NOTE PURCHASE AGREEMENT

 

2.1                                  Organization and Qualification .  To the extent the Investor is an entity, the Investor is duly incorporated, validly existing and in good standing under the laws of the state of organization, with full power and authority (corporate and other) to own, lease, use and operate its properties, if any, and to carry on its business as and where now owned, leased, used, operated and conducted.  To the extent the Investor is an entity, the Investor is duly qualified to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect.

 

2.2                                  Authorization; Enforcement .  To the extent the Investor is an entity, (a) the Investor has all requisite corporate power and authority to enter into and to perform its obligations under this Agreement and its Convertible Note, to consummate the transactions contemplated hereby and thereby and to purchase the Securities in accordance with the terms hereof and thereof; (b) the execution, delivery and performance of this Agreement and the Investor’s Convertible Note by the Investor and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all required parties and no further consent or authorization of Investor, its board of directors or its shareholders or members is required; (c) this Agreement has been duly executed and delivered by the Investor; and (d) assuming the valid and binding execution of this Agreement and the Convertible Notes by the Company and compliance with the terms of this Agreement and the Convertible Notes by the Company, each of this Agreement and the Investor’s Convertible Note constitutes a legal, valid and binding obligation of the Investor enforceable against the Investor by the Company in accordance with their respective terms, except as may be limited by any applicable bankruptcy, insolvency, reorganization, or moratorium or similar laws affecting the rights of creditors generally and the application of general principles of equity.  To the extent the Investor is a natural person, this Agreement has been duly and validly authorized, executed and delivered on behalf of the Investor and is a valid and binding agreement of the Investor, enforceable in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and the application of general principles of equity.

 

2.3                                  Investment Purpose .  The Investor is purchasing the Convertible Note(s) for its own account and not with a present view toward the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the Securities Act.

 

2.4                                  Accredited Investor Status .  The Investor is an “accredited investor” as defined in Rule 501(a) of Regulation D. 

 

2.5                                  Reliance on Exemptions .  The Investor understands that the Convertible Note(s) are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Investor’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Investor set forth herein in order to determine the availability of such exemptions and the eligibility of the Investor to acquire the Convertible Note(s).

 

2.6                                  Information and Sophistication .  The Investor and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company, and materials relating to the offer and sale of the Convertible Note(s), that have been requested by the Investor or its advisors, if any.  The Investor and its advisors, if any, have been afforded the opportunity to ask questions of the Company.  The Investor acknowledges and understands that its investment in the Convertible Note(s) involves a significant degree of risk, including the risks reflected in the SEC Documents.  The Investor is experienced and knowledgeable in financial and business matters, is capable of evaluating the merits and risks of investing in the Securities, and does not need or desire the assistance of a knowledgeable representative to aid in the evaluation of such risks who the Investor intends to use in connection with a decision as to whether to purchase the Securities.

 

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2.7                                  Governmental Review .  The Investor understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities or an investment therein.

 

2.8                                  Transfer or Resale .  The Investor understands that:

 

(a)                                   except as provided in Article IX, the Securities have not been and are not being registered under the Securities Act or any applicable state securities laws and, consequently, the Investor may have to bear the risk of owning the Securities for an indefinite period of time because the Securities may not be transferred unless (i) the resale of the Securities is registered pursuant to an effective registration statement under the Securities Act; (ii) the Investor has delivered to the Company an opinion of counsel satisfactory to the Company (in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration; or (iii) the Securities are sold or transferred pursuant to Rule 144;

 

(b)                                  any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with another exemption under the Securities Act or the rules and regulations of the SEC thereunder; and

 

(c)                                   except as set forth in Article IX, neither the Company nor any other person is under any obligation to register the Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.

 

2.9                                  Legends .  The Investor understands that until (a) the Securities may be sold by the Investor under Rule 144(k) or (b) such time as the resale of the Securities has been registered under the Securities Act as contemplated by Article IX, the certificates representing the Securities will bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES (COLLECTIVELY, THE “ ACTS ”).  THE SECURITIES MAY NOT BE SOLD, DISTRIBUTED, OFFERED, PLEDGED, ENCUMBERED, ASSIGNED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF THE FOLLOWING: (1) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE ACTS COVERING THE TRANSACTION, (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACTS, OR (3) THE COMPANY OTHERWISE SATISFIES ITSELF THAT REGISTRATION IS NOT REQUIRED UNDER THE ACTS.

 

The legend set forth above will be removed and the Company will issue a certificate without the legend to the holder of any certificate upon which it is stamped, in accordance with the terms of Article V hereof.

 

2.10                            Residency .  The Investor is a resident of the jurisdiction set forth immediately below such Investor’s name on the signature pages hereto.

 

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2.11                            No Intent to Effect a Change of Control .  The Investor has no present intent to change or influence the control of the Company within the meaning of Rule 13d-1 of the Exchange Act.

 

2.12                            No Broker Fees .  The Investor has not engaged any brokers, finders, or agents, and the Investor has not incurred, and neither the Investor nor the Company will incur, directly or indirectly, as a result of any action taken by the Investor, any liability for brokerage or finders’ fees or agents’ commissions or any similar charges in connection with this Agreement.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents and warrants to the Investors that:

 

3.1                                  Organization and Qualification . The Company is duly incorporated, validly existing and in good standing under the laws of the State of Minnesota, with full power and authority (corporate and other) to own, lease, use and operate its properties, if any, and to carry on its business as and where now owned, leased, used, operated and conducted.  The Company is duly qualified to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect.

 

3.2                                  Authorization; Enforcement .  (a) The Company has all requisite corporate power and authority to enter into and to perform its obligations under this Agreement and the Convertible Notes, to consummate the transactions contemplated hereby and thereby and to issue the Securities in accordance with the terms hereof and thereof; (b) the execution, delivery and performance of this Agreement and the Convertible Notes by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation the issuance of the Convertible Notes and the issuance and reservation for issuance of the Conversion Shares in accordance with the Company’s Articles of Incorporation, this Agreement and the Convertible Notes) have been duly authorized by the Company’s board of directors and no further consent or authorization of the Company, its board of directors or its shareholders is required; (c) this Agreement and the Convertible Notes have been duly executed and delivered by the Company; and (d) assuming the valid and binding execution of this Agreement by the Investor and compliance with the terms of this Agreement and the Convertible Notes by such Investor, each of this Agreement and the Convertible Notes constitutes a legal, valid and binding obligation of the Company enforceable against the Company by such Investor in accordance with their respective terms, except as may be limited by any applicable bankruptcy, insolvency, reorganization, or moratorium or similar laws affecting the rights of creditors generally and the application of general principles of equity.

 

3.3                                  Issuance of Securities .  The Convertible Note(s) have been duly authorized and, upon issuance in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable and free from all taxes, liens, claims, encumbrances and charges with respect to the issuance thereof (other than liens imposed by an Investor).  The Conversion Shares have been duly authorized and reserved for issuance, and, upon issuance in connection with or upon conversion of the Convertible Notes in accordance with the terms thereof, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances and charges with respect to the issuance thereof (other than liens imposed by an Investor).

 

3.4                                  No Conflicts; No Violation .

 

(a)                                   The execution, delivery and performance of this Agreement and the Convertible Notes by the Company, and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Convertible Notes and Conversion Shares) do not and will not (i) conflict with or result in a violation of any provision of the Company’s Articles of Incorporation or Bylaws,  (ii) violate or conflict with, or result in

 

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a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment (including without limitation, the triggering of any anti-dilution provision), acceleration or cancellation of, any agreement, indenture or instrument to which the Company is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including U.S. federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or by which any property or asset of the Company is bound or affected (except, in the case of clauses (ii) and (iii), for such conflicts, breaches, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect).

 

(b)                                  The Company is not in violation of its Articles of Incorporation, Bylaws or other organizational documents and the Company is not in default (and no event has occurred which with notice or lapse of time or both could put the Company in default) under, and the Company has not taken any action or failed to take any action that (and no event has occurred which, without notice or lapse of time or both) would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company is a party or by which any property or assets of the Company is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect.

 

(c)                                   Except as specifically contemplated by this Agreement and as required under the Securities Act and any applicable state securities laws or any listing agreement with any securities exchange or automated quotation system, the Company is not required to obtain any consent, authorization or order of (other than those obtained on or prior to the date hereof), or make any filing or registration with, any court or governmental agency or any regulatory or self regulatory agency in order for it to execute, deliver or perform any of its obligations under this Agreement or the Convertible Notes in each case in accordance with the terms hereof or thereof, or to issue and sell the Convertible Notes in accordance with the terms hereof and to issue the Conversion Shares in connection with or upon conversion of the Convertible Notes.

 

3.5                                  SEC Documents .  Since the closing date of the Company’s initial public offering, the Company has timely 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 Exchange Act (all of the foregoing filed prior to the date hereof being referred to herein as the “ SEC Documents ”).  As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act or the Securities Act, as the case may be, 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, other than SEC Documents that have been amended as of the date hereof.

 

3.6                                  No Broker Fees .  The Company has not engaged any brokers, finders, or agents, and the Company has not incurred, and neither the Company nor any Investor will incur, directly or indirectly, as a result of any action taken by the Company, any liability for brokerage or finders’ fees or agents’ commissions or any similar charges in connection with this Agreement.

 

ARTICLE IV
COVENANTS

 

4.1                                  Best Efforts .  Each party will use its best efforts to satisfy in a timely fashion each of the conditions to be satisfied by it under Articles VI and VII of this Agreement.

 

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4.2                                  Form D; Blue Sky Laws .  The Company will file a Notice of Sale of Securities on Form D with respect to the Convertible Notes, as required under Regulation D.  The Company will take such action as it reasonably determines to be necessary to qualify the Convertible Notes for sale to the Investors under this Agreement under applicable securities (or “blue sky”) laws of the states of the United States (or to obtain an exemption from such qualification).  The Company will file with the SEC a Current Report on Form 8-K disclosing this Agreement and the transactions contemplated hereby within four business days after the Closing Date and will make any required notice filings with state securities law authorities on a timely basis.

 

4.3                                  Use of Proceeds .  The Company will use the proceeds from the sale of the Convertible Notes for general corporate purposes, which may include the repayment of debt to institutional lenders.

 

4.4                                  Expenses .  Except as otherwise set forth in this Section 4.4, each party will pay its own fees and expenses, as well as the fees and expenses of its own advisors and consultants, in connection with the transactions contemplated by this Agreement.  Upon the consummation of the sale of the Convertible Notes anticipated by this Agreement, the Company will pay the reasonable out-of-pocket expenses incurred by the Investors in connection with the transactions herein contemplated, including without limitation, the fees and out-of-pocket expenses of one special counsel to the Investors in connection with the transactions herein contemplated, up to an aggregate amount of $30,000.  The Company will also pay all fees and expenses incurred by the Investors with respect to any amendments or waivers requested by the Company (whether or not the same become effective) under or in respect of this Agreement and the fees and expenses set forth in Section 9.21.

 

4.5                            Financial Information .  In the event the Company is no longer subject to the reporting requirements of the Exchange Act, the Company will deliver to the Investors within 45 days after the end of each fiscal quarter other than the Company’s fourth fiscal quarter and 90 days after the end of the Company’s fiscal year, the financial statements of the Company, prepared in accordance with United States generally accepted accounting principles (subject to the absence of footnotes and normal year-end adjustments for quarterly financial statements), consistently applied, and audited by the Company’s independent public accountants in the case of year-end financial statements.

 

4.6                                  Corporate Existence .  The Company will maintain its corporate existence in good standing.  The Company will conduct its business in compliance with all applicable laws, rules and regulations of the jurisdictions in which it is conducting business, including, without limitation, all applicable local, state and federal environmental laws and regulations, except where the failure to comply with such laws, rules and regulations would not have a Material Adverse Effect.

 

4.7                                  Reservation of Shares .  The Company will at all times have authorized, and reserved for the purpose of issuance, a sufficient number of shares of Common Stock to provide for the full conversion of the outstanding Convertible Notes and issuance of the Conversion Shares in connection therewith (based on the conversion price of the Convertible Notes in effect from time to time).

 

4.8                                  Sales by Investors .  Each Investor will sell any Securities sold by it in compliance with applicable prospectus delivery requirements, if any, or otherwise in compliance with the requirements for an exemption from registration under the Securities Act and the rules and regulations promulgated thereunder.  No Investor will make any sale, transfer or other disposition of the Securities in violation of federal or state securities laws or the restrictive provisions set forth in this Agreement.

 

4.9                                  Affiliate Transactions .  Without the approval of the audit committee of the Company’s board of directors, the Company will not enter into or commit directly or indirectly to any arrangement or transaction (i) in which the Company purchases, rents or leases property or assets from, or sells, transfers, or disposes of any material properties or assets (regardless of whether in the ordinary course of

 

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business or not) to any Affiliate or (ii) in which the Company loans any money or other property to any Affiliate.

 

4.10                            Subordination .  The Convertible Notes are unsecured and subordinated in right of payment to all of the Company’s other indebtedness, whether currently outstanding or incurred in the future (other than any indebtedness that by its terms is subordinated to or pari passu with the Convertible Notes).  If requested by the Company’s senior lenders, the holders of the Convertible Notes agree to execute and deliver one or more subordination or intercreditor agreements, together with such other related documents as such senior lenders may reasonably request, evidencing this subordination, including, without limitation, provisions relating to payment priority, permitted payments, senior lender blockage rights, and restrictions on modifications to the terms of the Convertible Notes.

 

4.11                            Standstill .

 

(a)                                   During the period that begins on the Closing Date and ends on the fifth anniversary of the Closing Date (the “ Standstill Period ”), each of the Investors agrees that it will not (and will not assist or encourage any other person to), and will cause each of its Affiliates and each partner, member, director, governor, officer and manager of it or of any of its Affiliates not to (and not to assist or encourage any other person to), directly or indirectly:

 

(i)                                      solicit proxies or consents or form or join a “group” or become a “participant” in a “solicitation” (as such terms are defined in the Exchange Act) of proxies or consents with respect to securities of the Company or initiate any shareholder proposal with respect to the Company;

 

(ii)                                   take any action for the purpose of convening a meeting of the Company’s shareholders;

 

(iii)                                acquire, offer or agree to acquire any voting securities of the Company (or securities convertible into or exchangeable for such voting securities) if after the acquisition thereof an Investor (together with its Affiliates) would hold in excess of 20% of the outstanding common equity of the Company (assuming full conversion of the Convertible Notes);

 

(iv)                               deposit voting securities into a voting trust or subject such securities to a voting agreement;

 

(v)                                  make any proposal relating to a tender or exchange offer for securities of the Company or a merger, business combination, sale of assets, liquidation or other extraordinary corporate transaction relating to the Company;

 

(vi)                               engage in any short sale of the Company’s voting stock or any other type of hedging transaction involving the Company’s securities (including, without limitation, depositing shares of the Company’s securities with a brokerage firm where such securities are made available by the broker to other customers of the firm for purposes of hedging or short selling the Company’s securities);

 

(vii)                            make any public announcement regarding, or advise, assist or encourage any other person in connection with, any of the foregoing; or

 

(viii)                         request that the Company, directly or indirectly, waive or amend any provision of this Section 4.11.

 

(b)                                  If at any time during the Standstill Period an Investor or any of its Affiliates or Representatives is approached by any person regarding a transaction involving any of the Company’s assets (other than the acquisition of inventory in the ordinary course of business, consistent with past practices) or

 

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businesses or voting stock (other than with respect to brokerage or trading transactions by a securities dealer), then the Investor will promptly notify the Company of the nature of such transaction and the parties thereto.

 

(c)                                   Notwithstanding anything herein to the contrary, this Section 4.11 will terminate upon the first to occur of the following: (i) the vote of a majority of the Company’s continuing Independent Directors terminating this Section 4.11, (ii) the date the voting equity of the Company beneficially owned or controlled by the Erickson Family and its Affiliates constitutes less than 25% of the outstanding voting equity of the Company on a fully-diluted basis, (iii) a Change in Control or (iv) the date the voting equity of the Company beneficially owned or controlled by the Investor and its Affiliates constitutes less than 10% of the outstanding voting equity of the Company on a fully-diluted basis.

 

4.12                            Resale Restrictions .

 

(a)                                   Prior to the third anniversary of the Issue Date, the Investors will not sell, transfer, pledge or otherwise encumber the Securities except: (i) to or between controlled Affiliates who agree to be bound by the terms set forth in this Agreement; (ii) with the consent of a majority of the Company’s continuing Independent Directors, provided, that the Company shall have a right of first refusal to purchase such securities on the terms set forth in Section 4.12(b); (iii) into a tender or exchange offer approved by a majority of the Company’s continuing Independent Directors; or (iv) in the case of sales, in amounts that satisfy the volume limitations set forth in Rule 144(e).  Notwithstanding anything herein to the contrary, this Section 4.11 will terminate upon the first to occur of the following: (I) the vote of a majority of the Company’s continuing Independent Directors terminating this Section 4.11, (II) the date the voting equity of the Company beneficially owned or controlled by the Erickson Family and its Affiliates constitutes less than 25% of the outstanding voting equity of the Company on a fully-diluted basis, (III) a Change in Control or (IV) the date the voting equity of the Company beneficially owned or controlled by the Investor and its Affiliates constitutes less than 10% of the outstanding voting equity of the Company on a fully-diluted basis.

 

(b)                                  In the event an Investor seeks the consent of a majority of the Company’s continuing Independent Directors to a resale under Section 4.12(a)(ii), the Company will then have the first right to purchase such Investor’s Securities for which such consent is sought at the price and on such other terms and conditions as are no less favorable to the Company than the terms of the resale for which such consent is sought.  The Company may exercise this right of first refusal by delivery of written notice to the Investor at any time within 30 business days (the “ Exercise Period ”) after the date that the Company receives written notice from the Investor that a consent under Section 4.12(a)(ii) is sought.  In order to be effective, the Investor’s notice must include the price and the other material terms and conditions on which the Investor intends to enter into such resale.  If the Company does not exercise its right of first refusal during the Exercise Period and provided that the Investor receives the consent required by Section 4(a)(ii), the Investor shall have 30 business days (the “ Permitted Resale Period ”) from the expiration of the Exercise Period to enter into the resale that is the subject of the Investor’s notice at such price and on such other material terms and conditions as are specified therein.  If the Investor does not enter into such resale at such price and on such material terms and conditions within the Permitted Resale Period, any resale of the applicable Securities shall again be subject to the provisions of this Section 4.12.  In the event an Investor seeks consent under Section 4.12(a)(ii) to resell Securities on the open market, the Investor shall specify “market price” as the proposed price of the resale in its notice thereof to the Company pursuant to this Section 4.12(b) and the Company will have the right to purchase those Securities at the closing market price on the date the Company exercises its right of first refusal pursuant to this Section 4.12(b).  In the event an Investor seeks consent under Section 4.12(a)(ii) to resell Securities for consideration other than cash, the Company shall have the right to purchase such Securities for cash at the fair market value of the other consideration to be received by the Investor, as determined in good faith by the Company’s board of directors.  Notwithstanding any

 

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other provision of this Agreement to the contrary, the right of first refusal set forth under this Section 4.12 may be assigned by the Company to any other party.

 

ARTICLE V
TRANSFER AGENT INSTRUCTIONS; REMOVAL OF LEGENDS

 

5.1                                Issuance of Certificates .  The Company will instruct its transfer agent to issue certificates, registered in the name of each Investor or its nominee, for Conversion Shares in such amounts as specified from time to time by each Investor to the Company issuable in connection with or upon conversion of the Convertible Notes in accordance with their terms.  All such certificates will bear the restrictive legend described in Section 2.9, except as otherwise specified in this Article V.  In addition, the Company will issue irrevocable Transfer Agent Instructions to the transfer agent in the form of Exhibit B hereto.  The Company will not give to its transfer agent any instruction other than as described in this Article V and stop transfer instructions to give effect to Section 2.9 (prior to registration of the Conversion Shares under the Securities Act).  Nothing in this Section 5.1 will affect in any way the Investors’ obligations and agreement set forth in Section 2.9 to comply with all applicable prospectus delivery requirements, if any, upon resale of the Conversion Shares.

 

5.2                                Unrestricted Securities .  If, unless otherwise required by applicable state securities laws, (a) the resale of the Securities represented by a certificate has been registered under an effective registration statement filed under the Securities Act, (b) a holder of Securities provides the Company and the Transfer Agent with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the Securities Act and such sale either may occur without restriction on the manner of such sale or transfer, (c) such holder provides the Company and the Transfer Agent with reasonable assurances that such Securities can be sold under Rule 144, or (d) the Securities represented by a certificate can be sold without restriction as to the number of securities sold under Rule 144(k), the Company will permit the transfer of the Conversion Shares, and the Transfer Agent will issue one or more certificates, free from any restrictive legend, in such name and in such denominations as specified by such holder.

 

ARTICLE VI
CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL

 

The obligation of the Company to issue and sell the Convertible Notes to each Investor at the Closing is subject to the satisfaction by such Investor, on or before the Closing Date, of each of the following conditions.  These conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

 

6.1                                  The Investor will have executed this Agreement and will have delivered this Agreement to the Company.

 

6.2                                  The Investor will have delivered the purchase price for the Convertible Notes to the Company in accordance with this Agreement.

 

6.3                                  The representations and warranties of the Investor must be true and correct in all material respects as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date, which representations and warranties must be correct as of such date), and the Investor will have performed and complied in all material respects with the covenants and conditions required by this Agreement to be performed or complied with by the Investor at or prior to the Closing.

 

6.4                                  No statute, rule, regulation, executive order, decree, ruling or injunction will have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent

 

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jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

 

6.5                                  The Company shall have received the consent of the Erickson Family to the granting of registration rights by this Agreement as required by that certain Registration Rights Agreement dated as of March 11, 2004 by and among the Company and members of the Erickson Family.

 

6.6                                  The Company shall have received any consent required under the definitive agreements or instruments governing the Senior Debt to be received prior to the execution of this Agreement or the consummation of the transactions contemplated hereby.

 

ARTICLE VII
CONDITIONS TO THE INVESTOR’S OBLIGATION TO PURCHASE

 

The obligation of each Investor hereunder to purchase the Convertible Notes from the Company at the Closing is subject to the satisfaction, on or before the Closing Date, of each of the following conditions.  These conditions are for each Investor’s respective benefit and may be waived by any Investor at any time in its sole discretion:

 

7.1                                  The Company will have executed this Agreement and will have delivered this Agreement to the Investor.

 

7.2                                  The Company will have delivered to the Investor the duly executed Convertible Notes in the amounts specified in Section 1.1.

 

7.3                                  The representations and warranties of the Company must be true and correct in all material respects as of the Closing as though made at that time (except for representations and warranties that speak as of a specific date, which representations and warranties must be true and correct as of such date) and the Company must have performed and complied in all material respects with the covenants and conditions required by this Agreement to be performed or complied with by the Company at or prior to the Closing.

 

7.4                                  No litigation, statute, rule, regulation, executive order, decree, ruling or injunction will have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

 

7.5                                  Trading and listing of the Common Stock on the Nasdaq must not have been suspended by the SEC or the Nasdaq, nor shall Nasdaq have notified the Company of any failure of the Company to meet any of the continued listing standards.

 

7.6                                  The Irrevocable Transfer Agent Instructions, in form and substance substantially like the form attached hereto as Exhibit B will have been delivered to the Company’s transfer agent.

 

7.7                                  The Investors will have received an opinion from Faegre & Benson LLP, counsel to the Company, in the form attached hereto as Exhibit C .

 

7.8                                  There shall exist at the time of Closing no condition or event which would constitute an Event of Default (as hereinafter defined) or which, after notice or lapse of time or both, would constitute an Event of Default.

 

7.9                                  The Company shall have received the consent of the Erickson Family to the granting of registration rights by this Agreement as required by that certain Registration Rights Agreement dated as of March 11, 2004 by and among the Company and members of the Erickson Family.

 

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7.10                            The Company shall have received any consent required under the definitive agreements or instruments governing the Senior Debt to be received prior to the execution of this Agreement or the consummation of the transactions contemplated hereby.

 

ARTICLE VIII
DEFAULT

 

8.1                                  Events of Default .  Each of the following events shall be an event of default (an “ Event of Default ”) for purposes of this Agreement:

 

(a)                                   if default shall be made in the punctual payment of interest on the Convertible Notes, and such default shall have continued for a period of ten days after written notice thereof to the Company by the holder of any of the Convertible Notes; or

 

(b)                                  if default shall be made in the punctual payment of any installment of the principal of the Convertible Notes and such default shall have continued for a period of five days after written notice thereof to the Company by the holder of any of the Convertible Notes; or

 

(c)                                   if a trustee or receiver is appointed for the Company or for the major part of the Company’s property and the order of such appointment is not discharged, vacated or stayed within 60 days after such appointment; or

 

(d)                                  if any judgment, writ or warrant of attachment or of any similar process in an amount in excess of $10,000,000 shall be entered or filed against the Company or against any of the property or assets of the Company and remains unpaid, unvacated, unbonded or unstayed for a period of 60 days; or

 

(e)                                   if an order for relief shall be entered in any Federal bankruptcy proceeding in which the Company is the debtor; or if bankruptcy, reorganization, arrangement, insolvency, or liquidation proceedings, or other proceedings for relief under any bankruptcy or similar law or laws for the relief of debtors, are instituted by or against the Company and, if instituted against the Company, are consented to or, if contested by the Company, are not dismissed by the adverse parties or by an order, decree or judgment within 60 days after such institution; or

 

(f)                                     if the Company shall default in any material respect in the due and punctual performance of any covenant or agreement in the Senior Debt and such default shall continue for more than the period of notice and/or grace, if any, therein specified and shall have thereby caused the acceleration of all amounts due under the Senior Debt, which acceleration shall not have been cured or waived; or

 

(g)                                  if default shall be made in the due and punctual performance or observance of any other term contained in this Agreement or the Convertible Notes, and such default shall have continued for a period of 30 days after the earlier of the Company’s knowledge thereof or written notice thereof to the Company by the holder of any Convertible Note.

 

8.2                                  Remedies Upon Events of Default .  For so long as any Convertible Note remains outstanding, upon the occurrence of an Event of Default as herein defined, and so long as such Event of Default continues unremedied, then, each holder of any Convertible Notes shall be entitled by notice to declare the principal of and any accrued interest on the Convertible Notes, to be immediately due and payable, and thereupon the Convertible Notes, including both principal and interest shall become immediately due and payable; provided, however, that when any Event of Default described in Section 8.1(e) hereof has occurred, the Convertible Notes shall immediately become due and payable

 

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without presentment, demand or notice of any kind.  In addition, from and after receipt of written notice to the Company from the holder of a Convertible Note following the occurrence of an Event of Default, and during the continuation thereof, the rate per annum at which interest shall accrue on the unpaid principal balance of the holder’s Convertible Note shall increase by 2%.

 

8.3                                  Notice of Defaults .  When, to its knowledge, any Event of Default has occurred or exists, the Company agrees to give written notice within ten business days of such Event of Default to the holders of all outstanding Securities.  If the holder of any Securities shall give any notice or take any other actions in respect of a claimed Event of Default, the Company will forthwith give written notice thereof to all other holders of Securities at the time outstanding, describing such notice or action and the nature of the claimed Event of Default.

 

8.4                                  Suits for Enforcement .  In case any one or more Events of Default shall have occurred and be continuing, any holder of the Securities may proceed to protect and enforce its rights under this Article VIII by suit in equity or action at law.  It is agreed that in the event of such action such holders of Securities shall be entitled to receive all reasonable fees, costs and expenses incurred, including without limitation such reasonable fees and expenses of attorneys (whether or not litigation is commenced) and reasonable fees, costs and expenses of appeals.

 

8.5                                  Remedies Cumulative .  No right, power or remedy conferred upon any holder of Securities shall be exclusive, and each such right, power or remedy shall be cumulative and in addition to every other right, power or remedy, whether conferred hereby or by any such security or now or hereafter available at law or in equity or by statute or otherwise.

 

8.6                                  Remedies not Waived .  No course of dealing between the Company and any Investor or the holder of any Securities, and no delay in exercising any right, power or remedy conferred hereby or by any such security or now or hereafter existing at law or in equity or by statute or otherwise, shall operate as a waiver of or otherwise prejudice any such right, power or remedy; provided, however, that this Section 8.6 shall not be construed or applied so as to negate the provisions and intent of any statute that is otherwise applicable.

 

ARTICLE IX
REGISTRATION RIGHTS

 

9.1                                  Mandatory Registration .  The Company will use its best efforts to file with the SEC a Registration Statement on Form S-3 registering the Registrable Securities for resale within 90 days after the Closing Date.  If Form S-3 is not available at that time, then the Company will use its best efforts to file a Registration Statement on such form as is then available to effect a registration of the Registrable Securities within such 90-day period.

 

9.2                                  Effectiveness of the Registration Statement .

 

(a)                                   The Company will use its best efforts to cause the Registration Statement contemplated by Section 9.1 to be declared effective by the SEC as soon as practicable after filing, and in any event no later than the 60th day after its initial filing date; provided, that in the event the SEC performs a full review of the Registration Statement, the Company will use its best efforts to cause the Registration Statement to be declared effective by the SEC as soon as practicable after filing, and in any event no later than the 90th day after its initial filing date (the “ Required Effective Date ”).  If the SEC takes the position that registration of the resale of the Registrable Securities by the Investors is not available under applicable laws, rules and regulation and that the Company must register the offering of the Registrable Securities as a primary offering by the Company, the Company will file a Registration Statement as a primary offering and will use its best efforts to cause the Registration Statement to be declared effective by the SEC as soon as practicable after filing.

 

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(b)                                  The Company’s best efforts will include, but not be limited to, promptly responding to all comments received from the staff of the SEC.

 

(c)                                   In the event the Registration Statement contemplated by Section 9.1 is not declared effective by the Required Effective Date, the Company shall continue to use its best efforts to diligently pursue the effectiveness of the Registration Statement.

 

(d)                                  Once the Registration Statement is declared effective by the SEC, the Company will cause the Registration Statement to remain effective throughout the Registration Period, except as permitted under Section 9.3.

 

9.3                                  Continued Effectiveness of Registration Statement .  The Company will keep the Registration Statement covering the Registrable Securities effective under Rule 415 at all times during the Registration Period.  In the event that the number of shares available under a Registration Statement filed pursuant to this Agreement is insufficient to cover all of the Registrable Securities issued or issuable upon conversion of (or otherwise pursuant to) the Convertible Notes, the Company will (if permitted) amend the Registration Statement or file a new Registration Statement, or both, so as to cover all of the Registrable Securities.  The Company will file such amendment or new Registration Statement as soon as practicable, but in no event later than 30 business days after the necessity therefor arises (based upon the market price of the Common Stock and other relevant factors on which the Company reasonably elects to rely).  The Company will use its best efforts to cause such amendment or new Registration Statement to become effective as soon as is practicable after the filing thereof, but in no event later than 120 days after the date on which the Company reasonably first determines (or reasonably should have determined) the need therefor.

 

9.4                                  Accuracy of Registration Statement .  Any Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) filed by the Company covering Registrable Securities will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading.  The Company will promptly prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to permit sales pursuant to the Registration Statement at all times during the Registration Period, and, during such period, will comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by the Registration Statement until the termination of the Registration Period, or if earlier, until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in the Registration Statement.

 

9.5                                  Furnishing Documentation .  The Company will furnish to each Investor whose Registrable Securities are included in a Registration Statement, (a) promptly after each document is prepared and publicly distributed, filed with the SEC or received by the Company, one copy of any Registration Statement filed pursuant to this Agreement and any amendments thereto, each preliminary prospectus and final prospectus and each amendment or supplement thereto; and (b) a number of copies of a prospectus, including a preliminary prospectus (if any), and all amendments and supplements thereto, and such other documents as the Investor may reasonably request in order to facilitate the disposition of the Registrable Securities owned by the Investor.  The Company will promptly notify each Investor whose Registrable Securities are included in any Registration Statement of the effectiveness of the Registration Statement and any post-effective amendment.

 

9.6                                  Additional Obligations .  The Company will use its best efforts to (a) register and qualify the Registrable Securities covered by a Registration Statement under such other securities or blue sky laws of such jurisdictions as each Investor who holds (or has the right to hold) Registrable Securities

 

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being offered reasonably requests, (b) prepare and file in those jurisdictions any am