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SECURITIES PURCHASE AGREEMENT
Among
IMAGING TECHNOLOGIES CORPORATION,
BALMORE FUNDS S.A.,
AUSTOST ANSTALT SCHAAN,
NESHER, INC.
and
GUARANTEE & FINANCE CORP.
Dated as of January 13, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I PURCHASE AND SALE OF UNITS...........................................1
1.1 Purchase and Sale.......................................................1
1.2 Purchase Price..........................................................2
1.3 The Closings............................................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES......................................5
2.1 Representations, Warranties and Agreements of the Company...............5
2.2 Representations and Warranties of the Purchasers.......................13
ARTICLE III OTHER AGREEMENTS OF THE PARTIES...............................14
3.1 Transfer Restrictions..................................................14
3.2 Stop Transfer Instruction..............................................15
3.3 Furnishing of Information..............................................15
3.4 Blue Sky Laws..........................................................15
3.5 Integration............................................................16
3.6 Certain Agreements.....................................................16
3.7 Listing and Reservation of Underlying Shares
and Warrant Shares; Compliance with Law................................16
3.8 Notice of Breaches.....................................................17
3.9 Conversion Obligations of the Company..................................18
3.10 Use of Proceeds.......................................................18
3.11 Indemnification.......................................................18
3.12 Sales of Preferred Stock..............................................19
3.13 Subsequent Sales and Registrations....................................19
3.14 Shareholder Approval..................................................20
3.15 Interim Financing.....................................................20
3.16 Incorporation of Certificate of Designation By Reference..............20
3.17 Board of Directors....................................................20
3.18 Conversion of Shares and Exercise of Warrants.........................20
ARTICLE IV CONDITIONS.........................................................21
4.1 Conditions Precedent to Sale of the Initial Units......................21
4.2 Conditions Precedent to the Obligation of the
Purchasers to Purchase the Additional Units............................23
ARTICLE V MISCELLANEOUS.......................................................26
5.1 Fees and Expenses......................................................26
5.2 Entire Agreement; Amendments...........................................26
5.3 Notices................................................................26
5.4 Amendments; Waivers....................................................27
5.5 Headings...............................................................27
5.6 Successors and Assigns.................................................27
5.7 No Third Party Beneficiaries...........................................28
5.8 Governing Law..........................................................28
5.9 Survival...............................................................28
5.10 Execution.............................................................28
5.11 Publicity.............................................................28
5.12 Consent to Jurisdiction; Attorneys' Fees..............................28
5.13 Waiver of Jury Trial..................................................29
5.14 Severability..........................................................30
5.15 Remedies..............................................................30
5.16 Independent Nature of Purchasers' Obligations and Rights..............30
Schedules and Exhibits
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Schedule 1 - Purchasers of Units
Schedule 2.1(a) - Organization and Qualification; Subsidiaries
Schedule 2.1(c) - Capitalization; Rights to Acquire Capital Stock
Schedule 2.1(f) - Consents and Approvals
Schedule 2.1(g) - Litigation; Proceedings
Schedule 2.1(n) - Certain Fees
Schedule 2.1(r) - Listing and Maintenance Requirements Compliance
Schedule 2.1(u) - Registration Rights, Rights of Participation
Schedule 2.1(v) - Title
Schedule 2.1(aa) - Year 2000 Compliance
Schedule 3.13 - Subsequent Sales and Registrations
Schedule 3.18 - Conversion of Shares and Exercise of Warrants
Exhibit A - Certificate of Designation
Exhibit B - Warrants
Exhibit C - Registration Rights Agreement
Exhibit D - Legal Opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP
Exhibit E - Transfer Agent Instructions
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of January
13, 1999, among Imaging Technologies Corporation, a Delaware corporation (the
"Company"), Balmore Funds S.A. ("Balmore"), Austost Anstalt ▇▇▇▇▇▇ ("Austost"),
Nesher, Inc. ("Nesher") and Guarantee & Finance Corp. ("G&F"). Balmore, Austost,
Nesher and G&F are each referred to herein as a "Purchaser" and are collectively
referred to herein as the "Purchasers."
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company, shares of the Company's Series D
Convertible Preferred Stock, par value $1,000 per share and stated value of
$2,000 per share (the "Preferred Stock"), and warrants (the "Warrants") to
purchase shares of common stock, par value $.005 per share, of the Company (the
"Common Stock").
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the Company and each Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE OF UNITS
1.1 Purchase and Sale.
(a) Subject to the terms and conditions set forth herein, the
Company shall issue and sell to the Purchasers, and the
Purchasers, severally and not jointly, shall purchase from the
Company up to 1,200 units (the "Units"), each Unit consisting
of (i) a share of Preferred Stock and (ii) Warrants to
purchase two thousand shares of Common Stock. Notwithstanding
anything to the contrary set forth in this Agreement, the
aggregate number of Units to be sold hereunder shall not
exceed 1,200.
(b) The Preferred Stock shall have the respective rights,
preferences and privileges set forth in the Certificate of
Designation of the Company (the "Certificate of Designation")
the form of which is annexed hereto as Exhibit A, which shall
be approved by the Purchasers and the Company's Board of
Directors (the "Board of Directors") and filed and accepted
for filing on or prior to the Initial Closing Date (as defined
below) by the Company with the Secretary of State of the State
of Delaware. The Warrants shall be in the form of Exhibit B
annexed hereto.
For purposes of this Agreement, "Trading Day," "Per Share Market
Value," "Conversion Date," and "Original Issue Date" shall have the meanings set
forth in the Certificate of Designation.
1.2 Purchase Price. The purchase price per Unit shall be $2000.00.
1.3 The Closings.
(a) The Initial Closing.
(i) The closing of the purchase and sale of the
Initial Units (as defined below) (the "Initial Closing") shall
take place at the offices of Stroock & Stroock & ▇▇▇▇▇ LLP,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, immediately
following the execution hereof or such later date or different
location as the parties shall agree in writing, but not prior
to the date that the conditions set forth in Section 4.1 have
been satisfied or waived by the appropriate party. The date of
the Initial Closing, is hereinafter referred to as the
"Initial Closing Date." At the Initial Closing, the Company
shall sell and issue to the Purchasers, and the Purchasers
shall, severally and not jointly, purchase from the Company,
300 Units (the "Initial Units") for an aggregate purchase
price of $600,000 (the "Initial Purchase Price").
(ii) At the Initial Closing (a) the Company shall
deliver to each Purchaser (1) stock certificates representing
the shares of Preferred Stock included in the Initial Units
(the "Initial Shares") purchased by such Purchaser as set
forth next to such Purchaser's name on Schedule 1 attached
hereto, each registered in the name of such Purchaser, (2) the
Warrants included in the Initial Units (the "Initial
Warrants") purchased by such Purchaser as set forth next to
such Purchaser's name on Schedule 1 attached hereto,
registered in the name of such Purchaser, (3) and all other
documents, instruments and writings required to have been
delivered at or prior to the Initial Closing by the Company
pursuant to this Agreement and the Registration Rights
Agreement, dated the date hereof, by and among the Company and
the Purchasers, in the form of Exhibit C annexed hereto (the
"Registration Rights Agreement"), and (b) each Purchaser shall
deliver to the Company the portion of the Initial Purchase
Price set forth next to its name on Schedule 1, in United
States dollars in immediately available funds by wire transfer
to an account designated in writing by the Company for such
purpose on or prior to the Initial Closing Date, and all
documents, instruments and writings required to have been
delivered at or prior to the Initial Closing by such Purchaser
pursuant to this Agreement and the Registration Rights
Agreement.
(b) Subsequent Closings.
(i) Second Closing. (A) Subject to the terms and
conditions set forth in Section 4.2 and elsewhere in this
Agreement, beginning on the date on which the initial
Registration Statement (as defined in the Registration Rights
Agreement)
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is filed with the Securities and Exchange Commission (the
"Commission") with respect to the Units, the Company shall
have the right to deliver a written notice to the Purchasers
(a "Second Closing Notice") requiring the Purchasers to
purchase, severally and not jointly, up to an additional 300
Units (the "Second Tranche Units") for up to an aggregate
purchase price of $600,000 (the "Second Tranche Purchase
Price"). The Second Closing Notice shall set forth the number
of Second Tranche Units that the Company intends to sell the
Purchasers. At the Second Closing each Purchaser shall be
obligated (subject to the terms and conditions herein) to
purchase such portion of the Second Tranche Units sold by the
Company as equals such Purchaser's pro rata portion of the
purchase price for the Initial Units issued and sold at the
Initial Closing. The closing of the purchase and sale of the
Second Tranche Units (the "Second Closing") shall take place
in the same manner as the Initial Closing on such date
indicated in the Second Closing Notice (which may not be prior
to the 10th day after receipt by the Purchasers of the Second
Closing Notice or as otherwise agreed to by the parties);
provided, however, that in no case shall the Second Closing
take place unless and until the conditions listed in Section
4.2 have been satisfied or waived by the appropriate party.
The date of the Second Closing is hereinafter referred to as
the "Second Closing Date."
(B) At the Second Closing (a) the Company shall
deliver to each Purchaser (1) stock certificates representing
the shares of Preferred Stock included in the Second Tranche
Units (the "Second Tranche Shares") purchased by such
Purchaser as set forth next to such Purchaser's name on
Schedule 1 attached hereto, each registered in the name of
such Purchaser, (2) the Warrants included in the Second
Tranche Units (the "Second Tranche Warrants") purchased by
such Purchaser as set forth next to such Purchaser's name on
Schedule 1 attached hereto, registered in the name of such
Purchaser and (3) and all other documents, instruments and
writings required to have been delivered at or prior to the
Second Closing by the Company pursuant to this Agreement and
the Registration Rights Agreement, and (b) each Purchaser
shall deliver to the Company the portion of the Second Tranche
Purchase Price set forth next to its name on Schedule 1, in
United States dollars in immediately available funds by wire
transfer to an account designated in writing by the Company
for such purpose on or prior to the Second Closing Date, and
all documents, instruments and writings required to have been
delivered at or prior to the Second Closing by such Purchaser
pursuant to this Agreement and the Registration Rights
Agreement.
(ii) Third Closing. (A) Subject to the terms and
conditions set forth in Section 4.2 and elsewhere in this
Agreement, the Company shall have the right to deliver a
written notice to the Purchasers (a "Third Closing Notice")
requiring the Purchasers to purchase up to an additional 600
Units (the "Third Tranche Units" and together with the Second
Tranche Units, the "Additional Units") for an aggregate
purchase price of $1,200,000 (the "Third Tranche Purchase
Price").
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The Company may deliver a Third Closing Notice no earlier than
60 days after the date on which the initial Registration
Statement filed with the Commission with respect to the Units
has been declared effective by the Commission and no later
than 90 days after such effective date. Such Third Closing
Notice shall set forth the number of Third Tranche Units that
the Company intends to sell to the Purchasers. At the Third
Closing each Purchaser shall be obligated (subject to the
terms and conditions herein) to purchase such portion of the
Third Tranche Units sold by the Company as equals such
Purchaser's pro rata portion of the purchase price for the
Initial Units issued and sold at the Initial Closing. The
closing of the purchase and sale of the Third Tranche Units
(the "Third Closing") shall take place in the same manner as
the Initial Closing, on such date indicated in the Third
Closing Notice (which may not be prior to the 10th day after
receipt by the Purchasers of the Third Closing Notice or as
otherwise agreed to by the parties); provided, however, that
in no case shall the Third Closing take place unless and until
the conditions listed in Section 4.2 have been satisfied or
waived by the appropriate party. The date of the Third Closing
is hereinafter referred to as the "Third Closing Date.")
(B) At the Third Closing (a) the Company shall
deliver to each Purchaser (1) stock certificates representing
the shares of Preferred Stock included in the Third Tranche
Units (the "Third Tranche Shares" and together with the
Initial Shares and the Second Tranche Shares, the "Shares")
purchased by such Purchaser as set forth next to such
Purchaser's name on Schedule 1 attached hereto, each
registered in the name of such Purchaser, (2) the Warrants
included in the Third Tranche Units (the "Third Tranche
Warrants") purchased by such Purchaser as set forth next to
such Purchaser's name on Schedule 1 attached hereto,
registered in the name of such Purchaser and (3) and all other
documents, instruments and writings required to have been
delivered at or prior to the Third Closing by the Company
pursuant to this Agreement and the Registration Rights
Agreement, and (b) each Purchaser shall deliver to the Company
the portion of the Third Tranche Purchase Price set forth next
to its name on Schedule 1, in United States dollars in
immediately available funds by wire transfer to an account
designated in writing by the Company for such purpose on or
prior to the Third Closing Date, and all documents,
instruments and writings required to have been delivered at or
prior to the Third Closing by such Purchaser pursuant to this
Agreement and the Registration Rights Agreement.
The Second Closing and the Third Closing are
hereinafter collectively referred to as the "Subsequent
Closings," and the Second Closing Date and the Third Closing
Date are hereinafter referred to as the "Subsequent Closing
Dates."
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties to the
Purchasers:
(a) Organization and Qualification; Subsidiaries. The Company
is a corporation, duly organized, validly existing and in good standing
under the laws of the State of Delaware, with the requisite corporate
power and authority to own and use its properties and assets and to
carry on its business as currently conducted. The Company has no
subsidiaries other than as set forth in Schedule 2.1(a) (collectively,
the "Subsidiaries"). Each of the Subsidiaries is a corporation, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with
the full corporate power and authority to own and use its properties
and assets and to carry on its business as currently conducted. Each of
the Company and the Subsidiaries is duly qualified to do business and
is in good standing as a foreign corporation in each jurisdiction in
which the nature of the business conducted or property owned by it
makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, would not,
individually or in the aggregate, (x) adversely affect the legality,
validity or enforceability of the Preferred Stock or any of the
Transaction Documents (as defined below), (y) have or result in a
material adverse effect on the results of operations, assets, prospects
insofar as it may reasonably be foreseen, or financial condition of the
Company and the Subsidiaries, taken as a whole or (z) adversely impair
the Company's ability to perform fully on a timely basis its
obligations under any Transaction Document, including, without
limitation, the Company's covenant under Section 3.7 hereof (any of
(x), (y) or (z), being a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by this Agreement and the other Transaction
Documents, and otherwise to carry out its obligations hereunder and
thereunder. This Agreement, the Registration Rights Agreement, the
Certificate of Designation, the Warrants and the Funds Escrow Agreement
are collectively referred to as the "Transaction Documents." The
execution and delivery of each of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all necessary action on
the part of the Company and no further action is required by the
Company. Each of the Transaction Documents has been duly executed by
the Company and when delivered in accordance with the terms hereof will
constitute the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general
application. Neither the Company nor any Subsidiary is in violation of
any of the
5
provisions of its respective certificate of incorporation, bylaws or
other organizational documents. Prior to the Initial Closing Date the
Certificate of Designation has been filed with the Secretary of State
of the State of Delaware and will be in full force and effect,
enforceable against the Company in accordance with the terms thereof.
(c) Capitalization; Rights to Acquire Capital Stock. The
authorized, issued and outstanding capital stock of the Company as of
January 13, 1999, is set forth in Schedule 2.1(c). All issued and
outstanding shares of capital stock of the Company and each Subsidiary
have been duly authorized and validly issued and are fully paid and
non-assessable. Except as disclosed in Schedule 2.1(c), no shares of
the capital stock of the Company are entitled to preemptive or similar
rights, nor is any holder of the capital stock of the Company entitled
to preemptive or similar rights arising out of any agreement or
understanding with the Company by virtue of any of the Transaction
Documents. Except as disclosed in Schedule 2.1(c), as of January 13,
1999, there are no outstanding options, warrants, script rights to
subscribe to, calls, written commitments or, to the knowledge of the
Company, oral commitments relating to, or, except as a result of the
purchase and sale of the Units, securities, rights or obligations
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, written arrangements or, to the knowledge
of the Company, oral arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common
Stock, or securities or rights convertible or exchangeable into shares
of Common Stock. Except as set forth on Schedule 2.1(c), and, to the
best knowledge of the Company, no Person or group of related Persons
beneficially owns (as determined pursuant to Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) or has the right to acquire by agreement with or by obligation
binding upon the Company beneficial ownership of in excess of 5% of the
Common Stock. A "Person" means an individual or corporation,
partnership, trust, incorporated or unincorporated association, joint
venture, limited liability company, joint stock company, government (or
an agency or subdivision thereof) or other entity of any kind. The
Common Stock is quoted and is listed for trading on The Nasdaq
Small-Cap Market. Except as set forth on Schedule 2.1(c), the Company
has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for such listing, and the
Company has maintained all requirements for the continuation of such
listing.
(d) Issuance of Units. The Units are duly authorized, and when
issued and paid for in accordance with the terms hereof, shall be
validly issued, fully paid and nonassessable, free and clear of all
liens, encumbrances, and rights of first refusal of any kind
(collectively, "Liens"). The Units upon issuance will not subject the
holders thereof to personal liability by reason of being such holders.
The Company has and, at the Initial Closing Date and the each
Subsequent Closing Date (each, a "Closing Date"), as the case may be,
will have and at all times while the Shares and the Warrants are
outstanding will maintain an adequate reserve of duly authorized shares
of Common Stock to enable it to perform its obligations under this
Agreement, the Warrants and the Certificate of
6
Designation with respect to the number of Shares and Warrants issued
and outstanding at such Closing Date and in no circumstances shall such
reserved and available shares of Common Stock be less than 175% of the
maximum number of shares of Common Stock which would be issuable upon
conversion of the Shares and upon exercise of the Warrants issued
pursuant to the terms hereof with respect to the number of Shares and
Warrants issued and outstanding at such Closing Date were such
conversion or exercise, as the case may be, effected on the Initial
Closing Date. The shares of Common Stock issuable upon conversion of
the Shares are referred to herein as the "Underlying Shares." When
issued in accordance with the Certificate of Designation, the
Underlying Shares will be duly authorized, validly issued, fully paid
and nonassessable, free and clear of all Liens. The shares of Common
Stock issuable upon exercise of the Warrants are referred to herein as
the "Warrant Shares." When issued and paid for in accordance with the
Warrant, the Warrant Shares will be duly authorized, validly issued,
fully paid and nonassessable, free and clear of all Liens. The Shares,
the Warrants, the Underlying Shares and the Warrant Shares are referred
to herein as the "Securities."
(e) No Conflicts. The execution, delivery and performance of
this Agreement and the other Transaction Documents by the Company and
the consummation by the Company of the transactions contemplated hereby
and thereby do not and will not (i) conflict with or violate any
provision of its certificate of incorporation, bylaws or other
organizational documents (each as amended through the date hereof) or
(ii) subject to obtaining the consents referred to in Section 2.1(f),
conflict with, or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument (evidencing a
Company debt or otherwise) to which the Company is a party or by which
any property or asset of the Company is bound or affected, (iii) result
in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental
authority to which the Company is subject (including Federal and state
securities laws and regulations), or by which any material property or
asset of the Company is bound or affected, or (iv) result in the
creation of imposition of a Lien upon any of the Securities or any of
the assets of the Company, or any of its Affiliates (as such term is
defined under Rule 405 promulgated under the Securities Act), except in
the case of each of clauses (ii) and (iii), such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have or result in a
Material Adverse Effect. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any
governmental authority except for any such violation as would not,
individually or in the aggregate, have or result in a Material Adverse
Effect.
(f) Consents and Approvals. Except as specifically set forth
in Schedule 2.1(f), neither the Company nor any Subsidiary is required
to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person
in connection with the execution, delivery and performance by the
Company of
7
the Transaction Documents, other than (i) the approval of the Board of
Directors and the filing of the Certificate of Designation with respect
to the Preferred Stock with the Secretary of State of the State of
Delaware, which filing and approvals with respect to the Preferred
Stock shall be effected prior to the Initial Closing Date, (ii) the
filing of the Registration Statement with the Commission, which shall
be filed in accordance with and in the time periods set forth in the
Registration Rights Agreement, (iii) the application(s) or any
letter(s) acceptable to The Nasdaq Small-Cap Market for the listing of
the Underlying Shares and the Warrant Shares with The Nasdaq Small-Cap
Market (and with any other national securities exchange or market on
which the Common Stock is then listed), and (iv) any filings, notices
or registrations under applicable federal and state securities laws
(together with the consents, waivers, authorizations, orders, notices
and filings referred to in Schedule 2.1(f), the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically set forth
in Schedule 2.1(g) there is no action, suit, notice of violation,
proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of the
Subsidiaries or any of their respective properties before or by any
court, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) which (i) adversely affects
or challenges the legality, validity or enforceability of any of the
Transaction Documents or the Securities or (ii) would reasonably be
expected to, individually or in the aggregate, have a Material Adverse
Effect.
(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of any indenture,
loan or credit agreement or any other agreement or instrument to which
it is a party or by which it or any of its properties is bound which
would reasonably be expected to, individually or in the aggregate, have
a Material Adverse Effect, (ii) is in violation of any order of any
court, arbitrator or governmental body applicable to it, or (iii) is in
violation of any statute, rule or regulation of any governmental
authority to which it is subject, which violation would reasonably be
expected to, individually or in the aggregate, have a Material Adverse
Effect.
(i) Schedules. The Schedules to this Agreement furnished by or
on behalf of the Company do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements made therein not misleading.
(j) Private Offering. The Company and all Persons acting on
its behalf have not made, and will not make, offers or sales of the
Preferred Stock, and any securities that might be integrated with
offers and sales of the Preferred Stock, except to "accredited
investors" (as defined in Regulation D ("Regulation D") under the
Securities Act of 1933, as amended (the "Securities Act")) without any
general solicitation or advertising and otherwise in compliance with
the conditions of Regulation D. The offer and sale by the Company to
the Purchasers of the Shares and the Warrants and the Underlying Shares
and the Warrant Shares into which the Shares and the Warrants are
convertible or exercisable, as the case may be, is exempt from the
registration requirements of the Securities Act.
8
(k) SEC Documents; Financial Statements; No Adverse Change.
The Company has filed all reports required to be filed by it under the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
the three years preceding the date hereof (the foregoing materials
being collectively referred to herein as the "SEC Documents") on a
timely basis or has received a valid extension of such time of filing
and has filed any such SEC Documents prior to the expiration of any
such extension. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Exchange
Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Documents, when filed, contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading. All material agreements to which the
Company is a party or to which the property or assets of the Company
are subject have been filed as exhibits to the SEC Documents as
required; neither the Company nor any of the Subsidiaries is in breach
of any agreement where such breach would reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect. The
financial statements of the Company included in the SEC Documents
comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as
in effect at the time of filing. Such financial statements have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements or
the notes thereto, and fairly present in all material respects the
financial position of the Company as of and for the dates thereof and
the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal year-end audit
adjustments. Since the date of the financial statements included in the
Company's last filed Quarterly Report on Form 10-Q for the period ended
September 30, 1998, there has been no event, occurrence or development
that has had, or would reasonably be expected to have, a Material
Adverse Effect which has not been specifically disclosed to the
Purchasers by the Company. The Company last filed audited financial
statements with the Commission on October 13, 1998, and has not
received any comments from the Commission in respect thereof.
(l) Seniority. No class of equity securities of the Company is
senior to the Preferred Stock in right of payment, whether upon
liquidation, dissolution or otherwise.
(m) Investment Company. The Company is not, and is not
controlled by or under common control with an affiliate of, an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
(n) Certain Fees. Except as specifically set forth in Schedule
2.1(n), no fees or commissions will be payable by the Company to any
broker, financial advisor, finder, investment banker, or bank with
respect to the transactions contemplated by this Agreement. The
Purchasers shall have no obligation with respect to any fees or with
9
respect to any claims made by or on behalf of other Persons for fees of
a type contemplated in this Section 2.1(n) that may be due in
connection with the transactions contemplated by this Agreement. The
Company shall indemnify and hold harmless each of the Purchasers, its
employees, officers, directors, agents, and partners, and their
respective Affiliates, from and against all claims, losses, damages,
costs (including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees.
(o) Solicitation Materials. The Company has not distributed
any offering materials in connection with the offering and sale of the
Securities. The Company confirms that it has not provided the
Purchasers or their agents or counsel with any information that
constitutes or might constitute material non-public information. The
Company understands and confirms that the Purchasers shall be relying
on the foregoing representations in effecting transactions in
securities of the Company.
(p) Form S-3 Eligibility. The Company is, and at each Closing
Date will be, eligible to register securities (including the Underlying
Shares and the Warrant Shares) for resale with the Commission under
Form S-3 promulgated under the Securities Act.
(q) Exclusivity. The Company shall not issue and sell the
Preferred Stock to any Person other than the Purchasers pursuant to
this Agreement other than with the specific prior written consent of
each of the Purchasers.
(r) Listing and Maintenance Requirements Compliance. Except as
set forth on Schedule 2.1(r), the Company has not in the three years
preceding the date hereof received notice (written or oral) from any
stock exchange, market or trading facility on which the Common Stock is
or has been listed (or on which it has been quoted) to the effect that
the Company is not in compliance with the listing or maintenance
requirements of such exchange or market. Except as specifically set
forth on Schedule 2.1(r), after giving effect to the transactions
contemplated in this Agreement, the Company believes that it is in
compliance with all such maintenance requirements.
(s) Patents and Trademarks. The Company has, or has rights to
use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and
rights (collectively, the "Intellectual Property Rights") which are
necessary for use in connection with its business, as currently
conducted and as described in the SEC Documents, and which the failure
to so have would have a Material Adverse Effect.
(t) Acknowledgment of Dilution. The Company acknowledges that
the issuance of (i) the Underlying Shares upon conversion of the Shares
in accordance with the Certificate of Designation and (ii) the Warrant
Shares upon exercise of the Warrants may result in dilution of the
outstanding shares of Common Stock, which dilution may be substantial
under certain market conditions. The Company further acknowledges that
its
10
obligation to issue (i) the Underlying Shares upon conversion of the
Shares in accordance with the Certificate of Designation and (ii) the
Warrant Shares upon exercise of the Warrants is unconditional and
absolute regardless of the effect of any such dilution.
(u) Registration Rights; Rights of Participation. Except as
described on Schedule 2.1(u) hereto, (A) the Company has not granted or
agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered
with the Commission or any other governmental authority which has not
been satisfied and (B) except as set forth on Schedule 2.1(c) hereto,
no Person, including, but not limited to, current or former
shareholders of the Company, underwriters, brokers or agents, has any
right of first refusal, preemptive right, right of participation, or
any similar right to participate in the transactions contemplated by
this Agreement or any other Transaction Document.
(v) Title. Except as disclosed in Schedule 2.1(v), the Company
and the Subsidiaries have good and marketable title to, or the right to
use, all personal property owned by them which is material to the
business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for liens, claims or encumbrances as do not
materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company
and the Subsidiaries. Neither the Company nor any of its Subsidiaries
owns any real property. Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and the Subsidiaries.
(w) Regulatory Permits. The Company and the Subsidiaries
possess all franchises, certificates, licenses, authorizations and
permits or similar authority issued by the appropriate federal, state
or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Documents except where the failure
to possess such permits would not, individually or in the aggregate,
have a Material Adverse Effect ("Material Permits"), and neither the
Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(x) Insurance. The Company and each Subsidiary maintains
property and casualty, general liability, workers' compensation,
environmental hazard, personal injury and other similar types of
insurance with financially sound and reputable insurers that is
adequate, consistent with industry standards. Neither the Company nor
any Subsidiary has received notice from, and has any knowledge of any
threat by, any insurer (that has issued any insurance policy to the
Company or any Subsidiary) that such insurer intends to deny coverage
under or cancel, discontinue or not renew any insurance policy
presently in force.
11
(y) Taxes. All applicable tax returns required to be filed by
the Company and each of the Subsidiaries have been filed, or if not yet
filed have been granted extensions of the filing dates which extensions
have not expired, and all taxes, assessments, fees and other
governmental charges upon the Company, the Subsidiaries, or upon any of
their respective properties, income or franchises, shown in such
returns and on assessments received by the Company or the Subsidiaries
to be due and payable have been paid, or adequate reserves therefor
have been set up if any of such taxes are being contested in good
faith; or if any of such tax returns have not been filed or if any such
taxes have not been paid or so reserved for, the failure to so file or
to pay would not in the aggregate or individually have a Material
Adverse Effect.
(z) No Integrated Offering. Neither the Company, nor any of
its Affiliates, nor any Person acting on its or their behalf, has
directly or indirectly made any offers or sales in any security or
solicited any offers to buy any securities under circumstances that
would require registration of any such securities under the Securities
Act or cause the offering of the Securities pursuant to this Agreement
to be integrated with prior offerings by the Company for purposes of
the Securities Act or any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of The
Nasdaq Stock Market, as applicable. The Company has not conducted any
offering that will be integrated with the issuance of the Securities
solely for purpose of Rule 4460(i) of The Nasdaq Stock Market, Inc.'s
Marketplace Rules.
(aa) Year 2000 Compliance. The Company has initiated a review
and assessment of all areas within its and each Subsidiaries' business
and operations that could be adversely affected by the "Year 2000
Problem" (that is, the risk that computer applications used by the
Company or any of the Subsidiaries may be unable to recognize and
perform properly date-sensitive functions involving certain dates prior
to and any date after December 31, 1999). Based on the foregoing,
except as set forth on Schedule 2.1(aa), the Company believes that the
computer applications that are currently material to its or any
Subsidiaries' business and operations are reasonably expected to be
able to perform properly date-sensitive functions for all dates before
and after January 1, 2000, except to the extent that a failure to do so
would not reasonably be expected to have a Material Adverse Effect.
2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
(a) Investment Intent. Such Purchaser is acquiring the
Securities for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any
part thereof or interest therein, without prejudice, however, to such
Purchaser's right, subject to the provisions of this Agreement and the
Registration Rights Agreement, at all times to sell or otherwise
dispose of all or any part of such Securities pursuant to an effective
registration statement under the Securities Act and in compliance with
applicable State securities laws or under an exemption from such
registration.
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(b) Purchaser Status. At the time such Purchaser was offered
the Securities, and at each Closing Date, (i) it was and will be, an
"accredited investor" (as defined in Regulation D), or (ii) such
Purchaser either alone or together with its representatives, had and
will have such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and had and will
have so evaluated the merits and risks of such investment. Such
Purchaser has the authority and is duly and legally qualified to
purchase and own the Securities.
(c) Ability of Purchaser to Bear Risk of Investment. Such
Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss
of such investment.
(d) Reliance. Each Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to the Purchaser without
registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act under
Section 4(2) of the Securities Act or Regulation D promulgated
thereunder and (ii) the availability of such exemption, depends in part
on, and the Company will rely upon the accuracy and truthfulness of,
the foregoing representations and such Purchaser hereby consents to
such reliance.
13
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions.
(a) If any Purchaser should decide to dispose of any Shares
(and upon conversion thereof any of the Underlying Shares) or Warrants
(and upon exercise thereof any of the Warrant Shares) held by it, each
Purchaser understands and agrees that it may do so only pursuant to an
effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from the registration
requirements of the Securities Act. In connection with any transfer of
any Securities other than pursuant to an effective registration
statement or to the Company, the Company may require the transferor
thereof to provide to the Company a written opinion of counsel, the
form and substance of which opinion shall be reasonably satisfactory to
the Company, to the effect that such transfer does not require
registration of such transferred securities under the Securities Act.
Notwithstanding the foregoing, the Company hereby consents to and
agrees to register (i) any transfer of Securities by one Purchaser to
another Purchaser, and agrees that no documentation other than executed
transfer documents shall be required for any such transfer, and (ii)
any transfer by any Purchaser to an Affiliate of such Purchaser or to
an Affiliate of another Purchaser, or any transfer among any such
Affiliates, provided that transferee certifies in writing to the
Company that it is an "accredited investor" (as defined in Regulation
D). Any such transferee shall agree in writing to be bound by the terms
of this Agreement and shall have the rights of a Purchaser under this
Agreement and the Registration Rights Agreement.
(b) Each Purchaser agrees to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the
Securities:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.
The Underlying Shares issuable upon conversion of the Shares
and the Warrant Shares issuable upon exercise of the Warrants shall not
contain the legend set forth above if such conversion or exercise
occurs at any time while the Registration Statement is effective under
the Securities Act and upon the sale of the Underlying Shares or the
14
Warrant Shares by the Purchasers or in the event there is not an
effective Registration Statement at such time, if in the written
opinion of counsel to the Company (such opinion to be furnished at the
sole expense of the Company at the request of a Purchaser) such legend
is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the
staff of the Commission). The Company agrees that it will provide each
Purchaser, upon request, with a certificate or certificates
representing Underlying Shares and/or Warrant Shares, free from such
legend at such time as such legend is no longer required hereunder.
3.2 Stop Transfer Orders; Suspension of Qualification. The Company may
not make any notation on its records or give instructions to any transfer agent
of the Company which enlarge the restrictions of transfer set forth in Section
3.1. The Company will advise the Purchasers, promptly after it receives notice
of issuance by the Commission, any state securities commission or any other
regulatory authority of any stop order or of any order preventing or suspending
the use of any offering of any securities of the Company, or of the suspension
of the qualification of the Common Stock for offering or sale in any
jurisdiction, or the initiation of any proceeding for any such purpose.
3.3 Furnishing of Information. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act and to promptly furnish the Purchasers with
true and complete copies of all such filings. As long as any Purchaser owns
Securities, if the Company is not required to file reports pursuant to Section
13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act annual and quarterly financial statements,
together with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act, as
well as any other information required thereby, in the time period that such
filings would have been required to have been made under the Exchange Act. The
Company further covenants that it will take such further action as any holder of
Units may reasonably request, all to the extent required from time to time to
enable such Person to sell Underlying Shares and/or Warrant Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, including the legal
opinion referenced above in Section 3.1. Upon the request of any such Person,
the Company shall deliver to such Person a written certification of a duly
authorized officer as to whether it has complied with such requirements.
3.4 Blue Sky Laws. In accordance with the Registration Rights
Agreement, the Company shall qualify the Underlying Shares under the securities
or Blue Sky laws of such jurisdictions as the Purchasers may request and shall
continue such qualification at all times through the third anniversary of the
last Closing Date.
15
3.5 Integration. Except for the sale of Series E Convertible Preferred
Stock, the Company shall not sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in Section 2 of the
Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of any or all of such securities to any Purchaser.
3.6 Certain Agreements. As long as any Purchaser owns Securities, the
Company shall not and shall cause the Subsidiaries not to, without the consent
of the holders of all of the Shares then outstanding, (i) amend its certificate
of incorporation, bylaws or other charter documents so as to adversely affect
any rights of any Purchaser; (ii) declare, authorize, set aside or pay any
dividend or other distribution with respect to the Common Stock except as
permitted under the Certificate of Designation and as would not adversely affect
the rights of any Purchaser hereunder or under the Certificate of Designation;
(iii) repay, repurchase or offer to repay, repurchase or otherwise acquire
shares of its Common Stock in any manner; (iv) issue any series of preferred
stock or other securities with rights senior (in respect of liquidations,
dividends, preferences and similar rights) to those of the Shares; or (v) enter
into any agreement with respect to any of the foregoing.
3.7 Listing and Reservation of Underlying Shares and Warrant Shares;
Compliance with Law..
(a) The Company shall (i) not later than the tenth Business
Day following the applicable Closing Date prepare and file with The
Nasdaq Small-Cap Market (as well as any other national securities
exchange or market on which the Common Stock is then listed) an
additional shares listing application or a letter acceptable to The
Nasdaq Small-Cap Market covering and listing a number of shares of
Common Stock which is at least equal to 175% of the maximum number of
Underlying Shares and Warrant Shares then issuable, (ii) take all steps
necessary to cause the Underlying Shares and the Warrant Shares to be
approved for listing in The Nasdaq Small-Cap Market (as well as on any
other national securities exchange or market on which the Common Stock
is then listed) as soon as possible thereafter, and (iii) provide to
the Purchasers evidence of such listing, and the Company shall maintain
the listing of its Common Stock on such market. As used herein,
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the
State of New York generally are authorized or required by law or other
government actions to close.
(b) The Company shall at all times have authorized and
reserved for issuance upon conversion of the Shares pursuant to the
terms of the Certificate of Designation and upon exercise of the
Warrants pursuant to the Warrant the number of shares of Common Stock
required to provide for the conversion of the Shares and the exercise
of the Warrants.
(c) Until at least two (2) years after the last of the Shares
has been converted into Underlying Shares or the last of the Warrants
has been exercised for the Warrant
16
Shares, (i) the Company will cause its Common Stock to continue to be
registered under Sections 12(b) or 12(g) of the Exchange Act, will
comply in all respects with its reporting and filing obligations under
such Exchange Act, will comply with all requirements related to any
registration statement filed pursuant to this Agreement or the
Registration Rights Agreement and will not take any action or file any
document (whether or not permitted by the Securities Act or the
Exchange Act or the rules and regulations thereunder) to terminate or
suspend such registration or to terminate or suspend its reporting and
filing obligations under the Securities Act and Exchange Act, except as
permitted herein and (ii) the Company will take all action within its
power to continue the listing or trading of its Common Stock on The
Nasdaq Small-Cap Market and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or
rules of the NASD and The Nasdaq Stock Market.
3.8 Notice of Breaches.
(a) Each of the Company and each Purchaser shall give prompt
written notice to the other of any breach of any representation,
warranty or other agreement contained in this Agreement, the
Certificate of Designation, the Warrants or the Registration Rights
Agreement, as well as any events or occurrences arising after the date
hereof and prior to any Closing Date, which would reasonably be likely
to cause any representation or warranty or other agreement of such
party, as the case may be, contained herein to be incorrect or breached
as of such Closing Date. However, no disclosure by any party pursuant
to this Section 3.8 shall be deemed to cure any breach of any
representation, warranty or other agreement contained herein or in the
Registration Rights Agreement.
(b) Notwithstanding the generality of Section 3.8(a), the
Company shall promptly notify each Purchaser of any notice or claim
(written or oral) that it receives from any lender of the Company to
the effect that the consummation of the transactions contemplated
hereby, by the Certificate of Designation, by the Warrants and by the
Registration Rights Agreement violates or would violate any written
agreement or understanding between such lender and the Company, and the
Company shall promptly furnish by facsimile to each Purchaser a copy of
any written statement in support of or relating to such claim or
notice.
(c) The default by any Purchaser of any of its obligations,
representations or warranties under any Transaction Document shall not
be imputed to, and shall have no effect upon, any other Purchaser or
affect the Company's obligations under the Transaction Documents to any
non-defaulting Purchaser or to the defaulting Purchaser with respect to
any outstanding Shares, Warrants, Underlying Shares or Warrant Shares.
3.9 Conversion Obligations of the Company. The Company covenants to
convert Shares and to deliver the Underlying Shares in accordance with the terms
and conditions and within the time period set forth in the Certificate of
Designation.
17
3.10 Use of Proceeds. The Company shall use all of the proceeds from
the sale of the Units for working capital and general corporate purposes and not
for the satisfaction of any portion of Company borrowings outside the normal
course of business, including, without limitation, any obligation or liability
of any kind owed to a shareholder, officer or director of the Company, or to
redeem Company equity or equity-equivalent securities. Pending application of
the proceeds of this placement in the manner permitted hereby, the Company will
invest such proceeds in interest bearing accounts and/or short-term, investment
grade interest bearing securities.
3.11 Indemnification. The Company also will indemnify and hold the
Purchasers harmless against any and all losses, claims, damages or liabilities
to any such Person (including, without limitation, in connection with any
action, proceeding or investigation brought by or against any such Person,
including by shareholders of the Company) in connection with or as a result of
any matter referred to in the Transaction Documents, including, without
limitation, for any misrepresentation by the Company, for breaches of
representations and warranties contained in any of the Transaction Documents,
and for any breach, non-compliance or nonfulfillment by the Company of any
covenant, agreement or undertaking to be complied with or performed by it
contained in or pursuant to the Transaction Documents, except to the extent that
it is finally judicially determined that such losses, claims, damages or
liabilities resulted solely from the gross negligence or bad faith of the
Purchasers. If for any reason the foregoing indemnification is unavailable to
such Purchaser or is insufficient to hold such Person harmless, then the Company
shall contribute to the amount paid or payable by such Purchaser as a result of
such loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative economic interests of the Company and its shareholders on
the one hand and the Purchasers on the other hand in the matters contemplated by
the Transaction Documents as well as the relative fault of the Company and the
Purchasers with respect to such loss, claim, damage or liability and any other
relevant equitable considerations. The reimbursement, indemnity and contribution
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any affiliate of the Purchasers and the partners, directors,
agents, employees and controlling persons (if any), as the case may be, of the
Purchasers and any such affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, the Purchasers, any such affiliate and any such Person. The Company
also agrees that neither the Purchasers nor any of such Affiliates, partners,
directors, agents, employees or controlling persons shall have any liability to
the Company or any Person asserting claims on behalf of or in right of the
Company in connection with or as a result of any matter referred to in this
Agreement except to the extent that it is finally judicially determined that any
losses, claims, damages, liabilities or expenses incurred by the Company result
solely from the gross negligence or bad faith of, or knowing breach of this
Agreement by, the Purchasers. Promptly after receipt by the Purchasers or any
affiliate, partners, directors, agents, employees and controlling persons, as
the case may be, of notice of any claim or other commencement of any action in
respect of which indemnity may be sought, such party will notify the Company in
writing of the receipt or commencement thereof and the Company shall have the
right to assume the defense of such claim or action (including the employment of
counsel reasonably satisfactory to the indemnified parties and the payment of
fees and expenses of such
18
counsel). The indemnified party shall cooperate with the Company and the
Company's counsel in the defense of such claim or action. The Purchasers
understand that the Company shall not in connection with any one such claim or
action or separate but substantially similar related claims or actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys for all of the indemnified parties unless the defense of one
indemnified party is unique or separate from that of another indemnified party
or one or more legal defenses are available to an indemnified party but not to
other indemnified parties subject to the same claim or action. In the event the
Company does not promptly assume the defense of a claim or action, the
indemnified parties shall have the right to employ counsel reasonably
satisfactory to the Company, at the Company's expense, to defend such claim or
action. The indemnified party shall not admit any liability with respect to the
claim or action or settle, compromise, pay or discharge the same without the
prior written consent of the Company so long as the Company is reasonably
contesting or defending the same in good faith. The Company shall not
compromise, settle or discharge any claim or action without the Purchasers'
consent, as applicable, which consent will not be unreasonably withheld, unless
there is no finding or admission of any violation of any law against the
indemnified party and the sole relief is monetary damages paid in full by the
Company. Any right to trial by jury with respect to any action or proceeding
arising in connection with or as a result of either our engagement or any matter
referred to in this Agreement is hereby waived by the parties hereto. The
provisions of this Section 3.11 shall survive any termination or completion of
the Transaction Documents.
3.12 Sales of Preferred Stock. The Company shall not sell any shares of
Preferred Stock other than (i) the Shares and (ii) up to an aggregate of 1,250
shares of Series E Preferred Stock, par value $1,000 per share and stated value
$5,000 per share, other than as permitted in Section 3.13.
3.13 Subsequent Sales and Registrations. (a) Until the later of (i)
180 days after the Third Closing Date and (ii) 60 days after all Underlying
Shares and Warrant Shares have been registered under the Securities Act
pursuant to an effective registration statement, the Company shall not,
directly or indirectly, without the prior written consent of the Purchasers,
offer, sell, grant any option to purchase, or otherwise dispose of (or announce
any offer, sale, grant of any option to purchase or other disposition) any of
its or its Affiliates' equity or equity-equivalent securities or any instrument
that permits the holder thereof to acquire Common Stock, except (i) the
granting of options or warrants to employees, officers and directors, and the
issuance of shares upon exercise of options granted, under any stock option
plan heretofore or hereinafter duly adopted by the Company, (ii) shares issued
upon exercise of any currently outstanding warrants and upon conversion of any
currently outstanding convertible preferred stock in each case disclosed in
Schedule 2.1(c), (iii) shares of Common Stock issued upon conversion of Shares
or upon exercise of the Warrants, and (iv) shares of Common Stock issued in
connection with the transactions described on Schedule 3.13.
(b) Other than Underlying Shares, Warrant Shares and other
"Registrable Securities" (as defined in the Registration Rights Agreement) to
be registered in accordance with
19
the Registration Rights Agreement, the Company shall not, for a period of not
less than 90 Trading Days after the dates that any registration statement
relating to the Securities is declared effective by the Commission, without the
prior written consent of the Purchasers, (i) register for resale any securities
of the Company, or (ii) issue or sell any of its or any of its Affiliates'
equity or equity-equivalent securities except for (A) securities issued upon the
exercise or conversion of the securities set forth on Schedule 2.1(c) or (B)
securities sold pursuant to the Company's employee benefit plans. Any days that
any Purchaser is unable to sell Underlying Shares or Warrant Shares under the
Registration Statement shall be added to such 90 Trading Day period for the
purposes of (i) and (ii) above.
3.14 Shareholder Approval. The Company shall, as promptly as possible,
but in no event later than 65 days after the Initial Closing Date, convene a
shareholders' meeting, held in accordance with the Company's Certificate of
Incorporation and bylaws, and use its best efforts to obtain the approval
("Shareholder Approval") by a majority of the total votes cast on the proposal
at such shareholders' meeting, in person or by proxy, of (i) the issuance of the
Underlying Shares as a consequence of the conversion of the Shares and (ii) the
issuance of the Warrant Shares as a consequence of the exercise of the Warrants,
in each case in a number exceeding the maximum number of shares of Common Stock
issuable without shareholder approval at a price less than the greater of the
book or market value on the Original Issue Date as and to the extent required
pursuant to Rule 4460(i) of The Nasdaq Stock Market, Inc.'s Marketplace Rules
(or any successor or replacement provision thereof).
3.15 Interim Financing The Company shall use reasonable efforts to
obtain from its Affiliates an investment of additional working capital in an
aggregate amount not less than $1,000,000 and not more than $2,000,000 on terms
no more favorable to such Affiliates than the terms of the Units (such
investment being the "Interim Financing").
3.16 Incorporation of Certificate of Designation By Reference. The
Certificate of Designation is hereby incorporated herein by reference and made a
part hereof.
3.17 Board of Directors. If more than ten percent (10%) of the Shares
remain outstanding, the Purchasers shall have the right to approve the
appointment of any new or replacement member to the Board of Directors, such
approval not to be unreasonably withheld.
3.18 Conversion of Shares and Exercise of Warrants. Until the Company
has received Shareholder Approval, none of the Purchasers shall be issued shares
of Common Stock upon (i) the conversion of the Shares and/or (ii) the exercise
of the Warrants, at a price per share of Common Stock less than the Per Share
Market Value in excess of the number of shares of Common Stock set forth
opposite each of the Purchasers' name on Schedule 3.18 hereto.
20
ARTICLE IV
CONDITIONS
4.1 Conditions Precedent to Sale of the Initial Units.
(a) Conditions Precedent to the Obligation of the Company to
Sell the Initial Units. The obligation of the Company to sell the
Initial Units hereunder is subject to the satisfaction or waiver by the
Company, at or before the Initial Closing, of each of the following
conditions:
(i) Accuracy of the Purchasers' Representations and
Warranties. The representations and warranties of each
Purchaser shall be true and correct in all material respects
as of the date when made and as of the Initial Closing Date,
as though made on and as of such date;
(ii) Performance by the Purchasers. Each Purchaser
shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or
complied with by such Purchaser at or prior to the Initial
Closing; and
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights
Agreement.
(b) Conditions Precedent to the Obligation of the Purchasers
to Purchase the Initial Units. The obligation of each Purchaser
hereunder to acquire and pay for the Initial Units is subject to the
satisfaction or waiver by such Purchaser, at or before the Initial
Closing, of each of the following conditions:
(i) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company
set forth in this Agreement and in the Registration Rights
Agreement shall be true and correct in all material respects
as of the date when made and as of the Initial Closing Date as
though made on and as of such date;
(ii) Performance by the Company. The Company shall
have performed, satisfied and complied with in all material
respects all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by
the Company at or prior to the Initial Closing;
21
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions
contemplated by this Agreement, the Certificate of
Designation, the Warrants or the Registration Rights
Agreement;
(iv) Adverse Changes. Since the date of the financial
statements included in the Company's Quarterly Report on Form
10-Q or Annual Report on Form 10-K, whichever is more recent,
last filed prior to the date of this Agreement, no event which
had a Material Adverse Effect and no material adverse change
in the financial condition of the Company shall have occurred
(for purposes hereof changes in the market price of the Common
Stock may be considered as a factor in determining whether
there has occurred an event which has had a Material Adverse
Effect or whether a material adverse change has occurred);
(v) No Suspensions of Trading in Common Stock. The
trading in the Common Stock shall not have been suspended by
the Commission or on The Nasdaq Small-Cap Market which
suspension shall remain in effect;
(vi) Legal Opinion. The Company shall have delivered
to the Purchasers the opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau &
Klimpl, LLP, outside counsel to the Company, in substantially
the forms annexed hereto as Exhibit D;
(vii) Required Approvals. All approvals required
pursuant to clauses (i) and (iv) of the definition of
"Required Approvals" shall have been obtained;
(viii) Shares of Common Stock. On or prior to the
Initial Closing Date, the Company shall have duly reserved the
number of Underlying Shares and Warrant Shares required by the
Transaction Documents to be reserved for issuance upon
conversion of the Shares and upon exercise of the Warrants;
(ix) Delivery of Stock Certificates and Warrant
Certificates. The Company shall have delivered to each
Purchaser or such Purchaser's designee, (i) the stock
certificate(s) representing the Initial Shares, registered in
the name of such Purchaser, each in form satisfactory to the
Purchaser and (ii) warrant certificate(s) representing the
Initial Warrants, registered in the name of such Purchaser, in
form satisfactory to the Purchaser;
(x) Registration Rights Agreement. The Company
shall have executed and delivered the Registration Rights
Agreement;
(xi) Certificate of Designation. The Certificate of
Designation shall have been duly approved by the Board of
Directors and filed with and accepted by
22
the Secretary of State of the State of Delaware, and the
Company shall have delivered a copy thereof to each Purchaser
certified as filed by the office of the Secretary of State of
the State of Delaware;
(xii) Transfer Agent Instructions. The Irrevocable
Transfer Agent Instructions, in the form of Exhibit E annexed
hereto, shall have been delivered to and acknowledged in
writing by the Company's transfer agent; and
(xiii) Officer's Certificate. On the Initial Closing
Date the Company shall deliver to the Purchasers an Officer's
Certificate dated the Initial Closing Date and signed by an
executive officer of the Company confirming the accuracy of
the Company's representations, warranties and covenants as of
such Closing Date and confirming the compliance by the Company
with the conditions precedent set forth in this Section 4.1 as
of the Initial Closing Date.
4.2 Conditions Precedent to the Obligation of the Purchasers to
Purchase the Additional Units. The obligation of each Purchaser hereunder to
acquire and pay for the Additional Units is subject to the satisfaction or
waiver by each Purchaser, at or before the Subsequent Closing, of each of the
following conditions:
(a) Initial Closing; Subsequent Closings. The Initial
Closing shall have occurred, and with respect to the Third Tranche
Units, the Second Closing shall have occurred;
(b) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company contained herein and
in the Registration Rights Agreement shall be true and correct as of
the date when made and as of any Subsequent Closing Date, as though
made on and as of such date, except where the event causing such
representation or warranty to be untrue or incorrect would not result
in a Material Adverse Effect;
(c) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement, the
Certificate of Designation, the Warrants and the Registration Rights
Agreement to be performed, satisfied or complied with by the Company at
or prior to any Subsequent Closing Date;
(d) Registration Statements. With respect to the Third
Closing, the Registration Statement with respect to the Underlying
Shares issuable on conversion of all Shares and with respect to the
Warrant Shares issuable upon exercise of all Warrants shall have been
declared effective under the Securities Act by the Commission; and on
the Third Closing Date such Registration Statement shall be effective,
not subject to any stop order and not be subject to any suspension
pursuant to Section 3(n) of the Registration Rights Agreement, and
shall have been effective and shall not have been subject to any stop
order
23
for the 30 Trading Days prior to the Third Closing Date and no stop
order shall be pending or threatened as of the Third Closing Date;
(e) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court of governmental authority of
competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement, the Certificate of
Designation, the Warrants or the Registration Rights Agreement relating
to the issuance, conversion or exercise of any of the Securities;
(f) No Suspensions of Trading in Common Stock. The trading in
the Common Stock shall not have been suspended by the Commission or on
The Nasdaq Small-Cap Market (except for any suspension of trading of
limited duration solely to permit dissemination of material information
regarding the Company);
(g) Listing of Common Stock. The Common Stock shall have been
at all times since the Initial Closing Date listed for trading on The
Nasdaq Small-Cap Market, and the Company shall have no knowledge of any
action or proceeding, pending or threatened, that may result in the
delisting of the Common Stock from the Nasdaq Small-Cap Market;
(h) Change of Control. No Change of Control shall have
occurred since the Initial Closing Date. "Change of Control" means the
occurrence of any of (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d5(b)(1)
promulgated under the Exchange Act) of in excess of 50% of the voting
securities of the Company, (ii) a replacement of more than one-half of
the members of the Board of Directors which is not approved by those
individuals who are members of the Board of Directors on the date
hereof in one or a series of related transactions, (iii) the merger of
the Company with or into another entity, consolidation or sale of all
or substantially all of the assets of the Company in one or a series of
related transactions or (iv) the execution by the Company of an
agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i), (ii) or (iii);
(i) Legal Opinion. The Company shall have delivered to the
Purchasers the opinion of the Company's legal counsel, in substantially
the form annexed hereto as Exhibit D, dated the Subsequent Closing
Date;
(j) Required Approvals. All Required Approvals shall have been
obtained;
(k) Shares of Common Stock. On any Subsequent Closing Date the
Company shall have duly reserved the number of Underlying Shares and
Warrant Shares required by this Agreement to be reserved for issuance
upon conversion of the Shares and the exercise of the Warrants;
24
(l) Delivery of Stock Certificates. The Company shall have
delivered to each Purchaser or such Purchaser's designee (i) the stock
certificate(s) representing the Second Tranche Shares, in the case of
the Second Closing, and representing the Third Tranche Shares, in the
case of the Third Closing, registered in the name of such Purchaser,
each in form satisfactory to such Purchaser, and (ii) the warrant
certificate(s) representing the Second Tranche Warrants, in the case of
the Second Closing, and the Third Tranche Warrants, in the case of
Third Closing, registered in the name of such Purchaser, each in form
satisfactory to such Purchaser;
(m) Performance of Conversion/Exercise Obligations. The
Company shall have delivered Underlying Shares upon conversion of
Shares and otherwise performed its obligations in accordance with the
terms, conditions and timing requirements of each Certificate of
Designation;
(n) Common Stock Price; Trading Volume. For the ten
consecutive Trading Days immediately preceding any Subsequent Closing
Date (i) the average Per Share Market Value shall not have been less
than $.75 and (ii) the average trading volume of the Common Stock shall
have been at least 100,000 shares per day;
(o) Adverse Changes. During the period which is ten
consecutive Trading Days prior to any Subsequent Closing Date, the Per
Share Market Value of the Common Stock shall not have decreased by more
than 50% from the highest Per Share Market Value during such period;
provided, however, that if the Per Share Market Value shall have so
decreased by more than 50%, but shall have subsequently increased so
that on such Subsequent Closing Date it has been, for the three
consecutive Trading Days immediately prior to such Subsequent Closing
Date, no more than 25% below the highest Per Share Market Value during
such period, then this condition shall be satisfied;
(p) Transfer Agent Instructions. The Irrevocable Transfer
Agent Instructions, in the form of Exhibit E annexed hereto, shall have
been delivered to and acknowledged in writing by the Company's transfer
agent;
(q) Officer's Certificate. On each Subsequent Closing Date the
Company shall deliver to the Purchasers an Officer's Certificate dated
such Subsequent Closing Date and signed by an executive officer of the
Company confirming the accuracy of the Company's representations,
warranties and covenants as of such Subsequent Closing Date and
confirming the compliance by the Company with the conditions precedent
set forth in this Section 4.2 as of such Subsequent Closing Date;
(r) Shareholder Approval. The Company shall have obtained
Shareholder Approval; and
(s) Interim Financing. The Company shall have obtained the
Interim Financing.
25
ARTICLE V
MISCELLANEOUS
5.1 Fees and Expenses. The Company shall pay the reasonable legal fees
and expenses of Stroock & Stroock & ▇▇▇▇▇ LLP, counsel for the Purchasers,
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement and the other Transaction Documents, which legal fees shall not
exceed $30,000 in connection with the negotiation, preparation, execution and
delivery of this Agreement and the other Transaction Documents. The Company
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by the Company incident to the
negotiation, preparation, execution, delivery and performance of this Agreement
and the other Transaction Documents. The Company shall pay all stamp and other
taxes and duties levied in connection with the issuance of the Securities
pursuant to the Transaction Documents.
5.2 Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto and the other Transaction Documents, contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters.
5.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., New York City time, on
a Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice later than 5:00 p.m., New York City time, on any
date and earlier than 11:59 p.m., New York City time, on such date, (iii) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service or (iv) actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall be
with respect to each Purchaser at its address set forth under its name on
Schedule 1 attached hereto, or with respect to the Company, addressed to:
Imaging Technologies Corporation
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices
26
to any Purchaser shall be sent to Stroock & Stroock & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.,
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇. Copies of notices to the Company shall be sent to
▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., Facsimile No.: (212)
704-6288.
5.4 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by both the Company and the Purchasers; or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter. Notwithstanding the
foregoing, no such amendment shall be effective to the extent that it applies to
less than all of the holders of the Units outstanding. The Company shall not
offer or pay any consideration to a Purchaser for consenting to such an
amendment or waiver unless the same consideration is offered to each Purchaser
and the same consideration is paid to each Purchaser which consents to such
amendment or waiver.
5.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each of the Purchasers. Each Purchaser may
assign this Agreement or any rights or obligations hereunder (i) to its
affiliates or to another Purchaser without the prior written consent of the
Company and (ii) to any other Person with the prior written consent of the
Company, such consent not to be unreasonably withheld, except that any assignee
must make the representations and warranties set forth in Section 2.2 and
otherwise comply with the terms of this Agreement otherwise applicable to its
assignor. This provision shall not limit a Purchaser's right to transfer
securities or transfer or assign rights under the Registration Rights Agreement.
5.7 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
5.8 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York, without
regard to the principles of conflicts of law thereof.
5.9 Survival. The agreements, covenants, representations, warranties
and provisions contained in this Agreement shall survive the delivery of the
Units pursuant to this Agreement and each Closing hereunder and any conversion
of the Shares or exercise of the Warrants.
27
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that all
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
5.11 Publicity. The Company and each Purchaser shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other Party with prior notice of such public statement. The Company
shall not publicly or otherwise disclose the names of any of the Purchasers
without each such Purchaser's prior written consent unless otherwise required by
law, in which case the Company shall inform such Purchaser of such disclosure in
writing prior to making such disclosure.
5.12 Consent to Jurisdiction; Attorneys' Fees (a) The Company
(including, but not limited to, its affiliates, subsidiaries, officers,
directors and controlling persons) and each Purchaser hereby (i) irrevocably
submits to the exclusive jurisdiction of any New York State court or Federal
court sitting in the Borough of Manhattan, The City of New York in any action
related to, connected with or arising out of, in whole or in part, the
Transaction Documents, including, but not limited to, transactions in the
securities of the Company subsequent to the purchase by such Purchaser or
Persons claimed to be affiliated with such Purchaser, (ii) agrees that all
claims in such action shall be decided in such court, (iii) waives, to the
fullest extent it may effectively do so, the defense of inconvenient forum and
(iv) consents to the service of process by certified mail, return receipt
requested. Nothing herein shall affect the right of any party to serve legal
process in any manner permitted by law or affect its right to bring any action
in any other court.
(b) In connection with any dispute between the Company and any
Purchaser, related to, connected with or arising out of, in whole or in part,
the Transaction Documents including, but not limited to, transactions in the
securities of the Company subsequent to the purchase, by a Purchaser or Persons
claimed to be affiliated to a Purchaser, the prevailing party shall be awarded
all reasonable attorneys' fees and expenses incurred by it. In that connection
fees and expenses actually paid by a party in connection with the litigation of
any dispute shall be deemed presumably reasonable.
(c) In the event that any Purchaser or any Person claimed to be
affiliated or associated with such Purchaser becomes involved in any capacity in
any action, proceeding or investigation brought by or against any Person,
including shareholders of the Company, in connection with or as a result of any
matter referred to in the Transaction Documents, the Company will reimburse
28
such Purchaser and/or those claimed to be affiliated or associated with such
Purchaser for its legal fees and expenses and other expenses (including the cost
of any investigation and preparation) incurred in connection therewith, as those
fees and expenses are incurred; provided, however, that if at the conclusion of
such action, proceeding or investigation it shall be finally judicially
determined by a court of competent jurisdiction that indemnity for such fees and
expenses is contrary to law, or that such Purchaser is not the prevailing party
then in that event, such Purchaser and/or any other Person having received such
advances of fees and expenses shall reimburse the Company in full for the sums
advanced.
(d) The provisions of this Section 5.12 shall survive any termination
or completion of the Transaction Documents.
5.13 Waiver of Jury Trial (a) The parties hereto each waive their
respective rights to a trial by jury of any claim or cause of action based upon
or arising out of or related to the Transaction Documents, or the transactions
contemplated by the Transaction Documents, in any action, proceeding or other
litigation of any type brought by any of the parties against any other party or
parties, whether with respect to contract claims, tort claims, or otherwise. The
parties hereto each agree that any such claim or cause of action shall be tried
by a court trial without a jury. Without limiting the foregoing, the parties
further agree that their respective right to a trial by jury is waived by
operation of this Section 5.13 as to any action, counterclaim or other
proceeding which seeks, in whole or in part, to challenge the validity or
enforceability of any of the Transaction Documents or any provision hereof or
thereof. The waiver shall apply to any subsequent amendments, renewals,
supplements or modifications to any of the Transaction Documents.
(b) The provisions of this Section 5.13 shall survive any termination
or completion of the Transaction Documents.
5.14 Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable in any
respect, the remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall use their
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
the Transaction Documents and injunctive relief. Each of the Company and the
Purchasers (severally and not jointly) agree that monetary damages would not be
adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agrees to waive in
any action for
29
specific performance of any such obligation or injunctive relief the defense
that a remedy at law would be adequate.
5.16 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any Closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
[Remainder of Page Intentionally Left Blank]
30
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
IMAGING TECHNOLOGIES CORPORATION
By:_____________________________________
▇▇▇▇▇ ▇▇▇▇▇
President
BALMORE FUNDS S.A.
By:_____________________________________
Name:
Title:
AUSTOST ANSTALT ▇▇▇▇▇▇
By:_____________________________________
Name:
Title:
NESHER, INC.
By:_____________________________________
Name:
Title:
GUARANTEE & FINANCE CORP.
By:_____________________________________
Name:
Title:
31