<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 7, 2000
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM S-2
REGISTRATION STATEMENT
Under the Securities Act of 1933
________________________
FieldWorks, Incorporated
(Exact Name of Registrant as Specified in Its Charter)
Minnesota 3571 41-1731723
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) Number)
FieldWorks, Incorporated
7631 Anagram Drive
Eden Prairie, Minnesota 55344
(Address,including zip code, and telephone number, including area code, of
registrant's principal executive offices)
________________________
Karen L. Engebretson
Chief Financial Officer
FieldWorks, Incorporated
7631 Anagram Drive
Eden Prairie, Minnesota 55344
(612) 974-7000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
_________________________
Copies to:
Kenneth L. Cutler, Esq.
R. Kirkland Cozine, Esq.
Dorsey & Whitney LLP
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402
(612) 340-2600
Fax: (612) 340-8738
_________________________
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
_________________________
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
<PAGE>
If the registrant elects to deliver its latest annual report to
security holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this form, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [_]
___________________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of Each Class of Proposed Maximum Aggregate Amount of
Securities to be Registered Offering Price (1) Registration Fee
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Rights to purchase Common Stock...... $ 0 (2)
-------------------------------------------------------------------------------------------------
Common Stock, $.01 par value......... $9,096,284 $2,401
-------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
(2) Pursuant to Rule 457(g), no separate registration fee is required for
the rights since they are being registered in the same registration
statement as the Common Stock underlying them.
__________________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell theses securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS Subject to Completion dated , 2000
__________Subscription Rights
[LOGO OF FIELDWORKS]
_________Shares of Common Stock
__________________________
We are distributing non-transferable rights to purchase shares of our
common stock to persons who owned shares of our common stock or of our preferred
stock as of the close of business on the record date, April 14, 2000. You will
have the right to subscribe for one share of common stock, at a subscription
price of $2.00, for each three shares of common stock or three shares of common
stock issuable upon conversion of preferred stock that you owned on April 14,
2000. We will issue up to 4,548,142 shares of common stock in this offering. You
will not receive any fractional rights. If you exercise all of your rights, you
may also have the opportunity to purchase additional shares of common stock at
the same purchase price.
You will be able to exercise your rights to purchase shares of common stock
only during a limited period. If you do not exercise your rights before 5:00
p.m. Central Daylight Savings Time on _____, 2000, the rights will expire. We
may decide to extend the rights offering, in our discretion, for up to 10 days.
Our common stock is listed on the Nasdaq National Market under the symbol
"FWRX." On March 31, 2000, the closing bid price of our common stock as reported
on the Nasdaq National Market was $2 11/16 per share.
Investing in our common stock involves risks. See "Risk Factors" beginning
on page 10.
Neither the SEC nor any state regulator has approved or disapproved of
these securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this prospectus is ________, 2000
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Prospectus Summary............................................................................................ 5
Risk Factors.................................................................................................. 10
Warning About Forward-Looking Statements...................................................................... 18
Use of Proceeds............................................................................................... 19
Price Range of Common Stock................................................................................... 19
Dividend Policy............................................................................................... 19
Determination of Subscription Price........................................................................... 20
Dilution ..................................................................................................... 20
Capitalization................................................................................................ 21
The Rights Offering........................................................................................... 22
Related Party Transactions.................................................................................... 28
Description of Capital Stock.................................................................................. 31
Legal Matters................................................................................................. 34
Experts ..................................................................................................... 34
Where You Can Find More Information........................................................................... 34
Incorporation of Documents by Reference....................................................................... 35
</TABLE>
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PROSPECTUS SUMMARY
Because this is only a summary, it does not contain all of the information
that may be important to you. For a more complete understanding of this
offering, we encourage you to read the entire prospectus carefully, including
the risk factors, and our financial statements and the notes to those statements
incorporated by reference in this prospectus. You should do so before decide to
exercise your rights to buy our common stock.
About FieldWorks, Incorporated
FieldWorks began as a company dedicated to the development and sale of
rugged mobile computing platforms. Over the past several years, we have evolved
our strategy to focus on designing and providing complete customer-specific
field technology solutions. We believe that our strongest opportunity for growth
and differentiation lies in integrating our hardware with our own and third
parties' open architecture software. The resulting computing solutions are
intended for use in service bay, test and measurement, and logistics management
applications in the trucking, public services, heavy equipment and
government/military industries worldwide. To produce these solutions, we combine
appropriate hardware, software and peripherals - in other words, we function as
a sophisticated systems supplier and integrator. We also offer customers a high
level of industry expertise in service and support. Our professional services
capabilities include consultation and/or management of solution
conceptualization, design, development, implementation and support.
We have designed our computing platforms for demanding field environments.
All of our platforms meet military standards for shock, vibration, moisture and
temperature extremes. Features include daylight-readable color displays and a
pointing device that is impervious to dirt and can be used with a glove. Our
platforms also offer a high level of expandability. Expansion paths include
desktop-like ISA and PCI expansion slots, PC card slots, serial ports, universal
serial bus and custom modules. As a result, all platforms are flexible
"electronic toolboxes" that integrate an end-user's application-specific tools
and technologies into one custom, rugged mobile tool. Lastly, we have designed
our platforms with a modular system architecture that allows a user to upgrade
them to incorporate new central processing units, display technologies and
peripheral technologies, such as wireless communication. This contributes to a
long life span and reduces the customer's total cost of ownership.
The market for our products and solutions consists of those businesses and
entities that are seeking effective mobile platforms for field personnel and
functions. We have focused on the following vertical markets:
. transportation/trucking companies, which require diagnostic service
applications in a single PC-based tool with integrated software
modules and hardware peripherals;
. utilities and telecommunications test crews, which require electronic
toolboxes that can perform data acquisition, diagnostic,
communications and analysis tasks to expedite installation, repair and
troubleshooting;
. public safety personnel, who require mobile data terminals that link
into central dispatch; and
. the military, which requires mobile units that are capable of
withstanding battlefield conditions and are used chiefly for
communication and field data acquisition purposes.
Our goal is to be the worldwide leader in providing computing solutions for
demanding field environments. To accomplish this, we:
. mainly target the key vertical markets mentioned above and develop
specialized product features and functions to address the special
needs of those vertical markets;
. are working to position ourselves as a professional service and system
integration company that offers unique market application expertise
and customer support regarding the use of the technology we provide;
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. are in the final stages of outsourcing work where value is not
recognized and rewarded by our customers, in particular procurement
and manufacturing related to our products; and
. are focused on reducing product cost through significant product re-
design initiatives that incorporate embedded systems in the design of
our products.
FieldWorks was incorporated under the laws of the State of Minnesota in
October 1992. Our executive offices are located at 7631 Anagram Drive, Eden
Prairie, Minnesota 55344, and our telephone number is (612) 974-7000. Our
Internet address is www.field-works.com. Information on our web site is not part
of this prospectus.
We have a federally registered design trademark that includes the words
"FieldWorks, Inc." This prospectus also contains names, trademarks, service
marks and registered trademarks and service marks of other companies.
<TABLE>
<CAPTION>
About the Rights Offering
<S> <C>
Distribution of rights.......................... Each FieldWorks shareholder will receive one subscription right for each
three shares of common stock or three shares of common stock issuable upon
conversion of preferred stock held on the record date. We will not issue
fractional rights; the number of rights we offer to each shareholder will be
rounded up or down to the nearest whole number.
Each right includes a basic subscription privilege and an oversubscription
privilege.
Common stock offered............................ shares.
Common stock to be outstanding
after the offering........................... shares.
Record date..................................... April 14, 2000.
Expiration time................................. 5:00 p.m. Central Daylight Savings time on , 2000, unless we
extend the expiration date for up to ten days (but no later than 5:00 p.m.
Central Daylight Savings time on _________________, 2000). No one may
exercise rights after the expiration time.
Non-transferability............................. No shareholder may sell or otherwise transfer any subscription rights.
Basic subscription privilege.................... The basic subscription privilege entitles you to buy one share of common
stock for each three shares you own on the record date.
Oversubscription privilege...................... If you fully exercise your basic subscription right, you may also subscribe
for any shares of common stock that other shareholders do not purchase.
Shares of common stock available for purchase pursuant to the
oversubscription privilege will be prorated if the number of oversubscribed
shares exceeds the number of shares of common stock available. We will
prorate in proportion to the number of shares of common stock each holder
has subscribed for pursuant to the basic subscription privilege.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Industrial-Works Holding Co., LLC minimum
purchase commitment.......................... Industrial-Works Holding Co., LLC, the sole holder of our series B and
series C preferred stock, has agreed to purchase a minimum of 1,000,000
shares in this rights offering if other shareholders purchase at least
1,500,000 shares. This commitment will expire if this rights offering is not
completed by June 30, 2000 or if, prior to the completion of this rights
offering, our common stock ceases to be admitted to trading on the Nasdaq
National Market or we are given notice of a decision to cause a delisting.
As the result of one of our agreements with Glenmount, LLC (an affiliate of
Industrial-Works), if Industrial-Works purchases its full commitment in this
rights offering, we will be required to pay Glenmount, LLC $80,000 (or more
if Industrial-Works exercises its oversubscription privilege and we issue
oversubscription shares to it).
Procedure for subscribing....................... To exercise your subscription rights, you should complete the subscription
certificate and forward it, along with payment for the shares you are
purchasing, to the subscription agent. You are responsible for ensuring that
your subscription reaches the subscription agent before the expiration time.
If you plan to mail the subscription certificate, we recommend that you use
insured, registered mail. See "The Rights Offering - Exercise of
Subscription Rights."
Persons holding shares, or wishing to exercise
rights, through others....................... If you hold shares of common stock through a broker, dealer, commercial
bank, trust company or other nominee, you should contact the institution and
inform them if you wish to participate in this offering. See "The Rights
Offering -Exercise of Subscription Rights - Shares Held for Others."
No revocation................................... You may not revoke your subscription after the subscription agent receives
your subscription certificate.
Amendments...................................... We reserve the right to amend the terms and conditions of this offering.
Our withdrawal right............................ We reserve the right to withdraw the offering at any time until it has
expired and for any reason. If we withdraw the offering, we will have no
obligation to you other than to return any rights subscription payment we
have received from you, without interest.
Delivery of shares.............................. We will send you certificates representing shares you purchase as soon as
practicable after ___________ , 2000, whether you exercise your rights
immediately before that date or earlier. If you hold your common stock
through The Depository Trust Company (known as DTC), or arrange for delivery
and payment through DTC, DTC will credit the appropriate account for the
shares you purchase.
</TABLE>
5
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<TABLE>
<S> <C>
Listing......................................... We intend to apply to have the shares approved for listing on the Nasdaq
National Market.
Subscription price.............................. $2.00 per share of common stock. See "Determination of Subscription Price."
Subscription agent.............................. Norwest Bank Minnesota, National Association.
Use of proceeds................................. For general corporate purposes including future development of computing
solutions and market expansion.
Risk factors.................................... Investing in our common stock involves risks, including the risks that are
described on pages 8 to 16 of this prospectus.
Questions about how to subscribe................ You should direct any questions concerning the procedure for subscribing to
Norwest Shareowner Services. Their phone number is 1-800-468-9716 or email
at [email protected].
</TABLE>
About This Prospectus
Except as otherwise noted, all information in this prospectus assumes
that we sell all of the estimated 4,548,142 shares of our common stock subject
to the rights offering. However, we have not set any minimum number of shares of
common stock that we will issue on exercise of the rights and we may close on
the sale of significantly fewer shares than we are offering.
In making a decision to buy our common stock, you should only rely on
the information incorporated by reference or contained in this prospectus. We
have not authorized anyone else to provide you with different or additional
information. If anyone provides you with different or inconsistent information,
you should not rely on it.
You should assume that the information appearing in this prospectus is
accurate only as of the date on the front cover of this prospectus. Our
business, financial condition, results of operations and prospects may have
changed since that date.
6
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Summary Consolidated Financial Information
<TABLE>
<CAPTION>
Fiscal Year
--------------------------------------------------
1997 1998 1999
--------------- -------------- ---------------
<S> <C> <C> <C>
Statement of Operations Data:
Sales............................................... $ 23,815,045 $ 20,001,787 $ 25,329,192
Cost of sales....................................... 14,620,121 14,199,526 17,950,297
--------------- -------------- ---------------
Gross profit........................................ 9,194,924 5,802,261 7,378,895
Operating expenses.................................. 9,961,341 13,083,781 12,444,859
--------------- -------------- ---------------
Operating loss...................................... (766,417) (7,281,520) (5,065,964)
Interest expense and other, net..................... (257,561) 157,333 (314,094)
--------------- -------------- ---------------
Net loss............................................ $ (1,023,978) $ (7,124,187) $ (5,380,058)
=============== ============== ===============
Basic and diluted loss per common share............. $ (.12) $ (.81) $ (.61)
=============== ============== ===============
</TABLE>
<TABLE>
<CAPTION>
January 2, 2000
------------ --------------- ------------------
Actual Pro forma (1) Pro forma
as adjusted (2)
------------ --------------- ------------------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........................... $ 86,786 $ 5,336,786 $14,133,070
Working capital..................................... 1,828,611 7,078,611 15,874,895
Total assets........................................ 12,013,543 17,263,543 26,059,827
Total liabilities................................... 10,610,162 10,610,162 10,610,162
Shareholders' equity................................ 1,403,381 6,653,381 15,449,665
</TABLE>
(1) The pro forma amounts reflect the sale of 4,250,000 shares of series B
preferred stock at $1.00 per share and the sale of 500,000 shares of
series C preferred stock at $2.00 per share.
(2) The pro forma as adjusted amounts reflect the sale of the estimated
4,548,142 shares of common stock in this offering at $2.00 per share,
after deducting estimated offering expenses of $300,000.
7
<PAGE>
RISK FACTORS
Before investing in our common stock, you should be aware that there are
various risks, including those described below. Your investment in our common
stock will be subject to the risks inherent in our business. The value of your
investment may decline and could result in a loss of your entire investment. You
should carefully consider the following factors as well as the other information
contained in or incorporated by reference in this prospectus before deciding to
exercise your rights to buy our common stock.
Risks Related to Our Operations
We have a history of losses and expect to continue to generate losses in the
future
As of January 2, 2000, we had an accumulated deficit of $19.8 million. We
have not achieved profitability and, as the result of computing solution
development and initiatives to reduce the cost of our products, we expect to
continue to incur net losses through at least 2000. We expect to continue to
incur significant operating expenses and, as a result, will need to generate
significant revenues to achieve profitability, which may not occur. Even if we
do achieve profitability, we may be unable to sustain or increase profitability
on a quarterly or annual basis in the future.
We cannot assure you that we will generate sufficient sales to allow us to
operate profitably
The market for the kind of computing platforms and solutions we sell is
relatively new and limited. The rugged computing platforms that we use are both
heavier and more expensive than most consumer portable personal computers. Our
success will depend upon our ability to expand the professional services and
solutions we offer, penetrate our key vertical markets of
transportation/trucking, heavy equipment, public service and
government/military, and increase the market acceptance of our solutions and
products. We cannot assure you that our current or new products will gain
widespread acceptance or that we will generate sufficient sales to allow us to
operate profitably. We will in particular suffer adverse effects if the market
for the kind of computing solutions and products we sell does not expand.
Our ability to develop solutions around our rugged platforms will influence our
ability to compete in the marketplace
In the past year we have begun to shift our business focus from producing
hardware to designing and implementing full computing solutions. These computing
solutions are intended for use in service bay, test and measurement, and
logistics management applications in the trucking, public services, heavy
equipment and government/military industries worldwide. To produce these
solutions, we combine appropriate hardware, software and peripherals and also
provide service and support. To succeed with this new approach, we will need to
design, develop, conceptualize and support computing solutions that address the
needs of these vertical markets. We cannot guarantee that we will be able to do
this in a timely, cost-effective manner or that our target markets will accept
the solutions that we do introduce.
We have only limited experience with our solutions-based business model
We began to shift our business focus in early 1999. For us, this means that
we have only limited experience in operating a solutions-based business from
which to evaluate our business prospects and analyze the risks and uncertainties
that we face. For you, this means that you have limited historical information
from which to evaluate our prospects.
We depend on third-party manufacturers to produce our products
We depend on third-party manufacturers to manufacture and assemble our
products. This results in dependence on the timely delivery of high quality
products from these manufacturers and may leave us with less flexibility and
control over the manufacturing process than if we conducted these operations
internally. These manufacturers (including the manufacturers of subassemblies
included in our final products) may not timely deliver
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the items they are expected to produce. Any occurrence of this sort could
compromise our ability to deliver our products and solutions in a timely
fashion. It could also require us to make alternative arrangements, which might
not be available on acceptable terms or on a timely basis. If we were unable to
make alternative arrangements, our business and financial condition could
suffer.
We have only recently changed from internally manufacturing our final
products to employing third parties to do so. Therefore we do not have long-
standing relationships or experience with our third-party manufacturers.
Our business may suffer if we do not design and implement appropriate new sales
and marketing strategies in a timely manner
As we shift our business focus from producing hardware to designing and
implementing full computing solutions, we are also working to build our internal
sales organization, retrain our sales personnel and refine our sales and
marketing strategies. Our business may suffer if we do not design and implement
appropriate strategies in a timely manner. Our business may also suffer if, as a
result of the change in our business focus, we are required to replace
significant numbers of our current sales personnel.
Our failure to anticipate or rapidly respond to changing customer demands could
adversely affect our market position
Both the computer industry and the diagnostic and data collection
instrument industry are characterized by rapid technological change, including
changes in customer requirements, frequent new product introductions and
enhancements, and evolving industry standards. Our success will depend in part
on our ability to keep pace with technological developments and emerging
industry standards and to respond to customer requirements by enhancing our
current products and developing and introducing new solutions and products. Our
market position will be adversely affected if we do not adequately anticipate or
rapidly respond to changes of this type. Technological advances may also
increase the level of competition in our market niche.
Intense competition could reduce our market share and harm our financial
performance
We occupy a niche in the portable computer market. In this niche, we
currently face direct competition from companies that produce portable computers
intended for field use such as Dolch Computer Systems; Getac Corp.; Itronix
Corp.; Kontron Elektronik Corp., Paravant Computer Systems, Inc.; Motorola,
Inc.; Melard Technologies, Inc.; WPI Husky Computers Inc.; Intermec Technologies
Corp. and Panasonic Personal Computer Company. Our computing platforms also face
indirect competition from a variety of different companies and products,
including consumer portable personal computers, customized portable personal
computers and single-purpose diagnostic and data collection instruments.
Both the computer industry and the diagnostic and data collection
instrument industry are intensely competitive. To the extent that we and our
current direct competitors expand and develop the market niche that we currently
service, other manufacturers may turn their attention to it and begin to produce
products directly competitive with those we offer. Many of the companies that
produce or may produce devices that compete or may compete, directly or
indirectly, with ours have greater name recognition, larger client bases and
substantially more financial, technological and marketing resources than we do.
These factors may provide them with significant advantages over us. Among other
things, these factors may allow them to adapt more rapidly and effectively to
changes in technology or in the market or to develop or market products that
will be more widely accepted. Competitive pressures could result in reduced
market share, price reductions, reduced margins and increased spending on
marketing and product development, any of which could adversely affect our
business.
If we do not adequately manage our inventory we may be required to make write-
offs in the future
In the past, we have written off portions of our parts inventory that have
become obsolete. If our current policies aimed at preventing a recurrence prove
ineffective, we may be required to do so again. Any significant future write-
offs could have an adverse effect on our financial condition. Our current effort
to outsource all of our
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assembly operations may increase the risk of an additional build-up of excess or
obsolete inventory that leads to a write-off.
Our business may suffer if we fail to manage growth effectively
To grow successfully we must increase our professional services and
solutions offerings and also improve the efficiency of our operations. If we
succeed in this, it will place significant strain on our managerial, operational
and financial systems and resources. We may not be able to successfully plan for
or manage increased production and marketing of our products and services. If we
grow, we may encounter difficulties, including:
. problems with our manufacturing partners;
. disrupted quality control and assurance;
. decreased product reliability;
. increased costs;
. difficulties maintaining internal accounting controls;
. malfunctioning of existing and new equipment;
. insufficient or untimely component supplies; and
. personnel shortages.
If we are unable to manage growth effectively, our business could suffer.
We may not succeed in attracting and retaining the personnel we need for our
business
Our future success depends substantially on our ability to attract and
retain the personnel we need for our business. Our personnel needs include
highly trained personnel for management, sales and engineering. Qualified
individuals in these areas are in high demand and are often subject to competing
employment opportunities. In recent years there has been great demand for
qualified employees in the Minneapolis area, where our headquarters are located.
We may not succeed in attracting and retaining the personnel we need for our
business.
We have experienced a high turnover rate in some of our significant
management positions over the past three years. In that period we have had four
Chief Executive Officers, three Vice Presidents of Sales and Marketing and two
Vice Presidents of Engineering/Operations. Continued high turnover in these or
similar positions could have an adverse effect on our operations and business.
Adverse events with respect to our international sales could have an adverse
effect on our business and financial condition
In the year ended January 2, 2000, international sales represented
approximately 14% of our net sales. International sales are subject to inherent
risks, including:
. longer payment cycles;
. greater difficulty or delay in accounts receivable collection;
. U.S. and foreign import and export restrictions and tariffs;
. the burdens of complying with a variety of foreign laws;
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. potentially adverse tax consequences;
. potentially inadequate protection of intellectual property rights;
. restrictions on repatriation of earnings; and
. exposure to increased political and economic instability.
All of our export sales are currently denominated in United States dollars.
An increase in the value of the United States dollar relative to foreign
currencies could make our products more expensive and, therefore, potentially
less competitive in foreign markets. In the future, if we were to denominate our
export sales in foreign currencies, our financial condition and results of
operations would become subject to foreign currency translations and the
possibility of currency exchange or price controls or other restrictions on
foreign currencies. If any of these events occurred, or if we lost a key foreign
distributor or were unable to maintain our foreign distribution network, it
could have an adverse effect on our business and financial condition.
We depend on resellers for our product distribution
We distribute a substantial portion of our products through independent
sales representatives and distributors. We also sell our products to value-
added-resellers (known as VARs), distributors and systems integrators. Our
success depends in large part upon the performance of these resellers and on our
ability to attract new resellers. Many of our resellers also carry - and may
have incentives to encourage purchase of - competitive products. Most of our
resellers may terminate their written agreements with us with or without cause
by giving us 30 days' written notice. The loss of any of our major resellers or
a failure to make acceptable arrangements with resellers in new markets could
have a material adverse effect on us.
We obtain a number of our components from single sources
Our rugged computing platforms employ a number of components not generally
used in off-the-shelf personal computers, such as special hard disk drives, CD-
ROM drives, floppy disk drives, displays and power supplies. We currently obtain
a number of these components from single sources. It could create uncertainty
and be costly and time-consuming if we had to change suppliers. If we could not
obtain adequate or timely quantities of necessary components from our current
suppliers, we might not be able to identify or access alternative sources within
a reasonable period of time, on acceptable terms, or at all. Some of our current
vendors use tools that have been designed for us and are our property. If we
were required to change suppliers for these components, we would need either to
move the necessary tools or to obtain new tools, either of which could entail
significant cost and delay. Moreover, our buying power may be limited by our
small volume and we may receive less favorable allocations and other terms such
as price, timing or other factors than larger companies buying from the same
suppliers. Any of these factors or a significant increase in the price of
components could have a material adverse effect on our ability to manufacture
and market our products.
Potential fluctuations in our quarterly financial results make financial
forecasting difficult
Our quarterly operating results may fluctuate significantly in the future
as a result of a variety of factors, many of which are outside our control.
These factors include:
. long customer sales cycles (especially for customers that are
government agencies or large corporations);
. changes in customer buying patterns;
. orders from significant customers in one quarter that are
disproportionate in size or value compared to our other orders;
. the timing and nature of customer returns;
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. the timing of the introduction of new products by us or our
competitors;
. our competitors' tactics;
. technological developments; and
. the overall strength of the economy.
All of these factors, along with the uncertainties associated with the
introduction of any new product or product enhancement, in gauging ultimate
customer demand, and in predicting general trends in the market for our
products, solutions and services, may limit our ability to plan for production
and to forecast quarterly results of operations accurately. We believe that
quarter-to-quarter comparisons of our operating results may not be a good
indication of our future performance. Investors should not rely on our operating
results for any particular quarter as an indication of our future operating
results.
Risks Related to Intellectual Property
Failure to protect our intellectual property rights could harm our brand and our
ability to compete effectively
We rely on a combination of unpatented trade secrets and know-how and on
the expertise of our employees. We do not rely on patented processes or
technologies. The protective steps we have taken may be inadequate to deter
misappropriation of our proprietary information. We may be unable to detect the
unauthorized use of, or take appropriate steps to enforce, our intellectual
property rights. Effective trade secret protection may not be available in every
country in which we offer or intend to offer our products and services.
Likewise, others may independently develop or otherwise acquire unpatented
and/or patented technologies or products similar or superior to ours. We have
four registered trademarks in the United States. We also claim trademark rights
in an additional mark that we use in connection with our products in the United
States. We are aware that there are third parties that have claimed or may claim
superior rights, in some U.S. territories, to use marks in which we also claim
rights. One or more of these third parties may contest our right to use or
register our trademarks or contest the registration of any or all of our
registered trademarks. We do not know whether any of the trademarks we may
attempt to register will be found registrable, that registrations will issue, or
that we can support the cost of defense of our trademarks. Failure to protect
our intellectual property adequately could harm our brand and affect our ability
to compete effectively. Defending our intellectual property rights could also
result in the expenditure of significant financial and managerial resources,
which could materially adversely affect our business.
Loss of software licenses could have an adverse effect on us
We license some of the software that we include in our products from third
parties. If any licensor terminated any of these licenses, we might not be able
to license similar software from another party in a timely fashion, on
acceptable terms, or at all.
We may have to defend against intellectual property infringement claims, which
could have an adverse effect on us whether or not we prevailed
Disputes over intellectual property are frequent in the high technology
area. Although we believe that our business activities do not infringe the
intellectual property rights of others, other parties may assert infringement
claims against us or claim that we have violated a patent or other proprietary
right belonging to them. Likewise, disputes may arise in the future with respect
to ownership of technology developed by employees who were previously employed
by other companies. Infringement claims, even if not meritorious, could result
in the expenditure of significant financial and managerial resources. An adverse
determination could subject us to significant liabilities, require us to seek
licenses from or pay royalties to third parties or require us to develop
appropriate alternative technology. We might not be able to do any of these
things on acceptable terms, at an acceptable price, or at all. Any of these
results could materially adversely affect our business.
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<PAGE>
Risks Related to Our Financial Condition
When our line of credit expires in November 2000 we may be unable to renew or
replace it with alternative financing
Since 1998 we have depended on our line of credit for many of our operating
capital needs. This line of credit expires in November 2000. We may be unable to
renew or replace it on acceptable terms. If this happened, we would have to
repay all amount outstanding at the time (as of March 30, 2000 we had $550,000
outstanding). We might not be able to do so. If we were able to repay all
outstanding amounts, those amounts, coupled with the loss of access to our
credit facility, could adversely affect our financial condition. If we were not
able to repay all outstanding amounts, the lender could take various legal steps
against us, including taking action with respect to items subject to a security
interest we have granted the lender. Items we have pledged include our
equipment, inventory, receivables, investment properties, deposit accounts and
general intangibles.
We have outstanding $3,000,000 of subordinated notes that mature in September
2001
We have $3,000,000 of subordinated notes outstanding. These notes mature in
September 2001. We may not be able to refinance these notes when they mature,
thus requiring us to repay them in full. If we are able to do so, the need to
use cash in that manner could adversely affect our financial condition.
Failure to satisfy the covenants under our line of credit would give the lender
the right to require immediate repayment
Our line of credit facility requires us to satisfy a number of covenants
during fiscal year 2000, including the requirement that at the end of each
quarter we have achieved a cumulative net profit before income tax on a year-to-
date basis. If we do not satisfy these covenants, the lender may request
immediate payment of all amounts outstanding ($550,000 as of March 30, 2000). If
the lender were to do so, we might not be able to repay the amounts and the
lender could take various legal steps against us, including taking action with
respect to items subject to a security interest we have granted the lender.
Items we have pledged include our equipment, inventory, receivables, investment
properties, deposit accounts and general intangibles. Even if we were able to do
so, the need to use cash in that manner, coupled with the loss of access to our
credit facility, could adversely affect our financial condition.
The Nasdaq National Market has initiated delisting proceedings against us
By means of a letter dated November 24, 1999, the Nasdaq National Market
notified us that we did not meet the continued listing requirement with respect
to net tangible assets. On February 24, 2000, we attended an oral hearing before
a panel authorized by the Nasdaq Stock Market's board of directors at which we
stated our belief that, based on our recent capital raising efforts, we should
satisfy the Nasdaq National Market's continued listing requirements. Nasdaq has
not yet informed us of its final decision on this matter. If Nasdaq delists our
common stock from the National Market, it may be more difficult for shareholders
to trade our common stock. It may also make future capital-raising efforts on
our part more expensive and time-consuming. Finally, if Nasdaq delists our
common stock from the National Market or gives us notice of a decision to do so,
then Industrial-Works Holding Co., LLC's minimum purchase commitment in this
offering expires.
We may need to raise additional cash in the future but may not be able to do so
If we sell all of the shares offered, we believe that the proceeds of this
offering will be sufficient to fund our operations and to maintain our net
tangible assets for continued listing on the Nasdaq National Market through the
end of 2000. However, our actual cash needs may vary significantly from our
projections -- for example, if we do not achieve the revenues we currently
project or if we are unable to replace our line of credit when it expires. We
cannot assure you that our estimates regarding our cash needs will prove
accurate. If our estimates as to future cash needs are wrong or if we do not
sell a significant portion of the shares offered, we may soon need additional
capital. We may not, however, be able to access sufficient capital when required
on favorable terms, if at all. If we raise additional funds by issuing equity
securities, existing shareholders may experience dilution in their ownership
13
<PAGE>
interest. If we raise additional funds by issuing debt securities, we may incur
significant interest expense and become subject to covenants that could limit
our ability to operate and fund our business. If we cannot obtain additional
funds when required, we may be unable to realize our current plans and may even
be forced to cease operations.
Our subordinated notes, our line of credit, our agreements with Industrial-
Works Holding Co., LLC (the holder of our series B and series C preferred stock)
and the terms of our series B and series C preferred stock all contain covenants
that limit our ability to incur indebtedness. These covenants may restrict our
options for future financing.
Risks Related to Our Corporate Structure
One of our shareholders owns a significant percentage of our outstanding stock
and by virtue of that ownership and various charter and contractual rights has
significant influence over our operations and strategic direction
As of April 2, 2000, one of our shareholders, Industrial-Works Holding Co.,
LLC (which is wholly-owned by Glenmount International, L.P.), owned or had the
right to acquire up to approximately 29% of our outstanding common stock on a
fully diluted basis (assuming exercise of warrants that Industrial-Works owns
and the conversion of all its outstanding shares of preferred stock). If we have
not sold at least $5,000,000 of our common stock in this rights offering on or
before June 30, 2000, the conversion price of our series C preferred stock (all
of which Industrial-Works owns) will adjust from $2.00 to $1.00. If this occurs,
or if Industrial-Works acquires a disproportionate number of the shares of
common stock subject to the rights offering (which is likely), Industrial-Works'
fully-diluted ownership would increase even further.
The terms of our series B preferred stock, all of which Industrial-Works
owns, and the terms of the agreement under which Industrial-Works purchased
those shares provide that for so long as any shares of series B stock or the
warrant that we issued to Industrial-Works remain outstanding, the holders of
the series B preferred stock (currently Industrial-Works) shall have the right
to elect three of the seven current members of our board of directors. Three
directors currently serving on our board of directors were elected by
Industrial-Works pursuant to these provisions. In addition, since we have failed
to meet financial goals specified in the terms of our series B preferred stock
and the series B preferred stock purchase agreement, the holder of a majority of
the series B preferred stock (currently Industrial-Works) may increase the
number of members of our board of directors by two (to nine) and elect the two
additional members (which would give Industrial-Works the right to elect a
majority of our directors). Finally, Industrial-Works and shareholders holding
approximately 21% of our outstanding common stock have entered into a voting
agreement pursuant to which those shareholders have agreed, until February 2003,
to vote all of their shares in favor of the election of the nominees designated
by Industrial-Works.
The terms of both our series B and our series C preferred stock (all of
which Industrial-Works owns) and the terms of the agreements under which
Industrial-Works purchased these shares of stock contain significant
restrictions on our ability to enter into a wide variety of transactions without
the prior approval of two-thirds of the holders of each series.
All of these circumstances give Industrial-Works significant influence on
our operations and strategic direction. Industrial-Works' ownership may also
have the effect of delaying, deterring or preventing a change in control or a
change in the composition of our board of directors.
Our series B and series C preferred stock, our charter documents and Minnesota
law may discourage a takeover of our company
The terms of our series B and series C preferred stock and provisions of
our articles of incorporation, bylaws and Minnesota law could make it more
difficult for a third party to acquire us, even if doing so would be beneficial
to our shareholders.
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<PAGE>
Some of our existing agreements prevent us from paying dividends, which we have
no current intention of doing, anyway
Our subordinated notes and our line of credit contain a covenant that
prohibits us from declaring or paying any dividend (other than a dividend
payable in capital stock). In addition, we currently intend to retain any
earnings for use in the operation and expansion of our business and therefore do
not anticipate paying any cash dividends in the foreseeable future.
Risks Related to The Offering
We may close on the sale of significantly fewer shares than we are offering
We have not set any minimum number of shares of common stock that we will
issue on exercise of the rights, although Industrial-Works Holding Co., LLC, the
sole holder of our series B and series C preferred stock, has agreed to purchase
a minimum of 1,000,000 shares in this rights offering if other shareholders
purchase at least 1,500,000 shares. However, this commitment will expire if this
rights offering is not completed by June 30, 2000 or if, prior to the completion
of this rights offering, our common stock ceases to be admitted to trading on
the Nasdaq National Market or we are given notice of a decision to cause a
delisting. Accordingly, we may close on the sale of significantly fewer shares
than we are offering. If this occurred, it could adversely affect our financial
condition and our likelihood of continued Nasdaq National Market listing. Under
the terms of our series C preferred stock, if we have not sold at least
$5,000,000 of our common stock in this rights offering on or before June 30,
2000, the conversion price for the series C shares, which is currently $2.00 per
share, will be reduced to $1.00 per share.
You may not revoke your exercise of rights; we may cancel the rights offering
Once you have exercised your rights, you may not revoke your exercise. We
may cancel this rights offering in our discretion. In that case, neither we nor
the subscription agent will have any obligation to you with respect to the
rights except to return any payment of the subscription price received by the
subscription agent, without interest or penalty.
If you do not exercise all of your rights, your ownership interest in FieldWorks
will be diluted
If we issue all of the shares of common stock offered by this prospectus,
we will issue an additional _______ shares of common stock, which represents
approximately ___% of the shares of common stock we had outstanding (on an
as-if-converted basis) on April 2, 2000. Holders of our stock that elect not to
exercise their rights will accordingly experience dilution in their level of
ownership in FieldWorks.
We set the exercise price for the subscription rights without regard to net
worth, earnings or any other similar value, and you should not consider this
price to be an indication of the actual value of our common stock
We have set the $2.00 subscription price on the shares of common stock
subject to the rights at a price less than the market price on the date on which
we determined to proceed with this offering. We selected this price based on a
number of factors, including the desire to encourage shareholder participation
in this offering. However, you should not consider this price to be an
indication of the actual value of our common stock and was not based on our net
worth, earnings or any other established criteria of value. This price may not
be indicative of the price that
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<PAGE>
will prevail in the public market after the offering. In particular, the market
price of our common stock may decline below $2.00.
Management could spend or invest the proceeds of this offering in ways with
which you may not agree
Our management will have significant discretion in applying the net
proceeds of this offering, and may spend or invest the proceeds from this
offering ineffectively or in ways with which you may not agree.
You will incur immediate and substantial dilution
If you exercise your rights to purchase shares of our common stock, you
will incur immediate and substantial dilution in net tangible book value per
share.
WARNING ABOUT FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference in it include
forward-looking statements. We have based these statements on our current
expectations and projections about future events. These forward-looking
statements include statements about:
. our strategies;
. the future growth of our market and business;
. trends based on our perceptions of past activity; and
. other statements that are not historical facts.
When used in this prospectus, the words "anticipate," "believe," "expect,"
"estimate" and similar expressions are generally intended to identify forward-
looking statements. Our actual results may vary materially from those
anticipated or implied by these forward-looking statements as a result of a
number of risks and uncertainties, including the risks described in "risk
factors" or elsewhere in this prospectus.
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<PAGE>
USE OF PROCEEDS
We estimate our net proceeds from the sale of the shares of our common
stock offered to be approximately $ million, after deducting our estimated
offering expenses.
We intend to use the net proceeds from this offering for general corporate
purposes including future development of computing solutions and market
expansion. We expect that the proceeds from this offering (assuming that we sell
all of the shares of common stock that are subject to the rights offering) will
be sufficient to meet our needs at least through the end of 2000.
In addition, we may acquire businesses, products and technologies that are
complementary to ours, and a portion of the net proceeds may be used for these
acquisitions. We have no agreements with respect to any material acquisitions as
of the date of this prospectus.
Pending these uses, we intend to invest the net proceeds from this offering
in short-term, investment-grade, interest-bearing securities.
PRICE RANGE OF COMMON STOCK
Our common stock is listed on the Nasdaq National Market under the symbol
"FWRX."
The following table sets forth, for the fiscal quarters indicated, the high
and low closing sales prices per share of our common stock, as reported on the
Nasdaq National Market, for the periods indicated:
<TABLE>
<CAPTION>
High Low
------ -------
<S> <C> <C>
Fiscal year ended January 3, 1999:
First quarter ................................ $ 5 9/16 $ 3 3/8
Second quarter ............................... 4 2 1/4
Third quarter ................................ 3 5/8 1 9/16
Fourth quarter ............................... 4 1/4 2 9/16
Fiscal year ended January 2, 2000:
First quarter ................................ $ 3 1/2 $ 2
Second quarter ............................... 2 5/8 1 3/8
Third quarter ................................ 1 11/16 15/16
Fourth quarter ............................... 1 1/2 7/8
Fiscal year ending December 31, 2000:
First quarter ................................ $ 1 7/32 $ 3 3/32
Second quarter (through April 4, 2000) ....... 2 3/8 1 7/8
</TABLE>
On March 31, 2000, the closing bid price of our common stock as reported
on the Nasdaq National Market was $2 11/16 per share.
DIVIDEND POLICY
Our subordinated notes and our line of credit contain a covenant that
prohibits us from declaring or paying any dividend (other than a dividend
payable in capital stock). In addition, we currently intend to retain any
earnings for use in the operation and expansion of our business and therefore do
not anticipate paying any cash dividends in the foreseeable future.
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<PAGE>
DETERMINATION OF SUBSCRIPTION PRICE
We determined the $2.00 subscription price following discussions with
Industrial-Works Holding Co., LLC our largest shareholder and the sole holder of
our two outstanding series of preferred stock. We based this price on a number
of factors, including the desire to encourage shareholder participation in this
offering. We did not base it on our net worth, earnings or any other established
criteria of value and we did not discuss this price with any independent third
party. As a result, you should not consider this price to be an indication of
the actual value of our common stock. This price may not be indicative of the
price that will prevail in the public market after the offering. In particular,
the market price of our common stock may decline below $2.00.
DILUTION
If you exercise your subscription rights, your interest with respect to
those shares of common stock will be diluted to the extent of the difference
between the subscription price per share of and the pro forma net tangible book
value per share of our common stock after this offering. Pro forma net tangible
book value per share is equal to our total tangible assets less total
liabilities, divided by the number of outstanding shares of common stock after
giving pro forma effect to the conversion of our outstanding preferred stock,
which does not convert in connection with this offering, at currently effective
conversion rates. The dilution in pro forma net tangible book value per share
represents the difference between the amount per share paid by those who
exercise their subscription rights in this offering and the pro forma net
tangible book value per share of common stock immediately after completion of
this offering.
Our pro forma net tangible book value as of January 2, 2000 was $6,653,381,
or $0.49 per share of our common stock and preferred stock on an as-if-converted
basis. After giving effect to the sale of all of the estimated 4,548,142 shares
of our common stock subject to the rights offering and after deducting our
estimated offering expenses, our pro forma net tangible book value as of January
2, 2000 would have been approximately $15,449,665, or $0.85 per share. This
represents an immediate dilution of $1.15 per share to those shareholders who
exercise their subscription rights with respect to the shares so purchased. The
following table illustrates this per share dilution:
<TABLE>
<CAPTION>
<S> <C>
Offering price per share $ 2.00
Pro forma net tangible book value per share as of January 2, 2000 0.49
Increase in pro forma net tangible book value per share attributable to
this offering 0.36
------
Pro forma net tangible book value per share after the offering 0.85
------
Dilution per share to shareholders exercising their subscription rights $ 1.15
======
</TABLE>
The above discussion and table both:
. Assume that we sell all of the shares of our common stock that are
subject to the rights offering. However, we have not set any minimum
number of shares of common stock that we will issue on exercise of the
rights and we may close on the sale of significantly fewer shares than
we are offering. Under the terms of our series C preferred stock, if
we have not sold at least $5,000,000 of our common stock in this
rights offering on or before June 30, 2000, the conversion price for
the series C shares, which is currently $2.00 per share, will be
reduced to $1.00 per share. This would result in further dilution to
those shareholders who exercise their subscription rights.
. Exclude all of our options and warrants. At April 3, 2000, we had
reserved 1,786,200 shares of common stock for issuance on exercise of
outstanding options with a weighted average exercise price of $2.36
per share, and 2,788,654 shares of common stock issuable upon exercise
of outstanding warrants with a weighted average exercise price of
$2.02 per share.
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<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of January 2, 2000 as
follows:
1) on an actual basis;
2) on a pro forma basis to reflect:
. the issuance of 4,250,000 shares of series B preferred stock at
$1.00 per share and the issuance of 500,000 shares of series C
preferred stock at $2.00 per share;
. a preferred stock dividend of approximately $250,000 representing
the fair value of the beneficial conversion feature on the
issuance of the series C preferred stock in March 2000 (the
beneficial conversion feature was calculated at the issuance date
of the series C preferred stock based upon the difference between
the conversion price of $2.00 per share and the estimated fair
value of the common stock at that date); and
3) on a pro forma as adjusted basis to reflect the sale of the estimated
4,548,142 shares of common stock at $2.00 per share in this offering,
after deducting estimated offering expenses of $300,000.
<TABLE>
<CAPTION>
January 2, 2000
----------------------------------------------------
Pro forma
Actual Pro forma as adjusted
----------- --------------- ----------------
<S> <C> <C> <C>
Long term debt, less current portion....................................... $ 2,267,821 $ 2,267,821 $ 2,267,821
----------- ------------ ------------
Shareholders' equity:
Preferred Stock, $.001 par value per share; 5,000,000 shares
authorized:
Series B Convertible Participating Preferred Stock, 4,250,000
shares issued and outstanding pro forma and pro forma as adjusted.... - 4,250 4,250
Series C Convertible Participating Preferred Stock, 500,000 shares
issued and outstanding pro forma and pro forma as adjusted........... - 500 500
Common stock, $.001 par value per share; 30,000,000 shares
authorized; 8,894,426 shares issued and outstanding, 13,442,568
shares outstanding pro forma as adjusted, maximum........................ 8,894 8,894 13,443
Additional paid-in capital............................................... 21,226,081 26,721,331 35,513,066
Accumulated deficit...................................................... (19,831,594) (20,081,594) (20,081,594)
----------- ------------ ------------
Total shareholders' equity............................................. 1,403,381 6,653,381 15,449,665
----------- ------------ ------------
Total capitalization..................................................... $ 3,671,202 $ 8,921,202 $ 17,717,486
=========== ============ ============
</TABLE>
The preceding table excludes:
. 1,786,200 shares of common stock issuable upon exercise of
outstanding options with a weighted average exercise price of $2.36
per share; and
. 2,788,654 shares of common stock issuable upon exercise of outstanding
warrants with a weighted average exercise price of $2.02 per share.
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<PAGE>
THE RIGHTS OFFERING
General
We are distributing to the holders of our common stock and our
preferred stock, at no cost to the holders, non-transferable rights to purchase
shares of our common stock. We will give each shareholder who owned shares at
the end of the day on April 14, 2000, the record date, one subscription right
for each three shares of common stock or three shares of common stock issuable
upon conversion of preferred stock owned. We will not issue fractional rights;
the number of rights we offer to each shareholder will be rounded up or down to
the nearest whole number.
Each right includes a basic subscription privilege and an
oversubscription privilege.
We are offering the shares of common stock to be issued on exercise of
the subscription rights directly to our shareholders as of the record date. We
estimate that our expenses in connection with this offering will be $300,000.
There will be no public market for the rights.
You may not sell, assign or otherwise transfer your rights, except by
operation of law in the event of your death or dissolution.
Basic Subscription Privilege
Each right will entitle you, upon payment of $2.00 to us, to receive
one share of our common stock. We will send you certificates representing shares
you purchase as soon as practicable after, 2000, whether you exercise your
rights immediately before that date or earlier. If you hold your common stock
through The Depository Trust Company ("DTC"), or arrange for delivery and
payment through DTC, DTC will credit the appropriate account for the shares you
purchase.
Oversubscription Privilege
Each right also gives you an "oversubscription privilege" to purchase
additional shares of our common stock that other shareholders do not purchase.
You may exercise your oversubscription privilege only if you exercise your basic
subscription privilege in full. The subscription price for any oversubscription
shares you purchase will be $2.00.
If you want to exercise your oversubscription privilege, you should
indicate the number of additional shares that you would like to purchase in the
space provided on your subscription certificate. In this case, when you send in
your subscription certificate you must send the full purchase price for the
number of oversubscription shares that you have requested in addition to full
payment for shares you are purchasing pursuant to your basic subscription
privilege.
If the number of shares remaining after the exercise of all basic
subscription privileges is not sufficient to satisfy all oversubscription
privileges, you will be allocated shares pro rata (subject to rounding to
eliminate fractional shares) in proportion to the number of shares that you
purchased by exercising your basic subscription privilege.
As soon as practicable after ______, 2000, the Subscription Agent will
determine the number of shares of our common stock that you may purchase
pursuant to the oversubscription privilege. We will send you certificates
representing these shares as soon as practicable after, 2000. If you request
and pay for more oversubscription shares than are allocated to you, we will
refund the amount of the overpayment, without interest.
Banks, brokers and other nominee holders who act on behalf of
beneficial owners will have to certify to us and to the Subscription Agent as to
the aggregate number of rights that they are exercising and the number of shares
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<PAGE>
of our common stock that they are requesting pursuant to the oversubscription
privilege on behalf of each beneficial owner.
Expiration Time
The rights will expire at 5:00 p.m. Central Daylight Savings time on
______, 2000, unless we, in our discretion, extend the expiration date for up to
ten days (but no later than 5:00 p.m. Central Daylight Savings time on _____,
2000). If you do not exercise your basic subscription privilege and your
oversubscription privilege (if you so desire) prior to that time, your
subscription rights will cease and be null and void. We will not be required to
issue shares of our common stock to you if the Subscription Agent receives your
subscription certificate or your payment after that time, regardless of whether
you sent the subscription certificate and payment, unless you sent them in
compliance with the guaranteed delivery procedures described below.
Industrial-Works Holding Co., LLC Minimum Purchase Commitment
By means of a letter dated March 31, 2000, Industrial-Works Holding
Co., LLC, the sole holder of our series B and series C preferred stock, agreed
to purchase a minimum of 1,000,000 of the shares of our common stock subject to
this rights offering. This commitment is subject to the requirements that:
. other shareholders purchase at least 1,500,000 shares; and
. the subscription price be $2.00 per share.
If we change the price with Industrial-Works' consent, Industrial-Works has
agreed to purchase $2,000,000 in value provided that other shareholders purchase
at least $3,000,000 in value.
Industrial-Works' commitment will expire if:
. this rights offering is not completed by June 30, 2000; or
. prior to the completion of this rights offering, our common stock
ceases to be admitted to trading on the Nasdaq National Market or
if we are given notice of a decision to cause a delisting.
Industrial-Works has reserved the right to purchase its full allocation
in the rights offering and to exercise its oversubscription privilege.
As the result of one of our agreements with Glenmount, LLC (an
affiliate of Industrial-Works), if Industrial-Works purchases its full
commitment in this rights offering, we will be required to pay Glenmount, LLC
$80,000 (four percent of the $2,000,000 commitment). If Industrial-Works
exercises its oversubscription privilege and we issue oversubscription shares to
it, this amount - which is set at four percent of the amount of our securities
that Industrial-Works purchases - will be even larger.
No Board Recommendation
You must make your decision whether to exercise your subscription
rights based on your own evaluation of your situation and our offer. Our board
of directors does not make any recommendation to any holder of subscription
rights regarding the exercise of those rights.
Exercise of Subscription Rights
Important
Please carefully read the instructions accompanying the subscription
certificate and follow those instructions in detail. Do not send subscription
certificates to FieldWorks.
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<PAGE>
You are responsible for choosing the payment and delivery method for
your subscription certificate, and you bear the risks associated with your
choices. If you choose to deliver your subscription certificate and payment by
mail, we recommend that you use registered mail, properly insured, with return
receipt requested. We also recommend that you allow a sufficient number of days
to ensure delivery to the subscription agent and clearance of payment prior to
_________, 2000. Because uncertified personal checks may take at least five
business days to clear, we strongly urge you to pay, or arrange for payment, by
means of certified or cashier's check , money order or wire transfer of funds.
Method of Exercise
You may exercise your subscription rights by delivering to the
subscription agent, Norwest Bank Minnesota, National Association, on or prior to
_______, 2000:
1. the properly completed and signed subscription certificate
accompanying this prospectus;
2. any required signature guarantees; and
3. payment in full of the subscription price for all of the shares
of common stock you wish to purchase by exercising your basic
subscription privilege and your oversubscription privilege.
You should deliver your subscription certificate and payment in the
enclosed envelope to the address set forth below under " - Subscription Agent."
Method of Payment
You must pay for the shares of common stock you subscribe for by means
of (1) check or bank draft (cashier's check) drawn on a United States bank or a
postal, telegraphic or express money order payable to "Norwest Bank Minnesota,
National Association," as subscription agent or (2) wire transfer of funds to an
account maintained by the subscription agent for the purpose of accepting
subscriptions at NORWEST SHAREOWNER SERVICES, WIRE CLEARING ACCOUNT,
ABA#091000019, Account #: 1067899, Attn: Juli Harless (FieldWorks,
Incorporated). You will have paid the subscription price only:
. in the case of an uncertified check, when it has cleared;
. in the case of an certified check or bank draft on a United
States bank or a postal, telegraphic or express money order, when
the subscription agent has received it; or
. in the case of a wire transfer, when the subscription agent's
account designated above has received the funds.
An uncertified personal check may take at least five business days to
clear. Accordingly, if you intend to pay using an uncertified personal check, we
urge you to make payment sufficiently in advance of ________, 2000 to ensure
that the payment can clear before that date. We also urge you to consider paying
with a certified or cashier's check or money order.
Guaranteed Delivery Procedures
If you want to exercise your rights, but time will not permit your
subscription certificate to reach the subscription agent on or prior to 5:00
p.m., on _________, 2000, you may exercise your rights using the following
guaranteed delivery procedures:
1. On or prior to _______, 2000, you must have sent, and the
subscription agent must have received, payment in full for each
share of common stock you are purchasing through your basic
subscription right and your oversubscription privilege;
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2. On or prior to _____, 2000, you must have sent, and the
subscription agent must have received, a Notice of Guaranteed
Delivery, substantially in the form provided with the attached
instructions, from a member firm of a registered national
securities exchange or a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company
having an office or correspondent in the United States. The
Notice of Guaranteed Delivery must state your name, the number of
rights that you hold, the number of shares of common stock that
you wish to purchase pursuant to your basic subscription right
and the number of shares of common stock, if any, you wish to
purchase pursuant to your oversubscription privilege. The Notice
of Guaranteed Delivery must guarantee the delivery of your
subscription certificate to the subscription agent within three
Nasdaq National Market trading days following the date of the
Notice of Guaranteed Delivery; and
3. You must send, and the subscription agent must receive, your
properly completed and duly executed subscription certificate,
including any required signature guarantees, within three Nasdaq
National Market trading days following the date of your Notice of
Guaranteed Delivery. You may physically deliver the Notice of
Guaranteed Delivery via the enclosed envelope to the subscription
agent at its address set forth below. You can obtain additional
copies of the form of Notice of Guaranteed Delivery by requesting
it from the subscription agent at the address set forth below
under "-- Subscription Agent."
Signature Guarantee
Signatures on the subscription certificate must be guaranteed by an
Eligible Guarantor Institution, as defined in Rule 17Ad-15 of the U.S.
Securities Exchange Act of 1934, subject to the standards and procedures adopted
by the subscription agent. Eligible Guarantor Institutions include banks,
brokers, dealers, credit unions, national securities exchanges and savings
associations.
Signatures on the subscription certificate do not need to be guaranteed
if the subscription certificate :
. provides that the shares of common stock you are purchasing are
to be delivered directly to the record owner of the subscription
rights; or
. is submitted for the account of a member firm of a registered
national securities exchange or a member of the National
Association of Securities Dealers, Inc., or a commercial bank or
trust company having an office or correspondent in the United
States.
Shares Held for Others
If you hold shares of common stock for the account of others, such as a
broker, a trustee or a depository for securities, you should notify the
respective beneficial owners of the shares as soon as possible to obtain
instructions with respect to the subscription rights they beneficially own.
If you are a beneficial owner of common stock held by a holder of
record, such as a broker, trustee or a depository for securities, you should
contact the holder and ask the holder to effect transactions in accordance with
your instructions.
Ambiguities in Exercise of the Subscription Rights
If you do not specify the number of rights being exercised on your
subscription certificate, or if your payment is not sufficient to pay the total
purchase price for all of the shares that you indicated you wish to purchase,
you will be deemed to have exercised the maximum number of rights that could be
exercised for the amount of the payment that the subscription agent receives
from you.
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If your payment exceeds the total purchase price for the number of
shares of common that you have indicated you wish to exercise on your
subscription certificate, your payment will be applied until depleted as
follows:
1. to subscribe for the number of shares of common stock that you
indicated on the subscription certificate(s) that you wish to
purchase through your basic subscription privilege;
2. to subscribe for additional shares of common stock until your
basic subscription privilege has been fully exercised; and
3. to subscribe for additional shares of common stock pursuant to
your oversubscription privilege (subject to any applicable
proration).
We will return any excess payment remaining after the foregoing
allocation to you as soon as practicable by mail, without interest or
deductions.
Validity of Subscriptions
FieldWorks will determine all questions concerning the timeliness,
validity, form and eligibility of any exercise of subscription rights. We may,
in our sole discretion:
. waive any defect or irregularity;
. permit a defect or irregularity to be corrected within any period
of time that we set; or
. reject the purported exercise of any right by reason of any
defect or irregularity.
Any determination we make with respect to these matters will be final and
binding. Subscriptions will not be deemed to have been received or accepted
until the person submitting the subscription has cured all irregularities or we
have waived them. This must occur within any period of time that we, in our sole
discretion, set. Neither FieldWorks nor the subscription agent will:
. be under any duty to notify anyone of any defect or irregularity
in connection with the submission of any subscription
certificate; or
. incur any liability for any failure to give notice of this sort.
Subscribers' Fees and Expenses
You are responsible for paying all commissions, fees, taxes and other
expenses that you incur in exercising your subscription rights.
No Revocation
You may not revoke your subscription after the subscription agent
receives your subscription certificate. You should not send your subscription
certificate unless you are certain that you want to purchase shares of our
common stock.
Amendments
We reserve the right to amend the terms and conditions of this offering
at any time until it has expired and for any reason.
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Withdrawal Right
We reserve the right to withdraw this rights offering at any time until
it has expired. We may do so for any reason. If we withdraw the offering, we
will have no obligation to you other than to return any rights subscription
payment we have received from you, without interest or penalty.
Rights as a Shareholder
You will not have any rights as a shareholder with respect to shares of
common stock you subscribe for until we issue the certificates representing
those shares.
Listing
We intend to apply to have the shares of common stock to be issued on
exercise of the subscription rights approved for listing on the Nasdaq National
Market.
The rights themselves are non-transferable and will not be listed on
any national securities exchange or quotation system.
Subscription Agent
We have appointed Norwest Bank Minnesota, National Association as
subscription agent. The subscription agent's address for packages sent by mail
or overnight delivery is: Norwest Bank Minnesota, N.A., 161 North Concord
Exchange, South St. Paul, MN 55075-1139.
The subscription agent's telephone number is 1-800-468-9716.
You should deliver your subscription certificate, payment for the
subscription price and Notice of Guaranteed Delivery (if any) to the
subscription agent. Do not deliver them to us.
We will pay the fees and expenses of the subscription agent and have
agreed to indemnify it against any liability that it may incur in connection
with the rights offering, including liabilities under the federal Securities
Act.
Questions About How to Subscribe
You should direct any questions concerning the procedure for
subscribing to Norwest Shareowner Services. Their phone number is 1-800-468-
9716.
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RELATED PARTY TRANSACTIONS
On November 20, 1999, we entered into a Securities Purchase Agreement with
Industrial-Works Holding Co., LLC, a wholly owned subsidiary of Glenmount
International, L.P. Under this agreement we agreed, among other things:
. subject to receipt of shareholder approval and other conditions, to
issue 4,250,000 shares of series B preferred stock and a warrant to
purchase 500,000 shares of our common stock to Industrial-Works for
$4.25 million;
. to refrain from various actions with respect to "competing proposals"
in the period from execution of the agreement to the closing on the
sale of the series B preferred stock;
. so long as the warrant and the shares of series B preferred stock to
be issued remained outstanding, the holders of the series B preferred
stock will have the right to designate three directors to a board of
directors that is set at seven members, except that, following the
occurrence of any one or more "triggering events" (one of which has
occurred), the holders of the series B preferred stock have the right
by majority vote to increase the size of our board of directors to
nine and nominate the directors to fill the two vacancies created;
. the right to nominate the two additional directors shall lapse, and
the number of directors shall be reduced to seven, if the holders of
the series B preferred stock have not exercised their conversion
rights within six months of the date on which they increase the board
size and elect two additional directors;
. we must receive the prior affirmative written consent of the holders
of the warrant and at least two-thirds of the shares of series B
preferred stock to take various actions, including creating any series
of stock that is senior to the series B preferred stock, agreeing to
various events that would constitute a liquidation or merger in which
our shareholders control less than a majority of the resulting entity
and entering into various other transactions outside of the ordinary
course or above set levels;
. to pay Industrial-Works' expenses related to the transaction up to
$50,000; and
. to pay Industrial-Works a termination or break-up fee of $500,000 if
the agreement was terminated under various specified circumstances.
On November 20, 1999, we also entered into a management services agreement
with Glenmount, LLC, which is the manager of Glenmount International, L.P. Under
this agreement:
. Glenmount, LLC has agreed to provide our management with active and
continuing support in identifying, developing and executing all major
strategic, acquisition, operational and financial opportunities;
. we agreed to pay Glenmount, LLC $10,000 immediately, $10,000 within 30
days of the date of the agreement, $10,000 within 60 days of the date
of the agreement and $200,000 at the closing of the series B preferred
stock purchase transaction;
. we may be obligated to pay Glenmount, LLC additional amounts if we
request them to perform additional services;
. our obligations continue for a period of one year; and
. we agreed that the management services agreement would terminate if
the series B securities purchase agreement terminated, subject to our
obligation to pay the minimum compensation due to
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Glenmount, LLC ($30,000) and to pay $100,000 if the termination was
the result of our shareholders not approving the transactions
contemplated by the series B securities purchase agreement.
On February 18, 2000, we amended our management services agreement with
Glenmount, LLC to address services that Glenmount, LLC had provided that were
beyond the scope of that agreement. We agreed to:
. pay Glenmount, LLC an additional $30,000 as additional compensation
for the initial three-month period of the management services
agreement;
. extend the $10,000 per month fee to Glenmount, LLC for each month
during the balance of the term of the management services agreement;
and
. pay to Glenmount, LLC an additional fee equal to four percent of the
purchase price of any securities we issue to Industrial-Works (other
than the series B preferred stock and the warrants issued to
Industrial-Works on November 20, 1999), payable on the date that
Industrial-Works purchases the securities.
As the result of the last of these agreements, if Industrial-Works purchases its
full commitment in this rights offering, we will be required to pay Glenmount,
LLC $80,000. That fee will be higher if Industrial-Works exercises its
oversubscription privilege and we issue oversubscription shares to it.
On February 18, 2000 we also issued Industrial-Works a warrant to purchase
an additional 100,000 shares of our common stock at an exercise price of $2.00
per share, subject to adjustment for changes to our capitalization and for later
issuances of common stock at price per share less than $2.00. These warrants are
immediately exercisable and expire on February 19, 2005.
On February 22, 2000, we closed the series B preferred stock transaction
with Industrial-Works. We discuss the terms of the series B preferred stock more
fully under "Description of Capital Stock." At the time of sale, the shares of
series B stock that we issued represented approximately 32% of our shares of
common stock outstanding on an as-if-converted basis. We also issued Industrial-
Works a warrant to purchase 500,000 shares of our common stock at an exercise
price of $1.00 per share, subject to adjustment for changes to our
capitalization and for later issuances of common stock at price per share less
than $1.00. The warrants become fully exercisable and expire on February 27,
2007, but may become exercisable sooner:
. as to 167,000 shares (subject to adjustment as described above) if the
closing price of our common stock averages $2.50 for five consecutive
trading days, provided that these shares shall not be exercisable more
than three years after the accelerated vesting (or after the
expiration date, if that occurs sooner);
. as to 167,000 shares (subject to adjustment as described above) if the
closing price of our common stock averages $3.75 for five consecutive
trading days, provided that these shares shall not be exercisable more
than three years after the accelerated vesting (or after the
expiration date, if that occurs sooner); and
. as to the remaining 166,000 (subject to adjustment as described above)
shares if the closing price of our common stock averages $5.00 for
five consecutive trading days, provided that these shares shall not be
exercisable more than three years after the accelerated vesting (or
after the expiration date, if that occurs sooner).
As required by our management services agreement with Glenmount, LLC, we also
paid Glenmount, LLC $200,000.
On March 31, 2000, we entered into a Preferred Stock Purchase Agreement
with Industrial-Works. On the same day we closed on the sale of 500,000 shares
of series C preferred stock to Industrial-Works for $1,000,000 or
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$2.00 per share. We discuss the terms of the series C preferred stock more fully
under "Description of Capital Stock." Among other things, the Preferred Stock
Purchase Agreement:
. gave the holders of the series C preferred stock the right to name an
observer to our board of directors unless the holders of the series B
preferred stock hold at least 50% of the series C preferred stock;
and
. requires the prior affirmative written consent of the holders of at
least two-thirds of the shares of series C preferred stock to take
various actions, including creating any series of stock that is senior
to the series C preferred stock, agreeing to various events that would
constitute a liquidation or merger in which our shareholders control
less than a majority of the resulting entity and entering into various
other transactions outside of the ordinary course or above set levels.
At the time of the sale, these shares of series C preferred stock represented
approximately 5% of our shares of common stock outstanding on an as-if-converted
basis. In connection with this transaction, we paid Glenmount, LLC $40,000 under
our management services agreement as supplemented.
On March 31, 2000, Industrial-Works also agreed to purchase a minimum of
1,000,000 of the shares of our common stock subject to this rights offering.
This commitment is described in greater detail above under the caption "The
Rights Offering - Industrial-Works Holding Co., LLC Minimum Purchase
Commitment."
As provided by our agreements with Industrial-Works and the terms of our
series B preferred stock and series C preferred stock, Industrial-Works
nominated three of our directors. All three of these directors are affiliated
with various Glenmount entities as follows:
. Richard J. Boyle is a director of Glenmount Investment, LLC (which is
the general partner of Glenmount International, L.P.);
. Robert D.D. Forbes is a director of Glenmount Investment LLC and is a
Managing Director of Glenmount, LLC; and
. Michael E. Johnson is a director of Glenmount Investment, LLC and is
a Managing Director of Glenmount, LLC.
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DESCRIPTION OF CAPITAL STOCK
We are authorized to issue 35 million shares of capital stock, $.001 par
value. Thirty million of these shares are common stock and five million shares
are preferred stock, of which 4,250,000 have been designated Series B
Convertible Participating Preferred Stock, 500,000 have been designated Series C
Convertible Participating Preferred Stock and 250,000 are undesignated as to
rights and preferences. As of April 3, 2000, there were 8,894,426 shares of
common stock outstanding, which were held of record by 156 shareholders,
4,250,000 shares of Series B Convertible Participating Preferred Stock
outstanding, which were held of record by one shareholder, and 500,000 shares of
Series C Convertible Participating Preferred Stock outstanding, which were held
of record by one shareholder.
Common Stock
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of shareholders. There is no
cumulative voting for the election of directors, and the holders of more than
50% of the outstanding common stock can elect all directors, subject to the
rights of our outstanding series of preferred stock. Subject to preferences that
may be applicable to any outstanding preferred stock, holders of common stock
are entitled to receive ratably any dividends that our board of directors may
declare out of funds legally available for that purpose and in liquidation
proceedings. Holders of common stock have no preemptive or subscription rights
and there are no redemption rights with respect to shares of common stock. Our
outstanding shares of common stock are, and the shares of common stock we are
offering in this prospectus will be, fully paid and nonassessable.
Preferred Stock
Series B Convertible Participating Preferred Stock
Under the terms of our Series B Convertible Participating Preferred Stock:
. each share has a liquidation preference of $1.00 plus any accrued and
unpaid dividends;
. each share has the right to participate on an as-if-converted basis
with our common stock in the distribution of any assets or funds that
remain to be distributed to shareholders after the liquidation
preference of all preferred stock (including the series B preferred
stock) has been paid;
. except as otherwise required by law and as otherwise provided, the
holders vote on an as-if-converted basis as a single class with our
common stock on all matters submitted to our shareholders;
. the holders of the series B preferred stock have the right, voting as
a class, to elect three directors to a board of directors that is set
at seven members, except that, following the occurrence of any one or
more "triggering events" (one of which has occurred), the holders of
the series B preferred stock have the right by majority vote to
increase the size of our board of directors to nine and fill the two
vacancies created;
. the right to elect two additional directors shall lapse, and the
number of directors shall be reduced to seven, if the holders of the
series B preferred stock have not exercised their conversion rights
within six months of the date on which they increase the board size
and elect two additional directors;
. we must receive the prior affirmative written consent of the holders
of at least two-thirds of the shares of series B preferred stock to
take various actions, including creating any series of stock that is
senior to the series B preferred stock, agreeing to various events
that would constitute a liquidation or merger in which our
shareholders control less than a majority of the resulting entity and
entering into various other transactions outside of the ordinary
course or above set levels;
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. the holder may elect to convert shares of series B preferred stock
into shares of common stock at a price that is currently equal to
$1.00 per share, subject to adjustment for changes in our
capitalization and, with a few exceptions, for issuances of common
stock or shares convertible into or exercisable for shares of common
stock at a price less than $1.00 per share; and
. if we offer to sell any securities other than debt securities issued
to financial institutions and options or shares issued to employees,
directors and consultants, we must first offer the holders of the
series B preferred stock (or of shares of common stock issued on
conversion of the series B preferred stock) the right to purchase
sufficient securities to prevent dilution of the holder's ownership in
FieldWorks.
Series C Convertible Participating Preferred Stock
Under the terms of our Series C Convertible Participating Preferred Stock:
. each share has a liquidation preference of $2.00 plus any accrued and
unpaid dividends;
. each share has the right to participate on an as-if-converted basis
with our common stock in the distribution of any assets or funds that
remain to be distributed to shareholders after the liquidation
preference of all preferred stock (including the series C stock) has
been paid;
. except as otherwise required by law and as otherwise provided, the
holders vote on an as-if-converted basis as a single class with our
common stock on all matters submitted to our shareholders;
. we must receive the prior affirmative written consent of the holders
of at least two-thirds of the shares of series C preferred stock to
take various actions, including creating any series of stock that is
senior to the series C preferred stock, agreeing to various events
that would constitute a liquidation or merger in which our
shareholders control less than a majority of the resulting entity and
entering into various other transactions outside of the ordinary
course or above set levels;
. the holder may elect to convert shares of series C preferred stock
into shares of common stock at a price that is currently equal to
$2.00 per share;
. the conversion price for the series C preferred stock is subject to
adjustment for changes in our capitalization and, with a few
exceptions, for issuances of common stock or shares convertible into
or exercisable for shares of common stock at a price less than $1.00
per share;
. the conversion price for the series C preferred stock is subject to
adjustment from $2.00 to $1.00 if we have not sold at least $5,000,000
of our common stock in this rights offering on or before June 30,
2000; and
. if we offer to sell any securities other than debt securities issued
to financial institutions and options or shares issued to employees,
directors and consultants, we must first offer the holders of the
series C preferred stock (or of shares of common stock issued on
conversion of the series C preferred stock) the right to purchase
sufficient securities to prevent dilution of the holder's ownership in
FieldWorks.
Undesignated Preferred Stock
Our Second Amended and Restated Articles of Incorporation authorize our
board of directors, subject to any restrictions contained within the terms of
any then-outstanding series of preferred stock, without further shareholder
action, to issue preferred stock in one or more series and to fix the voting
rights, liquidation preferences, dividend rights, repurchase rights, conversion
rights, redemption rights, terms, including sinking fund provisions, and certain
other rights and preferences, of any preferred stock so created.
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Warrants
As of April 3, 2000, we had outstanding warrants to purchase a total of
2,788,654 shares of our common stock at a weighted average exercise price of
$2.02 per share. These warrants are all currently exercisable and expire on
dates ranging from May 2000 to February 2007. All outstanding warrant agreements
provide for antidilution adjustments in the event of certain mergers,
consolidations, reorganizations, recapitalizations, stock dividends, stock
splits, or other changes in our corporate structure.
Options
As of April 3, 2000, we had outstanding options to purchase a total of
1,786,200 shares of our common stock under our 1994 Long-Term Incentive and
Stock Option Plan and our 1996 Directors' Stock Option Plan at a weighted
average exercise price of $2.36 per share.
Provisions of Our Articles and Bylaws and Minnesota Law That May Have Anti-
Takeover Effect
All of the following could have the effect of discouraging certain attempts
to acquire us, which could in turn deprive you of the opportunity to sell your
shares of our common stock at prices higher than prevailing market prices:
. the terms of our series B and series C preferred stock, which contain
limitations on our ability to enter into mergers and other change of
control transactions;
. the existence of authorized but unissued preferred stock;
. various provisions of our Second Amended and Restated Articles of
Incorporation;
. various provisions of our Second Amended and Restated Bylaws; and
. various provisions of Minnesota law.
Section 302A.671 of the Minnesota Business Corporation Act applies, with
certain exceptions, to any acquisition of our voting stock (from a person other
than us, and other than in connection with certain mergers and exchanges to
which we are a party) resulting in the beneficial ownership of 20% or more of
our voting stock then outstanding. Section 302A.671 requires approval of any
acquisitions of this type by a majority vote of our shareholders prior to its
consummation. In general, shares acquired in the absence of this approval are
denied voting rights and are redeemable at their then fair market value by us
within 30 days after the acquiring person has failed to give a timely
information statement to us or the date our shareholders voted not to grant
voting rights to the acquiring person's shares.
Section 302A.673 of the Minnesota Business Corporation Act generally
prohibits any business combination between us, or any of our subsidiaries, and
any shareholder which purchases 10% or more of our voting shares (an "interested
shareholder") within four years following the interested shareholder's share
acquisition date, unless the business combination or the acquisition of shares
is approved by the affirmative vote of a majority of a committee of all of the
disinterested members of our board of directors, before the interested
shareholder's share acquisition date.
Transfer Agent and Registrar
The Transfer Agent and Registrar with respect to our common stock is
Norwest Bank Minnesota, National Association.
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LEGAL MATTERS
Dorsey & Whitney LLP, Minneapolis, Minnesota, will pass upon the validity
of the issuance of shares of common stock offered by this prospectus.
EXPERTS
The financial statements and schedule incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference herein in
reliance on the authority of said firm as experts in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly, and special reports, proxy statements, and other
information with the Securities and Exchange Commission (the "SEC"). You may
read and copy any materials that we file with the SEC at its Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. In addition, the SEC maintains an Internet web site
(http://www.sec.gov) that contains all reports, proxy and information
statements, and other information that we and other electronic filers file.
This prospectus is a part of a registration statement on Form S-2 that we
have filed with the SEC. Parts of the registration statement have been omitted
from this prospectus as permitted by the rules and regulations of the SEC and
this prospectus does not contain all the information contained in the
registration statement. In particular, statements in this prospectus concerning
the provisions of documents are necessarily summaries of those documents and in
each case we refer you to the copy of the applicable document to the extent we
have filed it as an exhibit to the registration statement. We refer to the
registration statement and to the exhibits to the registration statement for
further information with respect to us and the information in this prospectus.
Copies of the registration statement and the exhibits to the registration
statement are on file at the offices of the SEC. You may obtain them by paying a
prescribed fee or you may examine them without charge at the public reference
facilities of the SEC described above.
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INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information by referring
you to those documents. The information incorporated by reference is an
important part of this prospectus. We incorporate by reference the following
documents which we have filed with the SEC: (1) our Annual Report on Form 10-K
for the fiscal year ended January 2, 2000; and (2) our Current Report on Form 8-
K dated April 3, 2000 and filed on April 3, 2000.
A copy of the Form 10-K referenced above is included with this prospectus.
If you need another copy of the Form 10-K, you may request one at no cost, by
writing or telephoning us at the following address:
Chief Financial Officer
FieldWorks, Incorporated
7631 Anagram Drive
Eden Prairie, Minnesota 55344
(612) 974-7000
In making a decision to buy our common stock, you should only rely on the
information incorporated by reference or contained in this prospectus. We have
not authorized anyone else to provide you with different or additional
information. If anyone provides you with different or inconsistent information,
you should not rely on it.
You should assume that the information appearing in this prospectus is
accurate only as of the date on the front cover of this prospectus. Our
business, financial condition, results of operations and prospects may have
changed since that date.
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- -------------------------------------------------------------------------------
___________ Subscription Rights
[LOGO OF FIELDWORKS]
_________ Shares of Common Stock
======================================
PROSPECTUS
======================================
__________________, 2000
We are offering to sell these securities only where it is legal to sell them.
We have not authorized any person to give you information or make
representations as to the matters to which this prospectus relates.
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses payable by
FieldWorks in connection with the registration of its common stock hereunder.
All amounts are estimated, except for the SEC registration fee.
SEC registration fee................................... $ 2,401
Nasdaq National Market additional listing fee.......... 17,500
Legal fees and expenses................................ 40,000
Accountants' fees and expenses......................... 10,000
Blue sky fees and expenses............................. 5,000
Fee to Glenmount, LLC.................................. 80,000
Printing expenses...................................... 30,000
Mailing expenses....................................... 10,000
Information Agent fees and expenses.................... 20,000
Subscription Agent fees and expenses................... 25,000
Transfer Agent and Registrar fees and expenses......... 25,000
Miscellaneous.......................................... 35,099
---------
Total................................................. $ 300,000
=========
Item 15. Indemnification of Directors and Officers.
Section 302A.521 of the Minnesota Statutes provides that a corporation
shall indemnify any person made or threatened to be made a party to a proceeding
by reason of the former or present official capacity of such person against
judgments, penalties, fines (including, without limitation, excise taxes
assessed against such person with respect to any employee benefit plan),
settlements and reasonable expenses, including attorneys' fees and
disbursements, incurred by such person in connection with the proceeding, if,
with respect to the acts or omissions of such person complained of in the
proceeding, such person (1) has not been indemnified therefor by another
organization or employee benefit plan for the same judgments, penalties or
fines; (2) acted in good faith; (3) received no improper personal benefit and
Section 302A.255 (with respect to director conflicts of interest), if
applicable, has been satisfied; (4) in the case of a criminal proceeding, had no
reasonable cause to believe the conduct was unlawful; and (5) in the case of
acts or omissions in such person's official capacity for the corporation,
reasonably believed that the conduct was in the best interests of the
corporation, or in the case of acts or omissions in such person's official
capacity for other affiliated organizations, reasonably believed that the
conduct was not opposed to the best interests of the corporation. Section
302A.521 also requires payment by a corporation, upon written request, of
reasonable expenses in advance of final disposition of the proceeding in certain
instances. A decision as to required indemnification is made by a disinterested
majority of the Board of Directors present at a meeting at which a disinterested
quorum is present, or by a designated committee of the Board, by special legal
counsel, by the shareholders or by a court.
Provisions regarding indemnification of officers and directors of the
Company to the extent permitted by Section 302A.521 are contained in the
Company's Second Amended and Restated Bylaws (Exhibit 4.2 hereto, which is
incorporated herein by reference).
II-1
<PAGE>
Item 16. Exhibits.
Number Description
------ -----------
4.1 Second Amended and Restated Articles of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.2 to the
Registrant's Registration Statement on Form S-1, File No. 333-
18335).
4.2 Second Amended and Restated Bylaws of the Registrant (incorporated
by reference to Exhibit 3.4 to the Registrant's Registration
Statement on Form S-1, File No. 333-18335).
4.3 Form of Certificate for Common Stock (incorporated by reference to
Exhibit 4.1 to the Registrant's Registration Statement on Form S-
1, File No. 333-18335).
4.4 Form of Subscription Certificate (to be filed by amendment).
5.1 Opinion of Dorsey & Whitney LLP (to be filed by amendment).
10.1 Form of Warrant to purchase Shares of Common Stock, including
registration rights provisions (incorporated by reference to
Exhibit 10.1 to the Registrant's Registration Statement on Form S-
1, File No. 333-18335)
10.2 Warrant, dated as of June 19, 1996, between the Company and
Brightstone Capital, Ltd. (incorporated by reference to Exhibit
10.3 to the Registrant's Registration Statement on Form S-1, File
No. 333-18335)
10.3 Form of Warrant (July 1996) (incorporated by reference to Exhibit
10.6 to the Registrant's Registration Statement on Form S-1, File
No. 333-18335)
10.4 Warrant, dated as of July 29, 1996, issued to Network General
Corporation (incorporated by reference to Exhibit 10.8 to the
Registrant's Registration Statement on Form S-1, File No. 333-
18335)
10.5 Form of Warrant (September 1996) (incorporated by reference to
Exhibit 10.12 to the Registrant's Registration Statement filed on
Form S-1, File No. 333-18335)
10.6 Amendment to Warrant, dated October 15, 1996, between the Company
and Brightstone Capital, Ltd. (incorporated by reference to
Exhibit 10.13 to the Registrant's Registration Statement on Form
S-1, File No. 333-18335)
10.7 Agreement to Extend Promissory Notes and Amendment to Warrants,
dated as of October 15, 1996, between the Company and Brightstone
Fund VI, Brightstone Fund VII and Brightstone Capital, Ltd.
(incorporated by reference to Exhibit 10.14 to the Registrant's
Registration Statement on Form S-1, File No. 333-18335)
10.8 Agreement to Extend Promissory Note and Amendment to Warrant,
dated as of October 15, 1996, between the Company and Stephen L.
Becher (incorporated by reference to Exhibit 10.15 to the
Registrant's Registration Statement on Form S-1, File No. 333-
18335)
10.9 Amendment to Warrant, dated as of October 15, 1996, between the
Company and Brightbridge Fund I L.P. (incorporated by reference to
the Exhibit 10.16 to the Registrant's Registration Statement filed
on Form S-1, File No. 333-18335)
10.10 Form of Warrant (December 1996) (incorporated by reference to the
Exhibit 10.19 to the Registrant's Registration Statement filed on
Form S-1, File No. 333-18335)
II-2
<PAGE>
10.11 Office/Warehouse Lease, dated May 10, 1994, by and between The
Northwestern Mutual Life Insurance Company and the Company
(incorporated by reference to Exhibit 10.20 to the Registrant's
Registration Statement on Form S-1, File No. 333-18335)
10.12 Amendment to Lease, dated May 22, 1996, between the Company and
The Northwestern Mutual Life Insurance Company (incorporated by
reference to Exhibit 10.21 to the Registrant's Registration
Statement on Form S-1, File No. 333-18335)
10.13 Lease Agreement dated April 7, 1995, by and between Ronald C.
Devine and the Company (incorporated by reference to Exhibit
10.22 filed with the Registrant's Registration Statement on Form
S-1, File No. 333-18335)
10.14 1994 Long Term Incentive and Stock Option Plan, as amended,
including forms of option agreements (incorporated by reference
to Exhibit 10.24 to the Registrant's Registration Statement on
Form S-1, File No. 333-18335)
10.15 Directors' Stock Option Plan (incorporated by reference to the
Exhibit 10.25 to the Registrant's Registration Statement filed on
Form S-1, File No. 333-18335)
10.16 Form of Employee Disclosure and Assignment Agreement
(incorporated by reference to Exhibit 10.27 to the Registrant's
Registration Statement on Form S-1, File No. 333-18335)
10.17 Form of Extended Limited Warranty Agreement (incorporated by
reference to Exhibit 10.31 to the Registrant's Registration
Statement on Form S-1, File No. 333-18335)
10.18 Lease Agreement, dated November 11, 1996, by and between OMNI
Offices/Woodlawn Hills and the Company (incorporated by reference
to Exhibit 10.32 to the Registrant's Registration Statement on
Form S-1, File No. 333-18335)
10.19 Option Agreement, dated as of January 21, 1997, by and between
the Company and David C. Malmberg (incorporated by reference to
the Exhibit 10.33 to the Registrant's Registration Statement
filed on Form S-1, File No. 333-18335)
10.20 Warrant dated March 25, 1997, issued to R.J. Steichen & Company
(incorporated by reference to Exhibit 10.1 to the Registrant's
Report on Form 10-Q for the fiscal quarter ended April 6, 1997)
10.21 Lease Agreement, dated May 16, 1997, by and between CSM
Properties, Inc. and the Company (incorporated by reference to
Exhibit 10.35 to the Registrant's Report on Form 10-K for the
fiscal year ended January 4, 1998)
10.22 Addendum to Lease, dated as of December 30, 1997, between the
Company and CSM Properties, Inc. (incorporated by reference to
Exhibit 10.36 to the Registrant's Report on Form 10-K for the
fiscal year ended January 4, 1998)
10.23 Sublease Agreement, dated November 6, 1997, by and between Golf
Galaxy and the Company (incorporated by reference to Exhibit
10.37 to the Registrant's Report on Form 10-K for the fiscal year
ended January 4, 1998)
10.24 Sublease Agreement, dated December 5, 1997, by and between LSC,
Inc. and the Company (incorporated by reference to Exhibit 10.38
filed with the Registrant's Report on Form 10-K for the fiscal
year ended January 4, 1998)
10.25 Sublease Agreement, dated January 6, 1998, by and between
Apartment Search and the Company (incorporated by reference to
Exhibit 10.39 to the Registrant's Report on Form 10-K for the
fiscal year ended January 4, 1998)
II-3
<PAGE>
10.26 General Credit and Security Agreement, dated November 19, 1998,
by and between Spectrum Commercial Services and the Company
(incorporated by reference to Exhibit 10.31 to the Registrant's
Report on Form 10-K for the fiscal year ended January 3, 1999)
10.27 Promissory Note, dated November 19, 1998, by and between Spectrum
Commercial Services and the Company (incorporated by reference to
the Exhibit 10.31 to the Registrant's Report on Form 10-K for the
fiscal year ended January 3, 1999)
10.28 Securities Purchase Agreement between the Company and Industrial-
Works Holding Corp. dated November 20, 1999 (filed herewith)
10.29 Warrant to Purchase Shares of Common Stock including Exhibit A to
Warrant Issued to Industrial-Works Holding Co., LLC by the
Registrant on February 23, 2000 (incorporated by reference to
Exhibit 4.2 to the Registrant's Current Report on Form 8-K dated
February 23, 2000 and filed February 23, 2000)
10.30 Form of Founders Non-Competition and Non-Solicitation Agreement
(incorporated by reference to Exhibit 10.31 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended January 2,
2000)
10.31 Form of Mutual Non-disclosure Agreement (incorporated by
reference to Exhibit 10.32 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended January 2, 2000)
10.32 Form of Non-disclosure Agreement (incorporated by reference to
Exhibit 10.33 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended January 2, 2000)
10.33 Form of International Distributor Agreement (incorporated by
reference to Exhibit 10.34 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended January 2, 2000)
10.34 Form of Product Evaluation Agreement (incorporated by reference
to Exhibit 10.35 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended January 2, 2000)
10.35 Form of OEM Agreement (incorporated by reference to Exhibit 10.36
to the Registrant's Annual Report on Form 10-K for the fiscal
year ended January 2, 2000)
10.36 Form of Sales Representative Agreement (incorporated by reference
to Exhibit 10.37 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended January 2, 2000)
10.37 Management Services Agreement, dated November 20, 1999, by and
between Glenmount, LLC and the Registrant (filed herewith)
10.38 Voting and Transfer Restriction Agreement, dated November 20,
1999, by and between selected Shareholders and the Registrant
(filed herewith)
10.39 Letter Amendment, dated February 18, 2000, to the Management
Services Agreement by and between Glenmount, LLC and the
Registrant (filed herewith)
10.40 Preferred Stock Purchase Agreement between the Registrant and
Industrial-Works Holding Co., LLC dated as of March 31, 2000
(filed herewith)
10.41 Warrant to Purchase Shares of Common Stock including Exhibit A to
Warrant Issued to Industrial-Works Holding Co., LLC by the
Registrant on February 18, 2000 (filed herewith)
10.42 Letter dated March 31, 2000 from Industrial-Works Holding Co.,
LLC to the Registrant (filed herewith)
23.1 Consent of Arthur Andersen LLP (filed herewith).
II-4
<PAGE>
23.2 Consent of Dorsey & Whitney LLP (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities would not exceed that which
was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in
the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in
the effective Registration Statement; and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the Registration Statement or any material change to such
information in the Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above will
not apply if the Registration Statement is on Form S-3, Form S-8, or
Form F-3, and the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed with or furnished by the registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes to supplement
the prospectus, after the expiration of the subscription period, to set forth
the results of the subscription offer and the terms of any subsequent reoffering
thereof.
(c) The undersigned registrant hereby undertakes to deliver or
cause to be delivered with the prospectus, to each person to whom the prospectus
is sent or given, the latest annual report, to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to be
presented by Article 3 of Regulation S-X is not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the prospectus is sent
or given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.
II-5
<PAGE>
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(e) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(f) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Eden Prairie, State of Minnesota, on April 6, 2000.
FieldWorks, Incorporated
By: /s/ David G. Mell
----------------------------------------
David G. Mell
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints David G. Mell and Karen L. Engebretson,
or either of them (with full power to act alone), as his or her true and lawful
attorneys-in-fact and agents, with full powers of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any additional Registration Statement pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and any or all
amendments (including post-effective amendments) to this Registration Statement
(or Registration Statements, if an additional Registration Statement is filed
pursuant to Rule 462(b)), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on April 6, 2000:
II-7
<PAGE>
Signature Title
--------- -----
/s/ David G. Mell President, Chief Executive Officer and
- ------------------------------ Director (principal executive director)
David G. Mell
/s/ Karen L. Engebretson Chief Financial Officer and Vice President,
- ------------------------------ Finance (principal financial and accounting
Karen L. Engebretson officer)
/s/ David C. Malmberg Chairman of the Board of Directors
- ------------------------------
David C. Malmberg
/s/ James A. Bernards Director
- ------------------------------
James A. Bernards
/s/ Richard J. Boyle Director
- ------------------------------
Richard J. Boyle
/s/ Robert D.D. Forbes Director
- ------------------------------
Robert D.D. Forbes
Director
- ------------------------------
Marvin W. Goldstein
/s/ Michael E. Johnson Director
- ------------------------------
Michael E. Johnson
II-8
<PAGE>
EXHIBIT INDEX
Number Description
- ------ -----------
4.1 Second Amended and Restated Articles of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.2 to the
Registrant's Registration Statement on Form S-1, File No. 333-
18335).
4.2 Second Amended and Restated Bylaws of the Registrant
(incorporated by reference to Exhibit 3.4 to the Registrant's
Registration Statement on Form S-1, File No. 333-18335).
4.3 Form of Certificate for Common Stock (incorporated by reference
to Exhibit 4.1 to the Registrant's Registration Statement on Form
S-1, File No. 333-18335).
4.4 Form of Subscription Certificate (to be filed by amendment).
5.1 Opinion of Dorsey & Whitney LLP (to be filed by amendment).
10.1 Form of Warrant to purchase Shares of Common Stock, including
registration rights provisions (incorporated by reference to
Exhibit 10.1 to the Registrant's Registration Statement on Form
S-1, File No. 333-18335)
10.2 Warrant, dated as of June 19, 1996, between the Company and
Brightstone Capital, Ltd. (incorporated by reference to Exhibit
10.3 to the Registrant's Registration Statement on Form S-1, File
No. 333-18335)
10.3 Form of Warrant (July 1996) (incorporated by reference to Exhibit
10.6 to the Registrant's Registration Statement on Form S-1, File
No. 333-18335)
10.4 Warrant, dated as of July 29, 1996, issued to Network General
Corporation (incorporated by reference to Exhibit 10.8 to the
Registrant's Registration Statement on Form S-1, File No. 333-
18335)
10.5 Form of Warrant (September 1996) (incorporated by reference to
Exhibit 10.12 to the Registrant's Registration Statement filed on
Form S-1, File No. 333-18335)
10.6 Amendment to Warrant, dated October 15, 1996, between the Company
and Brightstone Capital, Ltd. (incorporated by reference to
Exhibit 10.13 to the Registrant's Registration Statement on Form
S-1, File No. 333-18335)
10.7 Agreement to Extend Promissory Notes and Amendment to Warrants,
dated as of October 15, 1996, between the Company and Brightstone
Fund VI, Brightstone Fund VII and Brightstone Capital, Ltd.
(incorporated by reference to Exhibit 10.14 to the Registrant's
Registration Statement on Form S-1, File No. 333-18335)
10.8 Agreement to Extend Promissory Note and Amendment to Warrant,
dated as of October 15, 1996, between the Company and Stephen L.
Becher (incorporated by reference to Exhibit 10.15 to the
Registrant's Registration Statement on Form S-1, File No. 333-
18335)
10.9 Amendment to Warrant, dated as of October 15, 1996, between the
Company and Brightbridge Fund I L.P. (incorporated by reference
to the Exhibit 10.16 to the Registrant's Registration Statement
filed on Form S-1, File No. 333-18335)
10.10 Form of Warrant (December 1996) (incorporated by reference to the
Exhibit 10.19 to the Registrant's Registration Statement filed on
Form S-1, File No. 333-18335)
10.11 Office/Warehouse Lease, dated May 10, 1994, by and between The
Northwestern Mutual Life Insurance Company and the Company
(incorporated by reference to Exhibit 10.20 to the Registrant's
Registration Statement on Form S-1, File No. 333-18335)
<PAGE>
10.12 Amendment to Lease, dated May 22, 1996, between the Company
and The Northwestern Mutual Life Insurance Company
(incorporated by reference to Exhibit 10.21 to the
Registrant's Registration Statement on Form S-1, File No. 333-
18335)
10.13 Lease Agreement dated April 7, 1995, by and between Ronald C.
Devine and the Company (incorporated by reference to Exhibit
10.22 filed with the Registrant's Registration Statement on
Form S-1, File No. 333-18335)
10.14 1994 Long Term Incentive and Stock Option Plan, as amended,
including forms of option agreements (incorporated by
reference to Exhibit 10.24 to the Registrant's Registration
Statement on Form S-1, File No. 333-18335)
10.15 Directors' Stock Option Plan (incorporated by reference to the
Exhibit 10.25 to the Registrant's Registration Statement filed
on Form S-1, File No. 333-18335)
10.16 Form of Employee Disclosure and Assignment Agreement
(incorporated by reference to Exhibit 10.27 to the
Registrant's Registration Statement on Form S-1, File No.
333-18335)
10.17 Form of Extended Limited Warranty Agreement (incorporated by
reference to Exhibit 10.31 to the Registrant's Registration
Statement on Form S-1, File No. 333-18335)
10.18 Lease Agreement, dated November 11, 1996, by and between OMNI
Offices/Woodlawn Hills and the Company (incorporated by
reference to Exhibit 10.32 to the Registrant's Registration
Statement on Form S-1, File No. 333-18335)
10.19 Option Agreement, dated as of January 21, 1997, by and between
the Company and David C. Malmberg (incorporated by reference
to the Exhibit 10.33 to the Registrant's Registration
Statement filed on Form S-1, File No. 333-18335)
10.20 Warrant dated March 25, 1997, issued to R.J. Steichen &
Company (incorporated by reference to Exhibit 10.1 to the
Registrant's Report on Form 10-Q for the fiscal quarter ended
April 6, 1997)
10.21 Lease Agreement, dated May 16, 1997, by and between CSM
Properties, Inc. and the Company (incorporated by reference to
Exhibit 10.35 to the Registrant's Report on Form 10-K for the
fiscal year ended January 4, 1998)
10.22 Addendum to Lease, dated as of December 30, 1997, between the
Company and CSM Properties, Inc. (incorporated by reference to
Exhibit 10.36 to the Registrant's Report on Form 10-K for the
fiscal year ended January 4, 1998)
10.23 Sublease Agreement, dated November 6, 1997, by and between
Golf Galaxy and the Company (incorporated by reference to
Exhibit 10.37 to the Registrant's Report on Form 10-K for the
fiscal year ended January 4, 1998)
10.24 Sublease Agreement, dated December 5, 1997, by and between
LSC, Inc. and the Company (incorporated by reference to
Exhibit 10.38 filed with the Registrant's Report on Form 10-K
for the fiscal year ended January 4, 1998)
10.25 Sublease Agreement, dated January 6, 1998, by and between
Apartment Search and the Company (incorporated by reference to
Exhibit 10.39 to the Registrant's Report on Form 10-K for the
fiscal year ended January 4, 1998)
10.26 General Credit and Security Agreement, dated November 19,
1998, by and between Spectrum Commercial Services and the
Company (incorporated by reference to Exhibit 10.31 to the
Registrant's Report on Form 10-K for the fiscal year ended
January 3, 1999)
<PAGE>
10.27 Promissory Note, dated November 19, 1998, by and between
Spectrum Commercial Services and the Company (incorporated by
reference to the Exhibit 10.31 to the Registrant's Report on
Form 10-K for the fiscal year ended January 3, 1999)
10.28 Securities Purchase Agreement between the Company and
Industrial-Works Holding Corp. dated November 20, 1999
(filed herewith)
10.29 Warrant to Purchase Shares of Common Stock including Exhibit A
to Warrant Issued to Industrial-Works Holding Co., LLC by the
Registrant on February 23, 2000 (incorporated by reference to
Exhibit 4.2 to the Registrant's Current Report on Form 8-K
dated February 23, 2000 and filed February 23, 2000)
10.30 Form of Founders Non-Competition and Non-Solicitation
Agreement (incorporated by reference to Exhibit 10.31 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended January 2, 2000)
10.31 Form of Mutual Non-disclosure Agreement (incorporated by
reference to Exhibit 10.32 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended January 2, 2000)
10.32 Form of Non-disclosure Agreement (incorporated by reference to
Exhibit 10.33 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended January 2, 2000)
10.33 Form of International Distributor Agreement (incorporated by
reference to Exhibit 10.34 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended January 2, 2000)
10.34 Form of Product Evaluation Agreement (incorporated by
reference to Exhibit 10.35 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended January 2, 2000)
10.35 Form of OEM Agreement (incorporated by reference to Exhibit
10.36 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended January 2, 2000)
10.36 Form of Sales Representative Agreement (incorporated by
reference to Exhibit 10.37 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended January 2, 2000)
10.37 Management Services Agreement, dated November 20, 1999, by and
between Glenmount, LLC and the Registrant (filed herewith)
10.38 Voting and Transfer Restriction Agreement, dated November 20,
1999, by and between selected Shareholders and the Registrant
(filed herewith)
10.39 Letter Amendment, dated February 18, 2000, to the Management
Services Agreement by and between Glenmount, LLC and the
Registrant (filed herewith)
10.40 Preferred Stock Purchase Agreement between the Registrant and
Industrial-Works Holding Co., LLC dated as of March 31, 2000
(filed herewith)
10.41 Warrant to Purchase Shares of Common Stock including Exhibit A
to Warrant Issued to Industrial-Works Holding Co., LLC by the
Registrant on February 18, 2000 (filed herewith)
10.42 Letter dated March 31, 2000 from Industrial-Works Holding Co.,
LLC to the Registrant (filed herewith)
23.1 Consent of Arthur Andersen LLP (filed herewith).
23.2 Consent of Dorsey & Whitney LLP (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
<PAGE>
EXHIBIT 10.28
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") dated as of November
20, 1999 by and among Fieldworks, Incorporated, a Minnesota corporation (the
"Company"), and Industrial-Works Holding Corp., a Delaware corporation
("Purchaser"). Section 6.17 lists certain defined terms used in this Agreement.
WHEREAS, on the terms and subject to the conditions set forth herein, the
Company wishes to issue and sell to Purchaser newly issued shares ("Series B
Shares") of the authorized but unissued Series B Convertible Participating
Preferred Stock of the Company (the "Series B Preferred Stock"), and a warrant
to purchase 500,000 shares of the Common Stock, $.001 par value per share
("Common Stock") of the Company (the "Warrant");
WHEREAS, the Purchaser wishes to purchase the Series B Shares and the
Warrant on the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I
AUTHORIZATION, ISSUANCE AND SALE OF SECURITIES
SECTION 1.01 Authorization. The Company has authorized and reserved for
issuance 4,250,000 shares of Series B Preferred Stock, upon the terms and
conditions described herein, and has authorized and reserved 4,250,000 shares of
the Company's Common Stock for issuance upon conversion of the Series B Shares.
The Company has authorized and reserved 500,000 shares of the Company's Common
Stock for issuance upon exercise of the Warrant, and will reserve 250,000 shares
of the Company's Common Stock for issuance upon the exercise of the Breakup
Warrant, if the Breakup Warrant is issued.
SECTION 1.02 The Series B Shares. The Series B Shares shall be issued
pursuant to, and shall be vested with the rights and preferences, and subject to
the limitations set forth in the Certificate of Designation of the Series B
Convertible Participating Preferred Stock (the "Series B Certificate") attached
hereto as Exhibit A.
SECTION 1.03 The Warrant. The Warrant and the Warrant Shares shall be
issued pursuant to, and shall be vested with the rights and subject to the
limits of the Warrant to Purchase Shares of Common Stock attached hereto as
Exhibit B.
SECTION 1.04 The Conversion Shares and Warrant Shares. The shares of the
Company's Common Stock issued or issuable upon conversion of the Series B Shares
(the "Conversion Shares") and the shares of the Company's Common Stock issued or
issuable upon exercise of the Warrant, or the Breakup Warrant (the "Warrant
Shares") will be entitled to the registration rights provisions attached as
Exhibit A to the Warrant.
SECTION 1.05 Purchase and Sale. Subject to the terms and conditions of this
Agreement, the Company agrees to issue and sell to Purchaser and Purchaser
agrees to purchase from the Company, 4,250,000 shares of Series B Preferred
Stock for a purchase price of one dollar ($1.00) per share.
Subject to the terms and conditions of this Agreement, the Company agrees
to issue and sell to Purchaser and Purchaser agrees to purchase from the Company
a warrant to purchase 500,000 shares of the Company's Common Stock in
consideration for Purchaser's investment in the Series B Shares. If any rule,
law or regulation requires an allocation of a portion of the Purchase Price to
the Warrants, $100 shall be so allocated.
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SECTION 1.06 Closing. Subject to the terms and conditions of this Agreement,
the closing shall take place at the offices of Paul, Hastings, Janofsky &
Walker LLP, 17th Floor, 695 Town Center Drive, Costa Mesa, California 92626 on
January 19, 2000 or at such other place, time and date as Company and Purchaser
may direct (the "Closing Date"). At the Closing, Company will deliver to
Purchaser the Warrant and the Series B Shares, registered in Purchaser's name,
and Purchaser shall transfer the Purchase Price to the account of the Company
by wire transfer of immediately available funds.
SECTION 1.07 Use of Proceeds. The Company shall use such proceeds for
acquisitions and for general working capital.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser that, except as set
forth in the Disclosure Schedules attached hereto (which Disclosure Schedules
make explicit reference to the particular representation or warranty as to
which exception is taken, which in each case shall constitute the sole
representation and warranty as to which such exception shall apply):
SECTION 2.01 Organization, Qualifications and Corporate Power.
(a) The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of its state of incorporation and is duly licensed
or qualified to transact business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of the business transacted by
it or the character of the properties owned or leased by it requires such
licensing or qualification, except for such jurisdictions, if any, in which the
failure to be so qualified or in good standing would not, individually or in
the aggregate, have a Material Adverse Effect. The Company has the corporate
power and authority to own and hold its properties and to carry on its business
as now conducted and as proposed to be conducted, as described in the Company's
Annual Report on Form 10-K for the year ended January 3, 1999 (the "Annual
Report"), and the Company has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement, the Warrant, the
Breakup Warrant, and all other documents to be delivered in connection with any
of them (the "Transaction Documents"), and to issue, sell and deliver the
Series B Shares and to issue and deliver the Warrant Shares, or the Conversion
Shares.
(b) The Company does not (i) own of record or beneficially, directly or
indirectly, (A) any shares of capital stock or securities convertible into
capital stock of any other corporation or (B) any participating or limited
liability company interest in any partnership, joint venture, limited liability
company or other non-corporate business enterprise or (ii) control, directly or
indirectly, any other entity.
(c) The Articles of Incorporation of the Company (the "Articles of
Incorporation") and the Bylaws of the Company (the "Bylaws") are in full force
and effect as of the date hereof in the forms attached to, or incorporated by
reference in, the Annual Report.
SECTION 2.02 Authorization of Agreements.
(a) The execution and delivery by the Company of this Agreement, the
Warrant, the Breakup Warrant, and all other Transaction Documents, the
performance by the Company of its obligations hereunder and thereunder, the
issuance, sale and delivery of the Series B Shares, the Warrant, and the
Breakup Warrant, if issued, and the issuance and delivery of the Conversion
Shares and the Warrant Shares have been duly authorized by all requisite
corporate action and do not violate any provision of law, any order of any
court or other agency of government, the Articles of Incorporation or the
Bylaws, or any provision of any indenture, agreement or other instrument to
which the Company, or any of its properties or assets is bound, or conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any such
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indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company.
(b) The Series B Certificate, the Warrant, and the Breakup Warrant have been
duly approved by the Board of Directors of the Company. The Series B Shares
have been duly authorized and, when issued in accordance with this Agreement
and the Series B Certificate, will be validly issued, fully paid and
nonassessable shares of Series B Preferred Stock, with no personal liability
attaching to the ownership thereof, and will be free and clear of all liens,
charges, restrictions, claims and encumbrances imposed by or through the
Company except as set forth in this Agreement and the Series B Certificate. The
Conversion Shares and the Warrant Shares have been duly reserved for issuance
upon conversion of the Series B Shares and the exercise of the Warrant or the
Breakup Warrant, respectively, and, when so issued, will be duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock not subject
to, or issued in violation of, any purchase option, right of first refusal,
pre-emptive right, subscription right or any similar right under any provision
of the Minnesota Business Corporation Act (the "MBCA"), the Articles of
Incorporation or Bylaws, or any contract to which the Company is a party or is
otherwise bound, with no personal liability attaching to the ownership thereof
and will be free and clear of all liens, charges, restrictions, claims and
encumbrances imposed by or through the Company except as set forth in this
Agreement, the Series B Certificate, the Warrant, or the Breakup Warrant.
Neither the issuance, sale or delivery of the Series B Shares, the Warrant or
the Breakup Warrant nor the issuance or delivery of the Conversion Shares or
the Warrant Shares is subject to, or in violation of, any purchase option,
right of first refusal, pre-emptive right, subscription right or any similar
right under any provision of the MBCA, the Articles of Incorporation or Bylaws,
or any contract to which the Company is a party or is otherwise bound, or of
any other right in favor of any Person that has not been effectively waived.
SECTION 2.03 Validity. This Agreement has been duly executed and delivered
by the Company and constitutes a legal, valid and binding obligation of the
Company, enforceable in accordance with its terms, and each other Transaction
Document when executed and delivered in accordance with this Agreement will
constitute a legal, valid and binding obligation of the Company, enforceable in
accordance with its terms (subject in each case, as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting the rights of creditors generally, and as to the remedy
of specific performance and other forms of injunctive relief, subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought).
SECTION 2.04 Authorized Capital Stock. The authorized capital stock of the
Company consists of (i) 30,000,000 shares of Common Stock and (ii) 5,000,000
shares of preferred stock, of which 4,250,000 shares have been designated
Series B Preferred Stock. 8,894,426 shares of Common Stock are validly issued
and outstanding, fully paid and nonassessable with no personal liability
attaching to the ownership thereof, 3,893,604 shares of Common Stock are
reserved for issuance upon exercise of outstanding options and warrants, and
another 793,777 shares have been reserved for issuance under the 1994 Long-Term
Incentive and Stock Option Plan and the 1996 Directors' Stock Option Plan, and
no Series B Shares shall have been issued. The shareholders of record, and
holders by name or by category of subscriptions, warrants, options, convertible
debt or equity securities, and other rights (contingent or other) to purchase
or otherwise acquire equity securities of the Company, and the number of shares
of Common Stock and the number of such subscriptions, warrants, options,
convertible securities, and other such rights held by each, are as set forth on
Schedule 2.04. Schedule 2.04 also identifies, to the extent known to the
Company, all the beneficial owners of such securities, to the extent the record
holders are not the beneficial owners of such securities. The designations,
powers, preferences, rights, qualifications, limitations and restrictions in
respect of each class and series of authorized capital stock of the Company are
as set forth in the Articles of Incorporation, and all such designations,
powers, preferences, rights, qualifications, limitations and restrictions are
valid, binding and enforceable and in accordance with all applicable laws.
Except as contemplated by this Agreement or set forth in the attached Schedule
2.04, (i) no Person owns of record or is known to the Company to own
beneficially any share of Common Stock, (ii) no subscription, warrant, option,
convertible security, or other right (contingent or other) to
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purchase or otherwise acquire equity securities of the Company is authorized or
outstanding, (iii) there is no commitment by the Company to issue shares,
subscriptions, warrants, options, convertible equity or debt securities, or
other such rights or to distribute to holders of any of its equity or debt
securities any evidence of indebtedness or asset and (iv) there are no options,
warrants, rights, convertible or exchangeable securities, "phantom" stock
rights, stock appreciation rights, stock-based performance units, commitments,
contracts, arrangements or undertakings of any kind to which the Company is a
party or by which it is bound (x) obligating the Company to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other equity interests in, or any security convertible into, or
exercisable for or exchangeable for, any capital stock of or other equity
interest in, the Company, (y) obligating the Company to issue, grant, extend or
enter into any such option, warrant, call, right, security, commitment,
contract, arrangement or undertaking, or (z) that give any person the right to
receive any economic benefit or right similar to or derived from the economic
benefits and rights occurring to holders of Common Stock. Except as provided
for in the Articles of Incorporation or as set forth in the attached Schedule
2.04, the Company has no obligation (contingent or other) to purchase, redeem
or otherwise acquire any of its securities or any interest therein or to pay
any dividend or make any other distribution in respect thereof. Except as set
forth on Schedule 2.04 and in the Series B Certificate, or as expressly
contemplated by the terms of this Agreement, there are no voting trusts or
agreements, shareholders' agreements, pledge agreements, buy-sell agreements,
rights of first refusal, preemptive rights or proxies relating to any
securities of the Company whether or not the Company is a party thereto. All of
the outstanding securities of the Company were issued in compliance with all
applicable federal and state securities laws.
SECTION 2.05 Third-Party Approvals. No registration or filing with, or
consent or approval of or other action by any third party, is or will be
necessary for the valid execution, delivery and performance by the Company of
the Transaction Documents, the issuance, sale and delivery of the Warrant or of
the Series B Shares on the Closing Date, or, if issued, the Breakup Warrant,
or, upon exercise or conversion thereof, the issuance and delivery of the
Warrant Shares and the Conversion Shares, other than (i) filings pursuant to
state securities laws (all of which filings have been made by the Company,
other than those which are required to be made after the Closing and which will
be duly made on a timely basis) in connection with the sale of the Series B
Shares, the Warrant and the Breakup Warrant, if issued, and (ii) with respect
to the registration rights granted in the Warrant or the Breakup Warrant, the
registration of the shares covered thereby with the United States Securities
and Exchange Commission (the "SEC") and filings pursuant to state securities
laws.
SECTION 2.06 SEC Filings. The Company has filed, on a timely basis, all
filings required to be made by it with the SEC.
SECTION 2.07 Litigation. Except as set forth on Schedule 2.07, as of the
date hereof there is no action, suit, claim, proceeding or investigation
pending or, to the best of the Company's knowledge, threatened against or
affecting the Company. The Company is not subject to any order, writ,
injunction or decree entered in any lawsuit or proceeding. The Company has no
knowledge of any facts or circumstances that might give rise to any of the
foregoing.
SECTION 2.08 Material Agreements and Liabilities; Financial Statements.
(a) Schedule 2.08(a) contains a complete list of the Company's Material
Agreements, obligations and Liabilities (whether absolute, accrued or
contingent). "Material Agreements" shall mean all agreements to which the
Company is a party or by which the Company is bound that are material to the
conduct and operations of its business and properties, including without
limitation any agreements (i) which are not terminable upon less than thirty
(30) days' notice, (ii) which provide for payments to or by the Company in
excess of $100,000 annually (except for purchase orders and customer orders
entered in the ordinary course of business), (iii) which obligate the Company
to share, license or develop any product or technology (except those which
would not have a Material Adverse Effect), (iv) which involve transactions or
proposed transactions between the Company, on the one hand, and any Affiliate
of the Company, on the other hand, (v) which are debt financing agreements
(excluding equipment leases which in the aggregate do not obligate the
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Company for payments in excess of $50,000), (vi) pursuant to which the Company
has issued or proposes to issue any Capital Stock or Convertible Securities or
(vii) pursuant to which the Company has granted registration rights pertaining
to any securities to any Person. "Liability" or "Liabilities" means, with
respect to any Person, any liability or obligation of such Person of any kind,
character or description, whether known or unknown, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated, secured or unsecured, joint
or several, due or to become due, vested or unvested, executory, determined,
determinable or otherwise and whether or not the same is required to be accrued
on the financial statements of such Person. The Company has in all material
respects performed, and is now performing in all material respects, its
obligations under, and is not in default (or by the lapse of time and/or the
giving of notice would otherwise be in default) in respect of, any of the
Material Agreements. To the Company's knowledge, none of the other parties to
the Material Agreements are in default thereunder. Each of the Material
Agreements is in full force and effect and is a valid and enforceable
obligation against the Company and, to the Company's knowledge, the other party
or parties thereto, in accordance with its terms.
(b) The audited balance sheet of the Company as of January 3, 1999, the
unaudited balance sheet of the Company for the nine-month period ended October
3, 1999, the audited statement of income and cash flow of the Company for the
fiscal year ended January 3, 1999 and unaudited statement of income and cash
flow of the Company for the nine-month period ended October 3, 1999
(collectively, the "Financial Statements") are set forth on Schedule 2.08(b) or
in the Annual Report. The Financial Statements have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods indicated and
with each other (except that the unaudited Financial Statements may not contain
all footnotes required by GAAP) and fairly present the financial condition of
the Company and the results of operations as of such dates and for such periods
indicated. Except as reflected in the Financial Statements, the Company is not
a guarantor or indemnitor of any Indebtedness or Liability of any other Person.
The Company maintains a standard system of accounting established and
administered in accordance with GAAP. The general ledger, accounts receivable,
accounts payable, bank reconciliations and payroll records of the Company have
been maintained in all material respects in the ordinary course and contain a
materially correct and complete record of the matters typically contained in
records of such nature.
(c) The Company has not received any management letters or other letters
from the Company's independent auditing firm(s) relating to the results of
operations, financial statements or internal controls of the Company insofar as
the same may pertain to the business or assets of the Company which it has not
disclosed to Purchaser.
SECTION 2.09 Inventory.
To the Company's knowledge, and subject to the inventory reserves described
in Schedule 2.09, each item of inventory of the Company, whether reflected on
the Company's balance sheet or subsequently acquired, is (a) free of any
material defect or deficiency, (b) in good, usable and currently marketable
condition in the ordinary course of the business of the Company (subject, in
the case of raw materials and work-in-process, to the completion of the
production process) and (c) properly reflected in the books and records of the
Company at the lesser of cost and fair market value, all as determined in
accordance with GAAP. All inventory reflected on the Company's balance sheets
conforms to the Company's published specifications and to any additional
requirements of the intended purchaser, in the case of items identified to a
particular order. Except as set forth in Schedule 2.09, since January 3, 1999,
there have not been any write-downs of the value of, or establishment of any
reserves against, any inventory of the Company.
SECTION 2.10 Absence of Certain Changes.
(a) Except as disclosed in the Company's filings pursuant to the Securities
Exchange Act of 1934 (the "Exchange Act"; the "Exchange Act Filings") or as set
forth in the Financial Statements, since January 3, 1999, there has not been
any change to the financial condition of the Company that would have a Material
Adverse Effect on the Company or on the business or prospects of the Company,
and, except as specifically
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reflected in the Financial Statements or in the Exchange Act filings, the
Company has not (i) declared or paid any dividends, or authorized or made any
distribution upon or with respect to any class or series of its capital stock;
(ii) made capital expenditures or commitments therefor exceeding (excluding
purchases of tooling in an aggregate amount not exceeding $800,000) $50,000
individually or $250,000 in the aggregate; (iii) made any loans or advances to
any Person exceeding $15,000 individually or $30,000 in the aggregate or
guaranteed the obligations of any Person; (iv) sold, exchanged or otherwise
disposed of any of its assets or rights exceeding $50,000 individually or
$100,000 in the aggregate; (v) incurred any material change in the assets,
liabilities, financial condition, operating results or business of the Company
from that reflected in the Financial Statements; (vi) suffered any damage,
destruction or loss, whether or not covered by insurance, that had or would
have a Material Adverse Effect on the Company; (vii) waived a right or a debt
owed to it exceeding $15,000 individually or $30,000 in the aggregate; (viii)
agreed to or made any material change or amendment to any Material Agreement;
(ix) permitted or allowed any of its assets to be subjected to any material
encumbrance; (x) written up or down the value of any inventory, notes or
accounts receivable or other assets in any material respect; (xi) licensed,
sold, transferred, pledged, modified, disclosed, disposed of or permitted to
lapse any right to the use of any Intellectual Property; (xii) made any change
in any method of accounting or accounting practice or any change in
depreciation or amortization policies or rates previously adopted; (xiii) paid,
lent or advanced any amount to, sold, transferred or leased any assets to or
entered into any Material Agreement or material arrangement with any of its
Affiliates or entered into any agreement or arrangement whatsoever with any of
its Affiliates, except for directors' fees, travel expense advances and
employment compensation to officers; or (xiv) incurred or suffered any other
event or condition of any character that could reasonably be expected to have a
Material Adverse Effect on the Company.
(b) Schedule 2.10(b) sets forth a list of the ten (10) most highly
compensated employees and officers of the Company for the fiscal year ended
January 3, 1999, and a list of the ten (10) most highly compensated employees
and officers of the Company for the current fiscal year (on an annualized
basis), in each case based on total compensation paid to each such employee or
officer, and in each case setting forth such annual (or annualized) total
compensation for such employee or officer.
SECTION 2.11 Proprietary Information of Third Parties. No third party has
claimed or, to the Company's knowledge, has reason to claim that any Person
employed by or affiliated with the Company has (a) violated or may be violating
any of the terms or conditions of his or her employment, non-competition or
non-disclosure agreement with such third party, (b) disclosed or may be
disclosing or utilized or may be utilizing any trade secret or proprietary
information or documentation of such third party or (c) interfered or may be
interfering in the employment relationship between such third party and any of
its present or former employees. No third party has requested information from
the Company which suggests that such a claim might be contemplated. To the
Company's knowledge, no Person employed by or affiliated with the Company has
employed or proposes to employ any trade secret or any information or
documentation proprietary to any former employer, except as licensed or
otherwise authorized or permitted to do so, and no Person employed by or
affiliated with the Company has violated any confidential relationship which
such Person may have had with any third party, in connection with the
development, manufacture or sale of any product or proposed product or the
development or sale of any service or proposed service of the Company, and the
Company has no reason to believe there will be any such employment or
violation. None of the execution or delivery of this Agreement, or the carrying
on of the business of the Company, or the conduct or proposed conduct of the
business of the Company will conflict with or result in a breach of the terms,
conditions or provisions of or constitute a default under any contract,
covenant or instrument under which any such Person is obligated.
SECTION 2.12 Patents, Trademarks, Copyrights, Etc. The Annual Report sets
forth a list and brief description of all domestic and foreign patents, patent
rights, patent applications, trademarks, trademark applications, service marks,
service mark applications, trade names, domain names and copyrights, and all
applications for such which are in the process of being prepared, owned by or
registered in the name of the Company, or of which the Company is a licensor or
licensee, or in which the Company has any right, and in each case a brief
description of the nature of such right. The Company owns or possesses adequate
licenses or other rights to use all patents, patent applications, trademarks,
trademark applications, service marks, service
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mark applications, trade names, domain names, copyrights, manufacturing
processes, formulae, trade secrets, customer lists and know how (collectively,
"Intellectual Property") used in or necessary to the conduct of its business as
conducted and as proposed to be conducted, and no claim is pending or, to the
best of the Company's knowledge, threatened on the ground that the operations
of the Company infringe upon or conflict with the asserted rights of any other
Person under any Intellectual Property, and to the best of the Company's
knowledge, there is no basis for any such claim (whether or not pending or
threatened). No claim is pending or, to the best of the Company's knowledge,
threatened on the ground that any such Intellectual Property owned or licensed
by the Company, or which the Company otherwise has the right to use, is invalid
or unenforceable by the Company and there is no basis for any such claim
(whether or not pending or threatened). To the best of the Company's knowledge,
all technical information developed by and belonging to the Company which has
not been patented has been kept confidential, except for instances of non-
compliance which would not have a Material Adverse Effect.
SECTION 2.13 Compliance with Laws.
(a) The Company is in compliance with all Applicable Laws, except for
instances of non-compliance which would not have a Material Adverse Effect. The
Company has not received any notice of, nor does the Company have any knowledge
of, any material violation (or of any investigation, inspection, audit or other
proceeding by any governmental entity involving allegations of any material
violation) of any Applicable Law involving or related to the Company which has
not been dismissed or otherwise disposed of. The Company has not received
notice and does not otherwise have any knowledge that the Company is charged
with, threatened with or under investigation with respect to, any violation of
any Applicable Law, and has no knowledge of any proposed change in any
Applicable Law that would have a material adverse effect on the Company. The
Company has not received any opinion or memorandum or legal advice from legal
counsel to the effect that it is exposed, from a legal standpoint, to any
liability that may be material to its business, prospects, financial condition,
operations, property or affairs. There is no existing law, rule, regulation or
order, and the Company is not aware of any proposed law, rule, regulation or
order, whether federal, state, county or local, that would prohibit the Company
from, or otherwise materially adversely affect the Company in, conducting its
business in any jurisdiction in which it proposes to conduct business.
(b) The Company has, and, to the Company's knowledge after due inquiry, all
professional employees or agents of the Company have, all licenses, franchises,
permits, accreditations, authorizations, and other approvals from all
Governmental Entities ("Approvals") necessary for or used in the conduct of, or
relating to the operation of, the business of the Company and the occupancy and
operation, for its present uses, of the real and personal property which the
Company owns or leases. The Company is not in material violation of any such
Approval or any terms or conditions thereof. All such Approvals are in full
force and effect, have been issued to and fully paid for by the holder thereof
and no notice or warning from any Governmental Entity with respect to the
suspension, revocation or termination of any Approval has been, to the
knowledge of the Company, threatened by any Governmental Entity or issued or
given to the Company. No such Approvals will in any way be affected, terminate
or lapse by reason of the consummation of all or any portion of the
transactions contemplated by this Agreement.
SECTION 2.14 Certain Other Agreements. Except as contemplated or otherwise
set forth or disclosed by this Agreement, the Company has no legal obligation,
absolute or contingent, to any other Person to sell any Capital Stock, material
assets or the business of the Company or to effect any merger, consolidation,
liquidation, dissolution, recapitalization or other reorganization of the
Company or to enter into any agreement with respect thereto.
SECTION 2.15 Offering of the Series B Shares Warrant. Neither the Company
nor any Person authorized or employed by the Company as agent, broker, dealer
or otherwise in connection with the offering or sale of the Series B Shares,
the Warrant or any security of the Company similar to the Series B Shares or
the Warrant has offered the Series B Shares or the Warrant or any such similar
security for sale to, or solicited any offer to buy the Series B Shares, the
Warrant or any such similar security from, or otherwise approached or
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negotiated with respect thereto with, any Person or Persons, and neither the
Company nor any Person acting on its behalf has taken or will take any other
action (including, without limitation, any offer, issuance or sale of any
security of the Company under circumstances which might require the integration
of such security with the Series B Shares or the Warrant under the Securities
Act of 1933 (the "Securities Act") or the rules and regulations of the
Commission thereunder), in either case so as to subject the offering, issuance
or sale of the Series B Shares or the Warrant to the registration provisions of
the Securities Act.
SECTION 2.16 Brokers. The Company has no contract, arrangement or
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
SECTION 2.17 Officers. Schedule 2.17 sets forth the names of the officers of
the Company, together with the title or job classification of each such Person
and the total compensation anticipated to be paid to each such Person by the
Company in calendar year 1999. Except as set forth on Schedule 2.17, no
employee of the Company has an employment agreement or understanding, whether
oral or written, with the Company.
SECTION 2.18 Employees. Except as disclosed to Purchaser on Schedule 2.18,
each of the officers of the Company, each key employee and each other employee
now employed by the Company who has access to confidential information of the
Company has executed an appropriate nondisclosure agreement in customary form,
and such agreements are in full force and effect. No officer or key employee of
the Company has advised the Company (orally or in writing) that he or she
intends to terminate employment with the Company. The Company has never had any
employees represented by collective bargaining agreements. The Company is
currently in compliance with all Applicable Laws relating to the employment of
labor, including provisions relating to employment practices, terms and
conditions of employment, wages, hours, equal opportunity, collective
bargaining and the payment of Social Security and other taxes, and with ERISA.
There is no unfair labor practice charge or complaint against the Company
pending before the National Labor Relations Board or any other governmental
agency arising out of the activities of the Company of which the Company has
received notice or of which the Company has knowledge, and the Company has no
knowledge of any facts or information which would give rise thereto. There is
no labor strike or labor disturbance pending or, to the knowledge of the
Company, threatened against the Company. No collective bargaining
representation petition is pending or, to the knowledge of the Company,
threatened against the Company.
SECTION 2.19 Year 2000. The disclosure under the heading "Year 2000" in the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 3,
1999 (the "99Q3 Quarterly Report") is complete and accurate in all material
respects. The Company has no reasons to believe that it will incur expenses
after the date hereof in an amount in excess of $100,000 in the aggregate as a
result of problems commonly referred to as "Year 2000" software problems with
respect to the products, internal computer systems, non-computer operations or
productions processes of the Company or its vendors, business partners or
customers.
SECTION 2.20 Taxes. The Company has filed, or caused to be filed, on a
timely basis all tax returns (including payroll, unemployment and other taxes
related to its employees and independent contractors) required to be filed with
any federal or state governmental body and all material tax returns required to
be filed with any local or municipal governmental body, all such tax returns
are true, correct and complete in all material respects and the Company, has
paid or caused to be paid all taxes, levies, assessments, tariffs, duties or
other fees and any interest and penalties thereon ("Taxes") imposed, assessed
or collected by any governmental body that may have become due and payable
pursuant to those tax returns or otherwise. No such federal, state, local or
municipal tax returns have ever been audited by the Internal Revenue Service,
state or other authorities (except for an audit of state sales and use tax
returns). No deficiency assessment with respect to or proposed adjustment of
any of the Company's Federal, state, municipal or local tax returns has
occurred or, to the Company's knowledge, is threatened (except for a deficiency
assessment following the most recent audit of sales and use tax returns, which
the Company has fully satisfied). There has been no tax lien imposed by any
governmental body outstanding against the business or the Company's assets or
properties, except liens for current taxes not yet due. The reserve for Taxes
on the balance sheet in the Financial Statements is fully adequate to cover all
liabilities for Taxes with respect to periods ending on or before the Closing
Date. The transactions contemplated by this Agreement will not, assuming
compliance by parties to all Transaction
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Documents with the terms thereof, cause or result in a limitation on the
Company's net operating losses pursuant to Section 382 of the Code.
SECTION 2.21 ERISA. "Employee Benefit Plans" means (i) all of the Company's
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and (ii) all other employee
benefit arrangements or payroll practice, including employment agreements,
stock option plans, severance agreements, board of directors' and executive
compensation arrangements, incentive programs or arrangements, sick leave,
severance pay policies, salary continuation for disability, consulting
arrangements, workers' compensation, retirement, deferred compensation, bonus,
stock purchase, hospitalization, medical insurance, life insurance, tuition
reimbursement or scholarship programs, plans providing benefits or payments in
the event of a change of control, change in ownership, or sale of a substantial
portion of the Company's assets, maintained by the Company (including ERISA
Affiliates as defined below) or to which the Company or an ERISA Affiliate has
contributed or is or was obligated to make payments, in each case with respect
to any current or former employee or director of the Company or an ERISA
Affiliate. The Company has no employee pension benefit plans (as defined in
Section 3(2) of ERISA) ("Employee Pension Plans"). The Company, including its
ERISA Affiliates, does not and has never maintained or participated in, been
obligated to make contributions to, and does not have and has had no liability
with respect to, any Employee Benefit Plan which is: (i) subject to Title IV of
ERISA or the minimum funding requirements of Section 412 of the Code or Section
302 of ERISA, (ii) a "multi-employer plan" (as defined in Section 3(37) of
ERISA), (iii) a "multiple employer plan" (as defined in Section 4063 or 4064 of
ERISA), or (iv) a funded vacation pay plan. The Company and its ERISA
Affiliates have, with respect to each Employee Benefit Plan, complied in all
material aspects with all applicable laws, and the lawful terms of such plans.
No employee of the Company nor any fiduciary with respect to the Employee
Benefit Plans has issued or distributed any written communication to any
present or former employee of the Company regarding the effect the transactions
contemplated by this Agreement may have on any Employee Benefit Plan or other
employee-related practice, policy, or arrangement. There shall be no payment,
accrual of additional benefits, acceleration of payments, vesting or term
extension of any benefit under any Employee Benefit Plan or any agreement or
arrangement solely by reason of entering into or in connection with the
transactions contemplated by this Agreement. No Employee Benefit Plan has
participated in, engaged in or been a party to any non-exempt prohibited
transaction as described under the Code or ERISA, and neither the Company nor
any of its ERISA Affiliates has had asserted against them any claim for taxes
under Chapter 43 of Subtitle D of the Code and Section 5000 of the Code, or for
penalties under ERISA Section 502(c), (i) or (l), with respect to any Employee
Benefit Plan nor, to the knowledge of the Company, is there a basis for any
such claim. No officer, director or employee of the Company has committed a
material breach of any responsibility or obligation imposed upon fiduciaries by
Title I of ERISA with respect to any Employee Benefit Plan. Other than routine
claims for benefits, there is no claim pending or, to the knowledge of the
Company, threatened, involving any Employee Benefit Plan by any Person against
such plan, the Company or any of its ERISA Affiliates. There is no pending or,
to the knowledge of the Company, threatened, proceeding involving any Employee
Benefit Plan before any governmental agency. In accordance with applicable law
and the terms of such plan, each Employee Benefit Plan can be amended or
terminated at any time, without consent from any other party. With respect to
the Employee Benefit Plans, individually and in the aggregate, no event has
occurred, and to the knowledge of the Company, there exists no condition or set
of circumstances in connection with which the Company could be subject to any
liability that is reasonably likely to have a Material Adverse Effect. For
purposes of this Agreement, an "ERISA Affiliate" is any entity, whether or not
incorporated, deemed to be under common control or affiliated with the Company
under Section 414.
SECTION 2.22 Environmental Matters.
(a) To the best knowledge of the Company, the Company: (i) is, and within
the period of all applicable statutes of limitation has been, in compliance
with all applicable Environmental Laws; (ii) holds all Environmental Permits
(each of which is in full force and effect) required for any of its current
operations or for any property owned, leased or otherwise operated by it; and
(iii) is, and within the period of all applicable
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statutes of limitation has been, in compliance with all of its Environmental
Permits. The Company reasonably believes that each of its Environmental Permits
currently in effect will be renewed effective prior to the expiration of such
Environmental Permit.
(b) The Company has not received any notice of alleged, actual or potential
responsibility for, or any inquiry or investigation regarding, any
Environmental Condition. The Company has not received any notice of any other
claim, demand or action by any individual or entity alleging any actual or
threatened injury or damage to any person, property, natural resource or the
environment arising from or relating to any Release or threatened Release of
any Hazardous Materials at, on, under, in, to or from any Facility or any
former Facilities, or in connection with any operations or activities of the
Company.
(c) The Company has not entered into or agreed to and is not subject to any
consent decree, order or settlement or other agreement in any judicial,
administrative, arbitral or other similar forum relating to compliance with or
Liability under any Environmental Law.
(d) To the best knowledge of the Company, Hazardous Materials have not been
transported, disposed of, emitted, discharged or otherwise Released or
threatened to be Released to or at any real property presently or formerly
owned or leased by the Company, which Hazardous Materials are reasonably
expected to (i) give rise to a material Liability of the Company under any
applicable Environmental Law, (ii) interfere with the Company's continued
operations or (iii) materially impair the fair salable value of any real
property owned or leased by the Company.
(e) The Company has not assumed or retained, by contract or, to the
knowledge of the Company, by operation of law in connection with the sale or
transfer of any assets or business, Liabilities arising from or associated with
or otherwise in connection with such assets or business of any kind, fixed or
contingent, known or not known, under any applicable Environmental Law. The
Company is not required to make any material capital or other expenditures to
comply with any Environmental Law nor to the knowledge of the Company is there
any reasonable basis on which any Governmental Entity could take any action
that would require any such capital expenditures.
(f) No environmental audits or assessments which have been conducted in
respect of any Facility or any former Facility within the past five (5) years,
by the Company, or any attorney, environmental consultant or engineer or other
Person engaged by the Company for such purpose.
SECTION 2.23 Affiliate Transactions. Except for regular salary payments,
warrants, rights, options and fringe benefits under an individual's
compensation package with the Company, none of the officers, directors,
employees or other Affiliates of the Company, nor any member of the family of
such a person, is a party to any agreement, understanding, Indebtedness or
proposed transaction with the Company or, to the Company's knowledge, is
directly interested in any Material Agreement with the Company. The Company has
not guaranteed or assumed any obligations of its officers, directors, employees
or other Affiliates or members of any of their families. To the Company's
knowledge, other than as contemplated by this Agreement, none of the officers,
directors, or other Affiliates of the Company nor any member of their families
has any direct or indirect ownership interest in any Person (other than a less
than 5% ownership interest in a publicly traded company) with which the Company
has a business relationship or with any Person that competes with the Company.
To the Company's knowledge without any duty of inquiry, no employees nor any
member of their families has any direct or indirect ownership interest in any
Person with which the Company has a business relationship or that competes with
the Company.
SECTION 2.24 Insurance. To the best knowledge of the Company, each insurance
policy held by or for the benefit of the Company is in full force and effect.
The Company carries, and will continue to carry, insurance with reputable
insurers with respect to such of its properties and businesses, in such amounts
and against such risks as is adequate for its business and as is customarily
maintained by other entities of similar size engaged in similar businesses.
None of such insurance was obtained through the use of materially false or
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misleading information or the failure to provide the insurer with all material
information requested in order to evaluate the liabilities and risks insured.
The Company has not received any notice of cancellation or non-renewal of any
insurance policies or binders.
SECTION 2.25 Tangible Assets.
(a) The Company has good and valid title to or valid and subsisting
leasehold interests in all fixtures and equipment having original cost or fair
market value in excess of $25,000, including all such fixtures and equipment
reflected in the Company's most recent balance sheet included in the Financial
Statements and all such fixtures and equipment purchased or otherwise acquired
by the Company since the date of such balance sheet. None of such fixtures and
equipment is subject to any encumbrance except for encumbrances incurred in the
ordinary course of business or which, individually or in the aggregate, are not
substantial in amount and do not materially detract from the value of the
property or assets of the Company or interfere with the present use of such
property or assets.
(b) The buildings and fixtures and equipment owned by the Company are in
good operating condition and repair (except for ordinary wear and tear), with
no material defects, are sufficient for the operation of the business of the
Company as presently conducted and are in conformity, in all material respects,
with all Applicable Laws relating thereto currently in effect.
SECTION 2.26 Customer Relations. "Material Customer" means any Person from
whom the Company has recognized revenue in excess of $100,000 since January 1,
1997 or to whom the Company has any obligation to complete work or honor any
contractual warranty or has any obligation or Liabilities. Except as set forth
in Schedule 2.26, since January 1, 1997, no Material Customer has canceled or
terminated any purchase order, purchase contract or Material Agreement or
notified the Company in writing or orally of its intent to cancel or terminate
purchase order, purchase contract or any Material Agreement or materially alter
the amount of business that it transacts with the Company. Ryder has not
terminated, deferred or delayed (i) any programs that are likely to affect the
Company's projected product sales for any quarterly period from the date of
this Agreement through December 31, 2000 or (ii) any joint development project
now in progress or previously proposed.
SECTION 2.27 Books and Records. The Company has made and kept (and given
Purchaser access to) books and records and accounts, which, in reasonable
detail, accurately and fairly reflect the activities of the Company. The minute
books of the Company previously made available to Purchaser accurately and
adequately reflect all material action previously taken by the shareholders,
the Board of Directors and committees of the Board of Directors of the Company.
SECTION 2.28 Warranties. The Company's warranty terms are as described on
Schedule 2.28 to this Agreement. The reserve for warranty claims on the
Company's most recent quarterly balance sheet dated October 3, 1999, reflects
the Company's historical and anticipated warranty expense accurately and in
accordance with GAAP.
SECTION 2.29 Outsourcing. Company anticipates that its present vendors will
be able to ship the products known as the FW8000, FW5000 and FW2000 in
commercial quantities sufficient to meet projected demand no later than
February 28, 2000, at a cost to the Company which does not exceed the costs
previously disclosed to Purchaser.
SECTION 2.30 Disclosure. Neither this Agreement, nor any Schedule or Exhibit
to this Agreement, contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained herein or therein not
misleading. None of the statements, documents, certificates or other items
prepared or supplied by the Company with respect to the transactions
contemplated hereby contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein not
misleading. There is no fact which the Company has not disclosed to Purchaser
in writing and of which the
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Company is aware which materially and adversely affects or could be reasonably
expected to materially and adversely affect the business, prospects, financial
condition, operations, property or affairs of the Company. The financial
projections and other estimates provided to Purchaser were prepared by the
Company based on assumptions of fact and opinion as to future events which the
Company, at the date of the issuance of such projections and estimates,
believed to be reasonable. As of the date hereof, no facts have come to the
attention of the Company which would, in its opinion, require the Company to
revise or amplify the assumptions underlying such projections and other
estimates or the conclusions derived therefrom.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS
SECTION 3.01 Representations. Purchaser represents and warrants to the
Company that:
(a) it is wholly owned by Glenmount International, L.P., which is a
partnership which was not organized for the specific purpose of acquiring the
Series B Shares or the Warrant;
(b) it has sufficient knowledge and experience in investing to be able to
evaluate the risks and merits of its investment in the Company, and it is able
financially to bear the risks thereof;
(c) it has had an opportunity to discuss the Company's business, management
and financial affairs with the Company's management;
(d) the Series B Shares, the Warrant, the Breakup Warrant (if issued), and
the Conversion Shares and Warrant Shares are being acquired for Purchaser's own
account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof;
(e) Purchaser is a corporation, duly formed, validly existing and in good
standing under the laws of its state of formation and has the power and
authority to execute, deliver and perform this Agreement;
(f) the execution and delivery by Purchaser of this Agreement, and the
performance by the Purchaser of its obligations hereunder, have been duly
authorized by all requisite corporate action; and
(g) Purchaser has duly executed and delivered this Agreement and it
constitutes its legal, valid and binding obligation, enforceable in accordance
with its terms (subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws affecting
the rights of creditors generally and as the remedy of specific performance and
other forms of injunctive relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be
brought).
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS
SECTION 4.01 Conditions to Obligations of the Purchaser. The obligation of
Purchaser to purchase and pay for the Series B Shares to be purchased by it on
the Closing Date hereunder is, at its option, subject to the satisfaction, on
or before the Closing Date of the following conditions:
(a) Shareholder Approval. The Company shall have obtained approval of this
Agreement and the transactions contemplated hereby, including any actions
necessary to increase the number of directors, from its Shareholders.
(b) Warrant. The Company shall have executed and delivered the Warrant,
substantially in the form of Exhibit B hereto.
(c) Management Services Agreement. The Company shall have executed and
delivered, at the same time this Agreement is delivered, a Management Services
Agreement with Purchaser in the form of Exhibit C hereto (the "Management
Services Agreement") and Company shall not be in default on any monthly payment
to Purchaser pursuant to such Management Services Agreement.
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(d) Voting Agreement and Transfer Restrictions. The Company shall have
executed and delivered, and each of its current officers and directors and
their respective Affiliates and all other parties listed on Schedule 4.01(d)
(owning an aggregate of not less than 1,700,000 shares of Common Stock) shall
have executed and delivered within five (5) business days of the execution of
this Agreement, an agreement in substantially the form attached hereto as
Exhibit D, pursuant to which each such officer, director or Affiliate agrees on
behalf of himself, herself or itself, (i) to vote his or her or its outstanding
shares in support of the transactions contemplated by this Agreement, (ii) to
vote his or her or its outstanding shares in favor of Purchaser's nominees to
the Board of Directors for a period of three (3) years following the Closing,
(iii) to refrain from transferring any shares of the Company prior to March 20,
2000, and (iv) to refrain from exercising or transferring any existing options
or warrants prior to March 20, 2000.
(e) Board of Directors. The Company shall have taken all necessary actions
and obtained all needed resignations so that, immediately following the
Closing, the Company's Board of Directors consists of David Malmberg, David
Mell, Gary Beeman, Robert D. D. Forbes, Michael E. Johnson, Richard J. Boyle
and one other person selected by the Company and reasonably acceptable to
Purchaser (to be agreed upon in within ten (10) business days following the
execution of this Agreement). If any such person becomes unavailable prior to
the Closing, Purchaser and Company shall agree upon a replacement (except that
Company may not object to Purchaser's nominee to replace Michael Johnson,
Robert D.D. Forbes or Richard J. Boyle).
(f) Opinion of the Company's Counsel. Purchaser shall have received from
Dorsey & Whitney, counsel for the Company, an opinion dated the Closing Date,
in the form attached as Exhibit E hereto.
(g) Representations and Warranties to be True and Correct on Date Hereof.
The representations and warranties of the Company contained in Article II shall
have been true, complete and correct on the date of this Agreement and the
Chief Executive Officer and Chief Financial Officer of the Company shall have
certified to such effect the Purchaser in writing.
(h) Performance. The Company shall have performed and complied with all
agreements contained herein required to be performed or complied with by it
prior to or at the Closing Date and the Chief Executive Officer and Chief
Financial Officer of the Company shall have certified to the Purchaser in
writing to such effect and to the further effect that all of the conditions set
forth in this Article IV have been satisfied.
(i) All Proceedings to be Satisfactory. All corporate and other proceedings
to be taken by the Company in connection with the transactions contemplated
hereby and all documents incident thereto shall be reasonably satisfactory in
form and substance to the Purchaser, and Purchaser shall have received all such
counterpart originals or certified or other copies of such documents as it
reasonably may request.
(j) Supporting Documents. Purchaser shall have received a copy of:
(i) (A) the Articles of Incorporation, certified as of a recent date by
the Secretary of State of the State of Minnesota, and (B) a certificate of
the Secretary of State of the State of Minnesota dated as of a recent date
as to the due incorporation and good standing of the Company, the payment
of all applicable taxes by the Company and listing all documents of the
Company on file with said Secretary; and
(ii) such additional supporting documents and other information with
respect to the operations and affairs of the Company as Purchaser
reasonably may request.
(k) Terms of Series B Shares. The Board of Directors of the Company shall
have adopted the Series B Certificate in substantially the form attached as
Exhibit A hereto and such Certificate shall have been filed with the Minnesota
Secretary of State and have become effective.
(l) Third-Party Approvals. All Persons having any right to consent to or
approve the issuance of the Series B Shares, the Warrant, the Conversion
Shares, or the Warrant Shares shall have delivered such consents
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or approvals in writing. All Persons having any preemptive, first refusal or
other rights with respect to the issuance of the Series B Shares, the
Conversion Shares, or the Warrant Shares shall have irrevocably waived the same
in writing.
(m) No Material Adverse Change. No Material Adverse Change, as defined in
Section 6.17, in the reasonable judgment of the Purchaser, shall have occurred
in the Company's business, financial condition, prospects or results of
operations since October 3, 1999.
(n) Expenses. The Company shall have paid fees and expenses due pursuant to
Section 6.01 hereof incurred prior to the Closing (subject to the limitation
set forth in such Section 6.01).
(o) Directors and Officers Liability Insurance. The Company shall have
maintained in effect directors' and officers' liability insurance coverage, on
customary terms and conditions (including coverage for liabilities arising
before the date of taking office to the extent arising from such person's
status as a prospective member of the Board of Directors), ensuring an
aggregate of at least $5,000,000 in such liability insurance coverage.
All such documents shall be reasonably satisfactory in form and substance to
the Purchaser.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Purchasers that:
SECTION 5.01 Stockholder Meeting; Voting Agreement and Transfer
Restrictions.
(a) The Company agrees to promptly submit this Agreement and the
transactions contemplated hereby to the Company's stockholders for approval in
compliance with the MBCA and the policies of the NASDAQ Stock Market and to use
best efforts to obtain such approval on or before January 31, 2000.
(b) The Company will execute and deliver and shall use its best efforts to
cause each of its current officers and directors and their respective
Affiliates listed on Schedule 4.01(d) (owning an aggregate of not less than
1,700,000 shares of Common Stock) to execute and deliver, within five (5)
business days of the execution of this Agreement, an agreement in substantially
the form attached hereto as Exhibit D, pursuant to which each such officer and
director agrees on behalf of himself, herself or itself and each of his, her or
its Affiliates, (i) to vote his, her or its outstanding shares in support of
the transactions contemplated in this Agreement, (ii) to vote his, her or its
outstanding shares in favor of Purchaser's nominees to the Board of Directors
for a period of three (3) years following the Closing of the transactions
contemplated by this Agreement, (iii) to refrain from transferring any shares
of the Company prior to March 20, 2000, and (iv) to refrain from exercising or
transferring any existing options or warrants prior to March 20, 2000. Company
will not issue or redeem any Capital Stock or security convertible into Capital
Stock prior to March 20, 2000, except as contemplated by this Agreement.
SECTION 5.02 SEC Filings. The Company shall at all times file all reports
required to be filed by it under the Securities Act or the Exchange Act, and
shall take such further action as Purchaser may reasonably request, all to the
extent required from time to time, to allow Purchaser to sell the Conversion
Shares and the Warrant Shares without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the SEC. Upon the request of
Purchaser, the Company shall deliver to Purchaser (i) a certificate from the
President, Chief Executive Officer or Chief Financial Officer stating that the
Company has complied with all such requirements; (ii) copies of the Company's
most recent quarterly or annual report; and (iii) all such other reports and/or
documents as Purchaser may reasonably request to avail itself of Rule 144, 144A
or any other SEC regulation allowing it to sell the Conversion Shares or the
Warrant Shares without registration.
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SECTION 5.03 Financial Statements, Reports, Etc. Until the Closing, and
thereafter, so long as the Warrant or any Series B Shares are outstanding,
Purchaser shall be entitled to receive the following information:
(a) within ninety (90) days after the end of each fiscal year of the
Company, a balance sheet of the Company, as of the end of such fiscal year and
the related consolidated statements of income, shareholders' equity and cash
flows for the fiscal year then ended, prepared in accordance with GAAP and
certified by a "Big Five" firm of independent public accountants of recognized
national standing selected by the Board of Directors of the Company (the
"Annual Audited Financial Statements");
(b) within twenty-one (21) days after the end of each accounting month of
the Company within each fiscal year, a balance sheet of the Company and the
related statements of income, shareholders' equity and cash flows, unaudited
but prepared in accordance with GAAP and certified by the Chief Financial
Officer of the Company, or, if there is no Chief Financial Officer, the Chief
Executive Officer, such consolidated balance sheet to be as of the end of such
month and such consolidated statements of income, shareholders' equity and cash
flows to be for such month and for the period from the beginning of the fiscal
year to the end of such month, in each case with comparative statements for the
prior fiscal year and with respect to the then-applicable budget;
(c) at the time of delivery of each financial statement pursuant to Section
5.03(b), a certificate executed by the Chief Financial Officer of the Company
or, if there is no Chief Financial Officer, the Chief Executive Officer,
stating that such officer has reviewed this Agreement, the terms of the
Warrant, and the terms of the Series B Preferred Stock contained in the
Articles of Incorporation and has no knowledge of any default by the Company in
the performance or observance of any of the provisions of this Agreement, the
terms of the Warrant, or the terms of the Series B Preferred Stock contained in
the Articles of Incorporation or, if such officer has such knowledge,
specifying such default and the nature thereof;
(d) within thirty (30) days after the end of each quarter, a quarterly
management narrative report explaining all significant variances from forecasts
and all significant current developments in staffing, marketing, sales and
operations;
(e) no later than thirty (30) days prior to the start of each fiscal year,
consolidated capital and operating expense budgets, cash flow projections and
income and loss projections for the Company in respect of such fiscal year, all
itemized in reasonable detail and prepared on a monthly basis, and, promptly
after preparation, any revisions to any of the foregoing;
(f) promptly following receipt by the Company, each audit response letter,
accountant's management letter and other written report submitted to the
Company by its independent public accountants in connection with an annual or
interim audit of the books of the Company;
(g) promptly after the commencement thereof, notice of all actions, suits,
claims, proceedings, investigations and inquiries of the type described in
Section 2.07 involving the Company that could materially adversely affect the
Company;
(h) promptly upon sending, making available or filing the same, all press
releases, reports and financial statements that the Company sends or makes
available to its shareholders or files with the SEC; and
(i) promptly, from time to time, such other material information regarding
the business, prospects, financial condition, operations, property or affairs
of the Company as Purchaser reasonably may request.
SECTION 5.04 Reserve for Conversion Shares. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, for the purpose of effecting the conversion of the Series B Shares and
otherwise complying with the terms of this Agreement, such number of its duly
authorized shares of Common Stock as shall be sufficient to effect the
conversion of the Series B
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Shares from time to time outstanding, or otherwise to comply with the terms of
this Agreement. If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of the Series B
Shares or otherwise to comply with the terms of this Agreement, the Company
will immediately take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes. The Company will obtain all
authorizations, consents, approvals or other actions by or make any filing with
any court or administrative body that may be required under applicable state
securities laws in connection with the issuance of shares of Common Stock upon
conversion of the Series B Shares, which conversion may be made by Purchaser at
any time.
SECTION 5.05 Reserve for Warrant Shares. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, for the purpose of effecting the exercise of the Warrant and the Breakup
Warrant and otherwise complying with the terms of this Agreement, such number
of its duly authorized shares of Common Stock as shall be sufficient to effect
the exercise of the Warrant and the Breakup Warrant, or otherwise to comply
with the terms of this Agreement. If at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the exercise
of the Warrant or the Breakup Warrant or otherwise to comply with the terms of
this Agreement, the Company will immediately take such corporate action as may
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purposes. The Company
will obtain all authorizations, consents, approvals or other actions by or make
any filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon exercise of the Warrant, which exercise may be made by
Purchaser at any time.
SECTION 5.06 Corporate Existence. The Company shall maintain its respective
corporate existence, rights and franchises in full force and effect.
SECTION 5.07 Properties, Business, Insurance.
(a) The Company shall maintain as to its properties and businesses, with
financially sound and reputable insurers, insurance against such casualties and
contingencies and of such types and in such amounts as is customary for
companies similarly situated, which insurance shall be at all times adequate
and sufficient for the business of the Company, as reasonably determined by the
Board of Directors. Without limiting the foregoing, the Company shall at all
times maintain general liability insurance in an amount not less than
$7,000,000. The Company shall not cause or permit any assignment or change in
beneficiary and shall not borrow against any such policy. If requested by
Purchaser, the Company will add one designee of Purchaser as a notice party for
each such policy and shall request that the issuer of each policy provide such
designee with ten (10) days' notice before such policy is terminated (for
failure to pay premiums or otherwise) or assigned or before any change is made
in the beneficiary thereof.
(b) Without limiting its obligations pursuant to Section 5.07(a), the
Company shall maintain so long as the Warrant or any shares of the Series B
Shares remain outstanding, directors' and officers' liability insurance the
Warrant or coverage, on customary terms and conditions (including coverage for
liabilities arising before the date of taking office to the extent arising from
such person's status as a prospective member of the Board of Directors),
providing an aggregate of at least $5,000,000 in such liability insurance
coverage. The Company shall at all times maintain provisions in its Bylaws and
Articles of Incorporation indemnifying all directors against liability and
absolving all directors from liability to the maximum extent permitted under
the laws of the State of Minnesota.
SECTION 5.08 Inspection, Consultation and Advice. The Company shall permit
Purchaser and such Persons as Purchaser may designate, to visit and inspect, at
Purchaser's expense, any of the properties of the Company, examine its books
and take copies and extracts therefrom, discuss the affairs, finances and
accounts of the Company with their officers, employees and public accountants
(and the Company hereby authorizes said accountants to discuss with such
Purchaser and such designees such affairs, finances and accounts), and consult
with and advise the management of the Company as to its affairs, finances and
accounts, all at reasonable times
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and upon reasonable notice. In addition, and without limiting the foregoing,
Company shall permit Purchaser to conduct such environmental investigations of
Company facilities as Purchaser deems appropriate, including "Phase II" review.
SECTION 5.09 No Solicitation; Restrictive Agreements Prohibited.
(a) The Company shall not seek, initiate or encourage any agreement,
transaction or discussions which would be a Competing Proposal as defined in
Section 6.02.
(b) The Company shall not become a party to any agreement which, by its
terms, restricts the Company's performance of its obligations under the
Transaction Documents.
SECTION 5.10 Fees and Expenses of Directors. The Company shall promptly
reimburse in full each director of the Company who is not an employee of the
Company for all of his or her reasonable out-of-pocket expenses, including, but
not limited to, travel expenses, incurred in attending each meeting of the
Board of Directors of the Company or any committee thereof and any other
meetings attended at the request of the Company and pay any fees paid to
directors therefor.
SECTION 5.11 Board of Directors.
(a) Other than as provided in paragraphs (b) and (c) below, the number of
directors of the Company shall be fixed at seven (7).
(b) So long as the Warrant or any Series B Shares remain outstanding, the
holders of the Series B Shares shall have the right to designate three (3)
directors of the Company, and shall have the right pursuant to paragraph (c)
below to designate two (2) additional directors of the Company (each such
director, a "Series B Director"). The holders of the Series B Shares, voting
together as a class, shall have the exclusive right to (i) terminate any Series
B Director during his or her term of office, with or without cause; and (ii) to
fill any vacancy among the Series B Directors.
(c) The holders of the Warrant and the Series B Shares shall have the right
to compel the Company to take all necessary action to increase the number of
directors from seven (7) to nine (9), and the right to appoint two (2)
additional directors to fill the vacancies created by such increase, upon the
occurrence of any one or more of the circumstances described in Section 5(c) of
the Series B Certificate attached as Exhibit A to this Agreement.
(d) If, within six months following the election of additional directors by
the holders of the Series B Shares pursuant to clause (c) above, the Series B
Shares shall not have been converted to Company Common Stock, the right of the
Series B Shares to elect an additional two directors shall expire, but the
right to elect three directors shall remain in effect.
SECTION 5.12 Compliance with Laws. The Company shall conduct its business in
compliance with all Applicable Laws.
SECTION 5.13 Keeping of Records and Books of Account. The Company shall keep
adequate records and books of account, in which complete entries will be made
in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company, and in which, for each fiscal year, all proper
reserves for depreciation, depletion, obsolescence, amortization, taxes, bad
debts and other purposes in connection with its business shall be made.
SECTION 5.14 Protective Provisions. The Company shall not take any of the
following actions without the prior affirmative written consent of Purchaser
or, following the Closing, of the holders of the Warrant and holders of at
least two-thirds (2/3) of the Series B Shares:
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(a) alter, change or amend (by merger or otherwise) any of the rights,
preferences or privileges of the Series B Preferred Stock;
(b) alter, change or amend any of the terms of the Warrant;
(c) other than as provided in Section 5.11(c) hereof, amend, restate, alter,
modify or repeal (by merger or otherwise) its Articles of Incorporation or
Bylaws, including, without limitation, amending, restating, modifying or
repealing (by merger or otherwise) (i) any certificate of designation or
preferences (as in effect from time to time) relating to any series of
Preferred Stock or (ii) any of the rights, preferences and privileges of any
other class of Capital Stock or the terms or provisions of any option or
Convertible Security;
(d) (i) create, authorize or issue Senior Securities, Parity Securities,
Supervoting Securities or shares of any such class or series; (ii) create,
authorize or issue any securities (including Convertible Securities)
convertible into, or exercisable, redeemable or exchangeable for, shares of
Senior Securities, Parity Securities or Supervoting Securities; (iii) increase
or decrease the authorized number of shares of Series B Preferred Stock; or
(iv) increase or decrease the authorized number of shares of any class or
series of Senior Securities, Parity Securities, Supervoting Securities or
shares of any such class or series;
(e) (i) initiate or suffer to exist any Liquidation Event with respect to
the Company, (ii) enter into any merger or consolidation with any other Person
that results in the holders of the Company's Capital Stock immediately prior to
such transaction owning less than fifty percent (50%) of the voting power of
the successor entity's Capital Stock after such transaction or (iii) otherwise
discontinue or dispose of more than ten percent (10%) of the assets of the
business of the Company, taken as a whole;
(f) initiate or suffer to exist any recapitalization of the Company, or
reclassify any authorized Capital Stock of the Company into any other class or
series of Capital Stock of the Company;
(g) redeem any shares of Capital Stock;
(h) acquire, in one or a series of transactions, any equity ownership
interest, by way of merger or otherwise, in any Person, or any asset or assets
of any Person, where the aggregate consideration payable in connection with
such acquisition (including, without limitation, cash consideration, the fair
market value of any securities and the net present value of any deferred
consideration) is at least $1,000,000, or (ii) make any capital expenditures in
excess of $500,000 individually or $1,000,000 for any fiscal year;
(i) change the number of directors of the Company to a number other than
seven (7) or the manner in which the directors are selected, except as set
forth in Section 5.11(c) hereof;
(j) make any material change in the nature of its business as conducted on
the Closing Date, or fail to conduct its business in the ordinary course
consistent with past practice;
(k) sell, transfer, convey, lease or dispose of, outside the ordinary course
of business, any material assets or properties of the Company, whether now or
hereafter acquired, in any transaction or transactions that call for payments
in excess of $500,000;
(l) establish or purchase any Subsidiary;
(m) enter into any agreements, transactions or leases not in the ordinary
course of the Company's business as conducted on the Closing Date that call for
payments in excess of $250,000;
(n) incur any new or additional Indebtedness which exceeds $500,000 provided
that this clause (n) shall not prohibit the extension, renewal, amendment or
refinancing (including refinancings with other lenders) of the Company's
existing credit facility with Spectrum Commercial Services, a Division of Lyon
Financial Services, Inc. on terms no more restrictive than those contained in
the General Credit and Security Agreement dated November 19, 1998, as amended
on August 20, 1999 (except interest rate "spreads" may increase by no more
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than 50 basis points over prime and principal amounts advanced against accounts
receivable or inventory (but no other amounts of principal) may increase or
decrease provided that advance rates are no greater than those currently in
effect).
(o) other than as set forth in an annual compensation plan approved by the
Series B Directors, increase management compensation with respect to any Person
in an amount greater than ten percent (10%) in any single fiscal year
(including without limitation by issuance of warrants, options or other
contingent compensation); or hire any new employee whose annual compensation
exceeds $125,000; or
(p) except for transactions on customary and reasonable terms, enter into
any transaction with (i) any Affiliate of the Company, (ii) any employee of the
Company, (iii) any holder of more than five percent (5%) of the outstanding
capital stock of any class or series of Capital Stock of the Company, (iv) any
member of the immediate family of any Person set forth in clauses (i), (ii) and
(iii) above, or (v) any corporation, partnership, trust or other entity in
which any Person set forth in clauses (i), (ii), (iii) or (iv) above, or member
of the family of any such Person, is a director, officer, trustee, partner or
holder of more than five percent (5%) of the outstanding capital stock thereof.
For purposes of this Agreement, the members of the "immediate family" of any
Person shall consist of the spouse, parents, children, siblings, mothers- and
fathers-in-law, sons-and daughters-in-law, and brothers- and sisters-in-law of
such Person.
SECTION 5.15 Publication Matters. The Company shall not use the name or logo
of Purchaser or any of its Affiliates in connection with any press releases or
advertisements without the prior written consent of Purchaser and the prior
written approval by Purchaser of the form and content of any such press release
or advertisement. The Company consents to the publication by Purchaser or any
of its Affiliates of a tombstone or similar advertising material relating to
the transactions contemplated by this Agreement, which may include the
Company's name, business description and size of investment. In addition, the
Company agrees that Purchaser and its Affiliates may use the Company's name and
logo on websites among a list of representative investments and may provide the
Company's name and appropriate individual contacts to companies for the purpose
of securing supplier discounts or other similar benefits for the Company.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01 Expenses. The Company shall pay all reasonable out-of-pocket
due diligence expenses and outside legal and consulting fees and expenses of
Purchaser incurred in connection with investigating, negotiating or documenting
the transactions contemplated hereby (whether such fees and expenses are
incurred prior to or after the Closing Date), provided that the payment for
such expenses shall be limited to $50,000 except as otherwise provided in
Section 6.03.
SECTION 6.02 Breakup Fee. (a) If any person (other than Purchaser or any of
its Affiliates) shall have made, proposed, communicated or disclosed a proposal
for an acquisition of the Company or its assets or business, or a combination
with the Company, or a financing transaction proposal as an alternative to the
transactions contemplated by this Agreement (a "Competing Proposal") in a
manner which is or becomes public and this Agreement is terminated following
such proposal, then the Company shall, simultaneously with termination of this
Agreement, pay to Purchaser a fee (the "Breakup Fee") in the amount of $500,000
or, if greater, 2.5% of the value of the Company established by a proposed
transaction, if, following the announcement or proposal of a transaction, this
Agreement is terminated. If (in the absence of a Competing Proposal) the
stockholders do not approve the transactions contemplated by this Agreement,
the Company shall pay to Purchaser the $100,000 required pursuant to the terms
of the Management Services Agreement (the "Consulting Fee") and shall issue to
Purchaser a warrant (the "Breakup Warrant") for 250,000 shares at the purchase
price of $1.00 per share, which will be exercisable immediately and will expire
if not exercised within five years, and will otherwise have the terms and
conditions set forth on Exhibit F. The Consulting Fee shall be paid by wire
transfer of immediately available funds.
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(b) The Company agrees that the agreement contained in Section 6.02(a) above
is an integral part of the transactions contemplated by this Agreement and that
the Consulting Fee constitutes liquidated damages and not a penalty. If Company
fails to promptly pay to Purchaser any amount due under such Section 6.02(a),
Company shall pay the costs and expenses (including reasonable legal fees and
expenses) in connection with any action, including the filing of any lawsuit or
other legal action, taken to collect payment thereof, together with interest on
the amount of any unpaid amount at the annual rate of four percent (4%) above
the publicly announced prime rate of Citibank, N.A. (or, if lower, the maximum
rate permitted by law) from the date such amount was required to be paid to the
date of payment.
(c) The Company agrees to reserve 250,000 shares of its Common Stock for
issuance in connection with the exercise of the Breakup Warrant, if the Breakup
Warrant is issued. The obligation to reserve shares in connection with the
Breakup Warrant shall survive termination of this Agreement pursuant to Section
6.03, below, and shall remain binding upon the Company.
(d) Except as provided otherwise in paragraphs (a) and (b) above and in
Section 6.01, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses, except that Company shall pay all costs and expenses (i) in
connection with obtaining shareholder approval for this Agreement and the
transactions contemplated hereby, including printing and mailing the proxy
statement and (ii) of obtaining any consents of any third party.
SECTION 6.03 Termination. This Agreement may be terminated:
(a) at any time by mutual agreement of the parties;
(b) by Purchaser by written notice to the Company if all conditions to
closing have not been satisfied prior to February 11, 2000;
(c) by the Company following a proposal of the type described in Section
6.02(a), by written notice to Purchaser; or
(d) by either party following a material breach by the other party to this
Agreement, provided that if such breach is curable, this Agreement may only be
terminated if, after ten (10) business days' notice, the party in breach has
not either cured such breach or commenced diligent efforts to cure such breach.
Termination of this Agreement shall not waive any party of liability for
breaches of this Agreement which occurred prior to termination. If this
Agreement is terminated by Purchaser pursuant to subsection (b) of this Section
6.03, the limitation on expenses payable pursuant to Section 6.01 shall be
$85,000.
SECTION 6.04 Survival of Agreements. All covenants, agreements,
representations and warranties made in the Transaction Documents or any
certificate or instrument delivered to Purchaser pursuant to or in connection
with the Transaction Documents shall survive the execution and delivery of the
Transaction Documents, the issuance, sale and delivery of the Series B Shares,
the issuance and delivery of the Warrants, and the issuance and delivery of the
Conversion Shares and the Warrant Shares, and all statements contained in any
certificate or other instrument delivered by the Company hereunder or
thereunder or in connection herewith or therewith shall be deemed to constitute
representations and warranties made by the Company.
SECTION 6.05 Brokerage. Each party hereto will indemnify and hold harmless
the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
SECTION 6.06 Parties in Interest. All representations, covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting the
generality of the
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foregoing, all representations, covenants and agreements benefiting Purchaser
shall inure to the benefit of any and all subsequent holders from time to time
of Series B Shares, the Warrants, Conversion Shares or the Warrant Shares.
SECTION 6.07 Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in Person,
mailed by certified or registered mail, return receipt requested, delivered by
overnight courier, or sent by telecopier or telex, addressed as follows:
(a) if to the Company,
Fieldworks, Incorporated
7631 Anagram Drive
Eden Prairie, Minnesota
Attention: Karen Engebretson
Facsimile: (612) 947-7030
with a copy to:
Dorsey & Whitney LLP
Pillsbury Center
220 South Sixth Street
Minneapolis, MN 55402
Attention: Kenneth Cutler
Facsimile: (612) 340-8738
(b) if to Purchaser:
Industrial Works Holding Corp.
c/o Glenmount International, L.P.
19200 Von Karman Avenue, Suite 400
Irvine, California 92612
Attention: Michael E. Johnson
Facsimile: (949) 477-8044
with a copy to:
Paul, Hastings, Janofsky & Walker LLP
695 Town Center Drive, 17th Floor
Costa Mesa, California 92626-1924
Attention: Peter J. Tennyson
Facsimile: (714) 979-1921
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
SECTION 6.08 Governing Law; Jury Trial Waiver. This Agreement shall be
construed, interpreted and the rights of the parties determined in accordance
with the laws of the State of California without regard to the conflict of law
principles thereof; except with respect to matters of law concerning the
internal corporate affairs of any corporate entity which is a party to or the
subject of this Agreement and as to those matters, the law of the jurisdiction
under which the respective entity derives its powers shall govern. The parties
irrevocably elect as the sole judicial forum for the adjudication of any
matters arising under or in connection with this Agreement, the Transaction
Documents and the transactions contemplated hereby and thereby, and consent to
the jurisdiction of, the courts located in Orange County, California, and waive
any and all objections to such jurisdiction or venue that they may have. The
parties hereby waive any right to have trial by jury in any action,
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suit or proceeding brought to enforce or defend any rights or remedies arising
under or in connection with this Agreement, whether grounded in tort, contract
or otherwise.
SECTION 6.09 Injunctive Relief. The parties hereto acknowledge and agree
that irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and shall be entitled to enforce specifically the provisions of this
Agreement in any court of the United States or any state thereof having
jurisdiction, in addition to any other remedy to which the parties may be
entitled under this Agreement or at law or in equity.
SECTION 6.10 Assignment.
(a) Neither this Agreement nor any of the rights or obligations hereunder
may be assigned by the Company without the prior written consent of Purchaser.
(b) Purchaser may, without the consent of the Company, sell, transfer, or
otherwise convey the Warrant, any Breakup Warrant or any of the Series B Shares
purchased by Purchaser hereunder or the Conversion Shares or Warrant Shares,
and the rights and obligations of Purchaser hereunder, to any of its Affiliates
or to an Accredited Investor, provided, however, that such Person (except for a
transferee of the Breakup Warrant) shall not have any rights under this
Agreement unless it executes a counterpart of this Agreement in connection with
such transfer.
(c) Subject to the foregoing, this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, and no other person shall have any right, benefit or obligation
hereunder.
SECTION 6.11 Limitation of Liability. In no event shall (a) any Affiliate of
Purchaser, or (b) any direct or indirect member, shareholder, officer,
director, limited partner, employee or any other representative of Purchaser or
any Affiliate of Purchaser, be personally liable for any obligation of
Purchaser under this Agreement.
SECTION 6.12 Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto, constitutes the sole and entire agreement of the parties with
respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
SECTION 6.13 Counterparts. 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.
SECTION 6.14 Amendments. This Agreement may not be amended or modified
without the written consent of the Company and Purchaser.
SECTION 6.15 Severability. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
SECTION 6.16 Titles and Subtitles. The titles and subtitles used in this
Agreement are for convenience only and are not to be considered in construing
or interpreting any term or provision of this Agreement.
SECTION 6.17 Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Affiliate" means, with respect to a specified Person, (a) any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person, (b) any other Person
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that owns, directly or indirectly, five percent (5%) or more of such specified
person's Capital Stock, (c) any employee or director of such specified Person,
(d) any member of the family of any Person specified in clauses (a), (b), and
(c), or (e) any corporation, limited liability company, partnership, trust or
other entity in which any Person set forth in clauses (a), (b), (c) or (d)
above, or member of the family of any such Person, is a director, officer,
trustee, partner or holder of more than five percent (5%) of the outstanding
Capital Stock thereof. For the purposes of this definition, "control," when
used with respect to any specified person, means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. All
limited partners in Glenmount International, L.P. shall be considered
Purchaser's Affiliates.
"Agreement" has the meaning set forth in the preamble hereto.
"Applicable Law" means any statute, law, rule or regulation or any judgment,
order, writ, injunction, decree or financial assessment (subject, in the case
of financial assessments, to the exhaustion of appeals) of any Governmental
Entity to which a specified Person or its properties or assets, or its
officers, directors, employees, consultants or agents (in their capacities as
such) is subject, including, without limitation, all such statutes, laws,
rules, regulations, judgments, orders, writs, injunctions, decrees and
financial assessments relating to, without limitation, energy regulation,
public utility regulation, securities regulation, consumer protection, equal
opportunity, health care industry regulation, public health and safety, motor
vehicle safety or standards, third party reimbursement, environmental
protection, fire, zoning, building and occupational safety and health matters
and laws respecting employment practices, employee documentation, terms and
conditions of employment and wages and hours.
"Approvals" has the meaning set forth in Section 2.13(b) hereof.
"Breakup Warrant" means a Warrant in the form of Exhibit F.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Change of Control" shall be deemed to have occurred upon (i) the
consummation of a tender for or purchase of more than fifty percent (50%) of
the Company's Common Stock by a third party, in a single transaction or series
of related transactions, (ii) a merger, consolidation or sale of all or
substantially all of the assets of the Company such that the shareholders of
the Company immediately prior to the consummation of such transaction own less
than fifty percent (50%) of the voting securities of the surviving entity
immediately after the transaction or transactions, in a single transaction or
series of related transactions, or (iii) the sale or transfer of more than
twenty-five percent (25%) of the shares of Capital Stock of the Company, in a
single transaction or series of related transactions.
"Closing" has the meaning set forth in Section 1.06 hereof.
"Closing Date" has the meaning set forth in Section 1.06 hereof.
"Code" means the Internal Revenue Code.
"Common Stock" has the meaning set forth in the preamble hereto.
"Company" has the meaning set forth in the preamble hereto.
"Consulting Fee" has the meaning set forth on Section 6.02 hereof.
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"Conversion Shares" has the meaning set forth in Section 1.04 hereof.
"Convertible Security" means any stock or security that is directly or
indirectly convertible into or exchangeable for or exercisable for Capital
Stock, including without limitation, the Series B Shares, the Warrant and any
other option, warrant or exchangeable debt security.
"Employee Benefit Plans" has the meaning set forth in Section 2.21 hereof.
"Employee Pension Plans" has the meaning set forth in Section 2.21 hereof.
"Environmental Condition" means the Release or threatened Release of any
Hazardous Material (whether or not upon a Facility or any former Facility or
other property and whether or not such Release constituted at the time thereof
a violation of any Environmental Law) as a result of which the Company has or
would reasonably be expected to become liable to any Person or by reason of
which any Facility, any former Facility or any of the assets of the Company may
suffer or be subjected to any encumbrances.
"Environmental Laws" means any and all foreign, federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
legally binding decrees or other requirements of any Governmental Entity
(including, without limitation, common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of the environment or
of human health relating to exposure of any kind of Hazardous Materials, as
have been, are now or may at any time hereafter be in effect.
"Environmental Permits" means any and all permits, licenses, registrations,
notifications, exemptions and any other authorizations required under any
Environmental Law.
"ERISA" has the meaning set forth in Section 2.21 hereof.
"ERISA Affiliate" has the meaning set forth in Section 2.21 hereof.
"Facility" or "Facilities" means one or more of the offices and buildings
and all other real property and related facilities which are owned, leased or
operated by the Company.
"Financial Statements" has the meaning set forth in Section 2.08(b) hereof.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, as in effect from time to time.
"Governmental Entity" means any court or tribunal in any jurisdiction
(domestic or foreign) or any federal, state or local public, governmental or
regulatory body, agency, department, commission, board, bureau or other
authority or instrumentality (domestic or foreign).
"Hazardous Materials" means any hazardous substance, gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products,
polychlorinated biphenyls, ureaformaldehyde insulation, asbestos or asbestos-
containing materials, pollutants, contaminants, radioactivity and any other
materials or substances of any kind, whether solid, liquid or gas, and whether
or not any such substance is defined as hazardous under any Environmental Law,
that is regulated pursuant to any Environmental Law or that could give rise to
liability under any Environmental Law.
"Indebtedness" means, as to any Person, (a) all indebtedness of such Person
for borrowed money or for the deferred purchase price of property or services
(including, without limitation, reimbursement and all other obligations with
respect to surety bonds, letters of credit and bankers' acceptances, whether or
not matured, but not including obligations to trade creditors incurred in the
ordinary course of business), (b) all obligations evidences by notes, bonds,
debentures or similar instruments, (c) all indebtedness created or arising
under any
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conditional sale or other title retention agreements with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (d) all obligations of such Person that are required
to be classified and accounted for as capital lease obligations under GAAP, (e)
all indebtedness of any other Person guaranteed, directly or indirectly, by
such Person, and (f) all Indebtedness referred to in clauses (a), (b), (c),
(d), and (e) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien upon or
in property (including, without limitation, accounts and contract rights) owned
by such Person, even though such Person has not assumed or become liable for
the payment of such Indebtedness.
"Intellectual Property" has the meaning set forth in Section 2.12 hereof.
"Knowledge" or "known" means, with respect to any Person, the actual
knowledge of such Person, after reasonable inquiry; provided, that a Person
shall be deemed to have actual knowledge of the contents of all books and
records with respect to which such Person has reasonable access; provided,
further, and without limiting the generality of the foregoing, with respect to
any Person that is a corporation actual knowledge shall be deemed to include
the actual knowledge of all principal employees of any such Person (including
without limitation each director, the Chief Executive Officer, President, Chief
Financial Officer and all Vice Presidents of such Person).
"Liability" has the meaning set forth in Section 2.08 hereof.
"Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment,
conditional sale agreement, deposit arrangement, security interest,
encumbrance, lien (statutory or other), preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever in
respect of any property of a Person, whether granted voluntarily or imposed by
law, and includes the interest of a lessor under a capital lease or under any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement or similar notice naming
the owner of such property as debtor, under the Uniform Commercial Code or
other comparable law of any jurisdiction.
"Liquidation Event" means, with respect to any Person, any of the following
events: (i) the commencement by such Person of a voluntary case under the
bankruptcy laws of the United States, as now or hereafter in effect, or the
commencement of an involuntary case against such Person with respect to which
the petition shall not be controverted within fifteen (15) days, or be
dismissed within sixty (60) days, after commencement thereof; (ii) the
appointment of a custodian for, or the taking charge by a custodian of, all or
substantially all of the property of such Person; (iii) the commencement by
such Person of any proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar
law of any jurisdiction whether now or hereafter in effect relating to such
Person; (iv) the commencement against such Person of any proceeding set forth
in the preceding clause (iii), which is not controverted within ten (10) days
thereof and dismissed within sixty (60) days after the commencement thereof;
(v) the adjudication of such Person insolvent or bankrupt, or the adoption by
such Person of a plan of liquidation, (vi) the occurrence of any Change of
Control with respect to such Person or (vii) the filing of a certificate of
dissolution in respect of the Company with the Secretary of State of the State
of Minnesota; in any of cases (i) through (vi) above, in a single transaction
or series of related transactions.
"Material Adverse Change" shall mean, with respect to the Company (a) the
failure of the company to generate revenues of at least $5,000,000 in the
fourth fiscal quarter of 1999; (b) Company Operating Losses in excess of
$1,250,000 in the fourth fiscal quarter of 1999; (c) a material breach by the
Company of any contract with Ryder; (d) any acceleration of the indebtedness
under Company's existing subordinated notes; (e) the filing of any bankruptcy
proceeding with the consent of the Company or the filing against the Company of
an involuntary bankruptcy or insolvency petition; (f) any litigation against
the Company or formal, written threat of litigation against the Company
involving an amount in excess of $1,000,000; (g) any litigation filed against
the Company seeking to enjoin, or obtain damages for, the infringement of the
intellectual property or patent
25
<PAGE>
rights to any third party, or (h) binding, accepted and credit- approved orders
for fewer than 50 units of the Series 5000 on normal terms and conditions
(including delivery within 60 days and price not less than expected price
previously disclosed to Purchaser) are received by the Company in connection
with the Ryder RCRC Program prior to December 31, 1999.
"Material Adverse Effect" means, with respect to the Company, any effect or
change, as the case may be, that individually or in the aggregate is material
and adverse to the business, financial condition, results of operations or
prospects of the Company.
"Material Agreements" has the meaning set forth in Section 2.08 hereof.
"Parity Securities" means any class or series of capital stock which ranks
on a parity with the Series B Preferred Stock as to dividend distributions or
distributions upon the liquidation, winding up and dissolution of the Company.
"Operating Losses" shall mean, for any period, the amount of operating
losses for such period, if any, determined in accordance with generally
accepted accounting principles applied in a manner consistent with the
application of such principles in periods prior to 1999, provided that the
impact of any expenses directly attributable to the Management Services
Agreement or revenues or expenses directly attributable to (a) any reversal of
prior inventory, warranty or other reserves, (b) any sale of assets (other than
inventory in the ordinary course), and (c) any business acquired by the Company
after the date hereof through merger, acquisition of securities, acquisition of
assets or otherwise, in each case, shall be excluded from the determination of
operating losses pursuant to this sentence.
"Person" shall mean an individual, corporation, trust, partnership, joint
venture, unincorporated organization, government agency or any agency or
political subdivision thereof, or other entity.
"Purchaser" has the meaning set forth in the preamble hereto, but in the
event Purchaser distributes Series B Shares, it shall mean any holder of Series
B Shares.
"Release" means and includes any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment or the workplace of any Hazardous Materials, and
otherwise as defined in any Environmental Law.
"SEC" has the meaning set forth in Section 2.05 hereof.
"Senior Securities" means any class or series of capital stock which ranks
senior to the Series B Preferred Stock as to dividend distributions or
distributions upon the liquidation, winding up and dissolution of the Company.
"Series B Preferred Stock" has the meaning set forth in the Recitals hereto.
"Series B Shares" has the meaning set forth in the Recitals hereto.
"Supervoting Securities" means any class or series of the Company's Capital
Stock the holders of which have the right to cast more than one vote per share
and/or have the right to elect one or more members of the Board of Directors,
voting as a class or series.
"Taxes" has the meaning set forth in Section 2.20 hereof.
"Transaction Documents" has the meaning set forth in Section 2.01(a) hereof.
"Warrant" has the meaning set forth in the Recitals hereto.
"Warrant Shares" has the meaning set forth in Section 1.04 hereof.
* * * * *
(Signatures on following page)
26
<PAGE>
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the Company and Purchaser have executed this Securities
Purchase Agreement as of the day and year first above written.
COMPANY: FIELDWORKS, INC., a Minnesota
corporation
By: _________/s/ David G. Mell__________
Name: David G. Mell
Title: President & CEO
PURCHASER: INDUSTRIAL-WORKS HOLDING CORP., a
Delaware corporation
By: ______ /s/ Michael E. Johnson_______
Name: Michael E. Johnson Title:
President
27
<PAGE>
EXHIBIT 10.37
[LETTERHEAD OF FIELDWORKS, INCORPORATED]
Glenmount, LLC
Suite 400
19200 Von Karman Avenue
Irvine, California 92612-8512
Re: Management Services Agreement
Gentlemen:
Fieldworks, Incorporated ("Fieldworks") hereby engages you to perform
advisory and consulting services to Fieldworks for a period of one-year
commencing upon the date of this Agreement.
1. Scope of Primary Services. The primary services to be provided by you
consist of active and continuing support to FieldWorks' management in
identifying, developing and executing all major strategic, acquisition,
operational and financial opportunities for FieldWorks.
a. During the initial three months of this Agreement, you will arrange
for Robert Forbes to provide these primary services for at least 16
days per month, unless you and we agree to a different schedule.
During this initial three-month period, you agree that these services
will be provided on-site at our facilities, off-site for meetings
with existing or prospective vendors or customers, or at another
mutually agreed location.
b. Following the initial three months of this Agreement, you shall
determine, in consultation with our board of directors, which of your
personnel shall be assigned to provide these primary services.
Further, we agree that, following the initial three month period of
this Agreement, such services are not expected to consume more than
five man-days per month and such services may be provided from such
locations as you determine.
2. Compensation for Primary Services. For the primary services described
above, we will pay you (a) $10,000 on the date hereof, (b) $10,000
within 30 days after the date hereof, (c) $10,000 within 60 days after
the date hereof, and (d) $200,000 simultaneously with the closing of the
transactions contemplated by the Securities Purchase Agreement of even
date herewith, between Industrial-Works Holding Corp., a Delaware
corporation (the "Securities Purchase Agreement").
3. Reimbursement of Expenses. We agree to reimburse or pay directly your
reasonable expenses, including travel, hotel or boarding charges, meals
and other items customarily reimbursed to outside advisors or
consultants. Such expenses, if not paid directly by Fieldworks at your
request, shall be paid to you within five business days of submission of
an itemized invoice evidencing your payment of such expenses.
4. Additional Services and Compensation. In addition to the primary
services and related compensation described above, we agree that you
will be entitled to additional compensation if, for example, at our
request (a) any of your employees or representatives (in addition to
Robert Forbes) provide substantial services to us during the initial
three-month period of this Agreement, or (b) Robert Forbes or any other
employees or representatives provide more than five man-days of services
per month following the initial three-month period of this Agreement. If
such additional services do not arise in connection with any such
transaction, you shall be entitled to such additional compensation as
shall be negotiated at the time such services are rendered.
<PAGE>
5. Investment Banking Services. Further, if you perform additional services
to initiate a merger, acquisition, disposition, joint venture, financing
or other similar transaction or expend substantial time on any such
transaction initiated by others, you shall be entitled to receive
additional fees of the type customarily received by investment bankers
on terms satisfactory to the Board of Directors in its reasonable
discretion.
6. Term. The term of this Agreement shall be for a period of one year
commencing on the date hereof. Prior to the expiration of this
Agreement, FieldWorks and you shall negotiate the terms and conditions
upon which this Agreement may be renewed, subject to approval by the
members of our board of directors not nominated by the holders of Series
B Preferred Stock. If the Securities Purchase Agreement is terminated,
then this Agreement shall immediately terminate. Notwithstanding any
termination, (x) we will immediately pay you the amounts identified in
clauses (a), (b) and (c) of paragraph 2 above (to the extent such
amounts have not previously been paid), (y) the indemnity provisions of
paragraph 6 below shall survive plus (z) you shall be paid$100,000 if
the Securities Purchase Agreement is terminated upon a failure of the
Company's shareholders to approve the transactions it contemplates,.
7. Insurance and Indemnity. We agree during the term of this Agreement to
carry directors' and officers' insurance in an amount not less than $5
million to include you and your designated persons as additional
insureds, to the extent our insurance company will permit us to treat
your assigned persons as consultants. In addition, we hereby agree to
the indemnity provisions set forth on Exhibit A to this Agreement.
Please countersign this Agreement in the place indicated below to confirm
your acceptance of an agreement to the terms stated in this letter.
Very truly yours,
FIELDWORKS INCORPORATED
By /s/ David G. Mell
----------------------------------
President and Chief Executive
Officer
CONFIRMED AND ACCEPTED
By Glenmount, LLC
By /s/ Michael E. Johnson
Managing Director
<PAGE>
ADDENDUM A
In connection with the engagement described in the foregoing letter
agreement to which this Addendum A is attached, Fieldworks, Incorporated
("Company") agrees to indemnify and hold harmless Glenmount, LLC ("Glenmount")
and each of its officers, directors, representatives, agents, employees and
controlling persons (within the meaning of the Securities Act of 1933, as
amended) against any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) related to or arising out of this engagement,
and will reimburse Glenmount and each other person indemnified hereunder for
all legal and other expenses as incurred in connection with investigating or
defending any such loss, claim, damage, liability, action or proceeding whether
or not in connection with pending or threatened litigation in which Glenmount
or any of other person indemnified hereunder is a party; provided, however,
that the Company will not be liable in any such case (except cases arising out
of the use of information provided by any Company) for losses, claims, damages,
liabilities or expenses arising from the gross negligence or willful misconduct
of Glenmount or the party claiming a right to indemnification.
In case any proceeding shall be instituted involving any person in respect
of whom indemnity may be sought, such person (the "Indemnified Party") shall
promptly notify the Company, and the Company, upon the request of the
Indemnified Party, shall retain counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party and any others the Company
may designate in such proceeding and shall pay as incurred the fees and
expenses of such counsel related to such proceedings. In any such proceeding,
any Indemnified Party shall have the right to retain its own counsel at its own
expense, except that the Company shall pay as incurred the fees and expenses of
counsel retained by the Indemnified Party in the event that (i) the Company and
the Indemnified Party shall have mutually agreed to the retention of such
counsel or, (ii) the named parties to any such proceeding (including any
impleaded parties) include the Company and the Indemnified Party and
representation of such parties by the same counsel would be inappropriate, in
the reasonable opinion of the Indemnified Party, due to actual or potential
differing interests between them.
The Company shall not be liable for any settlement of any proceeding
effected without its written consent. In addition, the Company will not,
without the prior written consent of Glenmount, settle or compromise or consent
to the entry of any judgment in any pending or threatened claim, action, suit
or proceeding in respect of which indemnification may be sought hereunder
(whether or not Glenmount or any Indemnified Party is an actual or potential
party to such claim, action, suit or proceeding) unless such settlement,
compromise or consent includes an unconditional release of Glenmount and each
other Indemnified Party hereunder from all liability arising out of such claim,
action, suit or proceeding.
<PAGE>
EXHIBIT 10.38
VOTING AND TRANSFER RESTRICTION AGREEMENT
This VOTING AGREEMENT (this "Agreement") is entered into as of this 20th day
of November, 1999, by and among Fieldworks, Incorporated, a Minnesota
corporation ("Company"), and those persons listed on Exhibit "A" hereto
(collectively, the "Shareholders"), and, for the purpose of enforcing its
rights under this Agreement pursuant to the Minnesota Business Corporation Act,
Industrial-Works Holding Corp., a Delaware corporation ("Purchaser").
WITNESSETH:
WHEREAS, the Company has entered into that certain Securities Purchase
Agreement dated as of November 20, 1999 (the "Purchase Agreement"), pursuant to
which the Company will issue to Purchaser 4,250,000 shares of the Company's
Series B Participating Preferred Stock ("Series B Stock"), which is convertible
into an equal number of shares of the Company's common stock (the "Company
Common Stock"), and warrants to purchase 500,000 shares of Company Common
Stock, in exchange for the consideration set forth in the Purchase Agreement;
WHEREAS, the Company and the Shareholders are entering into this Agreement
in order to fulfill the obligations of the Company pursuant to Section 5.01 of
the Purchase Agreement;
WHEREAS, the Shareholders believe that the terms of this Agreement, and the
transactions contemplated by the Purchase Agreement, are in the best interests
of both the Company and the Shareholders, and the Company and the Shareholders
will benefit substantially from the performance of the transactions and
obligations thereunder:
NOW, THEREFORE, as an inducement to Purchaser to enter into and to perform
its obligations under the Purchase Agreement, and in consideration of the
benefits to be realized by both the Company and the Shareholders from such
performance, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in accordance with Section
302A.455 of the Minnesota Business Corporation Act, the parties hereto agree as
follows:
1. Voting. Each Shareholder agrees that:
a. He, she or it shall vote or cause to be voted (or give a written
consent with respect to) all of his, her, or its shares of Company Common
Stock in favor of the Purchase Agreement and all transactions contemplated
thereby.
b. For a period of three (3) years following the closing of the
transactions contemplated by the Purchase Agreement, at any special or
annual meeting of Company stockholders at which directors of the Company
are to be elected, or in connection with a solicitation of consents through
which directors of the Company are to be elected, he, she or it shall vote
or cause to be voted (or give a written consent with respect to) all of
his, her, or its shares of Company Common Stock (i) in favor of the
election to the board of directors of the nominees favored by Purchaser,
and (ii) against any nominees opposed by Purchaser, with respect to the
three (3) or five (5) directors, whichever is the number of directors
Purchaser may elect pursuant to its rights as a holder of Series B Stock.
2. Restrictions on Transfer of Company Common Stock. Each Shareholder
agrees that he, she, or it will not transfer, sell, assign, or otherwise
dispose of, in whole or in part, the shares of Company Common Stock held by
him, her, or it on or prior to March 20, 2000.
<PAGE>
3. Restrictions on Transfer or Exercise of Options and Warrants. Each
Shareholder agrees that he, she, or it will not transfer, sell, assign, or
otherwise dispose of, or convert, exercise or attempt to exercise or convert,
in whole or in part, any options convertible into, or warrants to purchase,
shares of Company Common Stock held by him, her, or it on or prior to March 20,
2000.
4. Termination. This Agreement and the obligations contained herein shall
continue in effect for the period commencing on the date hereof and ending at
the earliest of (i) [January 31, 2003], (ii) the date, if any, upon which the
Purchase Agreement is terminated pursuant to the provisions of Section 6.03(a)
or (b) thereof, or (iii) the date, if any, upon which the Purchaser and all
parties hereto mutually agree to terminate the obligations and rights of the
parties hereunder.
5. Miscellaneous.
a. Additional Representations. Each Shareholder represents and warrants
that (i) he, she or it has the requisite power and authority to enter into
and perform this Agreement; and (ii) the performance of this Agreement by
such Shareholder will not require him, her or it to obtain the consent,
waiver or approval of any person and will not, to the best of his, her or
its knowledge, violate, result in a breach of or constitute a default under
any statute, regulation, agreement, judgment, consent, decree or
restriction by which he, she or it is bound.
b. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
c. Amendments and Modification. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of
a written agreement executed by the parties hereto. Notwithstanding the
foregoing, this Agreement may not be amended without the written consent of
Purchaser.
d. Equitable Relief. Each Shareholder agrees that if he, she, or it
fails to perform his, her or its obligations under this Agreement for any
reason, then Purchaser shall be entitled to specific performance and
injunctive or other equitable relief, and each Shareholder hereby further
agrees to waive any requirement for the securing or posting of any bond in
connection with the obtaining of any injunctive or other equitable relief.
This provision is without prejudice to any other rights that Purchaser may
have against such Shareholder for any failure to perform his, her or its
obligations under this Agreement.
e. Governing Law. This Agreement and the legal relations between the
parties hereto arising from this Agreement shall be governed by and
construed in accordance with the laws of the State of Minnesota, without
reference to or application of any conflicts of law principles.
f. Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties hereto in respect of the subject matter
hereof, and supersedes all prior negotiations and understandings between
the parties with respect to such subject matters.
g. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
h. Binding Effect. During the term of this Agreement, the rights and
obligations of the parties hereto shall inure to the benefit of and be
binding upon the parties and all transferees, assigns, and successors of
the Shareholders with respect to shares of Company Common Stock.
2
<PAGE>
i. Capacity. The shareholders are executing this Agreement in their
capacity as shareholders, and not in their capacity as directors or
officers, and, without limiting their obligations as shareholders, nothing
herein shall limit their actions or require any actions in any director or
officer capacity.
[Signature Page Follows]
3
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered as
of the day and year first written above.
FIELDWORKS, INCORPORATED
By: /s/ David G. Mell________________
Its: President & Chief Executive
Officer_____________________________
SHAREHOLDERS
By: /s/ Gary J. Beeman_______________
Gary J. Beeman
By: /s/ James A. Bernards____________
James A. Bernards
By: /s/ Karen L. Engebretson_________
Karen L. Engebretson
By: /s/ Robert W. Heller_____________
Robert W. Heller
By: /s/ David C. Malmberg____________
David C. Malmberg
By: /s/ David G. Mell________________
David G. Mell
By: /s/ Robert C. Szymborski_________
Robert C. Szymborski
By: /s/ Richard J. York______________
Richard J. York
By: /s/ George E. Kline______________
George E. Kline for Brightstone
Entities
INDUSTRIAL-WORKS HOLDING CORP.
By: /s/ Michael E. Johnson___________
Its: President_______________________
4
<PAGE>
EXHIBIT A
TO
VOTING AGREEMENT
Gary J. Beeman
James A. Bernards
Karen L. Engebretson
Robert W. Heller
David C. Malmberg
David G. Mell
Robert C. Szymborski
Richard J. York
Brightstone Entities
5
<PAGE>
EXHIBIT 10.39
[LETTERHEAD OF GLENMOUNT, LLC]
February 18, 2000
Mr. David Maimberg
Chairman
Fieldworks, Incorporated
7631 Anagram Drive
Eden Prairie, MN 55344
Dear David:
As you know, Glenmount, LLC ("Glenmount") has provided services to FieldWorks,
Incorporated ("FieldWorks") during the initial three-month period of the
Management Services Agreement, dated as of November 20, 1999 (the "Agreement"),
that exceed the scope and nature of the services contemplated by the monthly
and closing fees specified in the Agreement. In addition, Glenmount has arranged
for Industrial-Works Holding Co., LLC ("IWHC") to provide a commitment letter
to FieldWorks with respect to the purchase of up to 3,000,000 shares of
preferred stock.
This letter will confirm our mutual agreement to supplement the Agreement, as
set forth below, to compensate Glenmount for these additional services.
In consideration of the foregoing, FieldWorks hereby agrees (a) to promptly pay
Glenmount $30,000 as additional compensation for the initial three-month
period of the Agreement, (b) to extend the $10,000 per month fee to Glenmount
for each month during the balance of the term of the Agreement, and (c) to pay
an additional fee equal to 4% of the purchase price of any securities issued by
FieldWorks to IWHC (other than the 4,250,000 shares of Series B Convertible
Preferred Stock, the warrant and the 500,000 warrant shares issued pursuant to
the Stock Purchase Agreement dated as of November 20, 1999), payable on the date
any such securities are purchased by IWHC.
If the terms of this letter are acceptable, please sign below and return a copy
of this letter to us.
Sincerely,
Michael E. Johnson
/s/ Michael E. Johnson
Managing Director
The undersigned confirms and agrees with the terms of the foregoing letter.
FIELDWORKS, INCORPORATED
By: /s/ David Malmberg
---------------------------
David Malmberg
Chairman
<PAGE>
EXHIBIT 10.40
================================================================================
PREFERRED STOCK
PURCHASE AGREEMENT
between
FIELDWORKS, INCORPORATED,
a Minnesota corporation
and
INDUSTRIAL-WORKS HOLDING CO., LLC,
a Delaware limited liability company
Dated as of March 31, 2000
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I AUTHORIZATION, ISSUANCE AND SALE OF SECURITIES.............. 1
Section 1.1 Authorization......................................... 1
Section 1.2 The Series C Shares................................... 1
Section 1.3 The Conversion Shares................................. 1
Section 1.4 Purchase and Sale..................................... 1
Section 1.5 Closing............................................... 1
Section 1.6 Use of Proceeds....................................... 2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... 2
Section 2.1 Organization, Qualifications and Corporate Power...... 2
Section 2.2 Authorization of Agreements........................... 2
Section 2.3 Validity.............................................. 3
Section 2.4 Authorized Capital Stock.............................. 3
Section 2.5 Third-Party Approvals................................. 4
Section 2.6 SEC Filings........................................... 5
Section 2.7 Offering of the Series C Shares and Warrant........... 5
Section 2.8 Brokers............................................... 5
Section 2.9 Disclosure............................................ 5
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS. 5
Section 3.1 Representations....................................... 5
ARTICLE IV CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS............. 6
Section 4.1 Conditions to Obligations of the Purchaser............ 6
ARTICLE V COVENANTS OF THE COMPANY.................................... 7
Section 5.1 Rights Offering....................................... 7
Section 5.2 SEC Filings........................................... 8
Section 5.3 Financial Statements, Reports, Etc.................... 8
Section 5.4 Reserve for Conversion Shares......................... 9
Section 5.5 Corporate Existence................................... 9
Section 5.6 Inspection, Consultation and Advice................... 9
Section 5.7 Board of Directors.................................... 10
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 5.8 Compliance with Laws............................... 10
Section 5.9 Keeping of Records and Books of Account............ 10
Section 5.10 Protective Provisions.............................. 10
Section 5.11 Publication Matters................................ 12
ARTICLE VI MISCELLANEOUS.............................................. 12
Section 6.1 Expenses........................................... 12
Section 6.2 Termination........................................ 12
Section 6.3 Survival of Agreements............................. 12
Section 6.4 Brokerage.......................................... 13
Section 6.5 Parties in Interest................................ 13
Section 6.6 Notices............................................ 13
Section 6.7 Governing Law; Jury Trial Waiver................... 14
Section 6.8 Injunctive Relief.................................. 14
Section 6.9 Assignment......................................... 14
Section 6.10 Limitation of Liability............................ 15
Section 6.11 Entire Agreement................................... 15
Section 6.12 Counterparts....................................... 15
Section 6.13 Amendments......................................... 15
Section 6.14 Severability....................................... 15
Section 6.15 Titles and Subtitles............................... 15
Section 6.16 Certain Defined Terms.............................. 15
</TABLE>
-ii-
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") dated as of March 31,
2000 by and among Fieldworks, Incorporated, a Minnesota corporation (the
"Company"), and Industrial-Works Holding Co., LLC, a Delaware limited liability
company ("Purchaser"). Section 6.16 lists certain defined terms used in this
Agreement.
WHEREAS, on the terms and subject to the conditions set forth herein, the
Company wishes to issue and sell to Purchaser newly issued shares ("Series C
Shares") of the authorized but unissued Series C Convertible Participating
Preferred Stock of the Company (the "Series C Preferred Stock");
WHEREAS, the Purchaser wishes to purchase the Series C Preferred Stock on
the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I
AUTHORIZATION, ISSUANCE AND SALE OF SECURITIES
SECTION 1.1 Authorization. The Company has authorized and reserved for
-------------
issuance 500,000 shares of Series C Preferred Stock, upon the terms and
conditions described herein, and has authorized and reserved 500,000 shares of
the Company's Common Stock for issuance upon conversion of the Series C Shares.
SECTION 1.2 The Series C Shares. The Series C Shares shall be issued
-------------------
pursuant to, and shall be vested with the rights and preferences, and subject to
the limitations set forth in the Certificate of Designation of the Series C
Convertible Participating Preferred Stock (the "Series C Certificate") attached
hereto as Exhibit A.
---------
SECTION 1.3 The Conversion Shares. The shares of the Company's Common
---------------------
Stock issued or issuable upon conversion of the Series C Shares (the "Conversion
Shares") will be entitled to the registration rights provisions attached as
Exhibit C to this Agreement.
SECTION 1.4 Purchase and Sale. Subject to the terms and conditions of this
-----------------
Agreement, the Company agrees to issue and sell to Purchaser and Purchaser
agrees to purchase from the Company, 500,000 shares of Series C Preferred Stock
for a purchase price of two dollars ($2.00) per share.
SECTION 1.5 Closing. Subject to the terms and conditions of this
-------
Agreement, the closing shall take place at the offices of Paul, Hastings,
Janofsky & Walker LLP, 17th Floor, 695 Town Center Drive, Costa Mesa, California
92626 on March 31, 2000 or at such other place, time and date as Company and
Purchaser may direct (the "Closing Date"). At the Closing, Company will deliver
to Purchaser the Series C Shares, registered in Purchaser's name, and
1
<PAGE>
Purchaser shall transfer the Purchase Price to the account of the Company by
wire transfer of immediately available funds.
SECTION 1.6 Use of Proceeds. The Company shall use such proceeds for
---------------
acquisitions and for general working capital.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser that, except as set
forth in the Disclosure Schedules attached hereto (which Disclosure Schedules
make explicit reference to the particular representation or warranty as to which
exception is taken, which in each case shall constitute the sole representation
and warranty as to which such exception shall apply):
SECTION 2.1 Organization, Qualifications and Corporate Power.
------------------------------------------------
(a) The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of its state of incorporation and is duly
licensed or qualified to transact business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification, except for such jurisdictions, if any,
in which the failure to be so qualified or in good standing would not,
individually or in the aggregate, have a Material Adverse Effect. The Company
has the corporate power and authority to own and hold its properties and to
carry on its business as now conducted and as proposed to be conducted, as
described in the Company's draft Annual Report on Form 10-K for the year ended
_________, 2000 (the "Annual Report"), and the Company has the corporate power
and authority to execute, deliver and perform its obligations under this
Agreement, and all other documents to be delivered in connection with any of
them (the "Transaction Documents"), and to issue, sell and deliver the Series C
Shares and to issue and deliver the Conversion Shares.
(b) The Company does not (i) own of record or beneficially, directly or
indirectly, (A) any shares of capital stock or securities convertible into
capital stock of any other corporation or (B) any participating or limited
liability company interest in any partnership, joint venture, limited liability
company or other non-corporate business enterprise or (ii) control, directly or
indirectly, any other entity.
(c) The Articles of Incorporation of the Company (the "Articles of
Incorporation") and the Bylaws of the Company (the "Bylaws") are in full force
and effect as of the date hereof in the forms attached to, or incorporated by
reference in, the Annual Report.
SECTION 2.2 Authorization of Agreements.
---------------------------
(a) The execution and delivery by the Company of this Agreement and all
other Transaction Documents, the performance by the Company of its obligations
hereunder and thereunder, the issuance, sale and delivery of the Series C
Shares, and the issuance and delivery of the Conversion Shares have been duly
authorized by all requisite corporate action and do not violate any provision of
law, any order of any court or other agency of government, the Articles
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of Incorporation or the Bylaws, or any provision of any indenture, agreement or
other instrument to which the Company, or any of its properties or assets is
bound, or conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company.
(b) The Series C Certificate and this Agreement have been duly approved by
the Board of Directors of the Company. The Series C Shares have been duly
authorized and, when issued in accordance with this Agreement and the Series C
Certificate, will be validly issued, fully paid and nonassessable shares of
Series C Preferred Stock, with no personal liability attaching to the ownership
thereof, and will be free and clear of all liens, charges, restrictions, claims
and encumbrances imposed by or through the Company except as set forth in this
Agreement and the Series C Certificate. The Conversion Shares have been duly
reserved for issuance upon conversion of the Series C Shares, and, when so
issued, will be duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock not subject to, or issued in violation of, any purchase
option, right of first refusal, pre-emptive right, subscription right or any
similar right under any provision of the Minnesota Business Corporation Act (the
"MBCA"), the Articles of Incorporation or Bylaws, or any contract to which the
Company is a party or is otherwise bound, with no personal liability attaching
to the ownership thereof and will be free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through the Company except
as set forth in this Agreement and the Series C Certificate. Neither the
issuance, sale or delivery of the Series C Shares, nor the issuance or delivery
of the Conversion Shares is subject to, or in violation of, any purchase option,
right of first refusal, pre-emptive right, subscription right or any similar
right under any provision of the MBCA, the Articles of Incorporation or Bylaws,
or any contract to which the Company is a party or is otherwise bound, or of any
other right in favor of any Person that has not been effectively waived.
SECTION 2.3 Validity. This Agreement has been duly executed and
--------
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company, enforceable in accordance with its terms, and each other
Transaction Document when executed and delivered in accordance with this
Agreement will constitute a legal, valid and binding obligation of the Company,
enforceable in accordance with its terms (subject in each case, as to the
enforcement of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium and similar laws affecting the rights of creditors generally, and as
to the remedy of specific performance and other forms of injunctive relief,
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought).
SECTION 2.4 Authorized Capital Stock. The authorized capital stock of the
------------------------
Company consists of (i) 30,000,000 shares of Common Stock and (ii) 5,000,000
shares of preferred stock, of which 4,250,000 shares have been designated Series
B Preferred Stock (Series B Preferred Stock) and of which 500,000 shares have
been designated Series C Preferred Stock. 8,894,426 shares of Common Stock are
validly issued and outstanding, fully paid and nonassessable with no personal
liability attaching to the ownership thereof, 4,674,854 shares of Common Stock
are reserved for issuance upon exercise of outstanding options and warrants, and
another 888,800 shares have been reserved for issuance under the 1994 Long-Term
Incentive and Stock Option Plan and the 1996 Directors' Stock Option Plan,
4,250,000 shares Series B Preferred Stock have
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been issued and no Series C Shares shall have been issued. The designations,
powers, preferences, rights, qualifications, limitations and restrictions in
respect of each class and series of authorized capital stock of the Company are
as set forth in the Articles of Incorporation, and all such designations,
powers, preferences, rights, qualifications, limitations and restrictions are
valid, binding and enforceable and in accordance with all applicable laws.
Except as contemplated by this Agreement or set forth in the Annual Report,
including the financial statements made a part thereof, (i) no Person owns of
record or is known to the Company to own beneficially any share of Common Stock,
(ii) no subscription, warrant, option, convertible security, or other right
(contingent or other) to purchase or otherwise acquire equity securities of the
Company is authorized or outstanding, (iii) there is no commitment by the
Company to issue shares, subscriptions, warrants, options, convertible equity or
debt securities, or other such rights or to distribute to holders of any of its
equity or debt securities any evidence of indebtedness or asset and (iv) there
are no options, warrants, rights, convertible or exchangeable securities,
"phantom" stock rights, stock appreciation rights, stock-based performance
units, commitments, contracts, arrangements or undertakings of any kind to which
the Company is a party or by which it is bound (x) obligating the Company to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other equity interests in, or any security
convertible into, or exercisable for or exchangeable for, any capital stock of
or other equity interest in, the Company, (y) obligating the Company to issue,
grant, extend or enter into any such option, warrant, call, right, security,
commitment, contract, arrangement or undertaking, or (z) that give any person
the right to receive any economic benefit or right similar to or derived from
the economic benefits and rights occurring to holders of Common Stock. Except as
provided for in the Articles of Incorporation or as set forth in the Annual
Report, the Company has no obligation (contingent or other) to purchase, redeem
or otherwise acquire any of its securities or any interest therein or to pay any
dividend or make any other distribution in respect thereof. Except as set forth
in the Annual Report, or as expressly contemplated by the terms of this
Agreement, there are no voting trusts or agreements, shareholders' agreements,
pledge agreements, buy-sell agreements, rights of first refusal, preemptive
rights or proxies relating to any securities of the Company whether or not the
Company is a party thereto. All of the outstanding securities of the Company
were issued in compliance with all applicable federal and state securities laws.
SECTION 2.5 Third-Party Approvals. No registration or filing with, or
---------------------
consent or approval of or other action by any third party, is or will be
necessary for the valid execution, delivery and performance by the Company of
the Transaction Documents, the issuance, sale and delivery of the Warrant or of
the Series C Shares on the Closing Date, or, or upon exercise of conversion
rights, the issuance and delivery of the Conversion Shares, other than (i)
filings pursuant to state securities laws (all of which filings have been made
by the Company, other than those which are required to be made after the Closing
and which will be duly made on a timely basis) in connection with the sale of
the Series C Shares, and (ii) with respect to the registration rights granted in
this Agreement, the registration of the shares covered thereby with the United
States Securities and Exchange Commission (the "SEC") and filings pursuant to
state securities laws.
SECTION 2.6 SEC Filings. The Company has filed, on a timely basis, all
-----------
filings required to be made by it with the SEC. The Company's Annual Report will
be filed in substantially the form of the draft given to Purchaser.
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SECTION 2.7 Offering of the Series C Shares and Warrant. Neither the
-------------------------------------------
Company nor any Person authorized or employed by the Company as agent, broker,
dealer or otherwise in connection with the offering or sale of the Series C
Shares, the Warrant or any security of the Company similar to the Series C
Shares or the Warrant has offered the Series C Shares or the Warrant or any such
similar security for sale to, or solicited any offer to buy the Series C Shares,
the Warrant or any such similar security from, or otherwise approached or
negotiated with respect thereto with, any Person or Persons, and neither the
Company nor any Person acting on its behalf has taken or will take any other
action (including, without limitation, any offer, issuance or sale of any
security of the Company under circumstances which might require the integration
of such security with the Series C Shares or the Warrant under the Securities
Act of 1933 (the "Securities Act") or the rules and regulations of the
Commission thereunder), in either case so as to subject the offering, issuance
or sale of the Series C Shares or the Warrant to the registration provisions of
the Securities Act.
SECTION 2.8 Brokers. The Company has no contract, arrangement or
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understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement except for fees due Glenmount, LLC
under its Management Services Agreement.
SECTION 2.9 Disclosure. Neither this Agreement nor the Annual Report
----------
contains an untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein not misleading.
None of the statements, documents, certificates or other items prepared or
supplied by the Company with respect to the transactions contemplated hereby
contains an untrue statement of a material fact or omits a material fact
necessary to make the statements contained therein not misleading. There is no
fact which the Company has not disclosed to Purchaser in writing and of which
the Company is aware which materially and adversely affects or could be
reasonably expected to materially and adversely affect the business, prospects,
financial condition, operations, property or affairs of the Company. Any
financial projections and other estimates provided to Purchaser were prepared by
the Company based on assumptions of fact and opinion as to future events which
the Company, at the date of the issuance of such projections and estimates,
believed to be reasonable. As of the date hereof, no facts have come to the
attention of the Company which would, in its opinion, require the Company to
revise or amplify the assumptions underlying such projections and other
estimates or the conclusions derived therefrom.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS
SECTION 3.1 Representations. Purchaser represents and warrants to the
---------------
Company that:
(a) it is wholly owned by Glenmount International, L.P., which is a
partnership which was not organized for the specific purpose of acquiring the
Series C Shares;
(b) it has sufficient knowledge and experience in investing to be able to
evaluate the risks and merits of its investment in the Company, and it is able
financially to bear the risks thereof;
(c) it has had an opportunity to discuss the Company's business,
management and financial affairs with the Company's management;
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(d) the Series C Shares and the Conversion Shares are being acquired for
Purchaser's own account for the purpose of investment and not with a view to or
for sale in connection with any distribution thereof;
(e) Purchaser is a limited liability company, duly formed, validly
existing and in good standing under the laws of its state of formation and has
the power and authority to execute, deliver and perform this Agreement;
(f) the execution and delivery by Purchaser of this Agreement, and the
performance by the Purchaser of its obligations hereunder, have been duly
authorized by all requisite corporate action; and
(g) Purchaser has duly executed and delivered this Agreement and it
constitutes its legal, valid and binding obligation, enforceable in accordance
with its terms (subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws affecting
the rights of creditors generally and as the remedy of specific performance and
other forms of injunctive relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought).
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS
SECTION 4.1 Conditions to Obligations of the Purchaser. The obligation of
------------------------------------------
Purchaser to purchase and pay for the Series C Shares to be purchased by it on
the Closing Date hereunder is, at its option, subject to the satisfaction, on or
before the Closing Date of the following conditions:
(a) Director Approval. The Company shall have obtained approval of this
-----------------
Agreement and the transactions contemplated hereby, from its directors.
(b) Rights Offering. The Board of Directors of the Company shall have
---------------
approved and directed the rights offering contemplated by Section 5.1 of this
Agreement.
(c) Opinion of the Company's Counsel. Purchaser shall have received from
--------------------------------
Dorsey & Whitney, counsel for the Company, an opinion dated the Closing Date, in
the form attached as Exhibit B hereto.
---------
(d) Representations and Warranties to be True and Correct on Date Hereof.
--------------------------------------------------------------------
The representations and warranties of the Company contained in Article II shall
have been true, complete and correct on the date of this Agreement and the Chief
Executive Officer and Chief Financial Officer of the Company shall have
certified to such effect the Purchaser in writing.
(e) Performance. The Company shall have performed and complied with all
-----------
agreements contained herein required to be performed or complied with by it
prior to or at the Closing Date and the Chief Executive Officer and Chief
Financial Officer of the Company shall have certified to the Purchaser in
writing to such effect and to the further effect that all of the conditions set
forth in this Article IV have been satisfied.
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(f) All Proceedings to be Satisfactory. All corporate and other
----------------------------------
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchaser, and Purchaser shall have
received all such counterpart originals or certified or other copies of such
documents as it reasonably may request.
(g) Terms of Series C Shares. The Board of Directors of the Company
------------------------
shall have adopted the Series C Certificate in substantially the form attached
as Exhibit A hereto and such Certificate shall have been filed with the
---------
Minnesota Secretary of State and have become effective.
(h) Third-Party Approvals. All Persons having any right to consent to or
---------------------
approve the issuance of the Series C Shares, or the Conversion Shares, shall
have delivered such consents or approvals in writing. All Persons having any
preemptive, first refusal or other rights with respect to the issuance of the
Series C Shares, the Conversion Shares, shall have irrevocably waived the same
in writing.
(i) Fees and Expenses. The Company shall have paid fees and expenses due
-----------------
pursuant to Section 6.01 hereof incurred prior to the Closing and the closing
fee due to Glenmount, LLC.
(j) Directors and Officers Liability Insurance. The Company shall have
------------------------------------------
maintained in effect directors' and officers' liability insurance coverage, on
customary terms and conditions (including coverage for liabilities arising
before the date of taking office to the extent arising from such person's status
as a prospective member of the Board of Directors), ensuring an aggregate of at
least $5,000,000 in such liability insurance coverage.
All such documents shall be reasonably satisfactory in form and substance
to the Purchaser.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Purchasers that:
SECTION 5.1 Rights Offering. The Company shall as promptly as feasible
---------------
commence an offering to its existing shareholders of rights to purchase one
share of Common Stock at a price of $2.00 per share for every three shares of
Common Stock held on the record date for such offering, and shall cause such
offering to expire on or before June 30, 2000 or on such other date as the
Company and the Purchaser shall mutually agree.
SECTION 5.2 SEC Filings. The Company shall at all times file all reports
-----------
required to be filed by it under the Securities Act or the Exchange Act, and
shall take such further action as Purchaser may reasonably request, all to the
extent required from time to time, to allow Purchaser to sell the Conversion
Shares without registration under the Securities Act within the limitation of
the exemptions provided by (a) Rule 144 under the Securities Act, as such rule
may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the SEC. Upon the request of Purchaser, the Company shall
deliver to Purchaser (i) a certificate
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from the President, Chief Executive Officer or Chief Financial Officer stating
that the Company has complied with all such requirements; (ii) copies of the
Company's most recent quarterly or annual report; and (iii) all such other
reports and/or documents as Purchaser may reasonably request to avail itself of
Rule 144, 144A or any other SEC regulation allowing it to sell the Conversion
Shares without registration.
SECTION 5.3 Financial Statements, Reports, Etc. Until the Closing, and
------------------------------------
thereafter, so long as the any Series C Shares are outstanding, Purchaser shall
be entitled to receive the following information:
(a) within ninety (90) days after the end of each fiscal year of the
Company, a balance sheet of the Company, as of the end of such fiscal year and
the related consolidated statements of income, shareholders' equity and cash
flows for the fiscal year then ended, prepared in accordance with GAAP and
certified by a "Big Five" firm of independent public accountants of recognized
national standing selected by the Board of Directors of the Company (the "Annual
------
Audited Financial Statements");
- ----------------------------
(b) within twenty-one (21) days after the end of each accounting month of
the Company within each fiscal year, a balance sheet of the Company and the
related statements of income, shareholders' equity and cash flows, unaudited but
prepared in accordance with GAAP and certified by the Chief Financial Officer of
the Company, or, if there is no Chief Financial Officer, the Chief Executive
Officer, such consolidated balance sheet to be as of the end of such month and
such consolidated statements of income, shareholders' equity and cash flows to
be for such month and for the period from the beginning of the fiscal year to
the end of such month, in each case with comparative statements for the prior
fiscal year and with respect to the then-applicable budget;
(c) at the time of delivery of each financial statement pursuant to
Section 5.3(b), a certificate executed by the Chief Financial Officer of the
- --------------
Company or, if there is no Chief Financial Officer, the Chief Executive Officer,
stating that such officer has reviewed this Agreement, and the terms of the
Series C Preferred Stock contained in the Articles of Incorporation and has no
knowledge of any default by the Company in the performance or observance of any
of the provisions of this Agreement, the terms of the Warrant, or the terms of
the Series C Preferred Stock contained in the Articles of Incorporation or, if
such officer has such knowledge, specifying such default and the nature thereof;
(d) within thirty (30) days after the end of each quarter, a quarterly
management narrative report explaining all significant variances from forecasts
and all significant current developments in staffing, marketing, sales and
operations;
(e) no later than thirty (30) days prior to the start of each fiscal year,
consolidated capital and operating expense budgets, cash flow projections and
income and loss projections for the Company in respect of such fiscal year, all
itemized in reasonable detail and prepared on a monthly basis, and, promptly
after preparation, any revisions to any of the foregoing;
8
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(f) promptly following receipt by the Company, each audit response letter,
accountant's management letter and other written report submitted to the Company
by its independent public accountants in connection with an annual or interim
audit of the books of the Company;
(g) promptly after the commencement thereof, notice of all actions, suits,
claims, proceedings, investigations and inquiries involving the Company that
could materially adversely affect the Company;
(h) promptly upon sending, making available or filing the same, all press
releases, reports and financial statements that the Company sends or makes
available to its shareholders or files with the SEC; and
(i) promptly, from time to time, such other material information regarding
the business, prospects, financial condition, operations, property or affairs of
the Company as Purchaser reasonably may request.
SECTION 5.4 Reserve for Conversion Shares. The Company shall at all times
-----------------------------
reserve and keep available out of its authorized but unissued shares of Common
Stock, for the purpose of effecting the conversion of the Series C Shares and
otherwise complying with the terms of this Agreement, such number of its duly
authorized shares of Common Stock as shall be sufficient to effect the
conversion of the Series C Shares from time to time outstanding, or otherwise to
comply with the terms of this Agreement. If at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of the Series C Shares or otherwise to comply with the terms of this
Agreement, the Company will immediately take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes. The Company will
obtain all authorizations, consents, approvals or other actions by or make any
filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon conversion of the Series C Shares, which conversion may be
made by Purchaser at any time.
SECTION 5.5 Corporate Existence. The Company shall maintain its
-------------------
respective corporate existence, rights and franchises in full force and effect.
SECTION 5.6 Inspection, Consultation and Advice. The Company shall permit
-----------------------------------
Purchaser and such Persons as Purchaser may designate, to visit and inspect, at
Purchaser's expense, any of the properties of the Company, examine its books and
take copies and extracts therefrom, discuss the affairs, finances and accounts
of the Company with their officers, employees and public accountants (and the
Company hereby authorizes said accountants to discuss with such Purchaser and
such designees such affairs, finances and accounts), and consult with and advise
the management of the Company as to its affairs, finances and accounts, all at
reasonable times and upon reasonable notice. In addition, and without limiting
the foregoing, Company shall permit Purchaser to conduct such environmental
investigations of Company facilities as Purchaser deems appropriate, including
"Phase II" review.
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SECTION 5.7 Board of Directors.
------------------
(a) So long as the any Series C Shares remain outstanding, the holders of
the Series C Shares shall have the right to designate one observer to attend, at
Company expense, all meetings of directors of the Company, unless the holders of
the Series B Preferred Stock hold at least fifty percent (50%) of the Series C
Shares.
SECTION 5.8 Compliance with Laws. The Company shall conduct its
--------------------
business in compliance with all Applicable Laws.
SECTION 5.9 Keeping of Records and Books of Account. The Company shall
---------------------------------------
keep adequate records and books of account, in which complete entries will be
made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company, and in which, for each fiscal year, all proper
reserves for depreciation, depletion, obsolescence, amortization, taxes, bad
debts and other purposes in connection with its business shall be made.
SECTION 5.10 Protective Provisions. The Company shall not take any of the
---------------------
following actions without the prior affirmative written consent of Purchaser or,
following the Closing, of the holders of at least two-thirds (2/3) of the Series
C Shares:
(a) alter, change or amend (by merger or otherwise) any of the rights,
preferences or privileges of the Series C Preferred Stock;
(b) other than as required by the terms of the Series B Preferred Stock,
amend, restate, alter, modify or repeal (by merger or otherwise) its Articles of
Incorporation or Bylaws, including, without limitation, amending, restating,
modifying or repealing (by merger or otherwise) (i) any certificate of
designation or preferences (as in effect from time to time) relating to any
series of Preferred Stock or (ii) any of the rights, preferences and privileges
of any other class of Capital Stock or the terms or provisions of any option or
Convertible Security;
(c) (i) create, authorize or issue Senior Securities, Parity Securities,
Supervoting Securities or shares of any such class or series; (ii) create,
authorize or issue any securities (including Convertible Securities) convertible
into, or exercisable, redeemable or exchangeable for, shares of Senior
Securities, Parity Securities or Supervoting Securities; (iii) increase or
decrease the authorized number of shares of Series C Preferred Stock; or (iv)
increase or decrease the authorized number of shares of any class or series of
Senior Securities, Parity Securities, Supervoting Securities or shares of any
such class or series;
(d) (i) initiate or suffer to exist any Liquidation Event with respect to
the Company, (ii) enter into any merger or consolidation with any other Person
that results in the holders of the Company's Capital Stock immediately prior to
such transaction owning less than fifty percent (50%) of the voting power of the
successor entity's Capital Stock after such transaction or (iii) otherwise
discontinue or dispose of more than ten percent (10%) of the assets of the
business of the Company, taken as a whole;
(e) initiate or suffer to exist any recapitalization of the Company, or
reclassify any authorized Capital Stock of the Company into any other class or
series of Capital Stock of the Company;
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(f) redeem any shares of Capital Stock;
(g) acquire, in one or a series of transactions, any equity ownership
interest, by way of merger or otherwise, in any Person, or any asset or assets
of any Person, where the aggregate consideration payable in connection with such
acquisition (including, without limitation, cash consideration, the fair market
value of any securities and the net present value of any deferred consideration)
is at least $1,000,000, or (ii) make any capital expenditures in excess of
$500,000 individually or $1,000,000 for any fiscal year;
(h) make any material change in the nature of its business as conducted on
the Closing Date, or fail to conduct its business in the ordinary course
consistent with past practice;
(i) sell, transfer, convey, lease or dispose of, outside the ordinary
course of business, any material assets or properties of the Company, whether
now or hereafter acquired, in any transaction or transactions that call for
payments in excess of $500,000;
(j) establish or purchase any Subsidiary;
(k) enter into any agreements, transactions or leases not in the ordinary
course of the Company's business as conducted on the Closing Date that call for
payments in excess of $250,000;
(l) incur any new or additional Indebtedness which exceeds $500,000
provided that this clause (n) shall not prohibit the extension, renewal,
amendment or refinancing (including refinancings with other lenders) of the
Company's existing credit facility with Spectrum Commercial Services, a Division
of Lyon Financial Services, Inc. on terms no more restrictive than those
contained in the General Credit and Security Agreement dated November 19, 1998,
as amended on August 20, 1999 (except interest rate "spreads" may increase by no
more than 50 basis points over prime and principal amounts advanced against
accounts receivable or inventory (but no other amounts of principal) may
increase or decrease provided that advance rates are no greater than those
currently in effect).
(m) except for transactions on customary and reasonable terms, enter into
any transaction with (i) any Affiliate of the Company, (ii) any employee of the
Company, (iii) any holder of more than five percent (5%) of the outstanding
capital stock of any class or series of Capital Stock of the Company, (iv) any
member of the immediate family of any Person set forth in clauses (i), (ii) and
(iii) above, or (v) any corporation, partnership, trust or other entity in which
any Person set forth in clauses (i), (ii), (iii) or (iv) above, or member of the
family of any such Person, is a director, officer, trustee, partner or holder of
more than five percent (5%) of the outstanding capital stock thereof. For
purposes of this Agreement, the members of the "immediate family" of any Person
shall consist of the spouse, parents, children, siblings, mothers- and fathers-
in-law, sons-and daughters-in-law, and brothers- and sisters-in-law of such
Person.
SECTION 5.11 Publication Matters. The Company shall not use the name or
-------------------
logo of Purchaser or any of its Affiliates in connection with any press releases
or advertisements without the prior written consent of Purchaser and the prior
written approval by Purchaser of the form
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and content of any such press release or advertisement. The Company consents to
the publication by Purchaser or any of its Affiliates of a tombstone or similar
advertising material relating to the transactions contemplated by this
Agreement, which may include the Company's name, business description and size
of investment. In addition, the Company agrees that Purchaser and its Affiliates
may use the Company's name and logo on websites among a list of representative
investments and may provide the Company's name and appropriate individual
contacts to companies for the purpose of securing supplier discounts or other
similar benefits for the Company.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Expenses. The Company shall pay all reasonable
--------
out-of-pocket due diligence expenses and outside legal and consulting fees and
expenses of Purchaser incurred in connection with investigating, negotiating or
documenting the transactions contemplated hereby (whether such fees and expenses
are incurred prior to or after the Closing Date).
SECTION 6.2 Termination. This Agreement may be terminated:
------------
(a) at any time by mutual agreement of the parties;
(b) by Purchaser by written notice to the Company if all conditions to
closing have not been satisfied prior to April 6, 2000;
(c) by either party following a material breach by the other party to this
Agreement, provided that if such breach is curable, this Agreement may only be
terminated if, after ten (10) business days' notice, the party in breach has not
either cured such breach or commenced diligent efforts to cure such breach.
Termination of this Agreement shall not waive any party of liability for
breaches of this Agreement which occurred prior to termination.
SECTION 6.3 Survival of Agreements. All covenants, agreements,
----------------------
representations and warranties made in the Transaction Documents or any
certificate or instrument delivered to Purchaser pursuant to or in connection
with the Transaction Documents shall survive the execution and delivery of the
Transaction Documents, the issuance, sale and delivery of the Series C Shares,
and the issuance and delivery of the Conversion Shares, and all statements
contained in any certificate or other instrument delivered by the Company
hereunder or thereunder or in connection herewith or therewith shall be deemed
to constitute representations and warranties made by the Company.
SECTION 6.4 Brokerage. Each party hereto will indemnify and hold harmless
---------
the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
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SECTION 6.5 Parties in Interest. All representations, covenants and
-------------------
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants and agreements
benefiting Purchaser shall inure to the benefit of any and all subsequent
holders from time to time of Series C Shares, the Warrants, Conversion Shares or
the Warrant Shares.
SECTION 6.6 Notices. All notices, requests, consents and other
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communications hereunder shall be in writing and shall be delivered in Person,
mailed by certified or registered mail, return receipt requested, delivered by
overnight courier, or sent by telecopier or telex, addressed as follows:
(a) if to the Company,
Fieldworks, Incorporated
7631 Anagram Drive
Eden Prairie, Minnesota
Attention: Karen Engebretson
Facsimile: (612) 947-7030
with a copy to:
Dorsey & Whitney LLP
Pillsbury Center
220 South Sixth Street
Minneapolis, MN 55402
Attention: Kenneth Cutler
Facsimile: (612) 340-8738
(b) if to Purchaser:
Industrial Works Holding Co., LLC
c/o Glenmount International, L.P.
19200 Von Karman Avenue, Suite 400
Irvine, California 92612
Attention: Michael E. Johnson
Facsimile: (949) 477-8044
with a copy to:
Paul, Hastings, Janofsky & Walker LLP
695 Town Center Drive, 17/th/ Floor
Costa Mesa, California 92626-1924
Attention: Peter J. Tennyson
Facsimile: (714) 979-1921
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
13
<PAGE>
SECTION 6.7 Governing Law; Jury Trial Waiver. This Agreement shall be
--------------------------------
construed, interpreted and the rights of the parties determined in accordance
with the laws of the State of California without regard to the conflict of law
principles thereof; except with respect to matters of law concerning the
internal corporate affairs of any corporate entity which is a party to or the
subject of this Agreement and as to those matters, the law of the jurisdiction
under which the respective entity derives its powers shall govern. The parties
irrevocably elect as the sole judicial forum for the adjudication of any matters
arising under or in connection with this Agreement, the Transaction Documents
and the transactions contemplated hereby and thereby, and consent to the
jurisdiction of, the courts located in Orange County, California, and waive any
and all objections to such jurisdiction or venue that they may have. The parties
hereby waive any right to have trial by jury in any action, suit or proceeding
brought to enforce or defend any rights or remedies arising under or in
connection with this Agreement, whether grounded in tort, contract or otherwise.
SECTION 6.8 Injunctive Relief. The parties hereto acknowledge and agree
-----------------
that irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and shall be entitled to enforce specifically the provisions of this
Agreement in any court of the United States or any state thereof having
jurisdiction, in addition to any other remedy to which the parties may be
entitled under this Agreement or at law or in equity.
SECTION 6.9 Assignment.
----------
(a) Neither this Agreement nor any of the rights or obligations hereunder
may be assigned by the Company without the prior written consent of Purchaser.
(b) Purchaser may, without the consent of the Company, sell, transfer, or
otherwise any of the Series C Shares purchased by Purchaser hereunder or the
Conversion Shares and the rights and obligations of Purchaser hereunder, to any
of its Affiliates or to an Accredited Investor, provided, however, that such
-------- -------
Person (except for a transferee of the Breakup Warrant) shall not have any
rights under this Agreement unless it executes a counterpart of this Agreement
in connection with such transfer.
(c) Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, and no other person shall have any right, benefit or obligation
hereunder.
SECTION 6.10 Limitation of Liability. In no event shall (a) any Affiliate
-----------------------
of Purchaser, or (b) any direct or indirect member, shareholder, officer,
director, limited partner, employee or any other representative of Purchaser or
any Affiliate of Purchaser, be personally liable for any obligation of Purchaser
under this Agreement.
SECTION 6.11 Entire Agreement. This Agreement, including any Schedules and
----------------
the Exhibits hereto, constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto
are hereby incorporated herein by reference.
14
<PAGE>
SECTION 6.12 Counterparts. 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.
SECTION 6.13 Amendments. This Agreement may not be amended or modified
----------
without the written consent of the Company and Purchaser.
SECTION 6.14 Severability. If any provision of this Agreement shall be
------------
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
SECTION 6.15 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
SECTION 6.16 Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Affiliate" means, with respect to a specified Person, (a) any other person
---------
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person, (b) any other Person that owns,
directly or indirectly, five percent (5%) or more of such specified person's
Capital Stock, (c) any employee or director of such specified Person, (d) any
member of the family of any Person specified in clauses (a), (b), and (c), or
(e) any corporation, limited liability company, partnership, trust or other
entity in which any Person set forth in clauses (a), (b), (c) or (d) above, or
member of the family of any such Person, is a director, officer, trustee,
partner or holder of more than five percent (5%) of the outstanding Capital
Stock thereof. For the purposes of this definition, "control," when used with
-------
respect to any specified person, means the power to direct the management and
policies of such person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
-----------
"controlled" have meanings correlative to the foregoing. All limited partners
----------
in Glenmount International, L.P. shall be considered Purchaser's Affiliates.
"Agreement" has the meaning set forth in the preamble hereto.
---------
"Applicable Law" means any statute, law, rule or regulation or any
--------------
judgment, order, writ, injunction, decree or financial assessment (subject, in
the case of financial assessments, to the exhaustion of appeals) of any
Governmental Entity to which a specified Person or its properties or assets, or
its officers, directors, employees, consultants or agents (in their capacities
as such) is subject, including, without limitation, all such statutes, laws,
rules, regulations, judgments, orders, writs, injunctions, decrees and financial
assessments relating to, without limitation, energy regulation, public utility
regulation, securities regulation, consumer protection, equal opportunity,
health care industry regulation, public health and safety, motor vehicle safety
or standards, third party reimbursement, environmental protection, fire, zoning,
building and occupational safety and health matters and laws respecting
employment practices, employee documentation, terms and conditions of employment
and wages and hours.
15
<PAGE>
"Capital Stock" means (i) in the case of a corporation, corporate stock,
-------------
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Change of Control" shall be deemed to have occurred upon (i) the
-----------------
consummation of a tender for or purchase of more than fifty percent (50%) of the
Company's Common Stock by a third party, in a single transaction or series of
related transactions, (ii) a merger, consolidation or sale of all or
substantially all of the assets of the Company such that the shareholders of the
Company immediately prior to the consummation of such transaction own less than
fifty percent (50%) of the voting securities of the surviving entity immediately
after the transaction or transactions, in a single transaction or series of
related transactions, or (iii) the sale or transfer of more than twenty-five
percent (25%) of the shares of Capital Stock of the Company, in a single
transaction or series of related transactions.
"Closing" has the meaning set forth in Section 1.5 hereof.
------- -----------
"Closing Date" has the meaning set forth in Section 1.5 hereof.
------------ -----------
"Code" means the Internal Revenue Code.
----
"Common Stock" has the meaning set forth in the preamble hereto.
------------
"Company" has the meaning set forth in the preamble hereto.
-------
"Conversion Shares" has the meaning set forth in Section 1.3 hereof.
----------------- -----------
"Convertible Security" means any stock or security that is directly or
--------------------
indirectly convertible into or exchangeable for or exercisable for Capital
Stock, including without limitation, the shares of Series B Stock, the Series C
Shares, existing Warrants and any other option, warrant or exchangeable debt
security.
"Governmental Entity" means any court or tribunal in any jurisdiction
-------------------
(domestic or foreign) or any federal, state or local public, governmental or
regulatory body, agency, department, commission, board, bureau or other
authority or instrumentality (domestic or foreign).
"Knowledge" or "known" means, with respect to any Person, the actual
--------- -----
knowledge of such Person, after reasonable inquiry; provided, that a Person
--------
shall be deemed to have actual knowledge of the contents of all books and
records with respect to which such Person has reasonable access; provided,
--------
further, and without limiting the generality of the foregoing, with respect to
- -------
any Person that is a corporation actual knowledge shall be deemed to include the
actual knowledge of all principal employees of any such Person (including
without limitation each director, the Chief Executive Officer, President, Chief
Financial Officer and all Vice Presidents of such Person).
16
<PAGE>
"Liquidation Event" means, with respect to any Person, any of the following
-----------------
events: (i) the commencement by such Person of a voluntary case under the
bankruptcy laws of the United States, as now or hereafter in effect, or the
commencement of an involuntary case against such Person with respect to which
the petition shall not be controverted within fifteen (15) days, or be dismissed
within sixty (60) days, after commencement thereof; (ii) the appointment of a
custodian for, or the taking charge by a custodian of, all or substantially all
of the property of such Person; (iii) the commencement by such Person of any
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to such Person; (iv)
the commencement against such Person of any proceeding set forth in the
preceding clause (iii), which is not controverted within ten (10) days thereof
and dismissed within sixty (60) days after the commencement thereof; (v) the
adjudication of such Person insolvent or bankrupt, or the adoption by such
Person of a plan of liquidation, (vi) the occurrence of any Change of Control
with respect to such Person or (vii) the filing of a certificate of dissolution
in respect of the Company with the Secretary of State of the State of Minnesota;
in any of cases (i) through (vi) above, in a single transaction or series of
related transactions.
"Parity Securities" means any class or series of capital stock which ranks
-----------------
on a parity with the Series C Preferred Stock as to dividend distributions or
distributions upon the liquidation, winding up and dissolution of the Company.
"Person" shall mean an individual, corporation, trust, partnership, joint
------
venture, unincorporated organization, government agency or any agency or
political subdivision thereof, or other entity.
"Purchaser" has the meaning set forth in the preamble hereto, but in the
---------
event Purchaser distributes Series C Shares, it shall mean any holder of Series
C Shares.
"SEC" has the meaning set forth in Section 2.5 hereof.
--- -----------
"Senior Securities" means any class or series of capital stock which ranks
-----------------
senior to the Series C Preferred Stock as to dividend distributions or
distributions upon the liquidation, winding up and dissolution of the Company.
"Series C Preferred Stock" has the meaning set forth in the Recitals
------------------------
hereto.
"Series C Shares" has the meaning set forth in the Recitals hereto.
---------------
"Supervoting Securities" means any class or series of the Company's Capital
----------------------
Stock the holders of which have the right to cast more than one vote per share
and/or have the right to elect one or more members of the Board of Directors,
voting as a class or series.
"Transaction Documents" has the meaning set forth in Section 2.1(a) hereof.
--------------------- --------------
* * * * *
(Signatures on following page)
17
<PAGE>
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the Company and Purchaser have executed this Securities
Purchase Agreement as of the day and year first above written.
COMPANY: FIELDWORKS, INC.,
a Minnesota corporation
By: /s/ Karen Engebretson
--------------------------
Name: Karen Engebretson
-----------------------
Title: Chief Financial Officer
PURCHASER: INDUSTRIAL-WORKS HOLDING CO., LLC
a Delaware corporation
By: /s/ Michael E. Johnson
Name: Michael E. Johnson
Title: President
18
<PAGE>
INDEX TO EXHIBITS
- -----------------
EXHIBIT A Form of Certificate of Designation for Series C Convertible
Participating Preferred Stock
EXHIBIT B Form of Opinion of Counsel to Company
EXHIBIT C Registration Rights
iii
<PAGE>
Exhibit A
---------
FIELDWORKS, INCORPORATED
RESOLUTION ESTABLISHING THE SERIES,
SETTING FORTH THE DESIGNATION AND FIXING
THE RELATIVE RIGHTS AND PREFERENCES OF
SERIES C CONVERTIBLE PARTICIPATING PREFERRED STOCK
Pursuant to the powers expressly granted to the Board of Directors of
Fieldworks, Incorporated, a Minnesota corporation (the "Company"), by the
provisions of the Articles of Incorporation of the Company and Chapter 302A of
the Minnesota Business Corporation Act, the Board of Directors of the Company
duly established by written action of the Board of Directors a series of shares
consisting of 500,000 shares, with the designation of the series and the
relative rights and preferences of the series as follows:
1. Designation. The designation of the series of shares is Series C
-----------
Convertible Participating Preferred Stock (the "Series C Shares") and the number
of shares of such series is 500,000.
2. Dividends. Dividends shall be payable on the Series C Shares out of
---------
funds legally available for the declaration of dividends only if and when
declared by the Board of Directors. In no event shall any dividend be paid or
declared, nor shall any distribution be made, on the Common Stock, unless the
holders of the Series C Shares shall have consented thereto and shall
participate in such dividend on a pro rata basis with the holders of Common
Stock, counting the Series C Shares on an as-if-converted basis.
3. Liquidation Preference. In the event of any liquidation, the holders
----------------------
of the Series C Shares then outstanding shall be entitled to receive out of the
assets of the Company, after distribution of all amounts due the holders of the
Company's Series B Convertible Participating Preferred Stock ("Series B
Preferred Stock"), but prior and in preference to any distribution of any of the
assets or surplus funds of the Company to the holders of the Common Stock or any
other class of shares of preferred stock of the Company ranking junior to the
Series C Shares with respect to payments upon Liquidation (such preferred stock
hereinafter called "Junior Liquidation Stock"), and junior to any such
distribution to the holders of any class of shares of the Company ranking senior
to the Series C Shares in such respect, an amount equal to $2.00 per share plus
any accrued and unpaid dividends thereon for each Series C Share (the "preferred
amount"). Following any distribution of assets or surplus funds of the Company
to the holders of any outstanding series of Junior Liquidation Stock, the
remainder of any such assets or, surplus funds shall be
-1-
<PAGE>
distributed to the holders of the Common Stock and any other series of preferred
stock entitled to participate in distributions of assets or surplus funds upon
liquidation until each holder shall have received an amount per share equal to
the preferred amount. Thereafter, any remaining assets or funds shall be
distributed pro rata to the holders of the Common Stock, the holders of any
other series of preferred stock having a right to participate, and the holders
of the Series C Preferred Stock, counting Series C Shares on an as-if-converted
basis. If upon the occurrence of any Liquidation, the assets and funds of the
Company available for the distribution to its shareholders shall be insufficient
to pay the holders of the Series C Shares the full preferred amount to which
they shall be entitled, the holders of the Series C Shares shall share ratably
in any distribution of such assets and surplus funds available to the Series C
Shares in proportion to the Series C Shares held by them.
4. Voting Rights. Each holder of record of Series C Shares shall be
-------------
entitled to notice of and to attend all meetings of the shareholders of the
Company and shall be entitled at each such meeting to a number of votes for each
Series C Share held equal to the number of shares of Common Stock into which
each share of Series C Shares is then convertible. Each holder of Common Stock
shall have one vote on all matters submitted to the shareholders for each share
of Common Stock standing in the name of such holder on the books of the Company.
Except as otherwise provided in this Section 4, and except as otherwise required
by agreement or law, the holders of the Series C Shares and the holders of
Common Stock of the Company shall vote as a single class on all matters
submitted to the shareholders.
5. Protective Provisions. The Company shall not take any of the
---------------------
following actions without the prior affirmative written consent of the holders
of at least two-thirds (2/3) of the Series C Shares:
(a) alter, change or amend (by merger or otherwise) any of the rights,
preferences or privileges of the Series C Shares;
(b) other than as provided in Section 5(c) of the Certificate of
Designation of Rights, Preferences and Limitations of the Company's Series
B Preferred Stock, amend, restate, alter, modify or repeal (by merger or
otherwise) the Articles of Incorporation or the Bylaws of the Company,
including, without limitation, amending, restating, modifying or repealing
(by merger or otherwise) (i) any certificate of designation or preferences
(as in effect from time to time) relating to any series of preferred stock
or (ii) any of the rights, preferences and privileges of any other class of
capital stock, or the terms or provisions of any option or convertible
security;
(c) (i) create, authorize or issue any securities or shares of any
such class or series of securities which rank senior to or on parity with
the Series C Shares;
-2-
<PAGE>
(ii) create, authorize or issue any securities or shares of any such class
or series of securities the holders of which have the right to cast more
than one vote per share, and/or have the right, voting as a class or
series, to elect one or more members of the Board of Directors; (iii)
create, authorize or issue any securities or shares of any such class or
series of securities convertible into, or exercisable, redeemable or
exchangeable for, shares of any of the foregoing; (iv) increase or decrease
the authorized number of shares of any of the foregoing; or (v) increase or
decrease the authorized number of Series C Shares;
(d) (i) initiate or suffer to exist any Liquidation Event with respect
to the Company, (ii) enter into any merger or consolidation with any other
Person that results in the holders of the Company's capital stock
immediately prior to such transaction owning less than fifty percent (50%)
of the voting power of the successor entity's capital stock after such
transaction or (iii) otherwise discontinue or dispose of more than ten
percent (10%) of the assets of the business of the Company, taken as a
whole. For purposes of this Section 5, "Liquidation Event" shall mean any
of the following events: (i) the commencement by the Company of a
voluntary case under the bankruptcy laws of the United States, as now or
hereafter in effect, or the commencement of an involuntary case against the
Company, which petition shall not be opposed within fifteen (15) days or be
dismissed within sixty (60) days after commencement thereof; (ii) the
appointment of a custodian for, or the taking charge by a custodian of, all
or substantially all of the property of the Company; (iii) the commencement
by the Company or on its behalf or with its consent of any proceeding under
any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect; (iv) the commencement by anyone without
the Company's consent of any proceeding of the type set forth in the
preceding clause (iii) which is not controverted within fifteen (15) days
thereof and dismissed within sixty (60) days after the commencement
thereof; (v) the adjudication of the Company as insolvent or bankrupt, or
the adoption by the Company of a plan of liquidation, (vi) the occurrence
of any Change of Control; or (vii) the filing of a certificate of
dissolution on behalf of the Company with the Secretary of State of the
State of Minnesota; in any of cases (i) through (vi) above, in a single
transaction or series of related transactions. For purposes of this
Section 5(d), a "Change of Control" shall be deemed to have occurred upon
(i) the consummation of a tender for or purchase of more than fifty percent
(50%) of the Company's Common Stock by a third party other than the holder
of a majority of the Series C Stock, in a single transaction or series of
related transactions, or (ii) any other transaction such that the
shareholders of the Company immediately prior to the consummation of such
transaction possess less than fifty percent (50%) of the voting securities
of the surviving or continuing entity immediately after the transaction, in
a single transaction or a series of related
-3-
<PAGE>
transactions unless such transactions have been approved by the vote of all
directors elected or designated by the holders of the Series B Preferred
Stock.
(e) initiate or suffer to exist any recapitalization of the Company,
or reclassify any authorized capital stock of the Company into any other
class or series of Capital Stock of the Company;
(f) redeem any shares of the Company's capital stock;
(g) (i) acquire, in one or a series of transactions, any equity
ownership interest, by way of merger or otherwise, in any Person, or any
asset or assets of any Person, where the aggregate consideration payable in
connection with such acquisition (including, without limitation, cash
consideration, the fair market value of any securities and the net present
value of any deferred consideration) is at least $1,000,000, or (ii) make
any capital expenditures in excess of $500,000 individually or $1,000,000
for any fiscal year;
(h) change the number of directors of the Company to a number other
than seven (7), or, under the circumstances in Section 5(c) of the Series B
Preferred Stock's Certificate of Designation of Rights, Preferences and
Limitations, nine (9), or the manner in which the directors are selected,
except as set forth in Section 5(c) of the Series B Preferred Stock's
Certificate of Designation of Rights, Preferences and Limitations;
(i) make any material change in the nature of its business as
conducted on the date the Series C Shares are issued, or fail to conduct
its business in the ordinary course consistent with past practice;
(j) sell, transfer, convey, lease or dispose of, outside the ordinary
course of business, any material assets or properties of the Company,
whether now or hereafter acquired, in any transaction or transactions that
call for payments in excess of $500,000;
(k) establish or purchase any subsidiary;
(l) enter into any agreements, transactions or leases not in the
ordinary course of the Company's business as conducted on the date hereof
that call for payments in excess of $250,000;
(m) incur any new or additional indebtedness which exceeds $500,000,
provided that this clause (m) shall not prohibit the extension, renewal,
amendment or refinancing (including refinancings with other lenders) of the
Company's existing
-4-
<PAGE>
credit facility with Spectrum Commercial Services, a division of Lyon
Financial Services, Inc. on terms no more restrictive than those contained
in the General Credit and Security Agreement dated November 19, 1998 as
amended on August 20,1999, (except that interest rate "spreads" may
increase by no more than 50 basis points over prime and principal amounts
advanced against accounts receivable or inventory (but no other amounts of
principal) may increase or decrease provided that advance rates are no
greater than those currently in effect); or
(o) except for transactions on customary and reasonable terms, enter
into any transaction with (i) any Affiliate of the Company, (ii) any
employee of the Company, (iii) any holder of more than five percent (5%) of
the outstanding capital stock of any class or series of capital stock of
the Company, (iv) any member of the immediate family of any Person set
forth in clauses (i), (ii) and (iii) above, or (v) any corporation,
partnership, trust or other entity in which any Person set forth in clauses
(i), (ii), (iii) or (iv) above, or member of the family of any such Person,
is a director, officer, trustee, partner or holder of more than five
percent (5%) of the outstanding capital stock thereof. For purposes of
this Agreement, the members of the "immediate family" of any Person shall
consist of the spouse, parents, children, siblings, mothers- and fathers-
in-law, sons- and daughters-in-law, and brothers- and sisters-in-law of
such Person.
6. Conversion Rights.
-----------------
(a) At Option of Holders. Holders of Series C Shares may, at their
--------------------
option, upon surrender of the certificates therefor, convert any or all of their
Series C Shares into fully paid and nonassessable shares of Common Stock at any
time. The right of holders of Series C Shares to convert their shares shall be
exercised by surrendering for such purpose to the Company or any transfer agent
for the Series C Shares, and at such other office or offices, if any, as the
Board of Directors may designate, certificates representing the Series C Shares
to be converted, duly endorsed in blank or accompanied by proper instruments of
transfer. Upon the surrender of certificates representing the Series C Shares to
be converted, the person converting such shares shall be deemed to be the holder
of record of the Common Stock (and such other securities and property as the
holders of Series C Shares may be entitled to upon the conversion thereof, as
hereinafter provided) issuable upon such conversion, and all rights with respect
to the Series C Shares surrendered shall forthwith terminate except the right to
receive the Common Stock or other securities, cash or other assets receivable
upon such conversion as herein provided.
(b) Conversion Rate/Conversion Price. In addition to the adjustments
--------------------------------
required by Section 6(e), 6(f) and 6(g), the conversion of Series C Shares into
Common Stock shall be governed by the following: Series C Shares shall be
convertible into that number of fully paid and nonassessable shares of Common
Stock (calculated as to each
-5-
<PAGE>
conversion to the nearest 1/100th of a share) as shall be determined by
multiplying the "Conversion Rate," determined as hereinafter provided, in effect
at the time of conversion by the product of (i) the number of shares of Series C
Shares to be converted and (ii) the "Initial Conversion Price" applicable to the
shares of Series C Shares being converted (as hereinafter defined) and dividing
the product of such multiplication by the "Conversion Price" applicable to the
Series C Shares being converted, determined as hereinafter provided, in effect
at the time of conversion and making any adjustments required by Section 6(e)
hereof. The Conversion Rate shall initially be one and shall be adjusted from
time to time as provided in Section 6(e) (such conversion rate, as so adjusted
from time to time, being referred to herein as the "Conversion Rate"). The
"Initial Conversion Price" for the Series C Shares shall be the price per Series
C Share paid to the Company upon the issuance thereof. The conversion price for
Series C Shares shall initially be equal to the Initial Conversion Price and
shall be adjusted from time to time as provided in Sections 6(f) and (g) (the
conversion price for Series C Shares, as so adjusted from time to time, being
herein referred to as the "Conversion Price" applicable to such Series C
Shares).
(c) Reservation of Shares. A number of shares of authorized but
---------------------
unissued Common Stock of the Company sufficient to provide for the conversion of
all of the Series C Shares outstanding upon the basis herein provided
("Conversion Common Stock") shall at all times be reserved by the Company, free
from preemptive rights, for such conversion. If the Company shall issue any
securities or make any change in its capital structure that would change the
number of shares of Common Stock into which each Series C Share shall be
convertible as herein provided, the Company shall at the same time also make
proper provision so that thereafter there shall be a sufficient number of
additional shares of capital stock authorized and reserved, free from preemptive
rights, for conversion of the outstanding Series C Shares on the new basis. The
Company shall comply with all securities laws regulating the offer and delivery
of shares of Common Stock upon conversion of Series C Shares and shall list such
shares on any national securities exchange on which the Common Stock is listed
or have such shares admitted for quotation on the Nasdaq National or Small Cap
Market if the Common Stock is admitted for quotation thereon.
(d) Fractional Shares. No fractional shares of Common Stock shall be
-----------------
issued upon the conversion of Series C Shares but, in lieu of any fraction of a
share of Common Stock that would otherwise be issuable in respect of the
aggregate number of such shares surrendered for conversion at one time by the
same holder, the Company shall pay in cash an amount equal to the product of (a)
the "Closing Price" (as defined in the next sentence) of a share of Common Stock
on the last trading day before the relevant conversion date and (b) such
fraction of a share. The "Closing Price" for each day shall be the last reported
sale price regular way or, in case no sale takes place on such day, the average
of the closing bid and asked prices regular way on such day, in either case as
reported on the New York Stock Exchange Composite Tape, or, if the Common Stock
is not listed or admitted to trading on such Exchange, on the principal national
securities exchange on which the
-6-
<PAGE>
Common Stock is listed or admitted to trading, or, if the Common Stock is not
listed or admitted to trading on any national securities exchange, on the Nasdaq
National or Small Cap Market, or, if the Common Stock is not admitted for
quotation on the Nasdaq National or Small Cap Market, the average of the high
bid and low asked prices on such day as recorded by the National Association of
Securities Dealers, Inc. through Nasdaq, or, if the National Association of
Securities Dealers, Inc. through Nasdaq shall not have reported any bid and
asked prices for the Common Stock on such day, the average of the bid and asked
prices for such day as furnished by any New York Stock Exchange member firm
selected from time to time by the Company for such purpose, or, if no such bid
and asked prices can be obtained from any such firm, the fair market value of
one share of the Common Stock on such day as determined in good faith by the
Board of Directors of the Company.
(e) Conversion Rate Adjustments. Subject to Section 6(g) hereof, if
---------------------------
the Company shall (A) subdivide its outstanding Common Stock into a greater
number of shares, (B) combine the shares of its outstanding Common Stock into a
smaller number of shares or (C) declare a dividend upon its shares of Common
Stock payable in shares of Common Stock, then in each such case the Conversion
Rate in effect immediately prior thereto shall be proportionately adjusted so
that the holder of any shares of any Series C Shares thereafter surrendered for
conversion shall be entitled to receive, to the extent permitted by applicable
law, the number and kind of shares of capital stock of the Company that such
holder would have owned or have been entitled to receive after the happening of
such event had such Series C Shares been converted immediately prior to the
record date for such event (or if no record date is established in connection
with such event, the effective date for such action). An adjustment pursuant to
this Section 6(e) shall become effective immediately after the record date in
the case of a stock dividend or distribution, or immediately after the effective
date in the case of a subdivision, combination or reclassification.
(f) Initial, One-Time Conversion Price Adjustment. The Company
---------------------------------------------
contemplates a registered offering of rights to purchase common stock to its
shareholders. If the purchase price of such offering is less than $2.00 per
share, the Conversion Price shall be adjusted to such purchase price. If the
Company abandons, or shall not have completed such registered offering to its
existing shareholders of rights to purchase Common Stock resulting in gross
proceeds equal to or exceeding $5,000,000 on or before June 30, 2000, the
Conversion Price shall be reduced to One Dollar ($1.00) per share, effective as
of March 31, 2000, and any transactions subsequent to March 31, 2000 shall, for
purposes of Section 6(g), be evaluated using that adjusted Conversion Price.
(g) Continuing Conversion Price Adjustments. With respect to Series C
---------------------------------------
Shares, if and whenever the Company shall issue or sell any shares of its Common
Stock or any securities convertible into or exercisable or exchangeable for
shares of Common Stock ("Convertible Securities") for a consideration per share
(in the case of the sale of any Convertible Securities, the amount, if any,
payable for such Convertible Security and upon
-7-
<PAGE>
the exercise or conversion thereof (and/or upon the exercise or conversion of
the securities receivable upon such exercise or conversion) for each share of
Common Stock receivable thereby shall be included in determining such
consideration per share) less than the Conversion Price applicable to the Series
C Shares, in effect immediately prior to the time of such issuance or sale,
then, forthwith upon such issuance or sale, such higher Conversion Price(s) for
the Series C Shares shall be reduced to a price (calculated to the nearest tenth
of a cent) determined by dividing (x) an amount equal to the sum of (A) the
number of shares of Common Stock outstanding immediately prior to such issuance
or sale multiplied by such higher Conversion Price plus (B) the aggregate
----
consideration, if any, received or receivable by the Company for the share of
Common Stock issued or issuable upon the exercise of any issued Convertible
Security (and/or upon the exercise or conversion of the security receivable upon
such exercise or conversion), by (y) an amount equal to the sum of (A) the
number of shares of Common Stock outstanding immediately prior to such issuance
or sale plus (B) the number of shares of Common Stock thus issued or sold or
----
receivable upon the exercise or conversion of the Convertible Securities (or the
securities receivable upon the exercise or conversion of such Securities). If
any Convertible Securities taken into account in any such adjustment of a
Conversion Price subsequently expire without exercise, such Conversion Price
shall be recomputed to eliminate the effect of such expired Convertible
Securities. However, no adjustment pursuant to this Section 6(g) shall be
required upon the issuance of shares of Common Stock upon conversion of any
shares of preferred stock, including the Series C Shares, outstanding prior to
such issuance or sale or upon the exercise of options available under the 1996
Directors Stock Option Plan or the 1999 Long-term Incentive Plan of the Company
as in effect prior to November 1, 1999.
(h) Consolidations, Mergers, Sales of Assets, Reclassifications and
---------------------------------------------------------------
Certain Dividends. In case of any (A) consolidation or merger of the Company
- -----------------
with any other company (other than the merger of a subsidiary of the Company
into the Company in a transaction in which the Company is the surviving
corporation and the outstanding shares of capital stock of the Company are not
exchanged for or converted into any other securities, cash or other property),
(B) sale or transfer of all or substantially all of the assets of the Company
for cash, securities or other property, (C) any share exchange pursuant to which
all of the outstanding shares of Common Stock are converted into other
securities or property, or (D) issuance of any shares of the Company's capital
stock in connection with a reclassification of the Common Stock, the Company
shall, prior to or at the time of such transaction, make appropriate provision
or cause appropriate provision to be made so that the holders of each Series C
Share then outstanding shall have the right thereafter to receive the kind and
amount of shares of stock and other securities and property receivable upon such
consolidation, merger, sale, transfer, share exchange or reclassification by a
holder of the number of shares of Common Stock into which such Series C Shares
could have been converted immediately prior to the effective date of such
consolidation, merger, sale, transfer, share exchange or reclassification. If
in connection with any such consolidation, merger, sale, transfer, share
exchange or reclassification, each holder of Common Stock is
-8-
<PAGE>
entitled to elect to receive either securities, cash or other assets upon
completion of such transaction, the Company shall provide or cause to be
provided to each holder of Series C Shares the right to elect the securities,
cash or other assets into which the Series C Shares held by such holder shall be
convertible after completion of any such transaction on the same terms and
subject to the same conditions applicable to holders of the Common Stock
(including, without limitation, notice of the right to elect, limitations on the
period in which such election shall be made and the effect of failing to
exercise the election).
(i) Rounding. All calculations hereunder, unless otherwise specified,
--------
shall be made to the nearest cent or to the nearest 1/100th of a share, as the
case may be.
(j) Notices. Whenever the Conversion Rate or a Conversion Price is
-------
adjusted as herein provided, the Company shall give prompt notice by mail to the
holders of the outstanding Series C Shares of such adjustment, which notice
shall set forth the adjustment and the new Conversion Rate or Conversion Price.
Notwithstanding the foregoing, failure by the Company to give such notice or a
defect in such notice shall not affect the binding nature of such corporate
action of the Company.
(k) Common Stock Defined. As used herein, the term "Common Stock"
--------------------
shall mean and include the presently authorized Common Stock of the Company and
shall also include any capital stock of any class of the Company (other than the
Series C Shares) hereafter authorized which shall have the right to vote on all
matters submitted to the shareholders of the Company and shall not be limited to
a fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the occurrence of
any Liquidation Event of the Company.
7. Preemptive Rights. If Company offers to sell its common stock,
-----------------
securities convertible into common stock, or any other debt (excluding debt
securities issued to banks or other financial institutions) or equity securities
other than the issuance of options or shares to employees, directors and
consultants which have been approved by the directors elected by the Series B
Preferred Stock (the "Additional Securities") it will first offer to the holders
of the Series C Shares, or, if applicable, Conversion Common Stock the right to
purchase a portion of the Additional Securities such that such holders'
aggregate percentage ownership of the Company on a fully diluted basis
("Purchasers' Percentage") will be unchanged. The offer shall set forth the
number of shares to be sold, the price, and material terms and conditions.
The right of the holders to purchase in the aggregate Additional Securities up
to but not more than the Purchaser's Percentage may be exercised as follows:
(a) the Company shall provide each holder with written notice of the
number of securities to be issued and the cash price therefor;
-9-
<PAGE>
(b) each holder shall have the right to purchase that percentage of
such securities equal to the ratio that the number of shares of Conversion
Common Stock held by such holder bears to the total number of shares of
Conversion Common Stock held by all holders;
(c) second, if not all holders elect to purchase their pro rata share,
then as to the excess of the amount of Purchaser's Percentage over the shares
taken by holders electing to purchase their pro rata part (such excess to be
referred to as the "Unsubscribed Shares"), the holders who do so elect shall be
offered the right to acquire pro rata among themselves based on their holdings
of Conversion Common Stock; and
(d) if after such offer, any of the Unsubscribed Shares remain unsold,
as to such unsold Unsubscribed Shares, as the holders who agreed to purchase
their pro rata part of the Unsubscribed Shares may agree, all within thirty (30)
days of notice by the Company of such proposed issuance.
The Company may, within thirty (30) days, sell the remaining
securities not to be purchased by the holders to third parties on the terms and
conditions set forth in the offer delivered to holders, and the holders shall be
required to deliver the consideration to Company for the securities being
purchased by the holders at the same time such third parties are required to
deliver their consideration to Company.
Notwithstanding anything in this Section 7 to the contrary, the
holders' rights under this Section 7 shall not apply to (i) the securities of
the Company outstanding immediately prior to the issuance of the initial Series
C Shares; (ii) shares of common stock issued in connection with any stock split,
stock dividends or recapitalization of Company or upon conversion of the Series
C Shares; (iv) any borrowings, direct or indirect from financial institutions by
the Company, whether or not presently authorized, evidenced by any type of debt
instrument with no equity features; (v) securities issued pursuant to an
effective registration statement filed with the SEC in connection with a
registered public offering; (vi) equity securities issued to a financial
institution in connection with any lease financing or debt financing of the
Company approved by a two-thirds (2/3) vote of the Board of Directors; or (vii)
any transaction in which all directors of the Company elect for this Section 7
not to apply.
-10-
<PAGE>
Exhibit B
---------
March 31, 2000
Industrial-Works Holding Co. LLC
c/o Glenmount International, L.P.
19200 Von Karman Avenue, Suite 400
Irvine, California 92612
Ladies and Gentlemen:
Reference is hereby made to that certain Preferred Stock Purchase
Agreement (the "Agreement") dated as of March 31, 2000, by and between
FieldWorks Incorporated, a Minnesota corporation (the "Company"), and
Industrial-Works Holding Co. LLC, a Delaware limited liability company
("Purchaser"). Unless otherwise defined herein, capitalized terms used herein
shall have the meanings assigned to them in the Agreement.
We have acted as counsel to the Company in connection with the issuance
of the Series C Shares to Purchaser as contemplated under the Agreement.
We have examined such documents and have reviewed such questions of law
as we have considered necessary and appropriate for the purposes of our opinions
set forth below.
In rendering our opinions, we have assumed the authenticity of all
documents submitted to us as originals, the genuineness of all signatures and
the conformity to authentic originals of all documents submitted to us as
copies. We have also assumed the legal capacity for all purposes relevant hereto
of all natural persons and, with respect to all parties to agreements or
instruments relevant hereto other than the Company, that such parties had the
requisite power and authority (corporate or otherwise) to execute, deliver and
perform such agreements or instruments, that such agreements or instruments have
been duly authorized by all requisite action (corporate or otherwise), executed
and delivered by such parties and that such agreements or instruments are the
valid, binding and enforceable obligations of such parties. As to questions of
fact material to our opinions, we have relied upon certificates of officers of
the Company, including certificates being delivered to you at the Closing.
<PAGE>
Industrial-Works Holding Co. LLC
March 31, 2000
Page 2
On the basis of the foregoing and of our examination of such other
questions of law and fact as we deem relevant under the circumstances, and in
reliance thereon, and subject to the limitations, qualifications, presumptions
and exceptions set forth herein, we are of the opinion that:
1. The Company is duly incorporated, validly existing and in good
standing under the laws of the State of Minnesota with corporate power and
authority to conduct its business as it is presently conducted, to own and lease
its properties and assets and to execute and deliver the Transaction Documents
and perform its obligations thereunder.
2. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which (i) such
qualification is necessary under applicable law as a result of its conduct of
business and (ii) the failure to be so qualified would have a Material Adverse
Effect.
3. Each of the Transaction Documents has been duly authorized, executed
and delivered by the Company and is a valid and binding obligation of Company,
enforceable against the Company in accordance with its terms.
4. The Company has taken action to reserve 500,000 shares of Common
Stock for future issuance in connection with the exercise of the Series C
Preferred Stock. Assuming the representations and warranties made by Purchaser
in Article III in the Agreement are true and correct, the offer and sale of the
Series C Preferred Stock to Purchaser pursuant to the terms of the Agreement are
exempt from the registration requirements of the Securities Act of 1933 (the
"Securities Act"). Assuming the representations and warranties made by Purchaser
in Article III in the Agreement are true and correct, the issuance to Purchaser
of the Conversion Shares in accordance with the terms of the Agreement will be
exempt from such registration and qualification requirements.
5. Neither the execution and delivery by the Company of the Transaction
Documents nor the performance of its obligations thereunder will (a) result in
the violation of (i) any federal or Minnesota statute or regulation applicable
to the Company or (ii) any order or decree known to us of any court or
governmental authority binding upon the Company or its property, (b) conflict
with the Company's Articles of Incorporation or Bylaws or (c) result in a
default or in creation of a lien under any indenture, loan agreement or other
agreement known to us by which the Company is bound.
<PAGE>
Industrial-Works Holding Co. LLC
March 31, 2000
Page 3
6. No registration with or approval by any federal or state
governmental agency is required of the Company in connection with the execution
and delivery or the performance of the Transaction Documents to which it is a
party.
7. The authorized capital stock of the Company consists of 30,000,000
shares of Common Stock, $0.001 par value per share ("Company Common Stock"), of
which 8,894,426 shares are issued and outstanding, and 5,000,000 shares of
preferred stock, $.001 par value, of which 4,250,000 shares have been designated
Series B Convertible Participating Preferred Stock (the "Series B Stock") and
500,000 shares have been designated Series C Convertible Participating Preferred
Stock (the "Series C Stock").
8. The Series C Stock has been validly authorized, and the delivery by
the Company to Purchaser at Closing of the certificates representing the Series
C Stock, upon payment in accordance with the Agreement, conveys and transfers to
Purchaser, good, complete and marketable title to all Series C Stock of the
Company, free and clear of restrictions or conditions to transfer or assignment
and free and clear of all defects of title or Encumbrances. The offer and sale
of the Series C Stock to the Purchaser pursuant to the terms of the Agreement
are exempt from the registration requirements of the Securities Act, and the
Series C Stock has been issued in compliance with the securities laws of the
State of Minnesota and all other applicable state securities laws.
9. The Company has taken action to reserve 500,000 shares of Common
Stock for future issuance in connection with the conversion of the Series C
Stock. Assuming the representations and warranties made by Purchaser in Article
III in the Agreement are true and correct, the issuance to Purchaser of Common
Stock in connection with such conversion will be exempt from the registration
and qualification requirements of the Securities Act.
Our opinions set forth above are subject to the following
qualifications:
(a) Our opinions in paragraph 3 above is subject to the effect of (i)
any applicable bankruptcy, insolvency, reorganization, moratorium, arrangement,
fraudulent transfer or other similar law affecting creditors' rights generally
and (ii) principles of equity, including (without limitation) concepts of
materiality, reasonableness, good faith and fair dealing, election of remedies,
estoppel and other similar doctrines affecting the enforceability of agreements
generally (regardless of whether considered in a proceeding in equity or at
law).
<PAGE>
Industrial-Works Holding Co. LLC
March 31, 2000
Page 4
(b) Our opinion as to good standing of the Company set forth in
paragraph 1 above is based solely upon a certificate of good standing from the
appropriate officer of the jurisdiction in which such corporation has been
incorporated, and is given as of the date of the certificate.
Our opinions expressed above are limited to the laws of the State of
Minnesota and the federal laws of the United States of America. We call your
attention to the fact that the Agreement states that it is governed by
California law. We have not examined the question of what law would govern the
interpretation or enforcement of such agreement and our opinion in paragraph 3
above is based on the assumption, for purposes of this opinion, that the
internal laws of the State of Minnesota and the federal laws of the United
States of America would govern the provisions of the Agreement and the
transactions contemplated thereby.
We express no opinion regarding the accuracy of any financial
representations in the Transaction Documents or the financial status of the
Company.
The foregoing opinion is given solely for your benefit, speaks only as
of the date hereof, may not be relied upon by any other person or entity and
shall not be copied or distributed to any other person or entity without our
prior express written consent. We specifically disclaim any obligation to inform
you of any change in law, facts or circumstances which may be brought to our
attention subsequent to the date hereof.
Very truly yours,
Dorsey & Whitney LLP
KLC
<PAGE>
EXHIBIT C
TO
STOCK PURCHASE AGREEMENT
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.
"Common Stock Equivalents" shall mean, with respect to any Eligible
Holder as of any applicable date of determination, a sum equal to (i) the
number of shares of Common Stock owned by such Eligible Holder as of such
date of determination plus (ii) with respect to the Warrant owned by such
Eligible Holder, the number of shares of Common Stock issued or issuable
upon exercise of such Warrant as of the date of determination (in each
case, whether or not such Series B Preferred Stock or Warrant is so
converted or exercised).
"Eligible Holders" means each of Industrial-Works Holding Co., LLC and
any Person to whom it transfers any Registrable Securities, or any of their
respective Permitted Transferees.
"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 7 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 conversion of the Company's Series C Convertible
Participating Preferred Stock, and (ii) any Common Stock of the Company
issued as (or issuable upon the conversion of any 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 this Exhibit A is are not assigned.
<PAGE>
"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 United States Securities and Exchange
Commission.
"Stock Purchase Agreement" shall mean the Agreement dated March 31,
2000 between the Company and Industrial Works Holding Co., LLC.
2. Demand Registrations
(a) Required Threshold.
Any Eligible Holder owning at least One Hundred Thousand (100,000)
Common Stock Equivalents (as such number may be equitably adjusted from
time to time to reflect any stock split, stock dividend, recapitalization,
reclassification, consolidation or the like) may request (such Person, the
"Initiating Holder") that the Company file a Registration Statement under
the Securities Act on an appropriate form with respect to at least fifty
percent (50%) of the Registrable Securities owned by such Initiating Holder
(which form shall be available for the sale of the Registrable Securities
in accordance with the intended method or methods of distribution thereof
and shall include all financial statements required by the SEC to be filed
herewith) covering the shares of Registrable Securities that are the
subject of such request and the Company shall file such a Registration
Statement.
(b) Number of Demand Registrations.
The Company shall be obligated to prepare, file and cause to become
effective pursuant to this Section 2 only one (1) Registration Statement in
the aggregate pursuant to Section 2(a) above for the Eligible Holders;
provided, however, that a Registration Statement shall not be counted as
the Demand Registration hereunder unless it becomes effective and is
maintained effective in accordance with the requirements specified in
Section 6(a); provided, further, that if there is an underwriter's cutback
pursuant to Section 2(e) with respect to the request for registration
initiated by an Eligible Holder, such requested registration shall not be
deemed to be the Demand Registration.
C-2
<PAGE>
(c) Deferral by Company.
Notwithstanding anything in this Section 2 to the contrary, the
Company shall not be obligated to prepare, file and cause to become
effective pursuant to this Section 2 a Registration Statement if within
five (5) days of receipt of a request for a Demand Registration the Company
furnishes to the Initiating Holder a certificate signed by the Chief
Executive Officer of the Company that, in the good faith judgment of the
Board of Directors, it would be detrimental in any material respect to the
Company and its shareholders for the Company to comply with the Demand
Registration, and it is therefore essential to defer the filing of the
Registration Statement relating thereto. Any such deferral shall be for a
period of not more than six (6) months after the Company's receipt of the
Initiating Holder's written request for registration pursuant to this
Section 2; provided, however, that the Company may not exercise this right
more than once with respect to the Demand Registration and that any
requested registration deferred, and not ultimately effected, by the
Company pursuant to the provisions of this Section 2(c) shall thereafter
not be deemed to be the Demand Registration for purposes of the Section
2(a) above.
(d) Participation.
The Company shall promptly give written notice to all other Eligible
Holders upon receipt of a request for a Demand Registration pursuant to
Section 2(a) above. Such other Eligible Holders may, by written notice to
the Company and the Initiating Holder, within thirty (30) business days of
the Company's notice, elect to join in a request for a Demand Registration
pursuant to Section 2(a) above, with respect to any number of shares of
Registrable Securities owned by such Eligible Holder. The Registrable
Securities of the other Eligible Holders being offered in such Demand
Registration shall be treated pari passu with the Registrable Securities
being offered by the Initiating Holder for all purposes including
"underwriter's cutbacks" under subsection (e) of this Section and any such
request by an Eligible Holder shall not be treated as either a request by
such Eligible Holder for a Piggyback Registration under Section 3 or as a
request by such Eligible Holder for a Demand Registration under this
Section 2. The Company shall include in such Demand Registration such
shares of Registrable Securities for which it has received written requests
to register such shares within thirty (30) days after such written notice
has been given, provided that all the Registrable Securities for which the
Initiating Holder and the other Eligible Holders have requested
registration shall be covered by such registration statement before any
other securities are included.
In addition, the Company shall promptly give written notice to all
eligible Holders upon receipt of a request for a demand registration by any
Person (such Person, the "Initiating Person") pursuant to any other
registration rights agreement with the Company (whether such other
registration rights agreement is entered into before or after the date
hereof).
C-3
<PAGE>
Each Eligible Holder may, by written notice to the Company, within thirty
(30) business days of the Company's notice, elect to request a Demand
Registration pursuant to Section 2(a) above, with respect to any shares of
Registrable Securities owned by such Eligible Holder. The Registrable
Securities of the Eligible Holders being offered in such Demand
Registration shall be treated pari passu with the registrable securities
being offered by the Initiating Person (unless such Initiating Person is a
holder of Series B Preferred Stock, Warrants issued to Industrial Works
Holding Co., LLC, or Common Stock obtained on exercise or conversion
thereof, in which case the securities proposed to be registered by such
Initiating Person should be given priority) for all purposes including
"underwriter's cutbacks" and any such request by an Eligible Holder shall
not be treated as either a request by such Eligible Holder for a Piggyback
Registration under Section 3 or as a request by such Eligible Holder for a
Demand Registration under this Section 2. The Company shall include in such
demand registration such shares of Registrable Securities for which it has
received written requests to register such shares within thirty (30) days
after such written notice has been given, provided that all the Registrable
Securities for which the Initiating Person and the Eligible Holders have
requested registration shall be covered by such registration statement
before any other securities are included.
(e) Underwriter's Cutback.
If the public offering of Registrable Securities is to be underwritten
and, in the good faith judgment of the managing underwriter, the inclusion
of all the Registrable Securities requested to be registered hereunder
would interfere with the successful marketing of such shares of Registrable
Securities, the number of shares of Registrable Securities to be included
shall be reduced and the number of shares to be included in the
underwriting or registration shall be allocated first among the Eligible
Holders pro rata upon the basis of the number of shares of Registrable
Securities sought to be offered by the Eligible Holders pursuant to such
Demand Registration and any remainder shall be allocated among the Company
and the other persons entitled to incidental registrations pro rata upon
the basis of the number of shares of Registrable Securities sought to be
registered thereby. If a person who has requested inclusion in such Demand
Registration does not agree to the terms of any such underwriting, such
person shall be excluded therefrom by written notice from the Company, the
underwriter or the Initiating Holder, and the securities owned by such
person(s) shall be withdrawn from registration (the "Withdrawn
Securities").
If there are any Withdrawn Securities as a result of an Underwriter's
Cutback, then the Company shall offer to those persons who have retained
rights to include securities in the Demand Registration the right to
include additional securities in the registration in an aggregate amount
equal to the number of Withdrawn Securities that would have been included
in the Demand Registration after giving effect to the Underwriter's Cutback
had such securities not been withdrawn, with such shares to be allocated
among such persons in accordance with the allocation of rights set forth in
this paragraph (e).
C-4
<PAGE>
(f) Managing Underwriter.
The managing underwriter or underwriters of any Underwritten Offering
covered by a Demand Registration shall be selected by a majority in
interest of the Eligible Holders participating in such Underwritten
Offering and shall be reasonably acceptable to the Company. The right of
any other Holders joining in a request for registration as provided in
Section 2(d) above to registration pursuant to this Section 2 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting on
the same terms as those of the Initiating Holder (unless otherwise mutually
agreed by a majority in interest of the Eligible Holders participating in
such registration and such Holder with respect to such participation and
inclusion).
3. Piggyback Registrations
(a) Participation.
Each time the Company decides to file a Registration Statement under
the Securities Act (other than registrations on Forms S-4 or S-8 or any
successor form thereto, and other than a Demand Registration or a demand
registration by an Initiating Person) covering the offer and sale by it or
any of its security holders of any of its securities for money, the Company
shall give written notice thereof to all Eligible Holders. The Company
shall include in such Registration Statement such shares of Registrable
Securities for which it has received a written request from any Eligible
Holder to register such shares within twenty (20) days after such written
notice has been given. If the Registration Statement is to cover an
Underwritten Offering, such Registrable Securities shall be included in the
underwriting on the same terms and conditions as the securities otherwise
being sold through the underwriters.
(b) Underwriter's Cutback.
Subject to the requirements of Section 12 hereof, if in the good faith
judgment of the managing underwriter of such offering the inclusion of all
of the shares of Registrable Securities and any other Common Stock
requested to be registered would interfere with the successful marketing of
such shares, then the number of shares of Registrable Securities and other
Common Stock to be included in the offering shall be reduced, with the
participation in such offering to be in the following order of priority:
(1) first, the shares of Common Stock which the Company proposes to sell
for its own account, (2) second, the shares of holders exercising rights
given to holders of Series B Preferred Stock or holders of Warrants issued
to Industrial-Works Holding Co., LLC, (3) third, the shares of Registrable
Securities of all Eligible Holders requested to be included, and (4)
fourth, any other shares of Common Stock requested to be included. Any
necessary allocation among the Holders of shares within each of the
foregoing groups shall be pro rata among such Holders requesting such
registration based
C-5
<PAGE>
upon the number of shares of Common Stock and Registrable Securities owned
by such Holders.
(c) Company Control.
The Company may decline to file a Registration Statement after giving
notice to Eligible Holders pursuant to Section 3(a) above, or withdraw a
Registration Statement after filing and after such notice, but prior to the
effectiveness thereof; provided that the Company shall promptly notify each
Eligible Holder in writing of any such action and provided further that the
Company shall bear all expenses incurred by each Eligible Holder or
otherwise in connection with such withdrawn Registration Statement.
4. Registration on Form S-3
(a) Right to Request Registrations on Form S-3.
At any time the Company is qualified for the use of Form S-3, in
addition to the rights contained in the foregoing provisions of this
Agreement, the Eligible Holders shall have the right to request
registrations on Form S-3 or any comparable or successor form. Each such
request shall be in writing and shall state the anticipated number of
shares of Registrable Securities to be disposed of and the anticipated
gross proceeds of such shares, and the intended methods of disposition of
such shares by such Eligible Holder or Eligible Holders, including whether
such resales are to be made on a delayed or continuous basis pursuant to
Rule 415. The Company shall not be obligated to effect any registration
pursuant to this Section 4 if (i) the Eligible Holders propose to sell
Registrable Securities representing less than fifteen percent (15% ) of the
shares of the Registrable Securities then held by all Eligible Holders or
(ii) the circumstances described in Section 2(c) shall apply (but subject
to the limitations set forth therein).
(b) Application of Certain Provisions.
If the registration is for an Underwritten Offering, the provisions of
Sections 2(d) and 2(f) hereof shall also apply to such registration, except
the Company may not include any shares for its own account.
5. Hold-back Agreements
(a) By Holders of Registrable Securities.
Upon the written request of the managing underwriter of any
Underwritten Offering of the Company's securities, a Holder of Registrable
Securities shall not sell or
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<PAGE>
otherwise dispose of any Registrable Securities (other than those included
in such registration) without the prior written consent of such managing
underwriter for a period (not to exceed thirty (30) days before the
effective date and one hundred twenty (120) days thereafter) that such
managing underwriter reasonably determines is necessary in order to effect
the Underwritten Offering; provided that each of the officers and directors
of the Company, and each Holder of more than one percent (1%) of the Common
Stock of the Company, shall have entered into substantially similar
holdback agreements with such managing underwriter covering at least the
same period.
(b) By the Company and Others.
The Company agrees:
(1) not to effect any public or private sale or distribution of
any of its equity securities during the 30-day period prior to, and
during the 120-day period after, the effective date of each
Underwritten Offering made pursuant to a Demand Registration or a
Piggyback Registration, if so requested in writing by the managing
underwriter (except as part of such Underwritten Offering, pursuant to
registrations on Forms S-4 or S-8 or any successor forms thereto), and
(2) not to issue any Equity Securities other than for sale in a
registered public offering unless each of the Persons to which such
securities are issued has entered a written agreement binding on its
transferees not to effect any public sale or distribution of such
securities during such 130-day period, including without limitation a
sale pursuant to Rule 144 under the Securities Act (except as part of
such Underwritten Registration, if and to the extent permitted
hereunder).
6. Registration Procedures
If and whenever the Company is required to register Registrable Securities
pursuant to this Agreement, the Company will use all commercially reasonable
efforts to effect such registration to permit the sale of such Registrable
Securities in accordance with the intended plan of distribution thereof and will
as expeditiously as practicable:
(a) prepare and file with the SEC as soon as practicable a
Registration Statement with respect to such Registrable Securities and use
all commercially reasonable efforts to cause such Registration Statement to
become effective and remain continuously effective until the date that is
the earlier to occur of (i) the date six months from the date such
Registration Statement was declared effective, and (ii) the date the last
of the Registrable
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<PAGE>
Securities covered by such Registration Statement have been sold, provided
that before filing a Registration Statement or Prospectus or any amendments
or supplements thereto, the Company shall furnish to Holders of Registrable
Securities covered by such Registration Statement and the underwriters, if
any, draft copies of all such documents proposed to be filed, which
documents will be subject to the review of each Eligible Holder and such
underwriters, and the Company shall not file any Registration Statement or
amendment thereto or any Prospectus or any supplement thereto to which the
Eligible Holders or the underwriters, if any, shall reasonably object;
(b) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement, and such supplements to the
Prospectus, as may be requested by any underwriter of Registrable
Securities or as may be required by the rules, regulations or instructions
applicable to the registration form used by the Company or by the
Securities Act or rules and regulations thereunder to keep the Registration
Statement effective until all Registrable Securities covered by such
Registration Statement are sold in accordance with the intended plan of
distribution set forth in such Registration Statement or supplement to the
Prospectus;
(c) promptly notify the selling Holders of Registrable Securities and
the managing underwriter, if any, and (if requested by any such Person)
confirm such advice in writing,
(1) when the Prospectus or any supplement or post-effective
amendment has been filed, and, with respect to the Registration
Statement or any post-effective amendment, when the same has become
effective,
(2) of any request by the SEC for amendments or supplements to
the Registration Statement or the Prospectus or for additional
information,
(3) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose,
(4) if at any time the representations and warranties of the
Company contemplated by clause (1) of paragraph (o) below cease to be
accurate in all material respects,
(5) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and
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<PAGE>
(6) of the existence of any fact which results in the
Registration Statement, the Prospectus or any document incorporated
therein by reference containing a misstatement;
(d) make all commercially reasonable efforts to obtain the withdrawal
of any order suspending the effectiveness of the Registration Statement at
the earliest practicable time;
(e) unless the Company objects in writing on reasonable grounds, if
requested by the managing underwriter or any Eligible Holder holding more
than twenty-five percent (25%) of the Registrable Securities then
outstanding, as promptly as practicable incorporate in a supplement or
post-effective amendment such information as the managing underwriter and
such Eligible Holder agree should be included therein relating to the sale
of the Registrable Securities, including, without limitation, information
with respect to the number of shares of Registrable Securities being sold
to underwriters, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the Underwritten
Offering of the Registrable Securities to be sold in such offering; and
make all required filings of such supplement or post-effective amendment as
soon as notified of the matters to be incorporated in such supplement or
post-effective amendment;
(f) only with respect to Demand Registrations, promptly prior to the
filing of any document which is to be incorporated by reference into the
Registration Statement or the Prospectus (after initial filing of the
Registration Statement) provide copies of such document to counsel to each
of the Eligible Holders and to the managing underwriter, if any, and make
the Company's representatives available for discussion of such document and
make such changes in such document prior to the filing thereof as counsel
for each Eligible Holder or underwriters may reasonably request;
(g) furnish to each selling Holder of Registrable Securities and the
managing underwriter, without charge, at least one signed copy of the
Registration Statement and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(h) deliver to each Eligible Holder and the underwriters, if any,
without charge, as many copies of each Prospectus (and each preliminary
prospectus) as such Persons may reasonably request (the Company hereby
consenting to the use of each such Prospectus (or preliminary prospectus)
by each of the selling Holders of Registrable Securities and the
underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by such Prospectus (or preliminary
prospectus));
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<PAGE>
(i) prior to any public offering of Registrable Securities, use all
commercially reasonable efforts to register or qualify or cooperate with
the selling Holders of Registrable Securities, the underwriters, if any,
and their respective counsel in connection with the registration or
qualification of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions as such underwriters may
designate in writing and do anything else necessary or advisable to enable
from a legal perspective the disposition in such jurisdictions of the
Registrable Securities covered by the Registration Statement; provided that
the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action
which would subject it to general service of process in any such
jurisdiction where it is not then so subject;
(j) cooperate with the selling Holders of Registrable Securities and
the managing underwriter, if any, to facilitate the timely preparation and
delivery of certificates not bearing any restrictive legends representing
the Registrable Securities to be sold and cause such Registrable Securities
to be in such denominations and registered in such names as the managing
underwriter may request at least three business days prior to any sale of
Registrable Securities to the underwriters;
(k) use all commercially reasonable efforts to cause the Registrable
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriters, if
any, to consummate the disposition of such Registrable Securities;
(l) if the Registration Statement or the Prospectus contains a
misstatement, prepare a supplement or post-effective amendment to the
Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable
Securities, the Prospectus will not contain a misstatement;
(m) use all commercially reasonable efforts to cause all Registrable
Securities covered by the Registration Statement to be listed on any
national securities exchange on which the Company's securities are listed
or authorized for quotation on Nasdaq, if requested by any Eligible Holder
or the managing underwriter, if any; provided, however, that the payment of
any required listing or other fee shall always be deemed to be
"commercially reasonable" for purposes of this Section 6(m);
(n) provide a CUSIP number for all Registrable Securities not later
than the effective date of the Registration Statement;
(o) enter into such agreements (including an underwriting agreement)
and do anything else reasonably necessary or advisable in order to expedite
or facilitate the
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<PAGE>
disposition of such Registrable Securities, and in such connection, whether
or not the registration is an Underwritten Registration:
(1) make such representations and warranties to the Holders of
such Registrable Securities and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to holders and
underwriters, respectively, in similar Underwritten Offerings;
(2) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriter, if any, and each
Eligible Holder) addressed to each selling Holder and the underwriter,
if any, covering the matters customarily covered in opinions delivered
to holders and underwriters, respectively, in similar Underwritten
Offerings and such other matters as may be reasonably requested by any
Eligible Holder or such underwriters;
(3) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the
selling Holders of Registrable Securities and the underwriters, if
any, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters to holders and
underwriters, respectively, in connection with similar Underwritten
Offerings;
(4) if an underwriting agreement is entered into, cause the same
to include customary indemnification and contribution provisions and
procedures with respect to such underwriters; and
(5) deliver such documents and certificates as may be reasonably
requested by any Eligible Holder and the managing underwriter, if any,
to evidence compliance with clause (1) above and with any customary
conditions contained in the underwriting agreement or other agreement
entered into by the Company.
The above shall be done at each closing under such underwriting or similar
agreement or as and to the extent otherwise reasonably requested by any
Eligible Holder;
(p) make available for inspection by representatives of any Eligible
Holder, any underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney or accountant retained by the
sellers or any such underwriter, all financial and other records and
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all information
reasonably requested
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<PAGE>
by any such seller or underwriter in connection with the Registration;
provided that any records, information or documents that are designated by
the Company in writing as confidential shall be kept confidential by such
Persons unless disclosure of such records, information or documents is
required by court or administrative order; and
(q) otherwise use all commercially reasonable efforts to comply with
all applicable rules and regulations of the SEC relating to such
Registration, and make generally available to its security holders earnings
statements satisfying the provisions of Section 12(a) of the Securities
Act, no later than forty-five (45) days after the end of any 12-month
period (or ninety (90) days, if such period is a fiscal year) commencing at
the end of any fiscal quarter in which Registrable Securities are sold to
underwriters in an Underwritten Offering, or, if not sold to underwriters
in such an offering, beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of the Registration
Statement, which statements shall cover said 12-month period.
7. Registration Expenses
(a) Demand Registrations and S-3 Registrations.
The Company shall bear all Expenses incurred in connection with any
Demand Registrations, S-3 Registrations or any Registrations which do not
become or are not maintained effective in accordance with the requirements
specified in Section 6(a), including expenses and fees of one counsel for
all Holders. Notwithstanding the foregoing, the Underwriters' Commissions
related or attributable to Registrable Securities sold or incurred in
connection with a Demand Registration or S-3 Registration that becomes
effective shall be shared by the Holders of the Registrable Securities
whose Registrable Securities are included in such Registration, pro rata,
in accordance with the aggregate amount of Registrable Securities sold by
such Holders.
(b) Piggyback Registrations.
The Company shall bear all Registration Expenses incurred in
connection with any Piggyback Registrations, including expenses and fees of
one counsel for all Holders, except that each Holder of the Registrable
Securities whose Registrable Securities are included in such Registration
shall pay its pro rata share of the Underwriters' Commissions related or
attributable to Registrable Securities sold or incurred in such
Registration, in accordance with the amount of Registrable Securities sold
by all such Holders.
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<PAGE>
(c) Company Expenses.
The Company also will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers
and employees performing legal or accounting duties), the expense of any
annual audit, the fees and expenses incurred in connection with any listing
of the securities to be registered on a securities exchange, and the fees
and expenses of any Person, including special experts, retained by the
Company.
8. Termination of Registration Rights. A Holder's registration rights under
this Exhibit A shall terminate and be of no further force and effect one year
following the issuance of the Warrant if all the Registrable Securities held by
and issuable to such Holder may be sold under Rule 144 during any ninety (90)
day period.
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<PAGE>
EXHIBIT 10.41
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, and in consideration of the execution and delivery
of the Commitment Letter between the issuer of this Warrant and Industrial-Works
Holding Co., LLC., a Delaware corporation dated February 18, 2000 ("Commitment
Letter"), Purchaser and its successors or assigns ("Holder"), is entitled to
purchase from FieldWorks, Incorporated, a Minnesota corporation (the "Company'),
up to 100,000 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 One Dollar $1.00 per share, subject to adjustment as noted below
(the "Warrant Exercise Price").
This Warrant may be exercised by Holder at any time or from time to
time, and shall remain exercisable until the fifth anniversary of the date
hereof. This Warrant, and any portion hereof, shall expire if not exercised
within such five-year period.
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
<PAGE>
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 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 Warrant remains exercisable shall also be delivered
to Holder hereof within such time. No fractional shares shall be issued upon any
exercise of this Warrant.
2. "Cashless" Exercise. At Holder's option, all or any portion of the
Warrant Exercise Price may be paid by surrendering a portion of the shares
issuable upon exercise of this Warrant. The value of the shares so surrendered
shall be the closing price of the Company's common stock on the date of Holder's
notice of exercise.
3. 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.
4. Adjustment. The Warrant Exercise Price shall be subject to
adjustment from time to time as hereinafter provided in this Section 4:
(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 stock dividend, 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 stock
dividend, reorganization, reclassification, consolidation, merger or
sale, 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
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<PAGE>
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 stock dividend, 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 Holder at the
last address of Holder appearing on the books of the Company the
obligation to deliver to Holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, 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 per-share consideration 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 Exercise 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
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, stock 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) Upon any adjustment of the Warrant Exercise Price, Holder
shall thereafter be entitled to purchase, at the Warrant Exercise Price
resulting from such
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<PAGE>
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.
(e) Upon any adjustment of the warrant exercise price, the
Company shall give written notice thereof to 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.
5. No Rights as Shareholder. This Warrant shall not entitle Holder to
any voting rights or other rights as a shareholder of the Company.
6. Registration Rights. Holder shall be entitled to certain demand
registration rights and also entitled to participate in any registered offering
of shares of the Company's common stock. Holder's participation in any such
offering shall be in accordance with the procedures, and subject to the
limitations, set forth on Exhibit A to this Warrant.
7. 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.
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<PAGE>
8. 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]
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<PAGE>
[SIGNATURE PAGE TO WARRANT]
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
and delivered by a duly authorized officer.
Dated: February 18, 2000
FIELDWORKS, INCORPORATED
By /s/ Karen L. Engebretson
-----------------------------
Chief Financial Officer
Name and Address of Holder:
Industrial-Works Holding Co., LLC
19200 Von Karman Avenue, Suite 400
Irvine, California 92612
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<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.
<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
other than to Holder: Social Security or other
Tax Identification No.
Please print present name and address
<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 address
<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.
"Common Stock Equivalents" shall mean, with respect to any Eligible
Holder as of any applicable date of determination, a sum equal to (i) the
number of shares of Common Stock owned by such Eligible Holder as of such
date of determination plus (ii) with respect to the Warrant owned by such
Eligible Holder, the number of shares of Common Stock issued or issuable
upon exercise of such Warrant as of the date of determination (in each
case, whether or not such Series B Preferred Stock or Warrant is so
converted or exercised).
"Eligible Holders" means each of Industrial-Works Holding Co., LLC and
any Person to whom it transfers any Registrable Securities, or any of their
respective Permitted Transferees.
"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 7 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 this Exhibit A
is are not assigned.
A-1
<PAGE>
"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 United States Securities and Exchange
Commission.
"Securities Purchase Agreement" shall mean the Agreement dated
November 20, 1999 between the Company and Industrial-Works Holding Corp.,
to which Industrial Works Holding Co., LLC has succeeded.
"Warrant" shall mean this Warrant to purchase common stock issued by
the Company in connection with the termination of the Securities Purchase
Agreement.
2. Demand Registrations
(a) Required Threshold.
Any Eligible Holder owning at least One Hundred Sixty-Five Thousand
(165,000) Common Stock Equivalents (as such number may be equitably
adjusted from time to time to reflect any stock split, stock dividend,
recapitalization, reclassification, consolidation or the like) may request
(such Person, the "Initiating Holder") that the Company file a Registration
Statement under the Securities Act on an appropriate form with respect to
at least fifty percent (50%) of the Registrable Securities owned by such
Initiating Holder (which form shall be available for the sale of the
Registrable Securities in accordance with the intended method or methods of
distribution thereof and shall include all financial statements required by
the SEC to be filed herewith) covering the shares of Registrable Securities
that are the subject of such request and the Company shall file such a
Registration Statement.
(b) Number of Demand Registrations.
The Company shall be obligated to prepare, file and cause to become
effective pursuant to this Section 2 only one (1) Registration Statement in
the aggregate pursuant to Section 2(a) above for the Eligible Holders;
provided, however, that a Registration Statement shall not be counted as
the Demand Registration hereunder unless it becomes effective and is
maintained effective in accordance with the requirements specified in
Section 6(a); provided, further, that if there is an underwriter's cutback
pursuant to Section 2(e) with respect to the request for registration
initiated by an Eligible Holder, such requested registration shall not be
deemed to be the Demand Registration.
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(c) Deferral by Company.
Notwithstanding anything in this Section 2 to the contrary, the
Company shall not be obligated to prepare, file and cause to become
effective pursuant to this Section 2 a Registration Statement if within
five (5) days of receipt of a request for a Demand Registration the Company
furnishes to the Initiating Holder a certificate signed by the Chief
Executive Officer of the Company that, in the good faith judgment of the
Board of Directors, it would be detrimental in any material respect to the
Company and its shareholders for the Company to comply with the Demand
Registration, and it is therefore essential to defer the filing of the
Registration Statement relating thereto. Any such deferral shall be for a
period of not more than six (6) months after the Company's receipt of the
Initiating Holder's written request for registration pursuant to this
Section 2; provided, however, that the Company may not exercise this right
more than once with respect to the Demand Registration and that any
requested registration deferred, and not ultimately effected, by the
Company pursuant to the provisions of this Section 2(c) shall thereafter
not be deemed to be the Demand Registration for purposes of the Section
2(a) above.
(d) Participation.
The Company shall promptly give written notice to all other Eligible
Holders upon receipt of a request for a Demand Registration pursuant to
Section 2(a) above. Such other Eligible Holders may, by written notice to
the Company and the Initiating Holder, within thirty (30) business days of
the Company's notice, elect to join in a request for a Demand Registration
pursuant to Section 2(a) above, with respect to any number of shares of
Registrable Securities owned by such Eligible Holder. The Registrable
Securities of the other Eligible Holders being offered in such Demand
Registration shall be treated pari passu with the Registrable Securities
being offered by the Initiating Holder for all purposes including
"underwriter's cutbacks" under subsection (e) of this Section and any such
request by an Eligible Holder shall not be treated as either a request by
such Eligible Holder for a Piggyback Registration under Section 3 or as a
request by such Eligible Holder for a Demand Registration under this
Section 2. The Company shall include in such Demand Registration such
shares of Registrable Securities for which it has received written requests
to register such shares within thirty (30) days after such written notice
has been given, provided that all the Registrable Securities for which the
Initiating Holder and the other Eligible Holders have requested
registration shall be covered by such registration statement before any
other securities are included.
In addition, the Company shall promptly give written notice to all
eligible Holders upon receipt of a request for a demand registration by any
Person (such Person, the "Initiating Person") pursuant to any other
registration rights agreement with the Company (whether such other
registration rights agreement is entered into before or after the date
hereof). Each Eligible Holder may, by written notice to the Company, within
thirty (30)
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business days of the Company's notice, elect to request a Demand
Registration pursuant to Section 2(a) above, with respect to any shares of
Registrable Securities owned by such Eligible Holder. The Registrable
Securities of the Eligible Holders being offered in such Demand
Registration shall be treated pari passu with the registrable securities
being offered by the Initiating Person for all purposes including
"underwriter's cutbacks" and any such request by an Eligible Holder shall
not be treated as either a request by such Eligible Holder for a Piggyback
Registration under Section 3 or as a request by such Eligible Holder for a
Demand Registration under this Section 2. The Company shall include in such
demand registration such shares of Registrable Securities for which it has
received written requests to register such shares within thirty (30) days
after such written notice has been given, provided that all the Registrable
Securities for which the Initiating Person and the Eligible Holders have
requested registration shall be covered by such registration statement
before any other securities are included.
(e) Underwriter's Cutback.
If the public offering of Registrable Securities is to be underwritten
and, in the good faith judgment of the managing underwriter, the inclusion
of all the Registrable Securities requested to be registered hereunder
would interfere with the successful marketing of such shares of Registrable
Securities, the number of shares of Registrable Securities to be included
shall be reduced and the number of shares to be included in the
underwriting or registration shall be allocated first among the Eligible
Holders pro rata upon the basis of the number of shares of Registrable
Securities sought to be offered by the Eligible Holders pursuant to such
Demand Registration and any remainder shall be allocated among the Company
and the other persons entitled to incidental registrations pro rata upon
the basis of the number of shares of Registrable Securities sought to be
registered thereby. If a person who has requested inclusion in such Demand
Registration does not agree to the terms of any such underwriting, such
person shall be excluded therefrom by written notice from the Company, the
underwriter or the Initiating Holder, and the securities owned by such
person(s) shall be withdrawn from registration (the "Withdrawn
Securities").
If there are any Withdrawn Securities as a result of an Underwriter's
Cutback, then the Company shall offer to those persons who have retained
rights to include securities in the Demand Registration the right to
include additional securities in the registration in an aggregate amount
equal to the number of Withdrawn Securities that would have been included
in the Demand Registration after giving effect to the Underwriter's Cutback
had such securities not been withdrawn, with such shares to be allocated
among such persons in accordance with the allocation of rights set forth in
this paragraph (e).
(f) Managing Underwriter.
The managing underwriter or underwriters of any Underwritten Offering
covered by a Demand Registration shall be selected by a majority in
interest of the Eligible
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Holders participating in such Underwritten Offering and shall be reasonably
acceptable to the Company. The right of any other Holders joining in a
request for registration as provided in Section 2(d) above to registration
pursuant to this Section 2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting on the same terms as those of
the Initiating Holder (unless otherwise mutually agreed by a majority in
interest of the Eligible Holders participating in such registration and
such Holder with respect to such participation and inclusion).
3. Piggyback Registrations
(a) Participation.
Each time the Company decides to file a Registration Statement under
the Securities Act (other than registrations on Forms S-4 or S-8 or any
successor form thereto, and other than a Demand Registration or a demand
registration by an Initiating Person) covering the offer and sale by it or
any of its security holders of any of its securities for money, the Company
shall give written notice thereof to all Eligible Holders. The Company
shall include in such Registration Statement such shares of Registrable
Securities for which it has received a written request from any Eligible
Holder to register such shares within twenty (20) days after such written
notice has been given. If the Registration Statement is to cover an
Underwritten Offering, such Registrable Securities shall be included in the
underwriting on the same terms and conditions as the securities otherwise
being sold through the underwriters.
(b) Underwriter's Cutback.
Subject to the requirements of Section 12 hereof, if in the good faith
judgment of the managing underwriter of such offering the inclusion of all
of the shares of Registrable Securities and any other Common Stock
requested to be registered would interfere with the successful marketing of
such shares, then the number of shares of Registrable Securities and other
Common Stock to be included in the offering shall be reduced, with the
participation in such offering to be in the following order of priority:
(1) first, the shares of Common Stock which the Company proposes to sell
for its own account, (2) second, the shares of Registrable Securities of
all Eligible Holders requested to be included, and (3) third, any other
shares of Common Stock requested to be included. Any necessary allocation
among the Holders of shares within each of the foregoing groups shall be
pro rata among such Holders requesting such registration based upon the
number of shares of Common Stock and Registrable Securities owned by such
Holders.
(c) Company Control.
The Company may decline to file a Registration Statement after giving
notice to Eligible Holders pursuant to Section 3(a) above, or withdraw a
Registration Statement after filing and after such notice, but prior to the
effectiveness thereof; provided that the
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Company shall promptly notify each Eligible Holder in writing of any such
action and provided further that the Company shall bear all expenses
incurred by each Eligible Holder or otherwise in connection with such
withdrawn Registration Statement.
4. Registration on Form S-3
(a) Right to Request Registrations on Form S-3.
After the Company has qualified for the use of Form S-3, in addition
to the rights contained in the foregoing provisions of this Agreement, the
Eligible Holders shall have the right to request registrations on Form S-3
or any comparable or successor form. Each such request shall be in writing
and shall state the anticipated number of shares of Registrable Securities
to be disposed of and the anticipated gross proceeds of such shares, and
the intended methods of disposition of such shares by such Eligible Holder
or Eligible Holders, including whether such resales are to be made on a
delayed or continuous basis pursuant to Rule 415. The Company shall not be
obligated to effect any registration pursuant to this Section 4 if (i) the
Eligible Holders propose to sell Registrable Securities representing less
than fifteen percent (15% ) of the shares of the Registrable Securities
then held by all Eligible Holders or (ii) the circumstances described in
Section 2(c) shall apply (but subject to the limitations set forth
therein).
(b) Application of Certain Provisions.
If the registration is for an Underwritten Offering, the provisions of
Sections 2(d) and 2(f) hereof shall also apply to such registration, except
the Company may not include any shares for its own account.
5. Hold-back Agreements
(a) By Holders of Registrable Securities.
Upon the written request of the managing underwriter of any
Underwritten Offering of the Company's securities, a Holder of Registrable
Securities shall not sell or otherwise dispose of any Registrable
Securities (other than those included in such registration) without the
prior written consent of such managing underwriter for a period (not to
exceed thirty (30) days before the effective date and one hundred twenty
(120) days thereafter) that such managing underwriter reasonably determines
is necessary in order to effect the Underwritten Offering; provided that
each of the officers and directors of the Company, and each Holder of more
than one percent (1%) of the Common Stock of the Company, shall have
entered into substantially similar holdback agreements with such managing
underwriter covering at least the same period.
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<PAGE>
(b) By the Company and Others.
The Company agrees:
(1) not to effect any public or private sale or distribution of
any of its equity securities during the 30-day period prior to, and
during the 120-day period after, the effective date of each
Underwritten Offering made pursuant to a Demand Registration or a
Piggyback Registration, if so requested in writing by the managing
underwriter (except as part of such Underwritten Offering, pursuant to
registrations on Forms S-4 or S-8 or any successor forms thereto), and
(2) not to issue any Equity Securities other than for sale in a
registered public offering unless each of the Persons to which such
securities are issued has entered a written agreement binding on its
transferees not to effect any public sale or distribution of such
securities during such 130-day period, including without limitation a
sale pursuant to Rule 144 under the Securities Act (except as part of
such Underwritten Registration, if and to the extent permitted
hereunder).
6. Registration Procedures
If and whenever the Company is required to register Registrable Securities
pursuant to this Agreement, the Company will use all commercially reasonable
efforts to effect such registration to permit the sale of such Registrable
Securities in accordance with the intended plan of distribution thereof and will
as expeditiously as practicable:
(a) prepare and file with the SEC as soon as practicable a
Registration Statement with respect to such Registrable Securities and use
all commercially reasonable efforts to cause such Registration Statement to
become effective and remain continuously effective until the date that is
the earlier to occur of (i) the date six months from the date such
Registration Statement was declared effective, and (ii) the date the last
of the Registrable Securities covered by such Registration Statement have
been sold, provided that before filing a Registration Statement or
Prospectus or any amendments or supplements thereto, the Company shall
furnish to Holders of Registrable Securities covered by such Registration
Statement and the underwriters, if any, draft copies of all such documents
proposed to be filed, which documents will be subject to the review of each
Eligible Holder and such underwriters, and the Company shall not file any
Registration Statement or amendment thereto or any Prospectus or any
supplement thereto to which the Eligible Holders or the underwriters, if
any, shall reasonably object;
(b) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement, and such supplements to the
Prospectus, as may be requested by any underwriter of Registrable
Securities or as may be required by the rules,
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regulations or instructions applicable to the registration form used by the
Company or by the Securities Act or rules and regulations thereunder to
keep the Registration Statement effective until all Registrable Securities
covered by such Registration Statement are sold in accordance with the
intended plan of distribution set forth in such Registration Statement or
supplement to the Prospectus;
(c) promptly notify the selling Holders of Registrable Securities and
the managing underwriter, if any, and (if requested by any such Person)
confirm such advice in writing,
(1) when the Prospectus or any supplement or post-effective
amendment has been filed, and, with respect to the Registration
Statement or any post-effective amendment, when the same has become
effective,
(2) of any request by the SEC for amendments or supplements to
the Registration Statement or the Prospectus or for additional
information,
(3) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose,
(4) if at any time the representations and warranties of the
Company contemplated by clause (1) of paragraph (o) below cease to be
accurate in all material respects,
(5) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and
(6) of the existence of any fact which results in the
Registration Statement, the Prospectus or any document incorporated
therein by reference containing a misstatement;
(d) make all commercially reasonable efforts to obtain the withdrawal
of any order suspending the effectiveness of the Registration Statement at
the earliest practicable time;
(e) unless the Company objects in writing on reasonable grounds, if
requested by the managing underwriter or any Eligible Holder holding more
than twenty-five percent (25%) of the Registrable Securities then
outstanding, as promptly as practicable incorporate in a supplement or
post-effective amendment such information as the managing underwriter and
such Eligible Holder agree should be included therein relating to the sale
of the Registrable Securities, including, without limitation, information
with respect to the
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number of shares of Registrable Securities being sold to underwriters, the
purchase price being paid therefor by such underwriters and with respect to
any other terms of the Underwritten Offering of the Registrable Securities
to be sold in such offering; and make all required filings of such
supplement or post-effective amendment as soon as notified of the matters
to be incorporated in such supplement or post-effective amendment;
(f) only with respect to Demand Registrations, promptly prior to the
filing of any document which is to be incorporated by reference into the
Registration Statement or the Prospectus (after initial filing of the
Registration Statement) provide copies of such document to counsel to each
of the Eligible Holders and to the managing underwriter, if any, and make
the Company's representatives available for discussion of such document and
make such changes in such document prior to the filing thereof as counsel
for each Eligible Holder or underwriters may reasonably request;
(g) furnish to each selling Holder of Registrable Securities and the
managing underwriter, without charge, at least one signed copy of the
Registration Statement and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(h) deliver to each Eligible Holder and the underwriters, if any,
without charge, as many copies of each Prospectus (and each preliminary
prospectus) as such Persons may reasonably request (the Company hereby
consenting to the use of each such Prospectus (or preliminary prospectus)
by each of the selling Holders of Registrable Securities and the
underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by such Prospectus (or preliminary
prospectus));
(i) prior to any public offering of Registrable Securities, use all
commercially reasonable efforts to register or qualify or cooperate with
the selling Holders of Registrable Securities, the underwriters, if any,
and their respective counsel in connection with the registration or
qualification of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions as such underwriters may
designate in writing and do anything else necessary or advisable to enable
from a legal perspective the disposition in such jurisdictions of the
Registrable Securities covered by the Registration Statement; provided that
the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action
which would subject it to general service of process in any such
jurisdiction where it is not then so subject;
(j) cooperate with the selling Holders of Registrable Securities and
the managing underwriter, if any, to facilitate the timely preparation and
delivery of certificates not bearing any restrictive legends representing
the Registrable Securities to be sold and cause such Registrable Securities
to be in such denominations and registered in such names
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as the managing underwriter may request at least three business days prior
to any sale of Registrable Securities to the underwriters;
(k) use all commercially reasonable efforts to cause the Registrable
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriters, if
any, to consummate the disposition of such Registrable Securities;
(l) if the Registration Statement or the Prospectus contains a
misstatement, prepare a supplement or post-effective amendment to the
Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable
Securities, the Prospectus will not contain a misstatement;
(m) use all commercially reasonable efforts to cause all Registrable
Securities covered by the Registration Statement to be listed on any
national securities exchange on which the Company's securities are listed
or authorized for quotation on Nasdaq, if requested by any Eligible Holder
or the managing underwriter, if any; provided, however, that the payment of
any required listing or other fee shall always be deemed to be
"commercially reasonable" for purposes of this Section 6(m);
(n) provide a CUSIP number for all Registrable Securities not later
than the effective date of the Registration Statement;
(o) enter into such agreements (including an underwriting agreement)
and do anything else reasonably necessary or advisable in order to expedite
or facilitate the disposition of such Registrable Securities, and in such
connection, whether or not the registration is an Underwritten
Registration:
(1) make such representations and warranties to the Holders of
such Registrable Securities and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to holders and
underwriters, respectively, in similar Underwritten Offerings;
(2) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriter, if any, and each
Eligible Holder) addressed to each selling Holder and the underwriter,
if any, covering the matters customarily covered in opinions delivered
to holders and underwriters, respectively, in similar Underwritten
Offerings and such other matters as may be reasonably requested by any
Eligible Holder or such underwriters;
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(3) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the
selling Holders of Registrable Securities and the underwriters, if
any, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters to holders and
underwriters, respectively, in connection with similar Underwritten
Offerings;
(4) if an underwriting agreement is entered into, cause the same
to include customary indemnification and contribution provisions and
procedures with respect to such underwriters; and
(5) deliver such documents and certificates as may be reasonably
requested by any Eligible Holder and the managing underwriter, if any,
to evidence compliance with clause (1) above and with any customary
conditions contained in the underwriting agreement or other agreement
entered into by the Company.
The above shall be done at each closing under such underwriting or similar
agreement or as and to the extent otherwise reasonably requested by any
Eligible Holder;
(p) make available for inspection by representatives of any Eligible
Holder, any underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney or accountant retained by the
sellers or any such underwriter, all financial and other records and
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all information
reasonably requested by any such seller or underwriter in connection with
the Registration; provided that any records, information or documents that
are designated by the Company in writing as confidential shall be kept
confidential by such Persons unless disclosure of such records, information
or documents is required by court or administrative order; and
(q) otherwise use all commercially reasonable efforts to comply with
all applicable rules and regulations of the SEC relating to such
Registration, and make generally available to its security holders earnings
statements satisfying the provisions of Section 12(a) of the Securities
Act, no later than forty-five (45) days after the end of any 12-month
period (or ninety (90) days, if such period is a fiscal year) commencing at
the end of any fiscal quarter in which Registrable Securities are sold to
underwriters in an Underwritten Offering, or, if not sold to underwriters
in such an offering, beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of the Registration
Statement, which statements shall cover said 12-month period.
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7. Registration Expenses
(a) Demand Registrations and S-3 Registrations.
The Company shall bear all Expenses incurred in connection with any
Demand Registrations, S-3 Registrations or any Registrations which do not
become or are not maintained effective in accordance with the requirements
specified in Section 6(a), including expenses and fees of one counsel for
all Holders. Notwithstanding the foregoing, the Underwriters' Commissions
related or attributable to Registrable Securities sold or incurred in
connection with a Demand Registration or S-3 Registration that becomes
effective shall be shared by the Holders of the Registrable Securities
whose Registrable Securities are included in such Registration, pro rata,
in accordance with the aggregate amount of Registrable Securities sold by
such Holders.
(b) Piggyback Registrations.
The Company shall bear all Registration Expenses incurred in
connection with any Piggyback Registrations, including expenses and fees of
one counsel for all Holders, except that each Holder of the Registrable
Securities whose Registrable Securities are included in such Registration
shall pay its pro rata share of the Underwriters' Commissions related or
attributable to Registrable Securities sold or incurred in such
Registration, in accordance with the amount of Registrable Securities sold
by all such Holders.
(c) Company Expenses.
The Company also will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers
and employees performing legal or accounting duties), the expense of any
annual audit, the fees and expenses incurred in connection with any listing
of the securities to be registered on a securities exchange, and the fees
and expenses of any Person, including special experts, retained by the
Company.
8. Termination of Registration Rights. A Holder's registration rights under
this Exhibit A shall terminate and be of no further force and effect one year
following the issuance of the Warrant if all the Registrable Securities held by
and issuable to such Holder may be sold under Rule 144 during any ninety (90)
day period.
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<PAGE>
[LETTERHEAD OF INDUSTRIAL-WORKS HOLDING CO., LLC]
March 31, 2000
Fieldworks, Incorporated
7631 Anagram Drive
Eden Prairie, MN 55344
Attention: Mr. David Malmberg, Chairman
Ladies and Gentlemen:
We previously issued to you by a letter dated February 18, 2000 a commitment to
purchase up to $3,000,000 of additional Series B Preferred Stock of Fieldworks.
You have requested us to modify such commitment and to invest additional funds
at a date earlier than our previous commitment contemplated, and we are today
entering into a Stock Purchase Agreement providing for us to purchase 500,000
shares of a new Series C Preferred Stock at $2.00 per share. In the same
agreement, Fieldworks is committing to commence a registered offering to all
holders of its stock of rights to purchase common stock at $2.00 per share (the
"rights offering").
This letter is written to confirm the agreement of IWHC to purchase at least
1,000,000 shares in this rights offering, provided that other shareholders
purchase at least 1,500,000 shares, and provided the purchase price in the
rights offering is $2.00 per share, as presently contemplated. If the price is
changed with our consent, IWHC will purchase $2,000,000 in value provided other
holders purchase at least $3,000,000 in value. This commitment shall expire if
the rights offering is not completed by June 30, 2000 or if prior to the
completion of the rights offering the Fieldworks common stock ceases to be
admitted to trading (or if Fieldworks is given notice of a decision to cause
such a delisting) on the Nasdaq National Market System.
IWHC reserves the right to purchase its full allocation in the rights offering
(considering both its Series B Preferred Stock and the newly acquired Series C
Preferred) and to exercise its oversubscription privilege.
In consideration for IWHC's commitment in this letter, FieldWorks acknowledges
that the February 18, 2000 comittment letter is cancelled and replaced by this
commitment letter. IWHC shall retain the five-year warrant to purchase 100,000
shares of Common Stock of FieldWorks issued on the date of acceptance of the
February 18, 2000 commitment.
<PAGE>
As the holder of the Fieldworks Series B Preferred Stock, IWHC hereby consents
to the Stock Purchase Agreement dated March 31, 2000 and to the issuance of the
Series C Convertible Participating Preferred Stock and to all terms of such
Series C Preferred.
If the terms of this Commitment Letter are acceptable, please sign below and
return a copy of this letter to us.
Sincerely,
/s/ Michael E. Johnson
- ----------------------
Michael E. Johnson
Managing Director
The undersigned accepts the foregoing commitment and the terms and conditions of
this Commitment Letter.
FIELDWORKS, INCORPORATED
By: /s/ David Malmberg
- -----------------------------
David Malmberg
Chairman
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 8, 2000
included in FieldWorks, Incorporated's Form 10-K for the year ended January 2,
2000 and to all references to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
April 6, 2000
