EXHIBIT 10.1
DATALOGIC INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
June 25, 2004
Table of Contents
Page
1. Agreement to Sell and Purchase .......................................1
2. Fees and Warrant......................................................1
3. Closing, Delivery and Payment.........................................2
3.1 Closing.........................................................2
3.2 Delivery........................................................2
3.3 Accounts .......................................................2
4. Representations and Warranties of the Company.........................3
4.1 Organization, Good Standing and Qualification...................3
4.2 Subsidiaries....................................................4
4.3 Capitalization; Voting Rights ..................................4
4.4 Authorization; Binding Obligations..............................5
4.5 Liabilities.....................................................5
4.6 Agreements; Action..............................................5
4.7 Obligations to Related Parties..................................6
4.8 Changes.........................................................7
4.9 Title to Properties and Assets; Liens, Etc......................8
4.10 Intellectual Property...........................................8
4.11 Compliance with Other Instruments ..............................9
4.12 Litigation......................................................9
4.13 Tax Returns and Payments .......................................9
4.14 Employees......................................................10
4.15 Registration Rights and Voting Rights..........................10
4.16 Compliance with Laws; Permits..................................11
4.17 Environmental and Safety Laws..................................11
4.18 Valid Offering.................................................11
4.19 Full Disclosure................................................11
4.20 Insurance......................................................12
4.21 SEC Reports....................................................12
4.22 Listing........................................................12
4.23 No Integrated Offering.........................................12
4.24 Stop Transfer..................................................12
4.25 Dilution.......................................................13
4.26 Patriot Act ...................................................12
5. Representations and Warranties of the Purchaser......................13
5.1 No Shorting....................................................13
5.2 Requisite Power and Authority .................................13
5.3 Investment Representations.....................................14
5.4 Purchaser Bears Economic Risk..................................14
5.5 Acquisition for Own Account....................................14
5.6 Purchaser Can Protect Its Interest.............................14
5.7 Accredited Investor............................................15
5.8 Legends........................................................15
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6. Covenants of the Company ............................................16
6.1 Stop-Orders....................................................16
6.2 Listing........................................................16
6.3 Market Regulations.............................................16
6.4 Reporting Requirements.........................................16
6.5 Use of Funds...................................................16
6.6 Access to Facilities...........................................16
6.7 Taxes..........................................................17
6.8 Insurance......................................................17
6.9 Intellectual Property..........................................18
6.10 Properties.....................................................18
6.11 Confidentiality................................................18
6.12 Required Approvals.............................................19
6.13 Reissuance of Securities.......................................20
6.14 Opinion........................................................20
6.15 Margin Stock ..................................................19
6.16 Restricted Cash Disclosure ....................................19
6.17 Financing Right of First Refusal...............................19
7. Covenants of the Purchaser...........................................21
7.1 Confidentiality................................................21
7.2 Non-Public Information.........................................21
8. Covenants of the Company and Purchaser Regarding Indemnification.....21
8.1 Company Indemnification........................................21
8.2 Purchaser's Indemnification....................................21
9. Conversion of Convertible Note.......................................22
9.1 Mechanics of Conversion........................................22
10. Registration Rights..................................................23
10.1 Registration Rights Granted....................................23
10.2 Offering Restrictions..........................................23
11. Miscellaneous........................................................23
11.1 Governing Law..................................................23
11.2 Survival.......................................................24
11.3 Successors.....................................................24
11.4 Entire Agreement...............................................24
11.5 Severability...................................................24
11.6 Amendment and Waiver...........................................24
11.7 Delays or Omissions ...........................................25
11.8 Notices........................................................25
11.9 Attorneys' Fees................................................26
11.10 Titles and Subtitles...........................................26
11.11 Facsimile Signatures; Counterparts.............................26
11.12 Broker's Fees..................................................26
11.13 Construction...................................................26
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LIST OF EXHIBITS
_____________________________________________________________________________
Form of Convertible Term Note.....................................Exhibit A
Form of Warrant...................................................Exhibit B
Form of Opinion...................................................Exhibit C
Form of Escrow Agreement..........................................Exhibit D
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of June 25, 2004, by and between DATALOGIC INTERNATIONAL,
INC., a Delaware corporation (the "Company"), and Laurus Master Fund, Ltd., a
Cayman Islands company (the "Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale to the Purchaser of a
Convertible Term Note in the aggregate principal amount of Three Million
Dollars ($3,000,000) (the "Note"), which Note is convertible into shares of
the Company's common stock, $0.001 par value per share (the "Common Stock") at
an initial fixed conversion price of $ 0.66 per share of Common Stock ("Fixed
Conversion Price");
WHEREAS, the Company wishes to issue a warrant to the Purchaser to
purchase up to 705,000 shares of the Company's Common Stock (subject to
adjustment as set forth therein) in connection with Purchaser's purchase of
the Note;
WHEREAS, Purchaser desires to purchase the Note and the Warrant (as
defined in Section 2) on the terms and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Note and Warrant to
Purchaser on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises, representations, warranties and covenants hereinafter set
forth and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Agreement to Sell and Purchase. Pursuant to the terms and
conditions set forth in this Agreement, on the Closing Date (as defined in
Section 3), the Company agrees to sell to the Purchaser, and the Purchaser
hereby agrees to purchase from the Company, a Note in the aggregate principal
amount of $3,000,000 convertible in accordance with the terms thereof into
shares of the Company's Common Stock in accordance with the terms of the Note
and this Agreement. The Note purchased on the Closing Date shall be known as
the "Offering." A form of the Note is annexed hereto as Exhibit A. The Note
will mature on the Maturity Date (as defined in the Note). Collectively, the
Note and Warrant and Common Stock issuable in payment of the Note, upon
conversion of the Note and upon exercise of the Warrant are referred to as the
"Securities."
2. Fees and Warrant. On the Closing Date:
(a) The Company will issue and deliver to the Purchaser a Warrant
to purchase up to 705,000 shares of Common Stock in connection with the
Offering (the "Warrant") pursuant to Section 1 hereof. The Warrant must be
delivered on the Closing Date. A form of Warrant is annexed hereto as Exhibit
B. All the representations, covenants, warranties, undertakings, and
indemnification, and other rights made or granted to or for the benefit of the
Purchaser by the Company are hereby also made and granted in respect of the
Warrant and shares of the Company's Common Stock issuable upon exercise of the
Warrant (the "Warrant Shares").
(b) Subject to the terms of Section 2(d) below, the Company shall
pay to Laurus Capital Management, LLC, the manager of the Purchaser, a closing
payment in an amount equal to three and one-half percent (3.90%) of the
aggregate principal amount of the Note. The foregoing fee is referred to
herein as the "Closing Payment."
(c) The Company shall reimburse the Purchaser for its reasonable
expenses including legal fees and expenses) incurred in connection with the
preparation and negotiation of this Agreement and the Related Agreements (as
hereinafter defined), and expenses incurred in connection with the Purchaser's
due diligence review of the Company and its Subsidiaries (as defined in
Section 6.8) and all related matters. Amounts required to be paid under this
Section 2(c) will be paid on the Closing Date and shall be $42,500 for such
expenses referred to in this Section 2(c) (net of deposits previously paid by
the Company).
(d) The Closing Payment and the expenses referred to in the
preceding clause (c) (net of deposits previously paid by the Company) shall be
paid at closing out of funds held pursuant to a Funds Escrow Agreement of even
date herewith among the Company, Purchaser, and an Escrow Agent (the "Funds
Escrow Agreement") and a disbursement letter (the "Disbursement Letter").
3. Closing, Delivery and Payment.
3.1 Closing. Subject to the terms and conditions herein, the
closing of the transactions contemplated hereby (the "Closing"), shall take
place on the date hereof, at such time or place as the Company and Purchaser
may mutually agree (such date is hereinafter referred to as the "Closing
Date").
3.2 Delivery. Pursuant to the Funds Escrow Agreement in the form
attached hereto as Exhibit D, at the Closing on the Closing Date, the Company
will deliver to the Purchaser, among other things, a Note in the form attached
as Exhibit A representing the aggregate principal amount of $3,000,000 and a
Warrant in the form attached as Exhibit B in the Purchaser's name representing
705,000 Warrant Shares and the Purchaser will deliver to the Company, among
other things, the amounts set forth in the Disbursement Letter by certified
funds or wire transfer (it being understood that $1,250,000 of the proceeds of
the Note shall be placed in the Restricted Account (as defined in the
Restricted Account Agreement referred to below)).
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as follows (which representations and
warranties are supplemented by the Company's filings under the Securities
Exchange Act of 1934 (collectively, the "Exchange Act Filings"), copies of
which have been provided to the Purchaser):
4.1 Organization, Good Standing and Qualification. Each of the
Company and each of its Subsidiaries is a corporation, partnership or limited
liability company, as the case may be, duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization. Each of the
Company and each of its Subsidiaries has the corporate power and authority to
own and operate its properties and assets, to execute and deliver (i) this
Agreement, (ii) the Note and the Warrant to be issued in connection with this
Agreement, (iii) the Master Security Agreement dated as of the date hereof
between the Company, certain Subsidiaries of the Company and the Purchaser (as
amended, modified or supplemented from time to time, the "Master Security
Agreement"), (iv) the Registration Rights Agreement relating to the Securities
dated as of the date hereof between the Company and the Purchaser (as amended,
modified or supplemented from time to time, the "Registration Rights
Agreement"), (v) the Subsidiary Guaranty dated as of the date hereof made by
certain Subsidiaries of the Company (as amended, modified or supplemented from
time to time, the "Subsidiary Guaranty"), (vi) the Stock Pledge Agreement
dated as of the date hereof among the Company, certain Subsidiaries of the
Company and the Purchaser (as amended, modified or supplemented from time to
time, the "Stock Pledge Agreement"), (vii) the Escrow Agreement dated as of
the date hereof among the Company, the Purchaser and the escrow agent referred
to therein, (viii) the Restricted Account Agreement dated as of the date
hereof among the Company, the Purchaser and North Fork Bank (as amended,
modified or supplemented from time to time, the "Restricted Account
Agreement"), (ix) the Restricted Account Side Letter related to the Restricted
Account Agreement dated as of the date hereof between the Company and the
Purchaser (as amended, modified or supplemented from time to time, the
"Restricted Account Side Letter"), (x) those certain agreements related to the
lockbox and clearing account arrangements maintained by the Company and its
Subsidiaries at Commerce Bank for the benefit of the Purchaser (as amended,
modified or supplemented from time to time, the "Clearing Account
Agreements"), (xi) the Subordination Agreement dated as of the date hereof
among Xxxxx X. Xxxxxx and Xxxxx X. Xxxxxx and the Purchaser (as amended,
modified or supplemented from time to time, the "Subordination Agreement") and
(xii) all other agreements related to this Agreement and the Note and referred
to herein (the preceding clauses (ii) through (xii), collectively, the
"Related Agreements"), to issue and sell the Note and the shares of Common
Stock issuable upon conversion of the Note (the "Note Shares"), to issue and
sell the Warrant and the Warrant Shares, and to carry out the provisions of
this Agreement and the Related Agreements and to carry on its business as
presently conducted. Each of the Company and each of its Subsidiaries is duly
qualified and is authorized to do business and is in good standing as a
foreign corporation, partnership or limited liability company, as the case may
be, in all jurisdictions in which the nature of its activities and of its
properties (both owned and leased) makes such qualification necessary, except
for those jurisdictions in which failure to do so has not, or could not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the business, assets, liabilities, condition (financial or
otherwise), properties, operations or prospects of the Company and it
Subsidiaries, taken individually and as a whole (a "Material Adverse Effect").
4.2 Subsidiaries. Each direct and indirect Subsidiary of the
Company, the direct owner of such Subsidiary and its percentage ownership
thereof, is set forth on Schedule 4.2. For the purpose of this Agreement, a
"Subsidiary" of any person or entity means (i) a corporation or other entity
whose shares of stock or other ownership interests having ordinary voting
power (other than stock or other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the directors
of such corporation, or other persons or entities performing similar functions
for such person or entity, are owned, directly or indirectly, by such person
or entity or (ii) a corporation or other entity in which such person or entity
owns, directly or indirectly, more than 50% of the equity interests at such
time.
4.3 Capitalization; Voting Rights.
(a) The authorized capital stock of the Company, as of the date
hereof consists of 100,000,000 shares, par value $0.001 per share, 36,830,366
shares of which are issued and outstanding . The authorized capital stock of
each Subsidiary of the Company is set forth on Schedule 4.3.
(b) Except as disclosed on Schedule 4.3, other than: (i) the
shares reserved for issuance under the Company's stock option plans; and (ii)
shares which may be granted pursuant to this Agreement and the Related
Agreements, there are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal), proxy or
stockholder agreements, or arrangements or agreements of any kind for the
purchase or acquisition from the Company of any of its securities. Except as
disclosed on Schedule 4.3, neither the offer, issuance or sale of any of the
Note or the Warrant, or the issuance of any of the Note Shares or Warrant
Shares, nor the consummation of any transaction contemplated hereby will
result in a change in the price or number of any securities of the Company
outstanding, under anti-dilution or other similar provisions contained in or
affecting any such securities.
(c) All issued and outstanding shares of the Company's Common
Stock: (i) have been duly authorized and validly issued and are fully paid
and nonassessable; and (ii) were issued in compliance with all applicable
state and federal laws concerning the issuance of securities.
(d) The rights, preferences, privileges and restrictions of the
shares of the Common Stock are as stated in the Company's Certificate of
Incorporation (the "Charter"). The Note Shares and Warrant Shares have been
duly and validly reserved for issuance. When issued in compliance with the
provisions of this Agreement and the Company's Charter, the Securities will be
validly issued, fully paid and nonassessable, and will be free of any liens or
encumbrances; provided, however, that the Securities may be subject to
restrictions on transfer under state and/or federal securities laws as set
forth herein or as otherwise required by such laws at the time a transfer is
proposed.
4.4 Authorization; Binding Obligations. All corporate,
partnership or limited liability company, as the case may be, action on the
part of the Company and each of its Subsidiaries (including the respective
officers and directors) necessary for the authorization of this Agreement and
the Related Agreements, the performance of all obligations of the Company and
its Subsidiaries hereunder and under the other Related Agreements at the
Closing and, the authorization, sale, issuance and delivery of the Note and
Warrant has been taken or will be taken prior to the Closing. This Agreement
and the Related Agreements, when executed and delivered and to the extent it
is a party thereto, will be valid and binding obligations of each of the
Company and each of its Subsidiaries, enforceable against each such person in
accordance with their terms, except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; and
(b) general principles of equity that restrict the availability of
equitable or legal remedies.
The sale of the Note and the subsequent conversion of the Note into Note
Shares are not and will not be subject to any preemptive rights or rights of
first refusal that have not been properly waived or complied with. The
issuance of the Warrant and the subsequent exercise of the Warrant for Warrant
Shares are not and will not be subject to any preemptive rights or rights of
first refusal that have not been properly waived or complied with.
4.5 Liabilities. Neither the Company nor any of its Subsidiaries
has any contingent liabilities, except current liabilities incurred in the
ordinary course of business and liabilities disclosed in any Exchange Act
Filings.
4.6 Agreements; Action. Except as set forth on Schedule 4.6 or as
disclosed in any Exchange Act Filings:
(a) there are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company or any of its Subsidiaries is a party or by which it is bound
which may involve: (i) obligations (contingent or otherwise) of, or payments
to, the Company in excess of $50,000 (other than obligations of, or payments
to, the Company arising from purchase or sale agreements entered into in the
ordinary course of business); or (ii) the transfer or license of any patent,
copyright, trade secret or other proprietary right to or from the Company
(other than licenses arising from the purchase of "off the shelf" or other
standard products); or (iii) provisions restricting the development,
manufacture or distribution of the Company's products or services; or (iv)
indemnification by the Company with respect to infringements of proprietary
rights.
(b) Since December 31, 2003, neither the Company nor any of its
Subsidiaries has: (i) declared or paid any dividends, or authorized or made
any distribution upon or with respect to any class or series of its capital
stock; (ii) incurred any indebtedness for money borrowed or any other
liabilities (other than ordinary course obligations) individually in excess of
$50,000 or, in the case of indebtedness and/or liabilities individually less
than $50,000, in excess of $100,000 in the aggregate; (iii) made any loans or
advances to any person not in excess, individually or in the aggregate, of
$100,000, other than ordinary course advances for travel expenses; or (iv)
sold, exchanged or otherwise disposed of any of its assets or rights, other
than the sale of its inventory in the ordinary course of business.
(c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including
persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual
minimum dollar amounts of such subsections.
4.7 Obligations to Related Parties. Except as set forth on
Schedule 4.7, there are no obligations of the Company or any of its
Subsidiaries to officers, directors, stockholders or employees of the Company
or any of its Subsidiaries other than:
(a) for payment of salary for services rendered and for bonus
payments;
(b) reimbursement for reasonable expenses incurred on behalf of
the Company and its Subsidiaries;
(c) for other standard employee benefits made generally available
to all employees (including stock option agreements outstanding under any
stock option plan approved by the Board of Directors of the Company); and
(d) obligations listed in the Company's financial statements or
disclosed in any of its Exchange Act Filings.
Except as described above or set forth on Schedule 4.7, none of the officers,
directors or, to the best of the Company's knowledge, key employees or
stockholders of the Company or any members of their immediate families, are
indebted to the Company, individually or in the aggregate, in excess of
$50,000 or have any direct or indirect ownership interest in any firm or
corporation with which the Company is affiliated or with which the Company has
a business relationship, or any firm or corporation which competes with the
Company, other than passive investments in publicly traded companies
(representing less than one percent (1%) of such company) which may compete
with the Company. Except as described above, no officer, director or
stockholder, or any member of their immediate families, is, directly or
indirectly, interested in any material contract with the Company and no
agreements, understandings or proposed transactions are contemplated between
the Company and any such person. Except as set forth on Schedule 4.7, the
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
4.8 Changes. Since December 31, 2003, except as disclosed in any
Exchange Act Filing or in any Schedule to this Agreement or to any of the
Related Agreements, there has not been:
(a) any change in the business, assets, liabilities, condition
(financial or otherwise), properties, operations or prospects of the Company
or any of its Subsidiaries, which individually or in the aggregate has had, or
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect;
(b) any resignation or termination of any officer, key employee or
group of employees of the Company or any of its Subsidiaries;
(c) any material change, except in the ordinary course of
business, in the contingent obligations of the Company or any of its
Subsidiaries by way of guaranty, endorsement, indemnity, warranty or
otherwise;
(d) any damage, destruction or loss, whether or not covered by
insurance, has had, or could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect;
(e) any waiver by the Company or any of its Subsidiaries of a
valuable right or of a material debt owed to it;
(f) any direct or indirect loans made by the Company or any of its
Subsidiaries to any stockholder, employee, officer or director of the Company
or any of its Subsidiaries, other than advances made in the ordinary course of
business;
(g) any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder of the Company
or any of its Subsidiaries;
(h) any declaration or payment of any dividend or other
distribution of the assets of the Company or any of its Subsidiaries;
(i) any labor organization activity related to the Company or any
of its Subsidiaries;
(j) any debt, obligation or liability incurred, assumed or
guaranteed by the Company or any of its Subsidiaries, except those for
immaterial amounts and for current liabilities incurred in the ordinary course
of business;
(k) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets owned by the Company or
any of its Subsidiaries;
(l) any change in any material agreement to which the Company or
any of its Subsidiaries is a party or by which either the Company or any of
its Subsidiaries is bound which either individually or in the aggregate has
had, or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;
(m) any other event or condition of any character that, either
individually or in the aggregate, has had, or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect; or
(n) any arrangement or commitment by the Company or any of its
Subsidiaries to do any of the acts described in subsection (a) through (m)
above.
4.9 Title to Properties and Assets; Liens, Etc. Except as set
forth on Schedule 4.9, each of the Company and each of its Subsidiaries has
good and marketable title to its properties and assets, and good title to its
leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than:
(a) those resulting from taxes which have not yet become
delinquent;
(b) minor liens and encumbrances which do not materially detract
from the value of the property subject thereto or materially impair the
operations of the Company or any of its Subsidiaries; and
(c) those that have otherwise arisen in the ordinary course of
business.
All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company and its Subsidiaries are in good
operating condition and repair and are reasonably fit and usable for the
purposes for which they are being used. Except as set forth on Schedule 4.9,
the Company and its Subsidiaries are in compliance with all material terms of
each lease to which it is a party or is otherwise bound.
4.10 Intellectual Property.
(a) Each of the Company and each of its Subsidiaries owns or
possesses sufficient legal rights to all patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes necessary for its business as now conducted
and to the Company's knowledge, as presently proposed to be conducted (the
"Intellectual Property"), without any known infringement of the rights of
others. There are no outstanding options, licenses or agreements of any kind
relating to the foregoing proprietary rights, nor is the Company or any of its
Subsidiaries bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information and other proprietary rights
and processes of any other person or entity other than such licenses or
agreements arising from the purchase of "off the shelf" or standard products.
(b) Neither the Company nor any of its Subsidiaries has received
any communications alleging that the Company or any of its Subsidiaries has
violated any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any other person or
entity, nor is the Company or any of its Subsidiaries aware of any basis
therefor.
(c) The Company does not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by the Company or any of its
Subsidiaries, except for inventions, trade secrets or proprietary information
that have been rightfully assigned to the Company or any of its Subsidiaries.
4.11 Compliance with Other Instruments. Neither the Company nor
any of its Subsidiaries is in violation or default of (x) any term of its
Charter or Bylaws, or (y) of any provision of any indebtedness, mortgage,
indenture, contract, agreement or instrument to which it is party or by which
it is bound or of any judgment, decree, order or writ, which violation or
default, in the case of this clause (y), has had, or could reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect. The execution, delivery and performance of and compliance with this
Agreement and the Related Agreements to which it is a party, and the issuance
and sale of the Note by the Company and the other Securities by the Company
each pursuant hereto and thereto, will not, with or without the passage of
time or giving of notice, result in any such material violation, or be in
conflict with or constitute a default under any such term or provision, or
result in the creation of any mortgage, pledge, lien, encumbrance or charge
upon any of the properties or assets of the Company or any of its Subsidiaries
or the suspension, revocation, impairment, forfeiture or nonrenewal of any
permit, license, authorization or approval applicable to the Company, its
business or operations or any of its assets or properties.
4.12 Litigation. Except as set forth on Schedule 4.12 hereto,
there is no action, suit, proceeding or investigation pending or, to the
Company's knowledge, currently threatened against the Company or any of its
Subsidiaries that prevents the Company or any of its Subsidiaries from
entering into this Agreement or the other Related Agreements, or from
consummating the transactions contemplated hereby or thereby, or which has
had, or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect or any change in the current equity
ownership of the Company or any of its Subsidiaries, nor is the Company aware
that there is any basis to assert any of the foregoing. Neither the Company
nor any of its Subsidiaries is a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency
or instrumentality. There is no action, suit, proceeding or investigation by
the Company or any of its Subsidiaries currently pending or which the Company
or any of its Subsidiaries intends to initiate.
4.13 Tax Returns and Payments. Each of the Company and each of
its Subsidiaries has timely filed all tax returns (federal, state and local)
required to be filed by it. All taxes shown to be due and payable on such
returns, any assessments imposed, and all other taxes due and payable by the
Company or any of its Subsidiaries on or before the Closing, have been paid or
will be paid prior to the time they become delinquent. Except as set forth on
Schedule 4.13, neither the Company nor any of its Subsidiaries has been
advised:
(a) that any of its returns, federal, state or other, have been or
are being audited as of the date hereof; or
(b) of any deficiency in assessment or proposed judgment to its
federal, state or other taxes.
The Company has no knowledge of any liability of any tax to be imposed upon
its properties or assets as of the date of this Agreement that is not
adequately provided for.
4.14 Employees. Except as set forth on Schedule 4.14, neither the
Company nor any of its Subsidiaries has any collective bargaining agreements
with any of its employees. There is no labor union organizing activity
pending or, to the Company's knowledge, threatened with respect to the Company
or any of its Subsidiaries. Except as disclosed in the Exchange Act Filings
or on Schedule 4.14, neither the Company nor any of its Subsidiaries is a
party to or bound by any currently effective employment contract, deferred
compensation arrangement, bonus plan, incentive plan, profit sharing plan,
retirement agreement or other employee compensation plan or agreement. To the
Company's knowledge, no employee of the Company or any of its Subsidiaries,
nor any consultant with whom the Company or any of its Subsidiaries has
contracted, is in violation of any term of any employment contract,
proprietary information agreement or any other agreement relating to the right
of any such individual to be employed by, or to contract with, the Company or
any of its Subsidiaries because of the nature of the business to be conducted
by the Company or any of its Subsidiaries; and to the Company's knowledge the
continued employment by the Company or any of its Subsidiaries of its present
employees, and the performance of the Company's and its Subsidiaries'
contracts with its independent contractors, will not result in any such
violation. Neither the Company nor any of its Subsidiaries is aware that any
of its employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with their duties to the Company or any of its Subsidiaries.
Neither the Company nor any of its Subsidiaries has received any notice
alleging that any such violation has occurred. Except for employees who have
a current effective employment agreement with the Company or any of its
Subsidiaries, no employee of the Company or any of its Subsidiaries has been
granted the right to continued employment by the Company or any of its
Subsidiaries or to any material compensation following termination of
employment with the Company or any of its Subsidiaries. Except as set forth
on Schedule 4.14, the Company is not aware that any officer, key employee or
group of employees intends to terminate his, her or their employment with the
Company or any of its Subsidiaries, nor does the Company or any of its
Subsidiaries have a present intention to terminate the employment of any
officer, key employee or group of employees.
4.15 Registration Rights and Voting Rights. Except as set forth
on Schedule 4.15 and except as disclosed in Exchange Act Filings, neither the
Company nor any of its Subsidiaries is presently under any obligation, and
neither the Company nor any of its Subsidiaries has granted any rights, to
register any of the Company's or its Subsidiaries' presently outstanding
securities or any of its securities that may hereafter be issued. Except as
set forth on Schedule 4.15 and except as disclosed in Exchange Act Filings, to
the Company's knowledge, no stockholder of the Company or any of its
Subsidiaries has entered into any agreement with respect to the voting of
equity securities of the Company or any of its Subsidiaries.
4.16 Compliance with Laws; Permits. Neither the Company nor any
of its Subsidiaries is in violation of any applicable statute, rule,
regulation, order or restriction of any domestic or foreign government or any
instrumentality or agency thereof in respect of the conduct of its business or
the ownership of its properties which has had, or could reasonably be expected
to have, either individually or in the aggregate, a Material Adverse Effect.
No governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to
be filed in connection with the execution and delivery of this Agreement or
any other Related Agreement and the issuance of any of the Securities, except
such as has been duly and validly obtained or filed, or with respect to any
filings that must be made after the Closing, as will be filed in a timely
manner. Each of the Company and its Subsidiaries has all material franchises,
permits, licenses and any similar authority necessary for the conduct of its
business as now being conducted by it, the lack of which could, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
4.17 Environmental and Safety Laws. Neither the Company nor any
of its Subsidiaries is in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety, and
to its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation. Except as set forth
on Schedule 4.17, no Hazardous Materials (as defined below) are used or have
been used, stored, or disposed of by the Company or any of its Subsidiaries
or, to the Company's knowledge, by any other person or entity on any property
owned, leased or used by the Company or any of its Subsidiaries. For the
purposes of the preceding sentence, "Hazardous Materials" shall mean:
(a) materials which are listed or otherwise defined as "hazardous"
or "toxic" under any applicable local, state, federal and/or foreign laws and
regulations that govern the existence and/or remedy of contamination on
property, the protection of the environment from contamination, the control of
hazardous wastes, or other activities involving hazardous substances,
including building materials; or
(b) any petroleum products or nuclear materials.
4.18 Valid Offering. Assuming the accuracy of the representations
and warranties of the Purchaser contained in this Agreement, the offer, sale
and issuance of the Securities will be exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and will have been registered or qualified (or are exempt from registration
and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws.
4.19 Full Disclosure. Each of the Company and each of its
Subsidiaries has provided the Purchaser with all information requested by the
Purchaser in connection with its decision to purchase the Note and Warrant,
including all information the Company and its Subsidiaries believe is
reasonably necessary to make such investment decision. Neither this
Agreement, the Related Agreements, the exhibits and schedules hereto and
thereto nor any other document delivered by the Company or any of its
Subsidiaries to Purchaser or its attorneys or agents in connection herewith or
therewith or with the transactions contemplated hereby or thereby, contain any
untrue statement of a material fact nor omit to state a material fact
necessary in order to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading. Any
financial projections and other estimates provided to the Purchaser by the
Company or any of its Subsidiaries were based on the Company's and its
Subsidiaries' experience in the industry and on assumptions of fact and
opinion as to future events which the Company or any of its Subsidiaries, at
the date of the issuance of such projections or estimates, believed to be
reasonable.
4.20 Insurance. Each of the Company and each of its Subsidiaries
has general commercial, product liability, fire and casualty insurance
policies with coverages which the Company believes are customary for companies
similarly situated to the Company and its Subsidiaries in the same or similar
business.
4.21 SEC Reports. Except as set forth on Schedule 4.21, the
Company has filed all proxy statements, reports and other documents required
to be filed by it under the Securities Xxxxxxxx Xxx 0000, as amended (the
"Exchange Act"). The Company has furnished the Purchaser with copies of: (i)
its Annual Report on Form 10-KSB for its fiscal year ended December 31, 2003;
and (ii) its Quarterly Report on Form 10-QSB for its fiscal quarter ended
March 31, 2004; and (iii) the Form 8-K filings which it has made during the
fiscal year 2004 to date (collectively, the "SEC Reports"). Except as set
forth on Schedule 4.21, each SEC Report was, at the time of its filing, in
substantial compliance with the requirements of its respective form and none
of the SEC Reports, nor the financial statements (and the notes thereto)
included in the SEC Reports, as of their respective filing dates, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
4.22 Listing. On the date hereof, the Company's Common Stock is
listed for trading on the National Association of Securities Dealers Over the
Counter Bulletin Board ("NASD OTCBB") and satisfies all requirements for the
continuation of such trading. The Company has not received any notice that
its Common Stock will not be eligible to be traded on the NASD OTCBB or that
its Common Stock does not meet all requirements for such trading.
4.23 No Integrated Offering. Neither the Company, nor any of its
Subsidiaries or affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or solicited
any offers to buy any security under circumstances that would cause the
offering of the Securities pursuant to this Agreement or any of the Related
Agreements to be integrated with prior offerings by the Company for purposes
of the Securities Act which would prevent the Company from selling the
Securities pursuant to Rule 506 under the Securities Act, or any applicable
exchange-related stockholder approval provisions, nor will the Company or any
of its affiliates or Subsidiaries take any action or steps that would cause
the offering of the Securities to be integrated with other offerings.
4.24 Stop Transfer. The Securities are restricted securities as
of the date of this Agreement. Neither the Company nor any of its
Subsidiaries will issue any stop transfer order or other order impeding the
sale and delivery of any of the Securities at such time as the Securities are
registered for public sale or an exemption from registration is available,
except as required by state and federal securities laws.
4.25 Dilution. The Company specifically acknowledges that its
obligation to issue the shares of Common Stock upon conversion of the Note and
exercise of the Warrant is binding upon the Company and enforceable regardless
of the dilution such issuance may have on the ownership interests of other
shareholders of the Company.
4.26 Patriot Act. The Company certifies that, to the best of
Company's knowledge, neither the Company nor any of its Subsidiaries has been
designated, and is not owned or controlled, by a "suspected terrorist" as
defined in Executive Order 13224. The Company hereby acknowledges that the
Purchaser seeks to comply with all applicable laws concerning money laundering
and related activities. In furtherance of those efforts, the Company hereby
represents, warrants and agrees that: (i) none of the cash or property that
the Company or any of its Subsidiaries will pay or will contribute to the
Purchaser has been or shall be derived from, or related to, any activity that
is deemed criminal under United States law; and (ii) no contribution or
payment by the Company or any of its Subsidiaries to the Purchaser, to the
extent that they are within the Company's and/or its Subsidiaries' control
shall cause the Purchaser to be in violation of the United States Bank Secrecy
Act, the United States International Money Laundering Control Act of 1986 or
the United States International Money Laundering Abatement and Anti-Terrorist
Financing Act of 2001. The Company shall promptly notify the Purchaser if any
of these representations ceases to be true and accurate regarding the Company
or any of its Subsidiaries. The Company agrees to provide the Purchaser any
additional information regarding the Company or any of its Subsidiaries that
the Purchaser deems necessary or convenient to ensure compliance with all
applicable laws concerning money laundering and similar activities. The
Company understands and agrees that if at any time it is discovered that any
of the foregoing representations are incorrect, or if otherwise required by
applicable law or regulation related to money laundering similar activities,
the Purchaser may undertake appropriate actions to ensure compliance with
applicable law or regulation, including but not limited to segregation and/or
redemption of the Purchaser's investment in the Company. The Company further
understands that the Purchaser may release confidential information about the
Company and its Subsidiaries and, if applicable, any underlying beneficial
owners, to proper authorities if the Purchaser, in its sole discretion,
determines that it is in the best interests of the Purchaser in light of
relevant rules and regulations under the laws set forth in subsection (ii)
above.
5. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company as follows (such representations
and warranties do not lessen or obviate the representations and warranties of
the Company set forth in this Agreement):
5.1 No Shorting. The Purchaser or any of its affiliates and
investment partners has not, will not and will not cause any person or entity,
directly or indirectly, to engage in "short sales" of the Company's Common
Stock as long as the Note shall be outstanding.
5.2 Requisite Power and Authority. The Purchaser has all
necessary power and authority under all applicable provisions of law to
execute and deliver this Agreement and the Related Agreements and to carry out
their provisions. All corporate action on Purchaser's part required for the
lawful execution and delivery of this Agreement and the Related Agreements
have been or will be effectively taken prior to the Closing. Upon their
execution and delivery, this Agreement and the Related Agreements will be
valid and binding obligations of Purchaser, enforceable in accordance with
their terms, except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; and
(b) as limited by general principles of equity that restrict the
availability of equitable and legal remedies.
5.3 Investment Representations. Purchaser understands that the
Securities are being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon Purchaser's
representations contained in the Agreement, including, without limitation,
that the Purchaser is an "accredited investor" within the meaning of
Regulation D under the Securities Act of 1933, as amended (the "Securities
Act"). The Purchaser confirms that it has received or has had full access to
all the information it considers necessary or appropriate to make an informed
investment decision with respect to the Note and the Warrant to be purchased
by it under this Agreement and the Note Shares and the Warrant Shares acquired
by it upon the conversion of the Note and the exercise of the Warrant,
respectively. The Purchaser further confirms that it has had an opportunity to
ask questions and receive answers from the Company regarding the Company's and
its Subsidiaries' business, management and financial affairs and the terms and
conditions of the Offering, the Note, the Warrant and the Securities and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to the Purchaser or to which the
Purchaser had access.
5.4 Purchaser Bears Economic Risk. The Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. The Purchaser must bear the economic
risk of this investment until the Securities are sold pursuant to: (i) an
effective registration statement under the Securities Act; or (ii) an
exemption from registration is available with respect to such sale.
5.5 Acquisition for Own Account. The Purchaser is acquiring the
Note and Warrant and the Note Shares and the Warrant Shares for the
Purchaser's own account for investment only, and not as a nominee or agent and
not with a view towards or for resale in connection with their distribution.
5.6 Purchaser Can Protect Its Interest. The Purchaser represents
that by reason of its, or of its management's, business and financial
experience, the Purchaser has the capacity to evaluate the merits and risks of
its investment in the Note, the Warrant and the Securities and to protect its
own interests in connection with the transactions contemplated in this
Agreement and the Related Agreements. Further, Purchaser is aware of no
publication of any advertisement in connection with the transactions
contemplated in the Agreement or the Related Agreements.
5.7 Accredited Investor. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities
Act.
5.8 Legends.
(a) The Note shall bear substantially the following legend:
"THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS
NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS. THIS NOTE AND THE
COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES
UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO DATALOGIC INTERNATIONAL, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED."
(b) The Note Shares and the Warrant Shares, if not issued by DWAC
system (as hereinafter defined), shall bear a legend which shall be in
substantially the following form until such shares are covered by an effective
registration statement filed with the SEC:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND APPLICABLE
STATE LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
DATALOGIC INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
(c) The Warrant shall bear substantially the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR THE
UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO DATALOGIC INTERNATIONAL, INC. THAT SUCH REGISTRATION
IS NOT REQUIRED."
6. Covenants of the Company. The Company covenants and agrees with the
Purchaser as follows:
6.1 Stop-Orders. The Company will advise the Purchaser, promptly
after it receives notice of issuance by the Securities and Exchange Commission
(the "SEC"), any state securities commission or any other regulatory authority
of any stop order or of any order preventing or suspending any offering of any
securities of the Company, or of the suspension of the qualification of the
Common Stock of the Company for offering or sale in any jurisdiction, or the
initiation of any proceeding for any such purpose.
6.2 Listing. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon conversion of the Note and upon the
exercise of the Warrant on the NASD OTCBB (the "Principal Market") upon which
shares of Common Stock are listed (subject to official notice of issuance) and
shall maintain such listing so long as any other shares of Common Stock shall
be so listed. The Company will maintain the listing of its Common Stock on the
Principal Market, and will comply in all material respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
National Association of Securities Dealers ("NASD") and such exchanges, as
applicable.
6.3 Market Regulations. The Company shall notify the SEC, NASD
and applicable state authorities, in accordance with their requirements, of
the transactions contemplated by this Agreement, and shall take all other
necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Securities to the Purchaser and promptly provide copies thereof to the
Purchaser.
6.4 Reporting Requirements. The Company will timely file with the
SEC all reports required to be filed pursuant to the Exchange Act and refrain
from terminating its status as an issuer required by the Exchange Act to file
reports thereunder even if the Exchange Act or the rules or regulations
thereunder would permit such termination.
6.5 Use of Funds. The Company agrees that it will use the
proceeds of the sale of the Note and the Warrant (i) to refinance existing
indebtedness of the Company and its Subsidiaries in an aggregate principal
amount of up to $________ and (ii) for general working capital purposes (it
being understood that $1,250,000 of the proceeds of the Note will be deposited
in the Restricted Account on the Closing Date and shall be subject to the
terms and conditions of the Restricted Account Agreement and the Restricted
Account Side Letter).
6.6 Access to Facilities. Each of the Company and each of its
Subsidiaries will permit any representatives designated by the Purchaser (or
any successor of the Purchaser), upon reasonable notice and during normal
business hours, at such person's expense and accompanied by a representative
of the Company, to:
(a) visit and inspect any of the properties of the Company or any
of its Subsidiaries;
(b) examine the corporate and financial records of the Company or
any of its Subsidiaries (unless such examination is not permitted by federal,
state or local law or by contract) and make copies thereof or extracts
therefrom; and
(c) discuss the affairs, finances and accounts of the Company or
any of its Subsidiaries with the directors, officers and independent
accountants of the Company or any of its Subsidiaries.
Notwithstanding the foregoing, neither the Company nor any of its Subsidiaries
will provide any material, non-public information to the Purchaser unless the
Purchaser signs a confidentiality agreement and otherwise complies with
Regulation FD, under the federal securities laws.
6.7 Taxes. Each of the Company and each of its Subsidiaries will
promptly pay and discharge, or cause to be paid and discharged, when due and
payable, all lawful taxes, assessments and governmental charges or levies
imposed upon the income, profits, property or business of the Company and its
Subsidiaries; provided, however, that any such tax, assessment, charge or levy
need not be paid if the validity thereof shall currently be contested in good
faith by appropriate proceedings and if the Company and/or such Subsidiary
shall have set aside on its books adequate reserves with respect thereto, and
provided, further, that the Company and its Subsidiaries will pay all such
taxes, assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security
therefor.
6.8 Insurance. Each of the Company and its Subsidiaries will keep
its assets which are of an insurable character insured by financially sound
and reputable insurers against loss or damage by fire, explosion and other
risks customarily insured against by companies in similar business similarly
situated as the Company and its Subsidiaries; and the Company and its
Subsidiaries will maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and
property to the extent and in the manner which the Company reasonably believes
is customary for companies in similar business similarly situated as the
Company and its Subsidiaries and to the extent available on commercially
reasonable terms. The Company, and each of its Subsidiaries will jointly and
severally bear the full risk of loss from any loss of any nature whatsoever
with respect to the assets pledged to the Purchaser as security for its
obligations hereunder and under the Related Agreements. At the Company's and
each of its Subsidiaries' joint and several cost and expense in amounts and
with carriers reasonably acceptable to Purchaser, the Company and each of its
Subsidiaries shall (i) keep all its insurable properties and properties in
which it has an interest insured against the hazards of fire, flood, sprinkler
leakage, those hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of companies
engaged in businesses similar to the Company's or the respective Subsidiary's
including business interruption insurance; (ii) maintain a bond in such
amounts as is customary in the case of companies engaged in businesses similar
to the Company's or the respective Subsidiary's insuring against larceny,
embezzlement or other criminal misappropriation of insured's officers and
employees who may either singly or jointly with others at any time have access
to the assets or funds of the Company or any of its Subsidiaries either
directly or through governmental authority to draw upon such funds or to
direct generally the disposition of such assets; (iii) maintain public and
product liability insurance against claims for personal injury, death or
property damage suffered by others; (iv) maintain all such worker's
compensation or similar insurance as may be required under the laws of any
state or jurisdiction in which the Company or the respective Subsidiary is
engaged in business; and (v) furnish Purchaser with (x) copies of all policies
and evidence of the maintenance of such policies at least thirty (30) days
before any expiration date, (y) excepting the Company's workers' compensation
policy, endorsements to such policies naming Purchaser as "co-insured" or
"additional insured" and appropriate loss payable endorsements in form and
substance satisfactory to Purchaser, naming Purchaser as loss payee, and (z)
evidence that as to Purchaser the insurance coverage shall not be impaired or
invalidated by any act or neglect of the Company or any Subsidiary and the
insurer will provide Purchaser with at least thirty (30) days notice prior to
cancellation. The Company and each Subsidiary shall instruct the insurance
carriers that in the event of any loss thereunder, the carriers shall make
payment for such loss to the Company and/or the Subsidiary and Purchaser
jointly. In the event that as of the date of receipt of each loss recovery
upon any such insurance, the Purchaser has not declared an event of default
with respect to this Agreement or any of the Related Agreements, then the
Company and/or such Subsidiary shall be permitted to direct the application of
such loss recovery proceeds toward investment in property, plant and equipment
that would comprise "Collateral" secured by Purchaser's security interest
pursuant to its security agreement, with any surplus funds to be applied
toward payment of the obligations of the Company to Purchaser. In the event
that Purchaser has properly declared an event of default with respect to this
Agreement or any of the Related Agreements, then all loss recoveries received
by Purchaser upon any such insurance thereafter may be applied to the
obligations of the Company hereunder and under the Related Agreements, in such
order as the Purchaser may determine. Any surplus (following satisfaction of
all Company obligations to Purchaser) shall be paid by Purchaser to the
Company or applied as may be otherwise required by law. Any deficiency
thereon shall be paid by the Company or the Subsidiary, as applicable, to
Purchaser, on demand.
6.9 Intellectual Property. Each of the Company and each of its
Subsidiaries shall maintain in full force and effect its existence, rights and
franchises and all licenses and other rights to use Intellectual Property
owned or possessed by it and reasonably deemed to be necessary to the conduct
of its business.
6.10 Properties. Each of the Company and each of its Subsidiaries
will keep its properties in good repair, working order and condition,
reasonable wear and tear excepted, and from time to time make all needful and
proper repairs, renewals, replacements, additions and improvements thereto;
and each of the Company and each of its Subsidiaries will at all times comply
with each provision of all leases to which it is a party or under which it
occupies property if the breach of such provision could, either individually
or in the aggregate, reasonably be expected tohave a Material Adverse Effect.
6.11 Confidentiality. The Company agrees that it will not
disclose, and will not include in any public announcement, the name of the
Purchaser, unless expressly agreed to by the Purchaser or unless and until
such disclosure is required by law or applicable regulation, and then only to
the extent of such requirement. Notwithstanding the foregoing, the Company
may disclose Purchaser's identity and the terms of this Agreement to its
current and prospective debt and equity financing sources.
6.12 Required Approvals. For so long as twenty-five percent (25%)
of the principal amount of the Note is outstanding, the Company, without the
prior written consent of the Purchaser, shall not, and shall not permit any of
its Subsidiaries to:
(a) directly or indirectly declare or pay any dividends, other
than dividends paid to the Company or any of its wholly-owned Subsidiaries,
(ii) issue any preferred stock that is manditorily redeemable by the holder
thereof prior to the one year anniversary of the Maturity Date or (iii) redeem
any of its preferred stock or other equity interests;
(b) liquidate, dissolve or effect a material reorganization (it
being understood that in no event shall the Company dissolve, liquidate or
merge with any other person or entity (unless the Company is the surviving
entity);
(c) become subject to (including, without limitation, by way of
amendment to or modification of) any agreement or instrument which by its
terms would (under any circumstances) restrict the Company's or any of its
Subsidiaries right to perform the provisions of this Agreement, any Related
Agreement or any of the agreements contemplated hereby or thereby;
(d) materially alter or change the scope of the business of the
Company and its Subsidiaries taken as a whole;
(e) (i) create, incur, assume or suffer to exist any indebtedness
(exclusive of trade debt and debt incurred to finance the purchase of
equipment (not in excess of five percent (5%) per annum of the fair market
value of the Company's assets) whether secured or unsecured other than (x) the
Company's indebtedness to Laurus, (y) indebtedness set forth on Schedule
6.12(e) attached hereto and made a part hereof and any refinancings or
replacements thereof on terms no less favorable to the Purchaser than the
indebtedness being refinanced or replaced, and (z) any debt incurred in
connection with the purchase of assets in the ordinary course of business, or
any refinancings or replacements thereof on terms no less favorable to the
Purchaser than the indebtedness being refinanced or replaced; (ii) cancel any
debt owing to it in excess of $50,000 in the aggregate during any 12 month
period; (iii) assume, guarantee, endorse or otherwise become directly or
contingently liable in connection with any obligations of any other Person,
except the endorsement of negotiable instruments by the Company for deposit or
collection or similar transactions in the ordinary course of business or
guarantees of indebtedness otherwise permitted to be outstanding pursuant to
this clause (e); and
(f) create or acquire any Subsidiary after the date hereof unless
(i) such Subsidiary is a wholly-owned Subsidiary of the Company and (ii) such
Subsidiary becomes party to the Master Security Agreement, the Stock Pledge
Agreement and the Subsidiary Guaranty (either by executing a counterpart
thereof or an assumption or joinder agreement in respect thereof) and, to the
extent required by the Purchaser, satisfies each condition of this Agreement
and the Related Agreements as if such Subsidiary were a Subsidiary on the
Closing Date.
6.13 Reissuance of Securities. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Section 5.8 above at such time as:
(a) the holder thereof is permitted to dispose of such Securities
pursuant to Rule 144(k) under the Securities Act; or
(b) upon resale subject to an effective registration statement
after such Securities are registered under the Securities Act.
The Company agrees to cooperate with the Purchaser in connection with all
resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions
necessary to allow such resales provided the Company and its counsel receive
reasonably requested representations from the selling Purchaser and broker, if
any.
6.14 Opinion. On the Closing Date, the Company will deliver to
the Purchaser an opinion acceptable to the Purchaser from the Company's
external legal counsel. The Company will provide, at the Company's expense,
such other legal opinions in the future as are deemed reasonably necessary by
the Purchaser (and acceptable to the Purchaser) in connection with the
conversion of the Note and exercise of the Warrant.
6.15 Margin Stock. The Company will not permit any of the
proceeds of the Note or the Warrant to be used directly or indirectly to
"purchase" or "carry" "margin stock" or to repay indebtedness incurred to
"purchase" or "carry" "margin stock" within the respective meanings of each of
the quoted terms under Regulation U of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect.
6.16 Restricted Cash Disclosure. The Company agrees that, in
connection with its filing of its 8-K Report with the SEC concerning the
transactions contemplated by this Agreement and the Related Agreements (such
report, the "Laurus Transaction 8-K") in a timely manner after the date
hereof, it will disclose in such Laurus Transaction 8-K the amount of the
proceeds of the Note issued to the Purchaser that has been placed in a
restricted cash account and is subject to the terms and conditions of this
Agreement and the Related Agreements. Furthermore, the Company agrees to
disclose in all public filings required by the Commission (where appropriate)
following the filing of the Laurus Transaction 8-K, the existence of the
restricted cash referred to in the immediately preceding sentence, together
with the amount thereof.
6.17 Financing Right of First Refusal. During the term of this
Agreement:
(a) The Company hereby grants to the Purchaser a right of first
refusal to provide any Additional Financing (as defined below) to be issued by
the Company and/or any of its Subsidiaries, subject to the following terms and
conditions. Prior to the incurrence of additional indebtedness or the issuance
of any additional equity interests (an "Additional Financing"), in each case,
after the date hereof, the Company and/or any Subsidiary of the Company, as
the case may be, shall notify the Purchaser of its intention to enter into
such Additional Financing, together with the terms that such proposed
Additional Financing will be subject to. In connection therewith, the
Company and/or the applicable Subsidiary thereof shall submit a fully executed
term sheet (a "Proposed Term Sheet") to the Purchaser setting forth the terms,
conditions and pricing of any such Additional Financing (such financing to be
negotiated on "arm's length" terms and the terms thereof to be negotiated in
good faith) proposed to be entered into by the Company and/or such Subsidiary.
The Purchaser shall have the right, but not the obligation, to agree to
provide such Additional Financing to the Company and/or such Subsidiary on
terms no less favorable than those outlined in Proposed Term Sheet within ten
business days of receipt of any such Proposed Term Sheet. If the provisions of
the Purchaser's term sheet are at least as favorable to the Company or such
Subsidiary, as the case may be, as the provisions of the Proposed Term Sheet,
the Company and/or such Subsidiary shall enter into the Additional Financing
outlined in the Purchaser's term sheet.
(b) The Company will not, and will not permit its Subsidiaries to,
agree, directly or indirectly, to any restriction with any person or entity
which limits the ability of the Purchaser to consummate an Additional
Financing with the Company or any of its Subsidiaries.
7. Covenants of the Purchaser. The Purchaser covenants and agrees with
the Company as follows:
7.1 Confidentiality. The Purchaser agrees that it will not
disclose, and will not include in any public announcement, the name of the
Company, unless expressly agreed to by the Company or unless and until such
disclosure is required by law or applicable regulation, and then only to the
extent of such requirement.
7.2 Non-Public Information. The Purchaser agrees not to effect
any sales in the shares of the Company's Common Stock while in possession of
material, non-public information regarding the Company if such sales would
violate applicable securities law.
8. Covenants of the Company and Purchaser Regarding Indemnification.
8.1 Company Indemnification. The Company agrees to indemnify,
hold harmless, reimburse and defend the Purchaser, each of the Purchaser's
officers, directors, agents, affiliates, control persons, and principal
shareholders, against any claim, cost, expense, liability, obligation, loss or
damage (including reasonable legal fees) of any nature, incurred by or imposed
upon the Purchaser which results, arises out of or is based upon: (i) any
misrepresentation by the Company or any of its Subsidiaries or breach of any
warranty by the Company or any of its Subsidiaries in this Agreement, any
other Related Agreement or in any exhibits or schedules attached hereto or
thereto; or (ii) any breach or default in performance by Company or any of its
Subsidiaries of any covenant or undertaking to be performed by Company or any
of its Subsidiaries hereunder, under any other Related Agreement or any other
agreement entered into by the Company and/or any of its Subsidiaries and
Purchaser relating hereto or thereto.
8.2 Purchaser's Indemnification. Purchaser agrees to indemnify,
hold harmless, reimburse and defend the Company and each of the Company's
officers, directors, agents, affiliates, control persons and principal
shareholders, at all times against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company which results, arises out of or is
based upon: (i) any misrepresentation by Purchaser or breach of any warranty
by Purchaser in this Agreement or in any exhibits or schedules attached hereto
or any Related Agreement; or (ii) any breach or default in performance by
Purchaser of any covenant or undertaking to be performed by Purchaser
hereunder, or any other agreement entered into by the Company and Purchaser
relating hereto.
9. Conversion of Convertible Note.
9.1 Mechanics of Conversion.
(a) Provided the Purchaser has notified the Company of the
Purchaser's intention to sell the Note Shares and the Note Shares are included
in an effective registration statement or are otherwise exempt from
registration when sold: (i) upon the conversion of the Note or part thereof,
the Company shall, at its own cost and expense, take all necessary action
(including the issuance of an opinion of counsel reasonably acceptable to the
Purchaser following a request by the Purchaser) to assure that the Company's
transfer agent shall issue shares of the Company's Common Stock in the name of
the Purchaser (or its nominee) or such other persons as designated by the
Purchaser in accordance with Section 9.1(b) hereof and in such denominations
to be specified representing the number of Note Shares issuable upon such
conversion; and (ii) the Company warrants that no instructions other than
these instructions have been or will be given to the transfer agent of the
Company's Common Stock and that after the Effectiveness Date (as defined in
the Registration Rights Agreement) the Note Shares issued will be freely
transferable subject to the prospectus delivery requirements of the Securities
Act and the provisions of this Agreement, and will not contain a legend
restricting the resale or transferability of the Note Shares.
(b) Purchaser will give notice of its decision to exercise its
right to convert the Note or part thereof by telecopying or otherwise
delivering an executed and completed notice of the number of shares to be
converted to the Company (the "Notice of Conversion"). The Purchaser will not
be required to surrender the Note until the Purchaser receives a credit to the
account of the Purchaser's prime broker through the DWAC system (as defined
below), representing the Note Shares or until the Note has been fully
satisfied. Each date on which a Notice of Conversion is telecopied or
delivered to the Company in accordance with the provisions hereof shall be
deemed a "Conversion Date." Pursuant to the terms of the Notice of
Conversion, the Company will issue instructions to the transfer agent
accompanied by an opinion of counsel within one (1) business day of the date
of the delivery to the Company of the Notice of Conversion and shall cause
the transfer agent to transmit the certificates representing the Conversion
Shares to the Holder by crediting the account of the Purchaser's prime broker
with the Depository Trust Company ("DTC") through its Deposit Withdrawal Agent
Commission ("DWAC") system within three (3) business days after receipt by the
Company of the Notice of Conversion (the "Delivery Date").
(c) The Company understands that a delay in the delivery of the
Note Shares in the form required pursuant to Section 9 hereof beyond the
Delivery Date could result in economic loss to the Purchaser. In the event
that the Company fails to direct its transfer agent to deliver the Note Shares
to the Purchaser via the DWAC system within the time frame set forth in
Section 9.1(b) above and the Note Shares are not delivered to the Purchaser by
the Delivery Date, as compensation to the Purchaser for such loss, the Company
agrees to pay late payments to the Purchaser for late issuance of the Note
Shares in the form required pursuant to Section 9 hereof upon conversion of
the Note in the amount equal to the greater of: (i) $500 per business day
after the Delivery Date; or (ii) the Purchaser's actual damages from such
delayed delivery. Notwithstanding the foregoing, the Company will not owe the
Purchaser any late payments if the delay in the delivery of the Note Shares
beyond the Delivery Date is solely out of the control of the Company and the
Company is actively trying to cure the cause of the delay. The Company shall
pay any payments incurred under this Section in immediately available funds
upon demand and, in the case of actual damages, accompanied by reasonable
documentation of the amount of such damages. Such documentation shall show
the number of shares of Common Stock the Purchaser is forced to purchase (in
an open market transaction) which the Purchaser anticipated receiving upon
such conversion, and shall be calculated as the amount by which (A) the
Purchaser's total purchase price (including customary brokerage commissions,
if any) for the shares of Common Stock so purchased exceeds (B) the aggregate
principal and/or interest amount of the Note, for which such Conversion Notice
was not timely honored.
Nothing contained herein or in any document referred to herein or delivered in
connection herewith shall be deemed to establish or require the payment of a
rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest or dividends required
to be paid or other charges hereunder exceed the maximum amount permitted by
such law, any payments in excess of such maximum shall be credited against
amounts owed by the Company to a Purchaser and thus refunded to the Company.
10. Registration Rights.
10.1 Registration Rights Granted. The Company hereby grants
registration rights to the Purchaser pursuant to a Registration Rights
Agreement dated as of even date herewith between the Company and the
Purchaser.
10.2 Offering Restrictions. Except as previously disclosed in the
SEC Reports or in the Exchange Act Filings, or stock or stock options granted
to employees, directors and consultants of the Company (these exceptions
hereinafter referred to as the "Excepted Issuances"), neither the Company nor
any of its Subsidiaries will issue any securities with a continuously
variable/floating conversion feature which are or could be (by conversion or
registration) free-trading securities (i.e. common stock subject to a
registration statement) prior to the full repayment or conversion of the Note
(together with all accrued and unpaid interest and fees related thereto) (the
"Exclusion Period").
11. Miscellaneous.
11.1 Governing Law. THIS AGREEMENT AND EACH RELATED AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION
BROUGHT BY EITHER PARTY AGAINST THE OTHER CONCERNING THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT AND EACH RELATED AGREEMENT SHALL BE BROUGHT
ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE
STATE OF NEW YORK. BOTH PARTIES AND THE INDIVIDUALS EXECUTING THIS AGREEMENT
AND THE RELATED AGREEMENTS ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE
JURISDICTION OF SUCH COURTS AND WAIVE TRIAL BY JURY. IN THE EVENT THAT ANY
PROVISION OF THIS AGREEMENT OR ANY RELATED AGREEMENT DELIVERED IN CONNECTION
HEREWITH IS INVALID OR UNENFORCEABLE UNDER ANY APPLICABLE STATUTE OR RULE OF
LAW, THEN SUCH PROVISION SHALL BE DEEMED INOPERATIVE TO THE EXTENT THAT IT MAY
CONFLICT THEREWITH AND SHALL BE DEEMED MODIFIED TO CONFORM WITH SUCH STATUTE
OR RULE OF LAW. ANY SUCH PROVISION WHICH MAY PROVE INVALID OR UNENFORCEABLE
UNDER ANY LAW SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER
PROVISION OF THIS AGREEMENT OR ANY RELATED AGREEMENT.
11.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser
and the closing of the transactions contemplated hereby to the extent provided
therein. All statements as to factual matters contained in any certificate or
other instrument delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder solely as of the date
of such certificate or instrument.
11.3 Successors. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, heirs, executors and administrators of the parties hereto and
shall inure to the benefit of and be enforceable by each person who shall be a
holder of the Securities from time to time, other than the holders of Common
Stock which has been sold by the Purchaser pursuant to Rule 144 or an
effective registration statement. Purchaser may not assign its rights
hereunder to a competitor of the Company.
11.4 Entire Agreement. This Agreement, the Related Agreements,
the exhibits and schedules hereto and thereto and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and no party
shall be liable or bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically set forth herein
and therein.
11.5 Severability. In case any provision of the Agreement shall
be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
11.6 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and the Purchaser.
(b) The obligations of the Company and the rights of the Purchaser
under this Agreement may be waived only with the written consent of the
Purchaser.
(c) The obligations of the Purchaser and the rights of the Company
under this Agreement may be waived only with the written consent of the
Company.
11.7 Delays or Omissions. It is agreed that no delay or omission
to exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the Related
Agreements, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring. All remedies, either under this Agreement or the
Related Agreements, by law or otherwise afforded to any party, shall be
cumulative and not alternative.
11.8 Notices. All notices required or permitted hereunder shall
be in writing and shall be deemed effectively given:
(a) upon personal delivery to the party to be notified;
(b) when sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next business day;
(c) three (3) business days after having been sent by registered
or certified mail, return receipt requested, postage prepaid; or
(d) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt.
All communications shall be sent as follows:
If to the Company, to: DataLogic International, Inc.
00000 Xxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx, Chief Financial Officer
Facsimile: 949-260-0130
with a copy to:
Weed & Co. LLP
0000 XxxXxxxxx Xx., Xxxxx 0000,
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Facsimile: 949-475-9086
If to the Purchaser, to: Laurus Master Fund, Ltd.
c/o Ironshore Corporate Services ltd.
X.X. Xxx 0000 G.T.
Queensgate House, South Church Street
Grand Cayman, Cayman Islands
Facsimile: 000-000-0000
with a copy to:
Xxxx X. Xxxxxx, Esq.
000 Xxxxx Xxxxxx 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: 000-000-0000
or at such other address as the Company or the Purchaser may designate by
written notice to the other parties hereto given in accordance herewith.
11.9 Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees,
costs and expenses of enforcing any right of such prevailing party under or
with respect to this Agreement, including, without limitation, such reasonable
fees and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
11.10 Titles and Subtitles. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
11.11 Facsimile Signatures; Counterparts. This Agreement may be
executed by facsimile signatures and in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
11.12 Broker's Fees. Except as set forth on Schedule 11.12
hereof, each party hereto represents and warrants that no agent, broker,
investment banker, person or firm acting on behalf of or under the authority
of such party hereto is or will be entitled to any broker's or finder's fee or
any other commission directly or indirectly in connection with the
transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 11.12 being
untrue.
11.13 Construction. Each party acknowledges that its legal
counsel participated in the preparation of this Agreement and the Related
Agreements and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Agreement to favor any party against the other.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
DATALOGIC INTERNATIONAL, INC. LAURUS MASTER FUND, LTD.
/s/ Xxxxx Xxxxxx /s/ Xxxxx Grin
By:__________________________________ By:__________________________________
Xxxxx Xxxxxx Xxxxx Grin
Name:________________________________ Name:________________________________
CFO
Title:_______________________________ Title:_______________________________
EXHIBIT A
FORM OF CONVERTIBLE NOTE
EXHIBIT B
FORM OF WARRANT
EXHIBIT C
FORM OF OPINION
1. Each of the Company and each of its Subsidiaries is a corporation
duly incorporated, validly existing and in good standing under the laws of
their respective jurisdiction of organization and has all requisite corporate
power and authority to own, operate and lease its properties and to carry on
its business as it is now being conducted.
2. Each of the Company and each of its Subsidiaries has the requisite
corporate power and authority to execute, deliver and perform its obligations
under the Agreement and the Related Agreements. All corporate action on the
part of the Company and each of its Subsidiaries and its officers, directors
and stockholders necessary has been taken for: (i) the authorization of the
Agreement and the Related Agreements and the performance of all obligations of
the Company and each of its Subsidiaries thereunder; and (ii) the
authorization, sale, issuance and delivery of the Securities pursuant to the
Agreement and the Related Agreements. The Note Shares and the Warrant Shares,
when issued pursuant to and in accordance with the terms of the Agreement and
the Related Agreements and upon delivery shall be validly issued and
outstanding, fully paid and non assessable.
3. The execution, delivery and performance by each of the Company and
each of its Subsidiaries of the Agreement and the Related Agreements to which
it is a party and the consummation of the transactions on its part
contemplated by any thereof, will not, with or without the giving of notice or
the passage of time or both:
(a) Violate the provisions of their respective Charter or bylaws;
or
(b) Violate any judgment, decree, order or award of any court
binding upon the Company or any of its Subsidiaries; or
(c) Violate any California, Delaware General Corporation Law,
Article 9 of the Uniform Commercial Code as in effect in the State of Delaware
on the date hereof or federal law
4. The Agreement and the Related Agreements will constitute, valid and
legally binding obligations of each of the Company and each of its
Subsidiaries (to the extent such person is a party thereto), and are
enforceable against each of the Company and each of its Subsidiaries in
accordance with their respective terms, except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; and
(b) general principles of equity that restrict the availability
of equitable or legal remedies.
5. To such counsel's knowledge, the sale of the Note and the
subsequent conversion of the Note into Note Shares are not subject to any
preemptive rights or rights of first refusal that have not been properly
waived or complied with. To such counsel's knowledge, the sale of the Warrant
and the subsequent exercise of the Warrant for Warrant Shares are not subject
to any preemptive rights or, to such counsel's knowledge, rights of first
refusal that have not been properly waived or complied with.
6. Assuming the accuracy of the representations and warranties of the
Purchaser contained in the Agreement, the offer, sale and issuance of the
Securities on the Closing Date will be exempt from the registration
requirements of the Securities Act. To such counsel's knowledge, neither the
Company, nor any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security or
solicited any offers to buy and security under circumstances that would cause
the offering of the Securities pursuant to the Agreement or any Related
Agreement to be integrated with prior offerings by the Company for purposes of
the Securities Act which would prevent the Company from selling the Securities
pursuant to Rule 506 under the Securities Act, or any applicable
exchange-related stockholder approval provisions.
7. There is no action, suit, proceeding or investigation pending or,
to such counsel's knowledge, currently threatened against the Company or any
of its Subsidiaries that prevents the right of the Company or any of its
Subsidiaries to enter into this Agreement or any of the Related Agreements, or
to consummate the transactions contemplated thereby. To such counsel's
knowledge, the Company is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency
or instrumentality; nor is there any action, suit, proceeding or investigation
by the Company currently pending or which the Company intends to initiate.
8. The terms and provisions of the Master Security Agreement and the
Stock Pledge Agreement create a valid security interest in favor of Laurus, in
the respective rights, title and interests of the Company and its Subsidiaries
in and to the Collateral (as defined in each of the Master Security Agreement
and the Stock Pledge Agreement). Each UCC-1 Financing Statement naming the
Company or any Subsidiary thereof as debtor and Laurus as secured party are in
proper form for filing and assuming that such UCC-1 Financing Statements have
been filed with the Secretary of State of Delaware, the security interest
created under the Master Security Agreement will constitute a perfected
security interest under the Uniform Commercial Code in favor of Laurus in
respect of the Collateral that can be perfected by filing a financing
statement. After giving effect to the delivery to Laurus of the stock
certificates representing the ownership interests of each Subsidiary of the
Company (together with effective endorsements) and assuming the continued
possession by Laurus of such stock certificates in the State of New York, the
security interest created in favor of Laurus under the Stock Pledge Agreement
constitutes a valid and enforceable first perfected security interest in such
ownership interests (and the proceeds thereof) in favor of Laurus, subject to
no other security interest. No filings, registrations or recordings are
required in order to perfect (or maintain the perfection or priority of) the
security interest created under the Stock Pledge Agreement in respect of such
ownership interests.
9. Assuming that North Fork Bank is a "bank" (as such term is defined
in Section 9-102(a)(8) of the UCC), and that the Restricted Account (as
defined in the Restricted Account Agreement) constitutes a "deposit account"
(as such term is defined in Section 9-102(a)(29) of the UCC), under the
Uniform Commercial Code, the due execution and delivery of the Restricted
Account Agreement perfects the Purchaser's security interest in the Restricted
Account.
EXHIBIT D
FORM OF ESCROW AGREEMENT
SCHEDULE 4.2
Subsidiaries of the Company
---------------------------
DataLogic Consulting, Inc., a Texas corporation (100% owned by Datalogic
International, Inc.)
IPN Communications, Inc., a California corporation (51% owned by Datalogic
International, Inc.)
SCHEDULE 4.3
Capitalization; Voting Rights
a. Authorized Capital Stock of Each Subsidiary of the Company
DataLogic Consulting, Inc.- 1,000 shares outstanding
IPN Communications, Inc.- 1,000,000 shares outstanding
b. Outstanding Options, Warrants or Rights
None.
SCHEDULE 4.6
NONE.
SCHEDULE 4.7
NONE.
SCHEDULE 4.9
NONE.
SCHEDULE 4.12
NONE.
SCHEDULE 4.14
NONE.
SCHEDULE 4.15
NONE.
SCHEDULE 4.17
NONE.
SCHEDULE 4.21
NONE.
SCHEDULE 6.12(E)
NONE.
SCHEDULE 11.12
Biscayne Capital Markets, Inc. $165,000
