-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OBexpKfo0hdh73H5Mz5cc4rd0CZfho506uN/ogYOtXpsVzYL5E6ptsYv2JycR9sD uUi+tw27kQoqAzUtr03BSg== 0000950135-98-000353.txt : 19980202 0000950135-98-000353.hdr.sgml : 19980202 ACCESSION NUMBER: 0000950135-98-000353 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19980129 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INDUSTRIAL IMAGING CORP CENTRAL INDEX KEY: 0000799514 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 050396504 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-15520 FILM NUMBER: 98517097 BUSINESS ADDRESS: STREET 1: 847 ROGERS ST STREET 2: C/O ONE LOWELL RESEARCH CENTER CITY: LOWELL STATE: MA ZIP: 01852 BUSINESS PHONE: 4018614228 MAIL ADDRESS: STREET 1: 2 CHARLES ST. CITY: PROVIDENCE STATE: RI ZIP: 02904 FORMER COMPANY: FORMER CONFORMED NAME: ORBIS INC DATE OF NAME CHANGE: 19920703 10-K405 1 INDUSTRIAL IMAGING CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ================================================================================ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 1997 COMMISSION FILE NUMBER 0-15520 INDUSTRIAL IMAGING CORPORATION ------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 05-0396504 - ---------------------------------- ------------------- (State or other jurisdiction (I.R.S. employer of incorporation or organization) identification no.) 847 ROGERS STREET, LOWELL, MASSACHUSETTS 01852 --------------------------------------------------- (Address of principal executive offices) (Zip code) (978) 937-5400 --------------------------------------------------- (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: TITLE OF CLASS ---------------------------- Common Stock, $.01 par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 60 days. Yes No X . --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X --- The issuer's revenue for the fiscal year ending March 31, 1997 was $1,823,576. The aggregate market value of the voting stock held by non-affiliates of the Issuer, based upon the average of the bid and ask prices of the Common Stock as reported by the OTC Bulletin Board on January 21, 1998 was approximately $11,570,000 for the Common Stock. As of January 21, 1998, 10,890,201 shares of Common Stock, $.01 par value per share, were outstanding. DOCUMENTS INCORPORATED BY REFERENCE: None 2 PART I ITEM 1. BUSINESS This report contains forward-looking statements regarding anticipated increases in revenues, marketing of products and proposed products and other matters. These statements, in addition to statements made in conjunction with the words "anticipate", "expect", "believe", "seek", "estimate", and similar expressions are forward-looking statements that involve a number of risks and uncertainties. The following is a list of factors, among others, that would cause actual results to differ materially from the forward-looking statements: business conditions and growth in certain market segments and in the general economy, an increase in competition, increased or continued market acceptance of the Company's products and proposed products, and other risks and uncertainties indicated from time to time in the Company's filings with the Securities and Exchange Commission. GENERAL Industrial Imaging Corporation designs, manufactures and markets automated optical, vision and industrial imaging systems for inspection and identification of defects in printed circuit boards ("PCB") and distributes Laser Plotters and Helios(TM) Film for creation of PCB artwork and phototools. Members of the Company's management were pioneers in the field of automated optical inspection of PCBs. These individuals developed the product line while working at Itek Corporation ("Itek") now a part of Hughes Corporation, through close cooperation between Itek and Digital Equipment Corporation ("DEC"). The prototype and initial production models developed by Itek and DEC were later completed and marketed by AOI Systems, Inc., which sold its assets and product base to the Company's subsidiary, Triple I Corporation ("Triple I"). Virtually all electronic equipment use PCBs, which contain conductors that interconnect electronic components. As such, PCBs are essential parts to consumer electronic and automotive products, telecommunications and computer components, industrial and medical equipment and military and aerospace applications. However, PCBs are susceptible to conductor defects, such as electrical shorts, open circuits and insufficient or excessive conductor widths, which interfere with the interconnections between electronic components attached to the finished boards. Moreover, the trend is towards the placement of more complex miniaturized components in greater surface density and having decreased conducting line widths. To avoid and cure defects, PCB manufacturers have sought the use of automated optical inspection and remote sensing to satisfy industry demands for the precise quality of finished PCBs and assemblies. The Company has already developed an installed base of customers in the United States, Europe and Asia, which include some of the largest PCB manufacturers in Sweden, France, Germany and Japan. Since 1994, the Company has accomplished a number of major strategic goals, including the following: *.........INTRODUCTION OF A NEW GENERATION OF INSPECTION SYSTEMS. In May 1996, the Company commenced production of its new AOI-2500 Series of modular 2 3 advanced automated inspection systems. Management believes that this new generation of products accurately detects defects in PCB production at speeds greater than conventional optical inspection systems with a detection capability that permits inspection of fine lines and difficult geometric patterns. Management believes that the unique modular design of the AOI-2500 Series offers customers optimum flexibility and ease of upgrading their systems. Because the mechanical portions of each model in the series are identical, a customer can purchase the lowest priced model and upgrade at an appropriate time based on its needs and inspection requirements. *.........IMPRIMUS INVESTORS LLC EQUITY INVESTMENT. In November 1997, Imprimus Investors LLC ("Imprimus"), and the Company executed a Securities Purchase Agreement whereby Imprimus invested $3 million into the Company in exchange for three million shares of Common Stock at $1.00 per share. In accordance with the agreement, the Company also issued warrants to purchase one million shares of Common Stock at $2.00 per share through November 12, 2002, and issued warrants to purchase one million shares of Common Stock at $1.00 per share through November 12, 2002. (SEE "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS"). *.........POLAROID LICENSE AND EQUITY INVESTMENT. In November 1994, the Company entered into the Polaroid Agreement. The Polaroid Agreement gives both companies royalty free access to each others' patents, technology and know-how for use in their respective fields of business. In addition, the Polaroid Agreement seeks to promote the development, marketing and sales of an photo plotter system in the field of PCB manufacturing consisting of equipment designed by the Company and other Polaroid partners using Polaroid's new Helios(TM) Film. As part of the Polaroid Agreement, the Company has been granted the exclusive right to market Polaroid's Helios(TM) Film and laser plotters within the PCB industry, subject to the Company satisfying certain ongoing sales and performance milestones. The Company is aggressively seeking sales opportunities for the Helios(TM) Film and the laser plotters that utilize the Helios(TM) Film. The Company estimates the current annual market for inspection systems for the PCB manufacturing industry alone to be in the range of $100 to $150 million. This market consists of approximately 2,500 PCB manufacturers domestically and internationally. The Company and Polaroid are currently negotiating to resolve a dispute regarding contract milestones and exclusivity. (See "Polaroid Agreement" and "LEGAL PROCEEDINGS"). *.........AWARD OF ARPA CONTRACT. In August 1994, the Company received a grant of up to $462,000 from the United States Department of Energy Advanced Research Project Agency ("ARPA"), as part of ARPA's technology reinvestment project (the "ARPA Contract"). The Company is obligated to share in the costs of the project for approximately an additional $462,000. Through March 31, 1997, the Company had incurred $320,000 in project expenses and had received $320,000 in matching funds from ARPA. Under the terms of the ARPA Contract, the Company is developing new automated optical inspection techniques to enable 3 4 inspection systems to measure the position and movement speed of the product being inspected. The results of this project and the development of the new automated optical inspection system, if successful, may significantly improve the performance of inspection systems for PCBs and other manufactured components. The Company's strategy is to continue to enhance its existing systems and products, to develop new systems for further automation of the PCB field and to develop its existing technologies and capabilities for additional applications. The Company believes it has leveraged its management expertise and technology to expand industrial imaging technologies into a number of electronics markets where high quality industrial inspection and reproduction capabilities are required. The Company markets its products under the name AOI International. HISTORY The Company's asset and product base was acquired in 1992 from AOI Systems, Inc. by the Company's subsidiary, Triple I. Certain members of the Company's management were pioneers in the automated optical inspection field. These individuals developed the Company's product line while working at Itek, which is now part of Hughes Corporation. The product line was developed through close cooperation between Itek and DEC. DEC was a knowledgeable user who funded part of the development and acted as an advisor, customer and beta site for the prototype and initial production models, which were later marketed by AOI Systems. In February 1997, the Company acquired Triple I, a privately held Delaware corporation, in a transaction whereby the shareholders of Triple I exchanged 100% of the outstanding Triple I Common Stock, $.01 par value, for approximately 90% ownership of the Company (the "Exchange"). As part of the Exchange, all Triple I outstanding warrants and options were transferred to the Company. Prior to the Exchange, the Company was a publicly held Rhode Island corporation known as Orbis, Inc. Orbis initially designed and manufactured software for use by health maintenance organizations, but had not had revenues from operations since 1992. Orbis's Common Stock, $.01 par value per share, was listed on NASDAQ after its initial public offering in 1987, but was delisted in October 1992 when operating revenues diminished. Since that date, the stock has been quoted on the OTC Bulletin Board, where limited trading of the shares has occurred. Immediately prior to the Triple I Transaction, Orbis reincorporated under the laws of Delaware, completed an 18:1 reverse split of its Common Stock and changed its name to Industrial Imaging Corporation. Unless otherwise indicated, all per share data relating to the number of shares of Common Stock outstanding has been adjusted to give effect to such reverse stock split. THE PCB INDUSTRY PCBs are the basic interconnecting platforms for the electronic components that comprise most electronic equipment. PCBs contain the electronic circuitry required to interconnect those components which, when operating together, perform a specified function. An assembly of one or more interconnected PCBs working together form an essential part of most electronic products. The design of conductor patterns is developed with the help of a Computer-Aided Design ("CAD") package, and later optimized for manufacturing at the PCB manufacturing plant 4 5 by using a Computer-Aided Manufacturing ("CAM") system. PCBs are manufactured through a series of complex steps. Generally, a board is made of one or more layers of fiberglass (or other material with insulating qualities) laminated with a conducting material. Holes are then drilled into the board in a specific pattern and the inner part of each hole is plated with conducting metal. The board or layer is then coated with a thin layer of light-sensitive material ("photoresist"). A transparent film containing the desired circuitry pattern corresponding to the drilled pattern on the board ("production phototool"), which has been either copied from an artwork master or produced directly by a photoplotter connected to a CAD/CAM data base, is then laid on the photoresist. The board or layer is then exposed to light, which transfers the conductor pattern from the production phototool to the photoresist. Subsequent development of the photoresist and a chemical etching process leave the desired conductor pattern printed on the board after excess conducting material is removed. PCBs may be single-sided or double-sided, and more complex PCBs may be multilayered. PCBs are susceptible to conductor defects, such as electrical shorts, open circuits and insufficient or off-measure conductor widths, which may impair or interfere with the electrical interconnections between electronic components mounted on the finished boards. The trend towards more complex and compact electronic products that utilize large-scale integrated circuits requires the production of high-density PCBs with finer conductor lines, reduced spacing between those lines and multiple layers. For such complex multilayer boards, production yield drops dramatically as the number of likely defects increases, unless in-process inspection is used. Inspection is required throughout PCB production to identify such defects, which are then repaired, if possible, or discarded. Early detection of these defects increases the possibility of successful repair and reduces the number and cost of unusable boards. PRODUCTS The Company's current products are automated vision systems sold to the PCB manufacturing industry. The Company's products were developed by the current Company management team while employed by Itek (now a part of Hughes Corporation) in the 1980's through close collaboration with DEC. The Company's systems are quality control and yield enhancement tools used for automated optical inspection of PCBs to determine the presence of flaws such as conductor breaks, short circuits, missing features and conductor width violations at various stages of the PCB manufacturing process. In addition, the Company's systems can generate statistical reports of defects in real-time to assist in the control of the PCB manufacturing process, which can result in substantially improved yields. These improved yields, in conjunction with the advantages in quality control offered by the Company's systems, provide a major economic incentive for companies in the PCB industry to purchase and use the Company's products. The Company estimates that the market size of the PCB industry approached $30 billion in 1997. The Company presently offers 'in-line" systems capable of inspecting almost any product at speeds ranging from three square feet per minute to over sixty square feet per minute, with current prices that range from $185,000 for the Company's AOI-190A model to approximately $600,000 for some of the models from the Company's new AOI-2500 Series. 5 6 PCB AUTOMATED OPTICAL INSPECTION SYSTEMS Each of the Company's AOI systems consists of an optomechanical/scanning and a processing unit. The optomechanical unit includes a moving platform that carries the PCB or artwork being inspected, and a scanning unit which acquires an image of the board, digitizes it and transmits it to the electronic processing unit. The electronic unit processes and enhances the image to allow efficient analysis and interpretation of the acquired images. The proprietary structure of the electronic logic unit enables real time parallel processing, a requirement for performing each defect detection at very high speeds. The Company's AOI systems incorporate both the "design rule check" and "reference comparison" methods of inspection. The design rule check method involves inspecting the circuitry of PCBs pursuant to a pre-programmed algorithm and detecting defects by applying prescribed rules to find flaws in the pattern of the circuitry. The reference comparison method involves an intelligent comparison of the subject PCB to a perfect "golden" board or to circuit pattern representations stored in a CAD or CAM database. The Company's systems can easily be integrated into the production processes of most PCB manufacturing facilities and can be employed at several stages during PCB manufacturing to inspect the artwork design master, the production phototools, the photoresist before the etching, the etched inner layers before lamination and the outer layers before attachment of electronic components. The systems are designed for operational simplicity and require no special skills or experience to operate. The design of each system permits easy maintenance and service. As a result, the Company believes that the use of its AOI systems significantly reduces the overall production costs of PCBs. AOI-190 SERIES The AOI-190 Series is the Company's basic optical inspection system. This system provides manufacturers of PCBs with a means to inspect PCB products for quality and analyze the information to achieve higher yields at an economical price. The AOI-190 inspection system provides a number of special features that clearly distinguish it from its competitors, including but not limited to the following: * The in-line conveyorized transport provides automated operation when linked to commercially available handling equipment. Communication is maintained between the host computer and the multi-functional evaluation/repair station (described below). Part identification is achieved through a bar code labeling device so that critical information moves throughout the system with reduced possibility of error, and tracking of parts and information throughout the manufacturing facility can be automated; * The linking of the AOI-190 inspector to the evaluation/repair station enables the customer to set-up or repair products while inspection is being conducted on the inspector with no interruptions or waiting periods. This feature significantly 6 7 enhances throughput. In addition, management believes the AOI-190 is the only system on the market in which throughput can be increased and features added by software and hardware upgrades that are not expensive, and which do not require major design changes, such as those offered by the competition. This is due to the open architecture and modularity inherent in the Company's AOI-190; and * AOI-190 can be interfaced to most-available CAM systems to permit direct "downloading" of set-up data. The Company presently manufactures and markets three models of the AOI-190 that currently range in price from $150,000 to $230,000, although various options can reduce or increase the cost of a specific system. AOI-2500 SERIES The AOI-2500 Series is a new generation of automatic optical inspectors designed to maximize productivity in demanding PCB operations. Prototypes were field tested in 1995, and full production of the series began in May 1996. The series includes four models, the AOI-1900, the AOI-1900X, the AOI-2500, and the AOI-3200 depending on the width of the PCB's being inspected. Each model has the option of a standard or a high speed version. These models currently range in price from $320,000 to $600,000. As with the AOI-190, the AOI-2500 has a mechanical transport which enables it to be placed in-line in the manufacturing process. The Company's systems continue to be the only ones with this capability. The AOI-2500 Series inspectors have the same overall functionality as the AOI-190 Series inspectors, but with a significantly enhanced level of both performance and modularity. In particular: * The AOI-2500 systems have an improved illumination system and higher resolution cameras, which permit it to inspect product with smaller features than can be inspected with the AOI-190, and it can find much smaller defects. * The AOI-2500 systems have a wider range of speeds than the AOI-190, with much higher speeds available for inspecting the more standard PCB designs. * The AOI-2500 systems have enhanced image processing electronics and more general purpose processing power, which enable it to detect a wider range of defects. Due to the modularity of the design and the fact that the mechanical portions of the machines in this series are identical, the customer can choose the lowest price model that can meet its requirements without risking obsolescence as either the width of their product changes, or the factory throughput increases. This is a further extension of the Company's philosophy of obsolescence-proof machines through the ability to continuously upgrade. 7 8 AOI ER 35-36 EVALUATION AND REPAIR (E/R STATION) The AOI E/R Station enables the user to view, classify and repair defects as well as create inspection set-up files without interrupting ongoing inspection at the inspection station. Ergonomically designed, the user may position the E/R Station's display monitors for optimum viewing comfort and easily access the defective PCB for repair. Convenient bar code labeling facilitates defect evaluation and eliminates inspection data confusion. Automated camera positioning precisely displays a magnified, crisp image of artwork and PCBs and of each reported defect on a high-resolution color monitor, significantly reducing operator fatigue. A computer generated reticle offers very precise measurement of defects. Defects requiring repair or additional evaluation may be marked or optionally photographed with a Polaroid freeze-frame camera for further review. Video recording of complete inspection data is also available. The inspection station defect report for the PCB under evaluation is simultaneously displayed on a separate screen. This report includes defect number, location and type of defect. To maximize throughput, defects are automatically sorted by user defined levels of severity. Additionally, defects may be further classified for yield analysis and process control using the included SPC software package, which can produce numerous reports. The Company's Evaluation/Repair Station and series of inspection stations combine to provide a complete automated optical inspection system for real-time process control and yield improvement. ARTWORK/PHOTOTOOL IMAGING SYSTEMS In PCB manufacturing, the design of the conductor patterns are developed with the help of a CAD software package, and later optimized for manufacturing at the PCB manufacturing plant by using a CAM system. The CAM system then drives a laser plotter that first generates the pattern on silver halide film. This silver halide film often becomes the photo tool (mask) to expose the photoresist that defines the conductor pattern on the PCB surface. The image manipulation that is done in the CAM system ensures that the final design meets all of the design rule criteria and makes optimum use of the base material. The digital image generated in the CAM system contains all of the information which is required both for generating the artwork and also for establishing the criteria for inspection of the artwork and completed PCB product. Because of this, it is customary now to treat the optical inspector, the CAM and the laser plotter as an integrated "front-end" system. POLAROID AGREEMENT On November 28, 1994, the Company and Polaroid entered into the Polaroid Agreement. Under the Polaroid Agreement, Polaroid and the Company are granted royalty free access to each others' patents, technology and know-how for use in their respective fields of business for a period of eight (8) years. The Company is also granted the exclusive right to market and sell Helios(TM) Film to the PCB market. To maintain this exclusive right, the Company is required to achieve certain performance milestones, which include sales requirements for the Helios(TM) Film and for the sale of laser plotters. On January 7, 1997, the Company and Polaroid agreed that Polaroid will not act with respect to the quarterly performance milestones under the Polaroid Agreement until May 31, 1997, the date by which the annual performance milestones had to have 8 9 been met. No such performance milestones apply to Triple I's agreement with Polaroid granting it access to Polaroid's other technology. The consequence of failing to achieve the annual performance milestones by May 31, 1997 would that the Company's exclusive right to sell and market the Helios(TM) Film to the PCB market could at Polaroid's option be converted to a nonexclusive right. The Company and Polaroid are involved in a dispute relating to whether the company did in fact meet its milestones under the Polaroid Agreement. The Company is currently negotiating to resolve the dispute and believes the ultimate resolution of this dispute will not have a material adverse effect on the results of operations.(SEE "LEGAL PROCEEDINGS"). The strategic partnership between the Company and Polaroid provides the Company with significant complementary technological, marketing and product advantages, including, but not limited to, the following: * Polaroid's Helios(TM) Film technology has been market tested and is presently in production; and * Polaroid's recording technology and devices have been developed through research and cooperation by Polaroid and other partners (and which will be enhanced by the Company through the state-of-the-art advanced optical concepts being developed by the Company under ARPA sponsorship). These advantages, combined with the strengths and features of the Company's AOI systems, enable the Company to provide its customers with the system and the Helios(TM) Film necessary for production of defect free artwork and phototools. POLAROID's HELIOS(TM) FILM AND PLOTTERS Polaroid has developed the Helios(TM) Film, a dry process film with many superior performance characteristics compared to the imaging films currently being used in the manufacture of PCBs. The Polaroid product is expected to be less prone to deterioration with use than silver halide and diazo. This permits repeated use of the Helios(TM) Film as both master and phototool, eliminating the current practice that often requires both tools. This should also eliminate most defects introduced by the relatively poor quality of diazo. The Helios(TM) Film also shows promise for imaging PCB designs with very small features, performance difficult to achieve with present technology. As the Helios(TM) Film is a dry process product, potential customers will benefit from elimination of chemicals and their effluent, a major concern in an industry that is closely scrutinized by environmental agencies. The dry process film also eliminates the need for "dark room" facilities for creating the phototools. The film will be marketed under private label. The Company will be distributing laser plotters under a private label. The plotter for recording on Helios Film was developed in cooperation between Polaroid and Heidelberg for the graphic arts industry, and later modified by the Company, for use in the PCB industry. Both products were introduced in the quarter ending December 31, 1996. PRODUCTS UNDER DEVELOPMENT 9 10 The Company intends to further develop and enhance its own proprietary technology to better serve the industrial imaging and inspection markets and exploit the synergy between its own technology in the field of image acquisition, processing and reconstruction and the technology of Polaroid. The Company currently has an engineering and product development staff of five individuals, and a group of customer support engineers, who assist the Company's customers in integrating the Company's products into the customer's work environment. This engineering work provides the Company an opportunity to keep abreast of new market opportunities for the Company's technologies. During the fiscal year ended March 31, 1997, and the six-month period ended March 31, 1996, the Company's expenditures on research and development amounted to $440,207 and $427,778 respectively. The Company's management believes that the major technological innovations that the Company has access to, through its previous work and its strategic partnership with Polaroid, will permit the Company to make major improvements in its PCB product line as well as create opportunities for expansion into other market areas, such as optical velocity tracking, optical Z dimension (three dimensional) gauging and advanced imaging devices. Management believes that the addition of depth and color will permit broadening the applicability of this product to types of PCBs that presently cannot be inspected and significantly increase the performance of the equipment in regard to defect detection, and improve the ability to discriminate between real defects and oxidation or discoloration flaws which are often flagged as defects, but judged not to be of consequence. As a result, the Company believes it will be able to increase the features of its present models and simplify its software. Although no assurance can be given, the Company also intends to expand into other inspection and industrial imaging markets, such as flat-panel displays and other products requiring precise high-resolution optical measurements to monitor quality control within the manufacturing process. The Company's success in developing and selling new and enhanced products depends upon a variety of factors, including accurate prediction of future customer requirements, introduction of new products on schedule, cost-effective manufacturing, product performance in the field, and raising additional funds. The Company's new product decisions and development commitments must anticipate the equipment needed to satisfy the requirements for inspection processes one or more years in advance of sales. Any failure to accurately predict customer requirements and to develop new generations of products to meet those requirements would have a substantial material adverse effect on the Company's business, financial condition and results of operations. New product transitions could adversely affect sales of existing systems, and product introductions could contribute to quarterly fluctuations in operating results as orders for new products commence and orders for existing products or enhancements of existing products fluctuate. The costs to the Company of complying with environmental laws are minimal have not had a material effect on the results of operations. CUSTOMERS The Company's customers include manufacturers of PCBs both domestically and internationally. The Company sells to a limited number of customers as the Company's market is dominated by a few major companies. As a result, any delay in the recognition of revenue could have a material adverse effect on the Company's results of operations in any given 10 11 accounting period. For the year ended March 31, 1997 ("Fiscal 1997"), the Company had sales to four customers that accounted for 28%, 25%, 15% and 12% of revenues. For the six months ending March 31, 1996 ("Six Months 1996"), the Company had sales to two customers that accounted for 39% and 31% of revenues. For the year ended September 30, 1995 ("Fiscal 1995"), the Company had sales to four customers that accounted for 18%, 17% 16% and 15% of total revenues. For the year ended September 30, 1994 ("Fiscal 1994"), the Company had four customers that accounted for 26%, 22%, 15% and 12% of revenues. The failure to replace these sales with sales to other customers in succeeding periods would have a material adverse effect on the Company's business, financial condition and results of operations. The Company expects that sales to relatively few customers will continue to account for a high percentage of the Company's revenues in any accounting period in the foreseeable future and therefore, quarterly and annual results could vary greatly. A reduction in orders from any such customer or the cancellation of any significant order could have a material adverse effect on the Company's business, financial condition and results of operations. None of the Company's customers has entered into a long-term agreement requiring it to purchase the Company's products. During Fiscal 1997, Six Months 1996 and Fiscal 1995, the Company's foreign revenues accounted for 80%, 94% and 91%, respectively, of the Company's revenues. These sales were made primarily in Europe. The high percentage of foreign revenues is due to the existence of an established network of distributors in Europe and Asia, along with a market representative in Europe for the Company's products, and the limited resources available to the Company to market its products in the United States. Although the Company generally requires advance deposits or letters of credit from customers, the Company sometimes extends credit to its foreign customers and collection may be more difficult in the event of a default. To help expand into the United States market, the Company hired a new Vice President of Marketing in January 1997. Management expects that revenues from foreign customers will continue to account for a significant portion of future revenues. The Company has been and will continue to be subject to risks associated with foreign customers in general, including political instability, embargoes, shipping delays, custom duties, import and export quotas and other trade restrictions, all of which could have a material adverse effect on the Company's operations, or could have a significant adverse impact on the Company's ability to deliver products on a competitive and timely basis. Recent events in the Asian markets, specifically the recent devaluation of some Asian currencies, the current banking crises, and a general economic downturn, could have an adverse effect on the Company's ability to effectively market its products in this market. Although the Company generally sells products to large, well-funded corporations or requests letters of credit from less creditworthy customers, the Company could experience difficulties in obtaining or enforcing judgments with respect to receivables outside the United States. The Company's foreign sales have been and are expected to be made in U.S. dollars. A strengthening in the dollar relative to the currencies of those countries where the Company does business would increase the prices of its products as stated in those currencies, and may adversely affect the Company's sales in those countries. To the extent the Company lowers its prices to reflect a change in exchange rates, the profitability of the Company's business in those markets may be adversely affected. In the past, there have been significant fluctuations in the exchange rates between the dollar and the currencies in those countries in which the Company does business. SALES AND MARKETING STRATEGY 11 12 The Company's strategy is to emphasize the broad range of competitive performance and cost advantages of its products and the ability to upgrade systems because of their modular designs. The AOI-190 Series is expected to be marketed to the customers that to date have not purchased any vendor's system, and to those accounts replacing outdated medium performance equipment. The AOI-2500 Series product is expected to be promoted to larger PCB manufacturers that require high productivity and higher technology requirements. Key elements of the Company's marketing strategy include: * emphasizing product performance advantages such as in-line conveyorized material handling, ease-of-use, high throughput, high reliability, flexible, affordable service policies and upgrade paths and a more cost-effective solution; * expanding the Company's direct sales force in the United States, particularly on the west coast; and * increasing international sales through additional support of the Company's existing representative and distributor network, including joint seminars, sales calls and product showings and the addition of distributors in other parts of the world. The Company currently employs two full-time, in-house, employees dedicated to sales and marketing. In addition, the Company relies upon the efforts of eight distributors and/or sales representatives located in Europe and Asia. The Company promotes its products through institutional advertising, distribution of product literature and promotional videotapes throughout the industries its products service, and exhibits and product presentations at industry and trade shows, such as Productronica, The Institute for Interconnecting and Packaging Electronic Circuits (IPC) and the Japan Printed Circuit Association (JPCA). Pending the outcome of current negotiations, the Company intends to introduce new products that are developed from its strategic alliance with Polaroid both domestically and in Japan through beta site testing (installed at a customer's site) and field trials. Subsequently, it intends to launch an advertising campaign designed to inform potential customers of the economic and performance benefits offered by these products, emphasizing both Polaroid's corporate image for creative technology and the Company's reputation for a high level of service and quality assurance. These products are expected to then be marketed throughout the United States, Europe and Asia through the Company's sales and marketing staff and its international network of agents and distributors. The Company also plans to utilize the benefits of the Polaroid Agreement to address the customer's preference to purchase an integrated "front-end" system, which includes an AOI system, a CAM and a laser plotter. Customers prefer to buy these components from one supplier to ensure the compatibility of interfaces and the efficiency of the most sophisticated aspect in PCB manufacturing. Through the Polaroid Agreement, the Company gains access to critical advanced technology for its base business, inspection systems, as well as an exclusive license to sell Polaroid's proprietary Helios(TM) Film in the PCB artwork and phototool markets. Using these benefits, the Company is working to increase volume sales per customer and to establish new 12 13 OEM agreements and strategic alliances with suppliers of CAM and laser plotter products. COMPETITION The optical inspection systems industry is intensely competitive. The Company competes with many companies in the United States and Europe, several of which have substantially greater financial, technical, sales and managerial resources than the Company and may be able to adapt more quickly to new or emerging technologies and changes in customer requirements or to devote greater resources to the promotion and sale of their products than the Company. The Company believes that in the future the principal competitive factors will be product functionality and performance (e.g., speed, ease of use, accuracy and reliability), the development of improved products through research and development, customer support services, customer relations and price. No assurance can be given that the Company will compete successfully with existing or potential future competitors. The Company believes that its products enjoy significant technical advantages over those of its competition for the following reasons: * RELIABILITY AND LIMITED DOWN-TIME. The Company believes that its products enjoy significantly higher reliability and less down-time than those of its competition. These benefits can be attributed to the more advanced in-line design of the Company's products, which employ few moving parts, and are therefore less prone to equipment failures, and the availability of direct diagnostic links, via modem, whereby the Company's in-house service technicians can diagnose and troubleshoot the Company's products in the field directly from the Company's facilities. * VERSATILE PRODUCTS THAT CAN BE EASILY UPGRADED. The Company's products are designed to be significantly less prone to obsolescence than those of its competition. Unlike those of the Company's competition, the Company's products are designed to be more highly dependent upon software with a very modular hardware design that may be easily upgraded to add more features. * INCREASED ACCURACY AND HIGHER THROUGHPUT. The Company believes that its products, as a result of its unique in-line system with multiple stationary cameras, achieve a higher throughput at most levels of resolution, resulting in enhanced productivity and overall performance. * COMPLETE INTEGRATION OF DESIGN, INSPECTION AND REPAIR SYSTEMS. The Company's products together allow for the integrated implementation of a complete automated inspection system for real-time process control and yield improvement through inspection, evaluation and repair. When combined with the laser plotters and advanced Helios(TM) Film currently being tested by the Company, the Company's product line will have the added advantage of offering a complete integrated solution to the "front needs" of PCB manufacturers. The Company believes that the quality of its products, its ability to quickly and adequately respond to the needs of its customers, its early recognition of trends in the 13 14 development of AOI related products, and its increasing product and brand name recognition are important competitive factors in achieving market penetration for its products. In addition, the Company believes that it will be able to distinguish itself from its competition as a result of the Company's broad selection of inspection products, proprietary technology and access to other advanced technology and products by virtue of the Company's relationship with Polaroid as well as funded development through ARPA and similar programs. BACKLOG The Company's backlog for products and services was approximately $1.5 million at March 31, 1997 (of which $390,000 represented plotters), compared to $675,000 at March 31, 1996. At December 31, 1997, the Company's backlog for products and services was approximately $1.3 million (of which approximately $500,000 represented plotters). The Company defines backlog to include only those systems, accessories, upgrades and service agreements with respect to which firm purchase orders have been received. Cancellations of product purchase orders are sometimes subject to penalties, depending upon the time of cancellation. Although a significant indicator of business levels, backlog is not necessarily representative of future sales. The Company believes its backlog at December 31, 1997 will be recognized in revenue in the next six to twelve months. MANUFACTURING The Company's manufacturing work force consists of a small group of individuals who are each trained to cover several areas of production. Emphasis is on performing final assembly, test and integration while maintaining critical skills in each aspect of production: machining, PCB assembly and rework, cable fabrication, electric-mechanical subassembly, optical alignment and electrical test. The Company believes that production lead time, product quality and customer response are key elements to its success. The Company's systems have a number of highly complex components. Although the Company manufactures some of the subassemblies used in its systems, most are purchased from unaffiliated subcontractors, typically to the Company's specifications. None of the Company's suppliers is obligated to provide the Company with any specific quantity of components or subassemblies over any specific period. Certain of the components and subassemblies included in the Company's products are obtained from a limited group of suppliers. In addition, because the Company believes that subsystem vendors have increased their manufacturing expertise, the Company expects to continue to obtain virtually all of its components and subassemblies from third parties in order to devote its resources toward systems design, software development and systems integration, its primary areas of competence. From March 1996 through December 1996, the Company utilized an agreement ("Purchasing Agreement") with Centennial Technologies, Inc. ("Centennial"), under which Centennial would purchase raw materials and certain components on its own account and sell them to the Company at the same price. During this time, the Company was able to obtain adequate and timely delivery of critical subassemblies and components through the Purchasing Agreement, although it has experienced occasional delays. The Company did not make any purchases through Centennial after December 31, 1996, which significantly limited the 14 15 Company's ability to purchase such materials. It experienced more significant delays after December 1996 because of payment terms that required cash in advance or cash on delivery. The Company was never a customer of Centennial nor was Centennial ever a customer of the Company. (SEE "MANAGEMEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS") In November 1997, the Company received a major equity investment from Imprimus and is using some of these funds to purchase materials to restabilize its supply of raw materials. In addition, the Company is presently negotiating with its major suppliers to reestablish credit terms for the purchase of materials, components and subassemblies. No assurance can be given that the Company will be successful in its negotiations or that it will obtain favorable financing terms, if at all. Further, because the manufacture of these components and subassemblies is very complex and requires long lead times, and although alternative sources are available, such sources may not be readily available. As a result, no assurance can be given that delays or shortages caused by suppliers will not occur in the future. Any disruption of the Company's supply of critical components and subassemblies could prevent the Company from meeting its manufacturing schedules, which could damage relationships with customers and would have a material adverse effect on the Company's business, financial condition and results of operations. Due to recent increases in demand, the average time between order and shipment of the Company's systems has increased over the last fiscal year. The Company's ability to increase its manufacturing capacity in response to an increase in demand is limited given the complexity of the manufacturing process, the lengthy lead times necessary to obtain critical components and the need for highly skilled personnel. The failure of the Company to keep pace with customer demand would lead to further extensions of delivery times, which could deter customers from placing additional orders, and could adversely affect product quality. There can be no assurance that the Company will be successful in increasing or be able to fund increasing its manufacturing capacity. Rapid growth of the Company's business, of which no assurance can be given, may significantly strain the Company's management, operational and technical resources. If the Company is successful in obtaining rapid market penetration of its products, the Company will be required to deliver increasing volumes of highly complex products and components to its customers on a timely basis at a reasonable cost to the Company. No assurance can be given that the Company's efforts to expand its manufacturing and quality assurance activities will be successful or that the Company will be able to satisfy increased commercial scale production on a timely and cost-effective basis. In addition to the levels of support currently provided, including the ability to modify its technology and products to meet end-user requirements, the Company will also be required to continue to improve its operational, management and financial systems and controls. Failure to effectively manage such growth could have a material adverse effect on the business of the Company. GOVERNMENTAL REGULATIONS AND INDUSTRY STANDARDS The Company's products and worldwide operations are subject to numerous governmental regulations designed to protect the health and safety of operators of manufacturing 15 16 equipment. In particular, the EU has recently issued regulations relating to electromagnetic fields, electrical power and human exposure to laser radiation. The Company believes that its products currently comply with all applicable material governmental health and safety regulations, including those of the EU, and with any voluntary industry standards currently in effect. PATENTS AND PROPRIETARY INFORMATION The Company holds five United States patents expiring between August 2003 and October 2005. The Company also holds two patents issued in Israel and England expiring in June 2004. The Company's products require technical know-how to engineer and manufacture and are based, in part, upon proprietary technology. To the extent proprietary technology is involved, the Company relies on patents, copyrighted software and trade secrets that it seeks to protect, in part, through confidentiality agreements. There can be no assurance that such agreements will not be breached, that the Company will have adequate remedies for any breach, or that the Company's trade secrets will not otherwise become known to, or independently developed by, existing or potential competitors of the Company. The Company may be involved from time to time in litigation to determine the enforceability, scope and validity of its rights. In addition, no assurance can be given that the Company's products will not infringe any patents of others. Litigation could result in substantial cost to the Company and diversion of effort by the Company's management and technical personnel. EMPLOYEES As of December 31, 1997, the Company had 25 full-time employees and one part-time employee along with six independent contractors, of which eight were in sales, marketing and service, six were in engineering and product development, six were in administration and finance, and 12 were in manufacturing. None of the Company's employees are represented by a labor union. The Company considers its relationships with its employees to be satisfactory. The Company's financial performance will depend significantly upon the continued contributions of its officers and key management, technical, sales and support personnel, many of whom would be difficult to replace. In addition, the Company believes that certain of its former employees currently provide services or technical support to the Company's customers or competitors. No assurance can be given that the Company will be successful in attracting or retaining qualified personnel. ITEM 2. PROPERTIES The Company maintains its corporate headquarters, executive offices and principal research, developing, engineering and manufacturing facilities in approximately 14,000 square feet in Lowell, Massachusetts pursuant to a renewed lease as of December 1, 1995, which expires on November 30, 1998. The Company's manufacturing operations in this facility occupy 6,000 square feet of space. The Company estimates that the current space is sufficient for shipment of up to three systems per month. The minimum annual rental for these premises is approximately 16 17 $119,000. The Company is responsible for payment of real estate taxes, which are approximately $13,000 per year, and maintenance. The Company believes that these facilities are adequate to meet its current needs. If additional space is required, the Company believes that adequate facilities are available at competitive prices. ITEM 3. LEGAL PROCEEDINGS The Company is currently involved in litigation with Polaroid. On August 5, 1997 (after the May 31, 1997 end of the contract year), Polaroid filed a complaint in Middlesex County (Massachusetts) Superior Court, in which Polaroid sought to declare the Company in default of its milestone obligations and to convert the arrangement to a non-exclusive relationship. The Company disputed this action and, when Polaroid refused to negotiate, a Superior Court judge entered a temporary restraining order prohibiting Polaroid from converting the agreement to a non-exclusive relationship. Polaroid subsequently sought to have the order overturned and the judge again found in favor of the Company, extending the temporary restraining order. This order was subsequently converted to a preliminary injunction. Polaroid has brought counterclaims, alleging breach of conflict and breach of the duty of good faith and fair dealing. The Company disputed those counterclaims and served a Motion to Dismiss causing Polaroid to amend its counterclaims. The Company has answered the amended counterclaims and disputes their validity. Currently, the Company is in negotiations with Polaroid to resolve the dispute. The outcome cannot be predicted, although the Company believes the ultimate resolution of this disupte will not have a material adverse effect on the Company's results of operations. The Company is not involved in any other litigation of a material nature. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company did not submit any matters during the fourth quarter of the fiscal year covered by this report to a vote of security holders through the solicitation of proxies or otherwise. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's stock is traded on the OTC Bulletin Board. Until January 1997, the Company traded with the symbol ORBS. As part of its acquisition of Triple I Corporation, the Company completed an 18:1 reverse stock split and changed its trading symbol to INIM. As of January 21, 1998, the Company had 255 holders of record of its Common Stock. Management believes that there are approximately 500 beneficial owners of the Company's Common Stock. For the fiscal quarters reported below, the following table sets forth the range of high and low bid quotations for the Common Stock for the relevant periods as reported by the OTC Bulletin Board. Such quotations represent inter-dealer quotations without adjustment for retail 17 18 markups, markdowns or commissions and may not represent actual transactions. The quotations have been adjusted to reflect the 18:1 reverse stock split. The quotations represent interdealer quotations, do not include retail mark-ups or commissions and do not necessarily represent actual transactions.
HIGH BID LOW BID -------- ------- COMMON STOCK Fiscal Year 1996 First Quarter................................... $ 5 1/16 $ 1 11/16 Second Quarter ................................. $ 5 1/16 $ 1 11/16 Third Quarter .................................. $ 5 1/16 $ 1 11/16 Fourth Quarter ................................. $ 5 1/16 $ 1 11/16 Fiscal Year 1997 First Quarter ................................... $ 2 13/16 $ 2 13/16 Second Quarter................................... $ 2 13/16 $ 2 13/16 Third Quarter.................................... $ 2 13/16 $ 2 1/4 Fourth Quarter................................... $ 4 1/4 $ 2 3/4 Fiscal Year 1998 First Quarter.................................... $ 3 1/4 $ 1 1/8 Second Quarter................................... $ 1 3/8 $ 1 1/8 Third Quarter.................................... $ 1 1/8 $ 7/8 Fourth Quarter (Through January 21, 1998)........ $ 1 $ 7/8
DIVIDENDS The Company has not paid any cash dividends on its Common Stock since inception and does not anticipate the payment of cash dividends on its Common Stock in the foreseeable future. It is expected that any earnings which may be generated from operations will be used to finance the growth of the Company. ITEM 6. SELECTED FINANCIAL DATA The following summary financial information of the Company is qualified in its entirety by, and should be read in conjunction with, the Company's audited Financial Statements and notes thereto. This data represents the financial information of Triple I for the year ended March 31, 1997 and includes Orbis Inc., for the period from the effective date of the exchange of February 1, 1997, through March 31, 1997. Prior to the Exchange, Triple I had a September 30 year end. As part of the Exchange, Triple I adopted a March 31 year end, which is evidenced by the six month period from September 30, 1995 to March 31, 1996, which includes financial information for Triple I only. Financial information for the years ended September 30, 1995, 1994 and 1993 includes only Triple I. 18 19 STATEMENTS OF OPERATIONS DATA: - --------------------------------------------------------------------------------
Fiscal Years Ended September 30, Six Months Year ------------------------------------------ Ended Ended 1993 1994 1995 March 31,1996 March 31, 1997 ---- ---- ---- ------------- -------------- Revenues $ 353,520 $ 1,310,148 $ 1,225,023 $ 580,366 $ 1,823,876 Cost of revenues 710,511 1,197,065 1,142,582 551,449 1,609,987 ----------- ----------- ----------- ----------- ----------- Gross profit (loss) (356,991) 113,083 82,441 28,917 213,589 Operating expenses: Research and development 448,875 468,075 505,147 427,778 440,207 Sales and marketing 275,323 370,859 218,704 125,370 361,392 Merger expenses 179,787 General and administrative 668,625 680,824 814,094 541,285 857,948 ----------- ----------- ----------- ----------- ----------- Total operating expenses 1,392,823 1,519,758 1,537,945 1,094,433 1,839,334 ----------- ----------- ----------- ----------- ----------- Loss from operations (1,749,814) (1,406,675) (1,455,504) (1,065,516) (1,625,745) Other income (expense) (80,291) (99,888) (119,622) (94,305) (268,809) ----------- ----------- ----------- ----------- ----------- Net loss $(1,830,105) $(1,506,563) $(1,575,126) $(1,159,821) $(1,894,554) Net loss per common share $(3.99) $(1.45) $(1.05) $(.55) $(.44) Weighted average number of common shares outstanding 458,405 1,039,025 1,507,099 2,105,823 4,257,727
BALANCE SHEET DATA: Fiscal Years Ended September 30, Six Months Year ---------------------------------------- Ended Ended 1993 1994 1995 March 31, 1996 March 31, 1997 ---- ---- ---- -------------- -------------- Total current assets $ 678,705 $ 744,803 $ 860,682 $ 807,559 $ 2,487,258 Working capital deficit 349,083 777,346 1,748,891 1,566,430 1,691,927 Total assets 1,231,906 1,167,675 1,143,002 1,019,444 2,594,279 Total liabilities 1,192,788 2,117,120 3,267,573 2,373,989 4,629,185 Accumulated deficit (1,830,105) (3,336,668) (4,911,794) (6,071,615) (7,861,380) Stockholders' equity (deficit) 39,118 (949,445) (2,124,571) (1,354,545) (2,034,906)
- -------------------------------------------------------------------------------- ITEM 7. MANAGEMENT's DISCUSSION AND ANALYSIS OF FINANCIAL 19 20 CONDITION AND RESULTS OF OPERATIONS GENERAL Industrial Imaging Corporation designs, manufactures and markets automated optical, vision and industrial imaging systems for inspection and identification of defects in PCBs and laser plotters for creation of PCB artwork and phototools. Members of the Company's management were pioneers in the field of automated optical inspection of PCBs. These individuals developed the Company's product line while working at Itek, now a part of Hughes Corporation, through close cooperation between Itek and DEC. The prototype and initial production models developed by Itek and DEC were later completed and marketed by AOI Systems, Inc., a predecessor to the Company's subsidiary, Triple I. The Company acquired Triple I as part of the Exchange, whereby the shareholders of Triple I received 90% ownership of the Company in exchange for 100% of Triple I's outstanding Common Stock (the "Exchange"). The Exchange was effective on February 1, 1997. Prior to the Exchange, Orbis had not had revenues from operations since 1992, and therefore, the impact of Orbis on the financial statements of Industrial Imaging is immaterial. The information provided below represents the financial information of Triple I for the year ended March 31, 1997 and includes Orbis for the period from the effective date of the Exchange of February 1, 1997 through March 31, 1997. Prior to the Exchange, Triple I had a September 30 year end. As part of the Exchange, Triple I adopted a March 31 year end, which is evidenced by the six-month period from September 30, 1995 to March 31, 1996, which includes financial information for Triple I only. Financial information for the years ended September 30, 1995, and 1994 includes only Triple I. The following discussion and analysis should be read in conjunction with the Financial Statements of the Company (including the Notes thereto) commencing on page F-1 of this report. RESULTS OF OPERATIONS YEAR ENDED MARCH 31, 1997 ("FISCAL 1997") COMPARED TO THE SIX MONTHS ENDED MARCH 31, 1996 ("SIX MONTHS 1996") As explained above, the periods being compared are the year ended March 31, 1997 as compared to the Six Months 1996. Thus, the comparison shows wide variation in absolute dollar amounts as well as the relationships due to volume differences. Revenues for the year ended March 31, 1997 were $1,823,576 as compared to $580,366 for the Six Months 1996, an increase of $1,243,210. Product revenues were $1,525,625 in Fiscal 1997 as compared to $419,782 in the Six Months 1996. This increase was due primarily to an increase in the number of units sold, which amounted to approximately $863,000 in revenues, and an increase in prices, which amounted to approximately $380,000 in revenues. Service revenues were $297,951 in Fiscal 1997 as compared to $160,584 in the Six Months 1996. This increase was due in part to increased levels of business during the one year period as opposed to the six month period. Due to the level of technical and marketing expertise necessary to support its existing and new customers, the Company must attract highly qualified and well-trained personnel. There can be only a limited number of persons with the requisite skills to serve in these positions and it may become increasingly 20 21 difficult for the Company to hire such personnel. The Company's planned expansion may also significantly strain the Company's management, manufacturing, financial and other resources. There can be no assurance that the Company's systems, procedures, controls and existing space will be adequate to support the Company's operations. Failure to manage the Company's growth properly could have a material adverse effect on the Company's future financial condition, revenues and operating results. Cost of revenues for Fiscal 1997 was $1,609,987 as compared to $551,449 for the Six Months 1996, an increase of $1,058,538, resulting from an increase in sales volume. Gross profit increased to $213,589 or approximately 11.7% in Fiscal 1997 as compared to $28,917 or approximately 4.9% in the Six Months 1996, due to fixed manufacturing costs being a lesser percentage of revenue for 1997 as compared to 1996. Operating expenses are less sensitive to volume changes at this level of sales than cost of sales. Operating expenses for Fiscal 1997 were $1,839,334 as compared to $1,094,433 in 1996, an increase of $744,901. Research and development expenses were $440,207 in Fiscal 1997 as compared to $427,778 in the Six Months 1996, which appears to remain the same for the Six Months 1996 and Fiscal 1997 primarily due to significant expenditures in research and development expenses relating to the development of the Company's AOI-2500 Series in 1996 and the recording of approximately $120,000 of cost reimbursements from the Department of Energy relating to the contract with the Company to research optics as an offset to and decrease of research and development expense in Fiscal 1997. Sales and marketing expenses were $361,392 in Fiscal 1997 as compared to $125,370 in the Six Months 1996. The more than doubling of these expenses was primarily due to the hiring of a Vice President of Sales and Marketing, the hiring of a marketing administrator, the Company's attendence in trade shows and increased travel costs for sales and marketing in Fiscal 1997. General and administrative expenses were $857,948 in Fiscal 1997 as compared to $541,285 in the Six Months 1996. The Six Months 1996 expense included a $200,000 one time fee paid to Centennial for the Centennial Agreement. In addition, 1997 expenses included Orbis expenses for the the period February 1, 1997, to March 31, 1997, compensation expense relating to stock options, merger expenses of $179,787,and increased legal, audit and travel costs. Interest expenses were $89,257 in Fiscal 1997 as compared to $94,305 in the Six Months 1996. The less than doubling of interest was due to the reduction in debt, primarily related to the conversion of $1,270,637 of debt to equity in February 1996, partially offset by the 1997 bridge financing. Other expense was $179,552 in Fiscal 1997 and primarily consisted of an expense recorded for the market value of shares granted in conjunction with the 1997 bridge financing. The net loss increased to $1,894,554 in Fiscal 1997 as compared to $1,159,821 in the Six Months 1996. This increase is primarily due to the aforementioned increase in sales, an increase in gross margins which was more than offset by the increase in operating expenses as well as other expenses explained above. SIX MONTHS ENDED MARCH 31, 1996 ("SIX MONTHS 1996") AND SIX MONTHS ENDED MARCH 31, 1995 UNAUDITED ("INTERIM 1995") Revenues for Six Months 1996 were $580,366 as compared to $584,828 for Interim 1995. Product revenues were $419,782 for Six Months 1996 as compared to $474,600 for 21 22 Interim 1995. This decrease was due to fewer systems being sold during the Six Months 1996 period. Service revenues were $160,584 in Six Months 1996 as compared to $110,228 in Interim 1995, due to an increase in customer service provided by the Company. Cost of revenues was $551,449 for Six Months 1996 as compared to $559,133 for Interim 1995. Gross margin increased to $28,917 or approximately 5% for Six Months 1996 from $25,695 or approximately 4% for Interim 1995. Operating expenses were $1,094,433 for Six Months 1996 as compared to $805,988 in Interim 1995, an increase of $288,445. Research and development expenses were $427,778 in Six Months 1996 as compared to $279,266 in Interim 1995, primarily due to increased research and development expenses associated with the development of the Company's AOI-2500 Series. Sales and marketing expenses were $125,370 in Six Months 1996 as compared to $106,584 in Interim 1995, resulting from an increase in expenditures for trade shows and advertising. General and administrative expenses were $541,285 in Six Months 1996 as compared to $420,138 in Interim 1995, primarily due to a one-time non-refundable fee of $200,000 paid by the Company to Centennial pursuant to the terms of the Purchasing Agreement. Interest expense increased to $94,305 in Six Months 1996 from $58,748 in Interim 1995 as a result of increased borrowings and increased use of factoring of accounts receivable. The net loss increased to $1,159,821 in Six Months 1996 as compared to $841,412 in Interim 1995. This change is primarily due to the aforementioned increase in operating expenses as well as an increase in interest expense from borrowings. YEAR ENDED SEPTEMBER 30, 1995 ("FISCAL 1995") COMPARED TO THE YEAR ENDED SEPTEMBER 30, 1994 ("FISCAL 1994") Revenues were $1,225,023 in Fiscal 1995 as compared to $1,310,148 in Fiscal 1994, a decrease of 7%. Product revenues were $986,660 in Fiscal 1995 as compared to $936,783 in Fiscal 1994. This increase was due to a price increase of $136,000 partially offset by decreases of units shipped of $86,000. Service revenues were $238,363 in Fiscal 1995 as compared to $373,365 in Fiscal 1994 as a result of a decrease in contract services provided to customers. Cost of revenues was $1,142,582 or 93% of revenues for Fiscal 1995 as compared to $1,197,065 or 91% of revenues for Fiscal 1994. Gross margin was $82,441 or 7% in Fiscal 1995 as compared to $113,083 or 9% in Fiscal 1994. Since fixed overhead costs accounted for a significant portion of the Company's cost of sales, if and when revenues increase, gross margins are expected to improve as fixed costs become a decreasing percentage of revenues. Operating expenses for Fiscal 1995 were $1,537,945 as compared to $1,519,758 for Fiscal 1994. Research and development expenses increased to $505,147 in Fiscal 1995 from $468,075 in Fiscal 1994. Sales and marketing expenses were $218,704 in Fiscal 1995 as compared to $370,859 in Fiscal 1994. This decrease was primarily due to a reduction in expenditures for trade shows, advertising and travel expenses. General and administrative expenses were $814,094 in Fiscal 1995 as compared to $680,824 in Fiscal 1994 to, primarily due to hiring a chief financial officer and increased use of technical consultants. 22 23 Interest expense was $126,189 in Fiscal 1995 as compared to $83,311 in Fiscal 1994 as a result of increased borrowings and the use of factoring of accounts receivable. Due to the uncertainty of realizing the tax benefits of net loss carryforwards, no provision for income tax benefit was made for either Fiscal 1995 or Fiscal 1994. Net loss was $1,575,126 for Fiscal 1995 as compared to $1,506,563 for Fiscal 1994, due to the consistency of revenues, cost of sales and operating expenses. LIQUIDITY AND CAPITAL RESOURCES The Company has incurred operating losses since inception that have continued through December 31, 1997. In addition, the financial statements of the Company for Fiscal 1994, Fiscal 1995, Six Months 1996, and Fiscal 1997 were prepared on the assumption that the Company will continue as a going concern and do not include any adjustments that would result if the Company would cease as a going concern. The report of the independent accountants contain an explanatory paragraph as to the Company's ability to continue as a going concern. Among the factors cited by the auditors as raising substantial doubt as to the Company's ability to continue as a going concern is that the Company has suffered recurring losses from operations, has a net working capital deficiency and has an accumulated deficit of $7,966,169 as of March 31, 1997. The auditors note that the Company's capital requirements may change depending upon numerous factors, including the demand for the Company's product. Management believes that the investment by Imprimus of $3 million in November 1997 will provide the additional capital funding that the Company needs to aggressively pursue market penetration. In view of the Company's current financial condition, the Company plans to continue to aggressively manage its working capital and expenses while pursuing product sales opportunities as well as strategic or other business relationships. (See Note B to the Financial Statements) The Company's operations to date have been funded by equity investments, borrowing from banks, investors and stockholders, factoring of accounts receivable, and to a limited extent, cash flow from operations. In addition, the Company raised $3 million of new equity in November, 1997. At March 31, 1997, the Company had cash of $62,103, and a working capital deficit of $1,691,927. During 1997, Six Months 1996, Fiscal 1995 and Fiscal 1994 cash used in operating activities was $1,376,031, $662,535, $775,226 and $1,169,231 respectively. Capital expenditures were $23,603, $0, $0 and $14,996 for 1997, Six Months 1996, Fiscal 1995 and Fiscal 1994, respectively. The Company has no outstanding material commitments for capital expenditures. During 1997, the Company raised (i) $816,496 from private equity sales to affiliates and partially from the 1996 Private Placement and (ii) $635,230 (net) from the issuance of debt. During Six Months 1996, the Company raised $559,210, net, from sales of Common Stock during the 1996 Private Placement and $107,118 from the net issuance of debt. For Fiscal 1995, cash provided by financing activities was $781,444, which was comprised of $400,000 from Common Stock sales and $381,444 from issuances of debt. Net cash provided by financing activities was $1,134,612 for Fiscal 1994, consisting of proceeds from sales of Common Stock of $518,000 and from net issuances of debt of $616,612. The net increases in cash for Fiscal 1994, Fiscal 1995, Six Months 1996 and 1997 were $0, $6,218, $3,793 and $52,092, respectively. The Company derives most of its annual revenues from a relatively small number of sales of products, systems and upgrades, with product prices ranging from $185,000 to $600,000 per 23 24 system. As a result, accounts receivable is expected to fluctuate based on the number of systems sold in each period and the timing of the individual sales within each period. Moreover, any delay in the recognition of revenue for single products or a delay in shipment to customers, systems or upgrades would have a material adverse effect on the Company's results of operations for a given accounting period. In addition, some of the Company's net sales have been realized near the end of a quarter. Accordingly, a delay in a customer's acceptance or in a shipment scheduled to occur near the end of a particular quarter could materially adversely affect the Company's results of operations for that quarter. The accounts receivable balance increased from $92,586 at March 31, 1996 to $493,778 at March 31, 1997, due to a sale where the balance was collected in Fiscal 1998. Fluctuations in inventory will be caused by changes in production levels, timing of materials inflows, amount of sales and the timing of shipments to customers. Inventory was $1,877,979 and $682,886 as of March 31, 1997 and March 31, 1996, respectively. The increase in inventory of $1,195,093 or 175% was primarily caused by an increase in raw materials to facilitate anticipated production increases and an increase in work in process. Finished goods also increase slightly during the period. Both the increases in raw materials and work in process were intended to support increased production to fill anticipated increases in cutomer demand and system sales. In addition, the Company has increased inventory balances to support increased production levels in anticipation of increased sales shipments. The increases in inventory balances in 1997 were for the most part, financed through the Purchasing Agreement. When the Company acquired the assets and product base of AOI Systems, Inc., the Company became responsible for $130,000 of indebtedness to certain creditors of AOI Systems, Inc. This indebtedness incurs interest at 8.0% per annum and became due and payable on January 30, 1995. The Company renegotiated the note in July 1994 to require interest only payments at a rate of 8.0%, due monthly. The Company recently paid $10,000 towards interest due and is currently negotiating an extension of the due date. As several installments have not been paid for a period of thirty days past their due dates, the noteholder, at his option, may declare the note due and payable upon demand. In December 1992, the Company received $50,000 from a stockholder in return for a subordinated promissory note bearing an interest rate of 8.4% per annum, due on December 31, 1996. The note provides that the Company is in default if the amount due is not received within 90 days of the maturity date. Upon an event of default, the noteholder may, upon written notice to the Company, declare the note immediately due and payable. As of January 29, 1998, the note has not been repaid. The Company has not received any demand notices and plans to continue paying the quarterly interest payments as they become due. (SEE "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS") From August 1993 through June 1995, various stockholders of the Company, including Dr. Harry Hsuan Yeh, Mr. Joseph Teves, the Massachusetts Technology Development Corporation (the "MTDC") and the Massachusetts Community Development Finance Corporation (the "CDFC"), loaned the Company an aggregate of approximately $1,200,000 to help fund operations. These loans were made pursuant to various promissory notes with various due dates through August 22, 1999. These notes provide for interest at per annum rates ranging from 8.4% to 10%. In February 1996, these noteholders agreed to convert the principal and interest due on the notes into 1,270,637 shares of the Company's Common Stock, on the basis of 24 25 one share of Common Stock for every one dollar of debt converted. Dr. Yeh and Mr. Teves did not convert all of their outstanding debt and each received a promissory note for $100,000 bearing an interest rates of 10% and 8.4% per annum, respectively, for the amounts due to them from the Company. The maturity date for the notes to Dr. Yeh and Mr. Teves was October 23, 1996. The notes provide that the Company is in default if the amount due is not paid within 90 days of the maturity date. Upon an event of default, the noteholder may, upon written notice to the Company, declare the note immediately due and payable. The Company has not received any demand notices from the noteholders. Dr. Yeh also forgave a $100,000 loan to the Company in return for a warrant to purchase 150,000 shares of Common Stock, exercisable until February 6, 1999 at $1.00 per share which was recorded as paid in capital on the balance sheet. In November 1995, the Company completed a 1995 Bridge Financing ("1995 Bridge Financing") as part of the 1996 Private Placement, whereby certain affiliates loaned $255,000 to the Company in return for $255,000 in subordinated promissory notes bearing an interest rate of 10% per annum, due May 24, 1996, and warrants to purchase 250,000 shares of Common Stock, exercisable until November 1998, at an exercise price of $1.00 per share. The following affiliates participated in the 1995 Bridge Financing: Dr. Juan J. Amodei, Dr. Joseph Bordogna, Mr. Joseph Teves, Polaroid and Centennial. To date, $150,000 has been repaid towards the outstanding balance. The notes provide that the Company is in default if the amount due is not paid within 90 days of the maturity date. Upon an event of default, the noteholder may, upon written notice to the Company, declare the note immediately due and payable. The Company has not received any demand notices from the noteholders. In February 1996, the Company commenced the 1996 Private Placement, which involved the sale of the Company's Common Stock for $1.00 per share. When the 1996 Private Placement was completed in April 1996, the Company had sold 880,000 shares of Common Stock and received net proceeds of $797,036, which included a purchase of 250,000 shares by Centennial. In March 1996, the Company entered into the Purchasing Agreement, whereby Centennial would purchase raw materials and certain components on its own account and sell them to the Company at the same price. Payment for such purchases were due upon the receipt of final payment from customers for the products containing such materials purchased through Centennial. Originally, Centennial agreed to allow the Company to purchase up to a total of $750,000 worth of materials at any one time, which could be increased to $1,500,000. The Company paid a one-time nonrefundable fee of $200,000 for this credit facility. The outstanding balance on this facility on December 31, 1996 was approximately $1,300,000. In May, 1997, the amount due to Centennial was satisfied through a cash payment of approximately $132,000 and a conversion of the remaining amount into 600,000 shares of the Company's Common Stock. The Company did not make any purchases through Centennial after December 31, 1996, which significantly limited the Company's ability to purchase such materials. The Company was never a customer of Centennial nor was Centennial ever a customer of the Company. As described below, the Company has received a major equity investment from Imprimus Investors and will use some of these funds to purchase materials. In addition, the Company is presently negotiating with its major suppliers to reestablish credit terms for the purchase of materials, components and subassemblies. No assurance can be given that the Company will be successful in its negotiations or that it will obtain favorable financing terms, if at all. (SEE "BUSINESS" AND "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS") 25 26 In June 1996, MTDC purchased 200,000 shares of Common Stock, at a price of $1.00 per share. In May 1996, Centennial had loaned $200,000 to the Company in the form of a convertible note bearing an interest rate of 10% per annum, which automatically converted to 200,000 shares of Common Stock upon the purchase of stock by MTDC. Upon MTDC's purchase in June 1996, Centennial converted the note to shares of Common Stock on the same terms as the MTDC stock purchase and later purchased another 250,000 shares of Common Stock at $1.00 per share. In August 1996, Centennial loaned the Company $100,000, in return for a three month promissory note for the amount borrowed, bearing a per annum interest rate equal to the prime rate plus 4%, and warrants to purchase 100,000 shares of Triple I's Common Stock exercisable for a period of five years from the date of issuance, at an exercise price of $1.00 per share. The warrants were exercised for the Company's Common Stock in January 1997 and the proceeds were used to pay the outstanding balance of the $100,000 promissory note. In November 1996, Centennial loaned Triple I $130,000 in return for a three month promissory note for the amount borrowed, bearing an interest rate equal to the prime rate plus 4%, and warrants to purchase 130,000 shares of the Triple I's Common Stock exercisable for a period of five years from the date of issuance, at an exercise price of $1.00 per share. The warrants were exercised to purchase the Company's Common Stock in January 1997 and the proceeds were used to pay the outstanding balance of the $130,000 promissory note. In December 1996, Dr. Harry Hsuan Yeh loaned $150,000 to Triple I, in return for a twelve-month promissory note. On January 15, 1997, this note was converted to a two year subordinated promissory note, bearing an interest rate of 10% per annum, which was issued to Dr. Yeh along with 44,100 shares of Common Stock. On January 22, 1997, Dr. Yeh loaned another $50,000 to the Company in exchange for a subordinated promissory note and 14,700 shares of Common Stock. Both subordinated promissory notes contain the same terms as the Bridge Notes (defined below) and payment is accelerated in the event the Company raises a certain amount of equity financing. In February 1997, the Company commenced the 1997 Bridge Financing and sold five (5) units ("Units"), each Unit consisting of a $50,000 subordinated promissory note bearing an annual interest rate of 10% ("Bridge Notes") and 10,714 shares of Common Stock. Aggregate gross proceeds to the Company were $250,000 as of February 14, 1997. The Bridge Notes are payable two years after the date of the Bridge Notes and payment is accelerated in the event the Company raises a certain amount of equity financing. In November 1997, Imprimus executed a Securities Purchase Agreement to invest $3 million in the Company by purchasing three million shares of the Company's Common Stock at $1.00 per share. In accordance with the agreement, the Company also issued warrants to purchase one million shares of Common Stock at $1.00 per share through November 12, 2002, and issued warrants to purchase one million shares of Common Stock at $2.00 per share through November 12, 2002. The investor was granted demand registration rights starting six months from the closing date for both the Common shares purchased and the warrants granted. In addition, the investor will hold a seat on the board of directors. The agreement contains certain covenants which restrict future activities of the company including, but not limited to, mergers or acquisitions, borrowings, issuance of securities, payment of dividends, granting a security 26 27 interest in company assets, and the purchase or sale of assets. The investment has been funded and closing and issuance costs (including commissions) amounted to approximately $250,000. In November, 1997, the Company offered a 50% discount of the exercise price to all warrantholders of the Company's common stock for a specified period of time, which has expired. Warrantholders exercised warrants to purchase 1,187,406 shares of Common Stock at prices from $.25 per share to $.60 per share. The Company received $252,145 in cash, received a promissory note from an officer of the Company for $125,000, interest and principal is payable in four years, and accrues interest at an rate of 8.5% per annum. The stock purchased is pledged as collateral against the note. In addition, a director of the Company cancelled a promissory note due from the Company for $100,000 in exchange for the exercise of warrants at a total exercise price of $98,480. The balance of the note payable plus accrued interest were paid to the noteholder in cash. The Company also repaid a $15,000 note payable to a director plus accrued interest. The impact of these transactions will result in the Company taking a charge in Fiscal 1998. To fund operations in the future, the Company will rely on proceeds from the Imprimus equity investment and cash flow from anticipated sales. The Company's management believes that the funds provided by the equity investment and cash flow from anticipated future product sales, will be sufficient to fund continuing operations through the end of fiscal 1998. INFLATION To date, inflation has not has a material effect on the Company's business. CHANGES IN ACCOUNTING STANDARDS Accounting Pronouncements - In February 1997, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128. "Earning Per Share" which is effective for fiscal years ending after December 31, 1997, including interim periods. Earlier adoption is not permitted. However, the statement permits disclosure of pro forma earnings per share amounts computed under SFAS 128 in the notes to the financial statements in periods prior to adoption. The statement requires restatement of all prior period earnings per share data presented after the effective date. SFAS 128 specifies the computation, presentation and disclosure requirements for earnings per share and is substantially similar to the standards recently issued by the International Accounting Standards Committee 27 28 entitled International Accounting Standards, Earnings Per Share. The Company will adopt SFAS 128 in fiscal 1998 and has not yet determined its impact. In June 1997, the FASB issued two additional statements. SFAS 130, "Reporting Comprehensive Income" and SFAS 131, "Disclosures About Segments of an Enterprise and Related Information" are both effective for years beginning after December 15, 1997. Adoption of these standards are not expected to impact the financial results of the Company. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Item 14 below and the Index therein for a listing of the financial statements and supplementary data filed as part of this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE No change in the Company's independent accountants occurred during the Company's two most recent fiscal years, nor did any disagreements occur on any matter of accounting principles or practices or financial statement disclosure that would be required to be reported on a Form 8-K. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS AND EXECUTIVE OFFICERS The current directors and executive officers of the Company, their ages and their positions held with the Company are as follows:
NAME AGE TITLE ---- --- ----- Juan J. Amodei, Ph.D.............. 63 Chief Executive Officer, President, Secretary and Chairman of the Board of Directors Bryan M. Gleason.................. 47 Chief Financial Officer and Treasurer K. Michael Chase.................. 53 Vice President of Manufacturing and Field Service of Triple I Richard J. Royston................ 66 Vice President of Research of Triple I Richard A. Desrosiers............. 55 Vice President of Sales of Triple I Joseph Bordogna, Ph.D............. 64 Director
28 29
Charles G. Broming................ 48 Director Joseph A. Teves................... 49 Director Harry Hsuan Yeh, Ph.D............. 71 Director Shaiy Pilpel, Ph.D. .............. 46 Director
The following is a brief summary of the background of the directors and executive officers named above: JUAN J. AMODEI, PH.D., 63, has served as the Chief Executive Officer, Chairman of the Board of Directors, President and Secretary of Industrial Imaging since December 1996. Dr. Amodei has served as Chairman of the Board, Chief Executive Officer, President and Secretary of Triple I since October 1992. From September 1986 to October 1992, Dr. Amodei served as Chairman of the Board of AOI Systems, Inc., a spin-off of Itek Optical Systems, where Dr. Amodei served as President from March 1976 to August 1986. Dr. Amodei holds a Bachelor of Science degree from Case Institute of Technology and both a Masters in Electrical Engineering and a Ph.D. in Electrical Engineering from the University of Pennsylvania. Dr. Amodei is a Trustee of the University of Pennsylvania and Chairman of the Board of Overseers of the School of Engineering and Applied Science. BRYAN M. GLEASON, 47, has served as Chief Financial Officer ("CFO") and Treasurer of Industrial Imaging since December 1996. Beginning in May 1996, Mr. Gleason served as the CFO and Treasurer for Triple I. Mr. Gleason was the CFO and Treasurer of Network Six, a public company specializing in systems integration from 1993 to 1996. From 1982 to 1993, Mr. Gleason was Vice President and Corporate Controller of Winthrop Financial Associates, a publicly held investment and management firm with a portfolio in excess of $6 billion. Mr. Gleason received a Bachelor of Science Degree with a concentration in Accounting at Northeastern University. Mr. Gleason is a Certified Public Accountant. K. MICHAEL CHASE, 52, has served as Triple I's Vice President of Manufacturing and Field Service since October 1992. From September 1990 to October 1992, Mr. Chase served as Vice President of Manufacturing for AOI Systems, Inc. From August 1987 to July 1990, Mr. Chase served as the Vice President of Operations for Datasec Corporation, a manufacturer of computer equipment. Mr. Chase holds both a Bachelor of Engineering degree and a Master of Engineering degree from Rensselaer Polytechnic Institute. RICHARD J. ROYSTON, 66, has served as Triple I's Vice President of Research since October 1992. From September 1986 to October 1992, Mr. Royston served as Vice President of AOI Systems, Inc. in several capacities. Mr. Royston holds a Masters of Arts degree in Mathematics from Oxford University and a Bachelor of Science degree in Mathematics from the University of London. 29 30 RICHARD A. DESROSIERS, 55, has served as Triple I's Vice President of Sales since January 1997. Prior to joining the Company in January 1997, Mr. Desrosiers served as President of D Squared Associates, a manufacturer's representative and management consulting firm serving the PCB industry. From March 1991 to January 1996, Mr. Desrosiers was a general manager and senior engineer for Hadco Corporation. Prior to that he held various technical positions at Parlex Corporation, Teledyne Electro Mechanisms and Wang Laboratories. Mr. Desrosiers holds a Bachelor of Science Degree in engineering from Western New England College, a Masters Degree in Electrical Engineering from the Naval Postgraduate School and a Master in Business Administration degree from New Hampshire College. Mr. Desrosiers is a retired Commander from the U.S. Navy. JOSEPH BORDOGNA, PH.D., 64, has served as a member of Industrial Imaging's Board of Directors since December 1996. He has served as a member of Triple I's Board of Directors since April 1993. Dr. Bordogna is presently Acting Deputy Director and Chief Operating Officer of the National Science Foundation ("NSF"), having served at NSF as Director of Engineering from 1991 to 1996. He is also the International President of the Institute of Electrical and Electronics Engineers. From 1981 to 1990, Dr. Bordogna was Dean of the School of Engineering and Applied Science at the University of Pennsylvania, and continues to hold the position of Dean of Engineering Emeritus and Alfred Fitler Moore Professor of Engineering . Dr. Bordogna also serves as a Director of University City Science Center, a regional science and technology transfer park located in Philadelphia, Pennsylvania, chairs the Board of Directors of Weston, Inc. a privately held comprehensive environment company located in West Chester, Pennsylvania, and is President-elect of the Institute of Electrical and Electronic Engineers. Dr. Bordogna received a Bachelor of Science degree and Ph.D. in electrical engineering from the University of Pennsylvania and a Master of Science degree in electrical engineering from the Massachusetts Institute of Technology. CHARLES G. BROMING, 48, has served as a member of Industrial Imaging's Board of Directors since December 1996. He has served as a Director of Triple I since February 1996. Mr. Broming is presently an Investment Officer for the Massachusetts Community Development Finance Corporation ("CDFC"), a state owned corporation that provides financing for businesses in financially distressed communities within Massachusetts. Prior to joining CDFC in 1994, Mr. Broming was a business consultant for Recoll Management Corporation, a privately held company that specializes in the recovery and collection of distressed loans. From 1990 to 1991, Mr. Broming ran CGB Associates, an independent management consulting business. Mr. Broming received a Bachelor of Arts degree from University of California, Riverside and a Master in Business Administration degree from University of Michigan, Ann Arbor. JOSEPH A. TEVES, 49, has served as a member of Industrial Imaging's Board of Directors since December 1996. He has served as a member of Triple I's Board of Directors since May 1994. In January 1997, Mr. Teves joined Separation Technologies, Inc. as Chairman and Chief Executive Officer. Separation Technologies, Inc. is a closely held company which processes minerals. From 1988 through 1996, Mr. Teves was the President of Distrigas Corporation, a 30 31 privately held company located in Everett, Massachusetts engaged in the import, export and distribution of liquid natural gas. Mr. Teves has also served as a Director of the New England Gas Association since 1989 and has served as a management consultant to companies within the gas industry. Mr. Teves holds a degree in Business Administration from the Massachusetts State College at Salem. HARRY HSUAN YEH, PH.D., 71, has served as a member of Industrial Imaging's Board of Directors since December 1996. Dr. Yeh has served as a member of Triple I's Board of Directors since 1992. Dr. Yeh is Chairman of Sinonar Corporation, a Taiwanese company founded by Dr. Yeh in 1982 engaged in the manufacture of amorphous silicon devices and solar cells. Dr. Yeh is a graduate of Chai-Tung University in China and holds a Ph.D. in Mechanical Engineering from the Massachusetts Institute of Technology. SHAIY PILPEL, PH. D., 46, has served as a member of Industrial Imaging's Board of Directors since November 1997. Dr. Pilpel curently serves as a Senior Vice President of Wexford Management LLP, an investment banking firm. From 1995 to 1996, Dr. Pilpel was a managing Director of Canadian Imperial Bank of Commerce where he headed the Mortgage Arbitrage snd Quantitative Strategies proprietary trading group and prior to that, was a portfolio manager for Steinhardt Partners. Dr. Pilpel received a Bachelor of Science degree in philosophy from the Tel Aviv University, a Masters of Science degree in Mathematics from the Hebrew University in Jerusalem, a Ph.D. in Statistics from the University of California at Berkeley and an M.B.A. from Columbia University. Dr. Pilpel is a retired Lieutenant from the Israel Defense Force. ITEM 11. EXECUTIVE COMPENSATION The following table sets forth the compensation paid to Dr. Juan J. Amodei, the Company's Chief Executive Officer, Chairman of the Board of Directors, President and Secretary and Triple I's Chief Executive Officer, Chairman of the Board of Directors, President and Secretary during the year ended March 31, 1997, six months ended March 31, 1996 and the fiscal years ended September 30, 1995 and September 30, 1994. No other executive officers of Industrial Imaging or Triple I received total compensation in excess of $100,000 in any of those periods. 31 32
Summary Compensation Table Annual Compensation ---------------------------------------------------------------------------------------------------------------- Annual Compensation Long Term Compensation -------------------------------------------- ------------------------------------- (a) (b) (c) (d) (e) (g) Other Annual Securities Name and Principal Compensation Underlying Position(1) Year(2) Salary(3) Bonus ($) ($)4 Options (#) ----------------------- ------- --------- ---------- ------------ ----------- Dr. Juan J. Amodei, 1997 $110,500 -- 8,400 -- Chief Executive 1996 $55,250 -- 4,200 40,000 Officer 1995 110,500 -- 8,400 -- 1994 110,500 -- 8,400 --
- --------------------- 1 See "MANAGEMENT -- Employment Agreements." 2 During Fiscal 1994 and 1995, Dr. Amodei's salary was paid by Triple I, according to the terms of his employment agreement with Triple I. Triple I assigned this Agreement to Industrial Imaging in connection with the Exchange with Industrial Imaging. As part of its Exchange, Triple I changed its year end to March 31. Therefore, the fiscal year for 1996 constitutes the six month period from September 30, 1995 to March 31, 1996. 3 Amounts shown indicate cash compensation earned and received by executive officers. Executive officers participate in group health and other benefits generally available to all employees of the Company. 4 This amount is comprised entirely of an automobile allowance. AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997 AND FY-END OPTION VALUES
Number of Value of Unexercised Securities Underlying In-the-Money Options Unexercised Options at Exercisable/ Shares Acquired Value FY-End Exercisable/ Unexercisable Name on Exercise Realized Unexercisable(1) ($)(2)(3) (a) (b) (c) (d) (e) ------------------ ---------------- ---------- ----------------------- -------------------- Dr. Juan J. Amodei 0 72,000 / 50,000 $144,000/$100,000
(1) See "Summary Compensation Table." (2) In-the-Money options are those options for which the fair market value of the underlying Common Stock is greater than the exercise price of the option. (3) The value of unexercised options is determined by multiplying the number of options held by the difference in the fair market value of the Common Stock underlying the options at the end of the Fiscal Year 1997 (as determined by the average of the high and low bid price of the Company as reported by OTC Bulletin Board, which were $3.25 to $2.75 per share, respectively) and the exercise price of the options granted. COMMITTEES 32 33 In October, 1997, the Board of Directors established an Audit Committee and a Compensation Committee. Messrs. Broming and Teves serve as members of the audit Committee. The Audit Committee is concerned primarily with recommending the selection of, and reviewing of the Company's independent auditors and reviewing the effectiveness of the Company's accounting policies and practices, financial reporting and internal controls. The audit Committee reviews any transactions which involve a potential conflict of interest and the scope of independent audit coverages, fees charged by the independent auditors, and internal control systems. To date, the Audit Committee has not held any meetings. Dr. Bordogna and Mr. Teves serve on the Compensation Committee. The compensation Committee is responsible for setting and administering the policies which govern annual compensation for the Company's executives. The Compensation Committee negotiates and proposes to the Board of Directors compensation arrangements for officers, other key employees, certain consultants and directors of the Company. Following review and approval by the Compensation Committee of the compensation policies, all issues pertaining to executive compensation are submitted to the Board of Directors. To date, the Compensation Committee has not held any meetings. COMPENSATION OF DIRECTORS Currently none of the directors receives fees for their service as directors. The Company is considering whether to provide a fee to non-employee directors. In October 1997, the Board of Directors voted to award non-qualified stock options to non-employee directors. Options will be granted at 5,000 per year over the next five years. In October 1997, options to purchase 5,000 shares were awarded to each non-employee director at an exercise price of $1.00 per share. EMPLOYMENT AGREEMENTS Effective as of October 31, 1995, Triple I entered into an employment and non-competition agreement (the "Agreement") with Dr. Juan J. Amodei. The Agreement was subsequently assigned to the Company as part of the Exchange with Triple I. The Agreement provides for an annual base salary of $110,500 through December 31, 1998, with bonuses and salary increases as the Board of Directors or Compensation Committee determine. Thereafter, the Agreement shall be automatically renewed for successive periods of three years, unless the Company gives Dr. Amodei not less than six months written notice of non-renewal. The Agreement also provides for vacation, insurance and certain other benefits as may be determined by the Company. Dr. Amodei is also entitled to receive severance in the event his employment is terminated by the Company without cause (the "Severance Benefits"). The Severance Benefits are equal to his "Compensation Package" for a period of one year following the date of the termination of his employment. Dr. Amodei's Compensation Package includes his base salary and all other benefits to which he is entitled, including his most recent bonus for the prior fiscal year annualized over the remaining term of the Agreement. 33 34 In the event of a Change in Control in the Company, Dr. Amodei will receive certain benefits as provided in the Agreement. A Change in Control is defined generally as: the acquisition by an individual, entity or group not a current stockholder of the Company or affiliated with the Company, of fifty percent (50%) or more of the outstanding shares of Common Stock outstanding immediately before the Change of Control. A Change of Control does not include the Company's Exchange with Triple I or any public offering of the Company's securities as approved by the Board of Directors. In the event of a Change of Control, Dr. Amodei shall have the option to terminate his employment with three month's notice. If within nine months of a Change of Control, (i) Dr. Amodei's duties are reduced, or (ii) he decides to terminate his employment; or (iii) he is terminated by the Company, then he is entitled to receive: (a) an amount equal to his Compensation Package for a period of one year, payable in a lump sum; and (b) the immediate removal of all loan guarantees and the repayment of all loans placed by him on behalf of or for the benefit of the Company. The Agreement also contains non-competition provisions for a period of one year following termination, a confidentiality provision and an ownership provision in the Company's favor for techniques, discoveries and inventions arising during the term of his employment. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT Section 16(a) of the Securities Exchange Act of 1934, as amended, ("Section 16(a)") requires executive officers, directors, and persons who beneficially own more than ten percent (10%) of the Company's stock to file initial reports of ownership on Form 3 and reports of changes in ownership on Form 4 with the Securities and Exchange Commission (the "Commission") and any national securities exchange on which the Company's securities are registered. Executive officers, directors and greater than ten percent (10%) beneficial owners are required by the Commission's regulations to furnish the Company with copies of all Section 16(a) forms they file. Based solely on a review of the copies of such forms furnished to the Company and written representations from the executive officers and directors, the Company believes that all its executive officers, directors and greater than ten percent (10%) beneficial owners complied with all applicable Section 16(a) filing requirements through March 31, 1997. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding beneficial ownership of the Company's Common Stock by (i) each of the Company's directors, (ii) each person who is known by the Company to beneficially own more than 5% of its voting securities, and (iii) all directors and executive officers as a group. Except as otherwise listed, the stockholders listed 34 35 below have sole voting and investment powers with respect to the shares indicated.
Number of Shares Approximate Beneficially Percentage of Name of Beneficial Owner(2) Owned Ownership(1) - --------------------------- ----- ------------ Shaiy Pilpel, Ph.D. (3) 5,000,000 38.79% Imprimus Investors, LLC (3)(4) 5,000,000 38.79% Harry Hsuan Yeh, Ph.D. (5) 1,535,563 14.10% Centennial Technologies, Inc. (6) 1,625,000 14.79% Juan J. Amodei, Ph.D. (7) 905,714 8.18% Massachusetts Technology Development 860,142 6.24% Corporation (8) Polaroid Corporation (9) 827,228 7.43% Massachusetts Community 786,811 7.04% Development Finance Corporation (10) Charles Broming (10)(11) 786,811 7.04% Shirley Hsin-Hui Wang (12) 342,400 4.72% Joseph A. Teves (13) 263,896 2.42% Joseph Bordogna, Ph.D. (14) 85,013 * All Officers and Directors as a group (9 persons) (1)(2)(3)(5)(8)(9)(11)(12) (13) 13,414,920 64.41%
- -------------- * Indicates less than 1%. (1) Pursuant to the rules of the Securities and Exchange Commission, shares of Common Stock which an individual or group has a right to acquire within 60 days pursuant to the exercise of options and warrants are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group but are not deemed to be 35 36 outstanding for the purpose of computing the percentage ownership of any other person shown in the table. (2) The address for Drs. Amodei, Bordogna and Yeh and Mr. Teves is c/o Industrial Imaging Corporation, 847 Rogers Street, Lowell, Massachusetts 01852. The address for Massachusetts Technology Development Corporation is 148 State Street, Boston, Massachusetts 02109. The address for Centennial Technologies is 7 Lopez Road, Wilmington, Massachusetts 01887. The address for Polaroid Corporation is 549 Technology Square, Cambridge, Massachusetts 02139. The address for Mr. Broming and Massachusetts Community Development Corporation is 10 Post Office Square, Suite 1090, Boston, Massachusetts 02109. The address for Shirley Wang is c/o Mr. Howard Yao, 2895 North Beverly Glen Boulevard, Los Angeles, California 90077. The address for Dr. Pilpel and Imprimus Investors, LLC, is c/o Wexford Management, LLC, 411 West Putnam Avenue, Greenwich, Connecticut, 06830. (3) Includes warrants to purchase 2,000,000 shares of Common Stock at exercise prices ranging from $1.00 to $2.00 per share. (4) Dr. Pilpel, a director of the Company, is also an investment officer of Imprimus Investors, LLC. As such, Dr. Pilpel retains voting control over shares owned by Impimus Investors, LLC. (5) Excludes warrants to purchase 248,145 shares of Common Stock at an exercise price of $1.00 per share and options to purchase 5,000 shares of Common Stock at an exercise price of $1.00 per share. (6) Includes warrants to purchase 95,000 shares of Common Stock at an exercise price of $1.00 per share. (7) Includes (i) warrants to purchase 108,729 shares of Common Stock with an exercise price of $1.00 (ii) options to purchase 32,000 shares of Common Stock at an exercise price of $.20 per share; and (iii) options to purchase 40,000 shares of Common Stock at an exercise price of $1.00. Excludes warrants to purchase 206,245 shares of Common Stock at an exercise price of $1.00 per share. (8) Includes (i) warrants to purchase 180,380 shares of Common Stock at an exercise price of $1.00. Excludes warrants to purchase 180,380 shares of Common Stock at an exercise price of $1.00 per share. (9) Includes warrants to purchase 250,028 shares of Common Stock at an exercise price of $1.00 per share. (10) Includes warrants to purchase 280,790 shares of Common Stock with exercise price of $1.00 per share. Excludes warrants to purchase 32,040 shares of Common Stock at an 36 37 exercise price of $1.00 per share and options to purchase 5,000 shares of Common Stock at an exercise price of $1.00 per share. (11) Mr. Broming, a director of the Company, is also an Investment Officer of the Massachusetts Community Development Finance Corporation. As such, Mr. Broming retains voting control over the shares owned by the Massachusetts Community Development Finance Corporation. (12) Excludes warrants to purchase 88,100 shares of Common Stock exercisable at $1.00 per share. (13) Excludes (i) warrants to purchase 28,470 shares of Common Stock at an exercise price of $1.00 per share (ii) warrants to purchase 14,675 shares of Common Stock at an exercise price of $1.00 per share (iii) 4,510 shares issuable upon exercise of outstanding warrants granted to Mr. Teves' adult son, to purchase 4,510 shares of Common Stock at an exercise price of $1.00 per share and (iv) and options to purchase 5,000 shares of Common Stock at an exercise price of $1.00 per share. (14) Excludes warrants to purchase 63,135 shares of Common Stock at an exercise price of $1.00 per share and options to purchase 5,000 shares of Common Stock at an exercise price of $1.00 per share. (15) Includes (i) 10,800 shares issuable upon exercise of the vested portion of options to purchase 12,400 shares of Common Stock at an exercise price of $.20 per share and 5,600 shares issuable upon exercise of the vested portion of an option to purchase 34,000 shares of Common Stock at an exercise price of $1.00 per share held by Michael Chase, the Company's Vice President of Manufacturing and Field Service; (ii) 15,600 shares issuable upon exercise of the vested portion of an option to purchase 17,600 shares of Common Stock at an exercise price of $.20 per share and 11,200 shares issuable upon exercise of the vested portion of an option to purchase 38,000 shares of Common Stock at an exercise price of $1.00 per share held by Richard J. Royston, the Company's Vice President of Research; and (iii) 20,000 shares issuable upon exercise of the vested portion of an option to purchase 60,000 shares of Common Stock at an exercise price of $1.00 per share held by Bryan Gleason, the Company's Chief Financial Officer. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS In November 1997, Imprimus, an outside investor, executed a Securities Purchase Agreement to invest $3 million in the Company by purchasing 3,000,000 shares of the Company's Common Stock at $1.00 per share. In accordance with the agreement, the Company also issued warrants to purchase 1,000,000 shares of Common Stock at $1.00 per share through November 12, 2002, and issued warrants to purchase 1,000,000 shares of Common Stock at $2.00 per share through November 12, 2002. The investor was granted demand registration rights starting six months from the closing date for both the common shares purchased and the 37 38 warrants granted. In addition, the investor will hold a seat on the board of directors. The agreement contains certain covenants which restrict future activities of the company including mergers or acquisitions, borrowings, issuance of securities, payment of dividends, granting a security interest in company assets, and the purchase or sale of assets. The investment has been funded and closing and issuance costs (including commissions) amounted to approximately $250,000. In November, 1997, the Company offered a 50% discount of the exercise price to all warrantholders of the Company's Common Stock for a specified period of time, which has expired. Warrantholders exercised warrants to purchase 1,187,406 shares of Common Stock at prices from $.25 per share to $.60 per share. The Company received $252,145 in cash. The Company also received a promissory note from Dr. Amodei, an officer and director of the Company, for $125,000, interest and principal payable in four years, and which accrues interest at an rate of 8.5% per annum to purchase 500,000 shares at $.25 per share. The stock purchased is pledged as collateral against the note. In addition, Mr. Teves, a director of the Company cancelled a promissory note due from the Company for $100,000 for the exercise of warrants at a total exercise price of $98,480 to purchases 196,961 shares at $.50 per share. The balance of the note payable plus accrued interest were paid to the noteholder in cash. The Company also repaid a $15,000 note payable to a director plus accrued interest. Dr. Yeh, a director of the Company exercised warrants to purchase 382,474 shares of the Company's Common Stock at $.50 per share, paid in cash. Dr. Bordogna, a director of the Company, exercised warrants to purchase 23,472 shares of the Company's Common Stock at $.50 per share, paid in cash. In addition, certain employees of Schneider Securities, Inc., the Placement Agent for the 1997 Bridge Financing and the 1996 Private Placement exercised warrants to purchase 69,229 shares of the Company's Common Stock for cash at a price of $.60 per share. In May 1997, the Company and Centennial, a 14.8% stockholder of the Company, agreed to terminate the Purchasing Agreement. The Company liquidated amounts owed to Centennial under the agreement by paying approximately $132,000 in cash and issuing 600,000 shares of Common Stock to pay off the remaining balance of approximately $1.2 million. In May 1997, MTDC, a 6.2% stockholder of the Company, exercised a warrant and purchased 100,014 shares of the Company's Common Stock, at a price of $1.00 per share. In December 1996, Dr. Harry Hsuan Yeh, a director and 14.1% stockholder of the Company loaned $150,000 to the Company, in return for a promissory note. On January 15, 1997, this note was converted to a two year subordinated promissory note, bearing an interest rate of 10% per annum, which was issued to Dr. Yeh along with 44,100 shares of Common Stock. On January 22, 1997, Dr. Yeh loaned another $50,000 to the Company in exchange for a two year subordinated promissory note and 14,700 shares of Common Stock. Both notes contain the same terms as the Bridge Notes. In November 1996, Centennial, a 14.8% stockholder of the Company, loaned the Company $130,000 in return for a three month promissory note for the amount borrowed, 38 39 bearing an interest rate equal to the prime rate plus 4% per annum and warrants to purchase 130,000 shares of the Company's Common Stock exercisable for a period of five years from the date of issuance, at an exercise price of $1.00 per share. The warrants were exercised to purchase the Company's Common Stock in January 1997 and the proceeds were used by the Company to pay the outstanding balance of the $130,000 promissory note. (SEE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS") In August 1996, Centennial loaned the Company $100,000, in return for a three month promissory note for the amount borrowed, bearing an interest rate equal to the prime rate plus 4% per annum, and warrants to purchase 100,000 shares of Triple I's Common Stock exercisable for a period of five years from the date of issuance, at an exercise price of $1.00 per share. The warrants were exercised for the Company's Common Stock in January 1997 and the proceeds were used to pay the outstanding balance of the $100,000 promissory note. (SEE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS") From March 1996 through December 1996, the Company utilized the Purchasing Agreement under which Centennial would purchase raw materials and certain components on its own account and sell them to the Company at the same price. Payment for such purchases were due upon the receipt of final payment from customers for the products containing such materials purchased through Centennial. Originally, Centennial agreed to allow the Company to purchase up to a total of $750,000 worth of materials at any one time, which could be increased to $1,500,000. The Company paid a one-time nonrefundable fee of $200,000 for this credit facility. Centennial used the fee to purchase 200,000 shares of the Company's Common Stock in May, 1996, at $1.00 per share. The outstanding balance on December 31, 1996 was approximately $1,300,000. The Company has not made any purchases through Centennial since December 31, 1996, which significantly limited the Company's ability to purchase such materials. In May, 1997, the amount due to Centennial was satisfied through a partial cash payment of the amount due and a conversion of the remaining amount into 600,000 shares of the Company's Common Stock. All outstanding balanced due to Centennial were liquidated at that time. (See Purchase Agreement attached as Exhibit No. 10b). In June 1996, MTDC, a 13.4% stockholder of the Company, purchased 200,000 shares of Common Stock, at a price of $1.00 per share. In May 1996, Centennial had loaned $200,000 to the Company in the form of a convertible note bearing an interest rate of 10% per annum, which automatically converted to 200,000 shares of Common Stock upon the purchase of stock by MTDC. Upon MTDC's purchase in June 1996, Centennial converted the note to shares of Common Stock on the same terms as the MTDC stock purchase. (SEE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS") In February 1996, in connection with the 1996 Private Placement, certain affiliates of the Company converted outstanding debt to Common Stock as follows: 39 40
Outstanding Loan Common Shares Name Balance ($) Issued (#) - ---- ----------- ------------- Massachusetts Community Development Finance Corporation 506,021 506,021 Juan J. Amodei, Ph.D. 45,985 45,985 Joseph Bordogna, Ph.D. 17,271 17,271 Massachusetts Technology Development Corporation 379,728 379,728 Joseph A. Teves 66,935 66,935 Harry Hsuan Yeh, Ph.D. 187,289 187,289
Dr. Yeh and Mr. Teves did not convert all their debt and each received a promissory note for $100,000 bearing interest rates of 10% and 8.4% per annum, respectively, for the remaining amounts due to them from the Company. The original due date for the notes was October 23, 1996. The notes provide that the Company is in default if the amount due is not paid within 90 days of the maturity date. Upon an event of default the noteholder may, upon written notice to the Company, declare the note immediately due and payable. The Company has not received any demand notices from the noteholders. Mr. Teves cancelled this note in exchange for the exercise of warrants. Dr. Yeh also forgave a $100,000 promissory note from the Company in return for a warrant to purchase 150,000 shares of Common Stock, exercisable until February 6, 1999 at $1.00 per share. (SEE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS") In November 1995, the Company completed a 1995 Bridge Financing, whereby certain affiliates loaned $255,000 to the Company in return for $255,000 in promissory notes bearing an interest rate of 10% per annum and warrants to purchase an aggregate of 250,000 shares of Common Stock, execisable until November 1998, at $1.00 per share. The following affiliates participated in the 1995 Bridge Financing: Dr. Amodei, Dr. Bordogna, Mr. Teves, Polaroid and Centennial. Approximately $150,000 has been repaid towards the outstanding balance. The original maturity date for the notes was May 24, 1996. The notes provide that the Company is in default if amount due is not paid within 90 days of the maturity date. Upon an event of default, the noteholder may, upon written notice to the Company, declare the note immediately due and payable. The Company has not received any demand notices from the noteholders and plans to pay the total amount due out of the proceeds of the Offering. (SEE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS") As part of the 1996 Private Placement, warrants to purchase 958,925 shares of Common Stock were issued pro rata to the stock and optionholders of Triple I as of September 30, 1995 ("Stockholder Warrants"). The Stockholder Warrants have an exercise price of $1.00 and are exercisable after the earlier of (a) February 28, 2001 (five years from the closing of the 1996 Private Placement), (b) upon the attainment of $12,000,000 in annual revenues or $1,000,000 in pretax net income in Fiscal 1997 or (c) upon the attainment of $15,000,000 in annual revenues or 40 41 $1,500,000 in pretax net income in Fiscal 1998. The following affiliates received Stockholder Warrants: Dr. Juan J. Amodei (206,245), Dr. Harry Hsuan Yeh (248,145), Mr. Joseph A. Teves (28,970), CDFC (32,040), Dr. Joseph Bordogna (14,675), MTDC (63,135), Polaroid (180,380) and Shirley Hsin-Hiu Wang (88,100). (SEE "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT"). PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K The following exhibits are filed herewith:
EXHIBIT NO. TITLE --------- (a) EXHIBITS 1 -- Not applicable. 2 -- Agreement of Merger, dated December 9, 1996. 3a -- Certificate of Incorporation. 3b -- Bylaws, as amended. 4 -- Sections of Bylaws and Certificate of Incorporation defining the rights of security-holders (contained in Exhibits 3a and 3b). 5 -- Not applicable. 6 -- Not applicable. 7 -- Not applicable. 8 -- Not applicable. 9 -- Not applicable. **10a -- License and Collaboration Agreement dated November, 1992 between the Company and Polaroid Corporation, with amendments. 10b -- Purchase agreement dated March 31, 1996 between the Company and Centennial Technologies, Inc., and the termination thereof. 10c -- 1996 Stock Option Plan. 10d -- Employment Agreement with Juan J. Amodei, Ph.D. 10e -- Lease Agreement between the Company and John Hancock Mutual Life Insurance Company, dated October 31, 1995, as amended. 10f -- Form of the Shareholder Exchange Agreement by and between Orbis, Inc., Triple I Corporation, and the Shareholders of Triple I Corporation. 10g -- Form of Subscription Agreement between the Company and investors in the 1997 Bridge Financing. 10h -- Form of Subscription Agreement between the Company and Dr. Harry Hsuan Yeh. 10i -- Form of Subscription Agreement between the Company and investors in the 1996
41 42
Private Placement. 10j -- Securities Purchase Agreement between the Company and Imprimus Investors LLC, dated November 12, 1997 10k Form of Class A and Class B Warrants issued by the Company to Imprimus Investors LLC 10l Registration Rights Agreement between the Company and Imprimus Investors LLC, dated November 12, 1997 11 -- Not applicable. 12 -- Not applicable. 13 -- Not applicable. 14 -- Not applicable. 15 -- Not applicable. 16 -- Not applicable. 18 -- Not applicable. 21 -- Subsidiaries of the Company 23 -- Not applicable. 24 -- Not applicable. 25 -- Not applicable. 26 -- Not applicable. 27 -- Financial Data Schedule
** Certain information is withheld and being filed separately with the Commission pursuant to a request for confidential treatment. 42 43 SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INDUSTRIAL IMAGING CORPORATION Date: January 29, 1998 By: /s/ Juan J. Amodei,Ph.D. ------------------------------------------ Juan J. Amodei, Ph.D. President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
NAME CAPACITY DATE ---- -------- ---- /s/ Juan J. Amodei, Ph.D. President, Chief Executive Officer, January 29, 1998 - ------------------------------ and Chairman of the Board of Juan J. Amodei, Ph.D. Directors (Principal Executive Officer) /s/ Bryan M. Gleason Chief Financial Officer, Vice January 29, 1998 - ------------------------------ President and Treasurer Bryan M. Gleason (Principal Financial and Principal Accounting Officer) /s/ Joseph Bordogna, Ph.D. Director January 29, 1998 - ------------------------------ Joseph Bordogna, Ph.D. /s/ Joseph A. Teves Director January 29, 1998 - ------------------------------ Joseph A. Teves /s/ Charles G. Broming Director January 29, 1998 - ------------------------------ Charles G.Broming
43 44 REPORT OF INDEPENDENT ACCOUNTANTS To The Board of Directors and Shareholders of Industrial Imaging Corporation: We have audited the accompanying balance sheets of Industrial Imaging Corporation as of March 31, 1997 and March 31, 1996 and the related statements of operations and shareholders' equity (deficit) and cash flows for the year ended March 31, 1997, the period from October 1, 1995 to March 31, 1996 and the years ended September 30, 1995 and 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Industrial Imaging Corporation at March 31, 1997 and March 31, 1996, and the results of its operations and its cash flows for the year ended March 31, 1997, the period from October 1, 1995 to March 31, 1996 and the years ended September 30, 1995 and 1994 in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note B to the financial statements, the Company has suffered recurring losses from operations and has a net working capital deficiency and stockholders' deficit that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in Note B. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Boston, Massachusetts January 16, 1998 F-1 45 INDUSTRIAL IMAGING CORPORATION BALANCE SHEETS
March 31, March 31, 1997 1996 --------- --------- ASSETS Current assets: Cash............................................................................... $ 62,103 $ 10,011 Accounts receivable, net of allowance for doubtful accounts of $31,000 and $20,000 at March 31, 1997 and 1996, respectively (Notes C and D)............. 493,778 92,586 Inventory (Notes C and E).......................................................... 1,877,979 682,886 Prepaid expenses................................................................... 53,398 22,076 ----------- ----------- Total current assets............................................................. 2,487,258 807,559 Property and equipment, net (Notes C and F)............................................ 34,256 32,870 Patents, net (Notes C and G)........................................................... 61,979 168,229 Other assets........................................................................... 10,786 10,786 ----------- ----------- Total assets..................................................................... 2,594,279 $ 1,019,444 =========== =========== LIABILITIES AND SHAREHOLDERS' DEFICIT Current liabilities: Notes payable (Notes J and K)...................................................... 480,404 495,174 Accounts payable................................................................... 2,497,890 281,094 Deferred revenue (Notes C and H)................................................... 242,938 667,387 Accrued expenses (Note I).......................................................... 957,953 930,334 ----------- ----------- Total current liabilities........................................................ 4,179,185 2,373,989 Notes payable B long-term portion (Notes J and K)...................................... 450,000 -- ----------- ----------- Total liabilities................................................................ 4,629,185 2,373,989 Commitments and contingencies (Note H) Shareholders' deficit (Notes J, K, L, and O): Common stock, par value $.01 per share, authorized 8,700,000 shares, 5,867,498 and 3,537,037 shares issued and outstanding at March 31, 1997, and March 31, 1996, respectively................................................. 58,675 35,370 Series A Preferred Stock, par value $.01 per share, authorized 1,000,000 shares, 0 and 633,200 shares issued and outstanding at March 31, 1997, and March 31, 1996, respectively..................................................... -- 6,332 Series B Preferred Stock, par value $.01 per share, authorized 300,000 shares, 0 shares issued and outstanding at March 31, 1997 and March 31, 1996, respectively..................................................................... -- -- Additional paid-in capital......................................................... 5,872,588 4,675,368 Accumulated deficit................................................................ (7,966,169) (6,071,615) ----------- ----------- Total shareholders' deficit...................................................... (2,034,906) (1,354,545) ----------- ----------- Total liabilities and shareholders' deficit.................................... $ 2,594,279 $ 1,019,444 =========== ===========
The accompanying notes are an integral part of the financial statements. F-2 46 ' INDUSTRIAL IMAGING CORPORATION STATEMENTS OF OPERATIONS
12 Months 6 Months 12 Months 12 Months Ended Ended Ended Ended March 31, 1997 March 31, 1996 September 30, 1995 September 30, 1994 -------------- -------------- ------------------ ------------------ Revenues (Note C): Product........................................ $ 1,525,625 $ 419,782 $ 986,660 $ 936,783 Service........................................ 297,951 160,584 238,363 373,365 -------------- ------------ ------------ ------------- 1,823,576 580,366 1,225,023 1,310,148 -------------- ------------ ------------ ------------- Cost of revenues: Product........................................ 1,341,919 450,746 730,180 783,213 Service........................................ 268,068 100,703 412,402 413,852 -------------- ------------ ------------ ------------- 1,609,987 551,449 1,142,582 1,197,065 -------------- ------------ ------------ ------------- Gross profit....................................... 213,589 28,917 82,441 113,083 -------------- ------------ ------------ ------------- Operating expenses: Research and development (Notes C and H)....... 440,207 427,778 505,147 468,075 Sales and marketing............................ 361,392 125,370 218,704 370,859 General and administrative..................... 857,948 541,285 814,094 680,824 Merger Expenses (Note R)....................... 179,787 -------------- ------------ ------------ ------------- Total operating expenses................... 1,839,334 1,094,433 1,537,945 1,519,758 -------------- ------------ ------------ ------------- Loss from operations............................... (1,625,745) (1,065,516) (1,455,504) (1,406,675) Other income (expense): Interest expense (Notes D and J) (89,257) (94,305) (126,189) (83,311) Other, net (Note Q)............................ (179,552) -- 6,567 (16,577) -------------- ------------ ------------ ------------- Other income (expense), net................ (268,809) (94,305) (119,622) (99,888) Loss before income taxes................... (1,894,554) (1,159,821) (1,575,126) (1,506,563) Provision for income taxes (Notes C and M)......... -- -- -- -- -------------- ------------ ------------ ------------- Net loss........................................... $ (1,894,554) $ (1,159,821) $ (1,575,126) $ (1,506,563) ============== ============ ============ ============= Net loss per share................................. $ (.44) $ (.55 $ (1.05) $ (1.45) ============== ============ ============ ============= Weighted Average common outstanding................ 4,257,727 2,105,823 1,507,099 1,039,025 ============== ============ ============ =============
The accompanying notes are an integral part of the financial statements. F-3 47 INDUSTRIAL IMAGING CORPORATION STATEMENTS OF CASH FLOWS
12 Months 6 Months 12 Months 12 Months Ended Ended Ended Ended March 31, 1997 March 31, 1996 September 30, 1995 September 30, 1994 -------------- -------------- ------------------ ------------------ Cash flows from operating activities: Net loss......................................... $(1,894,554) $(1,159,821) $(1,575,126) $(1,506,563) Adjustments to reconcile net loss to net cash used in operating activities: Loss on disposal of fixed assets............. -- -- -- 5,554 Depreciation................................. 22,217 17,310 34,612 33,290 Compensation relating to stock options....... 26,400 -- -- -- Shares issued in conjunction with bridge loan....................................... 171,297 -- -- -- Amortization................................. 106,250 53,125 106,250 106,250 Provision for doubtful accounts.............. -- -- (14,707) 9,704 Changes in assets and liabilities: Accounts receivable.......................... (401,192) (38,058) 201,843 (193,219) Inventory.................................... (1,195,093) 111,935 (302,483) 70,493 Prepaid expenses............................. (31,322) (16,961) 5,686 (1,384) Other assets................................. -- -- (310) (1,076) Accounts payable............................. 2,216,796 (18,279) 113,506 78,350 Deferred revenue............................. (424,449) (12,338) 364,072 45,538 Accrued expenses............................. 27,619 400,552 291,431 183,832 ----------- ----------- ----------- ----------- Net cash used in operating activities........ (1,376,031) (662,535) (775,226) (1,169,231) ----------- ----------- ----------- ----------- Cash flows from investing activities: Capital expenditures............................. (23,603) -- -- (14,996) Proceeds from sale of fixed assets............... -- -- -- 1,307 ----------- ----------- ----------- ----------- Net cash used in investing activities............ (23,603) -- -- (13,689) ----------- ----------- ----------- ----------- Cash flows from financing activities: Proceeds from issuance of nonconvertible debt.... 719,000 260,702 381,444 648,001 Principal payments on nonconvertible debt........ (283,770) (153,584) -- (31,389) Proceeds from issuance of convertible debt....... 200,000 -- -- -- Proceeds from issuance of stock (net)............ 816,496 559,210 400,000 518,000 ----------- ----------- ----------- ----------- Net cash provided from financing activities.... 1,451,726 666,328 781,444 1,134,612 ----------- ----------- ----------- ----------- Net increase (decrease) in cash................ 52,092 3,793 6,218 (48,308) Cash, beginning of period............................ 10,011 6,218 -- 48,308 ----------- ----------- ----------- ----------- Cash, end of period.................................. $ 62,103 $ 10,011 $ 6,218 $ -- =========== =========== =========== =========== Supplemental cash flows information: Cash paid during the period for interest......... $ 45,092 $ 6,963 $ 49,500 $ 47,200 Noncash items: Debt and accrued interest converted to equity during the period.............................. 200,000 1,270,637 Forgiveness of debt/contributed capital......... 100,000
The accompanying notes are an integral part of the financial statements. F-4 48 INDUSTRIAL IMAGING CORPORATION STATEMENT OF SHAREHOLDERS' DEFICIT
Series A Convertible Preferred Stock Common Stock Additional Total -------------------- ------------------- Paid-in Accumulated Shareholders' Capital Deficit Equity ---------- ----------- ------------- Shares Amount Shares Amount -------- -------- -------- -------- Balance at September 30, 1993.......... 397,200 $ 3,972 753,200 $ 7,532 $1,857,719 $(1,830,105) $ 39,118 Issuance of Series A convertible preferred stock and common 200,000 2,000 200,000 2,000 96,000 100,000 stock for cash, October 1993....... Issuance of Series A convertible preferred stock 20,000 200 20,000 200 9,600 10,000 and common stock for cash, October 1993.................... Issuance of Series A convertible preferred stock and common 16,000 160 16,000 160 7,680 8,000 stock for cash, November 1993...... Issuance of common stock for cash, 288,600 2,886 397,114 400,000 July 1994.............................. Net loss (1,506,563) (1,506,563) -------- --------- ---------- -------- ---------- ----------- ----------- Balance at September 30, 1994.......... 633,200 6,332 1,277,800 12,778 2,368,113 (3,336,668) (949,445) Issuance of common stock for cash, December 1994 288,600 2,886 397,114 400,000 Net loss (1,575,126) (1,575,126) -------- --------- ---------- -------- ---------- ----------- ----------- Balance at September 30, 1995.......... 633,200 6,332 1,566,400 15,664 2,765,227 (4,911,794) (2,124,571) Issuance of common stock for debt and interest conversion............ 1,270,637 12,706 1,257,931 1,270,637 Issuance of common stock for cash, net of issuance costs of $140,790.. 700,000 7,000 552,210 559,210 Issuance of warrants in exchange for forgiveness of debt................ 100,000 100,000 Net loss (1,159,821) (1,159,821) -------- --------- ---------- -------- ---------- ----------- ----------- Balance at March 31, 1996.............. 633,200 $ 6,332 3,537,037 $ 35,370 $4,675,368 $(6,071,615) $(1,354,545) Issuance of common stock for cash, net of issuance costs of $32,964 .. 830,000 8,300 788,736 797,036 Exercise of warrants for cash.......... 230,000 2,300 227,700 230,000 Shares issued in conjunction with 112,370 1,124 170,173 171,297 bridge loans........................... Compensation expense relating to 26,400 26,400 stock options.......................... Recapitalization of Orbis, Inc......... 524,891 5,249 (15,789) (10,540) Conversion of preferred shares to (633,200) (6,332) 633,200 6,332 -- common stock...... Net loss (1,894,554) (1,894,554) -------- --------- ---------- -------- ---------- ----------- ----------- -- -- $5,867,498 $58,675 $5,872,588 $(7,966,169) $(2,034,906) ======== ========= ========== ======== ========== =========== ===========
The accompanying notes are an integral part of the financial statements. F-5 49 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS A. ORGANIZATION AND DESCRIPTION OF BUSINESS Nature of Business Triple I Corporation (the "Company" or "Triple I"), a Delaware corporation, was organized as a successor to AOI Systems, Inc., whose assets and technologies it purchased in October 1992, for the purpose of manufacturing and selling optical inspection systems in the printed circuit board industry. The Company operates under the trade name of AOI International and has manufacturing operations based in Lowell, Massachusetts with customers located in the United States, Europe, and Asia. Exchange On November 16, 1995, the Board of Directors of the Company approved a transaction with Orbis, Inc. ("Orbis"), a publicly held corporation, whose only activity had been expenses during the fiscal year relating to filing fees and minimal overhead costs. Orbis has had no significant revenue for the last four fiscal years. On December 5, 1996, the Orbis stockholders approved the transaction between Triple I and Orbis, whereby the stockholders of Triple I exchanged 100% of the outstanding Common Stock of Triple I for 90% of the outstanding common stock of Orbis (the "Exchange"). On February 1, 1997, the Exchange was completed as the Company obtained approval from 100% of its shareholders. The Exchange will be accounted for as a capital stock transaction and will be treated as a recapitalization of Triple I with Triple I as the acquiror (reverse acquisition). The costs of the Exchange will be charged to other expense and no goodwill will be recorded. In connection with the Exchange, Orbis reincorporated from a Rhode Island corporation to a Delaware corporation and changed its name to Industrial Imaging Corporation via a merger of Orbis into Industrial Imaging Corporation. As a result, Triple I became a wholly owned subsidiary of Industrial Imaging Corporation. Change in Year-End In anticipation of the Exchange, the Company changed its year-end from a twelve-month period ending September 30 to a twelve-month period ending March 31. The financial statements include presentation of the transition period beginning October 1, 1995 and ending on March 31, 1996. F-6 50 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) B. MANAGEMENT'S FINANCING AND CAPITAL FORMATION PLANS Since its inception, the Company has suffered recurring losses from operations resulting in a net shareholders' deficit at March 31, 1997 and has been unable to pay certain debt obligations. The remedies available to the debt holders include immediate demand of payment and foreclosure. These conditions raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The ultimate success of the Company is dependent upon its ability to continue to raise financing and significantly increase contract revenue or product sales. However, the Company's capital requirements may change depending upon numerous factors, including the demand for the Company's product. In November 1997, the Company raised $3 million in a private equity transaction. Management believes that with this additional capital, it will have adequate funds to aggressively pursue market penetration. In view of the Company's current financial condition, the Company plans to continue to aggressively manage its working capital and expenses while pursuing product sales opportunities as well as strategic or other business relationships. C. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Inventories Inventories are stated at the lower of cost or market. Cost is determined on a first-in, first-out (FIFO) basis. Property And Equipment Property and equipment are recorded at cost. Depreciation and amortization are computed using the straight-line method over the lesser of the estimated useful lives of the assets, 3 to 5 years, or lease term. Maintenance and repair costs are expensed as incurred; renewals and betterments are capitalized. Upon the sale or retirement of fixed assets, the accounts are relieved of the cost and the related accumulated depreciation with any resulting gain or loss included in income. Patents Purchased patents are valued at cost and amortized on a straight-line basis over five years. Revenue Recognition F-7 51 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Sales of inspection systems and evaluation units are recorded when customer acceptance requirements are met. Revenue from service maintenance contracts is deferred and is recognized over the term of the contract, generally one year. Revenue from government grants is recognized when specific contract requirements have been met and no significant contingencies remain under the contract. The Company generally requires payment from customers in U.S. dollars as part of its normal payment terms. Fluctuations in foreign exchange rates to date have not had a material effect on the Company's financial statements. Income Taxes The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," which requires the use of an asset and liability approach for financial accounting and reporting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amount and the tax bases of assets and liabilities using the current statutory tax rates. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. Net Loss Per Common Share Net loss per common share is computed based upon the weighted average number of common shares and common equivalent shares (using the treasury method) outstanding after certain adjustments described below. Common equivalent shares are not included in the per-share calculations where the effect of their inclusion would be antidilutive. Research And Development Expenditures for research, development and engineering of products and manufacturing processes are expensed as incurred. Cost reimbursement under collaborative research agreements are recorded as offsets to research and development expenses. Use Of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. F-8 52 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Accounting Pronouncements In February 1997, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128. "Earning Per Share" which is effective for fiscal years ending after December 31, 1997, including interim periods. Earlier adoption is not permitted. However, the statement permits disclosure of pro forma earnings per share amounts computed under SFAS 128 in the notes to the financial statements in periods prior to adoption. The statement requires restatement of all prior period earnings per share data presented after the effective date. SFAS 128 specifies the computation, presentation and disclosure requirements for earnings per share and is substantially similar to the standards recently issued by the International Accounting Standards Committee entitled International Accounting Standards, Earnings Per Share. The Company will adopt SFAS 128 in fiscal 1998 and has not yet determined its impact. In June 1997, the FASB issued two additional statements. SFAS 130, "Reporting Comprehensive Income" and SFAS 131, "Disclosures About Segments of an Enterprise and Related Information" are both effective for years beginning after December 15, 1997. Adoption of these standards are not expected to impact the financial results of the Company. Concentrations of Credit Risk A significant portion of the Company's sales are to customers whose principal activities relate to the printed circuit board industry, included a heavy concentration of sales to customers in foreign countries. (See note P). Although the Company generally requires advance deposits or letters of credit from customers, the Company sometimes extends credit to its foreign customers and collection may be more difficult in the event of a default. D. ACCOUNTS RECEIVABLE In the normal course of business, the Company extends credit terms on a customer-by-customer basis based on its evaluation of collectibility exposure. Management's estimates of losses in this area are recorded through an evaluation of the adequacy of the allowance for doubtful accounts. The risk of loss from any concentrations of credit risk with respect to trade receivables is mitigated by management's evaluation and provision, the policy of securing larger dollar sales with substantial deposits at order and ship dates, and the incentive for customers to maintain their credit standing in order to receive ongoing technical service. During the year ended March 31, 1997 and the six months ended March 31, 1996, accounts receivable in the amounts of $347,500 and $261,400, respectively, were factored, without recourse, to a related party. Specific invoices were sold under individual purchase and F-9 53 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) sale agreements. The Company receives a portion of the value of a receivable at the date of the sale. Subsequent receipts of sold receivables are forwarded in full to the factor. Interest is calculated at Prime + 4% over the time the money owed the factor is outstanding. The transaction is completed when the Company receives the remaining balance of the receivable, net of interest charges, from the factor. Interest on these contracts totaled $21,257, $16,201, $7,642 and $3,415 during the year ended March 31, 1997, the six months ended March 31, 1996, and the years ended September 30, 1995 and 1994, respectively. E. INVENTORIES Inventories consist of the following:
MARCH 31, MARCH 31, 1997 1996 --------- --------- Raw materials................................ $949,895 $356,805 Work in process.............................. 596,277 28,049 Finished goods............................... 331,807 298,032 ---------- -------- $1,877,979 $682,886 ========== ========
F. PROPERTY AND EQUIPMENT Property and equipment consists of the following:
MARCH 31, MARCH 31, 1997 1996 --------- --------- Machinery and equipment.................................. $ 55,613 $ 55,613 Computer equipment, including $10,001 in capital leases in 1997 and 1996 respectively.................. 61,837 38,234 Computer software........................................ 14,949 14,949 Furniture and fixtures................................... 24,837 24,837 -------- -------- 157,236 133,633 Less: accumulated depreciation and amortization.......... 122,980 100,763 -------- -------- $ 34,256 $ 32,870 ======== ========
Depreciation expense for the year ended March 31, 1997, six months ended March 31, 1996, and the years ended September 30, 1995 and 1994, was $22, 217, $17,310, $34,612 and $33,290, respectively. G. INTANGIBLE ASSETS F-10 54 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) The Company holds several patents that were purchased. These patents are stated at the acquisition cost of $531,250 and are amortized using the straight-line method over 5 years. Amortization expense was $106,250, $53,125, $106,250, and $106,250 for the year ended March 31, 1997, the six months ended March 31, 1996, and the years ended September 30, 1995, and 1994, respectively. The Company periodically reviews the propriety of carrying amounts of its intangible assets as well as the amortization periods to determine whether current events and circumstances warrant adjustment to the carrying value or estimates useful lives. At each balance sheet date, management evaluates whether there has been a permanent impairment in the value of goodwill by assessing the carrying value of goodwill against anticipated future cash flows from related operating activities. Factors which management considers in performing this assessment include current operating results, trends, and prospects and, in addition, demand, competition and other economic factors. H. COMMITMENTS AND CONTINGENCIES The Company is obligated under a lease agreement for an office and manufacturing facility in Lowell, Massachusetts, expiring on November 30, 1998. Under the terms of the lease, the Company must pay base rent of $9,970 per month plus the Company's pro rata share of certain costs paid by the landlord. Total rent expense was $133,639, $66,084, $93,233, and $76,179 for the year ended March 31, 1997, the six months ended March 31, 1996, and the years ended September 30, 1995 and 1994, respectively. The amount of future minimum lease payments under the operating lease is as follows:
1998.............................................. $119,638 1999.............................................. 79,760 -------- Total minimum lease payments...................... $199,398 ========
On August 1, 1994 the Company entered into a cooperative agreement with the U.S. Department of Energy Advanced Research Project Agency ("ARPA") to research optics. The Company is finalizing its obligation under the contract. As of March 31, 1997, the Company had incurred $320,000 in project expenses and had received $320,000 in matching funds from ARPA which have been recorded as cost reimbursement against research and development expense to the extent of costs incurred. On November 28, 1994 the Company entered into an eight-year license and collaboration agreement with Polaroid Corporation ("Polaroid") to promote the development, marketing, and sales in the field of printed circuit board production, and to collaborate in the fields of Automatic Inspection and PCB PhotoTool generation. F-11 55 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Under the Polaroid Agreement, the Company is required to meet certain sales and performance milestones to maintain the Company's exclusivity concerning the technology. The Company and Polaroid are in the process of resolving a dispute regarding exclusivity. Management believes that the ultimate resolution of this dispute will not have a material effect on the Company=s financial statements. In March 1996, the Company entered into a purchase agreement with Centennial Technologies, Inc. ("Centennial") whereby Centennial had agreed to purchase components and materials up to $3 million on behalf of the Company and resell them to the Company. The Company has agreed to pay Centennial upon full payment from the Company's customers as systems are sold. The agreement is effective until June 30, 1997 and purchases must be specifically authorized by Centennial. As of March 31, 1996, Centennial had authorized purchases for the first $750,000. In accordance with the agreement, the Company incurred a one time non-refundable fee of $200,000, which is included in General and Administrative expenses for the six months ended March 31, 1996. In May 1997, the Company and Centennial agreed to terminate the purchase agreement. The Company liquidated amounts owed to Centennial under the agreement by paying approximately $132,000 in cash and agreeing to issue 600,000 shares of common stock to pay off the remaining balance of approximately $1.2 million. I. ACCRUED EXPENSES Accrued expenses consist of the following:
March 31, March 31, 1997 1996 --------- --------- Accrued vacation $106,343 $ 88,999 Accrued professional fees 131,546 161,803 Accrued payroll and related expenses 356,890 297,317 Accrued warranty 115,885 79,611 Accrued Centennial fee -- 200,000 Accrued interest and other 247,289 102,604 -------- -------- $957,953 $930,334 ======== ========
J. DEBT The following is a summary of the Company's debt obligations:
March 31, March 31, 1997 1996 --------- --------- Collateralized demand note with assignee for the benefit of creditors for the former AOI Systems, Inc., due January 30, 1995. The note was renegotiated in July 1994 to require interest only payments at a rate of 8.0%, due monthly..................................... $130,000 $130,000 Uncollateralized subordinated note with a related party, principal due December 31, 1996, interest rate of 8.4%, interest only payments due quarterly............... 50,000 50,000
F-12 56 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Uncollateralized note with a related party, principal due October 23, 1996, interest rate of 10% payable at maturity................................................. 100,000 100,000 Uncollateralized note with a related party, principal due October 23, 1996, interest rate of 8.4% payable at maturity................................................ 100,000 100,000 Uncollateralized note with a related party, principal due June 6, 1996, interest rate of 10% payable at maturity................................................. 15,000 25,000 Uncollateralized note with a related party, principal due June 6, 1996, interest rate of 10% payable at maturity................................................. 15,000 15,000 Uncollateralized note with a related party, principal due June 6, 1996, interest rate of 10% payable at maturity................................................. 5,000 5,000 Uncollateralized note with a related party, principal due June 6, 1996, interest rate of 10% payable at maturity................................................. -- 10,000 Uncollateralized note with a related party, principal due June 6, 1996, interest rate of 10% payable at maturity................................................. 50,000 50,000 Uncollateralized note with a related party, principal due January 15, 1999, interest rate of 10% payable at maturity................................................. 150,000 Uncollateralized note with a related party, principal due January 21, 1999, interest rate of 10% payable at maturity................................................. 50,000 Uncollateralized note with a related party, principal due February 6, 1999, interest rate of 10% payable at maturity................................................. 50,000 Uncollateralized note with a related party, principal due February 6, 1999, interest rate of 10% payable at maturity................................................. 50,000 Uncollateralized note with a related party, principal due February 6, 1999, interest rate of 10% payable at maturity................................................. 50,000 Uncollateralized note with a related party, principal due February 6, 1999, interest rate of 10% payable at maturity................................................. 25,000 Uncollateralized note with a related party, principal due February 6, 1999, interest rate of 10% payable at maturity................................................. 25,000 Uncollateralized note with a related party, principal due February 11, 1999, interest rate of 10% payable at maturity........................................ 50,000 Uncollateralized note, principal due in nine monthly payments of $3,467 plus interest at 8.1%................................................................ 13,866 5,702 Capital lease obligations............................................................ 1,538 4,472 -------- -------- 930,404 495,174 Less amounts due within one year..................................................... 480,404 495,174 -------- -------- $450,000 $ -- ======== ========
In February 1996, the Company and various debt holders entered into an agreement to convert $1,270,637 in unpaid debt and interest into 1,270,637 shares of the Company's common stock and warrants to purchase 150,000 shares of common stock at $1.00 per share through February 6, 1999. In addition, the Company and certain debt holders agreed to extend the maturity on $200,000 in notes until October 23, 1996, however, a portion of this debt is still outstanding. F-13 57 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) In May 1996, the Company issued a note to a related party for $200,000, bearing interest of 10% per annum, due May 1997. In June 1996, the related party converted this $200,000 unpaid debt into 200,000 shares of common stock, and purchased 250,000 shares of common stock at $1.00 per share. In August 1996, the Company issued a note to a related party for $100,000 bearing interest of 12.25% per annum, due September 1996. This note was repaid in January 1997 plus accrued interest. In November 1996, the Company issued a note to a related party for $130,000 bearing interest of 12.25% per annum, due 90 days from the date of issuance. This note was repaid in January 1996 plus accrued interest. In December 1996, the Company issued a note to a related party for $150,000 due in December 1999, bearing interest of 10% per annum. In January 1997, a shareholder of the Company converted a loan in the amount of $150,000 to a subordinated note which bears interest at 10% per annum and is payable in January 1999. The Company issued 44,100 shares of common stock to the noteholder in conjunction with this transaction. The common stock was recorded in equity at $1.00 per share or a total of $44,100 which the Company deemed to be fair market value with the offset to other expense. Payment of this note is accelerated in the event the Company raises a certain amount of equity financing. In addition, a shareholder of the Company loaned the Company $50,000 in January 1997. The Company issued a subordinated promissory note which bears interest at 10% per annum and is due in two years. Payment of this note is accelerated in the event the Company raises a certain amount of equity financing. In addition, the Company issued 14,700 shares of common stock to the noteholder in conjunction with this transaction. The common stock was recorded in equity at $1.00 per share or a total of $14,700 which the Company deemed to be fair market value with the offset to other expense. In January 1997, the Company through Schneider Securities, Inc. (the "Placement Agent"), commenced the 1997 bridge financing through the sale of 5 units, each of which consists of a $50,000 subordinated promissory note bearing interest at an annual rate of 10% and 10,714 shares of the Company's common stock. The promissory notes are due two years after issue and payment is accelerated in the event the Company raises a certain amount of equity financing. In February 1997, the Company raised $250,000 through the sale of 5 units and issued 53,570 shares of common stock. The common stock was recorded in equity at $2.10 per share or a total of $112,497 which the Company deemed to be fair market value, based upon the recent exchange, with the offset to other expense. The above debt instruments contain numerous covenants and remedies upon default including immediate demand of payment and foreclosure. As of March 31, 1997, the Company had not repaid various borrowings that had become due and therefore is in default. In addition, the collateralized note is secured by all assets of the Company. F-14 58 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) K. SHAREHOLDERS' EQUITY The Company's Board of Directors approved a 20-for-1 stock split of the common and preferred stock in February 1996. Accordingly, share information for all periods has been adjusted to reflect the split. Through Schneider Securities, Inc. (the "Placement Agent"), the Company raised $559,210 (net of issuance costs of $140,790) from February 1996 through March 1996. In April 1996, the Company raised $147,036 (net of issuance costs of $32,964) for the Private Placement (the "Private Placement"). The Company also issued warrants as part of the Private Placement, which were issued with an exercise price equal to the price of the common stock issued during the Private Placement. In accordance with the Private Placement, the Company issued to the Placement Agent warrants for the purchase of 88,000 shares of common stock exercisable on April 27, 1997 at an exercise price of $1.20 per share. In addition, the Company issued warrants to purchase 44,000 shares of the Company's common stock at an exercise price of $1.20 per share, to legal counsel in conjunction with the Private Placement. The Company accounts for the warrants at fair value. At the date of issuance, the value of the warrants was not material. In June 1996, a related party purchased 200,000 shares of common stock at $1.00 per share. In January 1997, a shareholder exercised warrants to purchase 230,000 shares of common stock at $1.00 per share. As of March 31, 1997, the Company had not repaid various borrowings that had become due and therefore was in default. In February 1996, the Company and various debt holders entered into an agreement to convert $1,270,637 of unpaid debt and interest into 1,270,637 shares of the Company's common stock. In addition, one debt holder agreed to exchange $100,000 of debt for warrants to purchase 150,000 shares of the Company's common stock at $1.00 per share through February 6, 1999. The Company has 5,867,498 and 3,537,037 shares of voting common stock issued and outstanding at March 31, 1997 and March 31, 1996, respectively. Holders of common stock are entitled to receive dividends only when declared by, and at the discretion of, the Board of Directors. An aggregate of 800,000 shares of voting common stock are reserved as follows: 200,000 shares for options under the 1992 Stock Option Plan; and 600,000 share for options under the 1995 Stock Option Plan. The Company has authorized 1,000,000 shares of preferred stock, with a par value of $.01 per share. At March 31, 1997 and March 31, 1996, 0 and 633,000 shares were issued and outstanding. In February, 1997, 633,000 preferred shares were converted to common shares on a one for one basis. The holders of the shares of preferred stock vote in certain circumstances and receive dividends in parity with holders of the common stock. Dividends are noncumulative for the Series A stock, while annual dividends are cumulative for the Series B Stock at 10% of the F-15 59 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) redemption value of $1.39. The Series A and Series B Stock are convertible at the option of the holder into shares of the Company=s common stock at a conversion rate using a conversion price that will be adjusted in certain instances such as dilutive issuances of equity securities, as defined. At March 31, 1996 and September 30, 1995, the per share conversion rate for the Series A Stock was $4.80 divided by the initial conversion price of $4.80, or one for one. At March 31, 1996 and September 30, 1995, the per share conversion rate for the Series B Stock was $1.39 divided by the initial conversion price of $1.39, also one for one. Upon liquidation, dissolution or winding up of the Company, holders of the Series A and Series B Stock, in parity with one another, are entitled to receive, prior and in preference to the holders of shares of stock ranking junior to the Series A and Series B stock, an amount equal to $4.80 and $1.39 per share, respectively. In addition, Series B stockholders are entitled to any accrued dividends at the date of liquidation. As of March 31, 1997 and March 31, 1996, no Series B stock was outstanding and no dividends were declared or accrued by the Company. In November 1997, an outside investor executed a Securities Purchase Agreement to invest $3 million in the Company by purchasing 3,000,000 shares of the Company's common stock at $1.00 per share. In accordance with the agreement, the Company also issued warrants to purchase 1,000,000 shares of common stock at $1.00 per share through November 12, 2002, and issued warrants to purchase 1,000,000 shares of common stock at $2.00 per share through November 12, 2002. The investor was granted demand registration rights starting six months from the closing date for both the common shares purchased and the warrants granted. In addition, the investor holds a seat on the board of directors. The agreement contains certain covenants which restrict future activities of the company including mergers or acquisitions, borrowings, issuance of securities, payment of dividends, granting a security interest in company assets, and the purchase or sale of assets. The investment has been funded and closing and issuance costs (including commissions) amounted to approximately $250,000. L. STOCK WARRANTS The Company has issued stock warrants as part of certain debt and equity transactions and accounts for warrants when issued at fair value. At date of issuance the value of these warrants was not material. The following summarizes the warrant issuances for the three classes of stock authorized by the Company. F-16 60 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Common Stock Warrants In December 1993 the Company issued to an officer, who personally guaranteed corporate indebtedness, warrants to purchase 500,000 shares of common stock at $.50 per share through December 22, 1998. Also in December 1993 the Company issued in connection with debt, warrants to purchase 20,000 shares of common stock at $.20 per share through December 22, 2003. In August 1994 the Company issued to several directors and stockholders, warrants to purchase 160,000 and 180,340 shares of common stock at $1.25 and $1.39 per share, respectively, through August 22, 2004 and August 22, 2002, respectively. In October 1994, the Company issued in connection with debt, warrants to purchase 72,140 shares of common stock at $1.39 per share through October 5, 2002. In December 1994, in connection with certain equity financing, the Company issued warrants to purchase 72,160 shares of common stock at $1.39 per share through December 15, 2002. In June 1995, the Company issued in connection with debt, warrants to purchase 203,480 shares of common stock at $1.39 per share through April 6, 2003. In October 1995, in connection with debt, the Company issued warrants to purchase 250,000 shares of common stock at $1.00 per share through October 1998. The Company, in February 1996, also issued warrants to purchase 150,000 shares of common stock at $1.00 per share through February 1999, in conjunction with the debt conversion and forgiveness of debt. In November 1997, the Company offered a 50% discount of the exercise price to all warrantholders of the Company's common stock for a specified period of time, which has expired. Warrantholders exercised warrants to purchase 1,187,406 shares of common stock at prices from $.25 per share to $.60 per share. The Company received $252,145 in cash, and received a promissory note from an officer of the Company for $125,000, interest and principal is payable in four years, and accrues interest at an rate of 8.5% per annum. The stock purchased is pledged as collateral against the note. In addition, a director of the Company cancelled a promissory note due from the Company for $100,000 in exchange for the exercise of warrants at a total exercise price of $98,480. The balance of the note payable plus accrued interest were paid to the noteholder in cash. The Company also repaid a $15,000 note payable to a director plus accrued interest. The impact of these transactions will result in the Company taking a charge in Fiscal 1998. Series B Preferred Stock Warrants In 1994 the Company issued warrants for the purchase of 180,380 and 20,000 shares of Series B Preferred Stock at $1.39 per share through August 22, 2004 and December 22, 2003, respectively. In September 1994 the Company issued warrants for the purchase of 16,000 shares of Series B Preferred Stock at $1.39 per share through September 15, 2004. All of these warrants were converted to common stock warrants in February 1997. F-17 61 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) M. INCOME TAXES At March 31, 1997, the Company had net operating loss ("NOL") carryforwards of approximately $6,800,000 for federal and Massachusetts income tax purposes. These carryforwards expire through 2012. In addition, the Company had Research and Experimentation ("R&E") credit carryforwards of approximately $60,000 and $25,000 for federal and Massachusetts income tax purposes, respectively. Utilization of these NOL and R&E credit carryforwards may be limited pursuant to the provisions of Section 382 of the Internal Revenue Code. The components of the deferred tax assets and liabilities are as follows (dollars in thousands):
MARCH 31, MARCH 31, 1997 1996 --------- --------- Deferred Tax Assets/(Liabilities): Accrued expenses and other ............................... $ 451 $ 280 Patents .................................................. 133 104 R&E credits .............................................. 85 85 NOL carryforwards ........................................ 2,762 2,202 -------- --------- Total deferred tax asset ................................. 3,431 2,671 Valuation allowance ...................................... (3,431) (2,671) -------- --------- Net deferred tax asset ................................... -- -- ======== =========
Due to the uncertainty surrounding the realization of the deferred tax assets in future income tax returns, the Company has recorded a full valuation allowance against its otherwise recognizable deferred tax assets. N. EMPLOYEE BENEFIT PLAN Effective October 26, 1992, the Company implemented a deferred compensation plan (the "Plan") under Section 401(k) of the Internal Revenue Code. Under the Plan, employees are permitted to contribute, subject to certain limitations. The Company's contribution to the Plan is discretionary and the Company has not contributed to the Plan since its inception. O. EMPLOYEE STOCK OPTION PLAN During 1993, the Company adopted, subject to shareholder approval, a stock award and incentive plan which permits the issuance of options or stock appreciation rights (SARs) to selected employees and independent contractors of the Company. The plan reserves 200,000 shares of common stock for grant and provides that the term of each award be determined by the Board of Directors charged with administering the plan. F-18 62 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Under the terms of the plan, options granted may be either nonqualified or incentive stock options and the exercise price, determined by the Board of Directors, may not be less than the fair market value of a share on the date of grant. SARs and limited SARs granted in tandem with an option shall be exercisable only to the extent the underlying option is exercisable and the grant price shall be equal to the exercise price of the underlying option. All options granted in 1993 and 1994 had an exercise price of $.20 per share. 42,140 options were granted in October of 1992 to employees who transferred to Triple I from AOI Systems; these options were immediately exercisable. All other options granted during 1993 and 1994 vest over a five-year period. In September 1995, the Company granted to certain employees, 34,060 options with an exercise price of $1.00 per share, vesting over a five-year period. Also during September 1995, the Company granted to an officer of the Company, 40,000 options with an exercise price of $1.00 per share, vesting over a two-year period. In May 1996 and January 1997 the Company granted 100,000 options and 50,000 options respectively, at $1.00 per share to officers of the Company. Also, in November 1996, 130,600 options were granted to employees at $1.00 per share. During the year ended March 31, 1997, the Company, in connection with certain stock option grants, recognized $26,400 in compensation expense, due to extending the exercise period which resulted in a remeasurement date. Details of stock options are as follows:
WEIGHTED AVERAGE SHARES EXERCISE PRICE -------- -------------- Year ended September 30, 1993 Granted................................................... 62,940 $ .20 Exercised................................................. 0 Canceled.................................................. 0 --------- --------- Outstanding at end of year................................ 62,940 .20 --------- --------- Exercisable at end of year................................ 42,140 .20 ========= ========= Year ended September 30, 1994 Granted................................................... 63,000 .20 Exercised................................................. 0 Canceled.................................................. 1,600 .20 --------- --------- Outstanding at end of year................................ 124,340 .20 --------- --------- Exercisable at end of year................................ 45,700 .20 ========= ========= Year ended September 30, 1995 Granted................................................... 74,060 1.00 Exercised................................................. 0 Canceled.................................................. 0 --------- --------- Outstanding at end of year................................ 198,400 .50 --------- --------- Exercisable at end of year................................ 62,220 .20 ========= ========= Six months ended March 31, 1996 Granted................................................... 0
F-19 63 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Exercised................................................. 0 Canceled.................................................. 2,000 1.00 --------- --------- Outstanding at end of year................................ 196,400 .49 --------- --------- Exercisable at end of year................................ 71,940 $ .20 ========= ========= Year ended March 31, 1997 Granted................................................... 280,600 1.00 Exercised................................................. 0 Canceled.................................................. 0 Outstanding at end of year................................ 477,000 .79 --------- --------- Exercisable at end of year................................ 114,872 .38 ========= =========
In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," ("SFAS 123"). SFAS 123 is effective for periods beginning after December 15, 1995, and requires that companies either recognize compensation expense for grants of stock, stock options, and other equity instruments based on fair value, or provide pro forma disclosure of net income and earnings per share in the notes to the financial statements. The Company adopted the disclosure provisions of SFAS 123 for the year ended March 31, 1997 and has applied APB Opinion 25 and related Interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized. Had compensation cost for the Company's stock-based compensation plans been determined based on the fair value at the grant dates as calculated in accordance with SFAS 123, the Company's net income and earnings per share for the years ended March 31, 1997 and March 31, 1996 would have been reduced to the pro forma amounts indicated below:
MARCH 31, 1997 MARCH 31, 1996 ------------------------- --------------------------- Loss Per Loss Per Net Income Share Net Income Share ------------ --------- ------------ -------- As reported $(1,894,554) $ (.44) $(1,159,821) $ (.55) Pro Forma $(1,916,682) $ (.45) $(1,164,526) $ (.55)
The effects of applying SFAS 123 in this pro forma disclosure are not indicative of future amounts. SFAS 123 does not apply to awards prior to Fiscal 1996 and additional awards in the future years are anticipated. The fair value of each stock option is estimated on the date of grant using the Minimum F-20 64 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Value option-pricing model with the following assumptions: an expected life of six years, no dividends, and risk free interest rates of 6.2% and 6.1% for the years ended March 31, 1997 and March 31, 1996, respectively. The fair value of options granted in the year ended March 31, 1997 and the six months ended March 31, 1996 was $280,600 and $0. The following table summarizes information about stock options at March 31, 1997:
Options Outstanding Options Exercisable -------------------------------------------------- ----------------------------- Weighted Average Range of Number Contractual Weighted Average Number Weighted Average Exercise Prices Outstanding Life Exercise Price Exercisable Exercise Price - --------------- ----------- ---- -------------- ----------- -------------- $0.20 124,140 6.20 $0.20 88,460 $0.20 $1.00 302,860 9.17 $1.00 26,412 $1.00 $4.00 50,000 9.77 $4.00 0 ------- ------- $0.20-4.00 477,000 8.46 $1.11 114,872 $0.38 ======= =======
P. SIGNIFICANT CUSTOMERS AND DOMESTIC AND EXPORT SALES Significant Customers Sales to significant customers were as follows:
YEAR ENDED SIGNIFICANT PERCENTAGE OF MARCH 31, 1997 CUSTOMERS AMOUNT REVENUES ----------------------------- ----------- ------ ------------- 1997......................... Customer A $515,272 28% 1997......................... Customer B 460,000 25% 1997......................... Customer C 274,781 15% 1997......................... Customer D 227,230 12% FOR THE SIX MONTHS ENDED SIGNIFICANT PERCENTAGE OF MARCH 31, 1996 CUSTOMERS AMOUNT REVENUES ----------------------------- ----------- ------ ------------- 1996......................... Customer A $226,059 39% 1996......................... Customer B 180,000 31% YEAR ENDED SIGNIFICANT PERCENTAGE OF SEPTEMBER 30, 1995 CUSTOMERS AMOUNT REVENUES ----------------------------- ----------- ------ ------------- 1995......................... Customer A $225,000 18% 1995......................... Customer B 209,248 17%
F-21 65 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1995......................... Customer C 197,000 16% 1995......................... Customer D 178,066 15% 1994......................... Customer A 341,052 26% 1994......................... Customer B 291,572 22% 1994......................... Customer C 198,000 15% 1994......................... Customer D 150,000 12%
Domestic and Export Sales Domestic and export sales as a percentage of revenues were as follows:
YEAR ENDED MARCH 31, 1997 -------------------------- AMOUNT % ----------- -------- Domestic........................................ $ 377,835 20% Europe.......................................... 990,808 54% Asia............................................ 484,933 26% SIX MONTHS ENDED MARCH 31, 1996 -------------------------- AMOUNT % ----------- -------- Domestic........................................ $ 37,328 6% Europe.......................................... 532,112 92% Asia............................................ 10,926 2% YEAR ENDED SEPTEMBER 30, 1995 -------------------------- AMOUNT % ----------- -------- Domestic........................................ $ 114,701 9% Europe.......................................... 1,095,642 90% Asia............................................ 14,680 1% YEAR ENDED SEPTEMBER 30, 1994 -------------------------- AMOUNT % ----------- -------- Domestic........................................ $ 500,545 38% Europe.......................................... 664,965 51% Asia............................................ 144,638 11%
F-22 66 INDUSTRIAL IMAGING CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Q. OTHER EXPENSE Included in other expense is $171,297, which represents the cost of shares of the Company's common stock issued in conjunction with loans made to the Company in January and February, 1997. (See Note J). R. MERGER EXPENSES The costs of the Exchange with Orbis, consisting of legal costs, printing costs, and accounting costs amounted to $179,787, and have been included in operating expenses. (See Note A). F-23 EX-2 2 AGREEMENT OF MERGER (12/9/96) 1 EXHIBIT 2 AGREEMENT OF MERGER AGREEMENT OF MERGER THIS AGREEMENT OF MERGER ("Merger Agreement"), dated as of December___, 1996 is between Orbis, Inc., a Rhode Island corporation ("Orbis") and Industrial Imaging Corporation, Delaware corporation ("Industrial Imaging"). Orbis and Industrial Imaging are hereafter sometimes collectively referred to as the "Constituent Corporation." WHEREAS, Orbis is a corporation duly organized and existing under the laws of the State of Rhode Island; WHEREAS, Industrial Imaging is a corporation duly organized and existing under the laws of the State of Delaware; WHEREAS, on the date of this Merger Agreement, Orbis, Inc. has authority to issue 10,000,000 shares of Common Stock, $.01 par value per share ("Orbis Common Stock"), 9,450,000 shares of which are issued and outstanding; WHEREAS, on the date of this Merger Agreement, Industrial Imaging has authority to issue twenty million (20,000,000) shares of Common Stock, $.01 par value per share ("Industrial Imaging Common Stock"), of which one (1) share is issued and outstanding, one million (1,000,000) shares of Preferred Stock, $.01 par value per share, of which no shares are issued and outstanding; WHEREAS, the respective Boards of Directors of Orbis and Industrial Imaging have determined that it is advisable and in the best interests of each of such corporations to merge in a tax-free reorganization with and into Industrial Imaging upon the terms and subject to the conditions of this Merger Agreement; and WHEREAS, the respective Boards of Directors of Orbis and Industrial Imaging have, by resolutions duly adopted, approved this Merger Agreement, and the shareholders of Orbis have duly approved this Merger Agreement, by majority of the shareholders voting at a Special Meeting of Stockholders on December 5, 1996 and the sole shareholder of Industrial Imaging has, by unanimous written consent dated __________, 1996, duly approved this Merger Agreement; 2 NOW, THEREFORE, in consideration of the mutual agreements and covenants set forth herein, Orbis and Industrial Imaging hereby agree as follows: 1. Merger. Orbis will be merged with and into Industrial Imaging (the "Merger"), and Industrial Imaging shall be the surviving corporation (hereinafter sometimes referred to as the "Surviving Corporation"). The merger shall become effective upon the time and date of filing of such documents as may be required under applicable law ("Effective Time"). 2. Governing Documents. The Certificate of Incorporation and the Bylaws of Industrial Imaging as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation without change or amendment until thereafter amended in accordance with the provisions thereof and applicable laws. 3. Succession. At the Effective Time, the separate corporate existence of Orbis shall cease, and Industrial Imaging shall possess all the rights, privileges, powers and franchises of a public and private nature and be subject to all the restrictions, disabilities and duties of Orbis; and all and singular, the rights, privileges, powers and franchises of Orbis and all property, real, personal and mixed, and all debts due to Orbis on whatever account, as well as for share subscriptions and all other things in action or belonging to Orbis shall be vested in the Surviving Corporation; and all property, rights, privileges, powers and franchises, and all and every other interest shall be thereafter as effectually the property of the Surviving Corporation as they were of Orbis, and the title to any real estate vested by deed or otherwise, under the laws of the State of Delaware, in Orbis shall not revert or be in any way impaired by reason of the General Corporation Law of the State of Delaware; but all rights of creditors and all liens upon any property of Orbis shall be preserved unimpaired; and all debts, liabilities and duties of Orbis shall thenceforth attach to the Surviving Corporation and may be enforced against it to the same extent as if such debts, liabilities and duties had been incurred or contracted by it. All corporate acts, plans, policies, agreements, arrangements, approvals and authorizations of Orbis, its shareholders, Board of Directors and committees thereof, officers and agents which were valid and effective immediately prior to the Effective Time, shall be taken for all purposes as the acts, plans, policies, agreements, arrangements, approvals and authorizations of Industrial Imaging and shall be as effective and binding thereon as the same were with respect to Orbis. 4. Further Assurances. From time to time, as and when required by Industrial Imaging or by its successors and assigns, there shall be executed and delivered on behalf of Orbis such deeds and other instruments, and there shall be taken or caused to be taken by it all such further and other action, as shall be appropriate or necessary in order to vest, perfect or confirm, of record or otherwise, in Industrial Imaging the title to and possession of all property, interest, assets, rights, privileges, immunities, powers, franchises and authority of Orbis and otherwise to carry out the purposes of this Merger Agreement, and the officers and directors of Industrial Imaging are fully authorized in the name and on behalf of Orbis to take any and all such action and to execute and deliver any and all deeds and other instruments. 5. Conversion of Shares. At the Effective Time, by virtue of the Merger and without any action on the part of the holder thereof: (a) Every eighteen (18) shares of Orbis Common Stock issued and outstanding immediately prior to the Effective Time shall be changed and converted into one (1) fully-paid and non-assessable share of Common Stock of Industrial Imaging. (b) The one (1) share of Industrial Imaging Common Stock presently issued and outstanding shall be given to Industrial Imaging as a capital contribution and shall be cancelled and resume the status of authorized and unissued shares of Industrial Imaging Common Stock, and no shares of Industrial Imaging Common Stock or other securities shall be issued in respect thereof. 6. Conversion of Warrants and Options. At the Effective Time, by virtue of the Merger 2 3 and without any action on the part of the holder thereof, unless the Board of Directors determines otherwise, each option and/or warrant to purchase Orbis Common Stock outstanding immediately prior to the Effective Time shall be changed and converted into an option and/or warrant to purchase Industrial Imaging Common Stock on the basis of the following ratio: (a) Options to purchase eighteen (18) shares of Orbis Common Stock shall be converted into an option to purchase one (1) share of Industrial Imaging Common Stock. (b) Warrants to purchase eighteen (18) shares of Orbis Common Stock shall be converted into a warrant to purchase one (1) share of Industrial Imaging Common Stock. 7. Stock Certificates. At and after the Effective Time, all of the outstanding certificates which immediately prior to the Effective Time represented shares of Orbis Common Stock shall be presented to Industrial Imaging to be exchanged for certificates representing shares of Industrial Imaging Common Stock as converted as herein provided. The registered owner of any such outstanding certificate shall, until such certificate shall have been surrendered for transfer or otherwise accounted for to Industrial Imaging or its transfer agents, have and be entitled to exercise any voting and other rights with respect to and to receive any dividends and other distributions upon the shares of Industrial Imaging Common Stock evidenced by such outstanding certificate as above provided. All certificates representing shares of Industrial Imaging outstanding immediately prior to the Effective Time shall be surrendered to Industrial Imaging for cancellation; at and after the Effective Time, the shares represented by such certificates shall be deemed to be cancelled whether or not the certificates have been surrendered or otherwise accounted for. 8. Employee Benefit Plans. As of the Effective Time, Industrial Imaging hereby assumes all obligations of Orbis under all employee benefit plans in effect, if any, as of the Effective Time or with respect to which employee rights or accrued benefits are outstanding, if any, as of the Effective Time. 9. Amendment. Subject to applicable law, this Merger Agreement may be amended, modified or supplemented by written agreement of the parties hereto at any time prior to the Effective Time with respect to any of the terms contained herein. 10. Abandonment. At any time prior to the Effective Time, this Merger Agreement may be terminated and the Merger may be abandoned by the Board of Directors of either Orbis or Industrial Imaging, or either of them, notwithstanding approval of this Merger Agreement by the stockholders of any of said corporations if circumstances arise which, in the opinion of the Board of Directors of Orbis or Industrial Imaging make the Merger inadvisable. 11. Counterparts. In order to facilitate the filing and recording of this Merger Agreement, the same may be executed in two or more counterparts, each of which shall be deemed to be an original and the same agreement. 3 4 IN WITNESS WHEREOF, Orbis and Industrial Imaging have caused this Merger Agreement to be signed by their respective duly authorized officers as of the date first above written. Orbis, Inc. a Rhode Island corporation By: -------------------------------- Pasquale Ruggieri, President WITNESS: Arthur G. Jenkins, Secretary Industrial Imaging Corporation a Delaware corporation By: -------------------------------- Juan J. Amodei, Ph.D., President WITNESS: - -------------------------------- Juan J. Amodei, Ph.D., Secretary EX-3.(I) 3 CERTIFICATE OF INCORPORATION 1 EXHIBIT 3a CERTIFICATE OF INCORPORATION OF INDUSTRIAL IMAGING CORPORATION ***** 1. The name of the corporation is Industrial Imaging Corporation. 2. The address of its registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. 3. The nature of the business or purposes to be conducted or promoted is: To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. 4. The total number of shares of stock which the Corporation shall have authority to issue is Twenty-one Million (21,000,000) shares; of which twenty million (20,000,000) will be Common Stock, of the par value $.01 per share; and one million (1,000,000) will be Preferred Stock, of the par value $.01 per share, amounting in the aggregate to Two Hundred Ten Thousand and 00/100 Dollars ($210,000.00). Additional designations and powers, preferences and rights and qualifications, limitations or restrictions thereof of the shares of each class shall be determined by the Board of Directors of the Corporation from time to time. 5. The name and mailing address of the Corporation's incorporator is Juan J. Amodei, Ph.D., Industrial Imaging Corporation, One Lowell Research Center, 847 Rogers Street, Lowell, Massachusetts 01852. 6. The name and address of the person who is to serve as the sole director of the Corporation until the first annual meeting of the stockholders or until his successors are elected and qualified is: Juan J. Amodei, Ph.D. Industrial Imaging Corporation One Lowell Research Center 847 Rogers Street Lowell, Massachusetts 01852 7. The Corporation is to have perpetual existence. 8. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized: 2 To make, alter or repeal the bylaws of the Corporation. To authorize and cause to be executed mortgages and liens upon the real and personal property of the Corporation. To set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and to abolish any such reserve in the manner in which it was created. By a majority of the whole Board, to designate one or more committees, each committee to consist of one or more of the Directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. The bylaws may provide that in the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such agent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, or in the bylaws of the Corporation, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease, or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the bylaws of the Corporation; and, unless the resolution or bylaws expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. When and as authorized by the stockholders in accordance with statute, to sell, lease or exchange all or substantially all of the property and assets of the Corporation, including its goodwill and its corporate franchises, upon such terms and conditions and for such consideration, which may consist in whole or in part of money or property, including shares of stock in, and/or other securities of, any other corporation or corporations, as its board of directors shall deem expedient and for the best interests of the Corporation. 9. To the maximum extent permitted by Section 102(b)(7) of the General Corporation Law of Delaware, a director of this Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. 10. Whenever a compromise or arrangement is proposed between this Corporation and its - 2 - 3 creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court or equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement to any reorganization of this Corporation as consequences of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders of this Corporation, as the case may be, and also on this Corporation. 11. Meetings of the stockholders may be held within or without the State of Delaware, as the bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the bylaws of the Corporation. Elections of directors need not be by written ballot unless the bylaws of the Corporation shall so provide. 12. The Corporation reserves the right to amend, alter, change, or repeal any provision contained in this certificate of incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] - 3 - 4 THE UNDERSIGNED, being the incorporator named hereinbefore, for the purposes of forming a corporation pursuant to the General Corporation Law of the State of Delaware, does make this certificate, hereby declaring and certifying that this is his act and deed and the facts herein stated are true, and accordingly, has hereunto set his hand this day of , 1996. -------------------------- Juan J. Amodei, Ph.D. COMMONWEALTH OF MASSACHUSETTS ) ) ss.: COUNTY OF MIDDLESEX ) BE IT REMEMBERED that on this day of , 1996, personally came before me, a Notary Public for the Commonwealth of Massachusetts, Juan J. Amodei, Ph.D., the party to the foregoing Certificate of Incorporation, known to me personally to be such, and acknowledged the said Certificate to be his free act and deed and that the facts stated therein are true. GIVEN under my hand and seal of office the day and year aforesaid. -------------------------- Notary Public My commission expires: - 4 - EX-3.(II) 4 BYLAWS 1 EXHIBIT 3b BYLAWS OF INDUSTRIAL IMAGING CORPORATION Article I. Offices. Section 1. Registered Office. The registered office of the Corporation shall be at The Corporation Trust Company, 1209 Orange Street, in the City of Wilmington, County of New Castle, State of Delaware 19801. Section 2. Additional Offices. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or as the business of the Corporation may require. Article II. Meetings of Stockholders. Section 1. Time and Place. A meeting of stockholders for any purpose may be held at such time and place within or without the State of Delaware as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual Meeting. Annual meetings of stockholders, commencing with the year 1997, shall be held on the first Monday in May at 10:00 a.m., or at such other date and time as shall, from time to time, be designated by the Board of Directors and stated in the notice of the meeting. At such annual meetings, the stockholders shall elect a Board of Directors and transact such other business as may properly be brought before the meetings. Section 3. Notice of Annual Meeting. Written notice of the annual meeting, stating the place, date, and time thereof, shall be given to each stockholder entitled to vote at such meeting not less than ten (unless a longer period is required by law) nor more than sixty days prior to the meeting. Section 4. Special Meetings. Special meetings of the stockholders may be called for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, by the Chairman of the Board, if any, or the President, and shall be called by the President or Secretary at the request, in writing, of a majority of the Board of Directors or of the stockholders owning a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote. Such request shall state the purpose of the proposed meeting. Section 5. Notice of Special Meeting. Written notice of a special meeting, stating the place, date, and time thereof and the purpose or purposes for which the meeting is called, shall be given to each stockholder entitled to vote at such meeting not less than ten (unless a longer period is required by law) nor more than sixty days prior to the meeting. 2 Section 6. List of Stockholders. The transfer agent or the officer in charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, at a place within the city where the meeting is to be held, which place, if other than the place of the meeting, shall be specified in the notice of the meeting. The list shall also be produced and kept at the place of the meeting during the whole time thereof and may be inspected by any stockholder who is present in person thereat. Section 7. Presiding Officer and Order of Business. (a) Meetings of stockholders shall be presided over by the Chairman of the Board. If he is not present or there is none, they shall be presided over by the President, or, if he is not present or there is none, by a Vice President, or, if he is not present or there is none, by a person chosen by the Board of Directors, or, if no such person is present or has been chosen, by a chairman to be chosen by the stockholders owning a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote at the meeting and who are present in person or represented by proxy. The Secretary of the Corporation, or, if he is not present, an Assistant Secretary, or, if he is not present, a person chosen by the Board of Directors, shall act as Secretary at meetings of stockholders; if no such person is present or has been chosen, the stockholders owning a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote at the meeting who are present in person or represented by proxy shall choose any person present to act as secretary of the meeting. (b) The following order of business, unless otherwise determined at the meeting, shall be observed as far as practicable and consistent with the purposes of the meeting: (1) Call of the meeting to order. (2) Presentation of proof of mailing of the notice of the meeting and, if the meeting is a special meeting, the call thereof. (3) Presentation of proxies. (4) Announcement that a quorum is present. (5) Reading and approval of the minutes of the previous meeting. (6) Reports, if any, of officers. (7) Election of directors, if the meeting is an annual meeting or a meeting called for that purpose. (8) Consideration of the specific purpose or purposes, other than the election of directors, for which the meeting has been called, if the meeting is a special meeting. (9) Transaction of such other business as may properly come before the meeting. (10) Adjournment. -2- 3 Section 8. Quorum and Adjournments. The presence in person or representation by proxy of the holders of a majority of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote shall be necessary to, and shall constitute a quorum for, the transaction of business at all meetings of the stockholders, except as otherwise provided by statute or by the Certificate of Incorporation. If, however, a quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat who are present in person or represented by proxy shall have the power to adjourn the meeting from time to time until a quorum shall be present or represented. If the time and place of the adjourned meeting are announced at the meeting at which the adjournment is taken, no further notice of the adjourned meeting need be given. Even if a quorum shall be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat who are present in person or represented by proxy shall have the power to adjourn the meeting from time to time for good cause to a date that is not more than thirty days after the date of the original meeting. Further notice of the adjourned meeting need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken. At any adjourned meeting at which a quorum is present in person or represented by proxy, any business may be transacted that might have been transacted at the meeting as originally called. If the adjournment is for more than thirty days, or if, after the adjournment, a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote thereat. Section 9. Voting. (a) At any meeting of the stockholders, every stockholder having the right to vote shall be entitled to vote in person or by proxy. Except as otherwise provided by law or the Certificate of Incorporation, each stockholder of record shall be entitled to one vote for each share of capital stock registered in his name on the books of the Corporation. (b) All elections shall be determined by a plurality vote, and, except as otherwise provided by law or the Certificate of Incorporation, all other matters shall be determined by a vote of a majority of the shares present in person or represented by proxy and voting on such other matters. Section 10. Action by Consent. Any action required or permitted by law or the Certificate of Incorporation to be taken at any meeting of stockholders may be taken without a meeting, without prior notice of a written consent, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present or represented by proxy and voted. Such written consent shall be filed with the minutes of the meetings of stockholders. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing thereto. Article III. Directors. Section 1. General Powers, Number, and Tenure. The business of the Corporation shall -3- 4 be managed by its Board of Directors, which may exercise all powers of the Corporation and perform all lawful acts that are not by law, the Certificate of Incorporation, or these Bylaws directed or required to be exercised or performed by the stockholders. The number of directors shall be determined by the Board of Directors; if no such determination is made, the number of directors shall be one. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until the next annual meeting and until his successor is elected and shall qualify. Directors need not be stockholders. Section 2. Vacancies. If any vacancies occur in the Board of Directors, or if any new directorships are created, they may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Each director so chosen shall hold office until the next annual meeting of stockholders and until his successor is duly elected and shall qualify. If there are no directors in office, any officer or stockholder may call a special meeting of stockholders in accordance with the provisions of the Certificate of Incorporation or these Bylaws, at which meeting such vacancies shall be filled. Section 3. Removal or Resignation. (a) Except as otherwise provided by law or the Certificate of Incorporation, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. (b) Any director may resign at any time by giving written notice to the Board of Directors, the Chairman of the Board, if any, or the President or Secretary of the Corporation. Unless otherwise specified in such written notice, a resignation shall take effect on delivery thereof to the Board of Directors or the designated officer. It shall not be necessary for a resignation to be accepted before it becomes effective. Section 4. Place of Meetings. The Board of Directors may hold meetings, both regular and special, either within or without the State of Delaware. Section 5. Annual Meeting. The annual meeting of each newly elected Board of Directors shall be held immediately following the annual meeting of stockholders, and no notice of such meeting shall be necessary to the newly elected directors in order to constitute the meeting legally, provided a quorum shall be present. Section 6. Regular Meetings. Additional regular meetings of the Board of Directors may be held without notice of such time and place as may be determined from time to time by the Board of Directors. Section 7. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President, or by two or more directors on at least two days' notice to each director, if such notice is delivered personally or sent by telegram, or on at least three days' notice if sent by mail. Special meetings shall be called by the Chairman of the Board, President, Secretary, or two or more directors in like manner and on like notice on the written request of one-half or more of the number of directors then in office. Any such notice need not state the purpose or purposes of such meeting, except as provided in Article XI. -4- 5 Section 8. Quorum and Adjournments. At all meetings of the Board of Directors, a majority of the directors then in office shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by law or the Certificate of Incorporation. If a quorum is not present at any meeting of the Board of Directors, the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting at which the adjournment is taken, until a quorum shall be present. Section 9. Compensation. Directors shall be entitled to such compensation for their services as directors and to such reimbursement for any reasonable expenses incurred in attending directors' meetings as may from time to time be fixed by the Board of Directors. The compensation of directors may be on such basis as is determined by the Board of Directors. Any director may waive compensation for any meeting. Any director receiving compensation under these provisions shall not be barred from serving the Corporation in any other capacity and receiving compensation and reimbursement for reasonable expenses for such other services. Section 10. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, and without prior notice, if a written consent to such action is signed by all members of the Board of Directors and such written consent is filed with the minutes of its proceedings. Section 11. Meetings by Telephone or Similar Communications Equipment. The Board of Directors may participate in a meeting by conference telephone or similar communications equipment by means of which all directors participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person by any such director at such meeting. Article IV. Committees. Section 1. Executive Committee. The Board of Directors, by resolution adopted by a majority of the whole Board, may appoint an Executive Committee consisting of one or more directors, one of whom shall be designated as Chairman of the Executive Committee. Each member of the Executive Committee shall continue as a member thereof until the expiration of his term as a director or his earlier resignation, unless sooner removed as a member or as a director. Section 2. Powers. The Executive Committee shall have and may exercise those rights, powers, and authority of the Board of Directors as may from time to time be granted to it by the Board of Directors to the extent permitted by law, and may authorize the seal of the Corporation to be affixed to all papers that may require it. Section 3. Procedure and Meetings. The Executive Committee shall fix its own rules of procedure and shall meet at such times and at such place or places as may be provided by such rules or as the members of the Executive Committee shall fix. The Executive Committee shall keep regular minutes of its meetings, which it shall deliver to the Board of Directors from time to time. -5- 6 The Chairman of the Executive Committee or, in his absence, a member of the Executive Committee chosen by a majority of the members present, shall preside at meetings of the Executive Committee; and another member chosen by the Executive Committee shall act as Secretary of the Executive Committee. Section 4. Quorum. A majority of the Executive Committee shall constitute a quorum for the transaction of business, and the affirmative vote of a majority of the members present at any meeting at which there is a quorum shall be required for any action of the Executive Committee; provided, however, that when an Executive Committee of one member is authorized under the provisions of Section 1 of this Article, that one member shall constitute a quorum. Section 5. Other Committees. The Board of Directors, by resolutions adopted by a majority of the whole Board, may appoint such other committee or committees as it shall deem advisable and with such rights, power, and authority as it shall prescribe. Each such committee shall consist of one or more directors. Section 6. Committee Changes. The Board of Directors shall have the power at any time to fill vacancies in, to change the membership of, and to discharge any committee. Section 7. Compensation. Members of any committee shall be entitled to such compensation for their services as members of the committee and to such reimbursement for any reasonable expenses incurred in attending committee meetings as may from time to time be fixed by the Board of Directors. Any member may waive compensation for any meeting. Any committee member receiving compensation under these provisions shall not be barred from serving the Corporation in any other capacity and from receiving compensation and reimbursement of reasonable expenses for such other services. Section 8. Action by Consent. Any action required or permitted to be taken at any meeting of any committee of the Board of Directors may be taken without a meeting if a written consent to such action is signed by all members of the committee and such written consent is filed with the minutes of its proceedings. Section 9. Meetings by Telephone or Similar Communications Equipment. The members of any committee designated by the Board of Directors may participate in a meeting of such committee by conference telephone or similar communications equipment by means of which all persons participating in such meeting can hear each other, and participation in such a meeting shall constitute presence in person by any such committee member at such meeting. Article V. Notices. Section 1. Form and Delivery. Whenever a provision of any law, the Certificate of Incorporation, or these Bylaws requires that notice be given to any director or stockholder, it shall not be construed to require personal notice unless so specifically provided, but such notice may be -6- 7 given in writing, by mail addressed to the address of the director or stockholder as it appears on the records of the Corporation, with postage prepaid. These notices shall be deemed to be given when they are deposited in the United States mail. Notice to a director may also be given personally or by telephone or by telegram sent to his address as it appears on the records of the Corporation. Section 2. Waiver. Whenever any notice is required to be given under the provisions of any law, the Certificate of Incorporation, or these Bylaws, a written waiver thereof signed by the person entitled to said notice, whether before or after the time stated therein, shall be deemed to be equivalent to such notice. In addition, any stockholder who attends a meeting of stockholders in person or is represented at such meeting by proxy, without protesting at the commencement of the meeting the lack of notice thereof to him, or any director who attends a meeting of the Board of Directors without protesting at the commencement of the meeting of the lack of notice, shall be conclusively deemed to have waived notice of such meeting. Article VI. Officers. Section 1. Designations. The officers of the Corporation shall be chosen by the Board of Directors. The Board of Directors may choose a Chairman of the Board, a President, a Vice President or Vice Presidents, a Secretary, a Treasurer, one or more Assistant Secretaries and/or Assistant Treasurers, and other officers and agents that it shall deem necessary or appropriate. All officers of the Corporation shall exercise the powers and perform the duties that shall from time to time be determined by the Board of Directors. Any number of offices may be held by the same person, unless the Certificate of Incorporation or these Bylaws provide otherwise. Section 2. Term of, and Removal From, Office. At its first regular meeting after each annual meeting of stockholders, the Board of Directors shall choose a President, a Secretary, and a Treasurer. It may also choose a Chairman of the Board, a Vice President or Vice Presidents, one or more Assistant Secretaries and/or Assistant Treasurers, and such other officers and agents as it shall deem necessary or appropriate. Each officer of the Corporation shall hold office until his successor is chosen and shall qualify. Any officer elected or appointed by the Board of Directors may be removed, with or without cause, at any time by the affirmative vote of a majority of the directors then in office. Removal from office, however, shall not prejudice the contract rights, if any, of the person removed. Any vacancy occurring in any office of the Corporation may be filled for the unexpired portion of the term by the Board of Directors. Section 3. Compensation. The salaries of all officers of the Corporation shall be fixed from time to time by the Board of Directors, and no officer shall be prevented from receiving a salary because he is also a director of the Corporation. Section 4. The Chairman of the Board. The Chairman of the Board, if any, shall be an officer of the Corporation and, subject to the direction of the Board of Directors, shall perform such executive, supervisory, and management functions and duties as may be assigned to him from time to time by the Board of Directors. He shall, if present, preside at all meetings of stockholders and of the Board of Directors. -7- 8 Section 5. The President. (a) The President shall be the chief executive officer of the Corporation and, subject to the direction of the Board of Directors, shall have general charge of the business, affairs, and property of the Corporation and general supervision over its other officers and agents. In general, he shall perform all duties incident to the office of President and shall see that all orders and resolutions of the Board of Directors are carried into effect. (b) Unless otherwise prescribed by the Board of Directors, the President shall have full power and authority to attend, act, and vote on behalf of the Corporation at any meeting of the security holders of other corporations in which the Corporation may hold securities. At any such meeting, the President shall possess and may exercise any and all rights and powers incident to the ownership of such securities that the Corporation might have possessed and exercised if it had been present. The Board of Directors may from time to time confer like powers upon any other person or persons. Section 6. The Vice President. The Vice President, if any, or in the event there be more than one, the Vice Presidents in the order designated, or in the absence of any designation, in the order of their election, shall, in the absence of the President or in the event of his disability, perform the duties and exercise the powers of the President and shall generally assist the President and perform such other duties and have such other powers as may from time to time be prescribed by the Board of Directors. Section 7. The Secretary. The Secretary shall attend all meetings of the Board of Directors and the stockholders and record all votes and the proceedings of the meetings in a book to be kept for that purpose. He shall perform like duties for the Executive Committee or other committees, if required. He shall give, or cause to be given, notice of all meetings of stockholders and special meetings of the Board of Directors, and shall perform such other duties as may from time to time be prescribed by the Board of Directors, the Chairman of the Board, or the President, under whose supervision he shall act. He shall have custody of the seal of the Corporation, and he, or an Assistant Secretary, shall have authority to affix it to any instrument requiring it, and, when so affixed, the seal may be attested by his signature or by the signature of the Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing thereof by his signature. Section 8. The Assistant Secretary. The Assistant Secretary, if any, or in the event there be more than one, the Assistant Secretaries in the order designated, or in the absence of any designation, in the order of their election, shall, in the absence of the Secretary or in the event of his disability, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as may from time to time be prescribed by the Board of Directors. Section 9. The Treasurer. The Treasurer shall have custody of the corporate funds and other valuable effects, including securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may from time to time -8- 9 be designated by the Board of Directors. He shall disburse the funds of the Corporation in accord with the orders of the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board, if any, the President, and the Board of Directors, whenever they may require it or at regular meetings of the Board, an account of all his transactions as Treasurer and of the financial condition of the Corporation. Section 10. The Assistant Treasurer. The Assistant Treasurer, if any, or in the event there shall be more than one, the Assistant Treasurers in the order designated, or in the absence of any designation, in the order of their election, shall, in the absence of the Treasurer or in the event of his disability, perform such other duties and have such other powers as may from time to time be prescribed by the Board of Directors. Article VII. Indemnification. Reference is made to Section 145 and any other relevant provisions of the General Corporation Law of the State of Delaware. Particular reference is made to the class of persons, hereinafter called "Indemnitees", who may be indemnified by a Delaware corporation pursuant to the provisions of such Section 145, namely, any person, or the heirs, executors, or administrators of such person, who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that such person is or was a director, officer, employee, or agent of such corporation or is or was serving at the request of such corporation as a director, officer, employee, or agent of such corporation or is or was serving at the request of such corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise. The Corporation shall, and is hereby obligated to, indemnify the Indemnitees, and each of them, in each and every situation where the Corporation is obligated to make such indemnification pursuant to the aforesaid statutory provisions. The Corporation shall indemnify the Indemnitees, and each of them, in each and every situation where, under the aforesaid statutory provisions, the Corporation is not obligated, but is nevertheless permitted or empowered, to make such indemnification, it being understood that, before making such indemnification with respect to any situation covered under this sentence, (i) the Corporation shall promptly make or cause to be made, by any of the methods referred to in Subsection (d) of such Section 145, a determination as to whether each Indemnitee acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, in the case of any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful, and (ii) that no such indemnification shall be made unless it is determined that such Indemnitee acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, in the case of any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. -9- 10 Article VIII. Affiliated Transactions and Interested Directors. Section 1. Affiliated Transactions. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof that authorizes the contract or transaction or solely because his or their votes are counted for such purpose if: (a) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (b) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by the vote of the stockholders; or (c) The contract or transaction is fair as to the Corporation as of the time it is authorized, approved, or ratified by the Board of Directors, a committee thereof, or the stockholders. Section 2. Determining Quorum. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee thereof which authorizes the contract or transaction. Article IX. Stock Certificates. Section 1. Form and Signatures. (a) Every holder of stock of the Corporation shall be entitled to a certificate stating the number and class, and series, if any, of shares owned by him, signed by the Chairman of the Board, if any, or the President and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, and bearing the seal of the Corporation. The signatures and the seal may be facsimiles. A certificate may be signed, manually or by facsimile, by a transfer agent or registrar other than the Corporation or its employee. In case any officer who has signed, or whose facsimile signature was placed on, a certificate shall have ceased to be such officer before the certificate is issued, it may nevertheless be issued by the Corporation with the same effect as if he were such officer at the date of its issue. (b) All stock certificates representing shares of capital stock that are subject to restrictions on transfer or to other restrictions may have imprinted thereon any notation to that effect determined by the Board of Directors. -10- 11 Section 2. Registration of Transfer. Upon surrender to the Corporation or any transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment, or authority to transfer, the Corporation or its transfer agent shall issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon the books of the Corporation. Section 3. Registered Stockholders. (a) Except as otherwise provided by law, the Corporation shall be entitled to recognize the exclusive right of a person who is registered on its books as the owner of shares of its capital stock to receive dividends or other distributions and to vote or consent as such owner, and to hold liable for calls and assessments any person who is registered on its books as the owner of shares of its capital stock. The Corporation shall not be bound to recognize any equitable or legal claim to, or interest in, such shares on the part of any other person. (b) If a stockholder desires that notices and/or dividends shall be sent to a name or address other than the name or address appearing on the stock ledger maintained by the Corporation, or its transfer agent or registrar, if any, the stockholder shall have the duty to notify the Corporation, or its transfer agent or registrar, if any, in writing of his desire and specify the alternate name or address to be used. Section 4. Record Date. In order that the Corporation may determine the stockholders of record who are entitled to receive notice of, or to vote at, any meeting of stockholders or any adjournment thereof or to express consent to corporate action in writing without a meeting, to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any lawful action, the Board of Directors may, in advance, fix a date as the record date for any such determination. Such date shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to the date of any other action. A determination of stockholders of record entitled to notice of, or to vote at, a meeting of stockholders shall apply to any adjournment of the meeting taken pursuant to Section 8 of Article II; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 5. Lost, Stolen, or Destroyed Certificates. The Board of Directors may direct that a new certificate be issued to replace any certificate theretofore issued by the Corporation that, it is claimed, has been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen, or destroyed. When authorizing the issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of the lost, stolen, or destroyed certificate, or his legal representative, to advertise the same in such manner as it shall require, and/or to give the Corporation a bond in such sum, or other security in such form, as it may direct as indemnity against any claims that may be made against the Corporation with respect to the certificate claimed to have been lost, stolen, or destroyed. -11- 12 Article X. General Provisions. Section 1. Dividends. Subject to the provisions of law and the Certificate of Incorporation, dividends upon the outstanding capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting, and may be paid in cash, in property, or in shares of the Corporation`s capital stock. Section 2. Reserves. The Board of Directors shall have full power, subject to the provisions of law and the Certificate of Incorporation, to determine whether any, and, if so, what part, of the funds legally available for the payment of dividends shall be declared as dividends and paid to the stockholders of the Corporation. The Board of Directors, in its sole discretion, may fix a sum that may be set aside or reserved over and above the paid-in capital of the Corporation as a reserve for any proper purpose, and may, from time to time, increase, diminish, or vary such amount. Section 3. Fiscal Year. Except as from time to time otherwise provided by the Board of Directors, the fiscal year of the Corporation shall end March 31 of each year. Section 4. Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its incorporation, and the words "Corporate Seal" and "Delaware". Article XI. Amendments. The Board of Directors shall have the power to alter and repeal these Bylaws and to adopt new Bylaws by an affirmative vote of a majority of the whole Board, provided that notice of the proposal to alter or repeal these Bylaws or to adopt new Bylaws must be included in the notice of the meeting of the Board of Directors at which such action takes place. -12- EX-10.A 5 LICENSE & COLLABORATION AGREEMENT 1 EXHIBIT 10a LICENSE AND COLLABORATION AGREEMENT ----------------------------------- This Agreement (the "Agreement") is made and entered into this 28th day of November, 1994 by and among Polaroid Corporation, a Delaware corporation having its principle place of business at 549 Technology Square, Cambridge, Massachusetts 02139 ("Polaroid"), and Triple I Corporation, a Delaware corporation having its principle place of business at One Lowell Research Center, 847 Rogers Street, Lowell, Massachusetts 01852 ("Triple I"). WHEREAS, the parties desire to promote the development, marketing and sales in the field of printed circuit board production of an image processing system consisting of a plotter or other image processing device designed by Triple I and using Polaroid's laser imagable film; and to collaborate in the fields of Automatic Inspection and PCB PhotoTool generation. In consideration of the mutual promises, covenants, representations and warranties contained in this Agreement, the parties agree as follows: 1. DEFINITIONS. "Automatic Inspection" shall mean the inspection of manufactured mechanical and electronic products, components and subassemblies, using computer analysis and processing techniques for image interpretation and control signal generation. "Developed Product" shall mean a product, process or service which has been offered for sale to the general public or as to which development has been substantially completed and firm plans exist to offer the product, process or service for sale to the general public within 6 months. "Triple I Electronic Imaging Intellectual Property" shall mean all Intellectual Property in electronic imaging devices and components and subassemblies thereof that incorporate, embody, use or are designed or produced using Technology developed by Triple I during. the term of this Agreement that either arises out of a collaboration between the parties or results from proprietary information provided by Polaroid. "Exploit" shall mean to utilize, and "Exploitation" shall mean the utilization of, any Technology in any manner, including without limitation making, having made, using, selling, leasing, and renting, and in the case of Technology that is a work of authorship, includes copying or creating derivative works of such Technology. "Intellectual Property" shall mean all proprietary rights in Technology, including all Patents, copyrights, mask works, trade secrets, licenses and proprietary information, whether existing now or in the future. "Joint Intellectual Property" shall mean all Intellectual Property in Technology as to which employees of both Triple I and Polaroid would be considered joint inventors or joint authors under applicable principles of patent or copyright law, regardless of whether such 2 Intellectual Property would be patentable or copyrightable, PROVIDED THAT Joint Intellectual Property shall not include any Medium Intellectual Property or Medium Subject Matter Intellectual Property. "Medium" shall mean a laser imagable film for the production of high resolution images in dry image-forming substance. "Medium Subject Matter" shall mean any Medium, method of (or apparatus for) developing an image from the Medium or method of (or apparatus for) stabilizing, protecting or otherwise improving or enhancing the image attributes of such an image. "Medium Intellectual Property" shall mean all Intellectual Property in Technology related to any Medium and which arises out of a collaboration between the parties or is derived from proprietary information provided by Polaroid. "Medium Subject Matter Intellectual Property" shall mean all Intellectual Property in Technology related to Medium Subject Matter and which arises out of a collaboration between the parties or is derived from proprietary information provided by Polaroid. "Patent" shall mean any: (i) United States or foreign patent, patent application, patent disclosure or other patent right; (ii) any division, continuation, continuation-in-part or similar extension of an application that is a Patent; and (iii) any patent or other patent right that issues or is based upon an application that is a Patent. "PCB" shall mean a printed circuit board device used to interconnect electrical, optoelectrical or mechanical components and requiring a laser Plotter in the production thereof. "PCB Field" shall mean areas of technology and business related to the production of a printed circuit board (PCB) device. "Plotter" shall mean a print engine, recorder or other electromechanical device, including film handling and laser exposure means, for the laser exposure and processing of a Medium into an image useful, for example, as a PhotoTool in the production of printed circuit boards. "PhotoTool" or "Art Work" shall mean an image which is prepared from a Medium and used in the production of a PCB device. "Polaroid Imaging Intellectual Property" shall mean all Intellectual Property in Technology related to apparatus for and methods of acquiring, processing or recording image information, and susceptible of application in the fields of Automatic Inspection and PhotoTool generation, now or hereafter owned, developed, or otherwise acquired by Polaroid, including as a result of this Agreement. "Technology" shall mean all inventions, discoveries, innovations, know-how, information and all other forms of technology, including improvements, modifications, derivatives or 2 3 changes, whether tangible or intangible, embodied in any form, including software, hardware and integrated circuit chips (e.g., analog line version), whether or not protectible or protected by patent, copyright, mask work right, trade secret law or otherwise. "Triple I Intellectual Property" shall mean all Intellectual Property in Technology susceptible of application in the fields of optics and image acquisition, now or hereafter owned, developed or otherwise acquired by Triple I, including as a result of this Agreement. 2. RESEARCH & DEVELOPMENT. a. SYSTEM INTEGRATION. Triple I shall be the overall system integrator of a system for use in the PCB Field and including a Plotter and Medium. b. DEVELOPMENT OF MEDIUM. Polaroid shall be responsible for development of the Medium and; aspects of image quality attributable to the Medium Subject Matter. c. PRODUCT REQUIREMENTS. The determination and validation of the product requirements for the Medium and for the Plotter shall be jointly determined and validated. Triple I shall lead such joint determination and validation. 3. MANUFACTURING. a. MEDIUM. Polaroid shall manufacture the Medium. Polaroid shall manufacture Medium in sufficient quantities to meet Triple I's needs, as set forth in Triple I's Sales Forecasts. Polaroid shall adhere to the highest standards of quality in manufacturing the Medium. b. PLOTTER. Triple I shall manufacture, or have manufactured, the Plotter. Triple I shall adhere to the highest standards of quality in manufacturing the Plotter, and shall impose the same requirement upon any third party that Triple I engages to manufacture the Plotter. c. INTERFACES. Triple I shall be responsible for providing all interfaces between the Plotter and other hardware. 4. MARKETING. a. MARKETING PLANS. Triple I shall develop, with the assistance of Polaroid, plans for marketing the Medium and the Plotter. Triple I's marketing plans shall include product positioning, pricing, packaging, promotion and placement. b. MARKETING IN THE PCB FIELD. Triple I shall have the right to market and sell the Medium in the PCB Field. Except as set forth in the following subparagraphs d. and e., Triple I's right to market and sell the Medium in the PCB Field shall be exclusive. 3 4 c. MILESTONES. Triple I agrees to use all commercially reasonable efforts to meet the performance milestones set forth in Exhibit A, which milestones may be amended from time to time by mutual agreement of the parties. d. FAILURE OF PERFORMANCE MILESTONES. In respect of any of the performance milestones set forth in paragraphs 1 through l0 of Exhibit A ("Performance Milestone(s)"), Triple I shall, within thirty (30) days of the end of any quarter in which it is determined that any such Performance Milestone will not be realized, provide Polaroid with a written report explaining Triple I's failure to meet any such Milestone and an undertaking by Triple I of steps necessary to ensure that it will meet such Milestone for the ensuing period. If Triple I fails during two consecutive quarters to meet its Performance Milestones, Polaroid may effective upon written notice from Polaroid to Triple I, elect at its option to (a) give notice of its willingness to revise any such Performance Milestone by a written mutual agreement which sets a revised (extended) date for performance of such Milestone; or (b) convert Triple I's right to market and sell the Medium in the PCB Field to a non-exclusive right. In the event that the parties undertake to revise any Performance Milestone by a written mutual agreement which extends the date for such Performance Milestone, Polaroid shall have the right, if any such Milestone remains unrealized by the end of the extended date, to exercise option (b) recited in this paragraph. The election of Polaroid to pursue revision (extension) of the date for performance of any Performance Milestone and consequent inability of the parties to reach an agreement extending the date for performance of such Milestone shall not preclude Polaroid from electing the option (b) of converting Triple I's right to market and sell the Medium in the PCB field to a non-exclusive right. Notwithstanding the foregoing, Triple I shall not be responsible for failing to meet any Performance Milestone if such failure is the result of a failure by Polaroid to supply quantities of Medium as required or the failure of Polaroid to meet a material obligation required by this Agreement. f. MARKET INFORMATION AND PLANNING. Triple I shall advise Polaroid promptly concerning any market information that may come to Triple I's attention regarding Polaroid, Polaroid's market position or the continued competitiveness of the Medium in the marketplace, including but not limited to charges, complaints, or claims by customers, or other persons, about Polaroid or its products, process or services. Triple I shall confer from time to time, at the request of Polaroid, on matters relating to market conditions, sales forecasting and product planning. In addition, Polaroid shall have access, via Triple I, to Triple I's customers for the purposes of obtaining feedback concerning product quality and customer needs and conducting technical and market testing. 5. SALES BY POLAROID. Polaroid shall sell Polaroid branded Medium to Triple I in sufficient quantities to meet Triple I's requirements, as set forth in Triple I's Sales Forecasts. In the event that Polaroid does not have sufficient inventory to meet Triple I's requirements and Polaroid's other commitments to supply Medium, Polaroid shall allocate a portion of its production of Medium to Triple I in the proportion that Triple I's then existing non-cancelable orders bears to total orders, until Polaroid is again meeting Triple I's requirements. 4 5 6. POLAROID: PRICES AND PAYMENT. a. PRICES. Medium will be sold to Triple I * , as it may be amended or modified from time to time by Polaroid, unless otherwise agreed to by formal price quotation. The amount of the aforesaid * shall be set by the * of product specifications for the Medium. b. PRICE INCREASE OR DECREASE. Polaroid may, upon thirty (30) days written notice, increase the prices for the Medium. Any increase shall apply to any order received by Polaroid after the date of the written notice, except that any increased price shall not apply to any firm order received by Polaroid during the thirty day notice period so long as shipment occurs no later than forty-five (45) days after the date of notice. Polaroid may decrease its prices without providing advance notice to Triple I. Price decreases shall apply to all Medium ordered but not yet shipped on the effective date of the decrease. Triple I will receive a credit equal to the difference between the net price paid by Triple I for Medium in Triple I's inventory, less any prior credits granted by Polaroid as to such Medium, and the new decreased price provided that (i) the Medium have been in Triple I's inventory less than one hundred twenty days from date of shipment and in a new and undamaged condition as of the effective date of the price decrease. c. TAXES. TARIFFS. FEES. Polaroid's prices do not include any federal, state or local sales, use, value added or other taxes, customs duties, or similar tariffs and fees which Polaroid may be required to pay or collect upon the sale or delivery of Medium or upon collection of the sales price. Should any tax or levy be made, Triple I agrees to pay such tax or levy and indemnify Polaroid for any claim for such tax or levy demanded. d. PAYMENT. All payments shall be made at the address designated by Polaroid. e. CREDIT TERMS. Shipments shall be made on credit terms with payment due forty-five (45) days after shipment. f. OTHER TERMS OF SALE. Except to the extent inconsistent, with this Agreement, all sales of Medium by Polaroid to Triple I shall be on Polaroid's standard terms and conditions of sale. g. DELIVERY OF TERMS AND CONDITIONS. Within sixty (60) days following execution of the Agreement, Polaroid shall provide to Triple I its standard terms. and conditions of sale. 7. RESALE PRICING. Polaroid may advise Triple I of an established list price for the Medium. Triple I shall establish the actual end user pricing for the Medium. Polaroid shall provide information to assist Triple I in establishing the actual end user pricing, but Triple I shall have the sole right to determine the price actually charged for the Medium. - ---------------------------------------------------- *Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Commission. 5 6 8. SERVICE. a. END USER SERVICE. Triple I shall provide end user service to Triple I's customers. b. BACK-UP SUPPORT. Polaroid shall provide back-up technical support concerning the Medium Subject Matter to the Triple I personnel providing end user support. Polaroid shall designate a technical support contact who shall be responsible for providing support to Triple I. The technical support contact shall have at least 9 months experience working with the Medium Subject Matter. c. TRAINING. Polaroid shall be responsible for providing training concerning the Medium Subject Matter to end users, Triple I engineers and Triple I support personnel, as appropriate. d. PERFORMANCE REPORTS. Triple I shall provide quarterly performance reports to Polaroid that report any feedback received by Triple I from its customers concerning the Medium. 9. LICENSES. a. TRIPLE I LICENSE TO POLAROID IMAGING INTELLECTUAL PROPERTY. Polaroid grants to Triple I a worldwide, royalty-free, nonexclusive license, to commercially exploit and otherwise use, within the fields of Automatic Inspection and PhotoTool generation, Polaroid Imaging Intellectual Property. b. POLAROID LICENSE TO TRIPLE I INTELLECTUAL PROPERTY. Triple I grants to Polaroid a worldwide, royalty-free, nonexclusive license to commercially exploit and otherwise use, within the fields of optics and image acquisition, recording and processing, Triple I Intellectual Property. c. POLAROID LICENSE. TO ELECTRONIC IMAGING INTELLECTUAL PROPERTY. Triple I grants to Polaroid a worldwide, royalty-free, nonexclusive license to commercially exploit and otherwise use Triple I Electronic Imaging Intellectual Property. d. NO NEW BUSINESS. In the event that either party desires to market a new product, process or service incorporating any Intellectual Property licensed from the other under this section: the party shall inform the other party in writing, describing the product, process or service and the manner in which the Intellectual Property is to be used. The commercialization of any such new product, process or service that substantially embodies or is substantially based upon or derived from Intellectual Property licensed from the other party shall require a new agreement which the parties shall negotiate in good faith. For the purposes of the requirements of this section, a product, process or service shall not be considered "new" if the licensed Intellectual Property is (i) used in a product, process or service offered on the effective date of this Agreement; (ii) used in a product, process or service within the scope of a business, research 6 7 or strategic plan existing at the time of this Agreement; (iii) used for minor improvement or evolutionary enhancement of a product, process or service offered on the date of this Agreement or (iv) used for a minor improvement or evolutionary enhancement of a product, process or service within the scope of a business, research, or strategic plan existing at the time of this Agreement but offered subsequent to the effective date of this Agreement. 10. OWNERSHIP OF INTELLECTUAL PROPERTY. a. INTELLECTUAL PROPERTY RELATED TO MEDIUM AND MEDIUM SUBJECT MATTER. Triple I hereby assigns and agrees to assign to Polaroid all Medium Intellectual Property and Medium Subject Matter Intellectual Property. b. JOINT INTELLECTUAL PROPERTY. Joint Intellectual Property will be owned jointly by Triple I and Polaroid. To the extent necessary to accomplish this result, Triple I hereby assigns and agrees to assign an undivided 50% interest in all Joint Intellectual Property to Polaroid, and Polaroid hereby assigns and agrees to assign an undivided 50% interest in all Joint Intellectual Property to Triple I. c. NO NEW BUSINESS In the event that either party desires to market a new product, process or service incorporating, embodying or substantially based upon Joint Intellectual Property, the party shall inform the other party in writing, describing the product, process or service and the manner in which the Joint Intellectual Property is to be used. The commercialization of any such new product, process or service that incorporates, substantially embodies or is substantially based upon such Joint Intellectual Property shall require a new agreement which the parties will negotiate in good faith. For purposes of the requirements of this section, a product, process or service shall not be considered "new" if the licensed Intellectual Property is (i) used in a product, process or service offered on the effective date of this Agreement; (ii) used in a product, process or service within the scope of a business, research or strategic plan existing at the time of the Agreement; (iii) used for minor improvement or evolutionary enhancement of a product, process or service offered on the date of this Agreement or (iv) used for a minor improvement or evolutionary enhancement of a product, process or service within the scope of a business, research, or strategic plan existing at the time of this Agreement but offered subsequent to the effective date of this Agreement. d. LICENSE OR SALE OF JOINT INTELLECTUAL PROPERTY. Neither Triple I nor Polaroid shall, without the prior written permission of the other, sell, license or otherwise transfer the whole or any part of its interest in Joint Intellectual Property, except to (i) a successor by merger, business combination or reorganization involving ownership of all or substantially all of the transferor's assets; or (ii) a purchaser of all or substantially all of the transferor's assets. 11. REPRESENTATIONS AND WARRANTIES. a. REPRESENTATIONS AND WARRANTIES OF POLAROID. Polaroid represents and warrants that: 7 8 i. no impediment exists to its entering into this Agreement, and that no other Agreement has been or shall be made with any third party which will interfere with its performance under this Agreement. ii. it is a corporation duly organized and validly existing under the laws of Delaware, and has all requisite power and authority to execute, deliver and perform this Agreement and any other agreements contemplated hereby and to consummate the transactions contemplated hereby. The warranties expressed above shall survive any termination or nonrenewal of this Agreement. Polaroid shall defend, at its expense, and shall pay all costs and damages awarded for any claim against Triple I to the extent that such claim is based upon a breach by Polaroid of its warranties hereunder. THE WARRANTIES SET FORTH IN THIS SECTION ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. b. REPRESENTATIONS AND WARRANTIES OF TRIPLE I. Triple I represents and warrants that: i. no impediment exists to its entering into this Agreement, and that no other Agreement has been or shall be made with any third party which will interfere with its performance under this Agreement. ii. it is a corporation duly organized and validly existing under the laws of Delaware, and has all requisite power and authority to execute, deliver and perform this Agreement and any other agreements contemplated hereby and to consummate the transactions contemplated hereby. The warranties expressed above shall survive any termination or nonrenewal of this Agreement. Triple I shall defend, at its expense, and shall pay all costs and damages awarded for any claim against Polaroid to the extent that such claim is based upon a breach by Triple I of its warranties hereunder. THE WARRANTIES SET FORTH IN THIS SECTION ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. 12. TRADEMARKS, TRADE NAMES AND COPYRIGHTS. During the term of this Agreement, Triple I is authorized to use the trademark "Polaroid" and all other trademarks or tradenames directly associated with the Medium in connection with Triple I's advertisement, promotion and distribution of the Medium, only in such form and manner as is specifically approved by Polaroid. Before any such use of trademarks, Triple I shall submit to Polaroid, for its written 8 9 approval, finished art work for all advertising material, publicity and promotional material, sales and trade literature, and any other material bearing or making reference to Polaroid trademarks. Any such material submitted to Polaroid and not disapproved within fifteen (15) days after receipt shall be deemed to have been approved. Upon expiration or termination of this Agreement, Triple I will cease all display, advertising and use of all Polaroid names, marks, logos and designations. Triple I will not alter, erase or overprint any notice of proprietary rights on anything provided by Polaroid and will not attach any additional trademarks, logos or designations to the Medium or affix any Polaroid trademark, logo or designation to any non-Polaroid product. 13. TERM OF AGREEMENT This Agreement (i) shall be effective from the date first written above; (ii) shall, unless earlier terminated pursuant to the terms hereof, remain in effect for a term of eight (8) years from such date; (iii) shall be reviewed by the parties at least ninety (90) days before expiration of the original eight-year term and (iv) shall be renewable or extendable for such additional term and under such terms and conditions as are mutually agreed upon in writing by the parties. The phrase "term of this Agreement" and any substantially similar phrases shall mean collectively the original eight year term and any renewal period(s). 14. CONFIDENTIALITY. Polaroid and Triple I will from time-to-time to transmit and exchange technical and business information that is proprietary to the owner thereof. With respect to such proprietary information of the other party: (a) each party shall maintain the confidentiality of the information and prevent the disclosure of the information to third parties; (b) each party shall use at least the same degree of care to maintain the confidentiality of the information and avoid disclosure of the information as each party employs with respect to its own most important, confidential, proprietary information; and (c) neither party shall, except as required to perform the tasks contemplated in this Agreement and as otherwise permitted by the terms of this Agreement, directly or indirectly use such proprietary information without the prior written consent of the other party. The provisions of this section shall not apply to any information which: (a) was already known to the receiving party before receipt or development of the information under an agreement between the parties, or (b) is or becomes publicly known through no wrongful act of the receiving party, or (c) is independently developed or acquired by employees or agents of the receiving party without access to the work performed hereunder, or (d) is required by law to be disclosed. The provisions of this section shall survive the term of this Agreement for a period of three (3) years. 15. RESOLUTION OF DISPUTES. Any disputes or controversies arising out of this Agreement or any breach thereof which cannot be resolved by the project management personnel for each party will be submitted for resolution to the President of Triple I and the Chief Executive Office (or designee thereof) of Polaroid, who shall endeavour to resolve the dispute. In the case of all disputes that cannot be so resolved, the parties shall be entitled to avail themselves of all legal remedies available to them. Neither party shall be entitled to consequential damages for violation of any of the provisions of this agreement. 9 10 16. TERMINATION. Either party shall have the right to terminate this Agreement for Cause upon written notice to the other party. "Cause" shall mean (i) Financial Distress or Collapse; or (ii) Default. FINANCIAL DISTRESS OR COLLAPSE. With respect to any party, "Financial Distress or Collapse" shall mean financial difficulties as evidenced by its making an assignment for the benefit of creditors, filing a petition in bankruptcy, petitioning or applying to any tribunal for the appointment of a custodian, receiver or any trustee for it or a substantial part of its assets, or commencing any proceeding under any law or statute of any jurisdiction, whether now or hereafter in effect, relating to bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, liquidation or the modification or alteration of the rights of creditors; or by there being filed against it any such petition or application, or having any such proceeding commenced against it, in which an order for relief is entered or which remains undismissed for a period of 30 days or more; or indicating its consent to, approval of or acquiescence in, any such petition, application, proceeding or order; or suffering any such custodianship, receivership or trusteeship to continue undischarged for a period of 30 days or more. DEFAULT. "Default" shall mean the failure, in any material respect, continued for the applicable period of grace as specified in the next sentence, by a party to comply with its obligations under the Agreement, including but not limited to paragraphs 11 and 12 of Exhibit A, but excluding paragraphs 1 through 10 of Exhibit A. Any such failure shall be a Default if it shall have continued, after written notice by the non-defaulting party, for thirty days if the failure relates to payment of money and for sixty days if it relates to any other undertaking. 17. EFFECT OF NONRENEWAL OR TERMINATION. a. CONTINUATION OF RIGHTS PENDING RESOLUTION OF DISPUTES. Notwithstanding any other provision of this Agreement, pending the final resolution of any good faith dispute between Polaroid and Triple I, the resolution of which shall be attempted by the parties pursuant to the provisions of section 15 of this Agreement, all of the rights of the parties under this Agreement shall continue in full force and effect, and neither party shall terminate this Agreement or the licenses hereunder. b. EFFECT OF NONRENEWAL OR TERMINATION. If this Agreement is not renewed or is terminated: i. except as set forth in Section 17(c), all licenses granted under this Agreement shall cease to be of further force and effect; and ii. except as is necessary to implement any licenses that continue in effect pursuant to Section 17(c), each party shall return to the other party or destroy all copies of all materials provided by the other party, and will certify to other party that such materials have been returned or destroyed. 10 11 c. PRESERVATION OF RIGHTS OF THE PARTIES WITH RESPECT TO DEVELOPED PRODUCTS. The rights, including any licenses, of any party under this Agreement with respect to any Developed Product shall not be subject to termination except for Default with respect to material obligations in relation to that particular Developed Product. 18. INDEMNIFICATION. The parties agree to indemnify and hold each other harmless from and against any and all claims, damages and liabilities whatsoever, asserted by any person or entity, resulting directly from any breach of this Agreement by the indemnifying party or any of its employees or agents. Such indemnification shall include the payment of all reasonable attorneys' fees and other costs incurred by the indemnified party in defending any such claims. 19. GENERAL. a. PUBLICITY AND PUBLIC INFORMATION. The parties agree that neither of them will make any public statement referencing the collaboration between the parties or the existence or terms of this Agreement without prior consultation with and approval by the other party, except as required by law or any court order. b. SURVIVAL OF REPRESENTATIONS. The representations and warranties made herein shall survive any investigation made by the parties and the execution of this Agreement. c. NONASSIGNMENT. This Agreement, as well as any right obtained under this Agreement, shall not be sublicensed, except as otherwise provided in this Agreement, or assigned to any third Party, except to a successor by merger, business combination or reorganization involving of ownership of all or Substantially all of the transferor's assets, or to a purchaser of all or Substantially all of the transferor's assets. d. INCORPORATION BY REFERENCE. All Exhibits appended to this Agreement are herein incorporated by reference and made a part hereof e. PARTIES IN INTEREST. All covenants, agreements, representations, warranties and undertakings in this Agreement made by and on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and permitted assigns of the parties hereto whether so expressed or not. f. AMENDMENTS AND WAIVERS. No changes in or additions to this Agreement may be made or compliance with any term, covenant, agreement, condition or provision set forth herein may be omitted or waived (either generally or in a particular instance and either retroactively or prospectively), except upon mutual written agreement of the parties. g. GOVERNING LAW. This Agreement shall be construed and enforced according to and all actions related to the subject matter hereof shall be governed by the internal laws of the Commonwealth of Massachusetts, without regard to its conflict of laws rules. 11 12 h. NOTICES. All notices or payments required to be sent to either party shall be in writing addressed to the party at the address set forth in the preamble or such other address as a party may from time to time furnish in writing to the other party. All notices shall be effective upon receipt by the intended recipient. i. RELATIONSHIP OF THE PARTIES. This Agreement does not create a Partnership or joint venture between the parties and neither party shall have power to obligate or bind the other in any manner whatsoever. j. COUNTERPARTS. This Agreement may be executed in counterparts, all of which together shall constitute one and the same instrument. k. EFFECT OF HEADINGS. The headings and titles used herein are for convenience only and shall not affect the construction hereof. 1. ENTIRE AGREEMENT. This Agreement Constitutes the entire agreement among the parties with respect to the subject matter hereof. There are no representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein. This Agreement supersedes all prior agreements between the parties with respect to the exchanges hereunder and the subject matter hereof. m. SEVERABILITY. If any term or provision of this Agreement shall become or be declared illegal, invalid or unenforceable, such term or provision shall be divisible from this Agreement and shall be deemed to be deleted from this Agreement, provided that if such deletion substantially affects or alters the commercial basis of this Agreement the parties shall negotiate in good faith to amend and modify the terms and provisions of this Agreement to give effect to the original intent of the parties. n. WARRANT OF AUTHORITY. The persons signing this Agreement as agents or representatives of the parties warrant that they have authority to bind to this Agreement each party for which such signature is made. IN WITNESS WHEREOF, the parties to this Agreement have duly authorized and executed this Agreement as of the date first written above. POLAROID CORPORATION By: /s/ Bruce B. Henry ---------------------------- Name: Bruce B. Henry Title: Executive Vice President TRIPLE I CORPORATION By: /s/ Juan J. Amodei ---------------------------- Name: Juan J. Amodei Title: President 12 13 Exhibit A Exhibit-A Attachment to: LICENSE AND COLLABORATION AGREEMENT ----------------------------------- Performance Milestones 1. By * Triple I shall have commercial access to a *. 2. By * Triple I shall have modified * to the extent necessary, *. 3. "Fiscal year" under this agreement shall mean Triple I's fiscal year beginning on October 1 and ending September 30. Year One under this agreement shall mean the twelve month period ending September 30, 1995. 4. * sales shall meet or exceed the following for each fiscal year specified under the Agreement as follows: *. Quarterly milestones for * sales shall be determined by dividing any Year's sales performance number into four approximately equal portions. 5. * sales shall meet or exceed the following * for each Year specified under the Agreement as follows: *. Quarterly milestones for * sales shall be determined by apportioning any Year's sales performance number into four approximately equal portions. 6. Without regard to the requirements of item 5 above, Triple I also agrees that sales of * must represent at least the following respective percentages of *. 7. Triple I agrees to launch the * no later than the *. Triple I further agrees that it will launch the *in either * no later than the * under the Agreement. 8. Triple I agrees that sales of * beginning with the fiscal year following the launch date specified in item 7, must represent at least the following *. 9. "Sales" for Years 2 through 8 shall exclude from consideration any *. "Sales" for Year 1 may include such conditional sales. 10. "Sales", for the purpose of satisfying requirements under items 4 and 5 only, may include * as sales for Year 2. Otherwise, annual * sales and * sales requirements for purposes of satisfying these performance milestones will not be cumulative from year to year. - ------------------------------------------------- * Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Commission. 14 11. Triple I must make prompt payment to Polaroid of all amounts due to Polaroid for MEDIUM or any other amounts due for other invoices. Terms of commercial payments between the parties shall be agreed to in writing and modified in writing when and if necessary. 12. Triple I's Financial books and records shall be subject to audit by Polaroid at Polaroid's expense. The audits may be undertaken by Polaroid employees; or Polaroid may engage nationally recognized firm of Certified Public Accountants to undertake the audits. 2 15 POLAROID CORPORATION 549 Technology Square Cambridge, Massachusetts 02139 June 17, 1996 Dr. Juan J. Amodei TRIPLE I CORPORATION One Lowell Research Center 847 Rogers Street Lowell, MA 01852 Dear Juan: As you are aware, Polaroid Corporation has made an equity investment of $800,000 and owns in excess of 20% of Triple I Corporation's outstanding common stock. Polaroid made that investment in anticipation of significant appreciation and continues to encourage Triple I's success in its various endeavors, and in particular those endeavors which maximize use of Polaroid's film products. Due to the fact that Triple I failed to meet certain milestones specified in the License And Collaboration agreement between Polaroid and Triple I dated November 28, 1994, as amended by fax from you dated April 26, 1996, a copy of which is enclosed (the "Agreement"), Polaroid, by letter of May 23, 1996, gave notice to Triple I of the conversion of its exclusive right to market and sell Medium in the PCB Field to a non-exclusive right in accordance with Section 4d of the Agreement. You have requested that Polaroid reconsider and withdraw its notice of conversion of exclusive Medium marketing rights to non-exclusive rights and make certain other amendments to the Agreement. Polaroid agrees with the essence of your proposal and offers by this letter to make the modifications that you requested. To avoid confusion concerning expectations, I have set forth below the amendments to the Agreement that we discussed and ask for your prompt review and consideration. The Agreement is hereby amended as follows: 1. Add as the last sentence to paragraph 4d: "In no event will the quality of Medium provided by Polaroid to Triple I be considered the failure of Polaroid to meet a material obligation required by this 16 Agreement if Medium of like quality is commercially sold by Polaroid for use in commercially available plotters used in the graphics field. 2. Delete Performance Milestone 3 and substitute the following: 3. Year One under this agreement shall mean the twelve month period ending May 31, 1996. 3. Delete Performance Milestone 4 and substitute the following: 4. * sales shall meet or exceed the following for each year specified under the Agreement as follows: *. Quarterly milestones for * sales shall be determined by dividing any year's sales performance number into four approximately equal portions. 4. Delete Performance Milestone 5 and substitute the following: 5. * sales shall meet or exceed the following * for each year specified under the Agreement as follows: *. Quarterly milestones for * sales shall be determined by apportioning any year's sales performance number into four approximately equal portions. 5. Delete Performance Milestone 7 and substitute the following: 7. Triple I agrees to launch the * no later than the * . Triple I further agrees that it will launch the * in either * no later than the * under the Agreement 6. In Performance Milestone 8, line 1, delete "fiscal". In addition, before August 1, 1996, Triple I will either pay to Polaroid $90,000, in which event Polaroid will transfer title to its plotter now resident at Triple I's facility to Triple I, or Triple I will return the plotter to Polaroid at Polaroid's expense. Also, as of the date of execution of this amendatory letter by Triple I, Triple I represents that there is no outstanding failure of Polaroid to meet any material obligation required by the Agreement. - ------------------------------------------------------ *Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Commission. 2 17 Juan, I believe we continue to have the basis for a mutually beneficial relationship. As a consequence of your acceptance of these amendments to the Agreement, the letter of May 23, 1996 from Polaroid to Triple I, which converted Triple I's Medium marketing rights from exclusive to non-exclusive, will be automatically withdrawn and of no legal effect. Polaroid's offer to amend the Agreement and withdraw the May 23, 1996 letter will expire at 5:00 p.m. on June 26, 1996 if not accepted by Triple I before that time. Acceptance may be communicated by signing one copy of this letter where indicated below and returning it to me. Sincerely yours, /s/ Robert M. Delahunt ----------------------------------- Robert M. Delahunt Senior Vice President Accepted and Agreed: /s/ Juan J. Amodei By: Juan J. Amodei Date: June 25, 1996 3 18 AOI INTERNATIONAL Juan J. Amodei President January 10, 1997 Mr. Robert Delahunt Senior Vice President Polaroid Corporation 549 Technology Square Cambridge, Massachusetts 02139 Re: License And Collaboration Agreement ----------------------------------- Dear Bob: On November 23, 1994, Triple I Corporation ("Triple I") and Polaroid Corporation ("Polaroid") entered into a License and Collaboration Agreement, which was amended on June 17, 1996 (the agreement and all amendments are hereby referred to as the "Agreement"). This letter is intended to state the parties' understanding as to certain performance milestones, listed in Sections 4 and 5 of EXHIBIT A under the Agreement ("Performance Milestones"), that Triple I must achieve as part of the Agreement. Polaroid and Triple I acknowledge their differences in respect of any right of Polaroid to convert Triple I's exclusive rights to market MEDIUM in the PCB field from exclusive to non-exclusive rights. Nonetheless, Polaroid and Triple I hereby agree that Polaroid will not act in respect to the Year-2 quarterly Performance Milestones until May 31, 1997, at which time Triple I is required to meet the annual Performance Milestones due on that date. If Triple I fails to meet these annual requirements, Polaroid, at its discretion, may proceed in accordance with Section 4(d) of the Agreement. Polaroid and Triple I also agree that Industrial Imaging Corporation ("Industrial Imaging"), the parent corporation of Triple I, shall include certain disclosures, in the form attached as EXHIBIT A, in Industrial Imaging's Form 8-K to be timely filed in accordance with the rules of the Securities and Exchange Commission following the completion of the exchange of shares between Triple I and Industrial Imaging. Simultaneously with the agreement by the parties to the above terms of this letter, Polaroid, a shareholder of Triple I, agrees to execute its Shareholder Exchange Agreement, which will enable Triple I to proceed with the transaction involving Industrial Imaging. Triple I also acknowledges that, as of the date of this letter, there is no outstanding failure of Polaroid to meet any material obligation required by the Agreement. In no event will the 19 quality of the MEDIUM provided by Polaroid to Triple I be considered the failure of Polaroid to meet a material obligation required by this Agreement if MEDIUM of like quality is commercially sold by Polaroid for use in commercially available plotters used in the graphics field. Triple I agrees that it will not, in the event it fails to meet the full Year-2 Performance Milestones by the end of May 1997, invoke in justification thereof any alleged failure of or responsibility in Polaroid, as of the date of this letter. For the purpose of testing the full Year-2 Performance Milestones set for performance by May 31, 1997, * sales, shall only be considered sales upon the receipt of Triple I of *. All of the provisions of the Agreement, as amended June 17,1996, remain in full force and effect to the extent not inconsistent with the provisions of this letter. Triple I acknowledges that the Agreement does not prohibit Polaroid from accepting inquiries from any person, partnership, corporation or other third party in respect of possible mutual business opportunities involving any plotter and MEDIUM for use in the PCB field (including opportunities based upon sales of MEDIUM by any such third party); and the Agreement shall not be construed in any manner to preclude or inhibit any such discussions. Polaroid agrees, however, that it will not, except with Triple I's prior written approval, enter into any agreement with any such third party authorizing the marketing of MEDIUM by such party in the PCB field unless Triple I shall have failed to meet its full Year-2 Performance Milestones and Polaroid shall have served notice upon Triple I of the conversion of its exclusive marketing rights to non-exclusive rights. If you agree with the above terms, kindly acknowledge your agreement by signing this letter below where indicated and returning it to me, along with a copy of the Shareholder Agreement signature page containing Polaroid's signature. - -------------------- * Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Commission. 2 20 Please contact me with questions. Very truly yours, /s/ Juan J. Amodei ----------------------------------- Juan J. Amodei, Ph.D. Enclosures c: Neil H. Aronson, Esquire ACKNOWLEDGED AND AGREED: POLAROID CORPORATION By: /s/ Robert M. Delahunt ------------------------------- Duly authorized Date: January 10, 1997 ------------------------------- 3 EX-10.B 6 PURCHASE AGREEMENT (CO. + CENTENNIAL) 1 EXHIBIT 10b TRIPLE I CORPORATION ONE LOWELL RESEARCH CENTER 847 ROGERS STREET LOWELL, MASSACHUSETTS 01852 March 31, 1996 Emanuel Pinez, Chief Executive Officer Centennial Technologies 37 Manning Road Billerica, Massachusetts 01821 Re: Purchase Agreement Dear Mr. Pinez: This letter serves as written expression of the agreement between Triple I Corporation ("Triple I") and Centennial Technologies, Inc. ("Centennial"), whereby Centennial agrees to assist Triple I with purchases of components used in the manufacture of Triple I products, subject to full reimbursement from Triple I (the "Agreement "). This Agreement shall run for a period of one (1) year and three months, from March 31, 1996 until June 30, 1997, and is renewable upon the mutual written consent of the parties prior to the termination of this Agreement. Upon receipt of a written purchase order from Triple I (the "Triple I Purchase Order"), Centennial agrees to use its reasonable efforts to purchase the requested components from the stated vendor on Centennial's account using Centennial's purchasing system. Triple I shall negotiate the terms, prices and delivery dates with the vendor prior to forwarding the Triple I Purchase Order to Centennial, and reflect such terms in the Triple I Purchase Order. Centennial agrees to use its reasonable efforts to place orders with the vendor in a timely manner, according to the terms and conditions stated in the Triple I Purchase Order, and forward copies of the documents evidencing the orders to Triple I. Centennial shall receive the components at its place of business and notify Triple I of the receipt within one (1) business day of receipt. Triple I shall be required to transport the components to its place of business from Centennial at the sole expense of Triple I. Centennial shall pay the vendor the cost of the components in a timely manner. Triple I shall pay Centennial for the components within ten (10) days of receipt of full payment to Triple I for the sale of the Triple I product within which the components were installed (the "Due Date"). Centennial agrees to reduce Triple I's outstanding balance with Centennial accordingly as payment for the components is received from Triple I. At the times Triple I pays Centennial for the components, Triple I shall provide Centennial with evidence of the dates on which Triple I received full payment for the sale of the Triple I product within which the components were installed. 2 Emanuel Pinez, President Re: Purchase Agreement March 31, 1996 Page 2 If any payment for components due Centennial hereunder is not received by Centennial from Triple I within three (3) business days after the Due Date, then Centennial at any time thereafter may attempt to collect said overdue payment, through legal proceedings or otherwise, and Triple I will pay all of Centennial's reasonable legal fees and costs and expenses of collection incurred in connection with Centennial's attempts to collect said overdue payment. In the event that any such payment for components is not received by Centennial within five (5) business days of the Due Date, Centennial, at its option, may assess to Triple I a late payment fee equal to five percent (5%) of the overdue payment, payable to Centennial with the overdue payment. The parties have agreed that Centennial will use its reasonable efforts to purchase for Triple I, subject to full reimbursement from Triple I, components necessary to manufacture twenty (20) systems, estimated at $3,000,000. Centennial hereby agrees to assist Triple I with the purchases of components on Centennial's account up to a total of $750,000 due at any one time. The $750,000 limit may be increased upon the prior written consent of Centennial. In consideration of Centennial's purchasing services to be provided to Triple I hereunder, Triple I shall pay to Centennial a one-time fee of $200,000. No other fees or interest shall be due. Triple I will pay the $200,000 fee in full in cash on or before May 31, 1996. Centennial acknowledges that Triple I has granted a prior security interest to its principal lender and that Centennial has not requested or received any security interest under this Agreement. The parties agree that Centennial may terminate this Agreement, in its sole discretion, if Triple I shall take any voluntary action or be the subject of any involuntary action seeking bankruptcy, insolvency administration, receivership or any such similar action without obtaining dismissal of such action within sixty (60) days after the taking thereof. No delay or failure by Centennial to exercise any right hereunder, and no partial or single exercise of any such right, shall constitute a waiver of that or any other right, unless otherwise expressly provided herein. This Agreement shall be binding upon and inure to the benefit of the parties and their legal representatives, successors and assigns. The parties have requested that the law firm of O'Connor, Broude & Aronson prepare this Agreement. The parties acknowledge that they have been advised to review this Agreement with their own legal counsel and other advisors of their choosing and that prior to entering into this Agreement, they have had the opportunity to review this Agreement with their attorney and other advisors and have not asked (or relied upon) O'Connor, Broude & Aronson to represent them in this matter. 3 Emanuel Pinez, President Re: Purchase Agreement March 31, 1996 Page 3 By the signatures below, the undersigned agree that this Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof, that it may be changed only by a written agreement signed by the parties, and agree to abide by the terms herein. TRIPLE I CORPORATION By: -------------------------------- Juan Amodei, Ph.D. President CENTENNIAL TECHNOLOGIES, INC. By: -------------------------------- Emanuel Pinez President EX-10.C 7 1996 STOCK OPTION PLAN 1 EXHIBIT 10c INDUSTRIAL IMAGING CORPORATION 1996 STOCK OPTION PLAN ARTICLE I PURPOSE OF THE PLAN The purpose of this Plan is to encourage and enable employees, consultants, directors and others who are in a position to make significant contributions to the success of INDUSTRIAL IMAGING CORPORATION and of its Affiliated Corporations upon whose judgment, initiative and efforts the Corporation depends for the successful conduct of its business, to acquire a closer identification of their interests with those of the Corporation by providing them with opportunities to purchase stock in the Corporation pursuant to options granted hereunder, thereby stimulating their efforts on behalf of the Corporation and strengthening their desire to remain involved with the Corporation. Any person designated to participate in the Plan is referred to as a "Participant." ARTICLE II DEFINITIONS 2.1 "Affiliated Corporation" means any stock corporation of which a majority of the voting common or capital stock is owned directly or indirectly by the Corporation. 2.2 "Award" means an Option granted under Article V. 2.3 "Board" means the Board of Directors of the Corporation or, if one or more has been appointed, a Committee of the Board of Directors of the Corporation. 2.4 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 2 2.5 "Committee" means a Committee composed solely of two or more Non-Employee Directors appointed by the Board to administer the Plan. 2.6 "Corporation" means INDUSTRIAL IMAGING CORPORATION, a Delaware corporation, or its successor. 2.7 "Employee" means any person who is a regular full-time or part-time employee of the Corporation or an Affiliated Corporation on or after the effective date of the Plan. 2.8 "Incentive Stock Option" ("ISO") means an option that qualifies as an incentive stock option as defined in Section 422 of the Code, as amended. 2.9 "Non-Employee Director" means (unless otherwise provided under Rule 16b-3 of the Securities Exchange Act of 1934) a member of the Board who (i) is not currently an officer or Employee of the Corporation; (ii) does not receive direct or indirect compensation from the Corporation or a parent or subsidiary of the Corporation as a consultant or in any other capacity (except as a Director) in an amount of more than $60,000 per year; (iii) does not possess an interest in any other transaction for which proxy statement disclosure would be required under Regulation S-K Item 404(a) (generally, transactions with the Corporation involving an amount in excess of $60,000); and (iv) who is not engaged in a business relationship with the Corporation for which disclosure would be required pursuant to Regulation S-K Item 404(b) (generally involving, among others, payments or indebtedness in excess of five percent of the Corporation's or another entity's gross revenues or total assets, depending on the transaction at issue). - 2 - 3 2.10 "Non-Qualified Option" means any option not intended to qualify as an Incentive Stock Option. 2.11 "Option" means an Incentive Stock Option or Non-Qualified Option granted by the Board under Article V of this Plan in the form of a right to purchase Stock evidenced by an instrument containing such provisions as the Board may establish. Except as otherwise expressly provided with respect to an Option grant, no Option granted pursuant to the Plan shall be an Incentive Stock Option. 2.12 "Participant" means a person selected by the Board or by the Committee to receive an award under the Plan. 2.13 "Plan" means this 1996 Stock Option Plan. 2.14 "Restricted Period" means the period of time selected by the Committee during which an award may be forfeited by the Participant. 2.15 "Stock" means the Common Stock, $.01 par value, of the Corporation or any successor, including any adjustments in the event of changes in capital structure of the type described in Article X. ARTICLE III ADMINISTRATION OF THE PLAN 3.1 Administration by Board. This Plan shall be administered by the Board of Directors of the Corporation. The Board may, from time to time, in its discretion delegate any of its functions under this Plan to one or more Committees. All references in this Plan to the Board shall also - 3 - 4 include the Committee or Committees, if one or more have been appointed by the Board. From time to time the Board may increase the size of the Committee or committees and appoint additional Non- Employee Directors as members thereto, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies however caused, or remove all members of the Committee or committees and thereafter directly administer the Plan. No member of the Board or a Committee shall be liable for any action or determination made in good faith with respect to the Plan or any options granted under it. If a Committee is appointed by the Board, a majority of the members of the Committee shall constitute a quorum, and all determinations of the Committee under the Plan shall be made by a majority of its members and may be made without notice or meeting of the Committee by a writing signed by a majority of Committee members. 3.2 Powers. The Board of Directors and/or any Committee appointed by the Board shall have full and final authority to operate, manage and administer the Plan on behalf of the Corporation. This authority includes, but is not limited to: (a) The power to grant Awards conditionally or unconditionally, (b) The power to prescribe the form or forms of any instruments evidencing Awards granted under this Plan, (c) The power to interpret the Plan, - 4 - 5 (d) The power to provide regulations for the operation of the incentive features of the Plan, and otherwise to prescribe and rescind regulations for interpretation, management and administration of the Plan, (e) The power to delegate responsibility for Plan operation, management and administration on such terms, consistent with the Plan, as the Board may establish, (f) The power to delegate to other persons the responsibility of performing ministerial acts in furtherance of the Plan's purpose, and (g) The power to engage the services of persons, companies, or organizations in furtherance of the Plan's purpose, including but not limited to, banks, insurance companies, brokerage firms and consultants. 3.3 Additional Powers. In addition, as to each Option to buy Stock of the Corporation, the Board or any Committee appointed by it shall have full and final authority in its discretion: (a) to determine the number of shares of Stock subject to each Option; (b) to determine the time or times at which Options will be granted; (c) to determine the option price of the shares of Stock subject to each Option, which price shall be not less than the minimum price specified in Article V of this Plan; (d) to determine the time or times when each Option shall become exercisable and the duration of the exercise period (including the acceleration of any exercise period), which shall not exceed the maximum period specified in Article V; (e) to determine whether each Option granted shall be an Incentive Stock Option or a Non-Qualified Option; and (f) to waive, generally and in particular instances, compliance by a Participant with any obligation to be performed by him under an Option, - 5 - 6 to waive any condition or provision of an Option, and to amend or cancel any Option (and if an Option is canceled, to grant a new Option on such terms as the Board may specify), except that the Board may not take any action with respect to an outstanding option that would adversely affect the rights of the Participant under such Option without such Participant's consent. Nothing in the preceding sentence shall be construed as limiting the power of the Board to make adjustments required by Article X. In no event may the Corporation grant an Employee any Incentive Stock Option that is first exercisable during any one calendar year to the extent the aggregate fair market value of the Stock (determined at the time the options are granted) exceeds $100,000 (under all stock option plans of the Corporation and any Affiliated Corporation); provided, however, that this paragraph shall have no force and effect if its inclusion in the Plan is not necessary for Incentive Stock Options issued under the Plan to qualify as such pursuant to Section 422(d)(1) of the Code. ARTICLE IV ELIGIBILITY 4.1 Eligible Employees. All Employees (including Directors who are Employees) are eligible to be granted Incentive Stock Option and Non-Qualified Option Awards under this Plan. Incentive Stock Options shall be granted only to Employees. 4.2 Consultants, Directors and other Non-Employees. Any consultant, Director (whether or not an Employee) and any other non-employee is eligible to be granted Non-Qualified Option - 6 - 7 Awards under the Plan, provided the person has not irrevocably elected to be ineligible to participate in the Plan. 4.3 Relevant Factors. In selecting individual Employees, consultants, Directors and other non-employees to whom Awards shall be granted, the Board shall weigh such factors as are relevant to accomplish the purpose of the Plan as stated in Article I. An individual who has been granted an Award may be granted one or more additional Awards, if the Board so determines. The granting of an Award to any individual shall neither entitle that individual to, nor disqualify him from, participation in any other grant of Awards. ARTICLE V STOCK OPTION AWARDS 5.1 Number of Shares. Subject to the provisions of Article X of this Plan, the aggregate number of shares of Stock for which Options may be granted under this Plan shall not exceed 450,000 shares. The shares to be delivered upon exercise of Options under this Plan shall be made available, at the discretion of the Board, either from authorized but unissued shares or from previously issued and reacquired shares of Stock held by the Corporation as treasury shares, including shares purchased in the open market. Stock issuable upon exercise of an Option granted under the Plan may be subject to such restrictions on transfer, repurchase rights or other restrictions as shall be determined by the Board of Directors. - 7 - 8 5.2 Effect of Expiration, Termination or Surrender. If an Option under this Plan shall expire or terminate unexercised as to any shares covered thereby, or shall cease for any reason to be exercisable in whole or in part, or if the Corporation shall reacquire any unvested shares issued pursuant to Options under the Plan, such shares shall thereafter be available for the granting of other Options under this Plan, subject to the limits set forth in Section 5.1 hereof. 5.3 Term of Options. The full term of each Option granted hereunder shall be for such period as the Board shall determine. In the case of Incentive Stock Options granted hereunder, the term shall not exceed ten (10) years from the date of granting thereof. Each Option shall be subject to earlier termination as provided in Sections 6.3 and 6.4. Notwithstanding the foregoing, the term of Options intended to qualify as Incentive Stock Options shall not exceed five (5) years from the date of granting thereof if such Option is granted to any Employee who at the time such Option is granted owns, directly or indirectly, or is deemed to own by reason of the attribution rules set forth in Section 425(d) of the Code, more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation and its Affiliated Corporations (a "Ten-Percent Shareholder"). 5.4 Option Price. The Option price shall be determined by the Board at the time any Option is granted. In the case of Incentive Stock Options, the exercise price shall not be less than l00% of the fair market value of the shares covered thereby at the time the Incentive Stock Option is granted (but in no event less than par value), provided that no Incentive Stock Option shall be granted hereunder to any Employee who is a Ten-Percent Shareholder unless the Incentive Stock Option price equals not less than 110% of the fair market value of the shares covered thereby at the time the Incentive Stock Option is granted. In the case of Non-Qualified Stock Options, the exercise price shall not be less than par value. - 8 - 9 5.5 Fair Market Value. If, at the time an Option is granted under the Plan, the Corporation's Stock is publicly traded, then "fair market value" shall be determined as of the last business day for which the prices or quotes discussed in this sentence are available prior to the date such Option is granted and shall mean (i) the average (on that date) of the high and low prices of the Stock on the principal national securities exchange on which the Stock is traded, if the Stock is then traded on a national securities exchange; or (ii) the last reported sale price (on that date) of the Stock on the NASDAQ National Market List, if the Stock is not then traded on a national securities exchange; or (iii) the closing bid price (or average of bid prices) last quoted (on that date) by an established quotation service for over-the-counter securities, if the Stock is not reported on the NASDAQ National Market List. However, if the Stock is not publicly traded at the time an Option is granted under the Plan, "fair market value" shall be deemed to be the fair value of the Stock as determined in good faith by the Board after taking into consideration all factors that it deems appropriate, including without limitation, recent sale and offer prices of the Stock in private transactions negotiated at arm's length. 5.6 Non-Transferability of Options. No Option granted under this Plan shall be transferable by the grantee otherwise than by will or the laws of descent and distribution, and such Option may be exercised during the grantee's lifetime only by the grantee. 5.7 Foreign Nationals. Awards may be granted to Participants who are foreign nationals or employed outside the United States on such terms and conditions different from those specified in the Plan as the Committee considers necessary or advisable to achieve the purposes of the Plan or comply with applicable laws. - 9 - 10 ARTICLE VI EXERCISE OF OPTION 6.1 Exercise. Each Option granted under this Plan shall be exercisable on such date or dates and during such period and for such number of shares as shall be determined pursuant to the provisions of the instrument evidencing such Option. The Board shall have the right to accelerate the date of exercise of any option, provided that the Board shall not accelerate the exercise date of any Incentive Stock Option granted if such acceleration would violate the annual vesting limitation contained in Section 422(d)(1) of the Code. 6.2 Notice of Exercise. A person electing to exercise an Option shall give written notice to the Corporation of such election and of the number of shares he or she has elected to purchase and shall at the time of exercise tender the full purchase price of the shares he or she has elected to purchase. The purchase price can be paid partly or completely in shares of the Corporation's stock valued at Fair Market Value as defined in Section 5.5 hereof, or by any such other lawful consideration as the Board may determine. Until such person has been issued a certificate or certificates for the shares so purchased, he or she shall possess no rights of a record holder with respect to any of such shares. 6.3 Option Unaffected by Change in Duties. No Incentive Stock Option (and, unless otherwise determined by the Board of Directors, no Non-Qualified Option granted to a person who is, on the date of the grant, an Employee of the Corporation or an Affiliated Corporation) shall be affected by any change of duties or position of the optionee (including transfer to or from an Affiliated Corporation), so long as he or she continues to be an Employee. Employment shall be considered as continuing uninterrupted during any bona fide leave of absence (such as those - 10 - 11 attributable to illness, military obligations or governmental service) provided that the period of such leave does not exceed 90 days or, if longer, any period during which such optionee's right to reemployment is guaranteed by statute. A bona fide leave of absence with the written approval of the Board shall not be considered an interruption of employment under the Plan, provided that such written approval contractually obligates the Corporation or any Affiliated Corporation to continue the employment of the optionee after the approved period of absence. If the optionee shall cease to be an Employee for any reason other than death, such Option shall thereafter be exercisable only to the extent of the purchase rights, if any, which have accrued as of the date of such cessation; provided that (i) the Board may provide in the instrument evidencing any Option that the Board may in its absolute discretion, upon any such cessation of employment, determine (but be under no obligation to determine) that such accrued purchase rights shall be deemed to include additional shares covered by such Option; and (ii) unless the Board shall otherwise provide in the instrument evidencing any Option, upon any such cessation of employment, such remaining rights to purchase shall in any event terminate upon the earlier of (A) the expiration of the original term of the Option; or (B) where such cessation of employment is on account of disability, the expiration of one year from the date of such cessation of employment and, otherwise, the expiration of three months from such date. For purposes of the Plan, the term "disability" shall mean "permanent and total disability" as defined in Section 22(e)(3) of the Code. In the case of a Participant who is not an employee, provisions relating to the exercisability of an Option following termination of service shall be specified in the award. If not so specified, all Options held by such Participant shall terminate on termination of service to the Corporation. - 11 - 12 6.4 Death of Optionee. Should an optionee die while in possession of the legal right to exercise an Option or Options under this Plan, such persons as shall have acquired, by will or by the laws of descent and distribution, the right to exercise any Options theretofore granted, may, unless otherwise provided by the Board in any instrument evidencing any Option, exercise such Options at any time prior to one year from the date of death; provided, that such Option or Options shall expire in all events no later than the last day of the original term of such Option; provided, further, that any such exercise shall be limited to the purchase rights which have accrued as of the date when the optionee ceased to be an Employee, whether by death or otherwise, unless the Board provides in the instrument evidencing such Option that, in the discretion of the Board, additional shares covered by such Option may become subject to purchase immediately upon the death of the optionee. ARTICLE VII TERMS AND CONDITIONS OF OPTIONS Options shall be evidenced by instruments (which need not be identical) in such forms as the Board may from time to time approve. Such instruments shall conform to the terms and conditions set forth in Articles V and VI hereof and may contain such other provisions as the Board deems advisable which are not inconsistent with the Plan, including restrictions applicable to shares of Stock issuable upon exercise of Options. In granting any Non-Qualified Option, the Board may specify that such Non-Qualified Option shall be subject to the restrictions set forth herein with respect to Incentive Stock Options, or to such other termination and cancellation provisions as the Board may determine. The Board may from time to time confer authority and responsibility on one or more of its own members and/or one or more officers of the Corporation to execute and deliver such - 12 - 13 instruments. The proper officers of the Corporation are authorized and directed to take any and all action necessary or advisable from time to time to carry out the terms of such instruments. ARTICLE VIII BENEFIT PLANS Awards under the Plan are discretionary and are not a part of regular salary. Awards may not be used in determining the amount of compensation for any purpose under the benefit plans of the Corporation, or an Affiliated Corporation, except as the Board may from time to time expressly provide. Neither the Plan, an Option or any instrument evidencing an Option confers upon any Participant any right to continue as an Employee of, or consultant or advisor to, the Corporation or an Affiliated Corporation or affect the right of the Corporation or any Affiliated Corporation to terminate them at any time. Except as specifically provided by the Board in any particular case, the loss of existing or potential profits granted under this Plan shall not constitute an element of damages in the event of termination of the relationship of a Participant even if the termination is in violation of an obligation of the Corporation to the Participant by contract or otherwise. ARTICLE IX AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN The Board may suspend the Plan or any part thereof at any time or may terminate the Plan in its entirety. Awards shall not be granted after Plan termination. The Board may also amend the Plan from time to time, except that amendments which affect the following subjects must be approved by stockholders of the Corporation: - 13 - 14 (a) Except as provided in Article X relative to capital changes, the number of shares as to which Options may be granted pursuant to Article V; and (b) The requirements as to eligibility for participation in the Plan. Awards granted prior to suspension or termination of the Plan may not be canceled solely because of such suspension or termination, except with the consent of the grantee of the Award. ARTICLE X CHANGES IN CAPITAL STRUCTURE The instruments evidencing Options granted hereunder shall be subject to adjustment in the event of changes in the outstanding Stock of the Corporation by reason of stock dividends, stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges or other relevant changes in capitalization occurring after the date of an Award to the same extent as would affect an actual share of Stock issued and outstanding on the effective date of such change. Such adjustment to outstanding Options shall be made without change in the total price applicable to the unexercised portion of such options, and a corresponding adjustment in the applicable option price per share shall be made. In the event of any such change, the aggregate number and classes of shares for which Options may thereafter be granted under Section 5.1 of this Plan may be appropriately adjusted as determined by the Board so as to reflect such change. Notwithstanding the foregoing, any adjustments made pursuant to this Article X with respect to Incentive Stock Options shall be made only after the Board, after consulting with counsel for the Corporation, determines whether such adjustments would constitute a "modification" of such Incentive Stock Options (as that term is defined in Section 424 of the Code) or would cause any - 14 - 15 adverse tax consequences for the holders of such Incentive Stock Options. If the Board determines that such adjustments made with respect to Incentive Stock Options would constitute a modification of such Incentive Stock Options, it may refrain from making such adjustments. In the event of the proposed dissolution or liquidation of the Corporation, each Option will terminate immediately prior to the consummation of such proposed action or at such other time and subject to such other conditions as shall be determined by the Board. Except as expressly provided herein, no issuance by the Corporation of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to Options. No adjustments shall be made for dividends paid in cash or in property other than securities of the Corporation. No fractional shares shall be issued under the Plan and the optionee shall receive from the Corporation cash in lieu of such fractional shares. ARTICLE XI EFFECTIVE DATE AND TERM OF THE PLAN The Plan shall become effective on June 17, 1992. The Plan shall continue until such time as it may be terminated by action of the Board or the Committee; provided, however, that no Options may be granted under this Plan on or after the tenth anniversary of the date on which the Plan was adopted by the Board or the date on which the Plan was approved by the stockholders of the Corporation, whichever is earlier. This Plan must be approved by the stockholders of the Corporation within twelve (12) months of June 17, 1992. - 15 - 16 ARTICLE XII CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOS The Board, at the written request of any optionee, may in its discretion take such actions as may be necessary to convert such optionee's Incentive Stock Options, that have not been exercised on the date of conversion, into Non-Qualified Options at any time prior to the expiration of such Incentive Stock Options, regardless of whether the optionee is an employee of the Corporation or an Affiliated Corporation at the time of such conversion. Such actions may include, but not be limited to, extending the exercise period or reducing the exercise price of such Options. At the time of such conversion, the Board or the Committee (with the consent of the optionee) may impose such conditions on the exercise of the resulting Non-Qualified Options as the Board or the Committee in its discretion may determine, provided that such conditions shall not be inconsistent with the Plan. Nothing in the Plan shall be deemed to give any optionee the right to have such optionee's Incentive Stock Options converted into Non-Qualified Options, and no such conversion shall occur until and unless the Board or the Committee takes appropriate action. The Board, with the consent of the optionee, may also terminate any portion of any Incentive Stock Option that has not been exercised at the time of such termination. ARTICLE XIII APPLICATION OF FUNDS The proceeds received by the Corporation from the sale of shares pursuant to Options granted under the Plan shall be used for general corporate purposes. - 16 - 17 ARTICLE XIV GOVERNMENTAL REGULATION The Corporation's obligation to sell and deliver shares of Stock under this Plan is subject to the approval of any governmental authority required in connection with the authorization, issuance or sale of such shares. ARTICLE XV WITHHOLDING OF ADDITIONAL INCOME TAXES Upon the exercise of a Non-Qualified Option or the making of a Disqualifying Disposition (as defined in Article XVI) the Corporation, in accordance with Section 3402(a) of the Code, may require the optionee to pay additional withholding taxes in respect of the amount that is considered compensation includible in such person's gross income. The Board in its discretion may condition the exercise of an Option on the payment of such additional withholding taxes. ARTICLE XVI NOTICE TO CORPORATION OF DISQUALIFYING DISPOSITION Each Employee who receives an Incentive Stock Option must agree to notify the Corporation in writing immediately after the employee makes a Disqualifying Disposition of any Stock acquired pursuant to the exercise of an Incentive Stock Option. A Disqualifying Disposition is any disposition (including any sale) of such Stock before the later of (a) two years after the date the employee was granted the Incentive Stock Option or (b) one year after the date the Employee acquired Stock by exercising the Incentive Stock Option. If the Employee has died before such Stock is sold, these holding period requirements do not apply and no Disqualifying Disposition can occur thereafter. - 17 - 18 ARTICLE XVII GOVERNING LAW; CONSTRUCTION The validity and construction of the Plan and the instruments evidencing Options shall be governed by the laws of the State of Delaware (without regard to the conflict of law principles thereof). In construing this Plan, the singular shall include the plural and the masculine gender shall include the feminine and neuter, unless the context otherwise requires. - 18 - EX-10.D 8 EMPLOYMENT AGREEMENT 1 EXHIBIT 10d ---------------------- KEY EMPLOYEE AGREEMENT ---------------------- To: Juan J. Amodei, Ph.D. As of October 13, 1995 Triple I Corporation 847 Rogers Street Lowell, Massachusetts 01852 The undersigned, Triple I Corporation, a Delaware corporation (the "Company"), in consideration of the salary and benefits provided you herein, and for other good and valuable consideration, the sufficiency and receipt whereof are hereby acknowledged, hereby agrees with you as follows: l. Position and Responsibilities. 1.1 You shall serve as Chief Executive Officer of the Company, and shall perform the duties customarily associated with such capacity from time to time and at such executive offices of the Company (provided that such offices are within a thirty (30) mile radius of Lowell, Massachusetts) as the Company shall designate are appropriate and necessary in connection with such employment. 1.2 You will, to the best of your ability, devote your full time and best efforts to the performance of your duties hereunder and the business and affairs of the Company. You agree to perform such executive duties as may be assigned to you by or on authority of the Company's Board of Directors from time to time. 1.3 You will duly, punctually and faithfully perform and observe any and all rules and regulations which the Company may now or shall hereafter establish governing the conduct of its business. 2. Term of Employment; Change in Control. 2.1 The initial term of this Agreement shall be from the date hereof until December 31, 1998. Thereafter, this Agreement shall be automatically renewed for successive periods of three (3) years, unless the Company shall give you not less than six (6) months written notice of non-renewal. You may terminate your employment pursuant to this Agreement at any time after giving the Company three (3) months' notice. Your employment with the Company may be terminated at any time as provided in Section 2.2. 2.2 The Company shall have the right, on written notice to you, to terminate your employment: 2 (a) immediately at any time for "cause" as defined herein; or (b) at any time without cause, provided the Company shall be obligated to pay to you as severance pay an amount equal to your "Compensation Package" for a period of three (3) years following the date of termination of your employment (which Compensation Package shall include your Base Salary and all other benefits as set forth on Exhibit A hereto, including but not limited to your most recent bonus for the prior fiscal year annualized over the remaining term of this Agreement). Such sums shall be reduced by applicable taxes and other required withholdings and any amounts you may owe to the Company. 2.3 For purposes of Section 2.2, the term "cause" shall include (i) the falseness of any warranty or representation by you herein, or (ii) the willful breach of your obligations under this Agreement or your duties as an employee of the Company, or (iii) fraud or embezzlement involving the Company, their employees, suppliers or customers, or (iv) conviction on a felony charge. 2.4 In the event of a "Change of Control" in the Company, you will have the option to terminate your employment subject to the provisions of Section 2.1 herein. If, within nine (9) months of a Change in Control, (i) your duties are reduced, or (ii) you decide to terminate your employment, or (iii) you are terminated by the Company, then you shall be entitled to receive: (x) an amount equal to your Compensation Package (as described in Exhibit "A") for a period of one (1) year, payable in a lump sum; and (y) the immediate removal of all loan guarantees and the repayment of all loans placed by you on behalf of or for the benefit of the Company. For purposes of this Agreement, a "Change in Control" shall be defined as the acquisition (in or as a result of a single transaction or an integrated series of transactions) by any person or entity not a current stockholder of the Company or affiliated with the Company, fifty percent (50%) or more of the Common Stock of the Company outstanding immediately before the Change of Control. a Change of Control shall not include a merger or the exchange of shares between the Company and the shareholders of Orbis, Inc., a Rhode Island corporation, or any public offering of the Company's securities as approved by the Company's Board of Directors. 3. Compensation. You shall receive the compensation and benefits set forth on Exhibit A hereto ("Compensation") for all services to be rendered by you hereunder and for your transfer of property rights pursuant to an agreement relating to proprietary information and inventions of even date herewith attached hereto as Exhibit C between you and the Company (the "Proprietary Information and Inventions Agreement"). 4. Other Activities During Employment. You hereby agree that, except as disclosed on Exhibit B hereto, during your employment hereunder, you will not, directly or indirectly, engage (a) individually, (b) as an officer, (c) as a director, (d) as an employee, (e) as a consultant, (f) as an advisor, (g) as an agent (whether a salesperson or otherwise), (h) as a broker, or (i) as a partner, coventurer, stockholder or other proprietor owning directly or indirectly more than five percent (5%) 2 3 interest, in any firm, corporation, partnership, trust, association, or other organization which is engaged in any line of business engaged in or under demonstrable development by the Company (such firm, corporation, partnership, trust, association, or other organization being hereinafter referred to as a "Prohibited Enterprise"). Except as may be shown on Exhibit B hereto, you hereby represent that you are not engaged in any of the foregoing capacities (a) through (i) in any Prohibited Enterprise. 5. Former Employers. 5.1 You represent and warrant that your employment by the Company will not conflict with and will not be constrained by any prior or current employment, consulting agreement or relationship whether oral or written. You represent and warrant that you do not possess confidential information arising out of any such employment, consulting agreement or relationship which, in your best judgment, would be utilized in connection with your employment by the Company in the absence of Section 5.2. 5.2 If, in spite of the second sentence of Section 5.1, you should find that confidential information belonging to any other person or entity might be usable in connection with the Company's business, you will not intentionally disclose to the Company or use on behalf of the Company any confidential information belonging to any of your former employers; but during your employment by the Company you will use in the performance of your duties all information which is generally known and used by persons with training and experience comparable to your own all information which is common knowledge in the industry or otherwise legally in the public domain. 6. Proprietary Information and Inventions. You agree to execute, deliver and be bound by the provisions of the Proprietary Information and Inventions Agreement attached hereto as Exhibit C and incorporated herein. 7. Post-Employment Activities. 7.1 For a period of one (1) year after the termination or expiration, for any reason, of your employment with the Company hereunder, absent the Company's prior written approval, you will not directly or indirectly engage in activities similar or reasonably related to those in which you shall have engaged hereunder during the two years immediately preceding termination or expiration, nor render services similar or reasonably related to those which you shall have rendered hereunder during such two years, to any person or entity whether now existing or hereafter established which directly competes with (or proposes or plans to directly compete with) the Company ("Direct Competitor") in any line of business engaged in or under development by the Company. Nor shall you entice, induce or encourage any of the Company's other employees to engage in any activity which, were it done by you, would violate any provision of the Proprietary Information and Inventions Agreement or this Section 7. As used in this Section 7.1, the term "any line of business engaged in or under development by the Company" shall be applied as at the date of termination of 3 4 your employment, or, if later, as at the date of termination of any post-employment consulting arrangement. 7.2 No provision of this Agreement shall be construed to preclude you from performing the same services which the Company hereby retains you to perform for any person or entity which is not a Direct Competitor of the Company upon the expiration or termination of your employment (or any post-employment consulting arrangement) so long as you do not thereby violate any term of the Proprietary Information and Inventions Agreement. 8. Remedies. Your obligations under the Proprietary Information and Inventions Agreement and the provisions of Sections 6, 7, 8 and 9 of this Agreement (as modified by Section 10, if applicable) shall survive the expiration or termination of your employment (whether through your resignation or otherwise) with the Company. You acknowledge that a remedy at law for any breach or threatened breach by you of the provisions of the Proprietary Information and Inventions Agreement or Section 7 would be inadequate and you therefore agree that the Company shall be entitled to such injunctive relief in case of any such breach or threatened breach. 9. Assignment. This Agreement and the rights and obligations of the parties hereto shall bind and inure to the benefit of any successor or successors of the Company by reorganization, merger or consolidation and any assignee of all or substantially all of its business and properties, but, except as to any such successor or assignee of the Company, neither this Agreement nor any rights or benefits hereunder may be assigned by the Company or by you, except by operation of law. 10. Interpretation. IT IS THE INTENT OF THE PARTIES THAT in case any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. MOREOVER, IT IS THE INTENT OF THE PARTIES THAT in case any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, such provision shall be construed by limiting and reducing it as determined by a court of competent jurisdiction, so as to be enforceable to the maximum extent compatible with applicable law. 11. Notices. Any notice which the Company is required to or may desire to give you shall be given by personal delivery or registered or certified mail, return receipt requested, addressed to you at your address of record with the Company, or at such other place as you may from time to time designate in writing. Any notice which you are required or may desire to give to the Company hereunder shall be given by personal delivery or by registered or certified mail, return receipt requested, addressed to the Company at its principal office, or at such other office as the Company may from time to time designate in writing. The date of personal delivery or the date of mailing any notice under this Section 11 shall be deemed to be the date of delivery thereof. 4 5 12. Waivers. If either party should waive any breach of any provision of this Agreement, such party shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement. 13. Complete Agreement; Amendments. The foregoing including Exhibits A, B and C hereto, is the entire agreement of the parties with respect to the subject matter hereof, superseding any previous oral or written communications, representations, understandings, or agreements with the Company or any officer or representative thereof. Any amendment to this Agreement or waiver by the Company of any right hereunder shall be effective only if evidenced by a written instrument executed by the parties hereto, upon authorization of the Company's Board of Directors. 14. Headings. The headings of the Sections hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning of this Agreement. 15. Counterparts. This Agreement may be signed in two counterparts, each of which shall be deemed an original and both of which shall together constitute one agreement. 16. Governing Law. This Agreement shall be governed by and construed under Massachusetts law, without regard to the conflict of laws principles thereof. If you are in agreement with the foregoing, please sign your name below and also at the bottom of the Proprietary Information and Inventions Agreement, whereupon this Agreement shall become binding in accordance with its terms. Please then return this Agreement to the Company. (You may retain for your records the accompanying counterpart of this Agreement enclosed herewith). Very truly yours, TRIPLE I CORPORATION By: ____________________________ (Duly Authorized) Accepted and Agreed: - ----------------------------- Juan J. Amodei 5 6 EXHIBIT A EMPLOYMENT TERM, COMPENSATION AND BENEFITS OF JUAN J. AMODEI l. Term. The term of the Agreement to which this Exhibit A is annexed and incorporated shall be until December 31, 1998. 2. Compensation. (a) Base Salary. Your base salary shall be $110,500 per year. (b) Car Allowance: Monthly car allowance of $700.00. (c) Bonuses. You shall be entitled to such bonuses and salary increases as the Board of Directors, or Compensation Committee, as the case may be, may determine. (d) Annual Review. Your compensation package shall be reviewed annually by the Board of Directors, or Compensation Committee, as the case may be, of the Company. 3. Vacation. You shall be entitled to all legal and religious holidays, and four (4) weeks paid vacation in accordance with Company policy. 4. Insurance and Benefits. You shall be eligible for participation in any health or other group insurance plan which may be established by the Company or which the Company is required to maintain by law. 5. Sick Days and Personal Days. You shall be entitled to compensation for sick days and personal days in accordance with Company policy. 6. Expenses. The Company shall reimburse you for all reasonable and ordinary business expenses incurred by you in the scope of your employment hereunder. A-1 7 EXHIBIT B OUTSIDE EMPLOYMENTS AND DIRECTORSHIPS OF JUAN J. AMODEI B-1 8 EXHIBIT C ------------------------------------------------ PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT ------------------------------------------------ To: Triple I Corporation One Lowell Research Center 847 Rogers Street Lowell, Massachusetts 01852 As of October 13, 1995 The undersigned, in consideration of and as a condition of my employment or continued employment by you and/or by companies which you own, control, or are affiliated with or their successors in business (collectively, the "Company"), hereby agrees as follows: 1. Confidentiality. I agree to keep confidential, except as the Company may otherwise consent in writing, and, except for the Company's benefit, not to disclose or make any use of at any time either during or subsequent to my employment, any Inventions (as hereinafter defined), trade secrets, confidential information, knowledge, data or other information of the Company relating to products, processes, know-how, designs, formulas, test data, customer lists, business plans, marketing plans and strategies, pricing strategies, or other subject matter pertaining to any business of the Company or any of its affiliates, which I may produce, obtain, or otherwise acquire during the course of my employment, except as herein provided. I further agree not to deliver, reproduce or in any way allow any such trade secrets, confidential information, knowledge, data or other information, or any documentation relating thereto, to be delivered to or used by any third parties without specific direction or consent of a duly authorized representative of the Company. 2. Conflicting Employment; Return of Confidential Material. I agree that during my employment with the Company I will not engage in any other employment, occupation, consulting or other activity relating to the business in which the Company is now or may hereafter become engaged, or which would otherwise conflict with my obligations to the Company. In the event my employment with the Company terminates for any reason whatsoever, I agree to promptly surrender and deliver to the Company all records, materials, equipment, drawings, documents and data which I may obtain or produce during the course of my employment, and I will not take with me any description containing or pertaining to any confidential information, knowledge or data of the Company which I may produce or obtain during the course of my employment. C-1 9 3. Assignment of Inventions. 3.1 I hereby acknowledge and agree that the Company is the owner of all Inventions. In order to protect the Company's rights to such Inventions, by executing this Agreement I hereby irrevocably assign to the Company all my right, title and interest in and to all Inventions to the Company. 3.2 For purposes of this Agreement, "Inventions" shall mean all discoveries, processes, designs, technologies, devices, or improvements in any of the foregoing or other ideas, whether or not patentable and whether or not reduced to practice, made or conceived by me (whether solely or jointly with others) during the period of my employment with the Company which relate in any manner to the actual or demonstrably anticipated business, work, or research and development of the Company, or result from or are suggested by any task assigned to me or any work performed by me for or on behalf of the Company. 3.3 Any discovery, process, design, technology, device, or improvement in any of the foregoing or other ideas, whether or not patentable and whether or not reduced to practice, made or conceived by me (whether solely or jointly with others) which I develop entirely on my own time not using any of the Company's equipment, supplies, facilities, or trade secret information ("Personal Invention") is excluded from this Agreement provided such Personal Invention (a) does not relate to the actual or demonstrably anticipated business, research and development of the Company, and (b) does not result, directly or indirectly, from any work performed by me for the Company. 4. Disclosure of Inventions. I agree that in connection with any Invention, I will promptly disclose such Invention to my immediate superior at the Company in order to permit the Company to enforce its property rights to such Invention in accordance with this Agreement. My disclosure shall be received in confidence by the Company. 5. Patents and Copyrights; Execution of Documents. 5.1 Upon request, I agree to assist the Company or its nominee (at its expense) during and at any time subsequent to my employment in every reasonable way to obtain for its own benefit patents and copyrights for Inventions in any and all countries. Such patents and copyrights shall be and remain the sole and exclusive property of the Company or its nominee. I agree to perform such lawful acts as the Company deems to be necessary to allow it to exercise all right, title and interest in and to such patents and copyrights. 5.2 In connection with this Agreement, I agree to execute, acknowledge and deliver to the Company or its nominee upon request and at its expense all documents, including assignments of title, patent or copyright applications, assignments of such applications, assignments of patents or copyrights upon issuance, as the Company may determine necessary or desirable to protect the Company's or its nominee's interest in Inventions, and/or to use in obtaining patents or C-2 10 copyrights in any and all countries and to vest title thereto in the Company or its nominee to any of the foregoing. 6. Maintenance of Records. I agree to keep and maintain adequate and current written records of all Inventions made by me (in the form of notes, sketches, drawings and other records as may be specified by the Company), which records shall be available to and remain the sole property of the Company at all times. 7. Prior Inventions. It is understood that all Personal Inventions, if any, whether patented or unpatented, which I made prior to my employment by the Company, are excluded from this Agreement. To preclude any possible uncertainty, I have set forth on Schedule A attached hereto a complete list of all of my prior Personal Inventions, including numbers of all patents and patent applications and a brief description of all unpatented Personal Inventions which are not the property of a previous employer. I represent and covenant that the list is complete and that, if no items are on the list, I have no such prior Personal Inventions. I agree to notify the Company in writing before I make any disclosure or perform any work on behalf of the Company which appears to threaten or conflict with proprietary rights I claim in any Personal Invention. In the event of my failure to give such notice, I agree that I will make no claim against the Company with respect to any such Personal Invention. 8. Other Obligations. I acknowledge that the Company from time to time may have agreements with other persons or with the U.S. Government or agencies thereof, which impose obligations or restrictions on the Company regarding Inventions made during the course of work thereunder or regarding the confidential nature of such work. I agree to be bound by all such obligations and restrictions and to take all action necessary to discharge the Company's obligations. 9. Trade Secrets of Others. I represent that my performance of all the terms of this Agreement and my position as an employee of the Company do not and will not breach any agreement to keep confidential proprietary information, knowledge or data acquired by me in confidence or in trust prior to my employment with the Company, and I will not disclose to the Company, or induce the Company to use, any confidential or proprietary information or material belonging to any previous employer or others. I agree not to enter into any agreement either written or oral in conflict herewith. 10. Modification. I agree that any subsequent change or changes in my employment duties, salary or compensation or, if applicable, in any Employment Agreement between the Company and me, shall not affect the validity or scope of this Agreement. 11. Successors and Assigns. This Agreement shall be binding upon my heirs, executors, administrators or other legal representatives and is for the benefit of the Company, its successors and assigns. C-3 11 12. Interpretation. IT IS THE INTENT OF THE PARTIES THAT in case any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. MOREOVER, IT IS THE INTENT OF THE PARTIES THAT in case any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, such provision shall be construed by limiting and reducing it in accordance with a judgment of a court of competent jurisdiction, so as to be enforceable to the extent compatible with applicable law. 13. Waivers. If either party should waive any breach of any provision of this Agreement, he or it shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement. 14. Complete Agreement, Amendments. I acknowledge receipt of this Agreement, and agree that with respect to the subject matter thereof it is my entire agreement with the Company, superseding any previous oral or written communications, representations, understandings, or agreements with the Company or any officer or representative thereof. Any amendment to this Agreement or waiver by either party of any right hereunder shall be effective only if evidenced by a written instrument executed by the parties hereto, and, in the case of the Company, upon written authorization of the Company's Board of Directors. 15. Headings. The headings of the sections hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof. 16. Counterparts. This Agreement may be signed in two counterparts, each of which shall be deemed an original and both of which shall together constitute one agreement. 17. Governing Law. This Agreement shall be governed and construed under Massachusetts law, without regard to the conflict of law principles thereof. Very truly yours, ---------------------------------- Juan J. Amodei Accepted and Agreed: Triple I Corporation By: ________________________________ (Duly Authorized) C-4 12 SCHEDULE A LIST OF PRIOR INVENTIONS Identifying Number or Title Date Brief Description - ----- ---- --------------------- EX-10.E 9 LEASE AGREEMENT 1 EXHIBIT 10e LEASE DATED: NOVEMBER 5, 1992 JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY AND TRIPLE I CORPORATION 2 TABLE OF CONTENTS ARTICLE I SUMMARY OF BASIC LEASE PROVISIONS ................................ 1 1.1 BASIC DATA ............................................................ 1 1.2 DEFINITIONS ........................................................... 2 ARTICLE II DESCRIPTIONS OF PREMISES AND APPURTENANT RIGHTS; ................ 3 2.1 LOCATION OF PREMISES .................................................. 3 2.2 APPURTENANT RIGHTS AND RESERVATIONS ................................... 3 ARTICLE III TERM OF LEASE; CONSTRUCTION .................................... 4 3.1 COMMENCEMENT DATE ..................................................... 4 3.2 DELIVERY OF PREMISES .................................................. 4 3.4 CONSTRUCTION OF IMPROVEMENTS .......................................... 4 ARTICLE IV RENT ............................................................ 6 4.1 RENT .................................................................. 6 4.2 BASE RENT ............................................................. 6 ARTICLE V USE OF PREMISES .................................................. 7 5.1 PERMITTED USE ......................................................... 7 5.2 ALTERATIONS ........................................................... 8 ARTICLE VI ASSIGNMENT AND SUBLETTING ....................................... 9 6.1 PROHIBITION ........................................................... 9 6.2 ACCEPTANCE OF RENT FROM TRANSFEREE .................................... 10 ARTICLE VII RESPONSIBILITY FOR REPAIRS ..................................... 11 7.1 REPAIRS ............................................................... 11 ARTICLE VIII SERVICES TO BE FURNISHED BY LANDLORD .......................... 12 8.1 CLEANING SERVICES ..................................................... 12 8.2 OTHER SERVICES ........................................................ 13 ARTICLE IX REAL ESTATE AND OTHER TAXES; OTHER EXPENSES ..................... 13 9.1 LANDLORD TO PAY REAL ESTATE TAXES ..................................... 13 9.2 TENANT'S SHARE OF REAL ESTATE TAXES ................................... 13 ARTICLE X OPERATING COSTS .................................................. 14 10.1 TENANT'S SHARE OF OPERATING COSTS ..................................... 14 ARTICLE XI INDEMNITY ....................................................... 16 11.1 THE TENANTS INDEMNITY ................................................. 16 11.2 THE TENANT'S RISK ..................................................... 17 11.3 INJURY CAUSED BY THIRD PARTIES ........................................ 17 ARTICLE XII THE LANDLORD'S ACCESS TO PREMISES .............................. 18 12.1 THE LANDLORD'S RIGHT OF ACCESS ........................................ 18 12.2 ACCESS DURING THE LAST MONTH OF TERM .................................. 18
i 3 ARTICLE XIII CASUALTY ...................................................... 18 13.1 DEFINITIONS OF "SUBSTANTIAL DAMAGE" & "PARTIAL DAMAGE" ............... 18 13.2 PARTIAL DAMAGE TO THE BUILDING ....................................... 18 13.3 SUBSTANTIAL DAMAGE TO THE BUILDING ................................... 19 13.4 ABATEMENT OF RENT .................................................... 19 13.5 MISCELLANEOUS ........................................................ 19 ARTICLE XIV EMINENT DOMAIN ................................................. 20 14.1 RIGHTS OF TERMINATION FOR TAKING ..................................... 20 14.2 PAYMENT OF AWARD ..................................................... 20 14.3 ABATEMENT OF RENT .................................................... 21 14.4 MISCELLANEOUS ........................................................ 21 ARTICLE XV INSURANCE ....................................................... 21 15.1 PUBLIC LIABILITY AND PROPERTY INSURANCE .............................. 21 15.2 NON-SUBROATION ....................................................... 22 15.3 EXTRA HAZARDOUS USE .................................................. 22 ARTICLE XVI DEFAULT ........................................................ 24 16.1 TENANT'S DEFAULT ..................................................... 24 16.2 REMEDIES UPON DEFAULT ................................................ 25 16.3 DAMAGES UPON TERMINATION ............................................. 25 16.4 COMPUTATION OF RENT FOR PURPOSES OF DEFAULT .......................... 26 16.5 RIGHTS OF LANDLORD IN BANKRUPTCY ..................................... 26 ARTICLE XVII MISCELLANEOUS PROVISIONS ...................................... 27 17.1 WAIVER ............................................................... 27 17.2 COVENANT OF QUIET ENJOYMENT .......................................... 27 17.3 NO PERSONAL LIABILITY OF THE LANDLORD ................................ 27 17.4 NOTICE TO MORTGAGE AND GROUND LESSOR; OPPORTUNITY TO CURE ............ 28 17.5 NO BROKERAGE ......................................................... 28 17.6 INVALIDITY OF PARTICULAR PROVISIONS .................................. 28 17.7 PROVISIONS BINDING, ETC .............................................. 28 17.8 RECORDING ............................................................ 29 17.9 NOTICES .............................................................. 29 17.10 WHEN LEASE BECOMES BINDING ........................................... 29 17.11 PARAGRAPH HEADINGS ................................................... 30 17.12 RIGHTS OF MORTGAGEE .................................................. 30 17.13 STATUS REPORT; MODIFICATION .......................................... 31 17.14 SECURITY DEPOSIT ..................................................... 31 17.15 SELF-HELP ............................................................ 32 17.16 RELIEF LIMITED ....................................................... 32 17.17 HOLDING OVER ......................................................... 32 17.18 CERTIFICATE .......................................................... 32 EXHIBIT A PLAN SHOWING THE PREMISES ....................................... 34 EXHIBIT B DESCRIPTION OF LOT .............................................. 35 EXHIBIT C RULES AND REGULATIONS ........................................... 38
ii 4 LEASE This instrument is an Indenture of Lease between John Hancock Mutual Life Insurance Company (the "Landlord") and Triple I Corporation (the "Tenant"). The parties to this instrument hereby agree with each other as follows: ARTICLE I SUMMARY OF BASIC LEASE PROVISIONS 1.1 BASIC DATA Date: November 5, 1992 Landlord: John Hancock Mutual Life Insurance Company Present Mailing Address of Landlord: Hancock Realty Investors, Inc. 200 Berkeley Street, P.O. Box 111 Boston, MA 02118 Tenant: Triple I Corporation Present Mailing Address of Tenant: 650 Suffolk Street Lowell, MA 01853 Lease Premises: Premises on the first floor of the building known as 847 Rogers Street, Lowell, MA 01853, shown on Exhibit A. Rentable Area: 11,118 rentable square feet Lease Term: Thirty six (36) calendar months (plus the partial month, if any, immediately following the Commencement Date). Commencement Date: November 6, 1992 Rental Commencement Date: November 6, 1992 Base Rent: See Section 4.2 Security Deposit: One (1) months rent ($6,400.00). Tenant's Parking Spaces: Non-exclusive right to thirty nine (39) parking space. Tenant's Proportionate Share: 19.8%
5 1.2 DEFINITIONS As used in this Lease, the terms defined in this Section 1.2 shall have the following meanings: BROKER: Meredith & Grew, Incorporated, 160 Federal Street, Boston, MA 02110-1701; Palladins, 100 Corporate Place, Suite 106, Peabody, MA 01960. BUILDING: as defined in Section 2.1. BUILDING MANAGER: Meredith & Grew, or such other managing agent as may be designated by the Landlord. LEASE: this lease agreement including all of its Exhibits as executed and delivered, as amended from time to time, pursuant to the terms hereof. LEASE YEAR: as defined in Section 10.1 (c). LOT: the land area described in Exhibit B, subject to minor adjustments by the Landlord from time to time during the Lease Term. OPERATING COSTS: as defined in Section 10.1 (c). OPERATION: as defined in Section 10.1 (c) (1). PARTIAL LEASE YEAR: as defined in Section 10.1 (c). PARTIAL DAMAGE: as defined in Section 13.1. PERMITTED USE: General office, light manufacturing, research and development, and uses accessory thereto (as permitted by applicable law). PREMISES: as defined in Section 2.1. PROPERTY: as defined in Section 10.1 (c) (1). RULES & REGULATIONS: as set forth in Exhibit F and as the same may be amended by the Landlord from time to time. SUBSTANTIAL DAMAGE: as defined in Section 13.1. TAXES: as defined in Section 9.1. 2 6 ARTICLE II DESCRIPTION OF PREMISES AND APPURTENANT RIGHTS; NET RENTABLE AREA 2.1 LOCATION OF PREMISES The Landlord hereby leases to the Tenant and the Tenant hereby accepts from the Landlord, the premises (the "Premises") identified on Exhibit A in the Landlord's building located on land owned by the Landlord (the "Lot"), known as 847 Rogers Street, Lowell, MA (the "Building"). Nothing in Exhibit A shall be treated as a representation that the Premises (other than the Rentable Area thereof described in Section 1.1 shall be precisely of the dimensions or shapes as shown, it being the intention of the parties only to show diagrammatically, rather than precisely, on Exhibit A the layout of the Premises. 2.2 APPURTENANT RIGHTS AND RESERVATIONS Tenant shall have, as appurtenant to the Premises, rights to use in common with others entitled thereto: (a) the common facilities included in the Building or Lot, including common walkways, driveways and ramps; (b) the parking facility (including the visitor's parking area and parking spaces reserved for the handicapped) to the extent of the number of Tenant's Parking Spaces, at location which may from time to time be designated by Landlord; and (c) the pipes, ducts, conduits, wires and appurtenant equipment serving the Premises. Such rights shall always be subject to the Rules and Regulations set forth in Exhibit C attached hereto an incorporated herein by reference, as the same maybe amended by the Landlord from time to time and such other reasonable rules and regulations from time to time established by the Landlord by suitable notice, and to the right of the Landlord to designate and change from time to time areas and facilities so to be used. Not included in the Premises are the roof and all exterior perimeter walls of the space identified in Exhibit A, except the inner surfaces thereof and the interior doors and windows. The Tenant agrees that the Landlord shall have the right to place in the Premises (but in such a manner as not unreasonably to interfere with the Tenant's use of the Premises) utility lines, telecommunication lines, shafts, pipes and the like, for the use and benefit of Landlord and other tenants in the Building, and re replace and maintain and repair such lines, shafts, pipes, and the like, shall not be deemed part of the Premises under this Lease. ARTICLE III TERM OF LEASE; CONSTRUCTION 3.1 COMMENCEMENT DATE The Term of this Lease shall be the period specified in Section 1.1 hereof as the "Lease Term" and the term shall commence on the Commencement Date. 3 7 Tenant shall, in all events, be treated as having commenced beneficial use of the Premises when it begins to move into the Premises furniture and equipment for its regular business operations. 3.2 DELIVERY OF PREMISES Landlord shall deliver the premises to Tenant on the Commencement Date broom clean and free of tenants and occupants, but otherwise "AS IS" as to condition and layout. Tenant, at Tenant's sold risk, may, upon prior notice to Landlord and in accordance with the terms herein, construct its leasehold improvement and install its furniture, furnishings and equipment. Tenant shall construct the leasehold improvements in accordance with the requirements of Section 3.4 hereof and Tenant and Tenant's agents, contractors, workmen, mechanics, suppliers and invitees shall work in harmony with Landlord and contractors working for Landlord and with other tenants and occupants in the Building. 3.3 CONSTRUCTION OF IMPROVEMENTS (a) Tenant shall construct all leasehold improvements to the Premises in accordance with the provisions of this Section. Once installed, all such leasehold improvements with the exception of a 50 Hz generator shall be part of the Premises and shall be the sole property of Landlord. Landlord shall have no obligation to construct any leasehold improvements to the Premises. (b) All leasehold improvements constructed by Tenant within the Premises shall be done in accordance with plans and specifications first approved by Landlord. Tenant shall submit to Landlord for Landlord's approval all plans and specifications for Tenant's construction of any leasehold improvements, alterations or additions in or to any part of the Premises. Landlord shall review such plans and specifications as submitted within thirty (30) business days after the receipt thereof and shall notify Tenant if Landlord approves or disapproves such plans and specifications. If Landlord disapproves such plans, Landlord shall specify the reasons for its disapproval of any aspect of such plans. Tenant shall prepare any revisions to such plans and specifications which may be necessary as a result of Landlord's disapproval and complete and revise the same so that the plans are satisfactory to, and have been approved by, Landlord within seven (7) business days after Landlord's request for revisions of the same. Landlord and Tenant shall initial the plans and specifications after the same have been submitted by Tenant and approved by Landlord. Tenant agrees that Tenant's construction shall be built in accordance with such final plans and specifications meet all federal, state and local governmental requirements, including, without limitation, all applicable zoning laws, building codes, environmental codes, rules, ordinances or regulations, and any applicable laws and regulations regarding accommodations for handicapped persons. Landlord shall not be deemed unreasonable for withholding approval of any improvements, alternations or additional which (i) adversely affect any structural, mechanical, plumbing HVAC electrical or exterior elements of the Building, or (ii) will require unusual expense to re-adapt the Premises to normal warehouse use on termination of the Lease or (iii) will increase the cost of construction or of insurance or taxes on the Building or the Premises, unless Tenant agrees in writing to pay all such costs. Tenant 4 8 shall provide Landlord with a full set of as-built plans for the Premises so improved upon completion of such improvements. (c) All construction work in the Premises shall be done by contractors and laborers approved by Landlord, in a good and workman like manner and in compliance with the Lease, all applicable laws and ordinances, regulations and order of governmental authority and insurers of the Building or the Premises. Tenant further covenants that it shall 1 not employ or permit the use of any contractors or laborers or otherwise take any action in connection with any work to the Premises which might in any was result in a labor dispute or disharmony with any personnel providing services at the Building. Before Tenant begins any work, it shall secure all licenses and permits necessary therefore and cause each contractor to carry (1) workmen's compensation insurance in statutory amounts covering all the contractor's subcontractor's employees, (2) comprehensive public liability insurance with such limits as Landlord may reasonably require, but in no event less than $1,000,000, and (3) property damage insurance with limits of not less than $1,000,000 (all such insurance to be written in companies approved by Landlord and insuring Landlord and Tenant as well as the contractors), and to deliver to Landlord certificates of all such insurance; and secure casualty insurance against loss or damage to Tenant's work pending completion and deliver evidence of such insurance to Landlord. Tenant agrees to pay promptly when due the entire cost of any work done in the Premises by Tenant, its agents, employees or independent contractors, and not to cause or permit any liens for labor or materials performed or furnished in connection with its work to attach the Premises and immediately discharge any such work liens which may attach. Landlord may inspect the work at any time. Tenant shall indemnify Landlord and hold it harmless from and against any cost, claim or liability arising from any work done by or at the direction of Tenant. All work shall be done so as to minimize interference with other tenants and with Landlord's operation of the Building or other construction work being done by Landlord. ARTICLE IV RENT 4.1 RENT The Base Rent (specified in Section 1.1 hereof) and any additional rent or other charges payable pursuant to this Lease (collectively or individually, "Rent"), shall be payable by the Tenant to the Landlord at Landlord's mailing address or such other place as the Landlord may from time to time designate by notice to the Tenant without prior demand therefore and without any offset or deduction whatsoever except at otherwise specifically provided for in this Lease. (a) The Rent shall be payable in advance on the first day of each and every calendar month during the term of this Lease, except as otherwise provided in Subsection (b) of this Section 4.1. 5 9 (b) The Rent for the first calendar month of the Lease Term is due and payable at the time of execution and delivery of the Lease. If the Commencement Date occurs on a day other than the first day of a calendar month, the Tenant shall pay to the Landlord on the first day of the succeeding calendar month a pro rata payment of Rent for the Partial month from the Commencement Date to the first day of the succeeding calendar month. Such payment, together with the payment made by the Tenant upon execution and delivery of the Lease, shall constitute payment for the first full calendar month of the Lease Term plus the partial month, if any, immediately following the Commencement Date. (c) Rent for any partial month shall be paid by the Tenant to the Landlord at such rate on a pro rata basis. Other charges payable by the Tenant on a monthly basis, as hereinafter provided, shall likewise be prorated. (d) Rent, additional rent and any other sums due hereunder not paid on the date shall bear interest at the rate of 1% per month or fraction thereof (or at any lesser maximum legally permissible rate) from 5 days past the due date until paid. 4.2 BASE RENT Rent for November 6, 1992 through November 30, 1993 shall be at a monthly rate of $6,717.00 ($7.25 per rentable square foot); Rent for December 1, 1993 through November 30, 1994 shall be at a monthly rate of $7,180.00 ($7.75 per rentable square foot); Rent for December 1, 1994 through November 30, 1995 shall be at a monthly rate of $7,643.62 ($8.25 per rentable square foot). ARTICLE V USE OF PREMISES 5.1 PERMITTED USE Tenant agrees that the Premises shall be used and occupied by Tenant only for the purpose specified as the Permitted Use thereof in Section 1.2 of this Lease, and for no other purpose or purposes. Tenant further agrees to conform to the following provisions during the entire term of this Lessee: (a) Tenant will not place on the exterior of exterior walls (including both interior and exterior surfaces of windows and doors) or on any part of the Building outside the Premises, any signs, symbols, advertisement or the like visible to public view outside of the Premises without the prior consent of Landlord. Without limitation, lettering on windows is expressly prohibited. 6 10 (b) The Tenant, at its expense, shall comply with all rules, ordinances, orders, regulations and requirements of any Board of Fire Underwriters, or any other body hereafter constituted exercising similar functions and governing insurance rating bureaus; and shall not do or permit anything to be done in or upon the Premises, or bring or keep anything therein, except as now or hereafter permitted by any governmental authority, Board of Fire Underwriters or any other similar body having jurisdiction, or insurance rating bureaus; and shall keep the Premises equipped with all safety appliances or equipment required by any governmental authority, Board of Fire Underwriters or other similar body or governing insurance rating bureau by reason of the Tenant's particular use of the Premises or the location of partition, trade fixtures or other contents of the Premises; and shall procure all licenses, permits or other approvals required because of such use, it being understood that the foregoing provisions shall not be construed to broaden in any way the Permitted Use of the Premises; (c) The Tenant, at its expenses, shall comply with all rules, ordinances, orders, permit conditions and regulations of governmental authorities now or hereafter in force and with any lawful direction of any public officer, in each case to the extent the same are applicable to the Premises or the use and maintenance thereof. If the Tenant receives notice of any violation of law, ordinance, order, permit conditions or regulation applicable to the Premises or the use and maintenance thereof, it shall give prompt written notice thereof to the Landlord; (d) [The Tenant shall not place a load upon any floor of the Premises exceeding the load which such floor was designed to carry or that which is allowed by law, whichever is less. The Landlord reserves the right to limit the weight of safes and other heavy objects and to designate their position. The Tenant shall not move any safes or heavy objects in or out of the Building without the Landlord's prior consent;] (e) The Tenant shall not commit or suffer to be committed any waste upon the Premises or any public or private nuisance or other act or thing which may disturb the quiet enjoyment of any other tenant or occupant in the Building, nor, without limiting the generality of the foregoing, shall the Tenant make any unusual noises in the Building, cause or permit any offensive odors to be produced upon the Premises, or use any apparatus, machinery or device in or about the Premises which shall cause any damage to the Building or the Premises or any vibration outside of the Premises; (ee) The Tenant shall be permitted to utilize the premises for the manufacturing of its products subject to applicable law. (f) The electricity furnished to the Premises shall be separately metered. The tenant shall pay directly to the supplier of electricity , within thirty (30) days of invoice therefor, the entire cost of such electricity consumed in the Premises. The Tenant 7 11 shall not, without the Landlord's written consent in each instance, connect to the electrical distribution system any fixtures, appliances or equipment other than lamps, typewriters and similar small office machines which operate on a voltage not in excess of 120, or make any alteration or addition to the electrical system of the Premises; and (g) The Tenant shall continuously occupy the Premises during the Lease Term, subject to temporary interruptions for causes beyond the Tenant's reasonable control. The Tenant shall comply and shall cause its employees, agents and invitees to comply with the Rules and Regulations of the Building as set forth in Exhibit E and such changes therein and other reasonable rules and regulations as the Landlord shall from time to time establish for the proper regulation of the Building and the Lot, provided that such additional rules and regulations shall be of general application to all the tenants in the Building. 5.2 ALTERATIONS. The Tenant shall not make alterations, additions or improvements to the Premises, except with the prior written consent of the Landlord. All alterations, additions and improvements made by the Tenant to the Premises shall remain therein and, at the termination of the Lease, shall be surrendered as a part thereof, except for trade fixtures and equipment (as distinguished from leasehold improvement) installed prior to or during the term of this Lease at the Tenant's sole cost. Such trade fixtures and equipment may be removed by the Tenant if the Tenant is not then in default hereunder and if such removal shall not result in permanent damage to the Premises or the Building. The Tenant shall remove such trade fixtures and equipment at the termination of the Lease if requested to do so by the Landlord. The Tenant shall at its expense promptly repair any and all damage to the Premises or the Building resulting from any removal of such fixtures and equipment. Any personal property which shall remain in the Building or on the Premises after the expiration of earlier termination of the Lease shall conclusively be deemed to have been abandoned by the Tenant, and either may be retained by the Landlord as its own property or may be disposed of by sale, storage or otherwise as the Landlord shall see fit, all at the Tenant's expense. Notwithstanding the foregoing, the Tenant will, upon request of the Landlord after the expiration or termination of the Term hereof, promptly remove from the Building any such personal property, or if any part of such personal property shall be sold, the Landlord may receive and retain the proceeds of such sale and apply the same, at its option, against the expenses of sale, the costs of moving and storage, and arrears of Rent, additional rent or other charges payable hereunder or any damages in which the Landlord may be entitled. 8 12 ARTICLE VI ASSIGNMENT AND SUBLETTING 6.1 PROHIBITION Notwithstanding any other provisions of this Lease, the Tenant shall not assign or otherwise transfer, voluntarily or involuntarily, this Lease or any interest herein or sublet (which term, without limitation, shall include granting of concessions, licenses and the like) or allow any other person to occupy the whole or any part of the Premises, without, in each instance, the prior written consent of the Landlord. This prohibition does not include any assignment, subletting or other transfer which would occur by merger, consolidation, reorganization, acquisition, transfer or other change of the Tenant's corporate or proprietary structure, including a change in the partners of any partnership, and the sale, pledge or other transfer of any of the issued and outstanding capital stock of any corporate Tenant (unless such stock is publicly traded on a recognized security exchange or over-the-counter market), provided however, that the Tenant's business continues to operate in the Premises prior to said merger, assignment or other transaction. Notwithstanding the above, any request by Tenant for Landlord's consent to an assignment or a sublease of the premises ("Transfer", and the party to whom the Transfer shall be directed shall hereinafter be referred to as "Transferee") shall include (i) the name and address of the proposed Transferee; (ii) the nature of the proposed Transferee's business and proposed use of the Premises; (iii) complete information as to the financial condition and standing of the proposed Transferee, including a copy of the proposed Transferee's most recent quarterly and annual financial statements; (iv) the terms and conditions of the proposed Transfer; and (v) such other information as Landlord shall reasonably request. Landlord shall have the right to meet and interview the proposed Transferee or its managing officers. Landlord shall not unreasonably withhold consent to a proposed Transfer, provided, however, a refusal based on any of the following factors shall be deemed a reasonable refusal of consent to a Transfer: (i) the proposed Transferee's expected use of the Premises is not consistent with the use, image and character which the Landlord desires to promote for the Building; or (ii) the proposed Transferee's balance sheet for the previous 8 months does not reflect a cash flow which would cover the rental obligations set forth herein, when added to the Transferee's other obligations of its operation. In no event shall a failure by Landlord to approve a proposed Transferee cause a termination of this Lease. Tenant may, without prior consent of the Landlord, but with prior written notice, assign this Lease, or sublet all or any portion of the Premises, to a wholly-owned subsidiary of the Tenant or an affiliate of the Tenant. For the purposes of this Lease, the term "affiliate" shall mean any corporation that controls, is controlled by, or is under common control with, the Tenant; as used in the preceding clause, the term "control" shall mean the right to exercise more than 50% of the voting rights attributable to the shares of the controlled corporation. 9 13 In any case, where the Landlord shall consent to such assignment, other transfer or subletting, the Tenant originally named herein shall remain fully liable for Tenant obligations hereunder, including, without limitation , the obligation to pay the rent and other amounts provided under this Lease, and the Tenant also hereby agrees to pay to the Landlord, within fifteen (15) days of billing therefor, all legal and other fees incurred by the Landlord in connection with reviewing and approving any such assignment, other transfer or subletting. The Tenant shall give written notice to the Landlord of the terms of any such proposed assignment or sublease and the Landlord shall be entitled to 50% net profits from any such sublease or assignment. Net profit shall be calculated by first allowing Tenant to recover any actual construction inducement and other related costs including brokerage fees, given to the subtenant or assignee. It shall be a condition to the validity of any permitted assignment or other transfer or subletting that the assignee or transferee or sublessee agree directly with the Landlord, in form satisfactory to the Landlord, to be bound by all Tenant obligations hereunder, including, without limitation, the obligation to pay rent and other amounts provided for under this Lease and the covenant against further assignment or other transfer or subletting. 6.2 ACCEPTANCE OF RENT FROM TRANSFEREE. The acceptance by the Landlord of the payment of Rent, additional rent or other charges following an assignment, subletting or other transfer prohibited by this Article VI shall not be deemed to be a consent by the Landlord to any such assignment, subletting or other transfer, nor shall the same constitute a waiver of any right or remedy of the Landlord. ARTICLE VII RESPONSIBILITY FOR REPAIRS 7.1 REPAIRS. From and after the date that possession of the Premises is delivered to the Tenant and until the end of the Lease Term, the Tenant shall keep the Premises and every part thereof in good order, condition and repair, reasonable wear and tear and damage by unavoidable casualty only excepted; and the Tenant shall surrender the Premises at the end of the Lease Term in such condition. Except as may be provided in Articles XIII and XIV, the Landlord agrees to keep in good order, condition and repair the structural and exterior portions of the Building and the common areas and facilities and common equipment in the Building, except any condition caused by any act, omission or neglect of the Tenant or any contractor of the Tenant or any party for whose conduct the Tenant is responsible. Without limitation, the Landlord shall not be responsible to make any improvements or repairs other than as expressly provided in this Section, and the Landlord shall not be liable for any failure to make such repairs unless the Tenant has given notice to the Landlord of the need to make such repairs and the Landlord has failed to commence to make such repairs within a reasonable time thereafter. 10 14 In addition to the requirements of Section 3.4 herein, whenever the Tenant shall make repairs, alterations, decorations, additions, removals, or improvements (including the installation of any equipment other than normal light business office equipment) in or to the Premises: (a) No material or equipment shall be incorporated in or added to the Premises in connection with any such repair, alteration, decoration, addition, removal or improvement which is subject to or claimed to be subject to any lien, charge, mortgage, or other encumbrance of any kind whatsoever or is subject to any security interest or any form of title retention agreement. Any mechanic's or materialmen's lien filed against the Premises or the Building for work claimed to have been done for, or materials claimed to have been furnished to the Tenant, shall be immediately discharged by the Tenant, at the Tenant's expense, by filing the bond required by law or otherwise. If the Tenant fails so to discharge any lien, the Landlord may do so at the Tenant's expense and the Tenant shall reimburse the Landlord for all expenses and costs incurred by the Landlord in so doing immediately after rendition of a bill therefor by the Landlord to the Tenant. (b) All installations or work done by or for the Tenant shall be at its own expense and shall at all times comply with (i) laws, rules, orders and regulations of governmental authorities having jurisdiction thereof; (ii) orders and regulations of any Board of Fire Underwriters, or any other body hereafter constituted exercising similar functions, and governing insurance rating bureaus; (iii) plans and specifications (which shall be prepared by and at the expense of the Tenant) theretofore submitted to and approved in writing by the Landlord. (c) The Tenant shall procure all necessary permits before undertaking any work in the Premises and shall do all such work in a good and workmanlike manner, employing new materials of first class quality and shall defend, save harmless, exonerate and indemnify the Landlord from all injury, loss or damage to any person or property occasioned by such work. The Tenant shall cause contractors employed by the Tenant to carry and maintain in force during the continuance of any work being performed for the Tenant Worker's Compensation Insurance in accordance with statutory requirements and Comprehensive Public Liability Insurance and Automobile Liability Insurance covering such contractors on or about the Premises in amounts reasonably acceptable to the Landlord and to submit certificates evidencing such coverage to the Landlord prior to the commencement of such work. (d) The Tenant shall not, at any time prior to or during the Term of this Lease, directly or indirectly employ, or permit the employment of, any contractor, mechanic or laborer in the Premises, whether in connection with any repair work or the making of any alteration, improvements or additions or otherwise, if such employment will interfere or cause any conflict with other contractors, mechanics or laborers engaged in the construction, maintenance or operation of the Building by the Landlord, Tenant or others. In the event of any such interference or 11 15 conflict, the Tenant, upon demand of the Landlord, shall cause all contractors, mechanics or laborers causing such interference or conflict to leave the Building immediately. ARTICLE VIII SERVICES TO BE FURNISHED BY LANDLORD 8.1 LANDLORD SERVICES. The Landlord shall maintain the Building and the access roadways and drives and the parking areas and landscaping immediately adjacent to the Building in which the demised premises are located. The Landlord shall provide heating, ventilating and air conditioning as normal seasonal changes may require during normal building operating hours. Landlord shall also provide cleaning. The Landlord shall furnish water at City temperature for ordinary cleaning, toilet, lavatory and drinking purposes. If the Tenant uses or consumes water for any other purpose, it shall reimburse the Landlord therefor, and for any related sewer charge, as reasonably estimated by the Landlord or, at its election, metered. In the latter event, the Tenant shall pay the cost of the meter and its installation and maintenance. Such reimbursement shall be made as and when bills are rendered. All water piping and equipment shall be installed and maintained by the Landlord at the Tenant's expense. 8.2 CAUSES BEYOND CONTROL OF THE LANDLORD. The Landlord shall in no event be liable for failure to perform any of its obligations under this Lease when prevented from doing so by causes beyond its control, including, without limitation, labor dispute, breakdown, accident, order or regulation of or by any governmental authority, or failure of supply, or inability by the exercise of reasonable diligence to obtain supplies, parts or employees necessary to furnish services required under this Lease or because of war or other emergency, or for any cause due to any act, neglect or default of the Tenant or the Tenant's servants, contractors, agents, employees, licensees or any person claiming by, through or under the Tenant, and in no event shall the Landlord ever be liable to the Tenant for any indirect or consequential damages under the provisions of this Section 8.2 or any other provision of this Lease. ARTICLE IX REAL ESTATE AND OTHER TAXES; OTHER EXPENSES 9.1 LANDLORD TO PAY REAL ESTATE TAXES. 12 16 Landlord shall be responsible for the payment, before the same becomes delinquent, of all general and special taxes, including assessments for local improvements, and other governmental charges which may be lawfully charged, assessed or imposed (herein collectively called the "Taxes") upon the Building and the Lot. However, if authorities having jurisdiction assess real estate taxes, assessments or other charges which Landlord considers excessive, Landlord may defer compliance therewith to the same extent permitted by the laws of the jurisdiction in which the same are located, so long as the validity or amount thereof is contested by Landlord in good faith, and so long as Tenant's occupancy of the Premises is not disturbed. 9.2 TENANT'S SHARE OF REAL ESTATE TAXES. With reference to the Taxes described in Section 9.1, it is agreed as follows: (a) Tenant shall pay to Landlord Tenant's Proportionate Share of an increase in Taxes assessed against the Building and the Lot over the fiscal year 1993 Taxes during the term of this Lease. The Tenant shall pay to the Landlord pro rated monthly installments on account of projected increased Taxes for the Lease Year, calculated by the Landlord on the basis of the most recent Tax data or budget available, with an adjustment made to account for actual increase in Taxes for such Lease Year. If the total of such monthly installments in any Lease Year is greater than the actual increase in Taxes for such Lease Year, the Tenant shall be entitled to a credit against the Tenant's base rental obligations hereunder in the amount of such difference. If the total of such monthly installments is less than the actual Taxes for such Lease Year, the Tenant shall pay to the Landlord the amount of such difference promptly upon billing therefor. (c) If some method or type of taxation or assessment shall replace in whole or in part, the current method of assessment of real estate taxes, or the type thereof, Tenant agrees that Tenant shall pay Tenant's equitable share of the same computed in a fashion consistent with the method of computation herein provided, to the end that Tenant's cost on account thereof shall be, to the maximum extent practicable, the same as Tenant would bear under the foregoing paragraphs. (d) If a tax (other than a net income tax) is assessed on account of the rents or other charges payable by Tenant Landlord under this Lease, Tenant agrees to pay the same within ten (10) days after billing therefor, unless applicable law prohibits the payment of such tax by the Tenant. Tenant's obligation to make payment of the same shall be applicable irrespective of the party to which the tax is assessed. 13 17 ARTICLE X OPERATING COSTS 10.1 TENANT'S SHARE OF OPERATING COSTS. (b) Tenant shall pay, as additional rent, the Tenant's Proportionate Share of increases in Operating Costs over the calendar year 1993 actual expenses. The Tenant shall pay to the Landlord pro rata monthly installments on account of projected Operating Costs for the Lease Year, calculated by the Landlord on the basis of the most recent Operating Costs data or budget available, with an adjustment made to account for actual increased Operating Costs for such Lease Year. If the total of such monthly installments in any Lease Year is greater than the actual Operating Costs for such Lease Year, the Tenant shall be entitled to a credit against the Tenant's base rental obligations hereunder in the amount of such difference. If the total of such monthly installments is less than the actual Operating Costs for such Lease Year, the Tenant shall pay to the Landlord the amount of such difference promptly upon billing therefor. (c) For the purposes of this Article "Lease Year" shall mean any fiscal year from January 1 to December 31, except that the first Lease Year during the term of this Lease shall commence on the Commencement Date and end on the next following December 31 and the last Lease Year during the term of this Lease shall end on the date this Lease terminates (each of such first and last Lease Years are referred to in the immediately preceding paragraph (b) as a "Partial Lease Year"); and "Operating Costs" shall include: (1) All expense incurred by the Landlord or its agents which shall be directly related to employment of day and night supervisors, janitors, handymen, carpenters, engineers, firemen, mechanics, electricians, plumbers, guards, cleaners, secretaries and other personnel (including amounts incurred for wages, salaries and other compensation for services, payroll, social security, unemployment and similar taxes, workmen's compensation insurance, disability benefits, pensions, hospitalization, retirement plans and group insurance, uniforms and working clothes and the cleaning thereof, and expenses imposed on the Landlord or its agents pursuant to any collective bargaining agreement), for services in connection with the operation, management, minor repair, maintenance, cleaning and protection (collectively, "the Operation") of the Building, the Building heating, ventilating, air conditioning, electrical, plumbing, fire protection and other systems and the Lot (collectively, "the Property"), and personnel engaged in supervision of any of the persons mentioned above; 14 18 (2) The cost of services, materials and supplies furnished or used in the Operation of the Property; (3) The cost of replacements for tools and equipment used in the Operation of the Property; (4) The amounts paid to managing agents and for legal, accounting and other professional fees relating to the Operation of the Property, but excluding such fees paid in connection with negotiations for leases; (5) Insurance premiums; (6) Costs for electricity, steam and other utilities required in the Operation of the Property; (7) Water and sewer use charges; (8) The costs of snow-plowing and removal and landscaping; (9) Amounts paid to independent contractors for services, materials and supplies furnished for the Operation of the Property; (10) All other expenses incurred in connection with the Operation of the Property; (11) Any replacement of capital equipment will be amortized over the useful life of the capital item. Operating Costs shall be computed on all accrual basis and shall be determined in accordance with generally accepted accounting principles consistently applied. They may be incurred directly or by way of reimbursement, and shall include taxes applicable thereto. The following shall be excluded from Operating Costs: (1) Salaries of officers and executives of the Landlord not connected with the Operations of the Property; (2) Depreciation; (3) Expenses relating to tenants' alterations; (4) Interest on indebtedness; (5) Expenses for which the Landlord, by the terms of this Lease or any other lease, makes a separate charge; 15 19 (6) Real estate taxes; and (7) Leasing fees or commissions. All Operating Costs shall be reduced by the amount (net of collection costs) of any insurance reimbursement, discount or allowance received by the Landlord in connection with such costs. ARTICLE XI INDEMNITY 11.1 THE TENANT'S INDEMNITY. To the maximum extent permitted by law, the Tenant shall indemnify and save harmless the Landlord, the directors, officers, agents and employees of the Landlord and those in privity of estate with the Landlord, from and against all claims, expenses or liability of whatever nature (a) arising from any default, act, omission or negligence of the Tenant, or the Tenant's contractors, licensees, agents, servants or employees or the failure o the Tenant or such persons to comply with any rule, order, regulation or lawful direction now or hereafter in force of any public authority, in each case to the extent the same are related, directly or indirectly, in the Premises or the Building, or the Tenant's use thereof; or (b) arising directly or indirectly from any accident, injury or damage, however caused, to any person or property on or about the Premises; or (c) arising, directly or indirectly, out of default or breach by the Tenant under any of the terms or covenants of this Lease or in connection with any equipment or installations to be maintained or repaired by the Tenant; or (d) arising directly or indirectly, from any accident, injury or damage to any person or property occurring outside the Premises but within the Building, or on the Lot where such accident, injury or damage results, or is claimed to have resulted from, any act, omission or negligence on the part of the Tenant, or the Tenant's contractors, licensees, agents, servants, employees or customers of anyone claiming by or through the Tenant; provided, however, that in no event shall the Tenant be obligated under this Section 11.1 to indemnify the Landlord, the directors, officers, agents and employees of the Landlord, or those in privity of estate with the Landlord, where such claim, expense or liability results solely from any omission, fault, negligence or other misconduct of the landlord or the officers, agents or employees of the Landlord on or about the Premises or the Building. This indemnify and hold harmless agreement shall include indemnity against all expenses and liabilities incurred in or in connection with any such claim of proceeding brought thereon, and the defense thereof with counsel acceptable to the Landlord or counsel selected by an insurance company which has accepted liability for any such claim. 11.2 THE TENANT'S RISK. 16 20 The Tenant agrees to use and occupy the Premises and to use such other portions of the Building and the Lot as the Tenant is herein given the right to use at the Tenant's sole risk; and to the fullest extent permitted by law the Landlord shall have no responsibility or liability for any loss of or damage to furnishings, fixtures, equipment or other personal property of the Tenant or of any persons claiming by, through or under the Tenant. 11.3 INJURY CAUSED BY THIRD PARTIES. The Tenant agrees that the Landlord shall not be responsible or liable to the Tenant, or to those claiming by, through or under the Tenant for any loss or damage resulting to the Tenant or those claiming by, through or under the Tenant, or its or their property, that may be occasioned by or through the acts or omissions of persons occupying adjoining premises or any part of the premises adjacent to or connecting with the Premises or in any part of the Building, or for any loss or damage from the breaking, bursting, stopping or leaking of electric cables and wires, and water, gas, sewer or steam pipes or like matters. ARTICLE XII THE LANDLORD'S ACCESS TO PREMISES 12.1 THE LANDLORD'S RIGHT OF ACCESS. The Landlord shall have the right to enter the Premises at all reasonable hours for the purpose of inspecting or of making repairs, alterations or additions to the premises or the Building, and the Landlord shall also have the right to make access available at all reasonable hours to prospective or existing mortgagees or purchasers of any part of the Building. To assure access by the Landlord to the Premises, the Tenant shall provide the Landlord with duplicate copies of all keys to be used in emergencies only used by the Tenant in providing access to the Premises. For a period commencing twelve (12) months prior to the expiration of the term of this Lease, the Landlord may have reasonable access to the Premises at all reasonable hours for the purpose of exhibiting the same to prospective tenants. 12.2 ACCESS DURING THE LAST MONTH OF TERM. If during the last month of the Lease Term, the Tenant shall have removed all of the Tenant's property therefrom, the Landlord may immediately enter and alter, renovate and redecorate the Premises without elimination or abatement of rent, or incurring liability to the Tenant for any compensation, and such acts shall have no effect upon otherwise applicable terms of this Lease. 17 21 ARTICLE XIII CASUALTY 13.1 DEFINITION OF "SUBSTANTIAL DAMAGE" AND "PARTIAL DAMAGE". The term "substantial damage", as used herein, shall refer to damage which is of such a character that in the Landlord's reasonable opinion the same cannot, in ordinary course, be expected to be repaired within 120 calendar days from the time that such repair work would commence. Any damage which is not "substantial damage" is "partial damage". 13.2 PARTIAL DAMAGE. If during the Lease Term there shall be partial damage to the Building by fire or other casualty and if such damage shall materially interfere with the Tenant's use of the Premises as contemplated by this Lease, the Landlord shall promptly proceed to restore the Building to substantially the condition in which it was immediately prior to the occurrence of such damage. If during the Lease Term there shall be a partial damage to the Premises by fire or other casualty, the Landlord shall promptly proceed to restore the Premises to substantially the condition it was immediately prior to the occurrence of such damage. 13.3 SUBSTANTIAL DAMAGE. If during the Lease Term there shall be substantial damage to the Building by fire or other casualty and if such damage shall materially interfere with the Tenant's use of the Premises as contemplated by this Lease, or there shall be substantial damage to the Premises, the Landlord shall promptly restore the Building or the Premises, as applicable to the extent reasonably necessary to enable the Tenant's use of the Premises, unless the Landlord, within forty-five (45) days after the occurrence of such damage, shall give notice to the Tenant of the Landlord's election to terminate this Lease. The Landlord shall have the right to make such election in the event of substantial damage to the Building whether or not such damage materially interferes with the Tenant's use of the Premises. If the Landlord shall give such notice, then this Lease shall terminate as of the date of such notice with the same force and effect as if such date were the date originally established as the expiration date hereof. Notwithstanding the foregoing, if the damage has not been substantially completed within nine (9) months of the casualty, Tenant may elect to terminate the lease. 13.4 ABATEMENT OF RENT. If during the Lease Term the Building or the Premises shall be damaged by fire or casualty and if such damage shall materially interfere with the Tenant's use of the Premises as contemplated by this Lease, a just proportion of the Rent and other charges payable by the Tenant hereunder shall abate proportionately for the period in which, by reason of such damage, there is such interference with the Tenant's use of the Premises. 18 22 13.5 MISCELLANEOUS. In no event shall the Landlord have any obligation to make any repairs or perform any restoration work under this Article XIII if prevented from doing so by reason of any cause beyond its reasonable control, including without limitation, the requirements of any applicable laws, codes, ordinances, rules or regulations, or in the event of damage to or destruction of any portion of he Building which is not fully covered by the insurance proceeds received by Landlord, or in the event that any portion of the insurance proceeds must be paid over to or are retained by the holder of any mortgage or deed of trust on the Building or Lot, and in such events Landlord may terminate this Lease by written notice to the Tenant, given within thirty (30) days after the date of notice to Landlord that said damage or destruction is not so covered or that the proceeds are not available for repair of the damage or destruction. Further, the Landlord shall not be obligated to make any repairs or perform any restoration work to any fixtures in or portions of the Premises or the Building which were constructed or installed by or for some party other than the Landlord or which are not the property of the Landlord or if the damage arises out of an act or omission of Tenant. ARTICLE XIV EMINENT DOMAIN 14.1 RIGHTS OF TERMINATION FOR TAKING. If the Premises, or such portion thereof as to render the balance (if reconstructed to the maximum extent practicable in the circumstances) physically unsuitable for the Tenant's purposes, shall be taken by condemnation or right of eminent domain (including a temporary taking in excess of 180 days), the Landlord or the Tenant shall have the right to terminate this Lease by notice to the other of its desire to do so, provided that such notice is given not later than thirty (30) days after the Tenant has been deprived of possession. Further, if so much of the Building (which may include the Premises) of the Lot shall be so taken or condemned or shall receive any direct or consequential damage by reason of anything done pursuant to public or quasi-public authority such that continued operation of the same would, in the Landlord's reasonable opinion, be uneconomical, the Landlord shall have the right to terminate this Lease by giving notice to the Tenant of the Landlord's desire so to do not later than thirty (30) days after the effective date of such taking. Should any part of the Premises be so taken or condemned or receive such damage and should this Lease be not terminated in accordance with the foregoing provisions, the Landlord shall promptly after the determination of the Landlord's award on account thereof, expend so much as may be necessary of the net amount which may be awarded to the Landlord in such condemnation proceedings in restoring the Premises to an architectural unit that is reasonably suitable to the uses of the Tenant permitted hereunder. Should the net amount so awarded to the Landlord be insufficient to cover the cost of so restoring the Premises, in the reasonable estimate of the Landlord, the Landlord may, but shall have no obligation to, supply the amount of such 19 23 insufficiency and restore the premises to such an architectural unit, with reasonable diligence, or may terminate this Lease by giving notice to the Tenant not later than a reasonable time after the Landlord has determined the estimated cost of such restoration. 14.2 PAYMENT OF AWARD. The Landlord shall have and hereby reserves and excepts, and the Tenant hereby grants and assigns to the Landlord, all rights to recover for damages to the Building and the Lot and the leasehold interest hereby created, and to compensation accrued or hereafter to accrue by reason of such taking or damage, as aforesaid. The Tenant covenants to deliver such further assignments and assurances thereof as the Landlord may form time to time request, hereby irrevocably designating and appointing the Landlord as its attorney-in-fact to execute and deliver in the Tenant's name and behalf all such further assignments thereof. Nothing contained herein shall be construed to prevent the Tenant from prosecuting in any condemnation proceedings a separate claim for the value of any of the Tenant's trade fixtures installed in the Premises by the Tenant at the Tenant's expense and for relocation expenses, provided that such action shall not affect the amount of compensation otherwise recoverable hereunder by the Landlord from the taking authority. 14.3 ABATEMENT OF RENT. In the event of any such taking of the Premises, the Rent and other charges, or a fair and just proportion thereof, according to the nature and extent of the damage sustained, shall be suspended or abated, as appropriate and equitable in the circumstances. 14.4 MISCELLANEOUS. In no event shall the Landlord have any obligation to make any repairs under this Article XIV if prevented from doing so by reason or any cause beyond its reasonable control, including requirements of any applicable laws, codes, ordinances, permit conditions, rules or regulations. Further, the Landlord shall not be obligated to make any repairs to any portions of the Premises or the Building which were constructed or installed by or for some party other than the Landlord or which were not the property of the Landlord. ARTICLE XV INSURANCE 15.1 PUBLIC LIABILITY AND PROPERTY INSURANCE. The Tenant agrees to maintain in full force from the date upon which the Tenant first enters the Premises for any reason, throughout the Lease Term, and thereafter so long as the Tenant is in occupancy of any part of the Premises, a policy of comprehensive public liability insurance, written on an occurrence basis and including contractual liability coverage to cover any liabilities assumed under this Lease, insuring against all claims for injury to or death of 20 24 persons or damage to property on or about the Premises or arising out of the use of the Premises and under which the Landlord, and such other persons as are in privity of estate with the Landlord (as may be set forth in a notice given from time to time by the Landlord) and the Tenant are named as insureds, as their respective interests appear, each with the same effect as if separately insured. The minimum limits of liability of such insurance shall be: Bodily injury - $1,000,000 per occurrence and in the aggregate over the term of the policy, and Property Damage - $1,000,000 per occurrence. The Landlord shall have the right from time to time to increase such minimum limits upon notice to the Tenant, provided that any such increase shall provide for coverage in amounts similar to like coverage being carried on like property in the greater Boston area. The Tenant shall also maintain in full force and effect from the date upon which the Tenant first enters the Premises for any reason, throughout the Lease Term and thereafter so long as the Tenant is in occupancy of any part of the Premises property insurance covering the Tenant's furnishings, fixtures, equipment or other personal property of the Tenant written on an "All Risk" basis for full replacement cost, and such other insurance as the Landlord may, from time to time, reasonably require. Without limiting the provisions of Section 11.2, if the Tenant fails to take out or maintain any policy of insurance required by this Article XV to be taken out and maintained, such failure shall be compete defense to any claim asserted by the Tenant against the Landlord by reason of any loss sustained by the Tenant that would have been covered by such policy. Each such policy shall be non-cancellable and non-amendable with respect to the Landlord and such designees of the Landlord without thirty (30) days' prior notice to the Landlord, and a duplicate original of certificate thereof shall be delivered to the Landlord. 15.2 NON-SUBROGATION. Insofar as, and to the extent that, the following provision may be effective without invalidating or making it impossible to secure insurance coverage obtainable from responsible insurance companies doing business in the locality in which the Premises are located (even though extra premium may result therefrom), the Landlord and the Tenant mutually agree that, with respect to any hazard which is covered by insurance then being carried by them, respectively, the one carrying such insurance and suffering such loss releases the other of and from any and all claims with respect to such loss; and they further mutually agree that their respective insurance companies shall have no right of subrogation against the other on account thereof. In the event that extra premium is payable by either party as a result of this provision, the other party shall reimburse the party paying such premium the amount of such extra premium. If, at the request of one party, this release and non-subrogation provision is waived, then the obligation of reimbursement shall cease for such period of time as such waiver shall be effective. If the release of either party provided above shall contravene any law with respect to exculpatory agreements, the liability of the party for whose benefit such release was intended shall remain but shall be secondary to that of the other party's insurer. 15.3 EXTRA HAZARDOUS USE. 21 25 The Tenant covenants and agrees that the Tenant will not do or permit anything to be done in or upon the Premises, or bring in anything or keep anything therein, which would invalidate or be in conflict with insurance coverage maintained by or for the Landlord with respect to the Building or which would increase the rate of insurance on the Premises or on the Building above the standard rate applicable to the Premises or the Building for the use to which the Tenant has agreed to devote the Premises; and the Tenant further agrees that, in the event that the Tenant shall do any of the foregoing, the Tenant will, at Landlord's election, cease such activity or promptly pay to the Landlord, on demand, any such increase resulting therefrom, which shall be due and payable as additional rent hereunder. Tenant shall not cause or permit any hazardous or toxic wastes, hazardous or toxic substances or hazardous or toxic materials (collectively, "Hazardous Materials") to be used, generated, stored or disposed of on, under or about, or transported to or from, the Premises (collectively, "Hazardous Materials Activities") without first receiving Landlord's written consent, which may be withheld for any reason and revoked at any time. If Landlord consents to any such Hazardous Materials Activities, Tenant shall conduct them in strict compliance (at Tenant's expense) with all applicable Regulations, as hereinafter defined, and using all necessary and appropriate precautions to prevent any spill, discharge, release or exposure to persons or property. Landlord shall not be liable to Tenant for any loss, cost, expense, claims, damage or liability arising out of any Hazardous Materials Activities by Tenant, Tenant's employees, agents, contractors, licensees, customers or invitees, whether or not consented to by Landlord. Tenant shall indemnify, defend with counsel acceptable to Landlord, and hold Landlord harmless from and against any and all loss, costs, expenses, claims, damages or liabilities arising out of all Hazardous Materials Activities on the Premises, whether or not consented to by Landlord, which obligation shall survive the termination of this Lease. For purposes hereof, Hazardous Materials shall include but not be limited to substances defined as "hazardous substances", "toxic substances", or "hazardous waste" in the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; the Federal Hazardous Materials Transportation Act, as amended; and the Federal Resource Conservation and Recovery Act, as amended ("RCRA"); those substances defined as "hazardous wastes" in the Massachusetts Hazardous Waste Facility Siting Act, as amended (Massachusetts General Laws Chapter 21D); those substances defined as "hazardous materials" or "oil" in Massachusetts General Laws Chapter 21E, as amended; and as such substances are defined in any regulations adopted and publication promulgated pursuant to any of said laws (collectively, "Regulations"). If Landlord consents to any Hazardous Materials Activities, prior to using, storing or maintaining any Hazardous Materials on or about the Premises, Tenant shall provide Landlord with a list of the types and quantities thereof, and shall update such list as necessary for continued accuracy. Tenant shall also provide Landlord with a copy of any Hazardous Materials inventory statement required by any applicable Regulations, and any update filed in accordance with any applicable Regulations. If Tenant's activities violate or create a risk of violation of any Regulations or cause a spill, discharge, release or exposure to any persons or property, Tenant shall cease such activities immediately upon notice from Landlord. Tenant shall immediately notify Landlord both by telephone and in writing of any spill, discharge, release or exposure of Hazardous Materials or of any condition constituting an "imminent hazard" under any Regulations. Landlord, Landlord's representatives and employees may enter the Premises at any time during 22 26 the Term to inspect Tenant's compliance herewith, and may disclose any spill, discharge, release, or exposure or any violation of any Regulations to any governmental agency with jurisdiction. Nothing herein contained shall prohibit Tenant from using minimal quantities of cleaning fluid and office supplies which may constitute Hazardous Materials but which are customarily present in premises devoted to office use, provided that such use is in compliance with all Regulations and shall be subject to all of the other provisions of this Section 15.3. ARTICLE XVI DEFAULT 16.1 TENANT'S DEFAULT. The occurrence of any of the following shall constitute an "Event of Default" on the part of the Tenant: a) the Tenant shall fail to pay the Rent or other charges on or before the date on which the same becomes due and payable and the same continues for ten (10) days (up to two times per year) after the date the same becomes due hereunder, or b) the Tenant shall fail to perform or observe any other term or condition contained in this Lease within thirty (30) days after notice from the Landlord thereof, unless such default is of such a nature that it cannot be cured within such thirty (30) day period, in which case no event of default shall occur unless the Tenant shall not commence to cure such failure promptly within such ten (10) day period and thereafter continuously and diligently complete the curing of the same, or c) the Tenant shall vacate or abandon the Lease Premises, or d) if the Tenant's interest in this Lease shall devolve upon or pass to any person, whether by operation of law or otherwise, except as expressly permitted under Article VI, e) except as otherwise provided by applicable law, if the estate hereby created shall be taken on execution or by other process of law, or if the Tenant shall be judicially declared bankrupt or insolvent according to law, or if any assignment shall be made of the property of the Tenant for the benefit of creditors, or if a receiver, guardian, conservator, trustee in involuntary bankruptcy or other similar officer shall be appointed to take charge of all or any substantial part of the Tenant's property by a court of competent jurisdiction, or if a petition shall be filed for the reorganization of the Tenant under any provisions of law now or hereafter enacted, and such proceeding is not dismissed within forty-five (45) 23 27 days after it is begun, or if the Tenant shall file a petition for such reorganization, or for arrangements under any provisions of such laws providing a plan for a debtor to settle, satisfy or extend the time for the payment of debts. 16.2 REMEDIES UPON DEFAULT. (a) If an Event of Default occurs, Landlord shall have the right, with or without notice or demand, immediately to terminate this Lease, and at any time thereafter recover possession of the Premises or any part thereof and expel and remove therefrom Tenant and any other person occupying the same, by any lawful means, and again repossess and enjoy the Premises without prejudice to any of the remedies that Landlord may have under this Lease, or at law or equity be reason of Tenant's default or of such termination. (b) Even though Tenant has breached this Lease, this Lease shall continue in effect for so long as Landlord does not terminate Tenant's right to possession under Section 16.2(a) hereof, and Landlord may enforce all of its rights and remedies under this Lease, including, without limitation, the right to recover Rent as it becomes due. Acts of maintenance, preservation or efforts to lease the Premises or the appointment of a receiver upon application of Landlord to protect Landlord's interest under this Lease shall not constitute an election to terminate Tenant's right to possession. 16.3 DAMAGES UPON TERMINATION. Should Landlord terminate this Lease pursuant to the provisions of Section 16.2(a) hereof, Landlord shall have all the rights and remedies of a landlord in law or in equity. Upon such termination, in addition to any other rights and remedies to which Landlord may be entitled under applicable law, Landlord shall be entitled to recover from Tenant: (i) the worth at the time of award of the unpaid Rent and other amounts which had been earned at the time of termination; (ii) the worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such Rent loss that the Tenant proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the rental value of the Premises for the balance of the Term after the time of award exceeds the rental value of the Premises for the balance of the Term; and (iv) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which, in the ordinary course, would be likely to result therefrom. Tenant further covenants, as an additional cumulative obligation after any such termination, to punctually pay to Landlord all sums and perform all obligations which Tenant covenants in this Lease to pay and to perform, as if this Lease had not been terminated. In calculating the amounts to be paid by Tenant pursuant to this Section 16.3, Tenant shall be credited with any amount paid to Landlord pursuant to this Section 16.3 and also (in respect of the amounts referred to in (i) and (ii)) the net proceeds of rent obtained by Landlord by reletting the Premises through the time of award, after deducting all Landlord's expenses in connection with such reletting, including, without limitation, all repossession costs, brokerage commission, fees for legal services and expenses of preparing the Premises for reletting it being agreed by Tenant that Landlord may (x) relet the Premises or any part thereof for a term or terms which may at Landlord's option be 24 28 equal or less than or exceed the period which would otherwise have constituted the balance of the Term and may grant such concessions and free rent as Landlord in its sole judgement considers advisable or necessary to relet the same and (y) make such alterations, repairs and decorations in the Premises as Landlord in its sole judgment considers advisable or necessary to relet the same, and no action of Landlord in accordance with the foregoing or failure to relet to collect rent under Landlord's reletting of the Premises shall operate or be construed to release or reduce Tenant's liability as aforesaid. The "time of award" shall refer to such time as (I) Tenant shall, as a settlement of the amounts due pursuant to this Section 16.3, pay to Landlord such sums pursuant to a written agreement in form and substance satisfactory to Landlord or (II) the date on which a judgment shall be entered in a court of competent jurisdiction to the effect that Tenant shall pay Landlord the amounts due and owing pursuant to this Section 16.3. The "worth at the time of award" of the amounts referred to in (i) and (ii) shall mean such amounts together with interest at the lesser of eighteen percent (18%) per annum or the maximum rate allowed by law. The "worth at the time of award" of the amount referred to in (iii) shall mean such amounts as computed by referenced to competent appraisal evidence or the formula prescribed by and using the lowest discount rate permitted under applicable law. 16.4 COMPUTATION OF RENT FOR PURPOSES OF DEFAULT. For purposes of computing unpaid Rent which would have accrued and become payable under this Lease pursuant to the provisions of Section 16.3, unpaid Rent shall consist of the sum of: (1) the total Base Rent for the balance of the Term, plus (2) a computation of the Operating Expenses and Taxes for the balance oft he Term, the assumed Operating Expenses for the calendar year of the default and each future calendar year in the Term to be equal to the Operating Expenses and Taxes for the calendar year prior to the year in which the default occurs compounded at a per annum rate equal to the mean average rate of inflation for the preceding five (5) calendar years as determined by the United States Department of Labor, Bureau of Labor Statistics Consumer Price Index (All Urban Consumers, All Items, 1967 equals 100) for the metropolitan Area or Region of which Boston, Massachusetts is a part. If such Index is discontinued or revised, the average rate of inflation shall be determined by reference to the index designated as the successor or substitute index by the government of the United States, plus (3) the amounts, if any, designated in Section 4.1. 16.5 RIGHTS OF LANDLORD IN BANKRUPTCY. Nothing contained in this Lease shall limit or prejudice the right of Landlord to prove for and obtain in proceedings for bankruptcy or insolvency, by reason of the termination of this Lease, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, the damages are to be proved, whether or 25 29 not the amount be greater, equal to, or less than the amount of the loss or damages referred to in this Article XVI. ARTICLE XVII MISCELLANEOUS PROVISIONS 17.1 WAIVER. Failure on the part of the Landlord to complain of any action or non-action on the part of the Tenant, no matter how frequently the same may occur or how long the same may continue, shall never by a waiver by the Landlord of its rights hereunder. Further, no waiver at any time of any of the provisions hereof by the Landlord shall be construed as a waiver of any of the other provisions hereof, and a waiver at any time of any of the provisions hereof shall not be construed as a waiver at any subsequent time of the same provisions. The consent or approval of the Landlord to or of any action by the other requiring such consent or approval shall not be construed to waive or render unnecessary the Landlord's consent or approval to or of any subsequent similar act by the Tenant. No option or right granted to the Tenant to renew this Lease or to extend the Lease Term shall be considered to give the Tenant any further option or right to renew or extend. 17.2 COVENANT OF QUIET ENJOYMENT. Subject to the terms and provisions of this Lease and on payment of the rent and compliance with all of the terms and provisions of this Lease, the Tenant shall lawfully, peaceably and quietly have, hold, occupy and enjoy the Premises during the term hereof, without hindrance or ejection by the Landlord or by any persons lawfully claiming under the Landlord; the foregoing covenant of quiet enjoyment is in lieu of any other covenant, express or implied. 17.3 NO PERSONAL LIABILITY OF THE LANDLORD. The Tenant agrees to look solely to the Landlord's then equity interest in the Building at the time owned, or in which the Landlord holds an interest as ground lessee, for recovery of any judgment from the Landlord; it being specifically agreed that neither the Landlord (whether the Landlord be an individual, partnership, firm, corporation, trustee or other fiduciary) nor any of the partners comprising the Landlord, nor any beneficiary of any trust of which any person holding the Landlord's interest is trustee nor any successor in interest to any of the foregoing shall ever by personally liable for any such judgment, or for the payment of any monetary obligation to the Tenant. The covenants of the Landlord contained in this Lease shall be binding upon the Landlord and the Landlord's successors only with respect to breaches occurring during the Landlord's and the Landlord's successors' respective periods of ownership of the Landlord's interest hereunder. 17.4 NOTICE TO MORTGAGEE AND GROUND LESSOR; OPPORTUNITY TO CURE. 26 30 After receiving notice from any person, firm or other entity that it holds a mortgage which includes the Premises as part of the mortgaged premises, or that it is the ground lessor under a lease with the Landlord, as ground lessee, which includes the Premises as a part of the demised premises, no notice from the Tenant to the Landlord shall be effective unless and until a copy of the same is given to such holder or ground lessor, and the curing of any of the Landlord's defaults by such holder or ground lessor shall be treated as performance by the Landlord. Accordingly, no act or failure to act on the part of the Landlord which would entitle the Tenant under the terms of this Lease, or by law, to be relieved of the Tenant's obligations hereunder or to terminate this Lease, shall result in a release or termination of such obligations or a termination of this Lease unless (i) the Tenant shall have first given written notice of the Landlord's act or failure to act to such holder or ground lessor, if any, specifying the act or failure to act on the part of the Landlord which could or would give basis to the Tenant's rights; and (ii) such holder or ground lessor, after receipt of such notice, has failed or refused to correct or cure the condition complained of within a reasonable time thereafter, but nothing contained in this paragraph shall be deemed to impose any obligation on any such holder or ground lessor to correct or cure any such condition. "Reasonable time" as used above means and includes a reasonable time to obtain possession of the Lot and Building if any such holder or ground lessor elects to do so and a reasonable time to correct or cure the condition if such condition is determined to exist. 17.5 NO BROKERAGE. The Tenant warrants and represents that the Tenant has dealt with no broker other than the Broker in connection with the consummation of this Lease, and, in the event of any brokerage claims, other than claims by the Broker, against the Landlord predicated upon prior dealings with the Tenant named herein, the Tenant agrees to defend the same and indemnify the Landlord against any such claim. Landlord shall be responsible for the payment to Broker of any commission arising out of this Lease. 17.6 INVALIDITY OF PARTICULAR PROVISIONS. If any term or provision of this Lease, or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and been forced to the fullest extent permitted by law. 17.7 PROVISIONS BINDING, ETC. Except as herein otherwise expressly provided, the terms hereof shall be binding upon and shall inure to the benefit of the successors and assigns, respectively, of the Landlord and the Tenant and, if the Tenant shall be an individual, upon and to his heirs, executors, administrators, legal representatives, successors and assigns. Each term and each provision of this Lease to be performed by the Tenant shall be construed to be both a covenant and a condition. The reference contained to successors and assigns of the Tenant is not intended to constitute a consent to assignment by the Tenant, but has reference only to those instances in which the Landlord may later give consent to a particular assignment as required by those provisions of Article VI hereof. 27 31 If the Tenant be several persons, natural or corporate, the liability of such persons for compliance with the obligations of the Tenant under this Lease shall be joint and several. In all instances where the Tenant is required under this Lease to pay any sum or do any act at or by a particular time it is agreed that time is of the essence. 17.8 RECORDING. The Tenant agrees not to record this Lease. 17.9 NOTICES. Whenever, by the terms of this Lease, notice shall or may be given either to the Landlord or to the Tenant, such notice shall be in writing and shall be sent by registered or certified mail, postage prepaid or by so-called "express" mail (such as Federal Express or U.S. Postal Service Express Mail); If intended for the Landlord, addressed to the Landlord at the address set forth on the first page of this Lease, or to such other address or addresses as may from time to time hereafter be designated by the Landlord by like notice. with a copy to : Meredith & Grew Incorporated 160 Federal Street Boston, Massachusetts 02110-1701 If intended for the Tenant, addressed to the Tenant at the address set forth on the first page of this Lease, or to such other address or addresses as may from time to time hereafter be designated by the Tenant by like notice. All such notices shall be effective two (2) days after deposited in the United States mail within the Continental United States or when received by the "express" mail carrier, as the case may be. 17.10 WHEN LEASE BECOMES BINDING. Employees or agents of the Landlord have no authority to make or agree to make a lease or any other agreement or undertaking in connection herewith. The submission of this document for examination and negotiation does not constitute an offer to lease, or a reservation of , or option for, the Premises, and this document shall become effective and binding only upon the execution and delivery hereof by both the Landlord and the Tenant. All negotiations, consideration, representations and understandings between the Landlord and the Tenant are incorporated herein and may be modified or altered only by written agreement between the Landlord and the Tenant, and no act or omission of any employee or agent of the Tenant, and no act or omission of any employee or agent of the Landlord shall alter, change or modify any of the provisions hereof. 17.11 PARAGRAPH HEADINGS. 28 32 The paragraph headings throughout this instrument are for convenience and reference only, and the words contained therein shall in no way be held to explain, modify, amplify or aid in the interpretation, construction or meaning of the provisions of this Lease. 17.12 RIGHTS OF MORTGAGEE. (a) If any holder of a mortgage or holder of a ground lease of property which includes the Premises, originally given to a lender, and executed and recorded subsequent to the date of this Lease, shall so elect, the interest of the Tenant hereunder shall be subordinate to the rights of such holder. If any holder of a mortgage or holder of a ground lease of property which includes the premises, originally given to a lender, and executed and recorded prior to the date of this Lease, shall so elect, this Lease, and the rights of the Tenant hereunder, shall be superior in right to the rights of such holder, with the same force and effect as if this Lease had been executed and delivered, and recorded, or a statutory notice hereof recorded, prior to the execution, delivery and recording of any such mortgage. If in connection with obtaining financing for the Building, a bank, insurance company, pension trust or other institutional lender shall request reasonable modifications in this Lease as a condition to such financing, the Tenant will not unreasonably withhold, delay or condition its consent thereto, provided that such modifications do not materially increase the obligations of the Tenant hereunder or materially adversely affect the Tenant or the leasehold interest hereby created. No assignment of this Lease and no agreement to make or accept any surrender, termination or cancellation of this Lease and no agreement to modify so as to reduce the rent, change the term, or otherwise materially change the rights of the Landlord under this Lease, or to relieve the Tenant of any obligations or liability under this Lease, shall be valid unless consented to in writing by the Landlord's mortgagees of record, if any. Tenant agrees on request of the Landlord to execute and deliver from time to time any agreement which may reasonably be deemed necessary to implement the provisions of this Section 17.12. (b) Notwithstanding anything to the contrary contained in Section 14.15(a) or Section 14.6(b), Tenant shall not be required to subordinate this Lease to any mortgage or to thee lien of any mortgage or sale and leaseback, nor shall the subordination provided herein be self-operative unless the holder of such mortgage or ground lease, as the case may be, shall enter into an agreement with Tenant, recordable in form, to the effect that in the event of foreclosure of, or similar action taken under, such mortgage or ground lease, this Lease shall not be terminated or disturbed by such mortgageholder or ground lessor or anyone claiming under such mortgageholder or ground lessor, as the case may be, so long as Tenant shall not be in Default under this Lease. The form of any such agreement shall not be the form as required by any such mortgagee or ground lessor (consistent with the provisions of this Lease). 17.13 STATUS REPORT; MODIFICATION. Recognizing that the Landlord may find it necessary to establish to third parties, such as accountants, banks, mortgagees or the like, the then current status of performance hereunder Tenant agrees to execute in form satisfactory to the Landlord within ten (10) days of a written request therefor a certificate stating (i) that this Lease is then in full force and effect and has not 29 33 been modified or if modified, setting forth the specific nature of all modifications, (ii) the date to which the Rent and any additional rent or other charges has been paid, (iii) whether or not the Landlord is in default under this Lease, and if the Landlord is in default, setting forth the specific nature of all such defaults) and (iv) any other matters relating to the Lease reasonably requested by Landlord. Tenant's failure to deliver such statement within such time shall be conclusive upon Tenant that this Lease is in full force and effect, without modification except as may be represented by Landlord, that there are no uncured defaults in Landlord's performance and that not more than one (1) month's Rent has been paid in advance. Without limiting the generality of the foregoing, the Tenant specifically agrees, promptly upon the commencement of the Term hereof, to acknowledge to the Landlord satisfaction of any requirements with respect to construction except for such matters as the Tenant may set forth specifically in such statement. The Tenant acknowledges that any statement delivered pursuant to this Section 17.13 may be relied upon by any purchaser or owner of the Building, or the Lot or any part thereof, or Landlord's interest in the Building or the Lot or any ground or underlying lease, or by any mortgagee, or by any assignee of any mortgagee, or by any lessee under any ground or underlying lease. 17.14 SECURITY DEPOSIT. If, in Section 1.1 hereof a security deposit is specified, the Tenant agrees that the same will be paid upon execution and delivery of this Lease, and that the Landlord shall hold the same, throughout the term of this Lease, as security for the performance by the Tenant of all obligations on the part of the Tenant to be kept and performed. The Landlord shall have the right from time to time, without prejudice to any other remedy the Landlord may have on account thereof, to apply such deposit, or any part thereof, to the Landlord's damages arising from any default on the part of the Tenant. Upon such application the amount so applied shall be paid by Tenant to Landlord upon demand in order that the security deposit may at all times be equal to the amount set forth in Section 1.1. The Tenant not then being in default, the Landlord shall return the deposit, or so much thereof as shall not have theretofore been applied in accordance with the terms of this Section 17.14, to the Tenant on the expiration or earlier termination of the Lease Term and surrender of possession of the Premises by the Tenant to the Landlord at such time. The Landlord shall, unless otherwise required by law, have no obligation to pay interest on the deposit and shall have the right to commingle the same with the Landlord's other funds. If the Landlord conveys the Landlord's interest under this Lease, the deposit, or any part thereof not previously applied, may be turned over by the Landlord to the Landlord's grantee, and, if so turned over, the Tenant agrees to look solely to such grantee for proper application of the deposit in accordance with the terms of this Section 17.14, and the return thereof in accordance herewith. The Tenant agrees that the Tenant will not assign, encumber or pledge attempt to assign, encumber or pledge the moneys deposited herein as security, and that neither the Landlord, nor its successors and assigns, shall be bound by any such assignment, encumbrance or pledge, attempted assignment, attempted pledge, or attempted encumbrance. The holder of a mortgage of property which includes the Premises shall not be responsible to the Tenant for the return or applicability of any such deposit, whether or not it 30 34 succeeds to the position of the Landlord hereunder, unless such deposit shall have been in hand by such holder. 17.15 SELF-HELP. The Landlord shall have the right, but shall not be required, to pay such sums or do any act which requires the expenditure of moneys which may be necessary or appropriate by reason of the failure or neglect of the Tenant to perform any of the provisions of this Lease, and in the event of the exercise of such right by the Landlord, the Tenant agrees to pay to the Landlord forthwith upon demand the cost of performing the same, plus an administrative charge (covering overhead and profit) not to exceed 15% of such cost; and if the Tenant shall default in such payment, the Landlord shall have the sane rights and remedies as the Landlord as hereunder for the failure of the Tenant to pay the Rent. 17.16 RELIEF LIMITED. Whenever the Tenant shall claim under any provision of this Lease, that the Landlord has unreasonably withheld or delayed is consent to some request of the Tenant, the Tenant shall have no claim for damages by reason of such alleged withholding or delay, and Tenant's sole remedy therefore shall be declaratory or injunctive relief, but in no event without the recovery of damages. 17.17 HOLDING OVER. Any holding over by the Tenant after the expiration of the term of this Lease without the written consent or the Landlord shall be treated as a tenancy at sufferance at double the rent specified herein (prorated on a daily basis) and shall otherwise be on the terms and conditions set forth in this Lease, so far as applicable. Any holding over by the Tenant after the expiration of the term of this Lease with the written consent of the Landlord shall be on a month-to-month basis, terminable by either party on thirty (30) days notice and shall be at the same Rent specified herein and shall otherwise be on the terms and conditions set forth herein, so far as applicable. 17.18 CERTIFICATE. If the Tenant is a corporation, each of the person executing this instrument on behalf of the Tenant, hereby covenants and warrants that the Tenant is a duly existing and valid and corporation and that the Tenant is qualified to do business in Massachusetts. Further, if the Tenant is a corporation, the Tenant shall deliver to the Landlord, at the time of execution of this Lease, a Clerk's or Secretary's Certificate in the form attached hereto as Exhibit H or other suitable form satisfactory to counsel for the Landlord), as to the due authorization of this Lease and incumbency of the signing officer. IN WITNESS WHEREOF, the parties hereto have caused this Lease to be executed, under seal, as of the Date set forth in Section 1.1. 31 35 LANDLORD: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: HANCOCK REALTY INVESTORS, INC. By: __________________________________ Melina E. Armour, Associate TENANT: TRIPLE I CORPORATION By: __________________________________ Juan J. Amodei, Its Chairman & CEO hereunto duly authorized 32 36 EXHIBIT A PLAN SHOWING THE PREMISES 37 EXHIBIT B DESCRIPTION OF LOT Land in Lowell and Tewksbury, Middlesex County, Massachusetts shown as Lot 1 on a "Plan of Land in Lowell & Tewksbury, Mass. Prepared for the Iver Company" dated April 2, 1984 by Fleming, Bienvenu & Associates, Inc. recorded with Middlesex North District Deeds Plan Book 143, Plan 104, bounded and described, as follows: NORTHERLY: by Rogers Street, 58.65 feet; WESTERLY: by land of owners unknown, 324.99 feet; NORTHERLY: by land of owners unknown, 94.28 feet; EASTERLY: by land of owners unknown, 17.03 feet; WESTERLY: by land of owners unknown, 153.66 feet; NORTHWESTERLY: by land of owners unknown, 16.76 feet; SOUTHERLY, WESTERLY and NORTHERLY: by land now or formerly of Duke, 7.21 feet and 410.62 feet; SOUTHERLY, SOUTHEASTERLY, EASTERLY, SOUTHERLY, EASTERLY, SOUTHEASTERLY and EASTERLY: by Lot 2, as shown on said plan, 291.64 feet, 70.71 feet, 124.00 feet, 209.50 feet, 60.00 feet, 45.93 feet and 16.27 feet; NORTHERLY: by Lot 4, shown on said plan, 429.43 feet; EASTERLY: by said Lot 4 by four courses measuring 138.95 feet, 256,19 feet, 54.63 feet and 100.00 feet. The following parcels of registered land are included within the above-described premises: PARCEL 1 (LOT 1 ON LAND COURT PLAN 34845B) A certain parcel of land in Lowell, Middlesex County, Massachusetts, bounded and described as follows: NORTHEASTERLY: by the southwesterly line of Rogers Street by two courses measuring respectively: 23.29 feet and 7.62 feet; 38 WESTERLY: by Lot 2 as shown on the plan hereinafter mentioned, 97.80 feet; and EASTERLY: by land of owners unknown 100.42 feet. All of the boundaries are located as shown on a plan drawn by Essex Survey Service, Inc. (Land Court Plan No. 34845B) filed with the Land Registration Office with Certificate of Title No. 25071 and the premises described are shown thereon as Lot 1. PARCEL 2 (LOT 3 ON LAND COURT PLAN 34845B) A certain parcel of land in Lowell, Middlesex County, Massachusetts, bounded and described as follows: NORTHERLY by Lot 2 as shown on the plan hereinafter mentioned, 21.05 feet; EASTERLY: by land of owners unknown, 34.25 feet; and WESTERLY: by land of owners unknown; 34.26 feet. All of the boundaries are located as shown on a plan drawn by Essex Survey Service, Inc. (Land Court Plan No. 34845B) filed with the Land Registration Office with Certificate of Title No. 25071 and the premises described are shown thereon as Lot 3. PARCEL 3 (LOT 4 ON LAND COURT PLAN NO. 36430C) A certain parcel of land in Lowell, Middlesex County, Massachusetts, bounded and described as follows: NORTHERLY: by Rogers Street, 35.36 feet; EASTERLY: by Lot 3 on the plan below mentioned by four courses measuring respectively: 100.00 feet, 54.63 feet, 256.19 feet and 138.95 feet; NORTHERLY: by said Lot 3, 394.73 feet; SOUTHEASTERLY: by land now or formerly of Bournival by a curved line with a radius of 60.00 feet, a distance of 94.25 feet; SOUTHERLY: by land now or formerly of said Bournival by two courses measuring respectively: 372.84 feet and 50.10 feet; WESTERLY: by land now or formerly of said Bournival 265.76 feet; 35 39 NORTHWESTERLY: by Lot 3 shown on Land Court Plan Number 34845B, 34125 feet; NORTHERLY AND WESTERLY: by land now or formerly of McDonald's Corp. by two courses measuring respectively: 73.23 feet and 227.19 feet; and NORTHWESTERLY: by land now or formerly of Richard D. Bournival, being Lot 1 on said Land Court Plan No. 34845B, 100.41 feet. All of the boundaries are located as shown on a plan drawn by Fleming, Bienvenu & Associates, Inc. (Land Court Plan No. 36430C) filed with the Land Registration Office with Certificate of Title No. 25853 and the premises described are shown thereon as Lot 4. That portion of the unregistered premises which is part of Parcel B on a "Plan of Land in Lowell, Mass. Surveyed for Phoenix Real Estate Corp." dated June 1, 1961 by Dana F. Perkins and Sons. Inc. recorded with said Deeds, Plan Book 105, Plan 93 is entitled to the to the benefit of a 45 foot easement over Parcel A on said plan to Phoenix Avenue (which 45 foot easement is the same as the 45 foot easement over land now or formerly of Duke shown on the plan first mentioned in this Exhibit "A") as set forth in a deed from Joan V. Sullivan to Odesseus J. Chiungos dated July 7, 1967 recorded with said Deeds, Book 1802, Page 489. The unregistered premises are entitled to the easements reserved in a deed from Phoenix Real Estate Corporation to John C. MacLellan, Jr. dated October 28, 1964 recorded with said Deeds Book 1673, Page 338. Said premises are entitled to the benefit of easements as set forth in an Access and Parking Easement dated as of November 10, 1984, recorded with said Deeds Book 2914, Page 256 also filed with said Registry District as Document No. 103171. 36 40 EXHIBIT C RULES AND REGULATIONS The Tenant shall observe faithfully, and comply with, and shall not permit the violation of, the Rules and Regulations set forth in this Exhibit C and such additional Rules and Regulations as Landlord may, from time to time, adopt. All of the terms, covenants and conditions of this Exhibit C shall be deemed part of this Lease as though fully set forth in the body of this Lease. In case Tenant disputes the reasonableness of any additional Rules and Regulations hereafter adopted by Landlord, the Tenant's right to dispute the reasonableness of any additional Rule or Regulation shall be deemed waived unless asserted by service of a notice upon the Landlord within ten (10) days after the date upon which the Landlord shall give notice to the Tenant of the adoption of any such additional Rule or Regulation. The Tenant agrees: 1. The sidewalks, entrances, lobbies, corridors, elevators, fire exits and stairways of the Building shall not be encumbered or obstructed by any tenant or its agents, employees, licensees or invitees, or be used for any purpose other than ingress to and egress from the tenant's premises. 2. If a tenant's premises become infested with vermin due to tenants own misuse of the premises, such tenant, at its sole cost and expense, shall cause its premises to be exterminated by such exterminators as shall be approved the Landlord at such times and to such extent as the Landlord deems necessary to exterminate the vermin. 3. No animals or birds shall be allowed in the Building. 4. The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no sweeping, rubbish, rags or other substances shall be thrown therein. All damages resulting from any misuse of the fixtures by Tenant, its servants, employees, agents. visitors or licensees, shall be borne by Tenant. 5. Each tenant shall, at its expense, provide artificial light for the employees of Landlord when such are making repairs or alterations in said premises. Landlord shall be in no way responsible to any tenant for loss of property from the premises, however occurring, or for damage done to the furniture or other effects of any tenant by Landlord's agents, other janitors, cleaners, employees or contractors doing work in the premises. 6. Each tenant shall be responsible for all persons under the tenant's control authorized to have access to the Building and shall be liable to Landlord for all of their acts while in the Building or on the Lot. 41 7. No curtains, blinds, shades or screens other than those furnished by Landlord shall be attached to, hung in or used in connection with, any window or door of the Premises, without the prior written consent of Landlord. Such curtain, blinds, shades, screens or other fixtures must be of a quality, type, design and color, and attached in the manner approved by Landlord. 8. The Landlord reserves the right at any time to change, rescind or waive any one or more of these Rules and Regulations, and to make such other and further reasonable rules and regulations as its judgment may from time to time be necessary for the safety, care, convenience or cleanliness of the Building or for the preservation of comfort or good order therein. The Landlord shall not be liable to any tenant for violation of the same by any other tenant, its agents, employees, licensees or invitees. 38 42 AMENDMENT TO LEASE This Amendment to Lease executed this 31st day of October, 1995 between John Hancock Mutual Life Insurance Company, a corporation ("Landlord") and Triple I Corporation, a corporation ("Tenant"). W I T N E S S E T H - - - - - - - - - - WHEREAS, Landlord and Tenant executed an Indenture of Lease dated November 5, 1992 (the "Original Lease") of premises located at 847 Rogers Street, Lowell, Massachusetts; WHEREAS, Landlord and Tenant wish to extend the term of the Lease and to otherwise amend the Lease in accordance with the provisions hereof. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. All capitalized terms used herein and not defined herein shall have the meanings ascribed to them in the Lease. 2. The Lease Term, which but for this Amendment is currently scheduled to expire on November 30, 1995, is hereby extended for one (1) period of three (3) years commencing on December 1, 1995 and expiring on November 30, 1998 (the "Extended Term"), unless sooner terminated in accordance with the provisions of the Lease, such extension to be upon all of the same terms and conditions set forth in the Lease, such extension to be upon all of the same terms and conditions set forth in the Lease except as otherwise provided in this Amendment. 3. The original Premises is hereby expanded by 2,957 square feet as outlined on the attached Exhibit A, and the Premises will be 14,075 square feet as of December 1, 1995. 4. Tenant's Proportionate Share shall be increased to 26% upon expansion into the 2,957 square feet as outlined in the attached Exhibit A. 5. During the Extended Term, Basic Rent shall be payable by Tenant at the annual rate of $119,637.50 (being the product of (a) $8.50 and (b) the rentable floor area of the premises (being 14,075 square feet)). For the period prior to December 1, 1995, basic Rent shall continue to be paid by Tenant as set forth in the Lease prior to this Amendment. 6. Landlord will construct improvements to the Premises as outlined in the specifications attached hereto as Exhibit B. Landlord shall contribute $10,000 towards said improvements and Tenant shall reimburse Landlord promptly in full upon receipt of invoice for the balance of the cost of said improvements. 43 7. Tenant warrants and represents that Tenant has not dealt with any broker in connection with the consummation of this Amendment other than Meredith & Grew, Incorporated. In the event that any claim is made against Landlord relative to dealings by Tenant with any brokers (other than Meredith & Grew, Incorporated), Tenant shall defend the claim with counsel reasonably acceptable to Landlord and save harmless and indemnify Landlord on account of loss, cost or damage which may arise by reason of such claim. 8. Except as set forth herein, the Lease shall remain unmodified and in full force and effect. EXECUTED as a sealed insturment as of the day and year first written above. LANDLORD: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: --------------------------------- Melina E. Armour Its: Associate Investment Officer Hereunto Duly Authorized TENANT: TRIPLE I CORPORATION By: --------------------------------- Its:Chief Financial Officer Hereunto Duly Authorized 2 44 EXHIBIT B (PAGE ONE OF TWO) IMPROVEMENTS TO AREA AS DEFINED IN EXHIBIT A Demolition Remove carpet in first room, main room and hallway including vinyl base Scrape floor at old computer room Remove 64 lineal feet of existing hallway partition Cut in one 3070 door and one 6070 door opening Remove debris from site Leave existing two floor standing Liebert HVAC units Leave 24 lineal feet of existing partition at first room Leave electrical disconnect panels and excess outlets Drywall Patch walls at removed electrical outlets Patch & prep walls as required Do not create soffitt at reception wall as not being demolished Doors Doors Furnish and install one new pair of doors, 6070 Painting Paint walls two coats, latex eggshell Paint door frames and touch up doors Ceilings Patch back grid at demising walls Replace damaged ceiling tiles as required Flooring Furnish and install 26 ounce level loop carpet at main room and first room Patch flooring at removed hallway partition Furnish and install 4" vinyl base Furnish and install Tarkett VCT in computer room 3 45 EXHIBIT B (PAGE TWO OF TWO) IMPROVEMENTS TO AREA AS DEFINED IN EXHIBIT A Plumbing No plumbing, sinks, ejector pump included HVAC Add required ductwork to serve both new and old computer room Relocate six diffusers and relocate one thermostat Start up, test & air balance Work does not include removal of any existing HVAC equipment or moving of existing HVAC equipment Electrical Rework electrical as required at demolished walls Add specified outlets per Tenant's list (Does not include 400 volt, triple phase, 15 amp outlet) Phone and data excluded General Conditions Building permit Supervision Insurance Progress cleaning and broom clean at completion No stamped architectural plans 4 46 ATTACHMENT B October 10, 1995 Karen L. Heinick, RPA Meredith and Grew, Inc. 160 Federal Street Boston, MA 02110-1701 RE: Triple I Expansion Revised Proposal 847 Rogers Street, Lowell Dear Karen, We submit this revised proposal to furnish all labor and materials to construct the following per attached sketch and our discussion: Demolition * remove existing carpet in first room, main room, and hallway including vinyl base * scrape floor at old computer room * remove 64 lineal feet of existing hallway partition * cur in one 3070 door and one 6070 door opening * remove debris from site * existing Liebert units to remain as is * existing partition at first room to remain as is * existing electrical panels and excess outlets to remain as is Drywall * patch walls at removed electrical outlets * parch and prep wails as required * soffit at reception area is excluded Doors * furnish and install one new pair of doors, 6070 * reinstall one 3070 door and frame Painting * paint walls two coats, latex eggshell * paint door frames and touch up doors 5 47 Ceilings * patch back grid at demising walls * replace damaged ceiling tiles as required Plumbing and Sprinkler * excludes all plumbing and sprinkler work Flooring * furnish and install 26 ounce level loop carpet at main room and first room * furnish and install 4" vinyl base * furnish and install Tarkctt VCT in computer room * patch flooring at removed hallway partition HVAC * add required ductwork to serve new and old computer rooms * install six diffusers and one thermostat * start up, test, and air balance * excludes removal or relocation of any existing HVAC equipment excludes any hook up of existing HVAC equipment Electrical * rework electrical as required at demolished walls * add specified outlets per renovation list, excludes the 400 volt, triple phase 15 amp outlets * existing panels to remain as is * phone and data excluded General Conditions * building permit is included * includes supervision * includes insurance * includes progress cleaning and broom clean at completion * excludes cost of stamped architectural plans The revised cost of construction as listed above is twenty thousand eight hundred twenty dollars (20,820.), subject to additions and deductions. The payment terms are net ten days from invoice. Invoicing to be as work progresses. We expect to need three weeks for construction. This proposal presented in outline form, more detail available upon request. _____________________________ _________________________________ Meredith and Grew, Inc. Chapman Construction/Design, Inc. by Karen L. Heinick, RPA by John J. Ferreira 6 EX-10.F 10 SHAREHOLDER AGREEMENT 1 EXHIBIT 10F SHAREHOLDER AGREEMENT BY AND AMONG ORBIS, INC., TRIPLE I CORPORATION AND THE SHAREHOLDERS OF TRIPLE I CORPORATION DATED AS OF DECEMBER 5, 1996 2 TABLE OF CONTENTS
Page ---- 1. Exchange of Shares......................................................1 1.1 Transfer of Triple I Stock........................................1 1.2 Issuance of Industrial Imaging Common Stock.......................2 1.3 Conversion of Warrants and Options................................2 2. Representations and Warranties of Triple I..............................2 2.1 Capitalization of Triple I........................................2 2.2 Authorization.....................................................3 2.3 Organization and Good Standing....................................3 2.4 Books and Records.................................................3 2.5 Financial Statements..............................................4 2.6 Tax Matters.......................................................4 2.7 Title to Properties...............................................5 2.8 Agreements, Contracts and Commitments.............................5 2.9 Required Consents, No Default.....................................6 2.10 Litigation........................................................6 2.11 No Broker's or Finder's Fees......................................6 2.12 Compliance with Agreements and Laws...............................6 2.13 Employee Relations and Labor Matters..............................7 2.14 Tort Claims.......................................................7 2.15 Disclosure........................................................7 3. Representations and Warranties of Orbis.................................7 3.1 Reincorporation and Capitalization of Orbis.......................8 3.2 Authorization.....................................................8 3.3 Organization and Good Standing....................................8 3.4 Books and Records.................................................9 3.5 Financial Statements..............................................9 3.6 Tax Matters.......................................................9 3.7 Title to Properties..............................................10 3.8 Agreements, Contracts and Commitments............................10 3.9 Required Consents, No Default....................................11 3.10 Litigation.......................................................11 3.11 No Broker's or Finder's Fees.....................................11 3.12 Tort Claims......................................................11 3.13 Disclosure.......................................................11
i 3 4. Representations and Warranties of the Shareholders.....................12 5. Conditions to Closing..................................................12 5.1 Resignation of Officers..........................................12 5.2 Opinion of Counsel...............................................13 5.3 Accuracy of Representations and Warranties and Performance of Obligation by Triple I and Orbis..............................13 5.4 Legal Proceedings................................................13 5.5 Orbis Stockholder Approval.......................................13 6. Provisions for Indemnification.........................................13 7. Termination............................................................14 8. Tax Consequences.......................................................14 9. Entire Agreement.......................................................14 10. Waiver.................................................................15 11. Severability...........................................................15 12. Governing Law..........................................................15 13. Binding Agreement......................................................15 14 Counterparts...........................................................15 15. Assignment.............................................................15 16. Arbitration............................................................15 17. Counsel................................................................15 Exhibit A List of Triple I Shareholders Exhibit B Triple I's Master Schedule Exhibit C Outstanding Options and Warrants of Triple I Exhibit D Orbis Master Schedule
ii 4 SHAREHOLDERS' AGREEMENT This Shareholders' Agreement (the "Agreement") is made and entered into as of the 5th day of December, 1996 (the "Effective Date") by and among Orbis, Inc. ("Orbis" or its successor corporation Industrial Imaging Corporation) a Rhode Island corporation and the shareholders of Triple I Corporation, a Delaware Corporation ("Triple I"), which are listed in Exhibit A (collectively, the "Shareholders"). W I T N E S S E T H: WHEREAS, the Shareholders own all of the issued and outstanding capital stock of Triple I Corporation, a Delaware corporation with its principal place of business at One Lowell Research Center, 847 Rogers Street, Lowell, Massachusetts 01852; and WHEREAS, Orbis shall reincorporate under Delaware corporate law and change its name to Industrial Imaging Corporation ("Industrial Imaging"); WHEREAS, Industrial Imaging will have authority to issue 20,000,000 shares of Common Stock, $.01 par value, of Industrial Imaging (the "Industrial Imaging Common Stock"), 525,000 shares of which will be issued and outstanding immediately prior to the date of the Exchange (as defined below); WHEREAS, the Shareholders believe that it is in each of their best interests to exchange all of Triple I outstanding Common Stock, $.01 par value (the "Triple I Stock") for Industrial Imaging Common Stock (the "Exchange"); and WHEREAS, the Board of Directors of Industrial Imaging (as the successor corporation of Orbis), by resolutions duly adopted, has approved this Agreement and the issuance of a total of 5,000,237 shares of Industrial Imaging Common Stock to the Shareholders in the amounts as hereinafter described; NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, Orbis, Triple I and the Shareholders agree as follows: 1. EXCHANGE OF SHARES 1.1. Transfer of Triple I Stock. The Exchange shall be effective upon the ratification of this Agreement by Orbis shareholders, the reincorporation of Orbis as a Delaware corporation under the name of Industrial Imaging and the approval by each Shareholder of this Agreement as indicated by their signature hereto. Each Shareholder shall deliver the certificate evidencing their Triple I Stock to a representative of Triple I's legal counsel, O'Connor, Broude & Aronson, as agent (the "Exchange Agent"). The Exchange Agent shall mail to any Shareholder who has not duly surrendered his Triple I Stock certificates as of the Effective Date, a letter of transmittal, together 1 5 with instructions on how to surrender such Triple I Stock certificates to the Exchange Agent. Upon receiving these instructions, each holder of an outstanding certificate who has not previously delivered his Triple I Stock certificates shall surrender them to the Exchange Agent. 1.2. Issuance of Industrial Imaging Common Stock. On the Effective Date, Industrial Imaging shall issue to each Shareholder who has surrendered his Triple I Stock certificates, as described in this Section 1, one share of Industrial Imaging Common Stock for each share of Triple I Stock. All shares of Industrial Imaging Common Stock to be issued on the Effective Date will be deemed issued as of the Effective Date. Triple I Stock shall be deemed to be cancelled whether or not the certificates have been surrendered or otherwise accounted for. Holders of Triple I Stock will not receive any dividends or distributions with respect to shares of Industrial Imaging Common Stock which may be declared or payable following the Effective Date to holders of record of Industrial Imaging Common Stock until and unless they surrender their Triple I Stock certificates to the Exchange Agent. Former holders of Triple I Stock will be entitled to exercise all rights of holders of shares of Industrial Imaging Common Stock without having to surrender their stock certificates, except the right to receive dividends or distributions. 1.3. Conversion of Warrants and Options. At the Effective Date, by virtue of the Exchange and without any action on the part of the holder thereof each option and/or warrant to purchase Triple I Common Stock outstanding immediately prior to the Effective Date shall be changed and converted into an option and/or warrant to purchase Industrial Imaging Common Stock on the basis of the following ratio: (a) An option to purchase one (1) share of Triple I Common Stock shall be converted into an option to purchase one (1) share of Industrial Imaging Common Stock. (b) A warrant to purchase one (1) share of Triple I Common Stock shall be converted into a warrant to purchase one (1) share of Industrial Imaging Common Stock. 2. REPRESENTATIONS AND WARRANTIES OF TRIPLE I. Triple I represents and warrants to Industrial Imaging, upon which representations and warranties Industrial Imaging shall be entitled to rely regardless of any investigation by Industrial Imaging of the affairs of Triple I, as follows (as supplemented by any referenced exhibit or on the Triple I's Master Schedule listed in Exhibit B (the "Triple I's Master Schedule"),: 2.1 Capitalization of Triple I. Triple I's authorized capital stock consists of 8,700,000 shares of Common Stock, $.01 par value per share, of which 5,000,237 shares are issued and outstanding on the date hereof, 1,000,000 shares of Series A Preferred Stock, $.01 par value per share, of which no shares are issued and outstanding on the date hereof, and 300,000 shares of Series B Preferred Stock, $.01 par value per share, of which no shares are issued and outstanding on the date hereof. All such issued and outstanding shares of Common Stock have been duly and validly 2 6 issued and are fully paid and non-assessable. All outstanding options, warrants or other rights to purchase from Triple I any capital stock of Triple I are listed on Exhibit C. 2.2 Authorization. This Agreement has been duly and validly executed and delivered by Triple I. Subject to the approval of the Agreement by the Shareholders, this Agreement constitutes, and, when executed and delivered at the Closing, all other agreements entered into in connection with the transactions contemplated hereby to which Triple I is a party will constitute, the valid and legally binding obligations of Triple I, enforceable against it in accordance with their respective terms except insofar as enforceability may be limited by bankruptcy, insolvency, or similar laws affecting the rights of creditors and general equitable principles. The execution, delivery and performance by Triple I of this Agreement and the agreements provided for herein, and the consummation by Triple I of the transactions contemplated hereby and thereby, will not, with or without the giving of notice or the passage of time or both, (a) violate the provisions of any law, rule or regulation applicable to Triple I; (b) violate the provisions of the Certificate of Incorporation or Bylaws of Triple I; (c) violate any judgment, decree, order or award of any court, governmental body or arbitrator; or (d) conflict with or result in the breach or termination of any term or provision of, or constitute a default under, or cause any acceleration under or the creation of any indebtedness, contract, lease, license, permit, lien, charge or encumbrance upon the properties or assets of Triple I pursuant to, any indenture, mortgage, deed of trust or other instrument or agreement to which Triple I is a party or by which Triple I or any of its properties is or may be bound, subject to the consent requirements described in Triple I's Master Schedule. 2.3 Organization and Good Standing. Triple I is a corporation duly organized, validly existing and in good standing under the laws of the Delaware and has all requisite power and authority (corporate and other) to own its properties and to carry on its business as now being conducted. Except as disclosed in Triple I's Master Schedule, Triple I is duly qualified to do business and in good standing in all jurisdictions in which its ownership of property or the character of its business requires such qualification and where failure to be so qualified would have an adverse effect on Triple I. Neither Triple I nor any of its officers or directors are subject to any agreement, commitment or understanding which restricts or may restrict the conduct of Triple I's business in any jurisdiction or location. The copies of the Certificate of Incorporation and Bylaws of Triple I previously delivered to Industrial Imaging are complete and correct. 2.4 Books and Records. The minute books of Triple I produced for Industrial Imaging's review contain an accurate record of all meetings and other corporate action of the Triple I Shareholders and the Board of Directors of Triple I. The stock ledgers of Triple I produced for Industrial Imaging's review contain an accurate record of the holdings of the stock issued by Triple I and all transfers in connection therewith. 3 7 2.5 Financial Statements. (a) Triple I's Financial Statements. Triple I has delivered to Industrial Imaging true and complete copies of its Balance Sheets as of September 31, 1995 and related Statements of Operations, Stockholders' Equity and Cash Flows, all of which have been audited by Coopers & Lybrand L.L.P. as set forth in their report thereon, and its unaudited Balance Sheet as of June 30, 1996 and related Statement of Operations for the nine months then ended (collectively, the "Financial Statements"). Except as described in Triple I's Master Schedule, all Financial Statements are in accordance with the books and records of Triple I, and (i) present fairly the financial position and results of operations of Triple I as of the respective dates and for the respective periods indicated, (ii) include all adjustments required to fairly reflect the financial condition of Triple I and, (iii) have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior periods and practices; provided, however, that the interim financial statements as of and for the nine months ended June 30, 1996 have been prepared in accordance with Triple I's normal practices for internal management reporting purposes and accordingly certain items may not be classified in a manner consistent with the generally accepted accounting principles followed in the preparation of Triple I's audited financial statements and such interim financial statements do not include the notes required by generally accepted accounting principles. (b) No Adverse Changes or Undisclosed Liabilities. Except as disclosed in Triple I's Master Schedule, since June 30, 1996, there has not occurred or arisen, whether or not in the ordinary course of business any material adverse change in the assets or financial condition of Triple I or any adverse change in the operation or business of Triple I. Triple I has no liabilities or obligations, fixed, accrued, contingent or otherwise, which are required to be reflected on financial statements prepared in accordance with the generally accepted accounting principles as set forth in the Financial Statements and which are not fully reflected or provided for on, or disclosed in the notes to, the Financial Statements, where applicable, except liabilities and obligations incurred in the ordinary course of business since June 30, 1996, none of which individually or in the aggregate has been or is adverse to the operations, business, financial condition or prospects of Triple I. 2.6 Tax Matters. (a) Except as disclosed on Triple I's Master Schedule, Triple I has paid (and, as to any of the following which are payable after the Effective Date, Triple I has properly reserved against in accordance with generally accepted accounting principles) all income taxes, capital gains taxes, payroll and withholding taxes, capital taxes, sales and use taxes, goods and services taxes, business taxes, ad valorem taxes, property taxes, excise taxes, customs and import duties, rates, levies, assessments and fees, and all other taxes of every kind, character or description, including all interest, fines, and penalties relating thereto, imposed by any governmental or quasi-governmental authority, domestic or foreign, whether federal, state, territorial or municipal (collectively, the "Taxes") required to be paid by Triple I for all periods prior to the Effective Date. No outstanding assessments, reassessments, Notices of Determination, or notices of any kind whatsoever with respect to any such Taxes exist or could become a lien on the properties or assets of Triple I. Except 4 8 as disclosed on Triple I's Master Schedule, Triple I has duly and timely filed or caused to be filed all reports, returns and other documents relating to or covering all such Taxes, which are due or required to be filed at or prior to the date of Effective Date, and the Taxes or applicable amount shown thereon have been timely accrued and paid. No such filings have contained any misstatement or omitted any statement of any fact that should have been included therein. 2.7 Title to Properties. Except as disclosed in Triple I's Master Schedule, Triple I has good and marketable title to all of its properties and assets reflected in the Financial Statements or acquired since June 30, 1996, except properties and assets disposed of in the ordinary course of business since the date thereof, and none of such properties or assets is subject to any mortgage, pledge, lien, security interest, lease, charge, encumbrance, objection, claim or joint ownership. To its knowledge, Triple I is not in violation of any applicable zoning laws or in violation of any other local, state or federal laws and regulations affecting the use and occupancy of such property, which violation would have a material adverse effect on Triple I. 2.8 Agreements, Contracts and Commitments. Except as shown on Triple I's Master Schedule, Triple I is not a party to or liable in connection with and has not made or granted any oral or written: (a) Note, loan, credit, security or guaranty agreement or other obligation relating to the borrowing of money; (b) license agreement, or sales representative, distributor, franchise, advertising or property management agreement; (c) agreement for the future purchase by Triple I of any material, equipment, services or supplies in an amount in excess of $25,000 in any instance or $100,000 in the aggregate, other than purchase orders issued by Triple I in the ordinary course of business for components and supplies used in the manufacture and service of its products; (d) agreement for the future sale by Triple I of any materials, equipment, services or supplies in an amount in excess of $25,000 in any instance or $100,000 in the aggregate, other than purchase orders for Triple I products and services received by Triple I from customers in the ordinary course of business; (e) agreement, not elsewhere specifically disclosed pursuant to this Agreement, involving, or providing any benefit to, any officer, director, employee or stockholder of Triple I; (f) agreement or arrangement for the sale of any of its assets or the grant of any preferential rights to purchase any of its assets, property or rights or requiring the consent of any party to the transfer and assignment of such assets, property or rights, other than purchase orders for Triple I products in the ordinary course of business; 5 9 (g) any contracts, agreements or other arrangements imposing a non-competition or non-solicitation obligation on Triple I; and (h) any other agreement, whether or not in the ordinary course of business, which is not otherwise disclosed in this Agreement and which (i) can reasonably be expected to require the payment to or by Triple I of more than $25,000 in the aggregate for all such agreements in any period of 12 months or (ii) has a remaining term of more than six months and cannot be terminated by Triple I on 60 days' or less notice. All agreements listed on Triple I's Master Schedule are valid and in full force and effect, unless otherwise indicated therein. 2.9 Required Consents, No Default. Except as described in Triple I's Master Schedule, neither the execution and delivery of this Agreement nor the consummation of the Exchange, nor compliance by Triple I with its terms and provisions will require the affirmative consent, approval, order or authorization of or any registration, declaration or filing with any third party or governmental authority, the failure to obtain which would have an adverse effect on the Surviving Corporation after the Effective Date. Triple I is not in default under or in violation of any provision of its Certificate of Incorporation or Bylaws. Triple I is not in default under or in violation of any provision of any indenture, mortgage, lease, loan or other agreement to which it is a party or is bound or to which its properties are subject, which default or violation would have an adverse effect on Triple I's business. 2.10 Litigation. There is no action, suit or proceeding to which Triple I is a party (either as a plaintiff or defendant or otherwise) pending or, to Triple I's knowledge, threatened before any court or governmental agency, authority, body or arbitrator, and Triple I is not aware of any basis for any such action, suit or proceeding. Neither Triple I nor any officer, director or employee of Triple I has been permanently or temporarily enjoined by any order, judgment or decree of any court or any governmental agency, authority or body from engaging in or continuing any conduct or practice in connection with the business, assets, or properties of Triple I. There is not in existence on the date hereof any order, judgment or decree of any court, tribunal or agency enjoining or requiring Triple I to take any action of any kind with respect to its business, assets or properties. 2.11 No Broker's or Finder's Fees. No agent, broker, investment banker, person or firm acting on behalf of Triple I or any of its affiliates or under the authority of any of them is or will be entitled to any broker's or finder's fee or any other commission or similar fee directly or indirectly in connection with any of the transactions contemplated herein. 2.12 Compliance with Agreements and Laws. Triple I has all required licenses, permits and certificates, including health and safety permits, from federal, state and local authorities necessary to conduct its business as currently conducted the failure to have which, individually or collectively, would have an adverse effect on its business or assets (collectively, the "Permits"). To the best of Triple I's knowledge, the business of Triple I as conducted through the date hereof has 6 10 not violated any federal, state, local or foreign laws, regulations or orders (including, but not limited to, any of the foregoing relating to employment discrimination, occupational safety, conservation, or corrupt practices), the enforcement of which would have an adverse effect on the business of Triple I. Triple I has had no notice or communication from any federal, state or local governmental or regulatory authority or otherwise of any such violation or noncompliance. 2.13 Employee Relations and Labor Matters. (a) Triple I is in compliance with all federal, state and municipal laws regarding employment, employment practices, terms and conditions of employment and wages and hours, the failure of which would, individually or collectively, have an adverse effect on Triple I's business or assets, and it is not engaged in any unfair labor practice, and there are no arrears in the payment of wages or social security taxes. (b) None of the employees of Triple I is represented by any labor union, nor does Triple I have any agreements, whether directly or indirectly, with any labor union, employee association or other similar entity. Triple I has not made commitments to or conducted negotiations with any labor union or employee association or similar entity with respect to any future agreements. No trade union, employee association or other similar entity has any bargaining rights acquired by either certification or voluntary recognition with respect to the employees of Triple I. There is no unfair labor practice complaint against Triple I pending before any federal, state or local agency. There is no pending labor strike or other material labor trouble affecting Triple I (including, without limitation, any organizational drive). (c) Triple I is in compliance with all applicable and material provisions of the Federal Fair Labor Standards Act or any similar state statute and all rules and regulations under each, the failure of which would, individually or collectively, have an adverse effect on Triple I's business or assets. 2.14 Tort Claims. Except as disclosed in Triple I's Master Schedule, there are no personal injury, property damage or other tort claims made against Triple I, not including service calls, and all accidents known to Triple I which could reasonably be expected to give rise to such a claim. 2.15 Disclosure. The representations and warranties by Triple I in this Agreement, including the certificates, Exhibits and Schedules furnished by Triple I do not contain any untrue or misleading statement of a material fact or omit to state a material fact reasonably related to the transactions covered by this Agreement, and all such representations and warranties are and on the Effective Date will be accurate and complete in all material respects. 3. REPRESENTATIONS AND WARRANTIES OF ORBIS. Orbis represents and warrants to the Shareholders and Triple I, upon which representations and warranties the Shareholders and Triple I shall be entitled to rely regardless of any investigation 7 11 by Shareholders and Triple I of the affairs of Orbis (and its successor corporation Industrial Imaging), as follows (as supplemented by any referenced exhibit or on Orbis's master schedule at Exhibit D (the "Orbis Master Schedule"): 3.1 Reincorporation and Capitalization of Orbis. As of the Effective Date, Orbis will have (i) reincorporated as a Delaware corporation, (ii) changed its name to Industrial Imaging, and (iii) authorized capital stock will consist of 20,000,000 shares of Common Stock, $.01 par value per share, of which 525,000 shares are issued and outstanding, and 1,000,000 shares of Preferred Stock, $.01 par value per share, of which no shares are issued and outstanding. Orbis shall also have authorized a 1996 Stock Option Plan with 600,000 shares reserved for issuance under the plan. All such issued and outstanding shares of Common Stock have been duly and validly issued and are fully paid and non-assessable. Except as provided in Orbis's Master Schedule, there are no outstanding options, warrants or other rights to purchase from Orbis any capital stock of Orbis. 3.2 Authorization. This Agreement has been duly and validly executed and delivered by Orbis. This Agreement constitutes, and, when executed and delivered on the Effective Date, all other agreements entered into in connection with the transactions contemplated hereby to which Orbis is a party will constitute, the valid and legally binding obligations of Orbis, enforceable against it in accordance with their respective terms except insofar as enforceability may be limited by bankruptcy, insolvency, or similar laws affecting the rights of creditors and general equitable principles. The execution, delivery and performance by Orbis of this Agreement and the agreements provided for herein, and the consummation by Orbis of the transactions contemplated hereby and thereby, will not, with or without the giving of notice or the passage of time or both, (a) violate the provisions of any law, rule or regulation applicable to Orbis; (b) violate the provisions of the Certificate of Incorporation or Bylaws of Orbis; (c) violate any judgment, decree, order or award of any court, governmental body or arbitrator; or (d) conflict with or result in the breach or termination of any term or provision of, or constitute a default under, or cause any acceleration under or the creation of any indebtedness, contract, lease, license, permit, lien, charge or encumbrance upon the properties or assets of Orbis pursuant to, any indenture, mortgage, deed of trust or other instrument or agreement to which Orbis is a party or by which Orbis or any of its properties is or may be bound. 3.3 Organization and Good Standing. Orbis is (and as of the Effective Date, Industrial Imaging will be) a corporation duly organized, validly existing and in good standing under the laws of its State of incorporation and has all requisite power and authority (corporate and other) to own its properties and to carry on its business as now being conducted. Except as disclosed in the Orbis's Master Schedule, Orbis is duly qualified to do business and in good standing in all jurisdictions in which its ownership of property or the character of its business requires such qualification and where failure to be so qualified would have an adverse effect on Orbis. Neither Orbis nor any of its officers or directors are subject to any agreement, commitment or understanding which restricts or may restrict the conduct of Orbis's business in any jurisdiction or location. The copies of the Certificate of Incorporation and Bylaws of Orbis previously delivered to Triple I are complete and correct. 8 12 3.4 Books and Records. The minute books of Orbis produced for Triple I's review contain an accurate record of all meetings and other corporate action of the Orbis stockholders and the Board of Directors of Orbis. The stock ledgers of Orbis produced for Triple I's review contain an accurate record of the holdings of the stock issued by Orbis and all transfers in connection therewith. 3.5 Financial Statements. (a) Orbis's Financial Statements. Orbis has delivered to Triple I true and complete copies of its Balance Sheets as of March 31, 1996 and related Statements of Operations, Stockholders' Equity and Cash Flows, all of which have been audited by Cager, Prescott, Clune & Chatellier as set forth in their report thereon, (collectively, the "Financial Statements"). Except as described in the Orbis Master Schedule, all Financial Statements are in accordance with the books and records of Orbis, and (i) present fairly the financial position and results of operations of Orbis as of the respective dates and for the respective periods indicated, (ii) include all adjustments required to fairly reflect the financial condition of Orbis and, (iii) have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior periods and practices. (b) No Adverse Changes or Undisclosed Liabilities. Except as disclosed in Master Schedule, since March 31, 1996, there has not occurred or arisen, whether or not in the ordinary course of business any material adverse change in the assets or financial condition of Orbis or any adverse change in the operation or business of Orbis. Orbis has no liabilities or obligations, fixed, accrued, contingent or otherwise, which are required to be reflected on financial statements prepared in accordance with the generally accepted accounting principles as set forth in the Financial Statements and which are not fully reflected or provided for on, or disclosed in the notes to, the Financial Statements, where applicable, except liabilities and obligations incurred in the ordinary course of business since March 31, 1996, none of which individually or in the aggregate has been or is adverse to the operations, business, financial condition or prospects of Orbis. 3.6 Tax Matters. Except as disclosed on the Orbis Master Schedule, Orbis has paid (and, as to any of the following which are payable after the Effective Date, Orbis has properly reserved against in accordance with generally accepted accounting principles) all income taxes, capital gains taxes, payroll and withholding taxes, capital taxes, sales and use taxes, goods and services taxes, business taxes, ad valorem taxes, property taxes, excise taxes, customs and import duties, rates, levies, assessments and fees, and all other taxes of every kind, character or description, including all interest, fines, and penalties relating thereto, imposed by any governmental or quasi-governmental authority, domestic or foreign, whether federal, state, territorial or municipal (collectively, the "Taxes") required to be paid by Orbis for all periods prior to the Effective Date. No outstanding assessments, reassessments, Notices of Determination, or notices of any kind whatsoever with respect to any such Taxes exist or could become a lien on the properties or assets of Orbis. Except 9 13 as disclosed on the Orbis Master Schedule, Orbis has duly and timely filed or caused to be filed all reports, returns and other documents relating to or covering all such Taxes, which are due or required to be filed at or prior to the date of Effective Date, and the Taxes or applicable amount shown thereon have been timely accrued and paid. No such filings have contained any misstatement or omitted any statement of any fact that should have been included therein. 3.7 Title to Properties. Except as disclosed in the Orbis Master Schedule, Orbis has good and marketable title to all of its properties and assets reflected in the Financial Statements or acquired since March 31, 1996, except properties and assets disposed of in the ordinary course of business since the date thereof, and none of such properties or assets is subject to any mortgage, pledge, lien, security interest, lease, charge, encumbrance, objection, claim or joint ownership. 3.8 Agreements, Contracts and Commitments. Except as shown on the Orbis Master Schedule, Orbis is not a party to or liable in connection with and has not made or granted any oral or written: (a) Note, loan, credit, security or guaranty agreement or other obligation relating to the borrowing of money; (b) license agreement, or sales representative, distributor, franchise, advertising or property management agreement; (c) agreement for the future purchase by Orbis of any material, equipment, services or supplies in an amount in excess of $25,000 in any instance or $100,000 in the aggregate, other than purchase orders issued by Orbis in the ordinary course of business for components and supplies used in the manufacture and service of its products; (d) agreement for the future sale by Orbis of any materials, equipment, services or supplies in an amount in excess of $25,000 in any instance or $100,000 in the aggregate, other than purchase orders for Orbis products and services received by Orbis from customers in the ordinary course of business; (e) agreement, not elsewhere specifically disclosed pursuant to this Agreement, involving, or providing any benefit to, any officer, director, employee or stockholder of Orbis; (f) agreement or arrangement for the sale of any of its assets or the grant of any preferential rights to purchase any of its assets, property or rights or requiring the consent of any party to the transfer and assignment of such assets, property or rights, other than purchase orders for Orbis products in the ordinary course of business; (g) any contracts, agreements or other arrangements imposing a non-competition or non-solicitation obligation on Orbis; and 10 14 (h) any other agreement, whether or not in the ordinary course of business, which is not otherwise disclosed in this Agreement and which (i) can reasonably be expected to require the payment to or by Orbis of more than $25,000 in the aggregate for all such agreements in any period of 12 months or (ii) has a remaining term of more than six months and cannot be terminated by Orbis on 60 days' or less notice. All agreements listed on Master Schedule are valid and in full force and effect, unless otherwise indicated therein. 3.9 Required Consents, No Default. Except as described in the Orbis Master Schedule, neither the execution and delivery of this Agreement nor the consummation of the Exchange, nor compliance by Orbis with its terms and provisions will require the affirmative consent, approval, order or authorization of or any registration, declaration or filing with any third party or governmental authority, the failure to obtain which would have an adverse effect on the Surviving Corporation after the Effective Date. Orbis is not in default under or in violation of any provision of its Certificate of Incorporation or Bylaws. Orbis is not in default under or in violation of any provision of any indenture, mortgage, lease, loan or other agreement to which it is a party or is bound or to which its properties are subject, which default or violation would have an adverse effect on Orbis's business. 3.10 Litigation. There is no action, suit or proceeding to which Orbis is a party (either as a plaintiff or defendant or otherwise) pending or, to Orbis's knowledge, threatened before any court or governmental agency, authority, body or arbitrator, and Orbis is not aware of any basis for any such action, suit or proceeding. Neither Orbis nor any officer, director or employee of Orbis has been permanently or temporarily enjoined by any order, judgment or decree of any court or any governmental agency, authority or body from engaging in or continuing any conduct or practice in connection with the business, assets, or properties of Orbis. There is not in existence on the date hereof any order, judgment or decree of any court, tribunal or agency enjoining or requiring Orbis to take any action of any kind with respect to its business, assets or properties. 3.11 No Broker's or Finder's Fees. No agent, broker, investment banker, person or firm acting on behalf of Orbis or any of its affiliates or under the authority of any of them is or will be entitled to any broker's or finder's fee or any other commission or similar fee directly or indirectly in connection with any of the transactions contemplated herein. 3.12 Tort Claims. Except as disclosed in the Orbis's Master Schedule, there are no personal injury, property damage or other tort claims made against Orbis, not including service calls, and all accidents known to Orbis which could reasonably be expected to give rise to such a claim. 3.13 Disclosure. The representations and warranties by Orbis in this Agreement, including the certificates, Exhibits and Schedules furnished by Orbis do not contain any untrue or misleading statement of a material fact or omit to state a material fact reasonably related to the transactions 11 15 covered by this Agreement, and all such representations and warranties are and on the Effective Date will be accurate and complete in all material respects. 4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Each of the Shareholders represents and warrants to Industrial Imaging, jointly and severally, upon which representations and warranties Orbis relies, and which representations and warranties shall survive the Closing, notwithstanding any investigation of the affairs by Orbis (and its successor Industrial Imaging), as follows: 4.1 The Shareholders have full power and authority to execute and deliver this Agreement and consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by each of the Shareholders and no other actions or proceedings on the part of the Shareholders are necessary to consummate the transactions so contemplated. This Agreement has been duly and validly executed and delivered by each of the Shareholders and constitutes the valid and legally binding obligation of each of the Shareholders and enforceable against each of them in accordance with its terms, subject only as to enforcement to general equitable principles and to bankruptcy, insolvency, reorganization, moratorium, or similar laws of general application affecting the rights and remedies of creditors. 4.2 In connection with the receipt by each of the Shareholders of any and all of the Industrial Imaging Common Stock that such Stockholder may receive pursuant to this Agreement, each Stockholder acknowledges by their signature that the Common Stock is not being registered under the Securities Act of 1933, as amended (the "Securities Act"), on the basis of a statutory exemption that is based in part on the representations made by the Shareholders in connection with this Agreement. Each Stockholder shall warrant and represent in writing that (a) he or it is acquiring such Common Stock for his or its own account and not with a view to reselling or otherwise distributing such shares in violation of any relevant federal or state securities laws; (b) he or it does not intend to resell or otherwise dispose of such shares unless and until a registration statement under the Securities Act is then in effect with respect to such shares or an exemption from the registration requirements of the Securities Act is then in fact applicable to such transfer; and (c) any and all stock certificates evidencing ownership of any Common Stock shall bear any legends that counsel for Industrial Imaging deem, in their sole opinion, to be required by state or federal law. 5. CONDITIONS TO CLOSING. 5.1 Resignation of Officers. The Officers of Orbis, on the Effective Date, shall deliver their resignations, all of which resignations shall take effect on the Effective Date. The new officers of Industrial Imaging shall thereafter be appointed by the Board of Directors of Industrial Imaging. 12 16 5.2 Opinion of Counsel. Triple I shall have received from counsel to Orbis, an opinion, dated the Effective Date, in form and substance satisfactory to Triple I as to the matters described in Exhibit E. 5.3 Accuracy of Representations and Warranties and Performance of Obligations by Triple I and Orbis. The representations and warranties of Triple I and Orbis (applying to both Orbis and its successor corporation Industrial Imaging) set forth in Sections 2 and 3 shall be true and correct in all material respects on the Effective Date, with the same effect as though made at such time, except for changes expressly contemplated by this Agreement. Orbis shall have performed all obligations and complied with all covenants and conditions required by this Agreement to be performed or complied with by it prior to the Effective Date. Triple I and Orbis shall have received certificates from authorized officers of the other company as to the fulfillment of the conditions set forth in this Section 5.3. 5.4 Legal Proceedings. No action or proceeding by or before any court or any governmental body shall have been instituted or threatened to restrain, prohibit or invalidate the transactions contemplated by this Agreement which might affect the right of the Shareholders and Triple I to own, operate or control Industrial Imaging after the Effective Date or which, either individually or in the aggregate, might be materially adverse to the operations, business, financial condition or prospects of Industrial Imaging. 5.5 Orbis Stockholder Approval. The Orbis stockholders shall have approved the Exchange as described in Section 1. 6. PROVISIONS FOR INDEMNIFICATION 6.1 In the manner and to the extent provided in this Section 6, the Shareholders shall be defended, indemnified and held harmless from and against any and all damages, losses and expenses (including reasonable legal and other costs and expenses arising from or in connection with any action, suit, proceeding, claim or investigation) suffered or incurred by them or by any of their officers, directors, successor or assigns resulting from (i) any breach of a representation or warranty of Orbis in this Agreement or any Schedule or certificate thereto, (ii) any failure by Orbis to perform any covenant made by it in this Agreement, and (iii) all awards, judgments or settlements arising from or in connection with any action, suit, proceeding or claim by any third party as a consequence of any such breach or failure. 6.2 Triple I, its directors, officers, employees or agents, if claiming a right to indem nification under the provisions of this Section 6 (hereinafter, the "Indemnitee"), shall give prompt written notice to the Orbis of each claim for indemnification hereunder, specifying the amount and nature of the claim, and of any matter which, in the opinion of the claiming party, is likely to give rise to an indemnification claim. The party against whom such indemnity is sought to be recovered (hereinafter, the "Indemnitor") shall have the right to undertake and control the defense and settlement (so long as such settlement imposes no financial or other obligation upon Triple I or its 13 17 directors, officers, employees or agents) of any such matter at Indemnitor's sole expense and through legal counsel acceptable to Indemnitee, provided that Indemnitor proceeds in good faith, expeditiously and diligently. Indemnitee shall, at its option and expense, have the right to participate in any defense undertaken by Indemnitor, with legal counsel of its own selection. No settlement or compromise may be made by Indemnitor without the prior written consent of Indemnitee unless (i) prior to such settlement or compromise Indemnitor acknowledges in writing Indemnitor's obligation to pay in full the amount of the settlement or compromise and all associated expenses and (ii) Indemnitee is furnished with security reasonably satisfactory to Indemnitee that Indemnitor will in fact pay such amount and expenses. 6.3 Orbis shall pay to Indemnities the amount of established claims for indemnification within fifteen (15) days after the establishment thereof. Indemnities may set off the amount of any established claim due to it from the Orbis against Indemnities any Deficiency Payment due to the Shareholders. 6.4 No claim for indemnification provided in this Section 6 shall be made more than 36 months (or, if longer, the applicable statute of limitations period with respect to tax matters) following the Effective Date. 6.5 Any remedies of the indemnitees shall be cumulative and not exclusive. 7 . TERMINATION. This Agreement may be terminated by Orbis or Triple I, in its sole discretion, upon the occurrence of any of the following circumstances, by written notice given to the non-terminating party on or before the Effective Date: (a) A breach by the non-terminating party of any representation, warranty, covenant or other agreement contained herein; or (b) If any condition to its obligations is not fulfilled on or before the Effective Date. Notwithstanding the foregoing, the parties may terminate this agreement at any time upon their mutual written agreement. 8. TAX CONSEQUENCES. The Exchange is intended to qualify as a tax-free reorganization under Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the "Code"). 9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the Shareholders and the Company with respect to the subject matter hereof and supersedes any and all prior oral or written communications, understanding or agreements concerning the subject matter hereof. This Agreement may be amended or modified only by a written instrument signed by all of the Shareholders and an officer of the Company. 14 18 10. WAIVER. No waiver of any right under this Agreement shall be deemed effective unless contained in a writing signed by the Shareholder charged with such waiver, and no waiver of any right arising from any breach or failure to perform shall be deemed to be a waiver of any future such right or of any other right arising under this Agreement. 11. SEVERABILITY. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. If any provision of this Agreement is or becomes or is deemed invalid, illegal or unenforceable to the maximum extent permissible in any jurisdiction, such provision shall be deemed amended to conform to applicable laws so as to be valid and enforceable or, if it cannot be so amended without materially altering the intention of the parties, it shall be stricken and the remainder of this Agreement shall remain in full force and effect. 12. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. 13. BINDING AGREEMENT. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives and successors. 14. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original. 15. ASSIGNMENT. No Shareholder may assign this Agreement or his rights hereunder without the other Shareholders' written consent, which consent may be withheld at the non-assigning Shareholders' sole discretion. 16. ARBITRATION. Any dispute concerning this Agreement including but not limited to, its existence, validity, interpretation, performance or non-performance, arising before or after termination or expiration of this Agreement, shall be settled by a single arbitrator in Boston, Massachusetts, in accordance with the rules then in effect of the American Arbitration Association. Judgment upon any award may be entered in any court of competent jurisdiction. The cost of such arbitration shall borne equally between the parties thereto unless otherwise determined by such arbitrator. 17. COUNSEL. Each of the parties acknowledges and confirms that each has had the opportunity to secure advice, counsel and suggestions from professional persons of such party's choosing in connection with this Agreement and related matters. 15 19 IN WITNESS WHEREOF, the parties hereto have set their hands and seals on this 5th day of December, 1996. ATTEST: ORBIS, INC. By: - -------------------------- ---------------------------------- Pasquale Ruggieri, President ATTEST: TRIPLE I CORPORATION By: - -------------------------- ---------------------------------- Juan J. Amodei, Ph.D., President TRIPLE I SHAREHOLDERS WITNESS: JUAN J. AMODEI, Ph.D. - -------------------------- ---------------------------------- WITNESS: JOSEPH BORDOGNA - -------------------------- ---------------------------------- ATTEST: CENTENNIAL TECHNOLOGIES By: - -------------------------- ---------------------------------- Emanuel Pinez, President 16 20 WITNESS: CHARLES RIVER MORTGAGE COMPANY, INC. By: - -------------------------- ---------------------------------- WITNESS: ROBERT COHEN - -------------------------- ---------------------------------- WITNESS: CRESENT CAPITAL COMPANY, LLC By: - -------------------------- ---------------------------------- WITNESS: EZREIL DIAMOND - -------------------------- ---------------------------------- WITNESS: WILLIAM G. EATON JR. - -------------------------- ---------------------------------- WITNESS: S. MARCUS FINKLE - -------------------------- ---------------------------------- WITNESS: LAWRENCE K. FLEISCHMANN - -------------------------- ---------------------------------- 17 21 WITNESS: ARTHUR G. JENKINS AND ROBERT R. JENKINS, JTWROS By: - -------------------------- ---------------------------------- WITNESS: PETER O. KLIEM - -------------------------- ---------------------------------- WITNESS: DAVID S. LAWI - -------------------------- ---------------------------------- WITNESS: JAMES LEE - -------------------------- ---------------------------------- WITNESS: DAVID & ESTER MANN, JTWROS By: - -------------------------- ---------------------------------- ATTEST: MASSACHUSETTS COMMUNITY DEVELOPMENT FINANCE CORPORATION By: - -------------------------- ---------------------------------- ATTEST: MASSACHUSETTS TECHNOLOGY DEVELOPMENT CORPORATION By: - -------------------------- ---------------------------------- 18 22 WITNESS: POLAROID CORPORATION - -------------------------- ---------------------------------- WITNESS: P. DANIEL QUINN - -------------------------- ---------------------------------- ATTEST: RETIREMENT ACCOUNTS, INC. CUST FBO JAMES F. TWADDLE By: - -------------------------- ---------------------------------- WITNESS: JEFFREY RUBIN - -------------------------- ---------------------------------- WITNESS: HAROLD SCHEIN - -------------------------- ---------------------------------- WITNESS: K. JOSEPH SHEKARCHI - -------------------------- ---------------------------------- WITNESS: SHIRLEY HSIN-HUI WANG 19 23 - -------------------------- ---------------------------------- WITNESS: HARRY HSUAN YEH - -------------------------- ---------------------------------- WITNESS: JOSEPH TEVES 20 EX-10.G 11 SUBSCRIPTION AGREEMENT (1997 BRIDGE FINANCING) 1 EXHIBIT 10g Issued to : ------------------- INDUSTRIAL IMAGING CORPORATION SUBSCRIPTION BOOKLET In the event you decide not to participate in this offering please return the Information Statement, the Confidential Overview of Bridge Financing and the Subscription Agreement to the Company. January 15, 1997 2 SUBSCRIPTION INSTRUCTIONS (PLEASE READ CAREFULLY) NO PERSON WILL BE ACCEPTED AS A SUBSCRIBER PRIOR TO A CLOSING OF THE OFFERING. THE COMPANY RESERVES THE RIGHT TO REJECT ANY SUBSCRIPTION, IN WHOLE OR IN PART, OR TO ALLOT TO ANY PROSPECTIVE SUBSCRIBER LESS THAN THE AMOUNT SUBSCRIBED FOR BY SUCH SUBSCRIBER. ANY REPRESENTATION TO THE CONTRARY IS UNAUTHORIZED AND MUST NOT BE RELIED UPON. I. THIS SUBSCRIPTION BOOKLET CONTAINS MATERIAL NECESSARY FOR YOU TO PURCHASE ONE OR MORE UNITS, EACH UNIT CONSISTING OF ONE SUBORDINATED PROMISSORY NOTE IN THE PRINCIPAL AMOUNT OF $50,000 AND 10,714 SHARES OF COMMON STOCK. THIS MATERIAL IS ARRANGED IN THE FOLLOWING ORDER: A. Overview of Bridge Financing; B. Subscription Agreement, including Form of Promissory Note, attached thereto as an Exhibit; C. Questionnaire for an INDIVIDUAL Subscriber; D. Questionnaire for a TRUST Subscriber; E. Questionnaire for a PARTNERSHIP Subscriber; F. Questionnaire for a CORPORATE Subscriber; and G. Questionnaire for a RETIREMENT PLAN Subscriber. 3 The respective Questionnaires are designed to allow you to demonstrate that you meet the minimum legal requirements relating to your subscription. II. EACH SUBSCRIBER MUST READ AND COMPLETE THE SUBSCRIPTION AGREEMENT AND ONE OF THE FIVE QUESTIONNAIRES. THE QUESTIONNAIRE AND THE SUBSCRIPTION AGREEMENT CONTAIN REPRESENTATIONS RELATING TO YOUR SUBSCRIPTION. Once you have completed the Subscription Agreement and the appropriate Questionnaire, please return the entire Subscription Agreement and any additional required documents (as described in the Questionnaire) to O'Connor, Broude & Aronson at the address set forth below in Section IV. FAILURE TO COMPLY WITH THE ABOVE INSTRUCTIONS WILL CONSTITUTE AN INVALID SUBSCRIPTION, WHICH, IF NOT CORRECTED, WILL RESULT IN THE -i- 4 REJECTION OF YOUR SUBSCRIPTION REQUEST. EVEN IF CORRECTED, THE DELAY MAY RESULT IN (1) THE ACCEPTANCE OF ANOTHER SUBSCRIBER WHOSE SUBSCRIPTION AGREEMENT WAS INITIALLY RECEIVED BY O'CONNOR, BROUDE & ARONSON AFTER YOURS OR (2) THE OFFERING BEING CLOSED WITHOUT YOUR SUBSCRIPTION REQUEST BEING CONSIDERED BY THE COMPANY. III. ENCLOSE A CERTIFIED OR BANK CHECK PAYABLE TO THE ORDER OF "O'CONNOR, BROUDE & ARONSON - CLIENT FUND ACCOUNT FOR INDUSTRIAL IMAGING CORPORATION" IN THE AMOUNT OF THE PAYMENT DUE UPON SUBSCRIPTION. or WIRE TRANSFER THE AMOUNT OF THE PAYMENT DUE UPON SUBSCRIPTION AS FOLLOWS: Cambridge Trust Company, 1336 Massachusetts Avenue, Cambridge, Massachusetts, ABA number 011300595, for deposit to O'Connor, Broude & Aronson Client Fund Account, number 57-240-3-01, in favor of "Industrial Imaging Corporation." PLEASE CONTACT STEVEN J. CAGNETTA, ESQUIRE, AT O'CONNOR, BROUDE & ARONSON AT (617) 890-6600 BEFORE INITIATING THE WIRE TRANSFER. IV. SEND ALL COMPLETED DOCUMENTS AND YOUR CHECK TO THE FOLLOWING ADDRESS: O'Connor, Broude & Aronson Bay Colony Corporate Center 950 Winter Street, Suite 2300 Waltham, Massachusetts 02154 Attention: Marguerite J. Hill, Esquire V. QUESTIONS REGARDING COMPLETION OF SUBSCRIPTION DOCUMENTS SHOULD BE DIRECTED TO: O'Connor, Broude & Aronson Bay Colony Corporate Center 950 Winter Street, Suite 2300 Waltham, Massachusetts 02154 Attention: Marguerite J. Hill, Esquire or Steven J. Cagnetta, Esquire Telephone: (617) 890-6600 PLEASE PRINT IN INK OR TYPE ALL INFORMATION -ii- 5 SUBSCRIPTION AGREEMENT LIMITED OFFERING OF INVESTMENT UNITS OF INDUSTRIAL IMAGING CORPORATION THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE REGULATORY AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS AGREEMENT OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THE SECURITIES MAY NOT BE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THE INFORMATION CONTAINED IN THIS AGREEMENT DOES NOT PURPORT TO BE ALL INCLUSIVE OR TO CONTAIN ALL THE INFORMATION THAT A PROSPECTIVE SUBSCRIBER MAY DESIRE IN INVESTIGATING THE COMPANY. EACH SUBSCRIBER MUST RELY ON THE SUBSCRIBER'S OWN EVALUATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED, IN MAKING AN INVESTMENT DECISION WITH RESPECT TO THE SECURITIES. SEE "RISK FACTORS" CONTAINED IN THE INFORMATION STATEMENT FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH THE PURCHASE OF THE SECURITIES. THIS AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY STATE OR OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. EXCEPT AS OTHERWISE INDICATED, THIS AGREEMENT SPEAKS AS OF THE DATE HEREOF. NEITHER THE DELIVERY OF THIS AGREEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY AFTER THE DATE HEREOF. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS AGREEMENT IN CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE PLACEMENT AGENT. EACH SUBSCRIBER WILL BE ENTITLED TO RELY SOLELY ON THOSE REPRESENTATIONS -iii- 6 AND WARRANTIES WHICH MAY BE MADE TO IT IN ANY FINAL SUBSCRIPTION AGREEMENT RELATING TO THE SECURITIES. PROSPECTIVE SUBSCRIBERS ARE NOT TO CONSTRUE THE CONTENTS OF THIS AGREEMENT AS LEGAL ADVICE. EACH SUBSCRIBER SHOULD CONSULT THEIR OWN ATTORNEY OR BUSINESS ADVISOR AS TO THE LEGAL, TAX AND OTHER CONSIDERATIONS RELATING TO AN INVESTMENT IN THE SECURITIES. OFFERS AND SALES WILL ONLY BE MADE TO PERSONS WHOM THE COMPANY BELIEVES TO BE "ACCREDITED INVESTORS" AS DEFINED IN REGULATION D, PROMULGATED UNDER THE ACT WHO, EITHER ALONE OR WITH SUCH SUBSCRIBER REPRESENTATIVE, HAVE SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT SUCH SUBSCRIBER IS CAPABLE OF EVALUATING THE MERITS AND RISKS OF THE PROSPECTIVE INVESTMENT. IT IS EXPECTED THAT SUCH SECURITIES WOULD BE EXEMPT FROM REGISTRATION UNDER THE ACT PURSUANT TO AN EXEMPTION FROM REGISTRATION CONTAINED IN SECTION 4(2) OF THE ACT AND RULE 506 UNDER REGULATION D. A SUBSCRIBER'S INVESTMENT IN THE SECURITIES PROPOSED UNDER THE TERMS OF THIS OFFERING WILL BE SUBJECT TO CERTAIN RESTRICTIONS AS DESCRIBED MORE FULLY IN THE TERMS OF THE OFFERING AND THE SUBSCRIPTION AGREEMENT. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT, AND THE APPLICABLE STATE SECURITIES LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. SUBSCRIBERS MUST EXPECT TO BEAR THE ECONOMIC RISK OF AN INVESTMENT IN THE SECURITIES FOR AN INDEFINITE PERIOD OF TIME. THIS AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES OFFERED HEREBY. CERTAIN PROVISIONS OF VARIOUS OF DOCUMENTS ARE SUMMARIZED IN THIS AGREEMENT BUT PROSPECTIVE SUBSCRIBERS SHOULD NOT ASSUME THAT THESE SUMMARIES ARE COMPLETE. SUCH SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO TEXT OF THE ORIGINAL DOCUMENT WHICH WILL BE MADE AVAILABLE TO PROSPECTIVE SUBSCRIBERS BY THE COMPANY UPON REQUEST. BY ACCEPTANCE OF THIS AGREEMENT, PROSPECTIVE SUBSCRIBERS RECOGNIZE AND ACCEPT THE NEED TO CONDUCT THEIR OWN THOROUGH INVESTIGATION AND DUE DILIGENCE BEFORE CONSIDERING PURCHASING THE SECURITIES OFFERED HEREBY. -iv- 7 STATE SECURITIES NOTICES IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. FOR CONNECTICUT RESIDENTS THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER SECTION 36B-21 OF THE CONNECTICUT UNIFORM SECURITIES ACT AND, THEREFORE, CANNOT BE RESOLD UNLESS THEY ARE REGISTERED UNDER SUCH ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. FOR FLORIDA RESIDENTS THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER SECTION 517.061 OF THE FLORIDA SECURITIES ACT AND HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA. -v- 8 INDUSTRIAL IMAGING CORPORATION SUBSCRIPTION AGREEMENT PRIVATE OFFERING OF UNITS CONSISTING OF SUBORDINATED PROMISSORY NOTES AND SHARES OF COMMON STOCK SUBSCRIPTION AGREEMENT made as of the date set forth below between Industrial Imaging Corporation, a publicly held Delaware corporation with its principal offices at One Research Center, 847 Rogers Street, Lowell, Massachusetts 01852 (the "Company") and the undersigned (the "Subscriber"). WHEREAS, the Company desires to issue an aggregate of up to $600,000 of investment units (the "Investment Units"), each Investment Unit consisting of a two year, 10% Subordinated Promissory Note in the principal amount of $50,000 (the "Notes") and 10,714 shares of Common Stock (the "Shares"), on the terms and conditions hereinafter set forth and the Subscriber desires to acquire the amount of Investment Units set forth herein (the "Offering"). NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows: 1. SUBSCRIPTION FOR INVESTMENT UNITS. 1.1 Subscription. Subject to the terms and conditions hereinafter set forth, the Subscriber hereby subscribes for and agrees to purchase from the Company such Investment Units as is set forth in Section 1.4(a) below at a purchase price equal to $50,000 per Investment Unit (the "Purchase Price") and the Company agrees to sell such Investment Units to the Subscriber for said Purchase Price. Except as provided under state securities laws, this Subscription Agreement is irrevocable, provided that the undersigned's obligations hereunder will terminate if this subscription is not accepted by the Company by the Termination Date, as hereinafter defined. Funds will be paid to the Company in accordance with the closing provisions set forth herein and pursuant to the terms of the Company's Confidential Overview of Bridge Financing dated as of January 15, 1997 (the "Overview of Financing"). The Company reserves the unrestricted right to accept subscriptions for a fraction of an Investment Unit or reject any subscription, notwithstanding prior receipt by the Subscriber of notice of acceptance. The Company may, in its discretion, increase the size of the Offering. If this subscription is accepted in part and all other conditions are satisfied, any amounts that have been tendered in excess of the payment for the Investment Units allocated to the Subscriber will be returned without interest to the Subscriber. -1- 9 1.2 Validity of Documents. The Company and the Escrow Agent may rely, and shall be protected in acting, upon any papers or other documents that may be submitted to either of them in connection with the Investment Units and which are believed by them to be genuine and to have been signed or presented by the proper party or parties, and neither the Company nor the Escrow Agent shall have any liability or responsibility with respect to the form, execution, or validity thereof. 1.3 Purchase Price. The Purchase Price is payable by (i) wire transfer, or (ii) certified or bank check made payable to the "O'Connor, Broude & Aronson - Client Fund Account for Industrial Imaging Corporation" contemporaneously with the execution and delivery of this Subscription Agreement. The Purchase Price of the Investment Units shall be determined as follows: (a) Purchase Price of Each Investment Unit $ 50,000 (b) Number of Investment Units subscribed for: ______ (c) Total Purchase Price (the amount in (a) multiplied by the amount in (b)) $ 1.4 USE OF PROCEEDS. Upon acceptance of this Subscription Agreement by the Company, the Company may use such funds for working capital and general corporate purposes, including reduction of trade payables and a $100,000 promissory note. 1.5 PLACEMENT AGENT. In connection with the Offering, Schneider Securities, Inc. (the "Placement Agent") will receive as compensation a commission of ten percent (10%) of the Purchase Price of the aggregate number of Investment Units sold in the Offering. 2. CONSUMMATION OF OFFERING OF INVESTMENT UNITS. 2.1 CLOSING DATE. The Company expects to hold one or more closings (the "Closing") of this Offering, with the first Closing expected to be held on January 20, 1997 and the final Closing being held on the Termination Date (as hereinafter defined). This Offering of Investment Units shall terminate upon the earlier of (i) the Company selling an aggregate of $600,000 in Investment Units or (ii) January 31, 1997, unless extended or earlier terminated by the Company in its sole discretion ((i) or (ii) is referred to as the "Termination Date"). 2.2 DELIVERY. Within fifteen (15) days following the Closing, the Company will use its best efforts to deliver to each Subscriber a certificate or certificates, in such denominations and registered in such name or names as each Subscriber may designate by notice to the Company, representing the Shares purchased by each Subscriber from the Company. Prior to the Closing, each -2- 10 Subscriber shall have delivered to the Company payment of the Purchase Price therefor by certified check or wire transfer to such Company account as the Company shall designate. If, at the Closing, any of the Subscribers shall have failed to tender the Purchase Price for the Investment Units to be purchased by such Subscriber at the Closing or any of the conditions specified herein shall not have been fulfilled to the satisfaction of the Company, the Company shall, at its election, be relieved of all of its obligations under this Agreement to such Subscriber. The Company shall be under no obligation to accept this offer and to close this transaction until the Closing. 2.3 FURTHER UNDERTAKINGS BY SUBSCRIBERS. Each Subscriber undertakes to execute and deliver to the Company, within five (5) days after receipt of the Company's request therefor, such further designations, authorizations, and other instruments as the Company deems necessary or appropriate to carry out the provisions of this Agreement. 2.4 DISCRETION TO USE FUNDS. The Company shall be entitled to use the funds received from the sale of the Investment Units immediately upon its acceptance of the subscription contemplated herein. No minimum amount of Investment Units shall be required to be sold (i) by the Company in the Offering, or (ii) before a Closing occurs. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to the Subscriber as follows: 3.1 DUE ORGANIZATION. It is a corporation duly organized, validly existing, and in good corporate standing under the laws of the State of Delaware. 3.2 SALE OF SECURITIES. The Notes and Shares included in each Investment Unit will be duly authorized and enforceable. 4. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. The Subscriber hereby represents and warrants as follows: 4.1 RELIANCE ON REPRESENTATIONS AND WARRANTIES. The Subscriber acknowledges that the Company is offering the Investment Units in reliance upon the representations, warranties, and other information set forth by the Subscriber. The Subscriber undertakes to notify the Company immediately of any changes in any of the representations, warranties, and other information contained herein. 4.2 SUBSCRIBER'S AUTHORITY. The Subscriber represents that he has full legal power and authority to enter into this Agreement and to purchase the Investment Units. 4.3 RISKS ASSOCIATED WITH OFFERING. The Subscriber recognizes that the purchase of the Investment Units involves a high degree of risk in that (i) he may not be able to liquidate his investment; (ii) transferability is extremely limited; and (iii) in the event of a disposition, he could sustain the loss of his entire investment. In addition, the Subscriber recognizes -3- 11 additional risks, including, but not limited to, those set forth in the Overview of Financing and the Information Statement of the Company, dated as of November 14, 1996 (the "Information Statement"), which risks the Subscriber has carefully read and considered. 4.4 INVESTMENT REPRESENTATIONS. The Subscriber represents that he is acquiring the Investment Units hereunder for his own account and not with a view to reselling or otherwise distributing such securities in violation of any Federal or state securities laws and understands and agrees that the securities to be issued hereunder are restricted on transfer and must be held unless (i) they are registered under the Securities Act of 1933, as amended, (the "Act") or (ii) an exemption from registration is available, and the Company has received an opinion of counsel, in form and substance satisfactory to it, to such effect. There can be no assurance that the Company will make available to the public at any time in the future information necessary to enable security holders to make routine sales of securities pursuant to Rule 144 under the Act. 4.5 SOPHISTICATION AND ABILITY TO RISK LOSS OF INVESTMENT. The Subscriber acknowledges that he has prior investment experience, including investment in non-listed and non-registered securities, or he has employed the services of an investment advisor, attorney or accountant to read all of the documents furnished or made available by the Company both to him and to all other prospective subscribers in connection with the Offering and to evaluate the merits and risks of such an investment on his behalf; that he recognizes the highly speculative nature of this investment; that a noteholder, including the Subscriber, may not at any time demand the withdrawal of capital from the Company; and that he is able to bear the economic risk he hereby assumes, namely, of holding the Investment Units for an indefinite period of time and of losing his entire investment. The Subscriber represents that his overall commitment to investments that are not readily marketable is not excessive in view of his net worth and financial circumstances and the purchase of the Investment Units will not cause such commitment to become excessive, and that the investment is a suitable one for the Subscriber. 4.6 ACCESS TO INFORMATION. The Subscriber acknowledges receipt of the Overview of Financing and the Information Statement, which contains certain audited and unaudited financial statements of the Company. The Subscriber hereby represents and acknowledges that he has carefully read the Overview of Financing and Information Statement furnished by the Company during the course of this transaction and all additional information regarding the Company that he had requested or desired to know; that all documents which could be reasonably provided have been made available for his inspection and review; that he has been afforded the opportunity to ask questions of and receive answers from duly authorized officers or other representatives of the Company concerning the terms and conditions of the Offering, and that he has received any additional information that he has requested. The Subscriber further represents and acknowledges that because certain of the financial statements and financial information included in the Information Statement are unaudited, that such statements and information are subject to change and that the final financial statements may report the Company's results of operations for and financial condition as of the respective dates of such statements to be less than and/or worse than the financial statements provided. -4- 12 4.7 FINDINGS OR RECOMMENDATIONS. The Subscriber is aware that neither the Securities and Exchange Commission (the "SEC") nor the Attorney General of the State of Delaware nor any other federal or state agency has made any findings or determination as to the fairness of the Investment Units, nor has any recommendation or any endorsement of the Investment Units has been made and the Investment Units offered are not registered under federal, Delaware or any other state law and the securities are restricted securities within the meaning of the U.S. federal securities laws because of the Company's representations that this is intended to be a non-public offering pursuant to Section 4(2) and/or 4(6) of the Act. 4.8 REGISTRATION EXEMPTION. The Subscriber understands that the Investment Units have not been registered under the Act by reason of a claimed exemption under the provisions of the Act which depends, in part, upon his investment intention. In this connection, the Subscriber understands that it is the position of the SEC that the statutory basis for such exemption would not be present if his representation merely meant that his present intention was to hold such securities for a short period, such as the capital gains period of tax statutes, for a deferred sale, for a market rise, assuming that a market develops, or for any other fixed period. The Subscriber realizes that, in the view of the SEC's position, a purchase now with an intent to resell would represent a purchase with an intent inconsistent with his representation to the Company, and the SEC might regard such a sale or disposition as a deferred sale to which the exemption is not available. 4.9 LIMITED AND NO PUBLIC MARKET FOR SECURITIES. The Subscriber understands that no public market for the Notes exists and no public market can be expected to develop for the Notes. The Company's Common Stock trades on the NASDAQ System. The Subscriber understands that trading of the Company's Common Stock has been limited and no assurance can be given that an active public trading market for the Common Stock will develop, or if developed, be sustained. The Subscriber understands that it may not be possible to liquidate an investment in the Investment Units on an emergency basis. The Subscriber understands that the Company makes no representation or warranty regarding its fulfillment in the future of any reporting requirements under the Securities Exchange Act of 1934, as amended, or its dissemination to the public of any current financial or other information concerning the Company, if required as one of the conditions of the availability of any exemption. The Subscriber understands and hereby acknowledges that the Company is under no obligation to register the Investment Units under the Act. 4.10 LEGENDS. The Subscriber consents to the placement of any legends required by state securities laws and of a legend, in a form satisfactory to the Company's counsel, on any certificate or other document evidencing the Notes or the Shares indicating that they have not been registered under the Act and setting forth or referring to the restrictions on transferability and sale thereof. The Subscriber is aware that the Company will make a notation in its appropriate records with respect to the restrictions on the transferability of such securities. 4.11 UNREGISTERED SECURITIES. The Subscriber understands that the Notes and the Shares are not registered under the Act, or the securities laws of any state, and that the Company is under no obligation to so register them. As such, the Notes and the Shares will be considered -5- 13 "restricted securities" and may not be transferred unless registered under the Act or an exemption under the Act and the relevant state securities laws is available. The Company may, if it desires, permit the transfer out of the Subscriber's name of the Investment Units only if the Subscriber's request for transfer is accompanied by an opinion of counsel reasonably satisfactory to the Company that neither the sale nor the proposed transfer results in a violation of the Act or any applicable state "blue sky" laws (collectively, the "Securities Laws"). The Subscriber agrees to indemnify, and hold the Company and its directors, officers, and controlling persons and their respective heirs, representatives, successors, and assigns harmless and to indemnify them against all liabilities, costs, and expenses incurred by them as a result of any misrepresentation made by Subscriber contained herein or in the Confidential Subscriber Questionnaire (attached hereto and made a part hereof) or material breach of an agreement or representation made by the Subscriber herein or any sale or distribution by the Subscriber in violation of any Securities Laws. 4.12 DECISION TO INVEST. In making his decision to purchase the Investment Units herein subscribed for, the Subscriber is not relying on any representations or warranties from the Company or any of its officers, directors, affiliates, employees or agents, other than the information provided by the Company to him in this Offering. In addition, the Subscriber represents that he is not purchasing any Investment Units as a result of or subsequent to (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio or (ii) any seminar or meeting whose attendees, including the Subscriber, were invited as a result of, subsequent to, or pursuant to, any general solicitation. 4.13 NO PROTECTION OF SUBSCRIBER'S INTERESTS. The Subscriber has been advised that the Company has not retained any independent professionals to review or comment on this Offering or otherwise protect the interests of the Subscriber. Although the Company has retained its own counsel, neither such firm nor any other firm has acted on behalf of the Subscriber, and any Subscriber of the Investment Units offered hereby should not rely on the firm so retained by the Company with respect to any matters herein described. 4.14 SUBSCRIBER'S FINANCIAL CONDITION. The Subscriber has completed the accompanying confidential Subscriber Questionnaire and has delivered it herewith and represents and warrants that it accurately sets forth his financial condition on the date hereof. The Subscriber has no reason to expect there will be any material adverse change in his financial condition and will immediately advise the Company of any such changes occurring prior to any Closing or termination of the Offering. 4.15 NO REPRESENTATIONS ON COMPANY'S RESULTS OF OPERATIONS. There has never been represented, guaranteed, or warranted to the Subscriber by any broker, the Company, its officers, directors, agents, or employees or any other person, expressly or by implication (i) the percentage of profits and/or amount of or type of consideration, profit or loss to be realized, if any, as a result of the Company's operations; and (ii) that the past performance or experience on the part of the management of the Company, or of any other person, will in any way result in the overall profitable operations of the Company. -6- 14 4.16 NO BROKERAGE COMMISSIONS. The Subscriber represents the he has taken no action that would give rise to any claim by any person for brokerage commissions, finders' fees or the like relating to this Subscription Agreement or the transactions contemplated hereby (other than commissions to be paid by the Company to the Placement Agent). 4.17 ENTITY ORGANIZATION AND AUTHORITY. The Subscriber represents that if the Subscriber is a corporation, partnership, association, joint stock company, trust, unincorporated organization or other entity, such entity was not formed for the specific purpose of acquiring the Investment Units, such entity is duly organized, validly existing and in good standing under the laws of the state of its organization, the consummation of the transactions contemplated hereby is authorized by, and will not result in, a violation of state law or its charter or other organizational documents, such entity has full power and authority to execute and deliver this Agreement and all other related agreements or certificates and to carry out the provisions hereof and thereof and to purchase and hold the securities constituting the Investment Units. The Subscriber also represents that (i) the execution and delivery of this Agreement has been duly authorized by all necessary action; (ii) this Agreement has been duly executed and delivered on behalf of such entity; and (iii) is a legal, valid and binding obligation of such entity. 4.18 REPRESENTATIVE OR FIDUCIARY CAPACITY. The Subscriber warrants that if he is executing this Agreement in a representative or fiduciary capacity, he has full power and authority to execute and deliver this Agreement in such a capacity and on behalf of the subscribing individual, ward, partnership, trust estate, corporation or other entity for whom the Subscriber is executing this Agreement, and such individual, ward, partnership, trust, estate, corporation or other entity has full right and power to perform pursuant to this Agreement and make an investment in the Company, and this Agreement constitutes a legal, valid and binding obligation of such entity. 4.19 REVIEW OF SUBSCRIPTION AGREEMENT. The Subscriber understands that the Company will review this Agreement and is hereby given authority by the undersigned to call his bank or place of employment or otherwise review the financial standing of the Subscriber; and it is further agreed and understood that the Company reserves the unrestricted right to reject or limit any subscription and to close the Offering at any time. 5. REGISTRATION OF SHARES. 5.1 REGISTRATION RIGHTS. (a) At any time within nine (9) months after the closing of an underwritten public offering in which the Company raises gross proceeds of at least $4,000,000 and provided that the Company is eligible to use a Form S-3 registration statement, the Company will use its best reasonable efforts to prepare and file with the Securities and Exchange Commission a registration statement on Form S-3 (or any successor form) relating to the Shares sold in this Offering. Other selling security holders may participate in this registration at the sole option of the Company. In addition, the Company may, in its sole discretion, at any time and after notice to the Subscribers, -7- 15 elect to register all of such Shares on a Form SB-2 or Form S-3 (or other appropriate form) in connection with any other registration statement or on a stand-alone basis. (b) If permitted by applicable law and regulation, the Company at the request of the holders owning a majority of the Shares, shall file such amendments and/or supplements to such registration statement, and, subject to this Section 5 hereof, take such other steps as may be required to maintain such registration statement in effect, and to keep the information therein current, until the earlier of the sale of all of the Shares included in the registration statement or the expiration of nine (9) months from the effective date of such registration statement. (c) The Company will use its reasonable efforts to furnish to the security holders participating in such registration (the "Selling Security Holders") and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as such underwriters may reasonably request in order to facilitate the public offering of such securities. (d) In connection with any registration statement referred to in Section 6 of this Agreement, Subscriber will furnish to the Company such information as the Company may reasonably require from the Subscriber for inclusion in the registration statement (and the prospectus included therein). (e) The Company's obligations under this Agreement shall be conditioned upon the Subscriber executing and delivering to the Company an appropriate agreement, if necessary in the reasonable opinion of counsel to the Company, in form reasonably satisfactory to counsel for the Company, that it will comply with all anti-stabilization, manipulation, and similar provisions of Section 10 of the 1934 Act, and any rules promulgated thereunder and will furnish to the Company information about sales made in such public offering. (f) The Company, at its expense, shall cause all of the Shares included in a registration statement referred to in Section 5 hereof to be qualified under the laws of such reasonable number of jurisdictions, as the Company may reasonably designate, and the Company will continue such qualification in effect for such period of time not to exceed nine (9) months from the effective date of the registration statement referred to in Section 5 which relates to such Shares, provided, however, that the Company shall not for any purpose be required to execute a general consent to service of process or to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified. (g) The Company shall not be required to effect any registration within three months after the effective date of any other underwritten registration statement of the Company. The Company shall have the right to designate the managing underwriter in respect of a public offering pursuant to this Section 5.1. -8- 16 (h) If at the time the Company is registering the Shares pursuant to this subsection 5.1, the Company is engaged or has fixed demonstrable plans to engage within ninety (90) days of the time of the request in an underwritten public offering (other than on a Form S-4 or S-8) as to which the holders may include Common Stock pursuant to subsection 5.1 or is engaged in any other activity which, in the good faith determination of the Company's Board of Directors, would be adversely affected by the registration to the material detriment of the Company, then the Company may, at its option (i) refuse to register the Shares or (ii) direct that if the managing underwriter agrees and the Company effectuates the registration, the holders of the Shares shall agree not to publicly sell such registered Shares for such period of time as requested by the underwriter managing the public offering or by the Company's Board of Directors. 5.2 EXPENSES. (a) With respect to the registration right granted in Section 5.1 hereof, all fees, costs and expenses of an incidental to such registration, inclusion and public offering (as specified in paragraph (b) below) in connection therewith shall be borne by the Company, provided, however, that any Selling Security Holders participating in such registration shall bear their pro rata share of the underwriting discount and commissions and transfer taxes, if any. (b) The fees, costs and expenses of registration to be borne by the Company as provided in paragraph (a) above shall include, without limitation, all registration, filing, and NASD fees, printing expenses, fees and disbursements of counsel and accountants for the Company, and all legal fees and disbursements and other expenses of complying with state securities or blue sky laws of any jurisdictions in which the securities to be offered are to be registered and qualified (except as provided in 5.2(a) above). Fees and disbursements of counsel and accountants for the selling security holders and any other expenses incurred by the selling security holders not expressly included above shall be borne by the Selling Security Holders. 6. MISCELLANEOUS 6.1 Notices. Any notice or other communication given hereunder shall be deemed sufficient if in writing and sent by registered or certified mail, return receipt requested, addressed to the Company, at its registered office, One Lowell Research Center, 847 Rogers Street, Lowell, Massachusetts 01852, Attention: Juan J. Amodei, Ph.D., President, with a copy to O'Connor, Broude & Aronson, 950 Winter Street, Suite 2300, Waltham, Massachusetts 02154, Attention: Marguerite J. Hill, Esquire, and to the Subscriber at his address indicated on the last page of this Subscription Agreement. Notices shall be deemed to have been given on the date of mailing, except notices of change of address, which shall be deemed to have been given when received. 6.2 Modifications. This Subscription Agreement shall not be changed, modified or amended except by a writing signed by the parties to be charged, and this Subscription Agreement may not be discharged except by performance in accordance with its terms or by a writing signed by the party to be charged. -9- 17 6.3 BINDING EFFECT; ENTIRE AGREEMENT. This Subscription Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, legal representatives, successors, and assigns. This Subscription Agreement sets forth the entire agreement and understanding between the parties as to the subject matter thereof and merges and supersedes all prior discussions, agreements, and understandings of any and every nature among them. 6.4 GOVERNING LAW. This Subscription Agreement and its validity, construction and performance shall be governed in all respects by the laws of the Commonwealth of Massachusetts, without regard to its conflict of laws principles. Subscriber agrees that any disputes arising with respect to or in connection with this Agreement shall be finally decided in accordance with the rules of arbitration. 6.5 USE OF SPEECH. All pronouns contained herein and any variations thereof, shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the parties may require. 6.6 HEADINGS. Headings contained in this Agreement are only as a matter of convenience and in no way define, limit, extend, or describe the scope of this Agreement or the intent of any provisions hereof. 6.7 UNENFORCEABILITY. If any provision of this Agreement is or becomes or is deemed invalid, illegal, or unenforceable in any jurisdiction, to the maximum extent permissible, such provision shall be deemed amended to conform to applicable laws so as to be materially altering the intention of the parties, it shall be stricken and the remainder of this Agreement shall remain in full force and effect. 6.8 ASSIGNMENT. The Subscribers may not assign this Agreement or its rights hereunder without the Company's written consent. 6.9 MULTIPLE SUBSCRIBERS. If more than one person is signing this Agreement, each representation, warranty, and undertaking stated herein shall be the joint and several representation, warranty, and undertaking of each such person. Notwithstanding the foregoing, no Subscriber shall be liable with respect to any representation, warranty or undertaking of any other Subscriber who signed a separate Subscription Agreement. The Subscribers understand the meaning and legal consequences of the representations and warranties contained in this Agreement. 6.10 SUBMISSION TO JURISDICTION. Each of the parties submits to the jurisdiction of any state or federal court sitting in the Commonwealth of Massachusetts, in any action or proceeding arising out of or relating to this Agreement and offering and agrees that all claims in respect of the action or proceeding may be heard and determined in any such court. Each party also agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Each of the parties waives any defense or inconvenient forum to the maintenance of any -10- 18 action or proceeding so brought and waives any bond, surety, or other security that might be required of any other party with respect thereto. 6.11 BLUE SKY QUALIFICATION. The right to purchase Investment Units under this Agreement is expressly conditioned upon the exemption from qualification of the offer and sale of the Investment Units from applicable federal and state securities laws. The Company shall not be required to qualify this transaction under the securities laws of any jurisdiction and, should qualification be necessary, the Company shall be released from any and all obligations to maintain its offer, and may rescind any sale contracted, in the jurisdiction. 6.12 CONFIDENTIALITY. The Subscriber acknowledges and agrees that any information or data it has acquired from or about the Company, not otherwise properly in the public domain, was received in confidence. The Subscriber agrees not to divulge, communicate or disclose, except as may be required by law or for the performance of this Agreement, or use to the detriment of the Company or for the benefit of any other person or persons, or misuse in any way, any confidential information of the Company, including any scientific, technical, trade or business secrets of the Company and any scientific, technical, trade or business materials that are treated by the Company as confidential or proprietary, including, but not limited to, ideas, discoveries, inventions, developments and improvements belonging to the Company and confidential information obtained by or given to the Company about or belonging to third parties. 6.13 SURVIVAL. The Subscriber's representations and warranties made in this Agreement shall survive the execution and delivery of this Agreement and of the Investment Units. 6.14 EXPENSES. Each of the parties hereto shall pay its own fees and expenses (including the fees of any attorneys, accountants, appraisers or others engaged by such party) in connection with this Agreement and the transactions contemplated hereby, whether or not the transactions contemplated hereby are consummated. 6.15 COUNTERPARTS. This Agreement may be executed simultaneously in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document binding all parties, notwithstanding that all parties are not signatories to the same counterpart. Upon the execution and delivery of this Subscription Agreement by the Subscriber, this Subscription Agreement shall become a binding obligation of the Subscriber with respect to the purchase of Investment Units as herein provided; subject, however, to the right hereby reserved to the Company to enter into the same agreements with other subscribers and to add and/or to delete other persons as subscribers. IN WITNESS WHEREOF, the parties have executed this Subscription Agreement as of this ___ day of January, 1997. By: ----------------------------- -11- 19 ----------------------------------- Street Address ----------------------------------- City, State, Zip Code ACCEPTED: INDUSTRIAL IMAGING CORPORATION By: ------------------------------ Juan J. Amodei, Ph.D. President Date: ---------------------------- -12- 20 IMPORTANT: Subscriber Name:_______________________ Please Complete Booklet No.:___________________________ INDIVIDUAL SUBSCRIBER QUESTIONNAIRE ------------------------------ INDUSTRIAL IMAGING CORPORATION ------------------------------ Industrial Imaging Corporation One Lowell Research Center 847 Rogers Street Lowell, Massachusetts 01852 The information contained in this Questionnaire is being furnished in order to determine whether the undersigned's subscription to purchase Investment Units of Industrial Imaging Corporation (the "Company") may be accepted. ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED CONFIDENTIALLY. The undersigned understands, however, that the Company may present this Questionnaire to such parties as it deems appropriate if called upon to establish that the proposed offer and sale of the Shares is exempt from registration under the Securities Act of 1933, as amended, or meets the requirements of applicable state securities or "blue sky" laws. Further, the undersigned understands that the Offering is required to be reported to the Securities and Exchange Commission and to various state securities or "blue sky" regulators. IF YOU ARE PURCHASING INVESTMENT UNITS WITH YOUR SPOUSE, YOU MUST BOTH SIGN THE SIGNATURE PAGE (PAGE A-5). IF YOU ARE PURCHASING INVESTMENT UNITS WITH ANOTHER PERSON NOT YOUR SPOUSE, YOU MUST EACH FILL OUT A SEPARATE QUESTIONNAIRE. Please make a photocopy of pages A-1 to A-5 and return both completed Questionnaires to the Company in the same envelope. A-1 21 I. PLEASE INDICATE DESIRED TYPE OF OWNERSHIP OF INVESTMENT UNITS ___ Individual ___ Joint Tenants (rights of survivorship) ___ Tenants in Common (no rights of survivorship) II. PLEASE CHECK ANY OF STATEMENTS 1-3 BELOW THAT APPLY TO YOU ___ 1. I have an individual net worth* or joint net worth with my spouse in excess of $1,000,000. ___ 2. I have had an individual income* in excess of $200,000 in each of the two most recent years and I reasonably expect an individual income in excess of $200,000 for the current year. NOTE: IF YOU ARE BUYING JOINTLY WITH YOUR SPOUSE, YOU MUST EACH HAVE AN INDIVIDUAL INCOME IN EXCESS OF $200,000 IN EACH OF THESE YEARS IN ORDER TO CHECK THIS BOX. ___ 3. My spouse and I have had a joint income* in excess of $300,000 in each of the two most recent years and I reasonably expect a joint income in excess of $300,000 for the current year. III. OTHER CERTIFICATIONS By signing the Signature Page, I certify the following (or, if I am purchasing Investment Units with my spouse as co-owner, each of us certifies the following): (a) that I am at least 21 years of age; (b) that my purchase of Investment Units will be solely for my own account and not for the account of any other person (other than my spouse, if co-owner); (c) that the name, home address and social security number or taxpayer identification number as set forth in this Questionnaire are true, correct and complete; and (d) that one of the following is true and correct (check one): A-2 22 Spouse, if Subscriber Co-Owner ___ ___ (i) I am a United States citizen or resident of the United States for United States federal income tax purposes. ___ ___ (ii) I am neither a United States citizen nor a resident of the United States for United States federal income tax purposes. - ------------- * For purposes of this Questionnaire, the term "net worth" means the excess of total assets over total liabilities. In determining income, a subscriber should add to his or her adjusted gross income any amounts attributable to tax-exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depletion, contributions to IRA or Keogh retirement plans, alimony payments and any amount by which income from long-term capital gains has been reduced in arriving at adjusted gross income. IV. GENERAL INFORMATION (a) PERSONAL INFORMATION. Subscriber Name:___________________________________________________________________________ Social Security or Taxpayer Identification Number:______________________________ Residence Address:______________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Residence Telephone Number:_____________________________________________________ (Area Code) (Number) Business Address:_______________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Business Telephone Number:______________________________________________________ (Area Code) (Number) A-3 23 I prefer to have correspondence sent to: ____ Residence ____ Business SPOUSE, IF CO-OWNER Name:___________________________________________________________________________ Social Security or Taxpayer Identification Number:______________________________ Residence Address:______________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Residence Telephone Number (if different from Subscriber's):____________________ (Area Code) (Number) Business Address:_______________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Business Telephone Number (if different from Subscriber's):_____________________ (Area Code) (Number) I prefer to have correspondence sent to: ____ Residence ____ Business V. SIGNATURE The Signature Page to this Questionnaire is contained on page A-5, entitled Individual Signature Page. A-4 24 INDIVIDUAL SIGNATURE PAGE ------------------------------ INDUSTRIAL IMAGING CORPORATION ------------------------------ Your signature on this Individual Signature Page evidences your agreement to be bound by the Questionnaire and the Subscription Agreement. 1. The undersigned represents that (a) he/she has read and understands this Subscription Agreement, (b) the information contained in this Questionnaire is complete and accurate and (c) he/she will telephone the Company (contact at 508-937-5400) immediately if any material change in any of this information occurs before the acceptance of his/her subscription and will promptly send the Company written confirmation of such change. ____________________ Number of Investment Units applied for ____________________ Date _________________________________ Name (Please Type or Print) _________________________________ Signature _________________________________ Name of Spouse if Co-Owner (Please Type or Print) _________________________________ Signature of Spouse if Co-Owner IF YOU ARE PURCHASING INVESTMENT UNITS WITH YOUR SPOUSE, YOU MUST BOTH SIGN THE SIGNATURE PAGE (PAGE A-5). IF YOU ARE PURCHASING INVESTMENT UNITS WITH ANOTHER PERSON NOT YOUR SPOUSE, YOU MUST EACH FILL OUT A SEPARATE QUESTIONNAIRE. Please make a photocopy of pages A-1 to A-5 and return both completed Questionnaires to the Company in the same envelope. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER ANY STATE LAWS, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL, CONCURRED IN BY COUNSEL TO THE COMPANY, HAS BEEN DELIVERED TO THE EFFECT THAT REGISTRATION OF SUCH SECURITIES IS NOT REQUIRED. A-5 25 IMPORTANT: Subscriber Name:___________ Please complete Booklet No.:_______________ TRUST QUESTIONNAIRE __________________________________ INDUSTRIAL IMAGING CORPORATION __________________________________ Industrial Imaging Corporation One Lowell Research Center 847 Rogers Street Lowell, Massachusetts 01852 The information contained in this Questionnaire is being furnished in order to determine whether the undersigned TRUST's subscription to purchase Investment Units of Industrial Imaging Corporation (the "Company") may be accepted. NOTE: RETIREMENT PLANS SHOULD COMPLETE THE QUESTIONNAIRE ON PAGES E-1 to E-4. ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED CONFIDENTIALLY. The undersigned TRUST understands, however, that the Company may present this Questionnaire to such parties as it deems appropriate if called upon to establish that the proposed offer and sale of the Investment Units is exempt from registration under the Securities Act of 1933, as amended, or meets the requirements of applicable state securities or "blue sky"' laws. Further, the undersigned TRUST understands that the Offering is required to be reported to the Securities and Exchange Commission and to various state securities or "blue sky" regulators. I. PLEASE CHECK STATEMENTS 1 AND 2 BELOW, AS APPLICABLE ___ 1. (a) the TRUST has total assets in excess of $5,000,000; and (b) the TRUST was not formed for the specific purpose of acquiring the Investment Units; (c) the purchase by the TRUST is directed by a person who has such knowledge and experience in financial and business matters that he/she is capable of evaluating the merits and risks of an investment in the Investment Units; and B-1 26 (d) the purchase by the TRUST is directed by a person who has such knowledge and experience in financial and business matters that he/she is capable of evaluating the merits and risks of an investment in the Investment Units. ___ 2. The grantor of the TRUST may revoke the TRUST at any time; the grantor retains sole investment control over the assets of the trust and (a) the grantor is a natural person whose individual net worth* or joint net worth with the grantor's spouse exceeds $1,000,000; or (b) the grantor is a natural person who had an individual income* in excess of $200,000 in each of the two most recent years and who reasonably expects an individual income in excess of $200,000 in the current year; or (c) the grantor is a natural person who, together with his or her spouse, has had a joint income* in excess of $300,000 in each of the two most recent years and who reasonably expects a joint income in excess of $300,000 in the current year. IF YOU CHECKED STATEMENT 2 IN SECTION I AND DID NOT CHECK STATEMENT 1, THE GRANTOR MUST PROVIDE A COMPLETED INDIVIDUAL SUBSCRIBER QUESTIONNAIRE (PAGES A-1 TO A-5) FOR EACH GRANTOR. II. OTHER CERTIFICATIONS By signing the Signature Page, the undersigned certifies the following: (a) that the TRUST's purchase of the Investment Units will be solely for the TRUST's own account and not for the account of any other person; (b) that the TRUST's purchase of the Investment Units is within the investment powers and authority of the TRUST (as set forth in the declaration of trust or other governing instrument) and that all necessary consents, approvals and authorizations for such purchase have been obtained and that each person who signs the Signature Page has all requisite power and authority as trustee to execute this Questionnaire and the Subscription Agreement on behalf of the TRUST; (c) that the TRUST has not been established in connection with either (i) an employee benefit plan (as defined in Section 3(3) of ERISA), whether or not subject to the provisions of Title I of ERISA, or (ii) a plan described in Section 4975(e)(i) of the Internal Revenue Code; B-2 27 (d) that the TRUST's name, address of principal office, place of formation and taxpayer identification number as set forth in this Questionnaire are true, correct and complete; and (e) that one of the following is true and correct (check one): ___ (i) the TRUST is an estate or trust whose income from sources outside of the United States is includable in its gross income for United States federal tax purposes regardless of its connection with a trade or business carried on in the United States. ___ (ii) the TRUST is an estate or trust whose income from sources outside the United States is not includable in its gross income for United States federal income taxes purposes regardless of its connection with a trade or business carried on in the United States. - ------------------- * For purposes of this Questionnaire, the term "net worth" means the excess of total assets over total liabilities. In determining income, a subscriber should add to his or her adjusted gross income any amounts attributable to tax-exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depletion, contributions to IRA or Keogh retirement plans, alimony payments and any amount by which income from long-term capital gains has been reduced in arriving at adjusted gross income. III. GENERAL INFORMATION (a) PROSPECTIVE SUBSCRIBER (THE TRUST) Name:___________________________________________________________________________ Address:________________________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Address for Correspondence (if different): ________________________________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) B-3 28 Telephone Number:_______________________________________________________________ (Area Code) (Number) State in which Formed:__________________________________________________________ Date of Formation:______________________________________________________________ Taxpayer Identification Number:_________________________________________________ (b) TRUSTEES WHO ARE EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE TRUST Name(s) of Trustee(s): IV. ADDITIONAL INFORMATION A TRUST MUST ATTACH A COPY OF ITS DECLARATION OF TRUST OR OTHER GOVERNING INSTRUMENT, AS AMENDED, AS WELL AS ALL OTHER DOCUMENTS THAT AUTHORIZE THE TRUST TO INVEST IN THE INVESTMENT UNITS. ALL DOCUMENTATION MUST BE COMPLETE AND CORRECT. V. SIGNATURE The Signature Page to this Questionnaire is contained on page B-5, entitled Trust Signature Page. B-4 29 TRUST SIGNATURE PAGE ------------------------------ INDUSTRIAL IMAGING CORPORATION ------------------------------ Your signature on this TRUST Signature Page evidences the agreement by the Trustee(s), on behalf of the TRUST, to be bound by the Questionnaire and the Subscription Agreement. 1. The undersigned represent that (a) the information contained in this Questionnaire is complete and accurate and (b) the TRUST will notify the Company (contact at 508-937-5400) immediately if any material change in any of this information occurs before the acceptance of the TRUST's subscription and will promptly send the Company written confirmation of such change. 2. The undersigned Trustees hereby certify that they have read and understand this Subscription Agreement. 3. The undersigned TRUST hereby represents and warrants that the persons signing this Subscription Agreement on behalf of the TRUST are duly authorized to acquire the Investment Units and sign this Subscription Agreement on behalf of the TRUST and, further, that the undersigned TRUST has all requisite authority to purchase such Investment Units and enter into this Subscription Agreement. ____________________ Number of Investment Units applied for ____________________ Date ______________________________________ Title of Trust (Please Type or Print) By:___________________________________ Signature of Trustee Name of Trustee:______________________ (Please Type or Print) By:___________________________________ Signature of Co-Trustee Name of Co-Trustee:___________________ (Please Type or Print) THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER ANY STATE LAWS, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL, CONCURRED IN BY COUNSEL TO THE COMPANY, HAS BEEN DELIVERED TO THE EFFECT THAT REGISTRATION OF SUCH SECURITIES IS NOT REQUIRED. B-5 30 IMPORTANT: Subscriber Name:______________________ Please complete Booklet No.:__________________________ PARTNERSHIP QUESTIONNAIRE ------------------------------ INDUSTRIAL IMAGING CORPORATION ------------------------------ Industrial Imaging Corporation One Lowell Research Center 847 Rogers Street Lowell, Massachusetts 01852 The information contained in this Questionnaire is being furnished in order to determine whether the undersigned PARTNERSHIP's subscription to purchase Investment Units of Industrial Imaging Corporation (the "Company") may be accepted. ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED CONFIDENTIALLY. The undersigned PARTNERSHIP understands, however, that the Company may present this Questionnaire to such parties as it deems appropriate if called upon to establish that the proposed offer and sale of the Investment Units is exempt from registration under the Securities Act of 1933, as amended, or meets the requirements of applicable state securities or "blue sky" laws. Further, the undersigned PARTNERSHIP understands that the Offering is required to be reported to the Securities and Exchange Commission and to various state securities or "blue sky" regulators. I. PLEASE CHECK ANY OF STATEMENTS 1-3 BELOW THAT APPLY TO THE PARTNERSHIP ___ 1. Each of the partners of the undersigned PARTNERSHIP is able to certify that such partner meets at least one of the following conditions: (a) The partner is a natural person whose individual net worth* or joint net worth with his or her spouse exceeds $1,000,000. (b) The partner is a natural person whose individual income* was in excess of $200,000 in each of the two most recent years and who reasonably expects an individual income in excess of $200,000 in the current year. C-1 31 ___ 2. Each of the partners of the undersigned PARTNERSHIP is able to certify that such partner is a natural person who, together with his or her spouse, has had a joint income* in excess of $300,000 in each of the two most recent years and who reasonably expects a joint income in excess of $300,000 in the current year. ___ 3. The undersigned PARTNERSHIP:(a) was not formed for the specific purpose of acquiring the Investment Units; and (b) has total assets in excess of $5,000,000. IF YOU CHECKED STATEMENT 1 OR STATEMENT 2 IN SECTION I AND DID NOT CHECK STATEMENT 3, YOU MUST PROVIDE A LETTER SIGNED BY A GENERAL PARTNER OF THE UNDERSIGNED PARTNERSHIP LISTING THE NAME OF EACH PARTNER (WHETHER A GENERAL OR LIMITED PARTNER) AND THE REASON (UNDER STATEMENT 1 OR STATEMENT 2) SUCH PARTNER QUALIFIES AS AN ACCREDITED INVESTOR (ON THE BASIS OF NET WORTH, INDIVIDUAL INCOME OR JOINT INCOME), OR EACH PARTNER MUST PROVIDE A COMPLETED INDIVIDUAL SUBSCRIBER QUESTIONNAIRE (PAGES A-1 TO A-5). II. OTHER CERTIFICATIONS By signing the Signature Page, the undersigned certifies the following: (a) that the PARTNERSHIP's purchase of the Investment Units will be solely for the PARTNERSHIP's own account and not for the account of any other person; (b) that the PARTNERSHIP's name, address of principal office, place of formation and taxpayer identification number as set forth in this Questionnaire are true, correct and complete; and (c) that one of the following is true and correct (check one): ___ (i) the PARTNERSHIP is a partnership formed in or under the laws of the United States or any political subdivision thereof. ___ (ii) the PARTNERSHIP is not a partnership formed in or under the laws of the United States or any political subdivision thereof. - ---------------- * For purposes of this Questionnaire, the term "net worth" means the excess of total assets over total liabilities. In determining income, a subscriber should add to his or her adjusted gross income any amounts attributable to tax-exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depletion, contributions to IRA or Keogh retirement plans, alimony payments and any amount by which income from long-term capital gains has been reduced in arriving at adjusted gross income. C-2 32 III. GENERAL INFORMATION (a) PROSPECTIVE SUBSCRIBER (THE PARTNERSHIP) Name:___________________________________________________________________________ Principal Place of Business:____________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Address for Correspondence (if different):_________________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Telephone Number:_______________________________________________________________ (Area Code) (Number) State in which Formed:__________________________________________________________ Date of Formation:______________________________________________________________ Taxpayer Identification Number:_________________________________________________ Number of Partners:_____________________________________________________________ (b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE PARTNERSHIP ____________________________ Name ____________________________ Position or Title IV. SIGNATURE The Signature Page to this Questionnaire is contained on page C-4, entitled Partnership Signature Page. C-3 33 PARTNERSHIP SIGNATURE PAGE ------------------------------ INDUSTRIAL IMAGING CORPORATION ------------------------------ Your signature on this PARTNERSHIP Signature Page evidences the agreement by the PARTNERSHIP to be bound by the Questionnaire and the Subscription Agreement. 1. The undersigned PARTNERSHIP represents that (a) the information contained in this Questionnaire is complete and accurate and (b) the PARTNERSHIP will notify the Company (contact at 508-937-5400) immediately if any material change in any of this information occurs before the acceptance of the undersigned PARTNERSHIP's subscription and will promptly send the Company written confirmation of such change. 2. The undersigned PARTNERSHIP hereby certifies that it has read and understands this Subscription Agreement. 3. The undersigned PARTNERSHIP hereby represents and warrants that the person signing this Subscription Agreement on behalf of the PARTNERSHIP is a general partner of the PARTNERSHIP, has been duly authorized by the PARTNERSHIP to acquire the Investment Units and sign this Subscription Agreement on behalf of the PARTNERSHIP and, further, that the undersigned PARTNERSHIP has all requisite authority to purchase such Investment Units and enter into this Subscription Agreement. ______________________ Number of Investment Units applied for ______________________ Date ______________________________________ Name of Partnership (Please Type or Print) ______________________________________ Signature ______________________________________ Name (Please Type or Print) THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER ANY STATE LAWS, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL, CONCURRED IN BY COUNSEL TO THE COMPANY, HAS BEEN DELIVERED TO THE EFFECT THAT REGISTRATION OF SUCH SECURITIES IS NOT REQUIRED. C-4 34 IMPORTANT: Subscriber Name:___________ Please Complete Booklet No.:_______________ CORPORATION QUESTIONNAIRE ------------------------------ INDUSTRIAL IMAGING CORPORATION ------------------------------ Industrial Imaging Corporation One Lowell Research Center 847 Rogers Street Lowell, Massachusetts 01852 The information contained in this Questionnaire is being furnished in order to determine whether the undersigned CORPORATION's subscription to purchase Investment Units of Industrial Imaging Corporation (the "Company") may be accepted. ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED CONFIDENTIALLY. The undersigned CORPORATION understands, however, that the Company may present this Questionnaire to such parties as it deems appropriate if called upon to establish that the proposed offer and sale of the Investment Shares is exempt from registration under the Securities Act of 1933, as amended, or meets the requirements of applicable state securities or "blue sky" laws. Further, the undersigned CORPORATION understands that the Offering is required to be reported to the Securities and Exchange Commission and to various state securities or "blue sky" regulators. I. PLEASE CHECK ANY OF STATEMENTS 1-3 BELOW THAT APPLY TO THE CORPORATION ___ 1. Each of the shareholders of the undersigned CORPORATION is able to certify that such shareholder meets at least one of the following two conditions: (a) The shareholder is a natural person whose individual net worth* or joint net worth with his or her spouse exceeds $1,000,000; or (b) The shareholder is a natural person who had an individual income* in excess of $200,000 in each of the two most recent years and who reasonably expects an individual income in excess of $200,000 in the current year. D-1 35 ___ 2. Each of the shareholders of the undersigned CORPORATION is able to certify that such shareholder is a natural person who, together with his or her spouse, has had a joint income* in excess of $300,000 in each of the two most recent years and who reasonably expects a joint income in excess of $300,000 during the current year. ___ 3. The undersigned CORPORATION: (a) was not formed for the specific purpose of acquiring any Investment Units; and (b) has total assets in excess of $5,000,000. IF YOU CHECKED STATEMENT 1 OR STATEMENT 2 IN SECTION 1 AND DID NOT CHECK STATEMENT 3, YOU MUST PROVIDE A LETTER SIGNED BY AN OFFICER OF THE UNDERSIGNED CORPORATION LISTING THE NAME OF EACH SHAREHOLDER AND THE REASON (UNDER STATEMENT 1 OR STATEMENT 2) WHY SUCH SHAREHOLDER QUALIFIES AS AN ACCREDITED INVESTOR (ON THE BASIS OF NET WORTH, INDIVIDUAL INCOME OR JOINT INCOME), OR EACH SHAREHOLDER MUST PROVIDE A COMPLETED INDIVIDUAL SUBSCRIBER QUESTIONNAIRE (PAGES A-1 TO A-5). II. OTHER CERTIFICATIONS By signing the Signature Page, the undersigned certifies the following: (a) that the CORPORATION's purchase of the Investment Units will be solely for the CORPORATION's own account and not for the account of any other person or entity; (b) that the CORPORATION's name, address of principal office, place of incorporation and taxpayer identification number as set forth in this Questionnaire are true, correct and complete; and (c) that one of the following is true and correct (check one): ___ (i) the CORPORATION is a corporation organized in or under the laws of the United States or any political subdivision thereof. ___ (ii) the CORPORATION is a corporation which is neither created nor organized in or under the United States or any political subdivision thereof, but which has made an election under either Section 897(i) or 897(k) of the United States Internal Revenue Code of 1986, as amended, to be treated as a domestic corporation for certain purposes of United States federal income taxation (A COPY OF THE INTERNAL REVENUE SERVICE ACKNOWLEDGMENT OF THE UNDERSIGNED'S ELECTION MUST BE ATTACHED TO THIS SUBSCRIPTION AGREEMENT IF THIS PROVISION IS APPLICABLE). ___ (iii) neither (i) nor (ii) above is true. D-2 36 * For purposes of this Questionnaire, the term "net worth" means the excess of total assets over total liabilities. In determining income, a subscriber should add to his or her adjusted gross income any amounts attributable to tax-exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depletion, contributions to IRA or Keogh retirement plans, alimony payments and any amount by which income from long-term capital gains has been reduced in arriving at adjusted gross income. III. GENERAL INFORMATION (a) PROSPECTIVE SUBSCRIBER (THE CORPORATION) Name:___________________________________________________________________________ Principal Place of Business:____________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Address for Correspondence (if different):_________________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Telephone Number:_______________________________________________________________ (Area Code) (Number) State of Incorporation:_________________________________________________________ Date of Formation:______________________________________________________________ Taxpayer Identification Number:_________________________________________________ Number of Shareholders:_________________________________________________________ (b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE CORPORATION Name:___________________________________________________________________________ Position or Title:______________________________________________________________ IV. SIGNATURE The Signature Page to this Questionnaire is contained on page D-4, entitled Corporation Signature Page. D-3 37 CORPORATION SIGNATURE PAGE ------------------------------ INDUSTRIAL IMAGING CORPORATION ------------------------------ Your signature on this CORPORATION Signature Page evidences the agreement by the CORPORATION to be bound by the Questionnaire and the Subscription Agreement. 1. The undersigned CORPORATION represents that (a) the information contained in this Questionnaire is complete and accurate and (b) the CORPORATION will notify the Company (contact at 508-937-5400) immediately if any material change in any of the information occurs prior to the acceptance of the undersigned CORPORATION's subscription and will promptly send the Company written confirmation of such change. 2. The undersigned CORPORATION hereby certifies that it has read and understands this Subscription Agreement. 3. The undersigned CORPORATION hereby represents and warrants that the person signing this Subscription Agreement on behalf of the CORPORATION has been duly authorized by all requisite action on the part of the CORPORATION to acquire the Investment Units and sign this Subscription Agreement on behalf of the CORPORATION and, further, that the undersigned CORPORATION has all requisite authority to purchase the Investment Units and enter into this Subscription Agreement. ________________________ Number of Investment Units applied for ________________________ Date ________________________________________ Name of Corporation (Please Type or Print) By:_____________________________________ Signature Title:__________________________________ (Please Type or Print) THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER ANY STATE LAWS, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL, CONCURRED IN BY COUNSEL TO THE COMPANY, HAS BEEN DELIVERED TO THE EFFECT THAT REGISTRATION OF SUCH SECURITIES IS NOT REQUIRED. D-4 38 IMPORTANT: Subscriber Name:___________ Please Complete Booklet No.:_______________ RETIREMENT PLAN QUESTIONNAIRE ------------------------------ INDUSTRIAL IMAGING CORPORATION ------------------------------ Industrial Imaging Corporation One Lowell Research Center 847 Rogers Street Lowell, Massachusetts 01852 The information contained in this Questionnaire is being furnished in order to determine whether the undersigned RETIREMENT PLAN's subscription to purchase Investment Units of Industrial Imaging Corporation (the "Company") may be accepted. ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED CONFIDENTIALLY. The undersigned RETIREMENT PLAN understands, however, that the Company may present this Questionnaire to such parties as it deems appropriate if called upon to establish that the proposed offer and sale of the Investment Units is exempt from registration under the Securities Act of 1933, as amended, or meets the requirements of applicable state securities or "blue sky" laws. Further, the undersigned RETIREMENT PLAN understands that the Offering is required to be reported to the Securities and Exchange Commission and to various state securities or "blue sky" regulators. I. PLEASE CHECK ANY OF THE FOLLOWING STATEMENTS, AS APPLICABLE ___ 1. The undersigned RETIREMENT PLAN certifies that it is an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 ("ERISA") and: (a) the investment decisions are made by a plan fiduciary as defined in Section 3(21) of ERISA that (i) is either a bank, insurance company or registered investment advisor or (ii) is a savings and loan association; or (b) The undersigned RETIREMENT PLAN has total assets in excess of $5,000,000; or E-1 39 (c) The undersigned RETIREMENT PLAN is self-directed, with investment decisions made solely by persons each of whom satisfies at least one of the following conditions: (i) such person's individual net worth* or joint net worth with his or her spouse exceeds $1,000,000; or (ii) such person had an individual income* in excess of $200,000 in each of the two most recent years and reasonably expects an individual income in excess of $200,000 in the current year; or (iii) such person together with his or her spouse, had a joint income* in excess of $300,000 in each of the two most recent years and reasonably expects a joint income in excess of $300,000 in the current year. ___ 2. The undersigned RETIREMENT PLAN certifies that it is an employee benefit plan, Keogh plan or Individual Retirement Account in which each participant satisfies at least one of the following conditions: (a) such person's individual net worth* or joint net worth with his or her spouse exceeds $1,000,000; or (b) such person had an individual income* in excess of $200,000 in each of the two most recent years and reasonably expects an individual income in excess of $200,000 in the current year; or (c) such person, together with his or her spouse, had a joint income* in excess of $300,000 in each of the two most recent years and reasonably expects a joint income in excess of $300,000 in the current year. - ------------------ * For purposes of this Questionnaire, the term "net worth" means the excess of total assets over total liabilities. In determining income, a subscriber should add to his or her adjusted gross income any amounts attributable to tax-exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depletion, contributions to IRA or Keogh retirement plans, alimony payments and any amount by which income from long-term capital gains has been reduced in arriving at adjusted gross income. E-2 40 IF YOU CHECKED STATEMENT 1(c) OR STATEMENT 2 AND NOT STATEMENT 1(a) OR STATEMENT 1(b), YOU MUST PROVIDE A LETTER SIGNED BY A PERSON DULY AUTHORIZED BY THE RETIREMENT PLAN LISTING, AS APPLICABLE (I) THE NAMES OF THE PERSONS (OR ENTITIES) MAKING THE INVESTMENT DECISIONS, OR (II) THE NAMES OF ALL OF THE PARTICIPANTS IN THE PLAN AND THE REASON (UNDER STATEMENT 1(c) OR STATEMENT 2) SUCH PERSON (OR ENTITY), QUALIFIES AS AN ACCREDITED INVESTOR (ON THE BASIS OF NET WORTH, INDIVIDUAL INCOME, JOINT INCOME OR OTHERWISE), OR EACH SUCH PERSON (OR ENTITY) MUST COMPLETE THE APPROPRIATE QUESTIONNAIRE (i.e. FOR AN INDIVIDUAL, TRUST, PARTNERSHIP OR CORPORATION). II. OTHER CERTIFICATIONS By signing the Signature Page, the undersigned certifies the following: (a) that the RETIREMENT PLAN's purchase of the Investment Units will be solely for the RETIREMENT PLAN's own account and not for the account of any other person or entity; (b) that the RETIREMENT PLAN's governing documents duly authorize the type of investment contemplated herein, and the undersigned is authorized and empowered to make such investment on behalf of the RETIREMENT PLAN. (c) that one of the following is true and correct (check one): ___ (i) the RETIREMENT PLAN is a retirement plan whose income from sources outside of the United States is includable in its gross income for United States federal tax purposes regardless of its connection with a trade or business carried on in the United States. ___ (ii) the RETIREMENT PLAN is a retirement plan whose income from sources outside the United States is not includable in its gross income for United States federal income tax purposes regardless of its connection with a trade or business carried on in the United States. E-3 41 III. GENERAL INFORMATION (a) PROSPECTIVE SUBSCRIBER (THE RETIREMENT PLAN) Name:___________________________________________________________________________ Address:________________________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Address for Correspondence (if different):_________________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Telephone Number:_______________________________________________________________ (Area Code) (Number) State in which Formed:__________________________________________________________ Date of Formation:______________________________________________________________ Taxpayer Identification Number:_________________________________________________ (b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE RETIREMENT PLAN Name:___________________________________________________________________________ Position or Title:______________________________________________________________ IV. ADDITIONAL INFORMATION THE RETIREMENT PLAN MUST ATTACH COPIES OF ALL DOCUMENTS GOVERNING THE PLAN AS WELL AS ALL OTHER DOCUMENTS AUTHORIZING THE RETIREMENT PLAN TO INVEST IN THE INVESTMENT UNITS. INCLUDE, AS NECESSARY, DOCUMENTS DEFINING PERMITTED INVESTMENTS BY THE RETIREMENT PLAN, AND DEMONSTRATING AUTHORITY OF THE SIGNING INDIVIDUAL TO ACT ON BEHALF OF THE PLAN. ALL DOCUMENTATION MUST BE COMPLETE AND CORRECT. V. SIGNATURE The Signature Page to this Questionnaire is contained on page E-5, entitled Retirement Plan Signature Page. E-4 42 RETIREMENT PLAN SIGNATURE PAGE ------------------------------ INDUSTRIAL IMAGING CORPORATION ------------------------------ Your signature on this RETIREMENT PLAN Signature Page evidences the agreement by the RETIREMENT PLAN to be bound by the Questionnaire and the Subscription Agreement. 1. The undersigned RETIREMENT PLAN represents that (a) the information contained in this Questionnaire is complete and accurate and (b) the RETIREMENT PLAN will notify the Company (contact at 508-937- 5400) immediately if any material change in any of the information occurs prior to the acceptance of the undersigned RETIREMENT PLAN's subscription and will promptly send the Company written confirmation of such change. 2. The undersigned RETIREMENT PLAN hereby certifies that it has read and understands this Subscription Agreement. 3. The undersigned RETIREMENT PLAN hereby represents and warrants that the person signing this Subscription Agreement on behalf of the RETIREMENT PLAN has been duly authorized to acquire the Investment Units and sign this Subscription Agreement on behalf of the RETIREMENT PLAN and, further, that the undersigned RETIREMENT PLAN has all requisite authority to purchase the Investment Units and enter into this Subscription Agreement. _____________________ Number of Investment Units applied for _____________________ Date ________________________________________ Name of Retirement Plan (Please Type or Print) By:_____________________________________ Signature Name:___________________________________ (Please Type or Print) Title:__________________________________ (Please Type or Print) THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER ANY STATE LAWS, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL, CONCURRED IN BY COUNSEL TO THE COMPANY, HAS BEEN DELIVERED TO THE EFFECT THAT REGISTRATION OF SUCH SECURITIES IS NOT REQUIRED. E-5 EX-10.H 12 SUBSCRIPTION AGREEMENT (DR. HARRY HSUAN YEH) 1 EXHIBIT 10h ISSUED TO: _____________________ INDUSTRIAL IMAGING CORPORATION SUBSCRIPTION BOOKLET In the event you decide not to participate in this offering please return the Information Statement, the Confidential Overview of Bridge Financing and the Subscription Agreement to the Company. January 15, 1997 2 SUBSCRIPTION INSTRUCTIONS (Please Read Carefully) NO PERSON WILL BE ACCEPTED AS A SUBSCRIBER PRIOR TO A CLOSING OF THE OFFERING. THE COMPANY RESERVES THE RIGHT TO REJECT ANY SUBSCRIPTION, IN WHOLE OR IN PART, OR TO ALLOT TO ANY PROSPECTIVE SUBSCRIBER LESS THAN THE AMOUNT SUBSCRIBED FOR BY SUCH SUBSCRIBER. ANY REPRESENTATION TO THE CONTRARY IS UNAUTHORIZED AND MUST NOT BE RELIED UPON. I. THIS SUBSCRIPTION BOOKLET CONTAINS MATERIAL NECESSARY FOR YOU TO PURCHASE ONE OR MORE UNITS, EACH UNIT CONSISTING OF ONE SUBORDINATED PROMISSORY NOTE IN THE PRINCIPAL AMOUNT OF $50,000 AND 14,700 SHARES OF COMMON STOCK. THIS MATERIAL IS ARRANGED IN THE FOLLOWING ORDER: A. Overview of Bridge Financing; B. Subscription Agreement; C. Questionnaire for an INDIVIDUAL Subscriber; D. The Promissory Note The respective Questionnaires are designed to allow you to demonstrate that you meet the minimum legal requirements relating to your subscription. II. EACH SUBSCRIBER MUST READ AND COMPLETE THE SUBSCRIPTION AGREEMENT AND ONE OF THE FIVE QUESTIONNAIRES. THE QUESTIONNAIRE AND THE SUBSCRIPTION AGREEMENT CONTAIN REPRESENTATIONS RELATING TO YOUR SUBSCRIPTION. Once you have completed the Subscription Agreement and the appropriate Questionnaire, please return the entire Subscription Agreement and any additional required documents (as described in the Questionnaire) to O'Connor, Broude & Aronson at the address set forth below in Section IV. FAILURE TO COMPLY WITH THE ABOVE INSTRUCTIONS WILL CONSTITUTE AN INVALID SUBSCRIPTION, WHICH, IF NOT CORRECTED, WILL RESULT IN THE REJECTION OF YOUR SUBSCRIPTION REQUEST. EVEN IF CORRECTED, THE DELAY MAY RESULT IN (1) THE ACCEPTANCE OF ANOTHER SUBSCRIBER WHOSE SUBSCRIPTION AGREEMENT WAS INITIALLY RECEIVED BY O'CONNOR, BROUDE & ARONSON AFTER YOURS OR (2) THE OFFERING BEING CLOSED WITHOUT YOUR SUBSCRIPTION REQUEST BEING CONSIDERED BY THE COMPANY. -i- 3 III. ENCLOSE A CERTIFIED OR BANK CHECK PAYABLE TO THE ORDER OF "O'CONNOR, BROUDE & ARONSON - CLIENT FUND ACCOUNT FOR INDUSTRIAL IMAGING CORPORATION" IN THE AMOUNT OF THE PAYMENT DUE UPON SUBSCRIPTION. or WIRE TRANSFER THE AMOUNT OF THE PAYMENT DUE UPON SUBSCRIPTION AS FOLLOWS: Cambridge Trust Company, 1336 Massachusetts Avenue, Cambridge, Massachusetts, ABA number 011300595, for deposit to O'Connor, Broude & Aronson Client Fund Account, number 57-240-3-01, in favor of "Industrial Imaging Corporation." PLEASE CONTACT STEVEN J. CAGNETTA, ESQUIRE, AT O'CONNOR, BROUDE & ARONSON AT (617) 890-6600 BEFORE INITIATING THE WIRE TRANSFER. IV. SEND ALL COMPLETED DOCUMENTS AND YOUR CHECK TO THE FOLLOWING ADDRESS: O'Connor, Broude & Aronson Bay Colony Corporate Center 950 Winter Street, Suite 2300 Waltham, Massachusetts 02154 Attention: Marguerite J. Hill, Esquire V. QUESTIONS REGARDING COMPLETION OF SUBSCRIPTION DOCUMENTS SHOULD BE DIRECTED TO: O'Connor, Broude & Aronson Bay Colony Corporate Center 950 Winter Street, Suite 2300 Waltham, Massachusetts 02154 Attention: Marguerite J. Hill, Esquire or Steven J. Cagnetta, Esquire Telephone: (617) 890-6600 PLEASE PRINT IN INK OR TYPE ALL INFORMATION -ii- 4 SUBSCRIPTION AGREEMENT LIMITED OFFERING OF INVESTMENT UNITS OF INDUSTRIAL IMAGING CORPORATION THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE REGULATORY AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS AGREEMENT OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THE SECURITIES MAY NOT BE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THE INFORMATION CONTAINED IN THIS AGREEMENT DOES NOT PURPORT TO BE ALL INCLUSIVE OR TO CONTAIN ALL THE INFORMATION THAT A PROSPECTIVE SUBSCRIBER MAY DESIRE IN INVESTIGATING THE COMPANY. EACH SUBSCRIBER MUST RELY ON THE SUBSCRIBER'S OWN EVALUATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED, IN MAKING AN INVESTMENT DECISION WITH RESPECT TO THE SECURITIES. SEE "RISK FACTORS" CONTAINED IN THE INFORMATION STATEMENT FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH THE PURCHASE OF THE SECURITIES. THIS AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY STATE OR OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. EXCEPT AS OTHERWISE INDICATED, THIS AGREEMENT SPEAKS AS OF THE DATE HEREOF. NEITHER THE DELIVERY OF THIS AGREEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY AFTER THE DATE HEREOF. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS AGREEMENT IN CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE PLACEMENT AGENT. EACH SUBSCRIBER WILL BE ENTITLED TO RELY SOLELY ON THOSE REPRESENTATIONS -iii- 5 AND WARRANTIES WHICH MAY BE MADE TO IT IN ANY FINAL SUBSCRIPTION AGREEMENT RELATING TO THE SECURITIES. PROSPECTIVE SUBSCRIBERS ARE NOT TO CONSTRUE THE CONTENTS OF THIS AGREEMENT AS LEGAL ADVICE. EACH SUBSCRIBER SHOULD CONSULT THEIR OWN ATTORNEY OR BUSINESS ADVISOR AS TO THE LEGAL, TAX AND OTHER CONSIDERATIONS RELATING TO AN INVESTMENT IN THE SECURITIES. OFFERS AND SALES WILL ONLY BE MADE TO PERSONS WHOM THE COMPANY BELIEVES TO BE "ACCREDITED INVESTORS" AS DEFINED IN REGULATION D, PROMULGATED UNDER THE ACT WHO, EITHER ALONE OR WITH SUCH SUBSCRIBER REPRESENTATIVE, HAVE SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT SUCH SUBSCRIBER IS CAPABLE OF EVALUATING THE MERITS AND RISKS OF THE PROSPECTIVE INVESTMENT. IT IS EXPECTED THAT SUCH SECURITIES WOULD BE EXEMPT FROM REGISTRATION UNDER THE ACT PURSUANT TO AN EXEMPTION FROM REGISTRATION CONTAINED IN SECTION 4(2) OF THE ACT AND RULE 506 UNDER REGULATION D. A SUBSCRIBER'S INVESTMENT IN THE SECURITIES PROPOSED UNDER THE TERMS OF THIS OFFERING WILL BE SUBJECT TO CERTAIN RESTRICTIONS AS DESCRIBED MORE FULLY IN THE TERMS OF THE OFFERING AND THE SUBSCRIPTION AGREEMENT. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT, AND THE APPLICABLE STATE SECURITIES LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. SUBSCRIBERS MUST EXPECT TO BEAR THE ECONOMIC RISK OF AN INVESTMENT IN THE SECURITIES FOR AN INDEFINITE PERIOD OF TIME. THIS AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES OFFERED HEREBY. CERTAIN PROVISIONS OF VARIOUS OF DOCUMENTS ARE SUMMARIZED IN THIS AGREEMENT BUT PROSPECTIVE SUBSCRIBERS SHOULD NOT ASSUME THAT THESE SUMMARIES ARE COMPLETE. SUCH SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO TEXT OF THE ORIGINAL DOCUMENT WHICH WILL BE MADE AVAILABLE TO PROSPECTIVE SUBSCRIBERS BY THE COMPANY UPON REQUEST. BY ACCEPTANCE OF THIS AGREEMENT, PROSPECTIVE SUBSCRIBERS RECOGNIZE AND ACCEPT THE NEED TO CONDUCT THEIR OWN THOROUGH INVESTIGATION AND DUE DILIGENCE BEFORE CONSIDERING PURCHASING THE SECURITIES OFFERED HEREBY. -iv- 6 STATE SECURITIES NOTICES IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. FOR CONNECTICUT RESIDENTS THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER SECTION 36B-21 OF THE CONNECTICUT UNIFORM SECURITIES ACT AND, THEREFORE, CANNOT BE RESOLD UNLESS THEY ARE REGISTERED UNDER SUCH ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. FOR FLORIDA RESIDENTS THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER SECTION 517.061 OF THE FLORIDA SECURITIES ACT AND HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA. -v- 7 INDUSTRIAL IMAGING CORPORATION SUBSCRIPTION AGREEMENT PRIVATE OFFERING OF UNITS CONSISTING OF SUBORDINATED PROMISSORY NOTES AND SHARES OF COMMON STOCK SUBSCRIPTION AGREEMENT made as of the date set forth below between Industrial Imaging Corporation, a publicly held Delaware corporation with its principal offices at One Research Center, 847 Rogers Street, Lowell, Massachusetts 01852 (the "Company") and the undersigned (the "Subscriber"). WHEREAS, the Company desires to issue an aggregate of up to $150,000 of investment units (the "Investment Units"), each Investment Unit consisting of a two year, 10% Subordinated Promissory Note in the principal amount of $50,000 (the "Notes") and 14,700 shares of Common Stock (the "Shares"), on the terms and conditions hereinafter set forth and the Subscriber desires to acquire the amount of Investment Units set forth herein (the "Offering"). NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows: 1. SUBSCRIPTION FOR INVESTMENT UNITS. 1.1 SUBSCRIPTION. Subject to the terms and conditions hereinafter set forth, the Subscriber hereby subscribes for and agrees to purchase from the Company such Investment Units as is set forth in Section 1.4(a) below at a purchase price equal to $50,000 per Investment Unit (the "Purchase Price") and the Company agrees to sell such Investment Units to the Subscriber for said Purchase Price. Except as provided under state securities laws, this Subscription Agreement is irrevocable, provided that the undersigned's obligations hereunder will terminate if this subscription is not accepted by the Company by the Termination Date, as hereinafter defined. Funds will be paid to the Company in accordance with the closing provisions set forth herein and pursuant to the terms of the Company's Confidential Overview of Bridge Financing dated as of January 15, 1997 (the "Overview of Financing"). The Company reserves the unrestricted right to accept subscriptions for a fraction of an Investment Unit or reject any subscription, notwithstanding prior receipt by the Subscriber of notice of acceptance. The Company may, in its discretion, increase the size of the Offering. If this subscription is accepted in part and all other conditions are satisfied, any amounts that have been tendered in excess of the payment for the Investment Units allocated to the Subscriber will be returned without interest to the Subscriber. -1- 8 1.2 VALIDITY OF DOCUMENTS. The Company and the Escrow Agent may rely, and shall be protected in acting, upon any papers or other documents that may be submitted to either of them in connection with the Investment Units and which are believed by them to be genuine and to have been signed or presented by the proper party or parties, and neither the Company nor the Escrow Agent shall have any liability or responsibility with respect to the form, execution, or validity thereof. 1.3 PURCHASE PRICE. The Purchase Price is payable by (i) wire transfer, or (ii) certified or bank check made payable to the "O'Connor, Broude & Aronson - Client Fund Account for Industrial Imaging Corporation" contemporaneously with the execution and delivery of this Subscription Agreement. The Purchase Price of the Investment Units shall be determined as follows: (a) Purchase Price of Each Investment Unit $ 50,000 (b) Number of Investment Units subscribed for: 3 -------- (c) Total Purchase Price (the amount in (a) multiplied by the amount in (b)) $150,000 --------
1.4 USE OF PROCEEDS. Upon acceptance of this Subscription Agreement by the Company, the Company may use such funds for working capital and general corporate purposes, including reduction of trade payables and a $100,000 promissory note. 2. CONSUMMATION OF OFFERING OF INVESTMENT UNITS. 2.1 CLOSING DATE. The Company expects to hold one or more closings (the "Closing") of this Offering, with the first Closing expected to be held on January 16, 1997 and the final Closing being held on the Termination Date (as hereinafter defined). This Offering of Investment Units shall terminate upon the earlier of (i) the Company selling an aggregate of $150,000 in Investment Units or (ii) January 31, 1997, unless extended or earlier terminated by the Company in its sole discretion ((i) or (ii) is referred to as the "Termination Date"). 2.2 DELIVERY. Within fifteen (15) days following the Closing, the Company will use its best efforts to deliver to each Subscriber a certificate or certificates, in such denominations and registered in such name or names as each Subscriber may designate by notice to the Company, representing the Shares purchased by each Subscriber from the Company. Prior to the Closing, each Subscriber shall have delivered to the Company payment of the Purchase Price therefor by certified check or wire transfer to such Company account as the Company shall designate. If, at the Closing, any of the Subscribers shall have failed to tender the Purchase Price -2- 9 for the Investment Units to be purchased by such Subscriber at the Closing or any of the conditions specified herein shall not have been fulfilled to the satisfaction of the Company, the Company shall, at its election, be relieved of all of its obligations under this Agreement to such Subscriber. The Company shall be under no obligation to accept this offer and to close this transaction until the Closing. 2.3 FURTHER UNDERTAKINGS BY SUBSCRIBERS. Each Subscriber undertakes to execute and deliver to the Company, within five (5) days after receipt of the Company's request therefor, such further designations, authorizations, and other instruments as the Company deems necessary or appropriate to carry out the provisions of this Agreement. 2.4 DISCRETION TO USE FUNDS. The Company shall be entitled to use the funds received from the sale of the Investment Units immediately upon its acceptance of the subscription contemplated herein. No minimum amount of Investment Units shall be required to be sold (i) by the Company in the Offering, or (ii) before a Closing occurs. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to the Subscriber as follows: 3.1 DUE ORGANIZATION. It is a corporation duly organized, validly existing, and in good corporate standing under the laws of the State of Delaware. 3.2 SALE OF SECURITIES. The Notes and Shares included in each Investment Unit will be duly authorized and enforceable. 4. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. The Subscriber hereby represents and warrants as follows: 4.1 RELIANCE ON REPRESENTATIONS AND WARRANTIES. The Subscriber acknowledges that the Company is offering the Investment Units in reliance upon the representations, warranties, and other information set forth by the Subscriber. The Subscriber undertakes to notify the Company immediately of any changes in any of the representations, warranties, and other information contained herein. 4.2 SUBSCRIBER'S AUTHORITY. The Subscriber represents that he has full legal power and authority to enter into this Agreement and to purchase the Investment Units. 4.3 RISKS ASSOCIATED WITH OFFERING. The Subscriber recognizes that the purchase of the Investment Units involves a high degree of risk in that (i) he may not be able to liquidate his investment; (ii) transferability is extremely limited; and (iii) in the event of a disposition, he could sustain the loss of his entire investment. In addition, the Subscriber recognizes additional risks, including, but not limited to, those set forth in the Overview of -3- 10 Financing and the Information Statement of the Company, dated as of November 14, 1996 (the "Information Statement"), which risks the Subscriber has carefully read and considered. 4.4 INVESTMENT REPRESENTATIONS. The Subscriber represents that he is acquiring the Investment Units hereunder for his own account and not with a view to reselling or otherwise distributing such securities in violation of any Federal or state securities laws and understands and agrees that the securities to be issued hereunder are restricted on transfer and must be held unless (i) they are registered under the Securities Act of 1933, as amended, (the "Act") or (ii) an exemption from registration is available, and the Company has received an opinion of counsel, in form and substance satisfactory to it, to such effect. There can be no assurance that the Company will make available to the public at any time in the future information necessary to enable security holders to make routine sales of securities pursuant to Rule 144 under the Act. 4.5 SOPHISTICATION AND ABILITY TO RISK LOSS OF INVESTMENT. The Subscriber acknowledges that he has prior investment experience, including investment in non-listed and non-registered securities, or he has employed the services of an investment advisor, attorney or accountant to read all of the documents furnished or made available by the Company both to him and to all other prospective subscribers in connection with the Offering and to evaluate the merits and risks of such an investment on his behalf; that he recognizes the highly speculative nature of this investment; that a noteholder, including the Subscriber, may not at any time demand the withdrawal of capital from the Company; and that he is able to bear the economic risk he hereby assumes, namely, of holding the Investment Units for an indefinite period of time and of losing his entire investment. The Subscriber represents that his overall commitment to investments that are not readily marketable is not excessive in view of his net worth and financial circumstances and the purchase of the Investment Units will not cause such commitment to become excessive, and that the investment is a suitable one for the Subscriber. 4.6 ACCESS TO INFORMATION. The Subscriber acknowledges receipt of the Overview of Financing and the Information Statement, which contains certain audited and unaudited financial statements of the Company. The Subscriber hereby represents and acknowledges that he has carefully read the Overview of Financing and Information Statement furnished by the Company during the course of this transaction and all additional information regarding the Company that he had requested or desired to know; that all documents which could be reasonably provided have been made available for his inspection and review; that he has been afforded the opportunity to ask questions of and receive answers from duly authorized officers or other representatives of the Company concerning the terms and conditions of the Offering, and that he has received any additional information that he has requested. The Subscriber further represents and acknowledges that because certain of the financial statements and financial information included in the Information Statement are unaudited, that such statements and information are subject to change and that the final financial statements may report the Company's results of operations for and financial condition as of the respective dates of such statements to be less than and/or worse than the financial statements provided. -4- 11 4.7 FINDINGS OR RECOMMENDATIONS. The Subscriber is aware that neither the Securities and Exchange Commission (the "SEC") nor the Attorney General of the State of Delaware nor any other federal or state agency has made any findings or determination as to the fairness of the Investment Units, nor has any recommendation or any endorsement of the Investment Units has been made and the Investment Units offered are not registered under federal, Delaware or any other state law and the securities are restricted securities within the meaning of the U.S. federal securities laws because of the Company's representations that this is intended to be a non-public offering pursuant to Section 4(2) and/or 4(6) of the Act. 4.8 REGISTRATION EXEMPTION. The Subscriber understands that the Investment Units have not been registered under the Act by reason of a claimed exemption under the provisions of the Act which depends, in part, upon his investment intention. In this connection, the Subscriber understands that it is the position of the SEC that the statutory basis for such exemption would not be present if his representation merely meant that his present intention was to hold such securities for a short period, such as the capital gains period of tax statutes, for a deferred sale, for a market rise, assuming that a market develops, or for any other fixed period. The Subscriber realizes that, in the view of the SEC's position, a purchase now with an intent to resell would represent a purchase with an intent inconsistent with his representation to the Company, and the SEC might regard such a sale or disposition as a deferred sale to which the exemption is not available. 4.9 LIMITED AND NO PUBLIC MARKET FOR SECURITIES. The Subscriber understands that no public market for the Notes exists and no public market can be expected to develop for the Notes. The Company's Common Stock trades on the NASDAQ System. The Subscriber understands that trading of the Company's Common Stock has been limited and no assurance can be given that an active public trading market for the Common Stock will develop, or if developed, be sustained. The Subscriber understands that it may not be possible to liquidate an investment in the Investment Units on an emergency basis. The Subscriber understands that the Company makes no representation or warranty regarding its fulfillment in the future of any reporting requirements under the Securities Exchange Act of 1934, as amended, or its dissemination to the public of any current financial or other information concerning the Company, if required as one of the conditions of the availability of any exemption. The Subscriber understands and hereby acknowledges that the Company is under no obligation to register the Investment Units under the Act. 4.10 LEGENDS. The Subscriber consents to the placement of any legends required by state securities laws and of a legend, in a form satisfactory to the Company's counsel, on any certificate or other document evidencing the Notes or the Shares indicating that they have not been registered under the Act and setting forth or referring to the restrictions on transferability and sale thereof. The Subscriber is aware that the Company will make a notation in its appropriate records with respect to the restrictions on the transferability of such securities. -5- 12 4.11 UNREGISTERED SECURITIES. The Subscriber understands that the Notes and the Shares are not registered under the Act, or the securities laws of any state, and that the Company is under no obligation to so register them. As such, the Notes and the Shares will be considered "restricted securities" and may not be transferred unless registered under the Act or an exemption under the Act and the relevant state securities laws is available. The Company may, if it desires, permit the transfer out of the Subscriber's name of the Investment Units only if the Subscriber's request for transfer is accompanied by an opinion of counsel reasonably satisfactory to the Company that neither the sale nor the proposed transfer results in a violation of the Act or any applicable state "blue sky" laws (collectively, the "Securities Laws"). The Subscriber agrees to indemnify, and hold the Company and its directors, officers, and controlling persons and their respective heirs, representatives, successors, and assigns harmless and to indemnify them against all liabilities, costs, and expenses incurred by them as a result of any misrepresentation made by Subscriber contained herein or in the Confidential Subscriber Questionnaire (attached hereto and made a part hereof) or material breach of an agreement or representation made by the Subscriber herein or any sale or distribution by the Subscriber in violation of any Securities Laws. 4.12 DECISION TO INVEST. In making his decision to purchase the Investment Units herein subscribed for, the Subscriber is not relying on any representations or warranties from the Company or any of its officers, directors, affiliates, employees or agents, other than the information provided by the Company to him in this Offering. In addition, the Subscriber represents that he is not purchasing any Investment Units as a result of or subsequent to (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio or (ii) any seminar or meeting whose attendees, including the Subscriber, were invited as a result of, subsequent to, or pursuant to, any general solicitation. 4.13 NO PROTECTION OF SUBSCRIBER'S INTERESTS. The Subscriber has been advised that the Company has not retained any independent professionals to review or comment on this Offering or otherwise protect the interests of the Subscriber. Although the Company has retained its own counsel, neither such firm nor any other firm has acted on behalf of the Subscriber, and any Subscriber of the Investment Units offered hereby should not rely on the firm so retained by the Company with respect to any matters herein described. 4.14 SUBSCRIBER'S FINANCIAL CONDITION. The Subscriber has completed the accompanying confidential Subscriber Questionnaire and has delivered it herewith and represents and warrants that it accurately sets forth his financial condition on the date hereof. The Subscriber has no reason to expect there will be any material adverse change in his financial condition and will immediately advise the Company of any such changes occurring prior to any Closing or termination of the Offering. 4.15 NO REPRESENTATIONS ON COMPANY'S RESULTS OF OPERATIONS. There has never been represented, guaranteed, or warranted to the Subscriber by any broker, the Company, its officers, directors, agents, or employees or any other person, expressly or by implication (i) -6- 13 the percentage of profits and/or amount of or type of consideration, profit or loss to be realized, if any, as a result of the Company's operations; and (ii) that the past performance or experience on the part of the management of the Company, or of any other person, will in any way result in the overall profitable operations of the Company. 4.16 NO BROKERAGE COMMISSIONS. The Subscriber represents the he has taken no action that would give rise to any claim by any person for brokerage commissions, finders' fees or the like relating to this Subscription Agreement or the transactions contemplated hereby (other than commissions to be paid by the Company to the Placement Agent). 4.17 ENTITY ORGANIZATION AND AUTHORITY. The Subscriber represents that if the Subscriber is a corporation, partnership, association, joint stock company, trust, unincorporated organization or other entity, such entity was not formed for the specific purpose of acquiring the Investment Units, such entity is duly organized, validly existing and in good standing under the laws of the state of its organization, the consummation of the transactions contemplated hereby is authorized by, and will not result in, a violation of state law or its charter or other organizational documents, such entity has full power and authority to execute and deliver this Agreement and all other related agreements or certificates and to carry out the provisions hereof and thereof and to purchase and hold the securities constituting the Investment Units. The Subscriber also represents that (i) the execution and delivery of this Agreement has been duly authorized by all necessary action; (ii) this Agreement has been duly executed and delivered on behalf of such entity; and (iii) is a legal, valid and binding obligation of such entity. 4.18 REPRESENTATIVE OR FIDUCIARY CAPACITY. The Subscriber warrants that if he is executing this Agreement in a representative or fiduciary capacity, he has full power and authority to execute and deliver this Agreement in such a capacity and on behalf of the subscribing individual, ward, partnership, trust estate, corporation or other entity for whom the Subscriber is executing this Agreement, and such individual, ward, partnership, trust, estate, corporation or other entity has full right and power to perform pursuant to this Agreement and make an investment in the Company, and this Agreement constitutes a legal, valid and binding obligation of such entity. 4.19 REVIEW OF SUBSCRIPTION AGREEMENT. The Subscriber understands that the Company will review this Agreement and is hereby given authority by the undersigned to call his bank or place of employment or otherwise review the financial standing of the Subscriber; and it is further agreed and understood that the Company reserves the unrestricted right to reject or limit any subscription and to close the Offering at any time. -7- 14 5. REGISTRATION OF SHARES. 5.1 REGISTRATION RIGHTS. (a) At any time within nine (9) months after the closing of an underwritten public offering in which the Company raises gross proceeds of at least $4,000,000 and provided that the Company is eligible to use a Form S-3 registration statement, the Company will use its best reasonable efforts to prepare and file with the Securities and Exchange Commission a registration statement on Form S-3 (or any successor form) relating to the Shares sold in this Offering. Other selling security holders may participate in this registration at the sole option of the Company. In addition, the Company may, in its sole discretion, at any time and after notice to the Subscribers, elect to register all of such Shares on a Form SB-2 or Form S-3 (or other appropriate form) in connection with any other registration statement or on a stand-alone basis. (b) If permitted by applicable law and regulation, the Company at the request of the holders owning a majority of the Shares, shall file such amendments and/or supplements to such registration statement, and, subject to this Section 5 hereof, take such other steps as may be required to maintain such registration statement in effect, and to keep the information therein current, until the earlier of the sale of all of the Shares included in the registration statement or the expiration of nine (9) months from the effective date of such registration statement. (c) The Company will use its reasonable efforts to furnish to the security holders participating in such registration (the "Selling Security Holders") and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as such underwriters may reasonably request in order to facilitate the public offering of such securities. (d) In connection with any registration statement referred to in Section 6 of this Agreement, Subscriber will furnish to the Company such information as the Company may reasonably require from the Subscriber for inclusion in the registration statement (and the prospectus included therein). (e) The Company's obligations under this Agreement shall be conditioned upon the Subscriber executing and delivering to the Company an appropriate agreement, if necessary in the reasonable opinion of counsel to the Company, in form reasonably satisfactory to counsel for the Company, that it will comply with all anti-stabilization, manipulation, and similar provisions of Section 10 of the 1934 Act, and any rules promulgated thereunder and will furnish to the Company information about sales made in such public offering. (f) The Company, at its expense, shall cause all of the Shares included in a registration statement referred to in Section 5 hereof to be qualified under the laws of such -8- 15 reasonable number of jurisdictions, as the Company may reasonably designate, and the Company will continue such qualification in effect for such period of time not to exceed nine (9) months from the effective date of the registration statement referred to in Section 5 which relates to such Shares, provided, however, that the Company shall not for any purpose be required to execute a general consent to service of process or to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified. (g) The Company shall not be required to effect any registration within three months after the effective date of any other underwritten registration statement of the Company. The Company shall have the right to designate the managing underwriter in respect of a public offering pursuant to this Section 5.1. (h) If at the time the Company is registering the Shares pursuant to this subsection 5.1, the Company is engaged or has fixed demonstrable plans to engage within ninety (90) days of the time of the request in an underwritten public offering (other than on a Form S-4 or S-8) as to which the holders may include Common Stock pursuant to subsection 5.1 or is engaged in any other activity which, in the good faith determination of the Company's Board of Directors, would be adversely affected by the registration to the material detriment of the Company, then the Company may, at its option (i) refuse to register the Shares or (ii) direct that if the managing underwriter agrees and the Company effectuates the registration, the holders of the Shares shall agree not to publicly sell such registered Shares for such period of time as requested by the underwriter managing the public offering or by the Company's Board of Directors. 5.2 EXPENSES. (a) With respect to the registration right granted in Section 5.1 hereof, all fees, costs and expenses of an incidental to such registration, inclusion and public offering (as specified in paragraph (b) below) in connection therewith shall be borne by the Company, provided, however, that any Selling Security Holders participating in such registration shall bear their pro rata share of the underwriting discount and commissions and transfer taxes, if any. (b) The fees, costs and expenses of registration to be borne by the Company as provided in paragraph (a) above shall include, without limitation, all registration, filing, and NASD fees, printing expenses, fees and disbursements of counsel and accountants for the Company, and all legal fees and disbursements and other expenses of complying with state securities or blue sky laws of any jurisdictions in which the securities to be offered are to be registered and qualified (except as provided in 5.2(a) above). Fees and disbursements of counsel and accountants for the selling security holders and any other expenses incurred by the selling security holders not expressly included above shall be borne by the Selling Security Holders. -9- 16 6. MISCELLANEOUS 6.1 NOTICES. Any notice or other communication given hereunder shall be deemed sufficient if in writing and sent by registered or certified mail, return receipt requested, addressed to the Company, at its registered office, One Lowell Research Center, 847 Rogers Street, Lowell, Massachusetts 01852, Attention: Juan J. Amodei, Ph.D., President, with a copy to O'Connor, Broude & Aronson, 950 Winter Street, Suite 2300, Waltham, Massachusetts 02154, Attention: Marguerite J. Hill, Esquire, and to the Subscriber at his address indicated on the last page of this Subscription Agreement. Notices shall be deemed to have been given on the date of mailing, except notices of change of address, which shall be deemed to have been given when received. 6.2 MODIFICATIONS. This Subscription Agreement shall not be changed, modified or amended except by a writing signed by the parties to be charged, and this Subscription Agreement may not be discharged except by performance in accordance with its terms or by a writing signed by the party to be charged. 6.3 BINDING EFFECT; ENTIRE AGREEMENT. This Subscription Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, legal representatives, successors, and assigns. This Subscription Agreement sets forth the entire agreement and understanding between the parties as to the subject matter thereof and merges and supersedes all prior discussions, agreements, and understandings of any and every nature among them. 6.4 GOVERNING LAW. This Subscription Agreement and its validity, construction and performance shall be governed in all respects by the laws of the Commonwealth of Massachusetts, without regard to its conflict of laws principles. Subscriber agrees that any disputes arising with respect to or in connection with this Agreement shall be finally decided in accordance with the rules of arbitration. 6.5 USE OF SPEECH. All pronouns contained herein and any variations thereof, shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the parties may require. 6.6 HEADINGS. Headings contained in this Agreement are only as a matter of convenience and in no way define, limit, extend, or describe the scope of this Agreement or the intent of any provisions hereof. 6.7 UNENFORCEABILITY. If any provision of this Agreement is or becomes or is deemed invalid, illegal, or unenforceable in any jurisdiction, to the maximum extent permissible, such provision shall be deemed amended to conform to applicable laws so as to be materially altering the intention of the parties, it shall be stricken and the remainder of this Agreement shall remain in full force and effect. -10- 17 6.8 ASSIGNMENT. The Subscribers may not assign this Agreement or its rights hereunder without the Company's written consent. 6.9 MULTIPLE SUBSCRIBERS. If more than one person is signing this Agreement, each representation, warranty, and undertaking stated herein shall be the joint and several representation, warranty, and undertaking of each such person. Notwithstanding the foregoing, no Subscriber shall be liable with respect to any representation, warranty or undertaking of any other Subscriber who signed a separate Subscription Agreement. The Subscribers understand the meaning and legal consequences of the representations and warranties contained in this Agreement. 6.10 SUBMISSION TO JURISDICTION. Each of the parties submits to the jurisdiction of any state or federal court sitting in the Commonwealth of Massachusetts, in any action or proceeding arising out of or relating to this Agreement and offering and agrees that all claims in respect of the action or proceeding may be heard and determined in any such court. Each party also agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Each of the parties waives any defense or inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other party with respect thereto. 6.11 BLUE SKY QUALIFICATION. The right to purchase Investment Units under this Agreement is expressly conditioned upon the exemption from qualification of the offer and sale of the Investment Units from applicable federal and state securities laws. The Company shall not be required to qualify this transaction under the securities laws of any jurisdiction and, should qualification be necessary, the Company shall be released from any and all obligations to maintain its offer, and may rescind any sale contracted, in the jurisdiction. 6.12 CONFIDENTIALITY. The Subscriber acknowledges and agrees that any information or data it has acquired from or about the Company, not otherwise properly in the public domain, was received in confidence. The Subscriber agrees not to divulge, communicate or disclose, except as may be required by law or for the performance of this Agreement, or use to the detriment of the Company or for the benefit of any other person or persons, or misuse in any way, any confidential information of the Company, including any scientific, technical, trade or business secrets of the Company and any scientific, technical, trade or business materials that are treated by the Company as confidential or proprietary, including, but not limited to, ideas, discoveries, inventions, developments and improvements belonging to the Company and confidential information obtained by or given to the Company about or belonging to third parties. 6.13 SURVIVAL. The Subscriber's representations and warranties made in this Agreement shall survive the execution and delivery of this Agreement and of the Investment Units. -11- 18 6.14 EXPENSES. Each of the parties hereto shall pay its own fees and expenses (including the fees of any attorneys, accountants, appraisers or others engaged by such party) in connection with this Agreement and the transactions contemplated hereby, whether or not the transactions contemplated hereby are consummated. 6.15 COUNTERPARTS. This Agreement may be executed simultaneously in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document binding all parties, notwithstanding that all parties are not signatories to the same counterpart. Upon the execution and delivery of this Subscription Agreement by the Subscriber, this Subscription Agreement shall become a binding obligation of the Subscriber with respect to the purchase of Investment Units as herein provided; subject, however, to the right hereby reserved to the Company to enter into the same agreements with other subscribers and to add and/or to delete other persons as subscribers. -12- 19 IN WITNESS WHEREOF, the parties have executed this Subscription Agreement as of this ___ day of January, 1997. By: ____________________________ ________________________________ Street Address ________________________________ City, State, Zip Code ACCEPTED: INDUSTRIAL IMAGING CORPORATION By: __________________________ Juan J. Amodei, Ph.D. President Date: ________________________ -13- 20 IMPORTANT: Subscriber Name: ________________________ Please Complete Booklet No.: INDIVIDUAL SUBSCRIBER QUESTIONNAIRE INDUSTRIAL IMAGING CORPORATION Industrial Imaging Corporation One Lowell Research Center 847 Rogers Street Lowell, Massachusetts 01852 The information contained in this Questionnaire is being furnished in order to determine whether the undersigned's subscription to purchase Investment Units of Industrial Imaging Corporation (the "Company") may be accepted. ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED CONFIDENTIALLY. The undersigned understands, however, that the Company may present this Questionnaire to such parties as it deems appropriate if called upon to establish that the proposed offer and sale of the Shares is exempt from registration under the Securities Act of 1933, as amended, or meets the requirements of applicable state securities or "blue sky" laws. Further, the undersigned understands that the Offering is required to be reported to the Securities and Exchange Commission and to various state securities or "blue sky" regulators. IF YOU ARE PURCHASING INVESTMENT UNITS WITH YOUR SPOUSE, YOU MUST BOTH SIGN THE SIGNATURE PAGE (PAGE A-5). IF YOU ARE PURCHASING INVESTMENT UNITS WITH ANOTHER PERSON NOT YOUR SPOUSE, YOU MUST EACH FILL OUT A SEPARATE QUESTIONNAIRE. Please make a photocopy of pages A-1 to A-5 and return both completed questionnaires to the Company in the same envelope. I. PLEASE INDICATE DESIRED TYPE OF OWNERSHIP OF INVESTMENT UNITS ___ Individual ___ Joint Tenants (rights of survivorship) ___ Tenants in Common (no rights of survivorship) A-1 21 II. PLEASE CHECK ANY OF STATEMENTS 1-3 BELOW THAT APPLY TO YOU ___ 1. I have an individual net worth* or joint net worth with my spouse in excess of $1,000,000. ___ 2. I have had an individual income* in excess of $200,000 in each of the two most recent years and I reasonably expect an individual income in excess of $200,000 for the current year. NOTE: IF YOU ARE BUYING JOINTLY WITH YOUR SPOUSE, YOU MUST EACH HAVE AN INDIVIDUAL INCOME IN EXCESS OF $200,000 IN EACH OF THESE YEARS IN ORDER TO CHECK THIS BOX. ___ 3. My spouse and I have had a joint income* in excess of $300,000 in each of the two most recent years and I reasonably expect a joint income in excess of $300,000 for the current year. III. OTHER CERTIFICATIONS By signing the Signature Page, I certify the following (or, if I am purchasing Investment Units with my spouse as co-owner, each of us certifies the following): (a) that I am at least 21 years of age; (b) that my purchase of Investment Units will be solely for my own account and not for the account of any other person (other than my spouse, if co-owner); (c) that the name, home address and social security number or taxpayer identification number as set forth in this Questionnaire are true, correct and complete; and (d) that one of the following is true and correct (check one): Spouse, if Subscriber Co-Owner - ---------- ---------- ___ ___ (i) I am a United States citizen or resident of the United States for United States federal income tax purposes. ___ ___ (ii) I am neither a United States citizen nor a resident of the United States for United States federal income tax purposes. * For purposes of this Questionnaire, the term "net worth" means the excess of total assets over total liabilities. In determining income, a subscriber should add to his or her adjusted gross income any amounts attributable to tax-exempt income received, losses claimed as a limited A-2 22 partner in any limited partnership, deductions claimed for depletion, contributions to IRA or Keogh retirement plans, alimony payments and any amount by which income from long-term capital gains has been reduced in arriving at adjusted gross income. IV. GENERAL INFORMATION (a) PERSONAL INFORMATION. SUBSCRIBER Name: __________________________________________________________________________ ________________________________________________________________________________ Social Security or Taxpayer Identification Number: _____________________________ ________________________________________________________________________________ Residence Address: _____________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Residence Telephone Number: ____________________________________________________ (Area Code) (Number) Business Address: ______________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Business Telephone Number: _____________________________________________________ (Area Code) (Number) I prefer to have correspondence sent to: ____ Residence ____ Business A-3 23 SPOUSE, IF CO-OWNER Name: __________________________________________________________________________ ________________________________________________________________________________ Social Security or Taxpayer Identification Number: _____________________________ ________________________________________________________________________________ Residence Address: _____________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Residence Telephone Number (if different from Subscriber's):_________________________________ (Area Code) (Number) Business Address: ______________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) ________________________________________________________________________________ Business Telephone Number (if different from Subscriber's):_________________________________ (Area Code) (Number) I prefer to have correspondence sent to: ____ Residence ____ Business V. SIGNATURE The Signature Page to this Questionnaire is contained on page A-5, entitled Individual Signature Page. A-4 24 INDIVIDUAL SIGNATURE PAGE INDUSTRIAL IMAGING CORPORATION Your signature on this Individual Signature Page evidences your agreement to be bound by the Questionnaire and the Subscription Agreement. 1. The undersigned represents that (a) he/she has read and understands this Subscription Agreement, (b) the information contained in this Questionnaire is complete and accurate and (c) he/she will telephone the Company (contact at 508-937-5400) immediately if any material change in any of this information occurs before the acceptance of his/her subscription and will promptly send the Company written confirmation of such change. ______________________________________ Number of Investment Units applied for Date: ___________________________ _________________________________ Name (Please Type or Print) _________________________________ Signature _________________________________ Name of Spouse if Co-Owner (Please Type or Print) _________________________________ Signature of Spouse if Co-Owner IF YOU ARE PURCHASING INVESTMENT UNITS WITH YOUR SPOUSE, YOU MUST BOTH SIGN THE SIGNATURE PAGE (PAGE A-5). IF YOU ARE PURCHASING INVESTMENT UNITS WITH ANOTHER PERSON NOT YOUR SPOUSE, YOU MUST EACH FILL OUT A SEPARATE QUESTIONNAIRE. Please make a photocopy of pages A-1 to A-5 and return both completed questionnaires to the Company in the same envelope. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER ANY STATE LAWS, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL, CONCURRED IN BY COUNSEL TO THE COMPANY, HAS BEEN DELIVERED TO THE EFFECT THAT REGISTRATION OF SUCH SECURITIES IS NOT REQUIRED. A-5 25 IMPORTANT: Subscriber Name: ________________________ Please Complete Booklet No.: TRUST QUESTIONNAIRE INDUSTRIAL IMAGING CORPORATION Industrial Imaging Corporation One Lowell Research Center 847 Rogers Street Lowell, Massachusetts 01852 The information contained in this Questionnaire is being furnished in order to determine whether the undersigned TRUST's subscription to purchase Investment Units of Industrial Imaging Corporation (the "Company") may be accepted. NOTE: RETIREMENT PLANS SHOULD COMPLETE THE QUESTIONNAIRE ON PAGES E-1 TO E-4. ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED CONFIDENTIALLY. The undersigned TRUST understands, however, that the Company may present this Questionnaire to such parties as it deems appropriate if called upon to establish that the proposed offer and sale of the Investment Units is exempt from registration under the Securities Act of 1933, as amended, or meets the requirements of applicable state securities or "blue sky" laws. Further, the undersigned TRUST understands that the Offering is required to be reported to the Securities and Exchange Commission and to various state securities or "blue sky" regulators. I. PLEASE CHECK STATEMENTS 1 AND 2 BELOW, AS APPLICABLE ___ 1. (a) the TRUST has total assets in excess of $5,000,000; and (b) the TRUST was not formed for the specific purpose of acquiring the Investment Units; (c) the purchase by the TRUST is directed by a person who has such knowledge and experience in financial and business matters that he/she is capable of evaluating the merits and risks of an investment in the Investment Units; and B-1 26 (d) the purchase by the TRUST is directed by a person who has such knowledge and experience in financial and business matters that he/she is capable of evaluating the merits and risks of an investment in the Investment Units. 2. The grantor of the TRUST may revoke the TRUST at any time; the grantor retains sole investment control over the assets of the trust AND (a) the grantor is a natural person whose individual net worth* or joint net worth with the grantor's spouse exceeds $1,000,000; or (b) the grantor is a natural person who had an individual income* in excess of $200,000 in each of the two most recent years and who reasonably expects an individual income in excess of $200,000 in the current year; or (c) the grantor is a natural person who, together with his or her spouse, has had a joint income* in excess of $300,000 in each of the two most recent years and who reasonably expects a joint income in excess of $300,000 in the current year. IF YOU CHECKED STATEMENT 2 IN SECTION I AND DID NOT CHECK STATEMENT 1, THE GRANTOR MUST PROVIDE A COMPLETED INDIVIDUAL SUBSCRIBER QUESTIONNAIRE (PAGES A-1 TO A-5) FOR EACH GRANTOR. II. OTHER CERTIFICATIONS By signing the Signature Page, the undersigned certifies the following: (a) that the TRUST's purchase of the Investment Units will be solely for the TRUST's own account and not for the account of any other person; (b) that the TRUST's purchase of the Investment Units is within the investment powers and authority of the TRUST (as set forth in the declaration of trust or other governing instrument) and that all necessary consents, approvals and authorizations for such purchase have been obtained and that each person who signs the Signature Page has all requisite power and authority as trustee to execute this Questionnaire and the Subscription Agreement on behalf of the TRUST; (c) that the TRUST has not been established in connection with either (i) an employee benefit plan (as defined in Section 3(3) of ERISA), whether or not subject to the provisions of Title I of ERISA, or (ii) a plan described in Section 4975(e)(i) of the Internal Revenue Code; B-2 27 (d) that the TRUST's name, address of principal office, place of formation and taxpayer identification number as set forth in this Questionnaire are true, correct and complete; and (e) that one of the following is true and correct (check one): ___ (i) the TRUST is an estate or trust whose income from sources outside of the United States is includable in its gross income for United States federal tax purposes regardless of its connection with a trade or business carried on in the United States. ___ (ii) the TRUST is an estate or trust whose income from sources outside the United States is not includable in its gross income for United States federal income taxes purposes regardless of its connection with a trade or business carried on in the United States. * For purposes of this Questionnaire, the term "net worth" means the excess of total assets over total liabilities. In determining income, a subscriber should add to his or her adjusted gross income any amounts attributable to tax-exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depletion, contributions to IRA or Keogh retirement plans, alimony payments and any amount by which income from long-term capital gains has been reduced in arriving at adjusted gross income. III. GENERAL INFORMATION (a) PROSPECTIVE SUBSCRIBER (THE TRUST) Name: __________________________________________________________________________ Address: _______________________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) B-3 28 Address for Correspondence (if different): _____________________________________ ________________________________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Telephone Number: ______________________________________________________________ (Area Code) (Number) State in which Formed: _________________________________________________________ Date of Formation: _____________________________________________________________ Taxpayer Identification Number: ________________________________________________ (b) TRUSTEES WHO ARE EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE TRUST Name(s) of Trustee(s): _________________________________________________________ IV. ADDITIONAL INFORMATION A TRUST MUST ATTACH A COPY OF ITS DECLARATION OF TRUST OR OTHER GOVERNING INSTRUMENT, AS AMENDED, AS WELL AS ALL OTHER DOCUMENTS THAT AUTHORIZE THE TRUST TO INVEST IN THE INVESTMENT UNITS. ALL DOCUMENTATION MUST BE COMPLETE AND CORRECT. V. SIGNATURE The Signature Page to this Questionnaire is contained on page B-5, entitled Trust Signature Page. B-4 29 TRUST SIGNATURE PAGE INDUSTRIAL IMAGING CORPORATION Your signature on this TRUST Signature Page evidences the agreement by the Trustee(s), on behalf of the TRUST, to be bound by the Questionnaire and the Subscription Agreement. 1. The undersigned represent that (a) the information contained in this Questionnaire is complete and accurate and (b) the TRUST will notify the Company (contact at 508-937-5400) immediately if any material change in any of this information occurs before the acceptance of the TRUST's subscription and will promptly send the Company written confirmation of such change. 2. The undersigned Trustees hereby certify that they have read and understand this Subscription Agreement. 3. The undersigned TRUST hereby represents and warrants that the persons signing this Subscription Agreement on behalf of the TRUST are duly authorized to acquire the Investment Units and sign this Subscription Agreement on behalf of the TRUST and, further, that the undersigned TRUST has all requisite authority to purchase such Investment Units and enter into this Subscription Agreement. ______________________________________ Number of Investment Units applied for Date: ________________________________ Title of Trust: ______________________ (Please Type or Print) By: __________________________________ Signature of Trustee Name of Trustee: _____________________ (Please Type or Print) By: __________________________________ Signature of Co-Trustee Name of Co-Trustee: _______________________ (Please Type or Print) THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER ANY STATE LAWS, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL, CONCURRED IN BY COUNSEL TO THE COMPANY, HAS BEEN DELIVERED TO THE EFFECT THAT REGISTRATION OF SUCH SECURITIES IS NOT REQUIRED. B-5 30 IMPORTANT: Subscriber Name: ________________________ Please Complete Booklet No.: PARTNERSHIP QUESTIONNAIRE INDUSTRIAL IMAGING CORPORATION Industrial Imaging Corporation One Lowell Research Center 847 Rogers Street Lowell, Massachusetts 01852 The information contained in this Questionnaire is being furnished in order to determine whether the undersigned PARTNERSHIP's subscription to purchase Investment Units of Industrial Imaging Corporation (the "Company") may be accepted. ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED CONFIDENTIALLY. The undersigned PARTNERSHIP understands, however, that the Company may present this Questionnaire to such parties as it deems appropriate if called upon to establish that the proposed offer and sale of the Investment Units is exempt from registration under the Securities Act of 1933, as amended, or meets the requirements of applicable state securities or "blue sky" laws. Further, the undersigned PARTNERSHIP understands that the Offering is required to be reported to the Securities and Exchange Commission and to various state securities or "blue sky" regulators. I. PLEASE CHECK ANY OF STATEMENTS 1-3 BELOW THAT APPLY TO THE PARTNERSHIP ___ 1. Each of the partners of the undersigned PARTNERSHIP is able to certify that such partner meets at least one of the following conditions: (a) The partner is a natural person whose individual net worth* or joint net worth with his or her spouse exceeds $1,000,000. (b) The partner is a natural person whose individual income* was in excess of $200,000 in each of the two most recent years and who reasonably expects an individual income in excess of $200,000 in the current year. ___ 2. Each of the partners of the undersigned PARTNERSHIP is able to certify that such partner is a natural person who, together with his or her spouse, has had a joint income* in C-1 31 excess of $300,000 in each of the two most recent years and who reasonably expects a joint income in excess of $300,000 in the current year. ___ 3. The undersigned PARTNERSHIP: (a) was not formed for the specific purpose of acquiring the Investment Units; and (b) has total assets in excess of $5,000,000. IF YOU CHECKED STATEMENT 1 OR STATEMENT 2 IN SECTION I AND DID NOT CHECK STATEMENT 3, YOU MUST PROVIDE A LETTER SIGNED BY A GENERAL PARTNER OF THE UNDERSIGNED PARTNERSHIP LISTING THE NAME OF EACH PARTNER (WHETHER A GENERAL OR LIMITED PARTNER) AND THE REASON (UNDER STATEMENT 1 OR STATEMENT 2) SUCH PARTNER QUALIFIES AS AN ACCREDITED INVESTOR (ON THE BASIS OF NET WORTH, INDIVIDUAL INCOME OR JOINT INCOME), OR EACH PARTNER MUST PROVIDE A COMPLETED INDIVIDUAL SUBSCRIBER QUESTIONNAIRE (PAGES A-1 TO A-5). II. OTHER CERTIFICATIONS By signing the Signature Page, the undersigned certifies the following: (a) that the PARTNERSHIP's purchase of the Investment Units will be solely for the PARTNERSHIP's own account and not for the account of any other person; (b) that the PARTNERSHIP's name, address of principal office, place of formation and taxpayer identification number as set forth in this Questionnaire are true, correct and complete; and (c) that one of the following is true and correct (check one): ___ (i) the PARTNERSHIP is a partnership formed in or under the laws of the United States or any political subdivision thereof. ___ (ii) the PARTNERSHIP is not a partnership formed in or under the laws of the United States or any political subdivision thereof. * For purposes of this Questionnaire, the term "net worth" means the excess of total assets over total liabilities. In determining income, a subscriber should add to his or her adjusted gross income any amounts attributable to tax-exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depletion, contributions to IRA or Keogh retirement plans, alimony payments and any amount by which income from long-term capital gains has been reduced in arriving at adjusted gross income. C-2 32 III. GENERAL INFORMATION (a) PROSPECTIVE SUBSCRIBER (THE PARTNERSHIP) Name: __________________________________________________________________________ ________________________________________________________________________________ Principal Place of Business: ___________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Address for Correspondence (if different): ________________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Telephone Number: ______________________________________________________________ (Area Code) (Number) State in which Formed: _________________________________________________________ Date of Formation: _____________________________________________________________ Taxpayer Identification Number: ________________________________________________ Number of Partners: ____________________________________________________________ (b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE PARTNERSHIP Name: ______________________________________________ Position or Title: _________________________________ IV. SIGNATURE The Signature Page to this Questionnaire is contained on page C-4, entitled Partnership Signature Page. C-3 33 PARTNERSHIP SIGNATURE PAGE INDUSTRIAL IMAGING CORPORATION Your signature on this PARTNERSHIP Signature Page evidences the agreement by the PARTNERSHIP to be bound by the Questionnaire and the Subscription Agreement. 1. The undersigned PARTNERSHIP represents that (a) the information contained in this Questionnaire is complete and accurate and (b) the PARTNERSHIP will notify the Company (contact at 508-937-5400) immediately if any material change in any of this information occurs before the acceptance of the undersigned PARTNERSHIP's subscription and will promptly send the Company written confirmation of such change. 2. The undersigned PARTNERSHIP hereby certifies that it has read and understands this Subscription Agreement. 3. The undersigned PARTNERSHIP hereby represents and warrants that the person signing this Subscription Agreement on behalf of the PARTNERSHIP is a general partner of the PARTNERSHIP, has been duly authorized by the PARTNERSHIP to acquire the Investment Units and sign this Subscription Agreement on behalf of the PARTNERSHIP and, further, that the undersigned PARTNERSHIP has all requisite authority to purchase such Investment Units and enter into this Subscription Agreement. ______________________________________ Number of Investment Units applied for Date: _____________________________ ___________________________________ Name of Partnership (Please Type or Print) ___________________________________ Signature ___________________________________ Name (Please Type or Print) THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER ANY STATE LAWS, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL, CONCURRED IN BY COUNSEL TO THE COMPANY, HAS BEEN DELIVERED TO THE EFFECT THAT REGISTRATION OF SUCH SECURITIES IS NOT REQUIRED. C-4 34 IMPORTANT: Subscriber Name: ________________________ Please Complete Booklet No.: CORPORATION QUESTIONNAIRE INDUSTRIAL IMAGING CORPORATION Industrial Imaging Corporation One Lowell Research Center 847 Rogers Street Lowell, Massachusetts 01852 The information contained in this Questionnaire is being furnished in order to determine whether the undersigned CORPORATION's subscription to purchase Investment Units of Industrial Imaging Corporation (the "Company") may be accepted. ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED CONFIDENTIALLY. The undersigned CORPORATION understands, however, that the Company may present this Questionnaire to such parties as it deems appropriate if called upon to establish that the proposed offer and sale of the Investment Shares is exempt from registration under the Securities Act of 1933, as amended, or meets the requirements of applicable state securities or "blue sky" laws. Further, the undersigned CORPORATION understands that the Offering is required to be reported to the Securities and Exchange Commission and to various state securities or "blue sky" regulators. I. PLEASE CHECK ANY OF STATEMENTS 1-3 BELOW THAT APPLY TO THE CORPORATION ___ 1. Each of the shareholders of the undersigned CORPORATION is able to certify that such shareholder meets at least one of the following two conditions: (a) The shareholder is a natural person whose individual net worth* or joint net worth with his or her spouse exceeds $1,000,000; or (b) The shareholder is a natural person who had an individual income* in excess of $200,000 in each of the two most recent years and who reasonably expects an individual income in excess of $200,000 in the current year. ___ 2. Each of the shareholders of the undersigned CORPORATION is able to certify that such shareholder is a natural person who, together with his or her spouse, has had a joint D-1 35 income* in excess of $300,000 in each of the two most recent years and who reasonably expects a joint income in excess of $300,000 during the current year. ___ 3. The undersigned CORPORATION: (a) was not formed for the specific purpose of acquiring any Investment Units; and (b) has total assets in excess of $5,000,000. IF YOU CHECKED STATEMENT 1 OR STATEMENT 2 IN SECTION 1 AND DID NOT CHECK STATEMENT 3, YOU MUST PROVIDE A LETTER SIGNED BY AN OFFICER OF THE UNDERSIGNED CORPORATION LISTING THE NAME OF EACH SHAREHOLDER AND THE REASON (UNDER STATEMENT 1 OR STATEMENT 2) WHY SUCH SHAREHOLDER QUALIFIES AS AN ACCREDITED INVESTOR (ON THE BASIS OF NET WORTH, INDIVIDUAL INCOME OR JOINT INCOME), OR EACH SHAREHOLDER MUST PROVIDE A COMPLETED INDIVIDUAL SUBSCRIBER QUESTIONNAIRE (PAGES A-1 TO A-5). II. OTHER CERTIFICATIONS By signing the Signature Page, the undersigned certifies the following: (a) that the CORPORATION's purchase of the Investment Units will be solely for the CORPORATION's own account and not for the account of any other person or entity; (b) that the CORPORATION's name, address of principal office, place of incorporation and taxpayer identification number as set forth in this Questionnaire are true, correct and complete; and (c) that one of the following is true and correct (check one): ___ (i) the CORPORATION is a corporation organized in or under the laws of the United States or any political subdivision thereof. ___ (ii) the CORPORATION is a corporation which is neither created nor organized in or under the United States or any political subdivision thereof, but which has made an election under either Section 897(i) or 897(k) of the United States Internal Revenue Code of 1986, as amended, to be treated as a domestic corporation for certain purposes of United States federal income taxation (A COPY OF THE INTERNAL REVENUE SERVICE ACKNOWLEDGMENT OF THE UNDERSIGNED'S ELECTION MUST BE ATTACHED TO THIS SUBSCRIPTION AGREEMENT IF THIS PROVISION IS APPLICABLE). D-2 36 ___ (iii) neither (i) nor (ii) above is true. * For purposes of this Questionnaire, the term "net worth" means the excess of total assets over total liabilities. In determining income, a subscriber should add to his or her adjusted gross income any amounts attributable to tax-exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depletion, contributions to IRA or Keogh retirement plans, alimony payments and any amount by which income from long-term capital gains has been reduced in arriving at adjusted gross income. III. GENERAL INFORMATION (a) PROSPECTIVE SUBSCRIBER (THE CORPORATION) Name: __________________________________________________________________________ Principal Place of Business: ___________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Address for Correspondence (if different): ________________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Telephone Number: ______________________________________________________________ (Area Code) (Number) State of Incorporation: ________________________________________________________ Date of Formation: _____________________________________________________________ ________________________________________________________________________________ Taxpayer Identification Number: ________________________________________________ Number of Shareholders: ________________________________________________________ D-3 37 (b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE CORPORATION Name: __________________________________________________________________________ ________________________________________________________________________________ Position or Title: _____________________________________________________________ IV. SIGNATURE The Signature Page to this Questionnaire is contained on page D-4, entitled Corporation Signature Page. D-4 38 CORPORATION SIGNATURE PAGE INDUSTRIAL IMAGING CORPORATION Your signature on this CORPORATION Signature Page evidences the agreement by the CORPORATION to be bound by the Questionnaire and the Subscription Agreement. 1. The undersigned CORPORATION represents that (a) the information contained in this Questionnaire is complete and accurate and (b) the CORPORATION will notify the Company (contact at 508-937-5400) immediately if any material change in any of the information occurs prior to the acceptance of the undersigned CORPORATION's subscription and will promptly send the Company written confirmation of such change. 2. The undersigned CORPORATION hereby certifies that it has read and understands this Subscription Agreement. 3. The undersigned CORPORATION hereby represents and warrants that the person signing this Subscription Agreement on behalf of the CORPORATION has been duly authorized by all requisite action on the part of the CORPORATION to acquire the Investment Units and sign this Subscription Agreement on behalf of the CORPORATION and, further, that the undersigned CORPORATION has all requisite authority to purchase the Investment Units and enter into this Subscription Agreement. ______________________________________ Number of Investment Units applied for Date: _______________________________ _____________________________________ Name of Corporation (Please Type or Print) By: _________________________________ Signature Title: ______________________________ (Please Type or Print) THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER ANY STATE LAWS, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL, CONCURRED IN BY COUNSEL TO THE COMPANY, HAS BEEN DELIVERED TO THE EFFECT THAT REGISTRATION OF SUCH SECURITIES IS NOT REQUIRED. D-5 39 IMPORTANT: Subscriber Name: ________________________ Please Complete Booklet No.: RETIREMENT PLAN QUESTIONNAIRE INDUSTRIAL IMAGING CORPORATION Industrial Imaging Corporation One Lowell Research Center 847 Rogers Street Lowell, Massachusetts 01852 The information contained in this Questionnaire is being furnished in order to determine whether the undersigned RETIREMENT PLAN's subscription to purchase Investment Units of Industrial Imaging Corporation (the "Company") may be accepted. ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED CONFIDENTIALLY. The undersigned RETIREMENT PLAN understands, however, that the Company may present this Questionnaire to such parties as it deems appropriate if called upon to establish that the proposed offer and sale of the Investment Units is exempt from registration under the Securities Act of 1933, as amended, or meets the requirements of applicable state securities or "blue sky" laws. Further, the undersigned RETIREMENT PLAN understands that the Offering is required to be reported to the Securities and Exchange Commission and to various state securities or "blue sky" regulators. I. PLEASE CHECK ANY OF THE FOLLOWING STATEMENTS, AS APPLICABLE ___ 1. The undersigned RETIREMENT PLAN certifies that it is an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 ("ERISA") and: (a) the investment decisions are made by a plan fiduciary as defined in Section 3(21) of ERISA that (i) is either a bank, insurance company or registered investment advisor or (ii) is a savings and loan association; or (b) The undersigned RETIREMENT PLAN has total assets in excess of $5,000,000; or (c) The undersigned RETIREMENT PLAN is self-directed, with investment decisions made solely by persons each of whom satisfies at least one of the following conditions: (i) such person's individual net worth* or joint net worth with his or her spouse exceeds $1,000,000; or E-1 40 (ii) such person had an individual income* in excess of $200,000 in each of the two most recent years and reasonably expects an individual income in excess of $200,000 in the current year; or (iii) such person together with his or her spouse, had a joint income* in excess of $300,000 in each of the two most recent years and reasonably expects a joint income in excess of $300,000 in the current year. ___ 2. The undersigned RETIREMENT PLAN certifies that it is an employee benefit plan, Keogh plan or Individual Retirement Account in which each participant satisfies at least one of the following conditions: (a) such person's individual net worth* or joint net worth with his or her spouse exceeds $1,000,000; or (b) such person had an individual income* in excess of $200,000 in each of the two most recent years and reasonably expects an individual income in excess of $200,000 in the current year; or (c) such person, together with his or her spouse, had a joint income* in excess of $300,000 in each of the two most recent years and reasonably expects a joint income in excess of $300,000 in the current year. * For purposes of this Questionnaire, the term "net worth" means the excess of total assets over total liabilities. In determining income, a subscriber should add to his or her adjusted gross income any amounts attributable to tax-exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depletion, contributions to IRA or Keogh retirement plans, alimony payments and any amount by which income from long-term capital gains has been reduced in arriving at adjusted gross income. IF YOU CHECKED STATEMENT 1(c) OR STATEMENT 2 AND NOT STATEMENT 1(a) OR STATEMENT 1(B), YOU MUST PROVIDE A LETTER SIGNED BY A PERSON DULY AUTHORIZED BY THE RETIREMENT PLAN LISTING, AS APPLICABLE (I) THE NAMES OF THE PERSONS (OR ENTITIES) MAKING THE INVESTMENT DECISIONS, OR (II) THE NAMES OF ALL OF THE PARTICIPANTS IN THE PLAN AND THE REASON (UNDER STATEMENT 1(c) OR STATEMENT 2) SUCH PERSON (OR ENTITY), QUALIFIES AS AN ACCREDITED INVESTOR (ON THE BASIS OF NET WORTH, INDIVIDUAL INCOME, JOINT INCOME OR OTHERWISE), OR EACH SUCH PERSON (OR ENTITY) MUST COMPLETE THE APPROPRIATE QUESTIONNAIRE (I.E. FOR AN INDIVIDUAL, TRUST, PARTNERSHIP OR CORPORATION). E-2 41 II. OTHER CERTIFICATIONS By signing the Signature Page, the undersigned certifies the following: (a) that the RETIREMENT PLAN's purchase of the Investment Units will be solely for the RETIREMENT PLAN's own account and not for the account of any other person or entity; (b) that the RETIREMENT PLAN's governing documents duly authorize the type of investment contemplated herein, and the undersigned is authorized and empowered to make such investment on behalf of the RETIREMENT PLAN. (c) that one of the following is true and correct (check one): ___ (i) the RETIREMENT PLAN is a retirement plan whose income from sources outside of the United States is includable in its gross income for United States federal tax purposes regardless of its connection with a trade or business carried on in the United States. ___ (ii) the RETIREMENT PLAN is a retirement plan whose income from sources outside the United States is not includable in its gross income for United States federal income tax purposes regardless of its connection with a trade or business carried on in the United States. III. GENERAL INFORMATION (a) PROSPECTIVE SUBSCRIBER (THE RETIREMENT PLAN) Name: __________________________________________________________________________ Address: _______________________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Address for Correspondence (if different): ________________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (Zip Code) Telephone Number: ______________________________________________________________ (Area Code) (Number) E-3 42 State in which Formed: _________________________________________________________ Date of Formation: _____________________________________________________________ Taxpayer Identification Number: ________________________________________________ (b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE RETIREMENT PLAN Name: __________________________________________________________________________ ________________________________________________________________________________ Position or Title: _____________________________________________________________ IV. ADDITIONAL INFORMATION THE RETIREMENT PLAN MUST ATTACH COPIES OF ALL DOCUMENTS GOVERNING THE PLAN AS WELL AS ALL OTHER DOCUMENTS AUTHORIZING THE RETIREMENT PLAN TO INVEST IN THE INVESTMENT UNITS. INCLUDE, AS NECESSARY, DOCUMENTS DEFINING PERMITTED INVESTMENTS BY THE RETIREMENT PLAN, AND DEMONSTRATING AUTHORITY OF THE SIGNING INDIVIDUAL TO ACT ON BEHALF OF THE PLAN. ALL DOCUMENTATION MUST BE COMPLETE AND CORRECT. V. SIGNATURE The Signature Page to this Questionnaire is contained on page E-5, entitled Retirement Plan Signature Page. E-4 43 RETIREMENT PLAN SIGNATURE PAGE INDUSTRIAL IMAGING CORPORATION Your signature on this RETIREMENT PLAN Signature Page evidences the agreement by the RETIREMENT PLAN to be bound by the Questionnaire and the Subscription Agreement. 1. The undersigned RETIREMENT PLAN represents that (a) the information contained in this Questionnaire is complete and accurate and (b) the RETIREMENT PLAN will notify the Company (contact at 508-937- 5400) immediately if any material change in any of the information occurs prior to the acceptance of the undersigned RETIREMENT PLAN's subscription and will promptly send the Company written confirmation of such change. 2. The undersigned RETIREMENT PLAN hereby certifies that it has read and understands this Subscription Agreement. 3. The undersigned RETIREMENT PLAN hereby represents and warrants that the person signing this Subscription Agreement on behalf of the RETIREMENT PLAN has been duly authorized to acquire the Investment Units and sign this Subscription Agreement on behalf of the RETIREMENT PLAN and, further, that the undersigned RETIREMENT PLAN has all requisite authority to purchase the Investment Units and enter into this Subscription Agreement. ______________________________________ Number of Investment Units applied for Date: _______________________________ _____________________________________ Name Retirement Plan (Please Type or Print) By: _________________________________ Signature Name: _______________________________ (Please Type or Print) Title: ______________________________ (Please Type or Print) THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER ANY STATE LAWS, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL, CONCURRED IN BY COUNSEL TO THE COMPANY, HAS BEEN DELIVERED TO THE EFFECT THAT REGISTRATION OF SUCH SECURITIES IS NOT REQUIRED. E-5 EX-10.I 13 SUBSCRIPTION AGREEMENT (1996 PRIVATE PLACEMENT) 1 EXHIBIT 10i Name of Offeree: Agreement No: ---------------------- ------- SUBSCRIPTION AGREEMENT Triple I Corporation, a Delaware corporation (the "Corporation"), is offering for sale to institutions and individuals who are "Accredited Investors" as defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended, a minimum of 500,000 shares ("Minimum Offering") and a maximum of 2,000,000 shares ("Maximum Offering") of its Common Stock, $.01 par value per share (the "Shares"), at a purchase price of $1.00 per share (the "Offering"). Upon receipt of subscriptions to purchase the Minimum Offering the Corporation, will merge (the "Merger") with Orbis, Inc., a publicly held Rhode Island corporation ("Orbis"). The Corporation was incorporated in October 1992 as a successor corporation to a designer, manufacturer and marketer of automated optical vision and industrial imaging systems for inspection and identification of defects in printed circuit boards. Orbis is the continuation of two Rhode Island corporations, Information Systems, Inc., incorporated in 1971, and Dataman, Inc., incorporated in 1973. In March 1987, Orbis completed a public offering of 1,000,000 shares of its Common Stock, $.01 par value per share, at an offering of $2.50 per share. Orbis has been a shell corporation and has not had material revenue from any operations since 1992. The Merger will take place immediately prior to the initial closing of the Offering. As part of the Merger, all of the Corporation's securities will be exchanged for similar securities of Orbis, on a one-for-one basis. UPON COMPLETION OF THE MERGER, ORBIS HAS AGREED WITH THE CORPORATION TO CHANGE ITS NAME TO INDUSTRIAL IMAGING CORPORATION, WHICH SHALL CONTINUE TO OPERATE AND CONDUCT THE BUSINESS OF THE CORPORATION. ACCORDINGLY, SUBSCRIBERS IN THIS OFFERING WILL RECEIVE STOCK CERTIFICATES REPRESENTING SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE, OF INDUSTRIAL IMAGING CORPORATION. 2 FOR ACCREDITED INVESTORS ONLY ----------------------------- SUBSCRIPTION AGREEMENT ---------------------- Private Placement of a minimum of 500,000 Shares and a maximum of 2,000,000 Shares of Common Stock, $.01 value per share, of Triple I Corporation (a) Number of Shares subscribed for (b) Total Subscription Price (multiply (a) by $1.00 per Share) THE UNDERSIGNED ("Subscriber") hereby subscribes for the number of Shares of Common Stock, $.01 par value per share (the "Shares"), offered by Triple I Corporation (the "Corporation"), a Delaware corporation, set forth in (a) above. The Subscriber hereby agrees to pay the amount set forth in (b) above upon execution of this Agreement, subject to and in accordance with the following terms and conditions. THE SUBSCRIBER UNDERSTANDS THAT AN INVESTMENT IN THE SECURITIES OF THE CORPORATION IS HIGHLY SPECULATIVE, AND SHOULD CAREFULLY CONSIDER THE IMPACT OF THE RISK FACTORS AND DILUTION IDENTIFIED IN THE CORPORATION'S CONFIDENTIAL PRIVATE OFFERING MEMORANDUM, DATED NOVEMBER 7, 1995 (THE "MEMORANDUM"). SECTION 1. SUBSCRIPTION FOR SHARES 1.1 Subscriber hereby deposits with the Union Bank & Trust, Denver, Colorado, the amount set forth in (b) above via wire transfer or certified or bank check payable to "Schneider Securities, Inc., in favor of Triple I Corporation." Should this Subscription Agreement not be accepted by the Company or the terms and conditions of this Offering not be satisfied, the funds deposited herewith shall be returned to Subscriber without interest accrued thereon, net of bank fees. 1.2 Upon receipt and acceptance by the Corporation of subscriptions for a minimum of 500,000 Shares or $500,000 (the "Minimum Offering") under this Agreement, there shall be an initial closing (the "Initial Closing") of the purchase of the Shares. Immediately prior to the Initial Closing, the Corporation will merge with Orbis, Inc., a publicly-held Rhode Island corporation ("Orbis"). As part of the merger by and between the Corporation and Orbis, Orbis will change its -2- 3 name to Industrial Imaging Corporation, which shall continue to operate the business of the Corporation as described in the Memorandum. In the merger, all of the Corporation's securities will be exchanged for similar securities of Industrial Imaging Corporation, on a one-for-one basis. The Subscriber acknowledges that the Shares of Common Stock purchased hereunder shall be shares of Common Stock, $.01 par value per share, of Industrial Imaging Corporation. Accordingly, the Subscriber shall receive within five (5) days after the relevant closing a stock certificate representing the Shares of Common Stock of Industrial Imaging Corporation. Such shares shall be registered in the Subscriber's name as set forth in the applicable purchaser questionnaire completed and executed by the Subscriber in connection herewith. Thereafter, one or more additional closings may take place (collectively, the "Closings") until all Shares are subscribed for or until the Offering terminates, in accordance with the terms as set forth in the Memorandum. The Shares issued hereunder, when delivered to the Subscriber in accordance with the terms hereof, shall be duly authorized by appropriate corporate action and shall constitute validly issued and outstanding securities of the Corporation. 1.3 Subscriber hereby understands and agrees that the Corporation reserves the right to reject this subscription for the Shares, as a whole or in part, and at any time, notwithstanding prior receipt by Subscriber of notice of acceptance by the Corporation of the Subscription, if in the Corporation's judgment it deems such action to be in the best interest of the Corporation. In the event of rejection of this Subscription, or a portion thereof, or if the Minimum Offering is not completed, said payment will promptly be returned to Subscriber, in accordance with Section 1.1 of this Agreement, and this Subscription Agreement shall have no force or effect. If this subscription is accepted, then upon closing the funds specified above shall be deposited in the general account of the Corporation and the Shares will be delivered to Subscriber in accordance with Section 1.2. 1.4 Subscriber agrees that he will not transfer or assign this Subscription Agreement or any of Subscriber's interest herein. Subscriber may not cancel, terminate or revoke this Subscription Agreement, and this Subscription Agreement will be binding upon Subscriber's successors and assigns. 1.5 The Subscriber undertakes to execute and deliver to the Corporation within five (5) days after receipt of the Corporation's request therefor, such further designations, powers of attorney, proxies, consents, and other instruments as the Corporation deems necessary or appropriate to carry out the provisions of this Agreement, and the merger by and between the Corporation and Orbis. 1.6 The Subscriber acknowledges that the Shares are being sold to him pursuant to exemptions from the registration provisions of the Securities Act of 1933, as amended (the "Act") and the securities laws of the state of his legal residence, in reliance upon the representations made by the Subscriber herein. -3- 4 SECTION 2. REPRESENTATIONS, WARRANTIES, AND ACKNOWLEDGEMENTS OF SUBSCRIBERS The Subscriber acknowledges that the Corporation is offering the Shares in reliance upon the representations, warranties, and other information presented by the Subscriber herein. The Subscriber undertakes to notify the Corporation immediately of any changes in any of the representations, warranties, and other information contained herein. In order to induce the Corporation to accept the subscription made hereby, the Subscriber hereby represents, warrants and acknowledges to the Corporation as follows: 2.1 Sophistication. The Subscriber represents that he (i) is an "Accredited Investor" as defined in Rule 501 of Regulation D under the Act and shall confirm such by completing the applicable Questionnaire attached hereto and made a part hereto, (ii) has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of acquisition of the Shares and of making an informed investment decision with respect thereto, and (iii) has the net worth required of investors in the offering and his financial condition is such that he is able to bear and understands all risks and risk factors of holding the Shares for an indefinite period of time and losing his entire investment, each of which is more fully described in the "Investor Suitability Requirements" and "Risk Factors" sections of the Memorandum. 2.2 Access to Information. The Subscriber acknowledges that he, his legal counsel, investment advisor or other representatives, if any, have been given access through meetings with representatives of the Corporation to current and other information about the Corporation as well as an opportunity to ask questions of the Corporation's officers and directors about the information to which he and his representatives have been given access. The Subscriber or his legal counsel or investment advisor has been given a full opportunity to ask questions of, and to receive answers from, the Company and its officers and directors concerning the terms and conditions of the offering and the business of the Corporation and to obtain additional information necessary to verify the accuracy of the information concerning the Corporation, or such other information as desired in order to evaluate an investment in the Shares, and all such questions have been answered to the full satisfaction of the undersigned. 2.3 Risk Factors. The Subscriber recognizes that the purchase of Shares hereunder involves a high degree of risk in that (i) the market for the sale of these Shares is limited and, as such, the Subscriber may not be able to liquidate his investment; (ii) transferability of these Shares, if at all possible, is extremely limited; and (iii) in the event of a disposition of these Shares, Subscriber could sustain the loss of his entire investment. In addition, the Subscriber recognizes additional risks, including but not limited to, those set forth in the Memorandum. 2.4 Investment Representation. The Subscriber represents that he is acquiring the Shares hereunder for his own account and not with a view to reselling or otherwise distributing such Shares in violation of any federal securities laws and understands and agrees that the Shares to be issued hereunder are restricted on transfer and must be held unless they are registered under the Act or an -4- 5 exemption from registration is available, and the Corporation has received an opinion of counsel, in form and substance satisfactory to it, to such effect. No assurance can be given that the Corporation will be able to make available to the public at any time in the future information necessary to enable security holders to make routine sales of Shares pursuant to Rule 144 under the Act. 2.5 Restrictions on Transfer. Each Subscriber agrees that the Shares purchased hereunder may only be transferred if registered under the Act or pursuant to an exemption from such registration requirements. The Subscriber understands that compliance with an applicable exemption under the Act may be required for a sale or other disposition of shares that are not registered under the Act. The Subscriber agrees that the following legend may be placed on any certificates evidencing the Shares purchased herein: "The securities represented by the certificate have not been registered under the Securities Act of 1933, as amended, and may not be sold, offered for sale, assigned, transferred or otherwise disposed of unless registered pursuant to the provisions of that Act or an opinion of counsel to the Company is obtained stating that such disposition is in compliance with an available exemption from such registration." Each Subscriber understands that, so long as the legend may remain on the certificates representing the Shares sold hereby, the Corporation may maintain appropriate "stop transfer" orders with respect to such shares on its books and records and with those to whom it may delegate registrar and transfer functions. Subject to the approval of counsel for the Corporation, which approval shall not be unreasonably withheld, each Subscriber shall be entitled to replacement certificates without the legend provided in this paragraph hereof upon receipt by the Corporation of a favorable opinion from counsel reasonably satisfactory in form and substance to the Corporation that the removal of such legend is not in violation of either the Act and the rules and regulations thereunder or applicable provisions of state securities laws. 2.6 Authority. The Subscriber represents that he has full legal power and authority to enter into this Subscription Agreement and to purchase the Shares. 2.7 Valuation of the Shares. The Subscriber understands that the valuation placed upon the Shares has been determined by negotiations between the Corporation and the Placement Agent, and does not necessarily bear any relationship to traditionally accepted criteria of value such as the Company's asset value, earnings or book value. The Subscriber represents that he has independently evaluated the fairness of the offering price for the Shares. 2.8 Decision to Invest. In making his decision to purchase the Shares herein subscribed for, the Subscriber has relied solely upon the information about the Corporation provided to the Subscriber and upon independent investigations made by him, or his legal counsel or investment advisor. He is not relying on any representations or warranties from the Corporation or any of its -5- 6 officers, directors, affiliates, employees or agents other than the information provided by the Corporation to him in this offering. The Subscriber has consulted with his own legal counsel, accountant, and investment representative as to tax and related matters concerning the Corporation and investments therein; no representations or warranties of any kind are intended or should be inferred concerning any economic returns or tax related effects which may result from an investment in the Corporation. No assurances are given that existing tax laws will not be changed or interpreted adversely to the Subscriber. In addition, he is not subscribing pursuant hereto for any Shares as a result of or subsequent to (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or (ii) any seminar or meeting whose attendees, including the undersigned, had been invited as a result of, subsequent to, or pursuant to, any of the foregoing. 2.9 Unregistered Securities. The Subscriber understands that the Shares have not been registered under the Act in reliance upon specific exemptions from registration thereunder, and understands that it is not anticipated that there will be any market for resale of the Shares and that it may not be possible for the undersigned to liquidate an investment in the Shares on an emergency basis. 2.10 No State Review. The Subscriber acknowledges that the Shares are being sold pursuant to exemptions from the registration requirements of the state indicated as the Subscriber's state of residence, that no securities commission or regulatory authority has approved, passed upon, or endorsed the merits of this Offering, nor is it intended that any such agency will do so. Any representation to the contrary is unlawful. 2.11 State Residence Status. The Subscriber represents that he is a resident and domiciliary (not a temporary or transient resident) of the state, county, and country set forth in the attached Questionnaire, and has no present intention to become a resident of any other jurisdiction, and all communications, written or oral, concerning the Shares have been directed to the Subscriber in, and received by the Subscriber in, such state jurisdiction. 2.12 No Representation Regarding the Corporation's Results of Operations. There has never been represented, guaranteed, or warranted to the Subscriber by any broker, the Corporation, its officers, directors or agents, or employees or any other person, expressly or by implication (i) the percentage of profits and/or amount of or type of consideration, profit or loss to be realized, if any, as a result of the Corporation's operations; and (ii) that the past performance or experience on the part of the management of the Corporation, or of any other person, will in any way result in profitable operations of the Corporation. 2.13 Subscription. The Subscriber understands that the Company reserves the unrestricted right to reject or limit any subscription and to close the offer at any time. 2.14 Subscriber's Understanding. The Subscriber has read and understands the written material supplied by the Corporation, including the Memorandum, and understands the meaning and -6- 7 legal consequences of the Agreement and the representations and warranties made herein. This Agreement contains the complete understanding between Subscriber and the Corporation and no representative of the Corporation or any other person has any power or authority to change or alter the terms hereof. This Agreement is subject to acceptance by the Corporation, which may accept or reject subscriptions in whole or in part, in its sole discretion, and is not assignable without the written consent of the Corporation. 2.15 Subscriber's Consent to Merger. The Subscriber acknowledges that upon receipt of subscriptions to purchase the Minimum Offering the Corporation will merge with Orbis, Inc., a publicly-held Rhode Island corporation ("Orbis"). The merger will take place immediately prior to the Initial Closing. As part of the Merger, all of the Corporation's securities will be exchanged for similar securities of Orbis, on a one-for-one basis. UPON COMPLETION OF THE MERGER, ORBIS HAS AGREED WITH THE CORPORATION TO CHANGE ITS NAME TO INDUSTRIAL IMAGING CORPORATION, WHICH SHALL CONTINUE TO OPERATE AND CONDUCT THE BUSINESS OF THE CORPORATION. ACCORDINGLY, SUBSCRIBERS IN THIS OFFERING WILL RECEIVE STOCK CERTIFICATES REPRESENTING SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE, OF INDUSTRIAL IMAGING CORPORATION. The exchange of securities and the Merger are more fully described in the Memorandum, and the Subscriber hereby acknowledges, consents, and agrees to such transactions. SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION The Corporation hereby represents and warrants to the Subscribers that as of the date hereof, except as otherwise set forth herein: 3.1 Organization and Corporate Power. The Corporation is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and is qualified to do business as a foreign corporation in each jurisdiction in which such qualification is required, except where failure so to qualify would not have a material adverse effect on the Corporation. The Corporation has all required corporate power and authority to own its property, to carry on its business as presently conducted or contemplated, to enter into and perform this Agreement and generally to carry out the transactions contemplated hereby. The Corporation is not in violation of any term of its Articles of Organization or its Bylaws, or any material instrument, agreement, judgment, decree, order, statute, rule or regulation of any federal, state or local government or agency applicable to the Corporation. 3.2 Authorization. This Agreement, and all documents and instruments executed pursuant hereto, are legal, valid and binding obligations of the Corporation, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws applicable to creditors' rights and remedies and to the exercise of judicial discretion in accordance with general principles of equity. The execution, delivery and performance of this Agreement and the issuance of the shares of Common Stock have been duly authorized by all necessary corporate or other action of the Corporation. -7- 8 SECTION 4. REPRESENTATIONS AND WARRANTIES OF ORBIS, INC., TO BE KNOWN IN THE FUTURE AS INDUSTRIAL IMAGING CORPORATION Orbis, Inc. ("Orbis") hereby represents and warrants to the Subscribers that as of the date hereof, except as otherwise set forth herein: 4.1 Organization and Corporate Power. Orbis is a corporation duly organized, validly existing and in good standing under the laws of the State of Rhode Island, and is qualified to do business as a foreign corporation in each jurisdiction in which such qualification is required, except where failure so to qualify would not have a material adverse effect on Orbis. Orbis has all required corporate power and authority to own its property, to carry on its business as presently conducted or contemplated, to enter into and perform this Agreement and generally to carry out the transactions contemplated hereby. Orbis is not in violation of any term of its Articles of Organization or its Bylaws, or any material instrument, agreement, judgment, decree, order, statute, rule or regulation of any federal, state or local government or agency applicable to Orbis. 4.2 Authorization. This Agreement, and all documents and instruments executed pursuant hereto, are legal, valid and binding obligations of Orbis, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws applicable to creditors' rights and remedies and to the exercise of judicial discretion in accordance with general principles of equity. The execution, delivery and performance of this Agreement and the issuance of the shares of Common Stock have been duly authorized by all necessary corporate or other action of Orbis. 4.3 SEC Reports and Financial Statements. Each of Orbis and its Subsidiaries has filed all required forms, reports and documents with the SEC since January 1, 1992 (collectively, the "SEC Reports"), each of which has complied as to form in all material respects with all applicable requirements of the Securities Act and the Exchange Act. None of the SEC Reports, including, without limitation, any financial statements or schedules included therein, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited consolidated financial statements and unaudited consolidated interim financial statements of Orbis included in its Annual Reports on Form 10-K for each of the two fiscal years ended March 31, 1993 and 1994 and its Quarterly Report on Form 10-Q for its fiscal quarters ended June 30, and September 30, 1995 fairly present, in conformity with generally accepted accounting principles applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of Orbis and its Subsidiaries as of the dates thereof and their consolidated results of operations and changes in financial position for the periods then ended (subject to normal year-end adjustments and the addition of footnotes in the case of any unaudited financial statements). -8- 9 SECTION 5. REGISTRATION RIGHTS 5.1 Demand Registration Rights. (a) The then holder(s) (the "Holders") of at least a majority of the shares sold in this Offering may request in writing one time, at any time from and after twelve (12) months after the final Closing Date of the Offering but not later than three (3) years from such date, that the Corporation effect the registration of the shares. Upon receipt of any such request, the Corporation shall, as expeditiously as practicable, use its best efforts to file the registration statement. Upon receipt of any such demand, the Corporation shall promptly notify all of the Holders that such registration statement will be filed and that the shares then held by the Holders (the "Registrable Shares") are eligible to be included in such registration statement at the Holder's request, which request must be made in writing within twenty (20) days of such notice. The Corporation will then, as expeditiously as practicable, use its best efforts to file a registration statement. (b) The Corporation shall not be required to cause a registration statement pursuant to this Section 4.1 to become effective prior to ninety (90) days following the effective date of any other registration statement filed by the Corporation. (c) In the case of any registration statement effected pursuant to this paragraph, the Corporation shall bear all additional registration and qualification fees and expenses (excluding underwriters' discounts and commissions). The Holders shall bear the expenses of underwriter's discounts and commissions pro-rata on the basis of the amount of Registrable Shares so registered. In addition, each selling Holder shall bear the fees and costs of any separate counsel it may select. 5.2 Piggyback Registration Rights. (a) On one occasion, if any, following the Closing that the Corporation contemplates a public offering (other than an offering on Form S-4 or S-8 or similar form) of shares of its Common Stock to be registered under the Securities Act, the Corporation shall so notify the Holders in writing of its intention to do so at least 30 days prior to the filing of a registration statement in respect of such offering. The Holders must give written notice to the Corporation, within 10 days of receipt of such notice from the Corporation, of their desire to have any of the Registrable Shares included in such registration statement, and may, subject to the provisions of this Section, have said Registrable Shares included in such registration statement. Notwithstanding the foregoing, if the managing underwriter of any such offering, in its sole discretion, determines that the number of Registrable Shares proposed to be included in the registration statement and sold by the Holders would materially and adversely affect the successful marketing of the securities proposed to be registered and sold for the account of the Corporation, then the number of Registrable Shares to be offered for the account of the Holders shall be reduced (or, if necessary, excluded) to the extent necessary to reduce the total amount of the securities to be included in the offering to the amount recommended by the managing underwriter. The Corporation shall have the right to designate the managing underwriter in respect of a public offering pursuant to this paragraph. -9- 10 The Corporation shall bear all expenses in connection with the registration of any such Registrable Shares, but the Corporation shall have no obligation to pay or otherwise bear any portion of the fees or disbursements of any special counsel which any Holder may retain in connection with the registration of the Registrable Shares, or any portion of the underwriter's commission, discounts and expenses attributable to the Registrable Shares being offered and sold by the holder or any taxes payable upon sale of the Registrable Shares. (b) If at the time of any request to register the Registrable Shares pursuant to this Section 5.2(b), the Corporation is engaged or has fixed demonstrable plans to engage within 90 days of the time of the request in an underwritten public offering (other than on a Form S-4 or S-8) as to which any Holder may include such Holder's Registrable Shares pursuant to a Section 4 or is engaged in any other activity which, in the good faith determination of the Corporation's Board of Directors, would be adversely affected by the requested registration to the material detriment of the Corporation, then the Corporation may, at its option, direct that if it effectuates the requested registration, the Holder shall agree not to publicly sell such registered Registrable Shares for such period of time as requested by the underwriter managing the public offering or by the Corporation's Board of Directors, but in any event not to exceed 90 days from the effectiveness of any such registration statement. SECTION 6. MISCELLANEOUS PROVISIONS 6.1 Use of Speech. All pronouns contained herein and any variations thereof, shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the parties may require. 6.2 Waiver. No waiver of any right under this Agreement shall be deemed effective unless contained in a writing signed by the party charged with such waiver, and no waiver of any right arising from any breach or failure to perform shall be deemed to be a waiver of any future such right or of any other right arising under this Agreement. 6.3 Entire Agreement; Modification. This Agreement constitutes the entire agreement between the parties and supersedes any prior understanding or agreements concerning the subject matter hereof. This Agreement may be amended, modified, or terminated only by a written instrument signed by the Corporation and at least holders of two-thirds (2/3) of the Shares issued to the Subscribers hereunder. 6.4 Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. 6.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts without regard to the conflict of law principles thereof. Subscriber agrees that any disputes arising with respect to or in connection with this Agreement shall be finally decided in accordance with the rules of arbitration. -10- 11 6.6 Notices. All notices, requests, demands, and communications related to this Agreement will be deemed given if and when delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid, to the following addresses: If to the Corporation: Industrial Imaging Corporation. 847 Rogers Street Lowell, Massachusetts 01852 Attention: Juan J. Amodei, President With a copy to: O'Connor, Broude & Aronson 950 Winter Street, Suite 2300 Waltham, Massachusetts 02154 Attention: Neil H. Aronson, Esquire If to the Subscriber: At the address set forth in the Questionnaire attached hereto. or, as to each of the foregoing, at such other address as shall be designated by the addressee in a written notice to the other parties complying as to delivery with the terms of this Section 6.6. Notwithstanding anything to the contrary contained in this Agreement, all notices, requests, demands and other communications shall be effective when received. 6.7 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives and successors. 6.8 Headings. Headings contained in this Agreement are only as a matter of convenience and in no way define, limit, extend, or describe the scope of this Agreement or the intent of any provisions hereof. 6.9 Unenforceability. If any provision of this Agreement is or becomes or is deemed invalid, illegal, or unenforceable in any jurisdiction, to the maximum extent permissible, such provision shall be deemed amended to conform to applicable laws. If such provision cannot be so amended without materially altering the intention of the parties, it shall be stricken and, to the extent possible, the remainder of this Agreement shall remain in full force and effect. 6.10 Assignment. The Subscriber may not assign this Agreement or its rights hereunder without the Corporation's written consent. 6.11 Multiple Subscribers. If more than one person is signing this Agreement, each representation, warranty, and undertaking stated herein shall be the joint and several representation, warranty, and undertaking of each such person. -11- 12 6.12 Indemnification. Subscriber hereby agrees to indemnify and hold harmless the Corporation, its officers, directors, shareholders, employees, agents, and attorneys against any and all losses, claims, demands, liabilities, and expenses (including reasonable legal or other expenses, including reasonable attorneys' fees) incurred by each such person in connection with defending or investigating any such claims or liabilities, whether or not resulting in any liability to such person, to which any such indemnified party may become subject under the Securities Act, under any other statute, at common law or otherwise, insofar as such losses, claims, demands, liabilities and expenses (a) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact made by Subscriber and contained in this Subscription Agreement, or (b) arise out of or are based upon any breach of any representation, warranty, or agreement made by Subscriber contained herein. 6.13 Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute but one and the same document. 6.14 Acceptance of Subscription. The Corporation may accept this Subscription Agreement at any time for all or any portion of the Shares subscribed for by executing a copy hereof as provided and notifying Subscriber within a reasonable time thereafter. [THIS SPACE INTENTIONALLY LEFT BLANK] -12- 13 IN WITNESS WHEREOF, the undersigned parties have executed this Subscription Agreement as a sealed instrument as of the date written below. Triple I Corporation By:______________________________________ Juan J. Amodei, President Orbis, Inc., to be known in the future as Industrial Imaging Corporation By:______________________________________ Pasquale Ruggieri Date:_____________________ NOTE: EACH SUBSCRIBER MUST COMPLETE, SIGN AND RETURN THE APPLICABLE SIGNATURE PAGE AND INVESTOR QUESTIONNAIRE PROVIDED ON THE ACCOMPANYING PAGES. -13- EX-10.J 14 PURCHASE AGREEMENT-SECURITIES 1 EXHIBIT 10j ================================================================================ SECURITIES PURCHASE AGREEMENT BETWEEN INDUSTRIAL IMAGING CORPORATION AND IMPRIMIS INVESTORS LLC ================================================================================ 2 SECURITIES PURCHASE AGREEMENT, dated as of November 12, 1997 (the "Agreement"), between Industrial Imaging Corporation, a Delaware corporation (the "Company"), and Imprimis Investors LLC, a Delaware limited liability company (the "Purchaser"). ------------------------------------------------------------------ INTRODUCTION The Company desires to issue and sell to the Purchaser, and the Purchaser desires to purchase from the Company, (a) 750,000 shares (the "Initial Shares") of common stock, par value $0.01 per share ("Common Stock"), of the Company, (b) 2,250,000 shares (the "Subsequent Shares") of Common Stock, (c) 250,000 warrants, substantially in the form of Exhibit A, to purchase shares of Common Stock (the "Initial Class A Warrants"), (d) 750,000 warrants, substantially in the form of Exhibit A, to purchase shares of Common Stock (the "Subsequent Class A Warrants"), (e) 250,000 warrants, substantially in the form of Exhibit B, to purchase shares of Common Stock (the "Initial Class B Warrants") and (f) 750,000 warrants, substantially in the form of Exhibit B, to purchase shares of Common Stock (the "Subsequent Class B Warrants"), in each case on the terms and conditions set forth in this Agreement. The Initial Shares and the Subsequent Shares are collectively referred to herein as the "Shares." The Initial Class A Warrants and the Subsequent Class A Warrants are collectively referred to herein as the "Class A Warrants." The Initial Class B Warrants and the Subsequent Class B Warrants are collectively referred to herein as the "Class B Warrants." The Class A Warrants and the Class B Warrants are collectively referred to herein as the "Warrants." The Initial Shares, the Initial Class A Warrants and the Initial Class B Warrants are collectively referred to herein as the "Initial Securities." The Subsequent Shares, the Subsequent Class A Warrants and the Subsequent Class B Warrants are collectively referred to herein as the "Subsequent Securities." The Shares and the Warrants are collectively referred to herein as the "Securities." As a condition to the Purchaser's purchasing the Initial Securities, (i) the Company is amending and restating its By-laws substantially in the form of Exhibit C (the "By-laws"), (ii) the Company and the Purchaser are entering into a Registration Rights Agreement, substantially in the form of Exhibit D (the "Registration Rights Agreement") and (iii) the Company and the Purchaser are entering into a Small Business Investment Company Letter Agreement, substantially in the form of Exhibit E (the "SBIC Letter Agreement"). 3 The parties agree as follows: ARTICLE I PURCHASE AND SALE OF THE SHARES SECTION 1.1. THE SECURITIES. (a) Upon the terms and subject to the conditions set forth in this Agreement, at the Initial Closing (as defined in Section 1.3(a)), the Company shall issue and sell to the Purchaser, and the Purchaser shall purchase from the Company, the Initial Securities, free and clear of all security interests, liens, pledges, charges, escrows, options, rights of first refusal, encumbrances, agreements, arrangements, commitments or other claims of any kind or character (collectively, the "Claims"), except as imposed by applicable Federal or state securities laws. (b) Upon the terms and subject to the conditions set forth in this Agreement, at the Subsequent Closing (as defined in Section 1.3(b)), the Company shall issue and sell to the Purchaser, and the Purchaser shall purchase from the Company, the Subsequent Securities, free and clear of all claims, except as imposed by applicable Federal or state securities laws. SECTION 1.2. PURCHASE PRICE. (a) In consideration of the issuance and sale of the Securities by the Company to the Purchaser, the Purchaser shall pay to the Company $750,000 (the "Initial Purchase Price") in cash on the Initial Closing Date (as defined in Section 1.3(a)). (b) In consideration of the issuance and sale of the Subsequent Securities by the Company to the Purchaser, the Purchaser shall pay to the Company $2,250,000 (the "Subsequent Purchase Price") in cash on the Subsequent Closing Date (as defined in Section 1.3(b)). SECTION 1.3. CLOSING. (a) The closing (the "Initial Closing") for the purchase of the Initial Securities and the consummation of the transactions related thereto as contemplated by this Agreement shall take place at the offices of Howard, Darby & Levin, 1330 Avenue of the Americas, New York, New York 10019, or such other place or places as the Company and the Purchaser shall agree, at 10:00 a.m. (Eastern time) on the later of November 12, 1997 and two business days following the date on which all conditions set forth in Sections 4.1 and 4.2 shall have been satisfied or waived, or such other date and time agreed to by the Company and the Purchaser (such date, the "Initial Closing Date"). (b) The closing (the "Subsequent Closing") for the purchase of the Subsequent Securities and the consummation of the transactions related thereto as contemplated by this Agreement shall take place at the offices of Howard, Darby & Levin, 1330 Avenue of the Americas, New York, New York 10019, or such other place or places as the Company and the Purchaser shall agree, at 10:00 a.m. (Eastern time) on the later of November 21, 1997 and two business days following the date on which all conditions set forth in Sections 4.3 and 4.4 shall 2 4 have been satisfied or waived, or such other date and time agreed to by the Company and the Purchaser (such date, the "Subsequent Closing Date"). SECTION 1.4. DELIVERY AND PAYMENT. (a) At the Initial Closing: (i) The Company shall deliver to the Purchaser: (A) one or more duly executed stock certificates evidencing the Initial Shares issued in the name of the Purchaser (in the amounts specified by the Purchaser); (B) one or more duly executed warrant certificates evidencing the Initial Class A Warrants issued in the name of the Purchaser (in the amounts specified by the Purchaser); (C) one or more duly executed warrant certificates evidencing the Initial Class B Warrants issued in the name of the Purchaser (in the amounts specified by the Purchaser); (D) the Registration Rights Agreement duly executed by the Company; (E) the SBIC Letter Agreement duly executed by the Company; (F) a copy of the Certificate of Incorporation of the Company (the "Certificate of Incorporation"), certified by the Secretary of State of the State of Delaware; (G) a Long Form Certificate of Good Standing of the Company from the Secretary of State of the State of Delaware; (H) a Certificate of Good Standing of the Company from the Secretary of State of each jurisdiction in which the Company is qualified to do business as a foreign corporation; and (I) evidence, in form satisfactory to the Purchaser, that a representative designated by the Purchaser has been elected to the Board of Directors of the Company and has been designated a Class III Director as that term is used in the By-laws. (J) all other documents, instruments and writings required by the Purchaser to be delivered to it pursuant to this Agreement. (ii) The Purchaser shall deliver to the Company: (A) an amount equal to the Initial Purchase Price by wire transfer to the account of the Company; 3 5 (B) the Registration Rights Agreement duly executed by the Purchaser; and (C) all other documents, instruments and writings required by the Company to be delivered to it pursuant to this Agreement. (b) At the Subsequent Closing: (i) The Company shall deliver to Purchaser: (A) one or more duly executed stock certificates evidencing the Subsequent Shares issued in the name of the Purchaser (in the amounts specified by the Purchaser); (B) one or more duly executed warrant certificates evidencing the Subsequent Class A Warrants issued in the name of the Purchaser (in the amounts specified by the Purchaser); (C) one or more duly executed warrant certificates evidencing the Subsequent Class B Warrants issued in the name of the Purchaser (in the amounts specified by the Purchaser); and (D) all other documents, instruments and writings reasonably required by the Purchaser to be delivered by it pursuant to this Agreement. (ii) The Purchaser shall deliver to the Company: (A) an amount equal to the Subsequent Purchase Price (less the costs and expenses referred to in the second sentence of Section 3.1 in the amount designated by the Purchaser to the Company no later than the day before the Subsequent Closing) by wire transfer to the account of the Company; and (B) all other documents, instruments and writings required by the Company to be delivered to it pursuant to this Agreement. ARTICLE II REPRESENTATIONS AND WARRANTIES SECTION 2.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Purchaser as follows: (a) ORGANIZATION, STANDING AND POWER. (i) The Company and its wholly-owned subsidiary, Triple I Corporation (the "Subsidiary"), are corporations duly organized, validly existing and in good standing under the laws of the State of Delaware and have all requisite corporate power and authority to own, lease and operate their respective properties and 4 6 to carry on their respective businesses as now being conducted and as currently proposed to be conducted, subject to any shareholder and Board of Directors approvals that may be required in the future by the corporate law of the State of Delaware. The Company and the Subsidiary are duly qualified to do business and are in good standing in each jurisdiction in which such qualification is necessary because of the property owned, leased or operated by them or because of the nature of its business as now being conducted, except for those jurisdictions where the failure to be so qualified would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the condition (financial or otherwise), operations, business, assets, liabilities, earnings or prospects of the Company and the Subsidiary taken as a whole ("Material Adverse Effect"). Each such jurisdiction in which the Company is qualified as of the date hereof and the Initial Closing Date and the Subsequent Closing Date is listed on Schedule 2.1(a) of the disclosure schedule being delivered to the Purchaser simultaneously with the execution of this Agreement (the "Disclosure Schedule"). (ii) The Company has prior to the execution of this Agreement delivered to the Purchaser a true and complete copy of the Certificate of Incorporation. The By-laws, in substantially the form attached hereto as Exhibit C, have been duly adopted by the Company. The minute books of the Company (which have been made available for inspection by the Purchaser prior to the date hereof) are true and complete in all material respects. (b) AUTHORIZATION; VALID AND BINDING AGREEMENTS. The Company has all requisite corporate power and authority to execute and deliver this Agreement, the Registration Rights Agreement, the SBIC Letter Agreement and the certificates evidencing the Securities and to perform all of its obligations and undertakings under such agreements and to carry out the transactions contemplated under such agreements. The execution and delivery of this Agreement, the Registration Rights Agreement, the SBIC Letter Agreement and the certificates evidencing the Securities, the performance by the Company of its obligations under such agreements, and the issuance and sale of the Securities have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company are necessary to authorize the execution, delivery or performance by the Company of this Agreement, the Registration Rights Agreement, the SBIC Letter Agreement or the certificates evidencing the Securities. This Agreement, the Registration Rights Agreement, the SBIC Letter Agreement and the certificates evidencing the Securities have each been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its respective terms subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. (c) CAPITALIZATION; EQUITY INTERESTS. (i) At the Initial Closing, immediately prior to the issuance of the Securities, the authorized capital stock of the Company consists solely of (A) 20,000,000 shares of Common Stock, of which 5,672,137 shares are issued and outstanding; and (B) 1,000,000 shares of preferred stock, par value $0.01 per share (together with the Common Stock, the "Capital Stock"), of which no shares are issued and outstanding. The outstanding shares of Capital Stock have been duly authorized and issued and are fully paid and non-assessable and not subject to any purchase option or right of first refusal or preemptive, subscription or similar rights. The Securities have been duly authorized and, when issued in accordance with this Agreement, will be duly issued, fully paid and non-assessable and not subject to any purchase option or right of first refusal or preemptive, 5 7 subscription or similar rights. The shares of Common Stock initially issuable upon exercise of the Warrants (the "Exercise Shares") have been duly authorized and reserved for issuance upon exercise and, when issued upon such exercise, will be duly issued, fully paid and non-assessable and not subject to any purchase option, or right of first refusal or preemptive, subscription or similar rights. (ii) Except for this Agreement and the Warrants, and as set forth on Schedule 2.1(c) of the Disclosure Schedule, (A) there are no bonds, debentures, notes or other indebtedness or securities of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which shareholders of the Company may vote, (B) there are no securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which the Company is a party or by which the Company is bound obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of Capital Stock or other voting securities of the Company or obligating the Company to issue, grant, extend or enter into any such security, option, warrant, call right, commitment, agreement, arrangement or undertaking and (C) there are no outstanding rights, commitments, agreements, arrangements or undertakings of any kind obligating the Company to repurchase, redeem or otherwise acquire any shares of Capital Stock or other voting securities of the Company or any securities of the type described in clauses (A) or (B) above. No dividends on any shares of Capital Stock have been declared but not yet paid. (iii) Except for the Subsidiary, the Company does not have any subsidiaries or own or hold, directly or indirectly, any equity or other security interests in any corporation, partnership, limited liability company, joint venture or other entity. The Company is not subject to any liability for any claim that the Company violated any applicable Federal or state securities laws in connection with the issuance of Capital Stock or other securities. There are no restrictions on the transfer of shares of Capital Stock other than those imposed by relevant state and Federal securities laws. There are no voting trusts, voting agreements, proxies or other agreements or instruments with respect to the voting of the Capital Stock to which the Company is a party, or to the best of the knowledge of any of the Company's officers, directors or employees (the "Company's Knowledge"), among or between any persons other than the Company. Except as provided in the Registration Rights Agreement and in Schedule 2.1(c) of the Disclosure Schedule, no person has the right to demand or other rights to cause the Company to file any registration statement under the Securities Act of 1933 (the "Securities Act") relating to any securities of the Company presently outstanding or any right to participate in any such registration statement. (d) CONFLICTS; CONSENTS. The execution and delivery by the Company of this Agreement, the Registration Rights Agreement, the SBIC Letter Agreement and the certificates evidencing the Securities, the consummation of the transactions contemplated hereby and thereby and compliance by the Company with any of the provisions hereof or thereof does not and will not conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any 6 8 obligation or to loss of a material benefit under, or to any increased, additional, accelerated or guaranteed rights or entitlement of any person or entity under, or result in the creation of any Claim on the properties or assets of the Company or the Subsidiary under, any provision of (i) the certificate of incorporation or by-laws of the Company or the Subsidiary, (ii) any note, bond, mortgage, indenture, deed of trust, license, lease, contract, commitment, agreement, instrument or arrangement to which the Company or the Subsidiary is a party or by which any of their respective properties or assets are bound, (iii) any license, franchise, permit or other similar authorization held by the Company or the Subsidiary or (iv) any judgment, order or decree or statute, law, ordinance, rule or regulation applicable to the Company or the Subsidiary or their respective properties or assets. (e) FINANCIAL INFORMATION. (i) Set forth on Schedule 2.1(e) of the Disclosure Schedule are complete and correct copies of (A) the audited balance sheets of the Company as at September 30, 1994 and 1995 and the related statements of operations, shareholders' equity and cash flows for the years ended September 30, 1994 and 1995, and the audited balance sheet of the Company as at March 31, 1996 and the related statements of operations, shareholders' equity and cash flows for the six months ended March 31, 1996, including any notes thereto with the opinion of Coopers & Lybrand L.L.P., thereon (collectively, the "Audited Financial Statements") and (B) the unaudited balance sheet of the Company as at March 31, 1997 and the related statements of operations, shareholders' deficit and cash flows for the year then ended and the unaudited balance sheet of the Company as at September 30, 1997, and the related statements of operations, shareholders' deficit and cash flows for the six months then ended (collectively, the "Unaudited Financial Statements," and, together with the Audited Financial Statements, the "Financial Statements"). Except as set forth on Schedule 2.1(e) of the Disclosure Schedule, the Financial Statements have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis and fairly present the financial condition, results of operations, shareholders' equity and cash flows of the Company at or for the respective periods then ended, subject, in the case of the Unaudited Financial Statements, to the absence of footnotes and normal year-end adjustments. (ii) All reserves established by the Company are reflected on the balance sheets contained in the Financial Statements or in the footnotes to the Financial Statements of the Company and in management's reasonable estimate are adequate in the aggregate and there are no loss contingencies that are required to be accrued by Statement of Financial Accounting Standard No. 5 of the Financial Accounting Standards Board which are not provided for on such balance sheets. As of the date hereof, except for liabilities (A) reflected on or reserved against on the balance sheet as of September 30, 1997 (the "Latest Balance Sheet") (B) set forth on Schedule 2.1(e) of the Disclosure Schedule, (C) incurred in the ordinary course of the Company's business and consistent with past practice or (D) contemplated by this Agreement, the Company and the Subsidiary have no liabilities (absolute, accrued, fixed, contingent, known, unknown or otherwise) which would be required by GAAP to be reflected or reserved against on the balance sheet of the Company and which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 7 9 (iii) The forecasts and projections previously delivered to the Purchaser by the Company have been prepared in good faith and on the basis of assumptions that are fair and reasonable in light of current and reasonably foreseeable circumstances. (f) ABSENCE OF CHANGES. Except as set forth on Schedule 2.1(f) of the Disclosure Schedule, since September 30, 1997, the Company and the Subsidiary have operated in the ordinary course consistent with past practice and there has not been: (i) any event, occurrence or development or state of circumstances of facts which has had or would reasonably be expected to have a Material Adverse Effect; (ii) any payment, discharge or satisfaction of any claim or obligation of the Company or the Subsidiary or any amendment, termination or waiver of any rights of value to the Company or the Subsidiary, except in the ordinary course of business and consistent with past practice; (iii) any declaration, setting aside or payment of any dividend or other distribution with respect to any shares of capital stock of the Company or any direct or indirect redemption, purchase or other acquisition of any such shares; (iv) any creation of any Claim on, or any assignment or other disposition of, any property of the Company or the Subsidiary, except in the ordinary course of business consistent with past practice, and which Claims, assignments and dispositions together with all other such Claims, assignments and dispositions would not have a Material Adverse Effect; (v) any write-down of the value of any asset of the Company or the Subsidiary or any write-off as uncollectible of any accounts or notes receivable or any portion thereof, other than write-downs or write-offs which in the aggregate do not exceed $25,000; (vi) any capital expenditure or commitment or addition to property, plant or equipment of the Company or the Subsidiary, individually or in the aggregate, in excess of $25,000; (vii) (A) any change in any bonus, commission, pension, profit-sharing or other benefit or compensation plan, policy or arrangement or commitment or (B) any increase in any such compensation, bonus, commission, pension, profit sharing or other benefit payable now or in the future to any shareholder, director or officer of the Company or the Subsidiary, or any Affiliate (as defined in the Securities Exchange Act of 1934 (the "Exchange Act")) of such person (or, in each case, the entering into of any agreement to effect the same); 8 10 (viii) any obligation or liability (whether absolute, accrued, contingent or otherwise, and whether due or to become due) incurred by the Company or the Subsidiary, other than obligations incurred in the ordinary course of business and consistent with past practice; (ix) any issuance or sale, or any contract entered into for the issuance or sale, of any shares of capital stock or securities convertible into or exercisable for shares of capital stock of the Company or the Subsidiary; (x) any cancellation of any debts or claims or any amendment, termination or waiver of any rights of value to the Company or the Subsidiary; (xi) any material damage, destruction or loss (whether or not covered by insurance) affecting any asset or property of the Company or the Subsidiary; (xii) any change in the independent public accountants of the Company or in the accounting methods or accounting practices followed by the Company or any change in depreciation or amortization policies or rates; or (xiii) any agreement, whether in writing or otherwise, to take any of the actions specified in the foregoing items (i) through (xii). (g) ASSETS, PROPERTY AND RELATED MATTERS; REAL PROPERTY. (i) Except as set forth on Schedule 2.1(g) of the Disclosure Schedule, the Company or the Subsidiary has good title to, or a valid leasehold interest in, as applicable, all of the assets reflected on the Financial Statements, free and clear of all Claims. To the Company's Knowledge, such assets (other than inventory) are in good operating condition and repair, subject to ordinary wear and tear and constitute all of the properties, interests, assets and rights held for use or used in connection with the business and operations of the Company or the Subsidiary and constitute all those necessary to continue to operate the business of the Company or the Subsidiary, as the case may be, consistent with current and historical practice. (ii) All leases of real property to which the Company or the Subsidiary is a party ("Leases") are in writing and in full force and effect and constitute valid and binding obligations of the Company and, to the Company's Knowledge, of the other parties thereto, enforceable in accordance with their respective terms subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. The Company or the Subsidiary hold good and valid title to the leasehold interests under the Leases for the term set forth on Schedule 2.1(g) of the Disclosure Schedule, free and clear of all Claims. The Company has delivered to the Purchaser complete and accurate copies of the Leases and the Leases have not been modified in any material respect, except to the extent that such modifications are disclosed in a copy delivered to the Purchaser. There exists no material default, or any event which upon notice or the passage of time, or both, would give rise to any material default, in the performance of the Company or, to the Company's Knowledge, by any lessor under any such lease. The Company has not, and to the Company's Knowledge, no other person has, granted any oral or 9 11 written right to anyone other than the Company to lease, sublease or otherwise occupy any of its properties through the end of the applicable lease periods. (iii) Schedule 2.1(g) of the Disclosure Schedule contains a description of all of the real property leased by the Company or the Subsidiary. The Company does not own, and has not previously owned, any real property. (h) PATENTS, TRADEMARKS AND SIMILAR RIGHTS. (i) Set forth on Schedule 2(h) of the Disclosure Schedule is a true and complete list of the patents, patent applications, trademarks (registered or unregistered) and service marks (and any applications or registrations therefor), trade names, corporate names, copyrights, copyright registrations and other intellectual property that currently exists in written form owned or filed by, or licensed to, the Company or the Subsidiary or used in the conduct of the Company's or the Subsidiary's business as presently conducted ("Intellectual Property"). With respect to registered trademarks, Schedule 2(h) of the Disclosure Schedule sets forth a list of all jurisdictions in which such trademarks are registered or applied for and all registration and application numbers. To the Company's Knowledge, the Company has all rights to Intellectual Property as are used or are necessary in connection with the businesses of the Company and the Subsidiary as presently conducted, and except as set forth on Schedule 2(h) of the Disclosure Schedule, the Company owns, or has the right to use, execute, reproduce, display, perform, modify, enhance, distribute, prepare derivative works of and sublicense, without payment to any other person or entity, all Intellectual Property free and clear of all Claims whatsoever. The consummation of the transactions contemplated hereby will not conflict with, alter or impair any such right. (ii) Neither the Company nor the Subsidiary has granted any options, licenses or agreements of any kind relating to Intellectual Property or the marketing or distribution thereof. Neither the Company nor the Subsidiary is bound by or a party to any options, licenses or agreements of any kind relating to the intellectual property of any other person or entity, except as set forth in Schedule 2.1(d) of the Disclosure Schedule. The conduct of the business of the Company and of the Subsidiary as presently conducted does not, to the Company's Knowledge, violate, conflict with or infringe the intellectual property of any other person or entity. No claims are pending, or to the Company's Knowledge, threatened, against the Company or the Subsidiary by any person or entity with respect to the ownership, validity, enforceability, effectiveness or use of any Intellectual Property and, during the past three years, neither the Company nor the Subsidiary has received any communications alleging that the Company has violated any rights relating to intellectual property of any person or entity. (i) INSURANCE. Schedule 2.1(i) of the Disclosure Schedule contains a description of all insurance policies ("Insurance Policies") that are currently held by the Company or the Subsidiary, true and complete copies of which have been delivered to the Purchaser. All Insurance Policies are in the name of the Company or the Subsidiary, outstanding and in full force and effect and all premiums due with respect to such policies are currently paid. The Company has not received notice of cancellation or termination of any such policy, nor has it been denied or had revoked or rescinded any policy of insurance, nor borrowed against any such policies. To the Company's Knowledge, the activities and operations of the Company and 10 12 the Subsidiary have been conducted in a manner so as to conform in all material respects to all applicable provisions of the Insurance Policies. There are no claims in the last year for which an insurance carrier has denied or threatened to deny coverage. The Company or the Subsidiary carries, or is covered by, insurance with companies the Company believes to be responsible and in such amounts and covering such risks as is adequate for the conduct of its business and the value of its properties and as the Company believes is customary for companies engaged in similar businesses in similar industries. (j) AGREEMENTS. Schedule 2.1(j) of the Disclosure Schedule contains a true and complete list or description of all written or oral contracts, agreements and other instruments ("Contracts") to which the Company or the Subsidiary is a party (A) relating to indebtedness for money borrowed or the deferred purchase price of property or services or capital leases in excess of $10,000, (B) relating to any forward commitments or to other commitments in excess of $25,000 in any given year, (C) relating to any joint venture, partnership or limited liability company; (D) relating to the employment or compensation of any director, officer or shareholder of the Company or the Subsidiary, or any Affiliate of such companies, (E) relating to the employment or compensation of any employee, consultant, independent contractor or other agent of the Company or the Subsidiary, or any Affiliate of such companies, involving a payment in excess of $10,000 in any given year, (F) relating to the sale or other disposition of any assets, properties or rights (other than the sale of inventory), (G) which restricts the Company's or the Subsidiary's ability to do business in any geographic area or grants to any person exclusive or similar rights in any line of business or in any geographic area, (I) which restricts the Company's or the Subsidiary's ability from soliciting employees of another entity or restricts another entity's ability from soliciting the Company's or the Subsidiary's employees, (J) relating to the lease of any machinery, equipment, vehicle or other personal property owned by any other person or entity, for which the annual rental exceeds $2,500; (K) relating to the lease of any real or personal property to any other person or entity, for which the annual rental exceeds $2,500; (L) relating to any advance, loan, extension of credit or capital contribution to, or other investment in, any person or entity not in excess of $2,500 in the aggregate; or (M) that is otherwise material to the business, properties or assets of the Company and entered into other than in the ordinary course of business. The Company has provided to the Purchaser true and complete copies of all written Contracts and true, accurate and complete written summaries of all oral Contracts. Except as set forth on Schedule 2.1(j) of the Disclosure Schedule, all Contracts are valid, binding and in full force and effect as to the Company or the Subsidiary, as the case may be, and neither the Company or the Subsidiary nor, to the Company's Knowledge, any other party thereto is in breach or violation of, or default under, any such Contracts in any material respect. (k) LITIGATION. Except as set forth on Schedule 2.1(k) of the Disclosure Schedule, there have not been for the past five years, nor are there, any suits, actions, claims, investigations or legal or administrative or arbitration proceedings in respect of the Company or the Subsidiary, pending or, to Company's Knowledge, threatened, whether at law or in equity, or before or by any Federal, foreign, state or municipal or other governmental department, commission, board, bureau, agency or instrumentality. Except as set forth on Schedule 2.1(k) of the Disclosure Schedule, there have not been for the past five years, nor are there any judgments, decrees, injunctions or orders of any court, governmental department, commission, agency, 11 13 instrumentality or arbitrator against the Company or the Subsidiary or affecting any of its assets or properties. There is no lawsuit or claim by the Company or the Subsidiary pending, or which the Company or the Subsidiary intends or reasonably expects to initiate, against any other person or entity. (l) COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS. (i) Except as set forth on Schedule 2.1(l) of the Disclosure Schedule, the Company and the Subsidiary, to the Company's Knowledge, have complied and are in compliance with all Federal, state, local and foreign laws, ordinances, regulations, interpretations and orders (including those relating to disposal of materials, environmental protection and occupational safety and health) applicable to the Company or the Subsidiary or any of their respective businesses. There are no present or past conditions relating to the Company or the Subsidiary, or relating to any of the Company's or the Subsidiary's property or any appurtenances thereto or improvements thereon, that would reasonably be expected to lead to any material liability against, or have a Material Adverse Effect for violation of any health or safety laws. The Company has not received any written communication during the past five years from any governmental entity that alleges that the Company is not in compliance in any respect with any applicable Federal, state, local and foreign laws, ordinances, regulations, interpretations and orders. To the Company's Knowledge, the Company and the Subsidiary have all Federal, state, local and foreign governmental licenses and permits necessary to conduct their respective businesses as presently being conducted. Such licenses and permits are in full force and effect, no violations are or have been recorded in respect of any thereof, no proceeding is pending or, to the Company's Knowledge, threatened, to revoke or limit any thereof, and the Company does not know of any basis for any such proceeding and the consummation of the transactions contemplated in this Agreement will not result in the non-renewal, revocation or termination of any such license or permit. Except as set forth on Disclosure Schedule 2.1(l), the Company has filed, in a timely manner, all reports required by the rules and regulations of the Securities and Exchange Commission (the "SEC"). (ii) There are no conditions relating to the Company or the Subsidiary or relating to the Company's or the Subsidiary's ownership, use or maintenance of any real property previously owned or operated by the Company or any of its Affiliates, and the Company does not know or have reason to know of any such condition in respect of such real property not related to the ownership, use or maintenance, that could lead to any liability for violation of any Federal, state, county or local laws, regulations, orders or judgments relating to pollution or protection of the environment or any other applicable environmental, health or safety statutes, ordinances, orders, rules, regulations or requirements. The Company and the Subsidiary have received, handled, used, stored, treated, shipped and disposed of all hazardous or toxic materials, substances and wastes (whether or not on its properties or properties owned or operated by others) in compliance with all applicable environmental, health or safety statutes, ordinances, orders, rules, regulations or requirements. (m) LABOR RELATIONS; EMPLOYEES. (i) Within the last five years, neither the Company nor the Subsidiary has experienced any labor disputes with, or any work stoppages by, a group of employees due to labor disagreements and, to the Company's Knowledge, there is no such dispute or work stoppage threatened against the Company or the Subsidiary. No employee 12 14 of the Company is represented by any union or collective bargaining agent and, to the Company's Knowledge, there has been no union organizational effort in respect of any employees of the Company within the past five years. (ii) Schedule 2.1(m) of the Disclosure Schedule contains a list of each pension, retirement, savings, deferred compensation, and profit-sharing plan and each stock option, stock appreciation, stock purchase, performance share, bonus or other incentive plan, severance plan, health, group insurance or other welfare plan, or other similar plan and any "employee benefit plan" within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974 ("ERISA"), under which the Company or the Subsidiary has any current or future obligation or liability or under which any employee or former employee (or beneficiary of any employee or former employee) of the Company or the Subsidiary has or may have any current or future right to benefits on account of employment with the Company or the Subsidiary (the term "plan" shall include any contract, agreement, policy or understanding, each such plan being hereinafter referred to individually as a "Plan"). The Company has delivered to the Purchaser true and complete copies of (A) each Plan for which a Plan document exists, (B) the summary plan description for each Plan, (C) the latest annual report, if any, which has been filed with the Internal Revenue Service (the "IRS") for each Plan and (D) with respect to any Plan intended to comply with Section 401(k) of the Internal Revenue Code of 1986 (the "Code"), copies of calculations for the most recent three Plan years showing such Plan's compliance with the requirements of Section 401(k)(3) and, if applicable, 401(m)(2) of the Code. Each Plan intended to be tax qualified under Sections 401(a) and 501(a) of the Code is, and has been determined by the IRS to be, tax qualified under Sections 401(a) and 501(a) of the Code and, since such determination, no amendment to or failure to amend any such Plan or any other circumstance adversely affects its tax qualified status. There has been no prohibited transaction within the meaning of Section 4975 of the Code and Section 406 of Title I of ERISA with respect to any Plan. (iii) No Plan is subject to the provisions of Section 412 of the Code or Part 3 of Subtitle B of Title I of ERISA. No Plan is subject to Title IV of ERISA. During the past five years, neither the Company or the Subsidiary nor any business or entity then controlling, controlled by, or under common control with the Company or the Subsidiary contributed to or was obliged to contribute to an employee pension plan that was subject to Title IV of ERISA. (iv) There are no actions, claims, lawsuits or arbitrations (other than routine claims for benefits) pending, or, to the Company's Knowledge, threatened, with respect to any Plan or the assets of any Plan, and to the Company's Knowledge, there are no facts which could give rise to any such actions, claims, lawsuits or arbitrations (other than routine claims for benefits). Except as described on Schedule 2.1(m) of the Disclosure Schedule, the Company or the Subsidiary has satisfied all funding, compliance and reporting requirements for all Plans. With respect to each Plan, the Company or the Subsidiary has paid all contributions (including employee salary reduction contributions) and all insurance premiums that have become due and any such expense accrued but not yet due has been properly reflected in the Financial Statements. 13 15 (v) No Plan provides or is required to provide, now or in the future, health, medical, dental, accident, disability, death or survivor benefits to or in respect of any person beyond termination of employment, except to the extent required under any state insurance law or under Part 6 of Subtitle B of Title I of ERISA and under Section 4980(B) of the Code. No Plan covers any individual other than employees of the Company or the Subsidiary, other than dependents or spouses of employees under health and child care policies listed in Schedule 2.1(m) of the Disclosure Schedule and delivered to the Purchaser. (vi) The consummation of the transactions contemplated by this Agreement will not (A) entitle any employee of the Company or the Subsidiary to severance pay or termination benefits or (B) accelerate the time of payment or vesting, or increase the amount of compensation due to any such employee or former employee. (n) RELATED PARTY TRANSACTIONS. Except as set forth on Schedule 2.1(n) of the Disclosure Schedule, no current or former partner, director, officer, employee or shareholder of the Company or the Subsidiary or any associate or Affiliate thereof, or any parent, spouse, child, brother, sister or any other relative with a relationship (by blood, marriage or adoption) of not more remote than first cousin of any of the foregoing (collectively, "Family Members"), is presently, or during the 12-month period ending on the date of this Agreement has been, directly or indirectly (i) a party to any transaction with the Company (including any contract, agreement or other arrangement providing for the furnishing of services by, or rental of real or personal property from, or otherwise requiring payments to, any such director, officer, employee or shareholder or such associate) or (ii) to the Company's Knowledge, the direct or indirect owner of an interest in any corporation, firm, association or business organization (other than the ownership of less than 2% of the outstanding capital stock of any publicly traded entity) which is a present (or potential) competitor, lender, broker or customer of the Company or the Subsidiary, nor does any member of management or any of their Family Members receive income from any source other than the Company or the Subsidiary which relates to the Company's or the Subsidiary's respective businesses or should properly accrue to the Company or the Subsidiary. Schedule 2.1(n) of the Disclosure Schedule sets forth a list of all Family Members who are currently employed or who were employed by the Company or the Subsidiary at any time during the last three fiscal years together with a description of job, title and annual salary and bonus for each such person. Neither the Company nor the Subsidiary has any loans outstanding to any employee, officer, director or shareholder of the Company or the Subsidiary or to any Family Member. (o) TAXES. (i) All Federal, state, local and foreign tax returns and tax reports for periods ending on or prior to the Subsequent Closing Date by the Company or the Subsidiary have been or will be filed, or a valid request for extension has been or will be filed with respect thereto, on a timely basis (including any extensions) with the appropriate governmental agencies in all jurisdictions in which such returns and reports are required to be filed. All such returns and reports are and will be true, correct and complete. Except as described in Schedule 2.1(o) of the Disclosure Schedule, all Federal, state, local and foreign income, profits, franchise, sales, use, occupation, property, excise, employment and other taxes (including interest, penalties and withholdings of tax) due from and payable by the Company or the Subsidiary on or prior to the 14 16 Subsequent Closing Date have been fully paid on a timely basis. Except as set forth in Schedule 2.1(o) of the Disclosure Schedule, neither the Company nor the Subsidiary is currently the beneficiary of any extension of time within which to file any tax return. No claim has ever been made by an authority in a jurisdiction where the Company or the Subsidiary does not file tax returns that it is or may be subject to taxation by that jurisdiction, and neither the Company nor the Subsidiary has received any notice, or request for information from any such authority. No issues have been raised with the Company or the Subsidiary by the IRS or any other taxing authority in connection with any tax return or report filed by the Company or the Subsidiary and there are no issues which, either individually or in the aggregate, could result in any liability for tax obligations of the Company or the Subsidiary relating to periods ending on or before September 30, 1997 in excess of the accrued liability for taxes shown on the Financial Statements. No waivers of statutes of limitations have been given or requested with respect to the Company or the Subsidiary. Neither the Company nor the Subsidiary is a party to any tax allocation or sharing agreement, and neither the Company nor the Subsidiary has been a member of an affiliated group filing a consolidated federal income tax return (other than a group the common parent of which was the Company) or has any liability for taxes of any person (other than the Company and the Subsidiary) under Treasury Regulation 1.1502-6 (or any similar provision of state, local or foreign law) as a transferee or successor or by contract or otherwise. No differences exist between the amounts of the book basis and the tax basis of assets that are not accounted for by an accrual on the Financial Statements for Federal income tax purposes. Neither the Company nor the Subsidiary is required to include in income any adjustment pursuant to Section 481(a) of the Code by reason of a voluntary change in accounting method initiated by the Company, and the IRS has proposed no adjustment or change in accounting method. Neither the Company nor the Subsidiary has consented to be treated as a "consenting corporation" as defined in Section 341(f) of the Code or as a "collapsible corporation" as defined in Section 341(b) of the Code. Neither the Company nor the Subsidiary is a party to any agreement, contract or arrangement that would result, separately or in the aggregate, in the payment of any "excess parachute payments" within the meaning of Section 280G of the Code. All transactions or methods of accounting that could give rise to an understatement of Federal income tax (within the meaning of Section 6661 of the Code for tax returns filed on or before December 31, 1990, and within the meaning of Section 6662 of the Code for tax returns filed after December 31, 1990) have been adequately disclosed on the tax returns in accordance with Section 6661(b)(2)(B) of the Code for tax returns filed on or prior to December 31, 1990, and in accordance with Section 6662(d)(2)(B) of the Code for tax returns filed after December 31, 1990. Neither the Company nor the Subsidiary is nor has it been a United States real property holding company (as defined in Section 897(c)(2) of the Code) during the applicable period specified in Section 897(c)(1)(ii) of the Code. The Company and the Subsidiary have complied and will comply with all applicable laws relating to the payment and withholding of taxes (including withholding and reporting requirements under Section 1441 through 1464, 3401 through 3406, 6041 and 6049 of the Code and similar provisions under any other laws) and, within the time and in the manner prescribed by law, have withheld from wages, fees and other payments and paid over to the proper governmental or regulatory authorities all amounts required. (p) DISCLOSURE. No representation, warranty or statement of the Company contained in this Agreement, or any 15 17 certificate, schedule, annex or other writing furnished to the Purchaser by the Company or its predecessor pursuant to the Exchange Act, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statement contained herein or therein, in light of the circumstances under which they were made, not misleading. (q) BOOKS AND RECORDS. The books of account, ledgers, order books, records and documents of the Company accurately and completely reflect all material information relating to the businesses of the Company and the Subsidiary, the nature, acquisition, maintenance, location and collection of each of its assets, and the nature of all transactions giving rise to the obligations or accounts receivable of the Company. (r) FEDERAL RESERVE REGULATIONS. Neither the Company nor the Subsidiary is engaged in the business of extending credit for the purpose of purchasing or carrying margin securities (within the meaning of Regulation G of the Board of Governors of the Federal Reserve System), and no part of the proceeds from the issuance of the Securities will be used to purchase or carry any margin security or to extend credit to others for the purpose of purchasing or carrying any margin security or in any other manner which would involve a violation of any of the regulations of the Board of Governors of the Federal Reserve System. (s) INVESTMENT COMPANY ACT. The Company is not an "investment company" within the meaning of such term under the Investment Company Act of 1940 and the rules and regulations of the SEC thereunder. (t) SECURITIES ACT. Assuming that the representations and warranties of the Purchaser contained in Section 2.2(c) are true and correct, the Company has complied with all applicable Federal and state securities laws in connection with the issuance and sale of the Securities. Neither the Company nor anyone acting on its behalf has offered to sell the Securities or similar securities to, or solicited offers with respect thereto from, or entered into any preliminary conversations or negotiations relating thereto with, any person, so as to bring the issuance and sale of such Securities under the registration provisions of the Securities Act. (u) BROKERS. Other than International Capital Partners, Inc. ("ICP"), no agent, broker, investment banker, person or firm acting on behalf of the Company or under the authority of the Company is or will be entitled to any broker's or finder's fee or any other commission or similar fee directly or indirectly from any of the parties in connection with any of the transactions contemplated by this Agreement. (v) CONTROL. Officers and directors of the Company beneficially own, directly or indirectly, in excess of 25% of the issued and outstanding voting securities of the Company. SECTION 2.2. REPRESENTATIONS AND WARRANTS BY THE PURCHASER. The Purchaser represents and warrants to the Company as follows: (a) ORGANIZATION AND STANDING. The Purchaser is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware. 16 18 (b) AUTHORIZATION; VALID AND BINDING AGREEMENTS. The Purchaser has full corporate power and authority to enter into this Agreement, the SBIC Letter Agreement and the Registration Rights Agreement and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement, the SBIC Letter Agreement and the Registration Rights Agreement and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary action on the part of the Purchaser and no other proceedings on the part of the Purchaser are necessary to authorize the execution, delivery or performance by the Company of this Agreement, the SBIC Letter Agreement and the Registration Rights Agreement. This Agreement, the SBIC Letter Agreement and the Registration Rights Agreement have been duly executed and delivered by the Purchaser, and constitute the valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. (c) INVESTMENT REPRESENTATION. The Purchaser is an "accredited investor" as defined in the rules and regulations of the SEC under the Securities Act and is acquiring the Securities for its own account for investment purposes only and not with a view to resale or distribution within the meaning of the applicable Federal securities laws. The Purchaser's financial situation is such that it can afford to bear the economic risk of holding the Securities for an indefinite period of time and suffer complete loss of its investment. The Purchaser's knowledge and experience in financial and business matters are such that it is capable of evaluating the merits and risks of its purchase of the Securities as contemplated by this Agreement. (d) ACCESS TO INFORMATION. The Purchaser acknowledges that it has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities, and the merits and risks of investing in the Securities; (ii) access to information about the Company and the Company's financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information which the Company possesses or can acquire without unreasonable effort or expense that such Purchaser believes is necessary to make an informed investment decision with respect to the investment; PROVIDED that nothing in this Section 2.2(d) shall reduce the liability of the Company with respect to the representations and warranties made by the Company in Section 2.1. (e) RELIANCE. The Purchaser understands and acknowledges the (i) the Securities to be sold to it hereunder are being offered and sold to it in a private placement that is exempt from the registration requirements of the Securities Act and (ii) the availability of such exemption depends in part on, and the Company will rely upon, the accuracy and truthfulness of, the foregoing representations and the Purchaser hereby consents to such reliance. (f) BROKERS. Other than ICP, no agent, broker, investment banker, person or firm acting on behalf of the Purchaser or under the authority of the Purchaser is or will be 17 19 entitled to any broker's or finder's fee or any other commission or similar fee directly or indirectly from any of the parties in connection with any of the transactions contemplated by this Agreement. ARTICLE III ADDITIONAL AGREEMENTS SECTION 3.1. EXPENSES. The Company shall bear the costs and expenses incurred by it, the Purchaser and the Shareholders in connection with the negotiation, execution and delivery of this Agreement and the transactions contemplated hereby. At the Initial Closing, the Company shall pay to the Purchaser up to $50,000 of such costs and expenses incurred by the Purchaser. In addition, the Company shall pay any and all stamp and other documentary taxes payable or determined to be payable in connection with the issuance of the Securities and agrees to hold the Purchaser harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes. SECTION 3.2. CONDUCT OF BUSINESS. (a) From the date of this Agreement until the Subsequent Closing Date, the Company shall operate its business only in the ordinary course of business consistent with past practice. The Company shall not, until the Subsequent Closing Date, directly or indirectly, cause or permit any state of affairs, action or omission described in clauses (i) through (xiii) of Section 2.1(f). (b) From the Subsequent Closing Date and for so long as the Purchaser or its transferees (except transferees who acquire the Securities or Exercise Shares in a transaction not exempt from the registration requirements of the Securities Act) hold an amount of shares of Capital Stock equal to at least 10% of the Capital Stock then outstanding, the Company shall not change its line of business. SECTION 3.3. FURTHER ASSURANCES. Each party shall use all commercially reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations, to consummate and make effective the transactions contemplated by this Agreement as expeditiously as practicable and to ensure that the conditions set forth in Article IV are satisfied, insofar as such matters are within the control of any of them. SECTION 3.4. ACCESS AND INFORMATION. From the date of this Agreement until the first to occur of (i) the Subsequent Closing Date and (ii) the termination of this Agreement in accordance with Section 6.2, the Company shall permit the Purchaser and its representatives to make such investigation of the business, operations and properties of the Company as the Purchaser deems necessary or desirable in connection with the transactions contemplated by this Agreement. Such investigation shall include access to the respective directors, officers, employees, agents and representatives (including legal counsel and independent accountants) of the Company and the properties, books, records and commitments of the Company. The Company shall furnish the Purchaser and its representatives with such financial, operating and other data and information, and 18 20 copies of documents with respect to the Company or any of the transactions contemplated by this Agreement, as the Purchaser shall from time to time reasonably request. Such access and investigation shall be made upon reasonable notice and at reasonable places and times. Such access and information shall not in any way affect or diminish any of the representations or warranties hereunder. Without limiting the foregoing, during such period, the Company shall keep the Purchaser informed as to the business and operations of the Company and shall consult with the Purchaser as appropriate. The Purchaser shall keep confidential all information disclosed to it pursuant to this Section 3.4 and Section 3.5(v) unless such information was already in the Purchaser's possession or known to the Purchaser prior to being disclosed or provided to the Purchaser until the earliest of such time as (a) disclosure may be required by law, (b) three years from the date of the receipt of such information, (c) such information becomes publicly available through no action or fault of the Purchaser and, (d) such information was or is obtained by the Purchaser from a third party other than in violation of any agreement or law. SECTION 3.5 REPORTING REQUIREMENTS. For so long as the Purchaser or its transferees (except transferees who acquire the Purchasers' Capital Stock in a transaction not exempt from the registration requirements of the Securities Act), hold an amount of shares of Capital Stock equal to at least 10% of the Capital Stock then outstanding, the Company shall furnish the following to the Purchaser: (i) as soon as practicable after the end of each month and fiscal quarter, and in any event within 45 days thereafter, copies of: (A) an unaudited consolidated balance sheet of the Company as at the end of such month and quarter, (B) unaudited consolidated statements of operations, shareholders' equity and cash flows of the Company for the period ending with such month and quarter and setting forth in comparative form the figures for the corresponding periods in the preceding fiscal year certified by the chief financial officer of the Company as complete and correct, and having been prepared in accordance with GAAP (other than monthly balance sheets and statements of operations, shareholders' equity and cash flows) subject to the absence of footnotes and changes resulting from year-end adjustments; (ii) such financial information (other than the information described in clause (i) above) as the Company and Purchaser may agree; (iii) as soon as practicable after the end of each fiscal year of the Company, and in any event within 90 days thereafter, copies of: (i) a consolidated balance sheet of the Company as at the end of such year, and (ii) consolidated statements of operations, shareholders' equity and cash flows of the Company for such year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, together with supporting notes thereto and accompanied by an opinion thereon of independent accountants of recognized national standing, together with a summary prepared by the Company concerning the Company's operations and financial condition; 19 21 (iv) no later than 60 days prior to the end of each fiscal year of the Company, the proposed annual business plan and budget (including the capital expenditures and financing plans) of the Company for the next fiscal year; (v) promptly after sending, making available, or filing the same, all reports and financial statements that the Company sends or makes available to the shareholders of the Company or files with the SEC; and (vi) any other information respecting the business, properties or the condition or operations, financial or otherwise, of the Company that the Purchaser may from time to time reasonably request, including, but not limited to, business units analyses, performance reviews analyses and monthly sales analyses. SECTION 3.6. NO SHOPPING. From the date of this Agreement until the earlier of (i) the Subsequent Closing Date and (ii) the date this Agreement is terminated in accordance with Section 6.2, the Company and the Subsidiary shall not, and shall ensure that any directors, officers, agents, representatives or Affiliates of the Company or the Subsidiary do not, directly or indirectly, solicit or initiate, enter into or conduct, discussions concerning, or exchange information (including by way of furnishing information concerning the Company or the Subsidiary or their respective businesses) or enter into any negotiations concerning, or solicit, entertain or agree to any proposals for, (i) a merger, consolidation or other business combination involving the Company or the Subsidiary, (ii) a sale of any equity interest in the Company or the Subsidiary, (iii) a sale of a significant portion of business or assets of the Company or the Subsidiary, (iv) a recapitalization or restructuring of the Company or the Subsidiary or (v) a transaction similar to any of the foregoing. In addition, during such time period, the Company shall not authorize, direct or knowingly permit any officer, shareholder, director, employee or agent of the Company or the Subsidiary to do any of the foregoing and the Company shall notify the Purchaser promptly of the identity of any person who approaches the Company or the Subsidiary with respect to any of the foregoing, as well as the price and terms of any such proposal, if applicable SECTION 3.7. PUBLIC ANNOUNCEMENTS No press release or public announcement related to this Agreement or the transactions contemplated hereby shall be issued or made without the joint approval of the Purchaser and the Company, unless required by applicable law or legal process in which case the Purchaser and the Company shall have the right, to the extent reasonably practicable, to review and comment on such press release or announcement prior to publication. SECTION 3.8. RESERVED SHARES. The Company shall reserve and at all times keep available, free from preemptive rights, out of its authorized but unissued stock, a sufficient number of shares of Common Stock to provide for the issuance of such shares upon the exercise of the Warrants. SECTION 3.9. PROCEEDS. The proceeds from the sale of the Securities will be used for the purposes set forth on Schedule 1. 20 22 SECTION 3.10. NOTIFICATION. The Company shall promptly notify the Purchaser of (i) any notice or other communications from any person or entity that the consent of such person or entity is or may be required in connection with the consummation of the transactions contemplated hereby and (ii) any notice or other communication from any governmental or regulatory agency or authority in connection with the consummation of the transactions contemplated hereby. SECTION 3.11. NEGATIVE COVENANTS. Notwithstanding anything in the Certificate of Incorporation or the By-laws to the contrary, from and including the Initial Closing Date to and including the Subsequent Closing Date and after the Subsequent Closing Date for so long as the Purchaser or its Affliliates hold an amount of shares of Capital Stock equal to at least 10% of the Capital Stock then outstanding, then the following actions by the Company or the Subsidiary, shall require the written consent of the Purchaser (in addition to any stockholder or Board of Directors approval as may be required by applicable statute, agreement or otherwise): (i) the purchase, construction, acquisition, sale, lease, exchange or disposition of any property or asset, or the making of any investment, other than in the ordinary course of business, the purchase price or value of which exceeds $100,000; (ii) the entry into any agreement or series of related agreements, including any agreement to borrow money that, either individually or collectively, (A) creates a monetary obligation or a liability greater than $100,000 or (B) grants a mortgage on, a security interest in, a pledge or otherwise encumbers, any material asset of the Company or the Subsidiary; (iii) the entry into any transaction, including any contract, agreement or other arrangement providing for the furnishing of services by, or rental of real or personal property from, or otherwise requiring payments or the issuance of securities (including stock options) (or any amendments, modifications or waivers of any such contract, agreement or arrangement) to any shareholder (who holds in excess of five percent of the issued and outstanding voting securities of the Company) or any officer or director of the Company or the Subsidiary or any of their respective Affiliates, or any Family Members of any of the foregoing; (iv) the initiation by the Company or the Subsidiary of a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or consent by the 21 23 Company or the Subsidiary to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or a general assignment by the Company or the Subsidiary for the benefit of creditors, or the failure by the Company or the Subsidiary generally to pay their respective debts as they become due, or the taking by the Company or the Subsidiary of any action to authorize any of the foregoing; (v) the loan of funds to, or the guaranty of any obligation or liability of, or the entry into any other agreement, transaction or arrangement with any, officer, director or shareholder (who holds in excess of five percent of the issued and outstanding voting securities of the Company) of the Company or the Subsidiary or any of their respective Affiliates or of any Family Members of any of the foregoing other than the reimbursement of expenses of any such person in the ordinary course in accordance with the policies of the Company; (vi) the merger or the consolidation of the Company or the Subsidiary with or into another entity or other business combination or the sale, assignment, lease or other disposition of all or substantially all of the assets of the Company or the Subsidiary; (vii) any issuance of securities or any recapitalization, restructuring or other reorganization of the Company or the Subsidiary, including the capitalization of any subsidiaries of the Company or the Subsidiary, or any repurchase or redemption of the Company's or the Subsidiary's securities; (viii) any distributions or dividends, whether in cash, securities or in property in kind, by the Company to its stockholders; (ix) any material changes in accounting policies of the Company and any removal or appointment of the Company's independent accountants; (x) the initiation or settlement of legal, administrative or other suits or proceedings in the Company's name or in the Subsidiary's name; (xi) the establishment or amendment of, or the grant, acceleration or waiver of any terms or conditions in, or determination or acceleration pursuant to the terms of, any pension, retirement, savings, deferred compensation, profit sharing, benefit or incentive plan or any stock option, stock appreciation, stock purchase, performance or other similar plan or any Plan, for any or all current or former employees, officers or directors of the Company or the Subsidiary or any of their respective Affiliates or of any Family Member of any of the foregoing; (xii) the amendment of the Certificate of Incorporation or By-laws in any respect; (xiii) any change in any of the names under which the Company or the Subsidiary conducts business; or 22 24 (xiv) any other transaction, agreement or arrangement or series of related transactions, agreements or arrangements that is material to the business of the Company or the Subsidiary or to the condition (financial or otherwise), operations, business, assets, liabilities, earnings or prospects of the Company or the Subsidiary, taken as a whole, other than sales of inspection systems in the ordinary course of business ARTICLE IV CONDITIONS PRECEDENT SECTION 4.1. CONDITIONS TO OBLIGATIONS OF THE PURCHASER TO EFFECT THE INITIAL CLOSING. The obligation of the Purchaser to effect the Initial Closing is subject to the satisfaction of the following conditions unless waived by the Purchaser: (a) REPRESENTATIONS AND WARRANTIES; COVENANTS; DELIVERIES. (i) The representations and warranties of the Company contained in Section 2.1 shall be true and correct in all respects as of the date of this Agreement and as of the Initial Closing Date as if made on and as of the Initial Closing Date (except that such representations and warranties made as of a specified date shall be true and correct as of such date), (ii) the Company shall have performed and complied with all covenants and agreements required to be performed or complied with on or prior to the Initial Closing Date and (iii) the Company shall have made the closing deliveries set forth in Section 1.4 (a)(i). (b) CONFLICTS; CONSENTS. All permits, consents, approvals, licenses, orders, authorizations, registrations, declarations, filings and other actions that are required in connection with the execution, delivery or performance of this Agreement, the Registration Rights Agreement, the SBIC Letter Agreement and the certificates evidencing the Securities or the transactions contemplated hereby and thereby in order to prevent any of the effects described Section 2.1(d) with respect to any note, bond, mortgage, indenture, deed of trust, license, lease, contract, commitment, agreement or arrangement to which the Company or the Subsidiary is a party or by which any of their respective properties or assets are bound or with respect to any license, franchise, permit or other similar authorization held by the Company or the Subsidiary (all of which consents, if any, are set forth on Schedule 4.1(b) of the Disclosure Schedule) shall have been obtained or taken. (c) MATERIAL ADVERSE CHANGE. There shall not have been any material adverse change in the condition (financial or otherwise), operations, business, assets, liabilities, earnings or prospects of the Company and the Subsidiary, taken as a whole. 23 25 (d) CERTIFICATES. (i) The Purchaser shall have received a certificate from an executive officer of the Company, dated the Initial Closing Date, in substantially the form of Exhibit F. (ii) The Purchaser shall have received a certificate of the Secretary of the Company, dated the Initial Closing Date, in substantially the form of Exhibit G. (e) OPINION OF COUNSEL. The Purchaser shall have received the opinion, dated the Initial Closing Date, of Mintz Levin Cohn Ferris Glovsky and Popeo PC, counsel to the Company, in substantially the form of Exhibit H. SECTION 4.2. CONDITIONS OF OBLIGATIONS OF THE COMPANY TO EFFECT THE INITIAL CLOSING. The obligation of the Company to effect the Initial Closing are subject to the satisfaction or waiver of the following conditions: (a) the representations and warranties of the Purchaser contained in Section 2.2 shall be true and correct in all respects as of the date of this Agreement and as of the Initial Closing Date as if made on and as of the Initial Closing Date; (b) the Purchaser shall have performed and complied with all covenants and agreements required to be performed or complied with on or prior to the Initial Closing Date; and (c) the Purchaser shall have made the closing deliveries set forth in Section 1.4(a)(ii). SECTION 4.3. CONDITIONS TO OBLIGATIONS OF THE PURCHASER TO EFFECT THE SUBSEQUENT CLOSING. The obligation of the Purchaser to effect the Subsequent Closing is subject to the satisfaction of the following conditions unless waived by the Purchaser: (a) REPRESENTATIONS AND WARRANTIES; COVENANTS; DELIVERIES. (i) The representations and warranties of the Company contained in Section 2.1 shall be true and correct in all respects as of the date of this Agreement and as of the Subsequent Closing Date as if made on and as of the Subsequent Closing Date (except that such representations and warranties made as of a specified date shall be true and correct as of such date), (ii) the Company shall have performed and complied with all covenants and agreements required to be performed or complied with on or prior to the Subsequent Closing Date and (iii) the Company shall have made the closing deliveries set forth in Section 1.4 (b)(i). (b) CONFLICTS; CONSENTS. All permits, consents, approvals, licenses, orders, authorizations, registrations, declarations, filings and other actions that are required in connection with the execution, delivery or performance of this Agreement, the Registration Rights Agreement, the SBIC Letter Agreement and the certificates evidencing the Securities or the transactions contemplated hereby and thereby in order to prevent any of the effects described Section 2.1(d) with respect to any note, bond, mortgage, indenture, deed of trust, license, lease, contract, commitment, agreement or arrangement to which the Company or the Subsidiary is a party or by which any of their respective properties or assets are bound or with respect to any license, franchise, permit or other similar authorization held by the Company or the Subsidiary (all of which consents, if any, are set forth on Schedule 4.1(b) of the Disclosure Schedule) shall have been obtained or taken. 24 26 (c) MATERIAL ADVERSE CHANGE. There shall not have been any material adverse change in the condition (financial or otherwise), operations, business, assets, liabilities, earnings or prospects of the Company and the Subsidiary, taken as a whole. (d) CERTIFICATES. (i) The Purchaser shall have received a certificate from an executive officer of the Company, dated the Subsequent Closing Date, in substantially the form of Exhibit F. (ii) The Purchaser shall have received a certificate of the Secretary of the Company, dated the Subsequent Closing Date, in substantially the form of Exhibit G. (e) OPINION OF COUNSEL. The Purchaser shall have received the opinion, dated the Subsequent Closing Date, of Mintz Levin Cohn Ferris Glovsky and Popeo PC, counsel to the Company, in substantially the form of Exhibit H. SECTION 4.4. CONDITIONS OF OBLIGATIONS OF THE COMPANY TO EFFECT THE SUBSEQUENT CLOSING. The obligation of the Company to effect the Subsequent Closing are subject to the satisfaction or waiver of the following conditions: (a) the representations and warranties of the Purchaser contained in Section 2.2 shall be true and correct in all respects as of the date of this Agreement and as of the Subsequent Closing Date as if made on and as of the Subsequent Closing Date; (b) the Purchaser shall have performed and complied with all covenants and agreements required to be performed or complied with on or prior to the Subsequent Closing Date; and (c) the Purchaser shall have made the closing deliveries set forth in Section 1.4(b)(ii). ARTICLE V INDEMNITY SECTION 5.1. INDEMNIFICATION. (a) The Company indemnifies and holds harmless the Purchaser and its Affiliates, directors, officers, employees and other agents and representatives from and against any and all liabilities, judgments, claims, settlements, losses, damages (including any diminution in value as appropriate), reasonable fees (including attorneys' and other experts' fees and disbursements), liens, taxes, penalties, obligations and expenses (collectively, "Losses") incurred or suffered by any such person or entity arising from, by reason of or in connection with any misrepresentation or breach of any representation, warranty or agreement of the Company contained in this Agreement or any certificate or other document delivered by the Company under this Agreement. The Company shall indemnify and hold harmless the Purchaser and its Affiliates, directors, officers, employees and other agents and representatives from and against any and all Losses incurred or suffered by the Purchaser, arising from, by reason of or in connection with any third party claim or action, or potential or threatened claim or action, related to this Agreement and the transactions contemplated hereby. (b) The Company shall not have any liability under Section 5.1(a) unless the aggregate of all Losses relating thereto for which the Company would, but for this Section 5.1(b), be liable exceeds $50,000, in which case the Purchaser shall be entitled to all Losses regardless of 25 27 the limitation set forth in this sentence. The limitation on liability set forth in the immediately preceding sentence shall not apply (i) in the event of fraud, intentional misrepresentation or intentional breach or (ii) in the case of any representation or warranty set forth in Section 2.1(c) or Section 2.1(o). (c) The Purchaser indemnifies and holds harmless the Company and its Affiliates, directors, officers, employees and other agents and representatives, from and against any and all Losses incurred or suffered by any such person or entity arising from, by reason of or in connection with any misrepresentation or breach of any representation, warranty or agreement of the Purchaser contained in this Agreement or any certificate or other document delivered by the Purchaser under this Agreement. (d) In case any claim or litigation which might give rise to any obligation of a party under the indemnity and reimbursement provisions of this Agreement (each an "Indemnifying Party") shall come to the attention of the party seeking indemnification hereunder (the "Indemnified Party"), the Indemnified Party shall notify in writing promptly the Indemnifying Party of the existence, nature and amount of potential loss. Failure to give such notice shall not affect the rights of the Indemnified Party, except to the extent that the Indemnifying Party shall have been materially prejudiced by such failure. The Indemnifying Party shall be entitled to participate in and, if (i) such claim can properly be resolved by money damages alone and the Indemnifying Party has the financial resources to pay such damages and (ii) the Indemnifying Party admits that this indemnity fully covers the claim or litigation, the Indemnifying Party shall be entitled to direct the defense of any claim at its expense, but such defense shall be conducted by legal counsel reasonably satisfactory to the Indemnified Party. No Indemnifying Party shall be liable to an Indemnified Party for any settlement of any action or claim without the consent of the Indemnifying Party; provided that the Indemnifying Party shall not unreasonably withhold its consent to any such settlement. No Indemnifying Party shall, except with the consent of the Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability and equitable claims in response to such claim or litigation. (e) The Indemnifying Party shall only be obligated to indemnify and hold harmless the Indemnified Party for Losses for which a notice of claim is given within the applicable survival period as set forth in Section 6.6. SECTION 5.2. NO ELECTION. Nothing contained in this Article V, or elsewhere in this Agreement, shall be deemed an election of remedies under this Agreement or limit in any way the liability of any party under any other agreement to which such party is a party relating to this Agreement or the transactions contemplated by this Agreement. 26 28 ARTICLE VI MISCELLANEOUS SECTION 6.1. ENTIRE AGREEMENT. This Agreement and the schedules and exhibits hereto contain the entire agreement among the parties with respect to the transactions contemplated by this Agreement and supersede all prior agreements or understandings among the parties. SECTION 6.2. TERMINATION. (a) This Agreement shall terminate on the earliest to occur of any of the following events: (i) the mutual written agreement of the Purchaser and the Company; (ii) by written notice of the Purchaser or the Company to the other party, if the Subsequent Closing shall not have occurred prior to the close of business on November 25, 1997; (iii) by written notice of the Purchaser to the Company, if the Company shall have materially breached any of its representations, warranties or agreements contained in this Agreement; or (iv) by written notice of the Company to the Purchaser, if the Purchaser shall have materially breached any of its representations, warranties or agreements contained in this Agreement. (b) Nothing in this Section shall relieve any party of any liability for a breach of this Agreement prior to its termination, except that if this Agreement terminates in accordance with Section 6.2(a) and the Purchaser receives reimbursement of its costs and expenses in accordance with Section 3.1, then this Agreement shall terminate without any further liability. Except as aforesaid, upon the termination of this Agreement, all rights and obligations of the parties under this Agreement shall terminate, except their obligations under Section 3.1, Section 3.4 and Section 3.7. SECTION 6.3. DESCRIPTIVE HEADINGS; CERTAIN INTERPRETATIONS. (a) Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. (b) Whenever any party makes any representation, warranty or other statement to such party's knowledge, such party will be deemed to have made due inquiry into the subject matter of such representation, warranty or other statement. (c) Except as otherwise expressly provided in this Agreement, the following rules of interpretation apply to this Agreement: (i) the singular includes the plural and the plural includes the singular; (ii) "or" and "any" are not exclusive and "include" and "including" are not limiting; (iii) a reference to any agreement or other contract includes permitted supplements and 27 29 amendments; (iv) a reference to a law includes any amendment or modification to such law and any rules or regulations issued thereunder; (v) a reference to a person includes its permitted successors and assigns; (vi) a reference to GAAP refers to United States GAAP; and (vii) a reference in this Agreement to an Article, Section, Exhibit or Schedule is to the Article, Section, Exhibit or Schedule of this Agreement. SECTION 6.4. NOTICES. All notices, requests and other communications to any party hereunder shall be in writing and sufficient if delivered personally or sent by telecopy (with confirmation of receipt) or by registered or certified mail, postage prepaid, return receipt requested, addressed as follows: If to the Company: Industrial Imaging Corporation One Lowell Research Center 847 Rogers Street Lowell, Massachusetts 01852 Attention: Juan J. Amodei Telecopy: (508) 441-0122 With a copy to: Mintz Levin Cohn Ferris Glovsky and Popeo PC One Financial Center Boston, Massachusetts 02111 Attention: Neil H. Aronson Telecopy: (617) 542-2241 If to the Purchaser: Imprimis Investors LLC c/o Wexford Management LLC 411 West Putnam Avenue Greenwich, Connecticut 06830 Attention: Frank S. Plimpton Telecopy: (203) 862-7451 With a copy to: Howard, Darby & Levin 1330 Avenue of the Americas New York, New York 10019 Attention: Michael B. Hopkins Telecopy: (212) 841-1010 or to such other address or telecopy number as the party to whom notice is to be given may have furnished to the other party in writing in accordance herewith. Each such notice, request or communication shall be effective when received or, if given by mail, when delivered at the 28 30 address specified in this Section or on the fifth business day following the date on which such communication is posted, whichever occurs first. SECTION 6.5. COUNTERPARTS. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. SECTION 6.6. SURVIVAL. Unless otherwise expressly provided herein, all representations and warranties, agreements and covenants contained in this Agreement or in any document delivered pursuant to this Agreement or in connection with this Agreement shall survive both the Initial Closing and the Subsequent Closing and shall remain in full force and effect until the third anniversary of the Subsequent Closing Date, except for (i) the representations and warranties and agreements contained in Sections 2.1(c), (l)(ii), (m)(ii)-(iv) and (o) and Sections 3.2(b), 3.5, 3.7, 3.8 and 3.11, and (ii) in the case of fraud, intentional misrepresentation or intentional breach, any representation or warranty, shall remain in full force and effect until the expiration of the applicable statute of limitations, or, in the case of a third party claim, 30 days after the expiration of the applicable statute of limitations, taking into account any extensions thereof. Neither the period of survival nor the liability of the Company with respect to the representations and warranties shall be reduced by any investigation made at any time by or on behalf of the Purchaser. SECTION 6.7. BENEFITS OF AGREEMENT. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. This Agreement is for the sole benefit of the parties hereto and not for the benefit of any third party. SECTION 6.8. AMENDMENTS AND WAIVERS. No modification, amendment or waiver of any provision of, or consent required by, this Agreement, nor any consent to any departure herefrom, shall be effective unless it is in writing and signed by the parties hereto. Such modification, amendment, waiver or consent shall be effective only in the specific instance and for the purpose for which given. SECTION 6.9. ASSIGNMENT. This Agreement and the rights and obligations hereunder shall not be assignable or transferable by any party hereto without the prior written consent of the other party; PROVIDED that notwithstanding the foregoing, the Purchaser may assign this Agreement and the rights and obligations hereunder, in whole or in part, to an Affiliate. Any instrument purporting to make an assignment in violation of this Section shall be void. All covenants, agreements, representations, warranties and undertakings in this Agreement made by and on behalf of any party hereto shall bind and inure to the benefit of the successors and permitted assigns of such party. SECTION 6.10. ENFORCEABILITY. It is the desire and intent of the parties hereto that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated to be invalid or unenforceable, such provision shall be deemed amended to delete therefrom the portion thus 29 31 adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made. SECTION 6.11. SPECIFIC ENFORCEMENT. Each party expressly agrees that the other party will be irreparably damaged if this Agreement is not specifically enforced. Upon a breach or threatened breach of the terms, covenants or conditions of this Agreement, the non-breaching party shall in addition to all other remedies, be entitled to a temporary or permanent injunction, without any showing of any actual damage, or a decree for specific performance, in accordance with the provision hereof. SECTION 6.12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAWS PROVISIONS). SECTION 6.13. CONSENT TO JURISDICTION. EACH OF THE PURCHASER AND THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF ANY FEDERAL OR STATE COURT OF NEW YORK SITTING IN NEW YORK CITY AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE LITIGATED EXCLUSIVELY IN SUCH COURTS. EACH OF THE PURCHASER AND THE COMPANY AGREES NOT TO COMMENCE ANY LEGAL PROCEEDING RELATED HERETO EXCEPT IN SUCH COURT. EACH OF THE PURCHASER AND THE COMPANY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING IN ANY SUCH COURT AND HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. SECTION 6.14. RESTRICTIVE LEGEND (a) SHARES AND EXERCISE SHARES. Each certificate representing the Shares, the Exercise Shares or other securities issued in respect of the Warrants purchased hereunder upon any conversion or stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall be stamped or otherwise imprinted with the following legend: "THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE STATE SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS CONTAINED IN SAID LAWS. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SHARES 30 32 SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933, (2) SUCH SHARES ARE TRANSFERRED PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE, UNDER SUCH ACT OR (3)INDUSTRIAL IMAGING CORPORATION SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR SIMILAR STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER." (b) WARRANTS. Each certificate representing the Warrants purchased hereunder shall be stamped or otherwise imprinted with the following legend: "THESE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE STATE SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS CONTAINED IN SAID LAWS. THE WARRANTS REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO SUCH WARRANTS AND THE SHARES UNDERLYING SUCH WARRANTS SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933, (2) SUCH WARRANTS ARE TRANSFERRED PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE, UNDER SUCH ACT OR (3) INDUSTRIAL IMAGING CORPORATION SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR SIMILAR STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER." SECTION 6.15. RESTRICTIONS ON TRANSFERABILITY. The Company shall not be required to register the transfer of any Securities or Exercise Shares on the books of the Company unless: (i) such securities have been registered under applicable Federal and state securities laws, (ii) such shares are being transferred pursuant to Rule 144, or any successor rule, under the Securities Act or (iii) the Company shall have been provided with an opinion of counsel reasonably satisfactory to it to the effect that the proposed transfer is exempt from the registration requirement of the Securities Act and the relevant state securities laws. SECTION 6.16. GENERAL. All Exhibits, Schedules and Disclosure Schedules are hereby incorporated by reference and made a part of this Agreement. 31 33 IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly executed and delivered as of the day and year first above written. INDUSTRIAL IMAGING CORPORATION By: ----------------------------------- Name: Title: IMPRIMIS INVESTORS LLC By: ----------------------------------- Name: Title: 32 34 TABLE OF CONTENTS ARTICLE I PURCHASE AND SALE OF THE SHARES
SECTION 1.1. The Securities......................................................................2 SECTION 1.2. Purchase Price......................................................................2 SECTION 1.3. Closing.............................................................................2 SECTION 1.4. Delivery and Payment................................................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES
SECTION 2.1. Representations and Warranties of the Company.......................................4 (a) Organization, Standing and Power........................................................4 (b) Authorization; Valid and Binding Agreements.............................................5 (c) Capitalization; Equity Interests........................................................5 (d) Conflicts; Consents.....................................................................7 (e) Financial Information...................................................................7 (f) Absence of Changes......................................................................8 (g) Assets, Property and Related Matters; Real Property....................................10 (h) Patents, Trademarks and Similar Rights.................................................11 (i) Insurance..............................................................................11 (j) Agreements.............................................................................12 (k) Litigation.............................................................................12 (l) Compliance; Governmental Authorizations................................................13 (m) Labor Relations; Employees.............................................................14 (n) Related Party Transactions.............................................................15 (o) Taxes..................................................................................15 (p) Disclosure.............................................................................17 (q) Books and Records......................................................................17 (r) Federal Reserve Regulations............................................................17 (s) Investment Company Act.................................................................17 (t) Securities Act.........................................................................17 (u) Brokers................................................................................17 (v) Control................................................................................16 SECTION 2.3. Representations and Warranties by the Purchasers..................................18 (a) Organization and Standing..............................................................18 (b) Authorization; Valid and Binding Agreements............................................18
i 35 (c) Investment Representation..............................................................18 (d) Access to Information..................................................................19 (e) Reliance...............................................................................17 (f) Brokers................................................................................17
ARTICLE III ADDITIONAL AGREEMENTS SECTION 3.1. Expenses...........................................................................19 SECTION 3.2. Conduct of Business................................................................19 SECTION 3.3. Further Assurances.................................................................20 SECTION 3.4. Access and Information.............................................................20 SECTION 3.5. Reporting Requirements.............................................................20 SECTION 3.6. No Shopping........................................................................22 SECTION 3.7. Public Announcements...............................................................22 SECTION 3.8. Reserved Shares....................................................................22 SECTION 3.9. Proceeds...........................................................................22 SECTION 3.10 Notification.......................................................................23 SECTION 3.11 Negative Covenants.................................................................20
ARTICLE IV CONDITIONS PRECEDENT SECTION 4.1. Conditions to Obligations of the Purchaser to effect the Initial Closing...........25 (a) Representations and Warranties; Covenants; Deliveries..................................25 (b) Conflicts; Consents....................................................................19 (c) Material Adverse Change................................................................20 (d) Certificates...........................................................................26 (e) Opinion of Counsel.....................................................................26 SECTION 4.2. Conditions of Obligations of the Company to effect the Subsequent Closing..........26 SECTION 4.3 Conditions to Obligations of the Purchaser to effect the Subsequent Closing.........23 (a) Representations and Warranties; Covenants; Deliveries..................................23 (b) Conflicts; Consents....................................................................23 (c) Material Adverse Change................................................................24 (d) Certificates...........................................................................24
ii 36 (e) Opinion of Counsel.....................................................................24 SECTION 4.4 Conditions of Obligations of the Company to effect the Subsequent Closing...........24
ARTICLE V INDEMNITY SECTION 5.1. Indemnification....................................................................28 SECTION 5.2. No Election........................................................................29
ARTICLE VI MISCELLANEOUS SECTION 6.1. Entire Agreement...................................................................30 SECTION 6.2. Termination........................................................................30 SECTION 6.3. Descriptive Headings; Certain Interpretations......................................30 SECTION 6.4. Notices............................................................................31 SECTION 6.5. Counterparts.......................................................................32 SECTION 6.6. Survival...........................................................................32 SECTION 6.7. Benefits of Agreement..............................................................32 SECTION 6.8. Amendments and Waivers.............................................................32 SECTION 6.9. Assignment.........................................................................32 SECTION 6.10. Enforceability....................................................................33 SECTION 6.11. Specific Enforcement..............................................................33 SECTION 6.12. Governing Law.....................................................................33 SECTION 6.13. Consent to Jurisdiction...........................................................34 SECTION 6.14. Restrictive Legend................................................................34 SECTION 6.15. Restrictions on Transferability...................................................35 SECTION 6.16. General...........................................................................26 EXHIBITS Exhibit A Form of Class A Warrants Exhibit B Form of Class B Warrants Exhibit C Form of By-laws Exhibit D Form of Registration Rights Agreement Exhibit E Form of SBIC Letter Agreement Exhibit F Form of Officer's Certificate of the Company
iii 37
Exhibit G Form of Secretary's Certificate of the Company Exhibit H Form of Opinion of Mintz Levin Cohn Ferris Glovsky and Popeo PC SCHEDULE Schedule 1 Use of Proceeds
iv EX-10.K 15 FORM OF CLASS A & CLASS B WARRANTS 1 EXHIBIT 10k THESE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE STATE SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS CONTAINED IN SAID LAWS. THE WARRANTS REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO SUCH WARRANTS AND THE SHARES UNDERLYING SUCH WARRANTS SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933, (2) SUCH WARRANTS ARE TRANSFERRED PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE, UNDER SUCH ACT OR (3) INDUSTRIAL IMAGING CORPORATION SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR SIMILAR STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER. WARRANT NO. A-1 WARRANT TO PURCHASE SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF INDUSTRIAL IMAGING CORPORATION THIS IS TO CERTIFY THAT IMPRIMIS INVESTORS LLC, or such holder's registered assigns (the "Investor"), is the owner of 250,000 Warrants (as defined below), each of which entitles the registered holder thereof to purchase from INDUSTRIAL IMAGING CORPORATION, a Delaware corporation (the "Company"), one fully paid, duly authorized and nonassessable share of Common Stock, par value $0.01 per share, of the Company (the "Common Stock"), at any time or from time to time on or before 5:00 p.m., New York City time, on November 12, 2002, at an exercise price of $1.00 per share (the "Exercise Price"), all on the terms and subject to the conditions hereinafter set forth. The number of shares of Common Stock issuable upon exercise of each such Warrant (the "Number Issuable"), which is initially one (1) share, is subject to adjustment from time to time pursuant to the provisions of Section 2 of this Warrant Certificate. The Warrants evidenced by this certificate are part of a series of Class A 2 Warrants being issued by the Company on the Issue Date (the "Warrants"). The execution and delivery of this Warrant Certificate is a condition precedent to the obligations of the Investor under the Securities Purchase Agreement, dated as of November 12, 1997, between the Investor and the Company. Capitalized terms used herein but not otherwise defined shall have the meanings given them in Section 12 hereof. Section 1. EXERCISE OF WARRANT. (a) The Warrants evidenced hereby may be exercised, in whole or in part, by the registered holder hereof at any time or from time to time on or before 5:00 p.m., New York City time, on November 12, 2002, upon delivery to the Company at the principal executive office of the Company in the United States of America, of (i) this Warrant Certificate, (ii) a written notice stating that such holder elects to exercise all or some portion of the Warrants evidenced hereby in accordance with the provisions of this Section 1 and specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued and (iii) payment of the Exercise Price for the shares of Common Stock issuable upon exercise of such Warrants, which shall be payable either (A) by a certified or official bank check payable to the order of the Company or (B) in the manner prescribed in Section 1(e), at the holder's option (collectively, the "Warrant Exercise Documentation"). (b) As promptly as practicable, and in any event within five Business Days after receipt of the Warrant Exercise Documentation, the Company shall deliver or cause to be delivered (a) certificates representing the number of validly issued, fully paid and nonassessable shares of Common Stock specified in the Warrant Exercise Documentation, (b) if applicable, cash in lieu of any fraction of a share, as hereinafter provided, and (c) if less than the full number of Warrants evidenced hereby are being exercised, a new Warrant Certificate or Certificates, of like tenor, for the number of Warrants evidenced by this Warrant Certificate, less the number of Warrants then being exercised. Such exercise shall be deemed to have been made at the close of business on the date of delivery of the Warrant Exercise Documentation so that the Person entitled to receive shares of Common Stock upon such exercise shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time. No such surrender shall be effective to constitute the Person entitled to receive such shares as the record holder thereof while the transfer books of the Company for the Common Stock are closed for any purpose (but not for any period in excess of five days); but any such surrender of this Warrant Certificate for exercise during any period while such books are so closed shall become effective for exercise immediately upon the reopening of such books, as if the exercise had been made on the date the Warrant Exercise Documentation was received and for the Number Issuable of Common Stock specified in the Warrant Exercise Documentation and at the Exercise Price. (c) The Company shall pay all expenses in connection with, and all taxes and other governmental charges (other than income taxes of the holder) that may 2 3 be imposed in respect of, the issue or delivery of any shares of Common Stock issuable upon the exercise of the Warrants evidenced hereby. The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Common Stock in any name other than that of the registered holder of the Warrants evidenced hereby. (d) In connection with the exercise of any Warrants evidenced hereby, no fractions of shares of Common Stock shall be issued, but in lieu thereof the Company shall pay a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the Current Market Price per share on the Business Day which next precedes the day of exercise. If more than one such Warrant shall be exercised by the holder thereof at the same time, the number of full shares of Common Stock issuable on such exercise shall be computed on the basis of the total number of Warrants so exercised. (e) In addition to the method of payment set forth in Section 1(a)(iii) and in lieu of any cash payment required thereunder, the registered holder shall have the right to exercise the Warrants in full or in part by surrendering the Warrant Certificate in the manner specified in Section 1 in exchange for the number of shares of Common Stock equal to the quotient derived from dividing (i) the excess of (A) the product of (I) the Number Issuable of Common Stock as to which Warrants are being exercised and (II) the Current Market Price per share, over (B) the product of (y) the Number Issuable of Common Stock as to which Warrants being exercised and (z) the Exercise Price, by (ii) the Current Market Price per share. (f) In the event of a sale of all or substantially all of the Company's assets for cash, the Warrants shall be deemed exercised in accordance with the provisions of this Section 1 as of date of the consummation of such sale and the holder hereof shall be entitled to pay the Exercise Price in the manner prescribed in Section 1(a)(iii) or Section 1(d), at its option. Section 2. ADJUSTMENTS. (a) ADJUSTMENT OF NUMBER ISSUABLE. The Number Issuable shall be subject to adjustment from time to time as follows: (i) In case the Company shall at any time or from time to time after the Issue Date: (A) pay a dividend or make a distribution on the outstanding shares of Common Stock in capital stock of the Company; (B) subdivide the outstanding shares of Common Stock into a larger number of shares; or 3 4 (C) combine the outstanding shares of Common Stock into a smaller number of shares; then, and in each such case (other than a dividend or distribution received by or set aside for the benefit of the holder pursuant to Section 2(c) hereof), the Number Issuable in effect immediately prior to such event shall be adjusted (and any other appropriate actions shall be taken by the Company) so that the holder of any Warrant evidenced hereby thereafter exercised shall be entitled to receive the number of shares of Common Stock or other securities of the Company which such holder would have owned or had been entitled to receive upon or by reason of any of the events described above, had such Warrant been exercised immediately prior to the happening of such event. An adjustment made pursuant to this clause (i) shall become effective retroactively (x) in the case of any such dividend or distribution, to a date immediately following the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (y) in the case of any such subdivision or combination to the close of business on the date upon which such corporate action becomes effective. (ii) If after the Issue Date, the Company shall at any time or from time to time issue or sell (x) shares of Common Stock or (y) securities convertible into or exchangeable for shares of Common Stock, or any options, warrants or other rights to acquire shares of Common Stock (other than (A) shares of Common Stock issued upon exercise of the Warrants outstanding on the Issue Date, (B) shares of Common Stock issued pursuant to an employee stock option plan, stock bonus plan or other incentive compensation plan or award, each as approved by the Company's Board of Directors that, in the aggregate with all other shares of Common Stock issued pursuant to any such plans (whether or not approved by the Company's Board of Directors) constitute no more than five percent of the issued and outstanding Common Stock, and (C) shares of Common Stock issued as a result of adjustments made under agreements related to shares described in clauses (A) and (B)) at a price per share that is less than the Current Market Price per share of Common Stock then in effect as of the record date or issue date, as the case may be, referred to in the following sentence (the "RELEVANT DATE") (treating the price per share of Common Stock, in the case of the issuance of any security convertible or exchangeable or exercisable into Common Stock as equal to (x) the sum of the price for such security convertible, exchangeable or exercisable into Common Stock plus any additional consideration payable (without regard to any anti-dilution adjustments) upon the conversion, exchange or exercise of such security into Common Stock divided by (y) the number of shares of Common Stock initially underlying such convertible, exchangeable or exercisable security), in each case, other than issuances or sales for which an adjustment is made pursuant to another paragraph of this Section 2, then, and in each such case, the Number Issuable then in effect shall be adjusted by multiplying the Number Issuable in effect on the day immediately prior to the 4 5 Relevant Date by a fraction, (1) the numerator of which shall be the sum of the number of shares of Common Stock, on a fully diluted basis, outstanding on the Relevant Date, plus the number of additional shares of Common Stock issued or to be issued (or the maximum number into which such convertible or exchangeable securities initially may convert or exchange or for which such options, warrants or other rights initially may be exercised), and (2) the denominator of which shall be the sum of the number of shares of Common Stock, on a fully diluted basis, outstanding on the Relevant Date, plus the number of shares of Common Stock which the aggregate consideration (plus the aggregate amount of any additional consideration initially payable upon conversion or exchange of such convertible or exchangeable securities or exercise of such options, warrants or other rights) for the total number of such additional shares of Common Stock so issued (or into which such convertible or exchangeable securities may convert or exchange or for which such options, warrants or other rights may be exercised) would purchase at the Current Market Price per share of Common Stock on the Relevant Date. Such adjustment shall be made whenever such shares, securities, options, warrants or other rights are issued, and shall become effective retroactively to a date immediately following the close of business (x) in the case of an issuance to the stockholders of the Company, as such, on the record date for the determination of stockholders entitled to receive such shares, securities, options, warrants or other rights and (y) in all other cases, on the date (the "ISSUE DATE") of such issuance; PROVIDED, that if any convertible or exchangeable securities, options, warrants, or other rights (or any portions thereof) which shall have given rise to an adjustment pursuant to this Section 2(a)(ii) shall have expired or terminated without the exercise thereof and/or if by reason of the terms of such convertible or exchangeable securities, options, warrants or other rights there shall have been an increase or increases, with the passage of time or otherwise, in the Number Issuable, then the Number Issuable hereunder shall be readjusted (but to no greater extent than originally adjusted) on the basis of (A) eliminating from the computation any additional shares of Common Stock corresponding to such convertible or exchangeable securities, options, warrants or other rights as shall have expired or terminated, (B) treating the additional shares of Common Stock, if any, actually issued or issuable pursuant to the previous exercise of such convertible and exchangeable securities, options, warrants, or other rights as having been issued for the consideration actually received and receivable therefor and (C) treating any of such convertible or exchangeable securities, options, warrants or other rights which remain outstanding as being subject to exercise or conversion. Solely for purposes of this clause (ii), (I) Common Stock shall include the Common Stock, par value $0.01 per share, of the Company and each other class of capital stock of the Company that does not have a preference over any other class of capital stock of the Company as to dividends or upon liquidation, dissolution or winding up of the Company and, in each case, shall include any other class of capital stock of the Company into which such stock is reclassified or reconstituted and (II) if the provisions of any securities convertible into or exchangeable for shares of 5 6 Common Stock or options, warrants or other rights to acquire shares of Common Stock are amended after the date of issuance so as to reduce the applicable conversion price, exchange price or exercise price such amendment shall be deemed to be a new issuance of such securities. (iii) In case the Company shall at any time or from time to time after the Issue Date distribute to any holder of shares of its Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the resulting or surviving corporation and the Common Stock is not changed or exchanged) cash, evidences of indebtedness of the Company or another issuer, securities of the Company or another issuer or other assets (excluding dividends or other distributions of shares of Common Stock or other capital stock for which adjustment in the Number Issuable is made under Section 2(a)(i) or dividends or other distributions received by or set aside for the benefit of the holders of Common Stock pursuant to Section 2(c) below) or rights or warrants to subscribe for or purchase securities of the Company (excluding those in respect of which adjustment in the Number Issuable is made pursuant to Section 2(a)(ii)), then, and in each such case, the Number Issuable then in effect shall be adjusted by multiplying the Number Issuable in effect immediately prior to the date of such distribution by a fraction (x) the numerator of which shall be the Current Market Price per share on the record date referred to below and (y) the denominator of which shall be such Current Market Price per share less the then Fair Market Value (as determined in good faith by the Board of Directors of the Company, a certified resolution with respect to which shall be mailed to the holder of the Warrants evidenced hereby) of the portion of the cash, evidences of indebtedness, securities or other assets so distributed or of such subscription rights or warrants applicable to one share of Common Stock (but such denominator shall in no event be zero). Such adjustment shall be made whenever any such distribution is made and shall become effective retroactively to a date immediately following the close of business on the record date for the determination of stockholders entitled to receive such distribution. (iv) In case the Company at any time or from time to time shall take any action which could have a dilutive effect on the number of shares of Common Stock that may be issued upon exercise of the Warrants, other than an action described in any of Section 2(a)(i) through 2(a)(iii), inclusive, or Section 2(b), then, the Number Issuable shall be adjusted in such manner and at such time as the Board of Directors of the Company reasonably determines to be equitable under the circumstances (such determination to be evidenced in a resolution, a certified copy of which shall be mailed to the holder of the Warrants evidenced hereby). (v) Notwithstanding anything herein to the contrary, no adjustment under this Section 2(a) need be made to the Number Issuable unless such adjustment would require an increase or decrease of at least 1% of the 6 7 Number Issuable then in effect. Any lesser adjustment shall be carried forward and shall be made at the time of and together with the next subsequent adjustment, which, together with any adjustment or adjustments so carried forward, shall amount to an increase or decrease of at least 1% of such Number Issuable. Any adjustment to the Number Issuable carried forward and not theretofore made shall be made immediately prior to the exercise of any Warrants pursuant hereto. (vi) The Company promptly shall deliver to each registered holder of Warrants at least ten Business Days prior to effecting any transaction which would result in an increase or decrease in the Number Issuable pursuant to this Section 2(a) a notice thereof, together with a certificate, signed by the Chief Executive Officer or a Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company, setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated and specifying the increased or decreased Number Issuable then in effect following such adjustment. (vii) Notwithstanding anything contrary contained in this Section 2(a), the Company shall be entitled to make such upward adjustments in the Number Issuable, in addition to those otherwise required by this Section 2(a), as the Board of Directors of the Company in their discretion shall determine to be advisable in order that any stock dividend, subdivision or combination of shares, distribution of rights or warrants to purchase stock or securities, or distribution of securities convertible into or exchangeable for Common Stock, hereafter made by the Company to its shareholders shall not be taxable; provided, HOWEVER, that any such adjustment shall be made, as nearly as practicable, in a manner which treats all holders of Warrants with similar protections on an equal basis. (b) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE OF ASSETS. In case of any capital reorganization or reclassification or other change of outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in case of any consolidation or merger of the Company with or into another Person (other than a consolidation or merger in which the Company is the resulting or surviving person and which does not result in any reclassification or change of outstanding Common Stock), or in case of any sale or other disposition to another Person of all or substantially all of the assets of the Company (any of the foregoing, a "Transaction"), the Company, or such successor or purchasing Person, as the case may be, shall execute and deliver to each holder of the Warrants evidenced hereby, at least ten Business Days prior to effecting any of the foregoing Transactions, a certificate that the holder of each such Warrant then outstanding shall have the right thereafter to exercise such Warrant into the kind and amount of shares of stock or other securities (of the Company or another issuer) or property or cash receivable upon such Transaction by a holder of the number of shares of Common Stock into which such Warrant could have been exercised immediately prior to such Transaction. Such certificate shall provide for 7 8 adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 2 and shall contain other terms identical to the terms hereof. If, in the case of any such Transaction, the stock, other securities, cash or property receivable thereupon by a holder of Common Stock includes stock, securities, other property or cash of a Person other than the successor or purchasing Persons and other than the Company, in connection with such Transaction, then such certificate also shall be executed by such Person, and such Person shall, in such certificate, specifically assume the obligations of such successor or purchasing Person and acknowledge its obligations to issue such stock, securities, other property or cash to holders of the Warrants upon exercise thereof as provided above. The provisions of this Section 2(b) similarly shall apply to successive Transactions. (c) SPECIAL DISTRIBUTIONS. If the holder so elects by sending a Special Notice to the Company, in the event that the Company shall declare a dividend or make any other distribution (including, without limitation, in cash, in capital stock (which shall include, without limitation, any options, warrants or other rights to acquire capital stock) of the Company, whether or not pursuant to a shareholder rights plan, "poison pill" or similar arrangement) in other securities, property or assets, to holders of Common Stock (a "Special Distribution"), then the Board of Directors shall set aside the amount of such dividend or distribution that any holder of Warrants would have been entitled to receive had it exercised such Warrants prior to the record date for such dividend or distribution. Upon the exercise of a Warrant evidenced hereby, the holder shall be entitled to receive, such dividend or distribution that such holder would have received had such Warrant been exercised immediately prior to the record date for such dividend or distribution. Prior to any Special Distribution described in this Section 2(c), the Company shall as provided in Section 4 hereof notify each holder (not less than ten Business Days prior to the occurrence of each Special Distribution) of its intent to make such Special Distribution and the holder, if it elects to have such distribution set aside the amount thereof rather than have an adjustment to the Number Issuable as provided in Section 2(a)(i), 2(a)(ii) or 2(a)(iii), shall notify the Company by sending a Special Notice prior to the date of any such Special Distribution. Section 3. REDEMPTION. The Company shall not have any right to redeem any of the Warrants evidenced hereby. Section 4. NOTICE OF CERTAIN EVENTS. In case at any time or from time to time the holders of the Warrants evidenced hereby are entitled to notice pursuant to the terms of Section 2, such notice shall provide (a) the date on which a record is to be taken for the purpose of such dividend, distribution, subdivision, combination or issuance of shares of Common Stock, securities convertible into or exchangeable for shares of Common Stock or options, warrants or other rights, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, subdivision, combination, shares of Common Stock, securities convertible into or exchangeable for shares of Common Stock or options, warrants or other rights, are to be determined, (b) the issue date (as defined in Section 2(a)(ii) hereof) or (c) the date 8 9 on which such Transaction, dissolution, liquidation or winding up is expected to become effective. Section 5. CERTAIN COVENANTS. The Company covenants and agrees that all shares of capital stock of the Company which may be issued upon the exercise of the Warrants evidenced hereby will be duly authorized, validly issued and fully paid and nonassessable. The Company shall at all times reserve and keep available for issuance upon the exercise of the Warrants, such number of its authorized but unissued shares of Common Stock as will from time to time be sufficient to permit the exercise of all outstanding Warrants, and shall take all action required to increase the authorized number of shares of Common Stock if at any time there shall be insufficient authorized but unissued shares of Common stock to permit such reservation or to permit the exercise of all outstanding Warrants. The Company shall prepare and file, and cooperate with the holder of this Warrant so that it may prepare and file, in each case within five Business Days of a request by such holder, notification and report forms in compliance with the HSR Act, and shall otherwise fully comply with the requirements of the HSR Act, to the extent required in connection with the exercise of the Warrant. The Company shall bear all of its own expenses and all of its own out of pocket expenses (including reasonable attorneys' fees, charges and expenses) and filing fees of such holder in connection with any such preparation and filing. Section 6. REGISTERED HOLDER. The person in whose name this Warrant Certificate is registered shall be deemed the owner hereof and of the Warrants evidenced hereby for all purposes. Section 7. TRANSFER OF WARRANTS. Any transfer of the rights represented by this Warrant Certificate shall be effected by the surrender of this Warrant Certificate, along with the form of assignment attached hereto, properly completed and executed by the registered holder hereof, at the principal executive office of the Company in the United States of America; PROVIDED that (a) a registration statement with respect to the Warrants proposed for transfer, and with respect to the shares of Common Stock underlying such Warrants, shall be effective under the Securities Act, (b) the Warrants are transferred pursuant to Rule 144 under the Securities Act or (c) the Company shall have received an opinion of counsel reasonably satisfactory to it that no violation of such act or similar state acts will be involved in such transfer. Thereupon, the Company shall issue in the name or names specified by the registered holder hereof and, in the event of a partial transfer, in the name of the registered holder hereof, a new Warrant Certificate or Certificates evidencing the right to purchase such number of shares of Common Stock as shall be equal to the number of shares of Common Stock then purchasable hereunder. Section 8. DENOMINATIONS. The Company covenants that it will, at its expense, promptly upon surrender of this Warrant Certificate at the principal executive office of the Company in the United States of America, execute and deliver to the registered holder hereof a new Warrant Certificate or Certificates in denominations 9 10 specified by such holder for an aggregate number of Warrants equal to the number of Warrants evidenced by this Warrant Certificate. Section 9. REPLACEMENT OF WARRANTS. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant Certificate and, in the case of loss, theft or destruction, upon delivery of an indemnity reasonably satisfactory to the Company (in the case of an institutional investor, its own unsecured indemnity agreement shall be deemed to be reasonably satisfactory), or, in the case of mutilation, upon surrender and cancellation thereof, the Company will issue a new Warrant Certificate of like tenor for a number of Warrants equal to the number of Warrants evidenced by this Warrant Certificate. Section 10. GOVERNING LAW. THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISIONS). Section 11. RIGHTS INURE TO REGISTERED HOLDER. The Warrants evidenced by this Warrant Certificate will inure to the benefit of and be binding upon the registered holder thereof and the Company and their respective successors and permitted assigns. This Warrant Certificate shall be for the sole benefit of the registered holder thereof. Nothing in this Warrant Certificate shall be construed to give the registered holder hereof any rights as a holder of shares of Common Stock until such time, if any, as the Warrants evidenced by this Warrant Certificate are exercised in accordance with the provisions hereof. Section 12. DEFINITIONS. For the purposes of this Warrant Certificate, the following terms shall have the meanings indicated below: "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required by law or executive order to close. "COMMON STOCK" shall have the meaning assigned to such term in the Preamble hereof. "COMPANY" shall have the meaning assigned to such term in the Preamble hereof. "CURRENT MARKET PRICE" per share shall mean, on any date specified herein for the determination thereof, (a) if the Common Stock is then listed on a national securities exchange, designated as a Nasdaq Stock Market security or quoted in the over-the-counter-market by a member firm of the NYSE, the average daily Market Price of the Common Stock for those days during the period of 15 days, ending on such date, on 10 11 which the national securities exchanges were open for trading, and (b) if the Common Stock is not then so listed, designated or quoted, the Market Price on such date. "EXERCISE PRICE" shall have the meaning assigned to such term in the Preamble hereof. "FAIR MARKET VALUE" shall mean the amount which a willing buyer, under no compulsion to buy, would pay a willing seller, under no compulsion to sell, in an arm's-length transaction. "HSR ACT" shall mean the Hart Scott Rodino Anti-Trust Improvements Act of 1976, and the rules and regulations of the Federal Trade Commission promulgated thereunder. "INVESTOR" shall have the meaning assigned to such term in the Preamble hereof. "ISSUE DATE" shall mean November 12, 1997. "MARKET PRICE" shall mean, per share of Common Stock, on any date specified herein: (a) if the Common Stock is listed on any national securities exchange or is designated as a Nasdaq Stock Market security, the last trading price of the Common Stock on such date as reported in the Wall Street Journal; or (b) if the Common Stock is not so listed or designated, the average of the reported closing bid and ask prices of the Common Stock in the over-the-counter market, on such date as reported by any member firm of the NYSE selected by the Company; or (c) if none of (a) or (b) is applicable, the Fair Market Value per share determined in good faith by the Board of Directors of the Company which shall be deemed to be Fair Market Value unless holders of at least 50% of Common Stock issued or issuable upon exercise of the Warrants request that the Company obtain an opinion of a nationally recognized investment banking firm chosen by the Company (who shall bear the expense) and reasonably acceptable to such requesting holders of the Warrants, in which event the Fair Market Value shall be as determined by such investment banking firm. "NUMBER ISSUABLE" shall have the meaning given it in the Preamble hereof. "NYSE" shall mean the New York Stock Exchange, Inc. "PERSON" shall mean any individual, corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "RELEVANT DATE" shall have the meaning assigned to such term in Section 2(a)(ii) hereof. 11 12 "SECURITIES ACT" shall mean the Securities Act of 1933. "SPECIAL DISTRIBUTION" shall have the meaning assigned to such term in Section 2(c) hereof. "SPECIAL NOTICE" shall mean the notice sent by a holder to the Company indicating its preference to have any Special Distribution set aside for its benefit upon exercise of the Warrant. "TRANSACTION" shall have the meaning assigned to such term in Section 2(b) hereof. "WARRANTS" shall have the meaning assigned to such term in the Preamble hereof. "WARRANT EXERCISE DOCUMENTATION" shall have the meaning given it in Section 1 hereof. Section 13. NOTICES. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be sufficient if delivered personally or sent by telecopy (with confirmation of receipt) or by registered or certified mail, postage prepaid, return receipt requested, (a) if to the holder of a Warrant, at such holder's last known address or telecopy number appearing on the books of the Company; and (b) if to the Company, at its principal executive office, or the telecopy number of such office, in the United States, or such other address or telecopy number as the party to whom notice is to be given may have furnished to the other party. Each such notice, request or communication shall be effective when received or, if given by mail, when delivered at the address specified in this Section or on the fifth Business Day following the date on which such communication is posted, whichever occurs first. Section 14. SHARE LEGEND. Each certificate representing shares of Common Stock or any other securities issued upon exercise of this Warrant shall bear the following legend unless such shares or other securities have been registered under the Securities Act and any applicable state securities laws: "THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE STATE SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS CONTAINED IN SAID LAWS. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED UNLESS (A) A REGISTRATION STATEMENT SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933, (B) SUCH SHARES ARE TRANSFERRED PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE, UNDER SUCH ACT OR (C) INDUSTRIAL IMAGING CORPORATION SHALL HAVE 12 13 RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR SIMILAR STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER." 13 14 IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed as of the Issue Date. INDUSTRIAL IMAGING CORPORATION By: __________________________ Name: Title: 14 15 [Form of Assignment Form] [To be executed upon assignment of Warrants] The undersigned hereby assigns and transfers this Warrant Certificate to ________________________ whose Social Security Number or Tax ID Number is ___________________ and whose record address is ________________________________ _____________________________________, and irrevocably appoints ________________ as agent to transfer this security on the books of the Company. Such agent may substitute another to act for such agent. Signature: ______________________________________ Date: ___________________________ 16 THESE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE STATE SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS CONTAINED IN SAID LAWS. THE WARRANTS REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO SUCH WARRANTS AND THE SHARES UNDERLYING SUCH WARRANTS SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933, (2) SUCH WARRANTS ARE TRANSFERRED PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE, UNDER SUCH ACT OR (3) INDUSTRIAL IMAGING CORPORATION SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR SIMILAR STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER. WARRANT NO. B-1 WARRANT TO PURCHASE SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF INDUSTRIAL IMAGING CORPORATION THIS IS TO CERTIFY THAT IMPRIMIS INVESTORS LLC, or such holder's registered assigns (the "Investor"), is the owner of 250,000 Warrants (as defined below), each of which entitles the registered holder thereof to purchase from INDUSTRIAL IMAGING CORPORATION, a Delaware corporation (the "Company"), one fully paid, duly authorized and nonassessable share of Common Stock, par value $0.01 per share, of the Company (the "Common Stock"), at any time or from time to time on or before 5:00 p.m., New York City time, on November 12, 2002, at an exercise price of $2.00 per share (the "Exercise Price"), all on the terms and subject to the conditions hereinafter set forth. The number of shares of Common Stock issuable upon exercise of each such Warrant (the "Number Issuable"), which is initially one (1) share, is subject to adjustment from time to time pursuant to the provisions of Section 2 of this Warrant Certificate. The Warrants evidenced by this certificate are part of a series of Class B Warrants being issued by the Company on the Issue Date (the "Warrants"). The execution and delivery of this Warrant Certificate is a condition precedent to the 2 17 obligations of the Investor under the Securities Purchase Agreement, dated as of November 12, 1997, between the Investor and the Company. Capitalized terms used herein but not otherwise defined shall have the meanings given them in Section 12 hereof. Section 1. EXERCISE OF WARRANT. (a) The Warrants evidenced hereby may be exercised, in whole or in part, by the registered holder hereof at any time or from time to time on or before 5:00 p.m., New York City time, on November 12, 2002, upon delivery to the Company at the principal executive office of the Company in the United States of America, of (i) this Warrant Certificate, (ii) a written notice stating that such holder elects to exercise all or some portion of the Warrants evidenced hereby in accordance with the provisions of this Section 1 and specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued and (iii) payment of the Exercise Price for the shares of Common Stock issuable upon exercise of such Warrants, which shall be payable either (A) by a certified or official bank check payable to the order of the Company or (B) in the manner prescribed in Section 1(e), at the holder's option (collectively, the "Warrant Exercise Documentation"). (b) As promptly as practicable, and in any event within five Business Days after receipt of the Warrant Exercise Documentation, the Company shall deliver or cause to be delivered (a) certificates representing the number of validly issued, fully paid and nonassessable shares of Common Stock specified in the Warrant Exercise Documentation, (b) if applicable, cash in lieu of any fraction of a share, as hereinafter provided, and (c) if less than the full number of Warrants evidenced hereby are being exercised, a new Warrant Certificate or Certificates, of like tenor, for the number of Warrants evidenced by this Warrant Certificate, less the number of Warrants then being exercised. Such exercise shall be deemed to have been made at the close of business on the date of delivery of the Warrant Exercise Documentation so that the Person entitled to receive shares of Common Stock upon such exercise shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time. No such surrender shall be effective to constitute the Person entitled to receive such shares as the record holder thereof while the transfer books of the Company for the Common Stock are closed for any purpose (but not for any period in excess of five days); but any such surrender of this Warrant Certificate for exercise during any period while such books are so closed shall become effective for exercise immediately upon the reopening of such books, as if the exercise had been made on the date the Warrant Exercise Documentation was received and for the Number Issuable of Common Stock specified in the Warrant Exercise Documentation and at the Exercise Price. (c) The Company shall pay all expenses in connection with, and all taxes and other governmental charges (other than income taxes of the holder) that may be imposed in respect of, the issue or delivery of any shares of Common Stock issuable upon the exercise of the Warrants evidenced hereby. The Company shall not be required, 3 18 however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Common Stock in any name other than that of the registered holder of the Warrants evidenced hereby. (d) In connection with the exercise of any Warrants evidenced hereby, no fractions of shares of Common Stock shall be issued, but in lieu thereof the Company shall pay a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the Current Market Price per share on the Business Day which next precedes the day of exercise. If more than one such Warrant shall be exercised by the holder thereof at the same time, the number of full shares of Common Stock issuable on such exercise shall be computed on the basis of the total number of Warrants so exercised. (e) In addition to the method of payment set forth in Section 1(a)(iii) and in lieu of any cash payment required thereunder, the registered holder shall have the right to exercise the Warrants in full or in part by surrendering the Warrant Certificate in the manner specified in Section 1 in exchange for the number of shares of Common Stock equal to the quotient derived from dividing (i) the excess of (A) the product of (I) the Number Issuable of Common Stock as to which Warrants are being exercised and (II) the Current Market Price per share, over (B) the product of (y) the Number Issuable of Common Stock as to which Warrants being exercised and (z) the Exercise Price, by (ii) the Current Market Price per share. (f) In the event of a sale of all or substantially all of the Company's assets for cash, the Warrants shall be deemed exercised in accordance with the provisions of this Section 1 as of date of the consummation of such sale and the holder hereof shall be entitled to pay the Exercise Price in the manner prescribed in Section 1(a)(iii) or Section 1(d), at its option. Section 2. ADJUSTMENTS. (a) ADJUSTMENT OF NUMBER ISSUABLE. The Number Issuable shall be subject to adjustment from time to time as follows: (i) In case the Company shall at any time or from time to time after the Issue Date: (A) pay a dividend or make a distribution on the outstanding shares of Common Stock in capital stock of the Company; (B) subdivide the outstanding shares of Common Stock into a larger number of shares; or (C) combine the outstanding shares of Common Stock into a smaller number of shares; 4 19 then, and in each such case (other than a dividend or distribution received by or set aside for the benefit of the holder pursuant to Section 2(c) hereof), the Number Issuable in effect immediately prior to such event shall be adjusted (and any other appropriate actions shall be taken by the Company) so that the holder of any Warrant evidenced hereby thereafter exercised shall be entitled to receive the number of shares of Common Stock or other securities of the Company which such holder would have owned or had been entitled to receive upon or by reason of any of the events described above, had such Warrant been exercised immediately prior to the happening of such event. An adjustment made pursuant to this clause (i) shall become effective retroactively (x) in the case of any such dividend or distribution, to a date immediately following the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (y) in the case of any such subdivision or combination to the close of business on the date upon which such corporate action becomes effective. (ii) If after the Issue Date, the Company shall at any time or from time to time issue or sell (x) shares of Common Stock or (y) securities convertible into or exchangeable for shares of Common Stock, or any options, warrants or other rights to acquire shares of Common Stock (other than (A) shares of Common Stock issued upon exercise of the Warrants outstanding on the Issue Date, (B) shares of Common Stock issued pursuant to an employee stock option plan, stock bonus plan or other incentive compensation plan or award, each as approved by the Company's Board of Directors that, in the aggregate with all other shares of Common Stock issued pursuant to any such plans (whether or not approved by the Company's Board of Directors) constitute no more than five percent of the issued and outstanding Common Stock, and (C) shares of Common Stock issued as a result of adjustments made under agreements related to shares described in clauses (A) and (B)) at a price per share that is less than the Current Market Price per share of Common Stock then in effect as of the record date or issue date, as the case may be, referred to in the following sentence (the "RELEVANT DATE") (treating the price per share of Common Stock, in the case of the issuance of any security convertible or exchangeable or exercisable into Common Stock as equal to (x) the sum of the price for such security convertible, exchangeable or exercisable into Common Stock plus any additional consideration payable (without regard to any anti-dilution adjustments) upon the conversion, exchange or exercise of such security into Common Stock divided by (y) the number of shares of Common Stock initially underlying such convertible, exchangeable or exercisable security), in each case, other than issuances or sales for which an adjustment is made pursuant to another paragraph of this Section 2, then, and in each such case, the Number Issuable then in effect shall be adjusted by multiplying the Number Issuable in effect on the day immediately prior to the Relevant Date by a fraction, (1) the numerator of which shall be the sum of the number of shares of Common Stock, on a fully diluted basis, outstanding on the 5 20 Relevant Date, plus the number of additional shares of Common Stock issued or to be issued (or the maximum number into which such convertible or exchangeable securities initially may convert or exchange or for which such options, warrants or other rights initially may be exercised), and (2) the denominator of which shall be the sum of the number of shares of Common Stock, on a fully diluted basis, outstanding on the Relevant Date, plus the number of shares of Common Stock which the aggregate consideration (plus the aggregate amount of any additional consideration initially payable upon conversion or exchange of such convertible or exchangeable securities or exercise of such options, warrants or other rights) for the total number of such additional shares of Common Stock so issued (or into which such convertible or exchangeable securities may convert or exchange or for which such options, warrants or other rights may be exercised) would purchase at the Current Market Price per share of Common Stock on the Relevant Date. Such adjustment shall be made whenever such shares, securities, options, warrants or other rights are issued, and shall become effective retroactively to a date immediately following the close of business (x) in the case of an issuance to the stockholders of the Company, as such, on the record date for the determination of stockholders entitled to receive such shares, securities, options, warrants or other rights and (y) in all other cases, on the date (the "ISSUE DATE") of such issuance; PROVIDED, that if any convertible or exchangeable securities, options, warrants, or other rights (or any portions thereof) which shall have given rise to an adjustment pursuant to this Section 2(a)(ii) shall have expired or terminated without the exercise thereof and/or if by reason of the terms of such convertible or exchangeable securities, options, warrants or other rights there shall have been an increase or increases, with the passage of time or otherwise, in the Number Issuable, then the Number Issuable hereunder shall be readjusted (but to no greater extent than originally adjusted) on the basis of (A) eliminating from the computation any additional shares of Common Stock corresponding to such convertible or exchangeable securities, options, warrants or other rights as shall have expired or terminated, (B) treating the additional shares of Common Stock, if any, actually issued or issuable pursuant to the previous exercise of such convertible and exchangeable securities, options, warrants, or other rights as having been issued for the consideration actually received and receivable therefor and (C) treating any of such convertible or exchangeable securities, options, warrants or other rights which remain outstanding as being subject to exercise or conversion. Solely for purposes of this clause (ii), (I) Common Stock shall include the Common Stock, par value $0.01 per share, of the Company and each other class of capital stock of the Company that does not have a preference over any other class of capital stock of the Company as to dividends or upon liquidation, dissolution or winding up of the Company and, in each case, shall include any other class of capital stock of the Company into which such stock is reclassified or reconstituted and (II) if the provisions of any securities convertible into or exchangeable for shares of Common Stock or options, warrants or other rights to acquire shares of Common Stock are amended after the date of issuance so as to reduce the applicable 6 21 conversion price, exchange price or exercise price such amendment shall be deemed to be a new issuance of such securities. (iii) In case the Company shall at any time or from time to time after the Issue Date distribute to any holder of shares of its Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the resulting or surviving corporation and the Common Stock is not changed or exchanged) cash, evidences of indebtedness of the Company or another issuer, securities of the Company or another issuer or other assets (excluding dividends or other distributions of shares of Common Stock or other capital stock for which adjustment in the Number Issuable is made under Section 2(a)(i) or dividends or other distributions received by or set aside for the benefit of the holders of Common Stock pursuant to Section 2(c) below) or rights or warrants to subscribe for or purchase securities of the Company (excluding those in respect of which adjustment in the Number Issuable is made pursuant to Section 2(a)(ii)), then, and in each such case, the Number Issuable then in effect shall be adjusted by multiplying the Number Issuable in effect immediately prior to the date of such distribution by a fraction (x) the numerator of which shall be the Current Market Price per share on the record date referred to below and (y) the denominator of which shall be such Current Market Price per share less the then Fair Market Value (as determined in good faith by the Board of Directors of the Company, a certified resolution with respect to which shall be mailed to the holder of the Warrants evidenced hereby) of the portion of the cash, evidences of indebtedness, securities or other assets so distributed or of such subscription rights or warrants applicable to one share of Common Stock (but such denominator shall in no event be zero). Such adjustment shall be made whenever any such distribution is made and shall become effective retroactively to a date immediately following the close of business on the record date for the determination of stockholders entitled to receive such distribution. (iv) In case the Company at any time or from time to time shall take any action which could have a dilutive effect on the number of shares of Common Stock that may be issued upon exercise of the Warrants, other than an action described in any of Section 2(a)(i) through 2(a)(iii), inclusive, or Section 2(b), then, the Number Issuable shall be adjusted in such manner and at such time as the Board of Directors of the Company reasonably determines to be equitable under the circumstances (such determination to be evidenced in a resolution, a certified copy of which shall be mailed to the holder of the Warrants evidenced hereby). (v) Notwithstanding anything herein to the contrary, no adjustment under this Section 2(a) need be made to the Number Issuable unless such adjustment would require an increase or decrease of at least 1% of the Number Issuable then in effect. Any lesser adjustment shall be carried forward and shall be made at the time of and together with the next subsequent adjustment, 7 22 which, together with any adjustment or adjustments so carried forward, shall amount to an increase or decrease of at least 1% of such Number Issuable. Any adjustment to the Number Issuable carried forward and not theretofore made shall be made immediately prior to the exercise of any Warrants pursuant hereto. (vi) The Company promptly shall deliver to each registered holder of Warrants at least ten Business Days prior to effecting any transaction which would result in an increase or decrease in the Number Issuable pursuant to this Section 2(a) a notice thereof, together with a certificate, signed by the Chief Executive Officer or a Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company, setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated and specifying the increased or decreased Number Issuable then in effect following such adjustment. (vii) Notwithstanding anything contrary contained in this Section 2(a), the Company shall be entitled to make such upward adjustments in the Number Issuable, in addition to those otherwise required by this Section 2(a), as the Board of Directors of the Company in their discretion shall determine to be advisable in order that any stock dividend, subdivision or combination of shares, distribution of rights or warrants to purchase stock or securities, or distribution of securities convertible into or exchangeable for Common Stock, hereafter made by the Company to its shareholders shall not be taxable; provided, HOWEVER, that any such adjustment shall be made, as nearly as practicable, in a manner which treats all holders of Warrants with similar protections on an equal basis. (b) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE OF ASSETS. In case of any capital reorganization or reclassification or other change of outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in case of any consolidation or merger of the Company with or into another Person (other than a consolidation or merger in which the Company is the resulting or surviving person and which does not result in any reclassification or change of outstanding Common Stock), or in case of any sale or other disposition to another Person of all or substantially all of the assets of the Company (any of the foregoing, a "Transaction"), the Company, or such successor or purchasing Person, as the case may be, shall execute and deliver to each holder of the Warrants evidenced hereby, at least ten Business Days prior to effecting any of the foregoing Transactions, a certificate that the holder of each such Warrant then outstanding shall have the right thereafter to exercise such Warrant into the kind and amount of shares of stock or other securities (of the Company or another issuer) or property or cash receivable upon such Transaction by a holder of the number of shares of Common Stock into which such Warrant could have been exercised immediately prior to such Transaction. Such certificate shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 2 and shall contain other terms identical to the terms hereof. 8 23 If, in the case of any such Transaction, the stock, other securities, cash or property receivable thereupon by a holder of Common Stock includes stock, securities, other property or cash of a Person other than the successor or purchasing Persons and other than the Company, in connection with such Transaction, then such certificate also shall be executed by such Person, and such Person shall, in such certificate, specifically assume the obligations of such successor or purchasing Person and acknowledge its obligations to issue such stock, securities, other property or cash to holders of the Warrants upon exercise thereof as provided above. The provisions of this Section 2(b) similarly shall apply to successive Transactions. (c) SPECIAL DISTRIBUTIONS. If the holder so elects by sending a Special Notice to the Company, in the event that the Company shall declare a dividend or make any other distribution (including, without limitation, in cash, in capital stock (which shall include, without limitation, any options, warrants or other rights to acquire capital stock) of the Company, whether or not pursuant to a shareholder rights plan, "poison pill" or similar arrangement) in other securities, property or assets, to holders of Common Stock (a "Special Distribution"), then the Board of Directors shall set aside the amount of such dividend or distribution that any holder of Warrants would have been entitled to receive had it exercised such Warrants prior to the record date for such dividend or distribution. Upon the exercise of a Warrant evidenced hereby, the holder shall be entitled to receive, such dividend or distribution that such holder would have received had such Warrant been exercised immediately prior to the record date for such dividend or distribution. Prior to any Special Distribution described in this Section 2(c), the Company shall as provided in Section 4 hereof notify each holder (not less than ten Business Days prior to the occurrence of each Special Distribution) of its intent to make such Special Distribution and the holder, if it elects to have such distribution set aside the amount thereof rather than have an adjustment to the Number Issuable as provided in Section 2(a)(i), 2(a)(ii) or 2(a)(iii), shall notify the Company by sending a Special Notice prior to the date of any such Special Distribution. Section 3. REDEMPTION. The Company shall not have any right to redeem any of the Warrants evidenced hereby. Section 4. NOTICE OF CERTAIN EVENTS. In case at any time or from time to time the holders of the Warrants evidenced hereby are entitled to notice pursuant to the terms of Section 2, such notice shall provide (a) the date on which a record is to be taken for the purpose of such dividend, distribution, subdivision, combination or issuance of shares of Common Stock, securities convertible into or exchangeable for shares of Common Stock or options, warrants or other rights, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, subdivision, combination, shares of Common Stock, securities convertible into or exchangeable for shares of Common Stock or options, warrants or other rights, are to be determined, (b) the issue date (as defined in Section 2(a)(ii) hereof) or (c) the date on which such Transaction, dissolution, liquidation or winding up is expected to become effective. 9 24 Section 5. CERTAIN COVENANTS. The Company covenants and agrees that all shares of capital stock of the Company which may be issued upon the exercise of the Warrants evidenced hereby will be duly authorized, validly issued and fully paid and nonassessable. The Company shall at all times reserve and keep available for issuance upon the exercise of the Warrants, such number of its authorized but unissued shares of Common Stock as will from time to time be sufficient to permit the exercise of all outstanding Warrants, and shall take all action required to increase the authorized number of shares of Common Stock if at any time there shall be insufficient authorized but unissued shares of Common stock to permit such reservation or to permit the exercise of all outstanding Warrants. The Company shall prepare and file, and cooperate with the holder of this Warrant so that it may prepare and file, in each case within five Business Days of a request by such holder, notification and report forms in compliance with the HSR Act, and shall otherwise fully comply with the requirements of the HSR Act, to the extent required in connection with the exercise of the Warrant. The Company shall bear all of its own expenses and all of its own out of pocket expenses (including reasonable attorneys' fees, charges and expenses) and filing fees of such holder in connection with any such preparation and filing. Section 6. REGISTERED HOLDER. The person in whose name this Warrant Certificate is registered shall be deemed the owner hereof and of the Warrants evidenced hereby for all purposes. Section 7. TRANSFER OF WARRANTS. Any transfer of the rights represented by this Warrant Certificate shall be effected by the surrender of this Warrant Certificate, along with the form of assignment attached hereto, properly completed and executed by the registered holder hereof, at the principal executive office of the Company in the United States of America; PROVIDED that (a) a registration statement with respect to the Warrants proposed for transfer, and with respect to the shares of Common Stock underlying such Warrants, shall be effective under the Securities Act, (b) the Warrants are transferred pursuant to Rule 144 under the Securities Act or (c) the Company shall have received an opinion of counsel reasonably satisfactory to it that no violation of such act or similar state acts will be involved in such transfer. Thereupon, the Company shall issue in the name or names specified by the registered holder hereof and, in the event of a partial transfer, in the name of the registered holder hereof, a new Warrant Certificate or Certificates evidencing the right to purchase such number of shares of Common Stock as shall be equal to the number of shares of Common Stock then purchasable hereunder. Section 8. DENOMINATIONS. The Company covenants that it will, at its expense, promptly upon surrender of this Warrant Certificate at the principal executive office of the Company in the United States of America, execute and deliver to the registered holder hereof a new Warrant Certificate or Certificates in denominations specified by such holder for an aggregate number of Warrants equal to the number of Warrants evidenced by this Warrant Certificate. 10 25 Section 9. REPLACEMENT OF WARRANTS. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant Certificate and, in the case of loss, theft or destruction, upon delivery of an indemnity reasonably satisfactory to the Company (in the case of an institutional investor, its own unsecured indemnity agreement shall be deemed to be reasonably satisfactory), or, in the case of mutilation, upon surrender and cancellation thereof, the Company will issue a new Warrant Certificate of like tenor for a number of Warrants equal to the number of Warrants evidenced by this Warrant Certificate. Section 10. GOVERNING LAW. THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISIONS). Section 11. RIGHTS INURE TO REGISTERED HOLDER. The Warrants evidenced by this Warrant Certificate will inure to the benefit of and be binding upon the registered holder thereof and the Company and their respective successors and permitted assigns. This Warrant Certificate shall be for the sole benefit of the registered holder thereof. Nothing in this Warrant Certificate shall be construed to give the registered holder hereof any rights as a holder of shares of Common Stock until such time, if any, as the Warrants evidenced by this Warrant Certificate are exercised in accordance with the provisions hereof. Section 12. DEFINITIONS. For the purposes of this Warrant Certificate, the following terms shall have the meanings indicated below: "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required by law or executive order to close. "COMMON STOCK" shall have the meaning assigned to such term in the Preamble hereof. "COMPANY" shall have the meaning assigned to such term in the Preamble hereof. "CURRENT MARKET PRICE" per share shall mean, on any date specified herein for the determination thereof, (a) if the Common Stock is then listed on a national securities exchange, designated as a Nasdaq Stock Market security or quoted in the over-the-counter market by a member firm of the NYSE, the average daily Market Price of the Common Stock for those days during the period of 15 days, ending on such date, on which the national securities exchanges were open for trading, and (b) if the Common Stock is not then so listed, designated or quoted, the Market Price on such date. 11 26 "EXERCISE PRICE" shall have the meaning assigned to such term in the Preamble hereof. "FAIR MARKET VALUE" shall mean the amount which a willing buyer, under no compulsion to buy, would pay a willing seller, under no compulsion to sell, in an arm's-length transaction. "HSR ACT" shall mean the Hart Scott Rodino Anti-Trust Improvements Act of 1976, and the rules and regulations of the Federal Trade Commission promulgated thereunder. "INVESTOR" shall have the meaning assigned to such term in the Preamble hereof. "ISSUE DATE" shall mean November 12, 1997. "MARKET PRICE" shall mean, per share of Common Stock, on any date specified herein: (a) if the Common Stock is listed on any national securities exchange or is designated as a Nasdaq Stock Market security, the last trading price of the Common Stock on such date as reported in the Wall Street Journal; or (b) if the Common Stock is not so listed or designated, the average of the reported closing bid and ask prices of the Common Stock in the over-the-counter-market, on such date as reported by any member firm of the NYSE selected by the Company; or (c) if none of (a) or (b) is applicable, the Fair Market Value per share determined in good faith by the Board of Directors of the Company which shall be deemed to be Fair Market Value unless holders of at least 50% of Common Stock issued or issuable upon exercise of the Warrants request that the Company obtain an opinion of a nationally recognized investment banking firm chosen by the Company (who shall bear the expense) and reasonably acceptable to such requesting holders of the Warrants, in which event the Fair Market Value shall be as determined by such investment banking firm. "NUMBER ISSUABLE" shall have the meaning given it in the Preamble hereof. "NYSE" shall mean the New York Stock Exchange, Inc. "PERSON" shall mean any individual, corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "RELEVANT DATE" shall have the meaning assigned to such term in Section 2(a)(ii) hereof. "SECURITIES ACT" shall mean the Securities Act of 1933. 12 27 "SPECIAL DISTRIBUTION" shall have the meaning assigned to such term in Section 2(c) hereof. "SPECIAL NOTICE" shall mean the notice sent by a holder to the Company indicating its preference to have any Special Distribution set aside for its benefit upon exercise of the Warrant. "TRANSACTION" shall have the meaning assigned to such term in Section 2(b) hereof. "WARRANTS" shall have the meaning assigned to such term in the Preamble hereof. "WARRANT EXERCISE DOCUMENTATION" shall have the meaning given it in Section 1 hereof. Section 13. NOTICES. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be sufficient if delivered personally or sent by telecopy (with confirmation of receipt) or by registered or certified mail, postage prepaid, return receipt requested, (a) if to the holder of a Warrant, at such holder's last known address or telecopy number appearing on the books of the Company; and (b) if to the Company, at its principal executive office, or the telecopy number of such office, in the United States, or such other address or telecopy number as the party to whom notice is to be given may have furnished to the other party. Each such notice, request or communication shall be effective when received or, if given by mail, when delivered at the address specified in this Section or on the fifth Business Day following the date on which such communication is posted, whichever occurs first. Section 14. SHARE LEGEND. Each certificate representing shares of Common Stock or any other securities issued upon exercise of this Warrant shall bear the following legend unless such shares or other securities have been registered under the Securities Act and any applicable state securities laws: "THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE STATE SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS CONTAINED IN SAID LAWS. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED UNLESS (A) A REGISTRATION STATEMENT SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933, (B) SUCH SHARES ARE TRANSFERRED PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE, UNDER SUCH ACT OR (C) INDUSTRIAL IMAGING CORPORATION SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR SIMILAR STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER." 13 28 IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed as of the Issue Date. INDUSTRIAL IMAGING CORPORATION By: _______________________________ Name: Title: 14 29 [Form of Assignment Form] [To be executed upon assignment of Warrants] The undersigned hereby assigns and transfers this Warrant Certificate to _______________________ whose Social Security Number or Tax ID Number is _________________ and whose record address is __________________________________ _____________________________________, and irrevocably appoints ________________ as agent to transfer this security on the books of the Company. Such agent may substitute another to act for such agent. Signature: ______________________________________ Date: ___________________________ EX-10.L 16 REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 101 EXHIBIT D REGISTRATION RIGHTS AGREEMENT, dated as of November 12, 1997 (the "Agreement"), between Industrial Imaging Corporation, a Delaware corporation (the "Company"), and Imprimis Investors LLC (the "Investor"). ----------------------------------------------------------- The Company and the Investor have entered into the Securities Purchase Agreement, dated as of November 12, 1997 (the "Securities Purchase Agreement"), pursuant to which, among other things, the Company is selling to the Investor shares of Common Stock, par value $0.01 per share (the "Common Stock"), of the Company, and warrants that may be exercised for shares of Common Stock (the "Warrants"). The execution and delivery of this Agreement by the Company is a condition precedent to the obligations of the Investor under the Securities Purchase Agreement. In consideration of the foregoing, the covenants and obligations set forth below, the parties agree as follows: 1. REGISTRATION ON REQUEST. (a) REQUEST. Subject to the limitations set forth in Section 1(b), at any time more than 180 days after the date hereof, a Holder or Holders (as defined in Section 9(b)) may require on up to two occasions, upon written notice to the Company, the Company to effect the registration under the Securities Act of 1933 (the "Securities Act") of all or part of the Registrable Securities (as defined in Section 9(b)) held by such requesting Holder or Holders (each, an "Initiating Holder"). The Company promptly shall give notice of such requested registration to all other Holders of Registrable Securities who are entitled pursuant to Section 2 to join in such registration and, thereupon, the Company shall use its best efforts to effect, on the earliest possible date, the registration under the Securities Act for public sale (in accordance with the method of disposition specified in the notice from the requesting Holders), of the Registrable Securities that the Company has been requested to register by such Initiating Holder or Holders and the other Registrable Securities that the Company has been requested to register by the Holders thereof by written notice given to the Company within 20 days after the giving of such notice by the Company. (b) LIMITATIONS. The Company shall not be required to effect a registration pursuant to Section 1(a): (i) within 90 days after the effective date of a registration statement (a "Registration Statement") filed by the Company with the Securities and Exchange Commission (the "Commission") for a public offering and sale of equity securities of the Company (other than a registration of securities pursuant to a Registration Statement on Form S-8 or Form S-4 or 2 any successor form thereto, any registration statement covering only securities proposed to be issued in exchange for securities or assets of another corporation or any registration statement relating solely to employee stock option, stock purchase, benefit or similar plans (a "Special Registration Statement")), provided that the Company shall use its best efforts to achieve effectiveness of a registration requested hereunder promptly following such 90 day period if such request is made during such 90 day period; and (ii) on more than two occasions; it being understood and agreed that a registration effected under Section 2 shall not be counted as a registration under this Section. (c) EFFECTIVE REGISTRATION STATEMENT. A registration requested pursuant to this Section 1 shall not be deemed to have been effected, and shall not be deemed a requested registration for purposes of Section 1(a) and Section 1(b), (i) unless a Registration Statement covering all Registrable Securities specified in the notices from the Initiating Holders has become effective and remained effective in compliance with the provisions of the Securities Act with respect to the disposition of all of such Registrable Securities covered by such Registration Statement until the earlier of such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such Registration Statement, (ii) if after it has become effective, such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Initiating Holders or (iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied or waived, other than by reason of a failure on the part of the Initiating Holders. (d) PRIORITY IN REQUESTED REGISTRATION. So long as the Initiating Holders hold at least 25% of the Registrable Securities issued to all Holders on the date of this Agreement, the Company shall have the right to include in any Registration Statement initiated by a Holder pursuant to this Section 1, for sale in accordance with the method of disposition specified by the requesting Holders, Common Stock to be sold by the Company for its own account. If, in the good-faith judgment of the managing underwriter of any underwritten offering the inclusion of all of the Registrable Securities requested for inclusion pursuant to this Section 1 and the Common Stock proposed to be sold by the Company for its own account would adversely affect the successful marketing of the proposed offering, then the number of shares of Common Stock to be included in the offering shall be reduced to the required level, FIRST, by excluding Common Stock to be sold by the Company for its own account and SECOND, by reducing the participation of such Initiating Holders and other Holders in such offering pro rata among such Initiating Holders and other Holders, based upon the amount of Registrable Securities owned by such Initiating Holders and other Holders. Except for Special Registration Statements and other registrations required under Section 1, the Company will not cause any other registration statement with respect to its Registrable Securities for its own account to become effective less than 120 days after the effective date of any registration requested pursuant to this Section 1. (e) SELECTION OF UNDERWRITERS. If the proposed method of disposition is an underwriting, the Initiating Holders holding a majority of the Registrable Securities to be sold in 2 3 such offering may designate the managing underwriter of such offering, which underwriter shall be reasonably acceptable to the Company. Whenever a requested registration is for an underwritten offering, only securities which are to be included in the underwriting may be included in the registration unless the managing underwriter consents otherwise. 2. INCIDENTAL REGISTRATION. (a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If at any time and from time to time the Company proposes to register any shares of its capital stock under the Securities Act, whether or not for sale for its own account, on a form and in the manner that would permit registration of Registrable Securities for the sale to the public under the Securities Act, the Company will give written notice to all Holders of its intention to do so. Upon the written request of a Holder given within 20 days after the giving of any such notice by the Company, the Company will use its best efforts to cause to be included in such Registration Statement all of the Registrable Securities so requested for inclusion by Holders. If the Registration Statement is to cover, in whole or in part, any underwritten distribution, the Company shall use its best efforts to cause the Registrable Securities requested for inclusion pursuant to this Section to be included in the underwriting on the same terms and conditions (including any lock-up) as the shares otherwise being sold through the underwriters. (b) PRIORITY IN INCIDENTAL REGISTRATIONS. If, in the good faith judgment of the managing underwriter of any underwritten offering, the inclusion of all of the Registrable Securities requested for inclusion pursuant to this Section 2 would adversely affect the successful marketing of the proposed offering, then the number of shares of capital stock and Registrable Securities, if any, to be included in such registration shall be reduced, such reduction shall be applied, FIRST, by excluding (on a pro rata basis) capital stock of the Company to be sold by persons other than the Holders and Registrable Securities proposed to be sold by all Holders and SECOND, by excluding shares of capital stock to be sold by the Company for its own account. Notwithstanding the foregoing provisions, the Company may withdraw any registration statement referred to in this Section 2 without incurring any liability to Holders of Registrable Securities. 3. REGISTRATION PROCEDURES. If and whenever the Company is required by the provisions of Section 1 or 2 to effect the registration of Registrable Securities under the Securities Act, the Company will, at its expense, as expeditiously as possible: (i) prepare and, in any event within 40 days after a request for registration has been given to the Company, file with the Commission a Registration Statement with respect to such Registrable Securities and use its best efforts to cause such Registration Statement to become effective; provided that the Company may discontinue any registration of its securities which is being effected pursuant to Section 2 at any time prior to the effective date of the Registration Statement; (ii) prepare and file with the Commission such amendments and supplements to any Registration Statement referred to in clause (i) of this Section 3 and the prospectus used in connection therewith as may be necessary to keep such Registration 3 4 Statement effective for a period not in excess of 180 days (except with respect to any Registration Statement filed pursuant to Rule 415 under the Securities Act if the Company is eligible to file a Registration Statement on Form S-3, in which case the Company shall use its best efforts to keep such Registration Statement effective and updated until such time as all of the Registrable Securities have been disposed of in accordance with the intended methods of disposition by the Holder or Holders set forth in such Registration Statement) and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such Registration Statement during such period in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such Registration Statement; provided that before filing a Registration Statement or prospectus, or any amendments or supplements thereto, the Company will furnish to one counsel selected by the Holders holding a majority of the Registrable Securities covered by such Registration Statement to represent all Holders of Registrable Securities covered by such Registration Statement, copies of all documents proposed to be filed, which documents will be subject to the review of such counsel; (iii) furnish to each seller of such Registrable Securities such number of copies of any Registration Statement referred to in clause (i) of this Section 3 and of each amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus included in such Registration Statement (including each preliminary prospectus and summary prospectus), and any other prospectus filed under Rule 424 under the Securities Act in conformity with the requirements of the Securities Act, and such other documents as such seller may reasonably request; (iv) use its best efforts to register or qualify such Registrable Securities covered by any Registration Statement referred to in clause (i) of this Section 3 under such other securities or blue sky laws of such jurisdictions as each seller shall reasonably request, and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction where, but for the requirements of this clause (iv), it would not be obligated to be so qualified or to consent to general service of process in any such jurisdiction; (v) use its best efforts to cause such Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities; (vi) cause representatives of the Company to participate in any "road show" or "road shows" reasonably requested by any underwriter of an underwritten or "best efforts" offering of any Registrable Securities; (vii) notify each seller of any such Registrable Securities covered by a Registration Statement, at any time when a prospectus relating thereto is required to be delivered 4 5 under the Securities Act, of the Company's becoming aware that the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and at the request of any such seller, prepare and furnish to such seller a reasonable number of copies of an amended or supplemental prospectus as may be necessary so that, as thereafter delivered to the sellers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (viii) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable (but not more than eighteen months) after the effective date of the Registration Statement, an earnings statement which shall satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations promulgated thereunder; (ix) use its best efforts to list such Registrable Securities on any securities exchange or automated quotation system on which securities of the same class are then listed, if such Registrable Securities are not already so listed and if such listing is then permitted under the rules of such exchange or system, and to provide a transfer agent and registrar for such Registrable Securities covered by a Registration Statement not later than the effective date of such Registration Statement; (x) enter into such customary agreements (including an underwriting agreement in customary form) and take such other actions as sellers of a majority of such Registrable Securities or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities; (xi) obtain a "cold comfort" letter or letters from the Company's independent public accountants in customary form and covering matters of the type customarily covered by "cold comfort" letters as the seller or sellers of a majority of such Registrable Securities shall reasonably request; (xii) obtain an opinion of counsel for the Company in customary form and covering matters of the type customarily covered in opinions of issuer's counsel as the seller or sellers of a majority of such Registration Securities shall reasonably request; and (xiii) make available for inspection by any seller of such Registrable Securities covered by a Registration Statement, by any underwriter participating in any disposition to be effected pursuant to such Registration Statement and by any attorney, accountant or other agent retained by any such seller or any such underwriter, all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause all of the Company's officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such Registration Statement. 5 6 4. EXPENSES. With respect to each registration effected pursuant to Section 1 or 2, all Registration Expenses (defined below) in connection with such registration and the public offering in connection therewith shall be borne by the Company; provided that security holders participating in any such registration shall bear their pro rata share of the underwriting discounts and selling commissions (on the basis of the number of Registrable Securities of each such person included in such registration) and 50% of the fees and disbursements in excess of $200,000 described in clauses (vi) and (vii) of the immediately succeeding sentence; provided, further that the Company shall not be obligated to bear any Registration Expenses with respect to any registration effected pursuant to Section 1 after the second anniversary hereof. "Registration Expenses" shall mean any and all expenses incident to performance of or compliance with this Agreement, including, without limitation, (i) all registration and filing fees of the Commission, or the National Association of Securities Dealers, Inc., (ii) all fees and expenses of complying with securities or blue sky laws (including fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of the Registrable Securities), (iii) all printing, messenger and delivery expenses, (iv) all fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange or automated quotation system pursuant to Section 3(ix), (v) the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits and/or "cold comfort" letters required by or incident to such performance and compliance, (vi) the reasonable fees and disbursements of one counsel selected by the Holders of a majority of the Registrable Securities being registered to represent all Holders of the Registrable Securities being registered in connection with each such registration, (vii) any fees and disbursements of underwriters customarily paid by the issuers or sellers of securities, including fees and disbursements of counsel for the underwriters, but excluding underwriting discounts and commissions, (viii) liability insurance if the Company so desires or if the underwriters so require, and (ix) the reasonable fees and expenses of any special experts retained by the Company in connection with the requested registration. 5. INDEMNIFICATION AND CONTRIBUTION. (a) INDEMNIFICATION BY THE COMPANY. In the event of a registration of any Registrable Securities pursuant to Section 1 or 2, the Company will indemnify and hold harmless each Holder of such Registrable Securities included in a Registration Statement pursuant to the provisions of this Agreement and any underwriter (as defined in the Securities Act) of such Registrable Securities, and their respective Affiliates, and each of their successors from and against, and will reimburse such Holder, underwriter and Affiliate with respect to, any and all claims, actions, demands, losses, damages, liabilities, costs and expenses to which such Holder, underwriter or Affiliate may become subject under the Securities Act or otherwise, including, without limitation, the reasonable fees and expenses of legal counsel (including those incurred in connection with any claim for indemnity hereunder) insofar as such claims, actions, demands, losses, damages, liabilities, costs or expenses (or actions, or proceedings, whether commenced or threatened in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in such Registration Statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or 6 7 necessary to make the statements therein, in light of the circumstances in which they are made, not misleading or arise out of any violation by the Company of any rule or regulation under the Securities Act or any state securities laws applicable to the Company and relating to action or inaction required of the Company in connection with such registration; provided that the Company will not be liable in any case to the extent, but only to the extent, that any such claim, action, demand, loss, damage, liability, cost or expense arises out of or is based upon an untrue statement or omission made in reliance upon and in strict conformity with information furnished by such Holder or such underwriter in writing specifically for use in the preparation thereof. This indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Holder, underwriter or Affiliate and shall survive the transfer of such securities by such Holder or such underwriter. (b) INDEMNIFICATION BY THE HOLDERS. Each Holder of Registrable Securities, severally and not jointly, which Registrable Securities are included in a registration pursuant to the provisions of this Agreement, will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs the Registration Statement including such Registrable Securities, each director of the Company, each underwriter and any person who controls the underwriter and each of their successors from and against, and will reimburse the Company and such officer, director, underwriter or controlling person with respect to, any and all claims, actions, demands, losses, damages, liabilities, costs or expenses to which the Company or such officer, director, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such claims, actions, demands, losses, damages, liabilities, costs or expenses arise out of or are based upon any untrue statement of any material fact contained in such Registration Statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they are made, not misleading; provided that such Holder will be liable in any such case to the extent, but only to the extent, that any such claim, action, demand, loss, damage, liability, cost or expense arises out of or is based upon an untrue statement or omission made in reliance upon and in strict conformity with written information furnished by such Holder specifically for use in the preparation thereof. The liability of each Holder under this Section shall be limited to the proportion of any such claim, action, demand, loss, damage, liability, cost or expense which is equal to the proportion that the public offering price of the Registrable Securities sold by such Holder under such registration statement bears to the total offering price of all securities sold thereunder, but not, in any event, to exceed the proceeds received by such Holder from the sale of Registrable Securities covered by such Registration Statement. This indemnity shall survive the transfer of such securities by such Holder and the underwriter. (c) NOTICES OF CLAIMS, ETC. Promptly after receipt by a party to be indemnified pursuant to the provisions of Section 5(a) or 5(b) (an "indemnified party") of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions, such indemnified party will, if a claim thereof is to be made against the indemnifying party pursuant to the provisions of Section 5(a) or 5(b), notify the indemnifying party of the commencement thereof, but the omission to so notify the indemnifying party will not relieve it 7 8 from any liability which it may have to an indemnified party otherwise than under this Section and shall not relieve the indemnifying party from liability under this Section unless, and to the extent, such indemnifying party is prejudiced by such omission. In case such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after the notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party will not be liable to such indemnified party pursuant to the provisions of this Section 5(a) and 5(b) for any legal expense subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it that are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. No indemnifying party shall be liable to an indemnified party for any settlement of any action or claim without the consent of the indemnifying party and no indemnifying party may unreasonably withhold its consent to any such settlement. No indemnifying party will, except with the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability and equitable claims in respect to such claim or litigation. (d) CONTRIBUTION. In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any Holder exercising rights under this Agreement or any underwriter makes a claim for indemnification pursuant to this Section but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such Holder or underwriter, as the case may be, in circumstances for which indemnification is provided under this Section 5, then, and in each such case, the Company on the one hand and such Holder or underwriter, as the case may be, on the other, will contribute to the aggregate claims, actions, demands, losses, damages, liabilities, costs or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and of the Holder of Registrable Securities or the underwriter, as the case may be, on the other, in connection with the statements or omissions that resulted in such claims, actions, demands, losses, damages, liabilities, costs or expenses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Holder of Registrable Securities or the underwriter, as the case may be, on the other, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged 8 9 omission to state a material fact relates to information supplied by the Company on the one hand or by the Holder of Registrable Securities or the underwriter, as the case may be, on the other, and each party's relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided that, in any such case, (A) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation and (B) no such Holder or underwriter will be required to contribute any amount in excess of the proceeds received by such Holder or underwriter, as the case may be, from the sales of Registrable Securities covered by the Registration Statement. (e) OTHER INDEMNIFICATION. Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. 6. REPORTING REQUIREMENTS UNDER SECURITIES EXCHANGE ACT OF 1934. (a) EXCHANGE ACT REPORTING. The Company shall keep effective its registration under Section 12 of the Securities Exchange Act of 1934 (the "Exchange Act"), and shall timely file such information, documents and reports as the Commission may require or prescribe under the Exchange Act. The Company shall timely file such information, documents and reports as the Commission may require or prescribe under Section 13 of the Exchange Act. (b) FURNISHING INFORMATION TO HOLDERS. The Company shall forthwith upon request furnish any Holder of Registrable Securities (a) a written statement by the Company that it has complied with such reporting requirements, (b) a copy of the most recent Form 10-K or Form 10-Q filed by the Company and a copy of the most recent annual or quarterly report of the Company distributed to its shareholders, and (c) such other reports and documents filed by the Company with the Commission as such Holder may reasonably request in availing itself of an exemption for the sale of Registrable Securities without registration under the Securities Act. (c) RULE 144 AND FORM S-3. The Company acknowledges and agrees that the purposes of the requirements contained in this Section 6 are (i) to enable any such Holder to comply with the current public information requirement contained in paragraph (c) of Rule 144 under the Securities Act should such Holder ever wish to dispose of any of the securities of the Company acquired by it without registration under the Securities Act in reliance upon Rule 144 (or any other similar or successor exemptive provision), and (ii) to qualify the Company for the use of registration statements on Form S-3. In addition, the Company shall take such other measures and file such other information, documents and reports as shall hereafter be required by the Commission as a condition to the availability of Rule 144 under the Securities Act (or any similar or successor exemptive provision hereafter in effect) and the use of Form S-3. The Company also covenants to use its best efforts, to the extent that it is reasonably within its power to do so, to qualify for the use of Form S-3. From and after the effective date of the first Registration Statement filed by the Company, the Company agrees to use its best efforts to facilitate and expedite transfers of Registrable Securities pursuant to Rule 144 under the 9 10 Securities Act (or any similar or successor exemptive provision hereafter in effect), which efforts shall include timely instructions to its transfer agent to expedite such transfers of Registrable Securities. 7. SHAREHOLDER INFORMATION. The Company may require each Holder of Registrable Securities as to which any registration is to be effected pursuant to this Agreement to furnish the Company in a timely manner such information with respect to such Holder and the distribution of such Registrable Securities as the Company may from time to time reasonably request in writing and as shall be required by law or by the Commission. 8. SPECIFIC ENFORCEMENT. All of the parties acknowledge that the parties will be irreparably damaged in the event that this Agreement is not specifically enforced. Upon a breach or threatened breach of the terms, covenants or conditions of this Agreement by any of the parties hereto, the other parties shall, in addition to all other remedies, be entitled to a temporary or permanent injunction, without showing any actual damage, or a decree for specific performance, in accordance with the provisions of this Agreement. 9. DESCRIPTIVE HEADINGS; DEFINITIONS; CERTAIN INTERPRETATIONS. (a) Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. (b) As used in this Agreement, the following terms shall have the following respective meanings: "Affiliate" shall mean (a) any person or entity directly or indirectly controlling, controlled by or under common control with another person or entity; (b) any person or entity owning or controlling 10% or more of the outstanding voting securities of such other person or entity; (c) any partner, officer, director, employee or shareholder of such entity or any parent, spouse, child, brother, sister or other relative with a relationship (by blood, marriage or adoption) not more remote than first cousin of any of the foregoing; or (d) any liquidating trust, trustee or other similar person or entity for any such person or entity. "Holder" shall mean (a) the Investor and (b) any other person to which the rights of registration under this Agreement have been transferred or assigned by the Investor or its transferees. "Registrable Securities" shall mean (a) shares of Common Stock (including shares issuable or issued upon the exercise of any Warrants or the exercise of any other exchange, conversion or similar right), (b) any securities issued in respect of any such shares by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger or consolidation or reorganization and (c) Warrants; provided that, such securities shall cease to be Registrable Securities when such securities have been sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction. 10 11 (c) Except as otherwise expressly provided in this Agreement, the following rules of interpretation apply to this Agreement: (i) the singular includes the plural and the plural includes the singular; (ii) "or" or "any" are not exclusive and "include" and "including" are not limiting; (iii) a reference to any agreement or other contract includes permitted supplements and amendments; (iv) a reference to a law includes any amendment or modification to such law and any rules or regulations issued thereunder; (v) a reference to a person includes its successors and assigns; and (vi) a reference in this Agreement to a Section is to the Section of this Agreement. 10. NOTICES. All notices, requests and other communications to any party hereunder shall be in writing and sufficient if delivered personally or sent by telecopy (with confirmation of receipt) or by registered or certified mail, postage prepaid, return receipt requested, addressed as follows: If to the Company: Industrial Imaging Corporation One Lowell Research Center 847 Rogers Street Lowell, Massachusetts 01852 Attention: Juan J. Amodei Telecopy: (508) 441-0122 With a copy to: Mintz Levin Cohn Ferris Glovsky and Popeo PC One Financial Center Boston, Massachusetts 02111 Attention: Neil H. Aronson Telecopy: (617) 542-2241 If to the Investor: Imprimis Investors LLC c/o Wexford Management LLC 411 West Putnam Avenue Greenwich, Connecticut 06830 Attention: Frank S. Plimpton Telecopy: (203) 862-7451 With a copy to: Howard, Darby & Levin 1330 Avenue of the Americas New York, New York 10019 Attention: Michael B. Hopkins Telecopy: (212) 841-1010 or to such other address or telecopy number as the party to whom notice is to be given may have furnished to the other party in writing in accordance herewith. Each such notice, request or communication shall be effective when received or, if given by mail, when delivered at the address specified in this Section or on the fifth business day following the date on which such communication is posted, whichever occurs first. 11 12 11. COUNTERPARTS. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. 12. BENEFITS OF AGREEMENT. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. This Agreement is for the sole benefit of the parties hereto and not for the benefit of any third party. 13. ENFORCEABILITY. It is the desire and intent of the parties hereto that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated to be invalid or unenforceable, such provision shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made. 14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAWS PROVISIONS). 15. CONSENT TO JURISDICTION. EACH OF THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF ANY FEDERAL AND STATE COURT IN NEW YORK SITTING IN NEW YORK CITY AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE LITIGATED EXCLUSIVELY IN SUCH COURTS. EACH OF THE COMPANY AND THE HOLDER AGREES NOT TO COMMENCE ANY LEGAL PROCEEDING RELATED HERETO OR THERETO EXCEPT IN SUCH COURT. EACH OF THE COMPANY AND THE HOLDER IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING IN ANY SUCH COURT AND HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. 16. WAIVERS; AMENDMENTS. No waiver of any right hereunder by any party shall operate as a waiver of any other right, or of the same right with respect to any subsequent occasion for its exercise, or of any right to damages. No waiver by any party of any breach of this Agreement shall be held to constitute a waiver of any other breach or a continuation of the same breach. All remedies provided by this Agreement are in addition to all other remedies provided by law. This Agreement may not be amended except by a writing executed by the Company and by Holders holding at least 51% of the Registrable Securities; provided that the 12 13 provisions of this Section 16 may not be amended unless such amendment is executed by each Holder. 17. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. The Investor's rights are assignable to any assignee or transferee of all or a portion of the Registrable Securities held by the Investor. In addition, and whether or not any express assignment shall have been made, the provisions of this Agreement which are for the benefit of the parties hereto other than the Company shall also be for the benefit of and enforceable by any subsequent Holder of any Registrable Securities, subject to the provisions contained herein. 18. TERMINATION. This Agreement shall terminate upon the earliest to occur of the following events: (a) termination by mutual written agreement of the Investor and the Company; (b) all Registrable Securities have been sold to or through a broker or dealer or underwriter in a public distribution or public securities transaction; or (c) the fourth anniversary of the date hereof. 19. ENTIRE AGREEMENT. This Agreement contains the entire agreement among the parties with respect to the transactions contemplated by this Agreement and supersedes all prior agreements or understandings among the parties. 20. CONFIDENTIALITY. The Investor and any subsequent Holder agrees that it shall keep confidential all information disclosed to it pursuant to Section 3(xiii), unless such information was already in the Purchaser's possession or known to the Purchaser prior to being disclosed or provided to the Purchaser, until the earliest of such time as (a) disclosure may be required by law, (b) three years from the date of receipt of such information, (c) such information becomes publicly available through no action or fault of the Purchaser, and (d) such information was or is obtained by the Purchaser from a third party other than where such information was obtained in breach of contract or in violation of law. 13 14 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. INDUSTRIAL IMAGING CORPORATION By: ------------------------------------- Name: Title: IMPRIMIS INVESTORS LLC By: ------------------------------------- Name: Title: 14 EX-21 17 SUBSIDIARIES OF THE COMPANY 1 EXHIBIT 21 ---------- SUBSIDIARIES OF THE REGISTRANT The sole subsidiary of the registrant is Triple I Corporation, a Delaware corporation, which also does business under the name "AOI International, Inc." EX-27 18 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 U.S. DOLLARS YEAR MAR-31-1997 MAR-31-1996 MAR-31-1997 1 62,103 0 493,778 0 1,877,979 2,487,258 157,236 (122,980) 2,594,279 4,179,185 450,000 0 0 5,931,263 (7,966,169) 2,594,279 1,823,576 1,823,576 1,609,987 1,609,987 2,018,886 0 89,257 (1,894,554) 0 (1,894,554) 0 0 0 (1,894,554) (.44) 0
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