EXHIBIT 10.1
Eagle Pacific Industries, Inc.
Preferred Stock Purchase Agreement
Dated as of May 1, 1997
Re: 10,000 Shares 8% Convertible Preferred Stock
Table of Contents
Section Heading Page
Section 1. Description of Preferred Stock and Commitment..............1
Section 1.1. Authorization.................................1
Section 1.2. Commitment....................................2
Section 1.3. Failure to Deliver............................2
Section 1.4. The Closing Date..............................2
Section 1.5. Definitions...................................2
Section 1.6. Several Obligations...........................2
Section 2. Direct Payment; Delivery Expense; Taxes; Exchange
and Replacement of Shares..................................2
Section 2.1. Direct Payment................................2
Section 2.2. Delivery Expense..............................3
Section 2.3. Taxes.........................................3
Section 2.4. Replacement of Certificates for Shares........3
Section 2.5. Exchange of Certificates for Shares...........4
Section 3. Representations............................................4
Section 3.1. Representations of the Company................4
Section 3.2. Representations of the Purchasers.............9
Section 4. Closing Conditions.........................................9
Section 4.1. Execution of Documents........................9
Section 4.2. Closing Certificate...........................9
Section 4.3. Legal Opinions................................9
Section 4.4. Concurrent Sale of Preferred Stock............9
Section 4.5. Rights Agreement.............................10
Section 4.6. Charter Documents............................10
Section 4.7. Consent of Holders of Other Securities.......10
Section 4.8. West Jordan, Utah Facility...................10
Section 4.9. Legal Investment.............................10
Section 4.10. Resolution...................................10
Section 4.11. Private Placement Number.....................10
Section 4.12. Special Counsel Fees.........................10
Section 4.13. Satisfactory Proceedings.....................11
Section 4.14. Waiver of Conditions.........................11
Section 5. Financial Statements and Other Information................11
Section 5.1. Financial and Business Information...........11
Section 5.2. Officer's Certificates.......................13
Section 5.3. Accountants' Certificates....................13
Section 5.4. Inspection...................................13
Section 5.5. Observation Rights...........................13
Section 5.6. Confidentiality..............................14
Section 6. Covenants of the Company..................................15
Section 6.1. Corporate Existence..........................15
Section 6.2. Purchase of Shares...........................15
Section 6.3. Restrictions on Dividends or Redemptions.....15
Section 6.4. Reservation of Common Stock..................16
Section 6.5. Remedies and Default.........................16
Section 7. Definitions...............................................16
Section 7.1. Definitions..................................16
Section 7.2. Accounting Principles........................19
Section 7.3. Directly or Indirectly.......................19
Section 8. Amendments, Waivers and Consents..........................19
Section 8.1. Consent Required.............................19
Section 8.2. Solicitation of Holders......................19
Section 8.3. Effect of Amendment or Waiver................19
Section 9. Miscellaneous................................20
Section 9.1. Expenses.....................................20
Section 9.2. Notices......................................20
Section 9.3. Successors and Assigns.......................20
Section 9.4. Survival of Covenants and Representations....21
Section 9.5. Severability.................................21
Section 9.6. Governing Law................................21
Section 9.7. Captions.....................................21
Signatures..............................................................21
Attachments to Preferred Stock Purchase Agreement:
Schedule I -- Schedule of Purchasers
Schedule II -- Subsidiaries
Schedule III -- List of Outstanding Options, Warrants and Other
Agreements Pursuant to Which Company is Obligated
to Issue Common Stock
Exhibit A -- Form of Statement of Designation of Shares
Exhibit B -- Description of Closing Opinion of Special Counsel
to the Purchasers
Exhibit C -- Description of Closing Opinion of Counsel to the
Company
Exhibit D -- Form of Rights Agreement
Exhibit E -- Description of Indebtedness for Borrowed Money
and Liens
Eagle Pacific Industries, Inc.
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Preferred Stock Purchase Agreement
Re: 10,000 Shares 8% Convertible Preferred Stock
Dated as of May 1, 1997
To the Purchasers named in
Schedule I to this Agreement
Gentlemen:
The undersigned, Eagle Pacific Industries, Inc., a Minnesota corporation
(together with any Person who succeeds to all, or substantially all, of the
assets and business of Eagle Pacific Industries, Inc., the "Company"), agrees
with the purchasers named in Schedule I to this Agreement, the "Purchasers" as
follows:
Section 1. Description of Preferred Stock and Commitment.
Section 1.1. Authorization. The Company will issue and sell an aggregate of
10,000 shares of 8% Convertible Preferred Stock ($.01 Par Value), bearing
cumulative dividends at the annual rate of 8% of the Liquidation Value thereof
per annum per share, such dividends to be payable quarterly on each March 30,
June 30, September 30, and December 30, commencing June 30, 1997; provided that
if the corporation shall fail to pay any such quarterly dividend, such dividends
shall thereafter accrue at the rate of 12% of the Liquidation Value thereof per
annum per share until such time as the corporation shall thereafter pay such
accrued dividends in cash (which shares are referred to as the "Preferred
Stock"). The Preferred Stock shall have the respective designations,
preferences, qualifications, limitations, restrictions and such special and
relative rights as are set forth in the form of Statement of Designation of
Shares attached hereto
as Exhibit A (the "Statement of Designation") setting forth the Resolution (the
"Resolution") to be adopted by the Board of Directors of the Company prior to
the Closing Date (defined below) designating the Preferred Stock. The shares of
Preferred Stock are convertible into shares of Common Stock of the Company on
the terms and conditions set forth in the Statement of Designation. The
Preferred Stock will rank, as to preferences on payment of dividends, redemption
and distribution of assets upon liquidation, prior to any and all other equity
securities of the Company.
Section 1.2. Commitment. Subject to the terms and conditions hereof and on
the basis of the representations and warranties hereinafter set forth, the
Company agrees to issue and sell to each Purchaser, and such Purchaser agrees to
purchase from the Company, on the Closing Date, the number of shares of
Preferred Stock set forth opposite its name on Schedule I hereto at a price of
$1,000.00 per share. The Preferred Stock delivered to each Purchaser on the
Closing Date will be in the form of a certificate or certificates of Preferred
Stock registered in the name of such Purchaser or the name of its nominee and in
such denomination or denominations as are specified in Schedule I hereto.
Section 1.3. Failure to Deliver. If on the Closing Date the Company fails
to tender to each Purchaser against payment the Preferred Stock to be purchased
by such Purchaser on the Closing Date or if the conditions to such Purchaser's
obligation specified in Section 4 have not been fulfilled or waived by such
Purchaser, such Purchaser may thereupon elect to be relieved of all further
obligations under this Agreement. Nothing in this Section shall operate to
relieve the Company from its obligations hereunder or to waive any Purchaser's
rights against the Company.
Section 1.4. The Closing Date. Delivery of the certificates evidencing the
shares of Preferred Stock to be purchased by each Purchaser will be made at the
offices of ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, at
10:00 A.M., Chicago time, on May 9, 1997 (or such other date, not later than May
30, 1997, as the Purchasers shall agree (the "Closing Date")) against payment of
the purchase price therefor by wire transfer credit (of Federal or other
immediately available funds) to the Company's Account No. 105700660779 at
FirstBank, N.A., Lincoln, Nebraska, ABA No. ▇▇▇▇▇▇▇▇▇.
Section 1.5. Definitions. Capitalized terms not otherwise defined herein
shall have the respective meanings assigned thereto in Section 7.
Section 1.6. Several Obligations. The obligations of the Purchasers shall
be several and not joint and no Purchaser shall be liable or responsible for the
acts of any other Purchaser.
Section 2. Direct Payment; Delivery Expense; Taxes; Exchange and
Replacement of Shares.
Section 2.1. Direct Payment. The Company will pay punctually all amounts
(whether as dividends, upon redemption of shares or otherwise) payable to each
Purchaser or its nominee or any Institutional Holder of the outstanding shares
of Preferred Stock with respect to any shares of Preferred Stock (without any
presentment or surrender of any certificate for any such shares on partial
redemption of any of the shares evidenced by such certificate) (i) by wire
transfer in immediately available funds to such bank account at a commercial
bank in the United States of America as may be designated under such Purchaser's
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name at the foot of this Agreement or as may hereafter be designated or
redesignated by written notice to the Company from such Purchaser or such
Institutional Holder of the Preferred Stock, and (ii) if payment in the manner
provided by the foregoing clause (i) has not been specified, by check duly
mailed and addressed to such address as may be specified in a written notice to
the Company by such Purchaser or such Institutional Holder of the Preferred
Stock. Each Purchaser agrees that if such Purchaser sells or otherwise disposes
of any certificate for shares of Preferred Stock, such Purchaser will, prior to
the delivery of such certificate, make or cause to be made a notation on such
certificate of the number of shares of Preferred Stock originally evidenced
thereby which have theretofore been redeemed.
Section 2.2. Delivery Expense. If any Purchaser surrenders any certificate
for shares of Preferred Stock to the Company or a transfer agent of the Company
in exchange for certificates of other denominations or for registration in
another name or names, the Company will pay the reasonable cost of insurance and
delivery to such place as such Purchaser may designate from the Company or its
transfer agent of the certificates issued in substitution or replacement for the
surrendered certificate.
Section 2.3. Taxes. The Company will pay all taxes (other than (i) income
taxes and (ii) taxes which are the result of the ownership of the Preferred
Stock) which may be payable in connection with the execution and delivery of
this Agreement or the authorization, issuance and delivery upon the sale of the
Preferred Stock hereunder or in connection with any modification of the
Preferred Stock or of this Agreement, and will indemnify and save each Purchaser
and any holder from time to time of the Preferred Stock harmless, without
limitation as to time, from and against any and all liabilities with respect to
all such taxes and the Company agrees to pay to each Purchaser and any such
holder such additional amounts as may be necessary in respect of such taxes in
order that such Purchaser shall incur no greater cost or expenses than such
Purchaser or such holder would have incurred had there been no such taxes
payable in connection with such execution and delivery, such authorization and
issuance or such modification. The obligations of the Company under this Section
2.3 shall survive the termination of this Agreement and any redemption or
repurchase of the Preferred Stock or part thereof by the Company.
Section 2.4. Replacement of Certificates for Shares. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of any certificate evidencing any shares of Preferred
Stock and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided, if the owner of such shares
is a Purchaser or an Institutional Holder, its own agreement, in a
form reasonably satisfactory to the Company, to indemnify shall be
deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company, at its expense, will execute and deliver, in lieu thereof, a new
certificate for an equal number of shares of Preferred Stock.
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Section 2.5. Exchange of Certificates for Shares. Upon surrender at the
office of the Company of any certificate for shares of Preferred Stock and at
the request of the holder of such shares, the Company will execute and deliver,
at the Company's expense (except as provided below), new certificates for shares
of Preferred Stock in exchange for such surrendered certificates, which new
certificates shall be in denominations of 1,000 shares or any multiple thereof
(except as may be necessary to reflect any number of shares not evenly divisible
by 1,000) requested by such holder, in an aggregate number of shares equal to
the number of shares represented by such surrendered certificates. Such new
certificates shall be registered in the name of such Person as such holder may
request. The Company may require payment of a sum sufficient to cover any stamp
tax or governmental charge imposed in respect of any such exchange.
Section 3. Representations.
Section 3.1. Representations of the Company. The Company represents and
warrants to each Purchaser that:
(1) Corporate Organization and Qualification; Subsidiaries. The
Company is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and
has all requisite corporate power and authority and all necessary
licenses and permits to own and operate its properties and to carry on
its business as now conducted and as presently proposed to be
conducted and to enter into and carry out the terms and provisions of
this Agreement and the Rights Agreement and to create, issue and sell
the Preferred Stock and is duly licensed or qualified and is in good
standing as a foreign corporation in each foreign jurisdiction where
the nature of the business transacted by it or the nature of the
property owned or leased by it makes such licensing or qualification
necessary, except where the failure to have such license or permits or
to be so licensed or qualified as a foreign corporation (i) would not
impair the ability of the Company to perform its undertakings under
and in respect of this Agreement, the Rights Agreement or the
Preferred Stock and (ii) is not reasonably expected to have a material
adverse effect on the business, properties or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole.
Schedule II attached hereto states the name of each of the Company's
Subsidiaries, its jurisdiction of incorporation and the percentage of
its capital stock owned by the Company and/or its Subsidiaries.
(2) Agreements Enforceable. This Agreement and the Rights
Agreement have been duly authorized by proper corporate action on the
part of the Company (any approvals by the stockholders of the Company
required by law, by the Articles of Incorporation or By-laws of the
Company or otherwise having been duly obtained), and have been duly
executed and delivered by the Company and constitute the legal, valid
and binding obligations of Company enforceable against the Company in
accordance with their terms, subject to the bankruptcy, insolvency,
fraudulent conveyance and similar laws affecting creditors' rights
generally, and general principles of equity (regardless of whether the
application of such principles is considered in a proceeding in equity
or at law).
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(3) Shares Validly Issued. The creation, issuance and sale of the
Preferred Stock pursuant to this Agreement have been duly authorized
by all necessary corporate action on the part of the Company (any
approvals by the stockholders of the Company required by law, by the
Articles of Incorporation or By-laws of the Company, or otherwise
having been duly obtained), and on the Closing Date the certificates
for said Preferred Stock to be delivered on the Closing Date will have
been duly executed and delivered by the Company and the shares
evidenced by such certificates will have been validly issued, fully
paid and non-assessable.
(4) Stock Authorized and Outstanding. The authorized capital
stock of the Company consists of 30,000,000 shares of Common Stock,
par value $.01 per share, 2,000,000 shares of Series A 7% Convertible
Preferred Stock, and 18,000,000 shares of undesignated stock. Except
as set forth in Schedule III hereto, the Company has no outstanding
warrants, options or other agreements pursuant to which the Company is
obligated to purchase or issue any shares of its capital stock. There
are no outstanding preemptive rights. After giving effect to the
shares issued and sold on the Closing Date, 6,513,237 shares of Common
Stock, 18,750 shares of Series A 7% Convertible Preferred Stock and
10,000 shares of Preferred Stock will be outstanding on the Closing
Date. The Board of Directors of the Company has duly reserved for
issuance upon conversion of the Preferred Stock a sufficient number of
shares of Common Stock of the Company, including increases in such
number of shares as shall be required following the occurrence of
certain dilutive events and certain other events described in the
Statement of Designation. No shareholder of the Company or any other
Person is entitled to preemptive or similar rights with respect to the
shares of Common Stock of the Company which are issuable upon
conversion of the Preferred Stock and, if and when issued upon
conversion of the Preferred Stock in accordance with the provisions of
the Statement of Designation, such shares will be validly issued,
fully paid and non-assessable shares.
(5) Sale Legal. The issuance, sale and delivery of the Preferred
Stock and the execution, delivery and performance by the Company of
this Agreement and the Rights Agreement (i) do not and will not
violate any provisions of any order of any court or governmental
authority or agency applicable to the Company; (ii) do not and will
not violate any provision of law; and (iii) except for the Fleet
Agreement and the ▇▇▇▇▇ Agreement in respect of which the Company has
obtained all necessary consents, do not and will not conflict with or
result in any breach of any of the terms, conditions or provisions of,
or constitute a default under the Articles of Incorporation or By-laws
of the Company or any indenture or other agreement or instrument to
which the Company is a party or by which it may be bound or result in
the imposition of any Liens or encumbrances on any property of the
Company.
(6) Business and Property. Such Purchaser has heretofore been
furnished with a copy of the Offering Memorandum dated February, 1997
(the "Memorandum") which generally describes the Company and the
principal properties of the Company.
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(7) Financial Statements. (a) The consolidated balance sheet of
the Company and its consolidated Subsidiaries as of December 31 in
each of the years 1991 to 1996, both inclusive, and the statements of
income and retained earnings and changes in financial position or cash
flows for the fiscal years ended on said dates, each accompanied by a
report thereon containing an opinion unqualified as to scope
limitations imposed by the Company and otherwise without qualification
except as therein noted, by Deloitte & Touche LLP, have been prepared
in accordance with GAAP consistently applied except as therein noted,
are correct and complete and present fairly the financial position of
the Company and its Subsidiaries as of such dates and the results of
their operations and changes in their financial position or cash flows
for such periods.
(b) Since December 31, 1996, there has been no change in the
condition, financial or otherwise, of the Company and its consolidated
Subsidiaries as shown on the consolidated balance sheet as of such
date except changes in the ordinary course of business, none of which
individually or in the aggregate has been materially adverse.
(8) Indebtedness. Exhibit E attached hereto correctly describes
all Indebtedness for Borrowed Money of the Company and its
Subsidiaries that will be outstanding as of April 30, 1997.
(9) Full Disclosure. Neither the financial statements referred to
in paragraph (7) above nor this Agreement, the Rights Agreement, the
Memorandum or any other written statement furnished by or on behalf of
the Company to such Purchaser in connection with the negotiation of
the sale of the Preferred Stock, contains any untrue statement of a
material fact or omits a material fact necessary to make the
statements contained therein or herein not misleading. There is no
fact peculiar to the Company which the Company has not disclosed to
such Purchaser in writing which materially affects adversely nor, so
far as the Company can now foresee, will materially affect adversely
the properties, business, prospects, profits or condition (financial
or otherwise) of the Company and its Subsidiaries, taken as a whole,
or the ability of the Company to perform its undertakings under and in
respect of this Agreement, the Rights Agreement and the Preferred
Stock.
(10) Pending Litigation. There are no proceedings pending or, to
the knowledge of the Company, threatened against or affecting the
Company in any court or before any governmental authority or
arbitration board or tribunal which involve the possibility of
materially and adversely affecting the properties, business,
prospects, profits or condition (financial or otherwise) of the
Company and its Subsidiaries, taken as a whole, or the ability of the
Company to perform its undertakings under and in respect of this
Agreement, the Rights Agreement and the Preferred Stock.
(11) Title to Properties. The Company has, and will on the
Closing Date have, good title to all the material items of property it
purports to own, including that reflected in the most recent balance
sheet referred to in paragraph 7 hereof, and, other than as disclosed
or reflected in such balance sheet and in Exhibit E attached hereto,
such property is free of any material Lien.
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(12) No Defaults. The Company is not in default in the payment of
principal or interest on any Indebtedness for Borrowed Money or under
any instrument or instruments or agreements under and subject to which
any Indebtedness for Borrowed Money has been issued, and no event has
occurred and is continuing under the provisions of any such instrument
or agreement which with the lapse of time or the giving of notice, or
both, would constitute an event of default thereunder.
(13) Consents and Approvals. No approval, consent or waiting
period expiration on the part of any regulatory body, state, Federal
or local, is necessary in connection with the execution and delivery
by the Company of this Agreement or the Rights Agreement or the offer,
creation, issuance, sale or delivery of the Preferred Stock or
compliance by the Company with any of the provisions of this
Agreement, the Rights Agreement or the Preferred Stock, except for the
filing and recording of the Statement of Designation with the
Secretary of State of the State of Minnesota.
(14) Use of Proceeds. The net proceeds from the sale of the
Preferred Stock will be used to repay Indebtedness of the Company and
to fund capital expenditures and such proceeds will not be used for
the purchase of securities in violation of Section 7 of the Securities
Exchange Act of 1934, as amended, or any regulation issued pursuant
thereto, including, without limitation, Regulations G, T, U and X of
the Board of Governors of the Federal Reserve System, 12 CFR Chapter
11.
(15) Taxes. All tax returns required to be filed by the Company
or any Subsidiary in any jurisdiction have, in fact, been filed, and
all taxes, assessments, fees and other governmental charges upon the
Company or any Subsidiary or upon any of their respective properties,
income or franchises, which are shown to be due and payable in such
returns have been paid. For all taxable years ending on or before
December 31, 1990, the Federal income tax liability of the Company and
its Subsidiaries has been satisfied and either the period of
limitations on assessment of additional Federal income tax has expired
or the Company and its Subsidiaries have entered into an agreement
with the Internal Revenue Service closing conclusively the total tax
liability for the taxable year. The Company does not know of any
proposed additional tax assessment against it or any of its
Subsidiaries for which adequate provision has not been made on its
accounts, and no material controversy in respect of additional Federal
or state income taxes due since said date is pending or to the
knowledge of the Company threatened. The provisions for taxes on the
books of the Company and each Subsidiary are adequate for all open
years, and for its current fiscal period.
(16) ERISA. The consummation of the transactions provided for in
this Agreement and compliance by the Company with the provisions
thereof and of the Rights Agreement and the Preferred Stock issued
hereunder will not involve any prohibited transaction within the
meaning of ERISA or Section 4975 of the Code. Each Plan complies in
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all material respects with all applicable statutes and governmental
rules and regulations, and (a) no Reportable Event has occurred and is
continuing with respect to any Plan, (b) neither the Company nor any
ERISA Affiliate has withdrawn from any Plan or Multiemployer Plan or
instituted steps to do so, and (c) no steps have been instituted to
terminate any Plan. No condition exists or event or transaction has
occurred in connection with any Plan which could result in the
incurrence by the Company or any ERISA Affiliate of any material
liability, fine or penalty. No Plan maintained by the Company or any
ERISA Affiliate, nor any trust created thereunder, has incurred any
"accumulated funding deficiency" as defined in Section 302 of ERISA
nor does the present value of all benefits vested under all Plans
exceed, as of the last annual valuation date, the value of the assets
of the Plans allocable to such vested benefits. The Company does not
have any contingent liability with respect to any post-retirement
"welfare benefit plan" (as such term is defined in ERISA).
(17) Compliance with Law. Neither the Company nor any Subsidiary
(a) is in violation of any law, ordinance, franchise, governmental
rule or regulation to which it is subject; or (b) has failed to obtain
any license, permit, franchise or other governmental authorization
necessary to the ownership of its property or to the conduct of its
business, which violation or failure to obtain would materially
adversely affect the business, prospects, profits, properties or
condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole, or impair the ability of the Company
to perform its undertakings under and in respect of this Agreement,
the Rights Agreement or the Preferred Stock. Neither the Company nor
any Subsidiary is in default with respect to any order of any court or
governmental authority or arbitration board or tribunal.
(18) Private Offering. Neither the Company, directly or
indirectly, nor any agent on its behalf has offered or will offer the
Preferred Stock or any similar Security or has solicited or will
solicit an offer to acquire the Preferred Stock or any similar
Security from or has otherwise approached or negotiated or will
approach or negotiate in respect of the Preferred Stock or any similar
Security with any Person other than the Purchasers and not more than 5
other institutional investors, in each case, at private sale for
investment. Neither the Company, directly or indirectly, nor any agent
on its behalf has offered or will offer the Preferred Stock or any
similar Security or has solicited or will solicit an offer to acquire
the Preferred Stock or any similar Security from any Person so as to
bring the issuance and sale of the Preferred Stock within the
provisions of Section 5 of the Securities Act of 1933, as amended.
(19) Investment Company. Neither the Company nor any Subsidiary
is an "investment company" registered or required to be registered
under the Investment Company Act of 1940, as amended, or is subject to
regulation under the Public Utility Holding Company Act of 1935, as
amended.
(20) Restrictions on Distributions. Except for the ▇▇▇▇▇
Agreement, the Company is not a party to or bound by any contract,
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indenture, agreement, instrument, order of any court, or governmental
agency (except the Minnesota Business Corporation Act) rule or
regulation, or any note, debenture, bond, or other security, which
contains provisions expressly limiting or restricting payments by the
Company on or in respect of shares of its capital stock of any class,
and pursuant to which the Company's right and obligation to declare
and pay the regular dividends on the Preferred Stock or to make
mandatory redemption of shares of the Preferred Stock pursuant to the
provisions of the Articles of Incorporation of the Company and the
Statement of Designation is restricted.
Section 3.2. Representations of the Purchasers. Each Purchaser represents,
and in entering into this Agreement the Company understands, that such Purchaser
is acquiring the Preferred Stock for the purpose of investment and not with a
view to the distribution thereof, and that such Purchaser has no present
intention of selling, negotiating or otherwise disposing of the Preferred Stock;
it being understood, however, that the disposition of such Purchaser's property
will at all times be and remain within its control.
Section 4. Closing Conditions.
The obligation of each Purchaser to purchase the Preferred Stock to be
purchased by such Purchaser pursuant hereto on the Closing Date shall be subject
to the following conditions:
Section 4.1. Execution of Documents. This Agreement and the Preferred Stock
shall have been duly executed and delivered by the Company and on the Closing
Date shall be in full force and effect, and unless waived by such Purchaser no
default shall exist in the performance by the Company of any of its obligations
hereunder.
Section 4.2. Closing Certificate. Such Purchaser shall receive a
certificate dated the Closing Date, signed by the President or a Vice President
of the Company, the truth and accuracy of which shall be a condition to such
Purchaser's obligation to purchase the Preferred Stock proposed to be sold to
such Purchaser on the Closing Date, to the effect that (i) the representations
and warranties of the Company set forth in Section 3 hereof are true and correct
on and with respect to the Closing Date, (ii) the Company has performed all of
its obligations hereunder which are to be performed on or prior to the Closing
Date, and (iii) after giving effect to the transactions contemplated hereby, the
Company will not be in default in the performance or observance of the terms and
conditions of this Agreement, the Rights Agreement or the Statement of
Designation.
Section 4.3. Legal Opinions. Such Purchaser shall receive from ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇, who are acting as special counsel to the Purchasers in this transaction,
and from ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ P.A., counsel for the Company, their respective
opinions dated such Closing Date, in form and substance satisfactory to such
Purchaser, and covering the matters set forth in Exhibits B and C, respectively,
hereto.
Section 4.4. Concurrent Sale of Preferred Stock. The Company shall have
consummated the sale of all of the Preferred Stock scheduled to be sold on the
Closing Date.
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Section 4.5. Rights Agreement. The Rights Agreement shall be satisfactory
in scope and form to such Purchaser, shall have been duly executed by the
parties thereto and delivered substantially in the form attached hereto as
Exhibit D.
Section 4.6. Charter Documents. The Articles of Incorporation and Bylaws of
the Company shall be satisfactory to such Purchaser in all material respects.
Section 4.7. Consent of Holders of Other Securities. Any consent or
approvals required to be obtained from any holder or holders of any outstanding
securities of the Company which shall be necessary to permit the consummation of
the transactions contemplated hereby shall have been obtained and all such
consents or amendments shall be satisfactory in form and substance to such
Purchaser and such Purchaser's special counsel.
Section 4.8. West Jordan, Utah Facility. The Company shall have entered
into arrangements for the construction of a new facility at West Jordan, Utah,
and the terms of such arrangements (including the completion date thereof) shall
be satisfactory to such Purchaser in all material respects.
Section 4.9. Legal Investment. The Preferred Stock shall on the Closing
Date qualify as a legal investment for such Purchaser and such purchase shall
not subject such Purchaser to any penalty or other onerous condition under or
pursuant to any applicable law or governmental regulation, and such Purchaser
shall have received such evidence as it may reasonably request to establish
compliance with this condition.
Section 4.10. Resolution; Statement of Designation. On or prior to the
Closing Date, the Board of Directors of the Company shall have duly adopted the
Resolution (and such Purchaser shall have received a copy of the Resolution
certified as of the Closing Date by the Secretary or an Assistant Secretary of
the Company as having been so adopted and not modified, amended or rescinded as
of the Closing Date) and the Statement of Designation shall have been filed with
the Secretary of State of the State of Minnesota, all in compliance with the
applicable provisions of the Minnesota Business Corporation Act, and the
Statement of Designation shall constitute a legal and valid amendment of the
Articles of Incorporation of the Company.
Section 4.11. Private Placement Number. On or prior to the Closing Date,
the appropriate filings with Standard & Poor's CUSIP Service Bureau, as agent
for the National Association of Insurance Commissioners, in order to obtain a
private placement number for the Preferred Stock shall have been duly made.
Section 4.12. Special Counsel Fees. Without limiting the provisions of
Section 9.1, the Company shall have paid on or before the Closing Date the fees,
charges and disbursements of special counsel for the Purchasers to the extent
reflected in a statement of such special counsel rendered to the Company at
least one business day prior to the Closing Date.
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Section 4.13. Satisfactory Proceedings. All proceedings taken in connection
with the transactions contemplated by this Agreement, and all documents
necessary to the consummation thereof, shall be reasonably satisfactory in form
and substance to the Purchasers, and the Purchasers shall have received a copy
(executed as may be appropriate) of all legal documents or proceedings taken in
connection with the consummation of said transactions.
Section 4.14. Waiver of Conditions. If on the Closing Date the Company
fails to tender to any Purchaser the shares of Preferred Stock to be issued to
such Purchaser on such date or if the conditions specified in this Section 4
have not been fulfilled, such Purchaser may thereupon elect to be relieved of
all further obligations under this Agreement. Without limiting the foregoing, if
the conditions specified in this Section 4 have not been fulfilled, such
Purchaser may waive compliance by the Company with any such condition to such
extent as such Purchaser may in its sole discretion determine.
Section 5. Financial Statements and Other Information.
Section 5.1. Financial and Business Information. The Company agrees to
furnish to each holder of Preferred Stock or Registrable Securities initially
issued hereunder and to each subsequent transferee of such Preferred Stock or
Registrable Securities:
(a) Quarterly Statements. Within 45 days after the end of each
quarterly fiscal period (except the last) in each fiscal year of the
Company, duplicate copies of:
(1) consolidated and consolidating balance sheets of the
Company and its Subsidiaries as of the close of such quarterly
fiscal period setting forth in comparative form the consolidated
figures for the fiscal year then most recently ended,
(2) consolidated and consolidating statements of income of
the Company and its Subsidiaries for such quarterly fiscal period
and for the portion of the fiscal year ending with such period in
each case setting forth in comparative form the consolidated
figures for the corresponding periods of the preceding fiscal
year, and
(3) consolidated and consolidating statements of cash flows
of the Company and its Subsidiaries for the portion of the fiscal
year ending with such quarterly fiscal period, setting forth in
comparative form the consolidated figures for the corresponding
period of the preceding fiscal year,
all in reasonable detail and certified as having been prepared in
accordance with GAAP by an authorized financial officer of the Company.
(b) Annual Statements. As soon as available and in any event
within 90 days after the close of each fiscal year of the Company,
duplicate copies of:
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(1) audited consolidated and unaudited consolidating balance
sheets of the Company and its Subsidiaries as of the close of
such fiscal year, and
(2) audited consolidated and unaudited consolidating
statements of income, audited consolidated statements of
stockholders' equity and cash flows of the Company and its
Subsidiaries for such fiscal year,
in each case setting forth in comparative form the figures for the
preceding fiscal year, all in reasonable detail and in the case of the
audited consolidated financial statements accompanied by an opinion
thereon by Deloitte & Touche LLP or another firm of independent public
accountants selected by the Company from among the twelve largest
independent public accountants in the United States to the effect that
the consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Company and its
Subsidiaries as of the end of the fiscal year being reported on and the
consolidated results of the operations and cash flows for said year in
conformity with GAAP and that the examination of such accountants in
connection with such financial statements has been made in accordance
with generally accepted auditing standards and included such tests of
the accounting records and such other auditing procedures as said
accountants deemed necessary in the circumstances.
(c) Audit Reports. Promptly upon receipt thereof, one copy of
each interim or special audit made by independent accountants of the
books of the Company or any Subsidiary and any comment letter to
management received from such accountants, and copies of any orders in
any proceedings to which the Company or any of its Subsidiaries is a
party, issued by any governmental agency, Federal or state, having
jurisdiction over the Company or any of its Subsidiaries.
(d) SEC and Other Reports. Promptly upon their becoming
available, one copy of each financial statement, report, notice or
proxy statement sent by the Company to stockholders generally, of each
regular or periodic report and any registration statement or
prospectus filed by the Company or any Subsidiary with any securities
exchange or with the Securities and Exchange Commission or any
successor agency, and copies of any orders in any proceedings to which
the Company or any of its Subsidiaries is a party, issued by any
governmental agency, Federal or state, having jurisdiction over the
Company or any of its Subsidiaries.
(e) Notice of Defaults. Promptly and in any event within five
business days of any such event, notice that the holder of any
Indebtedness for Borrowed Money of the Company or any Subsidiary has
given notice or taken any action with respect to a claimed default, or
event of default pursuant to any agreement pursuant to which such
Indebtedness shall be outstanding.
(f) Requested Information. With reasonable promptness, such other
data and information as any such holder may reasonably request.
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Section 5.2. Officer's Certificates. With each set of financial statements
delivered pursuant to Section 5.1(a) and (b) above, the Company will deliver a
certificate of an authorized financial officer of the Company (i) to the effect
that the signer thereof has reexamined the terms and provisions of this
Agreement and the Rights Agreement and the provisions of the Statement of
Designation, (ii) containing a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate are based, (iii) stating that, in the opinion of such officer,
he has made such examination or investigation as is necessary to enable him to
express an informed opinion as to the matters covered by the following clause
(iv) hereof, and (iv) stating that based upon the examination and investigation
referred to in the foregoing clauses (i) through (iii) hereof, such officer is
of the opinion that as of the end of the periods covered by such financial
statements the Company was not in default in the fulfillment of any of the terms
and provisions referred to in foregoing clause (i) hereof or if the signer is
aware of any such default, he shall disclose in such certificate the nature
thereof, whether or not such default is continuing as of the date of such
certificate and what action, if any, the Company has taken or proposes to take
with respect thereto.
Section 5.3. Accountants' Certificates. With the annual financial
statements delivered pursuant to Section 5.1(b), the Company will deliver a
certificate of the accountants who render an opinion with respect to such
financial statements, stating that they have reviewed this Agreement and stating
further, whether in making their audit, such accountants have become aware of
any default by the Company in the performance or observance of the terms and
conditions of this Agreement, the Rights Agreement or the Statement of
Designation insofar as any such terms or conditions pertain to or involve
accounting matters or determinations, and if any such condition or event then
exists, specifying the nature and period of existence thereof.
Section 5.4. Inspection. The Company will permit each holder of Preferred
Stock or Registrable Securities (or such Persons as such holder may designate)
to visit and inspect, under the Company's guidance, any of the properties of the
Company or its Subsidiaries, to examine all their books of account, records,
reports and other papers, to make copies and extracts therefrom, and to discuss
their respective affairs, finances and accounts with their respective officers,
employees having management duties, and independent public accountants (and by
this provision the Company authorizes said accountants to discuss with such
holder the finances and affairs of the Company and its Subsidiaries) all at such
reasonable times and as often as may be reasonably requested. Prior to the
existence of any default under this Agreement, the cost of any visitation or
inspection pursuant to this Section 5.4 shall be borne by any holder exercising
its rights pursuant to this Section 5.4. So long as the Company shall be in
default in the performance or observance of the terms and conditions of this
Agreement, the Rights Agreement or the Statement of Designation, all such costs
shall be borne by the Company.
Section 5.5. Observation Rights. The Company agrees to (i) give the holders
of the Preferred Stock and Registrable Securities at least seven business days
prior written notice of each meeting of the Board of Directors of the Company (a
"Board Meeting"), (ii) permit one representative designated by the holder or
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holders of at least 66-2/3% of the Preferred Stock and Registrable Securities
then outstanding to serve as an observer at each Board Meeting, and (iii)
deliver to the holders of the Preferred Stock and Registrable Securities copies
of (a) all reports and other materials delivered to the Board of Directors of
the Company or any Subsidiary in connection with each Board Meeting, or
submitted to such Board of Directors of the Company or any Subsidiary in
connection with any proposed action to be taken by written consent of such Board
of Directors, and (b) the minutes of each Board Meeting (and any resolutions
that such Board of Directors passed pursuant to such written consent in lieu of
a Board Meeting), certified as true and correct by the Secretary or Assistant
Secretary of the Company or any Subsidiary, as the case may be, as soon as the
same are available and in any event within 30 days after each such Board Meeting
or within 10 days after the adoption of any resolution pursuant to such written
consent; provided that if the minutes of any such Board Meeting have not been
approved within such 30 day period, the Company shall furnish drafts of such
minutes in the form expected to be approved by the Board of Directors. Upon the
request of the holders of 66-2/3% of the Preferred Stock and Registrable
Securities then outstanding, the holders may receive notice of the meetings of
the Board of Directors of the Subsidiaries of the Company and designate an
observer to attend such meetings in the same manner as is provided for Board
Meetings in clauses (i) and (ii) of the immediately preceding sentence. So long
as the Company shall be in default in the performance or observance of the terms
and conditions of this Agreement, the Rights Agreement or the Statement of
Designation, all costs associated with the observation of any Board Meeting
pursuant to this Section 5.5 shall be borne by the Company.
Section 5.6. Confidentiality. Each holder of Preferred Stock or Registrable
Securities, by its acceptance thereof, agrees that it will use best efforts not
to disclose without the prior written consent of the Company (other than to its
directors, officers, employees, auditors, agents, professional consultants,
counsel or affiliates or to another holder who shall be bound by the provisions
of this Section 5.6) any information which is furnished pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by such holder as being
confidential information of the Company or any Subsidiary; provided that such
holder may disclose any such information (i) as has become generally available
to the public or otherwise known to such holder prior to the time it received
such information, (ii) as may be required or appropriate in any report,
statement or testimony submitted to any state or federal regulatory body having
or claiming to have jurisdiction over such holder or to the National Association
of Insurance Commissioners or similar organizations or their successors, (iii)
as may be required or appropriate in response to any summons or subpoena or in
connection with any litigation, (iv) if the Company shall be in default in the
performance or observance of the terms and conditions of this Agreement, the
Rights Agreement or the Statement of Designation, to the extent that such holder
believes it necessary or appropriate in order to protect its investment in the
Preferred Stock or Registrable Securities or the enforcement of its rights and
remedies under the Preferred Stock or Registrable Securities or this Agreement,
(v) in order to comply with any law, order, regulation or ruling applicable to
such holder, or (vi) to the prospective transferee in connection with any
contemplated transfer of any Preferred Stock or Registrable Securities by such
holder.
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Section 6. Covenants of the Company.
Section 6.1. Corporate Existence. The Company will preserve and keep in
force and effect its corporate existence and all licenses and permits necessary
to the proper conduct of its business, except where the failure to so preserve
and keep such licenses and permits in full force and effect, when taken as a
whole, would not impair the ability of the Company to perform its undertakings
under and in respect of this Agreement, the Rights Agreement or the Preferred
Stock.
Section 6.2. Purchase of Shares. The Company will not, directly or
indirectly, through any Subsidiary or otherwise, purchase, redeem or retire, or
make any offer to purchase, redeem or retire, any shares of Preferred Stock
other than pursuant to the applicable provisions of the Company's Articles of
Incorporation and the Statement of Designation, unless the offer has been made
to repurchase shares, pro rata, from all holders of shares of Preferred Stock at
the same time and at the same price and upon the same terms.
Section 6.3. Restrictions on Dividends or Redemptions. (a) The Company will
not after the Closing Date enter into, become a party to or be bound by or adopt
any contract, indenture, agreement or instrument, or any note, debenture, bond
or other security or amend any provision of its Articles of Incorporation or
By-laws, containing provisions which would restrict or limit the ability of the
Company to: (i) pay the full amount of the dividends on the Preferred Stock at
the rates and on the dates fixed in the Resolution or (ii) make the mandatory
redemption of the shares of the Preferred Stock in the full amount and on the
date fixed in the Resolution; provided, that (x) covenants set forth in the
Fleet Agreement and similar covenants which are no more restrictive on the
Company than the covenants set forth in the Fleet Agreement as in effect on the
date hereof may be included in any replacement or renewal of the Fleet Agreement
are hereby expressly permitted, (y) covenants set forth in the ▇▇▇▇▇ Agreement
and similar covenants which are no more restrictive on the Company than the
covenants set forth in the ▇▇▇▇▇ Agreement are hereby expressly permitted, and
(z) covenants or other provisions requiring the maintenance of reasonable
minimum levels of shareholders' equity or net worth, cash flow, current assets
and similar items shall not be deemed to limit, impair or otherwise modify the
obligations of the Company to declare and pay dividends on the Preferred Stock
as and when the same are due and payable or to redeem shares of Preferred Stock
in accordance with the Resolution.
(b) The Company will not permit any Subsidiary to be a party to or bound by
any contract, indenture, agreement, instrument or any note, debenture, bond or
other security under the terms of which such Subsidiary's right to declare and
pay dividends or make other distributions on or in respect of its capital stock
is restricted, and laws of the jurisdiction of its incorporation of general
application to business corporations, which restrict or prohibit payment of
dividends on or redemptions or purchases of capital stock under certain
circumstances provided, that (i) covenants set forth in the Fleet Agreement and
similar covenants which are no more restrictive on the Company's Subsidiaries
than the covenants set forth in the Fleet Agreement as in effect on the date
hereof may be included in any replacement or renewal of the Fleet Agreement and
are hereby expressly permitted, (ii) covenants set forth in the ▇▇▇▇▇ Agreement
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and similar covenants which are no more restrictive on the Company's
Subsidiaries than the covenants set forth in the ▇▇▇▇▇ Agreement are hereby
expressly permitted, and (iii) covenants or other provisions requiring the
maintenance of reasonable minimum levels of shareholders' equity or net worth,
cash flow, current assets and similar items shall not be deemed to limit, impair
or otherwise modify the obligations of the Subsidiaries to declare and pay
dividends on the Preferred Stock as and when the same are due and payable or to
redeem shares of Preferred Stock in accordance with the Resolution.
Section 6.4. Reservation of Common Stock. The Company will at all times
reserve and keep available such number of authorized shares of its common stock,
solely for the purpose of issue upon the conversion of Preferred Stock as
provided for in the Statement of Designation, as shall then be issuable upon the
conversion of all outstanding Preferred Stock.
Section 6.5. Remedies and Default. If the Company shall default in the
performance and observance of its covenants contained in this Section 6 or in
the Rights Agreement, the holders of at least 25% of the shares of the Preferred
Stock then outstanding may proceed to protect and enforce any or all of the
rights of the holders of the Preferred Stock and remedies resulting from such
failure, by suit in equity or action at law or by other appropriate proceeding.
The Company further agrees, to the extent not prohibited by law, to pay to the
holder or holders of the Preferred Stock all reasonable costs and expenses
incurred by them in enforcing the observance by the Company of its covenants
contained in this Section 6 or in the Rights Agreement, including reasonable
compensation to such holder's or holders' attorneys for all services rendered in
connection therewith; provided that such enforcement is sought for reasonable
cause and in good faith.
Section 7. Definitions; Interpretation of Agreement.
Section 7.1. Definitions. Unless the context otherwise requires, the terms
hereinafter set forth when used herein shall have the following meanings and the
following definitions shall be equally applicable to both the singular and
plural forms of any of the terms herein defined:
"▇▇▇▇▇ Agreement" means the Debenture Acquisition Agreement dated as of
March 16, 1995, among ▇▇▇▇▇▇▇ ▇▇▇▇▇ Mezzanine Capital Fund, L.P., an Illinois
limited partnership, the Company and certain Subsidiaries of the Company, as
amended by Amendment Agreement dated as of May 10, 1996.
"Closing Date" is defined in Section 1.4.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean any class of capital stock of the Company now or
hereafter authorized, the right of which to share in distributions either of
earnings or assets of the Company is without limit as to any amount or
percentage.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
"ERISA Affiliate" shall mean any corporation, trade or business that is,
along with the Company, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in section 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA.
"Fleet Agreement" means the Loan and Security Agreement dated May 10, 1996
between Fleet Capital Corporation and certain Subsidiaries of the Company.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"Guaranties" by any Person shall mean and include any obligation (whatever
called) of such Person to pay, purchase, provide funds (whether by the advance
of money, the purchase of or subscription for shares or other securities, the
purchase of assets or services or otherwise) for the payment of, indemnity
against the consequences of default in the payment of, or otherwise be
responsible for, any Indebtedness for Borrowed Money of any other Person (and
guarantor shall be construed accordingly).
"Indebtedness" shall mean any obligations (whether present or future,
actual or contingent, secured or unsecured, as principal or guarantor or
otherwise) for the payment or repayment of money.
"Indebtedness for Borrowed Money" of any Person shall mean and include any
Indebtedness (including, without limitation, any Guaranty by such Person of
Indebtedness for or in respect of money borrowed) for or in respect of money
borrowed or raised (whether or not for a cash consideration), by whatever means
(including deposits, advance payments and financial leasing or under or pursuant
to any letter of credit to secure financial accommodation, promissory note,
certificates of deposit or like instrument (whether negotiable or otherwise) or
any acceptance credit facility, note purchase facility or ▇▇▇▇ acceptance or
discounting facility or like arrangement entered into by such Person in order to
enable it to finance its operations or capital requirements). For the avoidance
of doubt, the Preferred Stock shall not be deemed Indebtedness for Borrowed
Money.
"Institutional Holder" shall mean each Purchaser and any insurance company,
pension fund, mutual fund, bank, trust company, or finance or credit company or
other institutional investor and any nominee of any of the foregoing.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or capitalized lease, upon
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or with respect to any property or asset of such Person (including in the case
of stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"Liquidation Value" with respect to the Preferred Stock shall mean
$1,000.00 per share thereof.
"Multiemployer Plan" shall have the same meaning as in ERISA.
"Officer's Certificate" shall mean a certificate of the Company signed by
the President, Chief Financial Officer or any Vice President.
"Person" shall mean an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, and a government or
agency or political subdivision thereof.
"Plan" means a "pension plan," as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to which
the Company or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"Preferred Stock" is defined in Section 1.1.
"Registrable Securities" means the Common Stock to be issued by the Company
upon conversion of the Preferred Stock, but only until such time as such Common
Stock (i) has been effectively registered under the Act and disposed of in
accordance with the Registration Statement covering it, or (ii) has been sold to
the public pursuant to Rule 144 (or any similar provision then in force) under
the Act.
"Reportable Event" shall have the same meaning as in ERISA.
"Resolution" is defined in Section 1.1.
"Rights Agreement" shall mean the Rights Agreement, substantially in the
form attached hereto as Exhibit D, among the Purchasers, the Company and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as Trustee under Agreement dated
6/14/78 FBO ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
"Security" shall have the same meaning as in Section 2(d) of the Securities
Act of 1933, as amended.
"Statement of Designation" is defined in Section 1.1.
"Subsidiary" shall mean any corporation more than 50% of the shares of
capital stock of which having ordinary voting power for the election of
directors is owned, directly or indirectly, by the Company and/or any other
Subsidiary.
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Section 7.2. Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the
purposes of thisAgreement, the same shall be done in accordance with GAAP, to
the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
Section 7.3. Directly or Indirectly. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether the action in question
is taken directly or indirectly by such Person.
Section 8.Amendments, Waivers and Consents.
Section 8.1. Consent Required. Any term, covenant, agreement or condition
of this Agreement may, with the consent of the Company, be amended or compliance
therewith may be waived (either generally or in a particular instance and either
retroactively or prospectively), if the Company shall have obtained the consent
in writing of the holders holding at least 66-2/3% in aggregate number of shares
of Preferred Stock then outstanding; provided, however, that without the written
consent of all of the holders of Preferred Stock, no such amendment or waiver
shall be effective which will change the percentage of holders of Preferred
Stock required to consent to any of the provisions of this Section 8.
Section 8.2. Solicitation of Holders. So long as there are any shares of
Preferred Stock outstanding, the Company will not solicit, request or negotiate
for or with respect to any proposed waiver or amendment of any of the provisions
of this Agreement unless each holder of Preferred Stock (irrespective of the
amount of Preferred Stock then owned by it) shall be informed thereof by the
Company and shall be afforded the opportunity of considering the same and shall
be supplied by the Company with sufficient information to enable it to make an
informed decision with respect thereto. The Company will not, directly or
indirectly, pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, to any holder of
Preferred Stock as consideration for or as an inducement to entering into by
such holder of any waiver or amendment of any of the terms and provisions of
this Agreement unless such remuneration is concurrently offered, on the same
terms, ratably to all holders of Preferred Stock.
Section 8.3. Effect of Amendment or Waiver. Any such amendment or waiver
shall apply equally to all of the holders of Preferred Stock and shall be
binding upon them, upon each future holder and upon the Company, whether or not
any share of Preferred Stock shall have been marked to indicate such amendment
or waiver. No such amendment or waiver shall extend to or affect any obligation
not expressly amended or waived or impair any right consequent thereon.
Section 9. Miscellaneous.
Section 9.1. Expenses. Whether or not the transactions herein contemplated
shall be consummated, the Company agrees to pay directly, or cause to be paid,
all of the Purchasers' reasonable out-of-pocket expenses in connection with the
preparation, execution and delivery of this Agreement and the transactions
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contemplated hereby, including but not limited to the reasonable charges and
disbursements of ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, special counsel for the Purchasers,
duplicating costs and charges for shipping the Preferred Stock, adequately
insured, to each Purchaser's home office or to such other place as such
Purchaser may designate, and all such reasonable out-of-pocket expenses of the
holders of Preferred Stock relating to any requested amendment, waivers or
consents pursuant to the provisions hereof or of the Articles of Incorporation
(whether or not the same are actually executed and delivered), including,
without limitation, any amendments, waivers or consents resulting from any
work-out, renegotiation or restructuring relating to the performance by the
Company of its obligations under this Agreement, the Rights Agreement and the
Articles of Incorporation. The Company agrees to protect and indemnify the
Purchasers and the holders from time to time of the Preferred Stock against any
liability for any and all brokerage fees and commissions payable or claimed to
be payable to any Person engaged by the Company in connection with the
transactions contemplated by this Agreement or the Rights Agreement.
Section 9.2. Notices. (a) All communications provided for hereunder shall
be in writing, shall be hand delivered (against a written receipt), deposited
into the United States of America mail (registered or certified mail), postage
prepaid, sent by courier, or sent by facsimile transmission, and shall be
addressed,
(i) if to the Company, at the address set forth at the head
of this Agreement, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, or at such other
address as the Company may designate by notice duly given to the
other parties in accordance with this Section 9.2, and
(ii) if to any of the holders of the Preferred Stock, at
their respective addresses set forth beneath the signatures of
such holders at the foot of this Agreement or such other address
as any holder may designate to the Company in writing.
(b) Notices to the Company or holders of the Preferred Stock, as the case
may be, by hand, mail or courier shall only be effective when delivered at a
street address designated for such purpose in accordance with this Section 9.2,
and notices to the Company or holders of the Preferred Stock, as the case may
be, by facsimile communication shall only be effective when made by confirmed
transmission at a telephone number designated for such purpose in accordance
with this Section 9.2 and shall be promptly followed by the delivery of such
notice by hand, registered or certified mail or courier, as set forth above.
Section 9.3. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Company and its successors and assigns and shall
be binding upon and inure to the benefit of each Purchaser and its successors
and assigns, including each successive holder or holders of any Preferred Stock.
Section 9.4. Survival of Covenants and Representations. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Closing Date, shall survive the closing and the delivery of this Agreement and
the Preferred Stock.
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Section 9.5. Severability. Should any part of this Agreement for any reason
be declared invalid, such decision shall not affect the validity of any
remaining portion of this Agreement, which remaining portion shall remain in
force and effect as if this Agreement had been executed with the invalid portion
thereof eliminated and it is hereby declared the intention of the parties hereto
that they would have executed the remaining portion of this Agreement without
including therein any such part, parts, or portion which may, for any reason, be
hereafter declared invalid.
Section 9.6. Governing Law. This Agreement and the sale of the Preferred
Stock hereunder shall be governed by and construed in accordance with the laws
of the State of Minnesota (without giving effect to any conflicts of law rules
which might apply the laws of any other jurisdiction).
Section 9.7. Captions. The descriptive headings of the various Sections or
parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
The execution hereof by the Purchasers shall constitute a contract among
the Company and the Purchasers for the uses and purposes hereinabove set forth.
This Agreement may be executed in any number of counterparts, each executed
counterpart constituting an original but all together only one agreement and all
signatures need not appear on any one counterpart.
Eagle Pacific Industries, Inc.
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Its Chief Executive Officer
-21-
Accepted as of the first date written above.
Massachusetts Mutual Life Insurance Company
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its Managing Director
Massachusetts Mutual Life Insurance Company (3,200 shares)
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Securities Investment Division
▇▇▇▇ ▇. ▇▇▇▇▇, Managing Director
Payments
All payments on or in respect of the Preferred Stock shall be made by crediting
in the form of bank wire transfer of Federal or other immediately available
funds (identifying each payment as "Eagle Pacific Industries, Inc. 8%
Convertible Preferred ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ 2* 0, redemption price and/or dividend")
to:
Citibank, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA No. ▇▇▇▇▇▇▇▇▇
for credit to: Massachusetts Mutual Life Insurance Company's
Long Term Pool Account Number ▇▇▇▇-▇▇▇▇
with telephone advice to the Securities Custody and Collection Department of
Massachusetts Mutual Life Insurance Company at (▇▇▇) ▇▇▇-▇▇▇▇, Facsimile: (413)
744-6263.
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments and corporate actions, to be addressed
Attention: Securities Custody and Collection Department, F381.
Name of Nominee in which stock certificates are to be issued: None
Taxpayer I.D. Number: ▇▇-▇▇▇▇▇▇▇
-22-
Massachusetts Mutual Life Insurance Company (800 shares)
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Securities Investment Division
▇▇▇▇ ▇. ▇▇▇▇▇, Managing Director
Payments
All payments on or in respect of the Preferred Stock shall be made by crediting
in the form of bank wire transfer of Federal or other immediately available
funds (identifying each payment as "Eagle Pacific Industries, Inc. 8%
Convertible Preferred ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ 2* 0, redemption
price and/or dividend") to:
Chase Manhattan Bank, N.A.
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA No. ▇▇▇▇▇▇▇▇▇
for credit to: Massachusetts Mutual Life Insurance Company's
Non-Traditional Account Number ▇▇▇-▇▇▇▇▇▇▇
with telephone advice to the Securities Custody and Collection Department of
Massachusetts Mutual Life Insurance Company at (▇▇▇) ▇▇▇-▇▇▇▇, Facsimile: (413)
744-6263.
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments and corporate actions, to be addressed
Attention: Securities Custody and Collection Department, F381.
Name of Nominee in which stock certificates are to be issued: None
Taxpayer I.D. Number: ▇▇-▇▇▇▇▇▇▇
-23-
Accepted as of the first date written above.
MassMutual Corporate Investors
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its Investment Officer
This Agreement is executed on behalf of MassMutual Corporate Investors,
organized under a Declaration of Trust, dated September 13, 1985, as amended
from time to time. The obligations of such trust are not personally binding
upon, nor shall resort be had to the property of, any of the trustees,
shareholders, officers, employees or agents of such trust, but the trust
property only shall be bound.
MassMutual Corporate Investors
c/o Massachusetts Mutual Life Insurance Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Securities Investment Division
Payments
All payments on or in respect of the stock certificates shall be made by
crediting in the form of bank wire transfer of Federal or other immediately
available funds (identifying each payment as "Eagle Pacific Industries, Inc. 8%
Convertible Preferred ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ 2*0, redemption price and/or dividend")
to:
Chase/NYC/Cust
ABA No. ▇▇▇▇▇▇▇▇▇
A/C No. ▇▇▇-▇-▇▇▇▇▇▇ for F/C/T
MassMutual Corporate Investors
A/C No. G06109
Attn: Bond Interest
Re: Description of Security (redemption price and dividend split,
if applicable)
With telephone advice of payment to the Securities and Collection Department of
Massachusetts Mutual Life Insurance Company at (▇▇▇) ▇▇▇-▇▇▇▇.
-24-
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments and corporate action, to be addressed
Attention: Securities Custody and Collection Department, F381.
Name of Nominee in which certificates are to be issued: None.
Taxpayer I.D. Number: ▇▇-▇▇▇▇▇▇▇
-25-
Accepted as of the first date written above.
MassMutual Participation Investors
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its Investment Officer
This Agreement is executed on behalf of MassMutual Participation Investors,
organized under a Declaration of Trust, dated April 7, 1988, as amended from
time to time. The obligations of such trust are not personally binding upon, nor
shall resort be had to the property of, any of the Trustees, shareholders,
officers, employees or agents of such Trust, but the Trust's assets and property
only shall be bound.
MassMutual Participation Investors
c/o Massachusetts Mutual Life Insurance Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Securities Investment Division
Payments
All payments on or in respect of the Preferred Stock shall be made by crediting
in the form of bank wire transfer of Federal or other immediately available
funds (identifying each payment as "Eagle Pacific Industries, Inc. 8%
Convertible Preferred ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ 2*0, redemption price and/or dividend")
to:
Chase/NYC/Cust
ABA No. ▇▇▇▇▇▇▇▇▇
A/C No. ▇▇▇-▇-▇▇▇▇▇▇ for F/C/T
MassMutual Participation Investors
A/C No. G06110
Attn: Bond Interest
Re: Description of Security (redemption price and dividend,
if applicable)
With telephone advice of payment to the Securities Custody and Collection
Department of Massachusetts Mutual Life Insurance Company at (▇▇▇) ▇▇▇-▇▇▇▇.
-26-
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments and corporate actions, to be addressed
Attention: Securities Custody and Collection Department, F381.
Name of Nominee in which stock certificates are to be issued: None.
Taxpayer I.D. Number: ▇▇-▇▇▇▇▇▇▇
-27-
Accepted as of the first date written above.
MassMutual Corporate Value
Partners Limited
By Massachusetts Mutual Life Insurance
Company, as Investment Manager
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its Managing Director
MassMutual Corporate Value
Partners Limited
c/o Bank of America Trust and Banking
Corporation (Cayman) Limited
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, B.W.I.
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Payments
All payments on or in respect of the Preferred Stock shall be made by crediting
in the form of bank wire transfer of Federal or other immediately available
funds (identifying each payment as "Eagle Pacific Industries, Inc. 8%
Convertible Preferred ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ 2* 0, redemption price and/or dividend")
to:
▇▇▇▇▇▇▇ & Co.
c/o Citibank, N.A.
ABA No. ▇▇▇▇▇▇▇▇▇
Concentration Account ▇▇▇▇▇▇▇▇
with telephone advice to the Securities Custody and Collection Department of
Massachusetts Mutual Life Insurance Company at (▇▇▇) ▇▇▇-▇▇▇▇, Facsimile: (413)
744-6263.
-28-
Notices
All notices and communications to be addressed as first provided above with a
copy to the Investment Manager at:
Massachusetts Mutual Life Insurance Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇/▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Name of Nominee in which stock certificates are to be issued: ▇▇▇▇▇▇▇ & Co.
Taxpayer I.D. Number: ▇▇-▇▇▇▇▇▇▇
-29-
Schedule of Purchasers
Number of Shares of
Preferred Stock to be
Name of Purchaser Purchased on Closing Date
Massachusetts Mutual Life Insurance Company (LTP) 3,200
Massachusetts Mutual Life Insurance Company (IFM) 800
MassMutual Corporate Investors 3,300
MassMutual Participation Investors 1,700
MassMutual Corporate Value Partners Limited
(certificates registered in the name
of ▇▇▇▇▇▇▇ & Co.) 1,000
SCHEDULE I
(to Preferred Stock Purchase Agreement)
Subsidiaries
1. Eagle Plastics, Inc., a Nebraska corporation ("EPI"). The Company owns
6,670,816 shares of EPI capital stock out of 6,807,194 outstanding.
2. Pacific Plastics, Inc., an Oregon corporation ("PPI"). The Company owns
100% of all 66 shares of PPI capital stock outstanding which are pledged to
former PPI shareholders.
3. Arrow Pacific Plastics, Inc., a Utah corporation ("APPI"). PPI owns 100% of
all 100 shares of capital stock of APPI outstanding.
SCHEDULE II
(to Preferred Stock Purchase Agreement)
List of Outstanding Options, Etc.
1. 30,250 shares of common stock reserved for issuance pursuant to awards
granted under the Company's 1997 Stock Option Plan.
2. 168,400 shares of common stock reserved for issuance pursuant to awards
granted under the Company's 1991 Stock Option Plan.
3. 1,200,000 shares of common stock reserved for issuance pursuant to
Nonqualified Stock Options granted outside of the Company's 1991 Stock
Option Plan.
4. 136,378 shares of common stock pursuant to Eagle Stock Agreement dated
December 17, 1993 (with ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇).
5. 324,438 shares of common stock reserved for issuance pursuant to
outstanding warrants.
6. 653,000 shares of Eagle Pacific Industries, Inc.'s common stock for
conversion of outstanding options issued pursuant to Eagle Plastics, Inc.'s
1993 Stock Option Plan.
SCHEDULE III
(to Preferred Stock Purchase Agreement)
Statement of Designation of Shares
of
Eagle Pacific Industries, Inc.
The undersigned hereby certifies that the resolutions set forth on Exhibit
A attached hereto were adopted by unanimous written action of the Board of
Directors of Eagle Pacific Industries, Inc., effective as of May ___, 1997.
I certify that I am authorized to execute this Statement and I further
certify that I understand that by signing this Statement I am subject to the
penalties of perjury as set forth in Minnesota Statutes, Section 609.48 as if I
had signed this Amendment under oath.
Chief Executive Officer
EXHIBIT A
(to Preferred Stock Purchase Agreement)
Whereas, Article 3.1 of the Articles of Incorporation of this Corporation
authorizes issuance of up to 20,000,000 shares of undesignated stock.
Whereas, the Board of Directors of the Corporation is authorized to
establish from the undesignated shares by resolution adopted and filed in the
manner provided by law, one or more classes or series of shares, to designate
each such class or series (which may include, but is not limited to, designation
as additional common shares), and to fix the relative rights and preferences of
each such class or series.
Designation of Class B Common Stock
Now, Therefore, Be It Hereby and It Is Resolved, that 3,500,000 shares of
the Corporation's undesignated shares shall be established as a class of common
stock designated as the "Class B Common Stock" of the Corporation.
Further Resolved, that the Class B Common Stock shall be identical in all
respects to all other Common Stock of the Corporation except for certain voting
rights as set forth in this resolution. As used in this Designation of Class B
Common Stock, the term "Common Stock" shall mean the Corporation's presently
authorized shares of common stock, $.01 par value.
Further Resolved, that the designation, the number of shares, the powers,
the relative, participating, optional and other special rights, and the
qualifications, limitations and restrictions, of the Class B Common Stock shall
be as follows:
(a) Designation and Number. The class of common stock established
hereby shall be designated as Class B Common Stock (herein called the
"Class B Common Stock") which shall have a par value of $.01 per share
and the authorized number of the shares of such class shall be
3,500,000, which authorized number shall not be subject to increase.
Except as otherwise provided by law and except as stated below, all
shares of Class B Common Stock shall be identical in all respects and
have equal rights and privileges including without limitation the
right to share ratably, together with all other shares of Common
Stock, on a per share basis (i) in such cash, stock, or other
dividends and distributions as from time to time may be declared by
the Board of Directors of the Corporation and (ii) in all
distributions in assets or funds of the Corporation upon the voluntary
or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation.
(b) Voting Rights. Except as otherwise required by law, the
holders of Class B Common Stock shall not be entitled to vote on any
matter submitted to stockholders for a vote.
(c) Conversion. Each holder of Class B Common Stock shall have
the right at any time and from time to time to convert any or all
EXHIBIT A
(to Statement of Designation)
shares of Class B Common Stock registered in the name of such holder
into an equal number of shares of Common Stock.
(d) Mergers, Consolidations, Sales. In the case of any
consolidation or merger of the Corporation with another entity, or any
reorganization or reclassification of the Common Stock or other equity
securities of the Corporation, then, as a condition of such
consolidation, merger, reorganization or reclassification, lawful and
adequate provision shall be made whereby the holders of the Class B
Common Stock shall thereafter have the right to receive upon the basis
and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore receivable hereunder,
such shares of stock, securities or assets as may (by virtue of such
consolidation, merger, sale, reorganization or reclassification) be
issued or payable with respect to or in exchange for a number of
outstanding shares of Common Stock equal to the number of shares of
Common Stock immediately theretofore so receivable hereunder had such
consolidation, merger, sale, reorganization or reclassification not
taken place, and in any such case appropriate provisions shall be made
with respect to the rights and interests of the holders of the Class B
Common Stock to the end that the provisions hereof shall thereafter be
applicable as nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon conversion of such
Class B Common Stock.
-2-
Designation of Class of Preferred Stock
Now, Therefore, Be It Hereby and It is Resolved, that 10,000 shares of the
Corporation's undesignated shares shall be established as a class of preferred
stock designated as the "8% Convertible Preferred Stock" of the Corporation.
Further Resolved, that the designation, the number of shares, the powers,
the relative, participating, optional and other special rights, and the
qualifications, limitations and restrictions, of the 8% Convertible Preferred
Stock shall be as follows:
(a) Designation and Number. The class of Preferred Stock
established hereby shall be designated as the 8% Convertible Preferred
Stock (herein called the "8% Preferred Stock") which shall have a par
value of $.01 per share and the authorized number of the shares of
such class shall be 10,000, which authorized number shall not be
subject to increase.
(b) Dividends. Except in the case of distributions in
liquidation, dissolution or winding up of the affairs of the
Corporation provided for in paragraph (c) below, the holders of the 8%
Preferred Stock shall be entitled to receive cumulative cash dividends
at the rate of 8% of the Liquidation Preference provided in
subparagraph (c) hereof per annum (computed on the basis of a 360-day
year of twelve 30-day months) per share, such dividends to be payable
quarterly on each March 30, June 30, September 30 and December 30 in
each year commencing June 30, 1997 (each such quarterly dividend
period being hereinafter referred to as a "Quarterly Dividend Period"
and each such dividend payment date being hereinafter referred to as a
"Quarterly Dividend Payment Date") and shall accrue on a daily basis
whether or not they have been declared and whether or not there are
profits, surplus or other funds of the Corporation legally available
for the payment of dividends. If on any Quarterly Dividend Payment
Date, the Corporation shall fail to pay such dividend in cash on the
Quarterly Dividend Payment Date, dividends on the 8% Preferred Stock
for each Quarterly Dividend Period thereafter shall be paid at the
rate of 12% of the Liquidation Preference provided in subparagraph (c)
hereof per annum per share (the "Adjusted Quarterly Dividend") for
each Quarterly Dividend Period until all accrued dividends on the 8%
Preferred Stock have been paid in full, in cash. If the Corporation
shall fail to pay in cash the accrued dividends payable on any
Quarterly Dividend Payment Date, to the extent permitted by applicable
law, an additional amount shall thereafter accrue on such accrued but
unpaid dividends which shall be computed at the rate of 12% per annum
on the amount of such accrued but unpaid dividends from the Quarterly
Dividend Payment Date on which the Corporation shall have failed to
pay such accrued dividends to the date on which such accrued dividends
shall be paid in full in cash. In addition, the holders of the 8%
Preferred Stock shall be entitled to receive cash dividends in the
amount per share determined by multiplying the amount per share at any
time distributed in cash on shares of Common Stock by the number of
shares of Common Stock at the time issuable upon conversion of a share
of 8%
-3-
Preferred Stock (such distribution being hereinafter referred to as the
"Common Equivalent Dividend"), payable on the date that distributions
shall be paid or set apart for any shares of Common Stock. In no event
shall any dividend be paid or declared, nor shall any distribution be
made on the Corporation's Common Stock or preferred stock of any other
class unless (i) all dividends on the 8% Preferred Stock for all past
periods shall have been paid or declared and a sum sufficient for the
payment thereof set apart for payment, and (ii) Common Equivalent
Dividends as set forth above are declared and paid on the 8% Preferred
Stock at or prior to such time. In addition, upon any conversion of
shares of 8% Preferred Stock in accordance with the provisions of
paragraph (g), all accrued dividends and other amounts, if any, payable
on the 8% Preferred Stock shall be paid in cash, including dividends
for the portion of any Quarterly Dividend Period in which such
conversion shall have occurred. The Corporation covenants and agrees
that dividends on the 8% Preferred Stock shall be declared at the
annual rate of 8% of the Liquidation Value per share and shall be paid
in cash on each Quarterly Dividend Payment Date unless the Corporation
is prevented by operation of law from the declaration or payment of
such dividend.
(c) Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or
involuntary, the holders of 8% Preferred Stock shall be entitled to be
paid out of the assets of the Corporation available for distribution
to its stockholders, before any payment or declaration and setting
apart for payment of any amount shall be made in respect of the Common
Stock or stock of any other class or series (including the Series A 7%
Convertible Preferred Stock of the Corporation, hereinafter referred
to as the "Series A Preferred Stock"), an amount equal to $1,000.00
per share of 8% Preferred Stock (as adjusted to reflect stock splits,
dividends, combinations, and reclassifications) (the "Liquidation
Preference") plus an amount equal to any accrued but unpaid dividends
on such share of 8% Preferred Stock and other amounts, if any, payable
thereon. Thereafter, the assets shall be distributed first, ratably
among the holders of Series A Preferred Stock, and second, ratably
among the holders of Common Stock and 8% Preferred Stock, all in
proportion to the number of shares of Common Stock owned by each such
holder and, in the case of the 8% Preferred Stock, to which such
holder would then be entitled upon conversion of such stock owned by
such holder.
(d) Mandatory Redemption. (i) On the seventh anniversary of the
original issuance of the 8% Preferred Stock (such date the "Redemption
Date"), the Corporation shall set apart out of its funds lawfully
available for such purpose (or to the extent that the same are
lawfully available therefor) for the redemption of the 8% Preferred
Stock on the Redemption Date that sum in cash which shall be
sufficient to redeem, and shall redeem on the Redemption Date, the
shares of 8% Preferred Stock then outstanding at a price equal to the
Liquidation Preference of such shares of 8% Preferred Stock set forth
in paragraph (c) above plus an amount equal to any accrued but unpaid
dividends thereon and other amounts payable thereon. If the full
number of shares required to be redeemed as aforesaid shall not be so
redeemed, the deficiency shall be made good thereafter as soon as
funds shall become lawfully available therefor.
-4-
(ii) If a Change in Ownership has occurred or the Corporation
obtains knowledge that a Change in Ownership is to occur, the
Corporation shall give prompt written notice of such Change in
Ownership describing in reasonable detail the definitive terms and
date of consummation thereof to each holder of 8% Preferred Stock, but
in any event such notice shall not be given later than five business
days after the occurrence of such Change in Ownership. The holder or
holders of a majority of the 8% Preferred Stock then outstanding may
require the Corporation to redeem all or any portion of the
Convertible Preferred Stock owned by such holder or holders at a price
per share equal to the Liquidation Preference thereof (plus all
accrued and unpaid dividends thereon and other amounts, if any,
payable thereon) by giving written notice to the Corporation of such
election prior to the later of (A) 21 days after receipt of the
Corporation's notice and (B) five business days prior to the
consummation of the Change in Ownership (the "Expiration Date"). The
Corporation shall give prompt written notice of any such election to
all other holders of 8% Preferred Stock with respect to which an
election under this subparagraph (ii) has been made within five days
after the receipt of notice thereof, and each such holder shall have
until the later of (1) the Expiration Date or (2) ten days after
receipt of such second notice to request redemption (by giving written
notice to the Corporation) of all or any portion of the shares of 8%
Preferred Stock owned by such holder. Upon receipt of such
election(s), the Corporation shall be obligated to redeem the
aggregate number of shares of 8% Preferred Stock specified therein on
the later of (I) the occurrence of the Change in Ownership or (II)
five days after the Corporation's receipt of such election(s). If in
any case a proposed Change in Ownership does not occur, all requests
for redemption in connection therewith shall be automatically
rescinded. The term "Change in Ownership" means (x) any sale or series
of sales of Common Stock by a member of the Spell Group which results
in the Spell Group owning beneficially and of record less than 358,024
shares of Common Stock of the Corporation, provided that shares of
Common Stock sold in an Exempt Sale shall be excluded from any
determination of a Change in Ownership, (y) any event which results in
an Acceptable Officer ceasing to continue to serve as either the Chief
Executive Officer or President of the Corporation, or (z) any sale or
issuance or series of sales and/or issuances of shares of the
Corporation's capital stock by the Corporation or any holder thereof
which results in any person or group of affiliated persons (other than
the Spell Group) owning capital stock of the Corporation possessing
the voting power (under ordinary circumstances) to elect a majority of
the Corporation's Board of Directors. The term "Acceptable Officer"
shall mean ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ or such other person as shall be
acceptable to the holders of at least a majority of the shares of 8%
Preferred Stock at the time outstanding. The term "Exempt Sale" shall
mean the sale of Common Stock by the estate of any person included in
the Spell Group following the death of such person.
(iii) If a Fundamental Change is proposed to occur, the
Corporation shall give written notice of such Fundamental Change
describing in reasonable detail the definitive terms and date of
consummation thereof to each holder of 8% Preferred Stock not more
than 45 days nor less than 20 days prior to the consummation thereof.
The
-5-
holder or holders of a majority of the 8% Preferred Stock then
outstanding may require the Corporation to redeem all or any portion of
the shares of 8% Preferred Stock owned by each such holder or holders
at a price per share equal to the Liquidation Preference (plus all
accrued and unpaid dividends thereon and other amounts, if any, payable
thereon) by giving written notice to the Corporation of such election
prior to the later of (A) ten days prior to the consummation of the
Fundamental Change or (B) ten days after receipt of notice from the
Corporation. The Corporation shall give prompt written notice of such
election to all other holders of 8% Preferred Stock with respect to
which an election under this subparagraph (iii) has been made (but in
any event within five business days prior to the consummation of the
Fundamental Change), and each such holder shall have until two days
after the receipt of such notice to request redemption (by written
notice given to the Corporation) of all or any portion of the shares of
8% Preferred Stock owned by such holder. Upon receipt of such
election(s), the Corporation shall be obligated to redeem the aggregate
number of shares specified therein upon the consummation of such
Fundamental Change. If any proposed Fundamental Change does not occur,
all requests for redemption in connection therewith shall be
automatically rescinded. The term "Fundamental Change" means (x) a sale
or transfer of more than 50% of the assets of the Corporation and its
subsidiaries on a consolidated basis (measured by either book value in
accordance with generally accepted accounting principles consistently
applied or fair market value determined in the reasonable good faith
judgment of the Corporation's Board of Directors) in any transaction or
series of transactions (other than sales in the ordinary course of
business) and (y) any merger or consolidation to which the Corporation
is a party, except for a merger in which the Corporation is the
surviving corporation and, after giving effect to such merger, no
person or group of affiliated persons (other than the Spell Group) owns
capital stock of the Corporation possessing the voting power (under
ordinary circumstances) to elect a majority of the Corporation's Board
of Directors.
(iv) If the Corporation shall fail to discharge its obligation to
redeem shares of 8% Preferred Stock pursuant to this paragraph (d)
(the "Mandatory Redemption Obligation"), the Mandatory Redemption
Obligation shall be discharged as soon as the Corporation is permitted
by law or by its applicable contracts, agreements, indentures, bonds,
notes, debentures or similar instruments to discharge such Mandatory
Redemption Obligation. If and so long as the Mandatory Redemption
Obligation shall not fully be discharged, the Corporation shall not,
directly or indirectly, declare or pay any dividend or make any
distributions on, or purchase, redeem or retire, or satisfy any
mandatory or optional redemption, sinking fund or other similar
obligation in respect of, any other series or class of its stock.
(v) Nothing contained in this paragraph (d) shall prevent or
otherwise impair the exercise by any holder of shares of the 8%
Preferred Stock of the conversion rights existing under paragraph (g)
below at any time prior to the actual redemption of such shares
pursuant to this paragraph (d).
-6-
(vi) All shares of 8% Preferred Stock which shall have been
redeemed, purchased or otherwise acquired by the Corporation shall be
canceled and shall not be reissued as shares of 8% Preferred Stock.
(e) Voting Rights. (i) Except as otherwise required by law and as
set forth in this paragraph (e) and paragraph (f) below, the holders
of the 8% Preferred Stock shall not be entitled to vote on any matter
submitted to stockholders for a vote.
(ii) If the Corporation shall fail to redeem the 8% Preferred
Stock in accordance with the requirements of paragraph (d) above, the
number of directors constituting the Corporation's Board of Directors
will, at the request of holders of two-thirds of the shares of the 8%
Preferred Stock then outstanding, be increased by one member, and the
holders of the 8% Preferred Stock will have the special right, voting
separately as a single class (with each share being entitled to one
vote) and to the exclusion of all other classes of the Corporation's
stock, to elect an individual to fill such newly created directorship,
to fill any vacancy of such directorship and to remove any individual
elected to such directorship. The newly created directorship will
constitute a separate class of directors, and the director elected by
the holders of the 8% Preferred Stock will be entitled to cast one
vote on each matter considered by the Board of Directors (including
for purposes of determining the existence of a quorum). The special
right of the holders of 8% Preferred Stock to elect members of the
Board of Directors may be exercised at the special meeting called
pursuant to this subparagraph (ii), at any annual or other special
meeting of stockholders and, to the extent and in the manner permitted
by applicable law, pursuant to a written consent in lieu of a
stockholders meeting. Such special right shall continue until such
time as all shares of 8% Preferred Stock shall have been redeemed in
accordance with the requirements of paragraph (d) above together with
accrued and unpaid dividends thereon, at which time such special right
shall terminate.
At any time when such special right has vested in the holders of
8% Preferred Stock, a proper officer of the Corporation shall, upon
the written request of the holder of at least 10% of the 8% Preferred
Stock then outstanding, addressed to the secretary of the Corporation,
call a special meeting of the holders of 8% Preferred Stock for the
purpose of electing a director pursuant to this paragraph (iii). Such
meeting shall be held at the earliest legally permissible date at the
principal office of the Corporation, or at such other place designated
by the holders of at least 10% of the 8% Preferred Stock then
outstanding. If such meeting has not been called by a proper officer
of the Corporation within 10 days after personal service of such
written request upon the secretary of the Corporation or within 20
days after mailing the same to the secretary of the Corporation at its
principal office, then the holders of at least 10% of the 8% Preferred
Stock then outstanding may designate in writing one of their number to
call such meeting at the expense of the Corporation, and such meeting
may be called by such person so designated upon the notice required
for annual meetings of stockholders and shall be held at the
Corporation's principal office, or at such other place designated by
the holders of at least 10% of the 8% Preferred Stock then
outstanding.
-7-
At any meeting or at any adjournment thereof at which the holders
of 8% Preferred Stock have the special right to elect a director, the
presence, in person or by proxy, of the holders of two-thirds of the
8% Preferred Stock then outstanding shall be required to constitute a
quorum for the election or removal of any director by the holders of
the 8% Preferred Stock exercising such special right. The vote of a
majority of such quorum shall be required to elect or remove any such
director.
Any director so elected by the holders of 8% Preferred Stock
shall continue to serve as a director until the redemption of the
shares of 8% Preferred Stock in accordance with the requirements of
paragraph (d) above. After the redemption of the 8% Preferred Stock in
accordance with the requirements of paragraph (d) above, the director
elected by the holders of the 8% Preferred Stock shall cease to be a
director and the number of directors constituting the Board of
Directors of the Corporation shall decrease to such number as
constituted the whole Board of Directors of the Corporation
immediately prior to the occurrence of the event giving rise to the
special right to elect directors.
(f) Restrictions on Corporate Action. So long as any shares of
the 8% Preferred Stock shall be outstanding and, in addition to any
other approvals or consents required by law, without the consent of
the holders of at least two-thirds of the shares of 8% Preferred Stock
at the time outstanding as of a record date fixed by the Board of
Directors, given either by their affirmative vote at a special meeting
called for that purpose, or, if permitted by law, in writing, without
a meeting, the Corporation shall not:
(i) Amend any provision of the Articles of Incorporation or
the Bylaws of the Corporation; or
(ii) Declare, pay or obligate itself to pay a dividend or
make any other distributions (including payments upon redemption
or repurchase) relative to any shares of its Common Stock or any
other class or series of its capital stock other than the 8%
Preferred Stock unless:
(A) such dividend or distribution is payable out of
earnings or surplus (other than revaluation surplus or
paid-in surplus) or payable in shares of Common Stock
referred to in subparagraph (iii)(A) of paragraph (g) or
payable in warrants, rights or Convertible Securities
referred to in subparagraph (iii)(C) of paragraph (g); and
(B) such dividend or other distribution is made in
compliance with paragraph (b); or
(iii) Create any new class or series of shares having
preferences over or on parity with the 8% Preferred Stock as to
dividend, liquidation, redemption, sinking fund, or assets
including, without limitation, any class or series of stock that:
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(A) could be redeemed in whole or in part at a price
per share greater than the consideration per share received
by the Corporation therefor plus any accrued and unpaid
dividends thereon or would be entitled to payment of any
redemption price prior to or concurrently with the holders
of the 8% Preferred Stock;
(B) would be entitled upon liquidation to receive any
amount per share in excess of the sum of the consideration
per share received by the Corporation therefor plus any
accrued and unpaid dividends thereon or would be entitled to
receive any liquidating distribution prior to or
concurrently with the holders of the 8% Preferred Stock;
(C) would be entitled to payment of any dividend or
distribution prior to or concurrently with the holders of
the 8% Preferred Stock; or
(D) would be convertible into or exchangeable for or
carry any option or right to acquire a class or series of
stock described in clauses (A), (B) or (C) above; or
(iv) Issue any evidence of indebtedness which is convertible into
or exchangeable for shares of any class or series of capital stock of
the Corporation; or
(v) (A) Directly or indirectly, or through any subsidiary,
purchase, redeem or retire any shares of its capital stock or any
warrant, rights or options to purchase or acquire any shares of its
capital stock (any such purchase, redemption or retirement being
herein collectively called "Restricted Payments") if either (x) the
Corporation shall have failed to pay dividends or any other amount
which shall have accrued on the shares of 8% Preferred Stock then
outstanding, or (y) the aggregate amount of Restricted Payments made
during the period from and after January 1, 1997 to and including the
date of the making of the Restricted Payment in question would exceed
8.9% of EBITDA for such period, computed on a cumulative basis for
said entire period; or
(B) For purposes of this subparagraph (v), "EBITDA" for any
period shall mean the sum of net income from continuing operations of
the Corporation during such period, plus (to the extent deducted in
determining net income from continuing operations of the Corporation)
(1) interest expense on indebtedness for borrowed money (including non
cash amortized interest expense on deferred finance costs, original
issue discount, prepaid interest, and amortized costs relating to
warrants) of the Corporation during such period, (2) all provisions
for any federal, state or other income taxes made by the Corporation
during such period and (3) depreciation and amortization expense of
the Corporation
-9-
during such period, all determined in accordance with generally
accepted accounting principles at the time in the United States except
as otherwise set forth herein; or
(vi) Alter or change the specific rights, preferences, or
privileges of any class or series of its Preferred Stock so as to have
an adverse effect on the 8% Preferred Stock or change any rights or
priorities of the 8% Preferred Stock (including the rights of the
holders of the 8% Preferred Stock under this paragraph (f)); or
(vii) Issue any Additional Shares of Common Stock or any options
warrants or other rights to subscribe for or purchase Additional
Shares of Common Stock at a price per share which is less than the
Conversion Price.
(g) Conversion. (i) (A) Optional Conversion. Each share of the 8% Preferred
Stock shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share, at the office of the Corporation or
any transfer agent for the 8% Preferred Stock, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing the
Liquidation Preference of such share by the Conversion Price then in effect. The
Conversion Price at which shares of Common Stock shall be delivered upon
conversion of each share of 8% Preferred Stock without the payment of any
additional consideration by the holder thereof shall initially be $4.26 per
share (the "Conversion Price"). Such initial Conversion Price shall be subject
to adjustment as set forth in subparagraph (iii) of this paragraph (g).
(B) Mandatory Conversion. (1) Subject to the provisions of subparagraph (2)
below, if at any time after the second anniversary of the initial issuance of
the 8% Preferred Stock, the Current Market Price per share of Common Stock shall
exceed 175% of the Conversion Price then in effect, all (but not less than all)
of the shares of 8% Preferred Stock shall be converted into shares of Common
Stock at the election of the Corporation as evidenced by a resolution adopted by
the Board of Directors of the Corporation. Such resolution shall set forth the
date upon which the conversion shall occur which shall be not less than 5 nor
more than 15 days after the date upon which such resolution is adopted. Written
notice of such conversion together with a copy of the resolution of the Board of
Directors relating to such conversion shall be given to each holder of the 8%
Preferred Stock promptly following its adoption. Each holder of 8% Preferred
Stock so converted will be entitled to receive the number of shares of Common
Stock into which such 8% Preferred Stock held by such holder would have been
converted if such holder had exercised such holder's conversion rights on the
conversion date specified in the resolution adopted by the Board of Directors.
(2) Upon the occurrence of an event specified in subparagraph (i)(B) of
this paragraph (g), the outstanding shares of the 8% Preferred Stock to be
converted shall be converted without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided, however, (I)
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that such conversion will not violate any legal requirements (such as compliance
with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvement Act of 1976) and (II) that the
Corporation shall not be obligated to issue certificates evidencing the shares
of Common Stock issuable upon such conversion unless certificates evidencing
such shares of the 8% Preferred Stock being converted are delivered to either
the Corporation or any transfer agent, as hereinafter provided, or the holder
notifies the Corporation or any transfer agent, as hereinafter provided, that
such certificates have been lost, stolen, or destroyed and executes an agreement
satisfactory to the Corporation to indemnify the Corporation from any loss
incurred by it in connection therewith. Upon the mandatory conversion of the 8%
Preferred Stock, the holders of such 8% Preferred Stock shall surrender the
certificates representing such shares at the office of the Corporation or of any
transfer agent for the Common Stock. Thereupon, there shall be issued and
delivered to such holder, promptly at such office and in his name as shown on
such surrendered certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of the 8% Preferred
Stock surrendered were convertible on the date on which such mandatory
conversion occurred.
(ii) Mechanics of Conversion. The shares of Common Stock issued to the
holders of 8% Preferred Stock pursuant to this paragraph (g) will be shares of
Class B Common Stock; except that any holder of 8% Preferred Stock may request
by written notice to the Corporation that shares of Voting Common Stock be
issued upon conversion of the 8% Preferred Stock of such holder. Before any
holder of 8% Preferred Stock shall be entitled to convert the same into shares
of Common Stock pursuant to subparagraph (i)(A) of this paragraph (g), he or she
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of the Corporation or of any transfer agent for the 8% Preferred Stock,
and shall give written notice by mail, postage prepaid, to the Corporation at
its principal corporate office of the election to convert the same and shall
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. The Corporation shall as soon as
practicable thereafter, issue and deliver at such office to such holder of 8%
Preferred Stock, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of 8% Preferred Stock to be converted, and the person or person entitled
to receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date. If the conversion is in connection with an
underwritten offer of securities registered pursuant to the Securities Act of
1933, the conversion may, at the option of any holder tendering the 8% Preferred
Stock for conversion, be conditioned upon the closing with the underwriter of
the sale of securities pursuant to such offering, in which event the person(s)
entitled to receive the Common Stock issuable upon such conversion of the 8%
Preferred Stock shall not be deemed to have converted such 8% Preferred Stock
until immediately prior to the closing of such sale of securities.
-11-
(iii) Conversion Price Adjustments of 8% Preferred Stock. The Conversion
Price shall be subject to adjustment from time to time as follows:
(A) Stock Dividends, Subdivisions and Combinations. In case after
April 30, 1997 the Corporation shall
(1) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Common Stock, or
(2) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(3) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then the Conversion Price shall be adjusted to that rate determined by
multiplying the Conversion Price in effect immediately prior to such
event by a fraction (I) the numerator of which shall be the total
number of outstanding shares of Common Stock of the Corporation
immediately prior to such event, and (II) the denominator of which
shall be the total number of outstanding shares of Common Stock of the
Corporation immediately after such event. In the event that the
dividend or distribution referenced in subparagraph (iii)(A)(1) above
is lawfully abandoned, the Conversion Price shall be appropriately
readjusted.
(B) Issuance of Additional Shares of Common Stock. In case after April
30, 1997 the Corporation shall (except as hereinafter provided) issue any
Additional Shares of Common Stock for a consideration which is less than
the Current Market Price per share, then the per share Conversion Price
upon each such issuance shall be adjusted to that price determined by
multiplying the per share Conversion Price in effect immediately prior to
such event by a fraction:
(x) the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to the
issuance of such Additional Shares of Common Stock plus the
number of full shares of Common Stock which the aggregate
consideration for the total number of such Additional Shares
of Common Stock so issued would purchase at the Current
Market Price per share, and
(y) the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to the
issuance of such Additional Shares of Common Stock plus the
number of such Additional Shares of Common Stock so issued.
-12-
The provisions of this subparagraph (iii)(B) shall not apply
to any Additional Shares of Common Stock that are distributed
to holders of Common Stock as a stock dividend or subdivision,
for which an adjustment is provided for under subparagraph
(iii)(A) above. No adjustment of the per share Conversion
Price shall be made under this subparagraph (iii)(B) upon the
issuance of any Additional Shares of Common Stock that are
issued pursuant to the exercise of any warrants or other
subscription or purchase rights or pursuant to the exercise of
any conversion or exchange rights in any Convertible
Securities, if any such adjustment shall previously have been
made upon the issuance of such warrants or other rights or
upon the issuance of such Convertible Securities (or upon the
issuance of any warrants or other rights therefor) pursuant to
subparagraph (iii)(C) below.
(C) Issuance of Warrants, Other Rights or
Convertible Securities. In case the Corporation shall issue
any options, warrants or other rights to subscribe for or
purchase any Additional Shares of Common Stock or issue
Convertible Securities and the consideration per share for
which Additional Shares of Common Stock may at any time
thereafter be issuable pursuant to such options, warrants or
other rights or pursuant to the terms of such Convertible
Securities shall be less than the Current Market Price, then
the per share Conversion Price shall be adjusted as provided
in subparagraph (iii)(B) above.
For purposes of adjustments in the Conversion Price pursuant
to this subparagraph (iii)(C), the number of shares of Common
Stock outstanding shall be deemed to include the maximum
number of Additional Shares of Common Stock issuable pursuant
to all outstanding options, warrants or other rights or
necessary to effect the conversion or exchange of all such
outstanding Convertible Securities of the Corporation. All
such options, warrants, other rights or Convertible Securities
shall be deemed to have been issued as of, and the date as of
which the Current Market Price per share of Common Stock shall
be computed shall be, the earlier of (1) the date on which the
Corporation shall enter a firm contract or commitment for the
issuance of such options, warrants, other rights or
Convertible Securities or (2) the date of actual issuance of
such options, warrants, other rights or Convertible
Securities.
No adjustment of the per share Conversion Price shall be made
under this subparagraph (iii)(C) upon the issuance of any
Convertible Securities that are issued pursuant to the
exercise of any options, warrants or other subscription or
purchase rights therefor if any such adjustment shall
previously have been made upon the issuance of such options,
warrants or other rights pursuant to said paragraph.
(D) Other Provisions Applicable to Adjustments Under
This Subparagraph. The following provisions shall be
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applicable to the making of adjustments to the Conversion
Price hereinbefore provided in this subparagraph (iii):
(1) Computation of Consideration. To the extent that
any Additional Shares of Common Stock or any Convertible
Securities or any options, warrants or other rights to
subscribe for or purchase any Additional Shares of Common
Stock or any Convertible Securities shall be issued for a
cash consideration, the consideration received by the
Corporation therefor shall be deemed to be the amount of the
cash received by the Corporation therefor, or, if such
Additional Shares of Common Stock or Convertible Securities
or options, warrants or other rights are offered by the
Corporation for subscription, the subscription price, or, if
such Additional Shares of Common Stock or Convertible
Securities or options, warrants or other rights are sold to
underwriters or dealers for public offering without a
subscription offering, the initial public offering price, in
any such case excluding any amounts paid or receivable for
accrued interest or accrued dividends and without deduction
of any compensation, discounts or expenses paid or incurred
by the Corporation for and in the underwriting thereof, or
otherwise in connection with the issue thereof. To the
extent that such issuance shall be for a consideration other
than cash, then, except as herein otherwise expressly
provided, the amount of such consideration shall be deemed
to be the fair value of such consideration at the time of
such issuance as determined in good faith by the Board of
Directors of the Corporation. The consideration for any
Additional Shares of Common Stock issuable pursuant to any
options, warrants or other rights to subscribe for or
purchase the same shall be the consideration received by the
Corporation for issuing such options, warrants or other
rights, plus the additional consideration payable to the
Corporation upon the exercise of such options, warrants or
other rights. The consideration for any Additional Shares of
Common Stock issuable pursuant to the terms of any
Convertible Securities shall be the consideration received
by the Corporation for issuing any options, warrants or
other rights to subscribe for or purchase such Convertible
Securities plus the consideration paid or payable to the
Corporation in respect of the subscription for or purchase
of such Convertible Securities, plus the additional
consideration, if any, payable to the Corporation upon the
exercise of the right of conversion or exchange in such
Convertible Securities. In case of the issuance at any time
of any Additional Shares of Common Stock or Convertible
Securities in payment or satisfaction of any dividend upon
any class of equity securities other than Common stock, the
Corporation shall be deemed to have received for such
Additional Shares of Common Stock or Convertible Securities
a consideration equal to the amount of such dividend so paid
or satisfied.
-14-
(2) Readjustment of Conversion Price. Upon expiration
of the right of conversion or exchange of any Convertible
Securities, or upon the expiration of any rights, options or
warrants, or upon any increase in the minimum consideration
receivable by the Corporation for the issuance of Additional
Shares of Common Stock pursuant to such Convertible
Securities, rights, options or warrants, if any such
Convertible Securities shall not have been converted or
exchanged, or if any such rights, options or warrants shall
not have been exercised, the number of shares of Common
Stock deemed to be issued and outstanding by reason of the
fact that they were issuable upon conversion or exchange of
any such Convertible Securities or upon exercise of any such
rights, options or warrants shall no longer be computed as
set forth above, and the Conversion Price shall forthwith be
readjusted and thereafter be the rate which it would have
been (but reflecting any other adjustments in the Conversion
Price made pursuant to the provisions of this paragraph (g)
after the issuance of such Convertible Securities, rights,
options or warrants) had the adjustment of the Conversion
Price made upon the issuance or sale of such Convertible
Securities or the issuance of such rights, options or
warrants been made on the basis of the issuance only of the
number of Additional Shares of Common Stock actually issued
upon conversion or exchange of such Convertible Securities
or upon the exercise of such rights, options or warrants, or
upon the basis of such increased minimum consideration, as
the case may be, and thereupon only the number of Additional
Shares of Common Stock actually so issued or the number
thereof issuable upon the basis of such increased minimum
consideration shall be deemed to have been issued and only
the consideration actually received or such increased
minimum consideration receivable by the Corporation
(computed as in subparagraph (iii)(D)(1) of this paragraph
(g)) shall be deemed to have been received by the
Corporation.
(E) Common Equivalent Dividends. In case the Corporation shall
declare, to the extent otherwise permitted herein, a dividend upon its
Common Stock (except a dividend payable in shares of Common Stock
referred to in subparagraph (iii)(A) of this paragraph (g)) or a
dividend payable in warrants, rights or Convertible Securities
referred to in subparagraph (iii)(C) of this paragraph (g) payable
otherwise than out of earnings or surplus (other than revaluation
surplus or paid-in surplus), the Corporation shall simultaneously
declare a dividend, in cash, upon the 8% Preferred Stock equal to, in
the case of a cash dividend, the amount of the per share dividend
declared upon the Common Stock times the number of shares of Common
Stock to be received by the holders of the 8% Preferred Stock upon
conversion at the Conversion Price then in effect and, in the case of
a dividend payable other than in cash, the fair value of such dividend
declared upon the Common Stock as determined by the Board of Directors
of the Corporation. For the purposes of the foregoing, a dividend
-15-
payable other than in cash shall be considered payable out of earnings
or surplus (other than revaluation surplus or paid-in surplus) only to
the extent that such earnings or surplus are charged an amount equal
to the fair value of such dividend as determined by the Board of
Directors of the Corporation.
(F) Minimum Adjustment. Except as hereinafter provided, no
adjustment of the Conversion Price hereunder shall be made if such
adjustment results in a change of the Conversion Price then in effect
of less than one cent ($.01). Any adjustment of less than one cent
($.01) of any Conversion Price shall be carried forward and shall be
made at the time of and together with any subsequent adjustment that,
together with adjustment or adjustments so carried forward, amounts to
one cent ($.01) of the Conversion Price then in effect or more.
However, upon the conversion of any share of the 8% Preferred Stock,
the Corporation shall make all necessary adjustments not theretofore
made to the Conversion Price up to and including the date upon which
the conversion is exercised.
(G) Notice of Adjustments. Whenever the Conversion Price shall be
adjusted pursuant to this subparagraph (iii), the Corporation shall
promptly make a certificate signed by the President or a Vice
President and by the Treasurer or an Assistant Treasurer setting
forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the adjusted Conversion Price, the method by
which such adjustment was calculated (including a description of the
basis on which the Board of Directors of the Corporation made any
determination hereunder), and shall promptly cause copies of such
certificate to be mailed (by first class mail postage prepaid) to each
of the holders of the 8% Preferred Stock.
(iv) Mergers, Consolidations, Sales. In the case of any consolidation or
merger of the Corporation with another entity, or any reorganization or
reclassification of the Common Stock or other equity securities of the
Corporation (except a split-up or combination, provision for which is made in
subparagraph (iii)(A) of this paragraph (g)), then, as a condition of such
consolidation, merger, reorganization or reclassification, lawful and adequate
provision shall be made whereby the holders of the 8% Preferred Stock shall
thereafter have the right to receive upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore receivable hereunder, such shares of stock, securities
or assets as may (by virtue of such consolidation, merger, sale, reorganization
or reclassification) be issued or payable with respect to or in exchange for a
number of outstanding shares of Common Stock equal to the number of shares of
Common Stock immediately theretofore so receivable hereunder had such
consolidation, merger, sale, reorganization or reclassification not taken place,
and in any such case appropriate provisions shall be made with respect to the
rights and interests of the holders of the 8% Preferred Stock to the end that
the provisions hereof (including, without limitation, provisions for adjustment
of the Conversion Price) shall thereafter be applicable as nearly as may be, in
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relation to any shares of stock, securities or assets thereafter deliverable
upon conversion of such 8% Preferred Stock.
(v) Dissolution or Liquidation. In the event of any proposed distribution
of the assets of the Corporation in dissolution or liquidation (except under
circumstances when the foregoing subparagraph (iv) of this paragraph (g) shall
be applicable) the Corporation shall mail notice thereof to the holders of the
8% Preferred Stock and shall make no distribution to shareholders until the
expiration of 30 days from the date of mailing of the aforesaid notice, and in
any such case, the holders of the 8% Preferred Stock may exercise the conversion
rights with respect to the 8% Preferred Stock within 30 days from the date of
mailing such notice and all rights herein granted not so exercised within such
30-day period shall thereafter become null and void.
(vi) No Impairment. The Corporation will not, by amendment of its Articles
of Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all of the
provisions of this paragraph (g) and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion rights of the
holders of the 8% Preferred Stock against impairment.
(vii) Fully Paid Stock; Taxes. The shares of stock represented by each and
every certificate for its Common Stock to be delivered on the exercise of the
conversion rights herein provided for shall, at the time of such delivery, be
validly issued and outstanding and be fully paid and nonassessable. The
Corporation shall pay when due and payable any and all federal and state taxes
(other than income taxes) which may be payable in respect of the 8% Preferred
Stock or any Common Stock or certificates therefor upon the exercise of the
conversion rights herein provided for pursuant to the provisions hereof. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the transfer and delivery of stock
certificates in the name other than that of the holder of the 8% Preferred Stock
converted, and any such tax shall be paid by such holder at the time of
presentation.
(viii) Closing of Transfer Books. The right to convert any of the 8%
Preferred Stock shall not be suspended during any period while the stock
transfer books of the Corporation for its Common Stock may be closed. The
Corporation shall not be required, however, to deliver certificates of its
Common Stock upon such exercise while such books are duly closed for any
purpose, but the Corporation may postpone the delivery of the certificate for
such Common Stock until the opening of such books, and they shall, in such case,
be delivered forthwith upon the opening thereof, or as soon as practicable
thereafter.
(ix) Reservation of Common Stock. The Corporation will at all times reserve
and keep available such number of authorized shares of its Voting Common Stock
-17-
and Class B Common Stock, solely for the purpose of issue upon the conversion of
the 8% Preferred Stock as herein provided for, as shall then be issuable upon
the conversion of all outstanding shares of 8% Preferred Stock and such shares
of Common Stock shall at no time have a par value which is in excess of the
Conversion Price then in effect.
(h) Preemptive Rights. If at any time after the date of initial issuance of
the 8% Preferred Stock, the Corporation grants, issues or sells any Additional
Shares of Common Stock, or issues or sells any options, Convertible Securities
or any warrants or other rights to subscribe for or purchase Additional Shares
of Common Stock, then each holder of the 8% Preferred Stock shall be entitled to
acquire, upon the same terms provided in any such grant, or applicable to any
such issuance or sale of such additional securities, such number of additional
securities so as to cause the percentage of outstanding shares of Common Stock
to which such holder would be entitled upon conversion of the 8% Preferred Stock
(determined as of the date of issuance of such additional securities) to remain
unchanged.
(i) Definitions. In addition to the terms defined elsewhere in this
Designation of Class of Preferred Stock, the following terms have the following
respective meanings:
The term "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Corporation on and after April 30, 1997, except:
(A) Common Stock issued upon conversion of the Series A Preferred
Stock or the 8% Preferred Stock; and
(B) 2,512,466 shares of Common Stock which may be issued pursuant to
stock option plans, warrants and contractual commitments in effect on April
30, 1997.
The term "Class B Common Stock" shall mean the Corporation's Class B Common
Stock, $.01 par value, authorized on the date of issuance of the 8% Preferred
Stock.
The term "Common Stock" shall mean (i) the Voting Common Stock, (ii) the
Class B Common Stock, and (iii) any other class of capital stock of the
Corporation hereafter authorized which is not limited to a fixed amount or
percentage in respect of the rights of the holders thereof to participate in
dividends or in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; provided that the
shares to be received by the holders of the 8% Preferred Stock upon conversion
shall be either the Voting Common Stock or the Class B Common Stock authorized
on the date of issuance of the 8% Preferred Stock.
The term "Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities that are convertible into or exchangeable
-18-
for Additional Shares of Common Stock, either immediately or upon the arrival of
a specified date or the happening of a specified event.
The term "Current Market Price" per share of Common Stock for the purposes
of any provision of paragraph (g) means the average of the closing prices of
such security's sales on all securities exchanges on which such security may at
the time be listed, or, if there has been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
Nasdaq Stock Market as of 4:00 P.M., New York time, or, if on any day such
security is not quoted in the Nasdaq Stock Market, the average of the highest
bid and lowest asked prices on such day in the domestic over-the-counter market
as reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 31 days
consisting of the day as of which "Market Price" is being determined and the 30
consecutive business days prior to such day. For purposes of determination
pursuant to subparagraph (i)(B) of paragraph (g), if at any time the Common
Stock of the Company is not listed on any national securities exchange or quoted
in the Nasdaq Stock Market, the "Market Price" shall be deemed to be 0. For
purposes of determination pursuant to subparagraph (iii) of paragraph (g), if at
any time the Common Stock of the Company is not listed on any securities
exchange or quoted in the Nasdaq Stock Market or the over-the-counter market,
the "Market Price" shall be the fair value thereof determined by resolution of
the Board of Directors of the Corporation in good faith; provided that if such
valuation by the Board of Directors is contested by a majority of the holders of
the 8% Preferred Stock within 20 days after receipt of written notice of the
adoption of such resolution, then as determined by any member of the National
Association of Securities Dealers, Inc. selected by the Corporation.
The term "Family Trust" means, in respect of any person, any trust for the
exclusive benefit of such individual, his/her spouse and lineal descendants, so
long as such individual has the exclusive right to control such trust.
The term "Related Party" means, with respect to any person (i) a spouse or
child of such person, (ii) a Family Trust, or (iii) a corporation, partnership
or limited liability company in which such person owns or holds a 51% or more
controlling interest.
The term "Spell Group" shall mean any one or more of ▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ and their respective Related
Parties; provided that the Spell Group shall at all times include either ▇▇▇▇▇
▇. ▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
The term "Voting Common Stock" shall mean the Corporation's voting Common
Stock, $.01 par value, authorized pursuant to the Articles of Incorporation as
in effect on the date of issuance of the 8% Preferred Stock.
-19-
Description of Closing Opinion of
Special Counsel to the Purchasers
The closing opinion of ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, special counsel to the
Purchasers, called for by Section 4.3 of the Preferred Stock Purchase Agreement,
shall be dated the Closing Date and addressed to the Purchasers, shall be
satisfactory in form and substance to the Stock Purchasers and shall be to the
effect that:
1. The Company is a corporation, validly existing and in good standing
under the laws of the State of Minnesota, and has the corporate power and
the corporate authority to execute and deliver the Preferred Stock Purchase
Agreement and the Rights Agreement, to issue the Preferred Stock, and to
issue its shares of common stock upon conversion of the Preferred Stock.
2. The Preferred Stock Purchase Agreement and the Rights Agreement
have been duly authorized by all necessary corporate action on the part of
the Company, have been duly executed and delivered by the Company and
constitute the legal, valid and binding contracts of the Company
enforceable in accordance with their respective terms, subject to
bankruptcy, insolvency, fraudulent conveyance and similar laws affecting
creditors' rights generally, and general principles of equity (regardless
of whether the application of such principles is considered in a proceeding
in equity or at law); provided that no opinion is expressed as to whether
the enforcement of the indemnity provisions of Section 4(e) of the Rights
Agreement may be limited under certain circumstances by public policy
considerations.
3. The Preferred Stock has been duly authorized by all necessary
corporate action on the part of the Company, the certificates evidencing
the Preferred Stock purchased by the Purchasers on the Closing Date have
been duly executed and delivered by authorized officers of the Company and
the shares evidenced by such certificates are validly issued, fully paid
and non-assessable.
4. The issuance, sale and delivery of the Preferred Stock under the
circumstances contemplated by the Preferred Stock Purchase Agreement do
not, under existing law, require the registration of the Preferred Stock
under the Securities Act, or the qualification of an indenture under the
Trust Indenture Act of 1939, as amended.
The opinion of ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ shall also state that the opinion of
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ P.A. is satisfactory in scope and form to ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
and that, in their opinion, the Purchasers are justified in relying thereon.
In rendering the opinion set forth in paragraph 1 above, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
may rely, as to matters referred to in paragraph 1, solely upon an examination
of the Articles of Incorporation certified by, and a certificate of good
standing of the Company from, the Secretary of State of the State of Minnesota,
EXHIBIT B
(to Preferred Stock Purchase Agreement)
the By-laws of the Company and the Business Corporation Act of the State of
Minnesota. The opinion of ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ shall be limited to the laws of the
State of Illinois, the Business Corporation Act of the State of Minnesota and
the Federal laws of the United States.
With respect to matters of fact upon which such opinion is based, ▇▇▇▇▇▇▇
and ▇▇▇▇▇▇ may rely on appropriate certificates of public officials and officers
of the Company and upon representations of the Company and the Purchasers
delivered in connection with the issuance and sale of the Preferred Stock.
B-2
Description of Closing Opinion of
Counsel for the Company
The closing opinion of ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ P.A., counsel for the Company,
which is called for by Section 4.3 of the Preferred Stock Purchase Agreement,
shall be dated the Closing Date and addressed to the Purchasers, shall be
satisfactory in scope and form to the Purchasers and shall be to the effect
that:
1. The Company is a corporation, duly incorporated, validly existing
and in good standing under the laws of the State of Minnesota, has the
corporate power and the corporate authority to execute and perform the
Preferred Stock Purchase Agreement and the Rights Agreement and to issue
the Preferred Stock and has the corporate power and the corporate authority
to conduct the activities in which it is now engaged and is duly licensed
or qualified and is in good standing as a foreign corporation in each
jurisdiction in which the character of the properties owned or leased by it
or the nature of the business transacted by it makes such licensing or
qualification necessary except where failure to so qualify would not have a
material adverse effect on the Company.
2. Each Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation,
has the full corporate power and authority to conduct the activities in
which it is now engaged and is duly licensed or qualified and is in good
standing in each jurisdiction in which the character of the properties
owned or leased by it or the nature of the business transacted by it makes
such licensing or qualification necessary except where failure to so
qualify would not have a material adverse effect on such Subsidiary and all
of the issued and outstanding shares of capital stock of each such
Subsidiary have been duly issued, are fully paid and non-assessable and
except as disclosed in Schedule II to the Preferred Stock Purchase
Agreement are owned of record by the Company, by one or more Subsidiaries,
or by the Company and one or more Subsidiaries.
3. The Preferred Stock Purchase Agreement and the Rights Agreement
have been duly authorized by all necessary corporate action on the part of
the Company, have been duly executed and delivered by the Company and
constitute the legal, valid and binding contracts of the Company
enforceable in accordance with their respective terms, subject to
bankruptcy, insolvency, fraudulent conveyance and similar laws affecting
creditors' rights generally, and good faith reasonableness materially and
other general principles of equity (regardless of whether the application
of such principles is considered in a proceeding in equity or at law);
provided that no opinion is expressed as to whether the enforcement of the
indemnity provisions of Section 4(e) of the Rights Agreement may be limited
under certain circumstances by public policy considerations.
4. The creation, issuance and sale of the Preferred Stock has been
duly authorized by all necessary corporate action on the part of the
EXHIBIT C
(to Preferred Stock Purchase Agreement)
Company (including any action by the stockholders of the Company being
required by law, by the Articles of Incorporation or Bylaws of the Company,
or otherwise), the certificates evidencing the Preferred Stock purchased by
the Purchasers on the Closing Date have been duly executed and delivered by
authorized officers of the Company and the shares evidenced by such
certificates are validly issued, fully paid and non-assessable.
5. No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any governmental body, Federal
or state, is necessary in connection with the execution and delivery of the
Preferred Stock Purchase Agreement, the Rights Agreement or the Preferred
Stock.
6. Except for the Fleet Agreement and the ▇▇▇▇▇ Agreement in respect
of which the Company has obtained all necessary consents, the issuance and
sale of the Preferred Stock and the execution, delivery and performance by
the Company of the Preferred Stock Purchase Agreement and the Rights
Agreement do not conflict with or result in any breach of any of the
provisions of or constitute a default under or result in the creation or
imposition of any lien upon any of the property of the Company pursuant to
the provisions of the Articles of Incorporation or Bylaws of the Company or
any agreement or other instrument known to such counsel to which the
Company is a party or by which the Company may be bound.
7. The issuance, sale and delivery of the Preferred Stock under the
circumstances contemplated by the Preferred Stock Purchase Agreement do
not, under existing law, require the registration of the Preferred Stock
under the Securities Act of 1933, as amended, or the qualification of an
indenture under the Trust Indenture Act of 1939, as amended.
8. The Company has duly authorized Capital Stock consisting of
30,000,000 shares of common stock, par value $.01 per share, 2,000,000
shares of Series A 7% Convertible Preferred Stock, par value $.01 per
share, and 18,000,000 shares of undesignated stock. After giving effect to
the shares issued and sold on the Closing Date, 6,513,237 shares of Common
Stock, 18,750 shares of Series A 7% Convertible Preferred Stock and 10,000
shares of Preferred Stock will be outstanding on the Closing Date. To such
counsel's knowledge, all such outstanding shares have been duly and validly
issued and are fully paid and non-assessable. To such counsel's knowledge,
except as disclosed in Schedule III to the Preferred Stock Purchase
Agreement, the Company has no outstanding warrants or options with respect
to its capital stock and there are no outstanding preemptive rights.
9. The Common Stock issued upon conversion of the Preferred Stock will
be duly authorized, fully paid, validly issued and nonassessable shares of
the Company.
10. To such counsel's knowledge, there are no actions, suits or
proceedings pending or, threatened against the Company in any court or
before any governmental authority or arbitration board or tribunal which
C-2
would, if adversely determined, be reasonably expected to have a material
adverse effect on the financial condition of the Company or the ability of
the Company to perform its obligations under the Preferred Stock Purchase
Agreement and the Rights Agreement or on the legality, validity or
enforceability of the Company's obligations under and in respect of the
Preferred Stock Purchase Agreement, the Rights Agreement or the Preferred
Stock.
11. None of the transactions contemplated by the Preferred Stock
Purchase Agreement including, without limitation, the use of the proceeds
from the issuance of the Preferred Stock will violate or result in a
violation of Section 7 of the Securities Exchange Act of 1934, as amended,
or any regulation issued pursuant thereto, or Regulations G, T and X of the
Board of Governors of the Federal Reserve System, 12 C.F.R., Chap. II.
12. The Resolution was duly adopted by unanimous written consent of
the board of directors of the Company and the Statement of Designation has
been duly filed for record and/or recorded in the manner and in all places
required by law in order to establish, preserve and protect the voting
power, designation, preferences, relative and other special rights, and the
qualifications, limitations and restrictions, of the Preferred Stock and
the powers, relative, participating, optional and other special rights
applicable to the Preferred Stock set forth in the Statement of Designation
are enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent conveyance and similar laws affecting creditors and
stockholders generally, and good faith, reasonableness, materiality and
other general principles of equity (regardless of whether the application
of such principles is considered in a proceeding in equity or in law).
The opinion of ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ P.A. shall cover such other matters
relating to the sale of the Preferred Stock as the Purchasers may reasonably
request. With respect to matters of fact on which such opinion is based, such
counsel shall be entitled to rely on appropriate certificates of public
officials and officers of the Company. The opinion of ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ P.A.
shall provide that subsequent transferees of the Preferred Stock which have
acquired the Preferred Stock in accordance with the Preferred Stock Purchase
Agreement and the Rights Agreement may rely upon said opinion.
C-3