EXHIBIT 10.6
SUBORDINATION AGREEMENT
This Agreement is made as of September 28, 2001 by SELECT COMFORT
CORPORATION (the "Company"), the parties named at the foot of this Agreement
under the heading "Subsidiaries" (each a "Subsidiary" and collectively the
"Subsidiaries"), MEDALLION CAPITAL, INC. ("Senior Lender"), and the other
parties named at the foot of this Agreement under the heading "Subordinated
Lenders" who have executed this Agreement (each a "Subordinated Lender" and
collectively the "Subordinated Lenders").
WHEREAS, the Subordinated Lenders are all of the holders of (i) the Senior
Secured Convertible Notes dated June 6, 2001 in the aggregate original principal
amount of $11,000,000 (the "Senior Secured Convertible Notes") issued by the
Company pursuant to the Note Purchase Agreement dated June 1, 2001 (the "Note
Purchase Agreement"), and (ii) the Convertible Subordinated Debenture dated
November 10, 2000 in the original principal amount of $4,000,000 issued by the
Company (the "Convertible Subordinated Debenture" and, together with Senior
Secured Convertible Notes, herein individually called a "Convertible Note" and
collectively called the "Convertible Notes");
WHEREAS, the Senior Lender has been asked to loan $5,000,000 to the Company
and is unwilling to do so unless the Subordinated Lenders enter into this
Agreement;
Now, therefore, the parties agree as follows:
1. CERTAIN DEFINITIONS. The following terms have the meanings specified:
"Senior Indebtedness" means all of the currently existing and any future
indebtedness, obligations and liabilities of the Company or the Subsidiaries to
the Senior Lender under any of (i) the Promissory Note in the initial face
amount of $5,000,000 issued by the Company to the Senior Lender (the "Note") and
substitutions, amendments or extensions of the Note, (ii) the Loan Agreement
dated September 28, 2001 (the "Loan Agreement") among the Company, the
Subsidiaries and the Senior Lender pursuant to which the Note was issued, and
(iii) the other agreements (the "Loan Documents") delivered by the Company or
the Subsidiaries to the Senior Lender pursuant to the Loan Agreement; provided,
however, that, notwithstanding anything to the contrary stated herein or
elsewhere in this Agreement, the outstanding principal amount of the Senior
Indebtedness shall at no time exceed $5,000,000.
"Subordinated Indebtedness" shall mean all existing and hereafter arising
indebtedness, obligations and liabilities of the Company or the Subsidiaries to
the Subordinated Lenders, whether direct or contingent, under any of (i) the
Convertible Notes, (ii) the Note Purchase Agreement, and (iii) the other
agreements delivered by the Company or the Subsidiaries to the Subordinated
Lenders pursuant to the Note Purchase Agreement or otherwise in connection with
the Convertible Notes, and all claims, rights, causes of action, judgments and
decrees in respect of the foregoing.
Except as otherwise specified herein, capitalized terms used in this Agreement
which are defined in the Loan Agreement have the same meanings.
2. REPRESENTATIONS AND WARRANTIES.
(a) Each of the Subordinated Lenders severally represents and warrants
to the Senior Lender that:
(i) As of the date hereof, the outstanding principal amount of
the Subordinated Indebtedness held by such Subordinated Lender is set
forth opposite the name of such Subordinated Lender on Schedule 1
hereto.
(ii) Such Subordinated Lender is the owner and holder of the
Subordinated Indebtedness set forth opposite the name of such
Subordinated Lender on Schedule 1 hereto, free and clear of all liens,
claims and encumbrances, and such Subordinated Lender is not subject
to any contractual limitations or restriction which would impair in
any way its ability to execute or perform its respective obligations
under this Agreement.
(iii) Such Subordinated Lender consents to the Company and the
Subsidiaries incurring the Senior Indebtedness.
(b) The Company and the Subsidiaries jointly and severally represent
and warrant to the Senior Lender that:
(i) As of the date hereof, the aggregate outstanding principal
amount of the Subordinated Indebtedness is $15,000,000.
(ii) The Subordinated Lenders are the record owners and holders
of the Subordinated Indebtedness.
3. TERMS OF SUBORDINATION.
3.1 NO TRANSFER. No Subordinated Lender will sell or otherwise dispose
of any of the Subordinated Indebtedness held by it, except to a person who
agrees in advance in writing to become a party to this Subordination
Agreement.
3.2 PAYMENT SUBORDINATED. Anything in any agreement governing
Subordinated Indebtedness notwithstanding, the payment of the Subordinated
Indebtedness is and shall be expressly subordinate and junior in right of
payment and exercise of remedies to the prior payment in full of the Senior
Indebtedness to the extent and in the manner provided herein, and the
Subordinated Indebtedness is so subordinated as a claim against the Company
or the Subsidiaries, or any of the assets of, or ownership interests in,
the Company or the Subsidiaries, whether such claim be:
(a) in the event of any distribution of the assets of the Company
or the Subsidiaries upon any voluntary or involuntary dissolution,
winding-up, total or partial liquidation or reorganization,
bankruptcy, insolvency, receivership or other similar statutory or
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common law proceedings or arrangements involving the Company or the
Subsidiaries or the readjustment of the liabilities of the Company or
the Subsidiaries or any assignment by the Company or the Subsidiaries
for the benefit of creditors or any marshaling of the assets or
liabilities of the Company or the Subsidiaries (collectively called a
"Reorganization"); or
(b) other than in connection with a Reorganization.
In furtherance of the foregoing, neither the Company nor the
Subsidiaries shall make, and no holder of Subordinated Indebtedness
will accept or receive, any payment of Subordinated Indebtedness until
all the Senior Indebtedness has been paid in full; provided, however,
the Company or the Subsidiaries may pay to any holder of Subordinated
Indebtedness, and any such holder may accept and retain, regularly
scheduled payments of principal and interest under the Subordinated
Indebtedness unless there exists at the time of the payment, or the
payment would give rise to, any Default under the terms governing the
Senior Indebtedness.
3.3 DISTRIBUTION IN REORGANIZATION. In the event of any Reorganization
of the Company or the Subsidiaries or their respective properties, all of
the Senior Indebtedness shall be paid in full before any payment is made on
the Subordinated Indebtedness, and in any such proceedings any payment or
distribution of any kind or character, whether in cash or property or
securities, which may be payable or deliverable in payment of the
Subordinated Indebtedness (other than securities of the Company or any
other entity provided for by a plan of reorganization or readjustment, the
payment of which is subordinate, at least to the extent provided in this
Agreement, to the payment in full of all Senior Indebtedness at the time
outstanding and any securities issued in exchange for any Senior
Indebtedness under any such plan of reorganization or readjustment) shall
be paid or delivered directly to the Senior Lender for application to the
Senior Indebtedness, until all the Senior Indebtedness shall have been paid
in full. In the event that upon any Reorganization, any payment or
distribution of assets of the Company or of the Subsidiaries of any kind or
character, whether in cash, property or securities, shall be received by
any holder of the Subordinated Indebtedness before all Senior Indebtedness
is paid in full (other than securities of the Company or any other entity
provided for by a plan of reorganization or readjustment, the payment of
which is subordinate, at least to the extent provided in this Agreement, to
the payment in full of all Senior Indebtedness at the time outstanding and
any securities issued in exchange for any Senior Indebtedness under any
such plan of reorganization or readjustment), the payment or distribution
shall be immediately paid over to the holder of the Senior Indebtedness,
for application to the payment of all Senior Indebtedness remaining unpaid
until all Senior Indebtedness shall have been paid in full after giving
effect to any concurrent payment or distribution to the holder of the
Senior Indebtedness.
3.4 EFFECT OF PROVISIONS. The provisions hereof as to subordination
are solely for the purpose of defining the relative rights of the holder of
the Senior Indebtedness on the one hand, and the holders of the
Subordinated Indebtedness on the other hand, and none of the provisions
shall impair the obligations of the Company or the Subsidiaries to the
Senior Lender or the Subordinated Lenders.
3.5 SUBROGATION, ETC. The holders of the Subordinated Indebtedness
shall not be subrogated to the rights of the holder of the Senior
Indebtedness with respect to payments or
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distributions of assets of, or ownership interests in, the Company or the
Subsidiaries on account of the Senior Indebtedness until the Senior
Indebtedness shall have been paid in full in cash, whereupon the holders of
the Subordinated Indebtedness shall be subrogated to such rights. For
purposes of such subrogation, no payments or distributions to the holder of
the Senior Indebtedness of any cash, properties or securities to which any
holder of Subordinated Indebtedness would be entitled but for the
provisions of this Agreement, and no payment to the holder of the Senior
Indebtedness by any holder of Subordinated Indebtedness, shall, as between
the Company, the Subsidiaries, their respective creditors (other than the
holder of the Senior Indebtedness) and the holders of the Subordinated
Indebtedness, be deemed to be a payment by the Company on account of the
Senior Indebtedness.
4. AGREEMENT TO HOLD IN TRUST. If any holder of Subordinated Indebtedness
shall receive any payment on the Subordinated Indebtedness at a time when the
making or acceptance thereof is prohibited by the provisions of this Agreement,
it shall hold the payment in trust for the benefit of the holder of the Senior
Indebtedness and shall promptly pay it over to the holder of the Senior
Indebtedness for application in payment of the Senior Indebtedness. If the
Senior Lender shall receive any payments to which it is not entitled under this
Subordination Agreement, such payment shall be held in trust for the benefit of
the holders of the Subordinated Indebtedness and shall be promptly paid to the
holders of the Subordinated Indebtedness.
5. LEGEND. The Company, the Subsidiaries and the Subordinated Lenders, for
themselves and their respective successors and assigns, agree to add to each
promissory note or debenture representing or evidencing any of the Subordinated
Indebtedness the following legend:
"This promissory note/debenture is subject to the Subordination Agreement
among Select Comfort Corporation, various of its subsidiaries, various
subordinated lenders to Select Comfort Corporation and Medallion Capital, Inc.,
a copy of which is available from any of the foregoing. By its acceptance of
this instrument/agreement, the holder agrees to be bound by the provisions of
the Subordination Agreement."
6. LIMIT ON RIGHT OF ACTION. Each of the Subordinated Lenders agrees that
so long as the Senior Indebtedness remains outstanding, such Subordinated Lender
will not, directly or indirectly, take any action to accelerate or demand
payment by the Company or the Subsidiaries of the Subordinated Indebtedness, to
exercise any of its remedies in respect of the Subordinated Indebtedness, to
initiate any Reorganization of, or litigation in respect of the Subordinated
Indebtedness against, the Company or the Subsidiaries, or to foreclose or
otherwise realize on any security given by the Company or the Subsidiaries or
any other person to secure the Subordinated Indebtedness; provided, however,
that (i) upon acceleration of the Senior Indebtedness by the Senior Lender, the
Subordinated Lenders may, in their discretion, accelerate all or any part of the
Subordinated Indebtedness, (ii) in a Reorganization the holders of Subordinated
Indebtedness may file, prosecute and defend a proof of claim as to the
Subordinated Indebtedness, may file motions and objections to motions, may
negotiate, vote on and object to any plan of reorganization, and may seek relief
from the automatic stay provisions of bankruptcy law, in each case so long as
such proof of claim or action does not contest the Senior Lender's priority and
rights under this Agreement, and (iii) nothing herein shall prevent any director
of the Company or any Subsidiary from voting, in the exercise of his or her
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fiduciary duties, to approve the initiation by the Company or such Subsidiary of
a Reorganization.
7. SUBORDINATION OF SECURITY INTERESTS. The Subordinated Lenders and the
Senior Lender confirm that, regardless of the relative times and method of
attachment or perfection or the order of filing of financing statements,
mortgages or other security agreements or documents, or anything in the
Subordinated Indebtedness or this Agreement or the Loan Agreement to the
contrary, the security interests and liens granted to secure the Senior
Indebtedness shall in all respects be first and senior security interests and
liens, superior to any security interests and liens granted to the Subordinated
Lenders. It is the express intention of the parties that, notwithstanding
anything in this Agreement to the contrary, all liens and security interests
granted to the Senior Lender to secure the Senior Indebtedness shall be prior
and superior to any liens or security interests granted to the Subordinated
Lenders to secure the Subordinated Indebtedness.
8. RELEASE OF COLLATERAL. Without limiting any of the rights (including any
of the foreclosure rights) of the Senior Lender under the Loan Agreement or the
Note, or any documents delivered to secure the obligations of the Company or the
Subsidiaries to the Senior Lender in connection therewith or under the
provisions of any applicable law, in the event that the Senior Lender releases
or discharges its security interest in, or liens upon, any assets which are
subject to a lien or security interest in favor of the Subordinated Lenders,
such assets shall thereupon be deemed to have been released from all liens and
security interests, provided that any released or discharged assets are being
sold or transferred either (a) in the ordinary course of the Company's or the
Subsidiary's business or (b) following the occurrence and during the continuance
of a Default under the Senior Indebtedness and the giving of 10 days' prior
written notice of any proposed release to the Subordinated Lenders, for
consideration equivalent to the fair value of such assets, under circumstances
in which the seller of such assets shall have agreed that the net proceeds of
any sale under this clause shall be applied to the payment of the Senior
Indebtedness and the Subordinated Indebtedness in the order of priority provided
in this Agreement.
9. COMPANY'S AND SUBSIDIARIES' ADDITIONAL AGREEMENT. The Company and the
Subsidiaries will not, without the Senior Lender's prior written consent,
execute or deliver any negotiable instrument as evidence of the Subordinated
Indebtedness or any part thereof, except as otherwise permitted by this
Agreement.
10. RIGHTS OF SENIOR LENDER TO AMEND LOAN DOCUMENTS. Subject to the terms
of this Subordination Agreement, the Senior Lender reserves the right, in its
sole discretion, to modify, amend, waive or release any of the terms of the Loan
Agreement, the Note, or any other Loan Document at any time executed by the
Company, the Subsidiaries or any other person securing the Senior Indebtedness
or any other document executed in connection with the Senior Indebtedness and to
exercise or refrain from exercising any powers or rights which the Senior Lender
may have thereunder, and such modification, amendment, waiver, release, exercise
or failure to exercise shall not affect any of the Senior Lender's or
Subordinated Lenders' rights under this Subordination Agreement.
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11. FURTHER ASSURANCES. Each of the Company, the Subsidiaries and the
Subordinated Lenders (for itself and its successors and assigns as holders of
Subordinated Indebtedness) agrees to execute and deliver to the Senior Lender
any further instruments and documents and take any further actions as the Senior
Lender may reasonably request, in each case for the purpose of carrying out the
provisions and intent of this Agreement.
12. NOTICES. All notices and other communications relating to this
Agreement shall be in writing and shall be delivered as follows:
If to the Senior Lender to:
Medallion Capital, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: President
If to the Company or the Subsidiaries to:
Select Comfort Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
If to any of the Subordinated Lenders to:
the address of such Subordinated Lender specified opposite its name on
Schedule 1 hereto
or to such other address as the party may have designated in writing to the
other parties. Notices shall be deemed given upon the earlier to occur of (i)
actual receipt by or delivery to the addressee, or (ii) the second day following
deposit in the U. S. mail for delivery via certified or registered mail.
13. SUCCESSORS CONTINUING EFFECT, ETC. This Agreement is being entered into
for the benefit of the holders of the Senior Indebtedness and the Subordinated
Indebtedness and their respective successors and assigns. This Agreement shall
be a continuing agreement and shall be irrevocable and shall remain in full
force and effect so long as there are both Senior Indebtedness and Subordinated
Indebtedness outstanding. The liability of the Subordinated Lenders shall be
reinstated and revived, and the rights of the holder of the Senior Indebtedness
shall continue, with respect to any amount paid on account of the Senior
Indebtedness which shall be required to be restored or returned by the holder of
the Senior Indebtedness in any Reorganization (including without limitation, any
repayment made pursuant to any provision of Chapter 5 of Title 11, United States
Code), all as though the amount had not been paid.
14. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof, and no
modification or waiver
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of any provision of this Agreement shall be effective unless it is in writing
signed by the Senior Lender, the Subordinated Lenders holding at least 67% of
the aggregate principal amount of the Senior Secured Convertible Notes
outstanding at the time of calculation, and the Subordinated Lender holding a
majority of the aggregate principal amount of the Convertible Subordinated
Debenture outstanding at the time of calculation (unless such amendment or
modification shall impose any additional obligations upon the Company or the
Subsidiaries, in which case the amendment or modification shall also require
execution by them).
15. MISCELLANEOUS. This Agreement, which may be executed in any number of
counterparts, shall be governed by the laws of the State of Minnesota. The
headings in this Agreement are for reference only and shall not alter or
otherwise affect the meaning. In the event of any conflict between the
provisions of this Subordination Agreement and the provisions of the
Subordinated Indebtedness or the Loan Agreement, the provisions of this
Subordination Agreement shall control. The Company and the Subsidiaries shall be
jointly and severally liable to reimburse the holders of the Senior and
Subordinated Indebtedness upon demand for all reasonable costs and expenses
(including reasonable attorney's fees and disbursements) paid or incurred by the
holders of the Senior or Subordinated Indebtedness in connection with the
preparation, negotiation, execution, delivery or enforcement of this Agreement.
Nothing in this Agreement shall restrict or prevent the Subordinated Lenders
from converting at any time and from time to time, at their sole discretion, all
or any part of the Convertible Notes in accordance with their terms. The
obligations of the Subordinated Lenders under this Agreement shall be several,
and not joint or joint and several.
16. CONSENT TO JURISDICTION. AT THE OPTION OF THE SENIOR LENDER, THIS
AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT SITTING
IN MINNEAPOLIS OR ST. ▇▇▇▇, MINNESOTA; AND EACH PARTY HERETO CONSENTS TO THE
JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN
SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT ANY PARTY COMMENCES ANY ACTION IN
ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY
OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE SENIOR LENDER
AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE
JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
17. WAIVER OF TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OF IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN, WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE.
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In Witness Whereof, the parties have executed this Agreement as of the date
first written above.
THE COMPANY:
SELECT COMFORT CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Senior Vice President
SUBSIDIARIES:
SELECT COMFORT RETAIL CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Senior Vice President
SELECT COMFORT DIRECT CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Senior Vice President
SELECT COMFORT SC CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Senior Vice President
DIRECT CALL CENTERS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Senior Vice President
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Senior Vice President
SENIOR LENDER:
MEDALLION CAPITAL, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Executive Vice President
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SUBORDINATED LENDERS:
ST. ▇▇▇▇ VENTURE CAPITAL V, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Managing Member
ST. ▇▇▇▇ VENTURE CAPITAL VI, LLC
By: SPVC MANAGEMENT VI, LLC
Its: Managing Member
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Managing Director
PRINTWARE, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
LIBERTY DIVERSIFIED
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Executive Vice President
STANDARD FUSEE CORPORATION
By: /s/ C. ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------------------------
Name: C. ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: President and CEO
/s/ ▇. ▇. ▇▇▇▇▇▇
--------------------------------------------
▇. ▇. ▇▇▇▇▇▇
-9-
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇-▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇-▇▇▇▇▇▇ ▇▇▇▇▇▇▇
HSBC GLOBAL CUSTODY NOMINEE (UK)
LIMITED, AS NOMINEE FOR BFSUS
SPECIAL OPPORTUNITIES TRUST PLC
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Director
FROST NATIONAL BANK CUSTODIAN FBO
RENAISSANCE US G&I TRUST, PLC, AS
NOMINEE FOR RENAISSANCE CAPITAL
GROWTH & INCOME FUND III, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Director
BAYSTAR CAPITAL, L.P.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Managing Member
BAYSTAR INTERNATIONAL, LTD.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Managing Member
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SCHEDULE 1
------------------------------ -------------------- -------------------- --------------------
NAMES AND ADDRESSES OF ORIGINAL PRINCIPAL NUMBER OF SHARES PURCHASE PRICE
PURCHASERS AMOUNT OF NOTES OF WARRANT STOCK
------------------------------ -------------------- -------------------- --------------------
St. ▇▇▇▇ Venture Capital VI, $4,100,000 1,640,000 $4,100,000
LLC
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
------------------------------ -------------------- -------------------- --------------------
Printware, Inc. $1,500,000 600,000 $1,500,000
c/o ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, CFO
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------ -------------------- -------------------- --------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇ $100,000 40,000 $100,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------ -------------------- -------------------- --------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $100,000 40,000 $100,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------ -------------------- -------------------- --------------------
Liberty Diversified $1,000,000 400,000 $1,000,000
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇▇, CFO
------------------------------ -------------------- -------------------- --------------------
Standard Fusee Corporation $1,000,000 400,000 $1,000,000
▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------ -------------------- -------------------- --------------------
▇. ▇. ▇▇▇▇▇▇ $50,000 20,000 $50,000
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------ -------------------- -------------------- --------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ $50,000 20,000 $50,000
Summer Address:
Mail:
▇▇ ▇▇▇▇▇▇ ▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Overnight:
▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------ -------------------- -------------------- --------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ $50,000 20,000 $50,000
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------ -------------------- -------------------- --------------------
▇▇▇▇-▇▇▇▇▇▇ ▇▇▇▇▇▇▇ $50,000 20,000 $50,000
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-11-
------------------------------ -------------------- -------------------- --------------------
HSBC Global Custody Nominee $500,000 200,000 $500,000
(UK) Limited, as nominee for
BFSUS Special Opportunities
Trust PLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇-▇▇ ▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------ -------------------- -------------------- --------------------
Frost National Bank Custodian $500,000 200,000 $500,000
FBO
Renaissance Capital Growth &
Income Fund III, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇-▇▇ ▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------ -------------------- -------------------- --------------------
BayStar Capital, L.P. $1,500,000 600,000 $1,500,000
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------ -------------------- -------------------- --------------------
BayStar International, Ltd. $500,000 200,000 $500,000
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------ -------------------- -------------------- --------------------
St. ▇▇▇▇ Venture Capital V, $4,000,000 -- $4,000,000
LLC
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------ -------------------- -------------------- --------------------
TOTAL $15,000,000 4,400,000 $15,000,000
------------------------------ -------------------- -------------------- --------------------
-12-