Exhibit 2.4
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ESC MEDICAL SYSTEMS LTD.,
AOC ACQUISITION CORP.
AND
APPLIED OPTRONICS CORPORATION
======================
NOVEMBER 20, 1997
THE SURVIVING CORPORATION SHALL BE A WHOLLY-OWNED SUBSIDIARY OF ESC.
======================
A. EFFECTIVE TIME OF THE MERGER. THE MERGER SHALL BECOME EFFECTIVE
WHEN PROPERLY EXECUTED ARTICLES OF MERGER ARE ULY FILED WITH THE SECRETARY
OF STATE OF THE STATE OF DELAWARE, HICH FILING SHALL BE MADE AS SOON AS
PRACTICABLE AFTER THE CLOSING F THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT IN CCORDANCE WITH SECTION 3.5 HEREOF UPON SATISFACTION OR WAIVER
OF HE CONDITIONS SET FORTH IN SECTION 8. WHEN USED IN THIS GREEMENT, THE
TERM "EFFECTIVE TIME" SHALL MEAN THE DATE AND
DRAFT - NOVEMBER 12, 1997
TABLE OF CONTENTS
ARTICLE I
THE MERGER........................................................... 1
1.1. The Merger..................................................... 1
1.2. Effective Time of the Merger................................... 1
1.3. Reservation of Shares.......................................... 1
ARTICLE II
THE SURVIVING CORPORATION............................................ 2
2.1. Articles of Incorporation...................................... 2
2.2. Bylaws......................................................... 2
2.3. Directors and Officers of Surviving Corporation................ 2
ARTICLE III
CONVERSION OF SHARES................................................. 2
3.1. Conversion of Securities....................................... 2
3.2. Allotment of Ordinary Shares and Warrants...................... 3
3.3. Surrender of Certificates...................................... 3
3.4. No Fractional Shares........................................... 5
3.5. Closing........................................................ 5
3.6. Appraisal Rights............................................... 5
3.7. Applied Optronics Options Terminated........................... 5
3.8. Applied Optronics Warrants..................................... 5
3.9. Escrow Agreement............................................... 5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ESC AND
ACQUISITION SUB.................................................... 6
4.1. Organization................................................... 6
4.2. Capitalization................................................. 6
4.3. Authority Relative to this Agreement........................... 6
4.4. Consents and Approvals; No Violations.......................... 7
4.5. Reports and Financial Statements............................... 7
4.6. ESC Ordinary Shares and Warrants............................... 7
4.7. Representations Complete....................................... 7
4.8. No Default..................................................... 8
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF APPLIED
OPTRONICS.......................................................... 8
5.1. Organization................................................... 8
5.2. Capitalization................................................. 8
5.3. Authority Relative to this Agreement........................... 8
5.4. Consents and Approvals; No Violations.......................... 9
5.5. Financial Statements........................................... 9
5.6. No Material Adverse Change..................................... 9
5.7. Absence of Undisclosed Liabilities............................. 10
5.8. Litigation..................................................... 10
5.9. Contracts...................................................... 10
5.10. Employee Benefit Plans......................................... 11
5.11. Tax Matters.................................................... 13
5.12. Compliance with Laws........................................... 13
5.13. Subsidiaries................................................... 13
5.14. Labor and Employment Matters................................... 14
5.15. Insurance Policies............................................. 14
5.16. Environmental Laws and Regulations............................. 14
5.17. Intellectual Property Rights................................... 15
5.18. Real Property.................................................. 16
5.19. Title as to Properties; Liens.................................. 16
5.20. Permits, Licenses, Etc......................................... 16
5.21. Product Liability Claims....................................... 16
5.22. Minute Books................................................... 17
5.23. Officers, Directors and Employees.............................. 17
5.24. Receivables.................................................... 17
5.25. Disclosure..................................................... 17
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE CLOSING.............................. 17
6.1. Conduct of Business by Applied Optronics....................... 17
6.2. Compensation Plans............................................. 18
6.3. Legal Conditions to Merger..................................... 18
6.4. Investment Letter.............................................. 18
6.5. Advice of Changes; Governmental Filings........................ 19
6.6. Risk of Loss................................................... 19
ARTICLE VII
ADDITIONAL AGREEMENTS................................................ 19
7.1. Access and Information......................................... 19
7.2. No Solicitation of Transactions................................ 19
7.3. Registration Rights Agreements................................. 20
7.4. Employment Agreement........................................... 20
7.5. Public Announcements........................................... 20
7.6. Expenses....................................................... 21
7.7. Additional Agreements.......................................... 21
7.8. Noncompetition and Confidentiality Agreements.................. 21
7.9. Indemnification................................................ 21
7.10. Tax Treatment.................................................. 22
ARTICLE VIII
CONDITIONS TO CLOSING................................................ 22
8.1. Conditions to Each Party's Obligation to Effect the
Merger......................................................... 22
8.2. Conditions to Obligation of Applied Optronics to
Effect the Merger.............................................. 23
8.3. Conditions to Obligations of ESC and Acquisition
Sub to Effect the Merger....................................... 24
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER.................................... 24
9.1. Termination.................................................... 24
9.2. Effect of Termination.......................................... 25
9.3. Amendment; Extension; Waiver................................... 25
ARTICLE X
GENERAL PROVISIONS................................................... 25
10.1. Survival of Representations and Warranties..................... 25
10.2. Brokers........................................................ 25
10.3. Notices........................................................ 26
10.4. Descriptive Headings........................................... 26
10.5. Entire Agreement; Assignment................................... 27
10.6. Governing Law; Procedural Matters.............................. 27
10.7. Parties in Interest............................................ 27
10.8. Counterparts................................................... 27
10.9. Validity....................................................... 27
10.10.Investigation.................................................. 27
10.11.Remedies....................................................... 27
10.12.Consents....................................................... 28
10.13.Knowledge; No Personal Liability............................... 28
EXHIBITS:
Exhibit 1 September 30 Balance Sheet
Exhibit 2.1 Articles of Incorporation of Acquisition Sub
Exhibit 3.1 Form of Warrant
Exhibit 3.2 Form of Escrow Agreement
Exhibit 6.4 Form of Investment Letter
Exhibit 7.3(a) Form of Registration Rights Agreement
Exhibit 7.3(b) Form of Warrant Registration Rights Agreement
Exhibit 7.4 Form of Employment Agreement
Exhibit 8.2(a) Form of Opinion of ESC's Counsel
Exhibit 8.3(b) Form of Opinion of Applied Optronics' Counsel
SCHEDULES:
Schedule 4.4 ESC Consents and Approvals
Schedule 5.2 Applied Optronics Capitalization
Schedule 5.4 Applied Optronics Consents and Approvals
Schedule 5.6 Applied Optronics Material Adverse Changes
Schedule 5.7 Applied Optronics Undisclosed Liabilities
Schedule 5.9 Applied Optronics Contracts
Schedule 5.10 Applied Optronics Employee Benefit Plans
Schedule 5.15 Applied Optronics Insurance Policies
Schedule 5.17 Applied Optronics Intellectual Property Rights
Schedule 5.18 Applied Optronics Real Property
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 20, 1997 (the
"Agreement"), by and among ESC Medical Systems Ltd., a corporation
organized under the laws of the State of Israel ("ESC"), AOC Acquisition
Corp., a Delaware corporation and a wholly-owned subsidiary of ESC
("Acquisition Sub"), and Applied Optronics Corp., a Delaware corporation
("Applied Optronics").
WHEREAS, each of the Boards of Directors of ESC and Applied Optronics
have determined that a strategic business combination between ESC and
Applied Optronics is in the best interests of their respective companies
and security holders and presents an opportunity for their respective
companies to achieve long-term strategic and financial benefits, and
accordingly have agreed to effect the merger provided for herein upon the
terms and subject to the conditions set forth herein, whereby each issued
and outstanding share of common stock, without par value, of Applied
Optronics (the "Applied Optronics Common Stock") will be converted into the
right to receive a certain number of Ordinary Shares, par value NIS 0.10
each, of ESC (the "Ordinary Shares") and Warrants to acquire Ordinary
Shares;
WHEREAS, the transaction contemplated hereby shall be effected by the
terms of this Agreement through a transaction in which Applied Optronics
will merge with and into Acquisition Sub, Acquisition Sub will survive as a
wholly-owned subsidiary of ESC and the stockholders of Applied Optronics
will become holders of Ordinary Shares of ESC (the "Merger"); and
WHEREAS, for federal income tax purposes, it is intended that the
merger contemplated herein shall qualify as a reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended
(the "Code").
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, each intending
to be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.2 hereof),
Applied Optronics shall be merged with and into Acquisition Sub,
Acquisition Sub shall be the surviving corporation and the separate
existence of Applied Optronics shall thereupon cease. The Merger shall have
the effects set forth in Section 251 of the Delaware General Corporation
Law (the "DGCL"). From and after the Effective Time, ime at which such
Articles of Merger are so filed.
1.3. Reservation of Shares. ESC will make available a
sufficient number of its Ordinary Shares to effect the Merger.
ARTICLE II
THE SURVIVING CORPORATION
2.1. Articles of Incorporation. The Articles of Incorporation of
Acquisition Sub shall be the Articles of Incorporation of the Surviving
Corporation, except that such Articles of Incorporation shall be amended
and restated as of the Effective Time in the form set forth in Exhibit 2.1
hereto.
2.2. Bylaws. The Bylaws of Acquisition Sub as in effect at the
Effective Time shall be the Bylaws of the Surviving Corporation.
2.3. Directors and Officers of Surviving Corporation.
(a) The directors of Acquisition Sub shall be the initial
directors of the Surviving Corporation and shall hold office from the
Effective Time until their respective successors are duly elected or
appointed and qualified in the manner provided in the Articles of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise
provided by law.
(b) The officers of Applied Optronics at the Effective Time
shall be the initial officers of the Surviving Corporation and shall hold
office from the Effective Time until removed or until their respective
successors are duly elected or appointed and qualified in the manner
provided in the Articles of Incorporation and Bylaws of the Surviving
Corporation, or as otherwise provided by law.
ARTICLE III
CONVERSION OF SHARES
3.1. Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any
shares of Applied Optronics Common Stock or ESC:
(a) Capital Stock of Acquisition Sub. Each share of capital
stock of Acquisition Sub then issued and outstanding shall become one fully
paid and nonassessable share of common stock, without par value, of the
Surviving Corporation which shares shall be issued to ESC and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation.
(b) Cancellation of Treasury Stock. Any shares of Applied
Optronics Common Stock that are owned by Applied Optronics as treasury
stock shall be canceled and retired and shall cease to exist and no share
capital of ESC or other consideration shall be delivered in exchange
therefor.
(c) Exchange of Merger Consideration for Applied
Optronics Outstanding Stock. Each issued and outstanding share of
Applied Optronics Common Stock and Applied Optronics Series A
Preferred Stock (other than shares to be canceled in accordance with
Section 3.1(b)) (collectively, the "Applied Optronics Outstanding Stock")
shall be converted into and shall be canceled in exchange for the right to
receive a number of Ordinary Shares and Warrants (as hereinafter defined)
to be calculated as follows: (i) of the Ordinary Shares and Warrants to be
issued by ESC pursuant to Section 3.1(d) hereof, a number of Ordinary
Shares equal to $2,000,000 divided by the Closing Market Value (as
hereinafter defined) and one-third (1/3) of the Warrants shall be issued to
the holders of Applied Optronics Series A Preferred Stock, pro rata in
accordance with the number of shares of such stock held by them; and (ii)
the remainder of the Ordinary Shares and Warrants to be issued by ESC
pursuant to Section 3.1(d) hereof shall be issued to the holders of Applied
Optronics Common Stock and Applied Optronics Series A Preferred Stock, pro
rata as if all such stock constituted a single class, in accordance with
the number of shares of such stock held by them.
(d) Merger Consideration. The total Merger consideration to be
issued by ESC in respect of all Applied Optronics Outstanding Stock shall
be (a) subject to Section 3.9 below, a number of Ordinary Shares equal to
(x) $6,000,000 less the Loan Balance and the Expense Provision (each, as
hereinafter defined), divided by (y) the average closing price of ESC
Ordinary Shares on the Nasdaq National Market for the last 20 trading days
ending two trading days prior to the Closing Date (such average closing
price being hereinafter referred to as the "Closing Market Value"); and (b)
warrants, substantially in the form attached hereto as Exhibit 3.1 and
having a term of five (5) years, to purchase an aggregate number of ESC
Ordinary Shares equal to $3,000,000 divided by the Closing Market Value, at
an exercise price of 133% of the Closing Market Value (the "Warrants"). All
of the merger consideration referred to in this paragraph (d) is
collectively referred to herein as the "Merger Consideration". If between
the date of this Agreement and the Effective Time the outstanding Ordinary
Shares of ESC shall be changed into a different number of shares by reason
of any stock dividend, subdivision, reclassification, split-up, combination
or the like, the Merger Consideration shall be appropriately adjusted. As
used herein, the term "Loan Balance" shall mean the outstanding principal
amount, plus any accrued and unpaid interest, and any other amounts due and
payable through and including the Closing Date in respect of the Promissory
Note, dated October 15, 1997, made by Applied Optronics and payable to the
order of ESC, in the original principal amount of $134,000.00. As used
herein, the term "Expense Provision" shall mean the sum of $25,000 in
respect of legal fees and expenses incurred and paid or payable by Applied
Optronics in connection with the Transactions contemplated hereby.
(e) Cancellation of Applied Optronics Common Stock. All shares
of Applied Optronics Outstanding Stock converted into the right to receive
Ordinary Shares and Warrants pursuant to this Section 3.1 shall no longer
be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereto, except the
right to receive Ordinary Shares and Warrants to be issued in consideration
therefor upon the surrender of such certificate in accordance with Section
3.3, without interest.
3.2. Allotment of Ordinary Shares and Warrants. In consideration of
the issue to ESC by the Surviving Corporation of shares of common stock of
the Surviving Corporation and the cancellation of shares of Applied
Optronics Outstanding Stock, ESC shall allot Ordinary Shares and Warrants
to be issued to the Exchange Agent (as defined in Section 3.3) for the
purpose of giving effect to the conversion and exchange referred to in
Section 3.1 of this Agreement.
3.3. Surrender of Certificates.
(a) Concurrently with or prior to the Effective Time, the
parties hereto shall designate American Stock Transfer & Trust Company to
act as agent (the "Exchange Agent") for purposes of exchanging certificates
representing shares of Applied Optronics Outstanding Stock as provided in
Section 3.1. As soon as practicable after the Effective Time, ESC shall
cause the Exchange Agent to mail or make available to each holder of record
of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Applied Optronics Outstanding Stock
a notice and letter of transmittal advising such holder of the
effectiveness of the Merger and the procedure for surrendering to the
Exchange Agent such certificate or certificates in exchange for the Merger
Consideration deliverable in respect thereof pursuant to this Article III.
At the Effective Time, the Surviving Corporation shall issue to ESC the
shares of common stock of the Surviving Corporation referred to in Section
3.1(a). ESC shall, prior to the Effective Time, conditionally allot
Ordinary Shares and Warrants referred to in Sections 3.1(c) and 3.2 subject
to the terms and conditions of this Agreement and deliver to the Exchange
Agent certificates representing the Ordinary Shares and Warrants.
(b) Each holder of shares of Applied Optronics Outstanding
Stock that have been converted into a right to receive the Merger
Consideration, upon surrender to the Exchange Agent of a certificate or
certificates representing such Applied Optronics Outstanding Stock,
together with a properly completed letter of transmittal covering such
shares of Applied Optronics Outstanding Stock, will be entitled to receive
Ordinary Shares and Warrants in respect of each share of Applied Optronics
Outstanding Stock surrendered. Until so surrendered, each share of Applied
Optronics Outstanding Stock shall, after the Effective Time, represent for
all purposes, only the right to receive the Merger Consideration.
(c) If any Ordinary Shares and Warrants are to be issued to a
person other than the registered holder of the Applied Optronics
Outstanding Stock represented by the certificate or certificates
surrendered with respect thereto, it shall be a condition to such issuance
that the certificate or certificates so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the person
requesting such issuance shall pay to the Exchange Agent any transfer or
other taxes required as a result of such issuance to a person other than
the registered holder of such Applied Optronics Outstanding Stock or
establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not payable.
(d) As of the Effective Time, there shall be no further
registration of transfers of shares of Applied Optronics Outstanding Stock
that were outstanding prior to the Merger. After the Effective Time,
certificates representing shares of Applied Optronics Outstanding Stock
presented to the Surviving Corporation for transfer shall be canceled and
exchanged for the consideration provided for, and in accordance with the
procedures set forth in this Article III.
(e) At the close of business on the Effective Time, the stock
ledger of Applied Optronics with respect to the issuance of Applied
Optronics Outstanding Stock shall be closed. Six months after the Effective
Time, any Ordinary Shares or Warrants made available to the Exchange Agent
pursuant to Section 3.2 that remain unclaimed by the holders of shares of
Applied Optronics Outstanding Stock shall be returned to ESC, or delivered
to such person or entity as ESC shall designate, upon demand. Any such
holder who has not delivered his shares of Applied Optronics Outstanding
Stock to the Exchange Agent in accordance with this Section 3.3 prior to
that time shall thereafter look only to ESC and the Surviving Corporation
for issuance of Ordinary Shares and Warrants in respect of shares of
Applied Optronics Outstanding Stock. Notwithstanding the foregoing, neither
ESC nor the Surviving Corporation shall be liable to any holder of shares
of Applied Optronics Outstanding Stock for any securities delivered or any
amount paid to a public official pursuant to applicable abandoned property
laws. Any Ordinary Shares or Warrants remaining unclaimed by holders of
shares of Applied Optronics Outstanding Stock three years after the
Effective Time (or such earlier date immediately prior to such time as such
securities would otherwise escheat to or become property of any
governmental entity or as is otherwise provided by applicable law) shall,
to the extent permitted by applicable law, be free and clear of any claims
or interest of any person previously entitled thereto.
(f) No dividends, interest or other distributions with respect
to securities of ESC or the Surviving Corporation issuable with respect to
Applied Optronics Outstanding Stock shall be paid to the holder of any
unsurrendered certificates representing Applied Optronics Outstanding Stock
until such certificates are surrendered as provided in this Section. Upon
such surrender, there shall be paid, without interest, to the person in
whose name the Ordinary Shares representing such securities are registered,
all dividends and other distributions payable in respect of such securities
on a date subsequent to, and in respect of a record date after, the
Effective Time.
3.4. No Fractional Shares. No fractional Ordinary Shares of
ESC shall be issued pursuant to the Merger. In lieu of the issuance of
any such fractional Ordinary Share of ESC pursuant to Section 3.1,
cash adjustments will be paid to holders in respect of any fractional
Ordinary Share of ESC that would otherwise be issuable. The amount of such
adjustment shall be the product of such fraction of an Ordinary Share of
ESC multiplied by the Closing Market Value.
3.5. Closing. The closing of the Merger (the "Closing") shall take
place at the offices of Xxxxxx & Xxxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx, as soon as practicable after the satisfaction of the conditions
described in Article VIII, on such date not later than December 31, 1997 as
ESC and Applied Optronics shall mutually agree (the "Closing Date").
3.6. Appraisal Rights. If holders of shares of Applied Optronics
Outstanding Stock are entitled to dissent from the Merger and demand
appraisal of any such shares in accordance with the provisions of the DGCL
concerning the right of such holders to dissent from the Merger and demand
appraisal of their Applied Optronics Outstanding Stock ("Dissenting
Holders"), any Applied Optronics Outstanding Stock held by a Dissenting
Holder as to which appraisal has been so demanded ("Excluded Shares") shall
not be converted as described in Section 3.1, but shall, from and after the
Effective Time, represent only the right to receive such consideration as
may be determined to be due to such Dissenting Holder pursuant to the DGCL;
provided, however, that each share of Applied Optronics Outstanding Stock
held by a Dissenting Holder who shall, after the Effective Time, withdraw
his demand for appraisal or lose his right of appraisal with respect to
such shares of Applied Optronics Outstanding Stock, in either case pursuant
to the DGCL, shall not be deemed Excluded Shares but shall be deemed to be
converted, as of the Effective Time, into the right to receive the Merger
Consideration.
3.7. Applied Optronics Options Terminated. Immediately prior to the
Effective Time, each of the Outstanding and unexercised Applied Optronics
Stock Options shall have been terminated and cancelled by their own terms,
without any payment of cash, stock or other property, or any obligation for
any such payment, on the part of ESC, Applied Optronics or the Surviving
Corporation.
3.8. Applied Optronics Warrants. Effective as of the Effective
Time, the Applied Optronics warrant in favor of Aberlyn Capital
Management Limited Partnership, exercisable for 131,733 shares of common
stock of Applied Optronics (the "Aberlyn Warrant"), will be surrendered at
the Closing, in consideration of a cash payment of not more than $15,000 by
Applied Optronics. All other outstanding warrants to acquire capital stock
of Applied Optronics (including, without limitation, the Class A,B,C,D and
E Warrants of Applied Optronics) shall have been, prior to the Effective
Time, terminated and cancelled, without any payment of cash, stock or other
property, or any obligation for any such payment, on the part of ESC,
Applied Optronics or the Surviving Corporation.
3.9. Escrow Agreement. Notwithstanding the provisions of Section 3.1
above, at the Closing one-sixth (1/6) of the ESC Ordinary Shares required
to be delivered to Applied Optronics pursuant to clause (c) of Section 3.1
shall be placed in escrow for a period of nine (9) months in accordance
with an escrow agreement, of even date herewith, in the form attached
hereto as Exhibit 3.2 (the "Escrow Agreement") to secure the
representations and warranties of Applied Optronics provided in this
Agreement including, but not limited to, the representation of the absence
of undisclosed liabilities. The liability of shareholders of AOC, except in
the case of fraud, shall be limited to those Ordinary Shares deposited in
escrow pursuant to the Escrow Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ESC AND
ACQUISITION SUB
ESC and Acquisition Sub, jointly and severally, represent and warrant
to Applied Optronics as follows:
4.1. Organization. Each of ESC and its subsidiaries is a
corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization and each such corporation
has all the requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted. Each of ESC and its subsidiaries is duly qualified or
licensed to carry on its business as it is now being conducted, and is
qualified to do business in each jurisdiction where the character of its
properties owned or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified will not in the
aggregate have a Material Adverse Effect.
Neither ESC nor any of its subsidiaries is in violation of any
provision of its Certificate of Incorporation or By-laws which would have a
Material Adverse Effect. Acquisition Sub has not engaged in any business
nor has it incurred any liabilities or obligations since it was
incorporated other than relating to this Agreement and the transactions
contemplated thereby.
As used in this Agreement, the term "Material Adverse Effect" means,
with respect to ESC, Acquisition Sub or Applied Optronics, as the case may
be, a material adverse effect on the business, assets, prospects, results
of operations or financial condition of such corporation and its
subsidiaries taken as a whole, or in such corporation's ability to conduct
its business as currently being conducted or as proposed to be conducted or
to perform its obligations hereunder.
4.2. Capitalization.
(a) As of the date hereof, the authorized capital stock of ESC
consists, in its entirety, of 50,000,000 Ordinary Shares, of which there
are 19,555,474 Ordinary Shares issued and outstanding, including Ordinary
Shares issued to a trustee under ESC's stock option plans. As of the date
hereof, 1,229,101 Ordinary Shares are reserved for issuance upon exercise
of outstanding options pursuant to ESC's employee stock option plans,
2,470,462 Ordinary Shares are reserved for issuance upon conversion of
ESC's 6% Convertible Subordinated Notes due September 1, 2002, and 639,812
Ordinary Shares are reserved for issuance upon exercise of outstanding
warrants. In addition, ESC has agreed to issue, subject to certain
conditions, up to 7,046,101 Ordinary Shares pursuant to an Agreement, dated
November 9, 1997, between ESC and Laser Industries Limited. All of the
issued and outstanding Ordinary Shares of ESC are validly issued, fully
paid, nonassessable and free of preemptive rights or similar rights created
by statute, the Articles of Association or Memorandum of Association of ESC
or any agreement to which ESC or any of its subsidiaries is a party or by
which ESC or any of its subsidiaries is bound.
(b) The authorized capital stock of Acquisition Sub consists of
100 shares of Common Stock, $1.00 par value per share, all of which are
validly issued and outstanding, fully paid and nonassessable and are owned
by ESC, free and clear of all liens, charges and encumbrances.
4.3. Authority Relative to this Agreement. Each of ESC and
Acquisition Sub has the requisite corporate power and authority to enter
into this Agreement, the Articles of Merger, the Escrow Agreement, the
Registration Rights Agreement, the Ordinary Share Purchase Warrant, the
Warrant Registration Rights Agreement and the Employment Agreement
(collectively, the "Transaction Documents") and to carry out its
obligations and hereunder. The execution and delivery of the Transaction
Documents by ESC and Acquisition Sub and the consummation by ESC and
Acquisition Sub of the transactions contemplated and hereby have been duly
authorized by the respective Boards of Directors of ESC and Acquisition
Sub, and no other corporate proceedings on the part of ESC or Acquisition
Sub are necessary to approve the Transaction Documents or the transactions
contemplated and hereby. The Transaction Documents have been duly and
validly executed and delivered by each of ESC and Acquisition Sub and
constitutes a valid and binding agreement of each of ESC and Acquisition
Sub, enforceable against ESC and Acquisition Sub in accordance with its
terms.
4.4. Consents and Approvals; No Violations. Except as disclosed
on Schedule 4.4, and except for the applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act" or "1933
Act") and state securities or blue sky laws, no filing with, and no
permit, authorization, consent or approval of, any public or
governmental body or authority is necessary for the consummation by
ESC and Acquisition Sub of the transactions contemplated by the
Transaction Documents, except where a failure to make such filing or
to obtain such permit, registration, authorization, consent or approval
will not in the aggregate have a Material Adverse Effect. Except as
disclosed on Schedule 4.4, neither the execution and delivery of the
Transaction Documents by ESC or Acquisition Sub, nor the consummation by
ESC or Acquisition Sub of the transactions contemplated and hereby, nor
compliance by ESC or Acquisition Sub with any of the provisions and hereof,
will (a) conflict with or result in any breach of any provision of the
Articles of Association or Memorandum of Association of ESC or the
Certificate of Incorporation of Acquisition Sub, or (b) violate any order,
writ, injunction, decree, statute, rule or regulation of any court or
federal, state, local or foreign body or authority, or any nongovernmental
self-regulatory organization or agency to which ESC, its subsidiaries, or
any of their properties or assets may be subject except for violations or
breaches which would not in the aggregate have a Material Adverse Effect.
4.5. Reports and Financial Statements. ESC has filed all forms,
reports, registration statements and documents required to be filed by it
with the Securities and Exchange Commission ("SEC") since January 24, 1996,
the effective date of the Registration Statement relating to ESC's initial
public offering of securities (such forms, reports, registration statements
and documents, together with any amendments thereto, are referred to as the
"ESC SEC Filings"). As of their respective dates, the ESC SEC Filings (i)
complied as to form in all material respects with the applicable
requirements of the 1933 Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act" or "1934 Act") as the case may be, and (ii) did
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they
were made, not misleading.
4.6. ESC Ordinary Shares and Warrants. The ESC Ordinary Shares to be
issued hereunder, when issued and delivered to Applied Optronics pursuant
to this Agreement, will be duly authorized, validly issued and outstanding,
fully paid and non-assessable, and free of preemptive rights with no
personal liability attaching to the ownership thereof. The Warrants have
been duly authorized, and when issued will be effective to convey the right
to purchase ESC Ordinary Shares in accordance with their terms. The ESC
Ordinary Shares issuable upon exercise of the Warrants will be, when
purchased pursuant to the terms of the Warrants, duly authorized, validly
issued, fully paid and non- assessable and free at preemptive rights with
no personal liability attaching to the ownership thereof.
4.7. Representations Complete. None of the representations or
warranties made by ESC or Acquisition Sub herein, or in any schedule or
certificate hereto or in any ESC SEC filings, when all such documents are
read together in their entirety contain, or will contain at the Closing,
any untrue statements of material facts or omit, or will omit at the
closing, to state any material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which made, not misleading.
4.8. No Default. Neither ESC nor any of its subsidiaries is in
default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provision of (i) ESC's Articles of Association or Memorandum
of Association or Acquisition Sub's Certificate of Incorporation or
By-Laws; (ii) any note, bond, mortgage, indenture, license, agreement,
contract, lease, commitment or other obligation to which ESC or any of its
subsidiaries are a party or by which ESC or any of its subsidiaries'
properties or assets may be bound; or (iii) any order, writ, injunction,
decree, statute, rule or regulation applicable to ESC or any of its
subsidiaries, except in the case of clauses (ii) and (iii) above for
defaults or violations which would not have a Material Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF APPLIED
OPTRONICS
Applied Optronics represents and warrants to ESC and Acquisition Sub
as follows:
5.1. Organization. Applied Optronics is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has all the requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as it is now being conducted. Applied Optronics is duly qualified
or licensed to carry on its business as it is now being conducted, and is
qualified to do business in each jurisdiction where the character of its
properties owned or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified will not in the
aggregate have a Material Adverse Effect.
5.2. Capitalization. As of the date hereof, the authorized capital
stock of Applied Optronics consists of 30,000,000 shares of Common Stock,
of which 10,435,450 shares are issued and outstanding. 585,480 shares of
Series A Preferred Stock and 4,903,436 Warrants are outstanding. All of the
issued and outstanding shares of Applied Optronics Common Stock are validly
issued, fully paid, nonassessable and free of preemptive rights or similar
rights created by statute, the Articles of Incorporation or Bylaws of
Applied Optronics or any agreement to which Applied Optronics is a party or
by which Applied Optronics is bound. Schedule 5.2 lists all the holders of
Applied Optronics Outstanding Stock and any options, warrants,
subscriptions, calls, claims, rights, convertible securities or other
agreements or commitments obligating Applied Optronics to issue, sell or
transfer any securities (collectively, "Stock Equivalents"), outstanding as
of the date hereof and the amount of shares of Applied Optronics Common
Stock and Stock Equivalents held by each. Except for the Series A Preferred
Stock, and except for the Aberlyn Warrant, which will be surrendered and
cancelled as provided in Section 3.8 hereof, all outstanding Stock
Equivalents will be terminated and cancelled, without payment of cash,
stock or other property, at or prior to the Effective Time.
5.3. Authority Relative to this Agreement. Subject to the
shareholder approval as referred to below, Applied Optronics has the
requisite corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement by Applied Optronics and the consummation by Applied Optronics of
the transactions contemplated hereby have been duly authorized by Applied
Optronics' Board of Directors and, except for the favorable vote or consent
of the requisite number of shares of the outstanding classes and/or series
of the capital stock of Applied Optronics entitled to vote thereon in
accordance with the Delaware General Corporations Law, no other corporate
proceedings on the part of Applied Optronics are necessary to approve this
Agreement or the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Applied Optronics and
constitutes a valid and binding agreement of Applied Optronics, enforceable
against Applied Optronics in accordance with its terms.
5.4. Consents and Approvals; No Violations. Except as disclosed
on Schedule 5.4, and except for any applicable requirements of the
Securities Act, state securities or blue sky laws, no filing with, and no
permit, authorization, consent or approval of, any public or governmental
body or authority is necessary for the consummation by Applied Optronics of
the transactions contemplated by this Agreement. Except as disclosed in
Schedule 5.4, neither the execution and delivery of this Agreement by
Applied Optronics, nor the consummation by Applied Optronics of the
transactions contemplated hereby, nor compliance by Applied Optronics with
any of the provisions hereof, will (a) conflict with or result in any
breach of any provisions of the Certificate of Incorporation or Bylaws of
Applied Optronics, (b) subject to obtaining necessary third-party consents
or other approvals set forth on Schedule 5.4, result in a violation or
breach of, or constitute (with or without due notice or lapse of time or
both) a default under, result in the loss of any material benefit under, or
give rise to any right of termination, cancellation, acceleration or change
in the award, grant, vesting or determination under, or result in the
creation of any lien, charge, security interest or encumbrance upon any of
the respective properties or assets of Applied Optronics under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, contract, lease, agreement, arrangement or other
instrument or obligation to which Applied Optronics is a party or by which
it or any of its properties or assets may be bound or affected or (c)
violate any order, writ, injunction, decree, statute, rule or regulation of
any court or federal, state, local or foreign body or authority, including,
but not limited to, the Food and Drug Administration (the "FDA") or any
nongovernmental self-regulatory organization or agency to which Applied
Optronics, or any of its properties or assets may be subject, except in the
case of clauses (b) and (c) for violations, breaches, defaults (or rights
of termination, cancellation, acceleration or change), liens, charges,
security interests or encumbrances which would not in the aggregate have a
Material Adverse Effect.
5.5. Financial Statements. Applied Optronics has previously delivered
to ESC (i) the audited financial statements of Applied Optronics at
December 31, 1996 and for the five prior years (including the footnotes
thereto) (the "Audited Financial Statements"), (ii) the unaudited balance
sheets of Applied Optronics at September 30, 1997 and related statements of
operations and cash flows for the period then ended (the "Interim Financial
Statements"). All of such financial statements referred to in this section
are collectively referred to herein as the "Applied Optronics Financial
Statements." The Applied Optronics Financial Statements have been prepared
from, and are in accordance with, the books and records of Applied
Optronics and present fairly, in all material respects, the financial
position and the results of operations of Applied Optronics as of the dates
and for the periods indicated, in each case in accordance with GAAP
consistently applied throughout the periods involved except as otherwise
stated therein, and subject, in the case of the Interim Financial
Statements, to normal year end audit adjustments which are not, in the
aggregate, material and to the absence of notes as may be required by GAAP.
As used in this Agreement, "GAAP" shall mean the accounting principles
generally accepted in the United States applied on a consistent basis.
5.6. No Material Adverse Change. Except as disclosed on
Schedule 5.6, since September 30, 1997 there has not been:
(a) any material adverse change in the business of Applied
Optronics, or any event or condition that has had or is likely to
have a Material Adverse Effect on the business of Applied Optronics;
or
(b) except as disclosed on Schedule 5.6, any transaction,
commitment, contract or agreement entered into by Applied Optronics
or any relinquishment by Applied Optronics of any contract or other
right having a value of or involving aggregate payments in excess of
$50,000.
5.7. Absence of Undisclosed Liabilities. Except to the extent
specifically disclosed on Schedule 5.7, Applied Optronics has no
liabilities or obligations of any nature (whether absolute, accrued,
contingent or otherwise) except (a) liabilities or obligations that are
accrued or reserved against in the audited balance sheet of Applied
Optronics as of December 31, 1996 contained in the Audited Financial
Statements or in the Interim Financial Statements, and (b) liabilities or
obligations arising since December 31, 1996, except as set forth in the
Interim Financial Statements, in the ordinary course of business and
consistent with past practice that would not have a Material Adverse
Effect.
5.8. Litigation. As of the date of this Agreement; (i) there is no
action, suit, judicial or administrative proceeding, arbitration or
investigation pending or, to the best knowledge of Applied Optronics,
threatened against or involving Applied Optronics, or any of its properties
or rights, before any court, arbitrator, or administrative or governmental
body; (ii) there is no judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
arbitrator outstanding against Applied Optronics; and (iii) Applied
Optronics is not in violation of any term of any judgment, decree,
injunction or order outstanding against it.
5.9. Contracts. Schedule 5.9 lists, and Applied Optronics has
heretofore furnished or made available to ESC complete and accurate copies
of (or, if oral, Schedule 5.9 states all material provisions of), (a) every
loan, credit, escrow, security, mortgage, guaranty, pledge, buy- sell,
letter of credit, supply, distribution, manufacturer's representative,
dealer, agency, lease, licensing, franchise, development, joint
development, joint venture, noncompetition, research and development, or
similar contract, agreement or understanding to which Applied Optronics is
a party or may be bound, (b) every employment or consulting agreement or
arrangement with or for the benefit of any director, officer, employee,
other person or shareholder of Applied Optronics or any affiliate thereof,
(c) every contract, agreement or understanding to which Applied Optronics
is a party that could reasonably be expected to involve payments by or to
Applied Optronics in excess of $50,000, or could have a Material Adverse
Effect, or that was not made in the ordinary course of business, (d) every
agreement or contract between Applied Optronics and any of Applied
Optronics' officers, directors or more than 5% shareholders or any entity
in which any of Applied Optronics' officers, directors or more than 5%
shareholders has a greater than 2% equity interest, and every agreement of
which Applied Optronics is aware between or among shareholders of Applied
Optronics and relating to the acquisition, ownership, voting or disposition
of securities of Applied Optronics and (e) every other contract, plan,
agreement or understanding to which Applied Optronics is a party or may be
bound and which would be required to be filed with the SEC in a filing to
which paragraph (b)(10) of Item 601 of Regulation S-K of the Rules and
Regulations of the SEC would be applicable. Applied Optronics has performed
all obligations required to be performed by it under any listed or
otherwise material contract, plan, agreement, understanding or arrangement
made or obligation owed by or to Applied Optronics, except where the
failure would not have a Material Adverse Effect; there has not been any
event of default (or any event or condition which with notice or the lapse
of time, both or otherwise, would constitute an event of default)
thereunder on the part of Applied Optronics, or, to Applied Optronics'
knowledge, any other party thereof that would have a Material Adverse
Effect; the same are in full force and effect and are valid and enforceable
by Applied Optronics in accordance with their respective terms, except to
the extent that enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar laws now or hereafter in
effect relating to creditors' rights generally, by general principles of
equity (regardless of whether enforceability is considered in a proceeding
at law or in equity); and the performance of any such contracts, plans,
agreements, understandings, arrangements or obligations would not have a
Material Adverse Effect.
5.10. Employee Benefit Plans.
(a) Schedule 5.10 sets forth a true and complete list of each
material written or oral employee benefit plan (including, without
limitation, any "employee benefit plan" as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, ("ERISA"),
policy or agreement (including, without limitation, any employment
agreement or severance agreement) that is maintained by Applied Optronics
or for the benefit of Applied Optronics' employees of the foregoing, the
"Applied Optronics Plans"), or is or was contributed to by Applied
Optronics or pursuant to which Applied Optronics is still potentially
liable for payments, benefits or claims. A copy of each Applied Optronics
Plan as currently in effect and, if applicable, the most recent Annual
Report, Actuarial Report of Valuation, Summary Plan Description, Trust
Agreement and a Determination Letter issued by the Internal Revenue Service
("IRS") for each Applied Optronics Plan have heretofore been delivered, or
shall be delivered prior to the Closing Date, to ESC or its counsel.
Neither Applied Optronics nor any ERISA affiliate, which together with
Applied Optronics would be deemed a "single employer" within the meaning of
Section 4001 of ERISA, has maintained or contributed to any plan subject to
Title IV of ERISA or Section 412 of the Code (including any Multiemployer
Plan) during the six calendar years preceding the date of this Agreement.
(b) Each Applied Optronics Plan which is an "employee benefit
plan", as defined in Section 3(3) of ERISA, complies by its terms and in
operation with the requirements provided by any and all statutes, orders or
governmental rules or regulations currently in effect and applicable to the
Applied Optronics Plan, including but not limited to ERISA, the Code and
the respective regulations thereunder, except for instances of
noncompliance that would not in the aggregate have a Material Adverse
Effect.
(c) All reports, forms and other documents required to be filed
with any government entity with respect to any Applied Optronics Plan
(including without limitations, summary plan descriptions, forms 5500 and
summary annual reports) have been timely filed and are accurate, except for
instances of noncompliance that would not in the aggregate have a Material
Adverse Effect.
(d) Each Applied Optronics Plan intended to qualify under
Section 401(a) of the Code has been determined by the IRS to so qualify
after January 1, 1985, and each trust maintained pursuant thereto has been
determined by the IRS to be exempt from taxation under Section 501 of the
Code. Except as disclosed in Schedule 5.10, nothing has occurred since the
date of the Internal Revenue Service's favorable determination letter that
could adversely affect the qualification of the Applied Optronics Plan and
its related trust, except such adverse effects as would not in the
aggregate constitute a Material Adverse Effect. Applied Optronics and each
ERISA affiliate of Applied Optronics have timely and properly applied for a
written determination by the IRS on the qualification of each such Applied
Optronics Plan and its related trust under Section 401(a) of the Code, as
amended by the Tax Reform Act of 1986 and subsequent legislation enacted
through the date hereof, and Section 501 of the Code.
(e) Except as disclosed on Schedule 5.10, all contributions or
other amounts payable by Applied Optronics as of the Effective Time with
respect to each Applied Optronics Plan and in respect of current or prior
plan years have been or will be prior to the Effective Time either paid or
accrued on the financial statements of Applied Optronics in accordance with
past practice and the recommended contribution in any actuarial report.
(f) No Applied Optronics Plan provides benefits, including
without limitation death or medical benefits (whether or not insured), with
respect to current or former employees for periods extending beyond their
retirement or other termination of service (other than (i) continuation
group health coverage pursuant to Section 4980B of the Code or applicable
state law, (ii) deferred compensation benefits with respect to which there
is an accrual of liability on the books of Applied Optronics or its ERISA
affiliates, (iii) benefits the full cost of which is borne by the current
or former employee (or his or her beneficiary), (iv) benefits set forth in
Schedule 5.10, or (v) benefits which in the aggregate are not material to
Applied Optronics' business).
(g) All insurance premiums have been paid in full, subject only
to normal retrospective adjustments in the ordinary course, with regard to
Applied Optronics Plans for plan years ending on or before the date hereof.
(h) As of the date hereof, no Applied Optronics Plan subject to
Title IV of ERISA, and no employee benefit plan maintained by an ERISA
affiliate of Applied Optronics and subject to Title IV of ERISA, has
benefit liabilities (as defined in Section 4001(a)(16) of ERISA) exceeding
the assets of such plan or has been completely or partially terminated.
(i) Except as disclosed in Schedule 5.10, with respect to each
Applied Optronics Plan:
(1) no prohibited transactions (as defined in Section 406
or 407 of ERISA or Section 4975 of the Code) have occurred for which
a statutory exemption is not available;
(2) no reportable event (as defined in Section 4043 of
ERISA) has occurred as to which a notice would be required to be
filed with the Pension Benefit Guaranty Corporation; and
(3) no action or claims (other than routine claims for
benefits made in the ordinary course of Plan administration for which
Plan administrative review procedures have not been exhausted or
actions seeking qualified domestic relations orders) are pending or,
to the knowledge of Applied Optronics, threatened or imminent against
or with respect to any Applied Optronics Plan, any employer who is
participating (or who has participated) in any Plan or any fiduciary
(as defined in Section 3(21) of ERISA), of the Applied Optronics
Plan.
(j) Neither Applied Optronics nor any ERISA affiliate of
Applied Optronics has any liability or is threatened with any liability
(whether joint or several (i) for the termination of any single employer
plan under Section 4062 or 4064 of ERISA or any multiple employer plan
under Section 4063 of ERISA, (ii) for any lien imposed under Section 302(f)
of ERISA or Section 412(n) of the Code, (iii) for any interest payments
required under Section 302(e) of ERISA or Section 412(m) of the Code, (iv)
for any excise tax imposed by Sections 4971, 4975, 4976, 4977 or 4979 of
the Code, (v) for any minimum funding contributions under Sections
302(c)(11) of ERISA or Section 412(c)(ii) of the Code, (vi) to a fine under
Section 502 of ERISA, or (vii) for any transaction within the meaning of
Section 4069 of ERISA.
(k) Applied Optronics has not incurred any withdrawal liability
with respect to any Multiemployer Plan within the meaning of Sections 4201
and 4204 of ERISA which has not been paid and which would in the aggregate
have a Material Adverse Effect, and no liabilities exist with respect to
withdrawals from any Multiemployer Plans which could subject Applied
Optronics to any controlled group liability under Section 4001(b) of ERISA
which would in the aggregate have a Material Adverse Effect.
(l) All of the Applied Optronics Plans, to the extent
applicable, are in substantial compliance with the continuation of group
health coverage provisions contained in Section 4980B of the Code and
Sections 601 through 608 of ERISA, except for such instances of
noncompliance which would not in the aggregate have a Material Adverse
Effect.
5.11. Tax Matters. Applied Optronics has previously furnished or made
available to ESC complete and accurate copies of all tax or assessment
reports and tax returns (including any applicable information returns)
required by any law or regulation (whether United States, foreign, state,
local or other jurisdiction) filed by Applied Optronics for each of the
three fiscal years ended September 30, 1994, 1995, and 1996. Applied
Optronics has filed, or has obtained extensions to file (which extensions
have not expired without filing), all material United States, state, local,
foreign or other tax reports and returns required to be filed by it.
Applied Optronics has duly paid all taxes (including estimated taxes) shown
as due on such reports and returns (or such extension requests), or
assessed against it, or that it is obligated to withhold from amounts owed
by it to any person, except for those contested in good faith and for which
adequate reserves have been taken. There are no Liens (as defined in
Section 5.19) for taxes upon any property or asset of Applied Optronics,
except Liens for taxes not yet due. Applied Optronics is not delinquent in
the payment of any tax assessment (including, but not limited to, any
applicable withholding taxes).
For the purposes of this Section 5.11, "tax" shall mean and
include taxes, additions to tax, penalties, interest, fines, duties,
withholdings, assessments, and charges assessed or imposed by any
governmental authority, including but not limited to all federal, state,
county, local and foreign income, profits, gross receipts, import, ad
valorem, real and personal property, franchise, license, sales, use, value
added, stamp, transfer, withholding, payroll, employment, excise, custom,
duty, and any other taxes, obligations and assessments of any kind
whatsoever; "tax" shall also include any liability arising as a result of
being (or ceasing to be) a member of any affiliated, consolidated,
combined, or unitary group as well as any liability under any tax
allocation, tax sharing, tax indemnity or similar agreement.
5.12. Compliance with Laws. To the knowledge of Applied Optronics,
all activities of Applied Optronics have been, and are currently being,
conducted in compliance with all applicable federal, state, local or
foreign laws, ordinances, regulations, interpretations, judgments, decrees,
injunctions, permits, licenses, certificates, governmental requirements,
orders and other similar items of any court or other governmental entity
(including, but not limited to, those of the FDA or any nongovernmental
self-regulatory agency), the failure to comply with which would have a
Material Adverse Effect. Applied Optronics has timely filed or otherwise
provided all registrations, reports, data, and other information and
applications with respect to its medical device, pharmaceutical, consumer,
health-care and other governmentally regulated products (the "Regulated
Products") required to be filed with or otherwise provided to the FDA or
any federal, state, local or foreign governmental authorities with
jurisdiction over the manufacture, use or sale of the Regulated Products,
and all regulatory licenses or approvals in respect thereof are in full
force and effect, except where the failure to file timely such
registrations, reports, data, information and applications or the failure
to have such licenses and approvals in full force and effect would not have
a Material Adverse Effect.
5.13. Subsidiaries. As of the date hereof, Applied Optronics
has no subsidiaries. Applied Optronics will not have any subsidiaries
as of the Effective Time.
5.14. Labor and Employment Matters.
(a) Except for such matters that would not in the aggregate
have a Material Adverse Effect, (i) Applied Optronics is and has been in
compliance with all applicable federal, state, local or foreign laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, including, without limitation, such laws
respecting employment discrimination, equal opportunity, affirmative
action, worker's compensation, occupational safety and health requirements
and unemployment insurance and related matters, and are not engaged in and
have not engaged in any unfair labor practice; (ii) no investigation or
review by or before any governmental entity concerning any violations of
any such applicable laws is pending or, to the knowledge of Applied
Optronics, threatened, nor has any such investigation occurred during the
last three years, and no governmental entity has provided any notice to
Applied Optronics asserting an intention to conduct any such
investigations; (iii) there is no labor strike, dispute, slowdown or
stoppage actually pending or, to the knowledge of Applied Optronics,
threatened against Applied Optronics; (iv) to the knowledge of Applied
Optronics, no union representation question or union organizational
activity exists respecting the employees of Applied Optronics; and (v)
Applied Optronics has not experienced any work stoppage or other labor
difficulty.
No collective bargaining agreement exists which is binding on Applied
Optronics.
(b) Except for benefits provided under agreements and plans
disclosed in Schedule 5.10, in the event of termination of the employment
of any officers, directors, employees or agents of Applied Optronics,
neither Applied Optronics, ESC, Acquisition Sub, nor any other subsidiaries
of ESC, will, pursuant to any agreement or by reason of anything done prior
to the Effective Time by Applied Optronics, be liable to any of said
officers, directors, employees or agents for so- called "severance pay" or
any other similar payments or benefits, including, without limitation,
post-employment health care (other than pursuant to COBRA) or insurance
benefits.
5.15. Insurance Policies. Schedule 5.15 sets forth a complete
and accurate list of all policies of insurance maintained by Applied
Optronics with respect to any of its officers, directors, employees,
shareholders, agents, properties, buildings, machinery, equipment,
furniture, fixtures or operations and a description of each claim made by
Applied Optronics during the three-year period preceding the date hereof
under any such policy of insurance. Applied Optronics has previously
delivered to ESC or made available for ESC's inspection complete and
accurate copies of all such policies of insurance and complete and accurate
copies of all documentation regarding claims made thereunder. All such
policies of insurance are in full force and effect, have been issued for
the benefit of Applied Optronics by properly licensed insurance carriers,
and to the knowledge of Applied Optronics are adequate and customary for
the assets, business and operations of Applied Optronics and its subsidiary
in all material respects. Applied Optronics has promptly and properly
notified its insurance carriers of any and all claims known to it with
respect to its operations or products for which it is insured.
5.16. Environmental Laws and Regulations. Applied Optronics has
heretofore delivered to ESC complete and accurate copies of all reports,
studies or tests in the possession of Applied Optronics or initiated by
Applied Optronics pertaining to the existence of Hazardous Materials on,
above or below any Real Property or any property adjoining or which could
reasonably be expected to affect Real Property, or concerning compliance
with or liability under the Regulations (as defined below).
Except as required by ISRA (as hereinafter defined) with respect to
the transactions contemplated by this Agreement, Applied Optronics has
obtained, and maintains in full force and effect, all required
environmental permits and other governmental approvals and is in compliance
with all applicable Regulations (as defined below), except where the
failure to so obtain and maintain or to be in compliance would not have a
Material Adverse Effect. Applied Optronics (i) has not received a written
notice or Claim (as defined below) alleging its potential liability under
any of the Regulations or alleging a violation of the Regulations and (ii)
has no knowledge that such a notice or Claim may be issued in the future.
Applied Optronics has no knowledge of any notices to or Claims against any
persons alleging potential liability under any of the Regulations with
respect to the Real Property or any adjoining properties or which could
reasonably be expected to affect the Real Property. Applied Optronics has
not been nor is presently subject to nor, to the knowledge of Applied
Optronics, threatened with any administrative or judicial proceedings
pursuant to the Regulations. Applied Optronics has no knowledge of any
conditions or circumstances that could reasonably be expected to result in
the determination of liability against Applied Optronics relating to
environmental matters that would have a Material Adverse Effect, including,
but not limited to, any Claim arising from past or present environmental
practices with respect to Hazardous Materials, the Real Property or to any
disposal sites. No Hazardous Materials have been or are threatened to be
discharged, omitted or released into the air, water, soil, or subsurface at
or from any Real Property by Applied Optronics or, to Applied Optronics'
knowledge, by any other person.
Applied Optronics will provide such notifications, and take such
further actions, as may be required under the New Jersey Industrial Site
Recovery Act, N.J.S.A. 13: 1K-6 et seq. ("ISRA"), all of which shall be
completed prior to the Closing Date. Applied Optronics will provide ESC
with copies of all notifications, filings, reports and declarations made or
obtained pursuant to or in connection with the requirements of ISRA.
For purposes of this Section 5.16, the following terms shall have the
following meanings: (i) "Hazardous Materials" means asbestos, urea
formaldehyde, polychlorinated biphenyls, nuclear fuel or materials,
chemical waste, radioactive materials, explosives, petroleum products or
other substances or materials listed, identified or designated as toxic or
hazardous or as a pollutant or contaminant in, or the use, release or
disposal of which is regulated by, the Regulations; (ii) "Regulations"
means the Comprehensive Environmental Response Compensation and Liability
Act ("CERCLA") as amended by the Superfund Amendments and Reauthorization
Act of 1986 ("XXXX"), 42 U.S.C. xx.xx. 6901 et seq.; the Federal Resource
Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. xx.xx. 6901 et
seq.; the Clean Water Act, 33 U.S.C. xx.xx. 1321 et seq.; the Clean Air
Act, 42 U.S.C. xx.xx. 7401 et seq.; ISRA; and any other federal, state,
county, local, foreign or other governmental statute, regulation, or
ordinance, as now in existence, that relates to or deals with employee
safety and human health, pollution, health or the environment including,
but not limited to, the use, generation, discharge, transportation,
disposal, record-keeping, notification and reporting of Hazardous
Materials; and (iii) "Claim" means any and all claims, demands, causes of
actions, suits, proceedings, administrative proceedings, losses, judgments,
decrees, debts, damages, liabilities, court costs, penalties, attorneys'
fees and any other expenses incurred, assessed, sustained or alleged by or
against Applied Optronics or its subsidiary.
5.17. Intellectual Property Rights. Schedule 5.17 contains a complete
and accurate list of all patents, trademarks, trade names, services marks,
copyrights and applications for or registrations of any of the foregoing as
to which Applied Optronics is the owner or a licensee (indicating whether
such license is exclusive or nonexclusive). Applied Optronics exclusively
owns, free and clear of any Lien (as defined in Section 5.19), or is
exclusively (unless otherwise indicated in Schedule 5.17) licensed to use,
all patents, trademarks, trade names, service marks, copyrights,
applications for or registrations of any of the foregoing, processes,
inventions, designs, technology, formulas, computer software programs,
know-how and trade secrets used in or necessary for the conduct of its
respective business as currently conducted or proposed to be conducted (the
"Applied Optronics Intellectual Property"). Except to the extent
specifically disclosed on Schedule 5.17, no claim has been asserted or, to
the knowledge of Applied Optronics, threatened by any person, and, to
Applied Optronics' knowledge, no basis for any claim exists, with respect
to the use of Applied Optronics Intellectual Property or challenging or
questioning the validity or effectiveness of any license or agreement with
respect thereto. To the knowledge of Applied Optronics, neither the use of
Applied Optronics Intellectual Property by Applied Optronics in the present
or planned conduct of its business nor any product or service of Applied
Optronics infringes on the intellectual property rights of any person.
Except to the extent specifically disclosed on Schedule 5.17, no current or
former shareholder, employee, officer, director or consultant of Applied
Optronics has any rights in or to any of the Applied Optronics Intellectual
Property. All Applied Optronics Intellectual Property listed on Schedule
5.17 has the status indicated therein and all applications are still
pending in good standing and have not been abandoned. Except to the extent
specifically disclosed on Schedule 5.17: (i) the Applied Optronics
Intellectual Property is valid and has not been challenged in any judicial
or administrative proceeding; (ii) Applied Optronics has made all
statutorily required filings, if any, to record its interests, and taken
reasonable actions to protect its rights, in the Applied Optronics
Intellectual Property; (iii) to the knowledge of Applied Optronics, no
person or entity nor such person's or entity's business or products has
infringed, misused or misappropriated the Applied Optronics Intellectual
Property or currently is infringing, misusing or misappropriating the
Applied Optronics Intellectual Property; and (iv) to the knowledge of
Applied Optronics, no other person or entity has any right to receive or
any obligation to pay a royalty with respect to any of the Applied
Optronics Intellectual Property or any product or service of Applied
Optronics.
5.18. Real Property. Applied Optronics owns no real property.
Schedule 5.18 sets forth a brief description of all real property which is
leased by Applied Optronics, including offices or facilities leased
thereby. To the knowledge of Applied Optronics, none of the properties
occupied by Applied Optronics is in material violation of any law or in
violation of any building, zoning, or other ordinance, code or regulation
which would have a Material Adverse Effect or materially interfere with the
use and occupancy thereof in the ordinary course of Applied Optronics'
business.
5.19. Title as to Properties; Liens. Applied Optronics has good and
marketable title to all properties and assets reflected on Applied
Optronics' Audited Financial Statements or acquired after the dates thereof
(except for properties and assets sold or otherwise disposed of in the
ordinary course of business since the dates thereof), which includes each
asset the absence or unavailability of which would have a Material Adverse
Effect, free and clear of any Liens. The term "Lien" as used in this
Agreement means any mortgage, pledge, security interest, encumbrance, lien,
claim or charge of any kind. All properties and assets purported to be
leased by Applied Optronics are subject to valid and effective leases that
are in full force and effect, and there does not exist, and the
transactions contemplated herein will not result in, any default or event
that with notice or lapse of time, or both or otherwise, would constitute a
default under any such leases. The properties and assets of Applied
Optronics and its subsidiary have been kept in good condition and repair in
the ordinary course of business.
5.20. Permits, Licenses, Etc. Applied Optronics has all
rights, permits, certificates, licenses, consents, franchises approvals,
registrations, and other authorizations necessary to sell its products and
services and otherwise carry on and conduct its businesses and to own,
lease, use and operate its properties and assets at the places and in the
manner now conducted and operated, except those the absence of which would
not be reasonably expected to (so far as can be foreseen at the time) have
a Material Adverse Effect. Applied Optronics has not received any notice or
claim pertaining to the failure to obtain any permit, certificate, license,
franchise, approval, registration or other authorization required by any
federal, state, local or foreign body or authority (including, but not
limited to, the FDA or any nongovernmental self-regulatory organization or
agency).
5.21. Product Liability Claims. Applied Optronics has never received
a claim, or incurred any uninsured or insured liability, for or based upon
breach of product warranty (other than warranty service and repair claims
in the ordinary course of business not material in amount or significance),
strict liability in tort, negligent manufacture of product, negligent
provision of services or any other allegation of liability, including or
resulting in, but not limited to, product recalls, arising from the
materials, design, testing, manufacture, packaging, labeling (including
instructions for use) or sale of its products or from the provision of
services (hereafter collectively referred to as "Product Liability").
5.22. Minute Books. The minute books of Applied Optronics, as
previously made available to ESC and its representatives, contain, in all
material respects, complete and accurate records of all meetings of and
corporate actions or written consents by the shareholders, Board of
Directors, and committees of the Board of Directors of Applied Optronics
through the date of such minutes.
5.23. Officers, Directors and Employees. Prior to the date hereof,
Applied Optronics has provided to ESC a list that completely and accurately
sets forth the name and current annual salary rate of each officer or
employee of Applied Optronics whose total remuneration for the last fiscal
year was, or for the current fiscal year has been set at, in excess of
$50,000, together with a summary of the bonuses, commissions, additional
compensation and other like benefits, if any, paid or payable to such
persons for the last fiscal year and proposed for the current year.
5.24. Receivables. Applied Optronics has no notice and is
not otherwise aware that any of its accounts receivable is subject to any
offset, claim, deduction, refund or is otherwise uncollectible for any
reason.
5.25. Disclosure. No representation or warranty by Applied Optronics
in this Agreement, and no information disclosed in the Schedules supplied
by Applied Optronics (taken as a whole), contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE CLOSING
6.1. Conduct of Business by Applied Optronics. During the
period from the date of this Agreement and continuing until the
Effective Time:
(a) the business of Applied Optronics shall be conducted only
in the ordinary and usual course of business and consistent with past
practices;
(b) Applied Optronics shall not (i) amend its Certificate of
Incorporation or Bylaws; or (ii) split, combine or reclassify any
shares of its outstanding capital stock or declare, set aside or pay
any dividend or other distribution payable in cash, stock or property
in respect of its capital stock, or directly or indirectly redeem,
purchase or otherwise acquire any shares of its capital stock.
(c) Applied Optronics shall not (i) acquire, dispose of,
transfer, lease, license, mortgage, pledge or encumber any
material fixed or other assets, enter into any material contract or
make any material capital expenditure, other than in the ordinary
course of business and consistent with past practices; (ii) incur,
assume or prepay any material indebtedness, liability or obligation
or any other material liabilities or issue any debt securities; (iii)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of
any other person in a material amount; (iv) make any material loans,
advances or capital contributions to, or investments in, any other
person; (v) fail to maintain adequate insurance consistent with past
practices for its businesses and properties; (vi) commence any
litigation; or (vii) enter into any contract, agreement, commitment
or arrangement with respect to any of the foregoing;
(d) Applied Optronics shall use its best efforts to preserve
intact the business organization of Applied Optronics, to keep
available the services of its present officers and key employees, and
to preserve the goodwill of those having business relationships with
it, in accordance with past practices; and
(e) Applied Optronics shall use its best efforts not to take
any action and not to omit to take any action (and not to agree in
writing or otherwise to take any such action or make any such
omission) the effect of which action or omission would be to make any
representation or warranty of Applied Optronics herein untrue or
incorrect in any material respect.
6.2. Compensation Plans. During the period from the date of this
Agreement and continuing until the Effective Time, Applied Optronics agrees
that it will not, without the prior written consent of ESC (except as
required by applicable law or pursuant to existing contractual arrangements
or solely to the extent necessary to make compensation increases in the
ordinary course of business consistent with past practices or make
available existing benefit arrangements to new or promoted employees in the
ordinary course of business in accordance with past practice): (a) enter
into, adopt or amend any bonus, profit sharing, compensation, stock option,
pension, retirement, deferred compensation, employment, severance or other
employee benefit plan, agreement, trust, plan, fund or other arrangement
between Applied Optronics, as applicable, and one or more of its officers,
directors or employees, in each case so as to materially increase benefits
thereunder (collectively, the "Compensation Plans"), (b) grant or become
obligated to grant any increase in the compensation or fringe benefits of
directors, officers or employees (including any such increase pursuant to
any Compensation Plan) or any increase in the compensation payable or to
become payable to any officer, except, with respect to employees other than
officers, for increases in compensation in the ordinary course of business
consistent with past practice, or enter into any contract, commitment or
arrangement to do any of the foregoing, (c) institute any new employee
benefit, welfare program or Compensation Plan, (d) make any change in any
Compensation Plan or other employee welfare or benefit arrangement or enter
into any employment or similar agreement or arrangement with any employee,
or (e) enter into or renew any contract, agreement, commitment or
arrangement providing for the payment to any director, officer or employee
of compensation or benefits contingent, or the terms of which are
materially altered in favor of such individual, upon the occurrence of any
of the transactions contemplated by this Agreement.
6.3. Legal Conditions to Merger. Each of Applied Optronics and ESC
shall, use all reasonable efforts (a) to take, or cause to be taken, all
actions necessary to comply promptly with all legal requirements which may
be imposed on such party with respect to the consummation of the
transactions contemplated by this Agreement, and (b) to obtain (and to
cooperate with the other party to obtain) any consent, authorization, order
or approval of, or any exemption by, any governmental entity or any other
public or private third party which is required to be obtained or made by
such party or any of its subsidiaries in connection with the Merger and the
transactions contemplated by this Agreement.
6.4. Investment Letter. Applied Optronics shall use its best
efforts to cause each holder of Applied Optronics Common Stock to
execute and deliver an investment letter in the form attached as Exhibit
6.4.
6.5. Advice of Changes; Governmental Filings. ESC and Applied
Optronics shall confer on a regular basis with the other, report on
operational matters and shall promptly advise the other party both orally
and in writing of any change or event having, or which, insofar as can
reasonably be foreseen, could have, a Material Adverse Effect on that party
or which would cause or constitute a material breach of any of the
representations, warranties or covenants of that party contained in this
Agreement. Except where prohibited by applicable statutes and regulations,
each party shall promptly provide the other (or its counsel) with copies of
all other filings made by such party with any state or federal government
entity in connection with this Agreement or the transactions contemplated
hereby.
6.6. Risk of Loss. In the event any material asset of Applied
Optronics is damaged or destroyed prior to the Closing Date (any such event
being herein referred to as an "Event of Loss"), Applied Optronics, at its
expense, shall use its best efforts to replace or repair the property with
comparable property of like value and quality as soon as possible before
the Closing Date. If any Event of Loss shall materially affect the
operation of Applied Optronics' business and repair or replacement cannot
be accomplished by the Closing Date, ESC and Acquisition Sub may elect, as
their sole remedy:
(a) To postpone the Closing Date, but not beyond the time
specified in Section 3.5 hereof, until such time as such property has
been restored to substantially its condition immediately prior to the
Event of Loss;
(b) To close the transaction on the Closing Date, and accept
the property as is, together with all of Applied Optronics' rights
under any insurance policies and all insurance proceeds, covering
that Event of Loss including property damage, loss of income and
continuing expenses; or
(c) To terminate this Agreement without liability to either
party by written notice to Applied Optronics within thirty days after the
Event of Loss has occurred.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. Access and Information.
(a) Applied Optronics shall afford ESC and its financial
advisors, legal counsel, accountants, consultants and other representatives
upon reasonable notice, access during normal business hours throughout the
period from the date hereof to the Closing Date to all of its books,
records, properties, facilities, personnel commitments and records and,
during such period, Applied Optronics shall furnish promptly to ESC all
information concerning its business, properties and personnel as ESC may
reasonably request.
(b) All information furnished by Applied Optronics to ESC
pursuant hereto shall be treated as the sole property of Applied Optronics,
until consummation of the Merger contemplated hereby.
7.2. No Solicitation of Transactions. From the date hereof until the
earlier of termination of this Agreement or consummation of the Merger,
Applied Optronics will not, directly or indirectly, whether through any
director, officer, employee, financial advisor, legal counsel, accountant,
other agent or representative (as used in this Section 7.2,
"representatives") or otherwise, (A) initiate, solicit or encourage, or
take any other action to facilitate any inquiries or the making of any
proposal with respect to, or (B) except to the extent required in the
exercise of the fiduciary duties of the Board of Directors of Applied
Optronics, under applicable law as advised by independent counsel in
connection with an unsolicited proposal, engage or participate in
negotiations concerning, provide any nonpublic information or data to, or
have any discussions with, any person other than a party hereto or their
representatives relating to, any (i) acquisition, (ii) tender offer
(including a self-tender offer), (iii) exchange offer, (iv) merger, (v)
consolidation, (vi) acquisition of beneficial ownership of (or the right to
vote securities representing) 10% or more of the total voting power of such
entity or any of its subsidiaries, (vii) dissolution, (viii) business
combination, (ix) purchase of all or any significant portion of the assets
or any division of (or any equity interest in) such entity, or (x) any
similar transaction other than the Merger (such proposals, announcements,
or transactions being referred to as "Acquisition Proposals").
Notwithstanding the foregoing, this Section shall not prohibit the Board of
Directors of Applied Optronics from (i) furnishing information to or
entering into discussions or negotiations with, any person or entity that
makes an unsolicited bona fide Acquisition Proposal, if, and only to the
extent that, (a) the Board of Directors of Applied Optronics determines in
good faith that such action is so required for the Board of Directors to
comply with its fiduciary duties to shareholders imposed by law and the
Board has been so advised in writing (with a copy furnished to ESC) by
independent, outside counsel, in its judgment and opinion, as being so
required, (b) prior to furnishing information to, or entering into
discussions and negotiations with, such person or entity, Applied Optronics
provides written notice to ESC to the effect that it is furnishing
information to, or entering into discussions or negotiations with, such
person or entity, and (c) Applied Optronics keeps ESC informed of the
status and all material information with respect to any such discussions or
negotiations. Nothing in this Section shall (x) permit Applied Optronics to
terminate this Agreement (except as specifically provided in Article IX
hereof), (y) permit Applied Optronics to enter into any Agreement with
respect to an Acquisition Proposal for as long as this Agreement remains in
effect (it being agreed that for as long as this Agreement remains in
effect, Applied Optronics shall not enter into any Agreement with any
person that provides for, or in any way facilities, an Acquisition
Proposal), or (z) affect any other obligation of Applied Optronics under
this Agreement.
7.3. Registration Rights Agreements. On or prior to the Closing Date,
ESC and Applied Optronics shall enter into a Registration Rights Agreement
and a Warrant Registration Rights Agreement in the forms attached as
Exhibits 7.3 (a) and 7.3(b) hereto, respectively, under which ESC shall
grant to Applied Optronics shareholders the registration rights contained
therein, with respect to the ESC Ordinary Shares and Warrants to be
delivered pursuant hereto.
7.4. Employment Agreement. On or prior to the Closing Date,
ESC and Xx. Xxxxxx Xxxxxxx, Xx. shall enter into an Employment
Agreement in the form attached as Exhibit 7.4.
7.5. Public Announcements. The initial press release or other public
announcement relating to this Agreement shall be issued jointly and, prior
to the Closing, ESC and Acquisition Sub, on the one hand, and Applied
Optronics, on the other hand, agree that they will each obtain the approval
of the other party prior to issuing any press release or any other written
communication regarding the transactions contemplated by this Agreement
(including any written communication to employees) and that they will use
their best efforts to consult with one another before otherwise making any
public statement or responding to any press inquiry with respect to this
Agreement or the transactions contemplated hereby, except as may be
required by law or any governmental agency if required by such agency or
the rules of the Nasdaq National Market.
7.6. Expenses. Except as provided in Section 9.2, all costs and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby (whether or not the Merger is
consummated) shall be paid by the party incurring such expenses.
7.7. Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable
efforts to take, or cause to be taken, all actions 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, including using all reasonable efforts to
obtain all necessary waivers, consents and approvals, and to effect all
necessary registrations and filings. In case at any time after the
Effective Time any further action is necessary or desirable to carry out
the purpose of this Agreement, the proper officers and/or directors of ESC,
Acquisition Sub and Applied Optronics shall take all such necessary action.
7.8. Noncompetition and Confidentiality Agreements. Applied Optronics
agrees not to terminate, amend or waive any of the confidentiality and
noncompetition agreements entered into by its employees and consultants
with Applied Optronics. Applied Optronics has heretofore furnished or made
available to ESC complete and accurate copies of the confidentiality and
noncompetition agreements executed by its employees and consultants.
7.9. Indemnification.
(a) Subject to the terms and conditions of this Section 7.9,
Applied Optronics hereby agrees to indemnify and save harmless ESC and
Acquisition Sub, their respective successors and assigns and each of their
respective officers, directors, employees and affiliates from, against, for
and in respect of any and all damages, losses, obligations, liabilities,
claims, actions or causes of action, encumbrances, cost and expenses
(including, without limitation, reasonable attorneys' fees, interest and
penalties) suffered, sustained, incurred or required to be paid by ESC or
Acquisition Sub or any of their respective officers, directors, employees
or affiliates because of the untruth, inaccuracy or breach of any
representation, warranty, covenant or agreement of Applied Optronics
contained in or made pursuant to this Agreement.
(b) Subject to the terms and conditions of this Section 7.9,
ESC and Acquisition Sub hereby agree, jointly and severally, to indemnify
and save harmless Applied Optronics, its successors and assigns, and its
officers, directors, shareholders, employees and affiliates from, against,
for and in respect of any and all damages, losses, obligations,
liabilities, claims, actions or causes of action, encumbrances, cost and
expenses (including, without limitation, reasonable attorneys' fees,
interest and penalties) suffered, sustained, incurred or required to be
paid by Applied Optronics or any of its respective officers, directors,
employees or affiliates because of the untruth, inaccuracy or breach of any
misrepresentation, warranty, covenant or agreement of ESC contained in or
made pursuant to this Agreement.
(c) Any party seeking indemnification hereunder ("Indemnified
Party") agrees to give prompt written notice to any Indemnifying Party of
any claim by a third party which might give rise to a claim based on the
indemnity agreements contained in Sections 7.9 (a) or (b) hereof, stating
the nature and basis of said claim and the amount thereof, to the extent
known. The Indemnifying Party shall satisfy its obligation to indemnify the
Indemnified Party under this Section 7.9 within 30 days after receipt of
the foregoing notice unless the Indemnifying Party shall have elected to
defend in good faith such claim as provided in subsection (d) hereof.
(d) In the event the Indemnified Party shall notify the
Indemnifying Party of any third-party claim pursuant to subsection (c)
hereof, the Indemnifying Party shall have the right to elect to defend such
claim (including all actions, suits or proceedings and all proceedings on
appeal or for review which counsel deem appropriate) with counsel
reasonably satisfactory to the Indemnified Party by written notice to the
Indemnified Party within 30 days after receipt of such notice. The
Indemnified Party shall make available to the Indemnifying Party and its
attorneys and accountants all books and records of the Indemnified Party
relating to such proceedings or litigation, and the parties hereto agree to
render to each other such assistance as they may reasonably require of each
other in order to ensure the proper and adequate defense of any such
action, suit or proceeding. So long as the Indemnifying Party is defending
in good faith any such claim, the Indemnified Party shall not compromise
such claim, without the written consent of the Indemnifying Party.
(e) In the event that an Indemnified Party shall seek
indemnification hereunder with respect to any claims (other than by third
parties), the Indemnified Party shall give the Indemnifying Party prompt
written notice of such claim, stating the nature and basis of said claim
and the amount thereof with specificity, to the extent known. Within 30
days after receipt of such notice, the Indemnifying Party shall either pay
the amount of such claim or set forth in writing any dispute with respect
to such claim. If such party shall dispute such claim, no amounts shall be
payable with respect to such claim until such dispute shall be resolved.
7.10. Tax Treatment. Each party hereto shall use its respective best
efforts to cause the Merger to qualify as a "reorganization" under the
provisions of section 368 of the Code, and no party shall take or cause to
be taken, whether before or after the Effective Time, any action that would
disqualify the Merger from being so qualified.
7.11. Nasdaq Listing. ESC shall use its reasonable best
efforts to cause the Ordinary Shares to be issued in connection with the
Merger to be approved for listing on the Nasdaq National Market,
subject to official notice of issuance, as promptly as practicable after
the date hereof, and in any event prior to the Closing Date. ESC shall also
use its reasonable best efforts to cause the Ordinary Shares issuable upon
exercise of the Warrants to be approved for listing on the Nasdaq National
Market as soon as practicable after the time of such exercise.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject
to the satisfaction, at or prior to the Closing Date, of the following
conditions, any one of which may be waived by a writing signed by each of
Applied Optronics and ESC:
(a) No preliminary or permanent injunction or other order by
any federal, state or foreign court of competent jurisdiction which
prohibits the consummation of the Merger shall have been issued and remain
in effect. No statute, rule, regulation, executive order, stay, decree, or
judgment shall have been enacted, entered, issued, promulgated or enforced
by any court or governmental authority which prohibits or restricts the
consummation of the Merger. All authorizations, consents, orders or
approvals of, or declarations or filings with, and all expirations of
waiting periods imposed by, any governmental entity (all of the foregoing,
"Consents") which are necessary for the consummation of the Merger, other
than Consents the failure to obtain which would not materially, adversely
affect the consummation of the Merger or in the aggregate have a Material
Adverse Effect shall have been filed, occurred or been obtained (all such
permits, approvals, filings and consents and the lapse of all such waiting
periods being referred to as the "Requisite Regulatory Approvals") and all
such Requisite Regulatory Approvals shall be in full force and effect.
(b) There shall be no action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger, by any federal, or state governmental entity which, in
connection with the grant of a Requisite Regulatory Approval, imposes any
condition or restriction upon any of the parties hereto, which in any such
case would materially adversely impact the economic or business benefits of
the transactions contemplated by this Agreement.
(c) The Escrow Agreement referred to in Section 3.9 hereof
shall have been executed and delivered.
(d) The Employment Agreement referred to in Section 7.4 hereof
shall have been executed and delivered.
(e) The Registration Rights Agreement and Warrant Registration
Rights Agreement referred to in Section 7.3 hereof shall have been executed
and delivered.
(f) The Merger shall have been duly approved by the requisite
vote of Applied Optronics shareholders.
(g) All of Applied Optronics Class A,B,C,D and E Warrants and
all outstanding stock options shall have been cancelled.
8.2. Conditions to Obligation of Applied Optronics to Effect the
Merger. The obligation of Applied Optronics to effect the Merger shall be
further subject to the satisfaction at or prior to the Closing Date of the
following additional conditions, any of which may be waived by Applied
Optronics in writing pursuant to Section 9.3:
(a) Each of ESC and Acquisition Sub shall have performed in all
material respects its obligations under this Agreement required to be
performed by it at or prior to the Closing Date and the representations and
warranties of ESC and Acquisition Sub contained in this Agreement shall be
true and correct in all material respects at and as of the Closing Date as
if made at and as of such time, except as contemplated by this Agreement,
and Applied Optronics shall have received a certificate signed by the
President, any Vice President or the Chief Financial Officer of ESC as to
the satisfaction of this condition.
(b) Applied Optronics shall have received opinions, dated
as of the Closing, of Xxxxxx & Xxxxxx and Kleinhendler & Halevy,
counsel for ESC, substantially in the forms attached hereto as Exhibit
8.2(b), and an opinion of Kleinhendler & Halevy, Israeli counsel for ESC,
in form and substance reasonably satisfactory to Applied Optronics, to the
effect that under current Israeli law, no shareholder of Applied Optronics,
unless he is otherwise subject to Israeli taxes, will become so subject by
virtue of the acquisition or disposition of the Ordinary Shares or Warrants
(or Ordinary Shares underlying the Warrants) received in connection with
the transactions contemplated by this Agreement.
(c) Applied Optronics shall have received the consents and
approvals referred to in Section 5.4.
8.3. Conditions to Obligations of ESC and Acquisition Sub to Effect
the Merger. The obligations of ESC and Acquisition Sub to effect the Merger
shall be further subject to the satisfaction at or prior to the Closing
Date of the following additional conditions, any of which may be waived by
ESC in writing pursuant to Section 9.3:
(a) Applied Optronics shall have performed in all material
respects its obligations under this Agreement required to be performed and
complied with by it at or prior to the Closing Date and the representations
and warranties of Applied Optronics contained in this Agreement shall be
true and correct in all material respects at and as of the Closing Date as
if made at and as of such time, except as contemplated by this Agreement,
and ESC and Acquisition Sub shall have received a certificate signed by the
President or any Vice President of Applied Optronics as to the satisfaction
of this condition.
(b) Applied Optronics shall have obtained and delivered to ESC
the consent or approval of each person whose consent or approval shall be
required in order to permit the consummation of the Merger.
(c) ESC and Acquisition Sub shall have received an opinion,
dated as of the Closing, of Xxxxxxx, Lippe, Goldstein, Wolf & Xxxxxxxxx,
P.C., counsel for Applied Optronics, substantially in the form attached
hereto as Exhibit 8.3(c).
(d) There shall not have occurred following the date of this
Agreement and prior to the Closing Date any change, or any event involving
a prospective change, in Applied Optronics' business, assets, financial
condition or results of operations which has had, or is reasonably likely
to have, a Material Adverse Effect.
(e) ESC and ESC's financial advisors, legal counsel,
accountants, consultants and other representatives shall have been afforded
access to information concerning Applied Optronics' business pursuant to
Section 7.1, shall have had an opportunity to conduct a thorough due
diligence review, and shall not discover any matter not disclosed or made
available to ESC as of the date hereof, which matter could have a Material
Adverse Effect on AOC.
(f) ESC and its counsel shall have reasonably concluded, based
on the representations and warranties of Applied Optronics set forth
herein, the investment letters referred to in Section 6.4 hereof, and such
other information as they deem relevant, that the Merger Consideration may
be issued, under the circumstances contemplated by this Agreement, without
registration under the Securities Act of 1933, as amended.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1. Termination. This Agreement may be terminated and the
Merger contemplated hereby abandoned at any time prior to the Closing
Date:
(a) by mutual written consent of ESC, Acquisition Sub and
Applied Optronics;
(b) by either ESC and Acquisition Sub, on the one hand, or
Applied Optronics, on the other hand, if the Merger shall not have
been consummated on or before December 31, 1997;
(c) by Applied Optronics if there shall have been any material
breach of a representation and warranty or material obligation of ESC
or Acquisition Sub hereunder and, if such breach is curable, such
default shall have not been remedied within ten days after receipt by
ESC of notice in writing from Applied Optronics specifying such
breach and requesting that it be remedied;
(d) by ESC and Acquisition Sub if there shall have been any
material breach of a representation and warranty or material
obligation of Applied Optronics hereunder and, if such breach is
curable, such default shall not have been remedied within ten days
after receipt by Applied Optronics of notice in writing from ESC or
Acquisition Sub specifying such breach and requesting that it be
remedied; or
(e) by either ESC or Applied Optronics if any court of
competent jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or any other
action shall have become final and non-appealable; provided, that the
party seeking to terminate this Agreement pursuant to this clause (e)
shall have used all reasonable efforts to remove such order, decree
or ruling.
9.2. Effect of Termination. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become of no
further effect and, except for a termination resulting from a breach by a
party of this Agreement, there shall be no liability or obligation on the
part of either ESC, Acquisition Sub or Applied Optronics or their
respective officers or directors. Moreover, in the event of termination of
this Agreement pursuant to Section 9.1(c) or (d), nothing herein shall
prejudice the ability of the non-breaching party from seeking damages from
the other party for any breach of this Agreement, including, without
limitation, attorneys' fees and the right to pursue any remedy at law or in
equity.
9.3. Amendment; Extension; Waiver. At any time prior to the Closing
Date, the parties hereto may, consistent with the provisions of the DGCL,
(a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document
delivered pursuant hereto, (c) waive compliance with any of the agreements
or conditions contained herein, and (d) amend this Agreement in any
respect. Any agreement on the part of a party hereto to any such extension,
waiver or amendment shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Such waiver shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
ARTICLE X
GENERAL PROVISIONS
10.1. Survival of Representations and Warranties. The
representations and warranties contained herein shall survive the
Closing and continue in effect for a period of one year after the Closing
Date.
10.2. Brokers.
(a) Applied Optronics represents and warrants to ESC and
Acquisition Sub that no broker, finder or financial advisor is entitled to
any brokerage, finder's or other fee or commission in connection with the
Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Applied Optronics.
(b) ESC represents and warrants to Applied Optronics that no
broker, finder or financial advisor is entitled to any brokerage, finder's
or other fee or commission in connection with the Merger or the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of ESC.
10.3. Notices. All notices, claims, demands and other
communications hereunder shall be in writing and shall be deemed
given if delivered personally or by telex or telecopy or mailed by
registered or certified mail (postage prepaid, return receipt requested) to
the respective parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) If to ESC or Acquisition Sub, to:
ESC Medical Systems Ltd.
X.X. Xxx 000
Xxxxxxx Xxxxxxxxxx Xxxx
Xxxxxxx, Xxxxxx 00000
Attention: Xx. Xxxxxx Xxxxxxxx
President and Chief Executive Officer
with a copy to:
Xxxxxx & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
(b) If to Applied Optronics, to:
Applied Optronics Corporation
000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxx 0
Xxxxx Xxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx, Xx.
President and Chief Executive Officer
with a copy to:
Xxxxxxx, Lippe, Goldstein, Wolf & Xxxxxxxxx, P.C.
The Chancery
000 Xxxxxx Xxxxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
10.4. Descriptive Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
10.5. Entire Agreement; Assignment. This Agreement (including the
Exhibits, Schedules and other documents and instruments referred to herein)
(a) constitutes the entire agreement and supersedes all other prior
agreements and understandings, both written and oral, among the parties or
any of them, with respect to the subject matter hereof; (b) is not intended
to confer upon any other person any rights or remedies hereunder; and (c)
shall not be assigned by operation of law or otherwise, provided that ESC
or Acquisition Sub may assign its rights and obligations hereunder to a
direct or indirect United States subsidiary of ESC, but no such assignment
shall relieve ESC or Acquisition Sub, as the case may be, of its
obligations hereunder. Any information disclosed under any section number
in the disclosure schedules attached to this Agreement shall be deemed
disclosed under and incorporated into any other section number where such
information would be appropriate. Terms defined in this Agreement shall
have the same meanings when used in the disclosure schedules unless the
context requires otherwise.
10.6. Governing Law; Procedural Matters. This Agreement shall be
governed by and construed in accordance with the laws of the State of New
York without giving effect to the provisions thereof relating to conflicts
of law. Any suit, action or proceeding arising out of or relating to the
enforcement of this Agreement and any action or proceeding to execute or
otherwise enforce any judgment obtained in connection herewith or therewith
shall be instituted in any state or federal court situated in the State of
New York having jurisdiction, and by execution and delivery of this
Agreement, each of the parties hereto irrevocably submits to the
jurisdiction of each such court for the purpose of any such suit, action or
proceeding. Each of the parties hereto hereby further irrevocably consents
to the service of process in any such suit, action or proceeding in said
courts by the mailing thereof by any other party by registered or certified
mail, postage prepaid, to such party at its address for notice specified in
Section 10.3 above. Each of the parties hereto hereby irrevocably waives
any objection which it may now or hereafter have to laying of venue of any
suit, action or proceeding arising out of or relating to the enforcement of
this Agreement brought in state or federal court situated in the State of
New York, and hereby further irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
10.7. Parties in Interest. Nothing in this Agreement, express
or implied, is intended to or shall confer upon any other person any
rights, benefits or remedies of any nature whatsoever or by reason of
this Agreement.
10.8. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original
but all of which shall constitute one and the same agreement.
10.9. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provisions of this Agreement, which shall
remain in full force and effect.
10.10.Investigation. The respective representations and warranties of
ESC, Acquisition Sub and Applied Optronics contained herein or in the
certificates or other documents delivered at or prior to the Closing shall
not be deemed waived or otherwise affected by any investigation made by any
party hereto.
10.11.Remedies. The parties agree that irreparable damage would
result if any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of New York or in New York state court,
this being in addition to any other remedy to which the parties are
entitled at law or in equity.
10.12.Consents. For purposes of any provision of this
Agreement requiring, permitting or providing for consent of ESC or
Applied Optronics, the written consent of the Chief Executive Officer
or Chief Financial Officer of ESC or Applied Optronics, as the case may be,
shall be sufficient to evidence such consent.
10.13.Knowledge; No Personal Liability. As used in this Agreement or
the instruments, certificates or other documents required hereunder, the
term "knowledge" shall mean actual knowledge of a fact or the knowledge
that such person or, if such person is a corporation, its directors,
officers or other key employees having responsibility for principal
business functions of the corporation could reasonably be expected to have
based on reasonable investigation and inquiry; provided, that such
directors, officers and employees shall have no personal liability (except
for fraud) for any representations, warranties or covenants made herein or
pursuant hereto. The knowledge of an entity shall be deemed to include the
knowledge of its subsidiaries. Nothing contained in this Agreement shall be
deemed to impose any personal liability on any shareholders of Applied
Optronics, except in the event of fraud and except as provided in the
Escrow Agreement.
IN WITNESS WHEREOF, each of ESC, Acquisition Sub and Applied
Optronics has caused this Agreement to be executed on its behalf by its
officers thereunto duly authorized, all as of the date first above written.
ESC MEDICAL SYSTEMS LTD.
By: _______________________________
Name: Xxxxxx Xxxxxxxx
Title: Executive Vice President
AOC ACQUISITION CORP.
By:_______________________________
Name: Xxxxxx Xxxxxxxx
APPLIED OPTRONICS CORPORATION
By:_______________________________
Name: Xxxxxx Xxxxxxx, Xx.
Title: President and
Chief Executive Officer
EXHIBIT 6.4
INVESTOR REPRESENTATION
This representation letter is being provided in connection with the
proposed merger (the "Merger") of Applied Optronics Corporation ("Applied
Optronics") with and into AOC Acquisition Corp., a wholly-owned subsidiary
of ESC Medical Systems Ltd. ("ESC"). If the Merger is approved each
stockholder of Applied Optronics will be entitled to receive Ordinary
Shares of ESC (the "Ordinary Shares") and warrants (the "Warrants") to
purchase Ordinary Shares of ESC (collectively, the "Shares") in exchange
for the shares of Applied Optronics that they currently hold.
ESC intends to issue Shares in connection with the Merger without
registration under the Securities Act of 1933, as amended ("Securities
Act"), in reliance on certain provisions of the Securities Act and
Regulation D promulgated thereunder that provide exemption from
registration. The purpose of this Investor Representation is to permit ESC
to determine whether you meet the "accredited investor" standards imposed
by Regulation D. ESC's reliance upon the exemption provided by Regulation D
will be based in part on the information herein supplied. In addition, by
your signature below, you are asked to designate Xxxxxxx X Xxxxxxxx as your
representative, agent and attorney-in-fact in connection with the Escrow
Agreement referred to in Section 3 below.
Please complete fully, sign, date and return this Investor
Representation to Xxxxx Xxxxxxxx, Esq., Xxxxxxx, Lippe, Goldstein,
Wolf & Xxxxxxxx, P.C., 000 Xxxxxx Xxxxxx, Xxxxxxx, Xxx Xxxx
00000.
Section 1. Investment Representations.
The undersigned certifies that the undersigned qualifies as an
"accredited investor" within the meaning of Rule 501(a) of Regulation D
promulgated under the Securities Act, for the reason(s) set forth in the
checklist below.
(a) The undersigned is (check each applicable condition):
____ a natural person whose individual net worth, or joint net worth
together with such person's spouse, exceeds $1,000,000 at the
time of purchase;
____ a natural person with individual income in excess of $200,000 in
each of the two most recent years or joint income with such
person's spouse in excess of $300,000 in each such year and with
a reasonable expectation of reaching the same level of income in
the current year;
____ a bank;
____ a savings and loan association;
____ a broker-dealer registered under the Securities
Exchange Act of 1934;
____ an insurance company;
____ an investment company registered under the
Investment Company Act of 1940 (the "1940
Act");
____ a business development company, as defined in
section 2(a) (48) of the 1940 Act, each of whose
equity owners has a net worth in excess of
$1,000,000;
____ a Small Business Investment Company;
____ an employee benefit plan with total assets in excess of
$5,000,000 which is established or maintained by a state,
political subdivision or their agencies or instrumentalities;
____ a private business development company, as
defined in section 202(a) (22) of the Investment
Advisors Act of 1940;
____ an organization as described in Section 501(c) (3) of the
Internal Revenue Code, corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific
purpose of acquiring the Shares, with total assets in excess of
$5,000,000;
____ a director or executive officer of ESC;
____ a trust with assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Shares, whose purchase is
directed by a person who has such knowledge and experience in
financial and business matters that he is capable of evaluating
the merits and risks of an investment in the Shares;
_____ an entity in which all of the equity owners meet
one or more of the above criteria.
(b) The undersigned is acquiring the Shares for investment purposes
only, solely for the account of the undersigned and not with a
view to, or for resale in connection with, the distribution or
other disposition thereof;
(c) The knowledge and experience of the undersigned in financial and
business matters are such that the undersigned is capable of
evaluating the merits and risks of its investment in the Shares,
and has made its own independent valuation with respect to the
value of the Shares; the undersigned understands that the Shares
are a speculative investment which involves a high degree of risk
of loss of the investment therein, the undersigned's financial
situation is such that the undersigned can afford to bear the
economic risk of holding the Shares acquired by the undersigned
hereunder for an indefinite period of time, has adequate means
for providing for the current needs and contingencies of the
undersigned and can afford to suffer the complete loss of the
investment in the Shares;
(d) The undersigned and the representatives of the undersigned,
including the financial, tax, legal and other advisers, have
carefully reviewed all documents furnished to them in connection
with the investment in the Shares, and the undersigned
understands and has taken cognizance of all the risk factors
related to such investment, and no representations or warranties
have been made to the undersigned or the representatives of the
undersigned concerning such investment or ESC, its prospects or
other matters;
(e) The undersigned and the representatives of the undersigned have
been given the opportunity to examine all documents and to ask
questions of, and to receive answers from, ESC and its
representatives concerning the terms and conditions of the
acquisition of the Shares and the business of ESC and to obtain
any additional information which the undersigned or the
representatives of the undersigned deem necessary to verify the
accuracy of the information that has been provided to the
undersigned in order for the undersigned to evaluate the merits
and risk of the investment in the Shares;
(f) The undersigned understands that no federal agency (including the
Securities and Exchange Commission), state agency or foreign
agency has made or will make any finding or determination as to
the fairness of an investment in the Shares (including as to the
purchase price).
Section 2. Transfer Restrictions.
(a) The undersigned understands that the offer and sale of the Shares
have not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), by virtue of Section 4(2) of the
Securities Act, or under the securities laws of any state of the
United States or of any foreign jurisdiction;
(b) The undersigned understands that no resales of the Shares may be
effected unless the resale of such Shares is registered under the
Securities Act or an exemption therefrom is available and all
applicable state and foreign securities laws are complied with;
(c) The undersigned understands that the Shares are subject to
Registration Rights Agreement under which ESC will not be
required to provide an effective registration statement for the
resale of the Shares until nine (9) months after the closing of
the Merger;
(d) The undersigned understands that Rule 144 promulgated under the
Securities Act is not available until one year after consummation
of the Merger with respect to the Ordinary Shares and until one
year after exercise of the Warrants with respect to the Ordinary
Shares covered thereby.
(e) The undersigned understands that the following restrictive legend
shall be placed on the certificates representing the Shares
acquired by the undersigned hereunder:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
OTHER SECURITIES LAWS. SUCH SHARES MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION FROM SAID ACT OR SUCH OTHER LAWS AND, IF REQUESTED
BY THE ISSUER, AN OPINION OF COUNSEL SELECTED BY THE HOLDER AND
REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS
NOT REQUIRED, OR IS EXEMPT FROM SAID ACT OR SUCH OTHER LAWS; and
(f) The undersigned understands that a notation shall be made in the
appropriate records of ESC, indicating that the Shares are
subject to restrictions on transfer and appropriate stop-transfer
instructions will be issued to the transfer agent with respect to
the Shares.
Section 3. Escrow Representative.
By signing this Investor Representation, you hereby agree to appoint
Xxxxxxx X. Xxxxxxxx as your representative, agent, and attorney-in-fact
(the "Representative") to represent you, exercise your rights, and perform
your obligations for all purposes under the Escrow Agreement which has been
provided to you herewith.
(SIGNATURE PAGE FOLLOWS)
Name of Stockholder: _______________________
Signatory Name: _______________________
Address: _______________________
_______________________
_______________________
Telephone number: _______________________
Facsimile: _______________________
Authorized Signature: _______________________
PLEASE INDICATE ANY SPECIAL STOCK ISSUANCE INSTRUCTIONS BELOW. UNLESS
OTHERWISE INDICATED, THE SHARES WILL BE ISSUED IN THE NAME SET FORTH ABOVE.
EXHIBIT 8.2(B)
[Form of Xxxxxx & Xxxxxx Opinion]
December __, 1997
Applied Optronics Corporation
000 Xxxxxxxxx Xxxxxxxxx, Xxxxxxxx X
Xxxxx Xxxxxxxxxx, Xxx Xxxxxx 00000
Ladies and Gentlemen:
We have served as United States counsel to ESC Medical Systems Ltd.,
an Israeli corporation ("ESC") and as counsel to AOC Acquisition Corp., a
Delaware corporation ("Acquisition Sub") in connection with the merger (the
"Merger") of Applied Optronics Corporation ("Applied Optronics") with and
into Acquisition Sub. The Merger is being effected pursuant to an Agreement
and Plan of Merger, dated as of November 20, 1997, by and among ESC,
Acquisition Sub and Applied Optronics (the "Merger Agreement"). This letter
is provided to you pursuant to Section 8.2(b) of the Merger Agreement.
Capitalized terms used herein without definition shall have the meanings
attributed to such terms in the Merger Agreement.
In connection with rendering the opinions set forth in this letter,
we have examined and/or relied upon the following documents (the
"Documents"):
1. A fully executed copy of the Merger Agreement (including the
schedules and exhibits attached thereto);
2. The Articles of Merger (the "Articles of Merger"), dated December
__, 1997, executed by Acquisition Sub and Applied Optronics;
3. The Ordinary Shares Purchase Warrant, dated as of the Closing
Date, executed by ESC (the "Ordinary Shares Purchase Warrant");
4 The Registration Rights Agreement, dated as of the Closing Date,
by and among ESC and Applied Optronics (the "Registration Rights
Agreement");
5. The Warrant Registration Rights Agreement, dated as of the Closing
Date, by and among ESC and Applied Optronics (the "Warrant Registration
Rights Agreement");
6. The Escrow Agreement, dated as of the Closing Date, by and among
ESC, Applied Optronics, the Representative of the stockholders of Applied
Optronics and the Escrow Agent (the "Escrow Agreement");
7. A copy of the Articles of Incorporation of Acquisition Sub, dated
November 17, 1997 (the "Articles of Incorporation") and Bylaws of
Acquisition Sub (the "Bylaws"), each certified by an officer of Acquisition
Sub as being in full force and effect as of the Closing Date;
8. A Certificate of Existence/Authorization dated
November 17, 1997, issued by the Secretary of State of the State
of Delaware with respect to Acquisition Sub;
9. Resolutions adopted by the Board of Directors of Acquisition Sub
on November 20, 1997, certified by an officer of Acquisition Sub as being
in full force and effect as of the Closing Date;
10. Resolutions adopted by the Board of Directors of ESC on November
__, 1997, certified by an officer of ESC as being in full force and effect
as of the Closing Date;
11. Copies of all other certificates and documents delivered by ESC
and Acquisition Sub to Applied Optronics in connection with the closing of
the Merger.
Items 1 through 6 are referred to as the "Transaction Documents." We
express no opinion with respect to any document other than the Transaction
Documents, the Articles of Incorporation and the Bylaws, and we have not
reviewed any documents for the purposes of this opinion other than the
documents identified as items 1 through 11 and certificates of public
officials, including, without limitation, those described in item 8 above.
We have assumed without verification the genuineness of all
signatures on all documents, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity
to original documents of all documents submitted to us as copies and the
authenticity of the originals of such copies, as well as the due and valid
authorization, execution and delivery of these documents (other than the
authorization, execution and delivery of the Transaction Documents by ESC
and Acquisition Sub).
The term "actual knowledge" or "our actual knowledge" means such
current, conscious knowledge as we have obtained from our examination of
the documents described above and of attorneys presently in our office who
have been involved in substantive legal representation of ESC during the
six months prior to the date of this letter.
In connection with the opinions set forth below, we have examined and
relied exclusively as to certain factual matters upon the items referred to
in Items 1 through 11 above, including without limitation the accuracy and
completeness of the representations and warranties of the parties to the
Merger Agreement. We have not verified any factual matters in connection
with or apart from our review of the documents and matters listed above,
and accordingly, we do not express any opinion or belief as to matters that
might have been disclosed by such verification.
Members of our firm are admitted to the bar in the State of New York,
and we do not express any opinion as to matters arising under the laws of
any jurisdiction other than the federal laws of the United States of
America, the State of New York and the Delaware General Corporation Law.
To the extent that the opinions set forth below relate to matters of
Israeli law, we have relied, with your consent, solely on the opinion of
Kleinhendler & Halevy, Advocates, a copy of which is attached hereto. We
believe we and Applied Optronics are justified in relying on such opinion.
Based solely on the foregoing, and subject to the assumptions and
qualifications set forth herein, we are of the opinion that:
1. Acquisition Sub is duly incorporated, validly existing
and in good standing under the laws of the State of Delaware.
2. Acquisition Sub has all necessary corporate power and corporate
authority to execute and deliver the Transaction Documents to which it is a
party and to perform its obligations under such Transaction Documents. The
execution, delivery and performance of the Transaction Documents have been
duly authorized by all necessary corporate and shareholder action on the
part of Acquisition Sub.
3. The Transaction Documents have been duly executed and delivered by
Acquisition Sub, and the Transaction Documents constitute the legal, valid
and binding obligations of Acquisition Sub, enforceable against it in
accordance with their respective terms, except (A) to the extent that
enforcement thereof may be limited by (x) bankruptcy, insolvency,
reorganization, moratorium and similar laws now or hereafter in effect
relating to creditors' rights generally and (y) general principles of
equity (regardless of whether enforceability is considered in a proceeding
at law or in equity) and (B) the enforceability of any rights to indemnity
and contribution thereunder may be limited by United States federal or
state securities laws or the public policy underlying such laws.
4. The consummation of the Merger of Applied Optronics with and into
Acquisition Sub does not (a) result in a violation of the Articles of
Incorporation or Bylaws of Acquisition Sub, or (b) to our actual knowledge,
violate, breach or result in a default under any law, regulation or decree
of any governmental authority or any judgment, decree or order of a court
or agency of competent jurisdiction by which Acquisition Sub or ESC is
bound. The execution, delivery and performance of the Merger Agreement will
not constitute a breach of or default under any mortgage, deed of trust,
lease, loan or credit agreement, or any other agreement, document or
instrument of which we have actual knowledge to which Acquisition Sub or
ESC may be subject or by which Acquisition Sub or ESC may be bound.
5. Upon filing of the Articles of Merger with the Secretary of State
of the State of Delaware, the Merger contemplated by the Articles of Merger
will become effective as of the date set forth in the Plan of Merger in
accordance with its terms.
6. Except as disclosed in the Merger Agreement, delivery and
performance of the Transaction Documents by ESC or the Acquisition Sub does
not require the consent, approval or other authorization of, or filing or
registration with, any court or governmental agency, commission or other
authority.
7. To our actual knowledge, there are no pending or overtly
threatened actions, suits, claims or other proceedings before or by any
court, governmental agency or arbitrator which would have a material
adverse effect on the business of ESC or Acquisition Sub that have not been
disclosed in ESC's public filings. To our actual knowledge, ESC and
Acquisition Sub are not in default with respect to any order, writ,
injunction or decree of any court, governmental agency or arbitrator.
This letter is given for the sole benefit of Applied Optronics and
its counsel pursuant to Section 8.2(b) of the Merger Agreement, and may not
be relied upon by any other person or entity, other than Kleinhendler &
Halevy, and may not be used, circulated, quoted or otherwise referred to
for any purpose without our express written consent. The opinions expressed
herein are limited to present statutes and regulations and judicial
interpretations thereof and to the facts as they presently exist.
Neither you nor any other person to whom we may grant our consent to
rely upon this opinion may rely upon any portion of this opinion which such
person knows to be false or has information which would make reliance upon
such portion of the opinion unreasonable in the circumstances. We expressly
disclaim any obligation to advise you of any changes or developments in
matters of law or fact covered by this opinion that occur after the date
hereof.
