Exhibit 1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT ("AGREEMENT") is made and entered into
as of October 10, 2000, by and among ▇▇▇▇▇▇ Manufacturing Inc., a Minnesota
corporation (the "COMPANY"), Activar, Inc., a Minnesota corporation ("ACTIVAR"),
▇.▇. ▇▇▇▇▇▇▇▇ ("REISSNER"), and ▇.▇. ▇▇▇▇ ("▇▇▇▇") (Activar, Reissner and ▇▇▇▇,
individually an "INVESTOR" and collectively, the "INVESTORS").
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Investors hereby
agree as follows:
1. AUTHORIZATION OF SECURITIES. The Company shall designate, from its
previously authorized "blank check" preferred stock, the number of shares of
Series A Convertible Preferred Stock, $.1875 par value per share (the "SERIES A
PREFERRED"), as provided herein, which shall be entitled to the preferences,
rights and benefits set forth in the certificate of designation attached hereto
as EXHIBIT 1 (the "CERTIFICATE OF DESIGNATION"). As used in this Agreement, the
term "PREFERRED STOCK" shall mean the Series A Preferred to be sold at the
closing described in Section 3 of this Agreement and all shares of Series A
Preferred issued in exchange or substitution therefor. The Series A Preferred
shall be convertible into shares of the Company's common stock, $.1875 par value
per share (the "COMMON STOCK"). Any shares of Common Stock issuable upon
conversion of the Series A Preferred, when issued, shall be referred to as
"CONVERSION SHARES."
2. SALE AND PURCHASE OF SHARES. Subject to the terms and conditions hereof,
the Company agrees to sell to each Investor and each Investor agrees to purchase
from the Company in accordance with this Agreement, the respective numbers of
shares of Series A Preferred and Common Stock set forth opposite each Investor's
name on EXHIBIT 2 at a purchase price of $0.1777778 per share (the "PURCHASE
COMMITMENT"), a total purchase price of eight hundred thousand dollars
($800,000). The Series A Preferred and Common Stock sold to the Investors
pursuant to this Agreement are referred to herein as the "SHARES." The Company's
agreements with each Investor are separate agreements, and the Company's sales
of Series A Preferred and Common Stock to each Investor are separate sales.
3. CLOSING. The closing of the purchase of the Shares described herein shall
take place at the offices of ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10 a.m., Minneapolis time,
on or about October 10, 2000, or as soon as practicable thereafter (the
"CLOSING"), or at such other place or different time or day as may be mutually
acceptable to the Investors and the Company, provided that an aggregate of at
least $800,000 of Shares are purchased by the Investors at the Closing. The date
and time on which the Closing occurs shall be referred to as the "CLOSING DATE."
At the Closing, (a) the Company shall deliver to each Investor stock
certificates for the number of Shares being purchased by such Investor, which
Shares shall be registered in the Investor's name or as otherwise designated by
the Investor, and (b) the Investor shall pay to the Company the purchase price
for the Purchase Commitment set forth on EXHIBIT 2, by wire transfer or bank or
cashier's check payable to the Company. The Company acknowledges receipt of
$407,000 of the purchase price from Activar prior to the date of this Agreement.
4. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. To induce the Investors to
enter into this Agreement and to purchase the Shares, the Company hereby
represents and warrants to the Investors that:
4.1. ORGANIZATION, STANDING, ETC. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Minnesota and has the requisite corporate power and authority to
own, lease or operate its properties and to carry on its business as it is
now being conducted and as it is proposed to be conducted.
4.2. GOVERNING INSTRUMENTS. The copies of the Articles of Incorporation
and the Bylaws of the Company, and all amendments thereto (collectively,
the "CHARTER DOCUMENTS"), made available to the Investors prior to the
execution of this Agreement, are true and complete copies of the duly and
legally adopted Charter Documents in effect as of the date of this
Agreement and at the Closing.
4.3. CORPORATE ACTS AND PROCEEDINGS. This Agreement and the Voting
Agreement have been duly authorized by all necessary corporate action on
behalf of the Company, have been duly executed and delivered by authorized
officers of the Company, are valid and binding agreements on the part of
the Company and are enforceable against the Company in accordance with
their respective terms, except as the enforceability thereof may be
limited by (a) bankruptcy, insolvency, fraudulent conveyance, moratorium,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally or (b) judicial limitations on the enforcement
of the remedy of specific performance and other equitable remedies.
4.4. CAPITAL STOCK. Immediately prior to the Closing, the authorized
capital stock of the Company consists of 9,000,000 shares of Common Stock,
of which 5,224,219 shares are issued and outstanding; and 1,000,000 shares
of Series A Preferred, none of which is issued and outstanding. All of the
outstanding shares of capital stock of the Company were duly authorized
and validly issued and are fully paid and nonassessable. Schedule 4.4
contains a listing of all options, warrants and other rights outstanding
for the purchase of equity of the Company outstanding as of the date of
this Agreement.
4.5. VALID ISSUANCE. The Company has the requisite corporate power and
authority to execute and deliver this Agreement and the Voting Agreement
and to perform its obligations under each. The Shares, when issued and
paid for pursuant to the terms of this Agreement, will be duly authorized
and validly issued and outstanding, fully paid, nonassessable and free and
clear of all pledges, liens, encumbrances and restrictions, except as set
forth herein or in the Articles of Incorporation or the Voting Agreement.
Upon approval by the shareholders of the Company of an amendment to the
Company's Articles of Incorporation increasing the number of authorized
shares of Common Stock, the Conversion Shares will be reserved for
issuance upon conversion of the Series A Preferred and, when issued upon
conversion of the Series A Preferred in accordance with the terms of this
Agreement, will be duly authorized, validly issued and outstanding, fully
paid, nonassessable and free and clear of all pledges, liens, encumbrances
and restrictions, except as set forth herein or in the Articles of
Incorporation or the Voting Agreement.
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4.6. NO BROKERS OR FINDERS. No person, firm or corporation has or will
have, as a result of any contractual undertaking by the Company, any
right, interest or valid claim against the Company or the Investors for
any commission, fee or other compensation as a finder or broker, or in any
similar capacity, in connection with the transactions contemplated by this
Agreement. The Company will defend, indemnify and hold the Investors
harmless against any and all liability with respect to any such
commission, fee or other compensation which may be payable or determined
to be payable.
5. REPRESENTATIONS OF THE INVESTORS. Each Investor represents to the Company
that with respect to such Investor:
5.1. INVESTMENT INTENT. The Shares and the Conversion Shares into which
such Shares may be converted being acquired by such Investor are being
purchased for investment for such Investor's own account and not with the
view to, or for resale in connection with, any distribution or public
offering thereof. Such Investor has no current plan or intention to engage
in a sale, exchange, transfer, distribution, redemption, reduction in any
way of such Investor's risk of ownership by short sale or otherwise, or
other disposition, directly or indirectly of the Shares being acquired by
each such Investor pursuant to this Agreement or the Conversion Shares
into which such Shares may be converted. Such Investor is able to bear the
economic risk of its investment and has the knowledge and experience in
financial and business matters that it is capable of evaluating the merits
and risks (including tax considerations) of its investment, including the
high degree of risk of loss of such Investor's entire investment herein.
5.2. RESTRICTIONS ON RESALE, RULE 144. The Investor understands that the
Shares have not been registered under the Securities Act of 1933, as
amended (the "SECURITIES ACT") or any state securities laws by reason of
their contemplated issuance in transactions exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) thereof or
Rule 504, 505 or 506 promulgated under the Securities Act and applicable
state securities laws, and that the reliance of the Company and others
upon these exemptions is predicated in part upon this representation by
the Investor. The Investor further understands that the Shares may not be
transferred or resold without (i) registration under the Securities Act
and any applicable state securities laws or (ii) an exemption from the
requirements of the Securities Act and applicable state securities laws.
The Investor also understands that the Conversion Shares will be issued
without prior registration thereof under the Securities Act or applicable
state securities laws in reliance upon Section 4(2) of the Securities Act
and transactional exemptions from registration under applicable state
securities laws based upon appropriate representations of the Investor. As
such, the Conversion Shares will be subject to transfer restrictions
similar to restrictions applicable to the Shares. The Investor understands
that any sales pursuant to Rule 144 can be made only in full compliance
with the provisions of Rule 144.
5.3. LOCATION OF PRINCIPAL OFFICE, QUALIFICATION AS AN ACCREDITED
INVESTOR, ETC. The state in which the Investor's principal office is
located is the state set forth in the Investor's address on EXHIBIT 2. The
Investor by execution of this Agreement hereby represents that he or it
qualifies as an "accredited investor" for purposes of Regulation D
promulgated under the Securities Act. The Investor (i) is an investor in
securities of
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companies in the development stage and acknowledges that he or it is able
to fend for himself or itself, and bear the loss of his or its entire
investment in the Shares and (ii) has such knowledge and experience in
financial and business matters that he or it is capable of evaluating the
merits and risks of the investment to be made by him or it pursuant to
this Agreement. Activar also represents he or it has not been organized
solely for the purpose of acquiring the Shares or Conversion Shares.
5.4. ACTS AND PROCEEDINGS. The Investor has full power and authority to
enter into and perform under this Agreement in accordance with its terms.
This Agreement has been duly authorized by all necessary action on the
part of the Investor, has been duly executed and delivered by the such
Investor, and is a valid and binding agreement of the Investor and
enforceable against the Investor in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and to judicial limitations on the remedy of
specific enforcement and other equitable remedies. The execution of and
performance of the transactions contemplated by this Agreement to be
executed by the Investor and compliance with its provisions by the
Investor will not violate any provision of law and will not conflict with
or result in any breach of any of the terms, conditions or provisions of,
or constitute a default under, or require a consent or waiver under, its
organizational documents (each as amended to date) or any indenture,
lease, agreement or other instrument to which the Investor is a party or
by which the Investor or any of the Investor's properties is bound, or any
decree, judgment, order, statute, rule or regulation applicable to the
Investor.
5.5. DISCLOSURE OF INFORMATION. The Investor represents that the Company
has made available to the Investor at a reasonable time prior to the
execution of this Agreement sufficient and satisfactory opportunity to ask
questions and receive answers from the Company's management concerning the
Company's business, management and financial affairs, the terms and
conditions of the offering of the Shares and to obtain any additional
information (which the Company possesses or can acquire without
unreasonable effort or expense) as may be necessary to verify the accuracy
of information furnished to the Investor. The Investor has reviewed the
representations concerning the Company contained in this Agreement. The
foregoing, however, does not limit or modify the representations and
warranties of the Company in this Agreement or the right of the Investor
to rely thereon.
5.6. LEGEND; STOP TRANSFER. The Shares, and any Conversion Shares issued
upon conversion thereof, shall bear a legend substantially similar to the
following:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR APPLICABLE BLUE SKY LAWS, AND ARE
SUBJECT TO CERTAIN INVESTMENT REPRESENTATIONS. THESE
SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
UNDER THE ACT AND SUCH APPLICABLE BLUE SKY LAWS, OR AN
OPINION OF COUNSEL
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SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
The Company shall make a notation regarding the restrictions on transfer
of the Shares and any such Conversion Shares in its books and the Shares
and any such Conversion Shares shall be transferred on the books of the
Company only if transferred or sold pursuant to an effective registration
statement under the Securities Act covering the securities to be
transferred or an opinion of counsel satisfactory to the Company that such
registration is not required.
5.7. NO BROKERS OR FINDERS. No person, firm or corporation has or will
have, as a result of any contractual undertaking by any Investor, any
right, interest or valid claim against any Investor or the Company for any
commission, fee or other compensation as a finder or broker, or in any
similar capacity, in connection with the transactions contemplated by this
Agreement. Each Investor will indemnify and hold the Company harmless
against any and all liability with respect to any such commission, fee or
other compensation which may be payable or determined to be payable.
6. CONDITIONS OF THE INVESTOR'S OBLIGATION. The obligation of each Investor
to purchase the Shares on the Closing Date is subject to the fulfillment or
waiver by each such Investor prior to or on such Closing Date of the conditions
set forth in this Section 6.
6.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company under this Agreement shall be true in all material respects as
of the Closing Date with the same effect as though made on and as of such
date.
6.2. COMPLIANCE WITH AGREEMENTS. The Company shall have performed and
complied in all material respects with all agreements or conditions
required by this Agreement and the Voting Agreement to be performed and
complied with by it prior to or as of the Closing Date.
6.3. QUALIFICATION UNDER STATE SECURITIES LAWS. All registrations,
qualifications, permits and approvals required under Minnesota state
securities laws for the lawful execution and delivery of this Agreement
and the offer, sale, issuance and delivery of the Shares to each Investor
at the Closing shall have been obtained or will be obtained by the Company
in compliance with such laws.
6.4. VOTING AGREEMENT. As of the Closing Date, the Voting Agreement shall
have been executed and delivered and remain in effect, in the form
attached hereto as EXHIBIT 6.4.
7. CONVERSION OF PREFERRED STOCK. The Series A Preferred shall be convertible
into Conversion Shares in accordance with the terms and conditions set forth in
the Certificate of Designation. Each Investor acknowledges the need to amend the
Company's Articles of Incorporation in order to authorize additional shares of
Common Stock to effect the conversion of the Series A Preferred. All shares of
Conversion Shares that may be issued will be, upon issuance in accordance with
the terms of this Agreement, fully paid and nonassessable and free from all
taxes, liens and charges (except for taxes, if any, upon the income of the
holder and
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applicable transfer taxes) with respect to the issue thereof, and the issuance
thereof shall not give rise to any preemptive rights on the part of any person.
8. RESTRICTIONS ON TRANSFER OF SECURITIES.
8.1. RESTRICTIONS. The Shares, and upon conversion of the Series A
Preferred, the Conversion Shares, are transferable only pursuant to (i) a
public offering registered under the Securities Act; (ii) Rule 144 of the
Commission (or any similar rule then in effect) if such rule is available;
and (iii) subject to the conditions specified elsewhere in this Section 8,
any other legally available means of transfer under applicable federal and
state securities laws; provided, however, that in the case of (ii) and
(iii), the Company first shall have received an opinion of legal counsel,
reasonably satisfactory to the Company, to the effect that such sale or
transfer is exempt from the registration requirements of the Securities
Act.
8.2. LEGEND. Each certificate representing Shares or Conversion Shares
shall be endorsed with a legend substantially similar to the legend set
forth in Section 5.6 hereof.
8.3. REMOVAL OF LEGEND. Any legend endorsed on a certificate shall be
removed, and the Company shall issue a certificate without such legend to
the holder of such security, if such security is being disposed of
pursuant to a registration under the Securities Act or pursuant to Rule
144 or any similar rule then in effect or if such holder provides the
Company with an opinion of counsel satisfactory to the Company to the
effect that a transfer of such securities may be made without
registration. In addition, if the holder of such securities delivers to
the Company an opinion of such counsel, reasonably satisfactory to the
Company, to the effect that no subsequent transfer of such securities will
require registration pursuant to Rule 144(k) under the Securities Act, the
Company will promptly upon such contemplated transfer deliver new
certificates evidencing such security that do not bear the legend set
forth in Section 5.6.
9. MISCELLANEOUS.
9.1. ORAL CHANGES, WAIVERS, ETC. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only
by a statement in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought.
9.2. NOTICES. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be
delivered, or mailed first-class postage prepaid, registered or certified
mail, as follows: (a) if to any Investor, to such Investor's address as
listed on EXHIBIT 2; (b) if to the Company, to ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attn: President. Such notices and other communications
shall for all purposes of this Agreement be treated as being effective or
having been given if delivered personally, or, if sent by mail, when
received. Any party may change its address for such communications by
giving notice thereof to the other parties in conformity with this
Section.
9.3. SURVIVAL OF REPRESENTATIONS, WARRANTIES, ETC. All representations,
warranties,
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covenants and agreements contained herein or in any other agreement or
schedule delivered pursuant to this Agreement shall survive for a period
of one year after the execution and delivery of this Agreement or such
other agreement or schedule, as the case may be.
9.4. DELAYS OR OMISSIONS. Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing to any party
under this Agreement shall impair any such right, power or remedy of such
party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence thereto, or of a similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default
be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind
or character on the part of any party hereto of any breach or default
under this Agreement, or any waiver on the part of any party of any
provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing.
9.5. OTHER REMEDIES. Any and all remedies herein expressly conferred upon
a party shall be deemed cumulative with, and not exclusive of, any other
remedy conferred hereby or by law on such party, and the exercise of any
one remedy shall not preclude the exercise of any other. The parties may
seek enforcement of the terms of this Agreement by suit in equity on
action at law to protect the rights granted under this Agreement.
9.6. ENTIRE AGREEMENT. This Agreement, the exhibits hereto, the documents
referenced herein and the exhibits thereto, constitute the entire
understanding and agreement of the parties hereto with respect to the
subject matter hereof and thereof and supersede all prior and
contemporaneous agreements or understandings, inducements or conditions,
express or implied, written or oral, between the parties with respect
hereto and thereto, including without limitation any term sheet(s)
executed prior to and relating to this Agreement (the "TERM SHEET"). The
express terms hereof control and supersede any course of performance or
usage of the trade inconsistent with any of the terms hereof.
9.7. SEVERABILITY. Should any one or more of the provisions of this
Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, all other provisions of this
Agreement and of each other agreement entered into pursuant to this
Agreement, shall be given effect separately from the provision or
provisions determined to be illegal or unenforceable and shall not be
affected thereby. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable
provision which will achieve, to the extent possible, the economic,
business and other purposes of the void or unenforceable provision.
9.8. SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon and be enforceable by
the successors and assigns of the parties hereto.
9.9. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Minnesota, notwithstanding the laws of
conflict of any jurisdiction.
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9.10. COUNTERPARTS. This Agreement may be executed concurrently in two (2)
or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
9.11. PAYMENT OF FEES AND EXPENSES. The parties will be solely responsible
for their own respective legal costs incurred in negotiating and
performing this transaction.
(BALANCE OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGE FOLLOWS NEXT)
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IN WITNESS WHEREOF, this Agreement is hereby executed as of the date first
written above.
COMPANY: ▇▇▇▇▇▇ MANUFACTURING INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇
Its: President and Chief Executive Officer
INVESTOR: ACTIVAR, INC.
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇
---------------------------------------------
Its: President and Chief Operating Officer
--------------------------------------
INVESTOR: ▇.▇. ▇▇▇▇▇▇▇▇
/s/ ▇.▇. ▇▇▇▇▇▇▇▇
-------------------------------------------------
INVESTOR: ▇.▇. ▇▇▇▇
/s/ ▇.▇. ▇▇▇▇
-------------------------------------------------
(SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT)
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LIST OF EXHIBITS
1 Certificate of Designation
2 Investors' Respective Addresses and Purchase Commitments
6.4 Voting Agreement
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EXHIBIT 2
INVESTORS AND PURCHASE COMMITMENTS
Number of Number of
Series a Common
Shares @ Shares @ Total
$0.1777778 $0.1777778 Purchase
Name and Address of Investor Per Share Per Share Price
------------------------------------------------------------------------
Activar, Inc.
625,000 2,187,500 $500,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇
▇.▇. ▇▇▇▇▇▇▇▇
250,000 875,000 $200,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇
▇.▇. ▇▇▇▇
125,000 437,500 $100,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇
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