SECURITIES PURCHASE AGREEMENT
BETWEEN
INDUSTRIAL IMAGING CORPORATION
AND
IMPRIMIS INVESTORS LLC
SECURITIES PURCHASE AGREEMENT, dated as of November 12, 1997 (the
"Agreement"), between Industrial Imaging Corporation, a Delaware corporation
(the "Company"), and Imprimis Investors LLC, a Delaware
limited liability company (the "Purchaser").
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INTRODUCTION
The Company desires to issue and sell to the Purchaser,
and the Purchaser desires to purchase from the Company, (a) 750,000 shares
(the "Initial Shares") of common stock, par value $0.01 per share ("Common
Stock"), of the Company, (b) 2,250,000 shares (the "Subsequent Shares") of
Common Stock, (c) 250,000 warrants, substantially in the form of Exhibit
A, to purchase shares of Common Stock (the "Initial Class A Warrants"),
(d) 750,000 warrants, substantially in the form of Exhibit A, to purchase
shares of Common Stock (the "Subsequent Class A Warrants"), (e) 250,000
warrants, substantially in the form of Exhibit B, to purchase shares of
Common Stock (the "Initial Class B Warrants") and (f) 750,000 warrants,
substantially in the form of Exhibit B, to purchase shares of Common Stock
(the "Subsequent Class B Warrants"), in each case on the terms and
conditions set forth in this Agreement. The Initial Shares and the
Subsequent Shares are collectively referred to herein as the "Shares." The
Initial Class A Warrants and the Subsequent Class A Warrants are
collectively referred to herein as the "Class A Warrants." The Initial
Class B Warrants and the Subsequent Class B Warrants are collectively
referred to herein as the "Class B Warrants." The Class A Warrants and the
Class B Warrants are collectively referred to herein as the "Warrants."
The Initial Shares, the Initial Class A Warrants and the Initial Class B
Warrants are collectively referred to herein as the "Initial Securities."
The Subsequent Shares, the Subsequent Class A Warrants and the Subsequent
Class B Warrants are collectively referred to herein as the "Subsequent
Securities." The Shares and the Warrants are collectively referred to
herein as the "Securities."
As a condition to the Purchaser's purchasing the Initial
Securities, (i) the Company is amending and restating its By-laws
substantially in the form of Exhibit C (the "By-laws"), (ii) the Company
and the Purchaser are entering into a Registration Rights Agreement,
substantially in the form of Exhibit D (the "Registration Rights
Agreement") and (iii) the Company and the Purchaser are entering into a
Small Business Investment Company Letter Agreement, substantially in the
form of Exhibit E (the "SBIC Letter Agreement").
The parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
SECTION 1.1. The Securities. (a) Upon the terms and
subject to the conditions set forth in this Agreement, at the Initial
Closing (as defined in Section 1.3(a)), the Company shall issue and sell
to the Purchaser, and the Purchaser shall purchase from the Company, the
Initial Securities, free and clear of all security interests, liens,
pledges, charges, escrows, options, rights of first refusal, encumbrances,
agreements, arrangements, commitments or other claims of any kind or
character (collectively, the "Claims"), except as imposed by applicable
Federal or state securities laws.
(b) Upon the terms and subject to the conditions set
forth in this Agreement, at the Subsequent Closing (as defined in Section
1.3(b)), the Company shall issue and sell to the Purchaser, and the
Purchaser shall purchase from the Company, the Subsequent Securities, free
and clear of all claims, except as imposed by applicable Federal or state
securities laws.
SECTION 1.2. Purchase Price. (a) In consideration of the
issuance and sale of the Securities by the Company to the Purchaser, the
Purchaser shall pay to the Company $750,000 (the "Initial Purchase Price")
in cash on the Initial Closing Date (as defined in Section 1.3(a)).
(b) In consideration of the issuance and sale of the
Subsequent Securities by the Company to the Purchaser, the Purchaser shall
pay to the Company $2,250,000 (the "Subsequent Purchase Price") in cash on
the Subsequent Closing Date (as defined in Section 1.3(b)).
SECTION 1.3. Closing. (a) The closing (the "Initial
Closing") for the purchase of the Initial Securities and the consummation
of the transactions related thereto as contemplated by this Agreement
shall take place at the offices of Xxxxxx, Xxxxx & Xxxxx, 0000 Xxxxxx xx
xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or such other place or places as
the Company and the Purchaser shall agree, at 10:00 a.m. (Eastern time) on
the later of November 12, 1997 and two business days following the date on
which all conditions set forth in Sections 4.1 and 4.2 shall have been
satisfied or waived, or such other date and time agreed to by the Company
and the Purchaser (such date, the "Initial Closing Date").
(b) The closing (the "Subsequent Closing") for the
purchase of the Subsequent Securities and the consummation of the
transactions related thereto as contemplated by this Agreement shall take
place at the offices of Xxxxxx, Xxxxx & Xxxxx, 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or such other place or places as the
Company and the Purchaser shall agree, at 10:00 a.m. (Eastern time) on the
later of November 21, 1997 and two business days following the date on
which all conditions set forth in Sections 4.3 and 4.4 shall have been
satisfied or waived, or such other date and time agreed to by the Company
and the Purchaser (such date, the "Subsequent Closing Date").
SECTION 1.4. Delivery and Payment. (a) At the Initial
Closing:
(i) The Company shall deliver to the Purchaser:
(A) one or more duly executed stock
certificates evidencing the Initial Shares issued in the
name of the Purchaser (in the amounts specified by the
Purchaser);
(B) one or more duly executed warrant
certificates evidencing the Initial Class A Warrants issued
in the name of the Purchaser (in the amounts specified by
the Purchaser);
(C) one or more duly executed warrant
certificates evidencing the Initial Class B Warrants issued
in the name of the Purchaser (in the amounts specified by
the Purchaser);
(D) the Registration Rights Agreement
duly executed by the Company;
(E) the SBIC Letter Agreement duly
executed by the Company;
(F) a copy of the Certificate of
Incorporation of the Company (the "Certificate of
Incorporation"), certified by the Secretary of State of
the State of Delaware;
(G) a Long Form Certificate of Good
Standing of the Company from the Secretary of State of
the State of Delaware;
(H) a Certificate of Good Standing of the
Company from the Secretary of State of each jurisdiction in
which the Company is qualified to do business as a foreign
corporation; and
(I) evidence, in form satisfactory to the
Purchaser, that a representative designated by the Purchaser
has been elected to the Board of Directors of the Company
and has been designated a Class III Director as that term is
used in the By-laws.
(J) all other documents, instruments and
writings required by the Purchaser to be delivered to it
pursuant to this Agreement.
(ii) The Purchaser shall deliver to the Company:
(A) an amount equal to the Initial
Purchase Price by wire transfer to the account of the
Company;
(B) the Registration Rights Agreement
duly executed by the Purchaser; and
(C) all other documents, instruments
and writings required by the Company to be delivered to
it pursuant to this Agreement.
(b) At the Subsequent Closing:
(i) The Company shall deliver to Purchaser:
(A) one or more duly executed stock
certificates evidencing the Subsequent Shares issued in the
name of the Purchaser (in the amounts specified by the
Purchaser);
(B) one or more duly executed warrant
certificates evidencing the Subsequent Class A Warrants
issued in the name of the Purchaser (in the amounts
specified by the Purchaser);
(C) one or more duly executed warrant
certificates evidencing the Subsequent Class B Warrants
issued in the name of the Purchaser (in the amounts
specified by the Purchaser); and
(D) all other documents, instruments and
writings reasonably required by the Purchaser to be
delivered by it pursuant to this Agreement.
(ii) The Purchaser shall deliver to the Company:
(A) an amount equal to the Subsequent
Purchase Price (less the costs and expenses referred to in
the second sentence of Section 3.1 in the amount designated
by the Purchaser to the Company no later than the day before
the Subsequent Closing) by wire transfer to the account of
the Company; and
(B) all other documents, instruments and
writings required by the Company to be delivered to it
pursuant to this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1. Representations and Warranties of the
Company. The Company represents and warrants to the Purchaser as follows:
(a) Organization, Standing and Power(a)Organization,
Standing and Power. (i) The Company and its wholly-owned subsidiary,
Triple I Corporation (the "Subsidiary"), are corporations duly organized,
validly existing and in good standing under the laws of the State of
Delaware and have all requisite corporate power and authority to own,
lease and operate their respective properties and to carry on their
respective businesses as now being conducted and as currently proposed to
be conducted, subject to any shareholder and Board of Directors approvals
that may be required in the future by the corporate law of the State of
Delaware. The Company and the Subsidiary are duly qualified to do business
and are in good standing in each jurisdiction in which such qualification
is necessary because of the property owned, leased or operated by them or
because of the nature of its business as now being conducted, except for
those jurisdictions where the failure to be so qualified would not
reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the condition (financial or otherwise),
operations, business, assets, liabilities, earnings or prospects of the
Company and the Subsidiary taken as a whole ("Material Adverse Effect").
Each such jurisdiction in which the Company is qualified as of the date
hereof and the Initial Closing Date and the Subsequent Closing Date is
listed on Schedule 2.1(a) of the disclosure schedule being delivered to
the Purchaser simultaneously with the execution of this Agreement (the
"Disclosure Schedule").
(ii) The Company has prior to the execution of this
Agreement delivered to the Purchaser a true and complete copy of the
Certificate of Incorporation. The By-laws, in substantially the form
attached hereto as Exhibit C, have been duly adopted by the Company. The
minute books of the Company (which have been made available for inspection
by the Purchaser prior to the date hereof) are true and complete in all
material respects.
(b) Authorization; Valid and Binding Agreements(b)
Authorization; Valid and Binding Agreements. The Company has all requisite
corporate power and authority to execute and deliver this Agreement, the
Registration Rights Agreement, the SBIC Letter Agreement and the
certificates evidencing the Securities and to perform all of its
obligations and undertakings under such agreements and to carry out the
transactions contemplated under such agreements. The execution and
delivery of this Agreement, the Registration Rights Agreement, the SBIC
Letter Agreement and the certificates evidencing the Securities, the
performance by the Company of its obligations under such agreements, and
the issuance and sale of the Securities have been duly and validly
authorized by all necessary corporate action and no other corporate
proceedings on the part of the Company are necessary to authorize the
execution, delivery or performance by the Company of this Agreement, the
Registration Rights Agreement, the SBIC Letter Agreement or the
certificates evidencing the Securities. This Agreement, the Registration
Rights Agreement, the SBIC Letter Agreement and the certificates
evidencing the Securities have each been duly executed and delivered by
the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its respective
terms subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(c) Capitalization; Equity Interests(c)Capitalization;
Equity Interests. (i) At the Initial Closing, immediately prior to the
issuance of the Securities, the authorized capital stock of the Company
consists solely of (A) 20,000,000 shares of Common Stock, of which
5,672,137 shares are issued and outstanding; and (B) 1,000,000 shares of
preferred stock, par value $0.01 per share (together with the Common
Stock, the "Capital Stock"), of which no shares are issued and
outstanding. The outstanding shares of Capital Stock have been duly
authorized and issued and are fully paid and non-assessable and not
subject to any purchase option or right of first refusal or preemptive,
subscription or similar rights. The Securities have been duly authorized
and, when issued in accordance with this Agreement, will be duly issued,
fully paid and non-assessable and not subject to any purchase option or
right of first refusal or preemptive, subscription or similar rights. The
shares of Common Stock initially issuable upon exercise of the Warrants
(the "Exercise Shares") have been duly authorized and reserved for
issuance upon exercise and, when issued upon such exercise, will be duly
issued, fully paid and non-assessable and not subject to any purchase
option, or right of first refusal or preemptive, subscription or similar
rights.
(ii) Except for this Agreement and the Warrants, and as
set forth on Schedule 2.1(c) of the Disclosure Schedule, (A) there are no
bonds, debentures, notes or other indebtedness or securities of the
Company having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which
shareholders of the Company may vote, (B) there are no securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company is a party or by which the
Company is bound obligating the Company to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of Capital Stock
or other voting securities of the Company or obligating the Company to
issue, grant, extend or enter into any such security, option, warrant,
call right, commitment, agreement, arrangement or undertaking and (C)
there are no outstanding rights, commitments, agreements, arrangements or
undertakings of any kind obligating the Company to repurchase, redeem or
otherwise acquire any shares of Capital Stock or other voting securities
of the Company or any securities of the type described in clauses (A) or
(B) above. No dividends on any shares of Capital Stock have been declared
but not yet paid.
(iii) Except for the Subsidiary, the Company does not
have any subsidiaries or own or hold, directly or indirectly, any equity
or other security interests in any corporation, partnership, limited
liability company, joint venture or other entity. The Company is not
subject to any liability for any claim that the Company violated any
applicable Federal or state securities laws in connection with the
issuance of Capital Stock or other securities. There are no restrictions
on the transfer of shares of Capital Stock other than those imposed by
relevant state and Federal securities laws. There are no voting trusts,
voting agreements, proxies or other agreements or instruments with respect
to the voting of the Capital Stock to which the Company is a party, or to
the best of the knowledge of any of the Company's officers, directors or
employees (the "Company's Knowledge"), among or between any persons other
than the Company. Except as provided in the Registration Rights Agreement
and in Schedule 2.1(c) of the Disclosure Schedule, no person has the right
to demand or other rights to cause the Company to file any registration
statement under the Securities Act of 1933 (the "Securities Act") relating
to any securities of the Company presently outstanding or any right to
participate in any such registration statement.
(d) Conflicts; Consents(d) Conflicts; Consents. The
execution and delivery by the Company of this Agreement, the Registration
Rights Agreement, the SBIC Letter Agreement and the certificates
evidencing the Securities, the consummation of the transactions
contemplated hereby and thereby and compliance by the Company with any of
the provisions hereof or thereof does not and will not conflict with, or
result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation
or acceleration of any obligation or to loss of a material benefit under,
or to any increased, additional, accelerated or guaranteed rights or
entitlement of any person or entity under, or result in the creation of
any Claim on the properties or assets of the Company or the Subsidiary
under, any provision of (i) the certificate of incorporation or by-laws of
the Company or the Subsidiary, (ii) any note, bond, mortgage, indenture,
deed of trust, license, lease, contract, commitment, agreement, instrument
or arrangement to which the Company or the Subsidiary is a party or by
which any of their respective properties or assets are bound, (iii) any
license, franchise, permit or other similar authorization held by the
Company or the Subsidiary or (iv) any judgment, order or decree or
statute, law, ordinance, rule or regulation applicable to the Company or
the Subsidiary or their respective properties or assets.
(e) Financial Information(e) Financial Information. (i)
Set forth on Schedule 2.1(e) of the Disclosure Schedule are complete and
correct copies of (A) the audited balance sheets of the Company as at
September 30, 1994 and 1995 and the related statements of operations,
shareholders' equity and cash flows for the years ended September 30, 1994
and 1995, and the audited balance sheet of the Company as at March 31,
1996 and the related statements of operations, shareholders' equity and
cash flows for the six months ended March 31, 1996, including any notes
thereto with the opinion of Coopers & Xxxxxxx L.L.P., thereon
(collectively, the "Audited Financial Statements") and (B) the unaudited
balance sheet of the Company as at March 31, 1997 and the related
statements of operations, shareholders' deficit and cash flows for the
year then ended and the unaudited balance sheet of the Company as at
September 30, 1997, and the related statements of operations,
shareholders' deficit and cash flows for the six months then ended
(collectively, the "Unaudited Financial Statements," and, together with
the Audited Financial Statements, the "Financial Statements"). Except as
set forth on Schedule 2.1(e) of the Disclosure Schedule, the Financial
Statements have been prepared in conformity with generally accepted
accounting principles ("GAAP") applied on a consistent basis and fairly
present the financial condition, results of operations, shareholders'
equity and cash flows of the Company at or for the respective periods then
ended, subject, in the case of the Unaudited Financial Statements, to the
absence of footnotes and normal year-end adjustments.
(ii) All reserves established by the Company are
reflected on the balance sheets contained in the Financial Statements or
in the footnotes to the Financial Statements of the Company and in
management's reasonable estimate are adequate in the aggregate and there
are no loss contingencies that are required to be accrued by Statement of
Financial Accounting Standard No. 5 of the Financial Accounting Standards
Board which are not provided for on such balance sheets. As of the date
hereof, except for liabilities (A) reflected on or reserved against on the
balance sheet as of September 30, 1997 (the "Latest Balance Sheet") (B)
set forth on Schedule 2.1(e) of the Disclosure Schedule, (C) incurred in
the ordinary course of the Company's business and consistent with past
practice or (D) contemplated by this Agreement, the Company and the
Subsidiary have no liabilities (absolute, accrued, fixed, contingent,
known, unknown or otherwise) which would be required by GAAP to be
reflected or reserved against on the balance sheet of the Company and
which would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(iii) The forecasts and projections previously delivered
to the Purchaser by the Company have been prepared in good faith and on
the basis of assumptions that are fair and reasonable in light of current
and reasonably foreseeable circumstances.
(f) Absence of Changes. Except as set forth on Schedule
2.1(f) of the Disclosure Schedule, since September 30, 1997, the Company
and the Subsidiary have operated in the ordinary course consistent with
past practice and there has not been:
(i) any event, occurrence or development or
state of circumstances of facts which has had or would reasonably
be expected to have a Material Adverse Effect;
(ii) any payment, discharge or satisfaction of
any claim or obligation of the Company or the Subsidiary or any
amendment, termination or waiver of any rights of value to the
Company or the Subsidiary, except in the ordinary course of
business and consistent with past practice;
(iii) any declaration, setting aside or payment
of any dividend or other distribution with respect to any shares
of capital stock of the Company or any direct or indirect
redemption, purchase or other acquisition of any such shares;
(iv) any creation of any Claim on, or any
assignment or other disposition of, any property of the Company
or the Subsidiary, except in the ordinary course of business
consistent with past practice, and which Claims, assignments and
dispositions together with all other such Claims, assignments and
dispositions would not have a Material Adverse Effect;
(v) any write-down of the value of any asset of
the Company or the Subsidiary or any write-off as uncollectible
of any accounts or notes receivable or any portion thereof, other
than write-downs or write-offs which in the aggregate do not
exceed $25,000;
(vi) any capital expenditure or commitment or
addition to property, plant or equipment of the Company or the
Subsidiary, individually or in the aggregate, in excess of
$25,000;
(vii) (A) any change in any bonus, commission,
pension, profit-sharing or other benefit or compensation plan,
policy or arrangement or commitment or (B) any increase in any
such compensation, bonus, commission, pension, profit sharing or
other benefit payable now or in the future to any shareholder,
director or officer of the Company or the Subsidiary, or any
Affiliate (as defined in the Securities Exchange Act of 1934 (the
"Exchange Act")) of such person (or, in each case, the entering
into of any agreement to effect the same);
(viii) any obligation or liability (whether
absolute, accrued, contingent or otherwise, and whether due or to
become due) incurred by the Company or the Subsidiary, other than
obligations incurred in the ordinary course of business and
consistent with past practice;
(ix) any issuance or sale, or any contract entered
into for the issuance or sale, of any shares of capital stock or
securities convertible into or exercisable for shares of capital
stock of the Company or the Subsidiary;
(x) any cancellation of any debts or claims or
any amendment, termination or waiver of any rights of value to
the Company or the Subsidiary;
(xi) any material damage, destruction or loss
(whether or not covered by insurance) affecting any asset or
property of the Company or the Subsidiary;
(xii) any change in the independent public
accountants of the Company or in the accounting methods or
accounting practices followed by the Company or any change in
depreciation or amortization policies or rates; or
(xiii) any agreement, whether in writing or
otherwise, to take any of the actions specified in the foregoing
items (i) through (xii).
(g) Assets, Property and Related Matters; Real
Property(g) Assets, Property and Related Matters; Real Property. (i)
Except as set forth on Schedule 2.1(g) of the Disclosure Schedule, the
Company or the Subsidiary has good title to, or a valid leasehold interest
in, as applicable, all of the assets reflected on the Financial
Statements, free and clear of all Claims. To the Company's Knowledge, such
assets (other than inventory) are in good operating condition and repair,
subject to ordinary wear and tear and constitute all of the properties,
interests, assets and rights held for use or used in connection with the
business and operations of the Company or the Subsidiary and constitute
all those necessary to continue to operate the business of the Company or
the Subsidiary, as the case may be, consistent with current and historical
practice.
(ii) All leases of real property to which the Company or
the Subsidiary is a party ("Leases") are in writing and in full force and
effect and constitute valid and binding obligations of the Company and, to
the Company's Knowledge, of the other parties thereto, enforceable in
accordance with their respective terms subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles. The Company or the Subsidiary hold good and valid title
to the leasehold interests under the Leases for the term set forth on
Schedule 2.1(g) of the Disclosure Schedule, free and clear of all Claims.
The Company has delivered to the Purchaser complete and accurate copies of
the Leases and the Leases have not been modified in any material respect,
except to the extent that such modifications are disclosed in a copy
delivered to the Purchaser. There exists no material default, or any event
which upon notice or the passage of time, or both, would give rise to any
material default, in the performance of the Company or, to the Company's
Knowledge, by any lessor under any such lease. The Company has not, and to
the Company's Knowledge, no other person has, granted any oral or written
right to anyone other than the Company to lease, sublease or otherwise
occupy any of its properties through the end of the applicable lease
periods.
(iii) Schedule 2.1(g) of the Disclosure Schedule
contains a description of all of the real property leased by the Company
or the Subsidiary. The Company does not own, and has not previously owned,
any real property.
(h) Patents, Trademarks and Similar Rights(h) Patents,
Trademarks and Similar Rights. (i) Set forth on Schedule 2(h) of the
Disclosure Schedule is a true and complete list of the patents, patent
applications, trademarks (registered or unregistered) and service marks
(and any applications or registrations therefor), trade names, corporate
names, copyrights, copyright registrations and other intellectual property
that currently exists in written form owned or filed by, or licensed to,
the Company or the Subsidiary or used in the conduct of the Company's or
the Subsidiary's business as presently conducted ("Intellectual
Property"). With respect to registered trademarks, Schedule 2(h) of the
Disclosure Schedule sets forth a list of all jurisdictions in which such
trademarks are registered or applied for and all registration and
application numbers. To the Company's Knowledge, the Company has all
rights to Intellectual Property as are used or are necessary in connection
with the businesses of the Company and the Subsidiary as presently
conducted, and except as set forth on Schedule 2(h) of the Disclosure
Schedule, the Company owns, or has the right to use, execute, reproduce,
display, perform, modify, enhance, distribute, prepare derivative works of
and sublicense, without payment to any other person or entity, all
Intellectual Property free and clear of all Claims whatsoever. The
consummation of the transactions contemplated hereby will not conflict
with, alter or impair any such right.
(ii) Neither the Company nor the Subsidiary has granted
any options, licenses or agreements of any kind relating to Intellectual
Property or the marketing or distribution thereof. Neither the Company nor
the Subsidiary is bound by or a party to any options, licenses or
agreements of any kind relating to the intellectual property of any other
person or entity, except as set forth in Schedule 2.1(d) of the Disclosure
Schedule. The conduct of the business of the Company and of the Subsidiary
as presently conducted does not, to the Company's Knowledge, violate,
conflict with or infringe the intellectual property of any other person or
entity. No claims are pending, or to the Company's Knowledge, threatened,
against the Company or the Subsidiary by any person or entity with respect
to the ownership, validity, enforceability, effectiveness or use of any
Intellectual Property and, during the past three years, neither the
Company nor the Subsidiary has received any communications alleging that
the Company has violated any rights relating to intellectual property of
any person or entity.
(i) Insurance. Schedule 2.1(i) of the
Disclosure Schedule contains a description of all insurance policies
("Insurance Policies") that are currently held by the Company or the
Subsidiary, true and complete copies of which have been delivered to the
Purchaser. All Insurance Policies are in the name of the Company or the
Subsidiary, outstanding and in full force and effect and all premiums due
with respect to such policies are currently paid. The Company has not
received notice of cancellation or termination of any such policy, nor has
it been denied or had revoked or rescinded any policy of insurance, nor
borrowed against any such policies. To the Company's Knowledge, the
activities and operations of the Company and the Subsidiary have been
conducted in a manner so as to conform in all material respects to all
applicable provisions of the Insurance Policies. There are no claims in
the last year for which an insurance carrier has denied or threatened to
deny coverage. The Company or the Subsidiary carries, or is covered by,
insurance with companies the Company believes to be responsible and in
such amounts and covering such risks as is adequate for the conduct of its
business and the value of its properties and as the Company believes is
customary for companies engaged in similar businesses in similar
industries.
(j) Agreements. Schedule 2.1(j) of the Disclosure
Schedule contains a true and complete list or description of all written
or oral contracts, agreements and other instruments ("Contracts") to which
the Company or the Subsidiary is a party (A) relating to indebtedness for
money borrowed or the deferred purchase price of property or services or
capital leases in excess of $10,000, (B) relating to any forward
commitments or to other commitments in excess of $25,000 in any given
year, (C) relating to any joint venture, partnership or limited liability
company; (D) relating to the employment or compensation of any director,
officer or shareholder of the Company or the Subsidiary, or any Affiliate
of such companies, (E) relating to the employment or compensation of any
employee, consultant, independent contractor or other agent of the Company
or the Subsidiary, or any Affiliate of such companies, involving a payment
in excess of $10,000 in any given year, (F) relating to the sale or other
disposition of any assets, properties or rights (other than the sale of
inventory), (G) which restricts the Company's or the Subsidiary's ability
to do business in any geographic area or grants to any person exclusive or
similar rights in any line of business or in any geographic area, (I)
which restricts the Company's or the Subsidiary's ability from soliciting
employees of another entity or restricts another entity's ability from
soliciting the Company's or the Subsidiary's employees, (J) relating to
the lease of any machinery, equipment, vehicle or other personal property
owned by any other person or entity, for which the annual rental exceeds
$2,500; (K) relating to the lease of any real or personal property to any
other person or entity, for which the annual rental exceeds $2,500; (L)
relating to any advance, loan, extension of credit or capital contribution
to, or other investment in, any person or entity not in excess of $2,500
in the aggregate; or (M) that is otherwise material to the business,
properties or assets of the Company and entered into other than in the
ordinary course of business. The Company has provided to the Purchaser
true and complete copies of all written Contracts and true, accurate and
complete written summaries of all oral Contracts. Except as set forth on
Schedule 2.1(j) of the Disclosure Schedule, all Contracts are valid,
binding and in full force and effect as to the Company or the Subsidiary,
as the case may be, and neither the Company or the Subsidiary nor, to the
Company's Knowledge, any other party thereto is in breach or violation of,
or default under, any such Contracts in any material respect.
(k) Litigation. Except as set forth on Schedule 2.1(k)
of the Disclosure Schedule, there have not been for the past five years,
nor are there, any suits, actions, claims, investigations or legal or
administrative or arbitration proceedings in respect of the Company or the
Subsidiary, pending or, to Company's Knowledge, threatened, whether at law
or in equity, or before or by any Federal, foreign, state or municipal or
other governmental department, commission, board, bureau, agency or
instrumentality. Except as set forth on Schedule 2.1(k) of the Disclosure
Schedule, there have not been for the past five years, nor are there any
judgments, decrees, injunctions or orders of any court, governmental
department, commission, agency, instrumentality or arbitrator against the
Company or the Subsidiary or affecting any of its assets or properties.
There is no lawsuit or claim by the Company or the Subsidiary pending, or
which the Company or the Subsidiary intends or reasonably expects to
initiate, against any other person or entity.
(l) Compliance; Governmental Authorizations. (i) Except
as set forth on Schedule 2.1(l) of the Disclosure Schedule, the Company
and the Subsidiary, to the Company's Knowledge, have complied and are in
compliance with all Federal, state, local and foreign laws, ordinances,
regulations, interpretations and orders (including those relating to
disposal of materials, environmental protection and occupational safety
and health) applicable to the Company or the Subsidiary or any of their
respective businesses. There are no present or past conditions relating to
the Company or the Subsidiary, or relating to any of the Company's or the
Subsidiary's property or any appurtenances thereto or improvements
thereon, that would reasonably be expected to lead to any material
liability against, or have a Material Adverse Effect for violation of any
health or safety laws. The Company has not received any written
communication during the past five years from any governmental entity that
alleges that the Company is not in compliance in any respect with any
applicable Federal, state, local and foreign laws, ordinances,
regulations, interpretations and orders. To the Company's Knowledge, the
Company and the Subsidiary have all Federal, state, local and foreign
governmental licenses and permits necessary to conduct their respective
businesses as presently being conducted. Such licenses and permits are in
full force and effect, no violations are or have been recorded in respect
of any thereof, no proceeding is pending or, to the Company's Knowledge,
threatened, to revoke or limit any thereof, and the Company does not know
of any basis for any such proceeding and the consummation of the
transactions contemplated in this Agreement will not result in the
non-renewal, revocation or termination of any such license or permit.
Except as set forth on Disclosure Schedule 2.1(l), the Company has filed,
in a timely manner, all reports required by the rules and regulations of
the Securities and Exchange Commission (the "SEC").
(ii) There are no conditions relating to the Company or
the Subsidiary or relating to the Company's or the Subsidiary's ownership,
use or maintenance of any real property previously owned or operated by
the Company or any of its Affiliates, and the Company does not know or
have reason to know of any such condition in respect of such real property
not related to the ownership, use or maintenance, that could lead to any
liability for violation of any Federal, state, county or local laws,
regulations, orders or judgments relating to pollution or protection of
the environment or any other applicable environmental, health or safety
statutes, ordinances, orders, rules, regulations or requirements. The
Company and the Subsidiary have received, handled, used, stored, treated,
shipped and disposed of all hazardous or toxic materials, substances and
wastes (whether or not on its properties or properties owned or operated
by others) in compliance with all applicable environmental, health or
safety statutes, ordinances, orders, rules, regulations or requirements.
(m) Labor Relations; Employees. (i) Within the last five
years, neither the Company nor the Subsidiary has experienced any labor
disputes with, or any work stoppages by, a group of employees due to labor
disagreements and, to the Company's Knowledge, there is no such dispute or
work stoppage threatened against the Company or the Subsidiary. No
employee of the Company is represented by any union or collective
bargaining agent and, to the Company's Knowledge, there has been no union
organizational effort in respect of any employees of the Company within
the past five years.
(ii) Schedule 2.1(m) of the Disclosure Schedule
contains a list of each pension, retirement, savings, deferred
compensation, and profit-sharing plan and each stock option, stock
appreciation, stock purchase, performance share, bonus or other incentive
plan, severance plan, health, group insurance or other welfare plan, or
other similar plan and any "employee benefit plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974
("ERISA"), under which the Company or the Subsidiary has any current or
future obligation or liability or under which any employee or former
employee (or beneficiary of any employee or former employee) of the
Company or the Subsidiary has or may have any current or future right to
benefits on account of employment with the Company or the Subsidiary (the
term "plan" shall include any contract, agreement, policy or
understanding, each such plan being hereinafter referred to individually
as a "Plan"). The Company has delivered to the Purchaser true and complete
copies of (A) each Plan for which a Plan document exists, (B) the summary
plan description for each Plan, (C) the latest annual report, if any,
which has been filed with the Internal Revenue Service (the "IRS") for
each Plan and (D) with respect to any Plan intended to comply with Section
401(k) of the Internal Revenue Code of 1986 (the "Code"), copies of
calculations for the most recent three Plan years showing such Plan's
compliance with the requirements of Section 401(k)(3) and, if applicable,
401(m)(2) of the Code. Each Plan intended to be tax qualified under
Sections 401(a) and 501(a) of the Code is, and has been determined by the
IRS to be, tax qualified under Sections 401(a) and 501(a) of the Code and,
since such determination, no amendment to or failure to amend any such
Plan or any other circumstance adversely affects its tax qualified status.
There has been no prohibited transaction within the meaning of Section
4975 of the Code and Section 406 of Title I of ERISA with respect to any
Plan.
(iii) No Plan is subject to the provisions of
Section 412 of the Code or Part 3 of Subtitle B of Title I of ERISA. No
Plan is subject to Title IV of ERISA. During the past five years, neither
the Company or the Subsidiary nor any business or entity then controlling,
controlled by, or under common control with the Company or the Subsidiary
contributed to or was obliged to contribute to an employee pension plan
that was subject to Title IV of ERISA.
(iv) There are no actions, claims, lawsuits or
arbitrations (other than routine claims for benefits) pending, or, to the
Company's Knowledge, threatened, with respect to any Plan or the assets of
any Plan, and to the Company's Knowledge, there are no facts which could
give rise to any such actions, claims, lawsuits or arbitrations (other
than routine claims for benefits). Except as described on Schedule 2.1(m)
of the Disclosure Schedule, the Company or the Subsidiary has satisfied
all funding, compliance and reporting requirements for all Plans. With
respect to each Plan, the Company or the Subsidiary has paid all
contributions (including employee salary reduction contributions) and all
insurance premiums that have become due and any such expense accrued but
not yet due has been properly reflected in the Financial Statements.
(v) No Plan provides or is required to provide,
now or in the future, health, medical, dental, accident, disability, death
or survivor benefits to or in respect of any person beyond termination of
employment, except to the extent required under any state insurance law or
under Part 6 of Subtitle B of Title I of ERISA and under Section 4980(B)
of the Code. No Plan covers any individual other than employees of the
Company or the Subsidiary, other than dependents or spouses of employees
under health and child care policies listed in Schedule 2.1(m) of the
Disclosure Schedule and delivered to the Purchaser.
(vi) The consummation of the transactions
contemplated by this Agreement will not (A) entitle any employee of the
Company or the Subsidiary to severance pay or termination benefits or (B)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee or former employee.
(n) Related Party Transactions. Except as set forth on
Schedule 2.1(n) of the Disclosure Schedule, no current or former partner,
director, officer, employee or shareholder of the Company or the
Subsidiary or any associate or Affiliate thereof, or any parent, spouse,
child, brother, sister or any other relative with a relationship (by
blood, marriage or adoption) of not more remote than first cousin of any
of the foregoing (collectively, "Family Members"), is presently, or during
the 12-month period ending on the date of this Agreement has been,
directly or indirectly (i) a party to any transaction with the Company
(including any contract, agreement or other arrangement providing for the
furnishing of services by, or rental of real or personal property from, or
otherwise requiring payments to, any such director, officer, employee or
shareholder or such associate) or (ii) to the Company's Knowledge, the
direct or indirect owner of an interest in any corporation, firm,
association or business organization (other than the ownership of less
than 2% of the outstanding capital stock of any publicly traded entity)
which is a present (or potential) competitor, lender, broker or customer
of the Company or the Subsidiary, nor does any member of management or any
of their Family Members receive income from any source other than the
Company or the Subsidiary which relates to the Company's or the
Subsidiary's respective businesses or should properly accrue to the
Company or the Subsidiary. Schedule 2.1(n) of the Disclosure Schedule sets
forth a list of all Family Members who are currently employed or who were
employed by the Company or the Subsidiary at any time during the last
three fiscal years together with a description of job, title and annual
salary and bonus for each such person. Neither the Company nor the
Subsidiary has any loans outstanding to any employee, officer, director or
shareholder of the Company or the Subsidiary or to any Family Member.
(o) Taxes. (i) All Federal, state, local and
foreign tax returns and tax reports for periods ending on or prior to the
Subsequent Closing Date by the Company or the Subsidiary have been or will
be filed, or a valid request for extension has been or will be filed with
respect thereto, on a timely basis (including any extensions) with the
appropriate governmental agencies in all jurisdictions in which such
returns and reports are required to be filed. All such returns and reports
are and will be true, correct and complete. Except as described in
Schedule 2.1(o) of the Disclosure Schedule, all Federal, state, local and
foreign income, profits, franchise, sales, use, occupation, property,
excise, employment and other taxes (including interest, penalties and
withholdings of tax) due from and payable by the Company or the Subsidiary
on or prior to the Subsequent Closing Date have been fully paid on a
timely basis. Except as set forth in Schedule 2.1(o) of the Disclosure
Schedule, neither the Company nor the Subsidiary is currently the
beneficiary of any extension of time within which to file any tax return.
No claim has ever been made by an authority in a jurisdiction where the
Company or the Subsidiary does not file tax returns that it is or may be
subject to taxation by that jurisdiction, and neither the Company nor the
Subsidiary has received any notice, or request for information from any
such authority. No issues have been raised with the Company or the
Subsidiary by the IRS or any other taxing authority in connection with any
tax return or report filed by the Company or the Subsidiary and there are
no issues which, either individually or in the aggregate, could result in
any liability for tax obligations of the Company or the Subsidiary
relating to periods ending on or before September 30, 1997 in excess of
the accrued liability for taxes shown on the Financial Statements. No
waivers of statutes of limitations have been given or requested with
respect to the Company or the Subsidiary. Neither the Company nor the
Subsidiary is a party to any tax allocation or sharing agreement, and
neither the Company nor the Subsidiary has been a member of an affiliated
group filing a consolidated federal income tax return (other than a group
the common parent of which was the Company) or has any liability for taxes
of any person (other than the Company and the Subsidiary) under Treasury
Regulation 1.1502-6 (or any similar provision of state, local or foreign
law) as a transferee or successor or by contract or otherwise. No
differences exist between the amounts of the book basis and the tax basis
of assets that are not accounted for by an accrual on the Financial
Statements for Federal income tax purposes. Neither the Company nor the
Subsidiary is required to include in income any adjustment pursuant to
Section 481(a) of the Code by reason of a voluntary change in accounting
method initiated by the Company, and the IRS has proposed no adjustment or
change in accounting method. Neither the Company nor the Subsidiary has
consented to be treated as a "consenting corporation" as defined in
Section 341(f) of the Code or as a "collapsible corporation" as defined in
Section 341(b) of the Code. Neither the Company nor the Subsidiary is a
party to any agreement, contract or arrangement that would result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code. All transactions
or methods of accounting that could give rise to an understatement of
Federal income tax (within the meaning of Section 6661 of the Code for tax
returns filed on or before December 31, 1990, and within the meaning of
Section 6662 of the Code for tax returns filed after December 31, 1990)
have been adequately disclosed on the tax returns in accordance with
Section 6661(b)(2)(B) of the Code for tax returns filed on or prior to
December 31, 1990, and in accordance with Section 6662(d)(2)(B) of the
Code for tax returns filed after December 31, 1990. Neither the Company
nor the Subsidiary is nor has it been a United States real property
holding company (as defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(ii) of the Code. The
Company and the Subsidiary have complied and will comply with all
applicable laws relating to the payment and withholding of taxes
(including withholding and reporting requirements under Section 1441
through 1464, 3401 through 3406, 6041 and 6049 of the Code and similar
provisions under any other laws) and, within the time and in the manner
prescribed by law, have withheld from wages, fees and other payments and
paid over to the proper governmental or regulatory authorities all amounts
required.
(p) Disclosure. No representation, warranty or
statement of the Company contained in this Agreement, or any other
agreement contemplated by this Agreement, or any certificate, schedule,
annex or other writing furnished to the Purchaser by the Company or its
predecessor pursuant to the Exchange Act, contains any untrue statement of
a material fact or omits to state a material fact necessary to make the
statement contained herein or therein, in light of the circumstances under
which they were made, not misleading.
(q) Books and Records. The books of account, ledgers,
order books, records and documents of the Company accurately and
completely reflect all material information relating to the businesses of
the Company and the Subsidiary, the nature, acquisition, maintenance,
location and collection of each of its assets, and the nature of all
transactions giving rise to the obligations or accounts receivable of the
Company.
(r) Federal Reserve Regulations. Neither the Company
nor the Subsidiary is engaged in the business of extending credit for the
purpose of purchasing or carrying margin securities (within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System), and
no part of the proceeds from the issuance of the Securities will be used
to purchase or carry any margin security or to extend credit to others for
the purpose of purchasing or carrying any margin security or in any other
manner which would involve a violation of any of the regulations of the
Board of Governors of the Federal Reserve System.
(s) Investment Company Act. The Company is not an
"investment company" within the meaning of such term under the Investment
Company Act of 1940 and the rules and regulations of the SEC thereunder.
(t) Securities Act of 1933. Assuming that the
representations and warranties of the Purchaser contained in Section
2.2(c) are true and correct, the Company has complied with all applicable
Federal and state securities laws in connection with the issuance and sale
of the Securities. Neither the Company nor anyone acting on its behalf has
offered to sell the Securities or similar securities to, or solicited
offers with respect thereto from, or entered into any preliminary
conversations or negotiations relating thereto with, any person, so as to
bring the issuance and sale of such Securities under the registration
provisions of the Securities Act.
(u) Brokers. Other than International Capital Partners,
Inc. ("ICP"), no agent, broker, investment banker, person or firm acting
on behalf of the Company or under the authority of the Company is or will
be entitled to any broker's or finder's fee or any other commission or
similar fee directly or indirectly from any of the parties in connection
with any of the transactions contemplated by this Agreement.
(v) Control. Officers and directors of the Company
beneficially own, directly or indirectly, in excess of 25% of the issued and
outstanding voting securities of the Company.
SECTION 2.3. Representations and Warranties by the
Purchasers. The Purchaser represents and warrants to the Company as
follows:
(a) Organization and Standingg. The Purchaser is a
limited liability company duly formed, validly existing and in good
standing under the laws of the State of Delaware.
(b) Authorization; Valid and Binding Agreements. The
Purchaser has full corporate power and authority to enter into this
Agreement, the SBIC Letter Agreement and the Registration Rights Agreement
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement, the SBIC Letter Agreement and
the Registration Rights Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by
all necessary action on the part of the Purchaser and no other proceedings
on the part of the Purchaser are necessary to authorize the execution,
delivery or performance by the Company of this Agreement, the SBIC Letter
Agreement and the Registration Rights Agreement. This Agreement, the SBIC
Letter Agreement and the Registration Rights Agreement have been duly
executed and delivered by the Purchaser, and constitute the valid and
binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with their respective terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles..
(c) Investment Representation. The Purchaser is an
"accredited investor" as defined in the rules and regulations of the SEC
under the Securities Act and is acquiring the Securities for its own
account for investment purposes only and not with a view to resale or
distribution within the meaning of the applicable Federal securities laws.
The Purchaser's financial situation is such that it can afford to bear the
economic risk of holding the Securities for an indefinite period of time
and suffer complete loss of its investment. The Purchaser's knowledge and
experience in financial and business matters are such that it is capable
of evaluating the merits and risks of its purchase of the Securities as
contemplated by this Agreement.
(d) Access to Information. The Purchaser acknowledges
that it has been afforded (i) the opportunity to ask such questions as it
has deemed necessary of, and to receive answers from, representatives of
the Company concerning the terms and conditions of the offering of the
Securities, and the merits and risks of investing in the Securities; (ii)
access to information about the Company and the Company's financial
condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii)
the opportunity to obtain such additional information which the Company
possesses or can acquire without unreasonable effort or expense that such
Purchaser believes is necessary to make an informed investment decision
with respect to the investment; provided that nothing in this Section
2.2(d) shall reduce the liability of the Company with respect to the
representations and warranties made by the Company in Section 2.1.
(e) Reliance. The Purchaser understands and
acknowledges the (i) the Securities to be sold to it hereunder are being
offered and sold to it in a private placement that is exempt from the
registration requirements of the Securities Act and (ii) the availability
of such exemption depends in part on, and the Company will rely upon, the
accuracy and truthfulness of, the foregoing representations and the
Purchaser hereby consents to such reliance.
(f) Brokers. Other than ICP, no agent, broker,
investment banker, person or firm acting on behalf of the Purchaser or
under the authority of the Purchaser is or will be entitled to any
broker's or finder's fee or any other commission or similar fee directly
or indirectly from any of the parties in connection with any of the
transactions contemplated by this Agreement.
ARTICLE III
ADDITIONAL AGREEMENTS
SECTION 3.1. Expenses. The Company shall bear the costs
and expenses incurred by it, the Purchaser and the Shareholders in
connection with the negotiation, execution and delivery of this Agreement
and the transactions contemplated hereby. At the Initial Closing, the
Company shall pay to the Purchaser up to $50,000 of such costs and
expenses incurred by the Purchaser. In addition, the Company shall pay any
and all stamp and other documentary taxes payable or determined to be
payable in connection with the issuance of the Securities and agrees to
hold the Purchaser harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such
taxes.
SECTION 3.2. Conduct of Business. (a) From the date of
this Agreement until the Subsequent Closing Date, the Company shall
operate its business only in the ordinary course of business consistent
with past practice. The Company shall not, until the Subsequent Closing
Date, directly or indirectly, cause or permit any state of affairs, action
or omission described in clauses (i) through (xiii) of Section 2.1(f).
(b) From the Subsequent Closing Date and for so long as
the Purchaser or its transferees (except transferees who acquire the
Securities or Exercise Shares in a transaction not exempt from the
registration requirements of the Securities Act) hold an amount of shares
of Capital Stock equal to at least 10% of the Capital Stock then
outstanding, the Company shall not change its line of business.
SECTION 3.3. Further Assurances. Each party shall use
all commercially reasonable efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations, to consummate and make
effective the transactions contemplated by this Agreement as expeditiously
as practicable and to ensure that the conditions set forth in Article IV
are satisfied, insofar as such matters are within the control of any of
them.
SECTION 3.4. Access and Information. From the date of
this Agreement until the first to occur of (i) the Subsequent Closing Date
and (ii) the termination of this Agreement in accordance with Section 6.2,
the Company shall permit the Purchaser and its representatives to make
such investigation of the business, operations and properties of the
Company as the Purchaser deems necessary or desirable in connection with
the transactions contemplated by this Agreement. Such investigation shall
include access to the respective directors, officers, employees, agents
and representatives (including legal counsel and independent accountants)
of the Company and the properties, books, records and commitments of the
Company. The Company shall furnish the Purchaser and its representatives
with such financial, operating and other data and information, and copies
of documents with respect to the Company or any of the transactions
contemplated by this Agreement, as the Purchaser shall from time to time
reasonably request. Such access and investigation shall be made upon
reasonable notice and at reasonable places and times. Such access and
information shall not in any way affect or diminish any of the
representations or warranties hereunder. Without limiting the foregoing,
during such period, the Company shall keep the Purchaser informed as to
the business and operations of the Company and shall consult with the
Purchaser as appropriate. The Purchaser shall keep confidential all
information disclosed to it pursuant to this Section 3.4 and Section
3.5(v) unless such information was already in the Purchaser's possession
or known to the Purchaser prior to being disclosed or provided to the
Purchaser until the earliest of such time as (a) disclosure may be
required by law, (b) three years from the date of the receipt of such
information, (c) such information becomes publicly available through no
action or fault of the Purchaser and, (d) such information was or is
obtained by the Purchaser from a third party other than in violation of
any agreement or law.
SECTION 3.5. Reporting Requirements. For so long as the
Purchaser or its transferees (except transferees who acquire the
Purchasers' Capital Stock in a transaction not exempt from the
registration requirements of the Securities Act), hold an amount of shares
of Capital Stock equal to at least 10% of the Capital Stock then
outstanding, the Company shall furnish the following to the Purchaser:
(i) as soon as practicable after the end of
each month and fiscal quarter, and in any event within 45 days
thereafter, copies of: (A) an unaudited consolidated balance
sheet of the Company as at the end of such month and quarter, (B)
unaudited consolidated statements of operations, shareholders'
equity and cash flows of the Company for the period ending with
such month and quarter and setting forth in comparative form the
figures for the corresponding periods in the preceding fiscal
year certified by the chief financial officer of the Company as
complete and correct, and having been prepared in accordance with
GAAP (other than monthly balance sheets and statements of
operations, shareholders' equity and cash flows) subject to the
absence of footnotes and changes resulting from year-end
adjustments;
(ii) such financial information (other than the
information described in clause (i) above) as the Company and
Purchaser may agree;
(iii) as soon as practicable after the end of
each fiscal year of the Company, and in any event within 90 days
thereafter, copies of: (i) a consolidated balance sheet of the
Company as at the end of such year, and (ii) consolidated
statements of operations, shareholders' equity and cash flows of
the Company for such year, setting forth in each case in
comparative form the corresponding figures for the preceding
fiscal year, together with supporting notes thereto and
accompanied by an opinion thereon of independent accountants of
recognized national standing, together with a summary prepared by
the Company concerning the Company's operations and financial
condition;
(iv) no later than 60 days prior to the end of
each fiscal year of the Company, the proposed annual business
plan and budget (including the capital expenditures and financing
plans) of the Company for the next fiscal year;
(v) promptly after sending, making available,
or filing the same, all reports and financial statements that the
Company sends or makes available to the shareholders of the
Company or files with the SEC; and
(vi) any other information respecting the
business, properties or the condition or operations, financial or
otherwise, of the Company that the Purchaser may from time to
time reasonably request, including, but not limited to, business
units analyses, performance reviews analyses and monthly sales
analyses.
SECTION 3.6. No Shopping. From the date of this
Agreement until the earlier of (i) the Subsequent Closing Date and (ii)
the date this Agreement is terminated in accordance with Section 6.2, the
Company and the Subsidiary shall not, and shall ensure that any directors,
officers, agents, representatives or Affiliates of the Company or the
Subsidiary do not, directly or indirectly, solicit or initiate, enter into
or conduct, discussions concerning, or exchange information (including by
way of furnishing information concerning the Company or the Subsidiary or
their respective businesses) or enter into any negotiations concerning, or
solicit, entertain or agree to any proposals for, (i) a merger,
consolidation or other business combination involving the Company or the
Subsidiary, (ii) a sale of any equity interest in the Company or the
Subsidiary, (iii) a sale of a significant portion of business or assets of
the Company or the Subsidiary, (iv) a recapitalization or restructuring of
the Company or the Subsidiary or (v) a transaction similar to any of the
foregoing. In addition, during such time period, the Company shall not
authorize, direct or knowingly permit any officer, shareholder, director,
employee or agent of the Company or the Subsidiary to do any of the
foregoing and the Company shall notify the Purchaser promptly of the
identity of any person who approaches the Company or the Subsidiary with
respect to any of the foregoing, as well as the price and terms of any
such proposal, if applicable
SECTION 3.7. Public Announcements. No press release or
public announcement related to this Agreement or the transactions
contemplated hereby shall be issued or made without the joint approval of
the Purchaser and the Company, unless required by applicable law or legal
process in which case the Purchaser and the Company shall have the right,
to the extent reasonably practicable, to review and comment on such press
release or announcement prior to publication.
SECTION 3.8. Reserved Shares. The Company shall reserve
and at all times keep available, free from preemptive rights, out of its
authorized but unissued stock, a sufficient number of shares of Common
Stock to provide for the issuance of such shares upon the exercise of the
Warrants.
SECTION 3.9. Proceeds. The proceeds from the sale of the
Securities will be used for the purposes set forth on Schedule 1.
SECTION 3.10. Notification. The Company shall promptly
notify the Purchaser of (i) any notice or other communications from any
person or entity that the consent of such person or entity is or may be
required in connection with the consummation of the transactions
contemplated hereby and (ii) any notice or other communication from any
governmental or regulatory agency or authority in connection with the
consummation of the transactions contemplated hereby.
SECTION 3.11. Negative Covenants. Notwithstanding
anything in the Certificate of Incorporation or the By-laws to the
contrary, from and including the Initial Closing Date to and including the
Subsequent Closing Date and after the Subsequent Closing Date for so long
as the Purchaser or its Affliliates hold an amount of shares of Capital
Stock equal to at least 10% of the Capital Stock then outstanding, then
the following actions by the Company or the Subsidiary, shall require the
written consent of the Purchaser (in addition to any stockholder or Board
of Directors approval as may be required by applicable statute, agreement
or otherwise):
(1) the purchase, construction, acquisition, sale, lease,
exchange or disposition of any property or asset, or
the making of any investment, other than in the
ordinary course of business, the purchase price or
value of which exceeds $100,000;
(ii) the entry into any agreement or series of related
agreements, including any agreement to borrow money
that, either individually or collectively, (A)
creates a monetary obligation or a liability greater
than $100,000 or (B) grants a mortgage on, a
security interest in, a pledge or otherwise
encumbers, any material asset of the Company or the
Subsidiary;
(iii) the entry into any transaction, including any contract,
agreement or other arrangement providing for the
furnishing of services by, or rental of real or
personal property from, or otherwise requiring
payments or the issuance of securities (including
stock options) (or any amendments, modifications or
waivers of any such contract, agreement or
arrangement) to any shareholder (who holds in excess
of five percent of the issued and outstanding voting
securities of the Company) or any officer or
director of the Company or the Subsidiary or any of
their respective Affiliates, or any Family Members
of any of the foregoing;
(iv) the initiation by the Company or the Subsidiary of a
voluntary case or other proceeding seeking
liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar
official of it or any substantial part of its
property, or consent by the Company or the
Subsidiary to any such relief or to the appointment
of or taking possession by any such official in an
involuntary case or other proceeding commenced
against it, or a general assignment by the Company
or the Subsidiary for the benefit of creditors, or
the failure by the Company or the Subsidiary
generally to pay their respective debts as they
become due, or the taking by the Company or the
Subsidiary of any action to authorize any of the
foregoing;
(v) the loan of funds to, or the guaranty of any
obligation or liability of, or the entry into any
other agreement, transaction or arrangement with
any, officer, director or shareholder (who holds in
excess of five percent of the issued and outstanding
voting securities of the Company) of the Company or
the Subsidiary or any of their respective Affiliates
or of any Family Members of any of the foregoing
other than the reimbursement of expenses of any such
person in the ordinary course in accordance with the
policies of the Company;
(vi) the merger or the consolidation of the Company or the
Subsidiary with or into another entity or other
business combination or the sale, assignment, lease
or other disposition of all or substantially all of
the assets of the Company or the Subsidiary;
(vii) any issuance of securities or any recapitalization,
restructuring or other reorganization of the Company
or the Subsidiary, including the capitalization of
any subsidiaries of the Company or the Subsidiary,
or any repurchase or redemption of the Company's or
the Subsidiary's securities;
(viii) any distributions or dividends, whether in cash,
securities or in property in kind, by the Company to
its stockholders; any material changes in accounting
policies of the Company and any removal or
appointment of the Company's independent
accountants; the initiation or settlement of legal,
administrative or other suits or proceedings in the
Company's name or in the Subsidiary's name;
(ix) the establishment or amendment of, or the grant,
acceleration or waiver of any terms or conditions
in, or determination or acceleration pursuant to the
terms of, any pension, retirement, savings, deferred
compensation, profit sharing, benefit or incentive
plan or any stock option, stock appreciation, stock
purchase, performance or other similar plan or any
Plan, for any or all current or former employees,
officers or directors of the Company or the
Subsidiary or any of their respective Affiliates or
of any Family Member of any of the foregoing;
(x) the amendment of the Certificate of Incorporation or
By-laws in any respect; any change in any of the
names under which the Company or the Subsidiary
conducts business; or any other transaction,
agreement or arrangement or series of related
transactions, agreements or arrangements that is
material to the business of the Company or the
Subsidiary or to the condition (financial or
otherwise), operations, business, assets,
liabilities, earnings or prospects of the Company or
the Subsidiary, taken as a whole, other than sales
of inspection systems in the ordinary course of
business
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions to Obligations of the Purchaser to
Effect the Initial Closing. The obligation of the Purchaser to effect the
Initial Closing is subject to the satisfaction of the following conditions
unless waived by the Purchaser:
(a) Representations and Warranties; Covenants;
Deliveries. (i) The representations and warranties of the Company
contained in Section 2.1 shall be true and correct in all respects as of
the date of this Agreement and as of the Initial Closing Date as if made
on and as of the Initial Closing Date (except that such representations
and warranties made as of a specified date shall be true and correct as of
such date), (ii) the Company shall have performed and complied with all
covenants and agreements required to be performed or complied with on or
prior to the Initial Closing Date and (iii) the Company shall have made
the closing deliveries set forth in Section 1.4 (a)(i).
(b) Conflicts; Consents. All permits, consents,
approvals, licenses, orders, authorizations, registrations, declarations,
filings and other actions that are required in connection with the
execution, delivery or performance of this Agreement, the Registration
Rights Agreement, the SBIC Letter Agreement and the certificates
evidencing the Securities or the transactions contemplated hereby and
thereby in order to prevent any of the effects described Section 2.1(d)
with respect to any note, bond, mortgage, indenture, deed of trust,
license, lease, contract, commitment, agreement or arrangement to which
the Company or the Subsidiary is a party or by which any of their
respective properties or assets are bound or with respect to any license,
franchise, permit or other similar authorization held by the Company or
the Subsidiary (all of which consents, if any, are set forth on Schedule
4.1(b) of the Disclosure Schedule) shall have been obtained or taken.
(c) Material Adverse Change. There shall not have been
any material adverse change in the condition (financial or otherwise),
operations, business, assets, liabilities, earnings or prospects of the
Company and the Subsidiary, taken as a whole.
(d) Certificates.
(i) The Purchaser shall have received a
certificate from an executive officer of the Company, dated the Initial
Closing Date, in substantially the form of Exhibit F.
(ii) The Purchaser shall have received a
certificate of the Secretary of the Company, dated the Initial Closing
Date, in substantially the form of Exhibit G.
(e) Opinion of Counsel. The Purchaser shall have
received the opinion, dated the Initial Closing Date, of Xxxxx Xxxxx Xxxx
Xxxxxx Xxxxxxx and Xxxxx PC, counsel to the Company, in substantially the
form of Exhibit H.
SECTION 4.2. Conditions of Obligations of the Company to
Effect the Initial Closing. The obligation of the Company to effect the
Initial Closing are subject to the satisfaction or waiver of the following
conditions: (a) the representations and warranties of the Purchaser
contained in Section 2.2 shall be true and correct in all respects as of
the date of this Agreement and as of the Initial Closing Date as if made
on and as of the Initial Closing Date; (b) the Purchaser shall have
performed and complied with all covenants and agreements required to be
performed or complied with on or prior to the Initial Closing Date; and
(c) the Purchaser shall have made the closing deliveries set forth in
Section 1.4(a)(ii).
SECTION 4.3. Conditions to Obligations of the Purchaser
to Effect the Subsequent Closing . The obligation of the Purchaser to
effect the Subsequent Closing is subject to the satisfaction of the
following conditions unless waived by the Purchaser:
(a) Representations and Warranties; Covenants;
Deliveries. (i) The representations and warranties of the Company
contained in Section 2.1 shall be true and correct in all respects as of
the date of this Agreement and as of the Subsequent Closing Date as if
made on and as of the Subsequent Closing Date (except that such
representations and warranties made as of a specified date shall be true
and correct as of such date), (ii) the Company shall have performed and
complied with all covenants and agreements required to be performed or
complied with on or prior to the Subsequent Closing Date and (iii) the
Company shall have made the closing deliveries set forth in Section 1.4
(b)(i).
(b) Conflicts; Consents. All permits, consents,
approvals, licenses, orders, authorizations, registrations, declarations,
filings and other actions that are required in connection with the
execution, delivery or performance of this Agreement, the Registration
Rights Agreement, the SBIC Letter Agreement and the certificates
evidencing the Securities or the transactions contemplated hereby and
thereby in order to prevent any of the effects described Section 2.1(d)
with respect to any note, bond, mortgage, indenture, deed of trust,
license, lease, contract, commitment, agreement or arrangement to which
the Company or the Subsidiary is a party or by which any of their
respective properties or assets are bound or with respect to any license,
franchise, permit or other similar authorization held by the Company or
the Subsidiary (all of which consents, if any, are set forth on Schedule
4.1(b) of the Disclosure Schedule) shall have been obtained or taken.
(c) Material Adverse Change. There shall not have been
any material adverse change in the condition (financial or otherwise),
operations, business, assets, liabilities, earnings or prospects of the
Company and the Subsidiary, taken as a whole.
(d) Certificates.
(i) The Purchaser shall have received a
certificate from an executive officer of the Company, dated the Subsequent
Closing Date, in substantially the form of Exhibit F.
(ii) The Purchaser shall have received a
certificate of the Secretary of the Company, dated the Subsequent Closing
Date, in substantially the form of Exhibit G.
(e) Opinion of Counsel. The Purchaser shall have
received the opinion, dated the Subsequent Closing Date, of Xxxxx Xxxxx
Xxxx Xxxxxx Xxxxxxx and Xxxxx PC, counsel to the Company, in substantially
the form of Exhibit H.
SECTION 4.4. Conditions of Obligations of the Company to
Effect the Subsequent Closing. The obligation of the Company to effect the
Subsequent Closing are subject to the satisfaction or waiver of the
following conditions: (a) the representations and warranties of the
Purchaser contained in Section 2.2 shall be true and correct in all
respects as of the date of this Agreement and as of the Subsequent Closing
Date as if made on and as of the Subsequent Closing Date; (b) the
Purchaser shall have performed and complied with all covenants and
agreements required to be performed or complied with on or prior to the
Subsequent Closing Date; and (c) the Purchaser shall have made the closing
deliveries set forth in Section 1.4(b)(ii).
ARTICLE V
INDEMNITY
SECTION 5.1. Indemnification. (a) The Company
indemnifies and holds harmless the Purchaser and its Affiliates,
directors, officers, employees and other agents and representatives from
and against any and all liabilities, judgments, claims, settlements,
losses, damages (including any diminution in value as appropriate),
reasonable fees (including attorneys' and other experts' fees and
disbursements), liens, taxes, penalties, obligations and expenses
(collectively, "Losses") incurred or suffered by any such person or entity
arising from, by reason of or in connection with any misrepresentation or
breach of any representation, warranty or agreement of the Company
contained in this Agreement or any certificate or other document delivered
by the Company under this Agreement. The Company shall indemnify and hold
harmless the Purchaser and its Affiliates, directors, officers, employees
and other agents and representatives from and against any and all Losses
incurred or suffered by the Purchaser, arising from, by reason of or in
connection with any third party claim or action, or potential or
threatened claim or action, related to this Agreement and the transactions
contemplated hereby.
(b) The Company shall not have any liability under
Section 5.1(a) unless the aggregate of all Losses relating thereto for
which the Company would, but for this Section 5.1(b), be liable exceeds
$50,000, in which case the Purchaser shall be entitled to all Losses
regardless of the limitation set forth in this sentence. The limitation on
liability set forth in the immediately preceding sentence shall not apply
(i) in the event of fraud, intentional misrepresentation or intentional
breach or (ii) in the case of any representation or warranty set forth in
Section 2.1(c) or Section 2.1(o).
(c) The Purchaser indemnifies and holds harmless the
Company and its Affiliates, directors, officers, employees and other
agents and representatives, from and against any and all Losses incurred
or suffered by any such person or entity arising from, by reason of or in
connection with any misrepresentation or breach of any representation,
warranty or agreement of the Purchaser contained in this Agreement or any
certificate or other document delivered by the Purchaser under this
Agreement.
(d) In case any claim or litigation which might give
rise to any obligation of a party under the indemnity and reimbursement
provisions of this Agreement (each an "Indemnifying Party") shall come to
the attention of the party seeking indemnification hereunder (the
"Indemnified Party"), the Indemnified Party shall notify in writing
promptly the Indemnifying Party of the existence, nature and amount of
potential loss. Failure to give such notice shall not affect the rights of
the Indemnified Party, except to the extent that the Indemnifying Party
shall have been materially prejudiced by such failure. The Indemnifying
Party shall be entitled to participate in and, if (i) such claim can
properly be resolved by money damages alone and the Indemnifying Party has
the financial resources to pay such damages and (ii) the Indemnifying
Party admits that this indemnity fully covers the claim or litigation, the
Indemnifying Party shall be entitled to direct the defense of any claim at
its expense, but such defense shall be conducted by legal counsel
reasonably satisfactory to the Indemnified Party. No Indemnifying Party
shall be liable to an Indemnified Party for any settlement of any action
or claim without the consent of the Indemnifying Party; provided that the
Indemnifying Party shall not unreasonably withhold its consent to any such
settlement. No Indemnifying Party shall, except with the consent of the
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability and equitable claims in response to such claim or
litigation.
(e) The Indemnifying Party shall only be obligated to
indemnify and hold harmless the Indemnified Party for Losses for which a
notice of claim is given within the applicable survival period as set
forth in Section 6.6.
SECTION 5.2. No Election. Nothing contained in this
Article V, or elsewhere in this Agreement, shall be deemed an election of
remedies under this Agreement or limit in any way the liability of any
party under any other agreement to which such party is a party relating to
this Agreement or the transactions contemplated by this Agreement.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Entire Agreement. This Agreement and the
schedules and exhibits hereto contain the entire agreement among the parties
with respect to the transactions contemplated by this Agreement and supersede
all prior agreements or understandings among the parties.
SECTION 6.2. Termination. (a) This Agreement shall terminate
on the earliest to occur of any of the following events:
(i) the mutual written agreement of the
Purchaser and the Company;
(ii) by written notice of the Purchaser or the
Company to the other party, if the Subsequent Closing shall not
have occurred prior to the close of business on November 25,
1997;
(iii) by written notice of the Purchaser to the
Company, if the Company shall have materially breached any of its
representations, warranties or agreements contained in this
Agreement; or
(iv) by written notice of the Company to the
Purchaser, if the Purchaser shall have materially breached any of
its representations, warranties or agreements contained in this
Agreement.
(b) Nothing in this Section shall relieve any party of any
liability for a breach of this Agreement prior to its termination, except that
if this Agreement terminates in accordance with Section 6.2(a) and the
Purchaser receives reimbursement of its costs and expenses in accordance with
Section 3.1, then this Agreement shall terminate without any further
liability. Except as aforesaid, upon the termination of this Agreement, all
rights and obligations of the parties under this Agreement shall terminate,
except their obligations under Section 3.1, Section 3.4 and Section 3.7.
SECTION 6.3. Descriptive Headings; Certain
Interpretations. (a) Descriptive headings are for convenience only and
shall not control or affect the meaning or construction of any provision
of this Agreement.
(b) Whenever any party makes any representation,
warranty or other statement to such party's knowledge, such party will be
deemed to have made due inquiry into the subject matter of such
representation, warranty or other statement.
(c) Except as otherwise expressly provided in this
Agreement, the following rules of interpretation apply to this Agreement:
(i) the singular includes the plural and the plural includes the singular;
(ii) "or" and "any" are not exclusive and "include" and "including" are
not limiting; (iii) a reference to any agreement or other contract
includes permitted supplements and amendments; (iv) a reference to a law
includes any amendment or modification to such law and any rules or
regulations issued thereunder; (v) a reference to a person includes its
permitted successors and assigns; (vi) a reference to GAAP refers to
United States GAAP; and (vii) a reference in this Agreement to an Article,
Section, Exhibit or Schedule is to the Article, Section, Exhibit or
Schedule of this Agreement.
SECTION 6.4. Notices. All notices, requests and other
communications to any party hereunder shall be in writing and sufficient
if delivered personally or sent by telecopy (with confirmation of receipt)
or by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to the Company: Industrial Imaging Corporation
One Xxxxxx Research Center
000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Telecopy: (000) 000-0000
With a copy to: Mintz Xxxxx Xxxx Xxxxxx Xxxxxxx
and Popeo PC
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx
Telecopy: (000) 000-0000
If to the Purchaser: Imprimis Investors LLC
c/o Wexford Management LLC
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
With a copy to: Xxxxxx, Xxxxx & Xxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Telecopy: (000) 000-0000
or to such other address or telecopy number as the party to whom notice is to
be given may have furnished to the other party in writing in accordance
herewith. Each such notice, request or communication shall be effective when
received or, if given by mail, when delivered at the address specified in this
Section or on the fifth business day following the date on which such
communication is posted, whichever occurs first.
SECTION 6.5. Counterparts. This Agreement may be
executed in any number of counterparts, and each such counterpart hereof
shall be deemed to be an original instrument, but all such counterparts
together shall constitute but one agreement.
SECTION 6.6. Survival. Unless otherwise expressly
provided herein, all representations and warranties, agreements and
covenants contained in this Agreement or in any document delivered
pursuant to this Agreement or in connection with this Agreement shall
survive both the Initial Closing and the Subsequent Closing and shall
remain in full force and effect until the third anniversary of the
Subsequent Closing Date, except for (i) the representations and warranties
and agreements contained in Sections 2.1(c), (l)(ii), (m)(ii)-(iv) and (o)
and Sections 3.2(b), 3.5, 3.7, 3.8 and 3.11, and (ii) in the case of
fraud, intentional misrepresentation or intentional breach, any
representation or warranty, shall remain in full force and effect until
the expiration of the applicable statute of limitations, or, in the case
of a third party claim, 30 days after the expiration of the applicable
statute of limitations, taking into account any extensions thereof.
Neither the period of survival nor the liability of the Company with
respect to the representations and warranties shall be reduced by any
investigation made at any time by or on behalf of the Purchaser.
SECTION 6.7. Benefits of Agreement. All of the terms and
provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
This Agreement is for the sole benefit of the parties hereto and not for
the benefit of any third party.
SECTION 6.8. Amendments and Waivers. No modification,
amendment or waiver of any provision of, or consent required by, this
Agreement, nor any consent to any departure herefrom, shall be effective
unless it is in writing and signed by the parties hereto. Such
modification, amendment, waiver or consent shall be effective only in the
specific instance and for the purpose for which given.
SECTION 6.9. Assignment. This Agreement and the rights
and obligations hereunder shall not be assignable or transferable by any
party hereto without the prior written consent of the other party;
provided that notwithstanding the foregoing, the Purchaser may assign this
Agreement and the rights and obligations hereunder, in whole or in part,
to an Affiliate. Any instrument purporting to make an assignment in
violation of this Section shall be void. All covenants, agreements,
representations, warranties and undertakings in this Agreement made by and
on behalf of any party hereto shall bind and inure to the benefit of the
successors and permitted assigns of such party.
SECTION 6.10. Enforceability. It is the desire and
intent of the parties hereto that the provisions of this Agreement shall
be enforced to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular provision of this Agreement shall be
adjudicated to be invalid or unenforceable, such provision shall be deemed
amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation
of such provision in the particular jurisdiction in which such
adjudication is made.
. Each party expressly agrees that the other party will
be irreparably damaged if this Agreement is not specifically enforced.
Upon a breach or threatened breach of the terms, covenants or conditions
of this Agreement, the non-breaching party shall in addition to all other
remedies, be entitled to a temporary or permanent injunction, without any
showing of any actual damage, or a decree for specific performance, in
accordance with the provision hereof.
SECTION 6.11. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK (WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAWS PROVISIONS).
SECTION 6.12. CONSENT OF JURISDICTION. EACH OF THE
PURCHASER AND THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS
TO THE JURISDICTION OF ANY FEDERAL OR STATE COURT OF NEW YORK SITTING IN
NEW YORK CITY AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY SHALL BE LITIGATED EXCLUSIVELY IN SUCH COURTS. EACH OF
THE PURCHASER AND THE COMPANY AGREES NOT TO COMMENCE ANY LEGAL PROCEEDING
RELATED HERETO EXCEPT IN SUCH COURT. EACH OF THE PURCHASER AND THE COMPANY
IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH PROCEEDING IN ANY SUCH COURT AND HEREBY
FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR
CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT
IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 6.13. Restrictive Legend.
(a) Shares and Exercise Shares. Each certificate
representing the Shares, the Exercise Shares or other securities issued in
respect of the Warrants purchased hereunder upon any conversion or stock
split, stock dividend, recapitalization, merger, consolidation or similar
event, shall be stamped or otherwise imprinted with the following legend:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER
THE FEDERAL OR APPLICABLE STATE SECURITIES LAWS AND
INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS
CONTAINED IN SAID LAWS. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SHARES SHALL
BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933, (2) SUCH
SHARES ARE TRANSFERRED PURSUANT TO RULE 144, OR ANY
SUCCESSOR RULE, UNDER SUCH ACT OR (3)INDUSTRIAL IMAGING
CORPORATION SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO IT THAT NO VIOLATION OF SUCH
ACT OR SIMILAR STATE ACTS WILL BE INVOLVED IN SUCH
TRANSFER."
(b) Warrants. Each certificate representing the Warrants
purchased hereunder shall be stamped or otherwise imprinted with the
following legend:
"THESE WARRANTS HAVE NOT BEEN REGISTERED UNDER
THE FEDERAL OR APPLICABLE STATE SECURITIES LAWS AND
INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS
CONTAINED IN SAID LAWS. THE WARRANTS REPRESENTED BY THIS
CERTIFICATE MAY NOT BE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH WARRANTS AND
THE SHARES UNDERLYING SUCH WARRANTS SHALL BE EFFECTIVE
UNDER THE SECURITIES ACT OF 1933, (2) SUCH WARRANTS ARE
TRANSFERRED PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE,
UNDER SUCH ACT OR (3) INDUSTRIAL IMAGING CORPORATION
SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR
SIMILAR STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER."
SECTION 6.14. Restrictions on Transferability. The
Company shall not be required to register the transfer of any Securities
or Exercise Shares on the books of the Company unless: (i) such securities
have been registered under applicable Federal and state securities laws,
(ii) such shares are being transferred pursuant to Rule 144, or any
successor rule, under the Securities Act or (iii) the Company shall have
been provided with an opinion of counsel reasonably satisfactory to it to
the effect that the proposed transfer is exempt from the registration
requirement of the Securities Act and the relevant state securities laws.
SECTION 6.15. General. All Exhibits, Schedules and
Disclosure Schedules are hereby incorporated by reference and made a part
of this Agreement.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed and delivered as of the day and year first
above written.
INDUSTRIAL IMAGING CORPORATION
By:________________________________
Name:
Title:
IMPRIMIS INVESTORS LLC
By:________________________________
Name:
Title:
TABLE OF CONTENTS
ARTICLE I
PURCHASE AND SALE OF THE SHARES
SECTION 1.1. The Securities...........................................1
SECTION 1.2. Purchase Price...........................................2
SECTION 1.3. Closing 2
SECTION 1.4. Delivery and Payment.....................................2
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1. Representations and Warranties of the Company.............4
(a) Organization, Standing and Power.............................4
(b) Authorization; Valid and Binding Agreements..................5
(c) Capitalization; Equity Interests.............................5
(d) Conflicts; Consents..........................................6
(e) Financial Information........................................7
(f) Absence of Changes...........................................7
(g) Assets, Property and Related Matters; Real Property..........9
(h) Patents, Trademarks and Similar Rights.......................9
(i) Insurance...................................................10
(j) Agreements..................................................10
(k) Litigation..................................................11
(l) Compliance; Governmental Authorizations.....................11
(m) Labor Relations; Employees..................................12
(n) Related Party Transactions..................................13
(o) Taxes.......................................................14
(p) Disclosure..................................................15
(q) Books and Records...........................................15
(r) Federal Reserve Regulations.................................15
(s) Investment Company Act......................................16
(t) Securities Act..............................................16
(u) Brokers.....................................................16
(v) Control.....................................................16
SECTION 2.3. Representations and Warranties by the Purchasers........16
(a) Organization and Standing...................................16
(b) Authorization; Valid and Binding Agreements.................16
(c) Investment Representation...................................17
(d) Access to Information.......................................17
(e) Reliance....................................................17
(f) Brokers.....................................................17
ARTICLE III
ADDITIONAL AGREEMENTS
SECTION 3.1. Expenses 17
SECTION 3.2. Conduct of Business......................................18
SECTION 3.3. Further Assurances.......................................18
SECTION 3.4. Access and Information...................................18
SECTION 3.5. Reporting Requirements...................................19
SECTION 3.6. No Shopping..............................................20
SECTION 3.7. Public Announcements.....................................20
SECTION 3.8. Reserved Shares..........................................20
SECTION 3.9. Proceeds ................................................20
SECTION 3.10 Notification.............................................20
SECTION 3.11 Negative Covenants.......................................20
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions to Obligations of the Purchaser to
effect the Initial Closing...............................23
(a) Representations and Warranties; Covenants; Deliveries.......23
(b) Conflicts; Consents.........................................19
(c) Material Adverse Change.....................................20
(d) Certificates................................................23
(e) Opinion of Counsel..........................................23
SECTION 4.2. Conditions of Obligations of the Company to effect
the Subsequent Closing...................................24
SECTION 4.3 Conditions to Obligations of the Purchaser to
effect the Subsequent Closing................. .........23
(a) Representations and Warranties; Covenants; Deliveries.......23
(b) Conflicts; Consents.........................................23
(c) Material Adverse Change.....................................24
(d) Certificates................................................24
(e) Opinion of Counsel..........................................24
SECTION 4.4 Conditions of Obligations of the Company to effect
the Subsequent Closing....................................24
ARTICLE V
INDEMNITY
SECTION 5.1. Indemnification..........................................25
SECTION 5.2. No Election..............................................26
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Entire Agreement.........................................26
SECTION 6.2. Termination..............................................27
SECTION 6.3. Descriptive Headings; Certain Interpretations............27
SECTION 6.4. Notices .................................................28
SECTION 6.5. Counterparts.............................................28
SECTION 6.6. Survival ................................................29
SECTION 6.7. Benefits of Agreement....................................29
SECTION 6.8. Amendments and Waivers...................................29
SECTION 6.9. Assignment...............................................29
SECTION 6.10. Enforceability..........................................29
SECTION 6.11. Specific Enforcement....................................30
SECTION 6.12. Governing Law...........................................30
SECTION 6.13. Consent to Jurisdiction.................................30
SECTION 6.14. Restrictive Legend......................................31
SECTION 6.15. Restrictions on Transferability.........................31
SECTION 6.16. General ................................................26
EXHIBITS
Exhibit A Form of Class A Warrants
Exhibit B Form of Class B Warrants
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of SBIC Letter Agreement
EXHIBIT A
THESE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE
STATE SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS
CONTAINED IN SAID LAWS. THE WARRANTS REPRESENTED BY THIS CERTIFICATE MAY
NOT BE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO
SUCH WARRANTS AND THE SHARES UNDERLYING SUCH WARRANTS SHALL BE EFFECTIVE
UNDER THE SECURITIES ACT OF 1933, (2) SUCH WARRANTS ARE TRANSFERRED
PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE, UNDER SUCH ACT OR (3)
INDUSTRIAL IMAGING CORPORATION SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR SIMILAR
STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER.
WARRANT NO. A-1
WARRANT
TO PURCHASE SHARES OF COMMON STOCK,
PAR VALUE $0.01 PER SHARE,
OF
INDUSTRIAL IMAGING CORPORATION
THIS IS TO CERTIFY THAT IMPRIMIS INVESTORS LLC, or such
holder's registered assigns (the "Investor"), is the owner of _______
Warrants (as defined below), each of which entitles the registered holder
thereof to purchase from INDUSTRIAL IMAGING CORPORATION, a Delaware
corporation (the "Company"), one fully paid, duly authorized and
nonassessable share of Common Stock, par value $0.01 per share, of the
Company (the "Common Stock"), at any time or from time to time on or
before 5:00 p.m., New York City time, on November ___, 2002, at an
exercise price of $1.00 per share (the "Exercise Price"), all on the terms
and subject to the conditions hereinafter set forth.
The number of shares of Common Stock issuable upon
exercise of each such Warrant (the "Number Issuable"), which is initially
one (1) share, is subject to adjustment from time to time pursuant to the
provisions of Section 2 of this Warrant Certificate. The Warrants
evidenced by this certificate are part of a series of Class A Warrants
being issued by the Company on the Issue Date (the "Warrants"). The
execution and delivery of this Warrant Certificate is a condition
precedent to the obligations of the Investor under the Securities Purchase
Agreement, dated as of November __, 1997, between the Investor and the
Company.
Capitalized terms used herein but not otherwise defined
shall have the meanings given them in Section 12 hereof.
Section 1. Exercise of Warrant. (a) The Warrants
evidenced hereby may be exercised, in whole or in part, by the registered
holder hereof at any time or from time to time on or before 5:00 p.m., New
York City time, on November ___, 2002, upon delivery to the Company at the
principal executive office of the Company in the United States of America,
of (i) this Warrant Certificate, (ii) a written notice stating that such
holder elects to exercise all or some portion of the Warrants evidenced
hereby in accordance with the provisions of this Section 1 and specifying
the name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued and (iii) payment of
the Exercise Price for the shares of Common Stock issuable upon exercise
of such Warrants, which shall be payable either (A) by a certified or
official bank check payable to the order of the Company or (B) in the
manner prescribed in Section 1(e), at the holder's option (collectively,
the "Warrant Exercise Documentation").
(b) As promptly as practicable, and in any event within
five Business Days after receipt of the Warrant Exercise Documentation,
the Company shall deliver or cause to be delivered (a) certificates
representing the number of validly issued, fully paid and nonassessable
shares of Common Stock specified in the Warrant Exercise Documentation,
(b) if applicable, cash in lieu of any fraction of a share, as hereinafter
provided, and (c) if less than the full number of Warrants evidenced
hereby are being exercised, a new Warrant Certificate or Certificates, of
like tenor, for the number of Warrants evidenced by this Warrant
Certificate, less the number of Warrants then being exercised. Such
exercise shall be deemed to have been made at the close of business on the
date of delivery of the Warrant Exercise Documentation so that the Person
entitled to receive shares of Common Stock upon such exercise shall be
treated for all purposes as having become the record holder of such shares
of Common Stock at such time. No such surrender shall be effective to
constitute the Person entitled to receive such shares as the record holder
thereof while the transfer books of the Company for the Common Stock are
closed for any purpose (but not for any period in excess of five days);
but any such surrender of this Warrant Certificate for exercise during any
period while such books are so closed shall become effective for exercise
immediately upon the reopening of such books, as if the exercise had been
made on the date the Warrant Exercise Documentation was received and for
the Number Issuable of Common Stock specified in the Warrant Exercise
Documentation and at the Exercise Price.
(c) The Company shall pay all expenses in connection
with, and all taxes and other governmental charges (other than income
taxes of the holder) that may be imposed in respect of, the issue or
delivery of any shares of Common Stock issuable upon the exercise of the
Warrants evidenced hereby. The Company shall not be required, however, to
pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for shares of Common Stock in any
name other than that of the registered holder of the Warrants evidenced
hereby.
(d) In connection with the exercise of any Warrants
evidenced hereby, no fractions of shares of Common Stock shall be issued,
but in lieu thereof the Company shall pay a cash adjustment in respect of
such fractional interest in an amount equal to such fractional interest
multiplied by the Current Market Price per share on the Business Day which
next precedes the day of exercise. If more than one such Warrant shall be
exercised by the holder thereof at the same time, the number of full
shares of Common Stock issuable on such exercise shall be computed on the
basis of the total number of Warrants so exercised.
(e) In addition to the method of payment set forth in
Section 1(a)(iii) and in lieu of any cash payment required thereunder, the
registered holder shall have the right to exercise the Warrants in full or
in part by surrendering the Warrant Certificate in the manner specified in
Section 1 in exchange for the number of shares of Common Stock equal to
the quotient derived from dividing (i) the excess of (A) the product of
(I) the Number Issuable of Common Stock as to which Warrants are being
exercised and (II) the Current Market Price per share, over (B) the
product of (y) the Number Issuable of Common Stock as to which Warrants
being exercised and (z) the Exercise Price, by (ii) the Current Market
Price per share.
(f) In the event of a sale of all or substantially all
of the Company's assets for cash, the Warrants shall be deemed exercised
in accordance with the provisions of this Section 1 as of date of the
consummation of such sale and the holder hereof shall be entitled to pay
the Exercise Price in the manner prescribed in Section 1(a)(iii) or
Section 1(d), at its option.
Section 2. Adjustments.
(a) Adjustment of Number Issuable. The Number
Issuable shall be subject to adjustment from time to time as follows:
(i) In case the Company shall at any time or
from time to time after the Issue Date:
(A) pay a dividend or make a
distribution on the outstanding shares of Common Stock in capital
stock of the Company;
(B) subdivide the outstanding shares
of Common Stock into a larger number of shares; or
(C) combine the outstanding shares of
Common Stock into a smaller number of shares;
then, and in each such case (other than a dividend or
distribution received by or set aside for the benefit of the
holder pursuant to Section 2(c) hereof), the Number Issuable in
effect immediately prior to such event shall be adjusted (and any
other appropriate actions shall be taken by the Company) so that
the holder of any Warrant evidenced hereby thereafter exercised
shall be entitled to receive the number of shares of Common Stock
or other securities of the Company which such holder would have
owned or had been entitled to receive upon or by reason of any of
the events described above, had such Warrant been exercised
immediately prior to the happening of such event. An adjustment
made pursuant to this clause (i) shall become effective
retroactively (x) in the case of any such dividend or
distribution, to a date immediately following the close of
business on the record date for the determination of holders of
shares of Common Stock entitled to receive such dividend or
distribution, or (y) in the case of any such subdivision or
combination to the close of business on the date upon which such
corporate action becomes effective.
(ii) If after the Issue Date, the Company shall
at any time or from time to time issue or sell (x) shares of
Common Stock or (y) securities convertible into or exchangeable
for shares of Common Stock, or any options, warrants or other
rights to acquire shares of Common Stock (other than (A) shares
of Common Stock issued upon exercise of the Warrants outstanding
on the Issue Date, (B) shares of Common Stock issued pursuant to
an employee stock option plan, stock bonus plan or other
incentive compensation plan or award, each as approved by the
Company's Board of Directors that, in the aggregate with all
other shares of Common Stock issued pursuant to any such plans
(whether or not approved by the Company's Board of Directors)
constitute no more than five percent of the issued and
outstanding Common Stock, and (C) shares of Common Stock issued
as a result of adjustments made under agreements related to
shares described in clauses (A) and (B)) at a price per share
that is less than the Current Market Price per share of Common
Stock then in effect as of the record date or issue date, as the
case may be, referred to in the following sentence (the "Relevant
Date") (treating the price per share of Common Stock, in the case
of the issuance of any security convertible or exchangeable or
exercisable into Common Stock as equal to (x) the sum of the
price for such security convertible, exchangeable or exercisable
into Common Stock plus any additional consideration payable
(without regard to any anti-dilution adjustments) upon the
conversion, exchange or exercise of such security into Common
Stock divided by (y) the number of shares of Common Stock
initially underlying such convertible, exchangeable or
exercisable security), in each case, other than issuances or
sales for which an adjustment is made pursuant to another
paragraph of this Section 2, then, and in each such case, the
Number Issuable then in effect shall be adjusted by multiplying
the Number Issuable in effect on the day immediately prior to the
Relevant Date by a fraction, (1) the numerator of which shall be
the sum of the number of shares of Common Stock, on a fully
diluted basis, outstanding on the Relevant Date, plus the number
of additional shares of Common Stock issued or to be issued (or
the maximum number into which such convertible or exchangeable
securities initially may convert or exchange or for which such
options, warrants or other rights initially may be exercised),
and (2) the denominator of which shall be the sum of the number
of shares of Common Stock, on a fully diluted basis, outstanding
on the Relevant Date, plus the number of shares of Common Stock
which the aggregate consideration (plus the aggregate amount of
any additional consideration initially payable upon conversion or
exchange of such convertible or exchangeable securities or
exercise of such options, warrants or other rights) for the total
number of such additional shares of Common Stock so issued (or
into which such convertible or exchangeable securities may
convert or exchange or for which such options, warrants or other
rights may be exercised) would purchase at the Current Market
Price per share of Common Stock on the Relevant Date. Such
adjustment shall be made whenever such shares, securities,
options, warrants or other rights are issued, and shall become
effective retroactively to a date immediately following the close
of business (x) in the case of an issuance to the stockholders of
the Company, as such, on the record date for the determination of
stockholders entitled to receive such shares, securities,
options, warrants or other rights and (y) in all other cases, on
the date (the "issue date") of such issuance; provided, that if
any convertible or exchangeable securities, options, warrants, or
other rights (or any portions thereof) which shall have given
rise to an adjustment pursuant to this Section 2(a)(ii) shall
have expired or terminated without the exercise thereof and/or if
by reason of the terms of such convertible or exchangeable
securities, options, warrants or other rights there shall have
been an increase or increases, with the passage of time or
otherwise, in the Number Issuable, then the Number Issuable
hereunder shall be readjusted (but to no greater extent than
originally adjusted) on the basis of (A) eliminating from the
computation any additional shares of Common Stock corresponding
to such convertible or exchangeable securities, options, warrants
or other rights as shall have expired or terminated, (B) treating
the additional shares of Common Stock, if any, actually issued or
issuable pursuant to the previous exercise of such convertible
and exchangeable securities, options, warrants, or other rights
as having been issued for the consideration actually received and
receivable therefor and (C) treating any of such convertible or
exchangeable securities, options, warrants or other rights which
remain outstanding as being subject to exercise or conversion.
Solely for purposes of this clause (ii), (I) Common Stock shall
include the Common Stock, par value $0.01 per share, of the
Company and each other class of capital stock of the Company that
does not have a preference over any other class of capital stock
of the Company as to dividends or upon liquidation, dissolution
or winding up of the Company and, in each case, shall include any
other class of capital stock of the Company into which such stock
is reclassified or reconstituted and (II) if the provisions of
any securities convertible into or exchangeable for shares of
Common Stock or options, warrants or other rights to acquire
shares of Common Stock are amended after the date of issuance so
as to reduce the applicable conversion price, exchange price or
exercise price such amendment shall be deemed to be a new
issuance of such securities.
(iii) In case the Company shall at any time or
from time to time after the Issue Date distribute to any holder
of shares of its Common Stock (including any such distribution
made in connection with a consolidation or merger in which the
Company is the resulting or surviving corporation and the Common
Stock is not changed or exchanged) cash, evidences of
indebtedness of the Company or another issuer, securities of the
Company or another issuer or other assets (excluding dividends or
other distributions of shares of Common Stock or other capital
stock for which adjustment in the Number Issuable is made under
Section 2(a)(i) or dividends or other distributions received by
or set aside for the benefit of the holders of Common Stock
pursuant to Section 2(c) below) or rights or warrants to
subscribe for or purchase securities of the Company (excluding
those in respect of which adjustment in the Number Issuable is
made pursuant to Section 2(a)(ii)), then, and in each such case,
the Number Issuable then in effect shall be adjusted by
multiplying the Number Issuable in effect immediately prior to
the date of such distribution by a fraction (x) the numerator of
which shall be the Current Market Price per share on the record
date referred to below and (y) the denominator of which shall be
such Current Market Price per share less the then Fair Market
Value (as determined in good faith by the Board of Directors of
the Company, a certified resolution with respect to which shall
be mailed to the holder of the Warrants evidenced hereby) of the
portion of the cash, evidences of indebtedness, securities or
other assets so distributed or of such subscription rights or
warrants applicable to one share of Common Stock (but such
denominator shall in no event be zero). Such adjustment shall be
made whenever any such distribution is made and shall become
effective retroactively to a date immediately following the close
of business on the record date for the determination of
stockholders entitled to receive such distribution.
(iv) In case the Company at any time or from
time to time shall take any action which could have a dilutive
effect on the number of shares of Common Stock that may be issued
upon exercise of the Warrants, other than an action described in
any of Section 2(a)(i) through 2(a)(iii), inclusive, or Section
2(b), then, the Number Issuable shall be adjusted in such manner
and at such time as the Board of Directors of the Company
reasonably determines to be equitable under the circumstances
(such determination to be evidenced in a resolution, a certified
copy of which shall be mailed to the holder of the Warrants
evidenced hereby).
(v) Notwithstanding anything herein to the
contrary, no adjustment under this Section 2(a) need be made to
the Number Issuable unless such adjustment would require an
increase or decrease of at least 1% of the Number Issuable then
in effect. Any lesser adjustment shall be carried forward and
shall be made at the time of and together with the next
subsequent adjustment, which, together with any adjustment or
adjustments so carried forward, shall amount to an increase or
decrease of at least 1% of such Number Issuable. Any adjustment
to the Number Issuable carried forward and not theretofore made
shall be made immediately prior to the exercise of any Warrants
pursuant hereto.
(vi) The Company promptly shall deliver to each
registered holder of Warrants at least ten Business Days prior to
effecting any transaction which would result in an increase or
decrease in the Number Issuable pursuant to this Section 2(a) a
notice thereof, together with a certificate, signed by the Chief
Executive Officer or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of
the Company, setting forth in reasonable detail the event
requiring the adjustment and the method by which such adjustment
was calculated and specifying the increased or decreased Number
Issuable then in effect following such adjustment.
(vii) Notwithstanding anything contrary
contained in this Section 2(a), the Company shall be entitled to
make such upward adjustments in the Number Issuable, in addition
to those otherwise required by this Section 2(a), as the Board of
Directors of the Company in their discretion shall determine to
be advisable in order that any stock dividend, subdivision or
combination of shares, distribution of rights or warrants to
purchase stock or securities, or distribution of securities
convertible into or exchangeable for Common Stock, hereafter made
by the Company to its shareholders shall not be taxable;
provided, however, that any such adjustment shall be made, as
nearly as practicable, in a manner which treats all holders of
Warrants with similar protections on an equal basis.
(b) Reorganization, Reclassification,
Consolidation, Merger or Sale of Assets. In case of any capital
reorganization or reclassification or other change of outstanding shares
of Common Stock (other than a change in par value, or from par value to no
par value, or from no par value to par value, or as a result of a
subdivision or combination), or in case of any consolidation or merger of
the Company with or into another Person (other than a consolidation or
merger in which the Company is the resulting or surviving person and which
does not result in any reclassification or change of outstanding Common
Stock), or in case of any sale or other disposition to another Person of
all or substantially all of the assets of the Company (any of the
foregoing, a "Transaction"), the Company, or such successor or purchasing
Person, as the case may be, shall execute and deliver to each holder of
the Warrants evidenced hereby, at least ten Business Days prior to
effecting any of the foregoing Transactions, a certificate that the holder
of each such Warrant then outstanding shall have the right thereafter to
exercise such Warrant into the kind and amount of shares of stock or other
securities (of the Company or another issuer) or property or cash
receivable upon such Transaction by a holder of the number of shares of
Common Stock into which such Warrant could have been exercised immediately
prior to such Transaction. Such certificate shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 2 and shall contain other terms
identical to the terms hereof. If, in the case of any such Transaction,
the stock, other securities, cash or property receivable thereupon by a
holder of Common Stock includes stock, securities, other property or cash
of a Person other than the successor or purchasing Persons and other than
the Company, in connection with such Transaction, then such certificate
also shall be executed by such Person, and such Person shall, in such
certificate, specifically assume the obligations of such successor or
purchasing Person and acknowledge its obligations to issue such stock,
securities, other property or cash to holders of the Warrants upon
exercise thereof as provided above. The provisions of this Section 2(b)
similarly shall apply to successive Transactions.
(c) Special Distributions. If the holder so
elects by sending a Special Notice to the Company, in the event that the
Company shall declare a dividend or make any other distribution
(including, without limitation, in cash, in capital stock (which shall
include, without limitation, any options, warrants or other rights to
acquire capital stock) of the Company, whether or not pursuant to a
shareholder rights plan, "poison pill" or similar arrangement) in other
securities, property or assets, to holders of Common Stock (a "Special
Distribution"), then the Board of Directors shall set aside the amount of
such dividend or distribution that any holder of Warrants would have been
entitled to receive had it exercised such Warrants prior to the record
date for such dividend or distribution. Upon the exercise of a Warrant
evidenced hereby, the holder shall be entitled to receive, such dividend
or distribution that such holder would have received had such Warrant been
exercised immediately prior to the record date for such dividend or
distribution. Prior to any Special Distribution described in this Section
2(c), the Company shall as provided in Section 4 hereof notify each holder
(not less than ten Business Days prior to the occurrence of each Special
Distribution) of its intent to make such Special Distribution and the
holder, if it elects to have such distribution set aside the amount
thereof rather than have an adjustment to the Number Issuable as provided
in Section 2(a)(i), 2(a)(ii) or 2(a)(iii), shall notify the Company by
sending a Special Notice prior to the date of any such Special
Distribution.
Section 3. Redemption. The Company shall not have any
right to redeem any of the Warrants evidenced hereby.
Section 4. Notice of Certain Events. In case at any time
or from time to time the holders of the Warrants evidenced hereby are
entitled to notice pursuant to the terms of Section 2, such notice shall
provide (a) the date on which a record is to be taken for the purpose of
such dividend, distribution, subdivision, combination or issuance of
shares of Common Stock, securities convertible into or exchangeable for
shares of Common Stock or options, warrants or other rights, if a record
is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution, subdivision,
combination, shares of Common Stock, securities convertible into or
exchangeable for shares of Common Stock or options, warrants or other
rights, are to be determined, (b) the issue date (as defined in Section
2(a)(ii) hereof) or (c) the date on which such Transaction, dissolution,
liquidation or winding up is expected to become effective.
Section 5. Certain Covenants. The Company covenants and
agrees that all shares of capital stock of the Company which may be issued
upon the exercise of the Warrants evidenced hereby will be duly
authorized, validly issued and fully paid and nonassessable. The Company
shall at all times reserve and keep available for issuance upon the
exercise of the Warrants, such number of its authorized but unissued
shares of Common Stock as will from time to time be sufficient to permit
the exercise of all outstanding Warrants, and shall take all action
required to increase the authorized number of shares of Common Stock if at
any time there shall be insufficient authorized but unissued shares of
Common stock to permit such reservation or to permit the exercise of all
outstanding Warrants. The Company shall prepare and file, and cooperate
with the holder of this Warrant so that it may prepare and file, in each
case within five Business Days of a request by such holder, notification
and report forms in compliance with the HSR Act, and shall otherwise fully
comply with the requirements of the HSR Act, to the extent required in
connection with the exercise of the Warrant. The Company shall bear all of
its own expenses and all of its own out of pocket expenses (including
reasonable attorneys' fees, charges and expenses) and filing fees of such
holder in connection with any such preparation and filing.
Section 6. Registered Holder. The person in whose name
this Warrant Certificate is registered shall be deemed the owner hereof
and of the Warrants evidenced hereby for all purposes.
Section 7. Transfer of Warrants. Any transfer of the
rights represented by this Warrant Certificate shall be effected by the
surrender of this Warrant Certificate, along with the form of assignment
attached hereto, properly completed and executed by the registered holder
hereof, at the principal executive office of the Company in the United
States of America; provided that (a) a registration statement with respect
to the Warrants proposed for transfer, and with respect to the shares of
Common Stock underlying such Warrants, shall be effective under the
Securities Act, (b) the Warrants are transferred pursuant to Rule 144
under the Securities Act or (c) the Company shall have received an opinion
of counsel reasonably satisfactory to it that no violation of such act or
similar state acts will be involved in such transfer. Thereupon, the
Company shall issue in the name or names specified by the registered
holder hereof and, in the event of a partial transfer, in the name of the
registered holder hereof, a new Warrant Certificate or Certificates
evidencing the right to purchase such number of shares of Common Stock as
shall be equal to the number of shares of Common Stock then purchasable
hereunder.
Section 8. Denominations. The Company covenants that it
will, at its expense, promptly upon surrender of this Warrant Certificate
at the principal executive office of the Company in the United States of
America, execute and deliver to the registered holder hereof a new Warrant
Certificate or Certificates in denominations specified by such holder for
an aggregate number of Warrants equal to the number of Warrants evidenced
by this Warrant Certificate.
Section 9. Replacement of Warrants. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant Certificate and, in the case of loss, theft or
destruction, upon delivery of an indemnity reasonably satisfactory to the
Company (in the case of an institutional investor, its own unsecured
indemnity agreement shall be deemed to be reasonably satisfactory), or, in
the case of mutilation, upon surrender and cancellation thereof, the
Company will issue a new Warrant Certificate of like tenor for a number of
Warrants equal to the number of Warrants evidenced by this Warrant
Certificate.
Section 10. Governing Law. THIS WARRANT CERTIFICATE
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW
PROVISIONS).
Section 11. Rights Inure to Registered Holder. The
Warrants evidenced by this Warrant Certificate will inure to the benefit
of and be binding upon the registered holder thereof and the Company and
their respective successors and permitted assigns. This Warrant
Certificate shall be for the sole benefit of the registered holder
thereof. Nothing in this Warrant Certificate shall be construed to give
the registered holder hereof any rights as a holder of shares of Common
Stock until such time, if any, as the Warrants evidenced by this Warrant
Certificate are exercised in accordance with the provisions hereof.
Section 12. Definitions. For the purposes of this
Warrant Certificate, the following terms shall have the meanings indicated
below:
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law or executive order to close.
"Common Stock" shall have the meaning assigned to such
term in the Preamble hereof.
"Company" shall have the meaning assigned to such term
in the Preamble hereof.
"Current Market Price" per share shall mean, on any date
specified herein for the determination thereof, (a) if the Common Stock is
then listed on a national securities exchange, designated as a Nasdaq
Stock Market security or quoted in the over-the-counter-market by a member
firm of the NYSE, the average daily Market Price of the Common Stock for
those days during the period of 15 days, ending on such date, on which the
national securities exchanges were open for trading, and (b) if the Common
Stock is not then so listed, designated or quoted, the Market Price on
such date.
"Exercise Price" shall have the meaning assigned to such
term in the Preamble hereof.
"Fair Market Value" shall mean the amount which a
willing buyer, under no compulsion to buy, would pay a willing seller,
under no compulsion to sell, in an arm's-length transaction.
"HSR Act" shall mean the Xxxx Xxxxx Xxxxxx Anti-Trust
Improvements Act of 1976, and the rules and regulations of the Federal
Trade Commission promulgated thereunder.
"Investor" shall have the meaning assigned to
such term in the Preamble hereof.
"Issue Date" shall mean November ___, 1997.
"Market Price" shall mean, per share of Common Stock, on
any date specified herein: (a) if the Common Stock is listed on any
national securities exchange or is designated as a Nasdaq Stock Market
security, the last trading price of the Common Stock on such date as
reported in the Wall Street Journal; or (b) if the Common Stock is not so
listed or designated, the average of the reported closing bid and ask
prices of the Common Stock in the over-the-counter-market, on such date as
reported by any member firm of the NYSE selected by the Company; or (c) if
none of (a) or (b) is applicable, the Fair Market Value per share
determined in good faith by the Board of Directors of the Company which
shall be deemed to be Fair Market Value unless holders of at least 50% of
Common Stock issued or issuable upon exercise of the Warrants request that
the Company obtain an opinion of a nationally recognized investment
banking firm chosen by the Company (who shall bear the expense) and
reasonably acceptable to such requesting holders of the Warrants, in which
event the Fair Market Value shall be as determined by such investment
banking firm.
"Number Issuable" shall have the meaning given it in the
Preamble hereof.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Person" shall mean any individual,
corporation, limited liability company, partnership, trust, incorporated
or unincorporated association, joint venture, joint stock company,
government (or an agency or political subdivision thereof) or other entity
of any kind.
"Relevant Date" shall have the meaning assigned to such
term in Section 2(a)(ii) -------------- hereof.
"Securities Act" shall mean the Securities Act of 1933.
"Special Distribution" shall have the meaning assigned
to such term in Section 2(c) --------------------- hereof.
"Special Notice" shall mean the notice sent by a holder
to the Company indicating its preference to have any Special Distribution
set aside for its benefit upon exercise of the Warrant.
"Transaction" shall have the meaning assigned to such
term in Section 2(b) hereof.
"Warrants" shall have the meaning assigned to such term
in the Preamble hereof.
"Warrant Exercise Documentation" shall have the meaning
given it in Section 1 hereof.
Section 13. Notices. All notices, demands and other
communications provided for or permitted hereunder shall be made in
writing and shall be sufficient if delivered personally or sent by
telecopy (with confirmation of receipt) or by registered or certified
mail, postage prepaid, return receipt requested, (a) if to the holder of a
Warrant, at such holder's last known address or telecopy number appearing
on the books of the Company; and (b) if to the Company, at its principal
executive office, or the telecopy number of such office, in the United
States, or such other address or telecopy number as the party to whom
notice is to be given may have furnished to the other party. Each such
notice, request or communication shall be effective when received or, if
given by mail, when delivered at the address specified in this Section or
on the fifth Business Day following the date on which such communication
is posted, whichever occurs first.
Section 14. Share Legend. Each certificate representing
shares of Common Stock or any other securities issued upon exercise of
this Warrant shall bear the following legend unless such shares or other
securities have been registered under the Securities Act and any
applicable state securities laws:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE FEDERAL
OR APPLICABLE STATE SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT
TO EXEMPTIONS CONTAINED IN SAID LAWS. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE TRANSFERRED UNLESS (A) A REGISTRATION STATEMENT
SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933, (B) SUCH SHARES ARE
TRANSFERRED PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE, UNDER SUCH ACT OR
(C) INDUSTRIAL IMAGING CORPORATION SHALL HAVE RECEIVED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR
SIMILAR STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER."
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed as of the Issue Date.
INDUSTRIAL IMAGING CORPORATION
By:_________________________________
Name:
Title:
[Form of Assignment Form]
[To be executed upon assignment of Warrants]
The undersigned hereby assigns and transfers this
Warrant Certificate to ____________________ whose Social Security Number
or Tax ID Number is _________________ and whose record address is
_____________________________________, and irrevocably appoints
________________ as agent to transfer this security on the books of the
Company. Such agent may substitute another to act for such agent.
Signature:
-------------------------------
Date: ___________________________
EXHIBIT B
THESE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE
STATE SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS
CONTAINED IN SAID LAWS. THE WARRANTS REPRESENTED BY THIS CERTIFICATE MAY
NOT BE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO
SUCH WARRANTS AND THE SHARES UNDERLYING SUCH WARRANTS SHALL BE EFFECTIVE
UNDER THE SECURITIES ACT OF 1933, (2) SUCH WARRANTS ARE TRANSFERRED
PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE, UNDER SUCH ACT OR (3)
INDUSTRIAL IMAGING CORPORATION SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR SIMILAR
STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER.
WARRANT NO. B-1
WARRANT
TO PURCHASE SHARES OF COMMON STOCK,
PAR VALUE $0.01 PER SHARE,
OF
INDUSTRIAL IMAGING CORPORATION
THIS IS TO CERTIFY THAT IMPRIMIS INVESTORS LLC, or such
holder's registered assigns (the "Investor"), is the owner of _______
Warrants (as defined below), each of which entitles the registered holder
thereof to purchase from INDUSTRIAL IMAGING CORPORATION, a Delaware
corporation (the "Company"), one fully paid, duly authorized and
nonassessable share of Common Stock, par value $0.01 per share, of the
Company (the "Common Stock"), at any time or from time to time on or
before 5:00 p.m., New York City time, on November ___, 2002, at an
exercise price of $2.00 per share (the "Exercise Price"), all on the terms
and subject to the conditions hereinafter set forth.
The number of shares of Common Stock issuable upon
exercise of each such Warrant (the "Number Issuable"), which is initially
one (1) share, is subject to adjustment from time to time pursuant to the
provisions of Section 2 of this Warrant Certificate. The Warrants
evidenced by this certificate are part of a series of Class B Warrants
being issued by the Company on the Issue Date (the "Warrants"). The
execution and delivery of this Warrant Certificate is a condition
precedent to the obligations of the Investor under the Securities Purchase
Agreement, dated as of November __, 1997, between the Investor and the
Company.
Capitalized terms used herein but not otherwise defined
shall have the meanings given them in Section 12 hereof.
Section 1. Exercise of Warrant. (a) The Warrants
evidenced hereby may be exercised, in whole or in part, by the registered
holder hereof at any time or from time to time on or before 5:00 p.m., New
York City time, on November ___, 2002, upon delivery to the Company at the
principal executive office of the Company in the United States of America,
of (i) this Warrant Certificate, (ii) a written notice stating that such
holder elects to exercise all or some portion of the Warrants evidenced
hereby in accordance with the provisions of this Section 1 and specifying
the name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued and (iii) payment of
the Exercise Price for the shares of Common Stock issuable upon exercise
of such Warrants, which shall be payable either (A) by a certified or
official bank check payable to the order of the Company or (B) in the
manner prescribed in Section 1(e), at the holder's option (collectively,
the "Warrant Exercise Documentation").
(b) As promptly as practicable, and in any event within
five Business Days after receipt of the Warrant Exercise Documentation,
the Company shall deliver or cause to be delivered (a) certificates
representing the number of validly issued, fully paid and nonassessable
shares of Common Stock specified in the Warrant Exercise Documentation,
(b) if applicable, cash in lieu of any fraction of a share, as hereinafter
provided, and (c) if less than the full number of Warrants evidenced
hereby are being exercised, a new Warrant Certificate or Certificates, of
like tenor, for the number of Warrants evidenced by this Warrant
Certificate, less the number of Warrants then being exercised. Such
exercise shall be deemed to have been made at the close of business on the
date of delivery of the Warrant Exercise Documentation so that the Person
entitled to receive shares of Common Stock upon such exercise shall be
treated for all purposes as having become the record holder of such shares
of Common Stock at such time. No such surrender shall be effective to
constitute the Person entitled to receive such shares as the record holder
thereof while the transfer books of the Company for the Common Stock are
closed for any purpose (but not for any period in excess of five days);
but any such surrender of this Warrant Certificate for exercise during any
period while such books are so closed shall become effective for exercise
immediately upon the reopening of such books, as if the exercise had been
made on the date the Warrant Exercise Documentation was received and for
the Number Issuable of Common Stock specified in the Warrant Exercise
Documentation and at the Exercise Price.
(c) The Company shall pay all expenses in connection
with, and all taxes and other governmental charges (other than income
taxes of the holder) that may be imposed in respect of, the issue or
delivery of any shares of Common Stock issuable upon the exercise of the
Warrants evidenced hereby. The Company shall not be required, however, to
pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for shares of Common Stock in any
name other than that of the registered holder of the Warrants evidenced
hereby.
(d) In connection with the exercise of any Warrants
evidenced hereby, no fractions of shares of Common Stock shall be issued,
but in lieu thereof the Company shall pay a cash adjustment in respect of
such fractional interest in an amount equal to such fractional interest
multiplied by the Current Market Price per share on the Business Day which
next precedes the day of exercise. If more than one such Warrant shall be
exercised by the holder thereof at the same time, the number of full
shares of Common Stock issuable on such exercise shall be computed on the
basis of the total number of Warrants so exercised.
(e) In addition to the method of payment set forth in
Section 1(a)(iii) and in lieu of any cash payment required thereunder, the
registered holder shall have the right to exercise the Warrants in full or
in part by surrendering the Warrant Certificate in the manner specified in
Section 1 in exchange for the number of shares of Common Stock equal to
the quotient derived from dividing (i) the excess of (A) the product of
(I) the Number Issuable of Common Stock as to which Warrants are being
exercised and (II) the Current Market Price per share, over (B) the
product of (y) the Number Issuable of Common Stock as to which Warrants
being exercised and (z) the Exercise Price, by (ii) the Current Market
Price per share.
(f) In the event of a sale of all or substantially all
of the Company's assets for cash, the Warrants shall be deemed exercised
in accordance with the provisions of this Section 1 as of date of the
consummation of such sale and the holder hereof shall be entitled to pay
the Exercise Price in the manner prescribed in Section 1(a)(iii) or
Section 1(d), at its option.
Section 2. Adjustments.
(a) Adjustment of Number Issuable. The Number
Issuable shall be subject to adjustment from time to time as follows:
(i) In case the Company shall at any time or
from time to time after the Issue Date:
(A) pay a dividend or make a
distribution on the outstanding shares of Common Stock in capital
stock of the Company;
(B) subdivide the outstanding shares
of Common Stock into a larger number of shares; or
(C) combine the outstanding shares of
Common Stock into a smaller number of shares;
then, and in each such case (other than a dividend or
distribution received by or set aside for the benefit of the
holder pursuant to Section 2(c) hereof), the Number Issuable in
effect immediately prior to such event shall be adjusted (and any
other appropriate actions shall be taken by the Company) so that
the holder of any Warrant evidenced hereby thereafter exercised
shall be entitled to receive the number of shares of Common Stock
or other securities of the Company which such holder would have
owned or had been entitled to receive upon or by reason of any of
the events described above, had such Warrant been exercised
immediately prior to the happening of such event. An adjustment
made pursuant to this clause (i) shall become effective
retroactively (x) in the case of any such dividend or
distribution, to a date immediately following the close of
business on the record date for the determination of holders of
shares of Common Stock entitled to receive such dividend or
distribution, or (y) in the case of any such subdivision or
combination to the close of business on the date upon which such
corporate action becomes effective.
(ii) If after the Issue Date, the Company shall
at any time or from time to time issue or sell (x) shares of
Common Stock or (y) securities convertible into or exchangeable
for shares of Common Stock, or any options, warrants or other
rights to acquire shares of Common Stock (other than (A) shares
of Common Stock issued upon exercise of the Warrants outstanding
on the Issue Date, (B) shares of Common Stock issued pursuant to
an employee stock option plan, stock bonus plan or other
incentive compensation plan or award, each as approved by the
Company's Board of Directors that, in the aggregate with all
other shares of Common Stock issued pursuant to any such plans
(whether or not approved by the Company's Board of Directors)
constitute no more than five percent of the issued and
outstanding Common Stock, and (C) shares of Common Stock issued
as a result of adjustments made under agreements related to
shares described in clauses (A) and (B)) at a price per share
that is less than the Current Market Price per share of Common
Stock then in effect as of the record date or issue date, as the
case may be, referred to in the following sentence (the "Relevant
Date") (treating the price per share of Common Stock, in the case
of the issuance of any security convertible or exchangeable or
exercisable into Common Stock as equal to (x) the sum of the
price for such security convertible, exchangeable or exercisable
into Common Stock plus any additional consideration payable
(without regard to any anti-dilution adjustments) upon the
conversion, exchange or exercise of such security into Common
Stock divided by (y) the number of shares of Common Stock
initially underlying such convertible, exchangeable or
exercisable security), in each case, other than issuances or
sales for which an adjustment is made pursuant to another
paragraph of this Section 2, then, and in each such case, the
Number Issuable then in effect shall be adjusted by multiplying
the Number Issuable in effect on the day immediately prior to the
Relevant Date by a fraction, (1) the numerator of which shall be
the sum of the number of shares of Common Stock, on a fully
diluted basis, outstanding on the Relevant Date, plus the number
of additional shares of Common Stock issued or to be issued (or
the maximum number into which such convertible or exchangeable
securities initially may convert or exchange or for which such
options, warrants or other rights initially may be exercised),
and (2) the denominator of which shall be the sum of the number
of shares of Common Stock, on a fully diluted basis, outstanding
on the Relevant Date, plus the number of shares of Common Stock
which the aggregate consideration (plus the aggregate amount of
any additional consideration initially payable upon conversion or
exchange of such convertible or exchangeable securities or
exercise of such options, warrants or other rights) for the total
number of such additional shares of Common Stock so issued (or
into which such convertible or exchangeable securities may
convert or exchange or for which such options, warrants or other
rights may be exercised) would purchase at the Current Market
Price per share of Common Stock on the Relevant Date. Such
adjustment shall be made whenever such shares, securities,
options, warrants or other rights are issued, and shall become
effective retroactively to a date immediately following the close
of business (x) in the case of an issuance to the stockholders of
the Company, as such, on the record date for the determination of
stockholders entitled to receive such shares, securities,
options, warrants or other rights and (y) in all other cases, on
the date (the "issue date") of such issuance; provided, that if
any convertible or exchangeable securities, options, warrants, or
other rights (or any portions thereof) which shall have given
rise to an adjustment pursuant to this Section 2(a)(ii) shall
have expired or terminated without the exercise thereof and/or if
by reason of the terms of such convertible or exchangeable
securities, options, warrants or other rights there shall have
been an increase or increases, with the passage of time or
otherwise, in the Number Issuable, then the Number Issuable
hereunder shall be readjusted (but to no greater extent than
originally adjusted) on the basis of (A) eliminating from the
computation any additional shares of Common Stock corresponding
to such convertible or exchangeable securities, options, warrants
or other rights as shall have expired or terminated, (B) treating
the additional shares of Common Stock, if any, actually issued or
issuable pursuant to the previous exercise of such convertible
and exchangeable securities, options, warrants, or other rights
as having been issued for the consideration actually received and
receivable therefor and (C) treating any of such convertible or
exchangeable securities, options, warrants or other rights which
remain outstanding as being subject to exercise or conversion.
Solely for purposes of this clause (ii), (I) Common Stock shall
include the Common Stock, par value $0.01 per share, of the
Company and each other class of capital stock of the Company that
does not have a preference over any other class of capital stock
of the Company as to dividends or upon liquidation, dissolution
or winding up of the Company and, in each case, shall include any
other class of capital stock of the Company into which such stock
is reclassified or reconstituted and (II) if the provisions of
any securities convertible into or exchangeable for shares of
Common Stock or options, warrants or other rights to acquire
shares of Common Stock are amended after the date of issuance so
as to reduce the applicable conversion price, exchange price or
exercise price such amendment shall be deemed to be a new
issuance of such securities.
(iii) In case the Company shall at any time or
from time to time after the Issue Date distribute to any holder
of shares of its Common Stock (including any such distribution
made in connection with a consolidation or merger in which the
Company is the resulting or surviving corporation and the Common
Stock is not changed or exchanged) cash, evidences of
indebtedness of the Company or another issuer, securities of the
Company or another issuer or other assets (excluding dividends or
other distributions of shares of Common Stock or other capital
stock for which adjustment in the Number Issuable is made under
Section 2(a)(i) or dividends or other distributions received by
or set aside for the benefit of the holders of Common Stock
pursuant to Section 2(c) below) or rights or warrants to
subscribe for or purchase securities of the Company (excluding
those in respect of which adjustment in the Number Issuable is
made pursuant to Section 2(a)(ii)), then, and in each such case,
the Number Issuable then in effect shall be adjusted by
multiplying the Number Issuable in effect immediately prior to
the date of such distribution by a fraction (x) the numerator of
which shall be the Current Market Price per share on the record
date referred to below and (y) the denominator of which shall be
such Current Market Price per share less the then Fair Market
Value (as determined in good faith by the Board of Directors of
the Company, a certified resolution with respect to which shall
be mailed to the holder of the Warrants evidenced hereby) of the
portion of the cash, evidences of indebtedness, securities or
other assets so distributed or of such subscription rights or
warrants applicable to one share of Common Stock (but such
denominator shall in no event be zero). Such adjustment shall be
made whenever any such distribution is made and shall become
effective retroactively to a date immediately following the close
of business on the record date for the determination of
stockholders entitled to receive such distribution.
(iv) In case the Company at any time or from
time to time shall take any action which could have a dilutive
effect on the number of shares of Common Stock that may be issued
upon exercise of the Warrants, other than an action described in
any of Section 2(a)(i) through 2(a)(iii), inclusive, or Section
2(b), then, the Number Issuable shall be adjusted in such manner
and at such time as the Board of Directors of the Company
reasonably determines to be equitable under the circumstances
(such determination to be evidenced in a resolution, a certified
copy of which shall be mailed to the holder of the Warrants
evidenced hereby).
(v) Notwithstanding anything herein to the
contrary, no adjustment under this Section 2(a) need be made to
the Number Issuable unless such adjustment would require an
increase or decrease of at least 1% of the Number Issuable then
in effect. Any lesser adjustment shall be carried forward and
shall be made at the time of and together with the next
subsequent adjustment, which, together with any adjustment or
adjustments so carried forward, shall amount to an increase or
decrease of at least 1% of such Number Issuable. Any adjustment
to the Number Issuable carried forward and not theretofore made
shall be made immediately prior to the exercise of any Warrants
pursuant hereto.
(vi) The Company promptly shall deliver to each
registered holder of Warrants at least ten Business Days prior to
effecting any transaction which would result in an increase or
decrease in the Number Issuable pursuant to this Section 2(a) a
notice thereof, together with a certificate, signed by the Chief
Executive Officer or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of
the Company, setting forth in reasonable detail the event
requiring the adjustment and the method by which such adjustment
was calculated and specifying the increased or decreased Number
Issuable then in effect following such adjustment.
(vii) Notwithstanding anything contrary
contained in this Section 2(a), the Company shall be entitled to
make such upward adjustments in the Number Issuable, in addition
to those otherwise required by this Section 2(a), as the Board of
Directors of the Company in their discretion shall determine to
be advisable in order that any stock dividend, subdivision or
combination of shares, distribution of rights or warrants to
purchase stock or securities, or distribution of securities
convertible into or exchangeable for Common Stock, hereafter made
by the Company to its shareholders shall not be taxable;
provided, however, that any such adjustment shall be made, as
nearly as practicable, in a manner which treats all holders of
Warrants with similar protections on an equal basis.
(b) Reorganization, Reclassification,
Consolidation, Merger or Sale of Assets. In case of any capital
reorganization or reclassification or other change of outstanding shares
of Common Stock (other than a change in par value, or from par value to no
par value, or from no par value to par value, or as a result of a
subdivision or combination), or in case of any consolidation or merger of
the Company with or into another Person (other than a consolidation or
merger in which the Company is the resulting or surviving person and which
does not result in any reclassification or change of outstanding Common
Stock), or in case of any sale or other disposition to another Person of
all or substantially all of the assets of the Company (any of the
foregoing, a "Transaction"), the Company, or such successor or purchasing
Person, as the case may be, shall execute and deliver to each holder of
the Warrants evidenced hereby, at least ten Business Days prior to
effecting any of the foregoing Transactions, a certificate that the holder
of each such Warrant then outstanding shall have the right thereafter to
exercise such Warrant into the kind and amount of shares of stock or other
securities (of the Company or another issuer) or property or cash
receivable upon such Transaction by a holder of the number of shares of
Common Stock into which such Warrant could have been exercised immediately
prior to such Transaction. Such certificate shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 2 and shall contain other terms
identical to the terms hereof. If, in the case of any such Transaction,
the stock, other securities, cash or property receivable thereupon by a
holder of Common Stock includes stock, securities, other property or cash
of a Person other than the successor or purchasing Persons and other than
the Company, in connection with such Transaction, then such certificate
also shall be executed by such Person, and such Person shall, in such
certificate, specifically assume the obligations of such successor or
purchasing Person and acknowledge its obligations to issue such stock,
securities, other property or cash to holders of the Warrants upon
exercise thereof as provided above. The provisions of this Section 2(b)
similarly shall apply to successive Transactions.
(c) Special Distributions. If the holder so
elects by sending a Special Notice to the Company, in the event that the
Company shall declare a dividend or make any other distribution
(including, without limitation, in cash, in capital stock (which shall
include, without limitation, any options, warrants or other rights to
acquire capital stock) of the Company, whether or not pursuant to a
shareholder rights plan, "poison pill" or similar arrangement) in other
securities, property or assets, to holders of Common Stock (a "Special
Distribution"), then the Board of Directors shall set aside the amount of
such dividend or distribution that any holder of Warrants would have been
entitled to receive had it exercised such Warrants prior to the record
date for such dividend or distribution. Upon the exercise of a Warrant
evidenced hereby, the holder shall be entitled to receive, such dividend
or distribution that such holder would have received had such Warrant been
exercised immediately prior to the record date for such dividend or
distribution. Prior to any Special Distribution described in this Section
2(c), the Company shall as provided in Section 4 hereof notify each holder
(not less than ten Business Days prior to the occurrence of each Special
Distribution) of its intent to make such Special Distribution and the
holder, if it elects to have such distribution set aside the amount
thereof rather than have an adjustment to the Number Issuable as provided
in Section 2(a)(i), 2(a)(ii) or 2(a)(iii), shall notify the Company by
sending a Special Notice prior to the date of any such Special
Distribution.
Section 3. Redemption. The Company shall not have any
right to redeem any of the Warrants evidenced hereby.
Section 4. Notice of Certain Events. In case at any time
or from time to time the holders of the Warrants evidenced hereby are
entitled to notice pursuant to the terms of Section 2, such notice shall
provide (a) the date on which a record is to be taken for the purpose of
such dividend, distribution, subdivision, combination or issuance of
shares of Common Stock, securities convertible into or exchangeable for
shares of Common Stock or options, warrants or other rights, if a record
is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution, subdivision,
combination, shares of Common Stock, securities convertible into or
exchangeable for shares of Common Stock or options, warrants or other
rights, are to be determined, (b) the issue date (as defined in Section
2(a)(ii) hereof) or (c) the date on which such Transaction, dissolution,
liquidation or winding up is expected to become effective.
Section 5. Certain Covenants. The Company covenants and
agrees that all shares of capital stock of the Company which may be issued
upon the exercise of the Warrants evidenced hereby will be duly
authorized, validly issued and fully paid and nonassessable. The Company
shall at all times reserve and keep available for issuance upon the
exercise of the Warrants, such number of its authorized but unissued
shares of Common Stock as will from time to time be sufficient to permit
the exercise of all outstanding Warrants, and shall take all action
required to increase the authorized number of shares of Common Stock if at
any time there shall be insufficient authorized but unissued shares of
Common stock to permit such reservation or to permit the exercise of all
outstanding Warrants. The Company shall prepare and file, and cooperate
with the holder of this Warrant so that it may prepare and file, in each
case within five Business Days of a request by such holder, notification
and report forms in compliance with the HSR Act, and shall otherwise fully
comply with the requirements of the HSR Act, to the extent required in
connection with the exercise of the Warrant. The Company shall bear all of
its own expenses and all of its own out of pocket expenses (including
reasonable attorneys' fees, charges and expenses) and filing fees of such
holder in connection with any such preparation and filing.
Section 6. Registered Holder. The person in whose name
this Warrant Certificate is registered shall be deemed the owner hereof
and of the Warrants evidenced hereby for all purposes.
Section 7. Transfer of Warrants. Any transfer of the
rights represented by this Warrant Certificate shall be effected by the
surrender of this Warrant Certificate, along with the form of assignment
attached hereto, properly completed and executed by the registered holder
hereof, at the principal executive office of the Company in the United
States of America; provided that (a) a registration statement with respect
to the Warrants proposed for transfer, and with respect to the shares of
Common Stock underlying such Warrants, shall be effective under the
Securities Act, (b) the Warrants are transferred pursuant to Rule 144
under the Securities Act or (c) the Company shall have received an opinion
of counsel reasonably satisfactory to it that no violation of such act or
similar state acts will be involved in such transfer. Thereupon, the
Company shall issue in the name or names specified by the registered
holder hereof and, in the event of a partial transfer, in the name of the
registered holder hereof, a new Warrant Certificate or Certificates
evidencing the right to purchase such number of shares of Common Stock as
shall be equal to the number of shares of Common Stock then purchasable
hereunder.
Section 8. Denominations. The Company covenants that it
will, at its expense, promptly upon surrender of this Warrant Certificate
at the principal executive office of the Company in the United States of
America, execute and deliver to the registered holder hereof a new Warrant
Certificate or Certificates in denominations specified by such holder for
an aggregate number of Warrants equal to the number of Warrants evidenced
by this Warrant Certificate.
Section 9. Replacement of Warrants. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant Certificate and, in the case of loss, theft or
destruction, upon delivery of an indemnity reasonably satisfactory to the
Company (in the case of an institutional investor, its own unsecured
indemnity agreement shall be deemed to be reasonably satisfactory), or, in
the case of mutilation, upon surrender and cancellation thereof, the
Company will issue a new Warrant Certificate of like tenor for a number of
Warrants equal to the number of Warrants evidenced by this Warrant
Certificate.
Section 10. Governing Law. THIS WARRANT CERTIFICATE
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW
PROVISIONS).
Section 11. Rights Inure to Registered Holder. The
Warrants evidenced by this Warrant Certificate will inure to the benefit
of and be binding upon the registered holder thereof and the Company and
their respective successors and permitted assigns. This Warrant
Certificate shall be for the sole benefit of the registered holder
thereof. Nothing in this Warrant Certificate shall be construed to give
the registered holder hereof any rights as a holder of shares of Common
Stock until such time, if any, as the Warrants evidenced by this Warrant
Certificate are exercised in accordance with the provisions hereof.
Section 12. Definitions. For the purposes of this
Warrant Certificate, the following terms shall have the meanings indicated
below:
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law or executive order to close.
"Common Stock" shall have the meaning assigned to such
term in the Preamble hereof.
"Company" shall have the meaning assigned to such term
in the Preamble hereof.
"Current Market Price" per share shall mean, on any date
specified herein for the determination thereof, (a) if the Common Stock is
then listed on a national securities exchange, designated as a Nasdaq
Stock Market security or quoted in the over-the-counter-market by a member
firm of the NYSE, the average daily Market Price of the Common Stock for
those days during the period of 15 days, ending on such date, on which the
national securities exchanges were open for trading, and (b) if the Common
Stock is not then so listed, designated or quoted, the Market Price on
such date.
"Exercise Price" shall have the meaning assigned to such
term in the Preamble hereof.
"Fair Market Value" shall mean the amount which a
willing buyer, under no compulsion to buy, would pay a willing seller,
under no compulsion to sell, in an arm's-length transaction.
"HSR Act" shall mean the Xxxx Xxxxx Xxxxxx Anti-Trust
Improvements Act of 1976, and the rules and regulations of the Federal
Trade Commission promulgated thereunder.
"Investor" shall have the meaning assigned to such term
in the Preamble hereof.
"Issue Date" shall mean November ___, 1997.
"Market Price" shall mean, per share of Common Stock, on
any date specified herein: (a) if the Common Stock is listed on any
national securities exchange or is designated as a Nasdaq Stock Market
security, the last trading price of the Common Stock on such date as
reported in the Wall Street Journal; or (b) if the Common Stock is not so
listed or designated, the average of the reported closing bid and ask
prices of the Common Stock in the over-the-counter-market, on such date as
reported by any member firm of the NYSE selected by the Company; or (c) if
none of (a) or (b) is applicable, the Fair Market Value per share
determined in good faith by the Board of Directors of the Company which
shall be deemed to be Fair Market Value unless holders of at least 50% of
Common Stock issued or issuable upon exercise of the Warrants request that
the Company obtain an opinion of a nationally recognized investment
banking firm chosen by the Company (who shall bear the expense) and
reasonably acceptable to such requesting holders of the Warrants, in which
event the Fair Market Value shall be as determined by such investment
banking firm.
"Number Issuable" shall have the meaning given it in the
Preamble hereof.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Person" shall mean any individual, corporation, limited
liability company, partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an agency
or political subdivision thereof) or other entity of any kind.
"Relevant Date" shall have the meaning assigned to such
term in Section 2(a)(ii) -------------- hereof.
"Securities Act" shall mean the Securities Act of 1933.
"Special Distribution" shall have the meaning assigned
to such term in Section 2(c) --------------------- hereof.
"Special Notice" shall mean the notice sent by a holder
to the Company indicating its preference to have any Special Distribution
set aside for its benefit upon exercise of the Warrant.
"Transaction" shall have the meaning assigned to such
term in Section 2(b) hereof.
"Warrants" shall have the meaning assigned to such term
in the Preamble hereof.
"Warrant Exercise Documentation" shall have the meaning
given it in Section 1 hereof.
Section 13. Notices. All notices, demands and other
communications provided for or permitted hereunder shall be made in
writing and shall be sufficient if delivered personally or sent by
telecopy (with confirmation of receipt) or by registered or certified
mail, postage prepaid, return receipt requested, (a) if to the holder of a
Warrant, at such holder's last known address or telecopy number appearing
on the books of the Company; and (b) if to the Company, at its principal
executive office, or the telecopy number of such office, in the United
States, or such other address or telecopy number as the party to whom
notice is to be given may have furnished to the other party. Each such
notice, request or communication shall be effective when received or, if
given by mail, when delivered at the address specified in this Section or
on the fifth Business Day following the date on which such communication
is posted, whichever occurs first.
Section 14. Share Legend. Each certificate representing
shares of Common Stock or any other securities issued upon exercise of
this Warrant shall bear the following legend unless such shares or other
securities have been registered under the Securities Act and any
applicable state securities laws:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE FEDERAL
OR APPLICABLE STATE SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT
TO EXEMPTIONS CONTAINED IN SAID LAWS. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE TRANSFERRED UNLESS (A) A REGISTRATION STATEMENT
SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933, (B) SUCH SHARES ARE
TRANSFERRED PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE, UNDER SUCH ACT OR
(C) INDUSTRIAL IMAGING CORPORATION SHALL HAVE RECEIVED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR
SIMILAR STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER."
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed as of the Issue Date.
INDUSTRIAL IMAGING CORPORATION
By:_________________________________
Name:
Title:
[Form of Assignment Form]
[To be executed upon assignment of Warrants]
The undersigned hereby assigns and transfers this
Warrant Certificate to ____________________ whose Social Security Number
or Tax ID Number is _________________ and whose record address is
_____________________________________, and irrevocably appoints
________________ as agent to transfer this security on the books of the
Company. Such agent may substitute another to act for such agent.
Signature:
--------------------------------
Date: ___________________________
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT, dated as of November 12,
1997 (the "Agreement"), between Industrial Imaging
Corporation, a Delaware corporation (the "Company"), and
Imprimis Investors LLC (the "Investor").
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The Company and the Investor have entered into the
Securities Purchase Agreement, dated as of November 12, 1997 (the
"Securities Purchase Agreement"), pursuant to which, among other things,
the Company is selling to the Investor shares of Common Stock, par value
$0.01 per share (the "Common Stock"), of the Company, and warrants that
may be exercised for shares of Common Stock (the "Warrants").
The execution and delivery of this Agreement by the
Company is a condition precedent to the obligations of the Investor under
the Securities Purchase Agreement.
In consideration of the foregoing, the covenants and
obligations set forth below, the parties agree as follows:
1. Registration on Request.
(a) Request. Subject to the limitations set forth in
Section 1(b), at any time more than 180 days after the date hereof, a
Holder or Holders (as defined in Section 9(b)) may require on up to two
occasions, upon written notice to the Company, the Company to effect the
registration under the Securities Act of 1933 (the "Securities Act") of
all or part of the Registrable Securities (as defined in Section 9(b))
held by such requesting Holder or Holders (each, an "Initiating Holder").
The Company promptly shall give notice of such requested registration to
all other Holders of Registrable Securities who are entitled pursuant to
Section 2 to join in such registration and, thereupon, the Company shall
use its best efforts to effect, on the earliest possible date, the
registration under the Securities Act for public sale (in accordance with
the method of disposition specified in the notice from the requesting
Holders), of the Registrable Securities that the Company has been
requested to register by such Initiating Holder or Holders and the other
Registrable Securities that the Company has been requested to register by
the Holders thereof by written notice given to the Company within 20 days
after the giving of such notice by the Company.
(b) Limitations. The Company shall not be required to
effect a registration pursuant to Section 1(a):
(i) within 90 days after the effective date of a
registration statement (a "Registration Statement") filed by the Company
with the Securities and Exchange Commission (the "Commission") for a
public offering and sale of equity securities of the Company (other than a
registration of securities pursuant to a Registration Statement on Form
S-8 or Form S-4 or any successor form thereto, any registration statement
covering only securities proposed to be issued in exchange for securities
or assets of another corporation or any registration statement relating
solely to employee stock option, stock purchase, benefit or similar plans
(a "Special Registration Statement")), provided that the Company shall use
its best efforts to achieve effectiveness of a registration requested
hereunder promptly following such 90 day period if such request is made
during such 90 day period; and
(ii) on more than two occasions; it being understood and
agreed that a registration effected under Section 2 shall not be counted
as a registration under this Section.
(c) Effective Registration Statement. A registration
requested pursuant to this Section 1 shall not be deemed to have been
effected, and shall not be deemed a requested registration for purposes of
Section 1(a) and Section 1(b), (i) unless a Registration Statement
covering all Registrable Securities specified in the notices from the
Initiating Holders has become effective and remained effective in
compliance with the provisions of the Securities Act with respect to the
disposition of all of such Registrable Securities covered by such
Registration Statement until the earlier of such time as all of such
Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth
in such Registration Statement, (ii) if after it has become effective,
such registration is interfered with by any stop order, injunction or
other order or requirement of the Commission or other governmental agency
or court for any reason not attributable to the Initiating Holders or
(iii) if the conditions to closing specified in the underwriting
agreement, if any, entered into in connection with such registration are
not satisfied or waived, other than by reason of a failure on the part of
the Initiating Holders.
(d) Priority in Requested Registration. So long as the
Initiating Holders hold at least 25% of the Registrable Securities issued
to all Holders on the date of this Agreement, the Company shall have the
right to include in any Registration Statement initiated by a Holder
pursuant to this Section 1, for sale in accordance with the method of
disposition specified by the requesting Holders, Common Stock to be sold
by the Company for its own account. If, in the good-faith judgment of the
managing underwriter of any underwritten offering the inclusion of all of
the Registrable Securities requested for inclusion pursuant to this
Section 1 and the Common Stock proposed to be sold by the Company for its
own account would adversely affect the successful marketing of the
proposed offering, then the number of shares of Common Stock to be
included in the offering shall be reduced to the required level, first, by
excluding Common Stock to be sold by the Company for its own account and
second, by reducing the participation of such Initiating Holders and other
Holders in such offering pro rata among such Initiating Holders and other
Holders, based upon the amount of Registrable Securities owned by such
Initiating Holders and other Holders. Except for Special Registration
Statements and other registrations required under Section 1, the Company
will not cause any other registration statement with respect to its
Registrable Securities for its own account to become effective less than
120 days after the effective date of any registration requested pursuant
to this Section 1.
(e) Selection of Underwriters. If the proposed method of
disposition is an underwriting, the Initiating Holders holding a majority
of the Registrable Securities to be sold in such offering may designate
the managing underwriter of such offering, which underwriter shall be
reasonably acceptable to the Company. Whenever a requested registration is
for an underwritten offering, only securities which are to be included in
the underwriting may be included in the registration unless the managing
underwriter consents otherwise.
2. Incidental Registration.
(a) Right to Include Registrable Securities. If at any
time and from time to time the Company proposes to register any shares of
its capital stock under the Securities Act, whether or not for sale for
its own account, on a form and in the manner that would permit
registration of Registrable Securities for the sale to the public under
the Securities Act, the Company will give written notice to all Holders of
its intention to do so. Upon the written request of a Holder given within
20 days after the giving of any such notice by the Company, the Company
will use its best efforts to cause to be included in such Registration
Statement all of the Registrable Securities so requested for inclusion by
Holders. If the Registration Statement is to cover, in whole or in part,
any underwritten distribution, the Company shall use its best efforts to
cause the Registrable Securities requested for inclusion pursuant to this
Section to be included in the underwriting on the same terms and
conditions (including any lock-up) as the shares otherwise being sold
through the underwriters.
(b) Priority in Incidental Registrations. If, in the
good faith judgment of the managing underwriter of any underwritten
offering, the inclusion of all of the Registrable Securities requested for
inclusion pursuant to this Section 2 would adversely affect the successful
marketing of the proposed offering, then the number of shares of capital
stock and Registrable Securities, if any, to be included in such
registration shall be reduced, such reduction shall be applied, first, by
excluding (on a pro rata basis) capital stock of the Company to be sold by
persons other than the Holders and Registrable Securities proposed to be
sold by all Holders and second, by excluding shares of capital stock to be
sold by the Company for its own account. Notwithstanding the foregoing
provisions, the Company may withdraw any registration statement referred
to in this Section 2 without incurring any liability to Holders of
Registrable Securities.
3. Registration Procedures. If and whenever the Company
is required by the provisions of Section 1 or 2 to effect the registration
of Registrable Securities under the Securities Act, the Company will, at
its expense, as expeditiously as possible:
(i) prepare and, in any event within 40 days after a
request for registration has been given to the Company, file with the
Commission a Registration Statement with respect to such Registrable
Securities and use its best efforts to cause such Registration Statement
to become effective; provided that the Company may discontinue any
registration of its securities which is being effected pursuant to Section
2 at any time prior to the effective date of the Registration Statement;
(ii) prepare and file with the Commission such
amendments and supplements to any Registration Statement referred to in
clause (i) of this Section 3 and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement
effective for a period not in excess of 180 days (except with respect to
any Registration Statement filed pursuant to Rule 415 under the Securities
Act if the Company is eligible to file a Registration Statement on Form
S-3, in which case the Company shall use its best efforts to keep such
Registration Statement effective and updated until such time as all of the
Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the Holder or Holders set forth in such
Registration Statement) and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement; provided that
before filing a Registration Statement or prospectus, or any amendments or
supplements thereto, the Company will furnish to one counsel selected by
the Holders holding a majority of the Registrable Securities covered by
such Registration Statement to represent all Holders of Registrable
Securities covered by such Registration Statement, copies of all documents
proposed to be filed, which documents will be subject to the review of
such counsel;
(iii) furnish to each seller of such Registrable
Securities such number of copies of any Registration Statement referred to
in clause (i) of this Section 3 and of each amendment and supplement
thereto (in each case including all exhibits), such number of copies of
the prospectus included in such Registration Statement (including each
preliminary prospectus and summary prospectus), and any other prospectus
filed under Rule 424 under the Securities Act in conformity with the
requirements of the Securities Act, and such other documents as such
seller may reasonably request;
(iv) use its best efforts to register or qualify such
Registrable Securities covered by any Registration Statement referred to
in clause (i) of this Section 3 under such other securities or blue sky
laws of such jurisdictions as each seller shall reasonably request, and do
any and all other acts and things which may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such seller, except
that the Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction
where, but for the requirements of this clause (iv), it would not be
obligated to be so qualified or to consent to general service of process
in any such jurisdiction;
(v) use its best efforts to cause such Registrable
Securities covered by a Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(vi) cause representatives of the Company to
participate in any "road show" or "road shows" reasonably requested by any
underwriter of an underwritten or "best efforts" offering of any
Registrable Securities;
(vii) notify each seller of any such Registrable
Securities covered by a Registration Statement, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, of the Company's becoming aware that the prospectus
included in such Registration Statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, and at the
request of any such seller, prepare and furnish to such seller a
reasonable number of copies of an amended or supplemental prospectus as
may be necessary so that, as thereafter delivered to the sellers of such
Registrable Securities, such prospectus shall not include an 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 not
misleading in the light of the circumstances then existing;
(viii) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable (but not more
than eighteen months) after the effective date of the Registration
Statement, an earnings statement which shall satisfy the provisions of
Section 11(a) of the Securities Act and the rules and regulations
promulgated thereunder;
(ix) use its best efforts to list such Registrable
Securities on any securities exchange or automated quotation system on
which securities of the same class are then listed, if such Registrable
Securities are not already so listed and if such listing is then permitted
under the rules of such exchange or system, and to provide a transfer
agent and registrar for such Registrable Securities covered by a
Registration Statement not later than the effective date of such
Registration Statement;
(x) enter into such customary agreements (including
an underwriting agreement in customary form) and take such other actions
as sellers of a majority of such Registrable Securities or the
underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities;
(xi) obtain a "cold comfort" letter or letters from
the Company's independent public accountants in customary form and
covering matters of the type customarily covered by "cold comfort" letters
as the seller or sellers of a majority of such Registrable Securities
shall reasonably request;
(xii) obtain an opinion of counsel for the Company in
customary form and covering matters of the type customarily covered in
opinions of issuer's counsel as the seller or sellers of a majority of
such Registration Securities shall reasonably request; and
(xiii) make available for inspection by any seller of
such Registrable Securities covered by a Registration Statement, by any
underwriter participating in any disposition to be effected pursuant to
such Registration Statement and by any attorney, accountant or other agent
retained by any such seller or any such underwriter, all pertinent
financial and other records, pertinent corporate documents and properties
of the Company, and cause all of the Company's officers, directors and
employees to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with such
Registration Statement.
4. Expenses. With respect to each registration effected
pursuant to Section 1 or 2, all Registration Expenses (defined below) in
connection with such registration and the public offering in connection
therewith shall be borne by the Company; provided that security holders
participating in any such registration shall bear their pro rata share of
the underwriting discounts and selling commissions (on the basis of the
number of Registrable Securities of each such person included in such
registration) and 50% of the fees and disbursements in excess of $200,000
described in clauses (vi) and (vii) of the immediately succeeding
sentence; provided, further that the Company shall not be obligated to
bear any Registration Expenses with respect to any registration effected
pursuant to Section 1 after the second anniversary hereof. "Registration
Expenses" shall mean any and all expenses incident to performance of or
compliance with this Agreement, including, without limitation, (i) all
registration and filing fees of the Commission, or the National
Association of Securities Dealers, Inc., (ii) all fees and expenses of
complying with securities or blue sky laws (including fees and
disbursements of counsel for the underwriters in connection with blue sky
qualifications of the Registrable Securities), (iii) all printing,
messenger and delivery expenses, (iv) all fees and expenses incurred in
connection with the listing of the Registrable Securities on any
securities exchange or automated quotation system pursuant to Section
3(ix), (v) the fees and disbursements of counsel for the Company and of
its independent public accountants, including the expenses of any special
audits and/or "cold comfort" letters required by or incident to such
performance and compliance, (vi) the reasonable fees and disbursements of
one counsel selected by the Holders of a majority of the Registrable
Securities being registered to represent all Holders of the Registrable
Securities being registered in connection with each such registration,
(vii) any fees and disbursements of underwriters customarily paid by the
issuers or sellers of securities, including fees and disbursements of
counsel for the underwriters, but excluding underwriting discounts and
commissions, (viii) liability insurance if the Company so desires or if
the underwriters so require, and (ix) the reasonable fees and expenses of
any special experts retained by the Company in connection with the
requested registration.
5. Indemnification and Contribution.
(a) Indemnification by the Company. In the event of a
registration of any Registrable Securities pursuant to Section 1 or 2, the
Company will indemnify and hold harmless each Holder of such Registrable
Securities included in a Registration Statement pursuant to the provisions
of this Agreement and any underwriter (as defined in the Securities Act)
of such Registrable Securities, and their respective Affiliates, and each
of their successors from and against, and will reimburse such Holder,
underwriter and Affiliate with respect to, any and all claims, actions,
demands, losses, damages, liabilities, costs and expenses to which such
Holder, underwriter or Affiliate may become subject under the Securities
Act or otherwise, including, without limitation, the reasonable fees and
expenses of legal counsel (including those incurred in connection with any
claim for indemnity hereunder) insofar as such claims, actions, demands,
losses, damages, liabilities, costs or expenses (or actions, or
proceedings, whether commenced or threatened in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of
any material fact contained in such Registration Statement, any prospectus
contained therein or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they are made,
not misleading or arise out of any violation by the Company of any rule or
regulation under the Securities Act or any state securities laws
applicable to the Company and relating to action or inaction required of
the Company in connection with such registration; provided that the
Company will not be liable in any case to the extent, but only to the
extent, that any such claim, action, demand, loss, damage, liability, cost
or expense arises out of or is based upon an untrue statement or omission
made in reliance upon and in strict conformity with information furnished
by such Holder or such underwriter in writing specifically for use in the
preparation thereof. This indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Holder,
underwriter or Affiliate and shall survive the transfer of such securities
by such Holder or such underwriter.
(b) Indemnification by the Holders. Each Holder of
Registrable Securities, severally and not jointly, which Registrable
Securities are included in a registration pursuant to the provisions of
this Agreement, will indemnify and hold harmless the Company, each person,
if any, who controls the Company within the meaning of the Securities Act,
each officer of the Company who signs the Registration Statement including
such Registrable Securities, each director of the Company, each
underwriter and any person who controls the underwriter and each of their
successors from and against, and will reimburse the Company and such
officer, director, underwriter or controlling person with respect to, any
and all claims, actions, demands, losses, damages, liabilities, costs or
expenses to which the Company or such officer, director, underwriter or
controlling person may become subject under the Securities Act or
otherwise, insofar as such claims, actions, demands, losses, damages,
liabilities, costs or expenses arise out of or are based upon any untrue
statement of any material fact contained in such Registration Statement,
any prospectus contained therein or any amendment or supplement thereto,
or arise out of or are based upon the omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they are made, not
misleading; provided that such Holder will be liable in any such case to
the extent, but only to the extent, that any such claim, action, demand,
loss, damage, liability, cost or expense arises out of or is based upon an
untrue statement or omission made in reliance upon and in strict
conformity with written information furnished by such Holder specifically
for use in the preparation thereof. The liability of each Holder under
this Section shall be limited to the proportion of any such claim, action,
demand, loss, damage, liability, cost or expense which is equal to the
proportion that the public offering price of the Registrable Securities
sold by such Holder under such registration statement bears to the total
offering price of all securities sold thereunder, but not, in any event,
to exceed the proceeds received by such Holder from the sale of
Registrable Securities covered by such Registration Statement. This
indemnity shall survive the transfer of such securities by such Holder and
the underwriter.
(c) Notices of Claims, etc. Promptly after receipt by a
party to be indemnified pursuant to the provisions of Section 5(a) or 5(b)
(an "indemnified party") of notice of the commencement of any action
involving the subject matter of the foregoing indemnity provisions, such
indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of Section 5(a) or 5(b),
notify the indemnifying party of the commencement thereof, but the
omission to so notify the indemnifying party will not relieve it from any
liability which it may have to an indemnified party otherwise than under
this Section and shall not relieve the indemnifying party from liability
under this Section unless, and to the extent, such indemnifying party is
prejudiced by such omission. In case such action is brought against any
indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to
participate in, and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party,
and after the notice from the indemnifying party to such indemnified party
of its election to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party pursuant to the provisions of this
Section 5(a) and 5(b) for any legal expense subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided that, if the defendants in any
such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may
be reasonable defenses available to it that are different from or
additional to those available to the indemnifying party or if the
interests of the indemnified party reasonably may be deemed to conflict
with the interests of the indemnifying party, the indemnified party shall
have the right to select a separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with
the expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the indemnifying party as
incurred. No indemnifying party shall be liable to an indemnified party
for any settlement of any action or claim without the consent of the
indemnifying party and no indemnifying party may unreasonably withhold its
consent to any such settlement. No indemnifying party will, except with
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability and equitable claims in respect to such
claim or litigation.
(d) Contribution. In order to provide for just and
equitable contribution to joint liability under the Securities Act in any
case in which either (i) any Holder exercising rights under this Agreement
or any underwriter makes a claim for indemnification pursuant to this
Section but it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the expiration of time
to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact
that this Section provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of any
such Holder or underwriter, as the case may be, in circumstances for which
indemnification is provided under this Section 5, then, and in each such
case, the Company on the one hand and such Holder or underwriter, as the
case may be, on the other, will contribute to the aggregate claims,
actions, demands, losses, damages, liabilities, costs or expenses to which
they may be subject (after contribution from others) in such proportion as
is appropriate to reflect the relative fault of the Company on the one
hand and of the Holder of Registrable Securities or the underwriter, as
the case may be, on the other, in connection with the statements or
omissions that resulted in such claims, actions, demands, losses, damages,
liabilities, costs or expenses, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of
the Holder of Registrable Securities or the underwriter, as the case may
be, on the other, shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or by the Holder of
Registrable Securities or the underwriter, as the case may be, on the
other, and each party's relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission; provided
that, in any such case, (A) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) will be entitled to contribution from any person or entity who was
not guilty of such fraudulent misrepresentation and (B) no such Holder or
underwriter will be required to contribute any amount in excess of the
proceeds received by such Holder or underwriter, as the case may be, from
the sales of Registrable Securities covered by the Registration Statement.
(e) Other Indemnification. Notwithstanding the
foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in
connection with the underwritten public offering are in conflict with the
foregoing provisions, the provisions in the underwriting agreement shall
control.
6. Reporting Requirements Under Securities
Exchange Act of 1934.
(a) Exchange Act Reporting. The Company shall keep
effective its registration under Section 12 of the Securities Exchange Act
of 1934 (the "Exchange Act"), and shall timely file such information,
documents and reports as the Commission may require or prescribe under the
Exchange Act. The Company shall timely file such information, documents
and reports as the Commission may require or prescribe under Section 13 of
the Exchange Act.
(b) Furnishing Information to Holders. The Company shall
forthwith upon request furnish any Holder of Registrable Securities (a) a
written statement by the Company that it has complied with such reporting
requirements, (b) a copy of the most recent Form 10-K or Form 10-Q filed
by the Company and a copy of the most recent annual or quarterly report of
the Company distributed to its shareholders, and (c) such other reports
and documents filed by the Company with the Commission as such Holder may
reasonably request in availing itself of an exemption for the sale of
Registrable Securities without registration under the Securities Act.
(c) Rule 144 and Form S-3. The Company acknowledges and
agrees that the purposes of the requirements contained in this Section 6
are (i) to enable any such Holder to comply with the current public
information requirement contained in paragraph (c) of Rule 144 under the
Securities Act should such Holder ever wish to dispose of any of the
securities of the Company acquired by it without registration under the
Securities Act in reliance upon Rule 144 (or any other similar or
successor exemptive provision), and (ii) to qualify the Company for the
use of registration statements on Form S-3. In addition, the Company shall
take such other measures and file such other information, documents and
reports as shall hereafter be required by the Commission as a condition to
the availability of Rule 144 under the Securities Act (or any similar or
successor exemptive provision hereafter in effect) and the use of Form
S-3. The Company also covenants to use its best efforts, to the extent
that it is reasonably within its power to do so, to qualify for the use of
Form S-3. From and after the effective date of the first Registration
Statement filed by the Company, the Company agrees to use its best efforts
to facilitate and expedite transfers of Registrable Securities pursuant to
Rule 144 under the Securities Act (or any similar or successor exemptive
provision hereafter in effect), which efforts shall include timely
instructions to its transfer agent to expedite such transfers of
Registrable Securities.
7. Shareholder Information. The Company may require each
Holder of Registrable Securities as to which any registration is to be
effected pursuant to this Agreement to furnish the Company in a timely
manner such information with respect to such Holder and the distribution
of such Registrable Securities as the Company may from time to time
reasonably request in writing and as shall be required by law or by the
Commission.
8. Specific Enforcement. All of the parties acknowledge
that the parties will be irreparably damaged in the event that this
Agreement is not specifically enforced. Upon a breach or threatened breach
of the terms, covenants or conditions of this Agreement by any of the
parties hereto, the other parties shall, in addition to all other
remedies, be entitled to a temporary or permanent injunction, without
showing any actual damage, or a decree for specific performance, in
accordance with the provisions of this Agreement.
9. Descriptive Headings; Definitions; Certain
Interpretations.
(a) Descriptive headings are for convenience only and
shall not control or affect the meaning or construction of any provision
of this Agreement.
(b) As used in this Agreement, the following terms shall
have the following respective meanings:
"Affiliate" shall mean (a) any person or entity directly
or indirectly controlling, controlled by or under common control with
another person or entity; (b) any person or entity owning or controlling
10% or more of the outstanding voting securities of such other person or
entity; (c) any partner, officer, director, employee or shareholder of
such entity or any parent, spouse, child, brother, sister or other
relative with a relationship (by blood, marriage or adoption) not more
remote than first cousin of any of the foregoing; or (d) any liquidating
trust, trustee or other similar person or entity for any such person or
entity.
"Holder" shall mean (a) the Investor and (b) any other
person to which the rights of registration under this Agreement have been
transferred or assigned by the Investor or its transferees.
"Registrable Securities" shall mean (a) shares of Common
Stock (including shares issuable or issued upon the exercise of any
Warrants or the exercise of any other exchange, conversion or similar
right), (b) any securities issued in respect of any such shares by way of
a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger or consolidation or reorganization and
(c) Warrants; provided that, such securities shall cease to be Registrable
Securities when such securities have been sold to or through a broker or
dealer or underwriter in a public distribution or a public securities
transaction.
(c) Except as otherwise expressly provided in this
Agreement, the following rules of interpretation apply to this Agreement:
(i) the singular includes the plural and the plural includes the singular;
(ii) "or" or "any" are not exclusive and "include" and "including" are not
limiting; (iii) a reference to any agreement or other contract includes
permitted supplements and amendments; (iv) a reference to a law includes
any amendment or modification to such law and any rules or regulations
issued thereunder; (v) a reference to a person includes its successors and
assigns; and (vi) a reference in this Agreement to a Section is to the
Section of this Agreement.
10. Notices. All notices, requests and other
communications to any party hereunder shall be in writing and sufficient
if delivered personally or sent by telecopy (with confirmation of receipt)
or by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to the Company: Industrial Imaging Corporation
One Xxxxxx Research Center
000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Telecopy: (000) 000-0000
With a copy to: Mintz Xxxxx Xxxx Xxxxxx Xxxxxxx
and Popeo PC
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx
Telecopy: (000) 000-0000
If to the Investor: Imprimis Investors LLC
c/o Wexford Management LLC
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
With a copy to: Xxxxxx, Xxxxx & Xxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Telecopy: (000) 000-0000
or to such other address or telecopy number as the party to whom notice is
to be given may have furnished to the other party in writing in accordance
herewith. Each such notice, request or communication shall be effective
when received or, if given by mail, when delivered at the address
specified in this Section or on the fifth business day following the date
on which such communication is posted, whichever occurs first.
11. Counterparts. This Agreement may be executed in any
number of counterparts, and each such counterpart hereof shall be deemed
to be an original instrument, but all such counterparts together shall
constitute but one agreement.
12. Benefits of Agreement. All of the terms and
provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
This Agreement is for the sole benefit of the parties hereto and not for
the benefit of any third party.
13. Enforceability. It is the desire and intent of the
parties hereto that the provisions of this Agreement shall be enforced to
the fullest extent permissible under the laws and public policies applied
in each jurisdiction in which enforcement is sought. Accordingly, if any
particular provision of this Agreement shall be adjudicated to be invalid
or unenforceable, such provision shall be deemed amended to delete
therefrom the portion thus adjudicated to be invalid or unenforceable,
such deletion to apply only with respect to the operation of such
provision in the particular jurisdiction in which such adjudication is
made.
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAWS PROVISIONS).
15. CONSENT TO JURISDICTION. EACH OF THE COMPANY AND THE
HOLDER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION
OF ANY FEDERAL AND STATE COURT IN NEW YORK SITTING IN NEW YORK CITY AND
IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL
BE LITIGATED EXCLUSIVELY IN SUCH COURTS. EACH OF THE COMPANY AND THE
HOLDER AGREES NOT TO COMMENCE ANY LEGAL PROCEEDING RELATED HERETO OR
THERETO EXCEPT IN SUCH COURT. EACH OF THE COMPANY AND THE HOLDER
IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH PROCEEDING IN ANY SUCH COURT AND HEREBY
FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR
CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT
IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
16. Waivers; Amendments. No waiver of any right
hereunder by any party shall operate as a waiver of any other right, or of
the same right with respect to any subsequent occasion for its exercise,
or of any right to damages. No waiver by any party of any breach of this
Agreement shall be held to constitute a waiver of any other breach or a
continuation of the same breach. All remedies provided by this Agreement
are in addition to all other remedies provided by law. This Agreement may
not be amended except by a writing executed by the Company and by Holders
holding at least 51% of the Registrable Securities; provided that the
provisions of this Section 16 may not be amended unless such amendment is
executed by each Holder.
17. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns. The Investor's rights are
assignable to any assignee or transferee of all or a portion of the
Registrable Securities held by the Investor. In addition, and whether or
not any express assignment shall have been made, the provisions of this
Agreement which are for the benefit of the parties hereto other than the
Company shall also be for the benefit of and enforceable by any subsequent
Holder of any Registrable Securities, subject to the provisions contained
herein.
18. Termination. This Agreement shall terminate upon the
earliest to occur of the following events:
(a) termination by mutual written agreement of the
Investor and the Company;
(b) all Registrable Securities have been sold to or
through a broker or dealer or underwriter in a public distribution or
public securities transaction; or
(c) the fourth anniversary of the date hereof.
19. Entire Agreement. This Agreement contains the entire
agreement among the parties with respect to the transactions contemplated
by this Agreement and supersedes all prior agreements or understandings
among the parties.
20. Confidentiality. The Investor and any subsequent
Holder agrees that it shall keep confidential all information disclosed to
it pursuant to Section 3(xiii), unless such information was already in the
Purchaser's possession or known to the Purchaser prior to being disclosed
or provided to the Purchaser, until the earliest of such time as (a)
disclosure may be required by law, (b) three years from the date of
receipt of such information, (c) such information becomes publicly
available through no action or fault of the Purchaser, and (d) such
information was or is obtained by the Purchaser from a third party other
than where such information was obtained in breach of contract or in
violation of law.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
INDUSTRIAL IMAGING CORPORATION
By:____________________________
Name:
Title:
IMPRIMIS INVESTORS LLC
By:____________________________
Name:
Title:
EXHIBIT E
INDUSTRIAL IMAGING CORPORATION
ONE XXXXXX RESEARCH CENTER
000 XXXXXX XXXXXX
XXXXXX, XXXXXXXXXXXXX 00000
November 12, 1997
Imprimis Investors LLC
c/o Wexford Management LLC
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxx
Dear Sirs:
Industrial Imaging Corporation, a Delaware corporation
(the "Company"), desires to issue and sell to Imprimis Investors LLC (the
"Purchaser"), and the Purchaser desires to purchase from the Company, (a)
3,000,000 shares (the "Shares") of common stock, par value $0.01 per share
("Common Stock"), of the Company, (b) 1,000,000 warrants to purchase
shares of Common Stock at an exercise price of $1.00 per share (the "Class
A Warrants") and (c) 1,000,000 warrants to purchase shares of Common Stock
at an exercise price of $2.00 per share (together with the Shares and the
Class A Warrants, the "Securities").
Subsequent to the consummation of the purchase and sale
of the Securities, the Purchaser intends to transfer at cost all or a
portion of the Securities to a small business investment company ("SBIC")
(as defined under the Small Business Investment Act of 1958 and the rules
and regulations promulgated thereunder (the "SBIA")) affiliate of the
Purchaser (an "SBIC Affiliate"). The date of such transfer is referred to
herein as the "Transfer Date". The Company agrees and consents to such
transfer and agrees and consents that all representations, warranties and
covenants given to the Purchaser shall also run in favor of the SBIC
Affiliate as if made to such entity directly. In the event the SBIC
Affiliate seeks to return to the Purchaser any or all of the Securities,
the Company agrees and consents to such return.
The parties agree as follows:
SECTION 1. Representations and Warranties of the Company.
The Company represents and warrants that:
(a) The Company, together with its affiliates (as that
term is defined in Title 13 Code of Federal Regulations ("C.F.R."), ss.
121.103), is a "small business concern" within the meaning of the SBIA,
and the regulations thereunder, including Title 13 C.F.R. ss. 121.301(c).
(b) Neither the Company's nor any of its subsidiaries'
primary business activity involves, directly or indirectly, providing
funds to others, the purchase or discounting of debt obligations,
factoring or long-term leasing of equipment with no provision for
maintenance or repair. Neither the Company nor any of its subsidiaries is
classified under the Major Group 65 (Real Estate) of the SIC Manual.
SECTION 2. Covenants of the Company. The Company covenants
and agrees that:
(a) The information set forth in Small Business
Administration Forms 480, 652 and Part A of Form 1031 regarding the
Company and its affiliates, when delivered to the Purchaser, will be
accurate and complete. Within five days of the Transfer Date, copies of
such forms shall be completed and executed by the Company and delivered to
the SBIC Affiliate.
(b) No portion of the proceeds from the sale of the
Securities will be used by the Company (i) to provide capital to a
corporation licensed under the SBIA, (ii) outside the United States
(except (A) to acquire abroad materials and industrial property rights for
a domestic operation or (B) for transfer to a controlled foreign
subsidiary of the Company, so long as at least 51% of the Company's assets
and activities will remain within the United States) or (iii) for any
purpose contrary to the public interest (including, but not limited to,
activities which are in violation of law) or inconsistent with free
competitive enterprise, in each case within the meaning of 13 C.F.R. ss.
107.720.
(c) Within five days of the Transfer Date, the Company
shall deliver to the SBIC Affiliate duplicate originals of (i) an executed
copy of Small Business Administration (the "SBA") Form 480, Size Status
Declaration, (ii) an executed copy of SBA Form 652, Assurance of
Compliance for Nondiscrimination and (iii) the information needed to
complete Part A and Part B of SBA Form 1031, Portfolio Financing Report.
(d) Within 75 days of the Transfer Date, the Company
shall provide to the SBIC Affiliate a certificate in form a substance
satisfactory to the SBIC Affiliate of the Company's chief financial
officer (i) verifying (and describing in reasonable detail) the use of the
proceeds from the sale of the Securities and (ii) certifying compliance by
the Company with the provisions of this Section 2 and the Company's use of
proceeds in compliance with the SBIA and Schedule I of the Securities
Purchase Agreement, dated November 11, 1997, between the Company and the
Purchaser. In addition to any other rights granted hereunder, the Company
shall provide the SBIC Affiliate and the SBA access to the Company's books
and records for the purpose of verifying the use of the proceeds from the
sale of the Securities and for all other purposes required by the SBA.
(e) Promptly after the end of each fiscal year (but in
any event prior to February 28 of each year) during which any Securities
are outstanding, the Company shall provide to the SBIC Affiliate a written
assessment, in form and substance reasonably satisfactory to the SBIC
Affiliate of the economic impact of the financing described herein,
specifying the full-time equivalent jobs created or retained, the impact
of the financing on the Company's business in terms of expanded revenue
and taxes and other appropriate economic benefits, including, but not
limited to, technology development or commercialization, minority business
development, urban or rural business development, expansion of exports and
assistance to manufacturing firms.
(f) Upon the request of the SBIC Affiliate for so long
as any Securities are outstanding, the Company will (i) provide to the
SBIC Affiliate such financial statements and other information as the SBIC
Affiliate may from time to time reasonably request for the purpose of
assessing the Company's financial condition and (ii) furnish to the SBIC
Affiliate all information reasonably requested by it in order for it to
prepare and file SBA Form 468 and any other information reasonably
requested or required by any governmental agency asserting jurisdiction
over the SBIC Affiliate.
(g) For a period of one year following the Transfer
Date, neither the Company nor any of its subsidiaries will change its
business activity if such change would render the Company ineligible to
receive financial assistance from an SBIC under the SBIA and the
regulations thereunder (within the meanings of 13 C.F.R. ss. ss. 107.720
and 107.750(b)).
(h) The Company and each of its subsidiaries will at all
times comply with the non-discrimination requirements of 13 C.F.R. Parts
112, 113 and 117, for so long as any Securities are outstanding.
SECTION 3. Notice of Transfer. The Purchaser shall give
notice to the Company in accordance with the terms hereof of any transfer
of Securities to an SBIC Affiliate, such notice shall include the proposed
Transfer Date.
SECTION 4. Consequences of a Breach by the Company. If
the Company breaches the representation and warranty in Section 1(b) or
the covenants in Section 2(b), Section 2(d) or Section 2(g) in any
material respect, then in addition to all other remedies available to the
SBIC Affiliate, the SBIC Affiliate may demand and the Company agrees that
the Company will upon such demand immediately repurchase all of the
Securities acquired by the SBIC Affiliate at the purchase price paid by
the Purchaser therefor.
SECTION 5. Costs of Compliance. The Company and the SBIC
Affiliate agree that the SBIC Affiliate will reimburse the Company for one
half of the reasonable, documented costs and expenses incurred by the Company
in connection with its ongoing compliance with the reporting requirements
imposed on the Company pursuant to Section 2.
SECTION 6. Descriptive Headings; Certain
Interpretations.
(a) Descriptive headings are for convenience only and
shall not control or affect the meaning or construction of any provision
of this Agreement.
(b) Whenever any party makes any representation,
warranty or other statement to such party's knowledge, such party will be
deemed to have made due inquiry into the subject matter of such
representation, warranty or other statement.
(c) Except as otherwise expressly provided in this
Agreement, the following rules of interpretation apply to this Agreement:
(i) the singular includes the plural and the plural includes the singular;
(ii) "or" and "any" are not exclusive and "include" and "including" are
not limiting; (iii) a reference to a law includes any amendment or
modification to such law and any rules or regulations issued thereunder;
(iv) a reference to a person includes its permitted successors and
assigns; and (v) a reference in this Agreement to a Section is to the
Section of this Agreement.
SECTION 7. Notices. All notices, requests and other
communications to any party hereunder shall be in writing and sufficient if
delivered personally or sent by telecopy (with confirmation of receipt) or by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to the Company: Industrial Imaging Corporation
One Xxxxxx Research Center
000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Telecopy: (000) 000-0000
With a copy to: Mintz Xxxxx Xxxx Xxxxxx Xxxxxxx
and Popeo PC
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx
Telecopy: (000) 000-0000
If to the Purchaser: Imprimis Investors LLC
c/o Wexford Management LLC
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
With a copy to: Xxxxxx, Xxxxx & Xxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Telecopy: (000) 000-0000
or to such other address or telecopy number as the party to whom notice is to
be given may have furnished to the other party in writing in accordance
herewith. Each such notice, request or communication shall be effective when
received or, if given by mail, when delivered at the address specified in this
Section or on the fifth business day following the date on which such
communication is posted, whichever occurs first.
SECTION 8. Counterparts. This Agreement may be executed
in any number of counterparts, and each such counterpart hereof shall be
deemed to be an original instrument, but all such counterparts together
shall constitute but one agreement.
SECTION 9. Benefits of Agreement. All of the terms and
provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
This Agreement is for the sole benefit of the parties hereto and the SBIC
Affiliate and not for the benefit of any other party.
SECTION 10. Amendments and Waivers. No modification,
amendment or waiver of any provision of, or consent required by, this
Agreement, nor any consent to any departure herefrom, shall be effective
unless it is in writing and signed by the parties hereto. Such
modification, amendment, waiver or consent shall be effective only in the
specific instance and for the purpose for which given.
SECTION 11. Assignment. This Agreement and the rights
and obligations hereunder shall not be assignable or transferable by any
party hereto without the prior written consent of the other party;
provided that the Purchaser shall be permitted to assign this Agreement to
an SBIC Affiliate as provided herein. Any instrument purporting to make an
assignment in violation of this Section shall be void. All covenants,
agreements, representations, warranties and undertakings in this Agreement
made by and on behalf of any party hereto shall bind and inure to the
benefit of the successors and permitted assigns of such party.
SECTION 12. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK (WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAWS PROVISIONS).
INDUSTRIAL IMAGING CORPORATION
By_________________________________
Name:
Title:
IMPRIMIS INVESTORS LLC
By_________________________________
Name:
Title:
