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EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
This Agreement is made as of this 6th day of September, 1996 by and
between LENEL SYSTEMS INTERNATIONAL, INC., a Delaware corporation, with its
principal executive offices located at 000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxxxxx, Xxx
Xxxx 00000 (the "Company") and ULTRAK, INC., a Delaware corporation with its
principal executive offices located at 0000 Xxxxxxxx Xxxxxx, Xxxxx 000,
Xxxxxxxxxx, Xxxxx 00000 ("Ultrak").
Subject to the terms and conditions hereof, the parties agree as
follows:
SECTION 1
SALE OF STOCK
1.1 Sale of Stock. Subject to the terms and conditions hereof, the
Company will issue and sell to Ultrak, and Ultrak will purchase from the
Company, an aggregate of 1,500,000 shares of Common Stock, par value $.10 (the
"Common Stock") of the Company (the "Shares") for a purchase price of One
Dollar and 75/100 ($1.75) per share.
SECTION 2
CLOSING DATES; DELIVERY
2.1 Closing Dates. The closing of the purchase and sale of the
Shares and the other transactions contemplated hereunder shall be held at the
offices of the Company at 8:30 a.m., local time, on September 6, 1996 (the
"Closing") or at such other time and place upon which Ultrak and the Company
shall agree (the date of the Closing is hereinafter referred to as the "Closing
Date").
2.2 Delivery. At the Closing, the Company will deliver to Ultrak a
certificate registered in Ultrak's name representing the number of Shares to be
purchased by Ultrak at the Closing, and Ultrak shall pay the purchase price, in
the amount of $2,625,000, by either (i) delivery of a certified check drawn on
a US bank and made payable to the Company, or (ii) direct wire transfer into
the Company's account.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Ultrak as follows:
3.1 Organization and Standing; Articles and By-Laws. The Company is
a corporation duly organized and existing under, and by virtue of, the laws of
the State of Delaware and is in good standing under such laws. The Company has
requisite corporate power and authority to own and operate its properties and
assets, and to carry on its business as presently conducted and as proposed to
be conducted. The Company is presently qualified to do business as a
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foreign corporation in the State of New York and in all other jurisdictions
where the failure to be so qualified would have a material adverse affect on
the Company's business as now conducted or as now proposed to be conducted.
The Company has furnished Ultrak with copies of its Articles of Incorporation
and By-Laws, as amended. Said copies are true, correct and complete and
contain all amendments through the Closing Date.
3.2 Corporate Power. The Company will have at the Closing Date all
requisite legal and corporate power and authority to execute and deliver this
Agreement, to issue the Shares and to carry out and perform its obligations
under the terms of this Agreement and the documents contemplated hereby or
executed in connection herewith.
3.3 Subsidiaries. The Company has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association or business entity.
3.4 Capitalization. The authorized capital stock of the Company
consists of 10,000,000 shares of Common Stock, of which 4,817,516 shares are
issued and outstanding, including 878,183 shares, which have been issued upon
the exercise of warrants accomplished by the cancellation of term debt, or by
the conversion to shares of convertible debentures and upon the conversion of
accrued interest on the term debt and debentures in the aggregate amount of
$1,317,300, and 883,000 shares are reserved for issuance upon exercise of
outstanding warrants and options as of the Closing Date and owned by the people
set forth on Schedule 3.4. The outstanding shares of Common Stock have been
duly authorized and validly issued, and are fully paid and nonassessable.
Except as set forth above and in Schedule 3.4, there are no options, warrants
or other rights to purchase any of the Company's authorized and unissued
capital stock. Except as set forth on Schedule 3.4, there are no outstanding
agreements regarding the voting of shares of common stock.
3.5 Authorization. All corporate action on the part of the Company,
its directors and shareholders, necessary for the authorization, execution,
delivery and performance of this Agreement by the Company and the performance
of all the Company's obligations hereunder has been taken or will be taken
prior to the Closing. This Agreement and the documents contemplated hereby or
executed in connection with, when executed and delivered by the Company, shall
constitute a valid and binding obligation of the Company, enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies. The
Shares, when issued in compliance with the provisions of or this Agreement,
will be validly issued, will be fully paid and nonassessable. The Shares are
not subject to any preemptive rights or rights of first refusal.
3.6 Balance Sheet. The Company has delivered to Ultrak its audited
financial statements for the year ending December 31, 1994 and its preliminary
and tentative financial statements for the year ending December 31, 1995, and
its Balance Sheet for the period ending June 30, 1996 (the "Balance Sheet").
The Balance Sheet is complete and correct in all material
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respects and has been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated. The
Balance Sheet accurately sets out and describes the financial condition of the
Company as of the dates indicated therein. Since June 30, 1996, there has not
been any change in the assets, liabilities, financial condition or operations
of the Company, from that reflected in the Balance Sheet, except changes in the
ordinary course of business which have not been, either in any case or in the
aggregate, materially adverse.
3.7 Material Liabilities. The Company has no material liabilities
or obligations, absolute or contingent (individually or in the aggregate),
except (i) the liabilities and obligations set forth in the Balance Sheet, (ii)
the liabilities evidenced by the Company's subordinated notes, convertible
debentures, and warrants set forth on Schedule 3.7 (the "Subordinated Debt"),
and (iii) liabilities and obligations which have been incurred subsequent to
June 30, 1996 in the ordinary course of business which have not been, either in
any case or in the aggregate, materially adverse.
3.8 Title to Properties and Assets. The Company has good and
marketable title to its properties and assets, and has good title to all its
leasehold interests, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (i) the lien of current taxes not yet due and
payable, and (ii) possible minor liens and encumbrances which do not in any
case materially detract from the value of the property subject thereto or
materially impair the operations of the Company, and which have not arisen
otherwise than in the ordinary course of business. To the best of its
knowledge, the Company owns or possesses, has access to, or can become licensed
on reasonable terms under, all patents, inventions, copyrights, licenses,
information, proprietary rights and processes necessary for the lawful conduct
of its business as now conducted and as proposed to be conducted, without any
infringement of or conflict with the rights of others. Schedule 3.8 sets forth
a true and complete list of all patents and parent applications owned by the
Company.
3.9 Compliance With Instruments. The Company is not in violation of
any term of its Articles of Incorporation or By-Laws, Shareholder Agreements,
or in any material respect of any term or provision of any material mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment or decree,
and to the best of its knowledge is not in violation of any order, statute,
rule or regulation applicable to the Company where such violation would
materially and adversely affect the Company. The execution, delivery and
performance of and compliance with this Agreement, and the issuance of the
Shares, have not resulted and will not result in any material violation of, or
conflict with, or constitute a material default under, the Company's Articles
of Incorporation or By-Laws or any of its agreements nor result in the creation
of, any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company; and there is no violation of default which
materially and adversely affects the business of the Company or any of its
properties or assets.
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3.10 Litigation. There are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court
or governmental agency (nor, to the best of the Company's knowledge, is there
any reasonable basis therefor or threat thereof).
3.11 Employees. To the best of the Company's knowledge and to the
best of the knowledge of Xxxxx Xxxxxxxxx, President and Chief Executive Officer
and of Xxxx Xxxxxxxxx, Vice President for Technology, in their capacities as
officers of the Company, no employee of the Company is in violation of any term
of any employment contract, patent disclosure agreement or any other contract
or agreement relating to the relationship of such employee with the Company or
any other party because of the nature of the business conducted or to be
conducted by the Company. The Company does not have any employment contracts
with any of its employees not terminable at will and does not have any
collective bargaining agreements covering any of its employees.
3.12 Governmental Consents. All consents, approvals, orders or
authorizations or, or registrations, qualifications, designations,
declarations, or filings with any federal or state governmental authority on
the part o the Company required in connection with the consummation of the
transactions contemplated by this Agreement shall have been obtained prior to,
and be effective as of, the Closing.
3.13 Information. To the best of the knowledge of the Company and of
Xxxxx Xxxxxxxxx, President and Chief Executive Officer and of Xxxx Xxxxxxxxx,
Vice President for Technology, in their capacities as officers of the Company,
no representation or warranty by the Company in this Agreement or in any
written statement or certificate furnished or to be furnished to Ultrak
pursuant to this Agreement or in connection with the transactions contemplated
by this Agreement, when taken together, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements made not misleading. All materials about the
Company's business presented by the Company to Ultrak, have been prepared in a
good faith effort by the Company to describe the Company's present and proposed
products, operations, and projected growth and the Company is not aware of any
materially misleading statements or omissions therein.
SECTION 4
REPRESENTATIONS, WARRANTIES AND AFFIRMATIVE COVENANTS
OF ULTRAK
Ultrak represents and warrants to the Company as follows:
4.1 Qualifications of Ultrak.
(a) Ultrak hereby represents and warrants to the Company that
it is an accredited Investor, inasmuch as it is a corporation, not formed for
the specific purpose of acquiring the Shares, with total assets in excess of
$5,000,000.
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(b) Ultrak hereby represents and warrants to the Company that
Ultrak has such knowledge and experience in financial and business matters that
Ultrak is capable of evaluating the merits and risks of this transaction and of
an investment in the Company.
(c) The overall commitment of Ultrak to securities which are
not readily marketable is not disproportionate to the its total assets, and
investment in the Shares will not cause Ultrak's overall commitment to become
excessive. Ultrak has adequate means of providing for current needs and
contingencies, has no need for liquidity in the investment in the Shares, and
can sustain a complete loss of the investment in the Shares.
(d) Ultrak further represents and warrants that: (i) Ultrak
has not been formed, reformed or recapitalized for the specific purpose of
purchasing the Shares; (ii) Ultrak has been duly formed and is validly existing
in good standing under the laws of the jurisdiction of its formation, with full
power and authority to enter into the transactions contemplated by this
Agreement; and (iii) this Agreement has been duly and validly authorized,
executed, and delivered by Ultrak and when executed and delivered by the
Company, will constitute the valid, binding and enforceable agreement of
Ultrak.
4.2 Access to Information; Independent Investigation.
(a) Ultrak has received and carefully reviewed a copy of the
Company's Business Plan.
(b) Ultrak, in making the decision to purchase the Shares
subscribed for, has relied upon the representations and warranties in this
Agreement and independent investigations made by it and Ultrak, has, prior to
any sale, been given access and the opportunity to examine all material books
and records of the Company, all material contracts and documents relating to
this offering and an opportunity to ask questions of, and to receive answers
from, the Company or any person acting on its behalf concerning the terms and
conditions of this offering, and to obtain any additional information to the
extent the Company possesses such information or can acquire it without
unreasonable effort or expense, necessary to verify the accuracy of the
information so furnished. Ultrak has been furnished with all materials
relating to: (i) the business, finances and operation of the Company and
materials relating to the offer and sale of the Shares, and (ii) any other
information, that has been requested. Ultrak has received complete and
satisfactory answers to any such inquiries.
(c) Ultrak acknowledges that it is subscribing for the Shares
after what it deems to be adequate investigation of the business, finances and
prospects of the Company by Ultrak.
(d) Ultrak understands that no federal or state agency has
passed on or made a recommendation or endorsement of the Shares. Ultrak
understands that this offering has not been reviewed by the Attorney General of
the State of New York and that any offering literature
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used in connection with this offering has not been pre-filed with the Attorney
General and has not been reviewed by the Attorney General
4.3 Investment Representations.
(a) Ultrak has been advised by the Company, and understands,
that it must bear the economic risk of an investment in the Shares for an
indefinite period of time because the Shares have not been registered under the
Securities Act of 1933, as amended ("Securities Act"), and the Company is under
no obligation to register the Shares, other than as set forth in Section 8
below. Therefore, the Shares must be held by Ultrak unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available for the transfer of the Shares.
(b) Ultrak represents that the Shares are being acquired
solely for its own account for investment and not with a view toward, or for
resale in connection with, any "distribution" (as that term is used in the
Securities Act and the rules and regulations thereunder) of all or any portion
thereof.
(c) Ultrak agrees not to subdivide the Shares or to offer,
sell, pledge, hypothecate or otherwise transfer or dispose of any of the Shares
in the absence of an effective registration statement under the Securities Act
covering such disposition, or an opinion of counsel, satisfactory to the
Company and its counsel, to the effect that registration under the Securities
Act is not required in respect of such transfer or disposition.
(d) Ultrak further understands that a stop transfer order will
be placed on the stock-transfer books of the Company respecting the
certificates evidencing the Shares, and such certificates shall bear until such
time as the Shares shall have been registered under the Securities Act or shall
have been transferred in accordance with such an opinion of counsel, the
following legend or one substantially similar thereto:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO
DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, OR AN
OPINION OF COUNSEL TO THE CORPORATION THAT REGISTRATION IS NOT REQUIRED
UNDER THE ACT.
(e) Ultrak understands that the offer and sale of the Shares
are not being registered under the Securities Act in reliance on exemptions
provided under the Securities Act and/or Regulation D promulgated pursuant to
the Securities Act, and that the Company is basing its reliance on that
exemption in part on the representations, warranties, statements and agreements
contained herein.
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4.4 Ultrak affirmatively covenants that Ultrak will not hire or
solicit for hiring as an employee, consultant, distributor, agent or otherwise
any person, who is employed by Company, or whose employment relationship with
Company was terminated after the date which is one year prior to the date such
person commences any employment, consulting or other relationship with Ultrak.
SECTION 5
CONDITIONS TO CLOSING
5.1 Conditions to Ultrak's Obligations at the Closing. Ultrak's
obligations to purchase the Shares at the Closing are subject to the
fulfillment on or prior to the Closing Date of the following conditions, any of
which may be waived in whole or in part by Ultrak:
(a) The representations and warranties made by the Company
herein shall be true and correct when made, and shall be true and correct on
the Closing Date with the same force and effect as if they had been made on
and as of the same date; and the Company shall have performed all obligations
and conditions herein required to be performed or observed by it on or prior to
the Closing Date and all documents incident thereto shall be satisfactory in
form and content to Ultrak and its counsel.
(b) The Company shall have obtained all consents, permits and
waivers necessary or appropriate for consummation of the transactions
contemplated by this Agreement which need to be obtained prior to the Closing.
(c) At the Closing, the purchase of the Shares by Ultrak shall
be legally permitted by all laws and regulations to which the Company is
subject.
(d) Each executive officer of the Company listed on Schedule
5.1(d) attached hereto shall have entered into a Non-Competition and Employment
Agreement with the Company in substantially the form of Exhibit 5.1(d)
attached hereto.
(e) The Company and Ultrak shall have entered into a
non-exclusive Distribution/Reseller Agreement in substantially the form of
Exhibit 5.1(e) attached hereto.
(f) The Subordinate Debt shall have been converted into shares
of Common Stock in accordance with the terms of the instruments evidencing such
debt.
(g) Effective as of the Closing Date, the Company shall have
increased its allowance for uncollectible receivables, warranty reserves, and
reserves for unrecorded liabilities to an aggregate minimum amount of $75,000,
subject to verification or modification by mutual agreement of the Company's
auditor and Ultrak's CFO prior to October 15, 1996.
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(h) The Company shall have executed the Warrant and the
Company, Ultrak, and the Shareholders identified therein shall have executed
the Shareholders' Voting Agreement in the forms, respectively, contained in
Exhibit 5.1(h) attached hereto.
(i) Xxxxx and Xxxx Xxxxxxxxx shall have executed the Right of
First Refusal and Co-Sell Agreement in the form of Exhibit 5.1(i) attached
hereto.
(j) The Company shall use its best efforts to obtain from
Mosler, Inc., a reseller of Company's products, an acknowledgment in writing
that Ultrak's Reseller Agreement with Company is in compliance with Company's
reseller agreement with Mosler, Inc. If and upon obtaining such
acknowledgement, it shall be attached as Exhibit 5.1(j) of this Agreement.
5.2 Conditions to the Company's Obligations at the Closing. The
Company's obligations to sell the Shares at the Closing are subject to the
fulfillment on or prior to the Closing Date of the following conditions, any of
which may be waived in whole or in part by the Company:
(a) The representations and warranties made by Ultrak herein
shall be true and correct when made, and shall be true and correct on the
Closing Date with the same force and effect as if they had been made on and as
of the same date; and Ultrak shall have performed all obligations and
conditions herein required to be performed or observed by it on or prior to the
Closing Date and all documents incident thereto shall be satisfactory in form
and content to the Company and its counsel.
(b) Ultrak shall have obtained all consents, permits and
waivers necessary or appropriate for consummation of the transactions
contemplated by this Agreement which need to be obtained prior to the Closing.
SECTION 6
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as follows:
6.1 Financial Information.
(a) The Company will mail the following reports to Ultrak for
so long as Seven Hundred Fifty Thousand (750,000) of the Shares are owned by
Ultrak:
(i) As soon as practicable after the end of each fiscal
year, and in any event within 45 days thereafter, a consolidated balance sheet
of the Company as of the end of such fiscal year, and a consolidated statement
of income and consolidated statement of cash flow for such year, prepared in
accordance with generally accepted accounting principles, all in reasonable
detail and audited by independent public accountants selected by the Company.
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(ii) Within 30 days following the beginning of each
fiscal year, an Annual Financial Projection. The Annual Financial Projection
shall set forth full and complete forecasted balance sheets, income statements,
and statements of cash flow for the next fiscal year and for each month within
that year. The Annual Financial Projection shall also describe in its
assumptions section, the marketing, production, research and development,
organization and staffing, and financial strategies which support the Annual
Financial Projection's projected figures.
(b) For so long as Ultrak is eligible to receive reports under
this Section 6.1, but in no event more often than once each first, second, and
third fiscal quarter, Ultrak shall also have the right, at its expense, and
upon reasonable notice to the Company (which in no event shall be less than
seven (7) days notice), to audit the books and records of the Company.
6.2 Additional Information. The Company will deliver or provide to
Ultrak (i) as soon as practicable after the end of each fiscal month, and in
any event within 20 days thereafter, an unaudited consolidated balance sheet
and statement of income of the Company and, (ii) with reasonable promptness,
such other information and data, including access to books, records, officers,
general managers exclusive of technical employees, sales managers and
accountants, with respect to the Company as Ultrak may from time to time
reasonably request; provided, however, that the Company shall not be obligated
to provide any information that it considers in good faith to be a trade secret
or to contain confidential or classified information.
6.3 Directors. Effective as of the Closing Date, the Company's
Board of Directors shall consist of at least one (1) director appointed by
Ultrak and, Ultrak, thereafter, shall have the right to appoint one (1)
additional director for every five (5) additional directors serving on the
Company's Board of Directors.
6.4 Termination of Covenants. The covenants set forth in Sections
6.1, 6.2, and 6.3 shall terminate and be of no further force or effect at such
time as the Company is required to file reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended.
6.5 Issuance of Equity Securities. Subsequent to the Closing Date,
the Company shall obtain Ultrak's prior written approval, which shall not be
unreasonably withheld, prior to issuance of any equity securities, defined as
Common Shares, warrants or options, for consideration valued at less than One
Dollar Seventy-Five Cents ($1.75) per Common Share or equivalent equity
security.
6.6 Key Employee Life Insurance. Company shall use its best efforts
to obtain within 60 days following Closing Date a "key employee" life insurance
policy on the life of Company's Vice President for Technology, Xxxx Xxxxxxxxx,
with a face insurance value of at least one million dollars ($1,000,000.00) and
with Company as named beneficiary.
6.7 Chief Financial Officer Selection Approval. In the event
Company, in its discretion, shall appoint and hire a Chief Financial Officer
and/or a General manager, Ultrak
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shall have the right to approve the selection of the final candidate prior to
an offer being tendered to such candidate by the Company. Ultrak's approval of
such final candidate(s) shall not unreasonably be withheld. Ultrak shall not
have the right to set or to approve the terms of employment or compensation
arrangements, which shall be in the sole discretion of the Company.
SECTION 7
MUTUAL INDEMNIFICATION
7.1 Mutual Indemnification. Ultrak will indemnify the Company and
hold it harmless from and in respect of any and all loss, liability, cost or
expense (including reasonable fees and expenses of counsel) accruing from or
resulting by reason of any breach of any representation, warranty, covenant, or
agreement made or to be performed by Ultrak pursuant to this Agreement. The
Company will indemnify Ultrak and hold it harmless from and in respect of any
and all loss, liability, cost or expense (including reasonable fees and
expenses of counsel) accruing from or resulting by reason of any breach of any
representation, warranty, covenant, or agreement made or to be performed by the
Company pursuant to this Agreement.
SECTION 8
REGISTRATION RIGHTS
8.1 Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Demand Registration" see Section 8.2 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"IPO" shall mean the sale of the Company's Common Stock in an
underwritten public offering registered under the Securities Act, where the
aggregate offering price equals or exceeds $5,000,000
"Registration Expenses" shall mean all expenses relating to the
registration, other than underwriting discounts, selling commissions and stock
transfer taxes applicable to the Common Shares to be registered.
"Registrable Securities" shall mean: (i) the shares (ii) any
securities issued or issuable with respect to the Shares by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation, or other reorganization and (iii) any
Common Stock issued or issuable in connection with the Warrant ("Warrant
Shares").
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"Piggyback Registration" see Section 8.3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
"SEC" shall mean the Securities and Exchange Commission.
"Shares" shall mean the shares of Common Stock being issued and
sold pursuant to this Agreement.
"Underwritten registration or underwritten offering" shall mean a
registration in which securities of the Company are sold pursuant to a firm
commitment underwriting.
"Register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of the
effectiveness of such registration statement.
8.2 Demand Registration.
(a) At any time following an IPO and subject to the provision
of Section 8.2(b) hereof, Ultrak may request a registration by the Company
under the Securities Act of all or part of the Registrable Securities ("Demand
Registration"). All requests made pursuant to this Section 8.2(a) will specify
the number of Registrable Securities to be registered. The Company shall cause
such Demand Registration to be effected as promptly as possible.
(b) Subject to the provisions of Section 8.4(b) hereof, Ultrak
will be entitled to request an aggregate of two (2) Demand Registrations in
which Ultrak and the Company will equally share all Registration Expenses;
provided, however, that the Company will not be obligated to register any
Registrable Securities pursuant to a Demand Registration unless there is
requested to be included in such registration not less than 250,000 Shares. A
registration initiated as a Demand Registration will not count as a Demand
Registration until such registration has become effective.
8.3 Piggyback Registration. (a) Following an IPO, if at any time or
from time to time the Company shall determine to register any of its securities
under the Securities Act (other than pursuant to a Demand Registration) (a
"Piggyback Registration"), either for its own account or the account of a
shareholder of the Company, other than (i) a registration relating solely to an
employee benefit plan or (ii) a registration relating solely to a Rule 145
transaction, the Company will:
(i) promptly give Ultrak written notice thereof; and
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(ii) include in such registration, and in any
underwriting involved therewith, all of the Registrable Securities specified by
Ultrak to be included made within 20 days after receipt of the written notice
specified in Section 8.3(a)(i).
8.4 Underwriting.
(a) If any registration is an underwritten offering, the
Company will have the right to select the investment banker or investment
bankers and manager or managers to administer the offering; provided that such
investment bankers and managers must be reasonably satisfactory to Ultrak.
(b) If the registration involves an underwriting, Ultrak's
participation therein shall be conditioned upon Ultrak signing a standard
underwriting agreement. If the number of Registrable Securities that Ultrak
requests to be included in the offering exceeds the amount of securities that
the underwriters reasonably believe compatible with the success of the
offering, the Company shall only be required to include in the offering so many
of the Registrable Securities as the underwriters believe will not jeopardize
the success of the offering. If all the Registrable Securities that Ultrak
requests to be included in the offering can not be accommodated, the number of
Registrable Securities to be included shall be apportioned pro rata among all
selling shareholders according to the total amount of securities owned by
selling shareholders, or in such other proportions as shall mutually be agreed
to by such selling holders.
8.5 Holdback Agreement.
(a) Ultrak agrees not to effect any public sale or
distribution of equity securities of the Company, including a sale pursuant to
Rule 144 under the Securities Act, during the seven (7) days prior to, and
during the 90- day period beginning on, the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration (except as part
of such underwritten registration).
(b) The Company agrees not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such equity securities, including a sale
pursuant to Rule 144 under the Securities Act, during the seven (7) days prior
to, and during the 90-day period beginning on, the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to registrations
on Form S-8).
8.6 Termination. The obligations of the Company set forth in Section
8.2 to 8.5 shall terminate at such time as all of the Registrable Securities
can be sold to the public under Rule 144 in the opinion of counsel to the
Company.
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SECTION 9
ULTRAK'S RIGHT OF FIRST REFUSAL
9.1 Right of First Refusal. The Company hereby grants to Ultrak the
right of first refusal to purchase its pro rata share of New Securities (as
defined in this Section 9.1) which the Company may, from time to time, propose
to sell and issue. A pro rata share, for purposes of this right of first
refusal, is the ratio that the sum of the number of shares of Common Stock then
held by Ultrak bears to the sum of the total number of shares of Common Stock
then outstanding.
(a) Except as set forth below, "New Securities" shall mean any
shares of capital stock of the Company including Common Stock and Preferred,
whether now authorized or not, and rights, options or warrants to purchase said
shares of Common Stock or Preferred, and securities of any type whatsoever that
are, or may become, convertible into said shares of Common Stock or Preferred.
Notwithstanding the foregoing, "New Securities" does not include (i) securities
offered to the public generally pursuant to a registration statement or
pursuant to Regulation A under the Securities Act, (ii) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets or other reorganization whereby the
Company or its shareholders own not less than fifty-one percent (51%) of the
voting power of the surviving or successor corporation, (iii) shares of the
Company's Common Stock or related options convertible into such Common Stock at
or above a per share purchase price and/or option exercise price of One Dollar
Seventy-Five Cents ($1.75) per Common Share issued to employees, officers and
directors of, and consultants, customers, and vendors to, the Company, pursuant
to any arrangement approved by the Board of Directors of the Company, (iv)
shares of the Company's Common Stock or related securities convertible into
such Common Stock set forth on Schedule 3.4, (v) stock issued pursuant to any
rights or agreements including without limitation convertible securities,
options and warrants, provided that the rights of first refusal established by
this Section 9.1 apply with respect to the initial sale or grant by the Company
of such rights or agreements and (vi) stock issued in connection with any stock
split, stock dividend or recapitalization by the Company.
(b) In the event the Company proposes to undertake an issuance
of New Securities, it shall give Ultrak written notice of its intention,
describing the type of New Securities, and the price and terms upon which the
Company proposes to issue the same. Ultrak shall have thirty (30) days from
the date of receipt of any such notice to propose to purchase its pro rata
share of such New Securities for the price and upon the terms specified in the
notice by giving written notice to the Company and stating therein the quantity
of New Securities desired to be purchased. A request shall be an irrevocable
offer to purchase the quantity of New Securities specified.
(c) In the event Ultrak fails to exercise the right of first
refusal within said thirty (30) day period, the Company shall have one hundred
eighty (180) days thereafter to sell or enter into an agreement (pursuant to
which the sale of New Securities covered thereby shall be closed, if at all,
within sixty (60) days from the date of said agreement) to sell the New
Securities not elected to be purchased by Ultrak at the price and upon the
terms no more favorable to the purchasers of such securities than specified in
the Company's notice. In the event the Company has not sold the New Securities
or entered into an agreement to sell the New
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Securities within said one hundred eighty (180) day period (or sold and issued
New Securities in accordance with the foregoing within sixty (60) days from the
date of said agreement), the Company shall not thereafter issue or sell any New
Securities, without first offering such securities in accordance with the
procedure provided above, which procedure in such event shall be termed the
"Second Round Right of First Refusal". In the event any such offering of New
Securities continues beyond said one hundred eighty (180) day period and thus
becomes and "Extended Offering" Ultrak, with the prior written approval of
Company, which shall not unreasonably be withheld, may assign its Second Round
Right of First Refusal, which shall be limited to such Extended Offering, to an
identified third party.
(d) The right of first refusal granted under this Agreement
shall expire upon the first to occur of the following: (i) the closing of the
first public offering of the Common Stock of the Company to the general public
which is effected pursuant to a registration statement filed with, and declared
effective by, the Commission under the securities Act; or (ii) Ultrak holds
less than one million two hundred fifty thousand (1,250,000) shares of Common
Stock (appropriately adjusted for stock splits, stock dividends or similar
capital reorganizations).
(e) Except in accordance with the provisions of paragraph
9.1(c) above, the right of first refusal hereunder is not assignable.
SECTION 10
COMPANY RIGHT OF FIRST REFUSAL
10.1 Company Right of First Refusal. In the event Ultrak proposes to
sell the Shares, it shall give the Company written notice of its intention,
describing the number of Shares it proposes to sell and the price and terms
upon which Ultrak proposes to sell the same. The Company shall have thirty
(30) days from the date of receipt of any such notice to agree to purchase all
or any portion of the Shares being sold for the price and upon the terms
specified in the notice by giving written notice to Ultrak.
10.2 Failure to Exercise. In the event the Company fails to exercise
the right of first refusal within the thirty (30) day period, Ultrak shall have
one hundred eighty (180) days thereafter to sell or enter into an agreement
(pursuant to which the sale of such Shares covered thereby shall be closed, if
at all, within sixty (60) days from the date of said agreement) to sell the
Shares not elected to be purchased by the Company or the remaining shareholders
at the price and upon the terms no more favorable to the purchasers of such
securities then specified in Ultrak's notice. In the event Ultrak has not sold
the Shares or entered into an agreement to sell the Shares within said one
hundred eighty (180) day period (or sold the Shares in accordance with the
foregoing within sixty (60) days from the date of said agreement), Ultrak shall
not thereafter sell any Shares, without first offering such securities in the
manner provided above.
10.3 Right of First Refusal Expiration. The right of first refusal
granted under this Section 10 shall expire upon the first to occur of the
following: (i) the closing of the first public
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offering of the Common Stock of the Company to the general public which is
effected pursuant to a registration statement filed with, and declared
effective by, the Commission under the securities Act; or (ii) Ultrak holds
less than 1,300,000 shares of Common Stock or Preferred Stock (appropriately
adjusted for stock splits, stock dividends or similar capital reorganizations),
where Ultrak has obtained the prior written approval of the Company for the
buyer of up to 200,000 of Ultrak's initial 1,500,000 shares; or (iii) Ultrak
holds less than 1,500,000 shares of Common Stock or Preferred Stock
(appropriately adjusted for stock splits, stock dividends or similar capital
reorganizations), where Ultrak has not obtained the prior written approval of
the Company for such buyer.
10.4 Additional Legend. In addition to whatever legends are required
to be placed on the certificate evidencing the Shares by applicable securities
laws, the following legend shall be endorsed thereon:
"The shares represented by this certificate are subject to
a right of first refusal option in favor of the corporation and certain
shareholders set forth in an agreement between the corporation and the
registered holder, a copy of which is on file at the principal office of this
corporation."
SECTION 11
MISCELLANEOUS
11.1 Governing Law. This Agreement shall be governed in all respects
by the internal laws of the State of New York.
11.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by Ultrak and the
closing of the transactions contemplated hereby.
11.3 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
11.4 Entire Agreement; Amendment. This Agreement and other documents
delivered pursuant hereto at the Closing constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged
or terminated other than by a written instrument signed by the party against
whom enforcement of any such amendment, waiver, discharge or termination is
sought.
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11.5 Notice, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first class
mail, postage prepared, or otherwise delivered by hand or by messenger,
addressed
(a) if to Ultrak: Xxx Xxxxx
Chief Financial Officer
Ultrak, Inc.
Suite 100
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxx 00000
with copies to: Xxxxxxx Xxxxxxxx, Esq.
Gardere & Xxxxx
3000 Thanksgiving Tower
0000 Xxx Xxxxxx
Xxxxxx, Xxxxx 00000
(b) if to the Company: Lenel Systems International, Inc.
000 Xxxxxxxxx Xxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxx and Xxxx Xxxxxxxxx
with copies to: Xxxxx X. Xxxxxxxxx, Esq.
Xxxxxx, Beach & Xxxxxx, LLP
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective (i) when delivered, if delivered either
personally or by overnight courier or (ii) at the earlier of its receipt or
five (5) days after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed as
aforesaid.
11.6 Delays or Omissions. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to Ultrak,
upon any breach or default of the Company under this Agreement, shall impair
any such right, power or remedy of such holder nor shall it be construed to be
a waiver of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval
of any kind or character on the part of any holder of any breach or default
under this Agreement, or any waiver on the part of any holder of any provisions
or conditions of this agreement, must be in writing and shall be effective only
to the extent specifically set forth in such writing. All remedies, either
under this
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Agreement or by law or otherwise afforded to any holder, shall be cumulative
and not alternative.
11.7 Expenses. The Company and Ultrak shall bear its own expenses
incurred on its behalf with respect to this Agreement and the transactions
contemplated hereby.
11.8 Counterparts. This Agreement may be signed in one or more
counterparts, and it shall not be necessary that the signatures of both parties
appear on each such counterpart; all counterparts shall collectively constitute
a single agreement.
11.9 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective
if it materially changes the economic benefit of this Agreement to any party.
11.10 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
The foregoing agreement is hereby executed as of the date first above
written.
ULTRAK, INC. LENEL SYSTEMS INTERNATIONAL, INC.
a Delaware corporation a Delaware corporation
By: /s/ XXXXXX X. XXXXXX By: /s/ XXXXX XXXXXXXXX
--------------------------- -----------------------------------
Title: President Title: President & CEO
------------------------
By: /s/ XXXX XXXXXXXXX
-----------------------------------
Title: Vice President, Technology
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