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EXHIBIT 99.2
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (including the Exhibits hereto, the
"Agreement"), dated as of August 29, 2001, is entered into by and among the
Investors listed on Exhibit A hereto (each an "Investor" or jointly the
"Investors") and HEI, Inc., a Minnesota corporation (the "Company").
WHEREAS, the Company will at the Closing (as defined below) sell up to
950,000 shares of its Common Stock, par value $0.05 per share (the "Common
Stock"), to the Investors and the Investors will purchase the Shares of Common
Stock from the Company on the terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained in this Agreement, the
parties agree as follows:
1. SUBSCRIPTION FOR SHARES.
1.1 AUTHORIZATION. The Company will authorize the sale and issuance of
up to 950,000 shares of its Common Stock (the "Shares"), having the rights,
privileges and preferences as set forth in the Company's Restated Articles of
Incorporation, as amended to date (the "Articles of Incorporation").
1.2 SALE OF COMMON STOCK. Subject to the terms and conditions hereof,
each Investor agrees, severally and not jointly, to purchase at the Closing (as
defined below) and the Company agrees to issue and sell to each Investor, that
number of shares of the Company's Common Stock set forth opposite each
Investor's name on Exhibit A, at a price of $7.00 per share (the "Purchase
Price").
1.3 CLOSING. The closing (the "Closing") of the purchase and sale of
the Shares shall take place at the offices of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.L.L.P., ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, at 10:00 a.m., on August 29, 2001, or at such
other time and place as the Company and the Investors mutually agree upon orally
or in writing (the "Closing Date"). At the Closing, the Company shall deliver to
each Investor a certificate representing the Common Stock which such Investor is
purchasing (as set forth on Exhibit A hereto) against delivery to the Company by
such Investor of a wire transfer in immediately available funds in the amount of
the Purchase Price therefor.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to the Investors to enter into this Agreement
and purchase the Shares, the Company hereby represents and warrants to each
Investor as follows:
2.1 ORGANIZATION AND STANDING. The Company and its subsidiaries are
corporations duly organized, validly existing, and in good standing under the
laws of the jurisdiction in which they are incorporated and have all requisite
corporate power and authority and all material qualifications, licenses, permits
and authorizations necessary to own and operate their properties,
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to carry on their businesses as now conducted and as proposed to be conducted
through the fiscal year ending August 31, 2002, and to carry out the
transactions contemplated by this Agreement. Each of the Company and its
subsidiaries is duly qualified to do business as a foreign corporation in all
jurisdictions in which the failure to be so qualified would have a material
adverse effect on the Company's or its subsidiaries' properties or business as
now conducted or as proposed to be conducted.
2.2 CORPORATE POWER. The Company has all requisite legal and corporate
power to execute and deliver this Agreement and the other agreements
contemplated hereby, to issue the Common Stock hereunder, and to carry out and
perform its obligations under the terms of this Agreement.
2.3 CAPITALIZATION. The authorized capital stock of the Company, the
designations of classes of capital stock and the rights and preferences of
capital stock are set forth in the Articles of Incorporation. As of the date
hereof, 5,006,460 shares of the Common Stock are issued and outstanding,
excluding the Shares, and no shares of preferred stock are issued and
outstanding. All issued and outstanding shares of the Company's Common Stock as
of the date hereof have been duly authorized and validly issued, are fully paid
and nonassessable, and were issued in compliance with applicable federal and
state securities laws. Except as set forth on Schedule 2.3, as of the date
hereof, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
subsidiaries. No shareholder of the Company has any rights or preferences not
afforded all shareholders of the Company, except (i) to the extent the Company
may be obligated to include additional securities pursuant to that certain
Registration Rights Agreement, dated as of March 3, 2000, among the Company and
the Selling Shareholders identified therein; provided, that, the Company shall
use its best efforts to obtain a waiver from such Selling Shareholders with
respect to such obligations, and (ii) pursuant to this Agreement. No shareholder
of the Company has any options or warrants to purchase Common Stock, except
pursuant to options issued under the Company's stock option plan, stock
incentive plan or any other equity-based compensation plans. No shareholder has
any pre-emptive or approval right pertaining to the sale and purchase of the
Common Stock pursuant to this Agreement, whether by statute, contractual
obligation or otherwise, except pursuant to Section 6 of this Agreement.
2.4 AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution,
delivery and performance by the Company of this Agreement and each of the other
agreements contemplated hereby to which the Company is a party; the
authorization, issuance, sale and delivery of the Shares; and the performance of
all of the Company's obligations hereunder and thereunder has been taken. This
Agreement, and each of the other agreements contemplated hereby to which the
Company is a party, when executed and delivered by the Company and each
Investor, shall constitute a valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to laws of general application relating to bankruptcy,
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insolvency or creditors' rights and rules of law governing specific performance,
injunctive relief or other equitable remedies.
2.5 VALID ISSUANCE. The Shares, when issued, sold and delivered in
accordance with this Agreement, will be duly authorized and validly issued,
fully paid and nonassessable, and will be free and clear of any liens or
encumbrances, except for restrictions imposed under applicable state and federal
securities laws.
2.6 SEC DOCUMENTS; FINANCIAL STATEMENTS. Since September 1, 1999, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC Documents"). The
Company (i) has delivered or made available to each Investor or its
representative true and complete copies of the SEC Documents to the extent that
each Investor or its representative has requested any such SEC Documents from
the Company and (ii) agrees to deliver or make available to each Investor or its
representative true and complete copies of any additional SEC Documents, upon
request. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with United States generally accepted accounting
principles, consistently applied during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
any Investor which is not included in the SEC Documents, including, without
limitation, information referred to in Section 3.6 of this Agreement, contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they are or were made, not misleading.
2.7 NO CONFLICTS. The Company is not in violation of any term of the
Articles of Incorporation or its Bylaws, and except for noncompliance with the
terms of certain agreements that have been executed, as listed on Schedule 2.7,
the Company is not in violation of any term of any contract, agreement,
mortgage, indebtedness, indenture, instrument, judgment, decree, order to which
the Company is subject or any statute, rule or regulation applicable to the
Company, except for any such violations that, individually or in the aggregate,
are not likely to
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have a material adverse effect on the Company's business, properties or
prospects, taken as a whole ("Material Adverse Effect"). The execution and
delivery by the Company of this Agreement and each of the other agreements
contemplated hereby to which the Company is a party, the offering, sale and
issuance of the Shares and the fulfillment of and compliance with the respective
terms hereof and thereof and the consummation of the transactions contemplated
hereby and thereby, do not and shall not (i) conflict with or result in a breach
of the terms, conditions or provisions of, (ii) constitute a default under,
(iii) result in the creation of any lien, security interest, charge or
encumbrance upon the Company's capital stock or assets pursuant to, (iv) give
any third party the right to modify, terminate or accelerate any obligation
under, (v) result in a violation of, or (vi) require any authorization, consent,
approval, exemption or other action by or notice to any court or administrative
or governmental body pursuant to, the Articles of Incorporation or Bylaws of the
Company, or any law, statute, rule or regulation to which the Company is
subject, or any agreement, instrument, order, judgment or decree to which the
Company is subject, except with respect to any of the foregoing which would not
have a Material Adverse Effect. The Company is not in violation of the listing
requirements of The Nasdaq National Market and is unaware of any facts or
circumstances that reasonably might cause the Common Stock to be delisted by The
Nasdaq National Market in the foreseeable future.
2.8 LITIGATION. Except as described on Schedule 2.8 or as disclosed in
the SEC Documents, there are no actions, suits, proceedings orders,
investigations or claims pending or, to the best of the Company's knowledge,
threatened against or affecting the Company (or to the best of the Company's
knowledge, pending or threatened against or affecting any of the officers,
directors or employees of the Company with respect to the Company's business or
proposed business activities) at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or instrumentality
(including, without limitation, any actions, suit, proceedings or investigations
with respect to the transactions contemplated by this Agreement); and the
Company is not a party to any arbitration proceedings under collective
bargaining agreements or otherwise or, to the best of the Company's knowledge,
any governmental investigations or inquiries (including inquiries as to the
qualification to hold or receive any license or permit). The Company is not
subject to any judgment, order or decree of any court or other governmental
agency.
2.9 TAX RETURNS. The Company has filed all tax returns which it is
required to file under applicable foreign, federal, state and local laws and
regulations; all such returns are complete and correct in all material respects;
and the Company has paid all taxes which have become due and payable. The
Company has not been advised that any of its returns, federal, state or other,
have been or are being audited as of the date thereof. The Company has not
waived any statute of limitations with respect to taxes or agreed to any
extension of time with respect to a tax assessment or deficiency, and there are
no agreements, waivers or other arrangements providing for an extension of time
with respect to the assessment of any tax or deficiency. There are no actions,
suits, proceedings or claims now pending against the Company in respect of any
tax or assessment. There is no pending or, to the Company's knowledge,
threatened investigation of the Company by any federal, state, foreign or local
authority relating to any taxes or assessments, or any claims for additional
taxes or assessments asserted by any such authority.
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2.10 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental authority on the part of the Company is required
in connection with the valid execution and delivery of this Agreement, the
offer, sale or issuance of the Shares, or the consummation of any other
transaction contemplated hereby, except under applicable state securities laws,
which filings and qualifications, if required, will be accomplished within the
required statutory period, for the filing pursuant to Regulation D promulgated
under the Securities Act of 1933, as amended (the "1933 Act"), which filing will
be made within 15 days of the execution hereof, and for the filing of the NASDAQ
National Market Additional Listing Application, which filing has been made.
2.11 EMPLOYMENT MATTERS; ERISA MATTERS. The Company and its
subsidiaries are in compliance with all federal, state, local and foreign laws
and regulations respecting employment and employment practices, terms and
conditions of employment and wages and hours, except where failure to be in
compliance would not have a Material Adverse Effect. There are no pending
investigations involving the Company or any of its subsidiaries by the U.S.
Department of Labor or any other governmental agency responsible for the
enforcement of such federal, state, local or foreign laws and regulations. There
is no unfair labor practice charge or complaint against the Company or any of
its subsidiaries pending before the National Labor Relations Board or any
strike, picketing, boycott, dispute, slowdown or stoppage pending or threatened
against or involving the Company or any of its subsidiaries. No representation
question exists respecting the employees of the Company or any of its
subsidiaries, and no collective bargaining agreement or modification thereof is
currently being negotiated by the Company or any of its subsidiaries. No
grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company or any of its subsidiaries. No
material labor dispute with the employees of the Company or any of its
subsidiaries exists or, to the knowledge of the Company, is imminent. Except for
such failures that would not result in a Material Adverse Effect, every employee
benefit plan (whether or not subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) maintained or contributed to by the Company
has been maintained and administered in accordance with their terms, ERISA, the
Internal Revenue Code of 1986, as amended (the "Code"), and other applicable
laws. None of the plans is subject to Title IV of ERISA and no plan is a
multi-employer plan (within the meaning of Section 3(37) of ERISA). Each plan
intended to qualify under Section 401(a) or 501(c)(9) of the Code has received a
favorable determination or approval letter from the Internal Revenue Service
regarding its qualification under such section and no event has occurred which
cause any such plan to lose its qualification.]
2.12 INTELLECTUAL PROPERTY RIGHTS. The Company and its subsidiaries own
or possess the requisite rights or licenses to use all trademarks, trade names,
service marks, service ▇▇▇▇ registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights (collectively "Intellectual Property
Rights") necessary to conduct their respective businesses as now conducted and
as proposed to be conducted through the fiscal year ending August 31, 2002.
Except as set forth on Schedule 2.12, none of the Intellectual Property Rights
or other intellectual property rights have expired or terminated, or are
expected to expire or terminate on or before August 31, 2002. The Company and
its subsidiaries do not have any knowledge of any event, fact or circumstance
relating to (i) any infringement by the Company or its subsidiaries of any
trademarks, trade names, service
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marks, service ▇▇▇▇ registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets or other similar rights of others, or (ii) any person or entity now
infringing any Intellectual Property Rights or other similar rights, or (iii)
any person or entity now infringing any Intellectual Property Rights or other
similar rights, except for such infringements that would not result in a
Material Adverse Effect. There is no claim, action or proceeding being made or
brought against, or to the Company's knowledge, being threatened against, the
Company or its subsidiaries regarding any trademarks, trade names, service
marks, service ▇▇▇▇ registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets or other similar rights of others. The Company and its subsidiaries have
taken reasonable security measures to protect the secrecy, confidentiality and
value of all of their Intellectual Property Rights.
2.13 ENVIRONMENTAL LAWS.
(a) To the knowledge of the Company, it and its subsidiaries (1)
are in compliance with any and all Environmental Laws, (2)
have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to
conduct their respective businesses, and (3) are in compliance
with all terms and conditions of any such permit, license or
approval, except in each case where the failure would not have
a Material Adverse Effect. To the knowledge of the Company,
with respect to the Company (A) there are no past or present
releases of any Hazardous Materials into the environment,
actions, activities, circumstances, conditions, events,
incidents, or contractual obligations which may give rise to
any common law environmental liability or any liability under
any Environmental Law in any material respect and (B) the
Company has not received any notice with respect to the
foregoing, nor is any action pending or to the Company's
knowledge, threatened in connection with the foregoing, except
in each case where the condition or obligation would not have
a Material Adverse Effect. The term "Environmental Laws" means
all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants,
contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or
otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered,
promulgated or approved thereunder.
(b) Other than those that are or were stored, used or disposed of
in compliance with applicable law, to the knowledge of the
Company, no Hazardous Materials are contained on or about any
real property currently owned, leased or used by the Company,
and no Hazardous Materials were released on or about any real
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property previously owned, leased or used by the Company
during the period the property was owned, leased or used by
the Company.
(c) To the knowledge of the Company, there are no underground
storage tanks on or under any real property owned, leased or
used by the Company or any of its subsidiaries that are not in
compliance with applicable law.
2.14 REGULATORY PERMITS; COMPLIANCE. The Company possesses all
franchises, grants, authorizations, licenses permits, easements, consents,
certificates, approvals and orders necessary to own, lease and operate its
properties and to conduct its business as currently being conducted
(collectively, the "Company Permits"), except where the failure to obtain a
Company Permit will not have a Material Adverse Effect. There is no action
pending, or to the knowledge of the Company, threatened regarding the suspension
or cancellation of any of the Company Permits. The Company is not in conflict
with, or in default or violation of, any of the Company Permits except where
such violation would not have a Material Adverse Effect. The Company has not
received any notification with respect to possible conflicts, defaults, or
violations of applicable laws.
2.15 INVESTMENT COMPANY STATUS. The Company is not and upon
consummation of the sale of the Common Stock will not be an "investment
company," a company controlled by an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company" as such terms are defined in the Investment Company Act of 1940, as
amended.
2.16 ACCURACY OF INFORMATION. The information that has been furnished
to the Investors is true and correct and accurate in all material respects as of
the date hereof except for financial data that is accurate as of the date shown
therein, and the Company has not omitted to state any material fact necessary in
order to make the statements made herein or therein, in light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company or
its business, properties, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly disclosed or announced
2.17 LABOR DISTURBANCES. No labor disturbance by the employees of the
Company exists, or to the knowledge of the Company, is imminent which could
reasonably be expected to have a material adverse effect on the conduct of the
business, operations, financial condition, or income of the Company.
2.18 INTERNAL ACCOUNTING CONTROLS. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurances that:
(i) transactions are recorded as necessary to permit preparation of financial
statements in conformity with United States generally accepted accounting
principles and to maintain accountability for assets; (ii) transactions are
executed in accordance with management's general or specific authorization;
(iii) access to assets is available only if permitted in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for amounts is compared with
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existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
2.19 S-3 REGISTRATION. The Company is currently eligible to register
secondary offerings of securities, including the resale of the Shares, on a
registration statement on Form S-3 under the 1933 Act.
2.20 USE OF PROCEEDS. The proceeds received from the sale of the Shares
shall be used for general business purposes of the Company. Except as set forth
in Schedule 2.20, no compensation is payable in connection with the sale of the
Shares.
3. REPRESENTATIONS AND WARRANTIES OF INVESTOR
Each Investor hereby represents and warrants, severally and not
jointly, to the Company as follows:
3.1 ORGANIZATION AND STANDING; POWER.
(a) With respect to each Investor that is an entity, such Investor
is an entity duly organized, validly existing, and in good
standing under the laws of the jurisdiction in which it is
formed and has all requisite power and authority and all
material qualifications, licenses, permits and authorizations
necessary to own and operate its properties, to carry on its
business as now conducted and as proposed to be conducted
through the current fiscal year and to carry out the
transactions contemplated by this Agreement. Such Investor has
all requisite power to execute and deliver this Agreement and
the other agreements contemplated hereby to which it is a
party, and to carry out and perform its obligations under the
terms of this Agreement.
(b) With respect to each Investor who is a natural person, such
Investor has full right, power, authority and capacity to
execute and deliver this Agreement and the other agreements
contemplated hereby, and to carry out and perform such
Investor's obligations under the terms of this Agreement.
3.2 AUTHORIZATION. This Agreement, and each of the other agreements
contemplated hereby to which an Investor is a party, when executed and delivered
by the Investor and the Company, will constitute valid and legally binding
obligations of the Investor, enforceable against the Investor in accordance with
their terms, subject to laws of general application relating to bankruptcy,
insolvency or creditors' rights and rules of law governing specific performance,
injunctive relief or other equitable remedies.
3.3 EXPERIENCE. The Investor has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of its investment in the Company and has the capacity to protect its own
interests. The Investor acknowledges that investment in the Shares is a
speculative risk. The Investor is able to fend for itself in the transactions
contemplated by this Agreement, can bear the economic risk of its investment in
the
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Shares (including possible complete loss of such investment) for an indefinite
period of time and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the investment
in the Shares. The Investor understands that nothing in this Agreement or any
other materials presented to Investor in connection with the purchase and sale
of the Shares constitutes legal, tax or investment advice. The Investor has
consulted such legal, tax and investment advisors as such Investor, in its sole
discretion, has deemed necessary or appropriate.
3.4 INVESTMENT PURPOSE. The Investor is acquiring the Shares for
investment for its own account, not as a nominee or agent, and not with a view
to, or for resale in connection with, any distribution thereof. The Investor
understands that the Shares have not been registered under the Securities Act of
1933, as amended (the "1933 Act"), by reason of a specific exemption from the
registration provisions of the 1933 Act, the availability of which depends upon,
among other things, the bona fide nature of the investment intent and the
accuracy of such Investor's representations as expressed herein. The Investor
understands that the Shares are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving any public offering and that under such laws and
applicable regulations, the Shares may be resold without registration under the
1933 Act only in certain limited circumstances. The Investor shall not, directly
or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of the
Shares except in compliance with the 1933 Act, applicable state securities laws
and the respective rules and regulations thereunder.
3.5 ACCESS TO DATA. The Investor and its representatives have been
afforded access to corporate books, financial statements, records, contracts,
documents and other information concerning the Company (to the extent such
exists), and to its offices and facilities, have been afforded an opportunity to
ask such questions of the Company's officers, employees, agents, accountants and
representatives concerning the Company's existing and proposed business,
operations, financial condition, assets, liabilities and other relevant matters
as they have deemed necessary or desirable, and have been given all such
information as has been requested, in order to evaluate the merits and risks of
the prospective investments contemplated herein. The Investor further represents
and acknowledges that it has been solely responsible for its own "due diligence"
investigation of the Company and its management and business, for its own
analysis of the merits and risks of this investment, and for its own analysis of
the fairness and desirability of the terms of the investment. The foregoing,
however, does not limit or modify the representations and warranties of the
Company in Section 2 hereof.
3.6 RESIDENCY. For purposes of the application of state securities
laws, the Investor represents and warrants to the Company that it is a bona fide
resident of, or a duly formed entity domiciled in, the state or country set
forth in its address opposite its name on Exhibit A hereto.
3.7 ACCREDITED INVESTOR. The Investor is an accredited investor within
the meaning of Rule 501(a) of Regulation D of the Securities and Exchange
Commission and has substantial experience in evaluating and investing in private
placement transactions of securities in companies similar to the Company so that
the Investor is capable of evaluating the merits and risks of its investment in
the Company and has the capacity to protect its own interests.
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3.8 NOT AN AFFILIATE OR GROUP. Except as specified on Exhibit A, the
Investor represents that it is not under the control of, controlled by or under
common control with any other Investor, and the Investor represents that it,
along with any other Investor or Investors, is not a Person or a Group under
Section 13(d)(3) of the Securities Exchange act of 1934.
3.9 RESTRICTIVE LEGENDS. The Investors agree that, so long as the
Shares remain restricted securities, the Company shall place a restrictive
legend on the certificate(s) representing the Shares in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED WITHOUT REGISTRATION UNDER SUCH ACT OR AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED."
3.10 TRANSACTIONS IN COMMON STOCK. Investor has not, during the 30
trading days immediately preceding the Closing Date, sold or established a short
position in any shares of the Common Stock or other capital stock of the
Company.
3.11 NO GENERAL SOLICITATION. Investor did not learn of the investment
in the Common Stock as a result of any public advertising or general
solicitation.
4. REGISTRATION RIGHTS AND TERMINATION EVENTS
4.1 REGISTRATION RIGHTS. The Shares shall have the registration rights
set forth in the Registration Rights Agreement, substantially in the form as set
forth in Exhibit B attached hereto.
4.2 TERMINATION EVENTS. Upon the declaration of a Termination Event (as
defined the Registration Rights Agreement, Investors will have the right for 30
days, to put the Shares acquired pursuant to this Agreement back to the Company
at 125% of the aggregate Purchase Price. If the Investors exercise such right,
the Company will make payment to the Investors within ten days, upon delivery of
the Shares.
5. CLOSING CONDITIONS.
5.1 CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The Company's
obligation to sell and deliver the Shares to the Investors shall, unless waived
by the Company, be subject to the satisfaction, with respect to each Investor,
prior to or on the Closing Date, of each of the following conditions:
(a) Each Investor shall have executed this Agreement and the
Registration Rights Agreement and delivered the same to the
Company.
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(b) Each Investor shall have delivered to the Company the purchase
price for the Shares being purchased by such Investor at the
Closing by wire transfer of immediately available funds
pursuant to the wire instructions provided by the Company.
(c) The representations and warranties contained in Section 3
hereof shall be true and correct in all material respects at
and as of the Closing as though then made, except to the
extent of changes caused by the transactions expressly
contemplated herein, and each Investor shall have performed,
satisfied and complied in all material respects with the
covenants, agreements and conditions required by this
Agreement to be performed, satisfied and complied with by such
Investor at or prior to the Closing.
5.2 CONDITIONS TO EACH INVESTOR'S OBLIGATION TO PURCHASE. Each
Investor's obligation hereunder to purchase the Shares at the Closing shall,
unless waived by such Investor, be subject to the satisfaction, prior to or on
the Closing Date, of each of the following conditions:
(a) The Company and each other Investor shall have executed this
Agreement and the Registration Rights Agreement and any other
transaction document (to the extent a party thereto) and
delivered the same to such Investor.
(b) The representations and warranties contained in Section 2
hereof shall be true and correct in all material respects at
and as of the Closing as though then made, except to the
extent of changes caused by the transactions expressly
contemplated herein, and the Company shall have performed,
satisfied and complied in all material respects with the
covenants, agreements and conditions required by this
Agreement to be performed, satisfied and complied with by the
Company at or prior to the Closing.
(c) Each Investor shall have received from ▇▇▇▇, Plant, ▇▇▇▇▇,
▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.A., counsel for the Company, an opinion
substantially as set forth in Exhibit C attached hereto, which
shall be addressed to Investors and dated as of the Closing
Date.
(d) The Shares shall have been listed and authorized for trading
on The Nasdaq Stock Market.
(e) The Company shall have delivered to the Investors all of the
following documents, which shall be satisfactory in form and
substance to the Investors:
(1) An Officer's Certificate, executed by the Company's
Chairman and Chief Executive Officer and Chief
Financial Officer and dated the Closing Date, stating
that the conditions specified in Section 5.2(b) have
been fully satisfied;
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(2) Certified copies of the resolutions duly adopted by
the Company's Board of Directors authorizing the
execution, delivery and performance of this
Agreement, the Common Stock and each of the other
agreements contemplated hereby, the issuance and sale
of the Common Stock, and all other transactions
contemplated by this Agreement;
(3) Copies of all third party and governmental consents,
approvals and filings required in connection with the
consummation of the transactions hereunder
(including, without limitation, all blue sky law
filings and waivers of all preemptive rights and
rights of first refusal, if any);
(4) The legal opinion referred to in Section 5.2(c)
hereof;
(5) Certificates representing the Shares as described in
Section 1 hereof; and
(6) Such other documents relating to the transactions
contemplated by this Agreement as the Investors may
reasonably request not less than two (2) business
days before the Closing.
Any condition specified in this Section 5.2 may be waived with respect
to the Investors only if consented to in writing by the Investors granting such
waiver. In furtherance of the foregoing, if the Company does not satisfy all of
the conditions set forth in this Section 5.2, the Investors will nevertheless
have the option to purchase the Shares at the Closing.
6. RIGHT OF FIRST REFUSAL.
6.1 RIGHT OF FIRST REFUSAL. Subject to the terms and conditions
contained in this Section 6, the Company hereby grants to each Investor the
right of first refusal, for 180 days after the Closing Date, to purchase such
Investor's Pro Rata Portion of any New Securities (as defined below) which the
Company may, from time to time, propose to sell and issue. An Investor's "Pro
Rata Portion" for purposes of this Section 6.1 is equal to the fraction obtained
by dividing (a) the number of Shares held by such Investor by (b) the aggregate
number of shares of Common Stock then outstanding, assuming in each case the
conversion, exercise or exchange of all securities by their terms convertible
into or exercisable for Common Stock and the exercise of all options to purchase
or rights to subscribe for Common Stock or such convertible or exchangeable
securities, whether or not the terms of such securities or rights then permit
such conversion, exercise or exchange.
6.2 DEFINITION OF NEW SECURITIES. Except as set forth below, "New
Securities" shall mean any shares of capital stock of the Company, and rights,
options or warrants to purchase said shares of capital stock, and securities of
any type whatsoever that are, or may become, convertible into said shares of
capital stock. Notwithstanding the foregoing, "New Securities" does not include
(i) securities offered in an underwritten public offering pursuant to a
registration statement under the 1933 Act, (ii) all shares of Common Stock,
warrants or options to purchase Common Stock or other securities issued upon the
approval of the Board of Directors to employees, officers, directors and
consultants of the Company who have (x) provided bona fide
12
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services to the Company not in connection with the offer or sale of securities
in a capital raising transaction and (y) who do not, directly or indirectly,
promote or maintain a market for the Company's securities, pursuant to any plan
or arrangement approved by the Board of Directors or the shareholders of the
Company, (iii) all securities issued to lending or leasing institutions upon the
approval of the Board of Directors in connection with loans from or leasing
transactions with such institutions, (vi) stock issued pursuant to any private
placement completed on substantially similar terms or within 45 days of the
Closing Date, or (vii) stock issued in connection with any merger or acquisition
by the Company.
6.3 NOTICE OF RIGHT. In the event the Company proposes to undertake an
issuance of New Securities, it shall give each Investor written notice of its
intention, describing the type of New Securities and the price and terms upon
which the Company proposes to issue the same. Each Investor shall have 15 days
from the date of receipt of any such notice to agree to purchase shares of such
New Securities (up to the amount referred to in Section 6.1), for the price and
upon the terms specified in the notice, by giving written notice to the Company
and stating therein the quantity of New Securities to be purchased.
6.4 EXERCISE OF RIGHT. If any Investor exercises its right of first
refusal hereunder, the closing of the purchase of the New Securities by such
Investor with respect to which such right has been exercised shall take place on
the date set by the Company for the sale of New Securities; provided that such
closing shall not occur prior to the date 20 days following the date of the
written notice provided to the Investors, and provided, further, that the date
of such closing shall be extended in order to comply with applicable laws and
regulations.
6.5 LAPSE AND REINSTATEMENT OF RIGHT. In the event a Investor fails to
exercise the right of first refusal provided in Section 6.1 within said 15 day
period, the Company shall have 60 days thereafter to sell the New Securities not
elected to be purchased by such Investor at the price and upon the terms no more
favorable to the purchasers of such securities than specified in the Company's
notice. In the event the Company has not sold the New Securities or entered into
an agreement to sell the New Securities within said 60 day period, the Company
shall not thereafter issue or sell any New Securities without first offering
such securities to the Investors in the manner provided above.
7. MISCELLANEOUS.
7.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Minnesota, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of Minnesota or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Minnesota.
7.2 EXPENSES. The Company and each of the Investors shall bear its own
expenses in connection with the transactions contemplated by this Agreement,
except that the Company shall reimburse the Investors for out-of-pocket
expenses, including legal fees and due diligence expenses, not to exceed $50,000
in the aggregate.
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7.3 SURVIVAL. The representations, warranties, covenants, and
agreements made herein by the Company and each Investor shall survive any
investigation made by the Company or any Investor and shall survive the Closing.
All statements as to factual matters contained in any certificate or other
instrument delivered by or on behalf of the Company or each Investor pursuant
hereto shall be deemed to be representations and warranties by the Company or
such Investor, as appropriate, hereunder as of the date of such certificate or
instrument.
7.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto.
7.5 ENTIRE AGREEMENT. This Agreement, including the Exhibits hereto,
constitute the full and entire understanding and agreement among the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other party in any manner by and representations, warranties, covenants, or
agreements except as specifically set forth herein or therein. Nothing in this
Agreement, express or implied, is intended to confer upon any party, other than
the parties hereto and their respective successors and assigns, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided herein.
7.6 ASSIGNMENT AND TRANSFER. The Investors may transfer such shares, in
whole or in part, to another person or entity and may, in connection with such
transfer, assign its rights in whole or in part under this Agreement in
accordance with the provisions of this Section 7.6. The Company agrees to
execute and deliver such instruments, documents and certificates as the
Investors, holders or any such transferees may reasonably request in order to
document the transfer in whole or in part of rights hereunder, which
instruments, documents and certificates shall be satisfactory in form and
substance to counsel for the Investors, or holders or such transferees. Any such
transfer shall be subject to compliance with applicable federal and state
securities laws.
7.7 AMENDMENT AND WAIVER. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively) only with
the written consent of the Company and Investor.
7.8 NOTICES. All notices or other communications to a party required or
permitted hereunder shall be in writing and shall be delivered personally or by
telecopy (receipt confirmed) to such party (or, in the case of an entity, to an
executive officer of such party) or shall be sent by a reputable express
delivery service or by certified mail, postage prepaid with return receipt
requested, addressed as follows:
if to an Investor:
To the address set forth on Exhibit A or such other address as
may be designated in writing hereafter, in the same manner, by
such Investor.
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with copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇, Esq.
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.L.L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
and a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Esq.
ThinkEquity Partners, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
if to the Company:
HEI, Inc.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇, Plant, ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.A.
3400 City Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Any party may change the above-specified recipient and/or mailing
address by notice to all other parties given in the manner herein prescribed.
All notices shall be deemed given on the day when actually delivered as provided
above (if delivered personally or by telecopy) or on the day shown on the return
receipt (if delivered by mail or delivery service).
7.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument. A facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.
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IN WITNESS WHEREOF, the Company and the Investors have executed this
Agreement as of the date first written above.
HEI, INC.
By:
--------------------------------------
Name:
Title:
INVESTOR EXECUTION PAGE
INVESTOR SIGNATURE
-----------------------------------------
Investor (Signature)
-----------------------------------------
Print Name
-----------------------------------------
Print Name (If more than one investor)
-----------------------------------------
-----------------------------------------
Address
Dollar Amount of Investment: $
-----------
Number of Shares Subscribed:
-------------
State of Residence/Domicile:
-------------
TIN/SSN:
---------------------------------
17
Status as an "Accredited Investor". The Investor is an "accredited
investor" as defined in the regulations of the U.S. Securities and Exchange
Commission by virtue of meeting the criteria which have been checked below
(check all that apply):
____ (i) A natural person whose individual net worth (assets
less liabilities), or joint net worth with his or her spouse, exceeds
$1,000,000.
____ (ii) A natural person whose individual income was in
excess of $200,000, or whose joint income with his or her spouse was in excess
of $300,000, each of the two most recent years, and who has a reasonable
expectation of reaching the same income level for the current year.
____ (iii) A bank, insurance company, registered investment
company, business development company, small business investment company or
employee benefit plan.
____ (iv) A savings and loan association, credit union, or
similar financial institution, or a registered broker or dealer.
____ (v) A private business development company.
____ (vi) An organization described in Section 501(c)(3) of
the Internal Revenue Code with assets in excess of $5,000,000.
____ (vii) A corporation, Massachusetts or similar business
trust, or partnership with assets in excess of $5,000,000.
____ (viii) A trust with assets in excess of $5,000,000.
____ (ix) A director or an executive officer of the Company.
____ (x) An entity in which all of the equity owners are
accredited investors.
____ (xi) A self-directed ▇▇▇, ▇▇▇▇▇, or similar plan of which
the individual directing the investments qualifies as an "accredited investor"
under one or more of items (i)-(x) above. Also check the item(s) (i)-(x) above
that applies.
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Exhibits
--------
Exhibit A List of Investors
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Opinion of ▇▇▇▇, Plant, ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇
Disclosure Schedules
--------------------
2.3 Capitalization
2.7 No Conflicts
2.8 Litigation
2.11 Employee Benefit Plans
2.12 Intellectual Property Rights
2.20 Compensation Payable in Connection with Sale of Shares
19
EXHIBIT A
LIST OF INVESTORS
Investor Name and Address Closing ($) Shares (#) State of Domicile
------------------------- ----------- ---------- -----------------
RS Diversified Growth Fund $3,500,000 500,000 California
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
RS Smaller Company Growth Fund $700,000 100,000 California
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
The Paisley Fund, L.P. $490,000 70,000 California
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇ Pacific Master
Fund Unit Trust $980,000 140,000 California
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Constable Capital LLC $980,000 140,000 Minnesota
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
INVESTOR REPRESENTATION WITH RESPECT TO SECTION 3.7
Each Investor hereby represent that it is not under the control of,
controlled by or under common control with any other Investor, and the Investor
represents that it, along with any other Investor or Investors, is not a Person
or a Group under Section 13(d)(3) of the Securities Exchange Act of 1934, except
as follows: RS Diversified Growth Fund, RS Smaller Company Growth Fund, The
Paisley Fund, L.P. and ▇▇ ▇▇▇▇▇▇▇ Pacific Master Fund Unit Trust are under
common control.
20
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed as of the date first written above.
HEI, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: CEO
21
ACCEPTANCE
The undersigned hereby accepts the terms and conditions set forth in
the Stock Purchase Agreement, dated August 29, 2001, among HEI, Inc., a
Minnesota corporation (the "Company") and certain Purchasers listed on Schedule
1 thereto. By execution of this Acceptance, the undersigned hereby acknowledges
the indemnification obligations contained in Section 2.6 of the Stock Purchase
Agreement.
PURCHASER:
The Paisley Fund
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Portfolio Manager
PURCHASER:
▇▇ ▇▇▇▇▇▇▇ Pacific Master Fund Unit Trust
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Portfolio Manager
PURCHASER:
RS Diversified Growth
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Portfolio Manager
PURCHASER:
Constable, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: CEO
PURCHASER:
RS Smaller Company Growth Fund
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ III
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ III
Title: Principal
22
ACCEPTANCE
The undersigned hereby accepts the terms and conditions set forth in
the Stock Purchase Agreement, dated August 29, 2001, among HEI, Inc., a
Minnesota corporation (the "Company") and certain Purchasers listed on Schedule
1 thereto. By execution of this Acceptance, the undersigned hereby acknowledges
the indemnification obligations contained in Section 2.6 of the Stock Purchase
Agreement.
AGENT:
THINKEQUITY PARTNERS, LLC
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
-----------------------------------------
By: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: General Counsel
23
EXHIBIT C
[FORM OF OPINION]
24
SCHEDULES TO STOCK PURCHASE AGREEMENT
