1
EXHIBIT 2.2
EXCHANGE AGREEMENT
AMONG
SWISSRAY INTERNATIONAL INC.
AND
▇▇▇▇ ▇▇▇▇▇▇▇
AS OF NOVEMBER 22, 1996
2
TABLE OF CONTENTS
Page
----
1. Definitions.................................................... 1
2. Purchase and Sale of Target Shares............................. 4
(a) Basic Transaction..................................... 4
(b) Exchange Consideration................................ 4
(c) Adjustment of Exchange Consideration.................. 4
(d) The Closing........................................... 5
(e) Deliveries at the Closing............................. 5
(f) ...................................................... 5
(g) ...................................................... 5
3. Representations and Warranties Concerning the Transaction...... 5
(a) Representations and Warranties of the Seller.......... 5
(b) Representations and Warranties of the Buyer........... 7
4. Representations and Warranties Concerning the Target........... 7
(a) Organization, Qualification, and Corporate Power...... 8
(b) Capitalization........................................ 8
(c) Noncontravention...................................... 8
(d) Brokers' Fees......................................... 9
(e) Title to Assets....................................... 9
(f) Subsidiaries.......................................... 9
(g) Undisclosed Liabilities............................... 9
(h) Legal Compliance...................................... 9
(i) Contracts............................................. 9
(j) Financial Statements.................................. 9
(k) Disclosure............................................ 9
5. Pre-Closing Covenants.......................................... 9
(a) General............................................... 10
(b) Notices and Consents.................................. 10
(c) Operation of Business................................. 10
(d) Preservation of Business.............................. 10
(e) Full Access........................................... 10
(f) Notice of Developments................................ 10
(g) Exclusivity........................................... 10
6. Post-Closing Covenants......................................... 11
(a) General............................................... 11
i
3
(b) Litigation Support........................................ 11
(c) Transition................................................ 11
(d) Confidentiality........................................... 11
(e) Covenant Not to Compete................................... 12
(f) Certificates.............................................. 12
7. Conditions to Obligation to Close.................................. 13
(a) Conditions to Obligation of the Buyer..................... 13
(b) Conditions to Obligation of the Seller.................... 14
8. Remedies for Breaches of This Agreement............................ 15
(a) Survival of Representations and Warranties................ 15
(b) Indemnification Provisions for Benefit of the Buyer....... 15
(c) Indemnification Provisions for Benefit of the Seller...... 16
(d) Matters Involving Third Parties........................... 16
(e) Other Indemnification Provisions.......................... 17
9. Tax Matters........................................................ 17
(a) Tax Periods Ending on or Before the Closing Date.......... 17
(b) Tax Periods Beginning Before and Ending After
the Closing Date.......................................... 18
(c) Cooperation on Tax Matters................................ 18
(d) Tax Sharing Agreements.................................... 19
(e) Certain Taxes............................................. 19
10. Termination........................................................ 19
(a) Termination of Agreement.................................. 19
(b) Effect of Termination..................................... 20
11. Miscellaneous...................................................... 20
(a) Press Releases and Public Announcements................... 20
(b) No Third-Party Beneficiaries.............................. 20
(c) Entire Agreement.......................................... 20
(d) Succession and Assignment................................. 20
(e) Counterparts.............................................. 21
(f) Headings.................................................. 21
(g) Notices................................................... 21
(h) Governing Law............................................. 21
(i) Amendments and Waivers.................................... 21
(j) Severability.............................................. 21
(k) Expenses.................................................. 22
(l) Construction.............................................. 22
(m) Incorporation of Exhibits, Annexes, and Schedules......... 22
(n) Specific Performance...................................... 22
ii
4
(o) Submission to Jurisdiction.............................. 22
Exhibit A-- Registration Rights Agreement
Disclosure Schedule-- Exceptions to Representations and Warranties
Concerning the Target
Schedule 2(b)(ii) - Additional Consideration
iii
5
EXCHANGE AGREEMENT
Agreement entered into as of November 22, 1996, by and among Swissray
International Inc., a New York corporation (the "Buyer"), and ▇▇▇▇ ▇▇▇▇▇▇▇, an
individual (the "Seller"). The Buyer and the Seller are referred to collectively
herein as the "Parties."
WHEREAS, the Seller owns 75 shares of the outstanding capital stock of
Empower Inc., a New York corporation (the "Target") (25 of which are currently
being held in escrow), and
WHEREAS, this Agreement contemplates a transaction in which the Buyer
will purchase from the Seller, and the Seller will sell to the Buyer, all of the
shares of capital stock of the Target owned by the Seller in return for the
Shares (as such term is hereinafter defined).
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Additional Shares" has the meaning set forth in Section 2(b)(ii)
below.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Buyer Share" means any share of the Common Stock, par value $.01 per
share, of the Buyer.
"Closing" has the meaning set forth in Section 2(c) below.
6
"Closing Date" has the meaning set forth in Section 2(c) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the
businesses and affairs of the Target that is not already generally available to
the public.
"Disclosure Schedule" has the meaning set forth in the introductory
paragraph of Section 4 below.
"Escrow Agreement" means the escrow agreement dated April 15, 1996,
between the Seller and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Indemnified Party" has the meaning set forth in Section 8(d) below.
"Indemnifying Party" has the meaning set forth in Section 8(d) below.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Options" has the meaning set forth in Section 2(b)(iii) below.
2
7
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Registration Rights Agreement" means the Registration Rights Agreement
between the Seller at the Buyer attached hereto as Exhibit A, with such
amendments or modifications as shall be mutually agreed to by the Parties.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Shares" has the meaning set forth in Section 2(b)(I) below.
"Stipulation" means the Stipulation of Settlement dated April 15, 1996
between the Seller and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Target" has the meaning set forth in the preface above.
"Target Financial Statements" has the meaning set forth in Section 4(j)
below.
"Target Share" means any share of the common stock of the Target.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental
3
8
(including taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8(d) below.
2. Purchase and Sale of Target Shares.
(a) Basic Transaction. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to exchange with the Seller, and
the Seller agrees to exchange with the Buyer, all of the Target Shares owned by
the Seller for the consideration specified below in this Section 2.
(b) Exchange Consideration. (I) The Buyer agrees to issue to
the Seller at the Closing 80,000 shares of the Buyer Shares (the "Shares").
(ii) As additional consideration, the Buyer will
issue an additional 30,000 shares of the Buyer Shares (the "Additional
Shares") on the dates set forth on Schedule 2(b)(ii) attached hereto if
the Target achieves the performance goals set forth on Schedule
2(b)(ii).
(iii) Additionally, on the Closing Date the Seller
will be granted options to purchase 125,000 shares of the Buyer Shares
under the Buyer's option plan, or otherwise (the "Options"). The
Options shall have an exercise price of $4.00 per share, will vest
immediately and shall be exercisable for a period of five years from
the date of grant.
(c) Adjustment of Exchange Consideration. If within 90 days of
the Closing Date the Buyer shall discover adverse variances in the Target
Financial Statements, in an aggregate amount in excess of $10,000, the Buyer
shall notify the Seller of such findings within such 90 day period. Upon notice
to the Seller, the Buyer shall cause an independent accounting firm to verify
such findings and upon such verification the Seller shall return one Share to
the Buyer for each $4.00 of adverse variance.
(d) The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place commencing at 9:00 a.m. local
time on the business day following the satisfaction or waiver of all conditions
to the obligations of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions
4
9
the respective Parties will take at the Closing itself) or such other date as
the Buyer and the Seller may mutually determine (the "Closing Date").
(e) Deliveries at the Closing. At the Closing, (I) the Seller
will deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 7(a) below, (ii) the Buyer will deliver to the Seller the
various certificates, instruments, and documents referred to in Section 7(b)
below, (iii) the Seller will deliver to the Buyer stock certificates
representing 50 of the Target Shares owned by the Seller, endorsed in blank or
accompanied by duly executed assignment documents and will present the Buyer
with evidence satisfactory to the Buyer that the 25 Target Shares held pursuant
to the Escrow Agreement have been transferred from the Seller's name into the
name of the Buyer, and (iv) the Buyer will deliver to the Seller the
consideration specified in Section 2(b) above.
(f) The Seller shall have the right to put all of the Shares
issued to the Seller, plus, if issued, the Additional Shares, to the Buyer at
$4.00 per Share for the 12-month period commencing on the date which is two
years from the Closing Date and ending on the date which is three years from the
Closing Date.
(g) In the event that either of the Buyer or the Target is
acquired by, or merged into, a third party prior to the date on which the Seller
is eligible to receive the Additional Shares and, as a result of such
acquisition or merger, the Seller and the Buyer are no longer Affiliated with
the Target, then, no later than 15 days prior to the effective closing of the
transaction, the Buyer will issue the Additional Shares to the Seller.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Seller. The Seller
represents and warrants to the Buyer that the statements contained in this
Section 3(a) are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(a)) with respect to the Seller.
(i) Authorization of Transaction. The Seller has full
power and authority to execute and deliver this Agreement and to
perform his obligations hereunder. This Agreement constitutes the valid
and legally binding obligation of the Seller, enforceable in accordance
with its terms and conditions. The Seller need not give any notice to,
make any filing with, or obtain any authorization, consent, or approval
of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
(ii) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree,
5
10
ruling, charge, or other restriction of any government, governmental
agency, or court to which the Seller is subject or (B) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement
to which the Seller is a party or by which he or it is bound or to
which any of his or its assets is subject.
(iii) Brokers' Fees. The Seller has no Liability or
obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement
for which the Buyer could become liable or obligated.
(iv) Investment. The Seller (A) understands that the
Shares have not been, and, if issued, the Additional Shares will not
be, registered under the Securities Act, or under any state securities
laws, and are being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering, (B) is
acquiring the Shares, and, if issued, the Additional Shares, for his
own account for investment purposes, and not with a view to the
distribution thereof, (C) is a sophisticated investor with knowledge
and experience in business and financial matters, (D) has received
certain information concerning the Buyer and has had the opportunity to
obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding the Shares, and if issued, the
Additional Shares, (E) is able to bear the economic risk and lack of
liquidity inherent in holding the Shares, and if issued, the Additional
Shares, and (F) is an Accredited Investor as such term is defined in
the Securities Act.
(v) Target Shares. The Seller holds of record and
owns beneficially 75 Target Shares (25 of which are held in escrow
pursuant to the Escrow Agreement) representing all of the issued and
outstanding equity of the Target, free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act, state
securities laws, Taxes, Security Interests, options, warrants, purchase
rights, contracts, commitments, equities, claims, and demands, except
as provided in the Escrow Agreement. The Seller is not a party to any
option, warrant, purchase right, or other contract or commitment (other
than this Agreement and the Escrow Agreement) that could require the
Seller to sell, transfer, or otherwise dispose of any capital stock of
the Target. The Seller is not a party to any voting trust, proxy, or
other agreement or understanding with respect to the voting of any
capital stock of the Target. The Target Shares owned by the Seller
constitute all shares of capital stock of the Target.
(b) Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller that the statements contained in this
Section 3(b) are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(b)).
6
11
(i) Organization of the Buyer. The Buyer is a corporation
duly organized, validly existing, and in good standing under the laws
of the jurisdiction of its incorporation.
(ii) Authorization of Transaction. The Buyer has full
power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of the Buyer, enforceable in accordance with its terms and
conditions. The Buyer need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
(iii) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which the Buyer is subject or any provision of its charter or bylaws
or (B) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under
any agreement, contract, lease, license, instrument, or other
arrangement to which the Buyer is a party or by which it is bound or to
which any of its assets is subject.
(iv) Brokers' Fees. The Buyer has no Liability or
obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement
for which any Seller could become liable or obligated.
(v) Investment. The Buyer is not acquiring the Target
Shares with a view to or for sale in connection with any distribution
thereof within the meaning of the Securities Act.
4. Representations and Warranties Concerning the Target. The Seller
represents and warrants to the Buyer that the statements contained in this
Section 4 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Section 4), except as set forth in the disclosure schedule delivered by the
Seller to the Buyer on the date hereof and initialed by the Parties (the
"Disclosure Schedule"). Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein,
however, unless the Disclosure Schedule identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the representation
or warranty has to do with the existence of the document or other item itself).
7
12
The Disclosure Schedule will be arranged in paragraphs corresponding to the
lettered and numbered paragraphs contained in this Section 4.
(a) Organization, Qualification, and Corporate Power. The
Target is a corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation. The Target is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required. The Target has full corporate
power and authority and all licenses, permits, and authorizations necessary to
carry on the businesses in which it is engaged and to own and use the properties
owned and used by it. Section 4(a) of the Disclosure Schedule lists the
directors and officers of the Target. The Seller has delivered to the Buyer
correct and complete copies of the charter and bylaws of the Target (as amended
to date). The minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of the
Target are correct and complete in all material respects. The Target is not in
default under or in violation of any provision of its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of the
Target consists of 200 Target Shares of which 75 are issued and outstanding. All
of the issued and outstanding Target Shares have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record and
beneficially by the Seller, with 25 of such Target Shares being held in escrow
pursuant to the terms of the Escrow Agreement. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
the Target to issue, sell, or otherwise cause to become outstanding any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Target. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the Target.
(c) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (I) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Target is subject or any provision of
the charter or bylaws of any of the Target or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Target is a party or by which it is bound or to which
any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). The Target does not need to give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
8
13
(d) Brokers' Fees. The Target does not have any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
(e) Title to Assets. The Target has good and marketable title
to, or a valid leasehold interest in, the properties and assets used by them or
located on their premises, free and clear of all Security Interests.
(f) Subsidiaries. The Target has no Subsidiaries.
(g) Undisclosed Liabilities. The Target does not have any
Liability (and, to the best knowledge of the Seller, there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of them giving rise to any Liability),
which has not been disclosed in writing to the Buyer.
(h) Legal Compliance. The Target and its predecessors and
Affiliates has complied with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply.
(i) Contracts. The Target has provided to the Buyer copies of
all material contracts of the Target dated prior to the date of this Agreement,
or given the Buyer the opportunity to review, all such material contracts. A
list of such contracts is contained in Section 4(I) of the Disclosed Schedule.
(j) Financial Statements. The Target's financial statements
for the period ended September 30, 1996 (the "Target Financial Statements") are
accurate in all material respects and fairly represent the financial condition
of the Target.
(k) Disclosure. The representations and warranties contained
in this Section 4 do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Section 4 not misleading.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his or its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in Section 7 below).
9
14
(b) Notices and Consents. The Seller will cause the Target to give
any notices to third parties, and will cause the Target to use its reasonable
best efforts to obtain any third party consents, that the Buyer reasonably may
request in connection with the matters referred to in Section 4(c) above. Each
of the Parties will (and the Seller will cause the Target to) give any notices
to, make any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in Section 3(a)(ii), Section
3(b)(ii), and Section 4(c) above.
(c) Operation of Business. The Seller will not cause or permit the
Target to engage in any practice, take any action, or enter into any transaction
outside the Ordinary Course of Business. Without limiting the generality of the
foregoing, the Seller will not cause or permit the Target to (I) declare, set
aside, or pay any dividend or make any distribution with respect to its capital
stock or redeem, purchase, or otherwise acquire any of its capital stock.
(d) Preservation of Business. The Seller will cause the Target to
keep its business and properties substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers, and employees.
(e) Full Access. The Seller will permit, and the Seller will cause
Target to permit, representatives of the Buyer to have full access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of the Target, to all premises, properties, personnel,
books, records (including Tax records), contracts, and documents of or
pertaining to the Target.
(f) Notice of Developments. The Seller will give prompt written
notice to the Buyer of any material adverse development causing a breach of any
of the representations and warranties in Section 4 above. Each Party will give
prompt written notice to the others of any material adverse development causing
a breach of any of his or its own representations and warranties in Section 3
above. No disclosure by any Party pursuant to this Section 5(f), however, shall
be deemed to amend or supplement the Disclosure Schedule or to prevent or cure
any misrepresentation, breach of warranty, or breach of covenant.
(g) Exclusivity. The Seller will not (and the Seller will not cause
or permit the Target to) (I) solicit, initiate, or encourage the submission of
any proposal or offer from any Person relating to the acquisition of any capital
stock or other voting securities, or any substantial portion of the assets of,
the Target (including any acquisition structured as a merger, consolidation, or
share exchange) or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or seek
any of the foregoing. The Seller will not vote his Target Shares in favor of any
such acquisition structured as a merger, consolidation, or share exchange. The
Seller will notify the Buyer immediately if any Person makes any proposal,
offer, inquiry, or contact with respect to any of the foregoing.
10
15
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 8 below). The Seller acknowledges and agrees that from and after the
Closing the Buyer will be entitled to possession of all documents, books,
records (including Tax records), agreements, and financial data of any sort
relating to the Target.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(I) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Target, each of the other Parties will
cooperate with him or it and his or its counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their books
and records as shall be necessary in connection with the contest or defense, all
at the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Section 8 below).
(c) Transition. The Seller will not take any action that is designed
or intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of the Target from maintaining the same
business relationships with the Target after the Closing as it maintained with
the Target prior to the Closing. The Seller will refer all customer inquiries
relating to the businesses of the Target to the Buyer from and after the
Closing.
(d) Confidentiality. The Seller will treat and hold as such all of
the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
the Buyer or destroy, at the request and option of the Buyer, all tangible
embodiments (and all copies) of the Confidential Information which are in his or
its possession. In the event that the Seller is requested or required (by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, the Seller will notify the Buyer promptly
of the request or requirement so that the Buyer may seek an appropriate
protective order or waive compliance with the provisions of this Section 6(d).
If, in the absence of a protective order or the receipt of a waiver hereunder,
the Seller is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for contempt, that the Seller
may disclose the Confidential Information to the tribunal; provided, however,
that the Seller shall use his or its reasonable best efforts to obtain, at the
reasonable request of the Buyer, an order or other assurance that confidential
treatment will be accorded to such portion of the
11
16
Confidential Information required to be disclosed as the Buyer shall designate.
The foregoing provisions shall not apply to any Confidential Information which
is generally available to the public immediately prior to the time of
disclosure.
(e) Covenant Not to Compete. While an Affiliate of the Buyer
or any of its Subsidiaries, other than as an employee of or on behalf of the
Buyer and any of its Subsidiaries, and for a period of two years after the
Closing Date the Seller shall not engage directly or indirectly in any business
that the Target conducts as of the Closing Date in any geographic area in which
the Target conducts that business as of the Closing Date; provided, however,
that ownership of less than 1% of the outstanding stock of any publicly traded
corporation shall not be deemed a violation. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this Section 6(e)
is invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
(f) Certificates. Each certificate representing the Shares, and, if
issued, the Additional Shares, will be imprinted with a legend substantially in
the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THESE SECURITIES UNDER THE SECURITIES ACT OF 1933 OR
AN OPINION OF THE COMPANY'S COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT.
Each holder desiring to transfer any of the Shares, and, if issued, the
Additional Shares, first must furnish the Buyer with (I) a written opinion
reasonably satisfactory to the Buyer in form and substance from counsel
reasonably satisfactory to the Buyer by reason of experience to the effect that
the holder may transfer the Shares and, if issued, the Additional Shares as
desired without registration under the Securities Act and (ii) a written
undertaking executed by the desired transferee reasonably satisfactory to the
Buyer in form and substance agreeing to be bound by the recoupment provisions
and the restrictions on transfer contained herein.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
12
17
(i) the representations and warranties set forth in Section 3(a)
and Section 4 above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of his
covenants hereunder in all material respects through the Closing;
(iii) the Target shall have procured all of the third party
consents specified in Section 5(b) above, including, without limitation,
the necessary consents of any bank or other lender;
(iv) the Seller shall have assigned all of the Seller's rights,
interests and obligations under the Stipulation to the Buyer and all issues
regarding any Target Shares held by the Target as treasury shares or in
escrow, and all issues regarding the Stipulations and the Escrow Agreement,
shall have been resolved to the Buyer's full satisfaction;
(v) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, (C) affect adversely the right of
the Buyer to own the Target Shares and to control the Target, or (D) affect
adversely the right of the Target to own its assets and to operate its
businesses (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect);
(vi) the Buyer shall have received the resignations, effective as
of the Closing, of each director and officer of the Target other than those
whom the Buyer shall have specified in writing prior to the Closing;
(vii) The Registration Rights Agreement shall have been entered
into by the Parties; and
(viii) all actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will, unless otherwise set forth in this Agreement, be
reasonably satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 7(a) if it executes
a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by the Seller in
connection with the Closing is subject to satisfaction of the following
conditions:
13
18
(i) the representations and warranties set forth in Section 3(b)
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(iv) the Buyer shall have assumed all of the Seller's rights,
interests and obligations under the Stipulation;
(v) the loan from the Seller to the Target, in the principal amount
of approximately $180,000 as of September 30, 1996, shall be reduced by the
amount necessary to pay all amounts owed pursuant to the Stipulation as of
the Closing Date and the balance of such loan shall be converted into
either a term loan or into a loan convertible into Buyer Shares, in each
case acceptable to the Buyer and the Seller, and shall have also been
amended to provide that, at the Seller's option, the then outstanding
balance of such loan can be applied towards payment of the exercise price
of the Option;
(vi) The Registration Rights Agreement, shall have been entered
into by the Parties; and
(vii) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will, unless otherwise set
forth in this Agreement, be reasonably satisfactory in form and
substance to the Seller.
The Seller may waive any condition specified in this Section 7(b) if he executes
a writing so stating at or prior to the Closing.
14
19
8. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties.
All of the representations and warranties of the Parties
contained in this Agreement shall survive the Closing hereunder (even if the
damaged Party knew or had reason to know of any misrepresentation or breach of
warranty or covenant at the time of Closing) and continue in full force and
effect forever thereafter, subject to the applicable statutes of limitations.
(b) Indemnification Provisions for Benefit of the Buyer. With
respect to any alleged breach as to which the Buyer gives the Seller notice and
asserts a claim prior to the end of the applicable survival period pursuant to
Section 8(a) above.
(i) In the event the Seller breaches (or in the event
any third party alleges facts that, if true, would mean the Seller has
breached) any of his representations, warranties, and covenants
contained herein, provided that the Buyer makes a written claim for
indemnification against the Seller during the applicable survival
period, then the Seller agrees to indemnify the Buyer from and against
the entirety of any material Adverse Consequences the Buyer may suffer
through and after the date of the claim for indemnification (including
any material Adverse Consequences the Buyer may suffer after the end of
any applicable survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or the alleged
breach).
(ii) The Seller agrees to indemnify the Buyer from
and against the entirety of any material Adverse Consequences the Buyer
may suffer resulting from, arising out of, relating to, in the nature
of, or caused by any Liability of the Target (x) for any Taxes of the
Target with respect to any Tax year or portion thereof ending on or
before the Closing Date (or for any Tax year beginning before and
ending after the Closing Date to the extent allocable (determined in a
manner consistent with Section 9(c)) to the portion of such period
beginning before and ending on the Closing Date), to the extent such
Taxes are not reflected in the reserve for Tax Liability (rather than
any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) shown on the face of the
Targets most recent financial statements (rather than in any notes
thereto), as such reserve is adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of the
Target in filing its Tax Returns.
(c) Indemnification Provisions for Benefit of the Seller. In
the event the Buyer breaches (or in the event any third party alleges facts
that, if true, would mean the Buyer has breached) any of its representations,
warranties, and covenants contained herein, provided that the Seller makes a
written claim for indemnification against the Buyer during the applicable
survival period, then the Buyer agrees to indemnify the Seller from and against
the entirety of any Adverse Consequences the Seller may suffer through and after
the date of the claim for indemnification (including any Adverse Consequences
the Seller may suffer after the end of any
15
20
applicable survival period) resulting from, arising out of, relating to, in the
nature of, or caused by the breach (or the alleged breach).
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against any other
Party (the "Indemnifying Party") under this Section 8, then the
Indemnified Party shall promptly notify each Indemnifying Party thereof
in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to
defend the Indemnified Party against the Third Party Claim with counsel
of its choice reasonably satisfactory to the Indemnified Party so long
as (A) the Indemnifying Party notifies the Indemnified Party in writing
within 15 days after the Indemnified Party has given notice of the
Third Party Claim that the Indemnifying Party will indemnify the
Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party
Claim, (B) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against
the Third Party Claim and fulfill its indemnification obligations
hereunder, (C) the Third Party Claim involves only money damages and
does not seek an injunction or other equitable relief, (D) settlement
of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (E) the
Indemnifying Party conducts the defense of the Third Party Claim
actively and diligently.
(iii) So long as the Indemnifying Party is conducting
the defense of the Third Party Claim in accordance with Section
8(d)(ii) above, (A) the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in the defense
of the Third Party Claim, (B) the Indemnified Party will not consent to
the entry of any judgment or enter into any settlement with respect to
the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (C) the
Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without
the prior written consent of the Indemnified Party (not to be withheld
unreasonably).
(iv) In the event any of the conditions in
Section 8(d)(ii) above is or becomes unsatisfied, however, (A) the
Indemnified Party may defend against, and consent to the entry of any
judgment or enter into any settlement with respect to, the Third Party
Claim
16
21
in any manner it reasonably may deem appropriate (and the Indemnified
Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (B) the Indemnifying
Parties will reimburse the Indemnified Party promptly and periodically
for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (C) the Indemnifying
Parties will remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim to the fullest
extent provided in this Section 8.
(e) Other Indemnification Provisions. The foregoing
indemnification provisions are in addition to, and not in derogation of, any
statutory, equitable, or common law remedy any Party may have for breach of
representation, warranty, or covenant. The Seller hereby agrees that he will not
make any claim for indemnification against the Target by reason of the fact that
he or it was a director, officer, employee, or agent of any such entity or was
serving at the request of any such entity as a partner, trustee, director,
officer, employee, or agent of another entity (whether such claim is for
judgments, damages, penalties, fines, costs, amounts paid in settlement, losses,
expenses, or otherwise and whether such claim is pursuant to any statute,
charter document, bylaw, agreement, or otherwise) with respect to any action,
suit, proceeding, complaint, claim, or demand brought by the Buyer against the
Seller (whether such action, suit, proceeding, complaint, claim, or demand is
pursuant to this Agreement, applicable law, or otherwise).
9. Tax Matters. The following provisions shall govern the
allocation of responsibility as between the Buyer and the Seller for certain tax
matters following the Closing Date:
(a) Tax Periods Ending on or Before the Closing Date. The
Buyer shall prepare or cause to be prepared and file or cause to be filed all
Tax Returns for the Target for all periods ending on or prior to the Closing
Date which are filed after the Closing Date other than income Tax Returns with
respect to periods for which a consolidated, unitary or combined income Tax
Return of Seller will include the operations of the Target. The Buyer shall
permit the Target to review and comment on each such Tax Return described in the
preceding sentence prior to filing. The Seller shall reimburse the Buyer for
Taxes of the Target with respect to such periods within fifteen (15) days after
payment by the Buyer or the Target of such Taxes to the extent such Taxes are
not reflected in the reserve for Tax Liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) shown on the face of the last balance sheet of the Target prepared prior
to the Closing Date.
(b) Tax Periods Beginning Before and Ending After the Closing
Date. The Buyer shall prepare or cause to be prepared and file or cause to be
filed any Tax Returns of the Target for Tax periods which begin before the
Closing Date and end after the Closing Date. The Seller shall pay to the Buyer
within fifteen (15) days after the date on which Taxes are paid with respect to
such periods an amount equal to the portion of such Taxes which relates to the
portion of such Taxable period ending on the Closing Date to the extent such
Taxes are not reflected in
17
22
the reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown on
the face of the last balance sheet of the Target prepared prior to the Closing
Date. For purposes of this Section, in the case of any Taxes that are imposed on
a periodic basis and are payable for a Taxable period that includes (but does
not end on) the Closing Date, the portion of such Tax which relates to the
portion of such Taxable period ending on the Closing Date shall (x) in the case
of any Taxes other than Taxes based upon or related to income or receipts, be
deemed to be the amount of such Tax for the entire Taxable period multiplied by
a fraction the numerator of which is the number of days in the Taxable period
ending on the Closing Date and the denominator of which is the number of days in
the entire Taxable period, and (y) in the case of any Tax based upon or related
to income or receipts be deemed equal to the amount which would be payable if
the relevant Taxable period ended on the Closing Date. Any credits relating to a
Taxable period that begins before and ends after the Closing Date shall be taken
into account as though the relevant Taxable period ended on the Closing Date.
All determinations necessary to give effect to the foregoing allocations shall
be made in a manner consistent with prior practice of the Target.
(c) Cooperation on Tax Matters.
(i) The Buyer, the Target and the Seller shall
cooperate fully, as and to the extent reasonably requested by the other
party, in connection with the filing of Tax Returns pursuant to this
Section and any audit, litigation or other proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the other
party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding
and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. The Target and the Seller agree (A) to retain all books and
records with respect to Tax matters pertinent to the Target relating to
any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified
by the Buyer or the Seller, any extensions thereof) of the respective
taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give the other party
reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other party so
requests, the Target or the Seller, as the case may be, shall allow the
other party to take possession of such books and records.
(ii) Buyer and Seller further agree, upon request, to
use their best efforts to obtain any certificate or other document from
any governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including,
but not limited to, with respect to the transactions contemplated
hereby).
(iii) The Buyer and the Seller further agree, upon
request, to provide the other party with all information that either
party may be required to report pursuant to
18
23
Section 6043 of the Code and all Treasury Department Regulations
promulgated thereunder.
(d) Tax Sharing Agreements. All tax sharing agreements or
similar agreements with respect to or involving the Target shall be terminated
as of the Closing Date and, after the Closing Date, the Target shall not be
bound thereby or have any liability thereunder.
(e) Certain Taxes. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any New York
State Gains Tax, New York City Transfer Tax and any similar tax imposed in other
states or subdivisions), shall be paid by the Seller when due, and the Seller
will, at their own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and, if required by applicable law, the
Buyer will, and will cause its affiliates to, join in the execution of any such
Tax Returns and other documentation.
10. Termination.
(a) Termination of Agreement. The Parties may terminate
this Agreement as provided below:
(i) the Buyer and the Seller may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing (A) in
the event any of the Seller has breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, the Buyer has notified the Seller of the breach, and the
breach has continued without cure for a period of 30 days after the
notice of breach or (B) if the Closing shall not have occurred within
60 days of the date of this Agreement, by reason of the failure of any
condition precedent under Section 7(a) hereof (unless the failure
results primarily from the Buyer itself breaching any representation,
warranty, or covenant contained in this Agreement); and
(iii) the Seller may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing (A)
in the event the Buyer has breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, the Seller has notified the Buyer of the breach, and the
breach has continued without cure for a period of 30 days after the
notice of breach or (B) if the Closing shall not have occurred within
60 days of the date of this Agreement, by reason of the failure of any
condition precedent under Section 7(b) hereof (unless the failure
results primarily from any of the Seller themselves breaching any
representation, warranty, or covenant contained in this Agreement).
19
24
(b) Effect of Termination. If any Party terminates this
Agreement pursuant to Section 10(a) above, all rights and obligations of the
Parties hereunder shall terminate without any Liability of any Party to any
other Party (except for any Liability of any Party then in breach).
11. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written approval
of the Buyer and the Seller; provided, however, that any Party may make any
public disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing Party will use its reasonable best efforts to advise the
other Parties prior to making the disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of the Buyer and the Seller; provided, however, that the Buyer
may (i) assign any or all of its rights and interests hereunder to one or more
of its Affiliates and (ii) designate one or more of its Affiliates to perform
its obligations hereunder (in any or all of which cases the Buyer nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).
(e) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered
20
25
or certified mail, return receipt requested, postage prepaid, and addressed to
the intended recipient at the addresses set forth on the signature page hereto.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set on the signature page
hereto using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.
(i) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and the Seller. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(j) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(k) Expenses. Each of the Parties, and the Target, will bear
his or its own costs and expenses (including legal fees and expenses) incurred
in connection with this Agreement and the transactions contemplated hereby. The
Seller agrees the Target has not borne or will not bear any of the Seller's
costs and expenses (including any of their legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated hereby.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or
21
26
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty, or covenant.
(m) Incorporation of Exhibits, Annexes, and Schedules. The
Exhibits, Annexes, and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
(n) Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 10(o) below), in addition to any other remedy to which they may
be entitled, at law or in equity.
(o) Submission to Jurisdiction. Each of the Parties submits to
the jurisdiction of any state or federal court sitting in New York County, New
York in any action or proceeding arising out of or relating to this Agreement
and agrees that all claims in respect of the action or proceeding may be heard
and determined in any such court. Each Party also agrees not to bring any action
or proceeding arising out of or relating to this Agreement in any other court.
Each of the Parties waives any defense of inconvenient forum to the maintenance
of any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other Party with respect thereto.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
BUYER: SWISSRAY INTERNATIONAL, INC.
By:/ ▇▇▇▇▇▇ ▇▇▇▇▇/
------------------------------
Name:
Title:
Address for notice:
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇
▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
22
27
With a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Constant & ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
SELLER: /▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
Address for notice:
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
23
28
SCHEDULE 2(b)(ii)
If the Target achieves "pre-tax profits" (as defined below) equal to at
least 2% of gross revenues calculated in the aggregate for the two year period
which includes the fiscal years ending September 30, 1997 and September 30, 1998
(the "Performance Target") then the Seller shall be entitled to receive the
Additional Shares as set forth below.
The term "pre-tax profit" means the pre-tax profit which would appear
on a profit and loss statement prepared for the Target as a standalone entity in
accordance with generally accepted accounting principles, consistently applied.
Such determination shall be made within 90 days after September 30, 1998 (the
"Determination Date"); provided, however, that "pre-tax profit" shall not
include expenses incurred by the Target in connection with the sale or marketing
of products of the Buyer and its Affiliates (other than the Target), to the
extent there is no revenue related to such expenses allocated to the Target.
The determination of pre-tax profits shall be made by the Buyer's
independent auditors and shall be binding on all parties. If the Performance
Target has been met based upon such determination, the Buyer shall issue the
Additional Shares to the Seller within 15 days following the Determination Date.
24
29
$62,266.49 ▇▇▇▇▇ ▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇ INTERNATIONAL INC.
NON-NEGOTIABLE CONVERTIBLE DEBENTURE
DUE MARCH 13, 2000
(Convertible into Common Stock of
Swissray International Inc.)
Swissray International Inc., a Delaware corporation (hereinafter called
the "Company"), for value received, hereby promises to pay to ▇▇▇▇ ▇▇▇▇▇▇▇, an
individual with an address at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the
"Holder"), the principal sum of Sixty-Two Thousand, Two Hundred Sixty-Six
Dollars and Forty-Nine Cents ($62,266.49) on March 13, 2000 (the "Maturity
Date"), and to pay interest on said principal sum quarterly on December 31,
March 31, June 30 and September 30 of each year commencing March 31, 1997 at a
rate equal to the Interest Rate, (as hereinafter defined), from and including
the date hereof, until payment of said principal sum has been made. All cash
payments hereunder shall be made in such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts and shall be made at the offices of the Company at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or such other location as the Holder
shall designate from time to time in writing. Upon the occurrence and during the
continuance of an Event of Default, (as hereinafter defined), all amounts
outstanding under this Debenture (including past due interest, if any) shall
bear interest at a rate equal to the Interest Rate plus four (4%) percent.
Pursuant to the provisions of Article II hereof, the Holder is
entitled, at his option, at any time on and after the date hereof and prior to
the close of business on the date that is ten (10) Business Days prior to the
Maturity Date, to convert all, but not less than all, of the principal amount
hereof into that number of fully paid and non-assessable shares of Common Stock
of the Company as is equal to the then outstanding principal amount hereof
divided by the Conversion Price (as hereinafter defined),
30
by deposit of this Debenture accompanied by written notice that the Holder
elects to convert this Debenture, at the office of the Company in New York, New
York. No payment or adjustment shall be made on account of interest accrued on
this Debenture after it has been so converted or on account of any dividends on
the Common Stock delivered upon such conversion. Pursuant to the provisions of
Article II hereof, the holder is entitled, at his option, at any time on and
after the date hereof and prior to the close of business on the date that is ten
(10) Business Days prior to the Maturity Date, to apply the then outstanding
principal amount of this Debenture towards the exercise price of the Options (as
hereinafter defined).
In case an Event of Default, (as hereinafter defined), shall have
occurred and be continuing, the principal hereof may be declared, and upon such
declaration shall become, due and payable in the manner, with the effect and
subject to the conditions provided in this Debenture.
The Company may prepay this Debenture, in whole but not in part, upon
ten (10) days written notice to the Holder in cash at any time without premium
or penalty, subject to the right of the Holder to convert the principal amount
hereof to Common Stock of the Company prior to the expiration of such ten (10)
day period. Any such prepayment shall include unpaid interest accrued to the
date of prepayment.
This Debenture is issued subject to, and shall be governed by, the
following terms and conditions:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
1.1 Definitions. For all purposes of this Debenture, except as
otherwise expressly provided or unless the context otherwise requires:
(1) all references in this instrument to designated "Articles",
"Sections" and other subdivisions are to the designated Articles, Sections and
other subdivisions of this instrument. The words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Debenture as a whole
-2-
31
and not to any particular Article, Section or other subdivision; and
(2) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular.
"Board of Directors" means the Board of Directors or the Executive
Committee or any other committee thereof duly authorized to act hereunder of the
Company.
"Business Day" means any day of the week other than Saturday, Sunday or
a day which shall be in The City of New York a legal holiday or a day on which
banking institutions are authorized by law to close.
"Common Stock" means the Company's common stock, $0.01 par
value.
"Conversion" means the exchange of this Debenture for Common Stock by
the Holder as provided in Article II.
"Dollars" and the symbol "$" means United States dollars.
"Event of Default" has the meaning specified in Section 4.1.
"Interest Rate" means, as determined on a daily basis, the rate per
annum established by the State Bank of Long Island from time to time as the
reference rate for short-term commercial loans in dollars to domestic corporate
borrowers plus one (1%) percent.
1.2 Headings. The Article and Section headings herein are for
convenience only and shall not affect the construction hereof.
1.3 Successors and Assigns. All covenants and agreements in this
Debenture by the Company shall bind its successors and assigns, whether so
expressed or not.
1.4 Severability. In case any provision in this Debenture shall be
invalid, illegal or unenforceable, the validity,
-3-
32
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
1.5 No Third-Party Benefits. Nothing express or implied in this
Debenture shall give to any person, other than the Company, the Holder and their
successors hereunder any benefit or any legal or equitable right, remedy or
claim under this Debenture.
1.6 Notice. Any notice or demand which by any provision of this
Debenture is required or permitted to be given or served by the Holder to or on
the Company may be given or served by being deposited postage prepaid in a post
office letter box addressed as follows:
If to the Company:
▇▇▇▇▇▇▇▇▇▇▇▇. ▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Constant & ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
If to the Holder:
▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-4-
33
1.7 Legal Holidays. In any case where the date of maturity of principal
of or interest on this Debenture or the last date on which the Holder has the
right to convert or exchange this Debenture shall not be a Business Day at the
place of payment or conversion, then payment of the principal of, or interest
on, or conversion or exchange of, this Debenture need not be made on such date
but may be made on the next succeeding Business Day at the place of payment or
conversion or exchange, with the same force and effect as if made on the date of
maturity or such last date for conversion or exchange, and no interest shall
accrue for the period from and after such date.
1.8 Interest Basis. Interest on this Debenture shall be computed on the
basis of a 365-day year.
1.9 Governing Law. This Debenture shall be deemed to be a contract made
under the laws of the State of New York, and all rights and obligations
hereunder and thereunder shall for all purposes be governed by the laws of said
State.
ARTICLE II
CONVERSION OF DEBENTURE
2.1 Conversion. (a) Subject to, and upon compliance with, the
provisions of this Article II, at the option of the Holder, the principal amount
of this Debenture may, at any time on and after the date hereof and prior to the
close of business on the date that is ten (10) Business Days prior to the
Maturity Date, be converted into that number of shares (calculated to the
nearest 1/100th of a share) of Common Stock as is equal to the then outstanding
principal amount of this Debenture divided by the Conversion Price, determined
as hereinafter provided, in effect at the time of conversion. The rights of the
Holder under this Section 2.1(a) shall be referred to herein as the "Conversion
Privilege."
(b) Subject to, and in compliance with, the provisions of this
Article II, at the option of the Holder, any portion of the then outstanding
principal amount of this Debenture may, at any time on and after the date hereof
and prior to the close of business on the date that is ten (10) Business Days
prior to the Maturity Date, be applied toward the payment of the exercise
-5-
34
price of the options (the "Options") to purchase up to 125,000 shares of Common
Stock which are being granted to the Holder by the Company on the date hereof
pursuant to an option agreement (the "Option Agreement") being entered into
between the Company and the Holder. The rights of the Holder pursuant to this
Section 2.1(c) may only be exercised (i) as to options that are at the time of
such exercise fully vested and exercisable, and are otherwise being exercised in
accordance with the terms of the Option Agreement and (ii) in amounts that are
not less than $10,000 and in increments of $5,000. The principal amount of this
Debenture shall be reduced by the amount of any exercise pursuant to this
section 2.1(c). The rights of the Holder under this Section 2.1(c) shall be
referred to herein as the "Exercise Privilege."
The Conversion Price shall mean the price per share of Common Stock at
which the principal amount of this Debenture is to be converted upon conversion
of this Debenture. The Conversion Price shall be equal to the market price per
share as of the date of conversion less twenty (20%) percent of such market
price per share. The current market price per share of Common Stock at any date
shall be deemed to be the average of the daily closing prices for five
consecutive business days commencing eight business days before such date. The
closing price for each day shall be the reported last sale price regular way or,
in case no such reported sale takes place on such day, the average of the
reported last bid and asked prices regular way, in either case on the principal
national securities exchange on which the Common Stock is admitted to trading or
listed or on the NASDAQ National Market System, or if not listed or admitted to
trading on such exchange or such National Market System, the average of the
reported highest bid and reported lowest asked prices as reported by NASDAQ, or
other similar organization if NASDAQ is no longer reporting such information, or
if not so available, the fair market price as determined by the Board of
Directors.
2.2 Fractional Shares. No fractional shares or scrip representing
fractional shares of Common Stock shall be issued upon conversion of this
Debenture. Instead of any fractional share of Common Stock which would otherwise
be issuable upon conversion of this Debenture, the Company shall pay a cash
adjustment in respect of such fraction in an amount equal to the
-6-
35
same fraction of the market price per share of Common Stock at the close of
business on the day of conversion as determined in good faith by the Board of
Directors.
2.3 Exercise of Conversion or Exercise Privilege. In order to exercise
the Conversion Privilege or the Exercise Privilege, the Holder of this Debenture
shall surrender this Debenture to the Company at its principal office in New
York, New York or such other locations as the Company shall designate in writing
from time to time, accompanied by written notice to the Company that the Holder
elects to exercise its Conversion Privilege or Exercise Privilege as
appropriate, by exchanging it for Common Stock or exercising a number of the
Options. In the case of an exercise of the Conversion Privilege, such notice
shall also state the name or names of the person or persons (with address) in
which the certificate or certificates for Common Stock which shall be
deliverable on such conversion shall be registered and shall be accompanied (if
so required by the Company) by such instruments of transfer as may be
appropriate, in form satisfactory to the Company, duly executed by the Holder to
be converted or by his attorney duly authorized in writing. In the case of an
exercise of the Exercise Privilege, such notice shall also state the number of
Options to be exercised. As promptly as practicable after the receipt of such
notice and the delivery of this Debenture as aforesaid, the Company shall
deliver at such place to the Holder, or on his written order, a certificate or
certificates for the number of full shares of Common Stock deliverable upon the
conversion of this Debenture, and provision shall be made in respect of any
fraction of a share as provided in Section 2.2 or the procedures for the
exercise of the Options set forth in the Option Agreement shall be followed. No
payment or adjustment shall be made upon any conversion or exercise on account
of any interest accrued on the Debenture surrendered for conversion or exercise
or on account of any dividends on the Common Stock issued upon conversion or
exercise. Such conversion or exercise shall be deemed to have been effected
immediately prior to the close of business on the date on which such notice
shall have been received by the Company and this Debenture shall have been
delivered to it as aforesaid, and at such time upon a conversion or exercise for
the full principal amount hereof the rights of the Holder as such Holder shall
cease and the person or persons entitled to receive the Common Stock issuable
upon conversion shall be treated for all purposes as the Holder or the
-7-
36
holder of record of such Common Stock at such time. Upon an exercise of the
Exercise Privilege for less than the full principal amount of this Debenture, a
replacement Debenture reflecting the remaining principal amount shall be
delivered to the Holder within a reasonable period of time following such
exercise.
The Holder understands that none of the shares of Common Stock issuable
upon exercise of the Conversion Privilege will be registered under the
Securities Act of 1933, as amended (the "Act") or any state securities laws, and
that none of such shares may be sold, hypothecated or otherwise disposed of
unless subsequently registered under the Act and applicable state securities
laws or an exemption from registration is available. Legends shall be placed on
certificates representing all shares of Common Stock so issued to the effect
that they have not been registered under the Act or applicable state securities
laws and appropriate notations thereof will be made in the Company's stock
books.
2.4 Reservation of Common Stock. The Company shall at all times reserve
and keep available, free from pre-emptive rights, out of its authorized but
unissued Common Stock, for the purpose of effecting the conversion of this
Debenture, the full number of shares of Common Stock then issuable upon such
conversion.
2.5 Taxes on Conversions. The Company will pay any and all documentary
or similar issue taxes that may be payable to the United States of America or
any State or political subdivision thereof in respect of the issue or delivery
of shares of Common Stock on conversion of this Debenture (or payment hereof by
the issuance of shares of Common Stock) or in respect of the delivery of this
Debenture to the Company upon conversion pursuant hereto. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that of the Holder, and no such issue or delivery shall be made
unless and until the person requesting such issue has paid to the Company the
amount of any such tax, or has established, to the satisfaction of the Company,
that such tax has been paid. The Company does not extend any protection with
respect to any taxes imposed by any other government or any subdivision thereof,
and no delivery of shares of Common Stock on conversion of this
-8-
37
Debenture need be made unless and until the person requesting such delivery has
paid to the Company the amount of any such tax imposed in connection with such
conversion or has established to the satisfaction of the Company, that such tax
has been paid, whether or not the tax shall be imposed upon or collectible from
the Company.
2.6 Effect of Consolidations, Mergers and Sales of Assets. In case of
any consolidation of the Company with, or merger of the Company into, any other
corporation (other than a consolidation or merger in which the Company is the
continuing corporation), or in case of any sale or transfer of all or
substantially all the assets of the Company, the corporation formed by such
consolidation or the corporation into which the Company shall have been merged
or the corporation which shall have acquired such assets, as the case may be,
shall execute and deliver to the Holder a supplement to this Debenture providing
that the Holder shall have the right thereafter to convert this Debenture into
the kind and amount of shares of stock and other securities and property
receivable upon such consolidation, merger, sale or transfer by a holder of the
number of shares of Common Stock of the Company into which this Debenture might
have been converted immediately prior to such consolidation, merger, sale or
transfer. Such supplement shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
II. The above provisions of this Section 2.6 shall similarly apply to successive
consolidations, mergers, sales or transfers.
ARTICLE III
COVENANTS
3.1 Payment of Principal and Interest. The Company will duly and
punctually pay the principal of and interest on this Debenture in accordance
with the terms of this Debenture.
ARTICLE IV
REMEDIES
4.1 Events of Default. "Event of Default", wherever used herein, means
any one of the following events (whatever the
-9-
38
reason for such Event of Default and whether it shall be occasioned by the
provisions of Article II hereof or be voluntary or involuntary or be effected by
operation of law pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon this Debenture
when the same becomes due and payable, and continuance of such default for a
period of ten (10) Business Days; or
(2) default in the payment of the principal of this Debenture
as and when the same shall become due and payable at maturity, by declaration or
otherwise; or
(3) default in the performance, or breach, of any covenant or
warranty of the Company or in this Debenture (other than a covenant or warranty
a default in whose performance or whose breach is elsewhere in this Section
specifically dealt with), and continuance of such default or breach for a period
of twenty (20) days after there has been given, by registered or certified mail,
to the Company by the Holder, a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(4) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company under the Title 11 of
the United States Code or any other applicable federal or State law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or of any substantial part of its property, or
ordering the winding-up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of sixty (60)
consecutive days; or
(5) the institution by the Company of proceedings to be
adjudicated a bankrupt or insolvent, or the consent by the Company to the
institution of bankruptcy or insolvency proceedings against it, or the filing by
the Company of a petition or answer or consent seeking reorganization or relief
under the Title 11 of the United States Code or any other
-10-
39
applicable federal or State law, or the consent by the Company to the filing of
any such petition or to the appointment of a receiver, liquidator, assignee,
trustee sequestrator (or other similar official) of the Company or of any
substantial part of its property, or the making by the Company of an assignment
for the benefit of creditors, or the admission by the Company in writing of its
inability to pay its debts generally as they become due, or the taking of
corporate action by the Company in furtherance of any such action.
4.2 Acceleration of Maturity; Rescission and Annulment. If an Event of
Default occurs and is continuing, then and in every such case the Holder may
declare the principal of this Debenture to be immediately due and payable, by a
notice in writing to the Company and upon any such declaration such principal
shall become come immediately due and payable.
4.3 Application of Money Collected. Any money collected by the Holder
pursuant to this Article IV shall be applied in the following order:
FIRST: To the payment of all costs and expenses (including reasonable
attorneys' fees and costs) incurred by the Holder in connection with such
collection;
SECOND: In case the principal of this Debenture shall not have become
due and be unpaid, to the payment of interest in default on this Debenture, in
the order of the maturity of the installments of such interest;
THIRD: In case the principal of this Debenture shall have become due,
by declaration as authorized by this Article IV or otherwise, to the payment of
the whole amount then owing and unpaid upon this Debenture for principal and
interest, with interest on the overdue principal at the rate per annum expressed
in this Debenture; and
FOURTH: To the payment of the remainder, if any, to the Company, its
successors or assigns, or to whosoever may be lawfully entitled to receive the
same, or as a court of competent jurisdiction may direct.
-11-
40
4.4 Rights and Remedies Cumulative. No right or remedy herein conferred
upon or reserved to the Holder is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, (or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or remedy.
4.5 Delay or Omission Not Waiver. No delay or omission of the Holder to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Holder may be exercised from time to time, and as often as may be deemed
expedient, by the Holder.
ARTICLE V
IMMUNITY OF INCORPORATORS, STOCKHOLDERS;
OFFICERS AND DIRECTORS
5.1 Exemption from Individual Liability. No recourse under or upon any
obligation, covenant or agreement of this Debenture, or for any claim based
hereon or otherwise in respect hereof, shall be had against any incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or of any successor corporation, either directly or through the Company,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being expressly
understood that this Debenture and the obligations issued hereunder are solely
corporate obligations of the Company and that no personal liability whatever
shall attach to, or is or shall be incurred by, the incorporators, stockholder,
officers or directors, as such, of the Company or of any successor corporation,
or any of them, because of the creation of the indebtedness hereby authorized,
or under or by reason of the obligations, covenants or agreements contained in
this Debenture or implied therefrom; and that any and all such personal
liability, either at common law or in equity or by constitution or statute, of,
and any and all such rights and claims against, every such incorporator,
stockholder, officer or
-12-
41
director, as such, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations, covenants or agreements
contained in this Debenture or implied therefrom, are hereby expressly waived
and released as a condition of, and as a consideration for, the execution of
this Debenture.
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed on the date first above written.
SWISSRAY INTERNATIONAL, INC.
By: /▇▇▇▇▇▇ ▇▇▇▇▇/
--------------------------------
Title:
Attest:
/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇/
---------------------------
Title:
-13-
42
REGISTRATION RIGHTS AGREEMENT
AGREEMENT, dated as of March 13, 1997, between SWISSRAY INTERNATIONAL,
INC., a New York corporation (the "Buyer"), having an address c/o ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, Esq., ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, and ▇▇▇▇
▇▇▇▇▇▇▇, an individual (the "Seller"), having an address c/o ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Esq., ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
WHEREAS, the Buyer and the Seller have entered into an Exchange
Agreement dated as of November 22, 1996 (the "Exchange Agreement;" all
capitalized terms used herein without definition shall have the meanings
assigned to such terms in the Exchange Agreement); and
WHEREAS, as a condition to the closing under the Exchange Agreement the
Buyer has agreed to register the Shares, and, if issued, the Additional Shares
and shares of Buyer Shares issuable upon the exercise of the Options (the
"Option Shares"), (the Shares, the Additional Shares and the Option Shares are
referred to herein as the "Seller Shares") pursuant to the terms of this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the parties hereto
mutually agree as follows:
1. Registration of the Shares.
(a) If, at any time commencing after the date of this
Agreement and expiring three (3) years thereafter, the Buyer proposes to file a
registration statement or statements under the Securities Act of 1933 (the
"Act") for the public sale of Buyer Shares for cash (other than in connection
with a merger or pursuant to Form ▇-▇, ▇▇▇▇ ▇-▇ or comparable registration
statement) it will give written notice, at least twenty (20) days prior to the
filing of each such registration statement, to the Seller of its intention to do
so. If the Seller notifies the Buyer in writing within five (5) business days
after receipt of any such notice of his desire to include the Seller Shares in
such proposed registration statement, the Buyer shall afford the Seller the
opportunity to have the Seller Shares registered under such registration
statement; provided, however, that in the case of an underwritten offering, if
the Buyer notifies the Seller in writing that the managing underwriter has
notified the Buyer that the inclusion in the registration statement of any
portion of the Seller Shares would have an adverse effect on such underwritten
offering, then the managing underwriter may limit the number of Seller Shares to
be included in such registration statement only to the extent necessary to avoid
such adverse effect; and provided, further, however, that in the event
securities of the Buyer held by any person or entity other than the Buyer or the
Seller ("Third Party Securities") are to be included in such underwritten
offering, and the managing underwriter shall have determined to limit the number
of Seller Shares or Third Party Securities to be so included, then such
limitation shall be applied to the Seller Shares and the Third Party Securities,
pro rata based on the number of Seller Shares and Third Party Securities
requested to be included in such underwritten offering. Notwithstanding the
provisions of this Section 1(a), the Buyer shall have the right at any time
after it shall have given written notice pursuant to this Section 1(a)
(irrespective of
43
whether a written request for inclusion of any such securities shall have been
made) to elect not to file any such proposed registration statements or to
withdraw the same after the filing but prior to the effective date thereof.
(b) Following the effective date of any registration statement
including any Seller Shares, the Buyer shall, upon the request of the Seller,
forthwith supply such reasonable number of copies of the registration statement,
prospectus and other documents necessary or incidental to the registration as
shall be reasonably requested by the Seller to permit the Seller to make a
public distribution of the Seller Shares. The Buyer will use its reasonable
efforts to qualify the Seller Shares for sale in such states as the Seller shall
reasonably request, provided that no such qualification will be required in any
jurisdiction where, solely as a result thereof, the Buyer would be subject to
general service of process or to taxation or qualification as a foreign
corporation doing business in such jurisdiction. The obligations of the Buyer
hereunder with respect to the Seller Shares are expressly conditioned on the
Seller furnishing to the Buyer such appropriate information concerning the
Seller and the Seller Shares as the Company may reasonably request.
(c) The Company shall bear the entire cost and expense of the
registration of the Seller Shares; provided, however, that the Seller shall be
solely responsible for the fees of any counsel retained by the Seller in
connection with such registration and any transfer taxes or underwriting
discounts, commissions or fees applicable to the Seller Shares sold by the
Seller pursuant thereto.
(d) Neither the filing of such registration statement by the
Buyer pursuant to this Agreement nor the making of any request for prospectuses
by the Seller shall impose upon the Seller any obligation to sell the Seller
Shares.
(e) The Seller, upon receipt of notice from the Buyer that an
event has occurred which requires a post-effective amendment to any registration
statement including any Seller Shares or a supplement to the prospectus included
therein, shall promptly discontinue the sale of the Seller Shares until the
Seller receives a copy of a supplemented or amended prospectus from the Buyer,
which the Buyer shall provide as soon as practicable after such notice.
(f) Notwithstanding anything else to the contrary contained in
this Agreement, if the Seller requests to have any of the Seller Shares
registered under the Act pursuant to this Agreement, and if such Seller Shares
are so registered then this Agreement shall be of no further force or effect.
2. Indemnification.
(a) The Buyer shall indemnify and hold harmless the Seller
from and against any and all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, liabilities, obligations, taxes, liens, losses, expenses, and
2
44
fees, including court costs and reasonable attorneys' fees and expenses
(collectively "Damages") caused by any untrue statement of a material fact
contained in any registration statement including the Seller Shares filed by the
Buyer under the Act, any post-effective amendment to such registration
statement, or any prospectus included therein required to be filed or furnished
by reason of this Agreement or caused by any omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except, insofar as such Damages are caused by any such
untrue statement or omission based upon information furnished or required to be
furnished in writing to the Buyer by the Seller expressly for use therein;
provided, however, that the indemnification in this paragraph 2(a) with respect
to any prospectus shall not inure to the benefit of the Seller on account of any
such Damage arising from the sale of the Shares by the Seller, if a copy of a
subsequent prospectus correcting the untrue statement or omission in such
earlier prospectus was provided to the Seller by the Buyer prior to the subject
sale and the subsequent prospectus was not delivered or sent by the Seller to
the purchaser prior to such sale; and provided further, that the Buyer shall not
be obligated to so indemnify the Seller unless the Seller shall at the same time
indemnify the Buyer, its directors, each officer signing such registration
statement and each person, if any, who controls the Buyer within the meaning of
the Act, from and against any and all Damages caused by any untrue statement of
a material fact contained in such registration statement, any post-effective
amendment to such registration statement or any prospectus required to be filed
or furnished by reason of this Agreement or caused by any omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, insofar as such Damages are caused by any
untrue statement or omission based upon information furnished in writing to the
Buyer by the Seller expressly for use therein.
(b) If for any reason the indemnification provided for in the
preceding subparagraph is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any Damages referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party thereunder, shall contribute to the amount paid or payable by the
indemnified party as a result of such Damages in such proportion as is appro-
priate to reflect not only the relative benefits received by the indemnified
party and the indemnifying party, but also the relative fault of the indemnified
party and the indemnifying party, as well as any other relevant equitable
considerations.
3. Governing Law.
(a) This Agreement shall be deemed to have been made and
delivered in the State of New York and shall be governed as to validity,
interpretation, construction, effect and in all other respects by the internal
laws of the State of New York.
4. Amendment. This Agreement may only be amended by a written
instrument executed by the Buyer and the Seller.
3
45
5. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof, and
supersedes all prior agreements and understandings of the parties, oral and
written, with respect to the subject matter hereof.
6. Execution in Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document.
7. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed duly given when delivered by
hand, facsimile or five days after such notice is mailed by registered or
certified mail, postage prepaid, return receipt requested to the address set
forth on the first page of this Agreement.
8. Headings. The headings contained herein are for the sole
purpose of convenience of reference, and shall not in any way limit or affect
the meaning or interpretation of any of the terms or provisions of this
Agreement.
9. Severability. Any provision of this Agreement which is held by a
court of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto as of the date first above written.
SWISSRAY INTERNATIONAL, INC.
By:/▇▇▇▇▇▇ ▇▇▇▇▇/
---------------------------------
Name:
Title:
/▇▇▇▇ ▇▇▇▇▇▇▇/
---------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
4
46
ASSIGNMENT AND ASSUMPTION AGREEMENT
WHEREAS, ▇▇▇▇ ▇▇▇▇▇▇▇ (hereinafter referred to as "Assignor"), and
SWISSRAY INTERNATIONAL INC. (hereinafter referred to as "Assignee") has entered
into and EXCHANGE AGREEMENT as of November 22, 1996; and
WHEREAS, pursuant to the terms of said EXCHANGE AGREEMENT ▇▇▇▇
▇▇▇▇▇▇▇ has agreed to transfer all of his right, title and interest in and to
all of the issued and outstanding shares of the common stock of EMPOWER, INC.;
and
WHEREAS, on April 15, 1996 ▇▇▇▇ ▇▇▇▇▇▇▇ purchased twenty-five (25)
shares of EMPOWER, INC. common stock from ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ pursuant to the
terms of a Stipulation of Settlement dated April 2, 1996; and
WHEREAS, the above mentioned twenty-five (25) shares of EMPOWER, INC.
common stock purchased from ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ is held "in escrow" pending the
payment-in-full of the purchase price set forth in paragraph "1" of the
Stipulation of Settlement; and
WHEREAS, the said purchase price has not been paid-in-full as of the
date hereof and the said shares remain held "in escrow" in accordance with the
terms of the Stipulation of Settlement,
NOW, THEREFORE, in consideration of the mutual promises contained
herein and in that certain Exchange Agreement dated as of November 22, 1996, it
is hereby understood and agreed by and between the parties hereto as follows:
1. The Assignor assigns to the Assignee all of his right, title and
interest in and to the twenty-five shares of Empower, Inc. common stock which he
purchased from ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ on April 15, 1996 and which is presently held
"in escrow" pursuant to the terms of a Stipulation
47
of Settlement dated April 2, 1996. A copy of said Stipulation of Settlement is
annexed hereto for reference.
2. The Assignee assumes the obligations of the Assignor as set forth in
paragraphs "1" (payment) and paragraph "8" (confidentiality) of the Stipulation
of Settlement as of the date hereof and agrees to fully perform the obligations
of the Assignor as set forth in those provisions as of the date hereof as if the
Assignee had been a party to the Stipulation of Settlement for the purpose of
those two provisions.
3. The Assignee agrees to indemnify and hold the Assignor harmless from
and against any legal or equitable claim, proceeding, or action, including all
damages and expenses, including reasonable attorney's and accountant's fees,
arising out of or in connection with Assignor's failure to fully perform the
obligations it assumes pursuant to paragraph 2 hereof.
4. The Assignor warrants and represents that all payments required to
be made pursuant to paragraph "1" of the Stipulation of Settlement have been
made through and including February 15, 1997. Further, the Assignor agrees to
indemnify and hold the Assignee harmless from and against any legal or equitable
claim, proceeding, or action, including all damages and expenses, including
reasonable attorney's and accountant's fees, arising out of or in connection
with Assignee's failure to fully perform his obligations under the Stipulation
of Settlement up to and including the date hereof.
Dated: Locust Valley, NY
March 13, 1997
/▇▇▇▇ ▇▇▇▇▇▇▇/
---------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, a/k/a J. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, JR.
SWISSRAY INTERNATIONAL INC.
48
BY: / /
--------------------------------------------------
, an
authorized officer
49
OPTION AGREEMENT
The undersigned hereby grants ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇, (pursuant to the Swissray
International, Inc. 1996 Non-Statutory Stock Option Plan dated January 30, 1996
attached hereto) an option to purchase 125,000 shares of Swissray International,
Inc. (the "Corporation").
Option Period. This option shall be for a period of five years from the date of
this Option Agreement ("Option Period").
Option Price. The option price shall be $4.-- per share for an aggregate of
$500,000.00 if the entire 125,000 shares are purchased. The option price of the
shares of Common Stock shall be paid in full at the time of exercise and no
shares of Common Stock shall be issued until full payment is made therefor.
Payment shall be made either (i) in cash, represented by bank or cashier's
check, certified check or money order, (ii) in lieu of payment for bona fide
services rendered, and such services were not in connection with the offer or
sale of securities in a capital- raising transaction, (iii) by delivering shares
of the undersigned's Common Stock which have been beneficially owned by the
optionee, the optionee's spouse, or both of them for a period of least six (6)
month prior to the time of exercise (the "Delivered Stock") in a number equal to
the number of shares of Stock being purchased upon exercise of the option or
(iv) by delivery of shares of corporate stock which are freely tradeable without
restriction and which are part of a class of securities which has been listed
for trading on Nasdaq system or a national securities exchange, with an
aggregate fair market value equal to or greater than the exercise price of the
shares of Stock being purchased under the option, or (v) a combination of cash,
services, delivered stock or other corporate shares.
Shareholder Rights. No holder of an option shall be, or have any or the right
and privileges of, a shareholder of the Corporation in respect of any shares of
Common Stock purchasable upon exercise of any part of an option unless and
until certificates representing such shares shall have been issued by the
Corporation to him or her.
Determination of Exercise Date. This option or a portion of this option shall be
deemed exercised when written notice thereof, accompanied by the appropriate
payment in full, is received by the Corporation.
Date: January 24, 1997
SWISSRAY International Inc.
/▇▇▇▇ ▇▇▇▇▇/
------------
By: ▇▇▇▇ ▇▇▇▇▇, Chairman
/Ruedi Laupper/
---------------
By: Ruedi Laupper, President