AMENDED AND RESTATED PLAN AND AGREEMENT OF MERGER
THIS AMENDED AND RESTATED PLAN AND AGREEMENT OF MERGER (this
"Agreement") is entered into as of the 15 day of December, 2003, by and among
iCAD, Inc., a Delaware corporation ("ICAD"), Qualia Acquisition Corp., a
Delaware corporation which is a wholly owned Subsidiary of iCAD ("MERGER SUB")
(iCAD and Merger Sub collectively, the "ICAD PARTIES") and Qualia Computing,
Inc., a Delaware corporation ("QUALIA"), Steven K. Rogers, Thomas E. Shoup and
James Corbett (collectively, the "PRINCIPAL STOCKHOLDERS"). Capitalized terms
not defined in this Agreement have the meanings ascribed to them in ANNEX 1
hereto.
RECITALS
WHEREAS, the Board of Directors of each of iCAD, Merger Sub and Qualia
has determined that it is in the best interests of their respective stockholders
for iCAD to acquire Qualia upon the terms and subject to the conditions set
forth herein;
WHEREAS, the iCAD Parties and Qualia are desirous of effecting a
merger, all upon the terms and conditions set forth herein;
WHEREAS, the parties hereto entered into a Plan and Agreement of Merger
dated November 28, 2003 (the "Original Merger Agreement");
WHEREAS, the parties hereto desire to amend and restate the Original
Merger Agreement as set forth herein;
NOW, THEREFORE, the iCAD Parties, Qualia and the Principal
Stockholders, intending to be legally bound, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
hereby represent, warrant, covenant, and agree as follows:
SECTION 1
THE MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement, Qualia
shall be merged with and into Merger Sub in a transaction intended to qualify
for non recognition treatment in accordance with 368(a)(1)(A) and (a)(2)(D) of
the Code.
SECTION 2
TERMS OF MERGER
2.1 Terms of Merger; Effective Time. The terms of merger (the "MERGER")
are:
(a) Qualia shall be merged with and into Merger Sub in accordance
with the statutory provisions of the Delaware General Corporation Law ("DGCL").
(b) Merger Sub shall be the surviving corporation (the "SURVIVING
CORPORATION"), and the corporate identity, existence, purposes, powers,
franchises, rights, and immunities of Merger Sub shall continue unaffected and
unimpaired by the Merger. The corporate identity, existence, purposes, powers,
franchises, rights, and immunities of Qualia shall be merged into the Surviving
Corporation, and the Surviving Corporation shall be fully vested therewith.
(c) Immediately after the Closing, the Merger shall be effected by
filing with the Secretary of State of Delaware ("DELAWARE SOS") the Certificate
of Merger annexed hereto as EXHIBIT A (the "CERTIFICATE OF MERGER"). The time at
which the Certificate of Merger is filed with the Delaware SOS shall be the
"EFFECTIVE TIME" of the Merger. iCAD shall cause the Certificate of Merger to be
so filed and recorded within one (1) business day after the Closing Date.
(d) Except insofar as specifically otherwise provided by law, Qualia
shall cease at the Effective Time, whereupon the separate existence of Qualia
and Merger Sub shall become a single corporation.
(e) The certificate of incorporation and by-laws of Merger Sub shall
be the certificate of incorporation and by-laws of the Surviving Corporation,
respectively, until thereafter amended.
(f) Steven Rogers, W. Scott Parr and Robert H. Howard, at the
Effective Time, shall be the duly appointed directors of the Surviving
Corporation, to hold office in accordance with applicable law, the Certificate
of Incorporation and By-Laws of the Surviving Corporation until resignation,
removal or replacement. James Corbett and Annette Heroux and such other officers
as are designated by iCAD shall, at the Effective Time, be duly nominated and
appointed as President and Secretary and to such other offices to which such
other officers are appointed, respectively, of the Surviving Corporation, and
shall constitute the initial officers of the Surviving Corporation, in each case
to serve at the pleasure of the Board of Directors of the Surviving Corporation
until their respective resignations, removal or replacement. In addition, James
Corbett shall be duly nominated and appointed as Chief Operating Officer of
iCAD, who shall report to the Chief Executive Officer of iCAD.
(g) At the Effective Time, without any action by the holder thereof,
(i) all of the issued and outstanding shares of Class A common stock, $.00001
par value ("CLASS A COMMON STOCK"), of Qualia (other than the shares of Class A
Common Stock held by Briana BioTech, Inc. (the "Briana Shares")) and the Class B
common stock, $.00001 par value ("CLASS B COMMON STOCK"), of Qualia held by
stockholders other than CADx Canada, Inc. shall be deemed cancelled, and
converted into the right to receive 4,300,000 shares (the "SHARE CONSIDERATION")
of common stock, $.01 par value ("ICAD COMMON STOCK"), of iCAD and (ii)(A) all
of the issued and outstanding shares of Class B Common Stock and options to
purchase shares of Class B Common Stock owned by CADx Canada, Inc. shall be
deemed cancelled, and converted into the right to receive cash in the aggregate
amount of $1,000,000 and a promissory note in the principal amount of $4,500,000
(the "Note") (payable over a thirty-six (36) month period and bearing interest
at the rate of the greater of (i) 6.25% per annum and (ii) the prime rate
published by Citibank N.A plus one percent) secured by a first priority security
interest in all of the assets of iCAD in accordance with SECTION 5.20 hereof and
(B) the Briana Shares shall be deemed cancelled, and converted into the right to
receive cash in the aggregate amount of $550,000, each as set forth on SCHEDULE
2.1 (together with the Share Consideration, the "MERGER CONSIDERATION").
Anything contained in this Agreement to the contrary notwithstanding, 1,650,000
shares of iCAD Common Stock constituting the Merger Consideration (collectively,
the "ESCROW SHARES") shall be subject to and held in escrow in accordance with
the Escrow Agreement (as hereinafter defined) proportionately, based on the
number of shares of iCAD Common Stock to which each such holder of Class A
Common Stock (other than Briana BioTech, Inc.) is entitled pursuant to this
SECTION 2.1(G), in order to secure the indemnification obligations of such
stockholders pursuant to SECTION 9.
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(h) Fractional shares of iCAD Common Stock shall not be issued and
each holder of Qualia Common Stock who would otherwise be entitled to receive
any such fractional shares (taking into account all share amounts to which such
holder is otherwise entitled hereunder) shall forfeit such fractional shares
without additional consideration. No Person entitled to receive a fractional
share of iCAD Common Stock will be entitled to dividends, voting rights or any
other rights of a stockholder of iCAD with respect to such fractional share.
(i) At the Effective Time, iCAD, Merger Sub, Qualia and Steven
Rogers, as representative of the stockholders of Qualia who receive shares of
iCAD Common Stock pursuant to the Merger (collectively, the "Indemnifying
Stockholders"), and Blank Rome LLP, as escrow agent ("Escrow Agent"), shall
execute and deliver an escrow agreement in the form of EXHIBIT B (the "Escrow
Agreement"). ICAD shall deposit the Escrow Shares with the Escrow Agent, which
shall be withheld from the Merger Consideration as provided in SECTION 2.1(G) in
connection with the indemnification obligations of the Indemnifying Stockholders
set forth in SECTION 9. Subject to the provisions of this SECTION 2.1(I) and the
Escrow Agreement, the Escrow Shares shall be paid the Indemnifying Stockholders
twelve (12) months following the Effective Time, as reduced by the amount of any
Losses of the iCAD Parties arising from or in connection with all claims for
indemnification asserted in writing within such twelve (12) month period
pursuant to SECTION 9 that have not been fully resolved. For all purposes of
this Agreement and the Escrow Agreement, whenever Escrow Shares shall be
required to be released from escrow under the Escrow Agreement and delivered to
the iCAD Parties to satisfy an indemnity obligation of the Indemnifying
Stockholders hereunder, such shares shall be valued at the average closing bid
price of the iCAD Common Stock for the five (5) consecutive Trading Days
immediately preceding the last full business day before the final resolution of
such indemnity obligation. For purposes hereof, "Trading Days" means a day on
which iCAD Common Stock is traded on the Nasdaq SmallCap Market.
(j) From and after the Effective Time, iCAD shall make available to
Continental Stock Transfer & Trust Company, as exchange agent (the "EXCHANGE
AGENT"), for the benefit of the holders of shares of Qualia Common Stock for
exchange in accordance with this SECTION 2.1, through the Exchange Agent,
certificates evidencing such number of shares of iCAD Common Stock issuable to
holders of Qualia Common Stock in the Merger pursuant to SECTION 2.1(G), less
the Escrow Shares (such certificates for shares of iCAD Common Stock, together
with any dividends or distributions with respect thereto being hereinafter
referred to as the "EXCHANGE FUND"). The Exchange Agent shall, pursuant to
irrevocable instructions, deliver the iCAD Common Stock contemplated to be
issued pursuant to SCHEDULE 2.1 out of the Exchange Fund.
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(k) As promptly as practicable after the Effective Time, iCAD shall
cause the Exchange Agent to mail to each holder of a certificate or certificates
which immediately prior to the Effective Time represented outstanding shares of
Class A Common Stock (other than Briana BioTech, Inc.) (the "CERTIFICATES") (i)
a letter of transmittal (which shall be in customary form and shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates evidencing shares of iCAD Common Stock.
(l) Upon surrender to the Exchange Agent of a Certificate for
cancellation, together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and such other documents
as may be reasonably required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of iCAD Common Stock which such
holder's shares of Qualia Common Stock have been converted into pursuant to this
SECTION 2.1 (and any dividends or other distributions to which such holder is
entitled), and the Certificate so surrendered shall forthwith be cancelled. In
the event of a transfer of ownership of shares of Qualia Common Stock which is
not registered in the transfer records of Qualia, shares of iCAD Common Stock
may be issued to a transferee if the Certificate representing such shares of
Qualia Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this SECTION 2.1(L), each Certificate shall be deemed at all
times after the Effective Time to represent only the right to receive upon such
surrender the number of whole shares of iCAD Common Stock into which the shares
of Qualia Common Stock formerly represented thereby have been converted.
(m) Any portion of the Exchange Fund (including any shares of iCAD
Common Stock) which remains undistributed to the holders of Qualia Common Stock
for six months after the Effective Time shall be delivered to iCAD, upon demand,
and any holders of Qualia Common Stock who have not theretofore complied with
this SECTION 2.1 shall thereafter look only to iCAD for the Merger Consideration
and/or any cash in lieu of shares of iCAD Common Stock to which they are
entitled. Any portion of the Exchange Fund remaining unclaimed by holders of
shares of Qualia Common Stock as of a date which is immediately prior to such
time as such amounts would otherwise escheat to or become property of any
government entity shall, to the extent permitted by applicable law, become the
property of iCAD free and clear of any claims or interest of any person
previously entitled thereto.
(n) None of the Exchange Agent, iCAD nor the Surviving Corporation
shall be liable to any holder of shares of Qualia Common Stock for any such
shares of iCAD Common Stock or cash delivered to a public official pursuant to
any abandoned property, escheat or similar law.
(o) If any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by iCAD, the
posting by such person of a bond, in such reasonable amount as iCAD may direct,
as indemnity against any claim that may be made against it with respect to such
Certificate, iCAD will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration, and any dividends or other distributions
to which the holders thereof are entitled pursuant to this Agreement.
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(p) Notwithstanding anything in this Agreement to the contrary,
shares of Qualia Common Stock which are issued and outstanding immediately prior
to the Effective Time and which are held by Qualia stockholders who have
exercised the right to dissent from the Merger provided under the DGCL and, as
of the Effective Time, have neither effectively withdrawn nor lost their rights
to payment under the DGCL, shall not be converted into or be exchangeable for
the right to receive Merger Consideration, unless and until such holder shall
have failed to exercise or shall have effectively withdrawn or lost such
holder's right to dissent from the Merger provided under the DGCL. If such
holder shall have so failed to exercise or shall have effectively withdrawn or
lost such right, such holder's shares of Qualia Common Stock shall thereupon be
deemed to have been converted into and to have become exchangeable for, at the
Effective Time, the right to receive the Merger Consideration provided for in
this Agreement, without any interest thereon.
(q) Prior to the Closing, Qualia shall give iCAD (i) notice of any
written objections to the Merger made by any Qualia stockholder and any demand
for the payment of the fair value of the shares owned by such shareholder
pursuant to Section 262 of the DGCL, any withdrawals of such demands, and any
other instruments served pursuant to such Section of the DGCL and received by
Qualia and (ii) the opportunity to participate in (and, from and after the
Effective Time, direct) all negotiations and proceedings with respect to any
such objections and demands for payment under the DGCL. Qualia shall not, except
with the prior written consent of iCAD or as otherwise required by applicable
law, make any payment with respect to any such objections and demands for
payment or agree to settle any such demands.
2.2 Closing. The closing (the "CLOSING") of the transactions contemplated
by this Agreement shall take place at 10:00 a.m. EST on the second business day
following the satisfaction or waiver of all conditions to the obligations of the
parties hereto to consummate the transactions contemplated by this Agreement
(the "CLOSING Date"), at the offices of Blank Rome LLP, The Chrysler Building,
405 Lexington Avenue, New York, New York 10174, unless another time, date or
place is agreed to in writing by the parties hereto.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF QUALIA
Each of Qualia and the Principal Stockholders, jointly and severally,
represents and warrants to the iCAD Parties as of the date hereof and as of the
Closing Date (except for representations and warranties that speak as of a
specific date or time, in which case, such representations and warranties shall
be true and complete as of such date or time) as follows:
3.1 ORGANIZATION OF QUALIA. Qualia is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
Qualia has the requisite corporate power and authority to own, lease, and
operate its properties, to carry on its business where such properties are now
owned, leased, or operated and such business is now conducted. Qualia is
qualified to do business as a foreign corporation in the jurisdictions in which
the failure to so qualify would have a Material Adverse Effect. Except as set
forth on SCHEDULE 3.1, Qualia is not a participant in any joint venture or
partnership with any other Person with respect to any part of its operation of
its business.
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3.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS.
(a) Qualia has the requisite corporate power and authority to
execute and deliver this Agreement and all agreements and documents contemplated
hereby. The Principal Stockholders are individuals having all necessary
capacity, power and authority to execute and deliver this Agreement and such
other agreements and documents to be executed and delivered by any of them
pursuant hereto and to consummate the transactions contemplated hereby and
thereby.
(b) The consummation by Qualia of the transactions contemplated
hereby has been duly authorized by all requisite corporate action, including
approval by the stockholders of Qualia as required to consummate the Merger.
This Agreement constitutes, and all agreements and documents contemplated hereby
(when executed and duly delivered pursuant hereto) will constitute, the valid
and legally binding obligations of Qualia and the Principal Stockholders to the
extent they are parties thereto, enforceable in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, moratorium or other similar
laws relating to creditors' rights and general principles of equity.
3.3 BOOKS AND RECORDS. The minute books, stock record books, and other
records of Qualia and its Subsidiaries, all of which have been made available to
iCAD, are complete and correct in all respects. Except as set forth on SCHEDULE
3.3, the minute books of Qualia and its Subsidiaries contain accurate and
complete records in all respects of all meetings held of, and corporate action
taken by, the respective stockholders, the respective Board of Directors, and
committees of the Board of Directors of Qualia and its Subsidiaries, and no
meeting of any such stockholders, Board of Directors, or committee has been held
for which minutes have not been prepared and are not contained in such minute
books. At the Closing, all of those books and records shall be in the possession
of Qualia.
3.4 ABSENCE OF CONFLICTING AGREEMENTS. Except as set forth on SCHEDULE
3.4, as to Qualia and its Subsidiaries, the execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement (with or without the giving of notice, the lapse of time, or both):
(a) does not require the consent of any third party; (b) will not conflict with
any provision of the Certificate of Incorporation, By-Laws, or other
organizational documents of Qualia or any of its Subsidiaries; (c) will not
conflict with, result in a breach of, or constitute a default under any
applicable Order, Legal Requirement, or ruling of any court or Governmental Body
to which Qualia or any of its Subsidiaries is subject; (d) will not conflict
with, constitute grounds for termination of, result in a breach of, constitute a
default under, or accelerate or permit the acceleration of any performance
required by the terms of, any agreement, instrument, license, or permit to which
Qualia or any of its Subsidiaries is a party or by which Qualia or any of its
Subsidiaries or their respective assets may be bound; and (e) will not create
any claim, liability, mortgage, lien, pledge, condition, charge, or encumbrance
of any nature whatsoever upon any of the assets of Qualia or any of its
Subsidiaries or any of the Qualia Common Stock. Except for the filing of the
Certificate of Merger, no filing or consent with any Governmental Body or any
other third party is required of Qualia or any of its Subsidiaries to consummate
this Agreement or the transactions contemplated hereby.
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3.5 GOVERNMENTAL AUTHORIZATIONS. SCHEDULE 3.5 contains a complete and
accurate list of each Governmental Authorization that is held by Qualia or any
of its Subsidiaries or that otherwise relates to the business of, or to any of
the assets owned or used by, Qualia or any of its Subsidiaries. Qualia has made
available to iCAD true and complete copies of all such Governmental
Authorizations. Each Governmental Authorization listed or required to be listed
in SCHEDULE 3.5 is valid and in full force and effect. No event has occurred or
circumstance exists that may (with or without notice or lapse of time) (i)
constitute or result directly or indirectly in a violation of or a failure to
comply with any term or requirement of any Governmental Authorization listed or
required to be listed in SCHEDULE 3.5, or (ii) result directly or indirectly in
the revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or required to be listed
in SCHEDULE 3.5. The Governmental Authorizations listed in SCHEDULE 3.5
collectively constitute all of the Governmental Authorizations necessary to
permit Qualia and its employees to lawfully conduct and operate Qualia's and
each of its Subsidiaries' respective businesses in the manner currently
conducted and operated and to permit Qualia and each of its Subsidiaries to own
and use its assets in the manner in which it currently owns and uses such
assets.
3.6 REAL PROPERTY. SCHEDULE 3.6 contains a complete description of all
Real Property Interests (including street address, owner, and Qualia's or any of
its Subsidiary's use thereof). The Real Property Interests listed on SCHEDULE
3.6 comprise all interests in real property necessary to conduct Qualia's and
its Subsidiaries' business and operations as now conducted. Each leasehold or
subleasehold interest on SCHEDULE 3.6 is legal, valid, binding, enforceable, and
in full force and effect. No party thereto is in default, violation, or breach
under any lease or sublease, and no event has occurred and is continuing that
constitutes (with notice or passage of time or both) a default, violation, or
breach thereunder. Except as set forth on SCHEDULE 3.6, neither Qualia nor any
of its Subsidiaries has received any notice of a default, offset, or
counterclaim under any lease or sublease with respect to any of the Real
Property Interests. As of the date hereof, Qualia and its Subsidiaries enjoy
peaceful and undisturbed possession of the leased Real Property Interests; and
so long as Qualia and its Subsidiaries fulfill their respective obligations
under the lease(s) therefor, Qualia and its Subsidiaries have enforceable rights
to non-disturbance and quiet enjoyment against its lessor or sublessor; and,
except as set forth in SCHEDULE 3.6, no third party holds any interest in the
leased premises with the right to foreclose upon Qualia's leasehold or
subleasehold interest. Qualia and its Subsidiaries have legal and practical
access to all of the Leased Real Property. All Leased Real Property (including
the improvements thereon): (a) is in good condition and repair consistent with
its current use; (b) is available for immediate use in the conduct of Qualia's
business and operations; and (c) complies in all respects with all applicable
building or zoning codes and the regulations of any Governmental Body having
jurisdiction, except to the extent that the current use by Qualia and/or its
Subsidiaries, while permitted, constitutes or would constitute a "nonconforming
use" under current zoning or land use regulations. No eminent domain or
condemnation proceedings are pending or threatened with respect to any Real
Property Interests.
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3.7 TANGIBLE PERSONAL PROPERTY. SCHEDULE 3.7 lists the Tangible Personal
Property comprising all items of tangible personal property necessary to conduct
Qualia's and its Subsidiaries' business and operations as now conducted. Except
as described in SCHEDULE 3.7, Qualia owns and has good title to each item of
Tangible Personal Property, and none of the Tangible Personal Property owned by
Qualia is subject to any security interest, mortgage, pledge, conditional sales
agreement, or other lien or encumbrance, except for Permitted Encumbrances. With
allowance for normal repairs, maintenance, wear, and obsolescence, each item of
Tangible Personal Property is in good operating condition and repair and is
available for immediate use in Qualia's and its Subsidiaries' business and
operations.
3.8 CONTRACTS. SCHEDULE 3.8 lists all written Contracts and true and
complete descriptions of all oral Contracts (including any amendments and other
modifications to such Contracts). All of the Contracts are in full force and
effect and are valid, binding, and enforceable in accordance with their terms
except as the enforceability of such Contracts may be affected by bankruptcy,
insolvency, or similar laws affecting creditors' rights generally and by
judicial discretion in the enforcement of equitable remedies. Neither Qualia nor
any of its Subsidiaries is, and no other party thereto is, in default,
violation, or breach in any respect under any Contract, and, no event has
occurred and is continuing that constitutes (with notice or passage of time or
both) a default, violation, or breach in any respect thereunder. To Qualia's
Knowledge, other than in the Ordinary Course of Business, no party to any
Contract has any intention (a) to terminate such Contract or amend the terms
thereof; (b) to refuse to renew the Contract upon expiration of its term; or (c)
to renew the Contract upon expiration only on terms and conditions that are more
onerous than those now existing. Except as set forth in SCHEDULE 3.8 or as may
occur in the Ordinary Course of Business: (a) no Person has or may acquire any
rights under, and no Person has or may become subject to any obligation or
liability under, any Contract that relates to the business of, or any of the
assets owned or used by Qualia or any of its Subsidiaries; and (b) no officer,
director, agent, employee, consultant, or contractor of Qualia or any of its
Subsidiaries is bound by any Contract that purports to limit the ability of such
officer, director, agent, employee, consultant, or contractor to (i) engage in
or continue any conduct, activity, or practice relating to the business of
Qualia and its Subsidiaries, or (ii) assign to Qualia or to any other Person any
rights to any invention, improvement, or discovery.
3.9 INTANGIBLES.
(a) SCHEDULE 3.9 (a) contains (i) an accurate, true and complete
list of all Intangibles and Software material to the business of Qualia or its
Subisdiaries (other than trade secrets and know-how) owned, marketed, licensed
(as licensor or licensee), supported, maintained, used or under development or
design by Qualia and its Subsidiaries with respect to Qualia's and its
Subsidiaries' respective business, (ii) in the case of Software (other than
commercially available third party applications), a product description, the
language in which it is written and the type of hardware platform(s) on which it
runs, and (iii) an indication whether it is owned or licensed by Qualia or any
of its Subsidiaries. No other Intangibles (other than trade secrets, know-how
and Software) are used to operate Qualia's or its Subsidiaries' respective
business as now conducted and Qualia or its Subsidiaries are the sole and
exclusive owners of all such Intangibles. No other Software is used to operate
Qualia's and its Subsidiaries' respective business as now conducted, and Qualia
or its Subsidiaries are either the sole and exclusive owner or have the valid
right to use such Software. Each of the Principal Stockholders is sufficiently
familiar with the Software, technologies, patent applications and licenses
related to the so called "Second Look" computer aided detection application
(collectively, the "TECHNOLOGY") as is reasonably required of their respective
offices and responsibilities with Qualia and its subsidiaries.
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(b) Except as set forth on SCHEDULE 3.9(B), (a) each of Qualia and
its Subsidiaries have good and marketable title to, and have the full right to
use, all of the Intangibles owned by it, free and clear of any mortgages,
pledges, liens, security interests, encumbrances, or other charges or rights of
others of any kind or nature except for Permitted Encumbrances; (b) no rights of
any other Person are necessary to use, reproduce, distribute, display, perform,
market, license, sell, modify, adapt, translate, update, and/or create
derivative works based upon the Intangibles which are owned by Qualia or any of
its Subsidiaries; (c) all of the Intangibles (other than the Intangibles
licensed to Qualia or any of its Subsidiaries) were created as a work for hire
(as defined under U.S. copyright law) for and of Qualia and/or its Subsidiaries
by regular full time employees of Qualia or its Subsidiaries; and (d) to the
extent that any author, creator, contributor or developer of any such
Intangibles was not a regular full-time employee of Qualia or any of its
Subsidiaries at the time such Person contributed to such Intangibles, such
author or developer has irrevocably assigned to Qualia or its Subsidiaries in
writing all copyrights and other proprietary rights in such Person's work with
respect to such Intangibles.
(c) With respect to the Software listed on SCHEDULE 3.9(A) and owned
by Qualia or any of its Subsidiaries, (i) Qualia and its Subsidiaries maintain
machine-readable master-reproducible copies, source code listing, technical
documentation and (with respect to Software licensed or provided to Qualia's and
its Subsidiaries' customers for their use) user manuals for all versions and
releases thereof and for all earlier versions thereof currently being used,
provided, supported, maintained or marketed by it; (ii) in each case, the
machine-readable copy substantially conforms to the corresponding source code
listing; (iii) it is written in the language set forth on SCHEDULE 3.9(A), for
use on the hardware set forth on SCHEDULE 3.9(A) with standard operating
systems; (iv) it can be maintained and modified by reasonably competent
programmers familiar with such languages, hardware and operating systems, and
(v) in each case, it operates substantially in accordance with technical
documentation and user manuals (if any), without material operating defects.
(d) Except as set forth on SCHEDULE 3.9 (D), and to Qualia's
Knowledge, none of the Intangibles (other than commercially available Software
being licensed by Qualia or any of its Subsidiaries from third Persons), or
their respective past or current uses, including the preparation, distribution,
marketing or licensing thereof, has violated or infringed upon, or is violating
or infringing upon, any Intellectual Property Right or other proprietary right
of any Person. None of the Intangibles (other than commercially available
Software being licensed by Qualia or any of its Subsidiaries from third Persons)
is subject to any mortgages, pledges, liens, security interests, encumbrances,
writ, injunction, citation, award, judgment, order or decree or other charges or
rights of others of any kind or nature except for Permitted Encumbrances. No
proceeding is pending against or any of its Subsidiaries, nor to Qualia's
Knowledge, has any proceeding been threatened or claim or demand been made
against Qualia or any of its Subsidiaries, which challenges or challenged the
legality, validity, enforceability, use or ownership (as applicable) by Qualia
or any of its Subsidiaries of any or all of the Intangibles. To Qualia's
Knowledge, and except as disclosed in SCHEDULE 3.9(D), no Person is violating or
infringing upon, or has violated or infringed upon at any time, any of the
Intangibles. CADx is not improperly using any confidential information or trade
secrets of any of its past or present employees. The ownership and use of the
Intangibles does not violate any law, statute, ordinance or regulation.
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(e) Qualia and its Subsidiaries have maintained all copyrights,
patents, trade secrets and other Intellectual Property Rights included in the
Intangibles. Except as set forth on Schedule 3.9 (e), Qualia and its
Subsidiaries have taken reasonable precautions to prevent, and to Qualia's
Knowledge, neither Qualia nor any of its Subsidiaries has (i) disclosed or
delivered or permitted disclosure of the source code (or any aspect or portion
thereof) for the Software or other Intangibles owned by Qualia or any of its
Subsidiaries to any escrow agent or any other Person (other than the employees
of Qualia or its Subsidiaries and software developers under contract with Qualia
or its Subsidiaries), or (ii) disclosed or delivered or permitted disclosure of
the object code (or any aspect or portion thereof) for the Software or other
Intangibles owned by Qualia or any of its Subsidiaries to any escrow agent or
any other Person, other than the employees of Qualia or any of its Subsidiaries
and software developers under contract with Qualia or any of its Subsidiaries,
or other than pursuant to a valid license.
(f) Except as set forth on SCHEDULE 3.9 (F), all licenses,
sublicenses, agreements, arrangements and other contracts to which Qualia or any
of its Subsidiaries is a party under which Qualia or any of its Subsidiaries
uses any Intangible, or which covers or relates to any or all Intangible, are
legal, valid and binding obligation of Qualia and its Subsidiaries, and, to
Qualia's Knowledge, of the other parties thereto, and are in full force and
effect. Upon consummation of the transactions contemplated hereby, each such
license, sublicense, agreement, arrangement and other contract will continue to
be the legal, valid and binding obligation of Qualia and its Subsidiaries, and
to Qualia's Knowledge, the other parties thereto, and will be in full force and
effect on terms identical to those in effect immediately prior to the
consummation of the transactions contemplated hereby. Neither Qualia nor any of
its Subsidiaries is in breach of or default under any license, sublicense or
other contract covering or relating to any Intangible and has not performed any
act or omitted to perform any act which, with notice or lapse of time or both,
will become or result in a material breach or default thereunder. No proceeding
is pending or, to Qualia's Knowledge, threatened, against Qualia or any of its
Subsidiaries, nor has any claim or demand been made against Qualia or any of its
Subsidiaries, which challenges the legality, validity, enforceability or
ownership of any license, sublicense, agreement, arrangement or other contract
covering or relating to any Intangible.
(g) None of the Software, Technology or other Intangibles listed or
required to be listed on SCHEDULE 3.9(A) is owned by or registered in the name
of any of the Principal Stockholders or any current or former owner,
shareholder, partner, director, executive, officer, employee, salesman, agent,
customer, representative or contractor (other than software licensors listed on
SCHEDULE 3.9(A)) of Qualia or any of its Subsidiaries nor does any such Person
have any interest therein or right thereto, including but not limited to the
right to royalty payments.
(h) Except with respect to demonstration or trial copies, no portion
of any Intangibles owned by Qualia or any of its Subsidiaries contains any "back
door," "time bomb," "Trojan horse," "worm," "drop dead device," "virus" or other
software routines, code or program or hardware components that permits
unauthorized access or to disable or erase software, hardware, or data without
the consent of the user or that is intended to do so.
-10-
(i) Schedule 3.9(i) contains a list of all Internet domain names
("Domain Names") registered in the name of Qualia or any of its Subsidiaries
and/or used or held for use in connection with their respective business. Qualia
and/or its Subsidiaries are the registrant of all such Domain Names and all
registrations of such Domain Names are current and in good standing. No action
has been taken or is pending to challenge rights to, suspend, cancel or disable
any of its Domain Names, the registration therefor or the right of Qualia or any
of its Subsidiaries to use such Domain Name. Qualia and each of its Subsidiaries
have all right, title and interest in and to, and rights to use on the Internet,
those Domain Names that are used as trademarks or trade names by them.
(j) There is no governmental prohibition or restriction on the use
by or any of its Subsidiaries of any of the Software, Technology or any other
Intangible used or held for use in the conduct of Qualia's and its Subsidiaries'
respective business as currently conducted.
(k) Except as disclosed in SCHEDULE 3.9(K) and except for databases
owned by third Persons and generally made available to the public without
charge, Qualia is the sole owner of, and has good and marketable title to, all
databases held for use in Qualia's or any of its Subsidiaries' business. Except
as specified in SCHEDULE 3.9(K), no Person other than Qualia has any right or
interest of any kind or nature in or to such databases. Neither the past nor
current use of any database owned by Qualia or any of its Subsidiaries or the
information contained therein in Qualia's or any of its Subsidiaries' respective
business (i) has violated or infringed upon, or is violating or infringing upon,
the rights of any Person; or (ii) breaches any duty or obligation owed to any
Person; or (iii) violates the privacy or any law, rule or regulation relating to
the privacy of any Person.
3.10 TITLE TO PROPERTIES. Except as disclosed in SCHEDULE 3.6 or 3.7, each
of Qualia and its Subsidiaries has good and marketable title to its respective
assets and properties, and its respective assets and properties are not subject
to mortgages, pledges, liens, security interests, encumbrances, or other charges
or rights of others of any kind or nature except for Permitted Encumbrances.
3.11 FINANCIAL STATEMENTS. Qualia has delivered to iCAD the following
financial statements (the "FINANCIAL STATEMENTS") with respect to Qualia and its
Subsidiaries: (a) the consolidated financial statements, including the balance
sheet, statement of income, changes in stockholder's equity and cash flow
statements for the three (3) years ended March 31, 2003, March 31, 2002 and
March 31, 2001 as audited by Barry Smith CPA and Associates and Brady Ware &
Schoenfeld, Inc., independent public accountants, (b) the unaudited consolidated
balance sheet, statement of income, changes in stockholders' equity and cash
flow statements for the period ending September 30, 2003. Each of the foregoing
Financial Statements (including, in all cases, the notes thereto, if any) (i) is
accurate and complete in all respects, (ii) fairly presents in all respects the
financial condition and results of operations of Qualia and its Subsidiaries,
and (iii) have been prepared in accordance with GAAP applied on a consistent
basis throughout the period covered thereby (except as may be indicated in the
notes to such financial statements and that the unaudited statements will be
subject to normal year-end adjustments). No financial statements of any Person
other than Qualia or its Subsidiaries delivered to iCAD are required by GAAP to
be included in the financial statements of Qualia and its Subsidiaries in order
to present a true financial picture of Qualia and its Subsidiaries. Except as
set forth in SCHEDULE 3.11, neither Qualia nor any of its Subsidiaries has
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent, or otherwise, including, without limitation, any
capital commitments) except for liabilities or obligations reflected or reserved
against in the Financial Statements and liabilities incurred in the Ordinary
Course of Business since the dates thereof. No off-balance sheet transactions
exist in which Qualia or its Subsidiaries are a party.
-11-
3.12 TAX MATTERS.
(a) Except as set forth on SCHEDULE 3.12(A) hereto:
(i) All Tax Returns required to be filed by Qualia and each of
its Subsidiaries have been filed when due in a timely fashion and all such Tax
Returns are true, correct and complete in all respects.
(ii) Qualia and each of its Subsidiaries has paid in full on a
timely basis all Taxes owed by it that were payable on or prior to the date
hereof, whether or not shown on any Tax Return.
(iii) The aggregate amount of the liabilities of Qualia and
its Subsidiaries for unpaid Taxes did not, as of September 30, 2003, exceed the
amount of the current liability accruals for such Taxes (excluding reserves for
deferred Taxes) reflected on the Financial Statements.
(iv) Qualia and each of its Subsidiaries has withheld and paid
over to the proper Governmental Bodies all Taxes required to have been withheld
and paid over (and complied in all respects with all information reporting and
backup withholding requirements, including maintenance of required records with
respect thereto) in connection with amounts paid to any employee, independent
contractor, creditor, or other third party.
(v) Neither Qualia nor any of its Subsidiaries has received
notice or is the subject of any Tax Proceeding currently pending with respect to
it, and neither Qualia nor any of its Subsidiaries has received notice from any
Tax Authority that it intends to commence a Tax Proceeding.
(vi) No waiver or extension by Qualia or any of its
Subsidiaries of any statute of limitations is currently in effect with respect
to the assessment, collection, or payment of Taxes of Qualia or any of its
Subsidiaries or for which Qualia or any of its Subsidiaries is liable.
(vii) Neither Qualia nor any of its Subsidiaries has requested
any extension of the time within which to file any Tax Return of Qualia or any
of its Subsidiaries that is currently in effect.
(viii) There are no liens on the assets of Qualia or any of
its Subsidiaries relating or attributable to Taxes, other than Permitted
Encumbrances.
-12-
(ix) Neither Qualia nor any of its Subsidiaries is or has been
at any time during the preceding five years a "United States real property
holding corporation" within the meaning of Section 897(c)(2) of the Code.
(x) Neither Qualia nor any of its Subsidiaries has entered
into an agreement or consent made under Section 341(f) of the Code.
(xi) Neither Qualia nor any of its Subsidiaries has agreed to,
or is required to, make any adjustments under Section 481(a) of the Code as a
result of a change in accounting methods.
(xii) Neither Qualia nor any of its Subsidiaries is or has at
any time been a party to a tax sharing, tax indemnity or tax allocation
agreement, and neither Qualia nor any of its Subsidiaries has assumed the Tax
Liability of any other Person.
(xiii) Neither Qualia nor any of its Subsidiaries is or has at
any time been a member of an affiliated group filing a consolidated federal
income tax return or has any liability for the Taxes of another entity or person
under Section 1.1502-6 of the Treasury Regulations (or any similar provision of
state, local or foreign law), as a transferee or successor, or otherwise.
(xiv) Neither Qualia nor any of its Subsidiaries is a party to
any joint venture, partnership, limited liability company or other arrangement
that is treated as a partnership for U.S. federal income tax purposes.
(xv) None of Qualia's or any of its Subsidiaries' assets are
treated as "tax exempt use property" within the meaning of Section 168(h) of the
Code.
(xvi) Neither Qualia nor any of its Subsidiaries has made an
election under Section 1362 of the Code to be treated as an S corporation or is
currently treated as an S Corporation for federal income tax purposes.
(b) Qualia has furnished or otherwise made available to iCAD correct
and complete copies of (i) all income, franchise and other Tax Returns filed by
Qualia and its Subsidiaries since March 31, 2000; and (ii) all examination
reports, statements of deficiencies and closing agreements received by Qualia
and its Subsidiaries relating to Taxes.
(c) SCHEDULE 3.12(C) contains complete and accurate statements of
(i) Qualia's basis in its assets as of March 31, 2003, (ii) the amount of any
net operating loss, net capital loss and any other Tax carryovers of Qualia
(including losses and other carryovers subject to any limitations), and (iii)
Tax elections made by Qualia as of March 31, 2003. Except as stated in SCHEDULE
3.12(C), Qualia has no net operating losses or other Tax attributes presently
subject to limitation under Code Sections 382, 383 or 384, or the federal
consolidated return regulations.
3.13 INSURANCE. Qualia and its Subsidiaries maintain insurance coverage
with reputable insurers in such amounts and covering such risks as are
consistent with its past practices. SCHEDULE 3.13 sets forth a complete listing
of all insurance maintained by Qualia or any of its Subsidiaries (attaching a
certificate of insurance for each such policy and indicating the respective
premiums of such policies).
-13-
3.14 PERSONNEL AND EMPLOYEE BENEFITS.
(a) EMPLOYEES AND COMPENSATION. SCHEDULE 3.14 contains a true and
complete list of all employees employed by Qualia or any of its Subsidiaries as
of the date hereof. SCHEDULE 3.14 also contains a true and complete list of all
employee benefit plans or arrangements covering the officers and employees
employed by Qualia or any of its Subsidiaries, including, with respect to the
employees any:
(i) "Employee welfare benefit plan," as defined in Section
3(1) of ERISA, that is maintained or administered by Qualia or any of its
Subsidiaries or to which Qualia or any of its Subsidiaries contributes or is
required to contribute (a "WELFARE PLAN");
(ii) "Multiemployer pension plan," as defined in Section 3(37)
of ERISA, that is maintained or administered by Qualia or any of its
Subsidiaries or to which Qualia or any of its Subsidiaries contributes or is
required to contribute (a "MULTIEMPLOYER PLAN" and, together with the Welfare
Plans, the "BENEFIT PLANS");
(iii) "Employee pension benefit plan," as defined in Section
3(2) of ERISA (other than a Multiemployer Plan), to which Qualia or any of its
Subsidiaries contributes or is required to contribute (a "PENSION PLAN");
(iv) Employee plan that is maintained in connection with any
trust described in Section 501(c)(9) of the Code; and
(v) Employment, severance, or other similar contract,
arrangement, or policy and each plan or arrangement (written or oral) providing
for insurance coverage (including any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, or retirement benefits or arrangement for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation rights, stock
purchases, or other forms of incentive compensation or post-retirement
insurance, compensation, or benefits that (A) is not a Welfare Plan, Pension
Plan, or Multiemployer Plan, and (B) is entered into, maintained, contributed
to, or required to be contributed to by Qualia or any of its Subsidiaries or
under which Qualia or any of its Subsidiaries has any liability relating to
employees (collectively, "BENEFIT ARRANGEMENTS").
(b) PENSION PLANS. Neither Qualia nor any of its Subsidiaries
sponsors, maintains, or contributes to any Pension Plan other than any Pension
Plan listed on SCHEDULE 3.14. Each Pension Plan complies currently and has been
maintained in substantial compliance with its terms and, both as to form and in
operation, with all requirements prescribed by any and all statutes, orders,
rules and regulations that are applicable to such plans, including ERISA and the
Code.
(c) WELFARE PLANS. Each Welfare Plan complies currently and has been
maintained in compliance with its terms and, both as to form and in operation,
with all requirements prescribed by any and all statutes, orders, rules and
regulations that are applicable to such plans, including ERISA and the Code.
Neither Qualia nor any of its Subsidiaries sponsors, maintains, or contributes
to any Welfare Plan that provides health or death benefits to former employees
of Qualia or any of its Subsidiaries other than as required by Section 4980B of
the Code or other applicable laws.
-14-
(d) BENEFIT ARRANGEMENTS. Each Benefit Arrangement has been
maintained in compliance with its terms and with the requirements prescribed by
all statutes, orders, rules and regulations that are applicable to such Benefit
Arrangement. Neither Qualia nor any of its Subsidiaries is a party to written
contract prohibiting the termination of any employee.
(e) MULTIEMPLOYER PLANS. Except as disclosed in SCHEDULE 3.14,
neither Qualia nor any of its Subsidiaries has at any time been a participant in
any Multiemployer Plan.
(f) DELIVERY OF COPIES OF RELEVANT DOCUMENTS AND OTHER INFORMATION.
Qualia has delivered or made available to iCAD true and complete copies of each
of the following documents:
(i) Each Welfare Plan and Pension Plan (and, if applicable, related
trust agreements) and all amendments thereto, and written descriptions thereof
that have been distributed to Employees, all annuity contracts or other funding
instruments; and (ii) Each Benefit Arrangement and written descriptions thereof
that have been distributed to Employees and complete descriptions of any Benefit
Arrangement that is not in writing.
(g) LABOR RELATIONS. Except as set forth in SCHEDULE 3.14(G),
neither Qualia nor any of its Subsidiaries is a party to or subject to any
collective bargaining agreement or written or oral employment agreement with any
employee. Except as set forth in SCHEDULE 3.14(G), with respect to the
employees, Qualia and its Subsidiaries have complied in all respects with all
laws, rules and regulations relating to the employment of labor, including those
related to wages, hours, collective bargaining, occupational safety,
discrimination, and the payment of social security and other payroll related
taxes, and has not received any notice alleging that Qualia or any of its
Subsidiaries has failed to comply with any such laws, rules, or regulations. No
proceedings are pending or threatened between Qualia or any of its Subsidiaries,
on the one hand, and any employee (singly or collectively), on the other hand.
No labor union or other collective bargaining unit represents or claims to
represent any of the employees. There is no union campaign being conducted to
solicit cards from any employees to authorize a union to represent any of the
employees of Qualia or any of its Subsidiaries or to request a National Labor
Relations Board certification election with respect to any employees.
3.15 LEGAL ACTIONS AND ORDERS.
(a) Except as disclosed on SCHEDULE 3.15, there is no claim, legal
action, counterclaim, suit, arbitration, or other legal or administrative
proceeding, or Tax Proceeding pending or threatened, against Qualia or any of
its Subsidiaries or relating to the assets used by Qualia or any of its
Subsidiaries, or the business or operations of Qualia or any of its
Subsidiaries, nor does Qualia or any of its Subsidiaries know of any basis for
the same.
-15-
(b) Except as set forth in SCHEDULE 3.15:
(i) there is no Order to which Qualia or any of its
Subsidiaries or the assets owned or used by Qualia or any of its Subsidiaries,
or to which Qualia's or any of its Subsidiaries' business or operations, is
subject; and
(ii) no officer, director, agent, or employee of Qualia or any
of its Subsidiaries is subject to any Order that prohibits such officer,
director, agent, or employee from engaging in or continuing any conduct,
activity, or practice relating to the business of Qualia and its Subsidiaries.
(c) Except as set forth in SCHEDULE 3.15:
(i) Qualia and each of its Subsidiaries are, and at all times
have been, in compliance with all of the terms and requirements of each Order to
which any of them, or any of the assets owned or used by any of them, or their
business or operations, is or has been subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation of
or failure to comply with any term or requirement of any Order to which Qualia
or any of its Subsidiaries, or any of the assets owned or used by Qualia or any
of its Subsidiaries, or their business or operations, is subject; and
(iii) neither Qualia nor any of its Subsidiaries has received
any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any term or requirement of
any Order to which Qualia or any of its Subsidiaries, or any of the assets owned
or used by Qualia or any of its Subsidiaries, or their business or operations,
is or has been subject.
3.16 ENVIRONMENTAL COMPLIANCE.
(a) Except as disclosed on SCHEDULE 3.16: (i) none of the Tangible
Personal Property, none of the Real Property and none of the Real Property
Interests contain (x) any asbestos, polychlorinated biphenyls or any PCB
contaminated oil; (y) any Contaminants; or (z) any underground storage tanks;
(ii) no underground storage tank disclosed on SCHEDULE 3.16 has leaked and has
not been remediated or leaks and such tank is in substantial compliance with all
applicable Environmental Laws; and (iii) all of the Leased Real Property
Interests are in full compliance with all applicable Environmental Laws.
(b) Qualia and each of its Subsidiaries have obtained all
Governmental Authorizations that are required under all Environmental Laws.
3.17 COMPLIANCE WITH LEGAL REQUIREMENTS. Except as set forth in SCHEDULE
3.17:
(a) Qualia and each of its Subsidiaries are, and at all times have
been, in material compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its business or the ownership
or use of any of its assets;
-16-
(b) No event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a violation by
Qualia or any of its Subsidiaries of, or a failure on the part of Qualia or any
of its Subsidiaries to comply with, any Legal Requirement, or (B) may give rise
to any obligation on the part of Qualia or any of its Subsidiaries to undertake,
or to bear all or any portion of the cost of, any remedial action of any nature;
and
(c) neither Qualia nor any of its Subsidiaries has received any
notice or other communication (whether oral or written) from any Governmental
Body or any other Person regarding (A) any actual, alleged, possible, or
potential violation of, or failure to comply with, any Legal Requirement, or (B)
any actual, alleged, possible, or potential obligation on the part of Qualia or
any of its Subsidiaries to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature.
3.18 CONDUCT OF BUSINESS IN ORDINARY COURSE. Except as set forth in
SCHEDULE 3.18, since September 30, 2003 and through the date hereof, there has
not been any Material Adverse Effect involving Qualia or its Subsidiaries.
Without limiting the generality, since that date, neither Qualia nor any of its
Subsidiaries have:
(a) other than granting employee bonuses with respect to the
exercise of previously existing outstanding options and the Additional Options
(as defined below) and the acceleration of such previously existing outstanding
options, made any increase in compensation payable or to become payable to any
of its employees outside the Ordinary Course of Business;
(b) made any sale, assignment, lease, or other transfer of assets
other than in the Ordinary Course of Business with suitable replacements being
obtained therefor;
(c) canceled any debts owed to or claims held by Qualia or any of
its Subsidiaries outside the Ordinary Course of Business;
(d) made any changes in Qualia's or any of its Subsidiaries'
accounting practices;
(e) suffered any write-down of the value of any assets or any
write-off as uncollectible of any of its accounts receivable;
(f) transferred or granted any right under, or entered into any
settlement regarding the breach or infringement of, any license, patent,
copyright, trademark, trade name, franchise, or similar right, or modified any
existing right;
(g) imposed any security interest upon any of its assets, tangible
or intangible;
(h) made any capital expenditures outside the Ordinary Course of
Business;
(i) made any capital investment in or any loan to any other Person
outside the Ordinary Course of Business;
-17-
(j) created, incurred, assumed, or guaranteed more than Twenty
Thousand Dollars ($20,000.00) in aggregate indebtedness for borrowed money in
capitalized lease obligations;
(k) made any or authorized any change to its Certificate of
Incorporation or Bylaws;
(l) issued, sold, or otherwise disposed of any of its capital stock,
or granted any options, warrants, or other rights to purchase or obtain
(including upon conversion, exchange, or exercise) any of its capital stock,
other than (i) the grant of options to employees to purchase up to an additional
100,000 shares evenly divided between Class A Common Stock and Class B Common
Stock (the "Additional Options") and (ii) the issuance of Qualia Common Stock
upon exercise of previously existing outstanding options to Purchase Qualia
Common Stock and the Additional Options;
(m) declared, set aside, or paid any dividend or made any
distribution with respect to its capital stock (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any of its capital stock;
(n) experienced any damage, destruction, or loss (whether or not
covered by insurance) to its property;
(o) made any loan to, or entered into any other transaction with,
any of its directors, officers, and employees outside the Ordinary Course of
Business;
(p) granted any increase in the base compensation of or made any
other change of employment terms for any of its directors outside the Ordinary
Course of Business;
(q) granted any increase in the base compensation of or made any
other change of employment terms for any of its officers outside the Ordinary
Course of Business;
(r) granted any increase in the base compensation of or made any
other change of employment terms for any of its employees outside the Ordinary
Course of Business;
(s) made or changed any Tax election or taken any other action with
respect to Taxes not in the Ordinary Course of Business and consistent with past
practices; or
(t) committed to do any of the foregoing.
3.19 INSOLVENCY PROCEEDINGS. Neither Qualia nor any of its Subsidiaries
is, and their respective assets and properties are not, the subject of any
pending or threatened insolvency proceedings of any character, including,
without limitation, bankruptcy, receivership, reorganization, or composition
with creditors, voluntary or involuntary. Neither Qualia nor any of its
Subsidiaries has made an assignment for the benefit of creditors or taken any
action in contemplation of or which would constitute a valid basis for the
institution of any such insolvency proceedings.
-18-
3.20 CAPITALIZATION. The authorized capital stock of Qualia consists of
(i) 1,905,554 shares of Class A common stock, $.00001 par value, of which
907,500 shares are issued and outstanding, and (ii) 952,777 shares of Class B
common stock, $.00001 par value, of which 780,000 shares are issued and
outstanding. All of the issued and outstanding shares of Qualia Common Stock and
their ownership are as described on SCHEDULE 3.20. All of the outstanding shares
of Qualia Common Stock have been validly issued and are fully paid and
nonassessable and are held of record by the Qualia stockholders as set forth
SCHEDULE 3.20 hereto. Except as described on SCHEDULE 3.20, (a) no shares of
Qualia Common Stock are held in treasury; (b) there are no other issued or
outstanding equity securities of Qualia or other securities of Qualia
convertible or exchangeable at any time into equity securities of Qualia; (c)
there are no outstanding stock appreciation rights, phantom stock rights, profit
participation rights, or other similar rights with respect to any capital stock
of Qualia; and (d) Qualia is not subject to any commitment or obligation that
would require the issuance or sale of additional shares of capital stock of
Qualia at any time under options, subscriptions, warrants, rights, or other
obligations.
3.21 INTERESTS IN OTHER ENTITIES; RELATIONSHIPS WITH RELATED PERSONS.
(a) SCHEDULE 3.21(A) sets forth a true and complete list of all
Subsidiaries of Qualia, together with the jurisdiction of incorporation of each,
the percentage of each such Subsidiary's outstanding capital stock owned by
Qualia or another of Qualia's Subsidiaries and, to the extent that any
Subsidiaries are not wholly-owned by Qualia or any of its Subsidiaries, the
identity of all owners thereof and the percentage of each such Subsidiaries
capital stock held by each such owner. Each such Subsidiary is a duly organized
corporation, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority and governmental authority to own, operate or lease the properties
that it purports to own, operate or lease and to carry on its business as it is
now being conducted. Except as otherwise provided in SCHEDULE 3.21(A), all of
the capital stock of each of such Subsidiaries is owned by Qualia or another of
Qualia's Subsidiaries free and clear of any and all Liens.
(b) No Related Person of Qualia or any of its Subsidiaries has, or
since the first day of the next to last completed fiscal year of Qualia has had,
any interest in any property (whether real, personal, or mixed and whether
tangible or intangible), used in or pertaining to Qualia's business. Except as
set forth in SCHEDULE 3.21(B), no Related Person of Qualia is, or since the
first day of the next to last completed fiscal year of Qualia has owned (of
record or as a beneficial owner) an equity interest or any other financial or
profit interest in, a Person that has (i) had business dealings or a financial
interest in any transaction with Qualia other than business dealings or
transactions conducted in the Ordinary Course of Business with Qualia at
substantially prevailing market prices and on substantially prevailing market
terms, or (ii) engaged in competition with Qualia or any of its Subsidiaries
with respect to any line of the products or services of Qualia or any of its
Subsidiaries (a "COMPETING BUSINESS") in any market presently served by Qualia
or any of its Subsidiaries except for less than one percent of the outstanding
capital stock of any Competing Business that is publicly traded on any
recognized exchange or in the over-the-counter market. Except as set forth in
SCHEDULE 3.21(B), no Related Person of Qualia or any of its Subsidiaries is a
party to any Contract with, or has any claim or right against, Qualia or any of
its Subsidiaries.
-19-
3.22 ACCOUNTS; LOCKBOXES; SAFE DEPOSIT BOXES. SCHEDULE 3.22 contains a
true and complete list of (i) the names of each bank, savings and loan
association, securities or commodities broker or other financial institution in
which any of Qualia and its Subsidiaries has an account, including cash
contribution accounts, and the names of all persons authorized to draw thereon
or have access thereto and (ii) the location of all lockboxes and safe deposit
boxes of the Qualia or its Subsidiaries and the names of all persons authorized
to draw thereon or have access thereto. At the Effective Time, neither Qualia
nor any of its Subsidiaries shall have any such account, lockbox or safe deposit
box other than those listed in SCHEDULE 3.22, nor shall any additional person
have been authorized, from the date of this Agreement, to draw thereon or have
access thereto. The stockholders of Qualia and their Affiliates have not
commingled monies or accounts of Qualia or its Subsidiaries with other monies or
accounts of such stockholders and their Affiliates or relating to their other
businesses nor have such stockholders or their Affiliates transferred monies or
accounts of Qualia or its Subsidiaries other than to an account of Qualia or its
Subsidiaries. At the Effective Time, all monies and accounts of Qualia and its
Subsidiaries shall be held by, and be accessible only to, Qualia or its
Subsidiaries.
3.23 BROKERS OR FINDERS. Except as set forth in SCHEDULE 3.23, neither
Qualia, its Subsidiaries, the Principal Stockholders nor any other Qualia
stockholders, nor any director, officer, agent or employee thereof, has employed
any broker or finder or has incurred or will incur any broker's, finder's or
similar fees, commissions or expenses, in each case in connection with the
transactions contemplated by this Agreement.
3.24 DISCLOSURE. No representation or warranty of Qualia in this Agreement
and no statement in the Schedules omit to state a material fact necessary to
make the statements herein or therein, in light of the circumstances in which
they were made, not misleading.
3.25 DUE DILIGENCE. Except as provided in SCHEDULE 3.25, Qualia has made
available to iCAD or Blank Rome LLP, counsel to iCAD, all agreements,
certificates, correspondence and other items, documents and information
requested pursuant to the Corporate Review Memorandum dated November 13, 2003 of
Blank Rome LLP.
3.26 FDA QUALIFICATION AND APPROVALS:
(a) Each of Qualia and its Subsidiaries (i) is in compliance with
the provisions of all laws, rules and regulations applicable to Qualia and its
Subsidiaries and their products, including the Federal Food, Drug, and Cosmetic
Act (the "FDC ACT") and all applicable state and foreign laws and regulations
comparable to the FDC Act, the rules and regulations promulgated thereunder and
all rules and regulations promulgated by the Food and Drug Administration
("FDA") and all comparable and applicable state and foreign regulatory
authorities, including but not limited to those laws, rules and regulations
relating to investigational use, premarket clearance, good manufacturing
practices, labeling, adverstising, record keeping, medical device reporting, and
security; (ii) has all authorizations, approvals, consents, orders,
registrations, licenses or permits of any court or the FDA and all comparable
state and foreign regulatory authorities which are necessary or required for it
to conduct its business as now conducted; and (iii) has had no material
liabilities, debts, obligations or claims asserted against it, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, on account
of such regulatory matters.
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(b) All applications, submissions, information, claims and
statistics and other data and conclusions derived therefrom, utilized as the
basis for or submitted in connection with any and all requests for such
authorizations, approvals, consents, orders, registrations, licenses or permits
are accurate, complete, correct and true as of the date of submission and any
necessary or required updates, changes, corrections or modification to such
applications, submissions, information and data have been submitted to the
appropriate regulatory body.
(c) All experiments, human or otherwise, performed in connection
with or as the basis for any regulatory approval required for Qualia's or any of
its Subsidiaries' products have been performed in accordance with appropriate
research and study design, and all required protocols and consents and any
conclusions derived therefrom are scientifically supported. The claims approved
by the FDA for each of Qualia's and its Subsidiaries' respective products are
valid and supported by proper research design, testing, analysis and disclosure.
(d) No product of Qualia or any of its Subsidiaries has been
recalled, withdrawn, suspended or discontinued by Qualia or any of its
Subsidiaries. No proceedings are pending against Qualia or any of its
Subsidiaries seeking the recall, withdrawal, suspension or seizure of any
product of Qualia or any of its Subsidiaries. Neither Qualia nor any of its
Subsidiaries has received notice that the FDA or any state or foreign regulatory
authority has commenced or threatened to initiate any action to withdraw its
approval or to request the recall of any product of Qualia or any of its
Subsidiaries, or has commenced or threatened to initiate any action to enjoin
production at any facility of Qualia or any of its Subsidiaries.
(e) Neither Qualia, any of its Subsidiaries nor any officer,
employee or agent of Qualia has made any untrue statement of a material fact or
fraudulent statement to the FDA or any state or foreign regulatory authority or
failed to disclose a fact required to be disclosed to the FDA or any state or
foreign regulatory authority, or committed any act, made any statement or failed
to make any statement that, at the time such disclosure was made, could
reasonably be expected to provide a basis for the FDA or any other regulatory
authority to invoke with respect to Qualia or any of its Subsidiaries its policy
respecting "Fraud, Untrue Statements of Material Facts, Bribery, and Illegal
Gratuities," set forth in 56 Fed. Reg. 46191 (Sept. 10, 1991) or any similar
policy.
3.27 INVESTMENT INTENT. Each of the Principal Stockholders who will
receive shares of iCAD Common Stock pursuant to this Agreement represents and
warrants to iCAD that:
(a) He, she or it understands that the shares of iCAD Common Stock
are "restricted securities" within the meaning of Rule 144 promulgated under the
Securities Act and that the shares have not been registered under the Securities
Act, and may not be sold, transferred or otherwise disposed of, except if an
effective registration statement is then in effect or pursuant to an exemption
from registration under said Act or any other applicable state securities laws
("OTHER SECURITIES LAWS"), and that iCAD is under no obligation to register the
shares of iCAD Common Stock under the Securities Act, and that the iCAD is not
obligated to take any other action in order to make compliance with an exemption
from the registration provisions of the Securities Act available, except that,
until Rule 144(k) is available to the Principal Stockholders who continue to own
any shares of iCAD Common Stock which can only be sold or disposed of in
accordance with Rule 144. iCAD shall use its commercial reasonable efforts to
comply with the current public information requirements thereunder so that the
applicable Principal Stockholder will be able to avail himself of Rule 144 in
order to sell or dispose of such shares of iCAD Common Stock.
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(b) He, she or it understands that the certificates representing the
shares of iCAD Common Stock will bear a restrictive legend thereon substantially
as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY OTHER APPLICABLE SECURITIES LAWS, AND ARE RESTRICTED
SECURITIES AS THAT TERM IS DEFINED UNDER RULE 144 PROMULGATED UNDER
THE ACT. THESE SECURITIES MAY NOT BE SOLD, PLEDGED, TRANSFERRED,
DISTRIBUTED OR OTHERWISE DISPOSED OF IN ANY MANNER UNLESS THEY ARE
REGISTERED UNDER THE ACT AND ANY APPLICABLE SECURITIES LAWS, OR
UNLESS THE REQUEST FOR TRANSFER IS ACCOMPANIED BY AN OPINION OF
COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH
TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT AND ANY OTHER
SECURITIES LAWS."
(c) He, she or it understands that iCAD will direct its transfer
agent for the iCAD Common Stock to place a stop transfer instruction against the
certificates representing the shares of iCAD Common Stock and will instruct its
transfer agent to refuse to effect any transfer thereof in the absence of a
registration statement declared effective by the SEC with respect to the Shares
or a favorable opinion of counsel, satisfactory to iCAD, that such transfer is
exempt from registration under the Act and Other Securities Laws.
(d) He, she or it has appointed a Purchaser Representative (within
the meaning of Rule 502 of the Act) as his, her or its investment advisor and
Purchaser Representative in connection with the evaluation of the
representations and warranties of any investment by the him, her or it in the
iCAD Common Stock and that he, she or it has (i) had an opportunity to ask
questions of and receive answers from such Purchaser Representative with respect
to iCAD, and all such questions have been answered to the full satisfaction of
such Principal Stockholder, (ii) discussed with such Purchaser Representative
the terms and conditions of his, her or its investment in the iCAD Common and
(iii) discussed with such Purchaser Representative the merits and risks of an
investment in the shares of iCAD Common Stock.
(e) He, she or it or their Purchaser Representative has received
copies of the iCAD Annual Report on Form 10-K for the year ended December 31,
2002 and the Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30 and September 30 and all other documents that iCAD filed with the SEC
under Sections 13, 14(a) and 15(d) of the Securities Exchange Act of 1934, as
amended ("EXCHANGE ACT"), subsequent to the filing of such Form 10-K, including,
in each case, the exhibits thereto; and that he, she or it has had the
opportunity to review public information concerning iCAD, and understands such
information.
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(f) He, she or it is able to bear the economic risk of an investment
in the shares of iCAD Common Stock, including, without limiting the generality
of the foregoing, the risk of losing part or all of his, her or its investment
in the shares of iCAD Common Stock and his, her or its possible inability to
sell or transfer the shares of iCAD Common Stock for an indefinite period of
time.
(g) He, she or it is acquiring the shares of iCAD Common Stock for
his, her or its own account and for the purpose of investment and not with a
view to, or for resale in connection with, any distribution within the meaning
of the Securities Act or any Other Securities Laws, in violation of the
Securities Act.
(h) He, she or it acknowledges that iCAD has relied on the
representations contained herein and that the statutory basis for exemption from
the requirements of Section 5 of the Securities Act may not be present if,
notwithstanding such representations, he, she or it is acquiring the shares of
iCAD Common Stock for resale or distribution upon the occurrence or
non-occurrence of some predetermined event.
(i) that he, she, it or the Purchaser Representative has such
knowledge and expertise in financial and business matters that is capable of
evaluating the merits and risks involved in an investment in iCAD Common Stock
and that he, she or it and the Purchaser Representative have had a reasonable
opportunity to ask questions of and receive answers from iCAD concerning iCAD
and that any such questions had been answered to their satisfaction.
3.28 RECAPITALIZATION. The execution and delivery by each of Qualia and
CADx Medical Systems Inc. (collectively, the "RECAPITALIZATION PARTIES") of that
certain Recapitalization and Participation Agreement (the "RECAPITALIZATION
AGREEMENT") and the consummation of the transactions contemplated thereby (with
or without the giving of notice, the lapse of time, or both): (a) did not
require the consent of any third party; (b) did not and will not conflict with,
result in a breach of, or constitute a default under any applicable Order, Legal
Requirement, or ruling of any court or Governmental Body to which Qualia or any
of its Subsidiaries is subject; and (c) did not and will not and will not
conflict with, constitute grounds for termination of, result in a breach of,
constitute a default under, or accelerate or permit the acceleration of any
performance required by the terms of, any agreement, instrument, license, or
permit to which either of the Recapitalization Parties is a party or by which
either of the Recapitalization Parties or their respective assets may be bound.
SECTION 4
REPRESENTATIONS AND WARRANTIES
OF THE ICAD PARTIES
The iCAD Parties, jointly and severally, represent and warrant to Qualia
as of the date hereof and as of the Closing Date (except for representations and
warranties that speak as of a specific date or time, in which case, such
representations and warranties shall be true and complete as of such date or
time) as follows:
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4.1 ORGANIZATION OF ICAD AND MERGER SUB. Each of iCAD and Merger Sub is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. Each of iCAD and Merger Sub has the requisite
corporate power and authority to own, lease, and operate its properties, to
carry on its business where such properties are now owned, leased, or operated
and such business is now conducted. Each of iCAD and Merger Sub is qualified to
do business as a foreign corporation in the jurisdictions in which the failure
to so qualify would have a Material Adverse Effect. Neither iCAD nor Merger Sub
is a participant in any joint venture or partnership with any other Person with
respect to any part of its operations of its business.
4.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. iCAD and Merger Sub
have the requisite corporate power and authority to execute and deliver this
Agreement and all agreements and documents contemplated hereby. The consummation
by iCAD and Merger Sub of the transactions contemplated hereby has been duly
authorized by all requisite corporate action. This Agreement constitutes, and
all agreements and documents contemplated hereby (when executed and duly
delivered pursuant hereto) will constitute, the valid and legally binding
obligations of iCAD and Merger Sub, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general principles of
equity.
4.3 ABSENCE OF CONFLICTING AGREEMENTS. As to iCAD and Merger Sub, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement (with or without the giving of
notice, the lapse of time, or both): (a) do not require the consent of any third
party; (b) will not conflict with any provision of the Certificate of
Incorporation, By-Laws, or other organizational documents of iCAD or Merger Sub;
(c) will not conflict with, result in a breach of, or constitute a default under
any applicable Order, Legal Requirement, or ruling of any court or Governmental
Body to which iCAD or Merger Sub is subject; (d) will not conflict with,
constitute grounds for termination of, result in a breach of, constitute a
default under, or accelerate or permit the acceleration of any performance
required by the terms of, any material agreement, instrument, license, or permit
to which iCAD is a party or by which Merger Sub or its assets may be bound; and
(e) will not create any claim, liability, mortgage, lien, pledge, condition,
charge, or encumbrance of any nature whatsoever upon any of the assets of iCAD
or Merger Sub or any of the iCAD Common Stock. Except for the filing of the
Certificate of Merger, no filing with any Governmental Body or any other third
party is required to consummate this Agreement or the transactions contemplated
hereby.
4.4 CAPITALIZATION. The authorized capital stock of iCAD consists of
1,000,000 shares of Preferred Stock and 50,000,000 shares of iCAD Common Stock.
All of the outstanding shares of such Preferred Stock and iCAD Common Stock have
been validly issued and are fully paid and nonassessable. Other than as set
forth on SCHEDULE 4.4, iCAD does not have any Subsidiaries and does not have any
equity interest in any corporation, partnership, limited liability company,
joint venture, or other entity. All of the Share Consideration will, upon its
issuance in accordance with the provisions of this Agreement, be validly issued,
fully paid and, subject to the provisions of the Escrow Agreement,
non-assessable.
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4.5 SEC FILINGS; FINANCIAL STATEMENTS.
(i) As of the date hereof, iCAD has filed all forms, reports and
documents required to be filed by iCAD with the SEC (collectively, the "ICAD SEC
REPORTS"). The iCAD SEC Reports (a) at the time filed, complied in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act, as the case may be, and (b) did not at the time they were filed (or if
amended or superseded by a subsequent filing, then on the date of such filing),
to iCAD's Knowledge, contain any untrue statement of a material fact or omit to
state a material fact required to be stated in such iCAD SEC Reports or
necessary in order to make the statements in such iCAD SEC Reports, in the light
of the circumstances under which they were made, not misleading. To the
Knowledge of the iCAD Parties, there is no material adverse information not
contained in the iCAD SEC Reports with respect to iCAD which a reasonable
investor would consider material in making an investment decision in a similar
situation.
(ii) Each of the consolidated financial statements (including, in
each case, any related notes) contained in the iCAD SEC Reports during the last
three fiscal years (the "ICAD FINANCIAL STATEMENTS"), complied as to form in all
material respects with the applicable published rules and regulations of the SEC
with respect thereto, was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements or, in the case of unaudited statements,
as permitted by Form 10-Q or 8-K promulgated by the SEC), and fairly presented
the consolidated financial position of iCAD as at the respective dates and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected to
be material in amount.
4.6 BROKERS OR FINDERS. Except as set forth on SCHEDULE 4.6, neither iCAD
nor Merger Sub, nor any director, officer, agent or employee thereof, has
employed any broker or finder or has incurred or will incur any broker's,
finder's or similar fees, commissions or expenses, in each case in connection
with the transactions contemplated by this Agreement.
4.7 DISCLOSURE. No representation or warranty of iCAD or Merger Sub in
this Agreement and no statement in the Schedules omit to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
SECTION 5
COVENANTS
5.1 PROCEDURE FOR EXCHANGE. Immediately after the Effective Time, iCAD
shall make appropriate provision for issuance of certificates representing a
portion of the Merger Consideration against surrender of the Qualia Common Stock
or otherwise at the direction of iCAD.
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5.2 CONDUCT OF QUALIA'S BUSINESS PRIOR TO CLOSING. Except as otherwise
contemplated by this Agreement, from the date hereof through the earlier of the
termination of this Agreement or the Effective Time, each of Qualia and its
Subsidiaries shall conduct its business in the Ordinary Course of Business.
Without limiting the generality of the foregoing, except as contemplated by this
Agreement or as consented to by iCAD, during the period set forth in the
preceding sentence, Qualia and its Subsidiaries shall act as follows:
(i) neither Qualia nor any of its Subsidiaries shall not adopt any
change in any method of accounting or accounting practice, except as
contemplated or required by GAAP;
(ii) neither Qualia nor any of its Subsidiaries shall amend its
Certificate of Incorporation or Bylaws;
(iii) except for the disposition of obsolete equipment in the
Ordinary Course of Business, neither Qualia nor any of its Subsidiaries shall
sell, mortgage, pledge, or otherwise dispose of any assets or properties owned,
leased, or used in the operation of its business;
(iv) neither Qualia nor any of its Subsidiaries shall merge or
consolidate with, or agree to merge or consolidate with, or purchase or agree to
purchase all or substantially all of the assets of, or otherwise acquire, any
other business entity;
(v) except as contemplated in this Agreement, neither Qualia nor any
of its Subsidiaries shall authorize for issuance, issue, or sell any additional
shares of its capital stock or issue any securities or obligations convertible
or exchangeable into shares of its capital stock or issue or grant any option,
warrant, or other right to purchase any shares of its capital stock;
(vi) neither Qualia nor any of its Subsidiaries shall incur, or
agree to incur, any debt for borrowed money;
(vii) neither Qualia nor any of its Subsidiaries shall change its
historic practices concerning the payment of accounts payable;
(viii) except in the Ordinary Course of Business, neither Qualia nor
any of its Subsidiaries shall take any action, or fail to take action, to cause
its liabilities to increase;
(ix) neither Qualia nor any of its Subsidiaries shall declare,
issue, or otherwise approve the payment of dividends of any kind in respect of
its capital stock or redeem, purchase, or acquire any of its capital stock;
(x) Qualia and its Subsidiaries shall the existing insurance
policies on the assets of their business or other policies providing
substantially similar coverages;
(xi) except in the Ordinary Course of Business or except as
otherwise contemplated by this Agreement, neither Qualia nor any of its
Subsidiaries shall permit any increases in the compensation of any of its
employees except as required by law or existing contract or agreement or enter
into or amend any Qualia Benefit Plan or Qualia Benefit Arrangement;
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(xii) except in the Ordinary Course of Business, neither Qualia nor
any of its Subsidiaries shall enter into or renew, extend or terminate, or waive
any Contract, or incur any obligation that will be binding on Qualia or any of
its Subsidiaries after Closing;
(xiii) neither Qualia nor any of its Subsidiaries shall enter into
any transactions with any Affiliate that will be binding upon Qualia or any of
its Subsidiaries following the Closing Date;
(xiv) Qualia and its Subsidiaries shall maintain their assets or
replacements thereof in good operating condition and adequate repair, normal
wear and tear excepted;
(xv) neither Qualia nor any of its Subsidiaries shall make or change
any Tax election, amend any Tax Return, or take or omit to take any other action
not in the Ordinary Course of Business that would have the effect of increasing
any Taxes of Qualia or any of its Subsidiaries;
(xvi) Qualia and its Subsidiaries shall file all Tax Returns when
due; and
(xvii) Qualia and its Subsidiaries shall preserve their business and
assets and keep available their present employees and preserve present
relationships with their customers, employees, and others having business
relations with either of them.
5.3 ACCESS TO QUALIA INFORMATION. Subject to the prior execution of an
appropriate confidentiality agreement by iCAD, in a form reasonably acceptable
to Qualia, from and after the date of this Agreement until the Closing Date,
Qualia shall (a) give the iCAD Parties and the iCAD Parties' employees,
accountants and counsel full and complete access upon reasonable notice during
normal business hours, to all officers, employees, offices, properties,
agreements, records and affairs of Qualia to perform its due diligence review of
Qualia; (b) provide the iCAD Parties with all financial information of Qualia
that is distributed to the officers and directors of Qualia, including, but not
limited to, the monthly internal financial statements prepared by Qualia
promptly upon distribution of such information to the officers and directors of
Qualia; and (c) provide copies of such information concerning Qualia as the iCAD
Parties may reasonably request.
5.4 CONSUMMATION OF TRANSACTION. Each of the parties hereto hereby agrees
to use its commercially reasonable efforts to cause all conditions precedent to
its obligations (and to the obligations of the other parties hereto to
consummate the transactions contemplated hereby) to be satisfied, including, but
not limited to, using all commercially reasonable efforts to obtain all required
(if so required by this Agreement) consents, waivers, amendments, modifications,
approvals, authorizations, novations and licenses; provided, however, that
nothing herein contained shall be deemed to modify any of the absolute
obligations imposed upon any of the parties hereto under this Agreement or any
agreement executed and delivered pursuant hereto.
5.5 COOPERATION/FURTHER ASSURANCES.
(a) Each of the parties hereto hereby agrees to fully cooperate with
the other parties hereto in preparing and filing any notices, applications,
reports and other instruments and documents which are required by, or which are
desirable in the reasonable opinion of any of the parties hereto, or their
respective legal counsel, in respect of, any statute, rule, regulation or order
of any governmental or administrative body in connection with the transactions
contemplated by this Agreement.
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(b) Each of the parties hereto hereby further agrees to execute,
acknowledge, deliver, file and/or record, or cause such other parties to the
extent permitted by law to execute, acknowledge, deliver, file and/or record
such other documents as may be required by this Agreement and such parties, or
their respective legal counsel may reasonably require in order to document and
carry out the transactions contemplated by this Agreement.
5.6 QUALIA STOCKHOLDER MEETING. Each of Qualia and the Principal
Stockholders shall take all action, to the extent necessary in accordance with
applicable law, its Certificate of Incorporation and By-laws, to have Qualia's
stockholders consider and take written action to adopt this Agreement and
approve the Merger in accordance with the DGCL.
5.7 REGISTRATION STATEMENT. iCAD shall, within thirty (30) business days
after the Effective Time, prepare and file with the SEC, a registration
statement on Form S-3 (the "REGISTRATION STATEMENT") under the Securities Act
for the resale of the 750,000 of shares of iCAD Common Stock issued pursuant to
the Merger and set forth on SCHEDULE 5.7. The obligations of iCAD under this
SECTION 5.7 with respect to the registration of any shares of iCAD Common Stock
are expressly conditioned on each holder of such shares furnishing to iCAD such
appropriate information concerning such holder, such holder's shares of iCAD
Common Stock and the terms of such holder's offering of such iCAD Common Stock
as iCAD may request.
5.8 NOTICE OF DEVELOPMENTS. Each of the parties hereto shall give prompt
written notice to the other Parties of any material adverse development causing
a breach of any of its own representations and warranties in SECTION 3, and
SECTION 4 above. No disclosure by any Party pursuant to this SECTION 5.8,
however, shall be deemed to amend or supplement the Disclosure Schedule or to
prevent or cure any misrepresentation, breach of warranty or breach of covenant.
5.9 INTENTIONALLY OMITTED.
5.10 INVESTMENT REPRESENTATION LETTERS. On the Closing Date, the Principal
Stockholders shall cause all of the other stockholders of Qualia who shall
receive shares of iCAD Common Stock pursuant to the Merger to execute and
deliver to iCAD an Investment Representation Letter containing the same
representations and warranties as made by the Principal Stockholders set forth
in SECTION 3.27 hereof (the "INVESTMENT REPRESENTATION LETTER").
5.11 QUALIA STOCK OPTIONS AND PLANS. Prior to the Closing Date, Qualia
shall take all action necessary to arrange for (i) all outstanding Qualia
Options, warrants and other rights, contracts or commitments to purchase any of
the capital stock or other equity interests in Qualia (collectively, "Qualia
Option Rights") to be exercised or cancelled, and (ii) all stock option plans,
equity participation plans and other equity plans of Qualia (collectively,
"Qualia Option Plans") to be terminated.
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5.12 DIRECTORS OF ICAD. Within ten (10) days after the Effective Time,
Steven Rogers and one independent director mutually agreed upon by Steven Rogers
and iCAD shall be elected to the Board of Directors of the iCAD, subject to
applicable Nasdaq governance rules.
5.13 STOCKHOLDERS' AGREEMENT. At the Closing, each of the Principal
Stockholders shall execute a stockholders agreement in the form of EXHIBIT C
annexed hereto ("Stockholders' Agreement") with respect to certain restrictions
on the sale of the shares of iCAD Common Stock received pursuant to this
Agreement.
5.14 RETIREMENT OF RIVER RAIN PROMISSORY NOTE. On or prior to Closing
Date, iCAD shall retire the promissory note in favor of River Rain in the
principal amount of $1.54 million, plus accrued interest, and Qualia shall
obtain and deliver to iCAD a release of any and all liens on Qualia's and its
Subsidiaries' respective assets.
5.15 VOTING AGREEMENT. Contemporaneously with the execution of this
Agreement, each of the Principal Stockholders shall enter into, and Qualia and
the Principal Stockholders shall cause each of Briana BioTech, Inc. and CADx
Canada, Inc. to enter into, a voting agreement with iCAD in the form of EXHIBIT
D annexed hereto.
5.16 STOCK CERTIFICATES. Contemporaneously with the execution of this
Agreement, each of the Principal Stockholders shall, and Qualia and each of the
Principal Stockholders shall cause each of Briana BioTech, Inc. and CADx Canada,
Inc. to, deliver all stock certificates representing their respective shares of
Qualia Common Stock, together with stock powers endorsed in bank, to Blank Rome
LLP to be held in escrow pending the Closing.
5.17 NONCOMPETE AGREEMENT. On or prior to the Closing Date, each of the
Principal Stockholders shall, and Qualia and each of the Principal Stockholders
shall use their reasonable best efforts to cause each of the persons and/or
entities set forth on Schedule 5.17 to, enter into a noncompetition agreement
with iCAD in the form of EXHIBIT E annexed hereto (the "NONCOMPETITION
AGREEMENT"). Each of the Principal Stockholders hereby agrees to be bound by the
terms and restrictions set forth in the Noncompetition Agreement as of the date
hereof.
5.18 PROPRIETARY RIGHTS AGREEMENT. Promptly following the Closing Date,
the Principal Stockholders shall cause each employee of the Surviving
Corporation to execute iCAD's standard form of proprietary rights agreement.
5.19 ACCREDITED INVESTORS. On or prior to the Closing Date, Qualia shall
take whatever action as is necessary, including, without limitation, the
purchase and/or redemption of shares of Qualia Common Stock, such that Qualia
does not have more than thirty-five (35) stockholders who are not "accredited
investors" (within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act) as of the Closing Date.
5.20 SECURITY INTEREST; SUBORDINATION. On or prior to the Closing, iCAD
shall, and shall cause Robert Howard to, subordinate the existing first priority
security interest of Robert Howard in all of the assets of iCAD to the first
priority security interest in all of the assets of iCAD to be granted to CADx
Canada, Inc. pursuant to the Security Agreement (as defined in the Voting
Agreement), including but not limited to (a) entering into the Security
Agreement (as defined in the Voting Agreement) with CADx Canada, Inc. and (b)
entering into and causing Robert Howard to enter into the Intercreditor
Agreement (as defined in the Voting Agreement) with CADx Canada, Inc. and (c)
performing, and causing Robert Howard to perform, all related actions reasonably
necessary to perfect such first-priority security interest contemplated by the
Security Agreement and the Intercreditor Agreement (each as defined in the
Voting Agreement).
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5.21 RELEASE OF CERTAIN OBLIGATIONS OF CADX CANADA, INC. At the Closing,
Qualia shall release CADx Canada, Inc. with respect to any and all
representations, warranties and indemnification obligations made by CADx Canada,
Inc. in favor of Qualia.
SECTION 6
CONDITIONS TO OBLIGATIONS OF THE PARTIES
6.1 CONDITIONS TO OBLIGATIONS OF THE ICAD PARTIES. All obligations of the
iCAD Parties to consummate the Merger and the other transactions contemplated by
this Agreement are subject, at the iCAD Parties' option, to the fulfillment
prior to or at the Closing Date of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Qualia contained in this Agreement shall be true and complete at
and as of the Closing Date as though made at and as of that time (except for
representations and warranties that speak as of a specific date or time which
need only be true and complete as of such date or time).
(b) COVENANTS AND CONDITIONS. Qualia shall have performed and
complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by them prior to or on the Closing
Date.
(c) NO LITIGATION. No action, suit or proceeding against Qualia,
other than any lawsuit which may be filed by R2 Technology, Inc. seeking to
enjoin the Merger, relating to the consummation of any of the transactions
contemplated by this Agreement or any governmental action seeking to delay or
enjoin any such transactions shall be pending or threatened.
(d) MATERIAL ADVERSE CHANGE. No Material Adverse Change with respect
to Qualia shall have occurred.
(e) CONSENTS AND APPROVALS. All required consents and approvals
hereunder shall have been received, including, without limitation, the requisite
stockholder approval of Qualia as required under the DGCL.
(f) OPINION OF COUNSEL. Receipt of an opinion of Coolidge, Wall,
Womsley & Lombard Co., L.P.A., dated the Closing Date substantially in the form
of EXHIBIT F.
(g) INVESTMENT REPRESENTATION LETTERS. The Principal Stockholders
shall have delivered or caused to be delivered the Investment Representation
Letters of the Qualia stockholders receiving iCAD Common Stock under this
Agreement.
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(h) STOCKHOLDERS' AGREEMENT. The Stockholders' Agreement shall have
been executed by the Parties who are signatories thereto.
(i) ESCROW AGREEMENT. The Escrow Agreement shall have been executed
by the Parties who are signatories thereto.
(j) NONCOMPETITION AGREEMENT. The Noncompetition Agreements shall
have been executed in accordance with the provisions of SECTION 5.16.
(k) DUE DILIGENCE REVIEW. iCAD shall be satisfied with its due
diligence review of Qualia as conducted in accordance with the provisions of
SECTION 5.3.
(l) RESIGNATION OF OFFICERS AND DIRECTORS. Except as set forth on
SCHEDULE 6.1(L), all of the officers and directors and Qualia and each of its
Subsidiaries shall have resigned.
(m) QUALIA STOCK OPTIONS AND PLANS. All Qualia Option Rights shall
have been exercised or cancelled and all Qualia Option Plans shall have been
terminated.
(n) FAIRNESS OPINION. iCAD and its stockholders shall have received
a fairness opinion from an investment banking firm reasonably acceptable to iCAD
with respect to the Merger not more than five (5) days prior to the Closing
Date.
(o) NON-ACCREDITED INVESTORS. Qualia shall have no more than 35
stockholders that are not "accredited investors".
6.2 CONDITIONS TO OBLIGATIONS OF QUALIA. All obligations of Qualia and the
Principal Stockholders to consummate the Merger and the other transactions
contemplated by this Agreement, are subject, at Qualia's and the Principal
Stockholders' option, to the fulfillment prior to or at the Closing Date of each
of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the iCAD Parties contained in this Agreement shall be true and
complete in all material respects at and as of the Closing Date as though made
at and as of that time (except for representations and warranties that speak as
of a specific date or time which need only be true and complete as of such date
or time).
(b) COVENANTS AND CONDITIONS. The iCAD Parties shall have performed
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date, including entering into the Security Agreement
and the Intercreditor Agreement (each as defined in the Voting Agreement) and
causing Robert Howard to enter into the Intercreditor Agreement (as defined in
the Voting Agreement).
(c) NO LITIGATION. No action, suit or proceeding against any of the
iCAD Parties, other than any lawsuit which may be filed by R2 Technology, Inc.
seeking to enjoin the Merger, relating to the consummation of any of the
transactions contemplated by this Agreement or any governmental action seeking
to delay or enjoin any such transactions shall be pending or threatened.
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(d) MATERIAL ADVERSE CHANGE. No Material Adverse Change with respect
to iCAD has occurred; provided, however, that changes in the price at which iCAD
Common Stock is traded shall not constitute a Material Adverse Change with
respect to iCAD.
(e) CONSENTS AND APPROVALS. Any required consents and approvals
hereunder shall have been received, including, without limitation, the requisite
Qualia stockholder approval as required under the DGCL.
(f) OPINION OF COUNSEL. Receipt of an opinion of Blank Rome LLP
dated the Closing Date substantially in the form of EXHIBIT G.
(g) ESCROW AGREEMENT. The Escrow Agreement shall have been executed
by the Parties who are signatories thereto.
SECTION 7
CLOSING DELIVERIES
7.1 DELIVERIES BY QUALIA. On the Closing Date, Qualia shall deliver to the
iCAD Parties the following, in form and substance reasonably satisfactory to the
iCAD Parties and their counsel:
(a) EXCHANGE AGENT AGREEMENT. A duly executed exchange agent
agreement if required by the Exchange Agent;
(b) CERTIFICATE OF MERGER. the Certificate of Merger in the form
attached hereto as EXHIBIT A dated the Closing Date and duly executed by the
appropriate officers of Qualia;
(c) CERTIFICATE. A certificate, dated as of the Closing Date,
executed by an appropriate officer of Qualia, certifying jointly and severally
to iCAD: (i) that the representations and warranties of Qualia contained in this
Agreement are true and complete in all material respects as of the Closing Date
as though made on and as of that date (except for representations and warranties
that speak as of a specific date or time, which need only be true and complete
as of such date or time, and except with respect to any litigation which may be
filed by R2 Technology, Inc. seeking to enjoin the Merger) and (ii) that Qualia
has in all material respects performed and complied with all of their respective
obligations, covenants and agreements in this Agreement to be performed and
complied with on or prior to the Closing Date;
(d) SECRETARY'S CERTIFICATE. A certificate, dated as of the Closing
Date, executed by Qualia's Secretary (i) certifying that the resolutions, as
attached to such certificate, were duly adopted by each of Qualia's Board of
Directors and stockholders, authorizing and approving the execution of this
Agreement and the consummation of the transaction contemplated hereby and that
such resolutions remain in full force and effect, and (ii) providing, as
attachments thereto, Qualia's Certificate of Incorporation and Bylaws, with all
amendments;
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(e) GOOD STANDING CERTIFICATES. Certificates as to the formation
and/or good standing of Qualia issued by the Delaware SOS to be dated a date not
more than a reasonable number of days prior to the Closing Date;
(f) STOCK CERTIFICATES. Certificates representing all of the
outstanding shares of Class B Common Stock and all of the shares of Class A
Common Stock held by Briana BioTech, Inc. as of the Closing Date, accompanied by
all documents required to effect the surrender of such certificates and evidence
that any applicable stock transfer taxes have been paid; and
(g) OTHER DOCUMENTS. Such other documents listed herein or as are
reasonably requested by the iCAD Parties or their counsel for complete
implementation of this Agreement and consummation of the transaction
contemplated hereby.
7.2 DELIVERIES BY THE ICAD PARTIES. Prior to or on the Closing Date, the
iCAD Parties shall deliver the following, in form and substance reasonably
satisfactory to the Exchange Agent, Qualia and its counsel:
(a) DELIVERY OF MERGER CONSIDERATION.
(i) To the Exchange Agent, stock certificate(s) representing
the shares of iCAD Common Stock constituting Merger Consideration in the amounts
contemplated by this Agreement, less the Escrow Shares;
(ii) to Briana BioTech, Inc., a certified check in the amount
of US$550,000 made payable to "The Trustee of Briana BioTech, Inc. - David
Azoulay et Associes Inc." and couriered the same day to David Azoulay et
Associes Inc.; and
(iii) to CADx Canda, Inc., the cash and promissory note set
forth opposite its name on SCHEDULE 2.1;
(b) CERTIFICATE OF MERGER. To Qualia, the Certificate of Merger duly
executed by the appropriate officers of Merger Sub;
(c) OFFICER'S CERTIFICATE. A certificate, dated as of the Closing
Date, executed on behalf of an officer of each of the iCAD Parties, certifying
(i) that the representations and warranties of each of the iCAD Parties
contained in this Agreement are true and complete in all material respects as of
the Closing Date as though made on and as of that date, and (ii) that each of
the iCAD Parties have in all material respects performed and complied with all
of its obligations, covenants and agreements in this Agreement to be performed
and complied with on or prior to the Closing Date;
(d) SECRETARY'S CERTIFICATE. To Qualia, a certificate, dated as of
the Closing Date, executed by each of the iCAD Parties' Secretary: (i)
certifying that the resolutions, as attached to such certificate, were duly
adopted by each of the iCAD Parties' Board of Directors, authorizing and
approving the execution of this Agreement and the consummation of the
transaction contemplated hereby and that such resolutions remain in full force
and effect; and (ii) providing, as an attachment thereto, each of the iCAD
Parties' Certificates of Incorporation and Bylaws;
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(e) GOOD STANDING CERTIFICATES. To Qualia, certificates as to the
formation and/or good standing of the iCAD Parties issued by the Delaware SOS to
be dated a date not more than a reasonable number of days prior to the Closing
Date; and
(f) OTHER DOCUMENTS. To Qualia, such other documents listed herein
or as are reasonably requested by Qualia or its counsel for complete
implementation of this Agreement and consummation of the transactions
contemplated hereby.
SECTION 8
TERMINATION
8.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated at any
time prior to Closing by the mutual consent of the parties.
8.2 OTHER TERMINATION. This Agreement may be terminated by any party
hereto and the Merger abandoned if any other party hereto (the iCAD Parties, on
the one hand, and Qualia and the Principal Stockholders, on the other hand)
shall have failed to satisfy any of its respective conditions precedent under
SECTION 6 hereof (unless such failure results primarily from the terminating
party's breach of any representation, warranty or covenant contained in this
Agreement or under any other agreement contemplated hereunder) or the Closing
shall not have occurred on or before December 31, 2003.
8.3 TERMINATION BY ICAD. iCAD may terminate this Agreement by giving
written notice to Qualia at any time prior to the Closing in the event Qualia
and/or the Principal Stockholders have breached any representation, warranty or
covenant contained in this Agreement, iCAD has notified Qualia of the breach and
the breach has continued without cure for a period of 30 days after the notice
of breach.
8.4 TERMINATION BY QUALIA. Qualia may terminate this Agreement by giving
written notice to iCAD at any time prior to the Closing in the event the iCAD
Parties have breached any representation, warranty or covenant contained in this
Agreement in any material respect, Qualia has notified iCAD of the breach and
the breach has continued without cure for a period of 30 days after the notice
of breach.
8.5 SPECIFIC PERFORMANCE. The parties recognize that, if either party
hereto breaches this Agreement and refuses to perform under the provisions of
this Agreement, monetary damages alone would not be adequate to compensate the
other party for its injury. Such party shall therefore be entitled, in addition
to any other remedies that may be available, to obtain specific performance of
the terms of this Agreement. If any action is brought by such party to enforce
this Agreement, the breaching party shall waive the defense that there is an
adequate remedy at law.
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SECTION 9
SURVIVAL; INDEMNIFICATION; CERTAIN REMEDIES
9.1 SURVIVAL. All representations and warranties, covenants and agreements
of the iCAD Parties and Qualia contained in or made pursuant to this Agreement
or in any certificate furnished pursuant hereto shall survive the Effective
Time.
9.2 INDEMNIFICATION BY THE INDEMNIFYING STOCKHOLDERS. From and after the
Closing and subject to the limitations set forth in Section 9.4 hereof, the
Indemnifying Stockholders, jointly and severally, shall indemnify and hold the
iCAD Parties harmless against and with respect to, and shall promptly reimburse
the iCAD Parties for any and all Losses arising out of or resulting from any
breach of any representation, warranty, covenant or agreement of Qualia or any
Principal Stockholder contained in this Agreement or in any exhibit hereto,
including but not limited to any certificate, document, or instrument delivered
to the iCAD Parties by Qualia or any Qualia stockholder under or in connection
with this Agreement.
9.3 PROCEDURE FOR INDEMNIFICATION. The procedure for indemnification shall
be as follows:
(a) The party claiming indemnification (the "CLAIMANT") shall
promptly give notice to the party(s) from which indemnification is claimed (the
"INDEMNIFYING PARTY") of any claim, whether between the parties or brought by a
third party, specifying in reasonable detail the factual basis for the claim. If
the claim relates to an action, suit, or proceeding filed by a third party
against Claimant, such notice shall be given by Claimant within five (5)
business days after written notice of such action, suit, or proceeding was given
to Claimant.
(b) With respect to claims solely between the iCAD Parties and
Qualia and/or the Principal Stockholders, following receipt of notice from the
Claimant of a claim, the Indemnifying Party shall have thirty (30) days to make
such investigation of the claim as the Indemnifying Party deems necessary or
desirable. For the purposes of such investigation, the Claimant agrees to make
available to the Indemnifying Party and its authorized representatives the
information relied upon by the Claimant to substantiate the claim. If the
Claimant and the Indemnifying Party agree at or prior to the expiration of the
thirty (30) day period (or any mutually agreed upon extension thereof) to the
validity and amount of such claim, the Indemnifying Party shall immediately pay
to the Claimant the full amount of the claim. If the Claimant and the
Indemnifying Party do not agree within the thirty (30) day period (or any
mutually agreed upon extension thereof), the Claimant may seek appropriate
remedy at law or equity.
(c) With respect to any claim by a third party as to which the
Claimant is entitled to indemnification under this Agreement, the Indemnifying
Party shall have the right at its own expense, to participate in or assume
control of the defense of such claim, and the Claimant shall cooperate fully
with the Indemnifying Party, subject to reimbursement for actual out-of-pocket
expenses incurred by the Claimant as the result of a request by the Indemnifying
Party. If the Indemnifying Party elects to assume control of the defense of any
third-party claim, the Claimant shall have the right to participate in the
defense of such claim at its own expense. If the Indemnifying Party does not
elect to assume control or otherwise participate in the defense of any
third-party claim, it shall be bound by the results obtained in good faith by
the Claimant with respect to such claim.
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(d) If a claim, whether between the parties or by a third party,
requires immediate action, the parties will make every effort to reach a
decision with respect thereto as expeditiously as possible.
9.4 LIMITATION OF LIABILITY.
(a) The Indemnifying Stockholders shall not be obligated to
indemnify the iCAD Parties pursuant to this SECTION 9 unless and until the iCAD
Parties' aggregate Losses equal or exceed one hundred thousand dollars
($100,000) (the "Basket Amount"), at which time the Indemnifying Stockholders
shall be obligated to indemnify the iCAD Parties for the full amount of all such
Losses.
(b) Anything contained in this Agreement to the contrary
notwithstanding, the iCAD Parties' sole and exclusive remedy for any and all
claims for indemnification under this Section 9 shall be limited to the
Indemnifying Stockholders forfeiting, returning, assigning and transferring to
the iCAD Parties the appropriate number of Escrow Shares, on a pro rata basis,
pursuant to the terms of the Escrow Agreement and the Indemnifying Stockholders
shall not be liable for any such Losses that cannot be satisfied from the
proceeds of the Escrow Shares.
SECTION 10
MISCELLANEOUS
10.1 FEES AND EXPENSES. Each party shall pay its own expenses incurred in
connection with the authorization, preparation, execution and performance of
this Agreement, including all fees and expenses of counsel, accountants, agents
and representatives, and each party shall be responsible for all fees or
commission payable to any finder, broker, advisor, or similar Person retained by
or on behalf of such party; provided, however, that such expenses of Qualia
shall not exceed an aggregate of $525,000. The provisions of this SECTION 10.1
shall survive the termination of this Agreement
10.2 NOTICES. All notices, requests, consents, payments, demands, and
other communications required or contemplated under this Agreement shall be in
writing and (a) personally delivered or sent via telecopy (receipt confirmed and
followed promptly by delivery of the original), or (b) sent by Federal Express
or other reputable overnight delivery service (for next business day delivery),
shipping prepaid, as follows:
If to the iCAD Parties to:
iCAD, Inc.
4 Townsend West, Suite 17
Nashua, NH 03063
Attn: W. Scott Parr
Telephone: (603) 882-5200
Fax: (603) 880-3843
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With a copy to:
Robert J. Mittman, Esquire
Blank Rome LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Telephone: (212) 885-5000
Fax: (212) 885-5001
If to Qualia or the Principal Stockholders:
Qualia Computing, Inc.
2689 Common Blvd.
Beaver Creek, Ohio 45431
Attn: Thomas Shoup
Telephone: (937) 431-1464
Fax: (937) 431-1465
With a copy to:
Sam Warwar, Esquire
Coolidge, Wall, Womsley & Lombard Co., L.P.A.
Suite 600, 33 West First Street
Dayton, Ohio 45402
Telephone: (937) 223-8177
Fax: (937) 223-6705
or to such other Persons or addresses as any Person may request by notice given
as aforesaid. Notices shall be deemed given and received at the time of personal
delivery or completed telecopying, or, if sent by Federal Express or such other
overnight delivery service one Business Day after such sending.
10.3 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns,
executors personal and legal representatives.
10.4 FURTHER ASSURANCES. The parties shall take any actions and execute
any other documents that may be necessary or desirable (before or after the
Closing) to the implementation and consummation of this Agreement.
10.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO
THE CHOICE OF LAW PROVISIONS THEREOF).
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10.6 ENTIRE AGREEMENT. Any confidentiality agreement entered into between
or among the parties, this Agreement and the Annexes and the Schedules hereto,
each of which Annexes and Schedules are hereby incorporated herein by reference,
and all documents, certificates and other documents to be delivered by the
parties pursuant hereto, collectively, represent the entire understanding and
agreement between iCAD, Merger Sub and Qualia with respect to the subject matter
of this Agreement. Except for the aforementioned confidentiality agreement, this
Agreement supersedes all prior negotiations and agreements between the parties
(including, without limitation, the Original Merger Agreement") and cannot be
amended, supplemented, or changed except by an agreement in writing duly
executed by each of the parties hereto.
10.7 WAIVER OF COMPLIANCE; CONSENTS. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
representation, warranty, covenant, agreement, or condition herein may be waived
by the party entitled to the benefits thereof only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, representation, warranty, covenant,
agreement, or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such consent shall be given
in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this SECTION 10.7.
10.8 HEADINGS. The headings of the Sections and subsections contained in
this Agreement are inserted for convenience only and do not form a part or
affect the meaning, construction or scope thereof.
10.9 COUNTERPARTS. This Agreement may be signed in two or more
counterparts with the same effect as if the signature on each counterpart were
upon the same instrument.
10.10 COOPERATION. The parties hereto shall reasonably cooperate with each
other and their respective counsel and accountants in connection with any
actions required to be taken as part of their respective obligations under this
Agreement, and in connection with any litigation after the implementation and
consummation of this Agreement, and otherwise use their commercially reasonable
efforts to consummate the transaction contemplated hereby and to fulfill their
obligations under this Agreement.
10.11 PUBLIC ANNOUNCEMENTS. The parties hereto shall consult with each
other before issuing any press releases or otherwise making any public
statements with respect to this Agreement or the transactions contemplated
herein and shall not issue any such press release or make any such public
statement without the prior written consent of the other party, which shall not
be unreasonably withheld; provided, however, that a party may, without the prior
written consent of the other party, issue such press release or make such public
statement as may be required by law or any listing agreement with a national
securities exchange to which the iCAD Parties are a party if it has used all
reasonable efforts to consult with the other party and to obtain such party's
consent but has been unable to do so in a timely manner. This provisions of this
SECTION 10.11 shall survive the termination of this Agreement.
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10.12 PERMITTED DISCLOSURE. Notwithstanding anything set forth in this
Agreement to the contrary or in any other agreement to which a party hereto is
bound, the parties hereto (and any employee, representative or other agent of
any of the parties) are hereby expressly authorized to disclose the "tax
treatment" and "tax structure" (as those terms are defined in Treasury
Regulations ss. 1.6011-4(c)(8) and (9) respectively) of the transactions
contemplated by this Agreement, this Agreement and all materials of any kind
(including opinions or other tax analyses) that are provided to the parties
relating to such "tax treatment" or "tax structure"; provided, however, that (a)
such disclosure shall not be made until the earliest of (i) the date of the
public announcement of discussions relating to such transactions, (ii) the date
of the public announcement of such transactions, or (iii) the date of the
execution of an agreement to enter into such transactions; (b) "tax treatment"
and "tax structure" shall not include the identity of any existing or future
party (or any Affiliate thereof) to this Agreement., and (c) this provision
shall not permit disclosure to the extent that nondisclosure is required to
comply with any applicable federal or state securities laws.
[The remainder of this page has intentionally been left blank.]
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IN WITNESS WHEREOF, this Agreement has been executed by the duly
authorized officers of Qualia and the iCAD Parties as of the date first written
above.
The iCAD Parties:
iCAD, Inc.
By: /s/ W. Scott Parr
-----------------------------
Name: W. Scott Parr
Title: President and CEO
Qualia Acquisition Corp.
By: /s/ W. Scott Parr
-----------------------------
Name: W. Scott Parr
Title: President
Qualia:
Qualia Computing, Inc.
By: /s/ Steven K. Rogers
-----------------------------
Name: Steven K. Rogers
Title: President / CEO
Principal Stockholders:
/s/ Steven K. Rogers
----------------------------------
Steven K. Rogers
/s/ Thomas E. Shoup
----------------------------------
Thomas E. Shoup
/s/ James Corbett
----------------------------------
James Corbett
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Annex 1
CERTAIN DEFINITIONS
The following terms, as used in this Agreement, have the meanings set
forth in this ANNEX 1 (terms defined in the singular to have the correlative
meaning in the plural and vice versa):
"AFFILIATE" means, with respect to any Person, (a) any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with such Person, or (b) an officer or
director of such Person or of an Affiliate of such Person within the meaning of
clause (a) of this definition. For purposes of clause (a) of this definition,
(i) a Person shall be deemed to control another Person if such Person (A) has
sufficient power to enable such Person to elect a majority of the board of
directors of such Person, or (B) owns a majority of the beneficial interests in
income and capital of such Person; and (ii) a Person shall be deemed to control
any partnership of which such Person is a general partner.
"ACQUISITION PROPOSAL" means any proposal or offer (including, without
limitation, any proposal or offer to Qualia's stockholders) with respect to a
merger, acquisition, consolidation, recapitalization, reorganization,
liquidation, tender offer or exchange offer or similar transaction involving, or
any purchase of 15% or more of the consolidated assets of, or any equity
interest representing 15% or more of the outstanding shares of capital stock in,
Qualia.
"CLOSING" means the closing of the transactions contemplated by this
Agreement on the Closing Date.
"CLOSING DATE" means the date on which the Closing occurs, as determined
pursuant to SECTION 2.2.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONTAMINANT" shall mean and include any pollutant, contaminant, hazardous
material (as defined in any of the Environmental Laws), toxic substances (as
defined in any of the Environmental Laws), asbestos or asbestos containing
material, urea formaldehyde, polychlorinated biphenyls, regulated substances and
wastes, radioactive materials, and petroleum or petroleum by-products, including
crude oil or any fraction thereof.
"CONTRACTS" means all contracts, consulting agreements, leases,
non-governmental licenses and other agreements (including leases for personal or
real property and employment agreements), written or oral (including any
amendments and other modifications thereto) that relate to or affect a party's
assets, properties, or its business or operations, the performance of which
involves annual consideration in excess of $15,000 and that either (a) are in
effect on the date of this Agreement, or (b) are entered into by any party
hereto between the date of this Agreement and the Closing Date.
"ENVIRONMENTAL LAWS" shall mean and include, but not be limited to, any
applicable federal, state or local law, statute, charter, ordinance, rule or
regulation or any Governmental Body interpretation, policy or guidance,
including, without limitation, applicable safety/environmental/health laws, such
as, but not limited to, the Resource Conservation and Recovery Act of 1976,
Comprehensive Environmental Response Compensation and Liability Act, Federal
Emergency Planning and Community Right-to-Know Law, the Clean Air Act, the Clean
Water Act, and the Toxic Substance Control Act, as any of the foregoing have
been amended, and any Governmental Authorization or Order applicable to or
affecting the Property or any other property (real or personal) used by or
relating to Qualia or issued pursuant to any Environmental Laws which pertains
to, governs, or controls the generation, storage, remediation or removal of
Contaminants or otherwise regulates the protection of health and the
environment, including, but not limited to, any of the following activities,
whether on site or off site if such could materially affect the site: (i) the
emission, discharge, release, spilling or dumping of any Contaminant into the
air, surface water, ground water, soil or substrata; or (ii) the use,
generation, processing, sale, recycling, treatment, handling, storage, disposal,
transportation, labeling or any other management of any Contaminant.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"GAAP" means generally accepted United States accounting principles,
applied on a consistent basis.
"GOVERNMENTAL AUTHORIZATION" means any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" means any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body;
(e) self-regulatory organization (including, with limitation, NASD);
or
(f) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
2
"INTANGIBLE" OR "INTANGIBLES" means all copyrights, trademarks, trade
names, corporate names, fictitious names, service marks, service names, logos,
brand names, product name, slogan, licenses, trade secrets, industrial property,
patents, Intellectual Property Rights, Software, Technology (as defined in
Section 3.9) and any applications therefore, permits, proprietary information,
know-how, technical information and data, designs, formulae, inventions, product
rights, technology, machinery and equipment, hardware, software and information
systems, warranties, and other intangible assets or property rights and
interests (and any goodwill associated with any of the foregoing) of any nature,
whether in use, under development or design, or inactive, that are applied for,
issued to, or owned by Qualia or any of its Subsidiaries or under which Qualia
or any of its Subsidiaries is licensed or franchised and that are used in any
way in the business and operations of Qualia or any of its Subsidiaries, whether
arising under statutory or common law in any jurisdiction or otherwise, together
with any additions thereto between the date of this Agreement and the Closing
Date.
"INTELLECTUAL PROPERTY RIGHTS" means all intellectual property rights and
industrial property rights (throughout the universe, in all media, now existing
or created in the future, and for the entire duration of such rights) arising
under statutory or common law, contract or otherwise, and whether or not
perfected, including without limitation, all (a) patents, reissues and
reexamined patents and patent applications, whenever filed and wherever issued,
including without limitation, continuations, continuations in part, substitutes
and divisions of such applications and all priority rights result from such
applications; (b) rights associated with works of authorship including, but not
limited to, copyrights, moral rights, copyright applications, copyright
registrations; (c) rights relating to the protection of trade secrets and
confidential information; (d) rights in trademarks, service marks, trade names,
logos, symbols and the like; (e) rights analogous to those set forth in this
paragraph and any and all other proprietary rights relating to intangible
property; and (f) divisions, continuations, renewals, reissues and extensions of
the foregoing (as and to the extent applicable) now existing, hereafter filed,
issued or acquired.
"KNOWLEDGE" means the actual knowledge of such Person referred to, and
with respect to the iCAD Parties, the actual knowledge of its executive
officers, and with respect to Qualia, the actual knowledge of (i) the executive
officers of Qualia or any of its Subsidiaries or (ii) the Principal
Stockholders.
"LEASED REAL PROPERTY" means all real property and all buildings and other
improvements thereon and appurtenant thereto leased or held by Qualia.
"LEGAL REQUIREMENT" means any federal, state, local, municipal, foreign,
international, multinational, self regulatory organization or court or other
administrative order, constitution, law, ordinance, principle of common law,
rule, regulation, statute, treaty, by-law, or the like.
"LOSSES" means any loss, liability, damage, cost, or expense, including,
without limitation, reasonable attorneys' fees and expenses.
"MATERIAL ADVERSE CHANGE" means since March 31, 2003, any material adverse
change in the business, operations, properties, prospects, assets, or condition,
of the Person referred to, or the occurrence of any event or the existence of
any circumstance that constitutes a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
business, prospects, operations, properties, financial condition, assets,
liabilities or results of operations of the Person referred to, taken as a
whole, or the ability of such Person to consummate the transactions contemplated
by this Agreement.
3
"ORDER" means any award, decision, injunction, judgment, decree, order,
ruling, writ, determination, subpoena, or verdict entered, issued, made, or
rendered by any court, administrative agency, or other Governmental Body or by
any arbitrator.
"ORDINARY COURSE OF BUSINESS" an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
"PERMITTED ENCUMBRANCES" means (a) encumbrances of a landlord, or other
statutory lien not yet due and payable, or landlord's liens arising in the
Ordinary Course of Business, (b) encumbrances arising in connection with
equipment or maintenance financing or leasing under the terms of the Contracts
set forth on the Schedules, which Contracts have been made available to the iCAD
Parties, (c) encumbrances for Taxes not yet delinquent or which are being
contested in good faith and by appropriate proceedings if adequate reserves with
respect thereto are maintained on Qualia's books in accordance with generally
accepted accounting principles, or (d) encumbrances that do not materially
detract from the value of any of the assets of Qualia or materially interfere
with the use thereof as currently used.
"PERSON" means an individual, corporation, association, partnership, joint
venture, trust, estate, limited liability company, limited liability
partnership, organization or other entity or Governmental Body.
"PRINCIPAL STOCKHOLDERS" shall have the meaning ascribed to such term in
the preamble.
"QUALIA COMMON STOCK" shall collectively mean the Class A Common Stock and
the Class B Common Stock.
"REAL PROPERTY" means all real property and all buildings and other
improvements thereon and appurtenant thereto leased by Qualia used in the
business or operations of Qualia.
"REAL PROPERTY INTERESTS" means all interests in Leased Real Property,
including fee estates, leaseholds and subleaseholds, purchase options,
easements, licenses, rights to access, and rights of way, and all buildings and
other improvements thereon and appurtenant thereto, owned or held by Qualia that
are used in the business or operations of Qualia, together with any additions,
substitutions and replacements thereof and thereto between the date of this
Agreement and the Closing Date.
"RELATED PERSON" means with respect to a particular individual:
4
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves as
a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or
(c). For purposes of this definition, (a) the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse, (iii) any other natural person
who is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Exchange Act) of voting securities or other
voting interests representing at least 5% of the outstanding voting power of a
Person or equity securities or other equity interests representing at least 5%
of the outstanding equity securities or equity interests in a Person.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SOFTWARE" means any computer program, operating system, applications
system, firmware or software of any nature, whether operational, under
development or inactive including all object code, source code, system and
database architecture, design features, technical manuals, test scripts, user
manuals and other documentation therefor, whether in machine-readable form,
programming language or any other language or symbols, and whether stored,
encoded, recorded or written on disk, tape, film, memory device, paper or other
media of any nature and any data bases necessary to operate any such computer
program, operating system, application system, firmware or software.
5
"SUBSIDIARY" OR "SUBSIDIARIES" means, with respect to any party, any
corporation, limited liability company, partnership, trust, limited partnership,
joint venture, or other business association or entity, twenty percent (20%) or
more of the voting securities or economic interests of which is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries.
"TANGIBLE PERSONAL PROPERTY" means all machinery, equipment, tools,
vehicles, furniture, leasehold improvements, office equipment, plant, inventory,
spare parts and other tangible personal property owned or held by Qualia that is
used or useful in the conduct of the business or operations of Qualia, together
with any additions, substitutions and replacements thereof and thereto between
the date of this Agreement and the Closing Date.
"TAX" or "TAXES" means any federal, state, local, or foreign income, gross
receipts, windfall profits, severance, property, production, sales, use,
license, excise, franchise, capital, transfer, employment, withholding, or other
tax or similar governmental assessment, together with any interest, additions,
or penalties with respect thereto and any interest in respect of such additions
or penalties.
"TAX AUTHORITY" means any Governmental Body or other authority exercising
any taxing or tax regulatory authority.
"TAX LIABILITY" means any liability for Taxes.
"TAXABLE PERIOD" means any taxable year or any other period that is
treated as a taxable year with respect to which any Taxes may be imposed under
any applicable statute, rule, or regulation.
"TAX PROCEEDING" means any audit, examination, claim, or other
administrative or judicial proceeding involving Taxes.
"TAX RETURN" means any tax return, declaration of estimated tax, tax
report or other tax statement (including supporting information), or any other
similar filing required to be submitted to any Governmental Body with respect to
any Taxes.
6
Pursuant to Item 601(b)(2) of Regulation S-K, the following is a list of omitted
schedules to the Amended and Restated Plan and Agreement of Merger. iCAD agrees
to provide complete copies of the foregoing schedules to the Securities and
Exchange Commission upon request.
Schedule 2.1 Distribution of Merger Consideration
Qualia Schedules
- ----------------
Schedule 3.1 Organization of Qualia
Schedule 3.3 Books and Records
Schedule 3.4 Absence of Conflicting Agreements
Schedule 3.5 Governmental Authorizations
Schedule 3.6 Real Property
Schedule 3.7 Tangible Personal Property
Schedule 3.8 Contracts
Schedule 3.9 Intangibles
Schedule 3.11 Financial Statements
Schedule 3.12 Tax Matters
Schedule 3.13 Insurance
Schedule 3.14 Personnel and Employee Benefits
Schedule 3.15 Legal Actions and Orders
Schedule 3.16 Environmental Compliance
Schedule 3.17 Compliance with Legal Requirements
Schedule 3.18 Conduct of Business in Ordinary Course
Schedule 3.20 Capitalization
Schedule 3.21 Interests in Other Entities; Relationships with Related Persons
Schedule 3.22 Accounts; Lockboxes; Safe Deposit Boxes
Schedule 3.23 Brokers or Finders
Schedule 3.25 Due Diligence
iCAD Schedules
Schedule 4.4 Capitalization
Schedule 4.6 Brokers or Finders
Schedule 5.7 Registration Statement
Schedule 5.17 Noncompetition Agreements
Schedule 6.1(l) Resignation of Officers and Directors
7
EXHIBIT A
CERTIFICATE OF MERGER
OF
QUALIA COMPUTING, INC.
INTO
QUALIA ACQUISITION CORP.
Pursuant to Section 251(c) of the General Corporation Law
QUALIA COMPUTING, INC., a Delaware corporation, desiring to merge
with QUALIA ACQUISITION CORP., a Delaware corporation, pursuant to the
provisions of Section 251(c) of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
FIRST: The names and states of incorporation of each constituent
corporation are:
Name State of Incorporation
---- ----------------------
Qualia Computing, Inc. Delaware
Qualia Acquisition Corp. Delaware
SECOND: A Plan and Agreement of Merger has been approved, adopted,
certified, executed and acknowledged by each constituent corporation in
accordance with Section 251(c) of the General Corporation Law.
THIRD: The name of the surviving corporation is QUALIA ACQUISITION
CORP.
FOURTH: The Certificate of Incorporation of QUALIA ACQUISITION CORP.
shall be the Certificate of Incorporation of the surviving corporation.
FIFTH: An executed copy of the Plan and Agreement of Merger is on
file at the principal place of business of the surviving corporation, c/o iCAD,
Inc., 4 Townsend West, Suite 17, Nashua, NH 03063 and a copy of the Plan and
Agreement of Merger will be furnished by the surviving corporation, on request
and without cost, to any stockholder of any constituent corporation.
IN WITNESS WHEREOF, QUALIA COMPUTING, INC. and QUALIA ACQUISITION
CORP. have caused this Certificate to be executed this ___ day of ___________,
2003.
QUALIA COMPUTING, INC.
By:_____________________________________
Name: Steven K. Rogers
Title: President / CEO
QUALIA ACQUISITION CORP.
By:_____________________________________
Name: W. Scott Parr
Title: President
-2-
EXHIBIT B
ESCROW AGREEMENT
ESCROW AGREEMENT dated as of December __, 2003, by and among iCAD, Inc., a
Delaware corporation ("iCAD"), Qualia Acquisition Corp., a Delaware corporation
which is a wholly owned Subsidiary of iCAD ("MERGER Sub") (iCAD and Merger Sub
collectively, the "ICAD PARTIES"), Qualia Computing, Inc., a Delaware
corporation ("QUALIA"), Steven K. Rogers, as Representative of the Indemnifying
Stockholders of Qualia (the "REPRESENTATIVE"), and Blank Rome LLP, as escrow
agent (the "ESCROW AGENT").
RECITALS
A. The iCAD Parties, Qualia and certain stockholders of Qualia named
therein entered into an Amended and Restated Plan and Agreement of Merger dated
December 15, 2003 (the "MERGER AGREEMENT"), pursuant to which iCAD agreed to
acquire all of the issued and outstanding shares of Class A common stock,
$.00001 par value, and Class B Common Stock, $.00001 par value, of Qualia,
pursuant to a merger of Qualia with and into Merger Sub (the "MERGER").
Capitalized terms used but not defined herein in this Agreement shall have the
meanings given such terms in the Merger Agreement.;
B. Section 2.1(i) of the Merger Agreement provides that iCAD will deliver
and deposit the "ESCROW SHARES" in an "ESCROW ACCOUNT" with the Escrow Agent as
security for the indemnification obligations of the Indemnifying Stockholders in
accordance with the terms and conditions of Section 9 of the Merger Agreement.
C. In order to provide for the appropriate administration of the Escrow
Shares, each of the iCAD Parties, Qualia and the Representative desire to
establish the Escrow Account with the Escrow Agent subject to the terms and
conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
1. Appointment. Each of the iCAD Parties, Qualia and the Representative do
hereby appoint and designate the Escrow Agent as escrow agent for the purposes
set forth herein, and the Escrow Agent does hereby accept such appointment
subject to the terms and conditions set forth herein. Qualia hereby appoints the
Representative as the agent of the Indemnifying Stockholders, which
Representative shall have full authority to act on behalf of the Indemnifying
Stockholders with respect only to the Escrow Shares for purposes of this
Agreement and the Merger Agreement.
2. Establishment of Escrow.
(a) Simultaneously with the execution and delivery hereof, iCAD is
depositing stock certificates representing the Escrow Shares with the Escrow
Agent, together with stock powers executed in blank related thereto.
(b) The Escrow Agent shall hold and disburse the Escrow Shares
deposited with the Escrow Agent under this Escrow Agreement pursuant to and in
accordance with this Escrow Agreement.
3. Release from Escrow; Escrow Period.
(a) The iCAD Parties may at any time, and from time to time, prior
the first anniversary of the date hereof (the "EXPIRATION DATE"), deliver
written instructions to the Escrow Agent directing the Escrow Agent to disburse
all or a portion of the Escrow Shares to any person (including iCAD and Merger
Sub) in the amounts specified therein for the purpose of satisfying any
obligation based on, arising from or in connection with all claims for
indemnification asserted in writing by the iCAD Parties pursuant to the Merger
Agreement. Such written instruction shall specifically identify the nature of
the matter for which the iCAD Parties seek indemnification and the manner in
which the number of Escrow Shares subject to such instruction was calculated.
Within ten (10) days after receipt of such instructions, the Escrow Agent shall
send a copy of such instructions to the Representative and shall notify the iCAD
Parties in writing of the date on which such copy was sent. On or promptly after
the tenth (10th) day after delivery of such instructions to the Representative,
and provided that the Representative has not objected to such notice in writing
delivered to the iCAD Parties and the Escrow Agent, the Escrow Agent shall
release to the iCAD Parties all or part of the Escrow Shares in accordance with
such instructions. If the Escrow Agent receives such a written objection, the
Escrow Agent shall continue to hold such Escrow Shares until:
(i) The Escrow Agent receives instructions signed by both the
iCAD Parties and Legal Representatives; or
(ii) The Escrow Agent receives a final non-appealable order
from a court of competent jurisdiction directing payment of such amount.
(b) On or promptly after the Expiration Date, the Escrow Agent shall
disburse to the Representative, as agent for the Indemnifying Stockholders, all
Escrow Shares, if any, then held by it less any amount which it shall have been
previously instructed to disburse pursuant to Section 3(a) above but shall not
have disbursed for any reason.
(c) Notwithstanding anything contained herein to the contrary, the
Escrow Agent shall not be required at any time to disburse more than the
aggregate number of Escrow Shares held by it.
(d) Upon delivery by the Escrow Agent of all of the Escrow Shares,
in accordance with the provisions of this Escrow Agreement, this Escrow
Agreement shall terminate, subject to the provisions of Section 6 hereof, which
Section shall survive such termination.
(e) The Indemnifying Stockholders shall have the right to vote their
respective Escrow Shares and shall be entitled to any dividends declared on
their respective Escrow Shares for so long as such Escrow Shares are held in
escrow in accordance with the provisions of this Escrow Agreement.
-2-
4. Duties and Responsibilities of the Escrow Agent.
(a) The duties and responsibilities of the Escrow Agent hereunder
shall be determined solely by the express provisions of this Escrow Agreement
and no other or further duties or responsibilities shall be implied. The Escrow
Agent shall be under no obligation to refer to the Merger Agreement or any other
documents between or among the parties related in any way to this Escrow
Agreement.
(b) The Escrow Agent may rely and shall be protected in acting or
refraining from acting upon any written instructions by the iCAD Parties or the
Representative furnished to it hereunder and believed by it to be genuine and to
have been signed or presented by the proper party or parties.
(c) In the event that the Escrow Agent (i) shall be uncertain as to
its duties or rights hereunder, (ii) shall receive instructions, claims or
demands from any party hereto which conflict with any of the provisions of this
Escrow Agreement, (iii) shall receive an objection from any party hereto with
respect to the instructions given by any other party for the distribution of any
of the Escrow Shares, or (iv) shall resign pursuant to Section 5 hereof and it
does not receive joint written instructions regarding the disposition of the
Escrow Shares, as provided therein, then the Escrow Agent shall refrain from
taking any action and its sole obligation shall be (x) to keep safely all Escrow
Shares held in escrow until it shall be directed otherwise by an order or
judgment of a court of competent jurisdiction or (y) to deliver the Escrow
Shares to a court of competent jurisdiction and commence an action for
interpleader or its equivalent. The costs of the foregoing shall be borne by
whichever of the iCAD Parties or the Representative on behalf of the
Indemnifying Stockholders is the losing party.
(d) The Escrow Agent shall not be liable for any action taken or
omitted by it in good faith unless a court of competent jurisdiction determines
that the Escrow Agent's willful misconduct or gross negligence was the cause of
any loss to the iCAD or the Principal Stockholders and the Indemnifying
Stockholders. The Escrow Agent may consult with counsel of its own choice and,
at its option, may act as its own counsel in connection herewith.
5. Discharge and Resignation of the Escrow Agent. The Escrow Agent may
resign and be discharged from its duties and obligations hereunder by giving
notice in writing of such resignation specifying a date when such resignation
shall take effect. The Escrow Agent shall, upon the effectiveness of such
resignation, dispose of the Escrow Shares in accordance with the joint written
instructions of the iCAD Parties and the Representative.
6. Indemnification. The iCAD Parties and the Representative on behalf of
the Indemnifying Stockholders hereby agree to jointly and severally indemnify
the Escrow Agent for, and to hold it harmless against, any loss, liability or
expense, arising out of or in connection with this Escrow Agreement and carrying
out its duties hereunder, including, without limitation, reasonable attorneys'
fees and other costs and expenses of defending itself against any claim of
liability, except to the extent such loss, liability or expense is the result of
the Escrow Agent's willful misconduct or gross negligence; provided, however,
that the foregoing provisions of this Section 6 shall not affect the rights and
remedies of the iCAD Parties and the Representative on behalf of the
Indemnifying Stockholders as against each other. Anything in this Escrow
Agreement to the contrary notwithstanding, in no event shall the Escrow Agent be
liable for special, indirect or consequential loss or damage of any kind
whatsoever (including, but not limited to, lost profits), even if the Escrow
Agent has been advised of the likelihood of such loss or damage and regardless
of the form of action.
-3-
7. Notices. All notices and communications hereunder shall be in writing
and shall be sent by certified or registered mail, return receipt requested, air
courier, personal delivery or verified facsimile, as follows:
If to the Escrow Agent: Blank Rome LLP
405 Lexington Avenue
New York, New York 10174
Attn: Robert J. Mittman, Esq.
Facsimile: (212) 885-5001
If to the iCAD Parties: iCAD, Inc.
4 Townsend West, Suite 17
Nashua, NH 03063
Attn: W. Scott Parr
Telephone: (603) 882-5200
Fax: (603) 880-3843
with a copy to:
Blank Rome LLP
405 Lexington Avenue
New York, New York 10174
Attn: Robert J. Mittman, Esq.
Facsimile: (212) 885-5001
If to the Representative
or the Indemnifying Stockholders:
Steven K. Rogers
2689 Common Blvd.
Beaver Creek, Ohio 45431
with a copy to:
Coolidge, Wall, Womsley & Lombard
Suite 600, 33 W. First Street
Dayton, OH 45402
Attn: Sam Warwar
Facsimile: (937) 223-6705
-4-
or to such other address as any of the above may have furnished to the other
parties in writing by certified or registered mail, return receipt requested,
air courier, personal delivery, or verified facsimile, and any such notice or
communication given in the manner specified in this Section 7 shall be deemed to
have been duly given on the date received by the recipient party. In the event
that the Escrow Agent, in its sole discretion, shall determine that any
emergency exists, the Escrow Agent may use such other means of communications,
as the Escrow Agent deems advisable.
8. Resignation or Incapacity of Representative. In the event of the
resignation or incapacity of the Representative, the Indemnifying Stockholders
shall appoint a successor Representative upon twenty (20) days prior written
notice to the iCAD Parties and the Escrow Agent.
9. Amendment. The provisions of this Escrow Agreement may be waived,
altered, amended or supplemented, in whole or in part, only by a writing signed
by all of the parties to be charged with such waiver, alteration, amendment or
supplement.
10. Binding Agreement. This Escrow Agreement shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and assigns.
11. Counterparts. This Escrow Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12. Conflict Waiver. The parties hereto acknowledge and agree that the
Escrow Agent currently represents and may continue to represent iCAD and Merger
Sub, including in connection with any dispute arising hereunder. The parties
hereto waive the right to raise any claim of conflict or any claim of a similar
nature in connection with such representation.
13. Governing Law; Jurisdiction. This Escrow Agreement shall be governed
by and construed in accordance with the laws of the State of New York without
regard to its principles of conflicts of laws and any action brought hereunder
shall be brought exclusively in the Federal or state courts located in the State
of New York, County of New York. With respect to any action brought hereunder in
said courts, each party hereto (a) irrevocably waives any objection on the
grounds of venue, forum non-conveniens or any similar grounds and (b)
irrevocably consents to service of process in any manner permitted by applicable
law and consents to the jurisdiction of said courts.
-5-
14. Federal Income Tax Treatment.
A. The specific terms and conditions of this Agreement and related
provisions of the Acquisition Agreement have been expressly negotiated by the
iCAD Parties, Qualia, and the Indemnifying Stockholders so as to satisfy, to the
extent possible, the specific requirements of the relevant case law as well as
Section 3.06 of the IRS Revenue Procedure 77-37, as it has been subsequently
amplified and interpreted by the IRS, which establishes the circumstances under
which the IRS will issue advance private letter rulings on escrow as well as
contingent stock arrangements in mergers which are intended to qualify as
"reorganizations" under Section 368(a) of the Code. Accordingly, the parties
agree that, pursuant to the terms and conditions of the Merger Agreement and
this Escrow Agreement, and, if not otherwise provided therein, the parties agree
here that: (i) there is a valid business reason for establishing the escrow
arrangement; (ii) all the Escrow Shares subject to this Escrow Agreement will be
issued to and registered in the names of the Indemnifying Stockholders at the
effective date of the Merger Agreement ("Effective Date") and will appear as
issued and outstanding on iCAD's balance sheet and will be legally outstanding
under Delaware law after the Effective Date; (iii) all dividends paid on the
Escrow Shares will be distributed currently to the Escrow Account on behalf of
the Indemnifying Stockholders; (iv) all voting rights of the Escrow Shares will
be exercisable by or on behalf of the Indemnifying Stockholders; (v) the rights
set forth in this Escrow Agreement with respect to the Escrow Shares are not
assignable except by operation of law; (vi) none of the Escrow Shares will be
subject to restrictions requiring their return to iCAD on account of Qualia's
dissolution or similar restrictions; (vii) the Escrow Shares will be released
from the escrow arrangement within five (5) years from the Effective Date
(except when there is a bona fide dispute as to whom the Escrow Shares should be
released); (viii) at least 50% of the number of iCAD shares issued to the
Indemnifying Stockholders pursuant to the Merger Agreement are not subject to
this escrow arrangement; (ix) the return of the Escrow Shares will not be
triggered by an event the occurrence or nonoccurrence of which is within the
control of the Indemnifying Stockholders; (x) the return of the Escrow Shares
will not be triggered by the payment of additional tax or reduction of tax paid
as a result of an IRS audit of Qualia or the Indemnifying Stockholders with
respect to this transaction; and (xi) the mechanism pursuant to this Escrow
Agreement and the Merger Agreement for the calculation of the number of the
Escrow Shares that may have to be returned to iCAD under this Escrow Agreement
is objective and readily ascertainable.
B. Further, the parties intend that by virtue of utilizing such an
escrow arrangement, no interest income will be imputed under Section 483 (or any
other provision) of the Code to the Indemnifying Stockholders upon receipt of
the Escrow Shares out of the Escrow Account.
C. The parties will report the Merger on the basis that it qualifies
as a "reorganization" under Section 368(a) of the Code for all tax reporting
purposes and will not take a tax return position inconsistent with the foregoing
tax return positions unless such inconsistent position shall arise out of or
through an audit of such returns by the IRS or other taxing authority. iCAD will
file its income tax return on the basis that (i) the Merger qualifies as a
"reorganization" under Section 368(a) of the Code and (ii) no interest is
imputed under Section 483 (or any other provision) of the Code to the
Indemnifying Stockholders upon receipt of the Escrow Shares out of the Escrow
Account. iCAD will not take a tax return position inconsistent with the
foregoing tax return positions unless such inconsistent position shall arise out
of or through an audit on such returns by the IRS or other taxing authority.
Notwithstanding anything to the contrary in this Section 14, any references to
the "parties" in this Section 14 shall be defined to refer to the parties other
than the Escrow Agent, and the Escrow Agent does not take any position on any of
the agreements in this Section 14.
-6-
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the day and year first above written.
iCAD, Inc.
By:__________________________________
Name: W. Scott Parr
Title: President and CEO
Qualia Acquisition Corp.
By:__________________________________
Name: W. Scott Parr
Title: President and CEO
Qualia Computing, Inc.
By: __________________________________
Name: Steven K. Rogers
Title: President / CEO
REPRESENTATIVE:
________________________________________
Steven K. Rogers
ESCROW AGENT:
BLANK ROME LLP
By:_____________________________________
Partner
-7-
EXHIBIT C
STOCKHOLDERS' AGREEMENT
This STOCKHOLDERS' AGREEMENT ("Agreement") is made and entered into as of
December ___, 2003, by and among iCAD, Inc., a Delaware corporation (the
"Company"), and Steven K. Rogers, Thomas E. Shoup and James Corbett,
(individually, a "Stockholder," and collectively, the "Stockholders").
WHEREAS, the Company has entered into an Amended and Restated Plan and
Agreement of Merger ("Merger Agreement") with Qualia Computing, Inc., a Delaware
corporation ("Qualia"), pursuant to which Qualia will merge (the "Merger") with
and into Qualia Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of the Company and, upon effectiveness of the Merger, the Company
will issue 4,300,000 shares of its Common Stock to former stockholders of
Qualia;
WHEREAS, closing of the Merger is conditioned upon the parties hereto
entering into this Agreement; and
WHEREAS, the Stockholders desire to mutually agree to the terms and
conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each of the parties
hereto, intending to be legally bound hereby, agrees as follows:
1. TERM. This Agreement shall become effective concurrently with the closing of
the Merger and shall remain in effect for a period of one year thereafter unless
earlier terminated as herein provided (the "Term").
2. COVENANTS.
2.1 Covenants. During the Term, without the prior written consent of the
Company, no Stockholder or any Permitted Transferee of such Stockholder shall
Transfer any Securities, except:
(a) up to the following amounts during the following periods:
Number of Shares Period
---------------- ------
0 closing date of the Merger
through the end of the next
two full calendar quarters
20,000 third calendar quarter
20,000 fourth calendar quarter
(b) pursuant to a bona fide underwritten public offering registered
under the Securities Act;
(c) to a Permitted Transferee;
(d) pursuant to a tender offer made to all the holders of the
Company's Common Stock;
(e) pursuant to any transaction duly approved by the stockholders of
the Company; and
(f) pursuant to the provisions of that certain Escrow Agreement
dated the date hereof, among the Company, Qualia Computing, Inc., Steven K.
Rogers, as representative, and Blank Rome LLP, as escrow agent.
The number of shares permitted to be Transferred or pledged pursuant to
clause (a) shall be adjusted to take into account the pro rata effect of stock
dividends, stock distributions, stock splits, stock combinations,
recapitalizations, reclassifications, subdivisions, conversions or similar
transactions in respect of Common Stock.
2.2 Certain Transferees to be Bound. Unless otherwise provided herein, no
Stockholder or Permitted Transferee may effect any Transfer to a Permitted
Transferee unless such Permitted Transferee executes an agreement pursuant to
which such Permitted Transferee agrees to be bound by the terms and provisions
of this Agreement applicable to the transferor. Any purported Transfer in
violation of this Section 2.2 shall be null and void and of no force and effect
and the purported transferee shall have no rights or privileges in or with
respect to the Company. The Company shall not register or record or permit a
transfer agent to register or record on the stock record books of the Company
any purported Transfer to a Permitted Transferee unless and until it has
received evidence that such Transfer and the parties thereto have complied with
this Section 2.2.
2
2.3 Other Restrictions May Apply. Each Stockholder (and Permitted
Transferee who becomes subject to this Agreement) acknowledges that the
restrictions set forth herein are in addition to and not in limitation of any
other restrictions that may be imposed by the Securities Act and the Exchange
Act, and the rules and regulations thereunder, state securities laws and the
rules and regulations thereunder, and any rules and regulations of the National
Association of Securities Dealers, Inc.
3. DEFINITIONS. For purposes of this Agreement, the following terms shall have
the following meanings:
3.1 Affiliate. An "Affiliate" of a person shall have the meaning set forth
in Rule 12b-2 of the Exchange Act as in effect on the date hereof and, in
addition, shall include "Associates" (as defined in Rule 12b-2 of the Exchange
Act as in effect on the date hereof) of such Person and its Affiliates.
3.2 Common Stock. "Common Stock" means the common stock, par value $.01
per share, of the Company.
3.3 Exchange Act. "Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder as in
effect from time to time.
3.4 Permitted Transferee. "Permitted Transferee" means (i) a Stockholder's
spouse or lineal descendents or any trust for the benefit of the Stockholder or
the Stockholder's spouse or lineal descendents and (ii) the heirs, executors,
administrators or personal representatives upon the death of the Stockholder or
upon the incompetency or disability of the Stockholder for purposes of the
protection and management of the Stockholder's assets;
3.5 Person. "Person" means any natural person, group, corporation, limited
liability company, partnership, business association, trust, firm, government or
agency or political subdivision thereof, or other entity of whatever nature.
3.6 Securities. "Securities" means the shares of Common Stock now held, or
hereafter acquired (but excluding any shares of Common Stock hereafter purchased
on the open market), by any party hereto and all other securities of the Company
(or a successor to the Company) received on account of ownership of such shares
of Common Stock, including all securities issued in connection with any stock
dividend, stock distribution, stock split, reverse stock split, stock
combination, recapitalization, reclassification, subdivision, conversion or
similar transaction in respect thereof, but excluding any securities received on
account of such ownership in any merger or consolidation.
3.7 Securities Act. "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder as in effect from
time to time.
3.8 Transfer. "Transfer" means the making of any sale, exchange,
assignment, hypothecation, gift, security interest, pledge or other encumbrance,
or any contract therefor, any voting trust or other agreement or arrangement
with respect to the transfer of voting rights or any other beneficial interest
in any of the Securities, the creation of any other claim thereto or any other
transfer or disposition whatsoever, whether voluntary or involuntary, affecting
the right, title, interest or possession in or to such Securities.
3
4. MISCELLANEOUS.
4.1 Legends. Each certificate or instrument representing Securities
subject to the terms of this Agreement will bear the following legends in
addition to any other legend required by law:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF A STOCKHOLDERS' AGREEMENT AMONG THE COMPANY
AND THE HOLDERS SPECIFIED THEREIN, A COPY OF WHICH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. THE SALE, TRANSFER OR
OTHER DISPOSITION OF THE SECURITIES IS SUBJECT TO THE TERMS OF SUCH
AGREEMENT AND THE SECURITIES ARE TRANSFERABLE ONLY UPON PROOF OF
COMPLIANCE THEREWITH.
Upon termination of this Agreement, the Company will cause such legends to be
removed as soon as practicable.
4.2 Governing Law; Severability. This Agreement shall be governed by the
laws of the State of Delaware without giving effect to conflicts of law
principles thereof. If any provision of this Agreement shall be declared invalid
or unenforceable by a court of competent jurisdiction, the remaining provisions
hereof shall remain valid and shall continue in effect.
4.3 Binding Effect on Successor. This Agreement shall be binding upon and
inure to the benefit of the Company and the Stockholders, and to their
respective successors and permitted assigns, including any successors to the
Company or the Stockholders or their businesses or assets as the result of any
merger, consolidation, reorganization, transfer of assets or otherwise, and any
subsequent successor thereto, without the execution or filing of any instrument
or the performance of any act.
4.4 Specific Performance. The Stockholders and the Company acknowledge and
agree that irreparable injury to the other party would occur in the event any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached and that such injury would not be
compensable in damages. It is accordingly agreed that each party hereto shall be
entitled to specific enforcement of, and injunctive relief to prevent any
violation of the terms hereof, and the other parties hereto will not take
action, directly or indirectly, in opposition to the party seeking such relief
on the grounds that any other remedy or relief is available at law or in equity.
The parties further agree that no bond shall be required as a condition to the
granting of any such relief.
4
4.5 No Waiver. Any waiver by any party of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
4.6 Entire Agreement; Amendments. This Agreement, together with the Merger
Agreement and other agreements entered into in connection herewith and
therewith, constitute the entire understanding of the parties with respect to
the subject matter hereof and thereof. This Agreement may be amended only by a
written instrument duly executed by the parties or their respective successors
or assigns.
4.7 Headings. The section headings contained in the Agreement are for
reference purposes only and shall not effect in any way the meaning or
interpretation of this Agreement.
4.8 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by hand delivery, facsimile or
recognized express carrier or delivery service to the respective parties as
follows:
if to the Company:
Icad, Inc.
4 Townsend West, Suite 17
Nashua, NH 03063
Attn: W. Scott Parr
Telephone: (603) 882-5200
Fax: (603) 880-3843
if to the Stockholders:
Qualia Computing, Inc.
2689 Common Blvd.
Beaver Creek, Ohio 45431
Attn: Thomas Shoup
Telephone: (937) 431-1464
Fax: (937) 431-1465
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
5
4.9 Further Assurances. From time to time on and after the date hereof,
the Company and the Stockholders, as the case may be, shall deliver or cause to
be delivered to the other party hereto such further documents and instruments
and shall do and cause to be done such further acts as the other party hereto
shall reasonably request to carry out more effectively the provisions and
purposes of this Agreement, to evidence compliance herewith or to assure that it
is protected in acting hereunder.
4.10 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which together shall be deemed one
and the same instrument.
IN WITNESS WHEREOF, the Company and the Stockholders have executed this
Agreement as of the date first above written.
ICAD, INC.
By:_____________________________________
Name: W. Scott Parr
Title: President and CEO
________________________________________
Steven K. Rogers
________________________________________
James Corbett
________________________________________
Thomas E. Shoup
6
EXHIBIT D
VOTING AGREEMENT
This VOTING AGREEMENT ("Agreement") is made and entered into as of
November ____, 2003, by and among iCAD, Inc., a Delaware corporation (the
"Company"), and __________________ (a "Stockholder").
WHEREAS, the Company has entered into a Plan and Agreement of Merger
("Merger Agreement") with Qualia Computing, Inc., a Delaware corporation
("Qualia"), pursuant to which Qualia will merge (the "Merger") with and into a
wholly-owned subsidiary of the Company; and
WHEREAS, the Stockholder collectively owns (as defined paragraph 2
hereof), as of the date hereof, ____________ shares of Class __ Common Stock,
$.00001 par value, of Qualia (respectively, the "Existing Shares;" and together
with any shares of Class A Common Stock and/or Class B Common Stock acquired by
the Stockholder after the date hereof and prior to the termination of this
Agreement, the "Shares");
WHEREAS, the closing of the Merger is conditioned upon the parties hereto
entering into this Agreement; and
WHEREAS, the Stockholder desires to mutually agree to the terms and
conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each of the parties
hereto, intending to be legally bound hereby, agrees as follows:
1. Term. The term of this Agreement shall commence on the date hereof and shall
continue until the earlier of (i) the Effective Time (as defined in the Merger
Agreement) or (ii) the termination of the Merger Agreement in accordance with
the provisions of Section 8 thereof (the "Term").
2. Voting of Shares.
(a) The Stockholder covenants and agrees that, during the Term, at any
meeting of the stockholders of Qualia, however called, and at every adjournment
or postponement thereof, and in any action by written consent of the
stockholders of Qualia unless otherwise directed in writing by the Company, such
Stockholder shall (i) appear in person or by proxy, or cause the holder of
record as of the Record Date (as defined below) to appear in person or by proxy,
for the purpose of establishing a quorum, and (ii) vote or cause to be voted all
issued and outstanding shares of Qualia Common Stock, including, without
limitation, the Shares, that are Owned by such Stockholder (individually or
jointly) as of the Record Date in favor of the adoption of the Merger Agreement.
(b) Contemporaneously with the execution of this Agreement, Stockholder
shall execute and deliver to the Company a proxy with respect to the Shares in
the form attached hereto as Exhibit A, which proxy will be irrevocable to the
fullest extent permitted by law (the "Proxy").
(c) For purposes of this Agreement, (a) a Stockholder shall be deemed to
"Own" or to have acquired "Ownership" of a security if the Stockholder: (i) is a
record owner of such security; or (ii) is a "beneficial owner" (within the
meaning of Rule 13d-3 under the Exchange Act) of such security and (b) the
"Record Date" for a particular matter shall be the date fixed for persons
entitled: (i) to receive notice of, and to vote at, a meeting of the
stockholders of Qualia called for the purpose of voting on such matter; or (ii)
to take action by written consent of the stockholders of Qualia with respect to
such matter.
3. Representations and Warranties of the Stockholder. Stockholder represents and
warrants to the Company as follows:
3.1 Ownership of Shares. On the date hereof, Stockholder is the sole
record and beneficial Owner of the Existing Shares as set forth in Schedule 3.1
attached hereto. Except as set forth on Schedule 3.1 attached hereto,
Stockholder currently has with respect to the Existing Shares, and at Closing
will have with respect to the Shares, good, valid and marketable title, free and
clear of all liens, encumbrances, restrictions, options, warrants, rights to
purchase, voting agreements or voting trusts, and claims of every kind (other
than the encumbrances created by this Agreement (as defined in the Merger
Agreement) and other than restrictions on transfer under applicable federal and
state securities laws).
3.2 Power; Binding Agreement. Stockholder has the full legal right,
corporate power and authority to enter into and perform all of such
Stockholder's obligations under this Agreement. The execution, delivery and
performance of this Agreement by the Stockholder will not violate any other
agreement to which such Stockholder is a party including, without limitation,
any voting agreement, stockholder agreement or voting trust. This Agreement has
been duly executed and delivered by the Stockholder and constitutes a legal,
valid and binding agreement of such Stockholder, enforceable in accordance with
its terms. Neither the execution or delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby will (a)
require any consent or approval of or filing with any third party, including any
governmental or other regulatory body, all of which have been obtained, or (b)
constitute a violation of, conflict with or constitute a default under, the
certificate of incorporation, articles of incorporation, by-laws and/or other
constituent documents of the Stockholder, if applicable, or of any contract,
commitment, agreement, understanding, arrangement or other restriction of any
kind to which the Stockholder is a party or by which the Stockholder or his or
its property is bound.
4. Covenants
4.1 During the Term, Stockholder, directly or indirectly, shall not: (a)
sell, transfer, pledge, encumber, assign or otherwise dispose of (including by
merger, testamentary disposition, interspousal disposition pursuant to a
domestic relations proceeding or otherwise or otherwise by operation of law), or
enter into any contract, option or other arrangement or understanding with
respect to the sale, transfer, pledge, encumbrance, assignment or other
disposition of, any of the Shares; or (b) grant any proxies with respect to any
Shares, deposit any Shares into a voting trust or enter into a voting agreement
with respect to any Shares, except for the Proxy called for by Section 2(b) of
this Agreement. Any action taken in violation of this Section 4.1 shall be void
and of no effect
2
4.2 During the Term, Stockholder shall notify the Company promptly of the
number of Shares acquired by such Stockholder after the date hereof.
5. Waivers.
5.1 Appraisal Rights. Stockholder hereby agrees not to exercise any rights
of appraisal and any dissenters' rights that Stockholder may have (whether under
applicable law or otherwise) or could potentially have or acquire in connection
with the Merger.
5.2 Other Rights. Stockholder agrees to (i) waive any rights of first
refusal, rights of first offer, rights of notice, rights of co-sale, tag-along
rights, information rights, registration rights, preemptive rights, rights of
redemption or repurchase, and similar rights of Stockholder under any agreement,
arrangement or understanding applicable to the Shares, in each case as the same
may apply to the execution and delivery of the Merger Agreement and the
consummation of the Merger and the other actions and transactions contemplated
by the Merger Agreement and (ii) to terminate any such agreements, arrangements
or undertakings, effective immediately prior to the Closing.
6. Miscellaneous
6.1 Governing Law; Severability. This Agreement shall be governed by the
laws of the State of Delaware without giving effect to conflicts of law
principles thereof. If any provision of this Agreement shall be declared invalid
or unenforceable by a court of competent jurisdiction, the remaining provisions
hereof shall remain valid and shall continue in effect.
6.2 Binding Effect on Successor. This Agreement shall be binding upon and
inure to the benefit of the Company and the Stockholder, and to their respective
successors and permitted assigns, including any successors to the Company or the
Stockholder or their businesses or assets as the result of any merger,
consolidation, reorganization, transfer of assets or otherwise, and any
subsequent successor thereto, without the execution or filing of any instrument
or the performance of any act.
6.3 Specific Performance. The Stockholder and the Company acknowledge and
agree that irreparable injury to the other party would occur in the event any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached and that such injury would not be
compensable in damages. It is accordingly agreed that each party hereto shall be
entitled to specific enforcement of, and injunctive relief to prevent any
violation of the terms hereof, and the other party hereto will not take action,
directly or indirectly, in opposition to the party seeking such relief on the
grounds that any other remedy or relief is available at law or in equity. The
parties further agree that no bond shall be required as a condition to the
granting of any such relief.
3
6.4 No Waiver. Any waiver by any party of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
6.5 Entire Agreement; Amendments. This Agreement, together with the Merger
Agreement and other agreements entered into in connection herewith and
therewith, constitute the entire understanding of the parties with respect to
the subject matter hereof and thereof. This Agreement may be amended only by a
written instrument duly executed by the parties or their respective successors
or assigns.
6.6 Headings. The section headings contained in the Agreement are for
reference purposes only and shall not effect in any way the meaning or
interpretation of this Agreement.
6.7 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by hand delivery, facsimile
(receipt confirmed and followed promptly by deliver of the original) or
recognized express carrier or delivery service to the respective parties as
follows:
if to the Company:
iCAD, Inc.
4 Townsend West, Suite 17
Nashua, NH 03063
Attn: W. Scott Parr
Telephone: (603) 882-5200
Fax: (603) 880-3843
if to the Stockholder:
__________________
__________________
__________________
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
4
6.8 Further Assurances. From time to time on and after the date hereof,
the Company and the Stockholder, as the case may be, shall deliver or cause to
be delivered to the other party hereto such further documents and instruments
and shall do and cause to be done such further acts as the other party hereto
shall reasonably request to carry out more effectively the provisions and
purposes of this Agreement, to evidence compliance herewith or to assure that it
is protected in acting hereunder.
6.9 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which together shall be deemed one
and the same instrument.
5
IN WITNESS WHEREOF, the Company and the Stockholder have executed this
Agreement as of the date first above written.
ICAD, INC.
By______________________________________
Name:
Title:
Stockholder
By______________________________________
Name:
Title:
6
EXHIBIT A
IRREVOCABLE PROXY
The undersigned stockholder of Qualia Computing, Inc., a Delaware
corporation (the "Qualia"), hereby irrevocably, to the fullest extent permitted
by law and subject to the Voting Agreement (defined below), appoints W. Scott
Parr as the sole and exclusive attorney and proxy of the undersigned, with full
power of substitution and resubstitution, to vote and exercise all voting and
related rights (to the full extent that the undersigned is entitled to do so)
with respect to all of the shares of capital stock of Qualia that now are or
hereafter may be beneficially owned by the undersigned, and any and all other
shares or securities of Qualia issued or issuable in respect thereof on or after
the date hereof (collectively, the "Shares") in accordance with the terms of
this Proxy. The Shares beneficially owned by the undersigned stockholder of
Qualia as of the date of this Proxy are listed the preamble of the Voting
Agreement of even date herewith by and between iCAD, Inc., a Delaware
corporation ("iCAD"), and the undersigned stockholder ("Voting Agreement"). Upon
the execution of this Proxy by the undersigned, any and all prior proxies given
by the undersigned with respect to any Shares are hereby revoked and the
undersigned hereby agrees not to grant any subsequent proxies with respect to
the Shares until after the termination of the Merger Agreement in accordance
with the provisions of Section 8 thereof (as defined below).
This Proxy is irrevocable to the fullest extent permitted by law, is
coupled with an interest and is granted pursuant to the Voting Agreement, and is
granted in consideration of iCAD entering into that certain Plan and Agreement
of Merger (the "Merger Agreement"), by and among iCAD, Qualia Acquisition Corp.,
Qualia and certain stockholders of Qualia named therein.
The attorneys and proxies named above, and each of them, are hereby
authorized and empowered by the undersigned, at any time prior to the
termination of the Merger Agreement in accordance with the provisions of Section
8 thereof, to act as the undersigned's attorney and proxy to vote the Shares,
and to exercise all voting, consent and similar rights of the undersigned with
respect to the Shares (including, without limitation, the power to execute and
deliver written consents) at every annual, special, adjourned or postponed
meeting of stockholders of Qualia and in every written consent in lieu of such
meeting (a) in favor of approval of the Merger Agreement, the transactions
contemplated thereby, any other matter necessary for the consummation of the
transactions contemplated thereby and considered and voted upon by the
stockholders of Qualia at any such meeting of stockholders or in such written
consent and (b) against approval of any proposal made in opposition to or in
competition with the consummation of the transactions contemplated by the Merger
Agreement or any action or agreement that would result in a breach in any
respect of any covenant, representation or warranty or any other obligation or
agreement of Qualia under the Merger Agreement or of the undersigned under the
Voting Agreement.
7
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
8
This Proxy shall terminate, and be of no further force and effect,
automatically upon the termination of the Merger Agreement in accordance with
the provisions of Section 8 thereof.
Dated: November __, 2003
By:_____________________________________
Name:
Title:
9
EXHIBIT E
NONCOMPETITION AGREEMENT
NONCOMPETITION AGREEMENT entered into this ____ day of December,
2003 (this "Agreement"), by and between iCAD, Inc., a Delaware corporation (the
"Company"), and _______________ ("Stockholder").
W I T N E S S E T H :
WHEREAS, Stockholder is a stockholder of Qualia Computing, Inc., a
Delaware corporation ("Qualia"), which is simultaneously herewith merging (the
"Merger") with and into Qualia Acquisition Corp., a wholly owned subsidiary of
the Company ("Subsidiary"), pursuant to the provisions of a Plan and Agreement
of Merger dated the date hereof ("Merger Agreement"), among the Company,
Subsidiary and Qualia and certain stockholders of Qualia named therein; and
WHEREAS, the Company and Stockholder recognize that the application
of Stockholder's experience, abilities and services to the business of any
competitor of the Company or its subsidiaries or affiliates (collectively, the
"Company") would cause irreparable damage to the Company; and
WHEREAS, as a condition to the closing of the Merger, Stockholder
will be restricted from competing with or disclosing information concerning the
Company and its business; and
WHEREAS, Stockholder will receive a substantial economic benefit
from the transactions contemplated by the Merger Agreement; and
WHEREAS, without agreement by Stockholder to be bound by the
covenants of this Agreement, the Company and Subsidiary would not have entered
into the Merger Agreement; and
WHEREAS, the provisions of this Agreement will be effective as of
the closing of the transactions contemplated by the Merger Agreement (the
"Effective Date").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, including, without limitation, the issuance to
Stockholder of shares of common stock of the Company as consideration for the
Merger, the parties hereto agree as follows:
1. CONFIDENTIALITY. Stockholder acknowledges that all Confidential
Information (as defined below) shall be and remain the exclusive property of the
Company at all times on and after the date hereof. Stockholder hereby agrees to
keep in strict confidence all Confidential Information. Stockholder shall not
disclose any Confidential Information, or any portion thereof, to any person or
entity nor use, license, sell, convey or otherwise exploit any Confidential
Information, or any portion thereof, for any purpose. As used in this Agreement,
the term "Confidential Information" refers to all information proprietary to,
used by or in the possession of the Company and not generally known in the
industry which was disclosed to or learned by Stockholder while he was employed
by the Company, whether or not reduced to writing and whether or not conceived,
originated, discovered or developed in whole or in part by Stockholder,
including, without limitation: (a) information not generally known in the
industry which relates to the business, products or work of the Company (x) of a
technical nature, such as trade secrets, methods, know-how, formulas,
compositions, designs, processes, information regarding product development and
other similar information and materials, and (y) of business or commercial
nature, such as information or compilation of data about costs, pricing,
profits, compensation, sales, product plans, markets, marketing plans and
strategies, equipment and operational requirements, operating policies or plans,
finances, financial records, methods of operation and competition, management
reorganization, customers and suppliers, and other similar information and
materials of the Company; and (b) any other technical business or commercial
information designated as confidential or proprietary that the Company may
receive belonging to any supplier, customer or others who do business with the
Company. The foregoing limitations on use and disclosure shall not apply to
information that (i) was lawfully known to the recipient before the receipt
thereof, (ii) is learned by the recipient from a third party that is entitled to
disclose same, (iii) becomes publicly known other than through the actions of
the recipient, or (iv) is required by law or court order to be disclosed by the
recipient.
2. NONCOMPETITION.
(a) Nonsolicitation. Stockholder hereby further agrees that,
commencing on the Effective Date and for so long as he is an employee of the
Company or any of its subsidiaries and for a period of twenty-four (24) months
thereafter, he shall not, whether directly or indirectly while in the service of
another, without the prior written consent of the Company, (i) recruit, hire or
solicit, or attempt to recruit, hire or solicit, any person who, during a
twenty-four (24) month period preceding the date of recruitment, hiring or
solicitation, or attempted recruitment, hiring or solicitation, was an employee
of or individual independent contractor to the Company and/or any of its
subsidiaries, or (ii) interfere with or disrupt, or attempt to interfere with or
disrupt, the relationship, contractual or otherwise, between the Company and/or
any of its subsidiaries, on the one hand, and any supplier, customer,
prospective customer, employee or contractor of the Company and/or any of its
subsidiaries or affiliates, on the other hand.
(b) Covenant Not to Compete. Stockholder agrees that,
commencing on the Effective Date and for so long as he is an employee of the
Company or any of its subsidiaries and for a period of twenty-four (24) months
thereafter, he shall not, anywhere in North America, Europe or Japan, without
the prior written consent of the Company, directly or indirectly (i) own, have a
proprietary interest of any kind (except as a shareholder holding less than a 1%
interest in a corporation whose securities are traded on a national securities
exchange or in the over-the-counter market (a "publicly-held company"), or a
limited partner holding no more than a 1% interest in limited partnership),
manage, join, control, advise, be employed by or otherwise engage or participate
in or be connected as an officer, employee, shareholder, partner, advisor,
consultant or otherwise in any business or firm which is in the business of
developing, marketing, servicing or supporting computer aided detection or
decision support systems for medical imaging or financial applications, or any
other related business in which the Company or any of its subsidiaries is
actively engaged or into which the Board of Directors of the Company has
approved the Company's or any of its subsidiaries' entry (collectively, the
"Business"), or (ii) engage in any other activity which is in competition with
the Business.
2
(c) Reformation. The agreements set forth in Section 2(b)
shall be deemed to consist of a series of separate covenants, one for each line
of business carried on by the Company in each region included within the
geographic area referred to in Section 2(b). Stockholder expressly agrees that
the character, duration and geographical scope of Section 2(b) are reasonable in
light of the circumstances as they exist on the date on which this Agreement has
been executed. However, should a determination nevertheless be made by a court
of competent jurisdiction at a later date that the character, duration or
geographical scope of Section 2(b) is unreasonable in light of the circumstances
as they then exist, then it is the intention and the agreement of Stockholder
and the Company that Section 2(b) shall be construed by the court in such a
manner as to impose only those restrictions on the conduct of Stockholder which
are reasonable in light of the circumstances as then exist and as are necessary
to assure the Company of the intended benefit of Section 2(b). If, in any
judicial proceeding, a court shall refuse to enforce all of the separate
covenants deemed included in Section 2(b) because, taken together, they are more
extensive than necessary to assure the Company of the intended benefit of
Section 2(b), it is expressly understood and agreed between the parties that
those of such covenants which, if eliminated, would permit the remaining
separate covenants to be enforced in such proceeding shall, for the purpose of
such proceeding, be deemed eliminated from the provisions hereof. If any
provision of Section 2(b) shall otherwise contravene or be invalid under the
laws of any jurisdiction where it is applicable but for such contravention or
invalidity, such contravention or invalidity shall not invalidate all of the
provisions of Section 2(b), but rather it shall be construed, insofar as the
laws of that jurisdiction are concerned, as not containing the provision or
provision contravening or invalid under the laws of such jurisdiction, and the
rights and obligations created hereby shall be construed and enforced
accordingly.
3. MISCELLANEOUS
(a) Entire Agreement. This Agreement contains the entire
understanding of the parties relating to the subject matter contained herein and
supersedes all prior agreements and understandings, written or oral, relating to
the subject matter hereof. This Agreement shall not be modified, amended or
terminated except in a writing signed by the party against whom enforcement is
sought.
(b) Multiple Counterparts. This Agreement may be executed in
one or more counterparts for the convenience of the parties hereto, all of which
together shall constitute one and the same instrument.
(c) Notices. Any notice, request, instruction or other
document to be given under this Agreement after the date hereof by any party
hereto to any other party shall be in writing and shall be deemed to have been
duly given on the date of service if delivered personally or by telecopier with
confirmed receipt, or on the third day after mailing if sent by certified or
registered mail, postage prepaid, at the addresses set forth below, or to such
other address or person as any party may designate by written notice to the
other:
3
If to the Company: iCAD, inc.
4 Townsend West, Suite 17
Nashua, NH 03063
Attn: W. Scott Parr
Telephone: (603) 882-5200
Fax: (603) 880-3843
With a copy to:
Robert J. Mittman, Esquire
Blank Rome LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Telephone: (212) 885-5000
Fax: (212) 885-5001
If to Stockholder:
(d) Injunctive Relief. The parties hereto acknowledge that the
breach of the provisions set forth in Sections 1 or 2 of this Agreement by
Stockholder cannot readily or adequately be compensated for in damages and that
the breach of any provision thereof may cause the Company irreparable injury.
Therefore, the Company shall be entitled, in addition to all other rights or
remedies that it may have, in law or at equity, to request injunctive and other
equitable relief to prevent any violation of the provisions of. In any such
proceeding, Stockholder hereby waives the claim or defense that the Company has
an adequate remedy at law.
(e) Headings: Pronouns. The headings of the sections of this
Agreement are inserted for convenience only and shall not constitute a part
hereof nor affect in any way the meaning or interpretation of this Agreement.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the entities
or persons referred may require.
(f) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of, the State of Ohio without regard to
principles of conflicts of law). Any controversies regarding this Agreement
shall be brought in state or Federal courts sitting the State of Ohio.
4
(g) Binding Effect. This Agreement shall be binding on, and
inure to the benefit of the parties hereto and their respective representatives,
successors and assigns.
(h) Severability. In the event that any provision contained
herein shall be held to be invalid, illegal or unenforceable for any reason,
such invalidity, illegality or unenforceability shall not affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.
(i) Waiver: Remedies Cumulative. The waiver by any party
hereto of any breach or default by the other party of all of the terms of this
Agreement shall not operate as a waiver of any other breach or default, whether
similar to or different from the breach or default waived. The remedies provided
herein shall be cumulative and shall not preclude the assertion by any party of
any other rights or the seeking of any other remedies against any other party ,
as tile case may be.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
iCAD, inc.
By:_____________________________________
Name: W. Scott Parr
Title: President & CEO
Stockholder:
________________________________________
5
EXHIBIT F
FORM OF OPINION OF COUNSEL TO iCAD
1. Each of iCAD and Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with full
corporate power and corporate authority to (a) own, lease and operate its
properties and (b) carry on its business as currently conducted by it.
2. The execution, delivery, carrying out and performance by each of iCAD
and Subsidiary of each of the Merger Agreement and the other iCAD Documents to
which it is a party and the consummation of all the transactions contemplated
thereby have been duly and validly authorized by iCAD and Subsidiary by all
necessary corporate action. Each of the Merger Agreement and the other iCAD
Documents have been duly executed and delivered by each of iCAD and Subsidiary
to the extent that they are parties thereto, and are valid and binding
obligations of iCAD and/or Subsidiary, as the case may be, enforceable in
accordance with their respective terms.
3. Neither the execution and delivery by iCAD or Subsidiary of the Merger
Agreement or of any other iCAD Documents, nor the consummation of any of the
transactions contemplated thereby, nor the performance by iCAD or Subsidiary of
its respective obligations thereunder, will conflict with or result in a breach
of any provision of the Certificate of Incorporation or By-Laws of iCAD or
Subsidiary, each as amended to date.
4. Upon the filing of the Certificate of Merger in the office of the
Secretary of State of the State of Delaware, and upon acceptance of such filings
and certification by the State of Delaware, the Merger will become effective
pursuant to the General Corporation Law of the State of Delaware in accordance
with the Merger Agreement.
5. The Shares, when issued in accordance with the Merger Agreement, will
be duly authorized, validly issued, fully paid and, subject to the provisions of
the Escrow Agreement, non-assessable.
EXHIBIT G
FORM OF OPINION OF COUNSEL TO QUALIA
1. Each of Qualia and its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, with full corporate power and corporate authority to (a) own,
lease and operate its properties and (b) carry on its business as currently
conducted by it. There are no states or jurisdictions in which the character and
location of any of the properties owned or leased by Qualia or any of its
Subsidiaries, or the conduct of its or their business makes it necessary for
Qualia or any of its Subsidiaries to qualify to do business as a foreign
corporation, except where the failure to so qualify would not have a Material
Adverse Effect on Qualia and its Subsidiaries, taken as a whole.
2. The execution, delivery, carrying out and performance by Qualia and
each of the Principal Stockholders of each of the Merger Agreement and the other
Qualia Documents to which he or it is a party, and the consummation of all the
transactions contemplated thereby have been duly and validly authorized by
Qualia and the Principal Stockholders by all necessary corporate or other
action, including, without limitation, the approvals of Qualia's Board of
Directors and stockholders. Each of the Merger Agreement and the other Qualia
Documents have been duly executed and delivered by Qualia and the Principal
Stockholders, and are valid and binding obligations of Qualia and the Principal
Stockholders, enforceable in accordance with their respective terms.
3. The authorized capital stock of Qualia consists of [1,905,554] shares
of Class A common stock, $.00001 par value, of which ________ shares are issued
and outstanding and [952,777] shares of Class B common stock $.00001 par value
of which _______ shares are issued and outstanding and ____ shares of Preferred
Stock $____ par value, none of which are issued and outstanding. All of the
Qualia capital stock is duly authorized, validly issued, fully paid and
nonassessable. To our knowledge, and except as set forth in the disclosure
schedules to the Merger Agreement, there are no options, warrants or other
rights, agreements, arrangements or commitments of any character relating to the
issued or unissued capital stock of Qualia or obligating Qualia to issue or sell
any shares of capital stock of or other equity interests in Qualia.
4. Neither the execution and delivery by Qualia of the Merger Agreement or
of any other Qualia Documents, nor the consummation of any of the transactions
contemplated thereby, nor the performance by Qualia of its obligations
thereunder, will (a) conflict with or result in a breach of any provision of the
Certificate of Incorporation or By-Laws of Qualia, each as amended to date, (b)
give rise to a default, or any right of termination, cancellation or
acceleration, or otherwise be in conflict with or result in a loss of
contractual benefits under any of the terms, conditions or provisions of any
material note, bond, mortgage, indenture, license, agreement or other instrument
or obligation known to us and to which Qualia or any of its Subsidiaries is a
party or by which Qualia or any of its Subsidiaries or any of their assets may
be bound, or, except as set forth in the Schedules to the Merger Agreement,
require any consent, approval, notice or payment under the terms of any such
document or instrument, (c) violate any order, writ, injunction, decree, law,
statute, rule or regulation of any court or governmental authority which is
applicable to Qualia, or (d) result in the creation or imposition of any lien,
adverse claim, restriction, charge or encumbrance upon any of the material
assets of Qualia or its Subsidiaries or the Qualia or its Subsidiaries Common
Stock, other than Permitted Encumbrances.
5. Except as obtained and in effect at the Closing, no consent, approval,
order, license, permit, notification or authorization of, or registration,
declaration, qualification or filing with, any governmental or administrative
entity or any third party is required on the part of Qualia in connection with
the execution, delivery and performance by Qualia of the Merger Agreement and
the other Qualia Documents.
6. To our knowledge, and except as set forth in the disclosure schedules
to the Merger Agreement, there is no (i) claim, suit, action, arbitration or
legal, administrative or other proceeding or governmental investigation or tax
audit pending or threatened against or related to Qualia or (ii) judgment,
order, injunction or decree of any court, governmental authority or regulatory
agency, to which Qualia and/or Qualia's properties or assets are subject, which
might adversely affect or restrict the ability of Qualia to consummate the
transactions in the manner contemplated by the Qualia Documents or have a
Material Adverse Effect on Qualia and its Subsidiaries, taken as a whole.
7. Upon the filing of the Certificate of Merger in the office of the
Secretary of State of the State of Delaware, and upon acceptance of such filings
and certification by the State of Delaware, the Merger will become effective
pursuant to the General Corporation Law of the State of Delaware in accordance
with the Merger Agreement.
8. To our knowledge, Qualia and its Subsidiaries own or posses adequate
and enforceable rights to all of its Intangibles. To our knowledge, Qualia and
its Subsidiaries have not infringed and are not infringing upon the rights of
others with respect to Qualia's and its Subsidiaries' Intangibles used or
proposed to be used in the conduct of its business; and to the best of our
knowledge, Qualia and its Subsidiaries have not received any notice that any of
them has or may have infringed, is infringing upon or is conflicting with the
asserted rights of other with respect to Qualia's Intangibles which might,
singly or in the aggregate, have a Material Adverse Effect on Qualia and its
Subsidiaries, taken as a whole.