As Filed with the Securities and Exchange Commission on October 10, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------
LIBERTY TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Charter)
PENNSYLVANIA
(State of Other Jurisdiction
of Incorporation or
Organization)
23-2295708
(I.R.S. Employer
Identification
Number)
555 North Lane
Conshohocken, Pennsylvania 19428
(610) 834-0330
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
Mr. R. Nim Evatt
Chief Executive Officer
Liberty Technologies, Inc.
555 North Lane
Conshohocken, Pennsylvania 19428
(610) 834-0330
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
---------------
WITH A COPY TO:
James D. Rosener, Esquire
Michael P. Gallagher, Esquire
Christopher S. Miller, Esquire
Pepper, Hamilton & Scheetz, LLP
1235 Westlakes Drive, Suite 400
Berwyn, PA 19312
(610) 640-7800
Approximate date of commencement of proposed sale to public: As soon as
practicable after the effectiveness of this Registration Statement.
---------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. | |
If any of the securities registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. | |
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. | |
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. | |
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
============================================================================================================
Proposed Maximum Proposed Maximum
Title Of Shares To Be Amount To Be Offering Price Per Aggregate Offering Amount Of
Registered Registered Share (1) Price (1) Registration Fee
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 407,972 $3.50 $1,427,902 $433
============================================================================================================
</TABLE>
(1) Estimated pursuant to Rule 457(c) under the Securities Act of 1933 solely
for the purpose of calculating the registration fee based on the average of the
high and low prices as reported on the Nasdaq National Market of The Nasdaq
Stock Market, Inc. as of October 8, 1997.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Subject to Completion, Dated October 10, 1997.
LIBERTY TECHNOLOGIES, INC.
407,972 Shares
of
Common Stock
-------------------------
This Prospectus relates to the offering of 407,972 outstanding shares (the
"Shares") of Common Stock, par value $.01 per share ("Common Stock"), of Liberty
Technologies, Inc. ("Liberty" or the "Company") which may be sold by certain
shareholders of the Company (the "Selling Shareholders").
The Company will not receive any proceeds from the sale of the Shares of
Common Stock offered hereby.
The Company's Common Stock is quoted on the Nasdaq National Market under
the trading symbol "LIBT." On October 8, 1997, the last reported sale price of
the Common Stock was $3.50 per share.
-------------------------
See "Risk Factors" beginning on page 6 for a discussion of certain factors
that should be considered by prospective investors of the Common Stock offered
hereby.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------------
The date of this Prospectus is ____________, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
-1-
<PAGE>
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Act"), with the Securities and Exchange Commission (the "Commission") relating
to the Shares of Common Stock offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement, certain portions of
which have been omitted pursuant to the rules and regulations of the Commission.
Reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company and the
securities offered hereby. Any statements contained herein concerning the
provisions of any document filed as an Exhibit to the Registration statement or
otherwise filed with the Commission are not necessarily complete, and in each
instance reference is made to the copy of such document so filed as an exhibit
to, or incorporated by reference into, the Registration Statement. Each
statement shall be qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith files reports, proxy and information statements and other information
with the Commission. Such reports, proxy and information statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the following Regional Offices of the Commission:
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511; and Seven World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, registration statements and certain other filings
made electronically with the Commission through its "EDGAR" system are publicly
available through the Commission's site on the Internet's World Wide Web,
located at http://www.sec.gov. This Registration statement, including all
exhibits thereto, has been filed with the Commission through EDGAR. Reports,
proxy and information statements and other information concerning the Company
can also be inspected at the offices of the Nasdaq National Market, 1735 K
Street, N.W., Washington, D.C. 20006-1506.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference:
(a) The Company's Annual Reports on Form 10-K for the years ended
December 31, 1996, 1995, and 1994 (including the Company's amended Annual
Report on Form 10-K/A for the years ended December 31, 1996 and 1994 and second
and third amendments on Form 10-K/A No. 2 and No. 3 for the year ended December
31, 1996);
(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
June 30, 1997, March 31, 1997 (including the Company's amended Quarterly Report
on Form 10-Q/A and Form 10-Q/A No. 2 for the quarter ended June 30, 1997);
(c) The Company's Reports on Form 8-K dated October 6, 1997 and July 25,
1997;
(d) The Company's Schedule 14A dated October 8, 1997; and
(e) The descriptions of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed on February 19, 1993 and the Series A
Junior Participating Preferred Stock Purchase Rights contained in Amendment No.
1 to the Company's Form 8-A filed on October 7, 1997, including any amendments
or reports filed for the purpose of updating such descriptions.
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<PAGE>
In addition, all documents and reports subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the termination of the offering shall
be deemed to be incorporated by reference herein from their respective dates of
filing. Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will furnish, without charge, to any person to whom a copy of
this Prospectus is delivered, upon such person's written or oral request, a copy
of any and all of the documents that have been incorporated by reference in the
Registration Statement and herein (not including exhibits to such documents,
unless such exhibits are specifically incorporated by reference into such
documents). The Company will also furnish, without charge, to any such person
upon such person's written or oral request, a copy of the Company's most recent
Annual Report to Shareholders. Any such request should be directed to the
Corporate Secretary, Liberty Technologies, Inc., 555 North Lane, Conshohocken,
Pennsylvania 19428, telephone number: (610) 834-0330.
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<PAGE>
CAUTIONARY STATEMENT
When used in this Prospectus and in other public statements by the Company
and Company officers, the words "estimate," "project," "intend," "believe,"
"anticipate" and similar expressions are intended to identify forward-looking
statements regarding events and financial trends which may affect the Company's
future operating results and financial position. Such statements are subject to
risks and uncertainties that could cause the Company's actual results and
financial position to differ materially. Such factors are described in detail
below under "Risk Factors." Additional factors are described in the Company's
public reports filed with the Commission which are incorporated herein by
reference. Investors are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date made. The Company
undertakes no obligation to publicly release the result of any revision of these
forward-looking statements to reflect events or circumstances after the date
they are made or to reflect the occurrence of unanticipated events.
THE COMPANY
The Company, founded in 1984, develops, manufactures, markets and sells
diagnostic, condition monitoring and nondestructive evaluation systems and
provides related services to customers in the worldwide power and process
industrial markets, such as the chemical, petrochemical, pulp and paper and
nuclear utility industries. Liberty's products and services are designed to
reduce operating and maintenance costs and increase efficiency, reliability and
safety of plant operations. The Company has established certain strategic
technical and commercial alliances to advance its business objectives, including
to support product development and the sales and marketing of diagnostic systems
and services.
Historically, Liberty has had four key business segments that support its
mission: (i) performance and condition monitoring products and services,
including dynamic testing services, (ii) Liberty Technical Services, (iii)
RADView(TM) imaging systems, and (iv) international business development. The
businesses described in clauses (i), (iii) and (iv) shall sometimes be referred
to collectively herein as the "Products Business."
Performance and Condition Monitoring Products and Services. The Company's
performance and condition monitoring products are designed to provide customers
with the tools to prevent unplanned downtime, improve asset utilization and
increase plant safety and reliability. The Company's proprietary products gather
and interpret operating data of valves, engines, compressors, motors, and
certain motor-driven equipment. The products utilize sensors, instruments and
proprietary software that capture and log data for trending and analysis.
Dynamic testing services are provided using primarily the Company's condition
monitoring products and systems. These services involve the condition monitoring
of, and predictive and general maintenance and repair for, plant equipment,
including without limitation, valves, compressors, engines, motors and certain
motor-driven equipment. The service business provides a channel for the
Company's products into new markets.
Liberty Technical Services. Liberty Technical Services ("LTS") provides
comprehensive nondestructive and dynamic testing services for customers in the
power, chemical, paper, petroleum and construction industries. Dynamic testing
services are provided for many plant components, including valves, compressors,
turbines, engines, motors and motor-driven equipment. Nondestructive evaluation
services include special applications of visual inspection, ultrasonic,
radiographic, dye penetrant, eddy current, and magnetic particle technologies.
Special services include process safety management support, plant inspection,
computerized reporting, and training in nondestructive testing.
On July 25, 1997, the Company entered into an asset purchase agreement with
General Electric Company ("GE") to sell substantially all of the assets of the
nondestructive evaluation and testing services portion of the LTS business unit
(the "NDE Business") to a subsidiary of GE ("GE-IS") for an initial purchase
price to be paid at
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<PAGE>
closing of at least $12,101,000, subject to downward adjustment based upon
certain post-closing adjustments plus the assumption of certain associated
liabilities not to exceed $1,390,000. Liberty will retain the Nuclear Service
group of LTS, as well as the existing Product Business. Consummation of the
transaction is subject to approval by the Company's shareholders and certain
other terms and conditions. If the transaction is approved and all conditions
set forth therein are satisfied, it is expected that the acquisition will be
consummated by October 31, 1997. The Company plans to use the proceeds from the
sale of the NDE Business to repay its outstanding bank debt, to invest in the
Products Business and for other general corporate purposes.
RADView(TM)Imaging Systems. RADView(TM)imaging systems involves the
production and sale of the Company's RADView(TM) Digital Radiography product
line and related equipment. The Company believes that RADView(TM)offers
improvements over conventional and industrial radiography, providing faster,
more accurate, lower cost and safer methods for acquiring and analyzing
radiographic information. During 1995, the Company released the first phase, the
Film Digitizer and Workstation, which converts conventional film to digital
format. The second phase, Filmless Radiography, which replaces conventional film
with reusable phosphor screens, was released in 1996. The Imaging Systems
Division focuses on marketing to customers in the power, process and aeronautics
industries. For the fiscal year ended December 31, 1996, the Company had
approximately $1.5 million in revenues from the sale of RADView products, which
represented a significant increase in RADView sales revenues from the previous
fiscal year, which were approximately $45,000.
International Business Development. The Company has actively sought joint
venture and strategic alliance opportunities abroad. In December 1995, the
Company formed a joint venture, Liberty Maintenance Predictive S.A.S. ("Liberty
M.P."), with French-owned Electricite de France ("EdF"), the largest utility in
the world. Through June 1997, the joint venture has contributed approximately
$3.5 million in revenues to the Company. Liberty M.P. provides predictive
maintenance products and related services critical to the safe, reliable
operation of electric power and industrial plants in the European Union. In
1996, the Company developed several business alliances for Europe, Scandinavia,
the United Kingdom, and the Far East. The Company intends to continue to
establish business alliances, joint ventures and partnerships in various
locations around the world where appropriate to meet its business objectives.
Strategic Alliances. The Company has entered into agreements with, and
continues to seek, strategic partners for its Products Business to support
product development and the sales and marketing of diagnostic systems and
services.
Products and Services Currently Offered. By combining advanced diagnostic
technologies with comprehensive software analysis, the Company's products and
services are designed to assist plant operators in various industries in
preventing unplanned downtime, improve asset utilization and increase plant
safety. The Company's proprietary products monitor machinery condition and
performance by gathering and interpreting operating data of valves, engines,
compressors, motors, and certain motor-driven equipment. In addition to product
sales, the Company provides sensors, accessories, hardware and software
upgrades, and offers field services and training to its customers. The Company
also performs specialized diagnostic and consulting services as part of
customers' periodic predictive maintenance programs.
-5-
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following factors, in
addition to other information contained in this Prospectus, in evaluating an
investment in the Common Stock offered hereby.
History of Recent Losses. The Company has experienced net losses for each
of the fiscal years ended December 31, 1996, 1995 and 1994 of $2.57 million,
$2.64 million and $0.1million, respectively, and for the six months ended June
30, 1997 of $20,000.
Liquidity and Capital Resources; Going Concern Qualification. During 1996
and 1997, the Company's primary source of financing has been borrowings under
its line of credit. During 1997, the Company continues to experience limitations
on its ability to borrow. Additionally, in 1997, the Company has failed to
comply with certain loan covenants that give the lenders the right to accelerate
the due date of the loan, and such failure to comply has not been cured. These
conditions, which occurred after the issuance of the initial opinion of the
Company's independent public accountants, have caused the Company's independent
public accountants to modify its report to the consolidated financial statements
of the Company and its subsidiaries for the year ended December 31, 1996 to
include a qualification that there is substantial doubt about the Company's
ability to continue as a going concern. The Company plans to use the proceeds
from the sale of the NDE Business to repay the Company's bank indebtedness. If
the sale of the NDE Business is not completed, or is substantially delayed, the
Company would need to pursue alternative financing, and management is unable to
estimate the amount and timing of funding required, if any, from such
alternative sources or if such funding could be obtained.
No Guaranteed Minimum Purchase Price for Sale of NDE Business. Because
there may be purchase price adjustments and indemnification claims, as described
below, there is no guaranteed minimum purchase price for the sale of the NDE
Business. The initial purchase price to be paid at closing (the "Purchase
Price") for the NDE Business is $12,101,000 in cash. In addition, $1,499,000
will be deposited in an escrow account to secure, in part, the Company's
indemnification obligations. If the closing had occurred as of August 31, 1997,
the Purchase Price would have been reduced by approximately $400,000 as a result
of the post-closing purchase price adjustments. The actual cash payment to the
Company and the payment into escrow depends on the amount of liabilities to be
assumed by GE-IS, which will not be determinable until the closing. Should the
actual amount of assumed liabilities be less than $1,390,000, the initial cash
purchase price will be increased by up to $139,000 and the amount placed in
escrow will be reduced by the same amount so that the sum of the cash payment
and the escrow deposit will be $13.6 million, subject to adjustment. The amounts
in the escrow account will be reduced to the extent of any indemnification
payments by the Company, and therefore the Company's receipt of the amount in
escrow is contingent. Further, the escrow funds are less than the maximum
liability for indemnification for which the Company could be obligated to pay to
GE-IS or GE should there be any requirement for the Company to indemnify GE or
GE-IS. The Purchase Price will also include assumed liabilities consisting of
accounts payable, accrued expenses and accrued taxes of the NDE Business, not to
exceed $1,390,000 in the aggregate. There is no minimum amount of liabilities
that GE-IS is required to assume. However, if the closing had occurred as of
August 31, 1997, the amount of liabilities assumed by GE-IS would have been $1.2
million. The actual amount of assumed liabilities may differ because they will
be calculated as of the closing date.
Company's Financial Position Upon Sale of the NDE Business. After the
completion of the sale of the NDE Business, the Company will continue to operate
the Products Business, which in the aggregate has been unprofitable in recent
years. For the fiscal years ended December 31, 1996 and 1995, respectively, the
NDE Business contributed operating income of approximately $2.0 million and $1.7
million, respectively. The Company reported on a consolidated basis operating
losses (before income taxes) for the fiscal years ended December 31, 1996 and
1995 of approximately $2.3 million and $3.7 million, respectively. For the six
months ended June 30, 1997, the NDE Business contributed operating income of
approximately $0.8 million, while the Company's consolidated operating income
(before income taxes) was approximately $0.2 million. Consequently, without the
NDE Business, the Company's operating losses would have been greater for 1996
and 1995, and the Company
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would have had an operating loss for the six month period ended June 30,
1997. If the Company is unable to operate profitably in its remaining
businesses, it is likely that the Company would consume any excess cash
generated from the sale of the NDE Business. In such event, the Company would be
required to seek additional external funding, and again management is unable to
estimate the amount and timing of funding required, if any, from such external
sources, or if such funding could be obtained.
Quarterly Fluctuations of Results of Operations. The Company has
experienced significant variability of operating results from quarter to
quarter, depending in part on the timing of major product and service orders.
This variability may continue in the future. The Company's revenues and
operating results may fluctuate as a result of other factors as well, including
seasonal patterns of capital spending by customers, the timing and receipt of
orders, competition, pricing, new product introductions by the Company or its
competitors, levels of market acceptance for new products, and general economic
and political factors. There can be no assurance that the Company will not
suffer net losses in future periods for any of the foregoing reasons.
Dependence on New Product Introductions and Market Acceptance. The
Company's growth and future financial performance depend in part upon its
ability to continue to develop and introduce new cost effective products, the
market acceptance of its new product introductions and its ability to enhance
existing products to meet technological advances and customer requirements.
There can be no assurance that any such products will be successfully developed
and introduced or that recently introduced products or future product
introductions will achieve market acceptance. Failure by the Company to
anticipate or respond adequately to changes in technology and customer
requirements, or delays in product development or introduction, could have a
material adverse effect on the Company's business.
Expansion of Presence in New Markets. The Company's growth and future
financial performance also depend in part on new markets for its technology and
products. The Company is actively seeking to expand its presence in the
international nuclear power and worldwide industrial process markets, where the
regulatory requirements for the testing of safety-related equipment generally
are significantly less stringent than in the U.S. nuclear power industry. The
Company believes that the cost effectiveness of its systems is important to
commercial acceptance in these markets, particularly the process industries.
There can be no assurance that the new products that the Company has developed
and recently introduced, or those that are currently under development and
expected to be introduced in the next several years, will gain widespread
commercial acceptance in these markets.
Patents and Proprietary Rights. The Company's current products and those
under development utilize the Company's proprietary and licensed technologies.
Although the Company relies on a combination of patent, copyright, trademark and
trade secret laws, employee and third-party nondisclosure agreements and other
methods to protect its products and technologies, there can be no assurance as
to the degree of protection that will be provided by these means. The inability
of the Company to maintain the proprietary nature of its significant products
and core technologies could have a material adverse effect on the Company's
results of operations.
Competition. The Company believes that competition in the power generation
and industrial equipment diagnostic testing markets is driven by product
performance, reliability, accuracy, ease of use and, particularly with respect
to process industries, cost effectiveness. Certain of the Company's existing and
potential competitors may have substantially greater financial, research and
development, sales and marketing, and production resources than the Company and,
as a result, may be better equipped to develop, test and market their products.
Accordingly, there is no assurance that the Company will be able to compete
effectively with these companies.
Dependence on and Ability to Attract and Retain Key Personnel. The
Company's success is dependent upon certain key management and technical
personnel. In addition, the Company's future success will depend in part on its
ability to continue to attract and retain qualified scientific, technical,
marketing and managerial personnel, who are in high demand. The loss of certain
of the Company's employees or an inability to attract and retain additional
qualified employees could adversely affect the Company's business.
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Risk of Product Liability. The Company's products include an inherent risk
of liability because they are used to diagnose critical equipment, the failure
of which could have adverse safety, environmental or economic consequences. The
Company is currently insured against such risks under its general liability
policies. The Company also is covered under the U.S. nuclear power industry's
nuclear liability insurance program against liability for personal injury and
off-site property damage arising from certain nuclear related incidents.
However, a successful product liability claim not covered under the nuclear
power liability insurance program and in excess of the Company's aggregate
insurance coverage could have a material adverse effect on the Company. There
can be no assurance that product liability insurance will continue to be
available to the Company in sufficient amounts or at acceptable costs.
Risk of Failure of Sources of Supply. The Company presently has multiple
sources of supply for most critical components used in its systems, although for
economic and quality control reasons the Company utilizes single sources of
supply for certain components. In situations where it relies on single sources
of supply, the Company believes that an adequate quantity of components is
available to meet its foreseeable needs, and, to date, the Company generally has
been able to obtain supplies of such components in a timely manner from these
sources. However, failure of sources of supply and the inability of the Company
to develop alternative sources of supply as required in the future could have a
material adverse effect on the Company's operations.
Possible Volatility of Stock Price. The market prices for common stocks of
technology companies, including the Company, have at times been highly volatile.
Future announcements concerning the Company or its competitors, including the
results of technological innovations or new commercial products, developments
concerning proprietary rights, as well as period-to-period variances in
financial results, could cause the market price of the Common Stock to
fluctuate. In addition, the stock market has in the past experienced significant
price and volume fluctuations that have affected the market price for many
growth companies, though unrelated to the operating performance of these
companies.
No Dividends on Common Stock. The Company expects that its future earnings,
if any, will be retained for the operation and expansion of the Company's
business, and that it will not pay cash dividends for the foreseeable future.
USE OF PROCEEDS
The Company will receive no proceeds from any sales of Shares of Common
Stock by the Selling Shareholders.
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SELLING SHAREHOLDERS
The following table sets forth as of September 25, 1997 information with
respect to the beneficial ownership of the Company's Common Stock by the Selling
Shareholders. Unless otherwise indicated, the shareholders listed below
possesses sole voting and investment power with respect to the shares listed.
<TABLE>
<CAPTION>
Number of Shares
Number of Shares To Be Beneficially
Beneficially Owned Number of Shares Owned After the
Name Prior to Registration Being Offered Offering
- ---- --------------------- -------------- --------
<S> <C> <C> <C>
Larry D. Hornbeck 12,000 12,000 -0-
Don V. Ingram 40,000 40,000 -0-
Atalanta Selective Fund Number Six, 450,500 450,500 -0-
Limited Partnership
Stephen F. Smith 40,000 40,000 -0-
Stephen A. Wells 264,400 264,400 -0-
Walter Epstein, Esq. 15,972 15,972 -0-
Energy Consolidation, Inc. 225,000 225,000 -0-
</TABLE>
The Selling Shareholders acquired the Shares through a Stock Purchase
Agreement among the Selling Shareholders, Edison Venture Fund, L.P. ("Edison")
and the Company. Pursuant to this agreement, Edison assigned its registration
rights under a Stock and Warrant Purchase Agreement dated October 27, 1987
between the Company and Edison and a Stock Purchase Agreement dated February 23,
1989 between the Company and certain Investors listed therein, to the Selling
Stockholders. Mr. Richard J. Defieux, a member of the Board of Directors of the
Company, is a general partner of Edison Partners, L.P., the general partner of
Edison. Mr. Defieux, together with the other general partners of Edison, shares
voting and investment power with respect to the shares owned by Edison. Mr.
Defieux does not own any outstanding shares of Common Stock in his individual
capacity and disclaims beneficial ownership of the shares held by Edison except
as to his proportionate partnership interest therein.
Certain of the Selling Shareholders have also entered into a letter
agreement with the Company dated August 18, 1997 (the "Standstill Agreement").
Pursuant to the Standstill Agreement, the Company agreed not to take any action
or exercise any rights under the Company's shareholder rights plan as long as
the other parties to the Standstill Agreement are in compliance with its terms.
The parties to the Standstill Agreement, other than the Company, have agreed for
a period of ten years not to take certain actions, including the acquisition, in
the aggregate, of more than twenty-five percent of the voting stock of the
Company. L. Mark Newman, who is a party to the Standstill Agreement, is a
principal and affiliate of Atalanta Selective Fund Number Six, Limited
Partnership.
As noted above, the Company will receive no proceeds from any sales of the
Shares under this Prospectus by the Selling Shareholders.
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PLAN OF DISTRIBUTION
The Company has been advised by the Selling Shareholders that they, or
their pledgees, donees, transferees or other successors in interest, may sell
all, a portion or none of the Shares offered by them hereby from time to time.
Any such sales may be in one or more transactions in the over-the-counter market
at prices prevailing at the times of such sales or in private sales of the
securities at prices related to the prevailing market prices or negotiated
prices. The sales may involve (a) a block transaction in which the broker or
dealer so engaged will attempt to sell the Shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction, (b) a
purchase by a broker or dealer as principal and a resale by such broker or
dealer for his account pursuant to this Prospectus, or (c) ordinary brokerage
transactions in which the broker will solicit purchasers. Broker-dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions (which compensation may be in excess of customary commissions). The
Selling Shareholders and any broker-dealers that participate in the distribution
of the Shares may be deemed to be underwriters and any commissions received by
them and any profit on the resale positioned by them may be deemed to be
underwriting discounts and commissions under the Act.
There is no assurance that the Selling Shareholders will sell any or all of
the Shares offered hereby. The Company will receive no proceeds from any sales
of the Shares offered hereby by the Selling Shareholders.
The Registration Statement of which this Prospectus is a part has been
filed with the Commission by the Company as a condition to, and in accordance
with the terms of the registration rights provisions of, that certain Stock
Purchase Agreement dated August 29, 1997 by and among the Company and certain
investors, including the Selling Shareholders. Such Agreement also imposes
certain restrictions on the transfer of the Shares by the Selling Shareholders
other than with respect to sales pursuant to a registered offering. In addition,
the Company has been advised by the Selling Shareholders that, if they do not
sell all of the Shares in this Offering under this Prospectus, they or their
pledgees, donees, transferees or other successors in interest may sell some or
all of the remaining Shares pursuant to Rule 144 under the Act.
The Company has agreed to pay the filing fees, costs and expenses
associated with such Registration Statement, including compliance with any state
blue sky requirements, commissions and discounts of underwriters, dealers or
agents, if any, and any stock transfer taxes. The Company has also agreed to
indemnify the Selling Shareholders and any underwriters for certain civil
liabilities in connection with such Registration Statement and the securities
offered thereby and hereby, including liabilities under the Act.
-10-
<PAGE>
LEGAL MATTERS
The validity of the Shares of Common Stock offered hereby is being passed
upon for the Company by Pepper, Hamilton & Scheetz LLP, Berwyn, Pennsylvania.
James D. Rosener, a partner of Pepper, Hamilton & Scheetz LLP, is a member of
the Board of Directors of the Company and holds options to purchase an aggregate
of 12,500 shares of Common Stock.
EXPERTS
The Consolidated Financial Statements and Consolidated Financial Statement
Schedule incorporated by reference into this Prospectus and in the Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
reports. Reference is made to their report which includes an explanatory
paragraph regarding the Company's ability to continue as a going concern.
-11-
<PAGE>
===============================================================================
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus in
connection with the offer made hereby, and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, the securities offered hereby to any person in any state or
other jurisdiction in which such offer or solicitation is unlawful. The delivery
of this Prospectus at any time does not imply that information contained herein
is correct as of any time subsequent to its date.
-------------------
TABLE OF CONTENTS
Page
----
Available Information...................................2
Incorporation of Certain
Documents by Reference..............................2
The Company.............................................4
Risk Factors ...........................................6
Use of Proceeds ........................................8
Selling Shareholders................................... 9
Plan of Distribution.................................. 10
Legal Matters .........................................11
Experts ...............................................11
407,972 Shares
LIBERTY TECHNOLOGIES, INC.
COMMON STOCK
----------
PROSPECTUS
----------
----------, 1997
===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
SEC registration fee ....... $ 433*
Accounting fees and expenses $ 2,000**
Legal fees and expenses .... $10,000**
Printing and Miscellaneous . $ 3,500**
-------
Total ................. $15,933**
=======
* Actual
** Estimated
Item 15. Indemnification of Directors and Officers.
Pursuant to Sections 1741-1747 of the Pennsylvania Business Corporation Law
of 1988, as amended (the "BCL"), Article IV of the Company's Bylaws provides
that the Company shall, in the case of directors and offices, and may, in the
case employees and agents, indemnify any such person who is or was a party
(other than a party acting on his or her own behalf) or who is threatened to be
made such a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (including
actions brought by or in the right of the Company where certain standards of
conduct have been met), by reason of the fact that such person is or was a
director or officer of the Company, or is or was serving at the request of the
Company on behalf of another enterprise, against expenses (including attorneys'
fees), judgments, fines and amount paid in settlement actually and reasonably
incurred by him or her in connection with such action if he or she met certain
requisite standards of conduct. In all such cases, the Company shall indemnify
any such person against all such expenses actually and reasonably incurred by
him or her in connection with any such action to the extent that such person has
been successful on the merits or in defense of any such action. The
indemnification provisions of the Bylaws are non-exclusive.
Pursuant to Section 1713 of the BCL, Section 4.15 of Article IV of the
Company's Bylaws provides that a director shall not be liable to the Company for
monetary damages as such for any action taken or omitted unless the director
breaches or fails to perform a duty of his office and that breach or failure to
perform constitutes self-dealing, willful misconduct or recklessness. This
limitation does not apply to criminal liability or liability for the payment of
taxes. The Company believes that the foregoing provisions will assist it in
securing and maintaining the services of qualified directors who are not
employees of the Company.
Item 16. Exhibits.
Exhibit
No. Description
- ------- -----------
2.1 Agreement and Plan of Merger dated as of March 11, 1994 by and among the
Company, Liberty Acquisition Corp., Industrial NDT Company, Inc., John D.
Ridgeway, Jr. and Sandra R. Miles(2)
2.2 Registration Rights and Stock Restriction Agreement between the Company and
the shareholders of INDT dated as of March 28, 1994(2)
2.3 Employment Agreements between the Company, Liberty Acquisition Corp., and
each of John D. Ridgeway, Jr. and Sandra R. Miles dated as of March 28,
1994(2)
II-1
<PAGE>
2.4 Stock Purchase Agreement dated as of August 9, 1994 by and among Liberty
Technologies, Inc., 3039111 Canada, Ltd., and the shareholders of Beta
Monitors & Controls, Ltd. (which are listed on Schedule A attached to such
Stock Purchase Agreement)(3)
2.5 Employment Agreement dated August 12, 1994 by and between Beta Monitors &
Controls, Ltd. and Bryan Long, President of Beta Monitors & Controls,
Ltd.(3)
2.6 Escrow Agreement dated August 12, 1994 by and among Liberty Technologies,
Inc., 3039111 Canada, Inc., the shareholders of Beta Monitors & Controls,
Ltd. (listed on Schedule A to the Stock Purchase Agreement) and Montreal
Trust Company of Canada, as escrow agent(3)
2.7 Asset Purchase Agreement among General Electric Company, GE Inspection
Services, Inc., Liberty Technologies, Inc., LTH Delaware, Inc. and Liberty
Technical Services, Inc. dated July 25, 1997
3.1 Restated Certificate of Incorporation of the Company(1)
3.2 Bylaws of the Company, Effective November 10, 1992(1)
4.1 Specimen Stock Certificate(1)
4.2 Amended and Restated Rights Agreement between Liberty Technologies, Inc.
and StockTrans, Inc. dated October 6, 1997, including Form of Series A
Rights Certificate (as amended) (Exhibit A), Form of Designation (Exhibit
B), and Form of Summary of Rights (as amended) (Exhibit C)(9)
5 Opinion of Pepper, Hamilton & Scheetz LLP
10.1 1992 Stock Option Plan and related Form of Stock Option Agreement(1)
10.2 1988 Stock Option Plan(1)
10.3 Employee Stock Purchase Plan(1)
10.4 Retirement Savings Plan (1)
10.5 Agreements between the Company and each of R. Nim Evatt and Anthony L.
Moffa(1)
10.6 Lease between the Company and Lee Park Investors, L.P. with respect to the
Company's principal executive offices(1)
10.7 Asset Purchase Agreement between the Company, Boggs Technical Services,
Inc. and Marcus Boggs(1)
10.9 Form of Employee Innovation and Non-Disclosure Agreement(1)
10.10 Joint Development Agreement between the Company and GE Nuclear Energy(1)
10.11 Agreement between the Company and B&W Nuclear Services(1)
10.13 Settlement Termination of Product Licensing Agreement(1)
10.14 Restrictive Covenant Agreement between the Company and Marcus Boggs(1)
10.15 Agreement between the Company and Richard H. Tuft(1)
10.16 Credit Agreement between the Company and First Fidelity Bank, N.A., as
amended dated December 30, 1995(6)
10.17 Joint Development Agreement between the Company and EdF(4)
10.18 Agreement between the Company and GE Nuclear Energy with respect to
diagnostic testing of international boiling water nuclear reactors dated
June 14, 1993(4)
10.19 Joint Venture Agreement between the Company and CHARTH, an affiliate of
EdF, dated November 22, 1994(5)
10.20 Amended Joint Venture Agreement between the Company and CHARTH dated
December 22, 1995(6)
10.21 Teaming Agreement between Framatome S.A. and Liberty for Spain dated March
1, 1995(6)
10.22 Technology Transfer and License Agreement between the Company and Quantex
Corporation dated June 14, 1994(6)
10.23 Teaming Agreement Between Framatome, Liberty M.P., S.A.S. and Liberty
Technologies, Inc. for France dated January 1, 1996(6)
10.24 Credit Agreement between the Company and First Union Bank, N.A. as amended
dated October 11, 1996(8)
10.25 Credit Agreement between the Company and First Union Bank, N.A. as amended
dated February 27, 1997(8)
10.26 Credit Agreement between the Company and First Union Bank, N.A. as amended
dated April 1, 1997(8)
10.27 Stock Purchase Agreement among Liberty Technologies, Inc., Edison Venture
Fund, L.P. and certain Purchasers listed therein dated August 29, 1997
10.28 Letter Agreement among Liberty Technologies, Inc. and L. Mark Newman,
Larry D. Hornbeck, Don V. Ingram, Stephen F. Smith, Stephen A. Wells and
Energy Consolidation, Inc. dated August 18, 1997.
II-2
<PAGE>
11.1 Earnings per share calculation(8)
21.1 Subsidiaries(8)
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Pepper, Hamilton & Scheetz (Included in Exhibit 5)
24 Power of Attorney (See Signature Page at page II-5)
- ---------------
(1) Filed as an exhibit to the Company's Form S-1 Registration Statement, No.
33-58600, and incorporated herein by this reference.
(2) Filed as an exhibit to the Company's Report on Form 8-K dated April 8,
1994, and incorporated herein by this reference.
(3) Filed as exhibit to the Company's Report on Form 8-K dated August 24, 1994,
and incorporated herein by this reference.
(4) Filed as an exhibit to the Company's Report on Form 10-K for the year ended
December 31, 1993, and incorporated herein by this reference.
(5) Filed as an exhibit to the Company's Report on Form 10-K for the year ended
December 31, 1994, and incorporated herein by this reference.
(6) Filed as an exhibit to the Company's Report on Form 10-K for the year ended
December 31, 1995, and incorporated herein by this reference.
(7) Filed as an exhibit to the Company's Report on Form 8-K dated May 15, 1996.
(8) Filed as an exhibit to the Company's Report on Form 10-K for the year ended
December 31, 1996, and incorporated herein by this reference.
(9) Filed as an exhibit to the Company's Report on Form 8-K dated October 6,
1997.
Item 17. Undertakings.
The Company hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement: (i) to include
any prospectus required by Section 10(a)(3) of the Act; (ii) to reflect in the
prospectus any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement; provided, however, that clauses (i)
and (ii) above do not apply if the information required to be included in a
post-effective amendment by those clauses is contained in periodic reports filed
by the Company pursuant to Section 13 or Section 15(d) of the Exchange Act that
are incorporated by reference in this Registration Statement;
(2) that, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE>
The Company hereby undertakes that, for purposes of determining any
liability under the Act, each filing of the Company's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Philadelphia, Pennsylvania, on October 9, 1997.
LIBERTY TECHNOLOGIES, INC.
By: /s/ R. Nim Evatt
--------------------------------------------
R. Nim Evatt, President, Chief Executive
Officer and Chairman of the Board
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints R. Nim Evatt and Daniel G. Clare, and
each or any of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their, his or her substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Date: October 9, 1997 /s/ R. Nim Evatt
----------------------------------------
R. Nim Evatt, President, Chief Executive
Officer and Chairman of the Board
II-5
<PAGE>
Date: October 9, 1997 /s/ Daniel G. Clare
----------------------------------------
Daniel G. Clare, Vice President-Finance,
Chief Financial Officer and Treasurer
Date: October 9, 1997 /s/ Richard J. Defieux
----------------------------------------
Richard J. Defieux, Director
Date: October 9, 1997 /s/ John A. Hinds
----------------------------------------
John A. Hinds, Director
Date: October 9, 1997 /s/ Robert L. Leon
----------------------------------------
Robert L. Leon, Director
Date: October 9, 1997 /s/ James D. Rosener
----------------------------------------
James D. Rosener, Director
II-6
<PAGE>
EXHIBIT INDEX
Exhibit Sequentially
No. Description Numbered Page
- ------- ----------- -------------
5 Opinion of Pepper, Hamilton & Scheetz LLP..................
10.27 Stock Purchase Agreement among Liberty Technologies, Inc.,
Edison Venture Fund, L.P. and certain Purchasers listed
therein dated August 29, 1997..............................
10.28 Letter Agreement among Liberty Technologies, Inc. and L. Mark
Newman, Larry D. Hornbeck, Don V. Ingram, Stephen F. Smith,
Stephen A. Wells and Energy Consolidation, Inc. dated August
18, 1997...................................................
23.1 Consent of Arthur Andersen LLP ............................
23.2 Consent of Pepper, Hamilton & Scheetz
(Included in Exhibit 5)....................................
24 Power of Attorney (See Signature Page at page II-5)........
Exhibit 5
October 9, 1997
Liberty Technologies, Inc.
Lee Park, Suite 6000
555 North Lane
Conshohocken, PA 19428
Gentlemen:
We have acted as special counsel to Liberty Technologies, Inc., a
Pennsylvania corporation (the "Company"), in connection with the preparation and
filing with the Securities and Exchange Commission (the "Commission") of a
registration statement (the "Registration Statement") of the Company on Form S-3
under the Securities Act of 1933, as amended (the "Act"). The Registration
Statement relates to the proposed offer and sale by certain selling shareholders
of the Company (the "Selling Shareholders") of up to 407,972 outstanding shares
(the "Shares") of the Company's Common Stock, par value $.01 per share (the
"Common Stock").
In this connection, we have examined the Registration Statement, including
the exhibits thereto, the originals or copies, certified or otherwise identified
to our satisfaction, of the Articles of Incorporation and the Bylaws of the
Company amended to date, resolutions of the Company's Board of Directors and
such other documents and corporate records relating to the Company and the
original issuance and sale of the Shares to the Selling Shareholders as we have
deemed appropriate. The opinion expressed herein is based exclusively on the
applicable provisions of the Pennsylvania Business Corporation Law as in effect
on the date hereof.
On the basis of the foregoing, we are of the opinion that the Shares are
duly authorized, validly issued, fully paid and nonassessable.
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the Registration Statement and to the filing of this opinion as an
exhibit to the Registration Statement. Such consent does not constitute a
consent under Section 7 of the Act, since we have not certified any part of such
Registration Statement and do not otherwise come within the categories of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission promulgated thereunder.
Very truly yours,
PEPPER, HAMILTON & SCHEETZ LLP
By: /s/ James D. Rosener
---------------------------
A Partner
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of August 29, 1997 by and between Liberty
Technologies, Inc. a Pennsylvania corporation (the "Company"), Edison Venture
Fund, L.P. a Delaware limited partnership (the "Seller"), and the purchasers
whose names are set forth on Schedule I hereto (the "Purchasers").
IN CONSIDERATION of the mutual covenants contained in this Agreement,
the parties agree as follows:
SECTION 1. Agreement to Sell and Purchase the Common Stock. At the
Closing (as defined in Section 2), Seller will sell to each Purchaser, and each
Purchaser will buy from Seller, upon the terms and conditions hereinafter set
forth, the number of shares of the Company's common stock, $0.01 par value, set
forth next to such Purchaser's name on Schedule I hereto (the "Shares") at a
purchase price per Share of $4.0625. Seller also agrees to assign to the
Purchasers, with the Shares, any and all registration rights Seller has under
that certain Stock and Warrant Purchase Agreement dated October 27, 1987 between
the Company and Seller and that certain Stock Purchase Agreement dated February
23, 1989 between the Company and the Investors listed therein (collectively, the
"Stock Purchase Agreements"), and pursuant to Section 17 of each of the Stock
Purchase Agreements, the Company agrees to honor such rights as exercised by the
Purchasers pursuant to the terms of this Agreement.
SECTION 2. Closing. The closing ("Closing") of the purchase and sale of
the Shares hereunder shall occur at the offices of Pepper, Hamilton & Scheetz in
Conshohocken, Pennsylvania promptly (and in any event within two business days)
after the first to occur of (i) an indication to the Company by the Securities
and Exchange Commission (the "SEC") that the SEC has declined to review the
Company's Registration Statement on Form S-3 (to be prepared and filed pursuant
to Section 8 below) (the "Form S-3"), or (ii) an indication to the Company by
the SEC that the SEC has completed its review and has no further comments on the
Company's Registration Statement on Form S-3 and acceptance by the SEC of the
Company's acceleration request with respect to the Form S-3 (the "Closing
Date"). At the Closing,
(a) The Escrow Agent (as defined in Section 3) shall deliver to Seller
the Total Aggregate Purchase Price, as set forth on Schedule I hereto (the
"Aggregate Purchase Price"), by a certified or official bank check or checks or
by wire transfer to an account to be designated by Seller by written notice to
the Purchasers and the Escrow Agent prior to the Closing Date.
(b) Seller shall deliver to each of the Purchasers certificates for the
Shares duly endorsed or accompanied by stock powers duly endorsed for transfer
in blank, with any required transfer stamps affixed thereto.
SECTION 3. Escrow. Promptly (and in any event within three business
days) after the execution of this Agreement, each Purchaser shall deposit with
Rubin, Baum, Levin, Constant & Friedman (the "Escrow Agent") cash in the amount
<PAGE>
set forth next to such Purchaser's name on Schedule I hereto. The Escrow Agent
shall deposit the Aggregate Purchase Price into a bank deposit or money market
account mutually agreed upon by Seller and the Purchasers (the "Escrow
Account"). The Escrow Agent shall hold the Aggregate Purchase Price in the
Escrow Account until the Closing Date, and on the Closing Date, the Escrow Agent
shall deliver the Aggregate Purchase Price to Seller in accordance with Section
2. Any interest earned upon the Aggregate Purchase Price in the Escrow Account
from the date hereof to the Closing Date shall be either (i) credited and
delivered to Seller at Closing if the price of the Company's common stock as
listed in The Wall Street Journal on the Closing Date is equal to or greater
than $4.0625, or (ii) distributed pro rata among the Purchasers at Closing if
the price of the Company's common stock as listed in The Wall Street Journal on
the Closing Date is less than $4.0625.
SECTION 4. Conditions to Closing. (a) Seller's obligation to close the
transaction shall be subject to the following conditions, any one or more of
which may be waived by Seller:
(1) receipt by the Seller of a certified or official bank
check or checks or wire transfer of funds in the full amount
of the Aggregate Purchase Price; and
(2) the accuracy of the representations and warranties made by
the Purchasers herein as of the date hereof and as of the
Closing Date; and
(3) the fulfillment of those undertakings of the Purchasers
and the Company to be fulfilled prior to the Closing.
(b) The Purchasers' obligation to close the transaction shall be
subject to the accuracy of the representations and warranties made by Seller
herein as of the Closing and the fulfillment of those undertakings of Seller and
the Company to be fulfilled prior to Closing as set forth herein.
(c) Seller's and the Purchasers' obligation to close the transaction
shall be subject to the further condition that arrangements satisfactory to the
Purchasers and the Company shall have been made providing for the Form S-3 to be
filed by the Company pursuant to Section 8 to be declared effective promptly
following the Closing.
SECTION 5. Representations, Warranties and Covenants of Seller. Seller
hereby represents and warrants to, and covenants with, the Purchasers, as of the
date hereof and as of the Closing Date, that:
(a) Seller now has, and on the Closing Date will have, good and
marketable title to and unrestricted power to vote and sell the Shares owned by
Seller free and clear of any lien, pledge, charge, security interest,
restriction or encumbrance of any kind other than restrictions on sale arising
under federal securities law (each a "Lien") and, upon purchase and payment
therefor and delivery to the Purchasers thereof in accordance with the terms of
this Agreement, each Purchaser will obtain good and marketable title to such
Shares free and clear of any Lien. All Shares owned by Seller have been duly
authorized and validly issued and are fully paid and non-assessable. All Shares
to be sold by Seller are registered in the name of such Seller.
-2-
<PAGE>
(b) Seller has the legal power, right and authority to enter into and
perform this Agreement, and to perform each of its obligations hereunder. The
execution, delivery and performance of this Agreement by Seller (i) requires no
action by or in respect of, or filing with, or consent of, any governmental
body, agency or official or any other person or entity and (ii) does not
contravene, or constitute a default under, any provision of applicable law or
regulation or of any agreement, judgment, injunction, order, decree or any other
instrument binding upon such Seller. This Agreement has been duly executed and
delivered by Seller and constitutes a valid and binding obligation of Seller,
enforceable in accordance with its terms.
SECTION 6. Representations, Warranties and Covenants of the Purchasers.
(a) Each of the Purchasers severally represent and warrant to, and
covenant with, Seller and the Company, as of the date hereof and as of the
Closing Date, that:
(1) such Purchaser is an "accredited investor" as defined in
Regulation D under the Securities Act of 1933, as amended (the
"Securities Act") and also is knowledgeable, sophisticated and
experienced in making, and is qualified to make decisions with
respect to investments in private placement transactions;
(2) such Purchaser is acquiring the number of Shares set forth
next to such Purchaser's name on Schedule I hereto for his or
its own account for investment and with no present intention
of distributing any of such Shares and that no arrangement or
understanding exists with any other person regarding the
distribution of any of such Shares (this representation and
warranty not limiting such Purchaser's right to sell pursuant
to an effective registration statement registering the Shares
for resale or to be indemnified pursuant to the provisions
hereof);
(3) such Purchaser will not, directly or indirectly,
voluntarily offer, sell, pledge, transfer or otherwise dispose
of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Shares except in
compliance with the Securities Act, applicable state
securities laws and the respective rules and regulations
promulgated thereunder;
(4) such Purchaser has had an opportunity to ask questions and
receive answers from the management of the Company regarding
the Company and its business and has reviewed and considered
all information it deemed relevant in making an informed
decision to purchase the Shares;
(5) such Purchaser has completed or caused to be completed the
Purchaser Questionnaire which is a part hereof and the answers
thereto are true and correct to the best knowledge of such
Purchaser as of the date hereof and will be true and correct
as of the effective date of the Registration Statement (as
defined in Section 8(a));
-3-
<PAGE>
(6) such Purchaser will notify the Company immediately of any
change in any of such information until such time as the
Purchaser has sold all of its Shares or until the Company is
no longer required to keep the Registration Statement
effective pursuant to Section 8(a)(4); and
(7) such Purchaser has, in connection with its decision to
purchase Shares, relied solely upon the documents that the
Company was required to file under the Securities Exchange Act
of 1934, as amended (the "Exchange Act") during the twelve
months preceding the date of this Agreement.
(b) Each Purchaser agrees not to make any sale of the Shares without
(i) complying with the requirements of Section 8(b), and (ii) effectively
causing the prospectus delivery requirements under the Securities Act to be
satisfied. Each Purchaser acknowledges that there may occasionally be times when
the Company must suspend the use of the prospectus forming a part of the
Registration Statement until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the Commission
or until the Company has amended or supplemented such prospectus. Each Purchaser
hereby severally covenants that it will not sell any Shares pursuant to said
prospectus during the period commencing at the time at which the Company gives
the Purchasers notice of the suspension of the use of said prospectus and ending
at the time the Company gives such Purchasers notice that the Purchasers may
thereafter effect sales pursuant to said prospectus. Each Purchaser further
acknowledges and agrees that the Shares are not transferable on the books of the
Company unless the Purchaser executes and delivers to Seller, the Company and to
the Company's transfer agent a certificate in the form attached hereto as
Exhibit A.
(c) Each Purchaser further severally represents and warrants to, and
covenants with, Seller that (i) such Purchaser has full right, power, authority
and capacity to enter into this Agreement and to consummate the transactions
contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and (ii) upon the
execution and delivery of this Agreement, this Agreement shall constitute a
valid and binding obligation of such Purchaser enforceable in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors' and
contracting parties' rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and except as
the indemnification agreements of the Purchasers herein may be legally
unenforceable.
(d) The Purchasers will not, prior to the effectiveness of the
Registration Statement, sell, offer to sell, solicit offers to buy, dispose of,
loan, pledge or grant any right with respect to (collectively, a "Disposition"),
the common stock of the Company, nor will the Purchasers engage in any hedging
or other transaction which is designed to or could reasonably be expected to
lead to or result in a Disposition of Common Stock of the Company by the
Purchasers or any other person or entity. Such prohibited hedging or other
transactions would include without limitation effecting any short sale or having
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<PAGE>
in effect any short position (whether or not such sale or position is against
the box and regardless of when such position was entered into) or any purchase,
sale or grant of any right (including without limitation any put or call option)
with respect to the common stock of the Company or with respect to any security
(other than a broad-based market basket or index) that includes, relates to or
derives any significant part of its value from the common stock of the Company.
SECTION 7. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Seller and the
Purchasers herein shall survive the execution of this Agreement, the delivery to
the Purchasers of the Shares being purchased and the payment therefor.
SECTION 8. Registration of the Shares; Compliance with the Securities
Act.
(a) Registration Procedures and Expenses. The Company shall, in
accordance with the terms of the Stock Purchase Agreements:
(1) as soon as practicable, give written notice to the holders
of any Restricted Securities (as such term is defined in the
Stock Purchase Agreements) of the Company of the Company's
intention to register the Shares pursuant to this Section 8;
(2) as soon as practicable (and in any event within five (5)
business days after the date hereof), prepare and file with
the Commission a registration statement on Form S-3 (the
"Registration Statement") covering the resale of the Shares by
the Purchasers from time to time on the Nasdaq National Market
or in privately negotiated transactions;
(3) use its best efforts, subject to receipt of necessary
information from the Purchasers, to cause the Registration
Statement to become effective as soon as practicable but in no
event later than sixty days after the date thereof;
(4) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus
used in connection therewith as may be necessary to keep the
Registration Statement effective for a period not exceeding,
with respect to each Purchaser's Shares purchased hereunder,
the earlier of (i) the second anniversary of the Closing Date,
(ii) such time after the first anniversary of the Closing Date
when such Purchaser's Shares purchased hereunder and then
owned by such Purchaser represent no more than one percent of
the Company's outstanding common stock, or (iii) such time as
all Shares purchased by such Purchaser pursuant to this
Agreement have been sold pursuant to the Registration
Statement.
(5) furnish to each of the Purchasers with respect to the
Shares registered under the Registration Statement (and to
each underwriter, if any, of such Shares) such number of
copies of prospectuses and preliminary prospectuses in
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<PAGE>
conformity with the requirements of the Securities Act and
such other documents as the Purchaser may reasonably request,
in order to facilitate the public sale or other disposition of
all or any of the Shares by the Purchasers, provided, however,
that the obligation of the Company to deliver copies of
prospectuses or preliminary prospectuses to the Purchasers
shall be subject to the receipt by the Company and Seller of
reasonable assurances from the Purchaser that the Purchaser
will comply with the applicable provisions of the Securities
Act and of such other securities or blue sky laws as may be
applicable in connection with any use of such prospectuses or
preliminary prospectuses;
(6) file documents required of the Company for normal blue sky
clearance in all states specified in writing by the Purchaser,
provided, however, that the Company shall not be required to
qualify to do business or consent to service of process in any
jurisdiction in which it is not now so qualified or has not so
consented; and
(7) bear all expenses in connection with the procedures in
paragraphs (1) through (6) of this Section 8(a) and the
registration of the Shares pursuant to the Registration
Statement, including the reasonable fees and expenses, if any,
of counsel or other advisers to the Purchasers.
The Company understands that each of the Purchasers disclaims being an
underwriter, but a Purchaser being deemed an underwriter shall not relieve the
Company of any obligations it has hereunder.
(b) Transfer of Shares After Registration. Each Purchaser agrees that
he or it will not effect any disposition of the Shares that would constitute a
sale within the meaning of the Securities Act or applicable state securities
laws except as contemplated in the Registration Statement referred to in Section
8(a). The Purchasers agree that to sell shares pursuant to the Registration
Statement:
(1) The Purchaser must notify the Company three (3) business
days prior to sale through the Company's counsel, James D.
Rosener, at the address provided in Section 10(a) hereto, of
his or its intent to sell, so as to confirm that no event has
occurred or is expected to occur which would make the
Registration Statement false or misleading in any material
respect, and to ensure that the Registration Statement in its
possession is current in all material respects and has not
been suspended. The Company may refuse to permit the Purchaser
to resell pursuant to the Registration Statement, provided
that it must notify the Purchaser in writing within three (3)
business days that such a sale would violate federal
securities laws unless the Registration Statement is updated.
In such an event, the Company shall use its best efforts to
amend the Registration Statement if necessary and take all
other actions necessary to allow such sale under the federal
securities laws within ten (10) business days of Purchaser's
initial notification, and shall notify the Purchaser promptly
after it has determined that such sale has become
-6-
<PAGE>
permissible under the federal securities laws. Notwithstanding
the foregoing, within any twelve (12) month period the Company
shall not, except upon advice of counsel as to the necessity
pursuant to federal securities laws, under any circumstances
be entitled to exercise its right to refuse to permit resale
of any Shares pursuant to the Registration Statement (i) more
than two (2) times or (ii) for an aggregate period in excess
of thirty (30) days. Each Purchaser hereby covenants and
agrees that it will not sell any Shares pursuant to the
Registration Statement during the periods the Registration
Statement is withdrawn as set forth in this Section.
(2) If the Company or its counsel does not, within such three
(3) business days, notify the Purchaser that it is exercising
its right to delay such sale, the Purchaser may proceed with
such sale provided that it arranges for delivery of a current
prospectus to the transferee. Upon receipt of a request
therefor, the Company has agreed to provide an adequate number
of current prospectuses to each Purchaser and to supply copies
to any other parties requiring such prospectuses.
(3) The Purchaser must also deliver to Seller and the
Company's counsel a Notice of Sale substantially in the form
attached hereto as Exhibit A, so that the Shares may be
properly transferred.
(c) Indemnification. The Company and Purchasers agree that the
following provisions regarding indemnification shall control over the
corresponding provisions in the Stock Purchase Agreements. For the purpose of
this Section 8(c):
(1) the term "Selling Shareholder" shall mean any person or
entity selling Shares pursuant to the Registration Statement,
and any affiliate thereof;
(2) the term "Registration Statement" shall include any
preliminary prospectus, final prospectus, exhibit, supplement
or amendment included in or relating to the Registration
Statement referred to in Section 8(a); and
(3) the term "untrue statement" shall mean any untrue
statement or alleged untrue statement of a material fact in
the Registration Statement, or any omission or alleged
omission to state in the Registration Statement a material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading.
The Company agrees to indemnify and hold harmless each Selling
Shareholder from and against any losses, claims, damages or liabilities to which
such Selling Shareholder may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any untrue
statement, or arise out of any failure by the Company to fulfill any undertaking
included herein or in the Registration Statement, and the Company promptly will
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<PAGE>
reimburse such Selling Shareholder for any legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim; provided, however, that the Company shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of, or is based upon, an untrue statement made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Selling Shareholder specifically for use in preparation of the Registration
Statement, or the failure of such Selling Shareholder to comply with the
covenants and agreements contained herein.
Each of the Purchasers severally agrees to indemnify and hold harmless
the Company (and each other person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act, each officer of the Company who
signs the Registration Statement and each director of the Company) from and
against any losses, claims, damages or liabilities to which the Company (or any
such officer, director or controlling person) may become subject (under the
Securities Act or otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any failure of any of such Purchaser to comply with its covenants
and agreements contained herein, or any untrue statement if such untrue
statement was made in reliance upon and in conformity with written information
furnished by or on behalf of such Purchaser specifically for use in preparation
of the Registration Statement, and such Purchaser promptly will reimburse the
Company (or such officer, director or controlling person), as the case may be,
for any legal or other expenses reasonably incurred in investigating, defending
or preparing to defend any such action, proceeding or claim.
Promptly after receipt by any indemnified person of a notice of a claim
or the beginning of any action in respect of which indemnity is to be sought
against an indemnifying person pursuant to this Section 8(c), such indemnified
person shall notify the indemnifying person in writing of such claim or of the
commencement of such action, and, subject to the provisions hereinafter stated,
in case any such action shall be brought against an indemnified person, such
indemnifying person shall be entitled to participate therein, and, to the extent
it shall wish, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified person. After notice from the indemnifying
person to such indemnified person of its election to assume the defense thereof,
such indemnifying person shall not be liable to such indemnified person for any
legal expenses subsequently incurred by such indemnified person in connection
with the defense thereof, provided, however, that if there exists or shall exist
an actual or potential conflict of interest that would make it inappropriate, in
the opinion of counsel to the indemnified person, for the same counsel to
represent both the indemnified person and such indemnifying person or any
affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
however, that no indemnifying person shall be responsible for the fees and
expenses of more than one separate counsel for all indemnified parties.
If the indemnification provided for in this Section 8(c) is unavailable
to or insufficient to hold harmless an indemnified party in respect of any
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to above, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
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<PAGE>
proportion as is appropriate to reflect the relative fault of the Company on the
one hand and the Purchasers on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or a Purchaser on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Purchasers
agree that it would not be just and equitable if contribution pursuant to this
paragraph were determined by pro rata allocation (even if the Purchasers were
treated as one entity for such purpose) or by any other method of allocation
which does not take into account the equitable considerations referred to above
in this paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this paragraph shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this paragraph, no Purchaser shall be required
to contribute any amount in excess of the amount by which the net amount
received by the Purchaser from the sale of the Shares to which such loss relates
exceeds the amount of any damages which such Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Each Purchaser's obligations in this paragraph to contribute
are several in proportion to their sales of the Shares to which such loss
relates and not joint.
The indemnifying party shall not make any settlement of any claims
indemnified against hereunder without the prior written consent of the
indemnified party or parties, which consent shall not be unreasonably withheld.
The Company, upon the reasonable request of a Purchaser, will meet with
such Purchaser or a representative thereof at the Company's headquarters to
discuss all information relevant for disclosure in the Registration Statement
covering the Stock and will otherwise cooperate with any Purchaser conducting an
investigation for the purpose of reducing or eliminating such Purchaser's
exposure to liability under the Securities Act, including the reasonable
production of information at the Company's headquarters; provided, that, the
Company shall not be required to disclose any confidential information to or
meet at its headquarters with any Purchaser until and unless the Purchaser shall
have entered into a confidentiality agreement in the form and substance
reasonably satisfactory to the Company with the Company with respect thereto.
(d) Termination of Conditions and Obligations. The restrictions imposed
by Section 6 or this Section 8 upon the transferability of the Shares shall
cease and terminate as to any particular number of the Shares when such Shares
shall have been effectively registered under the Securities Act and sold or
otherwise disposed of in accordance with the intended method of disposition set
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<PAGE>
forth in the Registration Statement covering such Shares or at such time as an
opinion of counsel satisfactory to the Company shall have been rendered to the
effect that such restrictions are not necessary in order to comply with the
Securities Act.
(e) Information Available. So long as the Registration Statement is
effective covering the resale of Shares owned by the Purchasers, the Company
will furnish to the Purchasers:
(i) as soon as practicable after it is filed, a copy of each
Form 10-K, Form 10-Q and Form 8-K filed by the Company with
the Commission;
(ii) upon the reasonable request of the Purchasers, all other
information concerning the Company that is generally available
to the public; and
(iii) upon the reasonable request of the Purchasers, an
adequate number of copies of the prospectuses relating to the
resale of the Shares to supply to any party requiring such
prospectuses.
SECTION 9. Indemnification. Each party agrees to indemnify and hold
harmless the other parties from and against any losses, claims, damages or
liabilities, together with all reasonable costs and expenses related thereto
(including, without limitation, reasonable legal fees and expenses) arising from
the breach of any of its representations, warranties, covenants or agreements
contained herein.
SECTION 10. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be addressed to the
receiving party's address set forth below or to such other address as a party
may designate by notice hereunder, and shall be either (i) delivered by hand,
(ii) made by telex, telecopy or facsimile transmission, (iii) sent by overnight
courier, or (iv) sent by registered or certified mail, return receipt requested,
postage prepaid:
(a) if to the Company to:
James D. Rosener, Esq.
Company Counsel
Liberty Technologies, Inc.
Lee Park, 555 North Lane
Conshohocken, PA 19428
(b) if to Seller to: with a copy to:
Richard J. Defieux William J. Schnoor, Esq.
Edison Venture Fund, L.P. Testa, Hurwitz & Thibeault, LLP
997 Lenox Drive #3 125 High Street
Lawrenceville, NJ 08648 Boston, MA 02110
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<PAGE>
the Purchasers, at its address as set forth on the signature page to this
Agreement, or at such other address or addresses as may have been furnished to
the Company in writing.
All notices, requests, consents and other communications hereunder
shall be deemed to have been given either (i) if by hand, at the time of the
delivery thereof to the receiving party at the address of such party set forth
above, (ii) if made by telex, telecopy or facsimile transmission, at the time
that receipt thereof has been acknowledged by electronic confirmation or
otherwise, (iii) if sent by overnight courier, on the next business day
following the day such notice is delivered to the courier service, or (iv) if
sent by registered or certified mail, on the fifth business day following the
day such mailing is made.
SECTION 11. Changes. Any term of this Agreement may be amended or
compliance therewith waived with the written consent of Seller, the Company, and
the holders of a majority of the Shares purchased pursuant to this Agreement.
SECTION 12. Assignment. The rights and obligations under this Agreement
may not be assigned by any party hereto without the prior written consent of the
other parties.
SECTION 13. Benefit. All statements, representations, warranties,
covenants and agreements in this Agreement shall be binding on the parties
hereto and shall inure to the benefit of the respective successors and permitted
assigns of each party hereto. Nothing in this Agreement shall be construed to
create any rights or obligations except among the parties hereto, and no person
or entity shall be regarded as a third-party beneficiary of this Agreement.
SECTION 14. Waiver. The Company agrees that its duly authorized
signature to this Agreement shall act as a waiver of Seller's and Seller's
counsel's obligations under Section 10.4 of both of the Stock Purchase
Agreements.
SECTION 15. Expenses. Each of the parties hereto shall pay its own fees
and expenses (including the fees of any attorneys, accountants, appraisers or
others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby whether or not the transactions contemplated
hereby are consummated.
SECTION 16. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 17. Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
SECTION 18. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the Commonwealth of
Pennsylvania and United States federal law.
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<PAGE>
SECTION 19. Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
SECTION 20. Termination. In the event the Closing has not taken place
by January 31, 1998 due to the failure to occur of either of the events
specified in clauses (i) and (ii) of Section 2, then either the Seller (by
written notice to the Purchasers) or Purchasers, who have agreed to purchase a
majority of the Shares (by written notice to the Seller and all other
Purchasers) may terminate this Agreement. Upon any such termination the Escrow
Agent shall return to each Purchaser the funds deposited by such Purchaser
(together with any interest in respect thereof).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase
Agreement to be executed by their duly authorized representatives as this 29th
day of August, 1997.
LIBERTY TECHNOLOGIES, INC. EDISON VENTURE FUND, L.P.
By: EDISON PARTNERS, L.P.,
Its General Partner
By: /s/ R. Nim Evatt By: /s/ Richard J. Defieux
------------------------------ ------------------------------
Title: President and CEO General Partner
PURCHASERS:
/s/ Larry D. Hornbeck /s/ Don V. Ingram
- ---------------------------------- ---------------------------------
Larry D. Hornbeck Don V. Ingram
503 Overton c/o Summit Partners
Fort Belivar, TX 77650 2200 Ross Avenue, Suite 4500E
Fax: 409-744-0201 Dallas, TX 77650
Fax: 972-869-6585
/s/ L. Mark Newman /s/ Stephen F. Smith
- ---------------------------------- ---------------------------------
L. Mark Newman Stephen F. Smith
Atlanta Investment Company Two Houston Center
601 Fairview Blvd. 909 Fanin, Suite 3250
Incline Village, NV 89460 Houston, TX 77010
Fax: 702-833-1890 Fax: 713-651-3028
/s/ Stephen A. Wells /s/ Walter Epstein, Esq.
- ---------------------------------- ---------------------------------
Stephen A. Wells Walter Epstein, Esq.
P.O. Box 549 144 South Mountain Ave.
Little River, TX 76544 Montclair, NJ 07042
Fax: 941-964-9080 Fax: 201-783-5699
ENERGY CONSOLIDATION, INC.
/s/ Stephen A. Wells
- ----------------------------------
By: Stephen A. Wells
------------------------------
Title: Chairman
Two Houston Center
909 Fanin, Suite 3250
Houston, TX 77010
Fax: 713-651-3028
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<PAGE>
Schedule I
Number of Aggregate
Name of Purchaser Shares Purchased Purchase Price
----------------- ---------------- --------------
Larry D. Hornbeck 12,000 $ 48,750.00
Don V. Ingram 40,000 $ 162,500.00
Atlanta Selective Fund 40,000 $ 162,500.00
Number Six, L.P.
Stephen F. Smith 40,000 $ 162,500.00
Stephen A. Wells 40,000 $ 162,500.00
Walter Epstein, Esq. 10,972 $ 44,573.75
Energy Consolidation, Inc. 225,000 $ 914,062.50
======= =============
TOTAL 407,972 $1,657,386.25
<PAGE>
Exhibit A
Date:
-------------------------
James D. Rosener, Esq.
Liberty Technologies, Inc.
Lee Park, 555 North Lane
Conshohocken, PA 19428
Richard J. Defieux
Edison Venture Fund, L.P.
997 Lenox Drive #3
Lawrenceville, NJ 08648
Re: Liberty Technologies, Inc.
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, an officer of, or other person duly authorized by
[official name of shareholder] ______________________________________________
("Shareholder") hereby certifies that Shareholder has sold [number]___________
shares of Liberty Technologies, Inc. Common Stock on [date] ________________ in
accordance with registration statement number [fill in number or otherwise
identify registration statement] ___________________ and the requirements of
delivering a current prospectus has been complied with in connection with such
sale.
Print or Type:
Name of Purchaser
(Individual or Institution):
-------------------------------
Name of Individual representing
Purchaser (if an Institution):
------------------------------
Title of Individual representing
Purchaser (if an Institution):
-----------------------------
Signature by:
Individual Purchaser or
Individual representing Purchaser:
-------------------------
<PAGE>
PURCHASER QUESTIONNAIRE
Name of Purchaser:
------------------------------------
Number of Shares to be Purchased:
------------------------------------
Name in which Shares are to be
registered (or specify DTC
settlement):
------------------------------------
Address of registered holder
(if other than DTC):
------------------------------------
------------------------------------
------------------------------------
Social Security or Tax ID No. of
registered holder (if other
than DTC):
------------------------------------
Contact name and telephone number
regarding settlement and
registration:
------------------------------------
Name
------------------------------------
Telephone Number
Number of shares of common stock of the Company beneficially owned by the
Purchasers (meaning shares owned or controlled or which the Purchasers has the
right to acquire or vote), other than the Shares being purchased pursuant
hereto:
--------------------------------
Have you or your organization had any position, office or other material
relationship within the past three years with the Company.
Yes No
------ ------
Do you or your organization have any direct or indirect affiliation or
association with any NASD member?
Yes No
------ ------
If yes to either of the last two questions, please indicate the nature of any
such relationships below:
August 18, 1997
Liberty Technologies, Inc.
555 North Lane, Lee Park
Conshohocken, PA 19428
Each of the individuals listed on Schedule I hereto is currently a
shareholder, officer and/or director of Energy Consolidation, Inc. ("ECI"). Each
of such individuals, together with ECI, shall sometimes be hereinafter referred
to individually as a "Holder" and collectively as the "Holders." In addition,
certain Holders currently own shares of Liberty Technologies, Inc. (the
"Company"). Each Holder that owns shares of the Company represents that he or it
has acted independently of any other owner and each specifically represents that
he or it is not a member of a group within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934.
In order to induce the agreement of the Company not to take any action
under the Shareholder Rights Plan, the Holders, without prejudice to their claim
that they are not members of a group, hereby agree with the Company as follows:
1. Shareholder Rights Agreement. The Company agrees that so long as the
Holders, in the aggregate, are in compliance with the terms of this agreement,
the Company will not take any action to exercise any rights under the
Shareholder Rights Plan. For the purposes of this Agreement, shares of the
Company held by any Holder shall be included for the purposes of computing the
aggregate number of shares of the Company held by the Holders, whether or not
such Holders are acting as a group, but shall only be counted a single time
where the shares held by a single Holder might otherwise be attributed to
another Holder.
2. Certain Definitions. The following terms shall have the meanings
hereinafter specified:
<PAGE>
August 18, 1997
Page 2
(a) "Affiliate" of any entity means a Person which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, such entity. The term "control" as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether the ownership of voting securities, by contract or otherwise.
(b) "Person" shall mean the individual, corporation, partnership,
company, joint venture, unincorporated organization, limited liability company
or partnership, sole proprietorship, association, bank, trust company or trust,
whether or not legal entities, or any governmental entity or agency or political
subdivision thereof.
(c) "Subsidiary" means any corporation or association (i) more than 50%
(by number of votes) of the Voting Stock of which is at the time owned, directly
or indirectly (including through possession of convertible or exercisable
securities), by the Company or by one or more Subsidiaries or by the Company and
one or more Subsidiaries owns, directly or indirectly (including through
possession of convertible or exercisable securities), more than 50% interest in
either the profits or capital of such business entity, or (b) whose net
earnings, or portions thereof, are consolidated with the net earnings of the
Company and are recorded on the books of the Company for financial reporting
purposes in accordance with generally accepted accounting principles.
(d) "Voting Stock" means securities of any class or series of a
corporation or association the holders of which are ordinarily, in the absence
of contingencies, entitled to vote generally in matters put before the
shareholders or members of such corporation or association.
3. Standstill Agreement.
Prior to the tenth anniversary of the date hereof (the "Standstill
Period"), each Holder will not, and will not encourage, direct or cause any of
its Affiliates to, directly or indirectly, without the written consent of the
Company:
(a) acquire or agree, offer, seek or propose to acquire ownership
(including, but not limited to, beneficial ownership as defined in Rule 13d-3
under the Securities Exchange Act) of any Voting Stock of the Company or
securities convertible or exchangeable into or exercisable for any Voting Stock
of the Company (if as a result of such acquisition, the Holders in the aggregate
would own more than 25% of the Voting Stock of the Company at the time of such
acquisition) or any assets of the Company or any of its Subsidiaries;
<PAGE>
August 18, 1997
Page 3
(b) cause to be acquired ownership (including, but not limited to,
beneficial ownership as defined in Rule 13d-3 under the Securities Exchange Act)
of any Voting Stock of the Company or securities convertible or exchangeable
into or exercisable for any Voting Stock of the Company (if as a result of such
acquisition, the Person acquiring ownership together with the Holders, in the
aggregate, would own more than 25% of the Voting Stock of the Company at the
time of such acquisition);
(c) make, or in any way participate in, any "solicitation" of "proxies"
(as such terms are defined under Regulation 14A of the Securities Exchange Act)
to vote or seek to advise or influence in any manner whatsoever any Person with
respect to Voting Stock of the Company or any of its Subsidiaries;
(d) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the Securities Exchange Act) with respect to any
Voting Stock of the Company or any of its Subsidiaries;
(e) arrange, or in any way participate in, any financing for the
purchase of any Voting Stock or securities convertible or exchangeable into or
exercisable for any Voting Stock or assets of the Company or any of it
Subsidiaries;
(f) otherwise act, whether alone or in concert with others, to seek to
propose under Rule 14(a)(8) of the Securities Exchange Act to the Company or
any of its stockholders any merger, business combination, restructuring,
recapitalization or similar transaction to or with the Company or any of its
Subsidiaries; or
(g) enter into any discussions, negotiations, arrangements or
understandings with or advise, assist or encourage any third party with respect
to, any of the foregoing.
4. Certain Voting Matters. During the Standstill Period, in the event any
proposal is submitted to a shareholder vote under Regulation 14A of the
Securities Exchange Act, and such proposal is not recommended by the Board of
Directors of the Company, then each Holder shall vote or cause to be voted all
Voting Stock beneficially owned by them or any Affiliate in the manner
recommended by the Board of Directors in respect of such proposal.
5. Remedies. Without prejudice to the rights and remedies otherwise
available to the parties, the Company shall be entitled to equitable relief by
way of injunction if any Holder or any Affiliate thereof breaches or threatens
to breach any of the provisions of this letter agreement. It is understood that
any failure or delay by a party in exercising any right,
<PAGE>
August 18, 1997
Page 4
power or privilege hereunder shall not operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof.
6. No Implied Waivers; Writing Required. No delay or failure of any party
in exercising any right, power or remedy hereunder shall affect or operate as a
waiver thereof, nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such a right, power or remedy
preclude any further exercise thereof of or any other right, power or remedy.
Any waiver, permit, consent or approval of any kind or character relating to
this letter agreement must be in writing and shall be effective only to the
extent in such writing specifically set forth.
7. Successors and Assigns. This letter agreement and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Company and the Holders, respectively.
8. Severability. Each provision of this letter agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this letter agreement is held to be prohibited by or
invalid under applicable law in any jurisdiction, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating any other provision of this letter agreement.
9. Entire Agreement. This letter agreement constitutes the entire and
exclusive agreement between the parties respecting the subject matter hereof,
superseding all prior discussions, agreements or arrangements, whether oral or
written, with respect to the subject matter hereof. It may not be amended unless
in writing and signed by all parties hereto.
10. Governing Law. This letter agreement, its interpretation and
enforcement, shall be governed by the laws of the Commonwealth of Pennsylvania
applicable to agreements made and to be performed wholly therein.
Please confirm your agreement with the foregoing by signing and returning
to the undersigned the duplicate copy of this letter enclosed herewith.
Yours truly,
/s/ L. Mark Newman
---------------------------------------
L. MARK NEWMAN
<PAGE>
August 18, 1997
Page 5
[SIGNATURES CONTINUE]
/s/ Don V. Ingram
------------------------------------
DON V. INGRAM
/s/ Larry D. Hornbeck
------------------------------------
LARRY D. HORNBECK
/s/ Stephen F. Smith
------------------------------------
STEPHEN F. SMITH
/s/ Stephen A. Wells
------------------------------------
STEPHEN A. WELLS
ENERGY CONSOLIDATION, INC.
By: /s/ Stephen A. Wells
--------------------------------
Name: Stephen A. Wells
Title: Chairman
Accepted and Agreed:
LIBERTY TECHNOLOGIES, INC.
By: /s/ R. Nim Evatt
----------------------------------
Dated: August 21, 1997
-------------------------------
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Percentage of Ownership of
Names and Addresses of Holders Ownership of ECI Company Shares
- ------------------------------ ---------------- --------------
<S> <C> <C>
Larry D. Hornbeck (Director) 1.44 0
903 Overton
Fort Belivar, TX 77650
Don V. Ingram (Director) 14.4 0
c/o Summit Partners
2200 Rees Avenue, Suite 4500 E
Dallas, TX 75201
L. Mark Newman (Director) 17.24 403,500
Atlanta Investment Company
601 Fairview Blvd.
Incline Village, NV 89460
Stephen F. Smith 14.4 0
(Director & President)
Two Houston Center
909 Fanin, Suite 3250
Houston, TX 77010
Stephen A. Wells 14.4 224,400
(Director & Chairman)
P.O. Box 549
Little River, TX 76554
Total Ownership by Directors: 61.88%
ENERGY CONSOLIDATION, INC. N/A --
</TABLE>
Exhibit 23.1
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Liberty Technologies, Inc.:
As independent public accountants, we hereby consent to the incorporation by
reference in this S-3 Registration Statement of our reports dated February 5,
1997 (except for the matter discussed in Note 1 and 6 as to which the date is
April 4, 1997) and September 17, 1997 included in Liberty Technologies, Inc.'s
Form 10-K and Form 10-K/A No. 2, respectively, for the year ended December 31,
1996 and to all references to our Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Philadelphia, PA
October 9, 1997
