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Exhibit 99.2
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT (this "AGREEMENT") is made and shall be
effective as of the 14th day of May, 1999, by and among XL VISION, INC., a
Delaware corporation (the "COMPANY"), SAFEGUARD 98 CAPITAL, L.P., a Delaware
limited partnership ("SAFEGUARD"), XXXXXXXX PARTNERS, L.P., a Delaware limited
partnership ("XXXXXXXX"), and each of the affiliates of Xxxxxxxx set forth on
Exhibit A hereto (all of such affiliates, together with Xxxxxxxx and their
respective transferees, are collectively referred to herein as the "XXXXXXXX
GROUP"). Unless otherwise provided in this Agreement, capitalized terms used
herein shall have the meanings ascribed to them in Section 8.1 hereof.
BACKGROUND
The Company desires to issue certain Convertible Subordinated Notes
due May 14, 2004, in the aggregate principal amount of $20,000,000, as more
particularly described in Section 1.1 of this Agreement.
Safeguard and each member of the Xxxxxxxx Group desire to purchase,
and hereby subscribe for, a Note in the principal amount set forth next to its
name on Schedule 1 hereto, pursuant to the terms and conditions set forth in
this Agreement.
SECTION 1. SALE AND PURCHASE OF THE NOTES; CLOSING.
1.1 Sale of Notes.
(a) The Company shall authorize the issuance of its
Convertible Subordinated Notes due May 14, 2004, in the aggregate principal
amount of $20,000,000 (individually a "NOTE" and collectively the "NOTES"). Each
Note originally issued hereunder will be dated the date of its issuance, will
mature on May 14, 2004, will bear interest at the rate of 6% per annum from the
date of issuance, payable at maturity, and will be subject to the other terms
and conditions set forth herein and in the form of Note attached hereto as
Exhibit B.
(b) Subject to the terms and conditions set forth herein, the
Company agrees to sell, issue and deliver to Safeguard and each member of the
Xxxxxxxx Group (each a "PURCHASER," and together the "PURCHASERS"), and each
Purchaser severally agrees to purchase from the Company, on the Closing Date (as
defined in Section 1.3), for the Purchase Price (as defined in Section 1.2), a
Note in the aggregate principal amount set forth next to its name on Schedule 1
hereto.
(c) The Note to be delivered to each Purchaser on the Closing
Date will be in typewritten form, and will be registered for each Purchaser's
account in the Purchaser's name, or such nominee name as shall be specified by
such Purchaser. The Company will bear all expenses arising in connection with
the preparation and issuance to the Purchasers of the Notes.
1.2 Purchase Price.
(a) The aggregate purchase price of the Notes to be issued and
sold to the Purchasers on the Closing Date shall be Twenty Million Dollars
(US$20,000,000) (the "PURCHASE PRICE").
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(b) The price for the Notes purchased by each Purchaser shall
be as set forth on Schedule 1 and shall be paid by wire transfer of immediately
available funds to an account designated by the Company.
(c) The Purchasers and the Company shall prepare and file
their respective Federal income tax returns in a manner which is consistent with
the allocation of the Purchase Price to the Notes as provided in this Agreement
and consistent with the treatment on the Federal income tax return of each other
party of matters related to such allocation.
1.3 Closing. The closing of the issuance and sale of the Notes to
the Purchasers hereunder shall be held at the offices of Safeguard located at
000 Xxx Xxxxxxxxx Xxxxxxxx, 000 Xxxxx Xxxx Drive, Xxxxx, Pennsylvania, on May
14, 1999, subject to notification of satisfaction (or waiver) of the conditions
to the Closing set forth in Sections 4 and 5 below, or such later date as is
mutually agreed upon by the Company and the Purchasers. As used herein,
"CLOSING" shall mean the closing of the issuance and sale of the Notes to the
Purchasers hereunder and the "CLOSING DATE" shall mean the date on which such
Closing takes place.
1.4 Nature of Purchasers' Obligations. In committing to purchase the
Notes hereunder, each Purchaser is contracting severally (and not jointly) to
purchase only the aggregate principal amount of Notes set forth next to its name
on Schedule 1.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Purchasers as
follows:
2.1 Organization and Standing of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite power and authority to own and
lease its properties and assets and to conduct its business as now conducted.
The Company is qualified to do business as a foreign corporation and is in good
standing in such states where the conduct of its business or its ownership or
leasing of property requires such qualification or where the failure to so
qualify would have a material adverse effect on the Company's financial
condition.
2.2 Authorization. The Company has all requisite power and authority
to execute and deliver this Agreement and to carry out the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by the Company have been duly authorized by all requisite corporate action, and
this Agreement has been duly executed and delivered by the Company and
constitutes its valid and binding obligation, enforceable against the Company in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, moratorium, reorganization and other similar laws
relating to or affecting the enforcement of creditors, rights generally, and
except that the availability of specific performance, injunctive relief or other
equitable remedies is subject to the discretion of the court before which any
such proceeding may be brought.
2.3 No Conflict with Law or Documents. The execution, delivery and
performance of this Agreement by the Company will not violate any provision of
law, any rule or regulation of any governmental authority, or any judgment,
decree or order of any court binding on the Company, and will not conflict with
or result in any breach of any of the terms, conditions or provisions of, or
constitute a default under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties, assets or
outstanding stock of the Company under its Certificate of Incorporation or
bylaws or any indenture, mortgage, lease, agreement or other instrument to which
the Company is a party or by which it or any of its properties is bound.
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2.4 Capitalization; Capital Stock; Affiliate Stock.
(a) As of the Closing, the Company will have an authorized
capitalization consisting of 10,000,000 shares of common stock, $.0l par value
("COMMON STOCK"). As of the Closing, 6,178,792 shares of Common Stock will be
issued and outstanding. All the outstanding shares of Common Stock of the
Company have been duly authorized, and are validly issued, fully paid and
non-assessable.
(b) There are no restrictions on the transfer of shares of
Common Stock other than those imposed by relevant federal and state securities
laws and as otherwise contemplated by this Agreement. Except as set forth on
Schedule 2.4(b) hereof, there are no agreements, written or oral,
understandings, trusts or other collaborative arrangements or understandings
concerning the voting or transfer of the Common Stock, or which obligate the
Company to effect the registration of any of its securities under the 1933 Act,
except as contemplated by this Agreement.
(c) The Company currently owns the number of shares of
Affiliate Stock (as defined in Section 8.1) set forth on Schedule 2.4(c) hereof,
free and clear of any and all liens and encumbrances of any nature whatsoever,
and all of such shares of Affiliate Stock are duly authorized, validly issued,
fully paid and non-assessable shares of each respective Affiliate. None of such
shares of Affiliate Stock owned by the Company are subject to any rights of
redemption, repurchase, rights of first refusal, preemptive rights or other
similar rights, whether contractual, statutory or otherwise, for the benefit of
any Person. There are no restrictions on the transfer of shares of Affiliate
Stock other than those imposed by relevant federal and state securities laws and
as otherwise contemplated by this Agreement. Except as set forth on Schedule
2.4(c) hereof, there are no agreements, understandings, trusts or other
collaborative arrangements or understandings concerning the voting or transfer
of the Affiliate Stock , or which obligate the Company to effect the
registration of any of its securities under the 1933 Act, except as contemplated
by this Agreement.
2.5 The Notes and Conversion Shares. The Notes, when issued and
delivered against payment therefor in accordance with this Agreement, will be
duly authorized and executed by the Company and will constitute valid and
legally binding obligations of the Company, enforceable in accordance with their
terms, except as such enforcement may be limited by bankruptcy, insolvency,
moratorium, reorganization and other similar laws relating to or affecting the
enforcement of creditors, rights generally, and except that the availability of
specific performance, injunctive relief or other equitable remedies is subject
to the discretion of the court before which any such proceeding may be brought.
The requisite number of shares of duly authorized and unissued Common Stock of
the Company have been, or will be, duly authorized and reserved for issuance
upon the conversion of the Notes in accordance with the terms of this Agreement,
and no further corporate action is, or will be, required for the valid issuance
of Common Stock of the Company upon the conversion of the Notes. The Company
owns (or will own), will continue to own, free and clear of any and all liens
and encumbrances of any nature whatsoever, and will not dispose of the requisite
number of shares of duly authorized and validly issued stock of each Conversion
Affiliate in order to satisfy any and all of the Company's obligations hereunder
with respect to the conversion of the Notes into shares of Affiliate Stock. The
Conversion Shares will, at the time of the Closing and thereafter, not be
subject to preemptive or similar rights of any person and, when issued against
payment therefor in accordance with the terms of this Agreement and the Notes,
will be duly and validly issued, fully paid and non-assessable.
2.6 Consents and Approvals. Except for filings under Federal and
applicable state securities laws, no permit, consent, approval or authorization
of, or declaration to or filing with, any governmental or regulatory authority
or other person, not made or obtained, is required in connection with the
execution or delivery of this Agreement by the Company, the offer, issuance,
sale or delivery of the
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Notes or Conversion Shares, or the carrying out by the Company of the other
transactions contemplated hereby.
2.7 Private Offering. The offer, issuance and delivery to the
Purchasers pursuant to the terms of this Agreement of the Notes and, assuming
compliance by the Purchasers with the terms of this Agreement and applicable
law, the Conversion Shares, are exempt from registration under the Securities
Act of 1933, as amended (the "1933 ACT"), and neither the registration of the
Notes nor the qualification of an indenture with respect thereto under the Trust
Indenture Act of 1939, as amended, is required in connection with such
transaction. Based on the representations of the Purchasers contained in Section
3, it is not necessary, under the circumstances contemplated by this Agreement,
to register the Notes or Conversion Shares under the 1933 Act. Neither this
Agreement nor any representation or warranty made by the Company in this
Agreement or in any document delivered to the Purchasers pursuant hereto contain
an untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements, in the light of the circumstances
under which they were made, not misleading.
2.8 Use of Proceeds. The proceeds from the sale of the Notes will be
used by the Company to satisfy, in part, certain indebtedness of the Company
owing to PNC Bank, N.A. and to Safeguard Scientifics, Inc., and for various
working capital needs.
2.9 Financial Statements. (a) The unaudited balance sheet and
related statements of income, cash flow and stockholders' equity of the Company
as at and for the year ended December 31, 1998, together with the notes thereto,
copies of which have heretofore been furnished to the Purchasers, present fairly
in all material respects the financial position of the Company at such dates and
the results of its operations for the periods then ended, in conformity with
generally accepted accounting principles, consistently applied ("GAAP").
(b) The unaudited balance sheet and related unaudited
statements of income, cash flows and stockholders' equity of the Company, as at
and for the three (3) months ended March 31, 1999, present fairly in all
material respects the financial position of the Company at such dates and the
results of its operations for the periods then ended, in conformity with GAAP.
(c) Since December 31, 1998, there has been no material
adverse change in the business, properties, assets or condition (financial or
otherwise) or prospects of the Company. The Company has not taken any steps, and
does not currently expect to take any steps, to seek protection pursuant to any
bankruptcy law, nor does the Company have any knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy proceedings.
2.10 Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its subsidiaries, threatened against or affecting the Company,
its subsidiaries or any Conversion Affiliate or their respective directors or
officers, or the Common Stock, wherein an unfavorable decision, ruling or
finding would (i) have a material adverse effect on the transactions
contemplated hereby, (ii) adversely affect the validity or enforceability of, or
the authority or ability of the Company to perform its obligations under, this
Agreement or any of the documents contemplated herein, or (iii) have a material
adverse effect on the business, operations, properties, financial condition,
results of operations or prospects of the Company and its subsidiaries taken as
a whole.
2.11 Intellectual Property Rights. The Company and its subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations,
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service names, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and rights (collectively,
"Intellectual Property Rights") necessary to conduct their respective businesses
as now conducted. None of the Intellectual Property Rights have expired or
terminated, or are expected to expire or terminate in the immediate future. The
Company and its subsidiaries do not have any knowledge of any event, fact or
circumstance relating to (i) any infringement by the Company or its subsidiaries
or any Conversion Affiliate of any trademarks, trade names, service marks,
service xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets or
other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others or (ii) any person or
entity now infringing any Intellectual Property Rights or other similar rights
or any such development of similar or identical trade secrets or technical
information owned or used by the Company or any of its subsidiaries or any
Conversion Affiliate and, there is no claim, action or proceeding being made or
brought against, or to the Company's knowledge, being threatened against, the
Company or its subsidiaries or any Conversion Affiliate regarding any
trademarks, trade names, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets or other similar rights of others, or
of any such development of similar or identical trade secrets or technical
information by others or (ii) any person or entity now infringing any
Intellectual Property Rights or other similar rights or any such development of
similar or identical trade secrets or other infringement; and the Company and
its subsidiaries are unaware of any facts or circumstances which might give rise
to any of the foregoing. The Company and its subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their Intellectual Property Rights.
2.12 Regulatory Permits. The Company and its subsidiaries and, to
the Company's knowledge the Conversion Affiliates, possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses, and
neither the Company nor any such subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit.
2.13 1934 Act Compliance. To the extent any Conversion Affiliate is
subject to the reporting requirements of the Securities and Exchange Act of
1934, as amended (the "1934 ACT"), such Conversion Affiliate has timely filed
any and all reports and documents required thereunder with the Securities and
Exchange Commission and such reports are correct and complete in all material
respects.
2.14 Disclosure. No representation by the Company in this Agreement,
nor any statement contained in any certificate, schedule, list or other writing
furnished or to be furnished by the Company to the Purchasers pursuant to this
Agreement (a) contains or shall contain any untrue statement of a material fact,
or (b) omits or shall omit to state a material fact necessary in order to make
the statements contained herein or therein not misleading.
SECTION 3. PURCHASERS' REPRESENTATIONS AND WARRANTIES.
The Purchasers understand that the Notes and Conversion Shares will
not be registered under the 1933 Act, on the grounds that the sales provided for
in this Agreement are exempt pursuant to Section 4(2) of the 1933 Act and/or
Regulation D promulgated under Section 3(b) and/or Section 4(2) of the 1933 Act,
and that the reliance of the Company on such exemptions is predicated in part on
the representations, warranties, covenants and acknowledgments of the Purchasers
set forth in this Section 3. The representations and warranties of the
Purchasers are made severally, and not jointly, and neither Purchaser is
responsible for the accuracy of the other's representations and warranties
hereunder.
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3.1 Pre-Existing Entity. Each Purchaser represents and warrants to
the Company that it was not organized for the specific purpose of purchasing the
Note subscribed for by it hereunder.
3.2 Principal Place of Business. Each Purchaser represents and
warrants to the Company that the address of its principal place of business is
as set forth on Schedule 1 hereto.
3.3 Purchase Without View to Distribute. Each Purchaser represents
and warrants to the Company that the Note to be purchased by such Purchaser is
being, and any Conversion Shares acquired upon exercise of such Notes will be,
acquired by such Purchaser for its own account, not as a nominee or agent, and
not with a view to resale or distribution within the meaning of the 1933 Act,
and the rules and regulations thereunder, and such Purchaser will not distribute
the Note or Conversion Shares in violation of the 1933 Act.
3.4 Restrictions on Transfer. Each Purchaser (i) acknowledges that
the Notes and Conversion Shares are not registered under the 1933 Act and that
the Note and Conversion Shares (if any) to be acquired by it must be held
indefinitely by it unless they are subsequently registered under the 1933 Act or
an exemption from registration is available, (ii) is aware that any routine
sales under Rule 144 of the Securities and Exchange Commission under the 1933
Act of Notes and Conversion Shares may be made only in limited amounts and in
accordance with the terms and conditions of that Rule and that in such cases
where the Rule is not applicable, compliance with some other registration
exemption will be required, (iii) is aware that Rule 144 is not presently
available for use by such Purchaser for resale of any such Notes and Conversion
Shares, and (iv) is aware that, except as provided in Section 6.8, the Company
is not obligated to register under the 1933 Act any sale, transfer or other
disposition of the Notes or Conversion Shares.
3.5 Access to Information. Each Purchaser confirms that the Company
has made available to it the opportunity to ask questions of and receive answers
from the Company's officers and directors concerning the terms and conditions of
the offering and the business and financial condition of the Company and the
Conversion Affiliates, and to acquire, and the Purchaser has received to its
satisfaction, such additional information, in addition to that set forth herein,
about the business and financial condition of the Company and the Conversion
Affiliates and the terms and conditions of the offering as it has requested.
3.6 Additional Representations of the Purchasers. (a) Each Purchaser
represents that (i) it is an "accredited investor" as such term is defined in
Rule 501 promulgated under the 1933 Act, (ii) its financial situation is such
that it can afford to bear the economic risk of holding the Notes and Conversion
Shares for an indefinite period of time and suffer complete loss of its
investment in the Notes and Conversion Shares, (iii) its knowledge and
experience in financial and business matters are such that it is capable of
evaluating the merits and risks of its purchase of the Notes and Conversion
Shares as contemplated by this Agreement, (iv) it understands that the Notes and
Conversion Shares are a speculative investment, (v) it understands and has taken
cognizance of all the risk factors related to the purchase of the Notes and
Conversion Shares, (vi) in making its decision to purchase the Notes and
Conversion Shares hereunder, the Purchaser has relied upon independent
investigations made by it and, to the extent believed by it to be appropriate,
the Purchaser's representatives, including the Purchaser's own professional tax
and other advisors, (vii) no representations have been made to the Purchaser
concerning the Notes, Conversion Shares or the Company except as set forth
herein, in the Schedules hereto and the Exhibits hereto or in a document
delivered pursuant hereto or thereto, (viii) the purchase of the Notes and
Conversion Shares by it has been duly and properly authorized and this Agreement
has been duly executed by it or on its behalf; (ix) the purchase of Notes and
Conversion Shares does not violate its charter, Bylaws or any law, regulation or
court order applicable to it; and (x) the purchase of Notes and
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Conversion Shares does not impose any penalty or other onerous condition on such
Purchaser under or pursuant to any applicable law or governmental regulation.
3.7 Blue Sky Requirements. Safeguard represents and warrants to the
Company that it is an "institutional investor" within the meaning of the
Pennsylvania Securities Act of 1972 and the regulations promulgated thereunder.
SECTION 4. CONDITIONS PRECEDENT TO PURCHASERS' OBLIGATIONS.
Each Purchaser's obligation to purchase and make payment for the
Note subscribed for hereunder by it on the Closing Date is subject, at its
option, to the satisfaction of each of the following conditions:
4.1 Proceedings and Certain Documents. All proceedings to be taken
in connection with the transactions contemplated by this Agreement to be
consummated on or prior to the Closing Date, and all documents incident thereto,
shall be reasonably satisfactory in form and substance to each Purchaser.
4.2 Representations and Warranties. On the Closing Date, the
representations and warranties contained in Section 2 hereof shall be true and
correct in all material respects with the same effect as though made on and as
of the Closing Date.
4.3 Performance. All the covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the Closing Date shall have been performed or complied with in all
material respects.
4.4 Pledge Agreement.
(a) On or prior to the Closing Date, the Company shall have
entered into a certain Pledge Agreement in the form attached hereto as Exhibit C
with Safeguard, pursuant to which the Company shall pledge, assign and grant to
Safeguard, as agent for the Purchasers, a first priority lien on, and security
interest in and to, the Affiliate Stock and all additions, replacements and
substitutions thereto as security for the full and faithful performance of all
of Company's obligations to the Purchasers hereunder (the "PLEDGE AGREEMENT").
(b) Each Purchaser hereby irrevocably appoints and authorizes
Safeguard to serve as its agent under the Pledge Agreement for the purposes
described therein, and to take such action on its behalf and to exercise such
powers as are delegated to Safeguard thereunder. The duties of Safeguard under
the Pledge Agreement shall be mechanical and administrative in nature and it
shall not be deemed a fiduciary or trustee for any Purchaser. As agent under the
Pledge Agreement, Safeguard shall not be required to take any action or exercise
any discretion, but shall be required to act or refrain from acting (and shall
be fully protected in so acting or refraining) upon the election and
instructions made by holders of a majority in aggregate principal amount of the
Notes then outstanding, and such election and instructions shall be binding upon
all Purchasers. Notwithstanding the foregoing, upon the occurrence and
continuation of an Event of Default under Sections 12.1(a)(i) or 12.1(a)(ii) of
this Agreement, Safeguard shall be required, as agent under the Pledge
Agreement, to pursue the remedies set forth in Section 6 of the Pledge Agreement
upon the written request of any holder of a Note, in the manner described and
subject to the provisions of Section 12 of this Agreement. As agent under the
Pledge Agreement, neither Safeguard nor any of its officers, directors,
employees or agents shall be liable to any Purchaser for any action taken or
omitted to be taken by it or them under or in connection with the Pledge
Agreement, absent gross negligence or willful misconduct. Safeguard may resign
as agent at any
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time upon thirty (30) days prior written notice to the Purchasers, at which time
the Purchasers shall have the right to appoint a successor agent thereunder.
4.5 Consent of PNC Bank, N.A. On or prior to the Closing Date, the
Company shall have obtained from PNC Bank, N.A. (i) acknowledgement and consent
as to the transactions contemplated by this Agreement, and (ii) documentation
satisfactory to Purchasers with respect to the release of the Affiliate Stock of
ChromaVision as collateral securing certain existing indebtedness of the
Company.
4.6 Certified Copies. Each Purchaser shall have received such
certified copies or other copies of such documents as it may reasonably request.
4.7 No Proceedings or Litigation. No suit, action, or other
proceeding seeking to restrain, prevent or change the transactions contemplated
hereby or otherwise questioning the validity or legality of such transactions
shall have been instituted and be pending.
4.8 Legal Opinion/Board Resolutions. Each Purchaser shall have
received an opinion of Company counsel dated as of the Closing Date, in form,
scope and substance reasonably satisfactory to such Purchaser and in
substantially the form set forth as Exhibit D hereto. In addition, Company shall
provide Purchaser with a copy of the resolutions of the Board of Directors of
the Company authorizing and approving the transactions contemplated by this
Agreement, certified as true and correct by the Secretary or other authorized
officer of the Company.
SECTION 5. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS.
The Company's obligation to sell the Notes subscribed for by the
Purchasers on the Closing Date is subject, at the Company's option, to the
satisfaction of each of the following conditions:
5.1 Representations and Warranties. On the Closing Date, the
representations and warranties contained in Section 3 hereof shall be true and
correct with the same effect as though made on and as of the Closing Date.
5.2 Performance. All the covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Purchasers
on or prior to the Closing Date shall have been performed or complied with in
all material respects.
5.3 No Proceeding or Litigation. No suit, action, or other
proceeding seeking to restrain, prevent or change the transactions contemplated
hereby or otherwise questioning the validity or legality of such transactions
shall have been instituted and be pending.
SECTION 6. COVENANTS OF THE COMPANY.
6.1 Rule 144. The Company covenants that (i) at all times after the
Company first becomes subject to the reporting requirements of Section 13 or
15(d) of the 1934 Act, the Company will use its best efforts to comply with the
current public information requirements of Rule 144(c)(1) under the 1933 Act;
(ii) if prior to becoming subject to such reporting requirements an
over-the-counter market develops for the Common Stock of the Company, the
Company will use its best efforts to make publicly available the information
required by Rule 144(c)(2); and (iii) at all such times as Rule 144 is available
for use by the holders of the Notes or Conversion Shares, the Company will
furnish each such holder upon request with all information within the possession
of the Company required for the preparation and filing of Form 144.
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6.2 Financial Statement; Budgets. Until such time as the Company is
required to register its Common Stock pursuant to Section 12(g) of the 1934 Act,
the Company shall furnish to the holders of the Notes and Conversion Shares of
Common Stock then outstanding within sixty (60) days of the end of each fiscal
year an unaudited, and within one hundred fifty (150) days of the end of each
fiscal year an audited, consolidated balance sheet, and related, audited
consolidated statements of income, cash flows, and stockholders', equity of the
Company and its subsidiaries as at the end of and for such fiscal year prepared
in accordance with generally accepted accounting principles, consistently
applied, and accompanied by the opinion of an independent public accountant, and
shall also furnish to the holders of the Notes and Conversion Shares of Common
Stock then outstanding (i) within forty-five (45) days after the end of each of
the first three fiscal quarters of each fiscal year, a consolidated balance
sheet and consolidated statements of income, cash flow and stockholders' equity
of the Company and its subsidiaries as at the end of and for such quarter and
the year to date and as at the end of and for the corresponding periods of the
preceding fiscal year; (ii) within thirty (30) days of the end of each calendar
month, a consolidated statement of income for such month and a consolidated
balance sheet as of the end of such month; (iii) no later than thirty (30) days
before the commencement of each fiscal year, capital and operating expense
budgets, projections of cash flows, balance sheets and profit and loss
projections, all for such fiscal year, all itemized in reasonable detail, and
any material revisions made in the budgets, projections or other information
furnished pursuant to this subsection within ten (10) days after adoption of
such revisions; and (iv) subject to the provision in Section 6.3 hereof, from
time to time such other information concerning the Company and its subsidiaries
as any of the holders of the Notes or Conversion Shares of Common Stock then
outstanding may reasonably request. The interim statements described in clauses
(i) and (ii) above shall be unaudited, but prepared in accordance with generally
accepted accounting principles, consistently applied, subject only to normal
year-end audit adjustments.
6.3 Inspection. Except to the extent prohibited by contracts with a
governmental agency or body and by law, from and after the Closing Date, the
Company shall permit each holder of the Notes or Conversion Shares of Common
Stock then outstanding and its representatives, at such holder's expense, to
visit and inspect the properties of the Company during normal business hours, to
examine its books of account and records, and to discuss its affairs, finances,
and accounts with its executive officers in each case for any purpose reasonably
related to such holder's investment in the Company; provided, however, that the
Company shall not be obligated to disclose any trade secret or other proprietary
information unless such holder signs a non-disclosure agreement reasonably
satisfactory to the Company.
6.4 Key-Man Insurance. The Company shall maintain in effect, for so
long as there are any Notes outstanding, not less than $4,000,000 of key-man
life insurance on the life of Xxxx Xxxxx, $3,000,000 of the proceeds of which
will be payable to the Company and $1,000,000 of the proceeds of which will be
payable to a designee of Xxxx Xxxxx. The Company represents and warrants to the
Purchasers that to the best of the Company's knowledge, Xxxx Xxxxx is insurable
at regular rates on the date hereof. The Company shall at all times retain all
the incidents of ownership of such insurance and shall not borrow upon or
otherwise impair its right to receive the proceeds of such insurance.
6.5 Payment of Expenses. The Company shall (i) pay the expenses
incurred by it in connection with the issuance and sale of the Notes and the
execution, delivery and performance of this Agreement; and (ii) pay the legal
fees incurred by the Purchasers in consulting with their respective counsel with
respect to the negotiation, preparation, execution, performance, amendment or
enforcement of this Agreement, whether or not the Closing shall have occurred.
6.6 Maintenance of Existence; Insurance. The Company will keep its
corporate existence, rights and franchises in full force and effect; will keep
its properties in good repair, working order and condition, normal wear and tear
excepted; and will maintain public liability, property damage
10
and workmen's compensation insurance and insurance on all its insurable property
against fire and other hazards with responsible insurance carriers to
substantially the same extent presently maintained.
6.7 Participation in Private Equity Offerings.
(a) The Purchasers shall have the right and option to
participate in the initial private offering of equity (e.g. common stock,
preferred stock, subordinated debt and other similar types of financing commonly
utilized in venture financing) securities made by any future Conversion
Affiliate from time to time in an aggregate amount not to exceed 500,000
common-equivalent shares per such Conversion Affiliate (the "PARTICIPATION
RIGHTS"). The Company covenants and agrees to provide for such rights in
connection with its creation and organization of all future Conversion
Affiliates. The Participation Rights of each Purchaser shall remain in full
force and effect for a period of five (5) years from the date of this Agreement
and shall survive any prepayment or conversion of the Notes hereunder.
(b) The Participation Rights shall (i) be issued by the
Conversion Affiliate in a written offering document delivered to each Purchaser,
(ii) remain exercisable for a period of no greater than twenty-one (21) days
after the commencement of the offering, and (iii) shall be transferable by the
holder thereof during such period to affiliates only. The Company shall bear all
costs and expenses of any Participation Rights offering other than the fees and
expenses of counsel for the Purchasers. The Participation Rights granted
hereunder shall be on the same terms and conditions as those issued with respect
to all other participants in such offerings.
(c) The Participation Rights afforded each respective
Purchaser hereunder shall bear the same ratio to the aggregate Participation
Rights offered to all Purchasers as the principal amount of Notes purchased by
such Purchaser pursuant to this Agreement (as set forth on Schedule 1 hereto)
bears to the aggregate principal amount of all Notes issued hereunder; provided,
however, that in the event either Purchaser elects not to exercise its
respective share of the Participation Rights granted hereunder in the entirety,
the other shall have the right to exercise all or any portion of such
unexercised Participation Rights. Each Purchaser agrees to promptly notify the
others in writing of its election not to exercise any or all of its
Participation Rights hereunder.
6.8 Registration Rights. Within thirty (30) days from the date of
this Agreement, the Company shall cause each Purchaser to be granted certain
demand and piggyback registration rights with respect to shares of Common Stock
of the Company, which rights may be exercised upon any conversion of the Notes
into Common Stock of the Company, on substantially the same, and not less
favorable in any material respect, terms and conditions as those granted
pursuant to that certain Registration Rights Agreement dated as of November 20,
1998, by and between Integrated Visions, Inc. and certain stockholders named
therein, a copy of which is attached hereto as Exhibit E (the "REGISTRATION
RIGHTS AGREEMENT"). The Company covenants and agrees that it currently has, or
will obtain prior to any conversion of the Notes into any Affiliate Stock and
prior to the exercise of any Participation Rights, demand and piggyback
registration rights with respect to such Affiliate Stock and the equity
securities issuable upon exercise of any Participation Rights, on substantially
the same, and not less favorable in any material respect, terms and conditions
as those granted to the Purchasers by the Company pursuant to the Registration
Rights Agreement. Such demand and piggyback registration rights shall be freely
transferable by the Company to the holders of the Notes. The Company covenants
agrees to utilize its best efforts to obtain such demand and piggyback rights
from each Conversion Affiliate as soon as practicable, with time being of the
essence.
6.9 Securities Law Compliance. The Company shall take such action as
the Company shall reasonably determine is necessary to qualify the Notes and the
Conversion Shares for, or
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obtain exemption for the Notes and the Conversion Shares for, sale to the
Purchasers pursuant to this Agreement under applicable securities and "Blue Sky"
laws of states of the Unites States.
6.10 Board Observation Rights. For a period of one (1) year from the
date of this Agreement, or until such time as the Xxxxxxxx Group no longer holds
at least ten percent (10%) in aggregate principal amount of the Notes, whichever
is greater, the Xxxxxxxx Group shall be entitled to receive reasonable prior
notice of meetings of the Board of Directors of the Company and shall have the
right to select one (1) individual to observe such meetings on behalf of the
Xxxxxxxx Group, and to receive a copy of any materials distributed to Company
directors in connection therewith. Such individual shall enter into a
confidentiality agreement with the Company, on terms and conditions reasonably
satisfactory to the Company, as a condition precedent to his or her observation
rights hereunder.
SECTION 7. THE NOTES.
7.1 Registration, Transfer and Exchange of the Notes.
(a) The Company shall keep at its principal offices a register
in which it shall provide for the registration of ownership of the Notes and for
the transfer of the Notes. The ownership of the Notes shall be proved by
reference to the register and, prior to due presentment for registration of
transfer, the Company may treat the person in whose name any of the Notes shall
be registered as the absolute owner thereof for the purpose of receiving payment
of amounts of principal of and interest on such Note and for all other purposes.
All payments made to any registered holder or upon its order shall be valid and,
to the extent of the amount or amounts so paid, effectual to satisfy and
discharge the liability for monies payable upon any such Note. Any demand,
request, waiver, consent or vote of the registered holder of any of the Notes
shall be conclusive and binding upon such holder and upon all future holders and
owners of such Note or any Note issued in exchange therefor or in place thereof.
(b) Upon surrender for registration of transfer of any of the
Notes at the principal offices of the Company and compliance with Sections 7 and
10 hereof, the Company shall execute and register in the name of the designated
transferee or transferees, one or more new Notes in such denomination or
denominations (in minimum amounts of $100,000), as may be requested, in
aggregate principal amount equal to the unpaid principal amount of the Note so
surrendered and substantially in the form thereof, with appropriate insertions
and variations, and dated and bearing interest from, the date to which interest
has been paid on the Note so surrendered unless no interest has been paid on the
Note so surrendered, in which case the new Note shall be dated the date of the
Note surrendered and the Company shall, in the same manner aforesaid, issue a
new Note to the transferor in an amount equal to the untransferred unpaid
principal amount of the Note surrendered for transfer.
(c) At any time upon the request of the holder of any of the
Notes and upon surrender of such Note for such purpose at the principal offices
of the Company, the Company will execute and register in the holder's name in
exchange therefor new Notes, in such denomination or denominations (in minimum
amounts of $100,000), as may be requested, in aggregate principal amount equal
to the unpaid principal amount of the Note so surrendered and substantially in
the form thereof, with appropriate insertions and variations, and dated, and
bearing interest from, the date to which interest has been paid on the Note so
surrendered unless no interest has been paid on the Note so surrendered, in
which case the new Notes shall be dated the date of the Note so surrendered.
(d) Upon receipt by the Company of evidence reasonably
satisfactory to it that any of the Notes has been mutilated, destroyed, lost or
stolen, and, in the case of any destroyed, lost
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or stolen Note, a bond of indemnity reasonably satisfactory to the Company, or
in the case of a mutilated Note, upon surrender and cancellation thereof, the
Company shall execute and register in the holder's name a new Note in exchange
and substitution for the Note so mutilated, destroyed, lost or stolen in an
aggregate principal amount equal to the unpaid principal amount of the Note so
mutilated, destroyed, lost or stolen and substantially in the form thereof, with
appropriate insertions and variations, and dated and bearing interest from the
date to which interest has been paid on the Note so mutilated, destroyed, lost
or stolen unless no interest has been paid on the Note so mutilated, destroyed,
lost or stolen, in which case the new Note shall be dated the date of the Note
so mutilated, destroyed, lost or stolen.
(e) All Notes presented or surrendered for exchange or
transfer as provided in this Section 7.1 shall, if required by the Company, be
accompanied by a written instrument or instruments of transfer, duly executed by
the registered holder thereof or its attorney duly authorized in writing. No
charge shall be made by the Company in respect of any transfer or exchange of
Notes, but the holder shall bear any applicable transfer tax.
(f) All Notes issued pursuant to this Section 7.1 shall
contain the restrictive legends on the Note surrendered for transfer or exchange
or which has been mutilated, lost, destroyed or stolen, unless such legends may
be removed under Section 10.4 hereof.
7.2 Transfer Taxes. The Company will pay, and hold the Purchasers
harmless against, liability for the payment of any transfer or similar taxes
payable in connection with the issuance and sale of the Notes and Conversion
Shares pursuant hereto.
7.3 Payment of Principal and Interest. The Company will make all
payments of principal and interest on the Notes at the time the same shall
become due thereunder or hereunder.
7.4 Notice of Default. The Company shall promptly notify each
Purchaser of the occurrence of any default under any instrument evidencing or
pursuant to which there shall be issued any Senior Indebtedness of the Company
(as defined in Section 11.1) that has resulted in the holder of such Senior
Indebtedness declaring a default thereunder or exercising any remedy with
respect thereto.
7.5 Method of Payment. The Company will promptly and punctually pay
the principal of and interest on the Notes to the holders thereof without any
presentment thereof and without any notation of such payment being made thereon
(except that presentment shall be required for payment of the Notes at
maturity). The Company will pay all amounts payable to such holder in respect of
principal of (other than the final payment of principal at maturity) and
interest on the Notes by check mailed to such holder, if a Purchaser, at the
address specified on Schedule 1 and, if a holder other than a Purchaser, at an
address designated by such holder to the Company in writing, or at such other
place as a holder may from time to time designate to the Company in writing. In
the case of any sale or transfer of the Note by a Purchaser (which sale or
transfer is subject to the restrictions set forth in Sections 3, 7 and 10 hereof
), such Purchaser shall notify the Company of the name and address of the
transferee of such Note and prior to the delivery of any Note sold or
transferred by such Purchaser, such Purchaser shall make a notation thereon of
the date to which interest has been paid on the Note, and, if not theretofore
made, a notation of the extent to which any payment has been made on account of
the principal thereof. Payment of interest or principal pursuant to this Section
7.5 shall constitute satisfaction in full of the obligation of the Company in
respect thereof notwithstanding any prior transfer by a Purchaser of the Note on
which interest or principal shall have been so paid unless and until notice of
such transfer shall have been given to the Company as herein provided.
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SECTION 8. CONVERSION.
8.1 Optional Conversion.
(a) At any time and from time to time after the date hereof,
and subject to the provisions of this Section 8, at the election of either the
holders of a majority in aggregate principal amount of the Notes then
outstanding, or the holders of a majority in aggregate principal amount of the
Notes then outstanding held by the Xxxxxxxx Group (the "XXXXXXXX NOTES"), by
written notice to the Company and to all other Purchasers, the Purchasers or the
Xxxxxxxx Group, following the expiration of a fifteen (15) day waiting period
following delivery of such written notice, may convert all or any portion of the
then outstanding principal balance and interest under the Notes, or the Xxxxxxxx
Notes, as the case may be, into fully paid and non-assessable shares of (i)
common stock of any of the Conversion Affiliates (as defined below) owned by the
Company as of the conversion date (the "AFFILIATE STOCK"), and/or (ii) Common
Stock of the Company; provided, however, that in no event may any portion of the
Notes be converted:
(A) into greater than one-third (1/3) of the total
number of shares, up to a maximum of 500,000 shares, of Affiliate Stock of any
one (1) Conversion Affiliate issued or sold by the Conversion Affiliate to the
Company from time to time (excluding any such shares granted by the Company or
specifically reserved by the Company's Board of Directors for grant to Company
employees or management under the benefit or incentive plans of the Company from
time to time (the "RESERVED AFFILIATE STOCK"), which Reserved Affiliate Stock
shall not, at any time exceed, in the aggregate, greater than sixty percent
(60%) of the total number of shares of Affiliate Stock of such Conversion
Affiliate issued or sold by the Conversion Affiliate to the Company);
(B) during any underwriter lockup period affecting the
Common Stock or the Affiliate Stock, as applicable, relating
to a registration of the Common Stock or Affiliate Stock under the 1933 Act; or
(C) into shares of the Common Stock of the Company prior
to the Company's IPO (as defined below).
Upon request, the Company's Chief Financial Officer shall provide each Purchaser
with a schedule identifying the maximum number of shares of each Conversion
Affiliate reserved for conversion and shall regularly update such schedule upon
any changes to the information set forth thereon. The initial conversion price
shall be equal to seventy-five percent (75%) of the initial gross selling price
to the public per share of common stock of the applicable Conversion Affiliate
pursuant to its IPO with respect to each share of Affiliate Stock other than (I)
shares of ChromaVision Medical Systems, Inc. ("ChromaVision"), for which the
initial conversion price shall be $9.07 per share, and (II) shares of any
Conversion Affiliate for which an IPO is consummated pursuant to the Safeguard
rights offering program, for which the initial conversion price shall equal the
rights offering price relating thereto (each of the foregoing being referred to
herein as the "AFFILIATE CONVERSION PRICE"), and the initial conversion price
with respect to shares of Common Stock shall be $7.27 per share ("COMPANY
CONVERSION PRICE," and collectively with the Affiliate Conversion Price, the
"CONVERSION PRICE"), each subject to adjustment as described below. The number
of shares issuable upon conversion of the Note shall be determined by dividing
the principal amount to be converted by the Conversion Price in effect on the
conversion date. Upon conversion, no payment or adjustment for accrued interest
on the Notes (other than the payment of interest to the Purchasers upon
conversion if the Notes have been called for full prepayment pursuant to Section
9 hereof) or for cash dividends or distributions on the Common Stock or
Affiliate Stock will be made. The Company will deliver a check in lieu of any
fractional share issuable upon conversion.
14
(b) The principal amount of the Notes to be converted
hereunder shall be allocated as nearly as may be possible among the respective
Notes and holders thereof so that the principal amount converted by each holder
shall bear the same ratio to the aggregate principal amount then to be converted
as the unpaid principal amount of Notes then held by such holder bears to the
aggregate unpaid principal amount of all Notes then outstanding held by the
converting holders.
(c) EACH NOTE HOLDER, OTHER THAN THE XXXXXXXX NOTE HOLDERS,
HEREBY AGREES TO BE BOUND BY EACH CONVERSION ELECTION MADE BY HOLDERS OF A
MAJORITY IN AGGREGATE PRINCIPAL AMOUNT OF THE NOTES THEN OUTSTANDING. SIMILARLY,
EACH XXXXXXXX NOTE HOLDER HEREBY AGREES TO BE BOUND BY EACH CONVERSION ELECTION
MADE BY HOLDERS OF A MAJORITY IN AGGREGATE PRINCIPAL AMOUNT OF THE XXXXXXXX
NOTES THEN OUTSTANDING. EACH NOTE HOLDER, OR XXXXXXXX NOTE HOLDER, AS THE CASE
MAY BE, HEREBY SPECIFICALLY CONSENTS TO ALL SUCH ELECTIONS AND AGREES NOT TO
TAKE ANY ACTION INCONSISTENT THEREWITH, EXCEPT AS OTHERWISE AUTHORIZED UNDER
THIS AGREEMENT.
(d) The terms listed below shall have the following meanings
for purposes of this Agreement:
(i) "CONVERSION AFFILIATES" shall mean Integrated
Vision, Inc., Who?Vision Systems, Inc., eMerge Vision Systems, Inc. and
ChromaVision, and each future corporation created by the Company, collectively,
and each such entity individually is sometimes referred to herein as a
"CONVERSION AFFILIATE."
(ii) "CONVERSION SHARES" shall mean Common Stock,
Affiliate Stock or any other securities issued or issuable upon the
conversion or prepayment of the Notes.
(iii) "IPO" means a company's initial public offering of
its common stock pursuant to an effective registration statement filed pursuant
to the 1933 Act (other than on Form S-4 or S-8 or any successor forms thereto)
in an underwritten public offering on a firm commitment basis in which the gross
proceeds of the offering will equal or exceed $15,000,000 (calculated before
deducting underwriters' discounts and commissions and other offering expenses),
and in which the public offering price per share of common stock (calculated
before deducting underwriters' discounts and commissions) results in a valuation
of the total number of outstanding shares of capital stock immediately prior to
the closing of the public offering of at least $75,000,000.
(iv) "TRADING DAY" means any day on which the stock
market listing such security is open for business and a trade was made in the
applicable security.
8.2 Mandatory Conversion. At any time and from time to time
beginning eighteen (18) months after the completion date of the IPO of any
Conversion Affiliate, and subject at all times to the provisions of this Section
8, the Company may, pursuant to written notice delivered to each Purchaser in
the manner described herein, require the Purchasers to convert all or any
portion of the then outstanding principal balance and interest under the Notes
into fully paid and non-assessable shares of the Affiliate Stock of such
Conversion Affiliate in accordance with and in the maximum amount permitted by
Section 8.1 above; provided, however, that the Purchasers shall have no
obligation to convert hereunder in the event that either (i) the closing price
of the Affiliate Stock to be received in connection with such conversion failed
to exceed a price equal to two (2) times the applicable Conversion Price per
share in any of the immediately preceding sixty-five (65) Trading Days, or (ii)
the Company fails or is otherwise
15
unable to deliver to the Purchasers, as of the date of conversion, the
registration rights described in Section 6.8 hereof with respect to the shares
of Affiliate Stock into which the Notes are to be converted.
8.3 Conversion. To convert Note principal hereunder, each Purchaser
must (a) complete and sign the conversion notice included with each Note, (b)
surrender their respective Notes to the Company, (c) furnish appropriate
endorsements and transfer documents, if required by the Company, and (d) pay any
transfer or similar tax, if required.
8.4 Reserve for Conversion; Delivery of Stock Certificates. The
Company shall reserve at all times and keep available free from preemptive
rights, out of its authorized but unissued Common Stock, enough shares of Common
Stock to permit the maximum conversion of principal amount of the Notes
permissible under this Agreement. If at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the maximum
conversion of the Notes or otherwise to comply with the terms of this Agreement,
the Company shall promptly take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes. The Company shall reserve at
all times the Affiliate Stock and shall not sell, transfer, pledge or otherwise
encumber the Affiliate Stock currently held by it (except in connection with a
transfer of Reserved Affiliate Stock in accordance with the terms of this
Agreement or with respect to that number of shares of Affiliate Stock in excess
of the number required to permit the maximum conversion of the Notes permissible
under this Agreement), and shall retain enough shares of Affiliate Stock to
permit the maximum conversion of the Notes permissible under this Agreement. The
Company will obtain any authorization, consent, approval or other action by, or
make any filing with, any court or administrative body that may be required
under applicable federal and state securities laws in connection with the
issuance of shares of Common Stock and Affiliate Stock upon conversion of the
Notes. The Company shall take any and all action necessary or appropriate in
order to effectuate any authorized conversion of any Note hereunder in
accordance with the terms and conditions of this Agreement. As soon as
practicable on or after the conversion date, and not less than ten (10) business
days thereafter, the Company shall deliver to Purchasers a certificate for the
number of full shares of Company Stock or Affiliate Stock issuable upon the
conversion of the Notes.
8.5 PURCHASERS ACKNOWLEDGE THAT THE COMMON STOCK AND AFFILIATE STOCK
ISSUED UPON CONVERSION OF THE NOTE MAY BE RESOLD, ASSIGNED, PLEDGED OR OTHERWISE
TRANSFERRED ONLY PURSUANT TO AN EXEMPTION FROM REGISTRATION IN ACCORDANCE WITH
RULE 144 (IF AVAILABLE) UNDER THE SECURITIES ACT OR AS OTHERWISE MAY BE
AVAILABLE UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS IN THE OPINION OF
COUNSEL FOR THE COMPANY OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT WITH RESPECT TO SUCH SHARES AND IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED
STATES.
8.6 Dilution. The Conversion Price with respect to shares of Common
Stock and Affiliate Stock issuable upon conversion of the Note shall be subject
to adjustment from time to time as follows:
(a) On any recapitalization through the subdivision or
combination of the outstanding Common Stock or Affiliate Stock into a greater or
smaller number of shares for no consideration, the Conversion Price shall be
appropriately decreased or increased to reflect such recapitalization; provided,
however, that, with respect to shares of any Conversion Affiliate, such decrease
or increase shall only apply in the event that such recapitalization occurs
subsequent to the IPO with respect to such shares.
16
(b) If the Company or a Conversion Affiliate takes a record of
the holders of its common stock for the purpose of entitling them to receive a
stock dividend or other distribution payable in Common Stock or Affiliate Stock,
or in securities convertible into or exchangeable for Common Stock or Affiliate
Stock, the maximum number of shares of Common Stock or Affiliate Stock, as
applicable, issuable in payment of such dividend or distribution, or on
conversion of or in exchange for the securities convertible into or exchangeable
for Common Stock or Affiliate Stock, shall be deemed to have been issued and to
be outstanding as of such record date, and the Conversion Price shall be
appropriately decreased, provided that if the dividend or distribution is
subsequently canceled such that the Company or the Conversion Affiliate shall
have no liability therefor then the Conversion Price shall be appropriately
increased to reflect such cancellation.
(c) The adjustments described in the preceding paragraphs
shall become effective immediately after the record date in the case of a
dividend or distribution and immediately after the effective date in the case of
a subdivision, combination or other recapitalization. Appropriate adjustments
shall be made in the application of the foregoing provisions so that such
provisions shall be applicable, as nearly as reasonably may be, in relation to
any securities or other assets thereafter deliverable on conversion of the
Notes.
(d) No adjustment in the Conversion Price shall be required in
the case of the issuance or granting by the Company or any Conversion Affiliate
of Common Stock, Affiliate Stock or other equity securities of Company for fair
value for any valid corporate purpose including, but not limited to, financing,
capital, employee or officer incentive programs, or conversion of warrants or
other equity securities of the Company or any Affiliate outstanding as of the
date hereof or as may be hereafter issued.
(e) In case of any reclassification of the Common Stock or
Affiliate Stock (other than a subdivision or combination referred to in
Subsection (a) above), or in case of any consolidation of the Company or a
Conversion Affiliate with, or merger of the Company or a Conversion Affiliate
into, another corporation (other than a consolidation or merger in which the
Company or a Conversion Affiliate, as applicable, is the continuing corporation
and which does not result in a reclassification or exchange of the Common Stock
or Affiliate Stock, as applicable), or in case of any sale or conveyance to
another corporation of the property of the Company or a Conversion Affiliate as
an entirety or substantially as an entirety, Company, or such successor or
purchasing corporation or person, as the case may be, shall execute (or, in the
case of a Conversion Affiliate, the Company shall use its best efforts to
obtain) and deliver to Purchasers a legally enforceable supplemental agreement
providing that the Purchasers shall thereafter have the right to convert the
Note into the kind and amount of shares of stock and other securities and
property receivable upon such consolidation, merger, sale or conveyance by
Purchasers of the number of shares of Common Stock or Affiliate Stock into which
the Note might have been converted immediately prior to such consolidation,
merger, sale or conveyance. Such agreement shall provide for adjustments in the
Conversion Price which shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section 8; provided, however, that, with
respect to the shares of any Conversion Affiliate, in the event that such
consolidation, merger, sale or conveyance occurs prior to the IPO with respect
to such shares, then the applicable Affiliate Conversion Price shall be $5.00
per share. The provisions of this Subsection (e) shall similarly apply to
succeeding reclassifications, consolidations, mergers, sales or conveyances.
(f) The Company shall promptly notify each Purchaser in
writing upon the occurrence of any event requiring an adjustment to the
Conversion Price under this Agreement. Whenever the Conversion Price is adjusted
as herein provided, the Company shall promptly provide each Purchaser with
written notice of such change, indicating its nature and stating the new
Conversion Price.
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SECTION 9. PREPAYMENT OF NOTES.
9.1 Prepayment in Cash. Subject to the terms set forth in this
Section 9, the Company may prepay all or any portion of the principal and
interest due under the Notes in cash at any time on or after May 1, 2001, at the
prepayment prices (expressed in percentages of principal amount) set forth in
the following table, plus accrued interest to, but not including, the prepayment
date set forth in Section 9.3, if prepaid during the twelve (12) month period
beginning May 1 of the years set forth in the following table:
YEAR PERCENTAGE
---- ----------
2001 104%
2002 102%
2003 and thereafter 100%
Any such payments shall only be made in integral multiples of
$100 by check payable in a manner consistent with payments of principal and
interest under this Agreement. Any such payment shall be applied first against
any accrued and unpaid interest and then against outstanding principal amounts.
9.2 Prepayment in Stock. The Company may prepay a portion of the
principal and interest due under the Notes at any time with shares of Affiliate
Stock of any of the Conversion Affiliates at a price equal to the lesser of (i)
seventy-five percent (75%) of the average closing price per share of the
applicable Affiliate Stock for the twenty (20) Trading Days immediately
preceding the date of prepayment, or (ii) eighty percent (80%) of the closing
price per share of the applicable Affiliate Stock on the Trading Day immediately
preceding the date of prepayment; provided, however, the Company shall have no
right to prepay any principal or interest on the Notes with Affiliate Stock
unless (x) the average closing price of such Affiliate Stock for the twenty (20)
Trading Days immediately preceding the date of repayment, and the closing price
per share of such applicable Affiliate Stock on the Trading Day immediately
preceding the date of prepayment, is at least equal to two (2) times the
applicable Conversion Price per share, (y) either eighteen (18) months have
elapsed since the IPO completion date for such Conversion Affiliate or ninety
(90) days have elapsed since the completion date of a second public offering of
the common stock of such Conversion Affiliate pursuant to a Form X-0, X-0 or S-3
registration statement under the 1933 Act, and (z) the registration rights
described in Section 6.8 shall be in effect with respect to the holders of the
Notes. In addition, in no event may the Company prepay more than $5,000,000 in
the aggregate of principal under the Notes through the conversion into Affiliate
Stock of any one (1) Conversion Affiliate, or prepay principal under the Notes
through the issuance of greater than 500,000 shares in the aggregate of
Affiliate Stock in any one (1) Conversion Affiliate. Any prepayments hereunder
shall be made in accordance with the procedures set forth in Section 8.3 above.
Any such payment shall be applied first against any accrued and unpaid interest
and then against outstanding principal amounts.
9.3 Prepayment Procedures. Any prepayment of Notes under this
Section 9 shall be made by giving the holders of the Notes not less than thirty
(30) days prior written notice thereof at its registered address. If there is
more than one holder of the Notes, the principal amount of the Notes so to be
prepaid shall be allocated as nearly as may be possible among the respective
Notes and holders thereof so that the principal amount prepaid to each holder
shall bear the same ratio to the aggregate principal amount then to be prepaid
as the unpaid principal amount of Notes then held by such holder bears to the
aggregate unpaid principal amount of all Notes then outstanding. If any Note is
to be prepaid only in part, upon the surrender of the Note to the Company for
prepayment, the Company shall execute and deliver to the holder of the Note so
surrendered a new Note equal in principal amount to the unpaid portion of the
18
surrendered Note, dated the most recent date to which interest shall have been
paid on the surrendered Note and bearing the restrictive legends, if any, on the
surrendered Note. Upon the fixing of a date for prepayment pursuant to this
Section 9.3, the Notes or portions to be prepaid shall cease to bear interest
and cease to be convertible on the date fixed for prepayment unless the Company
shall default in making such prepayment.
SECTION 10. COMPLIANCE WITH 1933 ACT; RESTRICTIONS ON TRANSFERABILITY OF
NOTES AND CONVERSION SHARES.
10.1 Compliance with 1933 Act. The Notes and Conversion Shares shall
not be transferable, except upon the conditions specified in this Section 10,
which conditions are intended to insure compliance with the provisions of the
1933 Act and applicable state securities laws in respect of any such transfer.
10.2 Restrictive Legend. The Notes and each certificate representing
the Conversion Shares and any shares of common stock or other securities issued
in respect of such Conversion Shares upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless
otherwise permitted by the provisions of Section 10.4 below) be stamped or
otherwise imprinted with the following legend:
"[THIS NOTE HAS] OR [THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE] NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAW AND THE TRANSFERABILITY [T]HEREOF IS
SUBJECT TO THE PROVISIONS OF A CERTAIN NOTE PURCHASE AGREEMENT DATED AS OF
MAY 14, 1999, BY AND AMONG XL VISION, INC. AND THE PURCHASERS NAMED
THEREIN"
10.3 Restrictions on Transferability. The Company shall not be
required to register the transfer of the Notes or any Conversion Shares of
Common Stock on the books of the Company unless registration under the 1933 Act
or any applicable state securities law is not required in connection with the
transaction resulting in such transfer. Each Note or certificate for Conversion
Shares of Common Stock issued upon any transfer as above provided shall bear the
restrictive legend set forth in Section 10.2 above, except that such restrictive
legend shall not be required if such legend is not required in order to
establish compliance with the provisions of the 1933 Act and any applicable
state securities law, or if the transfer is made in accordance with the
provisions of Rule 144(k) under the 1933 Act. The Company agrees to provide each
Note holder with any and all information reasonably requested in connection with
its efforts to remove such legend from any Affiliate Stock certificate.
10.4 Termination of Restrictions on Transferability. The conditions
precedent imposed by this Section 10 upon the transferability of the Notes and
Conversion Shares shall cease and terminate as to any of the Notes or Conversion
Shares when (i) such securities shall have been registered under the 1933 Act
and sold or otherwise disposed of in accordance with the intended method of
disposition by the seller or sellers thereof set forth in the registration
statement covering such securities, (ii) at such time as an opinion of counsel
satisfactory to the Company shall have been rendered to the effect that the
restrictive legend on such securities is no longer required, or (iii) when such
securities are transferred in accordance with the provisions of Rule 144(k)
promulgated under the 1933 Act. Whenever the conditions imposed by this Section
10 shall terminate as provided herein with respect to any of the Notes or
Conversion Shares, the holder of any such securities bearing the legend set
forth in this Section 10 as to which such conditions shall have terminated shall
be entitled to receive from the Company, without expense (except for the payment
of any applicable transfer tax) and as expeditiously as possible,
19
new Notes in accordance with Section 7.1(b) or (c) hereof or new stock
certificates not bearing such legend.
SECTION 11. SUBORDINATION OF NOTES.
11.1 Subordination. The indebtedness evidenced by, and the payment
of the principal of and interest on, the Notes is hereby expressly subordinated
and made junior, to the extent and in the manner set forth in this Agreement, to
the prior payment in full of all Senior Indebtedness of the Company and will
rank pari passu in all respects with other subordinated indebtedness of the
Company. The Company hereby covenants and agrees that it will not, without the
prior consent of the holders of a majority in aggregate principal amount of the
Notes then outstanding, incur in excess of Five Million Dollars ($5,000,000) of
parri passu indebtedness at any time for so long as any principal of or interest
on the Notes remains outstanding hereunder. As used herein, "Senior
Indebtedness" means any indebtedness, including interest and collection charges,
of the Company, whether now existing or hereafter created, and all refinancings
thereof, to any bank, trust company, pension or profit-sharing trust (other than
such a trust for the benefit of employees of the Company), insurance company or
other financial institution, except any such indebtedness which by its express
terms is not senior in right of payment to the Notes. As used in the foregoing
definition, "indebtedness" means (i) all obligations for borrowed money or for
the deferred portion of the purchase price of any asset, (ii) all rental
obligations under leases which, in accordance with generally accepted accounting
principles, are shown as capitalized obligations on the Company's balance sheet
as of the date as of which indebtedness is to be determined, and (iii)
indebtedness secured by any mortgage, pledge, lien or security interest existing
on property owned by the Company whether or not the indebtedness secured thereby
shall have been assumed.
11.2 Insolvency. In the event of any insolvency or bankruptcy
proceedings, or any receivership, liquidation, reorganization or other similar
proceedings in connection therewith, relative to the Company or to its creditors
as such, or to its property, or in the event of any proceedings for voluntary
liquidation, dissolution or other winding-up of the Company, whether or not
involving insolvency or bankruptcy, then the holders of Senior Indebtedness
shall be entitled to receive payment in full of all principal, premium, if any,
and interest on all Senior Indebtedness before the holder or holders of the
Notes are entitled to receive any payment on account of principal of or interest
on the Notes and the holders of Senior Indebtedness shall be entitled to
receive, ratably according to the aggregate amounts remaining unpaid on account
of the Senior Indebtedness held by each such holder, to the extent necessary to
make payment in full of all Senior Indebtedness remaining unpaid after giving
effect to any concurrent payment or distribution (or provision therefor) to the
holders of Senior Indebtedness, for application in payment thereof, any payment
or distribution of any kind or character, whether in cash or property or
securities, which may be payable or deliverable in any such proceedings in
respect of the Notes, except securities which are subordinate and junior in
right of payment to the payment of all Senior Indebtedness then outstanding.
11.3 Maturity of or Default on Senior Indebtedness.
(a) Upon the maturity of any Senior Indebtedness by lapse of
time, acceleration or otherwise, and the giving of written notice thereof to the
holders of the outstanding Notes by the holder or holders of such Senior
Indebtedness, all principal thereof (and premium, if any) and interest due
thereon shall first be paid in full, or such payment duly provided for in cash
or in a manner satisfactory to the holder or holders of such Senior
Indebtedness, before any payment is made on account of the principal of or
interest on the Notes or to purchase any of the Notes.
(b) Upon the happening of an event of default with respect to
any Senior Indebtedness, as such event of default is defined therein or in the
instrument under which it is
20
outstanding, permitting the holders to accelerate the maturity thereof, and upon
written notice thereof given to the Company and the holders of any outstanding
Notes by the holder or holders of such Senior Indebtedness or their
representative or representatives, then, unless and until such event of default
shall have been cured or waived or shall have ceased to exist, no payment
thereafter shall be made by the Company with respect to the principal of or
interest on the Notes or to purchase any of the Notes. In the event that,
notwithstanding the foregoing, following any such event of default in respect of
Senior Indebtedness and the giving of written notice thereof to the Company and
the holders of any outstanding Notes, any such payment or distribution shall be
received by any holder of the Notes before all Senior Indebtedness is paid in
full, such payment or distribution shall be held in trust for the benefit of and
shall be paid over to the holders of the Senior Indebtedness or their
representative or representatives, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness held by each such holder,
to the extent necessary to make payment in full of the principal of (and
premium, if any) and interest on, all Senior Indebtedness.
(c) Any payment or distribution received by any holder of
Notes prior to (i) written notice of maturity of Senior Indebtedness given to
such holder under paragraph (a) above or (ii) an event of default with respect
to the Senior Indebtedness and written notice given to such holder under
paragraph (b) above, may be retained by such holder.
11.4 Rights. No right of any present or future holder of any Senior
Indebtedness of the Company to enforce the subordination of the Notes as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act by any such holder, by the Company, or by any holder of any Note,
or by any noncompliance by the Company with the terms, provisions and covenants
of this Agreement or of any Note. The provisions of this Section 11 with respect
to subordination shall not affect the obligations of the Company to make, or
prevent the Company from making, at any time, except as provided in Sections
11.2 and 11.3, payments of principal of or interest on the Notes when the same
shall be due and payable. The provisions of this Section 11 in regard to
subordination are solely for the purpose of defining the relative rights of the
holders of Senior Indebtedness on the one hand, and the holders of the Notes on
the other hand, and nothing herein shall impair, as between the Company, its
creditors other than the holders of Senior Indebtedness, and the holders of the
Notes, the obligation of the Company, which is unconditional and absolute, to
pay to the holder of any Note the principal thereof and interest thereon in
accordance with its terms, or affect the relative rights of the holders of the
Notes and creditors of the Company other than holders of the Senior
Indebtedness, nor shall anything in this Agreement or the Notes prevent the
holders of the Notes from exercising all remedies otherwise permitted by
applicable law or under this Agreement or the Notes upon default thereunder,
subject to the rights, if any, under this Section 11 of holders of Senior
Indebtedness to receive cash, property or securities otherwise payable or
deliverable to the holders of the Notes. Upon any payment or distribution of
assets of the Company referred to in this Section 11, the holders of the Notes
shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which dissolution, winding-up, liquidation,
reorganization or other similar proceedings are pending or upon a certificate of
the liquidating trustee or agent or other person making any distribution to the
holders of the Notes for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of the Senior Indebtedness and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Section 11. The holders of the Senior Indebtedness may
extend, renew, modify or amend the terms of the Senior Indebtedness or any
security therefor and may release, sell or exchange such security and otherwise
deal freely with the Company, all without notice to or consent of the holders of
the Notes and without affecting the liabilities and obligations of the holders
of the Notes.
11.5 Subrogation. In the event that cash, securities or other
property otherwise payable or deliverable to the holders of the Notes shall have
been applied pursuant to this Section 11 to
21
the payment of Senior Indebtedness, then, subject to the payment in full of all
principal of (and premium, if any) and interest on Senior Indebtedness and to
any applicable preference period relating thereto, the holders of the Notes (a)
shall be entitled to receive from the holders of Senior Indebtedness at the time
outstanding any payments or distributions received by such holders of Senior
Indebtedness in excess of the amount sufficient to pay all principal of (and
premium, if any) and interest on Senior Indebtedness in full and (b) shall be
subrogated to all rights of any holders of Senior Indebtedness to receive
payments or distributions of cash, property or assets of the Company applicable
to the Senior Indebtedness, until all principal of and interest on the Notes
shall be paid in full. No such payments or distributions received by the holders
of the Notes shall, as between the Company and its creditors, if any, other than
the holders of Senior Indebtedness, on the one hand, and the holders of the
Notes, on the other hand, be deemed to have been made as a payment by the
Company to or on account of the Notes, it being understood that the provisions
of this Section are and are intended solely for the purpose of defining the
relative rights of the holders of the Notes, on the one hand, and the holders of
the Senior Indebtedness, on the other hand.
11.6 Binding Effect. The Company covenants and agrees, and each
holder of any Note, by acceptance thereof, likewise covenants and agrees that
the Notes shall be issued subject to the provisions of this Section 11, and each
holder of any Note, whether upon original issue or upon transfer or assignment
thereof, accepts and agrees to be bound thereby.
11.7 Pledge Agreement and Conversion Rights. Notwithstanding the
provisions of this Section 11, the Purchasers shall be entitled to (i) the
benefit of any and all available remedies arising under the Pledge Agreement,
and (ii) exercise any and all conversion rights arising under Section 8 hereof,
at any time in accordance with the terms and conditions thereof.
SECTION 12. EVENTS OF DEFAULT.
12.1 Events of Default. (a) If any one or more of the following
events (herein called "EVENTS OF DEFAULT") shall occur and be continuing:
(i) default shall be made in the payment of any installment of
interest on any of the Notes when and as the same shall become due and payable,
and such default shall have continued for a period of ten (10) days after notice
from the holder thereof;
(ii) default shall be made in the payment of the principal of any of
the Notes or any part thereof when and as the same shall become due and payable,
either at maturity or at a date fixed for prepayment or by acceleration or
otherwise and such default shall have continued for a period of three (3) days
after notice from the holder thereof;
(iii) default in any material respect shall be made in the due
performance or observance of any other covenant, agreement or provision herein
or in the Notes to be performed or observed by the Company or a material breach
shall exist in any representation or warranty herein contained and such default
or breach shall have continued for a period of thirty (30) days after written
notice thereof to the Company from the holder of any Note;
(iv) the Company shall (A) apply for or consent to the appointment
of a receiver, trustee or liquidator of the Company or any of its property, (B)
admit in writing its inability to pay its debts as they mature, (C) make a
general assignment for the benefit of creditors, (D) be adjudicated a bankrupt
or insolvent or (E) file a voluntary petition in bankruptcy, a petition or
answer seeking reorganization or an arrangement with creditors to take advantage
of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution
or liquidation law or statute, or an answer admitting the material allegations
of a petition filed against it in any proceeding under any such law or (F)
corporate
22
action shall be taken by the Company for the purpose of effecting any of the
foregoing; or (G) an order, judgment or decree shall be entered, without the
application, approval or consent of the Company, by any court of competent
jurisdiction, approving a petition seeking reorganization of the Company or of
all or a substantial part of the assets of the Company and such order, judgment
or decree shall continue unstayed and in effect for a period of sixty (60) days;
or
(v) a default shall occur under or with respect to any Senior
Indebtedness of the Company having an outstanding aggregate principal balance of
more than $50,000, which default has resulted in the holder of such Senior
Indebtedness declaring a default thereunder and exercising any remedy with
respect thereto;
then and in each and every such case of (x) an Event of Default under Sections
12.1(a)(i) or 12.1(a)(2) any holder of a Note then outstanding may by notice in
writing to the Company declare the unpaid principal of its Note, with accrued
interest, to be forthwith due and payable whereupon such principal and interest
shall be due and payable without presentation, protest or further demand or
notice of any kind, all of which are hereby expressly waived, and (y) any other
Event of Default (other than pursuant to Sections 12.1(a)(i) and 12.1(a)(2)),
the holders of a majority in aggregate principal amount of the Notes then
outstanding, may by notice in writing to the Company declare the unpaid
principal of its Note(s), with accrued interest, to be forthwith due and payable
whereupon such principal and interest shall be due and payable without
presentation, protest or further demand or notice of any kind, all of which are
hereby expressly waived. EACH NOTE HOLDER HEREBY AGREES TO BE BOUND BY EACH
EVENT OF DEFAULT ELECTION MADE BY HOLDERS OF A MAJORITY IN AGGREGATE PRINCIPAL
AMOUNT OF THE NOTES THEN OUTSTANDING. EACH NOTE HOLDER HEREBY SPECIFICALLY
CONSENTS TO ALL SUCH ELECTIONS AND AGREES NOT TO TAKE ANY ACTION INCONSISTENT
THEREWITH, EXCEPT AS OTHERWISE AUTHORIZED UNDER THIS AGREEMENT.
(b) If a holder of a Note shall demand payment thereof or take
any other action provided for hereunder (of which the Company has actual
knowledge) in respect of an Event of Default, the Company will forthwith give
written notice thereof, specifying such action and the nature of such event, to
each holder of record of the Notes then outstanding. The Company will also give
prompt written notice to each holder of record of the Notes at the time
outstanding of any written instrument of rescission or annulment filed with it
as aforesaid.
(c) The Company covenants that, if default be made in any
payment of principal of or interest on any Note, it will pay to the holder
thereof such further amount as shall be sufficient to cover the reasonable costs
and expenses of collection, including reasonable counsel fees.
(d) No course of dealing between the Company and any holder of
a Note or any delay on the part of the holder of a Note in exercising any rights
thereunder or hereunder shall operate as a waiver of any rights of any such
holder.
(e) Prior to the declaration of acceleration of the maturity
of the Notes, the holders of a majority in aggregate principal amount of the
Notes at the time outstanding may waive on behalf of all the Note holders any
default, except a default pursuant to Sections 12.1(a)(i) and 12.1(a)(2)).
SECTION 13. INDEMNIFICATION; SURVIVAL.
13.1 Indemnification. In consideration of each Purchaser's execution
and delivery of this Agreement and acquiring the Notes hereunder and in addition
to all of the Company's other obligations under this Agreement, the Company
shall defend, protect, indemnify and hold harmless each
23
Purchaser and each other holder of Securities and all of their officers,
directors, employees and agents (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "PURCHASER INDEMNITIES") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Purchaser Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "PURCHASER INDEMNIFIED LIABILITIES"), incurred by any
Purchaser Indemnitee (and shall advance the same) as a result of, or arising out
of, or relating to (a) any material misrepresentation or breach of any
representation or warranty made by the Company in this Agreement, the Pledge
Agreement, the Notes or any other certificate, instrument or document
contemplated hereby or thereby, (b) any material breach of any covenant,
agreement or obligation of the Company contained in this Agreement, the Pledge
Agreement, the Notes, or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim
brought or made against such Purchaser Indemnitee and arising out of or
resulting from the execution, delivery, performance or enforcement by the
Company of this Agreement or any other instrument, document or agreement
executed pursuant hereto by any of the Purchaser Indemnitees, or any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Notes. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Purchaser Indemnified Liabilities which is permissible under applicable law.
13.2 Survival. All covenants, agreements, representations and
warranties made herein and in the certificates delivered pursuant hereto shall
survive the execution and delivery of this Agreement and the issuance and sale
of the Notes hereunder.
SECTION 14. MISCELLANEOUS.
14.1 Owner of Conversion Shares. The Company may deem and treat the
person in whose name the Conversion Shares, as the case may be, are registered
as the absolute owner thereof for all purposes whatsoever, and the Company shall
not be affected by any notice to the contrary.
14.2 Successors. This Agreement shall be binding upon and except as
provided herein, shall inure to the benefit of the respective successors,
executors, personal representatives, heirs and assigns of each of the parties
hereto.
14.3 Broker or Finder. Each party to this Agreement represents and
warrants that, to the best of its knowledge, no broker or finder has acted for
such party in connection with this Agreement or the transactions contemplated by
this Agreement and that no broker or finder is entitled to any broker's or
finder's fee or other commission in respect thereof based in any way on
agreements, arrangements or understandings made by such party. The Company shall
indemnify each Purchaser against, and hold it harmless from, any liability,
cost, or expense (including reasonable attorneys' fees and expenses) resulting
from any agreement, arrangement, or understanding made by the Company, and each
Purchaser shall indemnify the Company against, and hold the Company harmless
from, any liability, cost, or expense (including reasonable attorneys fees and
expenses) resulting from any agreement, arrangement, or understanding made by
such Purchaser with any third party, for brokerage or finders fees or other
commissions in connection with this Agreement or any of the transactions
contemplated hereby.
14.4 Governing Law; Arbitration.
(a) This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Florida.
24
(b) None of the parties to this Agreement shall institute an
arbitration proceeding pursuant to this Section to resolve a dispute between the
parties hereunder before the parties have sought to resolve the dispute through
direct negotiation with the other parties. If the dispute is not resolved within
three (3) weeks after a demand for direct negotiation, the parties shall attempt
to resolve the dispute through mediation. If the parties do not promptly agree
on a mediator, then either party may notify the J.A.M.S/Endispute, 000 Xxxx
Xxxxxx, 0xx xxxxx, Xxx Xxxx, Xxx Xxxx, to initiate selection of a mediator from
J.A.M.S/Endispute's panel of neutrals. The fees and expenses of the mediator
shall be shared equally by each party to the dispute. If the mediator is unable
to facilitate a settlement of the dispute within a reasonable period of time, as
determined by the mediator, the mediator shall issue a written statement to the
parties to that effect and the aggrieved party may then seek relief through
arbitration, which shall be binding pursuant to the Commercial Arbitration Rules
of the American Arbitration Association (the "ASSOCIATION"). The place of
arbitration shall be Philadelphia, Pennsylvania. Arbitration may be commenced at
any time by any party thereto after giving written notice in the manner
described in this Agreement. A single arbitrator or arbitrators shall be
selected by the joint agreement of the parties, but if they do not so agree
within twenty (20) days after the date of the notice referred to above, the
selection of the arbitrator(s) shall be made pursuant to the rules from the
panels of the arbitrators maintained by such Association. The arbitrator(s)
shall render his decision within one hundred eighty (180) days of appointment.
Any award rendered by the arbitrator(s) shall be conclusive and binding upon the
parties hereto; provided, however, that any such award shall be accompanied by a
written opinion of the arbitrator(s) giving the reasons for the award. This
provision for arbitration shall be specifically enforceable by the parties and
the decision of the arbitrator(s) in accordance herewith shall be final and
binding and there shall be no right of appeal therefrom. Judgment upon the award
rendered by the arbitrator(s) may be entered by any court having jurisdiction
thereof. The costs and expenses of arbitration, including attorneys' fees and
expenses of the arbitrator(s) shall be apportioned between the parties as the
arbitrator(s) may assess. The arbitrator(s) shall not be permitted to award
punitive or similar type damages under any circumstances. This arbitration
provision shall constitute the sole and exclusive remedy for any dispute under
this Agreement.
14.5 Notice. Any notice or other communications required or
permitted hereunder shall be deemed given when delivered personally, or upon
receipt by the party entitled to receive the notice when sent by registered or
certified mail, postage prepaid, addressed as follows or to such other address
or addresses as may hereafter be furnished in writing by notice similarly given
by one party to the other:
To the Company:
XL Vision, Inc.
10300 000 Xxxxxxx
Xxxxxxxxx, XX 00000
Attention: Chief Financial Officer
To Safeguard:
Safeguard 98 Capital, L.P.
800 The Safeguard Building
000 Xxxxx Xxxx Xxxxx
Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esquire
To Wheatley or the Xxxxxxxx Group:
25
Xxxxxxxx Partners, L.P.
00 Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxxxx
With a copy to:
GEO Capital Corp.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx Xxxxxx
14.6 Full Agreement. This Agreement together with the Notes and
Exhibits and Schedules attached hereto or delivered herewith sets forth the
entire understanding of the parties with respect to the transactions
contemplated hereby.
14.7 Headings. The headings of the sections of this Agreement are
inserted for convenience of reference only and shall not be considered a part
hereof.
14.8 Business Days. Should any installment of interest on or
principal of any of the Notes become due and payable upon other than a business
day, the maturity thereof shall be extended to the succeeding business day and,
in the case of an installment of principal, interest shall be payable thereon at
the rate per annum specified in such Note during such extension.
14.9 Amendment. This Agreement may not be modified, amended or
changed without the written consent of the Company and the Purchasers.
14.10 Counterparts. This Agreement may be executed in one or more
counterparts which, taken together, shall constitute one and the same original
document.
26
IN WITNESS WHEREOF, each of the parties hereto has fully executed
this Agreement as of the date first set forth above.
XL VISION, INC.
By:____________________________
Name: Xxxxx Xxxxxxx
Title: Chief Financial Officer
SAFEGUARD 98 CAPITAL, L.P.
By: SAFEGUARD DELAWARE, INC.
Title: General Partner
By:_____________________________
Name:
Title:
XXXXXXXX GROUP:
XXXXXXXX PARTNERS, L.P.
By: Xxxxxxxx Partners, LLC
Title: General Partner
By:_____________________________
Name: Xxxxx Xxxxxxxxxx
Title: CEO
XXXXXXXX FOREIGN PARTNERS, L.P.
By: Xxxxxxxx Partners, LLC
Title: General Partner
By:_____________________________
Name: Xxxxx Xxxxxxxxxx
Title: CEO
WOODLAND PARTNERS
By:____________________________
Name: Xxxxx Xxxxxxxxxx
Its: General Partner
WOODLAND VENTURE FUND
By:____________________________
Name: Xxxxx Xxxxxxxxxx
Its: General Partner
SENECA VENTURES
By:____________________________
Name: Xxxxx Xxxxxxxxxx
Its: General Partner
27
SCHEDULE 1
PRINCIPAL AMOUNT OF NOTES
------------------------------------------------------------------------------
NOTE PURCHASER AND ADDRESS PRINCIPAL AMOUNT OF NOTE
------------------------------------------------------------------------------
Safeguard 98 Capital, L.P.
800 The Safeguard Building
000 Xxxxx Xxxx Xxxxx
Xxxxx, XX 00000 $13,600,000
------------------------------------------------------------------------------
Xxxxxxxx Partners, L.P.
00 Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000 $ 3,128,000
------------------------------------------------------------------------------
Wheatley Foreign Partners,
L.P.
00 Xxxxxxxxxx Xxxx, Xxxxx
000
Xxxxxxxxx, XX 00000 $ 272,000
------------------------------------------------------------------------------
Woodland Partners
00 Xxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000 $ 500,000
------------------------------------------------------------------------------
Woodland Venture Fund
00 Xxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000 $ 1,500,000
------------------------------------------------------------------------------
Seneca Ventures
00 Xxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000 $ 1,000,000
------------------------------------------------------------------------------
Total: $20,000,000
------------------------------------------------------------------------------
28
SCHEDULE 2.4(b)
COMMON STOCK AGREEMENTS
1. The Company agreed, by action of its Board of Directors, to repurchase
certain shares of Company common stock currently held by Company management upon
the completion of the IPO with respect to either eMerge Vision Systems, Inc. or
Who?Vision Systems, Inc.
2. Stock Restriction Agreement by and between the Company and certain
Company common stockholders.
SCHEDULE 2.4(c)
AFFILIATE STOCK
Affiliate Affiliate Stock
--------- ---------------
Integrated Vision, Inc. 1,348,750 shares, Common Stock,
representing approximately 13.1% of the issued and
outstanding shares
Who?Vision Systems, Inc. 1,869,031 shares, Common Stock,
representing approximately 10.0% of the issued and
outstanding shares
eMerge Vision Systems, Inc. 2,293,458 shares, Common Stock,
representing approximately 16.0% of the issued and
outstanding shares
ChromaVision Medical Systems, Inc. 1,432,114 shares, Common Stock,
representing approximately 4.0% of the issued and
outstanding shares
29
EXHIBIT A
XXXXXXXX GROUP
Name and Address:
Xxxxxxxx Partners, L.P. (a Delaware limited partnership)
The Wheatley Group
00 Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Wheatley Foreign Partners, L.P. (a Delaware limited partnership)
00 Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Woodland Partners (a New York general partnership)
00 Xxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Woodland Venture Fund (a New York general partnership)
00 Xxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Seneca Ventures (a New York general partnership)
00 Xxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
30
EXHIBIT B
FORM OF NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAW AND THE TRANSFERABILITY THEREOF IS
SUBJECT TO THE PROVISIONS OF A CERTAIN NOTE PURCHASE AGREEMENT DATED AS OF MAY
___, 1999, BY AND AMONG XL VISION, INC. AND THE PURCHASERS NAMED THEREIN.
6% CONVERTIBLE SUBORDINATED NOTE DUE MAY 14, 2004
$_________________ May 14, 1999
FOR VALUE RECEIVED, XL VISION, INC., a Delaware corporation (the
"COMPANY"), promises to pay to ____________________________________, or
registered assigns ("PAYEE"), on May 14, 2004, at the principal office of the
Company, 00000 000xx Xxxxxxx, Xxxxxxxxx, Xxxxxxx, the principal sum of
__________________________________ and 00/100 Dollars ($__________), as noted on
the Payee's books and records, which books and records shall be conclusive
absent manifest error, in lawful money of the United States of America, together
with interest (calculated on the basis of the actual number of days elapsed in a
year consisting of 365 days) from the date hereof on the unpaid balance of said
principal sum, at the rate of six percent (6%) per annum payable at maturity and
interest on any overdue principal or interest (to the extent lawful), at the
rate of nine percent (9%) per annum until paid. Presentation, demand, protest
and notice of dishonor are hereby waived by the Company.
This Note is one of a duly authorized issue of Notes of the Company,
limited in aggregate principal amount to $20,000,000 and known as its
Convertible Subordinated Notes due May 14, 2004 (the "NOTES"). The Notes are
issued pursuant to a certain Note Purchase Agreement dated as of May 14, 1999,
by and among the Company, Safeguard 98 Capital, L.P., and the Xxxxxxxx Group, as
defined therein (the "NOTE PURCHASE AGREEMENT"). The Notes are subject to the
provisions and entitled to the benefits of the Note Purchase Agreement,
including without limitation, provisions subordinating the Notes to the prior
payment in full of principal of, premium, if any, and interest on, all Senior
Indebtedness of the Company, and Payee assents to and expressly agrees to be
bound by such subordination. In case an Event of Default, as defined in the Note
Purchase Agreement, shall occur, the maturity of this Note may be accelerated in
the manner and with the effect provided in the Note Purchase Agreement.
The Company may prepay this Note in whole or in part in certain
circumstances in the manner and as and to the extent permitted under the Note
Purchase Agreement.
The holder of this Note may, at its option, as and to the extent
provided in the Note Purchase Agreement, apply all or any portion of the
outstanding principal amount of this Note to the payment of an equal dollar
amount of the purchase price of the common stock of the Company or a Conversion
Affiliate (as defined in the Note Purchase Agreement) issuable to the holder
upon the conversion of this Note in accordance with the terms and conditions of
the Note Purchase Agreement.
The Company may, at its option, as and to the extent provided in the
Note Purchase Agreement, apply all or any portion of the outstanding principal
amount of this Note to the payment of an
31
equal dollar amount of the purchase price of the common stock of the Company or
a Conversion Affiliate (as defined in the Note Purchase Agreement) issuable to
the holder upon the prepayment of this Note in accordance with the terms and
conditions of the Note Purchase Agreement.
This Note shall be binding upon and inure to the benefit of the
Company and its successors and assigns, and the registered holder of this Note
and its successors and registered assigns.
This Note is made and delivered in the Commonwealth of Pennsylvania,
and shall be construed and enforced in accordance with, and shall be governed
by, the laws of the Commonwealth of Pennsylvania.
This Note is further subject to the dispute resolution and
arbitration provisions set forth in the Note Purchase Agreement.
INTENDING TO BE LEGALLY BOUND, XL Vision, Inc. has caused this Note
to be executed in its corporate name by its duly authorized officers under its
corporate seal, and to be dated as of the day and year first above written.
XL VISION, INC.
By:__________________________________
Name: Xxxxx Xxxxxxx
Its: Chief Financial Officer
