STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of October 4, 1996, by and among IAT
Holdings, Inc., a Delaware corporation ("Holdings"), IAT AG, a corporation
organized under the laws of Switzerland ("IAT"), IAT Deutschland GmbH, a
corporation organized under the laws of Germany ("IAT Germany"),Vertical
Financial Holdings, a corporation organized under the laws of Liechtenstein
("Investor"), and the stockholders of IAT, all of which to become stockholders
of Holdings at the Closing (as defined below), listed on Exhibit A hereto (the
"Stockholders"). As used herein, the term "Holdings" refers to IAT Holdings,
Inc. and the term the "Company" refers to Holdings and its subsidiaries,
including, but not limited to, IAT AG and IAT Germany.
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Shares
1.1. Agreement to Purchase.
(a) Subject to the terms and conditions of this Agreement and in
reliance on the representations, warranties and agreements of Holdings,
IAT, IAT Germany and each of the Stockholders contained herein, the
Investor agrees to purchase at the Closing and Holdings agrees to sell and
issue to the Investor at the Closing, 1,980,000 shares of Series A
Convertible Preferred Stock, par value $.01 per share (the "Series A
Preferred Stock") of Holdings, for an aggregate purchase price of
$1,500,000 (the "Purchase Price").
(b) In addition, Holdings shall issue to the Investor, at the Closing,
a warrant in the form attached hereto as Exhibit E (the "Warrant") to
purchase up to 1,980,000 shares (the "Warrant Shares") of Common Stock, par
value $.01 per share, of Holdings (the "Common Stock"). In the event of an
initial public offering of shares of Common Stock (an "IPO"), the Warrant
shall be exercisable during the ten (10) year period following the closing
date of the IPO at an exercise price per share equal to 130% of the initial
public offering price of a share of Common Stock in the IPO.
1.2. Closing. The purchase and sale of the Series A Preferred Stock to be
purchased by the Investor shall take place at the offices of Bachner, Tally,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, New York, New York, on the 14th day following the delivery
by Holdings or IAT AG to the Investor of audited financial statements of the
Company, or at such other time and place as shall be mutually agreed upon
between the Investor and Holdings (the "Closing"). At the Closing, Holdings
shall deliver to the Investor a certificate or certificates representing the
Series A Preferred Stock that the Investor is purchasing, in such names and
denominations as the Investor may request not less than two (2) business days
prior to the date of the Closing, against receipt of a certified check payable
to the order of Holdings or a wire transfer of the purchase
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price to an account designated by Holdings not less than two (2) business days
prior to the date of the Closing.
1.3. Further Assurances. After the Closing, the parties shall from time to
time, at the request of the other parties and without further cost or expense to
such party, execute and deliver such other instruments of conveyance and
transfer and take such other actions as the other parties may reasonably
request, in order to more effectively consummate the transaction contemplated
hereby and to vest in Investor good and marketable title to the Shares being
sold hereunder.
2. Representations and Warranties of Holdings. Except for the exceptions
set forth on the Schedule of Exceptions attached hereto as Exhibit B and
furnished to the Investor, which exceptions shall be deemed to be
representations and warranties as if made hereunder, (i) Holdings, with respect
to itself, IAT and IAT Germany and (ii) IAT and IAT Germany, each with respect
to itself, hereby represent and warrant severally to the Investor that:
2.1 Organization, Good Standing, Qualification; Corporate Power and
Authorization.
(a) Each of Holdings, IAT and IAT Germany is a corporation duly
organized, validly existing and in good standing under the laws its
jurisdiction of incorporation and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. Holdings is duly qualified to transact business, and is in good
standing in each jurisdiction in which the failure so to qualify would have
a material adverse effect on its business or properties. True and correct
copies of the Certificate of Incorporation and By-laws of Holdings, IAT and
IAT Germany have been provided to the Investor.
(b) Holdings, IAT and IAT Germany, have all requisite legal and
corporate power to execute and deliver this Agreement and Holdings has all
requisite legal and corporate power to execute and deliver the Investor's
Rights Agreement of even date herewith, by and among Holdings and the
Investor, the form of which is attached hereto as Exhibit C (the "Rights
Agreement"), the Marketing Agreement of even date herewith, by and among
Holdings and General Capital, the form of which is attached hereto as
Exhibit D (the "Marketing Agreement") and the Warrant, the form of which is
attached hereto as Exhibit E, to issue and sell the Series A Preferred
Stock and the Warrant hereunder. Holdings, IAT and IAT Germany have all
requisite legal and corporate power to carry out and perform their
obligations under the terms of this Agreement and Holdings has all
requisite legal and corporate power to carry out and perform its
obligations under the terms of the Rights Agreement, the Marketing
Agreement and the Warrant. This Agreement has been duly authorized,
executed and delivered by Holdings, IAT and IAT Germany and constitutes the
legal, valid and binding obligation of Holdings, IAT and IAT Germany,
enforceable in accordance with its terms and, the Rights Agreement, the
Marketing Agreement and the Warrant have been duly authorized, executed and
delivered by Holdings and constitute the legal, valid and binding
obligations of Holdings, enforceable in
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accordance with their respective terms except as such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights or
other equitable principles..
2.2 Capitalization and Voting Rights. The authorized capital of Holdings
consists of:
(a) Preferred Stock. 2,000,000 shares of Preferred Stock, par value
$.01 per share, of which 1,980,000 shares have been designated Series A
Convertible Preferred Stock, of which no shares shall be issued and
outstanding until consummation of the transactions contemplated hereby. The
rights, privileges and preferences of the Series A Preferred Stock are as
stated in the Certificate of Incorporation of Holdings.
(b) Common Stock. 20,000,000 shares of Common Stock, par value $.01
per share, of which 4,620,000 shares are issued and outstanding or will be
issued and outstanding prior to the Closing.
(c) Except for the conversion privileges of the Series A Preferred
Stock, the Warrant and except for the warrant issuable to the
non-management stockholders of Holdings (the "Non-Management Stockholder
Warrant") and except as otherwise set forth on Exhibit B, there are not
outstanding any options, warrants, rights (including conversion or
preemptive rights) or agreements for the purchase or acquisition from
Holdings of any shares of its capital stock. The Stockholders set forth on
Exhibit A, together with the number of shares, options or other derivative
securities held by each such Stockholder and set forth on Exhibit A,
represent all of the holders of the capital stock of Holdings.
2.3 Subsidiaries. A list of the direct and indirect subsidiaries of
Holdings (each, a "Subsidiary") is set forth on Exhibit B, and Holdings
does not own, directly or indirectly, any capital stock or other equity
ownership or proprietary interests in any other corporation, association,
trust, partnership, joint venture or other entity. Each Subsidiary is a
corporation duly organized and validly existing under the laws of the state
or country set forth on Exhibit B, and the capital stock of each Subsidiary
set forth on Exhibit B is owned in the percentage amounts and by the entity
set forth on Exhibit B free and clear of all liens, encumbrances, security
interests, claims, restrictions on transfer and other defects in title
("Encumbrances").
2.4 Valid Issuance of Stock.
(a) The issuance, sale and delivery of the Series A Preferred
Stock which is being purchased by the Investor hereunder, the
issuance, sale and delivery of the Warrant and the reservation for
issuance of the Common Stock issuable upon conversion or exercise
thereof have been duly authorized by all required corporate action on
the part of Holdings, and when issued, sold, and delivered in
accordance with the terms hereof for the
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consideration expressed herein, will be duly and validly issued, fully
paid and non-assessable and, based in part upon the representations
and warranties of the Investor in this Agreement, will be issued in
compliance with all applicable federal and state securities laws. The
Common Stock issuable upon conversion of the Series A Preferred Stock
purchased under this Agreement and upon exercise of the Warrant has
been duly and validly reserved for issuance and, upon issuance in
accordance with the terms of the Certificate of Incorporation, shall
be duly and validly issued, fully paid, and non-assessable, and issued
in compliance with all applicable securities laws, as presently in
effect, of the United States and each of the states whose securities
laws govern the issuance of any of the Series A Preferred Stock
hereunder. The Series A Preferred Stock issued hereunder (and the
Common Stock issuable upon conversion of such Series A Preferred Stock
and upon exercise of the Warrant) will be free and clear from all
Encumbrances other than those created by, or imposed upon, the holders
thereof through no action of Holdings.
(b) The outstanding shares of capital stock of Holdings, IAT and
IAT Germany are, or will be upon issuance prior to the Closing, all
duly and validly authorized and issued, fully paid, and
non-assessable, and were, or will be, issued in compliance with all
applicable federal and state securities laws.
2.5 Financial Statements. Prior to the Closing, Holdings or IAT will have
delivered to the Investor IAT's audited consolidated balance sheet as of
December 31, 1995, and the related statements of operations, cash flows and
stockholder's equity as of, and for the twelve months ended, December 31, 1995
(the "Financial Statements"). Upon delivery to the Investor, the Financial
Statements will be complete and correct in all material respects and will have
been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis throughout the periods indicated. Prior
to the Closing, Holdings or IAT will also provide the Investor with IAT's
consolidated balance sheet as of June 30, 1996, and the related statements of
operations, cash flows and stockholder's equity as of, and for the six months
ended, June 30, 1996 (the "Interim Financial Statements"), certified by the
chief financial officer of Holdings or IAT. The Financial Statements and Interim
Financial Statements will fairly present the financial condition and results of
operations of IAT as of the dates and during the periods indicated therein,
subject to normal year-end audit adjustments which are neither individually nor
in the aggregate expected to be material. As of the date of the balance sheet
included in the Interim Financial Statements (the "Interim Balance Sheet Date"),
to the best of the Company's knowledge, IAT has no liabilities or obligations of
any nature (absolute, accrued, contingent or otherwise) which were not fully
reflected or reserved against in the Financial Statements, and all reserves
established by IAT and set forth on such balance sheet were adequate for the
purposes for which they were established.
2.6 Governmental Consents. Except as listed on Exhibit B, no consent,
approval, order, or authorization of, or registration, qualification,
designation, declaration or filing with, any Swiss, German or United States
federal, state, local or provincial governmental authority on the part of
Holdings or any Subsidiary is required in connection with the consummation of
the transactions contemplated by this Agreement. To the best of the
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Company's knowledge, Holdings and each Subsidiary has complied (and in carrying
out their respective businesses Holdings and each Subsidiary will be in
compliance) with all laws, ordinances and regulations applicable to it and its
business, which the failure to comply with would, either individually or in the
aggregate, have a materially adverse effect upon Holdings and its Subsidiaries
taken as a whole. Holdings and each Subsidiary has obtained all Swiss, German
and United States federal, state, local and foreign governmental licenses and
permits material to and necessary in the conduct of their respective businesses,
such licenses and permits are in full force and effect, no material violations
are or have been recorded in respect of any such licenses or permits, and no
proceeding is pending or, to the best of the Company's knowledge, threatened to
revoke or limit any thereof.
2.7 Litigation. Except as described on Exhibit B hereto, there is no
action, suit, proceeding, or investigation pending or to the Company's knowledge
currently threatened against Holdings or any Subsidiary (nor, to the Company's
knowledge, is there any reasonable basis therefor).
2.8 Patents and Trademarks.
(a) Except as set forth on Exhibit B, Holdings and each Subsidiary has
title and ownership of all Intellectual Property (as defined below) (i)
free and clear of all liens and encumbrances and (ii) without any conflict
with or infringement of the rights of others. Exhibit B attached hereto
contains a complete list of items of Intellectual Property which are
required for the conduct of the business of Holdings and each Subsidiary.
Except as shown on Exhibit B, there are no outstanding options, licenses,
or agreements of any kind relating to the Intellectual Property, nor is
Holdings or any Subsidiary bound by or a party to any options, licenses, or
agreements of any kind with respect to the patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights, and processes of any other person or entity. To the
Company's knowledge the Intellectual Property does not violate any of the
patents, trademarks, service marks, trade names, copyrights, or trade
secrets or other proprietary rights of any other person or entity. The
Company is not aware that any of the employees of Holdings or any
Subsidiary is obligated under any contract (including licenses, covenants,
or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of such employee's best efforts to promote the
interests of Holdings and each Subsidiary or that would conflict with the
business of Holdings and each Subsidiary as proposed to be conducted.
Except as disclosed on Exhibit B, none of the past or present employees,
officers, directors, shareholders or consultants of Holdings or any
Subsidiary has any rights in any of the Intellectual Property. Neither the
execution nor delivery of this Agreement, the Rights Agreement, the
Marketing Agreement or the Warrant, nor the carrying on of the business of
Holdings and each Subsidiary by the employees of Holdings and each
Subsidiary, nor the conduct of the business of Holdings and each Subsidiary
as proposed, will, to the Company's knowledge, conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any of such
employees is now obligated. Exhibit B sets
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forth all copyrights owned by Holdings and each Subsidiary and all
copyright applications which have been made by Holdings and each
Subsidiary. "Intellectual Property" includes all patents, patent
applications, trademarks (whether or not registered), trade names, service
marks (whether or not registered), trademark and service ▇▇▇▇ registrations
(and pending applications therefor), copyrights, computer software
(including without limitation all object code and source code owned by
Holdings or any Subsidiary or authored or developed for Holdings or any
Subsidiary by any of its employees or agents), licenses, sublicenses and
franchise agreements of Holdings or any Subsidiary, and all know-how,
formulae, processes, techniques, confidential business information,
designs, patterns, shapes, inventions (whether or not patented or
patentable), trade secrets and other proprietary information and technology
used in the business of Holdings and each Subsidiary or required to operate
such business.
(b) There is no object code used in the business of Holdings or any
Subsidiary or required to operate the business of Holdings or any
Subsidiary or other Intellectual Property that (i) is owned by entities
other than Holdings or any Subsidiary and (ii) is necessary to implement,
operate or maintain the business of Holdings and each Subsidiary as
presently operated.
2.9 Compliance with Other Instruments. Except as noted in Exhibit B hereto,
neither Holdings nor any Subsidiary is in violation or default of any provisions
of its respective Certificate of Incorporation or By-laws (or other
organizational documents) or of any instrument, judgment, order, writ, decree,
or contract to which it is a party or by which it is bound, the violation or
default of which would have a material adverse effect on Holdings and its
Subsidiaries taken as a whole. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
violate any provision of the respective Certificate of Incorporation or By-Laws
(or other organizational documents) of Holdings or any Subsidiary or (b)
violate, or be in conflict with, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
excuse performance by any person of any of its obligations under, or cause the
acceleration of the maturity of any debt or obligation pursuant to, or result in
the creation or imposition of any Encumbrance upon any property or assets of
Holdings or any Subsidiary under, any agreement or commitment to which Holdings
or any Subsidiary is a party or by which any of its respective property or
assets is bound, or to which any of the property or assets of Holdings or any
Subsidiary is subject, or (c) violate any statute or law or any judgment,
decree, order, regulation or rule of any court or other governmental authority
applicable to Holdings or such Subsidiary. Neither Holdings nor any Subsidiary
has any knowledge of any termination or material breach or anticipated
termination or material breach by the other parties to any material contract or
commitment to which it is a party or to which any of its assets is subject. To
the knowledge of the respective parties, there are no warranty claims or other
uninsured claims against Holdings or any Subsidiary under completed contracts
which might involve a material monetary liability which is not reserved against
in the Financial Statements.
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2.10 Agreements; Action.
(a) Except as listed on Exhibit B hereto and except for agreements
explicitly contemplated hereby, there are no agreements, understandings, or
proposed transactions between Holdings or any Subsidiary and any of their
respective officers, directors, affiliates (as defined in the Securities
Act of 1933, as amended), or any affiliate thereof.
(b) Except as listed on Exhibit B hereto, there are no agreements,
understandings, instruments, contracts or proposed transactions to which
Holdings or any Subsidiary is a party or by which it is bound which (i)
involve obligations (contingent or otherwise) of, or payments to Holdings
or any Subsidiary in excess of, $100,000 annually, (ii) are material to the
conduct and operations of Holdings' or any Subsidiary's business or
properties, including, without limitation, the license of any patent,
copyright, trade secret, or other proprietary rights to or from Holdings or
any Subsidiary or provisions restricting or affecting the development,
manufacture, or distribution of Holdings' or any Subsidiary's products or
services, or (iii) involve any employment or consulting arrangement,
whether written or oral, between Holdings or any Subsidiary and any person.
(c) Except as listed on Exhibit B hereto, neither Holdings or any
Subsidiary has (i) declared or paid any dividends, or authorized or made
any distribution upon or with respect to any class or series of its capital
stock, (ii) incurred any indebtedness for money borrowed or any other
liabilities individually in excess of $100,000 annually or, in the case of
indebtedness and/or liabilities individually less than $100,000 annually,
in excess of $200,000 in the aggregate annually, (iii) made any loans or
advances to any person, other than ordinary advances for travel expenses,
or (iv) sold, exchanged, or otherwise disposed of any of its assets or
rights, other than the sale of its inventory in the ordinary course of
business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments,
contracts, and proposed transactions involving the same person or entity
(including persons or entities Holdings or any Subsidiary has reason to
believe are affiliated therewith) shall be aggregated for the purpose of
meeting the individual minimum dollar amounts of such subsections.
2.11 Disclosure. Holdings or IAT has, or will, at or prior to the Closing,
provide the Investor with a copy of the most recently available financial
projections for Holdings and its Subsidiaries (the "Projections") and all other
information which the Investor has requested for deciding whether to enter into
the transactions contemplated hereby. The Projections were prepared in good
faith and were carefully reviewed by management of Holdings or IAT, and Holding
and IAT believe that the assumptions underlying the Projections were reasonable;
provided, that neither Holdings nor IAT warrants hereby that such Projections
will ultimately prove to be accurate. Neither the representations and warranties
made pursuant to this Agreement, including for these purposes Exhibit B attached
hereto, nor any other written statements or certificates made or delivered in
connection herewith, contains any untrue
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statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein not misleading in light of the circumstances in
which they were made.
2.12 Registration Rights. Except as provided in Section 1 of the Investor's
Rights Agreement, and as set forth on Exhibit B hereto, Holdings has not granted
or agreed to grant any registration rights, including piggyback rights, to any
person or entity.
2.13 Title to Property and Assets. Except as set forth on Exhibit B hereto,
Holdings and each Subsidiary has good and marketable title to its property and
assets free and clear of all mortgages, liens, loans, and encumbrances, except
such encumbrances and liens which arise in the ordinary course of business and
do not materially impair Holdings' or such Subsidiary's ownership or use of such
property or assets. With respect to the property and assets it leases, Holdings
and each Subsidiary is in compliance in all material respects with such leases
and, to the Company's knowledge, holds a valid leasehold interest free of any
liens, claims, or encumbrances. All of Holdings' and each Subsidiary's
properties and assets are, in all material respects, in good operating and
usable condition, subject to normal wear and tear.
2.14 Labor Agreements and Actions; Employee Benefits. Neither Holdings nor
any Subsidiary is bound by or subject to (and none of its assets or properties
is bound by or subject to) any written or oral, express or implied, contract,
commitment, or arrangement with any labor union, and no labor union has
requested or, to the knowledge of the Company, has sought to represent any of
the employees, representatives, or agents of Holdings or any Subsidiary. There
is no strike or other labor dispute involving Holdings or any Subsidiary
pending, or, to the knowledge of the Company, threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of Holdings and its subsidiaries taken as a whole
(as such business is presently conducted and as it is proposed to be conducted
taken as a whole), nor is the Company aware of any labor organization activity
involving its employees. Except as set forth on Exhibit B, neither Holdings nor
any Subsidiary has any employment contract, deferred compensation agreement or
bonus, incentive or profit-sharing plans currently in force and effect, and
there are no existing or proposed material arrangements or transactions between
Holdings or any Subsidiary and any officer or director or holder of capital
stock of Holdings or any Subsidiary, other than transactions referred to in this
Agreement. To the best of the Company's knowledge, no officer or key employee of
Holdings or any Subsidiary is in violation of (a) any material term of any
employment agreement, non-disclosure agreement, noncompete agreement or other
similar agreement with any previous employer of such employee (and the
employment of such employee with Holdings or any Subsidiary will not result in a
violation of any such agreement) or (b) any obligation binding on such employee
which would prohibit the use of information obtained from such employee which
Holdings or any Subsidiary has used or proposes to use.
2.15 Tax Matters. Holdings and each Subsidiary (i) has timely filed all tax
returns that are required to have been filed by it with all appropriate
governmental agencies (and all such returns are true and correct and fairly
reflect in all material respects its operations for tax
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purposes); and (ii) has timely paid all taxes owed or assessments by it (other
than taxes the validity of which are being contested in good faith by
appropriate proceedings and which are reserved) and all such returns are true
and correct in all material respects. The assessment of any additional taxes for
periods for which returns have been filed is not expected to exceed the recorded
liability therefor and, to the Company's knowledge, there are no material
unresolved questions or claims concerning Holdings' or any Subsidiary's tax
liability. Neither Holdings' nor any Subsidiary's tax returns have been reviewed
or audited by any taxing authority. There is no pending dispute with any taxing
authority relating to any of said returns.
2.16 Insurance. All insurable properties of Holdings and each Subsidiary
are insured for the benefit of Holdings or each Subsidiary against such risks as
are usually insured against, and in such amounts as are usually obtained, by
persons owning or operating similar properties in the locality where such
properties are located, under policies issued by insurers of recognized
responsibility. Exhibit B hereto sets forth a description of the liability
insurance carried by Holdings and each Subsidiary, including policy amounts,
deductibles, carriers and coverage.
2.17 Exchange of Shares of IAT and Issuance of Warrants. The Stockholders
delivered and exchanged, or will deliver and exchange prior to the Closing, all
of the outstanding shares of capital stock of IAT in exchange for an aggregate
of 4,620,000 shares of Common Stock and the Non-Management Stockholder Warrant.
Upon delivery and exchange of each Stockholder's shares of capital stock of IAT
for Common Stock, good and marketable title to such shares of capital stock of
IAT passed, or will pass to Holdings, free and clear of all Encumbrances and IAT
became, or will become, a wholly-owned subsidiary of Holdings. There are not
outstanding any options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from IAT of any shares of
its capital stock.
3. Representations and Warranties of the Stockholders. Each Stockholder
hereby represents and warrants to the Investor with respect to itself that:
3.1 Authorization. He, she or it is of full age and has full right, power,
legal capacity and authority to execute and deliver this Agreement and to
perform his, her or its obligations hereunder. The execution, delivery and
performance of this Agreement and the performance of his, her or its obligations
hereunder constitutes the valid and binding obligations of such Stockholder,
enforceable against such Stockholder in accordance with its terms except as such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
or other equitable principles.
3.2 Exchange of Shares of IAT. Each Stockholder delivered and exchanged, or
will deliver and exchange prior to the Closing, all of his, her or its
outstanding shares of capital stock of IAT in exchange for certain shares of
Common Stock. Upon delivery and exchange of each Stockholder's shares of capital
stock of IAT for Common Stock, good and marketable title to such shares of
capital stock of IAT passed, or will pass to Holdings, free and clear of all
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Encumbrances. There are not outstanding any options, warrants, rights (including
conversion or preemptive rights) or agreements for the purchase or acquisition
from IAT of any shares of its capital stock.
3.3 Ownership of Capital Stock of Holdings. The Stockholders set forth on
Exhibit A, together with the number of shares, options or other derivative
securities held by each such Stockholder and set forth on Exhibit A, represent
all of the holders of the capital stock of Holdings.
3.4 Loan to IAT. Investor understands that between August 1, 1996 and the
Closing, certain non-management stockholders contributed capital to IAT which is
evidenced by demand notes issued by IAT to such stockholders. Such loans do not
exceed 2.5 million S.F. in the aggregate.
4. Representations and Warranties of the Investor. The Investor hereby
represents and warrants to Holdings that:
4.1 Authorization. This Agreement and the Rights Agreement constitute its
valid and legally binding obligations, enforceable in accordance with their
terms except as such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights or other equitable principles. The Investor
represents that it has full power and authority to enter into this Agreement and
the Rights Agreement.
4.2 No Unregistered Distribution. The Series A Preferred Stock to be
received by the Investor pursuant to the terms hereof will be acquired for
investment for the Investor's own account, without any view to the unregistered
public distribution or resale thereof, all without prejudice, however, to the
right of the Investor and any other person or entity receiving shares of Series
A Preferred Stock at the Closing ("Permitted Affiliate Transferees") at any time
lawfully to sell or otherwise to dispose of all or any part of the Series A
Preferred Stock pursuant to registration, any exemption therefrom under the Act,
applicable state securities laws and as set forth in Section 7.7.
4.3 Restricted Securities. The Investor understands that the Series A
Preferred Stock it is purchasing are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from
Holdings in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Act only in certain limited circumstances.
4.4 Investor Suitability. The Investor represents and warrants that it and
any Permitted Affiliate Transferee has the capacity to evaluate the merits and
risks of an investment in the Series A Preferred Stock and is able to bear the
economic risk of this investment. The
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Investor acknowledges that it has been provided access to all information
requested by it in order to evaluate the merits and risks of an investment in
the Series A Preferred Stock.
4.5 Legends. It is understood that the certificates evidencing the Series A
Preferred Stock may bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT."
(b) Any legend required by the laws of the State of Delaware.
The legend referred to in clause (a) above shall be removed by Holdings
from any certificate at such time as the holder of the Series A Preferred Stock
represented by the certificate delivers an opinion of counsel reasonably
satisfactory to Holdings to the effect that such legend is not required in order
to establish compliance with any provisions of the Act, or at such time as the
holder of such shares satisfies the requirements of Rule 144(k) under the Act,
provided that Rule 144(k) as then in effect does not differ substantially from
Rule 144(k) as in effect as of the date of this Agreement, and provided further
that Holdings has received from the holder a written representation that such
holder satisfies the requirements of Rule 144(k) as then in effect with respect
to such shares.
4.6 Governmental Consents. Except as listed on Exhibit G, no consent,
approval, order, or authorization of, or registration, qualification,
designation, declaration or filing with, any Swiss federal, state, local or
provincial governmental authority on the part of Investor is required in
connection with the consummation of the transactions contemplated by this
Agreement. To the best of the Investor's knowledge, Investor has complied (and
in carrying out its businesses the Investor will be in compliance) with all
laws, ordinances and regulations applicable to it and its business, which the
failure to comply with would, either individually or in the aggregate, have a
materially adverse effect upon the Investor. The Investor has obtained all Swiss
federal, state, local and foreign governmental licenses and permits material to
and necessary in the conduct of its business, such licenses and permits are in
full force and effect, no material violations are or have been recorded in
respect of any such licenses or permits, and no proceeding is pending or, to the
best of the Investor's knowledge, threatened to revoke or limit any thereof.
4.7 Compliance with Other Instruments. Except as noted in Exhibit G hereto,
the Investor is not in violation or default of any provisions of its Certificate
of Incorporation or By-laws (or other organizational documents) or of any
instrument, judgment, order, writ, decree, or contract to which it is a party or
by which it is bound, the violation or default of which would have a material
adverse effect on the Investor. Neither the execution and delivery of this
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Agreement nor the consummation of the transactions contemplated hereby will (a)
violate any provision of the Certificate of Incorporation or By-Laws (or other
organizational documents) of the Investor or (b) violate, or be in conflict
with, or constitute a default (or an event which, with notice or lapse of time
or both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or excuse performance by any person of
any of its obligations under, or cause the acceleration of the maturity of any
debt or obligation pursuant to, or result in the creation or imposition of any
Encumbrance upon any property or assets of the Investor under, any agreement or
commitment to which the Investor is a party or by which any of its respective
property or assets is bound, or to which any of the property or assets of the
Investor is subject, or (c) violate any statute or law or any judgment, decree,
order, regulation or rule of any court or other governmental authority
applicable to the Investor. The Investor does not have any knowledge of any
termination or material breach or anticipated termination or material breach by
the other parties to any material contract or commitment to which it is a party
or to which any of its assets is subject.
4.8 Ability to Make the Investment. The Investor has sufficient financial
ability and funds to make the investment in the Series A Preferred Stock as
contemplated by this Agreement.
5. Conditions of Investor's Obligations at Closing. The obligations of the
Investor under subsection 1.2 of this Agreement are subject to the fulfillment
on or before the Closing of each of the following conditions, the waiver of
which shall not be effective against the Investor unless the Investor has
consented in writing thereto:
5.1 Representations and Warranties. The representations and warranties of
Holdings, IAT and IAT Germany contained in Section 2 and the Stockholders
contained in Section 3 shall be true in all material respects on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of the Closing.
5.2 Performance. The Stockholders and Holdings, shall have performed and
complied with all agreements, obligations, and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
5.3 Compliance Certificate. The President and Treasurer of Holdings shall
deliver to the Investor at the Closing a certificate certifying that the
relevant conditions specified in Sections 5.1 and 5.2 have been fulfilled.
5.4 Secretary's Certificate. The Secretary of each of Holdings, IAT and IAT
Germany shall deliver to the Investor at the Closing a certificate certifying:
(i) that attached thereto is a true and complete copy of the By-laws of
Holdings, IAT or IAT Germany, as the case may be, as in effect at the Closing;
(ii) that attached thereto is a true and complete copy of all resolutions
adopted by the Board of Directors and the stockholders of each such entity
authorizing the transactions contemplated hereby and that such resolutions have
not been amended or
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modified and are in full force and effect; (iii) that Certificate of
Incorporation of each such entity, a true and correct copy of which is attached,
has not been further amended since September 26, 1996; (iv) to the incumbency
and specimen signatures of each officer of each such entity executing this
Agreement and the other agreements and certificates contemplated hereby.
5.5 Qualifications. Holdings shall have obtained all necessary Blue Sky law
permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Series A Preferred Stock hereunder.
5.6 Opinions of Company Counsel. The Investor shall have received from
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, special counsel for Holdings and IAT, opinions, dated as of
the Closing, substantially in the forms attached hereto as Exhibit F, and from
▇▇. ▇▇▇▇▇▇▇▇ and Partner, special counsel for IAT Germany, substantially in the
form of the opinion from special counsel for IAT.
5.7 Consents and Waivers. Holdings shall have obtained any and all consents
and waivers necessary or appropriate for consummation of the transactions
contemplated by this Agreement.
5.8 Rights Agreement. Holdings and the Investor shall have executed and
delivered the Rights Agreement.
5.9 Marketing Agreement. Holdings and General Capital shall have executed
and delivered the Marketing Agreement.
5.10 Warrant. Holdings shall have issued and delivered to the Investor the
Warrant.
5.11 Exchange. Prior to the Closing, the Stockholders shall have delivered
and exchanged an aggregate of 10,000 shares of capital stock of IAT,
constituting all of the outstanding capital stock of IAT, in exchange for an
aggregate of 4,620,000 shares of Common Stock and the Non-Management
Stockholders' Warrant.
5.12 Financial Statements. Holdings or IAT shall have delivered to the
Investor the financial statements referred to in Section 2.5 hereof and there
has not been a material adverse change to such financial statements from the
draft of the financial statements previously delivered to the Investor.
6. Conditions of Holdings' Obligations at Closing. The obligations of
Holdings under subsection 1.2 of this Agreement are subject to the fulfillment
on or before the Closing of each of the following conditions, the waiver of
which shall not be effective against Holdings unless Holdings has consented in
writing thereto:
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6.1 Representations and Warranties. The representations and warranties of
the Investor contained in Section 4 shall be true in all material respects on
and as of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of the Closing.
6.2 Performance. The Investor shall have performed and complied with all
agreements, obligations, and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
6.3 Compliance Certificate. The President of the Investor shall deliver to
Holdings at the Closing a certificate certifying that the relevant conditions
specified in Sections 6.1 and 6.2 have been fulfilled.
6.4 Consents and Waivers. Investor shall have obtained any and all consents
and waivers necessary or appropriate for consummation of the transactions
contemplated by this Agreement.
6.5 Rights Agreement. Holdings and the Investor shall have executed and
delivered the Rights Agreement.
6.6 Marketing Agreement. Holdings and General Capital shall have executed
and delivered the Marketing Agreement.
6.7 Bank Statement. The Investor shall have delivered to Holdings a copy of
a bank statement representing the ability of Investor to make the investment
contemplated by this Agreement.
7. Covenants.
7.1 Initial Public Offering. Holdings agrees that it shall use all
reasonable efforts to prepare and file with the Securities and Exchange
Commission (the "SEC") a registration statement under the Act relating to the
initial public offering no later than December 31, 1996.
7.2 Establishment of Underwriting Committee. On the date of the Closing,
Holdings shall establish an Underwriting Committee of its Board of Directors
(the "Committee"), which Committee shall be vested with full and exclusive
responsibility and authority on behalf of Holdings to select an underwriter and
to negotiate all of the terms and conditions of any such underwriting. The
Committee shall consist of four members, with two members to be appointed by
each of Holdings and the Investor. The Chairman of the Committee shall be
designated by the Investor. In the event that the Committee is unable to produce
a majority vote on any particular issue, such issue shall be decided by a vote
of the Board of Directors of Holdings; provided, that
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the resolution of any such issue by the Board of Directors shall not be
effectuated without the written consent of the Investor.
7.3 Valuation Adjustments.
(a) If, on the effective date of the IPO, the aggregate value of the
shares of Common Stock (as measured by the per share offering price of the
shares of Common Stock offered in the IPO) owned by non-management
stockholders of Holdings to be identified at the Closing (the
"Non-Management Stockholders") is less than $15,000,000 (the amount of such
shortfall being hereinafter referred to as the "Shortfall"), the Investor
and management stockholders of Holdings to be identified at the Closing
(the "Management Stockholders") shall, within five business days of the
Closing of the IPO, issue to the Non-Management Stockholders such
additional number of shares of Common Stock as shall have a value equal to
the Shortfall, rounded down to the nearest whole share, with the Investor
contributing 60% of the Shortfall, rounded down to the nearest whole share,
and the Management Stockholders contributing 40% of the Shortfall, pro
rata, rounded down to the nearest whole share.
(b) If, on the effective date of the IPO, the aggregate value of the
shares of Common Stock (as measured by the per share offering price of the
shares of Common Stock offered in the IPO) owned by the Non-Management
Stockholders is greater than $25,000,000 (the amount of such excess amount
being hereinafter referred to as the "Excess Amount"), the Non-Management
Stockholders shall, within five business days of the Closing of the IPO,
distribute, without any further consideration, such number of shares of
Common Stock as shall have a value equal to (i) 60% of the Excess Amount,
rounded down to the nearest whole share, to the Investor and (ii) 40% of
the Excess Amount, rounded down to the nearest whole share, to the
Management Stockholders, pro rata according to their respective
stockholdings.
7.4 Co-Chairman Compensation. During the three year period following the
date of the Closing, Holdings shall pay to ▇▇▇▇▇ ▇▇▇▇, the Co-Chairman, or upon
▇▇▇▇▇ ▇▇▇▇'▇ resignation, the individual designated by the Investor, approved by
the Board of Directors and elected as Co-Chairman of Holdings monthly
compensation as follows: (i) for each month prior to the Closing of the IPO,
$5,000 and (ii) for each month subsequent to the Closing of the IPO, $12,000.
7.5 Board Composition. Holdings agrees that, for so long as the Investor
shall hold the Series A Preferred Stock (or Common Stock issued upon conversion
thereof or upon exercise of the Warrant), without the Investor's consent, the
composition of the Board of Directors of IAT and IAT Germany shall be identical
to the composition of the Board of Directors of Holdings; provided, that the
Investor's consent shall not be withheld if required to comply with Swiss law.
7.6 Capitalization of IAT and IAT Germany. Holdings shall cause IAT and IAT
Germany not to issue, and shall not permit the issuance of, any shares of
capital stock (or any
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security convertible into shares of capital stock) of IAT or IAT Germany, it
being the intention of the parties that IAT shall remain a direct or indirect
wholly-owned subsidiary of Holdings and IAT Germany shall remain a direct or
indirect subsidiary of Holdings.
7.7 Right of First Refusal. (a) From the Closing until June 30, 1997, the
Investor may not sell, transfer or dispose of ("Transfer") any of its shares of
Series A Preferred Stock (or Common Stock issued upon conversion thereof or upon
exercise of the Warrant), and after June 30, 1997, the Investor may not Transfer
any of its shares of Series A Preferred Stock (or Common Stock issued upon
conversion thereof or upon exercise of the Warrant), except in accordance with
the following procedures:
(i) If the Investor desires to Transfer all or any part of the
Investor's shares of Series A Preferred Stock, the Investor shall submit a
written offer (the "Offer") to sell such shares of Series A Preferred Stock
(together, the "Offered Shares") to Holdings and the Stockholders, which
Offer shall specify the number of Offered Shares proposed to be sold, the
total number of shares of Series A Preferred Stock owned by the Investor,
and the terms and conditions, including price, at which the shares of
Series A Preferred Stock are being offered to Holdings and the
Stockholders, and such terms shall not be more favorable to the Investor
than the terms offered to Investor by the third party.
(ii) Holdings shall have the first right to purchase all of the
Offered Shares. In the event that Holdings determines not to purchase any
of the Offered Shares or less than all of the Offered Shares, each
Stockholder shall have the right to purchase that number of Offered Shares
as shall be equal to the number of Offered Shares not purchased by Holdings
multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock then owned by such Stockholder and the denominator
of which shall be the aggregate number of shares then owned by all of the
Stockholders (the "Pro Rata Fraction"). In all instances, the Stockholders
shall only have the right, but not the obligation, to purchase such Offered
Shares as are not purchased by Holdings.
(iii) Stockholders shall have a right of oversubscription such that if
any Stockholder fails to accept the Offer as to its or his full Pro Rata
Fraction, the other Stockholders shall, among them, have the right to
purchase up to the balance of the Offered Shares not so purchased. Such
right of oversubscription may be exercised by a Stockholder by accepting
the Offer as to more than its or his Pro Rata Fraction. If, as a result
thereof, such oversubscriptions exceed the total number of Offered Shares
available in respect of such oversubscription privilege, the
oversubscribing Stockholders shall be cut back with respect to their
oversubscriptions so as to sell the Offered Shares as nearly as possible in
accordance with their respective Pro Rata Fractions or as they may
otherwise agree among themselves.
(iv) If Holdings or a Stockholder desires to purchase all or any part
of the Offered Shares, Holdings or such Stockholder (a "Purchasing
Stockholder") shall communicate in writing its or his election to purchase
(an "Acceptance") to the Investor, which
-16-
Acceptance shall state the number of Offered Shares Holdings or the
Purchasing Stockholder desires to purchase and shall be delivered in person
or mailed to the Investor at the address set forth in the Offer, with a
copy to Holdings and the other Stockholders, within 20 days of the date the
Offer was made. Sale of the Offered Shares to be sold to Holdings or the
Purchasing Stockholders pursuant to this Section 7.7 shall be made at the
offices of the Investor on the thirtieth day following the expiration of
the 20-day period after the Offer is made (or if such thirtieth day is not
a business day, then on the next succeeding business day). Such sales shall
be effected by the Investor's delivery to Holdings or each Purchasing
Stockholder, as the case may be, of a certificate or certificates
evidencing the Offered Shares to be purchased by it or him, duly endorsed
for transfer to Holdings or the Purchasing Stockholder, as the case may be,
which shares shall be delivered free and clear of all liens, charges,
claims and encumbrances of any nature whatsoever, against payment to the
Investor of the purchase price therefor by Holdings or such Purchasing
Stockholder, as the case may be. Payment for the Offered Shares shall be
made as provided in the Offer or by wire transfer or cashier's check.
(v) If Holdings and/or the Stockholders, as the case may be, do not
agree to purchase all of the Offered Shares, then all of the Offered Shares
may be sold by the Investor at any time within 120 days after the date the
Offer was made. Any such sale shall be upon terms and conditions, including
price, not less favorable to Investor than those specified in the Offer.
Any Offered Shares not sold within such 120-day period shall continue to be
subject to the requirements of a prior offer pursuant to this Section 7.7.
(b) Any prohibition on transfer stated in this Section 7.7 shall also
include the Warrant.
(c) The covenant set forth in this Section 7.7 shall terminate and be of no
further force or effect upon the consummation of an IPO.
8. Indemnification
8.1. Indemnification by Holdings, IAT and IAT Germany. In the event that
the transactions contemplated by this Agreement are consummated, Holdings, IAT
and IAT Germany severally shall indemnify Investor and each of its officers and
directors and hold each of them harmless from, against and in respect of and
shall on demand reimburse such persons for all its losses, liabilities, damages,
costs and expenses arising from any material misrepresentation or breach of any
representation, warranty, covenant or agreement on the part of Holdings, IAT or
IAT Germany, under this Agreement, the Rights Agreement, the Marketing Agreement
or the Warrant, and any and all actions, suits, proceedings, elections, demands,
assessments, judgments, costs and expenses, including without limitation,
reasonable legal fees and expenses, incident to any of the foregoing or incurred
in investigating or attempting to avoid same or to oppose the imposition
thereof, or in enforcing this indemnity; provided, that the aggregate liability
of Holdings, IAT and IAT Germany under this Section 8.1 shall be limited to
$1,500,000 and provided, further, that Holdings, IAT and IAT Germany shall have
no liability pursuant to this
-17-
Section 8.1 until the aggregate of all losses, damages, costs and expenses,
including reasonable legal fees, exceeds $25,000, except that this proviso shall
not apply to any liability resulting from Holdings', IAT's or IAT Germany's
fraud, intentional misrepresentation or intentional failure to perform or comply
with any agreement contained herein or in the Rights Agreement, the Marketing
Agreement or the Warrant and Holdings, IAT and IAT Germany shall be liable for
all losses, damages, costs and expenses with respect thereto. Notwithstanding
the foregoing, in the event that a court of competent jurisdiction having final
adjudicative authority and from which no appeal is available shall determine
that the Investor is not entitled to indemnification, then the Investor shall
not be entitled to recover its legal fees with respect to such claim from
Holdings, IAT or IAT Germany.
8.2. Indemnification by Investor. In the event that the transactions
contemplated by this Agreement are consummated, the Investor shall indemnify
Holdings, IAT and IAT Germany and each of their officers and directors and hold
each of them harmless from, against and in respect of and shall on demand
reimburse such persons for all its losses, liabilities, damages, costs and
expenses arising from or in connection with any material misrepresentation or
breach of any representation, warranty, covenant or agreement on the part of the
Investor under this Agreement, the Rights Agreement, the Marketing Agreement or
the Warrant, and any and all actions, suits, proceedings, elections, demands,
assessments, judgments, costs and expenses, including without limitation,
reasonable legal fees and expenses, incident to any of the foregoing or incurred
in investigating or attempting to avoid same or to oppose the imposition
thereof, or in enforcing this indemnity; provided, that the aggregate liability
of the Investor under this Section 8.2 shall be limited to $1,500,000 and
provided, further, that Investor shall have no liability pursuant to this
Section 8.2 until the aggregate of all losses, damages, costs and expenses,
including reasonable legal fees, exceeds $25,000, except that this proviso shall
not apply to any liability resulting from Investor's fraud, intentional
misrepresentation or intentional failure to perform or comply with any agreement
contained herein or in the Rights Agreement, the Marketing Agreement or the
Warrant and Investor shall be liable for all losses, damages, costs and expenses
with respect thereto. Notwithstanding the foregoing in the event that a court of
competent jurisdiction having final adjudicative authority and from which no
appeal is available shall determine that Holdings is not entitled to
indemnification then Holdings shall not be entitled to recover its legal fees
with respect to such claim from the Investor.
8.3. Procedures for Indemnification. Promptly after receipt by an
indemnified party under sections 8.1 or 8.2 of notice of the commencement of any
action for which indemnification may be available under section 8.1 or 8.2 such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party under such section, give notice to the indemnifying party of
the commencement thereof, but the failure so to notify the indemnifying party
shall not relieve it of any liability that it may have to any indemnified party
except to the extent the indemnifying party demonstrates that the defense of
such action is prejudiced thereby. In case any such action shall be brought
against an indemnified party and it shall give notice to the indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall elect, to assume the
defense thereof with counsel
-18-
reasonably satisfactory to such indemnified party and, after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under such section for any fees of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation and costs and
expenses of legal counsel, if the indemnified party and the indemnifying party
are both parties to the action and the indemnified party has been advised by
counsel that there may be one or more defenses available to it and not available
to the indemnifying party. If an indemnifying party assumes the defense of such
an action, (a) no compromise or settlement thereof may be effected by the
indemnifying party without the indemnified party's consent (which shall not be
unreasonably withheld) unless (i) there is no finding or admission of any
violation of law or any violation of the rights of any person and no effect on
any other claims that may be made against the indemnified party and (ii) the
sole relief provided is monetary damages that are paid in full by the
indemnifying party and (b) the indemnifying party shall have no liability with
respect to any compromise or settlement thereof effected without its consent
(which shall not be unreasonably withheld). If notice is given to an
indemnifying part of the commencement of any action and it does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense thereof, the
indemnifying party shall be bound by any determination made in such action or
any compromise or settlement thereof effected by the indemnified party.
Notwithstanding the foregoing, if an indemnified party determines in good faith
that there is a reasonable probability that an action may materially and
adversely affect it or its affiliates other than as a result of monetary
damages, such indemnified party may, by notice to the indemnifying party, assume
the exclusive right to defend, compromise or settle such action, but the
indemnifying party shall have the right to participate in such action and not be
bound by any determination of an action so defended or any compromise or
settlement thereof effected without its consent (which shall not be unreasonably
withheld).
9. Miscellaneous
9.1 Survival of Warranties. The warranties, representations, and covenants
of Holdings, the Stockholders, and the Investor contained in or made pursuant to
this Agreement shall survive the execution and delivery of this Agreement and
the Closing for a period of two years from the date of this Agreement and shall
in no way be affected by any investigation of the subject matter thereof made by
or on behalf of Holdings, the Investor or the Stockholders.
9.2 Successors and Assigns. Except as otherwise provided herein, the terms
and conditions of this Agreement may not be assigned by any party without the
written consent of the other parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
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9.3 Governing Law; Jurisdiction. This Agreement shall be governed by and
construed under the laws of the State of New York, disregarding any New York
principles of conflicts of laws that would otherwise provide for the application
of the substantive laws of another jurisdiction. The parties agree that all
actions or proceedings arising in connection with this Agreement shall be tried
and litigated only in the State of New York. The parties waive any right they
may have to assert the doctrine of forum non conveniens or to object to such
venue, and hereby consent to court ordered relief.
9.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.5 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
9.6 Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery or delivery by facsimile to the party to be
notified or four (4) days after deposit with an air courier or the United States
Post Office, by registered or certified mail, postage prepaid and addressed to
the party to be notified at the address indicated for such party on the
signature page hereof, or at such other address as such party may designate by
ten (10) days' advance written notice to the other parties, with a copy for
Holdings or IAT to ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, facsimile telephone number (▇▇▇) ▇▇▇-▇▇▇▇ and a copy
for the Investor to Bachner, Tally, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
9.7 Finder's Fee. Each party represents that it neither is nor will be
obligated for any finder's fee or commission in connection with this
transaction. Each party agrees to indemnify and hold harmless the other parties
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which such party or any of its officers, employees, or
representatives is responsible.
9.8 Entire Agreement; Amendments and Waivers. This Agreement constitutes
the full and entire understanding and agreement between the parties with regard
to the subjects hereof. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of Holdings and the Investor. Any amendment or waiver effected
in accordance with this Section 9.8 shall be binding upon each holder of any
securities purchased or exchanged under this Agreement at the time outstanding
(including securities into which such securities are convertible), each future
holder of all such securities, Investor and Holdings.
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9.9 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
9.10 Expenses. Whether or not the transactions contemplated by this
Agreement shall be consummated, each party agrees that all fees and expenses
incurred by it in connection with this Agreement shall be borne by it,
including, without limitation, all fees of counsel, actuaries and accountants.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
IAT HOLDINGS, INC.
By: /s/ ▇▇. ▇▇▇▇▇▇ ▇▇▇▇
------------------------------
Name: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇
Title: Chief Executive Officer
Address: Delaware, USA
Facsimile telephone number:
IAT AG
By: /s/ ▇▇. ▇▇▇▇▇▇ ▇▇▇▇
------------------------------
Name: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇
Title: Chief Executive Officer
Address:
Facsimile telephone number:
IAT GERMANY
By: /s/ ▇▇. ▇▇▇▇▇▇ ▇▇▇▇
------------------------------
Name: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇
Title: Managing Director
Address:
Facsimile telephone number:
VERTICAL FINANCIAL HOLDINGS
By: /s/ ▇▇▇▇▇ ▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: Director
Address:
Facsimile telephone number:
STOCKHOLDERS:
/s/ K. - ▇. ▇▇▇▇▇▇
-----------------------------------
/s/ ▇. ▇▇▇▇▇▇▇
-----------------------------------
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇ GmbH
-----------------------------------
/s/ ▇. ▇▇▇▇▇
-----------------------------------
/s/ ▇. ▇▇▇▇▇ Handel GmbH & Co KG
-----------------------------------
/s/ C. Holthuisen
-----------------------------------
/s/ ▇▇. ▇. ▇▇▇▇
-----------------------------------
/s/ ▇. ▇▇▇▇▇▇▇
-----------------------------------
/s/ bmp Management Consultants GmbH
-----------------------------------
/s/ ▇. ▇▇▇▇▇
-----------------------------------
/s/ ▇▇▇▇▇ Consult AG
------------------------------
Exhibit A
On the date of the Stock Purchase Agreement, the persons or entities
listed below are the stockholders of IAT AG and they hold the number of shares
set forth opposite of their respective names.
Non-Management Stockholders
K. - ▇. ▇▇▇▇▇▇ 1,792
▇. ▇▇▇▇▇▇▇ 1,679
Walther Glas GmbH 357
▇. ▇▇▇▇▇ 1,309
▇. ▇▇▇▇▇ Handel GmbH & Co KG 1,041
C. Holthuisen 306
▇▇. ▇. ▇▇▇▇ 214
▇. ▇▇▇▇▇▇▇ 146
bmp Management Consultants GmbH 143
▇. ▇▇▇▇▇ 107
▇▇▇▇▇ Consult AG 49
----------
7,143
Management Stockholders
▇▇. ▇. ▇▇▇▇ 2,857
Exhibit B
(Oktober 21, 1996)
Any item or matter contained in any subsection to this Exhibit B shall be deemed
incorporated by reference into all other subsections to this Exhibit B as though
set forth in full therein, without need for any reference thereto.
1. (Section 2.2 (c))
None
2. (Section 2.3)
IAT AG, a corporation incorporated in and under the laws of
Switzerland, having its domicile at Turgi (Gebenstorf). The nominal
share capital is SFr. 10,000,000 divided into 10,000 registered shares
with a nominal value of SFr. 1,000 each, 100% of which are held by
Holdings. However, under Swiss law, the members of the board of
directors require one share each. The Articles of Incorporation of IAT
AG provide for a restriction of the transfer of the shares.
IAT Deutschland GmbH, a company incorporated in and under the laws of
Germany, having its domicile at Bremen. The nominal share capital is DM
700,000, 74.9% of which is held by IAT AG. The minority shareholder
holding 25.1 of the share capital of the company is HIBEG (Hanseatische
Industrie-Beteiligungen GmbH), a company having its domicile in Bremen.
According to the Articles of Incorporation, the transfer of quotas of
the capital of IAT GmbH is subject to the consent of the other
shareholder.
3. (Section 2.6)
None
4. (Section 2.7)
A. Holdings
None
-1-
B. IAT AG
Dispute with Basix AG, Zurich, a supplier of computer chips regarding
the cancellation of a purchase order dated August 4, 1995, The value in
dispute amounts to approx. $23,000. So far, no provisions have been
made in the financial statements.
C. IAT GmbH
Dispute with Alarm Meyer, Breman, a supplier of a burglar alarm systems
regarding his insufficient performance. The value in dispute is approx.
DM 5,000.
Dispute with Vero Electronics, a supplier of IAT GmbH, concerning
defective hardware. The claim against IAT GmbH amounts to approx. DM
60,200. The local lawyer of IAT GmbH estimates that the matter can be
settled by payment of approx. 50% of the claim.
In both cases, provisions of approx. 50% of the claims in question
have been made in the financial statements.
5. (Section 2.8)
A. Holdings
None
B. IAT AG
I. Product Rights and Licenses in Joint Development Contracts
------------------------------------------------------------------------------------------------------------------------------------
Contract Partner Date Comment
------------------------------------------------------------------------------------------------------------------------------------
Vertrag der Entwicklungsgemein-schaft German Telkom August 1992 Special multimedia communication
Kommunikationsrechner (EGKP) ("Agreement as to the facilities
Joint Development of Communication FacilIATeAG)
The period of the agreement has expired
------------------------------------------------------------------------------------------------------------------------------------
MVP Cross License Agreement Texas Instruments ▇▇▇▇ August 1994 Version 1 H.32p Libraries, JPEG
IAT AG The period of the agreement will expire
in 2004 if not terminated earlier for
valid reasons
------------------------------------------------------------------------------------------------------------------------------------
-2-
------------------------------------------------------------------------------------------------------------------------------------
Contract Partner Date Comment
------------------------------------------------------------------------------------------------------------------------------------
Transfer of Source Codes between Texas I Texas Instruments ▇▇▇▇ August 1994 Closing of Version 1 H.320 cross
IAT License Agreement
IAT AG
The period of the agreement has expired
------------------------------------------------------------------------------------------------------------------------------------
Kooperationsvertrag zur Entwicklung der IBM Germany December 1994 Interactive Kiosk
Multimedialen Informations- und Kommunikations-
systems MIKS ("Cooperation-Agreement regGerman German Telekom
Telekom Development of Version 3 of the Multimedia
Information and Communication System MIKS") IAT AG According to the agreement the period
of the contract expired on June 30,
1996. The parties have, however,
agreed on an extension of the period
of the contract until December 31,
1996 in order to enable the completion
of the development of the product.
Furthermore, the parties are presently
negotiating an agreement as to the
marketing of the product.
------------------------------------------------------------------------------------------------------------------------------------
Rahmenkooperationsvertrag uber die gemeinsame German Telekom October 1995 Special functions:
Weiterentwicklung des IAT/Deutsche Telekom MPEG/JPEG
Softwarecodecs auf Basi's des Texas Instruments IAT AG H.320 as TMS320C80
Parallelprozessors TMS320C8x ("Frame-Cooperation-
Agreement regarding the Joint Further Development of
the IAT/ German Telecom Softwarecodecs based on According to the agreement the period
Texas Instruments Parallel Processor TMS320C8x") of the contract will expire on
December 31, the 1996. However, as the
development of product will not be
completed by that date, the parties
have agreed to extend the period of
the contract until the product has
been completed.
------------------------------------------------------------------------------------------------------------------------------------
Auftrag Entwicklung des Multi-funktional German Telekom December 1995 Last version of several contracts,
Kommunikations-systems MFKS ("Agreement closes MFKS development
regarding the Development of the Multifunctional IAT AG
Communications System MFKS") The period of the agreement has expired
------------------------------------------------------------------------------------------------------------------------------------
Auftrag Wavelet-Datacompression fur die ▇▇▇▇. ▇▇▇▇▇▇ April 1996 Quality still-video for telemedicine
Ubertragung von Still-Video-bildern in hoher
Qualitat ("Agreement regarding
Wavelet-Datenkompression for the IAT AG The period of the agreement will expire
Transmission of High Quality Still Video") on December 31, 1996
------------------------------------------------------------------------------------------------------------------------------------
Joint Development and Cross License Texas Instruments Inc. June 1996 Version 2, Low-cost board, H.320
Agreement Library, Software Modules, Production
IAT AG and Development Licenses
The period of the agreement will
expire on March 31, 1999 if not
terminated earlier for valid reasons
------------------------------------------------------------------------------------------------------------------------------------
-3-
Furthermore, there are, at present, ongoing negotiations between IAT AG and
Texas Instruments Inc. regarding the conclusion of a new agreement
concerning the development of Basic Codes for the TI C80 processor.
II. Use of Third Party Rights by License Agreements for Development or
Production of IAT-Products (standard tools excluded)
--------------------------------------------------------------------------------------------------------------------------
Contract Partner Date Comment
--------------------------------------------------------------------------------------------------------------------------
MVIP License and Technology Disclosure Mitel February 1993 Use of MVIP Interface
Agreement
IAT AG This agreement has been entered into for
an indefinite period of time but can be
terminated for valid reasons
--------------------------------------------------------------------------------------------------------------------------
Program License Agreement Texas Instruments November 1993 MVP
Germany
IAT AG This agreement has been entered into for
an indefinite period of time but can be
terminated for valid reasons
--------------------------------------------------------------------------------------------------------------------------
Software License Agreement Trillium February 1996 Version 2 (LAPD, Q.930/Q.931 CCITT
88, Q.930/Q.931 ETSI)
IAT AG
This agreement has been entered into for
an indefinite period of time but can be
terminated for valid reasons
--------------------------------------------------------------------------------------------------------------------------
License Agreement Amendment Trillium May 1996 Q.930/Q.931-National ▇▇▇▇-▇,
▇.▇▇▇/▇.▇▇▇ ▇▇▇
IAT AG
This agreement has been entered into for
an indefinite period of time but can be
terminated for valid reasons
--------------------------------------------------------------------------------------------------------------------------
III. Marketing and Project Agreement regarding Applications
--------------------------------------------------------------------------------------------------------------------------
Contract Partner Date Comment
--------------------------------------------------------------------------------------------------------------------------
Lizenz- und Vertriebsrahmen-vereinbarung GermaneTelekom April 1994 Sale/Marketing of jointly developed
and Frame-Distribution-Agreement") products
IAT AG
The agreement is governed by German law and does
not provide for an expiry date. It can, however,
be terminated for valid reasons.
--------------------------------------------------------------------------------------------------------------------------
-4-
Note: All relevant contracts include Non-Disclosure Agreements. Only those
parts of the contracts necessary for marketing and sales may be
published.
IV. Use of Rights owned by IAT AG by Third Parties
Except for the Agreements already listed in this section and for
license agreements entered into by IAT AG with third parties in the
normal course of its business, there are no other agreements entitling
any third party to make use of IAT AG's rights to Intellectual
Property.
V. Rights of Employees to Intellectual Property
According to Swiss law, the employee who creates Intellectual Property
while performing his employment activities and his contractual duties
automatically obtains a personal right thereto. The employer is,
however, entitled to make any use of this Intellectual Property, to the
extent consistent with the purpose of the employment relationship.
C. IAT GmbH
I. Project Agreement
Projektvertrag ("Project-Agreement") between Olympus Optical Co.
(Europa) GmbH and IAT GmbH concerning the development/integration of
ISDN-based remote control for parts of an Olympus Microscope. The date
of the Agreement is January 5, 1996. The Agreement came into force
retrospectively in September 1995 and expired on December 31, 1995.
II. Licensing and Marketing Agreement
Know-How, Vertriebs- und Herstellungs- Lizenzvertrag (Know-How,
Distribution- and Production- License Agreement) between IAT AG and IAT
GmbH. The date of the Agreement is December 1995. The Agreement grants
IAT GmbH the nonexclusive right to produce, use and distribute the
"IAT-Products" in Germany and contains detailed provisions as to the
rights and duties of each party to this Agreement. The Agreement has
been entered into for an indefinite period of time and except for valid
reasons it can not be terminated earlier than December 31, 2000.
Kooperationsvereinbarung (Cooperation-Agreement) between Olympus
Optical Co. (Europa) GmbH and IAT GmbH. The Agreement was entered into
on March 18, 1996, is governed by German law and does not contain any
provisions as to its termination.
-5-
III. Rights of Employees to Intellectual Property
Under German law according to the employee-invention-act
(Arbeitnehmererfindungsgesetz) the employee while performing his
employment activities and his contractual duties obtains a personal
right thereto. If the invention is patentable or admissible to model
registration utility, the employee has the duty to inform his employer
of his invention. The employer is entitled - respecting certain time
limits - to request the transfer of rights to the invention
indemnifying the employee. Employee-inventions subject to the
copyright-act (Urheberrechtsgesetz) are not transferable, therefore the
employer being only entitled to make use of it. According to the
copyright-act (Urheberrechtsgesetz, ss. 69 b) the employer, however,
has in general the exclusive right to make use of computer programs
which the employee has developed while performing his employment
activities and his contractual duties. In principle, jurisprudence
grants an indemnification to the employee for programs being qualified
as special performances (Sonderleistungsprinzip).
6. (Section 2.9)
A. Holdings
None
B. IAT AG
In the event that the assets, as listed in the annual balance sheet, no
longer cover half of the share capital and the legal reserves of the
company, Art. 725 subsection 1 of the Swiss Code of Obligations ("Art.
725 subsection 1") provides for the board of directors to call a
general meeting of the shareholders and to propose a financial
reorganization. Furthermore, Art. 725 subsection 2 of the Swiss Code of
Obligations ("Art. 725 subsection 2"_) states that if the claims of the
company's obligees are neither covered if the assets are valued at
on-going business value nor at liquidation values, the board of
directors shall notify the judge in order to commence bankruptcy
proceedings unless obligees of the company subordinate their claims to
those of all other company obligees to the extent of such insufficient
coverage.
As far as IAT AG is concerned, the assets as listed in the annual
balance sheets of the company have fallen below the limit provided in
Art. 725 subsection 1. Consequently, in order to comply with the
provisions of Art. 725 subsection 1. and Art. 725 subsection 2 the
shareholder and the board of directors have taken and are taking the
measures they deem appropriate. In particular, the capital of the
company was increased to
-6-
SFr. 10,000,000 and the present shareholders of IAT AG have provided
IAT AG with subordinated loans amounting to SFr. 900,000 and DM
700,000. Furthermore, from the point of view of the shareholders of IAT
AG, one of the objectives of this present Agreement is to increase the
capital of IAT AG with the funds which are expected to be provided with
the proceeds of the Closing and any subsequent financing and thus to
effect the financial restructuring of the company. IAT AG is of the
opinion that at Closing it will not be in violation of Art. 725
subsection 2. Future activities of IAT AG will, however, be dependent
upon further equity financing as described above.
C. IAT GmbH
The company discloses a negative owners' equity. Since the long-term
loans from the owners have been subjected to declaration of debt
subordination under German commercial law, these loans act as equity
substitutes versus other creditors of the company.
7. (Section 2.10(a))
A. Holdings
None
B. IAT AG
I. Officers and Directors
------------------------------------------------------------------------------------------------------------------------------
Notification
Amount Period of
Name and Position Form of Agreement SFr. Fringe benefits SFr. Termination
------------------------------------------------------------------------------------------------------------------------------
▇▇. ▇▇▇▇ oral 162,000 p.a. 12,000 p.a. expense Contract ruled
CEO company car by Swiss Code
option to shares of of Obligations
IAG AT
------------------------------------------------------------------------------------------------------------------------------
▇. ▇▇▇▇▇▇▇ oral 1,500 per meeting -- Contract ruled
Chairman of the Board by Swiss Code
of Obligations
------------------------------------------------------------------------------------------------------------------------------
C. Holthuizen oral 1,000 per meeting -- Contract ruled
Member of the Board by Swiss Code
of Obligations
------------------------------------------------------------------------------------------------------------------------------
-7-
------------------------------------------------------------------------------------------------------------------------------
▇. ▇▇▇▇▇ future oral 1,000 per meeting -- Contract ruled
Member of the Board by Swiss Code
of Obligations
------------------------------------------------------------------------------------------------------------------------------
K. Grissemann Consulting contract 775.-/day Company car 30 days before
CFO end of each
quarter
------------------------------------------------------------------------------------------------------------------------------
▇. ▇▇▇▇▇ Employment contract 128,000 p.a. Company car 6 months
Sales Manager Bonus based on performance
(none so far)
12,000 expense allowance
------------------------------------------------------------------------------------------------------------------------------
▇. ▇▇▇▇▇▇ Employment contract 126,000 p.a. Company car 6 months
Manager Product Development
------------------------------------------------------------------------------------------------------------------------------
II. Affiliates
Agreement as to subordinated loans between IAT AG, Walther Glas GmbH,
▇▇. ▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇. The date of this Agreement is August 23,
1996. According to this Agreement Walther Glas GmbH shall grant to IAT
AG a subordinated loan amounting to SFr. 1,000,000 and ▇▇. ▇▇▇▇▇▇
shall grant to IAT AG a subordinated loan amounting to SFr. 500,000
(or in the event that the loan granted by Telefutura AG has to be paid
back prior to the IPO amounting to SFr. 650,000). The loans are to be
paid back by the company by June 30, 1997. In the event that such
repayment cannot be effected, specific provisions apply and, in
particular, Walther Glas GmbH has an option to acquire the shares of
IAT AG or of Holding held by ▇▇. ▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇. After signing
of the Stock Purchase Agreement the additional shareholder loan of
SFr. 500,000 which ought to have been granted to IAT AG by ▇▇. ▇▇▇▇▇▇
was granted by Walther Glas GmbH. In return Walther Glas GmbH has
acquired 500 shares of IAT AG from ▇▇. ▇▇▇▇▇▇. ▇▇. ▇▇▇▇▇▇ has,
however, an option to reacquire the equivalent of 500 shares of IAT AG
in shares of Holdings from Walther Glas GmbH, in the event that this
last loan amounting to SFr. 500,000 granted by Walther Glas GmbH to
IAT AG is replaced by a similar loan granted by him at a latter date.
Investment agreement dated December 19, 1995 between AIG GmbH, IAT AG
and HIBEG, Bremen. The Agreement provided for the acquisition of 25.1%
of the capital of IAT GmbH by HIBEG. Furthermore the Agreement lays
down the general rules for the conduct of the business of IAT GmbH and
provides for both HIBEG and IAT AG to grant to IAT GmbH subordinated
shareholders' loans.
-8-
C. IAT GmbH
I. Officers and Directors
------------------------------------------------------------------------------------------------------------------------------------
Notification
Amount Period of
Name and Position Form of Agreement SFr. Fringe benefits SFr. Termination
------------------------------------------------------------------------------------------------------------------------------------
W. Gudauski written employment co168,000 p.a. Bonus on performance (none so far) 6 months
Managing Director Company car
IAT GmbH
------------------------------------------------------------------------------------------------------------------------------------
▇. ▇▇▇▇▇▇▇▇▇ written employment co95,000 p.a. 6 weeks before
Administration Manager end of each
quarter
------------------------------------------------------------------------------------------------------------------------------------
II. Affiliates
Investment agreement dated December 19, 1995 between AIG GmbH, IAT AG
and HIBEG, Bremen. The Agreement provided for the acquisition of 25.1%
of the capital of IAT GmbH by HIBEG. Furthermore the Agreement lays
down the general rules for the conduct of the business of IAT GmbH and
provides for both HIBEG and IAT AG to grant to IAT GmbH subordinated
shareholders' loans.
Agreement as to subordinated shareholders' loan between IAT GmbH and
HIBEG. The date of the Agreement is December 19, 1995. According to the
Agreement IAT AG shall grant to IAT GmbH a subordinated loan not
exceeding DM 750,000. The Agreement provides for that from June 30,
2000 to December 31, 2004 the loan has to be paid back in installments.
Agreement as to subordinated shareholders' loan between IAT GmbH and
IAT AG. The date of the Agreement is December 19, 1995. According to
the Agreement IAT AG shall grant to IAT GmbH a loan subordinated to the
loan of HIBEG not exceeding DM 1,000,000. The Agreement provides for
that from June 30, 2000 to December 31, 2004, the loan has to be paid
back in installments.
-9-
8. (Section 2.10(b))
A. Holdings
None
B. IAT AG
All the Agreements listed pursuant to section 2.8 and the employment
agreements which are not listed as none of them provides for an
exceptional notice period of termination.
Agreement as to the lease of the premises of IAT AG. The lease amounts
to approx. $120,000 p.a., the notification period of termination is 6
months and the Agreement can be terminated at the end of each quarter
of a year.
C. IAT GmbH
Agreement as to the lease of the premises of IAT GmbH. The lease
amounts to approx. $185,000 p.a. The notification period of termination
is 12 months, the earliest possible date of termination is January 1,
1998. The Agreement can then be terminated at the end of each quarter
of the year.
Agreement as to the purchase of Codecs from Elcoteq for the price of
approx. $140,000.
Consulting Agreement with R. Hlavatsch for technical advice. The
remuneration amounts to approx. $100,000 p.a. the notification period
of termination is 1 month and the agreement can be terminated at the
end of each quarter of the year.
9. (Section 2.10 (c))
A. Holdings
None
-10-
B. IAT AG
Subordinated loans:
Walther Glas GmbH SFr. 900,000 and DM. 700,000 (as of October
15, 1996) these loans are to be paid back
with the proceeds of the IPO
Other loans:
Telefutura AG approx. $125,000
Bank loans and bank overdrafts:
Schweiz. Bankverein approx. $1,550,000 (secured by guarantees
of IAT shareholders)
C. IAT GmbH
Subordinated shareholders' loans:
HIBEG approx. $500,000
IAT AG approx. $670,000
Bank loans and bank overdrafts:
Volksbank Sottrum approx. $670,000 (secured by pledge of
accounts receivable
and guarantees of IAT AG,
HIBEG, Mr.
Gudauski and ▇▇. ▇▇▇▇)
▇▇▇▇▇▇ Bank approx. $37,000 (secured by guarantee of
IAT AG)
Accounts payable:
Elcoteq approx. $150,000
10. (Section 2.12)
None
-11-
11. (Section 2.13)
A. Holdings
None
B. IAT AG
None
C. IAT GmbH
IAT GmbH has pledged all of its accounts receivable in order to secure
the bank loan granted by Volksbank Sottrum.
12. (Section 2.14)
A. Holdings
None
B. IAT AG
In Switzerland, most employment relations are based on written
agreements regardless of what position and responsibilities the
employee has and what kind of work he performs for the employer. Except
for some of the employment agreement already listed in other
subsections of Exhibit B, none of these employment contracts provide
for an unusual period of termination. It must, however, be noted that
some of the employees of IAT AG work in teams and that the termination
of some employment relations might, therefore, have an influence on the
performance of such a team.
C. IAT GmbH
In Germany, most employment relations are based on written agreements
regardless of what position and responsibilities the employee has and
what kind of work he performs for the employer. Except for some of the
employment agreement already listed in other subsections of Exhibit B,
none of these employment contracts provide for an unusual period of
termination. It must, however, be noted that some of the employees of
IAT
-12-
GmbH work in teams and that the termination of some employment
relations might, therefore, have an influence on the performance of
such a team.
13. (Section 2.16)
A. Holdings
None
B. IAT AG
------------------------------------------------------------------------------------------------------------------
Carrier Policy amount SFR Coverage
------------------------------------------------------------------------------------------------------------------
Genfer Versicherungen 1,000,000 Inventory and Fixed Assets, Fire,
Burglary
------------------------------------------------------------------------------------------------------------------
Genfer Versicherungen 2,000,000 Company liability
------------------------------------------------------------------------------------------------------------------
C. IAT GmbH
Carrier Policy amount DM Coverage
------------------------------------------------------------------------------------------------------------------
Securitas 800,000 Inventory and Fixed Assets, Fire,
Burglary
------------------------------------------------------------------------------------------------------------------
Securitas 2,000,000 Company liability
------------------------------------------------------------------------------------------------------------------
-13-
EXHIBIT C
INVESTOR'S RIGHTS AGREEMENT
THIS INVESTOR'S RIGHTS AGREEMENT (the "Agreement") is made as of October
__, 1996, by and between IAT Holdings, Inc., a Delaware corporation (the
"Company"), and Vertical Financial Holdings ("Vertical" or the "Investor").
RECITALS
WHEREAS, the Company and the Investor are parties to that certain Stock
Purchase Agreement of even date herewith (the "Stock Purchase Agreement");
WHEREAS, to induce the Investor to invest funds in the Company pursuant to
the Stock Purchase Agreement, the Investor and the Company hereby agree that
this Agreement shall govern the rights of the Investor to cause the Company to
register shares of Common Stock issuable to the Investor upon conversion of
shares of Series A Preferred Stock purchased by the Investor and upon exercise
of a Warrant issued to the Investor pursuant to the Stock Purchase Agreement,
and certain other matters as set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereto agree as follows:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Common Stock" means shares of the common stock of the
Company, par value $.01 per share.
(c) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted
by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the
SEC.
(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.12 hereof.
-1-
(e) The term "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(f) The term "Preferred Stock" means the Company's Series A
Convertible Preferred Stock, par value $.01 per share.
(g) The term "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(h) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Preferred Stock or upon exercise
of the Warrant, (ii) any Common Stock of the Company issued as (or issuable
upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of the shares referenced in (i) above,
excluding in all cases, however, any Registrable Securities sold by a
person in a transaction in which his rights under this Section 1 are not
assigned in accordance with the terms of Section 1.12 hereof.
(i) The term "SEC" shall mean the Securities and Exchange Commission.
(j) The term "Warrant" shall mean the warrant to purchase shares of
Common Stock of the Company issued to the Investor pursuant to the Stock
Purchase Agreement.
1.2 Request for Registration.
(a) If the Company shall receive at any time after December 31, 1996 a
written request from the Investor that the Company file a registration statement
under the Act covering the registration of at least twenty-five percent (25%) of
the Registrable Securities then held by the Investor, the Company shall:
(1) within ten (10) days of the receipt thereof, give written notice,
in accordance with Section 3.5 hereof, of such request to all
such other Holders; and
(2) file as soon as practicable, and in any event within sixty (60)
days of the receipt of such request, and use all reasonable
efforts to cause to become effective as soon as practicable, the
registration under the Act of all Registrable Securities which
such Holders request to be registered, subject to the limitations
of Subsection 1.2(b).
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting,
-2-
they shall so advise the Company as a part of their request made pursuant to
Subsection 1.2(a) and the Company shall include such information in the written
notice referred to in Subsection 1.2(a). The underwriter will be selected by the
Company and shall be acceptable to a majority in interest of the Initiating
Holders. In such event, the right of any Holder to include his Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in Subsection
1.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting. Notwithstanding any
other provision of this Section 1.2, if the underwriter advises the Initiating
Holders in writing that marketing factors require a limitation of the number of
shares to be underwritten, then the Company shall exclude from such underwriting
(x) first, the maximum number of securities, if any, other than Registrable
Securities, as is necessary to reduce the size of the offering and (y) then the
minimum number of Registrable Securities, pro rata to the extent practicable, on
the basis of the number of Registrable Securities requested to be registered
among the participating holders of Registrable Securities, as is necessary in
the opinion of the managing underwriter(s) to reduce the size of the offering.
(c) In addition, the Company shall not be obligated to effect, or to take
any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected two (2) registrations pursuant to
this Section 1.2, excluding any registrations effected on Form S-3, and
such registrations have been declared or ordered effective; provided, that
the Company shall not be obligated to effect more than one registration
pursuant to this Section 1.2 in any twelve (12) month period;
(ii) If the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.12 below; or
(iii) If the Company delivers to the Initiating Holders an opinion, in
form and substance acceptable to such Initiating Holders, of counsel
satisfactory to the Initiating Holders that the Registrable Securities
requested to be registered by the Initiating Holders may be sold or
transferred pursuant to Rule 144(k) of the Act.
1.3 Company Registration. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for stockholders other than the Holders) any of its stock or
other securities under the Act in connection with the public offering of such
securities (other than a registration relating solely to the sale of securities
to participants in a Company stock plan, a registration relating solely to a
Rule 145 transaction, a
-3-
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities or a registration in which the
only Common Stock being registered is Common Stock issuable upon conversion of
debt securities which are also being registered), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after giving of
such notice by the Company in accordance with Section 3.5, the Company shall,
subject to the provisions of Section 1.8, cause to be registered under the Act
all of the Registrable Securities that each such Holder has requested to be
registered; provided, that the Company shall not be obligated to effect more
than two (2) registrations pursuant to this Section 1.3.
1.4 Obligations of the Company. Whenever required under this Section 1 to
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and keep such registration
statement effective for a period of up to one hundred twenty (120) days or
until the distribution contemplated in the Registration Statement has been
completed, whichever first occurs; provided, however, that such one hundred
twenty (120) day period shall be extended for a period of time equal to the
period the Holder refrains from selling any securities included in such
registration at the request of an underwriter of Common Stock (or other
securities) of the Company, and provided further that in the case of any
registration of Registrable Securities on Form S-3 that are intended to be
offered on a continuous or delayed basis, such one hundred twenty (120) day
period shall be extended until all such Registrable Securities are sold, if
applicable rules under the Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective
amendment which (I) includes any prospectus required by Section 10(a)(3) of
the Act or (II) reflects facts or events representing a material or
fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be
included in (I) and (II) above to be contained in periodic reports filed
pursuant to Section 13 or 15(d) of the 1934 Act in the registration
statement.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as, in the opinion of counsel to the Company, may be
necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
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(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue
Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions,
unless the Company is already subject to service in such jurisdiction and
except as may be required by the Act.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of
such registration.
(i) Furnish, on the date that such Registrable Securities are
delivered to the underwriters for sale in connection with the registration
pursuant to this Section 1, if such Registrable Securities are being sold
through underwriters, or, if such Registrable Securities are not being sold
through underwriters, on the date that the registration statement with
respect to such Registrable Securities becomes effective, (i) an opinion,
dated such date, of counsel representing the Company for the purposes of
such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders, and (ii) a letter, dated such
date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders.
1.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself,
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the Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
1.6 Expenses of Demand Registration. All expenses other than underwriting
discounts and commissions incurred in connection with registrations, filings or
qualifications pursuant to Section 1.2, including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for the selling Holders shall be borne by the
Company.
1.7 Expenses of Company Registration. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to the registrations pursuant to Section
1.3 for each Holder, including (without limitation) all registration, filing,
and qualification fees, printers' and accounting fees relating or apportionable
thereto and, for one such registration only, the reasonable fees and
disbursements of one counsel for the selling Holders, but excluding underwriting
discounts and commissions relating to Registrable Securities.
1.8 Underwriting Requirements. In connection with any offering involving an
underwriting of shares of the Company's capital stock pursuant to Section 1.3,
the Company shall not be required under Section 1.3 to include any of a Holder's
securities in such underwriting unless such Holder accepts the terms of the
underwriting as agreed upon between the Company and the underwriters, and then
only in such quantity as the underwriters determine in their sole discretion
will not jeopardize the success of the offering by the Company. If the total
amount of securities, including Registrable Securities, requested by
stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall exclude from such underwriting (x) first, the maximum number of
securities, if any, other than Registrable Securities being sold for the account
of other than the Company, as is necessary to reduce the size of the offering
and (y) then the minimum number of Registrable Securities, pro rata to the
extent practicable, on the basis of the number of Registrable Securities
requested to be registered among the participating holders of Registrable
Securities, as is necessary in the opinion of the managing underwriter(s) to
reduce the size of the offering.
1.9 Indemnification. In the event any Registrable Securities are included
in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the officers and directors of each Holder
participating in such registration, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the 1934 Act, against any
losses, claims, damages, or liabilities (joint or several) to which they
may become subject under the Act, the 1934 Act or state
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securities and blue sky laws, or otherwise insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein
or any amendments or supplements thereto and any document filed in
connection therewith or in connection with any registration or
qualification under the state securities and blue sky laws, (ii) the
omission or alleged omission to state therein a material fact required to
be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of
the Act, the 1934 Act or state securities and blue sky laws or any rule or
regulation promulgated under the Act, the 1934 Act or state securities and
blue sky laws and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the
Company shall not be liable in any such case for any such loss, claim,
damage, liability, or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person;
provided, however, that the indemnity agreement contained in this
Subsection 1.9(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers
who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the Act, or the 1934 Act,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each
such Holder will pay, as incurred, any legal or other expenses reasonably
incurred by any person intended to be indemnified pursuant to this
Subsection 1.9(b), in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Subsection 1.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Holder,
which consent shall not be unreasonably withheld; provided, that, in no
event shall any selling Holder's liability under this Subsection 1.9(b)
exceed the proceeds received by such Holder from the offering (net of any
underwriting discounts and commissions).
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(c) Promptly after receipt by an indemnified party under this Section
1.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to
be made against any indemnifying party under this Section 1.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action, if prejudicial to its ability
to defend such action, shall relieve such indemnifying party of its
liability under this Section 1.9, but (i) only to the extent of the
liability actually resulting from the failure to deliver written notice and
(ii) the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 1.9.
(d) If the indemnification provided for in this Section 1.9 is held by
a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such loss, liability, claim,
damage, or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense
as well as any other relevant equitable considerations. The relative fault
of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or
omission; provided, that in no event shall any selling Holder's liability
under this Section 1.9(d) exceed the proceeds received by such Holder from
the offering (net of any underwriting discounts and commissions).
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
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(f) The obligations of the Company and Holders under this Section 1.9
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.10 Reports Under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the Act and
any other rule or regulation of the SEC that may at any time permit a Holder to
sell securities of the Company to the public without registration or pursuant to
a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable
the Holders to utilize Form S-3 for the sale of their Registrable
Securities, such action to be taken as soon as practicable after the end of
the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is
declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company
that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at
any time after it has become subject to such reporting requirements), (ii)
a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested in availing any Holder of
any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
1.11 Form S-3 Registration. In case the Company shall receive at any time
after the completion of the first registration statement for a public offering
of securities of the Company (other than a registration statement relating
either to the sale of securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or an SEC Rule 145 transaction), a
written request from the Holders of at least twenty five percent (25%) of the
Registrable Securities then outstanding that the Company effect a registration
on Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:
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(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within twenty (20) days after receipt of such written
notice from the Company; provided, however, that the Company shall not be
obligated to effect any such registration, qualification or compliance,
pursuant to this Section 1.11: (1) if Form S-3 is not available for such
offering by the Holders; (2) if the Holders, together with the holders of
any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public (net of any
underwriting discounts or commissions) of less than $500,000; (3) if the
Company has already effected during the previous twelve (12) month period
two (2) registrations on Form S-3, or any equivalent successor form, for
the Holders pursuant to this Section 1.11; or (4) in any particular
jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in effecting
such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so
requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection
with a registration requested pursuant to this Section 1.11, including,
without limitation, all registration, filing, qualification, printers' and
accounting fees and the reasonable fees and disbursements of one (1)
counsel for the selling Holder or Holders and counsel for the Company, but
excluding any underwriting discounts or commissions associated with
Registrable Securities, shall be borne by the Company. Registrations
effected pursuant to this Section 1.11 shall not be counted as
registrations effected pursuant to Sections 1.2 or 1.3.
(d) The Company shall not be obligated to effect any registration
pursuant to this Section 1.11 if the Company delivers to the Holders
requesting registration under this Section 1.11 an opinion, in form and
substance acceptable to such Holders, of counsel satisfactory to such
Holders, that the Registrable Securities so requested to be registered may
be sold or transferred pursuant to Rule 144(k) under the Act.
1.12 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 1 may be assigned (but
only with all related obligations) by a Holder to any transferee or assignee of
such securities, provided: (a) the Company is, within a reasonable time after
such transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are
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being assigned; and (b) such transferee or assignee agrees in writing to be
bound by and subject to the terms and conditions of this Agreement.
2. Covenants of the Company.
2.1 Financial Statements and Other Information. Except as otherwise set
forth below in this Section 2.1, until the Company is subject to the reporting
requirements of the 1934 Act, the Company will deliver to the Investor, for so
long as the Investor holds any shares of the Company's Common Stock:
(a) as soon as available, but in any event within forty-five (45) days
after the end of each quarterly accounting period in each fiscal year,
unaudited consolidated statements of operations and consolidated cash flows
of the Company and its subsidiaries for such quarterly period and for the
period from the beginning of the fiscal year to the end of such quarter,
and consolidated balance sheets of the Company and its subsidiaries as of
the end of such quarterly period, setting forth in each case comparisons to
the annual budget and to the corresponding period in the preceding fiscal
year, and all such statements will be prepared in accordance with generally
accepted accounting principles, consistently applied (except for the
absence of notes and subject to normal year-end adjustments);
(b) as promptly as possible (but in any event within ninety (90) days)
after the end of each fiscal year, audited consolidated statements of
operations and a consolidated statement of cash flows of the Company and
its subsidiaries for such fiscal year and consolidated balance sheets and
statements of stockholders' equity of the Company and its subsidiaries as
of the end of such fiscal year, setting forth comparisons to the annual
budget and to the preceding fiscal year, all prepared in accordance with
United States generally accepted accounting principles, consistently
applied, and accompanied by an unqualified opinion (except for
qualifications regarding specified contingent liabilities) of an
independent accounting firm selected by the Company's Board of Directors;
(c) prior to the end of each fiscal year, an annual budget (approved
by the Board of Directors) prepared on a monthly, consolidated basis for
the Company and its subsidiaries for the succeeding fiscal year (displaying
detailed anticipated statements of operations and cash flows and balance
sheets), and promptly upon preparation thereof any other significant
budgets which the Company prepares and any revisions of such annual or
other budgets;
(d) promptly (and in any event within thirty (30) days) after the
discovery or receipt of notice of any event or circumstance affecting the
Company or its subsidiaries that is determined in good faith by the Company
to be material to the Company and its subsidiaries, taken as a whole,
including but not limited to, the filing of any material litigation against
the Company or its subsidiaries, acquisitions, mergers, substantial sales
of assets, significant regulatory or legal developments, the commencement
of voluntary or involuntary bankruptcy proceedings, natural or
-11-
other disasters, significant changes in management or directors, changes in
auditors, and execution or termination of, or defaults under, material
contracts, a letter from the Chief Executive Officer or Chief Financial
Officer of the Company specifying the nature and period of existence
thereof and, in the case of material litigation, what actions the Company
and its subsidiaries have taken and propose to take with respect thereto;
(e) promptly after transmission thereof, copies of all financial
statements, proxy statements, reports and any other written communications
which the Company sends to its stockholders generally and copies of all
registration statements and all regular, special or periodic reports which
it files with the SEC or with any securities exchange on which any of its
securities are then listed, and copies of all press releases and other
statements made available generally by the Company to the public;
(f) a notice specifying the terms of all sales of the Company's
securities of which the Company is aware, promptly following the
consummation thereof; and
(g) notice of the effectiveness under the Act of the registration
covering the Company's initial public offering, such notice to be provided
by telecopier immediately following the SEC's notification to the Company
of such effectiveness.
Each of the financial statements referred to in this Section 2.1 will be
true and correct in all material respects and will fairly present the Company's
consolidated financial position and results of operations as of the dates and
for the periods stated therein, subject in the case of the unaudited financial
statements to changes resulting from normal year-end audit adjustments (none of
which would, alone or in the aggregate, be materially adverse to the Company's
financial condition, operating results or business prospects). The Company's
obligation to provide to the Investor the materials described in Subsection (e)
above will continue after the Company is subject to the reporting requirements
of the 1934 Act until the Investor no longer holds any shares of the Company's
Preferred Stock (or Common Stock issued upon conversion thereof or upon exercise
of the Warrant).
2.2 Designated Director. For so long as the Investor shall hold at least 5%
of the shares of the Company's Preferred Stock, (or at least 5% of the Common
Stock issuable upon conversion of the Preferred Stock or upon exercise of the
Warrant), the Investor shall have the right, but not the obligation, to nominate
as a member of the management slate for election to the Company's Board of
Directors by the stockholders of the Company one (1) person and for so long as
the Investor shall hold at least 10% of the shares of the Company's Preferred
Stock (or at least 10% of the Common Stock issued upon conversion thereof or
upon exercise of the Warrant), the Investor shall have the right, but not the
obligation, to nominate as a member of the management slate for election to the
Company's Board of Directors by the stockholders of the Company two (2) persons,
and the Company agrees to use its best efforts to ensure that such person or
persons are duly elected. Moreover, the
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Company agrees that one such person shall be elected Co-Chairman of the Board of
Directors of the Company.
2.3 Inspection of Property. Until the Company is subject to the reporting
requirements of the 1934 Act, the Company will permit the Investor, or any
representatives designated by the Investor, upon reasonable notice and during
normal business hours and such other times as the Investor may reasonably
request, to (i) visit and inspect any of the properties of the Company and its
subsidiaries, (ii) examine the corporate and financial records of the Company
and its subsidiaries and make copies thereof or extracts therefrom, (iii)
discuss the affairs, finances and accounts of the Company and its subsidiaries
with the directors, senior management and independent accountants of the Company
and its subsidiaries, and (iv) consult with and advise the management of the
Company and its subsidiaries as to their affairs, finances and accounts.
2.4 Positive Covenants. So long as any shares of the Preferred Stock are
outstanding, the Company agrees as follows:
(a) The Company will retain independent public accountants acceptable
to the Investor in its discretion who shall certify the Company's financial
statements at the end of each fiscal year. In the event the services of the
independent public accountants so selected, or any firm of independent
public accountants hereafter employed by the Company are terminated, the
Company will promptly thereafter notify the Investor and will request the
firm of independent public accountants whose services are terminated to
deliver to the Investor a letter from such firm setting forth the reasons
for the termination of their services. In the event of such termination,
the Company will promptly thereafter engage another firm of independent
public accountants of recognized national standing. In its notice to the
Investor the Company shall state whether the change of accountants was
recommended or approved by the Board of Directors of the Company or any
committee thereof.
(b) The Company will retain counsel to the Company acceptable to the
Investor in its discretion.
(c) The Company's Board of Directors will meet at least once every
fiscal quarter.
(d) The Company shall maintain in full force and effect, fire,
casualty, workmen's compensation and liability insurance policies, with
extended coverage, in such amounts and with such coverage as are carried by
companies in a position similar to that of the Company.
2.5 Termination of Certain Covenants. The covenants set forth in Sections
2.3 and 2.4 shall terminate and be of no further force or effect upon the
consummation of an initial public offering of shares of Common Stock of the
Company.
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3. Miscellaneous.
3.1 Successors and Assigns. Except as otherwise provided herein, the terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties (including transferees
of any shares of Registrable Securities). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
3.2 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of New York, disregarding New York principles of conflicts
of laws which would otherwise provide for the application of the substantive
laws of another jurisdiction. The parties agree that all actions or proceedings
arising in connection with this Agreement shall be tried and litigated only in
the State of New York. The parties waive any right they may have to assert the
doctrine of forum non conveniens or to object to such venue, and hereby consent
to court ordered relief.
3.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery or delivery by facsimile to the party to be
notified or four (4) days after deposit with an air courier, the United States
Post Office or air courier in the case of non-U.S. parties, by registered or
certified mail, postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties.
3.6 Expenses. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
3.7 Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the holders of two-thirds of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this Section 3.7 shall be binding upon each holder of any
Registrable Securities then outstanding, each future holder of all such
Registrable Securities, and the Company.
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3.8 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
3.9 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
IAT HOLDINGS, INC.
By: ___________________________________
Name:
Title:
Address:
Facsimile Telephone Number:
VERTICAL FINANCIAL HOLDINGS
By: _____________________________________
Name:
Title:
Address:
Facsimile Telephone Number:
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EXHIBIT D
MARKETING AGREEMENT
MARKETING AGREEMENT, dated as of October 24, 1996 (the "Agreement"),
between IAT Holdings, Inc., a Delaware corporation (the "Company"), and General
Capital, a corporation organized under the laws of Switzerland ("General").
W I T N E S S E T H :
WHEREAS, the Company desires to receive services in connection with (a)
marketing its products worldwide, (b) arranging debt or equity financing for the
Company's products to be purchased by its customers and (c) arranging financing
for the Company's operations, leasing programs, joint ventures and distribution
arrangements generally, in each case for the further enhancement of the
Company's marketing strategy (collectively, the "Objectives"); and
WHEREAS, General has established its expertise in, among other things,
assisting companies in marketing their produces worldwide and arranging
financing for customers; and
WHEREAS, General has performed services for the Company's wholly-owned
subsidiary IAT AG, a corporation organized under the laws of Switzerland, since
early 1996 as outlined above and the parties now desire to memorialize their
agreement and understanding as to their respective duties and obligations.
NOW, THEREFORE, in consideration of the mutual covenants and agreements,
and other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties do hereby covenant and agree, upon the terms
and subject to the conditions hereinafter set forth, as follows:
Section 1. Retention of General. The Company engages General to assist the
Company in achieving its Objectives, and General accepts such engagement,
subject to the terms and conditions of this Agreement.
Section 2. Services. (a) At such times as are mutually convenient to
General and the Company during the Term (as defined below), General shall
provide its services to the Company in connection with the Objectives.
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(b) In connection with performing its services, General and the Company
acknowledge and agree that General may, from time to time, propose certain
arrangements to the Company in connection with its Objectives and the Company
has no obligation to accept such proposals or further obligate itself, and shall
only do so with prior written approval.
Section 3. Term. Subject to Section 5 hereof, this Agreement shall be for a
term of five years, commencing on the date hereof and ending on October 24, 2001
(the "Term").
Section 4. Compensation. For services rendered or to be rendered by General
pursuant to this Agreement, the Company shall pay or issue to General the
following:
(a) $100,000 for services to be performed by General during the Term,
which shall be paid on the date hereof.
(b) $300,000 payable at such time as the Company's consolidated
stockholders' equity exceeds $6,000,000 and an additional $100,000 payable
at such time as the Company's consolidated stockholders' equity exceeds
$8,000,000; provided, that the current liabilities of Holdings used to
determine the consolidated stockholders' equity of the Company shall not
exceed $3,500,000 and, to the extent it exceeds $3,500,000 any such
additional amounts shall not reduce such stockholders' equity.
Section 5. Termination. The Company or General may terminate this Agreement
at any time after June 30, 1997 if the Company's working capital does not exceed
$4,000,000 by such date (the "Termination Date"), provided, however, that in the
event the Company's working capital exceeds such amount by the Termination Date,
this Agreement shall not be terminated and shall be a valid and binding
obligation upon the parties during the Term.
Section 6. Marketing Efforts. (a) The Company shall provide General with
certain technical and other information relating to its business and operations
as is reasonable and necessary for General to market the Company's products. In
addition, the Company shall provide General with the necessary sales promotion
materials to market the Company's products.
(b) The Company shall also make its management available to General and
prospective customers at such reasonable times and locations as is necessary for
General to market the Company's products.
Section 7. Confidentiality; Non-Competition. General acknowledges that in
the course of its engagement it will become familiar with trade secrets and
other confidential information ("Confidential Information") concerning the
Company and that its services will be special, unique and extraordinary to the
Company. General agrees that, during the Term and for a period of five years
following the Term, it shall not disclose to any third party any Confidential
Information for any
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purpose other than the performance of its duties under this Agreement and upon
the prior written approval of the Company. Subject to the limitations set forth
herein, General agrees that during the Term and for a period of two years
thereafter it shall not directly or indirectly own, manage, control, participate
in, consult with, render services for, or in any manner engage in any business
competing with the business of the Company as such business exists within any
geographical area in which the Company conducts its business. In the event the
Company breaches its duties or obligations under this Agreement, the Company
agrees that General shall not be bound by this Agreement, except for the
confidentiality provisions contained in this Section 7.
Section 8. Further Assurances. During the Term, the Company shall use its
reasonable good faith efforts to maintain and promote its products.
Section 9. Representations and Warranties. The Company and General each
represent that (a) it has the requisite power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby, (b) the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized and (c) this
Agreement is valid and binding upon each party, enforceable against each party
in accordance with its terms.
Section 10. Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York, disregarding any New York
principles of conflicts of laws that would otherwise provide for the application
of the substantive laws of another jurisdiction. The parties agree that all
actions or proceedings arising in connection with this Agreement shall be tried
and litigated only in the State of New York. The parties waive any right they
may have to assert the doctrine of forum non conveniens or to object to such
venue, and hereby consent to court ordered relief.
Section 11. Entire Agreement; Amendments. This Agreement contains the full
and entire understanding and agreement between the parties and supersedes and
preempts any prior understandings or agreements, whether written or oral. The
provisions of this Agreement may be amended or waived only with the prior
written consent of the Company and General.
Section 12. Successors and Assigns. This Agreement shall be binding upon,
inure to the benefit of, and shall be enforceable by General and the Company and
their respective successors and assigns. The rights and obligations of General
under this Agreement (with the exception of those rights in Section 4 hereof)
shall not be assignable.
Section 13. Counterparts. This Agreement may be executed in two or more
counterparts, each which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
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Section 14. Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery or delivery by facsimile to the party
to be notified or four (4) days after deposit with an air courier or the United
States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties.
Section 15. Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
IAT HOLDINGS, INC.
By:_______________________________
Name:
Title:
Address:
Facsimile telephone number:
GENERAL CAPITAL
By:_______________________________
Name:
Title:
Address:
Facsimile telephone number:
EXHIBIT E
Warrant to Purchase 1,980,000 Shares of Common Stock.
WARRANT TO PURCHASE COMMON STOCK
OF
IAT HOLDINGS, INC.
This is to Certify That, FOR VALUE RECEIVED, Vertical Financial Holdings,
or assigns ("Holder"), is entitled to purchase from IAT Holdings, Inc., a
Delaware corporation (the "Company"), following an initial public offering (the
"IPO") of shares of common stock, par value $.01 per share (the "Common Stock")
of the Company and subject to the provisions of this Warrant, 1,980,000 fully
paid, validly issued and nonassessable shares of Common Stock of the Company at
a price per share equal to 130% of the initial public offering price of a share
of Common Stock in the IPO at any time or from time to time during the ten (10)
year period following the closing date of the IPO, but not later than 5:00 p.m.
New York City Time on December 31, 2006. The number of shares of Common Stock to
be received upon the exercise of this Warrant and the price to be paid for each
share of Common Stock may be adjusted from time to time as hereinafter set
forth. The shares of Common Stock deliverable upon such exercise, and as
adjusted from time to time, are hereinafter sometimes referred to as "Warrant
Shares" and the exercise price of a share of Common Stock in effect at any time
and as adjusted from time to time is hereinafter sometimes referred to as the
"Exercise Price."
(a) EXERCISE OF WARRANT.
(1) This Warrant may be exercised in whole or in part at any time or
from time to time during the ten (10) year period following the closing
date of the IPO, but not later than 5:00 New York City Time on December 31,
2006 (the "Exercise Period") provided, however, that (i) if either such day
is a day on which banking institutions in the State of New York are
authorized by law to close, then on the next succeeding day which shall not
be such a day, and (ii) in the event of any merger, consolidation or sale
of substantially all the assets of the Company as an entirety, resulting in
any distribution to the Company's stockholders, prior to December 31, 2006,
the Holder shall have the right to exercise this Warrant commencing at such
time through December 31, 2006 into the kind and amount of shares of stock
and other securities and property (including cash) receivable by a holder
of the number of shares of Common Stock into which this Warrant might have
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been exercisable immediately prior thereto. This Warrant may be exercised
by presentation and surrender hereof to the Company at its principal
office, or at the office of its stock transfer agent, if any, with the
Purchase Form annexed hereto duly executed and accompanied by payment of
the Exercise Price for the number of Warrant Shares specified in such form.
As soon as practicable after each such exercise of the warrants, but not
later than seven (7) days from the date of such exercise, the Company shall
issue and deliver to the Holder a certificate or certificate for the
Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee. If this Warrant should be exercised in part only,
the Company shall, upon surrender of this Warrant for cancellation, execute
and deliver a new Warrant evidencing the rights of the Holder thereof to
purchase the balance of the Warrant Shares purchasable thereunder. Upon
receipt by the Company of this Warrant at its office, or by the stock
transfer agent of the Company at its office, in proper form for exercise,
the Holder shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be physically
delivered to the Holder.
(2) At any time during the Exercise Period, the Holder may, at its
option, exchange this Warrant, in whole or in part (a "Warrant Exchange"),
into the number of Warrant Shares determined in accordance with this
Section (a)(2), by surrendering this Warrant at the principal office of the
Company or at the office of its stock transfer agent, accompanied by a
notice stating such Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests
that such Warrant Exchange occur (the "Notice of Exchange"). The Warrant
Exchange shall take place on the date specified in the Notice of Exchange
or, if later, the date the Notice of Exchange is received by the Company
(the "Exchange Date"). Certificates for the shares issuable upon such
Warrant Exchange and, if applicable, a new warrant of like tenor evidencing
the balance of the shares remaining subject to this Warrant, shall be
issued as of the Exchange Date and delivered to the Holder within seven (7)
days following the Exchange Date. In connection with any Warrant Exchange,
this Warrant shall represent the right to subscribe for and acquire the
number of Warrant Shares (rounded to the next highest integer) equal to (i)
the number of Warrant Shares specified by the Holder in its Notice of
Exchange (the "Total Number") less (ii) the number of Warrant Shares equal
to the quotient obtained by dividing (A) the product of the Total Number
and the existing Exercise Price by (B) the current market value of a share
of Common Stock. Current market value shall have the meaning set forth
Section (c) below, except that for purposes hereof, the date of exercise,
as used in such Section (c), shall mean the Exchange Date.
(b) RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
the Warrants.
(c) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of
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a share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the current market value
of a share, determined as follows:
(1) If the Common Stock is listed on a national securities exchange or
admitted to unlisted trading privileges on such exchange or listed for
trading on the Nasdaq National Market, the current market value shall be
the last reported sale price of the Common Stock on such exchange or market
on the last business day prior to the date of exercise of this Warrant or
if no such sale is made on such day, the average closing bid and asked
prices for such day on such exchange or market; or
(2) If the Common Stock is not so listed or admitted to unlisted
trading privileges, but is traded on the Nasdaq Small Cap Market, the
current Market Value shall be the average of the closing bid and asked
prices for such day on such market and if the Common Stock is not so
traded, the current market value shall be the mean of the last reported bid
and asked prices reported by the National Quotation Bureau, Inc. on the
last business day prior to the date of the exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the
current market value shall be an amount, not less than book value thereof
as at the end of the most recent fiscal year of the Company ending prior to
the date of the exercise of the Warrant, determined in such reasonable
manner as may be prescribed by the Board of Directors of the Company.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of Common
Stock purchasable hereunder. Upon surrender of this Warrant to the Company at
its principal office or at the office of its stock transfer agent, if any, with
the Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax, the Company shall, without charge, execute and deliver a new
Warrant in the name of the assignee named in such instrument of assignment and
this Warrant shall promptly be cancelled. This Warrant may be divided or
combined with other warrants which carry the same rights upon presentation
hereof at the principal office of the Company or at the office of its stock
transfer agent, if any, together with a written notice specifying the names and
denominations in which new Warrants are to be issued and signed by the Holder
hereof. The term "Warrant" as used herein includes any Warrants into which this
Warrant may be divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant
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executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not this Warrant so lost, stolen, destroyed,
or mutilated shall be at any time enforceable by anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time and
the number and kind of securities purchasable upon the exercise of the Warrants
shall be subject to adjustment from time to time upon the happening of certain
events as follows:
(1) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock
into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect at the time of the record date for such dividend
or distribution or of the effective date of such subdivision, combination
or reclassification shall be adjusted so that it shall equal the price
determined by multiplying the Exercise Price by a fraction, the denominator
of which shall be the number of shares of Common Stock outstanding after
giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such
action. Such adjustment shall be made successively whenever any event
listed above shall occur.
(2) In case the Company shall fix a record date for the issuance of
rights or warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock (or securities convertible
into Common Stock) at a price (the "Subscription Price") (or having a
conversion price per share) less than the current market price of the
Common Stock (as defined in Subsection (8) below) on the record date
mentioned below, or less than the Exercise Price on such record date, the
Exercise Price shall be adjusted so that the same shall equal the lower of
(i) the price determined by multiplying the Exercise Price in effect
immediately prior to the date of such issuance by a fraction, the numerator
of which shall be the sum of the number of shares of Common Stock
outstanding on the record date mentioned below and the number of additional
shares of Common Stock which the aggregate offering price of the total
number of shares of Common Stock so offered (or the aggregate conversion
price of the convertible securities so offered) would purchase at such
current market price per share of the Common Stock, and the denominator of
which shall be the sum of the number of shares of Common Stock outstanding
on such
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record date and the number of additional shares of Common Stock offered for
subscription or purchase (or into which the convertible securities so
offered are convertible) or (ii) in the event the Subscription Price is
equal to or higher than the current market price but is less than the
Exercise Price, the price determined by multiplying the Exercise Price in
effect immediately prior to the date of issuance by a fraction, the
numerator of which shall be the sum of the number of shares outstanding on
the record date mentioned below and the number of additional shares of
Common Stock which the aggregate offering price of the total number of
shares of Common Stock so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at the Exercise Price in
effect immediately prior to the date of such issuance, and the denominator
of which shall be the sum of the number of shares of Common Stock
outstanding on the record date mentioned below and the number of additional
shares of Common Stock offered for subscription or purchase (or into which
the convertible securities so offered are convertible). Such adjustment
shall be made successively whenever such rights or warrants are issued and
shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or warrants;
and to the extent that shares of Common Stock are not delivered (or
securities convertible into Common Stock are not delivered) after the
expiration of such rights or warrants the Exercise Price shall be
readjusted to the Exercise Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made
upon the basis of delivery of only the number of shares of Common Stock (or
securities convertible into Common Stock) actually delivered.
(3) In case the Company shall hereafter distribute to the holders of
its Common Stock evidences of its indebtedness or assets (excluding cash
dividends or distributions and dividends or distributions referred to in
Subsection (1) above) or subscription rights or warrants (excluding those
referred to in Subsection (2) above), then in each such case the Exercise
Price in effect thereafter shall be determined by multiplying the Exercise
Price in effect immediately prior thereto by a fraction, the numerator of
which shall be the total number of shares of Common Stock outstanding
multiplied by the current market price per share of Common Stock (as
defined in Subsection (8) below), less the fair market value (as determined
by the Company's Board of Directors) of said assets or evidences of
indebtedness so distributed or of such rights or warrants, and the
denominator of which shall be the total number of shares of Common Stock
outstanding multiplied by such current market price per share of Common
Stock. Such adjustment shall be made successively whenever such a record
date is fixed. Such adjustment shall be made whenever any such distribution
is made and shall become effective immediately after the record date for
the determination of shareholders entitled to receive such distribution.
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(4) In case the Company shall issue shares of its Common Stock,
excluding shares issued (i) in any of the transactions described in
Subsection (1) above, (ii) upon exercise of options granted to the
Company's employees under a plan or plans adopted by the Company's Board of
Directors and approved by its shareholders, if such shares would otherwise
be included in this Subsection (4), (but only to the extent that the
aggregate number of shares excluded hereby and issued after the date
hereof, shall not exceed 5% of the Company's Common Stock outstanding at
the time of any issuance), (iii) upon exercise of this Warrant (iv) to
shareholders of any corporation which merges into the Company in proportion
to their stock holdings of such corporation immediately prior to such
merger, upon such merger, or (v) issued in a bona fide public offering
pursuant to a firm commitment underwriting, but only if no adjustment is
required pursuant to any other specific subsection of this Section (f)
(without regard to Subsection (9) below) with respect to the transaction
giving rise to such rights, for a consideration per share (the "Offering
Price") less than the current market price per share (as defined in
Subsection (8) below) on the date the Company fixes the offering price of
such additional shares or less than the Exercise Price, the Exercise Price
shall be adjusted immediately thereafter so that it shall equal the lower
of (i) the price determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, the numerator of which shall be
the sum of the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares and the number of shares of
Common Stock which the aggregate consideration received (determined as
provided in Subsection (7) below) for the issuance of such additional
shares would purchase at such current market price per share of Common
Stock, and the denominator of which shall be the number of shares of Common
Stock outstanding immediately after the issuance of such additional shares
or (ii) in the event the Offering Price is equal to or higher than the
current market price per share but less than the Exercise Price, the price
determined by multiplying the Exercise Price in effect immediately prior to
the date of issuance by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to the
issuance of such additional shares and the number of shares of Common Stock
which the aggregate consideration received (determined as provided in
subsection (7) below) for the issuance of such additional shares would
purchase at the Exercise Price in effect immediately prior to the date of
such issuance, and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after the issuance of such
additional shares. Such adjustment shall be made successively whenever such
an issuance is made.
(5) In case the Company shall issue any securities convertible into or
exchangeable for its Common Stock, excluding securities issued in
transactions described in Subsections (2) and (3) above, for a
consideration per share of Common
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Stock (the "Conversion Price") initially deliverable upon conversion or
exchange of such securities (determined as provided in Subsection (7)
below) less than the current market price per share (as defined in
Subsection (8) below) in effect immediately prior to the issuance of such
securities, or less than the Exercise Price, the Exercise Price shall be
adjusted immediately thereafter so that it shall equal the lower of (i) the
price determined by multiplying the Exercise Price in effect immediately
prior thereto by a fraction, the numerator of which shall be the sum of the
number of shares of Common Stock outstanding immediately prior to the
issuance of such securities and the number of shares of Common Stock which
the aggregate consideration received (determined as provided in Subsection
(7) below) for such securities would purchase at such current market price
per share of Common Stock, and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding immediately prior to such
issuance and the maximum number of shares of Common Stock of the Company
deliverable upon conversion of or in exchange for such securities at the
initial conversion or exchange price or rate or (ii) in the event the
Conversion Price is equal to or higher than the current market price per
share but less than the Exercise Price, the price determined by multiplying
the Exercise Price in effect immediately prior to the date of issuance by a
fraction, the numerator of which shall be the sum of the number of shares
outstanding immediately prior to the issuance of such securities and the
number of shares of Common Stock which the aggregate consideration received
(determined as provided in subsection (7) below) for such securities would
purchase at the Exercise Price in effect immediately prior to the date of
such issuance, and the denominator of which shall be the sum of the number
of shares of Common Stock outstanding immediately prior to the issuance of
such securities and the maximum number of shares of Common Stock of the
Company deliverable upon conversion of or in exchange for such securities
at the initial conversion or exchange price or rate. Such adjustment shall
be made successively whenever such an issuance is made.
(6) Whenever the Exercise Price payable upon exercise of each Warrant
is adjusted pursuant to Subsections (1), (2), (3), (4) and (5) above, the
number of Shares purchasable upon exercise of this Warrant shall
simultaneously be adjusted by multiplying the number of Shares initially
issuable upon exercise of this Warrant by the Exercise Price in effect on
the date hereof and dividing the product so obtained by the Exercise Price,
as adjusted.
(7) For purposes of any computation respecting consideration received
pursuant to Subsections (4) and (5) above, the following shall apply:
(A) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided
that in no case
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shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
(B) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors of the Company
(irrespective of the accounting treatment thereof), whose
determination shall be conclusive; and
(C) in the case of the issuance of securities convertible into or
exchangeable for shares of Common Stock, the aggregate consideration
received therefor shall be deemed to be the consideration received by
the Company for the issuance of such securities plus the additional
minimum consideration, if any, to be received by the Company upon the
conversion or exchange thereof (the consideration in each case to be
determined in the same manner as provided in clauses (A) and (B) of
this Subsection (7)).
(8) For the purpose of any computation under Subsections (2), (3), (4)
and (5) above, the current market price per share of Common Stock at any
date shall be determined in the manner set forth in Section (c) hereof
except that the current market price per share shall be deemed to be the
higher of (i) the average of the prices for 30 consecutive business days
before such date or (ii) the price on the business day immediately
preceding such date.
(9) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least five cents
($0.05) in such price; provided, however, that any adjustments which by
reason of this Subsection (9) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment required to be
made hereunder. All calculations under this Section (f) shall be made to
the nearest cent or to the nearest one-hundredth of a share, as the case
may be. Anything in this Section (f) to the contrary notwithstanding, the
Company shall be entitled, but shall not be required, to make such changes
in the Exercise Price, in addition to those required by this Section (f),
as it shall determine, in its sole discretion, to be advisable in order
that any dividend or distribution in shares of Common Stock, or any
subdivision, reclassification or combination of Common Stock, hereafter
made by the Company shall not result in any Federal Income tax liability to
the holders of Common Stock or securities convertible into Common Stock
(including Warrants).
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(10) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly but no later than 10 days after any request for such
an adjustment by the Holder, cause a notice setting forth the adjusted
Exercise Price and adjusted number of Shares issuable upon exercise of each
Warrant, and, if requested, information describing the transactions giving
rise to such adjustments, to be mailed to the Holders at their last
addresses appearing in the Warrant Register, and shall cause a certified
copy thereof to be mailed to its transfer agent, if any. In the event the
Company does not provide the Holder with such notice and information within
10 days of a request by the Holder, then notwithstanding the provisions of
this Section (f), the Exercise Price shall be immediately adjusted to equal
the lowest Offering Price, Subscription Price or Conversion Price, as
applicable, since the date of this Warrant, and the number of shares
issuable upon exercise of this Warrant shall be adjusted accordingly. The
Company may retain a firm of independent certified public accountants
selected by the Board of Directors (who may be the regular accountants
employed by the Company) to make any computation required by this Section
(f), and a certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
(11) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (1) above, the Holder of this Warrant thereafter
shall become entitled to receive any shares of the Company, other than
Common Stock, thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in Subsections (1) to
(9), inclusive above.
(12) Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of this Warrant,
Warrants theretofore or thereafter issued may continue to express the same
price and number and kind of shares as are stated in the similar Warrants
initially issuable pursuant to this Agreement.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted as
required by the provisions of the foregoing Section, the Company shall forthwith
file in the custody of its Secretary or an Assistant Secretary at its principal
office and with its stock transfer agent, if any, an officer's certificate
showing the adjusted Exercise Price determined as herein provided, setting forth
in reasonable detail the facts requiring such adjustment, including a statement
of the number of additional shares of Common Stock, if any, and such other facts
as shall be necessary to show the reason for and the manner of computing such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the holder or any holder of a Warrant
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executed and delivered pursuant to Section (a) and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such certificate to
the Holder or any such holder.
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Common Stock or (ii) if the Company shall offer to the holders of
Common Stock for subscription or purchase by them any share of any class or any
other rights or (iii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least fifteen days prior the
date specified in (x) or (y) below, as the case may be, a notice containing a
brief description of the proposed action and stating the date on which (x) a
record is to be taken for the purpose of such dividend, distribution or rights,
or (y) such reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and the date, if
any is to be fixed, as of which the holders of Common Stock or other securities
shall receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up.
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another corporation of
the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant at any time
prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances. In
the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part,
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for a security of the Company other than Common Stock, any such issue shall be
treated as an issue of Common Stock covered by the provisions of Subsection (1)
of Section (f) hereof.
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(j) REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Holder of this
Warrant and the shares of Common Stock issuable upon exercise of this Warrant
shall have the registration rights set forth in Section 1 of the Investor's
Rights Agreement dated as of October __, 1996 by and between the Company and the
Holder.
IAT HOLDINGS, INC.
By ______________________________
[SEAL]
Dated: October __, 1996
Attest:
-----------------------------
▇▇▇▇▇▇▇▇▇
-▇▇-
▇▇▇▇▇▇▇▇ FORM
Dated ____________, 19__
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _______ shares of Common Stock and hereby makes payment
of _______ in payment of the actual exercise price thereof.
__________________
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name ________________________________
(Please typewrite or print in block letters)
Address ______________________________
Signature _____________________________
ASSIGNMENT FORM
FOR VALUE RECEIVED, ______________ hereby sells, assigns and transfers unto
Name _____________________________
(Please typewrite or print in block letters)
Address ____________________________
the right to purchase Common Stock represented by this Warrant to the extent of
______ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint ___________ as attorney, to transfer the same on the
books of the Company with full power of substitution in the premises.
Date ____________, 19__
Signature ___________________
************************************************************************
STOCK PURCHASE WARRANT
To Purchase Common Stock of
IAT Holdings, Inc.
************************************************************************
EXHIBIT F
[▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ - New York Letterhead]
[Form of opinion of counsel to Holdings
Vertical Financial Holdings
[Address]
Ladies and Gentlemen:
We have acted as special counsel to IAT Holdings, Inc., a Delaware
corporation ("Holdings"), in connection with the Stock Purchase Agreement dated
as of October __, 1996 (the "Stock Purchase Agreement"), between Holdings, IAT
AG, a corporation organized under the laws of Switzerland, IAT Deutschland GmbH,
a corporation organized under the laws of Germany, Vertical Financial Holdings
(the "Investor") and the stockholders listed on Schedule I to the Stock Purchase
Agreement. This is the opinion contemplated by Section 5.6 of the Stock Purchase
Agreement. All capitalized terms used in this opinion without definition have
the respective meanings given to them in the Stock Purchase Agreement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Stock Purchase
Agreement, (ii) the Rights Agreement, (iii) the Marketing Agreement, (iv) the
Warrant (together with the Stock Purchase Agreement, the Rights Agreement and
the Marketing Agreement, the "Transaction Documents"), (v) the Certificate of
Incorporation and (vi) the By-Laws of Holdings. In addition, we have made such
investigations and examined such other documents, including certificates of the
officers of Holdings and of public officials, as we have considered necessary or
appropriate as a basis for this opinion. We have assumed the genuineness of the
signatures on all original documents we received and the conformity to the
original documents of all copies submitted to us as certified, conformed or
photographic copies; as to certificates of public officials, we have assumed
that such certificates have been properly given and are accurate.
Members of our firm are admitted to the bar of the State of New York. We
express no opinion as to the laws of any other jurisdiction other than (i) the
laws of the State of New York and the General Corporation Law of the State of
Delaware and (ii) the federal laws of the United States of America.
Based on the foregoing and subject to the assumptions and qualifications
herein, our opinion is as follows:
1. Holdings is a corporation duly organized, validly existing and in good
standing under the laws of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. Holdings is duly qualified to transact business, and is in good
standing in each jurisdiction in which the failure so to qualify would have a
material adverse effect on its business or properties.
2. Holdings has all requisite legal and corporate power to execute and
deliver each of the Transaction Documents and to carry out and perform its
obligations under the terms of each of the Transaction Documents. Each of the
Transaction Documents has been duly authorized, executed and delivered by
Holdings and constitutes the legal, valid and binding obligation of Holdings,
enforceable in accordance with its respective terms, except that (a) such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights,
(b) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought and (c) any rights
to indemnity may be limited by federal and state securities laws and public
policy considerations. Assuming that each of the Transaction Documents has been
duly authorized, executed and delivered by the Subsidiaries (as defined below)
and assuming that each of the Transaction Documents constitutes the legal, valid
and binding obligation of each of the Subsidiaries under the respective laws of
their jurisdictions, each of the Transaction Documents is enforceable as to each
of such Subsidiaries in accordance with its respective terms, except that (a)
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights, (b) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought and
(c) any rights to indemnity may be limited by federal and state securities laws
and public policy considerations.
3. The authorized capitalization of Holdings consists of 20,000,000 shares
of Common Stock, par value $.01 per share (the "Common Stock"), of which
4,620,000 shares are validly issued and outstanding, and 2,000,000 shares of
Preferred Stock, par value $.01 per share (the "Preferred Stock"), of which
1,980,000 shares have been designated Series A Convertible Preferred Stock.
Prior to the Closing, there were no issued and outstanding shares of Preferred
Stock of Holdings. All of the issued and outstanding shares of Common Stock are
duly and validly authorized and issued, fully paid and non-assessable. Except
for the conversion privileges of the Series A Preferred Stock, the Warrant and
the Non-Management Stockholder Warrant, there are not outstanding any options,
warrants, rights (including conversion or preemptive rights), agreements or
commitments of any kind relating to the issuance, sale or transfer of any
securities of Holdings as to which Holdings is a party.
None of the outstanding shares of Common Stock or other securities of Holdings
was issued in violation of the Securities Act of 1933, as amended.
4. Assuming that all of the subsidiaries of Holdings are listed on Schedule
I hereto, to the best of our knowledge Holdings does not own, directly or
indirectly, any capital stock or other equity ownership or proprietary interest
in any other corporation, association, trust, partnership, joint venture or
other entity.
5. The issuance, sale and delivery of the Series A Preferred Stock which is
being purchased by the Investor pursuant to the Stock Purchase Agreement, the
issuance, sale and delivery of the Warrant and the reservation for issuance of
the Common Stock issuable upon conversion or exercise thereof have been duly
authorized by all required corporate action on the part of Holdings, and when
issued, sold, and delivered in accordance with the terms of the Stock Purchase
Agreement for the consideration expressed therein, will be duly and validly
authorized and issued, fully paid and non-assessable and will be issued in
compliance with all applicable federal securities laws. The Common Stock
issuable upon conversion of the Series A Preferred Stock purchased under the
Stock Purchase Agreement upon issuance in accordance with the terms of the
Certificate of Incorporation and upon exercise of the Warrant, shall be duly and
validly authorized and issued, fully paid, and non-assessable, and issued in
compliance with all applicable federal securities laws. The Series A Preferred
Stock issued pursuant to the Stock Purchase Agreement (and the Common Stock
issuable upon conversion of such Series A Preferred Stock and upon exercise of
the Warrant) will be free and clear from all Encumbrances other than those
created by, or imposed upon, the holders thereof through no action of Holdings.
6. Neither the execution and delivery of the Transaction Documents nor the
consummation of any or all of the transactions contemplated thereby (a) violates
any provision of the Certificate of Incorporation or By-Laws of Holdings, (b)
violates, or is in conflict with, or constitutes a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
results in the termination of, or accelerates the performance required by, or
excuses performance by any person of any of its obligations under, or causes the
acceleration of the maturity of any debt or obligation pursuant to, or results
in the creation or imposition of any Encumbrance upon any property or assets of
Holdings under, any agreement or commitment to which Holdings is a party, or (c)
violates any statute, law, regulation, rule, judgment, decree or order of any
court or other governmental body applicable to Holdings.
7. No consent, approval, order, or authorization of, or registration,
qualification, designation, declaration or filing with, any United States state
or local governmental authority (other than such as may be required under
applicable securities laws of the various jurisdictions in which the Series A
Preferred Stock will be offered or sold, as to which we express no opinion) on
the part of Holdings is required in connection with the consummation of the
transactions contemplated by the Transaction Documents.
8. There is no action, suit, inquiry, proceeding or investigation by or
before any court or governmental body pending or, to the best of our knowledge,
threatened against or involving Holdings or which questions or challenges the
validity of the Transaction Documents or any action taken or to be taken by
Holdings pursuant to the Transaction Documents or in connection with the
transaction contemplated thereby.
9. To the best of our knowledge, except as provided in Section 1 of the
Rights Agreement, Holdings has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
We are furnishing this opinion to you solely for your benefit, and this
opinion is not to be used, circulated, quoted or otherwise referred to for any
other purpose without our prior written consent.
Very truly yours,
MIR/WD
October 23, 1996
Vertical Financial Holdings
Ladies and Gentlemen:
1. We have acted as counsel to IAT AG, a corporation organized under the laws
of Switzerland (the "Company" ) in connection with the Stock Purchase
Agreement dated October 4, 1996 (the "Stock Purchase Agreement"), between
AIT Holdings, Inc., a Delaware corporation ("Holdings"), the Company, IAT
Deutschland GmbH Interaktive Mediensysteme, a corporation organized under
the laws of Germany ("IAT Germany"), the stockholders of Holdings and
Vertical Financial Holdings (the "Investor"). This is the opinion
contemplated by Section 5.6 of the Stock Purchase Agreement. All
capitalized terms used in this opinion without definition have the
respective meaning given to them in the Stock Purchase Agreement.
2. In connection with this opinion we have examined a sample copy of (i) the
Stock Purchase Agreement, (ii) the Rights Agreement, (iii) the Marketing
Agreement, (iv) the Warrant (together with the Stock Purchase Agreement,
the Rights Agreement and the Marketing Agreement, the "Transaction
Agreements") and (v) a copy of the current Certificate of Registration and
Articles of Association of the Company, both dated September 26, 1996. In
addition, we have made such investigations and examined such other
documents, records and papers as we have thought relevant and necessary as
a basis for our opinions hereinafter expressed.
3. Assumptions
For the purposes of this opinion, we have assumed:
3.1 The genuineness of all signatures;
3.2 The completeness of and conformity to originals of all documents
purporting to be copies of originals and the authenticity of all
documents submitted to us as originals;
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3.3 the capacity, power and authority of each of the parties other
than the Company to enter into and the due execution and delivery
by such parties other than the Company of the Transaction
Agreements and the agreements examined by us mentioned in section
4.6 below;
3.4 that since October 21, 1996 there have been no amendments to the
Certificate of Registration and Articles of Associations of the
Company in the form examined by us;
3.5 that there are no provisions of the laws of any jurisdiction
outside Switzerland which would have any implication on the
opinions we express;
3.6 that the Transaction Agreements are legal, valid and enforceable
against the parties thereto under the laws of the State of New
York;
3.7 that, for the purpose of section 4.4(b) hereof and contrary to
the actual situation, all agreements listed in Schedule 1 are
governed by Swiss law.
4. Opinion
We have made such examination of the laws of Switzerland as currently
applied by the courts of Switzerland as in our judgment is necessary or
appropriate for the purposes of this opinion. We do not purport to be
qualified to pass upon and express no opinion herein as to the laws of any
other jurisdiction other than those of Switzerland.
This opinion shall be governed by and construed in accordance with Swiss
law.
On the above assumptions and subject to the reservations below, we are of
the opinion that:
4.1 The company is a corporation duly incorporated, registered and
existing under the laws of Switzerland and has all requisite corporate
power and authority to carry on its business as now conducted and as
proposed to be conducted. The Company is duly qualified to transact
business. According to publicly available information in Switzerland
obtained on October 21, 1996, no legal proceedings have been started
or threatened for the winding-up, dissolution or reorganization or for
the appointment of a receiver, administrator or similar officer of the
Company.
4.2 The Company has all requisite legal and corporate power to execute and
deliver the Stock Purchase Agreement and has all requisite legal and
corporate power to carry out and perform its obligations under the
terms of such agreement. The Stock Purchase Agreement has been duly
authorized, (subject to the assumption in section 3.1 above) executed
and delivered by the Company and, as a whole constitutes the valid and
-2-
binding obligation of the Company under the assumption that the Stock
Purchase Agreement were subject to Swiss law. The choice of New York
law to govern the Stock Purchase Agreement will be upheld and applied
by the courts in Switzerland in proceedings in relation to the Stock
Purchase Agreement, provided that the requested party has sufficiently
proven to such court the contents of New York law, and further
provided, that New York law is not incompatible with public policy as
understood in Switzerland.
4.3 The authorized capital of the Company consists of 10,000 registered
shares, par value CHF 1,000.- per share, which are all validly issued
and outstanding, all of which are held by Holdings to our knowledge
free and clear of all liens, encumbrances, security interests and,
subject to the transfer restriction contained in art. 7 of the
Articles of Association of the Company, free of any restrictions on
transfer. All of the issued and outstanding registered shares are
fully paid-in and non-assessable. To our knowledge, with the exception
of the agreement of August 20/23, 1996 between K.-▇. ▇▇▇▇▇▇, ▇. ▇▇▇▇▇,
Walther Glas GmbH and the Company, there are not outstanding any
options, warrants, rights (including conversion or preemptive rights)
or commitments of any kind relating to the issuance, sale or transfer
of any securities of the Company.
4.4 Neither the execution and delivery of the Stock Purchase Agreement nor
the consummation of any or all of the transactions contemplated
thereby (a) violates any provision of the Articles of Association of
the Company, (b) to our knowledge, violates, or is in conflict with,
or constitutes a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or results in the
termination of, or accelerates the performance required by, or excuses
performance by any person of any of its obligation under, or causes
the acceleration of the maturity of any debt or obligation pursuant
to, or results in the creation or imposition of any encumbrance upon
any property or assets of the Company under any agreement or
commitment to which the Company is a party, or (c) to our knowledge,
violates any statute, law, regulation, rule, judgment, decree or order
of any court or other governmental body applicable to the Company.
4.5 No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Swiss
federal, cantonal or municipal governmental authority on the part of
the Company is required in connection with the consummation of the
transactions contemplated by the Stock Purchase Agreement. The Company
has, to our knowledge, complied with all laws, ordinances and
regulations applicable to it and its business, which the failure to
comply with would, either individually on the aggregate, have a
materially adverse effect upon the Company. The Company has obtained
all Swiss federal, cantonal and municipal governmental licenses and
permits material to and necessary in the conduct of its
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respective business, such licenses and permits are according to
information received from management in full force and effect, no
material violations are or have been recorded according to publicly
available information in respect of any such licenses or permits, and
no proceeding is pending or, to our knowledge, threatened to revoke or
limit any thereof.
4.6 The agreements of the company listed in Schedule I hereto have been
duly executed by the Company and we are of the opinion that they
constitute the legal, valid and binding obligation of the Company,
enforceable in accordance with their terms to the extent they are
subject to Swiss law.
4.7 To our knowledge, there is no action, suit, inquiry, proceeding or
investigation by or before any court or governmental body pending or
threatened against or involving the Company which questions or
challenges the validity of the Stock Purchase Agreement or any action
taken or to be taken by the Company pursuant to the Stock Purchase
Agreement or in connection with the transactions contemplated thereby,
and the Company is, with the exception of the proceedings mentioned in
Exhibit B of the Stock Purchase Agreement, not subject to any
judgment, order, or decree that may have any material adverse effect
on its business practices or on its ability to acquire any property or
conduct any business in any part of the world.
5. Qualifications
This opinion is subject to the following qualifications:
(a) The enforceability and validity of the Transaction Agreements may be
limited or affected by bankruptcy, insolvency, liquidation,
arrangement, reorganization, moratorium or other laws relating to, or
affecting, creditor' rights generally and by general equitable
principles.
(b) We express no opinion on any statements or warranties of fact set out
in the Transaction Agreements.
(c) The enforcement of the Investor's rights under the Transaction
Agreements may be subject to the defenses of set off or counterclaim.
(d) With regard to our opinion expressed in section 4.3. last sentence,
section 4.4(b) and (c), section 4.5 second sentence and 4.7 above we
have solely relied upon information received from management of the
Company and we have not made any independent review of the Company's
records with regard to these issues, provided that with regard to
section 4.4(b) we have reviewed the documents listed in Schedule 1.
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6. Benefit
This opinion is addressed to you solely in your capacity as investor for your
own use. This opinion may not be referred or relied upon for any other purpose
or disclosed in whole or in part to any person other than your legal counsel.
Very truly yours,
▇▇▇▇▇▇ ▇▇▇▇
Schedule 1: List of Material Agreements
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SCHEDULE 1 TO THE OPINION LETTER OF ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
ZURICH
LIST OF MATERIAL AGREEMENTS
- MVP Cross License Agreement between Texas Instruments France and IAT
AG, dated August 8/16, 1994
- Kooperationsvertrag zur Entwicklung der Version 3 des Multimedialen
Informations-und Kommunikationssystems MIKS (-Co-operation Agreement
regarding the Development of Version 3 of the Multimedis Informaton
and Communications System MIKS-) between IBM Germany, German Telekom
and IAG AG, dated Decemher 16, 1994
- Rahenkooperationsvertrag ber die gemeinsame Weiterentwicklung des
LT/Deutsche Telekom Softwarecodecs aut Basis des Texas Instruments
Parallelprozesor TMS320C8x ("frame Cooperation Agreement regarding the
Joint Further Deelopment of the ▇.▇▇/▇▇▇▇ Telecom Softwarecodec based
on Texas Instruments Parallel Processor 5320C8") between German
Telekom and IAT AG, dated October 2/16, 1995 Joint Development and
Cross License Agreement between Texas Instruments Inc. and IAT AG,
dated June 21/July 18, 1996 Lizenz- und Vertriebsrhmenvereinbarung
("License and Frame-Distribution-Agreement") between German Telekom
and IAT At, dated March 11/April 11/1994
- Know-How, Vertriebo- und Herstellungs-Lizentvertrag ("Xnow-How",
Distribution- and Production-License Agreement") between IAT AG and
IAS GmbH, dated December 1995
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