<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended October 3, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 000-22221
FIELDWORKS, INCORPORATED
(Exact name of registrant as specified in its charter)
Minnesota 41-1731723
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
7631 Anagram Drive
Eden Prairie, Minnesota 55344
(Address of principal executive offices)
(Zip Code)
(612) 974-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of the registrant's Common Stock, $.001 par value,
outstanding as of November 9, 1999 was 8,894,426.
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<PAGE>
PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
FIELDWORKS, INCORPORATED
Consolidated Balance Sheets
<TABLE>
<CAPTION>
October 3, January 3,
1999 1999
------------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................................................... $ 1,175,253 $ 1,690,469
Accounts receivable, net of allowance for doubtful accounts of $250,100 and
$269,800, respectively........................................................... 3,756,684 3,930,366
Inventories........................................................................ 4,091,459 3,400,744
Prepaid expenses and other......................................................... 489,922 121,780
------------ ------------
Total current assets......................................................... 9,513,318 9,143,359
------------ ------------
PROPERTY AND EQUIPMENT:
Computers and equipment............................................................ 2,163,600 1,620,455
Furniture and fixtures............................................................. 1,093,099 1,109,895
Leasehold improvements............................................................. 435,813 458,216
Less: Accumulated depreciation..................................................... (1,888,993) (1,393,342)
------------ ------------
Property and equipment, net.................................................. 1,803,519 1,795,224
OTHER LONG TERM ASSETS, net........................................................... 133,879 17,385
------------ ------------
$ 11,450,716 $ 10,955,968
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit..................................................................... $ 1,009,631 $681,981
Accounts payable................................................................... 2,974,894 1,804,186
Accrued warranty and product upgrade............................................... 825,689 1,102,798
Accrued compensation and benefits.................................................. 518,969 376,932
Other accrued liabilities.......................................................... 322,857 321,532
Deferred revenue................................................................... 850,164 765,184
Current maturities of capitalized lease obligations................................ 40,226 13,548
------------ ------------
Total current liabilities.................................................... 6,542,430 5,066,161
NOTES PAYABLE:
Notes payable...................................................................... 3,000,000 --
Less: Discount on notes payable................................................... 882,000 --
------------ ------------
Notes payable, net........................................................... 2,118,000 --
CAPITALIZED LEASE OBLIGATIONS, less current maturities................................ 49,070 96,868
------------ ------------
Total liabilities............................................................ 8,709,500 5,163,029
------------ ------------
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value, 30,000,000 shares authorized; 8,894,426 and
8,823,926 issued and outstanding, respectively................................... 8,894 8,824
Common stock warrants.............................................................. 1,010,922 150,640
Additional paid-in capital......................................................... 20,186,658 20,085,011
Accumulated deficit................................................................ (18,465,258) (14,451,536)
------------ ------------
Total shareholders' equity................................................... 2,741,216 5,792,939
------------ ------------
$ 11,450,716 $ 10,955,968
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
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<PAGE>
FIELDWORKS, INCORPORATED
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
--------------------------- --------------------------
October 3, October 4, October 3, October 4,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES .................................................. $ 4,784,431 $ 4,412,312 $18,312,977 $13,632,083
COST OF SALES............................................... 3,538,376 2,969,855 13,095,256 9,945,144
----------- ----------- ----------- -----------
Gross profit....................................... 1,246,055 1,442,457 5,217,721 3,686,939
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Sales and marketing.................................... 1,561,435 1,290,331 4,033,387 4,154,229
General and administrative............................. 704,016 647,101 2,258,160 2,229,629
Research and development............................... 818,526 813,435 2,485,641 2,379,811
Restructuring and product upgrade costs................ 399,978 187,720 399,978 1,472,530
----------- ----------- ----------- -----------
Total operating expenses........................... 3,483,955 2,938,587 9,177,166 10,236,199
----------- ----------- ----------- -----------
Operating loss..................................... (2,237,900) (1,496,130) (3,959,445) (6,549,260)
INTEREST INCOME (EXPENSE) AND OTHER, net.................... (35,821) 33,927 (54,277) 136,863
----------- ----------- ----------- -----------
NET LOSS.................................................... $(2,273,721) $(1,462,203) $(4,013,722) $(6,412,397)
=========== =========== =========== ===========
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE:
Net loss per common share................................ $ (.26) $ (.17) $ (.45) $ (.73)
=========== =========== =========== ===========
Weighted average common shares outstanding............... 8,894,426 8,809,497 8,867,821 8,791,513
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
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<PAGE>
FIELDWORKS, INCORPORATED
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
------------------------------
October 3, October 4,
1999 1998
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss.................................................... $(4,013,722) $(6,412,397)
Adjustments to reconcile net loss to net cash used for
operating activities-
Depreciation and amortization.......................... 495,734 517,516
Accrued product upgrade and restructuring costs........ 399,978 1,010,001
Non-cash consulting expense............................ 9,500 --
Change in operating items:
Accounts receivable............................... 173,682 3,513,723
Inventories....................................... (690,715) 1,063,111
Prepaid expenses and other........................ (484,719) 50,265
Accounts payable.................................. 1,170,708 (182,012)
Accrued expenses.................................. (533,725) (313,269)
Deferred revenue.................................. 84,980 200,739
----------- -----------
Net cash used for operating activities............ (3,388,299) (552,323)
----------- -----------
INVESTING ACTIVITIES:
Net purchases of property and equipment..................... (503,946) (1,044,948)
----------- -----------
Net cash used for investing activities................. (503,946) (1,044,948)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of notes........................... 3,000,000 --
Proceeds from issuance of common stock...................... 70,499 115,508
Net line of credit borrowings (repayments).................. 327,650 --
Payment of capitalized lease obligations.................... (21,120) (39,556)
----------- -----------
Net cash provided by financing activities.............. 3,377,029 75,952
----------- -----------
CHANGE IN CASH AND CASH EQUIVALENTS.............................. (515,216) (1,521,319)
CASH AND CASH EQUIVALENTS, beginning of period................... 1,690,469 3,218,759
----------- -----------
CASH AND CASH EQUIVALENTS, end of period......................... $ 1,175,253 $ 1,697,440
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest...................................... $ 85,162 $ 5,962
=========== ===========
NON CASH FINANCING ACTIVITIES:
Issuance of warrants........................................ $ 882,000 $ --
=========== ===========
Expiration of warrants...................................... $ 31,218 $ --
=========== ===========
Non-cash consulting expense................................. $ 9,500 $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
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<PAGE>
FIELDWORKS, INCORPORATED
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation:
The accompanying unaudited consolidated financial statements of FieldWorks,
Incorporated (FieldWorks or the Company), should be read in conjunction with the
consolidated financial statements and notes thereto filed with the Securities
and Exchange Commission in the Company's Annual Report on Form 10-K, for the
fiscal year ended January 3, 1999. In the opinion of management, the
accompanying consolidated financial statements reflect all adjustments
(consisting only of normal recurring adjustments) considered necessary to
present fairly the financial results for the interim periods presented. The
results of operations for the interim periods are not necessarily indicative of
the results to be expected for the entire fiscal year.
2. 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:
October 3, January 3,
1999 1999
---------- ----------
Raw materials.............................. $2,873,011 $2,478,662
Work in process............................ 499,253 173,791
Finished goods............................. 719,195 748,291
---------- ----------
Total................................. $4,091,459 $3,400,744
========== ==========
3. Earnings (Loss) Per Share:
The Company presents earnings (loss) per share (EPS) data in accordance
with the requirements of the Statement of Financial Accounting Standards No.
128. Under SFAS No. 128, basic EPS is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the period.
No dilution for potentially dilutive securities is included. Diluted EPS is
calculated using the treasury stock method and reflects the dilutive effect of
outstanding options, warrants and other securities. In the Company's
calculations, the impact of common stock equivalents has been excluded from the
computation of weighted average common shares outstanding as the effect would be
antidilutive. As a result, basic and diluted EPS are equal for all periods
presented in the accompanying Consolidated Statements of Operations.
4. Restructuring and Product Upgrade Costs:
In 1999, the Company incurred restructuring costs due to severance charges
from reorganizational efforts related to outsourcing certain aspects of the
manufacturing and design of products. In 1998, these costs related to the
discontinuation of the 5000 Series I Workstation, as well as other internal
reorganization efforts.
5. Issuance of Notes:
In September 1999, the Company completed a private placement of $3.0
million in subordinated notes. The notes bear interest at 11% per annum and
mature in September 2001. Noteholders also received warrants to purchase 1.5
million shares of common stock exercisable at $1.00 per share. The warrants are
exercisable for five years, and were recorded at their estimated fair value at
the date of issuance.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Cautionary Statement Regarding Forward Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. When used in
this Form 10-Q and in future filings by the Company with the Securities and
Exchange Commission, in the Company's press releases and in oral statements made
with the approval of an authorized executive officer, the words or phrases
"believes," "anticipates," "expects," "intends," "estimates," "should," "may" or
similar expressions are intended to identify such forward-looking statements,
but are not the exclusive means of identifying such statements. These
forward-looking statements involve risks and uncertainties that may cause the
Company's actual results to differ materially from the results discussed in the
forward-looking statements. Factors that might cause such differences include,
but are not limited to, the following: risks associated with the development of
new products, market acceptance of new products, technological obsolescence,
dependence on third-party manufacturers and suppliers, risks associated with the
Company's dependence on proprietary technology, and the long customer sales
cycle. The Company wishes to caution readers not to place undue reliance on any
such forward-looking statements, which speak only as of the date made. The
Company undertakes no obligation to revise any forward-looking statements in
order to reflect events or circumstances after the date of such statements.
Readers are urged to carefully review and consider the various disclosures made
by the Company in this report and in the Company's other reports filed with the
Securities and Exchange Commission that attempt to advise interested parties of
the risks and factors that may affect the Company's business. The Company's
forward-looking statements are qualified in their entirety by the cautions and
risk factors set forth under the "Cautionary Statement" filed as Exhibit 99.1 to
its Form 10-K for the year ended January 3, 1999.
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<PAGE>
Results of Operations
The following table sets forth certain financial data expressed as a
percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
-------------------------- -------------------------
October 3, October 4, October 3, October 4,
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales..................................... 100% 100% 100% 100%
Cost of sales................................. 74 67 72 73
--- --- --- ---
Gross profit............................. 26 33 28 27
Operating expenses:
Sales and marketing...................... 33 29 22 30
General and administrative............... 15 15 12 16
Research and development................. 17 19 14 18
Restructuring and product upgrade costs.. 8 4 2 11
--- --- --- ---
Total operating expenses............ 73 67 50 75
--- --- --- ---
Operating loss................................ (47) (34) (22) (48)
Interest income (expense) and other, net...... (1) 1 * 1
--- --- --- ---
Net loss...................................... (48)% (33)% (22)% (47)%
=== === === ===
</TABLE>
*Less than .5%.
Net Sales. The Company's net sales increased 8% from $4.4 million in the
third quarter of fiscal 1998 to $4.8 million for the third quarter of fiscal
1999 and increased 34% from $13.6 million in the first nine months of 1998 to
$18.3 million for the comparable period in 1999. The year-to-date increase was
partially due to significant customer contracts in the first six months of 1999
for the 5000 Series Workstation, offset by a decrease in sales of the 7000
Series Workstation due to customer anticipation of the 8000 Series Workstation,
a technologically enhanced and updated product. Unit volumes of the 5000 Series
Workstation decreased 16% from the third quarter of 1998 to the third quarter of
1999; however, the volumes increased 84% from the first nine months of 1998 to
the comparable period in 1999 due to significant customer sales in the trucking
industry. Unit volumes of the 7000 Series Workstation decreased 29% from the
third quarter of 1998 to the third quarter of 1999 and 19% from the first nine
months of 1998 to the first nine months of 1999. Sales of the 5000 Series
Workstations represented 35% and 52% of net sales for the nine months ended
October 4, 1998 and October 3, 1999, respectively. Sales of the FW2000 Series
Embedded Vehicle Server were $0.8 million for the nine months ended October 3,
1999. Revenue of $0.7 million for the FW2000 Series during the third quarter of
1999 was less than anticipated due to initial production delays and supplier
constraints. Production of the FW2000 began in mid-1999; therefore, there were
no comparable sales in 1998. Professional Services revenue, including product
upgrades, technical support and non-standard product sales accounted for $1.0
million, or 20% of net sales, for the third quarter of 1999 and $2.7 million, or
15% of net sales, for the first nine months of 1999. Professional services
revenue was not significant in 1998.
The Company has focused its marketing efforts on the transportation, public
services and government/military markets with emphasis on service bay, mobile
communications and test measurement/data acquisition applications. Two
customers, John Deere Information Systems and Ryder Transportation Services,
represented over 10% of the Company's net sales or $0.8 million and $0.7
million, respectively for the third quarter of 1999 and one customer, Navistar
International, represented revenues of $0.5 million in the third quarter of
1998.
International sales decreased from $3.5 million, or 26% of net sales, for
the first nine months of 1998 to $2.7 million, or 15% of net sales, for the
comparable period in 1999. The decrease in international sales for the first
nine months of 1999 as compared to the same period in 1998 was due to the level
of significant contracts with domestic customers and order acceleration by
international customers in late 1998. Additionally, international customers are
waiting for the enhanced 8000 Series Workstation which is currently in the
pre-production testing phase. The majority of international sales, approximately
69%, are in Europe. The Company believes that international sales, as a
percentage of net sales, will be in the mid-teen to 20% range for the remainder
of 1999, with little impact on the Company's results of operations or liquidity.
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<PAGE>
Gross Profit. Gross profit decreased from $1.4 million, or 33% of net
sales, for the third quarter of 1998 to $1.2 million, or 26% of net sales, for
the third quarter of 1999. Gross profit increased from $3.7 million, or 27% of
net sales, for the first nine months of 1998 to $5.2 million, or 28% of net
sales, for the first nine months of 1999. Gross margin for the first nine months
in 1998 was negatively impacted by an inventory writedown of $1.0 million in the
second quarter. This writedown related to excess and obsolete inventory due to
product changes in response to technological developments and market needs. In
1999, sales under high volume contracts, which include volume discounts,
comprised a significant portion of sales for the first nine months.
Additionally, gross margin was negatively impacted by disposition of previously
identified obsolete inventory during the first nine months of 1999. Recovery on
this inventory has been less than anticipated resulting in additional write-off
of $264,000. Gross margin was also negatively impacted by start-up costs
associated with the introduction of the FW2000 Series. The Company's gross
profit margin will fluctuate as a result of a number of factors, including mix
of products sold, inventory obsolescence, the proportion of international sales,
utilization of manufacturing capacity, large customer contracts (with the
associated volume discounts) and outsourcing expenses.
The Company has identified contract manufacturers for outsourcing of
certain manufacturing activities and expects complete implementation in the
first quarter of 2000. The Company will initially outsource the final assembly
process with the intent of improving design for manufacturability. Final
integration work will remain at the Company, as appropriate. The Company
anticipates outsourcing will moderately reduce future material costs, inventory
write-offs and operating expenses. The Company anticipates gross profit margins
in the low 30% range in the near future.
Sales and Marketing. Sales and marketing expenses include salaries, sales
commissions, travel, technical support and professional services personnel,
advertising, promotions and trade shows. In addition, these expenses include the
labor and material costs related to maintaining the Company's standard one-year
warranty on its products. Sales and marketing expenses increased from $1.3
million, or 29% of net sales, for the third quarter of 1998 to $1.6 million, or
33% of net sales, for the comparable period in 1999. This increase is a result
of establishing the Professional Services organization and the writedown of
demonstration equipment in 1999. In the first nine months of 1998, sales and
marketing expenses were $4.2 million and 30% of net sales as compared to $4.0
million and 22% of net sales in the first nine months of 1999. The decrease in
the nine-month period was due to a reduction in promotion and advertising
expenses as vertical market strategies were developed, as well as other cost
control initiatives. In addition, warranty expense decreased due to enhanced
performance and specific component level repair. The Company plans to expand its
sales force and resale channels and moderately increase its promotion and
marketing efforts through 1999 within its target markets of transportation,
public services and government/military. Accordingly, the Company anticipates an
increase in sales and marketing expenditures in future periods.
General and Administrative. General and administrative expenses include the
Company's executive, finance and administration, human resources, and
information services departments. These expenses increased from $0.6 million for
the quarter ended October 4, 1998, to $0.7 million for the quarter ended October
3, 1999. As a percentage of net sales, general and administrative expenses
remained constant at 15% for the quarters ended October 4, 1998 and October 3,
1999. General and administrative expenses increased slightly from $2.2 million
for the first nine months of 1998 as compared to $2.3 million for the first nine
months and 1999 and represented 16% and 12% of net sales, respectively. The
increase is partially due to organizational changes resulting from outsourcing
activities. The Company anticipates holding the percentage growth of general and
administrative expenses to a level less than the growth of sales in the future.
Research and Development. Research and development expenses are incurred in
the design, development and testing of new or enhanced products, services and
customized computing platforms. These costs are expensed as incurred. Research
and development expenses remained constant at $0.8 million for the third
quarters of 1998 and 1999. As a percentage of net sales, research and
development costs were 19% and 17% for the third quarter of 1998 and 1999,
respectively. Research and development expenses increased slightly from $2.4
million for the first nine months of 1998 to $2.5 million for the comparable
period in 1999. As a percentage of net sales, research and development expenses
decreased from 18% for the first nine months of 1998 to 14% for the first nine
months of 1999. The $0.1 million increase was primarily due to the development
of new products, including the FieldWorks 2000 Series Mobile Embedded Vehicle
System and engineering support of customer-specific applications. The Company
expects research and development expenses to remain constant or slightly
increase in dollar amounts through the end of 1999 due to finalizing the 8000
Series Workstation and to remain stable in 2000 as product outsourcing is
completed.
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<PAGE>
Restructuring and Product Upgrade Costs. Restructuring and product upgrade
costs were $0.2 million, or 4% of net sales, for the third quarter of 1998 as
compared to $0.4 million, or 8% of net sales for the third quarter of 1999.
Restructuring and product upgrade costs decreased from $1.5 million, or 11% of
net sales, for the first nine months of 1998 to $0.4 million, or 2% of net
sales, for the first nine months of 1999. In 1999, the costs were due to
severance charges from reorganizational efforts related to outsourcing the
manufacturing and design of products. In 1998, these costs related to the
discontinuation of the 5000 Series I Workstation, as well as other internal
reorganization efforts.
Interest Income (Expense) and Other, Net. Net interest income was
approximately $34,000 for the third quarter of 1998 compared to net interest
expense of $36,000 for the comparable period in 1999. Net interest income for
the first nine months of 1998 was $137,000 compared to net interest expense of
$54,000 for the comparable period in 1999. The increase in interest expense is
due to borrowings on the Company's line of credit. The Company will continue
recording interest expense from both its line of credit and interest payments on
its subordinated notes issued in September 1999. Additionally, financing costs
of $882,000 related to warrants issued in September 1999 will be amortized over
the next two years. The Company anticipates recording net interest expense for
the foreseeable future.
Liquidity and Capital Resources
In September 1999, the Company completed a private placement of $3.0
million in subordinated notes. The notes bear interest at 11% per annum and
mature in September 2001. Noteholders also received warrants to purchase 1.5
million shares of common stock exercisable at $1.00 per share. The warrants are
exercisable for five years, and recorded at their estimated fair value at the
date of issuance.
In November 1998, the Company entered into a two-year, $3.0 million line of
credit agreement. Borrowings bear interest at the greater of 4% over prime or
9%. The interest rate changed from 3% over prime to 4% over prime in the third
quarter of 1999 due to default on the Company's profitability covenant. At
October 3, 1999, the interest rate was 12.25%. The line of credit balance was
$1.0 million as of October 3, 1999, as compared to $0.7 million at January 3,
1999. The borrowing base consists of 75% of eligible receivables plus the lesser
of $600,000 or 30% of eligible inventory as defined in the agreement.
Availability based on the borrowing base calculation, including accounts
receivable and inventory, was $2.5 million as of October 3, 1999 and was $1.7
million, including only accounts receivable, as of January 3, 1999. The
agreement contains a covenant requiring cumulative year-to-date profit on a
quarterly basis. The Company was out of compliance with the covenant as of
October 3, 1999, and has received a written waiver of default. Failure to comply
with this covenant in the future could result in default, interest rate
increases and immediate repayment requirements.
Cash used for operating activities totaled $3.4 million for the first nine
months of 1999. The Company's accounts receivable decreased $0.1 million from
$3.9 million at January 3, 1999 to $3.8 million at October 3, 1999 due to timing
of payments received. Inventories increased $0.7 million to $4.1 million at
October 3, 1999 due to purchases for anticipated sales and backlog on the FW2000
Series product.
The Company purchased $0.5 million of property, plant and equipment during
the first nine months of 1999. The expenditures related primarily to
manufacturing tooling for vendors of the Company's FW2000 Series Mobile Embedded
Vehicle System. The Company anticipates maintaining this level of expenditures
in the foreseeable future, as new product line developments are completed and
existing platforms are enhanced. However, the Company's overall property, plant
and equipment expenditures are expected to decrease slightly as compared to
prior years due to no additional planned leasehold improvements.
-9-
<PAGE>
The Company anticipates that the proceeds from its issuance of
subordinated notes, together with its line of credit, and anticipated operating
cash flows, should be sufficient to fund its cash flow needs through the year
2000. Although to accelerate the Company's growth and enhance its product
offering and market position, additional cash sources may be pursued. Cash
requirements for future periods depend on demand for the Company's products,
cash management operations, growth rate, and acquisition strategies, among other
factors. There can be no assurances that additional financing, if needed, will
be available, or if it is available, that it would be on terms favorable to the
Company and would not be dilutive to existing shareholders.
Year 2000
The year 2000 issue is the result of computer programs using only the last
two digits to identify the year. These programs may not be able to interpret
dates beyond the year 1999, which could cause computer system failure or other
errors disrupting operations. The Company is aware of the potential computing
difficulties that the issue presents for the Company's operations in the year
2000 and as a result, has established an internal team, reporting to upper
management, to address the issue. This team's focus includes the functioning of
the Company's products, internal computer systems and non-computer operations,
production processes, key vendors, vital business partners and critical
customers.
The Company's major internal information systems software was upgraded
during the first quarter of 1998 to ensure year 2000 compliance and provide
enhanced systems capabilities. The total cost of the implementation was
$110,000. The Company plans to perform other minor upgrades to its software and
hardware. Approximately 95% of the expected costs associated with internal
systems software alterations have been incurred to date. The Company's internal
production processes and non-information systems software have been assessed and
the Company believes these items are year 2000 compliant.
Management believes its current products are year 2000 compliant and is
offering updated configuration software for products shipped in prior periods.
Notification to customers of the availability of updated software has occurred.
Associated costs are expected to be under $100,000. Approximately 95% of the
expected costs associated with ensuring that the Company's products are year
2000 compliant have been incurred to date.
The source of funds for upgrades to internal software, production processes
and previously sold products is existing operating cash flows. There are
currently no other projects within the Company that are affected by the outlay
of significant resources to ensure year 2000 compliance.
The Company's operations with respect to the year 2000 may also be affected
by the readiness of other entities with which the Company transacts business.
The Company has requested documentation from its vendors regarding compliance,
and will evaluate alternative courses of action for vendors who are not or will
not be year 2000 compliant. The Company has identified its critical vendors and
is in the process of verifying which are currently year 2000 compliant.
Contingency plans for all critical vendors have not yet been completed.
The year 2000 issue creates risk for the Company from unforeseen problems
in its own computer systems and from the Company's vendors. Although the Company
does not believe that the year 2000 issue will have a material impact on its
business, financial position, results of operations or liquidity, it is
uncertain what effect any failure of the Company's systems or its vendors'
systems might have on its operations.
Although the Company intends to fully address the year 2000 issue, without
further assessment or resources assigned, the Company can give no assurance that
the year 2000 issue will not cause significant business disruption, including
delays in parts availability resulting in potential shipping delays and/or lost
revenues.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not utilize derivative or other financial instruments for
hedging or speculative purposes, and accordingly, is not exposed to these types
of market risk.
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<PAGE>
The Company is subject to interest rate risk related to its outstanding
line of credit and note borrowings and any existing money market or other
investment amounts. The Company's line of credit bears interest at a rate based
on the prime lending rate, and any money market investments also earn interest
based on market rates. The Company's long-term notes bear interest at a fixed
rate. Based on current interest rate conditions, the Company does not believe
that it is exposed to significant associated market risk.
All of the Company's transactions are conducted and accounts are
denominated in United States dollars and as such, the Company does not currently
have exposure to foreign currency risk.
PART II. OTHER INFORMATION
- --------------------------
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in legal actions in the ordinary course of its
business. Although the Company cannot predict the outcome of any such legal
actions, 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.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In September 1999, the Company completed a private placement of $3.0
million in subordinated notes. The subordinated notes were sold to accredited
investors through the placement agent Dougherty Summit Securities LLC. The
Company received $3.0 million in cash, less $240,000 in commission.
Additionally, the Company granted 150,000 warrants to Dougherty Summit
Securities LLC. The Company relied on an exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended. Noteholders also
received warrants to purchase 1.5 million shares of common stock exercisable at
$1.00 per share. The warrants are exercisable for five years.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 3.1 Second Amended and Restated Articles of Incorporation of
the Company (incorporated by reference to Exhibit 3.2 to
the Company's Registration Statement filed on Form S-1,
File No. 333-18335)
Exhibit 3.2 Second Amended and Restated Bylaws of the Company
(incorporated by reference to Exhibit 3.4 to the
Company's Registration Statement filed on Form S-1, File
No. 333-18335)
Exhibit 10.1 Compensation agreement with David C. Malmberg (filed
herewith)
Exhibit 10.2 Consulting agreement with Robert W. Heller (filed
herewith)
Exhibit 10.3 Form of Subscription and Note Purchase Agreement, Form
of Subordinated Promissory Note, Form of Warrant to
Purchase Shares of Common Stock (filed herewith)
Exhibit 10.4 Common Stock Warrant Agreements with Dougherty Summit
Securities LLC dated September 7, 1999; September 23,
1999; and September 30, 1999 (filed herewith)
Exhibit 10.5 First Amendment to General Credit and Security Agreement
with Spectrum Commercial Services, dated August 20, 1999
(filed herewith)
Exhibit 27.1 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
None.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIELDWORKS, INCORPORATED
Date: November 16, 1999 /s/ Karen L. Engebretson
----------------------------------------
Karen L. Engebretson, Vice President
of Finance and CFO (as authorized
officer and principal financial officer)
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<PAGE>
Exhibit 10.1
COMPENSATION AGREEMENT
----------------------
This Compensation Agreement (the "Agreement") is entered into as of, July
31, 1999, by and between FieldWorks, Incorporated, a Minnesota corporation (the
"Company"), and David C. Malmberg.
WHEREAS, effective July 31, 1999, Mr. Malmberg intends to resign as Chief
Executive Officer of the Company and to turn over those responsibilities to Mr.
David Mell.
NOW, THEREFORE, in recognition of the contribution he has made as Chief
Executive Officer and as a retainer for him to remain available on a limited
basis to consult with management, the Company and Mr. Malmberg agree to the
following compensation for Mr. Malmberg:
1. Payment of $100,000 payable by the Company as follows:
a.) $25,000 payable $10,000 on 12/31/99 and equal monthly
installments of $5,000 for the period 1/1/00 through
3/31/00.
b.) $75,000 payable in equal monthly payments of $2,083.34 for
the period 1/1/00 through 12/31/02.
2. Purchase by the Company of a $1,000,000 split-dollar life insurance
policy on Mr. Malmberg's life at available standard rates, whose
benefit will be directed to Mr. Malmberg's estate. Purchase of the
policy is contingent upon closing on subordinated notes by October 15,
1999.
3. Non-Incentive stock option grant of 140,000 shares with an exercise
price equal to $1.25, the closing price per share on July 30, 1999.
These options are granted under the 1994 Long-Term Incentive Stock
Option Plan, will have a term of 7 years and will vest 100%
immediately upon grant.
4. Non-Incentive Stock Option grant of 10,000 shares under the 1996
Director's Option Plan. These options are granted upon re-election to
the Board of Directors at the 1999 Annual Shareholders Meeting. These
options will have an exercise price of $2.188, the closing price on
the date of the meeting, will vest 100% on 11/18/99 and will have a
term of 10 years.
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<PAGE>
IN WITNESS WHEREOF, the Compensation Committee of the Board of Directors of the
Company and Mr. Malmberg have executed this Agreement as of the date set forth
in the first paragraph.
FieldWorks, Incorporated
By /s/ David C. Malmberg By /s/ James A. Bernards
---------------------------- -----------------------------
David C. Malmberg James A. Bernards
Director
By /s/ Richard J. York
-----------------------------
Richard J. York
Director
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<PAGE>
Exhibit 10.2
CONSULTING AGREEMENT
--------------------
This Consulting Agreement (the "Agreement") is entered into as of, July 31,
1999, by and between FieldWorks, Incorporated, a Minnesota corporation (the
"Company"), and Robert W. Heller
WHEREAS, effective July 31, 1999, Mr. Heller intends to resign Vice
President of Operations of the Company and to turn over those responsibilities
to Mr. David Mell.
NOW, THEREFORE, in recognition of the contribution he has made as Vice
President of Operations and as a retainer for him to remain available on a
limited basis to consult with management, the Company and Mr. Heller agree to
the following:
1. Payment of $25,000 payable by the Company $10,000 on 12/31/99 and
equal monthly installments of $5,000 for the period of 1/1/00 through
3/31/00.
2. Medical benefit participation will be available through COBRA.
3. Non-Incentive Stock Option grant of 10,000 shares under the 1996
Director's Option Plan. These options are granted upon re-election to
the Board of Directors at the 1999 Annual Shareholders Meeting. These
options will have an exercise price of $2.188, the closing price on
the date of the meeting, will vest 100% on 11/18/99 and will have a
term of 10 years.
IN WITNESS WHEREOF, the Compensation Committee of the Board of Directors of
the Company and Mr. Heller have executed this Agreement as of the date set
forth in the first paragraph.
FieldWorks, Incorporated
By /s/ Robert W. Heller By /s/ James A. Bernards
---------------------------- -----------------------------
Robert W. Heller James A. Bernards
Director
By /s/ Richard J. York
-----------------------------
Richard J. York
Director
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<PAGE>
Exhibit 10.3
Execution Form
SUBSCRIPTION AND NOTE PURCHASE AGREEMENT
THIS SUBSCRIPTION AND NOTE PURCHASE AGREEMENT (the "Agreement") dated
as of ________________, 1999, by and between FieldWorks, Incorporated, a
Minnesota corporation (the "Company"), and ____________________ (the
"Investor"), a resident of the State of ________________________ /a organized
under the laws of the State of ________________.
RECITALS:
a) Whereas, the Company needs financing to provide working capital for
its operations; and
b) Whereas, the Investor desires to lend funds to the Company on the
terms and conditions set forth in this Agreement; and
c) Whereas, other investors may lend funds to the Company on terms and
conditions equivalent to those set forth in this Agreement ("Other Investors")
and in the offering materials delivered in connection with this Agreement (the
"Offering Materials").
Accordingly, in consideration of the foregoing, the mutual promises set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Promissory Note: The Investor agrees to purchase from the Company a
Subordinated Promissory Note in the principal amount of $___________, and the
Company agrees to deliver and issue such Note to the Investor, in the form
attached hereto as Exhibit A (the "Note"), in such amount. The Note shall be in
the minimum denomination of $100,000, and additional increments of $50,000,
unless waived at the Company's option. The delivery of the Note shall be made
concurrently with delivery of funds to the Company in the amount set forth
above. The principal amount of the Note shall bear interest from the date
thereof at the rate of eleven percent (11%) per annum.
2. Subordination: Amounts due pursuant to the Note shall be
subordinated to all "Senior Debt", which term shall mean all liabilities and
obligations of the Company to all institutional lenders to which the Company is
indebted for borrowed money secured by security interests in assets of the
Company (collectively, "Senior Creditors"), howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising or incurred. Investor will not ask,
demand, sue for, take or receive from the Company or any other person liable for
all or any part of any Senior Debt, by setoff or in any other manner, the whole
or any part of payment of the obligations under the Note or any monies which may
now or hereafter be owing in respect of the Note (whether such amounts represent
principal or interest, or obligations which are due or not due, direct or
indirect, absolute
<PAGE>
or contingent), including, without limitation, taking any security for any of
the foregoing, or the taking of any negotiable instrument therefor, unless and
until all of the Senior Debt shall h-6- ave been fully paid and satisfied and
all financing arrangements between the Company and Senior Creditors have been
terminated, provided that, as long as no default has occurred with respect to
the Senior Debt, the Company may pay, and the Investor may receive, payments of
accrued interest and principal of the Note as originally scheduled under the
terms of this Agreement and the Note, and, with the prior written consent of the
Senior Creditors in their sole discretion, prepayments of the Note. The Investor
acknowledges and agrees that the Note is unsecured and agrees that (a) the
Investor hereafter will not accept any security therefor from the Company, or
from any third person for the benefit of the Company; and (b) in the event the
Investor does obtain any security for the Note, (i) all liens and security
interests of the Investor in any assets of the Company or any assets securing
the Senior Debt shall be and hereby are subordinated to the rights and interests
of the Senior Creditors, if any, in those assets, (ii) the Investor shall have
no right to possession of any such assets or to foreclose upon any such assets,
whether by judicial action or otherwise, unless and until all the Senior Debt
shall have been fully paid and satisfied and all financing arrangements between
the Company and Senior Creditors have been terminated, and (iii) at the request
of the Senior Creditors, the Investor shall execute and deliver to the Senior
Creditors such termination statements and releases as the Senior Creditors shall
reasonably request to release the Investor's security interest in or lien
against such property. The Investor, prior to the payment in full and discharge
of the Senior Debt and the termination of all financing arrangements between the
Company and the Senior Creditors, shall have no right to enforce any claim with
respect to obligations under the Note, or to take any action against the Company
or the property of the Company or of any other person liable for all or any part
of the Senior Debt for the benefit of the Company.
3. Repayment: The Note will be dated its date of issuance and bear
interest from such date at 11% per annum. Accrued interest shall be paid
monthly, commencing October 15, 1999, and on the 15th day of each month
thereafter. All principal and accrued interest is due and payable on
______________, 2001 (the "Maturity Date.") The Note may be prepaid in whole or
in part at any time and from time to time without premium or penalty, at the
option of the Company, subject to Section 2 hereof. In the event Other Investors
lend funds to the Company, all prepayments shall be applied to the original
aggregate principal amount of the Note and all notes issued to Other Investors,
pro rata, and shall be applied first to the payment of any costs of collection,
then to payment of accrued interest, and thereafter to principal.
4. Warrants: In consideration of the Note purchase, the Company shall
issue to the Investor, concurrently with delivery of the Note, a warrant to
purchase common stock of the Company in the form attached hereto as Exhibit B
(the "Warrant").
5. Representations and Warranties of the Company:. The Company
represents and warrants to the Investor that:
a) Organization and Standing. The Company has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
State of Minnesota, has full corporate power and authority to own or lease its
properties and conduct its business as presently conducted, and is duly
qualified as a foreign corporation and is in good standing in all
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<PAGE>
jurisdictions in which the character of the property owned or leased or the
nature of the business transacted by it makes qualification necessary (except
where the failure to be so qualified would not have a material adverse effect on
the business, properties, financial condition or results or operations of the
Company).
b) Corporate Power; Authorization. The Company has all requisite
corporate power, and will have taken all requisite corporate action, to execute
and deliver this Agreement, to sell and issue the Note and to carry out and
perform all of its obligations hereunder. This Agreement constitutes the legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the
enforcement of creditors' rights generally, (ii) as limited by equitable
principles generally, and (iii) as rights to indemnity or contributions
hereunder may be limited by federal or state securities laws or principles of
public policy.
c) SEC Documents; Financial Statements. The Company has filed in a
timely manner all documents that the Company was required to file with the
Securities and Exchange Commission ("SEC") under Sections 13, 14(a) and 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") during the
12 months preceding the date of this Agreement. As of their respective filing
dates (or, if amended, when amended), all documents filed by the Company with
the SEC, whether under the Exchange Act or under the Securities Act of 1933, as
amended (the "Securities Act"), during such 12-month period (the "SEC
Documents") complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as the case may be. None of the SEC
Documents as of their respective dates contained any untrue statement of
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The consolidated financial
statements of the Company included in the SEC Documents (the "Financial
Statements") comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto. The Financial Statements have been prepared in accordance
with generally accepted accounting principles consistently applied and fairly
present the consolidated financial position of the Company at the dates thereof
and the results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal, recurring adjustments
(unless otherwise disclosed in the SEC Documents) and the absence of footnotes).
There is no material liability or commitment of the Company which is not
reflected in the most recent Financial Statements except commitments made since
the date of such Financial Statements in the ordinary course of business. There
have not been any changes in the assets, liabilities, financial condition or
operations of the Company from those reflected in the most recent Financial
Statements, except changes in the ordinary course of business that have not had
and are not reasonably expected to have a material adverse effect on the
business, properties, financial condition or results of operations of the
Company.
d) Litigation. There is no pending or, to the Company's knowledge,
threatened, action, suit or other proceeding to which the Company is a party or
to which the property or assets of the Company is subject which might result in
a material adverse effect on the business, properties, financial condition or
results of operations of the Company.
-3-
<PAGE>
e) Listing. The Company's Common Stock is traded on The Nasdaq National
Market.
f) The execution, delivery and performance by the Company of this
Agreement and the will not (i) violate any provision of any law, statute, rule
or regulation or any order, writ, judgment, injunction, decree, determination or
award of any court, governmental agency or arbitrator presently in effect having
applicability to the Company, (ii) violate or contravene any provision of the
Articles of Incorporation or bylaws of the Company, or (iii) result in a breach
of or constitute a default under any agreement, lease or instrument to which the
Company is a party or by which it or any of its properties may be bound, except
for such breaches or defaults which have been waived or for which consents have
been obtained.
g) The Company has filed all federal, state and local tax returns
required to be filed and has paid or made provision for the payment of all taxes
due and payable pursuant to such returns and pursuant to any assessments made
against it or any of its property and all other taxes, fees and other charges
imposed on it or any of its property by any governmental authority (other than
taxes, fees or charges the amount or validity of which is currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in accordance with generally accepted accounting principles have been
provided on the books of the Company.
h) The Company has reviewed and assessed its business operations and
computer systems and products with respect to the "year 2000 problem" (that is,
that computer applications and equipment may not be able properly to perform
date-sensitive functions, before, during and after January 1, 2000) and, based
on those reviews and inquiries, the Company will have taken all necessary steps
to ensure that the year 2000 problem will not result in a material adverse
effect on the Company.
i) The Company has no subsidiary.
6. Representations and Warranties of the Investor: The Investor
represents and warrants to the Company as follows:
(a) The Investor has had the opportunity to ask questions of and
receive answers from the Company, or an agent of the Company, concerning the
terms and conditions of the investment and the business and affairs of the
Company, and to obtain any additional information necessary to verify such
information, as the Investor considers necessary or advisable in order to form a
decision concerning an investment in the Company.
(b) The Note, the Warrant, and the Warrant Shares (collectively, the
"Securities") are being acquired for investment for the Investor's own account
and not with the view to, or for resale in connection with, any distribution or
public offering thereof the Investor understands that these Securities have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities laws by reason of the contemplated issuance in
transactions exempt from the registration requirements of the Securities Act and
applicable state securities laws and that the reliance of the Company and others
upon these exemptions is predicated in part upon this representation by the
Investor. The Investor further understands that
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<PAGE>
the Securities may not be transferred or resold without registration under the
Securities Act and any applicable state securities laws, or an exemption from
the requirements of the Securities Act and applicable state securities laws.
(c) The Investor's principal residence is as described on the signature
page hereof.
(d) The Investor has carefully reviewed the Offering Materials. The
Investor is relying solely on the Offering Materials and the Investor's
investigation of the Company in making the investment decision and is not
relying on Dougherty Summit Securities LLC, the Company's placement agent, or
any officer, employee or agent thereof.
(e) The Investor is able to bear the loss of the entire investment in
the Note, the Warrant, and the Warrant Shares without any material adverse
effect on the Investors' financial position or prospects, and the Investor has
such knowledge and experience of financial and business matters to be capable of
evaluating the merits and risks of the investment to be made pursuant to this
Agreement. Without limiting the foregoing, the Investor understands that the
securities offered hereby are highly speculative, involve a high degree of risk
and immediate substantial dilution, and should be purchased by persons who can
afford the loss of their entire investment. The Investor has carefully
considered the risks and speculative factors described in the cautionary
statement filed as Exhibit 99.1 to the Company's Annual Report on Form 10-K for
the fiscal year ended January 3, 1999 (the "Cautionary Statement"), which
Cautionary Statement is included in the Offering Materials. Without limiting the
foregoing, the Investor recognizes and acknowledges that, in order to repay the
Note, the Company will be required to improve its current cash flow, refinance
the Note, or raise additional capital.
(f) The Investor is (check all that apply):
______ (i) A natural person whose individual net worth (assets
less liabilities), or joint net worth with his or her
spouse, exceeds $1,000,000.
______ (ii) A natural person whose individual income was in
excess of $200,000, or whose joint income with his or
her spouse was in excess of $300,000, each of the two
most recent years, and who has a reasonable
expectation of reaching the same income level for the
current year.
______ (iii) A bank, insurance company, registered investment
company, business development company, small business
investment company, or employee benefit plan.
______ (iv) A savings and loan association, credit union, or
similar financial institution, or a registered broker
or dealer.
______ (v) A private business development company.
______ (vi) An organization described in Section 501 (c)(3) of
the Internal Revenue Code with assets in excess of
$5,000,000.
-5-
<PAGE>
______ (vii) A corporation, Massachusetts or similar business
trust, or partnership with assets in excess of
$5,000,000.
______ (viii) A trust with assets in excess of $5,000,000.
______ (ix) A director or an executive officer of the Company
______ (x) An entity in which all of the equity owners are
accredited investors. If exemption is claimed all
equity owners must complete and execute this
Agreement. (Not available for an Irrevocable Trust).
______ (xi) A self-directed IRA, Keogh, or similar plan of which
the individual directing the investments qualifies as
an "accredited investor" under one or more items
(i)-(x), above. Also check the item(s) (i)-(x) which
applies.
(g) This Agreement has been duly authorized by all necessary action on
the part of the Investor, has been duly executed and delivered by the Investor,
and is a valid and binding agreement of the Investors.
(h) If the Investor is an entity, the Investor was not organized for
the specific purpose of acquiring the Note, the Warrant, or the Warrant Shares.
(i) The Investor is NOT subject to backup withholding provisions of
Section 3406(a)(i)(C) of the Internal Revenue Code of 1986, as amended (note:
Investor is subject to backup withholding upon the following : (i) failure to
furnish the Investor's Social Security number or taxpayer identification number
herein; (ii) notification from the Internal Revenue Service to the Company that
the Investor furnished an incorrect Social Security number or taxpayer
identification number, (iii) notification that the Investor is subject to backup
withholding; or (iv) failure to certify that the Investor is not subject to
backup withholding; or failure to certify the Investor's Social Security number
or taxpayer identification number).
7. Affirmative Covenants of the Company: Until the outstanding
principal balance of the Note is paid in full, the Company will:
a) Furnish to the Investor:
(i) Within 120 days after the and of each fiscal year of the
Company, a copy of Form 10-K filed by the Company with the
Securities and Exchange Commission pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended;
(ii) Within 45 days after the end of each fiscal quarter, a
copy of Form 10-Q filed by the Company with the Securities and
Exchange Commission pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended;
-6-
<PAGE>
b) Permit the Investor and its representatives access to, and the right
to make copies of the books, records, and properties of the Company at all
reasonable times upon prior written request to the Company;
c) Pay when due all taxes, assessments, and other liabilities against
it or its properties except those which are being contested in good faith and
for which an adequate reserve has been established, and make all withholding
payments when due;
d) Pay when due all amounts necessary to fund in accordance with its
terms any employee benefit plan or other class of benefits covered by Title IV
of "ERISA" (which term shall mean the Employee Retirement Income Security Act of
1974, as the same may from time to time be amended, and the rules and
regulations promulgated thereunder by any governmental agency or authority, as
from time to time in effect), in either case whether now in existence or
hereafter instituted, of the Company;
e) Comply in all material respects with all laws, acts, rules.
regulations and orders of any legislative, administrative or judicial body or
official applicable to the Company's business operation or any part thereof;
provided, however, that the Company may contest any such law, act, rule,
regulation or order in good faith by appropriate proceedings; and
f) Promptly notify the Investor of any default by the Company in its
obligations under this Agreement.
8. Negative Covenants: Until the outstanding principal balance of the
Note is paid in full, the Company agrees that it will not, without the
Investor's prior written consent:
(a) Purchase or redeem any shares of the Company's capital stock, or
declare or pay any dividends (other than dividends payable in capital stock);
(b) Incur or permit to exist any indebtedness, secured or unsecured,
for money borrowed, except: (i) borrowings under this Agreement; (ii) borrowings
from Other Investors; (iii) borrowings, if any, which are existing on the date
of this Agreement and which are disclosed on Schedule I attached hereto; or (iv)
indebtedness, not exceeding $250,000 at any one time in the aggregate
outstanding;
(c) Effect any recapitalization; or be a party to any merger or
consolidation; or, except in the normal course of business, sell, transfer,
convey or lease all or any substantial part of its property;
(d) Make any loans to any person or entity except as otherwise
permitted hereunder; or purchase any shares of stock of, or similar interest in,
or make any capital contribution to or investment in, any entity;
(e) Permit more than $150,000 to be owing at any one time to the
Company by all of the Company's employees, officers, directors, or shareholders,
or members of their families, as a result of any borrowings, purchases, travel
advances or other transactions or events;
-7-
<PAGE>
(f) Become a guarantor or surety or pledge its credit or its assets on
any undertaking of another;
(g) In any fiscal year pay excessive or unreasonable salaries, bonuses,
fees, commissions, fringe benefits or other forms of compensation;
(h) Permit any default to occur under the terms of any loan document,
note, loan agreement, lease, mortgage, contract for deed, security agreement, or
other contractual obligation binding upon the Company which is not cured or
waived within 60 days after the date of the occurrence of such default;
(i) Take any action to wind down, liquidate or close substantially all
of its business; or
(j) Enter into any transaction with any affiliate of the Company upon
terms and conditions less favorable to the Company than the terms and conditions
which would apply in a similar transaction with an unrelated third party.
9. Events of Default: If any one or more of the following events
("Events of Default") shall occur, then, in any such event, the Investor may, at
its option, declare the Note to be immediately due and payable, together with
all unpaid interest accrued hereon, without further notice or demand, but in the
case of any of the occurrence of any of events described in paragraph (d) below,
the Note shall become automatically due and payable, including unpaid interest
accrued hereon, without notice or demand:
(a) The Company shall default in the due and punctual payment of any
installment on the Note when the same shall become due and payable, and such
default continues for ten (10) days after written notice thereof from the
Investor;
(b) Any representation or warranty made by the Company under or in
connection with the Note or this Agreement shall prove to have been incorrect in
any material respect when made;
(c) Default in the due observance or performance of any covenant,
condition or agreement on the part of the Company to be observed or performed
pursuant to the terms of the Note and this Agreement, and such default continues
for thirty (30) days after written notice thereof from the Investor; or
(d) The Company shall (i) apply for or consent to the appointment of a
receiver, trustee or liquidator of any of Company's properties or assets, (ii)
admit in writing Company's inability to pay Company's debts as they mature,
(iii) make a general assignment for the benefit of creditors, (iv) be
adjudicated a bankrupt or insolvent, (v) file a voluntary petition in
bankruptcy, or a petition or an answer seeking reorganization or an arrangement
with creditors to take advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation law or statute, or an answer
admitting the material allegations of a petition filed against Company in any
proceeding under any such law, or (vi) a petition in bankruptcy, reorganization,
debt arrangement or other proceedings under any bankruptcy or insolvency law
shall be instituted against the Borrower and shall remain undismissed for 60
days.
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<PAGE>
10. Other:
(a) This Agreement and the rights and obligations of the parties
hereunder shall not be assignable, in whole or in part, by any party without the
prior written consent of the other party.
(b) This Agreement, including the appendices attached hereto,
constitutes the entire agreement of the parties relative to the subject matter
hereof and supersedes any and all other agreements and understandings, whether
written or oral, relative to the matters discussed herein.
(c) This Agreement shall be construed and enforced in accordance with
the laws of the State of Minnesota.
(d) This Agreement may be executed 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.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date set forth above.
Investor:
- ---------------------------------- ------------------------------------
Telephone Number
- ---------------------------------- ------------------------------------
Signature(s), if joint Taxpayer ID Number(s)
- ---------------------------------- ------------------------------------
Print Name(s) Social Security Number(s)
- ----------------------------------
Address
- ----------------------------------
- ----------------------------------
FieldWorks, Incorporated
By:-------------------------------
Its:------------------------------
-9-
<PAGE>
Exhibit A to
Subscription and
Note Purchase Agreement
SUBORDINATED PROMISSORY NOTE
NOTWITHSTANDING ANY TERM HEREOF TO THE CONTRARY, ANY PAYMENT OR OTHER
SATISFACTION OF CLAIMS ARISING HEREUNDER IS SUBORDINATED AS SET FORTH
IN THE NOTE PURCHASE AND SUBSCRIPTION AGREEMENT BETWEEN THE MAKER AND
HOLDER OF EVEN DATE HEREWITH
THIS NOTE IS SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH AT THE
BOTTOM OF THE LAST PAGE HEREOF
$________________
Minneapolis, Minnesota
_________________, 1999.
FOR VALUE RECEIVED, the undersigned, FieldWorks, Incorporated, a
Minnesota corporation, (the "Company"), promises to pay to the order of (the
"Holder"), at Holder's address specified in the Subscription and Note Purchase
Agreement referred to below, or such other place as the Holder may designate in
writing from time to time, the principal sum of _____________ ($____________),
in lawful money of the United States, together with simple interest from the
date hereof on the unpaid principal balance outstanding from time to time at the
rate of eleven percent (11%) per annum (calculated on the basis of the actual
number of days elapsed and a 360 day year), payable as provided in the
Subscription and Note Purchase Agreement (as defined below). All outstanding
principal and accrued interest on this Note shall be due and payable on
___________ 2001, subject to the provisions set forth in the Subscription and
Note Purchase Agreement (defined below).
1. Subscription and Note Purchase Agreement. This Note has been issued
pursuant to and is subject to the terms and provisions of a
Subscription and Note Purchase Agreement (the "Agreement"), dated as of
______________, 1999, between the Company and the Holder. The Holder is
entitled to all the benefits provided for in the Agreement. The
provisions of the Agreement are incorporated herein by reference with
the same force and effect as if fully set forth herein.
2. Restrictions on Transfer. Other than pursuant to registration under
federal and any applicable state securities laws or an exemption from
such registration, the availability of which is determined in an
opinion of counsel reasonably acceptable to the Company, this Note may
not be sold, pledged, or otherwise disposed of unless the Company has
received from the transferee hereof such representations and agreements
as the Company shall
-10-
<PAGE>
determine in its sole discretion may be necessary to permit such
transfer. The Holder, by acceptance hereof agrees to give written
notice to the Company before transferring this Note of the Holder's
intention to do so, describing the manner of any proposed transfer.
Within thirty (30) days after receiving such written notice, the
Company shall notify the Holder as to whether such transfer may be
effected and of the conditions to any such transfer.
3. Notices. All demands and notices to be given hereunder shall be
delivered or sent by certified mail, return receipt requested; in the
case of the Company, addressed to its corporate headquarters, 7631
Anagram Drive, Eden Prairie, Minnesota, 55344, and in the case of the
Holder, addressed to the address written above, in either case, until a
new address shall have been substituted by like notice.
4. Expenses. The Company agrees to pay all expenses (including, without
limitation, reasonable attorneys' fees and disbursements) in connection
with the Holder's enforcement of the obligations of the Company
hereunder.
5. Waiver. Presentment and demand for payment, notice of dishonor, protest
and notice of protest are hereby waived.
IN WITNESS WHEREOF, the Company has caused this Note to be executed on
its behalf by its duly authorized officer on the day and year first above
written.
FieldWorks, Incorporated
By:
Its:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS. THIS NOTE HAS BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND SUCH STATE LAWS OR PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE LAWS THE
AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY
WHOSE AUTHORIZED OFFICER HAS SIGNED THIS NOTE ABOVE.
-11-
<PAGE>
Exhibit B to
Subscription and
Note Purchase Agreement
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
EXEMPTION FROM REGISTRATION UNDER THE FOREGOING LAWS. ACCORDINGLY, THIS WARRANT
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT (i) AN OPINION OF
COUNSEL SATISFACTORY TO FIELDWORKS, INCORPORATED THAT SUCH SALE, TRANSFER OR
OTHER DISPOSITION MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES
ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS OR (ii) SUCH REGISTRATION.
FIELDWORKS, INCORPORATED
WARRANT
TO PURCHASE
SHARES OF COMMON STOCK
For value received, _____, successors or assigns ("Holder"), is
entitled to purchase from FieldWorks, Incorporated, a Minnesota corporation (the
"Company"), up to _____ fully paid and nonassessable shares of the Company's
common stock, $.001 par value per share or such greater or lesser number of such
shares as may be determined by application of the anti-dilution provisions of
this warrant, at the price of $1.00 per share, subject to adjustments as noted
below (the "warrant exercise price").
This warrant may be exercised by Holder at any time or from time to
time prior to the close of business on , _____________ 2004.
This warrant is subject to the following terms and conditions:
1. Exercise. The rights represented by this warrant may be exercised by
the Holder, in whole or in part, by written election, in the form set forth
below, by the surrender of this warrant (properly endorsed if required) at the
principal office of the Company, and by payment to it by cash, certified check
or bank draft of the warrant exercise price for the shares to be purchased. The
shares so purchased shall be deemed to be issued as of the close of business on
the date on which this warrant has been exercised by payment to the Company of
the warrant exercise price. Certificates for the shares of stock so purchased,
bearing the restrictive legend set forth at the end of this warrant, shall be
delivered to the Holder within 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 number of shares, if any, with respect to which
this
-12-
<PAGE>
warrant has not been exercised shall also be delivered to the Holder hereof
within such time. No fractional shares shall be issued upon the exercise of this
warrant.
2. Shares. All shares that may be issued upon the exercise of the
rights represented by this warrant shall, upon issuance, be duly authorized and
issued, fully paid and nonassessable shares. During the period within which the
rights represented by this warrant may be exercised, the Company shall at all
times have authorized and reserved for the purpose of issue or transfer upon
exercise of the subscription rights evidenced by this warrant a sufficient
number of shares of its common stock to provide for the exercise of the rights
represented by this warrant.
3. Adjustment. The warrant exercise price shall be subject to
adjustment from time to time as hereinafter provided in this Section 3:
(a) If the Company at any time divides the outstanding shares
of its common stock into a greater number of shares (whether pursuant
to a stock split, stock dividend or otherwise), and conversely, if the
outstanding shares of its common stock are combined into a smaller
number of shares, the warrant exercise price in effect immediately
prior to such division or combination shall be proportionately adjusted
to reflect the reduction or increase in the value of each such common
share.
(b) If any capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the Company
with another corporation, or the sale of all or substantially all of
its assets to another corporation shall be effected in such a way that
holders of the Company's common stock shall be entitled to receive
stock, securities or assets with respect to or in exchange for such
common stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, the Holder shall have
the right to purchase and receive upon the basis and upon the terms and
conditions specified in this warrant and in lieu of the shares of the
common stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby, such
shares of stock, other securities or assets as would have been issued
or delivered to the Holder if Holder had exercised this warrant and had
received such shares of common stock immediately prior to such
reorganization, reclassification, consolidation, merger or sale. The
Company shall not effect any such consolidation, merger or sale unless
prior to the consummation thereof the successor corporation (if other
than the Company) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written instrument
executed and mailed to the Holder at the last address of the Holder
appearing on the books of the Company the obligation to deliver to the
Holder such shares of stock, securities or assets as, in accordance
with the foregoing provisions, the Holder may be entitled to purchase.
(c) If and whenever the Company shall (1) issue or sell any
shares of its common stock for a consideration per share less than the
warrant exercise price in effect immediately prior to the time of such
issuance or sale, (2) issue or sell any warrants, options or other
rights to acquire shares of its common stock at a purchase price less
than the warrant purchase price in effect immediately prior to the time
of such issuance or sale or (3) issue or sell any other securities that
are convertible into shares of its common stock for a purchase or
exchange price less than the warrant exercise price in effect
-13-
<PAGE>
immediately prior to the time of such issuance or sale (except for the
issuance or sale of shares of the Company's common stock pursuant to
stock option plans, purchase plans or other employee stock incentive
programs adopted by the Company's Board of Directors, or pursuant to
business acquisition or lease financing transactions), then, upon such
issuance or sale, the warrant exercise price shall be reduced to the
price (calculated to the nearest cent) determined by dividing (A) an
amount equal to the sum of (1) the number of shares of the Company's
common stock outstanding immediately prior to such issue or sale
multiplied by the then existing warrant exercise price and (2) the
consideration, if any, received by the Company upon such issue or sale
plus the consideration to be received by the Company upon the exercise
of such stock purchase rights by (B) an amount equal to the sum of (1)
the number of shares of its common stock outstanding immediately prior
to such issue or sale and (2) the number of its shares of common stock
thus issued or sold or issuable or saleable upon the exercise of such
purchase rights or the conversion of such convertible securities;
provided, however, that in the event that any such purchase right
expires or is terminated prior to the exercise of this warrant, the
warrant exercise price shall be recalculated by deleting such purchase
right and provided further that if an adjustment is made to the warrant
exercise price as a result of the issuance or sale of any such purchase
rights or convertible securities, no further adjustment shall be made
to the warrant exercise price at the time such purchase rights are
exercised or convertible securities are converted.
(d) If the Company shall default in the due and punctual
payment of any payment of principal or interest on the subordinated
promissory note issued by the Company to the Holder pursuant to that
certain Subscription and Note Purchase Agreement dated as of ________,
1999 by and between the Company and the Holder, the warrant exercise
price shall be reduced to fifty percent (50%) of the warrant exercise
price then in effect. Following any such adjustment pursuant to this
Section 3(d), the other provisions of this Section 3 shall continue to
apply.
(e) Upon each adjustment of the warrant exercise price, the
Holder shall thereafter be entitled to purchase, at the warrant
exercise price resulting from such adjustment, the number of shares
obtained by multiplying the warrant exercise price in effect
immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the warrant exercise price resulting
from such adjustment.
(f) Upon any adjustment of the warrant exercise price, the
Company shall give written notice thereof to the Holder stating the
warrant exercise price resulting from such adjustment and the increase
or decrease, if any, in the number of shares 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.
4. No Rights as Shareholder. This warrant shall not entitle the Holder
to any voting rights or other rights as a shareholder of the Company.
5. Registration Rights. Holder shall be entitled to participate in any
registered offering of shares of the Company's common stock. Holder's
participation in any such offering
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<PAGE>
shall be in accordance with the procedures, and subject to the limitations, set
forth on Exhibit A to this warrant.
6. Transfer. This warrant and all rights hereunder are transferable, in
whole or in part, at the principal office of the Company by the holder hereof in
person or by duly authorized attorney, upon surrender of this warrant properly
endorsed to any person or entity who represents in writing that such person or
entity is acquiring the warrant for investment and without any view to the sale
or other distribution thereof. Each holder of this warrant, by taking or holding
the same, consents and agrees that the bearer of this warrant, when endorsed,
may be treated by the Company and all other persons dealing with this warrant as
the absolute owner hereof for any purpose and as the person entitled to exercise
the rights represented by this warrant, or to the transfer hereof on the books
of the Company, any notice to the contrary notwithstanding; but until such
transfer on such books, the Company may treat the registered owner hereof as the
owner for all purposes.
7. Notices. All demands and notices to be given hereunder shall be
delivered or sent by first class mail, postage prepaid; in the case of the
Company, addressed to its corporate headquarters, Attention: Chief Financial
Officer, 7631 Anagram Drive, Eden Prairie, MN 55344, until a new address shall
have been substituted by like notice; and in the case of Holder, addressed to
Holder at the address written below, until a new address shall have been
substituted by like notice.
[The remainder of this page intentionally is left blank; signature page follows]
IN WITNESS WHEREOF, the Company has caused this warrant to be executed
and delivered by a duly authorized officer.
Dated:__________, 1999
FIELDWORKS, INCORPORATED
By
--------------------------------
Its
-----------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
[Name and Address of Holder]
-15-
<PAGE>
RESTRICTION ON TRANSFER
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws of any
state and may not be sold, transferred or otherwise disposed of except pursuant
to an effective registration statement or exemption from registration under the
foregoing laws. Accordingly, the shares represented by this certificate may not
be sold, transferred or otherwise disposed of without (i) an opinion of counsel
satisfactory to FieldWorks, Incorporated that such sale, transfer or other
disposition may lawfully be made without registration under the Securities Act
of 1933 and applicable state securities laws or (ii) such registration.
-16-
<PAGE>
WARRANT EXERCISE
(To be signed only upon exercise of this warrant)
The undersigned, the Holder of the foregoing warrant, hereby
irrevocably elects to exercise the purchase right represented by such warrant
for, and to purchase thereunder, __________ shares of common stock of
FieldWorks, Incorporated, to which such warrant relates and herewith makes
payment of $__________ therefor in cash, certified check or bank draft and
requests that the certificates for such shares be issued in the name of, and be
delivered to ____________________, whose address is set forth below the
signature of the undersigned.
Dated:______________
________________________________
Signature
If shares are to be issued Social Security or other Tax
other than to Holder: Identification No.
_____________________________________ ________________________________
_____________________________________
_____________________________________
_____________________________________
Please print present name and address
-17-
<PAGE>
WARRANT ASSIGNMENT
(To be signed only upon transfer of this warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________ the right represented by the foregoing warrant to purchase
the shares of common stock of FieldWorks, Incorporated, and appoints
____________________ attorney to transfer such right on the books of FieldWorks,
Incorporated, with full power of substitution in the premises.
Dated:_______________
__________________________________
Signature
______________________________________ Social Security or other Tax
Identification No.
______________________________________
__________________________________
______________________________________
Please print present name and complete
address
-18-
<PAGE>
EXHIBIT A
TO
WARRANT
ISSUED BY
FIELDWORKS, INCORPORATED
Registration Rights
1. Definitions. As used in this Exhibit A, the following terms shall
have the following respective meanings:
"Company" means FieldWorks, Incorporated, a Minnesota corporation.
"Holder" means (i) any person owning of record Registrable Securities
that have not been sold to the public or (ii) any transferee of record of such
Registrable Securities in accordance with Section 6 of the Warrant.
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"Registrable Securities" means (i) Common Stock of the Company issued
or issuable upon exercise of the Warrants, and (ii) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such above-described
securities. Notwithstanding the foregoing, Registrable Securities shall not
include any securities sold by a person to the public either pursuant to a
registration statement or Rule 144 or sold in a private transaction in which the
transferor's rights under Section 6 of the instrument to which this Exhibit A is
attached are not assigned.
"Registrable Securities then outstanding" shall be the number of shares
determined by calculating the total number of shares of the Company's Common
Stock that are Registrable Securities and either (i) are then issued and
outstanding or (ii) are issuable pursuant to then exercisable or convertible
securities.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Warrants" shall mean those warrants issued by the Company in the
offering described in the Summary of the Offering dated as of August 16, 1999.
A-1
<PAGE>
2. Piggyback Registration Rights. 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 securities by it (other than a registration on Form S-8 or a
successor form), the Company will give written notice of its determination to
the Holders. Upon the written request of any Holder given within thirty (30)
days after receipt of any such notice from the Company, the Company will, except
as herein provided, cause all Registrable Securities owned by such Holder and
with respect to which Holder has requested registration to be included in such
registration statement, all to the extent requisite to permit the sale or other
disposition by such Holder 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 such registration initiated by it. If any such
registration pertains to an underwritten offering in whole or in part, the
Company may require that the shares requested for inclusion by any Holder
pursuant to this section be included in the underwritten offering on the same
terms and conditions as the securities otherwise being sold through the
underwriters. In the event that if, in the good faith judgment of the managing
underwriter of such underwritten offering, as evidenced in writing delivered to
the Company, the inclusion of all of the shares originally covered by a request
for registration made by a Holder would reduce the amount of securities to be
offered by the Company or interfere with the successful marketing of the
securities to be offered by the Company, the number of shares of stock owned by
such Holder and otherwise to be included in the underwritten offering may be
reduced; provided, however, that any such required reduction shall be pro rata
among all persons (other than the Company) who are participating in such
underwritten offering. Those shares which are thus excluded from the
underwritten offering shall be withheld from the market by such Holder for a
period, not to exceed 180 days, that the managing underwriter reasonably
determines is necessary in order to effect the underwritten offering.
3. Demand Registration Rights.
(a) Subject to the conditions of this Section 3, if the
Company shall receive a written request from the Holders of a majority
of the Registrable Securities then outstanding (the "Initiating
Holders") that the Company file a registration statement under the
Securities Act covering the registration of Registrable Securities,
then the Company shall, within thirty (30) days of the receipt thereof,
give written notice of such request to all Holders, and subject to the
limitations of this Section 3, use its best efforts to effect, as soon
as practicable, the registration under the Securities Act of all
Registrable Securities that the Holders request to be registered.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their
request made pursuant to this Section 3 and the Company shall include
such information in the written notice referred to in Section 3(a). In
such event, the right of any Holder to include its Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such
Holder) to the extent
A-2
<PAGE>
provided herein. All Holders proposing to distribute their securities
through such underwriting shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders (which
underwriter or underwriters shall be reasonably acceptable to the
Company). Notwithstanding any other provision of this Section 3, if the
underwriter advises the Company that marketing factors require a
limitation of the number of securities to be underwritten (including
Registrable Securities) then the Company shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant
hereto, and the number of shares that may be included in the
underwriting shall be allocated to the Holders of such Registrable
Securities on a pro rata basis based on the number of Registrable
Securities held by all such Holders (including the Initiating Holders).
Any Registrable Securities excluded or withdrawn from such underwriting
shall be withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 3:
(i) prior to __________, 2000;
(ii) after the Company has effected one (1)
registration pursuant to this Section 3, and such registration
has been declared or ordered effective; or
(iii) if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section
3, a certificate signed by the Chairman of the Board stating
that, in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company
and its shareholders for such registration statement to be
effected at such time, in which event the Company shall have
the right to defer such filing for a period of not more than
ninety (90) days after receipt of the request of the
Initiating Holders.
4. Registration Procedures. If and whenever the Company is required by
the provisions of Section 2 or Section 3 to effect the registration of any
shares under the Securities Act, the Company will:
(a) prepare and file with the Commission a registration
statement with respect to such shares, and use its best efforts to
cause such registration statement to become and remain effective for
such period as may be reasonably necessary to effect the sale of such
shares, not to exceed three (3) months;
(b) prepare and file with the Commission such amendments to
such registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement
effective for such period as may be reasonably necessary to effect the
sale of such securities, not to exceed six (6) months;
(c) furnish to the Holders of, and to the underwriters of, the
securities being registered such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and
such other documents as such Holders and underwriters may reasonably
request in order to facilitate the public offering of such securities;
A-3
<PAGE>
(d) use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as the underwriters may reasonably
request within twenty (20) days following the original filing of such
registration statement, except that the Company shall not for any
purpose be required to execute a general consent to service of process
or to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified; and
(e) prepare and promptly file with the Commission and promptly
notify Holders of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to
such securities is required to be delivered under the Securities Act,
any event shall have occurred as the result of which any such
prospectus or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading.
5. Expenses. With respect to any registration of shares pursuant to
Section 2 or Section 3, 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 and/or selling security holders are required to bear such fees and
disbursements), all internal Company expenses, the premiums and other costs of
policies of insurance against liability arising out of the public offering, and
all legal fees and disbursements and other expenses of complying with state
securities or blue sky laws of any jurisdictions in which the securities to be
offered are to be registered or qualified. Fees and disbursements of counsel and
accountants for Holders, underwriting discounts and commissions and transfer
taxes for Holders and any other expenses incurred by Holders not expressly
included above shall be borne by Holders.
6. Indemnification. In the event that any shares owned by Holders are
included in a registration statement under Section 1:
(a) The Company will indemnify and hold harmless Holders and
any underwriter (as defined in the Securities Act) for Holders from and
against any and all loss, damage, liability, cost and expense
(collectively, "Losses") to which Holders or any such underwriter may
become subject under the Securities Act or otherwise, insofar as such
Losses are caused by any untrue statement or alleged untrue statement
of any material fact contained in such registration statement, any
prospectus contained therein or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
in which they were made, not misleading; provided, however, that the
Company will not be liable in any such case to the extent that any such
Loss arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity
with information furnished by Holders or such underwriter.
A-4
<PAGE>
(b) Holders will indemnify and hold harmless the Company and
any underwriter from and against any and all Losses to which the
Company or any underwriter may become subject under the Securities Act
or otherwise, insofar as such Losses are caused by any untrue or
alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or
alleged omission was so made in reliance upon and in strict conformity
with information furnished by Holders.
(c) Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (a) or (b) of this section of notice of the
commencement of any action involving the subject matter of the
foregoing indemnity provisions, such indemnified party will, if a claim
thereof is to be made against the indemnifying party pursuant to the
provisions of said paragraph (a) or (b), promptly notify the
indemnifying party of the commencement thereof; but the omission to so
notify the indemnifying party will not relieve it from any liability
which it may have to any indemnified party otherwise than hereunder. In
case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party; provided, however, if the
defendants in any action include both the indemnified party and the
indemnifying party and there is a conflict of interest which would
prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties shall have the
right to select separate counsel to participate in the defense of such
action on behalf of such indemnified party or parties. After notice
from the indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party pursuant to the provisions of
paragraph (a) or (b) for any legal or other expense subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance with the
proviso of the preceding sentence, (ii) the indemnifying party shall
not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after the
notice of the commencement of the action or (iii) the indemnifying
party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party.
(d) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party in
respect of any Losses, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such Losses in such
proportion as appropriate to reflect the relative fault of the Company,
on the one hand, and such Holder of Registrable Securities, on the
other hand, and to reflect the parties' relative intent, knowledge,
access to information and opportunity to correct or mitigate the damage
in respect of or to prevent any untrue statement or omission giving
rise to
A-5
<PAGE>
such indemnification obligation. The Company and the Holders of
Registrable Securities agree that it would not be just and equitable if
contributions pursuant to this Section 6(d) were determined by pro rata
allocation (even if the Holders of Registrable Securities were treated
as one entity for such purpose) or by any other method of allocation
which did not take account of the equitable considerations referred to
above in this Section 6(d). No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
is not guilty of such fraudulent misrepresentation.
7. Termination of Registration Rights. A Holder's registration rights
under this Exhibit A shall terminate and be of no further force and effect if
all the Registrable Securities held by and issuable to such Holder may be sold
under Rule 144 during any ninety (90) day period.
A-6
<PAGE>
Exhibit 10.4
COMMON STOCK WARRANT
To Purchase 76,750
Shares of Common Stock of
Fieldworks, Incorporated
September 7, 1999
THE SECURITIES EVIDENCED BY THIS CERTIFICATE WERE ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT OR AN OPINION OF COUNSEL (WHICH SHALL BE IN FORM AND SUBSTANCE
SATISFACTORY TO THE COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED.
THIS CERTIFIES THAT, in consideration for $50.00 and other valuable
consideration, Dougherty Summit Securities LLC ("DSS"), or permitted assigns, is
entitled to subscribe for and purchase from Fieldworks, Incorporated (the
"Company"), a Minnesota corporation, at any time after the date hereof to and
including the Expiration Date (as defined in Section 1 hereof), 76,750 fully
paid and nonassessable shares of the Company's Common Stock, $.001 par value, at
a price of $1.00 per share.
This Warrant is subject to the following provisions, terms and conditions:
1. Expiration; Exercise; Transferability.
(a) This Warrant may be exercised in whole or in part, at any time
after the date hereof to and including the Expiration Date. As used herein
"Expiration Date" shall mean September 7, 2004.
(b) 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
stock), by written notice of exercise in the form appended hereto delivered
to the Company on or prior to the Expiration Date, ten (10) days prior to
the intended date of exercise and by the surrender of this Warrant
(properly endorsed if required) at the principal office of the Company and
upon payment to it in full by certified or bank check or wire transfer of
the purchase price for such shares.
(c) This Warrant may be transferred subject to the following
conditions: (i) during the first year after the date of this Warrant, it
may not be sold, transferred, assigned or hypothecated except to persons
who are (x) both officers and shareholders of DSS, or (y) both officers and
employees of DSS, and (ii) after such period, the Warrant shall be
transferable without restriction, but subject to the opinion of counsel as
provided by paragraph 7 herein that such transfer is not in violation of
federal or state securities laws. In the event of any such transfer, the
term "Warrants" as used hereinbelow shall apply to all of such transferred
Warrants, in the aggregate.
2. Issuance of Shares. The Company agrees that the shares purchased hereby
shall be and are deemed to be issued to the record holder hereof as of the close
of business on the date on which this Warrant shall have been exercised by
surrender of the Warrant and payment for the shares. Subject to the provisions
of the next succeeding paragraph, certificates for the shares of stock so
purchased shall be delivered to the holder hereof within a reasonable time, not
exceeding ten (10) days after the rights represented by this Warrant shall have
been so exercised, and, unless this Warrant has expired, a new Warrant
representing the number of shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the holder hereof
within such time.
<PAGE>
Notwithstanding the foregoing, however, the Company shall not be required
to deliver any certificate for shares of stock upon exercise of this Warrant,
except in accordance with the provisions, and subject to the limitations, of
paragraph 7 hereof.
3. Covenants of Company. The Company covenants and agrees that all shares
which may be issued upon the exercise of the rights represented by this Warrant
will upon receipt of payment therefor upon issuance, be duly authorized and
issued, fully paid, nonassessable and free from all taxes, liens and charges
with respect to the issue thereof, and, without limiting the generality of the
foregoing, the Company covenants and agrees that it will from time to time take
all such action as may be required to assure that the par value per share of the
common stock is at all times equal to or less than the then effective purchase
price per share of the common stock issuable pursuant to this Warrant. 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 or transfer upon
exercise of the subscription rights evidenced by this Warrant, a sufficient
number of shares of its common stock to provide for the exercise of the rights
represented by this Warrant.
4. Anti-Dilution Adjustments. The above provisions are, however, subject to
the following:
(a) In case the Company shall at any time hereafter subdivide or
combine the outstanding shares of common stock or declare a dividend
payable in common stock, the exercise price of this Warrant in effect
immediately prior to the subdivision, combination or record date for such
dividend payable in common stock shall forthwith be proportionately
increased, in the case of combination, or decreased, in the case of
subdivision or dividend payable in common stock. Upon each adjustment of
the exercise price, the holder of this Warrant shall thereafter be entitled
to purchase, at the exercise price resulting from such adjustment, the
number of shares obtained by multiplying the exercise price immediately
prior to such adjustment by the number of shares purchasable pursuant
hereto immediately prior to such adjustment and dividing the product
thereof by the exercise price resulting from such adjustment.
(b) No fractional shares of common stock are to be issued upon the
exercise of this Warrant, but the Company shall pay a cash adjustment in
respect of any fraction of a share which would otherwise be issuable in an
amount equal to the same fraction of the market price per share of common
stock on the day of exercise as determined in good faith by the Company.
(c) (i) If any capital reorganization or reclassification of the
capital stock of the Company shall be effected in such a way that holders
of common stock shall be entitled to receive stock, securities or assets
with respect to or in exchange for common stock, then, as a condition of
such reorganization or reclassification, lawful and adequate provision
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions
specified in this Warrant and in lieu of the shares of common stock of the
Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby, such stock, securities or assets
as may be issued or payable with respect to or in exchange for a number of
outstanding shares of such common stock equal to the number of shares of
such stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby had such reorganization or
reclassification not taken place, and in any such case appropriate
provisions shall be made with respect to the rights and interests of the
holder of this Warrant to the end that the provisions hereof (including
without limitation provisions for adjustments of the Warrant purchase price
and of the number of shares purchasable upon the exercise of this Warrant)
shall thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the
exercise hereof.
(ii) In any event any consolidation or merger of the Company or
the sale of all or substantially all of its assets, the Company shall
give the holder of this Warrant notice of any such transaction, which
notice shall be given at least 10 days prior to any record date which
shall be established in connection with any shareholder meeting or
consent solicitation with respect to such transaction.
Notwithstanding any language to the contrary set forth in this
paragraph 4 (c), if an occurrence or event described herein shall take
place in which the shareholders of the Company receive cash for their
shares of common stock of the Company and a successor corporation or
corporation purchasing assets shall survive the transaction then, at
the election of the record holder hereof, such corporation shall be
obligated to purchase this Warrant (or the unexercised part hereof)
from the record holder without requiring the holder to exercise all or
part of the Warrant.
2
<PAGE>
If such corporation refuses to so purchase this Warrant then the
Company shall purchase the Warrant for cash. In either case the
purchase price shall be the amount per share that shareholders of the
outstanding common stock of the Company shall receive as a result of
the transaction multiplied by the number of shares covered by the
Warrant, minus the aggregate exercise price of the Warrant. Such
purchase shall be closed within 60 days following the election of the
holder to sell this Warrant.
(d) Upon any adjustment of the Warrant purchase price, then, and
in each such case, the Company shall give written notice thereof, by
first class mail, postage prepaid, addressed to the registered holder
of this Warrant at the address of such holder as shown on the books of
the Company, which notice shall state the Warrant purchase price
resulting from such adjustment and the increase or decrease, if any,
in the number of shares 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.
(e) If any event occurs as to which in the good faith
determination of the Board of Directors of the Company the other
provisions of this paragraph 4 are not strictly applicable or if
strictly applicable would not fairly protect the purchase rights of
the holder of this Warrant or of common stock in accordance with the
essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles,
so as to protect such purchase rights as aforesaid.
5. Common Stock. As used herein, the term "common stock" shall mean and
include the Company's presently authorized shares of common stock and shall also
include any capital stock of any class of the Company hereafter authorized which
shall not be limited to fixed sum or percentage in respect of the rights of the
holders thereof to participate in dividends or in the distribution, dissolution
or winding up of the Company; provided that the share purchasable pursuant to
this Warrant shall include shares designated as common stock of the Company on
the date of original issue of this Warrant or, in the case of any
reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in Section 4 above.
6. No Voting Rights. This Warrant shall not entitle the holder hereof to
any voting rights or other rights as a stockholder of the Company.
7. Transfer of Warrant or Resale of Shares. In the event the holder of this
Warrant desires to transfer this Warrant, or any common stock issued upon the
exercise hereof, the holder shall provide the Company with a written notice
describing the manner of such transfer in the form appended hereto and an
opinion of counsel (reasonably acceptable to the Company) that the proposed
transfer may be effected without registration or qualification (under any
Federal or State law), whereupon such holder shall be entitled to transfer this
Warrant or to dispose of shares of common stock received upon the previous
exercise hereof in accordance with the notice delivered by such holder to the
Company; provided, that an appropriate legend may be endorsed on this Warrant or
the certificates for such shares respecting restrictions upon transfer thereof
necessary or advisable in the opinion of counsel satisfactory to the Company to
prevent further transfers which would be in violation of Section 5 of the
Securities Act, as amended (the "Securities Act").
If, in the opinion of either of the counsel referred to in this paragraph
7, the proposed transfer or disposition described in the written notice given
pursuant to this paragraph 7 may not be effected without registration or
qualification of this Warrant or the shares of common stock issued upon the
exercise hereof, the Company shall promptly give written notice thereof to the
holder hereof, and such holder will limit its activities in respect to such
proposed transfer or disposition as, in the opinion of both such counsel, are
permitted by law.
8. Registration Rights.
(a) If the Company proposes to claim an exemption under Section 3(b) for a
public offering of any of its securities or to register under the Securities Act
(except by a claim of exemption or registration statement on Form S-8 or Form
S-4 or any form that does not permit the inclusion of shares by its security
holders) any of its securities, it will give written notice to all registered
holders of Warrants, and all registered holders of shares of common stock
acquired upon the exercise of Warrants (the "Common Shares") of its intention to
do so and, on the written request of any such registered holders given within
twenty (20) days after receipt of any such notice, the Company will use its best
efforts to cause all Common Shares which such holders shall have requested the
registration or qualification thereof, to be included in such notification or
registration statement proposed to be filed by the Company; provided, however,
3
<PAGE>
that nothing herein shall prevent the Company from, at any time, abandoning or
delaying any such registration initiated by it. If any such registration shall
be underwritten in whole or in part, the Company may require that the shares
requested for inclusion pursuant to this section be included in the underwriting
on the same terms and conditions as the securities otherwise being sold through
the underwriters. In the event that, in the good faith judgment of the managing
underwriter of such public offering, the inclusion of all of the shares
originally covered by a request for registration would reduce the number of
shares to be offered by the Company or interfere with the successful marketing
of the shares of stock offered by the Company, the number of shares otherwise to
be included pursuant to this Section in the underwritten public offering may be
proportionately reduced (among all shareholders seeking registration) to a
number deemed satisfactory by the managing underwriter. Those shares which are
thus excluded from the underwritten public offering shall be withheld from the
market for a period, not to exceed 180 days from the effective date of the
registration statement, which the managing underwriter reasonably determines is
necessary in order to effect the underwritten public offering. All expenses of
such offering, except the fees of special counsel to such holders and brokers'
commissions or underwriting discounts payable by such holders, shall be borne by
the Company.
(b) If and whenever the Company is required by the provisions of Section
8(a) hereof to effect the registration of Warrants and/or shares issued upon the
exercise of the Warrants under the Securities Act, the Company will:
(i) Prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement with respect to such securities, and
use its diligent, good faith efforts to cause such registration statement
to become and remain effective for such period as may be reasonably
necessary to effect the sale of such securities, not to exceed three (3)
months;
(ii) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained therein
as may be necessary to keep such registration statement effective for such
period as may be reasonably necessary to effect the sale of such
securities, not to exceed six (6) months;
(iii) provide security holders' counsel with reasonable opportunities
to review and comment on, and otherwise participate in, the preparation of
such registration statement;
(iv) furnish to the security holders participating in such
registration and to the underwriters of the securities being registered
such reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such security
holders and underwriters may reasonably request in order to facilitate the
public offering of such securities;
(v) use its diligent, good faith efforts to register or qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating
holders may reasonably request in writing within 30 days following the
original filing of such registration statement, except that the Company
shall not for any purpose be required to execute a general consent to
service of process or to qualify to do business as a foreign corporation in
any jurisdiction wherein it is not so qualified;
(vi) notify the security holders participating in such registration,
promptly after it shall receive notice thereof, of the time when such
registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(vii) notify such holders promptly of any request by the Commission
for the amending or supplementing of such registration statement or
prospectus or for additional information;
(viii) prepare and file with the Commission, promptly upon the request
of any such holders, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for such holders
(and concurred in by counsel for the Company), is required under the
Securities Act or the rules and regulations thereunder in connection with
the distribution of the Warrants or shares by such holder;
4
<PAGE>
(ix) prepare and promptly file with the Commission and promptly notify
such holders of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities Act, any event
shall have occurred as the result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were
made, not misleading;
(x) advise such holders, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement or
the initiation or threatening of any proceeding for that purpose and
promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued;
(xi) not file any amendment or supplement to such registration
statement or prospectus to which a majority in interest of such holders
shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the requirements
of the Securities Act or the rules and regulations thereunder, after having
been furnished with a copy thereof at least five business days prior to the
filing thereof, unless in the opinion of counsel for the Company the filing
of such amendment or supplement is reasonably necessary to protect the
Company from any liabilities under any applicable federal or state law and
such filing will not violate applicable law; and
(xii) at the request of any such holder, furnish on the effective date
of the registration statement and, if such registration includes an
underwritten public offering, at the closing provided for in the
underwriting agreement: (i) opinions, dated such respective dates, of the
counsel representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the holder or holders making
such request, covering such matters as such underwriters and holder or
holders may reasonably request; and (ii) letters, dated such respective
dates, from the independent certified public accountants of the Company,
addressed to the underwriters, if any, and to the holder or holders making
such request, covering such matters as such underwriters and holder or
holders may reasonably request.
(c) The Company shall pay all Registration Expenses (as defined below) in
connection with the inclusion of Shares in any Registration Statement, or
application to register or qualify Shares under state securities laws, filed by
the Company hereunder, other than as set forth herein. For purposes of this
Agreement, the term "Registration Expenses" means the filing fees payable to the
Commission, any state agency and the National Association of Securities Dealers,
Inc.; the fees and expenses of the Company's legal counsel and independent
certified public accountants in connection with the preparation and filing of
the Registration Statement (and all amendments and supplements thereto) with the
Commission; and all expenses relating to the printing of the Registration
Statement, prospectuses and various agreements executed in connection with the
Registration Statement. Notwithstanding the foregoing, the security holder will
pay the fees and expenses of any legal counsel such holders may engage, as well
as the holder's proportionate share of any custodian fees or commission or
discounts which may be payable to any underwriter.
(d) The holders of Warrants and/or the holders of shares issued upon the
exercise of the Warrants acknowledge that there may occasionally be times when
the Company must suspend the use of the prospectus forming a part of the
Registration Statement, when there exists material non-public information
relating to the Company (including, but not limited to, an acquisition, merger,
recapitalization, consolidation, reorganization or similar transaction (or
negotiations with respect thereto)) which in the reasonable opinion of the
Company's Board of Directors should not be disclosed. Accordingly, the Company
may suspend resales pursuant to such Registration Statement for a period not to
exceed ninety (90) days in any twenty-four (24) month period if the Company has
been advised by counsel and the Board of Directors reasonably concurs that the
information the Board reasonably believes should not be disclosed is material
and therefore the prospectus forming a part of the Registration Statement is not
current. Each such holder agrees that it shall not sell any Shares pursuant to
said prospectus during the period commencing at the time at which the Company
gives the holder notice of the suspension of such prospectus and ending at the
time the Company gives the holder notice that the holder may thereafter effect
sales pursuant to such prospectus.
5
<PAGE>
(e) The Company hereby indemnifies the holder of this Warrant and of any
common stock issued or issuable hereunder, its officers and directors, and any
person who controls such Warrant holder or such holder of common stock within
the meaning of Section 15 of the Securities Act, against all losses, claims,
damages and liabilities caused by any untrue statement of a material fact
contained in any registration statement, prospectus, notification or offering
circular (and as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or any preliminary prospectus or caused by
any omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading except insofar as such
losses, claims, damages or liabilities are caused by any untrue statement or
omission contained in information furnished in writing to the Company by such
Warrant holder or such holder of common stock expressly for use therein, and
each such holder by its acceptance hereof severally agrees that it will
indemnify and hold harmless the Company and each of its officers who signs such
registration statement and each of its directors and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act with
respect to losses, claims, damages or liabilities which are caused by any untrue
statement or omission contained in information furnished in writing to the
Company by such holder expressly for use therein.
9. Additional Right to Convert Warrant.
(a) If at any time the shares to be issued upon exercise of this Warrant
cannot be immediately sold pursuant to an effective registration under the
Securities Act, the holder of this Warrant shall have the right to require the
Company to convert this Warrant (the "Conversion Right") at any time prior to
its expiration into shares of Common Stock as provided for in this Section 9.
Upon exercise of the Conversion Right, the Company shall deliver to the holder
(without payment by the holder of any Exercise Price) that number of shares of
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 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 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, 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 Warrantholder will
purchase pursuant to such conversion and (ii) a place and date not less than one
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 9(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 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" means, with respect to the Company's Common Stock,
as of any date:
(i) if the Common Stock is listed or admitted to unlisted trading
privileges on any national securities exchange or is not so listed or
admitted but transactions in the Common Stock are reported on the NASDAQ
National Market System, the reported closing price of the Common Stock on
such exchange or by the NASDAQ National Market System as of such date (or,
if no shares were traded on such day, as of the next preceding day on which
there was such a trade); or
(ii) if the Common Stock is not so listed or admitted to unlisted
trading privileges or reported on the NASDAQ National Market System, and
bid and asked prices therefor in the over-the-counter market are reported
by the NASDAQ system or National Quotation Bureau, Inc. (or any comparable
reporting service), the mean of the closing bid and asked prices as of such
date, as so reported by the NASDAQ System, or, if not so reported thereon,
as reported by National Quotation Bureau, Inc. (or such comparable
reporting service); or
(iii) if the Common Stock is not so listed or admitted to unlisted
trading privileges, or reported on the NASDAQ
6
<PAGE>
National Market System, and such bid and asked prices are not so reported
by the NASDAQ system or National Quotation Bureau, Inc. (or any comparable
reporting service), such price as the Company's Board of Directors
determines in good faith in the exercise of its reasonable discretion.
[Remainder of page intentionally left blank]
7
<PAGE>
IN WITNESS WHEREOF, Fieldworks, Incorporated has caused this Warrant to be
executed by its duly authorized officers and this Warrant to be dated as of
September 7, 1999.
FIELDWORKS, INCORPORATED
By /s/ Karen L. Engebretson
---------------------------------
8
<PAGE>
EXERCISE FORM
(TO BE SIGNED ONLY UPON EXERCISE OF WARRANT)
FIELDWORKS, INCORPORATED
The undersigned, the holder of the within warrant, hereby irrevocably
elects to exercise the purchase right represented by such warrant for, and to
purchase thereunder ______________ shares of the Common Stock, $.001 par value,
of Fieldworks, Incorporated and herewith makes payment of $________________
therefor, and requests that the certificates for such shares be issued in the
name of ________________________ and be delivered to _____________________ whose
address is _______________________________.
Dated:________________ __________________________________________
(Signature must conform in all respects to
the name of holder as specified on the
face of the warrant)
(Address)
(City - State - Zip)
9
<PAGE>
ASSIGNMENT FORM
(TO BE SIGNED ONLY UPON TRANSFER OF THE WARRANT)
For value received, the undersigned hereby sells, assigns and transfers
unto those individuals listed on Exhibit A, attached hereto, the right
represented by the within warrant to purchase the number of shares opposite
their names on the attached Exhibit A of Common Stock, $.001 par value, 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:________________ DOUGHERTY SUMMIT SECURITIES LLC
90 South Seventh Street
Suite 4300
Minneapolis, MN 55402
By________________________________
In the presence of:
- -------------------------------
10
<PAGE>
CONVERSION NOTICE
(TO BE SIGNED ONLY UPON EXERCISE OF CONVERSION RIGHT
SET FORTH IN SECTION 9 OF THE WARRANT)
TO Fieldworks, Incorporated
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the Conversion Right set forth in Section 9 of such Warrant
and to surrender for conversion _______________ shares of the Common Stock of
Fieldworks, Incorporated and to receive _________ shares of the Common Stock of
Fieldworks, Incorporated. The closing of this conversion shall take place at the
offices of the undersigned on ____________________. Certificates for the shares
to be delivered at the closing shall be issued in the name of __________________
whose address is ____________________________________.
Dated:________________ __________________________________________
(Signature must conform in all respects to
the name of holder as specified on
the face of the Warrant)
(Address)
(City - State - Zip)
11
<PAGE>
COMMON STOCK WARRANT
To Purchase 30,000
Shares of Common Stock of
Fieldworks, Incorporated
September 23, 1999
THE SECURITIES EVIDENCED BY THIS CERTIFICATE WERE ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT OR AN OPINION OF COUNSEL (WHICH SHALL BE IN FORM AND SUBSTANCE
SATISFACTORY TO THE COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED.
THIS CERTIFIES THAT, in consideration for $50.00 and other valuable
consideration, Dougherty Summit Securities LLC ("DSS"), or permitted assigns, is
entitled to subscribe for and purchase from Fieldworks, Incorporated (the
"Company"), a Minnesota corporation, at any time after the date hereof to and
including the Expiration Date (as defined in Section 1 hereof), 30,000 fully
paid and nonassessable shares of the Company's Common Stock, $.001 par value, at
a price of $1.00 per share.
This Warrant is subject to the following provisions, terms and conditions:
1. Expiration; Exercise; Transferability.
(a) This Warrant may be exercised in whole or in part, at any time
after the date hereof to and including the Expiration Date. As used herein
"Expiration Date" shall mean September 23, 2004.
(b) 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
stock), by written notice of exercise in the form appended hereto delivered
to the Company on or prior to the Expiration Date, ten (10) days prior to
the intended date of exercise and by the surrender of this Warrant
(properly endorsed if required) at the principal office of the Company and
upon payment to it in full by certified or bank check or wire transfer of
the purchase price for such shares.
(c) This Warrant may be transferred subject to the following
conditions: (i) during the first year after the date of this Warrant, it
may not be sold, transferred, assigned or hypothecated except to persons
who are (x) both officers and shareholders of DSS, or (y) both officers and
employees of DSS, and (ii) after such period, the Warrant shall be
transferable without restriction, but subject to the opinion of counsel as
provided by paragraph 7 herein that such transfer is not in violation of
federal or state securities laws. In the event of any such transfer, the
term "Warrants" as used hereinbelow shall apply to all of such transferred
Warrants, in the aggregate.
2. Issuance of Shares. The Company agrees that the shares purchased hereby
shall be and are deemed to be issued to the record holder hereof as of the close
of business on the date on which this Warrant shall have been exercised by
surrender of the Warrant and payment for the shares. Subject to the provisions
of the next succeeding paragraph, certificates for the shares of stock so
purchased shall be delivered to the holder hereof within a reasonable time, not
exceeding ten (10) days after the rights represented by this Warrant shall have
been so exercised, and, unless this Warrant has expired, a new Warrant
representing the number of shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the holder hereof
within such time.
Notwithstanding the foregoing, however, the Company shall not be required
to deliver any certificate for shares of stock upon exercise of this Warrant,
except in accordance with the provisions, and subject to the limitations, of
paragraph 7 hereof.
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3. Covenants of Company. The Company covenants and agrees that all shares
which may be issued upon the exercise of the rights represented by this Warrant
will upon receipt of payment therefor upon issuance, be duly authorized and
issued, fully paid, nonassessable and free from all taxes, liens and charges
with respect to the issue thereof, and, without limiting the generality of the
foregoing, the Company covenants and agrees that it will from time to time take
all such action as may be required to assure that the par value per share of the
common stock is at all times equal to or less than the then effective purchase
price per share of the common stock issuable pursuant to this Warrant. 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 or transfer upon
exercise of the subscription rights evidenced by this Warrant, a sufficient
number of shares of its common stock to provide for the exercise of the rights
represented by this Warrant.
4. Anti-Dilution Adjustments. The above provisions are, however, subject to
the following:
(a) In case the Company shall at any time hereafter subdivide or
combine the outstanding shares of common stock or declare a dividend
payable in common stock, the exercise price of this Warrant in effect
immediately prior to the subdivision, combination or record date for such
dividend payable in common stock shall forthwith be proportionately
increased, in the case of combination, or decreased, in the case of
subdivision or dividend payable in common stock. Upon each adjustment of
the exercise price, the holder of this Warrant shall thereafter be entitled
to purchase, at the exercise price resulting from such adjustment, the
number of shares obtained by multiplying the exercise price immediately
prior to such adjustment by the number of shares purchasable pursuant
hereto immediately prior to such adjustment and dividing the product
thereof by the exercise price resulting from such adjustment.
(b) No fractional shares of common stock are to be issued upon the
exercise of this Warrant, but the Company shall pay a cash adjustment in
respect of any fraction of a share which would otherwise be issuable in an
amount equal to the same fraction of the market price per share of common
stock on the day of exercise as determined in good faith by the Company.
(c) (i) If any capital reorganization or reclassification of the
capital stock of the Company shall be effected in such a way that holders
of common stock shall be entitled to receive stock, securities or assets
with respect to or in exchange for common stock, then, as a condition of
such reorganization or reclassification, lawful and adequate provision
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions
specified in this Warrant and in lieu of the shares of common stock of the
Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby, such stock, securities or assets
as may be issued or payable with respect to or in exchange for a number of
outstanding shares of such common stock equal to the number of shares of
such stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby had such reorganization or
reclassification not taken place, and in any such case appropriate
provisions shall be made with respect to the rights and interests of the
holder of this Warrant to the end that the provisions hereof (including
without limitation provisions for adjustments of the Warrant purchase price
and of the number of shares purchasable upon the exercise of this Warrant)
shall thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the
exercise hereof.
(ii) In any event any consolidation or merger of the Company or
the sale of all or substantially all of its assets, the Company shall
give the holder of this Warrant notice of any such transaction, which
notice shall be given at least 10 days prior to any record date which
shall be established in connection with any shareholder meeting or
consent solicitation with respect to such transaction.
Notwithstanding any language to the contrary set forth in this
paragraph 4 (c), if an occurrence or event described herein shall take
place in which the shareholders of the Company receive cash for their
shares of common stock of the Company and a successor corporation or
corporation purchasing assets shall survive the transaction then, at
the election of the record holder hereof, such corporation shall be
obligated to purchase this Warrant (or the unexercised part hereof)
from the record holder without requiring the holder to exercise all or
part of the Warrant. If such corporation refuses to so purchase this
Warrant then the Company shall purchase the Warrant for cash. In
either case the purchase price shall be the amount per share that
shareholders of the outstanding common stock of the Company shall
receive as a result of the transaction multiplied by the number of
shares covered by the Warrant, minus the
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aggregate exercise price of the Warrant. Such purchase shall be closed
within 60 days following the election of the holder to sell this
Warrant.
(d) Upon any adjustment of the Warrant purchase price, then, and in
each such case, the Company shall give written notice thereof, by first
class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company,
which notice shall state the Warrant purchase price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
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.
(e) If any event occurs as to which in the good faith determination of
the Board of Directors of the Company the other provisions of this
paragraph 4 are not strictly applicable or if strictly applicable would not
fairly protect the purchase rights of the holder of this Warrant or of
common stock in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make an adjustment in the
application of such provisions, in accordance with such essential intent
and principles, so as to protect such purchase rights as aforesaid.
5. Common Stock. As used herein, the term "common stock" shall mean and
include the Company's presently authorized shares of common stock and shall also
include any capital stock of any class of the Company hereafter authorized which
shall not be limited to fixed sum or percentage in respect of the rights of the
holders thereof to participate in dividends or in the distribution, dissolution
or winding up of the Company; provided that the share purchasable pursuant to
this Warrant shall include shares designated as common stock of the Company on
the date of original issue of this Warrant or, in the case of any
reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in Section 4 above.
6. No Voting Rights. This Warrant shall not entitle the holder hereof to
any voting rights or other rights as a stockholder of the Company.
7. Transfer of Warrant or Resale of Shares. In the event the holder of this
Warrant desires to transfer this Warrant, or any common stock issued upon the
exercise hereof, the holder shall provide the Company with a written notice
describing the manner of such transfer in the form appended hereto and an
opinion of counsel (reasonably acceptable to the Company) that the proposed
transfer may be effected without registration or qualification (under any
Federal or State law), whereupon such holder shall be entitled to transfer this
Warrant or to dispose of shares of common stock received upon the previous
exercise hereof in accordance with the notice delivered by such holder to the
Company; provided, that an appropriate legend may be endorsed on this Warrant or
the certificates for such shares respecting restrictions upon transfer thereof
necessary or advisable in the opinion of counsel satisfactory to the Company to
prevent further transfers which would be in violation of Section 5 of the
Securities Act, as amended (the "Securities Act").
If, in the opinion of either of the counsel referred to in this paragraph
7, the proposed transfer or disposition described in the written notice given
pursuant to this paragraph 7 may not be effected without registration or
qualification of this Warrant or the shares of common stock issued upon the
exercise hereof, the Company shall promptly give written notice thereof to the
holder hereof, and such holder will limit its activities in respect to such
proposed transfer or disposition as, in the opinion of both such counsel, are
permitted by law.
8. Registration Rights.
(a) If the Company proposes to claim an exemption under Section 3(b) for a
public offering of any of its securities or to register under the Securities Act
(except by a claim of exemption or registration statement on Form S-8 or Form
S-4 or any form that does not permit the inclusion of shares by its security
holders) any of its securities, it will give written notice to all registered
holders of Warrants, and all registered holders of shares of common stock
acquired upon the exercise of Warrants (the "Common Shares") of its intention to
do so and, on the written request of any such registered holders given within
twenty (20) days after receipt of any such notice, the Company will use its best
efforts to cause all Common Shares which such holders shall have requested the
registration or qualification thereof, to be included in such notification or
registration statement proposed to be filed by the Company; provided, however,
that nothing herein shall prevent the Company from, at any time, abandoning or
delaying any such registration initiated by it. If any such registration shall
be underwritten in whole or in part, the Company may require that the shares
requested for inclusion pursuant to this section be included in the underwriting
on the same terms and conditions as the
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<PAGE>
securities otherwise being sold through the underwriters. In the event that, in
the good faith judgment of the managing underwriter of such public offering, the
inclusion of all of the shares originally covered by a request for registration
would reduce the number of shares to be offered by the Company or interfere with
the successful marketing of the shares of stock offered by the Company, the
number of shares otherwise to be included pursuant to this Section in the
underwritten public offering may be proportionately reduced (among all
shareholders seeking registration) to a number deemed satisfactory by the
managing underwriter. Those shares which are thus excluded from the underwritten
public offering shall be withheld from the market for a period, not to exceed
180 days from the effective date of the registration statement, which the
managing underwriter reasonably determines is necessary in order to effect the
underwritten public offering. All expenses of such offering, except the fees of
special counsel to such holders and brokers' commissions or underwriting
discounts payable by such holders, shall be borne by the Company.
(b) If and whenever the Company is required by the provisions of Section
8(a) hereof to effect the registration of Warrants and/or shares issued upon the
exercise of the Warrants under the Securities Act, the Company will:
(i) Prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement with respect to such securities, and
use its diligent, good faith efforts to cause such registration statement
to become and remain effective for such period as may be reasonably
necessary to effect the sale of such securities, not to exceed three (3)
months;
(ii) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained therein
as may be necessary to keep such registration statement effective for such
period as may be reasonably necessary to effect the sale of such
securities, not to exceed six (6) months;
(iii) provide security holders' counsel with reasonable opportunities
to review and comment on, and otherwise participate in, the preparation of
such registration statement;
(iv) furnish to the security holders participating in such
registration and to the underwriters of the securities being registered
such reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such security
holders and underwriters may reasonably request in order to facilitate the
public offering of such securities;
(v) use its diligent, good faith efforts to register or qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating
holders may reasonably request in writing within 30 days following the
original filing of such registration statement, except that the Company
shall not for any purpose be required to execute a general consent to
service of process or to qualify to do business as a foreign corporation in
any jurisdiction wherein it is not so qualified;
(vi) notify the security holders participating in such registration,
promptly after it shall receive notice thereof, of the time when such
registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(vii) notify such holders promptly of any request by the Commission
for the amending or supplementing of such registration statement or
prospectus or for additional information;
(viii) prepare and file with the Commission, promptly upon the request
of any such holders, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for such holders
(and concurred in by counsel for the Company), is required under the
Securities Act or the rules and regulations thereunder in connection with
the distribution of the Warrants or shares by such holder;
(ix) prepare and promptly file with the Commission and promptly notify
such holders of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
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<PAGE>
securities is required to be delivered under the Securities Act, any event
shall have occurred as the result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were
made, not misleading;
(x) advise such holders, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement or
the initiation or threatening of any proceeding for that purpose and
promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued;
(xi) not file any amendment or supplement to such registration
statement or prospectus to which a majority in interest of such holders
shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the requirements
of the Securities Act or the rules and regulations thereunder, after having
been furnished with a copy thereof at least five business days prior to the
filing thereof, unless in the opinion of counsel for the Company the filing
of such amendment or supplement is reasonably necessary to protect the
Company from any liabilities under any applicable federal or state law and
such filing will not violate applicable law; and
(xii) at the request of any such holder, furnish on the effective date
of the registration statement and, if such registration includes an
underwritten public offering, at the closing provided for in the
underwriting agreement: (i) opinions, dated such respective dates, of the
counsel representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the holder or holders making
such request, covering such matters as such underwriters and holder or
holders may reasonably request; and (ii) letters, dated such respective
dates, from the independent certified public accountants of the Company,
addressed to the underwriters, if any, and to the holder or holders making
such request, covering such matters as such underwriters and holder or
holders may reasonably request.
(c) The Company shall pay all Registration Expenses (as defined below) in
connection with the inclusion of Shares in any Registration Statement, or
application to register or qualify Shares under state securities laws, filed by
the Company hereunder, other than as set forth herein. For purposes of this
Agreement, the term "Registration Expenses" means the filing fees payable to the
Commission, any state agency and the National Association of Securities Dealers,
Inc.; the fees and expenses of the Company's legal counsel and independent
certified public accountants in connection with the preparation and filing of
the Registration Statement (and all amendments and supplements thereto) with the
Commission; and all expenses relating to the printing of the Registration
Statement, prospectuses and various agreements executed in connection with the
Registration Statement. Notwithstanding the foregoing, the security holder will
pay the fees and expenses of any legal counsel such holders may engage, as well
as the holder's proportionate share of any custodian fees or commission or
discounts which may be payable to any underwriter.
(d) The holders of Warrants and/or the holders of shares issued upon the
exercise of the Warrants acknowledge that there may occasionally be times when
the Company must suspend the use of the prospectus forming a part of the
Registration Statement, when there exists material non-public information
relating to the Company (including, but not limited to, an acquisition, merger,
recapitalization, consolidation, reorganization or similar transaction (or
negotiations with respect thereto)) which in the reasonable opinion of the
Company's Board of Directors should not be disclosed. Accordingly, the Company
may suspend resales pursuant to such Registration Statement for a period not to
exceed ninety (90) days in any twenty-four (24) month period if the Company has
been advised by counsel and the Board of Directors reasonably concurs that the
information the Board reasonably believes should not be disclosed is material
and therefore the prospectus forming a part of the Registration Statement is not
current. Each such holder agrees that it shall not sell any Shares pursuant to
said prospectus during the period commencing at the time at which the Company
gives the holder notice of the suspension of such prospectus and ending at the
time the Company gives the holder notice that the holder may thereafter effect
sales pursuant to such prospectus.
(e) The Company hereby indemnifies the holder of this Warrant and of any
common stock issued or issuable hereunder, its officers and directors, and any
person who controls such Warrant holder or such holder of common stock within
the meaning of Section 15 of the Securities Act, against all losses, claims,
damages and
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<PAGE>
liabilities caused by any untrue statement of a material fact contained in any
registration statement, prospectus, notification or offering circular (and as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus or caused by any omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading except insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or omission contained
in information furnished in writing to the Company by such Warrant holder or
such holder of common stock expressly for use therein, and each such holder by
its acceptance hereof severally agrees that it will indemnify and hold harmless
the Company and each of its officers who signs such registration statement and
each of its directors and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act with respect to losses, claims,
damages or liabilities which are caused by any untrue statement or omission
contained in information furnished in writing to the Company by such holder
expressly for use therein.
9. Additional Right to Convert Warrant.
(a) If at any time the shares to be issued upon exercise of this Warrant
cannot be immediately sold pursuant to an effective registration under the
Securities Act, the holder of this Warrant shall have the right to require the
Company to convert this Warrant (the "Conversion Right") at any time prior to
its expiration into shares of Common Stock as provided for in this Section 9.
Upon exercise of the Conversion Right, the Company shall deliver to the holder
(without payment by the holder of any Exercise Price) that number of shares of
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 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 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, 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 Warrantholder will
purchase pursuant to such conversion and (ii) a place and date not less than one
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 9(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 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" means, with respect to the Company's Common Stock,
as of any date:
(i) if the Common Stock is listed or admitted to unlisted trading
privileges on any national securities exchange or is not so listed or
admitted but transactions in the Common Stock are reported on the NASDAQ
National Market System, the reported closing price of the Common Stock on
such exchange or by the NASDAQ National Market System as of such date (or,
if no shares were traded on such day, as of the next preceding day on which
there was such a trade); or
(ii) if the Common Stock is not so listed or admitted to unlisted
trading privileges or reported on the NASDAQ National Market System, and
bid and asked prices therefor in the over-the-counter market are reported
by the NASDAQ system or National Quotation Bureau, Inc. (or any comparable
reporting service), the mean of the closing bid and asked prices as of such
date, as so reported by the NASDAQ System, or, if not so reported thereon,
as reported by National Quotation Bureau, Inc. (or such comparable
reporting service); or
(iii) if the Common Stock is not so listed or admitted to unlisted
trading privileges, or reported on the NASDAQ National Market System, and
such bid and asked prices are not so reported by the NASDAQ system or
National Quotation Bureau, Inc. (or any comparable reporting service), such
price as the Company's Board of Directors determines in good faith in the
exercise of its reasonable discretion.
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18
<PAGE>
IN WITNESS WHEREOF, Fieldworks, Incorporated has caused this Warrant to be
executed by its duly authorized officers and this Warrant to be dated as of
September 23, 1999.
FIELDWORKS, INCORPORATED
By /s/ Karen L. Engebretson
-------------------------------
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<PAGE>
EXERCISE FORM
(TO BE SIGNED ONLY UPON EXERCISE OF WARRANT)
FIELDWORKS, INCORPORATED
The undersigned, the holder of the within warrant, hereby irrevocably
elects to exercise the purchase right represented by such warrant for, and to
purchase thereunder ______________ shares of the Common Stock, $.001 par value,
of Fieldworks, Incorporated and herewith makes payment of $________________
therefor, and requests that the certificates for such shares be issued in the
name of __________________________ and be delivered to ________________________
whose address is ____________________________.
Dated:________________ __________________________________________
(Signature must conform in all respects to
the name of holder as specified on the
face of the warrant)
(Address)
(City - State - Zip)
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<PAGE>
ASSIGNMENT FORM
(TO BE SIGNED ONLY UPON TRANSFER OF THE WARRANT)
For value received, the undersigned hereby sells, assigns and transfers
unto those individuals listed on Exhibit A, attached hereto, the right
represented by the within warrant to purchase the number of shares opposite
their names on the attached Exhibit A of Common Stock, $.001 par value, 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: ________________ DOUGHERTY SUMMIT SECURITIES LLC
90 South Seventh Street
Suite 4300
Minneapolis, MN 55402
By ___________________________________
In the presence of:
- -------------------------------
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<PAGE>
CONVERSION NOTICE
(TO BE SIGNED ONLY UPON EXERCISE OF CONVERSION RIGHT
SET FORTH IN SECTION 9 OF THE WARRANT)
TO Fieldworks, Incorporated
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the Conversion Right set forth in Section 9 of such Warrant
and to surrender for conversion _______________ shares of the Common Stock of
Fieldworks, Incorporated and to receive _________ shares of the Common Stock of
Fieldworks, Incorporated. The closing of this conversion shall take place at the
offices of the undersigned on ____________________. Certificates for the shares
to be delivered at the closing shall be issued in the name of __________________
whose address is _________________________.
Dated:________________ __________________________________________
(Signature must conform in all respects to
the name of holder as specified on the
face of the Warrant)
(Address)
(City - State - Zip)
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<PAGE>
COMMON STOCK WARRANT
To Purchase 43,250
Shares of Common Stock of
Fieldworks, Incorporated
September 30, 1999
THE SECURITIES EVIDENCED BY THIS CERTIFICATE WERE ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT OR AN OPINION OF COUNSEL (WHICH SHALL BE IN FORM AND SUBSTANCE
SATISFACTORY TO THE COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED.
THIS CERTIFIES THAT, in consideration for $50.00 and other valuable
consideration, Dougherty Summit Securities LLC ("DSS"), or permitted assigns, is
entitled to subscribe for and purchase from Fieldworks, Incorporated (the
"Company"), a Minnesota corporation, at any time after the date hereof to and
including the Expiration Date (as defined in Section 1 hereof), 43,250 fully
paid and nonassessable shares of the Company's Common Stock, $.001 par value, at
a price of $1.00 per share.
This Warrant is subject to the following provisions, terms and conditions:
1. Expiration; Exercise; Transferability.
(a) This Warrant may be exercised in whole or in part, at any time
after the date hereof to and including the Expiration Date. As used herein
"Expiration Date" shall mean September 30, 2004.
(b) 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
stock), by written notice of exercise in the form appended hereto delivered
to the Company on or prior to the Expiration Date, ten (10) days prior to
the intended date of exercise and by the surrender of this Warrant
(properly endorsed if required) at the principal office of the Company and
upon payment to it in full by certified or bank check or wire transfer of
the purchase price for such shares.
(c) This Warrant may be transferred subject to the following
conditions: (i) during the first year after the date of this Warrant, it
may not be sold, transferred, assigned or hypothecated except to persons
who are (x) both officers and shareholders of DSS, or (y) both officers and
employees of DSS, and (ii) after such period, the Warrant shall be
transferable without restriction, but subject to the opinion of counsel as
provided by paragraph 7 herein that such transfer is not in violation of
federal or state securities laws. In the event of any such transfer, the
term "Warrants" as used hereinbelow shall apply to all of such transferred
Warrants, in the aggregate.
2. Issuance of Shares. The Company agrees that the shares purchased hereby
shall be and are deemed to be issued to the record holder hereof as of the close
of business on the date on which this Warrant shall have been exercised by
surrender of the Warrant and payment for the shares. Subject to the provisions
of the next succeeding paragraph, certificates for the shares of stock so
purchased shall be delivered to the holder hereof within a reasonable time, not
exceeding ten (10) days after the rights represented by this Warrant shall have
been so exercised, and, unless this Warrant has expired, a new Warrant
representing the number of shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the holder hereof
within such time.
Notwithstanding the foregoing, however, the Company shall not be required
to deliver any certificate for shares of stock upon exercise of this Warrant,
except in accordance with the provisions, and subject to the limitations, of
paragraph 7 hereof.
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<PAGE>
3. Covenants of Company. The Company covenants and agrees that all shares
which may be issued upon the exercise of the rights represented by this Warrant
will upon receipt of payment therefor upon issuance, be duly authorized and
issued, fully paid, nonassessable and free from all taxes, liens and charges
with respect to the issue thereof, and, without limiting the generality of the
foregoing, the Company covenants and agrees that it will from time to time take
all such action as may be required to assure that the par value per share of the
common stock is at all times equal to or less than the then effective purchase
price per share of the common stock issuable pursuant to this Warrant. 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 or transfer upon
exercise of the subscription rights evidenced by this Warrant, a sufficient
number of shares of its common stock to provide for the exercise of the rights
represented by this Warrant.
4. Anti-Dilution Adjustments. The above provisions are, however, subject to
the following:
(a) In case the Company shall at any time hereafter subdivide or
combine the outstanding shares of common stock or declare a dividend
payable in common stock, the exercise price of this Warrant in effect
immediately prior to the subdivision, combination or record date for such
dividend payable in common stock shall forthwith be proportionately
increased, in the case of combination, or decreased, in the case of
subdivision or dividend payable in common stock. Upon each adjustment of
the exercise price, the holder of this Warrant shall thereafter be entitled
to purchase, at the exercise price resulting from such adjustment, the
number of shares obtained by multiplying the exercise price immediately
prior to such adjustment by the number of shares purchasable pursuant
hereto immediately prior to such adjustment and dividing the product
thereof by the exercise price resulting from such adjustment.
(b) No fractional shares of common stock are to be issued upon the
exercise of this Warrant, but the Company shall pay a cash adjustment in
respect of any fraction of a share which would otherwise be issuable in an
amount equal to the same fraction of the market price per share of common
stock on the day of exercise as determined in good faith by the Company.
(c) (i) If any capital reorganization or reclassification of the
capital stock of the Company shall be effected in such a way that holders
of common stock shall be entitled to receive stock, securities or assets
with respect to or in exchange for common stock, then, as a condition of
such reorganization or reclassification, lawful and adequate provision
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions
specified in this Warrant and in lieu of the shares of common stock of the
Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby, such stock, securities or assets
as may be issued or payable with respect to or in exchange for a number of
outstanding shares of such common stock equal to the number of shares of
such stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby had such reorganization or
reclassification not taken place, and in any such case appropriate
provisions shall be made with respect to the rights and interests of the
holder of this Warrant to the end that the provisions hereof (including
without limitation provisions for adjustments of the Warrant purchase price
and of the number of shares purchasable upon the exercise of this Warrant)
shall thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the
exercise hereof.
(ii) In any event any consolidation or merger of the Company or
the sale of all or substantially all of its assets, the Company shall
give the holder of this Warrant notice of any such transaction, which
notice shall be given at least 10 days prior to any record date which
shall be established in connection with any shareholder meeting or
consent solicitation with respect to such transaction.
Notwithstanding any language to the contrary set forth in this
paragraph 4 (c), if an occurrence or event described herein shall take
place in which the shareholders of the Company receive cash for their
shares of common stock of the Company and a successor corporation or
corporation purchasing assets shall survive the transaction then, at
the election of the record holder hereof, such corporation shall be
obligated to purchase this Warrant (or the unexercised part hereof)
from the record holder without requiring the holder to exercise all or
part of the Warrant. If such corporation refuses to so purchase this
Warrant then the Company shall purchase the Warrant for cash. In
either case the purchase price shall be the amount per share that
shareholders of the outstanding common stock of the Company shall
receive as a result of the transaction multiplied by the number of
shares covered by the Warrant, minus the
24
<PAGE>
aggregate exercise price of the Warrant. Such purchase shall be closed
within 60 days following the election of the holder to sell this
Warrant.
(d) Upon any adjustment of the Warrant purchase price, then, and
in each such case, the Company shall give written notice thereof, by
first class mail, postage prepaid, addressed to the registered holder
of this Warrant at the address of such holder as shown on the books of
the Company, which notice shall state the Warrant purchase price
resulting from such adjustment and the increase or decrease, if any,
in the number of shares 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.
(e) If any event occurs as to which in the good faith
determination of the Board of Directors of the Company the other
provisions of this paragraph 4 are not strictly applicable or if
strictly applicable would not fairly protect the purchase rights of
the holder of this Warrant or of common stock in accordance with the
essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles,
so as to protect such purchase rights as aforesaid.
5. Common Stock. As used herein, the term "common stock" shall mean and
include the Company's presently authorized shares of common stock and shall also
include any capital stock of any class of the Company hereafter authorized which
shall not be limited to fixed sum or percentage in respect of the rights of the
holders thereof to participate in dividends or in the distribution, dissolution
or winding up of the Company; provided that the share purchasable pursuant to
this Warrant shall include shares designated as common stock of the Company on
the date of original issue of this Warrant or, in the case of any
reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in Section 4 above.
6. No Voting Rights. This Warrant shall not entitle the holder hereof to
any voting rights or other rights as a stockholder of the Company.
7. Transfer of Warrant or Resale of Shares. In the event the holder of this
Warrant desires to transfer this Warrant, or any common stock issued upon the
exercise hereof, the holder shall provide the Company with a written notice
describing the manner of such transfer in the form appended hereto and an
opinion of counsel (reasonably acceptable to the Company) that the proposed
transfer may be effected without registration or qualification (under any
Federal or State law), whereupon such holder shall be entitled to transfer this
Warrant or to dispose of shares of common stock received upon the previous
exercise hereof in accordance with the notice delivered by such holder to the
Company; provided, that an appropriate legend may be endorsed on this Warrant or
the certificates for such shares respecting restrictions upon transfer thereof
necessary or advisable in the opinion of counsel satisfactory to the Company to
prevent further transfers which would be in violation of Section 5 of the
Securities Act, as amended (the "Securities Act").
If, in the opinion of either of the counsel referred to in this paragraph
7, the proposed transfer or disposition described in the written notice given
pursuant to this paragraph 7 may not be effected without registration or
qualification of this Warrant or the shares of common stock issued upon the
exercise hereof, the Company shall promptly give written notice thereof to the
holder hereof, and such holder will limit its activities in respect to such
proposed transfer or disposition as, in the opinion of both such counsel, are
permitted by law.
8. Registration Rights.
(a) If the Company proposes to claim an exemption under Section 3(b) for a
public offering of any of its securities or to register under the Securities Act
(except by a claim of exemption or registration statement on Form S-8 or Form
S-4 or any form that does not permit the inclusion of shares by its security
holders) any of its securities, it will give written notice to all registered
holders of Warrants, and all registered holders of shares of common stock
acquired upon the exercise of Warrants (the "Common Shares") of its intention to
do so and, on the written request of any such registered holders given within
twenty (20) days after receipt of any such notice, the Company will use its best
efforts to cause all Common Shares which such holders shall have requested the
registration or qualification thereof, to be included in such notification or
registration statement proposed to be filed by the Company; provided, however,
that nothing herein shall prevent the Company from, at any time, abandoning or
delaying any such registration initiated by it. If any such registration shall
be underwritten in whole or in part, the Company may require that the shares
requested for inclusion pursuant to this section be included in the underwriting
on the same terms and conditions as the
25
<PAGE>
securities otherwise being sold through the underwriters. In the event that, in
the good faith judgment of the managing underwriter of such public offering, the
inclusion of all of the shares originally covered by a request for registration
would reduce the number of shares to be offered by the Company or interfere with
the successful marketing of the shares of stock offered by the Company, the
number of shares otherwise to be included pursuant to this Section in the
underwritten public offering may be proportionately reduced (among all
shareholders seeking registration) to a number deemed satisfactory by the
managing underwriter. Those shares which are thus excluded from the underwritten
public offering shall be withheld from the market for a period, not to exceed
180 days from the effective date of the registration statement, which the
managing underwriter reasonably determines is necessary in order to effect the
underwritten public offering. All expenses of such offering, except the fees of
special counsel to such holders and brokers' commissions or underwriting
discounts payable by such holders, shall be borne by the Company.
(b) If and whenever the Company is required by the provisions of Section
8(a) hereof to effect the registration of Warrants and/or shares issued upon the
exercise of the Warrants under the Securities Act, the Company will:
(i) Prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement with respect to such securities, and
use its diligent, good faith efforts to cause such registration statement
to become and remain effective for such period as may be reasonably
necessary to effect the sale of such securities, not to exceed three (3)
months;
(ii) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained therein
as may be necessary to keep such registration statement effective for such
period as may be reasonably necessary to effect the sale of such
securities, not to exceed six (6) months;
(iii) provide security holders' counsel with reasonable opportunities
to review and comment on, and otherwise participate in, the preparation of
such registration statement;
(iv) furnish to the security holders participating in such
registration and to the underwriters of the securities being registered
such reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such security
holders and underwriters may reasonably request in order to facilitate the
public offering of such securities;
(v) use its diligent, good faith efforts to register or qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating
holders may reasonably request in writing within 30 days following the
original filing of such registration statement, except that the Company
shall not for any purpose be required to execute a general consent to
service of process or to qualify to do business as a foreign corporation in
any jurisdiction wherein it is not so qualified;
(vi) notify the security holders participating in such registration,
promptly after it shall receive notice thereof, of the time when such
registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(vii) notify such holders promptly of any request by the Commission
for the amending or supplementing of such registration statement or
prospectus or for additional information;
(viii) prepare and file with the Commission, promptly upon the request
of any such holders, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for such holders
(and concurred in by counsel for the Company), is required under the
Securities Act or the rules and regulations thereunder in connection with
the distribution of the Warrants or shares by such holder;
(ix) prepare and promptly file with the Commission and promptly notify
such holders of the filing of such amendment or supplement to such
26
<PAGE>
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities Act, any event
shall have occurred as the result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were
made, not misleading;
(x) advise such holders, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement or
the initiation or threatening of any proceeding for that purpose and
promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued;
(xi) not file any amendment or supplement to such registration
statement or prospectus to which a majority in interest of such holders
shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the requirements
of the Securities Act or the rules and regulations thereunder, after having
been furnished with a copy thereof at least five business days prior to the
filing thereof, unless in the opinion of counsel for the Company the filing
of such amendment or supplement is reasonably necessary to protect the
Company from any liabilities under any applicable federal or state law and
such filing will not violate applicable law; and
(xii) at the request of any such holder, furnish on the effective date
of the registration statement and, if such registration includes an
underwritten public offering, at the closing provided for in the
underwriting agreement: (i) opinions, dated such respective dates, of the
counsel representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the holder or holders making
such request, covering such matters as such underwriters and holder or
holders may reasonably request; and (ii) letters, dated such respective
dates, from the independent certified public accountants of the Company,
addressed to the underwriters, if any, and to the holder or holders making
such request, covering such matters as such underwriters and holder or
holders may reasonably request.
(c) The Company shall pay all Registration Expenses (as defined below) in
connection with the inclusion of Shares in any Registration Statement, or
application to register or qualify Shares under state securities laws, filed by
the Company hereunder, other than as set forth herein. For purposes of this
Agreement, the term "Registration Expenses" means the filing fees payable to the
Commission, any state agency and the National Association of Securities Dealers,
Inc.; the fees and expenses of the Company's legal counsel and independent
certified public accountants in connection with the preparation and filing of
the Registration Statement (and all amendments and supplements thereto) with the
Commission; and all expenses relating to the printing of the Registration
Statement, prospectuses and various agreements executed in connection with the
Registration Statement. Notwithstanding the foregoing, the security holder will
pay the fees and expenses of any legal counsel such holders may engage, as well
as the holder's proportionate share of any custodian fees or commission or
discounts which may be payable to any underwriter.
(d) The holders of Warrants and/or the holders of shares issued upon the
exercise of the Warrants acknowledge that there may occasionally be times when
the Company must suspend the use of the prospectus forming a part of the
Registration Statement, when there exists material non-public information
relating to the Company (including, but not limited to, an acquisition, merger,
recapitalization, consolidation, reorganization or similar transaction (or
negotiations with respect thereto)) which in the reasonable opinion of the
Company's Board of Directors should not be disclosed. Accordingly, the Company
may suspend resales pursuant to such Registration Statement for a period not to
exceed ninety (90) days in any twenty-four (24) month period if the Company has
been advised by counsel and the Board of Directors reasonably concurs that the
information the Board reasonably believes should not be disclosed is material
and therefore the prospectus forming a part of the Registration Statement is not
current. Each such holder agrees that it shall not sell any Shares pursuant to
said prospectus during the period commencing at the time at which the Company
gives the holder notice of the suspension of such prospectus and ending at the
time the Company gives the holder notice that the holder may thereafter effect
sales pursuant to such prospectus.
(e) The Company hereby indemnifies the holder of this Warrant and of any
common stock issued or issuable hereunder, its officers and directors, and any
person who controls such Warrant holder or such holder of common stock within
the meaning of Section 15 of the Securities Act, against all losses, claims,
damages and
27
<PAGE>
liabilities caused by any untrue statement of a material fact contained in any
registration statement, prospectus, notification or offering circular (and as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus or caused by any omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading except insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or omission contained
in information furnished in writing to the Company by such Warrant holder or
such holder of common stock expressly for use therein, and each such holder by
its acceptance hereof severally agrees that it will indemnify and hold harmless
the Company and each of its officers who signs such registration statement and
each of its directors and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act with respect to losses, claims,
damages or liabilities which are caused by any untrue statement or omission
contained in information furnished in writing to the Company by such holder
expressly for use therein.
9. Additional Right to Convert Warrant.
(a) If at any time the shares to be issued upon exercise of this Warrant
cannot be immediately sold pursuant to an effective registration under the
Securities Act, the holder of this Warrant shall have the right to require the
Company to convert this Warrant (the "Conversion Right") at any time prior to
its expiration into shares of Common Stock as provided for in this Section 9.
Upon exercise of the Conversion Right, the Company shall deliver to the holder
(without payment by the holder of any Exercise Price) that number of shares of
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 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 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, 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 Warrantholder will
purchase pursuant to such conversion and (ii) a place and date not less than one
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 9(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 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" means, with respect to the Company's Common Stock,
as of any date:
(i) if the Common Stock is listed or admitted to unlisted trading
privileges on any national securities exchange or is not so listed or
admitted but transactions in the Common Stock are reported on the NASDAQ
National Market System, the reported closing price of the Common Stock on
such exchange or by the NASDAQ National Market System as of such date (or,
if no shares were traded on such day, as of the next preceding day on which
there was such a trade); or
(ii) if the Common Stock is not so listed or admitted to unlisted
trading privileges or reported on the NASDAQ National Market System, and
bid and asked prices therefor in the over-the-counter market are reported
by the NASDAQ system or National Quotation Bureau, Inc. (or any comparable
reporting service), the mean of the closing bid and asked prices as of such
date, as so reported by the NASDAQ System, or, if not so reported thereon,
as reported by National Quotation Bureau, Inc. (or such comparable
reporting service); or
(iii) if the Common Stock is not so listed or admitted to unlisted
trading privileges, or reported on the NASDAQ National Market System, and
such bid and asked prices are not so reported by the NASDAQ system or
National Quotation Bureau, Inc. (or any comparable reporting service), such
price as the Company's Board of Directors determines in good faith in the
exercise of its reasonable discretion.
28
<PAGE>
[Remainder of page intentionally left blank]
29
<PAGE>
IN WITNESS WHEREOF, Fieldworks, Incorporated has caused this Warrant to be
executed by its duly authorized officers and this Warrant to be dated as of
September 30, 1999.
FIELDWORKS, INCORPORATED
By /s/ Karen L. Engebretson
----------------------------------
30
<PAGE>
EXERCISE FORM
(TO BE SIGNED ONLY UPON EXERCISE OF WARRANT)
FIELDWORKS, INCORPORATED
The undersigned, the holder of the within warrant, hereby irrevocably
elects to exercise the purchase right represented by such warrant for, and to
purchase thereunder ______________ shares of the Common Stock, $.001 par value,
of Fieldworks, Incorporated and herewith makes payment of $________________
therefor, and requests that the certificates for such shares be issued in the
name of ________________________ and be delivered to __________________________
whose address is ________________________________.
Dated:________________ __________________________________________
(Signature must conform in all respects to
the name of holder as specified on the
face of the warrant)
(Address)
(City - State - Zip)
31
<PAGE>
ASSIGNMENT FORM
(TO BE SIGNED ONLY UPON TRANSFER OF THE WARRANT)
For value received, the undersigned hereby sells, assigns and transfers
unto those individuals listed on Exhibit A, attached hereto, the right
represented by the within warrant to purchase the number of shares opposite
their names on the attached Exhibit A of Common Stock, $.001 par value, 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: ________________ DOUGHERTY SUMMIT SECURITIES LLC
90 South Seventh Street
Suite 4300
Minneapolis, MN 55402
By ___________________________________
In the presence of:
- -------------------------------
32
<PAGE>
CONVERSION NOTICE
(TO BE SIGNED ONLY UPON EXERCISE OF CONVERSION RIGHT
SET FORTH IN SECTION 9 OF THE WARRANT)
TO Fieldworks, Incorporated
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the Conversion Right set forth in Section 9 of such Warrant
and to surrender for conversion _______________ shares of the Common Stock of
Fieldworks, Incorporated and to receive _________ shares of the Common Stock of
Fieldworks, Incorporated. The closing of this conversion shall take place at the
offices of the undersigned on ____________________. Certificates for the shares
to be delivered at the closing shall be issued in the name of _________________
whose address is __________________________________.
Dated:________________ __________________________________________
(Signature must conform in all respects to
the name of holder as specified on the
face of the Warrant)
(Address)
(City - State - Zip)
33
<PAGE>
Exhibit 10.5
FIRST AMENDMENT TO
GENERAL CREDIT AND SECURITY AGREEMENT
THIS AGREEMENT, dated as of August 20, 1999, between SPECTRUM
Commercial Services, a division of Lyon Financial Services, Inc., a Minnesota
Corporation, having its mailing address and principal place of business at 7900
International Drive, Suite 890, Bloomington, Minnesota 55425 (herein called
"Lender"), and FieldWorks, Incorporated, a Minnesota corporation, having the
mailing address and principal place of business at 7631 Anagram Drive, Eden
Prairie, Minnesota 55344 (herein called "Borrower"), amends that certain General
Credit and Security Agreement dated November 19, 1999, ("Credit Agreement") as
amended. Where the provisions of this Agreement conflict with the Credit
Agreement, the intent of this Agreement shall control.
1. WHEREAS, certain Events of Default have occurred under the Credit
Agreement as follows: Borrower failed to post a year-to-date net profit for the
quarter ended 6/30/99.
2. WHEREAS, Lender is willing to waive such defaults provided that the
interest rate specified in the Credit Agreement is increased by 1%.
3. WHEREAS, Borrower desires to borrow up to $3 million in debt that is
subordinated to the loans described by the Credit Agreement on terms and
conditions previously disclosed to Lender ("Subordinated Debt").
4. It is hereby agreed that:
A. Lender hereby waives the Specific Defaults. No other default
or Event of Default is waived hereby and Lender reserves the
right to call future defaults and/or to demand payment of any
loans under the Credit Agreement or otherwise.
B. In paragraph 5 of the Credit Agreement, the phrase "three
Percent (3%) in excess of the Prime Rate" shall be deleted and
replaced with "four Percent (4%) in excess of the Prime Rate".
C. In paragraph 5 of the Credit Agreement, the phrase "in no
event shall the interest rate in effect under the Note at any
time be less than 9% per annum" and shall be replaced with "in
no event shall the interest rate in effect under the Note at
any time be less than 10% per annum".
D. Lender hereby consents to the Subordinated Debt provided the
debt itself contains language of subordination which is
approved by and satisfactory to Lender.
5. The provisions hereof are effective as of August 20, 1999.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SPECTRUM COMMERCIAL SERVICES FIELDWORKS, INCORPORATED
By /s/ Steven I. Lowenthal By /s/ David Mell
------------------------------------------ ---------------------------
Steven I. Lowenthal, Senior Vice President David Mell, CEO
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-02-2000
<PERIOD-START> JAN-04-1999
<PERIOD-END> OCT-03-1999
<CASH> 1,175,253
<SECURITIES> 0
<RECEIVABLES> 3,756,684
<ALLOWANCES> 0
<INVENTORY> 4,091,459
<CURRENT-ASSETS> 9,513,318
<PP&E> 3,692,512
<DEPRECIATION> 1,888,993
<TOTAL-ASSETS> 11,450,716
<CURRENT-LIABILITIES> 6,542,430
<BONDS> 0
0
0
<COMMON> 8,894
<OTHER-SE> 2,732,322
<TOTAL-LIABILITY-AND-EQUITY> 11,450,716
<SALES> 18,312,977
<TOTAL-REVENUES> 18,312,977
<CGS> 13,095,256
<TOTAL-COSTS> 13,095,256
<OTHER-EXPENSES> 2,485,641
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,277
<INCOME-PRETAX> (4,013,722)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,013,722)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,013,722)
<EPS-BASIC> (.45)
<EPS-DILUTED> (.45)
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