EXHIBIT 2
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AGREEMENT AND PLAN OF MERGER
BETWEEN
MTI ACQUISITION CORP.,
AND
MOBILE TECHNOLOGY INC.
DATED AS OF JANUARY 13, 1998
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TABLE OF CONTENTS
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PAGE
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Article I GENERAL.................................................................. 1
1.1 The Merger.................................................................. 1
1.2 Effective Time of the Merger................................................ 2
1.3 Effect of the Merger........................................................ 2
1.4 Charter, By-Laws, Officers and Directors of Surviving Corporation........... 2
1.5 Taking of Necessary Action.................................................. 2
1.6 Authorization of the Merger, this Agreement and the Certificate of Merger... 2
1.7 The Closing................................................................. 3
Article II EFFECT OF MERGER........................................................ 3
2.1 Effect on Capital Stock..................................................... 3
2.2 Delivery of Funds; Surrender of Certificates................................ 4
Article III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................... 5
3.1 Organization, Power, Authority and Good Standing............................ 5
3.2 Authorization, Execution and Enforceability................................. 5
3.3 Consents.................................................................... 6
3.4 Capitalization.............................................................. 6
3.5 Subsidiaries; Investments................................................... 7
3.6 Financial Information....................................................... 7
3.7 Absence of Changes.......................................................... 8
3.8 Tax Matters................................................................. 9
3.9 Title to Assets, Properties and Rights and Related Matters.................. 11
3.10 Real Property--Owned or Leased.............................................. 12
3.11 Intellectual Property....................................................... 12
3.12 Agreements, No Defaults, Etc................................................ 13
3.13 Litigation, Etc............................................................. 13
3.14 Compliance with Laws........................................................ 14
3.15 Insurance................................................................... 14
3.16 Labor Management Relations: Employees....................................... 15
3.17 ERISA Compliance............................................................ 16
3.18 Certain Additional Regulatory Matters....................................... 18
3.19 Medicare/Medicaid Participation; Accreditation.............................. 19
3.20 Environmental Matters....................................................... 20
3.21 Brokers..................................................................... 20
3.22 Related Transactions........................................................ 20
3.23 Accounts and Notes Receivable............................................... 21
3.24 Bank Accounts; Powers of Attorney........................................... 21
3.25 Suppliers and Vendors....................................................... 21
3.26 Customers................................................................... 21
Article IV REPRESENTATIONS AND WARRANTIES of newco................................. 22
4.1 Organization; Corporate Authority........................................... 22
4.2 Corporate Action; Authority; No Conflict.................................... 22
4.3 Brokers..................................................................... 22
4.4 Consents.................................................................... 23
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4.5 Investment Intent........................................................... 23
Article V COVENANTS AND AGREEMENTS................................................. 23
5.1 Access to Records and Properties of the Company............................. 23
5.2 Conduct of the Company...................................................... 23
5.3 Financial Information....................................................... 25
5.4 Efforts to Consummate....................................................... 26
5.5 Negotiation with Others..................................................... 26
5.6 Public Announcements........................................................ 26
5.7 Filings..................................................................... 26
5.8 Stock Option Plans and Warrants............................................. 26
Article VI CONDITIONS.............................................................. 27
6.1 Conditions to Each Party's Obligation to Effect the Merger.................. 27
6.2 Conditions to the Company's Obligation To Effect the Merger................. 28
6.3 Conditions to Newco's Obligations to Effect the Merger...................... 28
Article VII TERMINATION; EFFECT OF TERMINATION..................................... 29
7.1 Termination................................................................. 29
7.2 Effect of Termination....................................................... 30
Article VIII MISCELLANEOUS PROVISIONS.............................................. 30
8.1 Amendment................................................................... 30
8.2 Entire Agreement............................................................ 31
8.3 Survival of Representations and Warranties.................................. 31
8.4 Severability................................................................ 31
8.5 Benefits of Agreement....................................................... 31
8.6 Expenses.................................................................... 31
8.7 Headings.................................................................... 31
8.8 Notices..................................................................... 31
8.9 Counterparts................................................................ 33
8.10 Governing Law............................................................... 33
8.11 Incorporation of Exhibits and Schedules..................................... 33
8.12 Independence of Covenants and Representations and Warranties................ 33
8.13 Interpretation; Construction................................................ 34
8.14 Remedies.................................................................... 34
8.15 Waiver of Jury Trial........................................................ 34
8.16 Additional Schedules........................................................ 35
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AGREEMENT AND PLAN OF MERGER (this
"Agreement") dated as of January 13, 1998, by and
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between MTI ACQUISITION CORP., a Delaware
corporation ("Newco"), and MOBILE TECHNOLOGY INC.,
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a Delaware corporation (the "Company"). Certain
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capitalized term used herein are defined on ANNEX
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I hereto.
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WHEREAS, the Board of Directors of the Company has determined that it is
fair and in the best interests of its stockholders for Newco to merge with and
into the Company (the "Merger") pursuant to Section 251 of the Delaware General
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Corporation Law (the "Delaware Statute") upon the terms and subject to the
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conditions set forth herein;
WHEREAS, the Board of Directors of the Company has adopted resolutions
approving the Merger, this Agreement and the transactions to which the Company
is a party contemplated hereby, and has agreed, upon the terms and subject to
the conditions set forth herein, to recommend that the Company's stockholders
approve the Merger and this Agreement;
WHEREAS, the parties have agreed (subject to the terms and conditions of
this Agreement), as soon as practicable following the approval by the
stockholders of the Company, to effect the Merger, as more fully described
herein;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Newco to enter into this Agreement, Newco and certain stockholders
of the Company owning more than 50% of the outstanding capital stock of the
Company and more than 50% of the capital stock of the Company on a fully diluted
basis (the "Stockholders") are entering into a Stockholders' Agreement (the
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"Stockholders' Agreement") pursuant to which such stockholders have, among other
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things, granted to Newco an irrevocable proxy to vote their Shares in favor of
the Merger and all other actions necessary to consummate the Merger, upon the
terms and subject to the conditions set forth in the Stockholders' Agreement;
and
WHEREAS, Newco and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the premises and the mutual benefits to
be derived from this Agreement and the representations, warranties, covenants,
agreements and conditions hereinafter set forth, the parties hereto hereby agree
as follows:
ARTICLE I
GENERAL
1.1 THE MERGER
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In accordance with, and subject to, the provisions of this Agreement, the
Certificate of Merger in substantially the form of EXHIBIT A attached hereto
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(the "Certificate of Merger") and
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the Delaware Statute, Newco shall be merged with and into the Company, which, at
and after the Effective Time, shall be and is hereinafter sometimes referred to
as the "Surviving Corporation." Newco and the Company are hereinafter sometimes
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collectively referred to as the "Constituent Corporations."
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1.2 EFFECTIVE TIME OF THE MERGER.
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The Merger shall become effective on the Closing Date upon the filing by
Surviving Corporation of the Certificate of Merger with the Secretary of State
of the State of Delaware. The Certificate of Merger shall be executed and
delivered in the manner provided under the Delaware Statute. The time when the
Merger shall become effective is referred to herein as the "Effective Time."
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1.3 EFFECT OF THE MERGER.
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Except as specifically set forth herein or in the Certificate of Merger, at
the Effective Time, the identity, existence, corporate organization, purposes,
powers, objects, franchises, privileges, rights, immunities, restrictions,
debts, liabilities and duties (collectively, the "Corporate Rights") of the
Company shall continue in effect and be unimpaired by the Merger, and the
Corporate Rights of Newco shall be merged with and into the Company, which
shall, as the Surviving Corporation, be fully vested therewith. At the
Effective Time, the separate existence and corporate organization of Newco shall
cease, and Newco shall be merged with and into the Surviving Corporation.
1.4 CHARTER, BY-LAWS, OFFICERS AND DIRECTORS OF SURVIVING CORPORATION.
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From and after the Effective Time, the certificate of incorporation of the
Company shall be amended and restated in its entirety to read as set forth in
EXHIBIT B hereto (the "Company's Charter") and, as so amended, the Company's
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Charter shall be the certificate of incorporation of the Surviving Corporation
until altered, amended or repealed as provided in the Delaware Statute; the by-
laws of Newco shall become the by-laws of the Surviving Corporation (the
"Company's By-Laws"), unless and until altered, amended or repealed as provided
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in the Delaware Statute, the Company's Charter or such By-laws; and the officers
and directors of Newco shall become the officers and directors of the Surviving
Corporation, respectively, unless and until removed or until their respective
terms of office shall have expired in accordance with the Delaware Statute, the
Company's Charter or the Company's By-Laws, as applicable.
1.5 TAKING OF NECESSARY ACTION.
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Prior to the Effective Time, and subject to the terms and conditions
contained in this Agreement, the parties hereto shall take or cause to be taken
all such actions as may be necessary or appropriate in order to effectuate, as
expeditiously as reasonably practicable, the Merger.
1.6 AUTHORIZATION OF THE MERGER, THIS AGREEMENT AND THE CERTIFICATE OF
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MERGER.
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(a) Prior to or simultaneously with the execution and delivery of this
Agreement, the Stockholders shall execute a written consent in lieu of a
meeting, which written consent shall include resolutions approving and adopting
the Merger, this Agreement, the
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Certificate of Merger, and Related Documents and consummation of the
transactions contemplated hereby, as required by the Delaware Statute. If such
written consent is not unanimous, the Company will promptly prepare and
distribute a notice to the remaining holders of capital stock of the Company in
accordance with Section 228(d) of the Delaware Statute.
(b) Prior to or simultaneously with the execution and delivery of this
Agreement, Newco shall execute a written consent in lieu of a meeting, which
written consent shall include resolutions approving and adopting the Merger,
this Agreement, the Certificate of Merger, and Related Documents and
consummation of the transactions contemplated hereby, as required by the
Delaware Statute.
(c) The parties shall take as promptly as practicable, all such other
actions as may be necessary or advisable under the Delaware Statute and any
other applicable law or regulation in connection with this Agreement, the Merger
or the Certificate of Merger. The Company shall prepare and distribute any
written notice or other materials relating to the Stockholders' action
contemplated by Section 1.6(a) required to be delivered pursuant to the
Company's Charter or By-laws, the Delaware Statute or any other Federal or state
law applicable to this Agreement, the Merger, the Certificate of Merger, and
Related Documents or the Stockholders' action (collectively, the "Stockholders'
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Materials"); provided, however, that Newco and its counsel shall have a
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reasonable opportunity to review and comment on all Stockholders' Materials.
1.7 THE CLOSING.
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The closing of the transactions contemplated hereby (the "Closing") will
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take place as promptly as practicable after satisfaction or waiver of the
conditions set forth in Article VI or such other date (the "Closing Date") to be
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mutually agreed upon by the parties. On the Closing Date, the Surviving
Corporation shall file the Certificate of Merger with the Secretary of State of
the State of Delaware pursuant to Section 1.2 hereof. The Closing shall take
place at the offices of O'Sullivan, Graev & Karabell, LLP, 30 Rockefeller Plaza,
New York, New York 10112, unless another place is agreed to by the parties.
ARTICLE II
EFFECT OF MERGER
2.1 EFFECT ON CAPITAL STOCK.
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(a) The manner and basis of converting, exchanging or canceling the
shares of capital stock of each of the Constituent Corporations into or for cash
(or the contingent right to receive cash) or securities of the Surviving
Corporation shall be as follows:
(i) each share of common stock, $.01 par value, of Newco issued and
outstanding immediately prior to the Effective Time shall be converted into
one share of common stock, $.01 par value, of the Surviving Corporation;
(ii) each Share issued and outstanding immediately prior to the
Effective Time and owned directly or indirectly by the Company (whether as
treasury stock or
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otherwise) shall, by virtue of the Merger and without any action on the
part of the holder thereof, be canceled and no consideration shall be
delivered in exchange therefor;
(iii) Each Merger Share shall, by virtue of the Merger and without
any action on the part of the Stockholders thereof, cease to be outstanding
and be converted into the right to receive, subject to the terms and
conditions of this Agreement, an amount in cash equal to the Merger
Consideration; and
(iv) each authorized but unissued share of Company Common Stock
immediately prior to the Effective Time shall be canceled.
2.2 DELIVERY OF FUNDS; SURRENDER OF CERTIFICATES.
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(a) At the Effective Time Newco shall deposit with the Transfer Agent
for the benefit of the holders of the Merger Shares, for payment in accordance
with this Article II, the funds necessary to pay the Merger Consideration for
each Merger Share.
(b) As soon as practicable after the Effective Time of the Merger, each
holder of an outstanding certificate or certificates which prior thereto
represented Merger Shares, upon surrender to the Transfer Agent of such
certificate or certificates (together with a letter of transmittal signed by
such holder which is reasonably satisfactory to Newco and which shall include
customary representations and warranties as to title to such Merger Shares) and
acceptance thereof by the Company, shall be entitled to the amount of cash into
which the number of Merger Shares previously represented by such certificate or
certificates surrendered shall have been converted pursuant to this Agreement.
The Transfer Agent shall accept such certificates and such letter of transmittal
upon compliance with such reasonable terms and conditions as the Transfer Agent
may impose to effect an orderly exchange thereof in accordance with normal
practices. After the Effective Time of the Merger, there shall be no further
transfer on the records of the Company or its transfer agent of certificates
representing Merger Shares which have been converted, in whole or in part,
pursuant to this Agreement, into the right to receive cash, and if such
certificates are presented to the Company for transfer, they shall be canceled
against delivery of such cash. If cash is to be remitted to a name other than
that in which the certificate for Merger Shares surrendered for exchange is
registered, it shall be a condition of such exchange that the certificate so
surrendered shall be properly endorsed, with signature guaranteed or otherwise
in proper form for transfer. Until surrendered as contemplated by this Section
2.2(b), each certificate for Merger Shares shall be deemed at any time after the
Effective Time of the Merger to represent only the right to receive upon such
surrender the Merger Consideration for each Merger Share.
(c) No dividends or other distributions with respect to Shares with a
record date after the Effective Time of the Merger shall be paid to the holder
of any certificate for Shares not surrendered with respect to the Shares
represented thereby.
(d) All cash paid upon the surrender for exchange of certificates
representing Merger Shares in accordance with the terms of this Article II shall
be deemed to have been paid in full satisfaction of all rights pertaining to the
Merger Shares exchanged for cash theretofore represented by such certificates.
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(e) Any cash deposited with the Transfer Agent pursuant to this Section
2.2 (the "Exchange Fund") which remains undistributed to the holders of the
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certificates representing Merger Shares 360 days after the Effective Time of the
Merger shall be delivered to the Surviving Corporation at such time and any
holders of Shares prior to the Merger who have not theretofore complied with
this Article II shall thereafter look only to the Surviving Corporation and only
as general unsecured creditors thereof for payment of their claim for cash.
(f) Neither Newco nor the Company shall be liable to any person in
respect of any cash from the Exchange Fund delivered to a public office pursuant
to any applicable abandoned property, escheat or similar law. If any
certificates representing Merger Shares shall not have been surrendered prior to
one year after the Effective Time of the Merger (or immediately prior to such
earlier date on which any cash in respect of such certificate would otherwise
escheat to or become the property of any Governmental Entity), any such cash in
respect of such certificate shall, to the extent permitted by applicable law,
become the property of the Surviving Corporation, free and clear of all claims
or interest of any person previously entitled thereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Newco as follows:
3.1 ORGANIZATION, POWER, AUTHORITY AND GOOD STANDING.
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The Company is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite power and authority (corporate and otherwise) to own, lease and
operate its assets and properties and to carry on its business as presently
conducted. The Company is duly qualified and in good standing to transact
business as a foreign corporation in those jurisdictions set forth on Schedule
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3.1, which constitute all the material jurisdictions in which the character of
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the property owned, leased or operated by such entity or the nature of the
business or activities conducted by such entity makes such qualification
necessary. Newco has been furnished with true, correct and complete copies of
the Company's Charter and the Company's By-Laws, in each case as amended and in
effect on the date hereof. Except as set forth on Schedule 3.1, the Company has
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(i) not, within the last three years, engaged in any business other than the
Business and (ii) not used within the last three years any other trade name or
assumed names.
3.2 AUTHORIZATION, EXECUTION AND ENFORCEABILITY.
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The Company has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement and each Related
Document to which it is a party and to consummate the transactions contemplated
hereby and thereby. The Company's execution and delivery of this Agreement and
each Related Document to which it is a party, and performance by the Company of
its obligations hereunder and thereunder have been duly and validly authorized
by all requisite action on the part of the Company and its Stockholders, and
this Agreement and each Related Document to which the Company is or will be a
party has been,
5
or upon the execution and delivery thereof will be, duly and validly executed
and delivered by the Company and constitutes, or upon its execution and delivery
will constitute, a valid and binding obligation of the Company, enforceable
against the Company, as the case may be, in accordance with its terms, except as
enforceability may be limited by equitable principles of bankruptcy, fraudulent
conveyance or insolvency laws affecting creditors' rights generally. Except as
set forth on Schedule 3.2 or as otherwise contemplated by this Agreement,
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neither the Company's execution and delivery of, and/or performance of its
obligations under, this Agreement or the Related Documents to which it is or
will be a party, nor the consummation of the transactions contemplated hereby or
thereby will (a) violate, or result in the creation of an Encumbrance upon any
of the Company's assets as a result of, any Laws applicable to the Company or
any of its properties or assets or (b) conflict with, or result in any violation
or breach of, any of the terms, conditions or provisions of, or constitute (with
due notice or lapse of time, or both) a default or give rise to any right of
contingent payment, termination, cancellation or acceleration, or result in the
creation of any Encumbrance upon any of the properties or assets of the Company,
under, any provision of the Company's Charter or the Company's By-laws or any
Contract set forth on Schedule 3.12 to which it is a party or by which it or
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any of its assets or properties is or may be bound.
3.3 CONSENTS.
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Except as set forth on Schedule 3.3, no consent, approval, Permit, Order or
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authorization of, registration, declaration or filing with, or notification to
any Governmental Entity is required in connection with the execution, delivery
and performance by the Company of this Agreement or the Related Documents to
which it is a party or the consummation of the transactions contemplated hereby
or thereby.
3.4 CAPITALIZATION.
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(a) The authorized capital stock of the Company consists of two
million (2,000,000) duly authorized shares of Common Stock, par value $.01 per
share, of which 1,020,627 shares of Common Stock are duly and validly issued and
outstanding, fully paid and nonassessable, all of which are held of record by
the Persons set forth on Schedule 3.4(a).
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(b) Except as set forth on Schedule 3.4(b) there are no
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securities presently outstanding, that are convertible into, exchangeable for,
or carrying the right to acquire, equity securities of the Company or
subscriptions, warrants, options, calls, puts, convertible securities,
registration or other rights, arrangements or commitments obligating the Company
to issue, sell, register, purchase or redeem any of its equity securities or any
ownership interest or rights therein. There are no voting trusts or other
agreements or understandings to which the Company is bound with respect to the
voting of the Company's capital stock. There are no stock appreciation rights,
phantom stock rights or similar rights or arrangements outstanding. Except as
set forth on Schedule 3.4 or as otherwise contemplated by this Agreement, there
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are no Contracts, commitments, arrangements, understandings or restrictions to
which the Company is bound relating in any way to any shares of capital stock or
other securities of the Company.
(c) All securities issued by the Company have been issued in
transactions exempt from registration under the Securities Act and the rules and
regulations promulgated
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thereunder and all applicable state securities or "blue sky" laws, and the
Company has not violated the Securities Act or any applicable state securities
or "blue sky" laws in connection with the issuance of any such securities.
3.5 SUBSIDIARIES; INVESTMENTS.
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Except as set forth on Schedule 3.5, the Company does not own or hold,
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directly or indirectly, any equity interest in any Person. All of the equity
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interests set forth on Schedule 3.5 are owned of record and beneficially by the
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Company, free and clear of all Liens. Since December 31, 1996, no equity
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interests of any Subsidiary were issued, reserved for issuance, issuable or
outstanding. All equity interests of the Subsidiaries are fully paid,
nonassessable and not subject to preemptive rights. The authorized capital
stock of each Subsidiary is as set forth in Schedule 3.5.
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3.6 FINANCIAL INFORMATION.
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(a) Schedule 3.6(a) attached hereto contains true, correct and
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complete copies of the following:
(i) the audited consolidated balance sheets of the Company
as of December 31, 1994, 1995 and 1996 (each an "Audited Balance Sheet
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Date"), and the related audited consolidated statements of operations,
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Stockholders' equity and cash flows of the Company for the fiscal years
then ended, including the footnotes thereto, as audited by (and together
with the report of their audit) Price Waterhouse, LLP (all of foregoing
being hereinafter collectively called the "Audited Financial Statements");
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and
(ii) the unaudited consolidated balance sheet of the
Company as of November 30, 1997 (the "Latest Balance Sheet"; and such date
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being the "Latest Balance Sheet Date"), and the unaudited consolidated
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statements of operations of the Company for the period then ended,
including any footnotes thereto, if any (all of the foregoing, including
the Latest Balance Sheet, being hereinafter collectively referred to as the
"Unaudited Financial Statements"; and the Audited Financial Statements and
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the Unaudited Financial Statements, collectively, the "Financial
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Statements").
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(b) The financial statements were prepared in accordance with
GAAP applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present, in all material respects,
the consolidated financial position of the Company and its Subsidiaries as of
the dates thereof and the results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). Except as set forth on Schedule 3.6(a) and except
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for Liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the Latest Balance Sheet Date, neither the
Company nor any of its Subsidiaries has any Liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) required by GAAP to
be set forth on a balance sheet or in the notes thereto. Management of the
Company has no reason to believe that with respect to its long-lived assets and
intangible assets which are subject to Financial Accounting Standards No. 121,
as of December 31, 1997, the undiscounted
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future cash flows related to such assets did not exceed the carrying values
thereof recorded as of such date, as required by GAAP.
(c) Schedule 3.6(c) sets forth, as of the close of business on
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December 31, 1997, (A) the consolidated indebtedness owed by the Company and its
Subsidiaries to all third parties (separately identifying the portion of such
indebtedness incurred in respect of (i) any Magnetic Resonance Imaging unit
(each, an "MRI Unit") owned, leased or on order by the Company or any
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Subsidiary, including, mobile and fixed site MRI Units, (ii) any equipment
owned, leased or on order by the Company or any Subsidiary, which equipment is
used to provide computed axial tomography services and imaging systems (each a
"CT Unit"), including, mobile and fixed CT Units, (iii) any equipment owned,
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leased or on order by the Company or any Subsidiary, which equipment is used to
provide lithotripsy procedures (each a "LI Unit"), including, mobile and fixed
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LI Units (iv) any equipment owned, leased or on order by the Company or any
Subsidiary, which equipment is used to provide brachytherapy services (each a
"BR Unit"), including, mobile and fixed BR Units, (v) any equipment owned,
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leased or on order by the Company or any Subsidiary, which equipment is used to
provide prostate radiation services (each a "PR Unit") including, mobile and
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fixed PR Units and (vi) the construction costs incurred in respect of any fixed
site location, and (B) the Company's aggregate consolidated cash and cash
equivalents, in the case of clauses (A) and (B), each calculated in accordance
with GAAP, consistently applied. The term "indebtedness" shall include
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indebtedness for borrowed money, reimbursement obligations with respect to
letters of credit and similar instruments, obligations incurred, issued or
assumed as the deferred purchase price of property or services (other than
accounts payable incurred in the ordinary course of business consistent with
past practice), obligations of others secured by (or, for which the holder of
such indebtedness has an existing right, contingent or otherwise, to be secured)
any Lien on property or assets of the Company or any Subsidiary, capital lease
obligations, and obligations in respect of guarantees of any of the foregoing or
any "keep well" or other agreement to maintain any financial statement condition
of another person, in each case, whether or not matured, liquidated, fixed,
contingent, or disputed.
(d) Schedule 3.6(d) sets forth, (i) as of December 31, 1997, a
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fixed asset schedule that includes a general description of each MRI Unit, CT
Unit, LI Unit, BR Unit and PR Unit (including type, purchase price (to the
extent available), age, vendor and upgrades thereto) owned or subject to capital
lease or operating lease obligations by the Company or any Subsidiary as of that
date, and (ii) as of the date of this Agreement, a list (the "Commitments List")
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of all outstanding Commitments of the Company or any Subsidiary to purchase an
MRI Unit, CT Unit, LI Unit, BR Unit, or PR Unit (including type, vendor,
upgrades and delivery date thereto), indicating for each such Commitment, the
purchase price as indicated on the purchase order therefor placed with the
manufacturer or other seller of such unit.
3.7 ABSENCE OF CHANGES.
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Except as set forth on Schedule 3.7, from the date of the Latest Balance
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Sheet Date the Company has been operated in the ordinary course, consistent with
past practice, and there has not been:
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(a) any change in the business, operations, assets, condition
(financial or otherwise), operating results, prospects or Liabilities which has
had or is reasonably likely to have a material adverse effect on the Company and
its Subsidiaries (taken as a whole) or any material casualty loss or damage to
the assets of the Company (taken as a whole), whether or not covered by
insurance (a "Material Adverse Change");
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(b) except for intercompany payments in the ordinary course of
business, any declaration, setting aside or payment of any distribution with
respect to any shares of capital stock of the Company, or any direct or indirect
redemption, purchase or other acquisition of any thereof, or any other payments
of any nature outside the ordinary course of business to any Affiliate of the
Company whether or not on or with respect to any shares of capital stock of the
Company owned by such Affiliate (excluding salaries and benefits in ordinary
course consistent with past practices at rates equal to those in effect on the
Latest Balance Sheet Date);
(c) any general uniform increase in the compensation of
employees (including, without limitation, any increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment) of the Company, or any
increase in any such compensation payable to any officer, director or key
management employee;
(d) any change in the tax or other accounting methods or
practices followed by the Company, any change in depreciation or amortization
policies or rates previously adopted or any write-up of inventory or other
assets;
(e) any material change in the manner in which products or
services of the Company are marketed (including, without limitation, any change
in prices), any material change in the manner in which the Company extends
discounts or credit to customers or any material change in the manner or terms
by which the Company collects its accounts receivable or otherwise deals with
customers;
(f) any failure by the Company to make scheduled capital
expenditures or investments or any failure to pay trade accounts payable or any
other Liability of the Company in the ordinary course consistent with past
practices; or
(g) any entry into any agreement, whether in writing or
otherwise, to take any of the actions specified in the foregoing clauses (a)
through (f).
3.8 TAX MATTERS.
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(a) Except as set forth on Schedule 3.8(a): (i) the Company
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and (ii) each other Person included in any consolidated or combined Tax Return
and part of an affiliated group, within the meaning of Section 1504 of the
Internal Revenue Code of 1986, as amended (the "Code"), of which the Company is
----
or has been a member ("Tax Affiliate"), for the years that it was a Tax
-------------
Affiliate of the Company:
(i) has timely paid or caused to be paid all Taxes
required to be paid by it through the date hereof and as of the Closing
Date (including any Taxes shown due on any Tax Return);
9
(ii) has filed or caused to be filed in a timely and proper
manner (within any applicable extension periods) all Tax Returns required
to be filed by it with the appropriate Governmental Entities in all
jurisdictions in which such Tax Returns are required to be filed; and all
Tax Returns filed on behalf of the Company and each Tax Affiliate were
complete and correct in all material respects; and
(iii) has not requested or caused to be requested any
extension of time within which to file any Tax Return, which Tax Return has
not since been filed.
(b) The Company has previously delivered true, correct and
complete copies of all Federal Tax Returns filed by or on behalf of the Company
through the date hereof for the periods ending after December 31, 1993.
(c) Except as set forth in Schedule 3.8(c):
---------------
(i) neither the Company nor any Tax Affiliate (for the
years that it was a Tax Affiliate of the Company) has been notified by the
Internal Revenue Service or any other taxing authority that any issues have
been raised (and no such issues are currently pending) by the Internal
Revenue Service or to the Best Knowledge of the Company any other taxing
authority in connection with any Tax Return filed by or on behalf of the
Company or to the Best Knowledge of the Company any Tax Affiliate; there
are no pending Tax audits and no waivers of statutes of limitations have
been given or requested with respect to the Company or to the Best
Knowledge of the Company any Tax Affiliate (for the years that it was a Tax
Affiliate of the Company); no Tax liens have been filed against the Company
or any Tax Affiliate (for the years that it was a Tax Affiliate of the
Company) except for liens for current Taxes not yet due and payable for
which adequate reserves have been provided for in the Latest Balance Sheet;
no unresolved deficiencies or additions to Taxes have been proposed,
asserted, or assessed against the Company or to the Best Knowledge of the
Company any Tax Affiliate (for the years that it was a Tax Affiliate of the
Company);
(ii) full and adequate provision (at assumed tax rates) has
been made (A) on the Latest Balance Sheet, and the books and records of the
Company for all deferred Taxes not yet due and payable by the Company as if
it were a stand-alone Company for all periods on or prior to the Latest
Balance Sheet Date, and (B) on the books and records of the Company for all
deferred Taxes payable by the Company for all periods beginning on or after
the Latest Balance Sheet Date;
(iii) neither the Company nor any Subsidiary has incurred
any Liability for Taxes from and after the Latest Balance Sheet Date other
than Taxes incurred in the ordinary course of business and consistent with
past practices;
(iv) the Company has not (A) made an election (or had an
election made on its behalf by another person) to be treated as a
"consenting corporation" under Section 341(f) of the Code or (B) been a
----------------------
"personal holding company" within the meaning of Section 542 of the Code;
------------------------
10
(v) the Company has complied in all material respects with
all applicable Laws relating to the collection or withholding of Taxes
(such as sales Taxes or withholding of Taxes from the wages of employees);
(vi) neither the Company nor any Subsidiary has any
liability in respect of any Tax sharing agreement with any Person and all
Tax sharing agreements to which either the Company or any Subsidiary has
been bound have been terminated;
(vii) the Company has not incurred any Liability to make or
possibly make any payments either alone or in conjunction with any other
payments that:
(A) shall be non-deductible under, or would otherwise
constitute a "parachute payment" within the meaning of Section 280G of the
-----------------
Code (or any corresponding provision of state, local or foreign income Tax
Law); or
(B) are or may be subject to the imposition of an
excise Tax under Section 4999 of the Code;
(viii) the Company has not agreed to (nor has any other
person agreed to on its behalf) and is not required to make any adjustments
or changes either on, before or after the Closing Date, to its accounting
methods pursuant to Section 481 of the Code, and the Internal Revenue
Service has not proposed any such adjustments or changes in the accounting
methods of the Company;
(ix) no claim has been made within the last three years by
any taxing authority in a jurisdiction in which the Company does not file
Tax Returns that the Company is or may be subject to taxation by that
jurisdiction;
(x) the consummation of the transactions hereunder will
not trigger the realization or recognition of intercompany gain or income
to the Company under the Federal consolidated return regulations with
respect to Federal, state, or local taxes; and
(xi) The Company is not currently, nor has it been at any
time during the previous five years, a "U.S. real property holding
corporation" and, therefore, the Shares are not "U.S. real property
interests," as such terms are defined in Section 897 of the Code.
3.9 TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS.
----------------------------------------------------------
The Company has good and marketable title to all of the assets, properties
and interests in properties, real, personal or mixed, reflected on the Latest
Balance Sheet or acquired after the Latest Balance Sheet Date (except inventory
or other property sold or otherwise disposed of since the Latest Balance Sheet
Date in the ordinary course of business and accounts receivable and notes
receivable to the extent collected subsequent to the Latest Balance Sheet Date),
free and clear of all Encumbrances, of any kind or character, except for those
Encumbrances set forth on Schedule 3.9 and Permitted Encumbrances. Such assets
------------
comprise all of the assets necessary for the conduct of the Business as
currently conducted. Such assets are in good operating
11
condition and repair (normal wear and tear excepted), and are not subject to any
condition which materially interferes with the use thereof.
3.10 REAL PROPERTY--OWNED OR LEASED.
------------------------------
(a) The Company does not own any real property. Schedule 3.10(a)
----------------
contains a list by address of all of the real property leased by the Company
subject to one or more leases (the "Leased Property"), including the names of
---------------
the lessor and the lessee. The Leased Property constitutes all real property
used or occupied by the Company in connection with its operations .
(b) With respect to the Leased Property, except as set forth on Schedule
--------
3.10(b): (i) no portion thereof is subject to any pending condemnation
- -------
Proceeding or Proceeding by any Governmental Entity and to the Best Knowledge of
the Company there is no threatened condemnation or Proceeding with respect
thereto; (ii) the physical condition of the Leased Property is sufficient to
permit the continued conduct of the Business as presently conducted subject to
the provision of usual and customary maintenance and repair performed in the
ordinary course; (iii) the Company is the owner and holder of all the leasehold
estates purported to be granted by such leases; (iv) there are no Contracts,
written or oral, to which the Company or any Affiliate thereof is a party,
granting to any party or parties the right of use or occupancy of any portion of
the parcels of the Leased Property; (v) there are no parties (other than the
Company or their lessees disclosed pursuant to clause (iv) above) in possession
of the Leased Property; and (vi) no notice of any increase in the assessed
valuation of the Leased Property and no notice of any contemplated special
assessment has been received by the Company.
3.11 INTELLECTUAL PROPERTY.
---------------------
(a) Except in each case as set forth on Schedule 3.11(a):
----------------
(i) the Company owns, has the right to use, sell, license and
dispose of, and has the right to bring actions for the infringement of
(excluding readily available off-the-shelf software), all Intellectual
Property Rights (including the name "MTI") purported to be owned by the
---
Company, all of which are set forth on Schedule 3.11(a) (collectively, the
----------------
"Owned Requisite Rights"). The Company has the right to use all other
----------------------
Intellectual Property Rights used by it, for which the Company has a valid
license, all of which (other than readily-available off-the-shelf software)
are listed on Schedule 3.11(a) (collectively, the "Licensed Requisite
---------------- ------------------
Rights"; and, together with the Owned Requisite Rights, the "Requisite
------ ---------
Rights");
------
(ii) the Company has taken reasonable and practicable steps
designed to safeguard and maintain the proprietary rights of the Company in
all of its Owned Requisite Rights;
(iii) the Company has not received from any Person in the past two
years any notice, charge, complaint, claim or assertion of interference
with, infringement upon, misappropriation or other conflict with any
Intellectual Property Rights of any Person or commission of any acts of
unfair competition; and
12
(iv) the Company has not sent to any Person or otherwise
communicated to any Person, in the past three years, any notice, charge,
complaint, claim or other assertion of any present, impending or threatened
infringement by or misappropriation of, or other conflict with, any
Intellectual Property Rights of the Company by such other Person or any
acts of unfair competition by such other Person.
(b) Schedule 3.11(b) contains a true and complete list of all
----------------
applications, filings and other formal actions made or taken pursuant to any
Laws by the Company to perfect or protect its interest in its Intellectual
Property Rights, including, without limitation, all patents, patent
applications, trademarks, trademark applications, servicemarks and servicemark
applications, copyrights and copyright applications.
3.12 AGREEMENTS, NO DEFAULTS, ETC.
-----------------------------
Except as set forth on Schedule 3.12, there are no (a) notes, bonds,
-------------
mortgages, indentures, leases, or Permits by which the assets of the Company are
bound, or (b) other contracts, agreements or other instruments or obligations or
any amendments, supplements or restatements of any of the foregoing ((a) and
(b), collectively, "Commitments") that (i) relate to real property, (ii) relate
-----------
to services provided by the Company to or at hospitals, clinics, medical or
healthcare providers or other customers or services paid for by health
maintenance organizations or other third party payors, (iii) relate to the
construction, reconstruction, maintenance, transportation or use of any MRI
Unit, CT Unit, LI Unit, BR Unit or PR Unit, (iv) relate to contracts for the
provision of services provided to the Company by physicians, physician groups or
other medical professionals or (v) are otherwise material to the business,
financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole. Except as set forth on Schedule 3.12, the
-------------
Company is and, to the Best Knowledge of the Company, no other party is in
violation of or in default under (nor does there exist any condition affecting
the Company, or to the Best Knowledge of the Company, other parties to such
Commitments which upon the passage of time or the giving of notice or both would
reasonably be expected to cause such a violation of or default under) any
material Commitment to which it is a party or by which it or any of its
properties or assets is bound. Each Commitment constitutes a valid and binding
obligation of the Company and to the Best Knowledge of the Company each other
party thereto, enforceable against such other party in accordance with its
terms. The consummation of the transactions contemplated by this Agreement will
not give rise to any right of termination of any Contract, give rise to the
acceleration of the maturity of any indebtedness or otherwise require the
repurchase or redemption of any debt security of the Company.
3.13 LITIGATION, ETC.
----------------
(a) Except as disclosed on Schedule 3.13(a), there are no (i)
----------------
Proceedings pending or, to the Best Knowledge of the Company, threatened against
the Company, whether at law or in equity, whether civil or criminal in nature,
or (ii) Orders of any Governmental Entity or arbitrator with respect to,
involving or against the Company.
(b) Schedule 3.14(b) lists each matter described in
----------------
Section 3.14(a) that was in existence within the last three years that resulted
- ---------------
in any criminal sanctions or payments in excess
13
of $100,000.00 by the Company (whether as a result of a judgment, civil fine,
settlement or otherwise).
3.14 COMPLIANCE WITH LAWS.
--------------------
The Company (a) except as set forth on Schedule 3.14, has complied with,
-------------
and is in compliance with, all Laws, Orders and Permits applicable to it and the
Business and (b) has all Permits (other than local business Permits or licenses
containing no change of control provision) necessary in the conduct of its
Business, except with respect to such noncompliance or failure to obtain such
Permit as would not have a Material Adverse Effect (it being understood that
certificates of need shall be deemed material for all purposes under this
Agreement). All material Permits are listed on Schedule 3.14. All Permits are
-------------
in full force and effect, no material violations with respect to any thereof
have occurred or are or have been recorded, no Proceeding is pending or, to the
Best Knowledge of the Company, threatened to revoke or limit any thereof. No
notice of investigation or review by any Governmental Entity with respect to the
Company has been received by the Company, nor has any Governmental Entity
notified the Company of its intention to conduct the same.
3.15 INSURANCE.
---------
(a) Schedule 3.15(a) contains a true and complete list of all policies
----------------
of liability, theft, fidelity, life, fire, product liability, workmen's
compensation, health and other forms of insurance held by the Company and each
Subsidiary (specifying the insurer, amount of coverage, type of insurance,
policy number, Best's rating of the insurer and any pending claims thereunder).
The Company and each Subsidiary has maintained such insurance coverage at all
times during the course of the operation of the Business, and such insurance
coverage has been maintained on an occurrence (as opposed to a claims made)
basis. The Company and each Subsidiary is insured against all risks usually
insured against by Persons conducting similar businesses and operating similar
properties in the localities where the Business is conducted and the properties
of the Company and each Subsidiary are located, under policies of such types and
in such amounts as are customarily carried by such Persons. The Company and its
Subsidiaries have not exhausted the insurance coverage available under the
Company's currently existing insurance policies.
(b) Except as set forth on Schedule 3.15(b), with respect to each policy
-----------------
of insurance listed on Schedule 3.15(a): (i) all premiums with respect thereto
----------------
are currently paid and are not subject to adjustment, and no Person is in
default in any respect with respect to its obligations under such policy, and no
basis exists that would give any insurer under any such policy the right to
cancel or unilaterally reduce or limit the stated coverages contained in such
policy; (ii) there are no outstanding claims currently pending under such policy
that could be expected to cause an increase in the insurance rates of the
Company, and no facts or circumstances exist that might reasonably be expected
to relieve the insurer under such policy of its obligations to satisfy in full
any claim thereunder; and (iii) neither the Company nor any Subsidiary has
received any notice that such policy has been or shall be canceled or terminated
or will not be renewed on substantially the same terms as are now in effect or
the premium on such policy shall be materially increased on the renewal thereof.
14
3.16 LABOR MANAGEMENT RELATIONS: EMPLOYEES.
-------------------------------------
(a) Schedule 3.16(a) sets forth a list of all directors, officers and
----------------
key management employees of the Company as of the date hereof, together with
their respective titles (if any), their current compensation (including salary,
wages, current bonus plans and commissions) and the respective dates on which
they commenced employment. To the extent any such employee is on a leave of
absence, Schedule 3.16(a) indicates the nature of such leave of absence and such
----------------
employee's anticipated date of return to active employment. To the Best
Knowledge of the Company, none of the key management employees listed on
Schedule 3.16(a) has any plans or intends to terminate his or her employment or
- ----------------
engagement with the Company and no former key management employee has left the
service of the Company within the last six months. Schedule 3.16(a) does not
----------------
set forth information regarding present directors and officers of the Company
who will not be directors and/or officers of the Company immediately after the
Closing.
(b) Except as disclosed on Schedule 3.16(b) or as expressly provided in
----------------
this Agreement, since the date of the most recent Unaudited Financial
Statements, there has not been any adoption or amendment in any material respect
by the Company or any Subsidiary of any collective bargaining agreement or any
bonus, pension, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization, medical or
other plan or arrangement providing benefits to any current or former employee,
officer or director of the Company or any Subsidiary (for the avoidance of
doubt, regular salary and/or wage increases and modifications to bonus,
commission and other incentive compensation arrangements in case with respect to
non-officer employees of the Company or any Subsidiary in the ordinary course of
business and consistent with past practice are excluded from the foregoing).
Except as set forth in Schedule 3.16(b) and except as provided in the Company's
----------------
certificates and bylaws or as expressly provided in this Agreement, there exist
no employment, consulting, severance, termination or indemnification agreements
or arrangements between the Company and any current or former employee, officer
or director of the Company. Schedule 3.16(b) contains a list of all amounts
----------------
payable or that will or may become payable to each director, officer or employee
or former director, officer or employee of the Company or any Subsidiary
pursuant to any employment, change-in-control, severance or termination
agreement or arrangement.
(c) Schedule 3.16(c) sets forth a list of all directors and officers of
----------------
the Company and each Subsidiary as of the date hereof and the number of Company
Stock Options and/or Warrants granted or issued to each such officer and
director and to each employee of the Company or any Subsidiary in the most
recently completed fiscal year and paid and granted or issued to each such
person from the beginning of the current fiscal year through December 31, 1997.
(d) Schedule 3.16(d) sets forth a list of all outstanding Company Stock
----------------
Options and Warrants as of the date hereof, showing for each such Company Stock
Option and Warrant: (i) the number of Merger Shares issuable, (ii) the number of
vested Merger Shares, (iii) the date of grant, (iv) the exercise price and (v)
the holder thereof.
15
(e) Schedule 3.16(e) sets forth a description of all transactions
----------------
between the Company or its Subsidiaries, on the one hand, and any of their
respective Affiliates, directors, officers, employees, or consultants, on the
other hand, in each case consummated at any time since January 1, 1996 (except
for ordinary course commercial transactions involving MRI Units, CT Units , LI
Units, BR Units, or PR Units and related equipment, and the maintenance
(collectively an "Equipment Transaction")). Except as set forth on Schedule
---------------------- --------
3.16(e), or pursuant to an Equipment Transaction, there are no agreements or
- -------
arrangements between the Company or its Subsidiaries, on the one hand, and any
of their respective Affiliates, directors, officers, employees or consultants,
on the other hand, with respect to any such transactions. No Affiliate,
director, officer, employee or consultant of the Company owns any interest in
any asset or property (real or personal, tangible or intangible), business or
contract used or intended for use or otherwise relating to the business
currently conducted or proposed to be conducted by the Company or any
Subsidiary, other than pursuant to an Equipment Transaction.
(f) (i) There is no labor strike, dispute or grievance, slowdown or
stoppage actually pending or, to the Best Knowledge of the Company, threatened
against or involving the Company; and (ii) the Company is not a party to or
bound by any collective bargaining agreement, union contract or singular
agreement and no such agreement is currently being negotiated by the Company and
no labor union has taken any action with respect to organizing employees of the
Company and no representation question exists with respect to any such
employees.
3.17 ERISA COMPLIANCE.
----------------
(a) Schedule 3.17(a) contains a true, complete and correct
----------------
list of all Employee Benefit Plans (collectively, the "Employee Plans") (i) that
--------------
cover any employees, contract employees or former employees of any entity or any
spouses, family members or beneficiaries thereof (A) that are maintained,
sponsored or contributed to by any entity or (B) with respect to which any
entity is obligated to contribute or has any actual or potential Liability, or
(ii) with respect to which any entity has any actual or potential Liability or
obligation on account of the maintenance or sponsorship thereof or contribution
thereto by any present or former ERISA Affiliate (as defined below) of any
entity.
(b) Administration and Compliance. Except as set forth on
-----------------------------
Schedule 3.17(b), with respect to each Employee Plan:
- ----------------
(i) such Employee Plan has been established, maintained,
operated and administered in accordance with its terms and in compliance in
all material respects with ERISA, the Code, and other applicable Laws
(including with respect to reporting and disclosure);
(ii) all required, declared or discretionary (in
accordance with historical practices) payments, premiums, contributions,
reimbursements or accruals for all periods ending prior to or as of the
date hereof have been made or properly accrued on the Latest Balance Sheet,
or with respect to accruals properly made after the Latest Balance Sheet
Date, on the books and records of the applicable entity and all amounts
withheld from employees have been timely deposited into the appropriate
trust or account;
16
(iii) there is no unfunded actual or potential Liability
relating to such Employee Plan which is not reflected on the Latest Balance
Sheet, or with respect to accruals properly made after the Latest Balance
Sheet Date, on the books and records of the applicable entity;
(iv) no entity, any of their respective ERISA Affiliates
or any other "disqualified person" or "party in interest" (as such terms
------------------- -----------------
are defined in Section 4975 of the Code and Section 3(14) of ERISA,
respectively) with respect to such Employee Plan, has breached the
fiduciary rules of ERISA or engaged in a prohibited transaction that could
subject any of the foregoing Persons to any tax or penalty imposed under
Section 4975 of the Code of Section 502(i), (j) or (l) of ERISA;
(v) no Proceedings (other than routine claims for
benefits) are pending or, to the Best Knowledge of the Company, threatened
against or relating to any Employee Plan or any fiduciary thereof, and
there is, to the Best Knowledge of the Company, no basis for any such
Proceeding against any Employee Plan;
(vi) such Employee Plan, if intended to be "qualified",
---------
within the meaning of Section 401(a) of the Code, has been determined by
the Internal Revenue Service to be so qualified and the related trusts are
exempt from Tax under Section 501(a) of the Code, and nothing has occurred
that has or could reasonably be expected to adversely affect such
qualification or exemption;
(vii) except as may be required under Laws of general
application, such Employee Plan does not obligate any entity to provide any
employee or former employee, or their spouses, family members or
beneficiaries, any post-employment or post-retirement health or life
insurance, accident or other "welfare-type" benefits;
------------
(viii) if such Employee Plan is a "group health plan"
-----------------
within the meaning of Section 5000 of the Code, such Employee Plan has been
maintained in compliance with Section 4980B of the Code and Title I,
Subtitle B, Part 6 of ERISA and no tax payable on account of Section 4980B
of the Code has been or is expected to be incurred; and
(ix) no entity and no ERISA Affiliate of any entity is or
has ever maintained or been obligated to contribute to a Multiemployer Plan
(as defined in Section 3(37) of ERISA), a Multiple Employer Plan (as
defined in Section 413 of the Code) or a Defined Benefit Pension Plan (as
defined in Section 3(35) of ERISA);
(c) Newco has been provided with true and complete copies, to
the extent applicable, of all documents pursuant to which such Employee Plan is
maintained and administered, the most recent annual report (Form 5500 and
attachments) and financial statements therefor, all governmental rulings,
determinations, and opinions (and pending requests therefor), and, if such
Employee Plan provides post-employment or post-retirement health and life
insurance, accident or other "welfare-type" benefits, the most recent valuation
------------
of the present and future obligations under such Employee Plan; and the
foregoing documents accurately reflect all of the terms of such Employee Plan
(including, without limitation, any
17
agreement or provision which would limit the ability of any entity to make any
prospective amendments or terminate such Employee Plan).
3.18 CERTAIN ADDITIONAL REGULATORY MATTERS.
-------------------------------------
None of (x) the Company, any Affiliate of the Company, or, the officers,
directors, or agents or managing employees (within the meaning of 42 U.S.C. (S)
1320a-7(b)(8)) of the Company or any Affiliate, (y) to the Company's knowledge
(for this purpose, without independent investigation or inquiry), any of the
Persons having a direct or indirect ownership interest in the Company or any of
its Subsidiaries within the meaning of Section 1320a-7(b)(8) of Title 42 of the
United States Code or (z) to the Company's knowledge (for this purpose, without
independent investigation or inquiry), any of the Persons who provide
professional services under agreements with any of the Company or any Affiliate
as agents of such entities, have engaged in any activities which constitute
violations of, or are cause for imposition of civil penalties upon the Company
or mandatory or permissive exclusion of the Company from Medicare or Medicaid,
under Sections 1320a-7, 1320a-7a, 1320a-7b, or 1395nn of Title 42 of the United
States Code, the federal Civilian Health and Medical Plan of the Uniformed
Services statute ("CHAMPUS"), or the regulations promulgated pursuant to such
-------
statutes or regulations or related state or local statutes including the
following activities:
(a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment;
(b) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in determining
rights to any benefit or payment;
(c) presenting or causing to be presented a claim for
reimbursement under CHAMPUS, Medicare, Medicaid or any other State Health Care
Program (as defined below) or Federal Health Care Program (as defined below)
that is (i) for an item or service that the Person presenting or causing to be
presented knows or should know was not provided as claimed, or (ii) for an item
or service and the Person presenting knows or should know that the claim is
false or fraudulent;
(d) 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 (i) in return for
referring, or to induce the referral of, an individual to a Person for the
furnishing or arranging for the furnishing of any item or service for which
payment may be made in whole or in part by CHAMPUS, Medicare or Medicaid, or any
other State Health Care Program or any Federal Health Care Program, or (iii) 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 good, facility, service,
or item for which payment may be made in whole or in part by CHAMPUS, Medicare
or Medicaid or any other State Health Care Program or any Federal Health Care
Program; or
(e) knowingly and willfully making or causing to be made or
inducing or seeking to induce the making of any false statement or
representation (or omitting to state a material fact required to be stated
therein or necessary to make the statements contained therein
18
not misleading) of a material fact with respect to (i) the conditions or
operations of a facility in order that the facility may qualify for CHAMPUS,
Medicare, Medicaid or any other State Health Care Program certification or any
Federal Health Care Program certification, or (ii) information required to be
provided under Section 1124(A) of the Social Security Act ("SSA") (Section
---
1320a-3 of Title 42 of the United States Code).
3.19 MEDICARE/MEDICAID PARTICIPATION; ACCREDITATION.
----------------------------------------------
(a) Neither the Company nor any existing officers or directors
of the Company who (based on advice by Newco to the Company) is expected to be
an officer, director, agent (as defined in 42 C.F.R. Section 1001.1001(a)(2)),
or managing employee (as defined in SSA Section 1126(b) or any regulations
promulgated thereunder) of the Company: (1) has had a civil monetary penalty
assessed against it under Section 1128A of the SSA or any regulations
promulgated thereunder; (2) has been excluded from participation under the
Medicare program or a state health care program as defined in SSA Section
1128(h) or any regulations promulgated thereunder ("State Health Care Program")
-------------------------
or a federal health care program as defined in SSA Section 1128B(f) ("Federal
-------
Health Care Program"); or (3) has been convicted (as that term is defined in 42
- -------------------
C.F.R. Section 1001.2) of any of the following categories of offenses as
described in SSA Section 1128(a) and (b)(1), (2), (3) or any regulations
promulgated thereunder:
(i) criminal offenses relating to the delivery of an item
or service under Medicare or any State Health Care Program or any Federal
Health Care Program;
(ii) criminal offenses under federal or state law relating
to patient neglect or abuse in connection with the delivery of a health
care item or service; criminal offenses under federal or state law relating
to fraud, theft, embezzlement, breach of fiduciary responsibility, or other
financial misconduct in connection with the delivery of a health care item
or service or with respect to any act or omission in a program operated by
or financed in whole or in part by any federal, state or local governmental
agency;
(iii) federal or state laws relating to the interference
with or obstruction of any investigation into any criminal offense
described above in this clause (a); or
(iv) criminal offenses under federal or state law relating
to the unlawful manufacture, distribution, prescription or dispensing of a
controlled substance.
(b) The Company or a Subsidiary has a Medicare provider number,
and a participating provider agreement in force with a Medicare Part B carrier,
in each locale, as applicable, in which the Company or such Subsidiary bills
directly to Medicare for services furnished by the Company or such Subsidiary.
(c) The Company or a Subsidiary has a Medicaid number and a
participating provider agreement in each state, as applicable, in which the
Company or such Subsidiary bills directly to such states' Medicaid agency for
services provided by the Company or such Subsidiary.
19
(d) The Company or a Subsidiary intends to seek accreditation
from a private accrediting organization and has no reason to believe that such
accreditation will not be issued in the ordinary course.
3.20 ENVIRONMENTAL MATTERS.
---------------------
(a) The Company has not received any notice or report (written
or, to the Best Knowledge of the Company, oral) (i) regarding any actual or
alleged violation of any Environmental, Health and Safety Laws, or any
Liabilities, relating to any of its past or presently owned or leased properties
or operations or (ii) that the Company is potentially responsible under any
Environmental, Health and Safety Laws for response costs, corrective action or
natural resource damages, as those terms are defined under the Environmental,
Health and Safety Laws, at any location.
(b) Schedule 3.20(b) sets forth a complete and accurate list
----------------
of all properties and facilities previously owned by the Company or any
predecessor of the Company at any time during the last three years (the
"Previously Owned Properties", and together with the Leased Properties, the
---------------------------
"Covered Properties"). Except as set forth on Schedule 3.20(b), there are no
------------------ ----------------
hazardous waste treatment, storage or disposal facilities, as those terms are
defined under the Environmental, Health and Safety Laws, located at any of the
Leased Properties. During the period in which the Company owned the Previously
Owned Properties, there were no hazardous waste treatment, storage or disposal
facilities located at the Previously Owned Properties.
(c) Except as set forth on Schedule 3.20(c), the Company has
----------------
not treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled or released any substance, or owned or operated any
property (and no such property is contaminated by any such substance) in a
manner that has given or could reasonably be expected to give rise to
Liabilities pursuant to any Environmental, Health and Safety Laws, including any
Liability for response costs pursuant to any Environmental, Health and Safety
Laws.
(d) The Company has provided Newco with correct and complete
copies of all reports and studies within the possession or control of the
Company with respect to past or present environmental conditions or events at
any of the Covered Properties.
3.21 BROKERS.
-------
Except for Houlihan Lokey Howard & Zukin, whose fees and expenses will be
paid at Closing, the Company has not employed any broker or finder or incurred
any Liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
3.22 RELATED TRANSACTIONS.
--------------------
Except as set forth on Schedule 3.22, no current or former Affiliate of the
-------------
Company or any "associate" (as defined in the rules promulgated under the
---------
Securities Exchange Act of 1934, as amended) thereof, is now (i) party to any
transaction or Contract with the Company (including, but not limited to, any
contract, agreement or other arrangement providing for the furnishing of
services by, or rental of real or personal property from, or otherwise requiring
20
payments to, any such Affiliate or Associate), or (ii) the direct or indirect
owner of an interest in any Person which is a present or potential competitor,
supplier or customer of the Company (other than non-affiliated holdings in
publicly held companies). Except as set forth on Schedule 3.22, the Company is
-------------
not a guarantor or otherwise liable for any actual or potential Liability of its
Affiliates and their associates.
3.23 ACCOUNTS AND NOTES RECEIVABLE.
-----------------------------
Except as set forth on Schedule 3.23, all the accounts receivable and notes
-------------
receivable owing to the Company as of the date hereof constitute, valid and
enforceable claims arising from bona fide transactions in the ordinary course of
business, and, except to the extent reflected in reserves on the consolidated
books of the Company, there are no known or asserted claims, refusals to pay or
other rights of set-off against any thereof. Except as set forth on Schedule
--------
3.23, there is (i) no account debtor or note debtor that is delinquent for a
- ----
period in excess of 90 days for payments in excess of $50,000.00 in the
aggregate, and all such delinquencies (for a period in excess of 120 days) for
all account and note debtors do not exceed $100,000.00) in the aggregate (ii) no
account debtor or note debtor that has refused or, to the Best Knowledge of the
Company, threatened to refuse to pay its obligations to the Company for any
reason, or has otherwise made a claim of set-off or similar claim (other than in
amounts not in excess of $25,000.00 per account debtor or $100,000.00 in the
aggregate), and (iii) to the Best Knowledge of the Company, no account debtor or
note debtor that owes the Company amounts in excess of $25,000.00 in the
aggregate that is insolvent or bankrupt.
3.24 BANK ACCOUNTS; POWERS OF ATTORNEY.
---------------------------------
Schedule 3.24 sets forth a true and complete list of (i) all bank accounts
-------------
and safe deposit boxes of the Company and all persons who are signatories
thereunder or who have access thereto and (ii) the names of all persons, firms,
associations, corporations or business organizations holding general or special
powers of attorney from the Company and a summary of the terms thereof
(excluding ministerial powers of attorney granted to representatives of the
Company which are terminable at will).
3.25 SUPPLIERS AND VENDORS.
---------------------
Except in the ordinary course of business, no material supplier or vendor
of the Company, nor any franchisee or licensee of the Company, has (i) canceled
or otherwise terminated, or, to the Best Knowledge of the Company, threatened to
cancel or otherwise terminate, its relationship with the Company or has
decreased, limited or otherwise adversely modified, or (ii) threatened to
decrease, limit or otherwise adversely modify, the services, supplies or
materials it provides to the Company, and the transactions proposed to be
consummated pursuant to this Agreement and the Related Documents, to the Best
Knowledge of the Company, shall not materially adversely affect the relationship
of the Company to any supplier, vendor, franchisee or licensee.
3.26 CUSTOMERS.
---------
Except as set forth on Schedule 3.26, no customers to which more than
-------------
$250,000 in the aggregate of the Company's annual sales for the 11 month period
ending November 30, 1997 (on
21
an annualized basis) are attributable have notified the Company that they intend
to, or, to the Best Knowledge of the Company, have threatened to, terminate or
materially curtail their relationship and dealings with the Company, whether as
a result of the transactions contemplated by this Agreement or otherwise.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEWCO
Newco represents and warrants to the Company as follows:
4.1 ORGANIZATION; CORPORATE AUTHORITY.
---------------------------------
Newco is a corporation duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation and has all
requisite power and authority (corporate or otherwise) to own, lease and operate
its assets and properties and to carry on its business as presently conducted
and as presently proposed to be conducted. The Company has been furnished with
true, correct and complete copies of the certificate of incorporation ("Newco's
-------
Charter") and by-laws (the "Newco's By-laws"), of Newco in each case as amended
- ------- ---------------
and in effect on the date hereof.
4.2 CORPORATE ACTION; AUTHORITY; NO CONFLICT.
----------------------------------------
Newco has all requisite power and authority (corporate and otherwise) to
execute, deliver and perform its obligations under this Agreement and each
Related Document to which it is or will be a party and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Newco of this Agreement and each Related Document to which it is
or will be a party, and performance of its obligations hereunder and thereunder
have been duly and validly authorized by all necessary corporate action on the
part of Newco and its stockholders. This Agreement and each Related Document to
which it is or will be a party has been or upon the execution thereof will be,
duly and validly executed and delivered by Newco, and constitutes, or upon its
execution and delivery will constitute, a valid and binding obligation of Newco,
enforceable against it in accordance with its terms. Neither Newco's execution
and delivery of, and/or performance of its obligations under, this Agreement and
each Related Document to which it is or will be a party, nor the consummation of
the transactions contemplated hereby and thereby shall (i) conflict with or
result in any violation or breach of, any of the terms, conditions or provisions
of, or constitute (with due notice or lapse of time, or both) a default under,
or give rise to any right of termination, cancellation or acceleration or result
in the creation of any Encumbrance upon any of the assets or properties of Newco
under provision of Newco's Charter or Newco's By-laws or any Contract to which
Newco is a party or by which it or any of its assets or properties is or may be
bound or (ii) violate, or result in the creation of an Encumbrance upon any of
Newco's assets as a result of, any Law's applicable to Newco or any of its
properties or assets.
4.3 BROKERS.
-------
Newco has not employed any broker or finder or incurred any Liability for
any brokerage fees, commissions or finders' fees in connection with the
transactions contemplated hereby.
22
4.4 CONSENTS.
--------
No consent, approval, Order or authorization of, or registration,
declaration or filing with or notification to (except for any filings required
under the HSR Act), any Governmental Entity or any third party is required in
connection with the execution, delivery and performance by Newco of this
Agreement or the Related Documents to which Newco is or will be a party or the
consummation of the transactions contemplated hereby or thereby.
4.5 INVESTMENT INTENT.
-----------------
Newco is acquiring the shares of common stock of the Surviving Corporation
for its account and not with a view to their distribution within the meaning of
Section 2(11) of the Securities Act.
ARTICLE V
COVENANTS AND AGREEMENTS
5.1 ACCESS TO RECORDS AND PROPERTIES OF THE COMPANY.
-----------------------------------------------
From and after the date hereof until the Closing, the Company shall afford
(i) to Newco, its potential lenders and other financing sources and their
respective authorized representatives, including accountants, free and full
access at all reasonable times during normal business hours and after reasonable
prior notice to the assets, business, facilities, properties, books, records
(including tax returns filed and in preparation), customers, consultants, and
key employees of or relating to the Company in order that Newco has full
opportunity to make such investigation as it shall reasonably desire to make of
the affairs of the Company, and the Company shall cooperate fully in connection
therewith and (ii) to the respective independent certified public accountants of
Newco, free and full access at all reasonable times during normal business hours
and after reasonable prior notice to the records of the independent certified
public accountants of the Company relating to the Company. The investigation
contemplated by this Section 5.1 shall not affect or otherwise diminish or
obviate in any respect any of the representations and warranties or the
indemnification obligations of the Company contained in this Agreement.
5.2 CONDUCT OF THE COMPANY.
----------------------
From the date hereof to the Effective Time, the Company shall carry on its
business in the ordinary course consistent with past practice and use reasonable
efforts to preserve intact its current business organization, keep available the
services of its current officers and employees and preserve its relationships
with customers, suppliers, licensors, licensees and others having significant
business dealings with it. Without limiting the generality of the foregoing,
from the date hereof to the Effective Time, the Company shall not without the
prior written consent of Newco:
(a) (i) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, (ii) split, combine
or reclassify any of its
23
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 or any capital stock of
the Company or any Subsidiary or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(b) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities except pursuant to
outstanding options and warrants;
(c) amend its Certificate of Incorporation or Bylaws or other
comparable charter or organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating
with, or by purchasing a substantial portion of the assets or stock of, or by
any other manner, any business or any person, or (ii) any assets except for the
purchase of (x) equipment as identified on Schedule 3.6(d) (the "Anticipated
--------------- -----------
Commitments List") or (y) equipment or other assets in the ordinary course of
- ----------------
business, provided that the amount thereof does not exceed, $25,000 individually
or $125,000 in the aggregate, other than as set forth on Schedule 3.6(d);
---------------
(e) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or assets,
except (i) immaterial assets and (ii) in the ordinary course of business
(including for trade-ins);
(f) (i) incur any indebtedness or guarantee any such
indebtedness of another person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of the Company or any Subsidiary,
guarantee any debt securities of another person, enter into any "keep well" or
other agreement to maintain any financial statement condition of another person
or enter into any arrangement having the economic effect of any of the foregoing
except for short-term borrowings incurred in the ordinary course of business
consistent with past practice, or (ii) make any loans, advances (other than
advances to Subsidiaries or among Subsidiaries) or capital contributions to, or
investments in, any other person;
(g) make or agree to make any capital expenditure or
expenditures with respect to property, plant or equipment which, individually,
is in excess of $25,000.00 or, in the aggregate, are in excess of $125,000.00,
except as identified on the Commitments List, the Anticipated Commitments List
or otherwise in the ordinary course of business consistent with past practice in
order to satisfy actual or expected contractual commitments to customers, or as
set forth in Schedule 3.12;
-------------
(h) make any material tax election or settle or compromise any
material income tax liability;
(i) pay, discharge, settle 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 the most recent
consolidated financial statements (or the notes thereto) of the Company or
incurred thereafter in
24
the ordinary course of business consistent with past practice, or waive any
material benefits of, or agree to modify in any material respect, any
confidentiality, standstill, non-solicitation or similar agreement to which the
Company or any Subsidiary is a party;
(j) modify, amend or terminate any Commitment to which the
Company or any Subsidiary is a party, or waive, release or assign any rights or
claims, other than in the ordinary course of business consistent with past
practice;
(k) enter into any Commitment relating to the provision of
services by the Company or any Subsidiary, the maintenance of any MRI Unit, CT
Unit, LI Unit, BR Unit or PR Unit or the distribution, sale or marketing by
third parties of the Company's or any Subsidiary's services, including any
Commitment with any hospital, clinic, medical or healthcare provider, health
maintenance organization or other customer or third party payor, other than in
the ordinary course of business consistent with past practice;
(l) except as required to comply with applicable law, (i) adopt,
enter into, terminate or amend any Benefit Plan or other arrangement for the
benefit or welfare of any director, officer or current or former employee
(including any employment or severance agreements), other than, in the case or
non-officer employees, in the ordinary course of business consistent with past
practice (ii) increase in any manner the compensation or fringe benefits of, or
pay any bonus to, any director or officer (other than as set forth on Schedule
--------
3.16), (iii) pay any material benefit not provided for under any Benefit Plan,
- -----
(iv) except as permitted in clause (ii), grant any awards under any bonus,
incentive, performance or other compensation plan or arrangement or Benefit Plan
(including the grant of stock options, stock appreciation rights, stock based or
stock related awards, performance units or restricted stock, or the removal of
existing restrictions in any Benefit Plans or agreement or awards made
thereunder) or (v) take any action to fund or in any other way secure the
payment of compensation or benefits under any employee plan, agreement, contract
or arrangement or Benefit Plan; or
(m) authorize any of, or commit or agree to take any of, the
foregoing actions.
5.3 FINANCIAL INFORMATION.
---------------------
The Company shall furnish to Newco the following Financial Statements:
(a) as soon as available, but in any event prior to January 31,
1998 the Unaudited Financial Statement as of December 31, 1997 to be prepared in
accordance with GAAP, showing its financial condition as of the close of such
month and the results of operations during such month, which shall not be
materially different from the Unaudited Financial Statement as of November 30,
1997; and
(b) as soon as available and, in any event, prior to the
Closing, the audited consolidated balance sheets of the Company as of December
31, 1997 , and the related audited consolidated statements of operations,
Stockholders' equity and cash flows of the Company for the fiscal year then
ended, including the footnotes thereto, as audited by (and together with the
report of their audit) Price Waterhouse, LLP (all of the foregoing to be
prepared in accordance with GAAP).
25
5.4 EFFORTS TO CONSUMMATE.
---------------------
Subject to the terms and conditions of this Agreement, each party shall use
commercially reasonable efforts to take or cause to be taken all actions and do
or cause to be done all things required under all applicable Laws, in order to
consummate the transactions contemplated hereby.
5.5 NEGOTIATION WITH OTHERS.
-----------------------
From and after the date hereof until the Closing, or the termination of
this Agreement pursuant to Article VII, the Company shall not, and shall cause
its officers, directors, Affiliates, representatives and agents not to, directly
or indirectly, (i) take any action to solicit or initiate any Acquisition
Proposal, (ii) continue, initiate or engage in negotiations or discussions
relating to an Acquisition Proposal with, or disclose or provide any non-public
information or Confidential or Proprietary Information (other than in the
ordinary course of business or otherwise required by Law, Order or similar
compulsion) relating to the Company or any Person other than the parties hereto
and their respective representatives or (iii) enter into any written or oral
agreement or understanding with any Person (other than Newco) regarding an
Acquisition Proposal. If the Company receives any bona fide unsolicited offer
or proposal to enter into negotiations relating to any Acquisition Proposal,
such party shall promptly notify Newco of such offer or proposal and the general
economic terms of such offer or proposal and shall furnish a copy of any written
offer or proposal thereto.
5.6 PUBLIC ANNOUNCEMENTS.
--------------------
Each party agrees that, except (i) as otherwise required by Law and (ii)
for disclosure to its respective directors, officers, employees, financial
advisors, potential financing sources, legal counsel, independent certified
public accountants or other agents, advisors or representatives on a need-to-
know basis, it will not issue any reports, statements or releases, in each case
pertaining to this Agreement or any Related Document to which it is a party or
the transactions contemplated hereby or thereby, without the prior written
consent of the Company and Newco, which consent shall not unreasonably be
withheld or delayed; provided, however, that after reasonable prior notice to
-------- -------
Newco, the Company may make a public announcement concerning the execution and
delivery by each party of this Agreement.
5.7 FILINGS.
-------
Newco and the Company will make or cause to be made all such filings and
submissions under applicable law and regulations as may be required for the
consummation of the transactions contemplated hereunder, including without
limitation any filings required under the HSR Act. Newco shall be responsible
for payment of the filing fee required under the HSR Act. Newco and the Company
will cooperate and coordinate with one another in connection with any such
filings or submissions.
5.8 STOCK OPTION PLANS AND WARRANTS.
-------------------------------
(a) As soon as practicable following the date hereof but in no
event later than the Effective Time, the Company (or, if appropriate, the Board
of Directors of the Company or
26
any committee administering the Stock Option Plans (as defined below)) shall
take action, including by adopting resolutions or taking any other actions, so
as to allow each outstanding option to purchase Shares (a "Company Stock
-------------
Option") heretofore granted under any stock option, stock appreciation rights
- ------
or stock purchase plan, program or arrangement of the Company (collectively, the
"Stock Option Plans") and each outstanding warrant or other right or option to
------------------
purchase Shares (a "Warrant") in each case outstanding immediately prior to
-------
the date hereof, whether or not then exercisable, either (i) shall be canceled
at the Effective Time in exchange for an amount in cash, payable at the time of
such cancellation, equal to the product of (x) the number of Shares subject to
such Company Stock Option or Warrant immediately prior to the Effective Time and
(y) the excess of the Merger Consideration over the per Share exercise price of
such Company Stock Option or Warrant (the "Net Amount") or (ii) shall be
----------
converted immediately prior to the Effective Time into the right solely to
receive the Net Amount; provided, that no such cash payment has been made.
--------
The Company shall not make, or agree to make, any payment of any kind to any
holder of a Company Stock Option or a Warrant (except for the payment described
above) without the consent of Newco
(b) All Stock Option Plans shall be terminated as of the
Effective Time and the provisions in any other Benefit Plan providing for the
issuance, transfer or grant of any capital stock of the Company or any interest
in respect of any capital stock of the Company shall be terminated as of the
Effective Time. The Company shall ensure that following the Effective Time, no
holder of a Company Stock Option or Warrant or any participant in any Stock
Option Plan shall have any right thereunder to acquire any capital stock of the
Company, Newco or the Surviving Corporation, except as expressly agreed in
writing by Newco.
(c) The Company shall pay its portion and withhold and deposit
the proper amount of all Federal and state payroll and employment taxes required
to be paid and withheld (i) from the Net Amount and (ii) as a result of the
lapse of restrictions on the Restricted Stock (as defined in the Mobile
Technology Inc. 1996 Equity Plan) and the conversion of such stock into the
right to receive the Merger Consideration.
ARTICLE VI
CONDITIONS
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
----------------------------------------------------------
The respective obligations of each party to effect the Merger are subject
to the satisfaction or waiver, where permissible, prior to the Effective Time,
of the following conditions:
(a) The approval of the Company's Stockholders shall have been
obtained as required by and in accordance with applicable law and the
Certificate of Incorporation.
(b) No statute, rule, regulation, executive order, decree or
injunction shall have been enacted, entered, promulgated or enforced by any
court or Governmental Entity that prohibits or restricts the consummation of the
Merger or makes such consummation illegal (each party agreeing to use
commercially reasonable efforts to have any such prohibition lifted).
27
(c) The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
6.2 CONDITIONS TO THE COMPANY'S OBLIGATION TO EFFECT THE MERGER.
-----------------------------------------------------------
The obligation of the Company to effect the Merger shall be subject to the
satisfaction or waiver, prior to the proposed Effective Time, of the following
conditions: All of the representations and warranties of Newco set forth in
this Agreement shall be true and correct in all material respects as of the date
hereof and (except for those that are expressly made only as of another date) as
of the Effective Time as though made on and as of such time, and Newco shall
have performed in all material respects all covenants and agreements required to
be performed by then under this Agreement at or prior to the Effective Time.
6.3 CONDITIONS TO NEWCO'S OBLIGATIONS TO EFFECT THE MERGER.
------------------------------------------------------
The obligations of Newco to effect the Merger shall be subject to the
satisfaction or waiver by Newco, prior to the proposed Effective Time, of the
following conditions:
(a) All of the representations and warranties of the Company set
forth in this Agreement, shall be true and correct in all material respects
(except those representations or warranties that are qualified as to
materiality, which shall be true and correct in all respects) as of the date
hereof and (except for those that are expressly made only as of another date) as
of the Effective Time as though made on and as of such time, and the Company
shall have performed in all material respects all covenants and agreements
required to be performed by it under this Agreement at or prior to the Effective
Time.
(b) None of the following shall have occurred (i) a declaration
of a banking moratorium or any suspension of payments in respect of banks in the
United States or any limitation by federal or state authorities on the extension
of credit by lending institutions, or a disruption of or material adverse change
in either the syndication market for credit facilities or the financial, banking
or capital markets or (ii) in the case of the foregoing existing as of the date
hereof, a material acceleration or worsening thereof.
(c) There shall not have occurred any Material Adverse Change
since September 30, 1997.
(d) All filings required to be made prior to the Effective Time
with, and all consents, approvals, authorizations and Permits required to be
obtained prior to the Effective Time from, any Governmental Entity in connection
with the consummation of the Merger, have been made and/or obtained, other than
those the failure of which to be made and/or obtained would not reasonably be
expected to have a Material Adverse Effect or prevent or materially delay the
consummation of the Merger (it being understood that such failure with respect
to any certificates of need or licenses in respect of radioactive materials
shall be deemed to have such Material Adverse Effect).
(e) All notices required to be given prior to the Effective Time
with, and all consents, approvals, authorizations, waivers and amendments
required to be obtained prior to the Effective Time from, any third party in
connection with the consummation of the Merger shall
28
have been made and/or obtained (or, if the notice, consent, approval,
authorization, waiver or amendment that is not so made and/or obtained is
required pursuant to the terms of any of the Company's indebtedness or
obligations for money borrowed, the Company repays such indebtedness or
obligation prior to the Effective Time), other than those the failure of which
to be made and/or obtained would not reasonably be expected to have a Material
Adverse Effect or prevent or materially delay the consummation of the Merger;
provided that the Company shall have obtained the items set forth on Schedule
--------
6.3(e).
- ------
(f) Newco shall have received evidence satisfactory to it that
the payment of all Transaction Expenses incurred by the Company in connection
with the preparation for, and consummation of, the transactions contemplated
hereby and by the other agreements referred to herein, has occurred.
(g) The holders of no more than 10% of the outstanding Merger
Shares shall have validly elected to demand the appraisal of their Merger Shares
pursuant to Section 262 of the Delaware Statute.
(h) The parties agree that the Closing of the Merger constitutes
a waiver by Newco of any condition set forth in this Article VI and of any claim
or right against the Company relating to any such condition. Without limitation,
if the Closing shall have occurred and prior thereto Newco had knowledge that
any representation or warranty of the Company contained in this Agreement was
untrue or incorrect in any respect or that the Company has failed to perform any
of its agreements or covenants required under this Agreement to be performed by
it prior to or at the Closing Date, then notwithstanding anything to the
contrary contained in this Agreement, Newco shall not be entitled to make a
claim against the Company under this Agreement or otherwise with respect to any
such matter (it being understood that the Company shall have the burden of
proving Newco's knowledge as set forth herein).
(i) Newco shall have received the audited financial statements
referred to in Section 5.3(b).
(j) Prior to the Closing Date, Newco shall have received
evidence satisfactory to it that the Company (or its customers, as the case may
be) has issued, in its name, all certificates of need, all Permits in respect of
radioactive materials and all other material Permits necessary for the Business.
ARTICLE VII
TERMINATION; EFFECT OF TERMINATION
7.1 TERMINATION.
-----------
This Agreement may be terminated at any time prior to the Closing by:
(a) the mutual written consent of Newco and the Company; or
29
(b) Newco, if there has been a material breach by the Company of
any representation, warranty, covenant or agreement set forth in this Agreement
which is not cured by the Company within 10 days after notice thereof; or
(c) the Company, if there has been material breach by Newco of
any representation, warranty, covenant or agreement set forth in this Agreement
which is not cured by Newco within 10 days after notice thereof; or
(d) Newco, if the conditions set forth in Sections 6.1 or 6.3
shall not have been satisfied or waived by June 30, 1998; or
(e) the Company, if the conditions set forth in Sections 6.1 or
6.2 shall not have been satisfied or waived by June 30, 1998; or
(f) Newco, or the Company, if any permanent injunction or other
Order of a court or other competent authority preventing the Closing shall have
become final and nonappealable;
provided, however, that neither the Company nor Newco shall be entitled to
- -------- -------
terminate this Agreement if such party's breach of this Agreement has prevented
the satisfaction of a condition. Any termination pursuant to this Section 7.1
(other than a termination pursuant to Section 7.1(a)) shall be effected by
written notice from the party or parties so terminating to the other parties
hereto, which notice shall specify the Section of this Agreement pursuant to
which this Agreement is being terminated.
7.2 EFFECT OF TERMINATION.
---------------------
In the event of the termination of this Agreement as provided in Section
7.1, this Agreement shall be of no further force or effect, except for, this
Section 7.2 and Article VIII, each of which shall survive the termination of
this Agreement. The Liability of any party for any breach by such party of the
representations, warranties, covenants or agreements of such party set forth in
this Agreement occurring prior to the termination of this Agreement shall
survive the termination of this Agreement.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 AMENDMENT.
---------
This Agreement shall not be altered or otherwise amended except pursuant to
an instrument in writing signed by each party, except that any party may waive
any obligation owed to it by another party under this Agreement. No waiver by
any party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
30
8.2 ENTIRE AGREEMENT.
----------------
This Agreement and the other agreements and documents referenced herein
(including, but not limited to, the schedules and the exhibits (in their
executed form) attached hereto) and any other document or agreement
contemporaneously entered into this Agreement contain all of the agreements
among the parties hereto with respect to the transactions contemplated hereby
and supersede all prior agreements or understandings among the parties with
respect thereto.
8.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
------------------------------------------
The representations and warranties contained in this Agreement or in any
certificate or other writing delivered in connection with this Agreement shall
not survive the Closing.
8.4 SEVERABILITY.
------------
It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the Law and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any provision of this Agreement would be held in
any jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
8.5 BENEFITS OF AGREEMENT.
---------------------
All the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. Except as expressly provided herein, this Agreement shall
not confer any rights or remedies upon any Person other than the foregoing.
8.6 EXPENSES.
--------
Except as otherwise provided in this Agreement, Newco, the Company and the
Stockholders shall each bear their own expenses, incurred in connection with
this Agreement and the Related Documents.
8.7 HEADINGS.
--------
Descriptive headings are for convenience only and shall not control or
affect in any way the meaning or construction of any provision of this
Agreement.
8.8 NOTICES.
-------
All notices or other communications pursuant to this Agreement shall be in
writing and shall be deemed to be sufficient if delivered personally, by
facsimile sent by nationally-
31
recognized, overnight courier or mailed by registered or certified mail (return
receipt requested), postage prepaid, to the parties at the following addresses
(or at such other address for a part as shall be specified by like notice):
(a) if to the Company, to:
Mobile Technology Inc.
9841 Airport Boulevard
12th Floor
Los Angeles, California 90045
Attention: Joseph W. Cilurzo
Telephone No.: (310) 641-8614
Facsimile No.: (310) 641-4512
with a copy to:
Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, California 90071
Attention: Bryant B. Edwards, Esq.
Telephone No.: (213) 485-1234
Facsimile No.: (213) 891-8702
(b) if to Newco, to:
MTI Acquisition Corp.
c/o Apollo Management, L.P.
1301 Avenue of the Americas
38th Floor
New York, New York 10019
Attention: Josh Harris
Telephone No.: (212) 261-4000
Facsimile No.: (212) 261-4102
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: John J. Suydam, Esq.
Telephone No.: (212) 408-2400
Facsimile No.: (212) 728-5950.
All such notices and other communications shall be deemed to have been given and
received (i) in the case of personal delivery, on the date of such delivery,
(ii) in the case of delivery by
32
facsimile, on the date of such delivery, (iii) in the case of delivery by
nationally-recognized, overnight courier, on the Business Day following
dispatch, and (iv) in the case of mailing, on the third Business Day following
such mailing.
8.9 COUNTERPARTS.
------------
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute one agreement.
8.10 GOVERNING LAW.
-------------
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE, OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF DELAWARE TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL
LAW OF THE STATE OF DELAWARE WILL CONTROL THE INTERPRETATION AND CONSTRUCTION
OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION'S CHOICE OF LAW OR CONFLICT
OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY
APPLY. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
RELATED DOCUMENT MAY BE BROUGHT EXCLUSIVELY IN THE COURTS OF THE STATE OF
DELAWARE OR OF THE UNITED STATES FOR THE DISTRICT OF DELAWARE AND, BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH PARTY HERETO HEREBY IRREVOCABLY ACCEPTS FOR
ITSELF OR HIMSELF AND IN RESPECT OF ITS OR HIS PROPERTY AND ASSETS, GENERALLY
AND UNCONDITIONALLY THE JURISDICTION OF THE AFORESAID COURTS.
8.11 INCORPORATION OF EXHIBITS AND SCHEDULES.
---------------------------------------
The Exhibits, Schedules and Annexes identified in this Agreement are
-------- --------- -------
incorporated herein by reference and made a part hereof.
8.12 INDEPENDENCE OF COVENANTS AND REPRESENTATIONS AND WARRANTIES.
------------------------------------------------------------
All covenants hereunder shall be given independent effect so that if a
certain action or condition constitutes a default under a certain covenant, the
fact that such action or condition is permitted by another covenant shall not
affect the occurrence of such default, unless expressly permitted under an
exception to such initial covenant. In addition, all representations and
warranties hereunder shall be given independent effect so that if a particular
representation or warranty proves to be incorrect or is breached, the fact that
another representation or warranty concerning the same or similar subject matter
is correct or is not breached shall not affect the incorrectness of or a breach
of a representation and warranty hereunder.
33
8.13 INTERPRETATION; CONSTRUCTION.
----------------------------
The term "Agreement" means this agreement together with all schedules and
---------
exhibits hereto, as the same may from time to time be amended, modified,
supplemented or restated in accordance with the terms hereof. In this
Agreement, the term "Best Knowledge" of any Person means (i) the actual
--------------
knowledge of such Person and (ii) that knowledge which should have been acquired
by such Person after making such due inquiry and exercising such due diligence
as a prudent businessperson would have made or exercised in the management of
his or her business affairs. When used in the case of the Company, the term
"Best Knowledge" shall mean the Best Knowledge of the Persons listed on Schedule
- --------------- --------
8.13. The use in this Agreement of the term "including" means "including,
- ---- --------- ----------
without limitation." The words "herein", "hereof", "hereunder", "hereby",
- ------------------ ------ ------ --------- ------
"hereto", "hereinafter", and other words of similar import refer to this
- ------- -----------
Agreement as a whole, including the schedules and exhibits, as the same may from
time to time be amended, modified, supplemented or restated, and not to any
particular article, section, subsection, paragraph, subparagraph or clause
contained in this Agreement. All references to articles, sections, subsections,
clauses, paragraphs, schedules and exhibits mean such provisions of this
Agreement and the schedules and exhibits attached to this Agreement, except
where otherwise stated. The title of and the article, section and paragraph
headings in this Agreement are for convenience of reference only and shall not
govern or affect the interpretation of any of the terms or provisions of this
Agreement. The use herein of the masculine, feminine or neuter forms shall also
denote the other forms, as in each case the context may require. Where specific
language is used to clarify by example a general statement contained herein,
such specific language shall not be deemed to modify, limit or restrict in any
manner the construction of the general statement to which it relates. The
language used in this Agreement has been chosen by the parties to express their
mutual intent, and no rule of strict construction shall be applied against any
party. Accounting terms used but not otherwise defined herein shall have the
meanings given to them under GAAP. Unless expressly provided otherwise, the
measure of a period of one month or year for purposes of this Agreement shall be
that date of the following month or year corresponding to the starting date,
provided that if no corresponding date exists, the measure shall be that date of
the following month or year corresponding to the next day following the starting
date. For example, one month following February 18 is March 18, and one month
following March 31 is May 1.
8.14 REMEDIES.
--------
The parties shall each have and retain all rights and remedies existing in
their favor under this Agreement, at law or equity, including rights to bring
actions for specific performance and injunctive and other equitable relief to
enforce or prevent a breach or any violation of this Agreement. All such rights
and remedies shall, to the extent permitted by applicable Law, be cumulative.
8.15 WAIVER OF JURY TRIAL.
--------------------
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY RELATED DOCUMENT.
34
8.16 ADDITIONAL SCHEDULES.
Within three business days of the date hereof, the Company shall deliver to
Newco each of the following Schedules to this Agreement: 3.5, 3.6(c), 3.6(d),
3.7, 3.12, 3.13(a), 3.14, 3.15(a) and 3.23. Notwithstanding anything to the
contrary contained herein, Newco shall have the right to terminate this
Agreement if it is not satisfied with any of the information set forth in any of
such schedules. Notice of such termination shall be provided within 48 hours of
receipt of such schedules by Newco.
* * *
35
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Merger as of the date first written above.
MTI ACQUISITION CORP.
By: /s/ Josh Harris
----------------
Name: Josh Harris
Title: Vice President
MOBILE TECHNOLOGY INC.
By: Joseph W. Cilurzo
-----------------
Name: Joseph W. Cilurzo
Title: President and CEO
36
ANNEX I
-------
DEFINITIONS
-----------
"Acquisition Proposal" means any offer, proposal or indication of interest
--------------------
in (i) the direct or indirect acquisition of all or any material part of the
assets or properties of the Company, (ii) a merger, consolidation or other
business combination directly or indirectly involving the Company or (iii) the
direct or indirect acquisition of any capital stock, or option, warrant, right,
or other security convertible into or exercisable for capital stock, of the
Company.
"Affiliate" means, with respect to any Person, (i) a director, officer or
---------
Stockholder of such Person, (ii) a spouse of such Person, and (iii) any other
Person that, directly or indirectly through one or more intermediaries,
Controls, or is Controlled by, or is under common Control with, such Person.
"Agreement" has the meaning set forth in Section 8.13.
---------
"Alternative Transaction" has the meaning set forth in Section 3.12.
-----------------------
"Audited Balance Sheet Date" has the meaning set forth in Section
--------------------------
3.6.(a)(i).
"Audited Financial Statements" has the meaning set forth in Section
----------------------------
3.6.(a)(i).
"Best Knowledge" has the meaning set forth in Section 8.13.
--------------
"Business" means the business of providing mobile diagnostic imaging in the
--------
United States.
"Business Day" means any day that is not a Saturday, Sunday or a day on
------------
which banking institutions in New York, New York are not required to be open.
"Closing" has the meaning set forth in Section 1.7.
-------
"Closing Date" has the meaning set forth in Section 1.7.
------------
"Code" has the meaning set forth in Section 3.8(a).
----
"Company" has the meaning set forth in the caption.
-------
"Company's By-Laws" has the meaning set forth in Section 1.4.
-----------------
"Company's Charter" has the meaning set forth in Section 1.4.
-----------------
"Confidential or Proprietary Information" means all information disclosed
---------------------------------------
(i) by or on behalf of the Company to Newco, or to employees, consultants or
others in a confidential relationship with any of them, or (ii) by or on behalf
of Newco to the Company, the Stockholders or to employees, consultants or others
in a confidential relationship with any of them, in each case other than such
information which (A) becomes generally available to the public (other than as a
result of a breach of Section 5.6), (B) was known to the party to whom such
information was disclosed prior to its disclosure to such party, (C) is
hereafter available to the party to whom such information was disclosed on a
non-confidential basis from a source (other than the party disclosing or on
whose behalf such information was disclosed) which was, to the knowledge of the
receiving party after due inquiry, entitled to disclose the same or (D) is
required by law, governmental order or decree to be disclosed by the party to
whom such information was disclosed.
i
"Contract" means any loan or credit agreement, note, bond, mortgage,
--------
indenture, lease, sublease, purchase order or other agreement, commitment,
instrument, permit, concession, franchise or license.
"Control" means, with respect to any Person, the possession, directly or
-------
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Covered Properties" has the meaning set forth in Section 3.20.(b).
------------------
"Covered Taxes" means all Taxes of the Company and each Tax Affiliate for
-------------
periods ending on or prior to the close of business on the Closing.
"Effective Time" has the meaning set forth in Section 1.2.
--------------
"Employee Benefit Plan" means (i) any qualified or non-qualified Employee
---------------------
Pension Benefit Plan (as defined in Section 3(2) of ERISA), including any
Multiemployer Plan or Multiple Employer Plan, (ii) any Employee Welfare Benefit
Plan (as defined in Section 3(1) of ERISA), or (iii) any employee benefit,
fringe benefit, compensation, severance, incentive, bonus, profit-sharing, stock
option, stock purchase or other plan, program or arrangement, whether or not
subject to ERISA and whether or not funded.
"Employee Plans" has the meaning set forth in Section 3.17.
--------------
"Encumbrances" shall mean and include security interests, mortgages, liens,
------------
pledges, charges, easements, reservations, restrictions, rights of way,
servitudes, options, rights of first refusal, community property interests,
equitable interests, restrictions of any kind and all other encumbrances,
whether or not relating to the extension of credit or the borrowing of money.
"Environmental, Health and Safety Laws" means all Laws, Permits, Orders and
-------------------------------------
Contracts and all common law relating to or addressing pollution or protection
of the environment, including, but not limited to, all those relating to the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control or cleanup of any hazardous materials,
substances or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation.
"ERISA Affiliate" means, with respect to any Person, any other Person that
---------------
is a member of a "controlled group of corporations" with, or is under "common
control" with, or is a member of the same "affiliated service group" with such
Person as defined in Section 414(b), 414(c), or 414(m) or 414(o) of the Code.
"Federal Health Care Program" has the meaning set forth in Section 3.19.
---------------------------
"Financial Statements" has the meaning set forth in Section 3.6.(a)(ii).
--------------------
"Fraud and Abuse Laws" means: False Claims Act, 31 U.S.C. (S) 3729; 18
--------------------
U.S.C. (S) 287 (criminal provisions); Social Security Act, 42 U.S.C. (S)(S)
1320a-7, 1320a-7a, 1320a-7b, 1395nn; 18 U.S.C. (S)(S) 1347, 699, 1036, 1001,
1341, 1343, 1956, 1957, 371, 286, 1961, 641, 1345, 981, and all applicable
similar state laws and regulations.
"GAAP" means generally accepted accounting principles.
----
ii
"Governmental Entity" means federal, state, local or foreign government and
-------------------
any court, tribunal, administrative agency, commission or other governmental or
regulatory authority or agency, domestic, foreign or supranational.
"Group Health Plan" has the meaning set forth in Section 3.17.
-----------------
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
-------
as amended.
"Income Taxes" shall mean all Taxes based upon income, including without
------------
limitation income Taxes, franchise Taxes based upon income and any Taxes paid in
lieu of (or because they are greater than) any of the foregoing.
"Intellectual Property Rights" means all intellectual property rights,
----------------------------
including, without limitation, patents, patent applications, trademarks,
trademark applications, tradenames, servicemarks, servicemark applications,
trade dress, logos and designs and the goodwill connected with the foregoing,
copyrights and copyright applications, know-how, trade secrets, proprietary
processes and formulae, confidential information, franchises, licenses,
inventions, including, without limitation, manuals, memoranda and records.
"Latest Balance Sheet" has the meaning set forth in Section 3.6.(a)(ii).
--------------------
"Latest Balance Sheet Date" has the meaning set forth in Section
-------------------------
3.6.(a)(ii).
"Law" means any applicable foreign, federal, state or local law, statute,
---
treaty, rule, directive, regulation, ordinances and similar provisions having
the force or effect of law or an Order of any Governmental Entity (including all
Environmental, Health and Safety Laws).
"Leased Property" has the meaning set forth in Section 3.10.
---------------
"Liability" means any liability or obligation, whether known or unknown,
---------
asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated
or unliquidated and whether due or to become due, regardless of when asserted.
"Licensed Requisite Rights" has the meaning set forth in Section
-------------------------
3.11.(a)(i).
"Material Adverse Change" has the meaning set forth in Section 3.7.(a).
-----------------------
"Material Adverse Effect" means any effect or condition that, individually
-----------------------
or in the aggregate with any other effect or condition, is materially adverse to
the assets, properties, business, financial condition, results of operations or
prospects of the Company and its Subsidiaries.
"Maximum Closing Merger Consideration" means $65,000,000.00 less the
------------------------------------
aggregate amount of the Transaction Expenses.
"Merger Consideration" means the Maximum Closing Merger Consideration
--------------------
divided by the aggregate number of Shares outstanding assuming that all Shares
issuable upon the exercise or conversion of any Company Stock Option, Warrant or
convertible security and all shares of phantom stock (or any similar security)
have been converted into Shares.
"Merger Shares" means the Shares that are issued and outstanding
-------------
immediately prior to the Effective Time that are owned by any Person other than
the Company.
"Newco" has the meaning set forth in the caption.
-----
iii
"Newco's By-Laws" has the meaning set forth in Section 4.1.
---------------
"Newco's Charter" has the meaning set forth in Section 4.1.
---------------
"Orders" means judgments, writs, decrees, compliance agreements,
------
injunctions or judicial or administrative orders and determinations of any
Governmental Entity or arbitrator.
"Owned Requisite Rights" has the meaning set forth in Section 3.11.
------------------
"Permits" means all permits, licenses, authorizations, registrations,
-------
franchises, approvals, certificates, variances and similar rights obtained, or
required to be obtained, from Governmental Entities (including all certificates
of need).
"Permitted Encumbrances" means (i) Encumbrances to secure the performance
----------------------
of statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business, (ii)
Encumbrances existing on the date hereof; (iii) Encumbrances for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; (iv) Encumbrances incurred in the ordinary
course of business of the Company with respect to obligations that do not exceed
$25,000.00 and that (a) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by the Company; (v) workers or unemployment compensation
liens arising in the ordinary course of business; and (vi) mechanic's,
materialmen's supplier's, vendor's, or similar liens arising in the ordinary
course of business securing amounts that are not delinquent.
"Person" shall be construed broadly and shall include an individual, a
------
partnership, a corporation, a limited liability company, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization or a
governmental entity (or any department, agency or political subdivision
thereof).
"Previously Owned Properties" has the meaning set forth in Section 3.20.
---------------------------
"Proceeding" means any action, suit, investigation or proceedings before
----------
any Governmental Entity or arbitrator.
"Related Documents" means the Stockholders' Agreement and each other
-----------------
instrument or document executed in connection with the transactions contemplated
by this Agreement.
"Requisite Rights" has the meaning set forth in Section 3.11.
----------------
"Securities" means "securities" as defined in Section 2(1) of the
----------
Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Shares" means the shares of common stock, par value $.01, of the Company.
------
"SSA" has the meaning set forth in Section 3.18.
---
"State Health Care Program" has the meaning set forth in Section 3.19.
-------------------------
"Stockholder" has the meaning set forth in the recitals to this Agreement.
-----------
"Subsidiary" means any Person of which more than 50% of the total voting
---------
power is owned directly or indirectly by any other Person.
iv
"Tax Return" means any return, declaration, report, claim for refund, or
----------
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Taxes" means, with respect to any Person, (i) all income taxes (including
-----
any tax on or based upon net income, gross income, income as specially defined,
earnings, profits or selected items of income, earnings or profits) and all
gross receipts, sales, use, ad valorem, transfer, franchise, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property or windfall profits taxes, alternative or add-on minimum taxes, customs
duties and other taxes, fees, assessments or charges of any kind whatsoever,
together with all interest and penalties, additions to tax and other additional
amounts imposed by any taxing authority (domestic or foreign) on such Person (if
any) and (ii) any liability for the payment of any amount of the type described
in clause (i) above as a result of (A) being a "transferee" (within the meaning
of Section 6901 of the Code or any other applicable Law) of another Person, (B)
being a member of an affiliated, combined or consolidated group or (C) a
contractual arrangement or otherwise.
"Transaction Expenses" means all fees and expenses that are incurred by or
--------------------
on behalf of the Company in connection with the preparation for the and
consummation of the transactions contemplated hereby and by the other agreements
referred to herein.
"Transfer Agent" means ____________________.
--------------
"Unaudited Financial Statements" has the meaning set forth in Section
------------------------------
3.6.(a)(ii).
v