SECURITIES PURCHASE AND EXCHANGE AGREEMENT
THIS SECURITIES PURCHASE AND EXCHANGE AGREEMENT
("Agreement") is made as of the 31st day of January, 1996 by and
among Xxxxxx, Inc., a Delaware corporation (the "Company"),
Wand/Xxxxxx Investments L.P., a Delaware limited partnership
("Wand I"), Wand/Xxxxxx Investments II L.P., a Delaware limited
partnership, and Wand/Xxxxxx Investments III L.P., a Delaware
limited partnership ("Wand III"). Wand I, Wand II and Wand III
are referred to herein collectively as the "Purchasers."
RECITALS
A. Wand I and Wand II are each currently owners of
the following securities of the Company: (1) common stock, par
value $.01 per share ("Company Common Stock"); (2) Series C
Convertible Preferred Stock, par value $1.00 per shares ("Series
C Preferred Stock"); (3) Series D Convertible Preferred Stock,
par value $1.00 per share ("Series D Preferred Stock"); (4)
certain common stock purchase warrants to purchase shares of
Company Common Stock at various exercise prices (the "Old
Warrants").
B. Certain of the Company securities currently held
by Wand I will be transferred to Wand III, as follows:
(1) 74,151 shares of Company Common Stock (the "Wand
III Company Common Stock");
(2) 1,444 shares of Series C Preferred Stock (the
"Wand III Series C Preferred Stock");
(3) 8,322 shares of Series D Preferred Stock (the
"Wand III Series D Preferred Stock");
(4) Warrants to acquire 4,161 shares of Company Common
Stock at an exercise price of $2.00 per share (the "$2.00
Warrants");
(5) Warrants to acquire 416,115 shares of Company
Common Stock at an exercise price of $.65 per share (the "$.65
Warrants"); and
(6) Warrants to acquire 291,281 shares of Company
Common Stock at $1.00 per share (the "$1.00 Warrant").
C. the Company desires to sell to Wand I and Wand II,
and Wand I and Wand II desires to purchase from the Company, in
the aggregate, (1) 599 shares of a new class of convertible
preferred stock of the Company, par value $1.00 per share (the
"Series F Preferred Stock") having the terms set forth in the
Company's Certificate of Designation of the Terms of the Series F
Preferred Stock in the form set forth as Exhibit I, and (2)
Warrants to purchase up to an aggregate of 173,710 shares of
Company Common Stock in the form set forth as Exhibit II (the
"Regular Warrants");
D. The Company desires to sell to Wand III, and Wand
III desires to purchase from the Company, (1) 401 shares of a new
class of convertible preferred stock of the Company, par value
$1.00 per share (the "Series G Preferred Stock") having the terms
set forth in the Company's Designation of the Terms of the Series
G Preferred Stock set forth as Exhibit III and (2) warrants to
purchase up to an aggregate of 116,290 shares of Company Common
Stock in the form set forth as Exhibit IV (the "Restricted
Warrants").
E. In order to facilitate this purchase and sale of
the Company securities to the Purchasers, the Company and the
Purchasers have agreed that (1) the 1,776 Series C Preferred
Stock owned by Wand I (excluding the 1,444 shares of such stock
to be transferred to Wand III) and the 250 shares of Series C
Preferred Stock owned by Wand II shall be exchanged for an
aggregate of 2,026 shares of a new class of convertible preferred
stock of the Company, par value $1.00 per share (the "Series H
Preferred Stock") having the terms set forth in the Company's
Certificate of Designation of Terms of the Series H Preferred
Stock set forth as Exhibit V, (2) the 1,444 shares of Series C
Preferred Stock transferred to Wand III shall be exchanged for an
aggregate of 1,444 shares of a new class of convertible preferred
stock of the Company, par value $1.00 per share (the "Series E
Preferred Stock") having the terms set forth in the Company's
Certificate of Designation of terms of the Series E Preferred
Stock set forth as Exhibit VI, and (3) the $1.00 Warrants and the
$.65 Warrants shall be exchanged for revised Warrants having the
terms set forth in Exhibits VII (the "Revised $1.00 Warrants")
and VIII (the "Revised $.65 Warrants"), respectively. The
Revised $1.00 Warrants and the Revised $.65 Warrants are herein
referred to in the aggregate as the "Revised Warrants."
F. Concurrently herewith the parties are entering
into the Amended and Restated Registration Agreement, dated as of
January 31, 1996, in the form set forth as Exhibit IX (the
"Registration Rights Agreement").
NOW, THEREFORE, in consideration of the mutual
covenants contained herein, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, each intending to be legally
bound, do hereby agree as follows:
1. SALE AND PURCHASE OF COMPANY SECURITIES; OTHER TRANSACTIONS.
(a) The Company has authorized the issuance and sale
to Wand I and Wand II, in the respective amounts set forth on
Schedule I, (i) 599 shares (the "Series F Preferred Shares") of
the Series F Preferred Stock and (ii) the Regular Warrants.
Subject to the terms and conditions herein set forth, the Company
will issue and sell to Wand I and Wand II, and Wand I and Wand II
will purchase from the Company, at the Closing ( as defined
below) the Series F Preferred Shares and the Regular Warrants in
the respective amounts set forth on Schedule I. The aggregate
purchase price for the Series F Preferred Shares and Regular
Warrant shall be $599,000 in cash (the "Series F Purchase
Price").
(b) The Company has authorized the issuance and sale
to Wand III as set forth on Schedule I (i) 401 shares (the
"Series G Preferred Shares") of the Series G Preferred Stock and
(ii) the Restricted Warrants. Subject to the terms and
conditions herein set forth, including the receipt of all
requisite regulatory approvals, the Company will issue and sell
to Wand III, and Wand III will purchase from the Company, at the
Closing (as defined below) the Series G Preferred Shares and the
Restricted Warrants in the amount set forth on Schedule I. The
purchase price for the Series G Preferred Shares and the
Restricted Warrants shall be $401,000 in cash (the "Series G
Purchase Price").
(c) The Company has authorized the issuance to Wand
III of 1,444 shares (the "Series E Preferred Shares") in exchange
for 1,444 shares of Series C Preferred Stock (the "Wand III
Series C Preferred Shares"). The Wand III Series C Preferred
Shares shall be canceled and retired.
(d) The Company has authorized the issuance to Wand
III of the Revised $1.00 Warrant in exchange for the $1.00
Warrant and the Revised $.65 Warrant in exchange for the $.65
Warrant. The $1.00 Warrant and the $.65 Warrant shall be
canceled and retired.
(e) The Company has authorized the issuance to Wand I
and Wand II in the respective amounts set forth on Schedule I, of
an aggregate of 2,026 shares (the "Series H Preferred Shares") in
exchange for an aggregate of 2,026 shares of Series C Preferred
Stock (the "Wand I and Wand II Series C Preferred Shares"). The
Wand I and Wand II Series C Preferred Shares shall be canceled
and retired.
(f) The Series E Preferred Shares, the Series F
Preferred Shares, the Series G Preferred Shares, and the Series H
Preferred Shares are referred to herein in the aggregate as the
"Preferred Shares" and the Regular Warrants and the Restricted
Warrants are referred to herein in the aggregate as the "New
Warrants."
2. CLOSING.
(a) Subject to the applicable provisions of Sections
7, 8, and 9 hereof, the closing of (i) the sale of the Series F
Preferred Shares, the Series G Preferred Shares, the Regular
Warrants and the Restricted Warrants, (ii) the exchange of the
Series C Preferred Stock for the Series E Preferred Shares and
the Series H Preferred Shares, and (iii) the exchange of the $.65
Warrants and the $1.00 Warrants for the Revised Warrants (the
"Closing") shall take place at the offices of Skadden, Arps,
Slate, Xxxxxxx & Xxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, as soon as practicable following the satisfaction or
waiver of the applicable conditions set forth in Sections 7, 8
and 9 hereof.
(b) At the Closing, (i) the Company shall deliver to
the Purchasers certificates evidencing the respective number of
Series F Preferred Shares, Series G Preferred Shares, Regular
Warrants and Restricted Warrants to be purchased by the
Purchasers, (ii) the Purchasers shall deliver to the Company the
Series F Purchase Price and the Series G Purchase Price by wire
transfer of immediately available funds to an account designated
by the Company, and (iii) the parties shall make such other
deliveries as are contemplated hereby.
(c) In addition, at the Closing (i) the Company shall
deliver to the Purchaser certificates evidencing the respective
number of Series E Preferred Shares, Series H Preferred Shares
and Revised Warrants to be acquired by the Purchasers, (ii) the
Purchasers shall deliver to the Company for cancellation the Wand
I and Wand II Series C Preferred Shares, the Wand III Series C
Preferred Shares, the $1.00 Warrants and the $.65 Warrants, and
(iii) the parties shall make such other deliveries as are
contemplated hereby.
(d) The Closing of the purchase and sale of the
Company securities contemplated by this Agreement and the Closing
of the exchange of Company securities contemplated by this
Agreement may take place at different times if the parties
mutually agree.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the
Purchasers as follows:
(a) Organization, Standing and Power of the Company.
The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware.
The Company has all requisite power and authority to own, lease
and operate its properties, assets and business and to conduct
its business as now being conducted and is duly qualified to do
business as a foreign corporation in good standing in those
jurisdictions, other than the state of its incorporation, in
which the nature of the business conducted or property owned by
it makes such qualification necessary, except for any failures so
to qualify which would not have, individually or in the
aggregate, a material adverse effect on the business, condition
or results of operations of the Company (a "Company Material
Adverse Effect").
(b) Authority; Enforceability; No Conflict. The
Company has all requisite corporate power and authority to enter
into this Agreement, the Registration Rights Agreement, the New
Warrants and the Revised Warrants (such agreements other than
this Agreement are collectively referred to hereafter as the
"Related Agreements") to issue and sell the Preferred Shares, the
New Warrants and the Revised Warrants and to carry out its
obligations hereunder and under the Related Agreements. The
execution, delivery and performance of this Agreement and the
Related Agreements by the Company and the issuance and sale of
the Preferred Shares, the New Warrants and the Revised Warrants
by the Company have been duly and validly authorized by all
requisite corporate proceedings on the part of the Company. This
Agreement is, and the Related Agreements when executed and
delivered by the Company will be, and when issued and sold each
of the New Warrants and the Revised Warrants will be, a valid and
binding obligation of the Company, enforceable against it in
accordance with its terms, except that (i) such enforcement may
be subject to bankruptcy, insolvency, reorganization, moratorium,
rehabilitation, liquidation, conservatorship, receivership or
other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
Subject to the receipt of the consents or approvals set forth in
Section 3(b) of the disclosure schedule delivered by the Company
to the Purchasers concurrently with the execution and delivery of
this Agreement (the "Disclosure Schedule"), the execution and
delivery of this Agreement and each Related Agreement by the
Company do not, and the consummation by the Company of the
transactions contemplated hereby and thereby will not, the
issuance and sale of the Preferred Shares, the New Warrants and
the Revised Warrants will not, and the performance by the Company
of its obligations under the terms of the Preferred Shares, the
New Warrants and the Revised Warrants will not, result in or
constitute: (i) a default, breach or violation of or under the
Certificate of Incorporation or the By-laws of the Company, or
(ii) a default, breach or violation of or under any mortgage,
deed of trust, indenture, note, bond, license, lease agreement or
other instrument or obligation to which the Company is a party or
by which any of their properties or assets are bound, except for
any defaults, breaches or violations which would not have,
individually or in the aggregate, a Company Material Adverse
Effect, or (iii) a violation of any statute, rule, regulation,
order, judgment or decree of any court, public body or authority
by which the Company or any of its properties or assets are
bound, except for any violations which would not have,
individually or in the aggregate, a Company Material Adverse
Effect, or (iv) an event which (with notice or lapse of time or
both) would permit any person to terminate, accelerate the
performance required by, or accelerate the maturity of, any
indebtedness or obligation of the Company under any agreement or
commitment to which the Company is a party or by which the
Company is bound or by which any of its properties or assets are
bound, except for any accelerations or terminations which would
not have, individually or in the aggregate, a Company Material
Adverse Effect, or (v) the creation or imposition of any lien,
charge or encumbrance on any property of the Company under any
agreement or commitment to which the Company is a party or by
which the Company is bound or by which any of its respective
properties or assets are bound, except for any liens, charges or
encumbrances which would not have, individually or in the
aggregate, a Company Material Adverse Effect, or (vi) an event
which would require any consent under any agreement to which the
Company is a party or by which the Company is bound or by which
any of its respective properties or assets are bound, except for
any consents which, if not received, would not have, individually
or in the aggregate, a Company Material Adverse Effect.
(c) Capitalization. The authorized capital stock of
the Company consists of (i) 30,000,000 shares of Common Stock,
par value $.01 per share, of which 7,844,908 shares (excluding
shares held in treasury) are outstanding and 10,000,000 shares of
preferred stock, par value $1.00 per share (the "Preferred
Stock"), of which (i) 452,064 shares of Series A Preferred Stock,
par value $1.00 per share (the "Series A Preferred Stock"), of
which 452,064 shares are outstanding; (ii) 2,380,000 shares of
Series B Preferred Stock, par value $1.00 per share, of which
2,380,000 shares are outstanding; (iii) 3,500 shares of Series C
Preferred Stock, par value $1.00 per share, of which 3,470 shares
are outstanding; (iv) 210,549 shares of Series D Preferred Stock,
par value $1.00 per share, (the "Series D Preferred Stock"), of
which 210,549 shares are outstanding; (v) 1,444 shares of Series
E Preferred Stock, of which no shares are outstanding; (vi) 599
shares of Series F Preferred Stock, of which no shares are
outstanding; (vii) 401 shares of Series G Preferred Stock, of
which no shares are outstanding; and (viii) 2,026 shares of
Series H Preferred Stock, of which no shares are outstanding.
All of the outstanding shares of Common Stock, Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock have been duly authorized and validly
issued, and are fully paid and non-assessable. Immediately
following the Closing, (i) 7,844,908 shares of Common Stock will
be outstanding; (ii) 452,064 shares of Series A Preferred Stock
will be outstanding; (iii) 2,380,000 shares of Series B Preferred
Stock will be outstanding; (iv) no shares of Series C Preferred
Stock will be outstanding; (v) 210,549 shares of Series D
Preferred Stock will be outstanding; (vi) 1,444 shares of Series
E Preferred Stock will be outstanding; (vii) 599 shares of Series
F Preferred Stock will be outstanding; (viii) 401 shares of
Series G Preferred Stock will be outstanding, and (ix) 2,026
shares of Series H Stock will be outstanding. Except for the
outstanding shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock, and except as set forth in Section 3(c) of the Disclosure
Schedule, there are no outstanding preemptive, conversion or
other rights, options, warrants or agreements granted or issued
by or binding upon the Company for the purchase or acquisition of
any shares of capital stock of the Company or any other
securities convertible into, exchangeable for or evidencing the
right to subscribe for any shares of such capital stock. The
Company is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any
shares of the capital stock of the Company or any convertible
securities, rights or options of the type described in the
preceding sentence. The Company is not a party to, and does not
have knowledge of, any agreement expressly restricting the
transfer of any shares of the capital stock of the Company.
(d) No Subsidiaries or Other Ventures. The Company
has no subsidiaries. Except as set forth in Section 3(d)(i) of
the Disclosure Schedule, the Company does not own, directly or
indirectly, any interest in any corporation, partnership, joint
venture, association or other entity.
(e) Status of Shares. The Preferred Shares to be
issued at the Closing have been duly authorized by all necessary
corporate action on the part of the Company. When issued and paid
for as provided in this Agreement, the Preferred Shares will be
validly issued and outstanding, fully paid and nonassessable, and
the issuance of such Preferred Shares is not and will not be
subject to preemptive rights of any other stockholder of the
Company. The shares of Common Stock to be issued upon conversion
of the Preferred Shares and upon exercise of the New Warrants and
the Revised Warrants have been duly authorized by all necessary
corporate action on the part of the Company and, as of the
Closing, will be duly reserved for issuance. When the shares of
Common Stock are issued upon conversion of the Preferred Shares
and upon exercise of the New Warrants and the Revised Warrants,
such shares will be validly issued and outstanding, fully paid
and nonassessable and the issuance of such shares will not be
subject to preemptive rights of any other stockholder of the
Company.
(f) Financial Statements. (1) The Company has
heretofore delivered or made available to the Purchaser the
audited consolidated balance sheets at June 30, 1995, 1994 and
1993 of the Company and the related consolidated statements of
income, stockholders' equity and cash flows for the years then
ended, including the related notes and auditor's report thereon
(the "Financial Statements"). The Financial Statements (i)
present fairly the consolidated financial condition of the
Company at the dates thereof and present fairly its consolidated
results of operations and cash flows for the years then ended and
(ii) have been prepared in conformity with generally accepted
accounting principles ("GAAP") applied consistently with respect
to the immediately preceding fiscal year period except as set
forth in the notes to the Financial Statements or in the
auditor's report thereon.
(2) The Company has heretofore delivered or made
available to the Purchaser the unaudited consolidated balance
sheet at September 30, 1995 of the Company (the "September
Balance Sheet") and the related consolidated statements of income
and cash flows for the three months then ended (such September
Balance Sheet and related consolidated statements, collectively,
the "September Financial Statements"), each of which (i) presents
fairly, in all material respects, the consolidated financial
condition of the Company at September 30, 1995, and presents
fairly its consolidated results of operations and cash flows for
the nine months then ended and (ii) has been prepared in
compliance with all of the requirements of Section 15(d) of the
Securities Exchange Act of 1934, as amended, (the "Exchange Act")
and the applicable rules and regulations thereunder.
(g) SEC Reports. The Company has filed all reports,
statements, forms and documents with the Securities Exchange
Commission ("SEC") that it was required to file since December
31, 1990 (the "SEC Reports"), all of which have complied in all
material respects with all applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and
the Exchange Act. As of their respective dates, each such
report, statement, form or document, including without limitation
any financial statements or schedules included therein, did not
contain any untrue statement of a material fact or omit 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.
(h) Liabilities. As of the date hereof, except (i) as
set forth on the September Balance Sheet, (ii) as set forth in
Section 3(h) of the Disclosure Schedule or (iii) for liabilities
or obligations which were incurred after September 30, 1995 in
the ordinary course of business and consistent with past
practices, the Company has no liabilities, obligations, claims or
losses (whether liquidated or unliquidated, secured or unsecured,
absolute, accrued, contingent or otherwise) that would be
required to be disclosed on a consolidated balance sheet of the
Company (including the notes thereto) in conformity with GAAP.
(i) Indebtedness of the Company. Section 3(i) of the
Disclosure Schedule sets forth all outstanding secured and
unsecured Indebtedness (as defined hereinafter) of the Company in
excess of $50,000 in any individual case, or for which the
Company has commitments, on the date of this Agreement. The
Company is not in default with respect to any such Indebtedness.
"Indebtedness" means at any time, (i) all indebtedness for
borrowed money, (ii) all obligations evidenced by bonds,
debentures, notes or other similar instruments, (iii) all
reimbursement obligations and other liabilities under letters of
credit, (iv) all obligations to pay the deferred purchase price
of property or services, other than normal trade creditors in the
ordinary course, (v) all obligations in respect of capitalized
leases, (vi) all guarantees and contractual obligations of the
Company, contingent or otherwise, with respect to any
indebtedness or obligation of another, and (vii) all obligations
of the Company secured by any mortgage, pledge, lien, security
interest or other encumbrance on any asset or property of the
Company, whether or not such obligation has been assumed.
(j) Title to Properties; Liens. The Company does not
own any real property. Section 3(j) of the Disclosure Schedule
correctly describes all real property leased by the Company,
together with a description of the lease payment obligations and
lease termination provisions relating thereto. The Company
enjoys peaceful and undisturbed possession under all leases
necessary in any material respect for the operation of its
properties and assets, and all such leases are valid and
subsisting and are in full force and effect.
(k) Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the
Company, threatened, against the Company which questions the
validity of this Agreement or the Related Agreements or any
action taken or to be taken pursuant hereto or thereto. There is
no action, suit, claim, investigation or proceeding pending or,
to the knowledge of the Company, threatened, against or involving
the Company or any of its properties or assets. There are no
outstanding orders, judgments, injunctions, awards or decrees of
any court, arbitrator or governmental or regulatory body against
the Company.
(l) Compliance with Law. The business of the Company
has been and is presently being conducted so as to comply with
all applicable federal, state, and local governmental laws,
rules, regulations and ordinances. The Company has all material
franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals necessary for the conduct
of its business as now being conducted by it, and the Company is
in compliance therewith except for any non-compliances which
would not, individually or in the aggregate, have a Company
Material Adverse Effect.
(m) No Violations. The Company is not in violation of
or default under (i) any term of its Certificate of Incorporation
or By-Laws, (ii) any of its contracts or agreements or under any
instrument by which the Company is bound, or (iii) any
outstanding indenture or other debt instrument or with respect to
the payment of principal of or interest on any outstanding
obligations for borrowed money.
(n) Taxes.
(i) The Company has duly and timely filed, or
caused to be filed, and will duly and timely file, or cause to
file, with the appropriate taxing authority all Tax Returns (as
defined below) required to be filed on or before the date hereof
by or with respect to the Company and such Tax Returns were or
will be true, correct and complete in all material respects when
filed.
(ii) The Company has paid or caused to be paid in
full or has made adequate provision for on its balance sheet all
material Taxes (as defined below) shown to be due on such Tax
Returns. There are no liens for Taxes upon the assets of either
the Company except for statutory Liens for current Taxes not yet
due.
(iii) None of the Tax Returns filed by or on
behalf of the Company has been examined by the appropriate taxing
authorities.
(iv) Except as set forth in Schedule 3(n)(iv)
hereto, the Company has not received any notice of deficiency or
assessment from any taxing authority with respect to liabilities
or obligations for Taxes with respect to the Company which has
not been fully paid or finally settled, and any such deficiency
or assessment shown in Schedule 3(n)(iv) hereto is being
contested in good faith through appropriate proceedings. The
Company has not given any outstanding waivers or comparable
consents extending the application of the statute of limitations
with respect to any Taxes or Tax Returns with respect to the
Company.
(v) The Company has complied in all material
respects with all applicable laws, rules and regulations relating
to the payment and withholding of payroll and employment taxes
and have, within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper
governmental authorities all material payroll and employment
taxes required to be so withheld and paid over.
(vi) No audit or other administrative proceeding
or court proceeding which is material to the financial condition
of Company is presently pending with regard to any Taxes or Tax
Returns.
(vii) The amount and character of the tax loss
carryforwards as set forth in the Company's financial statements
for the year ending June 30, 1995 are materially accurate and, to
the Company's best knowledge, are not subject to any "Section 382
limitation" under Section 382 of the Code, and any regulations
promulgated thereunder. To the Company's best knowledge, at the
Closing Date, the issuance of the Preferred Shares, the Warrants
and the Fee Warrants in accordance with the terms of this
Agreement and the Related Agreements will not result in an
"ownership change" under Section 382 of the Code, and any
regulations promulgated thereunder. As of the Closing Date, the
Company shall not have any plan or intention to take any action
after the Closing Date, which to its best knowledge would result
in an "ownership change" under Section 382 of the Code and any
regulations promulgated thereunder.
(viii) For purposes of this Agreement, "Taxes"
shall mean any and all taxes, charges, fees, levies or other like
assessments (and all related interest, additions to tax and
penalties), including, but not limited to, income, transfer,
gains, gross receipts, excise, inventory, property (real,
personal or intangible), custom, duty, sales, use, license,
withholding, payroll, employment, capital stock and franchise
taxes, imposed by the United States, or any state, local or
foreign taxing authority, whether computed on a unitary, combined
or any other basis and "Tax Return" shall mean any report, return
or other information filed with any taxing authority with respect
to Taxes imposed upon or attributable to the operations of the
Company.
(o) ERISA. Section 3(o) of the Disclosure Schedule
contains a true and complete list of each employee benefit plan,
as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and any other bonus,
severance or termination pay, stock option or stock purchase,
incentive pay or other plan, program or arrangement covering
present or former employees of the Company which is maintained or
contributed to by the Company or any of its subsidiaries (the
"Plans"). None of the Plans is subject to the provisions of
Title IV of ERISA, and none of the Plans is a multiemployer Plan
as defined in Section 3(37) of ERISA (a "Multiemployer Plan").
The Company has not incurred (directly or indirectly) any
liability to the Pension Benefit Guaranty Corporation or with
respect to a Multiemployer Plan. None of the Plans is subject to
the minimum funding standards set forth in Section 302 of ERISA
or Section 412 of the Internal Revenue Code of 1986, as amended
(the "Code"). None of the Company or any of its officers or
employees has engaged in a "prohibited transaction" as defined in
Section 406 of ERISA or Section 4975 of the Code with respect to
any Plan which would subject any of such parties to a civil
penalty under Section 502(i) of ERISA or an excise tax under
Section 4975 of the Code. Each of the Plans has been operated in
all material respects in accordance with applicable law,
including ERISA and the Code. None of the Plans is an employee
welfare plan, as defined in Section 3(1) of ERISA, which provides
health or life insurance benefits to employees of the Company
following their retirement (other than coverage mandated by
applicable law). Each Plan that is intended to be qualified
under Section 401(a) of the Code is so qualified.
(p) Absence of Specified Changes. Except as set forth
in Section 3(p) of the Disclosure Schedule, during the period
from June 30, 1995 to the date hereof, there has not been any:
(1) material adverse change in the business,
condition or results of operations of the Company;
(2) transactions involving the Company except in
the ordinary course of business;
(3) change in accounting principles, methods or
practices of the Company;
(4) amendment to the Certificate of Incorporation
or By-Laws of the Company; or
(5) agreement or understanding to take any of the
actions described above in this paragraph.
(q) Certain Fees. No broker's, finder's or financial
advisory fees or commissions will be payable by the Company with
respect to the transactions contemplated by this Agreement and
the Related Agreements.
(r) Use of Proceeds. The Company will apply the
proceeds from the sale of the Series F Preferred Shares, the
Series G Preferred Shares and the New Warrants to general working
capital purposes.
(s) Intellectual Property Rights.
(i) The Company is the owner of or has rights to
use (including the right to xxx for past infringement) the
intellectual and similar property of every kind and nature used
at any time in or necessary for the conduct of its business,
including without limitation, (A) Patents (meaning all United
States and foreign patents and patent applications, patent
disclosures and inventions, and all patents issued upon said
patent applications or based upon said disclosures and
inventions, including all reissues, divisions, continuations,
continuations-in-part, substitutions, extensions or renewals of
any of the foregoing), (B) Trademarks (meaning all United States,
any political subdivision thereof, and foreign trademarks,
service marks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, logos,
designs and general intangibles of like nature, all registrations
and recordings thereof, and all applications in connection
therewith, including registrations, recordings and applications
in the United States Patent and Trademark Office (the "PTO"), any
State of the United States or any other country or jurisdiction
or any political subdivision thereof, and all goodwill symbolized
thereby and/or associated therewith and all extensions or
renewals thereof,), (C) Copyrights (meaning all copyrights,
United States and foreign copyright registrations, and
applications to register copyrights), (D) inventions, formulae,
processes, designs, know-how, show-how or other data or
information, (E) confidential or proprietary technical and
business information, processes and trade secrets, (F) computer
software and databases (including all embodiments or fixations
thereof and related documentation, registrations and franchises,
and all additions, improvements, enhancements, updated and
accessions thereto), (G) all technical manuals and documentation
made or used in connection with any of the foregoing, and (H) all
licenses and rights with respect to the foregoing or property of
like nature, in each case as any of the foregoing have been at
any time used in or necessary for the conduct of the business of
the Company (collectively, the "Intellectual Property Rights").
(ii) Section 3(s)(ii) of the Disclosure Schedule
sets forth a complete and accurate list of all Copyrights,
Patents, and Trademarks owned by or under obligation of
assignment to the Company. Each owner identified thereon is
listed in the records of the appropriate United States, State or
foreign agency as the sole owner of record.
(iii) Section 3(s)(iii) of the Disclosure
Schedule sets forth a complete and accurate list of (a) all
material agreements and (b) all other agreements entered into
since January 1, 1990, in each case between the Company and any
third party granting any right to use or practice any rights
under any Intellectual Property Right (collectively, the
"Intellectual Property Licenses"), except for single-user
licenses granting the right to use on a single personal computer
a single copy of application software incorporating any of the
Company's Intellectual Property Rights.
(iv) There is no restriction or limitation on the
right of the Company to transfer any of the Intellectual Property
Rights.
(v) No trade secret, formula, process, invention,
design, know-how, show-how or any other confidential information
relating to the Company's business has been disclosed or
authorized to be disclosed to any third party unless any such
third party has entered into, or is bound by, a confidentiality
agreement that is sufficient to protect fully the Company's
proprietary interest and right in and to such Intellectual
Property Right.
(vi) The use of the Intellectual Property Rights
by the Company is not in conflict with the rights of others.
There are no pending legal or governmental proceedings, including
oppositions, interferences, proceedings or suits, relating to the
Intellectual Property Rights, and, to the best knowledge of the
Company, no such proceedings are threatened. To the best
knowledge of the Company, the conduct of the business of the
Company and the exercise of the Intellectual Property Rights does
not infringe upon or otherwise violate, and the exercise of any
rights granted to the Company under any Intellectual Property
License would not infringe upon or violate any intellectual
property rights of any third party. To the best knowledge of the
Company, except as set forth in Section 3(s)(vi), no person is
infringing upon or otherwise violating any of the Intellectual
Property Rights. None of the Company or its affiliates has
received notice of any claims, and there are no pending claims,
of any persons relating to the scope, ownership or use of any of
the Intellectual Property Rights.
(vii) Each copyright registration, patent, and
registered trademark and application therefor listed in Section
3(s)(ii) of the Disclosure Schedule is valid, subsisting and in
proper form, and has been duly maintained, including the
submission of all necessary filings in accordance with the legal
and administrative requirements of the appropriate jurisdictions.
There have been no failures in complying with such requirements.
No such Copyright, Patent or Trademark has lapsed and there has
been no cancellation or abandonment thereof.
(viii) With respect to each patent and patent
application listed in Section 3(s) of the Disclosure Schedule,
there are no defects of form in the preparation or filing of the
applications thereof. Each pending application is being
diligently prosecuted. During the prosecution of each Patent,
(A) all pertinent prior art references known to the Company or
its counsel was properly disclosed to the PTO, and (B) neither
such counsel nor the Company made any misrepresentation to, or
concealed any material fact from, the PTO.
(ix) The execution and delivery of this Agreement
and the Related Agreements and the taking of the actions
contemplated hereby and thereby will not alter any of the rights
of the Company in or to the Intellectual Property Rights.
(t) Environmental Matters. The Company is in
compliance with the provisions of all federal, state and local
laws relating to pollution or protection of the environment
applicable to it or to real property leased by it or to the use,
operation or occupancy thereof, except for violations or
liabilities which individually or in the aggregate could not
reasonably be expected to have a Company Material Adverse Effect.
The Company has not engaged in any activity in violation of any
provision of any federal, state or local law relating to
pollution or protection of the environment, which violation could
reasonably be expected to have a Company Material Adverse Effect.
The Company has no liability, absolute or contingent, under any
federal, state or local law relating to pollution or protection
of the environment, except for liabilities which individually or
in the aggregate could not reasonably be expected to have a
Company Material Adverse Effect.
(u) Registration Rights. Except as set forth in
Section 3(u) of the Disclosure Schedule, the Company is not a
party to any agreement granting registration rights to any person
with respect to any of its equity or debt securities.
(v) Agreements. Section 3(v) of the Disclosure
Schedule contains a list of each agreement or instrument
(including any and all amendments thereto) to which the Company
is a party as of the date hereof and which is or, immediately
following the consummation of the transactions contemplated by
this Agreement, will be, material to the business, condition or
results of operations of the Company. Each such agreement or
instrument (including any and all amendments thereto) is in full
force and effect and constitutes a legal, valid and binding
obligation of (i) the Company and (ii) to the best knowledge of
the Company, the other respective parties thereto, and, to the
best knowledge of the Company, no person is in default or breach
of (with or without the giving of notice or the passage of time)
any such agreement or instrument.
(w) Availability of Documents. Section 3(w) of the
Disclosure Schedule contains a true, correct and complete copy of
the Company's Certificate of Incorporation, together with all
amendments thereto. The Company has also heretofore provided or
made available to the Purchaser an accurate copy of its by-laws
and has heretofore made available for inspection by the Purchaser
all written agreements, arrangements, commitments and documents
referred to herein or in the Disclosure Schedule, in each case,
together with all amendments and supplements thereto. The
Company has heretofore made available for inspection by the
Purchaser its corporate minute books. Such corporate minute
books contain the minutes of all the meetings of stockholders,
board of directors and any committees thereof which have been
held since the Company's date of incorporation and all written
consents to action executed in lieu thereof.
(x) Business Relations. To the knowledge of the
Company, no client, customer or supplier will cease to do
business with the Company due to the consummation of the
transactions contemplated by this Agreement or the Related
Agreements.
(y) Interest in Competitors, Suppliers, Customers,
etc. Except as set forth on Section 3(y) of the Disclosure
Schedule or with respect to the ownership of less than 1% of the
outstanding publicly traded securities of an entity, neither the
Company nor its officers, directors, or affiliates have any
ownership interest in any competitor, supplier, customer or
franchisee of the Company.
(z) Private Offering. Assuming the accuracy of the
Purchaser's representations set forth in Section 4(c) herein, the
offer and sale of the Shares hereunder is exempt from the
registration and prospectus delivery requirements of the
Securities Act. Neither the Company nor any person acting on
behalf of it has taken or will take any action which would
subject the offering and issuance of any of such securities to
the provisions of Section 5 of the Securities Act or to the
provisions of any securities law, rule or regulation of any
applicable jurisdiction.
(aa) Disclosure. No representation or warranty to
Purchaser contained in this Agreement and no statement contained
in the Disclosure Schedule or any Officer's Certificate of the
Company furnished pursuant to the provisions hereof, contains any
untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein
not misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser represents and warrants, severally and
not jointly, to the Company as follows:
(a) Organization and Standing of the Purchasers. The
Purchaser is a partnership duly organized, validly existing and
in good standing (to the extent such concept exists) under the
laws of the jurisdiction of its organization.
(b) Authority; Enforceability; No Conflict. The
Purchaser has all requisite power and authority (corporate or
otherwise) to enter into this Agreement and to carry out its
obligations hereunder. The execution, delivery and performance
of this Agreement by the Purchaser have been duly and validly
authorized by all requisite partnership proceedings on the part
of the Purchaser. This Agreement is a valid and binding
obligation of the Purchaser, enforceable against it in accordance
with its terms, except that (i) such enforcement may be subject
to bankruptcy, insolvency, reorganization, moratorium,
rehabilitation, liquidation, conservatorship, receivership or
other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought. The
execution and delivery of this Agreement by the Purchaser do not,
and consummation by the Purchaser of the transactions
contemplated hereby will not, result in or constitute (i) a
default, breach or violation of or under the organizational
documents of the Purchaser, or (ii) a default, breach or
violation of or under any mortgage, deed of trust, indenture,
note, bond, license, lease agreement or other instrument or
obligation to which the Purchaser is a party or by which any of
its properties or assets are bound, except for any defaults,
breaches or violations which would not, individually or in the
aggregate, have a material adverse effect on the Purchaser or
prevent or materially delay the consummation by the Purchaser of
the transactions contemplated hereby, or (iii) a violation of any
statute, rule, regulation, order, judgment or decree of any
court, public body or authority, except for any violations which
would not, individually or in the aggregate, have a material
adverse effect on the Purchaser or prevent or materially delay
the consummation by the Purchaser of the transactions
contemplated hereby.
(c) Acquisition for Investment. The Purchaser is
either an "accredited investor," as that term is defined in
230.501(a) of the rules and regulations promulgated by the SEC
under the 1933 Act or a person described in 230.506(b)(ii) of
such rules and regulations. The Purchaser is acquiring the
Preferred Shares, the New Warrants and, in the case of Wand III,
the Revised Warrants solely for its own account for the purpose
of investment and not with a view to or for sale in connection
with any distribution thereof, and has no present intention or
plan to effect any distribution of such Preferred Shares, the New
Warrants or Revised Warrants. The Purchaser acknowledges that it
is able to bear the financial risks associated with an investment
in the Preferred Shares and Warrants. The Preferred Shares and
Warrants may bear a legend to the following effect:
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE IN RELIANCE
ON CERTAIN EXEMPTIONS FROM REGISTRATION
THEREUNDER. THE SALE, PLEDGE, HYPOTHECATION
OR OTHER TRANSFER OF SUCH SECURITIES IS
SUBJECT TO COMPLIANCE WITH APPLICABLE
SECURITIES LAWS AND REGULATIONS AND CERTAIN
RESTRICTIONS AND CONDITIONS CONTAINED IN A
CERTAIN SECURITIES PURCHASE AND EXCHANGE
AGREEMENT AND RELATED AGREEMENTS DATED AS OF
JANUARY 31, 1996. THE HOLDER OF THIS
CERTIFICATE BY ACCEPTANCE HEREOF AGREES TO BE
BOUND BY SUCH RESTRICTIONS AND CONDITIONS. A
COPY OF THE SECURITIES PURCHASE AND EXCHANGE
AGREEMENT IS ON FILE WITH THE SECRETARY OF
THE COMPANY."
5. CONDUCT OF BUSINESS OF THE COMPANY.
Except as expressly contemplated by this Agreement or
the Related Agreements, during the period from the date hereof
through the Closing, the Company will conduct its operations
according to its ordinary course of business and consistent with
past practice, and the Company will use its best efforts to
preserve intact its business organization, to keep available the
services of its officers and employees and to maintain existing
relationships with customers and others having business
relationships with it. Without limiting the generality of the
foregoing, and except as otherwise expressly contemplated by this
Agreement or the Related Agreements or as set forth in Section 5
of the Disclosure Schedule, prior to the Closing, the Company
will not, without the prior written consent of the Purchaser:
(a) amend its Certificate of Incorporation or By-Laws;
(b) (i) except in accordance with the existing terms
of the convertible securities, warrants, options and other
agreements disclosed on Section 3(c) of the Disclosure Schedule,
authorize for issuance, issue, sell, deliver or agree or commit
to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights
to purchase or otherwise) any securities of any class, or (ii)
amend in any respect any of the terms of any such securities
outstanding as of the date hereof, except to the extent required
by the express terms on the date hereof of such securities;
(c) split, combine or reclassify any shares of its
capital stock, declare, set aside or pay any dividend or other
distribution (whether in cash, stock, or property or any
combination thereof) in respect of its capital stock (except for
dividends on the existing preferred stock in accordance with its
terms), or redeem, retire, repurchase or otherwise acquire,
directly or indirectly, any of its securities or adopt a plan of
complete or partial liquidation or resolutions providing for or
authorizing any such liquidation;
(d) incur any additional Indebtedness, except for
short-term borrowings or other Indebtedness incurred in the
ordinary course of business, or mortgage or pledge any of its
assets, tangible or intangible;
(e) acquire, sell, lease or dispose of any assets
outside the ordinary course of business;
(f) make any change in any of the accounting
principles or practices, methods or practices or business
policies used by it;
(g) acquire (by merger, consolidation, or acquisition
of stock or assets) any corporation, partnership or other
business organization or division thereof;
(h) pay, discharge or satisfy any claims, liabilities
or obligations (absolute, accrued, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary
course of business consistent with past practice or, in
accordance with their terms, of liabilities reflected or reserved
against in the September Balance Sheet (or the notes thereto) or
incurred in the ordinary course of business consistent with past
practice;
(i) increase the compensation payable to the officers
and employees of the Company, except for increases in salary or
wages (a) in accordance with past practice or (b) in conjunction
with promotions or other changes in job status in the ordinary
course of business;
(j) pay, loan or advance any amounts to, transfer or
lease any properties or assets to or enter into any contract or
agreement with any officers, directors, employees or shareholders
of the Company, except with respect to directors' fees and
compensation to officers and employees at rates in accordance
with past practice, and except with respect to reimbursable
business expenses of a nature and in amounts reasonably related
to the requirements of the business of the Company;
(k) waive or release any rights of material value or
terminate or fail to renew any material contract; or
(l) take, or agree in writing or otherwise to take,
directly or indirectly, any of the actions described in Sections
5(a) through 5(k).
6. ADDITIONAL AGREEMENTS.
(a) Access to Information; Confidentiality. From the
date hereof to the Closing, the Company shall afford the
officers, employees and agents of the Purchasers access during
normal business hours to the Company's officers, employees,
agents, properties, offices and all books and records of the
Company, and shall furnish the Purchasers with all financial,
operating and other data and information concerning the Company
as the Purchaser, through its officers, employees or agents, may
request and shall cooperate fully with the Purchasers and their
representatives in their examination of the Company.
Each Purchaser will, and will cause its respective
affiliates, partners, directors, officers, employees, agents,
representatives and financial advisors (collectively,
"Representatives") to, hold in strict confidence all Confidential
Information (as hereinafter defined), and not disclose the same
to any person without the prior consent of the Company, unless
compelled to disclose any such Confidential Information by
judicial or administrative process or, in the written opinion of
their counsel, by other requirements of law. Prior to disclosing
any Confidential Information to any such person, the Purchasers
will inform such person and its representatives of the
confidential nature thereof and will obtain from such person its
agreement to be bound by the provisions of this paragraph as if
references herein to the Purchaser were references to such
person. If this Agreement is terminated, each Purchaser will
promptly return to the Company or destroy all documents
(including all copies thereof) furnished by the Company and
received by such Purchaser or any of its Representatives
containing such Confidential Information. For purposes hereof,
"Confidential Information" shall mean all confidential nonpublic
information concerning the Company that the Purchaser obtains
from the Company, or its representatives, excluding any such
information that subsequently becomes publicly available (other
than directly or indirectly through acts of the Purchaser.)
(b) Best Efforts. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its
best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things reasonably necessary, proper
or advisable under applicable laws and regulations to consummate
and make effective the transactions contemplated by this
Agreement and the Related Agreements as promptly as practicable.
In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this
Agreement and the Related Agreements, the proper officers and
directors of each party hereto shall take all such necessary
action.
(c) Public Announcements. The Purchasers and the
Company will consult with each other before issuing any press
release or otherwise making any public statements with respect to
the transactions contemplated by this Agreement and the Related
Agreements, and shall not issue any such press release or make
any such public statement prior to such consultation, except as
may be required by applicable law. Except as may be required by
applicable law, the Company shall not disclose the identify of
any Purchaser in any such press release or other public statement
without the prior written consent of such Purchaser.
(d) Supplements to Disclosure Schedule. Prior to the
Closing, the Company will supplement or amend the Disclosure
Schedule with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have
been required to be set forth or described in the Disclosure
Schedule. No supplement or amendment of the Disclosure Schedule
made pursuant to this section shall be deemed to cure any breach
of any representation or warranty made in this Agreement unless
the Purchasers specifically agrees thereto in writing.
(e) Directors. For so long as the Purchasers shall
own, in the aggregate, Common Stock (or Preferred Shares
convertible into Common Stock) equal to or exceeding five percent
of the then outstanding Common Stock of the Company, the
Purchaser shall be entitled to propose two candidates (the
"Purchaser Designees") for election to the Board of Directors of
the Company. Subject to its fiduciary duties to shareholders,
the Company will recommend to its shareholders that the Purchaser
Designees be elected to the Company's Board of Directors.
7. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
COMPANY TO SELL THE PREFERRED SHARES AND WARRANTS AND OF THE
PURCHASERS TO PURCHASE THE PREFERRED SHARES AND WARRANTS.
The respective obligations hereunder of the Company to
issue and sell the Preferred Shares and Warrants and of the
Purchasers to purchase the Preferred Shares and Warrants are
subject to the satisfaction, at or before the Closing, of each of
the following conditions set forth in paragraphs (a) through (c)
below.
(a) Consents. The consents and approvals set forth in
Section 3(b) of the Disclosure Schedule shall have been obtained.
(b) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or enforced by any court or
governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this
Agreement.
(c) Related Agreements. The Related Agreements shall
have been executed and delivered by the parties thereto.
8. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
COMPANY TO SELL THE PREFERRED SHARES AND WARRANTS.
The obligation hereunder of the Company to sell the
Preferred Shares and Warrants to the Purchasers is further
subject to the satisfaction, at or before the Closing, of each of
the following conditions set forth in paragraphs (a) and (b)
below. These conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole discretion.
(a) Accuracy of the Purchasers' Representations and
Warranties. The representations and warranties of each Purchaser
shall be true and correct in all material respects as of the date
when made and as of the Closing as though made at that time
(except for representations and warranties that speak as of a
particular date).
(b) Performance by the Purchasers. The Purchasers
shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by
the Purchasers at or prior to the Closing.
9. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
PURCHASERS TO PURCHASE THE PREFERRED SHARES AND
WARRANTS.
The obligation of the Purchasers hereunder to acquire
and pay for the Preferred Shares and Warrants is subject to the
satisfaction, at or before the Closing, of each of the following
conditions set forth in paragraphs (a) through (e) below. These
conditions are for the Purchaser's sole benefit and may be waived
by the Purchasers at any time in its sole discretion.
(a) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company
shall be true and correct in all material respects as of the date
when made and as of the Closing as though made at that time
(except for representations and warranties that speak as of a
particular date).
(b) Performance by the Company. The Company shall
have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing.
(c) Legal Opinions. The Purchasers shall have
received the opinion of Xxxx Marks & Xxxxx, substantially in the
form set forth in Exhibit IX hereto.
(d) Compliance with Securities Laws. The offering and
sale by the Company, at or prior to the Closing, of the Preferred
Shares and Warrants shall have been made in compliance with all
applicable requirements of federal and state securities laws and
each Purchaser shall have received evidence thereof in form and
substance reasonably satisfactory to it.
(e) No Offerings. Neither the Company nor any of its
subsidiaries shall have offered, placed or sold, or caused or
agreed to be offered, placed or sold, any securities or other
obligations other than as part of the contemplated sale of the
Preferred Shares and Warrants and the capital structure as
reflected herein.
(f) Regulatory Approvals. All regulatory approvals
shall have been obtained by the Purchasers.
10. TERMINATION.
(a) Right To Terminate. Notwithstanding anything to
the contrary set forth in this Agreement, this Agreement may be
terminated and the transactions contemplated herein abandoned at
any time prior to the Closing:
(i) at any time by mutual written consent of the
Company and the Purchasers;
(ii) by either the Company or the Purchaser if
the Closing shall not have occurred by March 1, 1996; provided,
however, that the right to terminate this Agreement under this
Section 10(a)(ii) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of the Closing to occur
on or before such date; or
(iii) by either the Company or the Purchasers if
a court of competent jurisdiction shall have issued an order,
decree or ruling permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, and
such order, decree, ruling or other action shall have become
final and nonappealable.
(b) Obligations to Cease. In the event that this
Agreement shall be terminated pursuant to Section 10(a) hereof,
all obligations of the parties hereto under this Agreement shall
terminate and there shall be no liability of any party hereto to
any other party except that (i) the provisions of the second
paragraph of Section 6(a), Section 11, and Section 12(g) shall
survive, and shall be and remain in full force and effect and
(ii) nothing herein will relieve any party from liability for any
willful breach of this Agreement.
11. INDEMNIFICATION.
(a) General Indemnity. The Company agrees to
indemnify and save harmless the Purchasers (and their respective
directors, officers, partners, affiliates, representatives,
advisors, successors and assigns) from and against any and all
losses, liabilities, deficiencies, costs, damages and expenses
(including, without limitation, interest, penalties, reasonable
attorneys' fees, charges and disbursements) incurred by the
Purchasers as a result of (i) any breach of the representations,
warranties or covenants made by the Company herein or in the
Related Agreements or (ii) any action, proceeding or claim
commenced or threatened by a third party in connection with this
Agreement, the Related Agreements and the transactions
contemplated hereby and thereby. Each Purchaser agrees to
indemnify and save harmless the Company (and its directors,
officers, partners, affiliates, representatives, advisors,
successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses
(including, without limitation, interest, penalties, reasonable
attorneys' fees, charges and disbursements) incurred by the
Company as a result of any breach of the representations,
warranties or covenants made by such Purchaser herein or in the
Related Agreements. No party shall be entitled to
indemnification hereunder unless and until the aggregate amount
of such party's indemnification claims exceeds $15,000 and then
to the full extent of such claims.
(b) Indemnification Procedure. Any party entitled to
indemnification under this Section 11 (an "indemnified party")
will give prompt written notice to the indemnifying party of any
claim with respect to which it seeks indemnification promptly
after the discovery by such party of any matters giving rise to a
claim for indemnification; provided that the failure of any party
entitled to indemnification hereunder to give notice as provided
herein shall not relieve the indemnifying party of its
obligations under this Section 11 except to the extent that the
indemnifying party is actually prejudiced by such failure to give
notice. In case any action, proceeding or claim is brought
against an indemnified party in respect of which indemnification
is sought hereunder, the indemnifying party shall be entitled to
participate in and, unless in the reasonable judgment of the
indemnified party a conflict of interest between it and the
indemnifying party may exist in respect of such action,
proceeding or claim, to assume the defense thereof, with counsel
reasonably satisfactory to the indemnified party. In the event
that the indemnifying party advises an indemnified party that it
will contest such a claim for indemnification hereunder, or
fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to
defend, settle or compromise, at its sole cost and expense, any
action, proceeding or claim (or discontinues its defense at any
time after it commences such defense), then the indemnified party
may, at its option, defend, settle or otherwise compromise or pay
such action or claim. In any event, unless and until the
indemnifying party elects in writing to assume and does so assume
the defense of any such claim, proceeding or action, the
indemnified party's costs and expenses arising out of the
defense, settlement or compromise of any such action, claim or
proceeding shall be losses subject to indemnification hereunder.
The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to
the indemnifying party all information reasonably available to
the indemnified party which relates to such action or claim. The
indemnifying party shall keep the indemnified party fully
apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. If the
indemnifying party elects to defend any such action or claim,
then the indemnified party shall be entitled to participate in
such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any
settlement of any action, claim or proceeding effected without
its written consent, provided, however, that the indemnifying
party shall not unreasonably withhold, delay or condition its
consent. Anything in this Section 11 to the contrary
notwithstanding, the indemnifying party shall not, without the
indemnified party's prior written consent, settle or compromise
any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or
which does not include, as an unconditional term thereof, the
giving by the claimant or the plaintiff to the indemnified party
of a release from all liability in respect of such claim. The
indemnification required by this Section 11 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred. The indemnity
agreements contained herein shall be in addition to (i) any cause
of action or similar right of the indemnified party against the
indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
12. MISCELLANEOUS.
(a) Brokers. The Company and the Purchasers represent
and warrant to each other that they have not taken any action
which will result in any liability of the other to pay any
broker's or finder's fee with respect to this Agreement or the
transactions contemplated hereby.
(b) Expenses. Each party hereto shall pay its own
fees and expenses incurred in connection with this Agreement
except that, if the closing of the purchase of the Series G
Preferred Stock by the Wand III Partnership, as set forth on
Schedule 1 attached hereto, is consummated, the Company shall,
immediately thereafter, pay the reasonable out-of-pocket fees and
expenses, up to a maximum amount of $10,000, incurred by the
Purchasers in connection with this Agreement, the Related
Agreements and the transactions contemplated hereby and thereby,
including the reasonable fees and expenses of Skadden, Arps,
Slate, Xxxxxxx & Xxxx in its capacity as Purchasers' legal
counsel.
(c) Survival of Representations, Warranties and
Covenants. The representations and warranties set forth herein
shall survive the Closing until sixty days after the Company
shall have delivered to the Purchaser the audited financial
statements of the Company and its consolidated subsidiaries (if
any) for the fiscal year ended June 30, 1997, certified by the
Company's independent public accountants; provided that the
representations and warranties shall survive such date to the
extent written notice of any breach thereof is given on or prior
to such date and representations and warranties relating to Taxes
shall survive until a date which is six months after the
expiration of the applicable statute of limitations. The
covenants of the Company set forth herein shall endure for so
long as the Purchaser shall continue as a stockholder of the
Company or for such shorter period as may be specified herein.
(d) Assignment and Binding Effect. Neither the
Company nor the Purchaser shall assign all or any part of this
Agreement without the prior written consent of the other;
provided, however, that the Purchaser, without such prior written
consent, may assign its rights hereunder to any entity or
entities directly or indirectly controlled by, or under common
control with, it; provided, further, that no such assignment
shall relieve the Purchaser of its obligations under this
Agreement. This Agreement shall be binding upon and inure to the
benefit of the permitted successors and assigns of the parties
pursuant to this paragraph.
(e) Headings. Subject headings are included for
convenience only and shall not affect the interpretation of any
provisions of this Agreement.
(f) Notices. Any notice, demand, request, waiver, or
other communication under this Agreement shall be in writing and
shall be deemed to have been duly given on the date of service if
personally served or on the third day after mailing if mailed to
the party to whom notice is to be given, by first class mail,
registered, return receipt requested, postage prepaid and
addressed as follows:
To the Company: Xxxxxx, Inc.
Xxx Xxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxx 00000
Attention: Chief Executive Officer
With copies to: Xxxx Marks & Xxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
To the Wand (Xxxxxx) Inc.
Purchasers: c/o Wand Partners Inc.
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
With a copy to: Skadden, Arps, Slate,
Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxx, Esq.
(g) Governing Law. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF
DELAWARE AS APPLIED TO CONTRACTS MADE AND TO BE PERFORMED
ENTIRELY IN THE STATE OF DELAWARE.
(h) Entire Agreement. This Agreement, including the
Exhibits and Schedules hereto, sets forth the entire
understanding and agreement of the parties hereto relating to the
matters set forth herein and supersedes any and all other
understandings, negotiations or agreements between the parties
hereto relating to the matters set forth herein.
(i) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, and all
of which together shall constitute a single agreement.
(j) Severability. In the event that any one or more
of the provisions contained in this Agreement shall for any
reason be held to be invalid, illegal or unenforceable, the same
shall not affect any other provision of this Agreement, but this
Agreement shall be construed in a manner which, as nearly as
possible, reflects the original intent of the parties.
(k) Words in Singular and Plural Form. Words used in
the singular form in this Agreement shall be deemed to import the
plural, and vice versa, as the sense may require.
(l) Amendment and Modification. This Agreement may be
amended or modified only by written agreement executed by all
parties hereto.
(m) Waiver. At any time prior to the Closing, any
party hereto may (i) extend the time for the performance of any
of the obligations or other acts of any other party hereto, (ii)
waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto,
and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party
granting such waiver but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or future failure.
(n) Specific Enforcement. The Purchaser and the
Company acknowledge and agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were
not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the
United States or any state thereof having jurisdiction, this
being in addition to any other remedy to which they may be
entitled at law or equity.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first set forth above.
XXXXXX, INC.
By: /s/ Xxxxx Xxxxxxx
Name: Xxxxx Xxxxxxx
Title: Vice Chairman
WAND/XXXXXX INVESTMENTS L.P.
WAND/XXXXXX INVESTMENTS II L.P.
WAND/XXXXXX INVESTMENTS III L.P.
By: WAND (XXXXXX) INC.
as General Partner
By: /s/ Xxxxxxx X. Xxxxxxxxx
Name: Xxxxxxx X. Xxxxxxxxx
Title: Vice President
[150339/2a]
SCHEDULE I
SECURITIES TO BE PURCHASED BY WAND/XXXXXX INVESTMENTS L.P.
Security Purchase Price
527 Shares of Series F Preferred Stock $527,000
(together with detachable Warrants to
purchase 152.830 shares of Common Stock)
SECURITIES TO BE PURCHASED BY WAND/XXXXXX INVESTMENTS II L.P.
Security Purchase Price
72 Shares of Series F Preferred Stock $72,000
(together with detachable Warrants to
purchase 20,880 shares of Common Stock)
SECURITIES TO BE PURCHASED BY WAND/XXXXXX INVESTMENTS III L.P.
Security Purchase Price
401 Shares of Series G Preferred Stock $401,000
(together with detachable Warrants to
purchase 116,290 shares of Common Stock)
[The purchase of Series G Preferred Stock is subject to Wand
III's receipt of all regulatory approvals that it deems necessary
or advisable, in its sole discretion.]
Securities to be Transferred By
Wand/Xxxxxx Investments L.P. to Wand/Xxxxxx Investments III L.P.
74,151 Shares of Company Common Stock
1,444 Shares of Series C Preferred
Stock
8,322 Shares of Series D Preferred
Stock
416,115 $.65 Warrants
291,281 $1.00 Warrants
4,161 $2.00 Warrants
Securities To Be Exchanged By
Wand/Xxxxxx Investments L.P.
1,776 Shares of Series C Preferred
Stock for 1,776 Shares of Series H
Preferred Stock
Securities To Be Exchanged By Wand/Xxxxxx Investments II L.P.
250 Shares of Series C Preferred Stock
for 250 shares of Series H Preferred
Stock
Securities To Be Exchanged By Wand/Xxxxxx Investments III L.P.
1,444 Shares of Series C Preferred
Stock for 1,444 Shares of Series E
Preferred Stock
416,115 $.65 Warrants for 416,115
Revised $.65 Warrants
291,281 $1.00 Warrants for 291,281
Revised $1.00 Warrants
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
DISCLOSURE SCHEDULE 3(c)
CAPITAL STOCK
As of the date hereof, there are authorized 30,000,000 shares of
Common Stock, par value $.01 per share, of which 7,844,908 shares
are outstanding (excluding shares held in Treasury); and there
are authorized 10,000,000 shares of preferred stock, par value
$1.00 per share (the "Preferred Stock"), of which 452,064 shares
of Series A Preferred Stock, 2,380,000 shares of Series B
Preferred Stock, 3,470 shares of Series C Preferred Stock, and
210,549 shares of Series D Preferred Stock are outstanding.
RIGHTS, OPTIONS, WARRANTS
1. There are outstanding Incentive Stock Options to purchase
1,346,000 shares of the Company's common stock, which were
issued pursuant to the Company's Incentive Stock Option
Plan, expiring at various dates from 1996 through 2001.
2. There are outstanding 689,375 warrants to purchase shares of
the Company's common stock at $3.00 per share, which were
issued to purchasers of the Company's Series B Convertible
Preferred Shares, expiring in February 1996 and August 1996.
Schedules of such warrants are attached to this disclosure
schedule 3(c).
3. There are outstanding warrants to purchase 105,275 shares of
Common Stock of the Company at an exercise price of $2.00
per share, which warrants were acquired by purchases of
Series D Preferred Stock.
4. There are outstanding 206,000 other warrants and non-
qualified options to purchase Common Stock of the Company at
prices ranging from $1.00 per share to $4.63 per share,
expiring in 1996, 1997 and 1999, as more fully set forth
below:
Number of Expiration Exercise
Holder Shares Date Price
Xxx Xxxxxx 10,000 4/30/96 $4.625
Xxx Xxxxxx 10,000 2/23/97 $1.20
Xxxxx Xxx 68,000 5/1/99 $1.00
Xxxxx X. Xxxxxx 38,667 6/30/97 $1.20
Xxxx Xxxxxxx 5,800 6/30/97 $1.20
One Hundred Pearl
Street Ltd. 71,533 6/30/97 $1.20
Hampshire
Securities Corp. 2,000 6/30/97 $1.20
WARRANTS TO PURCHASE SHARES OF COMMON STOCK
AT $3.00 PER SHARE
EXPIRING FEBRUARY 26, 1996
FIRST LAST CERT. OUT-
NO. STANDING
Xxxxx Xxxxxx & Xxxxxx Xxxxxx, 61 5,000
Xxxxx X. Xxxxxxxx 62 5,000
Xxxxxxxx Enterprises,Inc. 63 30,000
Xxxxxx X. Xxxxxxxx 64 10,000
Xxxxxxx X. Xxxxx 66 25,000
Xxxxxx Xxxxxxx, M.D. 67 10,000
Xxxxx Xxxxxxx 68 10,000
Xxxx X. Xxxxxx 69 5,000
Xxxxx X. Xxxxxxx 70 10,000
Xxxx Xxxxx, Xx. 71 5,000
Xxx X. Xxxxxx 73 15,000
Xxxxxx Xxxxxxxxx III, Trustee 74 12,500
Xxxxxx Xxxxxxxxx III 75 12,500
Xxxx X. Xxxxxxxx XX 76 50,000
Xxxxxx X. Xxxxxxx and 79 12,500
Xxxxxxx X. Xxxxxx,Trustee 80 10,000
Xxxxxx X. Xxxxxxxx 81 5,000
Xxxxxx X. Xxxxx 82 5,000
Xxxxx Share 2,500
Xxxxxx Xxxxxx, Xx., Trustee 84 25,000
Xxxxxxx X. Xxxxxxxx 85 5,000
Guarantee Trust Co., Trustee 86 25,000
&
Xxxxxx & Xxxxxxxxx 87 20,000
Xxxx
Xxxxxx X. Xxxxxxxx 88 50,000
Xxxx X. Xxxxxxxx 89 25,000
TOTAL 390,000
WARRANTS TO PURCHASE SHARES OF COMMON STOCK
AT $3.00 PER SHARE
EXPIRING AUGUST 31, 1996
FIRST LAST CERT. NO. OUTSTANDING
Xxxxxxx X. Xxxxx 95 10,000
Xxxxxxxx X. Xxxxxxx 122 12,500
Dryad Corporation 98 10,000
Xxxx X. Xxxxxxxx, Xx. 100 12,500
Xxxxx X. Xxxxx 103 10,000
Xxxxxx X. Xxxxx 104 12,500
Xxxxxx X. Xxxxxxxx 105 20,000
Xxxxxxx X. Xxxxxx, XXX 107 40,000
Xxxxxxx X. Xxxxxx 108 10,000
Xxxx X. Xxxx 000 17,500
Xxxxxxx X. Xxxxxx 123 5,000
Xxxxxxx X. Xxxxxxx, Xx. 111 12,500
Xxxxxx X. Xxxxxxx 112 9,375
Xxxxxx X. Xxxxxxxx, Xx. 113 5,000
Xxxxxxx X. Xxxxxxxx XX 124 10,000
Xxxxx Xxxxx 114 12,500
Xxxxxx X. Xxxxxxx, Xx. 115 25,000
Xxxxxx X. Xxxxxxx,Xx. ACF Xxxx X.
Xxxxxxx 116 12,500
Xxxxxx X. Xxxxxxx,Xx. ACF Xxxxxxx
X. Xxxxxxx 117 12,500
R. Xxxxxx Xxxxxxxx, Xx. 119 15,000
Xxxxxxx X. Xxxxx & Xxxxxx X. Xxxxx 125 2,500
Xxxxxxx Xxxxx 120 10,000
Xxxxxx Xxxxxxx 127 5,000
Xxxxxx X. Xxxxxxx ACF Xxxxxx X
Xxxxxxx 128 2,500
Xxxxxx X. Xxxxxxx ACF Xxxxxxx X
Xxxxxxx 129 2,500
Xxxxxx X. Xxxxxxx ACF Xxxxxx
Xxxxxxx 130 2,500
TOTAL 299,375
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
DISCLOSURE SCHEDULE 3(d)
SUBSIDIARIES AND OTHER VENTURES
The Company has no subsidiaries.
The Company is the managing partner of a joint venture with
Xxxxxx, Xxxxx & Co., Inc., which is dormant.
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
DISCLOSURE SCHEDULE 3(i)
INDEBTEDNESS OF THE COMPANY
The Company has no indebtedness, secured or unsecured, in excess
of $50,000 in any individual case or for which the Company has
commitments on the date of this Agreement.
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
DISCLOSURE SCHEDULE 3(j)
REAL PROPERTY LEASED
The Company leases offices and research and development
facilities, consisting of approximately 10,000 square feet,
located at Xxx Xxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxx Xxxxxx 00000,
for which the annual base rental is $159,044.
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
DISCLOSURE SCHEDULE 3(n)(iv)
TAX ASSESSMENTS
The Company has received a notice of deficiency in New York City
Rent Tax in the amount of $571.32. The Company maintains that
this tax has been paid, and is disputing the notice of
deficiency.
The Company is in arrears in payment of $4,390 of Rhode Island
Sales and Use Tax.
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
DISCLOSURE SCHEDULE 3(o)
EMPLOYEE BENEFIT PLANS
The Company has instituted a defined-contribution pension plan
under Section 401(k) of the Internal Revenue Code of 1986.
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
DISCLOSURE SCHEDULE 3(p)
ABSENCE OF SPECIFIED CHANGES FOR PERIOD FROM JUNE 30, 1995 TO THE
DATE HEREOF
(1) The Company has heretofore furnished the Purchaser
with copies of the Company's Reports on Form 10-Q as
filed with the Securities and Exchange Commission for
the period ended September 30, 1995. Such Reports
reflect operating losses of the Company with consequent
reduction of the Company's net worth and working
capital. The Company has continued to experience
operating losses from the date of the last such Report
to the date of this Securities Purchase and Exchange
Agreement.
(2) On September 29, 1996, the Company close a public
offering of units, each units consisting of one share
of Series D Convertible Preferred Stock and one warrant
to purchase one-half share of the Company's Common
Stock. The sale of such units is reflected in the
Company's unaudited financial statement as at September
30, 1995.
On October 1995, the Company issued and delivered
to Wand/Xxxxxx Investments L.P. the securities
described in a Cross Receipt between the Company and
Wand/Xxxxxx Investment L.P. dated October 5, 1995, in
accordance with the terms of a First Amended and
Restated Standy Financing Agreement dated as of June
30, 1995.
(3) There has been no change in accounting principles,
methods or practices since June 30, 1993, except for
(a) the presentation of revenues and expenses by
product category and (b) accounting for the expense of
(i) reduction in the exercise price of issued warrants
and (ii) treating as an operating expense, and not a
capital expense, the issuance of shares in connection
with financing and the bargain-purchase value of
warrants issued in connection with financings, upon
their exercise.
(4) The following amendments to the Company's
Certificate of Incorporation have been filed:
(a) On March 16, 1995, amending the Certificate of
Designation relating to the Series C Senior Convertible
Preferred Stock to increase the number of authorized
shares to 3,500;
(b) On June 9, 1995 amending the Certificate of
Incorporation to increase the number of authorized
shares of Common Stock to 30,000,000;
(c) On August 9, 1995, a Certificate of
Designation authorizing issuance of 3,000,000 shares of
Series D Convertible Preferred Stock; and
(d) On January 30, 1996, amending the Certificate
of Designation relating to the Series D Convertible
Preferred Stock reducing the authorized number of
shares to 210,549.
(5) There has been no agreement or understanding to
take any of the actions described in paragraph 3(p) of
this Agreement.
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
DISCLOSURE SCHEDULE 3(s)(ii)
COPYRIGHTS, PATENTS AND TRADEMARKS
The Company places copyright notices on its software and related
documentation, as appropriate. The Company has not filed any
application for copyright registration.
There is annexed to this Schedule 3(s)(ii) a list of patents,
patent applications, trademark registrations, and trademark
applications owned by the Company.
XXXXXX, INC. PATENTS AND PATENT APPLICATIONS
DATE OF ISSUE PATENT NO.
United States
December 26, 1995 5,479,574
October 1, 1991 5,045,093
September 18, 1990 4,958,375
January 30, 1990 4,897,811
July 26, 1988 4,760,604
April 20, 1982 4,326,259
March 9, 1982 4,319,331
March 3, 1981 4,254,474
August 23, 1977 4,044,243
April 13, 1976 3,950,733
Canada
November 15, 1988 1,244,946
March 26, 1985 1,184,661
November 15, 1983 1,157,159
November 7, 1978 1,042,109
Netherlands
February 19, 1985 176,313
Mexico
January 7, 1993 166,402
January 25, 1985 151,653
April 13, 1981 143,269
Japan
July 13, 1989 1,506,188
July 14, 1987 1,389,124
Germany
January 8, 1981 2,524,734
Great Britain
March 30, 1977 1,457,338
France
July 27, 1981 7,705,803
June 5, 1975 7,517,627
Italy
October 30, 1979 1,036,906
Spain
September 7, 1987 548,992
November 10, 1981 500,677
October 29, 1977 453,378
September 13, 1977 453,377
December 9, 1976 436,945
Europe
September 24, 1986 037,164
September 9, 1993 0,328,861
Switzerland
November 24, 1980 620,307
PATENT APPLICATIONS
DATE FILED SERIAL NO.
Europe
January 5, 1989 89-100158.8 (allowed)
February 5, 1986 86101452.0 (allowed)
United States
July 1, 1994 08/269,848
(Adaptive Classifier Having
Multiple Subnetworks)
Japan
February 17, 1989 39180/1987
January 19, 1989 1-10983/1989
February 14, 1986 30604/1986
Xxxxxx Trademark Registrations:
Country Date Issued Reg. No. Trademark
United States February 1, 1977 1,057,914 XXXXXX
United States January 24, 1985 1,384,074 XXXXXX SYSTEM
Canada May 8, 1987 327,283 XXXXXX SYSTEM
France July 22, 1985 1,317,788 XXXXXX SYSTEM
Japan August 19, 1987 1,980,597 XXXXXX SYSTEM
Japan June 24, 1988 2,054,809 XXXXXX SYSTEM
Germany May 23, 1986 1,091,726 XXXXXX SYSTEM
United States August 18, 1993 1,707,862 HUMAN HEAD DESIGN
United States December 15, 1992 1,739,577 PENSHELL
United States December 19, 1995 1,942,624 OMNITOOLS
Xxxxxx Trademark Applications:
Country Date Filed Serial No. Trademark
United States July 12, 1993 74/413,383 FDS
United States Not Yet Filed PRISM
United States June 13, 1995 74/689,201 N'Route
United States November 3, 1995 75/015,599 OmniReader
United States November 30, 1995 TrafficVision*
* Intent-to-use TM application. Received notification of
receipt, but no serial number yet. Serial number assigned on
canceled application fee check.
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
DISCLOSURE SCHEDULE 3(s)(iii)
MATERIAL AGREEMENTS, AND OTHER AGREEMENTS SINCE JANUARY 1, 1988,
ALL RELATING TO RIGHTS TO USE OR PRACTICE INTELLECTUAL PROPERTY
RIGHTS OF THE COMPANY
There are annexed as part of this schedule two lists of
individual license agreements and material agreements involving
intellectual-property rights of the Company. The first list
contains such agreements entered into between January 1, 1988 and
August 1, 1994. (This list includes a number of agreements that
may have expired or may otherwise not be financially material to
the Company. They are nevertheless included here because they
contain provisions regarding intellectual-property rights or
obligations that survive termination.) The second list contains
such agreements entered into between August 1, 1994 and the date
of this Securities Purchase and Exchange Agreement.
In the earlier list, the individual license agreements are
grouped as follows:
NestorReader Reseller Agreements
N'Route Beta Agreements
Xxxxxx Fraud-detection System (FDS) Licenses
Ni1000 Chip Beta Agreements
License agreements entered into since January 1, 1988 do not
include all single-user licenses granting the right to use, on a
single personal computer, a single copy of application software
incorporating any of the Company's intellectual property.
LICENSE AGREEMENTS AND MATERIAL AGREEMENTS INVOLVING THE
COMPANY'S INTELLECTUAL PROPERTY ENTERED INTO BETWEEN JANUARY 1,
1988 AND AUGUST 1, 1994
(SEE FOLLOWING PAGES)
NestorReader Reseller Agreements
NestorReader License and Development Agreement:
Licensee Date
Accu-Automation Corporation April 30, 1993
Almedica May 29, 1992
Alliance Data Systems October 7, 1993
Cardiff Software December 13, 1991
CBIS January 27, 1993
Datacap, Inc. May 27, 1992
Diamond Head Software, Inc. February 3, 1994
Digital Image Technologies Corp. December 6, 1993
Document Access June 30, 1992
Document Management System October 23, 1993
Executive Technologies August 28, 1992
Handwriting Imaging Systems June 25, 1993
Hermes Precise Australia, Ltd. October 6, 1993
ILC Holding August 31, 1992
X. Xxxx & Associates, Inc. May 4, 1993
Interfax June 25, 1992
Microsystems Technology, Inc. September 4, 1992
Midcontinent Business Systems August 18, 1992
MoneyFax February 16, 1993
Optimum Solutions April 14, 1993
Pear Computing Systems, Ltd. July 26, 1993
Scan-Optics May 27, 1992
Synergy Imaging Systems June 28, 1993
Team Consultants July 10, 1992
TIS December 10, 1992
Trip Data September 8, 1992
Westinghouse December 24, 0000
XxxXxx Company September 24, 1993
NestorReader Software License Agreement:
Licensee Date
Alta Technology Corporation February 16, 1994
Fraud Detection System (FDS) Licenses
Agreement with Option to Use Under License:
Licensee Date
Canadian Imperial Bank of Commerce July 19, 1993
Mellon Bank November 6, 1993
License Agreement:
Licensee Date
Sligos S.A. October 26, 1990
Supplemental License Agreement:
Licensee Date
Sligos S.A. September 9, 1991
Ni1000 Chip Beta Program
80160NC Beta Test Program Agreement:
Licensee Date
AEG Electrocom
Alacron, Inc. July 7, 1993
Computer Sciences Innovations, Inc. August 18, 1993
Elsag Xxxxxx spa
Interactive Systems International December 13, 1993
Lockheed Missiles and Space Co., Inc.
Xxxxxx Xxxxxxxx Technologies, Inc. August 31, 1993
Profold Imaging Systems
Xxxx Systems Group, Inc. March 8, 1994
Material Agreements Involving Intellectual-Property Rights
Xxxxxx, Inc. Development License Agreement:
Licensee Date
Alta Technology Corporation December 11, 1990
License Agreement:
Licensee Date
Atari Corporation November 27, 1990
Exclusive Field-of-Use Agreement:
Licensee Date
BancTec, Inc. March 31, 1988
NestorWriter License and Development Agreement:
Licensee Date
Click Technologies June 29, 1993
License Agreement:
Licensee Date
CSK Corporation April 1, 1990
License Agreement For Product Development and Marketing:
Licensee Date
Dassault Electronique March 18, 1991
License Agreement:
Licensee Date
Digital Equipment Corporation September 20, 1983
Settlement Agreement, Release and Waiver:
Licensee Date
Digital Equipment Corporation September 10, 1986
Software License Agreement:
Licensee Date
X. X. xxXxxx de Nemours and Company December 21, 1988
Non-Exclusive Field-Of-Use Agreement:
Licensee Date
General Electric Company December 30, 1988
Xxxxxx, Inc. Development License Agreement:
Licensee Date
Hema Systemknowhow March 15, 1990
Intel/Xxxxxx License Agreement:
Licensee Date
Intel Corporation October 15,1993
Exclusive Marketing Agreement:
Licensee Date
Intel Corporation April 7, 1994
Confidential Settlement Agreement and Mutual Release
Licensee Date
Intel Corporation April 7, 1994
Technology Development Agreement:
Licensee Date
Intel Corporation May 1, 1990
Letter Agreement:
Licensee Date
Intel Corporation April 30, 1992
Letter Agreement:
Licensee Date
Intel Corporation August 24, 1993
NestorWriter License and Development Agreement:
Licensee Date
JFK Associates, Inc. May 15, 1992
Xxxxxx License and Development Agreement:
Licensee Date
Xxxxxx Aluminum & Chemical Corp. June 14, 1993
Software Development Agreement:
Licensee Date
Lyonnaise des Eaux-Xxxxx October 30, 1990
License Agreement for Product Development and Marketing:
Licensee Date
Lyonnaise des Eaux-Xxxxx October 30, 1990
Non-Exclusive Field-of-Use License Agreement:
Licensee Date
Xxxxxx Xxxxxxx & Co. Incorporated June 21, 1988
Contract:
Licensee Date
Office of Naval Research March 13, 1990
Contract:
Licensee Date
Office of Naval Research August 26, 1993
NestorWriter License and Development Agreement:
Licensee Date
Poqet Computer Corporation September 11, 1991
License Agreement:
Licensee Date
Scenario, Inc. September 19, 1989
Xxxxxx, Inc. Evaluation License Agreement:
Licensee Date
Science Applications International Corp. November 6, 1990
LICENSE AGREEMENTS AND MATERIAL AGREEMENTS INVOLVING THE PRACTICE
OR USE OF THE COMPANY'S INTELLECTUAL PROPERTY ENTERED INTO
BETWEEN AUGUST 1, 1994 AND THE DATE HEREOF
Counter Party Title of Agreement Date
Advantage Xxxxxx Software License December 28, 1995
Technologies, Inc. Agreement
Almedica Addendum to NR License December 28, 1995
and Development
Agreement of 1992
Automated Business Xxxxxx Software License June 30, 1995
Solutions Agreement (OmniTools)
Bank One, Columbus PRISM User License January 12, 1996
NA Agreement
Datalex NestorReader Software February 24, 1995
License Agreement
Diamond Head Letter Amendment to February 21, 1995
License Agreement
Diamond Head Letter Agreement September 21, 1995
(adding N'Route)
Diamond Head Letter Agreement November 1, 1995
(adding NR memories)
Document Imaging Letter Agreement
Systems, Ltd. (amending their company September 27, 1995
name on the
NestorReader Software
License dated Oct. 23,
1993)
Europay Xxxxxx Fraud Detection September 21, 1994
System User License
Europay Memorandum of May 5, 1995
Understanding
GECC PRISM Letter of April 15, 1995
Understanding
GISYS XX Xxxxxx Software License July 27, 1995
Agreement (OmniTools)
Xxxxxxxx Systems NestorReader Software February 24, 1995
Pte. Ltd. License Agreement
Xxxxxxxx Systems NestorReader Software February 17, 1995
Pte. Ltd. License Agreement
MetaFile Nestor's Software September 15, 1995
License Agreement
XXXX XX Software License February 16, 1995
Agrmt(upgraded schedule
ans addendum)
Xxxxx Knowledge Xxxxxx Software License December 20, 1995
Systems, Inc. Agreement (Ni1000 and
NestorACCESS)
Response Healthcare
Information Xxxxxx Software License January 8, 1996
Management, Inc. Agreement (OmniTools)
Sligos, S.A. Letter amendment to December 20, 1994
License Agreement dated
10/26/90
Texture NestorReader Software February 13, 1995
License and Letter
Amendment
Traffic USA Xxxxxx Software License August 11, 1995
Software Corp. Agreement (N'Route)
VisionShape NestorReader Software April 4, 1995
License
Wheb Systems Xxxxxx Software License June 1, 1995
Agreement (OmniTools)
Advanced Technology N'Route Beta Agreement February 7, 1995
Services
Alphanumerics N'Route Beta Agreement February 21, 1995
Avalon Technology N'Route Beta Agreement February 6, 1995
Dun & Bradstreet N'Route Beta Agreement March 3, 1995
(and letter addendum)
Xxxxxx Systems N'Route Beta Agreement February 7, 1995
Gateway Group N'Route Beta Agreement February 21, 1995
GSI N'Route Beta Agreement February 7, 1995
Xxxxx Computer N'Route Beta Agreement February 8, 1995
System
Judge Imaging N'Route Beta Agreement February 7, 1995
Systems
Kelar Corporation N'Route Beta Agreement February 3, 1995
Xxxxx Associates N'Route Beta Agreement February 21, 1995
Xxxxxx Xxxxxxxx N'Route Beta Agreement January 31, 1995
Naval Air Warfare N'Route Beta Agreement February 10, 1995
Center
RightFax N'Route Beta Agreement February 17, 1995
STMS N'Route Beta Agreement March 3, 1995
U. S. Government N'Route Beta Agreement February 1, 1995
Xxxxxx Xxxxxx N'Route Beta Agreement February 10,1995
Assoc.
The following are N'Route Distributor Agreements:
Advanced Technology Reseller Purchase and February 21, 1995
Services License Agreement
Avalon Technology Reseller Purchase and March 7, 1995
License Agreement
Xxxxxx Systems Reseller Purchase and February 21, 1995
License Agreement
Gateway Group Reseller Purchase and February 24, 1995
License Agreement
Judge Imaging Reseller Purchase and February 28, 1995
Systems License Agreement
Kelar Corporation Reseller Purchase and February 28, 1995
License Agreement
Xxxxx Assoc. Reseller Purchase and February 21, 1995
License Agreement
STMS Reseller Purchase and March 3,1995
License Agreement
Synaxis Reseller Purchase and February 17, 1995
License Agreement
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
DISCLOSURE SCHEDULE 3(s)(vi)
INFRINGEMENT OF THE COMPANY'S INTELLECTUAL PROPERTY RIGHTS
In April of 1994, IBM Corporation disclosed at a conference held
in San Francisco that IBM has under development a neural-network
chip to be called the Zero Instruction Set Chip (ZISC), whose
description on its face may imply infringement of one or more of
the Company's patents.
The Company has concluded negotiations relating to a license to
be granted to IBM Corporation with respect to use of the
Company's technology in ZISC. The Company expects a definitive
license agreement to be executed during January 1996.
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
DISCLOSURE SCHEDULE 3(u)
REGISTRATION RIGHTS
Reliance Insurance Company has the right to request two demand
registrations of Common Stock of the Company owned by Reliance,
and the Company shall use its best efforts if so requested to
include such shares on a piggy-back basis in any offering,
subject to the agreement of any underwriter.
Xxxxx & Co., Inc. or its assignees have one demand registration
right until June 30, 1997 with respect to the shares underlying
warrants to purchase 118,000 shares of Common Stock of the
Company at $1.20 per share, which warrants were issued to Xxxxx
in 1992 as Selling Agent for securities of the Company. Xxxxx or
its assignees have one piggy-back right in connection with the
registration of the shares underlying the 575,000 Warrants that
were included in the Units offered by Xxxxx. The Company
believes that this piggy-back right has been exhausted.
A majority of the Warrant holders who acquired (as part of Units)
warrants to purchase 1,435,000 shares of Common Stock of the
Company at $3.00 per share can demand one registration of the
shares of Common Stock of the Company underlying their Warrants,
subject to a delay of the lesser of six months after the
effective date of any public offering of securities of the
Company or nine months from the date of any request by an
underwriter or prospective underwriter of such offering. As of
the date hereof, there are 689,375 such warrants outstanding, of
which 390,000 expire in February 1996 and the balance expire in
August 1996.
Certain registration rights are granted to Wand/Xxxxxx
Investments L.P., Wand/Xxxxxx Investments II L.P., Wand Partners
L.P. and Hill & Partners pursuant to an Amended and Restated
Reigstration Rights Agreement dated as of October 5, 1995.
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
DISCLOSURE SCHEDULE 3(v)
AGREEMENTS, OTHER THAN LICENSE AGREEMENTS, THAT ARE MATERIAL TO
THE BUSINESS OF THE COMPANY
All agreements listed in Schedules 3(j) and 3(s)(iii) are
incorporated herein by reference.
In addition, the following agreements are material to the
business of the Company:
Alta Technology
Corporation Letter Agreement February 16, 0000
Xxxx xx Xxxxxxx Fraud Study Agreement July 15, 1993
CSK Research
Institute Distributorship Agreement December 15, 1988
Xxxxx Xxx Employment Agreement July 1, 1989
AS AMENDED
EuroPay
International S.A. Fraud Study
Agreement August 23, 1993
Xxxxx Xxxxxx Employment Agreement September 1, 1994
Alta Technology Technology Development December 20, 1994
Corporation Subcontracts
Alta Technology Amendment Letter to January 5, 1995
Corporation License Agreement dated
2/16/94
Calera Recognition Special Purpose Object
November 18, 1994
System, Inc. Code/Integrated Software
Dist. License
Universal Systems N'Route Reseller Purchase March 23, 1995
Inc. and License Agreement
Verity, Inc. OEM Software Development November 10, 1994
and Run Time License
Agreement
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
DISCLOSURE SCHEDULE 3(u)
OWNERSHIP INTEREST IN ANY COMPETITOR, SUPPLIER, CUSTOMER OR
FRANCHISEE OF THE COMPANY
None.
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
DISCLOSURE SCHEDULE 3(w)
TRUE, CORRECT AND COMPLETE COPY OF COMPANY'S CERTIFICATE OF
INCORPORATION, AS AMENDED, AND BY-LAWS
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
EXHIBIT I
CERTIFICATE OF DESIGNATION
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
EXHIBIT II
FORM OF WARRANT
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
EXHIBIT III
OPINION OF XXXX MARKS & XXXXX
