SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
(Name of Issuer)
Common Stock, par value $0.01 per share
(Title of Class of Securities)
460259 500
(CUSIP Number)
James L. Hurn
Digital Imaging Technologies, Inc.
2950 North West Loop, Suite #1050
Houston, Texas 77092
(713) 956-2165
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
July 31, 1996
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13G, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box: / /
Check the following box if a fee is being paid with the statement: /X/
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Page 2 of 12 Pages
SCHEDULE 13D
CUSIP No. 460259 500
- --------------------------------------------------------------------------------
1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Digital Imaging Technologies, Inc.
76-0464035
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2. Check the Appropriate Box if a Member of a Group
(a) /x/
(b) / /
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3. SEC Use Only
- --------------------------------------------------------------------------------
4. Source of Funds
OO
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5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e): / /
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6. Citizenship or Place of Organization
Delaware
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7. Sole Voting Power
Number of Shares
Beneficially 853,040 shares of Common Stock
Owned by -----------------------------------------------------
Each 8. Shared Voting Power
Person
With 0
-----------------------------------------------------
9. Sole Dispositive Power
853,040 shares of Common Stock
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Page 3 of 12 Pages
10. Shared Dispositive Power
-0-
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
853,040 shares of Common Stock issuable within sixty days upon the
exercise of a warrant held directly by Digital Imaging
Technologies, Inc. ("DITI")
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12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
/ /
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13. Percent of Class Represented by Amount in Row (11)
11.8%*
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14. Type of Reporting Person
CO
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- ----------
*Assumes 6,374,970 shares of International Remote Imaging Systems,
Inc. ("IRIS") Common Stock outstanding as of March 31, 1996, as represented by
IRIS in its quarterly report on Form 10-Q.
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Page 4 of 12 Pages
SCHEDULE 13D
CUSIP No. 460259 500
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1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Edward Randall, III
###-##-####
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2. Check the Appropriate Box if a Member of a Group
(a) /x/
(b) / /
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3. SEC Use Only
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4. Source of Funds
Not applicable
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5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e): / /
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6. Citizenship or Place of Organization
United States of America
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7. Sole Voting Power
Number of Shares
Beneficially 853,040 shares of Common Stock
Owned by -----------------------------------------------------
Each 8. Shared Voting Power
Person
With -0-
-----------------------------------------------------
9. Sole Dispositive Power
853,040 shares of Common Stock
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Page 5 of 12 Pages
10. Shared Dispositive Power
-0-
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
853,040 shares of Common Stock issuable within sixty days upon the
exercise of a warrant held directly by DITI. Mr. Randall currently
owns all of the outstanding shares of capital stock of DITI.
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12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
/ /
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13. Percent of Class Represented by Amount in Row (11)
11.8%**
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14. Type of Reporting Person
IN
- --------
** Assumes 6,374,970 shares of IRIS Common Stock outstanding as of
March 31, 1996, as represented by IRIS in its quarterly report on Form 10-Q.
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Page 6 of 12 Pages
Item 1. Security and Issuer
This Statement on Schedule 13D relates to the beneficial
ownership of shares of common stock, par value $0.01 per share ("Common Stock"),
of International Remote Imaging Systems, Inc., a Delaware corporation (the
"Company"). The address of the Company's principal executive offices is 9162
Eton Avenue, Chatsworth, California 91311.
Item 2. Identity and Background
(a) This Statement on Schedule 13D is being filed jointly
by Digital Imaging Technologies, Inc., a Delaware corporation ("DITI") and Mr.
Edward Randall, III.
(b) Following the sale of certain assets described in Item 4
below, DITI currently owns the stock of several subsidiaries and is engaged in
the business of developing, manufacturing, marketing and selling digital image
processing and analysis products and services for use solely in the oil and gas
industry. The address of the principal business and the principal office of DITI
is 2950 North West Loop, Suite #1050, Houston, Texas 77092.
(c) Information concerning (i) each executive officer and
director of DITI and (ii) each controlling person of DITI, which information is
required to be disclosed in response to Item 2 and General Instruction C to
Schedule 13D, is attached as Appendix A. The executive officer and sole director
may be deemed, but are not conceded to be, controlling persons of DITI. Mr.
Randall currently owns all of the outstanding shares of capital stock of DITI.
There are no other persons ultimately in control of DITI.
(d) The business address of Mr. Randall is 5851 San Felipe,
Suite 850, Houston, Texas 77057. Mr. Randall's current principal occupation is a
private investor.
(e) During the last five years, neither DITI nor Mr. Randall
have been convicted in a criminal proceeding (excluding traffic violations and
similar misdemeanors).
(f) During the last five years, neither DITI nor Mr. Randall
has been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding is or was subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
(g) Mr. Randall is a citizen of the United States.
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Page 7 of 12 Pages
Item 3. Source and Amount of Funds or Other Consideration
As consideration for the warrants, DITI transferred certain
intellectual property and other assets used in the business of developing,
manufacturing and marketing digital image processing and analysis products and
services. The transactions described in Item 4 below are incorporated herein by
reference.
Item 4. Purpose of Transactions
On July 31, 1996, pursuant to an Asset Purchase Agreement (the
"Purchase Agreement"), dated as of July 15, 1995, among the Company, DITI, and
Perceptive Scientific Instruments, Inc.("PSII") and Perceptive Scientific
Technologies, Inc. ("PSTI"), each of which are Delaware corporations wholly
owned by DITI, the Company purchased certain intellectual property and other
assets used in the business of developing, manufacturing and marketing digital
image processing and analysis products and services. The full text of the
Purchase Agreement is filed as Exhibit A hereto and incorporated herein by
reference. The purchase price paid by the Company to DITI on July 31, 1996 was
(i) $9,328,821 in cash, subject to adjustments, (ii) an 8-1/2% Senior
Subordinated Note due 2001 in the principal amount of $7,000,000 and (iii)
warrants to purchase 875,000 shares (the "Original Warrants") of Common Stock,
at an exercise price of $8.00 per share.
On July 31, 1996, immediately following the issuance of the
Original Warrants, DITI transferred, and the Company reissued, warrants to
purchase 21,960 shares of Common Stock to Anthony G. Landells pursuant to a
separate Agreement, dated as of July 2, 1996, the full text of which is filed as
Exhibit B hereto.
Following the completion of the immediately successive
transactions on July 31, 1996 pursuant to the agreements set forth in Exhibit A
and Exhibit B, DITI beneficially owned warrants to purchase 853,040 shares of
Common Stock. DITI is a beneficial owner of the 853,040 shares of Common Stock
pursuant to Rule 13d-3(a) and 13d-3(d)(1)(i)(A) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
All of the outstanding shares of capital stock of DITI are
owned by Mr. Edward Randall, III. Accordingly, Mr. Randall is also deemed a
beneficial owner of the 853,040 shares of Common Stock beneficially owned by
DITI pursuant to Rule 13d-3 under the Exchange Act.
Pursuant to Section 10.7 of the Purchase Agreement, Mr.
Randall will be elected as a director to the Board of Directors of the Company.
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Page 8 of 12 Pages
Except as disclosed in this Item 4, DITI and Mr. Randall do
not have any current plans or proposals that relate to or would result in any of
the events described in Items (a) through (j) of the instructions to Item 4 of
Schedule 13D. The foregoing response to this Item 4 is qualified in its entirety
by reference to the Purchase Agreement, the full text of which is filed as
Exhibit A hereto and incorporated herein by reference.
Item 5. Interest in Securities of the Issuer
(a) The Company reported in its quarterly report on Form 10-Q
that it had issued and outstanding on March 31, 1996 an aggregate of 6,374,970
shares of Common Stock. The number of shares of Common Stock which are deemed to
be beneficially owned directly by DITI and indirectly by Mr. Randall pursuant to
the warrant held by DITI is 853,040 shares, or approximately 11.8% of the class
of such securities. Beneficial ownership of such shares was acquired as
described in Item 4.
(b) The number of shares of Common Stock as to which there is
sole power to direct the vote, shared power to vote or to direct the vote, sole
power to dispose or direct the disposition or shared power to dispose or direct
the disposition for DITI is set forth in the cover pages, and such information
is incorporated herein by reference. To the knowledge of DITI and Mr. Randall,
the persons listed on Appendix A in response to Item 2, other than Mr. Randall,
do not beneficially own any shares of Common Stock.
(c) There have been no reportable transactions with respect to
the Common Stock within the last 60 days by DITI or Mr. Randall except for the
disposition of beneficial ownership of the 21,960 shares to Mr. Landells
described in Item 4 above and the acquisition by DITI and Mr. Randall of
beneficial ownership of the shares being reported on this Schedule 13D.
(d) To the knowledge of DITI and Mr. Randall, no other person
is known to have the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the shares being reported on
this Schedule 13D.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships With Respect to Securities of the Issuer
The responses to Item 2, Item 3 and Item 4, and the Purchase
Agreement are incorporated herein by reference.
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Page 9 of 12 Pages
Item 7. Material Filed as Exhibits
The following are filed herewith as Exhibits to this Schedule
13D:
A. Asset Purchase Agreement, dated as of July 15, 1996, by
and among International Remote Imaging Systems, Inc.,
Digital Imaging Technologies, Inc., Perceptive Scientific
Instruments, Inc. and Perceptive Scientific Technologies,
Inc.
B. Agreement, dated as of July 2, 1996, by and among Digital
Imaging Technologies, Inc., Perceptive Scientific
Instruments, Inc., Perceptive Scientific International
Limited, Edward Randall III, Anthony G. Landells and
Marjorie Landells.
C. Agreement for Joint Filing on Behalf of Each Reporting
Person
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Page 10 of 12 Pages
SIGNATURE
After reasonable inquiry and to the best of its knowledge and
belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: July 7, 1996
DIGITAL IMAGING TECHNOLOGIES, INC.
By: /s/ James L. Hurn
Name: James L. Hurn
Title: Chief Executive Officer
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Page 11 of 12 Pages
SIGNATURE
After reasonable inquiry and to the best of its knowledge and
belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: July 7, 1996
Signature: /s/ Edward Randall, III
Name: Edward Randall, III
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Page 12 of 12 Pages
APPENDIX A
DIRECTORS, EXECUTIVE OFFICERS
AND
CONTROLLING PERSONS
OF
DIGITAL IMAGING TECHNOLOGIES, INC.
The following table sets forth the name, business address and present
principal occupation or employment of (a) each director and executive officer
and (b) each controlling person of DITI. Unless otherwise indicated below, each
such person is a citizen of the United States of America, and the business
address of each such person is c/o Digital Imaging Technologies, Inc., 2950
North Loop West, Suite #1050, Houston, Texas 77092. Except as indicated below,
during the last five years, none of the persons listed below has been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors),
nor has any of such persons been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
Present Principal Occupation or
Name Employment; Business Address
(a) Executive Officers and Directors
James L. Hurn Chief Executive Officer and sole
Director
(b) Controlling Persons
Edward Randall, III Private investor. The business
address of Mr. Randall is
5851 San Felipe, Suite 850,
Houston, Texas 77057.
<PAGE>
EXHIBIT INDEX
Exhibit Description
A. Asset Purchase Agreement, dated as of July 15, 1996, by
and among International Remote Imaging Systems, Inc.,
Digital Imaging Technologies, Inc., Perceptive Scientific
Instruments, Inc. and Perceptive Scientific Technologies,
Inc.
B. Agreement, dated as of July 2, 1996, by and among Digital
Imaging Technologies, Inc., Perceptive Scientific
Instruments, Inc., Perceptive Scientific International
Limited, Edward Randall III, Anthony G. Landells and
Marjorie Landells.
C. Agreement for Joint Filing on Behalf of Each Reporting
Person
EXHIBIT A
ASSET PURCHASE AGREEMENT
by and among
INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.,
a Delaware corporation,
DIGITAL IMAGING TECHNOLOGIES, INC.,
a Delaware corporation,
PERCEPTIVE SCIENTIFIC INSTRUMENTS, INC.,
a Delaware corporation,
and
PERCEPTIVE SCIENTIFIC TECHNOLOGIES, INC.,
a Delaware corporation,
Dated as of July 15, 1996
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1 AGREEMENT TO PURCHASE AND SELL........................... 1
1.1 Acquisition............................................. 1
1.2 Closing; Effective Date................................. 2
1.3 Transfer of Assets...................................... 2
1.4 Purchase Price.......................................... 2
1.4.1 Amount......................................... 2
1.4.2 Payment........................................ 3
1.4.3 Post-Closing Adjustment........................ 3
1.5 Assumption of Liabilities............................... 3
1.6 Sales and Use Tax....................................... 4
1.7 Allocation of Purchase Price............................ 4
SECTION 2 REPRESENTATIONS AND WARRANTIES OF
SELLER.................................................. 4
2.1 Existence and Rights...................................... 4
2.2 Agreements Authorized..................................... 4
2.3 No Conflict............................................... 5
2.4 Capitalization............................................ 5
2.5 Contingencies............................................. 5
2.6 Financial Condition....................................... 6
2.7 No Subsequent Changes..................................... 6
2.8 Compliance with Laws...................................... 6
2.9 Title to Assets........................................... 7
2.10 Intellectual Property..................................... 7
2.11 Software.................................................. 7
2.12 Inventory................................................. 8
2.13 Equipment and Personalty.................................. 8
2.14 Files..................................................... 8
2.15 Product Liability......................................... 8
2.16 Insurance................................................. 9
2.17 Real Property............................................. 9
2.18 Environmental Matters..................................... 9
2.19 Material Assigned Contracts............................... 9
2.20 Purchase Commitments and Sales Commitments................ 10
2.21 Business Relations........................................ 10
2.22 Affiliate Transactions.................................... 11
2.23 Benefit Plans............................................. 11
2.24 Employment Matters........................................ 11
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Page
2.25 Accredited Investors; Investment Intent................ 12
2.26 Commissions............................................ 12
2.27 Taxes.................................................. 13
2.28 Accuracy of Information Furnished...................... 13
SECTION 3 REPRESENTATIONS AND WARRANTIES OF IRIS................ 13
3.1 Existence and Rights................................... 13
3.2 Agreements Authorized.................................. 14
3.3 No Conflict............................................ 14
3.4 SEC Filings............................................ 14
3.5 Capitalization......................................... 15
3.6 Contingencies.......................................... 15
3.7 No Material Changes.................................... 15
3.8 Compliance with Laws................................... 15
3.9 IRIS Securities........................................ 15
3.10 Purchasing Inventory for Resale........................ 15
3.11 Commissions............................................ 16
3.12 Accuracy of Information Furnished...................... 16
SECTION 4 COVENANTS OF SELLER.................................. 16
4.1 Conduct of Business Prior to Closing.................... 16
4.2 Representations True.................................... 17
4.3 Access.................................................. 17
4.4 Supplemental Information................................ 18
4.5 Permits................................................. 18
4.6 Security Interests...................................... 18
4.7 Closing Agreements...................................... 18
4.8 Legal Opinion........................................... 18
SECTION 5 COVENANTS OF IRIS.................................... 18
5.1 Representations True.................................. 18
5.2 Supplemental Information.............................. 18
5.3 Permits............................................... 19
5.4 Closing Agreements.................................... 19
5.5 Legal Opinion......................................... 19
SECTION 6 CONDITIONS PRECEDENT TO OBLIGATIONS
OF IRIS.............................................. 19
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Page
6.1 Accuracy of Representations and Warranties............ 19
6.2 Compliance with Covenants............................. 19
6.3 Consents Obtained; Filings............................ 19
6.4 No Material Adverse Effect............................ 19
6.5 Legal Actions or Proceedings.......................... 20
6.6 All Proceedings to Be Satisfactory.................... 20
6.7 Opinion of Counsel for Seller......................... 20
6.8 Closing Agreements.................................... 20
6.9 Transfer Documents.................................... 20
6.10 Closing Documents..................................... 20
6.11 Commissions........................................... 20
6.12 Capital Stock of PSI.................................. 20
6.13 Pending Lawsuit....................................... 20
SECTION 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF
SELLER............................................... 21
7.1 Accuracy of Representations and Warranties........... 21
7.2 Compliance with Covenants............................ 21
7.3 Consents Obtained; Filings........................... 21
7.4 No Material Adverse Effect........................... 21
7.5 All Proceedings to Be Satisfactory................... 21
7.6 Opinion of Counsel for IRIS.......................... 21
7.7 Legal Actions or Proceedings......................... 21
7.8 Closing Agreements................................... 22
7.9 Closing Documents.................................... 22
7.10 Purchase Price....................................... 22
SECTION 8 INDEMNIFICATION....................................... 23
8.1 Right of Indemnification.............................. 22
8.2 Deductible Amount..................................... 22
8.3 Survival of Representations; Effect of Disclosures.... 22
8.4 Time Limit............................................ 22
8.5 Procedures for Indemnification........................ 22
8.6 Cooperation........................................... 23
SECTION 9 TERMINATION............................................ 23
9.1 Grounds for Termination............................... 23
9.2 Effect of Termination................................. 24
9.3 Rights to Proceed..................................... 24
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Page
9.4 Specific Performance................................. 24
SECTION 10 OTHER COVENANTS.................................... 25
10.1 Confidentiality...................................... 25
10.2 Employment of Certain Personnel...................... 25
10.3 Change of Names...................................... 26
10.4 Collection of Accounts Receivable.................... 26
10.5 Notification of Suppliers and Distributors........... 26
10.6 Non-Competition...................................... 26
10.7 Nominee to IRIS Board of Directors................... 26
10.8 Cooperation by Seller................................ 27
10.8.1 Consulting Services.......................... 27
10.8.2 Additional Acts.............................. 27
10.8.3 Confirmation of Title........................ 28
10.8.4 Announcements................................ 28
10.9 Cooperation by Buyer................................. 28
SECTION 11 DEFINITIONS........................................ 28
SECTION 12 MISCELLANEOUS...................................... 35
12.1 Entire Agreement; Modifications..................... 35
12.2 Expenses............................................ 36
12.3 Waivers............................................. 36
12.4 Cooperation......................................... 36
12.5 Third-Party Benefits................................ 36
12.6 Successors and Assigns.............................. 36
12.7 Remedies Not Exclusive.............................. 36
12.8 Notices............................................. 37
12.9 Governing Law; Consent to Jurisdiction.............. 38
12.10 Attorneys' Fees..................................... 38
12.11 Headings............................................ 38
12.12 Severability........................................ 38
12.13 Arbitration of Disputes............................. 39
12.14 Agreement Negotiated................................ 39
12.15 Counterparts........................................ 39
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<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of July 15, 1996, by and among INTERNATIONAL REMOTE IMAGING SYSTEMS,
INC., a Delaware corporation ("IRIS"), on the one hand, and DIGITAL IMAGING
TECHNOLOGIES, INC., a Delaware corporation ("DITI"), PERCEPTIVE SCIENTIFIC
INSTRUMENTS, INC., a Delaware corporation ("PSII"), and PERCEPTIVE SCIENTIFIC
TECHNOLOGIES, INC., a Delaware corporation ("PSTI"), on the other hand, with
reference to the following facts:
A. PSII and PSTI are wholly-owned subsidiaries of DITI, and Perceptive
Scientific International Limited, a United Kingdom corporation ("PSIL"), is a
majority-owned subsidiary of PSII. (PSII, PSTI and PSIL are sometimes
hereinafter referred to collectively as the "Operating Companies," and DITI,
PSII and PSTI are sometimes hereinafter referred to collectively as the
"Seller.")
B. Seller is the owner of certain intellectual property and other
assets (as defined herein, the "Assets") used by the Operating Companies in the
business of developing, manufacturing and marketing digital image processing and
analysis products and services, including the proprietary PowerGene(TM) product
line of genetic analysis instruments.
C. IRIS desires to purchase the Assets from Seller, and Seller is
willing to sell the Assets to IRIS, on the terms and conditions set forth
herein.
D. Concurrently with the purchase of the Assets, IRIS will grant to
Perceptive Scientific Imaging Systems, Inc., a Delaware corporation and
wholly-owned subsidiary of DITI ("PSISI"), a royalty-free, exclusive license to
use all the technology purchased from Seller on a worldwide basis solely for use
in connection with the Well Log Business.
E. Capitalized terms not otherwise defined in the Agreement have
the meanings set forth in Section 11 of the Agreement.
NOW, THEREFORE, based on the above premises and in consideration of the
mutual covenants and agreements contained herein, the parties agree as follows:
SECTION 1
AGREEMENT TO PURCHASE AND SELL
1.1 Acquisition. On the terms and subject to the conditions of this
Agreement, on the Closing Date, Seller agrees to sell to IRIS, and IRIS agrees
to purchase from Seller, the Assets in exchange for the payment of the Purchase
Price and the assumption of the Obligations.
-1-
<PAGE>
1.2 Closing; Effective Date. Assuming satisfaction or waiver of all
conditions set forth in Sections 6 and 7, the closing of the Transactions (the
"Closing") will take place at the offices of Irell & Manella, counsel to IRIS,
at 1800 Avenue of the Stars, Suite 900, Los Angeles, California as soon as
practicable after the date hereof, or at such other date, time and place as may
be mutually agreed upon in writing by the parties (the "Closing Date"). Assuming
the Closing occurs, the parties agree that the effective date shall be July 1,
1996 (the "Effective Date").
1.3 Transfer of Assets. At the Closing, Seller will transfer, assign
and deliver the Assets to IRIS free and clear of any liens, charges, options,
adverse claims or security interests except the Obligations. The parties intend
that IRIS have the benefit of, and Seller's transfer and assignment to IRIS of
the Assets include, all of Seller's existing rights and remedies pursuant to any
representations, warranties, indemnifications, covenants or agreements made by
any other party pursuant to any of the Assigned Contracts.
1.4 Purchase Price.
1.4.1 Amount. The "Purchase Price" shall consist of the
following:
(i) an amount of cash equal to Nine Million Three Hundred
Twenty-Eight Thousand Eight Hundred Twenty-One Dollars ($9,328,821), plus PSII
Year-to-Date EBIT (or minus PSII Year-to-Date EBIT if negative), minus PSII Cash
and minus Net Cash Transfers to DITI (or plus Net Cash Transfers to DITI if
negative);
(ii) an 8 1/2% Senior Subordinated Note due 2001 in the
principal amount of Seven Million Dollars ($7,000,000); and
(iii) an IRIS Warrant to purchase Eight Hundred Seventy-Five
Thousand (875,000) shares of IRIS Common Stock at an exercise price of Eight
Dollars ($8.00) per share.
For purposes of determining the Purchase Price, "PSII Year-to-Date EBIT" shall
mean the consolidated net income (or loss) of the Operating Companies from
January 1, 1996 through the Effective Date before interest expense payable to
DITI and income taxes, all determined in accordance with GAAP, (i) including a
pro rata allocation of year-end reserves and accruals and (ii) including the
corporate management expenses of DITI properly allocable to the Operating
Companies (which percentage shall not be less than the percentage allocated to
the Operating Companies for the year ended December 31, 1995) (hereinafter
referred to as "Corporate Management Expenses"). "PSII Cash" shall mean the cash
and cash equivalents of the Operating Companies as of the close of business on
the Closing Date. "Net Cash Transfers to DITI" shall mean, for the period from
January 1, 1996 through the Closing Date, (a) the aggregate amount of cash
transferred from the Operating Companies to DITI, (b) plus the aggregate amount
of cash paid
-2-
<PAGE>
directly to any creditor of DITI, the Controlling Stockholder or any Affiliate
of the Controlling Stockholder (including, without limitation, principal and
interest payments to Southwest Bank of Texas), (c) minus the aggregate amount of
cash advanced by DITI to the Operating Companies and (d) minus payments from the
Operating Companies to DITI for Corporate Management Expenses. All of the
expenses of Seller related to the Transactions (including, without limitation,
commissions, legal fees, employee bonuses and the cost of reacquiring the
minority interest in PSIL) shall be incurred and paid solely by DITI and not by
any of the Operating Companies.
1.4.2 Payment. On the Closing Date, IRIS shall (i) wire
transfer to an account designated in writing by DITI the Estimated Cash Portion
of the Purchase Price and (ii) execute and deliver to DITI the Senior
Subordinated Note and the IRIS Warrant. As far in advance of the Closing as is
practicable, DITI shall prepare and deliver to IRIS reasonably detailed
estimates of PSII Year-to-Date EBIT, PSII Cash and Net Cash Transfers to DITI.
The "Estimated Cash Portion of the Purchase Price" payable at Closing shall be
Nine Million Three Hundred Twenty-Eight Thousand Eight Hundred Twenty-One
Dollars ($9,328,821) plus estimated PSII Year-to-Date EBIT (or minus estimated
PSII Year-to-Date EBIT if negative), minus estimated PSII Cash and minus
estimated Net Cash Transfers to DITI (or plus estimated Net Cash Transfers to
DITI if negative).
1.4.3 Post-Closing Adjustment. Not more than 60 days after the
Closing, DITI, with the full cooperation of IRIS employees and full access to
the Files, shall prepare and deliver to IRIS (i) a final determination of PSII
Year-to-Date EBIT, PSII Cash and Net Cash Transfers to DITI, (ii) audited
consolidated financial statements of PSII as of and for the 6-month period ended
on the Effective Date, together with an unqualified auditor's report thereon
from Buffington & Company, P.C., and (iii) unaudited consolidated financial
statements of PSII as of the Closing Date and for the period from the Effective
Date to the Closing Date. The cost of the auditor's report shall be borne
equally by each party. IRIS shall have up to 90 days thereafter to review and,
at its expense, cause Coopers & Lybrand, LLP to review the calculation of the
Purchase Price on its behalf to ensure that it has been calculated consistently
with Section 1.4.1. If IRIS believes that any material aspect of such
calculation has not been prepared appropriately, Coopers & Lybrand shall, not
later than the end of such 90-day period, contact Buffington & Company, acting
on behalf, and at the expense, of Seller to attempt to resolve the matter. If
they are unable to resolve the matter within 45 days from the date that
Buffington & Company is first contacted, Seller and IRIS shall request another
firm designated by the first two accounting firms to determine the matter
subject to disagreement, and the determination so made shall be final and
binding on all parties. The fees of the third firm shall be borne equally by
each party. Seller shall promptly refund to IRIS in cash the amount (if any) by
which the amount paid at Closing exceeds the Purchase Price, or IRIS shall
promptly pay to Seller cash in the amount (if any) by which the Purchase Price
exceeds the amount paid at Closing.
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1.5 Assumption of Liabilities. At the Closing, IRIS shall assume, and
thereafter will perform, pay or otherwise satisfy in accordance with their terms
as and when due, all of the Obligations. IRIS shall not assume nor be liable for
any other obligations, debts, contracts or liabilities of Seller. Seller shall
indemnify and hold harmless IRIS from and against the full amount of any Losses
incurred by IRIS with respect to claims based on any alleged obligations, debts,
contracts or liabilities of Seller not expressly assumed by IRIS under this
Section 1.5.
1.6 Sales and Use Tax. IRIS and Seller shall cooperate in preparing
and filing use and sales tax returns relating to, and Seller shall pay any sales
or use tax due with regard to, the Transactions.
1.7 Allocation of Purchase Price. The parties have negotiated an
allocation of the Purchase Price, including the portion of the Purchase Price
attributable to particular Assets, among the Assets and other matters as set
forth on Schedule 1.7. Each of the parties agrees (i) to report the Transactions
for federal and state income tax purposes in accordance with this allocation,
(ii) to not take any position inconsistent with such allocation on its tax
returns without the consent of the other and (iii) to timely file federal tax
Form 8594 (Asset Acquisition Statement) with the applicable tax return for the
year of the Transactions. Each party shall provide the other with a draft copy
of its federal tax form 8594 at least fifteen (15) days prior to filing it.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement for IRIS to enter into this Agreement, DITI, PSII and
PSTI, jointly and severally, represent and warrant to IRIS that each of the
following statements is true, correct and complete as of the date hereof:
2.1 Existence and Rights. Each of DITI, PSII and PSTI is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware. PSIL is a corporation duly incorporated and validly existing
under the laws of the United Kingdom. DITI and each of the Operating Companies
(i) has the corporate power and authority, rights and franchises to own its
properties, to carry on its business as now conducted and to make and carry out
the Transactions and (ii) is duly qualified and in good standing in each
jurisdiction in which the character of its business makes such qualification
necessary.
2.2 Agreements Authorized. The execution, delivery and performance by
Seller of this Agreement and each Closing Agreement to which DITI or any
Operating Company is listed as a party have been duly authorized by all
necessary corporate action (including, without limitation, shareholder approval)
and, except as set forth on
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Schedule 2.2, do not require notice to, or the consent or approval of, any
governmental body, regulatory authority or other person. This Agreement has been
duly executed and delivered by Seller and is a legal, valid and binding
obligation of Seller enforceable against Seller in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting or relating to creditors' rights generally and general principles
of equity. Upon execution and delivery by DITI or any Operating Company, each
Closing Agreement to which such entity is listed as a party will be a legal,
valid and binding obligation of such entity enforceable against such entity in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to creditors' rights
generally and general principles of equity.
2.3 No Conflict. Subject to obtaining the consents in Schedule 2.2, the
execution, delivery and performance by Seller of this Agreement and each Closing
Agreement to which DITI or any Operating Company is listed as a party will not
(i) breach or constitute grounds for the occurrence or declaration of a default
under or allow another party a right to terminate any Material Assigned Contract
or other material agreement, indenture, undertaking or other instrument to which
DITI or any Operating Company is a party or by which they or any of the Assets
are bound (including by virtue of any "key person" clause); (ii) violate any
provision of Law; (iii) violate any provision of the Articles of Incorporation
or Bylaws of DITI or any Operating Company; or (iv) result in the creation or
imposition of any lien, charge or encumbrance on, or security interest in, any
of the Assets. Seller is a "person" with total assets and annual net sales of
less than $100,000,000 as determined in accordance with the Hart-Scott-Rodino
Antitrust Improvement Act of 1976, as amended, and the regulations promulgated
thereunder.
2.4 Capitalization. The Controlling Stockholder is the beneficial and
record owner of a majority of the outstanding shares of capital stock of DITI,
and DITI is the beneficial and record owner of all of the outstanding shares of
capital stock of PSII, PSTI and PSISI. PSII and Tony Landells, an employee of
PSIL, are the beneficial and record owners of 75% and 25%, respectively, of the
outstanding ordinary shares of PSIL, and PSII is the beneficial and record owner
of all the outstanding preferred shares of PSIL. PSII will be the beneficial and
record owner of all the outstanding shares of capital stock of PSIL on or before
the Closing Date. Except as set forth on Schedule 2.9, there are no outstanding
options, warrants, convertible debt securities or other rights to purchase any
shares of capital stock of DITI, PSISI or any Operating Company.
2.5 Contingencies. Except as set forth in the notes to the Financial
Statements or on Schedule 2.5, (i) neither DITI nor any Operating Company is a
party to any express warranty or similar guarantee with respect to any Inventory
or other products previously sold or leased by it, (ii) there is no litigation,
arbitration, other proceedings, written audit requests or, to the knowledge of
Seller, investigations pending against DITI or any Operating Company, any of
their officers or directors (in their capacities as such) or the Assets, and
(iii) to the knowledge of Seller, there is no threat of, or a reasonable basis
for,
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any such litigation, arbitration, other proceedings or written audit requests,
the results of which could reasonably be expected to have a Material Adverse
Effect. Neither DITI nor any Operating Company is in default with respect to any
order, writ, injunction or decree of any court or other governmental or
regulatory authority.
2.6 Financial Condition. The Financial Statements, correct and complete
copies of which are attached hereto as Schedule 2.6, (i) are true and correct as
of the date thereof; (ii) fairly and accurately present the consolidated
financial condition of DITI and PSII as of the dates thereof and the
consolidated results of the operations of DITI and PSII for the periods covered
thereby; and (iii) have been prepared in accordance with GAAP. To the best
knowledge of Seller, except as set forth in the Financial Statements, the notes
thereto or Schedule 2.5, DITI and the Operating Companies did not have more than
$30,000 in the aggregate of liabilities or guarantees, matured or unmatured,
contingent or otherwise, as of the date of the Financial Statements which were
not accurately reflected in the Financial Statements, and none have arisen since
that time except in the ordinary course of the Business. The Financial
Statements include adequate reserves for contracts, commitments, warranties and
contingent liabilities to the extent required by GAAP.
2.7 No Subsequent Changes. Except as set forth on Schedule 2.7, since
December 31, 1995, (i) there has not been any Material Adverse Effect, or any
occurrence or event which could reasonably be expected to have a Material
Adverse Effect; (ii) neither DITI or any Operating Company has entered into,
amended or terminated any commitments, contracts or transactions, or waived any
contractual rights, except in the ordinary course of business, none of which
individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect; and (iii) neither DITI nor any Operating Company has made any
change in its accounting methods or practices or any revaluations of any Assets
or any reserves or liabilities associated therewith. Since December 31, 1995,
neither DITI nor PSII has directly or indirectly paid, declared, or set aside
any dividends or distributions with respect to, nor repurchased, any of its
capital stock or securities of any class. Since December 31, 1995, neither DITI
nor any Operating Company has paid any interest on, or repaid any principal of,
any debt owed to the Controlling Stockholder or any of his Affiliates. Except as
set forth on Schedule 2.7, there has been no acquisition, disposition or
transfer of Inventory, Equipment, Personalty or other Assets except in the
ordinary course of business since December 31, 1995. Without limiting the
foregoing, since December 31, 1995, there has been no transfer of cash or other
assets from any of the Operating Companies to, or for the behalf of, DITI, the
Controlling Stockholder or any Affiliate of the Controlling Stockholder other
than transfers of cash includable in the definition of "Net Cash Transfers to
DITI" as a reduction to the Purchase Price.
2.8 Compliance with Laws. The business and operations of DITI and the
Operating Companies are and have been in compliance with all Laws, except where
the failure to so comply could not reasonably be expected to have a Material
Adverse Effect. DITI and the Operating Companies have all permits, licenses,
orders, authorizations,
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registrations, approvals and other analogous instruments (each of which is
listed on Schedule 2.8, is in full force and effect and, except as disclosed on
Schedule 2.8, can be transferred without any consent or filing), and they have
made all filings and registrations and the like, which are necessary or proper
to conduct the Business, except where the failure to maintain such permits and
other instruments or to make such filings and registrations could not reasonably
be expected to have a Material Adverse Effect.
2.9 Title to Assets. Except as disclosed on Schedule 2.9, DITI and the
Operating Companies have good and marketable title to the Assets free and clear
of any liens, charges, options, adverse claims or security interests except the
Obligations. The Assets include all of the assets necessary or actually used to
conduct the Business.
2.10 Intellectual Property. Except as disclosed on Schedule 2.10, DITI
and the Operating Companies are the exclusive owners of all the Intellectual
Property. Schedule 2.10 correctly lists all the Patents, registered Copyrights
and registered Trademarks, the jurisdictions in which they were issued or
registered, the date of issuance or registration and the identification number
assigned thereto. The Patents, registered Copyrights and registered Trademarks
are valid and enforceable in the jurisdictions in which they were issued or
registered, as applicable. There are no options, licenses, royalty agreements or
encumbrances of any kind relating to the Intellectual Property other than as set
forth on Schedule 2.10. The Operating Companies possess the right to use in
perpetuity (without royalty or other payment except as disclosed on Schedule
2.10) all Intellectual Property necessary or actually used to conduct the
Business. Assuming execution of the New Employment Contracts, the failure of
present and former employees and consultants of DITI, the Operating Companies
and their respective predecessors to execute Employee Patent and Confidentiality
Agreements will not have a Material Adverse Effect. Schedule 2.10 correctly
lists all past and present litigation, arbitration or other disputes involving
any of the Intellectual Property (and the outcome or present status thereof). To
the best knowledge of Seller, the operation of the Business, including, but not
limited to, the making, use, or sale of any Product by DITI or any Operating
Company, does not violate or infringe any U.S. or foreign patent, copyright,
trademark, service mark, trade secret or other proprietary interest of any other
person. Without limiting the foregoing, the operation of the Business by the
Operating Companies, including, but not limited to, the making, use, or sale of
any Product by DITI or any Operating Company, does not violate or infringe U.S.
Patent No. 5,447,841 (Methods for Chromosome-Specific Staining) or any foreign
counterpart thereof. Further, to the best knowledge of Seller, no person is
contesting Seller's rights in or to or violating or infringing any of the
Intellectual Property.
2.11 Software. Schedule 2.11 contains a complete and accurate list of
the Software. Except as set forth on Schedule 2.10 or 2.11, PSTI is the
exclusive owner of the Software (including the exclusive right to make, copy,
sell, exploit and provide to others the use of the Software and all derivative
works thereof) free and clear of any liens, options, licenses, royalty
agreements or encumbrances of any kind. PSTI is in actual and
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sole possession of, and the Assets include, the complete source code of the
Software and all related design documentation. Except as set forth on Schedule
2.11, each author of the Software, and every other person who participated in
the development of the Software or any portion thereof or performed any work
related thereto (collectively, the "Software Authors"), made his contribution to
the Software within the scope of his employment by an Operating Company or one
of their predecessors as a "work for hire." Except as set forth on Schedule
2.11, the Software and every portion thereof is an original creation of an
Operating Company or one of their predecessors and does not contain any source
code or portions of source code (including any "canned program") created by any
parties other than the Software Authors. Any defects in the Software, and any
errors in the related design documentation, are not, in the aggregate, excessive
in light of industry standards. The Software has in all material respects the
features described in the design documentation or advertisements made available
to customers and, to the best knowledge of Seller, does not contain any
"viruses" (as that term is commonly used in the computer software industry). To
the best knowledge of Seller, the use and sale of the Software in the operation
of the Business does not violate or infringe any U.S. or foreign patent,
copyright, trademark, service mark, trade secret or other proprietary interest
of any other person. Further, to the best of knowledge of Seller, no person is
contesting Seller's rights in or to the Software or is violating or infringing
any of the Software.
2.12 Inventory. The Inventory reflected in the Financial Statements or
thereafter acquired by any Operating Company, consists of items of a quantity
and quality usable or salable in the ordinary course of the Business. Except as
disclosed on Schedule 2.12, neither DITI nor any Operating Company is under any
liability or obligation with respect to the return of inventory or merchandise
in the possession of others. Seller has not received written or oral notice that
any Operating Company will experience in the foreseeable future any material
difficulty in obtaining, in the desired quantity and quality and at a reasonable
price and upon reasonable terms and conditions, the raw materials, services,
supplies or component products required for the Business. The values at which
inventories are carried on the Financial Statements reflect the inventory
valuation policy of DITI and the Operating Companies in accordance with GAAP.
2.13 Equipment and Personalty. Schedule 2.13 is a complete, accurate
and correct list of all Equipment not in possession of DITI or an Operating
Company, the location thereof, the party in possession thereof and any
arrangements or understandings regarding the possession thereof. The Equipment
and Personalty is in good operating condition, ordinary wear and tear excepted.
2.14 Files. The Files include, among other things, (a) all Customer
Lists in the possession of DITI or an Operating Company and which were
obtainable from distributors after reasonable efforts, (b) all documentation
relating to all other Intellectual Property, (c) all documents relating to
customer complaints and (d) all documentation relating to quality assurance and
quality control.
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2.15 Product Liability. There are no statements, citations or decisions
by any governmental or regulatory body that any product manufactured, marketed
or distributed at any time by DITI or any Operating Company (a "Product") is
defective or fails to meet in any material respect any standards promulgated by
any such governmental or regulatory body, including, but not limited to, the
FDA, and, to the best knowledge of Seller, no governmental or regulatory body,
including, but not limited to, the FDA, intends to notify Seller of any
violation of such promulgated standards, including, but not limited to, the
Federal Food, Drug and Cosmetics Act, the regulations promulgated thereunder or
any comparable state or foreign law or regulation. There have been no recalls
ordered by any such governmental or regulatory body with respect to any Product.
There is no (a) fact relating to any Product that imposes upon DITI or any
Operating Company (or IRIS upon consummation of the transactions contemplated
hereby) a duty to recall any Product or a duty to warn customers of a defect in
any Product or (b), to the best knowledge of Seller, latent or overt design,
manufacturing or other defect in any Product. To the extent required under
applicable Law, each Product has been cleared for marketing in the United States
by the FDA and in every other country in which such Product is currently
marketed by a comparable governmental agency.
2.16 Insurance. The material properties and assets of DITI and each
Operating Company which are of an insurable character are insured against loss
or damage by fire and other customary risks, and DITI and the Operating
Companies have liability and worker's compensation insurance with independent
carriers, in each case to the extent and in the manner customary for companies
engaged in a similar business or owning similar assets. Schedule 2.16 correctly
sets forth all policies of insurance maintained by DITI and the Operating
Companies, the amount and type of coverage and the expiration date of such
coverage.
2.17 Real Property. Schedule 2.17 correctly identifies all the real
property used in the Business, all of which is leased to an Operating Company.
The leases for such property are listed on Schedule 2.19 as part of the Material
Assigned Contracts.
2.18 Environmental Matters. Except as set forth on Schedule 2.18, DITI
and each Operating Company has been, and is, in full compliance in all material
respects with all Laws relating to pollution or protection of the environment,
including Laws relating to (i) emissions, discharges, releases or threatened
releases or discharges of materials constituting Hazardous Materials into the
environment (including, without limitation, ambient air, surface water, land
surface or subsurface strata) or (ii) the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials
(collectively, "Environmental Laws") and with all terms and conditions of, all
permits, licenses and other authorizations required for the operation of the
Business under any Environmental Law. There is no civil, criminal or
administrative action, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter under the Environmental Laws
pending, or, to the best knowledge of Seller, threatened against DITI or any
Operating Company. Seller has delivered to IRIS
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true and complete copies of all environmental audits, reports and inspections in
its possession or control relating to any real property used in the Business.
Notwithstanding anything to the contrary contained in this Agreement, Seller
makes no representations or warranties with respect to Environmental Laws or
other environmental matters except as set forth in this Section 2.18.
2.19 Material Assigned Contracts. Schedules 2.10 and 2.19 collectively
set forth a correct and complete list of all the Material Assigned Contracts,
including all amendments, modifications and waivers thereto. Seller has
previously delivered to IRIS true and complete copies of all the Material
Assigned Contracts (or, in the case of oral Material Assigned Contracts, true
and correct summaries thereof). "Material Assigned Contracts" shall mean all
Assigned Contracts which are material to the Business, including, without
limitation, all Assigned Contracts (a) relating to Intellectual Property, (b)
involving real property, (c) relating to distributorships, (d) constituting
capital leases, (e) constituting operating leases with aggregate payments over
the life of the lease (assuming exercise of all options) in excess of $30,000,
(f) involving joint ventures, partnerships and similar arrangements or (g)
having a term (whether or not cancelable) of more than one year or potentially
involving the payment or receipt of more than $30,000 in any twelve-month
period. Except as disclosed on Schedule 2.19, each of the Material Assigned
Contracts (including all amendments, modifications and waivers) (a) has been
duly authorized, executed and delivered by DITI, PSII, PSTI and/or PSIL, as
applicable, and, to the best knowledge of Seller, the other parties thereto, (b)
remains in full force and effect to the extent of its terms without any
amendment, modification or waiver not reflected in the copies thereof previously
delivered to IRIS, (c) is binding on the parties thereto in accordance with and
to the extent of its terms and applicable Laws, subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to creditors rights generally and general principles of equity and (d)
will not be breached by the assignment thereof to IRIS. Seller has not received
any letter or other written notice threatening or declaring termination of any
Material Assigned Contract and does not know of any reasonable basis for any
claim of default by it or any other party to any Material Assigned Contract.
Seller is not restricted by agreement from carrying on the Business or any other
line of business anywhere in the world, and, to the best knowledge of Seller,
none of the employees of DITI or any Operating Company is bound by any contract
or restriction which has or could be reasonably expected to have a Material
Adverse Effect.
2.20 Purchase Commitments and Sales Commitments. Schedule 2.20 is a
true and complete list of (i) all Purchase Commitments under which any Operating
Company is obligated, or will become obligated to, pay any particular vendor an
aggregate sum in excess of $30,000; (ii) all Sales Commitments under which any
Operating Company is obligated, or will become obligated to, deliver products
and/or perform services for an aggregate price to any particular customer in
excess of $30,000; and (iii) all bids or proposals (together with a brief
description of each of same) submitted by any Operating Company pursuant to
which it may become obligated to deliver products
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and/or services for an aggregate price to any particular customer in excess of
$30,000. Seller has previously delivered to IRIS true and complete copies of all
such Purchase Commitments and Sales Commitments (or, in the case of oral
Purchase Commitments and Sales Commitments, true and correct summaries thereof).
2.21 Business Relations. DITI and the Operating Companies have good
commercial working relationships with their customers, suppliers and
distributors. Seller has not received notice that any of its customers,
suppliers or distributors intends to terminate or alter its relationship with
DITI or any Operating Company except for terminations or alterations which would
not, in the aggregate, have a Material Adverse Effect. Seller has not received
notice from customers, suppliers or distributors that the Transactions will have
a material adverse effect on the Business after the Closing.
2.22 Affiliate Transactions. Except as disclosed on Schedule 2.22 or in
the notes to the Financial Statements, neither the Controlling Stockholder nor
any of his Affiliates (i) owns (other than ownership of less than one percent
(1%) of the stock of a publicly traded corporation), directly or indirectly,
individually or collectively, any interest in any corporation, partnership,
firm, association or sole proprietorship, which is either a competitor,
potential competitor, customer, supplier or distributor of DITI or any Operating
Company or has an existing contractual relationship with DITI or any Operating
Company; or (ii) owes any money to or is owed any money by DITI or any Operating
Company.
2.23 Benefit Plans. Schedule 2.23 accurately reflects all of the
deferred compensation plans and arrangements maintained by DITI or any of the
Operating Companies, including profit sharing, pension, savings, stock option,
stock bonus and defined contribution plans. Such Schedule identifies all
"employee benefit plans" within the meaning of Section 3(2) of ERISA, all
"multiemployer plans" within the meaning of Section 3(37) of ERISA, all benefit
plans maintained outside the United States primarily for the benefit of
non-resident aliens, in each case with respect to which any material liability
under ERISA or otherwise may be incurred by DITI or any Operating Company
(singularly, a "Plan," and collectively, the "Plans"). Except for Plans which
are multiemployer plans, no Plan is a defined benefit plan within the meaning of
Section 3(35) of ERISA. Neither DITI nor any Operating Company is a "substantial
employer" with regard to any multiemployer plan. Each Plan is and has been
operated and administered in accordance with its provisions and applicable law,
except where the failures to do so, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect, and to the extent
required, is "qualified" within the meaning of 401(a) of the Code, and each
related trust is exempt from taxation under Section 501(a) of the Code, and
Seller knows of no current matter which might materially affect such statuses.
As to facts existing on the date hereof, with respect to any Plan which is not a
multiemployer plan and, to the best of Seller's knowledge with respect to any
Plan which is a multiemployer plan, there is not, and there are no reasonable
grounds to expect, any (i) present liability under ERISA or comparable foreign
Laws which has been or may be
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incurred by Seller or any Subsidiary; (ii) "reportable event" as within the
meaning of Section 406 of ERISA; or (iii) termination of any Title IV Plans
which liability, termination or reportable event, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect. To
the best knowledge of Seller, no persons connected with any Plan have engaged in
non-exempt "prohibited transactions" within the meaning of Section 406 of ERISA
which, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect. Neither DITI nor any Operating Company has violated any
of the health care continuation coverage requirements of Section 4980B of the
Code.
2.24 Employment Matters. There is no pending or (to the best
knowledge of Seller) threatened litigation by any employees or consultants of
DITI or any Operating Company, and there are no pending or (to the best
knowledge of Seller) threatened administrative actions or claims with respect to
the relationship of DITI or any Operating Company to any employee or consultant,
including, without limitation, discrimination claims (whether for sex, age,
race, religion, national origin or any other reason). There are no controversies
regarding compensation or other terms of employment pending or, to the knowledge
of Seller, threatened with any employee(s) of DITI or any Operating Company (nor
have there been any such controversies during the past three years) which could
reasonably be expected to have a Material Adverse Effect, and Seller does not
know of any organizational efforts presently being made involving any of such
employees. No Key Employee has recently terminated or, to the best knowledge of
Seller, has any plans to terminate his or her employment with DITI and the
Operating Companies. Schedule 2.24 lists all the employment agreements with
employees of Operating Company and the names and current compensation levels of
each employee of any Operating Company with a total annual compensation
(including reasonably anticipated bonus payments) over Sixty Thousand Dollars
($60,000), and all collective bargaining agreements or other contracts or
commitments to or with any labor unions or other employee representatives or
groups of employees (the "Existing Employment Contracts").
2.25 Accredited Investors; Investment Intent. DITI is an "Accredited
Investor" as defined in Rule 501 of Regulation D promulgated pursuant to the
Securities Act. All of the stockholders of DITI are residents of the State of
Texas. DITI is acquiring the Senior Subordinated Note and the IRIS Warrant (and
if the IRIS Warrant is exercised, will acquire shares of IRIS Common Stock) for
its own account and not with a view to the resale or distribution of any or all
of such securities in violation of the Securities Act, or any applicable state
securities laws, and DITI will not dispose of such securities in violation of
the Securities Act or any applicable state securities laws. DITI acknowledges
that the Senior Subordinated Note, the IRIS Warrant and the shares of IRIS
Common Stock issuable upon exercise of the IRIS Warrant will not be registered
under the Securities Act or any state securities laws except to the extent
provided in the Registration Rights/Standstill Agreement. As a result, such
securities cannot be sold, and must be held indefinitely, unless subsequently
registered under the Securities Act and
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applicable state securities laws or unless an exemption from such registration
is available. Consequently, DITI understands that any certificates representing
such securities will contain a legend setting forth restrictions on transfer
under such securities laws and the Registration Rights/Standstill Agreement.
Further, DITI acknowledges and understands that IRIS is and will be issuing such
securities pursuant to, and in reliance on, an exemption from the registration
requirements of the Securities Act and any applicable state securities laws
which is, in part, dependent on the representations and warranties made in this
Section 2.25.
2.26 Commissions. Except as provided in Schedule 2.26, neither Seller
nor any of its officers, directors, agents or employees has employed or incurred
any liability to any broker, finder or agent for any brokerage fees, finder's
fees, commissions or other amounts with respect to the Transactions, and Seller
agrees to hold IRIS harmless from and against any Losses incurred by reason of
any contrary assertions.
2.27 Taxes. Except as disclosed on Schedule 2.27, DITI and each
Operating Company has (i) timely filed all returns for Taxes required to be
filed on or before the date hereof or has obtained extensions (without penalty
or interest) of the deadline for filing; (ii) paid or adequately reserved on the
balance sheets contained in the Financial Statements for all Taxes owed on such
date; (iii) adequately reserved for deferred Taxes in accordance with GAAP; and
(iv) duly withheld, collected and paid over to the proper governmental
authorities all Taxes and assessments required to have been withheld or
collected and paid over by such entities, all as and to the extent prescribed by
law. Except as disclosed on Schedule 2.27, neither DITI nor any Operating
Company has been advised of any deficiency claimed or proposed to be claimed
against or relating to any of them by any taxing authority which has not been
paid, settled or adequately reserved for in the Financial Statements, and there
are no matters under discussion with any taxing authority which might reasonably
result in the assessment of additional amounts against or relating to DITI or
any Operating Company. There are no liens for Taxes (other than for current
Taxes not yet due and payable) upon the Assets. PSIL is not a party to or bound
by any tax indemnity, tax sharing or tax allocation agreement. PSIL has never
been a member of an affiliated group of corporations within the meaning of
Section 1504 of the Code. PSIL has never been a party to any joint venture,
partnership, or other arrangement or contract which could be treated as a
partnership for federal or foreign income tax purposes.
2.28 Accuracy of Information Furnished. To the best knowledge of
Seller, no statement or information contained in any schedule, certificate or
other document or information furnished, or to be furnished, by or on behalf of
Seller (i) contains or will contain any untrue statement of a material fact, or
(ii) omits or will omit to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which it was
made, not misleading, except where such untrue statement or omission was
corrected in subsequent information delivered or made available to IRIS or its
representatives by Seller or its representatives.
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SECTION 3
REPRESENTATIONS AND WARRANTIES OF IRIS
As an inducement for DITI, PSII and PSTI to enter into this Agreement,
IRIS represents and warrants to DITI, PSII and PSTI that each of the following
statements is true, correct and complete as of the date hereof:
3.1 Existence and Rights. IRIS (i) is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and (ii) has the corporate power and authority to own its properties, to carry
on its business as now conducted and to make and carry out the Transactions. On
or prior to the Closing Date, IRIS will be duly qualified and in good standing
as a foreign corporation in the State of Texas.
3.2 Agreements Authorized. The execution, delivery and performance by
IRIS of this Agreement and the Closing Agreements to which IRIS is listed as a
party have been duly authorized by all necessary corporate action and, except as
set forth on Schedule 3.2, do not require notice to, or the consent or approval
from, any governmental body, regulatory authority or other person. This
Agreement has been duly executed and delivered by IRIS and is a legal, valid and
binding obligation of IRIS enforceable against IRIS in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to creditors' rights generally and general
principles of equity. Upon execution and delivery by IRIS, the Closing
Agreements will be legal, valid and binding obligations of IRIS enforceable in
accordance with their terms, subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to creditors' rights
generally and general principles of equity.
3.3 No Conflict. The execution, delivery and, subject to obtaining the
consents in Schedule 3.2, performance by IRIS of this Agreement and each Closing
Agreement to which IRIS is listed as a party will not (i) breach or constitute
grounds for the occurrence or declaration of a default under, or allow another
party a right to terminate any agreement, indenture, undertaking or other
instrument to which IRIS is a party or by which it or any of its properties may
be bound or affected, (ii) violate any provision of Law, the violation of which
could have a Material Adverse Effect or (iii) violate any provision of the
Articles of Incorporation or Bylaws of IRIS.
3.4 SEC Filings. IRIS has previously furnished to Seller complete and
correct copies of the IRIS Annual Report on Form 10-K for the year ended
December 31, 1995, Proxy Statement dated April 29, 1996 and Quarterly Report on
Form 10-Q for the quarter ended March 31, 1996 (collectively, the "IRIS SEC
Documents"). The IRIS SEC Documents comply in all material respects with the
requirements of the Exchange Act and
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none of the IRIS SEC Documents contains any untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent modified or superseded by a
document subsequently filed with the SEC. Since December 31, 1995 through the
date hereof, IRIS has not made any filings with the Securities and Exchange
Commission other than (i) the IRIS SEC Documents, (ii) a Current Report on Form
8-K dated February 16, 1996 (reporting the acquisition of StatSpin
Technologies), (iii) a Registration Statement on Form S-3 dated March 27, 1996
(relating to the resale of up to 466,311 shares of IRIS Common Stock by selling
securityholders issued or issuable in connection with the acquisition of
StatSpin Technologies) and (iv) a Current Report on Form 8-K dated May 9, 1996
(reporting the execution of the Letter of Intent). The financial statements of
IRIS, including the notes thereto, included in the IRIS SEC Documents (the "IRIS
Financial Statements") comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC), fairly present the
consolidated financial position of IRIS at the dates thereof and of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal, recurring audit adjustments) and are complete
and correct in all material respects. The IRIS Financial Statements include
adequate reserves for contracts, commitments, warranties and contingent
liabilities to the extent required by GAAP.
3.5 Capitalization. Except for (i) items disclosed in the IRIS SEC
Documents, (ii) the issuance of additional stock options under the IRIS stock
option plans and (iii) the continuing right of employees to purchase shares of
IRIS Common Stock under the IRIS Key Employee Stock Purchase Plan, there are no
outstanding options, warrants, convertible debt securities or other rights to
purchase any shares of capital stock of IRIS. Since March 31, 1996, IRIS has not
issued or sold any shares of capital stock or any options, warrants, convertible
debt securities or other rights to purchase shares of capital stock except for
(i) stock options to purchase 44,200 shares of IRIS Common Stock granted under
the IRIS stock option plans and (ii) shares of IRIS Common Stock issued pursuant
to the exercise of outstanding warrants described in the SEC Documents. During
the period from March 31, 1996 through the date hereof, IRIS did not sell any
shares of IRIS Common Stock under the IRIS Key Employee Stock Purchase Plan.
3.6 Contingencies. Except as disclosed in the IRIS SEC Documents, there
is no litigation, arbitration, other proceedings, written audit requests or, to
the knowledge of IRIS, investigations pending against IRIS or any of its
officers or directors (in their capacities as such) which could reasonably be
expected to have a Material Adverse Effect. IRIS is not in default with respect
to any order, writ, injunction or decree of any court or other governmental or
regulatory authority.
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3.7 No Material Changes. Since March 31, 1996, there has not been any
Material Adverse Effect, or any occurrence or event which could reasonably be
expected to have a Material Adverse Effect.
3.8 Compliance with Laws. The business and operations of IRIS are and
have been in compliance with all Laws, except where the failure to so comply
could not reasonably be expected to have a Material Adverse Effect.
3.9 IRIS Securities. The Senior Subordinated Note and IRIS Warrant,
when issued at the Closing, will be duly authorized and validly issued, and IRIS
has reserved for issuance upon the exercise of the IRIS Warrant the requisite
number of shares of IRIS Common Stock. The shares of IRIS Common Stock issuable
upon exercise of the IRIS Warrant, when issued in compliance therewith, will be
duly and validly issued, fully paid and non-assessable.
3.10 Purchasing Inventory for Resale. IRIS is purchasing the Inventory
for resale in the ordinary course of business.
3.11 Commissions. Neither IRIS nor any of its officers, directors,
agents or employees has employed or incurred any liability to any broker, finder
or agent for any brokerage fees, finder's fees, commissions or similar amounts
with respect to the Transactions, and IRIS agrees to hold Seller harmless from
and against Losses incurred by reason of any contrary assertions.
3.12 Accuracy of Information Furnished. To the best knowledge of IRIS,
no statement or information contained in any schedule, certificate or other
document or information furnished, or to be furnished, by or on behalf of IRIS
(i) contains or will contain any untrue statement of a material fact, or (ii)
omits or will omit to state any material fact necessary in order to make the
statements contained therein, in light of the circumstances under which it was
made, not misleading, except where such untrue statement or omission was
corrected in subsequent information delivered or made available by IRIS or its
representatives to Seller or its representatives.
SECTION 4
COVENANTS OF SELLER
4.1 Conduct of Business Prior to Closing. Seller agrees that until the
Closing Date, unless IRIS shall otherwise consent in writing in advance, the
Operating Companies will:
4.1.1 Conduct business only in the ordinary and usual course
consistent with past practice;
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4.1.2 Use reasonable efforts to preserve the goodwill with
their customers, suppliers, distributors and others having business relations
with them;
4.1.3 Not transfer or encumber any of the Assets except for
the sale of Inventory in the ordinary course of business;
4.1.4 Maintain their books and records in accordance with past
practices and policies, except for such changes of which they will advise IRIS
as are required to comply with GAAP or applicable Law;
4.1.5 Preserve their business organization intact and use
reasonable efforts to keep available to IRIS the services of their present
employees;
4.1.6 Continue to maintain all of the Equipment, Inventory and
Personalty in good repair, order and condition, reasonable wear and tear
excepted;
4.1.7 Not enter into or amend, waive any rights under, or
exercise any option to extend or renew, any Material Assigned Contract except in
the ordinary and usual course consistent with past practice;
4.1.8 Use reasonable efforts to maintain in full force and
effect all policies of insurance with respect to the Business now in effect (or
secure comparable replacement policies in the event the insurer cancels or
declines to renew such policies) and give all notices and present all claims
under all such policies in a timely fashion;
4.1.9 Not (i) borrow or agree to borrow any funds, or incur,
assume or guarantee any obligation or liability (absolute or contingent), which
is not incurred in the ordinary course of business; or (ii) pay, discharge or
satisfy any Claim, liability or obligation (absolute, accrued, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business consistent with past practice of liabilities or obligations
reflected, or reserved against, in the Financial Statements or incurred after
the dates of the Financial Statements in the ordinary course of business
consistent with past practice;
4.1.10 Not effect any transaction or enter into any contract
or arrangement between any Operating Company, on the one hand, and DITI, the
Controlling Stockholder or any Affiliate of the Controlling Stockholder, on the
other hand, including, without limitation, PSISI, Terra Laboratories, Ltd. and
Terra Laboratories, Ltd. II;
4.1.11 Not advance any funds to, guarantee any indebtedness
of, or incur or pay any expenses or liabilities to or on behalf of, DITI, the
Controlling Stockholder or any Affiliate of the Controlling Stockholder,
including, without limitation, PSISI, Terra Laboratories, Ltd. and Terra
Laboratories, Ltd. II, other than the payment of Corporate Management Expenses
to DITI in the ordinary course consistent with past practice;
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4.1.12 Pay any interest on, or repay any principal of, any
indebtedness to or on behalf of DITI, the Controlling Stockholder or any
Affiliate of the Controlling Stockholder, including, without limitation, PSISI,
Terra Laboratories, Ltd. and Terra Laboratories, Ltd. II; and
4.1.13 Not declare, set aside or pay any dividend, make any
other distribution in respect of their stock or make any direct or indirect
redemption, purchase or other acquisition of their stock (except as contemplated
by Section 6.12).
4.2 Representations True. Until the Closing Date, Seller will perform
such reasonable acts as may be necessary or appropriate to make all of its
representations and warranties set forth in this Agreement true and correct on
and as of the Closing Date. Seller will inform IRIS promptly upon discovery that
any of its representations or warranties ceases to be true or correct.
4.3 Access. From the date hereof through the earlier of the Closing or
termination of this Agreement, Seller will (i) permit IRIS and its authorized
representatives to have full access during normal business hours and under
reasonable conditions to any and all premises, properties, files, books,
records, documents and other information of Seller, (ii) provide IRIS and its
authorized representatives with all information which such parties reasonably
request concerning the Business, including without limitation, the financial
condition and results of operation of Seller, (iii) otherwise reasonably
cooperate with and assist IRIS and its authorized representatives in connection
with their investigation, (iv) upon the request of IRIS, deliver to IRIS true
and correct copies of any documents requested, and (v) permit IRIS and its
auditors to confer with Seller's auditors, Buffington & Company, P.C. regarding
their audits and reviews of the Financial Statements.
4.4 Supplemental Information. From the date hereof through the Closing
Date, Seller shall deliver to IRIS immediately upon Seller's discovery or access
thereto, any information (i) as may be reasonably required to update the
information set forth on the Schedules hereto or (ii) that otherwise amends,
updates or conflicts with any of the matters discussed in the representations or
warranties set forth in Section 2.
4.5 Permits. Seller will make all filings with governmental bodies and
other regulatory authorities and obtain all other permits, approvals,
authorizations and consents of all third parties necessary for Seller to
consummate the Transactions, including those listed on Schedule 2.2.
4.6 Security Interests. On or before the Closing Date, Seller shall
secure termination of any liens, charges, options, adverse claims or security
interests in or to the Assets except the Obligations.
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4.7 Closing Agreements. Subject to the fulfillment by IRIS or waiver by
Seller of the conditions precedent contained in Section 7, Seller will, and will
cause all of its Affiliates which are listed as parties to the Closing
Agreements to, execute and deliver the Closing Agreements prior to or at the
Closing.
4.8 Legal Opinion. Seller shall use its best efforts to cause Andrews &
Kurth LLP, counsel to Seller, to render an opinion at the Closing, dated as of
the Closing Date, in substantially the form attached hereto as Exhibit C.
SECTION 5
COVENANTS OF IRIS
5.1 Representations True. Until the Closing Date, IRIS will perform
such reasonable acts as may be necessary or appropriate to make all of its
representations and warranties set forth in this Agreement true and correct on
and as of the Closing Date. IRIS will inform Seller promptly upon discovery that
any of its representations or warranties ceases to be true or correct.
5.2 Supplemental Information. From the date hereof through the Closing
Date, IRIS shall deliver to DITI immediately upon IRIS' discovery or access
thereto, any information that amends, updates or conflicts with any of the
matters discussed in the representations or warranties set forth in Section 3.
5.3 Permits. IRIS will make all filings with governmental bodies and
other regulatory authorities and obtain all permits, approvals, authorizations
and consents of all third parties, necessary for IRIS to consummate the
Transactions, including those listed on Schedule 3.2.
5.4 Closing Agreements. Subject to the fulfillment by Seller or waiver
by IRIS of the conditions precedent contained in Section 6, IRIS will execute
and deliver the Closing Agreements prior to or at the Closing.
5.5 Legal Opinion. IRIS shall use reasonable efforts to cause Irell &
Manella LLP, counsel for IRIS, to render an opinion at the Closing, dated as of
the Closing Date, in substantially the form attached hereto as Exhibit D.
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SECTION 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF IRIS
Subject to the proviso in clause (ii) of Section 9.1, the obligations
of IRIS to consummate this Agreement and the Transactions are subject to the
satisfaction, prior to or as of the Closing Date, of each of the following
conditions, each of which may be waived by IRIS in writing:
6.1 Accuracy of Representations and Warranties. The representations and
warranties of Seller contained in this Agreement or in any certificate or
document delivered to IRIS pursuant hereto shall be true and correct on and as
of the Closing Date as though made at and as of that date (except where such
representation and warranty is made as of a date specifically set forth
therein), and Seller shall have delivered to IRIS a certificate to that effect.
6.2 Compliance with Covenants. Seller shall have in all material
respects performed and complied with all terms, agreements, covenants and
conditions of this Agreement to be performed or complied with by them at the
Closing Date, and Seller shall have delivered to IRIS a certificate to that
effect.
6.3 Consents Obtained; Filings. Seller shall have obtained all consents
and approvals from, and shall have completed all declarations, filings and
registrations with, government agencies and private third parties that are
required for the execution, delivery and performance of this Agreement by
Seller.
6.4 No Material Adverse Effect. There shall have been no Material
Adverse Effect, or any occurrence or event which could reasonably be expected to
have a Material Adverse Effect.
6.5 Legal Actions or Proceedings. No legal action or proceeding shall
have been instituted or overtly threatened by any governmental agency seeking to
restrain, prohibit, invalidate or otherwise affect the consummation of the
Transactions, and no legal action or proceeding shall have been instituted or
overtly threatened by any private party seeking material monetary awards from
IRIS in connection with the Transactions.
6.6 All Proceedings to Be Satisfactory. All corporate and other
proceedings to be taken by Seller in connection with the Transactions and all
documents incident thereto shall be reasonably satisfactory in form and
substance to IRIS and its counsel, and IRIS and said counsel shall have received
all such certified or other copies of such documents as it may reasonably
request.
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6.7 Opinion of Counsel for Seller. IRIS shall have received the
favorable opinion of Andrews & Kurth, counsel to Seller, dated the Closing Date,
in substantially the form attached as Exhibit C.
6.8 Closing Agreements. The Closing Agreements shall have been
executed and delivered by all parties thereto, unless the failure to do so is a
result of a breach by IRIS.
6.9 Transfer Documents. Seller shall have executed and delivered the
Transfer Documents and thereby have delivered to IRIS good and marketable title
to the Assets free and clear of any liens, charges, options, adverse claims or
security interests except the Obligations.
6.10 Closing Documents. IRIS shall have received, in form and
substance reasonably satisfactory to its counsel, each and every closing
document required to be delivered to it as set forth in this Agreement.
6.11 Commissions. Seller shall have paid all the commissions listed on
Schedule 2.26.
6.12 Capital Stock of PSI. PSII shall have acquired and delivered to
IRIS beneficial and record ownership of all the outstanding shares of capital
stock of PSIL, and Mr. Landells shall have waived any and all rights he may have
to acquire stock of PSIL, including, without limitation, through any option or
right of first refusal.
6.13 Pending Lawsuit. DITI shall have (i) paid all fees and expenses
owed to the law firm of Singleton & Cooksey with respect to the Stockholder
Lawsuit, (ii) secured from Singleton & Cooksey a written release of all
liability for such fees and expenses for any employees to whom IRIS offers
employment or (iii) agreed in writing to indemnify such employees against any
liability for such fees and expenses.
SECTION 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
Subject to the proviso in clause (iii) of Section 9.1, the obligations
of Seller to consummate this Agreement and the Transactions are subject to the
satisfaction, prior to or at the Closing, of the following conditions, each of
which may be waived by Seller in writing:
7.1 Accuracy of Representations and Warranties. The representations
and warranties of IRIS contained in this Agreement or in any certificate or
document delivered to Seller pursuant hereto shall be true and correct on and as
of the Closing Date as though
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made at and as of that date (except where such representation and warranty is
made as of a date specifically set forth therein), and IRIS shall have delivered
to Seller a certificate to such effect.
7.2 Compliance with Covenants. IRIS shall in all material respects have
performed and complied with all terms, agreements, covenants and conditions of
this Agreement to be performed or complied with by it at the Closing Date, and
IRIS shall have delivered to Seller a certificate to that effect.
7.3 Consents Obtained; Filings. IRIS shall have obtained all consents
and approvals from, and shall have completed all declarations, filings and
registrations with, government agencies and private third parties that are
required for the execution, delivery and performance of this Agreement by IRIS.
7.4 No Material Adverse Effect. There shall have been no Material
Adverse Effect, and no occurrence or event which could reasonably be expected to
result in a Material Adverse Effect.
7.5 All Proceedings to Be Satisfactory. All corporate and other
proceedings to be taken by IRIS in connection with the Transactions and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Seller and its counsel, and Seller and said counsel shall have
received all such certified or other copies of such documents as they may
reasonably request.
7.6 Opinion of Counsel for IRIS. Seller shall have received the
favorable opinion of Irell & Manella, counsel for IRIS, dated the Closing Date,
substantially in the form attached as Exhibit D.
7.7 Legal Actions or Proceedings. No legal action or proceeding shall
have been instituted or overtly threatened by any governmental agency seeking to
restrain, prohibit, invalidate or otherwise affect the consummation of the
Transactions, and no legal action or proceeding shall have been instituted or
overtly threatened by any private party seeking material monetary awards from
Seller in connection with the Transactions.
7.8 Closing Agreements. The Closing Agreements shall have been
executed and delivered by all parties thereto, unless the failure to do so is a
result of a breach by Seller or a refusal by any of its Affiliates.
7.9 Closing Documents. Seller shall have received, in form and
substance reasonably satisfactory to its counsel, each and every closing
document required to be delivered to it as set forth in this Agreement.
7.10 Purchase Price. Seller shall have received, as of the Closing
Date, the Purchase Price in the manner set forth in Section 1.4.
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SECTION 8
INDEMNIFICATION
8.1 Right of Indemnification. Subject to Section 8.4, IRIS and Seller
each agree to indemnify and hold the other (and the other's respective officers,
directors, employees and agents) harmless from and against the full amount of
all Losses arising out of or resulting from a breach of any representation,
warranty or covenant made by the Indemnifying Party in this Agreement.
8.2 Deductible Amount. Notwithstanding the foregoing, neither IRIS, on
the one hand, nor Seller, on the other hand, shall be required to indemnify the
other under the terms of this Agreement unless and until the aggregate amount of
the Losses of the other exceeds $50,000, in which case such indemnification
obligations shall apply to all Losses in excess of such threshold. The foregoing
threshold shall not apply against IRIS for failure to make payments under the
Senior Subordinated Note.
8.3 Survival of Representations; Effect of Disclosures. The
representations and warranties in this Agreement shall survive the Closing and
remain in full force and effect regardless of any disclosures made to or
investigations made by a party.
8.4 Time Limit. Notwithstanding Section 8.3, neither party may seek
indemnity under this Section 8 or any other recovery or remedy for any Loss
under this Agreement at any time after two (2) years from the Closing Date;
provided, however, that IRIS may seek indemnification hereunder for any Loss
based on (i) any obligations, debts, contracts and liabilities not expressly
assumed by IRIS (including, without limitation, as a result of a breach of the
representations and warranties concerning the obligations, debts, contracts and
liabilities of PSIL) until 30 days after the expiration of the applicable
statute of limitations for the relevant obligation, debt, contract or liability
or (ii) any covenant contained in Section 10 (Other Covenants) until two (2)
years from the date the covenant is breached.
8.5 Procedures for Indemnification. If any claim is asserted or any
action or proceeding is brought in respect of which indemnity may be sought, the
Indemnified Party will promptly notify the Indemnifying Party in writing of such
asserted claim or the institution of such action or proceeding; provided,
however, that the Indemnified Party's failure to so notify the Indemnifying
Party will not relieve the Indemnifying Party from any liability it might
otherwise have on account of this indemnity, except to the extent that the
Indemnifying Party has been materially prejudiced by such failure to notify. If
requested by the Indemnified Party in the aforementioned notice, the
Indemnifying Party shall undertake full responsibility for the defense of any
Third-Party Claim which, if successful, would result in an obligation of
indemnity under this Agreement. The Indemnifying Party may contest or settle any
such claim on such terms as the
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Indemnifying Party may choose, provided that the Indemnifying Party will not
have the right, without the Indemnified Party's prior written consent, to settle
any such claim if such settlement (i) arises from or is part of any criminal
action, suit or proceeding, (ii) contains a stipulation to, confession of
judgement with respect to, or admission or acknowledgement of, any liability or
wrongdoing on the part of the Indemnified Party, (iii) relates to any tax
matters, (iv) provides for injunctive relief, or other relief or finding other
than money damages, which is binding on the Indemnified Party, or (v) does not
contain an unconditional release of the Indemnified Party. Such defense will be
conducted by reputable attorneys retained by the Indemnifying Party at the
Indemnifying Party's cost and expense, but the Indemnified Party will have the
right to participate in such proceedings and to be separately represented by
attorneys of its own choosing. The Indemnified Party will be responsible for the
costs of such separate representation unless the Indemnified Party will have
reasonably concluded that the interests of the Indemnified Party and the
Indemnifying Party in the action conflict in such a manner and to such an extent
as to make advisable, consistent with applicable standards of professional
responsibility, the retention of separate counsel for the Indemnified Party, in
which case the Indemnifying Party will pay for one (but not more than one)
separate counsel chosen by the Indemnified Party.
8.6 Cooperation. The Indemnifying Party and the Indemnified Party shall
cooperate in determining the validity of any Third-Party Claim for any Loss for
which a claim of indemnification may be made hereunder. Each party shall also
use all reasonable efforts to minimize all Losses.
SECTION 9
TERMINATION
9.1 Grounds for Termination. Subject to Section 9.3, this Agreement may
be terminated: (i) at any time prior to the Closing by either IRIS or Seller if
there has been a breach of the representations, warranties or covenants of the
other party set forth herein which is reasonably expected to have a Material
Adverse Effect, but only if such breach remains uncured for a period of ten (10)
days after receipt of written notice of such breach from the nonbreaching party;
(ii) by IRIS if any condition stated in Section 6 cannot be or have not been
satisfied by the Closing Date, provided, however, IRIS may not terminate this
Agreement pursuant to this clause "ii" if IRIS would be entitled to
indemnification under this Agreement for the failure to satisfy such condition,
money damages would adequately compensate IRIS for any Losses resulting
therefrom and the Losses could not reasonably be expected to exceed of $50,000;
(iii) by Seller if any condition stated in Section 7 cannot be or have not been
satisfied by the Closing Date, provided, however, Seller may not terminate this
Agreement pursuant to this clause "iii" if Seller would be entitled to
indemnification under this Agreement for the failure to satisfy such condition,
money damages would adequately compensate Seller for any Losses resulting
therefrom
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and the Losses could not reasonably be expected to exceed of $50,000; (iv) by
mutual agreement of Seller and IRIS; or (v) by Seller or IRIS if the Closing
shall not have occurred within forty-five (45) days of the date hereof, provided
that the right to terminate this Agreement pursuant to this Section 9.1 shall
not be available to a party who has materially breached any representation,
warranty or covenant of this Agreement.
9.2 Effect of Termination. If this Agreement is terminated as provided
in Section 9.1, all obligations of the parties hereunder will terminate without
liability of any party to any other party, except (i) that the obligations set
forth in Sections 2.26 and 3.11 (Commissions), 10.1 (Confidentiality), 12.2
(Expenses), 12.9 (Governing Law; Consent to Jurisdiction), 12.10 (Attorneys'
Fees) and 12.13 (Arbitration) will survive any such termination and (ii) for
liability for Losses caused by any prior breach (which shall not include the
mere failure of any condition precedent).
9.3 Rights to Proceed. If any of the conditions specified in Section 6
have not been satisfied, IRIS will have the right to proceed with the
Transactions without waiving any of its rights hereunder to seek damages for
Losses related to any breach of a representation, warranty or covenant; and if
any of the conditions specified in Section 7 have not been satisfied, Seller
will have the right to proceed with the Transactions without waiving any of its
rights hereunder to seek damages for Losses related to any breach of a
representation, warranty or covenant. Either party may elect by written notice
to postpone the Closing Date, but not by more than fifteen (15) days, if a
condition to closing has not been met either because of circumstances beyond its
reasonable control or an unintentional breach of a representation, warranty or
covenant by it and such condition is reasonably expected to be met or cured on
or before the new Closing Date.
9.4 Specific Performance. The Assets to be transferred under this
Agreement are uniquely suited for the purposes and needs of IRIS. If Seller
should default in its obligations under this Agreement, the parties each
acknowledge that the remedy at law would be inadequate to compensate IRIS.
Accordingly, IRIS, in addition to any other available rights or remedies, may at
its sole option sue in equity for specific performance, and Seller expressly
waives the defense that a remedy in damages will be adequate.
SECTION 10
OTHER COVENANTS
10.1 Confidentiality. Each party hereto shall strictly maintain the
confidential nature of, and not disclose to any third party or use for any
purpose other than in connection with the Transactions without prior written
consent, (a) any confidential information learned about the other in the course
of the Transactions or (b) the exact terms of this Agreement, or the Closing
Agreements or any other documents signed at the Closing, unless and to the
extent necessary to carry out the Transactions, provided that
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Seller will not make any public announcements regarding the Transactions prior
to Closing, and IRIS will consult with Seller in preparing any public
announcement, including affording Seller an opportunity to review in advance any
press releases regarding the Transactions. Each party shall be responsible for
any breach of this Section 10.1 by its officers, employees, agents or advisors.
Upon termination of this Agreement pursuant to Section 9.1, Seller and IRIS each
agree to return or destroy any and all materials containing any confidential
information. These restrictions on use and obligations of confidentiality will
not apply to any information (i) to the extent the receiving party is required
to disclose such information by law or applicable regulation or under court or
governmental order, (ii) then in the public domain by acts not attributable to
such party, (iii) hereafter received by the receiving party from a third party
source on an unrestricted basis, (iv) known to the receiving party prior to the
date of disclosure hereunder except to the extent subject to a prior
confidentiality agreement, or (v) necessary to enforce this Agreement provided
that all reasonable steps are taken to limit the amount of disclosure. If the
Closing occurs, IRIS shall be released from any obligations under this Section
10.1 with regard to the Business or Assets. Seller shall not disclose or use any
confidential information about the Business or Assets before or after Closing
without the prior written consent of IRIS except (i) if this Agreement is
terminated pursuant to Section 9.1, (ii) before Closing in the ordinary course
of business or (iii) as provided in clauses (i), (ii), (iii) or (v) of the
fourth sentence of this Section 10.1.
10.2 Employment of Certain Personnel. As far in advance of the Closing
as is practicable, IRIS shall provide Seller with a list of employees who will
be offered employment following the Closing (which shall constitute at least 75%
of the employees of the Operating Companies as of the date hereof) on an at-will
basis, subject to termination by IRIS or each employee for any reason or no
reason at any time, and Seller shall use reasonable efforts to assist IRIS in
hiring and retaining the employees of Seller on that basis. Any and all costs of
severance of Seller's employees not hired or retained by IRIS shall be for the
account of Seller, and IRIS shall not be deemed to have assumed any benefits
obligations of Seller to its employees. In accordance with Internal Revenue
Service Procedure 84-77, IRIS will include on the Wage and Tax Statement (Form
W-2) issued to each continuing employee for the year ending December 31, 1996,
all wages paid to, and taxes withheld from, such employee by Seller during such
period. Furthermore, Seller shall transfer to IRIS promptly after the Closing
the Employee Withholding Allowance Certificate (Form W-4) for each continuing
employee.
10.3 Change of Names. Promptly following the Closing, DITI, PSII and
PSTI shall amend their Articles of Incorporation to change their names to names
which in the reasonable opinion of IRIS are not confusingly similar to the name
"Perceptive Scientific" or any of the Trademarks, and thereafter none of them
shall have any further rights to use such name or any of the Trademarks. DITI
shall cause PSISI to take comparable actions and cease using such names and
Trademarks within 180 days of the Closing Date.
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10.4 Collection of Accounts Receivable. Seller covenants that in the
event it receives any payments with regard to any Asset, including the Accounts
Receivable, after the Closing, it will promptly pay the amount actually
collected directly to IRIS.
10.5 Notification of Suppliers and Distributors. After the Closing, if
requested by IRIS, Seller shall promptly notify all of its suppliers and
distributors that the Business has been transferred to IRIS.
10.6 Non-Competition. For a period of five (5) years from the Closing
Date, DITI and each Operating Company agree that they will not, directly or
indirectly, engage in, own, manage, operate, join, control or participate in the
ownership, management, operation or control of any business engaged in
developing, manufacturing and/or marketing digital image processing or analysis
products or services in any city or county in the United States of America or
any comparable subdivision of any foreign country; provided, however, that DITI
may own, manage and operate a business engaged in the Well Log Business. Seller
hereby represents and warrants to IRIS that Seller is currently engaged in
substantial activities related to the Business worldwide. The foregoing covenant
is a material part of the consideration for the purchase of the Assets, and the
Purchase Price includes consideration for such covenant. Furthermore, without
limiting the foregoing, neither DITI, PSISI nor any Operating Company shall
directly or indirectly, without the prior written consent of IRIS, (i) hire any
employee or consultant of IRIS for a period of two (2) years from the Closing
Date, (ii) induce or take any action intended to induce any employee or
consultant of IRIS to cease providing or otherwise alter the services provided
to IRIS for a period of five (5) years from the Closing Date or (iii) induce or
attempt to induce any customer of IRIS or any present customer of PSII, PSTI or
any of their subsidiaries to cease doing business with IRIS or to do business
with any of its then competitors or potential competitors for a period of five
(5) years from the Closing Date.
10.7 Nominee to IRIS Board of Directors. Promptly after the Closing
Date, IRIS shall appoint the Controlling Stockholder to the IRIS Board of
Directors as a Class 1 Director to serve until the next annual meeting of the
IRIS stockholders. During his tenure on the IRIS Board of Directors, the
Controlling Stockholder shall be entitled to cash compensation, reasonable
expenses and indemnification to the same extent as any other non-employee
director. The Controlling Stockholder may also invite one (1) advisor of his
choosing, subject to the reasonable approval of IRIS, to attend the IRIS Board
meetings. DITI shall be responsible for all compensation and expenses of the
Controlling Stockholder's advisor attending IRIS Board meetings. If, at the time
of the next annual meeting of the IRIS stockholders, (i) the Senior Subordinated
Note remains outstanding or (ii) DITI continues to beneficially own at least 50%
of the Warrant Shares (including, for this purpose, any Warrant Shares issuable
upon exercise of the unexercised portion of IRIS Warrant then owned by DITI),
the Controlling Stockholder shall have the right to nominate a replacement
nominee for DITI, subject to approval of the other members of the IRIS Board of
Directors based on their past practice of qualifying nominees, and IRIS
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shall use reasonable efforts to effect such nominee's election to the IRIS Board
of Directors at such annual meeting. In addition to cash compensation,
reasonable expenses and indemnification, the replacement nominee shall also be
entitled to stock option awards under the IRIS stock option plans to the same
extent as any other non-employee director. If, at any time, the Senior
Subordinated Note has been repaid in full and DITI no longer beneficially owns
at least 50% of the Warrant Shares (including, for this purpose, any Warrant
Shares issuable upon exercise of the unexercised portion of IRIS Warrant then
owned by DITI), then, upon the request of IRIS, DITI shall cause the Controlling
Stockholder or his replacement nominee, as applicable, to voluntarily resign
from the IRIS Board of Directors. DITI acknowledges and agrees that, until IRIS
has the right to request the resignation of DITI's nominee to the IRIS Board of
Directors, IRIS will consider DITI and the Controlling Stockholder to be
"affiliates" of IRIS as defined in Rule 144 promulgated pursuant to the
Securities Act.
10.8 Cooperation by Seller.
10.8.1 Consulting Services. For a period of 90 (ninety) days
from the Closing Date, Seller shall from time to time consult with IRIS during
normal business hours to the extent reasonably requested by IRIS for the purpose
of transferring the operation of the Business from Seller to IRIS. Such services
may include, without limitation, (i) advising IRIS with respect to Seller's
procedures for manufacturing digital imaging processing and analysis
instruments, (ii) introducing IRIS to the suppliers and distributors for the
Business, (iii) responding to questions about the Business or the Assets and
(iv) providing accounting, insurance, administrative, information systems and
such other services as IRIS may reasonably request. IRIS shall reimburse Seller
at its cost for providing such services. Seller acknowledges and agrees that
title and full ownership rights to any modifications, changes, derivative works
and enhancements made to the Intellectual Property by Seller in the course of
providing such consulting services under this Agreement shall vest in and remain
the sole property of IRIS.
10.8.2 Additional Acts. Each party hereto agrees, both before
and after the Closing, to execute any and all further documents and writings and
perform such other reasonable actions which may be or become necessary or
expedient to effectuate and carry out the Transactions (which shall not include
any obligation to make payments). Moreover, if following the Closing, either
party shall discover any Material Assigned Contract which was not listed on
Schedule 2.19, at the request and option of IRIS, Seller shall take all
reasonable steps necessary to assign such contract to IRIS except that Seller
shall not be required to pay money or other valuable consideration. Such
assignment shall not relieve Seller of responsibility for Losses of IRIS caused
by the failure to make the transfer on the Closing Date.
10.8.3 Confirmation of Title. At and following the Closing,
Seller shall promptly from time to time execute and deliver any assignments or
other assurances or
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reports which IRIS shall reasonably advise Seller are necessary to vest, perfect
or confirm title to any Asset in IRIS.
10.8.4 Announcements. Seller will not make any public
announcements regarding the Transactions prior to Closing, and IRIS will consult
with Seller in preparing any public announcement, including affording Seller an
opportunity to review in advance any press releases regarding the Transactions.
10.9 Cooperation by Buyer. For a period of 90 (ninety) days from the
Closing Date, Buyer shall cooperate with Seller as reasonably requested for the
purposes of facilitating the separation of the Business from Seller's remaining
businesses and operations. Such cooperation shall consist of reasonable access
to the Files and office Equipment and consultations with IRIS employees during
normal business hours.
SECTION 11
DEFINITIONS
The following terms shall have the meanings set forth below:
"Accounts Receivable" shall mean all payments, rights to payment,
accounts receivable, revenues or other sums payable to PSII or PSTI (and those
of DITI which relate to the Business).
"Affiliate" shall mean any person which, directly or indirectly through
one or more intermediaries, controls, is controlled by, or is in common control
with, a specified person.
"Assets" shall mean all of the real and personal property, tangible and
intangible, of every kind, nature and description, and wherever located, owned
or leased by PSII or PSTI (and those owned or leased by DITI which relate to the
Business), including, without limitation, the Accounts Receivable, Assigned
Contracts, Equipment, Files, Intellectual Property, Inventory, Personalty, PSIL
Stock, Purchase Commitments, Sales Commitments and the goodwill associated with
the Business, except the Retained Assets. For purposes of Section 2
(Representations and Warranties of Seller), Section 4 (Covenants of Seller) and
Section 6 (Conditions Precedent to Obligations of IRIS), the term Assets shall
also be deemed to include the Assets of PSIL.
"Assigned Contracts" shall mean all agreements, written and oral, to
which DITI, PSII or PSTI is a party and which relate to the Business, including,
without limitation, the Employee Patent and Confidentiality Agreements and those
agreements set forth on Schedule 2.19, other than Existing Employment Contracts,
Purchase Commitments, Sales Commitments and agreements relating to indebtedness
for borrowed money.
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"Audited Financial Statements" shall have the meaning set forth in
Section 2.6.
"Business" shall mean the business of developing, manufacturing and/or
marketing digital image processing and analysis products and services
(including, without limitation, the proprietary PowerGene(TM) product line of
genetic analysis instruments) as presently conducted, as conducted in the past
12 months and as contemplated to be conducted in the Private Placement
Memorandum, by DITI and the Operating Companies; provided, however, that the
Business shall not include the Well Log Business.
"Closing" and "Closing Date" shall have the meanings set forth in
Section 1.2
"Closing Agreements" shall mean (i) the License Agreement, (ii) the
Termination and Release Agreements, (iii) the Senior Subordinated Note, (iv) the
IRIS Warrant, (v) the Registration Rights/Standstill Agreement, (vi) the
Stockholder Guaranty, (vii) the Stockholder Noncompetition Agreement and (viii)
the New Employment Contracts.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Controlling Stockholder" shall mean Edward Randall III, an individual
and the majority stockholder of DITI.
"Copyrights" shall mean all U.S. and foreign copyrights, whether or not
registered, together with any pending applications for the registration thereof,
owned by or licensed to DITI, PSII or PSTI, including, without limitation, those
listed on Schedule 2.10.
"Corporate Management Expenses" shall have the meaning set forth in
Section 1.4.1.
"Customer Lists" shall mean all lists of, and information concerning,
the end users of the Products, wherever located and regardless of the form in
which stored.
"DITI" shall mean Digital Imaging Technologies, Inc., a Delaware
corporation.
"Effective Date" shall have the meaning set forth in Section 1.2.
"Equipment" shall mean all equipment, tools, machinery, molds, tooling
and similar tangible assets owned by PSII or PSTI (and those owned by DITI which
are used in the Business), wherever located and whether in the possession of
DITI, any Operating Company or others.
"Employee Patent and Confidentiality Agreements" shall mean any and all
agreements executed by any present or former employee or consultant of DITI,
PSII or PSTI or any of their respective predecessors for the purpose, in whole
or in part, of
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protecting rights to, or the confidentiality of, proprietary technology or
information. In the event that such agreements are contained in a more general
employment or consulting agreement, the term "Employee Patent and
Confidentiality Agreement" shall mean only the provisions of such agreement
relating to the protection of rights to, or the confidentiality of, proprietary
information or technology.
"Environmental Law" shall have the meaning set forth in Section 2.18.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Existing Employment Contracts" shall have the meaning set forth in
Section 2.24.
"FDA" shall mean the U.S. Food & Drug Administration.
"Files" shall mean all files, documents, papers and other records of
PSII or PSTI (and those of DITI which pertain to the Business or any of the
Assets), wherever located, whether in the possession of DITI, any Operating
Company or others and regardless of the form in which they are stored.
"Financial Statements" shall mean (i) the audited consolidated
financial statements of DITI for the years ended December 31, 1995 and 1994,
together with the related notes and schedules and the independent auditor's
report thereon, (ii) the unaudited consolidated financial statements of DITI for
the three-month period ended March 31, 1996, (iii) the unaudited consolidated
financial statements of PSII for the twelve-month period ended December 31, 1995
and (iv) the unaudited consolidated financial statements of PSII for the
three-month period ended March 31, 1996.
"GAAP" shall mean generally accepted accounting principles applied on a
consistent basis.
"Hazardous Materials" shall mean (i) any substance defined as
"hazardous" under any Environmental Law, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"); (ii) any substance or matter which results in liability to any
person or entity from discharge of or exposure to such substance or matter under
any statutory, regulatory or common law theory; (iii) any substance or matter
which becomes subject to a federal, state, local or foreign agency order or
requirement for removal, treatment or remediation; (iv) crude oil or any
fraction thereof, and (v) any material defined as "hazardous" under Texas or
United Kingdom law.
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"Indemnified Party" shall mean, with respect to any Loss or alleged
Loss, the party seeking indemnity hereunder.
"Indemnifying Party" shall mean, with respect to any Loss or alleged
Loss, the party from whom indemnity is being sought hereunder.
"Intellectual Property" shall mean the Software, Patents, Copyrights,
Trademarks, Customer Lists and other Proprietary Information.
"Inventory" shall mean all tangible goods held for future sale in the
Business, including, without limitation, raw materials and work in progress,
wherever located and whether in the possession of DITI, any Operating Company or
others.
"IRIS" shall mean International Remote Imaging Systems, Inc., a
Delaware corporation.
"IRIS Common Stock" shall mean shares of common stock, $.01 par value
per share, of IRIS.
"IRIS Warrant" shall mean a warrant, in substantially the form of
Exhibit B attached hereto, to purchase 875,000 shares of IRIS common stock at an
exercise price of $8.00 per share from the Closing Date until the Fifth
Anniversary of the Closing Date.
"Key Employees" shall mean the following employees of the Operating
Companies: (i) Mr. Tony Landells, President of PSIL, (ii) Dr. Ken Castleman,
Vice President of Research of PSII, (iii) Mr. Don Winkler, Vice President of
Business Development of PSII, (iv) Mr. Paul Douglas, Vice President of Sales of
PSIL, (v) Mr. Dindy Ramkisson, North American Sales Manager of PSII, (vi) Steve
Clarner, Senior Software Engineer for PSII, and (vii) Steve Rosser, Software
Engineer for PSII.
"Knowledge" shall mean (i) in the case of Seller, the actual knowledge
of the Controlling Stockholder or any director or senior officer of DITI or any
Operating Company and (ii) in the case of IRIS, any director or senior officer
of IRIS. "Best knowledge" shall mean the "knowledge" of such persons after
reasonable inquiry to the extent prudent under the circumstances, and "senior
officer" shall mean any officer with a title at least equal to vice president.
"Law" shall mean all foreign, federal, state and local laws,
ordinances, regulations, judgments, orders, decrees or rules of any court,
arbitrator or governmental, regulatory or administrative agency or entity.
"Letter of Intent" shall mean that certain letter dated May 3, 1996
from IRIS to DITI confirming the parties' mutual intention that IRIS acquire the
Business.
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"License Agreement" shall mean a license agreement between IRIS and
PSISI, dated as of the Closing Date, in substantially the form of Exhibit F
attached hereto.
"Loss" shall mean any and all costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses and court costs incident to
any suit, action, investigation or other proceedings), damages and losses, net
of any insurance proceeds received with respect thereto.
"Material Adverse Effect" shall mean (i) with respect to any
representation or warranty made by Seller or any condition to the obligations of
IRIS, a material adverse effect on the Transactions, the Assets, the
Obligations, the Business or the prospects for the Business and (ii) with
respect to any representation or warranty made by IRIS or any condition to the
obligations of Seller, a material adverse effect on the Transactions or on the
business or financial condition of IRIS and its subsidiaries taken as a whole.
For purposes of this definition, the terms Assets and Obligations shall include
the Assets and Obligations of PSIL.
"Material Assigned Contracts" shall have the meaning set forth in
Section 2.19.
"Net Cash Transfers to DITI" shall have the meaning set forth in
Section 1.4.1.
"New Employment Contracts" shall mean written employment agreements
satisfactory in form and substance to IRIS, effective as of the Closing Date,
between IRIS and each of the Key Employees for a term of not less than two (2)
years.
"Obligations" shall mean the obligations of PSII and/or PSTI under (i)
the Assigned Contracts, (ii) the Payables, (iii) the Purchase Commitments and
(iv) the Sales Commitments. Without expanding the foregoing definition, the
Obligations shall not include (i) liabilities or expenses relating to the
negotiation or performance of this Agreement (including, without limitation,
commissions, legal fees, employee bonuses and the cost of reacquiring the
minority interest in PSIL) which shall be incurred and paid solely by DITI and
not by any of the Operating Companies, (ii) liabilities associated with property
or assets not transferred or delivered to IRIS as part of the Assets, (iii)
accrued vacation, (iv) federal or state income or franchise taxes, (v)
liabilities to, or incurred on behalf of, PSISI, (vi) liabilities to, or
incurred on behalf of, the Controlling Stockholder or any of his Affiliates
(including, without limitation, Terra Laboratories, Ltd. or Terra Laboratories,
Ltd. II), (vii) liabilities or expenses relating to the Stockholder Lawsuit,
including, without limitation, legal fees and expenses payable to the firm of
Singleton & Cooksey, (viii) any liabilities or obligations for borrowed money
(except PSIL's line of credit with National Westminster Bank which shall remain
in effect under which there shall be no amounts outstanding on the Closing Date)
or (ix) any liabilities or obligations to DITI. For purposes of Section 2
(Representations and Warranties of Seller), Section 4 (Covenants of Seller) and
Section 6 (Conditions Precedent to Obligations of IRIS), the term Obligations
shall also be deemed to include the Obligations of PSIL.
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"Operating Companies" shall mean PSII, PSTI and PSIL.
"Patents" shall mean all U.S. and foreign patents and pending patents,
together with any enhancements or improvements thereto, owned by or licensed to
DITI, PSII or PSTI, including, without limitation, those listed on Schedule
2.10.
"Payables" shall mean all of the outstanding accounts payable to trade
creditors, accrued payroll, accrued and withheld payroll taxes and accrued and
withheld sales taxes reflected on PSII's consolidated balance sheet dated as of
December 31, 1995 or incurred subsequent to the date thereof in the ordinary
course of the Business consistent with past practice and reflected on books and
records of PSII or PSTI on the Closing Date.
"Personalty" shall mean all tangible personal property owned by PSII or
PSTI (and any owned by DITI which is used in the Business) except (i) the
Inventory, (ii) the Equipment and (iii) any tangible personal included in the
Retained Assets.
"Private Placement Memorandum" shall mean DITI's Private Placement
Memorandum dated December 1995.
"Products" shall have the meaning set forth in Section 2.15.
"Proprietary Information" shall mean all trade secrets, data, methods,
test results, procedures, processes, techniques, systems, inventions, apparatus,
information, manufacturing and engineering drawings and prints, artwork for
circuit boards, artwork for labels, regulatory and manufacturing documentation
and design specifications, know-how and other proprietary information owned by
or licensed to DITI, PSII or PSTI.
"PSII" shall mean Perceptive Scientific Instruments, Inc., a Delaware
corporation and wholly-owned subsidiary of DITI.
"PSII Cash" shall have the meaning set forth in Section 1.4.1.
"PSII Year-to-Date EBIT" shall have the meaning set forth in Section
1.4.1.
"PSIL" shall mean Perceptive Scientific International, Ltd., a United
Kingdom corporation and majority-owned subsidiary of PSII.
"PSIL Stock" shall mean all the outstanding capital stock of PSIL.
"PSISI" shall mean Perceptive Scientific Imaging Systems, Inc., a
Delaware corporation and wholly-owned subsidiary of DITI.
"PSTI" shall mean Perceptive Scientific Technologies, Inc., a Delaware
corporation and wholly-owned subsidiary of DITI.
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"Purchase Price" shall have the meaning set forth in Section 1.4.1.
"Purchase Commitments" shall mean the outstanding obligations of PSII
and PSTI to purchase Equipment or Inventory after the Closing Date incurred in
the ordinary course of the Business consistent with past practice.
"Registration Rights/Standstill Agreement" shall mean a Registration
Rights/Standstill Agreement between IRIS and DITI, dated as of the Closing Date,
in substantially the form of Exhibit G attached hereto.
"Retained Assets" shall mean (i) the PSII Cash and the cash and cash
equivalents of DITI, (ii) the capital stock of PSII, PSTI and PSISI, (iii) the
Personalty listed on Schedule 0, (iv) the accounts receivable by DITI which are
not related to the Business, (v) all notes and other accounts receivable by DITI
or any of the Operating Companies from the Controlling Stockholder or any of his
Affiliates, (vi) any refunds due to Seller for tax liabilities previously
overpaid by DITI or any of the Operating Companies and (vii) all equipment and
furniture used exclusively by PSISI.
"Sales Commitments" shall mean the outstanding obligations of PSII or
PSTI to sell Inventory or provide related services after the Closing Date
incurred in the ordinary course of the Business consistent with past practice.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller" shall mean DITI, PSII and PSTI.
"Senior Subordinated Note" shall mean a $7,000,000 principal amount 8
1/2% Senior Subordinated Note due 2001, dated as of the Closing Date, in
substantially the form of Exhibit A attached hereto.
"Software" shall mean all software products (including, without
limitation, both source code and object code) owned by DITI, PSII or PSTI,
including all enhancements, versions, releases and updates of such products, and
any other software products in development regardless of its stage of
development.
"Stockholder Guaranty" shall mean a Guaranty Agreement between IRIS and
the Controlling Stockholder in substantially the form of Exhibit L attached
hereto.
"Stockholder Lawsuit" shall mean the lawsuit referred to in Note 12
(Prior Contingency) to the Financial Statements for the year ended December 31,
1995 relating to the purchase of certain assets.
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"Stockholder Noncompetition Agreement" shall mean a Noncompetition
Agreement between IRIS and the Controlling Stockholder in substantially the form
of Exhibit M attached hereto.
"Tax or Taxes" shall mean any and all federal, state, local, foreign
and other net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, lease, service, service use, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
windfall profits, customs, duties or other taxes, fees, assessments or charges
of any kind whatever, together with any interest and any penalties, additions to
tax or additional amounts with respect thereto.
"Termination and Release Agreements" shall mean terminations of loan
agreements and/or releases of security interests in the Assets, dated as of the
Closing Date, in substantially the form of Exhibit E attached hereto, from all
third parties whose release is required for Seller to consummate the
Transactions and deliver good and marketable title to the Assets free and clear
of any liens, charges, options, adverse claims or security interests except the
Obligations.
"Third-Party Claim" shall mean a claim brought by a third party for
which indemnification is sought pursuant to this Agreement.
"Trademarks" shall mean all U.S. and foreign trade names (including,
but not limited to, the trade names "Perceptive Scientific Instruments",
"Perceptive Scientific Technologies", "Perceptive Scientific International",
"Perceptive Scientific Microscopy" and "Perceptive Scientific Imaging Systems")
trademarks and service marks (together with any pending applications for any of
the foregoing) owned by or licensed to DITI, PSII or PSTI, including, without
limitation, those listed on Schedule 2.10.
"Transactions" shall mean the transactions contemplated by this
Agreement.
"Transfer Documents" shall mean (i) the Bill of Sale attached hereto as
Exhibit H, (ii) the Assumption Agreement attached hereto as Exhibit I, (iii) the
Patent Assignment attached hereto as Exhibit J, (iv) the Trademark Assignment
attached hereto as Exhibit K and (v) such other documents as IRIS may reasonably
request for the purpose of transferring ownership of the Assets to IRIS.
"Warrant Shares" shall mean the shares of IRIS Common Stock issuable
upon exercise of the IRIS Warrant.
"Well Log Business" shall mean the business of developing,
manufacturing, marketing and selling digital image processing and analysis
products and services for use solely in the oil and gas industry.
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SECTION 12
MISCELLANEOUS
12.1 Entire Agreement; Modifications. This Agreement and any documents
referred to herein or executed contemporaneously herewith constitute the
parties' entire agreement with respect to the subject matter hereof and
supersede all agreements, representations, warranties, statements, promises and
understandings, whether oral or written, with respect to the subject matter
hereof; provided, however, that the paragraphs of the Letter of Intent which are
expressly designated as binding shall remain in full force and effect. This
Agreement may not be amended, altered or modified except by a writing signed by
the parties.
12.2 Expenses. Except as set forth in Section 1.6 (Sales and Use Tax)
or 12.10 (Attorneys' Fees), whether or not the Transactions are consummated,
none of the parties hereto shall have any obligation to pay any of the fees and
expenses of any other party incident to the negotiation, preparation and
execution of this Agreement or any related agreements, including the fees and
expenses of counsel, accountants, investment bankers and other experts.
12.3 Waivers. Seller may by written notice to IRIS, or IRIS may, by
written notice to the Seller, (a) extend the time for the performance of any of
the obligations or other actions of the other parties under this Agreement; (b)
waive any inaccuracies in the representations or warranties of the other parties
contained in this Agreement or in any document delivered pursuant to this
Agreement; (c) waive compliance with any of the conditions or covenants of the
other parties contained in this Agreement; or (d) waive performance of any of
the obligations of the other parties under this Agreement. With regard to any
power, remedy or right provided herein or otherwise available to any party
hereunder, (i) no waiver or extension of time will be effective unless expressly
contained in a writing signed by the waiving party or its representative, and
(ii) no alteration, modification or impairment will be implied by reason of any
previous waiver, extension of time, delay or omission in exercise or other
indulgence.
12.4 Cooperation. Each party hereto agrees, both before and after the
Closing Date, to execute any and all further documents and writings and to
perform such other actions which may be or become necessary or expedient to
effectuate and carry out this Agreement.
12.5 Third-Party Benefits. None of the provisions of this Agreement
will be for the benefit of, or enforceable by, any third-party beneficiary.
12.6 Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
permitted assigns. At any time prior to the Closing Date, IRIS may assign its
rights and obligations
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hereunder to a wholly-owned subsidiary of IRIS; however, such assignment will
not release IRIS from any obligations hereunder to Seller. Except for such right
of IRIS, none of the parties may assign any of its rights under this Agreement
without the prior written consent of the others.
12.7 Remedies Not Exclusive. Subject to Section 12.13 (Arbitration of
Disputes), no remedy conferred by any of the specific provisions of this
Agreement is intended to be exclusive of any other remedy, and each and every
remedy will be cumulative and will be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. The election of any one or more remedies will not constitute a waiver
of the right to pursue other available remedies.
12.8 Notices. All notices under this Agreement will be in writing and
will be delivered by personal service or facsimile or certified mail (or, if
certified mail is not available, then by first class mail), postage prepaid, to
such address as may be designated from time to time by the relevant party, and
which will initially be as set forth below. Any notice sent by certified mail
will be deemed to have been given three (3) days after the date on which it is
mailed. All other notices will be deemed given when received. No objection may
be made to the manner of delivery of any notice actually received in writing by
an authorized agent of a party. Notices will be addressed as follows or to such
other address as the party to whom the same is directed will have specified in
conformity with the foregoing:
(a) If to IRIS:
International Remote Imaging Systems, Inc.
9162 Eton Avenue
Chatsworth, California 91311
Attn: Fred H. Deindoerfer
Chairman of the Board and President
Telephone: (818) 709-1244
Facsimile: (818) 700-9661
With a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067
Attn: Theodore E. Guth, Esq.
Telephone: (310) 277-1010
Facsimile: (310) 203-7199
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(b) If to Seller
Digital Imaging Technologies, Inc.
2950 North West Loop, Suite #1050
Houston, Texas 77092
Attn: James L. Hurn
Chief Executive Officer
Telephone: (713) 956-2165
Facsimile: (713) 956-2185
With a copy to:
Andrews & Kurth LLP
Texas Commerce Tower
600 Travis, Suite 4200
Houston, Texas 77002
Attn: Robert V. Jewell, Esq.
Telephone: (713) 220-4200
Facsimile: (713) 220-4285
12.9 Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware without regard to the conflict of laws rules of the State of
Delaware or any other jurisdiction that would call for the application of the
laws of any jurisdiction other than the State of Delaware. Each party hereto
hereby irrevocably consents, for itself and its legal representatives, partners,
successors and assigns, to the exclusive jurisdiction of the Courts of the State
of Delaware for all purposes in connection with any action or proceeding that
arises from or relates to this Agreement, and further agrees that, subject to
Section 12.13 (Arbitration of Disputes), any action arising from or relating to
this Agreement shall be instituted and prosecuted only in the courts of the
State of Delaware, and hereby waives any rights it may have to personal service
of summons, complaint, or other process in connection therewith, and agrees that
service may be made by registered or certified mail to such party at the address
set forth in Section 12.8 (Notices).
12.10 Attorneys' Fees. Should any litigation or arbitration be
commenced (including any proceedings in a bankruptcy court) between the parties
hereto or their representatives concerning any provision of this Agreement or
the rights and duties of any person or entity hereunder, the party or parties
prevailing in such proceeding shall be entitled, in addition to such other
relief as may be granted, to the reasonable attorneys' fees and court costs
incurred by reason of such litigation or arbitration.
12.11 Headings. The Section headings in this Agreement are inserted
only as a matter of convenience, and in no way define, limit, or extend or
interpret the scope of this Agreement or of any particular Section.
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12.12 Severability. The validity, legality or enforceability of the
remainder of this Agreement shall not be affected even if one or more of the
provisions of this Agreement shall be held to be invalid, illegal or
unenforceable in any respect. To the extent permitted by applicable law, the
parties hereby waive any provision of law that would render any provision hereof
prohibited or unenforceable in any respect. Further, if the period of time, the
extent of the geographic area, or the scope of the proscribed activities covered
by Section 10.6 (Non-Competition) should be deemed unenforceable, then Section
10.6 shall be construed to cover the maximum period of time, geographic area and
scope of proscribed activities (not to exceed the maximum time, geographic area
or scope set forth herein) as may be valid under applicable law.
12.13 Arbitration of Disputes. Except for actions seeking injunctive
relief, which may be brought before any court having jurisdiction, any claim
arising out of or relating to (i) this Agreement, including, but not limited to,
its validity, interpretation, enforceability or breach, or (ii) the relationship
between the parties (including its commencement and termination) which are not
settled by agreement between the parties, shall be settled by arbitration
conducted exclusively in Wilmington, Delaware before a board of three
arbitrators, one selected by each party, and the third by the two persons so
selected, all in accordance with the Commercial Arbitration Rules of the
American Arbitration Association ("AAA") then in effect. The notice of intent to
arbitrate shall name one arbitrator, and the party(ies) receiving the notice
shall name the second arbitrator within 15 days or the moving party may select
the second arbitrator from a list supplied by the AAA. In the event that these
two arbitrators cannot agree upon a third arbitrator within 15 days, then the
third arbitrator shall be selected from the list provided by the AAA with the
parties striking names in order with the party striking first to be determined
by the flip of a coin. The parties hereby consent to the in personam
jurisdiction of the courts of the State of Delaware for purposes of confirming
any such award and entering judgment thereon. In any arbitration proceedings
hereunder, (a) all testimony of witnesses shall be taken under oath; (b)
discovery will be allowed to the same extent as available under the rules then
applicable to civil actions under Delaware law; (c) upon conclusion of any
arbitration, the arbitrators shall render findings of fact and conclusions of
law in a written opinion setting forth the basis and reasons for any decision
reached and deliver such documents to each party to this Agreement along with a
signed copy of the award; and (d) the rules of evidence as then applicable to
civil actions under Delaware law shall be applied in the arbitration. Each party
agrees that the arbitration provisions of this Agreement are its exclusive
damage remedy and expressly waives any right to seek redress in another forum.
Each party shall bear the fees of the arbitrator appointed by it, and the fees
of the neutral arbitrators shall be borne equally by each party during the
arbitration, but the fees of all arbitrators shall be borne by the losing party.
12.14 Agreement Negotiated. The parties hereto are sophisticated and
have consulted legal counsel with respect to this transaction. As a consequence,
the parties do not believe that the presumptions of any statutory or common law
rule relating to the
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<PAGE>
interpretation of contracts against the drafter of any particular clause should
be applied in this case and therefore waive its effects.
12.15 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
*** [NEXT PAGE IS SIGNATURE PAGE] ***
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<PAGE>
Signature Page to Asset Purchase Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
"IRIS"
INTERNATIONAL REMOTE IMAGING
SYSTEMS, INC., a Delaware corporation
By:
Name:
Title:
"DITI"
DIGITAL IMAGING TECHNOLOGIES, INC.,
a Delaware corporation
By:
Name:
Title:
S-1
<PAGE>
"PSII"
PERCEPTIVE SCIENTIFIC INSTRUMENTS,
INC., a Delaware corporation
By:
Name:
Title:
"PSTI"
PERCEPTIVE SCIENTIFIC TECHNOLOGIES,
INC., a Delaware corporation
By:
Name:
Title:
The undersigned hereby represents and warrants to IRIS that (i) he has
consented to the Transactions in his capacity as the sole stockholder of DITI,
(ii) he will not revoke such consent and (iii), subject to the satisfaction or
waiver by Seller of the conditions precedent to the obligations of Seller, he
will execute and deliver to IRIS on or before the Closing Date all the Closing
Agreements to which he is listed as a party.
"CONTROLLING STOCKHOLDER"
Edward Randall III
S-2
EXHIBIT B
AGREEMENT
This AGREEMENT ( this "Agreement") is entered into as of July 2, 1996
by and among DIGITAL IMAGING TECHNOLOGIES, INC., a Delaware corporation
("DITI"), PERCEPTIVE SCIENTIFIC INSTRUMENTS, INC., a Delaware corporation
("PSI"), PERCEPTIVE SCIENTIFIC INTERNATIONAL LIMITED, a United Kingdom
corporation ("PSIL"), Edward Randall III ("Randall"), Anthony G. Landells
("Landells") and Marjorie Landells ("Mrs. Landells").
WITNESSETH:
WHEREAS, PSI and Landells have previously entered into that certain
Terms of Agreement dated October 1, 1992 regarding the creation of PSIL (the
"Terms of Agreement"); and
WHEREAS, pursuant to the Terms of Agreement, Landells was granted
certain rights with respect to equity ownership in PSIL and PSI, any sale or
other disposition of PSIL or its assets, any sale of PSI, and management of
PSIL; and
WHEREAS, PSI, PSIL and Landells have previously entered into that
certain Subscription Agreement dated February 1, 1994 regarding equity ownership
in PSIL and certain related rights and obligations (the "Subscription
Agreement"); and
WHEREAS, pursuant to the Subscription Agreement, Landells was granted
certain rights with respect to the sale or other disposition of assets of PSIL;
and
WHEREAS, pursuant to the Articles of Association of PSIL dated January
30, 1994 (the "Articles of Association"), Landells and Mrs. Landells have
certain rights with respect to the transfer or other disposition of shares of
PSIL; and
WHEREAS, Randall owns 100% of the outstanding capital stock of DITI;
DITI owns 100% of the outstanding capital stock of PSI; PSI owns 75% of the
outstanding ordinary shares and 100% of the outstanding preference shares of
PSIL; Landells owns 13.5% of the outstanding ordinary shares of PSIL; and Mrs.
Landells owns 11.5% of the outstanding ordinary shares of PSIL; and
WHEREAS, DITI desires to effect a sale (the "Sale") of the assets of
PSI and the assets or shares of PSIL to International Remote Imaging Systems,
Inc., a Delaware corporation ("IRIS"), pursuant to one or more purchase
agreements between DITI, PSI, PSIL and certain of their affiliates, on the one
hand, and IRIS on the other hand (the " Purchase Agreement"); and
WHEREAS, Landells desires to transfer his shares in PSIL and to waive
his rights under the Terms of Agreement, the Subscription Agreement and the
Articles of Association in exchange for certain consideration, as described
herein; and
WHEREAS, Mrs. Landells desires to transfer her shares in PSIL and to
waive her rights under the Articles of Association in exchange for certain
consideration, as described herein.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Transfer of Shares. (a) Subject to the performance by DITI of its
obligations under paragraph 5(a) hereof, Landells hereby sells, assigns and
transfers 135 "A" ordinary shares of PSIL, represented by Certificate No. 7,
which constitute all of the shares of PSIL owned by him, to PSI, free
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<PAGE>
from all claims, charges, liens, encumbrances, equities or adverse rights of any
description, and irrevocably appoints and constitutes James L. Hurn attorney to
transfer the shares on the books of PSIL with full power of substitution in the
matter; and
(b) Subject to the performance by DITI of its obligations
under paragraph 5(b) hereof, Mrs. Landells hereby sells, assigns and transfers
115"A" ordinary shares of PSIL, represented by Certificate No. 6, which
constitute all of the shares of PSIL owned by her, to PSI, free from all claims,
charges, liens, encumbrances, equities or adverse rights of any description, and
irrevocably appoints and constitutes James L. Hurn attorney to transfer the
shares on the books of PSIL with full power of substitution in the matter.
2. Waiver of Rights. (a) Subject to the performance by DITI of its
obligations under paragraphs 5(c) and 6 hereof, Landells hereby irrevocably and
forever waives any and all rights he has or may have under the Terms of
Agreement and the Subscription Agreement, including without limitation any and
all rights relating to equity ownership in PSIL or PSI, voting rights, rights of
first refusal relating to the sale, transfer or other disposition of assets or
shares of PSIL, co-exit rights regarding the sale of PSI, and any rights under
common law or statute he has or may have relating to the foregoing; and
(b) Subject to the performance by DITI of its obligations
under paragraphs 5(a) and 5(b) hereof, respectively, Landells and Mrs. Landells
hereby irrevocably and forever waive any and all rights he or she has or may
have under the Articles of Association, including without limitation any and all
voting rights and rights of first refusal relating to the sale, transfer or
other disposition of shares of PSIL, and any rights under common law or statute
he or she has or may have relating to the foregoing.
3. Consent to Sale of Business. (a) Subject to the performance by DITI
of its obligations under paragraphs 5(c) and 6 hereof, in his capacity as a
party to the Terms of Agreement and the Subscription Agreement, Landells hereby
consents to the Sale to IRIS (or its permitted assignee) pursuant to the
Purchase Agreement; and
(b) Subject to the performance by DITI of its obligations
under paragraphs 5(a) and 5(b) hereof, respectively, in their capacities as
shareholders in PSIL, Landells and Mrs. Landells hereby consent to the Sale to
IRIS (or its permitted assignee) pursuant to the Purchase Agreement.
4. Release. Subject to the performance by DITI of its obligations under
paragraphs 5(a) and 5(b) hereof, respectively, Landells and Mrs. Landells hereby
release DITI, PSI, PSIL and their respective affiliates from any claim Landells
or Mrs. Landells has or may have against any of them relating to the Sale to
IRIS (or its permitted assignee); provided that such release shall not preclude
any such claims against IRIS or any of its subsidiaries.
5. Cash Payments. (a) In consideration of and subject to Landells'
performance under paragraphs 1(a), 2(b), 3(b) and 4 above, DITI agrees to pay to
Landells cash in the amount of US $46,980.
(b) In consideration of and subject to Mrs. Landells'
performance under paragraphs 1(b), 2(b), 3(b) and 4 above, DITI agrees to pay to
Mrs. Landells cash in the amount of US $40,020.
(c) In consideration of and subject to Landells' performance
under paragraphs 2(a) and 3(a) above, DITI agrees to pay to Landells cash in the
amount of US $296,960.
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<PAGE>
(d) The amounts to be paid by DITI pursuant to subparagraphs
(a) and (c) of this paragraph 5 shall be paid within 24 hours following the
consummation of the Sale to IRIS by wire transfer to Landells' and Mrs.
Landells' bank account in the name of A. G. Landells & M. Landells with Lloyds
Bank plc Northwich Branch of 36 High Street, Northwich, Cheshire CW9 5BQ England
Account Number 01279738 Sort Code 30-90-16.
(e) The amount to be paid by DITI pursuant to subparagraph (b)
of this paragraph 5 shall be paid within 24 hours following the consummation of
the Sale to IRIS by wire transfer to Mrs. Landells' Building Society Account in
the name of Mrs. Marjorie Landells with Halifax Building Society Northwich
Branch at 61/63 Witton Street, Northwich, Cheshire CW9 5DW England Account
Number 00260508 Sort Code 11-05-70.
(f) In the event any amounts payable under this paragraph 5
are not received in full within 24 hours following the consummation of the Sale
to IRIS, neither Landells nor Mrs. Landells shall be obligated to complete their
respective obligations under this Agreement until such amounts are received in
full and DITI shall pay interest to Landells and Mrs. Landells at the rate of
10% per annum on such amounts until paid in full, such interest to be payable
after as well as before any judgement or ruling and to accrue on a day to day
basis.
6. Assignment of Warrant. In consideration of Landells' performance
under paragraphs 2(a) and 3(a) above, DITI agrees to assign to Landells, free
from all claims, charges, liens, encumbrances, equities or adverse rights of any
description, warrants to purchase 21,960 shares of IRIS common stock (the
"Warrants"). The Warrants shall be represented by a warrant certificate
substantially in the form of Exhibit B to the Purchase Agreement (the "Warrant
Certificate"). The assignment shall be substantially in the form attached to the
Warrant Certificate and shall be dated and issued to Landells as of the date of
the consummation of the Sale to IRIS and delivered to Landells as soon as
reasonably practicable (but in any event within 48 hours) following the
consummation of the Sale to IRIS; provided, that the Warrants may be issued
directly to Landells by IRIS at the closing of the Sale pursuant to the Purchase
Agreement.
7. Consent to Transfer of Shares. Landells and Mrs. Landells each
consent to the transfer of the shares by the other as described in paragraph 1
above and waive any and all rights he or she has or may have with respect to
such shares.
8. Guaranty and Indemnity. In consideration of and subject to the
performance by Landells and Mrs. Landells under paragraphs 1, 2, 3 and 4 above,
Randall, as guarantor and primary obligor, hereby irrevocably and
unconditionally, as a continuing security to cover all liabilities due from time
to time by DITI to Landells and Mrs. Landells under this Agreement, (i)
guarantees the payment to Landells and Mrs. Landells of the cash payments to be
made pursuant to paragraph 5 above and the assignment to Landells of the
Warrants pursuant to paragraph 6 above, and (ii) as a separate and independent
obligation and liability from his obligations and liabilities under the
preceding clause (i), agrees to indemnify Landells and Mrs. Landells in full on
demand against all losses, costs and expenses suffered or incurred by Landells
or Mrs. Landells arising from or in connection with any default by DITI and/or
Randall in fulfilling their respective obligations hereunder.
9. Termination. The performance of the obligations of the parties under
this Agreement is expressly made subject to the consummation of the Sale to IRIS
(or its permitted assignee) pursuant to the Purchase Agreement. In the event the
Sale to IRIS (or its permitted assignee) pursuant to the Purchase Agreement is
not consummated, this Agreement shall automatically terminate and shall be of no
force or effect.
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<PAGE>
10. Miscellaneous.
(a) Complete Agreement. This Agreement and any documents
executed contemporaneously herewith constitute the parties' entire
agreement with respect to the subject matter hereof and supersede all
agreements, representations, warranties, statements, promises and
understandings, whether oral or written, with respect to the subject
matter hereof, including without limitation the Terms of Agreement, the
Subscription Agreement and the Articles of Association. This Agreement
may not be amended, altered or modified except by a writing signed by
the parties.
(b) Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(c) Cooperation. Each party hereto agrees to execute any and
all further documents and writings and to perform such other actions
which may be or become necessary or expedient or effectuate and carry
out the purposes and intent of this Agreement.
(d) Severability. In case any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of
this Agreement, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained
herein.
(e) Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of
Texas without regard to the conflict of laws rules of the State of
Texas or any other jurisdiction that would call for the application of
the laws of any jurisdiction other than the State of Texas.
(f) Arbitration of Disputes. Except for actions seeking
injunctive relief, which may be brought before any court having
jurisdiction, any claim arising out of or relating to (i) this
Agreement, including, but not limited to, its validity, interpretation,
enforceability or breach, or (ii) the relationship between the parties
(including its commencement and termination) which are not settled by
agreement between the parties, shall be settled by arbitration to be
held in Houston, Texas in accordance with the rules and regulations of
the American Arbitration Association. Each party agrees that
arbitration is its exclusive damage remedy and expressly waives any
right to seek redress in another form.
(g) Headings. The paragraph headings in this Agreement are
inserted only as a matter of convenience, and in no way define, limit,
or extend or interpret the scope of this Agreement or of any particular
paragraph.
(h) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date and year first written above.
DIGITAL IMAGING TECHNOLOGIES, INC.,
a Delaware corporation
By:
Name:
Title:
PERCEPTIVE SCIENTIFIC INSTRUMENTS, INC.,
a Delaware corporation
By:
Name:
Title:
PERCEPTIVE SCIENTIFIC INTERNATIONAL
LIMITED, a United Kingdom corporation
By:
Name:
Title:
Edward Randall III
Anthony G. Landells
Marjorie Landells
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EXHIBIT C
Agreement for Joint Filing
In connection with the beneficial ownership of shares of
common stock, par value $.01 per share, of International Remote Imaging Systems,
Inc., Edward Randall III and Digital Imaging Technologies, Inc. hereby agree to
the joint filing on behalf of such persons all filings, including the filing of
a Schedule 13D and all amendments thereto pursuant to Rule 13d-2(f)(1)(iii)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
required under the Exchange Act pursuant to which joint filing statements are
permitted.
IN WITNESS WHEREOF, the undersigned have caused this Agreement
for Joint Filing to be signed as of this 7th day of July, 1996.
DIGITAL IMAGING TECHNOLOGIES, INC.
By: /s/ James L. Hurn
Name: James L. Hurn
Title: Chief Executive Officer
EDWARD RANDALL, III
Signature: /s/ Edward Randall, III
Name: Edward Randall, III
