UNIT REDEMPTION AGREEMENT
Exhibit
10.1
The
parties to this Unit Redemption Agreement dated December 20, 2006 are
INSPX, LLC (the "Company") and KEY TECHNOLOGY, INC. ("Seller") and, for purposes
of Sections 4.2 and 7, PECO CONTROLS CORPORATION and PECO, LLC.
RECITALS
A. Peco
Controls Corporation, Peco, LLC and Seller organized and formed the Company
in
July of 2004. Since inception, F. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, an affiliate of Peco Controls
Corporation and Peco LLC, has had access to all information relevant to the
Company's historical financial performance and its prospects for future
business. Seller currently owns 100 units of ownership of the Company (the
"Units").
B. Seller
has agreed to sell to the Company, and the Company has agreed to redeem from
Seller, all of the Units on and subject to the terms and conditions set forth
in
this Agreement.
AGREEMENT
In
consideration of the premises and the representations and warranties contained
herein, the parties agree as follows:
1. Sale
and Redemption of the Units.
1.1 Redemption
of the Units.
The
Company hereby redeems from Seller, and Seller agrees to sell to the Company,
the Units. Seller represents that the Units are free and clear of all liens
and
encumbrances.
1.2 Redemption
Price.
The
price to be paid by the Company for the Units redeemed from Seller shall be
$1,500,000 (the "Fixed Redemption Price"), plus the Contingent Payment, subject
to Section 1.3 below. The Company will pay the Fixed Redemption Price as
follows:
(a) $750,000
payable by wire transfer to Seller's designated account within two business
days
of execution hereof.
(b) $750,000
pursuant to the terms of the term note (the "Term Note") attached to this
Agreement as Exhibit A.
1.3 Contingent
Payment.
The
Company will pay Seller an additional $500,000 (the "Contingent Payment") if
the
Company's revenues for the year ended December 31, 2008 are $9 million
or higher, or upon the sale of Company equity (by the Company or any existing
owner of the Company) for $2 million or more at an enterprise value of
$10 million or more by December 31, 2008. If either contingency occurs, the
Company will pay the Contingent Payment, at the Company's election, either
(i) in one cash payment, payable within 45 days of the event giving rise to
the Contingent Payment, or (ii) in four equal annual installments with
interest accruing from the date of the qualifying event at the Bank of America
prime rate, with the first annual installment due on the earlier of
December 31, 2009 or the first anniversary date of the qualifying sale of
Company equity. The deferred payment alternative, if elected, may be prepaid
at
any time without penalty.
2. Representations
and Warranties of Seller.
Seller
represents and warrants to the Company as follows:
2.1 Owner.
Seller
is the sole owner of all of the Units, and Seller owns the Units free and clear
of any liens, claims, charges, encumbrances or adverse claims
whatsoever.
2.2 Organization
and Good Standing.
Seller
is a corporation duly organized and validly existing under the laws of the
State
of Oregon and has all requisite corporate power and authority to own, lease
and
operate its properties and to carry on its business as now being
conducted.
2.3 Authority
Relative to Agreement.
Seller
has requisite corporate power to execute and deliver this Agreement and to
perform its obligations hereunder. Seller has taken all actions required by
law,
the Seller's Articles of Incorporation and Bylaws or otherwise to authorize
the
execution, delivery and performance of this Agreement. Upon the execution and
delivery of this Agreement by the parties, this Agreement will be the valid
and
legally binding obligation of Seller enforceable in accordance with its terms,
subject as to enforcement only to bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the enforceability of creditors' rights
generally or to general equitable principles.
2.4 Effect
of Agreement.
No
consents or approvals are required to be obtained from any governmental agencies
or are required under the provisions of any instruments to be obtained from
any
third party in connection with the execution and consummation of this Agreement
by Seller. The execution and delivery of this Agreement and consummation of
the
transactions contemplated hereby will not result in the breach of any term
or
provision of, or constitute a default under, any provision or restriction of
any
note, mortgage, indenture, agreement, license or other instrument to which
Seller is a party, or to the best of Seller's knowledge, any judgment, order
or
decree, rule or regulation of any court or administrative agency to which Seller
is a party or by which it or any of its assets is bound, nor will it conflict
with the provisions of the Articles of Incorporation or Bylaws of Seller, or
to
the best of Seller's knowledge, violate any statute, license or regulation
of
any governmental authority.
2.5 Enforceability.
Upon
the execution and delivery of this Agreement by the parties, this Agreement
will
be the valid and legally binding obligation of Seller enforceable in
2
accordance
with its terms, subject as to enforcement only to bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforceability of
creditors' rights generally or to general equitable principles.
3. Representations
and Warranties of the Company.
The
Company represents and warrants to Seller as follows:
3.1 Organization
and Good Standing.
The
Company is a limited liability company duly organized, validly existing and
in
good standing under the laws of the State of Oregon.
3.2 Authority
Relative to Agreement.
The
Company has the power to execute and deliver this Agreement and to perform
its
obligations hereunder. The Company has taken all action required by law, its
Articles of Organization, its Operating Agreement and otherwise to authorize
the
execution, delivery and performance of this Agreement.
3.3 Effect
of Agreement.
No
consents or approvals are required to be obtained from any governmental agencies
or are required under the provisions of any instruments to be obtained from
any
third party in connection with the execution and consummation of this Agreement
by the Company. The execution and delivery of this Agreement and consummation
of
the transactions contemplated hereby will not result in the breach of any term
or provision of, or constitute a default under, any provision or restriction
of
any note, mortgage, indenture, agreement, license or other instrument, or of
any
judgment, order or decree, rule or regulation of any court or administrative
agency to which the Company is a party or by which it is bound, nor will it
conflict with the provisions of the Articles of Organization or Operating
Agreement of the Company, or to the best of the Company's knowledge, violate
any
statute, license or regulation of any governmental authority.
3.4 Financial
Statements.
The
Company's financial statements for the year ended September 30, 2006 (the
"Financial Statements") are attached to this Agreement as Schedule 3.4.
The
Financial Statements were prepared in accordance with the books and records
of
the Company, fairly present the financial position and results of the Company's
operations at and for the periods indicated, and were prepared in accordance
with generally accepted accounting principles applied consistently with prior
periods.
3.5 No
Registration or Qualification.
The
Company acknowledges that the Units are being acquired without registration
or
qualification under any federal or state securities laws, and that the Units
are
being transferred pursuant to applicable exemptions from any registration
requirements.
3.6 Enforceability.
Upon
the execution and delivery of this Agreement by the parties, this Agreement
will
be the valid and legally binding obligation of the Company enforceable in
accordance with its terms, subject as to enforcement only to bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the
enforceability of creditors' rights generally or to general equitable
principles.
3
4. Restrictive
Covenants.
4.1 By
Seller.
Seller
agrees, for the 18-month period after the date of this Agreement, or sooner
in
the event of a default in payment under the Term Note, that it will not directly
or indirectly engage in the development or sale of x-ray based products or
technology for any use or application independent of or separate from being
combined with other non-x-ray based products of Seller providing sorting of
customer product streams where the sorter and the x-ray device are connected
through a data interface to provide combined sorting and inspection functions
with respect to customer product streams.
4.2 By
the
Company.
The
Company and Peco Controls Corporation each agree, for the 18-month period after
the date of this Agreement, that they will not directly or indirectly engage
in
the development or sale of x-ray based products or technology combined with
other non-x-ray based products providing sorting of customer product streams
where the sorter and the x-ray device are connected through a data interface
to
provide combined sorting and inspection functions with respect to customer
product streams.
5. Subordination.
F.
▇▇▇▇▇
▇▇▇▇▇▇▇▇ will expressly subordinate all indebtedness of the Company owed to
him
to payment of the Term Note in the form of the Subordination Agreement attached
hereto as Exhibit B.
6. Notices
to Seller; Inspection Rights.
6.1 2008
Revenues.
The
Company will deliver to Seller, no later than January 31, 2009, a report
that details the Company's calculation of revenue for the 12 months ending
December 31, 2008. The Company will maintain its books and records to be able
to
calculate or reconstruct calculation of revenue for such year.
6.2 Sale
of Equity.
The
Company will deliver to Seller, no later than 30 days from the date of sale,
notice of any sale of equity of the Company, which notice will include the
amount and price of equity sold and the ownership structure of the Company
after
giving effect to the sale.
6.3 Certificate.
The
Company's chief executive officer will prepare and deliver to Seller by the
end
of the first month of each calendar quarter a report reflecting the principal
balances of all Company debt and all principal payments made with respect
thereto in the preceding calendar quarter.
6.4 Inspection
Rights.
The
Company hereby grants to Seller the right, upon reasonable advance notice,
to
inspect its books and records on a periodic basis with respect to the foregoing
matters.
4
7. Consent
of Peco, LLC.
Notwithstanding
anything to the contrary in the Company's Operating Agreement, Peco, LLC
consents to the transactions contemplated by this Agreement and waives any
objection thereto.
8. Additional
Provisions.
8.1 Expenses.
Whether
or not the transactions contemplated by this Agreement are consummated, the
Company and Seller shall each pay their own expenses in connection with the
transactions contemplated by this Agreement, including the fees and expenses
of
their respective counsel.
8.2 Litigation
Expenses.
In the
event of any litigation to enforce or declare any of the provisions of this
Agreement, the prevailing party shall recover and the losing party shall pay
the
reasonable attorney fees incurred by the prevailing party at the trial or
arbitration and upon any appeals therefrom, as determined by the respective
courts or arbitrators.
8.3 Nature
and Survival of Representations.
All
representations and warranties made by the parties in this Agreement shall
survive the consummation of the transactions contemplated by this
Agreement.
8.4 Entire
Agreement.
This
Agreement sets forth the entire agreement and understanding between the parties
as to the subject matter hereof, and supersedes all prior discussions,
agreements and understandings of every kind and nature between them. No party
shall be bound by any condition, definition, warranty, or representation, other
than expressly set forth or provided for in this Agreement, or as may be, on
or
subsequent to the date hereof, set forth in writing and signed by the party
to
be bound thereby. This Agreement may not be changed or modified, except by
agreement in writing, signed by all of the parties hereto.
8.5 Parties
in Interest.
All
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the successors in interest of the respective
parties hereto. Nothing contained herein, express or implied, is intended nor
shall be construed to confer or give any person, firm or corporation other
than
the parties hereto, any rights or remedies under or by reason of the
Agreement.
8.6 Notices.
All
notices or other communications which are required or permitted hereunder shall
be sufficient if delivered personally or by registered or certified mail,
postage prepaid, as follows:
If
to the
Company: InspX
LLC
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
with
a
copy to: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇▇
Ten
Almaden Boulevard, Eleventh Floor
San
Jose,
CA 95113-2233
5
If
to
Seller: Key
Technology, Inc.
Attn:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Financial Officer
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with
a
copy to: ▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇ LLP
1600
Pioneer Tower
▇▇▇
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
Any
party
may, by written notice to the other, change its address for purposes of this
Agreement.
8.7 Waiver.
Waiver
by any party of the strict performance of any of the provisions of this
Agreement shall not be construed as a waiver of or prejudice that party's right
to subsequently require strict performance of, the same or any other provision
of this Agreement.
8.8 Section
Headings.
The
headings of the sections of this Agreement are for the convenience of the
parties only and shall not be construed as affecting the terms of this Agreement
or be used in the interpretation of the terms of this Agreement.
8.9 Counterparts.
This
Agreement may be executed in counterparts and when each party has signed at
least one counterpart, the Agreement shall be fully binding. Each counterpart
shall be considered an original, and all of them taken together, shall
constitute a single Agreement.
8.10 Termination
of Other Agreements.
The
execution of this Agreement terminates all rights and obligations of Seller
under all documents and agreements executed and delivered in connection with
the
formation of the Company in July of 2004.
6
8.11 Mutual
Release.
Seller,
on the one hand, and the Company, Peco Controls Corporation and Peco, LLC,
on
the other, hereby release each other for all claims, known or unknown, arising
out of or related to their ownership interest in the Company prior to the date
hereof, excepting from such general release all rights and obligations arising
under this Agreement and the Exhibits referenced herein.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as
of the day and year first above written.
INSPX,
LLC
By
/s/
F.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
F.
▇▇▇▇▇
▇▇▇▇▇▇▇▇
KEY
TECHNOLOGY, INC.
By
/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇
For
purposes of Section 4.2 only: PECO
CONTROLS CORPORATION
By
/s/
F.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
F.
▇▇▇▇▇
▇▇▇▇▇▇▇▇
For
purposes of Section 7 only: PECO
LLC
By
/s/
F.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
F.
▇▇▇▇▇
▇▇▇▇▇▇▇▇
7
EXHIBIT
A
TO UNIT REDEMPTION AGREEMENT
PROMISSORY
NOTE
$750,000
Portland, Oregon
December 20, 2006
InspX
LLC, an Oregon limited liability company ("Maker"), for value received hereby
promises to pay to Key Technology, Inc., an Oregon corporation ("Holder"),
the
principal sum of Seven Hundred Fifty Thousand Dollars ($750,000) and to pay
interest on the unpaid principal from the date of this Promissory Note at 5%
per
annum. Payments shall be made at the address last given in writing to Maker
by
Holder. Principal and interest are payable to Holder in such coin or currency
of
the United States of America as at the time of payment shall be legal tender
for
the payment of public and private debts. This Note is issued by Maker in
connection with Maker's redemption of ownership Units in Maker from Holder
pursuant to the Unit Redemption Agreement of even date herewith between Maker
and Holder (the "Agreement").
9. Scheduled
Payments.
Subject
to
the terms hereof, principal and interest on this Promissory Note shall be
payable as follows:
9.1 Quarterly
Interest Payments.
All
accrued and unpaid interest shall be due and payable quarterly beginning on
December 31, 2006, and on every subsequent March 31, June 30, September 30
and December 31 thereafter until this Promissory Note is paid in
full.
9.2 Lump
Sum Principal Payment.
All
principal hereunder, and any unpaid interest, shall be due in a single lump
sum
payment on September 30, 2009.
9.3 Prepayment.
Maker
shall have the right at any time to prepay the whole of the Subordinated
Indebtedness without penalty.
10. Acceleration
Events.
Subject
to the terms hereof, all of the unpaid principal and interest on this Promissory
Note shall become due and payable (but shall not be paid except to the extent
any such payment would be a Permitted Payment hereunder), at the option of
Holder, upon the occurrence and during the continuation of any of the following
events (each an "Acceleration Event"):
10.1 If
Maker
shall fail to make a scheduled payment of interest when due hereunder and such
failure is not cured by Maker within ten days following receipt by Maker of
a
written notice of default from Holder.
In order
to cure any late payment of interest due hereunder, the interest payment plus
a
late payment fee in the amount of $1,000 must be received by the Holder within
the ten-day grace period.
10.2 The
sale
or other transfer, whether in one transaction or in a series of related
transactions, of (i) all or substantially all of the assets of Maker or
(ii) 51% or more of the issued and outstanding ownership Units of Maker
after giving effect to such transfer or issuance, including transfers pursuant
to any statutory merger in which 51% or more of the voting securities of the
surviving entity are held by persons who were not members of Maker prior to
the
merger.
10.3 The
payment by Maker of any principal payment on any indebtedness owed by Maker
to
any non-institutional lender, including without limitation the Subordinated
Indebtedness referenced in the Subordination Agreement of even date herewith
as
executed by F. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
10.4 If
Maker
shall voluntarily file a petition under the Federal Bankruptcy Code, as such
Code may from time to time be amended, or under any similar or successor federal
statute relating to bankruptcy or insolvency, or file an answer in an
involuntary proceeding admitting insolvency of inability to pay debts, or if
Maker shall fail to obtain a vacation or stay of involuntary proceedings brought
for the reorganization, dissolution of liquidation of Maker within 90 days
of
the filing of such proceedings or if Maker shall be adjudged bankrupt, or if
a
trustee or receiver shall be appointed for Maker or Maker's property, or if
Maker shall make an assignment for the benefit of Maker's
creditors.
Upon
the
occurrence of an Acceleration Event, Holder shall give written notice thereof
to
Maker before pursuing any remedy. If Maker fails to take all necessary curative
action within ten days of receipt of the notice, Holder may initiate action
for
collection of all amounts payable hereunder. Interest after an Acceleration
Event will accrue at a rate of 12% per annum until all amounts due hereunder
are
paid in full. In addition, in the event of a failure to pay principal or
interest hereunder at any time when principal or interest is payable hereunder,
Holder may institute an action for the collection of the same unless paid in
full within ten days of notice of nonpayment sent by Holder to
Maker.
11. Senior
Status Re Existing Subordinated Debt.
This
indebtedness is senior in status to all indebtedness owed by Maker to F. ▇▇▇▇▇
▇▇▇▇▇▇▇▇. For so long as any amount remains payable hereunder, Maker's chief
executive will deliver a certification to Holder each calendar quarter as
provided in Section 6.3 of the Agreement.
12. Governing
Law and Venue.
Holder
and
Maker agree that this Promissory Note shall be deemed to have been made under
and shall be governed by the laws of the State of Oregon in all respects
including matters of construction, validity and performance, and that none
of
its terms or provisions may be waived, altered, modified or amended except
as
the holder of this Promissory Note may consent thereto in writing. The
obligation evidenced by this Promissory Note is incurred by Maker solely for
business or commercial purposes. Maker irrevocably submits to the jurisdiction
of any state or federal court located in Multnomah County, Oregon, over any
action or proceeding to enforce or defend any matter arising from or related
to
this Promissory Note.
13. Notices.
Any
notice
or other communication required or permitted to be given hereunder shall be
in
writing and shall be hand-delivered or mailed by registered or certified mail
to
the appropriate party at the following address (or such other address for a
party as shall be specified by notice pursuant hereto):
If
to
Maker: InspX
LLC
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
F.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
with
a
copy to: Berliner
▇▇▇▇▇
Ten
Almaden ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
Attn:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
If
to
Holder: Key
Technology, Inc.
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with
copies to: ▇▇▇▇▇▇
▇▇▇▇ LLP
1600
Pioneer Tower
▇▇▇
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
If
sent
by registered or certified mail, such notices or communications shall be
effective and deemed given when mailed; otherwise they shall be effective and
deemed given upon hand delivery to said address.
14. Attorney
Fees.
If
this
Promissory Note is not paid when due (whether by acceleration or otherwise)
or
if an action or suit is brought to interpret or enforce this Promissory Note,
the substantially prevailing party shall be entitled to a reasonable sum as
attorney fees (including attorney fees on appeal), and all costs and expenses
in
connection with such action including costs incurred on appeal.
15. Validity.
If
any
provision of this Promissory Note is in conflict with any statute or rule of
law
in the State of Oregon, or is otherwise unenforceable for any reason whatsoever,
then such provision shall be deemed null and void to the extent of such conflict
or unenforceability, but shall be deemed separate from and shall not invalidate
any other provision of this Promissory Note.
16. Holder's
Acceptance.
Holder
has executed this Promissory Note to evidence its acceptance of the
subordination provisions hereof.
InspX
LLC
By
/s/
F.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
F.
▇▇▇▇▇
▇▇▇▇▇▇▇▇
President
ACKNOWLEDGED
AND ACCEPTED:
KEY
TECHNOLOGY, INC.
By
/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇
Chief
Financial Officer
SUBORDINATION
AGREEMENT
This
Subordination Agreement is entered into this 20th
day of
December, 2006 by and between F.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("Subordinated
Noteholder"), Key
Technology, Inc. ("Key")
and InspX
LLC ("InspX")
with respect to all indebtedness owed to Subordinated Noteholder by InspX (the
"Subordinated Debt").
InspX
has
executed a Promissory Note in favor of Key in the principal amount of $750,000
(referred to herein as the "Senior Debt") in connection with the redemption
of
Key's entire equity interest in InspX. It is a requirement of the redemption
that the Subordinated Debt be made expressly subordinate to Key's Senior Debt.
InspX
and
Subordinated Noteholder hereby acknowledge and agree that the Subordinated
Debt
is subordinate to the Senior Debt, and InspX covenants that so long as any
amount remains payable on the Senior Debt it will make no payments on the
Subordinated Debt. Notwithstand-ing the foregoing, so long as no default in
payment shall exist with respect to the Senior Debt it shall be permissible
for
InspX to pay the interest on the Subordinated Note as specified in such Note
as
originally issued. Any payments received by the Subordinated Noteholder in
violation of the foregoing will be held in trust for Key's benefit until the
entirety of the Senior Debt is paid in full, and will be promptly delivered
to
Key for credit against the Senior Debt upon demand. A violation of this covenant
by InspX shall constitute an event of default under the note reflecting the
Senior Debt.
EXECUTED
this 20th
day of
December, 2006.
INSPX
LLC SUBORDINATED
NOTEHOLDER
By
/s/
F.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ /s/
F.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
F.
▇▇▇▇▇
▇▇▇▇▇▇▇▇ F.
▇▇▇▇▇
▇▇▇▇▇▇▇▇
President
KEY
TECHNOLOGY, INC.
By
/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇
Chief
Financial Officer