EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of March 31, 1997, by and among ADAC Laboratories, a California
corporation ("ADAC"); ADAC Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of ADAC ("Sub"); CORTET, INC., a Florida corporation
(the "Company"); and J.P. Patten, Michael Hill, Alexander Nikoloff, Lewis Lobel,
Robert Joicy, Chris Westervelt and Douglas Bowdoin (the "Designated
Shareholders").
RECITALS
A. ADAC, Sub and the Company intend to effect a merger of Sub into the
Company in accordance with this Agreement and the laws of the States of Delaware
and Florida (the "Merger"). Upon consummation of the Merger, Sub will cease to
exist and the Company will become a wholly owned subsidiary of ADAC.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a)of the Internal Revenue Code of 1986, as
amended (the "Code").
C. This Agreement has been adopted and approved by the Board of Directors
of the Company.
D. The Designated Shareholders own a total of 902,000 shares of the
voting common stock, $.001 par value per share, of the Company. (The voting
common stock, $.001 par value per share, of the Company is referred to in this
Agreement as "Company Common Stock".)
AGREEMENT
ADAC, Sub, the Company and the Designated Shareholders agree as follows:
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DESCRIPTION OF TRANSACTION
1.1 MERGER OF SUB INTO THE COMPANY. Upon the terms and subject to the
conditions set forth in this Agreement and the Plan of Merger attached hereto as
Exhibit A (the "Plan of Merger"), at the Effective Time (as defined in Section
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1.3), Sub shall be merged into the Company and the separate existence of Sub
shall cease. The Company will be the surviving corporation in the Merger (the
"Surviving Corporation").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement, the Plan of Merger, the applicable provisions of the Delaware
General Corporation
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Law (the "DGCL") and in the applicable provisions of the Florida Business
Corporation Act (the "FBCA").
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of ADAC on the date as of which each of the conditions set forth in Articles 5
and 6 has been fulfilled or waived or on such other date as may be jointly
designated by ADAC and the Company (the "Closing Date"). As soon as practicable
after the Closing, a properly executed certificate of merger conforming to the
requirements of the DGCL shall be filed with the Delaware Secretary of State and
the Plan of Merger and articles of merger conforming to the requirements of the
FBCA shall be filed with the Florida Secretary of State. The Merger shall
become effective at the time said certificate of merger is filed with the
Delaware Secretary of State and said Plan of Merger and articles of merger are
filed with the Florida Secretary of State (the "Effective Time").
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. The
Articles of Incorporation of the Company, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended. The Bylaws of the Surviving Corporation,
as in effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended, except that Article VII shall be
amended to provide that the fiscal year of the Surviving Corporation shall end
on the Sunday closest to September 30. The directors of the Surviving
Corporation shall be R. Andrew Eckert, P. Andre Simone and Karen L. Masterson,
who shall hold office in accordance with the Articles and Bylaws of the
Surviving Corporation, and the officers of the Surviving Corporation shall be R.
Andrew Eckert, President, P. Andre Simone, Vice President, Chief Financial
Officer, Treasurer and Assistant Secretary, and Karen L. Masterson, Vice
President and Secretary, who shall serve until their respective successors are
elected and qualified.
1.5 CONVERSION OF SHARES.
(a) At the Effective Time, by virtue of the Merger (and without any
action on the part of ADAC, Sub, the Company or any shareholder of the Company):
(i) each share of Company Common Stock, $.001 par value, of the
Company then held by the Company or any subsidiary of the Company (or held in
the Company's treasury) shall be canceled; and
(ii) except as provided in clause (i) above and subject to Section
1.5(c), 1.7 and 1.8, each share of Company Common Stock then outstanding shall
be converted into the right to receive the "Exchange Ratio" (as defined in
Section 1.5(b)(i) below) of a share of the common stock, no par value, of ADAC
("ADAC Common Stock")
(iii) each share of the common stock, no par value, of Sub
outstanding immediately prior to the Effective Time shall be converted into one
share of common stock of the Surviving Corporation.
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(b) For purposes of this Agreement, the "Exchange Ratio" shall be the
fraction (A) having as its numerator $3,500,000 and (B) having as its
denominator the amount determined by multiplying (1) the sum of the aggregate
number of shares of Company Common Stock outstanding immediately prior to the
Effective Time plus the number of shares of Company Common Stock issuable upon
the exercise and/or conversion of all outstanding options, warrants, rights,
convertible securities, by (2) $22.00 (the "Designated ADAC Stock Price");
(c) If, between the date of this Agreement and the Effective Time, the
outstanding shares of Company Stock or ADAC Common Stock are changed into a
different number or class of shares by reason of any stock dividend,
subdivision, reclassification, recapitalization, split-up, combination or
similar transaction, the Exchange Ratio shall be appropriately adjusted.
1.6 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time,
holders of certificates representing shares of Company Common Stock shall cease
to have any rights as shareholders of the Company, and the stock transfer books
of the Company shall be closed with respect to all shares of Company Common
Stock outstanding immediately prior to the Effective Time. No further transfer
of any such shares of Company Common Stock shall thereafter be made on such
stock transfer books. If, after the Effective Time, a valid certificate
previously representing any of such shares of Company Stock (a "Company Stock
Certificate") is presented to ADAC, such Company Stock Certificate shall be
canceled and exchanged as provided in Section 1.7.
1.7 EXCHANGE OF CERTIFICATES.
(a) At or as soon as practicable after the Effective Time, ADAC will
provide or mail to the holders of Company Stock Certificates (i) a letter of
transmittal in customary form and containing such provisions as ADAC may
reasonably require and (ii) instructions for use in effecting the surrender of
Company Stock Certificates in exchange for certificates representing ADAC Common
Stock. Upon surrender of a Company Stock Certificate to ADAC for exchange,
together with a duly executed letter of transmittal and such other documents as
may be reasonably required by ADAC, the holder of such Company Stock Certificate
shall be entitled to receive in exchange therefor a certificate representing the
number of whole shares of ADAC Common Stock that such holder has the right to
receive pursuant to the provisions of this Article 1 (after withholding the
Holdback Common Stock (as defined in Section 8.1)), and the Company Stock
Certificate so surrendered shall be canceled. Until surrendered as contemplated
by this Section 1.7, each Company Stock Certificate shall be deemed, from and
after the Effective Time, to represent only the right to receive upon such
surrender a certificate representing shares of ADAC Common Stock (and cash in
lieu of any fractional share of ADAC Common Stock) as contemplated by this
Article 1.
(b) No dividends or other distributions declared or made with respect
to ADAC Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Company Stock Certificate with respect to the
shares of ADAC Common Stock represented thereby, and no cash payment in lieu of
any fractional share shall be paid to any such holder, until such holder
surrenders such Company Stock Certificate in accordance with this
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Section 1.7 (at which time such holder shall be entitled to receive all such
dividends and distributions and such cash payment, all without interest
thereon).
(c) No certificates or scrip for fractional shares of ADAC Common
Stock shall be issued, but in lieu thereof each holder of shares of Company
Common Stock who would otherwise be entitled to receive a certificate or scrip
for a fraction of a share of ADAC Common Stock shall receive from ADAC a cash
amount (without interest) equal to the Designated ADAC Stock Price multiplied by
the fraction of a share of ADAC Common Stock to which such holder would
otherwise be entitled.
(d) The shares of ADAC Common Stock to be issued in the Merger shall
be characterized as "restricted securities" for purposes of Rule 144 under the
Securities Act, and each certificate representing any of such shares shall bear
a legend identical or similar in effect to the following legend (together with
any other legend or legends required by applicable state securities laws or
otherwise):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS REGISTERED UNDER THE ACT OR UNLESS AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE."
(e) ADAC shall not be liable to any holder or former holder of shares
of Company Common Stock with respect to any shares (or dividends or
distributions with respect thereto) or cash amounts issuable pursuant to this
Article 1 which is delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
1.8 DISSENTING SHARES. Notwithstanding anything to the contrary contained
in this Agreement, any shares of Company Common Stock that are outstanding
immediately prior to the Effective Time that were not voted in favor of the
Merger and are held by shareholders who have complied with the applicable
provisions of the FBCA ("Dissenting Shares") shall not be converted into or
represent the right to receive ADAC Common Stock in accordance with Section
1.5(a)(i) (or cash in lieu of fractional shares in accordance with Section 1.7),
and each holder of Dissenting Shares shall be entitled only to such rights as
may be granted to such holder in the FBCA. From and after the Effective Time, a
holder of Dissenting Shares shall not have and shall not be entitled to exercise
any of the voting rights or other rights of a shareholder of the Surviving
Corporation. If any holder of Dissenting Shares shall fail to perfect or shall
waive, rescind, withdraw or otherwise lose such holder's right of appraisal
under the FBCA, then such shares shall automatically be converted into and shall
represent only the right to receive (upon the surrender of the certificate or
certificates representing such shares) ADAC Common Stock in accordance with
Section 1.5(a)(i) (and cash in lieu of fractional shares in accordance with
Section 1.7). The Company (i) shall give ADAC prompt written notice of any
notice received by the Company of a shareholder's intent to demand payment for
such shareholder's shares of Company Common Stock pursuant to the FBCA
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and of any other notice, demand or instrument delivered to the Company pursuant
to the FBCA, and (ii) shall give ADAC's representatives the opportunity to
participate in all negotiations and proceedings with respect to any such notice,
demand or instrument. The Company shall not make any payment or settlement offer
with respect to any such notice or demand unless ADAC shall have consented in
writing to such payment or settlement offer.
1.9 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a tax-free reorganization within the meaning of Section
368 of the Code. The parties to this Agreement hereby adopt this Agreement as a
"plan of reorganization" within the meaning of the applicable United States
Treasury Regulations. Neither the Company, any Designated Shareholder nor ADAC
shall take a position inconsistent with this Section 1.9 on any tax return.
1.10 FURTHER ACTION. If at any time after the Effective Time any further
action is determined by ADAC to be necessary or desirable to carry out the
purposes of this Agreement or to vest ADAC as the Surviving Corporation with the
full right, title and possession of and to all assets, property, rights,
privileges, immunities, powers and franchises of the Company, the officers and
directors of ADAC shall be fully authorized (in the name of the Company and
otherwise) to take such action.
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REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE DESIGNATED SHAREHOLDERS
Except as set forth in the disclosure schedule delivered to ADAC with this
Agreement and signed by the President or any Vice President of the Company (the
"Disclosure Schedule"), the Company and the Designated Shareholders jointly and
severally represent and warrant to ADAC as follows:
2.1 ORGANIZATION; SUBSIDIARIES ETC.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Florida. The Company has all
necessary power and authority under applicable corporate law and its
organizational documents to own or lease its properties, to carry on its
business as presently conducted and to perform its obligations under all
contracts by which it is bound. Except as set forth in the Disclosure
Schedule, the Company has not conducted any business under or otherwise used for
any purpose or in any jurisdiction any fictitious name, trade mane or other
name. As of the date of this Agreement, the Company does not own or hold,
directly or indirectly, any debt or equity securities of, or have any other
interest in, any corporation, partnership, joint venture or other entity, and
the Company has not entered into any agreement to acquire any such interest.
The Company has no subsidiaries.
(b) The Company is qualified to do business as a foreign corporation
and is in good standing, under the laws of all jurisdictions where the nature of
its business requires such qualification and where the failure to so qualify
would have a material adverse effect, a list of
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which jurisdictions is set forth in the Disclosure Schedule. For purposes of
this Agreement, material adverse effect, as it applies to the Company, means a
material adverse effect on the business, operations, results, financial
condition or assets of the Company other than as a result of (i) general
economic or industry conditions, or (ii) the performance by the Company of its
obligations, or the exercise by ADAC of its rights under this Agreement (a
"Material Adverse Effect").
(c) The Disclosure Schedule sets forth (i) the names of the members of
the Company's board of directors, and (ii) the names and titles of the Company's
officers. The Company's board of directors has never established any
committees.
2.2 ARTICLES OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered to ADAC accurate and complete copies of: (1) the Company's articles
of incorporation and bylaws, including all amendments thereto; (2) the stock
records of the Company; and (3) the minutes and other records of the meetings
and other proceedings (including any actions taken by written consent or
otherwise without a meeting) of the shareholders of the Company and the board of
directors of the Company. There have been no meetings or other proceedings or
actions of the shareholders of the Company or the board of directors of the
Company that are not fully reflected in such minutes or other records. There
has not been any violation of any of the provisions of the Company's articles of
incorporation or bylaws or of any resolution adopted by the Company's
shareholders or the Company's board of directors that would have a Material
Adverse Effect. The general ledger, stock records, minute books and other
material records of the Company are accurate, up-to-date and complete in all
material respects.
2.3 CAPITALIZATION.
(a) As of the date of this Agreement, the authorized capital stock of
the Company consists of 1,400,100 shares, of which 1,400,000 shares constitute
Company Common Stock, and 100 shares constitute preferred stock, $1.00 par value
per share, of the Company ("Company Preferred Stock"). As of the date hereof,
902,000 shares of Company Common Stock and 100 shares of Company Preferred Stock
were issued and outstanding. All the issued and outstanding shares of Company
Common and Preferred Stock are validly issued, fully paid, nonassessable and
free of preemptive rights, and were issued in compliance with state and federal
securities laws, and none of such shares is subject to any repurchase option or
restriction on transfer (other than restrictions on transfer imposed by virtue
of applicable federal and state securities laws). As of the date of this
Agreement, except as set forth above, (i) there are no shares of capital stock
of the Company authorized, issued or outstanding, (ii) there are no outstanding
subscriptions, options, warrants, stock appreciation right plans, calls, rights,
convertible securities, stockholder rights plans (or similar plans commonly
referred to as "poison pills") or other agreements or commitments of any
character relating to issued or unissued capital stock or other securities of
the Company, or obligating the Company or any other party to issue, transfer or
sell any shares of the capital stock or other securities of the Company, and
(iii) there are no other outstanding securities convertible into, exchangeable
for or evidencing the right to subscribe for any shares of the capital stock or
other securities of the Company or any successor corporation or controlling
person of such successor
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corporation. The Disclosure Schedule sets forth the names of the Company's
shareholders and the number of shares of Company Common and/or Preferred Stock
owned of record by each.
(b) Neither the Company nor any of its affiliates owns any ADAC Common
Stock.
(c) Any shares of capital stock or other securities repurchased,
redeemed or otherwise reacquired by the Company were validly reacquired in
compliance with (i) the applicable provisions of the FBCA and all other
applicable Legal Requirements, and (ii) any requirements set forth in applicable
contracts by which the Company is bound.
2.4 FINANCIAL STATEMENTS; ABSENCE OF LIABILITIES.
(a) Except as set forth in Part 2.4(a) of the Disclosure Schedule, the
Company's unaudited interim balance sheet as of March 31, 1997 and the related
statement of operations for the six-month period then ended (the "Unaudited
Financial Statements") were prepared in accordance with the books and records of
the Company and fairly present the financial position of the Company as of the
date thereof and the results of its operations for the period indicated.
(b) The Company has no Liabilities, except for (i) Liabilities that
are disclosed as such in the Unaudited Financial Statements, (ii) accrued
salaries, accounts payable, sales taxes, accrued interest and royalty
obligations, and warranty obligations (such warranty obligations not to exceed
4% of the contract price on contracts executed after March 31, 1997), each of
which has been incurred by the Company since March 31, 1997 in the ordinary
course of business and consistent with past practice, and (iii) Liabilities
identified in Part 2.4 of the Disclosure Schedule. As used herein,
"Liabilities" shall mean any liability or obligation of any kind or nature,
secured or unsecured (whether absolute, accrued, contingent or otherwise, and
whether due or to become due). Except as set forth in the Unaudited Financial
Statements and Part 2.4(b) of the Disclosure Schedule, the Company has no
Liabilities to any officer, director, shareholder, affiliate or associate of the
Company.
(c) Part 2.4 of the Disclosure Schedule sets forth an accurate and
complete breakdown of (i) all accounts payable of the Company as of March 31,
1997, and (ii) all notes payable of the Company and all indebtedness of the
Company for borrowed money.
(d) Part 2.4 of the Disclosure Schedule sets forth an accurate and
complete breakdown of the Company's "deferred support revenue" and all related
obligations and other liabilities of the Company.
2.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in Part 2.5
of the Disclosure Schedule, since March 31, 1997,
(a) the Company has conducted its business and operations in the
ordinary course and there has not been any material adverse change in the
Company's business, condition,
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assets, liabilities, operations, financial performance or prospects, and no
event has occurred that will, or could reasonably be expected to, have a
Material Adverse Effect on the Company;
(b) there has not been any loss, damage or destruction to, or any
interruption in the use of, any of the Company's assets (whether or not covered
by insurance);
(c) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(d) the Company has not sold, issued or authorized the issuance of (i)
any capital stock or other security, (ii) any option, call, warrant or right to
acquire, or otherwise relating to, any capital stock or any other security, or
(iii) any instrument convertible into or exchangeable for any capital stock or
other security;
(e) there has been no amendment to the Company's articles of
incorporation or bylaws, and the Company has not effected or been a party to any
acquisition transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(f) the Company has not formed any subsidiary or acquired any equity
interest or other interest in any other entity;
(g) the Company has not made any capital expenditure which, when added
to all other capital expenditures made by the Company since March 31, 1997,
exceeds $10,000 in the aggregate;
(h) the Company has not (i) entered into or permitted any of the
assets owned or used by it to become bound by any Material Contract (as defined
in Section 2.10(a)), except that the Company has renewed various Material
Contracts in the ordinary course of business, without materially amending the
terms thereof, or (ii) amended or prematurely terminated, or waived any material
right or remedy under, any Material Contract to which it is or was a party or
under which it has or had any rights or obligations;
(i) the Company has not (i) acquired, leased or licensed any right or
other asset from any other person or entity (other than immaterial rights or
other immaterial assets acquired, leased or licensed by the Company from other
persons or entities in the ordinary course of business and consistent with the
Company's past practices), (ii) sold or otherwise disposed of, or leased or
licensed, any right or other asset to any other person or entity (other than
immaterial rights or other immaterial assets disposed of or leased or licensed
by the Company to other persons or entities in the ordinary course of business
and consistent with the Company's past practices), or (iii) waived or
relinquished any right (other than immaterial rights waived or relinquished by
the Company in the ordinary course of business and consistent with the Company's
past practices);
(j) the Company has not written off as uncollectible, or established
any extraordinary reserve with respect to, any account receivable or other
indebtedness;
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(k) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any lien, pledge,
charge or other encumbrance, except for pledges of immaterial assets made in the
ordinary course of business and consistent with the Company's past practices;
(l) the Company has not (i) lent money to any person or entity, or
(ii) incurred or guaranteed any indebtedness for borrowed money;
(m) the Company has not (i) established, adopted or amended any
Employee Benefit Plan, or (ii) made any profit-sharing or similar payment to any
of its directors, officers or employees;
(n) the Company has not changed any of its methods of accounting or
accounting practices in any respect;
(o) the Company has not made any tax election;
(p) the Company has not commenced or settled any Legal Proceeding;
(q) the Company has not entered into any material transaction or taken
any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(r) the Company has not agreed or committed to take any of the actions
referred to in clauses "(c)" through "(q)" above.
2.6 TITLE TO ASSETS.
(a) Except as set forth in Part 2.6(a) of the Disclosure Schedule, the
Company owns, and has valid and marketable title to, all assets purported to be
owned by it, including: (i) all assets reflected on the Unaudited Interim
Balance Sheet; (ii) all assets referred to in Parts 2.7(b), 2.8 and 2.9 of the
Disclosure Schedule and all of the Company's rights under the Contracts
identified in Part 2.10(a) of the Disclosure Schedule; and (iii) all other
assets reflected in the Company's books and records as being owned by the
Company. Except as set forth in Part 2.6(a) of the Disclosure Schedule, all of
said assets are owned by the Company free and clear of any liens or other
encumbrances, except for any lien for current taxes not yet due and payable.
(b) Part 2.6(b) of the Disclosure Schedule identifies all assets that
are being leased or licensed to the Company, except for (i) any equipment being
leased to the Company under a standard operating lease requiring annual payments
by the Company of less than $ 10,000, and (ii) any software being licensed to
the Company under any third party software license generally available to the
public at a total cost of less than $1,000.
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2.7 BANK ACCOUNTS; RECEIVABLES; CUSTOMERS.
(a) Part 2.7(a) of the Disclosure Schedule provides an accurate and
complete list of each account maintained by or for the benefit of the Company at
any bank or other financial institution.
(b) Part 2.7(b) of the Disclosure Schedule provides an accurate and
complete breakdown and aging of all accounts receivable, notes receivable and
other receivables of the Company as of March 31, 1997. Except as set forth in
Part 2.7(b) of the Disclosure Schedule, all existing accounts receivable of the
Company (including those accounts receivable reflected on the Unaudited Interim
Balance Sheet that have not yet been collected and those accounts receivable
that have arisen since March 31, 1997 and have not yet been collected) (i)
represent valid obligations of customers of the Company arising from bona fide
transactions entered into in the ordinary course of business, and (ii) are
current and will be collected in full, without any counterclaim or set off, when
due, net of an allowance for doubtful accounts not to exceed $25,000 in the
aggregate.
(c) Part 2.7(c) of the Disclosure Schedule identifies each customer
that is obligated to make payments to the Company in an aggregate amount
exceeding $25,000 per year. Since March 31, 1997, the Company has not received
any notice or other communication indicating that any customer or other person
or entity identified in Part 2.7(c) of the Disclosure Schedule intends or
expects to cease dealing with the Company or to effect a material reduction in
the volume of business transacted by such Person with the Company below
historical levels.
(d) Part 2.7(d) of the Disclosure Schedule provides an accurate and
complete breakdown of all pending and unfilled orders received by the Company
for products, systems and services.
2.8 EQUIPMENT; LEASEHOLD.
(a) Part 2.8 of the Disclosure Schedule provides accurate and complete
list of all items of equipment, fixtures, leasehold improvements and other
tangible assets owned by or leased to the Company. The assets identified in
Part 2.8 of the Disclosure Schedule are adequate for the uses to which they are
being put, are in good condition and repair (ordinary wear and tear excepted)
and are adequate for the conduct of the Company's business in the manner in
which such business is currently being conducted.
(b) The Company does not own any real property or any interest in real
property, except for the leasehold created under the real property lease
identified in Part 2.10(a) of the Disclosure Schedule.
2.9 PROPRIETARY ASSETS.
(a) Part 2.9(a)(1) of the Disclosure Schedule sets forth, with respect
to each Company Proprietary Asset that has been registered, recorded or filed
with any Governmental
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Body or with respect to which an application has been filed with any
Governmental Body, (i) a brief description of such Company Proprietary Asset,
and (ii) the names of the jurisdictions covered by the applicable registration,
recordation, filing or application. Part 2.9(a)(2) of the Disclosure Schedule
identifies and provides a brief description of all other Company Proprietary
Assets owned by the Company. Part 2.9(a)(3) of the Disclosure Schedule
identifies and provides a brief description of each Company Proprietary Asset
that is owned by any other person or entity and that is licensed to or used by
the Company (except for any Company Proprietary Asset that is licensed to the
Company under any third party software license that (1) is generally available
to the public at a cost of less than $1,000, and (2) imposes no future monetary
obligation on the Company) and identifies the license agreement or other
agreement under which such Company Proprietary Asset is being licensed to or
used by the Company. Except as set forth in Part 2.9(a)(4) of the Disclosure
Schedule, the Company has valid and marketable title to all of the Proprietary
Assets identified in Parts 2.9(a)(1) and 2.9(a)(2) of the Disclosure Schedule,
free and clear of all liens and other encumbrances, and has a valid right to use
all Proprietary Assets identified in Part 2.9(a)(3) of the Disclosure Schedule.
Except as set forth in Part 2.9(a)(5) of the Disclosure Schedule, the Company is
not obligated to make any payment to any Person for the use of any Company
Proprietary Asset. Except as set forth in Part 2.9(a)(6) of the Disclosure
Schedule, the Company is free to use, modify, copy, distribute, sell, license or
otherwise exploit each of the Company Proprietary Assets on an exclusive basis
(other than Company Proprietary Assets consisting of software licensed to the
Company under third party licenses generally available to the public, with
respect to which the Company's rights are not exclusive).
(b) The Company has taken all reasonable measures and precautions
necessary to protect and maintain the confidentiality and secrecy of all Company
Proprietary Assets (except Company Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the value
of all Company Proprietary Assets. Except as set forth in Part 2.9(b) of the
Disclosure Schedule, the Company has not disclosed or delivered or permitted to
be disclosed or delivered to any person or entity, and no person or entity
(other than the Company) has access to or has any rights with respect to, the
source code, or any portion or aspect of the source code, to any Company
Proprietary Asset.
(c) None of the Company Proprietary Assets infringes or conflicts with
any Proprietary Asset owned or used by any other person or entity. Except as
set forth in Part 2.9(c) of the Disclosure Schedule, the Company is not
infringing, misappropriating or making any unlawful use of, and the Company has
not at any time infringed, misappropriated or made any unlawful use of, or
received any notice or other communication of any actual, alleged, possible or
potential infringement, misappropriation or unlawful use of, any Proprietary
Asset owned or used by any other Person. To the best of the knowledge of the
Company and the Designated Shareholders, except as set forth in Part 2.9(c) of
the Disclosure Schedule, no other person or entity is infringing,
misappropriating or making any unlawful use of, and no Proprietary Asset owned
or used by any other person or entity infringes or conflicts with, any Company
Proprietary Asset.
(d) Except as set forth in Part 2.9(d) of the Disclosure Schedule:
(i) each Company Proprietary Asset conforms with any specification,
documentation, performance standard, representation or statement made or
provided with respect thereto by or on behalf of the
11
Company; and (ii) there has not been any claim by any customer or other Person
alleging that any Company Proprietary Asset does not conform with any
specification, documentation, performance standard, representation or statement
made or provided by or on behalf of the Company, and, to the best of the
knowledge of the Company and the Designated Shareholders, there is no basis for
any such claim. The Company is not required under generally accepted accounting
principles to establish reserves on its financial statements to cover any costs
associated with any obligations that the Company may have with respect to the
correction or repair of programming errors or other defects in the Company
Proprietary Assets.
(e) The Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable the Company to conduct its business in the manner in
which such business has been conducted. Except as set forth in Part 2.9(e) of
the Disclosure Schedule, (i) the Company has not licensed any of the Company
Proprietary Assets to any Person on an exclusive basis, and (ii) the Company has
not entered into any covenant not to compete or Contract limiting its ability to
exploit fully any of its Proprietary Assets or to transact business in any
market or geographical area or with any Person.
(f) Except as set forth in Part 2.9(f) of the Disclosure Schedule, all
current and former employees of the Company, and all current and former
consultants and independent contractors to the Company, have executed and
delivered to the Company written agreements (containing no exceptions to or
exclusions from the scope of their coverage) that are substantially identical to
the form of Nondisclosure and Assignment of Inventions Agreement attached to the
Disclosure Schedule as Appendix 2.9(f).
(g) Except as set forth in Part 2.9(g) of the Disclosure Schedule, the
Company has not entered into and is not bound by any Contract under which any
Person has the right to distribute or license, on a commercial basis, any
Company Proprietary Asset including source code, object code, or any versions,
modifications or derivative works of source code or object code in any Company
Proprietary Asset.
2.10 CONTRACTS.
(a) Part 2.10(a) of the Disclosure Schedule identifies each Company
Contract that constitutes a "Material Contract." (For purposes of this
Agreement, each of the following shall be deemed to constitute a "Material
Contract":
(i) any Contract relating to the employment or engagement of, or
the performance of services by, any employee, consultant or independent
contractor;
(ii) any Contract relating to the acquisition, transfer, use,
development, sharing or license of any technology or any Proprietary Asset;
(iii) any Contract imposing any restriction on the Company's right
or ability (A) to compete with any other person or entity, (B) to acquire any
product or other asset or any services from any other person or entity, to sell
any product or other asset to or perform any
12
services for any other person or entity or to transact business or deal in any
other manner with any other person or entity, or (C) to develop or distribute
any technology;
(iv) any Contract creating or involving any agency relationship,
distribution arrangement or franchise relationship;
(v) any Contract relating to the acquisition, issuance or
transfer of any securities;
(vi) any Contract creating or relating to the creation of any
lien, charge, pledge or other encumbrance with respect to any asset owned or
used by the Company;
(vii) any Contract involving or incorporating any guaranty, any
pledge, any performance or completion bond, any indemnity, any right of
contribution or any surety arrangement;
(viii) any Contract creating or relating to any partnership or
joint venture or any sharing of revenues, profits, losses, costs or liabilities;
(ix) any Contract relating to the purchase or sale of any product
or other asset by or to, or the performance of any services by or for, any
Related Party (as defined in Section 2.20);
(x) any Contract to which any Governmental Body is a party or
under which any Governmental Body has any rights or obligations (including any
subcontract or other Contract between the Company and any contractor or
subcontractor to any Governmental Body);
(xi) any Contract entered into outside the ordinary course of
business or inconsistent with the Company's past practices;
(xii) any Contract that has a term of more than 60 days and that
may not be terminated by the Company (without penalty) within 60 days after the
delivery of a termination notice by the Company; and
(xiii) any Contract (not otherwise identified in clauses "(i)"
through "(xii)" of this sentence) that contemplates or involves (A) the payment
or delivery of cash or other consideration in an amount or having a value in
excess of $10,000 in the aggregate, or (B) the performance of services having a
value in excess of $10,000 in the aggregate.)
(b) The Company has delivered to ADAC accurate and complete copies of
all Contracts identified in Part 2.10(a) of the Disclosure Schedule, including
all amendments thereto. Each Contract identified in Part 2.10(a) of the
Disclosure Schedule is valid and in full force and effect, and is enforceable by
the Company in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
13
(c) Except as set forth in Part 2.10(c) of the Disclosure Schedule:
(i) the Company has not violated or breached, or committed any
default under, any Company Contract, and, to the best of the knowledge of the
Company and the Designated Shareholders, no other Person has violated or
breached, or committed any default under, any Company Contract;
(ii) to the best of the knowledge of the Company and the
Designated Shareholders, no event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or could reasonably
be expected to, (A) result in a violation or breach of any of the provisions of
any Company Contract, (B) give any person or entity the right to declare a
default or exercise a remedy under any Company Contract, (C) give any person or
entity the right to accelerate the maturity or performance of any Company
Contract, or (D) give any person or entity the right to cancel, terminate or
materially modify any Company Contract;
(iii) since December 31, 1994, the Company has not received any
notice or other communication regarding (i) any actual or possible violation or
breach of, or default under, any Company Contract, or (ii) any actual or
possible termination of any Company Contract; and
(iv) the Company has not waived any of its rights under any
Contract.
(d) Except as set forth in Part 2.10(d) of the Disclosure Schedule, no
person or entity is renegotiating, or has the right to renegotiate, any amount
paid or payable to the Company under any Company Contract or any other term or
provision of any Company Contract.
(e) The Contracts identified in Part 2.10(a) of the Disclosure
Schedule collectively constitute all of the Material Contracts necessary to
enable the Company to conduct its business in the manner in which its business
is currently being conducted.
(f) The Company has not made any unexpired offer or proposal (to any
customer, prospective customer or other Person), except for any offer or
proposal that, if accepted, would result in the Company being bound by a
Contract that: (i) is substantially identical to one of the standard forms
attached to the Disclosure Schedule as Appendices 2.10(i), through 2.10(x) and
(ii) does not contain any material term or provision (relating to the payment of
license fees or other fees or relating to any other matter) that is less
favorable to the Company than the terms and provisions set forth in Part 2.10(f)
of the Disclosure Schedule.
2.11 COMPLIANCE WITH LEGAL REQUIREMENTS. The Company is, and has at all
times since December 31, 1994 been, in compliance with all applicable Legal
Requirements. Except as set forth in Part 2.11 of the Disclosure Schedule,
since December 31, 1994, the Company has not received any notice or other
communication from any Governmental Body regarding any actual or possible
violation of, or failure to comply with, any Legal Requirement.
14
2.12 GOVERNMENTAL AUTHORIZATIONS. Part 2.12 of the Disclosure Schedule
identifies each material Governmental Authorization held by the Company, and the
Company has delivered to ADAC accurate and complete copies of all Governmental
Authorizations identified in Part 2.12 of the Disclosure Schedule. The
Governmental Authorizations identified in Part 2.12 of the Disclosure Schedule
are valid and in full force and effect, and collectively constitute all
Governmental Authorizations necessary to enable the Company to conduct its
business in the manner in which its business is currently being conducted. The
Company is, and at all times since December 31, 1994 has been, in compliance
with the terms and requirements of the respective Governmental Authorizations
identified in Part 2.12 of the Disclosure Schedule. Since December 31, 1994,
the Company has not received any notice or other communication from any
Governmental Body regarding (a) any actual or possible violation of or failure
to comply with any term or requirement of any Governmental Authorization, or (b)
any actual or possible revocation, withdrawal, suspension, cancellation,
termination or modification of any Governmental Authorization.
2.13 TAX MATTERS.
(a) Except as set forth in Part 2.13 of the Disclosure Schedule, all
Tax Returns required to be filed by or on behalf of the Company with any
Governmental Body on or before the Closing Date (the "Company Returns") (i) have
been or will be filed when due, and (ii) have been, or will be when filed,
prepared accurately and completely in compliance with all applicable Legal
Requirements. All amounts shown on the Company Returns to be due on or before
the Closing Date have been or will be paid on or before the Closing Date. The
Company has delivered to ADAC accurate and complete copies of all Company
Returns filed since its date of incorporation.
(b) The Unaudited Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with generally accepted accounting principles. The
Company will establish, in the ordinary course of business and consistent with
its past practices, reserves adequate for the payment of all Taxes for the
period from March 31, 1997 through the Closing Date, and the Company will
disclose the dollar amount of such reserves to ADAC on or prior to the Closing
Date.
(c) No Company Return relating to income Taxes has ever been examined
or audited by any Governmental Body. Except as set forth in Part 2.13(c) of the
Disclosure Schedule, there has been no examination or audit of any Company
Return, and no such examination or audit has been proposed or scheduled by any
Governmental Body. The Company has delivered to ADAC accurate and complete
copies of all audit reports and similar documents (to which the Company has
access) relating to the Company Returns. Except as set forth in Part 2.13(c) of
the Disclosure Schedule, no extension or waiver of the limitation period
applicable to any of the Company Returns has been granted (by the Company or any
other Person), and no such extension or waiver has been requested from the
Company.
(d) Except as set forth in Part 2.13(d) of the Disclosure Schedule, no
claim or Legal Proceeding is pending or has been threatened against or with
respect to the Company in respect of any Tax. There are no unsatisfied
liabilities for Taxes (including liabilities for interest,
15
additions to tax and penalties thereon and related expenses) with respect to any
notice of deficiency or similar document received by the Company. There are no
liens for Taxes upon any of the assets of the Company, except liens for current
Taxes not yet due and payable. The Company has not entered into or become bound
by any agreement or consent pursuant to Section 341(f) of the Code. The Company
has not been, and the Company will not be, required to include any adjustment in
taxable income for any tax period (or portion thereof) pursuant to Section 481
or 263A of the Code or any comparable provision under state or foreign Tax laws
as a result of transactions or events occurring, or accounting methods employed,
prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, considered individually or
considered collectively with any other such Contracts, will, or could reasonably
be expected to, give rise directly or indirectly to the payment of any amount
that would not be deductible pursuant to Section 280G or Section 162 of the
Code. The Company is not, and has never been, a party to or bound by any tax
indemnity agreement, tax sharing agreement, tax allocation agreement or similar
Contract.
(f) Except as set forth in Part 2.14(f) of the Disclosure Schedule,
since December 31, 1991, (i) no Governmental Body has asserted any claim or
otherwise made any allegation that the Company has failed or may have failed to
pay any sales tax, use tax or similar Tax, and (ii) the Company has not engaged
in any discussions or negotiations with any Governmental Body, and has not sent
any written communication to or received any written communication from any
Governmental Body, in connection with any possible failure on the part of the
Company to pay any sales tax, use tax or similar Tax.
2.14 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.14(a) of the Disclosure Schedule contains a list of all
salaried employees of the Company as of the date of this Agreement, and
correctly reflects their salaries, any other compensation payable to them
(including compensation payable pursuant to bonus, deferred compensation or
commission arrangements), their dates of employment and their positions. The
Company is not a party to any collective bargaining contract or other Contract
with a labor union involving any of its employees.
(b) There is no employee of the Company who is not fully available to
perform work because of disability or other leave.
(c) Part 2.14(c) of the Disclosure Schedule identifies each salary,
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance pay, termination pay, hospitalization, medical, insurance,
supplemental unemployment benefits, profit-sharing, pension or retirement plan,
program or agreement (individually referred to as a "Plan" and collectively
referred to as the "Plans") sponsored, maintained, contributed to or required to
be contributed to by the Company for the benefit of any current or former
employee of the Company.
16
(d) Except as set forth in Part 2.13(d) of the Disclosure Schedule,
the Company does not maintain, sponsor or contribute to, and the Company has not
at any time in the past maintained, sponsored or contributed to, any employee
pension benefit plan (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), whether or not excluded from
coverage under specific Titles or Merger Subtitles of ERISA) for the benefit of
employees or former employees of the Company (a "Pension Plan").
(e) The Company does not maintain, sponsor or contribute to any
employee welfare benefit plan (as defined in Section 3(1) of ERISA, whether or
not excluded from coverage under specific Titles or Merger Subtitles of ERISA)
for the benefit of employees or former employees of the Company (a "Welfare
Plan") except for those Welfare Plans described in Part 2.15(e) of the
Disclosure Schedule, none of which is a multiemployer plan (within the meaning
of Section 3(37) of ERISA).
(f) With respect to each Plan, the Company has delivered to ADAC:
(i) an accurate and complete copy of such Plan (including all
amendments thereto);
(ii) an accurate and complete copy of the annual report (if
required under ERISA) with respect to such Plan for each of 1994 and 1995;
(iii) an accurate and complete copy of (A) the most recent summary
plan description, together with each Summary of Material Modifications (if
required under ERISA) with respect to such Plan, and (B) each material employee
communication relating to such Plan;
(iv) if such Plan is funded through a trust or any third party
funding vehicle, an accurate and complete copy of the trust or other funding
agreement (including all amendments thereto) and accurate and complete copies of
the most recent financial statements thereof;
(v) accurate and complete copies of all Contracts relating to such
Plan, including service provider agreements, insurance contracts, minimum
premium contracts, stop-loss agreements, investment management agreements,
subscription and participation agreements and recordkeeping agreements; and
(vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service with respect to
such Plan (if such Plan is intended to be qualified under Section 401(a) of the
Code).
(g) The Company is not required to be, and the Company has never been
required to be, treated as a single employer with any other Person under Section
4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the Code. The Company
has never been a member of an "affiliated service group" within the meaning of
Section 414(m) of the Code. The Company has never made a complete or partial
withdrawal from a "multiemployer plan" (as defined in Section 3(37) of ERISA)
resulting in "withdrawal liability" (as defined in
17
Section 4201 of ERISA), without regard to subsequent reduction or waiver of such
liability under either Section 4207 or 4208 of ERISA.
(h) The Company does not have any plan or commitment to create any
additional Welfare Plan or any Pension Plan, or to modify or change any existing
Welfare Plan or Pension Plan (other than to comply with applicable law).
(i) No Welfare Plan provides death, medical or health benefits
(whether or not insured) with respect to any current or former employee of the
Company after any such employee's termination of service (other than (i) benefit
coverage mandated by applicable law, including coverage provided pursuant to
Section 4980B of the Code, (ii) deferred compensation benefits accrued as
liabilities on the Unaudited Interim Balance Sheet, and (iii) benefits the full
cost of which are borne by current or former employees of the Company (or their
beneficiaries)).
(j) With respect to each of the Welfare Plans constituting a group
health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of Section 4980B of the Code ("COBRA") have been complied with in all
material respects.
(k) Each of the Plans has been operated and administered in all
material respects in accordance with applicable Legal Requirements, including
ERISA and the Code.
(l) Each of the Plans intended to be qualified under Section 401(a) of
the Code has received a favorable determination from the Internal Revenue
Service, and neither the Company nor any of the Designated Shareholders is aware
of any reason why any such determination letter should be revoked.
(m) Except as set forth in Part 2.14(m) of the Disclosure Schedule,
neither the execution, delivery or performance of this Agreement, nor the
consummation of the Merger or any of the other transactions contemplated by this
Agreement, will result in any bonus payment, golden parachute payment, severance
payment or other payment to any current or former employee or director of the
Company (whether or not under any Plan), or materially increase the benefits
payable under any Plan, or result in any acceleration of the time of payment or
vesting of any such benefits.
(n) The Company is in compliance with all applicable Legal
Requirements and Contracts relating to employment, employment practices,
employee compensation, wages, bonuses and terms and conditions of employment.
The Company has paid all sums due and owing all employees and independent
contractors of the Company for all periods ending on or prior to the Closing
Date or has made an appropriate reserve therefor in the Unaudited Financial
Statements.
(o) The Company has good labor relations, and, except as set forth in
Part 2.14(o) of the Disclosure Schedule, neither the Company nor any of the
Designated Shareholders has any knowledge of any facts indicating that (i) the
consummation of the Merger or any of the other transactions contemplated by this
Agreement will have a material adverse effect on
18
the Company's labor relations, or (ii) any of the Company's employees intends to
terminate his or her employment with the Company.
2.15 LITIGATION AND CLAIMS.
(a) There is no examination, review, investigation, arbitration, suit,
litigation or other proceeding (a "Legal Proceeding") pending or threatened by
or before any court or Governmental Body in which the Company is a party or
otherwise involved or to which any of the business or assets of the Company is
subject, nor has any third party made any claim against the Company which could
result in any such Legal Proceeding nor, to the Company's knowledge, is there
any basis for any such claim or Legal Proceeding.
(b) The Company is not a party to any decree, order or arbitration
award (or agreement entered into in any Legal Proceeding) with respect to its
properties, assets, personnel or business activities.
(c) There are no Legal Proceedings pending or, to the knowledge of the
Company, threatened (or any basis therefor known to the Company) involving the
prior employment of any of the Company's employees, their use in connection with
the Company's business of any information or techniques allegedly proprietary to
any of their former employers, or their obligations under any agreements with
prior employers.
2.16 ENVIRONMENTAL MATTERS. The Company is and has at all times been in
compliance with all applicable Environmental Laws. The Company possesses all
permits and other Governmental Authorizations required under applicable
Environmental Laws, and the Company is and has at all times been in compliance
with the terms and requirements of all such Governmental Authorizations. The
Company has not received any notice or other communication (whether from a
Governmental Body, citizens group, employee or otherwise) that alleges that the
Company is not in compliance with any Environmental Law, and, to the best of the
knowledge of the Company and the Designated Shareholders, there are no
circumstances that could reasonably be expected to prevent or interfere with the
Company's compliance with any Environmental Law in the future. To the best of
the knowledge of the Company and the Designated Shareholders, no current or
prior owner of any property leased or controlled by the Company has received any
notice or other communication (whether from a Governmental Body, citizens group,
employee or otherwise) that alleges that such current or prior owner or the
Company is not or was not in compliance with any Environmental Law. All
Governmental Authorizations currently held by the Company pursuant to
Environmental Laws are identified in Part 2.15 of the Disclosure Schedule. (For
purposes of this Section 2.15: (i) "Environmental Law" means any federal, state,
local or foreign Legal Requirement relating to pollution or protection of human
health or the environment (including ambient air, surface water, ground water,
land surface or subsurface strata), including any law or regulation relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern; and (ii) "Materials of Environmental
Concern" include chemicals, pollutants, contaminants, wastes, toxic substances,
19
petroleum and petroleum products and any other substance that is now or in the
future regulated by any Environmental Law or that is otherwise a danger to
health, reproduction or the environment.)
2.17 SALE OF PRODUCTS; PERFORMANCE OF SERVICES.
(a) To the Company's and the Designated Shareholders' knowledge, the
Company will not incur or otherwise become subject to any liability arising from
(i) any product, system, program, Proprietary Asset or other asset designed,
developed, manufactured, assembled, sold, supplied, installed, repaired,
licensed or made available by the Company on or prior to the Closing Date, or
(ii) any consulting services, installation services, programming services,
repair services, maintenance services, training services, support services or
other services performed by the Company on or prior to the Closing Date.
(b) Except as set forth in Part 2.17(b) of the Disclosure Schedule, no
customer or other Person has, at any time since December 31, 1994, asserted or
threatened to assert any claim against the Company (other than claims that have
been resolved satisfactorily at no material cost to the Company) under or based
upon (i) any warranty provided by or on behalf of the Company, or (ii) any
services performed by the Company.
2.18 INSURANCE. Part 2.18 of the Disclosure Schedule provides accurate and
complete list of each insurance policy maintained by, at the expense of or for
the benefit of the Company and with respect to any claims made thereunder. The
Company has delivered to ADAC accurate and complete copies of the insurance
policies identified in Part 2.18 of the Disclosure Schedule. Each of the
insurance policies identified in Part 2.18 of the Disclosure Schedule is in full
force and effect. Since December 31, 1994, the Company has not received any
notice or other communication regarding any actual or possible (a) cancellation
or invalidation of any insurance policy, (b) refusal of any coverage or
rejection of any claim under any insurance policy, or (c) material adjustment in
the amount of the premiums payable with respect to any insurance policy.
2.19 FULL DISCLOSURE. This Agreement, the Disclosure Schedule and all
other documents delivered by the Company to ADAC or its attorneys or agents in
connection herewith or in connection with the transactions contemplated hereby,
do not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. The information supplied by the Company to its
shareholders pursuant to Section 4.7 hereof shall not contain any statement that
is inaccurate or misleading with respect to any material fact or omit to state
any material fact necessary in order to make such information not misleading.
2.20 RELATED PARTY TRANSACTIONS. Except as set forth in Part 2.20 of the
Disclosure Schedule: (a) no Related Party has, and no Related Party has at any
time since December 31, 1994 had, any direct or indirect interest in any asset
used in or otherwise relating to the business of the Company; (b) no Related
Party is, or has at any time since December 31, 1994 been, indebted to the
Company; (c) since December 31, 1994, no Related Party has entered into, or has
had any direct or indirect financial interest in, any Material Contract,
transaction or business dealing involving the Company; (d) no Related Party is
competing, or has at any time since December 31, 1994
20
competed, directly or indirectly, with the Company; and (e) no Related Party has
any claim or right against the Company (other than rights to receive
compensation for services performed as an employee of the Company). (For
purposes of this Section 2.20, each of the following shall be deemed to be a
"Related Party": (i) each of the Designated Shareholders; (ii) each individual
who is, or who has at any time since December 31, 1994 been, an officer or
director of the Company; (iii) each individual who is, or who has at any time
since December 31, 1994 been, a member of the immediate family of any of the
individuals referred to in clauses "(i)" and "(ii)" above; and (iv) any trust or
other Entity (other than the Company) in which any one of the individuals
referred to in clauses "(i)", "(ii)" and "(iii)" above holds (or in which more
than one of such individuals collectively hold), beneficially or otherwise, a
voting, proprietary or equity interest.)
2.21 FINANCIAL ADVISOR. The Company and the Designated Shareholders
represent and warrant that, no broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Merger or any of the other transactions contemplated hereby based upon
arrangements made by or on behalf of the Company or any of its shareholders.
2.22 ENFORCEABILITY. The Company has the corporate power and authority to
execute, deliver and perform each of the Transactional Agreements (as defined
below) to which it is or will become a party. The execution and delivery of
said Transactional Agreements have been duly and validly authorized by the
unanimous vote of the Board of Directors of the Company. No other corporate
proceedings on the part of the Company is necessary to authorize the Company's
execution, delivery and performance its obligations under the Transactional
Agreements. Said Transactional Agreements (a) have been (or will be) duly
executed and delivered by duly authorized officers of the Company and (b)
constitute (or, when executed by the Company, will constitute) legal, valid and
binding obligations of the Company enforceable against it in accordance with
their terms. For purposes of this Agreement, (i) "Transactional Agreements"
means this Agreement and each of the other agreements and documents referred to
in Sections 5.10, 5.11, 5.12, 5.15 and 5.16; and (ii) "Transactions" means (A)
the execution, delivery and performance of the respective Transactional
Agreements and (B) each of the transactions contemplated by or otherwise
referred to in any of the Transactional Agreements (including the Merger).
2.23 GOVERNMENTAL CONSENTS; NO CONFLICTS. Except as set forth in the
Disclosure Schedule, there is no requirement applicable to the Company to make
any filing with, or to obtain any permit, authorization, consent or approval of,
any Governmental Body as a condition to the lawful consummation of any of the
Transactions. The Company does not know of any reason why any required permit,
authorization, consent or approval will not be obtained. Neither the execution
and delivery of this Agreement by the Company nor the consummation by the
Company of any of the Transactions will (a) conflict with, violate or result in
any breach of any provision of the Articles of Incorporation or Bylaws (or
comparable charter documents) of the Company, (b) result in a default (or with
notice or lapse of time or both would result in a default) under, or impair the
rights of the Company or alter the rights or obligations of any third party
under, or require the Company to make any material payment or become subject to
any liability to any third party under, or give rise to any right of
termination, amendment, cancellation, acceleration, repurchase, put or call
under, any of the terms, conditions or provisions of any Contract, (c) result in
the creation of any liens, charges or encumbrances on any of the assets of the
Company or (d) conflict with or
21
violate any law, statute, rule, regulation, judgment, order, writ, injunction,
decree or arbitration award applicable to the Company or any of its assets.
3
REPRESENTATIONS AND WARRANTIES OF ADAC AND SUB
ADAC and Sub represent and warrant to the Company and the Designated
Shareholders as follows:
3.1 SEC FILINGS; FINANCIAL STATEMENTS.
(a) ADAC has delivered to the Company accurate and complete copies
(excluding copies of exhibits) of each report, registration statement (on a form
other than Form S-8) and definitive proxy statement filed by ADAC with the SEC
between January 1, 1996 and the date of this Agreement (the "ADAC SEC
Documents"). As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing): (i) each of the ADAC SEC Documents complied in all material
respects with the applicable requirements of the Securities Act or the Exchange
Act (as the case may be); and (ii) none of the ADAC SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(b) The consolidated financial statements contained in the ADAC SEC
Documents: (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered, except as may be indicated in the notes to
such financial statements and (in the case of unaudited statements) as permitted
by Form 10-Q of the SEC, and except that unaudited financial statements may not
contain footnotes and are subject to year-end audit adjustments; and (iii)
fairly present the consolidated financial position of ADAC and its subsidiaries
as of the respective dates thereof and the consolidated results of operations of
ADAC and its subsidiaries for the periods covered thereby.
3.2 AUTHORITY; BINDING NATURE OF AGREEMENT. Each of ADAC and Sub has the
corporate power and authority to perform its obligations under this Agreement.
This Agreement has been duly and validly authorized by the Boards of Directors
of ADAC and Sub. No vote of ADAC's stockholders is needed to approve the
Merger. This Agreement constitutes the legal, valid and binding obligation of
each of ADAC and Sub, enforceable against it in accordance with its terms.
3.3 VALID ISSUANCE. The ADAC Common Stock to be issued in the Merger
will, when issued in accordance with the provisions of this Agreement, be
validly issued, fully paid and nonassessable.
22
3.4 FINANCIAL ADVISOR. ADAC represents and warrants that no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger or any of the other Transactions
based upon arrangements made by or on behalf of ADAC.
3.5 ABSENCE OF CERTAIN CHANGES. Since March 30, 1997, no event has
occurred that has had, will have, or could reasonably be expected to have, a
material adverse effect on ADAC and its subsidiaries taken as a whole other than
as a result of general economic or industry conditions or the performance by
ADAC of its obligations or the exercise by the Company of its rights under this
Agreement.
4
CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME;
ADDITIONAL AGREEMENTS
4.1 INFORMATION AND ACCESS.
(a) During the period from the date of this Agreement through the
Effective Time (the "Pre-Closing Period"):
(i) the Company shall afford, and shall cause its outside
accountant, counsel and other advisors and representatives (collectively,
"Representatives") of the Company to afford, to ADAC and to ADAC's
Representatives, reasonable access to the properties, books, records (including
filed Tax Returns, Tax Returns in preparation and the audit work papers and
other records of the independent auditors of the Company) and personnel of the
Company in order that ADAC and ADAC's Representatives may have a full
opportunity to make such investigation as ADAC reasonably desires to make of the
Company;
(ii) the Company shall permit ADAC and ADAC's Representatives to
make such reasonable inspections of the Company and its operations as ADAC may
reasonably require from time to time; and
(iii) the Company shall furnish ADAC and ADAC's Representatives
with, and shall cause the Company's Representatives to furnish ADAC with, such
financial and operating data and other information with respect to the business
and properties of the Company as ADAC or its counsel may reasonably request from
time to time.
(b) Without limiting the generality of Section 4.1(a), during the
period from the date of this Agreement through the Closing Date, the Company
shall promptly provide ADAC with copies of:
23
(i) all material operating and financial reports prepared by the
Company for its senior management, including copies of the unaudited monthly
balance sheets of the Company and the related unaudited statements of
operations;
(ii) any written materials or written communications sent by the
Company to its shareholders generally in connection with their status as such;
and
(iii) any notice, report or other document filed with or sent to
any Governmental Authority in connection with any of the Transactions.
(c) No investigation by ADAC or any of its Representatives pursuant to
this Section 4.1 shall limit or otherwise affect any representations or
warranties of the Company or any condition to any obligation of ADAC.
4.2 CONDUCT OF BUSINESS OF THE COMPANY.
(a) Except as provided in Section 4.2(b), during the Pre-Closing
Period, (i) the Company shall conduct its business in the ordinary and usual
course consistent with past practice and (ii) the Company shall use its best
efforts to maintain and preserve intact its business organization, to keep
available the services of its officers and employees and to maintain
satisfactory relations with lessors, suppliers, contractors, distributors,
customers and others having business relationships with the Company.
(b) During the Pre-Closing Period,
(i) the Company shall keep in full force all insurance policies
identified in Part 2.17 of the Disclosure Schedule;
(ii) the Company shall (to the extent requested by ADAC) cause its
officers to report regularly (but in no event less frequently than weekly) to
ADAC concerning the status of the Company's business;
(iii) the Company shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and shall not repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities;
(iv) the Company shall not sell, issue or authorize the issuance
of (A) any capital stock or other security, (B) any option, call, warrant or
right to acquire, or relating to, any capital stock or other security, or (C)
any instrument convertible into or exchangeable for any capital stock or other
security, except pursuant to the conversion of the Preferred Stock into shares
of Company Common Stock;
(v) neither the Company nor any of the Designated Shareholders
shall amend or permit the adoption of any amendment to the Company's articles of
incorporation or
24
bylaws, or effect or permit the Company to become a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock split, reverse
stock split or similar transaction;
(vi) the Company shall not form any subsidiary or acquire any
equity interest or other interest in any other entity;
(vii) except pursuant to Section 5.9, the Company shall not make
any capital expenditure, except for capital expenditures that, when added to all
other capital expenditures made on behalf of the Company during the Pre-Closing
Period, do not exceed $10,000 in the aggregate;
(viii) the Company shall not (i) enter into or become bound by, or
permit any of the assets owned or used by it to become bound by, any Material
Contract or (ii) amend or prematurely terminate, or waive any material right or
remedy under, any Material Contract;
(ix) the Company shall not (A) acquire, enter into or commence any
lease or license for any right or other asset from any other Person, (B) sell or
otherwise dispose of, or enter into or commence any lease or license, for any
right or other asset to any other Person, or (C) waive or relinquish any right,
except for immaterial assets acquired, leased, licensed or disposed of by the
Company pursuant to Contracts that are not Material Contracts;
(x) the Company shall not (A) lend money to any person or entity,
or (B) incur or guarantee any indebtedness, except that the Company may borrow
up to $466,000 under its line of credit, $110,000 of which has been borrowed to
date and the remaining $356,000 of which may be borrowed as necessary to pay the
legal and accounting fees described in Section 7.3, pay the bonus to Fred
Costello under Section 4.13, and to consummate the transaction described in
Section 5.9 below;
(xi) the Company shall not (A) establish, adopt or amend any
Employee Benefit Plan, (B) except as set forth in Section 4.13, pay any bonus or
make any profit-sharing or similar payment to, or, except as set forth in Part
2.14 of the Disclosure Schedule, increase the amount of the wages, salary,
commissions, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers or employees, or (C) hire any new employees.
(xii) the Company shall not change any of its methods of
accounting or accounting practices in any respect (except as necessary to
reflect the matter disclosed in Part 2.4 of the Disclosure Schedule);
(xiii) the Company shall not make any Tax election;
(xiv) the Company shall not commence or settle any Legal
Proceeding;
(xv) the Company shall not enter into any material transaction or
take any other material action outside the ordinary course of business or
inconsistent with its past practices; and
25
(xvi) the Company shall not agree or commit to take any of the
actions described in clauses "(v)" through "(xv)" of this Section 4.2.
4.3 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, the Company shall promptly notify
ADAC in writing of:
(i) the discovery by the Company of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or constitutes an inaccuracy in or breach of any representation
or warranty made by the Company or any of the Designated Shareholders in this
Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty made by
the Company or any of the Designated Shareholders in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or (B)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement;
(iii) any breach of any covenant or obligation of the Company or
any of the Designated Shareholders; and
(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required to
be disclosed pursuant to Section 4.3(a) requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming the Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then the Company shall promptly deliver to ADAC an update to the
Disclosure Schedule specifying such change. No such update shall be deemed to
supplement or amend the Disclosure Schedule for the purpose of (i) determining
the accuracy of any of the representations and warranties made by the Company or
any of the Designated Shareholders in this Agreement, or (ii) determining
whether any of the conditions set forth in Section 6 has been satisfied.
4.4 NEGOTIATION WITH OTHERS.
(a) During the Pre-Closing Period, the Company shall not, and it shall
not authorize or permit any of its officers, directors or employees, directly or
indirectly, to (i) solicit, initiate or knowingly encourage or induce the making
of any Acquisition Transaction, (ii) furnish information regarding the Company
or any of its subsidiaries in connection with an Acquisition Proposal or
potential Acquisition Transaction, (iii) negotiate or engage in discussions with
any third
26
party with respect to any Acquisition Transaction, (iv) approve, endorse or
recommend any Acquisition Transaction or (v) enter into any letter of intent,
contract or other instrument related directly or indirectly to any Acquisition
Transaction or contracts with advisors or consultants. "Acquisition Transaction"
shall mean any proposal (other than any proposal by ADAC) regarding (i) any
merger, consolidation, share exchange, business combination or other similar
transaction or series of related transactions involving the Company; (ii) any
sale, lease, exchange, transfer or other disposition of the assets of the
Company or any subsidiary of the Company constituting more than 10% of the
consolidated assets of the Company or accounting for more than 10% of the
consolidated revenues of the Company in any one transaction or in a series of
related transactions; and (iii) any offer to purchase, tender offer, exchange
offer or any similar transaction or series of related transactions made by any
person involving more than 10% of the outstanding shares of the capital stock of
the Company.
(b) During the Pre-Closing Period, each Shareholder shall not,
directly or indirectly, (i) solicit, initiate or knowingly encourage or induce
the making of any Acquisition Transaction, (ii) furnish information regarding
the Company or any of its subsidiaries in connection with an Acquisition
Transaction or potential Acquisition Transaction, (iii) negotiate or engage in
discussions with any third party with respect to any Acquisition Transaction,
(iv) approve, endorse or recommend any Acquisition Transaction or (v) enter
into any letter of intent, contract or other instrument related directly or
indirectly to any Acquisition Transaction or contracts with advisors or
consultants.
(c) The Company shall immediately cease and cause to be terminated any
discussions or negotiations with any parties existing as of the date of this
Agreement and that relate to any Acquisition Transaction.
4.5 REGULATORY APPROVALS.
(a) The Company and ADAC shall use all reasonable efforts to file as
soon as practicable after the date of this Agreement all notices, reports and
other documents required by law to be filed with any Governmental Body with
respect to the Merger and the other Transactions and to submit promptly any
additional information requested by any such Governmental Body.
(b) The Company and ADAC shall (i) give each other prompt notice of
the commencement of any Legal Proceeding by or before any court or Governmental
Body with respect to the Merger or any of the other Transactions, (ii) keep each
other informed as to the status of any such Legal Proceeding and (iii) except as
may be prohibited by any Governmental Body or by any law or court order or
decree, permit the other party to be present at each meeting or conference
relating to any such Legal Proceeding and to have access to and be consulted in
connection with any document filed or provided to any Governmental Body in
connection with any such Legal Proceeding.
4.6 ADDITIONAL AGREEMENTS. The Company and ADAC agree to use their best
efforts to take, or cause to be taken, all actions necessary to consummate the
Merger and make effective the other Transactions. Without limiting the
generality of the foregoing, the Company
27
shall use all commercially reasonable efforts to (i) obtain the consent and
approval of each Governmental Body, lessor or other person whose consent or
approval is required (by virtue of any contractual provision or Legal
Requirement or otherwise) in order to permit the consummation of the Merger or
any of the other Transactions or in order to enable the Surviving Corporation to
conduct its business in the manner in which such business is currently being
conducted or is proposed to be conducted, (ii) effect all registrations and
filings necessary to consummate the Merger and (iii) lift any restraint,
injunction or other legal bar to the Merger.
4.7 COMPANY SHAREHOLDER APPROVAL. The Company shall, in accordance with
its articles of incorporation and bylaws and the applicable requirements of the
FBCA, seek the approval of its shareholders as promptly as practicable to the
Merger, the Plan of Merger and related articles of merger, and this Agreement.
The Company shall, a reasonable period of time prior to such vote, cause a copy
of this Agreement and the ADAC SEC Documents to be delivered to each shareholder
of the Company who is entitled to vote on such matters. As promptly as
practicable after the delivery thereof to all shareholders entitled to vote, the
Company shall use its best efforts to cause each of such shareholders to execute
and deliver to ADAC a Shareholder Investment Certification in the form of
Exhibit B. Each Designated Shareholder shall cause all shares of the capital
- ---------
stock of the Company that are owned, beneficially or of record, by such
Designated Shareholder on the record date for the Company Shareholders' Meeting
to be voted in favor of the Merger and this Agreement.
4.8 PUBLIC ANNOUNCEMENTS.
(a) During the Pre-Closing Period, neither the Company nor any of the
Designated Shareholders shall (and the Company shall not permit any of its
representatives to) issue any press release or make any public statement
regarding this Agreement or the Merger, or regarding any of the other
transactions contemplated by this Agreement, without ADAC's prior written
consent.
(b) During the Pre-Closing Period, ADAC will consult with the Company
prior to issuing any press release or making any public statement regarding the
Merger (unless ADAC reasonably determines that ADAC is required, by virtue of
any applicable Legal Requirement, to issue any such press release or make any
such public statement under circumstances that make it infeasible or impractical
to consult with the Company).
4.9 EMPLOYMENT AGREEMENTS. Each of Messrs. Patten, Hill, Lobel, Nikoloff
and Joicy shall execute and deliver to ADAC, on or prior to the Closing Date,
Employment Agreements in the form attached hereto as Exhibit C.
---------
4.10 CONTINUITY OF INTEREST CERTIFICATES. Each Designated Shareholder
shall execute and deliver to ADAC, and the Company shall use its best efforts to
cause each other shareholder that holds 1% or more of Company Common Stock to
execute and deliver to ADAC, as promptly as possible after the execution of this
Agreement, a Continuity of Interest Certificate in the form attached hereto as
Exhibit D.
- ---------
28
4.11 TAX CERTIFICATES. The Company shall deliver to ADAC's counsel a tax
certificate substantially in the form attached hereto as Exhibit E (the "Company
---------
Tax Certificate"). ADAC shall deliver to the Company's counsel a tax
certificate substantially in the form attached hereto as Exhibit F (the "ADAC
----------
Tax Certificate").
4.12 RELEASE. At the Closing, each of the Designated Shareholders shall
execute and deliver to the Company and ADAC a Release in the form of Exhibit G.
----------
4.13 TERMINATION OF EMPLOYEE PLANS ETC. At the Closing, the Company shall
terminate all bonus plans and other benefit plans under which any of its
employees or former employees may have any rights, and shall ensure that no
employee or former employee of the Company has any rights thereunder and that
any liabilities of the Company thereunder (including any such liabilities
relating to services performed prior to the Closing) are fully extinguished at
no cost to the Company, except for the bonus to Mr Fred Costello, the amount of
which is set forth in the Disclosure Schedule. The employment of Mr. Fred
Costello shall terminate upon consummation of the closing, and the Company shall
have no further liability to Costello except for the payment of such amount.
4.14 REGISTRATION STATEMENT. As soon as practicable following the Closing
Date, ADAC shall prepare and cause to be filed with the SEC a Registration
Statement on Form S-3 to register for public sale the ADAC Common Stock to be
issued to the shareholders of the Company in connection with the Merger. ADAC
shall use its best efforts to cause such registration statement to become
effective as soon as practicable after the filing thereof.
4.15 TAX RETURNS. The Company shall timely file all federal and state
income tax returns for taxable periods ending on or prior to the Effective Time
and has paid or will pay all Taxes attributable to such periods. Such returns
will be prepared and filed in accordance with applicable law and in a manner
consistent with past practices and shall be subject to review and approval by
ADAC. After the Effective Time, ADAC and Shareholder will make available to the
other, as reasonably requested, all information, records or documents relating
to liability for Taxes for all periods prior to or including the Effective Time
and will preserve such information, records or documents until the expiration of
any applicable statutes of limitations.
5
CONDITIONS PRECEDENT TO OBLIGATIONS OF ADAC AND SUB
The obligations of ADAC and Sub to effect the Merger and to otherwise
consummate the transactions contemplated hereby are subject to the fulfillment
at or prior to the Closing of each of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES ACCURATE. The representations and
warranties of the Company and the Designated Shareholders contained in this
Agreement and in each of the other instruments and documents delivered to ADAC
in connection with the transactions contemplated
29
hereby shall have been accurate in all material respects as of the date of this
Agreement. The representations and warranties of the Company and the Designated
Shareholders contained in this Agreement and in each of the other instruments
and documents delivered to ADAC in connection with the transactions contemplated
hereby shall be accurate in all material respects as of the Closing Date as if
made on and as of the Closing Date.
5.2 COMPLIANCE WITH COVENANTS. The Company and the Designated
Shareholders shall have complied with and performed in all material respects
each covenant contained in this Agreement that is required to be performed by
them on or prior to the Closing Date.
5.3 SHAREHOLDER APPROVAL. The terms of the Merger, the Plan of Merger and
related articles of merger and this Agreement shall have been duly approved by
the affirmative vote of at least 90% of the shares of Company Common Stock
entitled to vote with respect thereto.
5.4 CONSENTS. All consents required to be obtained in connection with the
Merger and the other transactions contemplated by this Agreement (including the
consents identified in Part 2.22 of the Disclosure Schedule) shall have been
obtained and shall be in full force and effect.
5.5 AGREEMENTS AND DOCUMENTS. ADAC and Sub shall have received the
following agreements and documents, each of which shall be in full force and
effect:
(a) Shareholder Investment Certifications in the form of Exhibit B,
---------
each dated as of the date of the Company Shareholders' Meeting or as of an
earlier date, executed by each of the Company's shareholders;
(b) Employment Agreements in the form of Exhibit C, executed by the
----------
persons identified herein;
(c) Continuity of Interest Certificates in the form of Exhibit D,
---------
executed by the holders of 1% or more of the Company Common Stock;
(d) a Release in the form of Exhibit G, executed by the Designated
---------
Shareholders;
(e) a legal opinion of Smith, Mackinnon, Greeley, Bowdoin & Edwards,
P.A., dated as of the Closing Date, in the form of Exhibit H;
---------
(f) a certificate executed by each of the Company and the Designated
Shareholders and containing the representation and warranty of each that each of
the representations and warranties set forth in Section 2 is accurate in all
material respects as of the Closing Date as if made on the Closing Date and that
the conditions set forth in Sections 5.1, 5.2, 5.3, 5.4 and 5.7 have been duly
satisfied (the " Closing Certificate");
(g) the written resignations of all directors and officers of the
Company, effective as of the Effective Time;
30
(h) endorsed stock powers in blank from each of the Designated
Shareholders of the Company as required by Section 8.2; and
(i) UCC-3 termination statements and other appropriate documents
reflecting the release of all liens against the Proprietary Assets (as defined
in Section 5.9 below), including the registration of lien filed in the U.S.
Copyright Office, and any against any other assets of the Company, including the
liens created thereon by those certain Security Agreements dated June 6, 1994
and September 12, 1994 and the Collateral Assignment of License Agreement.
5.6 EMPLOYEES. None of the Designated Shareholders that is an employee
shall have ceased to be employed by, or expressed an intention to terminate his
or her employment with, the Company.
5.7 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in the Company's business, condition, assets, liabilities, operations,
financial performance or prospects since the date of this Agreement.
5.8 TERMINATION OF EMPLOYEE PLANS ETC. The Company shall have provided
ADAC with evidence, satisfactory to ADAC, as to the termination of the plans and
taking of the other actions referred to in Section 4.13.
5.9 ACQUISITION OF INTELLECTUAL PROPERTY RIGHTS ETC. The Company shall
have acquired all intellectual property rights owned by Archival Technologies,
Inc. ("ATI"), including those rights subject to that certain license agreement
between ATI and the Company dated September 12, 1994 but excluding the names
"Archival Technologies, Inc." and "ATI" (collectively, the "ATI Assets"), the
foregoing license agreement and related collateral assignment shall have been
terminated, all commitments made by the Company to ATI in the September 8, 1994
Offer Letter and any related documents shall have terminated, and ATI, and the
employees and shareholders of ATI, shall have released the Company and the
assets of the Company from and against any and all claims, liens and security
interests they might have against any of them or any of their respective assets.
5.10 EXEMPT TRANSACTION. The issuance of the ADAC stock to the
shareholders of the Company in the Merger shall be exempt from the registration
requirements of the Securities Act of 1933, as amended.
5.11 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
5.12 NO LEGAL PROCEEDINGS. No person shall have commenced or threatened to
commence any Legal Proceeding challenging or seeking the recovery of a material
amount of damages in connection with the Merger or that may have the effect of
preventing, delaying, making
31
illegal or otherwise interfering with the Merger or any of the other
transactions contemplated by this Agreement.
5.13 CONFIDENTIALITY AND NONDISCLOSURE AGREEMENTS. Except for the
Designated Shareholders executing Employment Agreements, each employee of the
Company, and each consultant to the Company, shall have executed and delivered
to the Company a Nondisclosure and Inventions Agreement in the form previously
supplied to the Company.
5.14 CONVERSION OF PREFERRED STOCK. All outstanding Preferred Stock shall
have been converted into shares of Company Common Stock.
5.15 DISSENTERS. No holder of Company Common Stock shall have exercised
dissenters' rights with respect to the transactions contemplated hereby.
6
CONDITIONS PRECEDENT TO THE COMPANY'S AND THE DESIGNATED SHAREHOLDERS'
OBLIGATIONS
The obligations of the Company and the Designated Shareholders to effect
the Merger and otherwise consummate the transactions contemplated by this
Agreement are subject to the fulfillment, at or prior to the Closing, of the
following conditions:
6.1 REPRESENTATIONS AND WARRANTIES ACCURATE. The representations and
warranties of ADAC and Sub contained in this Agreement and in each of the other
instruments and documents delivered to the Company in connection with the
transactions contemplated hereby shall have been accurate in all material
respects as of the date of this Agreement. The representations and warranties
of ADAC and Sub contained in this Agreement and in each of the other instruments
and documents delivered to the Company in connection with the transactions
contemplated hereby shall be accurate in all material respects as of the Closing
Date as if made on and as of the Closing Date.
6.2 COMPLIANCE WITH COVENANTS. ADAC and Sub shall have complied with and
performed in all material respects each covenant contained in this Agreement
that is required to be performed by ADAC on or prior to the Closing Date.
6.3 CERTIFICATE. ADAC shall have delivered to the Company a certificate
of an executive officer of ADAC evidencing compliance with the conditions set
forth in Sections 6.1 and 6.2.
6.4 LEGAL OPINION. The Company shall have received an opinion of counsel
to ADAC, dated the Closing Date, substantially to the effect of Exhibit I.
---------
32
6.5 ABSENCE OF RESTRAINT. No order to restrain, enjoin or otherwise
prevent the consummation of the Merger or any of the other Transactions shall
have been entered by any court or Governmental Body.
6.6 ACQUISITION OF ATI ASSETS. The Company shall have acquired the ATI
Assets at a cost to the Company of not more than $250,000.
6.7 NO MATERIAL ADVERSE CHANGE. Since the date hereof, there shall have
been no material adverse change in the business, condition, assets, liabilities,
operations, financial performance or prospects of ADAC and its subsidiaries
taken as a whole.
6.8 TAX CONSEQUENCES. Neither ADAC nor Sub shall have taken any action
prior to the Closing no provided for herein that could reasonably be expected to
prevent the Merger from constituting a tax-free reorganization within the
meaning of Section 368 of the Code.
7
TERMINATION OF AGREEMENT
7.1 TERMINATION.
(a) This Agreement may be terminated prior to the Effective Time:
(i) by mutual written consent of the respective Boards of
Directors of ADAC and the Company;
(ii) by either ADAC or the Company if the Merger shall not have
been consummated by May 31, 1997(unless the failure to consummate the Merger is
attributable to a failure on the part of the party seeking to terminate this
Agreement to perform any material obligation required to be performed by such
party at or prior to the Effective Time);
(iii) by either ADAC or the Company if a court of competent
jurisdiction or Governmental Authority shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger;
(b) This Agreement may be terminated prior to the Closing Date:
(i) by ADAC if any of the Company's representations and warranties
contained in this Agreement shall be or shall have become materially inaccurate
as of the date of this Agreement, or if any of the Company's covenants contained
in this Agreement shall have been breached in any material respect; provided,
however, that if an inaccuracy in the Company's representations and warranties
or a breach of a covenant by the Company is curable by the Company, the Company
shall have ten days to cure such breach; or
33
(ii) by the Company if any of ADAC's representations and
warranties contained in this Agreement shall be or shall have become materially
inaccurate as of the date of this Agreement, or if any of ADAC's covenants
contained in this Agreement shall have been breached in any material respect;
provided, however, that if an inaccuracy in ADAC's representations and
warranties or a breach of a covenant by ADAC is curable by ADAC, ADAC shall have
ten days to cure such breach.
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; provided, however, that (i) this Section 7.2, Section 7.3 and
Section 10.10 shall survive the termination of this Agreement and shall remain
in full force and effect and (ii) the termination of this Agreement shall not
relieve any party from any liability for any breach of this Agreement.
7.3 FEES AND EXPENSES. Each of ADAC, the Company and the Designated
Shareholders shall bear its own expenses in connection with the preparation,
negotiation, execution and performance of this Agreement, the Merger and the
Transactions, except that the Company may pay the legal and accounting expenses
of the Designated Shareholders provided the total such expenses paid by the
Company shall not exceed $81,000.
8
INDEMNITY AND HOLDBACK
8.1 AGREEMENT TO INDEMNIFY. The Designated Shareholders hereby severally
agree to indemnify and hold ADAC and its affiliates (including the Surviving
Corporation), and each of their respective officers, directors, employees and
agents, harmless from and against all claims, losses, liabilities, damages,
deficiencies, costs and expenses, including reasonable attorneys' fees and
expenses of investigation ("Losses") incurred by any of them as a result of (i)
any inaccuracy or breach of a representation or warranty of the Company or the
Designated Shareholders, (ii) any failure of the Company or the Designated
Shareholders to perform or comply with any covenant contained herein to be
complied with by them, (iii) any Taxes payable by the Company with respect to
any period ending on or prior to the Closing not disclosed or provided for in
the Unaudited Financial Statements or the Disclosure Schedule, and not incurred
in the ordinary course of business consistent with past practice since March 31,
1997, (iv) the conduct of the business of ATI or the ownership or operation of
its assets; or (5) any breach by the Company of the VA Contract (as defined
below), or any cancellation or rescission of the VA Contract by the customer or
the Department (as defined below), in each case in the circumstances described
in Section 8.10(c) below, but in no event shall the Losses therefrom for which
the Designated Shareholders shall be obligated to provide indemnity hereunder
exceed $170,000 in the aggregate. Notwithstanding anything to the contrary
contained herein, the liability of each Designated Shareholder shall not exceed
such shareholder's pro rata share of any Holdback Common Stock actually retained
by ADAC pursuant hereto plus an amount equal to the product of (x) the number of
shares of ADAC Common Stock actually received by such shareholder and (y) the
Designated ADAC Stock Price.
34
8.2 HOLDBACK AMOUNT. On the Closing Date, ADAC shall withhold from the
ADAC Stock to be issued to the Designated Shareholders in the Merger an
aggregate of 21.3% of the ADAC Common Stock (the "Holdback Common Stock") to be
issued in the Merger pursuant to Section 1.5(a)(ii) hereof, and the Designated
Shareholders shall deliver to ADAC endorsed stock powers (the "Stock Powers") in
blank for the Holdback Common Stock. ADAC shall hold the Holdback Common Stock
until the date specified in Section 8.7 (the "Holdback Period").
8.3 VOTING OF SHARES. During the Holdback Period, the record owners of
the shares of Holdback Common Stock shall be entitled to exercise all voting
rights with respect to such shares of Holdback Common Stock. Any cash,
securities or other property distributable (whether by way of dividend, stock
split or otherwise) in respect of or in exchange for any shares of Holdback
Common Stock held by ADAC shall not be distributed to the record owner of such
shares, but rather shall be held by ADAC. At the time any shares of Holdback
Common Stock are released by ADAC, any cash, securities or other property
previously distributed in respect of or in exchange for such shares shall be
released by ADAC to such person.
8.4 TRANSFERABILITY; FRACTIONAL SHARES. The interests of the record
owners in the Holdback Common Stock shall not be assignable or transferable,
other than by operation of law. No transfer of any of such interests by
operation of law shall be recognized or given effect until ADAC shall have
received written notice of such transfer. No fractional shares of Holdback
Common Stock shall be retained in or released pursuant to this Article 8. In
connection with any release of shares of the Holdback Common Stock, ADAC shall
be permitted to "round down" or to follow such other rounding procedures as ADAC
reasonably determines to be appropriate in order to avoid retaining any
fractional share and in order to avoid releasing any fractional share.
8.5 CLAIM NOTICE. If ADAC determines in good faith that (i) there has
been a possible breach by the Company or any Designated Shareholder of any
representation, warranty, covenant or other provision set forth in this
Agreement or the certificate issued pursuant to Section 5.5 (without giving
effect to any "Material Adverse Effect" or other materiality qualification or
any similar qualification contained or incorporated directly or indirectly in
such representation or warranty, but giving effect to any update to the
Disclosure Schedule delivered by the Company to ADAC prior to the Closing); (ii)
there has been any breach of any covenant or obligation of the Company or any of
the Designated Shareholders; (iii) there is a reasonable likelihood of ADAC or
the Company incurring any other Losses covered by Section 8.1; or (v) there has
arisen any Legal Proceeding relating to any inaccuracy, breach, failure,
liability or alleged liability, or Loss of the type referred to in clause "(i),"
"(ii)" or "(iii)" above, and if ADAC wishes to make a claim against the Holdback
Common Stock with respect to any matter set forth in clause "(i)," "(ii),"
"(iii)" or "(iv)" above, then ADAC may, pursuant to Section 9.7, deliver to Mr.
Mike Hill, as agent (the "Agent") for the Designated Shareholders, a certificate
signed by one or more of its officers (a "Claim Notice") setting forth the claim
and the amount of the claim (the "Claim Amount'). No Claim Notice may be made
following the Expiration Date.
8.6 RESPONSE NOTICE. Within thirty (30) days after the delivery of a
Claim Notice to the Agent, the Agent shall deliver to ADAC a written notice (the
"Response Notice") containing:
35
(a) instructions to the effect that shares of Holdback Common Stock
having a Stipulated Value (as defined below) equal to the entire Claim Amount
set forth in such Claim Notice are to be released to ADAC; or
(b) instructions to the effect that shares of Holdback Common Stock
having a Stipulated Value equal to a specified portion (but not the entire
amount) of the Claim Amount set forth in such Claim Notice are to be released to
ADAC, together with a statement that the remaining portion of such Claim Amount
is being disputed; or
(c) a statement that the entire Claim Amount set forth in such Claim
Notice is being disputed.
If no Response Notice is received by ADAC from the Agent within thirty (30) days
after the delivery of a Claim Notice to the Agent, then Shareholder shall be
deemed to have given instructions that shares of Holdback Common Stock having a
Stipulated Value equal to the entire Claim Amount set forth in such Claim Notice
are to be released to ADAC.
8.7 RELEASE OF SHARES TO ADAC.
(a) If the Agent gives (or is deemed to have given) instructions that
shares of Holdback Common Stock having a Stipulated Value equal to the entire
Claim Amount set forth in a Claim Notice are to be released to ADAC, then ADAC
shall be authorized to use the Stock Powers to transfer to ADAC shares of
Holdback Common Stock having a Stipulated Value equal to such Claim Amount.
(b) If a Response Notice delivered by the Agent in response to a Claim
Notice contains instructions to the effect that shares of Holdback Common Stock
having a Stipulated Value equal to a specified portion (but not the entire
amount) of the Claim Amount set forth in such Claim Notice are to be released to
ADAC, then (i) ADAC shall be authorized to use the Stock Powers to transfer to
ADAC shares of Holdback Common Stock having a Stipulated Value equal to such
specified portion of such Claim Amount, and (ii) the procedures set forth in
Section 8.7(c) shall be followed with respect to the remaining portion of such
Claim Amount.
(c) If a Response Notice delivered by the Agent in response to a Claim
Notice contains a statement that all or a portion of the Claim Amount set forth
in such Claim Notice is being disputed (such Claim Amount or the disputed
portion thereof being referred to as the "Disputed Amount"), then,
notwithstanding anything contained in Section 8.8, ADAC shall continue to hold
(in addition to any other shares of Holdback Common Stock permitted to be
retained, whether in connection with any other dispute, or otherwise) shares of
Holdback Common Stock having a Stipulated Value equal to One Hundred Twenty-Five
percent (125%) of the Disputed Amount. Such shares of Holdback Common Stock
shall continue to be held until such time as (i) ADAC or the Agent execute a
settlement agreement containing instructions regarding the release of such
shares, or (ii) ADAC receives a copy of a court order containing instructions to
ADAC regarding the release of such shares. ADAC shall thereupon release such
shares of
36
Holdback Common Stock in accordance with the instructions set forth in such
settlement agreement or court order. (The parties acknowledge that it is
appropriate to retain more than One Hundred percent (100%) of the Claim Amount
in recognition of the fact that ADAC may have underestimated the aggregate
amount of the actual and potential Losses arising from a particular breach.) For
purposes of this Article 8, the "Stipulated Value" of each of the shares of
Holdback Common Stock held shall be deemed to be equal to the Closing Price.
(d) Notwithstanding anything herein to the contrary, in addition to
any shares of Holdback Stock that may be retained by ADAC pursuant hereto, ADAC
may retain a number of shares of Holdback Common Stock equal to the quotient of
(x) the amount by which the total purchase price paid by the Company for the ATI
Assets under Section 5.9 hereof exceeds $150,000, divided by (y) the Designated
ADAC Stock Price.
(e) Shares of Holdback Common Stock shall be transferred to ADAC as
permitted under this Section 8 on a pro-rata basis from each shareholder, based
on the number of shares of Holdback Common Stock in the name of each
shareholder. Any release of Holdback Common Stock to ADAC shall be an adjustment
in and reduction of the consideration due the shareholders as set forth in
Section 1.5(a).
8.8 RELEASE OF SHARES TO AGENT. On September 13, 1998 (the "Expiration
Date"), ADAC shall release the remaining shares of Holdback Common Stock then
held by ADAC, except to the extent any such shares are to be retained by ADAC
pursuant to Section 8.7.
8.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNITY. The
representations and warranties made by and the indemnity given in this Agreement
and, as appropriate, the other agreements and instruments delivered pursuant
hereto shall survive the Closing and shall expire on the Expiration Date,
provided that any of the foregoing relating to Taxes shall survive for the
applicable statute of limitations period, provided however that if at any time
prior to the Expiration Date, ADAC delivers to Shareholder a Claim Notice then
the claim asserted in such notice shall survive the Expiration Date until such
time as such claim is fully and finally resolved.
8.10 VA CONTRACT.
(a) The Company is a party to a contract with the Veterans Administration
(the customer is "VAMC-Columbia, Missouri") under contract no. 95-MC-6274 (the
"VA Contract"), pursuant to which the Company is to provide to the customer
certain product more particularly described in the VA Contract. The Company is
presently negotiating with the Department of Veterans Affairs (the "Department")
to amend the VA Contract. In general terms, if accepted by the Department, the
amended contract would provide for the development of certain additional
software to enable certain acquisition units to read DICOM CD-ROMs, to enable
certain cardiac review stations to play back the DICOM video, and to enable the
applicable media to save the digital signal in the DICOM format, all as
described in more detail in Exhibit 2.4-12 to the Disclosure Schedule (the
"Sneakernet Solution"). The amended contract would further provide that the
Department would pay the Company in full upon receipt and acceptance of the
Sneakernet
37
Solution. In addition, the amended contract may provide that if in the future
Philips develops and provides the Company with documentation on a high speed
digital feed, then the Company would develop the software therefor in accordance
with the provisions of the original contract, free of charge.
(b) ADAC, the Company and the Designated Shareholders agree to make a good
faith effort to persuade the Department to amend or modify the VA Contract as
provided in paragraph (a) above. If the Department amends or modifies the VA
Contract in such manner or such other manner reasonably acceptable to ADAC, then
the Designated Shareholders shall have no liability under the VA Contract for
failure to develop and deliver the digital video archiving solution described in
Exhibit 2.4-12 (the "CorCAAT Integrated Information System").
(c) If the Department declines to modify or amend the VA Contract in
accordance with paragraph (a) or (b) above, and the Department or the customer
claims that the Company has breached the VA Contract or cancels or rescinds the
VA Contract for the Company's failure to develop and deliver the CorCAAT
Integrated Information System, and ADAC incurs Losses resulting directly
therefrom, then the Designated Shareholders shall severally indemnify ADAC for
up to $170,000 of such Losses in accordance with Section 8.1. The aggregate
liability of the Designated Shareholders under this provision shall not exceed
$170,000.
9
MISCELLANEOUS
9.1 NON-COMPETE. Each Designated Shareholder hereby agrees that during
the period commencing upon the Closing Date and ending two years after the
Closing Date, without the prior written consent of ADAC, such Designated
Shareholder shall not, within any state in the United States, either as an
individual or as an employee, agent, consultant, advisor, independent
contractor, general partner, officer, director, shareholder or investor of any
person: (i) participate or engage in the design, development, manufacture,
production, marketing, sale or servicing of any product, or the provision of any
service, that directly or indirectly competes with any product or service
designed, developed, manufactured, produced, marketed, sold or provided by the
Company prior to the Effective Time or by ADAC after the Effective Time; (ii)
solicit or attempt to solicit any person who at the time of such inducement is
an employee of ADAC to perform work or services for any other person; or (iii)
permit the name of such Shareholder to be used in connection with any business
that competes with ADAC.
9.2 AMENDMENT. This Agreement may be amended with the approval of the
respective Boards of Directors of the Company and ADAC at any time; provided,
however, that no amendment shall be made which would have a material adverse
effect on the shareholders of the Company without the further approval of such
shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
38
9.3 WAIVER.
(a) No failure on the part of any party to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any party
in exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.
(b) No party shall be deemed to have waived any claim arising out of
this Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
party; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
9.4 SEVERABILITY. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void, or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business an other purposes of such void or unenforceable provision.
9.5 ENTIRE AGREEMENT; COUNTERPARTS; APPLICABLE LAW. This Agreement and
the other agreements referred to herein constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral, among
or between any of the parties with respect to the subject matter hereof,
including the letter agreement between the parties dated February 10, 1997, as
amended. This Agreement may be executed in several counterparts, each of which
shall be deemed an original and all of which shall constitute one and the same
instrument, and shall be governed in all respects by the laws of the State of
California as applied to contracts entered into and to be performed entirely
within California.
9.6 ASSIGNABILITY. This Agreement shall be binding upon: the Company and
its successors and assigns (if any); the Designated Shareholders and their
respective personal representatives, executors, administrators, estates, heirs,
successors and assigns (if any); Sub and its successors and assigns (if any);
and ADAC and its successors and assigns (if any). This Agreement shall inure to
the benefit of: the Company; the Designated Shareholders; ADAC; and the
respective successors and assigns (if any) of the foregoing. This Agreement may
not be assigned by any party without the prior written consent of all the other
parties hereto.
9.7 NOTICES. All notices and other communications pursuant to this
Agreement shall be in writing and shall be deemed given if delivered personally,
telecopied, sent by nationally-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 party as
shall be specified by like notice):
39
If to ADAC,
to: ADAC Laboratories
540 Alder Drive
Milpitas, California 95035
Attention: Mark Lamp, with a copy to Karen L. Masterson
If to the Company,
to: CORTET
809 C South Orlando Avenue
Winter Park, FL 32789
with a copy to: Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A.
255 South Orange Avenue, Suite 800
Orlando, Florida 32801
Attn: Douglas Bowdoin
If to Agent, to: Mr. Mike Hill
1534 Leeway Avenue
Orlando, FL 32810
with a copy to: Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A.
255 South Orange Avenue, Suite 800
Orlando, Florida 32801
Attn: Douglas Bowdoin
All such notices and other communications shall be deemed to have been received
(a) in the case of personal delivery, on the date of such delivery, (b) in the
case of a telecopy, when the party receiving such telecopy shall have confirmed
receipt of the communication, (c) in the case of delivery by nationally-
recognized, overnight courier, on the Business Day following dispatch and (d) in
the case of mailing, on the fifth Business Day following such mailing.
9.8 COOPERATION. Each of the Company and ADAC agrees to cooperate fully
with the other and to execute and deliver such further documents, certificates,
agreements and instruments and to take such other actions as may be reasonably
requested by the other to evidence or reflect the Transactions and to carry out
the intent and purposes of this Agreement.
9.9 CONFIDENTIALITY. The parties hereby agree that all information about
the other's business obtained by them pursuant to this Agreement or the letter
agreement dated February 10, 1997, shall be deemed confidential and shall not be
disclosed to any other party except as contemplated hereby and such information
will not be used for any purpose except evaluating the desirability of the
Merger. The foregoing shall not apply however to information (i) known to a
party prior to such disclosure to such party, (ii) information that become
generally available to the public or to a party without confidentiality
restrictions after the date hereof, and (iii) required to be
40
disclosed by law or court order. Without limiting the generality of the
foregoing, on and at all times after the Closing Date, each Designated
Shareholder shall keep confidential, and shall not use or disclose to any other
Person, any non-public document or other non-public information in such
Designated Shareholder's possession that relates to the business of the Company
or ADAC.
9.10 CERTAIN TERMS. As used in this Agreement:
(a) "Company Contract" shall mean any Contract: (a) to which the
Company is a party; (b) by which the Company or any of its assets is or may
become bound or under which the Company has, or may become subject to, any
obligation; or (c) under which the Company has or may acquire any right or
interest.
(b) "Company Proprietary Asset" shall mean any Proprietary Asset owned
by or licensed to the Company or otherwise used by the Company.
(c) "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan, or legally binding commitment or undertaking of
any nature.
(d) "Employee Benefit Plan" shall have the meaning specified in
Section 3(3) of ERISA.
(e) the words "include" and "including," and variations thereof, shall
not be deemed to be terms of limitation, but rather shall be deemed to be
followed by the words "without limitation."
(f) "Governmental Authorization" shall mean any: (a) permit, license,
certificate, franchise, permission, clearance, registration, qualification or
authorization issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal Requirement; or (b)
right under any Contract with any Governmental Body.
(g) "Governmental Body" means any (i) nation, state, commonwealth,
province, territory, county, municipality, district or other jurisdiction of any
nature; (ii) federal, state, local, municipal, foreign or other government; or
(iii) governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or entity and any court or other tribunal.
(h) "Legal Requirements" means any federal, state, local, municipal,
foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Body.
(i) "person" refers to any (i) individual, (ii) corporation,
partnership, company or other entity, or (iii) Governmental Body;
41
(j) "Proprietary Asset" shall mean any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service mark (whether
registered or unregistered), service mark application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, source code, computer program, invention, design, blueprint,
engineering drawing, proprietary product, technology, proprietary right or other
intellectual property right or intangible asset; or (b) right to use or exploit
any of the foregoing.
(k) "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
(l) "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
9.11 TITLES. The titles and captions of the Articles and Sections of this
Agreement are included for convenience of reference only and shall have no
effect on the construction or meaning of this Agreement.
42
9.12 ARTICLES, SECTIONS AND EXHIBITS. Except as otherwise indicated, all
references in this Agreement to "Articles," "Sections" and "Exhibits" are
intended to refer to Articles and Sections of this Agreement and Exhibits to
this Agreement.
IN WITNESS WHEREOF, the parties hereby have executed this Agreement and
Plan of Reorganization as of the date first above written.
"ADAC"
ADAC LABORATORIES,
a California corporation
By: __________________________________
__________________________________
[Print name and title]
THE "SUB"
ADAC Acquisition Corp., a Delaware corporation
By: __________________________________
__________________________________
[Print name and title]
THE "COMPANY"
CORTET, Inc., a Florida corporation
By: ___________________________________
___________________________________
[Print name and title]
[Signatures Continue]
43
[Signatures Continued]
THE "DESIGNATED SHAREHOLDERS"
________________________________________
J.P. Patten
________________________________________
Michael Hill
________________________________________
Alexander Nikoloff
________________________________________
Lewis Lobel
________________________________________
Robert Joicy
________________________________________
Douglas Bowdoin
________________________________________
Chris Westervelt
44