SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
INDUSTRIAL IMAGING CORPORATION
- --------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK, $.01 PAR VALUE PER SHARE
- --------------------------------------------------------------------------------
(Title of Class of Securities)
45616N-10-0
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(CUSIP Number)
Neil H. Aronson, Esq.,
Mintz, Levin, Cohn, Ferris, Glovsky, and Popeo, P.C.
One Financial Center, 41st Floor
Boston, MA 02111
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
October 26, 1999
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(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 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box..
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for the other parties to whom copies are to be
sent.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 6 pages
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- -------------------------- --------------------------
CUSIP NO. 45616N-10-D SCHEDULE 13D Page 2 of 6 Pages
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1. NAME OF REPORTING PERSON/S.S. OR I.R.S. IDENTIFICATION
NO. OF ABOVE PERSON
CHARLES M. LEIGHTON
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [ ]
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3. SEC USE ONLY
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4. SOURCE OF FUNDS
PF
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(D) OR 2(E) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
USA
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7. SOLE VOTING POWER
3,000,000
NUMBER OF --------------------------------------------------
SHARES 8. SHARED VOTING POWER
BENEFICIALLY
OWNED BY 0
EACH --------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON
WITH: 3,000,000
--------------------------------------------------
10. SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,000,000
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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)
27.55%
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14. TYPE OF REPORTING PERSON
IN
================================================================================
Page 2 of 6 pages
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ITEM 1. SECURITY AND ISSUER
This statement relates to the common stock, $.01 par value
(the "Common Stock") of Industrial Imaging Corporation, a Delaware
corporation (the "Company"). The address of the Company's principal
executive offices is 847 Rogers Street, Lowell, MA 01852.
ITEM 2. IDENTITY AND BACKGROUND
This statement is being filed by Charles M. Leighton. Mr.
Leighton resides at 51 Vaughn Hill Road, Bolton, MA 01740. Mr.
Leighton's present principal occupation is private investor. Mr.
Leighton is a citizen of the United States. Mr. Leighton has not been,
during the last five years, (a) convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (b) 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.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Pursuant to the terms of a Stock and Warrant Purchase
Agreement between the Company, Imprimis SB, L.P. ("Imprimis SB"),
Imprimis Investors LLC ("Imprimis"), Wexford Spectrum Investors LLC
("WSI" and together with Imprimis SB and Imprimis, the "Wexford
Affiliates") and Mr. Leighton, dated October 26, 1999, the Wexford
Affiliates sold to Mr. Leighton 3,000,000 shares of the Common Stock
and warrants to purchase 2,000,000 additional shares of Common Stock
owned of record as of such date by the Wexford Affiliates for an
aggregate purchase price of $95,000 (the "Purchase Price"). Mr.
Leighton used his own personal funds to pay the Purchase Price. Mr.
Leighton did not borrow any portion of the Purchase Price and Mr.
Leighton is under no obligation to any third party resulting from his
use of personal funds to pay the Purchase Price.
ITEM 4. PURPOSE OF TRANSACTION
Mr. Leighton has purchased securities of the Company for
personal investment purposes. Mr. Leighton's purchase of securities of
the Company is related to the sale by the Company of substantially all
of its assets to an unaffiliated third party, Focus AOI, Inc.
("Focus"). Pursuant to a certain Asset Purchase Agreement dated as of
November 1, 1999 (the "APA"), Focus has agreed to pay the Company, not
later than four years after the closing of the transaction described in
the APA, a certain multiple of the net earnings of the Company's former
business (the "Earnout"). A substantial percentage of the Earnout,
after satisfaction of certain noteholders' claims, should be available
3 of 6 pages
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for distribution to the Company's shareholders in the form of a cash
dividend. Mr. Leighton's purchase of the securities of the Company was
conditioned upon the signing of the APA and the inclusion of
satisfactory Earnout provisions in the APA.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) Mr. Leighton beneficially owns 3,000,000 shares of Common
Stock and warrants to purchase an additional 2,000,000 shares. Mr.
Leighton currently owns 27.55% of the Company's issued and outstanding
Common Stock.
(b) Mr. Leighton has the sole power to vote or direct the vote
and the sole power to dispose or to direct the disposition of all of
the securities listed in section 5(a).
(c) Over the last sixty days, Leighton has not effected any
transactions in any security of the Company.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER
Mr. Leighton has acted as a broker on behalf of the Company
with respect to the transaction described in the APA. Pursuant to the
APA, Mr. Leighton is entitled to receive a certain percentage of the
Earnout as a broker's fee.
Mr. Leighton has also signed a Stockholder's Voting Agreement
and Irrevocable Proxy, pursuant to which Mr. Leighton has assigned to
officers of Focus AOI the right and obligation to vote his shares in
favor of the transaction described in the APA.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Copies of the following are hereby filed as exhibits:
(A) Asset Purchase Agreement dated as of November 1, 1999
between Focus AOI, Inc., AOI International, Inc. and Industrial Imaging
Corporation;
(B) Stock and Warrant Purchase Agreement dated October 26,
1999 between Industrial Imaging Corporation, Imprimis S.B., L.P.,
Imprimis Investors LLC, Wexford Spectrum Investors LLC, and Charles M.
Leighton; and
4 of 6 pages
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(C) Stockholder's Voting Agreement and Irrevocable Proxy dated
as of October 26, 1999 by and among Focus AOI, Inc., Industrial Imaging
Corporation and Charles M. Leighton.
5 of 6 pages
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Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: November 23, 1999 /s/ Charles M. Leighton
-----------------------
Charles M. Leighton
6 of 6 pages
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EXHIBIT A
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of November 1, 1999,
BETWEEN
FOCUS AOI, INC., a corporation incorporated under the laws of the
State of Delaware
(the "PURCHASER")
- and -
AOI INTERNATIONAL, INC., a corporation incorporated under the laws
of the State of Delaware
("AOI")
- and -
INDUSTRIAL IMAGING CORPORATION, a corporation existing under the
laws of the State of Delaware
("INDUSTRIAL")
WHEREAS:
A. Industrial and its wholly-owned subsidiary, AOI (collectively,
the "VENDORS" or the "COMPANIES" and, individually a "VENDOR")
are engaged in the business (the "BUSINESS") of developing,
manufacturing and distributing the Products for the automated
optical inspection of printed circuit boards and for other
purposes; and
B. The Purchaser desires to purchase from the Vendors, and the
Vendors desire to sell to the Purchaser, certain of the
operating assets of the Business, upon the terms and
conditions set forth in this Agreement.
NOW THEREFORE in consideration of the foregoing, the covenants
and agreements herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1 - DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 DEFINITIONS. For purposes of this Agreement, the following terms and
phrases shall have the following meanings:
(a) "AFFILIATE" means, with respect to any Person, any (a) director,
officer, manager or general partner of such Person, (b) a spouse,
parent, grandparent, sibling or descendant of such Person and (c)
any other Person that, directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common
control with such Person. The term "control" includes, without
limitation, the possession, directly or indirectly, of the power to
direct the management and
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policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
(b) "ANCILLARY DOCUMENTS" has the meaning ascribed thereto in Section
4.1(b).
(c) "ASSET ADVANCES" means the aggregate of all amounts advanced by
Focus or the Purchaser to or for the benefit of the Vendors pursuant
to the provisions of Section 5.10 which are used in whole or in part
to purchase any Inventory or Fixed Assets prior to Closing.
(c) "ASSIGNED CONTRACTS" has the meaning ascribed thereto on Section
2.1(h).
(d) "BUSINESS DAY" means any day other than a Saturday, a Sunday or a
legal holiday on which banks are authorized or required to be closed
for the conduct of commercial banking business in Massachusetts or
Ontario.
(e) "CLAIM NOTICE" has the meaning ascribed thereto in Section 11.3.
(f) "CLOSING" has the meaning ascribed thereto in Section 7.1.
(g) "CLOSING DATE" has the meaning ascribed thereto in Section 7.1.
(h) "COMMITMENTS" has the meaning ascribed thereto in Section 2.1(g).
(i) "CONTRACTS" has the meaning ascribed thereto in Section 2.1(h).
(j) "EARNOUT AMOUNT" has the meaning ascribed thereto in Section 3.1.
(k) "EARNOUT PAYMENT" has the meaning ascribed thereto in Section 11.5.
(l) "EARNOUT SECURITY AGREEMENT" means the security agreement executed
by the Purchaser in favour of the Vendor in the form attached hereto
as SCHEDULE 1.1(l).
(m) "EMPLOYMENT AGREEMENTS" has the meaning ascribed thereto in Section
5.6.
(n) "FINANCIAL STATEMENTS" has the meaning ascribed thereto in Section
4.1(e).
(o) "FIXED ASSETS" has the meaning ascribed thereto in Section 2.1(d).
(p) "FOCUS" means Focus Automation Systems Inc.
(q) "GAAP" has the meaning ascribed thereto in Section 4.1(e).
(r) "GOODWILL" has the meaning ascribed thereto in Section 2.1(j).
(s) "GOVERNMENTAL AUTHORITY" means any court, arbitrator, administrative
agency or commission, or governmental or regulatory official,
department, agency, body, authority or instrumentality, whether
Canadian, United States, or of any other foreign country, and
whether federal, provincial, state or local.
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(t) "INDEMNIFIED PARTY" has the meaning ascribed thereto in Section
11.3.
(u) "INDEMNIFYING PARTY" has the meaning ascribed thereto in Section
11.3.
(v) "INDUSTRY CERTIFICATIONS" has the meaning ascribed thereto in
Section 4.1(u).
(w) "INITIAL PAYMENT" has the meaning ascribed thereto in Section 3.1.
(x) "INVESTOR NOTES" has the meaning ascribed thereto in Section 5.9.
(y) "INVESTORS" has the meaning ascribed thereto in Section 5.9.
(z) "INVENTORY" has the meaning ascribed thereto in Section 2.1(a).
(aa) "ISSUE PRICE" has the meaning ascribed thereto in Section 6.1(d).
(bb)"KNOWLEDGE OF COMPANIES" or "COMPANIES' KNOWLEDGE" means the actual
knowledge of any director, officer or management level employee of
the Companies or John Freeman after reasonable enquiry within
Companies.
(cc)"LAWS" means any federal, provincial, state, local, municipal or
foreign statute, law, ordinance, regulation, rule, code, order, or
other requirement or rule of law.
(dd)"LETTER OF CREDIT" has the meaning ascribed thereto in Section
6.2(i)(i).
(ee)"LIABILITY" means any liability or obligation, whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated and whether due or to become
due, regardless of when asserted.
(ff)"LIABILITY ADVANCES" means the aggregate of all amounts advanced by
Focus or the Purchaser to or for the benefit of the Vendors pursuant
to the provisions of Section 5.10 which are used to satisfy in whole
or in part any Liability of the Vendors existing at the date hereof
including, without limitation, (i) the amount of U.S. $135,000 paid
to Barry Levine on or about the date of execution of this Agreement;
and (ii) U.S. $75,170.10 in respect of employee medical insurance
premiums.
(gg)"LIEN" means any lien, claim, hypothecation, assignment,
preference, priority, option, pledge, charge, security interest,
mortgage, equitable interest, or other encumbrance of any nature or
kind whatsoever.
(hh)"LOSSES" has the meaning ascribed thereto in Section 11.1.
(ii)"MATERIAL AGREEMENTS" has the meaning ascribed thereto in Section
4.1(m).
(jj)"NOTICE PERIOD" has the meaning ascribed thereto in Section 11.3.
(kk)"ORGANIZATIONAL DOCUMENTS" means the charter and by-laws of a
corporation, including any amendments thereto or restatements
thereof.
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(ll)"PERSON" means any individual, sole proprietorship, general
partnership, limited partnership, joint venture, trust,
unincorporated organization, association, corporation, limited
liability company, Governmental Authority or other entity.
(mm)"PRODUCTS" means printed circuit board inspection products, dry
film photograph plotters and all associated spare parts developed,
manufactured and distributed by the Vendors and all service revenue
derived by the Vendors therefrom.
(nn)"PROPRIETARY RIGHTS" has the meaning ascribed thereto in Section
4.1(l)(i).
(oo)"PURCHASE PRICE" has the meaning ascribed thereto in Section 3.1.
(pp)"PURCHASED ASSETS" has the meaning ascribed thereto in Section 2.1.
(qq)"PURCHASER NOTE" has the meaning ascribed thereto in Section 5.10.
(rr)"PURCHASER SECURITY AGREEMENT" has the meaning ascribed thereto in
Section 5.10.
(ss)"RECEIVABLES" has the meaning ascribed thereto in Section 2.1(b).
(tt)"RELATED PARTY" has the meaning ascribed thereto in Section 4.1(r).
(uu)"TAX" OR "TAXES" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any
and all interest, penalties, fines, additions to tax and additional
amounts imposed with respect thereto) imposed by any Governmental
Authority or other taxing authority, including, without limitation:
taxes or other charges on or with respect to income, franchises,
windfall or other profits, gross receipts, goods and services tax
(GST), land transfer tax, property, sales, provincial sales tax,
use, capital stock, payroll, employment, social security, workers'
compensation, unemployment insurance or compensation, or net worth;
taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added, or gains taxes; license,
registration and documentation fees; and customs duties, tariffs,
and similar charges that are or have been (a) imposed, assessed or
collected by or under authority of any Governmental Authority, or
(b) payable pursuant to any tax sharing agreement or similar
contract and all unemployment insurance, health insurance and
Canadian, Ontario and other government pension plan premiums.
(vv)"TAX RETURNS" has the meaning ascribed thereto in Section 4.1(t).
(ww)"UNRESOLVED CLAIM" has the meaning ascribed thereto in Section
11.5.
(xx)"WORKING CAPITAL ADVANCES" means the aggregate of: (i) the
aggregate of all amounts advanced or expended by Focus or the
Purchaser to or for the benefit of the Vendors pursuant to the
provisions of Section 5.10 other than Liability Advances and Asset
Advances; (ii) all amounts expended by Focus or the Purchaser (or
advanced by Focus or the Purchaser to the Vendors) with respect to
expenses for the EPC Tradeshow including, without limitation,
registration, travel and freight, being approximately Cdn. $80,000;
(iii) U.S. $45,000 with
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respect to legal fees and disbursements for the Vendors; (iv) U.S.
$26,100 with respect to insurance premiums; (v) U.S. $45,704 with
respect to premises rent; and (vi) compensation for a
Vice-President, Sales responsible for the Business.
(yy)"YEH/AMODEI SECURITY AGREEMENT" has the meaning ascribed thereto in
Section 5.9.
1.2 HEADINGS, SECTIONS. The headings preceding the text of Articles and
Sections included in this Agreement and the headings to Exhibits and
Schedules attached to this Agreement are for convenience only and shall
not be deemed part of this Agreement or be given any effect in
interpreting this Agreement. The use of the masculine, feminine or
neuter gender herein shall not limit any provision of this Agreement.
The use of the term "INCLUDE" shall in all cases mean "INCLUDE, WITHOUT
LIMITATION,". Any due diligence review, audit or other investigation or
inquiry undertaken or performed by or on behalf of a party shall not
limit, qualify, modify or amend the representations, warranties or
covenants of, or indemnities made by, any other party pursuant to this
Agreement, irrespective of the knowledge and information received (or
which should have been received) therefrom by the investigating party,
and consummation of the transactions contemplated herein by a party
shall not be deemed a waiver of a breach of or inaccuracy in any
representation, warranty or covenant or of any party's rights and
remedies with regard thereto.
1.3 SCHEDULES. The following are the Schedules attached to and incorporated
in this Agreement by reference and are deemed to be an integral part
hereof:
Schedule 1.1(l) Earnout Security Agreement
Schedule 2.1(a) Inventory
Schedule 2.1(b) Receivables
Schedule 2.1(c) Prepaid Expenses
Schedule 2.1(d) Fixed Assets
Schedule 3.1 Calculation of Earnout Amount
Schedule 4.1(l)(ii) Proprietary Rights
Schedule 4.1(m) Agreements
Schedule 4.1(o) Licenses, Permits and Authorizations
Schedule 4.1(p) Companies' Warranties
Schedule 4.1(r) Related Parties
Schedule 4.1(s) Companies' Insurance Policies
Schedule 4.1(t) Taxes
Schedule 4.1(u) Industry Certifications
Schedule 5.6 List of Key Employees
Schedule 5.9 Investor Notes, Yeh/Amodei Security
Agreement and First Intercreditor Agreement
Schedule 5.10 Purchaser Note, Purchaser Security Agreement
and Collateral Assignment of Patents
Schedule 5.11 Second Intercreditor Agreement
Schedule 6.1(d) Form of Warrants
Schedule 7.2(e) Opinion of Counsel to the Companies
Schedule 7.3(d) Opinion of Counsel to the Purchaser
ARTICLE 2 - PURCHASE AND SALE
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2.1 AGREEMENT OF PURCHASE AND SALE. Subject to the terms and conditions
hereof, at the Closing, the Vendors shall sell, assign, convey,
transfer and deliver to the Purchaser and the Purchaser shall purchase
from the Vendors all right, title and interest of the Vendors in and to
the following assets (the "PURCHASED ASSETS"):
(a) all of the packaging, supplies, raw materials, work in
progress, finished goods inventories, components and repair
and replacement parts used in the Business as at Closing as
listed on SCHEDULE 2.1(a) (the "INVENTORY");
(b) all notes and accounts receivable and other receivables of any
kind relating to the Business as at Closing as listed on
SCHEDULE 2.1(b) (the "RECEIVABLES");
(c) all prepaid expenses and deposits relating to the Business as
at Closing, including, without limitation, all prepaid taxes
and water rates, all prepaid purchases of gas, oil and hydro,
and all prepaid lease payments as at Closing as listed on
SCHEDULE 2.1(c) (the "PREPAID EXPENSES");
(d) all of the fixed assets, machinery, manufacturing equipment,
laboratory and testing equipment, demonstration instruments
and equipment, office equipment, furniture and motor vehicles
used in the Business, as at Closing as listed on SCHEDULE
2.1(d) but, for greater certainty, excluding all equipment
used by the Vendors pursuant to capital leases (the "FIXED
ASSETS");
(e) all Proprietary Rights, as defined in Section 4.1, owned or
licensed in connection with the Business to the extent
transferable by the Companies;
(f) all of the books and records directly related to the Products,
the Business and the Purchased Assets, including, but not
limited to, customer and supplier lists and records, account
histories, sales and pricing information, records relating to
marketing programs and training programs, and manufacturing
and quality control records ("BOOKS AND RECORDS");
(g) the purchase and sales orders and commitments issued to and
the purchase and sales orders and commitments (or the portions
thereof) issued by either Vendor related to the Products, the
Purchased Assets, or the Business which the Purchaser, in its
sole discretion, assumes on Closing (the "COMMITMENTS");
(h) the leases, capital leases, contracts, agreements and
commitments related to the Products, the Purchased Assets or
the Business to the extent transferable, which the Purchaser,
in its sole discretion, assumes on Closing (the "CONTRACTS"
and, together with the Commitments, the "ASSIGNED CONTRACTS");
(i) all of the sales literature, brochures, training manuals and
related materials and advertising and promotional materials
that are related to the Products, the Purchased Assets and the
Business ("SALES MATERIALS");
(j) all goodwill of the Companies and information and documents
relevant thereto, including, without limitation, lists of
customers and suppliers, phone numbers, web sites, e-mail
addresses, credit information, research materials and
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development files ("GOODWILL");
(k) all registrations, permits, licenses, or approvals of any
nature, or grandfathered practices or other authorizations
related to the Products, the Purchased Assets or the Business
to the extent transferable of which the Purchaser, in its sole
discretion, requests transfer ("LICENCES");
(l) The listings of Inventory, Receivables, Prepaid Expenses and
Fixed Assets on SCHEDULES 2.1(a), (b), (c) and (d),
respectively, are current as of the dates specified thereon.
Ten Business Days prior to Closing, lists of Inventory,
Receivables, Prepaid Expenses and Fixed Assets as of such date
shall be delivered to the Purchaser. On Closing, lists of
Inventory, Receivables, Prepaid Expenses and Fixed Assets as
of the Closing Date shall be attached hereto, as SCHEDULES
2.1(a), (b), (c) and (d), respectively, and shall include,
without limitation, all Inventory and Fixed Assets purchased
by the Vendors with the Asset Advances and all of the
provisions of this Agreement shall apply thereto.
2.2 TRANSFER OF TITLE TO THE PURCHASED ASSETS. The sale and delivery by the
Vendors of the Purchased Assets shall be made at the Closing, upon
payment of the Initial Payment by the Purchaser, by such bills of sale,
assignments, licenses, endorsements and other appropriate instruments of
transfer as shall be necessary to vest in the Purchaser, as of the
Closing Date, all right, title and interest of the Vendors in and to the
Purchased Assets, free and clear of all Liens.
2.3 TRANSFER OF CONTRACTS. Nothing in this Agreement shall be construed as
an attempt to assign any Purchased Asset which is by its terms or by Law
nonassignable without the consent of the other party or parties thereto,
unless such consent shall have been given or as to which all the
remedies for the enforcement thereof enjoyed by the Vendors would, as a
matter of Law, pass to the Purchaser as an incident of the assignments
provided for by this Agreement. In the event (a) any Purchased Asset
either does not permit or expressly prohibits the assignment by the
Vendors of their rights and obligations thereunder, (b) the Vendors have
not obtained the necessary written consents to an assignment from all
parties to any Purchased Asset prior to the Closing, or (c) direct
assumption of any Purchased Asset is not practical, the Purchaser shall
hold the Vendors harmless with respect to all obligations of the Vendors
payable and performable after the Closing Date in connection with such
Purchased Asset and the Vendors shall hold the benefits and privileges
of such Purchased Asset arising after the Closing Date in trust for the
Purchaser and cooperate with the Purchaser in any reasonable arrangement
designed to provide for the Purchaser the benefits with respect to such
Purchased Asset. Such arrangements shall include, but not be limited to,
the appointment of the Purchaser as attorney in fact for the Vendors.
2.4 COMPANIES' LIABILITIES. The Companies shall retain and remain
responsible for all of the Companies' Liabilities, including:
(a) all Liabilities of the Companies for borrowed money;
(b) all Tax Liabilities of the Companies (including claims not yet
filed);
(c) all general liability claims, including, without limitation,
product liability, personal
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injury or property damage claims in respect of pre-Closing
acts or omissions of the Companies or any predecessor or
Affiliate of the Companies;
(d) all Liabilities relating to any litigation involving the
Companies;
(e) all environmental Liabilities of the Companies;
(f) all labour relations, employee related and employee benefit
Liabilities of the Companies;
(g) all accounts payable and accrued expenses of the Companies
related to the Products, the Purchased Assets or the Business
and which arise or relate to the period prior to the Closing
Date;
(h) all Liabilities associated with Products sold prior to the
Closing Date, including, without limitation, and except as
provided in Section 5.8, all warranty repair or replacement
obligations of the Companies with respect to such Products;
(i) any Liabilities resulting from the operation of the Business
by the Companies on or prior to the Closing Date; and
(j) any suits, actions or claims which arise or relate to the
period prior to the Closing Date alleging infringement by the
Companies of Proprietary Rights held by others.
ARTICLE 3 - PURCHASE PRICE
3.1 PURCHASE PRICE. The aggregate purchase price for the Purchased Assets
shall be equal to the aggregate of US$1,000,000 (less the amount of
Liability Advances as at Closing together with interest thereon to
Closing as provided in the Purchaser Note) (the "INITIAL PAYMENT") and
the earnout amount (the "EARNOUT AMOUNT"), calculated and paid pursuant
to SCHEDULE 3.1 hereof (collectively, the "PURCHASE PRICE").
3.2 PAYMENT OF THE PURCHASE PRICE AND SECURITY. At the Closing, the
Purchaser shall pay to the Vendors the Initial Payment (allocated
between the Vendors as specified by them in writing). The Earnout
Amount shall be paid in accordance with the terms of SCHEDULE 3.1
hereof (allocated between the Vendors as specified by them in writing).
As security for the Earnout Amount, the Purchaser at Closing shall
deliver to the Vendors the Earnout Security Agreement. The Vendors
hereby acknowledge that Focus is not providing any guarantee or
security with respect to the Purchase Price.
3.3 ALLOCATION OF PURCHASE PRICE. The Purchaser shall allocate the Purchase
Price among the Purchased Assets covered by this Agreement as follows:
Inventory the lesser of fair market value and cost of
the Inventory, as agreed between the
Companies and the Purchaser prior to Closing
Receivables the net book value of Receivables less any
allowance therefor as determined in
accordance with GAAP
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Prepaid Expenses the face amount of the Prepaid Expenses
Fixed Assets the lesser of fair market value and net book
value of the Fixed Assets, as agreed between
the Companies and the Purchaser prior to
Closing
Proprietary Rights $1
Books and Records $1
Commitments $1
Contracts $1
Sales Materials $1
Goodwill $1
Licences $1
To the extent the aggregate of the amounts calculated pursuant to this
Section 3.3 is in excess of $1,000,000, the Parties agree that the
portion of the Purchase Price allocated to Fixed Assets shall be
reduced by the amount of such excess.
To the extent that the aggregate of the amounts calculated pursuant to
Section 3.3 is less than $1,000,000 and the Purchaser waives the
conditions contained in subsection 6.2(k), the Parties agree that the
portion of the Purchase Price allocated to Goodwill shall be increased
by such shortfall.
The Purchaser acknowledges that the amount of the Initial Payment shall
not be affected by the allocation determined pursuant to subsections
3.3 and 3.4.
3.4 DETERMINATION OF ALLOCATION. The listings of Inventory, Receivables and
Fixed Assets to be attached hereto pursuant to section 2.1 hereof as
SCHEDULES 2.1(a), (b) and (d), respectively, shall specify, on an
item-by-item basis, the amount to be allocated thereto, calculated as
specified in Section 3.3.
If the Purchaser disagrees with such allocations, within 30 days of the
Closing, such dispute shall be submitted for determination to an
independent firm of chartered accountants, mutually agreed to by the
Vendors and Purchaser, failing such agreement, to Ernst & Young LLP.
Such determination shall be final and binding on the Parties. Each of
the Vendor and Purchaser shall bear the costs of its respective
accountants and other advisors and the costs of the independent firm of
chartered accountants shall be borne equally between the Vendors and
the Purchaser.
3.5 FILINGS. Each party shall file in mutually agreeable form all returns
and elections required or desirable under the Internal Revenue Code of
1986, as amended (the "CODE") in a manner consistent with foregoing
allocation of the Purchase Price.
3.6 IRREVOCABLE DIRECTION. The Vendors hereby irrevocably direct the
Purchaser to pay, out of
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the Earnout Amount, pursuant to and in accordance with SCHEDULE 3.1 at
the time the Earnout Amount shall become payable, the amounts to Mr.
Charles M. Leighton and the amounts to Mr. Gene Weiner specified in
SCHEDULE 3.1 and to pay the remainder of the Earnout Amount, if any, to
the Vendors (allocated between the Vendors as specified by them in
writing).
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES. The Vendors
hereby jointly and severally represent and warrant to the Purchaser, as
of the date hereof (except as set forth below) and as of the Closing
Date, and acknowledges that the Purchaser is relying on same for
purposes of completing this transaction, as follows:
(a) ORGANIZATION, STANDING AND QUALIFICATION. Each of the Vendors
shall be, at Closing, a corporation duly incorporated, validly
existing and in good standing under the Laws of the State of
Delaware. Each of the Vendors shall, at Closing (i) have full
right, power and authority to carry on the Business as now
being conducted and to own or lease and operate its properties
as and in the places where the Business is now conducted, and
(ii) be duly qualified, licensed and authorized to do business
and in good standing in each jurisdiction where the nature of
the activities conducted by it or the character of the
properties owned, leased or operated by it in connection with
the Business require such qualification, licensing or
authorization.
(b) AUTHORITY. Each of the Vendors has full corporate power and
authority to enter into and deliver this Agreement and each of
the other agreements, certificates, instruments and documents
contemplated hereby (collectively, the "ANCILLARY DOCUMENTS")
to which either Vendor is a party, and to carry out the
transactions contemplated hereby and thereby. Each of the
Vendors has properly taken or shall have properly taken by the
Closing Date all corporate action required to be taken by it
with respect to the execution and delivery of this Agreement
and each of the Ancillary Documents to which it is a party,
and the consummation of the transactions contemplated hereby
and thereby.
(c) EXECUTION AND DELIVERY. This Agreement and each Ancillary
Document to which either of the Vendors is a party has been
duly authorized, executed and delivered by either Vendor and
constitutes a legal, valid and binding obligation of the
Vendors, enforceable against such Vendor in accordance with
its respective terms and conditions, except as enforceability
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws now or
hereinafter in effect affecting creditors' rights generally or
by general principles of equity.
(d) NO CONFLICTS. The execution, delivery and performance by the
Companies of this Agreement and each of the Ancillary
Documents to which either Vendor is a party, and the
consummation of the transactions contemplated hereby and
thereby, do not and will not violate, conflict with or result
in the breach of any material term, condition or provision of,
or, to the best of the Companies' Knowledge, require the
consent of any Person under, or give rise to the right to
accelerate or terminate, or result in the creation or right to
create any Lien upon
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the Purchased Assets under, (i) any Law to which either Vendor
or any of its assets or properties is subject, (ii) any
judgment, order, writ, injunction, decree or award of any
Governmental Authority to which either Vendor is subject,
(iii) any of the Companies' Organizational Documents or (iv)
any license, agreement, commitment or other instrument or
document to which either Vendor is a party or by which either
Vendor or any of its assets or properties is otherwise bound.
To the best of the Companies' Knowledge, no authorization,
approval or consent of, release from, and no registration or
filing with, any Governmental Authority or any other Person is
required in connection with the execution, delivery or
performance of this Agreement or any Ancillary Document by the
Vendor or Industrial.
(e) FINANCIAL STATEMENTS. The Companies have previously delivered
to the Purchaser true and correct copies of: (i) the audited
financial statements for the years ended March 31, 1998, 1997
and 1996; and (ii) the unaudited financial statements of the
Companies to March 31, 1999 (collectively, the "FINANCIAL
STATEMENTS"). The Financial Statements have been prepared from
and are consistent with the books, records and accounts of the
Companies, have been prepared in accordance with generally
accepted accounting principles used in the United States
("GAAP"), consistently applied throughout the periods
indicated (subject, in the case of the interim financial
statements, to normal year-end adjustments and information
which would normally be contained in footnotes to financial
statements) and fairly present, as of the dates and for the
periods referred to therein, the Companies' consolidated
financial position and results of operations. The books and
records of the Companies accurately record all material
transactions during the periods covered by the annual
Financial Statements, the interim financial statements and
since March 31, 1998.
(f) ABSENCE OF UNDISCLOSED LIABILITIES. Since March 31, 1999, the
Companies have not incurred any Liabilities except in the
ordinary course of business.
(g) ABSENCE OF CHANGES. Since March 31, 1999, the Companies have
carried on the Business in the ordinary course in
substantially the same manner as heretofore conducted and
have: (i) not sold or disposed of any of the Purchased Assets,
except sales or dispositions of Inventory in the ordinary
course of business; (ii) preserved and maintained the
Proprietary Rights and other intangible assets related to the
Business; (iii) performed in all material respects all of the
Companies' obligations under the Material Agreements as
defined in this Section 4.1; and (iv) performed all
obligations with respect to all employees of the Vendor. Since
March 31, 1999, there has not been any damage, destruction or
other casualty loss to or forfeiture of any of the Purchased
Assets (whether or not covered by insurance) which would be
material to the Business taken as a whole.
(h) TITLE TO ASSETS. At Closing, the Purchased Assets shall be
free and clear of all Liens other than the Liens to be created
by the Purchaser Security Agreement. The Purchased Assets
constitute substantially all the assets used in or necessary
to the conduct of the Business as presently conducted.
(i) RECEIVABLES. All of the Receivables of the Business, including
those arising since March 31, 1999, with respect to the
Business, to the best of the Companies'
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Knowledge, are bona fide, are not subject to any rights of
set-off and have arisen or were acquired in the ordinary
course of business and in a manner consistent with the regular
credit practices of the Business; (ii) the provisions for
doubtful accounts reserved on the books of the Business since
March 31, 1999, have been determined in good faith and in
accordance with GAAP; and (iii) since March 31, 1999, the
Companies have not canceled, reduced, discounted, credited or
rebated or agreed to cancel, reduce, discount, credit or
rebate, in whole or in part, any Receivables except in the
ordinary course of business. SCHEDULE 2.1(b) is a complete
list of all Receivables as at the date thereof.
(j) INVENTORY. (i) The Inventory was acquired in the ordinary
course of business and in a manner consistent with the regular
inventory practices of the Business; (ii) the Inventory
consists solely of quantities and qualities usable, salable
and merchantable by the Business in the ordinary course of
business, free from material defect, and is maintained at
normal levels consistent with business needs; (iii) the
Companies have not received any notice, and have no reason to
believe, that any customer could claim any right to return any
material amount of the Products sold by either Company for
credit or refund pursuant to any agreement, understanding or
practice; (iv) no Inventory is now stored with a bailee,
warehouseman or similar party; and (v) except as specified on
SCHEDULE 2.1(a), no Inventory is held by the Business on
consignment from other Persons or is held by other Persons on
consignment from the Business. SCHEDULE 2.1(a) is a complete
list of all Inventory as at the date thereof. At least 80% of
all Inventory (based on the cost thereof on the books of the
Vendors) is located at 847 Rogers Street, Lowell,
Massachusetts.
(k) TANGIBLE ASSETS. To the best of the Companies' Knowledge, the
tangible property owned or leased by the Companies in
connection with the Business (other than buildings, structures
and facilities) (i) is in good operating condition and repair,
reasonable wear and tear excepted if consistent with age; (ii)
is fit for its intended purpose and usable in the ordinary
course of business; and (iii) conforms in all material
respects to all applicable Laws relating to its use or
operation. SCHEDULE 2.1(c) is a complete list of all Fixed
Assets as at the date thereof.
(l) PROPRIETARY RIGHTS.
i) The Companies own or possess licenses or other rights
to use all trademarks, trade and business names,
service marks, service names, copyrights, patents,
processes, methods of production, trade secrets,
know-how, technologies and inventions (whether or not
patentable), including all rights therein provided by
international treaties or conventions (collectively,
"PROPRIETARY RIGHTS"), that are applicable to the
conduct of the Business as currently conducted.
ii) SCHEDULE 4.1(l)(ii) sets forth a true and complete
list of all trademarks, trade and business names,
service marks, service names, copyrights and patents
included in the Proprietary Rights used in the
Business (identifying which are owned and which are
licensed), including all registrations or
applications for registration thereof and all
agreements relating thereto.
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iii) To the best of the Companies' Knowledge, the
Companies are not required to pay any royalty,
license fee or similar compensation in connection
with the use of any of the Proprietary Rights in the
conduct of the Business.
iv) To the best of the Companies' Knowledge, the
Companies have not, in the conduct of the Business,
interfered with, infringed upon, misappropriated or
otherwise come into conflict with the intellectual
property rights of any other Person or committed any
acts of unfair competition and no claims have been
asserted by any Person alleging such interference,
infringement, misappropriation, conflict or act of
unfair competition.
v) To the best of the Companies' Knowledge, no Person is
infringing upon any of the Proprietary Rights used in
the Business, and the Companies have not notified any
Person that it believes that such Person is
interfering with, infringing, misappropriating or
otherwise acting in conflict with any of such
Proprietary Rights or engaging in any act of unfair
competition.
vi) To the best of the Companies' Knowledge, there are no
Proprietary Rights that have been developed by any
consultant or employee of the Business that have not
been transferred to, or are not owned free and clear
of any Liens by, the Companies.
vii) To the best of the Companies' Knowledge, the
Companies have taken reasonable and practicable steps
(including, without limitation, entering into
confidentiality and nondisclosure agreements with all
officers, directors and employees of and consultants
to the Companies with access to or knowledge of the
Proprietary Rights used in the Business) designed to
safeguard and maintain the secrecy, confidentiality
and proprietary nature of the Proprietary Rights used
in the Business.
viii) To the best of the Companies' Knowledge, the
Companies have taken (or has ensured that the owner
thereof has taken) all necessary action in all
appropriate jurisdictions to register and maintain
the registration of all of the Proprietary Rights
used in the Business that may be registered.
(m) AGREEMENTS. SCHEDULE 4.1(m) lists all leases, contracts,
agreements and commitments related to the Products, the
Purchased Assets or the Business to which the Companies are a
party or by which the Companies are bound and which involve
the payment or receipt of sums in excess of US $5,000 per year
in the aggregate (the "MATERIAL AGREEMENTS"). With respect to
each of the Material Agreements which is an Assigned Contract:
(i) a true and correct copy, or if a copy is not available, a
summary thereof, has been delivered to the Purchaser; (ii)
each is in full force and effect, without breach or default by
the Vendor or Industrial, or, to the best of the Companies'
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Knowledge, any other party thereto; (iii) to the best of the
Companies' Knowledge, each is valid and legally binding
against the Vendor and/or Industrial and, to the best of the
Companies' Knowledge, the other parties thereto; (iv) to the
best of the Companies' Knowledge, there are no unresolved
disputes with respect to any of them; and (v) to the best of
the Companies' Knowledge, no notice has been received
regarding termination of any of them.
(n) LITIGATION. There is no claim, legal action, suit, arbitration
or other proceeding pending against or relating to either
Vendor and involving the Business or any of the Purchased
Assets. As of the Closing Date, neither the Vendor, the
Business nor any of the Purchased Assets shall be subject to
any outstanding judgment, order, writ, injunction or decree of
any Governmental Authority.
(o) COMPLIANCE WITH LAWS. To the best of the Companies' Knowledge,
the Companies have obtained all material licenses, permits and
other authorizations from all applicable Governmental
Authorities necessary for the conduct of the Business as
currently conducted. SCHEDULE 4.1(o) hereto sets forth a true
and complete list of all such licenses, permits and other
authorizations obtained by the Companies, each of which is in
full force and effect. The Companies are in material
compliance, and have complied, with all Laws applicable to the
Business and the Purchased Assets and has not received any
notice of any violation thereof.
(p) PRODUCTS AND WARRANTIES. The Products conform in all material
respects to all literature, product descriptions or other
written material of the Companies, and any warranties granted
by the Companies therewith. Set forth as SCHEDULE 4.1(p) are
copies of the Companies' warranties for the Products sold in
the past five years and a written statement describing
customer service policies and any recurring warranty problems
for the Products. The Companies do not have any outstanding
contracts or proposals for the Products which depart from the
warranties and customer service policies and practices
described in such written warranties and customer service
policies.
(q) ENVIRONMENTAL MATTERS. To the best of the Companies'
Knowledge, the Companies' operation of the Business is in
material compliance with all applicable Laws relating to
hazardous substances, wastes, discharges, emissions,
disposals, dumping, burial or other forms of pollution, and
the Companies have received no written notice of any violation
or alleged violation thereof in connection with the operation
of the Business. The Companies have obtained all material
environmental, health and safety permits required by any
Governmental Authority for the operation of the Business as
currently conducted and has complied with all of the terms and
conditions of all such permits.
(r) RELATED PARTY TRANSACTIONS. Except as set forth on SCHEDULE
4.1(r), no Related Party is directly or indirectly a party to
any contract or other arrangement (whether written or oral)
with either Vendor providing for services (other than as an
employee of the Companies), products, goods or supplies,
rental of personal property, or otherwise requiring payments
from or to the Companies with respect to the Business. For
purposes hereof, the term "RELATED PARTY" shall mean a
director or officer of either Vendor or any member of his
immediate family or any corporation, partnership, other
business entity or trust in which he or any member of his
immediate family has greater than a ten percent (10%)
interest, or of which
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he or any member of his immediate family is an officer,
director, general partner or trustee.
(s) INSURANCE. SCHEDULE 4.1(s) sets forth, as of the date hereof
(and to be updated as of the Closing Date to reflect any
changes), the Vendors' currently effective insurance policies
with respect to the Purchased Assets and the Business
(including property, casualty, liability (general, products
and directors' and officers' and workers' compensation)
listing for each policy the identity of the insurance carrier,
the policy period, the limits and retentions and any special
exclusions. Such policies are currently in full force and
effect and neither Vendor has received any notice of
termination on the part of the insurance carriers. The
Purchased Assets are insured with respect to loss due to fire
and other risks.
(t) TAXES. Except as set forth in SCHEDULE 4.1(t), the Companies
have filed when due (taking into account permitted extensions)
with the appropriate Governmental Authorities all tax returns,
estimates and reports required to be filed in respect of the
Business or the Purchased Assets ("TAX RETURNS"), all of which
Tax Returns are true and complete. Except as set forth in
SCHEDULE 4.1(t), the Companies have fully reported and has
fully paid when due and will continue to report and pay when
due all federal, state, and local Taxes of every kind, nature
and description that are due and payable or accrued with
respect to the Business. The Companies have all documentation
(including exemption certificates from customers) necessary to
support the exemptions, deductions or special Tax rates
claimed on its Tax Returns for sales/use, excise or similar
gross receipt Taxes.
(u) INDUSTRY CERTIFICATIONS. Set forth on SCHEDULE 4.1(u) is a
list of all safety, manufacturing, quality and similar
certifications and approvals with respect to the Business and
each of the products manufactured, assembled, distributed or
sold by either Vendor in connection with the Business, and
processes relating thereto, which are currently in effect
(collectively, the "INDUSTRY CERTIFICATIONS"). Each of the
Industry Certifications is validly issued and in full force
and effect. The Companies and each of the products
manufactured, assembled, distributed or sold by the Vendors
with respect to the Business, and processes relating thereto,
are in full compliance with the terms and requirements of any
Industry Certification applicable thereto.
(v) NO YEAR 2000 PROBLEM. To the best of the Companies' Knowledge,
none of the computer software used by the Vendors, or licensed
by the Vendors to any third party, in connection with the
Business, and none of the computer software or hardware in any
of the Products, contains any date fields or codes which could
cause such computer software or hardware to fail to perform
any of its intended functions in a proper manner in connection
with the date change occurring on January 1, 2000. To the best
of the Companies' Knowledge, such computer hardware and
software is capable of correctly processing all dates, whether
such dates are in the twentieth century, the twenty-first
century or otherwise, and, without limiting the generality of
the foregoing, can,
i) manage and manipulate data involving dates, including
single century formulas, and will not cause abnormal
abend or abort with the application
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or result in the generation of incorrect values or
invalid output involving such dates,
ii) provide that all date-related user interface
functionalities and data fields include the
indication of the correct and intended century,
iii) provide that all date-related systems or
application-to-application data interface
functionalities will include the indication of the
correct and intended century to the extent that
sending or receiving systems or applications can send
or receive such information correctly, and
iv) can recognize the year 2000 as a leap year for all
data processing purposes.
(w) BROKERAGE FEES. Other than Charles M. Leighton and Gene
Weiner, the fees of each of whom shall be paid by the Vendors
in the manner described in Section 3.6, the Vendors have not
engaged or authorized any broker, investment banker or other
Person to act on its behalf, directly or indirectly, as a
broker or finder who might be entitled to a fee, commission or
other remuneration in connection with the transactions
contemplated by this Agreement. The fees payable to Charles M.
Leighton as described in SCHEDULE 3.1 shall be paid directly
to him by the Purchaser from the Earnout Amount in the manner
described in Section 3.6.
4.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to the Vendors, as of the date hereof and as of
the Closing Date, and acknowledges that the Vendors are relying on same
for purposes of completing this transaction, as follows:
(a) ORGANIZATION. The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware.
(b) AUTHORITY. The Purchaser has full corporate power and
authority to enter into this Agreement and each of the
Ancillary Documents to which the Purchaser is a party, and to
carry out the transactions contemplated hereby and thereby.
The Purchaser has properly taken all corporate action required
to be taken by the Purchaser with respect to the execution and
delivery of this Agreement and each of the Ancillary Documents
to which the Purchaser is a party, and the consummation of the
transactions contemplated hereby and thereby.
(c) EXECUTION AND DELIVERY. This Agreement and each of the
Ancillary Documents to which the Purchaser is a party has been
duly executed and delivered by the Purchaser and constitutes a
legal, valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its
respective terms and conditions, except as enforceability
thereof may be limited by any applicable bankruptcy,
reorganization, insolvency or other similar Laws affecting
creditors' rights generally or by general principles of
equity.
(d) NO CONFLICTS. The execution, delivery and performance by the
Purchaser of this Agreement and each of the Ancillary
Documents to which the Purchaser is a party, and the
consummation of the transactions contemplated hereby and
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thereby, do not and will not violate, conflict with or result
in a breach of any term, condition or provision of, or require
the consent of any Person under, (i) any Law to which the
Purchaser is subject, (ii) any judgment, order, writ,
injunction, decree or award of any Governmental Authority to
which the Purchaser is subject, (iii) any of the Purchaser's
Organizational Documents or (iv) any license, agreement,
commitment or other instrument or document to which the
Purchaser is a party or by which the Purchaser is otherwise
bound. No authorization, approval or consent of, and no
registration or filing with, any Governmental Authority is
required in connection with the execution, delivery or
performance by the Purchaser of this Agreement or any of the
Ancillary Documents to which the Purchaser is a party.
(e) LITIGATION. There is no claim, legal action, suit, arbitration
or other proceeding pending, or to the best of the Purchaser's
knowledge, threatened against or relating to the Purchaser
which, if adversely determined, would have a material adverse
effect on the ability of the Purchaser to perform its
obligations under this Agreement or any of the Ancillary
Documents to which the Purchaser is a party, or would
otherwise prevent, hinder or delay consummation of the
transactions contemplated herein or therein.
ARTICLE 5 - CERTAIN COVENANTS
5.1 CONDUCT OF VENDOR PENDING THE CLOSING. Each of the Vendors covenants
and agrees that, prior to the Closing, except as contemplated by this
Agreement, it shall:
(a) conduct the Business in the usual, regular and ordinary course
consistent with the representations and warranties made in
Section 4.1 and prior to Closing, shall not sell or dispose of
any of the Purchased Assets or terminate any of the Assigned
Contracts;
(b) use its best efforts to maintain and preserve its business
organization and its relationships with customers, suppliers,
distributors, agents and others having business dealings with
the Business and retain the services of its officers and
employees with respect to the Business; and
(c) promptly advise the Purchaser if at any time following the
date hereof but prior to Closing: (i) any warrants or options
with respect to the shares of the Companies have been
exercised and the aggregate number of shares into which such
warrants and/or options are exercisable exceeds 5% of the
number of shares outstanding prior to execution of this
Agreement, and (ii) any such warrants or options are exercised
subsequent to the exercise described in (i).
5.2 NO SOLICITATION. Neither Vendor shall, directly or indirectly, initiate
contact with, solicit, encourage or participate in any way in
discussions or negotiations with, or provide any information or
assistance to, any Person (other than the Purchaser) concerning any
acquisition of the Business or the Purchased Assets. The Vendors shall
promptly communicate to the Purchaser the terms of any proposal or
contact that either Vendor receives in respect of any such transaction.
5.3 REASONABLE EFFORTS; FURTHER ASSURANCES. Upon the terms and subject to
the conditions of
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this Agreement, each of the parties hereto shall use all reasonable
efforts to take or cause to be taken all action, and to do or cause to
be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by
this Agreement, including using reasonable efforts to (a) obtain all
consents, releases or approvals referred to in Section 6.2(d), and (b)
fulfill or cause the fulfillment of the conditions to Closing set forth
in Article 6. In case at any time after the Closing Date any further
action is reasonably necessary or desirable to carry out the purposes
of this Agreement, the Companies and the Purchaser shall take such
further action without additional consideration.
5.4 ACCESS AND INFORMATION.
(a) Prior to the Closing, the Companies shall afford to the
Purchaser and its accountants, counsel and other
representatives full access upon reasonable prior notice and
during normal business hours to all of the properties, books,
accounts, records, contracts, and personnel relating to the
Business and, during such period, each of the Vendors shall,
and shall cause its accountants, counsel and other
representatives to, furnish promptly to the Purchaser and its
representatives all information concerning the Business as the
Purchaser or its representatives may reasonably request.
(b) After the Closing, the Purchaser shall afford to the Vendors
and their accountants, counsel and other representatives
access to the books, records and personnel of the Purchaser
with respect to matters relating to the Business prior to the
Closing Date to the extent that the Vendors have a reasonable
need for the same (e.g., for Tax purposes or for purposes of
defending claims) and provided that such access does not
unreasonably interfere with the operations of the Business.
5.5 NOTIFICATION OF CERTAIN MATTERS. Each of the parties shall promptly
notify the other parties in writing:
(a) if, subsequent to the date of this Agreement and prior to the
Closing Date, it becomes aware of the occurrence of any event
or the existence of any fact that renders any of the
representations and warranties made in Section 4.1 or 4.2
inaccurate or untrue in any respect;
(b) of any notice or other communication from any third party
alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by
this Agreement; or
(c) of any notice or other communication from any Governmental
Authority in connection with the transactions contemplated
hereby.
5.6 EMPLOYMENT AGREEMENTS. Contemporaneously with the execution of this
Agreement, the Purchaser shall enter into employment agreements or
consulting agreements (as specified on Schedule 5.6) with each of the
employees of the Vendors listed on Schedule 5.6 (other than Wim van de
Kerkof) on terms satisfactory to the Purchaser (collectively, the
"Employment Agreements").
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5.7 PUBLIC ANNOUNCEMENTS. No party will issue or cause the publication of
any press release or other public announcement with respect to this
Agreement or the transactions contemplated hereby without the prior
written consent of the other party hereto; provided, however, that
nothing herein will prohibit any party from issuing or causing the
publication of any such press release or public announcement to the
extent that such party is advised by its legal counsel that such action
is required by law, in which case the party making such determination
will use reasonable efforts to allow the other party reasonable time to
comment on such release or announcement in advance of its issuance.
5.8 WARRANTY FULFILLMENT. After the Closing, to the extent that the
Companies refuse or are unable to fulfill the obligations of the
Companies under any outstanding warranties with respect to Products
sold by the Vendors prior to the Closing Date, the Purchaser shall have
the right, but not the obligation, to fulfill such obligations on
behalf of the Companies at the Purchaser's expense.
5.9 LOANS BY DR. YEH AND DR. AMODEI. Contemporaneously with the execution
of this Agreement: (a) Dr. Hsuan Yeh and Dr. Juan Amodei (the
"INVESTORS") shall make term loans in the amount of U.S.$300,000 (U.S.
$200,000 from Dr. Yeh and U.S. $100,000 from Dr. Amodei) to the
Purchaser evidenced by promissory notes (the "YEH/AMODEI NOTES")
attached hereto as SCHEDULE 5.9 with interest payable at 10% per annum,
with the interest payable semi-annually, and with the principal payable
3 years from the anniversary date of Closing, secured by a security
agreement granted by the Purchaser and charging all assets of the
Purchaser (the "YEH/AMODEI SECURITY AGREEMENT") attached hereto as
SCHEDULE 5.9; and (b) Focus, the Investors and the Purchaser shall
enter into an intercreditor agreement in the form attached hereto as
SCHEDULE 5.9 (the "FIRST INTERCREDITOR AGREEMENT") providing that (i)
the security interests granted by the Purchaser to Focus, and (ii) the
security interests granted by the Purchaser to the Investors pursuant
to the Yeh/Amodei Security Agreement shall rank pari passu and both
such security interests shall be subordinate to any security interests
granted by the Purchaser to one or more financial institutions from
time to time. The First Intercreditor Agreement shall also provide that
in the event that Focus guarantees any of the indebtedness of the
Purchaser to one or more financial institutions and Focus subsequently
makes a payment to such financial institution pursuant to such
guarantee, Focus shall rank ahead of the security interests described
in (i) and (ii) above to the extent of the amounts paid by Focus to
such financial institutions.
5.10 LOAN BY PURCHASER. Contemporaneously with the execution of this
Agreement and from time to time prior to Closing, the Purchaser may
(but is under no obligation to do so) make a loan or loans to the
Vendors upon the terms contained in the promissory note (the "PURCHASER
NOTE") attached hereto as SCHEDULE 5.10 and secured by a security
agreement granted by the Vendors and charging all assets of the Vendors
together with a collateral assignment of patents (collectively, the
"PURCHASER SECURITY AGREEMENT") attached hereto as SCHEDULE 5.10.
Contemporaneously with the execution of this Agreement, counsel to the
Vendors shall deliver to the Purchaser an opinion with respect to the
creation of a valid security interest by the Purchaser Security
Agreement and the enforceability of the Purchaser Note and the
Purchaser Security Agreement. Contemporaneously with the execution of
this Agreement, the Vendors shall obtain (i) an agreement from Dr. Yeh
providing that his existing security against the Vendors applies
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only to the equipment listed on SCHEDULE 5.10; (ii) a release from
Barry Levine with respect to all security and claims against the
Vendors and a UCC-3 termination statement in respect of UCC
registrations with respect to such security.
5.11 SECOND INTERCREDITOR AGREEMENT. Upon Closing, Focus, the Investors, the
Purchaser and the Vendors shall enter into an intercreditor agreement
in the form attached hereto as SCHEDULE 5.11 (the "SECOND INTERCREDITOR
AGREEMENT") providing that (i) the security interests granted by the
Purchaser to the Vendors pursuant to the Earnout Security Agreement
shall rank ahead, to the extent of U.S. $1,000,000, of the security
interests granted by the Purchaser to the Investors pursuant to the
Yeh/Amodei Security Agreement and the security interests granted by the
Purchaser to Focus, (ii) except for the priority described in (i), all
of the security interests described in (i) shall rank pari passu, and
(iii) all of the security interests in (i) shall rank subordinate to
any security interests granted by the Purchaser to one or more
financial institutions from time to time. The Second Intercreditor
Agreement shall also provide that in the event that Focus guarantees
any of the indebtedness of the Purchaser to one or more financial
institutions and Focus subsequently makes a payment to such financial
institution pursuant to such guarantee, Focus shall rank ahead of the
security interests described in (i) above to the extent of the amounts
paid by Focus to such financial institutions. Upon Closing, the
Purchaser shall execute a collateral assignment of patents (in
substantially the form attached hereto as SCHEDULE 5.10) in favour of
the Investors as further security for the Investor Notes and in favour
of the Vendors as further security for the Earnout Amount.
5.12 IMPRIMIS. Contemporaneously with the execution of this Agreement, the
Vendors shall deliver to the Purchaser (i) a release by Imprimis of all
claims, actions or demands it can, shall or may have against either of
the Vendors, and (ii) a withdrawal by Imprimis Investors L.L.C.
("IMPRIMIS") and related parties which held shares and/or warrants in
the Vendors of the judgment issued in the Supreme Court of the State of
New York against Industrial.
5.13 ASSET ADVANCES. On Closing, indebtedness of the Vendors to the
Purchaser equal to the aggregate amount of the Asset Advances shall be
forgiven by the Purchaser.
5.14 PROXIES. Contemporaneously with the execution of this Agreement, the
Purchaser shall have received irrevocable proxies approving the
transaction contemplated by this Agreement executed by at least 70% of
the shareholders of Industrial.
5.15 PATENTS. The Investors acknowledge and agree that they do not have any
security interest in or encumbrance on the Proprietary Rights listed on
SCHEDULE 4.1(l)(ii) and that they will take all steps and execute all
documents necessary to confirm the foregoing and to remove any
registrations with respect to security interests in any governmental
office or recording system.
ARTICLE 6 - CONDITIONS TO CLOSING
6.1 CONDITIONS TO OBLIGATION OF THE VENDORS. The obligation of the Vendors
to consummate the transactions contemplated hereby shall be subject to
the satisfaction on or prior to the Closing of the following conditions
(any of which may be waived in writing by the Vendor):
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(a) the Purchaser shall have performed and complied in all
material respects with all obligations and agreements required
to be performed and complied with by it hereunder on or prior
to the Closing Date (including, without limitation, those
specified in Section 7.3);
(b) the representations and warranties of the Purchaser contained
in this Agreement shall be true and correct in all material
respects at and as of the Closing Date as if made at and as of
such date (other than those representations and warranties
that (i) are qualified as to materiality, which shall be true
and correct, and (ii) address matters only as of a particular
date or only with respect to a specific period of time, which
need only be true and accurate as of such date or with respect
to such period);
(c) no action, suit, claim or proceeding by or before any
Governmental Authority shall be pending which seeks to
restrain, prevent or materially delay or restructure the
transactions contemplated hereby or which otherwise questions
the validity or legality of any such transactions;
(d) warrants in the form attached hereto as SCHEDULE 6.1(d) to
purchase common shares in Focus shall be issued to the
Investors expiring on the earlier of three years from Closing
or the completion by Focus of an initial public offering, with
an exercise price equal to the purchase price per share (the
"Issue Price") paid by the equity investors who finance the
acquisition contemplated by this Agreement. The number of
warrants issuable will equal U.S. $60,000 ($20,000 to Dr.
Amodei and $40,000 to Dr. Yeh) divided by the Issue Price; and
(e) the shareholders of the Companies shall have approved the
acquisition contemplated by this Agreement, in accordance with
all applicable laws and regulations, including those governing
proxy solicitation.
6.2 CONDITIONS TO OBLIGATION OF THE PURCHASER. The obligation of the
Purchaser to consummate the transactions contemplated hereby shall be
subject to the satisfaction on or prior to the Closing of the following
conditions (any of which may be waived in writing by the Purchaser):
(a) each of the Vendors shall have performed or complied in all
material respects with all obligations and agreements required
to be performed or complied with by it hereunder on or prior
to the Closing (including, without limitation, those specified
in Section 7.2);
(b) the representations and warranties of the Companies contained
in this Agreement shall be true and correct in all material
respects at and as of the Closing Date as if made at and as of
such date (other than those representations and warranties
that (i) are qualified as to materiality, which shall be true
and correct, and (ii) address matters only as of a particular
date or only with respect to a specific period of time, which
need only be true and accurate as of such date or with respect
to such period);
(c) no action, suit, claim or proceeding by or before any
Governmental Authority shall be pending which seeks to
restrain, prevent or materially delay or
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restructure the transactions contemplated hereby or which
otherwise questions the validity or legality of any such
transactions;
(d) the Companies shall have obtained on terms and conditions
reasonably satisfactory to the Purchaser all consents,
releases and approvals of third parties (including
Governmental Authorities) that are required (i) for the
consummation of the transactions contemplated hereby or (ii)
in order to prevent a material breach of, a default under or a
termination, material change in the terms or conditions or
material modification of, any Material Agreement as a result
of the consummation of the transactions contemplated;
(e) the Purchaser shall be satisfied with its business, legal, and
financial due diligence investigation and review of the
Business;
(f) the board of directors of the Purchaser shall have approved
the acquisition contemplated by this Agreement;
(g) the preliminary proxy statement of Industrial with respect to
the transactions contemplated by this Agreement shall have
been delivered to the Securities & Exchange Commission not
later than 10 Business Days following the date hereof;
(h) the Purchaser shall have received from the Dr. Yeh on Closing
a standby letter of credit (the "LETTER OF CREDIT") from a
financial institution approved by the Purchaser, in the amount
of U.S.$300,000 on terms approved by the Purchaser, including
but not limited to, that the Letter of Credit shall have a
term of one year from Closing and may be drawn upon by the
Purchaser in the event that the Purchaser presents to the
issuing bank a certificate of a senior officer of the
Purchaser certifying that the Purchaser has determined that it
requires working capital in excess of U.S. $3,300,000; in the
event that the Purchaser draws on the Letter of Credit each
amount drawn shall be a loan to the Purchaser upon the same
terms as set forth in Section 5.9 with the term of such loan
being three years from the draw date and the Purchaser shall
issue to Dr. Yeh a number of warrants (upon the same terms and
conditions as contained in the warrants described in
subsection 6.1 (d)) equal to U.S $1 divided by the Issue Price
for each U.S. $5 drawn;
(i) the Purchaser or Focus shall have obtained working capital
financing (equity or subordinated debt) in the minimum
aggregate amount of U.S.$3,000,000 from a financial
institution and/or investors, on terms satisfactory to the
Purchaser; and
(j) the value of the Purchased Assets (as determined pursuant to
Sections 3.3 and 3.4) shall be a minimum of US$1,000,000 at
Closing, such value to be determined by the Purchaser in
accordance with GAAP and Section 3.4.
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ARTICLE 7 - CLOSING
7.1 CLOSING. The closing of the transactions contemplated hereby (the
"CLOSING") shall take place at the offices of Gowling, Strathy &
Henderson, at 10:00 a.m. on such date that is not earlier than the
third Business Day following the later of (a) the date on which the
Companies' shareholders formally approve the transactions contemplated
by this Agreement, and (b) the date on which all of the conditions
contained in Sections 6.01 and 6.02 have been satisfied or waived, or
at such other place, at such other time or on such later date as the
parties may mutually agree. The date on which the closing actually
occurs is referred to herein as the "CLOSING DATE".
7.2 DELIVERIES BY THE VENDOR. Subject to the terms and conditions hereof,
the Vendors shall deliver the following to the Purchaser at or before
the Closing:
(a) such bills of sale and assignments (including of rights to
license and use Proprietary Rights); titles; releases;
estoppel certificates; duly endorsed certificates of title to
motor vehicles to be transferred; consents to the transfer or
assignment of Assigned Contracts to the extent required by the
terms of the Assigned Contracts; endorsements; and other good
and sufficient instruments and documents of conveyance and
transfer, in form and substance reasonably satisfactory to the
Purchaser and its counsel, as shall be necessary and
effective, as determined by the Purchaser and its counsel, to
transfer and assign to, and vest in, the Purchaser all right,
title and interest in and to the Purchased Assets, including,
but not limited to, title in and to all of the Purchased
Assets owned by the Vendors, leasehold interests in and to all
of the leased Purchased Assets, all of the Vendors' rights
under the Assigned Contracts, and all other rights or property
interests of the Companies included in the Purchased Assets;
(b) a certificate of the Secretary or Assistant Secretary of each
Vendor attesting to (i) due authorization of the execution and
delivery of this Agreement and the Ancillary Documents and the
consummation of the transactions contemplated hereby and
thereby by the Board of Directors of such Vendor, and (ii) the
incumbency of the Vendors' officers executing this Agreement
and the Ancillary Documents delivered by such Vendor
hereunder;
(c) evidence that the Vendors have obtained on terms and
conditions reasonably satisfactory to the Purchaser all
consents, releases and approvals of the shareholders of the
Companies and of third parties (including Governmental
Authorities) that are required (i) for the consummation of the
transactions contemplated hereby or (ii) in order to prevent a
material breach of, a default under or a termination, material
change in the terms or conditions or material modification of,
any Material Agreement as a result of the consummation of the
transactions contemplated hereby;
(d) a certificate of each Vendor, in form and substance reasonably
satisfactory to the Purchaser, dated the Closing Date and
signed by the President or a Vice President, certifying
compliance with the conditions set forth in Sections 6.2(a)
and 6.2(b);
(e) an opinion of counsel to the Vendors, substantially in the
form of SCHEDULE 7.2 (e).
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7.3 ACTIONS OR DELIVERIES BY THE PURCHASER. Subject to the terms and
conditions hereof, the Purchaser shall deliver the following to the
Vendors at or before the Closing:
(a) the Initial Payment;
(b) a certificate of the Secretary or Assistant Secretary of the
Purchaser attesting to (i) due authorization of the execution
and delivery of this Agreement and the Ancillary Documents and
the consummation of the transactions contemplated hereby and
thereby by the Board of Directors of the Purchaser and (ii)
the incumbency of the Persons executing this Agreement and the
Ancillary Documents delivered by the Purchaser hereunder;
(c) a certificate of the Purchaser, in form and substance
reasonably satisfactory to the Vendors, dated the Closing Date
and signed by the President or a Vice President of the
Purchaser, certifying compliance with the conditions set forth
in Sections 6.1(a) and 6.1(b)(i); and
(d) an opinion of counsel to the Purchaser substantially in the
form of SCHEDULE 7.3(d).
7.4 OTHER DOCUMENTS. The parties agree to execute and deliver on or before
the Closing all other documents and certificates that are necessary or
advisable in order to consummate the transactions contemplated hereby.
ARTICLE 8 - EXPENSES AND APPORTIONMENTS
8.1 APPORTIONMENTS. The parties shall apportion, on a per diem basis,
between the Vendors and the Purchaser as of the close of business on
the day immediately preceding the Closing Date amounts payable by the
Vendors under the Assigned Contracts, including, but not limited to,
leases of personal property.
8.2 TRANSFER TAXES. Any personal property transfer Taxes, documentary
stamps, sales Taxes, goods and services Taxes and other Taxes, fees or
charges imposed by any state, county, province, municipality or other
Governmental Authority in connection with the sale, assignment,
transfer and conveyance of any of the Purchased Assets by the Vendors
to the Purchaser shall be paid by the Purchaser.
8.3 EXPENSES. Each of the Purchaser, the Vendors shall pay their own
expenses, including, but not limited to, attorneys', accountants',
financial advisors' and brokers' or finders' fees, incurred in
connection with the transactions contemplated hereby.
ARTICLE 9 - RESTRICTIVE COVENANTS
9.1 NON-COMPETITION; NON-INTERFERENCE. The Companies agree that for a
period of five years after the Closing Date, the Vendors shall not, and
shall not permit any of their Affiliates to, either alone or in
conjunction with any other Person:
(a) own, manage, operate, provide financing to, or participate in
the ownership, management, operation or control of, or
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provision of financing to, any business wherever located if
such business (i) manufactures or sells any products or
services in the field of applications of machine vision or
(ii) sells any products competitive with the Products; or
(b) induce or attempt to induce any customer, supplier, licensee,
licensor, distributor or other business relation of the
Purchaser to cease doing business with the Purchaser with
respect to the Business or the Products or in any way
interfere with the relationship between any such customer,
supplier, licensee, licensor, distributor or business relation
and the Purchaser with respect to the Business or the Products
(including, without limitation, making any negative statements
or communications about the Purchaser or the Products).
9.2 CONFIDENTIAL INFORMATION. From and after the Closing, the Vendors shall
not use or disclose or permit any of its respective Affiliates to use
or disclose to any Person any trade secrets, confidential information,
know-how or other proprietary information it possesses relating to the
Business or the Products and shall use its best efforts to prevent such
use or disclosure.
9.3 CERTAIN ACKNOWLEDGMENTS. The Vendors specifically acknowledge and agree
that the restrictions set forth herein are reasonable in scope and
essential to the preservation of the value of the Purchased Assets and
the Business after the Closing. The Vendors further acknowledge and
agree that the remedy at law for any breach of the restrictions set
forth herein will be inadequate and that the Purchaser, in addition to
any other relief available to it, shall be entitled to temporary and
permanent injunctive relief without the necessity of posting a bond or
proving actual damage. In the event that the provisions of this Section
9.3 should ever be held by a court to exceed the restrictions permitted
by applicable law, then the parties hereto agree that such provisions
shall be reformed to set forth the maximum restrictions permitted by
law.
9.4 TOLLING. In the event of any breach by the Vendor of the covenants
contained in Section 9.1 or 9.2, the running of the applicable period
of restriction shall be automatically tolled and suspended for the
duration of such breach, and shall automatically recommence when such
breach is remedied in order that the Purchaser shall receive the full
benefit of the Vendors' compliance with the covenants contained in
Sections 9.1 and 9.2.
ARTICLE 10 - TERMINATION
10.1 TERMINATION. This Agreement may be terminated at any time prior to the
Closing:
(a) by mutual consent of the Purchaser and the Vendors; or
(b) by either the Purchaser or the Vendors if the Closing shall
not have been consummated on or before January 31, 2000
(provided that the terminating party is not otherwise in
material breach of its obligations under this Agreement).
10.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement in accordance with Section 10.1, this Agreement shall
thereafter become void (other than Sections 5.7 and 8.3, which shall
survive any termination hereof) and there shall be no obligation on the
part of any party hereto or their respective directors, officers,
stockholders or agents,
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except that any such termination shall be without prejudice to the
rights of any party hereto arising out of the material breach by any
other party of any covenant or agreement contained in this Agreement.
10.3 NON-COMPLETION FEE. Notwithstanding Section 10.2, if for any reason
other than the fault solely of the Purchaser, the purchase by the
Purchaser of the Purchased Assets at the Purchase Price is not
completed or if a transaction is completed on or before March 16, 2000
pursuant to which the Purchased Assets or the shares of the Vendors are
sold or a transaction is completed which has the same effect as such a
sale of the Purchased Assets or the shares of the Vendors upon
financial terms which are equivalent to or more favourable to the
Vendors or its shareholders than the terms contained in this Agreement,
then the Vendors jointly and severally agree to immediately pay or
cause the party who purchases the Purchased Assets or any portion
thereof or the shares of the Vendor to immediately pay to the Purchaser
a non-completion fee of $125,000, which the parties agree is a
reasonable estimate of costs incurred by Focus as a result of this
transaction and which shall be secured by the Purchaser Security
Agreement.
ARTICLE 11 - INDEMNIFICATION
11.1 INDEMNIFICATION BY THE COMPANIES. Subject to the terms of this Article
11, the Purchaser shall be indemnified and held harmless by the
Companies from and against any Liability, loss, damage or expense,
including, without limitation, reasonable legal and accountants' fees
(collectively, "Losses"), suffered or incurred by the Purchaser which
arise out of or result from:
(a) any inaccuracy in or breach of any of the representations and
warranties of the Vendors contained in Section 4.1; or
(b) any breach by either Vendor of any covenant or agreement of
such Vendor contained in this Agreement; or
(c) any Companies' Liabilities; or
(d) the ownership or operation of the Business on or prior to the
Closing Date, including without limitation, with respect to:
i) wages, salaries or benefits of employees, and for
greater clarity, vacation and sick time shall be
reconciled by either Vendor completely up to the
Closing Date and all disability, benefits, insurance,
pension and other funds or plans relating to such
Vendor's employees shall be fully funded as of the
Closing Date; and
ii) the termination of the employment of all of either
Vendor's employees; or
(e) any inaccuracy in any of the representations and warranties of
the Vendors contained in subsections 4.1(d), (i) or (w) as if
such representations and warranties had been made without
reference therein to "to the best of the Companies'
Knowledge".
11.2 INDEMNIFICATION BY THE PURCHASER. Subject to the terms of this Article
11, the Vendors
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shall be indemnified and held harmless by the Purchaser from and
against any Losses suffered by the Vendors which arise out of or result
from any inaccuracy in or breach of any of the representations,
warranties, covenants or agreements made by the Purchaser in this
Agreement.
11.3 METHOD OF ASSERTING THIRD PARTY CLAIMS. Promptly after the assertion by
any third party of any claim, demand or notice against any Person that
may be entitled to indemnification under this Article 11 with respect
to such claim (the "INDEMNIFIED PARTY"), the Indemnified Party shall
promptly notify the party from whom indemnification may be sought (the
"INDEMNIFYING PARTY"), specifying the nature of such claim and the
amount or the estimated amount thereof to the extent then feasible
(which estimate shall not be conclusive of the final amount of such
claim) (the "CLAIM NOTICE"). Within twenty days after receipt of a
Claim Notice (the "NOTICE PERIOD"), the Indemnifying Party may assume
the defense of such claim; provided, however, that (i) the Indemnifying
Party shall retain counsel reasonably acceptable to the Indemnified
Party, (ii) the Indemnifying Party agrees in writing that it is liable
to indemnify the Indemnified Party for all losses resulting from such
Claim, and (iii) the Indemnifying Party shall not, without the prior
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld or delayed), enter into any settlement of a
claim, consent to the entry of any judgment with respect to a claim or
cease to defend a claim, if pursuant to or as a result of such
settlement, consent or cessation, injunctive or other equitable relief
shall be imposed against the Indemnified Party or if such settlement
does not expressly and unconditionally release the Indemnified Party
from all Liabilities with respect to such claim, with prejudice. The
Indemnified Party may participate in the defense of such claim with
co-counsel of its choice; provided, however, that the fees and expenses
of the Indemnified Party's counsel shall be paid by the Indemnified
Party unless (A) the Indemnifying Party has agreed in writing to pay
such fees and expenses, (B) the Indemnifying Party has failed to assume
the defense and employ counsel as provided herein, or (C) a claim shall
have been brought or asserted against the Indemnifying Party as well as
the Indemnified Party, and the Indemnified Party shall have been
advised in writing by outside counsel that there may be one or more
factual or legal defenses available to it that are in conflict with
those available to the Indemnifying Party, in which case such
co-counsel shall be at the expense of the Indemnifying Party. If the
Indemnifying Party does not assume the defense of such claim, the
Indemnified Party may defend against the same in any manner that it
reasonably deems appropriate.
11.4 METHOD OF ASSERTING DIRECT CLAIMS. In the event an Indemnified Party
desires to assert a claim for indemnification against an Indemnifying
Party that does not involve a third party, the Indemnified Party shall
promptly send a Claim Notice with respect to such claim to the
Indemnifying Party. If the Indemnifying Party does not notify the
Indemnified Party within the Notice Period that it disputes such claim,
the amount of Losses suffered or incurred by the Indemnified Party with
respect to such claim shall be conclusively deemed a Liability of the
Indemnifying Party hereunder.
11.5 SETOFF AGAINST EARNOUT PAYMENTS. The Purchaser shall be entitled to
deduct from and set off against the Earnout Amount payable to the
Vendors the amount of any Losses for which it is entitled to
indemnification from the Companies under Section 11.1 and may hold in
reserve out of any payments in respect of the Earnout Amount ("EARNOUT
PAYMENT") otherwise due to the Vendors the Purchaser's reasonable
estimate of Losses which may be incurred by the Purchaser with respect
to any claim for which a Claim
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Notice has been given but which is not yet resolved at the time such
Earnout Payment is due (an "UNRESOLVED CLAIM"). At such time as an
Unresolved Claim is finally determined, the amount of any Losses for
which the Purchaser is entitled to indemnification shall be set off
against the Earnout Payments withheld (and any other Earnout Payments
which remain unpaid, to the extent that the amount of such Losses
exceeds the amount of Earnout Payments previously withheld) and
retained by the Purchaser, and the balance, if any, of the amount
withheld shall be promptly paid to the Vendors. The Purchaser shall
promptly notify the Vendors of any setoff which the Purchaser intends
to make against any Earnout Payments and of any amount which the
Purchaser intends to hold in reserve with respect to any Unresolved
Claims.
11.6 OTHER INDEMNIFICATION PAYMENTS. Except for any Losses which the
Purchaser elects to set off against Earnout Payments pursuant to
Section 11.5, all indemnified Losses shall be payable within thirty
days after the Indemnified Party notifies the Indemnifying Party or
Parties that such Losses have been suffered or incurred (including
those relating to the on-going costs of defending third party claims in
accordance with Section 11.3).
11.7 TAX TREATMENT OF INDEMNIFICATION PAYMENTS; SUBROGATION. Any
indemnification payment made pursuant to this Article 11 shall be
treated by the parties hereto as an adjustment to the Purchase Price
for income tax purposes to the extent of the Purchase Price. Upon the
payment in full of any claim, the Indemnifying Party shall be
subrogated to the rights of the Indemnified Party against any Person or
entity with respect to the subject matter of such claim.
11.8 SURVIVAL OF REPRESENTATIONS AND EARNOUT COVENANT. All of the
representations and warranties contained in this Agreement shall
survive for a period of two years following the Closing Date, except
for (a) those contained in Sections 4.1(q) and 4.1(t), which shall
survive until three months following the expiration of the statute of
limitations applicable with respect to claims that constitute a breach
of, or are the subject of, such representations and warranties, and (b)
those contained in Section 4.1(h) or those fraudulently made, which
shall survive indefinitely. In addition, the Purchaser's obligation to
pay the Earnout Amount shall survive until the later of (i) the Earnout
Payment Date or (ii) the date on which the Earnout Amount is fully
paid. No claim for indemnification may be made under this Article 11
for breach of a representation or warranty unless a Claim Notice is
given within the applicable survival period set forth herein.
11.9 FAILURE TO GIVE TIMELY NOTICE. Except as provided in Section 11.8, a
failure by an Indemnified Party to give timely, complete or accurate
notice as required under Sections 11.3 or 11.4 shall not affect the
rights or obligations of any party hereunder except and only to the
extent that, as a result of such failure, any party entitled to receive
such notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise damaged or prejudiced as
a result of such failure to give timely notice.
11.10 EXCLUSIVE REMEDY. The rights of the parties to indemnification under
this Agreement or with respect to the transactions contemplated hereby
shall be strictly limited to those contained in this Article 11, and
such indemnification rights shall be the exclusive remedies of the
parties subsequent to the Closing Date with respect to any matter in
any way relating to this Agreement or arising in connection herewith,
except to the extent that the same shall have been the result of fraud.
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ARTICLE 12 - MISCELLANEOUS
12.1 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered
personally (including delivery by courier service), transmitted by
facsimile with receipt confirmed electronically, or mailed by
registered or certified mail, postage prepaid, return receipt
requested, as follows:
(a) if to the Purchaser, to:
Focus AOI, Inc.
101 Randall Drive
Waterloo, ON N2V 1C5
Attention: David Chornaby
Facsimile: (519) 746-6754
with a copy (which shall not constitute notice) to:
Gowling, Strathy & Henderson
1020 - 50 Queen Street North
Kitchener, Ontario
Canada N2H 6M2
Attention: W. David Petras
Facsimile: (519) 571-5006
(b) if to the Vendor, to:
AOI International, Inc.
847 Rogers Street
Lowell, Massachusetts, U.S.A. 01852
Attention: Juan Amodei
Facsimile: (978) 453-0661
with a copy (which shall not constitute notice) to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts
U.S.A. 02111
Attention: Neil Aronson
Facsimile: (617) 542-2241
(c) if to Industrial, to:
Industrial Imaging Corporation
847 Rogers Street
Lowell, Massachusetts, U.S.A. 01852
Attention: Juan Amodei
Facsimile: (978) 453-0661
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with a copy (which shall not constitute notice) to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts
U.S.A. 02111
Attention: Neil Aronson
Facsimile: (617) 542-2241
or to such other address as the Person to whom notice is to be given
may have previously furnished to the other parties in writing in
accordance herewith. Notice shall be deemed given on the date received
(or, if receipt thereof is refused, on the date of such refusal).
12.2 AMENDMENTS AND WAIVERS. This Agreement may not be amended, modified or
supplemented except by written agreement of the parties hereto. No
waiver by any party of any default, misrepresentation or breach of
warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation
or breach of warranty or covenant hereunder or affect in any way any
rights arising by virtue of any prior or subsequent such occurrence.
12.3 NO PRESUMPTION AGAINST DRAFTER. Each of the parties hereto has had the
opportunity to participate in the negotiation and drafting of this
Agreement and each of the Ancillary Documents. In the event there
arises any ambiguity or question of intent or interpretation, this
Agreement and each of the Ancillary Documents shall be construed as if
drafted jointly by all of the parties hereto and no presumptions or
burdens of proof shall arise favoring any party by virtue of the
authorship of any of the provisions of this Agreement or any of the
Ancillary Documents.
12.4 NONASSIGNABILITY. This Agreement shall not be assigned without the
consent of the other parties hereto, by operation of law or otherwise,
except that the rights and obligations of the Purchaser hereunder may
be assigned to any Affiliate of the Purchaser (except that no such
assignment shall relieve the Purchaser of its obligations hereunder).
12.5 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of the parties hereto and their respective
successors and permitted assigns, and nothing in this Agreement,
express or implied, is intended to confer upon any other Person any
rights or remedies of any nature.
12.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original
and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to the other.
12.7 GOVERNING LAW. All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by and construed and
enforced in accordance with the laws of the Province of Ontario and the
laws of Canada applicable therein, without regard to the conflicts of
law principles of such Province.
12.8 SEVERABILITY. If any term or provision of this Agreement shall, to any
extent, be held by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this
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Agreement or the application of such term or provision to Persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall not be affected thereby and this Agreement shall
be deemed severable and shall be enforced otherwise to the full extent
permitted by law; provided, however, that such enforcement does not
deprive any party hereto of the benefit of the bargain.
12.9 ENTIRE AGREEMENT. This Agreement (including the Schedules and Exhibits
referred to herein and which form a part hereof) constitutes the entire
agreement between the parties hereto and supersede all prior agreements
and understandings, oral and written, between the parties hereto with
respect to the subject matter hereof including, without limitation, the
letter of intent dated July 16, 1999 from Focus to Industrial and
accepted by Industrial and the Investors.
12.10 CURRENCIES; EXCHANGE RATE. All references to "US$" shall be deemed to
refer to United States dollars. The exchange rate for purposes of
Section 6.1(d) and 6.2(h) shall be the Bank of Canada noon spot rate in
effect on the Business Day prior to the date of issuance of the
warrants.
12.11 ARBITRATION. Any controversy, dispute or claim arising out of or in
connection with this Agreement, or the breach, termination or validity
hereof including claims by either party for indemnity pursuant to
Article 11, shall be settled by final and binding arbitration to be
conducted by a single arbitrator in Toronto, Ontario, pursuant to the
rules of the American Arbitration Association. The parties shall agree
upon an arbitrator within 10 days of the request for arbitration
failing which the party initiating arbitration shall nominate one
arbitrator and the second party shall nominate a second within 10 days
of the initiating party nominating an arbitrator. The two arbitrators
so named will then jointly appoint the third arbitrator who shall
conduct the arbitration. If the answering party fails to nominate its
arbitrator within the ten day period, or if the arbitrators named by
the parties fail to agree on the third arbitrator within 10 days, the
American Arbitration Association shall make the necessary appointment
of such arbitrator. The decision or award of the arbitrator shall be
final, and judgment upon such decision or award may be entered in any
competent court or application may be made to any competent court for
judicial acceptance of such decision or award and an order of
enforcement. In the event of any procedural matter not covered by the
aforesaid rules, the procedural law of the Province of Ontario shall
govern.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the Purchaser and the Vendors on the date first above written.
FOCUS AOI, INC.
By: /s/ Ronald Stauss
---------------------------------------
Name: Ronald Strauss
Title: President
By: /s/ David Chornaby
---------------------------------------
Name: David Chornaby
Title: Secretary
We have authority to bind the Corporation.
AOI INTERNATIONAL, INC.
By: /s/ Juan J. Amodei
----------------------------------------
Name: Juan J. Amodei
Title: President
I have authority to bind the Corporation.
INDUSTRIAL IMAGING CORPORATION
By: /s/ Juan J. Amodei
----------------------------------------
Name: Juan J. Amodei
Title: President
I have authority to bind the Corporation.
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SCHEDULE 3.1
CALCULATION AND PAYMENT OF EARN-OUT AMOUNT
------------------------------------------
(a) In this Schedule 3.1, capitalized terms shall have the same meaning as
in the Asset Purchase Agreement except that the following terms shall
have the meanings set out below:
"ANNUALIZED WEIGHTED AVERAGE EARNOUT AMOUNT" means, at any
time, the sum of: (i) for each Year completed prior to the end
of the month preceding the Transaction Closing Date or the
Optional Payment Date, as the case may be, the Net Earnings of
the Purchaser attributable to sales of the Products for such
completed Year multiplied by the fraction the numerator of
which is the weighting factor for such Year and the
denominator (the "DENOMINATOR") of which is the sum of the
weighting factors from all Years completed prior to the end of
the month preceding the Transaction Closing Date or the
Optional Payment Date, as the case may be, plus the weighting
factor for the Partial Year (if any); and (ii) where the month
end of the month preceding the Transaction Closing Date is not
the end of a Year, the Net Earnings for the period commencing
the first day of the then current Year and ending on the month
end date preceding the Transaction Closing Date or the
Optional Payment Date, as the case may be (a "PARTIAL YEAR")
multiplied by the fraction the numerator of which is the
weighting factor for the Partial Year and the denominator of
which is the Denominator, which sum of (i) and (ii) above is
then multiplied by the P/E Multiple and further multiplied by
the Added Value Factor;
"ADJUSTED WEIGHTED AVERAGE EARNOUT AMOUNT" means the sum of
(i) for each Year completed prior to the end of the month
preceding the Optional Payment Date (except the Year 1
Period), the Net Earnings of the Purchaser attributable to the
sale of the Products for such year multiplied by, in respect
of the Net Earnings of Year 2, 0.5385, and in respect of the
Net Earnings for Year 3, 0.4615, less the Net Earnings (if
negative) of Year 1, if any, all as multiplied by the P/E
Multiple and further multiplied by the Added Value Factor;
"TRANSACTION CLOSING DATE" means the date on which the
Transaction is consummated;
"TRANSACTION" means any of the following (i) the filing of a
preliminary prospectus for the issuance to the public in
Canada and/or the United States of Common Shares of the
Purchaser or Focus; (ii) the entering into of a definitive
share purchase, merger or amalgamation agreement by the
Purchaser or Focus; or (iii) the entering into of a definitive
sale agreement pursuant to which the business of the Purchaser
is to be sold to an arm's length third party;
"YEAR" means any twelve month period beginning on the day
following the Closing Date (provided that where the Closing
Date is not the last day of a calendar month, such twelve
month period shall commence on the first day of the month
following the month in which the Closing Date occurred) or any
anniversary of such date;
<PAGE>
"Net Earnings" means for any period, the net earnings (or
loss) of the Purchaser for such period attributable to the
Business determined in accordance with GAAP after deducting
all expenses, taxes (including income and any other taxes),
and all other charges and costs attributable to the Business.
"Cumulative AOi Contribution" MEANS THE YEAR 1 CONTRIBUTION
PLUS THE YEAR 2 CONTRIBUTION PLUS THE YEAR 3 CONTRIBUTION PLUS
THE YEAR 4 CONTRIBUTION;
"YEAR 1 WEIGHTING FACTOR" means 0.15;
"YEAR 2 WEIGHTING FACTOR" means 0.20;
"YEAR 3 WEIGHTING FACTOR" means 0.30;
"YEAR 4 WEIGHTING FACTOR" means 0.35;
"P/E MULTIPLE" means 18;
"ADDED VALUE FACTOR" means 0.3333;
"YEAR 1 CONTRIBUTION" means the Year 1 AOI Earnings x Year 1
Weighting Factor;
"YEAR 2 CONTRIBUTION" means the Year 2 AOI Earnings x Year 2
Weighting Factor;
"YEAR 3 CONTRIBUTION" means the Year 3 AOI Earnings x Year 3
Weighting Factor;
"YEAR 4 CONTRIBUTION" means the Year 4 AOI Earnings x Year 4
Weighting Factor;
"YEAR 1 AOI EARNINGS" means the Net Earnings attributable to
the sale of the Products for Year 1 as determined in
accordance with GAAP by the Purchaser;
"YEAR 2 AOI EARNINGS" means the Net Earnings attributable to
the sale of the Products for Year 2 as determined in
accordance with GAAP by the Purchaser;
"YEAR 3 AOI EARNINGS" means the Net Earnings attributable to
the sale of the Products for Year 3 as determined in
accordance with GAAP by the Purchaser;
"YEAR 4 AOI EARNINGS" means the Net Earnings attributable to
the sale of the Products for Year 4 as determined in
accordance with GAAP by the Purchaser;
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"12 MONTH EARNOUT AMOUNT" means the Net Earnings attributable
to sales of the Products for the 12 month period ending the
month preceding the Transaction Closing Date multiplied by the
P/E Multiple and further multiplied by the Added Value Factor;
and
"EARNOUT PAYMENT DATE" means the date which is 90 days after
the fourth anniversary of the Closing Date.
"OPTIONAL PAYOUT DATE" means the date on which the Optional
Payment is made.
(b) Subject to paragraphs (c), (d), (e), (f), (g), (j) and (k) below, the
Purchaser shall pay to the Vendors (allocated between the Vendors as
specified by them in writing) on the Earnout Payment Date an amount
determined in accordance with the following formula:
EARNOUT AMOUNT = (I) CUMULATIVE AOI CONTRIBUTION X P/E
MULTIPLE X ADDED VALUE FACTOR; OR (II) US$1,000,000, WHICHEVER
IS GREATER.
(c) Notwithstanding paragraph (b) above, in the event that at any time
eighteen months or more subsequent to the Closing Date, the Purchaser
or Focus enters into a Transaction, the Purchaser shall be entitled to
pay to the Vendors in full satisfaction of the Earnout Amount on or
before the Transaction Closing Date the greatest of: (i) US$4,000,000;
(ii) the Annualized Weighted Average Earnout Amount; or (iii) the 12
month Earnout Amount.
(d) Notwithstanding paragraphs (b) or (c) above, at any time following the
third anniversary of the Closing Date, the Purchaser may, at its sole
discretion, pay to the Vendors, in full satisfaction of the Earnout
Amount (the "OPTIONAL PAYMENT"), the greatest of: (i) US $3,000,000;
(ii) the Annualized Weighted Average Earnout Amount; or (iii) the
Adjusted Weighted Average Earnout Amount.
(e) Notwithstanding paragraphs (b), (c) and (d) above, where the Purchaser
of the Business disposes (to a person, firm, corporation or other
entity at arm's length to the Purchaser) as a result of the Business
not performing in accordance with the expectations of the Purchaser,
the Purchaser may satisfy the requirement to pay the Earnout Amount by
paying to the Vendors fifty percent of the net proceeds of disposition
of the Business, calculated after first deducting from said proceeds
all expenses of the Purchaser incurred in disposing of the Business and
after deducting from said proceeds the cumulative losses of the
Purchaser accumulated to the time of disposition.
(f) At its sole discretion, the Purchaser may pay the Earnout Amount due to
the Vendors by the issuance of common stock of the Purchaser or Focus
if such shares are at the time of payout listed and posted on a
recognized stock exchange and, unless the Vendors agree otherwise, not
subject to any statutory resale restriction. The value of any shares
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<PAGE>
so issued shall equal, on a per share basis, the weighted average
trading price of such shares for the 10 day period immediately
preceding the payment date.
(g) Notwithstanding any other term of this Agreement, if immediately prior
to the payment of the Earnout Amount, the Purchaser has not collected,
at face value, all of the Receivables outstanding as of the Closing
Date or has not processed or otherwise fully realized the value of the
Inventory as at the Closing Date; the original face value of the
Receivables then uncollected and the original value of such unrealized
Inventory shall be deducted from the Earnout Amount prior to the
payment thereof to the Vendors and payment of such reduced Earnout
Amount to the Vendors shall fully satisfy the Purchaser's obligation to
pay the Earnout Amount.
(h) Not later than 45 business days following the end of each of Year 1, 2,
3, or 4, the Purchaser shall provide the Vendors written notice (the
"PURCHASER NOTICE") of its determination of the Net Earnings for each
such Year and in the event of a disagreement by the Vendors as set
forth in a written notice (the "VENDORS' NOTICE") from the Vendors to
the Purchaser within 15 days of receipt of the Purchaser Notice
specifying the details of such disagreement (if a Vendors' Notice is
not given within such 15 day period, the Vendors shall be deemed to
have conclusively accepted the Purchaser's determination as set out in
the Purchaser's Notice), such specific disagreement shall be submitted
for determination to an independent firm of chartered accountants,
mutually agreed to by the Vendors and Purchaser, or failing such
agreement within 10 days of the Vendors' Notice, to Ernst & Young LLP.
Such determination shall be final and binding on the Parties. Each of
the Vendor and Purchaser shall bear the costs of its respective
accountants and other advisors and the costs of the independent firm of
chartered accountants shall be borne entirely by the Vendor.
(i) Prior to the Earnout Payment Date, Focus shall not impose on the
Purchaser any charge in the nature of a parent corporation general and
administrative charge, but shall limit charges which it imposes to
costs incurred or expenses or taxes paid by Focus for the direct
benefit of the Purchaser, such as, without limitation, insurance
premiums for insurance placed on the Purchaser's business and property,
accounting fees, for review of the Purchaser's financial statements, as
allocated to the Purchaser by Focus's accountants, interest charges in
respect of capital loaned to the Purchaser by Focus, taxes relating to
the Purchaser's operations and assets and other services provided by
Focus.
(j) Notwithstanding any other provision of the Asset Purchase Agreement or
this Schedule 3.1, the Earnout Amount otherwise payable shall be
reduced by the amount of the Working Capital Advances as at the date of
payment of the Earnout Amount together with interest thereon as
provided in the Purchaser Note as at the date of payment of the Earnout
Amount.
(k) The Vendors hereby irrevocably direct the Purchaser to pay from the
Earnout Amount (after application of the provisions of paragraph (j)
above)(and in priority to payment of any portion of the Earnout Amount
to the Vendors):
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(i) to Charles M. Leighton, an amount equal to 5% of the
first U.S. $1,000,000 of the aggregate of the Initial
Payment and the Earnout Amount (such aggregate, the
"FEE BASE"), 4% of the second U.S. $1,000,000 of the
Fee Base, 3% of the third U.S. $1,000,000 of the Fee
Base, and 1% of the remainder of the Fee Base; and
(ii) to Gene H. Weiner & Associates, Inc., an amount equal
to 3% of the Fee Base.
To the extent that some or all of the Earnout Amount is
satisfied by the issuance of shares of Focus pursuant to the
provisions of (f) above, then the amounts in (i) and (ii)
above shall be satisfied in the same proportions of cash and
shares as the Earnout Amount is satisfied.
(l) Upon payment or satisfaction by the Purchaser of the Earnout Amount,
the Vendors shall forthwith cause the Earnout Security Agreement to be
discharged and released and if the Vendors fail to do so, the Purchaser
is hereby authorized as attorney to take all steps and execute all
documents necessary to do so.
(m) The Purchaser agrees that until the Earnout Amount has been paid it
shall maintain accounting records distinct from those of Focus or any
other entity. For the purposes of SCHEDULE 3.1, the Business shall be
deemed to include any property acquired by the Purchaser in the
ordinary course of business, any property acquired in substitution for
Purchased Assets disposed of subsequent to the Closing Date and any
additional or new products developed by the Purchaser in connection
with the Business as it exists at the Closing Date or as it is from
time to time thereafter.
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EXHIBIT B
STOCK AND WARRANT PURCHASE AGREEMENT
------------------------------------
This Agreement, dated October 26, 1999 is made by and among Industrial
Imaging Corporation, a Delaware corporation with its principle place of business
at One Lowell Research Center, 847 Rogers Street, Lowell, Massachusetts 01852
(the "Company"), Imprimis SB, L.P., a Delaware limited partnership with its
principal place of business at 411 West Putnam Avenue, Greenwich, Connecticut
06830, Imprimis Investors LLC, a Delaware limited liability company with its
principal place of business at 411 West Putnam Avenue, Greenwich, Connecticut
06830, Wexford Spectrum Investors LLC, a Delaware limited liability company with
its principal place of business at 411 West Putnam Avenue, Greenwich,
Connecticut 06830, (each individually a "Seller" and collectively, the
"Sellers") and Charles M. Leighton, an individual residing at 51 Vaughn Hill
Road, Bolton, MA 01740 ("Buyer").
WHEREAS, Sellers collectively own three million (3,000,000) shares of
the common stock of the Company and warrants to purchase an additional two
million (2,000,000) shares of the common stock of the Company (each Seller's
respective holdings of common stock and warrants are as shown on SCHEDULE 1
hereto) (all of Sellers' collective holdings of the common stock of the Company
and all of Sellers' collective warrants to purchase common stock of the Company
are referred to collectively herein as the "Securities"); and
WHEREAS, Sellers now desire to sell, and Buyer now desires to purchase,
the Securities.
NOW THEREFORE, in consideration of the premises and the mutual promises
and covenants contained herein the parties hereto agree as follows:
1. PURCHASE OF THE SECURITIES.
(a) PURCHASE AND SALE OF THE SECURITIES. Upon the terms and
conditions set forth below, Sellers hereby agree to sell and transfer the
Securities to Buyer, and Buyer hereby agrees to purchase the Securities from
Sellers.
(b) DELIVERY OF CERTIFICATES. Sellers hereby agree and
covenant to deliver to Buyer at the closing of the transaction contemplated by
this Agreement (the "Closing") the certificates representing the Securities,
duly endorsed in blank for transfer (or accompanied by stock transfer powers
duly endorsed in blank) together with such additional documentation as may
reasonably be required to effect the transfer of the Securities.
2. CONSIDERATION.
In consideration for the purchase of the Securities, Buyer
shall pay Sellers via wire transfer a total of Ninety-Five Thousand Dollars
($95,000) (the "Purchase Price").
<PAGE>
3. OTHER AGREEMENTS AND OBLIGATIONS.
Imprimis Investors LLC and the Company agree that at the
Closing, each of them shall execute and comply fully with their respective
obligations under a Settlement and Release Agreement in the form attached hereto
as EXHIBIT A (the "Settlement and Release Agreement").
4. THE CLOSING.
The Closing shall be conducted by escrow. Documents shall be executed
at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One
Financial Center, Boston, Massachusetts 02181 and at the offices of Wexford
Management LLC, 411 West Putnam Avenue, Greenwich, Connecticut 06830, at 10:00
a.m. on October 26, 1999 or at such other date, place or time upon which the
parties hereto may mutually agree in writing. On or before the Closing Date, the
parties hereto shall execute and deliver the documents which have been described
herein to each other by facsimile and overnight courier (receipt of facsimiles
shall be deemed conclusive evidence that delivery has occurred) and Imprimis
Investors LLC shall fully comply with its obligations under the Settlement and
Release Agreement, each such step shall be deemed to be taken as part of a
simultaneous transaction, and no delivery shall be deemed to have been completed
until all such steps have been taken.
5. REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES OF SELLERS. As a material
inducement to Buyer and the Company to enter into this Agreement, each Seller
hereby severally represents, warrants and agrees that:
(i) such Seller is duly organized, validly
existing and in good standing under the laws
of the State of Delaware. Such Seller has
all requisite corporate power and authority
to own its property, to carry on its
business as presently conducted, to enter
into and perform this Agreement, and
generally to carry out the transactions
contemplated hereby;
(ii) such Seller has good and valid title to its
proportionate holdings of the Securities
(such holdings as shown on SCHEDULE 1
hereto) free and clear of all restrictions,
encumbrances, liens, rights, title or
interests of others;
(iii) other than its proportionate holdings of the
Securities, such Seller owns no other shares
of the capital stock of the Company, or
interest therein, or any securities
convertible into any such shares, nor any
warrants, options or rights to purchase or
otherwise to acquire any such shares or
securities; and
(iv) the execution, delivery and performance of
this Agreement have been duly authorized by
all necessary corporate or other action of
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such Seller and will not conflict with or
result in any default under any material
contract, obligation or commitment of such
Seller. No consent, approval or
authorization of, or designation,
declaration or filing with, any governmental
authority or any other person or entity is
required of such Seller in connection with
the execution and delivery of this Agreement
or the consummation of any other transaction
contemplated hereby.
(b) REPRESENTATIONS AND WARRANTIES OF BUYER. As a material
inducement to Sellers and the Company to enter into this Agreement, Buyer hereby
represents, warrants and agrees that:
(i) Buyer has all requisite power and authority
to own its property, to carry on its
business as presently conducted, to enter
into and perform this Agreement, and
generally to carry out the transactions
contemplated hereby;
(ii) Buyer (a) has made all such investigation of
the financial condition, business affairs
and prospects of the Company as he deems to
be appropriate and has received all
information which he has requested; (b) has
consulted with personal financial and legal
representatives with respect to the legal,
tax and other financial ramifications of the
transaction contemplated hereunder; and (c)
is a sophisticated purchaser with respect to
the Securities and has adequate information
about the Company to make an informed
decision regarding the purchase of the
Securities and has independently and without
reliance upon Sellers and based on such
information as Buyer has deemed appropriate,
made his own analysis and decision to enter
into this Agreement;
(iii) Buyer has not received or relied on any
representations or warranties of Sellers
other than those set forth in this
Agreement; and
(iv) the execution, delivery and performance of
this Agreement have been duly authorized by
all necessary action of Buyer and will not
conflict with or result in any default under
any material contract, obligation or
commitment of Buyer. No consent, approval or
authorization of, or designation,
declaration or filing with, any governmental
authority or any other person or entity is
required of Buyer in connection with the
execution and delivery of this Agreement or
the consummation of any other transaction
contemplated hereby.
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(c) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As a
material inducement to Buyer and Sellers to enter into this Agreement, the
Company hereby represents, warrants and agrees that:
(i) This Agreement is a valid and binding
obligation of the Company, enforceable in
accordance with its terms, except insofar as
enforceability may be limited by bankruptcy,
insolvency, or similar laws affecting the
rights of creditors and the rights of a
court generally to exercise its equitable
powers to enforce an agreement;
(ii) The execution, delivery and performance of
this Agreement has been duly authorized by
all necessary corporate or other action of
the Company; and
(iii) The Company has not received or relied on
any representations or warranties of Seller
other than those set forth in this
Agreement.
(d) SURVIVAL. All representations, warranties and covenants of
the parties contained herein and in the Exhibits hereto shall survive the
Closing.
6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES.
(a) CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. The
obligation of Seller to sell the Securities as herein contemplated, and to
perform such other actions as are required of him hereunder, is subject to the
satisfaction of the following conditions prior to or at the Closing:
(i) Seller and the Company shall have entered
into the Settlement and Release Agreement;
(ii) Buyer shall have delivered to counsel to the
Company to hold in escrow the Purchase Price
until the deliverance to Buyer of the stock
and other certificate(s) representing the
Securities; and
(iii) All corporate and other proceedings or
actions to be taken by the Company in
connection with the transactions
contemplated by this Agreement shall have
been taken, and all documents incidental
thereto shall have been entered into, and
shall be satisfactory in form and substance
to Seller and its counsel.
(b) CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS AND THE
OBLIGATIONS OF THE COMPANY. The obligations of Buyer to purchase the Securities,
and of Buyer and the Company each to enter into this Agreement any other
documents to which each is a party and to perform such other actions as are
required of him or it hereunder and thereunder are subject to the satisfaction
of the following conditions prior to or at the Closing:
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(i) Seller shall have performed and complied
with all agreements and conditions required
by this Agreement to be performed and
complied with by Seller on or before the
Closing, including, without limitation, the
execution and delivery of and fulfillment by
Imprimis Investors LLC of its obligations
under the Settlement and Release Agreement;
and
(ii) All corporate and other proceedings or
actions to be taken by Seller in connection
with the transactions contemplated by this
Agreement shall have been taken, and all
documents incidental thereto shall have been
entered into, and shall be satisfactory in
form and substance to Buyer and the Company
and his or its counsel.
7. MISCELLANEOUS.
(a) NO ADMISSIONS. In no event shall the execution and
delivery of this Agreement be construed as an admission or acknowledgment by any
party that it has any obligation or liability to any other party, except as
specifically set forth herein.
(b) ADVICE OF COUNSEL. In signing this Agreement, each party
acknowledges that he or it does so freely and with full understanding of its
terms, that he or it has had a reasonable period of time to review the terms of
this Agreement and the Exhibit attached hereto, and to seek the advice of an
attorney before signing it. Each party further acknowledges that he or it is
voluntarily entering into this Agreement and neither the other parties hereto
nor their agents or representative have made any representations inconsistent
with the terms and effects of this Agreement.
(c) FURTHER ASSURANCES. Each of the parties hereto agree to
take such further actions as are reasonably necessary to carry out the intent of
the foregoing provisions of this Agreement, and the Exhibits hereto, including
executing such documents as the other party may reasonably request with the
approval of such party's counsel, which shall not be unreasonably withheld.
(d) NOTICES. Any notice or other communication hereunder shall
be in writing and shall be deemed to have been given, and any delivery hereunder
shall be deemed to have been made, on the second business day after such notice
or communication or item being delivered shall have been mailed in the
continental United States by registered or certified mail, return receipt
requested, all charges pre-paid, as follows:
If to Buyer: Charles M. Leighton
51 Vaughn Hill Road
Bolton, MA 01740
Facsimile: (978) 779-6993
5
<PAGE>
With a copy to: Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.
One Financial Center
Boston, MA 02111
Facsimile: (617) 542-2241
Attention: Neil H. Aronson, Esquire
If to the Company: Industrial Imaging Corporation.
847 Rogers Street
Lowell, Massachusetts 01852
Facsimile: (978) 453-0661
Attention: Juan J. Amodei, President
With a copy to: Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.
One Financial Center
Boston, MA 02111
Facsimile: (617) 542-2241
Attention: Neil H. Aronson, Esquire
If to Sellers: Imprimis SB, L.P. or
Imprimis Investors LLC or
Wexford Spectrum Investors LLC
c/o Wexford Management LLC
411 West Putnam Avenue
Greenwich, Connecticut 06830
Attention: Kenneth Rubin, Esquire
With a copy to: Wexford Management LLC
411 West Putnam Avenue
Greenwich, Connecticut 06830
Attention: Arthur Amron, Esquire
(e) BENEFIT AND BINDING EFFECT. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
personal representatives, successors and assigns.
(f) WAIVER. Neither this Agreement nor any term or condition
hereof, including without limitation the terms and conditions of this Section 7,
may be waived in whole or in part except in written instrument signed by the
party or parties hereto being charged to such waiver.
(g) ENTIRE AGREEMENT. This Agreement, including the Exhibit
attached (in its executed form) hereto, constitutes the entire Agreement among
the parties with respect to the subject matter hereof and supersedes any other
agreements among the parties with respect to such subject matter and may not be
amended except by an instrument in writing executed by the parties hereto.
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<PAGE>
(h) CAPTIONS. The captions set forth in this Agreement are for
convenience of reference only and shall not be considered part of this Agreement
or as in any way limiting or amplifying the terms and provisions hereof.
(i) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
counterparts collectively shall constitute one instrument representing the
Agreement between the parties.
(j) SEVERABILITY. In the event that any provision or portion
of this Agreement shall be deemed to be unenforceable, the remainder of this
Agreement shall not be affected thereby and shall remain in full force and
effect.
(k) GOVERNING LAW. This Agreement shall be governed, construed
and interpreted by and in accordance with the laws of the State of New York,
without regard to its conflict of laws principles, as an instrument under seal.
The parties hereto expressly consent to the exclusive jurisdiction of New York
courts. Each party hereby knowingly and voluntarily waives any and all rights to
a jury trial for any dispute, claim or loss arising under or in connection with
this Agreement.
(l) EXPENSES. The parties hereto shall each be responsible for
payment of its or his own legal fees and other expenses incurred in connection
with the transactions contemplated herein.
[THIS SPACE INTENTIONALLY LEFT BLANK]
7
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto executed this instrument
under seal as of the day and year first written above.
THE COMPANY
INDUSTRIAL IMAGING CORPORATION
By: /s/ Juan J. Amodei
---------------------------------------
Juan J. Amodei, President
SELLERS
IMPRIMIS S.B., LP
By: /s/ Arthur H. Amron
---------------------------------------
Arthur H. Amron
IMPRIMIS INVESTORS LLC
By: /s/ Arthur H. Amron
---------------------------------------
Arthur H. Amron
WEXFORD SPECTRUM INVESTORS LLC
By: /s/ Arthur H. Amron
---------------------------------------
Arthur H. Amron
BUYER
By: /s/ Charles M. Leighton
---------------------------------------
Charles M. Leighton, Buyer
8
<PAGE>
EXHIBIT C
STOCKHOLDER'S VOTING AGREEMENT
AND IRREVOCABLE PROXY
---------------------
This STOCKHOLDER'S VOTING AGREEMENT AND IRREVOCABLE PROXY (this
"Agreement"), dated as of this 29th day of October, 1999, is made by and among
FOCUS AOI, INC., a Delaware corporation ("Focus"), INDUSTRIAL IMAGING
CORPORATION, a Delaware corporation ("IIC"), and Charles M. Leighton (a
"Principal Stockholder").
RECITALS
WHEREAS, Focus and IIC have entered into an Asset Purchase Agreement of
even date herewith (as such agreement may hereafter be amended from time to
time, the "Purchase Agreement") whereby Focus will purchase substantially all of
the assets of IIC and of AOI International, Inc., a Delaware corporation
("AOI"), a wholly owned subsidiary of IIC;
WHEREAS, pursuant to the Purchase Agreement, among other things, IIC
and AOI has agreed to sell and deliver to Focus substantially all of the assets
of IIC and AOI, free and clear of all liens, pledges, charges and other
encumbrances (the "Purchase and Sale"); and
WHEREAS, as an inducement of and a condition to its entering into the
Purchase Agreement, Focus has required that IIC and certain Principal
Stockholders agree to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, and of the representations, warranties, covenants and agreements
contained herein, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.01. DEFINITIONS.
(a) Capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the Purchase Agreement.
(b) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of the
same securities by the same holder, securities Beneficially Owned by a person
shall include securities Beneficially Owned by all other persons with whom such
person would constitute a "group" within the meaning of Section 13(d)(3) of the
Exchange Act.
<PAGE>
(c) "Owned Shares" shall mean shares of IIC common stock owned or
Beneficially Owned by the Stockholder.
(d) "Person" shall mean an individual, corporation, trust, partnership,
joint venture, association, unincorporated organization or other entity.
ARTICLE II
COVENANTS OF THE STOCKHOLDER
SECTION 2.01. AGREEMENT TO VOTE. At any meeting of the Shareholders of
IIC held prior to the Termination Date (as defined in Section 5.06), however
called, and at every adjournment thereof prior to the Termination Date, or in
connection with any written consent of the Shareholders of IIC given prior to
the Termination Date, subject to the last sentence of this Section 2.01, the
Stockholder shall vote all of the Owned Shares that the Stockholder is entitled
to vote, (i) in favor of IIC's entering into and performing the obligations
under the Purchase Agreement (as amended from time to time), (ii) against any
proposal for any recapitalization, merger, sale of assets, sale of stock or
other business combination between or among IIC, AOI or any other Affiliate of
IIC, on the one hand, and any other person or entity other than Focus or any
Affiliate of Focus, on the other hand, or any other action or agreement, that
would result in a breach of any representation, warranty, covenant or other
obligation or agreement of AOI or IIC under the Purchase Agreement or that would
result in any of the conditions to the obligations of Focus under the Purchase
Agreement not being fulfilled, and (iii) in favor of any other matter necessary
for the consummation of the transactions contemplated by the Purchase Agreement
with respect to which the Shareholders may be entitled to vote.
The Stockholder, in furtherance of the transactions contemplated hereby
and by the Purchase Agreement, and in order to secure the performance by the
Stockholder of its duties and obligations under this Agreement, shall, upon
execution of this Agreement, execute and deliver to Focus an irrevocable proxy,
substantially in the form attached hereto as Exhibit A, and irrevocably appoint
two of Focus' designees its attorneys, agents and proxies to vote (or cause to
be voted) or, if applicable, to give consent, in the manner, and with respect to
the matters, set forth above. The Stockholder agrees that the proxy executed and
delivered by it shall be coupled with an interest, and shall constitute, among
other things, an inducement for Focus to enter into the Purchase Agreement, and
shall be irrevocable and binding on any successor in interest upon the
occurrence of any event. Such proxy shall operate to revoke and render void any
prior proxy as to the Owned Shares heretofore granted by the undersigned. Such
proxy shall terminate upon the Termination Date (as defined in Section 5.06 of
this Agreement).
SECTION 2.02. PROXIES AND VOTING AGREEMENTS.
(a) The Stockholder hereby revokes any and all previous proxies granted
with respect to matters set forth in Section 2.01 for the shares of IIC held by
the Stockholder.
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<PAGE>
(b) Prior to the Termination Date, the Stockholder shall not, directly
or indirectly, except as contemplated hereby, grant any proxies or powers of
attorney with respect to matters set forth in Section 2.01, deposit any of the
Owned Shares into a voting trust or enter into a voting agreement with respect
to any of the Owned Shares, in each case with respect to such matters.
SECTION 2.03. TRANSFER OF OWNED SHARES BY THE STOCKHOLDER. Prior to the
Termination Date, the Stockholder shall not (a) place any lien or other
encumbrance on any Owned Shares, other than pursuant to this Agreement, or (b)
make or agree to make any sale, transfer, pledge, hypothecation or other
disposition of any Owned Shares.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND ADDITIONAL
COVENANTS OF THE STOCKHOLDER
The Stockholder represents, warrants and covenants to Focus that:
SECTION 3.01. OWNERSHIP. The Stockholder is as of the date hereof the
beneficial and record owner of the number of IIC Common Shares set forth in
SCHEDULE A attached hereto, the Stockholder has the sole and unencumbered right
to vote the IIC Common Shares held by Stockholder and there are no restrictions
on rights of disposition or other liens pertaining to the IIC Common Shares held
by the Stockholder. None of the IIC Common Shares held by the Stockholder is
subject to any voting trust or other agreement, arrangement or restriction with
respect to the voting of the IIC Common Shares, other than this Agreement.
SECTION 3.02. AUTHORITY AND NON-CONTRAVENTION. The Stockholder has the
right, corporate power and authority, or, where the Stockholder is an
individual, has attained the age of majority and has legal capacity, and the
Stockholder has been duly authorized by all necessary action (including
consultation, approval or other action by or with any other person), to execute,
deliver and perform this Agreement and consummate the transactions contemplated
hereby. Such actions by the Stockholder (a) require no action by or in respect
of, or filing with, any Governmental Authority with respect to the Stockholder,
other than any required filings under Section 13 of the Exchange Act, and (b) do
not and will not contravene or constitute a default under, or give rise to a
right of termination, cancellation or acceleration of any right or obligation of
the Stockholder or to a loss of any benefit of the Stockholder under, any
provision of applicable law or regulation or any agreement (including this
Agreement), judgment, injunction, order, decree or other instrument binding on
the Stockholder or result in the imposition of any lien on any asset of the
Stockholder or any of its affiliates (other than as provided in this Agreement
with respect to IIC Common Shares held by the Stockholder).
SECTION 3.03. BINDING EFFECT. This Agreement has been duly executed and
delivered by the Stockholder and is the valid and binding agreement of the
Stockholder, enforceable against the Stockholder in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights generally and by equitable
3
<PAGE>
principles to which the remedies of specific performance and injunctive and
similar forms of relief are subject.
SECTION 3.04. TOTAL SHARES. The IIC Common Shares set forth in SCHEDULE
A hereof are the only shares of capital stock of IIC owned beneficially or of
record as of the date hereof by the Stockholder, and the Stockholder does not
have any option to purchase or right to subscribe for or otherwise acquire any
securities of IIC and has no other interest in or voting rights with respect to
any other securities of IIC. No third party has an option to acquire the Owned
Shares.
SECTION 3.05. FINDER'S FEES. Except as disclosed in the Purchase
Agreement, no investment banker, broker or finder is entitled to a commission or
fee in respect of this Agreement based upon any agreement made by or on behalf
of the Stockholder.
SECTION 3.06. REASONABLE EFFORTS. Prior to the Termination Date, the
Stockholder shall use reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with Focus
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Purchase and Sale and
the other transactions contemplated by the Purchase Agreement and this
Agreement, including (a) the obtaining of all necessary actions or non-actions,
waivers, consents and approvals from Governmental Authorities and the making of
all necessary registrations and filings relating to the acquisition of AOI's
assets and all other necessary filings with Governmental Authorities, if any and
the taking of all reasonable steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, any Governmental Authority,
(b) the obtaining of all necessary consents, approvals or waivers from third
parties, (c) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging the Purchase Agreement or this Agreement
or the consummation of any of the transactions contemplated by the Purchase
Agreement and this Agreement, including seeking to have any stay or temporary
restraining order entered by any court or other Governmental Authority vacated
or reversed, and (d) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, the Purchase Agreement and this Agreement.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND ADDITIONAL
COVENANTS OF FOCUS
Focus represents, warrants and covenants to the Stockholder that:
SECTION 4.01. CORPORATE POWER AND AUTHORITY. Focus has all requisite
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution, delivery and performance by Focus of this
Agreement and the consummation by Focus of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Focus.
4
<PAGE>
SECTION 4.02. BINDING EFFECT. This Agreement has been duly executed and
delivered by Focus and is a valid and binding agreement of Focus, enforceable
against Focus in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights generally and by equitable principles to which the remedies of
specific performance and injunctive and similar forms of relief are subject.
ARTICLE V
MISCELLANEOUS
SECTION 5.01. CONFIDENTIALITY. The Stockholder recognizes that
successful consummation of the transactions contemplated by this Agreement may
be dependent upon confidentiality with respect to the matters referred to
herein. In this connection, pending public disclosure thereof, the Stockholder
agrees that it shall not disclose or discuss such matters with anyone not a
party to this Agreement (other than its counsel and advisors, if any) without
the prior written consent of Focus, except for filings required pursuant to the
Exchange Act and the rules and regulations thereunder or disclosures
Stockholder's counsel advises are necessary in order to fulfill its obligations
imposed by law, in which event the Stockholder shall give notice of such
disclosure to Focus as promptly as practicable, and in any event prior to the
time any such filing or disclosure is made.
SECTION 5.02. EXPENSES. All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense.
SECTION 5.03. FURTHER ASSURANCES. From time to time, at the request of
Focus, in the case of the Stockholder, or at the request of the Stockholder, in
the case of Focus, and without further consideration, each party shall execute
and deliver or cause to be executed and delivered such additional documents and
instruments and take all such further action as may be necessary or desirable to
consummate the transactions contemplated by this Agreement.
SECTION 5.04. STOP TRANSFER. The Stockholder agrees that it shall not
request that IIC or any other person register the transfer (by book-entry or
otherwise) of any certificate or uncertificated interest representing any of the
Stockholder's Owned Shares, unless such transfer is made in compliance with this
Agreement and unless the transferee agrees in writing, in form and substance
satisfactory to Focus, to be bound by the provisions hereof for the benefit of
Focus. In the event of a stock dividend or distribution, or any change in the
IIC Common Shares by reason of any stock dividend, split-up, recapitalization,
combination, exchange of shares or the like, the term "Owned Shares" shall refer
to and include such Owned Shares as well as all such stock dividends and
distributions and any IIC Common Shares into which or for which any or all of
such Owned Shares may be changed or exchanged.
SECTION 5.05. SPECIFIC PERFORMANCE. The Stockholder agrees that Focus
would be irreparably damaged if for any reason the Stockholder fails to perform
any of the Stockholder's obligations under this Agreement, and that Focus would
not have an adequate remedy at law
5
<PAGE>
for money damages in such event. Accordingly, Focus shall be entitled to seek
specific performance and injunctive and other equitable relief to enforce the
performance of this Agreement by the Stockholder. This provision is without
prejudice to any other rights that Focus may have against the Stockholder for
any failure to perform its obligations under this Agreement.
SECTION 5.06. AMENDMENTS; TERMINATION. This Agreement may not be
modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. The
representations, warranties, covenants and agreements set forth in Article II,
Sections 3.01 and 3.06 and Article IV shall terminate, except with respect to
liability for prior breaches thereof, upon the termination of the Purchase
Agreement in accordance with its terms or, if earlier, upon the Closing (as
defined in the Purchase Agreement) (the "Termination Date").
SECTION 5.07. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective estates, heirs, successors and permitted assigns; provided, however,
that a party may not assign, delegate or otherwise transfer any of such party's
rights or obligations under this Agreement without the consent of the other
parties hereto and any purported assignment, delegation or transfer without such
consent shall be null and void.
SECTION 5.08. CERTAIN EVENTS. The Stockholder agrees that this
Agreement and the obligations hereunder shall attach to the IIC Common Shares
Beneficially Owned by the Stockholder and shall be binding upon any person to
which legal or Beneficial Ownership of such shares shall pass, whether by
operation of law or otherwise.
SECTION 5.09. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
SECTION 5.10. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given (a) on
the first business day following the date received, if delivered personally or
by telecopy (with telephonic confirmation of receipt by the addressee), (b) on
the business day following timely deposit with an overnight courier service, if
sent by overnight courier specifying next day delivery and (c) on the first
business day that is at least five (5) days following deposit in the mails, if
sent by first class mail, to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
If to Focus, to:
Focus Automation Systems, Inc.
101 Randall Drive
Waterloo, Ontario N2V 1C5
Facsimile: (519) 746-3204
Attention: David Chornaby
6
<PAGE>
with a copy (which shall not constitute notice) to:
Gowling, Strathy & Henderson
50 Queen Street North, Suite 1020
Kitchener, Ontario N2H 6M2
Facsimile: 519-571-5006
Attention: W. David Petras
If to IIC, to:
Industrial Imaging Corporation.
847 Rogers Street
Lowell, Massachusetts USA 01852
Facsimile: (978) 453-0661
Attention: Juan J. Amodei, President
with a copy (which shall not constitute notice) to:
Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.
One Financial Center
Boston, MA 02111
Facsimile: (617) 542-2241
Attention: Neil H. Aronson, Esquire
If to the Stockholder, to:
Charles M. Leighton
51 Vaughn Hill Rd
Bolton, MA 01740
Facsimile: (978) 779-6993
with a copy (which shall not constitute notice) to:
SECTION 5.11. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware.
SECTION 5.12. COUNTERPARTS; EFFECTIVENESS. This Agreement may be
executed in two or more counterparts, all of which shall be considered one and
the same agreement.
7
<PAGE>
SECTION 5.13. DESCRIPTIVE HEADINGS. The descriptive headings used
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
SECTION 5.14. SEVERABILITY. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner as
to be effective and valid but if any provision or portion of any provision of
this Agreement is held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability will not affect any other
provision or portion of any provision, and this Agreement will be reformed,
construed and enforced as if such invalid, illegal or unenforceable provision or
portion of any provision had never been contained herein. The parties shall
endeavor in good faith negotiations to replace any invalid, illegal or
unenforceable provision with a valid provision the effects of which come as
close as possible to those of such invalid, illegal or unenforceable provision.
SECTION 5.15. ATTORNEYS' FEES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys fees, costs and necessary
disbursements, in addition to any other relief to which such party may be
entitled.
{signature page immediately following}
8
<PAGE>
IN WITNESS WHEREOF, Focus and the Stockholder have caused this
Agreement to be duly executed as of the day and year first above written.
FOCUS AOI, INC.
By: /s/ David Chornaby
------------------------------------
Name: David Chornaby
Title: COO/Secretary-Treasurer
INDUSTRIAL IMAGING CORPORATION
By: /s/ Juan J. Amodei
------------------------------------
Name: Juan J. Amodei
Title: President
By: /s/ Charles M. Leighton
------------------------------------
Charles M. Leighton
9
<PAGE>
EXHIBIT A TO STOCKHOLDER'S AGREEMENT
AND IRREVOCABLE PROXY
In order to secure the performance of the duties of the undersigned
pursuant to the Stockholder's Voting Agreement and Irrevocable Proxy, dated as
of October 29, 1999 (the "Stockholder Agreement"), by and between Focus AOI,
Inc., Industrial Imaging Corporation and the undersigned., a copy of which is
attached hereto and incorporated by reference herein, the undersigned hereby
irrevocably appoints Ronald Strauss, failing him David Chornaby, the attorney,
agent and proxy, with full power of substitution in each of them, for the
undersigned, and in the name, place and stead of the undersigned, to vote or
cause to be voted or, if applicable, to give consent, in such manner as each
such attorney, agent and proxy shall, in his sole discretion, deem proper to
record such vote (or consent) in the manner, and with respect to the matters,
set forth in Article II of the Stockholder Agreement with respect to all shares
of Common Stock, $.01 par value per share (the "IIC Common Shares") of
Industrial Imaging Corporation, a Delaware corporation ("IIC"), which the
undersigned is or may be entitled to vote at any meeting of IIC held after the
date hereof, whether annual or special and whether or not an adjourned meeting,
or, if applicable, to give written consent with respect thereto. This Proxy is
coupled with an interest, shall be irrevocable and binding on any successor in
interest of the undersigned and shall not be terminated by operation of law upon
the occurrence of any event including, without limitation, the death or
incapacity of the undersigned. This Proxy shall operate to revoke and render
void any prior proxy as to the IIC Common Shares heretofore granted by the
undersigned. This Proxy shall terminate upon the Termination Date (as defined in
Section 5.06 of the Stockholder Agreement).
By: /s/ Charles M. Leighton
--------------------------------------
Name: Charles M. Leighton
3,000,000
---------------------------------------
Number of IIC Common Shares to be Voted
