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STOCK PURCHASE AGREEMENT
by and between
CRANE & CO., INC.
and
AMERICAN BANK NOTE
HOLOGRAPHICS, INC.
Dated June 30, 2000
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TABLE OF CONTENTS
Page
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ARTICLE I. DEFINITIONS............................................................................................1
Section 1.01. Definitions...............................................................................1
ARTICLE II. SALE AND PURCHASE OF COMMON STOCK.....................................................................5
Section 2.01. Sale and Purchase of the Common Stock.....................................................5
Section 2.02. Closing...................................................................................5
Section 2.03. Use of Proceeds...........................................................................6
ARTICLE III. REPRESENTATIONS AND WARRANTIES.......................................................................6
Section 3.01. Representations and Warranties of the Company.............................................6
Section 3.02. Representations and Warranties of Purchaser..............................................16
ARTICLE IV. ADDITIONAL AGREEMENTS OF THE PARTIES.................................................................17
Section 4.01. Taking of Necessary Action...............................................................17
Section 4.02. Conduct of Business......................................................................17
Section 4.03. Financial Statements and Other Reports...................................................18
Section 4.04. Access...................................................................................19
Section 4.05. Lost, Stolen, Destroyed or Mutilated Securities..........................................19
Section 4.06. Change of Control........................................................................19
Section 4.07. Legend...................................................................................20
Section 4.08. Further Assurances.......................................................................20
Section 4.09. Solicitation.............................................................................20
Section 4.10. Board Representation.....................................................................21
ARTICLE V. CONDITIONS OF CLOSING.................................................................................25
Section 5.01. Conditions of Purchase at Closing........................................................25
Section 5.02. Conditions of Sale at Closing............................................................26
ARTICLE VI. STANDSTILL...........................................................................................27
ARTICLE VII. MISCELLANEOUS.......................................................................................28
Section 7.01. Survival of Representations and Warranties...............................................28
Section 7.02. Notices..................................................................................28
Section 7.03. Entire Agreement; Amendment..............................................................29
Section 7.04. Counterparts.............................................................................30
Section 7.05. Governing Law............................................................................30
Section 7.06. Public Announcements.....................................................................30
Section 7.07. Expenses.................................................................................30
Section 7.08. Indemnification..........................................................................30
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Section 7.09. Successors and Assigns...................................................................32
Section 7.10. Jurisdiction.............................................................................32
Section 7.11. Specific Performance.....................................................................32
Section 7.12. Captions.................................................................................33
Section 7.13. Severability.............................................................................33
Section 7.14. Mutual Waiver of Jury Trial..............................................................33
EXHIBITS
Exhibit A - Form of Registration Rights Agreement
Exhibit B - Form of Note
Exhibit C - Form of Legal Opinion of Company Counsel
Exhibit D - Form of Legal Opinion of Purchaser's Counsel
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is dated, June 30,
2000, by and between CRANE & CO., INC., a Massachusetts corporation
("Purchaser"), and AMERICAN BANK NOTE HOLOGRAPHICS, INC., a Delaware corporation
(the "Company"). Capitalized terms not otherwise defined where used herein shall
have the meanings ascribed thereto in Article I.
WHEREAS, Purchaser desires to purchase from the Company, and the
Company desires to sell to Purchaser, in the manner and subject to the terms and
conditions set forth in this Agreement, 3,387,720 shares (the "Shares") of the
Company's Common Stock for an aggregate purchase price of $9,316,230;
WHEREAS, the Company and Purchaser desire to set forth certain
agreements herein;
NOW THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained and
intending to be legally bound hereby, the parties hereby agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Definitions. As used in this Agreement, the following
terms shall have the meanings set forth below:
"Affiliate" or "affiliate" shall mean, with respect to any Person, any
other Person which directly or indirectly controls or is controlled by or is
under common control with such Person. As used in this definition, "control"
(including its correlative meanings, "controlled by" and "under common control
with") shall mean possession, directly or indirectly, of power to direct or
cause the direction of management or policies of such Person, whether through
ownership of securities or partnership or other ownership interests, by contract
or otherwise.
"Applicable Law" shall mean all applicable provisions of all (a)
constitutions, treaties, statutes, laws (including common law), rules,
regulations, administrative positions, ordinances, codes or orders of any
Governmental Entity, self-regulating organization, securities exchange or other
securities trading system, (b) Consents of, with or from any Governmental
Entity, and (c) orders, decisions, injunctions, judgments, awards and decrees of
or agreement with any Governmental Entity.
"Board of Directors" or "Board" shall mean the duly elected and
qualified board of directors of the Company.
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"Business Day" shall mean any day, other than a Saturday, Sunday or a
day on which banking institutions in Boston, Massachusetts or the City of New
York are authorized or obligated by law or executive order to close.
"Change of Control" shall mean (a) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or
substantially all of the assets of the Company; or (b) a majority of the Board
of Directors of the Company shall consist of Persons who are not Continuing
Directors of the Company; or (c) the acquisition by any Person or Group (as
defined in Section 13(d) of the Exchange Act, but excluding Purchaser or the
Permitted Transferees or any of their respective Affiliates) of the power,
directly or indirectly, to vote or direct the voting of securities having more
than 50% of the total voting power for the election of directors of the Company
or of any direct or indirect holding company thereof.
"Closing" and "Closing Date" shall have the meanings set forth in
Section 2.02(a).
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Common Stock" shall mean the Common Stock, par value $.01 per share,
of the Company.
"Consents" shall mean any consent, approval, authorization, waiver,
permit, grant, franchise, concession, agreement, license, exemption or order of
registration, certificate, declaration or filing with, or report or notice to,
any Person or Governmental Entity.
"Continuing Director" shall mean, as of the determination date, any
Person who (a) was a member of the Board of Directors of the Company on the
Closing Date (after giving effect to the provisions of Section 4.10), or (b) was
nominated for election or elected to the Board of Directors of the Company with
the affirmative vote of a majority of the Continuing Directors of the Company
who were members of the Board of Directors at the time of such nomination or
election.
"Currency Agreement" shall mean, in respect of a Person, any foreign
exchange contract, currency swap agreement or other similar agreement as to
which such Person is a party or a beneficiary.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time, consistently applied.
"Governmental Entity" shall mean any court, department, body, board,
bureau, administrative agency or commission or other governmental authority or
instrumentality, whether federal, state, local or foreign.
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"Indebtedness" shall mean, with respect to any Person on any date of
determination (without duplication), (a) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money, (b) the principal
of and premium (if any) in respect of obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (c) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto) (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in clauses (a), (b) and (e)) entered into in the ordinary
course of business of such Person to the extent that such letters of credit are
not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed
no later than the third business day following receipt by such Person of a
demand for reimbursement following payment on the letter of credit), (d) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services (except trade payables and other accrued expenses incurred
in the ordinary course of business), which purchase price is due more than six
months after the date of placing such property in service or taking delivery and
title thereto or the completion of such services, (e) all capitalized lease
obligations of such Person, (f) all Indebtedness of other Persons secured by a
Lien on any asset of such Person, whether or not such Indebtedness is assumed by
such Person; provided, however, that if such obligations have not been assumed,
the amount of such Indebtedness shall be deemed to be the lesser of the
principal amount of the obligations or the fair market value of the pledged
property or assets, (g) all Indebtedness of other Persons to the extent
guaranteed by such Person, and (h) to the extent not otherwise included in this
definition, obligations under Currency Agreements and Interest Rate Agreements.
Unless specifically set forth above, the amount of Indebtedness of any Person at
any date shall be the outstanding principal amount of all unconditional
obligations as described above, as such amount would be reflected on a balance
sheet prepared in accordance with GAAP, and the maximum liability of such
Person, upon the occurrence of the contingency giving rise to the obligation, of
any contingent obligations described above at such date.
"Interest Rate Agreement" shall mean, in respect of a Person, any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is a party or a
beneficiary.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Material Adverse Effect" shall mean any event, circumstance, change,
development or effect which individually or in the aggregate would have a
material adverse effect on (a) the assets, business, properties, liabilities,
condition (financial or otherwise), results of operations or prospects of the
Company, (b) the ability of the Company to perform its obligations under this
Agreement or the Registration Rights Agreement or (c) the validity or
enforceability of this Agreement or any of the Registration Rights Agreement or
the rights or remedies of Purchaser hereunder and thereunder.
"Minimum Interest" shall mean ownership by Purchaser (or Permitted
Transferees) of at least 51% of the aggregate number of shares of Common Stock
theretofore actually issued to Purchaser (or Permitted Transferees) pursuant to
Section 2.01 of this Agreement (as may be adjusted for any
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dividends payable in shares of Common Stock or any stock split or reverse stock
split, combination, consolidation or reclassification of the Common Stock).
"Parity Securities" shall mean any stock of any class or classes of the
Company deemed to rank on a parity with the Common Stock, either as to dividends
or upon liquidation, if the holders of such class or classes shall be entitled
to receipt of dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Company, as the case may be, without preference
or priority, one over the other, as between the holders of such stock and the
holders of shares of Common Stock.
"Permits" shall have the meaning set forth in Section 3.01(p).
"Permitted Interest" shall mean ownership by Purchaser (or Permitted
Transferees) of at least 33 1/3% of the aggregate number of shares of Common
Stock theretofore actually issued to Purchaser (or Permitted Transferees)
pursuant to Sections 2.01 of this Agreement (as may be adjusted for any
dividends payable in shares of Common Stock or any stock split or reverse stock
split, combination, consolidation or reclassification of the Common Stock).
"Permitted Transferee" shall mean any Affiliate of Purchaser.
"Person" or "person" shall mean an individual, corporation,
association, partnership, limited liability company, group (as defined in
Section 13(d)(3) of the Exchange Act), trust, joint venture, business trust or
unincorporated organization, or a government or any agency or political
subdivision thereof.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement to be executed by the Company and Purchaser at the Closing, which
shall be substantially in the form attached hereto as Exhibit A, as amended from
time to time in accordance with the terms thereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Securities Filings" shall have the meaning set forth in Section
3.01(h).
"SEC" shall mean the United States Securities and Exchange Commission.
"Senior Officer's Certificate" shall have the meaning set forth in
Section 4.03(a).
"Senior Securities" shall mean any stock of any class or classes of the
Company deemed to rank prior to the Common Stock, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to the
receipt of dividends or of amounts distributable upon dissolution, liquidation
or winding up of the Company, as the case may be, in preference or priority to
the holders of Common Stock.
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"Subsidiary" shall mean, with respect to any corporation (the "parent")
any other corporation, association or other business entity of which 50% or more
of the shares of the voting stock are owned or controlled, directly or
indirectly, by the parent or one or more Subsidiaries of the parent, or by the
parent and one or more of its Subsidiaries.
"Surviving Person" shall mean the continuing or surviving Person of a
merger, consolidation or other corporate combination, the Person receiving a
transfer of all or a substantial part of the properties and assets of the
Company, or the Person consolidating with or merging into the Company in a
merger, consolidation or other corporate combination in which the Company is the
continuing or surviving Person, but in connection with which the Common Stock of
the Company is exchanged or converted into the securities of any other Person or
the right to receive cash or any other property.
"Tax" means any federal, state, local or foreign taxes, including, but
not limited to, income, gross receipts, windfall profits, premium, value added,
severance, stamp, occupation, property, environmental, production, sales, use,
license, excise, franchise, payroll, employment, withholding or similar taxes,
together with any interest, additions or penalties with respect thereto and any
interest in respect of such penalties.
"Tax Returns" means any return, report, information return form,
declaration, claim for refund, statement or other document (including any
amendments thereto and including any schedule or attachment thereto) in
connection with Taxes that are required to be filed with any Governmental Entity
or other tax authority, or sent or provided to another party under Applicable
Law.
ARTICLE II.
SALE AND PURCHASE OF COMMON STOCK
Section 2.01. Sale and Purchase of the Common Stock. At the Closing,
subject to all of the terms and conditions of this Agreement, including the
satisfaction or waiver of the conditions set forth in Sections 5.01 and 5.02,
and in reliance upon the representations, warranties, covenants and agreements
of the parties set forth herein, the Company shall sell to Purchaser, and
Purchaser shall purchase from the Company, the Shares for a purchase price equal
to $9,316,230.
Section 2.02. Closing.
(a) Subject to the satisfaction or waiver of the conditions set forth
in Sections 5.01 and 5.02 of this Agreement, the purchase and sale of the Shares
(the "Closing") shall take place at the offices of Xxxxxx, Xxxx & Xxxxxxx,
counsel to Purchaser, at Exchange Place, 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx,
on June 30, 2000 (the "Closing Date"), or at such other time and place as may be
mutually agreed upon in writing by Purchaser and the Company.
(b) At the Closing, (i) the Company will deliver to Purchaser a
certificate for the Shares registered in the name of Purchaser; (ii) Purchaser
shall deliver the purchase price for the Shares; and
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(iii) each party shall take or cause to be taken such other actions, and shall
execute and deliver such other instruments or documents, as shall be required
under Article V hereof.
Section 2.03. Use of Proceeds. The proceeds to be received by the
Company from the sale and issuance of the Shares hereunder shall be used for
general corporate and working capital purposes, including, at the Company's
option, repayment of Indebtedness under the Company's Loan and Security
Agreement with Foothill Capital Corporation dated September 29, 1999, in an
aggregate amount not to exceed $2,000,000.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Company. Except as
set forth in the disclosure schedule (by reference to the applicable Section of
this Agreement (it being understood that disclosure with respect to a specified
Section shall not be deemed made with respect to any other Section hereof))
delivered by the Company to Purchaser on the date hereof (the "Disclosure
Schedule"), a copy of which is attached hereto, the Company represents and
warrants to, and agrees with, Purchaser as follows:
(a) Organization and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it was incorporated or organized and has all requisite
power and authority (corporate or otherwise) to own, operate and lease its
properties and to carry on its business as it is now being conducted. The
Company is duly licensed or qualified as a foreign corporation to transact
business and is in good standing under the laws of each other jurisdiction in
which its ownership or lease of assets or conduct of its business requires such
qualification, except where the failure to be so licensed or qualified in any
such jurisdiction would not have a Material Adverse Effect. The Company does not
have any Subsidiaries.
(b) Authorization. The Company has full corporate power and authority
to enter into this Agreement and the Registration Rights Agreement and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Registration Rights Agreement
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by the Board of Directors of the Company. No stockholder
approval or other corporate proceedings on the part of the Company are necessary
to authorize the execution, delivery and performance of this Agreement and the
Registration Rights Agreement and the transactions contemplated hereby and
thereby. This Agreement has been, and on or prior to the Closing Date the
Registration Rights Agreement will be, duly and validly executed and delivered
by the Company. This Agreement constitutes, and upon its execution on or prior
to the Closing Date the Registration Rights Agreement will constitute, a valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms subject to applicable bankruptcy, insolvency,
fraudulent
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conveyance, reorganization, moratorium and similar laws affecting creditors'
rights generally and to general principles of equity.
(c) Capitalization. Schedule 3.01(c) sets forth as of the date hereof
(i) the authorized capital stock of the Company, the number of shares of each
class of capital stock issued and outstanding and the number of shares of Common
Stock reserved for issuance in connection with employee benefit, stock option
and dividend reinvestment plans, and (ii) all options, warrants, convertible
securities, subscriptions, contracts, undertakings, arrangements and commitments
to issue which may result in the issuance of equity securities of the Company,
in each case setting forth the identity (which may be by class) of the holder
thereof, the exercise or similar price and the date of expiration or termination
thereof. All of the issued and outstanding shares of the Company's capital stock
have been duly and validly authorized and issued and are fully paid and
non-assessable and have been issued in compliance with all applicable
requirements of law and are not subject to any preemptive or similar rights.
Other than as set forth in Schedule 3.01(c) or pursuant to this Agreement, as of
the date hereof (i) there are no options, warrants, subscriptions, commitments
or other agreements which obligate the Company to issue, sell or transfer, or
repurchase, redeem or otherwise acquire any securities of the Company, (ii)
there are no outstanding securities or rights convertible into or exchangeable
for shares of any capital stock of the Company, and (iii) there are no
contracts, commitments, understandings or arrangements which obligate the
Company to issue additional shares of its capital stock or securities or rights
convertible into or exchangeable for shares of any capital stock of the Company,
or options, warrants or rights to purchase or acquire any additional shares of
its capital stock. Except as set forth in Schedule 3.01(c), as of the date
hereof, there are no contracts, agreements or understandings between the Company
and any Person granting such Person the right to require the Company to file a
registration statement under the Securities Act with respect to any securities
of the Company owned or to be owned by such Person or to require the Company to
include such securities in any other registration statement filed by the Company
under the Securities Act. The Shares to be sold and issued to Purchaser will,
when issued to and paid for by Purchaser in accordance with this Agreement, be
duly and validly authorized and issued and will be fully paid and non-assessable
and will have been issued in compliance with all applicable requirements of law
and not be subject to any preemptive or similar rights. As of the Closing Date,
the Shares will constitute 18.2% of the outstanding Common Stock (calculated on
a fully-diluted basis assuming the conversion, exercise and exchange of all
outstanding securities convertible, exercisable or exchangeable for shares of
Common Stock).
(d) [Reserved]
(e) No Violation. Except as set forth in Schedule 3.01(e), the
execution, delivery and performance by the Company of this Agreement and the
Registration Rights Agreement, the consummation of the transactions by the
Company contemplated hereby and thereby and the compliance by the Company with
any of the provisions hereof and thereof will not conflict with, violate or
result in a breach of any provision of, require a Consent under, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of or accelerate the
performance required by, or result in a right of termination or acceleration
under, (i) any provision of the certificate of incorporation, bylaws or other
governing
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instrument of the Company or (ii) (x) any mortgage, note, indenture, deed of
trust, lease, loan agreement, warrant, registration rights agreement or other
agreement or instrument binding on the Company or (y) any permit, concession,
grant, franchise, license, judgment, order, decree, ruling, injunction, statute,
law, ordinance, rule, regulation or administrative position of any Governmental
Entity, self-regulating organization, securities exchange or securities trading
system or any other Person, in the case of (x) or (y), binding on or otherwise
applicable to the Company or its properties or assets, and the result of which
could reasonably be expected to have a Material Adverse Effect.
(f) Consents. No Consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required in
connection with the execution, delivery and performance of this Agreement and
the Registration Rights Agreement by the Company and the consummation of the
transactions by the Company hereunder and thereunder, including, without
limitation, any filings under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended.
(g) Financial Statements; Absence of Undisclosed Liabilities. The
Company has previously delivered to Purchaser copies of (A) the balance sheet of
the Company at December 31, 1998 and December 31, 1999, and the related
statements of operations, statements of stockholders' equity and cash flows for
the fiscal years ended December 31, 1997, December 31, 1998 and December 31,
1999, inclusive, as reported in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999, filed by the Company with the SEC under the
Exchange Act, in each case accompanied by the audit report of Deloitte & Touche
LLP, independent public accountants of the Company, and (B) the unaudited
consolidated balance sheet of the Company at May 31, 2000 and the related
unaudited consolidated statement of operations, statements of stockholders'
equity and cash flows for the five month period then ended. All of such
financial statements fairly present in all material respects the consolidated
financial position of the Company as of the dates shown and the results of the
operations, statements of shareholders' equity and cash flows of the Company for
the respective fiscal periods or as of the respective dates therein set forth,
in each case subject, as to interim statements, to changes resulting from
year-end adjustments (none of which will be material in amount and effect). All
of such financial statements have been prepared in accordance with GAAP
consistently applied during the periods involved, and the Company has no
material liabilities or obligations of any nature (absolute, accrued, contingent
or otherwise), whether or not due or to become due, that are not fully reflected
or reserved against in the balance sheet as of May 31, 2000, except for
liabilities that may have arisen in the ordinary course of business and
consistent with past practices and that, either individually or in the
aggregate, do not have and could not reasonably be expected to have a Material
Adverse Effect and except as set forth on Schedule 3.01(g) attached hereto. The
Company has provided to Purchaser the fiscal year 2000 budget of the Company
which was prepared in good faith and was based upon assumptions which the
Company believed were reasonable.
(h) Securities Filings. The Company has filed all reports, registration
statements, proxy statements, schedules, forms and other documents, together
with any amendments and supplements required to be made with respect thereto,
that were required to be filed with (i) the SEC under the Securities Act or the
Exchange Act and (ii) any applicable state securities authorities (all such
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reports, statements, schedules, forms and other documents are referred to herein
collectively as the "Securities Filings"). As of their respective dates, the
Securities Filings filed with the SEC during 1999, including any financial
statements contained therein, complied in all material respects with all of the
rules and regulations of the SEC promulgated under the Securities Act or the
Exchange Act and of any other regulatory authority with which they were filed,
and none of the Securities Filings contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading and were complete and accurate in all
material respects. There are no facts known to the Company existing as of the
date hereof peculiar to the Company or any Company Subsidiary which the Company
has not disclosed in the Securities Filings which, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
(i) Compliance with Applicable Law. Except as set forth on Schedule
3.01(i) attached hereto, the Company is not in breach of, default under, or
violation of its Certificate of Incorporation, bylaws or other governing
instrument or any law, statute, order, rule, regulation, policy or guideline of
any Governmental Entity applicable to the Company, other than such defaults or
violations which, either individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect. The business of the Company has
been, and is currently being, conducted in compliance with all Applicable Laws
of any Governmental Entity, except where the failure to comply, either
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(j) Legal Proceedings. Except as set forth on Schedule 3.01(j) attached
hereto, there are no legal, administrative, arbitration or other proceedings,
claims, actions, inquiries or governmental investigations of any nature pending
against the Company as of the date hereof or to which the Company or any of
their assets are subject as of the date hereof that were required to be
disclosed in the Securities Filings which were not so disclosed, and, to the
knowledge of the Company, there has not been threatened any such proceeding,
claim, action, inquiry or governmental investigation against the Company. The
Company is not subject to any outstanding order, writ, judgment, injunction, or
decree of any Governmental Entity.
(k) Employee Benefits.
(i) Each "employee benefit plan" (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended,
and the regulations thereunder ("ERISA")), and any other material employee plan,
agreement or arrangement that is maintained or otherwise contributed to by the
Company for the benefit of its employees (collectively, "Company Plans") has
been administered and is in material compliance with the terms of such plan and
all Applicable Laws. Each of the Company Plans (including amendments thereto) in
existence as of the date hereof is described in or has been included as an
exhibit to the Securities Filings or is otherwise listed in Schedule 3.01(k).
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(ii) As of the date hereof, there are no pending or, to the
knowledge of the Company, threatened, actions, claims or lawsuits which have
been asserted or instituted involving or arising out of the Company Plans, with
respect to the operation or administration of such plans (other than routine
benefit claims).
(iii) The Company has not incurred, and no event has occurred
which would be reasonably likely to result in, any material unfunded liability
under ERISA or the Code with respect to any Company Plan (other than routine
expenses related to administration of the Company Plans and payment of routine
benefit claims), including, but not limited to, complete or partial withdrawal
from a multiemployer plan within the meaning of Section 3(37) of ERISA or a
termination of a Company Plan which is covered by Title IV of ERISA.
(iv) No Company Plan exists which could result in the payment
to any employee of the Company of any money or other property or rights or
accelerate or provide any other rights or benefits to any such employee as a
result of the transaction contemplated by this Agreement, whether or not such
payment would constitute a parachute payment within the meaning of Section 280G
of the Code.
(v) As of the date hereof, the Company does not contribute to
and is not obligated to contribute to, and has not contributed to or has not
been obligated within the past five years to contribute to, any multiemployer
plan within the meaning of Section 4001(a)(3) of ERISA.
(vi) Except as disclosed in the Securities Filings or set
forth on Schedule 3.01(k), as of the date hereof, the Company does not maintain
any plans or programs providing post-retirement medical benefits (except as
required by law), death benefits or other material post-retirement welfare
benefits.
(vii) The Internal Revenue Service has issued an opinion
letter for each Company Plan existing as of the date hereof that is intended to
be qualified under Section 401(a) of the Code, determining that such plan is so
qualified and is exempt from tax under Section 501(a) of the Code, and, to the
knowledge of the Company, nothing has occurred since the date of such letter
that has adversely affected such qualification.
(l) Absence of Certain Changes. Except as set forth in the Securities
Filings, since December 31, 1999 and through the date hereof, the business of
the Company has been operated in the ordinary course of business and consistent
with past practice and, except as set forth in the Securities Filings or in
Schedule 3.01(l) or as specifically provided in this Agreement or the
Registration Rights Agreement:
(i) except for circumstances affecting the Company's industry
generally, there has been no event, condition or change that individually or in
the aggregate has had or could reasonably be expected in the foreseeable future
to have a Material Adverse Effect;
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(ii) the Company has not sold or transferred any of the assets
it owns except in the ordinary course of business and consistent with past
practice (it being understood that the sale of receivables is in the ordinary
course);
(iii) the Company has not incurred any Indebtedness;
(iv) the Company has not changed its accounting policies or
procedures as in effect on December 31, 1999;
(v) except as contemplated by this Agreement, the Company has
not amended or in any way altered its Certificate of Incorporation or bylaws;
(vi) the Company has not (A) changed the number of shares of
authorized capital stock of the Company, (B) except as contemplated by this
Agreement, issued or granted any option, warrant, call, commitment,
subscription, right to purchase or agreement of any character relating to the
authorized or issued and outstanding capital stock of the Company, or any
securities convertible into shares of such stock (except for grants of options
to purchase Common Stock approved by the Company's Board of Directors to be
granted pursuant to director or employee benefit plans of the Company), (C)
split, combined or reclassified any shares of the capital stock of the Company,
(D) declared, set aside or paid any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of the capital
stock of the Company, or (E) redeemed or otherwise acquired any shares of such
capital stock;
(vii) the Company has not increased the number of members of
the Board other than as required by Section 4.10 hereof;
(viii) the Company has not acquired any assets other than in
the ordinary course of business and consistent with past practice;
(ix) the Company has not entered into employment agreements
with any employee (other than agreements terminable at will without any
financial penalty), or granted any increase in the compensation (including
employee benefits) of any employee; and
(x) the Company has not agreed, whether in writing or
otherwise, to take any action that, if taken, would render any of the
representations set forth in this Section 3.01(l) untrue.
(m) Disclosure. Neither this Agreement nor the Registration Rights
Agreement nor any certificate or disclosure statement delivered by or on behalf
of the Company prior to the date hereof, nor any other written materials
delivered by the Company to Purchaser prior to the date hereof in connection
with the transactions contemplated hereby and identified in Schedule 3.01(m), as
of the date thereof contained any untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements contained
herein and therein, in light of the circumstances under which they were made,
not misleading. There are no facts known to the Company existing as of the date
hereof would cause any of the materials described in Schedule 3.01(m) to contain
an
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untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein, in light of the circumstances
under which they were made, not misleading.
(n) Securities Law Matters. Neither the Company nor any of its
Affiliates or any other Person acting on their behalf has, in connection with
the offer and sale of the Common Stock hereunder, engaged in (i) any form of
general solicitation or general advertising (as those terms are used within the
meaning of Rule 502(c) under the Securities Act), (ii) assuming the accuracy of
Purchaser's representations in Section 3.02(d), any action involving a public
offering within the meaning of Section 4 of the Securities Act, or (iii)
assuming the accuracy of Purchaser's representations in Section 3.02(d), and
compliance by Purchaser and the Permitted Transferees with the terms hereof, any
action that would require the registration under the Securities Act of the
offering and sale of the Common Stock pursuant to this Agreement or that would
violate applicable state securities or "blue sky" laws. The Company has not made
and will not make, directly or indirectly, any offer or sale of Common Stock of
the same or similar classes as the Common Stock if, as a result of such offer or
sale, the offer and sale of the Common Stock contemplated hereby could fail to
be entitled to exemption from the registration requirements of the Securities
Act. As used herein, the terms "offer" and "sale" have the meanings specified in
Section 2(3) of the Securities Act.
(o) Brokers and Finders. Neither the Company nor any of its officers,
directors, Affiliates, employees or agents has utilized any broker, finder,
placement agent or financial advisor or incurred any liability for any fees or
commissions in connection with any of the transactions contemplated hereby or by
the Registration Rights Agreement except as provided in this Agreement.
(p) Licenses and Permits. The Company possesses all material licenses,
franchises, permits, certificates, Consents, orders, approvals and
authorizations (collectively, the "Permits") and has made all declarations and
filings with all Governmental Entities necessary under law or otherwise to
conduct their businesses as currently being conducted, and each such Permit is
valid and subsisting and in full force and effect. No negotiation, application,
action or proceeding is pending for the renewal or modification of any Permits,
and no application, petition, objection, opposition, action or proceeding is
pending or, to the knowledge of the Company, threatened that may result in the
denial of an application for renewal, revocation, modification, nonrenewal or
suspension of any Permit.
(q) Material Agreements. Each contract, agreement, understanding,
arrangement and commitment (the "Contracts") which is existing on the date
hereof and is material to the business, results of operations, financial
condition, prospects or operations of the Company is described in or has been
included as an exhibit to the Securities Filings or is otherwise set forth on
Schedule 3.01(q), including, without limitation, all Contracts for Indebtedness.
A true and correct copy of each Contract set forth in Schedule 3.01(q) has been
delivered or made available to Purchaser, including, without limitation, all
amendments and supplements thereto and any schedules and exhibits attached
thereto. Each Contract referred to above and existing on the date hereof is a
valid, binding and enforceable agreement of the Company and, no event has
occurred that has caused, or with the
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passage of time or giving of notice would cause, nor has the execution of this
Agreement caused, or will the transactions contemplated under this Agreement
cause the Company to be in default under, or give rise to a right of
acceleration, or termination under any Contract.
(r) Properties and Insurance. The Company has good and marketable title
to all of its properties and assets, including, without limitation, the
properties and assets reflected on the balance sheet, dated May 31, 2000,
referred to in Section 3.01(g), except properties and assets disposed of since
such date in the ordinary course of business, free of all Liens (other than
Permitted Liens (as defined below)). The Company does not own or lease any real
property or any interest in real property, except as specified on Schedule
3.01(r). The Company enjoys peaceful and undisturbed possession under all leases
under which it operates, and all of such leases are valid, subsisting and in
full force and effect. None of such leases contains any unusual or burdensome
provision, which, in either case, has had, or could reasonably be expected to
have, a Material Adverse Effect. There are currently no lessees, sublessees or
licensees of any of the real property owned or leased by the Company. Schedule
3.01(r) fully and correctly sets forth the address of each location at which any
properties or assets of the Company are to be located immediately following the
Closing. As used herein, "Permitted Liens" shall mean (i) any materialmen's,
mechanics', carriers', workmen's, warehousemen's, repairmen's and other like
Liens arising in the ordinary course of business and (ii) the liens listed on
Schedule 3.01(r). Schedule 3.01(r) sets forth all insurance policies under which
the Company is insured, all of which are valid and in full force. All premiums
due to date under such policies have been paid, and no default exists
thereunder.
(s) Taxes. The Company has filed all federal, state and local income
and franchise Tax Returns which are required to be filed and all such Tax
Returns are correct and complete in all material respects. The Company has paid
all Taxes shown thereon to be due and all other taxes and assessments known to
the Company to be payable by it, except to the extent the same have become due
and payable but are not yet delinquent or to the extent the same are being
contested in good faith. To the extent that material Tax liabilities and
assessments have accrued but have not yet become payable, such Tax liabilities
have been adequately reflected as liabilities on the books of the Company and
adequate reserves have been established for the payment thereof. Schedule
3.01(s) sets forth the fiscal year through which the consolidated Federal Income
Tax Returns of the Company have been examined and reported on by the Internal
Revenue Service. To the Company's knowledge, there exists no dispute with the
Internal Revenue Service with respect to the consolidated Federal Income Tax
Returns of the Company. Except as set forth on Schedule 3.01(s), the Company is
not subject to any audit by any Governmental Entity with regard to any Tax nor,
to the Company's knowledge, has any Governmental Entity asserted against the
Company any liability for any Tax due and payable, but not paid. As of the date
hereof, the Company (i) has not been a member of an affiliated group filing a
consolidated federal income tax return (other than a group the common parent of
which is the Company), or (ii) does not have any liability for the taxes of any
Person (other than any taxes of the Company) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise.
(t) Environmental Matters. The ownership or use of the premises and
assets of the Company, the occupancy and operation thereof, and the conduct of
its business are in compliance
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in all material respects with all applicable federal, state and local laws,
ordinances, regulations, standards and requirements relating to safety, health,
pollution, environmental protection, hazardous substances, zoning and related
matters. There is no material liability attaching to such premises or assets or
the ownership or operation thereof as a result of any hazardous substance that
may have been discharged on or released from such premises, or disposed of
on-site or off-site, or any other circumstance occurring prior to the Closing or
existing as of the Closing. For purposes hereof, "hazardous substance" shall
mean oil or any other substance that is included within the definition of
"hazardous substance," "pollutant," "toxic substance," "toxic waste," "hazardous
waste," "contaminant" or other words of similar import in any federal, state or
local environmental law, ordinance or regulation.
(u) Absence of Certain Business Practices. Except as set forth on
Schedule 3.01(u) attached hereto, neither the Company nor, to the Company's
knowledge, any officer or director purporting to act on behalf of the Company
has at any time: (i) made any contributions to any candidate for political
office, or failed to disclose fully any such contributions, in violation of law,
(ii) made any payment of funds to, or received or retained any funds from, any
state, federal or foreign governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments required
or allowed by Applicable Law, (iii) violated or is in violation of any provision
of the Foreign Corrupt Practices Act of 1977, (iv) made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment or (v) engaged in
any material transaction, maintained any bank account or used any material
amount of corporate funds except for transactions, bank accounts and funds which
have been and are reflected in the normally maintained books and records of the
Company.
(v) Books of Account; Company Charter and Bylaws.
(i) The books of account and other financial records of the
Company are true and complete, have been maintained in accordance with good
business practices, and are accurately reflected in the financial statements
included in the Securities Filings.
(ii) The Company has previously delivered or made available to
Purchaser true and complete copies of the Certificate of Incorporation and
bylaws of the Company, as amended.
(iii) The minute books and other corporate records of the
Company have been made available to Purchaser, contain in all material respects
accurate records of all meetings held prior to the date hereof and accurately
reflect in all material respects all other corporate action of the shareholders
and board of directors and any committees of the board of directors of the
Company through the date hereof.
(w) Operating Company Status. The Company is primarily engaged in the
production or sale of a product or service other than the investment of capital,
within the meaning of the plan assets regulations issued by the Department of
Labor (29 C.F.R. Section 2510.3-101).
(x) Labor Relations; Suppliers, Distributors and Customers. No dispute
involving employees of the Company or the relationship between the Company and
its employees has resulted
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in, or could reasonably be expected to result in any Material Adverse Effect.
The relationships with the suppliers to and distributors for and customers of
the Company are satisfactory commercial working relationships and, during the
12-month period ended on the Closing Date, no such supplier, distributor or
customer has cancelled or otherwise terminated its relationship with or
decreased its services, supplies or materials to or its usage or purchase of the
services or products of the Company in a manner which has resulted in, or could
reasonably be expected to result in, a Material Adverse Effect. The Company is
not aware of any such supplier, distributor or customer to take any such action.
(y) Intellectual Property.
(i) Except as set forth in Schedule 3.01(y)(i):
(A) the Company owns the patents, pending
applications, trademarks, tradenames, copyrights and trade
secrets (the "Intellectual Property") used in the business of
the Company;
(B) the Intellectual Property is not subject to any
existing or contingent security interest or similar
encumbrance;
(C) no claims have been asserted or threatened by any
third party with respect to use, ownership, validity or
enforceability of any Intellectual Property; and
(D) the processes and products made, used and/or sold
by the Company are not the subject of any past, pending or
threatened litigation and, to the Company's knowledge, do not
infringe any intellectual property right of any third party.
(ii) Schedule 3.01(y)(ii) sets forth a complete list of all
patents, trademarks, registered copyrights, trade names and service marks, and
any applications therefor, included in the Intellectual Property, and the names
of the registered owners.
(iii) Schedule 3.01(y)(iii) sets forth a complete list of all
material licenses, sublicenses and other agreements as to which the Company is a
party pursuant to which the Company or any other person is authorized to use any
Intellectual Property or other trade secret material to the Company, and
includes the identity of all parties thereto. The Company is not in violation of
any license, sublicense or agreement described on such list except such
violations as do not materially impair the Company's rights under such license,
sublicense or agreement. The execution of this Agreement by the Company and the
consummation of the transactions contemplated hereby will not cause the Company
to be in violation of or default under any such license, sublicense or
agreement, nor entitle any other party to any such license, sublicense or
agreement to terminate or modify such license, sublicense or agreement.
Section 3.02. Representations and Warranties of Purchaser. The
Purchaser represents and warrants to, and agrees with, the Company as follows:
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(a) Organization. Purchaser is a validly existing and in good standing
under the laws of The Commonwealth of Massachusetts.
(b) Authorization. Purchaser has full power and authority to enter into
this Agreement and the Registration Rights Agreement and to consummate the
transactions hereby and thereby. The execution, delivery and performance by
Purchaser of this Agreement and the Registration Rights Agreement and the
consummation of the transactions contemplated hereby and thereby have been
authorized by all necessary action on the part of Purchaser. This Agreement has
been, and on or prior to the Closing Date the Registration Rights Agreement will
be, executed and delivered by Purchaser, and this Agreement is, and upon the
execution on or prior to the Closing Date the Registration Rights Agreement will
be, the valid and binding obligation of Purchaser, enforceable against it in
accordance with its terms subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights generally and to general principles of equity.
(c) Investment Intent; Suitability. Purchaser is acquiring the Common
Stock solely for its own account for investment and not with a view to any
distribution thereof in violation of the Securities Act. Purchaser is an
"accredited investor" as such term is defined in Rule 501 under the Securities
Act.
(d) Investigation by Purchaser. Purchaser acknowledges that it has had
an opportunity to ask questions of and receive answers from the Company
regarding the Company and its business, assets, results of operations and
financial condition and the terms and conditions of the issuance of the Common
Stock. Notwithstanding anything contained herein to the contrary, no
investigation by Purchaser shall in any way affect Purchaser's right to rely
upon the Company's representations, warranties and covenants contained herein.
(e) Investment Experience. Purchaser (i) has such knowledge, experience
and skill in evaluating and investing in common stocks and other securities,
based on actual participation in financial, investment and business matters, so
that it is capable of evaluating the merits and risks of an investment in the
Common Stock, (ii) has such knowledge, experience and skill in financial and
business matters that it is capable of evaluating the merits and risks of
investment in the Company and the suitability of the Common Stock as an
investment, and (iii) can bear the economic risk of an investment in the Common
Stock.
(f) Brokers and Finders. Neither Purchaser nor any of its officers,
directors, employees, Affiliates or agents has utilized any broker, finder,
placement agent or financial advisor or incurred any liability for any fees or
commissions in connection with any of the transactions contemplated hereby or by
the Registration Rights Agreement.
(g) No Violation. The execution, delivery and performance by Purchaser
of this Agreement, the consummation of the transactions by Purchaser
contemplated hereby and thereby and the compliance by Purchaser with any of the
provisions hereof and thereof will not conflict with, violate or result in a
breach of any provision of, require a Consent under, or constitute a default (or
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an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of or accelerate the performance
required by, or result in a right of termination or acceleration under, (i) any
provision of the certificate of incorporation or bylaws of Purchaser or (ii) (x)
any mortgage, note, indenture, deed of trust, lease, loan agreement, warrant,
registration rights agreement or other agreement or instrument binding on
Purchaser or (y) any permit, concession, grant, franchise, license, judgment,
order, decree, ruling, injunction, statute, law, ordinance, rule, regulation or
administrative position of any Governmental Entity, self-regulating
organization, securities exchange or securities trading system or any other
Person, in the case of (x) or (y), binding on or otherwise applicable to
Purchaser or its properties or assets, and the result of which could reasonably
be expected to have a material adverse effect on the ability of Purchaser to
perform its obligations under this Agreement.
ARTICLE IV.
ADDITIONAL AGREEMENTS OF THE PARTIES
Section 4.01. Taking of Necessary Action. Each of the parties hereto
agrees to use all 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 Law to consummate and make effective the transactions contemplated by
this Agreement.
Section 4.02. Conduct of Business. Except as otherwise required to
perform its obligations under this Agreement or in any agreement contemplated
herein, from the date hereof through the Closing Date, the Company shall:
(a) conduct its operations in the ordinary course of business and
consistent with past practice;
(b) unless required pursuant to the terms of this Agreement or the
Registration Rights Agreement, or consented to in writing by Purchaser, not
amend or in any way alter its Certificate of Incorporation, bylaws, partnership
agreement or other governing document;
(c) not engage in any other act, other than in the ordinary course of
business and consistent with past practice, that could reasonably be expected to
have a Material Adverse Effect or in any way delay or impair consummation of the
transactions contemplated by this Agreement and the Registration Rights
Agreement;
(d) not change the number of shares of the authorized capital stock of
the Company, issue or grant any option, warrant, call, commitment, subscription,
right to purchase or agreement of any character relating to the authorized or
issued capital stock of the Company, or any securities convertible into shares
of such stock (except for grants of options to purchase Common Stock approved by
the Board of Directors to be granted pursuant to existing Company Plans), split,
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combine or reclassify any shares of the capital stock of the Company, declare,
set aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of the capital stock of the
Company, or redeem or otherwise acquire any shares of such capital stock;
(e) not increase the number of directors of the Board of Directors of
the Company without the express written consent of Purchaser other than as
required by Section 4.10;
(f) not sell or transfer any of the assets it owns, except in the
ordinary course of its business and consistent with past practice;
(g) not incur any Indebtedness other than Indebtedness to trade
creditors incurred in the ordinary course of business and consistent with past
practice;
(h) not change its accountants nor change its accounting policies or
procedures in any material manner; or
(i) not do any other act which would cause any representation or
warranty in this Agreement to be or become untrue in any material respect.
Section 4.03. Financial Statements and Other Reports. For so long as
Purchaser or the Permitted Transferees own any shares of Common Stock, the
Company covenants that it will deliver to Purchaser or the Permitted
Transferees, as the case may be:
(a) in the event the Company is not at such time subject to the
reporting requirements of the Exchange Act, as soon as practicable and in any
event within 45 days after the end of each quarterly period (other than the last
quarterly period) in each fiscal year, consolidated statements of operations,
statements of shareholders' equity and cash flows of the Company for the period
from the beginning of the then current fiscal year to the end of such quarterly
period, and a consolidated balance sheet of the Company at the end of such
quarterly period setting forth in each case in comparative form figures for the
corresponding period or date in the preceding fiscal year, together with a
certificate from a senior officer of the Company ("Senior Officer's
Certificate") to the effect that such financial statements have been prepared in
accordance with GAAP consistently applied during the periods involved (except as
otherwise indicated in the notes thereto and subject to year-end adjustments)
and that such financial statements fairly present the results of operations and
changes in financial position, shareholders' equity, cash flows and financial
position of the Company and the Company Subsidiaries as of and for the period
then ended;
(b) in the event the Company is not at such time subject to the
reporting requirements of the Exchange Act, as soon as practicable and in any
event within 90 days after the end of each fiscal year, a consolidated balance
sheet of the Company as of the end of such fiscal year and the related
consolidated statements of operations, statements of shareholders' equity and
cash flows for such fiscal year, setting forth in each case in comparative form
the corresponding figures from the
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preceding fiscal year, together with the audit report of Deloitte & Touche LLP,
or other independent public accountants of recognized standing selected by the
Company;
(c) promptly upon transmission thereof, copies of all financial
statements, proxy statements, notices and reports as it shall send to its
shareholders and to its lenders and copies of all such registration statements,
other than registration statements relating to employee benefit or dividend
reinvestment plans, and all regular and periodic reports on Forms 10-K, 10-Q and
8-K (or similar or substitute forms) as it shall file with the SEC; and
(d) from time to time such additional information regarding results of
operations, financial condition, business or prospects of the Company and the
Company Subsidiaries as Purchaser or the Permitted Transferees may reasonably
request.
Section 4.04. Access.
(a) To permit Purchaser to complete its due diligence examination of
the Company, the Company shall permit representatives of Purchaser to have full
access: (i) to inspect the facilities and properties of the Company, (ii) to
examine the corporate books, records, agreements and files of the Company and
make copies or extracts therefrom and (iii) to consult with the directors,
officers or other employees of the Company and the Company' independent auditors
and legal counsel, all upon reasonable notice and at such reasonable times as
the Purchaser may reasonably request.
(b) For so long as Purchaser or the Permitted Transferees own, in the
aggregate, at least the Permitted Interest, the Company will permit
representatives of each Purchaser and any Permitted Transferee to visit and
inspect any of the properties of the Company, to examine the corporate books,
records, agreements and files of the Company and make copies or extracts
therefrom and to advise and consult with the principal officers of the Company
regarding the affairs, finances and accounts of the Company, all upon reasonable
notice and at such reasonable times Purchaser or such Permitted Transferee may
reasonably request.
Section 4.05. Lost, Stolen, Destroyed or Mutilated Securities. Upon
receipt of evidence of the loss, theft, destruction or mutilation of any
certificate for any security of the Company owned by Purchaser or the Permitted
Transferees and, in the case of loss, theft or destruction, upon delivery of an
undertaking by the holder thereof to indemnify the Company, or, in the case of
mutilation, upon surrender and cancellation thereof, the Company will issue a
new certificate for an equivalent number of shares of Common Stock or other
security of like tenor, as the case may be.
Section 4.06. Change of Control. The Company shall promptly notify
Purchaser and the Permitted Transferees (a) of the execution by the Company of a
definitive agreement with any Person relating to a transaction the consummation
of which will result in a Change of Control, (b) of the satisfaction or waiver
of all conditions of closing (other than conditions which can only be satisfied
on the closing date of such transaction) required under the terms of such
definitive agreement, and (c) immediately upon consummation of a Change of
Control.
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Section 4.07. Legend. Purchaser acknowledges and agrees that as of the
date hereof the shares of Common Stock have not been registered under the
Securities Act or the securities laws of any state, that the shares of Common
Stock will be characterized as "restricted securities" under federal securities
laws and that under such laws and applicable regulations the shares of Common
Stock cannot be sold or otherwise disposed of or otherwise transferred without
registration under the Securities Act or an exemption therefrom. Purchaser
further acknowledges and agrees that each certificate of Common Stock to be
issued to Purchaser or any Permitted Transferee hereunder shall bear the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN ABSENCE OF (i) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR (ii) AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Any holder of the Common Stock may request the Company to remove the legend
described herein from the certificates evidencing such Common Stock by
submitting to the Company such certificates, together with an opinion of counsel
reasonably satisfactory to the Company to the effect that such legend is no
longer required under the Securities Act.
Section 4.08. Further Assurances. The Company and Purchaser shall
execute and deliver, or cause to be executed and delivered, such additional
instruments and other documents and shall take such further actions as the
Company or Purchaser, as the case may be, may reasonably request to effectuate,
carry out and comply with all of the terms of this Agreement and the
Registration Rights Agreement and the transactions contemplated hereby and
thereby, including, without limitation, making application as soon as
practicable for all Consents required in connection with the transactions
contemplated hereby and diligently pursuing the receipt of such Consents in good
faith.
Section 4.09. Solicitation. From the date hereof until the Closing
Date, the Company shall not, and the Company shall direct and use its best
efforts to cause its directors, officers, employees, agents and representatives
not to, initiate, solicit or encourage, directly or indirectly, any inquiries
with respect to, or the making of, any Investment Proposal or engage in any
negotiations concerning, provide any nonpublic information or data to, or have
any discussions with, any Person (other than Purchaser) relating to, an
Investment Proposal, or enter into any agreement with respect to, or otherwise
take any action to effect or facilitate any effort or attempt to make or
implement an Investment Proposal, except that the Company may engage in such
negotiations, provide such information, have such discussions or enter into such
an agreement if and only to the extent that the Board of Directors determines in
good faith after receipt of written advice from outside legal counsel
experienced in such matters that such action is necessary in order for its
Directors to comply with their respective fiduciary duties under applicable law.
On the date hereof, the Company and the
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Company Subsidiaries shall terminate all existing negotiations and discussions
with any Person (other than Purchaser) relating to any Investment Proposal. For
purposes of this Section 4.09, an "Investment Proposal" shall mean any proposal
for the sale, exchange or issuance by the Company, whether in a private or
public offering, of any shares of Common Stock or other securities or any
securities, options, rights or warrants convertible into or exchangeable for any
Common Stock (other than options granted in the ordinary course and shares
issued upon exercise of options or upon conversion of outstanding convertible
debt securities) or other equity securities of the Company or any sale of all or
a material portion of the assets of the Company (other than sales in the
ordinary course of business) or merger with or into any other Person (whether or
not the Company is the Surviving Person) or any financing or any investment
banking or financing services involving the Company.
Section 4.10. Board Representation.
(a) On or prior to the Closing Date, the Board of Directors of the
Company and the Audit Committee of the Board of Directors shall each be expanded
by one position, and Xxxxxxx X. Xxxxx shall be appointed to fill the vacancies
created by such expansion. Thereafter, for so long as Purchaser and the
Permitted Transferees own, in the aggregate, at least the Minimum Interest,
Purchaser shall be entitled to designate one director on the management slate of
nominees to the Company's Board of Directors (the "Purchaser Designee"). In the
event that the number of directors comprising the Company's Board of Directors
(in addition to the Purchaser Designee) shall be six or more, the Board of
Directors shall be expanded by an additional position, and Purchaser shall be
entitled to designate an additional director on such management slate of
nominees (the "Additional Designee"). At least 90 days prior to each annual
meeting of stockholders at which a Purchaser Designee (and Additional Designee,
if applicable) will stand for election, Purchaser shall provide written notice
to the Company indicating the Purchaser Designee (and Additional Designee, if
applicable) to be nominated by Purchaser at such annual meeting, and such notice
shall set forth as to each Person proposed for nomination all information
relating to such Persons that is required to be disclosed in solicitations of
proxies for election of directors pursuant to Regulation 14A under the Exchange
Act (including such Person's written consent to being named in the related proxy
statement as a nominee and to serving as a director if elected).
(b) Subject to applicable law, the Company shall use its best efforts
at all times to take such action as is necessary to ensure that the nominating
committee of the Board of Directors (or the full Board if there is no nominating
committee) of the Company shall nominate and recommend to the stockholders of
the Company that the stockholders elect the Purchaser Designee (and Additional
Designee, if applicable) to the Board of Directors. As a condition precedent to
the inclusion of any Purchaser Designee on any slate of nominees to be
recommended to stockholders by the Board of Directors pursuant to Section
4.10(a), the nominating committee of the Board (or the full Board if there is no
nominating committee) may review the information provided pursuant to Section
4.10(a) to evaluate in good faith such Purchaser Designee's (and such Additional
Designee's) character and fitness to serve as a director. If the nominating
committee (or the full Board if there is no nominating committee) determines in
good faith that any such Purchaser Designee (or Additional Designee) lacks the
character or fitness to serve as a director based on applicable legal and
reasonable
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commercial standards, the nominating committee (or the full Board if there is no
nominating committee) shall inform Purchaser of such determination, and such
Purchaser shall then have the right to propose an alternative Purchaser Designee
(or Additional Designee, as applicable) who is reasonably acceptable to the
Company. All Purchaser Designees (and Additional Designees) elected to the Board
of Directors shall receive, during the period in which they serve, any and all
benefits (including, without limitation, any director compensation and grants of
stock options under the any non-employee director plan of the Company) provided
to the other members of the Board of Directors of the Company.
(c) If at any time Purchaser and the Permitted Transferees are entitled
to designate one or more nominees to the Board of Directors pursuant to this
Section 4.10 and Purchaser does not have a representative on the Board, so long
as Purchaser and the Permitted Transferees own, in the aggregate, at least the
Minimum Interest, the Company shall permit two representatives (or in the case
that Purchaser are entitled to designate only one nominee to the Board, only one
representative) of Purchaser (which representatives shall be acceptable to the
Company in its reasonable discretion) to attend, but not vote, as observers at
each meeting of the Board of Directors or any committee of the Board empowered
to act with full authority of the entire Board, including telephonic meetings.
The Company shall cause notice of any meeting of the Board of Directors or any
such committee of the Board to be delivered to any such representatives at the
same time and in the same manner as notice is given to the members of the Board
of Directors. Such representatives will be entitled to receive all written
materials given to the members of the Board of Directors in connection with such
meetings at the time such materials and information are given to the Board of
Directors. The Company shall reimburse such representatives for his or her
reasonable out-of-pocket expenses incurred in connection with attending meetings
of the Board of Directors or any such committee of the Board.
(d) Each Purchaser Designee and Additional Designee shall be entitled
to serve on any standing committee of the Board except to the extent the
Purchaser Designee's or Additional Designee's participation would cause the
Purchaser Designee's or Additional Designee's participation on such committee to
exceed their proportionate representation on the full Board, provided, however,
that the Purchaser Designee may serve on each standing committee selected in
accordance with this subsection (d). Subject to the preceding sentence, the
Company shall use its best efforts at all times as is necessary to ensure that
each Purchaser Designee and Additional Designee is appointed to all such
committees of the Board of Directors.
(e) For so long as any Purchaser Designee or Additional Designee
remains on the Board of Directors, the Company shall use best efforts to
maintain directors' and officers' liability insurance with financially sound and
reputable insurers at a level of coverage of at least $10,000,000.
(f) This Section 4.10 shall terminate in the event of a Change of
Control that is a merger or consolidation of the Company with or into another
entity or sale of all or substantially all of the assets of the Company or other
single transaction, as a result of such merger, consolidation or sale or other
transaction the holders of the Company's capital stock immediately before the
consummation thereof do not hold more than 50% of the voting power of the
surviving entity immediately after the consummation thereof.
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Section 4.11. Preemptive Rights.
(a) In the event the Company proposes to undertake an issuance of New
Securities (as defined below) after the date hereof, Purchaser and each
Permitted Transferee that owns any shares of Common Stock on the date of
issuance shall have the right to purchase its "proportionate share" of such New
Securities on the terms and conditions set forth herein. Purchaser and each
Permitted Transferee that owns any shares of Common Stock on such date shall
also have the right of over allotment such that, if Purchaser or any Permitted
Transferee fails to exercise its rights hereunder to purchase its proportionate
share of New Securities to the fullest extent permitted, the Purchaser and
Permitted Transferees may purchase all such New Securities that such Purchaser
or Permitted Transferee elected not to purchase. For purposes of this Section
4.11, each Purchaser's and Permitted Transferee's "proportionate share" means
the number of New Securities proposed to be issued and sold multiplied by a
fraction, the numerator of which is the number of shares of Common Stock held by
such Purchaser or Permitted Transferee on such date by such Person and the
denominator of which is the total number of shares of Common Stock outstanding
immediately prior to the issuance of the New Securities (determined on a fully
diluted basis assuming full exercise and conversion of all outstanding options,
warrants, rights and other securities which are convertible or exchangeable for
shares of Common Stock).
(b) As used in this Section 4.11, the term "New Securities" shall mean
(i) any capital stock of the Company, (ii) any rights, options or warrants to
purchase any such capital stock, or to purchase any securities of any type
whatsoever that are, or may become, convertible into or exercisable for any such
capital stock, and (iii) any securities of any type whatsoever that are, or may
become, convertible into or exercisable for any such capital stock; provided,
however, that "New Securities" shall not include (A) shares of Common Stock
issued upon conversion or exercise of options, debentures, notes, warrants or
rights outstanding as of the date hereof, (B) securities issued pursuant to the
acquisition of another corporation or legal entity by the Company by merger,
consolidation, purchase of all or substantially all of such other entity's
assets, or acquisition transaction in which the Company participates on an arm's
length basis, (C) securities (including options) issued in connection with any
director or employee stock option plan or stock option agreement approved by the
Board of Directors of the Company (or any committee thereof), (D) any securities
issued in replacement of any securities of the Company outstanding as of the
date hereof, (E) any securities issued to all holders of shares of Common Stock
on a pro rata basis, (F) any securities issued in connection with a strategic
investment by another Person in the Company or (G) subject to Section 4.11(e),
securities issued in connection with the settlement of litigation outstanding on
the Closing Date.
(c) In the event the Company proposes to undertake an issuance of New
Securities, it shall give Purchaser and the Permitted Transferees written notice
of its intention to do so at least 20 days prior to such issuance, describing
the New Securities and the price and terms upon which the Company proposes to
issue the same (the "Original Notice"). Purchaser and each Permitted Transferee
may purchase (i) such number of New Securities up to Purchaser's or such
Permitted Transferee' proportionate share of such New Securities ("Full Amount")
plus (ii) to the extent
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Purchaser or other Permitted Transferees do not exercise their Full Amount, any
additional New Securities that the Purchaser or other Permitted Transferees
elected not to purchase in amount as agreed to by Purchaser and Permitted
Transferees electing to purchase such additional New Securities (it being
understood that in no event shall the Company be required to issue, in the
aggregate, an amount of New Securities in excess of the aggregate amount
issuable if Purchaser and all Permitted Transferees purchased their respective
Full Amounts), for the price and upon the terms and conditions pertaining to the
issuance of the New Securities (notwithstanding any changes that may be made to
the terms and conditions set forth in the Original Notice) by giving a written
notice to the Company no later than 15 days after the date of receiving the
Original Notice ("Notice Date") identifying the number of New Securities to be
purchased. If Purchaser or any Permitted Transferees elect to purchase any New
Securities within such 15-day period, such New Securities shall be issued and
sold to each of them in accordance with the terms and conditions pertaining to
the issuance of the New Securities (notwithstanding any changes that may be made
to the terms and conditions set forth in the Original Notice). Any New
Securities that the Purchaser and Permitted Transferees elected not to purchase
may be sold by the Company in accordance with the terms and conditions
pertaining to such issuance of New Securities.
(d) Notwithstanding anything to the contrary contained in this Section
4.11, upon any purchase of any New Securities by Purchaser or a Permitted
Transferee pursuant to Section 4.11 on a later date than the issuance of the New
Securities that gave rise to such Purchaser' or Permitted Transferee's purchase
rights under Section 4.11, (i) the purchase price shall be adjusted by
subtracting therefrom the value of any dividend or distribution received in
respect of such New Securities after the date of such issuance and prior to the
purchase by such Purchaser or Permitted Transferee hereunder, and (ii) the
purchase price and number of shares or amount to be purchased shall be adjusted
to reflect any stock split, stock dividend or other combination or
reclassification of the capital stock during such time.
(e) In the event that the Company issues (i) shares of Common Stock
(other than upon conversion or exercise of securities, which is covered in the
following clause (ii)) and/or (ii) securities convertible into or exercisable
for shares of Common Stock (collectively, "Settlement Securities") in connection
with the settlement of litigation outstanding on the Closing Date, the Company
shall promptly notify Purchaser and each Permitted Transferee of such issuance,
and Purchaser and each Transferee shall have the right, for a period of 60 days
following receipt of such notice (or such longer period as shall be required for
the Company to seek any required approval of its stockholders, which approval,
if required, the Company agrees to seek promptly and to take such actions as are
reasonably necessary in connection therewith), to purchase from the Company, at
a price of $3.35 per share (subject to appropriate adjustment in the event of
any stock splits, stock dividends, combinations and the like) additional shares
of Common Stock ("Additional Shares") to the extent that, as a result of such
acquisitions of Additional Shares, the percentage of the shares of Common Stock
held by such Purchaser or Permitted Transferees of the total number of shares of
Common Stock outstanding immediately after such acquisitions of Additional
Shares and the issuance of such Settlement Securities (determined on a fully
diluted basis assuming full exercise and conversion of all outstanding options,
warrants, rights and other securities which are convertible or exchangeable for
shares of Common Stock) does not exceed the percentage of the shares of
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Common Stock held by such Purchaser or Permitted Transferee of the total number
of shares of Common Stock outstanding immediately prior to such acquisitions of
Additional Shares and the issuance of such Settlement Securities (determined on
a fully diluted basis assuming full exercise and conversion of all outstanding
options, warrants, rights and other securities which are convertible or
exchangeable for shares of Common Stock).
(f) The provisions of this Section 4.11 (other than Section 4.11(e))
shall terminate upon the first to occur of (i) the second anniversary of the
Closing Date or (ii) a Change of Control that is a merger or consolidation of
the Company with or into another entity or sale of all or substantially all of
the assets of the Company or other single transaction, as a result of which
merger, consolidation or sale or other transaction the holders of the Company's
capital stock immediately before the consummation thereof do not hold more than
50% of the voting power of the surviving entity immediately after the
consummation thereof.
Section 4.12. Public Disclosure. Neither Purchaser nor the Company
shall issue any press release or otherwise make any public statement or any
other public disclosure regarding the existence or terms of this Agreement and
the transactions contemplated hereby, without the prior written consent of the
other (which shall not unreasonably be withheld).
ARTICLE V.
CONDITIONS OF CLOSING
Section 5.01. Conditions of Purchase at Closing. The obligation of
Purchaser to purchase the Common Stock to be purchased at the Closing is subject
to satisfaction or waiver of each of the following conditions on or prior to the
Closing Date:
(a) Representations and Warranties; Covenants. The representations and
warranties of the Company contained in this Agreement and the Registration
Rights Agreement and in each certificate or document delivered by the Company to
Purchaser in connection with the transactions contemplated hereby and thereby
shall be true and correct in all material respects on and as of the date of this
Agreement or the date of the Registration Rights Agreement, certificates or
other documents, as the case may be, and on and as of the Closing Date, with the
same effect as though made on and as of the Closing Date (except for
representations and warranties that speak as of a specific date other than the
Closing Date (which need only be true and correct in all material respects as of
such date)), and the Company shall have performed all obligations and complied
in all material respects with all agreements, undertakings, covenants and
conditions required hereunder and thereunder to be performed by it at or prior
to the Closing.
(b) Opinion of Counsel. Purchaser shall have received at the Closing
from Fulbright & Xxxxxxxx L.L.P., counsel to the Company, a favorable written
opinion dated as of the Closing Date which shall be to the effect set forth in
Exhibit C hereto.
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(c) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby.
(d) Regulatory Approvals. All Permits, Consents, authorizations, orders
and approvals of, and filings and registrations with any Governmental Entity or
any other Person required to be made or obtained under any federal or state law,
rule or regulation in connection with the execution, delivery and performance of
this Agreement and the Registration Rights Agreement and the consummation of the
transactions contemplated hereby and thereby on the Closing Date shall have been
obtained or made, and all statutory waiting periods thereunder in respect
thereof shall have expired, in each case, without the imposition of any terms or
conditions which, either individually or in the aggregate, are unduly burdensome
to Purchaser or any of their Affiliates or are such that, had they been known to
Purchaser prior to the date hereof, it is reasonable to conclude that Purchaser
would not have entered into this Agreement or the transactions contemplated
hereby.
(e) Company Certificate. The Company shall have delivered to Purchaser
a certificate, dated the Closing Date, signed by its president and its chief
financial officer, in form and substance satisfactory to Purchaser to the effect
that the conditions set forth in this Section 5.01 hereof have been satisfied.
(f) Registration Rights Agreement. (i) The Registration Rights
Agreement shall have been executed and delivered by the parties thereto and
shall be in full force and effect and (ii) all Consents, approvals, waivers,
amendments, or authorizations required under any agreements set forth in
Schedule 3.01(c) in connection with the execution, delivery and performance by
the Company of the Registration Rights Agreement which are necessary in order
for Purchaser to have the full benefit or enjoyment of the provisions of the
Registration Rights Agreement shall have been obtained.
(g) Payment of Expenses. The Company shall have paid to Purchaser the
costs and expenses described in Section 7.07 hereof.
(h) Appointment of Purchaser Designee. The Purchaser Designee shall
have been appointed to the Board of Directors.
Section 5.02. Conditions of Sale at Closing. The obligation of the
Company to sell and issue the Common Stock to be sold and issued at the Closing
is subject to satisfaction or waiver of each of the following conditions on or
prior to the Closing Date:
(a) Representations and Warranties; Covenants. The representations and
warranties of Purchaser contained in this Agreement and the Registration Rights
Agreement and in any certificates or other documents delivered by Purchaser to
the Company in connection with the transactions contemplated hereby and thereby
shall be true and correct in all material respects on and as of the date of this
Agreement or the date of the, certificates or other documents, as the case may
be, and on and as of the Closing Date with the same effect as though made on and
as of the Closing Date (except for representations and warranties that speak as
of a specific date other than the Closing Date
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(which need only be true and correct in all material respects as of such date)),
and Purchaser shall have performed all obligations and complied in all material
respects with all agreements, undertakings, covenants and conditions required to
be performed by each of them at or prior to the Closing.
(b) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction with enjoins or
prohibits consummation of the transactions contemplated hereby.
(c) Purchaser's Certificate. Purchaser shall have delivered to the
Company a certificate, dated the Closing Date, in form and substance
satisfactory to the Company to the effect that the conditions set forth in this
Section 5.02 have been satisfied.
(d) Opinion of Counsel. The Company shall have received at the Closing
from Xxxxxx, Hall & Xxxxxxx, counsel to the Purchaser, a favorable written
opinion dated as of the Closing Date which shall be to the effect set forth in
Exhibit D hereto.
ARTICLE VI.
STANDSTILL
Purchaser hereby agrees that neither it nor its Affiliates will (a)
except as expressly provided for herein, acquire, offer to acquire or agree to
acquire, directly or indirectly, by purchase or otherwise, any voting securities
or direct or indirect rights or options to acquire any voting securities of the
Company, (b) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" to vote (as such terms are used in the proxy rules
of the Securities and Exchange Commission), or seek to advise or influence any
person or entity with respect to voting of any voting securities of the Company
or vote in favor of any matter (including without limitation any acquisition
transaction) that is opposed by the Board of Directors), (c) join a partnership,
syndicate or other group, or otherwise act in concert with any other person, for
the purpose of acquiring, holding, voting or disposing of any voting securities
of the Company, (d) directly or indirectly, offer, sell or transfer any voting
securities of the Company at such time that a tender or exchange offer is
pending or has been announced or which has otherwise been communicated to
Purchaser for outstanding voting securities of the Company that is opposed by
the Board of Directors, or (e) otherwise participate, directly or indirectly, in
any acquisition transaction involving the Company that is not approved by the
Board. Notwithstanding the foregoing sentence, in the event that the Company
issues any New Securities of the type described in Section 4.11(b)(iii)(B) or
(F), Purchaser and Permitted Transferees may acquire additional equity
securities of the Company to the extent that, as a result of such acquisitions,
the percentage of the shares of Common Stock held by such Purchaser or Permitted
Transferees of the total number of shares of Common Stock outstanding after such
acquisitions and the issuance of such New Securities (determined on a fully
diluted basis assuming full exercise and conversion of all outstanding options,
warrants, rights and other securities which are convertible or exchangeable for
shares of Common Stock) does not exceed the percentage of the
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shares of Common Stock held by such Purchaser or Permitted Transferee of the
total number of shares of Common Stock outstanding immediately prior to such
acquisitions and the issuance of such New Securities (determined on a fully
diluted basis assuming full exercise and conversion of all outstanding options,
warrants, rights and other securities which are convertible or exchangeable for
shares of Common Stock).
ARTICLE VII.
MISCELLANEOUS
Section 7.01. Survival of Representations and Warranties. All
representations and warranties made herein or in any Schedule or Exhibit hereto,
or in any certificates or documents delivered in connection with the Closing
shall survive the Closing for a period of two years following the Closing Date.
Section 7.02. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given, if delivered
personally, by telecopier or sent by overnight courier as follows:
(a) If to Purchaser, to:
Crane & Co., Inc.
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Lansing X. Xxxxx
With copies to:
Xxxxxx, Xxxx & Xxxxxxx
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxx X. Xxxxxx, Esq.
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(b) If to the Company, to:
American Bank Note Holographics, Inc.
000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx
With a copy to:
Fulbright & Xxxxxxxx L.L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxx Xxxxxx, Esq.
or to such other address or addresses as shall be designated in writing. All
notices shall be effective when received.
Section 7.03. Entire Agreement; Amendment. This Agreement and the
Registration Rights Agreement and the documents described herein and therein or
attached or delivered pursuant hereto or thereto set forth the entire agreement
between the parties hereto with respect to the transactions contemplated by this
Agreement. Any provision of this Agreement may be amended or modified in whole
or in part at any time by an agreement in writing among the parties hereto
executed in the same manner as this Agreement. No failure on the part of any
party to exercise, and no delay in exercising, any right shall operate as a
waiver thereof nor shall any single or partial exercise by any party of any
right preclude any other or future exercise thereof or the exercise of any other
right. No investigation by Purchaser of the Company prior to or after the date
hereof shall stop or prevent Purchaser from exercising any right hereunder or be
deemed to be a waiver of any such right. This Agreement shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the party drafting or causing any instrument to be
drafted.
Section 7.04. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to constitute an original, but all
of which together shall constitute one and the same instrument.
Section 7.05. Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of The Commonwealth of Massachusetts
applicable to contracts made and to be performed in Massachusetts without giving
effect to the conflict of laws of Massachusetts.
Section 7.06. Public Announcements. Subject to each party's disclosure
obligations imposed by law and any stock exchange, the Company agrees to provide
Purchaser for its review all
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news releases and other public disclosures that the Company anticipates
distributing relating to this Agreement and the transactions contemplated hereby
prior to any dissemination of the same. Purchaser shall also have the right to
review and, before filing or other public dissemination, approve (which approval
will not be unreasonably withheld) any statements made or information provided
with respect to Purchaser or the Permitted Transferees or the transactions
contemplated by this Agreement, including, without limitation, such statements
intended to be included in any future Securities Filings prepared by or on
behalf of the Company. The Company shall not use the name (or any derivative
thereof) of Purchaser or any Permitted Transferee in any news release or public
disclosures without the prior written consent of Purchaser.
Section 7.07. Expenses. The Company shall bear its own costs and
expenses incurred in connection with this Agreement and the Registration Rights
Agreement and the transactions contemplated hereby and thereby, including the
fees and expenses of the Company's financial advisors, accountants and counsel.
Upon the Closing or upon termination of this Agreement as a result of the
Company's failure to satisfy a condition to Closing, the Company agrees to pay
or reimburse Purchaser on the Closing Date for all reasonable out-of-pocket
costs and expenses incurred by Purchaser, up to a maximum of $50,000 (it being
understood that such limit in no way limits the Company's obligations pursuant
to Section 7.08 hereof), arising in connection with Purchaser's due diligence
investigation of the Company, the preparation and negotiation of this Agreement
and the Registration Rights Agreement and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, all filing fees,
travel expenses and the reasonable fees and expenses of Purchaser's counsel,
accountants and consultants.
Section 7.08. Indemnification.
(a) The Company agrees to indemnify and save harmless Purchaser, each
person who controls Purchaser within the meaning of the Exchange Act (including
the general partners thereof), and each of the respective partners, officers,
directors, employees, agents and Affiliates of the foregoing in their respective
capacities as such (the "Purchaser Indemnitees"), to the fullest extent lawful,
from and against any and all actions, suits, claims, proceedings, costs,
damages, judgments, amounts paid in settlement (subject to Section 7.08(d)) and
expenses (including reasonable attorneys' fees and disbursements) (collectively,
"Losses") relating to or arising out of (i) any inaccuracy in or breach of the
representations, warranties, covenants or agreements made by the Company herein
when made or deemed made or (ii) any other conduct by the Company or its
employees or agents as a result of which, in whole or in part, any Purchaser
Indemnitee is made a party to, or otherwise becomes liable pursuant to, any
action, suit, claim or proceeding arising out of or relating to any such
conduct, provided such indemnification obligation pursuant to this clause (ii)
shall not apply to the extent that any Purchaser Indemnitee seeking
indemnification hereunder contributed to the Losses that are the subject of such
action, suit, claim or proceeding.
(b) The Company shall reimburse the Purchaser Indemnitees for all
reasonable out-of-pocket expenses (including attorneys' fees and disbursements)
as they are incurred in connection with investigating, preparing to defend or
defending any such action, suit, claim or proceeding (including any inquiry or
investigation) whether or not a Purchaser Indemnitee is a party thereto.
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(c) In the event that the foregoing indemnity is unavailable to any
Purchaser Indemnitee for any reason, the Company agrees to contribute to any
such Losses and will do so in such proportion as is appropriate to reflect the
relative fault of each party in connection with the conduct which resulted in
the Losses. The parties agree that it would not be just or equitable if
contribution were determined by pro rata allocation or by any other method of
allocation which does not take account of relative fault and other equitable
considerations. The parties further agree that if and to the extent that pro
rata contribution were nevertheless considered by a court, all Purchaser
Indemnitees shall collectively be deemed to be one person. No Purchaser
Indemnitee shall in any event have liability to the Company arising out of an
inaccuracy in or breach of the representations, warranties, covenants or
agreements made by the Company herein, other conduct by the Company or their
employees or agents, or any action or failure to act undertaken by a Purchaser
Indemnitee at the request of the Company.
(d) A Purchaser Indemnitee shall give written notice to the Company of
any claim with respect to which it seeks indemnification promptly after the
discovery by such party of any matters giving rise to a claim for
indemnification; provided that the failure of any Purchaser Indemnitee to give
notice as provided herein shall not relieve the Company of its obligations under
this Section 7.08 unless and to the extent that the Company shall have been
prejudiced by the failure of such Purchaser Indemnitee to so notify the Company.
In case any such action, suit, claim or proceeding is brought against a
Purchaser Indemnitee, the Company shall be entitled to participate in the
defense thereof and, to the extent that it may wish, to assume the defense
thereof, with counsel reasonably satisfactory to such Purchaser Indemnitee, and
after notice from the Company of its election so to assume the defense thereof,
the Company will not be liable to such Purchaser Indemnitee under this Section
7.08 for any legal or other expense subsequently incurred by such Purchaser
Indemnitee in connection with the defense thereof; provided, however, that (i)
if the Company shall elect not to assume the defense of such claim or action or
(ii) if such Purchaser Indemnitee reasonably determines that there may be a
material conflict between the positions of the Company and of Purchaser
Indemnitee in defending such claim or action, then separate counsel shall be
entitled to participate in and conduct the defense, and the Company shall be
liable for any legal or other expenses reasonably incurred by Purchaser
Indemnitee in connection with the defense. The Company shall not be liable for
any settlement of any action, suit, claim or proceeding effected without its
written consent; provided, however, that the Company shall not unreasonably
withhold, delay or condition its consent. The Company further agrees that it
will not, without Purchaser Indemnitee's prior written consent, settle or
compromise any claim or consent to entry of any judgment in respect thereof in
any pending or threatened action, suit, claim or proceeding in respect of which
indemnification may be sought hereunder (whether or not any Purchaser Indemnitee
is an actual or potential party to such action, suit, claim or proceeding)
unless such settlement or compromise includes an unconditional release of
Purchaser and each other Purchaser Indemnitee from all liability arising out of
such action, suit, claim or proceeding.
(e) The obligations of the Company under this Section 7.08 shall
survive the transfer of the Shares or the termination of this Agreement or the
consummation of the transactions contemplated hereby.
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(f) The rights of Purchaser under this Section 7.08 shall be in
addition to any liability that the Company might otherwise have to Purchaser
under this Agreement, at common law or otherwise, provided, however, that, with
respect to any Losses incurred by the Purchaser Indemnitees relating to or
arising out of the inaccuracy in or breach of the representations, warranties,
covenants and agreements made by the Company herein, (i) the provisions of this
Section 7.08 shall be the exclusive remedy of Purchaser, except with respect to
any action for fraud, and (ii) the maximum liability of the Company for such
Losses under Section 7.08(a)(i) shall be limited to $9,316,230.
Section 7.09. Successors and Assigns. Subject to Applicable Law and the
provisions of Section 4.07, Purchaser may assign its rights under this Agreement
in whole or in part to any Permitted Transferee, but no such assignment shall
relieve Purchaser of its obligations hereunder. No transferee of Purchaser (or
the Permitted Transferees) which is not a Permitted Transferee shall have any
rights under this Agreement. The Company may not assign any of its rights or
delegate any of its duties under this Agreement without the prior written
consent of Purchaser. Any purported assignment in violation of this Section 7.09
shall be void.
Section 7.10. Jurisdiction. The courts of The Commonwealth of
Massachusetts and the United States District Court for the District of
Massachusetts shall have jurisdiction over the parties with respect to any
dispute or controversy between them arising under or in connection with this
Agreement and, by execution and delivery of this Agreement, each of the parties
to this Agreement submits to the jurisdiction of those courts, including, but
not limited to, the in personam and subject matter jurisdiction of those courts,
waives any objections to such jurisdiction on the grounds of venue or forum non
conveniens, the absence of in personam or subject matter jurisdiction and any
similar grounds, consents to service of process by mail (in accordance with
Section 7.02) or any other manner permitted by law, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement.
Section 7.11. Specific Performance. The Company acknowledges that the
rights granted to Purchaser in this Agreement are of a special, unique and
extraordinary character, and that any breach of this Agreement by the Company
could not be compensated for by damages. Accordingly, if the Company breaches
its obligations under this Agreement, Purchaser shall be entitled, in addition
to any other remedies that it may have, to seek enforcement of this Agreement by
a decree of specific performance requiring the Company to fulfill its
obligations under this Agreement.
Section 7.12. Captions. The captions contained in this Agreement are
for reference purposes only and are not part of this Agreement.
Section 7.13. Severability. Should any part of this Agreement for any
reason be declared invalid, such decision shall not affect the validity of any
remaining portion, which remaining portion shall remain in full force and effect
as if this Agreement had been executed with the invalid portion thereof
eliminated, and it is hereby declared the intention of the parties here to that
they would have executed the remaining portion of this Agreement without
including therein any such part or parts which may, for any reason, be hereafter
declared invalid.
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Section 7.14. Mutual Waiver of Jury Trial. Because disputes arising in
connection with complex financial transactions are most quickly and economically
resolved by an experienced and expert person and the parties wish applicable
state and federal laws to apply (rather than arbitration rules), the parties
desire that their disputes be resolved by a judge applying such Applicable Laws.
Therefore, to achieve the best combination of the benefits of the judicial
system and of arbitration, the parties hereto waive all right to trial by jury
in any action, suit or proceeding brought to enforce or defend any rights or
remedies under this Agreement.
[Signature page follows.]
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IN WITNESS WHEREOF, this Agreement has been executed by the
parties hereto or by their respective duly authorized officers, all as of the
date first above written.
AMERICAN BANK NOTE
HOLOGRAPHICS, INC.
By: /s/ Xxxxxxx Xxxxx
----------------------
Name: Xxxxxxx Xxxxx
Title: President and Chief
Executive Officer
CRANE & CO., INC.
By: /s/ Lansing X. Xxxxx
----------------------
Name: Lansing X. Xxxxx
Title: Chairman and Chief
Executive Officer
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