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EXHIBIT 10j
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SECURITIES PURCHASE AGREEMENT
BETWEEN
INDUSTRIAL IMAGING CORPORATION
AND
IMPRIMIS INVESTORS LLC
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SECURITIES PURCHASE AGREEMENT, dated as of November 12, 1997 (the
"Agreement"), between Industrial Imaging Corporation, a Delaware
corporation (the "Company"), and Imprimis Investors LLC, a
Delaware limited liability company (the "Purchaser").
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INTRODUCTION
The Company desires to issue and sell to the Purchaser, and the
Purchaser desires to purchase from the Company, (a) 750,000 shares (the "Initial
Shares") of common stock, par value $0.01 per share ("Common Stock"), of the
Company, (b) 2,250,000 shares (the "Subsequent Shares") of Common Stock, (c)
250,000 warrants, substantially in the form of Exhibit A, to purchase shares of
Common Stock (the "Initial Class A Warrants"), (d) 750,000 warrants,
substantially in the form of Exhibit A, to purchase shares of Common Stock (the
"Subsequent Class A Warrants"), (e) 250,000 warrants, substantially in the form
of Exhibit B, to purchase shares of Common Stock (the "Initial Class B
Warrants") and (f) 750,000 warrants, substantially in the form of Exhibit B, to
purchase shares of Common Stock (the "Subsequent Class B Warrants"), in each
case on the terms and conditions set forth in this Agreement. The Initial Shares
and the Subsequent Shares are collectively referred to herein as the "Shares."
The Initial Class A Warrants and the Subsequent Class A Warrants are
collectively referred to herein as the "Class A Warrants." The Initial Class B
Warrants and the Subsequent Class B Warrants are collectively referred to herein
as the "Class B Warrants." The Class A Warrants and the Class B Warrants are
collectively referred to herein as the "Warrants." The Initial Shares, the
Initial Class A Warrants and the Initial Class B Warrants are collectively
referred to herein as the "Initial Securities." The Subsequent Shares, the
Subsequent Class A Warrants and the Subsequent Class B Warrants are collectively
referred to herein as the "Subsequent Securities." The Shares and the Warrants
are collectively referred to herein as the "Securities."
As a condition to the Purchaser's purchasing the Initial
Securities, (i) the Company is amending and restating its By-laws substantially
in the form of Exhibit C (the "By-laws"), (ii) the Company and the Purchaser are
entering into a Registration Rights Agreement, substantially in the form of
Exhibit D (the "Registration Rights Agreement") and (iii) the Company and the
Purchaser are entering into a Small Business Investment Company Letter
Agreement, substantially in the form of Exhibit E (the "SBIC Letter Agreement").
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The parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
SECTION 1.1. THE SECURITIES. (a) Upon the terms and subject to
the conditions set forth in this Agreement, at the Initial Closing (as defined
in Section 1.3(a)), the Company shall issue and sell to the Purchaser, and the
Purchaser shall purchase from the Company, the Initial Securities, free and
clear of all security interests, liens, pledges, charges, escrows, options,
rights of first refusal, encumbrances, agreements, arrangements, commitments or
other claims of any kind or character (collectively, the "Claims"), except as
imposed by applicable Federal or state securities laws.
(b) Upon the terms and subject to the conditions set forth in
this Agreement, at the Subsequent Closing (as defined in Section 1.3(b)), the
Company shall issue and sell to the Purchaser, and the Purchaser shall purchase
from the Company, the Subsequent Securities, free and clear of all claims,
except as imposed by applicable Federal or state securities laws.
SECTION 1.2. PURCHASE PRICE. (a) In consideration of the issuance
and sale of the Securities by the Company to the Purchaser, the Purchaser shall
pay to the Company $750,000 (the "Initial Purchase Price") in cash on the
Initial Closing Date (as defined in Section 1.3(a)).
(b) In consideration of the issuance and sale of the Subsequent
Securities by the Company to the Purchaser, the Purchaser shall pay to the
Company $2,250,000 (the "Subsequent Purchase Price") in cash on the Subsequent
Closing Date (as defined in Section 1.3(b)).
SECTION 1.3. CLOSING. (a) The closing (the "Initial Closing") for
the purchase of the Initial Securities and the consummation of the transactions
related thereto as contemplated by this Agreement shall take place at the
offices of Xxxxxx, Xxxxx & Xxxxx, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, or such other place or places as the Company and the Purchaser shall
agree, at 10:00 a.m. (Eastern time) on the later of November 12, 1997 and two
business days following the date on which all conditions set forth in Sections
4.1 and 4.2 shall have been satisfied or waived, or such other date and time
agreed to by the Company and the Purchaser (such date, the "Initial Closing
Date").
(b) The closing (the "Subsequent Closing") for the purchase of
the Subsequent Securities and the consummation of the transactions related
thereto as contemplated by this Agreement shall take place at the offices of
Xxxxxx, Xxxxx & Xxxxx, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or
such other place or places as the Company and the Purchaser shall agree, at
10:00 a.m. (Eastern time) on the later of November 21, 1997 and two business
days following the date on which all conditions set forth in Sections 4.3 and
4.4 shall
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have been satisfied or waived, or such other date and time agreed to by the
Company and the Purchaser (such date, the "Subsequent Closing Date").
SECTION 1.4. DELIVERY AND PAYMENT. (a) At the Initial Closing:
(i) The Company shall deliver to the Purchaser:
(A) one or more duly executed stock certificates
evidencing the Initial Shares issued in the name of the Purchaser
(in the amounts specified by the Purchaser);
(B) one or more duly executed warrant certificates
evidencing the Initial Class A Warrants issued in the name of the
Purchaser (in the amounts specified by the Purchaser);
(C) one or more duly executed warrant certificates
evidencing the Initial Class B Warrants issued in the name of the
Purchaser (in the amounts specified by the Purchaser);
(D) the Registration Rights Agreement duly
executed by the Company;
(E) the SBIC Letter Agreement duly executed by the
Company;
(F) a copy of the Certificate of Incorporation of
the Company (the "Certificate of Incorporation"), certified by
the Secretary of State of the State of Delaware;
(G) a Long Form Certificate of Good Standing of
the Company from the Secretary of State of the State of Delaware;
(H) a Certificate of Good Standing of the Company
from the Secretary of State of each jurisdiction in which the
Company is qualified to do business as a foreign corporation; and
(I) evidence, in form satisfactory to the
Purchaser, that a representative designated by the Purchaser has
been elected to the Board of Directors of the Company and has
been designated a Class III Director as that term is used in the
By-laws.
(J) all other documents, instruments and writings
required by the Purchaser to be delivered to it pursuant to this
Agreement.
(ii) The Purchaser shall deliver to the Company:
(A) an amount equal to the Initial Purchase Price
by wire transfer to the account of the Company;
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(B) the Registration Rights Agreement duly
executed by the
Purchaser; and
(C) all other documents, instruments and writings
required by the Company to be delivered to it pursuant to this
Agreement.
(b) At the Subsequent Closing:
(i) The Company shall deliver to Purchaser:
(A) one or more duly executed stock certificates
evidencing the Subsequent Shares issued in the name of the
Purchaser (in the amounts specified by the Purchaser);
(B) one or more duly executed warrant certificates
evidencing the Subsequent Class A Warrants issued in the name of
the Purchaser (in the amounts specified by the Purchaser);
(C) one or more duly executed warrant certificates
evidencing the Subsequent Class B Warrants issued in the name of
the Purchaser (in the amounts specified by the Purchaser); and
(D) all other documents, instruments and writings
reasonably required by the Purchaser to be delivered by it
pursuant to this Agreement.
(ii) The Purchaser shall deliver to the Company:
(A) an amount equal to the Subsequent Purchase
Price (less the costs and expenses referred to in the second
sentence of Section 3.1 in the amount designated by the Purchaser
to the Company no later than the day before the Subsequent
Closing) by wire transfer to the account of the Company; and
(B) all other documents, instruments and writings
required by the Company to be delivered to it pursuant to this
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to the Purchaser as follows:
(a) ORGANIZATION, STANDING AND POWER. (i) The Company and its
wholly-owned subsidiary, Triple I Corporation (the "Subsidiary"), are
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware and have all requisite corporate power and
authority to own, lease and operate their respective properties and
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to carry on their respective businesses as now being conducted and as currently
proposed to be conducted, subject to any shareholder and Board of Directors
approvals that may be required in the future by the corporate law of the State
of Delaware. The Company and the Subsidiary are duly qualified to do business
and are in good standing in each jurisdiction in which such qualification is
necessary because of the property owned, leased or operated by them or because
of the nature of its business as now being conducted, except for those
jurisdictions where the failure to be so qualified would not reasonably be
expected to have, individually or in the aggregate, a material adverse effect on
the condition (financial or otherwise), operations, business, assets,
liabilities, earnings or prospects of the Company and the Subsidiary taken as a
whole ("Material Adverse Effect"). Each such jurisdiction in which the Company
is qualified as of the date hereof and the Initial Closing Date and the
Subsequent Closing Date is listed on Schedule 2.1(a) of the disclosure schedule
being delivered to the Purchaser simultaneously with the execution of this
Agreement (the "Disclosure Schedule").
(ii) The Company has prior to the execution of this Agreement
delivered to the Purchaser a true and complete copy of the Certificate of
Incorporation. The By-laws, in substantially the form attached hereto as Exhibit
C, have been duly adopted by the Company. The minute books of the Company (which
have been made available for inspection by the Purchaser prior to the date
hereof) are true and complete in all material respects.
(b) AUTHORIZATION; VALID AND BINDING AGREEMENTS. The Company has
all requisite corporate power and authority to execute and deliver this
Agreement, the Registration Rights Agreement, the SBIC Letter Agreement and the
certificates evidencing the Securities and to perform all of its obligations and
undertakings under such agreements and to carry out the transactions
contemplated under such agreements. The execution and delivery of this
Agreement, the Registration Rights Agreement, the SBIC Letter Agreement and the
certificates evidencing the Securities, the performance by the Company of its
obligations under such agreements, and the issuance and sale of the Securities
have been duly and validly authorized by all necessary corporate action and no
other corporate proceedings on the part of the Company are necessary to
authorize the execution, delivery or performance by the Company of this
Agreement, the Registration Rights Agreement, the SBIC Letter Agreement or the
certificates evidencing the Securities. This Agreement, the Registration Rights
Agreement, the SBIC Letter Agreement and the certificates evidencing the
Securities have each been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its respective terms subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(c) CAPITALIZATION; EQUITY INTERESTS.
(i) At the Initial Closing, immediately prior to the issuance of
the Securities, the authorized capital stock of the Company consists solely of
(A) 20,000,000 shares of Common Stock, of which 5,672,137 shares are issued and
outstanding; and (B) 1,000,000 shares of preferred stock, par value $0.01 per
share (together with the Common Stock, the "Capital Stock"), of which no shares
are issued and outstanding. The outstanding shares of Capital Stock have been
duly authorized and issued and are fully paid and non-assessable and not subject
to any purchase option or right of first refusal or preemptive, subscription or
similar rights. The Securities have been duly authorized and, when issued in
accordance with this Agreement, will be duly issued, fully paid and
non-assessable and not subject to any purchase option or right of first refusal
or preemptive,
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subscription or similar rights. The shares of Common Stock initially issuable
upon exercise of the Warrants (the "Exercise Shares") have been duly authorized
and reserved for issuance upon exercise and, when issued upon such exercise,
will be duly issued, fully paid and non-assessable and not subject to any
purchase option, or right of first refusal or preemptive, subscription or
similar rights.
(ii) Except for this Agreement and the Warrants, and as
set forth on Schedule 2.1(c) of the Disclosure Schedule, (A) there are no bonds,
debentures, notes or other indebtedness or securities of the Company having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which shareholders of the Company may vote, (B)
there are no securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Company is a
party or by which the Company is bound obligating the Company to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of Capital
Stock or other voting securities of the Company or obligating the Company to
issue, grant, extend or enter into any such security, option, warrant, call
right, commitment, agreement, arrangement or undertaking and (C) there are no
outstanding rights, commitments, agreements, arrangements or undertakings of any
kind obligating the Company to repurchase, redeem or otherwise acquire any
shares of Capital Stock or other voting securities of the Company or any
securities of the type described in clauses (A) or (B) above. No dividends on
any shares of Capital Stock have been declared but not yet paid.
(iii) Except for the Subsidiary, the Company does not
have any subsidiaries or own or hold, directly or indirectly, any equity or
other security interests in any corporation, partnership, limited liability
company, joint venture or other entity. The Company is not subject to any
liability for any claim that the Company violated any applicable Federal or
state securities laws in connection with the issuance of Capital Stock or other
securities. There are no restrictions on the transfer of shares of Capital Stock
other than those imposed by relevant state and Federal securities laws. There
are no voting trusts, voting agreements, proxies or other agreements or
instruments with respect to the voting of the Capital Stock to which the Company
is a party, or to the best of the knowledge of any of the Company's officers,
directors or employees (the "Company's Knowledge"), among or between any persons
other than the Company. Except as provided in the Registration Rights Agreement
and in Schedule 2.1(c) of the Disclosure Schedule, no person has the right to
demand or other rights to cause the Company to file any registration statement
under the Securities Act of 1933 (the "Securities Act") relating to any
securities of the Company presently outstanding or any right to participate in
any such registration statement.
(d) CONFLICTS; CONSENTS. The execution and delivery by the
Company of this Agreement, the Registration Rights Agreement, the SBIC Letter
Agreement and the certificates evidencing the Securities, the consummation of
the transactions contemplated hereby and thereby and compliance by the Company
with any of the provisions hereof or thereof does not and will not conflict
with, or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any
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obligation or to loss of a material benefit under, or to any increased,
additional, accelerated or guaranteed rights or entitlement of any person or
entity under, or result in the creation of any Claim on the properties or assets
of the Company or the Subsidiary under, any provision of (i) the certificate of
incorporation or by-laws of the Company or the Subsidiary, (ii) any note, bond,
mortgage, indenture, deed of trust, license, lease, contract, commitment,
agreement, instrument or arrangement to which the Company or the Subsidiary is a
party or by which any of their respective properties or assets are bound, (iii)
any license, franchise, permit or other similar authorization held by the
Company or the Subsidiary or (iv) any judgment, order or decree or statute, law,
ordinance, rule or regulation applicable to the Company or the Subsidiary or
their respective properties or assets.
(e) FINANCIAL INFORMATION.
(i) Set forth on Schedule 2.1(e) of the Disclosure
Schedule are complete and correct copies of (A) the audited balance sheets of
the Company as at September 30, 1994 and 1995 and the related statements of
operations, shareholders' equity and cash flows for the years ended September
30, 1994 and 1995, and the audited balance sheet of the Company as at March 31,
1996 and the related statements of operations, shareholders' equity and cash
flows for the six months ended March 31, 1996, including any notes thereto with
the opinion of Coopers & Xxxxxxx L.L.P., thereon (collectively, the "Audited
Financial Statements") and (B) the unaudited balance sheet of the Company as at
March 31, 1997 and the related statements of operations, shareholders' deficit
and cash flows for the year then ended and the unaudited balance sheet of the
Company as at September 30, 1997, and the related statements of operations,
shareholders' deficit and cash flows for the six months then ended
(collectively, the "Unaudited Financial Statements," and, together with the
Audited Financial Statements, the "Financial Statements"). Except as set forth
on Schedule 2.1(e) of the Disclosure Schedule, the Financial Statements have
been prepared in conformity with generally accepted accounting principles
("GAAP") applied on a consistent basis and fairly present the financial
condition, results of operations, shareholders' equity and cash flows of the
Company at or for the respective periods then ended, subject, in the case of the
Unaudited Financial Statements, to the absence of footnotes and normal year-end
adjustments.
(ii) All reserves established by the Company are
reflected on the balance sheets contained in the Financial Statements or in the
footnotes to the Financial Statements of the Company and in management's
reasonable estimate are adequate in the aggregate and there are no loss
contingencies that are required to be accrued by Statement of Financial
Accounting Standard No. 5 of the Financial Accounting Standards Board which are
not provided for on such balance sheets. As of the date hereof, except for
liabilities (A) reflected on or reserved against on the balance sheet as of
September 30, 1997 (the "Latest Balance Sheet") (B) set forth on Schedule 2.1(e)
of the Disclosure Schedule, (C) incurred in the ordinary course of the Company's
business and consistent with past practice or (D) contemplated by this
Agreement, the Company and the Subsidiary have no liabilities (absolute,
accrued, fixed, contingent, known, unknown or otherwise) which would be required
by GAAP to be reflected or reserved against on the balance sheet of the Company
and which would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
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(iii) The forecasts and projections previously delivered
to the Purchaser by the Company have been prepared in good faith and on the
basis of assumptions that are fair and reasonable in light of current and
reasonably foreseeable circumstances.
(f) ABSENCE OF CHANGES. Except as set forth on Schedule 2.1(f) of
the Disclosure Schedule, since September 30, 1997, the Company and the
Subsidiary have operated in the ordinary course consistent with past practice
and there has not been:
(i) any event, occurrence or development or state of
circumstances of facts which has had or would reasonably be expected to
have a Material Adverse Effect;
(ii) any payment, discharge or satisfaction of any claim
or obligation of the Company or the Subsidiary or any amendment,
termination or waiver of any rights of value to the Company or the
Subsidiary, except in the ordinary course of business and consistent
with past practice;
(iii) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital
stock of the Company or any direct or indirect redemption, purchase or
other acquisition of any such shares;
(iv) any creation of any Claim on, or any assignment or
other disposition of, any property of the Company or the Subsidiary,
except in the ordinary course of business consistent with past practice,
and which Claims, assignments and dispositions together with all other
such Claims, assignments and dispositions would not have a Material
Adverse Effect;
(v) any write-down of the value of any asset of the
Company or the Subsidiary or any write-off as uncollectible of any
accounts or notes receivable or any portion thereof, other than
write-downs or write-offs which in the aggregate do not exceed $25,000;
(vi) any capital expenditure or commitment or addition to
property, plant or equipment of the Company or the Subsidiary,
individually or in the aggregate, in excess of $25,000;
(vii) (A) any change in any bonus, commission, pension,
profit-sharing or other benefit or compensation plan, policy or
arrangement or commitment or (B) any increase in any such compensation,
bonus, commission, pension, profit sharing or other benefit payable now
or in the future to any shareholder, director or officer of the Company
or the Subsidiary, or any Affiliate (as defined in the Securities
Exchange Act of 1934 (the "Exchange Act")) of such person (or, in each
case, the entering into of any agreement to effect the same);
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(viii) any obligation or liability (whether absolute,
accrued, contingent or otherwise, and whether due or to become due)
incurred by the Company or the Subsidiary, other than obligations
incurred in the ordinary course of business and consistent with past
practice;
(ix) any issuance or sale, or any contract entered into
for the issuance or sale, of any shares of capital stock or securities
convertible into or exercisable for shares of capital stock of the
Company or the Subsidiary;
(x) any cancellation of any debts or claims or any
amendment, termination or waiver of any rights of value to the Company or
the Subsidiary;
(xi) any material damage, destruction or loss (whether or
not covered by insurance) affecting any asset or property of the Company
or the Subsidiary;
(xii) any change in the independent public accountants of
the Company or in the accounting methods or accounting practices
followed by the Company or any change in depreciation or amortization
policies or rates; or
(xiii) any agreement, whether in writing or otherwise, to
take any of the actions specified in the foregoing items (i) through
(xii).
(g) ASSETS, PROPERTY AND RELATED MATTERS; REAL PROPERTY.
(i) Except as set forth on Schedule 2.1(g) of the
Disclosure Schedule, the Company or the Subsidiary has good title to, or a valid
leasehold interest in, as applicable, all of the assets reflected on the
Financial Statements, free and clear of all Claims. To the Company's Knowledge,
such assets (other than inventory) are in good operating condition and repair,
subject to ordinary wear and tear and constitute all of the properties,
interests, assets and rights held for use or used in connection with the
business and operations of the Company or the Subsidiary and constitute all
those necessary to continue to operate the business of the Company or the
Subsidiary, as the case may be, consistent with current and historical practice.
(ii) All leases of real property to which the Company or
the Subsidiary is a party ("Leases") are in writing and in full force and effect
and constitute valid and binding obligations of the Company and, to the
Company's Knowledge, of the other parties thereto, enforceable in accordance
with their respective terms subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles. The
Company or the Subsidiary hold good and valid title to the leasehold interests
under the Leases for the term set forth on Schedule 2.1(g) of the Disclosure
Schedule, free and clear of all Claims. The Company has delivered to the
Purchaser complete and accurate copies of the Leases and the Leases have not
been modified in any material respect, except to the extent that such
modifications are disclosed in a copy delivered to the Purchaser. There exists
no material default, or any event which upon notice or the passage of time, or
both, would give rise to any material default, in the performance of the Company
or, to the Company's Knowledge, by any lessor under any such lease. The Company
has not, and to the Company's Knowledge, no other person has, granted any oral
or
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written right to anyone other than the Company to lease, sublease or otherwise
occupy any of its properties through the end of the applicable lease periods.
(iii) Schedule 2.1(g) of the Disclosure Schedule contains
a description of all of the real property leased by the Company or the
Subsidiary. The Company does not own, and has not previously owned, any real
property.
(h) PATENTS, TRADEMARKS AND SIMILAR RIGHTS.
(i) Set forth on Schedule 2(h) of the Disclosure Schedule is a
true and complete list of the patents, patent applications, trademarks
(registered or unregistered) and service marks (and any applications or
registrations therefor), trade names, corporate names, copyrights, copyright
registrations and other intellectual property that currently exists in written
form owned or filed by, or licensed to, the Company or the Subsidiary or used in
the conduct of the Company's or the Subsidiary's business as presently conducted
("Intellectual Property"). With respect to registered trademarks, Schedule 2(h)
of the Disclosure Schedule sets forth a list of all jurisdictions in which such
trademarks are registered or applied for and all registration and application
numbers. To the Company's Knowledge, the Company has all rights to Intellectual
Property as are used or are necessary in connection with the businesses of the
Company and the Subsidiary as presently conducted, and except as set forth on
Schedule 2(h) of the Disclosure Schedule, the Company owns, or has the right to
use, execute, reproduce, display, perform, modify, enhance, distribute, prepare
derivative works of and sublicense, without payment to any other person or
entity, all Intellectual Property free and clear of all Claims whatsoever. The
consummation of the transactions contemplated hereby will not conflict with,
alter or impair any such right.
(ii) Neither the Company nor the Subsidiary has granted any
options, licenses or agreements of any kind relating to Intellectual Property or
the marketing or distribution thereof. Neither the Company nor the Subsidiary is
bound by or a party to any options, licenses or agreements of any kind relating
to the intellectual property of any other person or entity, except as set forth
in Schedule 2.1(d) of the Disclosure Schedule. The conduct of the business of
the Company and of the Subsidiary as presently conducted does not, to the
Company's Knowledge, violate, conflict with or infringe the intellectual
property of any other person or entity. No claims are pending, or to the
Company's Knowledge, threatened, against the Company or the Subsidiary by any
person or entity with respect to the ownership, validity, enforceability,
effectiveness or use of any Intellectual Property and, during the past three
years, neither the Company nor the Subsidiary has received any communications
alleging that the Company has violated any rights relating to intellectual
property of any person or entity.
(i) INSURANCE. Schedule 2.1(i) of the Disclosure Schedule
contains a description of all insurance policies ("Insurance Policies") that are
currently held by the Company or the Subsidiary, true and complete copies of
which have been delivered to the Purchaser. All Insurance Policies are in the
name of the Company or the Subsidiary, outstanding and in full force and effect
and all premiums due with respect to such policies are currently paid. The
Company has not received notice of cancellation or termination of any such
policy, nor has it been denied or had revoked or rescinded any policy of
insurance, nor borrowed against any such policies. To the Company's Knowledge,
the activities and operations of the Company and
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the Subsidiary have been conducted in a manner so as to conform in all material
respects to all applicable provisions of the Insurance Policies. There are no
claims in the last year for which an insurance carrier has denied or threatened
to deny coverage. The Company or the Subsidiary carries, or is covered by,
insurance with companies the Company believes to be responsible and in such
amounts and covering such risks as is adequate for the conduct of its business
and the value of its properties and as the Company believes is customary for
companies engaged in similar businesses in similar industries.
(j) AGREEMENTS. Schedule 2.1(j) of the Disclosure Schedule
contains a true and complete list or description of all written or oral
contracts, agreements and other instruments ("Contracts") to which the Company
or the Subsidiary is a party (A) relating to indebtedness for money borrowed or
the deferred purchase price of property or services or capital leases in excess
of $10,000, (B) relating to any forward commitments or to other commitments in
excess of $25,000 in any given year, (C) relating to any joint venture,
partnership or limited liability company; (D) relating to the employment or
compensation of any director, officer or shareholder of the Company or the
Subsidiary, or any Affiliate of such companies, (E) relating to the employment
or compensation of any employee, consultant, independent contractor or other
agent of the Company or the Subsidiary, or any Affiliate of such companies,
involving a payment in excess of $10,000 in any given year, (F) relating to the
sale or other disposition of any assets, properties or rights (other than the
sale of inventory), (G) which restricts the Company's or the Subsidiary's
ability to do business in any geographic area or grants to any person exclusive
or similar rights in any line of business or in any geographic area, (I) which
restricts the Company's or the Subsidiary's ability from soliciting employees of
another entity or restricts another entity's ability from soliciting the
Company's or the Subsidiary's employees, (J) relating to the lease of any
machinery, equipment, vehicle or other personal property owned by any other
person or entity, for which the annual rental exceeds $2,500; (K) relating to
the lease of any real or personal property to any other person or entity, for
which the annual rental exceeds $2,500; (L) relating to any advance, loan,
extension of credit or capital contribution to, or other investment in, any
person or entity not in excess of $2,500 in the aggregate; or (M) that is
otherwise material to the business, properties or assets of the Company and
entered into other than in the ordinary course of business. The Company has
provided to the Purchaser true and complete copies of all written Contracts and
true, accurate and complete written summaries of all oral Contracts. Except as
set forth on Schedule 2.1(j) of the Disclosure Schedule, all Contracts are
valid, binding and in full force and effect as to the Company or the Subsidiary,
as the case may be, and neither the Company or the Subsidiary nor, to the
Company's Knowledge, any other party thereto is in breach or violation of, or
default under, any such Contracts in any material respect.
(k) LITIGATION. Except as set forth on Schedule 2.1(k) of the
Disclosure Schedule, there have not been for the past five years, nor are there,
any suits, actions, claims, investigations or legal or administrative or
arbitration proceedings in respect of the Company or the Subsidiary, pending or,
to Company's Knowledge, threatened, whether at law or in equity, or before or by
any Federal, foreign, state or municipal or other governmental department,
commission, board, bureau, agency or instrumentality. Except as set forth on
Schedule 2.1(k) of the Disclosure Schedule, there have not been for the past
five years, nor are there any judgments, decrees, injunctions or orders of any
court, governmental department, commission, agency,
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instrumentality or arbitrator against the Company or the Subsidiary or affecting
any of its assets or properties. There is no lawsuit or claim by the Company or
the Subsidiary pending, or which the Company or the Subsidiary intends or
reasonably expects to initiate, against any other person or entity.
(l) COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS.
(i) Except as set forth on Schedule 2.1(l) of the
Disclosure Schedule, the Company and the Subsidiary, to the Company's Knowledge,
have complied and are in compliance with all Federal, state, local and foreign
laws, ordinances, regulations, interpretations and orders (including those
relating to disposal of materials, environmental protection and occupational
safety and health) applicable to the Company or the Subsidiary or any of their
respective businesses. There are no present or past conditions relating to the
Company or the Subsidiary, or relating to any of the Company's or the
Subsidiary's property or any appurtenances thereto or improvements thereon, that
would reasonably be expected to lead to any material liability against, or have
a Material Adverse Effect for violation of any health or safety laws. The
Company has not received any written communication during the past five years
from any governmental entity that alleges that the Company is not in compliance
in any respect with any applicable Federal, state, local and foreign laws,
ordinances, regulations, interpretations and orders. To the Company's Knowledge,
the Company and the Subsidiary have all Federal, state, local and foreign
governmental licenses and permits necessary to conduct their respective
businesses as presently being conducted. Such licenses and permits are in full
force and effect, no violations are or have been recorded in respect of any
thereof, no proceeding is pending or, to the Company's Knowledge, threatened, to
revoke or limit any thereof, and the Company does not know of any basis for any
such proceeding and the consummation of the transactions contemplated in this
Agreement will not result in the non-renewal, revocation or termination of any
such license or permit. Except as set forth on Disclosure Schedule 2.1(l), the
Company has filed, in a timely manner, all reports required by the rules and
regulations of the Securities and Exchange Commission (the "SEC").
(ii) There are no conditions relating to the Company or
the Subsidiary or relating to the Company's or the Subsidiary's ownership, use
or maintenance of any real property previously owned or operated by the Company
or any of its Affiliates, and the Company does not know or have reason to know
of any such condition in respect of such real property not related to the
ownership, use or maintenance, that could lead to any liability for violation of
any Federal, state, county or local laws, regulations, orders or judgments
relating to pollution or protection of the environment or any other applicable
environmental, health or safety statutes, ordinances, orders, rules, regulations
or requirements. The Company and the Subsidiary have received, handled, used,
stored, treated, shipped and disposed of all hazardous or toxic materials,
substances and wastes (whether or not on its properties or properties owned or
operated by others) in compliance with all applicable environmental, health or
safety statutes, ordinances, orders, rules, regulations or requirements.
(m) LABOR RELATIONS; EMPLOYEES.
(i) Within the last five years, neither the Company nor
the Subsidiary has experienced any labor disputes with, or any work stoppages
by, a group of employees due to labor disagreements and, to the Company's
Knowledge, there is no such dispute or work stoppage threatened against the
Company or the Subsidiary. No employee
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of the Company is represented by any union or collective bargaining agent and,
to the Company's Knowledge, there has been no union organizational effort in
respect of any employees of the Company within the past five years.
(ii) Schedule 2.1(m) of the Disclosure Schedule contains
a list of each pension, retirement, savings, deferred compensation, and
profit-sharing plan and each stock option, stock appreciation, stock purchase,
performance share, bonus or other incentive plan, severance plan, health, group
insurance or other welfare plan, or other similar plan and any "employee benefit
plan" within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA"), under which the Company or the Subsidiary has
any current or future obligation or liability or under which any employee or
former employee (or beneficiary of any employee or former employee) of the
Company or the Subsidiary has or may have any current or future right to
benefits on account of employment with the Company or the Subsidiary (the term
"plan" shall include any contract, agreement, policy or understanding, each such
plan being hereinafter referred to individually as a "Plan"). The Company has
delivered to the Purchaser true and complete copies of (A) each Plan for which a
Plan document exists, (B) the summary plan description for each Plan, (C) the
latest annual report, if any, which has been filed with the Internal Revenue
Service (the "IRS") for each Plan and (D) with respect to any Plan intended to
comply with Section 401(k) of the Internal Revenue Code of 1986 (the "Code"),
copies of calculations for the most recent three Plan years showing such Plan's
compliance with the requirements of Section 401(k)(3) and, if applicable,
401(m)(2) of the Code. Each Plan intended to be tax qualified under Sections
401(a) and 501(a) of the Code is, and has been determined by the IRS to be, tax
qualified under Sections 401(a) and 501(a) of the Code and, since such
determination, no amendment to or failure to amend any such Plan or any other
circumstance adversely affects its tax qualified status. There has been no
prohibited transaction within the meaning of Section 4975 of the Code and
Section 406 of Title I of ERISA with respect to any Plan.
(iii) No Plan is subject to the provisions of Section 412
of the Code or Part 3 of Subtitle B of Title I of ERISA. No Plan is subject to
Title IV of ERISA. During the past five years, neither the Company or the
Subsidiary nor any business or entity then controlling, controlled by, or under
common control with the Company or the Subsidiary contributed to or was obliged
to contribute to an employee pension plan that was subject to Title IV of ERISA.
(iv) There are no actions, claims, lawsuits or
arbitrations (other than routine claims for benefits) pending, or, to the
Company's Knowledge, threatened, with respect to any Plan or the assets of any
Plan, and to the Company's Knowledge, there are no facts which could give rise
to any such actions, claims, lawsuits or arbitrations (other than routine claims
for benefits). Except as described on Schedule 2.1(m) of the Disclosure
Schedule, the Company or the Subsidiary has satisfied all funding, compliance
and reporting requirements for all Plans. With respect to each Plan, the Company
or the Subsidiary has paid all contributions (including employee salary
reduction contributions) and all insurance premiums that have become due and any
such expense accrued but not yet due has been properly reflected in the
Financial Statements.
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(v) No Plan provides or is required to provide, now or in
the future, health, medical, dental, accident, disability, death or survivor
benefits to or in respect of any person beyond termination of employment, except
to the extent required under any state insurance law or under Part 6 of Subtitle
B of Title I of ERISA and under Section 4980(B) of the Code. No Plan covers any
individual other than employees of the Company or the Subsidiary, other than
dependents or spouses of employees under health and child care policies listed
in Schedule 2.1(m) of the Disclosure Schedule and delivered to the Purchaser.
(vi) The consummation of the transactions contemplated by
this Agreement will not (A) entitle any employee of the Company or the
Subsidiary to severance pay or termination benefits or (B) accelerate the time
of payment or vesting, or increase the amount of compensation due to any such
employee or former employee.
(n) RELATED PARTY TRANSACTIONS. Except as set forth on Schedule
2.1(n) of the Disclosure Schedule, no current or former partner, director,
officer, employee or shareholder of the Company or the Subsidiary or any
associate or Affiliate thereof, or any parent, spouse, child, brother, sister or
any other relative with a relationship (by blood, marriage or adoption) of not
more remote than first cousin of any of the foregoing (collectively, "Family
Members"), is presently, or during the 12-month period ending on the date of
this Agreement has been, directly or indirectly (i) a party to any transaction
with the Company (including any contract, agreement or other arrangement
providing for the furnishing of services by, or rental of real or personal
property from, or otherwise requiring payments to, any such director, officer,
employee or shareholder or such associate) or (ii) to the Company's Knowledge,
the direct or indirect owner of an interest in any corporation, firm,
association or business organization (other than the ownership of less than 2%
of the outstanding capital stock of any publicly traded entity) which is a
present (or potential) competitor, lender, broker or customer of the Company or
the Subsidiary, nor does any member of management or any of their Family Members
receive income from any source other than the Company or the Subsidiary which
relates to the Company's or the Subsidiary's respective businesses or should
properly accrue to the Company or the Subsidiary. Schedule 2.1(n) of the
Disclosure Schedule sets forth a list of all Family Members who are currently
employed or who were employed by the Company or the Subsidiary at any time
during the last three fiscal years together with a description of job, title and
annual salary and bonus for each such person. Neither the Company nor the
Subsidiary has any loans outstanding to any employee, officer, director or
shareholder of the Company or the Subsidiary or to any Family Member.
(o) TAXES. (i) All Federal, state, local and foreign tax returns
and tax reports for periods ending on or prior to the Subsequent Closing Date by
the Company or the Subsidiary have been or will be filed, or a valid request for
extension has been or will be filed with respect thereto, on a timely basis
(including any extensions) with the appropriate governmental agencies in all
jurisdictions in which such returns and reports are required to be filed. All
such returns and reports are and will be true, correct and complete. Except as
described in Schedule 2.1(o) of the Disclosure Schedule, all Federal, state,
local and foreign income, profits, franchise, sales, use, occupation, property,
excise, employment and other taxes (including interest, penalties and
withholdings of tax) due from and payable by the Company or the Subsidiary on or
prior to the
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Subsequent Closing Date have been fully paid on a timely basis. Except as set
forth in Schedule 2.1(o) of the Disclosure Schedule, neither the Company nor the
Subsidiary is currently the beneficiary of any extension of time within which to
file any tax return. No claim has ever been made by an authority in a
jurisdiction where the Company or the Subsidiary does not file tax returns that
it is or may be subject to taxation by that jurisdiction, and neither the
Company nor the Subsidiary has received any notice, or request for information
from any such authority. No issues have been raised with the Company or the
Subsidiary by the IRS or any other taxing authority in connection with any tax
return or report filed by the Company or the Subsidiary and there are no issues
which, either individually or in the aggregate, could result in any liability
for tax obligations of the Company or the Subsidiary relating to periods ending
on or before September 30, 1997 in excess of the accrued liability for taxes
shown on the Financial Statements. No waivers of statutes of limitations have
been given or requested with respect to the Company or the Subsidiary. Neither
the Company nor the Subsidiary is a party to any tax allocation or sharing
agreement, and neither the Company nor the Subsidiary has been a member of an
affiliated group filing a consolidated federal income tax return (other than a
group the common parent of which was the Company) or has any liability for taxes
of any person (other than the Company and the Subsidiary) under Treasury
Regulation 1.1502-6 (or any similar provision of state, local or foreign law) as
a transferee or successor or by contract or otherwise. No differences exist
between the amounts of the book basis and the tax basis of assets that are not
accounted for by an accrual on the Financial Statements for Federal income tax
purposes. Neither the Company nor the Subsidiary is required to include in
income any adjustment pursuant to Section 481(a) of the Code by reason of a
voluntary change in accounting method initiated by the Company, and the IRS has
proposed no adjustment or change in accounting method. Neither the Company nor
the Subsidiary has consented to be treated as a "consenting corporation" as
defined in Section 341(f) of the Code or as a "collapsible corporation" as
defined in Section 341(b) of the Code. Neither the Company nor the Subsidiary is
a party to any agreement, contract or arrangement that would result, separately
or in the aggregate, in the payment of any "excess parachute payments" within
the meaning of Section 280G of the Code. All transactions or methods of
accounting that could give rise to an understatement of Federal income tax
(within the meaning of Section 6661 of the Code for tax returns filed on or
before December 31, 1990, and within the meaning of Section 6662 of the Code for
tax returns filed after December 31, 1990) have been adequately disclosed on the
tax returns in accordance with Section 6661(b)(2)(B) of the Code for tax returns
filed on or prior to December 31, 1990, and in accordance with Section
6662(d)(2)(B) of the Code for tax returns filed after December 31, 1990. Neither
the Company nor the Subsidiary is nor has it been a United States real property
holding company (as defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(ii) of the Code. The Company
and the Subsidiary have complied and will comply with all applicable laws
relating to the payment and withholding of taxes (including withholding and
reporting requirements under Section 1441 through 1464, 3401 through 3406, 6041
and 6049 of the Code and similar provisions under any other laws) and, within
the time and in the manner prescribed by law, have withheld from wages, fees and
other payments and paid over to the proper governmental or regulatory
authorities all amounts required.
(p) DISCLOSURE. No representation, warranty or statement of the
Company contained in this Agreement, or any
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certificate, schedule, annex or other writing furnished to the Purchaser by the
Company or its predecessor pursuant to the Exchange Act, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statement contained herein or therein, in light of the circumstances under
which they were made, not misleading.
(q) BOOKS AND RECORDS. The books of account, ledgers, order
books, records and documents of the Company accurately and completely reflect
all material information relating to the businesses of the Company and the
Subsidiary, the nature, acquisition, maintenance, location and collection of
each of its assets, and the nature of all transactions giving rise to the
obligations or accounts receivable of the Company.
(r) FEDERAL RESERVE REGULATIONS. Neither the Company nor the
Subsidiary is engaged in the business of extending credit for the purpose of
purchasing or carrying margin securities (within the meaning of Regulation G of
the Board of Governors of the Federal Reserve System), and no part of the
proceeds from the issuance of the Securities will be used to purchase or carry
any margin security or to extend credit to others for the purpose of purchasing
or carrying any margin security or in any other manner which would involve a
violation of any of the regulations of the Board of Governors of the Federal
Reserve System.
(s) INVESTMENT COMPANY ACT. The Company is not an "investment
company" within the meaning of such term under the Investment Company Act of
1940 and the rules and regulations of the SEC thereunder.
(t) SECURITIES ACT. Assuming that the representations and
warranties of the Purchaser contained in Section 2.2(c) are true and correct,
the Company has complied with all applicable Federal and state securities laws
in connection with the issuance and sale of the Securities. Neither the Company
nor anyone acting on its behalf has offered to sell the Securities or similar
securities to, or solicited offers with respect thereto from, or entered into
any preliminary conversations or negotiations relating thereto with, any person,
so as to bring the issuance and sale of such Securities under the registration
provisions of the Securities Act.
(u) BROKERS. Other than International Capital Partners, Inc.
("ICP"), no agent, broker, investment banker, person or firm acting on behalf of
the Company or under the authority of the Company is or will be entitled to any
broker's or finder's fee or any other commission or similar fee directly or
indirectly from any of the parties in connection with any of the transactions
contemplated by this Agreement.
(v) CONTROL. Officers and directors of the Company beneficially
own, directly or indirectly, in excess of 25% of the issued and outstanding
voting securities of the Company.
SECTION 2.2. REPRESENTATIONS AND WARRANTS BY THE PURCHASER. The
Purchaser represents and warrants to the Company as follows:
(a) ORGANIZATION AND STANDING. The Purchaser is a limited
liability company duly formed, validly existing and in good standing under the
laws of the State of Delaware.
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(b) AUTHORIZATION; VALID AND BINDING AGREEMENTS. The Purchaser
has full corporate power and authority to enter into this Agreement, the SBIC
Letter Agreement and the Registration Rights Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement, the SBIC Letter Agreement and the Registration Rights Agreement and
the consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary action on the part of the Purchaser
and no other proceedings on the part of the Purchaser are necessary to authorize
the execution, delivery or performance by the Company of this Agreement, the
SBIC Letter Agreement and the Registration Rights Agreement. This Agreement, the
SBIC Letter Agreement and the Registration Rights Agreement have been duly
executed and delivered by the Purchaser, and constitute the valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with their respective terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(c) INVESTMENT REPRESENTATION. The Purchaser is an "accredited
investor" as defined in the rules and regulations of the SEC under the
Securities Act and is acquiring the Securities for its own account for
investment purposes only and not with a view to resale or distribution within
the meaning of the applicable Federal securities laws. The Purchaser's financial
situation is such that it can afford to bear the economic risk of holding the
Securities for an indefinite period of time and suffer complete loss of its
investment. The Purchaser's knowledge and experience in financial and business
matters are such that it is capable of evaluating the merits and risks of its
purchase of the Securities as contemplated by this Agreement.
(d) ACCESS TO INFORMATION. The Purchaser acknowledges that it has
been afforded (i) the opportunity to ask such questions as it has deemed
necessary of, and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the Securities, and the
merits and risks of investing in the Securities; (ii) access to information
about the Company and the Company's financial condition, results of operations,
business, properties, management and prospects sufficient to enable it to
evaluate its investment; and (iii) the opportunity to obtain such additional
information which the Company possesses or can acquire without unreasonable
effort or expense that such Purchaser believes is necessary to make an informed
investment decision with respect to the investment; PROVIDED that nothing in
this Section 2.2(d) shall reduce the liability of the Company with respect to
the representations and warranties made by the Company in Section 2.1.
(e) RELIANCE. The Purchaser understands and acknowledges the (i)
the Securities to be sold to it hereunder are being offered and sold to it in a
private placement that is exempt from the registration requirements of the
Securities Act and (ii) the availability of such exemption depends in part on,
and the Company will rely upon, the accuracy and truthfulness of, the foregoing
representations and the Purchaser hereby consents to such reliance.
(f) BROKERS. Other than ICP, no agent, broker, investment banker,
person or firm acting on behalf of the Purchaser or under the authority of the
Purchaser is or will be
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entitled to any broker's or finder's fee or any other commission or similar fee
directly or indirectly from any of the parties in connection with any of the
transactions contemplated by this Agreement.
ARTICLE III
ADDITIONAL AGREEMENTS
SECTION 3.1. EXPENSES. The Company shall bear the costs and
expenses incurred by it, the Purchaser and the Shareholders in connection with
the negotiation, execution and delivery of this Agreement and the transactions
contemplated hereby. At the Initial Closing, the Company shall pay to the
Purchaser up to $50,000 of such costs and expenses incurred by the Purchaser. In
addition, the Company shall pay any and all stamp and other documentary taxes
payable or determined to be payable in connection with the issuance of the
Securities and agrees to hold the Purchaser harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes.
SECTION 3.2. CONDUCT OF BUSINESS. (a) From the date of this
Agreement until the Subsequent Closing Date, the Company shall operate its
business only in the ordinary course of business consistent with past practice.
The Company shall not, until the Subsequent Closing Date, directly or
indirectly, cause or permit any state of affairs, action or omission described
in clauses (i) through (xiii) of Section 2.1(f).
(b) From the Subsequent Closing Date and for so long as the
Purchaser or its transferees (except transferees who acquire the Securities or
Exercise Shares in a transaction not exempt from the registration requirements
of the Securities Act) hold an amount of shares of Capital Stock equal to at
least 10% of the Capital Stock then outstanding, the Company shall not change
its line of business.
SECTION 3.3. FURTHER ASSURANCES. Each party shall use all
commercially reasonable efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations, to consummate and make effective the
transactions contemplated by this Agreement as expeditiously as practicable and
to ensure that the conditions set forth in Article IV are satisfied, insofar as
such matters are within the control of any of them.
SECTION 3.4. ACCESS AND INFORMATION. From the date of this
Agreement until the first to occur of (i) the Subsequent Closing Date and (ii)
the termination of this Agreement in accordance with Section 6.2, the Company
shall permit the Purchaser and its representatives to make such investigation of
the business, operations and properties of the Company as the Purchaser deems
necessary or desirable in connection with the transactions contemplated by this
Agreement. Such investigation shall include access to the respective directors,
officers, employees, agents and representatives (including legal counsel and
independent accountants) of the Company and the properties, books, records and
commitments of the Company. The Company shall furnish the Purchaser and its
representatives with such financial, operating and other data and information,
and
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copies of documents with respect to the Company or any of the transactions
contemplated by this Agreement, as the Purchaser shall from time to time
reasonably request. Such access and investigation shall be made upon reasonable
notice and at reasonable places and times. Such access and information shall not
in any way affect or diminish any of the representations or warranties
hereunder. Without limiting the foregoing, during such period, the Company shall
keep the Purchaser informed as to the business and operations of the Company and
shall consult with the Purchaser as appropriate. The Purchaser shall keep
confidential all information disclosed to it pursuant to this Section 3.4 and
Section 3.5(v) unless such information was already in the Purchaser's possession
or known to the Purchaser prior to being disclosed or provided to the Purchaser
until the earliest of such time as (a) disclosure may be required by law, (b)
three years from the date of the receipt of such information, (c) such
information becomes publicly available through no action or fault of the
Purchaser and, (d) such information was or is obtained by the Purchaser from a
third party other than in violation of any agreement or law.
SECTION 3.5 REPORTING REQUIREMENTS. For so long as the Purchaser
or its transferees (except transferees who acquire the Purchasers' Capital Stock
in a transaction not exempt from the registration requirements of the Securities
Act), hold an amount of shares of Capital Stock equal to at least 10% of the
Capital Stock then outstanding, the Company shall furnish the following to the
Purchaser:
(i) as soon as practicable after the end of each month
and fiscal quarter, and in any event within 45 days thereafter, copies
of: (A) an unaudited consolidated balance sheet of the Company as at the
end of such month and quarter, (B) unaudited consolidated statements of
operations, shareholders' equity and cash flows of the Company for the
period ending with such month and quarter and setting forth in
comparative form the figures for the corresponding periods in the
preceding fiscal year certified by the chief financial officer of the
Company as complete and correct, and having been prepared in accordance
with GAAP (other than monthly balance sheets and statements of
operations, shareholders' equity and cash flows) subject to the absence
of footnotes and changes resulting from year-end adjustments;
(ii) such financial information (other than the
information described in clause (i) above) as the Company and Purchaser
may agree;
(iii) as soon as practicable after the end of each fiscal
year of the Company, and in any event within 90 days thereafter, copies
of: (i) a consolidated balance sheet of the Company as at the end of
such year, and (ii) consolidated statements of operations, shareholders'
equity and cash flows of the Company for such year, setting forth in
each case in comparative form the corresponding figures for the
preceding fiscal year, together with supporting notes thereto and
accompanied by an opinion thereon of independent accountants of
recognized national standing, together with a summary prepared by the
Company concerning the Company's operations and financial condition;
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(iv) no later than 60 days prior to the end of each
fiscal year of the Company, the proposed annual business plan and budget
(including the capital expenditures and financing plans) of the Company
for the next fiscal year;
(v) promptly after sending, making available, or filing
the same, all reports and financial statements that the Company sends or
makes available to the shareholders of the Company or files with the
SEC; and
(vi) any other information respecting the business,
properties or the condition or operations, financial or otherwise, of
the Company that the Purchaser may from time to time reasonably request,
including, but not limited to, business units analyses, performance
reviews analyses and monthly sales analyses.
SECTION 3.6. NO SHOPPING. From the date of this Agreement until
the earlier of (i) the Subsequent Closing Date and (ii) the date this Agreement
is terminated in accordance with Section 6.2, the Company and the Subsidiary
shall not, and shall ensure that any directors, officers, agents,
representatives or Affiliates of the Company or the Subsidiary do not, directly
or indirectly, solicit or initiate, enter into or conduct, discussions
concerning, or exchange information (including by way of furnishing information
concerning the Company or the Subsidiary or their respective businesses) or
enter into any negotiations concerning, or solicit, entertain or agree to any
proposals for, (i) a merger, consolidation or other business combination
involving the Company or the Subsidiary, (ii) a sale of any equity interest in
the Company or the Subsidiary, (iii) a sale of a significant portion of business
or assets of the Company or the Subsidiary, (iv) a recapitalization or
restructuring of the Company or the Subsidiary or (v) a transaction similar to
any of the foregoing. In addition, during such time period, the Company shall
not authorize, direct or knowingly permit any officer, shareholder, director,
employee or agent of the Company or the Subsidiary to do any of the foregoing
and the Company shall notify the Purchaser promptly of the identity of any
person who approaches the Company or the Subsidiary with respect to any of the
foregoing, as well as the price and terms of any such proposal, if applicable
SECTION 3.7. PUBLIC ANNOUNCEMENTS No press release or public
announcement related to this Agreement or the transactions contemplated hereby
shall be issued or made without the joint approval of the Purchaser and the
Company, unless required by applicable law or legal process in which case the
Purchaser and the Company shall have the right, to the extent reasonably
practicable, to review and comment on such press release or announcement prior
to publication.
SECTION 3.8. RESERVED SHARES. The Company shall reserve and at
all times keep available, free from preemptive rights, out of its authorized but
unissued stock, a sufficient number of shares of Common Stock to provide for the
issuance of such shares upon the exercise of the Warrants.
SECTION 3.9. PROCEEDS. The proceeds from the sale of the
Securities will be used for the purposes set forth on Schedule 1.
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SECTION 3.10. NOTIFICATION. The Company shall promptly notify the
Purchaser of (i) any notice or other communications from any person or entity
that the consent of such person or entity is or may be required in connection
with the consummation of the transactions contemplated hereby and (ii) any
notice or other communication from any governmental or regulatory agency or
authority in connection with the consummation of the transactions contemplated
hereby.
SECTION 3.11. NEGATIVE COVENANTS. Notwithstanding anything in the
Certificate of Incorporation or the By-laws to the contrary, from and including
the Initial Closing Date to and including the Subsequent Closing Date and after
the Subsequent Closing Date for so long as the Purchaser or its Affliliates hold
an amount of shares of Capital Stock equal to at least 10% of the Capital Stock
then outstanding, then the following actions by the Company or the Subsidiary,
shall require the written consent of the Purchaser (in addition to any
stockholder or Board of Directors approval as may be required by applicable
statute, agreement or otherwise):
(i) the purchase, construction, acquisition, sale, lease,
exchange or disposition of any property or asset, or the
making of any investment, other than in the ordinary course
of business, the purchase price or value of which exceeds
$100,000;
(ii) the entry into any agreement or series of related
agreements, including any agreement to borrow money that,
either individually or collectively, (A) creates a monetary
obligation or a liability greater than $100,000 or (B) grants
a mortgage on, a security interest in, a pledge or otherwise
encumbers, any material asset of the Company or the
Subsidiary;
(iii) the entry into any transaction, including any contract,
agreement or other arrangement providing for the furnishing
of services by, or rental of real or personal property from,
or otherwise requiring payments or the issuance of securities
(including stock options) (or any amendments, modifications
or waivers of any such contract, agreement or arrangement) to
any shareholder (who holds in excess of five percent of the
issued and outstanding voting securities of the Company) or
any officer or director of the Company or the Subsidiary or
any of their respective Affiliates, or any Family Members of
any of the foregoing;
(iv) the initiation by the Company or the Subsidiary of a
voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its
debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or
consent by the
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Company or the Subsidiary to any such relief or to the
appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it,
or a general assignment by the Company or the Subsidiary for
the benefit of creditors, or the failure by the Company or
the Subsidiary generally to pay their respective debts as
they become due, or the taking by the Company or the
Subsidiary of any action to authorize any of the foregoing;
(v) the loan of funds to, or the guaranty of any obligation or
liability of, or the entry into any other agreement,
transaction or arrangement with any, officer, director or
shareholder (who holds in excess of five percent of the
issued and outstanding voting securities of the Company) of
the Company or the Subsidiary or any of their respective
Affiliates or of any Family Members of any of the foregoing
other than the reimbursement of expenses of any such person
in the ordinary course in accordance with the policies of the
Company;
(vi) the merger or the consolidation of the Company or the
Subsidiary with or into another entity or other business
combination or the sale, assignment, lease or other
disposition of all or substantially all of the assets of the
Company or the Subsidiary;
(vii) any issuance of securities or any recapitalization,
restructuring or other reorganization of the Company or the
Subsidiary, including the capitalization of any subsidiaries
of the Company or the Subsidiary, or any repurchase or
redemption of the Company's or the Subsidiary's securities;
(viii) any distributions or dividends, whether in cash,
securities or in property in kind, by the Company to its
stockholders;
(ix) any material changes in accounting policies of the Company
and any removal or appointment of the Company's independent
accountants;
(x) the initiation or settlement of legal, administrative or
other suits or proceedings in the Company's name or in the
Subsidiary's name;
(xi) the establishment or amendment of, or the grant, acceleration
or waiver of any terms or conditions in, or determination or
acceleration pursuant to the terms of, any pension,
retirement, savings, deferred compensation, profit sharing,
benefit or incentive plan or any stock option, stock
appreciation, stock purchase, performance or other similar
plan or any Plan, for any or all current or former employees,
officers or directors of the Company or the Subsidiary or any
of their respective Affiliates or of any Family Member of any
of the foregoing;
(xii) the amendment of the Certificate of Incorporation or
By-laws in any respect;
(xiii) any change in any of the names under which the Company or
the Subsidiary conducts business; or
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(xiv) any other transaction, agreement or arrangement or series
of related transactions, agreements or arrangements that is
material to the business of the Company or the Subsidiary or
to the condition (financial or otherwise), operations,
business, assets, liabilities, earnings or prospects of the
Company or the Subsidiary, taken as a whole, other than sales
of inspection systems in the ordinary course of business
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. CONDITIONS TO OBLIGATIONS OF THE PURCHASER TO EFFECT
THE INITIAL CLOSING. The obligation of the Purchaser to effect the Initial
Closing is subject to the satisfaction of the following conditions unless waived
by the Purchaser:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS; DELIVERIES. (i)
The representations and warranties of the Company contained in Section 2.1 shall
be true and correct in all respects as of the date of this Agreement and as of
the Initial Closing Date as if made on and as of the Initial Closing Date
(except that such representations and warranties made as of a specified date
shall be true and correct as of such date), (ii) the Company shall have
performed and complied with all covenants and agreements required to be
performed or complied with on or prior to the Initial Closing Date and (iii) the
Company shall have made the closing deliveries set forth in Section 1.4 (a)(i).
(b) CONFLICTS; CONSENTS. All permits, consents, approvals,
licenses, orders, authorizations, registrations, declarations, filings and other
actions that are required in connection with the execution, delivery or
performance of this Agreement, the Registration Rights Agreement, the SBIC
Letter Agreement and the certificates evidencing the Securities or the
transactions contemplated hereby and thereby in order to prevent any of the
effects described Section 2.1(d) with respect to any note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment, agreement or
arrangement to which the Company or the Subsidiary is a party or by which any of
their respective properties or assets are bound or with respect to any license,
franchise, permit or other similar authorization held by the Company or the
Subsidiary (all of which consents, if any, are set forth on Schedule 4.1(b) of
the Disclosure Schedule) shall have been obtained or taken.
(c) MATERIAL ADVERSE CHANGE. There shall not have been any
material adverse change in the condition (financial or otherwise), operations,
business, assets, liabilities, earnings or prospects of the Company and the
Subsidiary, taken as a whole.
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(d) CERTIFICATES.
(i) The Purchaser shall have received a certificate from
an executive officer of the Company, dated the Initial Closing Date, in
substantially the form of Exhibit F.
(ii) The Purchaser shall have received a certificate of
the Secretary of the Company, dated the Initial Closing Date, in substantially
the form of Exhibit G.
(e) OPINION OF COUNSEL. The Purchaser shall have received the
opinion, dated the Initial Closing Date, of Xxxxx Xxxxx Xxxx Xxxxxx Xxxxxxx and
Xxxxx PC, counsel to the Company, in substantially the form of Exhibit H.
SECTION 4.2. CONDITIONS OF OBLIGATIONS OF THE COMPANY TO EFFECT
THE INITIAL CLOSING. The obligation of the Company to effect the Initial Closing
are subject to the satisfaction or waiver of the following conditions: (a) the
representations and warranties of the Purchaser contained in Section 2.2 shall
be true and correct in all respects as of the date of this Agreement and as of
the Initial Closing Date as if made on and as of the Initial Closing Date; (b)
the Purchaser shall have performed and complied with all covenants and
agreements required to be performed or complied with on or prior to the Initial
Closing Date; and (c) the Purchaser shall have made the closing deliveries set
forth in Section 1.4(a)(ii).
SECTION 4.3. CONDITIONS TO OBLIGATIONS OF THE PURCHASER TO EFFECT
THE SUBSEQUENT CLOSING. The obligation of the Purchaser to effect the Subsequent
Closing is subject to the satisfaction of the following conditions unless waived
by the Purchaser:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS; DELIVERIES. (i)
The representations and warranties of the Company contained in Section 2.1 shall
be true and correct in all respects as of the date of this Agreement and as of
the Subsequent Closing Date as if made on and as of the Subsequent Closing Date
(except that such representations and warranties made as of a specified date
shall be true and correct as of such date), (ii) the Company shall have
performed and complied with all covenants and agreements required to be
performed or complied with on or prior to the Subsequent Closing Date and (iii)
the Company shall have made the closing deliveries set forth in Section 1.4
(b)(i).
(b) CONFLICTS; CONSENTS. All permits, consents, approvals,
licenses, orders, authorizations, registrations, declarations, filings and other
actions that are required in connection with the execution, delivery or
performance of this Agreement, the Registration Rights Agreement, the SBIC
Letter Agreement and the certificates evidencing the Securities or the
transactions contemplated hereby and thereby in order to prevent any of the
effects described Section 2.1(d) with respect to any note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment, agreement or
arrangement to which the Company or the Subsidiary is a party or by which any of
their respective properties or assets are bound or with respect to any license,
franchise, permit or other similar authorization held by the Company or the
Subsidiary (all of which consents, if any, are set forth on Schedule 4.1(b) of
the Disclosure Schedule) shall have been obtained or taken.
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(c) MATERIAL ADVERSE CHANGE. There shall not have been any
material adverse change in the condition (financial or otherwise), operations,
business, assets, liabilities, earnings or prospects of the Company and the
Subsidiary, taken as a whole.
(d) CERTIFICATES.
(i) The Purchaser shall have received a certificate from
an executive officer of the Company, dated the Subsequent Closing Date, in
substantially the form of Exhibit F.
(ii) The Purchaser shall have received a certificate of
the Secretary of the Company, dated the Subsequent Closing Date, in
substantially the form of Exhibit G.
(e) OPINION OF COUNSEL. The Purchaser shall have received the
opinion, dated the Subsequent Closing Date, of Xxxxx Xxxxx Xxxx Xxxxxx Xxxxxxx
and Xxxxx PC, counsel to the Company, in substantially the form of Exhibit H.
SECTION 4.4. CONDITIONS OF OBLIGATIONS OF THE COMPANY TO EFFECT
THE SUBSEQUENT CLOSING. The obligation of the Company to effect the Subsequent
Closing are subject to the satisfaction or waiver of the following conditions:
(a) the representations and warranties of the Purchaser contained in Section 2.2
shall be true and correct in all respects as of the date of this Agreement and
as of the Subsequent Closing Date as if made on and as of the Subsequent Closing
Date; (b) the Purchaser shall have performed and complied with all covenants and
agreements required to be performed or complied with on or prior to the
Subsequent Closing Date; and (c) the Purchaser shall have made the closing
deliveries set forth in Section 1.4(b)(ii).
ARTICLE V
INDEMNITY
SECTION 5.1. INDEMNIFICATION. (a) The Company indemnifies and
holds harmless the Purchaser and its Affiliates, directors, officers, employees
and other agents and representatives from and against any and all liabilities,
judgments, claims, settlements, losses, damages (including any diminution in
value as appropriate), reasonable fees (including attorneys' and other experts'
fees and disbursements), liens, taxes, penalties, obligations and expenses
(collectively, "Losses") incurred or suffered by any such person or entity
arising from, by reason of or in connection with any misrepresentation or breach
of any representation, warranty or agreement of the Company contained in this
Agreement or any certificate or other document delivered by the Company under
this Agreement. The Company shall indemnify and hold harmless the Purchaser and
its Affiliates, directors, officers, employees and other agents and
representatives from and against any and all Losses incurred or suffered by the
Purchaser, arising from, by reason of or in connection with any third party
claim or action, or potential or threatened claim or action, related to this
Agreement and the transactions contemplated hereby.
(b) The Company shall not have any liability under Section 5.1(a)
unless the aggregate of all Losses relating thereto for which the Company would,
but for this Section 5.1(b), be liable exceeds $50,000, in which case the
Purchaser shall be entitled to all Losses regardless of
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the limitation set forth in this sentence. The limitation on liability set forth
in the immediately preceding sentence shall not apply (i) in the event of fraud,
intentional misrepresentation or intentional breach or (ii) in the case of any
representation or warranty set forth in Section 2.1(c) or Section 2.1(o).
(c) The Purchaser indemnifies and holds harmless the Company and
its Affiliates, directors, officers, employees and other agents and
representatives, from and against any and all Losses incurred or suffered by any
such person or entity arising from, by reason of or in connection with any
misrepresentation or breach of any representation, warranty or agreement of the
Purchaser contained in this Agreement or any certificate or other document
delivered by the Purchaser under this Agreement.
(d) In case any claim or litigation which might give rise to any
obligation of a party under the indemnity and reimbursement provisions of this
Agreement (each an "Indemnifying Party") shall come to the attention of the
party seeking indemnification hereunder (the "Indemnified Party"), the
Indemnified Party shall notify in writing promptly the Indemnifying Party of the
existence, nature and amount of potential loss. Failure to give such notice
shall not affect the rights of the Indemnified Party, except to the extent that
the Indemnifying Party shall have been materially prejudiced by such failure.
The Indemnifying Party shall be entitled to participate in and, if (i) such
claim can properly be resolved by money damages alone and the Indemnifying Party
has the financial resources to pay such damages and (ii) the Indemnifying Party
admits that this indemnity fully covers the claim or litigation, the
Indemnifying Party shall be entitled to direct the defense of any claim at its
expense, but such defense shall be conducted by legal counsel reasonably
satisfactory to the Indemnified Party. No Indemnifying Party shall be liable to
an Indemnified Party for any settlement of any action or claim without the
consent of the Indemnifying Party; provided that the Indemnifying Party shall
not unreasonably withhold its consent to any such settlement. No Indemnifying
Party shall, except with the consent of the Indemnified Party, consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability and equitable claims in
response to such claim or litigation.
(e) The Indemnifying Party shall only be obligated to indemnify
and hold harmless the Indemnified Party for Losses for which a notice of claim
is given within the applicable survival period as set forth in Section 6.6.
SECTION 5.2. NO ELECTION. Nothing contained in this Article V, or
elsewhere in this Agreement, shall be deemed an election of remedies under this
Agreement or limit in any way the liability of any party under any other
agreement to which such party is a party relating to this Agreement or the
transactions contemplated by this Agreement.
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ARTICLE VI
MISCELLANEOUS
SECTION 6.1. ENTIRE AGREEMENT. This Agreement and the schedules
and exhibits hereto contain the entire agreement among the parties with respect
to the transactions contemplated by this Agreement and supersede all prior
agreements or understandings among the parties.
SECTION 6.2. TERMINATION. (a) This Agreement shall terminate on
the earliest to occur of any of the following events:
(i) the mutual written agreement of the Purchaser and the
Company;
(ii) by written notice of the Purchaser or the Company to
the other party, if the Subsequent Closing shall not have occurred prior
to the close of business on November 25, 1997;
(iii) by written notice of the Purchaser to the Company,
if the Company shall have materially breached any of its
representations, warranties or agreements contained in this Agreement;
or
(iv) by written notice of the Company to the Purchaser,
if the Purchaser shall have materially breached any of its
representations, warranties or agreements contained in this Agreement.
(b) Nothing in this Section shall relieve any party of any
liability for a breach of this Agreement prior to its termination, except that
if this Agreement terminates in accordance with Section 6.2(a) and the Purchaser
receives reimbursement of its costs and expenses in accordance with Section 3.1,
then this Agreement shall terminate without any further liability. Except as
aforesaid, upon the termination of this Agreement, all rights and obligations of
the parties under this Agreement shall terminate, except their obligations under
Section 3.1, Section 3.4 and Section 3.7.
SECTION 6.3. DESCRIPTIVE HEADINGS; CERTAIN INTERPRETATIONS. (a)
Descriptive headings are for convenience only and shall not control or affect
the meaning or construction of any provision of this Agreement.
(b) Whenever any party makes any representation, warranty or
other statement to such party's knowledge, such party will be deemed to have
made due inquiry into the subject matter of such representation, warranty or
other statement.
(c) Except as otherwise expressly provided in this Agreement, the
following rules of interpretation apply to this Agreement: (i) the singular
includes the plural and the plural includes the singular; (ii) "or" and "any"
are not exclusive and "include" and "including" are not limiting; (iii) a
reference to any agreement or other contract includes permitted supplements and
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amendments; (iv) a reference to a law includes any amendment or modification to
such law and any rules or regulations issued thereunder; (v) a reference to a
person includes its permitted successors and assigns; (vi) a reference to GAAP
refers to United States GAAP; and (vii) a reference in this Agreement to an
Article, Section, Exhibit or Schedule is to the Article, Section, Exhibit or
Schedule of this Agreement.
SECTION 6.4. NOTICES. All notices, requests and other
communications to any party hereunder shall be in writing and sufficient if
delivered personally or sent by telecopy (with confirmation of receipt) or by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to the Company: Industrial Imaging Corporation
One Xxxxxx Research Center
000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Telecopy: (000) 000-0000
With a copy to: Mintz Xxxxx Xxxx Xxxxxx Xxxxxxx
and Popeo PC
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx
Telecopy: (000) 000-0000
If to the Purchaser: Imprimis Investors LLC
c/o Wexford Management LLC
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
With a copy to: Xxxxxx, Xxxxx & Xxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Telecopy: (000) 000-0000
or to such other address or telecopy number as the party to whom notice is to be
given may have furnished to the other party in writing in accordance herewith.
Each such notice, request or communication shall be effective when received or,
if given by mail, when delivered at the
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address specified in this Section or on the fifth business day following the
date on which such communication is posted, whichever occurs first.
SECTION 6.5. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all such counterparts together shall constitute but
one agreement.
SECTION 6.6. SURVIVAL. Unless otherwise expressly provided
herein, all representations and warranties, agreements and covenants contained
in this Agreement or in any document delivered pursuant to this Agreement or in
connection with this Agreement shall survive both the Initial Closing and the
Subsequent Closing and shall remain in full force and effect until the third
anniversary of the Subsequent Closing Date, except for (i) the representations
and warranties and agreements contained in Sections 2.1(c), (l)(ii),
(m)(ii)-(iv) and (o) and Sections 3.2(b), 3.5, 3.7, 3.8 and 3.11, and (ii) in
the case of fraud, intentional misrepresentation or intentional breach, any
representation or warranty, shall remain in full force and effect until the
expiration of the applicable statute of limitations, or, in the case of a third
party claim, 30 days after the expiration of the applicable statute of
limitations, taking into account any extensions thereof. Neither the period of
survival nor the liability of the Company with respect to the representations
and warranties shall be reduced by any investigation made at any time by or on
behalf of the Purchaser.
SECTION 6.7. BENEFITS OF AGREEMENT. All of the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. This Agreement
is for the sole benefit of the parties hereto and not for the benefit of any
third party.
SECTION 6.8. AMENDMENTS AND WAIVERS. No modification, amendment
or waiver of any provision of, or consent required by, this Agreement, nor any
consent to any departure herefrom, shall be effective unless it is in writing
and signed by the parties hereto. Such modification, amendment, waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
SECTION 6.9. ASSIGNMENT. This Agreement and the rights and
obligations hereunder shall not be assignable or transferable by any party
hereto without the prior written consent of the other party; PROVIDED that
notwithstanding the foregoing, the Purchaser may assign this Agreement and the
rights and obligations hereunder, in whole or in part, to an Affiliate. Any
instrument purporting to make an assignment in violation of this Section shall
be void. All covenants, agreements, representations, warranties and undertakings
in this Agreement made by and on behalf of any party hereto shall bind and inure
to the benefit of the successors and permitted assigns of such party.
SECTION 6.10. ENFORCEABILITY. It is the desire and intent of the
parties hereto that the provisions of this Agreement shall be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the portion thus
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adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
SECTION 6.11. SPECIFIC ENFORCEMENT. Each party expressly agrees
that the other party will be irreparably damaged if this Agreement is not
specifically enforced. Upon a breach or threatened breach of the terms,
covenants or conditions of this Agreement, the non-breaching party shall in
addition to all other remedies, be entitled to a temporary or permanent
injunction, without any showing of any actual damage, or a decree for specific
performance, in accordance with the provision hereof.
SECTION 6.12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAWS PROVISIONS).
SECTION 6.13. CONSENT TO JURISDICTION. EACH OF THE PURCHASER AND
THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION
OF ANY FEDERAL OR STATE COURT OF NEW YORK SITTING IN NEW YORK CITY AND
IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE LITIGATED
EXCLUSIVELY IN SUCH COURTS. EACH OF THE PURCHASER AND THE COMPANY AGREES NOT TO
COMMENCE ANY LEGAL PROCEEDING RELATED HERETO EXCEPT IN SUCH COURT. EACH OF THE
PURCHASER AND THE COMPANY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING IN ANY SUCH
COURT AND HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT
TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION, SUIT OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 6.14. RESTRICTIVE LEGEND
(a) SHARES AND EXERCISE SHARES. Each certificate representing the
Shares, the Exercise Shares or other securities issued in respect of the
Warrants purchased hereunder upon any conversion or stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall be stamped or
otherwise imprinted with the following legend:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR
APPLICABLE STATE SECURITIES LAWS AND INSTEAD ARE BEING ISSUED
PURSUANT TO EXEMPTIONS CONTAINED IN SAID LAWS. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED UNLESS (1)
A REGISTRATION STATEMENT WITH RESPECT TO SUCH SHARES
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SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933, (2) SUCH
SHARES ARE TRANSFERRED PURSUANT TO RULE 144, OR ANY SUCCESSOR
RULE, UNDER SUCH ACT OR (3)INDUSTRIAL IMAGING CORPORATION SHALL
HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT
THAT NO VIOLATION OF SUCH ACT OR SIMILAR STATE ACTS WILL BE
INVOLVED IN SUCH TRANSFER."
(b) WARRANTS. Each certificate representing the Warrants
purchased hereunder shall be stamped or otherwise imprinted with the following
legend:
"THESE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR
APPLICABLE STATE SECURITIES LAWS AND INSTEAD ARE BEING ISSUED
PURSUANT TO EXEMPTIONS CONTAINED IN SAID LAWS. THE WARRANTS
REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED UNLESS (1)
A REGISTRATION STATEMENT WITH RESPECT TO SUCH WARRANTS AND THE
SHARES UNDERLYING SUCH WARRANTS SHALL BE EFFECTIVE UNDER THE
SECURITIES ACT OF 1933, (2) SUCH WARRANTS ARE TRANSFERRED
PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE, UNDER SUCH ACT OR
(3) INDUSTRIAL IMAGING CORPORATION SHALL HAVE RECEIVED AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO IT THAT NO VIOLATION OF
SUCH ACT OR SIMILAR STATE ACTS WILL BE INVOLVED IN SUCH
TRANSFER."
SECTION 6.15. RESTRICTIONS ON TRANSFERABILITY. The Company shall
not be required to register the transfer of any Securities or Exercise Shares on
the books of the Company unless: (i) such securities have been registered under
applicable Federal and state securities laws, (ii) such shares are being
transferred pursuant to Rule 144, or any successor rule, under the Securities
Act or (iii) the Company shall have been provided with an opinion of counsel
reasonably satisfactory to it to the effect that the proposed transfer is exempt
from the registration requirement of the Securities Act and the relevant state
securities laws.
SECTION 6.16. GENERAL. All Exhibits, Schedules and Disclosure
Schedules are hereby incorporated by reference and made a part of this
Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be duly executed and delivered as of the day and year first above written.
INDUSTRIAL IMAGING CORPORATION
By:
-----------------------------------
Name:
Title:
IMPRIMIS INVESTORS LLC
By:
-----------------------------------
Name:
Title:
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TABLE OF CONTENTS
ARTICLE I
PURCHASE AND SALE OF THE SHARES
SECTION 1.1. The Securities......................................................................2
SECTION 1.2. Purchase Price......................................................................2
SECTION 1.3. Closing.............................................................................2
SECTION 1.4. Delivery and Payment................................................................3
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1. Representations and Warranties of the Company.......................................4
(a) Organization, Standing and Power........................................................4
(b) Authorization; Valid and Binding Agreements.............................................5
(c) Capitalization; Equity Interests........................................................5
(d) Conflicts; Consents.....................................................................7
(e) Financial Information...................................................................7
(f) Absence of Changes......................................................................8
(g) Assets, Property and Related Matters; Real Property....................................10
(h) Patents, Trademarks and Similar Rights.................................................11
(i) Insurance..............................................................................11
(j) Agreements.............................................................................12
(k) Litigation.............................................................................12
(l) Compliance; Governmental Authorizations................................................13
(m) Labor Relations; Employees.............................................................14
(n) Related Party Transactions.............................................................15
(o) Taxes..................................................................................15
(p) Disclosure.............................................................................17
(q) Books and Records......................................................................17
(r) Federal Reserve Regulations............................................................17
(s) Investment Company Act.................................................................17
(t) Securities Act.........................................................................17
(u) Brokers................................................................................17
(v) Control................................................................................16
SECTION 2.3. Representations and Warranties by the Purchasers..................................18
(a) Organization and Standing..............................................................18
(b) Authorization; Valid and Binding Agreements............................................18
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(c) Investment Representation..............................................................18
(d) Access to Information..................................................................19
(e) Reliance...............................................................................17
(f) Brokers................................................................................17
ARTICLE III
ADDITIONAL AGREEMENTS
SECTION 3.1. Expenses...........................................................................19
SECTION 3.2. Conduct of Business................................................................19
SECTION 3.3. Further Assurances.................................................................20
SECTION 3.4. Access and Information.............................................................20
SECTION 3.5. Reporting Requirements.............................................................20
SECTION 3.6. No Shopping........................................................................22
SECTION 3.7. Public Announcements...............................................................22
SECTION 3.8. Reserved Shares....................................................................22
SECTION 3.9. Proceeds...........................................................................22
SECTION 3.10 Notification.......................................................................23
SECTION 3.11 Negative Covenants.................................................................20
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions to Obligations of the Purchaser to effect the Initial Closing...........25
(a) Representations and Warranties; Covenants; Deliveries..................................25
(b) Conflicts; Consents....................................................................19
(c) Material Adverse Change................................................................20
(d) Certificates...........................................................................26
(e) Opinion of Counsel.....................................................................26
SECTION 4.2. Conditions of Obligations of the Company to effect the Subsequent Closing..........26
SECTION 4.3 Conditions to Obligations of the Purchaser to effect the Subsequent Closing.........23
(a) Representations and Warranties; Covenants; Deliveries..................................23
(b) Conflicts; Consents....................................................................23
(c) Material Adverse Change................................................................24
(d) Certificates...........................................................................24
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(e) Opinion of Counsel.....................................................................24
SECTION 4.4 Conditions of Obligations of the Company to effect the Subsequent Closing...........24
ARTICLE V
INDEMNITY
SECTION 5.1. Indemnification....................................................................28
SECTION 5.2. No Election........................................................................29
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Entire Agreement...................................................................30
SECTION 6.2. Termination........................................................................30
SECTION 6.3. Descriptive Headings; Certain Interpretations......................................30
SECTION 6.4. Notices............................................................................31
SECTION 6.5. Counterparts.......................................................................32
SECTION 6.6. Survival...........................................................................32
SECTION 6.7. Benefits of Agreement..............................................................32
SECTION 6.8. Amendments and Waivers.............................................................32
SECTION 6.9. Assignment.........................................................................32
SECTION 6.10. Enforceability....................................................................33
SECTION 6.11. Specific Enforcement..............................................................33
SECTION 6.12. Governing Law.....................................................................33
SECTION 6.13. Consent to Jurisdiction...........................................................34
SECTION 6.14. Restrictive Legend................................................................34
SECTION 6.15. Restrictions on Transferability...................................................35
SECTION 6.16. General...........................................................................26
EXHIBITS
Exhibit A Form of Class A Warrants
Exhibit B Form of Class B Warrants
Exhibit C Form of By-laws
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of SBIC Letter Agreement
Exhibit F Form of Officer's Certificate of the Company
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Exhibit G Form of Secretary's Certificate of the Company
Exhibit H Form of Opinion of Xxxxx Xxxxx Xxxx Xxxxxx Xxxxxxx and Xxxxx PC
SCHEDULE
Schedule 1 Use of Proceeds
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