and foreign import and export restrictions and tariffs, the burdens of
complying with a variety of foreign laws, potentially adverse tax
consequences, potentially inadequate protection of intellectual property
rights, restrictions on repatriation of earnings, and exposure to increased
political and economic instability. In addition, the Company's net receipts
from international sales are typically lower than net receipts from domestic
sales as the result of the Company bearing some of the cost of foreign import
tariffs and the time required to collect foreign sales receivables is
generally longer than that required for domestic receivables. The loss of a
key foreign distributor or the inability to maintain a foreign distribution
network could have an adverse effect on the Company's business, financial
condition and results of operations.
All of the Company's export sales are currently denominated in United States
dollars. An increase in the value of the United States dollar relative to
foreign currencies could make the Company's products more expensive and,
therefore, potentially less competitive in foreign markets. In the future, if
the Company's export sales were to be denominated in local currencies, foreign
currency translations may contribute to significant fluctuations in the
Company's financial condition and results of operations. If for any reason
currency exchange or price controls or other restrictions on foreign
currencies were imposed, the Company's business, financial condition and
results of operations could be materially adversely affected. See "Business--
Markets and Customers" and "--Sales and Marketing."
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company anticipates that the net proceeds of this offering, together
with cash on hand, interest expected to be earned thereon and anticipated cash
from operations will be sufficient to finance the Company's operations at
least through 1997, although there can be no assurance that additional capital
will not be required sooner. In order to meet its needs beyond such time, the
Company may be required to raise additional capital. There can be no assurance
that sufficient capital will be available if and when required on terms
acceptable to the Company, if at all. Any additional equity financings may be
dilutive to purchasers in this offering, and any debt financing may involve
restrictive covenants. Failure to secure additional financing if and when
needed could adversely affect the Company and its operations, including
requiring the Company to delay, scale back, or eliminate market expansion
activities and research and development on existing or new products, or
forcing the Company to cease operations entirely. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
NO PRIOR PUBLIC MARKET FOR COMMON STOCK; DETERMINATION OF OFFERING PRICE
Prior to this offering there has been no public market for the Common Stock.
Consequently, the initial public offering price of the Common Stock has been
determined by negotiations between the Company and the Underwriter and may
bear no relation to the market prices for the shares that will prevail in the
public market following this offering. The Common Stock has been approved for
quotation on The Nasdaq National Market; there can, however, be no assurance
that an active trading market in the Common Stock will develop or be sustained
upon completion of this offering or that the market price of the Common Stock
will not decline below the initial public offering price. For factors
considered in determining the initial public offering price, see
"Underwriting."
11
<PAGE>
POSSIBLE STOCK PRICE VOLATILITY
The trading prices of the Common Stock could be subject to wide fluctuations
in response to a variety of events or factors, many of which are beyond the
Company's control. These could include, without limitation (i) quarterly
variations in the Company's operating results, (ii) the liquidity of the
market for the Common Stock, (iii) announcements of business developments by
the Company or its competitors, (iv) developments or disputes concerning
proprietary rights, (v) technological innovations or newly introduced
products, and (vi) general conditions in the computer industry and the
economy. Moreover, the stock markets recently have experienced extreme price
and volume fluctuations, which have particularly affected the market prices of
many high technology companies and which have often been unrelated to the
operating performance of such companies.
CONTROL BY PRINCIPAL SHAREHOLDERS; ANTI-TAKEOVER PROVISIONS
Upon completion of this offering, the Company's directors and executive
officers and persons or entities affiliated with them will beneficially own in
the aggregate approximately 32% of the Company's outstanding Common Stock
(assuming the exercise of certain shares subject to outstanding options and
warrants). If these shareholders vote together as a group, they will be able
to substantially influence the business and affairs of the Company, including
the election of individuals to the Company's Board of Directors (the "Board of
Directors"), and to otherwise affect the outcome of certain actions that
require shareholder approval, including the adoption of amendments to the
Company's articles of incorporation and certain mergers, sales of assets and
other business acquisitions or dispositions. See "Principal Shareholders."
Upon completion of this offering, the Company will be authorized to issue
five million shares of undesignated preferred stock, $.001 par value, which
may be issued by the Board of Directors on such terms, and with such rights,
preferences and designations, as the Board of Directors may determine, without
further shareholder action. The rights of the holders of the Common Stock will
be subject to, and may be adversely affected by, the rights of any holders of
any preferred stock so issued. In addition, the Company is subject to certain
provisions of the Minnesota Business Corporation Act that limit the voting
rights of shares acquired in certain acquisitions and restrict certain
business combinations. Exercise of voting control by principal shareholders,
the existence or issuance of "blank check" preferred stock and the effect of
other anti-takeover provisions in the Company's charter documents or Minnesota
law, individually or in the aggregate, may render more difficult or discourage
any attempt to obtain control of the Company by means of a tender offer,
merger, proxy contest or otherwise, which could deprive the Company's
shareholders of opportunities to sell their shares of Common Stock at prices
higher than prevailing market prices. See "Description of Capital Stock--
Preferred Stock" and "--Provisions of the Company's Articles and Bylaws and
the Minnesota Business Corporation Act."
POSSIBLE ADVERSE MARKET EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE;
REGISTRATION RIGHTS
Sales of significant amounts of Common Stock in the public market or the
perception that such sales will occur could adversely affect the market price
of the Common Stock or the future ability of the Company to raise capital
through an offering of its equity securities. Upon completion of this
offering, the Company will have outstanding 8,230,736 shares of Common Stock
(or 8,508,236 shares if the Underwriter's over-allotment option is exercised
in full). Of those shares, 1,850,000 shares (or 2,127,500 shares if the
Underwriter's over-allotment option is exercised in full) will be eligible for
immediate sale in the public market without restriction unless they are held
by "affiliates" of the Company within the meaning of Rule 144 of the
Securities Act of 1933, as amended (the "Securities Act"). The remaining
6,380,736 shares of Common Stock will be "restricted securities," as that term
is defined in Rule 144 under the Securities Act, and may be sold in the public
market only if registered or if they qualify for an exemption from
registration under Rule 144, Rule 144(k), Rule 701 or otherwise. All
directors, executive officers and other affiliates of the Company, who own, in
the aggregate, 2,364,802 shares of Common Stock, have agreed that they will
not sell, directly or indirectly, any Common Stock without the prior consent
of the Representative for a period of 180 days from the date of this
Prospectus, and certain other shareholders, who own, in the aggregate,
shares of Common Stock, have agreed that they
12
<PAGE>
will not sell, directly or indirectly, any Common Stock without the prior
consent of the Representative for a period of 90 days from the date of this
Prospectus. Of the shares not subject to these agreements, (i) approximately
shares will be eligible for immediate sale without restriction pursuant to
Rule 144(k) on the effective date of this offering, (ii) approximately
shares will be eligible for sale, subject to compliance with the volume
limitations and other restrictions of Rule 144, 90 days after the effective
date of this offering, and (iii) approximately shares will become eligible
for sale under Rule 144 after the expiration of the two-year holding periods
from the dates of acquisition, which end between and . Beginning on the
91st day after the date of this Prospectus, when the first agreement not to
sell shares expires, of the shares subject to such agreement, (iv)
approximately shares will become eligible for sale without
restriction pursuant to Rule 144(k), (v) approximately shares will
become eligible for sale, subject to compliance with the volume limitations
and other restrictions of Rule 144 and (vi) approximately shares
will become eligible for sale under Rule 144 after the expiration of the two-
year holding periods from the dates of acquisition, which end between and
. Beginning on the 181st day after the date of this Prospectus, when the
second agreement not to sell shares expires, (vii) all of the 2,364,802 shares
subject to such agreement will become eligible for sale, subject to compliance
with the volume limitations and other restrictions of Rule 144. In addition,
certain shareholders and holders of warrants, options and convertible
promissory notes, who in the aggregate beneficially own 1,261,412 shares of
Common Stock, have the right, subject to certain conditions, to include their
shares in future registration statements relating to the Company's securities
and to cause the Company to register for public sale certain Common Stock
owned by them. The Securities and Exchange Commission has recently approved a
reduction, effective on April , 1997, of the two and three year holding
periods under Rule 144 and Rule 144(k) to one and two years, respectively.
When this reduction becomes effective, approximately shares will become
eligible for immediate sale pursuant to Rule 144(k) and the number of shares
eligible for sale under Rule 144 will increase. Such reduction, however, will
not affect the 90 and 180 day periods under the agreements with the
Representative described above. See "Shares Eligible for Future Sale" and
"Underwriting."
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of the Common Stock offered hereby will experience immediate and
substantial dilution in net tangible book value per share of $5.83 (assuming
an initial public offering price of $7.50 per share). Investors may also
experience additional dilution as a result of the exercise of outstanding
stock options and warrants. See "Dilution."
NO DIVIDENDS
The Company has never paid or declared a cash dividend on its capital stock
and does not anticipate doing so for the foreseeable future. See "Dividend
Policy."
13
<PAGE>
USE OF PROCEEDS
The net cash proceeds to the Company from the sale of the Common Stock
offered hereby are estimated to be approximately $12,256,250 ($14,150,200 if
the Underwriter's over-allotment option is exercised in full), after deducting
the underwriting discount and estimated expenses of this offering, and
assuming an initial public offering price of $7.50 per share. The Company
intends to apply such net proceeds substantially as follows:
<TABLE>
<S> <C>
Repayment of convertible bridge notes........................... $ 5,104,000
Repayment of affiliate bridge notes............................. 1,420,000
Capital expenditures............................................ 1,000,000
Working capital and general corporate purposes.................. 4,732,250
-----------
Total........................................................... $12,256,250
===========
</TABLE>
REPAYMENT OF CONVERTIBLE BRIDGE NOTES. Approximately $5,104,000 of the net
proceeds will be used to pay principal and accrued interest on the Company's
subordinated promissory notes issued in December 1996, assuming none of the
principal amount of such notes is converted into Common Stock. Up to 20% of
the principal amount of each such note is convertible for a period of 30 days
after the date of this Prospectus, at the option of the holder thereof, into
the Company's Common Stock at a conversion price of 80% of the Price to Public
in this offering. To the extent that any principal amount of such notes is
converted, the net proceeds that would have been used to repay such principal
amount will be used for general working capital purposes. The outstanding
principal and accrued interest on such notes will be due and payable on June
30, 1997; provided, that the Company may extend such maturity to December 31,
1997, and provided, further, that the outstanding principal and accrued
interest on such notes will be due and payable in full within 30 days after
the effective date of the registration statement of which this Prospectus
forms a part. Such notes bear interest at the rate of 10% per annum. Such
notes were purchased by various investors, none of whom are "affiliates" of
the Company. The proceeds from such notes were used to pay off approximately
$2,030,000 outstanding under bank lines of credit, $1,500,000 of which was
personally guaranteed by George E. Kline, a director of the Company, and for
general working capital purposes. See "Description of Capital Stock--Bridge
Loans."
REPAYMENT OF AFFILIATE BRIDGE NOTES. The Company entered into a series of
transactions from July through September 1996 resulting in unsecured loans of
which approximately $1,420,000 in principal and accrued interest is currently
outstanding, $1,314,000 of which is due to entities affiliated with George E.
Kline, a director of the Company. The remaining amount is due to a
nonaffiliate. These loans bear interest at rates from 10% to 12% per annum.
The proceeds from the short-term loans were used for general working capital
purposes. See "Certain Transactions" and "Description of Capital Stock--Bridge
Loans."
CAPITAL EXPENDITURES. The Company intends to spend approximately $1,000,000
in 1997 on capital expenditures, including the procurement of injection
molding tools for the production of the 5000 Series chassis and for leasehold
improvements to the expanded facilities that the Company anticipates requiring
in mid-1997.
WORKING CAPITAL AND GENERAL CORPORATE PURPOSES. The remainder of the net
proceeds, approximately $4,732,250 will be allocated to working capital and
will be used for purposes including the addition of manufacturing and
administrative infrastructure to support expansion.
In addition, the Company may also use a portion of the net proceeds to
acquire businesses, products or technologies that management believes may
complement the Company's operations, although the Company currently has no
agreements or understandings regarding any such acquisition and is not
involved in any negotiations with respect to any such transactions.
The amounts given above are estimates, and the amount and timing of actual
expenditures will depend on numerous factors, including competition,
manufacturing activities and the level of market acceptance of the Company's
products.
14
<PAGE>
Pending the use of the net proceeds of this offering, the Company will
invest the funds in short-term, interest-bearing, investment grade securities.
The Company believes that the proceeds of this offering, together with cash
on hand, interest expected to be earned thereon, and anticipated revenues will
be sufficient to fund its operations at least through 1997. In order to meet
its needs beyond such time, the Company may be required to raise additional
capital. There can be no assurance that sufficient capital will be available
if and when required on terms acceptable to the Company, if at all. See "Risk
Factors--Future Capital Needs; Uncertainty of Additional Funding."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain all of its earnings, if any, to
finance the development and continued expansion of its business, and does not
intend to pay dividends in the foreseeable future. The payment of dividends,
if any, in the future will be at the discretion of the Board of Directors and
will depend on the Company's earnings, financial condition, capital
requirements, and other relevant factors.
In November 1996, the Company's Board of Directors approved the distribution
of all of the issued and outstanding shares of the capital stock of a wholly-
owned subsidiary as a dividend to shareholders of record as of November 15,
1996. See "Recent Events--Dividend of Shares of Paragon Technology, Inc."
15
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
January 5, 1997 and as adjusted to give effect to the issuance and sale by the
Company of the 1,850,000 shares of Common Stock offered hereby at an assumed
initial public offering price of $7.50 per share and the application of the
estimated net proceeds therefrom and the automatic conversion of all
outstanding Preferred Stock into Common Stock upon the consummation of this
offering. This table should be read in conjunction with, and is qualified in
its entirety by, the more detailed information, including "Risk Factors" and
the Consolidated Financial Statements and Notes thereto, appearing elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
JANUARY 5, 1997
--------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt....................................... $ 6,083 $ 57
======= =======
Long-term debt and capital lease obligations, less
current portion...................................... $ 67 $ 67
------- -------
Shareholders' equity:
Series A Convertible Preferred Stock, $.001 par val-
ue, 300,000 shares authorized actual and no shares
authorized as adjusted; 300,000 shares issued and
outstanding actual and no shares issued and out-
standing as adjusted............................... -- --
Undesignated Preferred Stock, $.001 par value, no
shares authorized actual and 5,000,000 authorized
as adjusted; no shares issued and outstanding ac-
tual and as adjusted............................... -- --
Common Stock, $.001 par value, 14,700,000 shares au-
thorized actual, 30,000,000 shares authorized as
adjusted; 5,880,736 shares issued and outstanding
actual; 8,230,736 shares issued and outstanding as
adjusted(/1/)...................................... 6 8
Common stock warrants............................... 232 232
Additional paid-in capital.......................... 7,878 20,133
Accumulated deficit(/2/)............................ (6,303) (6,628)
------- -------
Total shareholders' equity........................ 1,813 13,745
------- -------
Total capitalization............................ $ 1,880 $13,812
======= =======
</TABLE>
- -----------------
(1) Excludes: (a) 778,400 shares of Common Stock issuable upon exercise of
outstanding options at a weighted average exercise price of $3.40 per
share, (b) 594,745 shares of Common Stock issuable upon exercise of
outstanding warrants at a weighted average exercise price of $4.72 per
share and (c) up to 166,667 shares of Common Stock issuable within 30 days
of the effective date of the registration statement of which this
Prospectus is a part upon conversion (at a conversion price equal to 80%
of an assumed initial public offering price of $7.50) of up to $1,000,000
of the principal amount of certain outstanding Promissory Notes. See
"Description of Capital Stock."
(2) Reflects the write-off of debt issuance costs totaling $325,000 incurred
in conjunction with bridge financing.
16
<PAGE>
DILUTION
Pro forma net tangible book value per share represents total assets, less
total liabilities, divided by the number of shares outstanding as of January
5, 1997 (adjusted to reflect the conversion of the Preferred Stock into Common
Stock upon the consummation of this offering). The Company's pro forma net
tangible book value as of January 5, 1997, was approximately $1,813,000, or
approximately $0.29 per share. Without taking into account any changes in such
net tangible book value per share after January 5, 1997, other than to give
effect to the sale of the shares of Common Stock offered hereby at an assumed
initial public offering price of $7.50 per share and the receipt of the net
proceeds of such sale, the pro forma net tangible book value per share as of
January 5, 1997, would have been approximately $13,745,000, or approximately
$1.67 per share. This represents an immediate increase in net tangible book
value per share of $1.38 to existing shareholders and an immediate dilution of
$5.83 per share to new investors. The following table sets forth this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $7.50
Pro forma net tangible book value per share as of January 5,
1997............................................................ $0.29
Increase per share attributable to new investors................. 1.38
-----
Pro forma net tangible book value per share after this offering.... 1.67
-----
Dilution per share to new investors................................ $5.83
=====
</TABLE>
The following table sets forth, on a pro forma basis as of January 5, 1997,
the differences between existing shareholders and new investors with respect
to the total number of shares of Common Stock and Preferred Stock (all of
which Preferred Stock will be converted into Common Stock upon the
consummation of this offering) purchased from the Company, the total
consideration paid and the average price per share paid (assuming the sale of
1,850,000 shares of Common Stock at an initial public offering price of $7.50
share and before deducting underwriting discounts and commissions and
estimated offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders....... 6,380,736 77.5% $ 7,884,772 36.2% $1.24
New investors............... 1,850,000 22.5 13,875,000 63.8 7.50
--------- ----- ----------- -----
Total..................... 8,230,736 100.0% $21,759,772 100.0%
</TABLE>
The above calculations do not give effect to the possible issuance of (i)
778,400 shares of Common Stock issuable upon exercise of options outstanding
at a weighted average exercise price of $3.40 per share, (ii) 594,745 shares
of Common Stock issuable upon exercise of warrants outstanding at a weighted
average exercise price of $4.72 per share and (iii) up to 166,667 shares of
Common Stock issuable within 30 days of the effective date of the registration
statement of which this Prospectus is a part upon conversion (at a conversion
price equal to 80% of an assumed initial public offering price of $7.50) of up
to $1,000,000 of the principal amount of certain outstanding Promissory Notes.
To the extent that these options, warrants and conversion rights become
exercisable and are exercised or to the extent additional options or warrants
are granted or exercised, there will be further dilution to new investors. See
"Description of Capital Stock."
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following selected consolidated financial data of the Company are
qualified by reference to and should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and
the Consolidated Financial Statements and Notes thereto included elsewhere
herein. The statements of operations data as of and for the period from
inception (October 2, 1992) to December 31, 1992, and as of and for the years
ended December 31, 1993, 1994 and 1995 and January 5, 1997, are derived from,
and are qualified by reference to, the audited consolidated financial
statements included elsewhere in this Prospectus and should be read in
conjunction with those consolidated financial statements and notes thereto.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(OCTOBER 2, 1992) YEARS ENDED DECEMBER 31, YEAR ENDED
TO DECEMBER 31, --------------------------- JANUARY 5,
1992 1993 1994 1995 1997
----------------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
SELECTED CONSOLIDATED
STATEMENTS OF
OPERATIONS DATA:
Net sales............... $ -- $ -- $ 2,742 $ 8,242 $13,111
Cost of sales .......... -- -- 1,978 4,980 8,311
------ ------- -------- -------- -------
Gross profit........... -- -- 764 3,262 4,800
Operating expenses:
Sales and marketing.... -- 36 904 1,523 3,235
General and administra-
tive.................. -- 160 762 1,169 2,232
Research and develop-
ment.................. -- 289 765 948 1,896
------ ------- -------- -------- -------
Total operating ex-
penses................ -- 485 2,431 3,640 7,363
------ ------- -------- -------- -------
Operating loss.......... (485) (1,667) (378) (2,563)
Interest expense and
other, net............. -- -- (21) (69) (356)
------ ------- -------- -------- -------
Net loss from continuing
operations............. -- (485) (1,688) (447) (2,919)
Loss from discontinued
operation(/1/)......... -- -- -- (180) (377)
------ ------- -------- -------- -------
Net loss................ $ -- $ (485) $ (1,688) $ (627) $(3,296)
====== ======= ======== ======== =======
Pro forma net loss per
common share(/2/):
Net loss per common
share from continuing
operations............ $ -- $ (.15) $ (.30) $ (.07) $ (.44)
Loss per common share
from discontinued
operation(/1/)........ -- -- -- (.03) (.06)
------ ------- -------- -------- -------
Net loss per common
share................. $ -- $ (.15) $ (.30) $ (.10) $ (.50)
====== ======= ======== ======== =======
Weighted average common
shares outstanding..... 3,061 3,126 5,563 6,265 6,576
====== ======= ======== ======== =======
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 5, 1997
----------------------------- -----------------------------
1992 1993 1994 1995 ACTUAL AS ADJUSTED(/3/)
---- ------ ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED CONSOLIDATED
BALANCE SHEET DATA:
Cash.................... $ -- $1,230 $ 126 $ 113 $ 2,132 $ 8,038
Working capital......... -- 1,845 1,317 1,685 1,042 12,975
Total assets............ 2 2,008 3,603 4,559 9,906 15,812
Long-term debt and
capital lease
obligations, less
current portion........ -- -- 11 62 67 67
Total debt.............. -- -- 809 1,254 6,150 124
Accumulated defi-
cit(/4/)............... -- (485) (2,173) (2,805) (6,303) (6,628)
Total shareholders' eq-
uity................... 2 1,919 1,636 2,132 1,813 13,745
</TABLE>
- -----------------
(1) In November 1996, the Company's Board of Directors approved the
distribution of all of the issued and outstanding shares of the common
stock of the Company's wholly-owned subsidiary, Paragon, as a dividend to
shareholders of record of the Company as of November 15, 1996. Paragon's
results of operations for the years ended December 31, 1995 and January 5,
1997, as well as the estimated loss from disposition, have been presented
as a discontinued operation in the above Statements of Operations Data.
See "Recent Events--Dividend of Shares of Paragon Technology, Inc."
(2) Computed on the basis described for pro forma net loss per common share in
Note 2 of Notes to Consolidated Financial Statements.
(3) Adjusted to reflect (a) the sale of 1,850,000 shares of Common Stock
offered hereby at an assumed public offering price of $7.50 per share and
the application of the estimated net proceeds therefrom and (b) the
automatic conversion of all outstanding Preferred Stock into Common Stock
upon the consummation of this offering. See "Use of Proceeds" and
"Capitalization."
(4) Reflects the write-off of debt issuance costs totaling $325,000 incurred
in conjunction with bridge financing.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Consolidated
Financial Statements and Notes thereto included elsewhere in this Prospectus.
This Prospectus contains, in addition to historical information, forward-
looking statements that involve risks and uncertainties. The Company's actual
results could differ materially from the results discussed in the forward-
looking statements. Factors that could cause or contribute to such differences
include those discussed below, as well as those discussed elsewhere in this
Prospectus. See "Risk Factors."
GENERAL
FieldWorks was incorporated in 1992 to provide rugged computing platforms
and computer system solutions for use by field personnel. From its inception
through June 1994, the Company's activities consisted primarily of developing
its products and building its infrastructure. The Company shipped its first
commercial product, the 7000 Series Field WorkStation rugged laptop computing
platforms, in June 1994, and the 5000 Series Field WorkStation rugged notebook
computing platforms in June 1996.
Effective in fiscal 1996, the Company changed to a 52/53-week fiscal year
ending on the first Sunday on or after December 31st. All references herein to
"1996," "1995" and "1994" represent the 53-week fiscal year ended January 5,
1997 and the years ended December 31, 1995 and December 31, 1994,
respectively. The Company does not believe that this change affects
comparability of the financial statements.
The Company recognizes revenue upon shipment of product. Although the
Company's revenues have increased significantly over the last two years, the
Company has incurred net losses with an accumulated deficit of $6.3 million as
of January 5, 1997. The Company's limited operating history makes the
prediction of future operating results difficult. Accordingly, although the
Company has experienced revenue growth, such growth should not be considered
indicative of future revenue growth, if any, or of future operating results.
See "Risk Factors--Limited Operating History; History of Operating Losses;
Uncertainty of Future Profitability" and "--Fluctuations in Quarterly
Operating Results."
RESULTS OF OPERATIONS
The following table sets forth certain financial data expressed as a
percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, YEAR ENDED
---------------- JANUARY 5,
1994 1995 1997
------ ------ ----------
<S> <C> <C> <C>
Net sales........................................ 100% 100% 100%
Cost of sales.................................... 72 60 63
------ ------ ---
Gross profit................................... 28 40 37
Operating expenses:
Sales and marketing............................ 33 18 25
General and administrative..................... 28 14 17
Research and development....................... 28 12 14
------ ------ ---
Total operating expenses..................... 89 44 56
Operating loss................................... (61) (4) (19)
Interest expense and other, net.................. (1) (1) (3)
------ ------ ---
Net loss from continuing operations.............. (62) (5) (22)
Loss from discontinued operation................. -- (3) (3)
------ ------ ---
Net loss......................................... (62)% (8)% (25)%
====== ====== ===
</TABLE>
20
<PAGE>
COMPARISON OF YEARS ENDED JANUARY 5, 1997 AND DECEMBER 31, 1995
Net Sales. The Company's net sales increased 59% from $8.2 million for 1995
to $13.1 million for 1996. Of the increase in net sales, $4.4 million was due
to an increase in the number of units sold. In addition, $0.5 million was due
to an increase in the average selling prices of the 7000 Series driven by the
levels of optional features included in units sold, such as Pentium chips, RAM
memory and CD-ROM drive upgrades, enhanced wet and cold weather packages, and
electromagnetic emission control packages, as well as peripheral equipment
purchases such as batteries and carrying cases. International sales decreased
from 35% of net sales for 1995 to 24% of net sales for 1996 as a result of the
Company's focus on building its domestic sales force and testing to
demonstrate continued compliance with new European EMI standards following
certain changes to the 7000 Series, and continuing efforts to achieve
compliance to these standards for the 5000 Series. The Company believes that
international sales as a percentage of total net sales will continue at levels
similar to those in 1996, with little impact on the Company's results of
operations or liquidity.
Gross Profit. Gross profit increased 45% from $3.3 million in 1995 to $4.8
million in 1996. As a percentage of net sales, gross profit decreased from 40%
in 1995 to 37% in 1996. In 1995 the Company incurred approximately $0.3
million, or 4% of net sales, in inventory disposal costs related to upgrading
computer components due to technological advances. This compares to $0.8
million, or 6% of net sales, in 1996. The introduction in the second half of
1996 of the 5000 Series, which carries lower pricing and profit margins, and
the introduction of a new lower base price 7000 Series model in the fourth
quarter, reduced margins as a percent of net sales by approximately 5% for the
fourth quarter. In addition, the Company's fourth quarter focus on the 5000
Series resulted in reduced shipments of the 7000 Series in that quarter. Such
reduction had a negative impact of 5% on margins as a percent of net sales for
the fourth quarter due to the fixed nature of certain expenses in the cost of
goods sold. With unit volume increases and improvements in manufacturing
efficiencies, the Company believes it will maintain gross margins in the mid
to high 30% range in 1997.
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, bonuses and commissions, promotions and advertising and travel.
Sales and marketing expenses increased from $1.5 million or 18% of net sales
for 1995 to $3.2 million or 25% of net sales for 1996. The increase was due
primarily to increased advertising, staffing and promotion expenses, all of
which were intended to build general product recognition and to introduce the
5000 Series. The Company expects that its sales and marketing expenses will
continue to increase as it seeks to expand its sales channels.
General and Administrative. General and administrative expenses consist
primarily of salaries, professional services, facilities, bad debt and
incentive compensation costs. General and administrative expenses increased
from $1.2 million or 14% of net sales for 1995 to $2.2 million or 17% of net
sales for 1996. The increase was due primarily to increased staffing, legal
fees, professional services and facilities expenses. The Company expects to
continue to increase its general and administrative expenses in the
foreseeable future as it adds general and administrative infrastructure.
Research and Development. Research and development expenses consist
primarily of salary and materials costs incurred in the development and
testing of new products and of computing platforms customized for special
applications. Research and development costs are expensed as incurred.
Research and development expenses increased from $0.9 million or 12% of net
sales for 1995 to $1.9 million or 14% of net sales for 1996. The increase in
research and development expenses was primarily due to significant investment
in the introduction of the 5000 Series and also to continued development of
the 7000 Series. The Company expects research and development expenses to
increase for the foreseeable future.
Interest Expense and Other, Net. Interest expense increased from
approximately $69,000 for 1995 to $356,000 for 1996, primarily due to higher
levels of indebtedness. Forms of indebtedness used included the Company's
terminated bank line of credit, loans from affiliated parties and the December
bridge notes, all of which were required to fund working capital requirements.
See "--Liquidity and Capital Resources."
21
<PAGE>
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994
Net Sales. Net sales increased 201% from $2.7 million in 1994, the Company's
first year of commercial sales, to $8.2 million in 1995. This increase was due
primarily to an increase in the number of units sold partially offset by a 6%
decrease in the average selling prices for the 7000 Series. Sales to the
Company's international distributors accounted for 39% and 35% of net sales
for 1994 and 1995, respectively.
Gross Profit. Gross profit increased 327% from $0.8 million in 1994 to $3.3
million in 1995. As a percentage of net sales, gross profit increased from 28%
in 1994 to 40% in 1995. This increase in gross profit was the result of
improved economies of scale realized from increases in production volume and
also of enhanced manufacturing and procurement efficiencies.
Sales and Marketing. Sales and marketing expenses increased from $0.9
million or 33% of net sales for 1994 to $1.5 million or 18% of net sales for
1995, primarily as the result of increased expenditures in advertising,
promotion and staffing. Sales and marketing expenses as a percentage of sales
decreased due to increased market acceptance of the Company's products.
General and Administrative. General and administrative expenses increased
from $0.8 million or 28% of net sales in 1994 to $1.2 million or 14% of net
sales in 1995. The increase resulted from a move to a new facility, the
addition of staff and an increase in professional service expenses.
Research and Development. Research and development expenses increased from
$0.8 million or 28% of net sales in 1994 to $0.9 million or 12% of net sales
in 1995. These increases were the result of the Company's efforts to build and
support its engineering infrastructure related to development of the 7000
Series. In addition, the Company's research and development costs increased in
the second half of 1995 as the result of efforts related to the development of
the 5000 Series.
Interest Expense and Other, Net. Interest expense increased from $21,000 in
1994 to $69,000 for 1995, primarily due to increased line of credit borrowings
to fund additional working capital requirements.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited financial data for each of
the eight consecutive quarters ended January 5, 1997. This data has been
derived from unaudited consolidated financial statements that, in the opinion
of management, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of such information. Such
statement of operations data should be read in conjunction with the Company's
audited Consolidated Financial Statements and Notes thereto.
The Company's operating results may vary significantly from quarter to
quarter due to a wide range of factors, such as changes in customer buying
patterns, the timing of the announcement and introduction of new products by
the Company or its competitors, the tactics of the Company's competitors,
technological developments affecting the rugged computing platform market, and
the overall strength of the economy. As a result, the Company's operating
results for any particular quarter are not necessarily indicative of results
that the Company may achieve for any subsequent quarter or full fiscal year.
See "Risk Factors--Fluctuations in Quarterly Operating Results."
22
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 YEAR ENDED JANUARY 5, 1997
---------------------------------- ----------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $1,784 $1,853 $2,238 $2,367 $2,830 $3,066 $3,702 $ 3,513
Cost of sales........... 1,048 1,100 1,266 1,566 1,735 1,840 2,269 2,467
------ ------ ------ ------ ------ ------ ------ -------
Gross profit............ 736 753 972 801 1,095 1,226 1,433 1,046
------ ------ ------ ------ ------ ------ ------ -------
Operating expenses:
Sales and marketing.... 368 353 380 422 591 775 910 959
General and
administrative........ 240 262 300 367 465 507 501 759
Research and
development........... 142 147 213 446 430 420 515 531
------ ------ ------ ------ ------ ------ ------ -------
Total operating
expenses.............. 750 762 893 1,235 1,486 1,702 1,926 2,249
------ ------ ------ ------ ------ ------ ------ -------
Operating income
(loss)................. (14) (9) 79 (434) (391) (476) (493) (1,203)
Interest expense and
other, net............. (19) (17) (17) (16) (64) (54) (104) (134)
------ ------ ------ ------ ------ ------ ------ -------
Net income (loss) from
continuing operations.. (33) (26) 62 (450) (455) (530) (597) (1,337)
Income (loss) from
discontinued
operation.............. (2) 7 (90) (95) (70) (137) (140) (30)
------ ------ ------ ------ ------ ------ ------ -------
Net loss................ $ (35) $ (19) $ (28) $ (545) $ (525) $ (667) $ (737) $(1,367)
====== ====== ====== ====== ====== ====== ====== =======
</TABLE>
The following table sets forth certain unaudited financial data for each of
the eight consecutive quarters ended January 5, 1997, expressed as a percentage
of the Company's net sales for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 YEAR ENDED JANUARY 5, 1997
------------------------------- -------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 %
Cost of sales........... 59 59 57 66 61 60 61 70
--- --- --- --- --- --- --- ---
Gross profit............ 41 41 43 34 39 40 39 30
--- --- --- --- --- --- --- ---
Operating expenses:
Sales and marketing.... 21 19 17 18 21 25 25 27
General and
administrative........ 13 14 13 15 16 17 13 22
Research and develop-
ment.................. 8 8 9 19 16 14 14 15
--- --- --- --- --- --- --- ---
Total operating
expenses.............. 42 41 39 52 53 56 52 64
--- --- --- --- --- --- --- ---
Operating income
(loss)................. (1) -- 4 (18) (14) (16) (13) (34)
Interest expense and
other, net............. (1) (1) (1) (1) (2) (2) (3) (4)
--- --- --- --- --- --- --- ---
Net income (loss) from
continuing operations.. (2) (1) 3 (19) (16) (18) (16) (38)
Loss from discontinued
operation ............. -- -- (4) (4) (3) (4) (4) (1)
--- --- --- --- --- --- --- ---
Net loss................ (2)% (1)% (1)% (23)% (19)% (22)% (20)% (39)%
=== === === === === === === ===
</TABLE>
23
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has principally financed its operations and
capital expenditures through the private sale of equity securities, loans
(including the sale of debt) and bank lines of credit. The Company generated
net proceeds from the private sale of common stock of $1.3 million in 1994 and
$1.6 million in 1995. The Company received net proceeds of $3.0 million from
the sale of preferred stock during 1996. Borrowings on loans generated $0.3
million in 1994, which was repaid in 1995, and $7.6 million in 1996, of which
$1.5 million was repaid prior to year end. As of January 5, 1997, the Company
had outstanding loans of $6.4 million, including $1.3 million with affiliated
parties. Borrowings under bank lines of credit generated $0.5 million in 1994,
$0.7 million in 1995 and $1.8 million in 1996. All bank lines of credit were
repaid in December 1996 and no bank lines were open as of January 5, 1997. The
Company is currently in negotiations with a bank to establish a new operating
line of credit, although there can be no assurances that such negotiations
will be successful. Cash provided by financing activities, including those
listed above, totaled $2.1 million in 1994, $2.0 million in 1995 and $8.1
million in 1996.
Cash used for operating activities totaled $2.9 million in 1994, $1.7
million in 1995 and $5.4 million in 1996. Inventories, which include primarily
raw materials, work in process and demonstration units, increased from $1.8
million at December 31, 1995 to $4.4 million at January 5, 1997. The increase
was primarily due to a build up of raw materials to fill the Company's backlog
of orders, an increase in work in process due to expanded production capacity
and an increase in the number of demonstration units in light of the Company's
larger potential customer base. Despite the 59% increase in net sales from
1995 to 1996, accounts receivable only increased 5.3% from $1.9 million at
December 31, 1995 to $2.0 million at January 5, 1997, primarily due to the
Company's collection efforts. Prepaid expenses and other current assets
increased from $0.1 million at December 31, 1995 to $0.4 million at January 5,
1997, primarily due to prepaid expenses related to this offering and a deposit
with a subcontractor who produces components for the Company's products.
Accrued warranty and other increased from $0.1 million at December 31, 1995 to
$0.5 million at January 5, 1997 due to warranties related to increased sales,
accruals for expenses related to this offering and interest on outstanding
notes. The Company purchased property and equipment of $0.3 million in 1994,
$0.3 million in 1995, and $0.6 million in 1996.
As of January 5, 1997 the Company had cash and cash equivalents of $2.1
million.
The Company believes that the proceeds of this offering, together with cash
on hand, interest expected to be earned thereon, and anticipated revenues will
be sufficient to fund its operations at least through 1997. In order to meet
its needs beyond such time, the Company may be required to raise additional
capital. There can be no assurance that sufficient capital will be available
if and when required on terms acceptable to the Company, if at all. See "Risk
Factors--Future Capital Needs; Uncertainty of Additional Funding."
24
<PAGE>
RECENT EVENTS
During the first half of 1996, the Company began shipping demonstration
units of its 5000 Series Field WorkStation for customer test trials.
Complexities in engineering development delayed the shift from production of
demonstration units to commercial production of the 5000 Series beyond the
time that the Company had initially anticipated. The Company began shipping
commercial production units of the 5000 Series to domestic customers in June
1996, with more than 15% of its 1996 unit volume represented by sales of that
model. However, strong early customer response caused a significant increase
in total order bookings in the third and fourth quarters of 1996, as shown in
the following table:
<TABLE>
<CAPTION>
ORDER BOOKINGS
1996 QUARTER
---------------------------
FIRST SECOND THIRD FOURTH
------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
7000 Series................................... $2,651 $2,909 $3,621 $3,603
5000 Series................................... 161 435 2,214 1,772
------ ------ ------ ------
Total......................................... $2,812 $3,344 $5,835 $5,375
</TABLE>
In light of the time necessary to introduce full-scale commercial production
of the 5000 Series, this large volume of orders contributed to a September 30,
1996, backlog of approximately $2.8 million, and an approximately $4.1 million
backlog as of January 5, 1997 (both figures include an order of approximately
$0.7 million deliverable in 1997). The re-design of critical 5000 Series
components to ease future manufacturability and the attendent delay
contributed to the continued build up of the Company's backlog during the
third and fourth quarters. In addition, testing and changes to printed circuit
boards, cabling, and the enclosure of the 7000 Series led to an approximately
three month hold, late in the year, on shipments to Europe to allow the
Company to demonstrate continued compliance with European EMI standards
following these changes. See "Business--Backlog."
The above factors have contributed to a substantial increase in inventories
from $1.8 million at December 31, 1995 to $4.4 million at January 5, 1997.
This increase in inventories raises the risk of future expenses due to
technological changes in the form of inventory obsolescence. The Company
currently has in place and is continuing to develop procedures to identify
changes in technology early and minimize the extent of inventory disposal
costs, although there can be no assurances that there will not be future
write-offs of obsolete inventory, which may be significant. See "Risk
Factors--Risk of Technological Obsolescence."
The Company had fulfilled approximately 50% of the September 30 backlog in
the 5000 Series by the end of 1996 and approximately 65% of the September 30
backlog in the 7000 Series by the end of 1996.
The Company is currently quoting lead times of six to eight weeks for
delivery of new 7000 Series orders and twelve weeks for 5000 Series orders.
The Company currently anticipates that it will have filled all current backlog
orders and will have reduced its average fulfillment time to its goal of four
weeks by the end of the first half of 1997. There can, however, be no
assurance that the Company will be able to do so; for factors that might
prevent this, see "Risk Factors--Risks Associated with Managing Growth," "--
Dependence on Third-Party Manufacturers" and "--Dependence on Availability of
Components."
The delay in the commercial introduction of the 5000 Series, together with
expenses incurred by the Company in connection with building its corporate
infrastructure to support the anticipated volume of sales of the 5000 Series,
adversely affected the Company's profits in the second half of 1996.
DIVIDEND OF SHARES OF PARAGON TECHNOLOGY, INC.
In August 1995 the Company acquired a wholly-owned subsidiary, Paragon
Technology, Inc. ("Paragon"), which designs and sells high performance
graphics subsystems for the commercial and OEM markets, including MPEG-II
video compression decoding solutions, image manipulation software and digital
video disk ("DVD") technology. The Company incorporates certain of Paragon's
technology in its computing platforms. Paragon also licenses its products to
large personal computer manufacturers, which include the Paragon products in
commercially available personal computers. In November 1996, the Company's
Board of Directors approved the distribution of all of the issued and
outstanding shares of Paragon's capital stock as a dividend to shareholders of
25
<PAGE>
record of the Company as of November 15, 1996, and the distribution of this
dividend was completed by December 31, 1996. The decision to distribute
Paragon's capital stock was based on the determination by the Company's Board
of Directors that, in light of the difference between the business plans being
pursued by the Company and Paragon and between the primary industry areas
addressed by each, the spin-off of Paragon would enable each company to focus
more effectively on meeting its separate goals and to raise capital for the
pursuit of those goals more easily. From November 1996 to January 1997 the
Company loaned an aggregate of $173,465 in working capital to Paragon; all
such amounts were repaid, together with an aggregate of $885 in interest, on
February 5, 1997. Two of the Company's directors and officers, Gary Beeman and
Robert Szymborski, currently serve as directors of Paragon, and Mr. Beeman
currently serves as Paragon's Chairman of the Board. The Company and Paragon
intend to enter into strategic relationships in the areas of product
development and marketing.
26
<PAGE>
BUSINESS
THE COMPANY
FieldWorks designs, manufactures, markets and supports portable rugged
computing platforms and computer system solutions for use in demanding field
environments. In addition to providing the full range of computer features,
performance and functionality typically found in high-end desktop computers,
the Company's portable computing platforms have been designed to meet rigorous
military standards for ruggedness and to function despite exposure to extreme
temperature, mechanical shock, vibration and moisture. The Company's computing
platforms are expandable through multiple expansion slots to provide a
flexible electronic "toolbox" that can integrate all of a user's application-
specific, multi-media and communications needs into one portable, rugged
device. The Company's products have been designed with a modular system
configuration that allows a user to easily upgrade the central processing unit
("CPU") processor or any of the other technological components without
purchasing a new computer. Further, the Company has the ability to customize
its computing platforms to meet the unique needs of its customers.
The Company targets those markets that require portable computing platforms
that can perform multiple functions, including diagnostics, data acquisition
and electronic testing and monitoring, and simultaneously provide
communications and computer capability even under adverse conditions in the
field. FieldWorks rugged computing platforms are in use in a variety of market
applications, including: electronic toolboxes for telecommunications test
crews to simplify and expedite installation, repair and troubleshooting tasks;
data collection and transmission for in-flight commercial airplane testing;
collection and analysis of Global Positioning System ("GPS") geographical
information and agricultural data to aid in the selection of crops, chemicals
and farming methods; diagnostic system analysis and wireless communication for
use with trucking fleets; and video surveillance and monitoring for law
enforcement purposes. The Company believes that its rugged computing
technology has enabled its customers to create new applications that improve
the productivity of their field personnel and believes further that additional
markets and customers will develop as more businesses recognize the benefits
of providing field personnel with effective, sophisticated computing power.
The Company markets its products worldwide through a direct sales force,
independent sales representatives and distributors, OEMs, VARs and systems
integrators. The Company's ten top customers during 1995 and 1996 were The
Freightliner Corporation ("Freightliner"), Liberty Technologies, Inc.
("Liberty"), Texas Instruments Incorporated ("Texas Instruments"), Keithley
Metrabyte, a division of Keithley Instruments Inc., Dateppli Inc. (for sale to
Ford Motor Company), Strategic Solutions, Inc., JoR A.B. (for sale to L.M.
Ericsson A.B., Sweden), U.S. Department of Defense, AT&T Corporation and
Pacific Avionics, Inc. In July 1996, one of the Company's customers, Network
General, entered into an agreement with the Company pursuant to which Network
General made a $3 million equity investment in the Company.
FIELD COMPUTING MARKET
Due to rapid technological advances over the past several years,
organizations have become increasingly dependent on mobile computing and
communications devices, such as portable computers, pagers and cellular
telephones, to enhance workforce productivity. Highlighting this trend is the
growth in the market for consumer portable computers, which Frost & Sullivan
has predicted may reach annual worldwide sales of nearly $80 billion by 2001.
Although this demand has to date been largely attributable to offices and
office staff, organizations are increasingly seeking to computerize field
personnel, in particular those who (i) have direct contact with customers,
(ii) install, diagnose and maintain company or customer equipment, or (iii)
collect the critical information that allows the business to better meet the
needs of its customers. Such computerization can provide sophisticated field
diagnostic and analytic capabilities, enhance field access to data and on-line
information, eliminate paperwork and improve electronic dispatching and
communication. As a result, the market for mobile computing and field force
automation products is predicted to be one of the fastest growing sectors of
the computer industry through 1999, with annual growth predicted at as much as
35% or more. According to International Data Corp. ("IDC") estimates, the
rugged portable computer market is currently over $500 million and is expected
to grow by more than 50% over the next three years.
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Industries such as telecommunications, utilities, farming, law enforcement,
the military and transportation have recognized the need for computerization
and automation in the field. However, the effectiveness of field force
computerization and automation efforts has often been limited by the nature of
the products that have been available. Computers are now being used in the
field to perform a wide range of tasks, but both off the shelf, consumer
portable computers and custom-designed portable computers generally have
significant shortcomings that limit their use by field personnel. In part as a
result of these limitations, some companies still prefer to employ only
single-purpose diagnostic and data collection machines in the field, foregoing
the benefits of full computerization.
Consumer portable personal computers that are designed for office or home
use frequently become inoperable under the harsher conditions present in the
field. The chart below illustrates the durability problems encountered when
attempting to use a consumer personal computer in the field.
[This graph shows the percentage of buyers reporting types of damage for the
following events:
Accidental drops/pavement:
Damage has happened: approximately 62%
Damage rendered computer inoperable: approximately 52%
Food/liquid spills:
Damage has happened: approximately 45%
Damage rendered computer inoperable: approximately 23%
Dirt/other contamination:
Damage has happened: approximately 43%
Damage rendered computer inoperable: approximately 9%
User negligence:
Damage has happened: approximately 42%
Damage rendered computer inoperable: approximately 23%
Objects dropped on unit:
Damage has happened: approximately 32%
Damage rendered computer inoperable: approximately 14%]
(1) Based on a random survey of 589 InfoWorld subscribers
involved in purchasing portable personal computers. Damage
as reported is not representative of damage per single
computer or over any particular time period, and should
not be deemed to represent the likelihood that any
particular computer will be damaged over any particular
time period.
Frost & Sullivan has reported that in one survey it conducted, respondents
reported that between 20% and 25% of all notebook computers used were sent in
for repairs each year, with average "down time" of five and one-half days per
computer. The frequent repair necessary for typical consumer portable
computers that are used in the field results not only in the cost of repair
itself, but also in the lost productivity and associated expense caused by
repair down time.
In addition, consumer portable personal computers are typically available
only with a standard set of features that cannot be expanded or customized to
meet the unique requirements of field personnel. For example, field
technicians require diagnostic and data collection capabilities in addition to
typical office environment computer functionality. Thus, standard portable
personal computers' lack of expandability limits their usefulness as complete
electronic toolboxes for field personnel.
Further, consumer portable personal computers generally are not designed to
be upgraded. Rapidly changing technology results in frequent changes in the
availability of portable personal computers as models change. Large
organizations can discover that their attempts to deploy effective and
consistent field force computerization over a period of time are impaired when
they are unable to continue to purchase the same models of portable personal
computers or when the computers become outmoded.
The alternatives to off the shelf, fragile, non-expandable, portable
personal computers have been either custom-designed personal computers or
mobile single-purpose diagnostic and data collection instruments. While
custom-designed portable personal computers can be configured to serve
specific field uses, they are expensive, generally limited in their
applications and often unable to withstand conditions typically present in the
field. Mobile single-purpose diagnostic and data collection instruments are
designed to withstand field conditions, but
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generally have little independent computing capability. Data analysis and
manipulation, therefore, must be performed later on a separate, non-portable
computer.
THE FIELDWORKS SOLUTION
The Company has focused on delivering products that address the varied and
specialized requirements of field force personnel. The Company's products
feature four critical design characteristics that it believes purchasers of
field computing platforms require.
Rugged. The Company's computing platforms have been designed to meet
stringent military standards of ruggedness, and to function despite extreme
temperatures, mechanical shock while operating up to 100 Gs (100 times the
force of gravity), vibration and moisture. The Company achieves this by using,
among other things: (i) high-strength cast magnesium chassis, (ii) special
shock absorbers for internal components, (iii) durable gold-plated
interconnect systems and (iv) rubber sealing.
Expandable. The Company has focused on providing computing platforms that
are expandable to accommodate both current and future needs of the field force
user. The Company's computing platforms allow for the integration of
application-specific equipment, including auxiliary test, measurement and
diagnostic subsystems and multi-media and communications modules. These
expansion capabilities also allow the Company's computing platforms to adapt
to the evolving requirements of the user, whose needs can change as additional
technology is developed in the future.
Upgradeable. The pace of change in technology such as processors, memory and
display methods can rapidly render non-upgradeable computers obsolete. Unlike
typical consumer portable computers, the Company's computing platforms are
designed to be easily upgraded using standard component parts. The modularity
of the Company's computing platforms allows for easy replacement of all major
subsystems, including processors, screens, disk drives, memory and keyboards,
thereby extending useful life and reducing the overall cost of ownership.
Customizable. Many of the Company's customers have unique needs that require
some degree of customization, from the incorporation of unique functions to
the design and production of special purpose machines. The modular design of
the Company's computing platforms allows the Company to readily adapt its
machines to a customer's specifications. Customization has ranged from fairly
simple mechanical adaptations to sophisticated electrical and mechanical
modifications. Examples of customized features have included: (i) designing
modifications to reduce electro-magnetic emissions, (ii) including
particularly delicate magneto-optical disk drives and (iii) incorporating
specialized high performance graphic subsystems to allow full-motion video
applications.
STRATEGY
The Company's objective is to be the leading designer, manufacturer and
marketer of rugged computing platforms and computer system solutions. The
Company's strategy consists of the following key components:
Penetrate Key Vertical Markets. The Company is seeking to penetrate key
vertical markets including military/government, utilities, transportation,
aviation, telecommunications and law enforcement. The Company intends to
employ a variety of approaches in these various markets, including building
strategic OEM relationships and focusing on relationships with large volume
repeat customers, depending on the characteristic purchasing patterns of
each vertical market. Where appropriate, the Company develops specialized
product features and functions to address the special needs of a particular
vertical markets.
Expand Strategic OEM Relationships. Certain of the Company's key vertical
markets are characterized by dominant third party OEMs. In those markets,
the Company sells its computing platforms to be bundled into computer
system solutions that the OEMs then sell to end users. Examples of existing
relationships include an OEM relationship with Texas Instruments, which
provides surveillance systems for military and law enforcement uses through
its Phototelesis division; an exclusive OEM supply relationship with
Liberty, the major producer of testing systems for the nuclear power
industry; and an OEM relationship with Network General, a major producer of
telecommunications testing systems.
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Establish Relationships with Large-Volume, Repeat Customers. The Company
intends to focus the efforts of its direct sales force and sales channel
partners on meeting the ongoing needs of large-volume purchasers. The
Company believes that its products are particularly attractive to such
customers given the Company's ability to customize its computing platforms
for specialized needs and the ease with which the Company's computing
platforms can be upgraded and standardized throughout an organization. The
Company believes that its ability to accommodate developing technologies
addresses the concerns many large organizations have regarding the impact
of technological obsolescence in the context of large computer equipment
investments.
Develop New Products and Enhance Existing Products. During the past four
years the Company has made a substantial investment in developing its
current computing platform technologies, which it believes have provided it
with significant expertise with regard to rugged computing platforms. The
Company intends to leverage this expertise to develop new products and
enhance existing products. The Company is currently developing additional
series of computing platforms designed to address broader customer
preferences for products with varying degrees of expandability, size and
price, all of which provide users with the ruggedness, processing power and
ease of upgrade that characterize the Company's current products. The
Company is also constantly working to add new features and functions to its
existing products.
Establish Product Recognition. The Company's goal is to establish the
Company's products as the standard for quality portable rugged computing
platforms. The Company's approach in this respect was to begin by
establishing the Company's products and their reputation for quality with
those customers who demand the greatest number of features. Accordingly,
the Company initially entered the rugged computing platform market with the
7000 Series Field WorkStation rugged laptop computing platform. The Company
intends to continue to build its reputation in the high-end portion of the
market while also utilizing its product recognition to penetrate portions
of the market where customers have different preferences for expandability,
size and price.
CURRENT PRODUCTS
The Company introduced its first commercial product, the 7000 Series Field
WorkStation rugged laptop computing platform, in June 1994. The 7000 Series,
available in a range of models, offers significant expansion capacity and is
targeted at the high end of the rugged field computing platform market. In
June 1996, the Company commercially introduced its 5000 Series Field
WorkStation rugged notebook computing platform, which is also offered in a
range of models. This Series is designed to meet the needs of those customers
with uses that require a smaller, more lightweight toolbox but do not require
the same degree of expandability.
The Company's 7000 Series and 5000 Series share many significant design and
performance characteristics. In particular, both series satisfy military
standards for battlefield equipment with respect to shock (up to 100Gs while
operating) and vibration. Both series share a modular design that allows for
ease of upgrading. Both series can be configured with a variety of screens,
memory capacities up to 128 Megabytes and disk drives up to 2.1 Gigabytes and
are available with x486 or Pentium processors, as well as various networking
and communications options. All of the Company's computing platforms are
compatible with DOS, Windows, Unix, OS/2 and other operating systems and come
with a sealed keyboard and a Field MousePad pointing device that can also
serve as a signature and drawing pad.
7000 Series Field WorkStation Rugged Laptop Computing Platform. The
structure of the 7000 Series Field WorkStation laptop computing platform is
based on a high-strength cast magnesium alloy external housing. Internal
components that are sensitive to shock and vibration are contained within this
housing and isolated with special tuned shock absorbing polymers, while a
shock absorbing bushing system suspends all drives and the CPU. The 7000
Series incorporates the Company's backplane/card cage design, which provides
up to six ISA/PCI expansion card slots within the housing. These slots permit
the integration of instrumentation, data acquisition and communications
capabilities in the computing platform. Also contained within the housing are
PCMCIA expansion capability, integrated AC/DC power, battery capability,
desktop ISA/PCI slots, optional integrated CD-ROM, optional dual removable
hard drive system and optional Motion Picture Experts Group
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("MPEG-II") video compression decoding boards. The units in the 7000 Series
weigh approximately 14 1/2 pounds.
5000 Series Field WorkStation Rugged Notebook Computing Platform. The
structure of the 5000 Series Field WorkStation rugged notebook computing
platform is based on an internal frame cast from a high-strength magnesium
alloy, and is encased in a specially-developed urethane coating. The skeleton
and coating protect internal sub-systems from shock and vibration. In
addition, some of the internal subsystems are suspended by a shock absorbent
bushing system. Virtually all of the electronics of the 5000 Series are
contained in a "technology module" that has been designed for easy removal,
making it possible for customers to service the units themselves and
simplifying upgrades. In addition to two optional ISA or PCI expansion slots,
all computing platforms in the 5000 Series have four universal bays in two
sizes. The two larger bays can house batteries, CD-ROM drives, an internal AC
adapter, hard drives or floppy drives. The two smaller bays can house
removable drives and/or PCMCIA slots. 5000 Series units weigh approximately 10
1/2 pounds.
The Company does not currently maintain an inventory of assembled computer
platforms; instead, it assembles its products to its customers' specifications
as orders are received. This enables the Company to provide each customer with
a computing platform that satisfies the customer's specific requirements.
The Company's 7000 Series Field WorkStation computing platforms have current
base list prices to end users of approximately $6,000 with standard features.
The Company's 5000 Series Field WorkStation computing platforms have base list
prices to end users of approximately $5,000 with standard features.
MARKETS AND CUSTOMERS
The markets for the Company's products consist of those businesses and other
entities that are seeking effective mobile computing platforms for field
personnel and functions. Users of the Company's field computing platforms and
their demands vary widely, and include: (i) the military, which needs mobile
units capable of withstanding battlefield conditions, (ii) utilities and
telecommunications test crews, which require electronic toolboxes that can
perform data acquisition, diagnostic, communications and analysis tasks to
expedite installation, repair and troubleshooting, and (iii) field sales
personnel, who need multi-media capabilities in a mobile unit that also
provides networking capabilities. Customers have found a wide variety of
specific uses for the Company's rugged computing platforms in the field, such
as the following examples drawn from some of the Company's target market
segments.
Law Enforcement. A federal law enforcement agency is conducting surveillance
and monitoring using a reconnaissance device that includes a FieldWorks
computing platform. This device was employed at the 1996 Summer Olympic Games
in Atlanta to capture digital images and to communicate sensitive information
to major intelligence agencies around the world. Among other functions, the
FieldWorks computing platform provided the expandability necessary to house
and control the device's encryption, digital image capture and satellite
communications subsystems and functions.
Aviation. The Company's computing platform is used for in-flight commercial
airplane testing, where it is connected to the plane's data logging computer
to collect information that is then transmitted to engineers for analysis.
Since the computing platform must operate in areas of the plane that are
sensitive to electro-magnetic interference ("EMI"), the Company's engineers
customized the FieldWorks computing platform to develop an EMI-certified
portable computing platform.
Agriculture. A software developer has integrated the Company's computing
platform into an on-board "precision farming" system that utilizes GPS
technology to collect and analyze geographic information, fertilizer levels,
plant population, yield and other variables present on a specific farm. These
data can then be used to select the most appropriate crops, chemicals and
farming methods. Detachable mounts allow the computing platform to be moved
from one farm vehicle to another or to the home office.
Telecommunications. Test crews use the Company's computing platforms as
electronic toolboxes to simplify and expedite installation, repair and
troubleshooting tasks, such as network testing. The expandability of the
Company's computing platforms allow for the integration of the diagnostic
instrumentation necessary for these tasks.
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Transportation. The Company's computing platforms are used in a portable
technical information and diagnostic system for use with fleets of trucks.
Maintenance personnel use the FieldWorks computing platforms incorporated in
this system not only to collect information from each vehicle's electronic
control and data logging units but also to view or graph the information and
to perform on the spot diagnostic routines that utilize the information.
The chart below lists some of the vertical markets that the Company has
targeted, along with the names of the largest FieldWorks customers in those
vertical markets:
<TABLE>
<CAPTION>
VERTICAL MARKET SIGNIFICANT CLIENTS
--------------- -------------------
<S> <C>
Military/Government U.S. Department of Defense
SAIC
California Microwave, Inc.
Lockheed Sanders, Inc.
Rockwell International
Utilities The Columbia Gas System, Inc.
International Atomic Energy Agency
Union Electric
Transportation Freightliner Corporation
Caterpillar
Detroit Diesel
Aviation Pacific Avionics
United Air Lines, Inc.
The Boeing Company
Bell Helicopter
Automotive Dateppli Inc. (for sale to Ford Motor Company)
Mercedes Benz
Chrysler Corporation
Law Enforcement Harris
New York Police Department
Telecommunications AT&T Corporation
Network General Corporation
Motorola, Inc.
JoR A.B. (for sale to L.M. Ericsson A.B., Sweden)
Instrumentation Liberty Technologies, Inc.
Gould Electronics Inc.
Minnesota Mining & Manufacturing Company (3M)
Honeywell Inc.
Imaging Texas Instruments Corporation
The Walt Disney Company
Eastman Kodak Company
Northrop Grumman Corp.
</TABLE>
During 1996, sales to two customers, Freightliner and Texas Instruments,
each accounted for more than 5% of net sales. During the same period, sales to
international customers represented approximately 24% of net sales. During
1995, sales to Freightliner accounted for more than 5% of net sales. During
the same period, sales to international customers represented approximately
35% of net sales. The Company does not believe that it is dependent upon sales
to any single customer given the Company's history of a relatively large
number of different customers and wide variations in the size and timing of
orders from both new and repeat customers.
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The Company believes that additional markets and customers will continue to
develop as more businesses recognize the benefits of providing field personnel
with effective, sophisticated computing power.
The market for portable rugged computing platforms is in the early stages of
its development. There can be no assurance that a substantial market will
develop for the Company's products within the timeframe it anticipates or at
all. See "Risk Factors--Uncertainty of Market Acceptance."
SALES AND MARKETING
The Company markets its products worldwide through a direct sales force,
independent sales representatives and distributors, OEMs, VARs and systems
integrators. The Company's sales and marketing efforts are based on the
recognition that each of the Company's target vertical markets purchase from
different channels.
The Company's direct sales force focuses its efforts on building and
maintaining relationships with large-volume, repeat purchasers of the
Company's computing platforms and with entities that the Company considers to
be dominant manufacturers or sales channel entities within their vertical
markets. The Company also utilizes a network of approximately 27 independent
sales representatives for domestic sales. Other segments of the market are
addressed by sales to VARs and systems integrators that typically sell systems
that have been configured for specific end-user applications through the
addition of hardware, software or service. For international sales, the
Company maintains a network of approximately 38 international distributors,
which are managed by the Company's director for international sales. To date,
the Company's international sales have been principally in Europe, the Far
East and Australia, with recent sales in South America and Africa.
As of January 5, 1997, the Company employed 22 people in sales and
marketing. The direct sales effort is managed by a Vice President of Sales,
five regional sales managers within the United States, one director for
federal government sales and one director for international sales. Six of the
employees are engaged principally in marketing efforts and the remaining
persons are engaged primarily in sales. The Company conducts its sales
activities from its headquarters in Minnesota as well as sales offices in
Virginia, New Jersey, California, Texas and Alabama.
The Company advertises its products both in industry-specific trade
publications in the Company's target markets, such as Aviation Week and
Maintenance Technology, and in general interest computer magazines, such as PC
Week and BYTE. In addition, the Company participates in industry trade shows
in the Company's target markets and in computer industry trade shows. For
example, the Company participates in the UTC (Utilities Trade Conference) and
the AFCEA, a government and military trade show, in addition to the COMDEX
fall and spring shows. The Company has also employed direct mail campaigns
aimed at potential customers in its target markets.
BACKLOG
The Company's order backlog at January 5, 1997, was approximately
$4,077,000, compared to approximately $599,000 at December 31, 1995. The
Company's sales are made through purchase orders. Orders are generally
shippable within the upcoming quarters unless noted as a committed future
release date order. The Company's goal is to deliver orders within four weeks
of receipt; however, the factors discussed above under "Recent Events"
contributed during the third and fourth quarters of 1996 to the creation of a
backlog of orders that currently exceeds the Company's ability to fulfill
orders within such time period. The Company currently anticipates that it will
have filled all current backlog orders and will have reduced its average
fulfillment time to its goal of four weeks by the end of the first half of
1997. There can, however, be no assurance that the Company will be able to do
so; for factors that might prevent this, see "Risk Factors--Risks Associated
with Managing Growth."
RESEARCH AND DEVELOPMENT
As of January 5, 1997, 17 of the Company's 92 employees were engaged in
research and development and engineering. The Company designs many of the
aspects and components of its computing platforms, including
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lay-out, housings and circuit boards, rather than incorporating other
manufacturers' products. The Company believes that its past efforts in this
area have provided it with significant technological advantages with regard to
rugged computing platforms, and the Company intends to continue to focus
research and development efforts on improving its core technologies. In
addition, the Company is beginning research and development efforts that are
focused on developing additional series of products that will address broader
customer preferences by providing toolboxes with a greater range of
expandability, size and price, all of which will provide the ruggedness,
processing power and ease of upgrade that characterize the Company's current
products. Finally, the Company's research and development efforts also involve
developing customized solutions for its customers who have unique, specialized
requirements. The Company has developed a number of customized solutions for
customers in the transportation, government and military, entertainment, field
service and engineering markets, and expects to continue to do so in
appropriate cases.
The Company spent approximately $0.3 million (on no net sales), $0.8 million
(representing 28% of net sales), $0.9 million (representing 12% of net sales),
and $1.9 million (representing 14% of net sales) on research and development
in 1993, 1994, 1995 and 1996, respectively.
INTELLECTUAL PROPERTY
In April 1996 the Company filed a provisional patent application related to
certain aspects of the design of its 5000 Series Field WorkStation notebook
computing platforms, including the technology module and features that enhance
its upgradeability and ruggedness. In July 1996, the Company filed a patent
application relating to the backplane design employed in its 7000 Series Field
WorkStation laptop computing platforms.
The Company claims trademark rights in the following marks used in
connection with its products: FieldWorks, FieldWorks with design, Field
MousePad, Field WorkStation, and Technology Module. In June 1996 the Company
filed applications in the U.S. Patent and Trademark Office to register
FieldWorks with design, Field Mousepad, Field WorkStation, and Technology
Module. Trademark applications are not normally examined for at least six
months from the date of filing, and the registrability of these trademarks has
not yet been determined. The Company is aware that there are third parties
that have claimed and may claim superior rights, in certain territories in the
United States, to the use of certain of the marks in which the Company claims
rights. See "Risk Factors--Dependence on Intellectual Property."
The Company places copyright notices on all software that it develops for
inclusion in its products.
In order to protect its trade secrets and other proprietary information, the
Company requires that all vendors and those customers that request
customization work execute non-disclosure agreements with respect to
confidentiality and ownership of the Company's proprietary information and of
any related innovations. The Company also requires all new employees to enter
into agreements covering confidentiality, non-disclosure, assignment of
inventions and non-solicitation of employees.
The Company licenses the source code for Basic Input/Output System ("BIOS")
software that is included in the Company's products from two companies, Award
Software, Inc. and Phoenix Technologies, Ltd. The licenses are covered by
license agreements that, among other things, provide for the payment of
royalties by the Company and grant the Company the right to modify the
software as necessary. Each of these licenses may be terminated by the
licensor in the event that the Company fails to remedy a breach of the license
agreement within a set time following notice thereof or immediately following
certain events relating to bankruptcy and insolvency. In addition, the Company
purchases video controller chips for inclusion in its products from Cirrus
Logic, Incorporated and also licenses the software associated with these
chips. The Company believes that the terms of these licenses are standard for
the industry.
There can be no assurance that the measures the Company takes with respect
to intellectual property will be sufficient to protect its intellectual
property or that such intellectual property will provide the Company with any
competitive advantage. See "Risk Factors--Dependence on Intellectual
Property."
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SERVICE AND SUPPORT
The Company maintains a service and support program for the benefit of its
customers. The Company's staff is available to monitor order status, to
provide simple troubleshooting and to answer technical questions and questions
on post-installation issues and other product information. The Company
provides a one-year warranty program under which the Company agrees to
diagnose, repair and test any product, and the Company's goal is to return the
product to the customer within 48 hours. In addition to the standard warranty,
the Company also offers limited warranty programs for extended periods. The
Company provides product training, either at the Company's in-house training
facility or at the customer's site, including in some cases customized
programs. The Company also provides customers with updates on additions to the
Company's product line and on new options, accessories and software, and
performs upgrades for its customers. In the past, the most common upgrades
have been processors and display technology.
COMPETITION
The Company believes that it currently occupies a niche in the market with
its rugged computing platforms. The Company currently faces direct competition
in this market niche from companies producing portable computers intended for
field use such as Amrel Technology, Inc., Badger Computers (a unit of Group
Financial Partners, Inc.), Dolch Computer Systems, Getac Corporation, Husky
Computers Inc., Itronix Corporation, Kontron Elektronik Corporation (a
subsidiary of Kontron Elektronik GmbH) and Panasonic Personal Computer
Company. To the extent the Company and its direct competitors expand and
develop this market niche, other manufacturers may turn their attention to
this niche and begin to produce products directly competitive with those
offered by the Company. The Company's computing platforms also face indirect
competition from a variety of different companies and products, including
consumer portable personal computers, customized portable personal computers
and single-purpose diagnostic and data collection instruments.
Both the computer industry and the diagnostic and data collection instrument
industry are intensely competitive. Many of the companies that produce or may
produce devices that compete, directly or indirectly, with the Company's
products have substantially greater financial, technological and marketing
resources than the Company. There can be no assurance that the Company will be
able to compete effectively against current or future competitors, or that
such competitors will not succeed in adapting more rapidly and effectively to
changes in technology or in the market or in developing or marketing products
that will be more widely accepted.
Both the computer industry and the diagnostic and data collection instrument
industry are characterized by rapid technological change, changes in customer
requirements, frequent new product introductions and enhancements, and
evolving industry standards. The Company's success will depend in part on its
ability to keep pace with technological developments and emerging industry
standards and to respond to customer requirements by enhancing its current
products and introducing new products. Failure to anticipate or respond
rapidly to advances in technology and to adapt the Company's products
appropriately could have a material adverse effect on the success of the
Company's products and thus on the Company's business, financial condition and
results of operations. Technological advances may also increase the level of
competition in the rugged computing platform market.
The Company's products compete with other rugged computer products primarily
on the basis of product reliability, functional expandability and system
design, which facilitates upgradeability and customization. See "Risk
Factors--Competition" and "--Risk of Technological Obsolescence."
MANUFACTURING
The Company's manufacturing process consists primarily of the mechanical
subassembly, final assembly and testing of components and subassemblies
acquired from third party suppliers and subcontractors. These functions, along
with the final packaging of its products, are performed at the Company's
production facilities in Eden Prairie, Minnesota. The Company generally
assembles products upon receiving customer orders, and operates with little
finished goods inventory. The Company's goal is to fill customer orders within
four weeks; recently, however, the Company has experienced an increase in its
order backlog. See "Recent Events" and "--Backlog."
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The Company works with a number of subcontractors to assemble mechanical
components, to manufacture printed circuit boards, and to produce certain
components, all to the Company's design specifications. A number of these
components are made using tools that have been designed for, and belong to,
the Company, but that are located on the manufacturer's premises. The Company
has relationships with subcontractors who provide subassemblies on a turn-key
basis. The Company also purchases components directly from one or more third
party suppliers before forwarding them to subcontractors for assembly. In
general, the Company believes that these services are available from a number
of different companies.
The Company employs extensive quality control systems and has a quality
assurance department that consists of seven full-time employees. The Company
received ISO 9001 quality assurance certification of its facilities in March
1996.
The Company currently has a limited manufacturing capability, and has, to
date, had no experience with high volume production runs of its products.
There can be no assurance that the Company will successfully develop this
manufacturing capability. See "Risk Factors--Risks Associated with Managing
Growth." Further, the Company's products employ a number of advanced high
technology components and there can be no assurance that these components will
continue to be available on acceptable terms or at all. See "Risk Factors--
Dependence on Availability of Components."
EMPLOYEES
As of January 5, 1997, the Company employed 92 full-time employees, of whom
36 were engaged primarily in manufacturing, 22 were engaged primarily in sales
and marketing, 17 were engaged primarily in engineering and research and
development, 13 were engaged primarily in administration and four were engaged
primarily in customer service. The Company also employs part-time or temporary
employees, mostly in manufacturing. None of the Company's employees are
represented by any labor union or other collective bargaining unit. The
Company believes that its relations with its employees are good.
The Company maintains $1 million key man life insurance policies on the
lives of each of Gary J. Beeman, the Company's President and Chief Executive
Officer, and Robert C. Szymborski, the Company's Executive Vice President and
Chief Technical Officer, with the proceeds payable to the Company.
FACILITIES
The Company currently leases an approximately 24,000 square foot facility in
Eden Prairie, Minnesota. This space houses the Company's headquarters and
manufacturing operations. This lease term expires in June 1999. The Company
believes that its existing facilities are adequate to meet its requirements
only through early to mid-1997 and has recently begun searching for additional
expansion space, although no facility has been located to date. The Company
believes that suitable expansion space is available in the proximity of its
existing facilities. There can, however, be no assurance that suitable
facilities will be available when needed on acceptable terms, if at all, or
that the Company can relocate its manufacturing and other operations without
significant disruption. See "Risk Factors--Risks Associated with Managing
Growth."
The Company also leases approximately 2,700 square feet in Springfield,
Virginia, and approximately 200 square feet in Woodland Hills, California. The
office of the Company's director of federal business, a repair center,
training center and demonstration center are located at the Springfield
facility, where the lease term expires in June 2000. The offices of the
Company's regional sales manager for the Western Region are located at the
Woodland Hills facility, where the lease term expires on December 31, 1997,
subject to extension.
LEGAL PROCEEDINGS
On June 25, 1996, a shareholder of the Company commenced an action in
Minnesota state district court against the Company and certain directors of
the Company. The essence of the shareholder's allegations was that the Company
issued shares of Common Stock without the authorization of all shareholders in
violation of certain agreements and that certain of the Company's directors
treated the plaintiff unfairly. The shareholder requested unspecified
equitable relief. On October 8, 1996, the district court judge granted the
Company's motion for summary judgment dismissing the lawsuit, and on October
29, 1996, judgment was entered in favor of the Company. By notice dated
January 15, 1997, the shareholder filed an appeal with the Minnesota Court of
Appeals. A briefing schedule has not been set and a date for oral arguments
has not been determined.
36
<PAGE>
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- ------------------------------------------------
<S> <C> <C>
Gary J. Beeman........... 43 President, Chief Executive Officer and Treasurer
Robert C. Szymborski..... 48 Executive Vice President, Chief Technical
Officer, Secretary and Director
G. Paige Hiatt........... 47 Vice President of Sales
Steven A. Manske ........ 41 Vice President of Finance
Robert W. Heller......... 51 Director
George E. 61 Director
Kline(/1/)(/2/).........
David C. Malm- 53 Chairman of the Board of Directors
berg(/1/)(/2/)..........
</TABLE>
- -----------------
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of Directors.
Gary J. Beeman was a co-founder of the Company and has served as its
President, Chief Executive Officer, Treasurer and a member of the Board of
Directors of the Company since the Company's inception in October 1992. He
also served as the Company's Chairman of the Board of Directors until January
1997. Mr. Beeman was also a co-founder of Network Communications Corporation
("NCC"), a Minneapolis-based designer and manufacturer of portable LAN/WAN
data communications diagnostic instrumentation, and served as Vice President
of Marketing and director of NCC from 1983 to 1991. Prior to that, Mr. Beeman
served as a marketing manager for ADC Telecommunications, Inc. ("ADC") and as
a program manager for Texas Instruments Corporation.
Robert C. Szymborski was a co-founder of the Company and has served as
Executive Vice President, Chief Technical Officer and Secretary and a member
of the Board of Directors since the Company's inception in October 1992. Mr.
Szymborski was also a co-founder of NCC and served as its Vice President of
Engineering from 1983 to 1992. Prior to that, Mr. Szymborski served as
Director of Engineering for ADC.
G. Paige Hiatt has served as the Company's Vice President of Sales since
July 1996. From 1994 to July 1996, Mr. Hiatt was a self-employed
manufacturer's representative who represented the Company in the San Francisco
area. From 1992 to 1993 he served as Vice President Sales for The Vantive
Corporation, a developer of client-server based customer response software.
From 1982 to 1992, Mr. Hiatt held various positions, including Director
Western Region and Vice President European Systems Sales, with Grid Systems
Corporation, a manufacturer of high performance portable computer systems.
Steven A. Manske has served as Vice President of Finance of the Company
since July 1995. Prior to his employment with the Company, Mr. Manske was
employed by Jostens, Inc., a provider of recognition and affiliation products,
from 1986, most recently as a division controller. Mr. Manske has also served
as a management consultant for Pragmatek Consulting Group.
Robert W. Heller has served as a director of the Company since January 1997.
He is the President and Chief Executive Officer of MiTech Research &
Development, Inc., a company involved in environmental cleanup using
bioremediation technology, and also works as a consultant to growing companies
regarding strategic, operational and international issues. From 1977 to 1996,
Mr. Heller held a variety of positions, including most recently Chief
Executive Officer, at Advance Circuits, Inc., a fabricator of printed circuit
boards that was acquired by Johnson Matthey Public Limited Company in 1995.
Mr. Heller is also a member of the boards of directors of Reuter
Manufacturing, Inc., and Capri, Inc.
George E. Kline has served as a director of the Company since February 1994.
He has been President of Venture Management, a financial consulting services
corporation, since 1966. Mr. Kline has also served as the General Partner of
Brightstone Capital, Ltd., a venture fund, since 1985 and has been a private
investor and
37
<PAGE>
financial consultant for over five years. He is also a member of the boards of
directors of Applied Biometrics, Inc., Health Fitness Physical Therapy, Inc.,
Rimage Corporation, CyberOptics Corporation and Nutrition Medical, Inc.
David C. Malmberg has served as Chairman of the Board of Directors since
January 1997 and as a director of the Company since October 1996. Since 1994,
Mr. Malmberg has been the president of David C. Malmberg, Inc., a management
consulting and private investment management firm. From 1972 to 1994 he served
in various positions, including Vice Chairman, President and Chief Operating
Officer, at National Computer Systems Inc., a provider of information systems
and services to the education, commercial and financial markets. Mr. Malmberg
is the Chairman of the Board of National City Bank in Minneapolis and serves
on the boards of directors of National City Bancorporation, Three Five
Systems, Inc. and PPT/Vision, Inc.
Each member of the Board of Directors holds office until the regular meeting
of shareholders next held after such director's election and until such
director's successor shall have been elected and shall qualify or until the
earlier death, resignation, removal, or disqualification of such director.
The Company's executive officers are elected or appointed by resolution
approved by the affirmative vote of a majority of the members of the Board of
Directors, and serve until their successors are elected or appointed. Any
officer may be removed from his or her office by the board of directors at any
time, with or without cause.
DIRECTORS' COMPENSATION
The Company at present does not pay any directors' fees. The Company may
reimburse its outside directors for expenses actually incurred in attending
meetings of the Board of Directors. In the past, non-employee directors have
each automatically been granted non-qualified options to purchase shares of
Common Stock under a plan adopted in February 1994: 25,000 shares at the time
of election to the Board of Directors and 10,000 shares at each re-election.
All such options have an exercise price equal to the fair market value of a
share of Common Stock on the day of grant and expire ten years after the date
of grant. Such options vest over varying periods not exceeding three years.
In connection with an agreement relating to consulting services to be
provided by David Malmberg, the Company's Chairman of the Board, as of January
21, 1997, the Company granted Mr. Malmberg an option to purchase 100,000
shares of Common Stock under the Company's 1994 Long-Term Incentive and Stock
Option Plan (the "1994 Stock Option Plan"). This option vested as to 25% on
the date of grant and will vest in full on January 20, 2007, subject to
accelerated vesting in cumulative 25% increments upon the satisfaction of
certain specified management and performance goals; has a per share exercise
price equal to the Price to Public in this offering; and expires ten years
from the date of grant. In addition, the Company entered into an oral
agreement whereby it will pay Mr. Malmberg $5,000 per month for such
consulting services.
In December 1996, the Board of Directors approved the FieldWorks,
Incorporated 1996 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan"), which was approved by the shareholders of the Company in January 1997.
See "--Stock Plans."
COMMITTEES
The Board of Directors has established a Compensation Committee and an Audit
Committee. The Compensation Committee makes recommendations concerning
executive salaries and incentive compensation for employees of the Company,
subject to ratification by the full Board of Directors, and administers the
Company's 1994 Stock Option Plan.
The Audit Committee reviews the results and scope of the audit and other
services provided by the Company's independent public accountants, as well as
the Company's accounting principles and its system of internal controls, and
reports the results of its review to the full Board of Directors and to
management.
LIMITATION OF LIABILITY; INDEMNIFICATION
Both the Company's Amended and Restated Articles of Incorporation, as
currently in effect, and its Second Amended and Restated Articles of
Incorporation, which will be effective upon the closing of this offering,
provide that, to the fullest extent permitted by Minnesota law, a director
shall not be liable to the Company or its shareholders for monetary damages
for breach of fiduciary duty as a director.
38
<PAGE>
Both the Company's Amended and Restated Bylaws, as currently in effect, and
its Second Amended and Restated Bylaws, which will be effective upon the
closing of this offering, limit the liability of directors in their capacity
as directors to the full extent permitted by Minnesota law. As permitted by
Minnesota law, a director shall not be liable to the Company or its
shareholders for monetary damages for breach of fiduciary duty as a director,
except (i) for any breach of the director's duty of loyalty to the Company or
its shareholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) for
dividends, stock repurchases and other distributions made in violation of
Minnesota law or for violations of the Minnesota securities laws, (iv) for any
transaction from which the director derived an improper personal benefit or
(v) for any act or omission occurring prior to the effective date of the
provision in the Company's Amended and Restated Bylaws limiting such
liability. These provisions do not affect the availability of equitable
remedies, such as an action to enjoin or rescind a transaction involving a
breach of fiduciary duty, although, as a practical matter, equitable relief
may not be available. The above provisions also do not limit liability of the
directors for violations of, or relieve them from the necessity of complying
with, the federal securities law.
EXECUTIVE COMPENSATION
Summary Compensation. The following table sets forth the cash and noncash
compensation for 1996, 1995 and 1994 awarded to or earned by the Chief
Executive Officer and all executive officers of the Company whose salary and
bonus earned in 1996 exceeded $100,000 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER(1) COMPENSATION(2)
--------------------------- ---- -------- ------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Gary J. Beeman.................. 1996 $140,000 $17,500 $5,400 $185
President, Chief Executive 1995 131,846 1,732 5,400 185
Officer and Treasurer 1994 120,000 -- -- 185
Robert C. Szymborski ........... 1996 140,000 17,500 5,400 185
Executive Vice President, Chief 1995 131,846 1,732 5,400 185
Technical Officer, Secretary 1994 120,000 -- -- 185
and Director
</TABLE>
- -----------------
(1) Represents payment of auto allowance.
(2) Represents premiums paid by the Company on life insurance policies for the
benefit of the Named Executive Officers.
Option Grants. The following table summarizes options granted to the Named
Executive Officers during 1996:
<TABLE>
<CAPTION>
OPTION GRANTS IN YEAR ENDED JANUARY 5, 1997
-----------------------------------------------------------------------
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
NUMBER OF SHARES PERCENT OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM(2)
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION ----------------
NAME GRANTED(1) 1996 PER SHARE DATE 5% 10%
- ---- ---------------- ---------------- --------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Gary J. Beeman.......... 50,000 15.6% $5.00 4/23/2001 $69,070 $152,628
Robert C. Szymborski.... 50,000 15.6 5.00 4/23/2001 69,070 152,628
</TABLE>
- -----------------
(1) Incentive stock options granted under the 1994 Stock Option Plan on April
23, 1996. Such options vested as to all shares on the date of grant.
(2) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission (the
"SEC") and do not represent the Company's estimate or projection of the
Company's future stock prices. These amounts represent certain assumed
rates of appreciation and may not necessarily be achieved. Actual gains,
if any, on stock option exercises are dependent on the future performance
of the Common Stock and overall stock market conditions.
39
<PAGE>
Option Values. The following table summarizes the value of options held at
January 5, 1997, by the Named Executive Officers. Neither Named Executive
Officer exercised any options during 1996.
<TABLE>
<CAPTION>
AGGREGATED OPTION VALUES AT JANUARY 5, 1997
----------------------------------------------------
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT JANUARY 5, 1997 JANUARY 5, 1997(1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- -------------------------- -------------------------
<S> <C> <C>
Gary J. Beeman............. 50,000/0 $125,000/$0
Robert C. Szymborski....... 50,000/0 125,000/ 0
</TABLE>
- -----------------
(1) Value is based on the difference between an assumed initial public
offering price of $7.50 per share and the exercise price of such options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. George E. Kline has served as a member of the Compensation Committee of
the Board of Directors since the establishment of the Compensation Committee
in February 1995. Mr. David C. Malmberg has served as a member of the
Compensation Committee of the Board of Directors since October 1996.
In December 1993, Venture Management, Inc., Profit Sharing Plan (of which
Mr. Kline is the sole trustee) purchased 1,500 shares of Common Stock for
$1,500.
Mr. Kline personally guaranteed the $500,000 bank line of credit that the
Company secured in July 1994 and amended in April 1995 to provide borrowing
capacity of up to $800,000. As consideration for Mr. Kline's guaranty, the
Company granted to Mr. Kline a warrant to purchase 100,000 shares of Common
Stock at an exercise price of $1.00 per share. Mr. Kline exercised this
warrant in December 1995. In December 1995, the line of credit was replaced by
a revolving line of credit agreement, with a borrowing capacity of $1,500,000.
This line of credit was also personally guaranteed by Mr. Kline; in
consideration of the guarantee, the Company issued a three-year warrant to Mr.
Kline to purchase 40,000 shares of the Company's common stock at $5.00 per
share. (In March 1996, the term of the December 1995 line of credit was
extended through April 1997 and the borrowing capacity was increased to
$2,000,000; the additional $500,000 was guaranteed by a non-affiliate
shareholder of the Company who received a three-year warrant to purchase
25,000 shares of the Company's common stock at $5.00 per share.) In December
1996, the Company repaid all amounts outstanding under this line of credit and
terminated this line of credit.
On May 30, 1996, Mr. Kline exercised a non-incentive stock option to
purchase 25,000 shares of the Company's common stock, which option had been
granted in March 1994, at an exercise price of $1.00 per share. Such shares
were issued in the name of Venture Management, Inc., a company of which Mr.
Kline is president. On June 21, 1996, Mr. Kline exercised a non-incentive
stock option to purchase 10,000 shares of the Company's common stock, which
option had been granted in August 1995, at an exercise price of $3.00 per
share.
Mr. Kline is also a member of a limited liability company that is the
general partner of certain venture capital limited partnerships (such limited
liability company and limited partnerships, collectively, the "Brightstone
Entities," as more fully described in Note 7 to the table under "Principal
Shareholders"). As such, Mr. Kline may be deemed to share voting and
investment of power for the shares held by the Brightstone Entities; Mr.
Kline, however, disclaims beneficial ownership of all such shares except to
the extent of his proportionate pecuniary interest in the Brightstone
Entities. Mr. Kline also disclaims beneficial ownership of certain shares of
the Company's common stock owned of record by his wife. See "Principal
Shareholders" and "Certain Transactions."
STOCK PLANS
1994 Stock Option Plan. The Board of Directors adopted the 1994 Stock Option
Plan on March 23, 1994, and the shareholders approved it on June 16, 1994.
Pursuant to the 1994 Stock Option Plan, executive officers, other employees
and consultants of the Company may receive options to purchase Common Stock.
The 1994 Stock Option Plan provides for the grant both of incentive stock
options intended to qualify for preferential tax
40
<PAGE>
treatment under Section 422 of the Internal Revenue Code of 1986, as amended,
and nonqualified stock options that do not qualify for such treatment. The
exercise price of incentive stock options must equal or exceed the fair market
value of the Common Stock at the time of grant. The 1994 Stock Option Plan
also provides for grants of stock appreciation rights, restricted stock awards
and performance awards and allows for the grant of restoration options.
The Compensation Committee administers the 1994 Stock Option Plan and
approves awards thereunder. A total of 720,000 shares of Common Stock was
initially reserved for issuance under the 1994 Stock Option Plan. In May 1996,
the 1994 Stock Option Plan was amended to increase the number of shares of
Common Stock available for issuance to 1,100,000. In January 1997, the 1994
Stock Option Plan was amended to increase the number of shares of Common Stock
available for issuance to 1,500,000. Incentive stock options may only be
granted under the Stock Option Plan to any full or part-time employee of the
Company (including officers and directors who are also employees) and of its
present and future subsidiary corporations. Full or part-time employees,
directors who are not employees, and consultants and independent contractors
to the Company or its subsidiaries or affiliates are eligible to receive
options which do not qualify as incentive stock options, as well as other
awards. In determining the persons to whom options and awards shall be granted
and the number of shares subject to each, the Board of Directors may take into
account the nature of services rendered by the respective employees or
consultants, their present and potential contributions to the success of the
Company, and such other factors as the Board of Directors in its discretion
shall deem relevant.
The Board of Directors may amend or discontinue the 1994 Stock Option Plan
at any time, but may not make any revisions or amendments to the 1994 Stock
Option Plan without shareholder approval that increase the number of shares
subject to the 1994 Stock Option Plan, decrease the minimum exercise price,
extend the maximum exercise term, or modify the eligibility requirements. The
Board of Directors may not alter or impair any award granted under the 1994
Stock Option Plan without the consent of the holder of the award. The 1994
Stock Option Plan will expire March 23, 2004.
Pursuant to the terms of the 1994 Stock Option Plan, appropriate adjustments
to the 1994 Stock Option Plan and outstanding options will be made in the
event of changes in the Common Stock through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, or other change
in corporate structure.
Directors' Plans. On February 1, 1994, the Board of Directors adopted a
stock option plan for non-employee directors that provided for the automatic
grant of a non-qualified option covering 25,000 shares of Common Stock to each
non-employee director at the time of his or her initial election to the Board
of Directors, and an automatic grant of a non-qualified stock option to
purchase 10,000 shares of Common Stock each time such director was re-elected
for a subsequent term. All such options, which were granted outside of the
1994 Stock Option Plan, have an exercise price equal to the fair market value
of the Common Stock on the date of grant, vest over varying periods not
exceeding three years and have terms of 10 years from the date of grant.
In January 1997, the shareholders of the Company approved the Directors'
Plan, which had been approved by the Board of Directors in December 1996.
Under the Directors' Plan, each non-employee director will automatically
receive non-qualified options to purchase shares of Common Stock as follows:
25,000 shares (each an "Initial Grant") at the time of election to the Board
of Directors and 10,000 shares (each an "Annual Grant") at each re-election.
All such options will have an exercise price equal to the fair market value of
a share of Common Stock on the day of grant and will expire ten years after
the date of grant. Initial Grants will vest one third on the date of grant and
one third on each of the first and second anniversaries, and Annual Grants
will vest six months from the date of grant. The Directors' Plan will expire
January 19, 2007. Pursuant to the terms of the Directors' Plan, appropriate
adjustments will be made in the event of certain changes in the Common Stock.
Savings Plan. The Company's savings plan (the "401(k) Plan") was adopted by
the Company effective January 1996.
41
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of February 15, 1997 (after giving effect to
the automatic conversion of all shares of Preferred Stock into Common Stock
upon the consummation of this offering) and as adjusted to reflect the sale by
the Company of the 1,850,000 shares of Common Stock offered hereby by: (i)
each person who is known by the Company to own beneficially more than 5% of
the Common Stock, (ii) each of the Company's directors, (iii) each of the
Named Executive Officers, and (iv) all directors and executive officers of the
Company as a group:
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
NUMBER OF SHARES OWNED
SHARES ---------------------------
BENEFICIALLY BEFORE AFTER
NAME OWNED(/1/) OFFERING(/1/) OFFERING(/1/)
---- ------------ ------------- -------------
<S> <C> <C> <C>
Robert C. Szymborski(/2/)......... 832,916 12.9% 10.0%
Gary J. Beeman(/3/)............... 768,152 11.9 9.3
George E. Kline(/4/).............. 244,500 3.8 3.0
David C. Malmberg(/5/)............ 37,400 * *
Robert W. Heller(/6/)............. 33,500 * *
Brightstone Entities(/7/)......... 743,334 11.4 8.9
Network General Corporation(/8/).. 540,000 8.4 6.5
All executive officers and
directors as a group
(7 persons)(/9/)................. 1,940,518 29.4 23.0
</TABLE>
- -----------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission, and generally includes voting power
and/or investment power with respect to securities. Shares of Common Stock
subject to options or warrants currently exercisable or exercisable within
60 days of February 15, 1997, are deemed outstanding for computing the
percentage of the person holding such options or warrants but are not
deemed outstanding for computing the percentage of any other person. This
table does not reflect any shares of Common Stock that these existing
shareholders may acquire in this offering. Except as indicated by
footnote, the Company believes that the persons named in this table, based
on information provided by such persons, have sole voting and investment
power with respect to the shares of Common Stock indicated.
(2) Includes 50,000 shares of Common Stock issuable pursuant to currently
exercisable options. Mr. Szymborski's address is 9961 Valley View Road,
Eden Prairie, Minnesota 55344.
(3) Includes 50,000 shares of Common Stock issuable pursuant to currently
exercisable options. Mr. Beeman's address is 9961 Valley View Road, Eden
Prairie, Minnesota 55344.
(4) Includes 41,500 shares of Common Stock held of record by Venture
Management, Inc., Profit Sharing Plan, of which Mr. Kline is the sole
trustee; 43,400 shares of Common Stock issuable pursuant to currently
exercisable options and warrants; and 60,000 shares of Common Stock held
of record by Mr. Kline's wife, of which Mr. Kline disclaims beneficial
ownership. Excludes an aggregate of 743,334 shares owned of record by, or
issuable upon exercise of outstanding warrants to, the Brightstone
Entities. The Brightstone Entities are a series of limited partnerships
and one entity, a limited liability company, which is the general partner
of each of the limited partnerships. Mr. Kline is a member of the limited
liability company, and as such may be deemed to share voting and
investment of power for the shares held by the Brightstone Entities,
however, Mr. Kline disclaims beneficial ownership of all such shares
except to the extent of his proportionate pecuniary interest in the
Brightstone Entities. See Note 7.
(5) Includes 8,500 shares of Common Stock issuable pursuant to currently
exercisable options.
(6) Includes 8,500 shares of Common Stock issuable pursuant to currently
exercisable options.
(7) Includes 200,000 shares of Common Stock held of record by Brightstone IV
Partners ("Brightstone IV"); 200,000 shares of Common Stock held of record
by Brightstone Fund V Partnership ("Brightstone V"); 100,000 shares of
Common Stock held of record by Brightstone Fund VI L.P. ("Brightstone
VI"); 83,334 shares of Common Stock held of record by Brightside Fund
Limited Partnership ("Brightside"); 50,000 shares of Common Stock held of
record by Brightstone Fund VII L.P. ("Brightstone VII"); 30,000 shares of
Common Stock issuable upon the exercise of warrants issued to Brightstone
Capital Ltd., LLC ("Brightstone Capital"); 20,000 shares of Common Stock
issuable upon the exercise of warrants issued to Brightstone Fund VII;
20,000 shares of Common Stock issuable upon the exercise of warrants
issued to Brightbridge Fund I L.P. ("Brightbridge," and, together with
Brighstone IV, Brightstone V, Brightstone VI, Brightstone VII,
Brightbridge and Brightstone Capital, the "Brightstone Entities"); 15,000
shares of Common Stock issuable upon the exercise of warrants issued to
Brightstone IV; 15,000 shares of Common Stock issuable upon exercise of
warrants issued to Brightstone V; and 10,000 shares of Common Stock
issuable upon the exercise of warrants issued to Brightstone VI.
Brightstone IV, Brightstone V, Brightstone VI, Brightstone VII, Brightside
and Brightbridge are all limited partnerships of which Brightstone Capital
is the general partner; Brightstone Capital is a limited liability company
of which Mr. Kline is a member. The address of the Brightstone Entities is
7200 Metro Boulevard, Edina, Minnesota 55439.
(8) Includes 40,000 shares of Common Stock issuable upon exercise of warrants.
The address of Network General Corporation is 4200 Bohannon Drive, Menlo
Park, California 94025.
(9) Includes 23,650 shares of Common Stock issuable pursuant to currently
exercisable options in addition to those shares of Common Stock reflected
in notes 2 through 6.
42
<PAGE>
CERTAIN TRANSACTIONS
For certain information regarding George Kline, a director of the Company,
see "Management--Compensation Committee Interlocks and Insider Participation."
On September 13, 1994, Brightstone IV and Brightstone V, partnerships of
which George Kline, a director of the Company, is a general partner, loaned
the Company an aggregate of $300,000 (the "1994 Loans"). The 1994 Loans bore
interest at an annual rate of 10% and were due on February 28, 1995. In
connection with the 1994 Loans, the Company issued warrants to purchase an
aggregate of 30,000 shares of Common Stock at a price of $3.00 per share to
Brightstone IV and Brightstone V. In March 1995, the Company repaid $200,000
original principal amount of the 1994 Loans, together with $13,750 interest.
In June 1995, the Company repaid the remaining $100,000 original principal
amount of the 1994 Loans, together with $2,500 interest.
In May and June 1996, Brightstone VI and Brightstone VII loaned the Company
an aggregate of $1,540,000 (the "June Loans"). The June Loans bore interest at
an annual rate of 10% and were due on August 2, 1996. In connection with the
June Loans, the Company issued to Brightstone Capital warrants (the "June
Warrants") to purchase 15,000 shares of Common Stock at a price of $10.00 per
share.
On July 15, 1996, Brightbridge loaned the Company $500,000. This loan, which
is represented by a promissory note (the "July Note"), bears interest at 10%
per year and was initially due on December 31, 1996; provided, that the July
Note would become payable in full within thirty (30) days after the effective
date of any registration statement relating to an initial public offering of
the Company's equity securities. In connection with this loan, the Company
issued to Brightbridge warrants (the "July Warrants") to purchase a number of
shares determined in accordance with a formula contained in the July Warrants
at an exercise price equal to 80% of the price to public of shares of the
Company's common stock in the Company's first registration statement to be
declared effective.
On July 29, 1996 the Company sold 300,000 shares of Series A Convertible
Preferred Stock to Network General Corporation for $10.00 per share and in
connection therewith issued warrants to purchase 24,000 shares of Common Stock
at $10.00 per share. The number of shares to be issued upon conversion, the
number of shares subject to the warrants and the exercise price of the
warrants are all subject to adjustment in the event that the Price to Public
in this Offering is less than $12.50 per share. In that event, the conversion
price will be reduced to a price equal to 80% of the Price to Public and the
warrant exercise price and the number of warrant shares will be similarly
adjusted.
As of August 2, 1996, the Company and Brightbridge amended the July Note to
subordinate it to certain bank indebtedness of the Company and to extend its
due date from December 31, 1996, to May 1, 1997.
On August 2, 1996, the Company repaid all principal amounts outstanding on
the June Loans, together with an aggregate of $27,168 in interest.
In September 1996, Brightstone VI and Brightstone VII loaned the Company an
aggregate of $750,000. These loans, which are represented by Promissory Notes
(the "September Notes"), bear interest at 12% per year and were initially due
on the date 180 days from the date of each such loan; provided, that the
September Notes would become payable in full within thirty (30) days after the
effective date of any registration statement relating to an initial public
offering of the Company's equity securities. In connection with the September
Notes, the Company issued to Brightstone VI, Brightstone VII and Brightstone
Capital warrants (the "September Warrants") to purchase a number of shares
determined in accordance with a formula contained in the September Warrants,
which formula (other than the formula in the warrants issued to Brightstone
Capital) depended on whether the September Notes were repaid before or after
the date 90 days after the date of each such note, at an exercise price equal
to 80% of the price per share received by the Company in its next sale of
equity securities with gross proceeds of $2.5 million or more.
43
<PAGE>
As of October 15, 1996, the Company agreed with Brightstone Capital,
Brightstone VI, Brightstone VII and Brightbridge to amend the June Warrant,
the July Warrants, the September Notes and the September Warrants. Pursuant to
these amendments, the final due date of each of such Notes was extended to May
1, 1997; provided, that all such Notes are payable in full within 30 days
after the effective date of any registration statement relating to an initial
public offering of the Company's equity securities; the exercise price under
each of such Warrants was amended to $5.00 per share; and the September
Warrants were amended to provide that they are exercisable for an aggregate of
45,000 shares of Common Stock. As a result of the exercise price amendment,
the July Warrants are currently exercisable for 20,000 shares of Common Stock.
44
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering, the Company will be authorized to issue 30
million shares of Common Stock, $.001 par value, and five million shares of
undesignated preferred stock, $.001 par value. As of January 5, 1997 (assuming
the automatic conversion of the Preferred Stock into Common Stock), there were
6,380,736 shares of Common Stock outstanding, which were held of record by 210
shareholders, and no shares of undesignated preferred stock outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of shareholders. There is no
cumulative voting for the election of directors, and the holders of more than
50% of the outstanding Common Stock can elect all directors. Subject to
preferences that may be applicable to any outstanding preferred stock, holders
of Common Stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor and
in liquidation proceedings. Holders of Common Stock have no preemptive or
subscription rights and there are no redemption rights with respect to such
shares. The outstanding shares of Common Stock are, and the shares of Common
Stock offered hereby will be, fully paid and nonassessable.
PREFERRED STOCK
The Second Amended and Restated Articles of Incorporation of the Company to
be in effect upon the closing of this offering authorize the Company's Board
of Directors, without further shareholder action, to issue preferred stock in
one or more series and to fix the voting rights, liquidation preferences,
dividend rights, repurchase rights, conversion rights, redemption rights,
terms, including sinking fund provisions, and certain other rights and
preferences, of any such preferred stock.
WARRANTS AND OPTIONS
As of January 5, 1997, the Company had outstanding warrants to purchase a
total of 594,745 shares of Common Stock at a weighted average exercise price
of $4.72 per share. Such warrants are all currently exercisable and expire on
dates ranging from December 20, 1998 to July 31, 2001. All outstanding warrant
agreements provide for antidilution adjustments in the event of certain
mergers, consolidations, reorganizations, recapitalizations, stock dividends,
stock splits, or other changes in the corporate structure of the Company.
As of January 5, 1997, the Company had outstanding options to purchase a
total of 778,400 shares of Common Stock at a weighted average exercise price
of $3.40 per share.
REGISTRATION RIGHTS
Following the completion of this offering, (i) the holders of 304,745 of the
warrants described above will be entitled to certain incidental or "piggyback"
rights to include the shares issued or issuable upon exercise of such warrants
in certain registration statements filed by the Company, (ii) the holder or
holders of the 500,000 shares of Common Stock issued upon the automatic
conversion of the Preferred Stock and the holder or holders of 40,000 shares
issuable upon the exercise of the warrants described above shall be entitled,
if the Company qualifies for the use of Form S-3 and subject to certain other
limitations, to require the Company to file registration statements on such
Form covering the sale of such shares and (iii) the holders of up to 166,667
shares of Common Stock issued or issuable upon conversion of certain of the
principal amounts of certain outstanding bridge loans and of 250,000 shares of
Common Stock issued or issuable upon exercise of the warrants described above
shall have certain incidental or "piggyback" rights to include the shares
issued or issuable upon exercise of such warrants or conversion of such notes
in certain registration statements filed by the Company and shall also have
the right, more than one year after the completion of this offering and on a
one-time basis only, to require the Company to file a registration statement
on Form S-3 and keep it effective for a period of nine months.
45
<PAGE>
BRIDGE LOANS
The Company has outstanding an aggregate of $1,350,000 in original principal
amount of loans which the Company received between May and September 1996 (the
"September Loans"). All original principal amount of the September Loans,
together with interest thereon, is due on May 1, 1997; provided, that the
September Loans shall be payable in full within 30 days after the effective
date of the registration statement of which this Prospectus forms a part.
The Company has outstanding an aggregate of $5,000,000 in original principal
amount of bridge loans which the Company received in December 1996 (the
"December Loans"). All original principal amount of the December Loans,
together with interest thereon, is due on June 30, 1997; provided, that the
Company may extend the final maturity of the December Loans to December 31,
1997, by written notice delivered to holders at any time before June 30, 1997;
provided, further, that the December Loans shall be payable in full within 30
days after the effective date of the registration statement of which this
Prospectus forms a part. During the 30 days after the effective date of the
registration statement of which this Prospectus forms a part, up to 20% of the
original principal amount of each of the December Loans is convertible into
shares of Common Stock at the option of the holder at a conversion price equal
to 80% of the Price to Public in this offering. In connection with the
December Loans, the Company issued five-year warrants to purchase an aggregate
of 250,000 shares of Common Stock at an exercise price equal to 80% of the
Price to Public in this offering.
PROVISIONS OF THE COMPANY'S ARTICLES AND BYLAWS AND THE MINNESOTA BUSINESS
CORPORATION ACT
The existence of authorized but unissued preferred stock, described above,
and certain provisions of the Company's Second Amended and Restated Articles
of Incorporation and Second Amended and Restated Bylaws (both of which will be
effective upon the closing of this offering) and of Minnesota law, described
below, could have an anti-takeover effect. These provisions are intended to
provide management flexibility, to enhance the likelihood of continuity and
stability in the composition of the Board of Directors and in the policies
formulated by the Board of Directors and to discourage an unsolicited takeover
of the Company if the Board of Directors determines that such a takeover is
not in the best interests of the Company and its shareholders. However, these
provisions could have the effect of discouraging certain attempts to acquire
the Company which could deprive the Company's shareholders of opportunities to
sell their shares of Common Stock at prices higher than prevailing market
prices.
Section 302A.671 of the Minnesota Business Corporation Act (the "MBCA")
applies, with certain exceptions, to any acquisition of voting stock of the
Company (from a person other than the Company, and other than in connection
with certain mergers and exchanges to which the Company is a party) resulting
in the beneficial ownership of 20% or more of the voting stock then
outstanding. Section 302A.671 requires approval of any such acquisitions by a
majority vote of the shareholders of the Company prior to its consummation. In
general, shares acquired in the absence of such approval are denied voting
rights and are redeemable at their then fair market value by the Company
within 30 days after the acquiring person has failed to give a timely
information statement to the Company or the date the shareholders voted not to
grant voting rights to the acquiring person's shares.
Section 302A.673 of the MBCA generally prohibits any business combination by
the Company, or any subsidiary of the Company, with any shareholder which
purchases 10% or more of the Company's voting shares (an "interested
shareholder") within four years following such interested shareholder's share
acquisition date, unless the business combination or the acquisition of shares
is approved by the affirmative vote of a majority of a committee of all of the
disinterested members of the Board of Directors, before the interested
shareholder's share acquisition date.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar with respect to the Common Stock will be
Norwest Bank Minnesota, N.A.
46
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for Common
Stock of the Company. Future sales of substantial amounts of Common Stock in
the public market could adversely affect the prevailing market price and
impair the Company's ability to raise additional funds.
Upon completion of this offering, the Company will have outstanding
8,230,736 shares of Common Stock (or 8,508,236 shares if the Underwriters'
over-allotment option is exercised in full). Of those shares, 1,850,000 shares
(or 2,127,500 shares, if the Underwriters' over-allotment option is exercised
in full) will be freely tradeable without restriction or further registration
under the Securities Act, unless held by "affiliates" of the Company, as that
term is defined in Rule 144 under the Securities Act (whose sales would be
subject to certain volume limitations and other restrictions described below).
The remaining 6,380,736 shares of Common Stock will be "restricted
securities," as that term is defined in Rule 144 under the Securities Act, and
may be sold in the public market only if registered or if they qualify for an
exemption from registration under Rule 144, Rule 144(k), Rule 701 or
otherwise. All directors, executive officers and other affiliates of the
Company who own, in the aggregate, 2,364,802 shares of Common Stock, have
agreed that they will not sell, directly or indirectly any Common Stock
without the prior consent of the Representative for a period of 180 days from
the date of this Prospectus, and certain other shareholders, who own, in the
aggregate, shares of Common Stock, have agreed that they will
not sell, directly or indirectly, any Common Stock without the prior consent
of the Representative for a period of 90 days from the date of this
Prospectus. Of the shares not subject to these agreements, (i) approximately
shares will be eligible for immediate sale without restriction pursuant
to Rule 144(k) on the effective date of this offering, (ii) approximately
shares will be eligible for sale, subject to compliance with the volume
limitations and other restrictions of Rule 144, 90 days after the effective
date of this offering, and (iii) approximately shares will become
eligible for sale under Rule 144 after the expiration of the two-year holding
periods from the dates of acquisition, which end between and . Beginning
on the 91st day after the date of this Prospectus, when the first agreement
not to sell shares expires, of the shares subject to such agreement, (iv)
approximately shares will become eligible for sale without
restriction pursuant to Rule 144(k), (v) approximately shares will
become eligible for sale, subject to compliance with the volume limitations
and other restrictions of Rule 144 and (vi) approximately shares will
become eligible for sale under Rule 144 after the expiration of the two-year
holding periods from the dates of acquisition, which end between ,
and , . Beginning on the 181st day after the date of this
Prospectus, when the second agreement not to sell shares expires, (vii) all of
the 2,364,802 shares subject to such agreement will be eligible for sale,
subject to compliance with the volume limitations and other restrictions of
Rule 144.
In general, under Rule 144, as currently in effect, if at least two years
have elapsed from the date that shares of Common Stock were acquired from the
Company or an affiliate of the Company, then the holder is entitled to sell in
"brokers' transactions" or to market makers, within any three-month period
commencing 90 days after the date of this Prospectus, a number of shares that
does not exceed the greater of (i) one percent of the then outstanding shares
of Common Stock (82,307 shares immediately after this offering) or (ii)
generally, the average weekly trading volume in the Common Stock during the
four calendar weeks preceding the filing of a Form 144 with respect to such
sale, subject to certain other limitations and restrictions. In addition, a
person who is not deemed to have been an affiliate of the Company at any time
during the three months preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least three years, would be entitled to sell
such shares under Rule 144(k) without regard to the requirements described
above.
The Securities and Exchange Commission has recently approved a reduction,
effective on April , 1997, of the two and three year holding periods under
Rule 144 and Rule 144(k) to one and two years, respectively. When this
reduction becomes effective, of the shares not subject to the agreements
described above, (i) approximately shares will be eligible for immediate
sale without restriction pursuant to Rule 144(k), (ii) approximately
shares will be eligible for sale, subject to compliance with the volume
limitations and
47
<PAGE>
other restrictions of Rule 144, 90 days after the effective date of this
offering, and (iii) approximately shares will become eligible for sale
under Rule 144 after the expiration of the one-year holding periods from the
dates of acquisition, which end between and . Beginning on the 91st day
after the date of this Prospectus, when the first agreement not to sell shares
expires, of the shares subject to such agreement, (iv) approximately
shares will become eligible for sale without restriction pursuant to Rule
144(k), (v) approximately shares will become eligible for sale,
subject to compliance with the volume limitations and other restrictions of
Rule 144 and (vi) approximately shares will become eligible for sale
under Rule 144 after the expiration of the one-year holding periods from the
dates of acquisition, which end between , and , .
Beginning on the 181st day after the date of this Prospectus, when the second
agreement not to sell shares expires, (vii) all of the 2,364,802 shares
subject to such agreement will be eligible for sale, subject to compliance
with the volume limitations and other restrictions of Rule 144.
Any employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or
contract is entitled to rely on the resale provisions of Rule 701, which
permits non-affiliates to sell their Rule 701 share without complying with the
public information, holding period, volume limitation or notice provisions of
Rule 144 and which permits Affiliates to sell their Rule 701 shares without
complying with the Rule 144 holding period restrictions, in each case
commencing 90 days after the date of this Prospectus. The Company has issued
644,500 shares under plans or contracts that satisfy the requirements of Rule
701.
The Company intends to file registration statements on Form S-8 under the
Securities Act to register the sale of the 1,500,000 and 300,000 shares
reserved for issuance under, respectively, the 1994 Stock Option Plan and the
Directors' Plan. The filing of such registration statements will permit the
resale of such shares by non-affiliates in the public market without
restriction under the Securities Act. Such registration statements are
expected to be filed soon after the date of this Prospectus and will
automatically become effective upon filing. "See "Management--Stock Option
Plans" and "Description of Capital Stock--Warrants and Options."
In addition, after this offering, the holders of approximately 666,667
shares of Common Stock (including the maximum of 166,667 shares of Common
Stock issuable upon conversion of $5,000,000 of the principal amount of
certain loans) and warrants to purchase approximately 594,795 shares of Common
Stock (together, the "Registrable Securities") will be entitled to certain
rights to cause the Company to register the sale of such shares under the
Securities Act. After this offering, if the Company proposes to register any
of its securities under the Securities Act for its own account, holders of
Registrable Securities are entitled to notice of such registration and are
entitled to include Registrable Securities therein, provided, among other
conditions, that the underwriters of any such offering have the right to limit
the number of shares included in such registration. The holders of certain of
the Registrable Securities may require the Company to prepare and file one or
more registration statements on Form S-3 at its expense, and the Company is
required to use its best efforts to effect such registration, subject to
certain conditions and limitations. Registration of such shares would result
in such shares becoming freely tradeable without restriction under the
Securities Act (except for shares purchased by affiliates of the Company)
immediately upon the effectiveness of such registration.
The Company can make no prediction as to the effect, if any, that sales of
shares of Common Stock or the availability of Common Stock for sale will have
on the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of the Common Stock in the public markets or the
perception that such sales will occur could adversely affect the market price
or the future ability to raise capital through an offering of its equity
securities. See "Risk Factors--Shares Eligible for Future Sale; Registration
Rights."
48
<PAGE>
UNDERWRITING
The Underwriters below, for whom R. J. Steichen & Company is acting as
representative (the "Representative"), have severally agreed, subject to the
terms and conditions contained in the Underwriting Agreement, to purchase from
the Company, the number of shares of Common Stock set forth opposite their
names below.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
R. J. Steichen & Company ...............................
---------
Total................................................... 1,850,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other considerations. The nature of obligations is such
that they are committed to purchase and pay for all of the above shares of
Common Stock if any are purchased.
The Underwriters, through the Representative, have advised the Company that
they propose to offer the Common Stock initially at the Price to Public set
forth on the cover page of this Prospectus; that the Underwriters may allow to
selected dealers a concession of $ per share; and that such dealers may
reallow a concession of $ per share to certain other dealers. After the
public offering, the offering price and other selling terms may be changed by
the Underwriters. Application has been made for the Common Stock to be
included for quotation on the Nasdaq National Market System. The
Representative has advised the Company that it does not intend to confirm
sales to any account over which it exercises discretionary authority.
The Company has granted to the Underwriters a 30-day over-allotment option
to purchase up to an aggregate of 277,500 additional shares of Common Stock,
exercisable at the Price to Public less the underwriting discount. If the
Underwriters exercise such over-allotment option, then each of the
Underwriters will have a firm commitment, subject to certain conditions, to
purchase approximately the same percentage thereof as the number of shares of
Common Stock to be purchased by it as shown in the above table, bears to the
1,850,000 shares of Common Stock offered hereby. The Underwriters may exercise
such option only to cover over-allotments made in connection with the sale of
the shares of Common Stock offered hereby. In addition, the Company has agreed
to pay the Representative at the closing of this offering a non-accountable
expense allowance of 2% of the aggregate public offering price (including the
aggregate public offering price of any over-allotment shares) to cover
expenses incurred by the Underwriters in connection with this offering,
reduced by amounts advanced by the Company, which totaled $10,000 on the date
of this Prospectus.
In connection with this offering, the Company has agreed to issue and sell
to the Representative, for nominal consideration, warrants to purchase a
number of shares of Common Stock equal to 10% of the shares of Common Stock
sold in this offering, exclusive of any shares of Common Stock sold pursuant
to the Underwriters' over-allotment option (the "Representative's Warrants").
The Representative's Warrants will be initially exercisable at a price per
share equal to 120% of the Price to Public, commencing one year from the date
of this Prospectus, and will continue to be exercisable for a period of four
years after such date. The Representative's Warrants are restricted from sale,
transfer, assignment or hypothecation for a period of 12 months from the
effective date of this offering, except to officers or successors of the
Representative. The exercise price of the Representative's Warrants and the
number of shares of Common Stock issuable upon exercise thereof are subject to
adjustment
49
<PAGE>
under certain circumstances. The Representative's Warrants grant to the holder
or holders thereof certain rights regarding the registration of the Common
Stock issuable upon exercise of the Representative's Warrants.
At the request of the Representative, the Company solicited all of its
shareholders to agree that they will not publicly sell or dispose of any
shares of Common Stock for a period of 180 days after the date on which the
Registration Statement is declared effective by the Commission, without the
prior written consent of the Representative. Shareholders who beneficially own
shares of Common Stock after the offering have agreed to such restrictions.
See "Shares Eligible for Future Sale."
The Company has agreed to indemnify the Underwriters against certain
liabilities, losses and expenses, including liabilities under the Securities
Act, or to contribute to payments the Underwriters may be required to make in
respect thereof.
Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price has been determined
through negotiations between the Company and the Representative. Among the
factors considered in determining the initial public offering price were
prevailing market and economic conditions, estimates of the business potential
and prospects of the Company, the present state of the Company's business
operations, an assessment of the Company's management and the consideration of
the above factors in relation to the market valuation of companies in related
businesses. See "Risk Factors--No Prior Market for Common Stock; Determination
of Offering Price."
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Dorsey & Whitney LLP, Minneapolis, Minnesota. Certain
legal matters in connection with this offering will be passed upon for the
Underwriters by Fredrikson & Byron, P.A. Members of Dorsey & Whitney LLP
beneficially own 90,589 shares of Common Stock.
EXPERTS
The financial statements of the Company included in this Prospectus and
elsewhere in the Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in giving said report.
50
<PAGE>
ADDITIONAL INFORMATION
A Registration Statement on Form S-1, including amendments thereto, relating
to the Common Stock offered hereby has been filed with the Commission. This
Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits and schedules
thereto. In particular, statements contained in this Prospectus as to the
contents of any contract or any other document referred to are not necessarily
complete, and in each instance reference is made to the copy of such contract
or documents filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. A copy of the
Registration Statement, including exhibits and schedules thereto, may be
inspected by anyone without charge at the public reference facilities
maintained by the Commission in Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following regional offices of the Commission: 13th
Floor, Seven World Trade Center, New York, New York, and Northwest Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of all or any part of such material may be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549,
upon payment of certain fees prescribed by the Commission. In addition, the
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants, including the Company,
that file electronically with the Commission. The Web site's address is
http://www.sec.gov.
The Company intends to furnish its shareholders with annual reports
containing financial statements audited by its independent public accountants
and quarterly reports containing unaudited financial information for the first
three quarters of each fiscal year.
51
<PAGE>
FIELDWORKS, INCORPORATED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants.................................. F-2
Consolidated Balance Sheets as of December 31, 1995 and January 5, 1997
(actual and pro forma)................................................... F-3
Consolidated Statements of Operations for the years ended December 31,
1994 and 1995 and January 5, 1997........................................ F-4
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1994 and 1995 and January 5, 1997 .......................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1994 and 1995 and
January 5, 1997.......................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To FieldWorks, Incorporated:
We have audited the accompanying consolidated balance sheets of FieldWorks,
Incorporated (a Minnesota corporation) and Subsidiaries as of December 31,
1995 and January 5, 1997, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended January 5, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of FieldWorks, Incorporated
and Subsidiaries as of December 31, 1995 and January 5, 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended January 5, 1997 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
February 5, 1997
F-2
<PAGE>
FIELDWORKS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31 JANUARY 5, 1997
----------- ------------------------
PRO FORMA
1995 ACTUAL (NOTE 5)
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equiva-
lents.................... $ 112,602 $ 2,132,089 $ 2,132,089
Accounts receivable, net
of allowance for doubtful
accounts of $110,600 and
$201,400................. 1,887,928 2,008,693 2,008,693
Inventories............... 1,821,301 4,417,322 4,417,322
Note receivable from sale
of common stock (Note
6)....................... 100,000 -- --
Note receivable from re-
lated party.............. -- 92,175 92,175
Prepaid expenses and oth-
er....................... 90,106 418,189 418,189
Net assets of discontinued
operation (Note 1)....... 38,251 -- --
---------- ----------- -----------
Total current assets.... 4,050,188 9,068,468 9,068,468
---------- ----------- -----------
PROPERTY AND EQUIPMENT:
Computers and equipment... 604,474 1,125,379 1,125,379
Furniture and fixtures.... 82,120 125,374 125,374
Leasehold improvements.... 51,150 98,585 98,585
Less: Accumulated depreci-
ation.................... (251,655) (553,178) (553,178)
---------- ----------- -----------
Property and equipment,
net.................... 486,089 796,160 796,160
DEPOSITS AND OTHER ASSETS,
net....................... 22,952 41,491 41,491
---------- ----------- -----------
$4,559,229 $ 9,906,119 $ 9,906,119
========== =========== ===========
LIABILITIES AND SHAREHOLD-
ERS' EQUITY
CURRENT LIABILITIES:
Lines of credit........... $1,160,000 $ -- $ --
Notes payable............. -- 4,675,838 4,675,838
Notes payable to related
parties (Note 4)......... -- 1,350,000 1,350,000
Accounts payable.......... 899,927 1,111,526 1,111,526
Accrued compensation and
benefits................. 143,025 264,035 264,035
Accrued warranty and oth-
er....................... 130,003 567,201 567,201
Current maturities of
capitalized lease
obligations.............. 32,244 57,411 57,411
---------- ----------- -----------
Total current liabili-
ties................... 2,365,199 8,026,011 8,026,011
CAPITALIZED LEASE
OBLIGATIONS, less current
maturities................ 61,886 66,722 66,722
---------- ----------- -----------
Total liabilities....... 2,427,085 8,092,733 8,092,733
---------- ----------- -----------
COMMITMENTS AND
CONTINGENCIES (Notes 8 and
10)
SHAREHOLDERS' EQUITY:
Series A convertible pre-
ferred stock, $.001 par
value, 300,000 shares au-
thorized, issued and out-
standing at January 5,
1997..................... -- 300 --
Common stock, $.001 par
value, 15,000,000 and
14,700,000 shares
authorized; 5,840,068 and
5,880,736 issued and
outstanding (6,297,403
pro forma at January 5,
1997).................... 5,840 5,881 6,381
Common stock warrants..... 115,185 231,985 231,985
Additional paid-in capi-
tal...................... 4,816,262 7,878,591 7,878,391
Accumulated deficit....... (2,805,143) (6,303,371) (6,303,371)
---------- ----------- -----------
Total shareholders' eq-
uity................... 2,132,144 1,813,386 1,813,386
---------- ----------- -----------
$4,559,229 $ 9,906,119 $ 9,906,119
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
FIELDWORKS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31 FOR THE
----------------------- YEAR ENDED
1994 1995 JANUARY 5, 1997
----------- ---------- ---------------
<S> <C> <C> <C>
NET SALES............................. $ 2,741,914 $8,241,791 $ 13,111,077
COST OF SALES......................... 1,978,157 4,979,504 8,310,933
----------- ---------- ------------
Gross profit....................... 763,757 3,262,287 4,800,144
----------- ---------- ------------
OPERATING EXPENSES:
Sales and marketing................. 904,129 1,523,648 3,234,692
General and administrative.......... 761,455 1,168,626 2,232,040
Research and development............ 765,081 948,406 1,896,448
----------- ---------- ------------
Total operating expenses........... 2,430,665 3,640,680 7,363,180
----------- ---------- ------------
Operating loss..................... (1,666,908) (378,393) (2,563,036)
INTEREST EXPENSE AND OTHER, net....... (21,310) (68,678) (356,328)
----------- ---------- ------------
NET LOSS FROM CONTINUING OPERATIONS... (1,688,218) (447,071) (2,919,364)
LOSS FROM DISCONTINUED OPERATION
(NOTE 1)............................. -- (179,848) (376,682)
----------- ---------- ------------
NET LOSS.............................. $(1,688,218) $ (626,919) $ (3,296,046)
=========== ========== ============
PRO FORMA (NOTE 2) (UNAUDITED):
Net loss per common share from
continuing operations.............. $ (.30) $ (.07) $ (.44)
Loss per common share from
discontinued operation............. -- (.03) (.06)
----------- ---------- ------------
Net loss per common share........... $ (.30) $ (.10) $ (.50)
=========== ========== ============
Weighted average common shares
outstanding........................ 5,563,430 6,264,703 6,575,802
=========== ========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-4
<PAGE>
FIELDWORKS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SERIES A
CONVERTIBLE
PREFERRED STOCK COMMON STOCK COMMON ADDITIONAL TOTAL
----------------- ---------------- STOCK PAID-IN ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT WARRANTS CAPITAL DEFICIT EQUITY
--------- ------- --------- ------ -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1993................... -- $ -- 4,850,000 $4,850 $ -- $2,398,350 $ (484,515) $1,918,685
Issuance of common
stock, net of
offering costs of
$113,700............. -- -- 479,100 479 -- 1,323,121 -- 1,323,600
Issuance of common
stock warrants....... -- -- -- -- 81,435 -- -- 81,435
Net loss.............. -- -- -- -- -- -- (1,688,218) (1,688,218)
--------- ------ --------- ------ -------- ---------- ----------- ----------
BALANCE, December 31,
1994................... -- -- 5,329,100 5,329 81,435 3,721,471 (2,172,733) 1,635,502
Issuance of common
stock, net of
offering costs of
$111,750............. -- -- 354,334 355 -- 950,895 -- 951,250
Exercise of stock op-
tions................ -- -- 31,334 31 -- 31,971 -- 32,002
Issuance of common
stock warrants....... -- -- -- -- 33,750 -- -- 33,750
Exercise of warrants.. -- -- 100,000 100 -- 99,900 -- 100,000
Merger with Paragon
(Note 1)............. -- -- 25,300 25 -- 12,025 (5,491) 6,559
Net loss.............. -- -- -- -- -- -- (626,919) (626,919)
--------- ------ --------- ------ -------- ---------- ----------- ----------
BALANCE, December 31,
1995................... -- -- 5,840,068 5,840 115,185 4,816,262 (2,805,143) 2,132,144
Issuance of preferred
stock................ 300,000 300 -- -- -- 2,999,700 -- 3,000,000
Exercise of stock
options.............. -- -- 40,668 41 -- 62,629 -- 62,670
Issuance of common
stock warrants....... -- -- -- -- 116,800 -- -- 116,800
Spin-off of Paragon
(Note 1)............. -- -- -- -- -- -- (202,182) (202,182)
Net loss.............. -- -- -- -- -- -- (3,296,046) (3,296,046)
--------- ------ --------- ------ -------- ---------- ----------- ----------
BALANCE, January 5,
1997................... 300,000 $ 300 5,880,736 $5,881 $231,985 $7,878,591 $(6,303,371) $1,813,386
========= ====== ========= ====== ======== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
FIELDWORKS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31
----------------------- FOR THE YEAR ENDED
1994 1995 JANUARY 5, 1997
----------- ---------- ------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss......................... $(1,688,218) $ (626,919) $(3,296,046)
Adjustments to reconcile net loss
to net cash used for operating
activities-
Depreciation and amortization.. 147,141 183,336 373,662
Change in operating items:
Accounts receivable.......... (727,421) (1,174,941) (120,765)
Inventories.................. (1,713,959) (121,476) (2,596,021)
Prepaid expenses and other... (49,302) (12,039) (348,991)
Net assets of discontinued
operation................... -- -- (163,931)
Accounts payable............. 951,132 (44,320) 211,599
Accrued expenses............. 139,917 83,302 558,208
----------- ---------- -----------
Net cash used for operating
activities.................. (2,940,710) (1,713,057) (5,382,285)
----------- ---------- -----------
INVESTING ACTIVITIES:
Purchase of property and
equipment....................... (303,226) (251,409) (556,120)
Loan to related party............ -- -- (92,175)
----------- ---------- -----------
Net cash used for investing
activities.................... (303,226) (251,409) (648,295)
----------- ---------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of common
stock........................... 1,356,848 1,616,354 162,670
Proceeds from issuance of
preferred stock................. -- -- 3,000,000
Net line of credit borrowings
(repayments).................... 490,000 670,000 (1,160,000)
Net proceeds from notes payable.. -- -- 4,735,952
Proceeds from notes payable to
related parties................. 300,000 10,341 2,890,000
Payment of notes payable to
related parties................. -- (300,000) (1,540,000)
Payment of capitalized lease
obligations..................... (7,287) (17,670) (38,555)
----------- ---------- -----------
Net cash provided by financing
activities.................... 2,139,561 1,979,025 8,050,067
----------- ---------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (1,104,375) 14,559 2,019,487
CASH AND CASH EQUIVALENTS,
beginning of year................. 1,230,258 125,883 112,602
----------- ---------- -----------
CASH AND CASH EQUIVALENTS, end of
year.............................. $ 125,883 $ 140,442 $ 2,132,089
=========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
FIELDWORKS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS:
Operating Activities
FieldWorks, Incorporated (FieldWorks or the Company), a Minnesota
corporation, was organized on October 2, 1992, and was in the development
stage until significant revenue-generating activities commenced in 1994.
FieldWorks is engaged in the design, development and marketing of portable
field-based computer workstations, and has integrated certain field
instrumentation platforms with state-of-the-art computer technology to produce
a new class of portable instrumentation equipment capable of simultaneously
supporting many types of diagnostic communication and computing capabilities
required by the field service, medical and engineering professions. FieldWorks
markets its products worldwide through a direct sales force, independent sales
representatives and distributors, original equipment manufacturers, value
added resellers and system integrators.
The Company's future operations are dependent upon the attainment of certain
objectives, including the continued successful development, marketing and sale
of its products, and the continued design and implementation of new
technology. After products have been successfully introduced into a market,
additional time may be necessary before continuing profitability is achieved.
During this time, the Company may require additional financing which may not
be available at favorable terms and conditions.
Merger With Paragon Technology, Incorporated and Subsequent Distribution
In August 1995, FieldWorks completed a merger agreement with Paragon
Technology, Incorporated (Paragon), a Pennsylvania company engaged in software
research and development. The merger was effected through a share-for-share
exchange of 25,300 shares of FieldWorks' common stock for all of the
outstanding shares of Paragon common stock. The merger was accounted for as a
pooling of interests and, accordingly, the accompanying consolidated financial
statements reflect the combined activities of FieldWorks and Paragon
(collectively, the Company) for the entire 1995 fiscal year. Amounts in the
1994 financial statements have not been restated to reflect Paragon amounts,
as the effects are not material to the Company's results of operations or
financial position.
On November 11, 1996, the Company's board of directors approved the
distribution of all of the issued and outstanding common stock of Paragon, as
a dividend to Company shareholders of record as of November 15, 1996. The
distribution was effected in order to take advantage of anticipated capital-
raising and product development opportunities on a separate-company basis. All
shares of Paragon stock were distributed prior to January 5, 1997. At January
5, 1997, the Company had a note receivable from Paragon of $92,175. This note
was repaid in full on February 5, 1997.
Paragon's results of operations for the year ended December 31, 1995 and for
the period ended November 15, 1996 have been presented as a discontinued
operation in the accompanying statements of operations. Revenues applicable to
Paragon were approximately $274,000 and $183,000 for the year ended December
31, 1995 and the period from January 1, 1996 to November 15, 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fiscal Year
Effective in fiscal 1996, the Company changed to a 52/53-week fiscal year
ending on the first Sunday on or after December 31st. All references herein to
"1996", "1995" and "1994" represent the 53-week fiscal year ended January 5,
1997 and the years ended December 31, 1995 and December 31, 1994,
respectively. The Company does not believe that this change affects
comparability of the financial statements.
F-7
<PAGE>
FIELDWORKS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Principles of Consolidation
The consolidated financial statements of the Company include the accounts of
the Company and its wholly owned subsidiaries. All intercompany accounts and
transactions have been eliminated in consolidation.
Pro Forma Net Loss Per Common Share
Unaudited pro forma net loss per common share was computed by dividing net
loss by the weighted average number of shares of common stock outstanding
during each period, including the effect of the conversion of preferred stock
to common stock (see Note 5). The impact of common stock equivalents has been
excluded from the computation of weighted average common shares outstanding,
except as follows, as the effect would be antidilutive. Pursuant to Securities
and Exchange Commission rules, stock options and warrants granted within one
year of the date of the contemplated initial public offering have been
included in the calculation of common stock equivalents, using the treasury
stock method, as if they were outstanding for all periods presented.
Cash and Cash Equivalents
Cash consists of amounts held in the Company's checking accounts and money
market funds with original maturities of 90 days or less. The carrying value
approximates fair value due to the short maturity of the instruments.
Inventories
Inventories are stated at the lower of cost or market value, as determined
by the first-in, first-out cost method, and consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31 JANUARY 5
1995 1997
----------- ----------
<S> <C> <C>
Raw materials............................................ $1,450,074 $2,772,219
Work in process.......................................... 188,963 1,066,189
Finished goods........................................... 182,264 578,914
---------- ----------
Total.................................................. $1,821,301 $4,417,322
========== ==========
</TABLE>
Property and Equipment
Property and equipment are recorded at cost. Repair and maintenance costs
which do not significantly extend the lives of the respective assets are
charged to expense as incurred. Depreciation is computed using the straight-
line method over the related assets' useful lives, ranging from three to five
years.
Warranties
The Company provides a one-year warranty from the date of sale. Estimated
warranty costs are accrued in the same period in which the related revenue is
recognized, based on anticipated parts and labor costs utilizing historical
experience. Ultimate results may differ from such estimates.
Revenue Recognition
The Company recognizes product revenue, net of estimated returns, at the
time the products are shipped. Revenue for services performed is recognized as
earned.
F-8
<PAGE>
FIELDWORKS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Significant Customers and Export Sales
For the year ended December 31, 1994, sales to one customer represented 14%
of net sales. For the years ended December 31, 1995 and January 5, 1997, there
were no customers representing over 10% of net sales.
Export sales by major region were as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Europe................................... $ 785,000 $1,925,000 $2,087,000
Americas................................. 83,000 292,000 342,000
Middle East/Africa....................... 43,000 137,000 299,000
Asia..................................... 75,000 249,000 158,000
Australia................................ 42,000 178,000 154,000
Russia................................... -- 70,000 152,000
---------- ---------- ----------
$1,028,000 $2,851,000 $3,192,000
========== ========== ==========
</TABLE>
Research and Development Costs
Research and development costs are charged to expense as incurred.
Concentrations of Credit Risk
The Company's exposure to concentrations of credit risk relates primarily to
trade receivables. Such exposure is limited due to the large number of
customers and their dispersion across many industries and geographies. The
Company controls credit risk by performing credit evaluations for all new
customers and requires letters of credit, bank guarantees and advance
payments, if deemed necessary. Through 1996, bad debt write-offs have not been
material.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities as of the date of the
financial statements. Estimates also affect the reported amounts of revenues
and expenses during the periods presented. Ultimate results could differ from
those estimates.
Recently Issued Accounting Standards
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," establishes standards for the recognition and measurement of impairment
of long-lived assets and certain identifiable intangibles. The adoption of
this pronouncement in fiscal 1996 did not have a material impact on the
Company's results of operations or financial position.
3. INCOME TAXES:
The Company accounts for income taxes under the liability method, which
requires recognition of deferred income tax assets and liabilities for the
expected future income tax consequences under enacted tax laws of temporary
differences between the financial reporting and tax bases of assets and
liabilities.
F-9
<PAGE>
FIELDWORKS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A reconciliation of the Company's statutory tax rate to the effective rate
is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate..................................... 34% 34% 34%
State taxes, net of federal tax benefit.................... 6 6 6
Valuation allowance........................................ (40) (40) (40)
--- --- ---
--% --% --%
=== === ===
</TABLE>
As of January 5, 1997, the Company had approximately $4,400,000 of net
operating loss carryforwards for federal income tax purposes that are
available to offset future taxable income through the year 2011. Certain
restrictions caused by the change in ownership resulting from sales of stock
will limit annual utilization of the net operating loss carryforwards.
The components of the Company's deferred tax asset are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
--------- ----------- -----------
<S> <C> <C> <C>
Net operating loss carryforwards........ $ 789,000 $ 877,000 $ 1,760,000
Deductible differences.................. 47,000 260,000 448,000
Valuation allowance..................... (836,000) (1,137,000) (2,208,000)
--------- ----------- -----------
$ -- $ -- $ --
========= =========== ===========
</TABLE>
4. LINES OF CREDIT AND NOTES PAYABLE:
Lines of Credit
In July 1994, the Company entered into a $500,000 line-of-credit agreement
with a bank, which was amended in April 1995 to provide increased borrowing
capacity of up to $800,000.
In December 1995, this line of credit matured and was replaced by a new
revolving line-of-credit agreement (the New Line), with borrowing capacity of
$1,500,000, limited to a borrowing base, as defined in the agreement.
Availability as of December 31, 1995 was $340,000. This credit facility bears
interest at prime plus 1.5%, payable monthly, and is collateralized by
substantially all assets of the Company. Additionally, the New Line is
personally guaranteed by a shareholder of the Company.
In March 1996, the New Line was extended through April 1997 and its
borrowing limit increased to $2,000,000. The incremental borrowing capacity of
$500,000 was personally guaranteed by a shareholder of the Company.
The following information relates to the Company's lines of credit for the
fiscal years ended:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Amount outstanding at end of year....................... $1,160,000 $ --
Maximum amount outstanding during the year.............. 1,160,000 2,000,000
Average borrowings during the year...................... 586,000 1,652,000
Weighted average interest rate during the year.......... 11.16% 9.77%
Interest rate at end of year............................ 10.00% --
</TABLE>
F-10
<PAGE>
FIELDWORKS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In December 1996, the Company repaid all amounts owed under its lines of
credit with bridge financing proceeds received in December 1996 and terminated
the New Line agreement.
Notes Payable
At December 31, 1994, the Company had two 10%, $150,000 unsecured notes
payable to related parties. These notes were repaid in March and June 1995.
In May through September 1996, the Company entered into certain short-term
financing agreements with related and other parties, for a total of
$2,890,000. These borrowings are due the earlier of 30 days following the
consummation of an initial public offering of common stock or May 1, 1997,
bear interest at rates ranging from 10% to 12%, and are unsecured. At January
5, 1997, outstanding borrowings under these agreements were $1,350,000.
During December 1996, the Company raised approximately $4,684,000 through a
private debt offering, net of $316,000 in offering costs. Such bridge notes
bear interest at 10% and mature at the earlier of June 30, 1997, which date
may be extended to December 31, 1997 at the option of the Company, or thirty
days following the effective date of a registration statement filed in
connection with an initial public offering.
5. SHAREHOLDERS' EQUITY:
The Company was originally capitalized by the founders who contributed
personal property and computer equipment in exchange for 2,350,000 shares of
$.001 par value common stock.
In December 1993, the Company completed a private placement of 2,500,000
shares of common stock at $1 per share, receiving $1,833,650 in proceeds prior
to December 31, 1993. The remaining proceeds of $666,350 were received through
March 20, 1994 and are reflected as notes receivable from sale of common stock
in the accompanying 1994 consolidated financial statements.
In December 1994, the Company completed a private placement (1994 Placement)
of 479,100 shares of common stock at $3 per share, receiving proceeds of
$804,198 prior to December 31, 1994. The remaining proceeds of $633,102 were
received through February 23, 1995 and are reflected as notes receivable from
sale of common stock in the accompanying 1994 financial statements. In 1995,
the Company extended the 1994 Placement to allow for issuance of an additional
354,334 shares of common stock at $3 per share.
In July 1996, the Company sold 300,000 shares of Series A, $.001 par value
preferred stock (Preferred Stock) at $10 per share. The Preferred Stock
contains a liquidation preference of $10 per share and is redeemable at the
option of the holder for $10 per share, exercisable beginning in the year
2001. The Preferred Stock is convertible at the option of the holder on a
share-for-share basis into common stock. Conversion to shares of common stock
is automatic upon the consummation of an initial public offering. The
accompanying pro forma consolidated balance sheet at January 5, 1997 reflects
the conversion of all preferred shares to common stock.
The holder of the preferred stock was also granted warrants to purchase
24,000 shares of the Company's common stock at an exercise price of $10 per
share. The warrants are exercisable through July 2001.
F-11
<PAGE>
FIELDWORKS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. WARRANTS:
In December 1993, the Company entered into an agreement with the owner of
its leased office space, offering the lessor the opportunity to earn warrants
to purchase up to 115,000 shares of the Company's common stock at an exercise
price of $1 per share, the estimated cash rent value, expiring in February
1999. The economic value of these warrants was allocated over the term of the
lease. In August 1994, the lease was terminated, and rights to unearned
warrants as of the lease termination date were forfeited.
Warrants for the purchase of 100,000 and 40,000 shares at exercise prices of
$1 and $5 per share were issued to a shareholder in 1994 and 1995,
respectively, in connection with personal guarantees of the Company's line-of-
credit agreements (see Note 4). In December 1995, the 1994 $1 per share
warrants were exercised for the purchase of 100,000 shares. As the proceeds
from this stock exercise were received in January 1996, this amount has been
classified as notes receivable from sale of common stock in the accompanying
1995 consolidated balance sheet.
In January 1995, five-year warrants for the purchase of 44,400 shares at an
exercise price of $3.35 per share were granted to an accredited investor in
connection with the 1994 Placement (see Note 5).
In May 1995, the Company issued warrants for a total of 30,000 shares to two
shareholders. The warrants are exercisable at $3 per share any time on or
prior to May 10, 2000 and were granted in connection with loans made to the
Company in 1994.
In March 1996, three-year warrants for the purchase of 25,000 shares at an
exercise price of $5 per share were granted to a shareholder in exchange for a
personal guarantee of the Company's amended line-of-credit agreement (see Note
4).
In June through September 1996, the Company granted warrants for the
purchase of 84,000 shares of common stock in connection with the bridge
financing agreements discussed in Note 4. These warrants are exercisable at $5
per share, at any time subsequent to the consummation of an initial public
offering, expiring at dates ranging from June through September 1999.
In connection with the December 1996 bridge financing, five-year warrants
for the purchase of 250,000 shares of the Company's common stock were issued
at an exercise price equal to 80% of the price obtained in an initial public
offering, or $6.40 in the event such an offering does not occur prior to
December 31, 1997.
7. STOCK OPTION AND 401(K) PLANS:
Stock Option Plan
In June 1994, the Company adopted a long-term incentive and stock option
plan (the Plan) for employees, directors and consultants of the Company. Under
the Plan, options are granted at an exercise price equal to the fair market
value of the common stock, as determined by the Company's board of directors,
at the date of grant. Incentive stock options are granted to employees, and
vest over varying periods not to exceed three years. The Plan also provides
for nonqualified options to be granted to directors and consultants, including
automatic grants of 25,000 stock options to each nonemployee director of the
Company on the date that each director is elected and an automatic grant of
10,000 stock options upon reelection. The nonemployee director options vest
over varying periods not to exceed three years.
F-12
<PAGE>
FIELDWORKS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As of December 31, 1995, the Plan authorized the issuance of up to 720,000
shares of common stock for such options. In May 1996, the Company increased
the number of shares authorized for grant under the Plan to 1,100,000. In
December 1996, the board of directors amended the Plan to increase the number
of shares of common stock available for issuance to 1,500,000, which was
approved at a shareholder meeting held on January 20, 1997. At December 31,
1995 and January 5, 1997, 245,666 and 249,598 shares were available for future
grants.
In December 1996, the Company's board of directors approved the Non-Employee
Directors' Stock Option Plan (the Directors' Plan), which was approved at a
shareholder meeting held on January 20, 1997. Under the Directors' Plan, each
nonemployee director will receive 25,000 nonqualified options upon election
and 10,000 options at each reelection date.
Shares subject to option are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED NON- WEIGHTED
INCENTIVE AVERAGE QUALIFIED AVERAGE
STOCK EXERCISE STOCK EXERCISE
OPTIONS PRICE OPTIONS PRICE
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Balance, December 31, 1993............. -- -- -- --
Options granted...................... 258,000 $1.11 80,000 $1.00
------- ----- ------- -----
Balance, December 31, 1994............. 258,000 1.11 80,000 1.00
Options granted...................... 123,000 2.99 20,000 3.00
Options canceled..................... (6,666) 2.25 -- --
Options exercised.................... (31,334) 1.02 -- --
------- ----- ------- -----
Balance, December 31, 1995............. 343,000 1.77 100,000 1.40
Options granted...................... 320,900 5.26 57,500 5.00
Options canceled..................... (2,332) 3.57 -- --
Options exercised.................... (5,668) 1.35 (35,000) 1.57
------- ----- ------- -----
Balance, January 5, 1997............... 655,900 $3.47 122,500 $3.04
======= ===== ======= =====
Options exercisable at:
December 31, 1994.................... 120,720 $1.11 80,000 $1.00
======= ===== ======= =====
December 31, 1995.................... 199,450 $1.48 86,800 $1.16
======= ===== ======= =====
January 5, 1997...................... 471,103 $2.92 81,217 $2.13
======= ===== ======= =====
</TABLE>
Additional information regarding options outstanding at January 5, 1997 is
as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
TYPE OF NUMBER OF EXERCISE WEIGHTED AVERAGE REMAINING
OPTION OPTIONS PRICE RANGE EXERCISE PRICE CONTRACTUAL LIFE
------- --------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C>
Incentive 335,000 $1.00-$3.00 $1.76 2.7 years
Incentive 320,900 $5.00-$7.50 5.26 4.4 years
-------
655,900
=======
Nonqualified 65,000 $1.00-$3.00 $1.31 7.3 years
Nonqualified 57,500 $5.00 $5.00 9.4 years
-------
122,500
=======
</TABLE>
F-13
<PAGE>
FIELDWORKS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related Interpretations in accounting for
its stock option plans. Accordingly, no compensation cost has been recognized
in the accompanying statements of operations. Had compensation cost been
recognized based on the fair values of options at the grant dates consistent
with the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," the Company's net loss and net loss per common share would have
been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
1995 1996
-------- ----------
<S> <C> <C> <C>
As reported $626,919 $3,296,046
Net loss....................................... Pro forma 736,919 4,156,046
As reported $ .10 $ .50
Net loss per common share...................... Pro forma .12 .63
</TABLE>
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
The weighted average fair values of options granted were as follows:
<TABLE>
<CAPTION>
INCENTIVE NONQUALIFIED
STOCK STOCK
OPTIONS OPTIONS
--------- ------------
<S> <C> <C>
1995 grants........................................ $2.20 $2.67
1996 grants........................................ 3.87 4.46
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Risk-free interest rate................................. 6.39% 6.59%
Expected life of incentive options...................... 5 years 5 years
Expected life of nonqualified options................... 10 years 10 years
Expected volatility..................................... 90% 90%
Expected dividend yield................................. -- --
</TABLE>
401(k) Profit-Sharing Plan
Effective January 1, 1996, the Company adopted a 401(k) profit-sharing plan
(the 401(k) Plan) covering substantially all full-time employees. Eligible
employees may elect to defer up to 15% of their eligible compensation. The
Company may make discretionary matching contributions of up to 6% of each plan
participant's eligible compensation. Through January 5, 1997, the Company had
not made any matching contributions to the 401(k) Plan.
8. COMMITMENTS AND CONTINGENCIES:
Leases
The Company leases its headquarters office facilities under an operating
lease which expires June 30, 1999. The Company also leases equipment under
capital leases which expire at various dates through November 2000. Property
and equipment under capital leases at January 5, 1997 totaled $197,300.
F-14
<PAGE>
FIELDWORKS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following is a schedule of future minimum lease payments as of January
5, 1997:
<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
-------------- ----------------
<S> <C> <C>
1997....................................... $ 71,148 $246,500
1998....................................... 51,390 205,200
1999....................................... 15,090 128,500
2000....................................... 7,750 27,300
2001....................................... -- 1,600
--------
Total minimum capital lease payments....... 145,378
Less--
Amount representing interest............. (21,245)
Current maturities....................... (57,411)
--------
Noncurrent portion of minimum capital lease
payments.................................. $ 66,722
========
</TABLE>
Legal Proceedings
The Company is involved in legal actions in the ordinary course of its
business. Although the outcome of any such legal actions cannot be predicted,
management believes that there is no pending legal proceeding against or
involving the Company for which the outcome is likely to have a material
adverse effect upon the Company's financial position, results of operations or
cash flows.
9. SUPPLEMENTAL CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31 FOR THE YEAR
------------------- ENDED JANUARY 5
1994 1995 1997
--------- --------- ---------------
<S> <C> <C> <C>
Supplemental cash flow disclosure:
Cash paid for interest................... $ 19,822 $ 86,292 $214,601
========= ========= ========
Noncash investing and financing activities:
Notes receivable from sale of common
stock................................... $ 633,102 $ 100,000 $ --
========= ========= ========
Property and equipment acquired under
capital leases.......................... $ 26,650 $ 99,409 $ 68,558
========= ========= ========
Issuance of warrants..................... $ 81,435 $ 33,750 $116,800
========= ========= ========
Net assets acquired/disposed of relating
to Paragon (Note 1)..................... $ -- $ 6,559 $202,182
========= ========= ========
</TABLE>
10. PROPOSED INITIAL PUBLIC OFFERING:
In November 1996, the Company signed a letter of intent to obtain financing
through an initial public offering (IPO) of approximately 1,850,000 shares of
common stock. The proceeds of the offering will be used to repay the bridge
financing arrangements, to fund capital expenditures and for working capital
purposes. In connection with the offering, the underwriter will receive a
warrant to purchase 185,000 shares of common stock at 120% of the IPO price.
Upon completion of the IPO, the Company's articles of incorporation will be
amended to authorize 30 million shares of Common Stock, $.001 par value, and
five million shares of undesignated preferred stock, $.001 par value.
Supplementary net loss per common share, giving effect to the assumed
retirement of debt with proceeds from the IPO at an assumed IPO price of
$7.50, and elimination of related interest expense, was $.41 for the year
ended January 5, 1997.
F-15
<PAGE>
INSIDE BACK COVER
[Company's "fieldworks, inc." logo]
FieldWorks, Incorporated designs, manufactures, markets and supports portable
rugged computing platforms and computer system solutions for use in demanding
field environments.
7000 Series Field WorkStation(TM)
[Photographs of the 7000 Series Field WorkStation its chassis and its
contents.]
5000 Series Field WorkStation(TM)
[Photographs of the 5000 Series Field WorkStation and parts.]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH IN-
FORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OTHER
THAN THE SHARES OF COMMON STOCK TO WHICH IT RELATES OR AN OFFER TO SELL, OR A
SOLICITATION OF ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITA-
TION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT INFORMATION CON-
TAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 15
Capitalization........................................................... 16
Dilution................................................................. 17
Selected Consolidated Financial Data..................................... 18
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Recent Events............................................................ 25
Business................................................................. 27
Management............................................................... 37
Principal Shareholders................................................... 42
Certain Transactions..................................................... 43
Description of Capital Stock............................................. 45
Shares Eligible for Future Sale.......................................... 47
Underwriting............................................................. 49
Legal Matters............................................................ 50
Experts.................................................................. 50
Additional Information................................................... 51
Index to Consolidated Financial Statements............................... F-1
</TABLE>
---------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT PARTIC-
IPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1,850,000 SHARES
LOGO
COMMON STOCK
---------------
PROSPECTUS
---------------
RJSTEICHEN&CO
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following fees and expenses (which do not include underwriting
commissions and discounts) will be paid by the Company in connection with the
issuance and distribution of the securities registered hereby. All such
expenses, except for the SEC, NASD and Nasdaq fees, are estimated.
<TABLE>
<S> <C>
SEC registration fee.................................................. $ 6,361
NASD filing fee....................................................... 2,515
Nasdaq Stock Market listing fee....................................... 37,700
Legal fees and expenses............................................... 120,000
Accounting fees and expenses.......................................... 133,000
Blue Sky fees and expenses............................................ 15,000
Transfer Agent's and Registrar's fees................................. 5,000
Printing and engraving expenses....................................... 45,000
Miscellaneous......................................................... 5,424
--------
Total............................................................... $370,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 302A.521 of the Minnesota Statutes provides that a corporation shall
indemnify any person made or threatened to be made a party to a proceeding by
reason of the former or present official capacity of such person against
judgments, penalties, fines (including, without limitation, excise taxes
assessed against such person with respect to any employee benefit plan),
settlements and reasonable expenses, including attorneys' fees and
disbursements, incurred by such person in connection with the proceeding, if,
with respect to the acts or omissions of such person complained of in the
proceeding, such person (1) has not been indemnified therefor by another
organization or employee benefit plan for the same judgments, penalties or
fines; (2) acted in good faith; (3) received no improper personal benefit and
Section 302A.255 (with respect to director conflicts of interest), if
applicable, has been satisfied; (4) in the case of a criminal proceeding, had
no reasonable cause to believe the conduct was unlawful; and (5) in the case
of acts or omissions in such person's official capacity for the corporation,
reasonably believed that the conduct was in the best interests of the
corporation, or in the case of acts or omissions in such person's official
capacity for other affiliated organizations, reasonably believed that the
conduct was not opposed to the best interests of the corporation. Section
302A.521 also requires payment by a corporation, upon written request, of
reasonable expenses in advance of final disposition of the proceeding in
certain instances. A decision as to required indemnification is made by a
disinterested majority of the Board of Directors present at a meeting at which
a disinterested quorum is present, or by a designated committee of the Board,
by special legal counsel, by the shareholders or by a court.
Provisions regarding indemnification of officers and directors of the
Company to the extent permitted by Section 302A.521 are contained in the
Company's Second Amended and Restated Bylaws as they will be in effect upon
closing of this offering (Exhibit 3.4 hereto, which is incorporated herein by
reference).
Under Section 6 of the Underwriting Agreement (Exhibit 1.1 hereto, which is
incorporated herein by reference), the Underwriter has agreed to indemnify,
under certain conditions, the Company, its directors, certain of its officers
and persons who control the Company within the meaning of the Securities Act
of 1933, as amended, against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The information set forth below does not give effect to the automatic
conversion of all shares of Preferred Stock into shares of Common Stock upon
the consummation of this offering. Since July 1, 1993, the Company
II-1
<PAGE>
has issued and sold the following securities that were not registered under
the Securities Act of 1933, as amended (the "Securities Act"):
Between November 1993 and March 1994, the Company sold 2,500,000 shares of
Common Stock at $1.00 per share to 98 accredited investors.
In February 1994, the Company issued a warrant to purchase 115,000 shares of
Common Stock at an exercise price of $1.00 per share in connection with an
agreement with the owner of the Company's leased office space. 33,655 of these
warrants were forfeited on August 1, 1994, in connection with the termination
of such lease.
On July 7, 1994, the Company issued a warrant to purchase 100,000 shares of
Common Stock at a price of $1.00 per share to a director of the Company in
connection with such director's personal guarantee of the Company's line of
credit with Bank Windsor. The warrant was exercised December 31, 1995.
From December 1994 to March 1995 the Company issued 479,100 shares of Common
Stock at $3.00 per share to 42 accredited investors.
On January 7, 1995, the Company issued a warrant to purchase 44,400 shares
of Common Stock at a price of $3.35 per share to an accredited investor, which
warrant was issued in connection with a private placement.
On January 26, 1995, the Company issued 12,000 shares of Common Stock to an
employee at a price of $1.00 per share upon exercise of an incentive stock
option.
On March 29, 1995, the Company issued 5,000 shares of Common Stock to an
employee at a price of $1.00 per share upon exercise of an incentive stock
option.
On April 7, 1995, the Company issued 1,500 shares of Common Stock to an
employee at a price of $1.00 per share upon exercise of an incentive stock
option.
On April 21, 1995 , the Company issued 5,000 shares of Common Stock to an
employee at a price of $1.00 per share upon exercise of an incentive stock
option.
On April 25, 1995, the Company issued 1,500 shares of Common Stock to an
employee at a price of $1.00 per share upon exercise of an incentive stock
option.
On May 5, 1995, the Company issued 5,000 shares of Common Stock to an
employee at a price of $1.00 per share upon exercise of an incentive stock
option.
On May 10, 1995, the Company issued warrants to purchase an aggregate of
30,000 shares of Common Stock at a price of $3.00 per share to two existing
shareholders in connection with a loan to the Company.
Between May and July 1995, the Company issued 354,334 shares of Common Stock
at $3.00 per share to 29 accredited investors.
On August 22, 1995, the Company issued 1,000 shares of Common Stock to an
employee at a price of $1.00 per share upon exercise of an incentive stock
option.
On August 22, 1995, the Company issued 334 shares of Common Stock to an
employee at a price of $3.00 per share upon exercise of an incentive stock
option.
On December 20, 1995, the Company issued a warrant to purchase 40,000 shares
of Common Stock at a price of $5.00 per share to a director of the Company in
connection with such director's personal guarantee of the Company's line of
credit.
On January 19, 1996, the Company issued 5,000 shares of Common Stock to an
employee at an exercise price of $1.00 per share upon exercise of an incentive
stock option.
II-2
<PAGE>
On February 19, 1996, the Company issued 333 shares of Common Stock to an
employee at a price of $3.00 per share upon exercise of an incentive stock
option.
On March 8, 1996, the Company issued a warrant to purchase 25,000 shares of
Common Stock at a price per share of $5.00 to an existing shareholder in
connection with such shareholder's personal guarantee of the Company's
$500,000 increase in its line of credit with Norwest Bank Minnesota, National
Association.
On May 30, 1996, the Company issued 25,000 shares of Common Stock to an
affiliate of a director of the Company at a price of $1.00 per share upon the
exercise of a non-incentive stock option granted to such director.
In May and June 1996, the Company issued promissory notes in the aggregate
principal amount of $1,540,000 to two accredited investors, both of which are
affiliates of a director of the Company, together with warrants to purchase
15,000 shares of Common Stock at a price of $10.00 per share, which warrants
were issued to an accredited investor that is an affiliate of such accredited
investors. In October 1996, in connection with the extension of the due dates
of certain related promissory note, such warrants were amended to provide for
a $5.00 per share exercise price.
On June 21, 1996, the Company issued 10,000 shares of Common Stock to a
director of the Company at an exercise price of $3.00 per share upon the
exercise of a non-incentive stock option.
On July 15, 1996, the Company issued 334 shares of Common Stock to an
employee at an exercise price of $5.00 per share upon the exercise of an
incentive stock option.
On July 15, 1996, the Company issued promissory notes in the aggregate
principal amount of $600,000 to two accredited investors, one of which is an
affiliate of a director of the Company, together with warrants to purchase a
number of shares determined in accordance with a formula contained in the
warrant agreement at an exercise price equal to 80% of the price to public of
shares of the Company's common stock in the Company's first registration
statement to be declared effective. In October 1996, in connection with an
extension of the due date of such promissory notes the Company amended the
exercise price of such warrants to $5.00 per share, which amendment resulted
in such warrants becoming exercisable for an aggregate of 24,000 shares of
Common Stock.
On July 29, 1996, the Company sold 300,000 shares of Series A Convertible
Preferred Stock to an accredited investor for $10.00 per share. The Company
also issued warrants to purchase an aggregate of 24,000 shares of Common Stock
at $10.00 per share in connection with the Preferred Stock, subject to
adjustment in the event that the Price to Public in this offering is less than
$12.50 per share.
In September 1996, the Company issued promissory notes in the aggregate
principal amount of $750,000 to two accredited investors, both of which are
affiliates of a director of the Company, together with warrants to purchase a
number of shares of Common Stock to be determined in accordance with a formula
contained therein at an exercise price equal to 80% of the price per share
received by the Company in its next sale of equity securities with gross
proceeds of $2.5 million or more. In October 1996, in connection with an
extension of the due date of such promissory notes, the Company amended such
warrants to provide that they would be exercisable for an aggregate of 45,000
shares at an exercise price of $5.00 per share.
In December 1996, the Company issued promissory notes in the aggregate
principal amount of $5,000,000 to 103 accredited investors, together with
warrants to purchase an aggregate of 250,000 shares of Common Stock. The
promissory notes are convertible into Common Stock as to up to 20% of their
original principal amount. The conversion price for the promissory notes and
the exercise price for the warrants will be 80% of the price per share of
Common Stock in the Company's initial public offering.
On January 7, 1997, the Company issued 10,050 shares of Common Stock to a
former employee at an exercise price of $3.00 per share upon the exercise of
an incentive stock option.
The shares of Common Stock sold to employees upon the exercise of stock
options were issued pursuant to Rule 701 under the Securities Act. The other
sales of securities listed above have been made by the Company in reliance on
Section 4(2) of the Securities Act and Rule 506 thereunder.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
1.1 Underwriting Agreement (filed herewith)
1.2 Form of Representative's Warrant (filed herewith)
3.1 Amended and Restated Articles of Incorporation of the Company
(previously filed)
3.2 Second Amended and Restated Articles of Incorporation of the Company
(to be effective upon closing of this offering) (filed herewith)
3.3 Amended and Restated Bylaws of the Company (previously filed)
3.4 Second Amended and Restated Bylaws of the Company (to be effective upon
closing of this offering) (filed herewith)
4.1 Form of Certificate for Common Stock (filed herewith)
5.1 Opinion of Dorsey & Whitney LLP (filed herewith)
10.1 Form of Warrant to purchase Shares of Common Stock, including
registration rights provisions (previously filed)
10.2 Form of Promissory Note (May and June 1996) (filed herewith)
10.3 Warrant, dated as of June 19, 1996, between the Company and Brightstone
Capital, Ltd. (previously filed)
10.4 Form of Bridge Loan Agreement (July 1996) (previously filed)
10.5 Form of Promissory Note (July 1996) (previously filed)
10.6 Form of Warrant (July 1996) (previously filed)
10.7 Purchase Agreement for Series A Convertible Preferred Stock, dated as
of July 29, 1996, by and between the Company and Network General
Corporation, including registration rights provisions (filed herewith)
10.8 Warrant, dated as of July 29, 1996, issued to Network General
Corporation (previously filed)
10.9 Amendment to Bridge Loan Agreement and Promissory Note, dated as of
August 2, 1996, between the Company and Brightbridge Fund I L.P.
(previously filed)
10.10 Form of Bridge Loan Agreement (September 1996) (previously filed)
10.11 Form of Promissory Note (September 1996) (previously filed)
10.12 Form of Warrant (September 1996) (previously filed)
10.13 Amendment to Warrant, dated as of October 15, 1996, between the Company
and Brightstone Capital, Ltd. (previously filed)
10.14 Agreement to Extend Promissory Notes and Amendment to Warrants, dated
as of October 15, 1996, between the Company and Brightstone Fund VI,
Brightstone Fund VII and Brightstone Capital, Ltd. (previously filed)
10.15 Agreement to Extend Promissory Note and Amendment to Warrant, dated as
of October 15, 1996, between the Company and Stephen L. Becher
(previously filed)
10.16 Amendment to Warrant, dated as of October 15, 1996, between the Company
and Brightbridge Fund I L.P. (previously filed)
10.17 Form of Bridge Loan Agreement including registration rights provisions
(December 1996) (previously filed)
10.18 Form of Subordinated Promissory Note (December 1996) (previously filed)
10.19 Form of Warrant (December 1996) (previously filed)
10.20 Office/Warehouse Lease, dated May 10, 1994, by and between The
Northwestern Mutual Life Insurance Company and the Company (previously
filed)
10.21 Amendment to Lease, dated as of May 22, 1996, between the Company and
The Northwestern Mutual Life Insurance Company (previously filed)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
10.22 Lease Agreement, dated April 7, 1995, by and between Ronald C. Devine
and the Company (previously filed)
10.23 [removed]
10.24 1994 Long-Term Incentive and Stock Option Plan, as amended, including
forms of option agreements (filed herewith)
10.25 Directors' Stock Option Plan (filed herewith)
10.26 Form of Mutual Confidentiality Agreement for use with third parties
(previously filed)
10.27 Form of Employee Disclosure and Assignment Agreement (previously filed)
10.28 Form of OEM Agreement (previously filed)
10.29 Form of Sales Representative Agreement (previously filed)
10.30 Form of System Integrator Agreement (previously filed)
10.31 Form of Extended Limited Warranty Agreement (previously filed)
10.32 Lease Agreement, dated November 11, 1996, by and between OMNI
Offices/Woodlawn Hills and the Company (filed herewith)
10.33 Option Agreement, dated as of January 21, 1997, by and between the
Company and David C. Malmberg (filed herewith)
11.1 Statement Re: Computation of Income (Loss) Per Common Share (filed
herewith)
21.1 Subsidiaries of the Company (filed herewith)
23.1 Consent of Arthur Andersen LLP (filed herewith)
23.2 Consent of Dorsey & Whitney LLP (included in Exhibit 5.1)
24.1 Powers of Attorney (included on signature page)
27.1 Financial Data Schedule (filed herewith)
</TABLE>
(b) Financial Statement Schedules
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
The undersigned registrant further undertakes that:
(1) It will provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(2) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and this offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO REGISTRATION STATEMENT ON FORM S-1 TO
BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF EDEN PRAIRIE, STATE OF MINNESOTA, ON FEBRUARY 20, 1997.
FIELDWORKS, INCORPORATED
/s/ Gary J. Beeman
By: __________________________________
GARY J. BEEMAN PRESIDENT AND
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO REGISTRATION STATEMENT ON FORM S-1 HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED ON FEBRUARY 20, 1997.
SIGNATURE TITLE
/s/ Gary J. Beeman President, Chief Executive Officer
- ------------------------------------ and Director (Principal Executive
GARY J. BEEMAN Officer)
/s/ Steven A. Manske
- ------------------------------------ Vice President Finance (Principal
STEVEN A. MANSKE Financial and Accounting Officer)
/s/ David C. Malmberg Chairman of the Board of Directors
- ------------------------------------
DAVID C. MALMBERG
Director
/s/ Robert C. Szymborski
- ------------------------------------
ROBERT C. SZYMBORSKI
*By: __________________________
GARY J. BEEMAN
Attorney-in-fact
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Gary J. Beeman and Steven A. Manske, or either
of them (with full power to act alone), as his or her true and lawful
attorneys-in-fact and agents, with full powers of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any additional Registration Statement pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and any or all
amendments (including post-effective amendments) to this Registration Statement
(or Registration Statements, if an additional Registration Statement is filed
pursuant to Rule 462(b)), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as
he or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO REGISTRATION STATEMENT ON FORM S-1 HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED ON FEBRUARY 20, 1997.
/s/ Robert Heller Director
- ------------------------------------
ROBERT HELLER
/s/ George E. Kline Director
- ------------------------------------
GEORGE E. KLINE
II-6
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
1.1 Underwriting Agreement (filed herewith)
1.2 Form of Representative's Warrant (filed herewith)
3.1 Amended and Restated Articles of Incorporation of the Company
(previously filed)
3.2 Second Amended and Restated Articles of Incorporation of the Company
(to be effective upon closing of this offering) (filed herewith)
3.3 Amended and Restated Bylaws of the Company (previously filed)
3.4 Second Amended and Restated Bylaws of the Company (to be effective
upon closing of this offering) (filed herewith)
4.1 Form of Certificate for Common Stock (filed herewith)
5.1 Opinion of Dorsey & Whitney LLP (filed herewith)
10.1 Form of Warrant to purchase Shares of Common Stock, including
registration rights provisions (previously filed)
10.2 Form of Promissory Note (May and June 1996) (filed herewith)
10.3 Warrant, dated as of June 19, 1996, between the Company and
Brightstone Capital, Ltd. (previously filed)
10.4 Form of Bridge Loan Agreement (July 1996) (previously filed)
10.5 Form of Promissory Note (July 1996) (previously filed)
10.6 Form of Warrant (July 1996) (previously filed)
10.7 Purchase Agreement for Series A Convertible Preferred Stock, dated as
of July 29, 1996, by and between the Company and Network General
Corporation, including registration rights provisions (filed herewith)
10.8 Warrant, dated as of July 29, 1996, issued to Network General
Corporation (previously filed)
10.9 Amendment to Bridge Loan Agreement and Promissory Note, dated as of
August 2, 1996, between the Company and Brightbridge Fund I L.P.
(previously filed)
10.10 Form of Bridge Loan Agreement (September 1996) (previously filed)
10.11 Form of Promissory Note (September 1996) (previously filed)
10.12 Form of Warrant (September 1996) (previously filed)
10.13 Amendment to Warrant, dated as of October 15, 1996, between the Company
and Brightstone Capital, Ltd. (previously filed)
10.14 Agreement to Extend Promissory Note and Amendment to Warrants, dated as
of October 15, 1996, between the Company and Brightstone Fund VI,
Brightstone Fund VII and Brightstone Capital, Ltd. (previously filed)
10.15 Agreement to Extend Promissory Notes and Amendment to Warrants, dated
as of October 15, 1996, between the Company and Stephen L. Becher
(previously filed)
10.16 Amendment to Warrant, dated as of October 15, 1996, between the Company
and Brightbridge Fund I L.P. (previously filed)
10.17 Form of Bridge Loan Agreement including registration rights provisions
(December 1996) (previously filed)
10.18 Form of Subordinated Promissory Note (December 1996) (previously filed)
10.19 Form of Warrant (December 1996) (previously filed)
10.20 Office/Warehouse Lease, dated May 10, 1994, by and between The
Northwestern Mutual Life Insurance Company and the Company (previously
filed)
10.21 Amendment to Lease, dated as of May 22, 1996, between the Company and
The Northwestern Mutual Life Insurance Company (previously filed)
10.22 Lease Agreement, dated April 7, 1995, by and between Ronald C. Devine
and the Company (previously filed)
10.23 [removed]
10.24 1994 Long-Term Incentive and Stock Option Plan, including forms of
option agreements (filed herewith)
10.25 Directors' Stock Option Plan (filed herewith)
10.26 Form of Mutual Confidentiality Agreement for use with third parties
(previously filed)
10.27 Form of Employee Disclosure and Assignment Agreement (previously filed)
10.28 Form of OEM Agreement (previously filed)
10.29 Form of Sales Representative Agreement (previously filed)
10.30 Form of System Integrator Agreement (previously filed)
10.31 Form of Extended Limited Warranty Agreement (previously filed)
10.32 Lease Agreement, dated November 11, 1996, by and between OMNI
Offices/Woodlawn Hills and the Company (filed herewith)
10.33 Option Agreement, dated as of January 21, 1997, by and between the
Company and David C. Malmberg (filed herewith)
11.1 Statement Re: Computation of Income (Loss) Per Common Share (filed
herewith)
21.1 Subsidiaries of the Company (filed herewith)
23.1 Consent of Arthur Andersen LLP (filed herewith)
23.2 Consent of Dorsey & Whitney LLP (included in Exhibit 5.1)
24.1 Powers of Attorney (included on signature page)
27.1 Financial Data Schedule (filed herewith)
</TABLE>
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<PAGE>
1,850,000 SHARES COMMON STOCK
FIELDWORKS, INCORPORATED
UNDERWRITING AGREEMENT
----------------------
______________________, 1997
R. J. Steichen & Company
As Representative of the Several Underwriters
801 Nicollet Mall, Suite 700
Minneapolis, MN 55402
Dear Ladies and Gentlemen:
FieldWorks, Incorporated, a Minnesota corporation (the "Company"), hereby
confirms its agreement to issue and sell to the underwriters named in Schedule I
hereto (the "Underwriters"), for which R. J. Steichen & Company is acting as the
representative (in such capacity, the "Representative"), an aggregate of
1,850,000 shares of authorized but unissued common stock, par value $.001 per
share, of the Company (the "Common Stock"). Such 1,850,000 shares of Common
Stock are collectively referred to in this Agreement as the "Firm Shares." The
Company also hereby confirms its agreement to issue and sell to the Underwriters
an aggregate of up to 277,500 additional shares of Common Stock upon the request
of the Representative solely for the purpose of covering overallotments. Such
additional shares are referred to in this Agreement as the "Option Shares." The
Firm Shares and the Option Shares are collectively referred to herein as the
"Shares." Further, the Company hereby confirms its agreement to issue to the
Representative warrants for the purchase of a total of 185,000 shares as
described in Section 5 hereof (the "Representative's Warrants"), assuming
purchase by the Underwriters of the Firm Shares. The shares issuable upon
exercise of the Representative's Warrants are referred to as the "Warrant
Shares."
The Company hereby confirms the arrangements with respect to the purchase,
severally and not jointly, by each of the Underwriters the number of the Firm
Shares set forth opposite their respective names in Schedule I, plus their pro
rata portion of the Option Shares purchased if the overallotment option is
exercised in whole or in part. The Company has been advised and hereby
acknowledges that R. J. Steichen has been duly authorized to act as the
representative of the Underwriters. As used in this Agreement, the term
"Underwriter" refers to any individual member of the underwriting syndicate and
includes any party substituted for an Underwriter under Section 9 hereof.
1. Representations and Warranties of the Company. The Company represents
and warrants to and agrees with each of the several Underwriters as follows:
1
<PAGE>
(a) A registration statement on Form S-1 with respect to the Shares
has been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "1933 Act") and the rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "SEC") thereunder and has been filed with the SEC under the
1933 Act. The Company has filed such amendments to the registration
statement and such amended preliminary prospectuses as may have been
required to be filed to the date hereof. If the Company has elected not to
rely upon Rule 430A, the Company has prepared and will promptly file an
amendment to the registration statement and an amended prospectus (provided
the Representative has consented to such filing). If the Company has
elected to rely upon Rule 430A, it will prepare and timely file a
prospectus pursuant to Rule 424(b) that discloses the information
previously omitted from the prospectus in reliance upon Rule 430A. Copies
of such registration statement and each pre-effective amendment thereto,
and each related preliminary prospectus have been delivered by the Company
to the Representative. Such registration statement, as amended or
supplemented, including all prospectuses included as a part thereof,
financial schedules, exhibits, the information (if any) deemed to be part
thereof pursuant to Rules 430A and 434 under the 1933 Act and any
registration statement filed pursuant to Rule 462 under the 1933 Act, is
herein referred to as the "Registration Statement." The term "Prospectus"
as used herein shall mean the final prospectus, as amended or supplemented,
included as a part of the Registration Statement on file with the SEC when
it becomes effective; provided, however, that if a prospectus is filed by
the Company pursuant to Rules 424(b) and 430A or a term sheet is filed by
the Company pursuant to Rule 434 under the 1933 Act, the term "Prospectus"
as used herein shall mean the prospectus so filed pursuant to Rules 424(b)
and 430A and the term sheet so filed pursuant to Rule 434. The term
"Preliminary Prospectus" as used herein means any prospectus, as amended or
supplemented, used prior to the Effective Date (as defined in Section 4(a)
hereof) and included as a part of the Registration Statement, including any
prospectus filed with the SEC pursuant to Rule 424(a).
(b) Neither the SEC nor any state securities division has issued any
order preventing or suspending the use of any Preliminary Prospectus, or
issued a stop order with respect to the offering of the Shares or, without
the Representative's knowledge on the date hereof, requiring the
recirculation of a Preliminary Prospectus and, to the best knowledge of the
Company, no proceeding for any such purpose has been initiated or
threatened. Each part of the Registration Statement, when such part became
or becomes effective, each Preliminary Prospectus, on the date of filing
with the SEC, and the Prospectus and any amendment or supplement thereto,
on the date of filing thereof with the SEC and on any Closing Date (as
defined in Section 3 hereof), as the case may be, conformed or will conform
in all material respects with the requirements of the 1933 Act and the
Rules and Regulations and the securities laws ("Blue Sky Laws") of the
states where the Shares are to be sold (the "States") and contained or will
contain all statements that are required to be stated therein in accordance
with the 1933 Act, the Rules and Regulations and the Blue Sky Laws of the
States. When the Registration Statement became or becomes effective and
when any post-effective amendments thereto shall become effective, the
Registration Statement did not and will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Neither any
Preliminary Prospectus, on the date of filing thereof with the SEC, nor the
Prospectus or any
2
<PAGE>
amendment or supplement thereto, on the date of filing thereof with the SEC
and on the First and Second Closing Dates, contained or will contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that none of the representations and warranties in this Subsection
1(b) shall apply to statements in, or omissions from, the Registration
Statement, Preliminary Prospectus or the Prospectus, or any amendment
thereof or supplement thereto, which are based upon and conform to written
information furnished to the Company by the Underwriters specifically for
use in the preparation of the Registration Statement, Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto. There
is no contract or other document of the Company of a character required by
the 1933 Act or the Rules and Regulations to be described in the
Registration Statement or Prospectus, or to be filed as an exhibit to the
Registration Statement, that has not been described or filed as required.
The descriptions of all such contracts and documents or references thereto
are correct in all material respects and include the information required
under the 1933 Act and the Rules and Regulations.
(c) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Minnesota,
with full corporate power and authority, to own, lease and operate its
properties and conduct its business as described in the Registration
Statement and Prospectus. The Company is duly qualified to do business as a
foreign corporation in good standing in each jurisdiction in which the
ownership or lease of its properties, or the conduct of its business,
requires such qualification and in which the failure to be qualified or in
good standing would have a material adverse effect on the business of the
Company. The Company has all necessary and material authorizations,
approvals and orders of and from all governmental regulatory officials and
bodies to own its properties and to conduct its business as described in
the Registration Statement and Prospectus, and is conducting its business
in substantial compliance with all applicable material laws, rules and
regulations of the jurisdictions in which it is conducting business. The
Company holds all material licenses, certificates, permits, authorizations,
approvals and orders of and from all state, federal and other governmental
regulatory officials and bodies necessary to own its properties and to
conduct its business as described in the Registration Statement and
Prospectus, or has obtained waivers from any such applicable requirements
from the appropriate state, federal or other regulatory authorities. All
such licenses, permits, approvals, certificates, consents, orders and other
authorizations are in full force and effect, and the Company has not
received notice of any proceeding or action relating to the revocation or
modification of any such license, permit, approval, certificate, consent,
order or other authorization which, individually or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, might materially
and adversely affect the conduct of the business or the condition,
financial or otherwise, or the earnings, affairs or business prospects of
the Company.
(d) The Company has no subsidiaries and is not affiliated with any
other Company or business entity, except as disclosed in the Registration
Statement.
(e) The Company is not in violation of its Articles of Incorporation
or Bylaws or in default in the performance or observance of any obligation,
agreement, covenant
3
<PAGE>
or condition contained in any bond, debenture, note or other evidence of
indebtedness or in any contract, indenture, mortgage, loan agreement, joint
venture or other agreement or instrument to which the Company is a party or
by which the Company or its properties are bound, and there does not exist
any state of facts which constitutes an event of default on the part of the
Company or which, with notice or lapse of time or both, would constitute
such an event of default. The Company is not, to the best of its knowledge,
in violation of any law, order, rule, regulation, writ, injunction or
decree of any government, governmental instrumentality or court, domestic
or foreign, which violation is material to the business of the Company.
(f) The Company has full power and authority to enter into this
Agreement. This Agreement has been duly authorized, executed and delivered
by the Company and, assuming the due authorization, execution and delivery
of this Agreement by the Representative on behalf of the Underwriters, will
be a valid and binding agreement on the part of the Company, enforceable in
accordance with its terms, if and when this Agreement shall have become
effective in accordance with Section 8, except as enforceability may be
limited by the application of bankruptcy, insolvency, moratorium or similar
laws affecting the rights of creditors generally and by judicial
limitations on the right of specific performance and except as the
enforceability of the indemnification or contribution provisions hereof may
be affected by applicable federal or state securities laws. The performance
of this Agreement and the consummation of the transactions herein
contemplated will not result in a breach or violation of any of the terms
and provisions of, or constitute a default under or result in the creation
or imposition of any lien, charge or encumbrance upon any property or
assets of the Company pursuant to, (i) any indenture, mortgage, deed of
trust, loan agreement, bond, debenture, note, agreement or other evidence
of indebtedness, lease, contract or other agreement or instrument to which
the Company is a party or by which the property or assets of the Company is
bound, (ii) the Company's Articles of Incorporation or Bylaws or (iii) any
statute or any order, rule or regulation of any court, governmental agency
or body having jurisdiction over the Company. No consent, approval,
authorization or order of any court, governmental agency or body is
required for the consummation by the Company of the transactions on its
part herein contemplated, except such as may be required under the 1933
Act, the Rules and Regulations, the Blue Sky Laws, the rules and
regulations of the National Association of Securities Dealers, Inc.
("NASD") and the rules and regulations of Nasdaq.
(g) Except as is otherwise expressly stated in the Registration
Statement or Prospectus, there are no actions, suits or proceedings pending
before any court or governmental agency, authority or body to which the
Company is a party or of which the business or property of the Company is
the subject which might result in any material adverse change in the
condition (financial or otherwise), business or prospects of the Company,
materially and adversely affect its properties or assets or prevent
consummation of the transactions contemplated by this Agreement; and, to
the best of the Company's knowledge, no such actions, suits or proceedings
are threatened except as is otherwise expressly stated in the Registration
Statement or Prospectus. The Company is not aware of any facts which would
form the basis for the assertion of any material claim or liability which
are not disclosed in the Registration Statement or the Prospectus or
adequately reserved for in the financial statements which are a part
thereof,
4
<PAGE>
except for such claims or liabilities which are not currently expected to
have a material adverse effect on the condition (financial or otherwise) or
the earnings, affairs or business prospects of the Company. All pending
legal or governmental proceedings to which the Company is a party or to
which any of its property is subject which are not described in the
Registration Statement and the Prospectus, including ordinary routine
litigation incidental to the business, are, considered in the aggregate,
not material to the Company.
(h) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus. The outstanding Common Stock of
the Company is duly authorized, validly issued, fully paid and
nonassessable. The Shares conform in substance to all statements relating
thereto contained in the Registration Statement and Prospectus. The Shares
to be sold by the Company hereunder have been duly authorized and, when
issued and delivered pursuant to this Agreement, will be validly issued,
fully paid and nonassessable and will conform to the description thereof
contained in the Prospectus. No preemptive rights or similar rights of any
security holders of the Company exist with respect to the issuance and sale
of the Shares by the Company or exercise of the Representative's Warrants.
Except as disclosed in the Prospectus, the Company has received waivers
from each security holder that has the right to require the Company to
register under the 1933 Act any securities of any nature owned or held by
such person either in connection with the transactions contemplated by this
Agreement or after a demand for registration by such holder. Upon payment
for and delivery of the Shares pursuant to this Agreement, the Underwriters
will acquire the Shares, free and clear of all liens, encumbrances or
claims created by actions of the Company. The certificates evidencing the
Shares will comply as to form with all applicable provisions of the laws of
the State of Minnesota. Except as set forth in any part of the Registration
Statement, the Company does not have outstanding any options to purchase,
or any rights or warrants to subscribe for, or any securities or
obligations convertible into, or any contracts or commitments to issue or
sell, any Common Stock or other securities of the Company, or any such
warrants, convertible securities or obligations.
(i) The Representative's Warrants and the Warrant Shares have been
duly authorized. The Representative's Warrants, when issued and delivered
to the Representative, will constitute valid and binding obligations of the
Company in accordance with their terms, except as enforceability may be
limited by the application of bankruptcy, insolvency, moratorium or similar
laws affecting the rights of creditors generally and by judicial
limitations on the right of specific performance. The Warrant Shares when
issued in accordance with the terms of this Agreement and pursuant to the
Representative's Warrants, will be validly issued, fully paid and
nonassessable and subject to no preemptive rights or similar rights on the
part of any person or entity. A sufficient number of shares of Common Stock
of the Company have been reserved for issuance by the Company upon exercise
of the Representative's Warrants.
(j) Arthur Andersen LLP, whose reports appear in the Registration
Statement and Prospectus, are independent accountants within the meaning of
the 1933 Act and the Rules and Regulations. The financial statements of the
Company, together with the related notes, forming part of the Registration
Statement and Prospectus (the "Financial Statements"), fairly present the
financial position and the results of operations of the
5
<PAGE>
Company at the respective dates and for the respective periods to which
they apply. The Financial Statements are accurate, complete and correct and
have been prepared in accordance with the 1933 Act, the Rules and
Regulations and generally accepted accounting principles ("GAAP"),
consistently applied throughout the periods involved, except as may be
otherwise stated therein. The summaries of the Financial Statements and the
other financial, statistical and related notes set forth in the
Registration Statement and the Prospectus are (i) accurate and correct and
fairly present the information purported to be shown thereby as of the
dates and for the periods indicated on a basis consistent with the audited
financial statements of the Company and (ii) in compliance in all material
respects with the requirements of the 1933 Act and the Rules and
Regulations.
(k) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus and at any Closing Date,
except as is otherwise disclosed in the Registration Statement or
Prospectus, there has not been:
(i) any change in the capital stock or long-term debt
(including any capitalized lease obligation), or increase in the
short-term debt of the Company;
(ii) any issuance of options, warrants, convertible securities
or other rights to purchase the capital stock of the Company;
(iii) any material adverse change, or any development involving a
material adverse change, in or affecting the business, business
prospects, properties, assets, patents or patent applications
(including those of the Company and those relating to devices or
technologies licensed to the Company), management, financial position,
stockholders' equity, results of operations or general condition of
the Company;
(iv) any material transaction entered into by the Company;
(v) any material obligation, direct or contingent, incurred by
the Company, except obligations incurred in the ordinary course of
business that, in the aggregate, are not material; or
(vi) any dividend or distribution of any kind declared, paid or
made on the Company's capital stock.
(l) Except as is otherwise disclosed in the Registration Statement or
Prospectus, the Company has good and marketable title to all of the
property, real and personal, described in the Registration Statement or
Prospectus as being owned by the Company, free and clear of all liens,
encumbrances, equities, charges or claims, except as do not materially
interfere with the uses made and to be made by the Company of such property
or as disclosed in the Financial Statements. Except as is otherwise
disclosed in the Registration Statement or Prospectus, the Company has
valid and binding leases to the real and personal property described in the
Registration Statement or Prospectus as being under lease to the Company,
except as to those leases which are not
6
<PAGE>
material to the Company or the lack of enforceability of which would not
materially interfere with the use made and to be made by the Company of
such leased property.
(m) The Company has filed all necessary federal and state income and
franchise tax returns and paid all taxes shown as due thereon. The Company
is not in default in the payment of any taxes and has no knowledge of any
tax deficiency which might be asserted against it which would materially
and adversely affect the Company's business or properties.
(n) No labor disturbance by the employees of the Company exists or,
to the best of the Company's knowledge, is imminent which could reasonably
be expected to have a material adverse effect on the conduct of the
business, operations, financial condition or income of the Company.
(o) Except as disclosed in the Prospectus:
(i) The Company owns or possesses the unrestricted rights to use
all patents, copyrights, trademarks, trade secrets and proprietary
rights or information necessary for the development, manufacture,
operation and sale of all products and services sold or proposed to be
sold by the Company and for the conduct of its present or intended
business as described in the Prospectus. There are no pending legal,
governmental or administrative proceedings relating to patents,
copyrights, trademarks or proprietary rights or information to which
the Company is a party or to which any property of the Company is
subject and no such proceedings are, to the best of the Company's
knowledge, threatened or contemplated against the Company by any
governmental agency or authority or others. The Company has not
received any notice of conflict with asserted rights of others. The
Company is not using any confidential information or trade secrets of
any third party without such party's consent.
(ii) The Company has no reason to believe that it is infringing
upon the right or claimed rights of any person under or with respect
to any of the intangible rights listed in the preceding subsection.
The Company is not obligated or under any liability whatsoever to make
any payments by way of royalties, fees or otherwise to any owner of,
licensor of, or other claimant to, any patent, trademark, trade name,
copyright or other intangible asset, with respect to the use thereof
or in connection with the conduct of its business or otherwise.
(p) The Company intends to apply the proceeds from the sale of the
Shares by it to the purposes and substantially in the manner set forth in
the Prospectus.
(q) The Company has no defined benefit pension plan or other pension
benefit plan, except for its 401(K) Plan which has no benefit obligations
and has not been funded, which is intended to comply with the provisions of
the Employee Retirement Income Security Act of 1974 as amended from time to
time, except as disclosed in the Registration Statement.
7
<PAGE>
(r) To the best of the Company's knowledge, no person is entitled,
directly or indirectly, to compensation from the Company or the
Underwriters for services as a finder in connection with the transactions
contemplated by this Agreement.
(s) The conditions for use of a Registration Statement on Form S-1
for the distribution of the Shares have been satisfied with respect to the
Company.
(t) The Company has not taken and will not take, directly or
indirectly, any action (and does not know of any action by its directors,
officers, stockholders, or others) which has constituted or is designed to,
or which might reasonably be expected to, cause or result in stabilization
or manipulation, as defined in the Securities Exchange Act of 1934, as
amended (the "1934 Act") or otherwise, of the price of any security of the
Company to facilitate the sale or resale of the Shares.
(u) The Company has not sold any securities in violation of Section
5(a) of the 1933 Act.
(v) The Company maintains insurance, which is in full force and
effect, of the types and in the amounts that it reasonably deems, following
consultation with its insurance broker, to be adequate for its business and
in line with the insurance maintained by similar companies and businesses.
(w) The Company hereby represents that, as of the date hereof, it has
complied with all provisions of Section 517.075, Florida Statutes and Rule
3E-900-001 of the Rules of the Florida Department of Banking and Finance,
Division of Securities, copies of which are attached hereto.
(x) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations
and (ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP.
(y) All material transactions between the Company and its
stockholders who beneficially own more than 5% of any class of the
Company's voting securities have been accurately disclosed in the
Prospectus, and the terms of each such transaction are fair to the Company
and no less favorable to the Company than the terms that could have been
obtained from unrelated parties.
(z) The Company has obtained a written agreement from each of the
officers and directors of the Company and each stockholder of the Company
who is an affiliate (as defined in Rule 144 under the 1933 Act) of the
Company that for 180 days following the Effective Date, such person will
not, without the Representative's prior written consent, sell, transfer or
otherwise dispose of, or agree to sell, transfer or otherwise dispose of,
other than by gift to donees who agree to be bound by the same restriction
or by will or the laws of descent, any of his or her Common Stock, or any
options, warrants or rights to purchase Common Stock or any shares of
Common Stock received upon exercise of any options, warrants or rights to
purchase Common Stock, all of which are beneficially held by such persons
during the 180-day period.
8
<PAGE>
(aa) The Company has obtained a written agreement from certain
stockholders of the Company who are not affiliates (as defined in Rule 144
under the 1933 Act) of the Company and who hold an aggregate of ________
shares of stock of the Company that for 90 days following the Effective
Date, such persons will not, without the Representative's prior written
consent, sell, transfer or otherwise dispose of, or agree to sell, transfer
or otherwise dispose of, other than by gift to donees who agree to be bound
by the same restriction or by will or the laws of descent, any of his or
her Common Stock, or any options, warrants or rights to purchase Common
Stock or any shares of Common Stock received upon exercise of any options,
warrants or rights to purchase Common Stock, all of which are beneficially
held by such persons during the 90-day period.
(bb) The Common Stock of the Company has been approved by Nasdaq for
trading on its National Market following effectiveness of the Registration
Statement.
2. Purchase, Sale, Delivery and Payment.
------------------------------------
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth,
the Company agrees to issue and sell to each of the Underwriters, and the
Underwriters agree, severally and not jointly, to purchase from the
Company, at $_____________ per Share (net of underwriting discounts and
commissions of $_____ per Share) the respective amount of Firm Shares set
forth opposite such Underwriter's name in Schedule I hereto. The
Underwriters will collectively purchase all of the Firm Shares if any are
purchased.
(b) On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set forth, the
Company hereby grants an option to the Underwriters to purchase an
aggregate of the Option Shares at the same purchase price as the Firm
Shares for use solely in covering any overallotments made by the
Underwriters in the sale and distribution of the Firm Shares. The option
granted hereunder may be exercised at any time (but not more than once)
within 30 days after the Effective Date (as defined in Section 4(a) hereof)
upon notice (confirmed in writing) by the Representative to the Company
setting forth the aggregate number of Option Shares as to which the
Underwriters are exercising the option and the date on which certificates
for such Option Shares are to be delivered. Option Shares shall be
purchased severally for the account of each Underwriter in proportion to
the number of Firm Shares set forth opposite the name of such Underwriter
in Schedule I hereto. The option granted hereby may be canceled by the
Representative as to the Option Shares for which the option is unexercised
at any time prior to the expiration of the 30-day period upon notice to the
Company.
(c) The Company will deliver the Firm Shares to the Representative at
the offices of Fredrikson & Byron, P.A., unless some other place is agreed
upon, at 10:00 A.M., Minneapolis time, against payment of the purchase
price at the same place, on the third full business day after trading the
Shares has commenced (but not more than ten full business days after the
date the Registration Statement is declared effective), or such earlier
time as may be agreed upon between the Representative and the Company. Such
time and place is herein referred to as the "First Closing Date."
9
<PAGE>
(d) The Company will deliver the Option Shares being purchased by the
Underwriters to the Representative at the offices of Fredrikson & Byron,
P.A. set forth in Section 2(c) above, unless some other place is agreed
upon, at 10:00 a.m., Minneapolis time, against payment of the purchase
price at the same place, on the date determined by the Representative and
of which the Company has received notice as provided in Section 2(b), which
shall not be earlier than one nor later than three full business days after
the exercise of the option as set forth in Section 2(b), or at such other
time not later than ten full business days thereafter as may be agreed upon
by the Representative and the Company, such time and date being herein
referred to as the "Second Closing Date." The First and Second Closing
Dates are collectively referred to herein as the "Closing Date."
(e) Certificates for the Shares to be delivered will be registered in
such names and issued in such denominations as the Underwriters shall
request of the Company at least two full business days prior to the First
Closing Date or the Second Closing Date, as the case may be. The
certificates will be made available to the Underwriters in definitive form
for the purpose of inspection and packaging at least 24 hours prior to each
respective Closing Date.
(f) Payment for the Shares shall be made, against delivery to the
Representative or its designated agent, of certificates for the Shares by
wire transfer to a designated account of the Company.
(g) The Underwriters will make a public offering of the Shares
directly to the public (which may include selected dealers who are members
in good standing with the NASD or foreign dealers not eligible for
membership in the NASD but who have agreed to abide by the interpretation
of the NASD's Board of Governor's with respect to free-riding and
withholding) as soon as the Underwriters deem practicable after the
Registration Statement becomes effective at the Price to Public set forth
in Section 2(a) above, subject to the terms and conditions of this
Agreement and in accordance with the Prospectus. Such concessions from the
public offering price may be allowed selected dealers of the NASD as the
Underwriters determine, and the Underwriters will furnish the Company with
such information about the distribution arrangements as may be necessary
for inclusion in the Registration Statement. It is understood that the
public offering price and concessions may vary after the initial public
offering. The Underwriters shall offer and sell the Shares only in
jurisdictions in which the offering of Shares has been duly registered or
qualified, or is exempt from registration or qualification, and shall take
reasonable measures to effect compliance with applicable state and local
securities laws.
(h) On the First Closing Date, the Company shall issue and deliver to
the Representative the Representative's Warrants.
(i) It is understood that the Representative, individually and not as
a Representative, may (but shall not be obligated to) make payment on
behalf of any Underwriter or Underwriters for the Shares to be purchased by
such Underwriter or Underwriters. No such payment by the Representative
shall relieve such Underwriter or Underwriters from any of its or their
other obligations hereunder.
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3. Further Agreements of the Company. The Company hereby covenants and
agrees with each of the Underwriters as follows:
(a) If the Registration Statement has not become effective prior to
the date hereof, the Company will use its best efforts to cause the
Registration Statement and any subsequent amendments thereto to become
effective as promptly as possible. The Company will notify the
Representative promptly, after the Company shall receive notice thereof, of
the time when the Registration Statement, or any subsequent amendment
thereto, has become effective or any supplement to the Prospectus has been
filed. Following the execution and delivery of this Agreement, the Company
will prepare, and timely file or transmit for filing with the SEC in
accordance with Rules 430A, 424(b) and 434, as applicable, copies of the
Prospectus, or, if necessary, a post-effective amendment to the
Registration Statement (including the Prospectus), in which event, the
Company will take all necessary action to have such post-effective
amendment declared effective as soon as possible. The Company will notify
the Representative promptly upon the Company's obtaining knowledge of the
issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement or of the initiation or threat of any proceedings
for that purpose and will use its best efforts to prevent the issuance of
any stop order and, if a stop order is issued, to obtain as soon as
possible the withdrawal or lifting thereof. The Company will promptly
prepare and file at its own expense with the SEC any amendments of, or
supplements to, the Registration Statement or the Prospectus which may be
necessary in connection with the distribution of the Shares by the
Underwriters. During the period when a Prospectus relating to the Shares is
required to be delivered under the 1933 Act, the Company will promptly file
any amendments of, or supplements to, the Registration Statement or the
Prospectus which may be necessary to correct any untrue statement of a
material fact or any omission to state any material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Company will notify the Representative promptly
of the receipt of any comments from the SEC regarding the Registration
Statement or Prospectus or request by the SEC for any amendment thereof or
supplement thereto or for any additional information. The Company will not
file any amendment of, or supplement to, the Registration Statement or
Prospectus, whether prior to or after the Effective Date, which shall not
previously have been submitted to the Representative and its counsel a
reasonable time prior to the proposed filing or to which the Representative
shall have reasonably objected.
(b) The Company has used and will continue to use its best efforts to
register or qualify the Shares for sale under the securities laws of such
jurisdictions as the Representative may designate and the Company will file
such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification. In each
jurisdiction in which the Shares shall have been registered or qualified as
above provided, the Company will continue such registrations or
qualifications in effect for so long as may be required for purposes of the
distribution of the Shares; provided, however, that in no event shall the
Company be obligated to qualify to do business as a foreign corporation in
any jurisdiction in which it is not now so qualified or to take any action
which would subject it to the service of process in suits, other than those
arising out of the offering or sale of the Shares, in any jurisdiction
where it is not now so subject. In each jurisdiction where any of the
Shares shall have
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been so qualified, the Company will file such statements and reports as are
or may be reasonably required by the laws of such jurisdiction to continue
such qualification in effect. The Company will notify the Representative
immediately of, and confirm in writing, the suspension of qualification of
the Shares or the threat of such action in any jurisdiction. The Company
will use its best efforts to qualify or register its Common Stock for sale
in nonissuer transactions under (or obtain exemptions from the application
of) the securities laws of such states designated by the Representative
(and thereby permit market-making transactions and secondary trading in its
Common Stock in such states), and will comply with such securities laws and
will continue such qualifications, registrations and exemptions in effect
for a period of five years after the date hereof.
(c) The Company will furnish to the Representative, as soon as
available, copies of the Registration Statement (one of which shall include
all exhibits), each Preliminary Prospectus, the Prospectus and any
amendments or supplements to such documents, including any prospectus
prepared to permit compliance with Section 10(a)(3) of the 1933 Act, all in
such quantities as the Representative may from time to time reasonably
request prior to the printing of each such document. The Company
specifically authorizes the Underwriters and all dealers to whom any of the
Shares may be sold by the Underwriters to use and distribute copies of such
Preliminary Prospectuses and Prospectuses in connection with the sale of
the Shares as and to the extent permitted by the federal and applicable
state and local securities laws.
(d) For as long as the Company has more than 100 beneficial owners,
but in no event more than five years after the Effective Date, the Company
will mail as soon as practicable to the holders of its Common Stock
substantially the following documents, which documents shall be in
compliance with this Section if they are in the form prescribed by the 1934
Act:
(i) within forty-five days after the end of the first three quarters
of each fiscal year, copies of the quarterly unaudited statement of
profit and loss and quarterly unaudited balance sheets of the Company
and any material subsidiaries; and
(ii) within ninety days after the close of each fiscal year,
appropriate financial statements as of the close of such fiscal year
for the Company and any material subsidiary which shall be certified
to by a nationally recognized firm of independent certified public
accountants in such form as to disclose the Company's financial
condition and the results of its operations for such fiscal year.
(e) For as long as the Company has more than 100 beneficial owners,
but in no event more than five years after the Effective Date, the Company
will furnish to the Representative (i) concurrently with furnishing such
reports to its stockholders, the reports described in Section 3(d) hereof;
(ii) as soon as they are available, copies of all other reports (financial
or otherwise) mailed to security holders; and (iii) as soon as they are
available, copies of all reports and financial statements furnished to, or
filed with, the SEC, the NASD, any securities exchange or any state
securities commission by the Company. During such period, the foregoing
financial statements shall be on a consolidated basis to the extent that
the accounts of the Company and any subsidiary or
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<PAGE>
subsidiaries are consolidated and shall be accompanied by similar financial
statements for any significant subsidiary which is not so consolidated.
(f) The Company will not, without the prior written consent of the
Representative, which consent shall not be unreasonably withheld, sell or
otherwise dispose of any capital stock or securities convertible or
exercisable into capital stock of the Company (other than pursuant to
currently outstanding options, warrants and convertible securities) during
the 180-day period following the Effective Date. Prior to the Closing
Date, the Company will not repurchase or otherwise acquire any of its
capital stock or declare or pay any dividend or make any distribution on
any class of its capital stock.
(g) Subject to the proviso set forth below, the Company shall be
responsible for and pay all costs and expenses incident to the performance
of its obligations under this Agreement including, without limiting the
generality of the foregoing, (i) all costs and expenses in connection with
the preparation, printing and filing of the Registration Statement
(including financial statements and exhibits), Preliminary Prospectuses and
the Prospectus and any amendments thereof or supplements to any of the
foregoing; (ii) the issuance and delivery of the Shares, including taxes,
if any; (iii) the cost of all certificates representing the Shares; (iv)
the fees and expenses of the Transfer Agent for the Shares; (v) the fees
and disbursements of counsel for the Company; (vi) all fees and other
charges of the independent public accountants of the Company; (vii) the
cost of furnishing and delivering to the Underwriters and dealers
participating in the offering copies of the Registration Statement
(including appropriate exhibits), Preliminary Prospectuses, the Prospectus
and any amendments of, or supplements to, any of the foregoing; (viii) the
NASD filing and quotation fees; (ix) the fees and disbursements, including
filing fees and all accountable fees and expenses of counsel for the
Company incurred in registering or qualifying the Shares for sale under the
laws of such jurisdictions upon which the Representative and the Company
may agree; and (x) a nonaccountable expense allowance to the Representative
equal to 2% of the gross proceeds of the Offering. The Representative
hereby acknowledge receipt of a $10,000 advance against the
Representative's non-accountable expense allowance referred to in the
preceding sentence. In the event this Agreement is terminated pursuant to
Section 8 below, the Company shall remain obligated to pay the
Representative its actual accountable out-of-pocket expenses, not to exceed
$20,000, without the prior written approval of the Company. Further, if
upon termination of this Agreement pursuant to Section 8 below, the
Representative's actual accountable out-of-pocket expenses do not exceed
the $10,000 advance against the Representative's accountable expense
allowance, the portion of the advance not used will be reimbursed to the
Company by the Representative.
(h) The Company will not take, and will use its best efforts to cause
each of its officers and directors not to take, directly or indirectly, any
action designed to or which might reasonably be expected to cause or result
in the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares.
(i) The Company will use its best efforts to maintain the listing of
its Common Stock on the Nasdaq National Market.
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<PAGE>
(j) For a period of at least three years after the Effective Date,
the Company will file with the SEC all reports and other documents as may
be required by the 1933 Act, the Rules and Regulations and the 1934 Act.
(k) The Company will apply the proceeds from the sale of the Shares
substantially in the manner set forth in the Prospectus.
(l) Prior to or as of the First Closing Date, the Company shall have
performed each condition to closing required to be performed by it pursuant
to Section 4 hereof.
(m) Other than as permitted by the 1933 Act and the Rules and
Regulations, the Company will not distribute any prospectus or other
offering material in connection with the Offering.
(n) On First Closing Date, the Company shall grant to the
Representative the Representative's Warrants, in substantially the form
attached as Appendix A hereto.
4. Conditions of the Underwriters' Obligations. The respective
obligations of the several Underwriters to purchase and pay for the Shares as
provided herein shall be subject to the accuracy of the representations and
warranties of the Company, in the case of the Firm Shares as of the date hereof
and the First Closing Date (as if made on and as of the First Closing Date) and
in the case of the Option Shares, as of the date hereof and the Second Closing
Date (as if made on and as of the Second Closing Date), to the performance by
the Company of its obligations hereunder, and to the satisfaction of the
following additional conditions on or before the First Closing Date in the case
of the Firm Shares and on or before the Second Closing Date in the case of the
Option Shares:
(a) The Registration Statement shall have become effective not later
than 5:00 P.M. Minneapolis time, on the first full business day following
the date of this Agreement, or such later date as shall be consented to in
writing by the Representative (the "Effective Date"). If the Company has
elected to rely upon Rule 430A, the information concerning the price of the
Shares and price-related information previously omitted from the effective
Registration Statement pursuant to Rule 430A shall have been transmitted to
the SEC for filing pursuant to Rule 424(b) within the prescribed time
period, and prior to the Closing Date the Company shall have provided
evidence satisfactory to the Representative of such timely filing (or a
post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the 1933 Act and
the Rules and Regulations). No stop order suspending the effectiveness
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or, to the knowledge of the Company or the
Representative, threatened by the SEC or any state securities commission or
similar regulatory body. Any request of the SEC for additional information
(to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to the satisfaction of the
Underwriters and their legal counsel. The NASD, upon review of the terms
of the Offering, shall not have objected to the terms of the Underwriters'
participation in the Offering.
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<PAGE>
(b) The Representative shall not have advised the Company that the
Registration Statement or Prospectus, or any amendment thereof or
supplement thereto, contains any untrue statement of a fact which is
material or omits to state a fact which is material and is required to be
stated therein or is necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading;
provided, however, that this Section 4(b) shall not apply to statements in,
or omissions from, the Registration Statement or Prospectus, or any
amendment thereof or supplement thereto, which are based upon and conform
to written information furnished to the Company by any of the Underwriters
specifically for use in the preparation of the Registration Statement or
the Prospectus, or any such amendment or supplement.
(c) Subsequent to the date as of which information is given the
Registration Statement and Prospectus, there shall not have occurred any
change, or any development involving a prospective change, which materially
and adversely affects the business or properties of the Company and which,
in the reasonable opinion of the Representative, materially and adversely
affects the market for the Shares.
(d) The Representative shall have received the opinion of Dorsey &
Whitney LLP, counsel for the Company, dated as of such respective Closing
Date and satisfactory in form and substance to the Representative and its
counsel, to the effect that:
(i) The Company has been duly incorporated and is validly
existing in good standing under the laws of the State of Minnesota
with the corporate power to own, lease and operate its properties and
conduct its business as described in the Prospectus; and is duly
qualified to do business as a foreign corporation in good standing in
all jurisdictions where the ownership or leasing of its properties or
the conduct of its business requires such qualification and in which
the failure to be so qualified or in good standing would have a
material adverse effect on its business.
(ii) The number of authorized shares of capital stock of the
Company are as set forth in the Prospectus and the outstanding capital
stock have been duly authorized and validly issued, and are fully paid
and nonassessable. Upon delivery of and payment for the Shares
hereunder, the Underwriters will acquire the Shares free and clear of
all liens, encumbrances or claims created by actions of the Company.
To such counsel's knowledge, no preemptive rights, contractual or
otherwise, of securities holders of the Company exist with respect to
the issuance or sale of the Shares by the Company pursuant to this
Agreement or the issuance of the Warrant Shares upon exercise of the
Representative's Warrants. To such counsel's knowledge, no rights to
require registration of shares of Common Stock or other securities of
the Company exist which may be exercised in connection with the filing
of the Registration Statement. The Shares, Representative's Warrants
and Warrant Shares conform as to matters of law in all material
respects to the description of these securities made in the Prospectus
and such description accurately sets forth the material legal
provisions thereof required to be set forth in the Prospectus.
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<PAGE>
(iii) The Shares have been duly authorized and, upon delivery to
the Underwriters against payment therefor, will be validly issued,
fully paid and nonassessable.
(iv) The certificates evidencing the Shares comply as to form
with the applicable provisions of the laws of the State of Minnesota.
(v) The Representative's Warrants have been duly authorized,
executed and delivered by the Company and are the valid and binding
obligations of the Company, enforceable in accordance with their
terms, except as enforceability may be limited by the application of
bankruptcy, insolvency, moratorium, or other laws of general
application affecting the rights of creditors generally and by
judicial limitations on the right of specific performance and other
equitable remedies, and except as the enforceability of
indemnification or contribution provisions hereof may be limited by
federal or state securities laws. The Warrant Shares when issued in
accordance with the terms of this Agreement and pursuant to the
Representative's Warrants will be validly issued, fully paid and
nonassessable. A sufficient number of shares of Common Stock has been
reserved for issuance upon exercise of the Representative's Warrants.
(vi) The Registration Statement has become and is effective
under the 1933 Act, the Prospectus has been filed as required by Rule
424(b), if necessary and, to such counsel's knowledge, no stop orders
suspending the effectiveness of the Registration Statement have been
issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the 1933 Act.
(vii) To such counsel's knowledge, there are no material legal
or governmental proceedings of a character required by the 1933 Act
and the Rules and Regulations to be described or referred to in the
Registration Statement or Prospectus that are not described or
referred to therein. All pending legal or governmental proceedings,
if any, to which the Company is a party or to which any of its
property is subject which are not described in the Registration
Statement and the Prospectus, including ordinary routine litigation
incidental to the business, are, considered in the aggregate, not
material to the Company.
(viii) No authorization, approval or consent of any governmental
authority or agency is necessary in connection with the issuance and
sale of the Shares as contemplated under this Agreement, except such
as may be required and obtained under the 1933 Act or under state or
other securities laws in connection with the purchase and distribution
of the Shares by the Underwriters.
(ix) The Registration Statement, when it became effective, the
Prospectus and any amendments thereof or supplements thereto, (other
than the financial statements and supporting financial and statistical
data included or incorporated therein, as to which such counsel need
express no opinion) on the date of filing or the date thereof,
complied as to form in all material respects with the requirements of
the 1933 Act and the Rules and Regulations.
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<PAGE>
(x) This Agreement has been duly authorized, executed and
delivered by, and, assuming the due authorization, execution and
delivery of this Agreement by the Representative on behalf of the
Underwriters, is a valid and binding agreement of the Company,
enforceable in accordance with its terms, except as enforceability may
be limited by the application of bankruptcy, insolvency, moratorium or
similar laws affecting the rights of creditors generally and judicial
limitations on the right of specific performance and except as the
enforceability of indemnification or contribution provisions hereof
may be limited by federal or state securities laws.
(xi) To such counsel's knowledge, the execution, delivery and
performance of this Agreement and the consummation of the transactions
described herein will not result in a violation of, or a default
under, the terms or provisions of (A) any material bond, debenture,
note, contract, lease, license, indenture, mortgage, deed of trust,
loan agreement, joint venture or other agreement or instrument to
which the Company is a party or by which the Company or any of its
properties are bound, or (B) any material law, order, rule,
regulation, writ, injunction, or decree known to such counsel of any
government, governmental agency or court having jurisdiction over the
Company or any of its properties.
(xii) To such counsel's knowledge, except as described in the
Prospectus, there are no United States patents of third parties which
are infringed by the manufacture, use or sale of the products or
processes currently made, used or sold by the Company.
(xiii) To such counsel's knowledge there are no legal,
governmental or administrative proceedings pending or threatened
against the Company that relate to patents, trademarks or other
intellectual property, except for pending or proposed United States
and foreign patent applications.
(xiv) To such counsel's knowledge, except as described in the
Prospectus, after due inquiry, the Company has not received any notice
of conflict with the asserted rights of others in respect of any
trademarks, service marks, trade names, trademark registrations,
service mark registrations, copyrights, licenses, inventions, trade
secrets, patents, patent applications, know-how, or similar rights,
nor of any threatened actions with respect thereto, which, if
determined adversely to the Company, would individually or in the
aggregate have a material adverse effect on the general affairs,
financial position, net worth or results of operations of the Company.
(xv) To such counsel's knowledge, after due inquiry, the
Company owns, possesses or is licensed under all such material
trademarks, trademark applications, trademark registrations, service
marks, service mark registrations, copyrights, patents, patent
applications and licenses as are described in the Prospectus and which
are necessary for the Company's present or planned future business as
described in the Prospectus.
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In expressing the foregoing opinion, as to matters of fact relevant to
conclusions of law, counsel may rely, to the extent that they deem proper, upon
certificates of public officials and of the officers of the Company, provided
that copies of such officers' certificates are attached to the opinion or
otherwise delivered at Closing.
In addition to the matters set forth above, such counsel shall also provide
a letter to the effect that, although such counsel cannot guarantee the
accuracy, completeness or fairness of any of the statements contained in the
Registration Statement, Prospectus, or any amendment thereof or supplement
thereto, in connection with such counsel's representation, investigation and due
inquiry of the Company in the preparation of the Registration Statement,
Prospectus and any amendment thereof or supplement thereto, nothing has come to
the attention of such counsel which causes them to believe that the Registration
Statement, Prospectus, or any amendment thereof or supplement thereto (other
than the financial statements and supporting financial and statistical data
included or incorporated therein, as to which such counsel need express no
opinion), as of the date of such letter, contains an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading; provided, however, that such letter does not
require any statement concerning statements in, or omissions from, the
Registration Statement, Prospectus, or any amendment thereof or supplement
thereto, which are based upon and conform to written information furnished to
the Company by any of the Underwriters specifically for use in the preparation
of the Registration Statement, Prospectus, or any such amendment or supplement.
(e) The Representative shall have received from Fredrikson & Byron,
P.A., its counsel, such opinion or opinions as the Representative may
reasonably require, dated as of each Closing Date and satisfactory in form
and substance to the Representative, with respect to the sufficiency of
corporate proceedings and other legal matters relating to this Agreement
and the transactions contemplated hereby, and the Company shall have
furnished to said counsel such documents as they may have requested for the
purpose of enabling them to pass upon such matters. In connection with such
opinion, as to matters of fact relevant to conclusions of law, such counsel
may rely, to the extent that they deem proper, upon representations or
certificates of public officials and of responsible officers of the
Company.
(f) The Representative and the Company shall have received letters,
dated the date hereof and as of each Closing Date, from Arthur Andersen,
LLP independent public accountants, containing statements and information
of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
and statistical information contained in the Registration Statement and the
Prospectus, all in form and substance satisfactory to the Representative.
(g) The Representative shall have received from the Company a
certificate, dated as of each Closing Date, of the principal executive
officer and the principal financial or accounting officer of the Company to
the effect that:
(i) The representations and warranties of the Company in this
Agreement are true and correct as if made on and as of such Closing
Date. The Company
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has complied with all the agreements and satisfied all the conditions
on its part to be performed or satisfied at, or prior to, such date.
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that
purpose has been instituted or is pending or to the best knowledge of
such officers contemplated under the 1933 Act.
(iii) Neither the Registration Statement nor the Prospectus nor
any amendment thereof or supplement thereto included any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading, and, since the effective date of the Registration
Statement, there has occurred no event required to be set forth in an
amended or supplemented prospectus which has not been so set forth;
provided, however, that such certificate does not require any
representation concerning statements in, or omissions from, the
Registration Statement or Prospectus, or any amendment thereof or
supplement thereto, which are based upon and conform to written
information furnished to the Company by any of the Underwriters
specifically for use in the preparation of the Registration Statement
or the Prospectus, or any such amendment or supplement.
(iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, and except
as contemplated or referred to in the Prospectus, no event has
occurred that should have been set forth in an amendment or supplement
to Registration Statement or the Prospectus which has not been so set
forth and the Company has not incurred any direct or contingent
liabilities or obligations material to the Company, or entered into
any material transactions, except liabilities, obligations or
transactions in the ordinary course of business, and there has not
been any change in the capital stock or long-term debt of the Company,
(including any capitalized lease obligations and other than pursuant
to the exercise or conversion of options, warrants or convertible
securities reflected in the Registration Statement or the Prospectus),
any material increase in the short-term debt of the Company, any
material adverse change in the financial position, net worth or
results of operations of the Company or declaration or payment of any
dividend.
(v) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, the Company
has not sustained any material loss of, or damage to, its properties,
whether or not insured.
(vi) Except as is otherwise expressly stated in the Registration
Statement and Prospectus, there are no material actions, suits or
proceedings pending before any court or governmental agency, authority
or body, or, to the best of their knowledge, threatened, to which the
Company is a party or of which the business or property of the Company
is the subject.
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(h) The Representative shall have received, dated as of each Closing
Date, from the Secretary of the Company a certificate of incumbency
certifying the names, titles and signatures of the officers authorized to
execute the resolutions of the Board of Directors of the Company
authorizing and approving the execution, delivery and performance of this
Agreement, a copy of such resolutions to be attached to such certificate,
certifying that such resolutions and the Articles of Incorporation of the
Company and the Bylaws of the Company have been validly adopted and have
not been amended or modified.
(i) The Representative shall have received a written agreement from
each of the officers and directors of the Company and each stockholder of
the Company who is an affiliate (as defined in Rule 144 under the 1933 Act)
of the Company that for 180 days following the Effective Date, such person
will not, without the Representative's prior written consent, sell,
transfer or otherwise dispose of, or agree to sell, transfer or otherwise
dispose of, other than by gift to donees who agree to be bound by the same
restriction or by will or the laws of descent, any of his or her Common
Stock, or any options, warrants or rights to purchase Common Stock or any
shares of Common Stock received upon exercise of any options, warrants or
rights to purchase Common Stock, all of which are beneficially held by such
persons during the 180-day period.
(j) The Representative shall have received a written agreement from
certain stockholders of the Company who are not affiliates (as defined in
Rule 144 under the 1933 Act) of the Company and who hold an aggregate of
______ shares of stock of the Company that for 90 days following the
Effective Date, such persons will not, without the Representative's prior
written consent, sell, transfer or otherwise dispose of, or agree to sell,
transfer or otherwise dispose of, other than by gift to donees who agree to
be bound by the same restriction or by will or the laws of descent, any of
his or her Common Stock, or any options, warrants or rights to purchase
Common Stock or any shares of Common Stock received upon exercise of any
options, warrants or rights to purchase Common Stock, all of which are
beneficially held by such persons during the 90-day period.
(k) The Company shall not have failed to have performed any of its
agreements herein contained and required to be performed by it at or prior
to the First Closing Date or the Second Closing Date, as the case may be.
The Representative may waive in writing the performance of any one or more
of the conditions specified in this Section 4 or extend the time for their
performance.
(l) The Shares shall have been registered or qualified for sale or
exempt from such registration or qualification under the securities laws of
such jurisdictions as designated by the Representative such qualifications
or exemptions shall continue in effect to and including the First Closing
Date or the Second Closing Date, as the case may be.
(m) The Company shall have furnished to the Representative, dated as
of the date of each Closing Date, such further certificates and documents
as the Representative shall have reasonably required.
(n) All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably
satisfactory to the Representative
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<PAGE>
and its legal counsel. All statements contained in any certificate, letter,
or other document delivered pursuant hereto by, or on behalf of, the
Company shall be deemed to constitute representations and warranties of the
Company.
(o) The Representative may waive in writing the performance of any one
or more of the conditions specified in this Section 4 or extend the time
for their performance.
(o) If any of the conditions specified in this Section 4 shall not
have been fulfilled when and as required by this Agreement to be fulfilled,
this Agreement and all obligations of the Underwriters hereunder may be
canceled at, or at any time prior to, each Closing Date by the
Representative. Any such cancellation shall be without liability of the
Underwriters to the Company and shall not relieve the Company of its
obligations under Section 3(g) hereof. Notice of such cancellation shall be
given to the Company at the address specified in Section 11 hereof in
writing, or by telegraph or telephone confirmed in writing.
5. Representative's Warrants. On the First Closing Date, the Company
shall sell the Representative's Warrants to the Representative for $50, which
Representative's Warrants shall first become exercisable one year after the
Effective Date and shall remain exercisable for a period of four years
thereafter. The Representative's Warrants shall have an initial exercise price
per share equal to 120% of the price per share set forth in Section 2(a), shall
be subject to certain transfer restrictions and shall be in substantially the
form filed as an exhibit to the Registration Statement and attached as Appendix
A hereto.
6. Indemnification.
---------------
(a) The Company hereby agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the 1933 Act against any losses, claims,
damages or liabilities, joint or several, to which such Underwriter or each
such controlling person may become subject, under the 1933 Act, the 1934
Act, the common law or otherwise, insofar as such losses, claims, damages
or liabilities (or judicial or governmental actions or proceedings in
respect thereof) arise out of, or are based upon, (i) any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, or the omission or alleged
omission to state in the Registration Statement or any amendment thereof 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; (ii) any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus if used prior to
the Effective Date of the Registration Statement or in the Prospectus (as
amended or as supplemented, if the Company shall have filed with the SEC
any amendment thereof or supplement thereto), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; or (iii) any
untrue statement or alleged untrue statement of a material fact contained
in any application or other statement executed by the Company or based upon
written information furnished by the Company filed in any jurisdiction in
order to qualify the Shares under, or exempt the Shares or the
21
<PAGE>
sale thereof from qualification under, the securities laws of such
jurisdiction, or the omission or alleged omission to state in such
application or statement a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; and the Company will reimburse
each Underwriter and each such controlling person for any legal or other
expenses reasonably incurred by such Underwriter or controlling person
(subject to the limitation set forth in Section 6(c) hereof) in connection
with investigating or defending against any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable
in any such case to the extent that any such loss, claim, damage or
liability arises out of, or is based upon, an untrue statement, or alleged
untrue statement, omission or alleged omission, made in reliance upon and
in conformity with written information furnished to the Company by, or on
behalf of, any Underwriter specifically for use in the preparation of the
Registration Statement or any such post effective amendment thereof, any
such Preliminary Prospectus or the Prospectus or any such amendment thereof
or supplement thereto, or in any application or other statement executed by
the Company or any Underwriter filed in any jurisdiction in order to
qualify the Shares under, or exempt the Shares or the sale thereof from
qualification under, the securities laws of such jurisdiction; and provided
further that the foregoing indemnity agreement is subject to the condition
that, insofar as it relates to any untrue statement, alleged untrue
statement, omission or alleged omission made in any Preliminary Prospectus
but eliminated or remedied in the Prospectus, such indemnity agreement
shall not inure to the benefit of any Underwriter if the person asserting
any loss, claim, damage or liability purchased the Shares from such
Underwriter which are the subject thereof (or to the benefit of any person
who controls such Underwriter), if a copy of the Prospectus was not sent or
given to such person with, or prior to, the written confirmation of the
sale of such Shares to such person. This indemnity agreement is in addition
to any liability which the Company may otherwise have.
(b) Each Underwriter severally, but not jointly, agrees to indemnify
and hold harmless the Company, each of the Company's directors, each of the
Company's officers who has signed the Registration Statement and each
person who controls the Company within the meaning of Section 15 of the
1933 Act against any losses, claims, damages or liabilities to which the
Company or any such director, officer, or controlling person may become
subject, under the 1933 Act, the 1934 Act, the common law, or otherwise,
insofar as such losses, claims, damages, or liabilities (or judicial or
governmental actions or proceedings in respect thereof) arise out of, or
are based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment
thereof, or the omission or alleged omission to state in the Registration
Statement or any amendment thereof, a material fact required to be stated
therein or necessary to make the statements therein not misleading; (ii)
any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus if used prior to the Effective Date
of the Registration Statement or in the Prospectus (as amended or as
supplemented, if the Company shall have filed with the SEC any amendment
thereof or supplement thereto), or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading; or (iii) any untrue statement or
alleged untrue statement of a material fact contained in any application or
other statement executed by the Company or by any
22
<PAGE>
Underwriter and filed in any jurisdiction in order to qualify the Shares
under, or exempt the Shares or the sale thereof from qualification under,
the securities laws of such jurisdiction, or the omission or alleged
omission to state in such application or statement 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; in each
case to the extent, but only the extent, that such untrue statement,
alleged untrue statement, omission or alleged omission, was made in
reliance upon and in conformity with written information furnished to the
Company by, or on behalf of, any Underwriter specifically for use in the
preparation of the Registration Statement or any such post effective
amendment thereof, any such Preliminary Prospectus or the Prospectus or any
such amendment thereof or supplement thereto, or in any application or
other statement executed by the Company or by any Underwriter and filed in
any jurisdiction; and each Underwriter will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer
or controlling person in connection with investigating or defending against
any such loss, claim, damage, liability or action. This indemnity agreement
is in addition to any liability which the Underwriters may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
6 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against any indemnifying party
under this Section 6, notify in writing the indemnifying party of the
commencement thereof. The omission so to notify the indemnifying party will
not relieve the indemnifying party from any liability under this Section 6
as to the particular item for which indemnification is then being sought,
unless such omission so to notify prejudices the indemnifying party's
ability to defend such action. In case any such action is brought against
any indemnified party and the indemnified party notifies an indemnifying
party of the commencement thereof, the indemnifying party will be entitled
to participate therein and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel who shall be reasonably satisfactory to such
indemnified party; and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 6 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that if, in the
reasonable judgment of the indemnified party, it is advisable for such
parties and controlling persons to be represented by separate counsel, any
indemnified party shall have the right to employ separate counsel to
represent it and all other parties and their controlling persons who may be
subject to liability arising out of any claim in respect of which indemnity
may be sought by the Underwriters against the Company or by the Company
against the Underwriters hereunder, in which event the fees and expenses of
such separate counsel shall be borne by the indemnifying party and paid as
incurred. Any such indemnifying party shall not be liable to any such
indemnified party on account of any settlement of any claim or action
effected without the prior written consent of such indemnifying party.
23
<PAGE>
7. Contribution.
------------
(a) If the indemnification provided for in Section 6 is unavailable
under applicable law to any indemnified party in respect of any losses,
claims, damages or liabilities referred to therein, 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, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and
the Underwriters from the offering of the Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law,in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company
and the Underwriters in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The Company and the Underwriters
agree that contribution determined by per capita allocation (even if the
Underwriters were considered a single person) would not be equitable. The
respective relative benefits received by the Company on the one hand, and
the Underwriters, on the other hand, shall be deemed to be in the same
proportion (A) in the case of the Company, as the total price paid to the
Company for the Shares by the Underwriters (net of underwriting discount
received but before deducting expenses) bears to the aggregate public
offering price of the Shares and (B) in the case of the Underwriters, as
the aggregate underwriting discount received by them bears to the aggregate
public offering price of the Shares, in each case as reflected in the
Prospectus. The relative fault of the Company and the Underwriters shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The amount paid or payable by a party as a result of the
losses, claims, damages and liabilities referred to above shall be deemed
to include any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it were offered to the
public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission in the Registration Statement,
any Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto. The Underwriters' obligation to contribute pursuant to this
section are several and not joint. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 7, each
person who controls an Underwriter within the meaning of the 1933 Act or
the 1934 Act shall have the same rights to contribution as such
Underwriter, each person who controls the Company within the meaning of the
1933 Act or the 1934 Act shall have the same rights to contribution as the
Company and each officer of the Company who shall have signed the
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company.
24
<PAGE>
(b) Promptly after receipt by a party to this Agreement of notice of
the commencement of any action, suit or proceeding, such person will, if a
claim for contribution in respect thereof is to be made against another
party (the "Contributing Party"), notify the Contributing Party of the
commencement thereof, but the omission so to notify the Contributing Party
will not relieve the Contributing Party from any liability which it may
have to any party other than under this Section 7, unless such omission so
to notify prejudices the Contributing Party's ability to defend such
action. Any notice given pursuant to Section 6 hereof shall be deemed to be
like notice under this Section 7. In case any such action, suit or
proceeding is brought against any party, and such person notifies a
Contributing Party of the commencement thereof, the Contributing Party will
be entitled to participate therein with the notifying party and any other
Contributing Party similarly notified.
8. Effective Date of This Agreement and Termination.
-------------------------------------------------
(a) This Agreement shall become effective at 8:00 a.m., Minneapolis
time, on the day on which the Underwriters release the initial public
offering of the Firm Shares for sale to the public. The Representative
shall notify the Company immediately after any action has been taken which
causes this Agreement to become effective. Until this Agreement is
effective, it may be terminated by the Company or the Representative by
giving notice as hereinafter provided, except that the provisions of
Sections 3(g), and 8 shall at all times be effective. For purposes of this
Agreement, the release of the initial public offering of the Firm Shares
for sale to the public shall be deemed to have been made when the
Underwriters release, by telegram or otherwise, firm offers of the Firm
Shares to securities dealers or release for publication a newspaper
advertisement relating to the Firm Shares, whichever occurs first.
(b) Until the First Closing Date, this Agreement may be terminated by
the Representative, at its option, by giving notice to the Company, if (i)
the Company shall have sustained a loss by fire, flood, accident or other
calamity which is material with respect to the business of the Company; the
Company shall have become a party to material litigation, not disclosed in
the Registration Statement or the Prospectus; or the business or financial
condition of the Company shall have become the subject of any material
litigation, not disclosed in the Registration Statement or the Prospectus;
or there shall have been, since the respective dates as of which
information is given in the Registration Statement or the Prospectus, any
material adverse change in the general affairs, business, key personnel,
capitalization, financial position or net worth of the Company, whether or
not arising in the ordinary course of business, which loss or change, in
the reasonable judgment of the Representative, shall render it inadvisable
to proceed with the delivery of the Shares, whether or not such loss shall
have been insured; (ii) trading in securities generally on the New York
Stock Exchange, American Stock Exchange, Nasdaq National Market, Nasdaq
SmallCap Market or the over-the-counter market shall have been suspended
or minimum prices shall have been established on such exchange by the SEC
or by such exchanges or markets; (iii) a general banking moratorium shall
have been declared by federal, New York or Minnesota authorities; (iv)
there shall have been such a material adverse change in general economic,
monetary, political or financial conditions, or the effect of international
conditions on the financial markets in the United States shall be such
that, in the
25
<PAGE>
judgment of the Representative, makes it inadvisable to proceed with the
delivery of the Shares; (v) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of
either of any court or other governmental authority which, in the judgment
of the Representative, materially and adversely affects or will materially
and adversely affect the business or operations of the Company; (vi) there
shall be a material outbreak of hostilities or material escalation and
deterioration in the political and military situation between the United
States and any foreign power, or a formal declaration of war by the United
States of America shall have occurred; or (vii) the Company shall have
failed to comply with any of the provisions of this Agreement on its part
to be performed on or prior to such date or if any of the conditions,
agreements, representations or warranties of the Company shall not have
been fulfilled within the respective times provided for in this Agreement.
Any such termination shall be without liability of any party to any other
party, except as provided in Sections 6 and 7 hereof; provided, however,
that the Company shall remain obligated to pay costs and expenses to the
extent provided in Section 3(g) hereof.
(c) If the Representative elects to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this
Section 8, it shall notify the Company promptly by telegram or telephone,
confirmed by letter sent to the address specified in Section 11 hereof. If
the Company shall elect to prevent this Agreement from becoming effective,
it shall notify the Representative promptly by telegram or telephone,
confirmed by letter sent to the address specified in Section 11 hereof.
9. Default of Underwriter. If any Underwriter or Underwriters default in
their obligation to purchase the Firm Shares hereunder and the aggregate amount
of Firm Shares which such defaulting Underwriter or Underwriters agreed but
failed to purchase does not exceed 10% of the total amount of Firm Shares, the
other Underwriters shall be obligated, severally, in proportion to their
respective commitments hereunder, to purchase the Firm Shares which such
defaulting Underwriter or Underwriters agreed but failed to purchase. If any
Underwriter or Underwriters so defaults and the aggregate amount of Firm Shares
with respect to which such default or defaults occur is more than 10% of the
total number of Firm Shares and arrangements satisfactory to the Representative
and the Company for purchase of such Firm Shares by other persons (who may
include one or more of the nondefaulting Underwriters, including the
Representative) are not made within 48 hours after such default (during which
time the Representative shall use its best efforts to procure such
arrangements), this Agreement will terminate without liability on the part of
any nondefaulting Underwriter or the Company except for the provisions of
Sections 6 and 7 hereof. In any such case, either the Representative or the
Company shall have the right to postpone the Closing Date, but in no event for
more than seven days, in order that any required changes, not including a
reduction in the number of Firm Shares, to the Registration Statement and the
Prospectus of any other documents or arrangements may be effected. As used in
this Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 9. Nothing herein shall relieve a defaulting
Underwriter from liability for its default.
10. Survival of Indemnities, Contribution Agreements, Warranties and
Representations. The respective indemnity and contribution agreements of the
Company and the Underwriters contained in Sections 6 and 7, respectively, the
representations and warranties of the Company set forth in Section 1 hereof and
the covenants of the Company set forth in Section
26
<PAGE>
3 hereof shall remain operative and in full force and effect, regardless of any
investigation made by, or on behalf of, the Underwriters, the Company, any of
its officers and directors, or any controlling person referred to in Sections 6
and 7, and shall survive the delivery of and payment for the Shares. The
aforesaid indemnity and contribution agreements shall also survive any
termination or cancellation of this Agreement. Any successor of any party or of
any such controlling person, or any legal representative of such controlling
person, as the case may be, shall be entitled to the benefit of the respective
indemnity and contribution agreements.
11. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and, if sent to
Representative or any of the Underwriters, shall be mailed, delivered or
telegraphed and confirmed, to R.J. Steichen & Company, 801 Nicollet Mall, Suite
700, Minneapolis, Minnesota 55402, Attention: Patrick M. Sidders, with a copy to
Timothy M. Heaney, Esq., Fredrikson & Byron, P.A., 1100 International Centre,
900 Second Avenue South, Minneapolis, Minnesota 55402; or, if sent to the
Company, shall be mailed, delivered or telegraphed and confirmed, to FieldWorks,
Incorporated, 9961 Valley View Road, Eden Prairie, Minnesota 55344, Attention:
Gary J. Beeman, with a copy to Kenneth L. Cutler, Esq., Dorsey & Whitney LLP,
220 South Sixth Street, Minneapolis, MN 55402.
12. Information Furnished by the Underwriter. The statements relating to
the stabilization activities of the Underwriters and the statements under the
caption "Underwriting" in any Preliminary Prospectus and in the Prospectus
constitute written information furnished by, or on behalf of, the Underwriters
specifically for use with reference to the Underwriters referred to in Section
1(b), Section 4(d), Section 4(g) and Section 6 hereof.
13. Parties. This Agreement shall inure to the benefit of and be binding
upon the several Underwriters and the Company, their respective successors and
assigns, and the officers, directors and controlling persons referred to in
Sections 6 and 7. Nothing expressed in this Agreement is intended or shall be
construed to give any person or corporation, other than the parties hereto,
their respective successors and assigns, and the controlling persons, officers
and directors referred to in Sections 6 and 7 any legal or equitable right,
remedy, or claim under, or in respect of, this Agreement or any provision herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of the parties
hereto and their respective executors, administrators, successors, assigns and
such controlling persons, officers and directors, and for the benefit of no
other person or corporation. No purchaser of any Shares from the Underwriters
shall be construed a successor or assign merely by reason of such purchase.
14. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota, without regard to the
conflict of laws provisions thereof.
If the foregoing is in accordance with the Representative's understanding
of this agreement, kindly sign and return to the Company the enclosed
counterpart of this Agreement, whereupon it will become a binding agreement
between the Company and each of the several Underwriters in accordance with its
terms.
Very truly yours,
FIELDWORKS, INCORPORATED
By
------------------------------
Its
-----------------------------
ACCEPTANCE
The foregoing Underwriting Agreement is hereby confirmed and accepted by the
undersigned for itself and as Representative of the several Underwriters
referred to in the foregoing Agreement as of the date first above written.
R. J. STEICHEN & COMPANY
By 631997
------------------------------
Its
-----------------------------
27
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Name of Underwriter Number of Firm Shares
- --------------------- ---------------------
<S> <C>
1. [NAME]. . . . . . . . . . . . . . . .
2. [NAME]. . . . . . . . . . . . . . . .
3. [NAME]. . . . . . . . . . . . . . . .
4. [NAME]. . . . . . . . . . . . . . . .
5. [NAME]. . . . . . . . . . . . . . . .
6. [NAME]. . . . . . . . . . . . . . . .
7. [NAME]. . . . . . . . . . . . . . . .
8. [NAME]. . . . . . . . . . . . . . . .
9. [NAME]. . . . . . . . . . . . . . . .
10. [NAME]. . . . . . . . . . . . . . . .
11. [NAME]. . . . . . . . . . . . . . . .
12. [NAME]. . . . . . . . . . . . . . . .
13. [NAME]. . . . . . . . . . . . . . . .
14. [NAME]. . . . . . . . . . . . . . . .
15. [NAME]. . . . . . . . . . . . . . . .
---------------------
TOTAL. . . . . . . . . . . . . . . =====================
</TABLE>
631997
28
<PAGE>
WARRANT
-------
To Purchase 185,000 Shares of Common Stock
of
FIELDWORKS, INCORPORATED
THIS CERTIFIES THAT, for good and valuable consideration, R. J. Steichen &
Company (the "Representative"), or its registered assigns, is entitled to
subscribe for and purchase from FieldWorks, Incorporated, a Minnesota
corporation (the "Company"), at any time after ________________, 1998, to and
including _________________, 2002, One Hundred Eighty-Five Thousand (185,000)
fully paid and nonassessable shares of the Common Stock of the Company at the
price of $_______ per share (the "Warrant Exercise Price"), subject to the
antidilution provisions of this Warrant. Reference is made to this Warrant in
the Underwriting Agreement dated ___________________, 1997, by and between the
Company and the Representative. The shares which may be acquired upon exercise
of this Warrant are referred to herein as the "Warrant Shares." As used herein,
the term "Holder" means the Representative, any party who acquires all or a part
of this Warrant as a registered transferee of the Representative, or any record
holder or holders of the Warrant Shares issued upon exercise, whether in whole
or in part, of the Warrant. As used herein, the term "Common Stock" means and
includes the Company's presently authorized common stock, $.001 par value, and
shall also include any capital stock of any class of the Company hereafter
authorized which shall not be limited to a fixed sum or percentage in respect of
the rights of the Holders thereof to participate in dividends or in the
distribution of assets upon the voluntary or involuntary liquidation,
dissolution, or winding up of the Company.
This Warrant is subject to the following provisions, terms and conditions:
1. Exercise; Transferability.
(a) The rights represented by this Warrant may be exercised by the Holder
hereof, in whole or in part (but not as to a fractional share of Common Stock),
by written notice of exercise (in the form attached hereto) delivered to the
Company at the principal office of the Company prior to the expiration of this
Warrant and accompanied or preceded by the surrender of this Warrant along with
a check in payment of the Warrant Exercise Price for such shares.
(b) Until exercisable, this Warrant may not be sold, assigned,
hypothecated, or otherwise transferred, other than by will or pursuant to the
operation of law, except to a person who is an officer of the Representative.
Further, this Warrant may not be sold, transferred, assigned, hypothecated or
divided into two or more Warrants of smaller denominations, nor may any Warrant
shares issued pursuant to exercise of this Warrant be transferred, except as
provided in Section 7 hereof.
2. Exchange and Replacement. Subject to Sections l and 7 hereof, this
Warrant is exchangeable upon the surrender hereof by the Holder to the Company
at its office for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of Warrant Shares purchasable
hereunder, each of such new Warrants to represent the right to purchase such
number of Warrant Shares (not to exceed the aggregate total number purchasable
hereunder) as shall be designated by the Holder at the time of such surrender.
Upon receipt by
1
<PAGE>
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction, or mutilation of this Warrant, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will make
and deliver a new Warrant of like tenor, in lieu of this Warrant; provided,
however, that if the Representative shall be such Holder, an agreement of
indemnity by such Holder shall be sufficient for all purposes of this Section 2.
This Warrant shall be promptly canceled by the Company upon the surrender hereof
in connection with any exchange or replacement. The Company shall pay all
expenses, taxes (other than stock transfer taxes), and other charges payable in
connection with the preparation, execution, and delivery of Warrants pursuant to
this Section 2.
3. Issuance of the Warrant Shares.
(a) The Company agrees that the shares of Common Stock purchased hereby
shall be and are deemed to be issued to the Holder as of the close of business
on the date on which this Warrant shall have been surrendered and the payment
made for such Warrant Shares as aforesaid. Subject to the provisions of the
subsection (b) below, certificates for the Warrant Shares so purchased shall be
delivered to the Holder within a reasonable time, not exceeding fifteen (15)
days after the rights represented by this Warrant shall have been so exercised,
and, unless this Warrant has expired, a new Warrant representing the right to
purchase the number of Warrant Shares, if any, with respect to which this
Warrant shall not then have been exercised shall also be delivered to the Holder
within such time.
(b) Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for Warrant Shares upon exercise of this
Warrant except in accordance with exemptions from the applicable securities
registration requirements or registrations under applicable securities laws.
Nothing herein, however, shall obligate the Company to effect registrations
under federal or state securities laws, except as provided in Section 9. If
registrations are not in effect and if exemptions are not available such as
would permit the Company to issue Warrant Shares to the Holder when the Holder
seeks to exercise the Warrant, the Warrant exercise period will be extended, if
need be, to prevent the Warrant from expiring, until such time as either
registrations become effective or exemptions are available such as would permit
the Company to issue Warrant Shares to the Holder, and the Warrant shall then
remain exercisable for a period of at least 30 calendar days from the date the
Company delivers to the Holder written notice of the availability of such
registrations or exemptions. The Holder agrees to execute such documents and
make such representations, warranties, and agreements as may be required solely
to comply with the exemptions relied upon by the Company, or the registrations
made, for the issuance of the Warrant Shares.
4. Covenants of the Company. The Company covenants and agrees that all
Warrant Shares will, upon issuance following payment therefor, be duly
authorized and issued, fully paid, nonassessable, and free from all taxes,
liens, and charges with respect to the issue thereof. The Company further
covenants and agrees that during the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized
and reserved for the purpose of issue upon exercise of the subscription rights
evidenced by this Warrant a sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by this Warrant.
2
<PAGE>
5. Antidilution Adjustments. The provisions of this Warrant are subject
to adjustment as provided in this Section 5.
(a) The Warrant Exercise Price shall be adjusted from time to time such
that in case the Company shall hereafter:
(i) pay any dividends on any class of stock of the Company payable in
Common Stock or securities convertible into Common Stock;
(ii) subdivide its then outstanding shares of Common Stock into a greater
number of shares; or
(iii) combine outstanding shares of Common Stock, by reclassification or
otherwise;
then, in any such event, the Warrant Exercise Price in effect immediately prior
to such event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full cent)
determined by dividing (a) the number of shares of Common Stock outstanding
immediately prior to such event, multiplied by the then existing Warrant
Exercise Price, by (b) the total number of shares of Common Stock outstanding
immediately after such event (including the maximum number of shares of Common
Stock issuable in respect of any securities convertible into Common Stock), and
the resulting quotient shall be the adjusted Warrant Exercise Price per share.
An adjustment made pursuant to this Subsection shall become effective
immediately after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If, as a result of an adjustment
made pursuant to this Subsection, the Holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive shares of two or more
classes of capital stock or shares of Common Stock and other capital stock of
the Company, the Board of Directors (whose determination shall be conclusive)
shall determine the allocation of the adjusted Warrant Exercise Price between or
among shares of such classes of capital stock or shares of Common Stock and
other capital stock. All calculations under this Subsection shall be made to
the nearest cent or to the nearest 1/100 of a share, as the case may be. In the
event that at any time as a result of an adjustment made pursuant to this
Subsection, the Holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive any shares of the Company other than shares of Common
Stock, thereafter the Warrant Exercise Price of such other shares so receivable
upon exercise of any Warrant shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions with
respect to Common Stock contained in this Section 5.
(b) Upon each adjustment of the Warrant Exercise Price pursuant to Section
5(a) above, the Holder of each Warrant shall thereafter (until another such
adjustment) be entitled to purchase at the adjusted Warrant Exercise Price the
number of shares, calculated to the nearest full share, obtained by multiplying
the number of shares specified in such Warrant (as adjusted as a result of all
adjustments in the Warrant Exercise Price in effect prior to such adjustment) by
the Warrant Exercise Price in effect prior to such adjustment and dividing the
product so obtained by the adjusted Warrant Exercise Price.
(c) In case of any consolidation or merger to which the Company is a party,
or in case of any sale or conveyance to another corporation of the property of
the Company as an entirety
3
<PAGE>
or substantially as an entirety, or in the case of any statutory exchange of
securities with another corporation (including any exchange effected in
connection with a merger of a third corporation into the Company), there shall
be no adjustment under Subsection (a) of this Section above but the Holder of
each Warrant then outstanding shall have the right thereafter to convert such
Warrant into the kind and amount of shares of stock and other securities and
property which he would have owned or have been entitled to receive immediately
after such consolidation, merger, statutory exchange, sale, or conveyance had
such Warrant been converted immediately prior to the effective date of such
consolidation, merger, statutory exchange, sale, or conveyance and in any such
case, if necessary, appropriate adjustment shall be made in the application of
the provisions set forth in this Section with respect to the rights and
interests thereafter of any Holders of the Warrant, to the end that the
provisions set forth in this Section shall thereafter correspondingly be made
applicable, as nearly as may reasonably be, in relation to any shares of stock
and other securities and property thereafter deliverable on the exercise of the
Warrant. The provisions of this Subsection shall similarly apply to successive
consolidations, mergers, statutory exchanges, sales or conveyances.
(d) Upon any adjustment of the Warrant Exercise Price, then and in each
such case, the Company shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the Holder as shown on the books of the Company,
which notice shall state the Warrant Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares of
Common Stock or other securities purchasable at such price upon the exercise of
this Warrant, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.
6. No Voting Rights. This Warrant shall not entitle the Holder to any
voting rights or other rights as a shareholder of the Company.
7. Notice of Transfer of Warrant or Resale of the Warrant Shares.
(a) Subject to the sale, assignment, hypothecation, or other transfer
restrictions set forth in Section 1 hereof, the Holder, by acceptance hereof,
agrees to give written notice to the Company before transferring this Warrant or
transferring any Warrant Shares of such Holder's intention to do so, describing
briefly the manner of any proposed transfer. Promptly upon receiving such
written notice, the Company shall present copies thereof to the Company's
counsel and to counsel to the original purchaser of this Warrant. If in the
opinion of each such counsel the proposed transfer may be effected without
registration or qualification (under any federal or state securities laws), the
Company, as promptly as practicable, shall notify the Holder of such opinion,
whereupon the Holder shall be entitled to transfer this Warrant or to dispose of
Warrant Shares received upon the previous exercise of this Warrant, all in
accordance with the terms of the notice delivered by the Holder to the Company;
provided that an appropriate legend may be endorsed on this Warrant or the
certificates for such Warrant Shares respecting restrictions upon transfer
thereof necessary or advisable in the opinion of counsel to the Company and
satisfactory to the Company to prevent further transfers which would be in
violation of Section 5 of the Securities Act of 1933, as amended (the "1933
Act") and applicable state securities laws; and provided further that the
prospective transferee or purchaser shall execute such documents and make such
representations, warranties, and agreements as may be required solely to comply
with the exemptions relied upon by the Company for the transfer or disposition
of the Warrant or Warrant Shares.
4
<PAGE>
(b) If in the opinion of either of the counsel referred to in this Section
7, the proposed transfer or disposition of this Warrant or such Warrant Shares
described in the written notice given pursuant to this Section 7 may not be
effected without registration or qualification of this Warrant or such Warrant
Shares the Company shall promptly give written notice thereof to the Holder, and
the Holder will limit its activities in respect to such as, in the opinion of
both such counsel, are permitted by law.
8. Fractional Shares. Fractional shares shall not be issued upon the
exercise of this Warrant, but in any case where the Holder would, except for the
provisions of this Section 8, be entitled under the terms hereof to receive a
fractional share, the Company shall, upon the exercise of this Warrant for the
largest number of whole shares then called for, pay a sum in cash equal to the
sum of (a) the excess, if any, of the Market Price of such fractional share over
the proportional part of the Warrant Exercise Price represented by such
fractional share, plus (b) the proportional part of the Warrant Exercise Price
represented by such fractional share. For purposes of this Section, the term
"Market Price" with respect to shares of Common Stock of any class or series
means the closing sale price reported by Nasdaq National Market or any national
securities exchange or, if none, the average of the last reported closing bid
and asked prices on any national securities exchange or quoted in Nasdaq
SmallCap Market(SM), or if not listed on a national securities exchange or
quoted in Nasdaq SmallCap Market(SM), the average of the last reported closing
bid and asked prices as reported by Metro Data Company, Inc. from quotations by
market makers in such Common Stock on the Minneapolis-St. Paul local over-the-
counter market.
9. Registration Rights.
(a) If at any time after ____________________, 1998 and prior to the end
of the two-year period following complete exercise of this Warrant or
____________________, 2004, whichever occurs earlier, the Company proposes to
register under the 1933 Act (except by a Form S-4 or Form S-8 Registration
Statement or any successor forms thereto) or qualify for a public distribution
under Section 3(b) of the 1933 Act, any of its securities, it will give written
notice to all Holders of this Warrant, any Warrants issued pursuant to Section 2
and/or Section 3(a) hereof, and any Warrant Shares of its intention to do so
and, on the written request of any such Holder given within thirty (30) days
after the date of any such notice (which request shall specify the interest in
this Warrant or the Warrant Shares intended to be sold or disposed of by such
Holder and describe the nature of any proposed sale or other disposition
thereof), the Company will use its best efforts to cause all such Warrant
Shares, the Holders of which shall have requested the registration or
qualification thereof, to be included in such registration statement proposed to
be filed by the Company; provided, however, that if a greater number of Warrant
Shares is offered for participation in the proposed offering than in the
reasonable opinion of the managing underwriter of the proposed offering can be
accommodated without adversely affecting the proposed offering, then the amount
of Warrant Shares proposed to be offered by such Holders for registration, as
well as the number of securities of any other selling shareholders participating
in the registration, shall be proportionately reduced to a number deemed
satisfactory by the managing underwriter.
(b) Further, on a one-time basis during the four-year period commencing
_______________, 1998, upon request by the Holder or Holders of a majority in
interest of this Warrant, of any Warrants issued pursuant to Section 2 and/or
Section 3(a) hereof, and of any
5
<PAGE>
Warrant Shares, the Company will promptly take all necessary steps to register
or qualify, on Form S-3 (or successor form) under the 1933 Act and the
securities laws of such states as the Holders may reasonably request, such
number of Warrant Shares issued and to be issued upon conversion of the Warrants
requested by such Holders in their request to the Company. The Company shall
keep effective and maintain any registration, qualification, notification, or
approval specified in this Paragraph (b) and from time to time shall amend or
supplement the prospectus used in connection therewith to the extent necessary
in order to comply with applicable law until _________, 1999 or such later
period, not to exceed six (6) months from the effective date of such
registration or qualification specified in this Paragraph (b), as may be
reasonably necessary for such Holder or Holders of such Warrant Shares to
dispose of such Warrant Shares.
(c) With respect to each inclusion of securities in a registration
statement pursuant to this Section 9, the Company shall bear the following fees,
costs, and expenses: all registration, filing and NASD fees, printing expenses,
fees and disbursements of counsel and accountants for the Company, fees and
disbursements of counsel for the underwriter or underwriters of such securities
(if the Company is required to bear such fees and disbursements), all internal
expenses, the premiums and other costs of policies of insurance against
liability arising out of the public offering, and legal fees and disbursements
and other expenses of complying with state securities laws of any jurisdictions
in which the securities to be offered are to be registered or qualified. Fees
and disbursements of special counsel and accountants for the selling Holders,
underwriting discounts and commissions, and transfer taxes for selling Holders
and any other expenses relating to the sale of securities by the selling Holders
not expressly included above shall be borne by the selling Holders.
(d) The Company hereby indemnifies each of the Holders of this Warrant and
of any Warrant Shares, and the officers and directors, if any, who control such
Holders, within the meaning of Section 15 of the 1933 Act, against all losses,
claims, damages, and liabilities caused by (1) any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement or
Prospectus (and as amended or supplemented if the Company shall have furnished
any amendments thereof or supplements thereto), any Preliminary Prospectus or
any state securities law filings; (2) any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except insofar as such losses, claims, damages, or liabilities
are caused by any untrue statement or omission or alleged untrue statement or
omission contained in information furnished in writing to the Company by such
Holder expressly for use therein; and each such Holder by its acceptance hereof
severally agrees that it will indemnify and hold harmless the Company, each of
its directors, each of its officers who signs such Registration Statement, and
each person, if any, who controls the Company, within the meaning of Section 15
of the 1933 Act, with respect to losses, claims, damages, or liabilities which
are caused by any untrue statement or alleged untrue statement, omission or
alleged omission contained in information furnished in writing to the Company by
such Holder expressly for use therein.
10. Additional Right to Convert Warrant.
(a) The Holder of this Warrant shall have the right to require the Company
to convert this Warrant (the "Conversion Right") at any time after it is
exercisable, but prior to its expiration into shares of Company Common Stock as
provided for in this Section 10. Upon exercise of the Conversion Right, the
Company shall deliver to the Holder (without payment by
6
<PAGE>
the Holder of any Warrant Exercise Price) that number of shares of Company
Common Stock equal to the quotient obtained by dividing (x) the value of the
Warrant at the time the Conversion Right is exercised (determined by subtracting
the aggregate Warrant Exercise Price for the Warrant Shares in effect
immediately prior to the exercise of the Conversion Right from the aggregate
Fair Market Value for the Warrant Shares immediately prior to the exercise of
the Conversion Right) by (y) the Fair Market Value of one share of Company
Common Stock immediately prior to the exercise of the Conversion Right.
(b) The Conversion Right may be exercised by the Holder, at any time or
from time to time after it is exercisable, prior to its expiration, on any
business day by delivering a written notice in the form attached hereto (the
"Conversion Notice") to the Company at the offices of the Company exercising the
Conversion Right and specifying (i) the total number of shares of Common Stock
the Holder will purchase pursuant to such conversion and (ii) a place and date
not less than three nor more than 20 business days from the date of the
Conversion Notice for the closing of such purchase.
(c) At any closing under Section 10(b) hereof, (i) the Holder will
surrender the Warrant and (ii) the Company will deliver to the Holder a
certificate or certificates for the number of shares of Company Common Stock
issuable upon such conversion, together with cash, in lieu of any fraction of a
share, and (iii) the Company will deliver to the Holder a new Warrant
representing the number of shares, if any, with respect to which the Warrant
shall not have been exercised.
(d) Fair Market Value of a share of Common Stock as of a particular date
(the "Determination Date") shall mean:
(i) If the Company's Common Stock is traded on an exchange or is
quoted on the Nasdaq National Market, then the closing or last sale price,
respectively, reported for the business day immediately preceding the
Determination Date,
(ii) If the Company's Common Stock is not traded on an exchange or on
the Nasdaq National Market but is traded on the Nasdaq SmallCap Market(SM)
or other over-the-counter market, then the closing bid and asked prices
reported for the business day immediately preceding the Determination Date,
and
(iii) If the Company's Common Stock is not traded on an exchange or
on the Nasdaq National Market, Nasdaq SmallCap Market(SM) or other
over-the-counter market, then the price established in good faith by the
Board of Directors.
IN WITNESS WHEREOF, FieldWorks, Incorporated has caused this Warrant to be
signed by its duly authorized officer and this Warrant to be dated
____________________, 1997.
FieldWorks, Incorporated
By_________________________________
Its________________________________
631994
7
<PAGE>
To: FieldWorks, Incorporated
NOTICE OF EXERCISE OF WARRANT -- To Be Executed by the Registered Holder in
- ----------------------------- Order to Exercise the Warrant
The undersigned hereby irrevocably elects to exercise the attached Warrant to
purchase for cash, _________________ of the shares issuable upon the exercise of
such Warrant, and requests that certificates for such shares (together with a
new Warrant to purchase the number of shares, if any, with respect to which this
Warrant is not exercised) shall be issued in the name of
______________________________
(Print Name)
Please insert social security
or other identifying number
of registered Holder of
certificate (______________) Address:
______________________________
______________________________
Date: __________________ ______________________________
Signature*
*The signature on the Notice of Exercise of Warrant must correspond to the name
as written upon the face of the Warrant in every particular without alteration
or enlargement or any change whatsoever. When signing on behalf of a
corporation, partnership, trust or other entity, PLEASE indicate your
position(s) and title(s) with such entity.
631994
8
<PAGE>
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrants.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto _____________________________ the right to purchase the securities of
FieldWorks, Incorporated
to which the within Warrant relates and appoints _____________, attorney, to
transfer said right on the books of FieldWorks, Incorporated with full power of
substitution in the premises.
Dated:________________ ______________________________
(Signature)
Address:
_______________________________
_______________________________
Social Security or Tax I.D. Number
of Assignee:
_______________________________
631994
9
<PAGE>
CASHLESS EXERCISE FORM
(To be executed upon exercise of Warrant
pursuant to Section 10)
To: FieldWorks, Incorporated
The undersigned hereby irrevocably elects a cashless exercise of the right
of purchase represented by the within Warrant Certificate for, and to purchase
thereunder, ______________ shares of Common Stock, as provided for in Section 10
therein.
Please issue a certificate or certificates for such Common Stock in the
name of, and pay any cash for any fractional share to:
Name_______________________________
(Please print name)
Address________________________________
___________________________________
Social Security No.________________
Signature______________________________
NOTE: The above signature should correspond exactly with the name on the
first page of this Warrant Certificate or with the name of the assignee
appearing in the assignment form below.
And if said number of shares shall not be all the shares purchasable under
the within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of the above signed for the balance remaining of the shares purchasable
thereunder.
631994
10
<PAGE>
Exhibit 3.2
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
FIELDWORKS, INCORPORATED
The following Second Amended and Restated Articles of Incorporation shall
supersede and take the place of the existing Amended and Restated Articles of
Incorporation and all amendments thereto:
ARTICLE 1. NAME
----------------
The name of the corporation is FieldWorks, Incorporated.
ARTICLE 2. REGISTERED OFFICE
-----------------------------
The address of the registered office of the corporation is 9961 Valley
View Road, Eden Prairie, Minnesota 55344.
ARTICLE 3. AUTHORIZED SHARES
-----------------------------
The total number of shares of capital stock which the corporation is
authorized to issue shall be 35,000,000 shares, consisting of 30,000,000 shares
of common stock, par value $.001 per share ("Common Stock"), and 5,000,000
shares of undesignated preferred stock, par value $.001 per share ("Preferred
Stock"). The board of directors of the corporation is hereby authorized to
provide, by resolution or resolutions adopted by such board, for the issuance of
Preferred Stock from time to time in one or more classes and/or series, to
establish the designation and number of shares of each such class or series, and
to fix the relative rights and preferences of the shares of each such class or
series, all to the full extent permitted by the Minnesota Business Corporation
Act, Section 302A.401, or any successor provision.
ARTICLE 4. NO CUMULATIVE VOTING
--------------------------------
No holder of shares of capital stock of the corporation shall have any
cumulative voting rights.
ARTICLE 5. NO PREEMPTIVE RIGHTS
--------------------------------
The shareholders of the corporation shall not have any preemptive
rights to subscribe for or acquire securities or rights to purchase securities
of any class, kind or series of the corporation.
<PAGE>
ARTICLE 6. DIRECTOR LIABILITY
------------------------------
To the fullest extent permitted by the Minnesota Business Corporation
Act as the same exists or may hereafter be amended, a director of this
corporation shall not be liable to this corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director. Any repeal or
modification of the foregoing provisions of this Article 6 by the shareholders
of the corporation shall not adversely affect any right or protection of a
director of the corporation existing at the time of such repeal or modification.
ARTICLE 7. WRITTEN ACTION BY DIRECTORS
---------------------------------------
Any action required or permitted to be taken at a meeting of the Board
of Directors of the corporation may be taken by a written action signed, or
counterparts of a written action signed in the aggregate, by all of the
directors unless the action need not be approved by the shareholders of the
corporation, in which case the action may be taken by a written action signed,
or counterparts of a written action signed in the aggregate, by the number and
type of directors that would be required to take the same action at a meeting of
the Board of Directors of the corporation at which all of the directors were
present.
-2-
<PAGE>
Exhibit 3.4
SECOND AMENDED BYLAWS
OF
FIELDWORKS, INCORPORATED
ARTICLE I.
OFFICES, CORPORATE SEAL
Section 1.01. Registered Office. The registered office of the
-----------------
corporation in Minnesota shall be that set forth in the articles of
incorporation or in the most recent amendment of the articles of incorporation
or resolution of the directors filed with the Secretary of State of Minnesota
changing the registered office.
Section 1.02. Other Offices. The corporation may have such other
-------------
offices, within or without the state of Minnesota, as the directors shall, from
time to time, determine.
Section 1.03. Corporate Seal. The corporation shall have no seal.
--------------
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 2.01. Place and Time of Meetings. Except as provided
--------------------------
otherwise by the Minnesota Business Corporation Act, meetings of the
shareholders may be held at any place, within or without the state of Minnesota,
as may from time to time be designated by the directors.
Section 2.02. Regular Meetings.
-----------------
(a) A regular meeting of the shareholders shall be held on such date
as the board of directors shall by resolution establish.
(b) At a regular meeting the shareholders, voting as provided in the
articles of incorporation and these bylaws, shall elect qualified successors for
directors who serve for an indefinite term or whose terms have expired or are
due to expire within six months after the date of the meeting and shall transact
such other business as may properly come before them.
(c) To be properly brought before a regular meeting of shareholders,
business must be (1) specified in the notice of the meeting, (2) directed to be
brought before the meeting by the board of directors or (3) proposed at the
meeting by a shareholder who (i) was a shareholder of record at the time of
giving of notice provided for in these bylaws, (ii) is entitled to vote at the
meeting and (iii) gives prior notice of the matter, which must otherwise be a
proper matter for shareholder action, in the manner herein provided. For
business to be properly brought before a regular meeting by a shareholder, the
shareholder must give written notice to the Secretary of the corporation so as
to be received at the principal executive offices of the corporation not later
than the close of business on the tenth day following the day on which the
notice of the regular meeting was mailed to shareholders. Such notice shall set
forth (aa) the name and record address of the shareholder and of the beneficial
owner, if any, on whose behalf the proposal will be made, (bb) the class and
number of shares of the corporation owned by the shareholder and beneficially
owned by the beneficial owner, if any, on whose behalf the proposal will be
made, (cc) a brief description of the business desired to be brought before the
regular meeting and the reasons for conducting such business, and (dd) any
material interest in such business of the shareholder and the beneficial owner,
if any, on whose behalf the proposal is made. The chair of
<PAGE>
the meeting may refuse to acknowledge any proposed business not made in
compliance with the foregoing procedure.
Section 2.03. Special Meetings. Special meetings of the shareholders
----------------
may be held at any time and for any purpose and may be called by the Chief
Executive Officer, the Chief Financial Officer, two or more directors or by a
shareholder or shareholders holding 10% or more of the voting power of all
shares entitled to vote, except that a special meeting for the purpose of
considering any action to directly or indirectly facilitate or affect a business
combination, including any action to change or otherwise affect the composition
of the board of directors for that purpose, must be called by 25% or more of the
voting power of all shares entitled to vote. A shareholder or shareholders
holding the requisite percentage of the voting power of all shares entitled to
vote may demand a special meeting of the shareholders by written notice of
demand given to the Chief Executive Officer or Chief Financial Officer of the
corporation and containing the purposes of the meeting. Within 30 days after
receipt of demand by one of those officers, the board of directors shall cause a
special meeting of shareholders to be called and held on notice no later than 90
days after receipt of the demand, at the expense of the corporation. Special
meetings shall be held on the date and at the time and place fixed by the Chief
Executive Officer or the board of directors, except that a special meeting
called by or at demand of a shareholder or shareholders shall be held in the
county where the principal executive office is located. The business transacted
at a special meeting shall be limited to the purposes as stated in the notice of
the meeting.
Section 2.04. Quorum, Adjourned Meetings. The holders of a majority
--------------------------
of the shares entitled to vote shall constitute a quorum for the transaction of
business at any regular or special meeting. In case a quorum shall not be
present at a meeting, the meeting may be adjourned from time to time without
notice other than announcement at the time of adjournment of the date, time and
place of the adjourned meeting. If a quorum is present, a meeting may be
adjourned from time to time without notice other than announcement at the time
of adjournment of the date, time and place of the adjourned meeting. At
adjourned meetings at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally noticed. If a
quorum is present when a meeting is convened, the shareholders present may
continue to transact business until adjournment notwithstanding the withdrawal
of enough shareholders originally present to leave less than a quorum.
Section 2.05. Voting. At each meeting of the shareholders every
------
shareholder having the right to vote shall be entitled to vote either in person
or by proxy. Each shareholder, unless the articles of incorporation or statutes
provide otherwise, shall have one vote for each share having voting power
registered in such shareholder's name on the books of the corporation. Jointly
owned shares may be voted by any joint owner unless the corporation receives
written notice from any one of them denying the authority of that person to vote
those shares. Upon the demand of any shareholder, the vote upon any question
before the meeting shall be by ballot. All questions shall be decided by a
majority vote of the number of shares entitled to vote and represented at the
meeting at the time of the vote, except if otherwise required by statute, the
articles of incorporation, or these bylaws.
Section 2.06. Record Date. The board of directors may fix a date,
-----------
not exceeding 60 days preceding the date of any meeting of shareholders, as a
record date for the determination of the shareholders entitled to notice of, and
to vote at, such meeting, notwithstanding any transfer of shares on the books of
the corporation after any record date so fixed. If the board of directors fails
to fix a record date for determination of the shareholders entitled to notice
of, and to vote at, any meeting of shareholders, the record date shall be the
20th day preceding the date of such meeting.
-2-
<PAGE>
Section 2.07. Notice of Meetings. There shall be mailed to each
------------------
shareholder, shown by the books of the corporation to be a holder of record of
voting shares, at the shareholder's address as shown by the books of the
corporation, a notice setting out the date, time and place of each regular
meeting and each special meeting, except where the meeting is an adjourned
meeting and the date, time and place of the meeting were announced at the time
of adjournment, which notice shall be mailed at least ten days prior thereto.
Every notice of any special meeting called pursuant to section 2.03 hereof shall
state the purpose or purposes for which the meeting has been called, and the
business transacted at all special meetings shall be confined to the purposes
stated in the notice.
Section 2.08. Waiver of Notice. Notice of any regular or special
----------------
meeting may be waived by any shareholder either before, at or after such meeting
orally or in writing signed by such shareholder or a representative entitled to
vote the shares of such shareholder. A shareholder, by such shareholder's
attendance at any meeting of shareholders, shall be deemed to have waived notice
of such meeting, except where the shareholder objects at the beginning of the
meeting to the transaction of business because the meeting is not lawfully
called or convened, or objects before a vote on an item of business because the
item may not lawfully be considered at that meeting and does not participate in
the consideration of the item at that meeting.
Section 2.09. Organization and Conduct of Meetings. The highest
------------------------------------
ranking officer of the corporation who is present shall call to order and act as
chair of any meeting of the shareholders. In the absence of the Secretary of
the corporation, the secretary of the meeting shall be such person as the chair
of the meeting appoints. The chair of the meeting shall have the right and
authority to prescribe such rules, regulations and procedures and to do all such
acts as, in the judgment of such chair, are appropriate for conduct of the
meeting. To the extent not prohibited by law, such rules, regulations or
procedures may include, without limitation, establishment of (1) an agenda or
order of business for the meeting and the method by which business may be
proposed, (2) rules and procedures for maintaining order at the meeting and the
safety of those present, (3) limitations on attendance at or participation in
the meeting to shareholders of record of the corporation, their duly authorized
proxies or such other persons as the chair of the meeting shall determine, (4)
restrictions on entry to the meeting after the time fixed for the commencement
thereof and (5) limitations on the time allotted to questions or comments by
participants. Any proposed business contained in the notice of a regular
meeting is deemed to be on the agenda and no further motions or other actions
shall be required to bring such proposed business up for consideration. Unless
and to the extent otherwise determined by the chair of the meeting, it shall not
be necessary to follow Robert's Rules of Order or any other rules of
parliamentary procedure at the meeting of the shareholders. Following
completion of the business of the meeting as determined by the chair of the
meeting, the chair of the meeting shall have the exclusive authority and power
to adjourn the meeting.
Section 2.10. Nomination of Directors. Only persons nominated in
-----------------------
accordance with the following procedures shall be eligible for election by
shareholders as directors. Nominations of persons for election as directors may
be made at a meeting of shareholders called for the purpose of electing
directors (a) by or at the direction of the board of directors or (b) by any
shareholder who (1) was a shareholder of record at the time of giving of notice
provided for in these Bylaws, (2) is entitled to vote at the meeting and (3)
gives prior notice of the nomination in the manner herein provided. For a
nomination to be properly made by a shareholder, the shareholder must give
written notice to the Secretary of the corporation so as to be received at the
principal executive offices of the corporation not later than the close of
business on the fifteenth day following the day on which the notice of the
shareholder meeting was mailed to shareholders. Such notice shall set forth
(aa) as to the shareholder giving the notice: (1) the name and record address
of the shareholder and of the beneficial owner, if any, on whose behalf the
nomination will be made, and (2) the class and number of shares of the
corporation owned by the shareholder and beneficially owned by the beneficial
owner, if any, on whose behalf the nomination will be made; and (bb) as to each
person the shareholder proposes to nominate: (1) the name, age, business
address and residence address of the person, (2) the principal
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<PAGE>
occupation or employment of the person and (3) the class and number of shares of
the corporation's capital stock beneficially owned by the person. The chair of
the meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
ARTICLE III.
DIRECTORS
Section 3.01. General Powers. The business and affairs of the
--------------
corporation shall be managed by or under the authority of the board of
directors, except as otherwise permitted by statute.
Section 3.02. Number, Qualification and Term of Office. The board
-----------------------------------------
of directors shall consist of one or more directors. The number of directors
shall be fixed by resolution of the board of directors and thereafter shall be
increased or decreased from time to time by resolution of the board of directors
or the shareholders. Directors need not be shareholders. Each of the directors
of the corporation shall hold office until such director's successor shall have
been elected and shall qualify, or until the earlier death, resignation, removal
or disqualification of such director.
Section 3.03. Board Meetings. Meetings of the board of directors may
--------------
be held from time to time at such time and place within or without the state of
Minnesota as may be designated in the notice of such meeting.
Section 3.04. Calling Meetings; Notice. Meetings of the board of
------------------------
directors may be called by the chairman of the board and/or the Chief Executive
Officer by giving at least twenty-four hours' notice, or by any other director
by giving at least five days' notice, of the date, time and place thereof to
each director by mail, telephone, telegram or in person. If the day or date,
time and place of a meeting of the board of directors has been announced at a
previous meeting of the Board, no notice is required. Notice of an adjourned
meeting of the board of directors need not be given other than by announcement
at the meeting at which adjournment is taken.
Section 3.05. Waiver of Notice. Notice of any meeting of the board
----------------
of directors may be waived by any director either before, at, or after such
meeting orally or in a writing signed by such director. A director, by his
attendance at any meeting of the board of directors, shall be deemed to have
waived notice of such meeting, except where the director objects at the
beginning of the meeting to the transaction of business because the meeting is
not lawfully called or convened and does not participate thereafter in the
meeting.
Section 3.06. Quorum and Vote at Meetings. A majority of the
---------------------------
directors holding office immediately prior to a meeting of the board of
directors shall constitute a quorum for the transaction of business at such
meeting. A vote of a majority of the directors present at any meeting at which
there is a quorum shall be the act of the board of directors, except if
otherwise required by statute, the Articles of Incorporation or these Bylaws.
Section 3.07. Absent Directors. A director may give advance written
----------------
consent or opposition to a proposal to be acted on at a meeting of the board of
directors. If such director is not present at the meeting, consent or
opposition to a proposal does not constitute presence for purposes of
determining the existence of a quorum, but consent or opposition shall be
counted as a vote in favor of or against the proposal and shall be entered in
the minutes or other record of action at the meeting, if the proposal acted on
at the meeting is substantially the same or has substantially the same effect as
the proposal to which the director has consented or objected.
Section 3.08. Conference Communications. Any or all directors may
-------------------------
participate in any meeting of the board of directors, or of any duly constituted
committee thereof, by any means of
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<PAGE>
communication through which the directors may simultaneously hear each other
during such meeting. For the purposes of establishing a quorum and taking any
action at the meeting, such directors participating pursuant to this section
3.08 shall be deemed present in person at the meeting; and the place of the
meeting shall be the place of origination of the conference telephone
conversation or other comparable communication technique.
Section 3.09. Vacancies; Newly Created Directorships. Vacancies on
---------------------------------------
the board of directors of this corporation occurring by reason of death,
resignation, removal or disqualification shall be filled for the unexpired term
by a majority of the remaining directors of the board although less than a
quorum; newly created directorships resulting from an increase in the authorized
number of directors by action of the board of directors as permitted by section
3.02 may be filled by a majority vote of the directors serving at the time of
such increase; and each director elected pursuant to this section 3.09 shall be
a director until such director's successor is elected by the shareholders at
their next regular or special meeting.
Section 3.10. Removal. Any director may be removed from office, but
-------
only for cause, by the affirmative vote of the shareholders holding a majority
of the shares entitled to vote at an election of directors. In the event that a
director is so removed, a new director shall be elected at the same meeting.
Section 3.11. Committees. A resolution approved by the affirmative
----------
vote of a majority of the board of directors may establish committees having the
authority of the Board in the management of the business of the corporation to
the extent provided in the resolution. A committee shall consist of one or more
persons, who need not be directors, appointed by affirmative vote of a majority
of the directors present. Committees (other than special litigation committees)
are subject to the direction and control of, and vacancies in the membership
thereof shall be filled by, the board of directors. A majority of the members
of the committee present at a meeting is a quorum for the transaction of
business
Section 3.12. Written Action. Any action which might be taken at a
--------------
meeting of the board of directors, or any duly constituted committee thereof,
may be taken without a meeting if done in writing and signed by all of the
directors or committee members, unless the articles of incorporation provide
otherwise and the action need not be approved by the shareholders.
Section 3.13. Compensation. Directors who are not salaried officers of
------------
this corporation shall receive such fixed sum per meeting attended or such fixed
annual sum as shall be determined, from time to time, by resolution of the board
of directors. The board of directors may, by resolution, provide that all
directors shall receive their expenses, if any, of attendance at meetings of the
board of directors or any committee thereof. Nothing herein contained shall be
construed to preclude any director from serving this corporation in any other
capacity and receiving proper compensation therefor.
ARTICLE IV.
OFFICERS
Section 4.01. Number and Designation. The corporation shall have one
----------------------
or more natural persons exercising the functions of the offices of Chief
Executive Officer and Chief Financial Officer. The board of directors may elect
or appoint such other officers or agents as it deems necessary for the operation
and management of the corporation, with such powers, rights, duties, and
responsibilities as may be determined by the board of directors, including,
without limitation, a Chairman of the Board, a President, one or more Vice
Presidents, a Secretary, a Treasurer and such assistant officers or other
officers as may from time to time be elected or appointed by the board of
directors. Each such officer
-5-
<PAGE>
shall have the powers, rights, duties and responsibilities set forth in these
bylaws unless otherwise determined by the board of directors. Any number of
offices may be held by the same person.
Section 4.02. Term of Office. The officers of the corporation shall
--------------
hold office until their respective successors are chosen and have qualified or
until their earlier death, resignation or removal.
Section 4.03. Removal and Vacancies. The board of directors may
---------------------
remove any officer from office at any time, with or without cause, by a
resolution approved by the affirmative vote of a majority of the directors
present at a duly held board meeting. Such removal, however, shall be without
prejudice to any contract rights of the officer so removed. A vacancy in an
office of the corporation by reason of death, resignation, removal,
disqualification or otherwise may, or in the case of a vacancy in the office of
the Chief Executive Officer or Chief Financial Officer shall, be filled for the
unexpired term by the board of directors.
Section 4.04. Chief Executive Officer. Unless provided otherwise by
-----------------------
a resolution adopted by the board of directors, the Chief Executive Officer: (a)
shall have general active management of the business of the corporation; (b)
shall, when present, preside at all meetings of the shareholders; (c) shall see
that all orders and resolutions of the board of directors are carried into
effect; (d) shall sign and deliver, in the name of the corporation, any deeds,
mortgages, bonds, contracts or other instruments pertaining to the business of
the corporation, except in cases in which the authority to sign and deliver is
required by law to be exercised by another person or is expressly delegated by
these bylaws or by the board of directors to some other officer or agent of the
corporation; (e) shall maintain records of and, whenever necessary, certify all
proceedings of the board of directors and the shareholders; and (f) shall
perform such other duties as may, from time to time, be assigned by the board of
directors.
Section 4.05. Chief Financial Officer. Unless provided otherwise by
-----------------------
a resolution adopted by the board of directors, the Chief Financial Officer: (a)
shall cause to be kept accurate financial records for the corporation; (b) shall
cause to be deposited all moneys, drafts and checks in the name of and to the
credit of the corporation in such banks and depositories as the board of
directors shall, from time to time, designate; (c) shall cause to be endorsed
for deposit all notes, checks and drafts received by the corporation as ordered
by the board of directors, making proper vouchers therefor; (d) shall cause to
be disbursed corporate funds and shall cause to be issued checks and drafts in
the name of the corporation, as ordered by the board of directors; (e) shall
render to the Chief Executive Officer and the board of directors, whenever
requested, an account of all the transactions as Chief Financial Officer and of
the financial condition of the corporation; and (f) shall perform such other
duties as may, from time to time, be assigned by the board of directors or the
Chief Executive Officer.
Section 4.06. Chairman of the Board. The Chairman of the Board, if
---------------------
one is elected, shall be a member of the board, shall preside at all meetings of
the directors and shall have such other duties as may be prescribed from time to
time by the board of directors.
Section 4.07. President. Unless otherwise determined by the board of
---------
directors, the President shall be the Chief Executive Officer of the
corporation. If an officer other than the President is designated Chief
Executive Officer, the President shall perform such duties as may, from time to
time, be assigned by the board of directors.
Section 4.08. Vice President. Each Vice President shall have such
--------------
powers and shall perform such duties as prescribed by these bylaws or as may,
from time to time, be assigned by the board of directors or by the Chief
Executive Officer. In the event of the absence or disability of the Chief
Executive Officer, the Vice President(s) shall succeed to the Chief Executive
Officer's power and duties in the order designated by the board of directors.
-6-
<PAGE>
Section 4.09. Secretary. Unless provided otherwise by a resolution
---------
adopted by the board of directors, the Secretary: (a) shall attend all meetings
of the shareholders and board of directors and shall record all proceedings of
such meetings in the minute book of the corporation; (b) shall give or cause to
be given proper notice of meetings of shareholders and, when required, meetings
of the board of directors and other notices required by law or these bylaws; and
(c) shall perform such other duties as may, from time to time, be assigned by
the board of directors or by the Chief Executive Officer.
Section 4.10. Treasurer. Unless otherwise determined by the board of
---------
directors, the Treasurer shall be the Chief Financial Officer of the
corporation. If an officer other than the Treasurer is designated Chief
Financial Officer, the Treasurer shall perform such duties as may, from time to
time, be assigned by the board of directors or by the Chief Executive Officer.
Section 4.11. Multiple Offices. Any number of offices or functions
----------------
of those offices may be held by the same person. If a document must be signed by
persons holding different offices or functions and one person holds or exercises
more than one of those offices or functions, that person may sign the document
in more than one capacity, but only if the document indicates each capacity in
which the person signs.
Section 4.12. Authority and Duties. In addition to the foregoing
--------------------
authority and duties, all officers of the corporation shall respectively have
such authority and perform such duties in the management of business of the
corporation as may be determined from time to time by the board of directors.
Unless prohibited by a resolution of the board of directors, an officer elected
or appointed by the board of directors may, without specific approval of the
board of directors, delegate some or all of the duties and powers of an office
to other persons.
Section 4.13. Compensation. The officers of the corporation shall
------------
receive such compensation for their services as may be determined by or in
accordance with resolutions of the board of directors or by one or more
committees to the extent so authorized from time to time by the board of
directors.
ARTICLE V.
SHARES AND THEIR TRANSFER
Section 5.01 Certificates for Shares. All shares of the corporation
-----------------------
shall be certificated shares. Each holder of shares of the corporation shall be
entitled to a certificate for shares in such form as the board of directors may,
from time to time, approve. Certificates shall be signed by an authorized
representative of the corporation's transfer agent. A certificate representing
shares of this corporation shall contain on its face the information required by
the Minnesota Business Corporation Act, section 302A.417. A certificate
representing shares of this corporation shall, if the corporation is authorized
to issue shares of more than one class or series, set forth upon the face or
back of the certificate, or shall state that the corporation will furnish to any
shareholder upon request and without charge, a full statement of the
designations, preferences, limitations and relative rights of the shares of each
class or series authorized to be issued, so far as they have been determined,
and the authority of the board to determine relative rights and preferences of
subsequent classes or series.
Section 5.02. Issuance of Shares. The board of directors is
------------------
authorized to cause to be issued shares of the corporation up to the full amount
authorized by the articles of incorporation in such amounts as may be determined
by the board of directors and as may be permitted by law. Shares may be issued
for any consideration, including, without limitation, in consideration of cash
or other property, tangible or intangible, received or to be received by the
corporation under a written agreement, of services rendered or to be rendered to
the corporation under a written agreement, or of an amount
-7-
<PAGE>
transferred from surplus to stated capital upon a share dividend. At the time of
approval of the issuance of shares, the board of directors shall state, by
resolution, its determination of the fair value to the corporation in monetary
terms of any consideration other than cash for which shares are to be issued.
Section 5.03. Transfer of Shares. Transfer of shares on the books of
------------------
the corporation may be authorized only by the shareholder named in the
certificate, or the shareholder's legal representative, or the shareholder's
duly authorized attorney-in-fact, and upon surrender of the certificate or the
certificates for such shares. The corporation may treat as the absolute owner of
shares of the corporation, the person or persons in whose name shares are
registered on the books of the corporation.
Section 5.04. Loss of Certificates. Except as otherwise provided by
--------------------
the Minnesota Business Corporation Act, section 302A.419, any shareholder
claiming a certificate for shares to be lost, stolen, or destroyed shall make an
affidavit of that fact in such form as the board of directors and/or the
corporation's transfer agent shall require and shall, if the board of directors
and/or the corporation's transfer agent so requires, give the corporation a bond
of indemnity in form, in an amount, and with one or more sureties satisfactory
to the Board of directors and/or the corporation's transfer agent, to indemnify
the corporation and/or the corporation's transfer agent against any claim which
may be made against it on account of the reissue of such certificate, whereupon
a new certificate may be issued in the same tenor and for the same number of
shares as the one alleged to have been lost, stolen or destroyed.
ARTICLE VI.
DISTRIBUTIONS, RECORD DATE
Section 6.01. Distributions. Subject to the provisions of the Articles of
-------------
Incorporation, of these Bylaws, and of law, the board of directors may authorize
and cause the corporation to make distributions whenever, and in such amounts or
forms as, in its opinion, are deemed advisable.
Section 6.02. Record Date. Subject to any provisions of the Articles of
-----------
Incorporation, the board of directors may fix a date not exceeding 120 days
preceding the date fixed for the payment of any distribution as the record date
for the determination of the shareholders entitled to receive payment of the
distribution and, in such case, only shareholders of record on the date so fixed
shall be entitled to receive payment of such distribution notwithstanding any
transfer of shares on the books of the corporation after the record date.
ARTICLE VII.
BOOKS AND RECORDS, FISCAL YEAR
Section 7.01. Share Register. The board of directors of the
--------------
corporation shall cause to be kept at its principal executive office, or at
another place or places within the United States determined by the board:
(1) a share register not more than one year old, containing the names
and addresses of the shareholders and the number and classes of
shares held by each shareholder; and
(2) a record of the dates on which certificates or transaction
statements representing shares were issued.
-8-
<PAGE>
Section 7.02. Other Books and Records. The board of directors shall
-----------------------
cause to be kept at its principal executive office, or, if its principal
executive office is not in Minnesota, shall make available at its Minnesota
registered office within ten days after receipt by an officer of the corporation
of a written demand for them made by a shareholder or other person authorized by
the Minnesota Business Corporation Act, section 302A.461, originals or copies
of:
(1) records of all proceedings of shareholders for the last three
years;
(2) records of all proceedings of the board for the last three years;
(3) its articles of incorporation and all amendments currently in
effect;
(4) its bylaws and all amendments currently in effect;
(5) financial statements required by the Minnesota Business
Corporation Act, section 302A.463 and the financial statements for
the most recent interim period prepared in the course of the
operation of the corporation for distribution to the shareholders
or to a governmental agency as a matter of public record;
(6) reports made to shareholders generally within the last three
years;
(7) a statement of the names and usual business addresses of its
directors and principal officers; and
(8) any shareholder voting or control agreements of which the
corporation is aware.
Section 7.03. Fiscal Year. The fiscal year of the corporation shall
-----------
be determined by the board of directors.
ARTICLE VIII.
LOANS, GUARANTEES, SURETYSHIP
Section 8.01. The corporation may lend money to, guarantee an
obligation of, become a surety for, or otherwise financially assist a person if
the transaction, or a class of transactions to which the transaction belongs, is
approved by the affirmative vote of a majority of the directors present, and:
(1) is in the usual and regular course of business of the corporation;
(2) is with, or for the benefit of, a related corporation, an
organization in which the corporation has a financial interest, an
organization with which the corporation has a business
relationship, or an organization to which the corporation has the
power to make donations;
(3) is with, or for the benefit of, an officer or other employee of
the corporation or a subsidiary, including an officer or employee
who is a director of the corporation or a subsidiary, and may
reasonably be expected, in the judgment of the board, to benefit
the corporation; or
(4) has been approved by (a) the holders of two-thirds of the voting
power of the shares entitled to vote which are owned by persons
other than the interested
-9-
<PAGE>
person or persons, or (b) the unanimous affirmative vote of the
holders of all outstanding shares whether or not entitled to vote.
Such loan, guarantee, surety contract or other financial assistance may be with
or without interest, and may be unsecured, or may be secured in the manner as a
majority of the directors present approve, including, without limitation, a
pledge of or other security interest in shares of the corporation. Nothing in
this section shall be deemed to deny, limit or restrict the powers of guaranty,
surety or warranty of the corporation at common law or under a statute of the
state of Minnesota.
ARTICLE IX.
INDEMNIFICATION OF CERTAIN PERSONS
Section 9.01. The corporation shall indemnify all officers and
directors of the corporation, for such expenses and liabilities, including the
advancement of reimbursement of expenses, in such manner, under such
circumstances and to such extent as permitted by the Minnesota Business
Corporation Act, section 302A.521, as now enacted or hereafter amended. The
Board of Directors may authorize the purchase and maintenance of insurance
and/or the execution of individual agreements for the purpose of such
indemnification, and the corporation shall advance all reasonable costs and
expenses (including attorney's fees) incurred in defending any action, suit or
proceeding to all persons entitled to indemnification under this section 9.01,
all in the manner, under the circumstances and to the extent permitted by
section 302A.521 of the Minnesota Business Corporation Act, as now enacted or
hereafter amended. Unless otherwise approved by the board of directors, the
corporation shall not indemnify any employee of the corporation who is not
otherwise entitled to indemnification pursuant to the prior sentence of this
section 9.01.
ARTICLE X.
AMENDMENTS
Section 10.01. These bylaws may be amended or altered by a vote of
the majority of the whole board of directors at any meeting. Such authority of
the board of directors is subject to the power of the shareholders, exercisable
in the manner provided in the Minnesota Business Corporation Act, section
302A.181, subd. 3, to adopt, amend, repeal bylaws adopted, amended, or repealed
by the board of directors. The board of directors shall not in any case adopt,
amend or repeal a bylaw fixing a quorum for meetings of shareholders,
prescribing procedures for removing directors or filling vacancies in the board
of directors, or fixing the number of directors or their classifications,
qualifications or terms of office, but the board of directors may adopt or amend
a bylaw to increase the number of directors.
ARTICLE XI.
SECURITIES OF OTHER CORPORATIONS
Section 11.01. Voting Securities Held by the Corporation. Unless
-----------------------------------------
otherwise ordered by the board of directors, the Chief Executive Officer shall
have full power and authority on behalf of the corporation (a) to attend any
meeting of security holders of other corporations in which the corporation may
hold securities and to vote such securities on behalf of this corporation; (b)
to execute any proxy for such meeting on behalf of the corporation; or (c) to
execute a written action in lieu of a meeting of such other corporation on
behalf of this corporation. At such meeting, the Chief Executive Officer shall
possess and may exercise any and all rights and powers incident to the ownership
of such securities that the corporation possesses. The board of directors may,
from time to time, grant such power and authority to one or more other persons
and may remove such power and authority from the Chief Executive Officer or any
other person or persons.
-10-
<PAGE>
Section 11.02. Purchase and Sale of Securities. Unless otherwise
-------------------------------
ordered by the board of directors, the Chief Executive Officer shall have full
power and authority on behalf of the corporation to purchase, sell, transfer or
encumber any and all securities of any other corporation owned by the
corporation, and may execute and deliver such documents as may be necessary to
effectuate such purchase, sale, transfer or encumbrance. The board of directors
may, from time to time, confer like powers upon any other person or persons.
-11-
<PAGE>
EXHIBIT 4.1
COUNTERSIGNED AND REGISTERED:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
COMMON STOCK COMMON STOCK
SEE REVERSE FOR
FieldWorks, Incorporated CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF MINNESOTA
-----------------
THIS CERTIFIES that CUSIP 31659P 10 3
-----------------
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR VALUE OF $.001
PER SHARE, OF
FieldWorks, Incorporated
TRANSFERABLE ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEREOF IN PERSON OR
BY DULY AUTHORIZED ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY
ENDORSED. THIS CERTIFICATE IS NOT VALID UNLESS COUNTERSIGNED AND REGISTERED BY
THE TRANSFER AGENT AND REGISTRAR.
WITNESS THE FASCIMILE SIGNATURES OF ITS DULY AUTHORIZED OFFICERS.
DATED:
SECRETARY PRESIDENT AND
CHIEF EXECUTIVE OFFICER
<PAGE>
FieldWorks Incorporated
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS
A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS AND RELATIVE
RIGHTS OF THE SHARES OF EACH CLASS OR SERIES AUTHORIZED TO BE ISSUED, SO FAR AS
THEY HAVE BEEN DETERMINED, AND THE AUTHORITY OF THE BOARD TO DETERMINE RELATIVE
RIGHTS AND PREFERENCES OF SUBSEQUENT CLASSES OR SERIES. ANY SUCH REQUEST IS TO
BE ADDRESSED TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL OFFICE.
--------------------------------------
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM --as tenants in common UNIF GIFT MIN ACT--.....Custodian.....
(Cust) (Minor)
TEN ENT --as tenants by the entireties under Uniform Gifts to Minors
JT TEN --as joint tenants with right of survivorship and not as
tenants in common
Act..........
(State)
Additional abbreviations may also be used though not in the
above list.
FOR VALUE RECEIVED ______________________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
--------------------------------------------------
- -------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
________________________________________________________________________ SHARES
REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
______________________________________________________________________ ATTORNEY
TO TRANSFER THE SAID SHARES ON THE BOOKS OF THE WITHIN-NAMED
CORPORATION WITH FULL POWER OF SUBSTITUTION IN THE PREMISES
DATED
--------------------------------------------
--------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE GUARANTEED
<PAGE>
Exhibit 5.1
[Dorsey & Whitney LLP letterhead]
FieldWorks, Incorporated
9961 Valley View Road
Eden Prairie, MN 55344
Re: Registration Statement on Form S-1
File No. 333-18335
Ladies and Gentlemen:
We have acted as counsel to FieldWorks, Incorporated, a Minnesota
corporation (the "Company"), in connection with a Registration Statement on Form
S-1 (the "Registration Statement") relating to the sale by the Company of up to
2,127,500 shares of common stock of the Company, par value $.001 per share
(including 277,500 shares to be subject to the Underwriters' over-allotment
option) (the "Common Stock").
We have examined such documents and have reviewed such questions of law as
we have considered necessary and appropriate for the purposes of our opinions
set forth below. In rendering our opinions set forth below, we have assumed the
authenticity of all documents submitted to us as originals, the genuineness of
all signatures and the conformity to authentic originals of all documents
submitted to us as copies. We have also assumed the legal capacity for all
purposes relevant hereto of all natural persons and, with respect to all parties
to agreements or instruments relevant hereto other than the Company, that such
parties had the requisite power and authority (corporate or otherwise) to
execute, deliver and perform such agreements or instruments, that such
agreements or instruments have been duly authorized by all requisite action
(corporate or otherwise), executed and delivered by such parties and that such
agreements or instruments are the valid, binding and enforceable obligations of
such parties. As to questions of fact material to our opinions, we have relied
upon certificates of officers of the Company and of public officials. We have
also assumed that the Common Stock will be priced by the Pricing Committee
established by the authorizing resolutions adopted by the Company's Board of
Directors in accordance with such resolutions and will be issued and sold as
described in the Registration Statement.
Based on the foregoing, we are of the opinion that the shares of Common
Stock to be sold by the Company pursuant to the Registration Statement have been
duly authorized by all requisite corporate action and, upon issuance, delivery
and
<PAGE>
FieldWorks, Incorporated
February 20, 1997
Page 2
payment therefor as described in the Registration Statement, will be validly
issued, fully paid and nonassessable.
Our opinions expressed above are limited to the laws of the State of
Minnesota.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and to the reference to our firm under the heading
"Legal Matters" in the Prospectus constituting part of the Registration
Statement.
Dated: February 20, 1997
Very truly yours,
/s/ Dorsey & Whitney LLP
KLC
<PAGE>
EXHIBIT 10.2
PROMISSORY NOTE
---------------
, 1996
- ---------- ---------
For value received, the undersigned, FIELDWORKS, INC., a Minnesota
corporation (the "Maker"), promises to pay to the order of __________ (the
"lender"), at such address as the holder hereof may from time to time designate
in writing, the principal amount of _________________.
Interest on unpaid principal balance from date hereof at a per annum
rate equal to ten percent (10%), calculated on the basis of a year consisting of
365/366 days. No provision of this Note shall require the payment or permit the
collection of interest in excess of the rate permitted by applicable law.
All principal and accrued interest hereunder shall be paid in full on
August 2, 1996.
All payments of principal, interest and fees shall be made in
immediately available funds in lawful money of the United States of America.
The Maker warrants and represents to the Lender that (a) it is a
corporation duly incorporated and in good standing under the laws of its state
of incorporation and duly qualified to do business in each jurisdiction where
such qualification is necessary, (b) the execution and delivery of this Note and
the performance by the Maker of its obligations hereunder are within the Maker's
corporate powers and have been duly authorized by all necessary corporate action
on the Maker's part, and (c) this Note is the Maker's legal valid and binding
obligation enforceable in accordance with its terms the making and performance
of which do not and will not contravene or conflict with the Maker's articles of
incorporation or by-laws or violate or constitute a default under any law any
presently existing requirement or restriction imposed by judicial, arbitrage or
other governmental instrumentality or any agreement instrument or indenture by
which the Maker is bound.
No failure or delay on the part of the holder of this Note in exercising
any power or right under this Note shall operate as a waiver thereof nor shall
any single or partial exercise of any such power or right preclude any other or
further exercise thereof of the exercise of any other power or right. No notice
to or demand on the Maker in any case shall entitle the Maker to any notice or
demand in similar or other circumstances.
The Maker agrees to pay all expenses (including without limitation
reasonable attorneys fees and disbursements) incurred by Lender in connection
with such holder's enforcement of the obligations of the Maker thereunder.
Presentment and demand for payment notice of dishonor, protest and
notice of protest are hereby waived except for written demand for payment as set
forth above. In the event of default as set forth above, the Maker agrees to
pay costs of collection and reasonable attorneys fees.
This Note shall be governed by and construed in accordance with the
internal laws of the State of Minnesota (without giving effect to the conflicts
of laws principles thereof).
FieldWorks INC.
----------------------------
By
-----------------------------------
Its
---------------------------------
<PAGE>
================================================================================
EXHIBIT 10.7
FIELDWORKS, INCORPORATED
___________________
PURCHASE AGREEMENT
FOR
SERIES A CONVERTIBLE PREFERRED STOCK
___________________
DATED AS OF
JULY 29, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Authorization of the Shares......................................... 1
2. Sale of Shares...................................................... 1
3. Closing Date; Delivery.............................................. 1
3.1 Closing Date................................................... 1
3.2 Delivery....................................................... 1
4. Definitions......................................................... 1
5. Representations and Warranties by the Company....................... 4
5.1 Organization and Standing...................................... 4
5.2 Articles....................................................... 4
5.3 Financial Statements........................................... 4
5.4 Tax Returns.................................................... 5
5.5 Compliance With Other Instruments.............................. 5
5.6 Shares, Conversion Stock and Warrant Stock..................... 5
5.7 Securities Laws................................................ 5
5.8 Capital Stock.................................................. 6
5.9 Corporate Acts and Proceedings................................. 6
5.10 No Brokers or Finders.......................................... 6
5.11 Intellectual Property.......................................... 6
6. Representations and Warranties of the Purchaser; Restrictions on
Transfer............................................................ 7
6.1 Representations and Warranties of the Purchaser................ 7
6.2 Restrictions on Transfer....................................... 8
7. Closing Conditions.................................................. 9
7.1 Conditions to Purchaser's Obligation........................... 9
7.2 Conditions to Company's Obligation............................. 9
8. Registration of Stock............................................... 9
9. Covenants of the Company............................................ 9
9.1 Corporate Existence............................................ 10
9.2 Books of Account and Reserves.................................. 10
9.3 Inspection and Attendance...................................... 10
9.4 Replacement of Stock Certificates.............................. 10
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
10. Miscellaneous................................................. 11
10.1 Waivers and Amendments.................................. 11
10.2 Notices................................................. 11
10.3 Survival of Representations and Warranties.............. 11
10.4 Parties in Interest..................................... 12
10.5 Headings................................................ 12
10.6 Choice of Law........................................... 12
10.7 Counterparts............................................ 12
10.8 Termination............................................. 12
</TABLE>
Exhibit A - Resolution Establishing the Series A Convertible Preferred Stock
Exhibit B - Disclosure Schedule
Exhibit C - Registration Rights Provisions
Exhibit D - Warrant
-ii-
<PAGE>
AGREEMENT made as of _______, 1996, between Fieldworks, Incorporated,
a Minnesota corporation (the "Company"), and Network General Corporation, a
Delaware corporation (the "Purchaser").
WHEREAS, the Company wishes to sell and the Purchaser desires to
purchase the Company's Series A Convertible Preferred Stock, par value $.001 per
share;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Authorization of the Shares. The Company has authorized, or before
---------------------------
the "Closing" (as hereinafter defined) will have authorized, the issuance and
sale of up to 300,000 shares of its Series A Convertible Preferred Stock, par
value $.001 per share (the "Series A Shares"), for an aggregate purchase price
of $3,000,000 (the "Purchase Price"). The Series A Shares have, or before the
Closing will have, the rights and preferences set forth in Exhibit A.
2. Sale of Shares. Subject to the terms and conditions of this
--------------
Agreement, the Company agrees to sell to the Purchaser, and the Purchaser agrees
to purchase from the Company, 300,000 shares of Series A Shares at a purchase
price equal to $10.00 per Series A Share. The Series A Shares to be sold to the
Purchaser pursuant to this Agreement are hereinafter referred to as the
"Shares." At the Closing, the Company shall also issue to Purchaser a warrant
in the form attached hereto as Exhibit D (the "Warrant").
3. Closing Date; Delivery.
----------------------
3.1 Closing Date. The closing (the "Closing") of the purchase and
------------
sale of the Shares hereunder will be held at the offices of Dorsey & Whitney
LLP, 220 South Sixth Street, Minneapolis, Minnesota 55402, at 10:00 a.m., on
July 29, 1996, or at such other time and place as the Company and the Purchaser
may agree (the "Closing Date").
3.2 Delivery. At the Closing, the Company will deliver to the
--------
Purchaser a certificate dated the Closing Date registered in the Purchaser's
name representing the Shares purchased by the Purchaser, together with the
Warrant. At the Closing, the Purchaser will pay to the Company the Purchase
Price by wire transfer or other manner of immediately available funds.
4. Definitions. Unless the context otherwise requires, the terms defined
-----------
in this Section 4 shall have the meanings herein specified for all purposes of
this Agreement. Certain other capitalized terms used herein are defined
elsewhere in this Agreement.
<PAGE>
"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934, as amended.
"Agreement" means this Agreement.
"Articles" means the Company's Restated Articles of Incorporation
together with the Resolution Establishing the Rights and Preferences of the
Series A Convertible Preferred Stock of the Company to be filed with the
Minnesota Secretary of State prior to the Closing.
"Closing" is defined in Section 3.1.
"Closing Date" is defined in Section 3.1.
"Code" means the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations thereunder.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the shares of Common Stock, $.001 par value,
authorized by the Articles, any additional shares of Common Stock which may be
authorized in the future by the Company and any stock into which such Common
Stock may hereafter be changed. "Common Stock" shall also include capital stock
of any other class of the Company that is not preferred as to dividends or
assets over any other class of stock of the Company or subject to redemption.
"Conversion Stock" shall mean the shares of Common Stock issuable upon
the conversion of outstanding Preferred Shares.
"Convertible Securities" shall mean options, warrants or similar
rights and indebtedness, shares of stock or other securities that are at any
time directly or indirectly convertible into or exercisable or exchangeable for
shares of the capital stock of the Company.
"Disclosure Schedule" is defined in Section 5.
"Lien" means any mortgage, deed of trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever and any assignment, deposit arrangement or lease intended as, or
having the effect of, security for any outstanding Indebtedness.
"Material Adverse Effect" shall mean a material adverse effect upon
the business, operations or condition (financial or otherwise) of the Company
and any Subsidiaries, taken as a whole.
-2-
<PAGE>
"MBCA" means Chapter 302A of the Minnesota Business Corporation Act,
as the same may be amended from time to time.
"Person" means any natural person, corporation, limited liability
company, association, partnership (general or limited), joint venture,
proprietorship, governmental agency, trust, estate, association, custodian,
nominee or any other individual or entity, whether acting in an individual,
fiduciary, representative or other capacity.
"Permitted Stock Issuances" means (i) sales or issuances of shares of
capital stock of a Subsidiary to the Company or another Subsidiary, (ii)
issuances of shares of capital stock upon the conversion of the Preferred
Shares, (iii) sales of shares of Common Stock to the public pursuant to a
registration statement filed under the Securities Act, (iv) the issuance of any
shares of Common Stock or any Convertible Securities, and the exercise or
vesting thereof, under the Stock Option Plan, as the same now exists or may
hereafter be amended in accordance with the terms of this Agreement, (v)
issuances of shares of capital stock of the Company pursuant to any Convertible
Securities outstanding on the Closing Date or thereafter issued in compliance
with or as contemplated by the terms of this Agreement, (vi) the issuance of
warrants to purchase shares of capital stock, and the issuance of such shares of
capital stock upon the exercise thereof, to Persons leasing equipment or
financing or guaranteeing equipment leases by the Company or (vii) the sale of
Shares at the Closing contemplated by this Agreement.
"Preferred Shares" means the Series A Shares.
"Warrant Stock" means the Common Stock issuable upon exercise of the
Warrant.
"Warrant" is defined in Section 2.
"Resolution means the Resolution Establishing the Rights and
Preferences of the Series A Convertible Preferred Stock of the Company to be
filed with the Minnesota Secretary of State prior to the Closing. The
Resolution shall be substantially in the form attached hereto as Exhibit A.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Series A Shares" is defined in Section 1.
"Shares" is defined in Section 2.
-3-
<PAGE>
"Shareholders" means the holders from time to time of the Company's
outstanding Preferred Shares.
"Stock Option Plan" means the Company's 1994 Long-Term Incentive and
Stock Option Plan.
"Subsidiary" means any corporation, association or other business
entity more than a majority (by number of votes) of the voting stock of which is
owned or controlled, directly or indirectly, by the Company or one or more of
its Subsidiaries or both.
5. Representations and Warranties by the Company. Except as disclosed in
---------------------------------------------
the Disclosure Schedule attached hereto as Exhibit B (the "Disclosure
Schedule"), the Company represents and warrants to the Purchaser that:
5.1 Organization and Standing. The Company is a corporation duly
-------------------------
organized, validly existing and in good standing under the laws of the State of
Minnesota and has the requisite corporate power and authority to own its
properties and to carry on its business as now being conducted and presently
proposed to be conducted. Other than as listed on the Disclosure Schedule, the
Company has no Subsidiaries or direct or indirect equity interest in any other
Person. The Company is duly qualified to do business as a foreign corporation
in all jurisdictions in which the failure to do so could reasonably be expected
to result in a Material Adverse Effect.
5.2 Articles. On the Closing Date, the Articles of Incorporation of
--------
the Company shall be substantially in the form of Exhibit A attached hereto.
5.3 Financial Statements. The Company's financial statements are
--------------------
based upon the information contained in the books and records of the Company and
fairly present the financial condition of the Company as of the dates thereof
and results of operations for the periods referred to therein. The unaudited
financial statements have been prepared in accordance with generally accepted
accounting principles and reflect all adjustments necessary to a fair statement
of the results for the interim period presented. Except as set forth in the
financial statements, the Company has no material debts or liabilities,
absolute, accrued, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business since the last balance sheet date, and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in the financial statements, which, in the case of both (i) and (ii),
individually or in the aggregate, are not material to the financial condition or
business of the Company.
-4-
<PAGE>
5.4 Tax Returns. The Company is not delinquent in the payment of any
-----------
material federal, state or local tax or in the payment of any assessment or
governmental charge. The Company does not have any tax deficiency proposed or
assessed against it and has not executed any waiver of any statute of
limitations on the assessment or collection of any tax. To the Company's
knowledge, the Company has not incurred any material tax or worker's
compensation liabilities from its inception through the date hereof, except
those incurred in the ordinary course of business. The Company has filed all
required state and federal tax returns on a timely basis.
5.5 Compliance With Other Instruments. To the knowledge of the
---------------------------------
Company, the business and operations of the Company have been and are being
conducted in material compliance with all applicable laws, rules and regulations
of all governmental authorities. Neither the execution or delivery of, the
performance or compliance with, this Agreement nor the consummation of the
transactions contemplated hereby will, with or without the giving of notice or
passage of time, (i) result in any breach of, or constitute a default under, or
result in the imposition of any Lien upon any asset or property of the Company
pursuant to, any agreement or other instrument to which the Company is a party
or by which it or any of its properties is bound or affected or (ii) violate its
Articles of Incorporation or its by-laws. The Company is not in violation of its
existing Articles of Incorporation, Bylaws or any lease, agreement, instrument,
commitment or arrangement to which it is a party or by which it or its
properties or assets may be bound, except for such violations as have not
resulted or could not reasonably be expected to result in a Material Adverse
Effect.
5.6 Shares, Conversion Stock and Warrant Stock. The Shares, when
------------------------------------------
issued and paid for pursuant to the terms of this Agreement, will be duly and
validly authorized, issued and outstanding, fully paid, nonassessable and free
and clear of all pledges, liens, encumbrances and restrictions, except as set
forth in Section 6.2 hereof. The shares of Conversion Stock issuable upon
conversion of the Shares and shares of Warrant Stock issuable upon exercise of
the Warrant have been or will be reserved for issuance and, when issued upon
such conversion or exercise, will be duly and validly authorized, issued and
outstanding, fully paid, nonassessable and free and clear of all Liens and
restrictions, except as set forth in Section 6.2 hereof.
5.7 Securities Laws. Based upon the representations and warranties
---------------
of the Purchaser contained in Section 6.1 of this Agreement, no consent,
authorization, approval, permit or order of or filing with any governmental or
regulatory authority is required under current laws and regulations in
connection with the execution and delivery of this Agreement or the offer,
issuance, sale or delivery of the Shares, the Conversion Stock or the Warrant
Stock, other than filings pursuant to Regulation D promulgated under the
Securities Act and
-5-
<PAGE>
qualifications and filings under certain applicable state securities laws, which
qualifications and filings have been or will be effected as a condition of such
sales or conversions. The Company has not, directly or through an agent, offered
the Shares or any similar securities for sale to, or solicited any offers to
acquire such securities from, Persons other than the Purchaser. Under the
circumstances contemplated hereby, the offer, issuance, sale and delivery of the
Shares will not under current laws and regulations require compliance with the
prospectus delivery or registration requirements of the Securities Act.
5.8 Capital Stock. Immediately prior to the Closing, the authorized
-------------
capital stock of the Company will consist of 15,000,000 shares, 5,880,736 of
which will be designated as Common Stock, and 8,819,264 of which will be
undesignated. Immediately prior to the Closing, 5,880,736 shares of Common Stock
will be outstanding, 220,745 shares of Common Stock will be reserved for
issuance upon the exercise of outstanding warrants and 1,100,000 shares of
Common Stock will be reserved for issuance pursuant to the Stock Option Plan.
No holder of any security of the Company is entitled to any preemptive or
similar rights to purchase any securities of the Company.
5.9 Corporate Acts and Proceedings. The execution and delivery of
------------------------------
this Agreement has been duly authorized by all requisite corporate action on
behalf of the Company and this Agreement has been duly executed and delivered by
an authorized officer of the Company. This Agreement is a valid and binding
obligation of the Company enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and as to limitations on the enforcement of the remedy of
specific performance and other equitable remedies. The requisite corporate
action necessary to the authorization, creation, issuance and delivery of the
Shares, the Conversion Stock, the Warrant and the Warrant Stock has been or will
be taken by the Company prior to the Closing.
5.10 No Brokers or Finders. No Person has or will have, as a result
---------------------
of any act of or omission of the Company, any right, interest or valid claim
against the Company or the Purchaser for any commission, fee or other
compensation as a finder or broker in connection with the transactions
contemplated by this Agreement. The Company will pay, and will indemnify and
hold the Purchaser harmless against any and all liability with respect to any
such commission, fee or other compensation which may be payable or determined to
be payable in connection with the transactions contemplated by this Agreement by
reason of any acts or omissions of the Company.
5.11 Intellectual Property. To the knowledge of the Company, the
---------------------
Company owns, or is licensed to use, rights to all patents, trade names, service
-6-
<PAGE>
marks, trademarks, mask works, trade secrets and copyrights ("Intellectual
Property") used to carry on or necessary to carry on its business as currently
conducted or proposed to be conducted. To the knowledge of the Company, the
Company is not infringing upon or otherwise acting adversely to any known right
or claimed right of any person under or with respect to any patents, patent
rights, trademarks, service marks, copyrights, trade names, trade secrets or any
other third party rights. The Company had not received any notice that it is
infringing upon any claimed right of any person under or with respect to any
patents, trademarks, service marks, trade names, copyrights, licenses or other
similar rights with respect to the foregoing.
6. Representations and Warranties of the Purchaser; Restrictions on
----------------------------------------------------------------
Transfer.
- --------
6.1 Representations and Warranties of the Purchaser. The Purchaser
-----------------------------------------------
represents and warrants to the Company that:
(a) The Shares, the Warrant, the Conversion Stock and the Warrant
Stock being acquired by the Purchaser hereunder are being purchased for the
Purchaser's own account and not with the view to, or for resale in connection
with, any distribution or public offering thereof within the meaning of the
Securities Act. The Purchaser understands that such securities have not been
registered under the Securities Act by reason of their contemplated issuance in
transactions exempt from the registration and prospectus delivery requirements
of the Securities Act pursuant to Section 4(2) thereof, and that the reliance of
the Company and others upon this exemption from such registration is predicated
in part upon the representations and warranties of the Purchaser contained
herein. The Purchaser further understands that an exemption from the
registration requirements of the Securities Act with respect to resale of the
securities is not presently available pursuant to Rule 144 promulgated under the
Securities Act by the Commission and that, in any event, the Purchaser may not
sell any Shares pursuant to Rule 144 prior to the expiration of a two-year
period after the Purchaser has acquired the Shares.
(b) The principal office of the Purchaser is located at the address
set forth in Section 10.2. The Purchaser is an "accredited investor" as that
term is defined in Regulation D promulgated under the Securities Act and has
such knowledge and experience in financial and business matters that the
Purchaser is capable of evaluating the merits and risks of the investment to be
made hereunder by the Purchaser. The Company has made available to the
Purchaser at a reasonable time prior to execution of this Agreement the
opportunity to ask questions and receive answers concerning the terms and
conditions of the sale of the securities contemplated by this Agreement and to
obtain any additional information regarding the Company desired by the
Purchaser. The Purchaser has utilized such access and opportunity to the extent
believed by the Purchaser to be necessary.
-7-
<PAGE>
(c) The Purchaser is able to bear the full economic risk of an
investment in the securities. Despite its high risk and lack of liquidity, an
investment in the securities is suitable for the Purchaser based on the
Purchaser's investment objectives and financial needs and the fact that the
Purchaser has adequate means to provide for the Purchaser's current financial
needs and contingencies and has no need for liquidity of investment with respect
to the Shares.
(d) The execution and delivery of this Agreement by the Purchaser has
been duly authorized by all requisite corporate action of the Purchaser and this
Agreement has been duly executed and delivered by the Purchaser. This Agreement
is a valid and binding obligation of the Purchaser enforceable in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and as to limitations on the
enforcement of the remedy of specific performance and other equitable remedies.
(e) No Person has or will have, as a result of any act of or omission
by the Purchaser, any right, interest or claim against the Company for any
commission, fee or other compensation as a finder or broker, or in any similar
capacity, in connection with the transactions contemplated by this Agreement.
The Purchaser will indemnify and hold the Company harmless against any and all
liability to any Person with respect to any such commission, fee or other
compensation which may be payable or determined to be payable in connection with
the transactions between the Purchaser and the Company contemplated by this
Agreement by reason of any acts or omissions of the Purchaser.
6.2 Restrictions on Transfer.
------------------------
(a) In addition to any legends required under applicable state
securities laws, each certificate representing the Shares shall be endorsed with
the following legend:
"The securities represented by this certificate may not be
transferred without (i) the opinion of counsel satisfactory to
the issuer thereof that such transfer may lawfully be made
without registration or qualification under the federal
Securities Act of 1933, as amended, and applicable state
securities laws or (ii) such registration or qualification."
Upon the conversion of any of the Shares into Conversion Stock, or the exercise
of the Warrant into Warrant Stock unless the Company receives an opinion of
counsel satisfactory to the Company to the effect that a transfer of the
Conversion
-8-
<PAGE>
Stock or the Warrant Stock may thereafter be made without registration, or
unless such Conversion Stock or the Warrant Stock is being disposed of pursuant
to a registration statement filed under the Securities Act, the same legend
shall be endorsed on the certificate evidencing such Conversion Stock or Warrant
Stock.
(b) Any legend endorsed on a certificate pursuant to Section 6.2(a)
hereof shall be removed, and the Company shall issue a certificate without such
legend to the holder of the securities, if the securities are being disposed of
pursuant to a registration statement filed under the Securities Act or if such
holder provides the Company with an opinion of counsel satisfactory to the
Company to the effect that a transfer of the securities represented by such
certificate may thereafter be made without registration.
7. Closing Conditions.
------------------
7.1 Conditions to Purchaser's Obligation. The Purchaser's
------------------------------------
obligation to purchase and pay for the Shares that the Purchaser has agreed to
purchase on the Closing Date is subject to the fulfillment prior to or on the
Closing Date of the following conditions, any of which may be waived in whole or
in part by the Purchaser:
(a) The representations and warranties of the Company made in Section
5 of this Agreement shall be true in all material respects as of such Closing
Date with the same effect as though made on and as of such Closing Date.
(b) The Resolution in the form attached hereto as Exhibit A shall
have been filed with the Minnesota Secretary of State.
(c) There shall not be threatened, instituted or pending any action
or proceeding before any court or governmental body, challenging or seeking to
invalidate, make illegal, or to delay or otherwise directly or indirectly
restrain or prohibit, the consummation of the transactions contemplated by the
Agreement or seeking to obtain material damages in connection with such
transactions.
7.2 Conditions to Company's Obligation. The obligation of the
----------------------------------
Company to issue and sell the Shares to the Purchaser is subject to the
fulfillment prior to or on the Closing Date of the following conditions, any of
which may be waived in whole or in part by the Company:
(a) All registrations, qualifications, permits and approvals required
under applicable state and federal securities laws for the lawful execution and
delivery of the Agreement and the offer, sale, issuance and delivery of the
Shares shall have been obtained, except for the notices required or permitted to
be filed after the Closing Date with certain federal and state securities
commissions.
-9-
<PAGE>
(b) The Purchaser at the Closing shall have tendered to the Company
the Purchase Price for the Shares to be purchased by it.
8. Registration of Stock. The Company hereby grants to the holder of the
---------------------
Shares the registration rights described in Exhibit C. The holder of the Shares
agrees to be subject to all of the provisions set forth in Exhibit C.
9. Covenants of the Company. The Company covenants and agrees with the
------------------------
Purchaser that:
9.1 Corporate Existence. Except as otherwise determined by the Board
-------------------
of Directors, the Company will maintain its corporate existence in good
standing.
9.2 Books of Account and Reserves. The Company will keep, and will
-----------------------------
cause any Subsidiary to keep, books of record and account in which full, true
and correct entries are made of all of its and their respective dealings,
business and affairs, in accordance with generally accepted accounting
principles. The Company will have annual audits made by such independent public
accountants in the course of which such accountants shall make such
examinations, in accordance with generally accepted auditing standards, as will
enable them to give such reports or opinions with respect to the financial
statements of the Company and its Subsidiaries as will satisfy the requirements
of the Commission in effect at such time with respect to reports or opinions of
accountants. Management will request such independent public accountants to
issue to the Company a management letter of recommendations in connection with
each annual audit of the financial statements of the Company.
9.3 Inspection and Attendance. Subject to the execution of a
-------------------------
reasonable confidentiality agreement, the Company will permit the Purchaser and
any of its officers or employees, to attend meetings of the Company's Board of
Directors as an observer and to visit and inspect at the expense of such
Purchaser, except for any expenses required to be borne by the Company under
Section 302A.461, subd. 5 of the MBCA, any of the properties of the Company or
any Subsidiaries, including their books and records (and, subject to the last
sentence of this Section 9.3, to make photocopies thereof or extracts
therefrom), and to discuss their affairs, finances and accounts with their
officers, except with respect to trade secrets and similar confidential
information, all to such reasonable extent and at such reasonable times and
intervals as Purchaser may reasonably request without disruption of the
Company's operations.
Purchaser agrees that any information delivered to or received by
Purchaser pursuant to this Section 9.3 shall be used by Purchaser solely to
evaluate the Company's financial condition and prospects and that Purchaser
shall maintain
-10-
<PAGE>
the confidential nature of such information and shall not disclose the same to
any Person, except as may be required by law.
9.4 Replacement of Stock Certificates. Upon receipt of evidence
---------------------------------
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any certificate representing any Preferred Shares or Conversion
Stock, and, in the case of any such loss, theft or destruction, upon delivery of
a bond of indemnity satisfactory to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of the certificate representing the
Preferred Shares or Conversion Stock, as the case may be, the Company will issue
a new certificate representing the Preferred Shares or Conversion Stock, as the
case may be, of like tenor, in lieu of such lost, stolen, destroyed or mutilated
certificate.
10. Miscellaneous.
-------------
10.1 Waivers and Amendments. With the written consent of the record
----------------------
holders of more than 50% of Preferred Shares, the obligations of the Company
under this Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively), and with the same consent the
Company may enter into a supplementary agreement for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement, or of any supplemental agreement hereto, or modifying in any
manner the rights and obligations created hereunder or thereunder; provided,
--------
however, that no such waiver or supplemental agreement shall (a) amend the terms
- -------
of the Preferred Shares as set forth in the Articles (any such amendment to the
terms of the Preferred Shares shall require the vote of the holders of the
Preferred Shares required by law or called for by the Articles) or (b) reduce
the aforesaid proportion of the Preferred Shares that is required to consent to
any waiver or supplemental agreement, without the consent of the record holders
of all of the then outstanding Preferred Shares.
10.2 Notices. All notices, requests, consents and other
-------
communications required hereunder shall be in writing and shall be personally
delivered, sent by overnight delivery service, telecopy or mailed, if to the
holders of the Preferred Shares at the addresses shown on the books and records
of the Company, or at such other address as may specify by written notice to the
Company, or, if to the Purchaser at 4200 Bohannon Drive, Menlo Park, CA 94025,
fax: (415) 327-2369, attention: Jill Fishbein, General Counsel, or at such
other address as the Purchaser may specify by written notice to the Company, or,
if to the Company at 9961 Valley View Road, Eden Prairie, MN 55344, fax (612)
947-0859, attention: Chief Executive Officer, with a copy to Kenneth L. Cutler,
Dorsey & Whitney LLP, 220 South Sixth Street, Minneapolis, Minnesota 55402, fax:
(612) 340-8738, or at such other address as the Company may specify by written
notice to the Purchasers, and such notices and other communications shall for
all purposes of the
-11-
<PAGE>
Agreement be treated as being effective or having been given when delivered, or,
if sent by mail or delivery service, three days after mailing, whichever is
earlier.
10.3 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties contained herein shall survive until the earlier of (i) for a
period of one year after the Closing Date and (ii) the conversion of all of the
outstanding Preferred Shares into shares of Conversion Stock.
10.4 Parties in Interest. All the terms and provisions of this
-------------------
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto but shall inure
to the benefit of and be enforceable by the holder or holders from time to time
of any of Preferred Shares only to the extent herein specifically provided.
10.5 Headings. The headings of the sections of this Agreement have
--------
been inserted for convenience of reference only and do not constitute a part of
this Agreement.
10.6 Choice of Law. It is the intention of the parties that the
-------------
internal laws of the State of Minnesota, without regard to its body of law
controlling conflicts of law, shall govern the validity of this Agreement, the
construction of its terms and the interpretation of the rights and duties of the
parties.
10.7 Counterparts. This Agreement may be executed concurrently in two
------------
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
10.8 Termination. Article 9 of this Agreement shall terminate in its
-----------
entirety:
(a) upon the merger of the Company with or into, or its consolidation
with, another Person if, immediately after such merger or consolidation, the
Persons who were Shareholders immediately prior thereto own, in the aggregate,
capital stock of the surviving or resulting corporation representing less than a
majority of the total voting power of such corporation; and
(b) upon the conversion of all of the outstanding Preferred Shares
into shares of Conversion Stock.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized representatives as of
the day and year first above written.
NETWORK GENERAL CORPORATION
By______________________________________
Its___________________________________
FIELDWORKS, INCORPORATED
By______________________________________
Its___________________________________
-13-
<PAGE>
Exhibit C
---------
REGISTRATION RIGHTS PROVISIONS
1. Registration of Stock.
---------------------
1.1 Definitions.
-----------
"Commission" shall mean the Securities and Exchange Commission or
----------
any other federal agency at the time administering the Securities Act.
"Company" shall mean Fieldworks, Incorporated, a Minnesota
-------
corporation.
"Common Shares" shall mean the shares of common stock, par value
-------------
$.001 per share, authorized by the Company's Articles of Incorporation and any
additional shares of Common Stock which may be authorized in the future by the
Company, and any stock into which such Common Shares may hereafter be changed,
and shall also include capital stock of any other class of the Company which is
not preferred as to dividends or assets over any other class of stock of the
Company and which is not subject to redemption.
"Preferred Stock" shall mean the outstanding shares of Series A
---------------
Convertible Preferred Stock, par value $.001 per share, of the Company, and any
securities (other than Common Shares) into which such shares may hereafter be
changed).
"Public Offering" shall mean any offering of Common Shares to the
---------------
public, either on behalf of the Company or any of its security holders, pursuant
to an effective registration statement under the Securities Act.
"Purchasers" shall mean the holders from time to time of the
----------
Preferred Stock.
"Registrable Securities" shall mean (i) the Common Shares at any
----------------------
time issued or subject to issuance upon the conversion of the Preferred Stock
and exercise of the Warrant and (ii) any additional securities issued with
respect to the above described securities upon any stock split, stock dividend,
recapitalization, or similar event. Registrable Securities shall cease to be
Registrable Securities when (x) a registration statement with respect to the
sale of such Securities shall have become effective under the Securities Act and
such Securities shall have been disposed of in accordance with such registration
statement, (y) they shall be eligible to be distributed pursuant to Rule 144
promulgated under the Securities Act in a
<PAGE>
single three-month period by the holder thereof or (w) they shall have ceased to
be outstanding.
"Registration Expenses" shall mean the expenses described in
---------------------
Section 1.6.
"Securities Act" shall mean the Securities Act of 1933, as
--------------
amended.
"Warrant" shall mean the warrant issued to Network General
-------
Corporation, pursuant to that certain Stock Purchase Agreement with the Company,
dated _____________________________________ , 1996 (the "Stock Purchase
Agreement") to purchase shares of the Company's Common Stock.
1.2 Demand Registration. (a) Subject to Section 1.2(d) and Section
-------------------
1.2(e), if twelve months have elapsed from the date of the Stock Purchase
Agreement and the Company has yet to consummate a Public Offering on Form S-1 or
Form SB-2, and if the Company shall have received a written request therefor
from the record holder or holders of an aggregate of at least 51% of the
Registrable Securities issued or issuable to the holders of Preferred Stock, the
Company shall prepare and file a registration statement under the Securities Act
covering such number of Registrable Securities as are the subject of such
request and shall use its best efforts to cause such registration statement to
become effective; provided, however, that the registration requested pursuant to
this Section 1.2 can only be requested if the Company has not consummated a
Public Offering prior to the requested registration. Upon the receipt of a
registration request meeting the requirements of this Section 1.2, the Company
shall promptly give written notice to all other record holders of Registrable
Securities that such registration is to be effected. The Company shall include
in such registration statement such additional Registrable Securities as such
other record holders request within thirty (30) days after the date of the
Company's written notice to them. If (i) the holders of a majority of the
Registrable Securities for which registration has been requested pursuant to
this Section 1.2 determine for any reason not to proceed with the registration
at any time before the related registration statement has been declared
effective by the Commission, (ii) such registration statement, if theretofore
filed with the Commission, is withdrawn and (iii) the holders of the Registrable
Securities subject to such registration statement agree to bear their own
Registration Expenses incurred in connection therewith and to reimburse the
Company for the Registration Expenses incurred by it in such connection or if
such registration statement, if theretofore filed with the Commission, is
withdrawn at the initiative of the Company, then the holders of the Registrable
Securities shall not be deemed to have exercised their demand registration right
pursuant to this Section 1.2.
2
<PAGE>
(b) The method of disposition of all Registrable Securities included
in such registration shall be an underwritten offering. The managing
underwriter of any such offering shall be selected by the Company. If in the
good faith judgment of the managing underwriter of the Public Offering, the
inclusion of all of the Registrable Securities the registration of which has
been requested would interfere with their successful marketing, the number of
Registrable Securities to be included in the offering shall be reduced, pro
---
rata, among the requesting holders thereof in proportion to the number of
- ----
Registrable Securities included in their respective requests for registration.
Registrable Securities that are so excluded from the underwritten Public
Offering shall be withheld by the holders thereof for such period, not exceeding
one hundred and twenty (120) days, that the managing underwriter reasonably
determines is necessary to effect the Offering. The Company shall have the right
to include any securities in a registration statement to be filed as part of a
demand registration pursuant to this Section 1.2.
(c) The Company shall be obligated to prepare, file and cause to be
effective only one (1) registration statement pursuant to this Section 1.2.
(d) Notwithstanding the foregoing, the Company may delay initiating
the preparation and filing of any registration statement requested pursuant to
this Section 1.2 for a period not to exceed one hundred eighty (180) days if in
the good faith judgment of the Company's Board of Directors effecting the
registration would adversely affect a proposed Public Offering by the Company or
would require the premature disclosure of any financing, acquisition,
disposition of assets or stock, merger or other comparable transaction or would
require the Company to make public disclosure of information the public
disclosure of which would have material adverse effect on the Company.
(e) Notwithstanding anything to the contrary contained herein, and
without limitation as to the rights of the Company to include in a demand
registration securities for sale for its own account as provided in Section
1.2(a), at any time within thirty (30) days after receiving a demand for
registration, the Company may elect to effect an underwritten primary
registration in lieu of the requested registration. If the Company so elects,
the Company shall give prompt written notice to all holders of Registrable
Securities of its intention to effect such a registration and shall afford such
holders the rights contained in Section 1.3 with respect to "piggyback"
registrations. In such event, the demand for registration shall be deemed to
have been withdrawn.
1.3 (a) Piggyback Registration. If twelve months have elapsed from the
----------------------
date of the Stock Purchase Agreement and the Company has yet to consummate a
Public Offering, then each time the Company shall determine to proceed with the
actual preparation and filing of a registration statement under the Securities
Act in connection with the proposed offer and sale for money of any of its
3
<PAGE>
securities by it or any of its security holders (other than a registration
statement on Form S-8, Form S-4 or other limited purpose form), the Company will
give written notice of its determination to all record holders of Registrable
Securities. Upon the written request of a record holder of any shares of
Registrable Securities given within 30 days after the date of any such notice
from the Company, the Company will, except as herein provided, cause all the
Registrable Securities the registration of which is requested to be included in
such registration statement, all to the extent requisite to permit the sale or
other disposition by the prospective seller or sellers of the Registrable
Securities to be so registered; provided, however, that nothing herein shall
-------- -------
prevent the Company from, at any time, abandoning or delaying any registration;
and provided, further, that if the Company determines not to proceed with a
-------- -------
registration after the registration statement has been filed with the Commission
and the Company's decision not to proceed is primarily based upon the
anticipated public offering price of the securities to be sold by the Company,
the Company shall promptly complete the registration for the benefit of those
selling security holders who wish to proceed with a Public Offering of their
Registrable Securities and who bear all of the Registration Expenses in excess
of $25,000 incurred by the Company as the result of such registration after the
Company has decided not to proceed. In the discretion of the holders of the
Registrable Securities to be included in the registration (provided that
--------
such holders are the record holders of at least 51% of the Registrable
Securities), such registration may count as a demand registration under Section
1.2 (if it otherwise meets the requirements of Section 1.2(a)) for which the
Company will pay the Registration Expenses.
(b) If any registration pursuant to this Section 1.3 is underwritten
in whole or in part, the Company may require that the Registrable Securities
included in the registration be included in the underwriting on the same terms
and conditions as the securities otherwise being sold through the underwriters.
If, in the good faith judgment of the managing underwriter of the Public
Offering, the inclusion of all of the Registrable Securities originally covered
by requests for registration would reduce the number of shares to be offered by
the Company or interfere with the successful marketing of the shares offered by
the Company, the number of Registrable Securities to be included in the Offering
may be reduced in the following manner: first, securities held by officers and
-----
directors of the Company (other than Registrable Securities) shall be excluded
from such underwritten public offering to the extent required by the managing
underwriter, second, any securities, other than Registrable Securities, proposed
------
to be sold in the Offering by persons other than the Company shall be excluded
and third, if a further reduction in the Offering is required, the Registrable
-----
Securities requested to be included in the Offering shall be reduced, pro rata,
--- ----
among the requesting holders thereof in proportion to the number of Registrable
Securities included in their respective requests for registration. The
Registrable Securities which are thus excluded from the underwritten Public
Offering shall be withheld from the market
4
<PAGE>
by the holders thereof for a period which the managing underwriter reasonably
determines is necessary in order to effect the Public Offering.
1.4 Short Form Registration. In addition to the registration rights
-----------------------
provided in Sections 1.2 and 1.3, if the Company qualifies for the use of Form
S-3 (or any similar registration form), the Company shall at the request of
holders of Registrable Securities from time to time register Registrable
Securities on behalf of such holder or holders on such form; provided, however,
-------- -------
that the Company shall not be required to accommodate any request to register
less than 100,000 Registrable Securities nor to accommodate more than two of
such registrations in any calendar year. The Company shall give notice of any
proposed Form S-3 registration to the record holders of Registrable Securities
who did not join in the request therefor and afford them a reasonable
opportunity to do so.
1.5 Registration Procedures. If and whenever the Company is required
-----------------------
by the provisions of Sections 1.2 and 1.3 or 1.4 to effect the registration of
shares of Registrable Securities under the Securities Act, the Company will use
its best efforts to effect the registration and sale of such Registrable
Securities in accordance with the intended methods of disposition specified by
the holders participating therein. Without limiting the foregoing, the Company
in each such case will, as expeditiously as possible,:
(a) prepare and file with the Commission (in the case of a demand
registration pursuant to Section 1.2 or Section 1.4) the requisite
registration statement to effect such registration (including such audited
financial statements as may be required by the Securities Act or the rules
and regulations promulgated thereunder) and use its best efforts to cause
such registration statement to become effective; provided, however, that as
-------- -------
far in advance as practical before filing such registration statement or
any amendment thereto, the Company will furnish to counsel for the
requesting holders copies of reasonably complete drafts of all such
documents proposed to be filed (including exhibits), and any such holder
shall have the opportunity to object to any information pertaining solely
to such holder that is contained therein and the Company will make the
corrections reasonably requested by such holder with respect to such
information prior to filing any such registration statement or amendment;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and any prospectus used in
connection therewith as may be necessary to maintain the effectiveness of
such registration statement and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities included in such registration statement, in accordance with the
intended methods of disposition thereof, until the earlier of (i) such time
as all of such
5
<PAGE>
securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth
in such registration statement and (ii) one hundred eighty (180) days after
such registration statement becomes effective;
(c) promptly notify each requesting holder and the underwriter or
underwriters, if any:
(i) when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has been
filed and, with respect to such registration statement or any post-
effective amendment thereto, when the same has become effective;
(ii) of any written request by the Commission for amendments or
supplements to such registration statement or prospectus;
(iii) of the notification to the Company by the Commission of its
initiation of any proceeding with respect to the issuance by the
Commission of, or of the issuance by the Commission of, any stop order
suspending the effectiveness of such registration statement; and
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable
Securities for sale under the applicable securities or blue sky laws
of any jurisdiction;
(d) furnish to each seller of Registrable Securities included in such
registration statement such number of conformed copies of such registration
statement and of each amendment and supplement thereto such number of
copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any
other prospectus filed under Rule 424 promulgated under the Securities Act
relating to such seller's Registrable Securities, and such other documents,
as such seller may reasonably request to facilitate the disposition of its
Registrable Securities;
(e) use its best efforts to register or qualify all Registrable
Securities included in such registration statement under such other
securities or blue sky laws of such jurisdictions as each holder of
Registrable Securities thereof shall reasonably request within twenty (20)
days following the original filing of such registration statement and to
keep such registration or qualification in effect for so long as such
registration statement remains in effect, and take any
6
<PAGE>
other action which may be reasonably necessary or advisable to enable such
holder to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such holder, except that the Company shall
not for any such purpose be required (i) to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not
but for the requirements of this paragraph (e) be obligated to be so
qualified, (ii) to consent to general service of process in any such
jurisdiction or (iii) to subject itself to taxation in any such
jurisdiction by reason of such registration or qualification;
(f) use its best efforts to cause all Registrable Securities included
in such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
each holder thereof to consummate the disposition of such Registrable
Securities;
(g) If and to the extent any of the following are obtained by or
furnished to the Company or the underwriters, furnish to any holder who so
requests a signed counterpart, addressed to such holder (and the
underwriters, if any), of
(i) an opinion of counsel for the Company, dated the effective
date of such registration statement (or, if such registration includes
an underwritten Public Offering, dated the date of any closing under
the underwriting agreement), and
(ii) a "cold comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten Public Offering, dated the date of any closing under the
underwriting agreement), signed by the independent public accountants
who have certified the Company's financial statements included in such
registration statement;
provided, however, that the obligation to furnish a "cold comfort" letter
-------- -------
shall only be imposed to the extent permitted under any then-prevailing
rules of accounting procedure;
(h) notify each holder whose Registrable Securities are included in
such registration statement, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the happening of
any event as a result of which any prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and at the request of any such
holder promptly prepare and furnish to such holder a reasonable number of
copies
7
<PAGE>
of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include 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 the light of the
circumstances under which they were made, not misleading;
(i) otherwise use its best efforts to comply with applicable rules
and regulations of the Commission;
(j) provide a transfer agent and registrar for all Registrable
Securities included in such registration statement not later than the
effective date of such registration statement; and
(k) use its best efforts to cause all Registrable Securities included
in such registration statement to be listed, upon official notice of
issuance, on any securities exchange or quotation system on which any of
the securities of the same class as the Registrable Securities are then
listed.
(l) The Company may require each holder whose Registrable securities
are being registered to, and each such holder, as a condition to including
Registrable Securities in such registration, shall, furnish the Company and
the underwriters with such information and affidavits regarding such holder
and the distribution of such securities as the Company and the underwriters
may from time to time reasonably request in writing in connection with such
registration. At any time during the effectiveness of any registration
statement covering Registrable Securities offered by a holder, if such
holder becomes aware of any change materially affecting the accuracy of the
information contained in such registration statement or the prospectus (as
then amended or supplemented) relating to such holder, it will immediately
notify the Company of such change.
(m) Upon receipt of any notice from the Company of the happening of
any event of the kind described in paragraph (h) of this Section 1.5, each
holder will forthwith discontinue such holder's disposition of Registrable
Securities pursuant to the registration statement relating to such
Registrable Securities until such holder receives the copies of the
supplemented or amended prospectus contemplated by paragraph (h) of this
Section 1.5 and, if so directed by the Company, shall deliver to the
Company all copies, other than permanent file copies, then in such holder's
possession of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice.
8
<PAGE>
1.6 Expenses. With respect to any registration requested pursuant to
--------
Section 1.2 (except as otherwise provided in such Section with respect to a
registration voluntarily terminated at the request of the requesting holders of
Registrable Securities), Section 1.3 (except as otherwise provided in such
Section with respect to a registration continued by selling security holders who
wish to proceed with a Public Offering that is withdrawn by the Company) or
Section 1.4, the Company shall bear all of the expenses ("Registration
Expenses") incident to the Company's performance of or compliance with its
obligations under this Agreement in connection with such registration including,
without limitation, all registration, filing, securities exchange listing and
NASD fees, all registration, filing, qualification and other fees and expenses
or complying with securities or blue sky laws, all word processing, duplicating
and printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and compliance, premiums and
other costs of any policies of insurance against liabilities arising out of the
Public Offering of the Registrable Securities being registered obtained by the
Company (it being understood that the Company shall have no obligation to obtain
such insurance) and any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any, in respect of Registrable Securities,
which discounts, commissions and taxes in respect of Registrable Securities, and
excluding any fees and disbursements of counsel and accountants to the holders
of the Registrable Securities, which shall in any registration be payable by the
holders of the Registrable Securities being registered, pro rata in proportion
--- ----
to the number of Registrable Securities being sold by them.
1.7 Indemnification.
---------------
(a) The Company will, to the full extent permitted by law,
indemnify and hold harmless each holder of Registrable Securities which are
included in a registration statement pursuant to the provisions of this
Section 1 and its directors, officers and partners and each other person,
if any, who controls such holder within the meaning of the Securities Act
from and against any and all losses, claims, damages, expenses or
liabilities, joint or several (collectively, "Losses") to which such holder
or any such director, officer, partner or controlling person may become
subject under the Securities Act or otherwise, insofar as such Losses (or
actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in a registration statement
prepared and filed hereunder, any preliminary, final or summary prospectus
contained therein or any amendment or supplement thereto or any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make
9
<PAGE>
the statements therein (in the case of a prospectus, in light of the
circumstances in which they were made) not misleading and the Company will
reimburse the holder and each such director, officer, partner and
controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending against any such Losses
(or action or proceeding in respect thereof); provided, however, that the
-------- -------
Company will not be liable in any such case to the extent that any such
Losses arise out of or are based upon (i) an untrue statement or alleged
untrue statement or omission or alleged omission made in conformity with
written information furnished by such holder specifically for use in the
preparation of the registration statement or (ii) such holder's failure to
send or give a copy of the final prospectus to the persons asserting an
untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such person if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such holder or any
such director, officer, partner or controlling person of such holder and
shall survive the transfer of such securities by such holder. The Company
shall also indemnify each other person who participates (including as an
underwriter) in the offering or sale of Registrable Securities, their
officers and directors, and partners, and each other person, if any, who
controls any such participating person within the meaning of the Securities
Act to the same extent as provided above with respect to holders of
Registrable Securities.
(b) Each holder of shares of Registrable Securities which are
included in a registration pursuant to the provisions of this Section 1
will, to the full extent permitted by law, indemnify and hold harmless the
Company, its officers, directors and each other person, if any, who
controls the Company within the meaning of the Securities Act from and
against any and all Losses to which the Company or any such officer,
director or controlling person may become subject under the Securities Act
or otherwise, insofar as such Losses (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon
any untrue or alleged untrue statement of any material fact contained in a
registration statement prepared and filed hereunder, any preliminary, final
or summary prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of a prospectus, in
the light of the circumstances under which they were made) not misleading,
in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was
so made in reliance upon and in strict conformity with written information
furnished by such holder specifically for use in the preparation
10
<PAGE>
of such registration statement. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person of the Company.
The holder of Registrable Securities included in a registration statement
shall also indemnify each other person who participates (including as an
underwriter) in the offering or sale of Registrable Securities, their
officers and directors, and partners, and each other person, if any, who
controls any such participating person within the meaning of the Securities
Act to the same extent as provided above with respect to the Company. In no
event shall the liability of any holder under this Section 1.7(b) exceed
the net proceeds received by such holder from the sale of their Registrable
Securities.
(c) Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (a) or (b) of this Section 1.7 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim thereof is to
be made against the indemnifying party pursuant to the provisions of
paragraph (a) or (b), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the indemnifying party
will not relieve the indemnifying party from any liability which it may
have to any indemnified party except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any
such action is brought against any indemnified party, the indemnifying
party shall have the right to participate in, and, to the extent that it
may wish, jointly with any other indemnifying party, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that if the defendants in any action include both the
-------- -------
indemnified party and the indemnifying party and the indemnified party
reasonably concludes that there is a conflict of interest that would
prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party shall have the right to select
separate counsel to participate in the defense of such action on behalf of
the indemnified party or parties. After notice from the indemnifying party
to such indemnified party of its election so to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party
pursuant to the provisions of said paragraph (a) or (b) for any legal or
other expense subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have
employed counsel in accordance with the proviso of the preceding sentence,
(ii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after the notice of the commencement of the action
or (iii) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying party. If the
indemnifying party is not entitled to, or elects not to, assume the defense
11
<PAGE>
of a claim, it will not be obligated to pay the fees and expenses of more
than one counsel for the indemnified parties with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other indemnified
parties with respect to such claim, in which event the indemnifying party
shall be obligated to pay the fees and expenses of additional counsel or
counsels for the indemnified parties. No indemnifying party shall consent
to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in
respect to such claim or litigation without the consent of the indemnified
party. No indemnifying party shall be subject to any liability for any
settlement made without its consent. An indemnified party may at any time
elect to participate in the defense of any claim or proceeding at its own
expense.
1.8 Covenants Relating to Rule 144. If at any time the Company is
------------------------------
required to filed reports in compliance with either Section 13 or Section 15(d)
of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") the
Company will (a) file reports in compliance with the Exchange Act and (b) comply
with all rules and regulations of the Commission applicable to the use of Rule
144.
1.9 Underwritten Offerings. If a distribution of Registrable
----------------------
Securities pursuant to a registration statement is to be underwritten, the
holders whose Registrable Securities are to be distributed by such underwriters
shall be parties to such underwriting agreement. No requesting holder may
participate in such underwritten offering unless such holder agrees to sell its
Registrable Securities on the basis provided in such underwriting agreement and
completes and executes all questionnaires, powers of attorney, indemnities and
other documents reasonably required under the terms of such underwriting
agreement. If any requesting holder disapproves of the terms of an
underwriting, such holder may elect to withdraw therefrom and from such
registration by notice to the Company and the managing underwriter, and each of
the remaining requesting holders shall be entitled to increase the number of
Registrable Securities being registered to the extent of the Registrable
Securities so withdrawn in the proportion which the number of Registrable
Securities being registered by such remaining requesting holder bears to the
total number of Registrable Securities being registered by all such remaining
requesting holders.
1.10 Stand-Off Agreement. Each holder of Registrable Securities
-------------------
agrees, so long as such holder holds at least 1% of the Company's outstanding
voting equity securities, in connection with the Company's initial Public
Offering, upon request of the Company or the underwriters managing such
Offering, not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Common Shares of the Company other than
those included in the
12
<PAGE>
registration without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not exceeding 180
days) from the effective date of such registration as may be requested by the
underwriters; provided, however, that all other holders of at least 1% of the
-------- -------
Company's outstanding voting equity securities and all of the officers and
directors of the Company who own stock of the Company must also agree to not
less onerous restrictions.
1.11 Amendment of Registration Rights. Without the written consent
--------------------------------
of the holders of more than 50% of the then outstanding Registrable Securities,
the Company shall not amend this Exhibit C, or enter into any agreement with any
holder or prospective holder of any securities of the Company which would allow
such holder or prospective holder to include such securities as Registrable
Securities under this Exhibit C. Any amendment to this Section 1 pertaining
only to rights of a particular series of the Company's outstanding Preferred
Stock and affecting such rights adversely and in a manner materially different
from its effect on the rights of the other outstanding series of the Preferred
Stock must be approved by the holders of more than 50% of the outstanding shares
of such series of Preferred Stock.
1.12 Termination. This Exhibit C, and all of the Company's
-----------
obligations (other than its obligations pursuant to Section 1.7, which Section
shall survive such termination) hereunder, shall terminate upon the earlier to
occur of (i) the date there are no Registrable Securities outstanding and (ii)
the fifth anniversary of the effective date of the registration statement filed
with respect to the Company's initial Public Offering.
13
<PAGE>
EXHIBIT 10.24
FIELDWORKS, INCORPORATED
1994 LONG-TERM INCENTIVE
AND
STOCK OPTION PLAN,
REVISED TO REFLECT THE CHANGE IN
THE NUMBER OF SHARES AVAILABLE
AS OF JANUARY 20, 1997
SECTION 1. PURPOSE OF PLAN.
- ----------------------------
This Plan shall be known as the "FIELDWORKS, INCORPORATED 1994 LONG-
TERM INCENTIVE AND STOCK OPTION PLAN" and is hereinafter referred to as the
"Plan". The purpose of the Plan is to aid in maintaining and developing
personnel capable of assuring the future success of Fieldworks, Incorporated, a
Minnesota corporation (the "Company"), to offer such personnel additional
incentives to put forth maximum efforts for the success of the business, and to
afford them an opportunity to acquire a proprietary interest in the Company
through stock options and other long-term incentive awards as provided herein.
Options granted under this Plan may be either incentive stock options
("Incentive Stock Options") within the meaning of Section 422 of the Internal
Revenue Code of 1986 (the "Code"), or options that do not qualify as Incentive
Stock Options. Awards granted under this Plan shall be SARs, restricted stock or
performance awards as hereinafter described.
SECTION 2. STOCK SUBJECT TO PLAN.
- ----------------------------------
Subject to the provisions of Section 16 hereof, the stock to be
subject to options or other awards under the Plan shall be the Company's
authorized common shares, par value $0.001 per share (the "Common Shares"). Such
Common Shares may be either authorized but unissued shares, or issued shares
which have been reacquired by the Company. Subject to adjustment as provided in
Section 16 hereof, the maximum number of shares on which options may be
exercised or other awards issued under this Plan shall be 1,500,000 shares. If
an option or award under the Plan expires, or for any reason is terminated or
unexercised with respect to any shares, such shares shall again be available for
options or awards thereafter granted during the term of the Plan.
SECTION 3. ADMINISTRATION OF PLAN.
- -----------------------------------
(a) The Plan shall be administered by the Board of Directors of the
Company or a committee thereof. The members of any such committee shall be
appointed by and serve at the pleasure of the Board of Directors. (The group
administering the Plan shall hereinafter be referred to as the "Committee".)
(b) The Committee shall have plenary authority in its discretion, but
subject to the express provisions of the Plan: (i) to determine the purchase
price of the Common Stock covered by each option or award, (ii) to determine the
employees to whom and the time or times at which such options and awards shall
be granted and the number of shares to be subject to each,
1
<PAGE>
(iii) to determine the form of payment to be made upon the exercise of an SAR or
in connection with performance awards, either cash, Common Shares of the Company
or a combination thereof, (iv) to determine the terms of exercise of each option
and award, (v) to accelerate the time at which all or any part of an option or
award may be exercised, (vi) to amend or modify the terms of any option or award
with the consent of the optionee, (vii) to interpret the Plan, (viii) to
prescribe, amend and rescind rules and regulations relating to the Plan, (ix) to
determine the terms and provisions of each option and award agreement under the
Plan (which agreements need not be identical), including the designation of
those options intended to be Incentive Stock Options, and (x) to make all other
determinations necessary or advisable for the administration of the Plan,
subject to the exclusive authority of the Board of Directors under Section 17
herein to amend or terminate the Plan. The Committee's determinations on the
foregoing matters, unless otherwise disapproved by the Board of Directors of the
Company, shall be final and conclusive.
(c) The Committee shall select one of its members as its Chair and
shall hold its meetings at such times and places as it may determine. A majority
of its members shall constitute a quorum. All determinations of the Committee
shall be made by not less than a majority of its members. Any decision or
determination reduced to writing and signed by all of the members of the
Committee shall be fully effective as if it had been made by a majority vote at
a meeting duly called and held. The grant of an option or award shall be
effective only if a written agreement shall have been duly executed and
delivered by and on behalf of the Company following such grant. The Committee
may appoint a Secretary and may make such rules and regulations for the conduct
of its business as it shall deem advisable.
SECTION 4. ELIGIBILITY AND GRANT.
- ----------------------------------
(a) Eligibility. Incentive Stock Options may only be granted under
-----------
this Plan to any full or part-time employee (which term as used herein includes,
but is not limited to, officers anddirectors who are also employees) of the
Company and of its present and future subsidiary corporations within the meaning
of Section 424(f) of the Code (herein called "subsidiaries"). Full or part-time
employees, directors who are not employees, consultants or independent
contractors to the Company or one of its subsidiaries or affiliates shall be
eligible to receive options which do not qualify as Incentive Stock Options and
awards. In determining the persons to whom options and awards shall be granted
and the number of shares subject to each, the Committee may take into account
the nature of services rendered by the respective employees or consultants,
their present and potential contributions to the success of the Company and such
other factors as the Committee in its discretion shall deem relevant.
(b) Grant of Additional Options. A person who has been granted an
---------------------------
option or award under this Plan may be granted additional options or awards
under the Plan if the Committee shall so determine; provided, however, that to
the extent the aggregate fair market value (determined at the time the Incentive
Stock Option is granted) of the Common Shares with respect to which all
Incentive Stock Options are exercisable for the first time by an employee during
any calendar year (under all plans described in subsection (d) of Section 422 of
the Code of his or her employer corporation and its parent and subsidiary
corporations) exceeds $100,000,
2
<PAGE>
such options shall be treated as options that do not qualify as Incentive Stock
Options. Nothing in the Plan or in any agreement thereunder shall confer on any
employee any right to continue in the employ of the Company or any of its
subsidiaries or affect, in any way, the right of the Company or any of its
subsidiaries to terminate his or her employment at any time.
SECTION 5. PRICE.
- ------------------
The option price for all Incentive Stock Options granted under the
Plan shall be determined by the Committee but shall not be less than 100% of the
fair market value of the Common Shares at the date of grant of such option. The
option price for options granted under the Plan that do not qualify as Incentive
Stock Options and, if applicable, the price for all awards shall also be
determined by the Committee. For purposes of the preceding sentence and for all
other valuation purposes under the Plan, the fair market value of the Common
Shares shall be as reasonably determined by the Committee. If on the date of
grant of any option or award hereunder the Common Shares are not traded on an
established securities market, the Committee shall make a good faith attempt to
satisfy the requirements of this Section 5 and in connection therewith shall
take such action as it deems necessary or advisable.
SECTION 6. TERM.
- -----------------
Each option and award and all rights and obligations thereunder shall
expire on the date determined by the Committee and specified in the option or
award agreement. The Committee shall be under no duty to provide terms of like
duration for options or awards granted under the Plan, but the term of an
Incentive Stock Option may not extend more than ten (10) years from the date of
grant of such option and the term of options granted under the Plan which do not
qualify as Incentive Stock Options may not extend more than fifteen (15) years
from the date of granting of such option.
SECTION 7. EXERCISE OF OPTION OR AWARD.
- ----------------------------------------
(a) Exercisability. The Committee shall have full and complete
--------------
authority to determine whether an option or award will be exercisable in full at
any time or from time to time during the term thereof, or to provide for the
exercise thereof in such installments, upon the occurrence of such events (such
as termination of employment for any r eason) and at such times during the term
of the option as the Committee may determine and specify in the option or award
agreement.
(b) No Violation of State or Federal Laws. The exercise of any
-------------------------------------
option or award granted hereunder shall only be effective at such time that the
sale of Common Shares pursuant to such exercise will not violate any state or
federal securities or other laws.
(c) Method of Exercise. An optionee or grantee electing to exercise
------------------
an option or award shall give written notice to the Company of such election and
of the number of shares subject to such exercise. The full purchase price of
such shares shall be tendered with such notice
3
<PAGE>
of exercise. Payment shall be made to the Company in cash (including bank check,
certified check, personal check, or money order), or, at the discretion of the
Committee and as specified by the Committee, (i) by delivering certificates for
the Company's Common Shares already owned by the optionee or grantee having a
fair market value as of the date of grant equal to the full purchase price of
the shares, or (ii) by delivering the optionee's or grantee's promissory note,
which shall provide for interest at a rate not less than the minimum rate
required to avoid the imputation of income, original issue discount or a below-
market-rate loan pursuant to Sections 483, 1274 or 7872 of the Code or any
successor provisions thereto, or (iii) a combination of cash, the optionee's or
grantee promissory note and such shares. The fair market value of such tendered
shares shall be determined as provided in Section 5 herein. The optionee's or
grantee's promissory note shall be a full recourse liability of the optionee and
may, at the discretion of the Committee, be secured by a pledge of the shares
being purchased. Until such person has been issued the shares subject to such
exercise, he or she shall possess no rights as a shareholder with respect to
such shares.
SECTION 8. RESTORATION OPTIONS.
- --------------------------------
The Committee may grant "restoration" options, separately or together
with another option, pursuant to which, subject to the terms and conditions
established by the Committee and any applicable requirements of Rule 16b-3
promulgated under the Exchange Act or any other applicable law, the optionee
would be granted a new option when the payment of the exercise price of the
option to which such "restoration" option relates is made by the delivery of
shares of the Company's Common Shares owned by the optionee, as described in
this Section 8, which new option would be an option to purchase the number of
shares not exceeding the sum of (a) the number of shares of the Company's Common
Shares tendered as payment upon the exercise of the option to which such
"restoration" option relates and (b) the number of shares of the Company's
Common Shares, if any, tendered as payment of the amount to be withheld under
applicable income tax laws in connection with the exercise of the option to
which such "restoration" option relates, as described in Section 12 hereof.
"Restoration" options may be granted with respect to options previously granted
under this Plan or any prior stock option plan of the Company, and may be
granted in connection with any option granted under this Plan at the time of
such grant. The purchase price of the Common Shares under each such new option,
and the other terms and conditions of such option, shall be determined by the
Committee, consistent with the provisions of the Plan.
SECTION 9. STOCK APPRECIATION RIGHTS.
- --------------------------------------
(a) Grant. At the time of grant of an option or award under the Plan
-----
(or at any other time), the Committee, in its discretion, may grant a Stock
Appreciation Right ("SAR") evidenced by an agreement in such form as the
Committee shall from time to time approve. Any such SAR may be subject to
restrictions on the exercise thereof as may be set forth in the agreement
representing such SAR, which agreement shall comply with and be subject to the
following terms and conditions and any additional terms and conditions
established by the Committee that are consistent with the terms of the Plan.
4
<PAGE>
(b) Exercise. An SAR shall be exercised by the delivery to the
--------
Company of a written notice which shall state that the holder thereof elects to
exercise his or her SAR as to the number of shares specified in the notice and
which shall further state what portion, if any, of the SAR exercise amount
(hereinafter defined) the holder thereof requests is to be paid in cash and what
portion, if any, is to be paid in Common Shares of the Company. The Committee
promptly shall cause to be paid to such holder the SAR exercise amount either in
cash, in Common Shares of the Company, or any combination of cash and shares as
the Committee may determine. Such determination may be either in accordance with
the request made by the holder of the SAR or in the sole and absolute discretion
of the Committee. The SAR exercise amount is the excess of the fair market value
of one share of the Company's Common Shares on the date of exercise over the per
share exercise price in respect of which the SAR was granted, multiplied by the
number of shares as to which the SAR is exercised. For the purposes hereof, the
fair market value of the Company's shares shall be determined as provided in
Section 5 herein.
SECTION 10. RESTRICTED STOCK AWARDS.
- ------------------------------------
Awards of Common Shares subject to forfeiture and transfer
restrictions may be granted by the Committee. Any restricted stock award shall
be evidenced by an agreement in such form as the Committee shall from time to
time approve, which agreement shall comply with and be subject to the following
terms and conditions and any additional terms and conditions established by the
Committee that are consistent with the terms of the Plan:
(a) Grant of Restricted Stock Awards. Each restricted stock award
---------------------------------
made under the Plan shall be for such number of Common Shares as shall be
determined by the Committee and set forth in the agreement containing the terms
of such restricted stock award. Such agreement shall set forth a period of time
during which the grantee must remain in the continuous employment of the Company
in order for the forfeiture and transfer restrictions to lapse. If the Committee
so determines, the restrictions may lapse during such restricted period in
installments with respect to specified portions of the shares covered by the
restricted stock award. The agreement may also, in the discretion of the
Committee, set forth performance or other conditions that will subject the
Common Shares to forfeiture and transfer restrictions. The Committee may, at its
discretion, waive all or any part of the restrictions applicable to any or all
outstanding restricted stock awards.
(b) Delivery of Common Shares and Restrictions. At the time of a
------------------------------------------
restricted stock award, a certificate representing the number of Common shares
awarded thereunder shall be registered in the name of the grantee. Such
certificate shall be held by the Company or any custodian appointed by the
Company for the account of the grantee subject to the terms and conditions of
the Plan, and shall bear such a legend setting forth the restrictions imposed
thereon as the Committee, in its discretion, may determine. The grantee shall
have all rights of a shareholder with respect to the Common Shares, including
the right to receive dividends and the right to vote such shares, subject to the
following restrictions: (i) the grantee shall not be entitled to delivery of the
stock certificate until the expiration of the restricted period and the
fulfillment
5
<PAGE>
of any other restrictive conditions set forth in the restricted stock agreement
with respect to such Common Shares; (ii) none of the Common Shares may be sold,
assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed
of during such restricted period or until after the fulfillment of any such
other restrictive conditions; and (iii) except as otherwise determined by the
Committee, all of the Common Shares shall be forfeited and all rights of the
grantee to such Common Shares shall terminate, without further obligation on the
part of the Company, unless the grantee remains in the continuous employment of
the Company for the entire restricted period in relation to which such Common
Shares were granted and unless any other restrictive conditions relating to the
restricted stock award are met. Any Common Shares, any other securities of the
Company and any other property (except for cash dividends) distributed with
respect to the Common Shares subject to restricted stock awards shall be subject
to the same restrictions, terms and conditions as such restricted Common Shares.
(c) Termination of Restrictions. At the end of the restricted period
---------------------------
and provided that any other restrictive conditions of the restricted stock award
are met, or at such earlier time as otherwise determined by the Committee, all
restrictions set forth in the agreement relating to the restricted stock award
or in the Plan shall lapse as to the restricted Common Shares subject thereto,
and a stock certificate for the appropriate number of Common Shares, free of the
restrictions and the restricted stock legend, shall be delivered to the grantee
or his or her beneficiary or estate, as the case may be.
SECTION 11. PERFORMANCE AWARDS.
- -------------------------------
The Committee is further authorized to grant performance awards.
Subject to the terms of this Plan and any applicable award agreement, a
performance award granted under the Plan (i) may be denominated or payable in
cash, Common Shares (including, without limitation, restricted stock), other
securities, other awards, or other property and (ii) shall confer on the holder
thereof rights valued as determined by the Committee, in its discretion, and
payable to, or exercisable by, the holder of the Performance awards, in whole or
in part, upon the achievement of such performance goals during such performance
periods as the Committee, in its discretion, shall establish. Subject to the
terms of this Plan and any applicable award agreement, the performance goals to
be achieved during any performance period, the length of any performance period,
the amount of any Performance award granted, and the amount of any payment or
transfer to be made by the grantee and by the Company under any Performance
award shall be determined by the Committee.
SECTION 12. INCOME TAX WITHHOLDING AND TAX BONUSES.
- ---------------------------------------------------
(a) Withholding of Taxes. In order to comply with all applicable
--------------------
federal or state income tax laws or regulations, the Company may take such
action as it deems appropriate to ensure that all applicable federal or state
payroll, withholding, income or other taxes, which are the sole and absolute
responsibility of an optionee or grantee under the Plan, are withheld or
collected from such optionee or grantee. In order to assist an optionee or
grantee in paying all federal and state taxes to be withheld or collected upon
exercise of an option or award which
6
<PAGE>
does not qualify as an Incentive Stock Option hereunder, the Committee, in its
absolute discretion and subject to such additional terms and conditions as it
may adopt, shall permit the optionee or grantee to satisfy such tax obligation
by (i) electing to have the Company withhold a portion of the shares otherwise
to be delivered upon exercise of such option or award with a fair market value,
determined in accordance with Section 5 herein, equal to such taxes or (ii)
delivering to the Company
Common Shares other than the shares issuable upon exercise of such
option or award with a fair market value, determined in accordance with Section
5, equal to such taxes.
(b) Tax Bonus. The Committee shall have the authority, at the time
---------
of grant of an option under the Plan or at any time thereafter, to approve tax
bonuses to designated optionees or grantees to be paid upon their exercise of
options or awards granted hereunder. The amount of any such payments shall be
determined by the Committee. The Committee shall have full authority in its
absolute discretion to determine the amount of any such tax bonus and the terms
and conditions affecting the vesting and payment thereafter.
SECTION 13. ADDITIONAL RESTRICTIONS.
- ------------------------------------
The Committee shall have full and complete authority to determine
whether all or any part of the Common Shares of the Company acquired upon
exercise of any of the options or awards granted under the Plan shall be subject
to restrictions on the transferability thereof or any other restrictions
affecting in any manner the optionee's or grantee's rights with respect thereto,
but any such restriction shall be contained in the agreement relating to such
options or awards.
SECTION 14. TEN PERCENT SHAREHOLDER RULE.
- -----------------------------------------
Notwithstanding any other provision in the Plan, if at the time an
option is otherwise to be granted pursuant to the Plan the optionee owns
directly or indirectly (within the meaning of Section 424(d) of the Code) Common
Shares of the Company possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or its parent or
subsidiary corporations, if any (within the meaning of Section 422(b)(6) of the
Code), then any Incentive Stock Option to be granted to such optionee pursuant
to the Plan shall satisfy the requirements of Section 422(c)(5) of the Code, and
the option price shall be not less than 110% of the fair market value of the
Common Shares of the Company determined as described herein, and such option by
its terms shall not be exercisable after the expiration of five (5) years from
the date such option is granted.
SECTION 15. NON-TRANSFERABILITY.
- --------------------------------
No option or award granted under the Plan shall be transferable by an
optionee or grantee, otherwise than by will or the laws of descent or
distribution. Except as otherwise provided in an option or award agreement,
during the lifetime of an optionee or grantee, the option shall be exercisable
only by such optionee or grantee.
7
<PAGE>
SECTION 16. DILUTION OR OTHER ADJUSTMENTS.
- ------------------------------------------
If there shall be any change in the Common Shares through merger,
consolidation, reorganization, recapitalization, dividend in the form of stock
(of whatever amount), stock split or other change in the corporate structure,
appropriate adjustments in the Plan and outstanding options and awards shall be
made by the Committee. In the event of any such changes, adjustments shall
include, where appropriate, changes in the aggregate number of shares subject to
the Plan, the number of shares and the price per share subject to outstanding
options and awards and the amount payable upon exercise of outstanding awards,
in order to prevent dilution or enlargement of option or award rights.
SECTION 17. AMENDMENT OR DISCONTINUANCE OF PLAN.
- ------------------------------------------------
The Board of Directors may amend or discontinue the Plan at any time.
Subject to the provisions of Section 16 no amendment of the Plan, however, shall
without shareholder approval: (i) increase the maximum number of shares under
the Plan as provided in Section 2 herein, (ii) decrease the minimum price
provided in Section 5 herein, (iii) extend the maximum term under Section 6, or
(iv) modify the eligibility requirements for participation in the Plan. The
Board of Directors shall not alter or impair any option or award theretofore
granted under the Plan without the consent of the holder of the option.
SECTION 18. TIME OF GRANTING.
- -----------------------------
Nothing contained in the Plan or in any resolution adopted or to be
adopted by the Board of Directors or by the shareholders of the Company, and no
action taken by the Committee or the Board of Directors (other than the
execution and delivery of an option or award agreement), shall constitute the
granting of an option or award hereunder.
SECTION 19. EFFECTIVE DATE AND TERMINATION OF PLAN.
- ---------------------------------------------------
(a) The Plan was approved by the Board of Directors on March 23,
1994, and shall be approved by the shareholders of the Company within twelve
(12) months thereof.
(b) Unless the Plan shall have been discontinued as provided in
Section 16 hereof, the Plan shall terminate March 23, 2004. No option or award
may be granted after such termination, but termination of the Plan shall not,
without the consent of the optionee or grantee, alter or impair any rights or
obligations under any option or award theretofore granted.
8
<PAGE>
FIELDWORKS, INCORPORATED
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT, made this ___rd day of _________, 19__, by and between
FIELDWORKS, INCORPORATED, a Minnesota corporation and _______________
("Employee").
WITNESSETH, THAT:
WHEREAS, the Company pursuant to it 1994 Long-Term Incentive and Stock Option
Plan wishes to grant this stock option to Employee.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Grant of Option
---------------
The Company hereby grants to Employee, on the date set forth above,
the right and option (hereinafter called "the option") to purchase all or any
part of an aggregate of _______ common shares, par value $0.01 per share (the
"Common Shares"), at the price of $_____ per share on the terms and conditions
set forth herein. This option is not intended to be an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
2. Duration and Exercisability
---------------------------
(a) This option shall in all events terminate five (5) years after
the date of grant subject to the other terms and conditions set forth herein,
this option may be exercised by Employee in cumulative installments as follows:
Cumulative percentage
On or after each of of shares as to which
the following dates option is exercisable
------------------- ---------------------
xx/xx/xx 34%
xx/xx/xx 33%
xx/xx/xx 33%
(b) During the lifetime of Employee, the option shall be exercisable
only by Employee and shall not be assignable or transferable by Employee, other
than by will or the laws of descent and distribution.
9
<PAGE>
(c) Notwithstanding the installment exercise provision set forth in
paragraph (a) above and subject to the other terms and conditions set forth
herein, this option may be exercised as to 100% of the Common Shares of the
Company for which this option was granted on the date of a "change of control"
as hereinafter defined. A "change of control" shall mean any of the following:
(i) A sale of all or substantially all of the assets of the
Company.
(ii) The acquisition of more than 80% of the Common Shares of
the Company (with all classes or series thereof treated as a single class)
by any person or group of persons, except a Permitted Shareholder as
hereinafter defined, acting in concert. A "Permitted Shareholder" means a
holder, as of the date the Plan was adopted by the Company, of Company
Common Shares.
(iii) A reorganization of the Company wherein the holders of
Common Shares of the Company receive stock in another company, a merger of
the Company with another company wherein there is an 80 % or greater change
in the ownership of the Common Shares of the Company as a result of such
merger, or any other transaction in which the Company (other than as the
parent corporation) is consolidated for federal income tax purposes with
another corporation.
(iv) In the event that the Common Shares of the Company are
traded on an established securities market: a public announcement that any
person has acquired or has the right to acquire beneficial ownership of 51%
or more of the then outstanding Common Shares of the Company and for this
purpose the terms "person" and "beneficial ownership" shall have the
meanings provided in Section 13(d) of the Securities and Exchange Act of
1934 or related rules promulgated by the Securities and Exchange Commission
or: the commencement of or public announcement of an intention to make a
tender offer or exchange offer for 51% or more of the then outstanding
Common Shares of the Company.
(v) The Board of Directors of the Company, in its sole and
absolute discretion, determines that there has been a sufficient change in
the share ownership of the Company to constitute a change of effective
ownership or control of the Company.
Employee understands that to the extent that the aggregate fair market value
(determined at the time the option was granted) of the Common Shares with
respect to which all options, that are incentive stock options within the
meaning of Section 422 of the Code, are exercisable for the first time by
Employee during any calendar year exceed $100,000, in accordance with Section
422(d) of the Code, such options shall be treated as options that do not qualify
as incentive stock options.
10
<PAGE>
3. Effect of Termination of Employment
-----------------------------------
(a) In the event that Employee shall cease to be employed by the
Company or its subsidiaries, if any, for any reason other than Employee's
serious misconduct or Employee's death or disability (as such term is defined in
Section 3(c) hereof), Employee shall have the right to exercise the option at
any time within one (1) month after such termination of employment to the extent
of the full number of shares Employee was entitled to purchase under the option
on the date of termination, subject to the condition that no option shall be
exercisable after the expiration of the term of the option.
(b) In the event that Employee shall cease to be employed by the
Company or its subsidiaries, if any, by reason of Employee's serious misconduct
during the course of employment, including but not limited to wrongful
appropriation of the Company's funds, or in the event that Employee violates the
covenants set forth in Section 5 hereof, the option shall be terminated as of
the date of the misconduct.
(c) If Employee shall die while in the employ of the Company or a
subsidiary, if any, or within one (1) month after termination of employment for
any reason other than serious misconduct or if employment is terminated because
Employee has become disabled (within the meaning of Code Section 22(e)(3)) while
in the employ of the Company or a subsidiary, if any, and Employee shall not
have fully exercised the option, such option may be exercised at any time within
twelve (12) months after Employee's death or date of termination of employment
for disability by Employee, personal representatives or administrators, or
guardians of Employee, as applicable, or by any person or persons to whom the
option is transferred by will or the applicable laws of descent and
distribution, to the extent of the full number of shares Employee was entitled
to purchase under the option on the date of death, termination of employment, if
earlier, or date of termination for such disability and subject to the condition
that no option shall be exercisable after the expiration of the term of the
option.
4. Manner of Exercise
------------------
(a) The option can be exercised only by Employee or other proper
party by delivering within the option period written notice to the Company at
its principal office. The notice shall state the number of shares as to which
the option is being exercised and be accompanied by payment in full of the
option price for all shares designated in the notice.
(b) Employee may pay the option price in cash, by check (bank check,
certified check or personal check), by money order, or with the approval of the
Company (i) by delivering to the Company for cancellation Common Shares of the
Company with a fair market value as of the date of exercise equal to the option
price or the portion thereof being paid by tendering such shares, (ii) by
delivering to the Company the full option price in a combination of cash and
Employee' full recourse liability promissory note
11
<PAGE>
with a principal amount not to exceed eighty percent (80%) of the option price
and a term not to exceed five (5) years, which promissory note shall provide for
interest on the unpaid balance thereof which at all times is not less than the
minimum rate required to avoid the imputation of income, original issue discount
or a below-market rate loan pursuant to Sections 483, 1274 or 7872 of the Code
or any successor provisions thereto or (iii) by delivering to the Company a
combination of cash, Employee's promissory note and Common Shares of the Company
with an aggregate fair market value and a principal amount equal to the option
price. For these purposes, the fair market value of the Company's Common Shares
as of any date shall be as reasonably determined by the Company pursuant to the
Plan.
5. Covenant Not to Compete and Protection of Confidential Information.
-------------------------------------------------------------------
Employee hereby agrees to a covenant not to compete and agreement to
protect certain information pursuant to the terms and conditions hereinafter set
forth. The covenant not to compete shall have a term beginning on the date
hereof and ending on the date that (a) is two (2) years after the date that
Employee has exercised this option or (b) is two (2) years after the date of the
termination of Employee's employment with the Company for any reason whatsoever,
whichever is longer. The covenant not to compete shall apply to the same
geographical area in which Employee worked on behalf of the Company at any time
during the two-year period preceding Employee's termination of employment with
the Company.
Employee further agrees that during the term of said covenant he or
she shall hold in a fiduciary capacity for the benefit of the Company all
confidential information, knowledge and data, including customer lists,
representative lists and the Company's products, processes and programs
(oConfidential Datao), relating in any way to the business of the Company for so
long as such Confidential Data remains confidential and all such Confidential
Data, together with all copies thereof and notes and other references thereto,
shall remain the sole property of the Company.
Employee further agrees that during the term of said covenant he or
she shall not, directly or indirectly, engage in any business activity on his or
her own behalf or a partner, shareholder (except by ownership of less than five
percent (5%) of the outstanding stock of a publicly held corporation), director,
trustee, principal, agent, employee, consultant or otherwise of any person or
entity which is in any respect in competition with or competitive with the
Company to engage in any such activity. Employee also agrees that during the
term of said covenant he or she shall not directly or indirectly solicit, entice
or induce any employee or representative of the Company to engage in any such
activity. Employee also agrees that during the term of said covenant he or she
shall not directly or indirectly solicit, entice or induce (or assist any other
person or entity in soliciting, enticing or inducing) any customer or potential
customer) with whom Employee had contact in the course of his or her employment
with the Company to deal with a competitor of the Company.
12
<PAGE>
If any court of competent jurisdiction shall determine that the
foregoing covenants are invalid in any respect, the parties hereto agree that
any court so holding may limit such covenant either or both in time, in area or
in any other manner which the court determines such that the covenant shall be
enforceable against Employee. Employee acknowledges that the remedy of law for
any breach of the foregoing covenants will be inadequate, and that the Company
shall be entitled, in addition to any remedy of law, to preliminary and
permanent to injunctive relief.
6. Company's Option to Repurchase Common Shares
--------------------------------------------
(a) Upon the occurrence of any one or more of the Option Events, as
hereinafter defined, the Company shall have the irrevocable right and option
(the oCall Optiono) to purchase from Employee or Employee's heirs, successors,
personal representatives or assigns, and Employee on behalf of his or her heirs,
successors, personal representatives or assigns, agrees to sell to the Company
upon the exercise of the Call Option all or any part of the Common Shares
acquired by Employee pursuant to this option. (The Company's Call Option, and
any reference to Common Shares acquired by Employee pursuant to this option,
shall be deemed to include all other shares of any class or series of the
Company's capital stock acquired by Employee on account of or with respect to
Common Shares acquired pursuant to this option, whether the acquisition of such
shares is by stock dividend, stock split, recapitalization or any other similar
means.) The Option Events shall be:
(i) The express desire of Employee to sell, assign, pledge,
transfer, give or otherwise dispose of or encumber any Common Shares
acquired by Employee pursuant to this option to a bona fide third party or
any attempt by Employee to transfer any such Common Shares except in strict
compliance with the terms and conditions of this Agreement.
(ii) The employment by a court of competent jurisdiction or
otherwise of a receiver, trustee or assignee of Employee or Employee's
property.
(iii) The expiration of thirty (30) days immediately following
the date upon which a money judgment entered in a court of record against
Employee becomes final, provided such judgment remains unsatisfied.
(iv) Voluntary application of Employee for relief any act of
Congress or any of the laws of the several states now or hereafter enacted
providing for the relief of debtors.
(v) Institution of a levy, garnishment or attachment involving
such Common Shares, unless released or discharged within a period of thirty
(30) days.
13
<PAGE>
(vi) Employee's termination of employment with the Company,
whether voluntary or involuntary with or without cause, including without
limitation termination as a result of death or disability.
(b) Upon the occurrence of any one or more of the Option Events,
Employee (or a legal representative thereof) shall deliver a written notice
thereof to the Company, which notice shall specify the Option Event, the person
to whom the shares are to be sold, transferred, exchanged or disposed of, if
applicable, the purchase price or other consideration to be received by Employee
for such shares, if any, and the terms upon which such purchase price or other
consideration is to be paid, if applicable. The Company may then exercise its
Call Option with respect to all or any part of such Common Shares by delivering
a written acceptance to Employee (or a legal representative thereof) within
thirty (30) days after receipt of the foregoing written notice from Employee. If
the Company elects not to exercise the Call Option, Employee (or a legal
representative thereof) shall be able to transfer or encumber such shares on the
terms specified in the written notice to the Company, but only if such
transaction is consummated within ninety (90) days after such notice to the
Company.
(c) The purchase price for the Common Shares that are repurchased by
the Company pursuant to the exercise of its Call Option shall be either the
amount to be paid therefor by a bona fide third party purchaser or the fair
market value thereof, whichever is greater. The fair market value of the Common
Shares shall be determined by the Company's Board of Directors; provided,
however, that if upon the occurrence of an Option Event the Company's Common
Shares are then traded on an established securities market, the fair market
thereof shall be determined by reference to such trading price, as determined by
the Company in its sold and absolute discretion.
(d) The Company shall make payment of the purchase price for any
Common Shares reacquired by it pursuant to its exercise of the Call Option by
delivering to Employee or Employee's heirs, successors, assigns or personal
representatives, as the case may be, either (i) the Company's check in the
amount of the purchase price or (ii) the Company's promissory note in the amount
of the purchase price, which promissory note shall provide for a term not to
exceed five (5) years and interest on the unpaid balance thereof at a rate which
is not less than the minimum rate required to avoid the imputation of income,
original issue discount or a below market rate loan pursuant to Sections
483,1274 and 7872 of the Code or any successor provisions thereto, as determined
by the Company, or (iii) a combination of cash and the Company's promissory
note, with the foregoing terms, the total of which is equal to such purchase
price. Upon receipt of such payment from the Company, Employee or his or her
heirs, successors, assigns or personal representatives, as the case may be,
shall deliver to the Company for Cancellation the stock certificate or
certificates evidencing the
14
<PAGE>
Common Shares being repurchased by the Company pursuant to the exercise of
its Call Option, which certificate or certificates shall be duly endorsed for
cancellation by the Company.
(e) Employee shall not voluntarily or involuntarily sell, exchange,
transfer, pledge or otherwise dispose of any of the Common Shares acquired
pursuant to the exercise of this option unless Employee shall first offer to
sell such Common Shares to the Company's Call Option as described above. The
following legend shall be affixed to the certificates evidencing the Common
Shares acquired pursuant to the exercise of this option.
The shares evidence by this certificate are subject to restrictions on
transferability and the repurchase options contained in an Incentive Stock
Option Agreement dated___________, 19__ between ___________ and FieldWorks,
Incorporated, a Minnesota corporation, a copy of which is available for review
at the principal offices of FieldWorks, Incorporated.
7. Miscellaneous
-------------
(a) This option is issued pursuant to the Company's 1994 Long Term
and Incentive Stock Option Plan and is subject to its terms. The terms of the
Plan are available for inspection during business hours at the principal offices
of the Company.
(b) This Agreement shall not confer on Employee any right with
respect to continuance of employment by the Company or any of its subsidiaries,
nor will it interfere in any way with the right of the Company to terminate such
employment at any time. Employee shall have none of the rights of a shareholder
with respect to shares subject to this option until such shares shall have been
issued to Employee upon exercise of this option.
(c) The exercise of all or any parts of this option shall only be
effective at such time that the sale of Common Shares pursuant to such exercise
will not violate any state or federal securities or other laws.
(d) If there shall be any change in the Common Shares of the Company
through merger, consolidation, reorganization, recapitalization, dividend in the
form of stock (of whatever amount), stock split or other change in the
corporate structure of the Company, and all or any portion of the option shall
then be unexercised and not yet expired, then appropriate adjustments in the
outstanding option shall be made by the Company, in order to prevent dilution or
enlargement of option rights. Such adjustments shall include, where appropriate,
changes in the number of shares of Common Shares and the price per share subject
to the outstanding option.
15
<PAGE>
(e) The Company shall at all times during the term of the option
reserve and keep available such number of shares as will be sufficient to
satisfy the requirements of this Agreement.
(f) if Employee shall dispose of any of the Common Shares of the
Company acquired by Employee pursuant to the exercise of the option within two
(2) years from the date this option was granted or within one (1) year after the
transfer of any such shares to Employee upon exercise of this option, then, in
order to provide the Company with the opportunity to claim the benefit of any
income tax deduction which may be available to it under the circumstances,
Employee shall promptly notify the Company of the dates of acquisition and
disposition of such shares, the number of shares so disposed of, and the
consideration, if any, received for such shares. In order to comply with all
applicable federal or state income tax laws or regulations, the Company may
take such action as it deems appropriate to insure (i) notice to the Company of
any disposition of the Common Shares of the Company within the time periods
described above and (ii) that, if necessary, all applicable federal or state
payroll, withholding, income or other taxes are withheld or collected from
Employee.
(g) Employee agrees to disclose neither the contents nor any of the
terms and conditions of this option to any other person, and agrees that such
disclosure may result in both immediate termination of this option without the
right to exercise any part thereof and termination of employment with the
Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the day and year first above written.
FIELDWORKS, INCORPORATED
By_______________________
Its_____________________
_________________________
Employee
16
<PAGE>
FIELDWORKS, INCORPORATED
NON-INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT, made this ____ day of _______, 19___, by and between FIELDWORKS,
INCORPORATED, a Minnesota corporation and ____________________.
WITNESSETH, THAT:
WHEREAS, the Company pursuant to it 1994 Long-Term Incentive and Stock Option
Plan wishes to grant this stock option to Optionee.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Grant of Option
---------------
The Company hereby grants to Optionee, on the date set forth above,
the right and option (hereinafter called "the option") to purchase all or any
part of an aggregate of _________ common shares, par value $0.001 per share (the
"Common Shares"), at the price of $_____ per share on the terms and conditions
set forth herein. This option is not intended to be an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
17
<PAGE>
2. Duration and Exercisability
---------------------------
(a) This option shall in all events terminate ten (10) years after
the date of grant subject to the other terms and conditions set forth herein,
this option may be exercised by Optionee in full; provided, however, that this
option shall be exercisable by Optionee prior to the Normal Exercise Date in
cumulative installments as follows:
Cumulative percentage
On or after each of of shares as to which
the following dates option is exercisable
------------------- ---------------------
xx/xx/xx 34%
xx/xx/xx 33%
xx/xx/xx 33%
Notwithstanding the foregoing, this option shall be exercisable by Optionee
prior to the Normal Exercise Date in accordance with the foregoing vesting
schedule if and only if, in addition to the other terms and conditions of the
option, Optionee has achieved, in the option of the Company, certain performance
objectives, which objectives shall be established at the outset of each calendar
quarter by the Company and provided in writing to Optionee.
(b) During the lifetime of Optionee, the option shall be exercisable
only by Optionee and shall not be assignable or transferable by Optionee, other
than by will or the laws of descent and distribution.
3. Manner of Exercise
------------------
(a) The option can be exercised only by Optionee or other proper
party by delivering within the option period written notice to the Company at
its principle office. The notice shall state the number of shares as to which
the option is being exercised and be accompanied by payment in full of the
option price for all shares designated in the notice.
18
<PAGE>
(b) Optionee may pay the option price in cash, by check (bank check,
certified check or personal check), by money order, or with the approval of the
Company (i) by delivering to the Company for cancellation Common Shares of the
Company with a fair market value as of the date of exercise equal to the option
price or the portion thereof being paid by tendering such shares, (ii) By
delivering to the Company the full option price in a combination of cash and
Optionee's full recourse liability promissory note with a principal amount not
to exceed eighty percent (80%) of the option price and a term not to exceed five
(5) years, which promissory note will provide for interest on the unpaid balance
thereof which at all times is not less than the minimum rate required to avoid
the imputation of income, original issue discount or a below-market rate loan
pursuant to Sections 483, 1274 or 7872 of the Code or any successor provisions
thereto or (iii) by delivering to the Company a combination of cash, Optionee's
promissory note and Common Shares of the Company with an aggregate fair market
value and a principal amount equal to the option price. For these purposes, the
fair market value of the Company's Common Shares as of any date shall be as
reasonably determined by the Company pursuant to the plan.
5. Miscellaneous
-------------
(a) This option is issued pursuant to the Company's 1994 Long Term
Incentive and Stock Option Plan and is subject to its terms. The terms of the
plan are available for inspection during business hours at the principal offices
of the Company.
(b) The exercise of all or any parts of this option shall only be
effective at such time that the sale of Common Shares pursuant to such exercise
will not violate any state or federal securities or other laws.
19
<PAGE>
(c) If there shall be any change in the Common Shares of the Company
through merger, consolidation, reorganization, recapitalization, dividend in the
form of stock (of whatever amount), stock split or other change in the corporate
structure of the Company, and all or any portion of the option shall then be
unexercised and not yet expired, then appropriate adjustments in the outstanding
option shall be made by the Company, in order to prevent dilution or enlargement
of option rights. Such adjustments shall include, where appropriate, changes in
the number of shares of Common Shares and the price per share subject to the
outstanding option.
(d) The Company shall at all times during the term of the option
reserve and keep available such number of shares as will be sufficient to
satisfy the requirements of this Agreement.
(e) In order to provide the Company with the opportunity to claim the
benefit of any income tax deduction which may be available to it upon the
exercise of the option, and in order to comply with all applicable federal or
state income tax laws or regulations, the Company may take such action as it
deems appropriate to insure that, if necessary, all applicable federal or state
payroll, withholding, income or other taxes are withheld or collected from
Optionee. Optionee may elect to satisfy his federal and state income tax
withholding obligations upon exercise of this option by (i) having the Company
withhold a portion of the shares of Common Stock otherwise to be delivered upon
exercise of such option having a fair market value equal to the amount of
federal and state income tax required to be withheld upon such exercise, in
accordance with the rules of the Committee, or (ii) delivering to the Company
shares of its Common Stock other than the shares issuable upon exercise of such
option with a fair market value equal to such taxes, in accordance with the
rules of the Committee.
20
<PAGE>
(f) Optionee agrees to disclose neither the contents nor any of the
terms and conditions of this option to any other person, and agrees that such
disclosure may result in immediate termination of this option without the right
to exercise any part thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
FIELDWORKS, INCORPORATED
By____________________________
Its_________________________
______________________________
Optionee
21
<PAGE>
EXHIBIT 10.25
FIELDWORKS, INCORPORATED
1996 DIRECTORS' STOCK OPTION PLAN
1. Purpose. The purpose of this Plan is to promote the interests of the
-------
Company and its shareholders by aiding the Company in attracting and retaining
experienced and knowledgeable Non-Employee Directors capable of providing
strategic direction to, and assuring the future success of, the Company, to
offer such Non-Employee Directors incentives to put forth maximum efforts for
the long-term success of the Company's business and an opportunity to acquire a
proprietary interest in the Company, thereby aligning the interests of such
directors with those of the Company's shareholders. None of the Options granted
hereunder shall be "incentive stock options" within the meaning of Section 422
of the Code (as hereinafter defined).
2. Definitions. As used in this Plan, the following terms shall have the
-----------
meanings set forth below:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any regulations promulgated thereunder.
(c) "Company" shall mean FieldWorks, Incorporated, a Minnesota
corporation, and any successor corporation.
(d) "Continuous Status as a Director" shall mean the absence of any
interruption or termination of service as a member of the Board.
(e) "Employee" shall mean any person, including officers and directors
of the Company, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be
sufficient in and of itself to constitute "employment" by the Company.
(f) "Exchange Act" shall mean the Securities and Exchange Act of 1934,
as amended.
(g) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair
market value of such property determined by such methods or procedures as
shall be established from time to time by the Board. Notwithstanding the
foregoing, where there is a public market for the common stock, par value
$.001 per share, of the Company, the fair market value per Share shall be
the closing price of such common stock in the over-the-counter market on
the date of
<PAGE>
grant, as reported in The Wall Street Journal (or, if not so reported,
-----------------------
as otherwise reported by the National Association of Securities Dealers
Automated Quotation ("NASDAQ") System or, in the event such common stock is
traded on the NASDAQ National Market System or listed on a stock exchange,
the fair market value per Share shall be the closing price on such system
or exchange on the date of grant of the Option, as reported in The Wall
--------
Street Journal.
--------------
(h) "Non-Employee Director" shall mean a director who is not also an
Employee.
(i) "Option" shall mean a stock option granted pursuant to this Plan.
(j) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 425(e) of the Code.
(k) "Plan" shall mean this FieldWorks, Incorporated 1996 Directors'
Stock Option Plan, as amended from time to time.
(l) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Exchange Act or any successor rule or
regulation.
(m) "Shares" shall mean shares of common stock, $.001 par value per
share, of the Company or such other securities or property as may become
subject to Options as the result of an adjustment made under Section 4(c)
of this Plan.
(r) "Subsidiary" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 425(f) of the Code.
3. Administration. This Plan shall be administered by the Board.
--------------
4. Shares Available.
----------------
(a) Shares Available. Subject to adjustment as provided in
----------------
Section 4(b), the aggregate number of Shares for which Options may be
issued under this Plan shall be 300,000 Shares. Such Shares may be either
Shares reacquired or newly issued, authorized but unissued Shares. If any
Shares covered by an Option are not purchased or are forfeited, or if an
Option otherwise terminates without delivery of any Shares, then the number
of Shares counted against the aggregate number of Shares available under
the
-2-
<PAGE>
Plan with respect to such Option, to the extent of any such forfeiture
or termination, shall again be available for granting Options under the
Plan.
(b) Adjustments. In the event that the Board shall determine that any
-----------
dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company or other similar corporate transaction or event
affects the Shares such that an adjustment is determined by the Board to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under this Plan, then the
Board shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and type of Shares (or other securities or other property)
which thereafter may be made the subject of Options, (ii) the number and
type of Shares (or other securities or other property) subject to
outstanding Options and (iii) the purchase or exercise price with respect
to any Options; provided, however, that the number of Shares covered by any
-------- -------
Option shall always be a whole number.
(c) Reservation of Shares. During the term of this Plan, the Company
---------------------
will at all times reserve and keep available such number of the Shares
available for issuance pursuant to this Plan as shall be sufficient to
satisfy the requirements of the Plan.
5. Option Grants. All grants of Options hereunder shall be automatic and
-------------
nondiscretionary and shall be made strictly in accordance with the following
provisions:
(a) No person shall have any discretion to select which Non-Employee
Directors shall be granted Options or to determine the number of Shares to
be covered by Options granted to Non-Employee Directors.
(b) Each Non-Employee Director shall be automatically granted an
Option (an "Initial Grant") to purchase 25,000 Shares upon the date on
which such person first becomes a member of the Board, whether through
election by the shareholders of the Company or appointment by the Board to
fill a vacancy. Options granted under this Section 5(b) shall become
exercisable in three equal annual installments with the first one-third
installment vesting on the date of the Initial Grant and the two remaining
one-third installments vesting on the first and second anniversary of the
Initial Grant, respectively.
(c) Each Non-Employee Director shall automatically receive, on the
date of each Regular Meeting of Shareholders, beginning with the Regular
-3-
<PAGE>
Meeting of Shareholders held in 1997, an Option to purchase 10,000 Shares,
such Option to become exercisable six months subsequent to the date of
grant; provided however, that such Option shall only be granted to Non-
--------
Employee Directors who have served since the date of the last Regular
Meeting of Shareholders and will continue to serve after the date of grant
of such Option.
(d) The terms of each Option granted hereunder shall be as follows:
(i) The term of such Option shall be ten years.
(ii) The exercise price per Share shall be 100% of the Fair
Market Value of a Share on the date of grant of the Option.
(e) Exercise. All Options granted under this Plan may be exercised in
--------
whole or in part from time to time by serving written notice of exercise on
the Company at its principal executive offices, to the attention of the
Company's Secretary. The notice shall state the number of Shares as to
which the Option is being exercised and be accompanied by payment of the
purchase price. A Non-Employee Director may, at such Non-Employee
Director's election, pay the purchase price by check payable to the
Company, in Shares, or in any combination thereof having a Fair Market
Value on the exercise date equal to the applicable exercise price.
(f) Termination of Status as a Director. If an Non-Employee Director
-----------------------------------
ceases to serve as a director of the Company (including termination due to
inability to continue service as a director with the Company as a result of
such Non-Employee Director's total and permanent disability (as defined in
Section 22(e)(3) of the Code)), such Non-Employee Director may exercise
his/her Options to the extent that he/she was entitled to exercise such
Option at the date of such termination. To the extent that such Non-
Employee Director was not entitled to exercise an Option at the date of
such termination, or if such Non-Employee Director does not exercise such
Option (which he/she was entitled to exercise) within the term of such
Option, the Option shall terminate.
(g) Death. Notwithstanding the provisions of Section 5(f) above, if a
-----
Non-Employee Director dies during the term of an Option:
(i) If such Non-Employee Director was at the time of death
serving as a director of the Company and had been in Continuous
Status as a Director since the date of grant of the Option, then
the Option may be exercised by such Non-Employee Director's estate
or by a person who acquired the right to exercise the Option by
bequest or inheritance, but only to the
-4-
<PAGE>
extent of the right to exercise that would have accrued had such
Non-Employee Director continued living and remained in Continuous
Status as a Director for six months after the date of death.
(ii) If such Non-Employee Director's death occurred within
30 days after the termination of such Non-Employee Director's
Continuous Status as a Director, then the Option may be exercised
by such Non-Employee Director's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but
only to the extent of the right to exercise that had accrued at
the date of termination of Continuous Status as a Director.
(h) Option Agreement. Options shall be evidenced by written a Non-
----------------
Qualified Option Agreement in such form as the Board shall approve, and no
Non-Employee Director will have rights under an Option granted to such Non-
Employee Director unless and until such a Non-Qualified Option Agreement
shall have been duly executed on behalf of the Company and, if requested by
the Company, by the Non-Employee Director.
(i) Other Terms and Conditions. All Options granted under this Plan
--------------------------
shall be subject to the other terms contained in this Plan and to the
standard terms and conditions contained in the form of Non-Qualified Stock
Option Agreement used by the Company from time to time.
6. Non-Transferability of Options. An Option may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder. An
Option may be exercised during the lifetime of the recipient thereof only by
such recipient.
7. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the common stock of the Company may then be listed or quoted, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance. As a condition to the exercise of an Option, the Company
may require the person exercising such Option to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present
-5-
<PAGE>
intention to sell or distribute such Shares, if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law. Inability of the Company to obtain authority from
any regulatory body having jurisdiction, which authority is deemed by the
Company's counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect of the failure
to issue or sell such Shares as to which such requisite authority shall not have
been obtained.
8. Tax Withholding. In order to comply with all applicable federal or
---------------
state income or other tax laws or regulations, the Company may take such action
as it deems appropriate to ensure that all applicable federal or state payroll,
withholding, income or other taxes, which are the sole and absolute
responsibility of a recipient of an Option under this Plan are withheld or
collected from such recipient. In order to assist a recipient in paying all or
a portion of the federal and state taxes to be withheld or collected upon
exercise or receipt of (or the lapse of restrictions relating to) an Option, the
Board, in its discretion and subject to such additional terms and conditions as
it may adopt, may permit the recipient to satisfy such tax obligation by
(i) electing to have the Company withhold a portion of the Shares otherwise to
be delivered upon exercise or receipt of (or the lapse of restrictions relating
to) such Option with a Fair Market Value equal to the amount of such taxes or
(ii) delivering to the Company Shares other than Shares issuable upon exercise
or receipt of (or the lapse of restrictions relating to) such Option with a Fair
Market Value equal to the amount of such taxes. The election, if any, must be
made on or before the date that the amount of tax to be withheld is determined.
9. Effective Date and Term.
-----------------------
(a) The Plan shall become effective upon its approval by the
affirmative vote or written consent of the holders of a majority of the
voting power of the outstanding shares of voting stock of the Company.
(b) The Plan shall continue in effect for a term of ten years from the
date of approval by the shareholders as provided above unless sooner
terminated as provided below, and Options shall only be granted under this
Plan during such ten-year period; provided, however, that unless otherwise
-------- -------
expressly provided in this Plan or in an applicable Non-Qualified Option
Agreement, any Option theretofore granted may extend beyond the end of such
10-year period, and the authority of the Board with respect to this Plan
and any Options shall extend beyond such termination.
10. Amendment and Termination; Adjustments. Except to the extent
--------------------------------------
prohibited by applicable law:
-6-
<PAGE>
(a) Amendments to Plan. The Board may at any time amend, alter,
------------------
suspend, discontinue or terminate this Plan; provided, however, that,
-------- -------
notwithstanding any other provision of this Plan or any Option, without the
approval of the shareholders of the Company, no such amendment, alteration,
suspension, discontinuation or termination shall be made that, absent such
approval:
(i) would cause Rule 16b-3 or Section 162(m) of the Code to
become unavailable with respect to this Plan; or
(ii) would violate the rules or regulations of the NASDAQ
National Market, any other securities exchange or the
National Association of Securities Dealers, Inc. that are
applicable to the Company.
(b) Effect of Amendment or Termination; Amendments to Options. Except
---------------------------------------------------------
as otherwise provided in this Plan or in an Option Agreement, no amendment,
alteration, suspension, discontinuation or termination of this Plan shall
affect Options already granted, prospectively or retroactively, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the holder
or beneficiary of such Option and the Board, which agreement must be in
writing and signed by the holder or beneficiary of such Option and the
Company.
(c) Correction of Defects, Omissions and Inconsistencies. The Board
----------------------------------------------------
may correct any defect, supply any omission or reconcile any inconsistency
in this Plan or any Option in the manner and to the extent it shall deem
desirable to carry this Plan into effect.
(d) Limitation. The provisions of this Plan may not be amended more
----------
often than once every six months, other than to comply with changes in the
Code, the Employee Retirement Income Security Act of 1974, as amended, or
the rules and regulations promulgated thereunder.
11. Section 16(b) Compliance. This Plan is intended to comply in all
------------------------
respects with Rule 16b-3 or any successor provision, as in effect from time to
time, and in all events the Plan shall be construed in accordance with the
requirements of Rule 16b-3. If any Plan provision does not comply with Rule
16b-3 as hereafter amended or interpreted, the provision shall be deemed
inoperative.
-7-
<PAGE>
12. General Provisions.
------------------
(a) No Right to Service as Director. Neither the existence of this
-------------------------------
Plan nor the grant of any Option hereunder shall be construed as giving a
Non-Employee Director any right with respect to continuation of service on
the Board or nomination for election to serve as a member of the Board, nor
shall it interfere in any way with any rights which any Non-Employee
Director or the Company may have to terminate his or her directorship at
any time.
(b) Rights as a Shareholder. Until the issuance (as evidenced by the
-----------------------
appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing Shares
issuable upon exercise of an Option, no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Shares
subject to the Option, notwithstanding the exercise of the Option. A share
certificate for the number of Shares so acquired shall be issued as soon as
practicable after exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 4 of this Plan.
(c) No Trust or Fund Created. Neither this Plan nor any Option issued
------------------------
hereunder shall create or be construed to create a trust or separate fund
of any kind or a fiduciary relationship between the Company and any Non-
Employee Director or other person.
(d) No Fractional Shares. No fractional Shares shall be issued or
--------------------
delivered upon the exercise of any Option, and the Board shall determine
whether cash shall be paid in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
(e) Headings. Headings are given to the Sections and subsections of
--------
this Plan solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or
interpretation of this Plan or any provision hereof.
(f) Governing Law. The validity, construction and effect of this Plan
-------------
or of any Option, and any rules and regulations relating to this Plan or
any Option, shall be determined in accordance with the laws of the State of
Minnesota.
(g) Severability. If any provision of this Plan or any Option is or
------------
becomes or is deemed to be invalid, illegal or unenforceable in any
-8-
<PAGE>
jurisdiction or would disqualify this Plan or any Option under any law
deemed applicable by the Board, such provision shall be construed or deemed
amended to conform to applicable laws, or if it cannot be so construed or
deemed amended without, in the determination of the Board, materially
altering the purpose or intent of this Plan or the Option, such provision
shall be stricken as to such jurisdiction or Option, and the remainder of
this Plan or any such Option shall remain in full force and effect.
-9-
<PAGE>
Exhibit 10.32
OMNIOFFICES(R)
Agreement for Office Space
This Agreement is made this 11th day of November, 1996 by and between
OMNIOFFICES/Woodland Hills, Inc. ("Lessor") having offices at Suite 1500 in that
certain building located at 6320 Canoga Avenue, Woodland Hills, CA 91367 (the
"Building") and FieldWorks, Inc. ("Lessee") a Corporation (corporation,
partnership, individual) whose address is 9961 Valley View Road, Eden Prairie,
MN 55344. The parties for themselves, their heirs, legal representatives,
successors and assigns, agree as follows:
1. Demise and Description of Property. Lessor leases to Lessee, and
----------------------------------
Lessee leases from Lessor, the space hereinafter referred to as the "Premises,"
being a part of Lessor's larger space, hereinafter referred to as the
"Facility," the Building, for the term and subject to the conditions and
covenants hereinafter set forth, and all encumbrances, restrictions, zoning laws
and governmental or other regulations or statutes affecting the Building, the
Facility, or Premises and being more particularly described as follows:
The Premises being office space number(s) 1534,
having a maximum occupancy capacity of 1 (one)
person(s). Lessor hereby grants Lessee the privilege
to use in common with other lessees and parties that
Lessor may designate, certain office amenities
located in the Facility. The amenities are more
particularly described in attached Schedule "A."
2. Use. (a) The Premises shall be used by Lessee for Sales of Rugged
----
computers and such other use as is normally incident thereto and for no other
purpose, in accordance with the rules and regulations attached and those which
may be promulgated for the mutual benefit of Lessor and its then similarly
situated lessees. Additionally, Lessee shall not offer at the Premises any of
the services which Lessor provides to its other lessees, including, but not
limited to, those amenities or services described in Schedules "A" and "B"
attached. In the event Lessee breaches any provision of this paragraph, Lessee
shall be in default hereunder and Lessor shall be entitled to exercise any
rights or remedies under Section 9 below, and in addition to such rights and
remedies, Lessee shall pay Lessor the sum of $300.00 per week as liquidated
damages for each such breach so long as such breach shall continue.
(b) Lessee will not make or permit to be made any use of the Premises
which would violate any of the terms of this Agreement or which directly or
indirectly is forbidden by public law, ordinance or government regulations or
which may be dangerous to life, limb, or property, or which may invalidate or
increase the premium of any policy of insurance carried on the Building or on
Lessor's Facility, or which will suffer or permit the Premises to be used in any
manner or anything to be brought into (or kept there) which, in the judgment of
Lessor, shall in any way impair or tend to impair the character, reputation or
appearance of the Building as a high quality office building, or which will
impair or interfere with or tend to impair or interfere with any of the services
performed by the lessor for Lessee or for others.
3. Term. The term of this Agreement shall be for a period of 12
-----
(twelve) months commencing on January 1, 1997, and ending on December 31, 1997,
unless renewed as provided below.
4. Rent. For and during the term of this Agreement, Lessee shall pay
-----
lessor as rent for the Premises of total annual rental of Twenty-Two Thousand
Five Hundred Dollars and no cents ($22,500.00), payable in equal monthly
installments of $1,875.00 each in advance on the first day of each calendar
month after the commencement of the term, or a prorated amount for any partial
calendar month during the term. The first such payment of rental as well as the
payment of the Deposit as set forth in Section 5 and prepayment of Schedule B
costs as set forth and defined in Section 6 shall be paid by Lessee
simultaneously with execution of this Agreement.
The rental payable during the term of this Agreement and as increased
pursuant to this Section shall be increased on the first day of the month
following notification of a rental increase (however designated), including
without limitations, increases in direct expenses to Lessor by the Building
pursuant to the main lease in effect between the Building and Lessor, or of an
increase in utility charges by the appropriate utility company(s), if billed to
lessor separately, by the same percentage as the percentage increase in Lessor's
rental under the main lease or in Lessor's utility charges. The term "direct
expenses" as used herein shall refer to the same items and costs as are used by
the Building in its determination of expenses and costs passed on to Lessor.
The statement of
<PAGE>
the Building as to the amount of such direct expenses, if accepted by Lessor,
shall be binding upon both Lessor and Lessee.
In the event Lessor receives notice from the Building of any increase,
the effective date of which is prior to the date of notification, Lessor shall
immediately notify Lessee in writing of such retroactive increase, and shall
bill Lessee for its pro rata share thereof; which bill Lessee shall pay upon
such notification. This provision shall not, however, limit the obligation of
Lessee to pay on a monthly basis any increase in future rents caused by the
Increase in rents charged Lessor under the main lease.
UPON THE ENDING DATE SET FORTH HEREIN, OR ANY EXTENSION THEREOF, THE
AGREEMENT SHALL BE EXTENDED FOR THE SAME PERIOD OF TIME AS THE INITIAL TERM AND,
UPON THE SAME TERMS AND CONDITIONS AS CONTAINED HEREIN, UNLESS EITHER PARTY
NOTIFIES THE OTHER IN WRITING BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, THAT THE AGREEMENT WILL NOT BE EXTENDED WITHIN THE PERIOD HEREINAFTER
SPECIFIED. IF LESSEE HAS LESS THAN THREE OFFICES, SUCH NOTICE MUST BE GIVEN AT
LEAST SIXTY (60) DAYS PRIOR TO THE EXPIRATION DATE OF THIS AGREEMENT. IF LESSEE
HAS THREE OR MORE OFFICES, SUCH NOTICE MUST BE GIVEN AT LEAST NINETY (90) DAYS
PRIOR TO THE EXPIRATION DATE OF THIS AGREEMENT.
Initials
5. Receipt of Deposit. Lessee as of its execution of this Agreement
-------------------
deposited with Lessor the sum of $1,875.00 ("Deposit") the receipt of which is
acknowledged by lessor, as security for the full performance by Lessee of the
aforementioned terms, conditions and covenants of this Agreement to be performed
and kept, as well as for the cost of any repair or collection of damage in
excess of normal wear and tear. If Lessee defaults with respect to the
performance of any terms of this Agreement, Lessor may use or apply all or any
part of the Deposit to cure such default and Lessee shall promptly upon notice
reimburse Lessor for any portion of the Deposit that Lessor shall from time to
time so apply. The Deposit or any balance thereof shall be returned within
sixty (60) days after Lessee has vacated and left the Premises in an acceptable
condition (following a personal inspection by Lessor), surrendered all keys, and
paid all rental and other charges hereunder. If Lessor determines that there is
any loss, damage or injury chargeable to lessee hereunder, lessor, at its
option, may retain said Deposit or may apply the sum against any actual loss,
damage or injury and the balance thereof will be the responsibility of Lessee.
It is further understood and agreed that the Deposit is not to be considered nor
used as the last rental payment under this Agreement.
6. Prepayment of Schedule B Services. In addition to the rental amount
----------------------------------
set forth in Section 4 and the Deposit set forth in Section 5 of this Agreement,
Lessee shall upon its execution of this Agreement pay to lessor the sum of
$1,875.00 which amount represents an Expense Deposit to be applied against the
cost of supplying Lessee with the Schedule B services, pursuant to the procedure
set forth in Section 7 of this Agreement. In addition, Lessee agrees that
Lessor may use or apply all or any part of the Expense Deposit to cure any
default by lessee hereunder. Any remaining balance of the Expense Deposit after
the end of the term of this Agreement shall be returned to Lessee in the same
manner and within the same period as the Deposit.
7. Services. Provided Lessee is not in default hereunder, Lessor shall
---------
make available certain amenities to Lessee as more particularly described in
Schedule A. Such services shall be offered to Lessee in conjunction with
services to other lessees of Lessor and there shall be no charge for same.
In addition, provided Lessee is not in default hereunder and provided the
cost thereof does not exceed the Expense Deposit, Lessor shall make available to
Lessee certain other services as more fully described in attached Schedule "B"
("Schedule B Services"). Schedule B Services shall be billed monthly and
payment for such services shall be due on or before the 10th day of each month.
Lessee's Expense Deposit shall be applied against the cost of supplying Lessee
with Schedule B Services or applied as otherwise permitted under Section 6, and
Lessee during the term shall promptly upon application of any amount of the
Expense Deposit toward Schedule B Services or toward amounts otherwise due pay
Lessor the amount necessary to restore the Expense Deposit to the amount set
forth in Section 6. In the event that Lessee fails to make payment for Schedule
B Services, Lessor shall, in addition to the remedies available to Lessor
pursuant to Section 9, be entitled to apply the Expense Deposit toward the cost
of such services and shall in addition be entitled to suspend amenities or
services pursuant to either Schedule "A" or Schedule "B" until such time as the
Expense Deposit is restored in full and Lessee has paid all sums due for such
services. Schedule B Services shall be performed at a rate which is then
prevailing throughout the Facility and said rate is subject to adjustment by
Lessor upon thirty (30) days written notice to Lessee. Lessee specifically
acknowledges that type of telephone service and the number of lines available
for
<PAGE>
Lessee's use is subject to reasonable limitations established from time to time
by lessor and that such service is subject to termination without notice in the
event of a default by lessee hereunder.
8. Surrender. Lessee agrees to and shall, on expiration or sooner
----------
termination of this Agreement or of any extended term, promptly surrender and
deliver the Premises to Lessor, without demand, and in good condition, ordinary
wear and tear excepted. Lessor shall have the right to show Lessee's office(s)
during the sixty (60) day period after notice to vacate is received. Without
prior written approval of Lessor, Lessee shall not remove any of its property
from the Premises upon termination of this Agreement, or at any other time,
except during Lessor's normal business hours. In the event Lessor consents to
Lessee's removing property before or after normal business hours, any expenses
incurred by Lessor as a result, including but not limited to expenses for
personnel, security, utilities, and the like, shall be paid by Lessee.
In the event that Lessee fails to surrender the Premises as provided,
Lessee agrees to pay Lessor, as liquidated damages, a sum equal to twice the
monthly rend and additional charges for services provided to be paid by Lessee
to Lessor for all the time Lessee shall so retain possession of the Premises or
any part thereof; provided, however, that the exercise of Lessor's rights under
this clause shall not be interpreted as a grant of permission to Lessee to
continue in possession.
9. Defaults and Remedies.
----------------------
9.1 Defaults. The occurrence of any one or more of the following events
shall constitute a material default and breach of this Agreement by lessee:
(a) The failure by Lessee to make any payment of rent or any
other payment required to be made by Lessee hereunder, as and when due, where
such failure shall continue for a period of five (5) days after written notice
thereof from Lessor to Lessee. In the event that Lessor serves Lessee with a
Notice to Pay Rent of Quit pursuant to applicable Unlawful Detainer statutes
such Notice to Pay Rent or Quit shall also constitute the notice required by
this subparagraph.
(b) The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this Agreement to be observed or
performed by Lessee, other than described in paragraph (a) above, where such
failure shall continue for a period of ten (10) days after written notice
thereof from lessor to Lessee.
9.2 Remedies. In the event of any such default or breach by lessee,
Lessor may at any time thereafter with or without notice or demand and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by
reason of such default or breach:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means in which case this Agreement shall terminate and Lessee shall
immediately surrender possession of the Premises to lessor. In such event
Lessor shall be entitled to recover from lessee all damages incurred by lessor
by reason of Lessee's default including, but not limited to, the cost of
recovering possession of the Premises; expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorney's fees,
and any real estate commission actually paid, the worth at the time of award by
the court having jurisdiction thereof of the amount by which the unpaid rent
for the balance of the term after the time of such award exceeds the amount of
such rental loss for the same period that Lessee proves could be reasonably
avoided; that portion of the leasing commission paid by lessor pursuant to
paragraph 16 applicable to the unexpired term of this Agreement.
(b) Maintain Lessee's right to possession in which case this
Agreement shall continue in effect whether or not Lessee shall have abandoned
the Premises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Agreement, including the right to recover the
rent as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to lessor
under the laws or judicial decisions of the state wherein the Premises are
located. Unpaid installments of rent and other unpaid monetary obligations of
lessee under the terms of this Agreement shall bear interest from the date due
at the maximum rate then allowable by law.
9.3 Default by Lessor. Lessor shall not be in default unless Lessor
fails to perform obligations required of Lessor within a reasonable time, but in
no event later than thirty (30) days after written notice by lessee to Lessor
and to the holder of any first mortgage or deed of trust covering the Premises
whose name and address shall have theretofore been furnished to Lessee in
writing, specifying where Lessor has failed to perform such obligation;
provided, however, that if nature of the Lessor's obligation is such that more
than thirty (30) days are required for performance then Lessor shall not be in
default if Lessor commences performance within such 30-day period and
thereafter diligently prosecutes the same to completion.
<PAGE>
10/ Notices. Any notice under this Agreement must be in writing and must
-------
be sent by certified mail, return receipt requested, or by an expedited mail
service that provides proof of delivery, to the last address of the party to
whom notice is to be given, as designated by such party in writing. Notices to
lessor must be simultaneously sent to each of the following addresses:
OMNIOFFICES/Woodland Hills, Inc. (Lessor's name)
c/o OMNIOFFICES Management Co., Inc.
1117 Perimeter Center West
Atlanta, Georgia 30338
and
SAME AS ABOVE
or such other address as Lessor shall designate to Lessee in writing. The
Lessee hereby designates its address (which address must be an address within
the United States, otherwise notice shall be deemed given three (3) days after
deposited with the mail service, regardless of whether or not received) as:
FieldWorks, Inc.
9961 Valley View Road
Eden Prairie, MN 55344
Such notices shall be deemed to be duly given only if mailed by certified
mail, return receipt requested, in a postage-paid envelope, addressed to the
other party at the addresses given above, and in the case of notices from Lessee
to Lessor, only if the address of the Premises is stated in the notice. If such
mail is properly addressed and mailed as above, it shall be deemed notice for
all purposes, even if undelivered.
11. Assumption Agreements and Covenants. The parties acknowledge and
------------------------------------
agree that this Agreement is subject and subordinate to the main Building lease
governing the Facility under which lessor is bound as tenant, and the provisions
of the main lease, other than as to the payment of rent of other monies, are
Incorporated into this Agreement as if completely rewritten herein. Lessee
shall comply with and shall be bound by all provisions of the main lease except
that the payment of rent shall be governed by the provisions of Section 4, and
Lessee shall indemnify and hold Lessor harmless from and against any claim or
liability under the main lease of lessor arising from lessee's breach of the
Main Lease or this Agreement. Lessor covenants and warrants that the use of the
Premises as a business office is consistent with and does not violate the terms
of the main lease.
12. Furniture and Fixtures. Lessor agrees, at its own cost and expense,
-----------------------
to furnish and install furniture, fixtures and equipment that are in the
Lessor's sole opinion necessary to provide suitable office facilities for the
Lessee upon such terms and conditions routinely applicable to the facility;
provided that such furniture, fixtures and equipment shall remain Lessor's
property.
13. Assignment and Subletting. No assignment or subletting of the
--------------------------
Premises, this Agreement or any part thereof shall be made by Lessee without
Lessor's prior written consent. Neither all nor any part of the Lessee's
interest in the Premises or this Agreement may be encumbered, assigned, or
transferred in whole or in part either by the act of the Lessee or by operation
of law.
14. Subletting to Other Lessee or licensee Prohibited. Any provision
--------------------------------------------------
herein to the contrary notwithstanding, Lessee shall not sublease any of the
Premises to any person or entity who is currently a Lessee or Licensee of lessor
or who becomes such at any time during the term of this Agreement. Upon breach
of the foregoing, Lessor, at its option, may cancel this Agreement, retain
Lessee's Deposit, and shall be entitled to recover as liquidated damages the sum
of $5,000.00 for each such breach.
15. Lessor's Liability. Lessor shall not be liable or responsible to
-------------------
Lessee for any injury or damage regardless of the cause thereof (and including
without limitation any loss of business or other incidental or consequential
damages suffered by Lessee) resulting from the acts or omissions of Lessor's
employees, persons leasing office space or services from lessor, or other
persons occupying any part of the Building, or for any failure of services
provided, such as water, gas or electricity, or for any injury or damage to
person or property caused by any person, or for Lessor's failure to make
repairs which it is obligated to make hereunder. Lessee agrees to indemnify and
hold Lessor harmless from and against any and all claims, damages or causes of
action for damages (including reasonable attorney's fees and court costs)
brought on account of injury to any person or persons or property, or loss of
life, arising out of the use, operation or maintenance of the Premises by
Lessee. The parties
<PAGE>
hereby agree that the foregoing provisions of this Section 15 have been made in
contemplation that all such risk of loss shall be borne by lessee's insurers
pursuant to Section 25 below.
16. Waiver of Breach. No failure by the Lessor to insist upon the strict
-----------------
performance of any term or condition of this Agreement or to exercise any right
or remedy available on a breach thereof, and no acceptance of full or partial
payment during the continuance of any such breach shall constitute a waiver of
any such breach or any such term or condition. No term or condition of this
Agreement required to be performed by the Lessee, and no breach thereof, shall
be waived, altered or modified, except by a written instrument executed by the
Lessor. No waiver of any breach shall affect or alter any term or condition in
the Agreement, and each term or condition shall continue in full force and
effect with respect to any other then existing or subsequent breach thereof.
17. Employment of Lessor's Employees. Lessee recognized that Lessor has
---------------------------------
expended considerable time, effort and expense in training Lessor's employees so
as to provide high quality service to Lessee, and that the hiring by lessee of
Lessor's present employees or any employee employed by Lessor within a six (6)
month period prior to the offer by Lessee to such employee would save Lessee,
and would cause Lessor to expend considerable time, effort and expense in
training and procurement. Lessee further acknowledges that were Lessee to hire
any such employees, Lessor would be forced to expend additional time, effort and
expense in training new employees, the amount of which cannot be determined with
certainty. Should Lessee, during the original or extended term of the Agreement
or for twelve (12) months thereafter, offer employment to and subsequently
employ any employee of Lessor who is or was an employee of Lessor at any time
during the six (6) month period immediately preceding such offer of employment
by lessee, lessee shall pay to lessor, as a procurement fee, and not as a
penalty, a sum equal to forty percent (40%) of the annual salary last payable by
lessor to such employee or $8,000 (whichever is greater).
18. Rules and Regulations. The rules and regulations attached to this
----------------------
instrument are made an integral part of this Agreement. Lessee, its employees
and agents will perform and abide by the rules and regulations and any
amendments or additions to said rules and regulations as Lessor may make. In
addition, Lessee, its employees and agents shall abide by all applicable
governmental rules, regulations, statutes and ordinances, failing which Lessee
shall be in default hereunder and shall pay any fines or penalties imposed for
such violation(s) directly to the appropriated governmental authority or to
Lessor, if Lessor has paid such amount on behalf of Lessee.
19. Severability. The invalidity of any one or more of the sections,
-------------
subsections, sentences, clauses or words contained in this Agreement, or the
application thereof to any particular set of circumstances, shall not affect the
validity of the remaining portions of this Agreement, or of the valid
application to any other set of circumstances, all of which sections,
subsections, sentences, clauses, or words are inserted conditionally on being
valid in law; and in the event that one or more of the sections, subsections,
sentences, clauses, or words contained herein shall be invalid, this Agreement
shall be construed as if such invalid sections, subsections, sentences, clauses
or words had not been inserted. In the event that any part of this Agreement
shall be held to be unenforceable or invalid, the remaining parts of this
Agreement shall nevertheless continue to be a valid and enforceable as though
the invalid portions had not been a part hereof. In addition, the parties
acknowledge and agree (I) that this Agreement has been fully negotiated by and
between the parties in good faith and is the result of the joint efforts of both
parties, (ii) that both parties have been provided with the opportunity to
consult with legal counsel regarding its terms, conditions and provisions, and
(iii) that regardless of whether or not either party has elected to consult with
legal counsel, it is the intent of the parties that in no event shall the terms
conditions or provisions of this Agreement be construed against the part which
has drafted this Agreement.
20. General This Agreement embodies the entire agreement between parties
-------
relative to its subject matter, and shall not be modified, changed or altered in
any respect except in writing signed by the parties.
21. Time of Essence. Time is of the essence as to the performance of all
----------------
covenants, terms and provisions of this Agreement by Lessee.
22. Landlord's Election Under This Agreement. Upon early termination of
-----------------------------------------
the main Building lease, this Agreement shall terminate unless the Building
Landlord under the main lease elects to have this Agreement assigned to the
Building Landlord or another entity as provided in the main lease. Upon notice
to Lessor of the termination of the main lease and such election, (I) the
Agreement shall be deemed to have been assigned by Lessor to the Building
Landlord, or to such other entity as is designated in such notice by the
Building Landlord ("Buildings Designee"), (ii) the Building Landlord or
Buildings Designee shall be deemed to be the Lessor under this Agreement.
23. Execution by Lessee. The party or parties executing this Agreement
--------------------
on behalf of the Lessee warrant(s) and represent(s) that such executing party
(or parties) has (or have) complete and full authority to
<PAGE>
execute this Agreement on behalf of Lessee, that Lessee shall fully perform its
obligations hereunder, and that same shall fully indemnify, defend and save
Lessor harmless from any breach of these warranties and representations.
24. Covenant and Conditions. Each term, provision and obligation of this
------------------------
Agreement to be performed by lessee shall be construed as both a covenant and
condition.
25. Mutual Waiver of Subrogation: Casualty: Condemnation. Lessee
---------------------------------------------------------
acknowledges that it shall be responsible for maintaining such insurance as
Lessee deems necessary to protect against risk of injury or damage to person or
property, including Lessee's property, and that the provisions of Section 15
above are in contemplation thereof. Any fire and extended risk casualty
insurance that Lessee maintains shall include a waiver of subrogation in favor
of Lessor and the Building Landlord, and any fire and extended risk insurance
carried on the Facility by lessor shall likewise contain a waiver of subrogation
in favor of Lessee. In the event the entire Premises or the Facility are
damaged, destroyed or taken by eminent domain or acquired by private purchase in
lieu of eminent domain so as to render the Premises fully untenantable and
unrestorable in Lessor's judgment, then within ninety (90) days thereafter by
written notice to the other party, either party shall be able to terminate this
Agreement, but otherwise it shall remain in full force and effect.
26. Attorney's fees. If either party or the broker names herein brings an
-----------------
action to enforce the terms hereof or declare rights hereunder, the prevailing
party in any such action, on trial or appeal, shall be entitled to his
reasonable attorney's fees to be paid by the losing party as fixed by the court.
The provisions of this paragraph shall inure to the benefit of the broker named
herein who seeks to enforce a right hereunder.
27. Compliance with Americans with Disabilities Act of 1990. Lessee
---------------------------------------------------------
shall, at its own cost and expense, comply with the Americans with Disabilities
Act of 1990, as now or hereafter amended, and the rules and regulations from
time to time promulgated thereunder (hereinafter collectively referred to as the
"Act"). Lessee acknowledges that Lessor shall have no responsibility with
respect to the Premises for complying with the Act. lessee hereby agrees to
defend, indemnify and hold Lessor harmless from and against any and all claims,
demands, actions, damages, fines, judgments, penalties, costs (including
attorney's and consultant's fees), liabilities and losses resulting from
lessee's failure to comply with the Act. The provisions of this paragraph shall
survive the expiration or other termination of this Agreement.
28. Relocation Addendum. Lessor hereby agrees that during the term of
---------------------
this Agreement, Lessee may relocate the Premises to any other OMNI/REGUS
Facility selected by Lessee (the Facility to which the Premises may be relocated
is hereinafter referred to as the "New Facility" and the relocated Premises in
the New Facility are hereinafter referred to as the "Relocation Premises") upon
the terms and conditions hereinafter set forth in the "Relocation Addendum."
29. Counterparts. This agreement may be executed in two or more counter
--------------
parts, each of which shall be deemed to be an original but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Agreement as of the
date first written above.
LESSOR: OMNIOFFICES/Woodland Hills, Inc.
By:
---------------------------------------------
If a corporation:
LESSEE: FieldWorks, Inc.
By: /s/ Mark Beeman
---------------------------------------------
Title: Sales Manager
------------------------------------------
[Corporate Seal]
<PAGE>
If an individual or partnership:
LESSEE:
By: (SEAL)
------------------------------------
By: (SEAL)
------------------------------------
<PAGE>
<TABLE>
<S> <C>
SCHEDULE "A" SCHEDULE "B"
Furnished Private Office Personal Secretarial Service
Furnished, Decorated Document Storage Library
Reception Room with
Qualified Receptionist word Processing Service
Limited Storage Facilities Office Assistant/Porter Services
Package Receipt in Messenger Service
Lessee's Absence
Reproduction Facilities
Personalized Telephone
Coverage During Office Facsimile Transmission
Hours in Lessee's Absence
UPS Shipping Service
Mail Receipt and Forwarding
Freight Express Services
Reasonable Conference Room
Usage (for 3 or more Package Handling/Boxing and Wrapping Facilities
people) with VCR and
Audio-Visual Facilities, Specialized Equipment and Furniture
subject to prior
scheduling and use by Purchasing Services - Printing and Office Supplies
other lessees
Paging Services
Corporate Identity on
Lobby Directory where Binding Services
Available
Local and Long Distance Telephone Equipment and
Listing of Facsimile Service
Numbers on Lessee's
Letterhead Travel and Entertainment Arrangements
Complete Mail Facility Catering Arrangements
Equipment: Small Business Overnight Letter/Package Arrangements
Machines
Voice Mail
Dictating and
Transcription Equipment Translation Services
Utilities and Maintenance
Janitorial Services
Reasonable Courtesy Use
of Affiliate OMNIOFFICES(R)
</TABLE>
<PAGE>
RULES AND REGULATIONS
(1) Lessees will conduct themselves in a businesslike manner; proper
attire will be worn at all times; the noise level will be kept to a level so as
not to interfere with or annoy other lessees.
(2) Lessee will not affix anything to the walls of the Premises without
the prior written consent of the Lessor.
(3) Lessee will not prop open any corridor doors, exit doors or doors
connecting corridors during or after business hours.
(4) Lessees using public areas may only do so with the consent of the
Lessor, and those areas must be kept neat and attractive at all times.
(5) All corridors, halls, elevators and stairways shall not be
obstructed by Lessee or used for any purpose other than egress and ingress.
(6) No advertisement or identifying signs or other notices shall be
inscribed, painted or affixed on any part of the corridors, doors or public
areas.
(7) Lessee shall not, without Lessor's written consent, or any other
large business machines, reproduction equipment, heating equipment, stove,
speaker phones, radios, stereo equipment or other mechanical amplification
equipment, refrigerator or coffee equipment, or conduct a mechanical business,
do any cooking, or use or allow to be used on the premises oil, burning fluids,
gasoline, kerosene for heating. warming or lighting. No article deemed extra
hazardous on account of fire or any explosives shall be brought into said
premises or Facility. No offensive gases, odors or liquids will be permitted.
(8) If Lessee requires any special wiring for business machines or
otherwise, such wiring shall be done by an electrician designated by Lessor at
Lessee's cost. The electrical current shall be used for ordinary lighting
purposes only, unless written permission to do otherwise shall first have been
obtained from Lessor at an agreed cost to Lessee.
(9) If Lessee requires any special wiring for telephone equipment or
otherwise, such wiring shall be done by personnel designated by lessor at
Lessee's cost. Lessor reserves the right to limit the number and type of lines
Lessee can install in Lessee's premises.
(10) Lessor and its agents shall have the right to enter the Premises at
all reasonable hours for the purpose of making any repairs, alterations or
additions which it shall deem necessary for the preservation, safety or
improvements of said Premises, without in any way being deemed or held to have
committed an eviction of or trespass against Lessee.
(11) Lessee shall give Lessor immediate access to the Premises to show
said Premises on Lessee or Lessor giving notice of intent to vacate in
accordance with the provisions of the Agreement. The Lessee shall in no way
hinder the Lessor from showing said premises. In addition, Lessor may enter the
Premises to show same at any time within sixty (60) days prior to the end of the
term.
(12) Lessee may not conduct business in the hallways or corridors or any
other areas except in its designated offices without written consent of Lessor.
(13) Lessee will bring no animals into the Premises Facility.
<PAGE>
(14) Lessee shall not remove furniture, fixtures or decorative material
from offices without written consent of Lessor.
(15) Lessor reserves the right to make such other reasonable rules and
regulations as in its judgment may from time to time be needed for the safety,
care and cleanliness of the Facility.
(16) Lessee shall not smoke nor allow smoking in any area of the
Facility and shall comply with all governmental regulations and ordinances
concerning smoking.
(17) Lessee shall not allow more than three (3) visitors in the
reception lobby of the Premises at any one time.
(18) Lessee shall cooperate and be courteous with all other occupants of
the Facility and Lessor's staff and personnel.
<PAGE>
ADDENDUM A
WOODLAND HILLS AGREEMENT FOR OFFICE SPACE
This addendum dated this 11th Day of November, 1996 shall be attached to and
become a part of that certain agreement for Office Space dated November 11, 1996
by and between OMNIOFFICES/Woodland Hills, Inc., as Lessor, and FieldWorks,
Inc., as Lessee, (the "Agreement").
(i) Lessee acknowledges that Lessor, pursuant to the terms of the Main
Lease, has collaterally assigned to the owner and/or operator of the Building
(the "Landlord") all of Lessor's interest in all rentals and income arising from
this Agreement and Landlord may collect such rent and income and apply same
towards Lessor's obligations under the Main Lease; provided, however that until
a default occurs in the performance of lessor's obligations under the Main Lease
(taking into account any applicable notice and cure periods), Lessor shall have
the right to receive and collect such amounts. Landlord shall not, by reason
of this assignment or the collection of rentals, be deemed liable to Lessee for
the performance of any of Lessor's obligations under this Agreement. Lessor
hereby irrevocably authorizes and directs Lessee, upon receipt of a written
notice from Landlord stating that an uncured default exists in the performance
of Lessor's obligations under the Main Lease, to pay to landlord all sums then
and thereafter due under this Agreement. Lessor agrees that Lessee may rely on
that notice without any duty of further inquiry and notwithstanding any notice
or claim by lessor to the contrary.
(ii) In the event of the termination of the Main Lease, Landlord or
Landlord's designee may, at its sold option, take over Lessor's entire interest
in this Agreement and, upon notice from Landlord or Landlord's designee given
within thirty (30) days following such termination, Lessee shall attorn to
Landlord or Landlord's designee under the terms of this Agreement. In no event,
however, shall Landlord or Landlord's designee be liable for any previous act or
omission by lessor under this Agreement, or for the return of any advance rental
payments or deposits under this Agreement that have not been actually delivered
to Landlord or Landlord's designee, nor shall Landlord or Landlord's designee be
bound by any modification to this Agreement without Landlord's consent for any
advance rental payment in excess of one month's rent, nor shall Landlord be
subject to any existing defense or offset against Lessor. Lessor shall remain
liable for the return of any advance rental payments or deposits under this
Agreement that have not been actually delivered to landlord or Landlord's
designee.
All other terms and conditions of the above-referenced lease agreement remain in
effect.
IN WITNESS WHEREOF, Lessor and Lessee have caused these presents to be duly
executed as of the date written above:
ACCEPTED BY LESSOR: ACCEPTED BY LESSEE:
OMNIOFFICES/Woodland Hills, Inc. FieldWorks, Inc.
By: By: /s/ Mark Beeman
------------------------------- ---------------------------------
Date: Date: 11/25/96
------------------------------ --------------------------------
<PAGE>
ADDENDUM B
This Addendum dated November 11, 1996 shall be attached to and become a part of
that certain Agreement for Office Space dated November 11, 1996 by and between
OMNIOFFICES/Woodland Hills, Inc., as Lessor, and FieldWorks, Inc., as Lessee,
(the "Agreement").
1. In consideration of the execution of this lease by lessee and provided
that Lessee is not in default hereunder or under any other agreement with
lessor, any parent, subsidiary or affiliate corporation of Lessor, the Lessor
will waive the Deposit as outlined in Paragraph 5; however, at any time during
the term of the agreement or any extension of the agreement that payment is not
received by the Lessor in its office at the address given above within five (5)
days of due date as outlined in Paragraph 4, the full amount as outlined in
Paragraph 5, $1,875.00 will become immediately due.
2. In consideration of the execution of this Agreement by Lessee and
provided that Lessee is not in default hereunder or under any other agreement
with Lessor, or any parent, subsidiary or affiliate corporation of Lessor,
Lessor hereby agrees to rebate $4,500.00 of rent otherwise due hereunder
pursuant to the following schedule provided, however, that the entire amount of
rent rebated pursuant to this Addendum plus interest thereon at the rate of 12%
per annum shall be repaid to lessor should Lessee breach this Agreement. At the
end of the schedule listed below, this addendum shall become null and void.
<TABLE>
<CAPTION>
Month Amount
----------------- -------
<S> <C>
January 1, 1997 $375.00
February 1, 1997 $375.00
March 1, 1997 $375.00
April 1, 1997 $375.00
May 1, 1997 $375.00
June 1, 1997 $375.00
July 1, 1997 $375.00
August 1, 1997 $375.00
September 1, 1997 $375.00
October 1, 1997 $375.00
November 1, 1997 $375.00
December 1, 1997 $375.00
</TABLE>
All other terms and conditions of the above-referenced Agreement remain in
effect.
ACCEPTED BY LESSOR: ACCEPTED BY LESSEE:
OMNIOFFICES/Woodland Hills, Inc. FieldWorks, Inc.
By: By: /s/ Mark Beeman
------------------------------- ---------------------------------
Date: Date: 11/25/96
------------------------------ --------------------------------
<PAGE>
ADDENDUM C
This Addendum shall be attached to and become part of that certain agreement for
office space dated November 11, 1996, by and between OMNIOFFICES/Woodland Hills,
Inc. as Lessor and FieldWorks, Inc. as Lessee (the "Agreement").
Notwithstanding anything to the contrary contained herein, Lessor and Lessee
agree that any increase in rent under this Agreement pursuant to an increase in
rent under the main lease shall be abated during the first twelve (12) months of
this Agreement (the "Abatement Period") so long as Lessee continues to pay the
rental set forth in the first paragraph of Section 4 of the Agreement as same
becomes due and is not otherwise in default of the terms of this Agreement;
provided, however, that at the end of the Abatement Period the rent shall
increase in an amount equal to the increases in rent under the main lease, if
any, during the Abatement Period and shall thereafter increase upon each
increase in rent under the main lease in accordance with the preceding
paragraphs of Section 4.
All other terms and conditions of the above-referenced Agreement remain in
effect.
ACCEPTED BY LESSOR: ACCEPTED BY LESSEE:
OMNIOFFICES/Woodland Hills, Inc. FieldWorks, Inc.
By: By: /s/Mark Beeman
--------------------------------- ----------------------------------
Date: Date: 11/25/96
------------------------------- --------------------------------
<PAGE>
Exhibit 10.33
FIELDWORKS, INCORPORATED
NON-INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT, made as of this 21st day of January, 1997, by and between
FieldWorks, Incorporated, a Minnesota corporation (the "Company"), and David C.
Malmberg ("Optionee").
WHEREAS, the Company pursuant to its FieldWorks, Incorporated 1994 Long-
Term Incentive and Stock Option Plan (the "Plan") wishes to grant this stock
option to Optionee;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. Grant of Option. The Company hereby grants to Optionee the right and
option ("the Option") to purchase all or any part of an aggregate of 100,000
shares (the "Shares") of the common stock, par value $.001 per share (the
"Common Stock"), of the Company at a price per share equal to the Price to
Public on the effective date of the Company's registration statement for its
initial public offering on the terms and conditions set forth herein. The Option
is not intended to be entitled to treatment as an incentive stock option within
the meaning of Section 422A of the Internal Revenue Code of 1986, as amended
(the "Code").
2. Duration and Exercisability. The Option may not be exercised by Optionee
except as set forth below, and the Option shall in all events terminate 10 years
from the date hereof. Subject to the other terms and conditions set forth
herein, the Option shall vest and may be exercised by Optionee as follows:
Percentage
On or after each of of Shares as to which the
the following dates Option is exercisable
------------------- --------------------------
January 20, 2007..........................100%;
provided, however, that 25% of the Option shall vest immediately
as of the date of this Option, and the vesting of the rest of
the Option shall accelerate by the cumulative increments
described below if the objectives described are achieved within
the time periods indicated:
a. If, in the final determination of
the Board of Directors, a management
team has been put in place on or before
July 21, 1997...........................25%;
b. The last day of the quarter in which
the Company's revenues first reach
$7.5 million AND the Company achieves
a net profit
<PAGE>
during such quarter........................25%
c. The last day of the quarter in which the
Company's revenues first reach $12.5 million
AND the Company achieves a net profit of
10% during such quarter................... 25%
During the lifetime of Optionee, the Option shall be exercisable only by
Optionee. The Option shall not be assignable or transferable by Optionee, other
than by will or the laws of descent and distribution.
3. Termination of Directorship
---------------------------
(a) If Optionee ceases to serve as Director of the Company (including
termination due to inability to continue service as Director with the Company as
a result of Optionee's total and permanent disability (as defined in Section
22(e)(3) of the Code)), Optionee may exercise the Option to the extent that he
was entitled to exercise it at the date of such termination. To the extent that
Optionee is not entitled to exercise the Option at the date of such termination,
or if Optionee does not exercise such Option (which he was entitled to exercise)
within the term of the Option, the Option shall terminate.
(b) Notwithstanding the provisions of Section 3(a) above, if Optionee dies
during the term of the Option:
(i) If Optionee was at the time of death serving as Director and had
been in Continuous Status as a Director since the date of grant of the
Option, then the Option may be exercised by Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that
would have accrued had Optionee continued living and remained in
Continuous Status as Director for six months after the date of death.
(ii) If Optionee's death occurred within 30 days after the termination
of Optionee's Continuous Status as Director, then the Option may be
exercised by Optionee's estate or by a person who acquired the right
to exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that had accrued at the date of
termination of Continuous Status as Director.
4. Manner of Exercise.
------------------
(a) The Option may only be exercised by Optionee or other proper party
within the option period by delivering written notice of exercise to the Company
at its principal executive office. The notice shall state the number of Shares
as to
-2-
<PAGE>
which the Option is being exercised and shall be accompanied by payment in full
of the option price for all of the Shares designated in the notice.
(b) Optionee may, at the Company's election, pay the option price in cash,
by check (bank check, certified check or personal check) or by any other means
set forth in the Plan.
(c) The exercise of the Option is contingent upon receipt from Optionee
(or other proper person exercising the Option) of a representation that, at the
time of such exercise, it is Optionee's intention to acquire the Shares being
purchased for investment and not with a view to the distribution or sale thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"); provided, however, that the receipt of such representation shall not be
required upon exercise of the Option if, at the time of such exercise, the
issuance of the Shares subject to the Option shall have been properly registered
under the Securities Act and all applicable state securities laws. Such
representation shall be in writing and in such form as the Company may
reasonably request. The certificate representing the Shares so issued for
investment shall be imprinted with an appropriate legend setting forth all
applicable restrictions on their transferability.
5. Adjustments. If Optionee exercises all or any portion of the Option
subsequent to any change in the Common Stock through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split or other change in
the corporate or capital structure of the Company, Optionee shall then receive
for the aggregate price paid by him or her on such exercise, the number and type
of securities or other consideration which he or she would have received if the
Option had been exercised prior to the event changing the outstanding Common
Stock in order to prevent dilution or enlargement of the rights granted
hereunder.
6. Miscellaneous.
-------------
(a) The Option is issued pursuant to the Plan and is subject to its terms.
Optionee hereby acknowledges receipt of a copy of the Plan. The Plan is also
available for inspection during business hours at the principal office of the
Company.
(b) Optionee shall have none of the rights of a shareholder with respect
to the Shares until such Shares shall have been issued to him or her upon
exercise of the Option.
(c) The Company shall at all times during the term of the Option reserve
and keep available such number of Shares as will be sufficient to satisfy the
requirements thereof. The exercise of all or any part of the Option shall only
be effective at, and may be deferred until, such time as the sale of the Shares
pursuant to such exercise will not violate any federal or state securities laws,
it being understood that the Company shall no obligation to register the
issuance or sale of the Shares for such purpose.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
FIELDWORKS INCORPORATED
By
-------------------------------------
Gary J. Beeman
President and Chief Executive Officer
----------------------------------------
David C. Malmberg
-4-
<PAGE>
Exhibit 11.1
FIELDWORKS, INC. AND SUBSIDIARIES
Computation of Pro Forma Net Loss Per Common Share
<TABLE>
<CAPTION>
For the Year Ended
For the Years Ended December 31 January 5
---------------------------------------------- -------------------
1993 1994 1995 1997
-------------- -------------- -------------- -------------------
<S> <C> <C> <C> <C>
PRIMARY AND FULLY DILUTED:
Net Loss $ (484,515) $ (1,688,218) $ (626,919) $ (3,296,046)
============== ============== ============== ==============
Weighted average common shares
outstanding 2,415,780 4,852,898 5,554,171 5,865,270
Effect of conversion of preferred
shares/(1)/ 500,000 500,000 500,000 500,000
Effect of cheap shares issued/(2)/ 210,532 210,532 210,532 210,532
-------------- -------------- -------------- --------------
3,126,312 5,563,430 6,264,703 6,575,802
============== ============== ============== ==============
PRO FORMA NET LOSS PER
COMMON SHARE $ (.15) $ (.30) $ (.10) $ (.50)
============== ============== ============== ==============
</TABLE>
/(1)/ Gives effect to preferred shares which convert to common shares concurrent
with this offering.
/(2)/ Warrants issued and options granted from March 1, 1996 to February 28,
1997 are included in the calculation for all periods presented, using the
treasury stock method, in accordance with Staff Accounting Bulletin Topic
4(D).
<PAGE>
Exhibit 21.1
Subsidiaries of the Company
---------------------------
Fieldworks International, Incorporated, a Barbados corporation
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
February 20, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-05-1997
<PERIOD-START> JAN-01-1996
<PERIOD-END> JAN-05-1997
<CASH> 2,132,089
<SECURITIES> 0
<RECEIVABLES> 2,100,868
<ALLOWANCES> 201,400
<INVENTORY> 4,417,322
<CURRENT-ASSETS> 9,068,468
<PP&E> 796,160
<DEPRECIATION> 553,178
<TOTAL-ASSETS> 9,906,119
<CURRENT-LIABILITIES> 8,026,011
<BONDS> 0
0
300
<COMMON> 5,881
<OTHER-SE> 8,110,576
<TOTAL-LIABILITY-AND-EQUITY> 9,906,119
<SALES> 13,111,077
<TOTAL-REVENUES> 13,111,077
<CGS> 8,310,933
<TOTAL-COSTS> 7,363,180
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 356,328
<INCOME-PRETAX> (2,919,364)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,919,364)
<DISCONTINUED> (376,682)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,296,046)
<EPS-PRIMARY> (.50)
<EPS-DILUTED> (.50)
</TABLE>
