AGREEMENT AND PLAN OF MERGER
AMONG
GE MEDICAL SYSTEMS
A DIVISION OF
GENERAL ELECTRIC COMPANY,
RUBY MERGER CORP.
AND
IMATRON INC.
DATED AS OF SEPTEMBER 21, 2001
TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER
PAGE
ARTICLE I PLAN OF MERGER.......................................................................1
Section 1.1 THE MERGER...........................................................1
Section 1.2 EFFECTIVE TIME.......................................................2
Section 1.3 EFFECTS OF THE MERGER................................................2
Section 1.4 CHARTER AND BY-LAWS; DIRECTORS AND OFFICERS..........................2
Section 1.5 CONVERSION OF SECURITIES.............................................2
Section 1.6 PARENT TO MAKE CERTIFICATES AVAILABLE................................3
Section 1.7 DIVIDENDS; TRANSFER TAXES; WITHHOLDING...............................4
Section 1.8 NO FRACTIONAL SECURITIES.............................................5
Section 1.9 RETURN OF EXCHANGE FUND..............................................5
Section 1.10 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK..................5
Section 1.11 CLOSING OF COMPANY TRANSFER BOOKS....................................6
Section 1.12 LOST CERTIFICATES....................................................6
Section 1.13 FURTHER ASSURANCES...................................................6
Section 1.14 CLOSING..............................................................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.....................................7
Section 2.1 ORGANIZATION, STANDING AND POWER.....................................7
Section 2.2 AUTHORITY............................................................7
Section 2.3 CONSENTS AND APPROVALS; NO VIOLATION.................................8
Section 2.4 PARENT COMMON STOCK TO BE ISSUED IN THE MERGER.......................9
Section 2.5 SEC DOCUMENTS AND OTHER REPORTS......................................9
Section 2.6 REGISTRATION STATEMENT AND PROXY STATEMENT...........................9
Section 2.7 BROKERS.............................................................10
Section 2.8 ABSENCE OF CERTAIN CHANGES OR EVENTS................................10
Section 2.9 REORGANIZATION......................................................10
Section 2.10 OPERATIONS OF SUB...................................................10
Section 2.11 OWNERSHIP OF COMPANY COMMON STOCK...................................10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................10
Section 3.1 ORGANIZATION, STANDING AND POWER....................................11
Section 3.2 CAPITAL STRUCTURE...................................................11
Section 3.3 AUTHORITY...........................................................13
Section 3.4 CONSENTS AND APPROVALS; NO VIOLATION................................14
Section 3.5 SEC DOCUMENTS AND OTHER REPORTS.....................................15
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TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 3.6 REGISTRATION STATEMENT AND PROXY STATEMENT..........................15
Section 3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS................................16
Section 3.8 PERMITS AND COMPLIANCE..............................................16
Section 3.9 TAX MATTERS.........................................................18
Section 3.10 ACTIONS AND PROCEEDINGS.............................................20
Section 3.11 CERTAIN AGREEMENTS..................................................21
Section 3.12 ERISA...............................................................22
Section 3.13 COMPLIANCE WITH WORKER SAFETY LAWS..................................25
Section 3.14 LIABILITIES; PRODUCTS...............................................25
Section 3.15 LABOR MATTERS.......................................................26
Section 3.16 INTELLECTUAL PROPERTY...............................................27
Section 3.17 OPINION OF FINANCIAL ADVISOR........................................29
Section 3.18 STATE TAKEOVER STATUTES.............................................29
Section 3.19 REQUIRED VOTE OF COMPANY SHAREHOLDERS...............................29
Section 3.20 REORGANIZATION......................................................29
Section 3.21 ACCOUNTS RECEIVABLE.................................................29
Section 3.22 INVENTORIES.........................................................30
Section 3.23 ENVIRONMENTAL MATTERS...............................................30
Section 3.24 SUPPLIERS AND DISTRIBUTORS..........................................31
Section 3.25 INSURANCE...........................................................32
Section 3.26 TRANSACTIONS WITH AFFILIATES........................................33
Section 3.27 ACCURACY OF INFORMATION.............................................33
Section 3.28 TITLE TO AND SUFFICIENCY OF ASSETS..................................34
Section 3.29 BROKERS.............................................................34
Section 3.30 REPRESENTATIONS AND WARRANTIES WITH RESPECT TO OPERATIONS OUTSIDE
OF THE UNITED STATES................................................35
Section 3.31 CODING..............................................................35
Section 3.32 ACTIONS BY THE BOARD OF DIRECTORS...................................35
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS...........................................35
Section 4.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER...............35
Section 4.2 NO SOLICITATION.....................................................38
Section 4.3 THIRD PARTY STANDSTILL AGREEMENTS...................................39
Section 4.4 REORGANIZATION......................................................40
ARTICLE V ADDITIONAL AGREEMENTS...............................................................40
Section 5.2 PREPARATION OF THE REGISTRATION STATEMENT AND THE PROXY STATEMENT...40
Section 5.3 ACCESS TO INFORMATION...............................................41
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TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 5.4 RULE 145 LETTERS....................................................42
Section 5.5 STOCK EXCHANGE LISTINGS.............................................42
Section 5.6 FEES AND EXPENSES...................................................42
Section 5.7 COMPANY STOCK OPTIONS...............................................44
Section 5.8 REASONABLE BEST EFFORTS.............................................46
Section 5.9 PUBLIC ANNOUNCEMENTS................................................47
Section 5.10 STATE TAKEOVER LAWS.................................................47
Section 5.11 INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE...................47
Section 5.12 NOTIFICATION OF CERTAIN MATTERS.....................................48
Section 5.13 SUSPENSION OF 1994 EMPLOYEE STOCK PURCHASE PLAN.....................49
ARTICLE VI CONDITIONS PRECEDENT TO THE MERGER..................................................49
Section 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER..........49
Section 6.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER........50
Section 6.3 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE MERGER....51
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER...................................................53
Section 7.1 TERMINATION.........................................................53
Section 7.2 EFFECT OF TERMINATION...............................................55
Section 7.3 AMENDMENT...........................................................55
Section 7.4 WAIVER..............................................................56
ARTICLE VIII GENERAL PROVISIONS..................................................................56
Section 8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES; NO OTHER
REPRESENTATIONS AND WARRANTIES......................................56
Section 8.2 NOTICES.............................................................56
Section 8.3 INTERPRETATION......................................................57
Section 8.4 COUNTERPARTS........................................................58
Section 8.5 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES......................58
Section 8.6 GOVERNING LAW.......................................................58
Section 8.7 ASSIGNMENT..........................................................58
Section 8.8 SEVERABILITY........................................................58
Section 8.9 ENFORCEMENT OF THIS AGREEMENT.......................................59
Section 8.10 PERFORMANCE BY SUB..................................................59
Section 8.11 DEFINED TERMS.......................................................59
iii
LIST OF EXHIBITS
DESCRIPTION
Exhibit A - Stock Option Agreement...............................................................Recital C
Exhibit B - Shareholder Agreement................................................................Recital C
Exhibit C - Plan of Merger.....................................................................Section 1.2
Exhibit D - Certificate of Incorporation.......................................................Section 1.4
Exhibit E - Rule 145 Letter....................................................................Section 5.4
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of September 21, 2001
(this "AGREEMENT"), is among General Electric Company, a
New York corporation
("PARENT"), Ruby Merger Corp., a New Jersey corporation and a wholly-owned
subsidiary of Parent ("SUB"), and
Imatron Inc., a New Jersey corporation (the
"COMPANY") (Sub and the Company being hereinafter collectively referred to as
the "CONSTITUENT CORPORATIONS").
RECITALS:
A. The respective Boards of Directors of Parent, Sub and the Company
have approved and declared advisable the merger of Sub with and into the
Company upon the terms and subject to the conditions of this Agreement (the
"MERGER"), and the respective Boards of Directors of Parent, Sub and the
Company have approved and adopted this Agreement;
B. Based upon their expectations that the Merger will further certain
business objectives of the Sub and the Company (including, without
limitation, diversification and the realization of economies of scale), the
respective Boards of Directors of Sub and the Company have determined that
the Merger is in the best interest of their respective shareholders;
C. In order to induce Parent and Sub to enter into this Agreement,
concurrently herewith (i) Parent and the Company are entering into the Stock
Option Agreement dated as of the date hereof (the "STOCK OPTION AGREEMENT")
in the form of the attached EXHIBIT A and (ii) Parent and certain of the
shareholders of the Company are entering into the Shareholder Agreement dated
as of the date hereof (the "SHAREHOLDER AGREEMENT") in the form of the
attached EXHIBIT B; and
D. For federal income tax purposes, it is intended by the parties
hereto that the Merger shall qualify as a "reorganization" within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder (the "CODE").
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
PLAN OF MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions
hereof, and in accordance with the New Jersey Business Corporation Act (the
"NJBCA"),
Sub shall be merged with and into the Company at the Effective Time (as
defined in Section 1.2). Following the Merger, the separate corporate
existence of Sub shall cease and the Company shall continue as the surviving
corporation (the "SURVIVING CORPORATION") and shall succeed to and assume all
the rights and obligations of Sub in accordance with the NJBCA.
Notwithstanding anything to the contrary herein, at the election of Parent,
any direct wholly-owned Subsidiary (as hereinafter defined) of Parent may be
substituted for Sub as a constituent corporation in the Merger. In such
event, the parties agree to execute an appropriate amendment to this
Agreement, in form and substance reasonably satisfactory to Parent and the
Company, in order to reflect such substitution.
SECTION 1.2 EFFECTIVE TIME. The Merger shall become effective when
the certificate of merger (the "CERTIFICATE OF MERGER"), executed in
accordance with the relevant provisions of the NJBCA, and attaching the "Plan
of Merger" in the form of EXHIBIT C, is filed with the Treasurer of the State
of New Jersey; PROVIDED, HOWEVER, that, upon mutual consent of the
Constituent Corporations, the Certificate of Merger may provide for a later
date of effectiveness of the Merger not more than 90 days after the date the
Certificate of Merger is filed. When used in this Agreement, the term
"EFFECTIVE TIME" shall mean the date and time at which the Certificate of
Merger is accepted for filing or such later time established by the
Certificate of Merger. The filing of the Certificate of Merger shall be made
on the date of the Closing (as defined in Section 1.14).
SECTION 1.3 EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in this Agreement and applicable provisions of the NJBCA.
SECTION 1.4 CHARTER AND BY-LAWS; DIRECTORS AND OFFICERS.
(a) The Certificate of Incorporation of the Company in effect at
the Effective Time will be amended in its entirety at the Effective Time to
read as set forth in EXHIBIT D hereto and shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law. The By-laws of Sub in
effect at the Effective Time will be the By-laws of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law.
(b) The directors of Sub at the Effective Time shall automatically,
and without further action, be the directors of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be. The officers
of Sub at the Effective Time shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
SECTION 1.5 CONVERSION OF SECURITIES. As of the Effective Time, by
virtue of the Merger and without any action on the part of Sub, the Company
or the holders of any securities of the Constituent Corporations:
2
(a) Each issued and outstanding share of common stock, no par value
per share, of Sub shall be converted into one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) All shares of Company Common Stock that are owned by Parent or
Sub shall automatically be canceled and retired and shall cease to exist and
no capital stock of Parent or other consideration shall be delivered in
exchange therefor.
(c) Subject to the provisions of Section 1.8 hereof, each share of
Common Stock, no par value per share, of the Company ("COMPANY COMMON STOCK")
issued and outstanding immediately prior to the Effective Time (other than
shares to be canceled in accordance with Section 1.5(b)) shall be converted
into the right to receive the number of shares of common stock, par value
$0.06 per share, of the Parent ("PARENT COMMON STOCK") determined by dividing
$1.89 by the Average Parent Share Price (as defined below) and rounding the
result to the nearest one thousandth of a share (the "MERGER CONSIDERATION");
provided, however, that if between the first day of the Valuation Period (as
defined below) and the Effective Time, the outstanding shares of Parent
Common Stock shall have been changed into a different number of shares or a
different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the Merger Consideration shall be correspondingly adjusted to the extent
appropriate to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares. The "AVERAGE
PARENT SHARE PRICE" means the average of the daily volume-weighted sales
prices per share of Parent Common Stock on the
New York Stock Exchange Tape
for each of the 10 consecutive trading days ending on the trading day which
is five calendar days prior to the Closing Date, or, if such ending date does
not fall on a trading day, then the trading day immediately preceding the
fifth calendar day prior to the Closing Date (the "VALUATION PERIOD"). All
such shares of Company Common Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and each holder
of a certificate representing any such shares shall cease to have any rights
with respect thereto, except the right to receive any dividends and other
distributions in accordance with Section 1.7, certificates representing the
shares of Parent Common Stock into which such shares are converted and any
cash, without interest, in lieu of fractional shares to be issued or paid in
consideration therefor upon the surrender of such certificate in accordance
with Section 1.6.
SECTION 1.6 PARENT TO MAKE CERTIFICATES AVAILABLE.
(a) EXCHANGE OF CERTIFICATES. Parent shall authorize a bank, trust
company, or such other person or persons as shall be reasonably acceptable to
Parent and the Company, to act as Exchange Agent hereunder (the "EXCHANGE
AGENT"). As soon as practicable after the Effective Time, Parent shall
deposit with the Exchange Agent, in trust for the holders of shares of
Company Common Stock converted in the Merger, certificates representing the
shares of Parent Common Stock issuable pursuant to Section 1.5(c) in exchange
for outstanding shares of Company Common Stock and cash, as required to make
payments in lieu of any fractional shares pursuant to Section 1.8 (such cash
and shares of Parent Common Stock, together with any dividends or
distributions
3
with respect thereto, being hereinafter referred to as the "EXCHANGE FUND").
The Exchange Agent shall deliver the Parent Common Stock contemplated to be
issued pursuant to Section 1.5(c) out of the Exchange Fund. Except as
contemplated by Section 1.9, the Exchange Fund shall not be used for any
other purpose.
(b) EXCHANGE PROCEDURES. As soon as practicable after the Effective
Time, the Exchange Agent shall mail to each record holder of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock converted in the Merger (the
"CERTIFICATES") a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon actual delivery of the Certificates to the Exchange Agent, and
shall contain instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent
Common Stock and cash in lieu of fractional shares). Upon surrender for
cancellation to the Exchange Agent of a Certificate held by any record holder
of a Certificate, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange
therefor a certificate representing that number of whole shares of Parent
Common Stock into which the shares represented by the surrendered Certificate
shall have been converted at the Effective Time pursuant to this Article I,
cash in lieu of any fractional share in accordance with Section 1.8 and
certain dividends and other distributions in accordance with Section 1.7, and
any Certificate so surrendered shall forthwith be canceled.
SECTION 1.7 DIVIDENDS; TRANSFER TAXES; WITHHOLDING. No dividends or
other distributions that are declared on or after the Effective Time on
Parent Common Stock, or are payable to the holders of record thereof on or
after the Effective Time, will be paid to any person entitled by reason of
the Merger to receive a certificate representing Parent Common Stock until
such person surrenders the related Certificate or Certificates, as provided
in Section 1.6, and no cash payment in lieu of fractional shares will be paid
to any such person pursuant to Section 1.8 until such person shall so
surrender the related Certificate or Certificates. Subject to the effect of
applicable law, there shall be paid to each record holder of a new
certificate representing such Parent Common Stock: (a) at the time of such
surrender or as promptly as practicable thereafter, the amount of any
dividends or other distributions theretofore paid with respect to the shares
of Parent Common Stock represented by such new certificate and having a
record date on or after the Effective Time and a payment date prior to such
surrender; (b) at the appropriate payment date or as promptly as practicable
thereafter, the amount of any dividends or other distributions payable with
respect to such shares of Parent Common Stock and having a record date on or
after the Effective Time but prior to such surrender and a payment date on or
subsequent to such surrender; and (c) at the time of such surrender or as
promptly as practicable thereafter, the amount of any cash payable with
respect to a fractional share of Parent Common Stock to which such holder is
entitled pursuant to Section 1.8. In no event shall the person entitled to
receive such dividends or other distributions be entitled to receive interest
on such dividends or other distributions. If any cash or certificate
representing shares of Parent Common Stock is to be paid to or issued in a
name other than that in which the Certificate surrendered in exchange
therefor is registered, it shall be a condition of such exchange that the
Certificate so surrendered
4
shall be properly endorsed and otherwise in proper form for transfer and that
the person requesting such exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of certificates
for such shares of Parent Common Stock in a name other than that of the
registered holder of the Certificate surrendered, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Parent or the Exchange Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement
to any holder of shares of Company Common Stock such amounts as Parent or the
Exchange Agent is required to deduct and withhold with respect to the making
of such payment under the Code or under any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Parent or the
Exchange Agent, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the shares of Company
Common Stock in respect of which such deduction and withholding was made by
Parent or the Exchange Agent.
SECTION 1.8 NO FRACTIONAL SECURITIES. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon
the surrender for exchange of Certificates pursuant to this Article I, and no
Parent dividend or other distribution or stock split shall relate to any
fractional share, and no fractional share shall entitle the owner thereof to
vote or to any other rights of a security holder of Parent. In lieu of any
such fractional share, each holder of Company Common Stock who would
otherwise have been entitled to a fraction of a share of Parent Common Stock
upon surrender of Certificates for exchange pursuant to this Article I will
be paid an amount in cash (without interest), rounded to the nearest cent,
determined by multiplying (a) the Average Parent Share Price by (b) the
fractional interest to which such holder would otherwise be entitled. As
promptly as practicable after the determination of the amount of cash, if
any, to be paid to holders of fractional share interests, the Exchange Agent
shall so notify the Parent, and the Parent shall deposit such amount with the
Exchange Agent and shall cause the Exchange Agent to forward payments to such
holders of fractional share interests subject to and in accordance with the
terms of Section 1.7 and this Section 1.8.
SECTION 1.9 RETURN OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the former shareholders of the Company for six
months after the Effective Time shall be delivered to Parent, upon demand of
Parent, and any such former shareholders who have not theretofore complied
with this Article I shall thereafter look only to Parent for payment of their
claim for Parent Common Stock, any cash in lieu of fractional shares of
Parent Common Stock and any dividends or distributions with respect to Parent
Common Stock. Neither Parent nor the Surviving Corporation shall be liable to
any former holder of Company Common Stock for any such shares of Parent
Common Stock, cash and dividends and distributions held in the Exchange Fund
which is delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
SECTION 1.10 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All
shares of Parent Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms hereof (including any cash paid
5
pursuant to Sections 1.7 and 1.8) shall be deemed to have been issued in full
satisfaction of all rights pertaining to the shares of Company Common Stock
represented by such Certificates.
SECTION 1.11 CLOSING OF COMPANY TRANSFER BOOKS. At the Effective Time,
the stock transfer books of the Company shall be closed and no transfer of
shares of Company Common Stock shall thereafter be made on the records of the
Company. If, after the Effective Time, Certificates are presented to the
Surviving Corporation, the Exchange Agent or the Parent, such Certificates
shall be canceled and exchanged as provided in this Article I.
SECTION 1.12 LOST CERTIFICATES. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent or the Exchange Agent, the posting by such person of a
bond, in such reasonable amount as Parent or the Exchange Agent may direct as
indemnity against any claim that may be made against them with respect to
such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the shares of Parent Common Stock, any cash
in lieu of fractional shares of Parent Common Stock to which the holders
thereof are entitled pursuant to Section 1.8 and any dividends or other
distributions to which the holders thereof are entitled pursuant to
Section 1.7.
SECTION 1.13 FURTHER ASSURANCES. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to
or under any of the rights, privileges, powers, franchises, properties or
assets of either of the Constituent Corporations, or (b) otherwise to carry
out the purposes of this Agreement, the Surviving Corporation and its proper
officers and directors or their designees shall be authorized to execute and
deliver, in the name and on behalf of either of the Constituent Corporations,
all such deeds, bills of sale, assignments and assurances and to do, in the
name and on behalf of either Constituent Corporation, all such other acts and
things as may be necessary, desirable or proper to vest, perfect or confirm
the Surviving Corporation's right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of such
Constituent Corporation and otherwise to carry out the purposes of this
Agreement.
SECTION 1.14 CLOSING. The closing of the transactions contemplated by
this Agreement (the "CLOSING") and all actions specified in this Agreement to
occur at the Closing shall take place at the offices of Xxxxxx, Xxxx &
Xxxxxxxx LLP, Xxx Xxxxxxxxxx Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, at
10:00 a.m., local time, no later than the second business day following the
day on which the last of the conditions set forth in Article VI shall have
been fulfilled or waived (if permissible) (the "CLOSING DATE") or at such
other time and place as Parent and the Company shall agree.
6
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
SECTION 2.1 ORGANIZATION, STANDING AND POWER. Each of Parent and Sub
is a corporation duly organized, validly existing and in good standing under
the laws of its place of incorporation and has the requisite corporate power
and authority to carry on its business as now being conducted. Each of Parent
and Sub are duly qualified to do business, and are in good standing, in each
jurisdiction where the character of their properties owned or held under
lease or the nature of their activities makes such qualification necessary,
except where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. For purposes of this
Agreement, "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means, when
used with respect to Parent, any change or effect that is or could reasonably
be expected (as far as can be foreseen at the time) to be materially adverse
to the business, operations, properties, assets, liabilities, employee
relationships, customer or supplier relationships, earnings or results of
operations, financial projections or forecasts, or the business prospects and
condition of Parent and its Subsidiaries, taken as a whole.
SECTION 2.2 AUTHORITY. On or prior to the date of this Agreement, the
Board of Directors of Sub shall have declared the Merger advisable and have
approved and adopted this Agreement in accordance with the NJBCA. Each of
Parent and Sub has all requisite corporate power and authority to enter into
this Agreement, Parent has all requisite corporate power and authority to
enter into the Stock Option Agreement and the Shareholder Agreement, and to
consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement by Parent and Sub, the execution and delivery
of the Stock Option Agreement and the Shareholder Agreement by Parent and the
consummation by Parent and Sub of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action
(including all Board action) on the part of Parent and Sub, subject to the
filing of appropriate Certificate of Merger as required by the NJBCA. This
Agreement has been duly executed and delivered by Parent and Sub, the Stock
Option Agreement and the Shareholder Agreement have been duly executed and
delivered by Parent, and (assuming the valid authorization, execution and
delivery of this Agreement and the Stock Option Agreement by the Company, the
valid authorization, execution and delivery of the Shareholder Agreement by
the shareholder of the Company that is a party thereto and the validity and
binding effect hereof and thereof on the Company and such shareholder) this
Agreement constitutes the valid and binding obligation of Parent and Sub
enforceable against each of them in accordance with its terms and the Stock
Option Agreement and the Shareholder Agreement constitute a valid and binding
obligation of Parent enforceable against Parent in accordance with its terms.
The filing of a registration statement on Form S-4 with the Securities and
Exchange Commission (the "SEC") by Parent under the Securities Act of 1933,
as amended (together with the rules and regulations promulgated thereunder,
the "SECURITIES ACT"), for the purpose of registering the shares of Parent
Common Stock to be issued in the Merger (together with
7
any amendments or supplements thereto, whether prior to or after the
effective date thereof, the "REGISTRATION STATEMENT") has been duly
authorized by Parent's Board of Directors.
SECTION 2.3 CONSENTS AND APPROVALS; NO VIOLATION. Assuming that all
consents, approvals, authorizations and other actions described in this
Section 2.3 have been obtained and all filings and obligations described in
this Section 2.3 have been made, the execution and delivery of this
Agreement, the Stock Option Agreement and the Shareholder Agreement do not,
and the consummation of the transactions contemplated hereby and thereby and
compliance with the provisions hereof and thereof will not, result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give to others a right of termination, cancellation or acceleration
of any obligation or result in the loss of a material benefit under, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of Parent or any of its Subsidiaries
under, any provision of (a) the Certificate of Incorporation or the By-laws
of Parent, each as amended to date, (b) any provision of the comparable
charter or organization documents of any of Parent's Subsidiaries, (c) any
loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable to
Parent or any of its Subsidiaries or (d) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or any of
its Subsidiaries or any of their respective properties or assets, other than,
in the case of clauses (b), (c) or (d), any such violations, defaults,
rights, losses, liens, security interests, charges or encumbrances that,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent, materially impair the ability of Parent or Sub to perform their
respective obligations hereunder or under the Stock Option Agreement or the
Shareholder Agreement or prevent the consummation of any of the transactions
contemplated hereby or thereby. No filing or registration with, or
authorization, consent or approval of, any domestic (federal and state),
foreign or supranational court, commission, governmental body, regulatory
agency, authority or tribunal (a "GOVERNMENTAL ENTITY") is required by or
with respect to Parent or any of its Subsidiaries in connection with the
execution and delivery of this Agreement, the Stock Option Agreement or the
Shareholder Agreement by Parent or Sub or is necessary for the consummation
of the Merger and the other transactions contemplated by this Agreement, the
Stock Option Agreement or the Shareholder Agreement, except for (i) in
connection, or in compliance, with the provisions of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), the
Securities Act and the Securities Exchange Act of 1934, as amended (together
with the rules and regulations promulgated thereunder, the "EXCHANGE ACT"),
(ii) the filing of the Certificate of Merger with the Secretary of State of
the State of New Jersey and appropriate documents with the relevant
authorities of other states in which the Company or any of its Subsidiaries
is qualified to do business, (iii) such filings and consents as may be
required under any environmental, health or safety law or regulation
pertaining to any notification, disclosure or required approval triggered by
the Merger or by the transactions contemplated by this Agreement, the Stock
Option Agreement, or the Shareholder Agreement, (iv) such filings,
authorizations, orders and approvals as may be required by state takeover
laws (the "STATE TAKEOVER APPROVALS"), (v) applicable requirements, if any,
of state securities or "blue sky" laws ("BLUE SKY LAWS") and the
New York
Stock Exchange (the "NYSE"), (vi) as
8
may be required under foreign laws and (vii) such other consents, orders,
authorizations, registrations, declarations, approvals and filings the
failure of which to be obtained or made would not, individually or in the
aggregate, have a Material Adverse Effect on Parent, materially impair the
ability of Parent or Sub to perform its obligations hereunder or under the
Stock Option Agreement or the Shareholder Agreement or prevent the
consummation of any of the transactions contemplated hereby or thereby.
SECTION 2.4 PARENT COMMON STOCK TO BE ISSUED IN THE MERGER. All of
the shares of Parent Common Stock issuable in exchange for Company Common
Stock at the Effective Time in accordance with this Agreement will be, when
so issued, duly authorized, validly issued, fully paid and nonassessable and
free of preemptive rights created by statute, Parent's Certificate of
Incorporation or By-laws or any agreement to which Parent is a party or by
which Parent is bound and will, when issued, be registered under the
Securities Act and the Exchange Act and registered or exempt from
registration under applicable Blue Sky laws.
SECTION 2.5 SEC DOCUMENTS AND OTHER REPORTS. Parent has filed all
required documents with the SEC since January 1, 1996 (the "PARENT SEC
DOCUMENTS"). As of their respective dates, the Parent SEC Documents complied
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and, at the respective times they were
filed, none of the Parent SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements (including, in each case, any notes thereto) of Parent
included in the Parent SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
United States generally accepted accounting principles (except, in the case
of the unaudited statements, as permitted by Form 10-Q of the SEC) applied on
a consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto) and fairly presented in all material
respects the consolidated financial position of Parent and its consolidated
Subsidiaries as at the respective dates thereof and the consolidated results
of their operations and their consolidated cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein). Except as
disclosed in the Parent SEC Documents or as required by generally accepted
accounting principles, Parent has not, since June 30, 2001, made any change
in the accounting practices or policies applied in the preparation of
financial statements.
SECTION 2.6 REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information to be supplied in writing by Parent or Sub for inclusion or
incorporation by reference in the Registration Statement or the proxy
statement/prospectus included therein (together with any amendments or
supplements thereto, the "PROXY STATEMENT") relating to the Shareholder
Meeting (as defined in Section 5.1) will (a) in the case of the Registration
Statement, at the time it becomes effective, contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading
or (b) in the case of the Proxy
9
Statement, at the time of the mailing of the Proxy Statement, at the time of
the Shareholder Meeting and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. If at
any time prior to the Effective Time any event with respect to Parent, its
officers and directors or any of its Subsidiaries shall occur which is
required to be described in the Proxy Statement or the Registration
Statement, such event shall be so described, and an appropriate amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the shareholders of the Company. The Registration Statement
will comply (with respect to Parent) as to form in all material respects with
the provisions of the Securities Act, and the Proxy Statement will comply
(with respect to Parent) as to form in all material respects with the
provisions of the Exchange Act.
SECTION 2.7 BROKERS. No broker, investment banker or other person, is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Sub.
SECTION 2.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Parent SEC Documents filed with the SEC prior to the date of this
Agreement, since June 30, 2001, there has been no event causing a Material
Adverse Effect on Parent, nor any development that would, individually or in
the aggregate, result in a Material Adverse Effect on Parent.
SECTION 2.9 REORGANIZATION. To the actual knowledge of the Vice
President and Senior Counsel of Parent, Taxes, neither Parent nor any
affiliate has taken or agreed to take any action or is aware of any fact with
respect to Parent or its affiliates that would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
SECTION 2.10 OPERATIONS OF SUB. Sub is a direct, wholly-owned
subsidiary of Parent, was formed solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business activities
and has conducted its operations only as contemplated hereby.
SECTION 2.11 OWNERSHIP OF COMPANY COMMON STOCK. Neither Parent nor any
of its Affiliates is the beneficial owner (as defined in Rule 13d-3
promulgated under the Exchange Act) of, nor has Parent or any of its
Affiliates within the last three years been the beneficial owner of, Company
Common Stock equal to or greater than ten percent (10%) of the aggregate
outstanding Company Common Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
10
The Company represents and warrants to Parent and Sub, subject to the
exceptions set forth in a letter dated the date hereof and delivered on the
date hereof by the Company to Parent, which relates to this Agreement and is
designated therein as the (the "COMPANY LETTER") (which exceptions shall each
specifically identify a Section, Subsection or clause of a single Section or
Subsection hereof, as applicable, to which such exception relates) as follows:
SECTION 3.1 ORGANIZATION, STANDING AND POWER. The Company is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of New Jersey and has the requisite corporate power and
authority to carry on its business as now being conducted, except where the
failure to be so incorporated, existing or in good standing or to have such
power or authority would not, initially or in the aggregate, have a Material
Adverse Effect on the Company. Each Subsidiary of the Company is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is organized and has the requisite
corporate power and authority to carry on its business as now being
conducted. The Company and each of its Subsidiaries are duly qualified to do
business, and are in good standing, in each jurisdiction where the character
of their properties owned or held under lease or the nature of their
activities makes such qualification necessary, except where the failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. For purposes of this Agreement, "MATERIAL
ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" mean, when used with respect to
the Company, any change or effect that is or could reasonably be expected (as
far as can be foreseen at the time) to be materially adverse to the business,
operations, properties, assets, liabilities, employee relationships, customer
or supplier relationships, earnings or results of operations, financial
projections or forecasts (including, without limitation, those included in
Section 3.1 of the Company Letter relating to the third and fourth quarters
of 2001), or the business prospects and condition (financial or otherwise) of
the Company and its Subsidiaries, taken as a whole.
SECTION 3.2 CAPITAL STRUCTURE.
(a) As of the date hereof, the authorized capital stock of the
Company consists of 150,000,000 shares of Company Common Stock and 10,000,000
shares of preferred stock, no par value ("COMPANY PREFERRED STOCK"). At the
close of business on September 20, 2001,
(i) 105,143,148 shares of Company Common Stock were issued
and outstanding, all of which were validly issued, fully paid and
nonassessable and free of preemptive rights,
(ii) no shares of Company Common Stock were reserved for
future issuance upon exercise of outstanding vesting and exercisable stock
options issued under the 2001 Option Plan, as amended (the "2001 Plan"),
(iii) 522,500 shares of Company Common Stock were reserved for
future issuance upon exercise of outstanding vesting and exercisable stock
options issued
11
under the 1998 Amended and Restated Non-Employee Director Stock Option Plan
(the "DIRECTOR PLAN"),
(iv) 3,663,782 shares of Company Common Stock were reserved
for future issuance upon exercise of outstanding vesting and exercisable
stock options issued under the 1993 Employee Stock Option Plan, as amended
(the "1993 PLAN")
(v) 1,079,893 shares of Company Common Stock were reserved
for future issuance upon under the 1987 Stock Bonus Incentive Plan, as
amended (the "1987 PLAN"),
(vi) no shares of Company Common Stock were reserved for
future issuance pursuant to any other plans of the Company or any of its
Subsidiaries or other plans assumed by the Company in connection with any
acquisition, business combination or similar transaction,
(vii) 6,465,555 shares of Company Common Stock were reserved
for future issuance pursuant to warrants to acquire Company Common Stock;
(ix) no shares of Company Preferred Stock are outstanding; and
(x) no shares of Company Common Stock are held by any
Subsidiary of the Company.
(b) Section 3.2 (b) of the Company Letter, contains a correct and
complete list as of the date of this Agreement of: (i) each outstanding
option to purchase shares of Company Common Stock issued under the 2001 Plan,
the Director Plan, and the 1993 Plan (collectively, the "COMPANY STOCK OPTION
PLANS" and the options granted thereunder are collectively, the "COMPANY
STOCK OPTIONS"), including the holder, date of grant, term, acceleration of
vesting or exercisability, if any, exercise price and number of shares of
Company Common Stock subject thereto; and (ii) each outstanding warrant to
purchase shares of Company Common Stock (collectively, the "COMPANY
WARRANTS"), including the holder, date of grant, term, acceleration of
vesting or exercisability, if any, exercise price, and number of shares of
Company Common stock subject thereto. Except as set forth on Section 3.2(b)
of the Company Letter, there are no options, warrants, calls, rights or
agreements to which the Company or any of its Subsidiaries is a party or by
which any of them is bound obligating the Company or any of its Subsidiaries
to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock of the Company or any of its Subsidiaries
or obligating the Company or any of its Subsidiaries to grant, extend or
enter into any such option, warrant, call, right or agreement.
(c) Except as set forth in Section 3.2(c) of the Company Letter,
there are no outstanding contractual obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of Company
Common Stock or any capital stock of or any equity interests in the Company
or any Subsidiary. Each outstanding share of capital stock of each Subsidiary
of the Company is duly authorized, validly issued, fully paid and
nonassessable and, except as disclosed in the Company
12
SEC Documents (defined below) filed prior to the date of this Agreement, each
such share is owned by the Company or another Subsidiary of the Company, free
and clear of all security interests, liens, claims, pledges, options, rights
of first refusal, agreements, limitations on voting rights, charges and other
encumbrances of any nature whatsoever. The Company does not have any
outstanding bonds, debentures, notes or other obligations the holders of
which have the right to vote (or are convertible into or exercisable for
securities having the right to vote) with the shareholders of the Company on
any matter.
(d) Except as set forth on Section 3.2(d) of the Company Letter, as
of the date hereof, neither the Company nor any of its Subsidiaries is party
to or bound by (i) any agreement or commitment pursuant to which the Company
or any Subsidiary of the Company is or could be required to register any
securities under the Securities Act or (ii) any debt agreements or
instruments which grant any rights to vote (contingent or otherwise) on
matters on which shareholders of the Company may vote.
(e) Section 3.2(e) of the Company Letter contains a correct and
complete list as of the date of this Agreement of each of the Company's
Subsidiaries.
(f) Section 3.2(f) of the Company Letter contains a correct and
complete list as of the date of this Agreement of each entity in which the
Company owns an equity interest (other than a Subsidiary), including the
number of outstanding shares of the stock of each such entity, the percentage
interest represented by the Company's ownership in the entity, and the date
of acquisition of the ownership interest in any such entity.
SECTION 3.3 AUTHORITY. On or prior to the date of this Agreement, the
Board of Directors of the Company has unanimously declared the Merger
advisable and fair to and in the best interest of the Company and its
shareholders, approved and adopted this Agreement and the Plan of Merger in
accordance with the NJBCA, resolved to recommend the adoption of this
Agreement by the Company's shareholders and directed that this Agreement and
the Plan of Merger be submitted to the Company's shareholders for adoption.
The Company has all requisite corporate power and authority to enter into
this Agreement and the Stock Option Agreement, to consummate the transactions
contemplated by the Stock Option Agreement and, subject, in the case of the
consummation of the Merger, to approval and adoption by the shareholders of
the Company of this Agreement, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the Stock Option
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company, subject, in the case
of this Agreement, to (i) approval and adoption of this Agreement by the
shareholders of the Company and (ii) the filing of the Certificate of Merger
as required by the NJBCA. This Agreement and the Stock Option Agreement have
been duly executed and delivered by the Company and (assuming the valid
authorization, execution and delivery of this Agreement by Parent and Sub and
the Stock Option Agreement by Parent and the validity and binding effect of
the Agreement on Parent and Sub and the Stock Option Agreement on Parent)
constitute the valid and
13
binding obligation of the Company enforceable against the Company in
accordance with its terms. The filing of the Proxy Statement with the SEC and
the issuance of up to 19.9% of the issued and outstanding shares of Company
Common Stock pursuant to the Stock Option Agreement have been duly authorized
by the Company's Board of Directors.
SECTION 3.4 CONSENTS AND APPROVALS; NO VIOLATION. Assuming that all
consents, approvals, authorizations and other actions described in this
Section 3.4 have been obtained and all filings and obligations described in
this Section 3.4 have been made, the execution and delivery of this Agreement
and the Stock Option Agreement do not, and the consummation of the
transactions contemplated hereby and thereby and compliance with the
provisions hereof and thereof will not, result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give to
others a right of termination, cancellation or acceleration of any obligation
or result in the loss of a material benefit under, or result in the creation
of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or any of its Subsidiaries under, any
provision of (a) the Certificate of Incorporation of the Company (as amended
from time to time, the "COMPANY CHARTER") or the By-laws of the Company, (b)
any provision of the comparable charter or organization documents of any of
the Company's Subsidiaries, (c) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to the Company or any of its
Subsidiaries or (d) any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the Company or any of its Subsidiaries or
any of their respective properties or assets, other than, in the case of
clauses (b), (c) or (d), any such violations, defaults, rights, losses,
liens, security interests, charges or encumbrances that, individually or in
the aggregate, would not have a Material Adverse Effect on the Company,
materially impair the ability of the Company to perform its obligations
hereunder or under the Stock Option Agreement or prevent the consummation of
any of the transactions contemplated hereby or thereby. No filing or
registration with, or authorization, consent or approval of, any Governmental
Entity is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement
or the Stock Option Agreement by the Company or is necessary for the
consummation of the Merger and the other transactions contemplated by this
Agreement or the Stock Option Agreement, except for (i) in connection, or in
compliance, with the provisions of the HSR Act, the Securities Act and the
Exchange Act, (ii) the filing of Certificate of Merger with the Secretary of
State of the State of New Jersey and appropriate documents with the relevant
authorities of other states in which the Company or any of its Subsidiaries
is qualified to do business, (iii) such filings and consents as may be
required under any environmental, health or safety law or regulation
pertaining to any notification, disclosure or required approval triggered by
the Merger or by the transactions contemplated by this Agreement or the Stock
Option Agreement, (iv) such filings, authorizations, orders and approvals as
may be required to obtain the State Takeover Approvals, (v) applicable
requirements, if any, of Blue Sky Laws or the Nasdaq National Market, (vi) as
may be required under foreign laws and (vii) such other consents, orders,
authorizations, registrations, declarations, approvals and filings the
failure of which to be obtained or made would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, materially impair
the ability
14
of the Company to perform its obligations hereunder or under the Stock Option
Agreement or prevent the consummation of any of the transactions contemplated
hereby or thereby.
SECTION 3.5 SEC DOCUMENTS AND OTHER REPORTS. The Company has filed
all required documents with the SEC since December 31, 1996 (the "COMPANY SEC
DOCUMENTS"). Except as set forth in Section 3.5 of the Company Letter, as of
their respective dates, the Company SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as
the case may be, and, at the respective times they were filed, none of the
Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading. The consolidated financial statements
(including, in each case, any notes thereto) of the Company included in the
Company SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with United States
generally accepted accounting principles (except, in the case of the
unaudited statements, to the extent permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and fairly presented in all
material respects the consolidated financial position of the Company and its
consolidated Subsidiaries as at the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments and to any other adjustments described
therein). Except as disclosed in Section 3.5 of the Company Letter or in the
Company SEC Documents or as required by generally accepted accounting
principles, the Company has not, since December 31, 1996, made any change in
the accounting practices or policies applied in the preparation of financial
statements.
SECTION 3.6 REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information to be supplied by the Company for inclusion or incorporation by
reference in the Registration Statement or the Proxy Statement will (a) in
the case of the Registration Statement, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading or (b) in the case of the Proxy Statement,
at the time of the mailing of the Proxy Statement, at the time of the
Shareholder Meeting and at the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at any time prior
to the Effective Time any event with respect to the Company, its officers and
directors or any of its Subsidiaries shall occur which is required to be
described in the Proxy Statement or the Registration Statement, such event
shall be so described, and an appropriate amendment or supplement shall be
promptly filed with the SEC and, as required by law, disseminated to the
shareholders of the Company. The Registration Statement will comply (with
respect to the Company) as to form in all material respects with the
provisions of the Securities Act, and the Proxy
15
Statement will comply (with respect to the Company) as to form in all
material respects with the provisions of the Exchange Act.
SECTION 3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in Section 3.7 of the Company Letter or as disclosed in the Company SEC
Documents filed with the SEC prior to the date of this Agreement, since June
30, 2001 (but excluding items disclosed under the heading "Certain Factors"
in the Company's Quarterly Report on Form 10-Q for the period ended June 30,
2001, as filed with the SEC and similar disclosures elsewhere in the Company
SEC Documents filed prior to the date hereof (collectively, the "RISK FACTOR
DISCLOSURES")), (a) the Company and its Subsidiaries have not incurred any
liability or obligation (indirect, direct or contingent), or entered into any
oral or written agreement or other transaction, that is not in the ordinary
course of business or that would result in a Material Adverse Effect on the
Company, (b) the Company and its Subsidiaries have not sustained any loss or
interference with their business or properties from fire, flood, windstorm,
accident or other calamity (whether or not covered by insurance) that has had
a Material Adverse Effect on the Company, (c) there has been no change in the
capital stock of the Company except for the issuance of shares of the Company
Common Stock pursuant to Company Stock Options, the 1987 Plan or the 1994
Employee Stock Purchase Plan, and no dividend or distribution of any kind
declared, paid or made by the Company on any class of its stock, (d) there
has not been (i) any adoption of a new Company Plan (as hereinafter defined),
(ii) any amendment to a Company Plan materially increasing benefits
thereunder, (iii) any granting by the Company or any of its Subsidiaries to
any executive officer or other key employee of the Company or any of its
Subsidiaries of any increase in compensation, except in the ordinary course
of business consistent with prior practice or as was required under
employment agreements in effect as of the date of the most recent audited
financial statements included in the Company SEC Documents, (iv) any granting
by the Company or any of its Subsidiaries to any such executive officer or
other key employee of any increase in severance or termination agreements in
effect as of the date of the most recent audited financial statements
included in the Company SEC Documents or (v) any entry by the Company or any
of its Subsidiaries into any employment, severance or termination agreement
with any such executive officer or other key employee, (e) there has not been
any material changes in the amount or terms of the indebtedness of the
Company and its Subsidiaries from that described in the 2000 Company Annual
Report (excluding the Risk Factor Disclosures), and (f) there has been no
event causing a Material Adverse Effect on the Company, nor any development
that would, individually or in the aggregate, result in a Material Adverse
Effect on the Company.
SECTION 3.8 PERMITS AND COMPLIANCE. Each of the Company and its
Subsidiaries is and at all times has been in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exceptions,
consents, certificates, approvals and orders of any Governmental Entity
necessary for the Company or any of its Subsidiaries to own, lease and
operate its properties or to carry on its business as it is now being
conducted (the "COMPANY PERMITS"), except where the failure to have any of
the Company Permits would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, and no suspension or cancellation of
any of the Company
16
Permits is pending or, to the Knowledge of the Company (as hereinafter
defined), threatened, except where the suspension or cancellation of any of
the Company Permits would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. Neither the Company nor any of its
Subsidiaries is or has been in violation of (a) its charter, by-laws or other
organizational documents, (b) any applicable law, ordinance, administrative,
or governmental rule or regulation, including any consumer protection, equal
opportunity, customs, export control, foreign trade, foreign corrupt
practices (including the Foreign Corrupt Practices Act), patient
confidentiality, health, health care industry regulation and third-party
reimbursement laws including under any Federal Health Care Program (as
defined in Section 1128B(f) of the U.S. Federal Social Security Act (together
with all regulations promulgated thereunder, the "SSA")), (c) any order,
decree or judgment of any Governmental Entity having jurisdiction over the
Company or any of its Subsidiaries or (d) any Company Permits, except, in the
case of clauses (a), (b), (c) and (d) for any violations that, individually
or in the aggregate, would not have a Material Adverse Effect on the Company.
Without limiting the foregoing, the Company is in compliance, in all material
respects, with all current applicable statutes, rules, regulations,
standards, guidelines, policies or orders administered or issued by the
United States Food and Drug Administration (the "FDA") or comparable foreign
Governmental Entity, including, but not limited to, FDA's Quality System
Regulation, 21 CFR Part 820; the Company does not have knowledge of any facts
which furnish any reasonable basis for any Form FDA-483 observations or
regulatory or warning letters from the FDA, Section 305 notices, or other
similar communications from the FDA or comparable foreign entity; and since
March 13, 1997, there have been no recalls, field notifications, alerts or
seizures requested or threatened relating to the Company's products, except
set forth in Section 3.8 of the Company Letter. The Company's products, where
required, are being marketed under valid 510(k) pre-market notifications
cleared by FDA under Section 510(k) of the Federal Food, Drug, and Cosmetic
Act, 21 U.S.C. ss. 360(k), and 21 C.F.R. Part 807, Subpart E ("510(k)s") or
pre-market approval applications approved by the FDA in accordance with 21
U.S.C. ss. 360e and 21 C.F.R. Part 814 ("PMAs"). All 510(k)s and/or PMAs for
the Company's products are exclusively owned by the Company, and there is no
reason to believe that FDA is considering limiting, suspending, or revoking
any such 510(k)s or PMAs or changing the marketing classification or labeling
of any such products. To the Knowledge of the Company, there is no false
information or significant omission in any product application or
product-related submission to the FDA or comparable foreign Governmental
Entity. The Company has obtained all necessary regulatory approvals from any
foreign regulatory agencies related to the products distributed and sold by
the Company. Neither the Company nor any Subsidiary, nor the officers,
directors, managing employees or agents (as those terms are defined in 42
C.F.R. ss.1001.1001) of the Company or any Subsidiary: (i) have engaged in
any activities which are prohibited under, or are cause for civil penalties
or mandatory or permissive exclusion from, any Federal Health Care Program
under Sections 1128, 1128A, 1128B, or 1877 of SSA or related state or local
statutes, including knowingly and willfully offering, paying, soliciting or
receiving any remuneration (including any kickback, bribe or rebate),
directly or indirectly, overtly or covertly, in cash or in kind in return
for, or to induce, the purchase, lease, or order, or the arranging for or
recommending of the purchase, lease or order, of any item or service for
17
which payment may be made in whole or in part under any such program; (ii)
have had a civil monetary penalty assessed against them under Section 1128A
of SSA; (iii) have been excluded from participation under any Federal Health
Care Program; or (iv) have been convicted (as defined in 42 C.F.R. ss.
1001.2) of any of the categories of offenses described in Sections 1128(a) or
1128(b)(1), (b)(2), or (b)(3) of SSA. Except as disclosed in the Company SEC
Documents filed prior to the date of this Agreement (excluding the Risk
Factor Disclosures), there are no contracts or agreements of the Company or
its Subsidiaries having terms or conditions which would have a Material
Adverse Effect on the Company or having covenants not to compete that
materially impair the ability of the Company to conduct its business as
currently conducted or would reasonably be expected to materially impair
Parent's ability to conduct its businesses. Except as set forth in the
Company SEC Documents filed prior to the date of this Agreement (excluding
the Risk Factor Disclosures), no event of default or event that, but for the
giving of notice or the lapse of time or both, would constitute an event of
default exists or, upon the consummation by the Company of the transactions
contemplated by this Agreement or the Stock Option Agreement, will exist
under any indenture, mortgage, loan agreement, note or other agreement or
instrument for borrowed money, any guarantee of any agreement or instrument
for borrowed money or any lease, contractual license or other agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any such Subsidiary is bound or to which any of the
properties, assets or operations of the Company or any such Subsidiary is
subject, other than any defaults that, individually or in the aggregate,
would not have a Material Adverse Effect on the Company. "KNOWLEDGE OF THE
COMPANY" means the actual knowledge of the officers and directors listed on
Section 3.8 of the Company Letter.
SECTION 3.9 TAX MATTERS. Except as otherwise set forth in Section 3.9
of the Company Letter, (a) the Company and each of its Subsidiaries have
timely filed (taking account of extensions to file that have been properly
obtained) all material Tax Returns (as hereinafter defined) required to have
been filed by it, and such Tax Returns are correct and complete in all
material respects; (b) the Company and each of its Subsidiaries have timely
paid (taking account of extensions to pay that have been properly obtained)
all Taxes (as hereinafter defined) required to be paid by it that are
material (either individually or in the aggregate) and that have been due,
will timely pay all Taxes required to be paid by it that are material (either
individually or in the aggregate) and that will be due on or prior to the
Effective Time, and the Company has established in accordance with Generally
Accepted Accounting Principles an adequate reserve for the payment of Taxes
that are not yet due or payable; (c) the Company and each of its Subsidiaries
have complied in all material respects with all rules and regulations
relating to the withholding of Taxes and the remittance of withheld Taxes;
(d) neither the Company nor any of its Subsidiaries has waived any statute of
limitations in respect of its Taxes, which remains open; (e) no federal,
state, local, or foreign audits or administrative proceedings, of which the
Company or its Subsidiaries has notice, are pending with regard to any
material Taxes or material Tax Returns of the Company or its Subsidiaries and
none of them has received a notice of any proposed audit or proceeding from
the Internal Revenue Service ("IRS") or any other taxing authority; (f) no
issues that have been raised by the relevant taxing authority in connection
with the examination of Tax Returns required to have been filed by or with
respect to the Company and each of
18
its Subsidiaries are currently pending; (g) all deficiencies asserted or
assessments made as a result of any examination of such Tax Returns by any
taxing authority have been paid in full; (h) neither the Company nor any of
its Subsidiaries has engaged in any transaction that would constitute a "tax
shelter" within the meaning of Section 6111 or 6662 of the Code; (i) neither
the Company nor any of its Subsidiaries has submitted a request for a ruling
to the IRS or a State tax authority; (j) neither the Company nor any of its
subsidiaries has made or rescinded any express or deemed election relating to
Taxes since March 31, 1997, that is not reflected in any Tax Return; (k)
neither the Company nor any of its Subsidiaries has changed any of its
methods of reporting income or deductions for Tax purposes from those
employed in the preparation of its Tax Returns for the year ending March 31,
1997; (l) neither Company nor any of its Subsidiaries has been a member of an
affiliated group of corporations (within the meaning of Section 1504(a))
filing a consolidated federal income tax return (or a group of corporations
filing a consolidated, combined, or unitary income tax return under
comparable provisions of state, local, or foreign tax law) for any taxable
period, other than a group the common parent of which is Company; (m) neither
Company nor any of its Subsidiaries has any obligation under any agreement or
arrangement with any other person with respect to material Taxes of such
other person (including pursuant to Treasury Regulations Section 1.1502-6 or
comparable provision of state, local or foreign tax law) including any
liability for Taxes of any predecessor entity; (n) to the Knowledge of the
Company, there are no facts that would prevent the Merger from qualifying as
a "reorganization" within the meaning of Section 368(a) of the Code; (o)
there is currently no limitation on the utilization of net operating losses,
capital losses, built-in losses, tax credits or similar items of the Company
and its subsidiaries under Sections 269, 382, 383, 384 or 1502 of the Code
and the Treasury Regulations thereunder (and comparable provisions of state,
local or foreign law); (p) no foreign subsidiary of the Company is, or at any
time has been, a passive foreign investment company within the meaning of
Section 1297 of the Code, neither the Company nor any Subsidiary is a
shareholder, directly or indirectly, in a passive foreign investment company,
and no foreign subsidiary of the Company that is not a United States person
(x) is, or at any time has been, engaged in the conduct of a trade or
business within the United States or treated as or considered to be so
engaged and (y) has, or at any time has had, an investment in "United States
property" within the meaning of Section 956(c) of the Code; neither the
Company nor any Subsidiary is, or at any time has been, subject to (A) the
dual consolidated loss provisions of the Section 1503(d) of the Code, (B) the
overall foreign loss provisions of Section 904(f) of the Code or (iii) the
recharacterization provisions of Section 952(c)(2) of the Code; (q) no claim
has been made by any taxing authority in any jurisdiction where the Company
or any of its subsidiaries does not file Tax Returns that it is or may be
subject to Tax by that jurisdiction; (r) the Company Letter sets forth all
foreign jurisdictions in which the Company or any of its subsidiaries is
subject to Tax, is engaged in business or has a permanent establishment; (s)
no income will be recognized by the Company or any of its Subsidiaries as a
result of the Merger; (t) the Company and each of its subsidiaries have
timely filed all Tax Returns relating to sales taxes that they were required
to file and have paid all sales taxes that have become due; (u) the Company
has furnished to Parent true and complete copies of all Tax Returns for all
periods, the statute of limitations for the assessment of Tax with respect to
which has not expired, (v) neither the Company nor
19
any of its Subsidiaries is a party to any agreement, contract, arrangement,
or plan that has resulted or would result, individually or in the aggregate,
in connection with this Agreement or any change of control of the Company or
any of its Subsidiaries, in the payment of any "excess parachute payments"
within the meaning of Section 280G of the Code; and (w) the Company has not
made any payments, and is not party to an agreement that could require it to
make any payments (including any deemed payment of compensation upon exercise
of any option), that would not be fully deductible by reason of Section
162(m) of the Code. For purposes of this Agreement: (i) "TAXES" means any
federal, state, local, foreign or provincial income, gross receipts,
property, sales, use, license, franchise, employment, payroll, withholding,
alternative or added minimum, ad valorem, value-added, transfer, excise,
capital, or net worth tax, or other tax, custom, duty, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest thereon or penalty imposed with respect thereto by any Governmental
Entity, whether computed on a separate, consolidated, unitary, combined, or
any other basis, and shall include any transferee or secondary liability in
respect of any tax (whether imposed by law, contractual agreement, or
otherwise), and (ii) "TAX RETURN" means any return, report or similar
statement (including the attached schedules) required to be filed with
respect to any Tax, including any information return, claim for refund,
amended return or declaration of estimated Tax.
SECTION 3.10 ACTIONS AND PROCEEDINGS. Except as set forth in the
Company SEC Documents filed prior to the date of this Agreement, there are no
outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving the Company or any of its
Subsidiaries, Company Plans or ERISA Affiliates, or against or involving any
of the present or former directors, officers, employees, consultants, agents
or shareholders of the Company or any of its Subsidiaries, as such, any of
its or their properties, assets or business or any Company Plan (as
hereinafter defined) that, individually or in the aggregate, would have a
Material Adverse Effect on the Company or materially impair the ability of
the Company to perform its obligations hereunder or under the Stock Option
Agreement. Except as set forth in Section 3.10 of the Company Letter, there
are no actions, suits or claims or legal, administrative or arbitrative
proceedings or investigations (including claims for workers' compensation)
pending or, to the Knowledge of the Company, threatened against or involving
the Company or any of its Subsidiaries, Company Plans or ERISA Affiliates, or
any of its or their present or former directors, officers, employees,
consultants, agents or shareholders, as such, or any of the Company or the
Subsidiaries properties, assets or business or any Company Plan that,
individually or in the aggregate, would have a Material Adverse Effect on the
Company or materially impair the ability of the Company to perform its
obligations hereunder or under the Stock Option Agreement. There are no
actions, suits, labor disputes or other litigation, legal or administrative
proceedings or governmental investigations pending or, to the Knowledge of
the Company, threatened against or affecting the Company or any of its
Subsidiaries, Company Plans or ERISA Affiliates, or any of its or their
present or former officers, directors, employees, consultants, agents or
shareholders, as such, or any of its or their properties, assets or business
relating to the transactions contemplated by this Agreement and the Stock
Option Agreement.
20
SECTION 3.11 CERTAIN AGREEMENTS.
(a) Except as set forth in Section 3.11(a) of the Company Letter,
neither the Company nor any of its Subsidiaries is a party to any oral or
written agreement or plan relating to the compensation or employment of
employees of the Company or its Subsidiaries, including any employment
agreement, confidentiality agreement, arbitration agreement, expatriate
agreement, severance agreement, stock option plan, stock appreciation rights
plan, restricted stock plan or stock purchase plan, pension plan (as defined
in Section 3(2) of ERISA) or welfare plan (as defined in Section 3(1) of
ERISA) (collectively the "COMPENSATION AGREEMENTS"), any of the benefits of
which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by
this Agreement or the Stock Option Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement or the Stock Option Agreement. No holder of
any option to purchase shares of Company Common Stock, or shares of Company
Common Stock granted in connection with the performance of services for the
Company or its Subsidiaries, is or will be entitled to receive cash from the
Company or any Subsidiary in lieu of or in exchange for such option or shares
as a result of the transactions contemplated by this Agreement or the Stock
Option Agreement except as provided in Section 5.7. Section 3.11(a) of the
Company Letter sets forth (i) for each officer, director, employee,
consultant, agent, or shareholder who is a party to, or will receive benefits
under, any Compensation Agreement as a result of the transactions
contemplated herein, the total amount that each such person may receive, or
is eligible to receive, assuming that the transactions contemplated by this
Agreement are consummated on the date hereof, and (ii) the total amount of
indebtedness owed to the Company or its Subsidiaries from each officer,
director, employee, consultant, agent, or shareholder of the Company and its
Subsidiaries. Each officer, director, employee, consultant, agent, or
shareholder of the Company or any Subsidiary with access to confidential or
proprietary information of the Company or any Subsidiary has executed a
legally binding agreement obligating such employee or consultant to hold
confidential such proprietary information. To the Knowledge of the Company,
no officer, director, employee, consultant, agent, or shareholder of the
Company or any of Subsidiary is in violation of any term of any Compensation
Agreement, employment contract, confidentiality or non-disclosure agreement
or any other contract, agreement, commitment or understanding relating to the
relationship of such employee, consultant or agent with the Company, any
Subsidiary, or any other party.
(b) Set forth in Section 3.11(b) of the Company Letter is a list of
all contracts that involve payments by the Company of more than $1,000,000 or
are otherwise material to the business of the Company and its Subsidiaries
taken as a whole (whether oral or written), including all distribution
contracts, sole-source supply contracts, national accounts contracts, any
indenture, mortgage, loan agreement, note or other agreement or instrument
for borrowed money, any guarantee of any agreement or instrument for borrowed
money or any material lease, contractual license or other agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any such Subsidiary is bound or to which any of the
properties, assets or operations of the Company or any such Subsidiary is
subject (collectively,
21
"SIGNIFICANT CONTRACTS"). Prior to the date hereof, the Company has provided
true and complete copies of all such contracts to Parent.
(c) Except as set forth on Section 3.11(c) of the Company Letter,
each Significant Contract is a legal, valid and binding agreement of the
Company or its Subsidiaries, neither the Company nor any of its Subsidiaries
(or to the Knowledge of the Company, any other party thereto) is in default
under any Significant Contract, and none of such Significant Contracts has
been canceled by the other party thereto; each Significant Contract is in
full force and effect and no event has occurred which, with the passage of
time or the giving of notice or both, would constitute a default, event of
default or other breach by the Company or any Subsidiary party thereto which
would entitle the other party to such Significant Contract to terminate the
same or declare a default or event of default thereunder; the Company and the
Subsidiaries are not in receipt of any claim of default under any such
agreement; in each instance, except where it would not have a Material
Adverse Effect on the Company.
SECTION 3.12 ERISA
(a) Each Company Plan is listed in Section 3.12(a) of the Company
Letter. With respect to each Company Plan, the Company has delivered to
Parent a true and correct copy of (i) the three most recent annual reports
(Form 5500) filed with the appropriate agency, to the extent required by the
Employee Retirement Income Security Act of 1974, as amended, and the rules
and regulations promulgated thereunder ("ERISA"), (ii) each such Company Plan
that has been reduced to writing and all amendments thereto, (iii) each trust
agreement, insurance contract or administration agreement relating to each
such Company Plan that is funded and the latest financial statements thereof,
(iv) a written summary of each unwritten Company Plan, (v) the most recent
summary plan description or other written explanation of each Company Plan
provided to participants, (vi) the three most recent actuarial reports or
valuations relating to a Company Plan subject to Title IV of ERISA , and the
most recent report prepared with respect thereto in accordance with Statement
of Financial Accounting Standards No. 35, (vii) the most recent determination
letter and request therefore, if any, issued by the IRS with respect to any
Company Plan intended to be qualified under section 401(a) of the Code,
(viii) any request for a determination currently pending before the IRS
including all correspondence related thereto, (ix) all correspondence with
the IRS, the Department of Labor, the SEC or Pension Benefit Guaranty
Corporation relating to any outstanding controversy, (x) all forms and
certificate samples used to comply with Sections 4980B, 9801 and 9802 of the
Code, (xi) the amounts of accrued benefits under any unfunded Company Plan
that defers the receipt of income, and (xii) all official filings, plan
documents, and computations related to COMPANY FOREIGN BENEFIT PLAN (AS
DEFINED IN SECTION 3.12(e)). Except as would not have a Material Adverse
Effect on the Company, each Company Plan and the administration thereof
complies, and has at all times complied, in all respects with ERISA, the Code
and all other applicable statutes and governmental rules and regulations.
Except as set forth in Section 3.12(a) of the Company Letter, no "reportable
event" (within the meaning of Section 4043 of ERISA) has occurred with
respect to any Company Plan for which the 30-day notice requirement has not
been waived and no transaction prohibited by Section 406 of ERISA and no
22
"prohibited transaction" under Section 4975(c) of the Code has occurred with
respect to any Company Plan. Neither the Company nor any of its Subsidiaries
or ERISA Affiliates (as hereinafter defined) has withdrawn from any Company
Multiemployer Plan (as hereinafter defined) and would not incur any
withdrawal liability if it withdrew from all Company Multiemployer Plans on
the date of this Agreement. No action has been taken, or is currently being
considered, to terminate or withdraw from any Company Plan subject to Title
IV of ERISA and there is no reason to believe the Pension Benefit Guaranty
Corporation would initiate the termination of any such Plan. No Company Plan,
nor any trust created thereunder, has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived. All
contributions to Company Plans that were required to be made under such Plans
will have been made as of the Closing Date, and all benefits accrued under
any unfunded Company Plan will have been paid, accrued or otherwise
adequately reserved in accordance with GAAP, as of such date, and the Company
and its ERISA Affiliates will have performed by the Closing all material
obligations required to be performed as of such date under all Company Plans.
None of the Company any of its Subsidiaries or ERISA Affiliates has any
commitment or formal plan, whether legally binding or not, to create any
additional employee benefit plan or modify or change any existing Company
Plan that would affect any employee or former employee of the Company or any
of its Subsidiaries or ERISA Affiliates. No person who is not an employee or
former employee or the surviving spouse, beneficiary or dependent of such an
employee or former employee of the Company or any Subsidiary or ERISA
Affiliate is entitled to benefits under any Company Plan.
(b) Except as listed in Section 3.12(b) of the Company Letter, with
respect to the Company Plans, no event has occurred and there exists no
condition or set of circumstances in connection with which the Company or any
Subsidiary or ERISA Affiliate or Company Plan fiduciary could be subject to
any liability under the terms of such Company Plans, ERISA, the Code or any
other applicable law which would have a Material Adverse Effect on the
Company. All Company Plans that are intended to be qualified under Section
401(a) of the Code have been determined by the IRS to be so qualified, or a
timely application for such determination is now pending, and nothing has
occurred with respect to the operation of such Company Plans which could
cause the loss of such qualification or the imposition of any liability,
penalty or tax under ERISA or the Code. Neither the Company nor any of its
Subsidiaries or ERISA Affiliates has been notified by any Company
Multiemployer Plan that such Company Multiemployer Plan is currently in
reorganization or insolvency under and within the meaning of Section 4241 or
4245 of ERISA or that such Company Multiemployer Plan intends to terminate or
has been terminated under Section 4041A of ERISA. No event has occurred and
there exists no condition or set of circumstances that would result in a
material increase in the contributions required to be made to any Company
Multiemployer Plan by the Company or any Subsidiary or ERISA Affiliate.
Except as disclosed in Section 3.12(b) of the Company Letter, neither the
Company nor any of its Subsidiaries or ERISA Affiliates has any liability or
obligation under any welfare plan to provide benefits after termination of
employment to any employee or dependent other than as required by Section
4980B of the Code. The Company and all ERISA Affiliates have at all times
complied with the notice and continuation requirements of Code Section 4980B
and ERISA Section 601.
23
Neither the Company nor any ERISA Affiliate has incurred any liability for
any tax imposed under Section 4971 through 4980B of the Code or civil
liability under Section 502(i) or (1) of ERISA.
(c) As used herein, (i) "COMPANY PLAN" means a "pension plan" (as
defined in Section 3(2) of ERISA (other than a Company Multiemployer Plan)),
a "welfare plan" (as defined in Section 3(1) of ERISA), or any other written
or oral bonus, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock option, phantom stock, restricted
stock, stock appreciation right, holiday pay, vacation, severance, time off,
termination, employment, medical, dental, vision, disability, death benefit,
sick leave, fringe benefit, personnel policy, insurance or other plan,
arrangement or understanding, or any plan or policy required under federal,
state, local, or foreign law, in each case established, maintained or
contributed to by the Company or any of its Subsidiaries or ERISA Affiliates
or as to which the Company or any of its Subsidiaries or ERISA Affiliates has
contributed or otherwise may have any liability, (ii) "COMPANY MULTIEMPLOYER
PLAN" means a "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA) to which the Company or any of its Subsidiaries or ERISA Affiliates is
or has been obligated to contribute or otherwise may have any liability, and
(iii) "ERISA AFFILIATE" means any trade or business (whether or not
incorporated) which would be considered a single employer with the Company
pursuant to Section 414(b), (c), (m) or (o) of the Code and the regulations
promulgated under those sections or pursuant to Section 4001(b) of ERISA and
the regulations promulgated thereunder.
(d) Section 3.12(d) of the Company Letter contains a list of all
(i) severance and employment agreements with employees of the Company and
each Subsidiary and ERISA Affiliate, (ii) severance programs and policies of
the Company and each Subsidiary and ERISA Affiliate with or relating to its
employees and (iii) plans, programs, agreements and other arrangements of the
Company and each Subsidiary and ERISA Affiliate with or relating to its
employees containing change of control or similar provisions.
(e) Except as set forth in Section 3.12(e) of the Company Letter,
with respect to each Company Plan not subject to United States law (a
"COMPANY FOREIGN BENEFIT PLAN"), except as would not have a Material Adverse
Effect on the Company, (i) the fair market value of the assets of each funded
Company Foreign Benefit Plan, the liability of each insurer for any Company
Foreign Benefit Plan funded through insurance or the reserve shown on the
Company's consolidated financial statements for any unfunded Company Foreign
Benefit Plan, together with any accrued contributions, is sufficient to
procure or provide for the projected benefit obligations, as of the Effective
Time, with respect to all current and former participants in such plan
according reasonable, country specific actuarial assumptions and valuations
and no transaction contemplated by this Agreement shall cause such assets or
insurance obligations or book reserve to be less than such projected benefit
obligations; and (ii) each Company Foreign Benefit Plan required to be
registered has been registered and has been maintained in good standing with
the appropriate regulatory authorities. No action has been taken, or is
24
currently being considered, to terminate or withdraw from any Company Foreign
Benefit Plan.
SECTION 3.13 COMPLIANCE WITH WORKER SAFETY LAWS The properties, assets
and operations of the Company and its Subsidiaries are in compliance with all
applicable federal, state, local and foreign laws, rules and regulations,
orders, decrees, judgments, permits and licenses relating to public and
worker health and safety (collectively, "WORKER SAFETY LAWS"), except for any
violations that, individually or in the aggregate, would not require
expenditures exceeding $100,000. With respect to such properties, assets and
operations, including any previously owned, leased or operated properties,
assets or operations, there are no past, present or reasonably anticipated
future events, conditions, circumstances, activities, practices, incidents,
actions or plans of the Company or any of its Subsidiaries that may interfere
with or prevent compliance or continued compliance with applicable Worker
Safety Laws, other than any such interference or prevention as would not,
individually or in the aggregate with any such other interference or
prevention, require expenditures exceeding $100,000.
SECTION 3.14 LIABILITIES; PRODUCTS.
(a) Except as fully reflected or reserved against in the financial
statements included in the 2000 Company Annual Report, or disclosed in the
footnotes thereto and as disclosed in Section 3.14(a) of the Company Letter,
the Company and its Subsidiaries had no liabilities (including Tax
liabilities) at the date of such financial statements, absolute or
contingent, other than liabilities that, individually or in the aggregate,
would not have a Material Adverse Effect on the Company, and had no
liabilities (including Tax liabilities) that were not incurred in the
ordinary course of business. As of the date hereof, the Company had less than
$5,500,000 of indebtedness for borrowed money.
(b) Since December 31, 1996, neither the Company nor any Subsidiary
has received a claim for or based upon breach of product or service warranty
or guaranty or similar claim (other than warranty or guaranty claims in the
ordinary course of business not material in amount or significance), strict
liability in tort, negligent design of product, negligent provision of
services or any other allegation of liability, including or arising from the
materials, design, testing, manufacture, packaging, labeling (including
instructions for use), or sale of its products or from the provision of
services; and, to the Knowledge of the Company, there is no basis for any
such claim which, if asserted, would likely have a Material Adverse Effect on
the Company.
(c) The Company has provided in Section 3.14(c) of the Company
Letter a schedule of products in development and planned introductions. The
Company reasonably expects the goals set forth therein to be achieved in all
material respects, except for such deviations as would not have a Material
Adverse Effect on the Company. The product and service engineering,
development, manufacturing and quality control processes which have been and
are being followed by the Company are reasonably designed to produce products
and services which (i) are consistent with the claims made about them in the
Company's sales brochures and other statements made about them by
25
or on behalf of the Company, (ii) otherwise meet the reasonable expectations
of customers, (iii) comply with applicable regulatory requirements and (iv)
avoid claims of the type described in Section 3.14(b).
(d) Neither the Company nor any of its Subsidiaries has made any
sales to customers that are contingent upon (i) providing future enhancements
of existing products, (ii) adding features not currently available on
existing products or (iii) otherwise enhancing the performance of existing
products (other than beta or similar arrangements pursuant to which customers
of the Company or any of its Subsidiaries from time to time test or evaluate
products).
SECTION 3.15 LABOR MATTERS.
(a) Company has previously delivered to Parent true, complete and
current copies of each collective bargaining agreement to which Company or
any Subsidiary is a party, as well as any similar such agreement or works
council documents related to the employment of Company Business Personnel
outside of the United States. The Company and each Subsidiary has complied
with all obligations under any national law or agreement requiring
information, consultation, or participation or other communications or
negotiation with employees or their representative regarding this
transaction. Except as listed in Section 3.15(a) of the Company Letter,
neither the Company nor any of its Subsidiaries is a party to any collective
bargaining agreement or labor contract, nor are they under any current
obligation to bargain with any bargaining agent on behalf of any of the
employees working in or for the Company or any Subsidiary, nor has there been
any attempt or threatened attempt to organize such employees, nor does any
question concerning representation exist concerning such employees. Neither
the Company nor any of its Subsidiaries has engaged in any unfair labor
practice with respect to any persons employed by or otherwise performing
services primarily for the Company or any of its Subsidiaries (the "COMPANY
BUSINESS PERSONNEL"). There is no labor strike, dispute, slowdown, stoppage,
or lockout actually pending or, to the Knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries and during the
past five years there has not been any such action. Without limiting the
generality of foregoing, except as identified in Section 3.15(a) of the
Company Letter: (A) no unfair labor practice charges or complaints have been
filed against the Company or any of its Subsidiaries with any Governmental
Entity, of which the Company or any of its Subsidiaries has received written
notice; (B) neither the Company nor any of its Subsidiaries have received any
written notice or communication reflecting an intention or threat to file any
such charge or complaint; (C) no person has made any claim or charge or
threatened any claim or charge against the Company or any of its Subsidiaries
under any statute, regulation or ordinance relating to discrimination with
respect to employees or employment practices; (D) no claim or charge is
pending or threatened against the Company or any of its Subsidiaries in
connection with the Fair Labor Standards Act, Title VII of the Civil Rights
Act, the Americans with Disabilities Act, the Occupational Safety and Health
Act or similar federal, state or local laws; (E) there is no grievance
arising out of any collective bargaining agreement or other grievance
procedure; (F) there are no written personnel policies, rules or procedures
applicable to employees of the Company or any of its
26
Subsidiaries, other than those listed in Section 3.15(a) of the Company
Letter, correct copies of which have heretofore been delivered to Parent; and
(G) neither the Company nor any of its Subsidiaries has received notice of
the intent of any federal, state, local or foreign Governmental Entity
responsible for the enforcement of labor or employment laws to conduct an
investigation with respect to or relating to the Company or any of its
Subsidiaries and, to the Knowledge of the Company, no such investigation is
in progress.
(b) Except as set forth in Section 3.15(b) of the Company Letter,
(i) the Company and its Subsidiaries have not incurred any liability under,
and have complied in all respects with, the Workers Adjustment Retraining
Notification Act, as amended, and any rules or regulations promulgated
thereunder (the "WARN ACT") , as well as any similar state, local, or foreign
law pertaining to notice or severance when employees are terminated, and no
fact or event exists that would reasonably be expected to give rise to
liability under such law; (ii) no compensation paid or payable to any
employee of the Company or any of its Subsidiaries has been or will be
nondeductible by reason of application of Section 162(m) of the Code; and
(iii) neither the Company nor any of its Subsidiaries has any obligations
under the Consolidated Omnibus Budget Reconciliation Act of 1985 with respect
to any former employees or their related qualifying beneficiaries.
(c) The Company and its Subsidiaries have complied in all material
respects with all applicable laws relating to the employment of Company
Business Personnel and individuals the Company or its Subsidiaries have
classified as agents, consultants, or independent contractors, including, but
not limited to all federal, state, local and foreign laws relating to wages
(including the proper classification of represented and non-represented
employees), working conditions, leave, unemployment insurance, workers'
compensation, disability, discrimination, recordkeeping, and the withholding
of payroll taxes.
(d) No employee, consultant or agent of the Company or any of its
Subsidiaries is in violation of any term of any employment contract,
collective bargaining agreement, confidentiality or non-disclosure agreement
or any other contract, agreement, commitment or understanding relating to the
relationship of such employee, consultant or agent with the Company or any of
its Subsidiaries or any other party.
(e) As of the date hereof, except as set forth in Section 3.15(e)
of the Company Letter, neither the Company nor any Subsidiary has knowledge
that any officer or key employee intends to terminate employment with the
Company or any Subsidiary. The Company will notify Parent promptly if it
gains such knowledge between the date hereof and the Effective Time.
SECTION 3.16 INTELLECTUAL PROPERTY. "COMPANY INTELLECTUAL PROPERTY"
means all United States and foreign trademarks, trademark registrations,
trademark rights and renewals thereof, trade names, trade name rights, trade
dress, patents, patent rights, patent applications, industrial models,
inventions, invention disclosures, author's rights, designs, utility models,
inventor rights, software, copyrights, copyright registrations and renewals
thereof, servicemarks, servicemark registrations and renewals thereof,
27
servicemark rights, trade secrets, applications for trademark and servicemark
registrations, know-how, data, confidential information and other proprietary
rights, and any data and information of any nature or form used or held for
use in connection with the businesses of the Company and/or its Subsidiaries
as currently conducted or as currently contemplated by the Company, together
with all applications currently pending or in process for any of the
foregoing.
(a) The Company and its Subsidiaries own, or possess adequate
licenses or other valid rights to use (including the right to sublicense to
customers, suppliers or others as needed), all of the Company Intellectual
Property that is necessary or appropriate for the conduct or contemplated
conduct of the Company's or Subsidiaries' businesses. Section 3.16 of the
Company Letter lists each license or other agreement pursuant to which the
Company or any Subsidiary has the right to use Company Intellectual Property
utilized in connection with any product of, or service provided by, the
Company and its Subsidiaries, the cancellation or expiration of which would
have a Material Adverse Effect on the Company (the "COMPANY LICENSES").
(b) There are no pending, and between the date hereof and the
Effective Time, there shall not be any pending or threatened interferences,
re-examinations, oppositions or cancellation proceedings involving any
patents or patent rights, trademarks or trademark rights, or applications
therefor, of the Company or any Subsidiary, except such as may be commenced
by Parent or any Subsidiary of Parent.
(c) There is no breach or violation by the Company or by any
Subsidiary under, and there is no breach or violation by any other party to,
any Company License that is reasonably likely to give rise to any termination
or any loss of rights thereunder.
(d) There has been no unauthorized disclosure or use of
confidential information, trade secret rights, processes and formulas,
research and development results and other know-how of the Company or any
Subsidiary, the value of which to the Company and its Subsidiaries is
dependent upon the maintenance of the confidentiality thereof.
(e) The conduct of the business of the Company and the Subsidiaries as
currently conducted or contemplated in connection with the introduction of
planned new products and services does not and will not infringe upon or
conflict with, in any way, any license, trademark, trademark right, trade name,
trade name right, patent, patent right, industrial model, invention, service
xxxx, service xxxx right, copyright, trade secret or any other intellectual
property rights of any third party.
(f) There are no infringements of, or conflicts with, any Company
Intellectual Property.
(g) There are no pending or threatened claims or litigation contesting
the validity, ownership or right to use, sell, license or dispose of the Company
Intellectual Property.
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(h) The Company and its Subsidiaries have entered into agreements
with employees, consultants, officers, shareholders and agents sufficient to
maintain the confidentiality of the Company Intellectual Property.
(i) Neither the Company nor any Subsidiary has licensed or
otherwise permitted the use by any third party of any proprietary information
or Company Intellectual Property on terms or in a manner which, individually
or in the aggregate, would have a Material Adverse Effect on the Company.
SECTION 3.17 OPINION OF FINANCIAL ADVISOR. The Company will have
received the written opinion of Xxxxxx Xxxxxx Partners LLC, dated the date
hereof to the effect that, as of the date hereof, the Merger Consideration is
fair to the Company's shareholders from a financial point of view, a copy of
which opinion has been delivered to Parent.
SECTION 3.18 STATE TAKEOVER STATUTES. The Board of Directors of the
Company has, to the extent such statute is applicable, taken all action
(including appropriate approvals of the Board of Directors of the Company)
necessary to render the provisions of Chapter 10A of the NJBCA inapplicable
to the Merger, this Agreement, the Stock Option Agreement, the Shareholder
Agreement, and the transactions contemplated hereby and thereby. To the
Knowledge of the Company, no other state takeover statute or similar charter
or bylaw provisions are is applicable to the Merger, this Agreement, the
Stock Option Agreement, and the Shareholder Agreement and the transactions
contemplated hereby and thereby.
SECTION 3.19 REQUIRED VOTE OF COMPANY SHAREHOLDERS. The affirmative
vote of the holders of a majority of the outstanding shares of Company Common
Stock is required to adopt this Agreement. No other vote of the security
holders of the Company is required by law, the Company Charter or the By-laws
of the Company or otherwise in order for the Company to consummate the Merger
and the transactions contemplated hereby and in the Stock Option Agreement.
SECTION 3.20 REORGANIZATION. To the Knowledge of the Company, (a)
neither it nor any of its Subsidiaries has taken any action or failed to take
any action which action or failure would jeopardize the qualification of the
Merger as a reorganization within the meaning of Section 368(a) of the Code,
and (b) there are no facts that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
SECTION 3.21 ACCOUNTS RECEIVABLE. All of the accounts and notes
receivable of the Company and its Subsidiaries set forth on the books and
records of the Company (net of the applicable reserves reflected on the books
and records of the Company and in the financial statements included in the
Company SEC Documents) (a) represent sales actually made or transactions
actually effected in the ordinary course of business for goods or services
delivered or rendered to unaffiliated customers in bona
29
fide arm's length transactions and (b) constitute valid claims. With respect
to the accounts receivable that existed on June 30, 2001 and arose out of the
sale of scanners, 75% of the amount due with respect to each of such accounts
will be collected on or before the earlier of November 30, 2001, or 5 days
prior to the Effective Time (net of reserves therefor reflected on the
financial statements included in the Company SEC Documents as of the date
hereof) without any amendment of the contract terms and conditions (including
pricing) of the applicable sales contract.
SECTION 3.22 INVENTORIES. Except as set forth in Section 3.22 of the
Company Letter, all inventories of the Company and its Subsidiaries consist
of items of merchantable quality and quantity usable or saleable in the
ordinary course of business, are saleable at prevailing market prices that
are not less than the book value amounts thereof or the price customarily
charged by the Company or the applicable Subsidiary therefor, conform to the
specifications established therefor, and have been manufactured in accordance
with applicable regulatory requirements, except to the extent that the
failure of such inventories so to consist, be saleable, conform, or be
manufactured would not have a Material Adverse Effect on the Company. Except
as set forth in Section 3.22 of the Company Letter, the quantities of all
inventories, materials, and supplies of the Company and each Subsidiary (net
of the obsolescence reserves therefor shown in the financial statements
included in the Company SEC Documents and determined in the ordinary course
of business consistent with past practice) are not obsolete, damaged,
slow-moving, defective, or excessive, and are reasonable and balanced in the
circumstances of the Company and its Subsidiaries, except to the extent that
the failure of such inventories to be in such conditions would not have a
Material Adverse Effect on the Company.
SECTION 3.23 ENVIRONMENTAL MATTERS.
(a) For purposes of this Agreement, the following terms shall have
the following meanings: (i) "HAZARDOUS SUBSTANCES" means (A) petroleum and
petroleum products, by-products or breakdown products, radioactive materials,
asbestos-containing materials and polychlorinated biphenyls, and (B) any
other chemicals, materials or substances capable of causing harm to human
health or the environment or regulated as toxic or hazardous or as a
pollutant, contaminant or waste under any applicable Environmental Law; (ii)
"ENVIRONMENTAL LAW" means any law or regulation, past, present or future and
as amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
or common law, relating to pollution or protection of the environment, health
or safety or natural resources, including those relating to the manufacture,
use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Substances; and (iii) "ENVIRONMENTAL PERMIT" means any
permit, approval, identification number, license or other authorization
required under any applicable Environmental Law.
(b) The Company and the Subsidiaries are and have been in
compliance with all applicable Environmental Laws, have obtained all
Environmental Permits and are in compliance with their requirements, and have
resolved all past non-compliance with Environmental Laws and Environmental
Permits without any pending,
30
on-going or future obligation, cost or liability, except in each case for the
notices set forth in Section 3.23 of the Company Letter or where such
non-compliance or obligation would not, individually or in the aggregate,
require expenditures exceeding $500,000.
(c) Neither the Company nor any of its Subsidiaries has (i) placed,
held, located, released, transported or disposed of any Hazardous Substances
on, under, from or at any of the Company's or any of its Subsidiaries'
properties or any other properties, other than in a manner that would not, in
all such cases taken individually or in the aggregate, require expenditures
exceeding $1,000,000, (ii) any Knowledge or reason to know of the presence of
any Hazardous Substances on, under, emanating from, or at any of the
Company's or any of its Subsidiaries' properties or any other property but
arising from the Company's or any of its Subsidiaries' current or former
properties or operations, other than in a manner that would not require
expenditures exceeding $1,000,000, or (iii) any Knowledge or reason to know,
nor has it received any written notice (A) of any violation of or liability
under any Environmental Laws, (B) of the institution or pendency of any suit,
action, claim, proceeding or investigation by any Governmental Entity or any
third party in connection with any such violation or liability, (C) requiring
the investigation of, response to or remediation of Hazardous Substances at
or arising from any of the Company's or any of its Subsidiaries' current or
former properties or operations or any other properties, (D) alleging
noncompliance by the Company or any of its Subsidiaries with the terms of any
Environmental Permit in any manner reasonably likely to require expenditures
exceeding $500,000, or (E) demanding payment for response to or remediation
of Hazardous Substances at or arising from any of the Company's or any of its
Subsidiaries' current or former properties or operations or any other
properties, except in each case for the notices set forth in Section 3.23 of
the Company Letter.
(d) No Environmental Law imposes any obligation upon the Company or
any of its Subsidiaries arising out of or as a condition to any transaction
contemplated by this Agreement, including any requirement to modify or to
transfer any permit or license, any requirement to file any notice or other
submission with any Governmental Entity, the placement of any notice,
acknowledgment or covenant in any land records, or the modification of or
provision of notice under any agreement, consent order or consent decree.
(e) There are no environmental assessments or audit reports or
other similar studies or analyses in the possession or control of the Company
or any of its Subsidiaries relating to any real property currently or
formerly owned, leased or occupied by the Company or any of its Subsidiaries.
SECTION 3.24 SUPPLIERS AND DISTRIBUTORS.
(a) Neither the Company nor any Subsidiary has received any
notice, oral or written, or has any reason to believe that (i) any significant
supplier, including without limitation any sole source supplier, will not sell
raw materials, supplies, merchandise and other goods to the Company or any
Subsidiary at any time after the Effective Time on terms and conditions
substantially similar to those used in its current
31
sales to the Company and its subsidiaries, subject only to general and
customary price increases, unless comparable raw materials, supplies,
merchandise, or other goods are readily available from other sources on
comparable terms and conditions, (ii) any significant customer of the Company
or any of its Subsidiaries intends to terminate or limit or alter its
business relationship with the Company or any such Subsidiary or (iii) as of
the date hereof, any individual included in Section 3.24 of the Company
Letter intends to terminate or has terminated such individual's employment
with the Company or any such Subsidiary.
(b) Except as set forth in Section 3.24 of the Company Letter,
neither the Company nor any Subsidiary has received any notice, oral or
written, or has any reason to believe that any distributors, sales
representatives, sales agents, or other third party sellers, will not sell or
market the products or services of the Company or any Subsidiary at any time
after the Effective Time on terms and conditions substantially similar to
those used in the current sales and distribution contracts of the Company and
its Subsidiaries.
(c) Except as set forth in Section 3.24 of the Company Letter, each
agreement between the Company or any of its Subsidiaries and any distributor,
sales representative, sales agent or other third party who sells or markets
the products or services of the Company or any of its Subsidiaries
constitutes a valid and binding obligation of the parties thereto and is in
full force and effect and will continue in full force and effect after the
Effective Time, in each case, without breaching the terms thereof, giving
rise to a right of termination thereunder or resulting in the forfeiture or
impairment of any rights thereunder and without the consent, approval or act
of, or the making of any filing with, any other party. Except as set forth in
Section 3.24 of the Company Letter, the Company or one of its Subsidiaries
has fulfilled and performed its obligations under each such agreement, and
neither the Company nor any of its Subsidiaries is in, or alleged to be in,
breach or default thereunder, nor is there or is there alleged to be any
basis for termination thereof, and, to the Knowledge of the Company, no other
party to any such agreement has breached or defaulted thereunder or has acted
or failed to act in any manner that is reasonably likely to result in
criminal charges or claims for material damages being brought against the
Company or any of its Subsidiaries; and except as set forth in Section 3.24
of the Company Letter, no event has occurred and no condition or state of
facts exists which, with the passage of time or the giving of notice or both,
would constitute such a default or breach by the Company or any of its
Subsidiaries or by any such other party.
SECTION 3.25 INSURANCE. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by the Company or any of its
Subsidiaries are with reputable insurance carriers, provide full and adequate
coverage for all normal risks incident to the business of the Company and the
Subsidiaries and their respective properties and assets, and are in character
and amount similar to that carried by persons engaged in similar businesses
and subject to the same or similar perils or hazards, except for any such
failures to maintain insurance policies that, individually or in the
aggregate, would not have a Material Adverse Effect on the Company. The
Company and each Subsidiary have made any and
32
all payments required to maintain such policies in full force and effect.
Neither the Company nor any Subsidiary has received notice of default under
any such policy, and has not received written notice or, to the Knowledge of
the Company, oral notice of any pending or threatened termination or
cancellation, coverage limitation or reduction or material premium increase
with respect to such policy.
SECTION 3.26 TRANSACTIONS WITH AFFILIATES.
(a) For purposes of this Section 3.26, the term "AFFILIATED
PERSON" means (i) any record, or (to the knowledge of the Company)
beneficial, holder of 2% or more of the Company Common Stock, (ii) any
director, officer or senior executive of the Company or any Subsidiary, (iii)
any person, firm, entity or corporation that directly or indirectly controls,
is controlled by, or is under common control with, any of the Company or any
Subsidiary; (iv) any member of the immediate family or any of such persons;
or (v) any person, firm, entity or corporation of which the Company owns more
than 5% of any class of outstanding equity securities or partnership
interests.
(b) Except as set forth in the Company SEC Reports filed with the
SEC prior to the date hereof (excluding the Risk Factor Disclosures), since
June 30, 2001, the Company and its Subsidiaries have not, in the ordinary
course of business or otherwise, (i) purchased, leased or otherwise acquired
any material property or assets or obtained any material services from, (ii)
sold, leased or otherwise disposed of any material property or assets or
provided any material services to (except with respect to remuneration for
services rendered in the ordinary course of business as director, officer or
employee of the Company or any Subsidiary), (iii) entered into or modified in
any manner any contract with, or (iv) borrowed any money from, or made or
forgiven any loan or other advance (other than expenses or similar advances
made in the ordinary course of business) to, any Affiliated Person.
(c) Except as set forth in the Company SEC Reports filed with the
SEC prior to the date hereof (excluding the Risk Factor Disclosures), (i) the
contracts of the Company and its Subsidiaries do not include any material
obligation or commitment between the Company or any Subsidiary and any
Affiliated Person, (ii) the assets of the Company or any Subsidiary do not
include any receivable or other obligation or commitment from an Affiliated
Person to the Company or any Subsidiary and (iii) the liabilities of the
Company and its Subsidiaries do not include any payable or other obligation
or commitment from the Company or any Subsidiary to any Affiliated Person.
(d) To the Knowledge of the Company and except as set forth in the
Company SEC Reports filed with the SEC prior to the date hereof, no
Affiliated Person of any of the Company or any Subsidiary is a party to any
contract with any customer or supplier of the Company or any Subsidiary that
affects in any material manner the business, financial condition or results
of operation of the Company or any Subsidiary.
SECTION 3.27 ACCURACY OF INFORMATION. Neither this Agreement nor any
other document provided by the Company or its Subsidiaries or any of their
respective employees or agents to Parent in connection with the transactions
33
contemplated herein contains an untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they are made, not
misleading.
SECTION 3.28 TITLE TO AND SUFFICIENCY OF ASSETS.
(a) As of the date hereof, the Company and its Subsidiaries own,
and as of the Effective Time the Company and its Subsidiaries will own, good
and marketable title to all of their assets constituting personal property
which is material to their business (excluding, for purposes of this
sentence, assets held under leases), free and clear of any and all mortgages,
liens, encumbrances, charges, claims, restrictions, pledges, security
interests or impositions (collectively, "LIENS"), except as set forth in the
Company SEC Documents filed with the SEC prior to the date hereof, or Section
3.28 of the Company Letter. Such assets, together with all assets held by the
Company and its Subsidiaries under leases, include all tangible and
intangible personal property, contracts and rights necessary or required for
the operation of the businesses of the Company as presently conducted.
(b) As of the date hereof, the Company and its Subsidiaries will
own, good and marketable title to all of their Real Estate which is material
to such persons (excluding, for purposes of this sentence, Real Estate
leases) free and clear of any and all Liens, except as set forth in the
Company SEC Documents filed with the SEC prior to the date hereof or in
Section 3.28 of the Company Letter or such other Liens on Real Estate which
would not, individually or in the aggregate, have a Material Adverse Effect
on the Company. Such Real Estate assets, together with all Real Estate
assets. All Real Estate leases held by the Company and its Subsidiaries, are
adequate for the operation of the businesses of the Company as presently
conducted. The leases to all Real Estate occupied by the Company and the
Subsidiaries are in full force and effect and no event has occurred which
with the passage of time, the giving of notice, or both, would constitute a
default or event of default by the Company or any Subsidiary or, to the
Knowledge of the Company, any other person who is a party signatory thereto,
other than such defaults or events of default which, individually or in the
aggregate, would not have a Material Adverse Effect on the Company. For
purposes of this Agreement, "REAL ESTATE" means, with respect to the Company
or any Subsidiary, as applicable, all of the fee, if any, or leasehold
ownership right, title and interest of such person, in and to all real estate
and improvement owned or leased by any such person and which is used by any
such person in connection with the operation of its business.
SECTION 3.29 BROKERS. No broker, investment banker or other person,
other than Xxxxxx Xxxxxx Partners LLC and AmeriCal Securities, Inc., the fees
and expenses of which will be paid by the Company (as reflected in an agreement
between such parties and the Company, a copy of each of which has been furnished
to Parent (the "BROKER AGREEMENTS")), is entitled to any broker's, finder's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement and by the Stock Option Agreement based upon arrangements made
by or on behalf of the Company. The total amount of fees and expenses to be paid
in connection with the transactions contemplated by this Agreement is set forth
in Section 3.29 of the Company
34
Letter. The Broker Agreements shall not be amended after the date hereof
without the consent of Parent.
SECTION 3.30 REPRESENTATIONS AND WARRANTIES WITH RESPECT TO OPERATIONS
OUTSIDE OF THE UNITED STATES. If a representation and warranty relates in
whole or in part to operations of the Company and its Subsidiaries in
jurisdictions outside of the United States, then the interpretation thereof
shall be made (to the extent appropriate) by reference to the laws and
regulations of the relevant jurisdiction.
SECTION 3.31 CODING. None of the Company, any of its Subsidiaries, or
any employee of either of them has presented or caused to be presented for
payment or reimbursement any claim for a procedure, item or service that is not
accurate and in conformity with the American Medical Association's CURRENT
PROCEDURAL TERMINOLOGY (CPT), the INTERNATIONAL CLASSIFICATION OF DISEASE, NINTH
REVISION, CLINICAL MODIFICATION (ICD-9-CM), and other applicable coding systems
with respect to the procedure, item or service that was provided.
SECTION 3.32 ACTIONS BY THE BOARD OF DIRECTORS. The Company has
delivered to Parent true, correct and complete copies of the minutes of all
meetings of the Company's Board of Directors and actions by written consent of
the Company's Board of Directors, for meetings and consents on or prior to July
2, 2001. Since July 2, 2001, the only actions taken by the Board of Directors or
any committee thereof are those reflected in the draft board minutes for
meetings of August 17, 2001, September 7, 2001 and September 21, 2001 included
as Exhibit 3.32 of the Company Letter.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER.
Except as expressly permitted by clauses (a) through (q) of this Section 4.1,
during the period from the date of this Agreement through the Effective Time,
the Company shall, and shall cause each of its Subsidiaries to, in all
material respects carry on its business in the ordinary course of its
business as currently conducted and, to the extent consistent therewith, use
reasonable best efforts to preserve intact its current business
organizations, keep available the services of its current officers and
employees and preserve its relationships with customers, suppliers and others
having business dealings with it to the end that its goodwill and ongoing
business shall be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, and except as otherwise expressly contemplated
by this Agreement or as set forth in the Company Letter (with specific
reference to the applicable subsection below), the Company shall not, and
shall not permit any of its Subsidiaries to, without the prior written
consent of Parent:
(a) (i) other than dividends paid by wholly-owned Subsidiaries,
declare, set aside or pay any dividends on, or make any other actual,
constructive or deemed distributions in respect of, any of its capital stock,
or otherwise make any
35
payments to its shareholders in their capacity as such, (ii) other than in
the case of any Subsidiary, split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or (iii)
purchase, redeem or otherwise acquire any shares of capital stock of the
Company or any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities;
(b) issue, deliver, sell, pledge, dispose of or otherwise encumber
any shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options (including options under the Company Stock Option Plans) to acquire
any such shares, voting securities, equity equivalent or convertible
securities, other than (i) the issuance of shares of Company Common Stock
upon the exercise of Company Stock Options outstanding on the date of this
Agreement in accordance with their current terms, (ii) the issuance of shares
of Company Common Stock pursuant to the Stock Option Agreement, (iii) shares
issuable upon the exercise of warrants outstanding as of the date hereof, and
(iv) pursuant to the terms set forth in Section 4.1(b) of the Company Letter;
(c) amend the Company Charter or by-laws;
(d) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of or equity in, or by
any other manner, any business or any corporation, limited liability company,
partnership, association or other business organization or division thereof
or otherwise acquire or agree to acquire any assets;
(e) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets, other than sales of inventory that
are in the ordinary course of business consistent with past practice;
(f) incur any indebtedness for borrowed money (other than draws
under the existing credit agreement with Silicon Valley Bank for use in the
ordinary course of business consistent with past practices), guarantee any
such indebtedness or make any loans, advances or capital contributions to, or
other investments in, any other person (except as set forth in Section 4.1(r)
below), other than indebtedness, loans, advances, capital contributions and
investments between the Company and any of its wholly-owned Subsidiaries or
between any of such wholly-owned Subsidiaries, in each case in the ordinary
course of business consistent with past practice;
(g) alter (through merger, liquidation, reorganization,
restructuring or in any other fashion) the corporate structure or ownership
of the Company or any Subsidiary;
(h) enter into or adopt any, or amend any existing, severance plan,
agreement or arrangement or enter into or amend any Company Plan, collective
bargaining, employment, or any consulting agreement or make any
determinations not in the ordinary course of business consistent with past
practice, under any collective
36
bargaining agreement or Company Plan, except as set forth in Section 4.1(h)
of the Company Letter;
(i) increase the compensation payable or to become payable to its
directors, officers or employees (except for (A) increases in the ordinary
course of business consistent with past practice in salaries or wages of
employees of the Company or any of its Subsidiaries who are not officers of
the Company or any of its Subsidiaries, and (B) and a one-time payment of
$10,000 for each non-employee director of the Company in lieu of per-meeting
fees in connection with the meetings of the Board of Directors to consider
strategic alternatives for the Company and (C) payments made to Mr. Test and
Xx. Xxxxx such that the fees received by them for 2001 were at an annual rate
equal to $36,000) or grant any severance or termination pay to, or enter into
any employment or severance agreement with, any director or officer of the
Company or any of its Subsidiaries, or establish, adopt, enter into, or,
except as may be required to comply with applicable law, amend in any
material respect or take action to enhance in any material respect or
accelerate any rights or benefits under, any labor, collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any director, officer or employee;
(j) knowingly violate or knowingly fail to perform any obligation
or duty imposed upon it or any Subsidiary by any applicable material federal,
state or local law, rule, regulation, guideline or ordinance;
(k) make any change to accounting policies or procedures (other
than actions required to be taken by generally accepted accounting
principles);
(l) prepare or file any Tax Return inconsistent with its past
practice in preparing or filing similar Tax Returns in prior periods or, on
any such Tax Return, take any position, make any election, or adopt any
method that is inconsistent with positions taken, elections made or methods
used in preparing or filing similar Tax Returns in prior periods;
(m) make or rescind any express or deemed election relating to
Taxes or change any of its methods of reporting income or deductions for Tax
purposes;
(n) commence any litigation or proceeding with respect to any
material Tax liability or settle or compromise any material Tax liability
without Parent's consent or commence any other litigation or proceedings or
settle or compromise any other material claims or litigation;
(o) except as set forth in Section 4.1(o) of the Company Letter,
enter into, renew, terminate or amend any agreement or contract material to
the Company and its Subsidiaries, taken as a whole, including any Significant
Contract but excluding any contracts for the sale by the Company of scanners
and including, without limitation, any lease amendment or extension related
to the real property leased under the terms of the
37
Lease between August Xxxxxxxx and the Company dated December 31, 1998, any
agreement with Cedara Software, and any agreement with AccuImage Diagnostics
Corp.; or purchase any real property or make or agree to make any new capital
expenditure or expenditures which real property purchases or capital
expenditures in the aggregate are in excess of $500,000;
(p) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent financial statements (or the notes thereto)
of the Company included in the Company SEC Documents or incurred in the
ordinary course of business consistent with past practice;
(q) authorize, recommend, propose or announce an intention to do
any of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing; or
(r) make any loans or advances to or other investments in, Positron
Corporation including, without limitation, any additional advances under the
Loan Agreement dated June 29, 2001 by and between Positron Corporation and
the Company, which consent in the case of this Subsection (r) shall not be
unreasonably withheld.
SECTION 4.2 NO SOLICITATION.
(a) The Company shall not, nor shall it permit any of its
Subsidiaries to, nor shall it authorize or permit any officer, director or
employee of or any financial advisor, attorney or other advisor or
representative of, the Company or any of its Subsidiaries to, (i) solicit,
initiate or encourage the submission of, any Takeover Proposal (as hereafter
defined), (ii) enter into any agreement with respect to or approve or
recommend any Takeover Proposal or (iii) participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to the Company or any Subsidiary in connection with, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes,
or may reasonably be expected to lead to, any Takeover Proposal; PROVIDED,
HOWEVER, that nothing contained in this Section 4.2(a) shall prohibit the
Company or its directors from (A) complying with Rule 14e-2 promulgated under
the Exchange Act with regard to a tender or exchange offer or (B) referring a
third party to this Section 4.2(a) or making a copy of this Section 4.2(a)
available to any third party; and PROVIDED, FURTHER, that prior to the
Shareholder Meeting, if the Board of Directors of the Company reasonably
determines the Takeover Proposal constitutes a Superior Proposal (as defined
below) and the Company complies with its obligations in Section 4.2(b) and in
Section 5.1, then, to the extent required by the fiduciary obligations of the
Board of Directors of the Company, as determined in good faith by a majority
thereof after consultation with independent counsel (who may be the Company's
regularly engaged independent counsel), the Company may, in response to an
unsolicited request, furnish non-public information, and afford access to the
properties, books, records, officers, employees and representatives of the
Company, participate in
38
discussions or negotiations regarding the Superior Proposal and, provided
that the Company has complied with the provisos to its rights to terminate
this Agreement pursuant to Section 7.1(g) hereof, enter into an agreement
with respect to or approve or recommend to its shareholders a Superior
Proposal (and, to the extent permitted by Section 5.1 hereof, withdraw,
modify or change its recommendation of this Agreement. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth
in the preceding sentence by any officer or director of the Company or any of
its Subsidiaries or any financial advisor, attorney or other advisor or
representative of the Company or any of its Subsidiaries, whether or not such
person is purporting to act on behalf of the Company or any of its
Subsidiaries or otherwise, shall be deemed to be a breach of this Section
4.2(a) by the Company. For purposes of this Agreement, "TAKEOVER PROPOSAL"
means any proposal for a merger, tender offer or other business combination
involving the Company or any of its Subsidiaries or any proposal or offer to
acquire in any manner, directly or indirectly, an equity interest in, any
voting securities of, or a substantial portion of the assets of the Company
or any of its Subsidiaries, other than the transactions contemplated by this
Agreement and the Stock Option Agreement, and "SUPERIOR PROPOSAL" means a
bona fide proposal made by a third party to acquire the Company pursuant to a
tender or exchange offer, a merger, a sale of all or substantially all its
assets or otherwise on terms which a majority of the disinterested members of
the Board of Directors of the Company determines, at a duly constituted
meeting of the Board of Directors or by unanimous written consent, in its
reasonable good faith judgment (after consultation with its financial
advisor) to be more favorable to the Company's shareholders than the Merger
and for which financing, to the extent required, is then committed or which,
in the reasonable good faith judgment of a majority of such disinterested
members of the Board of Directors of the Company, as expressed in a
resolution adopted at a duly constituted meeting of such directors, is
reasonably capable of being obtained by such third party.
(b) The Company shall advise Parent orally and in writing within 24
hours of (i) any Takeover Proposal or any inquiry with respect to or which
could lead to any expression of interest regarding a potential Takeover
Proposal that is received by or communicated to any officer or director of
the Company or, to the Knowledge of the Company, any financial advisor,
attorney or other advisor or representative of the Company, (ii) the material
terms of such Takeover Proposal (including a copy of any written proposal),
and (iii) the identity of the person making any such Takeover Proposal. If
the Company intends to participate in discussions or negotiations with and/or
furnish any Person with any information with respect to any inquiry or
Takeover Proposal in accordance with Section 4.2(a), the Company shall advise
Parent orally and in writing of such intention not less than 48 hours in
advance of providing such information. The Company will keep Parent fully
informed of the status and details of any such Takeover Proposal or inquiry.
SECTION 4.3 THIRD PARTY STANDSTILL AGREEMENTS. During the period from
the date of this Agreement through the Effective Time, the Company shall not
terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which the Company or any of its Subsidiaries is a
party (other than any involving Parent). During such period, the Company
agrees to enforce, to the fullest
39
extent permitted under applicable law, the provisions of any such agreements,
including, but not limited to, obtaining injunctions to prevent any breaches
of such agreements and to enforce specifically the terms and provisions
thereof in any court of the United States or any state thereof having
jurisdiction.
SECTION 4.4 REORGANIZATION. During the period from the date of this
Agreement through the Effective Time, unless the other party shall otherwise
agree in writing, none of Parent, the Company or any of their respective
Subsidiaries shall take or fail to take any action with the actual knowledge
of those taking or failing to take such action (or those directing such
action or failure to take action) that such action or failure would
jeopardize the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code.
SECTION 4.5 WARRANTS. The Parent shall cause the Surviving Corporation
to honor the terms of any warrants outstanding as of the date hereof and
listed in Section 3.2(b) of the Company Letter. The Company will use its best
efforts to obtain a waiver of all registration rights granted by the Company
to the persons listed in Schedule 4.5 of the Company Letter.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 SHAREHOLDER MEETING. The Company will, as soon as
practicable following the date of this Agreement, duly call, give notice of,
convene and hold a meeting of shareholders (the "SHAREHOLDER MEETING") for
the purpose of considering the approval and adoption of this Agreement and
the Plan of Merger at such meeting call for a vote and cause proxies to be
voted in respect of the approval and adoption of this Agreement. The Company
will, through its Board of Directors, recommend to its shareholders the
adoption and approval of this Agreement and shall not withdraw, modify or
change such recommendation; provided, however, that the Board of Directors of
the Company may withdraw, modify or change such recommendation if it (a) has
not breached Section 4.2 and (b) enters into a merger, acquisition or other
agreement (including an agreement in principle) to effect a Superior Proposal
or the Board of Directors resolves to do so, provided that the Company has
complied with the provisos to its right to terminate this Agreement in
Section 7.1(g) of this Agreement. Notwithstanding the Company's rights
regarding a Superior Proposal in the preceding sentence, the Company agrees
that its obligations pursuant to the first sentence of this Section 5.1 shall
not be affected by the commencement, public proposal, public disclosure or
communication to the Company of a Takeover Proposal or Superior Proposal.
SECTION 5.2 PREPARATION OF THE REGISTRATION STATEMENT AND THE PROXY
STATEMENT.
(a) The Company and Parent shall promptly prepare and file with the
SEC the Proxy Statement and Parent shall prepare and file with the SEC the
Registration
40
Statement, in which the Proxy Statement will be included as a prospectus.
Each of Parent and the Company shall use its reasonable best efforts to have
the Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing. As promptly as practicable after
the Registration Statement shall have become effective, the Company shall
mail the Proxy Statement to its shareholders. If holders of warrants set
forth in Section 3.2(b) of the Company Letter waive all registration rights
that would affect Parent Common Stock other than the right granted pursuant
to this Section (such warrants for which waivers are received being referred
to herein as "AMENDED WARRANTS") Parent shall (i) include in the Registration
Statement shares of Common Stock issuable upon exercise of the Amended
Warrants (ii) convert the Registration Statement to a shelf registration
which the Parent will keep effective for one year following the Effective
Time, and (iii) amend the Amended Warrants to provide that such warrants may
be exercised on a "cashless" or "net exercise" basis. Parent shall also take
any action (other than qualifying to do business in any jurisdiction in which
it is now not so qualified) required to be taken under any applicable state
securities laws in connection with the issuance of Parent Common Stock in the
Merger and upon the exercise of the Substitute Options (as defined in Section
5.7), and the Company shall furnish all information concerning the Company
and the holders of Company Common Stock as may be reasonably requested in
connection with any such action.
(b) Parent and the Company promptly will notify each other of the
receipt of comments from the SEC and of any request by the SEC for amendments
or supplements to the Registration Statement or the Proxy Statement or for
additional information, and promptly will supply each other with copies of
all correspondence between the parties and the SEC with respect thereto. If,
at any time prior to the Shareholder Meeting, any event should occur relating
to or affecting the Company, Parent or Sub, or to their respective
Subsidiaries, officers or directors, which event should be described in an
amendment or supplement to the Registration Statement or the Proxy Statement,
the parties promptly will inform each other and cooperate in preparing,
filing and having declared effective or clearing with the SEC and, if
required by applicable state securities laws, distributing to the Company's
shareholders such amendment or supplement.
SECTION 5.3 ACCESS TO INFORMATION. Subject to currently existing
contractual and legal restrictions applicable to the Company or any of its
Subsidiaries, the Company shall, and shall cause each of its Subsidiaries to,
and shall instruct their agents and representatives to, afford to the Parent
and its Subsidiaries and each of their accountants, counsel, financial
advisors and other representatives of Parent reasonable access, and permit
them to make such inspections as they may reasonably require of, during the
period from the date of this Agreement through the Effective Time, all of
their respective properties, books, contracts, commitments and records
(including engineering records and Tax Returns and the work papers of
independent accountants, if available and subject to the consent of such
independent accountants) and, during such period, the Company shall, and
shall cause each of its Subsidiaries to (i) furnish promptly to Parent a copy
of each report, schedule, registration statement and other document filed by
it during such period pursuant to the requirements of federal or state
securities laws, (ii) consistent with its legal obligations, furnish promptly
to Parent all other information
41
concerning its business, properties and personnel as Parent may reasonably
request, (iii) promptly make available to Parent all personnel of the Company
and its Subsidiaries knowledgeable about matters relevant to such inspections
as reasonably requested by Parent and (iv) provide reasonable access to the
Company's and Subsidiaries' facilities and operations to enable Parent to
conduct a health and safety review of the business, including the right to
drill and take samples. No investigation pursuant to this Section 5.3 shall
affect any representation or warranty in this Agreement of any party hereto
or any condition to the obligations of the parties hereto. All information
obtained by Parent pursuant to this Section 5.3 shall be kept confidential in
accordance with the Confidentiality Agreement, dated February 2, 2001,
between Parent and the Company (the "CONFIDENTIALITY AGREEMENT").
SECTION 5.4 RULE 145 LETTERS. On the date hereof, the Company shall
cause to be prepared and delivered to Parent a list (reasonably satisfactory
to counsel for Parent) identifying all persons who, at the time of the
Shareholder Meeting, may be deemed to be "affiliates" of the Company as that
term is used in paragraphs (c) and (d) of Rule 145 under the Securities Act
(the "RULE 145 AFFILIATES"). The Company shall use its reasonable best
efforts to cause each person who is identified as a Rule 145 Affiliate in
such list to deliver to Parent within 30 days of the date hereof a written
agreement in substantially the form of EXHIBIT E hereto, executed by each of
such persons identified in the foregoing list.
SECTION 5.5 STOCK EXCHANGE LISTINGS. Parent shall use its reasonable
best efforts to list on the NYSE, upon official notice of issuance, any
shares of Parent Common Stock to be issued in connection with the Merger or
in connection with Substitute Options that have not been previously listed.
SECTION 5.6 FEES AND EXPENSES.
(a) Except as provided in this Section 5.6, whether or not the
Merger is consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby, including the fees
and disbursements of counsel, financial advisors and accountants, shall be
paid by the party incurring such costs and expenses, provided that all
printing expenses and all filing fees (including filing fees under the
Securities Act, the Exchange Act and the HSR Act) shall be divided equally
between Parent and the Company.
(b) Notwithstanding any provision in this Agreement to the
contrary, if this Agreement is terminated (A) by the Company pursuant to
Section 7.1(d)(i) after receipt of a Superior Proposal, (B) by Parent
pursuant to Section 7.1(b), (c) or (f), (C) by Parent or the Company pursuant
to Section 7.1(e) (after receipt of a Superior Proposal or after the
occurrence of any of the events described in clause (i), (ii) or (iii) of
Section 7.1(f)) or (g), then, in each case, the Company shall (without
prejudice to any other rights of Parent against the Company) reimburse Parent
upon demand for all out-of-pocket fees and expenses incurred or paid by or on
behalf of Parent or any Affiliate (as hereinafter defined) of Parent in
connection with this Agreement, the Stock Option Agreement and the
transactions contemplated herein or therein, including all fees and expenses
of
42
counsel, investment banking firms, accountants and consultants (collectively,
"PARENT FEES") up to a maximum of $1,500,000. As used herein, "AFFILIATE"
shall have the meaning set forth in Rule 405 under the Securities Act.
(c) Notwithstanding any provision in this Agreement to the contrary:
(i) if this Agreement is terminated:
(A) by the Company pursuant to Section 7.1(d)(i) after
receipt of a Superior Proposal, or
(B) by Parent pursuant to Section 7.1(b) or (f), or
(C) by Parent pursuant to Section 7.1(c) or by Parent or
the Company pursuant to Section 7.1(e) in either case
after receipt of a Superior Proposal or after the
occurrence of any of the events described in clause (i),
(ii) or (iii) of Section 7.1(f),
and, in the case of (A), (B) or (C), prior to, concurrently with or within
twelve months after such a termination a Third Party Acquisition Event (as
defined below) occurs, then the Company shall (in addition to any obligation
under Section 5.6(b) and without prejudice to any other rights of Parent
against the Company) pay to Parent the Termination Fee (as defined below) in
cash, such payment to be made promptly, but in no event later than the second
business day following, the later to occur of such termination and such Third
Party Acquisition Event; or
(ii) if this Agreement is terminated by Parent or the Company
pursuant to Section 7.1(g), then the Company shall (in addition to any
obligation under Section 5.6(b) and without prejudice to any other rights of
Parent against the Company) pay to Parent the Termination Fee in cash, such
payment to be made by the Company concurrently with such termination if the
termination is by the Company, or no later than the second business day
following such termination if the termination is by Parent.
"TERMINATION FEE" means $11,000,000, provided, however, that
(i) such amount shall be reduced to an amount not less than zero by
subtracting from $11,000,000 the net amount realized or realizable by Parent
under the Stock Option Agreement, based on the facts as they exist on the
date such fee shall become due, which net amount shall be determined by
subtracting any exercise price and underwriting discounts or commissions
incurred by Parent in connection with the acquisition and disposition of the
"Optioned Shares" described in the Stock Option Agreement, and after giving
effect to Section 9(c) thereof, and (ii) the total of the Termination Fee and
any amount actually realized by Parent under the Stock Option Agreement shall
not exceed $11,000,000; provided further that if such Fee shall be so reduced
by an amount so realizable by Parent and thereafter the Stock Option
Agreement shall terminate without receipt by Parent of such amount, then an
additional payment shall be made to Parent in the amount by which the
Termination Fee was reduced hereunder promptly following such termination.
43
A "THIRD PARTY ACQUISITION EVENT" means any of the following
events: (A) any person (other than Parent or its Affiliates) acquires or
becomes the beneficial owner of 20% or more of the outstanding shares of
Company Common Stock; (B) any group (other than a group which includes or may
reasonably be deemed to include Parent or any of its Affiliates) is formed
which, at the time of formation, beneficially owns 20% or more of the
outstanding shares of Company Common Stock; (C) the Company enters into, or
announces that it proposes to enter into, an agreement, including, an
agreement in principle, providing for a merger or other business combination
involving the Company or a "significant subsidiary" (as defined in Rule
1.02(w) of Regulation S-X as promulgated by the SEC) of the Company or the
acquisition of a substantial interest in, or a substantial portion of the
assets, business or operations of, the Company or a significant subsidiary
(other than the transactions contemplated by this Agreement); (D) any person
(other than Parent or its Affiliates) is granted any option or right,
conditional or otherwise, to acquire or otherwise become the beneficial owner
of shares of Company Common Stock which, together with all shares of Company
Common Stock beneficially owned by such person, results or would result in
such person being the beneficial owner of 20% or more of the outstanding
shares of Company Common Stock; or (E) there is a public announcement with
respect to a plan or intention by the Company to effect any of the foregoing
transactions. For purposes of this Section 5.6(c), the terms "group" and
"beneficial owner" shall be defined by reference to Section 13(d) of the
Exchange Act.
(d) Notwithstanding any provision in this Agreement to the
contrary, if this Agreement is terminated (i) by the Company pursuant to
Section 7.1(b) or (c), then Parent shall (without prejudice to any other
rights of the Company against Parent) reimburse the Company upon demand for
all out-of-pocket fees and expenses incurred or paid by or on behalf of the
Company or any Affiliate of the Company in connection with this Agreement,
the Stock Option Agreement and the transactions contemplated herein or
therein, including all fees and expenses of counsel, investment banking
firms, accountants and consultants (collectively, "COMPANY FEES"), PROVIDED,
HOWEVER, that (A) in no event shall the amount paid pursuant to this Section
5.6(d) in reimbursement of the Company Fees exceed $1,500,000.
SECTION 5.7 COMPANY STOCK OPTIONS.
(a) Prior to the Effective Time, the Company shall elect to
accelerate all Company Stock Options pursuant to its right to do so under the
Company Stock Option Plans, and shall provide that all such Company Stock
Options will be cancelled at the Effective Time unless exercised prior
thereto, except to the extent set forth in Section 5.7(b).
(b) At the Effective Time, each Company Stock Option that is
outstanding immediately prior to the Effective Time and that has an exercise
or strike price less than $1.89 shall become and represent the right to
receive a number of shares of Parent Common Stock (each a "SUBSTITUTE
SHARE"), equal to:
X = A x {[ B - (C + T)] / B} x D
44
where:
X = number of Substitute Shares
A = number of shares of Company Common Stock subject or related
to such Company Stock Option
B = $1.89
C = exercise or purchase price per share of Company Common
Stock subject or related to such Company Stock Option
T = all applicable federal, state and local taxes required to
be withheld by the Parent per share of Company Common Stock
subject or related to such Company Stock Option
D = the Merger Consideration
Parent shall pay cash to holders of Substitute Shares in lieu of issuing
fractional shares of Parent Common Stock.
(c) Parent shall offer to employees of the Company who will become
Employees of the Surviving Corporation or Parent and who hold Company Stock
Options that are cancelled under Section 5.7(a), and that have exercise
prices equal to or greater than $1.89 ("CANCELLED OPTIONS"), the election to
waive any rights associated with the Cancelled Options in exchange for
options to purchase Parent Common Stock ("PARENT STOCK OPTIONS") on terms
consistent with options granted to Parent employees generally, which terms
shall include the following:
(i) the exercise price of any such Parent Stock Options shall
be equal to the exercise price of the Cancelled Option divided by the
Exchange Ratio, where the "EXCHANGE RATIO" is an amount equal to $1.89
divided by the Average Parent Share Price;
(ii) the number of shares of Parent Common Stock for which
such Parent Stock Options shall be exercisable shall be equal to the number
of shares of Company Common Stock subject to the Cancelled Option multiplied
by the Exchange Ratio;
(iii) the vesting schedule of the Parent Stock Option shall
provide for annual vesting in September of each year (each a "VESTING DATE");
(iv) the amount of shares of Parent Common Stock vesting on
each Vesting Date shall be determined as follows:
(A) to the extent the Cancelled Option was vested as of
the Effective Date, the portion of the Parent Stock Option attributable to
such vested shares shall also be vested; and
45
(B) to the extent the Cancelled Option would vest with
respect to Company Common Stock after the Effective Date, the portion of the
Parent Stock Option attributable to such unvested shares shall vest after the
Effective Date on succeeding Vesting Dates such that on each Vesting Date,
the number of shares of Parent Common Stock vesting on each Vesting Date
shall equal the number of shares of Company Common Stock that would have, but
had not already, vested over the prior 12-month period under the Cancelled
Option.
(v) Any determination of the extent to which a Cancelled
Option is vested as of the Effective Date shall be made without regard to the
operation of this Section 5.7 or any action by the Board of Directors of the
Company between the date hereof and the Effective Time.
(vi) Any grants of a Parent Stock Option may, at the request
of Parent, be made pursuant to and subject to definitive stock option
agreements between the Parent and each holder of a Cancelled Option.
(d) The Company shall take all action necessary in implementing the
provisions of this Section 5.7, including, for avoidance of doubt, amendment
of the Company Stock Option Plans pursuant to a resolution of the Board of
Directors in form and substance satisfactory to Parent, to ensure that, after
giving effect to the foregoing, no Company Stock Option shall be exercisable
for Company Common Stock or Parent Common Stock following the Effective Time.
SECTION 5.8 REASONABLE BEST EFFORTS.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use reasonable best efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated by
this Agreement, including: (i) the obtaining of all necessary actions or
non-actions, waivers, consents and approvals from all Governmental Entities
and the making of all necessary registrations and filings (including filings
with Governmental Entities) and the taking of all reasonable steps as may be
necessary to obtain an approval or waiver from, or to avoid or vigorously
defend an action or proceeding by, any Governmental Entity (including those
in connection with the HSR Act and State Takeover Approvals), (ii) the
obtaining of all necessary consents, approvals or waivers from third parties,
(iii) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement, the Stock Option
Agreement or the consummation of the transactions contemplated hereby and
thereby, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed, and
(iv) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by this Agreement, including without
limitation obtaining the waiver, cancellation or voluntary termination of the
registration rights listed on Schedule 3.2(b) prior to the Closing by the
holders thereof to the extent that they would otherwise be
46
outstanding after the Merger. No party to this Agreement shall consent to any
voluntary delay of the consummation of the Merger at the behest of any
Governmental Entity without the consent of the other parties to this
Agreement, which consent shall not be unreasonably withheld.
(b) Each party shall use reasonable best efforts to not take any
action, or enter into any transaction, which would cause any of its
representations or warranties contained in this Agreement to be untrue or
result in a breach of any covenant made by it in this Agreement.
(c) Notwithstanding anything to the contrary contained in this
Agreement, in connection with any filing or submission required or action to
be taken by either Parent or the Company to effect the Merger and to
consummate the other transactions contemplated hereby, (i) the Company shall
not, without Parent's prior written consent, commit to any divestiture
transaction or commit to alter or restrict its business or commercial
practices in any way, and (ii) neither Parent nor any of its Affiliates shall
be required to (A) divest or hold separate or otherwise take or commit to
take any action that limits its freedom of action with respect to, or its
ability to retain, the Company or any of the businesses, product lines or
assets of Parent or any of its Affiliates, or (B) alter or restrict in any
way the business or commercial practices of Parent, any of its Affiliates, or
the Company.
(d) The Company shall use reasonable best efforts to file, within
30 days of the date of this Agreement, a UCC-1 financing statement (or
similar form) with respect to each scanner that has been shipped to a third
party warehouse, and for which the Company has received less than all of the
cash that was due upon or as a result of such shipment.
SECTION 5.9 PUBLIC ANNOUNCEMENTS. Parent and the Company will not issue
any press release with respect to the transactions contemplated by this
Agreement or otherwise issue any written public statements with respect to
such transactions without prior consultation with the other party, except as
may be required by applicable law or by obligations pursuant to any listing
agreement with or rules of any national securities exchange or the Nasdaq
National Market.
SECTION 5.10 STATE TAKEOVER LAWS. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute
or regulation shall become applicable to the transactions contemplated hereby
or in the Stock Option Agreement, Parent and the Company and their respective
Boards of Directors shall use their best efforts to grant such approvals and
take such actions as are necessary so that the transactions contemplated
hereby and thereby may be consummated as promptly as practicable on the terms
contemplated hereby and thereby and otherwise act to minimize the effects of
any such statute or regulation on the transactions contemplated hereby and
thereby.
SECTION 5.11 INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE.
47
(a) From and after the Effective Time, Parent shall cause the
Surviving Corporation to indemnify and hold harmless all past and present
officers and directors of the Company and of its Subsidiaries to the same
extent and in the same manner such persons are indemnified as of the date of
this Agreement by the Company pursuant to the NJBCA, the Company Charter, the
Company's By-laws and in any agreement with the Company listed on Section
5.11 of the Company Letter for acts or omissions occurring at or prior to the
Effective Time (including indemnifying and holding harmless such persons for
acts or omissions occurring at or prior to the Effective Time in respect of
the Merger and the transactions contemplated thereby) to the same extent and
in the manner as such persons are indemnified as of the date of this
Agreement by the Company pursuant to the NJBCA, the Company Charter, the
Company's By-laws and the listed agreements.
(b) Prior to the Effective Time, the Company shall purchase a
"tail" insurance policy which provides the Company's current directors and
officers insurance and indemnification coverage for events occurring prior to
the Effective Time (the "D&O INSURANCE TAIL POLICY") with policy limits not
greater than those in effect on August 31, 2001, and with a term of not more
than six years from the Effective Time. Parent shall not cancel the D&O
Insurance Tail Policy.
(c) Parent hereby agrees that, effective at the Effective Time,
Parent will guarantee the obligations of the Surviving Corporation under
Section 5.11(a) and (b).
(d) Notwithstanding anything to the contrary contained in this
Agreement, neither the Surviving Corporation, Parent nor any affiliate of
Parent shall be obligated to pay in the aggregate any amounts (including, but
not limited to amounts paid as judgments, fines, penalties, settlement costs,
attorneys' fees or indemnification pursuant to Clauses (a), (b) or (c) of
this Section 5.11) in excess of $35,600,000.
(e) This covenant is intended to be for the benefit of, and shall
be enforceable by, each of the indemnified parties and their respective heirs
and legal representatives.
SECTION 5.12 NOTIFICATION OF CERTAIN MATTERS. Parent shall use its
reasonable best efforts to give prompt notice to the Company, and the Company
shall use its reasonable best efforts to give prompt notice to Parent, of:
(a) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which it is aware and which would be reasonably likely to
cause (i) any representation or warranty contained in this Agreement and made
by it to be untrue or inaccurate in any material respect or (ii) any
covenant, condition or agreement contained in this Agreement and made by it
not to be complied with or satisfied in all material respects, (b) any
failure of Parent or the Company, as the case may be, to comply in a timely
manner with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder or (c) any change or event which would be
reasonably likely to have a Material Adverse Effect on Parent or the Company,
as the case may be; PROVIDED, HOWEVER, that the delivery of any notice
pursuant to this Section 5.12 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
48
SECTION 5.13 SUSPENSION OF 1994 EMPLOYEE STOCK PURCHASE PLAN. The
Company shall amend, effective as of the date hereof, the 1994 Employee Stock
Purchase Plan to halt purchases under the plan at the end of the payroll
period in which this Agreement is executed.
SECTION 5.14 EMPLOYEE BENEFIT PLANS. For the first year following the
Effective Time while employed by the Surviving Corporation, employees of the
Surviving Corporation will receive base wages and salaries at rates no less
favorable to such employees than the rates of base wages and salaries paid by
the Company or its Subsidiaries to such employees on the date of this
Agreement (excluding bonuses and other variable pay). For a period of one
year immediately following the Effective Time, Parent shall or shall cause
the Surviving Corporation to maintain in effect employee benefit plans and
arrangements which provide benefits which have a value which is substantially
comparable, in the aggregate, to the benefits provided by the benefits plans
of the Company on the date of this Agreement (not taking into account the
value of any benefits under any such plans which are equity based). For
purposes of determining eligibility to participate, vesting and accrual or
entitlement to benefits where length of service is relevant under any
employee benefit plan or arrangement of the Surviving Corporation, employees
of the Company and its Subsidiaries as of the Effective Time shall receive
service credit for service with the Company and its Subsidiaries to the same
extent such credit was granted under the Company Plans, subject to offsets
for previously accrued benefits and no duplication of benefits.
Notwithstanding the foregoing, nothing in this Section 5.14 shall require any
action on the part of Parent or the Surviving Corporation with respect to any
employees subject the foreign laws or regulations relating to employee
benefits.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
SECTION 6.1 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 fulfillment at or prior to the Effective Time of each of the
following conditions:
(a) SHAREHOLDER APPROVAL. This Agreement and the Plan of Merger
shall have been duly approved by the requisite vote of shareholders of the
Company in accordance with applicable law, the Company Charter and the
Company's By-laws.
(b) STOCK EXCHANGE LISTINGS. The Parent Common Stock issuable in
the Merger and not reviously listed shall have been authorized for listing on
the NYSE, subject to official notice of issuance.
(c) HSR AND OTHER APPROVALS/CONSENTS OR WAIVERS.
(i) The waiting period (and any extension thereof) applicable
to the consummation of the Merger under the HSR Act shall have expired or
been terminated.
49
(ii) All authorizations, consents, orders, declarations or
approvals of, or filings with, or terminations or expirations of waiting
periods imposed by, any Governmental Entity, which the failure to obtain,
make or occur would have the effect of, directly or indirectly, restraining,
prohibiting or restricting the Merger or any of the transactions contemplated
hereby or would have, individually or in the aggregate, a Material Adverse
Effect on Parent (assuming the Merger had taken place), shall have been
obtained, shall have been made or shall have occurred.
(d) REGISTRATION STATEMENT. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act. No
stop order suspending the effectiveness of the Registration Statement shall
have been issued by the SEC and no proceedings for that purpose shall have
been initiated or, to the Knowledge of Parent or the Company, threatened by
the SEC. All necessary state securities or blue sky authorizations (including
State Takeover Approvals) shall have been received.
(e) NO ORDER. No court or other Governmental Entity having
jurisdiction over the Company or Parent, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered
any law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of, directly or indirectly, restraining, prohibiting or
restricting the Merger or any of the transactions contemplated hereby;
provided, however, that the provisions of this Section 6.1(e) shall not be
available to any party whose failure to fulfill its obligations pursuant to
Section 5.8 shall have been the cause of, or shall have resulted in, the
enforcement or entering into of any such law, rule, regulation, executive
order, decree, injunction or other order.
SECTION 6.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of each of the following
additional conditions:
(a) PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND WARRANTIES.
(i) Each of Parent and Sub shall have performed in all
material respects each of its agreements and covenants contained in this
Agreement required to be performed on or prior to the Effective Time;
(ii) Each of the representations and warranties of Parent
and Sub contained in this Agreement that is qualified by materiality shall
have been true and correct when made, and shall be true and correct on and as
of the Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date); and
(iii) Each of the representations and warranties that is
not so qualified shall have been true and correct in all material respects
when made, and shall be true and correct in all material respects on and as
of the Effective Time as if made on and
50
as of such date (other than representations and warranties which address
matters only as of a certain date which shall be true and correct in all
material respects as of such certain date), in each case except as
contemplated or permitted by this Agreement, and the Company shall have
received certificates signed on behalf of each of Parent and Sub by one of
its officers to such effect.
(b) TAX OPINION. The Company shall have received an opinion of
Xxxxx Xxxxxxx Xxxx Xxxxxx & Xxxxxxx LLP, counsel to the Company, in form and
substance reasonably satisfactory to the Company, dated the Effective Time,
on the basis of facts, representations and assumptions set forth in such
opinion which are consistent with the state of facts existing as of the
Effective Time substantially to the effect that, for federal income tax
purposes, the Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and the Company, Sub, and Parent will each be a
party to that reorganization within the meaning of Section 368(b) of the
Code. In rendering such opinion, Xxxxx Xxxxxxx Xxxx Xxxxxx & Xxxxxxx LLP may
receive and rely upon representations from Parent, the Company, and certain
shareholders of the Company.
(c) MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
there shall have been no Material Adverse Change with respect to Parent. The
Company shall have received a certificate signed on behalf of Parent by an
officer of Parent to such effect.
(d) COMPANY STOCK OPTION PLANS. Parent shall have taken all action
required to be taken by it to implement the provisions of Section 5.7.
SECTION 6.3 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE
MERGER. The obligations of Parent and Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of each of the
following additional conditions:
(a) PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND WARRANTIES.
(i) The Company shall have performed in all material
respects each of its covenants and agreements contained in this Agreement
required to be performed on or prior to the Effective Time;
(ii) Each of the representations and warranties of the
Company contained in this Agreement that is qualified by materiality shall
have been true and correct when made, and shall be true and correct on and as
of the Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date); and
(iii) Each of the representations and warranties that is
not so qualified shall have been true and correct in all material respects
when made, and shall be true and correct in all material respects on and as
of the Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as
51
of a certain date which shall be true and correct in all material respects as
of such certain date), in each case except as contemplated or permitted by
this Agreement. Parent shall have received a certificate signed on behalf of
the Company by its Chief Executive Officer or its Chief Financial Officer to
such effect.
(b) TAX OPINION. Parent shall have received an opinion of Xxxxxx,
Xxxx & Xxxxxxxx LLP, counsel to Parent, in form and substance reasonably
satisfactory to Parent, dated the Effective Time, on the basis of facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing as of the Effective Time
substantially to the effect that, for federal income tax purposes, the Merger
will constitute a "reorganization" within the meaning of Section 368(a) of
the Code, and the Company, Sub, and Parent will each be a party to that
reorganization within the meaning of Section 368(b) of the Code. In rendering
such opinion, Xxxxxx, Xxxx & Xxxxxxxx LLP may receive and rely upon
representations from Parent, the Company, and certain shareholders of the
Company.
(c) CONSENTS.
(i) The Company shall have obtained the consent or
approval of each person or Governmental Entity whose consent or approval
shall be required in connection with the transactions contemplated hereby
under any loan or credit agreement, note, mortgage, indenture, lease or other
agreement or instrument, except as to which the failure to obtain such
consents and approvals would not, in the reasonable opinion of Parent,
individually or in the aggregate, have a Material Adverse Effect on the
Company or Parent or upon the consummation of the transactions contemplated
in this Agreement or the Stock Option Agreement or the Shareholder Agreement.
(ii) In obtaining any approval or consent required to
consummate any of the transactions contemplated herein, in the Stock Option
Agreement or the Shareholder Agreement, no Governmental Entity shall have
imposed or shall have sought to impose any condition, penalty or requirement
which, in the reasonable opinion of Parent, individually or in aggregate
would have a Material Adverse Effect on the Company or Parent.
(d) AFFILIATE AGREEMENTS. Parent shall have received the written
agreements from Rule 145 Affiliates of the Company described in Section 5.4.
(e) MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
there shall have been no Material Adverse Change with respect to the Company.
Parent shall have received a certificate signed on behalf of the Company by
the Chief Executive Officer or the Chief Financial Officer of the Company to
such effect.
(f) COMPANY STOCK OPTION PLANS. The Company shall have taken all
action required to be taken by it to implement the provisions of Section 5.7.
In addition, the Company shall have received written consents specified with
respect to stock option grants set forth in Section 6.3(f) of the Company
Letter.
52
(g) DIRECTOR AND OFFICER RESIGNATIONS. All of the Directors of the
Company and its Subsidiaries and any officers thereof designated by Parent,
shall have tendered their resignation in form and substance satisfactory to
Parent.
(h) STOCK BONUS PLAN. The Company shall have terminated the 1987
Plan in form and substance satisfactory to Parent.
(i) NON EMPLOYEE DIRECTOR OPTION PLAN. The Company shall have
terminated the Non-Employee Director Option Plan and all options issued
pursuant thereto if not exercised prior to the Effective Time.
(j) ENVIRONMENTAL APPROVAL. Parent shall have received the results
of its environmental site assessments of the Company's and the Subsidiaries'
operations and real properties currently or formerly owned, leased or used by
the Company or any Subsidiary, and such results shall not have identified (i)
any contamination of ground water, surface water or sediment, (ii) any
significant contamination of soil or surfaces, or (iii) any other
environmental, health and safety concerns requiring cleanup or
decontamination or otherwise posing a risk to human health or the
environment, whether or not such matters are known by Parent prior to the
date hereof or contained in the Company Letter; provided, however, that this
condition shall be deemed satisfied if the matters described in each of (i),
(ii) or (iii) do not, or will not reasonably be expected to, result in
liabilities to the Company, or to the Parent or Surviving Corporation after
the Effective Time, in excess of $2,000,000, based on the reasonable
determination of Parent.
(k) TERMINATION OF 401(k) PLAN. Prior to the Effective Time, the
Company will take such action as is necessary to terminate the Imatron 401(k)
Plan (the "COMPANY 401(k) PLAN") in conformance with the requirements of
ERISA and the Internal Revenue Code, including rules and regulations issued
thereunder, immediately prior to the Effective Time and also will take all
necessary action to ensure that each participant who has an account in the
Company 401(k) Plan as of the Effective Time, shall be fully vested in his or
her Company 401(k) Plan account balance in a manner acceptable to Parent.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after any approval of the
matters presented in connection with the Merger by the shareholders of the
Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the other party shall have
failed to comply in any material respect with any of its covenants or
agreements contained in this Agreement required to be complied with prior to
the date of such termination, which failure to comply has not been cured
within five business days following receipt by such other party of written
notice of such failure to comply;
53
(c) by Parent if (i) there has been a breach of a representation or
warranty of the Company that gives rise to a failure of the fulfillment of a
condition of the Parent's and Sub's obligations to effect the Merger pursuant
to Section 6.3(a)(ii) or by Company if (ii) there has been a breach of a
representation or warranty of the Parent or Sub that gives rise to a failure
of the fulfillment of a condition of the Company's obligations to effect the
Merger pursuant to Section 6.2(a)(ii), in each case which breach has not been
cured within five business days following receipt by the breaching party of
written notice of the breach;
(d) by either Parent or the Company if:
(i) the Merger has not been effected on or prior to the
close of business on the later of June 15, 2002, or the date 75 days after
the waiting period applicable to the consummation of the Merger under the HSR
Act has expired or been terminated; PROVIDED, HOWEVER, that the right to
terminate this Agreement pursuant to this Section 7.1(d)(i) shall not be
available to any party whose failure to fulfill any of its obligations
contained in this Agreement has been the cause of, or resulted in, the
failure of the Merger to have occurred on or prior to the aforesaid date; or
(ii) Any court or other Governmental Entity having
jurisdiction over a party hereto shall have issued an order, decree or ruling
or taken any other action (which order, decree, ruling or other action the
parties shall have used their reasonable efforts to resist, resolve or lift,
as applicable, subject to the provisions of Section 5.8) permanently
enjoining, restraining or otherwise prohibiting the transactions contemplated
by this Agreement and such order, decree, ruling or other action shall have
become final and nonappealable;
(e) By either Parent or the Company if the shareholders of the
Company do not approve this Agreement at the Shareholder Meeting or at any
adjournment or postponement thereof;
(f) By Parent if
(i) The Board of Directors of the Company shall not have
recommended, or shall have resolved not to recommend, or shall have
qualified, changed, modified or withdrawn its recommendation of the Merger or
declaration that the Merger is advisable and fair to and in the best interest
of the Company and its shareholders, or shall have resolved to do so,
(ii) The Board of Directors of the Company, shall have
recommended to the shareholders of the Company any Takeover Proposal or shall
have resolved to do so, or
(iii) A tender offer or exchange offer for 20% or more of
the outstanding stocks of capital stock of the Company is commenced by a
third party that is not an Affiliate of Parent, and the Board of Directors of
the Company fails to recommend against acceptance of such tender offer or
exchange offer by its shareholders (including
54
by taking no position with respect to the acceptance of such tender offer or
exchange offer by its shareholders);
(g) By Parent or the Company if the Company enters into a merger,
acquisition or other agreement (including an agreement in principle) to
effect a Superior Proposal or the Board of Directors of the Company resolves
to do so; PROVIDED, HOWEVER, that the Company may not terminate this
Agreement pursuant to this Section 7.1(g) unless (i) the Company has
delivered to Parent a written notice of the Company's intent to enter into
such an agreement to effect the Superior Proposal, (ii) 48 hours have elapsed
following delivery to Parent of such written notice by the Company and (iii)
during such 48-hour period the Company has fully cooperated with Parent,
including informing Parent of the terms and conditions of the Takeover
Proposal and the identity of the person making the Takeover Proposal, with
the intent of enabling Parent to agree to a modification of the terms and
conditions of this Agreement so that the transactions contemplated hereby may
be effected; PROVIDED, FURTHER, that the Company may not terminate this
Agreement pursuant to this Section 7.1(g) unless at the end of such 48 hour
period the Board of Directors of the Company continues reasonably to believe
that the Takeover Proposal constitutes a Superior Proposal when compared to
the Merger (taking into account any such modification as may be proposed by
Parent) and concurrently with such termination the Company pays to Parent the
amounts specified under Sections 5.6(a), (b) and (c);
(h) By Company if the waiting period applicable to the consummation
of the Merger under the HSR Act has not expired or been terminated on or
prior to June 15, 2002; or
(i) By Parent if the waiting period applicable to the consummation
of the Merger under the HSR Act has not expired or been terminated on or
prior to June 15, 2002.
The right of any party hereto to terminate this Agreement pursuant to this
Section 7.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
SECTION 7.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Parent or the Company, as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability
hereunder on the part of the Company, Parent, Sub or their respective
officers or directors (except for the last sentence of Section 5.3 and the
entirety of Section 5.6, which shall survive the termination); PROVIDED,
HOWEVER, that nothing contained in this Section 7.2 shall relieve any party
hereto from any liability for any willful breach of a representation or
warranty contained in this Agreement or the breach of any covenant contained
in this Agreement.
SECTION 7.3 AMENDMENT. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of
Directors, in the case of Sub or the Company, or a Senior Vice President of
Parent, at any time before
55
or after approval of the matters presented in connection with the Merger by
the shareholders of the Company, but, after any such approval, no amendment
shall be made which by law or the rules of the Nasdaq National Market
requires further approval by such shareholders without such further approval.
This Agreement may not be amended except by an instrument in writing signed
on behalf of each of the parties hereto.
SECTION 7.4 WAIVER. At any time prior to the Effective Time, the parties
hereto may (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 and (c) waive compliance with any of the agreements or
conditions contained herein which may legally be waived. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party. No
delay on the part of any party hereto in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver
on the part of any party hereto of any right, power or privilege hereunder
operate as a waiver of any other right, power or privilege hereunder, nor
shall any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of
any other right, power or privilege hereunder. Unless otherwise provided, the
rights and remedies herein provided are cumulative and are not exclusive of
any rights or remedies which the parties hereto may otherwise have at law or
in equity. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of
those rights.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES; NO OTHER
REPRESENTATIONS AND WARRANTIES. The representations and warranties in this
Agreement or in any instrument delivered pursuant to this Agreement shall
terminate at the Effective Time. Each party hereto agrees that, except for
the representations and warranties contained in this Agreement, or the
documents, certificates and instruments contemplated hereby, none of the
Company, Parent or Sub makes any other representations and warranties, and
each hereby disclaims any other representations and warranties made by itself
or any of its officers, directors, employees, agents, financial and legal
advisors or other representatives, with respect to the execution and delivery
of this Agreement, the documents and the instruments referred to herein, or
the transactions contemplated hereby or thereby, notwithstanding the delivery
or disclosure to the other party or the other party's representatives of any
documentation or other information with respect to any one or more of the
foregoing.
SECTION 8.2 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given when delivered personally, one
day after being delivered to an overnight courier or when telecopied (with a
confirmatory copy sent by overnight courier) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
56
GE Medical Systems
X.X. Xxx 000, X-000
Xxxxxxxxx, XX 00000
Attn: General Counsel
Fax: 000-000-0000
and:
General Electric Company
0000 Xxxxxx Xxxxxxxx
Xxxxxxxxx, XX 00000-0000
Attn: Vice President and Senior Counsel - Transactions
and
Xxxxxx, Xxxx & Xxxxxxxx LLP
0000 Xxxxxxxxxx Xxxxxx , Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Facsimile No.: 000-000-0000
and
XxXxxxxx & English, LLP
000 Xxxxxxxx Xxxxxx
Xxxxxx, X.X. 00000 - 4096
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Facsimile No.: 000-000-0000
(b) if to the Company, to:
Imatron Inc.
000 Xxxxxx Xxxxx Xxxx
Xxxxx Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: S. Xxxxx Xxxxx
with a copy to:
Xxxxx Xxxxxxx Xxxx Xxxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx
Facsimile No.: 000-000-0000
SECTION 8.3 INTERPRETATION.
57
(a) When a reference is made in this Agreement to a Section, such
reference shall be to a Section of this Agreement unless otherwise indicated.
The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed
by the words "without limitation."
(b) "SUBSIDIARY" means any corporation, partnership, limited
liability company, joint venture or other legal entity of which Parent or
Company, as the case may be (either alone or through or together with any
other Subsidiary), owns or controls, directly or indirectly, 50% or more of
the stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or other
governing body of such corporation, partnership, limited liability company,
joint venture or other legal entity.
SECTION 8.4 COUNTERPARTS. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 8.5 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement, except for the Stock Option Agreement and as provided in the last
sentence of Section 5.3, constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof. This Agreement, except for the
provisions of Section 5.11, is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
SECTION 8.6 GOVERNING LAW. Except to the extent that the laws of the
State of New Jersey are mandatorily applicable to the Merger, this Agreement
shall be governed by, and construed in accordance with, the laws of the State
of
New York, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
SECTION 8.7 ASSIGNMENT. Subject to Section 1.1, neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned
by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of and be enforceable by the parties and their respective successors or
assigns.
SECTION 8.8 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other terms, conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic and legal substance of the transactions contemplated hereby are not
affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties shall negotiate in good faith to
modify this
58
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated by this Agreement may be consummated as originally contemplated
to the fullest extent possible.
SECTION 8.9 ENFORCEMENT OF THIS AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that 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 hereto
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof such
remedy being in addition to any other remedy to which any party is entitled
at law or in equity. Each party hereto irrevocably submits to the exclusive
jurisdiction of the United States District Court for the Southern District of
New York. Each party hereto waives any right to a trial by jury in connection
with any such action, suit or proceeding and waives any objection based on
FORUM NON CONVENIENS or any other objection to venue thereof.
SECTION 8.10 PERFORMANCE BY SUB. Parent hereby agrees to cause Sub to
comply with its obligations hereunder and to cause Sub to consummate the
Merger as contemplated herein and whenever this Agreement requires Sub to
take any action, such requirement shall be deemed to include an undertaking
of Parent to cause Sub to take such action.
SECTION 8.11 DEFINED TERMS. Each of the following terms is defined in
the Section identified below:
1993 Plan...............................................................................Section 3.2(a)(iv)
1997 Plan................................................................................Section 3.2(a)(v)
2001 Plan...............................................................................Section 3.2(a)(ii)
510(k).........................................................................................Section 3.8
Affiliate...................................................................................Section 5.6(b)
Affiliated Person.............................................................................Section 3.26
Agreement.........................................................................................Preamble
Average Parent Share Price..................................................................Section 1.5(c)
Blue Sky Laws..................................................................................Section 2.3
Cancelled Options...........................................................................Section 5.6(c)
Certain Factors................................................................................Section 3.7
Certificate of Merger..........................................................................Section 1.2
Certificates................................................................................Section 1.6(b)
Closing.......................................................................................Section 1.14
Closing Date..................................................................................Section 1.14
Code..............................................................................................Recitals
Company...........................................................................................Preamble
Company Business Personnel....................................................................Section 3.14
Company Charter................................................................................Section 3.4
59
Company Common Stock........................................................................Section 1.5(c)
Company Foreign Benefit Plan...............................................................Section 3.12(d)
Company Intellectual Property.................................................................Section 3.15
Company Letter...................................................................................Section 3
Company Licenses..............................................................................Section 3.15
Company Multiemployer Plan.................................................................Section 3.12(c)
Company Permits................................................................................Section 3.8
Company Plan............................................................................................23
Company Preferred Stock.....................................................................Section 3.2(a)
Company SEC Documents..........................................................................Section 3.5
Company Stock Option Plans..................................................................Section 3.2(b)
Company Stock Options.......................................................................Section 3.2(b)
Company Warrants............................................................................Section 3.2(b)
Compensation Agreements....................................................................Section 3.11(a)
Confidentiality Agreement......................................................................Section 5.3
Constituent Corporations..........................................................................Preamble
D&O Insurance..............................................................................Section 5.11(b)
Director Plan..........................................................................Section 3.2(a)(iii)
Effective Time.................................................................................Section 1.2
Environmental Law......................................................................Section 3.21(a)(ii)
Environmental Permit..................................................................Section 3.21(a)(iii)
ERISA......................................................................................Section 3.12(a)
ERISA Affiliate............................................................................Section 3.12(c)
Exchange Act...................................................................................Section 2.3
Exchange Agent..............................................................................Section 1.6(a)
Exchange Fund...............................................................................Section 1.6(a)
Exchange Ratio...........................................................................Section 5.6(c)(i)
FDA............................................................................................Section 3.8
Governmental Entity............................................................................Section 2.3
Hazardous Substances....................................................................Section 3.22(a)(i)
HSR Act........................................................................................Section 2.3
IRS............................................................................................Section 3.9
Knowledge of the Company.......................................................................Section 3.8
Liens.........................................................................................Section 3.28
Material Adverse Change...................................................................Section 2.1, 3.1
Material Adverse Effect...................................................................Section 2.1, 3.1
Merger............................................................................................Recitals
Merger Consideration........................................................................Section 1.5(c)
NJBCA..........................................................................................Section 1.1
NYSE...........................................................................................Section 2.3
Parent............................................................................................Preamble
Parent Common Stock.........................................................................Section 1.5(c)
60
Parent SEC Documents...........................................................................Section 2.5
Parent Stock Options........................................................................Section 5.6(c)
PMA............................................................................................Section 3.8
Proxy Statement................................................................................Section 2.6
Real Estate................................................................................Section 3.28(b)
Registration Statement.........................................................................Section 2.2
reorganization....................................................................................Recitals
Risk Factor Disclosures........................................................................Section 3.7
Rule 145 Affiliates............................................................................Section 5.4
SEC............................................................................................Section 2.2
Securities Act.................................................................................Section 2.2
Shareholder Agreement.............................................................................Recitals
Significant Contracts......................................................................Section 3.11(b)
SSA............................................................................................Section 3.8
State Takeover Approvals.......................................................................Section 2.3
Stock Option Agreement............................................................................Recitals
Stockholder Meeting............................................................................Section 5.1
Sub...............................................................................................Preamble
Subsidiary..................................................................................Section 8.3(b)
Substitute Share............................................................................Section 5.6(a)
Superior Proposal...........................................................................Section 4.2(a)
Surviving Corporation..........................................................................Section 1.1
Takeover Proposal...........................................................................Section 4.2(a)
Tax Return.....................................................................................Section 3.9
Taxes..........................................................................................Section 3.9
Third Party Acquisition Event...........................................................Section 5.6(c)(ii)
Valuation Period............................................................................Section 1.5(c)
Vesting Date...........................................................................Section 5.6(c)(iii)
Worker Safety Laws............................................................................Section 3.13
61
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement to be
signed by their respective officers thereunto duly authorized all as of the date
first written above.
GENERAL ELECTRIC COMPANY,
A
NEW YORK CORPORATION
By: /s/ J. Xxxxx Xxxxxx
-------------------
Name: J. Xxxxx Xxxxxx
Title: Vice President
RUBY MERGER CORP.,
A NEW JERSEY CORPORATION
By: /s/ J. Xxxxx Xxxxxx
-------------------
Name: J. Xxxxx Xxxxxx
Title: President
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
IMATRON INC.,
A NEW JERSEY CORPORATION
By: /s/ S. Xxxxx Xxxxx
------------------
Name: S. Xxxxx Xxxxx
Title: Chief Executive Officer
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
