EXHIBIT 10.1
COMMON STOCK AND DEBENTURE PURCHASE AGREEMENT
This Common Stock and Debenture Purchase Agreement is made and entered
into as of the 30th day of July, 1998, between Venturian Corp., a Minnesota
corporation and Quarterdeck Public Equities, LLC, a Delaware limited liability
company (the "Investor"). Except where the context otherwise requires, all
references herein to the "Company" shall be collectively to Venturian Corp. and
its consolidated subsidiaries, Napco International and International Precision
Machining, and their respective subsidiaries.
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged by the Company and the Investor, the Company and the
Investor agree as follows:
1. Sale and Purchase of Securities. Subject to the terms and conditions
hereof, the Company agrees to sell to the Investor at the Closing (as defined
herein) and the Investor agrees to purchase from the Company at the Closing,
63,005 shares of the Company's common stock, $1.00 par value per share (the
"Common Stock"), and an 11% Subordinated Convertible Debenture in the form
attached hereto as Exhibit A (the "Debenture") in the principal amount of
$504,040. The Common Stock and the Debenture are sometimes collectively referred
to herein as the "Securities."
2. Closing. The closing of the purchase and sale of the Securities
hereunder shall take place at the offices of Xxxxxxx, Street and Deinard
Professional Association, Minneapolis, Minnesota, at 10:00 a.m., Minnesota time,
on July 30, 1998 or at such other place or different time or day as may be
mutually acceptable to the Investor and the Company (the "Closing"). At the
Closing, the Company shall deliver to Investor the Debenture dated the date of
such Closing, and shall deliver to Investor a certificate representing the
63,005 shares of Common Stock and Investor shall cause to be delivered to the
Company a wire transfer of immediately available U.S. dollars in the amount of
$945,075, consisting of $441,035 in payment of the purchase price for such
shares of Common Stock and $504,040 in payment of the purchase price for the
Debenture.
3. Representations and Warranties by the Company. To induce the
Investor to enter into this Agreement and to purchase the Securities, the
Company hereby represents and warrants to the Investor as follows. (All
representations and warranties set forth below are subject to the information
contained in Schedule A attached hereto, whether or not such representation and
warranty expressly references such material):
(a) Disclosure. The Company has provided the Investor with all the
information it has requested in deciding whether to purchase the Securities and
all information the Company believes is necessary or appropriate relating to an
investment in the Company. This Agreement and the other written information
delivered in connection with the transactions contemplated herein (collectively,
the "Disclosed Information"), including without limitation the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998, Proxy Statement for its Annual
Meeting of Shareholders on May 5, 1998 and 1997 Annual Report to Shareholders
(the "SEC
Filings"), fairly presents all material information regarding the Company as of
the date hereof and, as of the date of the Closing, the Disclosed Information
will (i) fairly present all material information regarding the Company, and (ii)
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading. There is no fact known to the Company that has not been
disclosed to the Investor in writing that is known by the Company to be likely
to (a) have a Material Adverse Effect on the Company (as defined herein) or (b)
materially adversely affect the ability of the Company to perform its
obligations under this Agreement or the Debenture. The SEC Filings comply in all
material respects with the requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and all applicable rules and regulations of the
Securities and Exchange Commission (the "Commission").
(b) Organization, Good Standing, Etc. The Company is duly
incorporated and validly existing as a corporation in good standing under the
laws of the State of Minnesota, with power and authority to own its properties
and conduct its business as now conducted and proposed to be conducted. The
Company is duly qualified to do business as a foreign corporation and is in good
standing in all states or jurisdictions in which the ownership or lease of its
property or the conduct of its business requires such qualification and the
failure to be so qualified would have a material adverse effect on the Company's
business.
(c) Financial Statements. The financial statements (including all
related schedules and notes) included in the Disclosed Information fairly
present the financial condition and results of operations of the Company as of
the dates and for the periods indicated; such statements have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods indicated; and the report of the public accountant
included in the Disclosed Information is issued by an independent public
accountant within the meaning of the Exchange Act, and the rules and regulations
thereunder. The projected financial information presented to the Investor by the
Company was prepared by the Company in good faith and the Company has no reason
to believe that the assumptions underlying such projected financial information
are not reasonable or not likely to be true and correct.
(d) Authorization and Enforceability. The Company has full legal and
corporate power, right and authority to enter into this Agreement and to issue
the Securities and to carry out and perform its obligations under this
Agreement, the Debenture and the other documents entered into pursuant to or in
connection with this Agreement. This Agreement, the Securities and such other
documents have been duly authorized, executed and delivered on behalf of the
Company and are the valid and binding obligations of the Company, enforceable in
accordance with their respective terms and subject, as to enforcement, to
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally, to the exercise of judicial
discretion as to the availability of equitable remedies such as specific
performance and injunction and subject, as to enforcement of the indemnification
provisions, to limitations under applicable securities laws.
(e) Defaults. The execution of this Agreement and the consummation
of the transactions herein contemplated will not conflict with or result in any
breach of any of the terms
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or conditions of, or constitute a default or violation under, (i) the Articles
of Incorporation, as amended, or Bylaws, as amended, of the Company, (ii) any
indenture, agreement or other instrument to which the Company is now a party, or
(iii) any material law or any material order, rule or regulation applicable to
the Company of any court or of any federal or state regulatory body or
administrative agency having jurisdiction over the Company or its property,
except such breaches, defaults or violations which would not have a material
adverse effect on the business, earnings, properties, condition (financial or
otherwise) or prospects of the Company (a "Material Adverse Effect") or a
material adverse effect on the Company's ability to perform its obligations
under this Agreement, the Debenture or any of the other documents entered into
pursuant to or in connection with this Agreement.
(f) Consents. No consent, authorization, approval or order of any
governmental or regulatory authority or any third party of any kind is required
for the offer, issuance, sale or delivery of the Securities, other than the
qualification, if required, under applicable state securities laws, which
qualification will be obtained prior to the Closing.
(g) Valid Issuance of Common Stock. The Common Stock, when
authorized, issued, sold and delivered in accordance with the terms hereof will
be duly and validly issued, fully paid and nonassessable and will be free of
restrictions on transfer other than under this Agreement, and, based in part
upon the representations of the Investor in this Agreement, will be issued in
compliance with federal and state securities laws.
(h) Valid Issuance of Conversion Shares. The shares of the Company's
common stock issuable upon conversion of the Debentures (the "Conversion
Shares") have been reserved for issuance and, when issued and delivered in
accordance with the terms thereof, will be duly authorized, validly issued,
fully paid and non-assessable.
(i) Capital Stock. The authorized capital stock of the Company
consists of 30,000,000 shares of common stock, of which 1,134,076 shares are
issued and outstanding. Except for an aggregate of 231,650 shares of the
Company's common stock which are subject to outstanding options to employees
under the Company's various stock option plans and 191,350 additional shares
reserved for issuance under such plans, there are no outstanding rights to
acquire from the Company any shares of its capital stock, options, convertible
securities, voting agreements, voting trusts, calls, pledges, transfer
restrictions (other than those imposed by federal and state securities laws),
liens, rights of first offer, rights of first refusal, anti-dilution provisions
or commitments of any kind relating to any issued or unissued shares of capital
stock of the Company. All outstanding shares of the Company's capital stock have
been duly authorized, validly issued, fully paid and nonassessable.
(j) Fees and Commissions. Other than pursuant to agreements with
Quarterdeck Investment Partners, Inc., the Company has not incurred any
liability for any finder's or broker's fee or agent's commission in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
(k) Absence of Certain Changes. Except as set forth on Schedule A,
since March 31, 1998, the Company has not:
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(i) incurred any liabilities or obligations, whether absolute or
contingent, liquidated or unliquidated or due or to become due (collectively,
"Liabilities") other than current Liabilities incurred, or obligations under
contracts entered into, in the ordinary course of business, consistent with past
practice (the "Ordinary Course of Business");
(ii) paid, discharged or satisfied any claim, Lien (as hereinafter
defined) or Liability, other than any claim, Lien or Liability (A) reflected or
reserved against on the balance sheet dated March 31, 1998 of the Company
included in its Quarterly Report on Form 10-Q for the quarter then ended
presented to the Investor (the "Current Balance Sheet") and paid, discharged or
satisfied in the Ordinary Course of Business since the date of the Current
Balance Sheet or (B) incurred and paid, discharged or satisfied since the date
of the Current Balance Sheet, in each case in the Ordinary Course of Business;
(iii) sold, leased, assigned or otherwise transferred any of its
assets, tangible or intangible (other than sales of inventory in the Ordinary
Course of Business and for a fair consideration and use of supplies in the
Ordinary Course of Business);
(iv) permitted any of its assets, tangible or intangible, to become
subject to any material Lien;
(v) terminated or amended, suffered the termination or amendment
of, failed to perform in all material respects all of its obligations or
suffered or permitted any material default to exist under, any material
agreement, license or permit;
(vi) suffered any damage, destruction or loss of tangible property
(whether or not covered by insurance) which in the aggregate exceeds $100,000;
(vii) paid any amount to or entered into any agreement,
arrangement or transaction with any shareholder, director, officer or employee
of the Company or any person or entity related to or affiliated with any such
person (an "Affiliate") outside the Ordinary Course of Business;
(viii) granted any increase outside the Ordinary Course of Business
in the compensation of any officer or employee or made any other change in
employment terms of any officer or employee;
(ix) made any change in any method of accounting or accounting
practice; or
(x) agreed, in writing or otherwise, to any of the foregoing.
(l) Litigation. Set forth on Schedule A is a list and description of
all claims, suits, proceedings or investigations pending or to the knowledge of
the Company threatened against or affecting the Company, any officer or director
thereof or the Company's business. Except as set forth on Schedule A, no such
claim, suit, proceeding or investigation, could have a
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Material Adverse Effect or a material adverse effect on the ability of any
officer or director to participate in the affairs of the Company.
(m) No Undisclosed Liabilities. Except as set forth on Schedule A, the
Company has no material Liabilities except (i) as reflected or reserved against
on the Current Balance Sheet (ii) liabilities and obligations incurred in the
Ordinary Course of Business since the date thereof and (iii) Liabilities
disclosed in the Company's reports filed with the Commission under the Exchange
Act.
(n) Assets and Property. The Company owns or leases all of its
properties and assets, real and personal, used or reasonably necessary in
connection with the conduct of its business. Except as disclosed in the Current
Balance Sheet (including the notes thereto) and the balance sheet as of December
31, 1997 included in the Company's 1997 Annual Report to Shareholders (including
the notes thereto), each such property or asset is free from any material liens,
mortgages, pledges, security interests, restrictions, charges or encumbrances
("Liens"), except liens for current taxes and assessments not yet due, and has
been maintained in accordance with normal industry practice and any regulatory
standard or procedure to which it is subject.
(o) Contracts and Other Instruments. Each material contract, lease or
agreement to which the Company is a party is a valid, binding and enforceable
agreement of the Company and, to the best knowledge of the Company, the other
parties thereto. Except for defaults in the timing of shipments (which the
Company does not expect to have a Material Adverse Effect), the Company is not
presently in material default under any material contract, lease or agreement,
nor to the best knowledge of the Company, are any of the other parties thereto,
and no event has occurred which, with the giving of notice or the lapse of time,
or both, would constitute a material default by the Company under any material
contract, lease or agreement. Other than claims or disputes arising in the
Ordinary Course of Business (none of which, individually or in the aggregate,
the Company expects to have a Material Adverse Effect), there are no outstanding
or threatened claims or disputes under any material contract, lease or agreement
presently or heretofore in effect (including, without limitation, claims for
back charges, rebates, price reductions or settlements or for breaches of
product or service warranties or for product or service liability for products
manufactured or sold).
(p) Intellectual Property. Except as set forth on Schedule A, (i) the
Company owns or has a valid license to use all Intellectual Property (as
hereinafter defined) necessary for the operation of its business as currently
conducted or proposed to be conducted, free and clear of any Liens or adverse
claims; (ii) no claim by any third party contesting the validity,
enforceability, ownership or use of any of the material Intellectual Property or
material Nonregistered Intellectual Property (as hereinafter defined) owned or
used by the Company has been made and is currently outstanding or has been
overtly threatened; (iii) no loss or expiration of any individual Intellectual
Property right or related group of Intellectual Property rights owned or used by
the Company is threatened, pending or reasonably foreseeable; (iv) the Company
has not received any notice of any infringement or misappropriation by or
conflict with, any third party with respect to the Intellectual Property or
Nonregistered Intellectual
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Property owned or used by the Company and (v) the Company does not otherwise
have any knowledge of any such infringement, misappropriation or conflict. As
used in this Agreement, "Intellectual Property" means all patents, patent
applications, patent disclosures and inventions, trademarks, service marks,
trade dress, trade names, copyrights, and all registrations, applications and
renewals for any of the foregoing that are material to the operation of the
Company's business; and "Nonregistered Intellectual Property" means all product
designs and formulations, trade secrets, confidential information, ideas,
know-how, production processes and techniques, drawings, specifications, plans,
technical and computer data, documentation and software, financial, business and
marketing plans, customer and supplier lists and related information that are
material to the operation of the Company's business.
(q) Employees. Since March 31, 1998, no key employees and no group of
employees has terminated, or, to the knowledge of the Company plans to
terminate, employment with the Company. Except as set forth on Schedule A and as
disclosed in the Disclosed Information, the Company is not a party to or bound
by any collective bargaining agreement, nor has it experienced any strike,
grievance, claim of unfair labor practice or other collective bargaining
dispute. To the knowledge of the Company, there is no organizational effort
being made or threatened by or on behalf of any labor union with respect to its
employees.
(r) Guaranties. Except as set forth on Schedule A or as disclosed in
the Disclosed Information, the Company is not a guarantor and is not otherwise
liable for any Liability (including indebtedness) of any other person or entity.
Except as set forth on Schedule A, the Company has no obligation to purchase any
equity securities or debt of Atio Corporation USA, Inc. ("Atio"), or to guaranty
any indebtedness of Atio.
(s) Transactions With Affiliates. Except as set forth on Schedule A or
as disclosed in the Disclosed Information, the Company has not entered into any
agreement, arrangement or transaction with any Affiliate within the past twelve
months, and none of the Affiliates owns any property or right, tangible or
intangible, which is used in the Company's business.
(t) Licenses, Compliance with Law, Other Agreements, Etc. The Company
has all necessary franchises, permits, licenses and other rights to allow it to
conduct its business and is not in violation of any order or decree of any
court, or of any law, order or regulation of any governmental authority, or of
the provisions of any contract or agreement to which it is a party or by which
it is bound. The Company's business has been conducted in compliance with all
material federal, state and local laws, ordinances, rules and regulations except
where such violations, defaults or noncompliance would not have a Material
Adverse Effect.
(u) Employee Benefits. Except as set forth on Schedule A or disclosed
in the Disclosed Information, neither the Company nor any current ERISA
Affiliate (as hereinafter defined) maintains, contributes to or has an
obligation to establish, or has ever maintained, contributed to or had an
obligation to establish, an employee pension benefit plan as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"). Any
employee welfare benefit plan maintained or contributed to by the Company or any
current
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ERISA Affiliate has complied with all applicable law under ERISA and the
Internal Revenue Code (the "Code") and has not incurred any liability under
Section 4980(B) of the Code. In addition, neither the Company nor any ERISA
Affiliate has any present or future obligation or liability under any
multiemployer plan within the meaning of Section 3(37) of ERISA. As used herein,
the term "ERISA Affiliate" means any company which, as of the relevant measuring
date under ERISA is a member of a controlled group of corporations or trades or
businesses as defined in Sections 414(b) and (c) of the Code of which the
Company is a member.
(v) Environment, Health and Safety.
(i) The Company has obtained all permits, licenses and other
authorizations which are required under federal, state and local laws relating
to public health and safety, worker health and safety (including the
Occupational Safety and Health Act, as amended) and pollution or protection of
the environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants or hazardous or toxic materials
or wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants or hazardous or
toxic materials or wastes ("Environmental and Safety Laws").
(ii) The Company is in material compliance with all terms and
conditions of any and all required permits, licenses, and authorizations and, to
its knowledge (having conducted, in connection with previous transactions,
reasonable investigations with respect to the environmental condition of the
Company's properties), with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in any Environmental and Safety Laws or any notice or demand letter
issued, entered, promulgated or approved thereunder, except where failure so to
comply would not have a Material Adverse Effect.
(iii) Without limiting the foregoing and except with respect to
matters identified in the SEC Filings and other Disclosed Information, to the
Company's knowledge (having conducted, in connection with previous transactions,
reasonable investigations with respect to the environmental condition of the
Company's properties), (A) the Company has not disposed of any chemical, toxic
or hazardous waste in any manner which could form the basis for any present or
future claim, demand or action seeking clean-up of any site, location, or body
of water, surface or subsurface, and (B) there are no polychlorinated biphenyls,
methylene chloride, trichlorethylene 1, 2-transdichloroethylene, dioxins,
dibenzofurans, Extremely Hazardous Substances (as defined in Section 302 of the
Emergency Planning and Community Right-to-Know Act of 1986, as amended) or
asbestos on any properties owned, leased or used by the Company reasonably
expected to give rise to liability to the Company (other than the Company's
obligation to handle and dispose of that which is there in accordance with
applicable law).
(w) Taxes. The Company has prepared and filed all Tax Returns required
to be filed by it, which Tax Returns are true, correct and complete. The Company
has paid or made
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provision for the payment of all Taxes that are due or claimed to be due from it
by any taxing authority. There are no liens for Taxes upon any assets, tangible
or intangible, of the Company. The reserves for Taxes reflected on the Current
Balance Sheet are sufficient for payment of all unpaid Taxes (whether or not
currently disputed) incurred with respect to the periods ended on the date
thereof and for all periods ended prior to such date. As used in this Agreement,
"Tax Returns" means all returns (including information returns), declarations,
reports, estimates and statements, regarding Taxes, required to be filed under
any United States federal, state or local law or any foreign law. As used in
this Agreement, "Taxes" means all taxes, charges, fees, levies or other
assessments, including all net income, gross income, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, estimated, severance, stamp, occupation, property or other
taxes, customs duties, fees, assessments or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts imposed by any governmental agency.
(x) Inventory. All raw material, work in process and finished inventory
of the Company is usable and saleable in the Ordinary Course of Business for an
aggregate amount at least equal to the amount reflected on the Current Balance
Sheet.
(y) Government Contracts.
(i) Government Contracts Compliance. With respect to each
Government Contract, Bid or Subcontract (as such terms are defined below) to
which the Company is a party: (A) the Company has fully complied with all
material terms and conditions of such Government Contract, Subcontract or Bid,
including all clauses, provisions and requirements incorporated expressly, by
reference or by operation of law therein; (B) the Company has fully complied
with all material requirements of statute, rule, regulation, order or agreement
pertaining thereto; (C) all representations and certifications executed,
acknowledged or set forth in or pertaining thereto were current, accurate and
complete as of their effective date, and the Company has fully complied with all
such representations and certifications, including, without limitation, all
representations and certifications required by or relating to the
Truth-In-Negotiations Act, the Procurement Integrity Act, the Foreign Corrupt
Practices Act, the Cost Accounting Standards, the regulations and rules relating
to Foreign Military Sales and the regulations and rules relating to the
submission of progress payment requests; (D) no governmental entity nor any
prime contractor, subcontractor or other person has notified the Company, either
orally or in writing, that the Company have breached or violated any statute,
rule, regulation, certification, representation, clause, provision or
requirement; (E) no termination for convenience, termination for default, cure
notice or show cause notice has been issued which has had a Material Adverse
Effect and (F) no material cost incurred by the Company is the subject of any
pending audit, claim or disallowance.
(ii) Investigations and Audits. Except as set forth in Schedule A:
(A) to the Company's knowledge, neither the Company, nor any of the Company's
directors, officers, employees, agents or consultants is (or for the last five
years has been) under administrative, civil or criminal investigation,
indictment or information, audit or internal investigation with respect to any
alleged irregularity, misstatement or omission arising under or relating to any
8
Government Contract, Subcontract or Bid; (B) the Company has not made a
voluntary disclosure to the U.S. Government with respect to any alleged
irregularity, misstatement or omission arising under or relating to any
Government Contract, Subcontract or Bid that has led or could lead, either
before or after the Closing Date, to any of the consequences set forth in (A) or
(B) above or any other damage, penalty assessment, recoupment of payment or
disallowance of cost.
(iii) Financing Arrangements and Claims. Except as set forth in
Schedule A and except for claims and disputes arising in the ordinary course of
business (none of which the Company expects to have a Material Adverse Effect),
(A) no claims have been made against the Company, either by the U.S. Government
or by any prime contractor, subcontractor, vendor or other third party, arising
under or relating to any Government Contract, Subcontract or Bid; (B) no facts
are known by the Company upon which such a claim may be based in the future; (C)
no disputes exist between the Company and the U.S. Government or any prime
contractor, subcontractor or vendor arising under or relating to any Government
Contract, Subcontract or Bid; and (D) no facts are known by the Company over
which such a dispute may arise in the future.
(iv) No Suspension or Debarment. Neither the Company, nor any of
the Company's directors, officers or employees is (or for the last five years
has been) suspended or debarred from doing business with the U.S. Government or
has been declared nonresponsible or ineligible for U.S. Government contracting.
The Company knows of no circumstances that would warrant the institution of
suspension or debarment proceedings or the finding of nonresponsibility or
ineligibility on the part of the Company in the future.
(v) Loss Contracts. There exists no Government Contract,
Subcontract, Bid or contract as to which the estimated cost at completion
(including material and labor costs, other direct costs, overheads, engineering
costs and manufacturing costs, whether incurred or yet to be incurred exceeds by
$100,000 the aggregate contract revenue recorded or to be recorded thereunder
through completion (a "Loss Contract").
(vi) Foreign Corrupt Practices. To the knowledge of senior
management of the Venturian Corp. or Napco International Inc., neither the
Company nor any director, officer, employee or agent of the Company, nor any
other person acting on its behalf, had, directly or indirectly, within the past
four years given or agreed to give any gift or similar benefit to any customer,
supplier, governmental official or employee, representative of a political
party, or other person who is or may be in a position to help or hinder the
Company (or assist the Company in connection with any actual or proposed
transaction) which (A) is in violation of applicable law, (B) for any of the
purposes described in Section 162(c) of the Foreign Corrupt Practices Act, or
(C) for establishment or maintenance of any concealed fund or concealed bank
account. The Company has in place, and has had in place for at least the last
four years, a compliance program which the Company reasonably believes is
reasonably sufficient to assure that none of the forgoing actions have occurred
or will occur.
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(vii) Customer Furnished Assets. To the Company' knowledge, the
Company is in compliance in all material respects with all of its obligations
relating to the customer furnished items.
(viii) Accounting and Procurement Systems. The Company' cost
accounting and procurement systems with respect to Government Contracts are in
compliance in all material respects with all applicable governmental regulations
and rules.
(iv) Defined Terms. As used herein, (A) "Government Contract" means
any prime contract, teaming agreement, joint venture, basic ordering agreement,
letter contract, purchase order, delivery order, change order, arrangement or
other commitment of any kind between the Company and any entity of the United
States Government; (B)"Subcontract" means any contract, teaming agreement, joint
venture, basic ordering agreement, letter contract, purchase order, delivery
order, change order, arrangement or other commitment of any kind between the
Company and another company at any tier, wherein the ultimate beneficiary of
performance is the United States Government; and (C) "Bid" means any quotation,
offer, bid or proposal for the design, development, manufacture, sale, overhaul,
repair, or maintenance of products or the provision of services made by the
Company that, if accepted or awarded, would lead to a contract or subcontract,
wherein the ultimate beneficiary of performance is the United States Government.
4. Representations of the Investor. The Investor represents that:
(a) Investment Intent. The Securities being acquired by the
Investor are being purchased for investment for the Investor's own account and
not with the view to, or for resale in connection with, any distribution or
public offering thereof. The Investor understands that the Securities have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act") or any state securities laws by reason of their contemplated issuance in a
transaction exempt from the registration requirements of the Securities Act and
applicable state securities laws, and that the reliance by the Company upon
these exemptions is predicated in part upon this representation by the Investor.
The Investor further understands that the Securities, and the shares of the
Company's common stock issuable upon conversion thereof, may not be transferred
or resold without (i) registration under the Securities Act and any applicable
state securities laws, or (ii) an exemption from the requirements of the
Securities Act and applicable state securities laws.
(b) Location of Principal Office, Suitability, Etc. The state in
which the Investor's principal office is located is the State of Delaware. The
Investor acknowledges receipt of the Disclosed Information and further
acknowledges that the Company has made available to the Investor, at a
reasonable time prior to the execution of this Agreement, the opportunity to ask
questions and receive answers concerning the business and affairs of the Company
and the terms and conditions of the sale of Securities contemplated by this
Agreement and to obtain any additional information (which the Company possesses
or can acquire without unreasonable effort or expense) as may be necessary to
verify the accuracy of information furnished to the Investor. Each member of the
Investor has represented, among other things, that
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he or she, and the Investor hereby represents that it, (i) is able to bear the
loss of the entire investment in the Securities without any material adverse
effect on his, her or its business, operations or prospects, and (ii) has such
knowledge and experience in financial and business matters that he, she or it is
capable of evaluating the merits and risks of the investment to be made pursuant
to this Agreement. The Investor has no reason to believe that any
representations and warranties made by members of the Investor in connection
with the purchase of the Securities are untrue and incorrect.
(c) Acts and Proceedings. This Agreement has been duly authorized by
all necessary action on the part of the Investor, has been duly executed and
delivered by the Investor, and is a valid and binding agreement of the Investor.
(d) Forward-Looking Information. The undersigned recognizes that any
forward-looking statements, financial projections, assumptions or estimates
included in or referred to in the Disclosure Package or otherwise delivered or
communicated to the undersigned are not statements of fact and that, except as
provided in Section 3(c), no representation or warranty has been made, by the
Company or any officer, director, shareholder, employee or agent thereof, with
respect to the accuracy of such forward-looking statements, financial
projections, assumptions or estimates. The undersigned further recognizes that:
(i) the operating results, predictions, estimates and
projections contained in the Company's projections are based upon certain
assumptions and events over which the Company has only partial or no control;
(ii) variations in such assumptions, including sales, costs,
selling expenses, general and administrative expenses, development expenses,
regulatory matters, consumer acceptance and competitive developments could
significantly affect the projections;
(iii) to the extent that assumed events do not materialize, the
outcome will vary substantially from that projected; and
(iv) there are a number of other factors and risks which could
cause actual results to be substantially less than projected, including the
risks disclosed in the Disclosure Package and on Schedule A hereof.
5. Conditions of Investor's Obligation. The obligation to purchase and
pay for the Securities at the Closing is subject to the fulfillment prior to or
on the date of Closing (the "Closing Date") of the conditions set forth in this
Section 5.
(a) Representations and Warranties. The representations and
warranties of the Company under this Agreement shall be true on and as of the
Closing Date with the same effect as though made on and as of the Closing Date.
(b) Compliance with Agreement. The Company shall have performed and
complied with all agreements or conditions required by this Agreement to be
performed and complied with by it prior to or as of the Closing Date.
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(c) Qualification Under State Securities Laws. All registrations,
qualifications, permits and approvals required under applicable state securities
laws for the lawful execution and delivery of this Agreement and the offer,
sale, issuance and delivery of the Securities to the Investor at the Closing
shall have been obtained.
(d) Proceedings and Documents. All corporate and other proceedings
and actions taken in connection with the transactions contemplated hereby and
all certificates, opinions, agreements, instruments and documents mentioned
herein or incident to any such transaction shall be reasonably satisfactory in
form and substance to the Investor.
(e) Agreement of Xxxx Xxxxxxxxx. Xxxx X. Xxxxxxxxx shall have
entered into a voting agreement or other voting arrangement, satisfactory in
form and substance to the Investor, to the effect that he will vote his shares
to cause Xxx X. Xxxxxx to be nominated, elected and to remain a director of the
Company for so long as the Investor continues to hold at least 75% of the Common
Stock purchased hereunder, the Debentures and the Conversion Shares; provided,
however, that Xxxx X. Xxxxxxxxx shall not be required to support such election
during any period in which the Investor or Xx. Xxxxxx are adverse to Xx.
Xxxxxxxxx in any proxy contest, tender offer or other attempt to gain control of
the Company.
(f) Opinion. The Company's counsel, Xxxxxxx, Street and Deinard,
Professional Association, shall have delivered an opinion addressed to the
Investor in the form of Exhibit A.
6. Conditions to Company's Obligation. The obligation to issue the
Securities at the Closing is subject to the fulfillment prior to or on the
Closing Date of the conditions set forth in this Section 6.
(a) Representations and Warranties.
(i) The representations and warranties of the Investor under
this Agreement shall be true on and as of the Closing Date with the same effect
as though made on and as of the Closing Date.
(ii) The members of the Investor shall have made such
representations and warranties as the Company may reasonably request.
(b) Compliance With Agreement. The Investor shall have performed and
complied with all agreements or conditions required by this Agreement to be
performed and complied with by them prior to or as of the Closing Date.
(c) Qualification Under State Securities Laws. All registrations,
qualifications, permits and approvals required under applicable state securities
laws for the lawful execution and delivery of this Agreement and the offer,
sale, issuance and delivery of the Securities to the Investor at the Closing
shall have been obtained.
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(d) Amendment of Agreement. That certain Agreement dated June 6,
1998 between Quarterdeck Investment Partners, Inc. ("QIP") and the Company shall
have been amended to provide for a reduction in the fee payable thereunder from
3% (as presently stated in such agreement) to 1.5% of the amount to be invested
pursuant to this Agreement (in addition to reimbursement of out-of-pocket
expenses) and such amounts shall be paid at the Closing without credit for the
retainer paid under such agreement.
7. Affirmative Covenants.
(a) The Company covenants and agrees as follows:
(i) Corporate Existence. The Company will maintain its corporate
existence in good standing and comply with all applicable laws and regulations
of the United States or of any state or political subdivision thereof and of any
government authority where failure to so comply would have a material adverse
impact on the Company or its business or operations.
(ii) Books of Accounts. The Company will keep books of record
and account in which full, true and correct entries are made of all of its
respective dealings, business and affairs, in accordance with generally accepted
accounting principles. The Company will employ certified public accountants who
are "independent" within the meaning of the accounting regulations of the
Securities and Exchange Commission.
(iii) Board Representation. Upon the written request of the
Investor, the Company will nominate Xxx X. Xxxxxx for election to the Board of
Directors of the Company at the next annual meeting of shareholders of the
Company.
(iv) Additional Information. So long as the Investor holds at
least 25% of the aggregate of the Common Stock purchased hereunder, any
Conversion Shares issued in conversion of all or a portion of the Debenture, and
the Debenture (measuring the Debenture on the basis of the number of Conversion
Shares into which the outstanding balance thereof is convertible), the Company
shall (i) furnish to the Investor such information concerning the Company as the
Investor may from time to time reasonably request (other than information
protected by the attorney-client privilege), (ii) permit the Investor (or its
designated representatives) to visit the properties of the Company at reasonable
times, to interview key employees of the Company at their places of employment
at reasonable times and to examine the books of account of the Company and to
make copies therefrom, and (iii) furnish the Investor, as soon as practical,
with a complete and correct copy of the minutes of proceedings of the
shareholders and Board of Directors of the Company, any reports and registration
statements filed with the Commission, and any materials forwarded to the holders
of Common Stock as a class; provided, however, that the Investor shall agree to
hold in confidence and trust all information so provided.
(v) Cooperation. The Company shall cooperate in supplying such
information as may be reasonably requested by the Investor to complete and file
any information reporting forms presently or subsequently required by the
Commission as a condition to the
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availability of an exemption, presently existing or subsequently adopted, from
the Securities Act for the sale of the shares of Common Stock and the Conversion
Shares.
(vi) Use of Proceeds. The proceeds from the sale of the
Securities hereunder shall be used for working capital purposes and application
to potential mergers and acquisitions by the Company.
(vii) Reservation of Common Stock. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of issuance of the Conversion Shares upon
the conversion of the Debenture. The Company shall take all such actions as may
be necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which shares of Common
Stock may be listed (except for official notice of issuance which shall be
immediately transmitted by the Company upon issuance).
(viii) Current Public Information. The Company shall file all
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations thereunder to the extent required to enable the
Investor to sell such shares pursuant to Rule 144 under the Securities Act or
any successor provision. Upon request, the Company shall deliver to the Investor
a written statement as to whether it has complied with such requirements.
(ix) Expenses. The Company shall reimburse the Investor for all
of its reasonable out-of-pocket expenses associated with processing and closing
the transactions contemplated hereby, including but not limited to travel
expenses, legal fees and filing fees and costs.
(x) Conflict Waiver. The Company acknowledges that the Investor
is an affiliate of QIP and waives and releases any claim which it may have
against the Investor, QIP or any of their affiliates arising out of any
potential conflict of interest related to the transactions contemplated hereby.
(b) Investor covenants and agrees that, other than as contemplated
herein, for a period of two years from the date hereof, neither the Investor nor
any of its members or affiliates will purchase any capital stock or other
securities or rights to purchase capital stock or other securities of the
Company without the Company's prior written consent; provided, however, that the
Investor may purchase shares of the Company's common stock in the open market
with a purchase price not in excess of $54,925 in the aggregate; and provided,
further, that the Investor may purchase in the open market shares of capital
stock or other securities or rights to the extent necessary to maintain its
percentage interest in the Company. For purposes of this paragraph, the members
of the Investor shall include Xxx Xxxxxx'x family, any trust of which Xx. Xxxxxx
or any member of his family serves as trustee or of which Xx. Xxxxxx or any
member of his family is a beneficiary and any entity 50% or more of which is
held or controlled by Xx. Xxxxxx and/or his family.
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8. Restriction on Transfer of Preferred Stock, Warrant and Shares.
(a) Legend. Each Debenture and each certificate representing shares
of the Company's Common Stock and Conversion Shares shall be endorsed with a
legend in substantially the form which follows:
"The securities represented by this certificate may not be
transferred without (i) the opinion of counsel satisfactory to
this corporation that such transfer may lawfully be made without
registration under the Securities Act of 1933, as amended, and all
applicable state securities laws, or (ii) such registration."
(b) Removal of Legend. Any legend endorsed on a certificate
evidencing a security pursuant to Section 7(a) hereof shall be removed, and the
Company shall issue a certificate without such legend to the holder of such
security, if such security is being disposed of pursuant to a registration under
the Securities Act or pursuant to Rule 144 or any similar rule then in effect or
if such holder provides the Company with an opinion of counsel satisfactory to
the Company to the effect that a transfer of such security may be made without
registration. In addition, if the holder of such security delivers to the
Company an opinion of such counsel to the effect that no subsequent transfer of
such security will require registration under the Securities Act, the Company
will promptly upon such contemplated transfer deliver new certificates
evidencing such security that do not bear the legend set forth in Section 7(a).
9. Miscellaneous.
(a) Changes, Waivers, Etc. Neither this Agreement nor any provisions
hereof may be changed, waived, discharged or terminated orally, but only by a
statement in writing, signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
(b) Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
delivered, or mailed first-class postage prepaid, registered or certified mail
or shall be sent by facsimile transmission followed by mailed copy:
if to the Investor to Quarterdeck Public Equities, LLC, 00000
Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx, XX 00000, Attention: Xxx X.
Xxxxxx, facsimile number (000) 000-0000; or at such other address or facsimile
number as the Investor may specify in writing to the Company; or
if to the Company at Venturian Corp., 00000 Xxxxxxxxx
Xxxxxxxxx, Xxxxxxx, XX 00000, Attention: Chief Financial Officer, facsimile
number (000) 000-0000; or at such other address or facsimile number as the
Company may specify by written notice to the Investor;
and such notices and other communications shall for all
purposes of this Agreement be treated as being effective or having been given if
delivered personally, if sent by
15
mail, when received, or, if sent by facsimile, upon the sender's receipt of
confirmation from its facsimile machine of transmission.
(c) Survival of Representations and Warranties. All representations
and warranties and agreements contained herein shall survive the execution and
delivery of this Agreement, any investigation at any time made by the Investor
or on its behalf, and the sale and purchase of the Securities and payment
therefor.
(d) Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and do not constitute a part of
this Agreement.
(e) Choice of Law. The laws of the state of Delaware shall govern
the validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties hereunder. Nothing herein
shall affect the right of any Investor to serve process in any manner permitted
by law.
(f) Counterparts. This Agreement may be executed at different times
and in two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
(g) Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto, whether so
expressed or not, and, in particular, shall inure to the benefit of and be
enforceable by the holder or holders from time to time of any of the Securities.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
(h) Entire Agreement. This Agreement, including and incorporating
all Exhibits and Schedules hereto, constitutes and contains the entire agreement
and understanding of the parties regarding the subject matter of this Agreement
and supersedes any and all prior negotiations, correspondence, understandings
and agreements, written or oral, among the parties with respect to the subject
matter hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date indicated
above.
VENTURIAN CORP.
By: ____________________________________
Its: ____________________________________
QUARTERDECK PUBLIC EQUITIES, LLC
By: Quarterdeck Equity Partners, Inc.
By: _____________________________
Xxx X. Xxxxxx,
Chief Executive Officer
Tax Identification Number: _____________
With respect to the condition contained in Section 6(d), the undersigned hereby
agrees to enter into an amendment to that certain agreement, dated June 6, 1998,
as provided in Section 6(d) hereof.
QUARTERDECK INVESTMENT PARTNERS, INC.
By:_________________________________
Its:_________________________________
