Document/Exhibit Description Pages Size
1: 8-K Sac Technologies, Inc. Form 8-K 7 33K
2: EX-3.6 Certificate of Designation 10 45K
3: EX-10.31 Funding Agreement 18 64K
4: EX-10.32 Registration Rights Agreement 15 63K
5: EX-10.33 Exchange Agreement 7 30K
6: EX-10.34 Secured Note 10 40K
7: EX-10.35 Restated 5% Convertible Debenture 21 79K
8: EX-10.36 Convertible Debenture 15 58K
9: EX-10.37 Common Stock Purchase Warrant 7 31K
10: EX-10.38 Security Interest Provisions 10 37K
11: EX-10.39 Employment Agreement 14 64K
12: EX-10.40 Option to Purchase Common Stock 12 53K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): November 20, 2001
SAC TECHNOLOGIES, INC.
----------------------
(Exact name of registrant as specified in its charter)
Minnesota 1-13463 41-1741861
------------------------- ----------------------- -------------------
(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification No.)
incorporation)
1285 Corporate Center Drive
Suite 175
Eagan, MN 55212
---------------------------------------
(Address of principal executive office)
Registrant's telephone number, including area code: (651) 687-0414
--------------
N/A
-----------------------------------------------------------------
(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS.
1. RECAPITALIZATION TRANSACTION.
On November 26, 2001, SAC Technologies, Inc. (the "Company") completed
a comprehensive recapitalization transaction (the "Transaction") with The Shaar
Fund, Ltd. (the "Fund") pursuant to a Funding Agreement between the parties. As
a result of the Transaction, the Company converted approximately $4.6 million of
short term debt and accruals into long term convertible notes, obtained $1.065
million of additional funding and issued shares of its newly designated Series B
Convertible Preferred Stock, $0.01 par value per share (the "Series B Shares")
in exchange for all of the issued and outstanding shares of its Series A
Convertible Preferred Stock and all accrued dividends and interest due thereon.
Notes in the principal amount of approximately $4 million are secured by a
pledge of substantially all assets of the Company, including its intellectual
property. Under the terms of the Transaction, the Fund agreed to provide up to
$1.08 million of additional financing in monthly installments during the six (6)
month period commencing March 1, 2002 so long as certain conditions are
satisfied.
The material terms of the convertible securities issued or issuable to
the Fund in the Transaction are set forth below:
* 5% Convertible Debenture. A Restated 5% Convertible Debenture in the
principal amount of $539,625.93 was issued in exchange for the
cancellation of an outstanding debenture in the principal amount of
$418,000 and accrued interest of $121,625.93. The 5% Convertible
Debenture is due September 30, 2003, accrues interest at the rate of 5%
per annum payable quarterly in arrears commencing August 31, 2002, may
be prepaid without penalty, and is convertible into shares of common
stock at a per share conversion price equal to the lesser of $0.75 or a
22% discount to the average of the closing bid prices of the common
stock during the five trading days preceding conversion.
* No Interest Convertible Debenture. During the past two years, the
Company has accrued fines and penalties under a registration rights
agreement with the Fund in the amount of approximately $1,312,500. The
Fund converted this accrual into a Convertible Debenture (together with
the Restated 5% Convertible Debenture, the "Debentures") in the
principal amount of $1,000,000. The Debenture is due September 30,
2003, does not accrue interest, may be prepaid without penalty, and is
convertible into shares of common stock at a conversion price of $0.75
per share.
* Secured Convertible Note. During the past 18 months, the Company has
obtained unsecured loans from the Fund in the aggregate principal
amount of $2,770,000. The Fund converted this amount and associated
accrued interest of $263,377.78 together with additional financing of
$1,065,000 into a Secured Convertible Note in the principal amount of
$4,092,920 (the "Convertible Note"). The Convertible Note is due
September 30, 2003, is secured by a pledge of substantially all of the
Company's assets, including its intellectual property, accrues interest
at the rate of 10% per annum payable quarterly in arrears commencing
September 30, 2002, may be prepaid without penalty and is convertible
into shares of common stock at a conversion price of $0.75 per share.
The security interest terminates upon the Company obtaining $5,000,000
of additional equity financing.
2
* Series B Shares. The Company issued 21,430 Series B Shares in exchange
for all 18,449 outstanding shares of Series A Convertible Preferred
Stock and all accrued dividends and interest due thereon. Pursuant to
the Company's Articles of Incorporation, all previously issued shares
of Series A Convertible Preferred Stock were retired and cancelled and
became authorized but unissued shares of preferred stock. The Series B
Shares accrue dividends at the rate of 9% per annum which are payable
semi annually in cash, or at the option of the Company in additional
shares of common stock and are redeemable at the option of the Company,
so long as the Company's common stock is eligible for quotation on the
OTC Bulletin Board and the shares issuable upon conversion are subject
to an effective registration statement. The Series B Shares are
convertible into shares of common stock at a per share conversion price
equal to the lesser of $0.75 or a 22% discount to the average of the
closing bid prices of the common stock during the five trading days
preceding conversion. Other than provided by applicable law, holders of
the Series B Shares have no voting rights.
* Warrants. The Company issued warrants to the Fund to purchase 4,000,000
shares of common stock at an exercise price of $1.00 per share. The
Warrants have a term of five (5) years and are immediately exercisable.
3
The terms of the Debentures, Convertible Note, Series B Shares and
Warrants preclude the Fund from exercising or converting such securities if such
exercise or conversion would result in it beneficially owning in excess of 4.99%
of the Company's common stock. The conversion and exercise prices of such
instruments are subject to adjustment in the event of any stock slit, stock
dividend or similar transaction or upon the issuance of additional shares or
options or other convertible securities without consideration or for
consideration per share less than the exercise or conversion price in effect.
The Debentures, Convertible Note, Series B Shares and Warrants were issued in a
private placement transaction exempt from the registration requirements of the
Securities Act of 1933, as amended, pursuant to Section 4(2) thereunder without
payment of underwriting discounts or commissions to any person.
The Fund agreed to provide up to $1,080,000 of additional financing
through monthly advances in the amount of $180,000 during the six (6) month
period commencing March 1, 2002. The advances, if any, will be made pursuant to
a Convertible Note on the terms described above (the "Advance Note"). The Fund's
obligation to make advances in any month is subject to the satisfaction of the
following conditions: (i) all of the Company's representations and warranties in
the Funding Agreement being true and current in all material respects; (ii) the
Company amending its Articles of Incorporation to increase the number of shares
of common stock it is authorized to issue from 20,000,000 to 60,000,000 shares;
(iii) the Company being in compliance with its obligations under the Funding
Agreement and the other agreements between the Company and the Fund entered into
in connection with the Transaction; and (iv) the average of the closing bid
prices of the Company's common stock during the month preceding the advance
exceeding $1.00 per share.
In connection with the Transaction, the Company entered into a
registration rights agreement with the Fund which requires the Company to file
registration statements with the Securities and Exchange Commission covering the
public resale of (i) the shares of common stock issuable upon exercise or
conversion, as applicable, of the Convertible Note, Debentures, Series B Shares
and Warrants by no later March 15, 2002 and have such registration statement
declared effective by no later than May 30, 2002; and (ii) shares of common
stock issuable upon conversion of the Advance Note by no later than thirty (30)
days after, and have such registration statement declared effective 105 days
after the last advance under the Advance Note. In the event that the Company
either fails to file the registration statement or have such registration
statement declared effective by the dates set forth above, it is subject to a
fine equal to two percent (2%) of the liquidation preference of the Series B
Shares and two percent (2%) of the then outstanding principal amount of the
Convertible Notes, Debentures or Advance Notes, as applicable, subject to such
registration statement for each thirty (30) day period (prorated on a daily
basis if such period is less than thirty (30) days) thereafter until such filing
or effective date.
2. RETENTION OF VICE PRESIDENT OF TECHNOLOGY
On November 20, 2001, the Company entered into a one (1) year
employment agreement (the "Employment Agreement") with Mira LaCous to serve as
the Vice President of Technology and Development of the Company at an annual
base salary of $100,000 and a bonus of up to 50% of such base salary payable at
the discretion of the Board of Directors. Ms. LaCous has been employed by the
Company since May 15, 2000. The Employment Agreement automatically renews for an
additional one year term unless written notice of termination is received at
least one (1) month prior to the date it would otherwise terminate. The
Employment Agreement contains standard and customary confidentiality,
non-solicitation and "work made for hire" provisions as well as a covenant not
to compete which prohibits Ms. LaCous from doing business with any current or
prospective customer of the Company or engaging in a business competitive with
that of the Company during the term of her employment and for the one (1) year
period thereafter.
The Employment Agreement may be terminated by the Company at any time
with or without cause. In the event Ms. LaCous is terminated without cause after
completing one (1) year of employment with the Company, Ms. LaCous shall
continue to be paid her then current base salary for a period of nine (9) months
from the date of such termination. Ms. LaCous may terminate the Employment
Agreement if her current salary or benefits are reduced by more than 30%, in
which event, Ms. LaCous shall continue to be paid her then current base salary
for a period of two (2) months from the date of such termination.
4
In connection with the Employment Agreement, the Company issued options
to Ms. LaCous to purchase an aggregate of 340,000 shares of common stock at an
exercise price of $0.46 per share of which 200,000 were issued under the
Company's 1999 Stock Option Plan. Options to purchase 75,000 vested upon
issuance and the remainder vest in equal monthly installments during the three
(3) year period commencing on the date of grant. The options terminate on the
earlier of seven (7) years from the date of grant or ninety (90) days after the
termination of Ms. LaCous' employment, unless such termination is for cause, in
which case, the options expire on the date of such termination. The options were
issued in a private placement transaction exempt from the registration
requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2)
thereunder without payment of underwriting discounts or commissions to any
person.
3. RESIGNATION OF BARRY M. WENDT
On December 3, 2001 Barry M. Wendt resigned from the Company's Board of
Directors. He served as the Chairman of the Board of Directors since the
inception of the Company in 1993. His consulting agreement with the Company
terminates January 31, 2002. In connection with his resignation, Jeffry R. Brown
was elected to serve as the Chairman of the Board of Directors of the Company.
ITEM 7. EXHIBITS
Exhibit Description Method of Filing
------- ----------- ----------------
3.6 Certificate of Designation of Series B 9% Filed herewith
Convertible Preferred Stock
10.31 Funding Agreement by and between the Registrant Filed herewith
and The Shaar Fund dated November 26, 2001
10.32 Registration Rights Agreement by and between the Filed herewith
Registrant and The Shaar Fund Ltd. dated November
26, 2001
10.33 Exchange Agreement by and between the Registrant Filed herewith
and The Shaar Fund dated November 26, 2001
10.34 Secured Note Due September 30, 2003 Filed herewith
10.35 Restated 5% Convertible Debenture Due September Filed herewith
30, 2003
10.36 No Interest Debenture Due September 30, 2003 Filed herewith
10.37 Warrant Filed herewith
10.38 Security Interest Provisions Filed herewith
10.39 Employment Agreement by and between the Filed herewith
Registrant and Mira LaCous dated November 20,
2001
10.40 Option to Purchase 140,000 Shares of Common Stock Filed herewith
issued to Mira LaCous
5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: January 17, 2002 SAC TECHNOLOGIES, INC.
BY: /s/ Jeffry R. Brown
-------------------
Jeffry R. Brown
Chief Executive Officer
6
EXHIBIT INDEX
Exhibit Description
------- -----------
3.6 Certificate of Designation of Series B 9% Convertible Preferred
Stock
10.31 Funding Agreement by and between the Registrant and The Shaar Fund
dated November 26, 2001
10.32 Registration Rights Agreement by and between the Registrant and The
Shaar Fund Ltd. dated November 26, 2001
10.33 Exchange Agreement by and between the Registrant and The Shaar Fund
dated November 26, 2001
10.34 Secured Note Due September 30, 2003
10.35 Restated 5% Convertible Debenture Due September 30, 2003
10.36 No Interest Debenture Due September 30, 2003
10.37 Warrant
10.38 Security Interest Provisions
10.39 Employment Agreement by and between the Registrant and Mira LaCous
dated November 20, 2001
10.40 Option to Purchase 140,000 Shares of Common Stock issued to Mira
LaCous
Dates Referenced Herein and Documents Incorporated by Reference
7 Subsequent Filings that Reference this Filing
↑Top
Filing Submission 0000897101-02-000037 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)
Copyright © 2024 Fran Finnegan & Company LLC – All Rights Reserved.
About — Privacy — Redactions — Help —
Mon., Apr. 29, 4:48:01.1am ET 
