AGREEMENT
OF
PURCHASE AND SALE
AMONG IMAGE GUIDED TECHNOLOGIES, INC.
AND
STOCKHOLDERS OF BRIMFIELD PRECISION, INC.
TABLE OF CONTENTS
Page
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ARTICLE I - CERTAIN DEFINITIONS 1
ARTICLE II - PURCHASE AND SALE OF SHARES 3
2.1 Purchase and Sale 3
2.2 Earnest Money 3
2.3 Payment of Purchase Price 4
2.4 Certain Other Agreements 4
2.5 Closing 4
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS 5
3.1 Title to Shares 5
3.2 Authority, Execution and Delivery 5
3.3 Due Organization and Standing 5
3.4 Capitalization 5
3.5 Conflicting Agreements and Company Consents 6
3.6 Financial Statements 6
3.7 Corporate Books and Records 6
3.8 Assets 6
3.9 Tangible Personal Property 6
3.10 Real Property 7
3.11 Receivables and Inventory 7
3.12 FDA Regulations 7
3.13 Employee Plans 8
3.14 Labor Matters 8
3.15 No Changes 9
3.16 Taxes 10
3.17 Intellectual Property 10
3.18 Agreements, Contracts and Commitments 11
3.19 Litigation 12
3.20 Environmental Matters 12
3.21 Insurance 12
3.22 Compliance with Laws 12
3.23 Transactions With Affiliates 12
3.24 FIRPTA 13
3.25 Brokers 13
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER 13
4.1 Due Organization and Standing 13
4.2 Execution and Delivery 13
4.3 Consents, Waivers and Approvals 13
4.4 Investment Purpose 13
4.5 Capitalization 13
4.6 SEC Documents 14
4.7 Buyer Common 14
4.8 Brokers 14
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ARTICLE V - INTERIM PERIOD CONDUCT 14
5.1 Affirmative Acts 14
5.2 Prohibitions 15
5.3 List of Depositories and Bank Balances 15
5.4 Investigation by Buyer 16
ARTICLE VI - COVENANTS 16
6.1 Director 16
ARTICLE VII - COVENANTS OF BUYER AND STOCKHOLDERS 16
7.1 Third Party Consents 16
7.2 Further Assurances 16
ARTICLE VIII - CONDITIONS TO OBLIGATIONS OF BUYER 16
8.1 General 16
8.2 Performance 16
8.3 Representations and Warranties True as of Closing Date 16
8.4 Adverse Proceedings, Consents and Agreements 17
8.5 Opinion of Stockholders' Counsel 17
8.6 Environmental Inspection 17
8.7 Title Insurance 17
8.8 No Material Adverse Changes 18
8.9 Delivery of Stock 18
8.10 Resignations 18
8.11 Audited Financial Statements 18
8.12 Listing 18
8.13 Legal Matters 18
ARTICLE IX - CONDITIONS TO OBLIGATIONS OF STOCKHOLDERS 18
9.1 General 18
9.2 Performance 18
9.3 Representations and Warranties True as of Closing Date 18
9.4 Opinion of Buyer's Counsel 18
9.5 Payment of Purchase Price 19
9.6 Listing 19
9.7 Director 19
9.8 Legal Matters 19
ARTICLE X - MODIFICATION, WAIVERS AND TERMINATION 19
10.1 Modification 19
10.2 Waivers 19
10.3 Termination 19
10.4 Effect of Termination 20
10.5 Specific Performance 20
ARTICLE XI - INDEMNIFICATION 21
11.1 Survival of Representations and Warranties 21
11.2 Obligation of the Stockholders to Indemnify 21
11.3 Obligations of the Buyer to Indemnify 22
11.4 Administration of Indemnification 22
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ARTICLE XII - MISCELLANEOUS 23
12.1 Notices 23
12.2 Gender and Number 23
12.3 Expenses 23
12.4 Announcements 23
12.5 Successors and Assigns 24
12.6 Waiver 24
12.7 Attorneys' Fees 24
12.8 Counterparts 24
12.9 Entire Agreement 24
12.10 Governing Law 24
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INDEX OF EXHIBITS
Exhibit Description
- ------- ------------
A Escrow Agreement
B Investment Letter
C Non-Competition and Confidentiality Agreement
D Employment Agreement
E Stockholders' Counsel's Opinion
F Buyer's Counsel's Opinion
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("Agreement"), dated this 25th day of November,
1997, among IMAGE GUIDED TECHNOLOGIES, INC., a Colorado corporation
("Buyer"), and the undersigned stockholders ("Stockholders") of BRIMFIELD
PRECISION, INC., a Massachusetts corporation ("Company").
WITNESSETH
WHEREAS, the Stockholders own of record and beneficially all of the
issued and outstanding shares of the common stock, no par value, of the
Company ("Company Common Stock"); and
WHEREAS, Buyer desires to purchase from the Stockholders, and the
Stockholders desire to sell to Buyer, all the issued and outstanding shares
of the Company's Common Stock;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and in reliance upon the representations and warranties
contained herein, Buyer and Stockholders agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
I.1 "Acquisition Proposal" is any proposal, other than the transactions
contemplated herein, for (i) any merger or other business combination
involving the Company, (ii) the acquisition of the Company or a material
equity interest therein, (iii) the acquisition of a material portion of the
assets of the Company, or (iv) the acquisition by the Company of a material
equity interest in, or a material portion of the assets of, another entity.
I.2 "Affiliate" with respect to any Person means a Person which
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, such Person.
I.3 "Buyer Common Stock" shall have the meaning set forth in Section
2.3(b).
I.4 "Closing" shall have the meaning set forth in Section 2.5.
I.5 "Closing Date" shall have the meaning set forth in Section 2.5.
I.6 "Code" means the Internal Revenue Code of 1986, as amended.
I.7 "Commission" shall have the meaning set forth in Section 4.6.
I.8 "Company Common Stock" shall have the meaning set forth in the
first paragraph of the Recitals.
I.9 "Company Financial Statements" shall have the meaning set forth in
Section 3.6.
I.10 "Disclosure Letter" shall have the meaning set forth in the
introductory paragraph to Article III.
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I.11 "Documents" shall mean this Agreement and all Exhibits hereto, the
Disclosure Letter and each other agreement, certificate, document or
instrument delivered pursuant to or in connection with this Agreement.
I.12 "Earnest Money" shall have the meaning set forth in Section 2.2.
I.13 "Employee Plans" shall have the meaning set forth in Section 3.13.
I.14 "Encumbrances" means any and all mortgages, leases, security
interests, claims, liens, charges, preferential rights and encumbrances.
I.15 "Environmental Claim" means any notice (written or oral) by any
Person alleging potential liability arising out of, based on or resulting
from (i) the presence, or release into the environment, of any Material of
Environmental Concern at any location, whether or not owned by Seller or (ii)
circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law.
I.16 "Environmental Indemnity Claim" shall have the meaning set forth in
Section 11.1(b)(iii).
I.17 "Environmental Laws" means all federal, state, local and foreign
laws and regulations relating to pollution or protection of human health or
the environment including laws and regulations relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environment Concern.
I.18 "ERISA" shall have the meaning set forth in Section 3.13.
I.19 "Escrow Agent" means Bowditch & Dewey, LLP.
I.20 "Escrow Agreement" means the Escrow Agreement in the form attached
as Exhibit A which the Stockholders, Buyer and the Escrow Agent have entered
into concurrently with execution of this Agreement relating to the deposit,
holding and disbursement of the Earnest Money.
I.21 "FDA" means the United States Food and Drug Administration.
I.22 "GAAP" shall have the meaning set forth in Section 3.6(a).
I.23 "General Claim" shall have the meaning set forth in Section
11.1(b)(i).
I.24 "Governmental Entity" means any court, administrative agency or
commission, or other federal, state or local governmental authority or
instrumentality.
I.25 "Intellectual Property Rights" shall have the meaning set forth in
Section 3.17.
I.26 "IRS" means the Internal Revenue Service.
I.27 "Losses" shall have the meaning set forth in Section 11.2.
I.28 "Manufacturing Facilities" shall have the meaning set forth in
Section 3.10.
I.29 "Material" and "materially" shall be interpreted in terms of the
aggregate, potential effect on the matter or issue with respect to which such
words are used (to the extent the effect of such words can be measured in
monetary terms, it shall mean having a financial value in excess of One
Hundred Thousand Dollars ($100,000)).
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I.30 "Materials of Environmental Concern" means chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products.
I.31 "New Manufacturing Facility" shall have the meaning set forth in
Section 3.10.
I.32 "Old Manufacturing Facility" shall have the meaning set forth in
Section 2.4(d).
I.33 "Permitted Lien" shall mean any lien securing indebtedness to the
Bank of Boston and any statutory lien which secures a payment not yet due
that arises, and is customarily discharged, in the ordinary course of the
Company's business; or any imperfections of title, easements or Encumbrances
that, individually and in the aggregate, are not material in character or
amount and do not and could not reasonably be expected to materially impair
the value or materially interfere with the use of any asset or property of
the Company material to the operation, financial condition or results of
operation of its business as it has been and is now conducted.
I.34 "Person" means any individual, corporation or other entity.
I.35 "Purchase Price" shall have the meaning set forth in Section 2.3.
I.36 "Returns" shall have the meaning set forth in Section 3.16.
I.37 "SEC Documents" has the meaning set forth in Section 4.6.
I.38 "Securities Act" has the meaning set forth in Section 4.4.
I.39 "Shares" shall have the meaning set forth in Section 3.4.
I.40 "Stock Claim" shall have the meaning set forth in Section
11.1(b)(iv).
I.41 "Tax Claim" shall have the meaning set forth in Section 11.1(b)(ii).
I.42 "Taxes" (or "Tax" where the context requires) means all federal,
state, county, local, foreign and other taxes (including, without limitation,
income, profits, premium, estimated, excise, sales, use, occupancy, gross
receipts, franchise, ad valorem, severance, capital levy, production,
transfer, withholding, employment and payroll related, and property taxes,
import duties, insolvency assessments from guaranty associations, and other
governmental or other charges and assessments), whether attributable to
statutory or non-statutory rules and whether or not measured in whole or in
part by net income, and including interest, additions to tax or interest, and
penalties with respect thereto, and including expenses associated with
contesting any proposed adjustment related to any of the foregoing.
ARTICLE II
PURCHASE AND SALE OF SHARES
II.1 PURCHASE AND SALE. At Closing and upon the terms and conditions
hereinafter set forth, Stockholders agree to sell to Buyer, and Buyer agrees
to purchase from Stockholders, all of the shares of the Company Common Stock
owned by each of the Stockholders. The number of shares of the Company
Common Stock owned by each Stockholder is set forth in Section 3.1 of the
Disclosure Letter.
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II.2 EARNEST MONEY.
(a) Concurrently with the execution of this Agreement, Buyer has
deposited with the Escrow Agent under the Escrow Agreement in immediately
available funds the sum of Five Hundred Thousand Dollars ($500,000), which
amount is referred to herein as the "Earnest Money." The Escrow Agent shall
hold the Earnest Money, under the terms of the Escrow Agreement, in trust for
the benefit of the parties hereto.
(b) If Closing does not occur, the Earnest Money shall be
delivered to Stockholders or returned to Buyer in accordance with the terms
of the Escrow Agreement, and if Closing does occur, the Earnest Money shall
be applied to payment of the Purchase Price at Closing as provided in Section
2.3.
II.3 PAYMENT OF PURCHASE PRICE. The total purchase price (the "Purchase
Price") for the Company Common Stock being acquired hereby shall be Nine
Million Five Hundred Thousand Dollars ($9,500,000) payable as follows:
(a) At the Closing, Eight Million Dollars ($8,000,000) in
immediately available funds to the accounts of the Stockholders to be
designated in writing not later than three (3) business days prior to the
Closing. Such funds shall come from the following sources: (i) Five Hundred
Thousand Dollars ($500,000) shall be the Earnest Money and shall be disbursed
by the Escrow Agent; and (ii) Seven Million Five Hundred Thousand Dollars
($7,500,000) shall be from Buyer.
(b) One Million Five Hundred Thousand Dollars ($1,500,000) in
common stock, no par value, of Buyer ("Buyer Common Stock") divided among the
Stockholders in accordance with the percentages set forth in Section 3.1 of
the Disclosure Letter. The number of shares of Buyer Common Stock to be
delivered pursuant to this Section 2.3(b) shall be calculated by dividing One
Million Five Hundred Thousand Dollars ($1,500,000) by the Closing Market
Price per share of Buyer Common Stock. The term "Closing Market Price per
share of Buyer Common Stock" means the average "last" price of Buyer Common
Stock, as reported in the Wall Street Journal for the ten trading days
immediately preceding the Closing Date.
II.4 CERTAIN OTHER AGREEMENTS.
(a) Concurrently with the execution and delivery of this
Agreement, each Stockholder shall execute and deliver to Buyer an Investment
Letter in the form of Exhibit B attached hereto.
(b) At Closing, Matthew Lyons shall execute and deliver to Buyer a
noncompetition and confidentiality agreement in the form of Exhibit C
attached hereto.
(c) At Closing, William G. Lyons will enter into a one-year
employment agreement with the Company in the form of Exhibit D attached
hereto.
(d) At Closing, the Stockholders will cause the William G. Lyons
Trust to transfer and convey, without additional charge or payment therefor,
the real property where the Company's manufacturing facility at 68 Mill Lane
Road, Brimfield, Massachusetts is located ("Old Manufacturing Facility") to
the Company. Such conveyance shall transfer fee simple title to the Company,
free and clear of all liens, security interests, mortgages and encumbrances,
except existing water rights to contiguous real estate.
II.5 CLOSING. Subject to the satisfaction or waiver of the terms and
conditions hereof, the closing ("Closing") of the transactions contemplated
by this Agreement shall take place at the offices of Image Guided
Technologies, Inc., 5710-B Flatiron Parkway, Boulder, CO 80301 at 1:00 p.m.,
local
4
time, on December 12, 1997 (or such other time and place as is mutually
acceptable to the parties; the "Closing Date").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
The Stockholders, jointly and severally, represent and warrant to Buyer
that the statements contained in this Article III are true and correct,
except to the extent set forth in the disclosure letter delivered by the
Stockholders to the Buyer on or before the date of this Agreement (the
"Disclosure Letter"). The Disclosure Letter shall be arranged in sections
corresponding to the numbered sections contained in this Article III and the
disclosure in any section shall qualify only the corresponding section in
this Article III.
III.1 TITLE TO SHARES. Each Stockholder is the lawful owner, of
record and beneficially, of the number of shares of Company Common Stock set
forth in Section 3.1 of the Disclosure Letter. Each Stockholder has the full
power and authority to sell and deliver his shares of the Company Common
Stock to the Buyer hereunder, and will irrevocably transfer to Buyer at
Closing, full, valid, legal and marketable title to his shares of the Company
Common Stock, free and clear of all Encumbrances. There are no restrictions
on the voting or transfer rights of the Company Common Stock.
III.2 AUTHORITY, EXECUTION AND DELIVERY. This Agreement has been,
and the Documents at Closing will be, duly executed and delivered by the
Stockholders and constitute or will constitute the valid and binding
obligations of the Stockholders, enforceable against the Stockholders in
accordance with their terms. Neither the execution nor delivery of this
Agreement or the Documents nor the closing of the transactions contemplated
hereby will violate or result in a default under or conflict with the terms
or provisions of any material contract or commitment by which the
Stockholders may be bound or affected or violate any law or order, rule,
regulation, right or injunction or decree of any Governmental Entity having
jurisdiction over the Stockholders. No consent or approval of, or filing
with, any Governmental Entity or any Person under any contract or commitment
by which the Stockholders may be bound or affected is required in connection
with the execution and delivery by the Stockholders of this Agreement or the
Documents or the closing by the Stockholders of the transactions provided for
herein.
III.3 DUE ORGANIZATION AND STANDING. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and is duly qualified to transact business and
is in good standing as a foreign corporation in each jurisdiction where the
failure to so qualify would have a material adverse effect on the assets of
the Company or the business conducted by the Company. The Company has the
corporate power and authority to own its assets, to conduct its business as
it is now being conducted, and to enter into and perform its obligations
under this Agreement. The Company has no subsidiaries or direct or indirect
interests in any firm, corporation, association or business.
III.4 CAPITALIZATION. The authorized capital stock of the Company
consists of 200,000 shares of common stock, no par value. There are
presently issued and outstanding 43 shares (the "Shares") of the Company
Common Stock, all of which are duly authorized, validly issued, fully paid
and nonassessable and none of which were issued in violation of any
preemptive, first refusal or other rights of any Person. There are no
outstanding subscriptions, preemptive rights, warrants, options or other
agreements or rights of any kind to purchase or otherwise receive or be
issued, or securities or obligations of any kind convertible into, any shares
of capital stock of the Company. Section 3.1 in the Disclosure Letter is a
true and complete list of the record, and beneficial, owners of all the
Company capital stock.
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III.5 CONFLICTING AGREEMENTS AND COMPANY CONSENTS. Neither the
execution and delivery of this Agreement or the Documents nor the closing of
the transactions contemplated hereby (i) will violate or result in a default
under the terms or provisions of the Company's Articles of Incorporation or
By-Laws, or, except as set forth in Section 3.5 of the Disclosure Letter,
under any material contract or commitment by which the Company may be bound
or affected, (ii) violate any material license, permit or authorization held
by the Company, (iii) violate any law or order, rule, regulation, writ,
injunction, or decree of any Governmental Entity having jurisdiction over the
Company, or (iv) result in the creation or imposition of any Encumbrances on
any asset of the Company. Except as set forth in Section 3.5 of the
Disclosure Letter, no consent or approval of, or filing with, any
Governmental Entity or any Person under any contract or commitment by which
the Company may be bound or affected is required in connection with the
execution and delivery of this Agreement or the Documents by the Stockholders
or the closing by the Stockholders of the transactions provided for herein.
III.6 FINANCIAL STATEMENTS.
(a) True and correct copies of the Company's unaudited financial
statements for the years ended October 31, 1997, 1996 and 1995 have
previously been delivered to Buyer. These financial statements ("Company
Financial Statements") are true and complete, are in accordance with and
accurately reflect the books and records of the Company, have been prepared
in accordance with generally accepted accounting principles ("GAAP")
consistently maintained and applied and present fairly the financial position
of the Company at the respective dates indicated and the results of
operations of the Company for the respective periods indicated.
(b) Except for liabilities and obligations incurred in the
ordinary course of business since October 31, 1997 and except for the
Company's guaranty of the obligations of Blackstone Medical Corp. for lease
of the premises containing the New Manufacturing Facility, the Company has no
material liabilities or obligations of any nature, fixed or contingent,
matured or unmatured, which are not shown or provided for on the balance
sheet included in the Company Financial Statements as of October 31, 1997
(the "October Balance Sheet").
III.7 CORPORATE BOOKS AND RECORDS. The Minute Books of the Company
heretofore furnished Buyer for inspection contained complete and accurate
records of all the Company's meetings and actions of its stockholders, board
of directors and committees of the board. The stock books and ledgers of the
Company heretofore furnished Buyer for inspection contained complete and
accurate records of all issuances and transfers of its capital stock. True
and correct copies of the Articles of Incorporation and By-Laws of the
Company, in each case as amended to the date hereof, have been delivered to
Buyer.
III.8 ASSETS. Except as set forth in Section 3.8 of the Disclosure
Letter, the Company has good and marketable title, legal and equitable, to
all the assets (the "Assets") shown or reflected on the October Balance Sheet
(other than those disposed of in the ordinary course of business since such
date), free and clear of all Encumbrances except Permitted Liens. Except as
set forth in Section 3.8 of the Disclosure Letter, the Assets include all of
the assets, properties and rights of every type and description that are
necessary for or used to a material extent in the operation of the Company's
business as now conducted. The operation and use of the Assets conforms in
all material respects to all applicable laws, rules, regulations, permits and
authorities.
III.9 TANGIBLE PERSONAL PROPERTY. The material tangible personal
property owned or leased by the Company is in good operating condition and
repair, ordinary wear and tear excepted, except as set forth in Section 3.9
of the Disclosure Letter.
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III.10 REAL PROPERTY.
(a) The Company has two manufacturing facilities ("Manufacturing
Facilities"), the Old Manufacturing Facility and a recently leased facility
at 90 Brookdale Drive, Springfield, MA (the New Manufacturing Facility").
The Stockholders have heretofore delivered to Buyer true and complete copies
of the leases which evidence the Company's interest in the Manufacturing
Facilities. Such leases are in full force and effect and neither the Company
nor any other party thereto is in default thereunder. The Company does not
have any other interests in real property whether owned in fee, leased or
otherwise. The Old Manufacturing Facility currently leased by the Company
will be transferred to the Company prior to Closing.
(b) The Company holds all easements and rights-of-way necessary
for present access to and present operation of the Manufacturing Facilities.
The Manufacturing Facilities conform in all material respects with all
applicable laws, including, without limitation, building and zoning laws
(however, no representation is made with respect to the Americans With
Disability Act) and no notice or actual knowledge of any violation of zoning,
building or other laws, statutes and ordinances and regulations relating to
the Manufacturing Facilities has been received or is known as to either of
the Manufacturing Facilities. There is no proposed, pending or threatened
condemnation proceeding or similar action affecting any of the Manufacturing
Facilities. The buildings and improvements located on the Manufacturing
Facilities are in good condition and repair, ordinary wear and tear excepted,
and do not encroach on any real property not included in the Manufacturing
Facilities.
III.11 RECEIVABLES AND INVENTORY.
(a) Except as set forth in Section 3.11 of the Disclosure Letter,
the accounts receivable of the Company as shown on the October Balance Sheet
and all accounts receivable of the Company created after October 31, 1997,
arose from valid sales in the ordinary course of business. These accounts
have been collected in full since such date, or are collectible in full in
accordance with their terms in the ordinary course of the business of the
Company less (i) any reserve for doubtful accounts shown on the October
Balance Sheet, and (ii) a reasonable reserve consistent with past practices
for accounts receivable created after October 31, 1997.
(b) Except as set forth in Section 3.11 of the Disclosure Letter,
the inventory, raw materials, work in process and finished goods shown on the
October Balance Sheet are usable and saleable in the ordinary course of the
Company's business without markdown or discount. The finished goods: (i)
conform to the customer's current specifications; and (ii) were manufactured
in accordance with FDA Good Manufacturing Practices. The accrual for
warranty obligations on the Company's books and records is sufficient to
discharge all warranty obligations, based on the Company's historic warranty
claims (which is believed to be an accurate way to measure such obligations).
III.12 FDA REGULATIONS. The Company is in compliance in all material
respects with all laws, rules and regulations of the FDA applicable to its
business, including the FDA's Good Manufacturing Practice requirements. The
Company has not received any notice from the FDA of, and there has not been
asserted before the FDA, any claim, action or proceeding to which the Company
is a party or involving the Company and there is neither pending nor, to the
knowledge of the Company threatened, any investigation or administrative
proceeding concerning the Company arising out of or based upon any
governmental law, rule or regulation of the FDA, including the FDA's Good
Manufacturing Practice requirements. To the Company's knowledge, there are
no valid grounds for recall of any products heretofore sold by the Company,
except as set forth in Section 3.12 of the Disclosure Letter.
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III.13 EMPLOYEE PLANS.
(a) Set forth in Section 3.13 of the Disclosure Letter is a true
and complete list of all the Company's employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), all the Company's bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance,
insurance (including any self-insured or post-retirement arrangements),
disability, vacation, profit-sharing and other similar employee benefit
plans, arrangements, policies or agreements, and all the Company's unexpired
severance agreements, written or otherwise, for the benefit of, or relating
to, any current or former employee of the Company (collectively, the
"Employee Plans").
(b) With respect to each Employee Plan, the Company has made
available to Buyer, a true and correct copy of (i) the most recent annual
report (Form 5500) filed with the IRS, (ii) such Employee Plan, and (iii) the
most recent actuarial report or calculation relating to any Employee Plan
subject to Title IV of ERISA.
(c) With respect to the Employee Plans, individually and in the
aggregate, no event has occurred, and to the knowledge of the Company, there
exists no condition or set of circumstances in connection with which the
Company could be subject to any liability that is reasonable likely to have a
material adverse effect on the Company, under ERISA, the Code or any other
applicable law.
(d) Each Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during
the period from its adoption to date, and each trust forming a part thereof
is exempt from tax pursuant to Section 501(a) of the Code. The Company has
furnished to Buyer copies of the most recent IRS determination letters with
respect to each such plan.
(e) Each Employee Plan has been maintained in compliance with its
terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations, including but not limited to ERISA and the Code, which
are applicable to such Employee Plan. No "prohibited transaction" (as that
term is defined in Section 406 of ERISA or Section 4975 of the Code) has
occurred with respect to any Employee Plan. No tax under Section 4980B of
the Code has been incurred in respect to any Employee Plan that is a group
health plan, as defined in Section 5000(b) (1) of the Code. With respect to
the employees and former employees of the Company, there are no employee
post-retirement medical or health plans in effect, except as required by
Section 4980B of the Code.
(f) With respect to the Employee Plans, there are no funded
benefit obligations for which contributions have not been made or properly
accrued and there are no unfunded benefit obligations which have not been
accounted for by reserves, or otherwise properly footnoted in accordance with
generally accepted accounting principles, on the Company Financial Statements.
III.14 LABOR MATTERS.
(a) Schedule 3.14 of the Disclosure Letter contains a complete and
accurate list as of the date indicated thereon of the names of all persons
who are employed by the Company, job titles, the current annual salary or
hourly rate, original date of hire, bonus arrangements, severance benefits,
and fringe benefits other than those furnished to the Company's employees
generally. The Company has delivered to Buyer all employee handbooks, policy
memoranda and procedure manuals or similar documents applicable to its
employees. The Company is not a party to any collective bargaining
agreement, and there is no collective bargaining agreement applicable to any
employees of the Company.
(b) Except as disclosed in Section 3.14 of the Disclosure Letter:
8
(i) None of the employees of the Company has given notice
to the Company of an intention to cancel or otherwise terminate the
employment relationship with the Company or an intention not to be employed
following the Closing;
(ii) There is no labor strike, dispute, slow-down or
stoppage pending or threatened against the Company;
(iii) There are neither pending nor threatened, suits,
actions, administrative proceedings, union organizing activities,
arbitrations, grievances or other proceedings between the Company and any
employees of the Company; and there are no existing labor or employment or
other disturbances involving employees of the Company which have had or could
reasonably be expected to have a material adverse effect on the financial
condition or operation of the Company;
(iv) The Company is in compliance in all material respects
with all laws, rules and regulations relating to the employment of labor and
all contractual obligations, including those related to wages, hours,
collective bargaining, affirmative action, discrimination, sexual harassment,
wrongful discharge, and occupational safety and health employment practices.
The Company has not received any notice from any Governmental Entity, and
there has not been asserted before any Governmental Entity, any claim, action
or proceeding to which the Company is a party or involving the Company and
there is neither pending nor threatened investigations or administrative
proceedings concerning the Company arising out of or based upon any such law,
regulations or practices; and
(v) Buyer's consummation of the transactions contemplated
by this Agreement in accordance with the terms hereof shall not, as a result
of or in connection with the transactions contemplated hereby, impose upon
Buyer the obligation or potential obligation to pay any severance or
termination pay under any agreement, plan or arrangement binding upon the
Company.
III.15 NO CHANGES. Except as set forth in Section 3.15 of the
Disclosure Letter, the Company since July 31, 1997, has not:
(a) Suffered any material adverse change in its condition
(financial or otherwise), assets, business or prospects;
(b) Incurred any damage, destruction or similar loss, whether or
not covered by insurance, materially affecting its business or assets;
(c) Sold, transferred, or removed from the Company properties any
machinery, equipment, inventory or other property, except in the ordinary
course of business;
(d) Granted any severance or termination pay to any director,
officer or employee of the Company or amended any Employee Plan;
(e) Received notice of loss of any significant customer or
customers, made any material changes in the credit terms offered to any
significant customers, or materially changed the pricing on any of its
products;
(f) Committed to any capital expenditures in excess of Twenty Five
Thousand Dollars ($25,000) except with respect to manufacturing software
having a purchase price of approximately One Hundred Thousand Dollars
($100,000);
9
(g) Declared, set aside, or paid any dividend or other
distribution in respect to the shares of the Company, directly or indirectly
redeemed, purchased or acquired or sold any of its shares of capital stock;
(h) Increased the salary or other compensation payable or to
become payable by the Company to any of its officers, directors or employees,
or declared, paid or committed to the payment of a bonus or other additional
salary or compensation to any such person, other than increases, declarations
or commitments in the ordinary course of business to employees who are not
officers or directors;
(i) Materially amended or terminated any material contract,
agreement or commitment to which it is a party; or
(j) Conducted its business or entered into any material
transaction other than in the ordinary course of business.
III.16 TAXES. The Company has timely filed all required federal,
state and local returns, estimates, information statements and reports
("Returns") with respect to Taxes relating to or attributable to the Company
and its operations and such Returns are true and correct and have been
properly completed. The Company has timely paid all Taxes required to be
paid with respect to such Returns and has withheld all Taxes required to be
withheld. The accruals for the Company's Taxes on the books and records of
the Company are sufficient to discharge all Taxes. No issues have been
raised (and are currently pending) by any federal, state or local taxing
authority in connection with any of the Returns and the Company has not
executed any waiver of any statute of limitations on or extended the period
for the assessment or collection of any the Tax relating to the Company. No
audit or other examination of any Return of the Company is presently in
progress nor has any notification of any intention to examine such returns
been given. The Company is not a party to or bound by any tax indemnity, tax
sharing or tax allocation agreement and has never been a member of a group of
corporations filing a consolidated return and no related party transactions
have occurred which could create liability for Taxes due to actions which
such related party might take. The Company's S corporation election was
properly made (a copy of which has been provided to Buyer) and has been
effective since made and no actions have been taken to terminate that
election. The transactions set forth in this Agreement are not subject to
the tax withholding provisions of Section 3406 of the Code or any other
provisions of law. The Company has provided to Buyer copies of all federal
and state S Corporation and all state sales and use Returns for the fiscal
years ending October 31, 1994, 1995 and 1996. There is no contract,
agreement, plan or arrangement, including but not limited to the provisions
of this Agreement, covering any employee or former employee of the Company
that, individually or collectively, could give rise to the payment of any
amount that would not be deductible pursuant to Sections 280G, 162 or 404 of
the Code.
III.17 INTELLECTUAL PROPERTY. The Company owns, is licensed to use,
or has the legal right to use, all patents, trademarks, trade names, service
marks, copyrights, and any applications therefor, technology, know-how,
computer software programs or applications and tangible or intangible
proprietary information or material that are used or currently proposed to be
used in its business as currently conducted or as currently proposed to be
conducted (the "Intellectual Property Rights"). Schedule 3.17 of the
Disclosure Letter contains a true and complete list of all Intellectual
Property Rights and the status of the ownership thereof. There is, to the
Company's knowledge, no unauthorized use, disclosure or infringement of any
of the Intellectual Property Rights. No claims with respect to the
Intellectual Property Rights have been asserted or are threatened by any
Person, nor is there any valid grounds for any bona fide claim that the
Company infringes on any copyright, patent, trade mark, service mark or trade
secret of a third party, against the use by the Company of the Intellectual
Property Rights or challenging the ownership of the Intellectual Property
Rights. Each employee of, and consultant to, the Company has signed a
non-disclosure agreement, or consultant agreement, respectively, on the
Company's standard forms which have previously been delivered to the Company.
10
III.18 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth in
Section 3.18 of the Disclosure Letter, the Company does not have, is not a
party to, nor is it bound by:
(a) Any agreements that contain any unpaid severance liabilities or
obligations;
(b) Any agreement, contract or commitment with a vendor, or service
maintenance contract involving, a future obligation in excess of Ten Thousand
Dollars ($10,000);
(c) Any agreement, contract or commitment with any customer of the
Company or involving the Company's Intellectual Property Rights;
(d) Any employment or consulting agreement, contract or commitment
with an employee or individual consultant or salesperson or consulting or sales
agreement, contract or commitment with a firm or other organization, not
terminable by the Company on thirty days notice without liability;
(e) Any lease of personal property having a value in excess of Ten
Thousand Dollars ($10,000);
(f) Any agreement of indemnification or guaranty;
(g) Any agreement, contract or commitment containing any covenant
limiting the freedom of the Company to engage in any line of business or compete
with any Person;
(h) Any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of Ten Thousand Dollars
($10,000);
(i) Any agreement, contract or commitment relating to the disposition
or acquisition of assets not in the ordinary course of business or any ownership
interest in any corporation, partnership, joint venture or other business
enterprise;
(j) Any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of money
or extension of credit;
(k) Any distribution, joint marketing or development agreement;
(l) Any other agreement, contract or commitment which involves Ten
Thousand Dollars ($10,000) or more and is not cancelable without penalty within
thirty (30) days; or
(m) Any agreement, contract or commitment which is otherwise material
to the Company or its business.
The Company has not breached, or received any notice that it has breached,
any of the terms or conditions of any material agreement, contract or commitment
to which it is bound (including those set forth in the Disclosure Letter) in
such manner as would permit any other party to cancel or terminate the same or
seek material damages from the Company. Each material agreement, contract or
commitment required to be set forth in the Disclosure Letter is in full force
and effect and, except as otherwise disclosed, is not subject to any material
default thereunder of which the Company has knowledge by any party obligated to
the Company pursuant thereto. There is no contract, agreement or commitment to
which the Company is a party or is bound that is currently known or expected by
the Company to result in any material loss to the Company upon completion or
performance thereof. The Company has heretofore delivered to Buyer true and
correct copies of all agreements, contracts and commitments listed in Section
3.18 of the Disclosure Letter.
11
III.19 LITIGATION. Section 3.19 of the Disclosure Letter lists all
suits, actions and legal, administrative, arbitration or other proceedings and
governmental investigations pending against the Company or its Assets and all
other claims as to which the Company has received any notice of assertion, or as
to which the Company has a reasonable basis to expect such notice of assertion.
There is no judgment, decree or order enjoining the Company in respect of, or
the effect of which is to prohibit, any business practice or the acquisition or
disposition of any property or the conduct of business by the Company. Section
3.19 of the Disclosure Letter also lists all suits and legal actions initiated
by the Company.
III.20 ENVIRONMENTAL MATTERS.
(a) Except as set forth in Schedule 3.20 of the Disclosure Letter,
the Company and the Old Manufacturing Facility are in compliance in all
material respects with all applicable Environmental Laws; the Company has not
received any communication (written or oral), whether from a governmental
authority, citizens group, employee or otherwise, that alleges that the
Company or the Old Manufacturing Facility are not in compliance; and to the
Company's knowledge, there are no circumstances that may prevent or interfere
with such compliance in the future.
(b) There is no Environmental Claim pending or threatened against
the Company or the Old Manufacturing Facility or, to the Company's knowledge,
against any Person or entity whose liability for any Environmental Claim the
Company has or may have retained or assumed either contractually or by
operation of law.
(c) There are no past or present actions, activities,
circumstances, conditions, events or incidents, including the release,
emission, discharge or disposal of any Material of Environmental Concern that
could form the basis of any material Environmental Claim against the Company
or the Old Manufacturing Facility or, to the Company's knowledge, against any
Person or entity whose liability for any Environmental Claim the Company has
or may have retained or assumed either contractually or by operation of law.
III.21 INSURANCE. Section 3.21 of the Disclosure Letter lists all
insurance policies covering the assets, business, equipment, products,
operations, employees, officers and directors of the Company as well as all
claims made under any insurance policy by the Company since December 31,
1993. There is no claim by the Company pending under any of such policies as
to which coverage has been questioned, denied or disputed by the underwriters
of such policies. All premiums payable under all such policies have been
paid and the Company is otherwise in full compliance with the terms of such
policies (or other policies providing substantially similar insurance
coverage). During the past five (5) years the Company has not been denied
insurance coverage nor has any insurance policy of the Company been cancelled
for any reason.
III.22 COMPLIANCE WITH LAWS. The Company is in compliance, and has
complied in every material respect, with all federal, state and local laws,
rules and regulations and all decrees and orders of all Governmental Entities
that are material to the conduct of its business and/or ownership of its
assets. There are no existing or contemplated suits, investigations, or
claims of any Governmental Entity or any party asserting a claim or violation
of any such laws or other governmental rules or regulations. The Company has
all required approvals, permits, licenses and certifications necessary for
the conduct of its business, the sale of its products and the ownership of
its assets.
III.23 TRANSACTIONS WITH AFFILIATES. Except as set forth in Schedule
3.23 of the Disclosure Letter, there are no loans, leases or other agreements
or continuing transactions between the Company and any Affiliate of the
Company or a member of the Immediate Family of an officer, director or
stockholder of the Company. None of the Stockholders or members of their
Immediate Family have any material, direct or indirect, interest in any
entity which does business with the
12
Company or in any material property or asset owned by the Company other than
relationships which occur as an officer, director or stockholder of the
Company. As used herein, the term "Immediate Family" shall mean a person's
spouse, parents, children, siblings, mothers and fathers-in-law, sons and
daughters-in-law and brothers and sisters-in-law.
III.24 FIRPTA. The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
III.25 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Stockholders
directly with Buyer without the intervention of any Person on behalf of
Stockholders in such manner as to give rise to any claim by any Person
against Buyer, Stockholders or the Company for a finder's fee, brokerage
commission or similar payment.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Stockholders that:
IV.1 DUE ORGANIZATION AND STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Colorado and has all requisite corporate power and authority to execute
and deliver this Agreement and the Documents, and to perform its obligations
under this Agreement.
IV.2 EXECUTION AND DELIVERY. The execution, delivery and performance
of this Agreement and the Documents by Buyer have been duly and validly
authorized by all requisite corporate action on the part of Buyer. This
Agreement has been, and the Documents at Closing will be, duly executed and
delivered by Buyer and constitute or will constitute the valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their
terms.
IV.3 CONSENTS, WAIVERS AND APPROVALS. The execution and delivery of
this Agreement and the Documents by Buyer, the performance by Buyer of its
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby do not require Buyer to obtain any consent,
waiver, approval or action of, or make any filing with or give any notice to,
any Person or any Governmental Entity.
IV.4 INVESTMENT PURPOSE. The Shares to be acquired by Buyer under the
terms of this Agreement will be acquired for its own account for the purpose
of investment only and not with a view to the public resale or public
distribution of all or any part of the Shares. Buyer agrees that it will
refrain from transferring or otherwise disposing of any of the Shares, or any
interest therein, in such manner as to violate the Securities Act of 1933, as
amended (the "Securities Act"), or of any applicable state securities law
regulating the disposition thereof.
IV.5 CAPITALIZATION. As of October 31, 1997, the authorized capital
stock of Buyer consisted of (i) 2,416,688 shares of Series Preferred Stock,
no par value, none of which were issued and outstanding, and (ii) 10,000,000
shares of Buyer Common Stock, of which 3,114,112 shares were issued and
outstanding. As of October 31, 1997, there were reserved for issuance under
Buyer's various stock plans an aggregate of 919,118 shares of Buyer Common
Stock and warrants to issue 165,000 shares of Buyer Common Stock. Except as
provided in the immediately preceding sentence of this Section 4.5 and in
connection with the Buyer's proposed private placement in connection with
this transaction, as of October 31, 1997, there were no outstanding options,
warrants, calls, rights, commitments or agreements to which Buyer is a party
or by which Buyer is bound obligating Buyer to (x) issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock
13
of Buyer or (y) grant, execute or enter into any such option, warrant, call,
right, commitment or agreement.
IV.6 SEC DOCUMENTS. Buyer has made available to the Stockholders a
true and complete copy of the following Buyer documents: (i) its annual
report on Form 10-KSB for the fiscal year ended December 31, 1996; (ii) its
quarterly reports on Form 10-QSB for the fiscal quarters ended March 31,
1997, June 30, 1997, and September 30, 1997, (iii) its proxy statement dated
March 18, 1997; and (v) each report, schedule, registration statement and
definitive proxy filed by the Buyer with the Securities and Exchange
Commission (the "Commission") since December 31, 1996, and publicly available
prior to the date hereof (collectively, the "SEC Documents"), which are all
of the documents that Buyer was required to file with the Commission since
such date. As of their respective dates, the SEC Documents compiled in all
material respects with the requirements of the Securities Act, or the
Securities Exchange Act of 1934, as amended, as the case may be, and the
rules and regulations of the Commission thereunder applicable to such SEC
Documents, and none of the SEC Documents, as of their respective dates,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of Buyer included in the SEC
Documents complied as to form in all material respects with the published
rules and regulations of the Commission with respect thereto, were prepared
in accordance with GAAP applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
the unaudited statements, as permitted by Rule 10-01 of Regulation S-X) and
fairly presented in accordance with applicable requirements of GAAP (subject,
in the case of the unaudited statements, to normal recurring adjustments,
none of which will be material and recognizing that there are no notes to
such interim financial statements) the financial position of Buyer as of
their respective dates and the results of operations and cash flows of Buyer
for the periods presented therein.
IV.7 BUYER COMMON. The shares of Buyer Common Stock to be issued and
exchanged for shares of the Company Common Stock pursuant to this Agreement
will, at Closing, be duly authorized, validly issued, fully paid and
nonassessable and subject to no preemptive rights.
IV.8 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Buyer directly with
the Stockholders, without the intervention of any Person on behalf of Buyer
in such manner as to give rise to any claim by any Person against Buyer,
Stockholders or the Company for a finder's fee, brokerage commission or
similar payment.
ARTICLE V
INTERIM PERIOD CONDUCT
The Stockholders agree to cause the Company, except as otherwise
consented to in writing by Buyer prior to the Closing Date, to comply with
the following provisions:
V.1 AFFIRMATIVE ACTS. Except as otherwise permitted or restricted by
this Agreement, the Company shall:
(a) Carry on its business as now being conducted;
(b) Shall use its best efforts to keep available the services of its
existing employees and preserve the good will of its suppliers, customers and
others having business relations with it;
(c) Maintain, preserve, protect and keep its assets and properties in
good repair, working order and condition, reasonable wear and tear excepted; and
14
(d) Maintain in full force and effect all policies of insurance
currently in force or in substitution therefor enter into policies with
comparable coverage.
V.2 PROHIBITIONS. Except as required by this Agreement or the Documents
or as permitted in writing by the Buyer, the Company, and with respect to
paragraph (i) and (k), the Stockholders, will not:
(a) Create, authorize, issue, sell or deliver any of its capital
stock or its securities or grant or otherwise issue any options, warrants or
other rights with respect thereto, or enter into any contract or commitment to
do any of the foregoing;
(b) Incur, assume, guarantee or otherwise become liable with respect
to any indebtedness for money borrowed, except indebtedness in the ordinary
course of its business;
(c) Make any loan, advance or capital contribution to or investment
in any Person;
(d) Declare, set aside or make any payment of any dividend or other
distribution in respect of the capital stock of the Company or any direct or
indirect redemption, purchase or other acquisition of any such stock by the
Company;
(e) Sell, assign, transfer or otherwise dispose of, or pledge,
mortgage or otherwise encumber, any material part of its assets, properties or
rights;
(f) Enter into, amend or terminate any material agreements except in
the ordinary course of its business;
(g) Make any material expenditures not in the ordinary course of
business;
(h) Enter into or amend any employment contracts other than in the
ordinary course of business, increase the rate of compensation payable, or grant
bonuses, to any of its employees, or become obligated to increase such
compensation or grant bonuses, or modify any of its Employee Plans (nothing
herein shall prevent the Company from entering into one year employment
contracts with each of Messrs. Lemek, Szall, Irish, Labbe, McCurry, Shoar, Hicks
and McDonald at substantially similar salaries to their current salaries and
with other terms substantially similar to the Company's standard employment
agreement; the terms of such contracts to be discussed with Mr. Ray prior to
execution).
(i) Solicit, encourage or negotiate any Acquisition Proposal or
supply any non-public information concerning the Company's business, properties
or assets to anyone other than as required in the ordinary course of business;
(j) Except with regard to claims or disputes in the ordinary course
of business, commence any material litigation or arbitration; or
(k) Take any action which might cause any of the representations or
warranties set forth in Article III to be untrue in any material respect at the
Closing.
V.3 LIST OF DEPOSITORIES AND BANK BALANCES. The Company shall furnish to
Buyer at Closing a list, certified by its treasurer, which contains the names of
all banks and other institutions which are depositories of its funds and
securities, the names of all persons authorized to draw or sign checks or drafts
upon, or to give instructions with respect to, the accounts established in said
banks and other institutions, and the names and locations of any institutions in
which the Company has safe deposit boxes, the names of the persons having access
thereto and the contents thereof.
15
V.4 INVESTIGATION BY BUYER. Buyer may, prior to the Closing Date, make
or cause to be made such reasonable investigation of the business,
operations, assets, properties and legal and financial condition of the
Company as Buyer deems necessary or advisable; provided, however, that no
such investigation shall unduly interfere with the normal operations of the
Company. The Stockholders agree to cause the Company to permit Buyer or its
authorized representatives to have, after the date hereof and until the
Closing Date, full access to the books and records of the Company at all
reasonable hours. The Stockholders shall cause the Company to furnish Buyer
with such financial and operating data and other information with respect to
the business, operations, assets, properties and legal and financial
condition of the Company as Buyer shall reasonably request.
ARTICLE VI
COVENANTS
VI.1 DIRECTOR. Buyer agrees to cause William G. Lyons to be included in
the directors' slate of nominees for director for the next annual meeting of
the shareholders of Buyer.
ARTICLE VII
COVENANTS OF BUYER AND STOCKHOLDERS
VII.1 THIRD PARTY CONSENTS. The Stockholders and Buyer shall
cooperate with each other and use all reasonable efforts promptly to prepare
and file all necessary documentation, to effect all applications, notices,
petitions and filings, and to obtain as promptly as practicable all permits,
consents, approvals, waivers and authorizations of all third parties and
Governmental Entities which are necessary or advisable to consummate the
transactions contemplated by this Agreement.
VII.2 FURTHER ASSURANCES. Each party shall, on or prior to the
Closing Date, use all reasonable efforts to fulfill or obtain the fulfillment
of the conditions precedent to the consummation of the transactions
contemplated hereby, including the execution and delivery of any agreements,
certificates, instruments or other papers that are reasonably required for
the consummation of the transactions contemplated hereby. From time to time
following the Closing, each of the parties hereto shall, without additional
consideration, execute and deliver such further instruments and take such
further actions as may reasonably be requested by the other to make effective
the transactions contemplated by this Agreement.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER
VIII.1 GENERAL. Except as may be waived in writing by Buyer, the
obligations of Buyer to consummate the transactions contemplated hereby on
the Closing Date shall be subject to the satisfaction, prior to or
concurrently with the Closing, of each of the conditions set forth in this
Article VIII.
VIII.2 PERFORMANCE. The Stockholders shall have complied with and
performed in all material respects the terms, conditions, acts, undertakings,
covenants and obligations required by this Agreement and the Documents to be
complied with and performed by the Stockholders on or before the Closing
Date, and Buyer shall have received from the Stockholders at the Closing a
currently dated certificate signed by the Stockholders to such effect.
VIII.3 REPRESENTATIONS AND WARRANTIES TRUE AS OF CLOSING DATE. All
representations and warranties of the Stockholders set forth in this
Agreement shall be true and correct on and as of the Closing Date with the
same effect as though such representations and warranties had been made on
16
and as of the Closing Date and Buyer shall have received from the
Stockholders at the Closing a currently dated certificate signed by the
Stockholders to such effect.
VIII.4 ADVERSE PROCEEDINGS, CONSENTS AND AGREEMENTS.
(a) Buyer shall not be subject to any ruling, decree, order or
injunction restraining, imposing material limitations on or prohibiting (i)
the consummation of the transactions contemplated hereby or (ii) its
participation in the operation, management, ownership or control of the
Company; and no litigation, proceeding or other action seeking to obtain any
such ruling, decree, order or injunction shall be pending or shall have been
threatened. No Governmental Entity shall have notified any party to this
Agreement that consummation of the transaction contemplated hereby would
constitute a violation of the laws of the United States or of any state or
political subdivision or that it intends to commence proceedings to restrain
such consummation or to force divestiture, unless such Governmental Entity
shall have withdrawn such notice. No Governmental Entity having jurisdiction
shall have commenced any such proceeding.
(b) All consents, waivers and approvals listed in Section 3.5 of
the Disclosure Letter hereto shall have been obtained, and Buyer shall have
been furnished with appropriate evidence, reasonably satisfactory to it and
its counsel, of the granting of such consents, waivers and approvals.
(c) The Agreements to be executed and delivered pursuant to
Section 2.4 above shall have been so executed and delivered.
VIII.5 OPINION OF STOCKHOLDERS' COUNSEL. Buyer shall have received the
opinion of Bowditch & Dewey, LLP, outside counsel for the Stockholders, dated
the Closing Date, in the form of Exhibit E attached hereto.
VIII.6 ENVIRONMENTAL INSPECTION. Buyer shall have caused, at Buyer's
expense, an environmental inspection of the Old Manufacturing Facility by a
reputable engineering company to determine compliance with Environmental Laws
and the inspection report shall not disclose a reasonable basis for a
determination that the Old Manufacturing Facility in its current condition
would cause the Company as the owner to incur liability in excess of one
hundred thousand dollars $100,000 under applicable Environmental Laws.
VIII.7 TITLE INSURANCE.
(a) Within ten (10) calendar days after the date of this
Agreement, Buyer shall obtain at its expense a commitment to issue an ALTA
owner's title insurance policy ("Title Insurance Commitment"), committing to
insure fee simple title to the Old Manufacturing Facility in the amount of
$500,000. The Title Insurance Commitment shall provide that upon payment of
the premium therefor, an owner's title insurance policy will be issued to the
Company and shall provide for the deletion of the standard printed exceptions
by endorsement. The premium for such title policy shall be paid by the
Buyer. Prior to Closing, the Company shall obtain an owner's title insurance
policy issued in accordance with the Title Insurance Commitment.
(b) The Buyer may, within twenty (20) calendar days after the date
of this Agreement, obtain a current, pinned, monumented on the ground,
boundary and improvements survey ("Survey") of the Old Manufacturing Facility
(showing such other matters as Buyer shall request). Buyer shall pay the
costs of such Survey, and if Buyer fails to obtain such Survey it shall be
deemed to have waived the requirement to delete the standard printed
exceptions to the title insurance policy.
(c) Buyer shall have ten (10) days from the receipt thereof to
examine the Title Insurance Commitment and Survey. If Buyer reasonably finds
either of these unsatisfactory, it shall
17
notify the Stockholders of such fact in writing, and this Agreement, and the
obligations of the parties hereunder to each other, shall terminate and the
Earnest Money shall be returned to Buyer.
VIII.8 NO MATERIAL ADVERSE CHANGES. Since the date of executing the
Agreement, there shall have been no material adverse change in the financial
position, properties, net worth, prospects, business or results of operations
of the Company.
VIII.9 DELIVERY OF STOCK. The Stockholders shall have delivered to
Buyer stock certificates and stock powers duly executed, sufficient to
transfer to Buyer good and marketable title to the Shares, free and clear of
all Encumbrances and adverse claims. Such certificates shall represent all
of the issued and outstanding capital stock of the Company.
VIII.10 RESIGNATIONS. Stockholders shall have delivered to Buyer the
resignations of Matthew Lyons and Pasqualina C. Lyons as directors of the
Company.
VIII.11 AUDITED FINANCIAL STATEMENTS. Stockholders shall have
delivered to Buyer the audited balance sheet of the Company as of October 31,
1997, and the related statements of operations, stockholders' equity and cash
flows for the year ended on such date together with the notes thereto, in
each case audited by, and accompanied by the report thereon, of Aubrey Dixon
& Riley. Such audited financial statements shall not be materially different
from the Company Financial Statements for the same date and period.
VIII.12 LISTING. The shares of Buyer Common Stock to be issued to
Stockholders pursuant to this Agreement shall be authorized for listing on
the Nasdaq Small Cap Market.
VIII.13 LEGAL MATTERS. All actions, proceedings, instruments and
documents required to carry out this Agreement and to close the transactions
contemplated hereby and all other related legal matters shall be reasonably
satisfactory to counsel for Buyer.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF STOCKHOLDERS
IX.1 GENERAL. Except as may be waived in writing by the Stockholders,
the obligation of Stockholders to consummate the transactions contemplated
hereby on the Closing Date shall be subject to the satisfaction, prior to or
concurrently with the Closing, of each of the conditions set forth in this
Article IX.
IX.2 PERFORMANCE. Buyer shall have complied with and performed in all
material respects the terms, conditions, acts, undertakings, covenants and
obligations required by this Agreement and the Documents to be complied with
and performed by Buyer on or before the Closing Date, and Stockholders shall
have received from Buyer at the Closing a currently dated certificate signed
by the Chairman of the Board, the President or an authorized Vice President
of Buyer to such effect.
IX.3 REPRESENTATIONS AND WARRANTIES TRUE AS OF CLOSING DATE. All
material representations and warranties of Buyer set forth in this Agreement
shall be true and correct on and as of the Closing Date with the same effect
as though such representations and warranties had been made on and as of the
Closing Date, and Stockholders shall have received from Buyer at the Closing
a currently dated certificate signed (in form and substance reasonably
satisfactory to Stockholders) by the Chairman of the Board, the President or
an authorized Vice President of Buyer to such effect.
IX.4 OPINION OF BUYER'S COUNSEL. Stockholders shall have received an
opinion of Ireland, Stapleton, Pryor & Pascoe, P.C., outside counsel to
Buyer, dated the Closing Date, in the form of EXHIBIT F attached hereto.
18
IX.5 PAYMENT OF PURCHASE PRICE. Buyer shall have paid and delivered to
Stockholders the cash portion of the Purchase Price and delivered to the
Stockholders the Buyer Common Stock.
IX.6 LISTING. The shares of Buyer Common Stock to be issued to
Stockholders pursuant to this Agreement shall be authorized for listing on
the Nasdaq Small Cap Market.
IX.7 DIRECTOR. At Closing, William G. Lyons shall be elected a director
of the Company.
IX.8 LEGAL MATTERS. All actions, proceedings, instruments and documents
required to carry out this Agreement and to close the transactions
contemplated hereby and all other related legal matters shall be reasonably
satisfactory to counsel for Stockholders.
ARTICLE X
MODIFICATION, WAIVERS AND TERMINATION
X.1 MODIFICATION. Buyer and Stockholders may amend, modify or
supplement this Agreement in such manner as may be agreed upon by them in
writing at any time.
X.2 WAIVERS. Each of Buyer or the Stockholders may, by an instrument
in writing, extend the time for or waive the performance of any of the
obligations of the other parties or waive compliance by the other parties
with any of the covenants or conditions contained herein.
X.3 TERMINATION. If Closing shall not have previously occurred, this
Agreement shall terminate upon the earliest of:
(a) The giving of written notice from the Stockholders to Buyer, or
from Buyer to the Stockholders, if:
(i) The Stockholders give such termination notice and are not at
such time in material default hereunder, or Buyer gives such termination notice
and Buyer is not at such time in material default hereunder; and
(ii) Either:
(A) Any of the representations or warranties contained
herein of Buyer if such termination notice is given by the Stockholders or of
Stockholders if such termination notice is given by Buyer, are inaccurate in
any respect materially adverse to the party giving such termination notice; or
(B) Any material obligation to be performed by Buyer if
such termination notice is given by the Stockholders, or by Stockholders if
such termination notice is given by Buyer, is not timely performed in any
material respect; or
(C) Any condition (other than those referred to in
foregoing Clauses (A) and (B)) to the obligation to close the transaction
contemplated herein of the party giving such termination notice has not been
timely satisfied;
and any such inaccuracy, failure to perform or non-satisfaction of a
condition has been neither cured nor satisfied within twenty (20) days after
written notice thereof from the party giving such termination notice nor
waived in writing by the party giving such termination notice.
(b) Written notice from the Stockholders to Buyer, or from Buyer
to the Stockholders, at any time after December 12, 1997, unless extended by
both parties in writing,
19
provided that termination shall not occur upon the giving of such termination
notice by the Stockholders if the Stockholders are at such time in material
default hereunder or upon the giving of such termination notice by Buyer if
Buyer is at such time in material default hereunder.
X.4 EFFECT OF TERMINATION.
(a) Upon termination of the Agreement, each party hereto shall
thereafter remain liable for breach of this Agreement prior to termination
and remain liable to pay and perform any obligations under Article XI and
this Article; provided, however, that in the event of termination, the
aggregate liability of Buyer for breach hereunder shall be limited as
provided in paragraph (c) below.
(b) Upon termination of this Agreement, Buyer shall be entitled to
the return of the Earnest Money from the Escrow Agent under the Escrow
Agreement unless such termination is effected by Stockholders' giving of
written notice to Buyer pursuant to subsection 10.3(a) (excluding, however,
clause (ii)(C) of such subsection). If Buyer is entitled to the return of
the Earnest Money, Stockholders shall cooperate with Buyer in taking such
action as is required under the Escrow Agreement in order to effect such
return from the Escrow Agent.
(c) If this Agreement is terminated by Stockholders' giving of
written notice to Buyer pursuant to Subsection 10.3(a) (excluding, however,
clause (ii)(C) of such subsection), Buyer agrees that Stockholders shall be
entitled to receive upon such termination, as liquidated damages and not as a
penalty, the Earnest Money; PROVIDED, HOWEVER, if Buyer is unable to close
due to its failure to obtain financing for the purchase of the Shares on
commercially reasonable terms, Stockholders shall only be entitled to receive
upon such termination, as liquidated damages and not as a penalty, Three
Hundred Thousand Dollars ($300,000) of such Earnest Money, and the balance of
Two Hundred Thousand Dollars ($200,000) shall be returned to Buyer.
STOCKHOLDERS' RECEIPT OF THE LIQUIDATED DAMAGE AMOUNT SHALL CONSTITUTE
PAYMENT OF LIQUIDATED DAMAGES HEREUNDER AND NOT A PENALTY, AND SHALL BE
STOCKHOLDERS' SOLE REMEDY AT LAW OR IN EQUITY FOR BUYER'S BREACH HEREUNDER IF
CLOSING DOES NOT OCCUR. Buyer and Stockholders each acknowledge and agree
that the liquidated damage amount is reasonable in light of the anticipated
harm which will be caused by Buyer's breach of this Agreement, the difficulty
of proof of loss, the inconvenience and non-feasibility of otherwise
obtaining an adequate remedy, and the value of the transaction to be
consummated hereunder.
X.5 SPECIFIC PERFORMANCE. Stockholders acknowledge that the Company is
of a special, unique and extraordinary character, and that any breach of this
Agreement by Stockholders could not be compensated for by damages.
Accordingly, if Stockholders shall breach their obligations under this
Agreement, Buyer shall be entitled, in addition to any other remedies that it
may have, to enforcement of this Agreement by a decree of specific
performance or injunctive relief requiring the Stockholders to fulfill their
obligations under this Agreement.
20
ARTICLE XI
INDEMNIFICATION
XI.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) All representations, warranties, covenants and agreements
contained in this Agreement or in any other Document shall survive the
Closing, and the Closing shall not be deemed a waiver by either party of the
representations, warranties, covenants or agreements of the other party
contained herein or in any other Document; provided, however, that except as
set forth in the last sentence of this Section 11.1 (a) the period of
survival (i) in the case of General Claims, shall end two years after the
Closing Date, (ii) in the case of Tax Claims, shall survive for a period
equal to the statute of limitations to which the underlying Taxes relate,
(iii) in the case of Environmental Indemnity Claims, shall survive for a
period of time until all such claims are barred by applicable statutes of
limitations, (iv) in the case of Stock Claims, shall survive indefinitely (in
each case, the "Survival Period"), and (b) no claim may be brought under this
Agreement or any other Document unless written notice describing in
reasonable detail the nature and basis of such claim is given on or prior to
the last day of the applicable Survival Period. In the event such notice is
so given, the right to indemnification with respect thereto under this
Article shall survive the applicable Survival Period until such claim is
finally resolved and any obligations with respect thereto are fully satisfied.
(b) As used in this Article XI, the following terms have the
following meanings:
(i) "GENERAL CLAIM" means any claim based upon, arising out
of or otherwise in respect of any of the matters described in Section
11.2(a)(ii) below.
(ii) "TAX CLAIM" means any claim based upon, arising out of or
otherwise in respect of (A) issues raised on audit by taxing authorities with
respect to any period on or before the Closing Date or (B) any inaccuracy in
or any breach of any representation, warranty, covenant or agreement of the
Stockholders contained in this Agreement related to Taxes.
(iii) "ENVIRONMENTAL INDEMNITY CLAIM" means any claim based
upon, arising out of or otherwise in respect of any inaccuracy in or breach
of Section 3.20 of this Agreement.
(iv) "STOCK CLAIM" means any claim based upon, arising out of
or otherwise in respect of any matters described in Section 11.2(a)(i) below.
XI.2 OBLIGATION OF THE STOCKHOLDERS TO INDEMNIFY.
(a) Subject to the limitations set forth in this Article XI, the
Stockholders, jointly and severally, shall indemnify, defend and hold
harmless the Buyer (and its directors, officers, employees, Affiliates and
assigns) from and against all losses, liabilities, judgments, damages,
deficiencies, citations, fines, costs and expenses (including interest and
penalties imposed or assessed by any judicial or administrative body and
reasonable attorneys fees) ("Losses") based upon, arising out of or otherwise
in respect of:
(i) Any inaccuracy of any representation or warranty
contained in Sections 3.1, 3.2 or 3.4 to the Agreement or in any related part
of any Document;
(ii) Any inaccuracy in or any breach of any representation or
warranty (other than as set forth in paragraph (i) above), or covenant or
agreement of the Stockholders contained in this Agreement or in any Document;
or
21
(iii) Any Tax Claim or Environmental Indemnity Claim, whether
or not included in paragraph (ii) above.
(b) The Stockholders' obligations to indemnify under this Article
XI are subject to, and limited by, the following: (i) the Stockholders'
aggregate monetary liability for indemnification of Stock Claims,
Environmental Indemnity Claims and Tax Claims shall be limited to the
Purchase Price; and (ii) the Stockholders' aggregate monetary liability for
all General Claims shall be limited to $1,000,000.
(c) Notwithstanding anything contained herein to the contrary, if
Closing occurs, Stockholders shall not be obligated until the aggregate
amount of such Losses exceeds Two Hundred Fifty Thousand Dollars ($250,000),
in which case Buyer shall then be entitled to indemnification of the entire
such aggregate amount.
XI.3 OBLIGATIONS OF THE BUYER TO INDEMNIFY. Subject to the limitations
set forth in this Article XI, Buyer shall indemnify, defend and hold harmless
the Stockholders from and against all Losses based upon, arising out of or
otherwise in respect of any inaccuracy in or any breach of any
representation, warranty, covenant or agreement of Buyer contained in this
Agreement. If Closing does not occur, Stockholders shall not be entitled to
indemnification from Buyer or any other recourse or remedy except to the
extent provided under Section 10.4 above. Notwithstanding anything contained
herein to the contrary, if Closing occurs, Buyer shall not be obligated until
the aggregate amount of such Losses exceeds Two Hundred Fifty Thousand
Dollars ($250,000), in which case Stockholders shall then be entitled to
indemnification of the entire such aggregate amount.
XI.4 ADMINISTRATION OF INDEMNIFICATION. For purposes of administering
the indemnification provisions set forth in this Article XI, the following
procedure shall apply:
(a) Whenever a claim shall arise for indemnification under this
Article, the party entitled to indemnification (the "Indemnified Party")
shall reasonably promptly give written notice to the party from whom
indemnification is sought (the "Indemnifying Party") setting forth in
reasonable detail, to the extent then available, the facts concerning the
nature of such claim and the basis upon which the Indemnified Party believes
that it is entitled to indemnification hereunder.
(b) In the event of any claim for indemnification hereunder
resulting from or in connection with any claim, action, suit or legal
proceeding by a third party, the Indemnifying Party shall be entitled, at its
sole expense, either (i) to participate therein or (ii) to assume the entire
defense thereof with counsel which is selected by it and which is reasonably
satisfactory to the Indemnified Party, provided that (A) the Indemnifying
Party agrees in writing that it does not and will not contest its
responsibility for indemnifying the Indemnified Party, in respect of such
claim or proceeding and (B) no settlement shall be made without the prior
written consent of the Indemnified Party which shall not be unreasonably
withheld (except that no such consent shall be required if claimant is
entitled under the settlement to only monetary damages to be paid solely by
the Indemnifying Party). If, however, (A) the claim, action, suit or
proceeding would, if successful, result in the imposition of damages for
which the Indemnifying Party would not be solely responsible hereunder, (B)
representation of both parties by the same counsel would otherwise be
inappropriate due to actual or potential differing interests between them, or
(C) the Indemnified Party elects to participate in the defense with counsel
of its own choice, then the Indemnifying Party shall not be entitled to
assume the entire defense and each party shall be entitled to retain counsel
(in the case of Clause (A) and Clause (C), at their own expense) who shall
cooperate with one another in defending against such action, claim or
proceeding.
(c) If the Indemnifying Party does not choose to defend against a
claim, action, suit or legal proceeding by a third party, the Indemnified
Party may defend against such claim, action, suit or proceeding in such
manner as it deems appropriate or settle such action, suit or proceeding
(after giving notice thereof to the Indemnifying Party) on such terms as the
Indemnified Party may deem appropriate, and the Indemnified Party shall be
entitled to periodic reimbursement
22
of expenses incurred in connection therewith and prompt indemnification from
the Indemnifying Party, including reasonable attorneys' fees, in accordance
with this Article.
(d) Failure or delay by an Indemnified Party to give a reasonably
prompt notice of any claim or claims (if given prior to expiration of the
applicable Survival Period) shall not release, waive or otherwise affect an
Indemnifying Party's obligations with respect thereto, except to the extent
that the Indemnifying Party can demonstrate actual loss or prejudice as a
result of such failure or delay.
ARTICLE XII
MISCELLANEOUS
XII.1 NOTICES. Any notices or other communications required or
permitted hereunder shall be deemed to have been duly given only when
received by the party to whom such notice or communication is addressed at
the following addresses (or at such other address for a party as shall be
specified by like notice), having been sent by certified mail, return receipt
requested, or by hand delivery (including express courier):
To Stockholders: William G. Lyons
Brimfield Precision, Inc.
68 Mill Lane Road
Brimfield, MA 01010
Matthew Lyons
With Copy To: Michael P. Angelini
Bowditch & Dewey, LLP
311 Main Street
Worcester, MA 01608-1552
To Buyer: Paul L. Ray, Chairman of the Board
Image Guided Technologies, Inc.
5710-B Flatiron Parkway
Boulder, CO 80301
With Copy To: William E. Tanis, Esq.
Ireland, Stapleton, Pryor & Pascoe, P.C.
1675 Broadway, Suite 2600
Denver, CO 80202
XII.2 GENDER AND NUMBER. All words or terms used in this Agreement,
regardless of the number or gender in which they are used, shall be deemed to
include any other number and any other gender as the context may require.
XII.3 EXPENSES. All legal, accounting and other costs and expenses
incurred in connection with this Agreement and the transaction contemplated
hereby shall be paid by the party incurring such expenses.
XII.4 ANNOUNCEMENTS. It is a condition to Stockholders proceeding with
the transaction that no public announcement be made until Buyer has received
financing commitment(s) to close the transaction. Accordingly (except as
otherwise required by law), Buyer will not make a public announcement with
respect to this Agreement until such financing commitments have been
23
received and will at such time then make a public announcement. Upon such
public announcement after the financing commitments have been received, the
limitation of liquidated damages to Three Hundred Thousand Dollars ($300,000)
as set forth in Section 10.4 shall no longer apply (liquidated damages being
therefore increased to Five Hundred Thousand Dollars ($500,000)).
XII.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the respective successors and assigns of the
parties hereto but shall not be assigned by either of the parties without the
prior written consent of the other (however, nothing herein shall prevent
Buyer from assigning this Agreement to an Affiliate).
XII.6 WAIVER. The failure of any party at any time or times to require
performance of any provisions hereof shall in no manner affect such party's
right at a later date to enforce the same. No waiver by either party of a
condition or a breach of any term, covenant, representation or warranty
contained in this Agreement, whether by conduct or otherwise, in any one or
more instances shall be deemed to be construed as a further or continuing
waiver of such condition, breach or waiver of any condition or of the breach
of any other term, covenant, representation or warranty of this Agreement.
XII.7 ATTORNEYS' FEES. If either party hereto becomes a party to
litigation or any other proceeding in connection with or related to this
Agreement with the other party and prevails in such litigation or proceeding,
the other party will pay the cost and expenses relating to such litigation or
other proceeding including, without limitation, the attorneys' fees and
expenses of investigation of the prevailing party.
XII.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts with the same effect as if the signatures to each counterpart
were upon the same instrument.
XII.9 ENTIRE AGREEMENT. This Agreement, the Disclosure Letter and the
Exhibits and the Documents set forth the entire understanding of Buyer and
the Stockholders and supersede all prior agreements, arrangements and
communications, whether oral or written, between Buyer and Stockholders with
respect to the subject matter hereof; and this Agreement shall not be
modified or amended other than by written agreement of Buyer and the
Stockholders. Captions appearing in this Agreement are for convenience of
reference only and shall not be deemed to explain, limit or amplify the
provisions hereof.
XII.10 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Colorado.
24
IN WITNESS WHEREOF, the Buyer and the Stockholders have caused this
Agreement to be duly executed on the date first above written.
BUYER:
IMAGE GUIDED TECHNOLOGIES, INC.
By: /s/ Paul L. Ray
-------------------------------------------
Paul L. Ray, Chairman of the Board
STOCKHOLDERS:
/s/ William G. Lyons
-----------------------------------------------
WILLIAM G. LYONS
/s/ Matthew Lyons
-----------------------------------------------
MATTHEW LYONS
25
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, made and entered into as of this 25th day of
November, 1997, by and between WILLIAM G. AND MATTHEW LYONS (collectively
"Stockholders"), IMAGE GUIDED TECHNOLOGIES, INC. ("Purchaser"), and BOWDITCH
& DEWEY, LLP ("Escrow Agent").
WITNESSETH
WHEREAS, the Purchaser and the Stockholders (hereinafter collectively
the "Parties") have entered into an Agreement of Purchase and Sale, dated as
of November 25, 1997 (the "Stock Purchase Agreement"), in order for Purchaser
to acquire all the issued and outstanding capital stock of Brimfield
Precision, Inc.; and
WHEREAS, Section 2.2 of the Purchase Agreement requires that the sum of
Five Hundred Thousand Dollars ($500,000) in cash (the "Escrow Deposit") be
deposited with the Escrow Agent; and
WHEREAS, the Stockholders and Purchaser have agreed that Bowditch &
Dewey, LLP shall act as Escrow Agent for the Escrow Deposit; and
WHEREAS, as provided in Paragraph 2.2 of the Stock Purchase Agreement,
Stockholders and Purchaser agree to enter into this Escrow Agreement, and
Escrow Agent acknowledges receipt of a copy of the Stock Purchase Agreement
and has agreed to act as Escrow Agent.
NOW, THEREFORE, in consideration of the mutual promises and the mutual
benefits to be derived therefrom, the parties hereto agree as follows:
1. PURCHASER'S DEPOSIT OF FUNDS. Pursuant to Paragraph 2.2 of the
Purchase Agreement, Purchaser hereby deposits with the Escrow Agent the
Escrow Deposit, subject to the terms and conditions herein contained.
2. RECEIPT ACKNOWLEDGMENT AND INSTRUCTIONS. The Escrow Agent
acknowledges receipt of the Escrow Deposit and agrees to deliver the Escrow
Deposit to Stockholders or Purchaser upon the receipt of instructions
executed jointly by Stockholders and Purchaser, as directed by those
instructions.
3. INVESTMENT. The Escrow Agent shall invest and reinvest the Escrow
Deposit in short-term interest bearing obligations of the United States
Government, or in short-term federally insured certificates of deposit, or in
money market accounts, as directed by Purchaser. Interest earned on the
Escrow Deposit shall be paid by the Escrow Agent to the Purchaser when
received.
1
4. ESCROW DEPOSIT. The Escrow Deposit shall be:
a. Delivered to Stockholders in accordance with Section 2.3 of
the Stock Purchase Agreement if the purchase contemplated in the Stock
Purchase Agreement closes; or
b. Delivered to Stockholders or returned to Purchaser, as the
case may be, in accordance with Article 10 of the Stock Purchase Agreement if
the Stock Purchase Agreement is terminated.
Purchaser and Stockholders agree to instruct Escrow Agent in writing in
accordance with the foregoing, and Escrow Agent shall be obligated to deliver
the Escrow Deposit upon receipt of, and in accordance with, such
instructions.
5. ESCROW AGENT ACTS ONLY AS DEPOSITORY. The Escrow Agent will act
hereunder as a depository only and is not a party to or bound by the Stock
Purchase Agreement or any other agreement, document or understanding to which
Purchaser and Stockholders are parties and is not responsible or liable in
any manner for the sufficiency, correctness, genuineness or validity of any
of the agreements or documents existing between Purchaser and Stockholders.
6. ACTION IN GOOD FAITH. The Escrow Agent is authorized to act upon
any document, request, or notice which in good faith is believed by the
Escrow Agent to be genuine and signed or presented by the proper party or
parties, and shall be protected in so acting.
7. ESCROW AGENT'S DUTIES IN THE EVENT OF CONFLICTING DEMANDS. In the
event conflicting demands are made or conflicting notices are served upon the
Escrow Agent growing out of or directly related to its duties under this
Escrow Agreement, the Parties hereto expressly agree and consent that the
Escrow Agent may file an interpleader action in _________________,
Massachusetts (the "Court") and place the Escrow Deposit with the clerk of
said Court. Purchaser and Stockholders jointly and severally agree to pay
the Escrow Agent's costs, including reasonable attorney's fees which the
Escrow Agent may expend or incur in such interpleader suit. Upon the filing
of the interpleader action and the payment of the Escrow Deposit into the
registry of the Court, the Escrow Agent shall be fully released and
discharged from all obligations imposed on it in this Escrow Agreement.
8. ESCROW AGENT'S LIABILITY. The Escrow Agent shall have no liability
hereunder except for its own willful misconduct, bad faith or gross
negligence.
9. NOTICES. All notices, instructions or requests required or
permitted to be given under the provisions hereof shall be deemed to have
been fully given if personally delivered, or mailed, by registered mail,
postage prepaid, as follows:
2
As to Purchaser:
Paul L. Ray, Chairman and CEO
Image Guided Technologies, Inc.
5710-B Flatiron Parkway
Boulder, CO 80301
With a copy to:
William E. Tanis, Esq.
Ireland, Stapleton, Pryor & Pascoe, P.C.
1675 Broadway, Suite 2600
Denver, CO 80202
As to Stockholders:
William G. Lyons, President
Brimfield Precision, Inc.
68 Mill Lane Road
Brimfield, MA 01010
With a copy to:
Michael P. Angelini
Bowditch & Dewey, LLP
311 Main Street
Worcester, MA 01608-1552
As to Escrow Agent:
Bowditch & Dewey, LLP
311 Main Street
Worcester, MA 01608-1552
10. COUNTERPART SIGNATURES. This Escrow Agreement may be executed by
the parties in any number of counterparts and each executed copy shall be an
original for all purposes without account for the other copies, provided that
all parties hereto have executed a counterpart.
11. INTERPRETATION. This Escrow Agreement shall be construed and
interpreted under the laws of the Commonwealth of Massachusetts.
3
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed through their duly authorized representatives on the date first above
written.
STOCKHOLDERS:
/s/ William G. Lyons
------------------------------------
William G. Lyons
/s/ Matthew Lyons
------------------------------------
Matthew Lyons
PURCHASER:
IMAGE GUIDED TECHNOLOGIES, INC.
By: /s/ Paul L. Ray
--------------------------------
Paul L. Ray, Chairman and CEO
ESCROW AGENT:
BOWDITCH & DEWEY, LLP
By: /s/ illegible signature
--------------------------------
4
Investment Letter
Image Guided Technologies, Inc.
5710-B Flatiron Parkway
Boulder, CO 80301
Gentlemen:
In connection with the undersigned's acquisition of shares ("Shares") of
the common stock, no par value, of Image Guided Technologies, Inc. (the
"Company") pursuant to the Agreement of Purchase and Sale, dated November 25,
1997 (the "Agreement"), among the Company and the undersigned and his
brother, the undersigned advises you as follows:
1. The undersigned is knowledgeable about and understands the
Company's business affairs and financial condition and has sufficient
information about the Company to reach an informed and knowledgeable decision
to acquire the Shares in the transaction contemplated by the Agreement. The
undersigned understands that the Company intends to finance the cash portion
of the Purchase Price (as defined in the Agreement) with debt or equity or a
combination thereof and accordingly the liabilities and/or number of shares
of capital stock outstanding of the Company will increase. The undersigned
acknowledges he has previously received from the Company and has read (i) its
annual report on Form 10-KSB for the fiscal year ended December 31, 1996,
(ii) its proxy statement dated March 18, 1997, (iii) its quarterly reports on
Form 10-QSB for the fiscal quarters ended March 31, 1997, June 30, 1997, and
September 30, 1997 and (iv) the other SEC Documents (as defined in the
Agreement).
2. The undersigned acknowledges that the Company has made available to
him at a reasonable time prior to the date hereof the opportunity to ask
questions and receive answers concerning the terms and conditions of the
offering and to obtain any additional information which the Company possesses
or can acquire without unreasonable effort or expense that is necessary to
verify the accuracy of the information provided by the Company.
3. The undersigned understands that the Shares have not been
registered under the Securities Act of 1933, as amended (the "1933 Act"), or
any state securities laws and, therefore, cannot be resold unless they are
subsequently registered under the 1933 Act and applicable state securities
laws or unless an exemption from such registration is available; that he may
not resell or otherwise dispose of all or any part of the Shares unless (i)
such sale or other disposition is within the limitations of and in compliance
with Rule 144 promulgated by the Securities and Exchange Commission under the
1933 Act, (ii) some other exemption from registration under the 1933 Act is
available with respect to any proposed sale or other disposition or (iii)
such sale or disposition has been registered under the 1933 Act; that the
Company is under no obligation to register the sale, transfer or other
disposition of the Shares; and that the Company will issue stop transfer
instructions to its transfer agent in accordance with the provisions
contained in this paragraph.
1
4. Each certificate for the Shares shall be stamped or otherwise
imprinted with a legend stating in substance:
The shares represented by this Certificate have not been registered
under the Securities Act of 1933, as amended. Such shares are
subject to and may not be sold, offered for sale, transferred or
otherwise disposed of except (i) pursuant to an effective
registration statement related thereto, (ii) in compliance with
Rule 144 or (iii) pursuant to an opinion of counsel for the Company
that such registration is not required under the Securities Act of
1933.
5. The undersigned is acquiring the Shares for his own account for
investment only and has no present intention of selling or otherwise
disposing of the Shares.
6. The undersigned is a natural person whose individual net worth, or
joint net worth with his spouse, at the date hereof exceeds $1,000,000.
7. The undersigned by reason of his knowledge and experience in
financial and business matters is capable of evaluating the merits and risks
of this investment and has the capacity to protect his interest in connection
with this investment. The undersigned has determined that the Shares are a
suitable investment for him.
8. The undersigned understands that his representations are being
relied upon by the Company for purposes of establishing an exemption from
registration for the sale of the Shares.
9. The undersigned's address is
- ------------------------------------------------------------
- --------------------------------------------------.
Very truly yours,
/s/ Matthew Lyons
------------------------------
Matthew Lyons
2
NONCOMPETITION AND CONFIDENTIALITY AGREEMENT
THIS NONCOMPETITION AND CONFIDENTIALITY AGREEMENT (the "Agreement") effective
as of December 12, 1997, is by and between Brimfield Precision, Inc., a
Massachusetts corporation, with its offices located at 68 Mill Lane Rd.,
Brimfield, Massachusetts 01010 (the "Company"), and Matthew Lyons ("Lyons"),
an individual whose residence
is____________________________________________________________________
This Agreement is entered into in connection with the sale of all the stock of
the Company by Lyons and his brother to Image Guided Technologies, Inc. ("IGT").
Lyons understands and acknowledges that IGT would not have acquired the stock
of the Company without this Agreement.
1. NON-COMPETITION.
(a) NON-COMPETITION. For two years after the date first stated
above, Lyons will not, directly or indirectly, engage in, or own or control an
interest in (except as a passive investor owning less than one (1%) percent of
the equity securities of a publicly owned company), or act as a director,
officer or employee of, or consultant to, any individual, partnership, joint
venture, corporation or other business entity directly or indirectly engaged in,
the Business (as hereinafter defined) anywhere in the United States. The time
period during which the restrictions set forth in this Section 1(a) apply shall
be extended by the length of time during which it is judicially determined that
Lyons has violated these restrictions in any respect. In the event any of the
provisions of this Section 1(a) are unenforceable by law, then the restrictions
shall be for such period and such geographic area as a court shall find is
necessary to protect the goodwill and business of the Company. The provisions
of this Section 1(a) shall no longer be enforceable in the event the Company
either files for bankruptcy or other protection from creditors or ceases to
operate as an ongoing business entity.
(b) BUSINESS: The term "Business" as used in this Section 1 shall
mean (i) healthcare product contract machining, and (ii) any other business in
which the Company is engaged on the date first stated above; PROVIDED, HOWEVER,
"Business" shall not include the development, manufacture or sale of proprietary
(created by Blackstone Medical Corp.) health care products.
2. LYONS REPRESENTATION: Lyons represents that the Company does not owe
him any money, nor is it liable to him for any amount.
3. CONFIDENTIALITY. Lyons acknowledges that his stock ownership and
positions with the Company have brought him into close contact with many
confidential affairs of the Company and its collaborators, consultants and
clients, including, without limitation information about costs, profits,
markets, sales, key personnel, pricing policies, operational methods, concepts,
and other business affairs and methods of the Company and its collaborators,
consultants and clients and other information not readily available to the
public, as well as plans for future developments (collectively referred to
hereinafter as "Proprietary Information"). In recognition of the foregoing,
Lyons covenants and agrees:
1
(a) That all Proprietary Information shall be the exclusive property
of the Company and that he will keep secret all Proprietary Information and will
not use it for his own benefit or disclose it to, or use it for the benefit of,
anyone outside of the Company; and
(b) That he has delivered to the Company all memoranda, notes,
documentation, data listing, records, reports and other tangible manifestations
of the Proprietary Information (and all copies thereof), that he may possess or
have under his control.
4. NON-SOLICITATION. Lyons hereby covenants and agrees that, for a
period of two (2) years after the date first stated above, he will not induce or
attempt to induce any officer, employee, agent, consultant, or client of the
Company to discontinue such affiliation with the Company or to refrain from
entering into new business relationships with the Company. The time period
during which the prohibitions set forth above apply shall be extended by the
length of time during which it is judicially determined that Lyons has violated
any such prohibition in any respect.
5. SPECIFIC PERFORMANCE. Without intending to limit the remedies
available to the Company, Lyons agrees that damages at law will be an
insufficient remedy to the Company in the event that Lyons violates the terms of
Section 1, 3 or 4 of this Agreement and that the Company may apply for and
obtain immediate injunctive relief in any court of competent jurisdiction to
restrain the breach or threatened breach of, or otherwise to specifically
enforce, any of the agreements and covenants contained in such Sections. The
parties hereto understand that each of the agreements and covenants of Lyons
contained in Sections 1, 3 and 4 of this Agreement are essential elements of
this Agreement and agree that the obligations of Lyons thereunder will survive
the termination of this Agreement.
6. ENTIRE AGREEMENT AND WAIVER: This Agreement is the entire agreement
between the parties with respect to the subject matter hereof and supersedes any
and all prior or contemporaneous oral and prior written agreements and
understandings. There are no oral promises, conditions, representations,
understandings, interpretation or terms of any kind or condition or inducements
to the execution hereof or in effect among the parties. No custom or trade
usage, nor course of conduct among the parties, shall be relied upon to vary the
terms hereof. This Agreement may not be amended, and no provision hereof shall
be waived, except by writing signed by all the parties to this Agreement, which
states that it is intended to amend or waive a provision of this Agreement. Any
waiver of any rights or failure to act in a specific instance shall relate only
to such instance and shall not be construed as an agreement to waive any rights
or fail to act in any other instance, whether or not similar.
7. SEVERALITY. Should any provision of this Agreement be unenforceable
or prohibited by any applicable law, this Agreement shall be considered
divisible as to such provision which shall be inoperative, and the remainder of
this Agreement shall be valid and binding as though such provision were not
included herein.
8. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original. It shall not be
necessary when making proof of this Agreement to account for more than one
counterpart.
2
9. HEADINGS. All headings in this Agreement are for convenience only and
shall not affect the meaning of any provision hereof.
10. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of,
and be binding upon, the Company and any corporation with which the Company
merges or consolidates or to which the Company sells all or substantially all of
its assets, and upon Lyons and his executors, administrators, heirs and legal
representatives.
11. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Massachusetts, without reference
to the conflict of laws principles thereof.
12. NOTICES. All notices hereunder shall be in writing and shall be sent
to the parties at the following addresses:
If to Company:
Brimfield Precision, Inc.
c/o Image Guided Technologies, Inc.
5710-B Flatiron Parkway
Boulder, CO 80301
If to Lyons:
_____________________________
_____________________________
_____________________________
and shall be deemed received by the recipient when personally delivered or, if
mailed, three (3) days after the date of deposit in the United States Mail,
certified or registered, postage prepaid. Either party hereto may change its or
his address for notices by notice to the other party as above provided.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
COMPANY: LYONS:
Brimfield Precision, Inc.
By: /s/ William G. Lyons /s/ Matthew Lyons
--------------------------------- ----------------------------------
Matthew Lyons
3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") effective as of December 12,
1997, is by and between Brimfield Precision, Inc., a Massachusetts corporation,
with its offices located at 68 Mill Lane Rd., Brimfield, Massachusetts 01010
(the "Company"), and William G. Lyons (the "Employee"), an individual whose
residence is __________________________________________.
This Agreement is entered into in connection with the sale of all the
stock of the Company by Employee and his brother to Image Guided Technologies,
Inc. ("IGT"). Employee understands and acknowledges that IGT would not have
acquired the stock of the Company without this Agreement, including, without
limitation, its covenant not to compete.
1. EMPLOYMENT AND ACCEPTANCE OF EMPLOYMENT TERMS. Upon and subject to
the terms and conditions set forth herein, the Company hereby employs the
Employee as its President and in such additional management position(s) as
the Board of Directors of the Company (the "Board") may determine from time
to time, and the Employee hereby agrees to accept such employment, for a
period of one year (unless sooner terminated as hereinafter set forth)
commencing on the date hereof and ending one year thereafter (the "Term").
2. DUTIES. The Employee agrees, during the Term to devote his entire
business time, attention, and energies exclusively to the business of the
Company as shall be required to perform the duties of the position specified
in Section 1 (except with respect to advisory services to Blackstone Medical
and other incidental business and community responsibilities), and to conform
to the rules, regulations, instructions, personnel practices and policies of
the Company, as existing and amended from time to time by the Company.
3. COMPENSATION.
(a) SALARY. In consideration of the Employee's performance of
services hereunder, the Company will pay to the Employee, during the Term of
the Employee's employment, and the Employee agrees to accept from the Company
for his services, a salary (the "Salary") of $150,000 per annum during the
Term, payable in accordance with the Company's normal payroll practices
applicable to its executive officers but not less often than monthly.
(b) BENEFITS. During the term of the Employee's employment
hereunder, the Employee shall be entitled to full health insurance in
accordance with the plan currently in place at the Company and to participate
in any other medical, pension, bonus, profit-sharing or similar plan or
program that may be established by the Company and made available to its
officers and key employees generally; provided that the Company shall not be
required to implement or continue any such other employee benefit program.
(c) PAID VACATIONS. The Employee shall be entitled to an annual
paid vacation of five weeks at such times and for such periods as may be
mutually acceptable
1
to the Company and the Employee, in accordance with the Company's policies
governing vacations for officers and key employees. Unused vacation shall
not accumulate.
(d) PAID HOLIDAYS. The Employee shall be entitled to paid
holidays, in accordance with the Company's policies governing holidays for
officers and key employees.
(e) DEDUCTIONS. The Company shall have the right to deduct from
the Salary and all other cash amounts payable by the Company under the
provisions of this Agreement to the Employee or, if applicable, to his
estate, legal representatives or other beneficiary designated in writing by
the Employee (a 'Designee') all social security taxes, all federal, state and
municipal taxes and all other charges and deductions which now or hereafter
are imposed by law as charges on the compensation of the Employee or charges
on cash benefits payable by the Company hereunder to his estate, legal
representatives or Designee.
4. REIMBURSEMENT OF CERTAIN EXPENSES. The Company shall reimburse the
Employee, upon production of accounts and vouchers or other reasonable
evidence of payment by the Employee, all in accordance with the Company's
regular procedures in effect, from time to time and in form suitable to
establish the validity and deductibility of such expenses for tax purposes,
all reasonable, ordinary and necessary travel, automobile and other expenses
as shall have been incurred by him in the performance of his duties hereunder.
5. NON-COMPETITION.
(a) NON-COMPETITION. During the term of the Employee's employment
with the Company and the two year period immediately following the date on
which the Employee's employment with the Company terminates (the "Termination
Date"), the Employee will not, directly or indirectly, engage in or own or
control an interest in (except as a passive investor owning less than one
(1%) percent of the equity securities of a publicly owned company), or act as
a director, officer or employee of, or consultant to, any individual,
partnership, joint venture, corporation or other business entity directly or
indirectly engaged in, the Business (as hereinafter defined) anywhere in the
world. The time period during which the restrictions set forth in this
Section 5(a) apply shall be extended by the length of time during which it is
judicially determined that the Employee has violated these restrictions in
any respect. In the event any of the provisions of this Section 5(a) are
unenforceable by law, then the restrictions shall be for such period and such
geographic area as a court shall find is necessary to protect the goodwill
and business of the Company. The provisions of this Section 5(a) shall no
longer be enforceable in the event the Company either files for bankruptcy or
other protection from creditors or ceases to operate as an ongoing business
entity.
(b) BUSINESS. The term "Business" as used in this Agreement shall
mean (i) healthcare product contract machining, (ii) any other business in
which the Company or IGT is engaged on the this date, and (iii) any other
business in which the Company or IGT is engaged or is actively planning to
become engaged on the Termination Date, and in connection with the planning
of which the Employee has had significant involvement.
2
(c) EMPLOYEE REPRESENTATION. The Employee represents that he is
not now subject to any employment agreement nor has he previously, at any
time, entered into any written agreement with any person, firm or corporation
which would or could preclude or prevent him from entering into this
Agreement or which requires the consent of any other party, the employee
agrees to indemnify the Company and each of its officers, directors and
controlling persons against any loss, liability or expense (including
reasonable counsel fees) incurred by the Company or its officers, directors
and controlling persons arising out of or in connection with any knowing
misrepresentation made by the Employee hereunder. Employee further represents
that the Company does not owe him any money, nor is it liable to him for any
amount, other than his salary and other employment related expenses due him
in the ordinary course of business.
6. CONFIDENTIALITY. The Employee acknowledges that his employment by
the Company brings him into close contact with many confidential affairs of
the Company and its collaborators, consultants and clients, including,
without limitation information about costs, profits, markets, sales, key
personnel, pricing policies, operational methods, concepts, and other
business affairs and methods of the Company and its collaborators,
consultants and clients and other information not readily available to the
public, as well as plans for future developments (collectively referred to
hereinafter as "Proprietary Information"). The Employee further acknowledges
that the relationships between the Company and its officers, employees,
agents, consultants and clients constitute a valuable asset of the Company.
In recognition of the foregoing, the Employee covenants and agrees:
(a) That all Proprietary Information shall be the exclusive
property of the Company and that he will keep secret all Proprietary
Information and will not use it for his own benefit or disclose it to, or use
it for the benefit of, anyone outside of the Company, either during or after
his employment by the Company; and
(b) That he will deliver promptly to the Company on termination of
his employment by the Company, or at any time the Board may so request, all
memoranda, notes, documentation, data listing, records, reports and other
tangible manifestations of the Proprietary Information (and all copies
thereof), that he may then possess or have under his control.
7. NON-SOLICITATION. The employee hereby covenants and agrees that,
for a period of two (2) years after the termination of his employment
hereunder, he will not induce or attempt to induce any officer, employee,
agent, consultant, or client of the Company to discontinue such affiliation
with the Company or to refrain from entering into new business relationships
with the Company. The time period during which the prohibitions set forth
above apply shall be extended by the length of time during which it is
judicially determined that the Employee has violated any such prohibition in
any respect.
8. SPECIFIC PERFORMANCE. Without intending to limit the remedies
available to the Company, the Employee agrees that damages at law will be an
insufficient remedy to the Company in the event that the Employee violates
the terms of Section 5, 6 or 7 of this Agreement and that the Company may
apply for and obtain immediate injunctive
3
relief in any court of competent jurisdiction to restrain the breach or
threatened breach of, or otherwise to specifically enforce, any of the
agreements and covenants contained in such Sections. The parties hereto
understand that each of the agreements and covenants of the Employee
contained in Sections 5, 6 and 7 of this Agreement are essential elements of
this Agreement and agree that the obligations of the Employee thereunder will
survive the termination of this Agreement.
9. TERMINATION.
(a) TERMINATION BY THE COMPANY FOR CAUSE. The Company may
terminate this Agreement and its obligations to the Employee hereunder at any
time for "Cause", which shall mean only (i) the willful or reckless failure
by the Employee to perform his duties hereunder (other than a failure
resulting from the Employee's incapacity due to physical or mental illness),
which failure shall not have been cured within fifteen (15) days after the
receipt by the Employee of written notice thereof from the Board specifying
with reasonable particularity such alleged failure; (ii) the willful or
reckless violation by the Employee of Sections 5, 6 or 7 hereof, which
violation shall not have been cured within fifteen (15) days after the
receipt by the Employee of written notice thereof from the Board specifying
with reasonable particularity such alleged violation; (iii) the commission by
the Employee of an act of fraud or theft against the Company or any of its
subsidiaries, or the Employee's willful misfeasance or willful malfeasance in
the performance of his duties to the Company; or (iv) the conviction of the
Employee of (or the plea by the Employee of nolo contendere to) any felony.
(b) TERMINATION UPON DEATH OR DISABILITY OF EMPLOYEE. This
Agreement shall terminate upon the disability (resulting from the Employee's
inability, due to physical or mental illness, to perform his duties hereunder
on a full-time basis for three consecutive months or an aggregate of 90 days)
or death of the Employee, in which event the Employee or his estate, legal
representatives or designee shall be entitled to receive, in full
satisfaction of all obligations due to the Employee by the Company hereunder,
an amount equal to one month's Salary.
(c) TERMINATION BY THE COMPANY WITHOUT CAUSE. In the event the
Company terminates this Agreement without Cause, the Employee shall be
entitled to the following benefits:
(i) The Company shall continue to pay the Employee the
Employee's Salary for the remaining period of the Term; and
(ii) The Company shall maintain in effect for the Employee for
the remaining period of the Term, at its sole expense and on terms of
participation substantially the same as those in effect prior to such
termination, all group insurance and all other employee benefit plans,
programs or arrangements, in which the Employee was participating immediately
prior to such termination except for any revenue sharing programs based on
corporate performance.
(d) TERMINATION BY THE EMPLOYEE FOR CAUSE. The Employee may
terminate his employment hereunder for cause. Only the following shall
constitute "cause" for such termination: (i) failure of the Company to
continue the Employee in his
4
then current position during the term of this Agreement; (ii) a material
change by the Company in the nature or scope of the Employee's
responsibilities, title, authorities, powers, functions or duties from the
responsibilities, title, authorities, powers, functions or duties normally
exercised by an executive in the then current position in the Company, or
(iii) a material breach by the Company of Section 3 hereof or of any other
provision of this Agreement; which failure, change or breach continues for
more than fifteen (15) days following written notice given by the Employee to
the Company, such written notice to set forth in reasonable detail the nature
of such failure, change or breach. In such event the Company shall continue
to provide compensation and benefits in accordance with Sections 9(c)(i) and
(ii).
10. INDEMNIFICATION. To the fullest extent permitted by law and in
addition to any other rights permitted or granted under the Company's
articles of incorporation, by-laws, or any agreement or policy of insurance,
or by law, the Company shall indemnify the Employee if the Employee is made a
party, or threatened to be made a party, to any threatened, pending or
contemplated action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that the Employee is
or was an employee, officer or director of the Company or any subsidiary of
the Company, in which capacity the Employee is or was serving at the
Company's request, against any and all costs, losses, damages, judgments,
liabilities and expenses (including reasonable attorneys' fees) which may be
suffered or incurred by him in connection with any such action, suit or
proceeding provided, however that, there shall be no indemnification in
relation to matters as to which the Employee is adjudged to have been guilty
of fraud, bad faith or gross negligence or as a result of the Employee's
material breach of this Agreement.
11. IDEAS AND INVENTIONS. Employee agrees to, and does hereby, assign
to the Company all of Employee's right, title and interest in and to any and
all ideas, concepts, know-how, techniques, processes, inventions,
discoveries, developments, works of authorship, innovations and improvements
("Inventions") conceived or made by Employee, prior to or during the term of
this Agreement, whether alone or with others, whether patentable or not, that
relate to or are connected with the Business.
12. ENTIRE AGREEMENT AND WAIVER. This Agreement is the entire
agreement between the parties with respect to the subject matter hereof and
supersedes any and all prior or contemporaneous oral and prior written
agreements and understandings. There are no oral promises, conditions,
representations, understandings, interpretation or terms of any kind or
condition or inducements to the execution hereof or in effect among the
parties. No custom or trade usage, nor course of conduct among the parties,
shall be relied upon to vary the terms hereof. This Agreement may not be
amended, and no provision hereof shall be relied upon to vary the terms
hereof. This Agreement may not be amended, and no provision hereof shall be
waived, except by writing signed by all the parties to this Agreement, which
states that it is intended to amend or waive a provision of this Agreement.
Any waiver of any rights or failure to act in a specific instance shall
relate only to such instance and shall not be construed as an agreement to
waive any rights or fail to act in any other instance, whether or not similar.
13. SEVERALITY. Should any provision of this Agreement be
unenforceable or prohibited by any applicable law, this Agreement shall be
considered divisible as to such
5
provision which shall be inoperative, and the remainder of this Agreement
shall be valid and binding as though such provision were not included herein.
14. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original. It shall not
be necessary when making proof of this Agreement to account for more than one
counterpart.
15. HEADINGS. All headings in this Agreement are for convenience only
and shall not affect the meaning of any provision hereof.
16. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of, and be binding upon, the Company and any corporation with which the
Company merges or consolidates or to which the Company sells all or
substantially all of its assets, and upon the Employee and his executors,
administrators, heirs and legal representatives. This Agreement may not be
assigned by the Employee.
17. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Massachusetts, without
reference to the conflict of laws principles thereof.
18. NOTICES. All notices hereunder shall be in writing and shall be
sent to the parties at the following addresses:
If to Company:
Brimfield Precision, Inc.
c/o Image Guided Technologies, Inc.
5710-B Flatiron Parkway
Boulder, CO 80301
If to Employee:
_____________________________
_____________________________
_____________________________
and shall be deemed received by the recipient when personally delivered or,
if mailed, three (3) days after the date of deposit in the United States
Mail, certified or registered, postage prepaid. Either party hereto may
change its or his address for notices by notice to the other party as above
provided.
6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
COMPANY: EMPLOYEE:
Brimfield Precision, Inc.
By: /s/ William G. Lyons
----------------------------- ------------------------------------
William G. Lyons
7
EXHIBIT E
STOCKHOLDERS' COUNSEL'S OPINION
1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Massachusetts and has
all corporate power and authority necessary to enable it to own, lease and
otherwise hold its properties and assets and to carry on its business as now
conducted. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each state where the character of the
property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to
be so qualified would not have a material adverse effect upon the financial
condition, results of operations, business, properties, assets or operations
of the Company.
2. The Agreement has been duly executed and delivered by the
Stockholders and constitutes the valid and binding obligation of the
Stockholders enforceable against the Stockholders in accordance with its
terms, subject to limitations on enforceability under normal principles of
equity and by applicable bankruptcy, insolvency, reorganization, moratorium,
and other similar laws of general application affecting the rights of
creditors generally.
3. Neither the execution, delivery and performance by the Stockholders
of the Agreement nor the consummation of the transactions contemplated
thereby will (i) contravene or conflict with the Articles of Incorporation or
Bylaws of the Company, (ii) contravene or conflict with or constitute a
violation of any provision of any law, rule or regulation, or any judgment,
injunction, order or decree known to such counsel, that is currently in
effect and binding upon or applicable to the Stockholders or the Company, or
(iii) to such counsel's knowledge, require any consent, approval or other
action by any Person, or contravene or conflict with or constitute a
violation of or a default under any material agreement, contract, indenture,
lease or other instrument binding upon the Stockholders or the Company or its
assets.
4. The authorized capital stock of the Company consist of _________
shares of Common Stock, par value $___ per share. All issued and outstanding
shares of the Company's Common Stock are validly issued, fully paid and
nonassessable, and have not been issued in violation of any preemptive, first
refusal or other subscription rights of any stockholder of the Company or any
other person. Except as set forth on SCHEDULE 3.1 of the Disclosure Letter,
there are no outstanding (i) shares of capital stock or other voting
securities of the Company, (ii) securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company,
or (iii) options, warrants, exchange rights, subscription rights, preemptive
or other agreements, commitments or rights to purchase or otherwise acquire
from the Company, or agreements, commitments or obligations of the Company to
issue or sell, any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of the Company.
5. To such counsel's knowledge, there is no action, suit,
investigation or proceeding pending against or threatened against or
affecting, the Company or any of its properties or assets before any court or
arbitrator or any Governmental Entity. Except as set forth in Section 3.19
of the Disclosure Schedule, to such counsel's knowledge, the Company is not
subject to any judgment, order or decree entered in any lawsuit or proceeding
or issued by any Governmental Entity.
Very truly yours,
/s/ illegible signature
-----------------------------------
Michael P. Angelini
MPA: cms
-2-
EXHIBIT F
BUYER'S COUNSEL'S OPINION
1. Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Colorado and has all corporate power
and authority necessary to enable it to own, lease or otherwise hold its
properties and assets and to carry on its business as now conducted.
2. The Agreement has been duly authorized, executed and delivered by
Buyer and constitutes the valid and binding obligation of Buyer enforceable
against Buyer in accordance with its terms, subject to limitations on
enforceability under normal principles of equity and by applicable
bankruptcy, insolvency, reorganization, moratorium, and other similar laws of
general application affecting the rights of creditors generally.
3. Neither the execution, delivery and performance by Buyer of the
Agreement nor the consummation of the transactions contemplated thereby will
(i) contravene or conflict with the Articles of Incorporation or By-laws of
the Buyer, (ii) contravene or conflict with or constitute a violation of any
provision of any law, rule or regulation, or any judgment, injunction, order
or decree known to such counsel, that is currently in effect and binding upon
or applicable to Buyer, or (iii) to such counsel's knowledge, require any
consent, approval or other action by any Person, or contravene or conflict
with or constitute a violation of or a default under any provision of any
material agreement, contract, indenture, lease or other instrument binding
upon Buyer.
4. The shares of Buyer Common Stock issued and exchanged for the
Shares have been duly authorized, and when issued and delivered in
accordance with the terms of the Agreement, will be validly issued,
fully paid and nonassessable.
This opinion is subject to the exception that prohibition against oral
modification or modification by course of conduct may be unenforceable.
In rendering this opinion, we have relied, as to matters of fact, on the
representations and warranties contained in the Agreement, on Buyer's Closing
Certificate and on statements of governmental officials and officers of Buyer.
Very truly yours,
IRELAND, STAPLETON, PRYOR & PASCO, P.C.
By: /s/ William E. Tanis
---------------------------
Vice President
-2-