Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT is made as of August 6, 1998 (this
"Agreement"), by and among (i) VISION SCIENCES, INC., a Delaware Corporation
("VSI"), (ii) 3DV SYSTEMS LTD., a company organized under the laws of the State
of Israel ("3DV"), and (iii) RDC ▇▇▇▇▇▇ DEVELOPMENT CORPORATION LTD., a company
organized under the laws of the State of Israel ("RDC"). 3DV, VSI and RDC are
each referred to in this Agreement as a "Party" and collectively as the
"Parties."
Recitals:
A. The Parties desire to enter into a joint venture
relationship, on the terms and conditions described herein, to allow each party
to participate in the other party's growth and to engage in activities for the
mutual benefit and reward of each party;
B. 3DV wishes to sell and VSI wishes to purchase an interest
in 3DV's business, through the acquisition of certain shares of 3DV, together
with the right to purchase additional shares of 3DV, on the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein, the Parties agree as follows.
1. Definitions.
"3DV" has the meaning set forth in the preamble above.
"Affiliate" means with respect to a Person, any other Person
controlling, controlled by, or under common control with such Person, and
"control" shall mean the ownership of a majority of the equity of such Person or
the ability to appoint or elect a majority of the governing board or to appoint
the management of such Person.
"Approved Assigns" has the meaning set forth in the License and
Manufacturing Agreement.
"Acquired Shares" means 354.167 duly authorized, issued and outstanding
new ordinary shares, par value NIS 0.01 per share, of the share capital of 3DV,
entitled to such rights, terms and privileges as set forth in the Memorandum and
Articles of Association of 3DV, and represent twenty-five percent (25%) of all
the issued and outstanding shares of the fully diluted share capital of 3DV.
"Closing" has the meaning set forth in Section 2.4 below.
"Closing Date" has the meaning set forth in Section 2.4 below.
"Copyrights" has the meaning set forth in the definition of
Intellectual Property below.
"Disclosure Schedule" means the disclosure schedule accompanying this
Agreement and initialed by the Parties, which shall be arranged in schedules
corresponding to the numbered section and paragraph references contained in this
Agreement.
"Employee" means a person employed by 3DV.
"Employee Pension Benefit Plan" means and includes where applicable any
plan or arrangement, including any agreement, whether arising by statute or
otherwise under or pursuant to which 3DV has or could have any liability,
payment or obligation to any employee or consultant of 3DV or to any person or
group of persons performing services to 3DV or on its behalf.
"Environmental Requirements" shall mean all Israeli statutes,
regulations and ordinances concerning pollution or protection of the
environment, including all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control or cleanup of any hazardous materials, substances or wastes, as
such requirements are enacted on or prior to and in effect on the Closing Date.
"Exercise Notice" has the meaning set forth in Section 3.1(b) below.
"Financial Statements" has the meaning set forth in Section 4.5 below.
"GAAP" means Israeli generally accepted accounting principles as in
effect from time to time, consistently applied.
"Indemnitee" has the meaning set forth in Section 8.3 below.
"Indemnitor" has the meaning set forth in Section 8.3 below.
2
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
"Intellectual Property" means any and all rights of 3DV or its
Affiliates, anywhere in the world, with respect to patents, trade secrets,
copyrights, mask work rights and other proprietary rights, regardless whether
such rights exist as of the Closing Date or the Second Closing Date, including,
without limitation (i) any foreign or United States patents and patent
applications, including any divisions, continuations, continuations-in-part,
substitutions or reissues thereof, whether or not patents are issued on such
applications, owned by or licensed to 3DV or in which 3DV has any right, title
or interest (the foregoing in this clause (i) hereinafter referred to as
"Patents"), (ii) any foreign or United States trademarks, service marks, trade
dress, trade names, brand names, corporate names, logos, service marks, and all
registrations and applications for registration thereof of 3DV (the foregoing in
this clause (ii) hereinafter referred to as "Trademarks"), and (iii) any foreign
or United States copyright registrations and applications for registration
thereof of 3DV (the foregoing in this clause (iii) hereinafter referred to as
"Copyrights"), and (iv) any source code, object code, documentation,
modifications, upgrades, enhancements, and interfaces owned by 3DV or that 3DV
has the right to use, sell or distribute subject to the terms of such rights.
"Knowledge" of any Person means, the actual knowledge of any of the
executive officers of such Person.
"License and Manufacturing Agreement" means that certain License and
Manufacturing Agreement, dated as of the date hereof, between VSI and 3DV.
"Lien" means any mortgage, pledge, lien, encumbrance, charge or other
security interest.
"Loss" means any and all loss, cost, damage, judgment, claim,
liability, and expense (including reasonable attorneys' fees and disbursements),
but specifically excluding indirect, consequential or other special damages,
except that, in the case of an VSI Indemnifiable Claim, "Loss" shall include any
provable diminution in the value of the Acquired Shares, the value of,
represented by the purchase price for, such Acquired Shares as a result of a
breach of any of the representations and warranties made by 3DV in Section 5 of
this Agreement.
"Material Adverse Effect" means a material adverse effect on the
assets, financial condition or results of operations of 3DV.
"Notice of Claim" has the meaning set forth in Section 8.3 below.
"Option Period" means the period [**].
"Party" and "Parties" have the meanings set forth in the preface above.
"Patents" has the meaning set forth in the definition of Intellectual
Property above.
3
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a limited liability company, a trust, a
joint venture, an unincorporated organization or a government entity (or any
department, agency or political subdivision thereof).
"Put/Call Right" has the meaning set forth in Section 3.1, below.
"RDC Shares" means shares of the capital stock of 3DV other than the
Acquired Shares, representing 850,000 duly authorized, issued and outstanding
ordinary shares, par value NIS 0.01 per share, of the share capital of 3DV,
entitled to such rights, terms and privileges as set forth in the Memorandum and
Articles of Association of 3DV, and represent ing, after giving effect to the
issuance of the Acquired Shares as contemplated hereunder, sixty-percent (60%)
of all the issued and outstanding shares of the fully diluted share capital of
3DV. After the Closing, the Acquired Shares and the RDC Shares shall represent
all of the issued and outstanding voting shares of 3DV.
"Right of First Refusal" has the meaning set forth in Section 3.3,
below.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Tax" means any foreign, federal, state, or local income, sales, use,
transfer, excise, value added, registration, severance, stamp, occupation,
customs, duties, real property, personal property, capital stock, social
security, unemployment, disability, payroll or employee withholding, including
any interest, penalty, or addition thereto, including any interest, penalty, or
addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8.3 below.
"Trademarks" has the meaning set forth in the definition of
Intellectual Property above.
"VSI" has the meaning set forth in the preface above.
"VSI Shares" means 500,000 duly issued, fully paid and non-assessable
shares of the common stock of VSI, par value $0.01 per share.
4
2. Purchase and Sale of 3DV Shares.
2.1 Purchase and Sale of 3DV Shares. On the terms and subject to the
conditions set forth in this Agreement, VSI subscribes for and agrees to
purchase and accept from 3DV, and 3DV agrees to issue, sell and deliver the
Acquired Shares to VSI, free and clear of all liens, claims and encumbrances and
other rights of third parties whatsoever.
2.2 Purchase Price for Acquired Shares. The purchase price payable by
VSI to 3DV for the Acquired Shares acquired hereunder shall be US$3,000,000 (the
"Purchase Price"), payable in lawful currency of the United States on the
Closing Date by VSI in the manner provided in Section 2.5 below.
2.3 Issuance of VSI Shares. In consideration of the other rights and
benefits granted under Section 3. VSI shall issue and deliver the VSI Shares to
RDC, free and clear of all liens, claims and encumbrances and other rights of
third parties whatsoever. The certificates issued to RDC shall bear the legend
described in Section 5.21 below. RDC agrees that it shall not sell, assign,
transfer or otherwise dispose of the VSI Shares until the first anniversary of
the Closing Date, except with the prior written consent of VSI, which shall not
be unreasonably withheld, and except that RDC shall be entitled to assign its
rights in and to VSI Shares to employees of 3DV who agree to hold any VSI Shares
according to such restriction.
2.4 The Closing. The closing of the transactions contemplated by this
Article 2 (the "Closing") shall take place at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, commencing at 10:00 a.m. New York City time
on the later of August 17, 1998 or the date that the conditions to closing
described in Section 2.5 have been satisfied, or alternatively at such other
time and place as the parties may mutually agree. Either party may terminate
this Agreement if the Closing shall not have occurred on or before September 10,
1998 other than as a result of such party's breach of this Agreement.
2.5 Conditions to Closing. The obligation of VSI to consummate the
transactions contemplated by this Agreement are subject to the delivery to and
acceptance by VSI of the disclosure schedules (the "Disclosure Schedules") to
this Agreement, including without limitation the Disclosure Schedules referred
to in Section 5 of this Agreement, which 3DV shall deliver to VSI on or before
August 13, 1998 or as soon as practicable thereafter. VSI shall have five (5)
days following receipt to accept or reject such Disclosure Schedules based on
the matters disclosed thereon. The respective obligations of each of the parties
to consummate the transactions contemplated by this Agreement shall be subject
to the following additional conditions: (a) the representations and warranties
of the other party set forth in Section 5 or 6 shall be true and correct in all
material respects on and as of the closing date as though made on the closing
date, (b) each of the other parties shall have complied with the obligations of
such other party under this Agreement, (c) the receipt by such party of all
deliveries to be made to such party pursuant to Section 2.6, and (d) all
governmental consents
5
and approvals necessary to consummate the transactions contemplated hereby shall
have been obtained and be in full force and effect.
2.6 Deliveries at the Closing.
At the Closing
(a) 3DV shall deliver or cause to be delivered to VSI, a duly
issued and executed stock certificate, representing the Acquired Shares being
acquired by VSI hereunder;
(b) VSI shall deliver or cause to be delivered to 3DV the
Purchase Price by payment of an amount equal to the Purchase Price (less
$500,000 previously received by 3DV as an advance and which will be credited to
the payment of the Purchase Price hereunder), in cash and in lawful currency of
the United States by a wire transfer of immediately available funds to an
account designated by 3DV on Exhibit hereto;
(c) VSI shall deliver to RDC a duly issued and executed stock
certificate, representing the VSI Shares granted to RDC, as set forth below;
(d) VSI and 3DV shall execute and deliver the License and
Manufacturing Agreement;
(e) 3DV and RDC shall deliver to VSI an opinion of legal
counsel for 3DV and RDC, which is reasonably customary for transactions of the
type contemplated by this Agreement; and
(f) VSI shall deliver to 3DV an opinion of legal counsel for
VSI, which is reasonably customary for transactions of the type contemplated by
this Agreement.
3. Purchase and Sale of RDC Shares.
3.1 Put/Call Right. (a) At any time during the Option Period, VSI shall
have the right to acquire from RDC, and RDC shall have the right to sell to VSI,
the RDC Shares on the terms and conditions described herein. The purchase price
for the RDC Shares shall be equal to 60% of the fair market value of the
business of 3DV (determined on a going concern basis, but the License and
Manufacturing Agreement and the Agreement between AOC and 3DV shall be valued
fairly to 3DV for this purpose) and determined by consent between the Boards of
Directors of VSI, on the one hand, and RDC, on the other hand, to be fair from a
financial point of view to their respective companies; provided that in no event
shall RDC be
6
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
required to sell the RDC Shares based on a valuation of 3DV less than (US) [**].
In the event that the parties shall be unable to reach a consensus on the
valuation of 3DV, the matter shall be submitted to an internationally recognized
investment bank operating in Israel for determination of the fair market value
of the business of 3DV by such investment bank. The purchase price payable for
the purchase and sale of the shares shall be paid in cash, or, in the event that
the average daily closing price of the common stock of VSI on NASDAQ over the 20
trading day period preceding the closing date shall be at least [**] per share,
and, at the election of VSI, a portion of the purchase price (as shall be agreed
between VSI and the Shareholders) shall be paid in common stock of VSI with a
value (based on the average 45 day prior trading value of such common stock)
equal to such portion of the purchase price.
If RDC requests, VSI will acquire shares of capital stock of 3DV held by
employees of 3DV on the same terms and conditions that VSI shall acquire the RDC
Shares. VSI's right to require RDC to sell the RDC Shares and RDC's right to
require VSI to purchase the RDC Shares is referred to herein as the "Put/Call
Right."
(b) The Put/Call Right may be exercised by either VSI or RDC
at any time during the Option Period , by delivering a written notice (an
"Exercise Notice") of such Party's desire to exercise the Put/Call Right and
initiate the procedures described on Schedule 3.1.
3.2 Purchase Price for RDC Shares. The purchase price for the RDC
Shares (the "Put/Call Price") determined pursuant to Section 3.1 shall be
payable by VSI to RDC (or its assigns) in lawful currency of the United States
on the Second Closing Date in the manner provided in Section 3.4 below.
3.3 The Second Closing. The closing of the transactions contemplated by
this Article 3 (the "Second Closing") shall take place subject to the
satisfaction of the conditions to closing set forth in Section 3.5 below and the
compliance with the other terms of this Agreement, at the offices of ▇▇▇▇▇▇ &
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, commencing at 10:00 a.m. New York
City time on the next business day following the later of thirty days after (1)
the delivery by either party of the Exercise Notice, or (2) three (3) business
days following the satisfaction of the conditions to the obligations of RDC or
VSI; provided that either Party shall have the right to terminate this Agreement
if the conditions to such Party's obligations set forth in Section 3.5 below
have not been satisfied on or before 120 days following the delivery of the
Exercise Notice.
3.4 Deliveries at the Second Closing.
At the Second Closing
7
(a) RDC shall deliver or cause to be delivered to VSI, a duly
issued and executed stock certificate, representing and evidencing the RDC
Shares being acquired by VSI hereunder, together with a stock power duly
executed in blank and otherwise in a form required and sufficient to convey good
record and beneficial title to the RDC Shares to VSI (or its assigns), free and
clear of any liens, claims, encumbrances or rights of third parties of any
description whatsoever; and
(b) VSI shall deliver or cause to be delivered to RDC (for the
benefit of the Shareholders) the Put/Call Price by payment of an amount equal to
the Put/Call Price in cash and in lawful currency of the United States by a wire
transfer of immediately available funds to an account designated by RDC(for the
benefit of the Shareholders) at a bank located in Israel or the United States
and, if applicable in the form of VSI shares as provided in Section 3.1.
3.5 Conditions to Second Closing. (a) Conditions to VSI's Obligations.
The obligation of VSI to purchase the RDC shares following the exercise of the
Put/Call Right shall be subject to the satisfaction on or before the Second
Closing Date of the following conditions (each of which may be waived by VSI in
its sole discretion):
(i) the representations and warranties of RDC and 3DV set
forth in Section 5 below, as supplemented by written Disclosure Schedules
delivered to VSI at least ten (10) days prior to the Second Closing Date, shall
be true and correct in all respects, on and as of the Second Closing Date, as
though made on and as of the Second Closing Date;
(ii) each of RDC and 3DV shall have performed in all material
respects the covenants and agreements required to be performed by RDC or 3DV, as
the case may be (provided that VSI shall have promptly notified 3DV of any
breach or alleged breach of this Agreement by 3DV of which VSI becomes aware);
(iii) any consent, approval, license or other authorization
from any governmen tal or administrative authority under any applicable law
shall have been obtained and be in full force and effect on and as of the Second
Closing Date;
(iv) except for any of the foregoing events or conditions
which were known to 3DV and disclosed prior to and taken into account in the
determination of the Put/Call Price, there shall not have occurred or be
pending or threatened any material adverse event or condition which has had or
could reasonably be expected to have a material adverse effect on the business,
assets, financial condition, prospects or results of operations of 3DV since the
date of this Agreement, and no claim, legal proceeding, action or investigation
shall be pending or threatened which challenges the validity of, or would
interfere with, any of the transactions contemplated hereby or under the License
and Manufacturing Agreement;
8
(v) the License and Manufacturing Agreement shall be in full
force and effect and 3DV shall not have defaulted in any material respect in the
performance of any of its obligations to VSI thereunder (provided that VSI shall
have promptly notified 3DV of any breach or alleged breach of this Agreement by
3DV of which VSI becomes aware); and
(vi) VSI shall have received an opinion of legal counsel to
3DV and RDC, which is reasonably customary in transactions of this type, to the
effect that the RDC Shares are duly authorized, issued and outstanding ordinary
shares of 3DV, representing 75% of the issued and outstanding share capital of
3DV, and that the transaction undertaken at the Second Closing shall be
sufficient to convey good record and beneficial title to the RDC Shares to VSI,
free and clear of any liens, claims, encumbrances or rights of third parties of
any description whatsoever.
(b) Conditions to RDC's Obligations. The obligation of RDC to
sell the RDC shares following the exercise of the Put/Call Right shall be
subject to the satisfaction on or before the Second Closing Date of the
following conditions (each of which may be waived by RDC in its sole
discretion):
(i) if and to the extent that the Put/Call Price is to be paid
by VSI in part in the form of VSI shares of common stock, then the
representations and warranties of VSI set forth in Section 6 below shall be true
and correct in all respects, on and as of the Second Closing Date, as though
made on and as of the Second Closing Date;
(ii) VSI shall have performed in all material respects the
covenants and agreements required to be performed by VSI;
(iii) any consent, approval, license or other authorization
from any governmen tal or administrative authority under any applicable law
shall have been obtained and be in full force and effect on and as of the Second
Closing Date;
(iv) if and to the extent that the Put/Call Price is to be
paid by VSI in part in the form of VSI shares of common stock, except for any of
the foregoing events or conditions which were known and disclosed prior to and
reflected in the market price of the VSI shares, then there shall not have
occurred or be pending or threatened any material adverse event or condition
which could reasonably be expected to have a material adverse effect on the
business, assets, financial condition, prospects or results of operations of
VSI, and no claim, legal proceeding, action or investigation shall be pending or
threatened which challenges the validity of, or would interfere with, any of the
transactions contemplated hereby;
(v) the License and Manufacturing Agreement shall be in full
force and effect and VSI shall not have defaulted in any material respect in the
performance of any of its obligations to 3DV thereunder (provided that 3DV shall
have promptly notified VSI of any breach or alleged breach of this Agreement by
VSI of which 3DV becomes aware); and
9
(vi) if and to the extent that the Put/Call Price is to be
paid by VSI in part in the form of VSI shares of common stock, then RDC shall
have received an opinion of legal counsel to VSI, in form and substance
reasonably satisfactory to RDC, to the effect that such VSI shares are duly
authorized, issued and outstanding common shares of VSI, and that the
transaction undertaken at the Second Closing shall be sufficient to convey good
record and beneficial title to such VSI Shares to RDC, free and clear of any
liens, claims, encumbrances or rights of third parties of any description
whatsoever.
(c) Best Efforts to Satisfy Conditions. Each of ▇▇▇, ▇▇▇ and
RDC shall at all times prior to the expiration of the Option Period use its best
efforts to ensure that each of the conditions to its obligations have been and
will be duly and validly satisfied on the Second Closing.
3.6 No Competing Transactions. Each of 3DV and RDC agree that prior to
the expiration of the Option Period it will not enter into any agreements,
understanding, arrangement or negotiations with any third party, or otherwise
subject any of the business or assets of 3DV to any claims or rights of third
parties, that are inconsistent with or otherwise conflicts with the rights of
VSI under this Section 3. Without limiting the generality of the foregoing, RDC
agrees until the expiration of the Option Period not to transfer, assign,
convey, pledge or otherwise dispose of any of the RDC Shares or any right or
interest in or to the RDC Shares, including any beneficial right or interest in
or to the RDC Shares or any proceeds thereof.
4. Additional Post-Closing Covenants.
4.1 Right Of First Refusal. If the Put/Call Right shall not be
exercised, then for a period of six months following the expiration of the
Option Period, VSI shall have a right of first refusal with respect to (i) any
proposed sale of shares of 3DV by RDC, (ii) any proposed sale or other issuance
of 3DV shares by 3DV, or (iii) any proposed debt or equity financing by 3DV (a
"Right of First Refusal").
4.2 Budgets and Capital Support.
(a) On or before December 31, 1998, VSI and 3DV shall work
together in good faith to prepare and agree upon a detailed budget for 3DV for
3DV's fiscal year ending December 31, 1999 (the "1999 Budget"). VSI agrees that
upon approval of the 1999 Budget by the Board of Directors of each of VSI and
3DV, VSI shall advance or otherwise secure any funds as and when needed to
finance any shortfall in the working capital requirements of 3DV as set forth in
the 1999 Budget (the "1999 Advanced Funds").
10
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
(b) On or before December 1999, VSI and 3DV shall work
together in good faith to prepare and agree upon on a detailed budget for 3DV
for 3DV's fiscal year ending December 31, 2000 (the "2000 Budget"). VSI agrees
that upon approval of the 2000 Budget by the Board of Directors of each of VSI
and 3DV, VSI shall advance or otherwise secure any funds as and when needed to
finance any shortfall in the working capital requirements of 3DV as set forth in
the 2000 Budget for any period covered by the 2000 Budget that relates to the
period prior to November 15, 2000 (the "2000 Advanced Funds").
(c) In the event that the parties do not agree in a timely
fashion on the 1999 Budget or the 2000 Budget, then 115% of the budget or
operating statement for the immediately preceding fiscal year shall be the
effective operating budget for purposes of determining VSI's finance obligations
with respect to working capital shortfalls.
4.3 Issuance of Capital Notes.
(a) Against the 1999 Advanced Funds and the 2000 Advanced Funds 3DV
shall issue to VSI non-interest bearing, redeemable capital notes (the "Capital
Notes") which shall be convertible into ordinary shares of 3DV if the Put/Call
Rights are not exercised by either 3DV or VSI. If the Put/Call Right is not
exercised, the conversion price of the Capital Notes shall be based upon the
valuation of the first purchase of 3DV shares for an aggregate consideration of
at least [**] by any third party investor unaffiliated with any of the parties
in a bona fide, arms'-length transaction subsequent to the date of the
expiration of the Option Period.
4.4 Appointments to 3DV Board of Directors.
(a) From and after the Closing Date, and so long as VSI owns at least
seventy-five percent (75%) of the Acquired Shares, each of RDC and VSI shall
vote its RDC Shares and its Acquired Shares, respectively, and any other voting
securities of 3DV over which VSI or 3DV have voting control, and shall each take
all other reasonably necessary or desirable actions within each of its control
(whether in its capacity as a shareholder or otherwise, and including without
limitation attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings), and
3DV shall take all reasonably necessary and desirable actions within its control
(including without limitation calling special board and shareholder meetings),
so that:
(i) the authorized number of directors on the Board of
Directors shall consist of no more than 5 members, and no action shall be taken
which might cause any increase or decrease in the size of the Board of Directors
until the expiration of the Put/Call Right; and
11
(ii) ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ shall be elected
as members of the Board of Directors of 3DV, or such other two persons as may be
designated by VSI.
4.5 Shareholder Approval.
(a) Until the expiration of the Put/Call Right and the Right of First
Refusal, and so long as VSI owns at least seventy-five percent (75%) of the
Acquired Shares, all actions with respect to the following matters shall not be
taken by or on behalf of 3DV unless approved by holders of voting securities of
3DV representing at least of 80% of the outstanding voting shares of 3DV:
(i) the declaration or payment of any dividend or distribution in
respect of the securities of 3DV;
(ii) any amendment to the Memorandum and Articles of Association of
3DV;
(iii) any merger or consolidation of 3DV, any sale of all or
substantially all or of any material portion of 3DV's assets or properties of
3DV or the acquisition by 3DV of any other material business or the acquisition
of material assets outside the ordinary course of business of 3DV;
(iv) any fundamental change in the scope or nature of the business
of 3DV;
(v) the commencement of any initial public offering of 3DV's
securities;
(vi) any incurrence of indebtedness (including the issuance of any
guaranties), or the creation or imposition of any liens, mortgages or
encumbrances upon any assets or properties of 3DV securing indebtedness or
providing guaranties for or pledging 3DV's assets as collateral for indebtedness
of unaffiliated third parties;
(vii) any transaction, contract or commitment involving an Affiliate or
a shareholder of 3DV (other than subsidiaries of 3DV);
(viii) the commencement of any bankruptcy or insolvency proceeding,
liquidation or voluntary reorganization, or the taking of any corporate action
in furtherance thereof;
(ix) the issuance of any shares of capital stock or securities of
3DV; or
(x) any agreement or commitment to do any of the foregoing, or any
material amendment to, modification of or addition to any agreement or action
previously approved pursuant to this subsection.
12
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
4.6 Observer Rights. Until the expiration of the Put/Call Rights and
the Right of First Refusal, VSI shall allow 3DV to designate a representative to
attend and observe all meetings of the board of directors of VSI.
4.7 Put/Call Price Adjustment Rights. In the event that VSI shall
acquire the shares of 3DV from the Shareholders pursuant to the Put/Call Right
and in the event that within a period of twelve months after the Second Closing
VSI shall sell substantially all the shares of 3DV or the assets of 3DV (whether
by merger or otherwise) to a third party for an aggregate price per share (or
equivalent price in the event of an asset sale) equal to more than [**] of the
Put/Call Price, then VSI shall pay to the Shareholders an amount equal to 10% of
such excess amount paid to such third party above the Put/Call Price.
5. Representations and Warranties of 3DV. 3DV, represents and warrants to VSI
as follows, except as such representations or warranties are qualified by
matters identified on the Disclosure Schedules to this Agreement:
5.1 Organization; Capitalization. (a) 3DV is a corporation duly
organized and validly existing under the laws of the State of Israel. 3DV is
duly authorized to conduct business and is in good standing under the laws of
each jurisdiction where conducts business. 3DV has full corporate power and
authority to carry on the business in which it is engaged and to own and use the
properties owned and used by it. Schedule 5.1 of the Disclosure Schedule sets
forth for 3DV the number of shares of authorized share capital of each class of
its share capital, the number of issued and outstanding shares of each class of
its capital stock, the number of shares of its share capital held in treasury,
and the names of its duly elected directors and officers. True and correct
copies of the memorandum of association and articles of association, or any
other similar organizational and constituting documents of 3DV, as amended, have
been delivered to VSI and will be delivered to VSI at the Closing and the Second
Closing.
(b) All of the issued and outstanding shares of share capital
of 3DV have been duly authorized and are validly issued, fully paid and
nonassessable. The Acquired Shares to be issued and sold by 3DV to VSI hereunder
have been duly authorized and, when issued and delivered to VSI against payment
therefor as provided by this Agreement, will be validly issued, fully paid and
nonassessable.
(c) Except as set forth in Schedule 5.1(c) of the Disclosure
Schedule or this Agreement there are no outstanding or authorized options,
warrants, put rights, call rights, purchase rights, subscription rights,
conversion rights, exchange rights, stock appreciation rights, phantom stock
rights or other rights (contingent or other) that could require 3DV to sell,
transfer or otherwise dispose of any share capital of 3DV, and there are no
outstanding
13
commitments of 3DV to issue any shares, warrants, options or other such rights
that may cause to become outstanding any of its own share capital or to
distribute any evidences of indebtedness or assets to holders of any class of
its share capital. 3DV has no contingent or other obligation to purchase, redeem
or otherwise acquire any shares of its capital stock or any interest therein or
to pay any dividend or make any other distribution in respect thereof (other
than as contemplated by this Agreement). Except as contemplated by this
Agreement, the issuance, sale and delivery of the Acquired Shares issuable under
this Agreement are not subject to any preemptive rights of stockholders of 3DV
or to any right of first refusal or other similar right in favor of any person.
Except as contemplated by this Agreement, neither 3DV or RDC with respect to the
shares of 3DV is a party to any voting agreement, voting trust, proxy or similar
agreement, arrangement or understanding relating to its capital stock, other
than any of the foregoing that are pursuant to agreements or understandings to
be cancelled on or before the Closing, and 3DV is not a party to any agreement,
arrangement or understanding relating to or providing for registration rights
with respect to its share capital.
5.2 Authorization of Transaction. 3DV has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder, including the execution and delivery of the License and Manufacturing
Agreement and the issuance and delivery of the Acquired Shares. The execution,
delivery and performance by 3DV of this Agreement and the License and
Manufacturing Agreement, and the consummation by 3DV of the transactions
contemplated hereby and thereby, have been duly authorized by 3DV and no other
corporate action on the part of 3DV is necessary to authorize the execution and
delivery by 3DV of this Agreement and the License and Manufacturing Agreement
and the consummation by it of the transactions contemplated hereby and thereby.
This Agreement and the License and Manufacturing Agreement have been duly
executed and delivered by 3DV and constitute the valid and legally binding
obligations of 3DV, enforceable against 3DV in accordance with their respective
terms and conditions.
5.3 No Conflict. Neither the execution and the delivery of this
Agreement, the issuance and delivery of the Acquired Shares, the execution of
the License and Manufacturing Agreement, nor the consummation of the
transactions contemplated hereby or thereby, shall (i) violate any statute,
regulation, rule, injunction, judgment, order, decree or ruling of any
government, governmental agency or court to which 3DV is subject or any
provision of the charter or bylaws (or similar governing documents) of 3DV or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice under any material agreement, to which
3DV is a party or by which it is bound or to which its assets are subject, which
could reasonably be expected to have a Material Adverse Effect. 3DV is not
required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any government or governmental agency in
order for 3DV to consummate the transactions contemplated by this Agreement,
except as contemplated by this Agreement or set forth in Schedule 5.3 of the
Disclosure Schedule.
14
5.4 Brokers' Fees. 3DV has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
5.5 Financial Statements. (a) For purposes of this Agreement, the
term "Financial Statements" shall mean: (i) the audited consolidated balance
sheet as of December 31, 1997 (the "1997 Audited Balance Sheet") and the
related audited consolidated statements of income, shareholder's equity and
cash flows of 3DV, together with the notes thereto and report thereon of
independent public accountants, with respect to such accountants' review
thereof; and (ii) the unaudited consolidated balance sheets of 3DV as of June
30, 1998 recent interim date (the "Interim Balance Sheet") and the related
unaudited consolidated statements of income, shareholders' equity and cash
flows of 3DV for the 6 month period then ended, together with the notes
thereto. Exhibit A sets forth true and complete copies of the Financial
Statements.
(a) The Financial Statements present fairly the financial condition and
results of operations of 3DV as of their respective dates and for the periods
covered thereby, in conformity with GAAP applied on a consistent basis
throughout such periods.
(b) The books of account of 3DV are and, during the periods covered by
the Financial Statements were, and are, correct and complete in all material
respects, fairly and accurately reflect, reflected or will reflect the
consolidated income, expenses, assets and liabilities of 3DV taken as a whole,
including the nature thereof and the transactions giving rise thereto, and
provide or provided a fair and accurate basis for the preparation of the
Financial Statements.
5.6 Absence of Certain Developments. Except as otherwise contemplated
by this Agreement and except as reflected on the 1997 Balance Sheet, since the
date of the 1997 Balance Sheet, there has not been any material adverse change
in the properties, financial condition, or results of operations of 3DV. Without
limiting the generality of the foregoing and except as otherwise reflected on
the 1997 Balance Sheet, since the date of the 1997 Balance Sheet, 3DV has not:
(a) borrowed any amount or incurred or guaranteed or
otherwise become obligated to pay any material liabilities (including
performance bonds), except liabilities (other than indebtedness for borrowed
money) incurred in the under contracts entered into in the ordinary course of
business;
(b) mortgaged, pledged or subjected to any Lien any
material portion of its assets;
(c) sold, assigned, leased, transferred or disposed of or
abandoned any material portion of its properties or assets, including licenses
or sale of products embodying the Intellectual Property except in the ordinary
course of business;
15
(d) suffered any theft, damage, destruction or casualty loss
to any of its owned or leased properties or assets in excess of $100,000,
whether or not covered by insurance;
(e) made any material capital expenditures or commitments
therefor;
(f) declared, paid or made or set aside for payment or
distribution of any kind in respect of its capital stock of other securities, or
directly or indirectly retired, redeemed, purchased or otherwise acquired any
shares of capital stock of 3DV.
(g) issued, authorized or proposed the issuance of,
reclassified, or sold any shares of capital stock of any of 3DV, or securities
convertible into or exchangeable for, or rights, warrants or options to acquire
any such shares or other convertible securities or acquire any capital stock or
other securities or interests of any Person, or otherwise made a loan or advance
to or investment in any Person;
(h) made any material change in employment terms for any of
the key employees or officers or directors of 3DV; or
(i) committed to do any of the foregoing.
5.7 Undisclosed Liabilities. 3DV has no material liability (whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated and whether due or to become due), except for (i) liabilities set
forth on the Interim Balance Sheet (including any liabilities identified in the
notes thereto), (ii) liabilities under executory agreements, contracts, leases,
licenses and other arrangements listed in the Disclosure Schedule, (iii)
liabilities set forth in Schedule 5.7 of the Disclosure Schedule, and (iv)
liabilities that would not have a Material Adverse Effect.
5.8 Legal Compliance. (a) 3DV is in substantial compliance with all
applicable statutes, laws, ordinances, rules, orders and regulations of Israeli
government (and all agencies thereof). Since inception of 3DV, 3DV has not
received any written communication from any governmental authority that alleges
that 3DV is not in substantial compliance with any such foreign, federal, state
or local laws, rules or regulations.
(b) (i) No payments or inducements were made or given, directly or
indirectly, to any governmental officials in the jurisdictions in which 3DV
conducts its business, by 3DV or by any of its officers, directors, employees or
agents in connection with any opportunity, agreement, license, permit,
certificate, consent, order, approval, waiver or other authorization relating to
the business of 3DV, except for such payments or inducements as were lawful
under the written laws, rules and regulations of such jurisdictions.
(ii) Neither 3DV, nor any director, officer, agent, employee
or other person associated with or acting on behalf of 3DV, (A) has used any
corporate funds for any unlawful
16
contribution, gift, entertainment or other unlawful expense relating to
political activity; (B) made any direct or indirect unlawful payment to any
government official or employee from corporate funds; (C) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977; or (D)
made any bribe, unlawful rebate, payoff, influence payment, kickback or other
unlawful payment in connection with the business of 3DV.
(c) 3DV has all governmental licenses and permits or other
authorizations necessary to conduct its business as conducted on and prior to
the date of this Agreement and such licenses, permits and other authorizations
are in full force and effect, and no violation exists or has been recorded in
respect of any such licenses, permits or other authorizations, no proceeding is
pending seeking revocation or limitation of any such licenses, permits or other
authorizations.
5.9 Tax Matters. 3DV has filed all Tax Returns required to be
filed by it, and has paid all Taxes due and payable by it as and to the extent
reflected on such Tax Returns.
(b) Except as disclosed in Schedule 5.9 of the Disclosure Schedule, all
Taxes due and payable on or prior to the Closing Date in respect of all periods
prior to the Closing Date have been paid or accrued for on the books and records
of 3DV, except for any such Taxes that are either (i) being contested or
challenged in good faith or (ii) not in excess of the reserve for tax
liabilities reflected on the books and records of 3DV as adjusted through the
Closing Date in accordance and consistent with past custom and practices of 3DV.
10 Real Property.
(a) 3DV does not own any real property.
(b) Schedule 5.10(b) of the Disclosure Schedule sets forth all real
property leased or subleased and used (excluding premises of customers) by 3DV.
3DV has made available to VSI a true and correct copy of the leases and
subleases set forth in Schedule 5.10(b) of the Disclosure Schedule. Each lease
and sublease set forth in Schedule 5.10(b) of the Disclosure Schedule is valid,
binding, enforceable against 3DV and, to the Knowledge of 3DV, against the other
party thereto, and is in full force and effect in all material respects. With
respect to each such lease or sublease set forth in Schedule 5.10(b) of the
Disclosure Schedule, 3DV has exclusive possession of the leased or subleased
premises and 3DV has complied in all material respects with the terms of such
lease or sublease and is not in default or arrears with respect to the payment
of any rent or other amounts due under any such lease or sublease, and 3DV has
not received any current notice of default under any such lease or sublease.
5.11 Intellectual Property.
(a) 3DV owns or otherwise has the right to use all Intellectual
Property that is used in and necessary for the operation and conduct of the
business of 3DV as currently conducted and as to be conducted based on the
commitments of 3DV as of the date hereof
17
free and clear of all Liens and as of the Closing Date and have the right to
sell and distribute all Intellectual Property owned by 3DV and sold or
distributed by 3DV as part of 3DV's Imaging products.
(b) Schedule 5.11 of the Disclosure Schedule sets forth a list of all
Patents, Trademarks and Copyrights owned by 3DV or in which 3DV has any right to
use.
(c) None of the Intellectual Property is subject to any action, suit,
proceeding, order, hearing or claim that is pending, or to the Knowledge of 3DV,
threatened, which challenges the validity, disposition or use or ownership by
3DV of the Intellectual Property.
(d) 3DV has not received any written notice from any Person or given
any written notice to any Person alleging that any other Person is infringing
upon or otherwise violating the rights of 3DV in and to the Intellectual
Property. To the Knowledge of 3DV, no Person is infringing upon or otherwise
violating the rights of 3DV in and to the Intellectual Property.
(e) 3DV has not received any written notice from any Person alleging
that the use of the Intellectual Property by 3DV infringes upon or otherwise
violates the proprietary rights of such Person or any other Person. To the
Knowledge of 3DV, the use and disposition of the Intellectual Property in the
conduct of the business of 3DV does not infringe upon or otherwise violate the
proprietary rights of any other Person.
(f) Except for the License Agreement and as set forth in Schedule 5.11
of the Disclosure Schedule, 3DV is not a party to or bound by and, upon
consummation of the transactions contemplated by this Agreement, 3DV will be a
party to or bound by, any license or other agreement requiring the payment of
any royalty (excluding third party software generally commercially available).
(g) 3DV maintains and enforces a policy requiring its technical
personnel and officers to execute and deliver to 3DV a confidentiality agreement
on substantially the terms set forth in Schedule 5.11 of the Disclosure
Schedule. 3DV has taken such steps as are reasonable under the circumstances and
consistent with industry practices to preserve the legal protection for 3DV's
trade secret rights in the commercial Imaging products sold or distributed by
3DV.
5.12 Contracts.
(a) Schedule 5.12 of the Disclosure Schedule sets forth a complete list
of all material contracts, agreements or understanding involving any amount
greater than $50,000 (including any agreement providing for the performance of
any service by, for or on behalf of 3DV), and including, without limitation, any
agreement under which it has created, incurred, assumed or guaranteed any
indebtedness for borrowed money or any capitalized lease obligation.
18
(b) 3DV has made available to VSI a true and correct copy of each
written agreement set forth in Schedule 5.12 of the Disclosure Schedule. With
respect to each such agreement: (A) the agreement is legal, valid, binding and
enforceable against 3DV; (B) neither 3DV, nor to the Knowledge of 3DV, the other
party thereto, is in a breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default, permit
termination, modification or acceleration, or require indemnification, under the
agreement which could reasonably be expected to have a Material Adverse Effect;
and (C) 3DV has not repudiated any provision of the agreement.
5.13 Insurance. Schedule 5.13 of the Disclosure Schedule sets forth
each insurance policy issued by a third party maintained by or for the benefit
of 3DV. All such insurance policies are in full force and effect, and 3DV is not
in material default with respect to its obligations under any of such insurance
policies.
5.14 Litigation. Schedule 5.14 of the Disclosure Schedule sets forth
each instance in which any of 3DV (i) is subject to any outstanding judicial
injunction, judgment, order, decree or ruling in connection with which legal
process has been duly served upon any of 3DV or of which 3DV has Knowledge, or
(ii) is a party or, to the Knowledge of 3DV, is threatened to be made a party,
to any action, suit, proceeding, or hearing of, in or before any court or
administrative agency of any jurisdiction or before any arbitrator.
5.15 Employees. (a) (i) 3DV is not a party to nor is it bound by any
collective bargaining agreement, nor has it experienced any strike, slowdown,
stoppage, lockout or material dispute, grievance, or claim of unfair labor
practices or other collective bargaining dispute within the past three years;
(ii) to the Knowledge of 3DV, there are no current union organizing activities
among 3DV's employees; and (iii) 3DV has not received notice of the intent of
any government agency responsible for the enforcement of labor or employment
laws to conduct an investigation nor, to the Knowledge of 3DV, is any such
investigation in progress. As of the date of this Agreement, 3DV believes that
3DV's employee relations are satisfactory. Schedule 5.15 sets forth a complete
list of all persons (including their personal holding companies) employed by 3DV
or performing consulting services on a regular basis for or on behalf of 3DV or
otherwise receiving any form of compensation from or on behalf of 3DV.
5.16 Employee Benefits. (a) Schedule 5.16 of the Disclosure Schedule
sets forth all of the current Employee Benefit Plans and all other employee
benefit, fringe benefit plans and programs maintained or contributed to by 3DV
with respect to current or former employees of 3DV (collectively, the "Plans").
3DV has provided or made available to VSI a copy of each of the Plans, including
all amendments thereto.
5.17 Environmental Matters. (a) 3DV is in compliance with all
applicable environmental Requirements (which compliance includes, but is not
limited to, the possession
19
by 3DV of all permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof), except where failure to be in compliance would not have a Material
Adverse Effect. To the Knowledge of 3DV, 3DV has not received any written
communication, whether from a governmental authority, citizens group, employee
or otherwise, alleging that 3DV is not in such compliance, and there are no past
or present actions, activities, circumstances, conditions, events or incidents
that may prevent or interfere with such compliance in the future.
(b) There is no Environmental Claim pending or threatened against 3DV
or, to the Knowledge of 3DV, against any person or entity whose liability for
any Environmental Claim any of 3DV has or may have retained or assumed either
contractually or by operation of law which would have a Material Adverse Effect.
5.18 Tangible Assets. 3DV has good and sufficient title to, or the
right to use and commercially exploit, all of its material tangible assets, free
and clear of any Lien (other than a Permitted Lien).
5.19 Investments. 3DV does not own, directly or indirectly, any capital
stock of, or other equity or partnership interest in, any other Person.
5.20 Disclosure. The written information provided to VSI in connection
with the transactions contemplated by this Agreement does not contain any untrue
statement of a material fact or omit to state a material fact necessary to be
stated in order to make the information or statements contained or referenced
therein not misleading.
5.21 Acquisition of VSI Shares for Investment. (a) The VSI Shares being
acquired by RDC pursuant to Section 2.3 above are being acquired for investment
only and not with a view to any public distribution thereof, and RDC shall not
offer to sell or otherwise dispose of such shares in violation of any of the
registration requirements of the Securities Act or any comparable state or
foreign laws.
(b) Each share certificate representing (i) the VSI Shares or (ii) any
other securities issued in respect of the VSI Shares upon any stock split, stock
dividend, recapitalization, merger or similar event (unless no longer required
in the opinion of United States counsel to VSI) shall be stamped or otherwise
imprinted with a legend substantially in the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OR ANY STATE SECURITIES LAWS. NEITHER THESE
SECURITIES NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. IN NO
20
EVENT MAY THESE SECURITIES BE TRANSFERRED PRIOR TO AUGUST 6,
1999."
6. Representations and Warranties of VSI. VSI represents and warrants to 3DV and
RDC as follows:
6.1 Organization. VSI is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
6.2 Authorization of Transaction. VSI has full power and authority to
execute and deliver this Agreement and the License and Manufacturing Agreement,
and to issue and deliver the VSI shares, and to perform its obligations
hereunder and under the License and Manufacturing Agreement. This Agreement
constitutes the valid and legally binding obligation of VSI enforceable against
VSI in accordance with its terms and conditions.
6.3 No Conflict. Neither the execution and the delivery of this
Agreement or the License and Manufacturing Agreement, nor the consummation of
the transactions contemplated hereby or thereby, shall (i) violate any statute,
regulation, rule, injunction, judgment, order, decree or ruling of any
government, governmental agency or court to which VSI is subject or any
provision of its certificate of incorporation or bylaws or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel, or
require any notice under any agreement, contract, lease, license or instrument
to which VSI is a party or by which it is bound or to which any of its assets is
subject (including, without limitation, under any agreement, contract or
instrument governing the obligations of the shareholders of VSI). VSI is not
required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any government or governmental agency or
any other Person in order for VSI to consummate the transactions contemplated by
this Agreement, except where the failure to give notice, to file, or to obtain
any authorization, consent or approval would not prevent or interfere with the
ability of VSI to consummate the transactions contemplated by this Agreement.
6.4 Brokers' Fees. Except as set forth in Schedule 5.4 of the
Disclosure Schedule, VSI has no liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement for which 3DV or RDC could become liable or
obligated.
6.5 SEC Filed Documents. As of the date of this Agreement, VSI filings
with the Securities and Exchange Commission ("SEC"), as amended and supplemented
by each later filed report do not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein and
necessary to make the statements therein not misleading. VSI's current reports
filed with the SEC comply in all material respects with the
21
applicable requirements of the Exchange Act and the rules thereunder in effect
as of the date of filing.
6.6 Acquisition of 3DV Shares for Investment. (a) The 3DV shares being
purchased by VSI pursuant to Section 2.1 above are being acquired for investment
only and not with a view to any public distribution thereof, and VSI shall not
offer to sell or otherwise dispose of such shares in violation of any of the
registration requirements of the Securities Act or any comparable state or
foreign laws. VSI has such knowledge, experience and sophistication in the
industry of which 3DV is a part to enable it to evaluate the merits and risks
and to assume such risks associated with an investment in 3DV Shares. Prior to
the Closing Date VSI had full access to information and 3DV for the purpose of
conducting a due diligence of the business of 3DV.
(b) Each share certificate representing (i) the 3DV Shares or
(ii) any other securities issued in respect of the 3DV shares upon any stock
split, stock dividend, recapitalization, merger or similar event (unless no
longer required in the opinion of United States counsel to 3DV) shall be stamped
or otherwise imprinted with a legend substantially in the following form:
"The securities represented by this certificate were
originally issued on August ___, 1998, and have not been
registered under the United States Securities Act of 1933, as
amended, or under the securities laws of any other
jurisdiction, nor has any action been taken under the laws of
any other jurisdiction to permit the public distribution,
sale, trading or listing of the securities evidenced by this
certificate.
7. Representations and Warranties of RDC. Subject to the Disclosure Schedules,
RDC represents and warrants to VSI as follows:
7.1 Organization. RDC is a corporation duly organized, validly existing
and in good standing under the laws of State of Israel. Schedule 7.1 sets forth
the names of each of the shareholders of RDC.
7.2 Authorization of Transaction RDC has full power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of RDC,
enforceable against RDC in accordance with its terms and conditions.
7.3 No Conflict. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, shall
(i) violate any statute, regulation, rule, injunction, judgment, order, decree
or ruling of any government, governmental agency or court to which RDC is
subject or any provision of its certificate of incorporation or bylaws or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice
22
under any agreement, contract, lease, license or instrument to which RDC is a
party or by which it is bound or to which any of its assets is subject
(including, without limitation, under any agreement, contract or instrument
governing the obligations of the shareholders of RDC. RDC is not required to
give any notice to, make any filing with, or obtain any authorization, consent
or approval of any government or governmental agency or any other Person in
order for RDC to consummate the transactions contemplated by this Agreement,
except where the failure to give notice, to file, or to obtain any
authorization, consent or approval would not prevent or interfere with the
ability of RDC to consummate the transactions contemplated by this Agreement.
7.4 Warranties Regarding RDC Shares. RDC owns the RDC Shares free and
clear of any and all Liens. Except as contemplated by this Agreement above,
there are no outstanding or authorized options, warrants, put rights, call
rights, purchase rights, subscription rights, conversion rights, exchange
rights, stock appreciation rights, phantom stock rights or other rights
(contingent or other) that could require RDC to sell, transfer or otherwise
dispose of or encumber the RDC Shares or any other capital stock of 3DV owned or
controlled by RDC. RDC has no contingent or other obligation to sell, lend, or
otherwise dispose of any shares of 3DV capital stock or any interest therein
(other than as contemplated by this Agreement). Except as contemplated by this
Agreement, the sale and delivery of the RDC Shares pursuant to the Put/Call
Right are not subject to any preemptive rights of any other Person or other
stockholders of 3DV or RDC, or to any other right of first refusal or other
similar right in favor of any Person. Except as contemplated by this Agreement,
with respect to the RDC Shares, RDC is not a party to any voting agreement,
voting trust, proxy or similar agreement, arrangement or understanding relating
to the capital stock of 3DV, other than any of the foregoing that are pursuant
to agreements or understandings to be cancelled on or before the Closing.
7.5 Brokers' Fees. RDC has no liability or obligation to pay any fees
or commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
7.6 3DV Representations. To the best knowledge of RDC, none of the
representations and warranties of 3DV set forth in Section 5 hereof are untrue
or incorrect in any material respect.
8. Indemnification.
8.1 3DV and RDC Indemnification of VSI. (a) On the terms and subject to
the conditions of this Agreement, 3DV and RDC shall indemnify VSI against, and
hold VSI harmless from, any and all Loss based upon, arising out of or resulting
from (i) any breach by 3DV and RDC of any of the representations and warranties
made by 3DV in Section 5 (in the case of 3DV) or RDC in Section 7 (in the case
of RDC) above, or (ii) any breach by 3DV or RDC of any of the covenants and
agreements of either of them contained in this Agreement. Any claim by VSI for
indemnification under this Section 8.1 shall be hereinafter referred to as a
"VSI Indemnifiable Claim." Notwithstanding the foregoing, VSI shall not be
entitled to maintain any claim for indemnification under this Section 8.1 unless
and until the aggregate amount of such
23
Claims exceeds $250,000, and neither 3DV nor RDC shall have any liability under
this Section 8.1 for an amount in the aggregate greater than the Purchase Price
plus the market value of the VSI Shares on the Closing Date.
8.2 VSI Indemnification of 3DV. (a) On the terms and subject to the
conditions of this Agreement, following the Closing, VSI shall indemnify 3DV
against, and hold 3DV harmless from, any and all Loss based upon, arising out of
or resulting from (i) any breach by VSI of any of the representations and
warranties made by VSI in Section 6 above, or (ii) any breach by VSI of any of
the covenants and agreements of VSI contained in this Agreement. Any claim by
3DV for indemnification under this Section 7.2 shall be hereinafter referred to
as a "3DV Indemnifiable Claim."
Notwithstanding the foregoing, 3DV shall not be entitled to maintain any claim
for indemnification under this Section 8.2 unless and until the aggregate
amount of such Claims exceeds $250,000, and VSI shall have no liability under
this Section 8.3 for an amount in the aggregate greater than the Purchase Price.
8.3 Indemnification Procedures. (a) Any party seeking indemnification
hereunder (the "Indemnitee") shall notify the party liable for such
indemnification (the "Indemnitor") in writing of any event, omission or
occurrence which the Indemnitee has determined has given or could give rise to
liabilities or losses that are indemnifiable hereunder (such written notice
being hereinafter referred to as a "Notice of Claim"). Such notice shall be
given promptly after the Indemnitee becomes aware of its own claim or that of a
third party; provided that, the failure of any Indemnitee to give notice (other
than in respect of a third party claim) shall not relieve the Indemnitor of its
obligations under this Section 8 unless such failure continues beyond the time
limits set out in Section 8.5 below which shall relieve the Indemnitor of its
obligations under this Section 8. A Notice of Claim shall specify in reasonable
detail the nature and any particulars of the event, omission or occurrence
giving rise to a right of indemnification. The Indemnitor shall satisfy its
obligations hereunder within thirty (30) calendar days of its receipt of a
Notice of Claim or, if later, within thirty (30) calendar days after the
Indemnitee shall have actually incurred or suffered a liability or loss which is
the subject of such Notice of Claim; provided, however, that so long as the
Indemnitor is in good faith defending a claim pursuant to paragraph (ii) below
and provided that the Indemnitee has not otherwise actually incurred or suffered
a liability or loss for which the Indemnitee was required to pay or otherwise
post a bond, its obligation to indemnify the Indemnitee with respect thereto
shall be suspended.
(b) With respect to any third party claim (a "Third Party Claim") which
is the subject of a Notice of Claim, the Indemnitor shall, in good faith and at
its own expense, defend, contest or otherwise protect against any such Third
Party Claim with legal counsel of its own selection. The Indemnitee shall have
the right, but not the obligation, to participate, at its own expense, in the
defense thereof through counsel of its own choice and shall have the right, but
not the obligation, to assert any and all cross claims or counterclaims it may
24
have. The Indemnitee shall at all times cooperate in all reasonable ways with,
make its relevant files and records available for inspection and copying by, and
make its employees reasonably available or otherwise to render reasonable
assistance to, the Indemnitor. In the event that the Indemnitor fails to timely
defend, contest or otherwise protect against any such Third Party Claim, or if
injunctive relief is sought or issued (and not dismissed within 10 days) which
would have a material adverse effect on the Indemnitee, the Indemnitee shall
have the right to defend, contest, assert cross claims or counterclaims, or
otherwise protect against, the same and may make any compromise or settlement
thereof; provided that, it does so in good faith and be entitled to all amounts
paid as a result of such third party claim, demand, suit or action or any good
faith compromise or settlement thereof. Any compromise of asserted liability by
the Indemnitor shall require the prior written consent of the party seeking
indemnification, which consent shall not be unreasonably withheld.
8.4 Determination of Losses. In determining the amount of any loss,
liability or expenses for which any Party is entitled to indemnification under
this Section 8, the gross amount thereof will be reduced by the value of any
correlative benefit or any other benefit, including, without limitation, any tax
benefit or credit or insurance proceeds received or to be received by such.
8.5 Limitation on Indemnifiable Claims. No VSI Indemnifiable Claim may
be asserted or otherwise maintained by VSI against RDC or 3DV in respect of
Section 8.1(a)(i) above after either (a) twelve months following the Closing
Date, or (b) in the event that the Second Closing occurs, twelve months
following the Second Closing Date (unless in either case a Notice of Claim with
respect to such Indemnifiable Claim has been made before such date), except that
any VSI Indemnifiable Claims based on the breach of the representation and
warranty of 3DV relating to the capitalization of 3DV may be made until the
expiration of a period of five (5) years following the Closing Date. No 3DV
Indemnifiable Claim may be asserted or otherwise maintained by 3DV or RDC
against VSI in respect of Section 8.2(a)(i) above after either (a) twelve months
following the Closing Date, or (b) in the event that the Second Closing occurs,
twelve months following the Second Closing Date (unless in either case a Notice
of Claim with respect to such Indemnifiable Claim has been made before such
date).
9. Miscellaneous.
9.1 Press Releases and Public Announcements. The fact and terms of this
Agreement and the transactions proposed hereby are confidential and each Party
shall maintain such confidentiality and, without the written consent of the
other Parties hereto, which consent shall not be unreasonably withheld, shall
not disclose the financial terms of this Agreement or the transactions proposed
hereby, to any other Person, other than each Party's respective legal, financial
and accounting advisors who have been advised of the terms of this
confidentiality agreement. Notwithstanding the foregoing, any Party may make
public disclosure of the fact of or terms of this Agreement to the extent it is
required by applicable
25
law (as established by an opinion of counsel delivered to the other Parties) and
such disclo sure shall be limited to such information regarding this Agreement
as is so required by applicable law. The Parties agree to cooperate and consult
with each other as to the content of any such disclosure relating to this
Agreement required by law as described in the preceding sentence.
9.2 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person (including, without limitation, employees of
3DV) other than the Parties and their respective successors and permitted
assigns.
9.3 Entire Agreement. This Agreement (including the documents referred
to herein) and the License and Manufacturing Agreement constitute the entire
agreement between the Parties and supersedes any prior understandings,
agreements, or representations by or between the Parties with respect to the
subject matter hereof, written or oral, to the extent they related to the
subject matter hereof, including, without limitation, the Letter of Intent dated
May 9, 1998.
9.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. Neither 3DV, RDC nor VSI may assign either this Agreement
or any of its rights, interests or obligations hereunder without the prior
written approval of the other Parties.
9.5 Counterparts This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
9.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.7 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then seven
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to 3DV: 3DV Systems Ltd.
▇▇▇▇. ▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
Attn: Ori ▇. ▇▇▇▇▇, President
Tel: ▇▇▇-▇▇▇-▇-▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇-▇▇▇▇▇▇▇
26
with a copy to: Zellermayer, Pelossof Advocates
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Israel
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Facsimile: 011-972-3-695-2884
If to VSI:
Vision-Sciences, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇
Attn: Katsumi Oneda
Tel: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to RDC:
RDC Development Corporation Ltd.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇.▇.▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
Attention: ▇▇▇▇▇ Krupik
Facsimile: 011-972-4-959-0720
27
With a copy to:
Zellermayer, Pelossof Advocates
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Israel
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Facsimile: 011-972-3-695-2884
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
until the next business day after it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims and other communications hereunder are to be delivered by giving the
other Party notice in the manner herein set forth. For purposes of this Section
6.7, a business day shall be any day on which commercial banks are open in New
York and Israel.
9.8 Governing Law; Procedural Matters. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Israel without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Israel or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Israel. For the
adjudication of any disputes arising in connection with this Agreement, the
parties hereby consent to the personal jurisdiction of and venue in any district
court in of competent subject matter jurisdiction located in Tel Aviv, Israel,
and the parties agree that such jurisdiction and venue shall be exclusive. The
parties further consent to service of any process relating to this Agreement by
registered or certified mail or by personal service. The parties hereby exclude
from application to this Agreement the United Nations Convention on Contracts
for the International Sale of Goods.
9.9 Amendments and Waivers. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by the Parties. No
waiver by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to be a waiver
of any other default, misrepresentation or breach of warranty or covenant
hereunder.
28
9.10 Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction.
9.11 Expenses. Except as otherwise provided in this Agreement, each of the
Parties shall bear its own costs and expenses (including legal and investment
advisory fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby.
9.12 Incorporation of Exhibits and Schedules. The Exhibits and Schedules of the
Disclo sure Schedule identified in this Agreement are incorporated herein by
reference and made a part hereof.
* * * *
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first above written.
VISION SCIENCES, INC.
By: /s/Katsumi Oneda, President
-------------------------------
3DV SYSTEMS LTD.
By: /s/▇▇▇ ▇▇▇▇▇, President
-------------------------------
RDC ▇▇▇▇▇▇ DEVELOPMENT
CORPORATION LTD.
By: /s/▇▇▇▇▇ Kripik, CEO
-------------------------------
