SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 26, 1996
INFINITE MACHINES CORP.
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(Exact name of Registrant as specified in its charter)
DELAWARE 0-21816 52-1490422
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
923 Incline Way #9, P.O. Box 8219, Incline Village, Nevada 89452
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (701) 831-4680
N/A
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(Former name or former address, if changed since last report)
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Item 2: Acquisition or Disposition of Assets
On August 26, 1996 Infinite Machines Corp. (the "Registrant") acquired a
preferred stock interest (the "Preferred Stock") in Spectra Acquisition Corp., a
Delaware corporation ("Spectra"). The aggregate consideration paid for the
Preferred Stock was $2.7 million plus the transfer of certain technology rights
which the Registrant has licensed from Brown University Research Foundation. The
cash portion of the purchase price was paid 50% in cash and 50% in a
non-interest bearing promissory note due on or about September 30, 1996. The
Preferred Stock represents in excess of 51% of the voting power of Spectra.
Pursuant to a Stockholders' Agreement, the Registrant shall have the right to
designate two out of five directors of Spectra so long as it maintains at least
25% of the its Preferred Stock investment.
Spectra, whose operations are based in Warwick, Rhode Island, recently
consummated its acquisition of the operating assets of Spectra Science
Corporation. Spectra is a materials company with a worldwide license to a
patented platform technology called Laser Paint which can transform materials
such as plastics, liquids and powders into lasers for commercial application.
Spectra will also commercialize the licensed technology it has acquired from the
Registrant in the area of direct laser patterning of glasses.
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Item 7: Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statement of Business Acquired
(b) Pro Forma Financial Information:
The Registrant has determined that it is impracticable to provide the
financial statements and pro forma financial data required by the
provisions of Item 7 of Form 8-K with this Report. Such information
will be filed on a Form 8-K/A not later than sixty (60) days after
this Report on Form 8-K was due.
(c) Exhibits:
A Spectra Acquisition Corp. - Series A Convertible Preferred Stock
Purchase Agreement dated as of August 23, 1996.
B. Spectra Acquisition Corp. - Stockholders' Agreement dated as of
August 23, 1996
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report on Form 8-K to be signed on its
behalf by the undersigned, hereunto duly authorized.
INFINITE MACHINES CORP.
By: /s/ Clifford J. Brockmyre
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Clifford J. Brockmyre, President
Dated: September 9, 1996
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Exhibit A
SPECTRA ACQUISITION CORP.
SERIES A CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
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TABLE OF CONTENTS
Page
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1. Terms of Purchase ................................................. 1
1.1 Issuance of Securities .................................... 1
1.2 Payment ................................................... 2
1.3 Terms of Series A Preferred ............................... 3
1.4 Founder Common Stock ...................................... 3
1.5 Management Options ........................................ 3
1.6 Reserved Shares of Common Stock ........................... 3
1.7 Closing ................................................... 3
1.8 Use of Proceeds ........................................... 4
1.9 Transfer of IMC Rights to Technology ...................... 4
1.10 Payment of Expenses ....................................... 4
1.11 Definitions ............................................... 4
2. Representations and Warranties of the Company ..................... 4
2.1 Organization and Qualification ............................ 4
2.2 Subsidiaries .............................................. 5
2.3 Authorization of Transaction .............................. 5
2.4 Governmental Approvals .................................... 6
2.5 Capitalization ............................................ 6
2.6 Financial Statements ...................................... 7
2.7 Absence of Certain Changes ................................ 7
2.8 Properties ................................................ 7
2.9 Contracts and Commitments ................................. 7
2.10 Compliance with Other Instruments ......................... 8
2.11 Litigation and Bankruptcy Proceedings ..................... 8
2.12 Licenses and Other Rights; Compliance ..................... 9
2.13 Sales of Securities; Exemption ............................ 9
2.14 Employees ................................................. 9
2.15 Brokers or Finders ........................................ 10
2.16 Investments in Other Persons .............................. 10
2.17 Transactions with Affiliates .............................. 10
2.18 Benefit Plans ............................................. 10
2.19 Insurance ................................................. 11
2.20 Additional Representations ................................ 11
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Page
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3. Representations and Warranties of the Investors ................... 11
3.1 Authorization of Transaction .............................. 11
3.2 Investment Representations ................................ 11
3.3 Restrictive Legend ........................................ 12
3.4 Brokers or Finders ........................................ 12
3.5 Regulation S .............................................. 12
4. Affirmative Covenants of the Company .............................. 12
4.1 Payment of Taxes and Trade Debt ........................... 13
4.2 Reporting Requirements .................................... 13
4.3 Inspection ................................................ 14
4.4 Maintenance of Insurance .................................. 14
4.5 Preservation of Corporate Existence, Etc .................. 14
4.6 Licenses and Other Rights; Compliance with laws ........... 15
4.7 Keeping of Records and Books of Account ................... 15
4.8 Maintenance of Properties ................................. 15
4.9 Compliance with ERISA ..................................... 15
4.10 Directors' and Officers' Liability Insurance .............. 15
4.11 Further Assurance ......................................... 15
4.12 Nomination of Directors ................................... 15
4.13 Meetings of Directors; Expenses of Directors .............. 15
4.14 Board Committees .......................................... 16
5. Negative Covenants of the Company ................................. 16
5.1 Dealings with Affiliates .................................. 16
5.2 U.S. Real Property Holding Corporation .................... 16
6. Further Covenants of the Company .................................. 16
6.1 Reservation of Common Stock ............................... 16
6.2 Indemnification ........................................... 16
7. Conditions To Investors' Obligations .............................. 16
7.1 Consents and Waivers ...................................... 17
7.2 Certificates of Company ................................... 17
7.3 Representations and Warranties ............................ 17
7.4 Certified Governing Documents ............................. 17
7.5 Filing of Certificate of Designation ...................... 17
7.6 Stockholders' Agreement ................................... 17
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Page
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7.7 Registration Rights Agreement ............................. 18
7.8 Opinion of Company's Counsel .............................. 18
7.9 Certificates and Legends .................................. 18
7.10 Employment Agreements ..................................... 18
7.11 Assignment of IMC License ................................. 18
8. Preemptive Rights ................................................. 18
9. Definitions and Accounting Terms .................................. 20
9.1 Certain Defined Terms ..................................... 20
9.2 Accounting Terms .......................................... 22
10. Miscellaneous ..................................................... 22
10.1 Amendment ................................................. 22
10.2 Indemnification ........................................... 23
10.3 Notices ................................................... 23
10.4 Severability .............................................. 23
10.5 Delays or Omissions; Waiver ............................... 23
10.6 Governing Law ............................................. 24
10.7 Captions .................................................. 24
10.8 Counterparts .............................................. 24
10.9 Prior Agreements .......................................... 24
10.10 Survival of Representations, Warranties and Covenants ..... 24
10.11 Binding Effect; Assignment ................................ 24
10.12 Successor Holders ......................................... 24
10.13 Reliance .................................................. 24
10.14 Costs and Expenses ........................................ 25
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SCHEDULES
Schedule 1.1: Schedule of Investors
Schedule 2.5: Current Capitalization
Schedule 2.6: Financial Statements
Schedule 2.9: Contracts and Commitments
Schedule 2.11: Litigation and Bankruptcy Proceedings
Schedule 2.18: Benefit Plans
EXHIBITS
Exhibit A: Certificate of Designation
Exhibit B: Founder Common Stock Purchase Agreement
Exhibit 1.2A: Form of Promissory Note
Exhibit 1.2B: Form of Pledge Agreement
Exhibit 2.1A: Certificate of Incorporation of the Company
Exhibit 2.1B: By-Laws of the Company
Exhibit 7.6: Form of Stockholders' Agreement
Exhibit 7.7: Form of Registration Rights Agreement
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SPECTRA ACQUISITION CORP.
SERIES A CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
THIS AGREEMENT, dated as of August 23, 1996, is made by and between Spectra
Acquisition Corp., a Delaware corporation having its principal place of business
at 300 Metro Center Boulevard, Warwick, Rhode Island 02886 (the "Company"),
Infinite Machines Corp., a Delaware corporation having its principal place of
business at One Industrial Drive South, Smithfield, Rhode Island ("IMC"), Pillar
Investment Limited, a representative of the Pillar Investors as defined herein
("Pillar Group"), the persons named as Initial Pillar Investors on Schedule 1.1
hereto and any persons described below as Spectra Investors or Additional Pillar
Investors whose names may in the future be added to Schedule 1.1 in accordance
with the terms of this Agreement (collectively, the "Investors").
WHEREAS, the Company wishes to issue and sell and the Investors wish to
purchase the Company's Series A Convertible Preferred Stock, $.01 par value per
share (the "Series A Preferred") upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants hereinafter set forth and intending to be legally bound hereby, agree
as follows:
1. Terms of Purchase.
1.1. Issuance of Securities.
(a) First Round Investors. At the First Closing, as defined below, the
Company shall issue and sell to IMC and the Initial Pillar Investors as those
Investors are identified on Schedule 1.1 hereto and are collectively referred to
as "First Round Investors" and such First Round Investors shall purchase, an
aggregate of 3,136,000 shares of Series A Preferred at a price of One Dollar
($1.00) per share (the "Purchase Price"). Each First Round Investor shall
purchase that number of shares of Series A Preferred set forth opposite its name
on Schedule 1.1 hereto for the aggregate purchase price specified thereon.
(b) Additional Pillar Investors. On or before the earlier of (a) 30 days
after the First Closing Date, or (b) September 30, 1996, the Company shall issue
and sell to either (i) Pillar Group or (ii) such other additional investors as
Pillar Group shall designate (such additional Pillar Investors, whether Pillar
Group or the designated investors, shall hereafter be referred to as the
"Additional Pillar Investors" and shall be so identified on Schedule 1.1 hereto)
and the Additional Pillar Investors shall purchase 436,000 shares of Series A
Preferred at a price equal to the Purchase Price.
(c) Spectra Investors. Immediately following the First Closing, the Company
shall offer to sell up to 435,294 shares of Series A Preferred at a price equal
to the Purchase Price to certain
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shareholders of Spectra Science Corporation. The Company shall issue Series A
Preferred to those shareholders of Spectra Science Corporation who accept the
aforementioned offer (the "Spectra Investors") at the Second Closing referenced
below, upon the terms and conditions set forth in this Agreement, a counterpart
of which shall be duly executed by each such Investor. Execution of a
counterpart of this Agreement as aforesaid shall have the effect of amending
this Agreement to add the Spectra Investors as parties hereto with all rights
and obligations of an Investor hereunder, and Schedule 1.1 hereof shall likewise
be amended to reflect the addition of the Spectra Investors. The Spectra
Investors shall be deemed to have executed this Agreement as of the date hereof
and the sale of Series A Preferred to the Spectra Investors shall be deemed to
have occurred as of the First Closing Date (as herein defined below).
(d) Consulting Shares. Pillar Group may be issued from time to time an
aggregate of 228,000 shares of Series A Preferred, valued at One Dollar ($1.00)
per share, under the terms of a consulting agreement memorialized in the Term
Sheet referenced in Section 1.10 below.
1.2. Payment.
Payment of the Promissory Note described in subsection (a) and for all of
the Series A Preferred being issued in the First Closing or the Second Closing
shall be made by (i) bank or cashier's check or (ii) wire transfer of
immediately available funds.
(a) IMC. At the First Closing, IMC (a) shall pay an amount equal to $.50
per share of Series A Preferred purchased (the "Cash Installment"), which shall
be an aggregate amount equal to the First Closing amount set forth opposite
IMC's name on Schedule 1.1 hereof, less any amount previously deposited with the
Company by IMC as referenced in Schedule 1.1 hereto; and (b) shall issue a
non-interest bearing note to the Company in the principal amount of One Million
Three Hundred and Fifty Thousand Dollars ($1,350,000) (the "Promissory Note") in
substantially the form of Exhibit 1.2A hereto, which is to be paid in full on or
before the earlier of (i) 30 days after the First Closing Date or (ii) September
30, 1996. In addition, IMC shall execute and deliver to the Company a Stock
Pledge Agreement (the "Pledge Agreement") in substantially the form of Exhibit
1.2B hereto, pursuant to which IMC pledges as collateral its shares of Series A
Preferred purchased hereunder. The Company shall maintain possession of the
certificate representing those shares until the Promissory Note is paid in full.
(b) Pillar Investors. At the First Closing, each Pillar Investor identified
as an Initial Pillar Investor on Schedule 1.1 hereof shall pay the full Purchase
Price for the Series A Preferred being purchased by that Investor, less any
amount previously deposited with the Company by that Investor as referenced in
Schedule 1.1 hereto, which amount shall be credited in full against the
aggregate Purchase Price. On or before the earlier of (a) 30 days after the
First Closing Date, or (b) September 30, 1996, the Additional Pillar Investors
shall pay the full purchase price for the Series A Preferred being purchased by
that Investor. Upon full payment by the Additional Pillar Investors, the
signature page and Schedule 1.1 hereto shall be amended to reflect the addition
of these Investors.
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(c) Spectra Investors. At the Second Closing, each Spectra Investor shall
pay the full Purchase Price for the Series A Preferred being purchased by that
Investor, and Schedule 1.1 shall thereupon be updated to reflect that investment
and the signature pages to this Agreement shall be amended.
1.3. Terms of Series A Preferred. The Series A Preferred shall have the
terms and conditions set forth in the Certificate of Designation (the
"Certificate of Designation") a copy of which is attached to this Agreement as
Exhibit A, and the terms of which are incorporated herein by reference.
1.4. Founder Common Stock. The Company has issued at par value an aggregate
of 794,118 shares of its Common Stock, $.01 par value per share, to Nabil
Lawandy, the founder of and President and Chief Executive Officer of the
Company, pursuant to the terms of the Founder Stock Purchase Agreement attached
hereto as Exhibit B. The Founder Stock Purchase Agreement also provides for the
issuance to Mr. Lawandy of options (the "Founders Options") to purchase
additional shares of Common Stock under the terms and conditions stated therein.
1.5. Management Options. The Company will from time to time issue options
("Initial Management Options") to purchase up to an aggregate of not less than
264,706 shares of Common Stock to members of the Company's management team
pursuant to a management option plan to be adopted by the Compensation Committee
of the Board of Directors of the Company within a reasonable time following the
Closing.
1.6. Reserved Shares of Common Stock. The Company has authorized and
reserved for the purpose of issuance upon conversion of the Series A Preferred,
and covenants to continue to reserve, a sufficient number of shares of its
Common Stock, $.01 par value per share (the "Common Stock"), to satisfy fully
the rights of conversion of holders of shares of Series A Preferred outstanding
from time to time.
1.7. Closing.
(a) First Closing. The First Closing shall be held at the offices of Warner
& Stackpole LLP, 75 State Street, Boston, Massachusetts 02109 at 10:00 a.m.
Boston time on August __, 1996 (the "First Closing Date") or at such other time
and date as may be agreed upon by the Company and the First Round Investors. At
the First Closing, subject to the provisions of Section 1.2 above, the Company
shall deliver a certificate registered in the name of each First Round Investor
representing the number of shares of Series A Preferred being purchased by such
Investor.
(b) Second Closing. The Second Closing shall be held at the offices of
Warner & Stackpole LLP at such time and date as may be agreed upon by the
Company and the Spectra Investors referenced in Section 1.1(b) hereof, but in
any event not later than September 30, 1996 (the "Second Closing Date"). At the
Second Closing, the Company shall deliver a certificate registered in the name
of each Spectra Investor and each Additional Pillar Investor representing
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the number of shares of Series A Preferred being purchased by such Investor,
against payment in full of the aggregate Purchase Price therefor.
1.8. Use of Proceeds. The Company shall use the proceeds of the sale of the
Series A Preferred to finance the acquisition of substantially all of the assets
of Spectra Science Corporation pursuant to that certain Asset Purchase Agreement
dated July 15, 1996 between the Company and Spectra Science Corporation, a copy
of which has been previously delivered to representatives of the Investors, and
for the working capital purposes of the Company, including payment of expenses
relating to this Agreement.
1.9. Transfer of IMC Rights to Technology. IMC shall assign to the Company
all of its rights and responsibilities under that certain License Agreement
dated June 18, 1996 and that certain Research Agreement dated June 28, 1996,
each between HGG Laser Fare, Inc., a wholly-owned subsidiary of IMC, and Brown
University. Immediately following full payment of the Promissory Note pursuant
to Section 1.2(a) hereof, the Company shall pay to IMC or its subsidiary, as
reimbursement, an amount equal to the aggregate payments IMC or such subsidiary
has made to Brown University to that date under such agreements, including an
amount equal to the fair market value on the date of issuance of the 10,000
shares of common stock of IMC issued to Brown thereunder.
1.10. Payment of Expenses. Each of the parties to this Agreement shall pay
its own legal fees and disbursements incurred in connection with the
transactions contemplated herein. Notwithstanding the foregoing, Infinite
Machines Corp. ("IMC") and Pillar Group, each an Investor, previously deposited
an aggregate of $200,000 (the "Advance Payment") with Warner & Stackpole LLP, as
escrow agent for the Company. Pursuant to a certain Summary of Investment and
Acquisition Terms dated as of June __, 1996 executed by IMC and Pillar Group
(the "Term Sheet"), $34,000 of those escrowed funds were used by the Company to
pay consulting fees to Nabil Lawandy and to make certain rent deposits on behalf
of the Company. The entire Advance Payment made by IMC, including its pro rata
share of the amounts paid out as set forth in the preceding sentence, has been
credited for purposes of this Agreement against the cash payment portion of the
Purchase Price. The entire Advance Payment made by Pillar Group, including a
similar pro rata portion, has been credited against the purchase price payable
hereunder for Series A Preferred by HK Properties and Ibrahim Muhanna
1.11. Definitions. Capitalized terms not otherwise defined herein shall
have the meaning set forth in Section 9 of this Agreement.
2. Representations and Warranties of the Company.
To induce the Investors to enter into this Agreement, the Company
represents and warrants to the Investors that the following are true and correct
as of the First Closing Date:
2.1. Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite
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corporate power and authority to own and lease its property, to carry on its
business as now being conducted and as proposed to be conducted, and to carry
out the transactions contemplated hereby. The copies of the Company's Charter
and By-Laws and all amendments thereto, furnished contemporaneously herewith as
Exhibit 2.1A and Exhibit 2.1B respectively, are complete and correct as of the
Closing Date. The Company is duly qualified to do business as a foreign
corporation and is in good standing in every jurisdiction in which the failure
to so qualify or be licensed could have a material adverse effect upon the
Company, its assets, business, operations or financial condition. The Company
was organized in July 1996 for the purpose of acquiring the assets of Spectra
Science Corporation ("Old Spectra") pursuant to an Asset Purchase Agreement
dated as of July 15, 1996 (the "Acquisition Agreement") by and between the
Company and Old Spectra. The Company has not transacted any business other than
(i) in pursuit of such acquisition; (ii) in the negotiation and execution of a
development agreement with Textile Rental Services Association of America, an
Illinois not-for-profit trade association, as referenced on Schedule 2.9 hereof;
and (iii) as contemplated herein.
2.2. Subsidiaries. The Company has no subsidiaries and does not control nor
is it controlled by any other corporation, association or business organization,
directly or indirectly.
2.3. Authorization of Transaction. The Company has full corporate power and
authority to enter into this Agreement, the Stockholders' Agreement and the
Registration Rights Agreement, to offer, issue, sell and deliver the Series A
Preferred as designated in the Certificate of Designation, and to perform its
other obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement, and each other agreement, document and instrument
to be executed and delivered to the Investors in connection herewith, have been
duly authorized by all necessary corporate or other action of the Company, and
this Agreement and such other documents and instruments, when executed and
delivered, shall constitute valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms; subject to applicable bankruptcy, insolvency, reorganization and
moratorium laws and other laws of general application affecting enforcement of
creditors rights generally and to the availability of equitable remedies, which
are subject to the discretion of the court before which an action may be
brought. The issuance, sale and delivery of the Series A Preferred in accordance
with this Agreement and the issuance, sale and delivery of the Common Stock (the
"Underlying Common"), into which Series A Preferred is convertible in accordance
with the Certificate of Designation have been duly authorized by all necessary
corporate action on the part of the Company. When issued in accordance with this
Agreement and the applicable terms of the Company's Charter, as amended by the
Certificate of Designation, the Series A Preferred and the Underlying Common, as
the case may be, will be duly and validly issued, fully paid and nonassessable,
free of any liens or restrictions, voting or otherwise, imposed by or through
the Company, except as set forth in this Agreement, the Registration Rights
Agreement or under applicable securities laws. Except as set forth herein, the
issuance of the Series A Preferred and the Underlying Common will not be subject
to preemptive or other preferential rights or similar statutory or contractual
rights either arising pursuant to any agreement or instrument to which the
Company is a party or which are otherwise binding on the Company. The shares of
Series A Preferred and the Underlying Common are sometimes collectively referred
to herein as the "Series A Shares."
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2.4. Governmental Approvals. No authorization, consent, approval, license,
exemption of or filing or registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, was, is or will be necessary or appropriate for the execution and
delivery by the Company of this Agreement or any of the other agreements,
documents and instruments to be executed and delivered by the Company in
connection herewith, for the offer, issuance, sale and delivery of the Series A
Shares to the Investors or for the performance by the Company of its obligations
under this Agreement and pursuant to the terms of the Series A Shares.
2.5. Capitalization. The authorized capital stock of the Company consists
of (a) 5,000,000 shares of Preferred Stock, $.01 par value, of which 4,235,294
have been designated as Series A Convertible Preferred Stock, (i) 3,136,000 of
which will be issued and outstanding upon consummation of the First Closing
contemplated herein; (ii) 436,000 of which are reserved for issuance at the
Second Closing to the Additional Pillar Investors; (iii) 435,294 of which are
reserved for issuance at the Second Closing to the Spectra Investors; and (iv)
228,000 of which are reserved for issuance pursuant to the Pillar Consulting
Agreement; and (b) 10,000,000 shares of Common Stock, $.01 par value, (i)
794,118 of which are issued and outstanding; (ii) 4,235,294 of which are
reserved for issuance upon conversion of the Series A Preferred issued or
reserved for issuance as referenced above; and (iii) 264,706 of which are
reserved for issuance to members of the Company's management team under the
circumstances described in Section 1.5 hereof. All of the outstanding shares of
capital stock of the Company have been duly authorized and validly issued, are
fully paid and non-assessable and are owned of record by the persons named as
stockholders in Schedule 2.5 hereto. None of the Company's capital stock is
entitled to cumulative voting rights. There are no outstanding warrants,
options, conversion privileges or other rights to purchase or acquire any of the
authorized but unissued Common Stock or Series A Preferred, or any other equity
security, or security having any equity features, of the Company, except
pursuant to the terms of the Founder Common Stock Purchase Agreement and the
Pillar Consulting Agreement. The Company has no obligation, contingent or
otherwise, to issue or to purchase shares of its capital stock or securities
convertible into or evidencing any right to acquire shares of its capital stock,
or to pay any dividend or make any other distribution in respect thereof, except
as provided in this Agreement, the Founder Common Stock Purchase Agreement or in
the Charter, or pursuant to certain warrants to be issued to Old Spectra under
the terms of the Acquisition Agreement. Except as provided in this Agreement and
the Founder Common Stock Purchase Agreement, no stockholder has any preemptive
or similar right to acquire additional shares of capital stock, and except as
provided in the Stockholders' Agreement, there are no restrictions on the
transfer of shares of capital stock of the Company other than those imposed by
relevant state, federal and foreign securities laws. Other than pursuant to the
Registration Rights Agreement, no person has demand or other rights to cause the
Company to file any registration statement under the Securities Act of 1933
relating to any securities of the Company or any right to participate in any
such registration. The Common Stock and the Series A Preferred have the powers,
preferences and relative participating, optional and other special rights,
qualifications, limitations and restrictions, if any, set forth in the Company's
Charter, as amended by the Certificate of Designation. To the Company's
knowledge, no stockholder of the Company has granted options or other rights to
any other
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person to purchase from such stockholder any shares of capital stock of the
Company, except as provided in the Stockholders' Agreement. Except as
specifically described in this Agreement, there are no agreements or
understandings, written or oral, between the Company and any holder of its
securities or, to the best knowledge of the Company, among any holders of its
securities, relating to the pledge, acquisition, disposition or voting of the
securities of the Company.
2.6. Financial Statements. The Company has furnished each Investor with an
unaudited balance sheet of the Company as at July 31, 1996, and related
unaudited statements of income, changes in stockholders' equity and cash flow of
the Company for the period commencing on the date of incorporation of the
Company and ending on July 31, 1996 (collectively, the "Financial Statements").
The Financial Statements are attached hereto as Schedule 2.6. The Financial
Statements are true and correct in all material respects, are in accordance with
all of the books and records of the Company, fairly and accurately present in
all material respects the financial position of the Company as at the dates
referenced above and the statements of income, changes in stockholders equity
and cash flow of the Company for the referenced period, and have been prepared
in accordance with generally accepted accounting principles ("GAAP")
consistently applied (provided that the unaudited financial statements may not
contain all of the footnotes required by GAAP and are subject to normal year-end
adjustments). The Company has no material liability, contingent or otherwise,
not adequately reflected in or reserved against in the Financial Statements or
in the notes thereto, or disclosed on Schedule 2.6 herein, nor does the Company
have any reasonable grounds to know of any such liability. The Company has
furnished to IMC and Pillar Group, a representative of certain Pillar Investors,
a copy of the Acquisition Agreement and the financial statements of Old Spectra
included therein. The Company makes no representation or warranty with respect
to the financial statements of Old Spectra attached to or referenced in the
Acquisition Agreement.
2.7. Absence of Certain Changes. Since the date of the unaudited balance
sheet referenced in Section 2.6 above, there has been no event, development or
condition of any type that has had or is reasonably likely to have a material
adverse effect on or that has materially and adversely affected the Company, or
its business, prospects, condition, affairs, operations, properties or assets.
2.8. Properties. The Acquisition Agreement has been executed and delivered
by the Company and Old Spectra, and upon closing of the acquisition as
contemplated therein, the Company will acquire the assets of Old Spectra
referenced in the Acquisition Agreement. Except for rights under that certain
license agreement to be assigned by IMC to the Company as referenced in Sections
1.9 and 7.11 hereof, the Company has no other material properties.
2.9. Contracts and Commitments. Except for the Acquisition Agreement and as
otherwise set forth in Schedule 2.9, the Company is not a party to any material
contract, obligation or commitment (i) involving aggregate future payment by the
Company of more than $20,000, which is not terminable by the Company on sixty
days' notice or less, or (ii) that is otherwise material to the business of the
Company (collectively, the "Material Agreements"). Except as set forth on
Schedule 2.9, the Company has no employment contracts, deferred compensation
agreements or bonus, incentive, profit-sharing or pension plans currently in
force
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and effect, or any understanding with respect to any of the foregoing. No
default or defaults by the Company (without regard to notice or lapse of time or
both) exist in the due performance by it, or to the knowledge of the Company by
the other party or parties thereto, of any term, covenant or condition of any
contract to which the Company is a party that individually or in the aggregate
could have a material adverse effect on the business, assets, operations or
financial condition of the Company. All of the Material Agreements are in full
force and effect.
2.10. Compliance with Other Instruments. The Company is in compliance with
all material obligations, agreements and conditions contained in any contract or
agreement of the Company, the lack of compliance with which would afford to any
Person the right to accelerate any material indebtedness or terminate any
material right or agreement of the Company. None of the execution, delivery and
performance of this Agreement and each other agreement, document and instrument
to be entered into by the Company in connection with the transactions
contemplated hereby, and the issuance, sale and delivery of the Series A Shares
and compliance with the provisions thereof by the Company will (i) conflict with
or constitute or result in a breach or a violation of any of the terms,
conditions or provisions of, or constitute (with due notice or lapse of time or
both) a default under, the Charter or By-Laws, or of any agreement, license,
indenture, mortgage, deed of trust, lease or other instrument or agreement by
which the Company is bound or to which the Company or any of its assets or
properties is subject, or (ii) result in a violation of any decree or order of
any court or other agency of government, or any law, statute or regulation,
binding upon or applicable to the Company, or (iii) result in the creation or
imposition of any lien, security interest, charge or encumbrance upon any
property, assets or capital stock of the Company. The Company is in compliance
in all respects with the provisions of its Charter and By-Laws.
2.11. Litigation and Bankruptcy Proceedings. Except as set forth in
Schedule 2.11 hereof, no action, proceeding or governmental inquiry or
investigation (a "Proceeding") before any court, arbitrator or tribunal or
administrative or other governmental agency, is (a) pending, or to the knowledge
of the Company, threatened against the Company or, to the best of the Company's
knowledge, any of its officers, directors or employees (in their capacity as
such) or affecting any of its owned or leased assets, or (b) to the knowledge of
the Company, pending or threatened against any consultant or shareholder of the
Company (in their capacity as such) or affecting any of its other assets, nor is
the Company aware of any such threatened or contemplated Proceeding, nor, to the
knowledge of the Company, has there occurred any event or does there exist any
condition on the basis of which it is reasonably likely that any such Proceeding
might properly be instituted. There is no pending, threatened or contemplated
Proceeding by the Company against others. The Company is not in default with
respect to any order, writ, injunction, decree, ruling or decision of any court,
commission, board or other government agency, and, except as set forth in
Schedule 2.11 hereof, there are no actions or proceedings pending or threatened
(or any basis therefor known to the Company) which might call into question the
validity of this Agreement, any of the Series A Shares or any action taken,
required to have been taken, or to be taken pursuant hereto or thereto. The
Company has not admitted in writing its inability to pay its debts generally as
they become due, filed or consented to the filing against it of a petition in
bankruptcy or a petition to take advantage of any insolvency act, made an
assignment for the benefit of creditors, consented to the appointment of a
receiver
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for itself or for the whole or any substantial part of its property, or had a
petition in bankruptcy filed against it, been adjudicated a bankrupt, or filed a
petition or answer seeking reorganization or arrangement under the federal
bankruptcy laws or any other law or statute of the United States or any other
jurisdiction.
2.12. Licenses and Other Rights; Compliance. The Company has all
franchises, permits, licenses and other rights and privileges necessary to
permit it to own its properties and to conduct its business as presently
conducted and as planned to be conducted. The Company is in compliance in all
respects under each, and the transactions contemplated by this Agreement will
not cause a violation under any, of such franchises, permits, licenses or other
rights and privileges. The Company is in compliance in all material respects
with all laws and governmental rules and regulations applicable to its
businesses, properties and assets and to the systems and services provided or
sold by it, including, without limitation, all such laws, rules and regulations
relating to fair employment and anti-discrimination practices, public or
employee safety, insurance regulation and to environmental protection, water or
air pollution and similar matters.
2.13. Sales of Securities; Exemption. Neither the Company nor anyone acting
on its behalf has offered securities of the Company for sale to, or solicited
any offers to buy the same from, any person or organization, in either case so
as to subject the offering, issuance or sale of such securities to the
registration provisions of the Securities Act or applicable state securities
laws. Subject to the continuing truth and accuracy of the representations and
warranties of the Investors set forth in this Agreement, the offer, sale,
exchange and issuance of the Series A Preferred and the Underlying Common to the
Investors as contemplated by this Agreement and the Exhibits hereto are or will
be exempt from the registration requirements of the Securities Act and
applicable state securities laws, and neither the Company nor anyone acting on
its behalf will take any action hereafter that would cause the loss of such
exemption.
2.14. Employees. To the Company's knowledge and belief no employee or
consultant of the Company is, or is now expected to be, in violation of any term
of any employment contract, non-competition agreement, restrictive covenant or
any other contract or agreement with, or any other common law obligation to, a
former employer, or the purchaser of any or all of the assets or business of a
former employer, relating to the right of any such employee or consultant to be
employed or consulted by the Company because of the nature of the business
conducted or to be conducted by the Company or to the use of trade secrets or
proprietary information of others, and to the best of the Company's knowledge,
the employment of the Company's employees does not subject the Company or the
Investors to any liability. Except as referenced on Schedule 2.11 hereto, to the
Company's best knowledge and belief, there are neither pending nor threatened
any actions, suits, proceedings or claims, or to its knowledge any basis
therefor or threat thereof, with respect to any contract, agreement, covenant or
obligation referred to in the preceding sentence, nor is there any judgment,
decree or order of any court or administrative agency that would interfere with
the use by any employee or consultant of his or her best efforts to promote the
interests of the Company or would conflict with the Company's business as
proposed to be conducted. To the best of the Company's knowledge, no present or
former officer, employee or consultant of the Company is in violation of any
obligation relating to the use of confidential or
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proprietary information of the Company. None of the employees of the Company is
represented by any labor union and there is no labor strike or other labor
trouble with respect to the Company (including without limitation any
organizational drive) nor, to the best of the Company's knowledge, is any such
labor strike or trouble threatened.
2.15. Brokers or Finders. Upon the consummation of the Closing, no Person
has or will have, as a result of or in connection with the transactions
contemplated by this Agreement and because of any act or omission by the Company
or any of its agents, any right, interest or valid claim against or upon the
Company or the Investors for any commission, fee or other compensation as a
finder, broker, agent, financial advisor or other intermediary. The Company is a
party to a certain consulting agreement with the Pillar Group, as referenced in
Section 1.1(d), under which the Pillar Group is entitled to certain cash and
stock payments.
2.16. Investments in Other Persons. The Company has not made any loan or
advance to any Person which is outstanding on the Closing Date, nor is it
committed or obligated to make any such loan or advance, nor does the Company
have any material interest in any capital stock, assets or obligations of, or
any financial or equity interest in, any Person other than its rights under the
Spectra Acquisition Agreement.
2.17. Transactions with Affiliates. There are no loans, leases, contracts,
arrangements or continuing transactions between the Company, or to the Company's
knowledge, between any customer, licensor, licensee or supplier of the Company,
and any person or entity associated with the Company, in each case except as
specifically contemplated herein; nor to the best of the Company's knowledge and
belief does any person or entity associated with the Company own, directly or
indirectly, individually or collectively, any equity interest in any Person
which is a competitor, customer or supplier of the Company or have any existing
contractual relationship with any such Person. A "person or entity associated
with the Company" is any person who, or entity which, is a stockholder, officer
or director of the Company or is a relative by blood or marriage of, a trust or
estate for the benefit of, or a person or entity which directly or indirectly
controls, is controlled by or is under common control with, any such
stockholder, director or officer.
2.18. Benefit Plans. Except as described in Schedule 2.18, the Company has
not in the past and does not now maintain, sponsor or contribute to (a) any
program or arrangement that is an "employee pension benefit plan," an "employee
welfare benefit plan," a "multiple employer welfare arrangement" or a
"multi-employer plan," as those terms are defined in the Employee Retirement
Income Security Act of 1974, as amended to date, ("ERISA") or (b) any bonus or
incentive award or compensation plan or arrangement, severance pay policy or
agreement, deferred compensation agreement or arrangement, supplemental
executive retirement program, vacation plan, cafeteria plan, educational
assistance plan or any other employee benefit plans, agreements or arrangements
(collectively, "Employee Programs"). The Company has complied with all
applicable legal requirements, including without limitation, ERISA and the
provisions of the Internal Revenue Code of 1986, as amended, (the "Internal
Revenue Code") with respect to all Employee Programs.
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2.19. Insurance. The Company maintains valid policies of workers'
compensation insurance and carries insurance covering its properties and
business adequate and customary for the type and scope of its properties and
business.
2.20. Additional Representations. (a) Except as contemplated herein, since
the date of the unaudited balance sheet included in the Financial Statements,
the Company has not (i) entered into any material transaction, made any
distribution on its capital stock, or redeemed or repurchased any of its capital
stock; (ii) paid or canceled any obligations or liability, other than current
liabilities paid in the ordinary course of business consistent with prior
practice; (iii) suffered any substantial losses or waived any rights of material
value, whether or not in the ordinary course of business or covered by
insurance; or (iv) purchased any properties or assets, except in the ordinary
course of business in immaterial amounts.
(b) No officer or key employee of the Company has advised the Company,
orally or in writing, that he intends to terminate employment with the Company.
(c) The Company is not now and has never been a "United States real
property holding corporation," as defined in Section 897(c)(2) of the Internal
Revenue Code and Section 1-897-2(b) of the Regulations promulgated by the
Internal Revenue Service.
3. Representations and Warranties of the Investors.
Each Investor, except with respect to Section 3.3 which is applicable only
to each Investor who is a "U.S. Investor" as defined herein, and except with
respect to Section 3.5 which is applicable only to each Investor who is an
"Overseas Investor" as defined herein, hereby severally represents and warrants
to the Company, solely as to itself, as follows:
3.1. Authorization of Transaction. It has full power and authority to enter
into and to perform this Agreement, the Registration Rights Agreement and the
Stockholders' Agreement, in accordance with their respective terms. The
execution, delivery and performance of this Agreement, the Registration Rights
Agreement and the Stockholders' Agreement have been duly authorized by all
necessary action of the Investor.
3.2. Investment Representations. It is an "accredited investor" as that
term is defined in Rule 501(a) of Regulation D promulgated under the Securities
Act of 1933, as amended. It is acquiring the Series A Preferred (and any of the
Underlying Common into which the Series A Preferred may be converted) for its
own account, for investment and not with a view to, nor for sale in connection
with, any distribution thereof, and without any present intention of selling the
same. The Investor will not transfer any of the Series A Preferred or the
Underlying Common in violation of the provisions of any applicable Federal or
state securities law; provided, however, that nothing in this sentence shall in
any way limit the rights of the Investor consistent with applicable law to sell
or otherwise dispose of all or any part of its Series A Preferred or the
Underlying Common.
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3.3. Restrictive Legend. Until a security issued under this Agreement to a
U.S. Investor is registered under the Securities Act or unless the transfer of
that security is exempt from the registration requirements of the Securities
Act, all certificates evidencing that security, whether upon initial issuance or
upon any transfer thereof, shall bear a legend, prominently stamped or printed
thereon, reading substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE
SOLD, TRANSFERRED, OR ASSIGNED EXCEPT: (i) PURSUANT TO AN EFFECTIVE
REGISTRATION THEREOF UNDER THE ACT OR (ii) IF IN THE OPINION OF COUNSEL FOR
THE REGISTERED OWNER HEREOF, WHICH OPINION IS REASONABLY SATISFACTORY TO
THE COMPANY, THE PROPOSED SALE, TRANSFER OR ASSIGNMENT MAY BE EFFECTED
WITHOUT SUCH REGISTRATION AND WILL NOT BE IN VIOLATION OF APPLICABLE STATE
SECURITIES LAWS.
Upon request of a holder of any of the Series A Shares, the Company shall remove
any such legend from the certificates evidencing such Series A Shares or issue
to such holder new certificates therefor free of such legend if, with such
request, the Company shall have received an opinion of the holder's counsel,
which opinion is reasonably satisfactory to the Company, to the effect that any
transfer by such holder of such Series A Shares may be effected without
registration under the Securities Act or applicable state securities laws and
that the legend may be removed from the certificates evidencing such Series A
Shares.
3.4. Brokers or Finders. Upon consummation of any Closing hereunder, no
Person has or will have, as a result of or in connection with the transactions
contemplated by this Agreement, and because of any act or omission by the
Investor or any of its agents, any right, interest or valid claim against or
upon the Company for any commission, fee or other compensation as a finder,
broker, agent, financial advisor or other intermediary.
3.5. Regulation S. It is not a "U.S. person" as defined in Rule 902(o) of
Regulation S promulgated under the Securities Act of 1933, as amended.
4. Affirmative Covenants of the Company.
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that, until the consummation of a Qualified Public Offering
or, as to any Investor, until such earlier time as that Investor owns less than
twenty-five percent (25%) of the Series A Preferred (computed on an as-converted
basis and including Underlying Common into which the Series A Preferred may have
been converted) issued to such Investor under this Agreement, it will perform
and observe, and will cause any then-existing Subsidiaries to perform and
observe, the following covenants and provisions:
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4.1. Payment of Taxes and Trade Debt. Pay and discharge all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income, profits or business, or upon any properties belonging to it, prior to
the date on which penalties attach thereto, and all lawful claims which, if
unpaid, might become a lien or charge upon any properties of the Company,
provided that the Company shall not be required to pay any such tax, assessment,
charge, levy or claim which is being contested in good faith and by appropriate
proceedings if the Company shall have set aside on its books adequate reserves
with respect thereto; and pay when due or in conformity with customary trade
terms all lease obligations, all trade debt and all other indebtedness incident
to the operations of the Company, except such as are being contested in good
faith and by proper proceedings if the Company shall have set aside on its books
adequate reserves with respect thereto.
4.2. Reporting Requirements. Furnish to each Investor the following:
(a) As soon as available and in any event within 45 days after the end
of each fiscal quarter, an unaudited balance sheet of the Company as at the end
of such fiscal quarter and unaudited statements of income, changes in
stockholders' equity and cash flow of the Company for the quarter then ended,
compared to budget, prepared in accordance with GAAP consistently applied (other
than as to preparation of footnotes required by GAAP), and fairly presenting the
financial condition of the Company on the date of such statements and the
results of its operations and changes in stockholders' equity and cash flow for
the respective periods covered thereby, together with a management report
describing the then current status of the Company and its operations and
prospects;
(b) As soon as available and in any event within 90 days after the end
of each fiscal year of the Company, an audited balance sheet of the Company as
at the end of such fiscal year and the related audited statements of income and
changes in stockholders' equity and cash flow of the Company for such fiscal
year, setting forth in each case in comparative form the corresponding figures
for the preceding fiscal year, such balance sheet and such statements to be
accompanied by a certificate of a nationally recognized independent "Big Six"
firm of independent certified public accountants, or such other firm of
independent certified public accountants satisfactory to the Investors, to the
effect that such financial statements, in its opinion, fairly present the
financial condition of the Company as at the end of such fiscal year and the
results of its operations and changes in stockholders' equity and cash flow for
such fiscal year in conformity with GAAP applied on a basis consistent with the
preceding fiscal year, together with a management report describing the then
current status of the Company and its operations and prospects;
(c) Promptly upon receipt thereof, any written report submitted to the
Company by its independent certified public accountants in connection with an
annual or interim audit of the books of the Company made by such accountants;
(d) Within 15 days prior to the end of each fiscal year, an annual
budget for the next succeeding fiscal year (displaying anticipated monthly
capital, operating expense and cash flow budgets, and projected balance sheets
and statements of income) which shall have been
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presented to and approved by the Board of Directors within the preceding thirty
(30) days, and any revisions of such annual budget promptly upon the preparation
thereof;
(e) Copies of any significant documents relating to the material
affairs of the Company delivered to any other stockholder of the Company;
(f) Promptly after the happening thereof, notice of any material
adverse change in the business, properties, assets or condition, financial or
otherwise, of the Company, and promptly after the commencement thereof, notice
of all actions, suits, proceedings and investigations pending or threatened
against the Company, or against any officer, director, key employee or principal
stockholder of the Company, before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting or relating to the Company or any subsidiary of the Company or any of
its or their assets, rights or agreements; and
(g) With reasonable promptness, such other information and data as an
Investor may from time to time reasonably request.
4.3. Inspection. Except after such time as the Company shall be a reporting
company under the Exchange Act or have on file with the Commission a
registration statement with respect to a Qualified Public Offering (for so long
as the Company is actively working towards the effectiveness of such
registration statement), permit any of the Investors and any counsel, agents or
representatives thereof as may from time to time be designated by such Investor,
upon reasonable request and prearrangement, to examine and make copies of and
extracts from the financial records and books of account, and visit and inspect
the properties, of the Company and to discuss the affairs, finances and accounts
of the Company with any of its officers or directors and independent
accountants; provided, however, that the Company may, as a precondition to
disclosing any of its trade secrets to any of the Investors, and in its
reasonable judgment, require any such Investor to execute a confidentiality
agreement in form reasonably necessary to protect its interests with respect to
such trade secrets.
4.4. Maintenance of Insurance. Maintain insurance with responsible and
reputable insurance companies or associations in such amounts and covering such
risks as is customarily carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Company
operates.
4.5. Preservation of Corporate Existence, Etc. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified as a foreign corporation in
each jurisdiction in which the absence of such qualification could have a
material adverse effect upon the Company. Preserve and maintain all licenses and
other rights to use patents, processes, licenses, trademarks, trade names or
copyrights owned or possessed by it and deemed by the Company to be necessary to
the conduct of its business.
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4.6. Licenses and Other Rights; Compliance with Laws. Use its best efforts
to obtain all franchises, permits, licenses and other rights and privileges
necessary to permit it to conduct its business as proposed to be conducted at
any time hereafter. Comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority, noncompliance with which
could materially adversely affect its business, assets or condition, financial
or otherwise.
4.7. Keeping of Records and Books of Account. Keep adequate records and
books of account in which complete entries will be made in accordance with
generally accepted accounting principles consistently applied, reflecting all
financial transactions of the Company, and in which, for each fiscal year, all
reserves deemed necessary or advisable by the Board of Directors for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
4.8. Maintenance of Properties. Maintain and preserve all of its properties
necessary or useful in the proper conduct of its business in good repair,
working order and condition, ordinary wear and tear excepted.
4.9. Compliance with ERISA. Comply with all minimum funding requirements
applicable to any pension, employee benefit or employee contribution plans which
are subject to ERISA or to the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), and comply, and cause each subsidiary to comply, in
all other material respects with the provisions of ERISA and the Internal
Revenue Code, and the rules and regulations thereunder, which are applicable to
any such plan. The Company will not allow any event or condition to exist which
could permit any such plan to be terminated under circumstances which would
cause the lien provided for in Section 4068 of ERISA to attach to the assets of
the Company.
4.10. Directors' and Officers' Liability Insurance. At the request of a
majority of the members of the Board of Directors of the Company who are not
employees of the Company, the Company shall purchase, secure and maintain
directors' and officers' liability insurance in such amounts and under such
terms as shall be satisfactory to such Directors.
4.11. Further Assurance. The Company shall execute and deliver all such
further instruments and documents and do all such further acts and things as the
Company may be reasonably requested to do from time to time by any of the
Investors in order to satisfy the conditions and carry out the provisions and
purposes of this Agreement, the Registration Rights Agreement and the
Stockholders' Agreement.
4.12. Nomination of Directors. The Company shall cause the nomination as
directors of any individuals designated as directors in accordance with the
provisions of the Stockholders' Agreement.
4.13. Meetings of Directors; Expenses of Directors. The Company shall hold
meetings of its Board of Directors (any of which may be conducted as telephonic
meetings in accordance with applicable law) not less frequently than 4 times
during each calendar year. The Company
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shall promptly reimburse each director of the Company for all reasonable
out-of-pocket expenses incurred in attending each meeting of the Board or any
committee thereof.
4.14. Board Committees. The Company will use its best efforts to ensure
that, as soon as reasonably practicable after the Closing, the Compensation
Committee of the Board is established and constituted as set forth in Section 1
of the Stockholders' Agreement.
5. Negative Covenants of the Company.
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that, until the consummation of a Qualified Public Offering
or, as to any Investor, until such earlier time as that Investor owns less
(computed on an as converted basis and including Underlying Common into which
the Series A Preferred may have been converted) than twenty-five percent (25%)
of the Series A Preferred issued to such Investor under this Agreement, neither
it nor any Subsidiary will:
5.1. Dealings with Affiliates. Without the consent of the Board of
Directors, enter into any agreement or transaction, including, without
limitation, any loans or extensions of credit or service agreements, with any
"person or entity associated with the Company" as that term is defined in
Section 2.17 hereof (other than a Subsidiary), or any transaction in which any
of such persons or entities has a direct or indirect material interest other
than as a stockholder of the Company.
5.2. U.S. Real Property Holding Corporation. Conduct its operations in such
a manner as to become a "United States real property holding corporation," as
defined in Section 897(c)(2) of the Internal Revenue Code and Section 1-897-2(b)
of the Regulations promulgated by the Internal Revenue Service thereunder.
6. Further Covenants of the Company.
6.1. Reservation of Common Stock. For so long as any shares of Series A
Preferred remain outstanding, the Company shall increase the authorized amount
and maintain in reserve that number of shares of Common Stock necessary to
accommodate the conversion into Common Stock of all issued and outstanding
Series A Preferred and the exercise of all options issued under the terms of the
Founder Stock Purchase Agreement.
6.2. Indemnification. The Company shall at all times maintain provisions in
its Charter and By-Laws indemnifying all directors against, and exculpating
directors from, liability and providing for the advance of expenses in defense
of claims, to the maximum extent permitted under the laws of the jurisdiction of
its incorporation.
7. Conditions To Investors' Obligations.
Each of the Investors' obligations to purchase and pay for the Series A
Preferred as contemplated hereby shall be subject to the performance and
observance by the Company of all
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of the covenants, agreements and conditions specified herein to be performed or
observed by it at or prior to the First Closing or the Second Closing, as may be
applicable, to the truth of each of the representations and warranties of the
Company as made by it herein and to the satisfaction prior to or concurrently
with the First Closing of the additional conditions listed below.
7.1. Consents and Waivers. All necessary consents, waivers, approvals,
amendments and other action on the part of the Company necessary to have been
obtained or effected in order to carry out the transactions contemplated by this
Agreement shall have been obtained or effected.
7.2. Certificates of Company. The Company shall have delivered to the First
Round Investors a certificate or certificates, dated as of the First Closing
Date, of the Secretary of the Company certifying as to (i) the resolutions of
the Company's Board of Directors authorizing the execution and delivery of this
Agreement, the issuance to the Investors of the Series A Preferred, the
execution and delivery of such other documents and instruments as may be
required or contemplated by this Agreement, and the consummation of the
transactions contemplated hereby, and certifying that such resolutions were duly
adopted and have not been rescinded or amended as of said date, and (ii) the
names of the officers of the Company authorized to sign this Agreement and the
other documents and certificates to be delivered pursuant to this Agreement by
either the Company or any of its officers, and the validity of their signatures
as set forth on such certificate.
7.3. Representations and Warranties. The representations and warranties of
the Company contained in Section 2 hereof shall be true and correct on and as of
the First Closing Date, and a certificate dated as of the First Closing Date and
executed by the President to such effect, and to the effect that each of the
conditions specified in this Section 7 shall have been satisfied as of the First
Closing Date, shall have been delivered to the First Round Investors.
7.4. Certified Governing Documents. The Company shall have delivered to the
First Round Investors, prior to the First Closing Date, (i) a copy of all
Charter documents of the Company certified by the Secretary of the State of
Delaware; (ii) copies of the By-Laws of the Company, certified by the Clerk or
any Assistant Clerk of the Company to be true, correct and complete; and (iii)
certificates, as of the most recent practicable date, as to the corporate good
standing of the Company issued by the Secretary of the State of Delaware and as
to the good standing of the Company as a foreign corporation qualified to do
business in the State of Rhode Island, issued by the Secretary of the State of
Rhode Island.
7.5. Filing of Certificate of Designation. A duly executed Certificate of
Designation relating to the Preferred Stock in the form of Exhibit A hereto
shall have been filed with and accepted by the Secretary of the State of
Delaware, and evidence of the foregoing in form satisfactory to the First Round
Investors shall have been delivered to such Investors or their representatives.
7.6. Stockholders' Agreement. At the First Closing, the Company, each of
the First Round Investors, and each of the existing stockholders of the Company
shall have executed and delivered a stockholders' agreement in the form of
Exhibit 7.6 hereto (the "Stockholders'
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Agreement"), which agreement shall thereafter be executed and delivered by each
of the Additional Pillar Investors and the Spectra Investors at the Second
Closing.
7.7. Registration Rights Agreement. At the First Closing, the Company, each
of the First Round Investors, and each of the existing stockholders of the
Company shall have executed and delivered a registration rights agreement in the
form of Exhibit 7.7 hereto (the "Registration Rights Agreement"), which
agreement shall thereafter be executed and delivered by each of the Additional
Pillar Investors and the Spectra Investors at the Second Closing.
7.8. Opinion of Company's Counsel. All legal matters incident to the
purchase of the securities shall be satisfactory to Morse Zelnick Rose & Lander
LLP, counsel for IMC, and the Company's counsel shall have delivered to the
First Round Investors on the First Closing Date an opinion in form and substance
satisfactory to the First Round Investors, addressed to the First Round
Investors and to any subsequent Additional Pillar Investors and the Spectra
Investors and dated as of the First Closing Date, as to such matters as the
First Round Investors and their counsel may reasonably require.
7.9. Certificates and Legends. The restrictive legends required by Section
3.3 hereof and the Stockholders' Agreement shall have been placed on the
certificates evidencing the Series A Shares, and all legends provided for under
the Stockholders' Agreement shall have been placed on certificates evidencing
shares of Series A Preferred and Common Stock owned by the parties thereto.
7.10. Employment Agreements. The Company shall have entered into employment
agreements with Mr. Nabil Lawandy and such other employees as may be designated
by the Investors, containing such terms and conditions, including
confidentiality and inventions undertakings and noncompetition covenants as may
be satisfactory to the Investors.
7.11 Assignment of IMC License. IMC shall have duly assigned to the Company
all of its rights and responsibilities under that certain License Agreement
dated June 18, 1996 and that certain Research Agreement dated June 28, 1996,
each between HGG Laser Fare, Inc., a wholly-owned subsidiary of IMC, and Brown
University, and that assignment shall, to the extent required by the terms of
the license, have been duly consented to by Brown University.
8. Preemptive Rights.
(a) So long as there are any shares of Series A Preferred outstanding,
the Company hereby grants to each Investor a right of first refusal to purchase
all or any part of the Investor's pro rata share of New Securities (as defined
below) which the Company may, from time to time, propose to sell or otherwise
issue, subject to the terms and conditions set forth below. Each Investor's pro
rata share at any time, for purposes of this Section 8, shall equal the number
of New Securities proposed for sale or issuance multiplied by a fraction, the
numerator of which is the number of shares of Common Stock then held by such
Investor or issuable upon conversion or exercise of any Series A Preferred and
any other convertible securities, options, rights or warrants then held by such
Investor, and the denominator of which is the total number
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of shares of Common Stock then outstanding plus the number of shares of Common
Stock issuable upon conversion or exercise of all then outstanding Series A
Preferred and all other convertible securities, options, rights and warrants
then outstanding. Each Investor shall be entitled to purchase all or any part of
its pro rata share.
(b) Each Investor shall have a right of oversubscription such that if
any Investor declines to purchase all or a portion of its pro rata share (such
declined shares being referred to herein as "Refused Shares"), the other
Investors shall, among them, have the right to purchase the Refused Shares. Such
right of oversubscription may be exercised by an Investor by accepting the
Company's offer to sell New Securities, pursuant to paragraph (d) hereof, as to
more than its pro rata share. If, as a result thereof, such oversubscriptions
exceed the total number of Refused Shares available for sale, the Refused Shares
shall be divided among the oversubscribing Investors in proportion to their
respective pro rata shares.
(c) "New Securities" shall mean any (i) shares of Common Stock; (ii)
any other equity security of the Company; (iii) any debt security of the Company
with an equity feature or which is a combination of debt and equity, including
without limitation, any debt security which by its terms is convertible into or
exchangeable for any equity security of the Company; or (iv) any option, warrant
or other right to subscribe for, purchase or otherwise acquire any equity
security or any such debt security of the Company; provided, however, that the
term "New Securities" does not include (i) the shares of Common Stock issuable
upon conversion of the Series A Preferred; (ii) securities offered to the public
in a Qualified Public Offering; (iii) securities issued as a result of any stock
split, stock dividend or reclassification of Common Stock, distributable on a
pro rata basis to all holders of Common Stock; (iv) securities issued to any
officers, directors or employees of or consultants to the Company pursuant to a
stock option plan, employee stock purchase plan, restricted stock plan or other
employee stock plan or agreement approved by the Board of Directors; (v)
securities issued in connection with any merger or consolidation or acquisition
approved by the Board of Directors and by the holders of the Series A Preferred
in accordance with the terms and conditions of the Series A Preferred; (vi) any
securities issued upon the exercise of warrants to purchase Common Stock of the
Company issued to Spectra Science Corporation under the terms of the Acquisition
Agreement; (vii) any securities issued to Pillar Group pursuant to the
Consulting Agreement or issued upon conversion of any such securities; or (viii)
up to an aggregate of 264,706 shares of Common Stock pursuant to exercise of the
Initial Management Options; and (ix) Founder's Options and shares of Common
Stock issued upon exercise of any Founder's Options.
(d) In the event the Company intends to issue New Securities, it shall
give each Investor written notice of such intention, describing in full detail
the type and number of New Securities to be issued, the price thereof and the
terms upon which the Company proposes to effect such issuance. Each Investor
shall have 15 days from the date of any such notice to agree to purchase all or
part of its pro rata share of such New Securities for the price and upon the
terms and conditions specified in the Company's notice, by giving written notice
to the Company stating the quantity of New Securities to be so purchased.
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<PAGE>
(e) In the event any Investor or Investors fail to exercise the
foregoing right of first refusal with respect to any New Securities within such
30-day period, the Company may within 60 days after the end of such period sell
any or all of such New Securities not agreed to be purchased by the Investors,
at a price and upon terms no more favorable to the purchasers thereof than
specified in the notice given to each Investor pursuant to paragraph (c) above.
In the event the Company has not sold such New Securities within such 60-day
period, the Company shall not thereafter issue or sell any New Securities
without first offering such New Securities to the Investors in the manner
provided above.
(f) For purposes of this Section 8, "Investor" shall include the
general partners, officers and other affiliates of an Investor and any person
who becomes a holder of Series A Shares in a transfer made in accordance with
the provisions of Section 3.2 hereof; and an Investor may apportion its pro rata
share among itself and such general partners, officers and other affiliates in
such proportion as it deems appropriate.
(g) In the event the Company shall propose to sell less than all the
New Securities not subscribed for by Investors under Section 8(c), each Investor
may in its discretion reduce the number of the New Securities so subscribed for
to that number which is equal to the Investor's pro rata share multiplied by a
fraction, the numerator of which is the total amount of New Securities actually
sold by the Company, and the denominator of which is the total amount of New
Securities initially proposed to be sold by the Company.
(h) The rights of the Investors under this Section 8 shall terminate
immediately upon the effectiveness of a registration statement filed in
connection with a Qualified Public Offering.
9. Definitions And Accounting Terms.
9.1. Certain Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
"Acquisition Agreement" has the meaning given that term in Section 2.1 of
this Agreement.
"Additional Pillar Investors" shall have the meaning given that term in
Section 1.1(b) hereof and as set forth on Schedule 1.1.
"Agreement" means this Series A Convertible Preferred Stock Purchase
Agreement as from time to time amended and in effect among the parties,
including all Exhibits and Schedules hereto.
"By-Laws" mean the by-laws of the Company in effect on the date hereof.
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<PAGE>
"Certificate of Designation" has the meaning given that term in Section 1.3
of this Agreement.
"Charter" means the Certificate of Incorporation of the Company, as amended
from time to time.
"Commission" means the U.S. Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, $.01 par value.
"Company" refers to Spectra Acquisition Corp. and, unless the context
requires otherwise, its subsidiaries.
"Exchange Act" means the Securities Exchange Act of 1934 or any similar
federal statute and the rules and regulations of the Commission (or of any other
Federal agency then administering the Exchange Act) thereunder, all as the same
shall be in effect at the time.
"First Closing" has the meaning given that term in Section 1.6(a) of this
Agreement.
"First Closing Date" has the meaning given that term in Section 1.3 of this
Agreement.
"Founder Common Stock Purchase Agreement" refers to a certain agreement
regarding the purchase of Common Stock of the Company dated August 21, 1996
between the Company and Nabil Lawandy.
"IMC" refers to Infinite Machines Corp., a Delaware corporation.
"Investors" has the meaning given in the preamble to this Agreement.
"Overseas Investor" shall mean any Investor who is not a "U.S. Person" as
defined in Section 3.5 as set forth in Schedule 1.1 hereto.
"Person" means any individual, corporation, partnership, joint venture,
trust, or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Pillar Group" refers to Pillar Investment Limited.
"Pillar Consulting Agreement" refers to the agreement referenced in Section
7.11 hereof, a form of which is attached as Exhibit 7.11 hereto.
"Purchase Price" has the meaning given that term in Section 1.1 of this
Agreement.
"Qualified Public Offering" means the consummation of the first fully
underwritten, firm commitment public offering pursuant to an effective
registration statement under the Securities Act, other than on Forms S-4 or S-8,
or their then equivalents, covering the offer and sale by the
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<PAGE>
Company of its Common Stock, resulting in aggregate net proceeds to the Company
of at least $10,000,000 (excluding underwriting discounts and commissions) at a
per share sales price of at least $3.00 (such amount to be equitably adjusted
upon the occurrence of any stock split, stock dividend, combination,
subdivision, reclassification or other similar event).
"Registration Rights Agreement" has the meaning given that term in Section
7.7 of this Agreement.
"Second Closing" has the meaning given that term in Section 1.7(b) of this
Agreement.
"Second Closing Date: has the meaning given that term in Section 1.7(b) of
this Agreement.
"Series A Preferred" means the Series A Convertible Preferred Stock, $.01
par value per share, of the Company.
"Series A Shares" means the Series A Preferred and the Underlying Common.
"Securities Act" means the Securities Act of 1933, or any similar Federal
statute, and the rules and regulations of the Securities and Exchange Commission
(or of any other Federal agency then administering the Securities Act)
thereunder, all as the same shall be in effect at the time.
"Stockholders' Agreement" has the meaning given that term in Section 7.6 of
this Agreement.
"Underlying Common" has the meaning given that term in Section 2.3 of this
Agreement.
"U.S. Investor" shall mean the Investors so indicated on Schedule 1.1
hereto.
9.2. Accounting Terms. All accounting terms not specifically defined herein
shall be construed in accordance with U.S. generally accepted accounting
principles consistently applied, and all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles, unless
otherwise expressly provided herein.
10. Miscellaneous.
10.1. Amendment. Any provision in this Agreement to the contrary
notwithstanding, changes in or additions to this Agreement may be made, and
compliance with any covenant or provision set forth herein may be omitted or
waived if the Company (i) shall obtain consent thereto in writing from the
holder or holders of not less than 66 2/3% of the Series A Preferred issued and
outstanding and (ii) shall deliver copies of such consent in writing to any
holders who did not execute such consent; provided that no consent, unless it is
unanimous, shall be effective to reduce the percentage in interest of such
Series A Preferred the consent of the holders of which is required under this
Section 10.1. Any waiver or consent may be given subject to satisfaction
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<PAGE>
of conditions stated therein and any waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
10.2. Indemnification. The Company agrees to indemnify each of the
Investors against, and hold each of the Investors harmless from, any claim,
liability, loss, damage, penalty, fine, cost or expense, including without
limitation reasonable attorneys' fees and expenses of litigation ("Losses"),
which each such Investor may incur or suffer by reason of the inaccuracy of any
representation or warranty made by the Company, or the breach of any of the
agreements or covenants of the Company contained herein or in any certificate or
other document delivered by the Company to the Investors in accordance with the
provisions hereof. The Company shall also pay all reasonable attorney's fees and
costs, and court costs incurred by the Investors in enforcing the
indemnification provided for in this Section 10.2, provided, however, that if
more than one Investor is requesting indemnification hereunder, the Company
shall be obligated to pay attorney's fees of only one counsel to represent all
such Investors.
10.3. Notices. Except as otherwise provided herein or therein, any notice
or demand or other communication which, by any provision of this Agreement or
any agreement, document or instrument executed pursuant hereto, is required or
provided to be given shall be deemed to have been sufficiently given or served
for all purposes if personally delivered, or if sent by certified or registered
mail, return receipt requested, postage and charges prepaid, or by an overnight
delivery service, charges prepaid, to the following addresses: if to the
Company, at its address as shown on the first page hereof, or at any other
address designated by the Company to each Investor (including any successor
holder of the Series A Shares) in writing, with a copy to Kenneth S. Boger,
Esq., Warner & Stackpole LLP, 75 State Street, Boston, Massachusetts 02109; if
to an Investor, at its address shown on Schedule 1.1 hereto, or at any other
address designated by such Investor (or its successor in interest to the Series
A Shares) to the Company in writing, with a copy to Kenneth S. Rose, Esq., Morse
Zelnick Rose & Lander LLP, 450 Park Avenue, New York, New York 10002 and to such
other persons as are designated on Schedule 1.1 hereto to receive such notices,
and if to an assignee of an Investor, to its address as designated to the
Company in writing.
All such notices and other communications shall be effective when
personally delivered or, when mailed, four days after deposit in the mails, or
one day after delivery to an overnight courier, addressed as aforesaid, unless
otherwise provided herein.
10.4. Severability. Any provision of this Agreement which is held or found
to be prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
10.5. Delays or Omissions; Waiver. No delay or omission to exercise any
right, power or remedy accruing to the Company, the Investors or to any holder
of any securities issued or to be issued hereunder, upon any breach or default
of any party hereto under this Agreement, shall impair any such right, power or
remedy of the Company, the Investors or such holder nor shall it
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<PAGE>
be construed to be a waiver of any such breach or default, or an acquiescence
therein, of any similar breach or default theretofore or thereafter occurring.
Any waiver, permit, consent or approval of any kind or character on the part of
the Company, the Investors or any such holder of any breach or default under
this Agreement, or any waiver on the part of the Company, the Investors or any
such holder of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies either under this Agreement or by law or otherwise
afforded to the Company, the Investors or any such holder shall be cumulative
and not alternative.
10.6. Governing Law. This Agreement shall be deemed to be a contract under
the laws of the State of Delaware and shall be construed and enforced in
accordance with such laws.
10.7. Captions. The captions in this Agreement are for convenience of
reference only and shall not define or limit the provisions hereof.
10.8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
10.9. Prior Agreements. This Agreement constitutes the entire agreement
between the parties and supersedes any prior understandings or agreements
concerning the subject matter hereof.
10.10. Survival of Representations, Warranties and Covenants. Each
representation, warranty and covenant made in this Agreement or any other
instrument or document delivered in connection herewith or therewith, shall
survive the execution and delivery hereof or thereof, and shall continue in full
force and effect so long as such representation, warranty or covenant shall by
its terms have applicability.
10.11. Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the Company, the Investors and each other person who
shall become a registered holder of any Series A Shares, and the respective
successors and assigns of the Company, the Investors and each such other person,
except that the Company shall not have the right to assign its rights hereunder
or any interest herein.
10.12. Successor Holders. The rights of each Investor set forth in Sections
4.2, 4.3 and 8 shall inure to the benefit of any Person who becomes a holder of
Series A Shares in a transfer made in accordance with the provisions of Section
3.2 hereof, as if such holder were an Investor hereunder.
10.13. Reliance. The parties hereto agree that, notwithstanding any access
to information by any party or any right of a party to this Agreement to
investigate the affairs of any other party to this Agreement, the party having
such access and right to investigate shall nonetheless have the right to rely
fully upon the representations and warranties of the other party expressly
contained in this Agreement and on the accuracy of any schedule exhibit or other
document
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<PAGE>
attached hereto or referred to herein. Each of the Investors acknowledges that,
based on information provided by the Company, it has made its own analysis and
decisions regarding the transactions contemplated hereby and that it is not
relying on any of the other Investors in executing this Agreement or
consummating the transactions contemplated hereby.
10.14. Costs and Expenses. Subject to Section 1.10 hereof, each of the
parties shall bear its own costs and expenses in connection with this Agreement
and the transactions contemplated hereby.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Purchase Agreement
to be duly executed as of the day and year first written above.
THE COMPANY:
SPECTRA ACQUISITION CORP.
By:____________________________________
Name:
Title:
THE FIRST ROUND INVESTORS:
INFINITE MACHINES CORP.
By:____________________________________
Name:
Title:
PILLAR GROUP
By:____________________________________
Name:
Title:
INITIAL PILLAR INVESTORS
____________________________________
Dr. James Thrall
____________________________________
Charles N. Stolper
<PAGE>
SEIF FOUNDATION
By:_________________________________
Name:
Title:
HK PROPERTIES
By:_________________________________
Name:
Title:
____________________________________
Bassam Jabar
____________________________________
Ibrahim Muhanna
____________________________________
Tracey Wong
____________________________________
Mark Goldberg
____________________________________
Kathleen Domaszewicz
<PAGE>
ADDITIONAL PILLAR INVESTORS:
____________________________________
By:____________________________
Name:
Title:
THE SPECTRA INVESTORS:
____________________________________
By:____________________________
Name:
Title:
<PAGE>
Exhibit B
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT, made as of August 23, 1996 (the "Agreement") by
and among Spectra Acquisition Corp., a Delaware corporation with a principal
office at 300 Metro Center Boulevard, Warwick, Rhode Island 02886 (the
"Company"), the current holder of Common Stock of the Company identified on
Exhibit A hereto (the "Existing Stockholder"), the current holders of the
Company's Series A Convertible Preferred Stock, $.01 par value per share (the
"Series A Preferred") identified on Exhibit A hereto (the "Initial Series A
Holders") and those additional holders of Series A Preferred (the "Additional
Series A Holders") who may be added as parties hereto from time to time in
accordance with the terms of this Agreement. The Existing Stockholder, the
Initial Series A Holders and the Additional Series A Holders are hereinafter
collectively referred to as "Holders."
WHEREAS, as of the date hereof the Series A Holders have purchased an
aggregate of 3,136,000 shares of Series A Preferred, which is convertible into
Common Stock of the Company in accordance with the terms of the Company's
Certificate of Incorporation (the "Charter"), pursuant to the terms of a Series
A Convertible Preferred Stock Purchase Agreement of even date herewith (the
"Purchase Agreement") and in reliance upon the agreements of the Company and the
Holders hereinafter set forth; and
WHEREAS, the Company and the Holders wish to confirm their agreements by
entering into this Stockholders' Agreement, and each considers the provisions
contained herein to be in his, her or its best interest and in the best
interests of the Company;
NOW, THEREFORE, In consideration of the foregoing and the agreements set
forth below, the parties hereto agree as follows:
Section 1. Board of Directors.
In all elections of Directors of the Company held during the term of
this Agreement (whether at a meeting or by written consent in lieu of a
meeting), each of the Holders unconditionally agrees to vote all shares of the
Company's Common Stock, Series A Preferred and any other voting securities of
the Company now owned or hereafter acquired or controlled by him, her or it,
whether by purchase, conversion of other securities, exercise of rights,
warrants or options, stock dividends or otherwise (collectively, the "Stock"),
and otherwise to use his or its respective best efforts:
(i) to maintain a Board of Directors of five members;
(ii) for the election to the Board of Directors of one nominee
designated by the holders of a majority of the Common Stock issued under the
Founder Common Stock Purchase Agreement dated August 21, 1996 between the
Company and the Founder referenced therein, which designee shall initially be
Nabil Lawandy;
<PAGE>
(iii) for election to the Board of Directors of two nominees of
Infinite Machines Corp. ("IMC"), who shall initially be Clifford G. Brockmyre
and Carle Conway, and one nominee of Pillar Investments Limited ("Pillar"), who
shall initially be Nasser Menhall (collectively, the "Series A Directors");
(iv) for the election to the Board of Directors of one individual
recommended by the Chief Executive Officer of the Company who is not an employee
of or consultant to, and who is otherwise independent from, the Company and who
is acceptable to a majority of the other directors (the "Independent Director");
and
(v) to nominate and appoint one of the IMC designated Directors, the
Pillar designated Director and the Independent Director to the Compensation
Committee of the Board of Directors, with jurisdiction over such matters
(including, without limitation, review and approval of the Chief Executive
Officer's compensation and compensation recommendations made by the Company's
Chief Executive Officer with respect to other employees) as are delegated by the
full Board of Directors in accordance with the Company's By-laws.
Each Stockholder above who shall have the right to designate one or more
Directors shall inform the Company and the other Holders of the identity of his
or its designee or designees at least fifteen days prior to the date of any
stockholder's meeting for which proxies are solicited by the Company and at
which Directors are proposed to be elected, and in the case of meetings for
which proxies are not being solicited, orally at or prior to the commencement of
the meeting.
No Holder shall vote to remove any member of the Board of Directors of the
Company designated in accordance with the foregoing provisions of this Section
1, other than for cause, unless the person or persons entitled to nominate or
approve that Director shall so vote or otherwise consent, and, if the person or
persons so entitled to nominate or approve shall so vote or otherwise consent,
then all Holders shall vote likewise.
The obligation of the Holders to vote their stock in favor of the designees
of IMC shall terminate at such time as IMC owns or controls less than 25% of the
Series A Preferred (calculated on an as-if-converted basis, and including any
shares of Common Stock into which the Series A Preferred may have been
converted) issued to it under the Purchase Agreement. The obligation of the
Holders to vote their stock in favor of the designee of Pillar shall terminate
at such time as the Pillar Investors identified on Exhibit A hereto own or
control in the aggregate less than 25% of the Series A Preferred (calculated as
above) issued in the aggregate to them under the Purchase Agreement.
Section 2. Right of First Refusal on Dispositions By Holders.
(a) No Holder shall sell, assign or otherwise transfer or agree to sell,
assign or otherwise transfer any shares of Stock held or beneficially owned by
such Holder to any third party (the "Proposed Transferee"), unless in each such
case the Holder (an "Offering Holder") shall have first offered to sell those
shares (the "Offered Shares") to the Initial Series A Holders and the
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<PAGE>
Additional Series A Holders (collectively, the "Offeree Holders"), on terms and
conditions, including price, not less favorable to the Company and to the
Offeree Holders than those on which the Offering Holder proposes to sell such
Offered Shares to the Proposed Transferee, in accordance with this Section 2.
Any sale, assignment or other transfer contrary to the provisions of this
Agreement shall be void, and shall not be recorded on the Company's stock
transfer records. In the event of any attempt to make such a transfer, the
Company shall continue to treat the purported transferor as the owner of the
Stock purported to be transferred for all purposes, including without
limitation, voting and dividend rights.
(b) The Offering Holder shall give notice to the Company and to the Offeree
Holders in writing of the Offering Holder's intention to sell the Offered Shares
(the "Notification"), specifying the number of shares of Stock proposed to be
transferred and the price and terms of the proposed transfer (the "Terms") and
offering to sell the Offered Shares to the Offeree Holders on the Terms
specified.
(c) Each Offeree Holder shall have the absolute right (subject to the last
sentence of this subsection (c)), by delivery of written notice to the Company,
the Offering Holder and each other Offeree Holder (as hereinafter provided) to
purchase that number of Offered Shares as shall be equal to the number of
Offered Shares multiplied by a fraction, the numerator of which shall be the
number of shares of Series A Preferred then owned by such Offeree Holder
(computed on as-if-converted basis, including any shares of Common Stock into
which any Series A Preferred has been converted) and the denominator of which
shall be the aggregate number of shares of Common Stock outstanding (with all
shares of Series A Preferred included on an as-if-converted basis). The amount
of Offered Shares that each Offeree Holder is entitled to purchase under this
Section 2(c) shall be referred to as its "Pro Rata Fraction." Notwithstanding
the foregoing, no Offeree Holder shall have the right to purchase any of the
Offered Shares unless all of the Offered Shares are subscribed for by the
Offeree Holders under this Section 2.
(d) The Offeree Holders shall have a right to oversubscription such that if
any Offeree Holder declines to purchase its Pro Rata Fraction, the other Offeree
Holders shall, among them, have the right to purchase up to the balance of the
Offered Shares not so purchased. Such right of oversubscription may be exercised
by an Offeree Holder by accepting the offer of the Offered Shares as to more
than its Pro Rata Fraction. If, as a result thereof, such oversubscriptions
exceed the total number of Offered Shares available in respect of such
oversubscription privilege, the oversubscribing Offeree Holders shall be reduced
with respect to their oversubscriptions on a pro rata basis in accordance with
their respective Pro Rata Fractions or as they may otherwise agree among
themselves.
(e) The notice to be provided by an Offeree Holder under Section 2(c)
hereof shall state the number of Offered Shares the Offeree Holder desires to
purchase. The notice shall be delivered in person or mailed to the Offering
Holder, the Company, and each other Offeree Holder within 10 days of the date of
the Notification. Such notice shall, when taken in
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conjunction with the Notification, be deemed to constitute a valid, legally
binding and enforceable agreement for the sale and purchase of such Offered
Shares (subject to the aforesaid limitations as to an Offeree Holder's right to
purchase more than its Pro Rata Fraction and to the condition that all of the
Offered Shares be fully subscribed for by the Offeree Holders). Sales of the
Offered Shares to be sold to purchasing Offeree Holders pursuant to this Section
2 shall be made at the offices of the Company on the 45th day following the date
of the Notification (or if such 45th day is not a business day, then on the next
succeeding business day). Such sales shall be effected by the Offering Holder's
delivery to each purchasing Offeree Holder of a certificate or certificates
evidencing the Offered Shares to be purchase by it, duly endorsed for transfer
to such purchasing Offeree Holder, against payment to the Offering Holder of the
purchase price therefor by such purchasing Offeree Holder.
(f) If the Offeree Holders do not subscribe to purchase all of the Offered
Shares, the Offering Holder shall not be required to sell any of the Offered
Shares to the Offeree Holders hereunder; and in such event all (but not less
than all) of the Offered Shares may be sold by the Offering Holder to the
Proposed Transferee at any time within 90 days after the date the Notification
was made, subject to the provisions of this Section 2. Any such sale shall be to
the Proposed Transferee, at not less than the price and upon other terms and
conditions, if any, not more favorable to the Proposed Transferee than the Terms
specified in the Notification. If the Offered Shares not sold within the 90 day
period, they shall again be subject to the requirements of a prior offer
pursuant to this Section 2. Subject to the provisions of Section 3 hereof, if
Offered Shares are sold pursuant to this Section 2 to any purchaser who is not a
party to this Agreement, the Offered Shares so sold shall be subject to the
restrictions imposed by this Section 2.
(g) Notwithstanding any other provisions of this Section 2, each Holder
shall be entitled to transfer, without compliance with this Section 2, shares of
Stock held by it:
(i) to the trustees of a trust revocable by such Holder alone, the
beneficiaries of which consist solely of the Holder and transferees enumerated
in subsection (iv) below;
(ii) in the case of a Holder who is an individual, to his guardian or
conservator;
(iii) in the case of a deceased Holder, to his executors or
administrators or to trustees under his will;
(iv) in the case of a Holder who is an individual, or his guardian,
conservator or trustee under an inter vivos trust, or his executors,
administrators or trustees under his will, to the Holder's spouse, to any of his
children or their issue (or to custodians for the benefit of minor children or
issue) or to the Holder's parents or siblings;
(v) to its partners or other equity owners or to a liquidating trust
or similar entity established for the purpose of holding its assets prior to
distribution to its partners or other equity owners;
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(vi) to any entity which is controlled by or under common control with
such Holder; or
(vii) in the case of any Holder who is or becomes an employee of the
Company, to the Company in accordance with written agreements entered into in
connection with the original issuance of Stock to such Holder (or the grant of a
right to acquire such Stock) giving the Company a right of first refusal or a
right to repurchase such Stock;
Each such transferee is referred to herein as a "Permitted Transferee." All such
Permitted Transferees (other than the Company pursuant to clause (vii) above)
shall remain subject to the terms of this Agreement and shall be deemed to be
"Holders" for purposes hereof.
Section 3. Right to Participate in Sales.
Upon compliance by an Offering Holder with the provisions of Section 2(a)
through 2(c) hereby and prior to any transfer under Section 2(e) hereof, the
Offering Holder shall provide each Offeree with written notice (the "Transfer
Notice") of, and the opportunity to participate in, such transfer upon the same
terms as set forth in the original Notification under Section 2(b). Any Offeree
which elects to participate in such transfer shall notify the Offering Holder
not later than fifteen days after receipt of the Transfer Notice, specifying the
number of shares of Stock which such Offeree desires to transfer. The Offering
Holder will not transfer any shares of Stock pursuant to Section 2(e) in such
transaction unless the transferee thereof at the same time purchases from each
Offeree Holder who elects to participate in the transfer as aforesaid at least
the lesser of (1) the number of shares of Stock set forth in such Offeree
Holder's notice to the Offering Holder or (2) that number of shares computed by
multiplying the total number of shares of Stock to which the proposed transfer
relates by a fraction, the numerator of which is the aggregate number of shares
of Stock owned by such Offeree Holder and the denominator of which is the
aggregate number of shares of Stock owned by all Offeree Holders.
Section 4. Miscellaneous.
Section 4.1. Specific Performance; Other Rights. The Company and the
Holders recognize that the rights of the parties under this Agreement are
unique, and accordingly the Holders shall, in addition to such other remedies as
may be available to any of them at law or in equity, have the right to enforce
their rights hereunder by actions for injunctive relief and specific performance
to the extent permitted by law. Without limiting the generality of the
foregoing, if any transfer of shares of Stock of a Holder is made or attempted
to be made in contravention of the provisions of this Agreement, the other
Holders shall have the right to enforce their rights hereunder by actions for
injunctive relief and specific performance to the extent permitted by law.
Except as provided herein, this Agreement is not intended to limit or abridge
any rights of the parties which may exist apart from this Agreement.
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<PAGE>
Section 4.2. Stock Legend. Each certificate for shares of Stock subject to
this Agreement shall have endorsed, stamped or written thereon a legend which
shall read substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
TRANSFER RESTRICTIONS, VOTING RESTRICTIONS AND OTHER PROVISIONS OF A CERTAIN
STOCKHOLDERS' AGREEMENT DATED AS OF AUGUST 23, 1996 (COPIES OF WHICH ARE
AVAILABLE AT THE OFFICES OF THE COMPANY FOR EXAMINATION)."
Section 4.3. Termination. This Agreement shall terminate on the earliest to
occur of (a) the closing of the sale of shares of Common Stock of the Company in
a Qualified Public Offering, as defined in the Purchase Agreement (and shall not
apply to any Stock being sold as part of such offering), (b) such time as none
of the Series A Preferred and the Common Stock into which the Series A Preferred
is convertible is outstanding.
Section 4.4. Notices, Etc. All notices and other communications hereunder
shall be in writing and shall be deemed to have been given when delivered or
sent by overnight courier or mailed by certified mail, postage prepaid,
addressed (a) if to the Company, to the Chief Executive Officer at the address
first set forth above, with a copy to Warner & Stackpole LLP, 75 State Street,
Boston, Massachusetts 02109, Attn: Kenneth S. Boger, Esquire; (b) if to any
Holder, to the address set below its name on Exhibit A hereto; and (c) if to any
other person who becomes subject to the terms of this Agreement, to his address
as the same may appear in the records of the Company, and to the Company. Each
of the parties may change his, her or its notice address as referenced above by
notice to each of the other parties delivered as aforesaid.
Section 4.5. Entire Agreement. The parties hereto agree that this Agreement
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements and understandings between
them as to such subject matter.
Section 4.6. Waivers and Further Agreements. Any waiver of any terms or
conditions of this Agreement shall not be effective unless given in a writing
signed by the party against whom such waiver is sought to be enforced, nor shall
it operate as a waiver of any other breach of such terms or conditions or any
other term or condition, nor shall any failure to enforce any provision hereof
operate as a waiver of such provision or of any other provision hereof. No such
waiver, unless it by its own terms explicitly provides to the contrary, shall be
construed to effect a continuing waiver of the provision being waived, and no
such waiver in any instance shall constitute a waiver in any other instance or
for any other purpose or impair the right of the party against whom such waiver
is claimed in all other instances or for all other purposes to require full
compliance with such provision.
Section 4.7. Further Assurances. Each of the parties hereto agrees to
execute all such further instruments and documents and to take all such further
action as the other party may reasonably require in order to effectuate the
terms and purposes of this Agreement.
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<PAGE>
Section 4.8. Amendments. This Agreement may not be amended, nor shall any
waiver be effected except by an instrument in writing executed by the holders of
a majority of the Stock, which vote shall include the holders of 66 2/3% of the
Series A Preferred (on an as-if-converted basis, and including shares of Common
Stock into which any Series A Preferred may have been converted) then owned or
controlled by a Holder hereunder.
Section 4.9. Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
executors, legal representatives, successors and permitted assigns.
Section 4.10. Severability. If any provision of this Agreement shall be
held or deemed to be invalid, inoperative or unenforceable as applied to any
particular case in any jurisdiction or jurisdictions, or in all jurisdictions or
in all cases, because of the conflict of any provision with any constitution or
statute or rule of public policy or for any other reason, such circumstance
shall not have the effect of rendering the provision or provisions in question,
invalid, inoperative or unenforceable in any other jurisdiction or in any other
case or circumstance or of rendering any other provision or provisions herein
contained invalid, inoperative or unenforceable to the extent that such other
provisions are not themselves actually in conflict with such constitution,
statute or rule of public policy, but this Agreement shall be reformed and
construed in any such jurisdiction or case as if such invalid, inoperative or
unenforceable provision had never been contained herein, and such provision
shall be reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.
Section 4.11. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and in pleading or
proving any provision of this Agreement, it shall not be necessary to produce
more than one of such counterparts.
Section 4.12. Additional Parties. The Company may issue additional shares
of Series A Preferred to persons or entities not initially parties to this
Agreement (the "Additional Series A Holders") under the terms of the Purchase
Agreement or under the terms of a certain Consulting Agreement which the Company
proposes to enter into with Pillar. Each Additional Series A Holder shall
execute a counterpart of this Agreement and upon such execution this Agreement,
including Exhibit A hereto which shall be modified accordingly and distributed
to each Holder hereunder, shall be deemed to have been amended to add such
additional Series A Holder as a party hereto with all rights and obligations of
the other Holders hereunder.
Section 4.13. Section Headings. The headings contained in this Agreement
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 4.14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
7
<PAGE>
Section 4.15. Rhode Island Courts. Any action to enforce, arising out of,
or relating in any way to, any of the provisions of this Agreement may be
brought and prosecuted in such Federal or State court or courts located in the
State of Rhode Island as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of Rhode Island and
the service of process by registered mail, return receipt requested, or by any
other manner provided by law.
[THIS SPACE INTENTIONALLY LEFT BLANK]
8
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed under seal as of the date first above written.
THE COMPANY: SPECTRA ACQUISITION CORP.
By:____________________________________
Name:
Title:
THE SERIES A HOLDERS: INFINITE MACHINES CORP.
By:____________________________________
Name:
Title:
_______________________________________
Dr. James Thrall
_______________________________________
Charles N. Stolper
SEIF FOUNDATION
By:____________________________________
Name:
Title:
HK PROPERTIES
By:____________________________________
Name:
Title:
<PAGE>
_______________________________________
Bassam Jabar
_______________________________________
Ibrahim Muhanna
_______________________________________
Tracey Wong
_______________________________________
Mark Goldberg
_______________________________________
Kathleen Domaszewicz
[THIS SPACE LEFT INTENTIONALLY BLANK]
[ADDITIONAL SIGNATURES TO FOLLOW]
<PAGE>
ADDITIONAL SERIES A
HOLDERS:
By:____________________________________
Name:
Title:
ADDITIONAL MANAGEMENT
HOLDERS:
By:____________________________________
Name:
Title:
THE EXISTING STOCKHOLDER: _______________________________________
Nabil Lawandy
