SHARE PURCHASE AGREEMENT
EXHIBIT
10.2
This
Share Purchase Agreement (this “Agreement”)
is
dated as of June 25, 2008 between Document Security Systems, Inc., a New York
corporation (the “Company”),
and
Xxxxxx Invesco Inc. (“Purchaser”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities
Act”),
the
Company desires to issue and sell to Purchaser, and Purchaser desires to
purchase from the Company, certain securities of the Company as more fully
described in this Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and Purchaser agree as
follows:
ARTICLE
I
DEFINITIONS
1.1
Definitions.
In
addition to the terms defined elsewhere in this Agreement, the following terms
have the meanings indicated:
“Affiliate”
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such
terms are used in and construed under Rule 144 under the Securities Act.
“Business
Day”
means
any day other than Saturday, Sunday or other day on which commercial banks
in
The City of New York are authorized or required by law to remain
closed.
“Closing”
means
the closing of the purchase and sale of the Shares pursuant to Section
2.1.
“Closing
Date”
means
the date of the Closing.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the common stock of the Company, par value $.02 per share.
“Convertible
Securities”
means
any stock or securities (other than Options) convertible into or exercisable
or
exchangeable for Common Stock.
“Effective
Date”
means
the date that the Registration Statement is first declared effective by the
Commission.
“Eligible
Market”
means
any of the New York Stock Exchange, the American Stock Exchange, the NASDAQ
National Market or the NASDAQ SmallCap Market.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“Losses”
means
any and all losses, claims, damages, liabilities, settlement costs and expenses,
including, without limitation, costs of preparation and reasonable attorneys’
fees, but excluding any consequential losses, including lost
profits.
“Options”
means
any rights, warrants or options to subscribe for or purchase Common Stock or
Convertible Securities.
“Person”
means
any individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or any court
or
other federal, state, local or other governmental authority or other entity
of
any kind.
“Proceeding”
means an
action, claim, suit, investigation or proceeding (including, without limitation,
an investigation or partial proceeding, such as a deposition), whether commenced
or threatened.
“Prospectus”
means
the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by the Registration Statement,
and
all other amendments and supplements to the Prospectus including post effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
“Registrable
Securities”
means
any Common Stock issued or issuable pursuant to this Agreement, together with
any securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect to the
foregoing.
“Registration
Statement”
means
each registration statement required to be filed under Article
VI,
including (in each case) the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference
or
deemed to be incorporated by reference in such registration
statement.
“Rule
144,” “Rule
415,”
and
“Rule
424”
means
Rule 144, Rule 415 and Rule 424, respectively, promulgated by the Commission
pursuant to the Securities Act, as such Rules may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
“Trading
Day”
means
(a) any day on which the Common Stock is listed or quoted and traded on its
primary Trading Market, or (b) if the Common Stock is not then listed or quoted
and traded on any Eligible Market, then a day on which trading occurs on the
OTC
Bulletin Board (or any successor thereto), or (c) if trading ceases to occur
on
the OTC Bulletin Board (or any successor thereto), any Business
Day.
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“Trading
Market”
means
the NASDAQ SmallCap Market or any other Eligible Market, or any national
securities exchange, market or trading or quotation facility on which the Common
Stock is then listed or quoted.
“Transfer
Agent Instructions”
means
the transfer agent instructions, executed by the Company and delivered to and
acknowledged in writing by the Company’s transfer agent.
ARTICLE
II
PURCHASE
AND SALE
2.1
Closing.
Subject
to the terms and conditions set forth in this Agreement, at the Closing the
Company shall issue and sell to Purchaser, and Purchaser shall purchase from
the
Company, Three Hundred and Fifty Thousand (350,000) shares of Common Stock
(the
“Shares”)
at a
per Share purchase price of Four Dollars ($4.00), for total consideration of
One
Million Four Hundred Thousand Dollars ($1,400,000) (the “Purchase
Price”).
The
Closing shall take place at the offices of the Company or such other mutually
acceptable location, as soon as possible following satisfaction or waiver of
each of the conditions set forth in Article
V
hereof
or at such other time as the parties may agree.
2.2
Payment
of the Purchase Price.
Purchaser shall pay the Purchase Price for the Shares in the following
manner:
(a)
Initial
Purchase Price Payment.
Upon
the execution of this Agreement, Purchaser shall deliver to the Company an
amount equal to One Hundred Thousand Dollars ($100,000) (the “Initial Purchase
Price”),
in
immediately available funds, by check or wire transfer to an account designated
in writing to Purchaser by the Company.
(b)
Installment
Purchase Price Payment; Prepayment.
Purchaser shall pay the remainder of the Purchase Price, which shall equal
One
Million Three Hundred Thousand Dollars ($1,300,000), as set forth in this clause
(b). On each of the 6-month, 12-month, 18-month and 24-month anniversary of
the
date hereof, Purchaser shall deliver to the Company an amount equal to Three
Hundred Thousand Dollars ($300,000), Three Hundred Thousand Dollars ($300,000),
Three Hundred Thousand Dollars ($300,000) and Four Hundred Thousand Dollars
($400,000) (each, an “Installment Purchase
Price Payment”),
in
immediately available funds, by check or wire transfer to an account designated
in writing to Purchaser by the Company. Notwithstanding the foregoing, Purchaser
shall have the right to prepay any Installment Purchase Price Payment;
provided
that
such prepayment must be for one or more full Installment Purchase Price Payments
of Four Hundred Thousand Dollars ($400,000) or Three Hundred Thousand Dollars
($300,000) each. The Company’s only recourse for non-payment of an Installment
Purchase Price Payment shall be to terminate this Agreement pursuant to Section
7.1.
(c)
Restrictions
on Transfer.
Notwithstanding anything to the contrary contained herein, Purchaser may not,
directly or indirectly, sell, assign, pledge, hypothecate or otherwise transfer
any or all of the Shares, or offer to sell, assign, pledge, hypothecate or
otherwise transfer any or all of the Shares, prior to (the “Restricted
Period”)
(i)
one year after the Purchase Price being paid in full to the Company, or (ii)
the
one-year anniversary of a Payment Failure Termination Event.
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2.3
Additional
Listing Application with AMEX; Delivery of Shares.
Promptly after the Closing, the Company shall file all such necessary documents
with the American Stock Exchange to authorize the listing of the Shares on
the
American Stock Exchange, if such documents had not been filed prior to the
Closing. Promptly after the Company has received the approval from the American
Stock Exchange for the listing of the Shares, but in no event prior to the
Closing, the Company shall deliver or cause to be issued in the name of
Purchaser one or more stock certificates evidencing the Shares, registered
in
the name of Purchaser; provided, however, that until the expiration of the
Restricted Period (a) all such certificates shall be held by the Company, and
(b) Purchaser shall not have any right to vote on any matter as a result of
ownership of the Shares, and if Purchaser is deemed by operation of law or
otherwise to have such right to vote then Purchaser shall vote such Shares
as
instructed in writing by the Company or a designee of the Company.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
3.1
Representations
and Warranties of the Company.
The
Company hereby represents and warrants to Purchaser as follows:
(a)
Organization;
Authority.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of New York, with the requisite corporate power
and
authority to enter into and to consummate the transactions contemplated by
this
Agreement and otherwise to carry out its obligations hereunder and thereunder.
The issuance by the Company of the Shares to Purchaser hereunder has been duly
authorized by all necessary action on the part of the Company. This Agreement
has been duly executed and delivered by the Company and constitutes the valid
and binding obligation of the Company, enforceable against it in accordance
with
its terms.
(b)
No
Conflicts.
The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby do not
and
will (i) not conflict with or violate any provision of the Company’s
organizational or charter documents or (ii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction
of
any court or governmental authority to which the Company is subject.
(c) Status
of Shares.
The
Shares, when issued to Purchaser pursuant to this Agreement, will be validly
issued, fully paid and non-assessable and will have the rights provided in
the
Company’s certificate of incorporation. Neither the Company nor any Person
acting on its behalf has, either directly or indirectly, sold or offered for
sale any of the Shares, so as to bring the issuance or sale of the Shares within
the provisions of Section 5 of the Securities Act.
(d)
Acknowledgment
Regarding Purchaser’s Purchase of Shares.
The
Company acknowledges and agrees that Purchaser is acting solely in the capacity
of an arm’s length purchaser with respect to this Agreement and the transactions
contemplated hereby.
3.2
Representations
and Warranties of Purchaser.
Purchaser hereby represents and warrants to the Company as follows:
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(a)
Organization;
Authority.
Purchaser is an entity duly organized, validly existing and in good standing
under the laws of the state of its incorporation with the requisite corporate
or
partnership power and authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry out its obligations
hereunder and thereunder. The purchase by Purchaser of the Shares hereunder
has
been duly authorized by all necessary action on the part of Purchaser. This
Agreement has been duly executed and delivered by Purchaser and constitutes
the
valid and binding obligation of Purchaser, enforceable against it in accordance
with its terms.
(b)
No
Conflicts.
The
execution, delivery and performance of this Agreement by Purchaser and the
consummation by Purchaser of the transactions contemplated hereby do not and
will (i) not conflict with or violate any provision of Purchaser’s
organizational or charter documents or (ii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction
of
any court or governmental authority to which Purchaser is subject.
(c)
Investment
Intent.
Purchaser is acquiring the Shares as principal for its own account for
investment purposes only and not with a view to or for distributing or reselling
the Shares or any part thereof, without prejudice.
(d)
Purchaser
Status.
At the
time Purchaser was offered the Shares, it was, and at the date hereof it is,
an
“accredited investor” as defined in Rule 501(a) under the Securities
Act.
(e)
Experience
of Purchaser.
Purchaser, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters
so as
to be capable of evaluating the merits and risks of the prospective investment
in the Shares, and has so evaluated the merits and risks of such investment.
Purchaser is able to bear the economic risk of an investment in the Shares
and,
at the present time, is able to afford a complete loss of such
investment.
(f)
Information.
Purchaser has requested, received, reviewed and considered all information
it
deemed relevant in making an informed decision to purchase the Shares. Purchaser
understands that its acquisition of the Shares has not been registered under
the
Securities Act or registered or qualified under any state securities law in
reliance on specific exemptions therefrom, which exemptions may depend upon,
among other things, the bona fide nature of Purchaser’s investment intent as
expressed herein.
(g)
Affiliates.
Purchaser is not an Affiliate of the Company.
(h)
Consents.
There
are no consents required to be obtained by Purchaser in order
to
consummate the transactions contemplated hereby.
ARTICLE
IV
OTHER
AGREEMENTS OF THE PARTIES
4.1
Transfer
Restrictions.
(a)
The
Shares may only be disposed of, and Purchaser agrees to only transfer Shares,
pursuant to an effective registration statement under the Securities Act or
pursuant to an
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available
exemption from the registration requirements of the Securities Act, and in
compliance with any applicable state securities laws. In connection with any
transfer of Shares other than pursuant to an effective registration statement
or
to the Company, except as otherwise set forth herein, the Company may require
the transferor to provide to the Company an opinion of counsel selected by
the
transferor and reasonably acceptable to the Company, the form and substance
of
which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration under the Securities Act.
(b)
Purchaser
agrees to the imprinting, so long as is required by this Section
4.1(a),
of the
following legend on any certificate evidencing Shares or any portion thereof:
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS OR BLUE SKY LAWS.
Certificates
evidencing Shares shall not be required to contain such legend (i) while a
Registration Statement covering the resale of such Shares is effective under
the
Securities Act, (ii) following any sale of such Shares pursuant to Rule 144,
(iii) if such Shares are eligible for sale under Rule 144(d), or (iv) if such
legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the Staff
of
the Commission).
4.2
Integration.
The
Company shall not, and shall use its commercially reasonable best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined
in
Section 2 of the Securities Act) that would be integrated with the offer or
sale
of the Shares in a manner that would require the registration under the
Securities Act of the sale of the Shares to Purchaser or that would be
integrated with the offer or sale of the Shares for purposes of the rules and
regulations of any Trading Market.
4.3
Trading
Restrictions.
Purchaser agrees that beginning on the date hereof, it will not enter into
any
Short Sales. For purposes of this Section
4.4,
a
“Short
Sale”
by
Purchaser means a sale of Common Stock that is marked as a short sale or has
the
effect of a short sale and that is executed at a time when Purchaser has no
equivalent offsetting long position in the Common Stock. For purposes of
determining whether Purchaser has an equivalent offsetting long position in
the
Common Stock, all Common Stock and all Common Stock that would be issuable
upon
conversion or exercise in full of all Options then held by Purchaser (assuming
that such Options were then fully convertible or exercisable, notwithstanding
any provisions to the contrary, and giving effect to any conversion or exercise
price adjustments scheduled to take effect in the future) shall not be deemed
to
be held long by Purchaser.
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4.4
Payment
for Shares; Recourse for Non-Payment.
Purchaser shall pay each Installment Purchase Price Payment as set forth in
Section
2.2(b).
In the
event Purchaser fails to pay any Installment Purchase Price Payment in full
pursuant to the terms hereof, and such failure to pay in full continues for
more
than ten (10) days following receipt by Purchaser from the Company of notice
of
such failure to pay (a “Payment
Failure Termination Event”),
the
Company shall terminate this Agreement in accordance with the terms of
Section
7.1
and
Purchaser shall have no right or obligation to make any additional Installment
Purchase Price Payments.
ARTICLE
V
CONDITIONS
5.1
Conditions
Precedent to the Obligations of Purchaser.
The
obligation of Purchaser to purchase the Shares at the Closing is subject to
the
satisfaction, or waiver by Purchaser, at or before the Closing, of each of
the
following conditions:
(a)
Representations
and Warranties.
The
representations and warranties of the Company contained herein shall be true
and
correct in all material respects as of the date when made and as of the Closing
as though made on and as of such date;
(b)
Performance.
The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by it at or prior to the Closing;
and
(c)
No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits or makes illegal the
consummation of any of the transactions contemplated by this
Agreement.
5.2
Conditions
Precedent to the Obligations of the Company.
The
obligation of the Company to sell the Shares at the Closing is subject to the
satisfaction or waiver by the Company, at or before the Closing, of each of
the
following conditions:
(a)
Representations
and Warranties.
The
representations and warranties of Purchaser contained herein shall be true
and
correct in all material respects as of the date when made and as of the Closing
Date as though made on and as of such date;
(b)
Performance.
Purchaser shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by Purchaser at or prior to the Closing,
including, but not limited to, payment in full of the Purchase
Price.
(c)
No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any
of
the transactions contemplated by this Agreement; and
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ARTICLE
VI
REGISTRATION
RIGHTS
6.1
Registration.
(a)
Purchaser
shall have the right to request that the Company, and upon such request the
Company shall, prepare and file with the Commission a Registration Statement
covering the resale of all Registrable Securities for an offering to be made
on
a continuous basis pursuant to Rule 415, (i) no earlier than one hundred and
twenty (120) days following the payment by Purchaser of the entire Purchase
Price, or (ii) no earlier than two hundred and seventy (270) days following
a
Payment Failure Termination Event. The Registration Statement shall be on Form
S-3 (except if the Company is not then eligible to register for resale the
Registrable Securities on Form S-3, in which case such registration shall be
on
another appropriate form in accordance herewith).
(b)
The
Company shall use commercially reasonable efforts to cause the Registration
Statement to be declared effective by the Commission as promptly as reasonably
practicable after the filing thereof, and to keep the Registration Statement
continuously effective under the Securities Act until the second anniversary
of
the Effective Date or such earlier date when all Registrable Securities covered
by such Registration Statement have been sold pursuant thereto (the “Effectiveness
Period”).
(c)
The
Company shall notify Purchaser in writing promptly after receiving notification
from the Commission that the Registration Statement has been declared effective.
(d)
Notwithstanding
any provision in this Agreement to the contrary, following the 30th
Trading
Day following the Effective Date, the Company’s obligations hereunder to file,
achieve effectiveness of, or maintain effectiveness of a registration statement
continuously in effect under the Securities Act shall be suspended and all
penalties and other effects thereof hereunder shall not be applicable during
any
period (each such period, a “Suspension
Period”)
if, in
the good faith judgment of the Company’s Board of Directors, it is advisable to
suspend the use of the Prospectus included therein for a discrete period of
time
due to pending material corporate developments or similar material events that
have not yet been publicly disclosed and as to which the Company believes that
public disclosure would be prejudicial to the Company or its stockholders;
provided,
that
the Registration Statement shall be suspended for a total of no more than two
times or for a period of more than, in the aggregate, thirty (30) days in any
twelve (12) month period. Immediately
after the end of any Suspension Period under this Section
6.1(d),
the
Company shall take commercially reasonable actions necessary to restore the
effectiveness of the applicable Registration Statement and the ability of
Purchaser to publicly resell its Registrable Securities pursuant to such
effective Registration Statement.
6.2
Registration
Procedures.
In
connection with the Company’s registration obligations hereunder, the Company
and Purchaser (in respect of Section
6.2(k))
shall:
(a)
(i)
Prepare and file with the Commission such amendments, including post-effective
amendments, to each Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep the Registration Statement
continuously
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effective
as to the applicable Registrable Securities for the Effectiveness Period and
prepare and file with the Commission such additional Registration Statements
in
order to register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended or supplemented
by
any required Prospectus supplement, and as so supplemented or amended to be
filed pursuant to Rule 424; and (iii) respond as promptly as reasonably possible
to any comments received from the Commission with respect to the Registration
Statement or any amendment thereto.
(b)
Use
commercially reasonable efforts to avoid the issuance of or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of any Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, as soon as possible.
(c)
Promptly
deliver to Purchaser, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as Purchaser may reasonably request. The Company hereby
consents to the use of such Prospectus and each amendment or supplement thereto
by Purchaser in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement
thereto.
(d)
Prior
to
any public offering of Registrable Securities, use commercially reasonable
efforts to register or qualify or cooperate with Purchaser in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States
as
Purchaser reasonably requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness
Period.
(e)
Reasonably
cooperate with any reasonable due diligence investigation undertaken by
Purchaser in connection with the sale of Registrable Securities, including,
without limitation, by making available any documents and information;
provided
that the
Company will not deliver or make available to Purchaser material, nonpublic
information unless Purchaser specifically requests in advance to receive
material, nonpublic information in writing.
(f)
Complete
a questionnaire (in customary form) and to provide such additional information
and assistance as shall be reasonably requested by the Company in order to
effect registration of the Shares to be purchased by Purchaser
hereunder.
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6.3
Registration
Expenses.
(a)
If
Purchaser shall have paid the Purchase Price to the Company in full prior to
the
request for the Company to file a Registration Statement as provided in Section
6.1(a), the Company shall pay (or reimburse Purchaser for) all fees and expenses
incident to the performance of or compliance with this Agreement by the Company,
including without limitation (collectively, “Registration
Expenses”)
(a)
all registration and filing fees and expenses, including without limitation
those related to filings with the Commission, any Trading Market and in
connection with applicable state securities or Blue Sky laws, (b) printing
expenses (including without limitation expenses of printing certificates for
Registrable Securities and of printing prospectuses reasonably requested by
Purchaser), (c) messenger, telephone and delivery expenses, (d) fees and
disbursements of counsel for the Company, (e) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, and (f) all listing fees to be
paid
by the Company to the Trading Market.
(b)
If
a
Payment Failure Termination Event shall have occurred and shall not have been
cured, Purchaser shall pay (or reimburse the Company for) all Registration
Expenses.
6.4
Indemnification
(a)
Indemnification
by the Company.
The
Company shall, notwithstanding any termination of this Agreement, indemnify
and
hold harmless Purchaser, the officers, directors, partners, members, agents,
Affiliated investment advisors and employees of Purchaser, each Person who
controls Purchaser (within the meaning of Section 15 of the Securities Act
or
Section 20 of the Exchange Act) and the officers, directors, partners, members,
agents and employees of each such controlling Person, to the fullest extent
permitted by applicable law, from and against any and all Losses, as incurred,
arising out of or relating to any untrue or alleged untrue statement of a
material fact contained in the Registration Statement, any Prospectus or any
form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus
or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that such
untrue statements, alleged untrue statements, omissions or alleged omissions
are
based solely upon information regarding Purchaser furnished in writing to the
Company by Purchaser expressly for use therein, or to the extent that such
information relates to Purchaser or Purchaser’s proposed method of distribution
of Registrable Securities and was reviewed and expressly approved in writing
by
Purchaser expressly for use in the Registration Statement, such Prospectus
or
such form of Prospectus or in any amendment or supplement thereto. The Company
shall notify Purchaser promptly of the institution, threat or assertion of
any
Proceeding of which the Company is aware in connection with the transactions
contemplated by this Agreement.
(b)
Indemnification
by Purchaser.
Purchaser shall indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company (within
the
meaning of Section 15 of the Securities Act and Section 20 of the
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Exchange
Act), and the directors, officers, agents or employees of such controlling
Persons, to the fullest extent permitted by applicable law, from and against
all
Losses arising solely out of any untrue statement of a material fact contained
in the Registration Statement, any Prospectus, or any form of prospectus, or
in
any amendment or supplement thereto, or arising solely out of any omission
of a
material fact required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of prospectus or supplement
thereto, in the light of the circumstances under which they were made) not
misleading to the extent, but only to the extent, that such untrue statement
or
omission is contained in any information so furnished in writing by Purchaser
to
the Company specifically for inclusion in such Registration Statement or such
Prospectus or to the extent that such untrue statements or omissions are based
upon information regarding Purchaser furnished in writing to the Company by
Purchaser expressly for use therein, or to the extent that such information
relates to Purchaser or Purchaser’s proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by
Purchaser expressly for use in the Registration Statement, such Prospectus
or
such form of Prospectus or in any amendment or supplement thereto.
(c)
Conduct
of Indemnification Proceedings.
If any
Proceeding shall be brought or asserted against any Person entitled to indemnity
hereunder (an “Indemnified
Party”),
such
Indemnified Party shall promptly notify the Person from whom indemnity is sought
(the “Indemnifying
Party”)
in
writing, and the Indemnifying Party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified Party
and
the payment of all reasonable fees and expenses incurred in connection with
defense thereof; provided,
that
the failure of any Indemnified Party to give such notice shall not relieve
the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the reasonable fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (i) the Indemnifying Party has agreed in writing to pay
such
fees and expenses; or (ii) the Indemnifying Party shall have failed promptly
to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (iii) the
named parties to any such Proceeding (including any impleaded parties) include
both such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at
the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense
of
the Indemnifying Party, provided, the Indemnifying Party shall only be required
to pay the reasonable fees and expenses of one separate counsel). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of
the
Indemnified Party, effect any settlement of any pending Proceeding in respect
of
which any Indemnified
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Party
is
a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter
of
such Proceeding.
6.5
Dispositions.
Purchaser agrees that it will comply with the prospectus delivery requirements
of the Securities Act as applicable to it in connection with sales of
Registrable Securities pursuant to the Registration Statement. The Company
may
provide appropriate stop orders to enforce the provisions of this
paragraph.
ARTICLE
VII
MISCELLANEOUS
7.1
Termination.
This
Agreement may be terminated as follows:
(a)
By
the
Company or Purchaser, by mutual agreement of the parties;
provided
that no
such termination will affect the right of any party to xxx for any breach by
the
other party; or
(b)
By
the
Company, in the event of a Payment Failure Termination Event. In the event
the
Company terminates this Agreement pursuant to this clause (b), (i) the Company
shall have no obligations of any kind to Purchaser or any other Person
hereunder, (ii) the Company shall retain all amounts paid to it by Purchaser
prior to such termination, (iii) Purchaser shall not be entitled to receive
or
keep any Shares or other consideration from the Company hereunder; provided,
however, that Purchaser shall be entitled to ownership and possession of such
number of Shares equal to the amount of the Purchase Price actually received
by
the Company divided by $4.00 and the Company shall deliver such Shares to
Purchaser promptly after the Company terminates this Agreement pursuant to
this
Section 7.1(b), and (iv) Purchaser shall have no further obligation to pay
any
Installment Purchase Price Payments to the Company hereunder.
7.2
Fees
and Expenses.
Except
as expressly set forth in this Agreement to the contrary, each party shall
pay
the fees and expenses of its advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
Purchaser shall pay all transfer agent fees, stamp taxes and other taxes and
duties levied in connection with the issuance of the Shares.
7.3
Entire
Agreement.
This
Agreement, together with any Schedules hereto, contain the entire understanding
of the parties with respect to the subject matter hereof and supersede all
prior
agreements and understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits
and
schedules. At or after the Closing, and without further consideration, the
Company and Purchaser will execute and deliver to the other party such further
documents as may be reasonably requested in order to give practical effect
to
the intention of the parties under this Agreement.
7.4
Notices.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified in this Section
prior to 5:00 p.m. (local time of the
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recipient)
on a Business Day, (b) the next Business Day after the date of transmission,
if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Business Day or later than
5:00
p.m. (local time of the recipient) on any Business Day, (c) the Business Day
following the date of deposit with a nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required
to be given. The addresses and facsimile numbers for such notices and
communications are as follows (or such other address or facsimile number as
may
be designated in writing hereafter, in the same manner, by any such
Person):
If
to the
Company:
00
Xxxx
Xxxx Xxxxxx
Xxxxx
0000
Xxxxxxxxx,
XX 00000
Facsimile
No: (000)
000-0000
Attn:
Chief Executive Officer
With
a
copy to:
00
Xxxx
Xxxx Xxxxxx
Xxxxx
0000
Xxxxxxxxx,
XX 00000
Facsimile
No: (000)
000-0000
Attn:
General Counsel
If
to
Purchaser:
00
Xxxxxxx Xxxx
Xxxxxxx,
XX 00000
Facsimile
No.: 000-000-0000
Attn:
Xx.
Xxxx
With
a
copy to:
0000
Xxxxx Xxxxx Xxxxxx
Xxxxx
000
Xxxxxxxxx,
XX 00000
Facsimile
No.: 000-000-0000
Attn:
Xxxx Xxxx
7.5
Amendments;
Waivers.
No
provision of this Agreement may be waived or amended except in a written
instrument signed, in the case of an amendment, by the Company and Purchaser
or,
in the case of a waiver, by the party against whom enforcement of any such
waiver is sought. No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right.
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7.6
Construction.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
7.7
Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of Purchaser.
7.8
No
Third-Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except that each Related
Person is an intended third party beneficiary of Section
4.8
and each
Indemnified Party is an intended third party beneficiary of Section
6.4
and (in
each case) may enforce the provisions of such Sections directly against the
parties with obligations thereunder.
7.9
Governing
Law; Venue; Waiver Of Jury Trial.
ALL
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK. THE COMPANY AND PURCHASER HEREBY
IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS
SITTING IN THE CITY OF ROCHESTER, COUNTY OF MONROE FOR THE ADJUDICATION OF
ANY
DISPUTE BROUGHT BY THE COMPANY OR PURCHASER HEREUNDER, IN CONNECTION HEREWITH
OR
WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN, AND HEREBY
IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING
BROUGHT BY THE COMPANY OR PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT
TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING
IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS
AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING
BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE COMPANY AND PURCHASER HEREBY WAIVE ALL RIGHTS TO A TRIAL
BY JURY.
7.10
Survival.
The
representations, warranties, agreements and covenants contained herein shall
survive the Closing and the delivery of the Shares, as applicable.
7.11
Execution.
This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the
other party, it
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14 -
being
understood that both parties need not sign the same counterpart. In the event
that any signature is delivered by facsimile transmission, such signature shall
create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such facsimile
signature page were an original thereof.
7.12
Severability.
If any
provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that is
a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
7.13
Replacement
of Shares.
If any
certificate or instrument evidencing any Shares is mutilated, lost, stolen
or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable indemnity, if requested. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable
third-party costs associated with the issuance of such replacement
Shares.
7.14
Adjustments
in Share Numbers and Prices.
In the
event of any stock split, subdivision, dividend or distribution payable in
shares of Common Stock (or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly shares of Common
Stock), combination or other similar recapitalization or event occurring after
the date hereof, each reference herein to a number of shares or a price per
share shall be amended to appropriately account for such event.
[SIGNATURE
PAGE TO FOLLOW]
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IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
DOCUMENT
SECURITY SYSTEMS, INC.
By:
/s/
Xxxxxxx Xxxxx
Name:
Xxxxxxx
Xxxxx
Title:
Chief
Executive Officer
XXXXXX
INVESCO INC.
By:
/s/
Xxxxxx Xxxx
Name:
Xxxxxx
Xxxx
Title:
President
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