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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
/X/ Filed by the Registrant
/ / Filed by a Party Other than the Registrant
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14a-12
</TABLE>
<TABLE>
<S> <C>
HELPMATE ROBOTICS INC.
- ------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- ------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/ / No Fee Required.
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
Common Stock
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
14,372,152
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
$12,500,000
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$12,500,000
----------------------------------------------------------
(5) Total fee paid:
$2,500
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
</TABLE>
<PAGE>
HELPMATE ROBOTICS INC.
22 SHELTER ROCK LANE
DANBURY, CONNECTICUT 06810
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
DECEMBER 15, 1999
------------------------
A Special Meeting of Stockholders (the "SPECIAL MEETING") of HelpMate
Robotics Inc. (the "COMPANY") will be held on Wednesday, December 15, 1999 at
10:00 a.m., at the offices of the Company, 22 Shelter Rock Lane, Danbury,
Connecticut 06810 for the following purposes:
1. To consider and vote upon a proposal to approve the sale for cash
(the "PROPOSED SALE") to Pyxis Corporation (the "BUYER") of substantially
all of the assets and the assumption by the Buyer of certain specified
liabilities of the Company pursuant to the Asset Purchase Agreement between
the Company and the Buyer dated as of October 14, 1999, the text of which
(other than schedules and exhibits) is attached as Appendix A to the
accompanying proxy statement; and
2. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The proposal to be acted upon at the meeting is further described in detail
in the attached Proxy Statement. Only stockholders of record at the close of
business on November 22, 1999 (the "RECORD DATE") will be entitled to notice of
and to vote at the meeting and any adjournments or postponement thereof.
If your shares are held of record by a broker, bank or other nominee and you
wish to attend the meeting, you must obtain a letter from the broker, bank or
other nominee confirming your beneficial ownership of the shares and bring it to
the meeting. In order to vote your shares at the meeting, you must obtain from
the record holder a proxy issued in your name.
IMPORTANT: WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED, REGARDLESS OF THE NUMBER OF SHARES YOU HOLD.
ACCORDINGLY, YOU ARE ENCOURAGED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
IN THE REPLY ENVELOPE PROVIDED AS SOON AS POSSIBLE. THANK YOU FOR ACTING
PROMPTLY.
BY ORDER OF THE BOARD OF DIRECTORS,
PRUDENCE SHEPARD, ASSISTANT SECRETARY
DANBURY, CONNECTICUT
NOVEMBER , 1999
<PAGE>
HELPMATE ROBOTICS INC.
22 SHELTER ROCK LANE
DANBURY, CONNECTICUT 06810
(203) 798-8988
PROXY STATEMENT
QUESTIONS AND ANSWERS ABOUT THE PROPOSED SALE
Q: When and where is the Special Meeting?
A: The Special Meeting will take place on Wednesday, December 15, 1999, at
10:00 a.m., at the offices of the Company, 22 Shelter Rock Lane, Danbury,
Connecticut 06810.
Q: What proposal will I be voting on at the Special Meeting?
1: You will be asked to consider a proposal to approve the sale for cash (the
"PROPOSED SALE") to Pyxis Corporation (the "BUYER") of substantially all of
the assets and the assumption by the Buyer of certain specified liabilities
of the Company. Specifically, you will be asked to approve and adopt the
Asset Purchase Agreement (the "SALE AGREEMENT") between the Company and the
Buyer dated as of October 14, 1999, the full text of which (other than
exhibits or schedules) is attached as Appendix A to this proxy statement.
Q: Why is your Board of Directors recommending the Proposed Sale?
A: The Board of Directors has determined that the terms of the Proposed Sale are
in the best interests of the stockholders of the Company. In reaching this
conclusion, the Board considered a number of factors, including:
- the amount and nature of the consideration to be received by the Company;
- the financial results of the Company since 1996 and the prospects for the
Company's historical business;
- the Company's working capital and liquidity problems and its inability to
obtain working capital financing from other sources;
- the terms of the Proposed Sale and its effect on the Company's
stockholders;
- the absence of any better offer;
- the current and historical stock prices of the Company's Common Stock; and
- the proposed business plan and opportunities for the Company after the
Proposed Sale.
To review the background and reasons for the Proposed Sale in greater
detail, see "BACKGROUND OF THE PROPOSED SALE" and "REASONS FOR THE PROPOSED
SALE; RECOMMENDATION OF THE BOARD OF DIRECTORS."
Q: How will the Company pay for the costs and expenses associated with the
Proposed Sale?
A: To the extent not paid prior to the closing of the Proposed Sale, the Company
will pay all of the costs and expenses associated with the Proposed Sale,
and certain other liabilities, including payments to certain third parties,
from the proceeds of the Proposed Sale.
Q: Will I receive any payment as a result of the Proposed Sale?
A: The Company's Board of Directors has voted to make a distribution (the
"INITIAL DISTRIBUTION") to the Company's stockholders of record as of the
Distribution Record Date described herein in the aggregate amount of
$9,800,000 from the Proposed Sale proceeds received by the Company at the
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Closing. In the likely event that certain outstanding options and warrants
are exercised, the amount of this Initial Distribution would be $0.58 per
share. It is expected that the Initial Distribution will be made during the
first quarter of fiscal 2000. In the event that the closing of the Proposed
Sale does not occur until the year 2000, however, the Initial Distribution
will be postponed until January 2001. See "CERTAIN FEDERAL TAX
CONSEQUENCES." The Company's Chairman also has the authority to reduce the
Initial Distribution under certain circumstances.
Q: Can I still sell my Shares?
A: Neither the Proposed Sale nor the Sale Agreement will affect your right to
sell or otherwise transfer your Shares of the Company's Common Stock. In
connection with the Sale Agreement, however, certain Stockholders have
entered into specific agreements restricting the right to transfer their
Shares.
Q: What is the required vote to approve the Proposed Sale?
A: The affirmative vote of the holders of a majority of the outstanding Shares
of Common Stock is required to approve the Proposed Sale.
Q: If I sign and return the proxy without completing it, will that be considered
a "yes" or "no" vote?
A: If a proxy is executed and returned without instructions as to how it is to
be voted, such proxy will be voted FOR the approval of the Proposed Sale.
Q: What if I want to change my vote?
A: To change your vote, just send in a later-dated, completed and signed proxy
card before the Special Meeting or attend the Special Meeting in person and
vote.
Q: If my Shares are held in "street name" by my broker, will my broker vote my
Shares for me?
A: Your broker will vote your Shares ONLY if you instruct your broker how to
vote. Your broker should mail information to you that will explain how to
give instructions to your broker.
Q: Will I owe any federal income tax as a result of the Proposed Sale?
1: Although you would not owe any federal income tax as a result of the
Proposed Sale, under certain circumstances you may be required to pay
federal income taxes on amounts distributed by the Company after the closing
of the Proposed Sale. You should contact your own tax advisor regarding the
federal, state and local tax consequences of your receipt of these
distributed amounts. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES."
Q: When do you expect the Proposed Sale to be completed?
A: The Company and the Buyer are working toward completing the Proposed Sale as
quickly as possible, with the goal of closing on the Proposed Sale on the
same date that the Special Meeting is held, or as soon as possible
thereafter.
Q: Will I have dissenters' rights?
A: Under Connecticut law, Stockholders who do not vote in favor of the Proposed
Sale may be entitled to exercise their dissenters' rights to obtain payment
of the fair value of their Shares in the event the Proposed Sale is
consummated. THE FAIR VALUE OF THE SHARES, HOWEVER, WOULD BE DETERMINED
EXCLUDING ANY APPRECIATION IN VALUE IN ANTICIPATION OF THE PROPOSED SALE AND
WOULD BE IN LIEU OF ANY OTHER DISTRIBUTION DESCRIBED IN THIS PROXY STATEMENT
AND ANY OTHER BENEFIT OF CONTINUING OWNERSHIP OF THE SHARES. Failure to
comply with the statutory procedures in the exercise of dissenters' rights
will nullify such rights. See "THE PROPOSED SALE--DISSENTERS' RIGHTS."
Q: What will happen to the Company after the Proposed Sale?
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A: As a result of the Proposed Sale, substantially all of the Company's assets
will be sold to, and certain of its liabilities will be assigned to and
assumed by, the Buyer. After the Proposed Sale, the Company's objective will
then be to serve as a vehicle to effect a business combination, whether by
merger, exchange of capital stock, acquisition of assets or similar
transaction, with, or into, an operating company that the management and the
Board of Directors believe has potential to increase stockholder value. The
Company may at any time cease to pursue this business objective, and may
consider other alternatives, including recommending the dissolution of the
Company to its stockholders.
Q: Will I be able to vote separately on the change in the nature of the
Company's business?
A: You will not have an opportunity to vote separately on the Proposed Sale and
the change in the nature of the business of the Company. Consequently, a
vote in favor of the approval of the Proposed Sale will constitute a vote in
favor of changing the nature of the business of the Company.
Q: What do I need to do now?
A: Please complete and mail your signed proxy card in the enclosed return
envelope as soon as possible, so that your Shares may be represented at the
Special Meeting. In addition, you may attend and vote at the Special Meeting
in person, whether or not you have completed, signed and mailed your proxy
card.
Q: Whom should I call with questions?
A: If you have any questions about the Proposed Sale or this Proxy Statement,
please call Joseph F. Engelberger, the Company's Chairman, at 203-798-8988.
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT
CHARGE UPON REQUEST FROM HELPMATE ROBOTICS, INC., ATTENTION OF JOSEPH F.
ENGELBERGER, CHAIRMAN, TELEPHONE NUMBER 203-798-8988. IN ORDER TO ENSURE TIMELY
DELIVERY OF SUCH DOCUMENTS, ANY REQUEST SHOULD BE DELIVERED TO MR. ENGELBERGER
BY NO LATER THAN DECEMBER 1,1999.
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INFORMATION ABOUT THE MEETING
INTRODUCTION
This proxy statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors (the "BOARD") of HelpMate
Robotics Inc., a Connecticut corporation (the "COMPANY"). Proxies are being
solicited for use at a Special Meeting of Stockholders (the "SPECIAL MEETING")
to be held at 10:00 a.m., local time, on Wednesday, December 15, 1999, at the
offices of the Company, 22 Shelter Rock Lane, Danbury, Connecticut 06810, and
for all adjournments and postponements thereof.
The purpose of the Special Meeting is to consider a proposal to approve the
sale for cash (the "PROPOSED SALE") to Pyxis Corporation (the "BUYER") of
substantially all of the assets and the assumption by Buyer of certain specified
liabilities of the Company. Specifically, you will be asked to approve the Asset
Purchase Agreement between the Company and the Buyer dated as of October 14,
1999, the full text of which (other than schedules and exhibits) is attached as
Appendix A to this proxy statement.
Only holders of record (the "STOCKHOLDERS") of shares ("SHARES") of the
Company's Common Stock, no par value per share (the "COMMON STOCK") as of the
close of business on November 22, 1999, the record date for the Special Meeting
(the "RECORD DATE"), will be entitled to notice of and to vote at the Special
Meeting. At the close of business on the Record Date, 14,372,152 shares of the
Company's Common Stock were outstanding and entitled to vote at the Special
Meeting. Each share of Common Stock is entitled to one vote.
The Notice of Special Meeting, this proxy statement, and the accompanying
proxy are first being mailed on or about November , 1999 to Stockholders of
record as of the close of business on the Record Date.
You can ensure that your Shares are voted at the Special Meeting by signing,
dating and promptly returning the enclosed proxy in the envelope provided.
Sending in a signed proxy will not affect your right to attend the meeting and
vote in person. You may revoke your proxy at any time before it is voted by
notifying the Company's Transfer Agent, American Stock Transfer & Trust Company,
40 Wall Street, New York, New York 10005 in writing or by executing a subsequent
proxy, which revokes any previously executed proxy or by voting in person at the
meeting.
The Company's principal executive offices are located at 22 Shelter Rock
Lane, Danbury, Connecticut, 06810.
INFORMATION CONCERNING SOLICITATION AND VOTING
VOTE REQUIRED. An affirmative vote of the holders of at least a majority of
the outstanding Shares of Common Stock entitled to vote will be required to
approve the Proposed Sale.
QUORUM. In order to constitute a quorum for the conduct of business at the
Special Meeting, a majority of the outstanding shares of Common Stock entitled
to vote at the Special Meeting must be represented at the Special Meeting. If a
Share is represented for any purpose at the Special Meeting, it is deemed to be
present for all other matters. Shares represented by proxies that reflect
abstentions or broker non-votes will be counted as Shares that are present and
entitled to vote for purposes of determining the presence of a quorum.
VOTING OF PROXIES. Stockholders are encouraged to specify the way they wish
to vote their shares by marking the appropriate boxes on the enclosed proxy. All
Shares represented by each properly executed, unrevoked proxy received in time
for the Special Meeting will be voted in the manner specified therein.
Abstentions and broker non-votes are not treated as votes cast at the Special
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Meeting. If the manner of voting with respect to the Proposed Sale is not
specified in an executed proxy received by the Company, the proxy will be voted
FOR approval of the Proposed Sale.
Sending in a signed proxy will not affect a Stockholder's right to attend
the meeting and vote in person. Any Stockholder giving a proxy in the form
accompanying this proxy statement has the power to revoke the proxy prior to its
exercise. A proxy may be revoked at any time before it is exercised by the
Stockholder's delivery of a written instrument of revocation to the Company's
Transfer Agent, American Stock Transfer & Trust Company, 40 Wall Street, New
York, New York 10005. A Stockholder may also revoke the proxy by presenting at
the Special Meeting a duly executed proxy bearing a later date or time than the
date or time of the proxy being revoked. Finally, a proxy may be revoked if the
Stockholder is present at the Special Meeting and elects to vote in person. Mere
attendance at the Special Meeting will not serve to revoke a proxy.
EXPENSES. The expense of soliciting proxies will be borne by the Company.
The solicitation will be by mail. Expenses include reimbursement paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the Special Meeting to beneficial owners of the
Company's Common Stock. Further solicitation of proxies may be made by telephone
or oral communication with Stockholders by directors, officers and other
employees of the Company who will not receive additional compensation for the
solicitation.
The Board does not intend to present any matters for a vote at the meeting
except for proposal to approve the Proposed Sale described in this Proxy
Statement. The persons named in the proxy will, however, have discretionary
voting authority regarding any other business that may properly come before the
Special Meeting.
THE PROPOSED SALE
THE TERMS AND CONDITIONS OF THE PROPOSED SALE ARE CONTAINED IN THE SALE
AGREEMENT, A COPY OF WHICH (WITHOUT EXHIBITS AND SCHEDULES) IS ATTACHED TO THIS
PROXY STATEMENT AS APPENDIX A AND IS INCORPORATED HEREIN BY REFERENCE.The
description in this Proxy Statement of the terms and conditions of the Proposed
Sale is qualified in its entirety by, and made subject to, the more complete
information set forth in the Sale Agreement. Capitalized terms used in this
Proxy Statement but not defined herein shall have the meaning ascribed to such
terms in the Sale Agreement. STOCKHOLDERS ARE URGED TO, AND SHOULD, CAREFULLY
READ THE SALE AGREEMENT IN ITS ENTIRETY.
GENERAL
The Sale Agreement, which was executed and delivered by the Company and the
Buyer on October 14, 1999, provides, in part, for the sale for cash of
substantially all of the assets of the Company (the "PROPERTY") to the Buyer,
and the assumption by the Buyer of certain liabilities of the Company (the
"ASSUMED LIABILITIES"). Subject to approval by the Stockholders, the Company's
Board of Directors has approved the Proposed Sale of the Property to the Buyer
pursuant to the terms and conditions set forth in the Sale Agreement. See "THE
SALE AGREEMENT."
The consideration to be received by the Company from the Buyer pursuant to
the Sale Agreement consists of a cash payment of $12,500,000 payable at the
Closing, subject to certain downward adjustments, payments to third parties and
to a requirement that $1,250,000 of such cash payment be held in escrow and be
available to satisfy certain indemnification and reimbursement obligations of
the Company. See "THE SALE AGREEMENT."
THE COMPANY
The Company was incorporated in May 1984. The Company is primarily engaged
in the design, manufacture and sale of the Company's flagship product, the
HelpMate-Registered Trademark- robotics courier system, a
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trackless robotic courier used primarily in the health care industry to
transport materials. The Company derives revenue primarily from rentals and
sales of HelpMate robots. The Company also sells robotic components such as
LabMate, LightRanger and BiSight and performs research and development
contracts. If the Proposed Sale is approved by the Stockholders and the Proposed
Sale to the Buyer is consummated, the Company will no longer engage in this
business. The Company's business and principal office is located at 22 Shelter
Rock Lane, Danbury, Connecticut 06810, and its telephone number is 203-798-8988.
THE BUYER
The Buyer, established in 1987, is the No. 1 provider of automated
pharmaceutical and medical-supply dispensing systems. These advanced systems
streamline and control inventory-management processes in hospitals and clinics,
and capture information to help further reduce costs and improve outcomes. The
Buyer has advised the Company that the Buyer's technology is used in more
hospitals than any other form of pharmaceutical dispensing automation and that
the Buyer serves more than 3,300 customers worldwide with more than 60,000 units
installed. The Buyer is based in San Diego, California and is a wholly-owned
subsidiary of Cardinal Health, Inc.
BACKGROUND OF THE PROPOSED SALE
Since the founding of the Company in 1984, the Company has proceeded from a
contract research robotics company into a product company with the HelpMate
robotic courier system being its flagship product. The Company believes it has
proven the viability of HelpMate as a hospital courier.
Historically, the Company has been dependent upon sources other than
operations to finance its working capital requirements. These sources include
loans and/or investments from stockholders and their affiliates, private
placements of its debt and equity securities, the Company's initial public
offering and the proceeds of financed rentals.
During the second half of 1997, the Company's financial condition
deteriorated significantly as the Company experienced severe cash shortages. A
substantial downsizing of the Company was concluded in the third quarter of
fiscal 1997, sales and marketing activities were limited, the Company relocated
to smaller operational space, and the Company continued to build and install
robots at a reduced rate, filling orders from its existing backlog, and using
materials and parts which had been previously ordered and received. However, no
new materials for robots were ordered.
In the first half of 1998, the Company completed a series of steps directed
at improving its short-term liquidity and cash flow, including the receipt of
certain loans, the completion of a $1,350,000 private placement of common stock
and warrants, the agreement by certain creditors to accept reduced cash payments
in liquidation of outstanding trade payables, and the agreement by certain
creditors, including the Company's Chairman, Joseph F. Engelberger, and
Connecticut Innovations, Incorporated ("CONNECTICUT INNOVATIONS"), to whom the
Company has certain royalty obligations, to convert their loans, trade payables,
and other obligations of the Company to them into shares of common stock and
warrants to purchase common stock. To further reduce costs, the Company changed
its outside auditors. By mid-1998, the Company's near-term objective was to
stabilize its business at the level of its then current customer base while
seeking additional financing necessary to resume its original marketing plans.
In July of 1998, on behalf of the Company, Mr. Engelberger contacted the
Buyer suggesting that the Buyer consider having the Company develop a version of
its HelpMate robot to serve with the Buyer's "MedStation-Registered Trademark-."
In September of 1998, representatives of the Buyer visited the Company and
discussions then started on how the Company might design a version of its
HelpMate robot which was compatible with the Buyer's product and how the Buyer
might market the HelpMate robot courier in all of its applications. As
discussions progressed, the interest of the Buyer broadened. Discussions
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between the Buyer and the Company next led to consideration of the Buyer
becoming the Company's exclusive distributor. In October 1998 the Buyer's Vice
President of Marketing wrote to Mr. Engelberger suggesting a phased approach of
co-marketing followed by co-development and requested additional information
about the Company and its financial condition. However, the Company continued to
seek an infusion of working capital.
In October 1998 the Company's efforts to improve its working capital
position were dealt a severe setback. The Company announced that it was
conducting an investigation to determine the extent to which it had been
defrauded by its former payroll company resulting in an estimated exposure to
the United States Internal Revenue Services ("IRS") of $1,000,000 for unpaid
payroll taxes exclusive of interest and penalties.
The Company continued to pursue other avenues of meeting its working capital
needs. However, efforts to become bankable were thwarted by the potential IRS
liability. Three banks had been contacted about lines of credit; each rejected
the Company's proposals in light of the potential IRS liability. The Company
also considered the possibility of another round of private financing.
Management's analysis was that, given the Company's market capitalization, an
additional private placement, if available, would result in an unacceptable
dilution to the Company's existing stockholders. Management's belief was that a
fair valuation of the Company demanded a strategic investor who could see the
advantage of the Company's technology and the product acceptance so far garnered
by the Company's HelpMate robotic couriers.
In January 1999, Mr. Engelberger met with representatives of the Buyer and
indicated that the Company had two objectives: finding a strong national
distributor which handles equipment sales to hospitals, and obtaining sufficient
working capital to supply product. At the end of that month, the Buyer's Vice
President of Marketing wrote back to the Company asking for exclusivity in
discussions regarding a sole source marketing agreement, as well as an
"equity/co-development program." In February 1999, the Company and the Buyer
signed a confidentiality agreement permitting the Buyer to conduct a due
diligence investigation of the Company.
In February 1999, officials from the Buyer and from its parent corporation,
Cardinal Health Inc. met with the Company and suggested that the Buyer acquire
the Company's HelpMate product line. Mr. Engelberger responded to the Buyer
suggesting, instead, that the Company continue to own the product line and that
the Buyer consider a significant equity investment in the Company. The Buyer,
however, expressed concerns over a co-marketing, co-development arrangement. As
discussions continued, the Buyer stated it would not agree to an intermediate
transaction involving just a distribution agreement and an investment in the
Company. During the spring of 1999, discussions continued as the Buyer conducted
a due diligence investigation into the Company, its business, technical
capabilities and its financial condition.
On August 24, 1999 the Company reached a settlement with the IRS regarding
the unpaid payroll tax obligations. The Company paid $100,067, including
interest, to the IRS in full payment of the IRS claims, and agreed with the IRS
to forego the use of $2,710,432 of net operating loss carry forwards.
During the course of its due diligence, the Buyer cited three key issues
which would be required to be resolved as a condition to its moving forward with
a sale agreement. The first was that four of the Company's stockholders that had
previously been granted certain "negotiation rights" with respect to any sale of
the Company's assets to a third party waive such rights. The Company contacted
these stockholders and by September 3, 1999 the Company had obtained the
requested waivers.
Second, the Buyer noted that any sale of the Company's assets would require
the consent of Connecticut Innovations, which held a security interest in the
Company's assets. Moreover, the Buyer sought relief from, among other things,
the royalty payment obligations which the Company was required to pay to
Connecticut Innovations upon the sale of its robots. The Buyer also required
that
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Connecticut Innovations pledge to vote its Shares in favor of the transaction
with the Buyer. Discussions with Connecticut Innovations continued through
September. On October 13, 1999, Connecticut Innovations consented to the
Proposed Sale, and agreed to release the Company from the royalty obligations
and all other obligations and restrictions under the Company's agreements with
Connecticut Innovations in exchange for certain payments. See "CONNECTICUT
INNOVATIONS AGREEMENTS."
Third, the Buyer requested that Leasing Technologies International, Inc.
("LTI") consent to the Proposed Sale and agree to modify certain obligations of
the Company to LTI regarding exclusivity and rights of first refusal with
respect to financing under the Company's existing agreements with CII. On
October 13, 1999, LTI agreed with the Buyer to do so in exchange for a $25,000
payment from the Buyer to be made at the Closing. See "AGREEMENT WITH LTI."
The discussions with the Buyer regarding the material terms and conditions
of the sale, including pricing, continued through September and early October,
pending resolution of the Connecticut Innovations and LTI issues. In its
negotiation of pricing terms, the Company asserted that, in the Company's case,
market valuation was not appropriate in light of the value of the Company's
proprietary technology to the Buyer.
On September 23, 1999, the Company's Board of Directors reviewed the terms
of a draft purchase agreement and evaluated the benefits of transaction
described therein. After discussion and with the recommendation of the Company's
senior management, the Board of Directors determined that the Sale Agreement and
Proposed Sale were fair to and in the best interests of the stockholders,
approved the Sale Agreement and Proposed Sale, and authorized the execution of
the Sale Agreement, as conclusively negotiated by management. See "REASONS FOR
THE PROPOSED SALE; RECOMMENDATION OF THE BOARD OF DIRECTORS."
Execution of the Sale Agreement was delayed, however, through early October
pending resolution of certain issues regarding the payment of the waiver fee
proposed to be paid to Connecticut Innovations. See "CONNECTICUT INNOVATIONS
AGREEMENTS." After further discussions, and following the execution of the
Connecticut Innovations and LTI agreements described below, on the evening of
October 14, 1999, the Company and the Buyer reached agreement on all outstanding
issues and executed the Sale Agreement. The following morning, the Buyer issued
a press release announcing the execution of the Sale Agreement.
REASONS FOR THE PROPOSED SALE; RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE TERMS OF THE PROPOSED SALE
ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY, AND
HAS APPROVED THE SALE AGREEMENT. ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS
THAT THE STOCKHOLDERS VOTE TO APPROVE AND ADOPT THE SALE AGREEMENT. The purchase
price was negotiated on an arm's length basis between representatives of the
Company and the Buyer. In reaching its conclusion, the Board considered a number
of factors, including: (i) the amount and nature of the consideration to be
received by the Company; (ii) the financial results of the Company since 1996
and the prospects for the Company's historical business; (iii) the Company's
working capital and liquidity problems and its inability to obtain working
capital financing from other sources; (iv) the terms of the Proposed Sale and
its effect on the Company's stockholders; (v) the absence of any better offer;
(vi) the current and historical stock prices of the Common Shares; and
(vii) the proposed business plan and opportunities for the Company after the
Proposed Sale.
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During the course of the negotiations with the Buyer, and in evaluating the
Buyer's offer, the Company's Board of Directors of the Company considered the
following:
- The Company's continued dependence upon sources other than operations to
finance its working capital requirements;
- That the Company's relative mix of robot rentals versus robot sales
continued to erode the Company's cash position;
- The price and terms of the Proposed Sale, as reflected in the Sale
Agreement;
- That the Buyer will pay cash for the assets purchased, eliminating the
credit risk related to a Buyer promissory note and the investment risk
associated with receiving stock or other securities as consideration;
- The advantages and disadvantages of selling the Company's business in a
negotiated, arms-length transaction without conducting an auction, which
principal advantages included the avoidance of instability among
employees, the generally shorter time needed to effect a negotiated
transaction, and the presence of a buyer that could continue the Company's
product line and effect the Proposed Sale without a financing contingency;
- The effect of the Proposed Sale on the Company's stockholders which
included the likelihood that the Company could make a per share
distribution to the Company's stockholders significantly in excess of the
prices per share at which the Company's shares had been trading during an
extended period prior to the execution of the Sale Agreement;
- That, based on the Company's efforts in seeking potential acquirors and
management's assessment of the marketplace, a sale could not be structured
with another buyer, including prior strategic investors which held a
minority interest in the Company, that would offer greater value to the
Stockholders;
- The Company's goals and future business prospects; and
- That the terms and conditions of the Sale Agreement were favorable to the
Company and its stockholders.
The Board also placed value on the possibility that the Company may be able
to generate returns for its stockholders in the future through the
implementation of a post-sale strategy. See "BUSINESS OF THE COMPANY FOLLOWING
THE PROPOSED SALE."
THE COMPANY DID NOT OBTAIN, AND THE BOARD OF DIRECTORS DID NOT RELY ON, ANY
REPORT, OPINION OR APPRAISAL REGARDING THE PROPOSED SALE, THE SALE AGREEMENT OR
THE TRANSACTIONS RELATED TO THE PROPOSED SALE.
The foregoing discussion of the factors considered by the Board is not
intended to be complete, though it does include all material factors considered
by the Board. The Board did not attempt to quantify or otherwise assign relative
weights to the specific factors it considered or determine that any factor was
of particular importance. A determination of various weightings would, in the
view of the Board, be impractical. Rather, the Board viewed its position and
recommendations as being based on the totality of the information presented to,
and considered by, the Board. In addition, individual members of the Board may
have given different weight to different factors.
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THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL OF THE
PROPOSED SALE.
DISSENTERS' RIGHTS
The rights of the Stockholders to dissent from the Proposed Sale are
governed by the provisions of the Connecticut Business Corporation Act (the
"CBCA"). Pursuant to Section 33-855 through Section 33-872 of the CBCA, a
Stockholder of the Company has the right to dissent from the Proposed Sale and
demand payment in cash for the fair value of his or her Shares of the Company's
Common Stock as of the time immediately before the consummation of the Proposed
Sale, excluding any appreciation or depreciation in value in anticipation of the
Proposed Sale. A copy of the dissenters' rights provisions of the CBCA is
attached to this Proxy Statement as Appendix C.
To claim this right the Stockholder:
(1) must, before the vote is taken, deliver to the Company a written notice
(addressed to: the HelpMate Robotics Inc., 22 Shelter Rock Lane, Danbury,
Connecticut 06810-8159, Attention: Assistant Secretary) of the
Stockholder's intent to demand payment for his or her Shares if the
Proposed Sale is effectuated; and
(2) must not vote in favor of the Proposed Sale in person or by proxy at the
Special Meeting.
A STOCKHOLDER WILL NOT BE CONSIDERED ENTITLED TO RIGHTS UNDER SECTION 33-855
THROUGH SECTION 33-872 OF THE CBCA UNLESS THE STOCKHOLDER BOTH DELIVERS TIMELY
WRITTEN NOTICE OF INTENT TO DEMAND PAYMENT, AND EITHER VOTES AGAINST THE
PROPOSED SALE OR REFRAINS FROM VOTING.
Stockholders who execute and return the enclosed proxy but do not specify a
choice on the Proposed Sale will be deemed to have voted in favor of the
Proposed Sale, and, accordingly to have waived their dissenters' rights, unless
they revoke the proxy prior to its being voted.
If the Proposed Sale is approved by the Stockholders, then no later than ten
(10) days after the consummation of the Proposed Sale, the Company will send a
notice of dissenters' rights to those Stockholders who have given the Company
written notice (in the manner set forth above) of their intent to demand
payment, and have not voted in favor of the Proposed Sale at the Special
Meeting. The Company's notice will (1) state where the payment demand must be
sent, and where and when the dissenting Stockholders' stock certificates must be
deposited, (2) supply a proper form for demanding payment, (3) set a date by
which the Company must receive the payment demand (which date shall be no fewer
than 30 days and no more than 60 days after the date the notice is delivered),
and (4) include a copy of Section 33-855 through Section 33-872 of the CBCA.
After the consummation of the Proposed Sale or upon receipt of a payment
demand, the Company will pay each dissenting Stockholder who has complied with
all requirements of Section 33-855 through Section 33-872 of the CBCA and of the
Company's notice, the Company's estimate of the fair value of the dissenting
Stockholder's shares as of the time immediately prior to the Proposed Sale,
EXCLUDING ANY APPRECIATION IN VALUE IN ANTICIPATION OF THE PROPOSED SALE, plus
interest accrued from the Closing of the Proposed Sale until the payment date.
The determination of the Company's estimate of "fair value" will be based on the
financial condition of the Company, the trading history of the Company's Common
Stock, and other factors normally used to determine the value of a publicly-held
company's stock. See "HISTORICAL MARKET PRICE" and "RECENT MARKET PRICE" for a
description of the Company's reported trading prices during the periods prior to
the announcement of the Sale Agreement.
Dissenters may object to the fair value estimated by the Company by stating
their estimate of the fair value and demanding payment of the additional amount
claimed as fair value plus interest within 30 days after the Company makes
payment for the dissenters' shares. The Company shall either pay the
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amounts demanded by the dissenting Stockholders, or within 60 days after
receiving the demand for payment commence an action in the Superior Court for
the Judicial District of Danbury at Danbury, Connecticut, petitioning the court
to determine the fair value of the dissenters' shares and accrued interest. If
the Company initiates a judicial proceeding to determine fair value, all
dissenters whose demands remain unsettled shall be made parties to the
proceeding. The Court may appoint one or more appraisers to recommend a decision
on the fair value. The costs of the proceeding, including reasonable
compensation and expenses of the appraisers appointed by the Court, will be
assessed against the Company, except that the Court may assess costs against
some or all of the dissenters, in amounts the Court finds equitable, to the
extent that the Court finds that the dissenters acted arbitrarily, vexatiously
or not in good faith in demanding payment. The Court may also assess the fees
and expenses of counsel and experts for the parties, against the Company or any
dissenter or dissenters, in amounts the Court finds equitable. Each dissenter
made a party to the action will be entitled to receive the amount, if any, by
which the Court finds the fair value of the dissenters' shares, plus interest,
exceeds the amount paid by the Company.
THIS SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS DOES NOT PURPORT TO BE
COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY THE STATUTORY PROVISIONS ATTACHED
TO THIS PROXY STATEMENT AS APPENDIX C.
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THE SALE AGREEMENT
The Company and the Buyer are the parties to the Sale Agreement. THE
DESCRIPTION OF THE SALE AGREEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE COMPLETE TEXT OF THE SALE AGREEMENT, A COPY OF WHICH (WITHOUT EXHIBITS OR
SCHEDULES) IS ATTACHED TO THIS PROXY STATEMENT AS APPENDIX A AND IS INCORPORATED
HEREIN BY REFERENCE. Terms not otherwise defined in this summary or elsewhere in
this Proxy Statement have the meaning set forth in the Sale Agreement. All
stockholders are urged to carefully read the Sale Agreement in its entirety.
THE PROPERTY TO BE SOLD
At the Closing, the Company has agreed to sell, and the Buyer has agreed to
purchase, substantially all of the assets, properties, rights (contractual or
otherwise) and business of the Company (the "PROPERTY"). Excluded from the sale
are certain items of personal property consisting of certain claims against the
Company's former payroll service related to the IRS liability described above,
the Seller's corporate records and tax returns, certain non-assignable permits
and licenses, certain benefit plans and employment related agreements, insurance
policies and an account receivable in favor of LTI which is offset by an account
payable (the "EXCLUDED ASSETS").
With respect to certain Contracts and Personal Property Leases included
within the Property, the Company must use either its best efforts or
commercially reasonable efforts to obtain the consent of such other party to an
assignment to the Buyer. If such consent is not obtained, the Company has agreed
to cooperate with Buyer in any reasonable arrangement designed to provide the
Buyer with the benefits of any such Contract or Personal Property Lease.
LIABILITIES TO BE ASSUMED BY THE BUYER
At Closing the Buyer will assume the Company's liabilities and obligations
arising under the Personal Property Leases and Contracts to the extent such
liabilities and obligations arise and are first required to be performed after
the Closing and such Contracts and Personal Property Leases are actually
assigned to Buyer or Buyer gets the benefit of such Contracts and Personal
Property Leases. The Buyer will also assume certain other liabilities of Seller
consisting of accounts payable other than accounting or legal expenses, certain
sales tax liabilities, sublease security deposits, unearned maintenance contract
obligations, unamortized liabilities to LTI, office equipment liabilities, and
new liabilities arising in the ordinary course of business which would be
included in the specified liabilities consistent with Seller's past practices
(collectively, the "SCHEDULE 2.1 LIABILITIES"). All of the liabilities of Seller
being assumed by Buyer are hereinafter referred to as the "ASSUMED LIABILITIES."
The Buyer will not assume or otherwise be responsible for any other liability or
obligation of any nature of the Company (the "RETAINED LIABILITIES"), including
any liability or obligation of the Company to any Governmental Authority with
respect to unpaid Taxes, other than as expressly assumed in the Schedule 2.1
Liabilities.
PURCHASE PRICE
Upon the terms, conditions and adjustments set forth in the Sale Agreement,
the Purchase Price to be paid for the Property will be $12,500,000 (the
"PURCHASE PRICE"). The Purchase Price shall be payable by the Buyer as follows:
(a) a cash payment of $11,250,000 (the "CLOSING DATE PAYMENT"), less the
Estimated Closing Date Net Current Asset Value Deficiency described below, shall
be payable to the Company in cash at the Time of Closing; and (b) a cash payment
of $1,250,000 (the "HOLDBACK AMOUNT"), shall be deposited into an escrow account
at the Closing to be held in accordance with the terms and conditions of an
Escrow Agreement by and among the Company, the Buyer and Bank One Trust Company,
NA, a national banking association (the "ESCROW AGREEMENT"). A copy of the
Escrow Agreement (without exhibits or schedules) is attached hereto as Annex B.
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CLOSING ADJUSTMENTS
The Purchase Price and Closing Date Payment are subject to a downward
adjustment at the Closing. Prior to the Closing, the Company shall estimate its
Closing Date Net Current Asset Value (as described below) as of the Time of
Closing (the "ESTIMATED CLOSING DATE NET CURRENT ASSET VALUE"). To the extent
this Estimated Closing Date Net Current Asset Value is less than zero, such
difference (the "ESTIMATED CLOSING DATE NET CURRENT ASSET VALUE DEFICIENCY")
will be deducted from the Closing Date Payment.
POST CLOSING ADJUSTMENTS
The Purchase Price is subject to a downward adjustment following the
Closing. Within thirty (30) days after the Closing, the Company must deliver its
balance sheet dated as of the Closing Date (the "CLOSING DATE BALANCE SHEET")
and an accompanying closing statement (the "CLOSING STATEMENT") of the Company's
Closing Date Net Current Asset Value and its Book Asset Value as determined
below.
If the Closing Date Net Current Asset Value is less than zero and less than
the Estimated Closing Date Net Current Asset Value, the Company must pay to the
Buyer, within thirty (30) business days after the final determination, the
difference between the Closing Date Net Current Asset Value and the Estimated
Closing Date Net Current Asset Value (the "CLOSING DATE NET CURRENT ASSET VALUE
DEFICIENCY") (together with interest at the rate of nine percent (9%) per annum
from the Closing Date until paid).
If the Book Asset Value is less than $1,900,000, the Company must pay to the
Buyer, within thirty (30) business days after the final determination of the
Book Asset Value, the amount that the Book Asset Value is less than $1,900,000
(the "BOOK ASSET VALUE DEFICIENCY") (together with interest at the rate of nine
percent (9%) per annum from the Closing Date until paid).
The Buyer has the right, but not the obligation, to withdraw the Closing
Date Net Current Asset Value Deficiency or the Book Asset Value Deficiency, as
the case may be, from the Holdback Amount (together with interest at the rate of
nine percent (9%) per annum from the Closing Date until withdrawn).
The "CLOSING DATE NET CURRENT ASSET VALUE" shall be determined by
subtracting: (i) the sum of the Schedule 2.1 Liabilities shown on the Closing
Date Balance Sheet, from (ii) the amount of cash and cash equivalents shown on
the Closing Date Balance Sheet. The "BOOK ASSET VALUE" shall mean the book value
(as determined in accordance with GAAP) of the assets being purchased as
reflected on the Closing Date Balance Sheet (x) decreased by (A) the amount of
cash and cash equivalents reflected on the Closing Date Balance Sheet, and
(B) accumulated depreciation relating to such assets as of the Time of Closing,
and (y) increased by the net proceeds actually received by the Company prior to
the Time of Closing in respect of sales of inventory and robots in the ordinary
course of business consistent with past practice; provided, however, that such
proceeds are either transferred to the Buyer at the Time of Closing or are used
by the Company prior to the Time of Closing to discharge the Schedule 2.1
Liabilities.
The Buyer has the right to object to the Closing Date Balance Sheet and
Closing Statement within 60 days of its receipt. With respect to any disputed
amounts, the parties have agreed to negotiate in good faith to resolve any such
disputes. If they are unable to so resolve all such disputes, then the disputes
shall be submitted to a nationally recognized public accounting firm selected by
the parties who shall be engaged to provide a final, conclusive and binding
resolution of all unresolved disputes.
The Holdback Amount is also subject to a reduction with respect to a
reimbursement to the Buyer for certain payments made in accordance with the
retention agreements described below. See "TREATMENT OF THE COMPANY'S
EMPLOYEES."
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ESTIMATE OF CLOSING AND POST CLOSING ADJUSTMENTS
As of the date of this Proxy Statement, the Company estimates that
adjustments for the Estimated Closing Date Net Current Asset Value Deficiency,
the Closing Date Net Current Asset Value Deficiency, the Book Asset Value
Deficiency, and any interest payable thereon will be approximately $200,000.
This amount is subject to change and can be affected by, among other things,
unanticipated changes in the results of the Company's operations through the
Closing Date and any dispute between the Company and the Buyer over the
calculations of the post-closing adjustments described above.
CONNECTICUT INNOVATIONS AGREEMENTS
As a condition to its execution of the Sale Agreement, the Buyer required
that the Company obtain the consent of Connecticut Innovations. Connecticut
Innovations is a beneficial owner of 3,078,675 Shares (including certain
warrants) of the Company's Common Stock and has a security interest in certain
of the Company's assets, including certain of the Property to be sold to the
Buyer. The Company is required to pay certain royalties to Connecticut
Innovations under a Development Agreement dated December 29, 1986, pursuant to
which Connecticut Innovations reimbursed the Company for certain costs related
to the development of the HelpMate robotics courier system (the "SPONSORED
PRODUCTS"). Such royalties must be paid until the total royalties paid to or
credited by Connecticut Innovations have aggregated $2,205,000 ("ROYALTY
THRESHOLD"). Thereafter, the Company must pay royalties at a reduced rate for a
period equal to the period of time taken to reach the Royalty Threshold. The
Company's obligations to make royalty payments under the Development Agreement
are secured by Connecticut Innovations's lien on certain of the Company's
property.
In October 1999, Connecticut Innovations executed a letter agreement (the
"CONNECTICUT INNOVATIONS CONSENT LETTER") consenting to the Proposed Sale, and
agreeing to release the Company from all royalty and other obligations to
Connecticut Innovations. Connecticut Innovations' consent and release are
subject to the following conditions: (1) the closing of the Proposed Sale must
take place by February 1, 2000; (2) at the closing, Connecticut Innovations must
be paid all accrued and unpaid royalties through the Closing Date; (3) at the
closing, Connecticut Innovations must receive an additional payment of $400,000
(the "WAIVER AND RELEASE PAYMENT"); and (4) (a) the total consideration paid to
the Company at the Closing, including amounts placed in escrow, must be at least
$0.65 per share of outstanding Company shares (assuming the exercise of all the
Special Options described below), or (b) Connecticut Innovations shall receive
an additional payment (the "CONNECTICUT INNOVATIONS ADDITIONAL PAYMENT") at the
closing equal to the multiple of (i) the difference between the per share amount
(assuming the exercise of all the Special Options described below) received by
the Company at the Closing and $0.65, multiplied by (ii) the sum of the number
of Shares owned by Connecticut Innovations and the number of warrants held by
Connecticut Innovations with a per share exercise price of $0.65 or less,
reduced by (iii) the aggregate exercise price of such Connecticut Innovations
warrants.
The Buyer and the Company have agreed that the Buyer shall pay $300,000 of
the Waiver and Release Payment and that the Company shall pay $100,000 of the
Waiver and Release Payment. The Company also estimates that, assuming a
December 15, 1999 Closing Date, the aggregate amount of all royalties required
to be paid by the Company to Connecticut Innovations as of the Closing Date will
be approximately $132,000. Finally, the Company has estimated that it will not
be required to make any Connecticut Innovations Additional Payment.
AGREEMENT WITH LTI
In connection with the Proposed Sale, LTI has entered into an agreement with
the Buyer (1) consenting to the Proposed Sale and to the assignment to and
assumption by the Buyer of LTI's agreements with the Company; (2) from and after
the closing, consenting to waive all exclusivity and
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first refusal rights LTI enjoys with respect to equipment financing by the
Company pursuant to the agreements between LTI and the Company; and
(3) affirming the remaining amount of the rental payments due to LTI from the
Company pursuant to the Master Lease Agreement dated January 23, 1997. LTI is a
creditor and a security-holder of the Company. LTI provided courier lease
financing to the Company by purchasing HelpMate robotic couriers and leasing
them back to the Company to sublease to hospitals, or by leasing them to
hospitals directly. The HelpMate robotic couriers leased to the Company for
sublease to the hospitals are the subject of the Master Lease Agreement. The
Company's agreements with LTI also give LTI certain rights of first refusal and
exclusivity rights for future equipment financing by the Company. LTI's consent
and waiver of rights are contingent upon its receipt of $25,000 from the Buyer
on the Closing Date.
BUYER'S REPRESENTATIONS AND WARRANTIES
The Buyer has made certain representations and warranties in the Sale
Agreement relating to: (a) its corporate organization and authority, (b) its
authority relative to the Sale Agreement, (c) the absence of conflicts in its
performance of the Sale Agreement, (d) the absence of any brokerage, finder's or
similar fees in connection with the transaction and (e) its financial capacity
to pay the Closing Date Payment and Holdback Amount.
THE COMPANY'S REPRESENTATIONS AND WARRANTIES
The Company has made certain representations and warranties in the Sale
Agreement relating to: (a) its corporate organization and authority, (b) its
authority relative to the Sale Agreement, (c) its capitalization, (d) the
absence of any conflicts in its performance of the Sale Agreement, (e) the
absence of certain changes since December 31, 1998, (f) its employees and
certain compensation paid or payable by the Company, (g) its financial
statements, (h) its filing of tax returns and payment of taxes, (i) its
compliance with law, (j) its Intellectual Property, (k) its title to and the
condition of its properties, (l) certain environmental matters, (m) litigation,
(n) the absence of brokerage, finders' or similar fees in connection with the
transactions, (o) its employee benefit plans, (p) certain of its contracts,
(q) its accounts receivable and inventory, (r) labor matters, (s) the absence of
undisclosed liabilities, (t) the operations of the Company's business and its
relationships with suppliers and customers, (u) product warranties and
liabilities, (v) the recommendation of the Company's Board of Directors,
(w) its insurance, (x) its year 2000 compliance, (y) its compliance with certain
Negotiation Rights, and (z) the technology developed under certain Government
Agreements.
PROHIBITION AGAINST SOLICITING ACQUISITION PROPOSALS
Without the prior written consent of the Buyer, the Company has agreed not
to directly or indirectly solicit or encourage (including by way of furnishing
any non-public information concerning its business, properties or assets), or
enter into or participate in any negotiations or discussions concerning, any
Acquisition Proposal. "ACQUISITION PROPOSAL" means any proposal received by the
Company prior to the Closing for a merger or other business combination
involving the Company, or for the acquisition of the Company, or the acquisition
of an equity interest in, or a portion of the assets of, the Company, other than
as contemplated by the Sale Agreement. The Buyer has the right to obtain
injunctive relief to enforce the foregoing provisions.
CONDUCT OF BUSINESS PRIOR TO CLOSING
The Company has agreed that prior to the Time of Closing, it shall operate
its business and maintain the Property in the ordinary course of business
consistent with past practice and that it shall not take certain actions without
the prior written consent of the Buyer, including (a) incurring any obligation
or liability (absolute or contingent), except (i) sales of inventory in the
ordinary course of business and consistent with past practice, and (ii) current
liabilities incurred, and obligations under
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contracts entered into, in the ordinary course of business consistent with past
practice which do not exceed $20,000 in respect of any individual contract or
$60,000 with respect to all such contracts; (b) paying any obligation or
liability (absolute or contingent) other than (i) liabilities payable in the
ordinary course of business, (ii) certain royalties owed to Connecticut
Innovations, and (iii) any accrued vacation pay to its employees;
(c) encumbering or selling any of the Property; (d) entering into any
transaction other than in the ordinary course of business consistent with past
practice; (e) introducing any new method of management, operation or accounting
with respect to the Company's business; or (f) declaring or paying any dividend
or other distribution (whether in cash, stock, property or any combination
thereof) in respect of the Company's capital stock.
TREATMENT OF THE COMPANY'S EMPLOYEES
In connection with the transaction, the Buyer has entered into retention
agreements with each employee of the Company (other than Mr. Engelberger). Each
agreement provides that the employee will be entitled to a bonus of up to 25% of
the employee's base salary (the "MAXIMUM BONUS") if the employee remains
employed with Pyxis through the one-year anniversary of the Closing (in which
case the employee will be entitled to 75% of the Maximum Bonus), or through the
two-year anniversary of the Closing (in which case the employee will be entitled
to 100% of the Maximum Bonus. The Company has agreed to reimburse the Buyer for
certain portions of the retention amounts payable by the Buyer in an aggregate
amount of up to $31,593 to be funded from the Holdback Amount.
Moreover, the Company has agreed not to employ or enter into any
partnership, joint venture or other business association with, any person who
was at any time during the twelve months preceding the Closing an employee,
representative or agent of the Company for a period of twelve months after such
person ceases or has ceased, for any reason, to be an employee, representative
or agent of the Company.
THE COMPANY'S NON-COMPETE RESTRICTIONS
During the five-year period following the Closing Date, the Company has
agreed, in the United States or any other country, not to, directly or
indirectly, whether individually on its own account, or as a shareholder,
partner, joint venturer, director, officer, employee, consultant, creditor
and/or agent, of any person, firm, corporation or other entity or otherwise:
(i) enter into or engage in any business which competes with the business
carried on by Company on the date of the Sale Agreement, or by the Buyer or any
Buyer Affiliates (the "BUSINESS"); (ii) solicit customers or business patronage
which result in competition with the Business; or (iii) promote or assist,
financially or otherwise, any person, firm, association, corporation or other
entity engaged in any business which competes with the Business; provided,
however, the foregoing covenant shall not be deemed to have been violated by the
ownership of shares of any class of capital stock of any publicly held
corporation so long as the aggregate holdings represent less than 3% of the
outstanding shares of such class of capital stock. "BUYER AFFILIATE" includes
the Buyer and all subsidiaries and affiliates of the Buyer.
LEASE NEGOTIATION ASSISTANCE
The Company agreed to cooperate with the Buyer and take all action
reasonably requested by the Buyer in connection with negotiating the termination
or buy-out of the Company's lease of its Danbury, Connecticut headquarters.
CLOSING
The Company anticipates that the Closing of the Proposed Sale will take
place on the same date that the Special Meeting is held, or as soon as possible
thereafter, if the Proposed Sale is approved by the Company's Stockholders at
the Special Meeting.
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CONDITIONS TO THE PROPOSED SALE
The obligations of the Buyer to effect the Proposed Sale are subject to,
among other things: (a) the representations and warranties of the Company in the
Sale Agreement being true and correct when made and as of the Time of Closing;
(b) the Company having performed or complied with all covenants and other
obligations under the Sale Agreement in all material respects; (c) the Company
having obtained (i) all consents required under any law, statute, rule,
regulation, order or decree in connection with the consummation of the Sale
Agreement, except where the failure to obtain any such consent would not have a
Material Adverse Effect on the Buyer or the Company's business, and (ii) the
certain specific consents listed in the Sale Agreement; (d) there not having
occurred any material adverse change in the condition (financial or otherwise)
of the Company's business or the Property; (e) the Stockholders having approved
the Proposed Sale at the Special Meeting; and (f) the conditions specified in
the Connecticut Innovations Consent Letter having been satisfied or waived by
Connecticut Innovations at or prior to the Time of Closing.
The Company's obligations to effect the Proposed Sale are subject to, among
other things: (a) the Buyer's representations and warranties in the Sale
Agreement being true and correct when made and as of the Time of Closing;
(b) the Buyer having performed or complied with all covenants and other
obligations under the Sale Agreement in all material respects; (c) the
Stockholders having approved the Proposed Sale at the Special Meeting; (d) the
Buyer's payment of $300,000 of the Waiver and Release Payment (as defined in the
Connecticut Innovations Consent Letter); and (e) the Buyer's payment of the
$25,000 payment required to be paid to LTI pursuant to the LTI Agreement.
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SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
The representations and warranties of Buyer and the Company in the Sale
Agreement and in the Additional Documents shall survive until the second
anniversary of the Time of Closing.
INDEMNIFICATION
The Sale Agreement provides that the Company must defend, indemnify and hold
harmless the Buyer, its affiliates, shareholders, officers, directors, agents
and employees (each, a "BUYER INDEMNIFIED PARTY") from any Damages resulting
from: (a) any breach of any of the representations or warranties made by the
Company in the Sale Agreement; (b) any misrepresentation in or any omission from
any certificate, Schedule or Exhibit, or the documents furnished by the Company
pursuant to the Agreement (collectively, the "COMPANY'S ADDITIONAL DOCUMENTS");
(c) any breach or non-performance of any covenant, agreement or obligation to be
performed by Seller pursuant to the Sale Agreement or Company's Additional
Documents; (d) any liability or obligation imposed upon the Buyer as transferee
of the business or operations of the Company or the Property, or otherwise
relating to the conduct of the Company's business prior to the Closing, except
to the extent such liability or obligation is an Assumed Liability; or (e) any
liability or obligation relating to the Retained Liabilities.
The Purchase Agreement provides the Buyer must defend, indemnify and hold
harmless the Company and its affiliates, shareholders, officers, directors,
agents and employees (each, a "COMPANY INDEMNIFIED PARTY") from any Damages
from: (a) any breach of any of the representations or warranties made by Buyer
in the Sale Agreement; (b) any misrepresentation in or any omission from any
certificate, Schedule or Exhibit, or the documents furnished by the Buyer
pursuant to the Sale Agreement (collectively, the "BUYER'S ADDITIONAL
DOCUMENTS"); (c) any breach or non-performance of any covenant, agreement or
obligation to be performed by Buyer pursuant to the Sale Agreement or Buyer's
Additional Documents; (d) any liability or obligation imposed upon the Company
as a result of the Buyer's conduct of the Company's business after the Closing,
except to the extent such liability or obligation is a Retained Liability; or
(e) any liability or obligation relating to the Assumed Liabilities.
An indemnified party is only entitled to indemnification arising out of a
breach of a representation or warranty to the extent that the aggregate amount
of its Damages exceeds $50,000. The indemnification obligations terminate on the
second anniversary of the Closing Date; provided that indemnification claims
made on or prior to that second anniversary date may be pursued by the claiming
party beyond that second anniversary date. Any rights of any of the Buyer
Indemnified Parties to (i) indemnification, or (ii) reimbursement of certain
portions of the Retention Agreement Payments described below will be satisfied
solely out of the Holdback Amount, and none of the Buyer Indemnified Parties may
make any claim against any of the other assets or property of the Company. The
indemnification provisions of the Sale Agreement are the exclusive remedy
available to any of the Buyer Indemnified Parties, except for claims based on
fraud or intentional misrepresentation.
THE REPRESENTATIVE
The Sale Agreement also provides that in the event of the liquidation or
dissolution of the Company, the Company shall appoint an individual to act on
behalf of the Company with respect to all matters relating to the Sale Agreement
and the Company's Additional Documents (the "REPRESENTATIVE"). The
Representative will have no liability to the Company or its Stockholders with
respect to actions taken or omitted to be taken in its capacity as
Representative, except with respect to any liability resulting primarily from
the Representative's gross negligence or willful misconduct. The Representative
shall be entitled to rely upon any directions received from the Stockholders
holding a majority of Seller's common shares at the Time of Closing; provided,
however, that the Representative shall not be required to follow any such
direction, and shall be under no obligation to take any action in its capacity
as the Representative, unless the Representative has been provided with funds,
security
19
<PAGE>
or indemnities which, in the sole determination of the Representative, are
sufficient to protect the Representative against the costs, expenses and
liabilities which may be incurred by the Representative in responding to such
direction or taking such action. The Representative shall be entitled to
reimbursement by the Company's stockholders for all reasonable expenses,
disbursements and advances incurred by the Representative in such capacity, and
for indemnification, by the Company's stockholders, against any loss, liability
or expenses arising out of actions taken or omitted to be taken in its capacity
as the Representative (except for those arising primarily out of the
Representative's gross negligence or willful misconduct), including the costs
and expenses of investigation and defense of claims.
TERMINATION
The Sale Agreement may be terminated prior to the Time of Closing by either
party if: (i) any of the representations or warranties of the other party is
inaccurate or untrue in any material respects; (ii) any covenant, obligation,
term or condition to be performed, kept or observed by the other party has not
been performed, kept or observed in any material respect by the time specified
in the Sale Agreement; or (iii) the Closing has not occurred on or before
February 1, 2000 (except as a result of the failure of Stockholders to approve
the Proposed Sale at the Special Meeting; and provided, further, that in each
such case, the terminating party is not then in default in any material respect
in the performance of any obligation, term or condition to be performed, kept or
observed by the terminating party and no representation or warranty of the
terminating party is inaccurate or untrue in any material respect. The
terminating party will not be deemed to have waived any claim that it may have
against the other for a breach of the Sale Agreement. The Sale Agreement may
also be terminated and canceled by either party if the Stockholders do not
approve the Proposed Sale at the Special Meeting (a "NON-APPROVAL TERMINATION").
CONSEQUENCES OF TERMINATION
If (i) it shall be judicially determined that the Buyer's termination of the
Sale Agreement resulted from an intentional breach of this Agreement by the
Company, (ii) the Sale Agreement is terminated by reason of the Company's
failure to perform any covenant or obligation under the Sale Agreement and such
failure has been the cause of or resulted in the failure of the transaction
contemplated by this Agreement to be consummated on or before February 1, 2000,
or (iii) at any time prior to a Non-Approval Termination there shall have been
made to the Company or publicly disclosed a bona fide Acquisition Proposal with
respect to the Company, then the Company would be required to pay the Buyer
(x) a non-accountable, liquidated expense reimbursement of $500,000, and (y) a
termination fee equal to $1,500,000. Upon a termination in connection with (i),
(ii) or (iii) above, the Company would be prohibited for a period of two hundred
seventy (270) days from the date of such termination from directly or indirectly
soliciting or encouraging, or entering into or participating in any negotiations
or discussions concerning, or consummating any contemplated transaction
resulting from an Acquisition Proposal. See "THE SALE AGREEMENT--PROHIBITION
AGAINST SOLICITING ACQUISITION PROPOSALS."
VOTING SUPPORT AGREEMENTS
In connection with the transaction, Mr. Engelberger and Connecticut
Innovations executed Support/Voting Agreements in favor of the Buyer.
Mr. Engelberger is the Company's co-founder, and its Chairman, and a director.
Connecticut Innovations is a security-holder and creditor of the Company. In
their Support/Voting Agreements, Mr. Engelberger and Connecticut Innovations
each agreed to vote their Shares controlled by them in favor of the Proposed
Sale, and not in favor of any competing transaction, and each agreed not to sell
or transfer any Shares or voting rights controlled by them before the Special
Meeting. In aggregate, Mr. Engelberger and Connecticut Innovations have the
power
20
<PAGE>
to vote 3,703,375 Shares of the Company's Common Stock, or approximately 25.8%
of the Shares entitled to vote, at the Special Meeting.
ACCOUNTING TREATMENT OF THE SALE
The Proposed Sale will be accounted for as a sale of certain assets and a
transfer of certain liabilities. The Proposed Sale will not have any federal
income tax consequences to the Company's stockholders. Upon consummation of the
Proposed Sale, the Company will recognize a financial reporting gain equal to
the net proceeds (the sum of the consideration received less the expenses of the
Proposed Sale) plus the liabilities transferred, less the closing net book value
of the assets sold.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A GENERAL SUMMARY OF THE PRINCIPAL FEDERAL INCOME TAX
CONSEQUENCES OF THE PROPOSED SALE. IT DOES NOT ADDRESS ANY STATE OR LOCAL TAX
CONSEQUENCES. STOCKHOLDERS ARE ADVISED TO CONSULT WITH THEIR TAX ADVISORS FOR A
MORE DETAILED ANALYSIS OF ANY FEDERAL, STATE OR LOCAL TAX CONSEQUENCES.
For tax purposes, the gain will be equal to the net proceeds of the sale
plus liabilities transferred less the tax basis of the assets sold. In
accordance with the limitations imposed upon the utilization of net operating
losses by the Internal Revenue Code, an Alternative Minimum Tax of approximately
$200,000 will be imposed on the Company and accordingly, a tax expense and
related obligation will be recognized in connection with the Proposed Sale.
The cash received by a stockholder as its Initial Distribution would first
be treated as a dividend (subject to applicable ordinary income tax rates) to
the extent of the Company's earnings and profits for the year in which the
Initial Distribution is paid. Next, any cash received in excess thereof would be
treated as a nontaxable return of capital to the extent of the stockholder's tax
basis in the Company's stock. Thereafter, any cash received in excess of such
tax basis will be treated as either short-term or long-term capital gain
depending upon the length of the stockholder's holding period.
The federal income tax consequences to the Company's stockholders of the
Initial Distribution will depend on the timing of both the Closing Date of the
Proposed Sale and the making of the Initial Distribution. The gain reported by
the Company on the Proposed Sale will be includable in the Company's earnings
and profits for the tax year in which the Closing occurs. If the Closing of the
Proposed Sale and the making of the Initial Distribution occur in different tax
years, then the gain on the Proposed Sale would not result in any dividend
treatment with respect to the Initial Distribution. Accordingly, if, as
expected, the Closing of the Proposed Sale occurs in 1999 and the making of the
Initial Distribution occurs in 2000, the gain on the Proposed Sale would not
result in any dividend treatment with respect to the Initial Distribution.
On the other hand, if the Closing of the Proposed Sale and the making of the
Initial Distribution were both to occur in 2000, the Company estimates a
material portion of the Initial Distribution would be taxable as a dividend.
Accordingly, in the event the Closing Date of the Proposed Sale occurs in the
year 2000, the Initial Distribution will be postponed until January 2001.
Stockholders should consult their personal tax advisor to determine the
impact of these transactions to their particular tax situation.
THE COMPANY WILL NOT SEEK AN OPINION OF COUNSEL WITH RESPECT TO THE
ANTICIPATED TAX TREATMENT. THE FOREGOING SUMMARY OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES IS INCLUDED FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE
LEGAL ADVICE TO ANY STOCKHOLDER.
21
<PAGE>
DISTRIBUTIONS TO THE COMPANY'S STOCKHOLDERS
PAYMENT OF INITIAL DISTRIBUTION TO HOLDERS OF COMMON SHARES
The Company's Board of Directors has voted to make a distribution to the
Company's stockholders of record as of the Distribution Record Date described
below in the aggregate amount of $9,800,000 (the "INITIAL DISTRIBUTION"). The
Initial Distribution is subject to the closing of the Proposed Sale. The
Distribution Record Date shall be the date which is the thirtieth (30(th)) day
after the Time of Closing; provided, however, that if the Time of Closing occurs
on or after January 1, 2000, then the Distribution Record Date will be
January 2, 2001. The Initial Distribution will be made on the date which is the
tenth (10(th)) day following the Distribution Record Date or as soon as
reasonably practicable thereafter (the "INITIAL DISTRIBUTION DATE").
The Company believes that the $11,250,000 Closing Date Payment to be made by
the Buyer will be sufficient for the Company to make the Initial Distribution
and to satisfy: (1) the closing and post closing reductions to the Purchase
Price set forth in the Sale Agreement (see "CLOSING ADJUSTMENTS,"and "POST
CLOSING ADJUSTMENTS") currently estimated to be approximately $200,000;
(2) payments required to be made to Connecticut Innovations pursuant to the
Connecticut Innovations Letter and the Sale Agreement (see "CONNECTICUT
INNOVATIONS AGREEMENTS") currently estimated to be approximately $232,000;
(3) the expenses and taxes related to the Proposed Sale, currently estimated to
be approximately $450,000, (4) the Company's operating expenses through the
Initial Distribution Date; and (5) the amount of reserves as may be determined
by the Company's Chairman to be necessary and appropriate to the conduct of the
Company's business after the Closing, including discharging or making provision
for discharging the Company's closing date liabilities retained by the Company.
The Company's Chairman, however, has the authority to reduce the Initial
Distribution in the event that, prior to the Initial Distribution Date, he
determines that the actual amounts required to satisfy items (1) through
(5) will be more than the Company's present estimate. Accordingly, there can be
no assurance that the Company will make the Initial Distribution or that the
amount of the Per Share Distribution will not be materially less than the
Company's estimate.
SUBSEQUENT DISTRIBUTION OF THE HOLDBACK AMOUNT
The Holdback Amount will remain in escrow for approximately two years after
the Time of Closing and will be available to satisfy the Buyer's claims for
indemnification under the Sale Agreement. See "INDEMNIFICATION."Moreover a
portion of the Holdback Amount will be used to reimburse the Buyer for the
Retention Bonus Reimbursement. See "EMPLOYEE REIMBURSEMENT AGREEMENTS." The net
amount of the Holdback Amount remaining after satisfaction of these obligations
will be distributed to the Company. The Company, in turn, intends to make a
distribution of this net amount to the Company's stockholders. The amount of
such distribution, however, could be reduced by, among other things, the
Company's need to satisfy or provide for liabilities, contingencies and reserves
existing at the time of such distribution, any contractual restrictions limiting
such a distribution which may exist at the time of such distribution, and the
Company's activities after the sale. See "BUSINESS OF THE COMPANY FOLLOWING THE
PROPOSED SALE." Accordingly, there can be no assurance that any portion of the
Holdback Amount will be distributed to the Company's stockholders.
CASHLESS EXERCISE OF CERTAIN OUTSTANDING OPTIONS AND WARRANTS
The Company currently has outstanding options and warrants to purchase
5,599,161 Shares at per Share exercise prices between ten cents ($0.10) and
thirty three cents ($0.33) (the "SPECIAL OPTIONS"). The Company believes that it
is likely that all or a material portion of the Special Options will be
exercised on or prior to the Distribution Date in the event the Proposed Sale is
consummated.
In order to facilitate the exercise of the Special Options, the Company's
Board of Directors has authorized a procedure permitting a "cashless" exercise
of the Special Options (the "CASHLESS
22
<PAGE>
EXERCISE") as follows: the Company will permit each holder of the Special
Options to exercise its Special Options in full by delivery of written
instructions to the Company to withhold the dollar amount of the exercise price
of the Special Option from the Per Share Distribution with respect to the Shares
issuable upon exercise of a Special Option. The Cashless Exercise may only be
made during the period from the Time of Closing to the Distribution Record Date
(the "CASHLESS EXERCISE PERIOD"). A Cashless Exercise will be effective upon,
and only upon, the making of the Initial Distribution and only if the Per Share
Distribution to an exercising option holder would be at least equal to the
option exercise price. The Cashless Exercise described above is in addition to
any other payment terms provided for in the Special Option or the plan pursuant
to which the Special Option was issued. For purposes of determining the Per
Share Distribution, (i) the Shares issuable upon all Special Options for which
the Company has received a valid and timely exercise notice (the "EXERCISED
SPECIAL OPTIONS") shall be considered outstanding and of record as of the
Distribution Record Date, and (ii) the exercise price of all Exercised Special
Options shall be deemed received by the Company and added to the dollar amount
of the Initial Distribution. The actual amount of the per Share Initial
Distribution to all of the Company's stockholders will be calculated based upon
the number of Shares outstanding as of the date of the Distribution Record Date,
including Shares to be issued upon the Cashless Exercise of the Special Options
on or before the Distribution Record Date. The amount of the Per Share
Distribution payable to holders of Shares received upon exercise of Special
Options (the "CASHLESS EXERCISE SHARES") will be reduced by the aggregate
exercise price of those Special Options.
Assuming no options or warrants are exercised prior to the Distribution
Record Date, and based upon 14,372,152 Shares outstanding, the amount of the Per
Share Distribution would be approximately $0.68. In the likely event all of the
Special Options were exercised on a Cashless Exercise basis, and assuming no
other change in the Company's capitalization, the Company would have 19,971,313
shares outstanding on the Distribution Record Date, and the Per Share
Distribution would then be approximately $0.58. The net amount of the Per Share
Distribution payable with respect to the Cashless Exercise Shares will range
from $0.25 to $0.48 per Share.
The Stockholders will not have the ability to vote upon the "cashless"
exercise provisions described above at the Special Meeting.
INTERESTS OF CERTAIN PERSONS IN THE PROPOSED SALE
In connection with the transaction, Mr. Engelberger and the Buyer have
entered into a Consulting Agreement pursuant to which, for a period of three
years after the Closing Date, Mr. Engelberger will provide up to eighty-two days
of consulting services per calendar year to the Buyer, in return for an annual
consulting fee of $82,000. The Agreement includes agreements on the part of
Mr. Engelberger (1) not to disclose confidential information of the Buyer or its
affiliated companies; (2) not to solicit employees, representatives, officers or
directors of the Buyer or its affiliated companies for the longer of two years
after the termination or expiration of Mr. Engelberger's consulting services, or
five years after the date of the Agreement (the "RESTRICTED PERIOD"); (3) not to
engage in any business competitive with the business or activities of the Buyer
or its affiliated companies during the Restricted Period; and (4) acknowledging
the Buyer's ownership of technology developed during the term of
Mr. Engelberger's consulting services. Mr. Engelberger has also agreed not to
knowingly take action which would impair the value of the business of the Buyer
or its affiliated companies, including actions which would interfere with its
contractual relationships, diminish its reputation, or divert its customers. At
the Time of Closing, Mr. Engelberger's existing employment agreement with the
Company will be terminated.
In connection with the Proposed Sale, the Board of Directors has approved an
amendment to the Company's 1995 Amended and Restated Stock Option Plan to
accelerate the vesting of all outstanding options issued under that plan upon
the consummation of the Proposed Sale. As a result of this action, options
having an exercise price of between $.18 and $.20 per Share held by the
following officers and directors of the Company will vest (with respect to the
number of Shares listed in parentheses) as a result of the Proposed Sale: Joseph
F. Engelberger (64,543) and Fred T. Cordano (44,161).
23
<PAGE>
PRO FORMA SELECTED FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
The following unaudited pro forma selected financial data for the fiscal
years ended December 31, 1998 and 1997, and the nine month period ended
September 30, 1999 and as of September 30, 1999 were derived from the unaudited
pro forma statements of operations and the unaudited pro forma balance sheet
included elsewhere in this Proxy Statement and reflect the historical accounts
of the Company as of that date adjusted to give pro forma effect to the Proposed
Sale as if the transaction had occurred as of September 30, 1999. The pro forma
financial data for the nine month period ended September 30, 1998 is not
included in this Proxy Statement. This pro forma selected financial data should
be read in conjunction with the description of the Sale Agreement contained in
this Proxy Statement and the pro forma statements appearing elsewhere herein. As
of September 30, 1999, Stockholders' equity was $1,522; the pro forma
Stockholders' equity as of September 30, 1999 after giving effect to the
Proposed Sale would be $11,044.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30 DECEMBER 31
------------------- -------------------
1999 1998 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
PRO FORMA STATEMENT OF OPERATIONS DATA
Net revenues................................................ $ -- $ 271 $ 271 $ 309
Net loss.................................................... 100 120 128 100
Net loss per share:
Basic and diluted........................................... $(.03) $(.01) $(.01) $(.02)
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
PRO FORMA BALANCE SHEET DATA ------------------------
<S> <C>
Current assets.............................................. $11,050
Total assets................................................ $12,300
Stockholders' equity........................................ $11,044
</TABLE>
24
<PAGE>
HISTORICAL MARKET PRICE
The following table sets forth the high and low sales price of the Company's
Common Stock, as reported on the NASDAQ Small Cap Market (prior to
September 29, 1997) and on the Nasdaq Bulletin Board (thereafter).
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
1997
First Quarter............................................... $1.50 $.75
Second Quarter.............................................. 1.03 .78
Third Quarter............................................... .94 .31
Fourth Quarter.............................................. .67 .27
1998
First Quarter............................................... $ .45 $.27
Second Quarter.............................................. .34 .16
Third Quarter............................................... .25 .13
Fourth Quarter.............................................. .69 .13
1999
First Quarter............................................... $ .44 $.19
Second Quarter.............................................. .39 .17
Third Quarter............................................... .34 .19
</TABLE>
RECENT MARKET PRICE
The following table sets forth the closing price and the high and low sales
price per share of the Company's Common Stock on the Nasdaq Bulletin Board on
October 12, 1999, the last trading day preceding the public announcement of the
Proposed Sale and on November 4, 1999, the latest practicable trading day before
the printing of this Proxy Statement.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
October 12, 1999............................................ $.17 $.17
November 4, 1999............................................ $.38 $.33
</TABLE>
NUMBER OF HOLDERS
As of the Record Date, there were approximately 1,100 holders of record of
the Company's Common Stock.
25
<PAGE>
COMPARATIVE PER SHARE DATA
(UNAUDITED)
The following tabulation reflects the historical loss per share from
operations in comparison with the pro forma loss per share from operations after
giving effect to the Sale Agreement and discontinued operations resulting
therefrom. The information presented in this tabulation should be read in
conjunction with the description of the Sale Agreement contained in this Proxy
Statement and the pro forma financial statements appearing elsewhere herein and
the Company's financial statements included in the Company's 1998 Annual Report
on Form 10-KSB and the Company's Quarterly Report on Form 10-QSB for the nine
month period ended September 30, 1999, previously filed with the Securities and
Exchange Commission (the "SEC").
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30 DECEMBER 31
----------------- -------------------
1999 1998 1997
---- -------- --------
<S> <C> <C> <C>
Basic and diluted loss per share
Historical.................................................. $(.03) $(.04) $(.36)
Pro Forma................................................... (.01) (.01) (.02)
</TABLE>
BOOK VALUE PER SHARE
(UNAUDITED)
The following tabulation reflects the historical net book value per Share of
the Company's Common Stock from operations in comparison with the pro forma net
book value per share of the Company's Common Stock from operations after giving
effect to the Sale Agreement at September 30, 1999 based on 14,372,152 basic and
diluted shares outstanding. This calculation does not take into consideration
the additional shares that may be issued subsequent to the consummation of the
sale through the exercise of outstanding options and warrants. The information
presented in this tabulation should be read in conjunction with the description
of the Sale Agreement contained in this Proxy Statement and the pro forma
financial statements appearing elsewhere herein and in the Company's 1998 Annual
Report on Form 10-KSB and the Company's Quarterly Report on Form 10-QSB for the
nine month period ended September 30, 1999, previously filed with the SEC.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1999
----------------------
HISTORICAL PRO FORMA
---------- ---------
<S> <C> <C>
Book value per share........................................ $.11 $.77
</TABLE>
26
<PAGE>
PRO FORMA FINANCIAL DATA
The following unaudited pro forma statements of operations for the nine
months ended September 30, 1999 and the two years ended December 31, 1998 and
1997 reflect the historical accounts of the Company for those periods, adjusted
to give pro forma effect to the Proposed Sale as if the transaction had occurred
at the beginning of each period presented.
The following unaudited pro forma balance sheet as of September 30, 1999
reflects the historical accounts of the Company as of that date adjusted to give
pro forma effect to the Proposed Sale as if the transaction had occurred as of
September 30, 1999.
The pro forma financial data and accompanying notes should be read in
conjunction with the description of the Sale Agreement contained in this Proxy
Statement, the Financial Statements and related notes included in Company's 1998
Annual Report on Form 10-KSB previously filed with the Securities and Exchange
Commission and Form 10-QSB for the quarter ended September 30, 1999 previously
filed with the SEC. The Company believes that the assumptions used in the
following statements provide a reasonable basis on which to present the pro
forma financial data. The pro formal financial data is provided for
informational purposes only and should not be construed to be indicative of the
Company's financial condition or results of operations had the Proposed Sale
been consummated on the dates assumed and are not intended to project the
Company's financial condition on any future date or results of operations for
any future period.
27
<PAGE>
HELPMATE ROBOTICS INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS (1) PRO FORMA
---------- --------------- ----------
<S> <C> <C> <C>
Revenues:.............................................. $4,546,574 $(4,275,391) $ 271,183
Cost of revenues:...................................... 2,798,667 (2,499,482) 299,185
---------- ----------- ----------
Gross Profit........................................... 1,747,907 (1,775,909) (28,002)
Selling general and administrative..................... 2,205,343 (2,105,343) 100,000
---------- ----------- ----------
Operating loss......................................... (457,436) 329,434 (128,002)
Other income/expense, net.............................. (4,682) 4,682 --
---------- ----------- ----------
Net Loss............................................... $ (462,118) $ 334,116 $ (128,002)
========== =========== ==========
Net Loss per share:
Basic and diluted...................................... $ (.04) $ (.01)
========== ==========
Weighted average shares:
Basic and diluted...................................... 11,429,291 11,429,291
========== ==========
</TABLE>
- ------------------------
(1) Elimination of sales, costs of sales and selling, general and administrative
expenses related to the sale of the Company's assets.
28
<PAGE>
HELPMATE ROBOTICS INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS (1) PRO FORMA
----------- --------------- ---------
<S> <C> <C> <C>
Revenues:.............................................. $ 3,647,509 $(3,338,809) $ 308,700
Cost of revenues:...................................... 2,332,301 (2,023,601) 308,700
----------- ----------- ---------
Gross Profit........................................... 1,315,208 (1,315,208) --
Selling general and administrative..................... 3,538,254 (3,438,254) 100,000
----------- ----------- ---------
Operating loss......................................... (2,223,046) 2,123,046 (100,000)
Other income/expense, net.............................. (20,425) 20,425 --
----------- ----------- ---------
Net Loss............................................... $(2,243,471) $ 2,143,471 $(100,000)
=========== =========== =========
Net Loss per share:
Basic and diluted...................................... $ (.36) $ (.02)
=========== =========
Weighted average shares:
Basic and diluted...................................... 6,292,650 6,292,650
=========== =========
</TABLE>
- ------------------------
(1) Elimination of sales, costs of sales and selling, general and administrative
expenses related to the sale of the Company's assets.
29
<PAGE>
HELPMATE ROBOTICS INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS (1) PRO FORMA
---------- --------------- ----------
<S> <C> <C> <C>
Revenues:.............................................. $2,326,013 $(2,326,013) $ --
Cost of revenues:...................................... 1,297,750 (1,297,750) --
---------- ----------- ----------
Gross Profit........................................... 1,028,263 (1,028,263) --
Selling general and administrative..................... 1,372,530 (1,272,530) 100,000
---------- ----------- ----------
Operating loss......................................... (344,267) 244,267 (100,000)
Other income/expense, net.............................. (7,155) 7,155 --
---------- ----------- ----------
Net Loss............................................... $ (351,422) $ 251,422 $ (100,000)
========== =========== ==========
Net Loss per share:
Basic and diluted...................................... $ (.03) $ (.01)
========== ==========
Weighted average shares:
Basic and diluted...................................... 14,276,238 14,276,238
========== ==========
</TABLE>
- ------------------------
(1) Elimination of sales, costs of sales and selling, general and administrative
expenses related to the sale of the Company's assets.
30
<PAGE>
HELPMATE ROBOTICS INC.
PRO FORMA BALANCE SHEET AS OF SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------ -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash............................................... $ 399,025 $ (399,025)(1) $11,050,000
11,050,000 (2)
Accounts Receivable net of allowance for doubtful
accounts......................................... 239,498 (239,498)(1) --
Inventory, net of reserve for obsolescence......... 576,881 (576,881)(1) --
----------- ------------ -----------
Total current assets............................... 1,215,404 9,834,596 11,050,000
Property and equipment, net of accumulated
depreciation and amortization.................... 1,008,596 (1,008,596)(1) --
Deposits........................................... 113,189 (113,189)(1) --
Cash held in escrow................................ -- 1,250,000 (2) 1,250,000
----------- ------------ -----------
$ 2,337,189 $ 9,962,811 $12,300,000
=========== ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable................................... $ 121,428 $ (95,059)(1) $ 26,369
Accrued Expenses................................... 498,502 550,356 (1) 1,048,858
Notes payable...................................... 98,086 -- (1) 98,086
Deferred revenue................................... 96,890 (14,669)(1) 82,221
----------- ------------ -----------
Total current liabilities.......................... 814,906 440,628 1,255,534
Stockholders Equity................................ 1,522,283 9,522,183 (3) 11,044,466
----------- ------------ -----------
$ 2,337,189 $ 9,962,811 $12,300,000
=========== ============ ===========
Book value per share............................... $ .11 $ .77
=========== ===========
Shares at end of period............................ 14,372,152 14,372,152
=========== ===========
</TABLE>
- ------------------------
(1) Elimination of sales, cost of sales and selling, general and administrative
expenses related to the sale of the Company's assets.
(2) To reflect proceeds resulting from and related to the Proposed Sale.
<TABLE>
<CAPTION>
<S> <C>
Proceeds:
Cash from sale of assets................................ $12,500,000
Estimated purchase price adjustments.................... (200,000)
Cash held in escrow for two years....................... (1,250,000)
-----------
Net proceeds............................................ $11,050,000
===========
</TABLE>
(3) Estimated book gain resulting from the proposed sale calculated as follows:
<TABLE>
<CAPTION>
<S> <C>
Gross proceeds.......................................... $12,500,000
Estimated Purchase Price Adjustments.................... (200,000)
Net book value of acquired assets....................... (2,227,817)
Taxes and transaction costs............................. (550,000)
-----------
Book gain............................................... $ 9,522,183
===========
</TABLE>
31
<PAGE>
BUSINESS OF THE COMPANY FOLLOWING THE PROPOSED SALE
As a result of the Proposed Sale, substantially all of the Company's assets
will be sold, and certain of its liabilities will be assigned to and assumed by
the Buyer, and the Company will retain cash, certain remaining net loss carry
forwards (which may be used to offset future income, if any) and certain
liabilities. Set forth below is a description of the Company's business as
proposed to be operated following consummation of the Proposed Sale. The
stockholders of the Company will not have an opportunity to vote separately on
the Proposed Sale and the change in the nature of the Company's business. A vote
for the approval of the Proposed Sale is also a vote for a change in the nature
of the Company's business. See "RISK FACTORS."
BUSINESS PLAN
Upon consummation of the Proposed Sale, the business objective of the
Company (hereinafter, "POST-SALE HRI") will be to effect a business combination
with an operating business which Post-Sale HRI believes has potential to
increase stockholder value. Any such business combination would depend on the
availability of attractive candidates and the Company's ability to consummate
any such business combination. Post-Sale HRI intends to use its available cash
after payment of the Initial Distribution, together with additional equity or
debt, if any, or a combination thereof, in effecting a business combination.
Post-Sale HRI will endeavor to structure any business combination in a manner
which would not require a substantial capital investment by Post-Sale HRI of the
net proceeds of the Proposed Sale. Post-Sale HRI may at any time cease to pursue
this business objective, and may consider other alternatives, including
recommending the dissolution of Post-Sale HRI to its stockholders.
Of the various methods and forms by which Post-Sale HRI may structure a
business combination, Post-Sale HRI may use, without limitation, one of the
following forms: (i) a merger or consolidation of the new operating business
into or with Post-Sale HRI; (ii) a merger or consolidation of the new operating
business into or with a subsidiary of Post-Sale HRI,; (iii) an acquisition of
all, a controlling amount or a minority interest in the equity of a new
operating business; (iv) an acquisition of the assets of a new operating
business by Post-Sale HRI or a subsidiary; (v) a merger or consolidation of
Post-Sale HRI with or into the new operating business or subsidiary thereof;
(vi) a leveraged buyout transaction in which most of the purchase price is
provided by borrowings; or (vii) a combination of any of the foregoing. The
actual form and structure of a business combination may also be dependent upon
numerous other factors pertaining to the new operating business and its
stockholders as well as potential tax and accounting treatments afforded the
business combination.
The Company has not identified any acquisition candidates or the
availability of financing arrangements, and there can be no assurance that any
business combination will be accomplished or, if accomplished, it will result in
increased stockholder value. The Company has not chosen (nor will it choose
prior to the completion of the Proposed Sale) any particular area of business in
which it may propose to engage. Post-Sale HRI, however, would not engage in any
business which would cause it to be in violation of the non-competition
provisions of the Sale Agreement. See "THE PROPOSED SALE--THE COMPANY'S
NON-COMPETE RESTRICTIONS." The Company has not conducted any market studies with
respect to any business, property or industry. Nothing contained herein is, nor
shall it be deemed to be, a representation regarding the viability of Post-Sale
HRI, or of the availability, viability or success of any subsequent business
combinations or the results of operations of Post-Sale HRI in connection with
such subsequent business combinations or business venture. While Post-Sale HRI
expects to explore possible business combinations with more than one prospective
operating business, there can be no assurance that any business combination
transaction will be effected. See "RISK FACTORS" below for important factors
that should be considered in connection with the realization of Post-Sale HRI's
business objective.
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<PAGE>
This newly reconfigured Company will endeavor to effect a business
combination transaction that will add to stockholder value. Mr. Engelberger, at
the direction of the Board of Directors, will initially have the primary
responsibility of seeking potential business combinations. The ability to
acquire and to successfully and profitably operate a new operating business, if
any, will be subject to substantial business risks. See "RISK FACTORS."
TRANSITION ACTIVITIES AND OPERATIONS
The management of Post-Sale HRI will initially consist solely of
Mr. Engelberger who will implement Post-Sale HRI's strategy of pursuing business
combinations with new operating businesses at the direction of the Board of
Directors. At the present time, it is the intention of management and the Board
of Directors to meet or be in telephone contact periodically to review business
opportunities and evaluate potential business combinations. Prior to any such
business combination, Mr. Engelberger will administer the affairs of Post-Sale
HRI (including financial reporting matters, general administrative concerns and
the payment of retained liabilities) with the assistance of consultants hired on
an as needed basis. The need for employees or consultants and their availability
will be addressed in connection with the decision of whether or not to acquire a
new operating business or otherwise participate in a specific business
combination. HRI is unable to make any estimate as to the future number of
employees which may be necessary, if any, to work for Post-Sale HRI. If a new
operating business is acquired, it is possible that the existing staff of that
new operating business would be hired by Post-Sale HRI.
STRUCTURE AND FINANCING OF BUSINESS COMBINATIONS
No agreements, commitments or understandings have been made with any
operating business candidates. No assurances can be made that future discussions
will result in definitive agreements, although it is the Company's intention to
proceed diligently with the implementation of Post-Sale HRI's business plan.
It is anticipated that Post-Sale HRI would use cash, equity, debt or a
combination of these to achieve a business combination. POST-SALE HRI WILL
ENDEAVOR TO STRUCTURE ANY BUSINESS COMBINATION IN A MANNER WHICH WOULD NOT
REQUIRE A SUBSTANTIAL CAPITAL INVESTMENT BY POST-SALE HRI OF THE PROCEEDS OF THE
PROPOSED SALE. Post-Sale HRI may borrow funds to increase the amount of capital
available for a business combination or otherwise finance the operation of the
new operating business. The amount and nature of any borrowings by Post-Sale HRI
will depend on numerous considerations including its capital requirements, its
perceived ability to service such debt and prevailing conditions in the
financial markets and the general economy. Although Post-Sale HRI has no
commitments to issue any Common Stock, Post-Sale HRI may issue a substantial
number of additional shares in connection with a business combination. To the
extent that such additional Shares are issued, dilution to the interest of
Post-Sale HRI's stockholders may occur and the value of the Shares may be
adversely affected. See "RISK FACTORS."
RISK FACTORS
If the Proposed Sale is consummated, Post-Sale HRI will serve as a vehicle
to effect business combinations. The Stockholders of the Company will not have
the right to vote separately on whether to change the nature of Post-Sale HRI's
business to an acquisition company. Consequently, the following risk factors
should be taken into consideration by each stockholder in determining whether to
vote to approve and adopt the Sale Agreement.
NO OPERATING HISTORY. The Company will change the nature of its business if
the Sale Agreement is approved and the Proposed Sale is consummated. Post-Sale
HRI will have had no operating history in its new line of businesses, which is
yet to be determined. Accordingly, there can be no assurance that
33
<PAGE>
Post-Sale HRI's future operations will generate operating or net income, and
Post-Sale HRI's prospects must therefore be considered in light of the risks,
expenses, problems and delays inherent in establishing a new business.
ACQUISITION RISKS. Post-Sale HRI's strategy is to pursue business
combinations with new operating businesses. The success of Post-Sale HRI will
depend almost entirely on the operations, financial condition and management of
the companies with which Post-Sale HRI may merge or which it may acquire.
Further, these acquisitions involve certain financial and operational risks.
Financial risks include the possible incurrence of indebtedness by Post-Sale HRI
in order to effect the acquisition and the consequent need to service that
indebtedness. Operational risks include the possibility that an acquisition does
not ultimately provide the benefits originally anticipated by management to
result from the business combination while Post-Sale HRI continues to incur
operating expenses to provide the services formerly provided by the acquired
company. In addition, if Post-Sale HRI makes a strategic investment by acquiring
a minority interest in a company, Post-Sale HRI would lack control over the
operations and strategy of the business in which Post-Sale HRI invested. There
can be no assurance that Post-Sale HRI will be successful in identifying new
operating businesses, completing and financing business combination transactions
on favorable terms, or operating the new operating business profitably. In
implementing its strategy, Post-Sale HRI will attempt to minimize the risk of
unexpected liabilities and contingencies associated with the new operating
businesses through planning, investigation and negotiation, but such unexpected
liabilities may nevertheless accompany such business combination transactions.
UNSPECIFIED BUSINESS RISKS. The Company has not identified the business
opportunities in which it will attempt to obtain an interest. The Company
therefore cannot describe the specific risks presented by such business. To the
extent that Post-Sale HRI effects a business combination with a financially
unstable company or an entity in its early stage of development or growth
(including entities without established records of revenues or income),
Post-Sale HRI will become subject to numerous risks inherent in the business and
operations of financially unstable and early stage or potential emerging growth
companies. In addition, to the extent that Post-Sale HRI effects a business
combination with an entity in an industry characterized by a high level of risk,
Post-Sale HRI will become subject to the currently unascertainable risks of that
industry. An extremely high level of risk frequently characterizes certain
industries which experience rapid growth. Although management will endeavor to
evaluate the risks inherent in a particular new operating business or industry,
there can be no assurance that it will properly ascertain or assess all such
risks. Such new operating business may involve an unproven product, technology
or marketing strategy, the ultimate success of which cannot be assured. The new
operating business may be in competition with larger, more established firms
over which it will have no competitive advantage. Post-Sale HRI's investment in
a business opportunity may be highly illiquid and could result in a total loss
to Post-Sale HRI if the opportunity is unsuccessful.
NEED FOR ADDITIONAL FINANCING. Post-Sale HRI may be required to raise cash
to consummate a business combination or to provide funds for an additional
infusion of capital into a new operating business. The amount and nature of any
borrowings by Post-Sale HRI will depend on numerous considerations, including
Post-Sale HRI's capital requirements, Post-Sale HRI's perceived ability to meet
debt service on any such borrowings and the then prevailing conditions in the
financial markets, as well as general economic conditions. If Post-Sale HRI is
able to raise additional funds through the incurrence of debt, and it does so,
it would likely become subject to restrictive financial covenants. Additionally,
to the extent that debt financing ultimately proves to be available, any
borrowings may subject Post-Sale HRI to various risks and restrictions
traditionally associated with indebtedness, including the risks of interest rate
fluctuations and insufficiency of cash flow to pay principal and interest. If
additional funds are raised through the issuance of equity securities, the
percentage ownership of Post-Sale HRI's then current stockholders, including the
ownership interests represented by Common Shares, would be reduced and, if such
equity securities take the form of preferred stock,
34
<PAGE>
the holders of such preferred stock may have rights, preferences or privileges
senior to those of holders of Common Shares. Post-Sale HRI is not currently in
discussions, nor has it had any discussions in regard to obtaining any debt or
equity financing. There can be no assurance that Post-Sale HRI will be able to
raise equity capital, obtain capital lease or bank financing or incur other
borrowings to fund any business combination or the working capital and other
capital requirements of a new operating business on terms deemed to be
commercially acceptable by and in the best interests of Post-Sale HRI.
REGULATION. Post-Sale HRI will continue to be subject to regulation under
the Securities Act of 1933 and the Securities Exchange Act of 1934. Post-Sale
HRI does not intend to invest the net proceeds of the Proposed Sale in
investment securities or take any other action which would subject it to
regulation under the Investment Company Act of 1940 (the "1940 ACT"). There can
be no assurance, however, that, as a result of a business combination, the
Company would not become subject to, or be required to register under, the 1940
Act.
LIMITED MANAGEMENT RESOURCES AND EXPERIENCE. The management of Post-Sale
HRI will initially consist solely of Mr. Engelberger who, until his successor is
elected, will implement Post-Sale HRI's strategy at the direction of the Board
of Directors. Prior to any such business combination, Mr. Engelberger will
administer the affairs of Post-Sale HRI (including financial reporting matters,
general administrative concerns and the payment of retained liabilities) with
the assistance of consultants hired on an as needed basis. In order to
supplement the business experience of management and the directors, Post-Sale
HRI may employ accountants, technical experts, appraisers, attorneys or other
consultants or advisors. The selection of any such advisors will be made by
Post-Sale HRI's management and directors. Additionally, it is anticipated that
such persons may be engaged by Post-Sale HRI on an independent basis without a
continuing fiduciary or other obligation to Post-Sale HRI.
ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL. Post-Sale HRI's future success
may depend on its ability to attract and retain key management and other
personnel with expertise required in connection with the growth and development
of a new operating business. There can be no assurance that Post-Sale HRI will
be successful in attracting and retaining such executives and personnel. The
loss of the services of key personnel, or the inability to attract additional
qualified personnel, could have a material adverse effect on Post-Sale HRI's
results of operations, development efforts and ability to expand.
CONFLICTS OF INTEREST. Certain of the directors and officers of Post-Sale
HRI will be associated with other firms or occupations involving other business
activities. Because of the affiliations, there are potential inherent conflicts
of interest in their acting as directors and officers of Post-Sale HRI and of
other entities. The Company's post-sale directors and officers may be directors
or controlling stockholders of other entities engaged in a variety of businesses
which may in the future have various transactions with Post-Sale HRI. Additional
conflicts of interest and non-arm's length transactions may also arise in the
future in the event the officers or directors of Post-Sale HRI are involved in
the management of any firms with which Post-Sale HRI transacts business.
Post-Sale HRI may pay finder's fees or other fees to its post-Sale officers,
directors or affiliates in connection with any potential business combination
involving Post-Sale HRI.
SCARCITY OF AND COMPETITION FOR BUSINESS COMBINATIONS. Post-Sale HRI will
be an insignificant participant in the business of seeking mergers with and
acquisitions of small private entities. Post-Sale HRI expects to encounter
intense competition from other entities having business objectives similar to
those of Post-Sale HRI. Many of these entities are well-established and have
extensive experience in identifying and effecting business combinations directly
or through affiliates. Many of these competitors possess greater financial,
technical, human and other resources than Post-Sale HRI and there can be no
assurance that Post-Sale HRI will have the ability to compete successfully.
Post-Sale HRI's financial resources will be limited in comparison to those of
many of its competitors. This inherent competitive
35
<PAGE>
limitation may compel Post-Sale HRI to select certain less attractive business
combination prospects. There can be no assurance that Post-Sale HRI will be able
to achieve its stated business objectives.
NO AGREEMENT FOR BUSINESS COMBINATION OR OTHER TRANSACTION. The Company has
no current arrangement, agreement or understanding with respect to a business
combination transaction with any entity, private or public. There can be no
assurance Post-Sale HRI will be successful in identifying and evaluating
suitable new operating businesses and in concluding a business combination
transaction on terms favorable to Post-Sale HRI; or, if concluded, whether any
such business combination transaction will result in a financial return to its
stockholders.
POSSIBLE LACK OF DIVERSIFICATION. Post-Sale HRI may be unable to diversify
its business activities and, as a consequence, may suffer a total loss to
Post-Sale HRI and the stockholders should a business combination by Post-Sale
HRI prove to be unprofitable. Post-Sale HRI's failure or inability to diversify
its activities into a number of areas may subject Post-Sale HRI to economic
fluctuations within a particular business or industry and, therefore, increase
the risks associated with Post-Sale HRI's operations.
TAX CONSIDERATIONS. The Company expects that its remaining net loss carry
forwards will remain available for use by the Company following the Proposed
Sale. However, there are a number of potential restrictions under various
provisions of the Internal Revenue Code of 1986, as amended, including the time
periods during which the carry forwards may be used, that may apply to limit
Post-Sale HRI's (or any successor's) future utilization of the carry forwards,
absent a change in control of Post-Sale HRI. To finance a business combination,
Post-Sale HRI may have to raise equity from persons or entities not presently
stockholders of the Company, which could result in a change in control. There is
no assurance that Post-Sale HRI (or any Company successor) will receive future
tax benefits from such utilization.
As a general rule, federal and state tax laws and regulations have a
significant impact upon the structuring of business combinations. Post-Sale HRI
will evaluate the possible tax consequences of any prospective business
combination and will endeavor to structure the business combination so as to
achieve the most favorable tax treatment to Post-Sale HRI, the Acquired Business
and their respective stockholders. There can be no assurance, however, that the
Internal Revenue Service or appropriate state tax authorities will ultimately
assent to Post-Sale HRI's tax treatment of a consummated business combination.
To the extent the IRS or state tax authorities ultimately prevail in
recharacterizing the tax treatment of a business combination, there may be
adverse tax consequences to Post-Sale HRI, the new operating business and the
respective stockholders.
LIMITED PUBLIC MARKET FOR COMMON SHARES. There can be no assurance that an
active trading market for the Company's Shares will be developed or maintained.
Historically, the market prices for securities of non-operating companies in the
business of seeking mergers with and acquisitions have been highly volatile. The
market price of the Shares could be subject to significant fluctuations in
response to various factors and events, including the liquidity of the market
for the Shares, announcements of potential business combinations, and changes in
general market conditions.
ISSUANCE OF ADDITIONAL SHARES. The Board of Directors generally has the
power to issue such shares without stockholder approval. Post-Sale HRI may issue
Common Shares to raise additional capital or to effect a merger or acquisition
with a target corporation. In order to effect a business combination, Post-Sale
HRI may issue securities to the stockholders of a new operating business. Any
additional issuance by Post-Sale HRI from its authorized but unissued shares
would have the effect of further reducing the percentage ownership of Post-Sale
HRI's stockholders and could result in stockholders of a target company
obtaining a controlling interest in Post-Sale HRI.
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<PAGE>
CERTAIN ANTI-TAKEOVER PROVISIONS. Post-Sale HRI's certificate of
incorporation and bylaws include certain provisions which may have the effect of
delaying, deterring or preventing a future takeover or change in control of
Post-Sale HRI unless such takeover or change in control is approved by Post-Sale
HRI's Board of Directors. In addition, Post-Sale HRI is subject to the
anti-takeover provisions of Section 33-844 of the Connecticut Business
Corporations Act, which will prohibit it from engaging in a "business
combination" with an "interested stockholder" for a period of five years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
The application of this provision also could have the effect of delaying or
preventing a change in control of Post-Sale HRI.
NO DIVIDENDS ANTICIPATED. Any determination to pay dividends in the future
will be at the discretion of the Board of Directors and will be dependent upon
the Company's results of operations, financial condition, capital requirements,
contractual restrictions and other factors deemed relevant by the Board of
Directors. Other than the Initial Distribution, and a distribution of the net
proceeds of the Holdback Amount at the end of the escrow period, the Board of
Directors does not intend to declare dividends or make any other distributions
in the foreseeable future, but instead intends to retain earnings, if any, for
use in the Company's business operations. Although no assurance can be given,
Post-Sale HRI intends to structure any business combination in a manner which
would permit the Company's pre-business combination stockholders to obtain the
economic benefit of the net Holdback Amount.
YEAR 2000. Many currently installed computer systems and software products
use only two digits to identify a year in the date field with the assumption
that the first two digits of the year are always "19." Consequently, on
January 1, 2000, computers that are not Year 2000 compliant may read the year as
1900. Systems that calculate, compare or sort using the incorrect date may
malfunction. As a result, computer systems and software products used by many
companies may need to be upgraded before the end of 1999 to comply with such
"Year 2000" requirements. Specifically, these systems and programs must be
modified to accept four digit entries in the date field to distinguish
21st-century dates from 20th-century dates. Significant uncertainty exists
concerning the potential effects associated with such compliance. Post-Sale HRI
will not immediately be engaged in any substantial business operations, and
management, therefore, does not believe that computer problems associated with
the change of year to the Year 2000 will have any material effect on its
operations. However, the possibility exists that Post-Sale HRI may merge with or
acquire a business that will be negatively affected by the "year 2000" problem.
The effect of such problem on Post-Sale HRI in the future can not be predicted
with any accuracy until such time as Post-Sale HRI identifies a merger or
acquisition target.
FORWARD LOOKING STATEMENTS. This Proxy Statement contain forward-looking
statements. Actual results could differ materially from those projected herein.
Such difference could occur because of the application of factors referred to
above, of competitive or general business conditions or of some other and
unforeseen factor.
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<PAGE>
INFORMATION ABOUT CERTAIN BENEFICIAL OWNERS OF COMMON STOCK
The following table sets forth information based upon the Company's records
and Securities and Exchange Commission filings with respect to each executive
officer, each director and nominee for director, each person known to be a
beneficial owner of more than 5% of the Common Stock of the Corporation and all
executive officers and directors as a group as of November 4, 1999. Under the
rules and regulations of the Securities and Exchange Commission, a person is
deemed to own beneficially all securities of which that person owns or shares
voting or investment power as well as all securities which may be acquired
through the exercise of currently available conversion, warrant or option
rights. Unless otherwise indicated, each such person possesses sole voting and
investment power with respect to the shares owned by him.
<TABLE>
<CAPTION>
ADDRESS SHARES PERCENT
------- --------- --------
<S> <C> <C> <C>
Connecticut Financial c/o Prospect Street Connecticut Capital 1,014,188 7.06%
Developments, LP Inc.
250 Park Avenue, 17th Floor
New York, NY 10177
Robert Gault (1) 91 Shelby Street 806,060 5.53%
Eminence, KY 40019
Gabriel Kaplan (2) 9551 Hidden Valley Road 1,099,091 7.49%
Beverly Hills, CA 90210
The Boston Group, LP (3) 545 Madison Avenue, 14(th) Floor 2,411,866 14.37%
New York, NY 10022
Connecticut Innovations, 999 West Street 3,144,822 20.54%
Incorporated (4) Rocky Hill, CT 06067
Joseph F. Engelberger(5)(6) HelpMate Robotics Inc. 2,074,505 13.88%
22 Shelter Rock Lane
Danbury, CT 06810
Fred T. Cordano (6)(7) HelpMate Robotics Inc. 37,394 (9)
22 Shelter Rock Lane
Danbury, CT 06810
Howard E. Motter (8) 810 Monroe Turnpike 30,000 (9)
Monroe, 06468
Theodore Sall (8) 47 Lake View Drive 43,000 (9)
Old Tappan, NJ 07675
Sheldon Sandler (8) 11131 Taylor Court 30,000 (9)
Lawrenceville, NJ 08648
Joseph Cote (8) 19 Mallard Drive 30,000 (9)
Huntington, NY 11743
All Directors and Executive 2,244,899 14.87%
Officers as a Group (6)(7)(8)
</TABLE>
- ------------------------
(1) Includes warrants to purchase 200,000 Shares.
(2) Includes warrants to purchase 300,000 Shares.
(3) Consists of warrants to purchase 2,411,866 Shares.
(4) Includes warrants to purchase 938,939 Shares.
(5) Includes 72,589 Shares of owned by Mr. Engelberger's wife, Margaret
Engelberger, but does not include Shares beneficially owned by
Mr. Engelberger's adult children or his brother. Also includes 311,616
Shares owned by the Joseph F. Engelberger Foundation. Also includes warrants
to purchase 504,200 Shares, and options to purchase 72,613 Shares.
(6) Does not include options whose vesting will be accelerated as a result of
the Proposed Sale. See "INTERESTS OF CERTAIN PERSONS IN THE PROPOSED SALE."
(7) Include Options to purchase 32,468 Shares.
(8) Includes options to purchase 30,000 shares owned by each such person.
(9) Less than one percent.
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<PAGE>
SOLICITATION OF PROXIES
The cost of soliciting proxies for the Special Meeting will be borne by the
Company. In addition to solicitation by mail, solicitations may also be made by
personal interview, telecopier, telegram and telephone. The Company will use the
services of American Stock Transfer & Trust Company to assist in soliciting
proxies, and expects to pay a nominal fee for such services. Arrangements will
be made with brokerage houses and other custodians, nominees and fiduciaries to
send proxies and proxy material to their principals. Consistent with the
Company's confidential voting procedure, directors, officers and other regular
employees of the Company, as yet undesigned, may also request the return of
proxies by telephone, telecopier, telegram or in person.
STOCKHOLDER PROPOSALS
As more fully explained in the Company's Bylaws, stockholder proposals
intended to be presented at any meeting of stockholders, including the Special
Meeting, including proposals for the nomination of directors, removal of
directors, amendments to the Company's Certificate of Incorporation or Bylaws or
the repeal of a bylaw, must be received in writing by the Company's Secretary,
no later than 50 days in advance of the meeting of stockholders, or, if fewer
than 50 days' notice or prior public disclosure of the meeting date is given or
made by the Company, not later than the seventh day after which notice was
mailed or such public disclosure was made.
INDEPENDENT AUDITORS
Representatives of Arthur Andersen LLP, the Company's independent auditors,
are expected to be present at the Meeting, where they will be available to
respond to appropriate questions and have the opportunity to make a statement if
they so desire.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
As required by law, the Company files reports, proxy statements and other
information with the SEC. These reports, proxy statements and other information
contain additional information about the Company. You can inspect and copy these
materials at the public reference facilities maintained by the SEC at Room 1024,
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the
following Regional Offices of the SEC: 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and 7 World Trade Center, Suite 1300, New York, New
York 10048. For further information concerning the SEC's public reference rooms,
you may call the SEC at 1-800-SEC-0330. Some of this information may also be
accessed on the World Wide Web through the SEC's Internet address at
http://www.sec.gov.
The SEC allows the Company to "incorporate by reference" information into
this Proxy Statement, which means that the Company can disclose important
information by referring you to another document filed separately with the SEC.
Information incorporated by reference is considered part of this Proxy
Statement, except to the extent that the information is superseded by
information in this Proxy Statement. This Proxy Statement incorporates by
reference the information contained in the following documents previously filed
by the Company with the SEC (SEC file number 1-14160):
(a) the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1998;
(b) the Company's Quarterly Report on Form 10-QSB for the three months
ended March 31, 1999;
(c) the Company's Quarterly Report on Form 10-QSB for the three months
ended June 30, 1999;
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<PAGE>
(d) the Company's Quarterly Report on Form 10-QSB for the three months
ended September 30, 1999; and
(e) the Company's Current Report on Form 8-K dated October 15, 1999 and
filed with the SEC on October 15, 1999.
The Company also incorporates by reference the information contained in all
other documents the Company files with the SEC after the date of this Proxy
Statement and before the Meeting. The information contained in any such document
will be considered part of this Proxy Statement from the date the document is
filed.
If you are a stockholder of the Company and would like to receive a copy of
any document incorporated by reference into this Proxy Statement (which will not
include any of the exhibits to the document other than those exhibits that are
themselves specifically incorporated by reference into this Proxy Statement),
you should call or write to Joseph F. Engelberger, Chairman, 203-798-8988. In
order to ensure timely delivery of the documents you request, you should make
your request by December 1, 1999.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN (OR INCORPORATED BY
REFERENCE INTO) THIS PROXY STATEMENT. THE COMPANY HAS NOT AUTHORIZED ANYONE TO
GIVE ANY INFORMATION DIFFERENT FROM THE INFORMATION CONTAINED IN (OR
INCORPORATED BY REFERENCE INTO) THIS PROXY STATEMENT. THIS PROXY STATEMENT IS
DATED NOVEMBER , 1999. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN
THIS PROXY STATEMENT IS ACCURATE AS OF ANY LATER DATE, AND THE MAILING OF THIS
PROXY STATEMENT TO STOCKHOLDERS SHALL NOT CREATE ANY IMPLICATION TO THE
CONTRARY.
OTHER BUSINESS
The Board does not intend to bring any matters before the Special Meeting
other than those set forth in the accompanying notice. The Board knows of no
other matters to be brought before the Special Meeting by others. However, if
any other matters are brought before the meeting, the proxies named in the
enclosed form of proxy will vote in accordance with their judgment on such
matters.
By Order of the Board of Directors,
Prudence Shepard
Assistant Secretary
November , 1999
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APPENDIX A
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of October 14, 1999,
is between Pyxis Corporation, a Delaware corporation ("Buyer"), and Helpmate
Robotics, Inc., a Connecticut corporation ("Seller").
RECITALS :
A. Seller is in the business of developing, manufacturing and marketing
mobile robotic systems which are distinguished by their ability to navigate
autonomously without the need for fixed tracks or guide wires, and selling other
robot components; and
B. Buyer desires to purchase and Seller desires to sell substantially all of
the assets of Seller used or useful in the business of Seller on the terms and
subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained, Buyer and Seller hereby agree as follows:
ARTICLE I. ASSETS TO BE PURCHASED
Section 1.1. DESCRIPTION OF ASSETS. Except for Excluded Assets (as
hereinafter defined), upon the terms and subject to the conditions set forth in
this Agreement, at the Closing (as hereinafter defined), Seller shall convey,
sell, transfer, assign and deliver to Buyer, and Buyer shall purchase from
Seller, all right, title and interest of Seller at the Time of Closing in and to
all of the assets, properties, rights (contractual or otherwise) and business of
Seller wherever located, including, without limitation, those set forth below:
(a) All machinery, equipment (including, without limitation, computer
hardware), tooling, parts, furniture, supplies, and other tangible personal
property (the "Personal Property") including, without limitation, the Personal
Property listed on Schedule 1.1(a)(1);
(b) All raw materials, component parts, production and non-production
supplies, work-in-process and finished goods inventory and other inventory of
Seller (the "Inventory"), including, without limitation, the Inventory listed on
Schedule 1.1(b);
(c) All franchises, licenses, permits, consents, authorizations, approvals
and certificates of any regulatory, administrative or other governmental agency
or body (to the extent the same are transferable) (the "Permits"), including,
without limitation, the Permits listed on Schedule 1.1(c);
(d) All patents, inventions, trade secrets, processes, proprietary rights,
proprietary knowledge, know-how, computer software, trademarks (including,
without limitation, the trademarks for the names "HelpMate" and "LabMate"),
names (including, without limitation, the names "LightRanger" and "BiSight"),
service marks, trade names, copyrights, symbols, logos, trade secrets,
franchises, formulas, manufacturing data, blueprints, drawings and permits and
all applications therefor, registrations thereof and licenses, sublicenses or
agreements in respect thereof, which Seller owns or has the right to use or to
which Seller is a party and all filings, registrations or issuances of any of
the foregoing with or by any federal, state, local or foreign regulatory,
administrative or governmental office (collectively, the "Proprietary Rights")
including, without limitation, the Proprietary Rights listed on Schedule 1.1(d);
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(1) Each reference in this Agreement to an Exhibit or Schedule shall mean an
Exhibit or Schedule attached to this Agreement and incorporated into this
Agreement by such reference.
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(e) All leases of equipment, computer hardware, machinery, vehicles or other
tangible personal property (the "Personal Property Leases"), including, without
limitation, the Personal Property Leases listed on Schedule 1.1(e);
(f) All contracts, agreements, contract rights, license agreements,
franchise rights and agreements, policies, purchase and sales orders, quotations
and executory commitments, instruments, third party guaranties,
indemnifications, arrangements, and understandings, whether oral or written, to
which Seller is a party (whether or not legally bound thereby) (the
"Contracts"), including, without limitation, the Contracts listed on Schedule
1.1(f);
(g) All accounts receivable and notes receivable, deposits, prepaid expenses
and other miscellaneous assets of Seller, including, without limitation, the
items listed on Schedule 1.1(g);
(h) All causes of action, judgments, claims or demands of whatever kind or
description which Seller has or may have against any other person or entity (the
"Seller's Claims"), including, without limitation, the Seller's Claims listed on
Schedule 1.1(h);
(i) All automobiles, trucks and other vehicles (the "Vehicles"), including,
without limitation, the Vehicles described on Schedule 1.1(i);
(j) All books of account, customer lists, supplier lists, files, papers and
records;
(k) All telephone and facsimile numbers and web site addresses;
(l) All goodwill of or relating to the business of Seller; and
(m) All cash and cash equivalents.
Notwithstanding the foregoing, there shall be excluded from the assets,
properties, rights (contractual and otherwise) and business of Seller to be
conveyed, sold, transferred, assigned and delivered to Buyer under this
Agreement all items listed or described on Schedule 1.1(x) (the "Excluded
Assets"). All of the assets, properties, rights (contractual and otherwise) and
business to be conveyed, sold, transferred, assigned and delivered to Buyer
pursuant to this Section 1.1 are hereinafter collectively referred to as the
"Property."
Section 1.2. NON-ASSIGNMENT OF CERTAIN PROPERTY. To the extent that the
assignment hereunder of any of the Contracts or Personal Property Leases shall
require the consent of any other party (or in the event that any of the same
shall be non-assignable), neither this Agreement nor any action taken pursuant
to its provisions shall constitute an assignment or an agreement to assign if
such assignment or attempted assignment would constitute a breach thereof or
result in the loss or diminution thereof; provided, however, that with respect
to any Contract or Personal Property Lease set forth on Schedule 7.1(f), Seller
shall use its best efforts to obtain the consent of such other party to an
assignment to Buyer, and with respect to any Contract or Personal Property Lease
not set forth on Schedule 7.1(f), Seller shall use commercially reasonable
efforts to obtain the consent of such other party to an assignment to Buyer. If
such consent is not obtained, Seller shall cooperate with Buyer in any
reasonable arrangement designed to provide for Buyer the benefits of any such
Contract or Personal Property Lease including, without limitation, enforcement
for the account and benefit of Buyer of any and all rights of Seller against any
other person with respect to any such Contract or Personal Property Lease.
ARTICLE II. ASSUMPTION OF OBLIGATIONS
Section 2.1. ASSUMPTION OF CERTAIN LIABILITIES. Buyer shall assume, and
indemnify (in accordance with the rights, procedures and limitations set forth
in Article VIII of this Agreement) Seller and the Seller Indemnified Parties (as
defined herein) with respect to, hold Seller and the Seller Indemnified Parties
harmless from and defend Seller and the Seller Indemnified Parties against
(a) the liabilities
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and obligations of Seller arising under the Personal Property Leases listed on
Schedule 1.1(e) and the Contracts listed on Schedule 1.1(f) to the extent such
liabilities and obligations arise and are first required to be performed after
the Closing and such Contracts and Personal Property Leases are actually
assigned to Buyer or Buyer gets the benefit of such Contracts and Personal
Property Leases, and (b) the liabilities of Seller set forth on Schedule 2.1.
All of the liabilities of Seller being assumed by Buyer are hereinafter referred
to as the "Assumed Liabilities" and the liabilities of Seller set forth on
Schedule 2.1 being assumed by Buyer are hereinafter referred to as the "Schedule
2.1 Liabilities".
Section 2.2. LIABILITIES NOT ASSUMED. With the exception of the Assumed
Liabilities, Buyer shall not, by the execution or performance of this Agreement,
or otherwise, assume or otherwise be responsible for any liability or obligation
of any nature of Seller, or claims of such liability or obligation, matured or
unmatured, liquidated or unliquidated, fixed or contingent, or known or unknown,
whether arising out of occurrences prior to, at or after the date hereof (the
"Retained Liabilities"), including, without limitation, any liability or
obligation of Seller to any Governmental Authority (as defined herein) with
respect to unpaid Taxes (as defined in Section 4.2(i)(v)). Seller shall pay or
otherwise satisfy in full, when due, all liabilities and obligations of Seller,
other than the Assumed Liabilities.
ARTICLE III. PURCHASE PRICE
Section 3.1. CONSIDERATION. Upon the terms and subject to the conditions
set forth in this Agreement, in consideration for the sale by Seller to Buyer of
the Property and the representations, warranties and covenants made by Seller to
Buyer:
(a) Buyer shall assume, and indemnify Seller and the Seller Indemnified
Parties with respect to, hold Seller and the Seller Indemnified Parties harmless
from and defend Seller and the Seller Indemnified Parties against (in accordance
with the rights, procedures and limitations set forth in Article VIII of this
Agreement), the Assumed Liabilities at the Time of Closing as provided in
Section 2.1 of this Agreement; and
(b) Subject to Section 3.3 of this Agreement, the purchase price for the
Property shall be $12,500,000 (the "Purchase Price"), payable in accordance with
Section 3.2.
Section 3.2. Payment of Purchase Price. The Purchase Price set forth in
Section 3.1(b) shall be paid at the Time of Closing by Buyer as follows:
(a) An amount equal to $11,250,000 (the "Closing Date Payment"), less any
deduction pursuant to Section 3.3(a) of this Agreement, payable by delivery to
Seller by wire transfer of immediately available funds to a bank account
designated by Seller in writing prior to the Time of Closing; and
(b) An amount equal to $1,250,000 (the "Holdback Amount"), payable by
deposit into an escrow account at the Closing to be held in accordance with the
terms and conditions of an Escrow Agreement by and among Buyer, Seller and Bank
One Trust Company, NA, a national banking association, in the form attached
hereto as Exhibit 3.2(b) (the "Escrow Agreement").
Section 3.3. ADJUSTMENT OF PURCHASE PRICE.
(a) Not less than three (3) business days prior to the Closing Date, Seller
shall deliver to Buyer an estimate of the Closing Date Net Current Asset Value
(as determined pursuant to clause (d) below) of Seller as of the Time of
Closing, determined on an accrual basis in accordance with generally accepted
accounting principles ("GAAP"), consistently applied (the "Estimated Closing
Date Net Current Asset Value"). To the extent that the Estimated Closing Date
Net Current Asset Value is less than zero, such difference (the "Estimated
Closing Date Net Current Asset Value Deficiency") will be deducted from the
Closing Date Payment to be paid to Seller.
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(b) As promptly as practicable (but in no event later than thirty (30) days
after the Closing Date), Seller shall deliver to Buyer a balance sheet of Seller
dated as of the close of business on the Closing Date (the "Closing Date Balance
Sheet") and an accompanying closing statement (the "Closing Statement")
reasonably detailing Seller's determination of the Closing Date Net Current
Asset Value of Seller and the Book Asset Value (as defined in clause (d) below)
of Seller. For purposes of this Section 3.3, the Closing Date Balance Sheet
shall be: (i) prepared as if it were a year-end balance sheet (including typical
year-end adjustments customarily made by Seller); (ii) prepared in accordance
with GAAP, applied on a basis consistent with that used to prepare the balance
sheet included in the Audited Statements using the accrual basis method;
provided, however, the Closing Date Balance Sheet shall not be required to be
audited; and (iii) in a format identical to the balance sheet included in the
Audited Statements. The accounting procedures used to prepare the Closing Date
Balance Sheet shall include the taking of a physical inventory as of ten
(10) days immediately preceding the Closing Date (the "Inventory Test Date") and
a subsequent adjustment to reflect sales which occur during the period beginning
on the Inventory Test Date and ending on the Closing Date. Buyer and its
independent public accountant shall be entitled to observe the taking of such
physical inventory. During such ten (10) day period, Buyer and its accountants
shall be permitted to discuss with Seller and its accountants the proposed
Closing Date Balance Sheet and, provided Buyer executes and delivers a letter
agreement in the form of Exhibit 3.3(b), Buyer and its accountants shall from
and after the Time of Closing have full access upon reasonable notice at all
reasonable times during normal business hours to the work papers and supporting
records of Seller and its accountants so as to permit Buyer and its accountants
to make copies of such work papers and supporting records and to allow Buyer to
become informed concerning all matters relating to the preparation of the
Closing Date Balance Sheet and the accounting procedures, methods, tests and
approaches being utilized in connection therewith. Buyer must, within sixty (60)
days after Buyer's receipt of the Closing Date Balance Sheet and the Closing
Statement, give written notice (the "Notice") to Seller specifying in reasonable
detail Buyer's objections, if any, with respect thereto. If Buyer does not
timely deliver the Notice, Seller's determination of the Closing Date Balance
Sheet, Closing Date Net Current Asset Value and the Book Asset Value shall be
final, binding and conclusive on Seller and Buyer. With respect to any disputed
amounts, Seller and Buyer shall meet in person and negotiate in good faith
during the ten (10) business day period (the "Resolution Period") after the date
of Seller's receipt of the Notice to resolve any such disputes. If Seller and
Buyer are unable to resolve all such disputes within the Resolution Period, then
within five (5) business days after the expiration of the Resolution Period, all
disputes shall be submitted to a nationally recognized public accounting firm
selected by Seller and Buyer (the "Independent Accountant") who shall be engaged
to provide a final and conclusive resolution of all unresolved disputes within
fifteen (15) business days after such engagement. The determination of the
Independent Accountant shall be final, binding and conclusive on Seller and
Buyer, and the fees and expenses of the Independent Accountant shall be borne by
the party that the Independent Accountant determines is the non-prevailing
party.
(c) If the Closing Date Net Current Asset Value is less than zero and less
than the Estimated Closing Date Net Current Asset Value, Seller shall pay to
Buyer, within thirty (30) business days after the final determination of the
Closing Date Net Current Asset Value pursuant to this Section 3.3, the
difference between the Closing Date Net Current Asset Value and the Estimated
Closing Date Net Current Asset Value (the "Closing Date Net Current Asset Value
Deficiency") (together with interest at the rate of nine percent (9%) per annum
from the Closing Date until paid). If the Book Asset Value is less than
$1,900,000, Seller shall pay to Buyer, within thirty (30) business days after
the final determination of the Book Asset Value pursuant to this Section 3.3,
the amount that the Book Asset Value is less than $1,900,000 (the "Book Asset
Value Deficiency") (together with interest at the rate of nine percent (9%) per
annum from the Closing Date until paid). If the Closing Date Net Current Asset
Value Deficiency or any interest thereon due to Buyer, or the Book Asset Value
Deficiency or any interest thereon due to Buyer, as the case may be, is not paid
to Buyer within thirty (30) business
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days after the final determination of the Closing Date Net Current Asset Value
or the Book Asset Value, as the case may be, pursuant to this Section 3.3, Buyer
shall have the right, but not the obligation, to withdraw the Closing Date Net
Current Asset Value Deficiency or the Book Asset Value Deficiency, as the case
may be, from the Holdback Amount (together with interest at the rate of nine
percent (9%) per annum from the Closing Date until withdrawn).
(d) The "Closing Date Net Current Asset Value" shall be determined by
subtracting: (i) the sum of the Schedule 2.1 Liabilities shown on the Closing
Date Balance Sheet, from (ii) the amount of cash and cash equivalents shown on
the Closing Date Balance Sheet. The "Book Asset Value" shall mean the book value
(as determined in accordance with GAAP) of the assets being purchased by Buyer
hereunder as reflected on the Closing Date Balance Sheet (x) decreased by (A)
the amount of cash and cash equivalents reflected on the Closing Date Balance
Sheet, and (B) accumulated depreciation relating to such assets as of the Time
of Closing, and (y) increased by the net proceeds actually received by Seller
prior to the Time of Closing in respect of sales of inventory and robots made by
Seller in the ordinary course of business consistent with past practice;
provided, however, that such proceeds are either transferred to Buyer on the
Closing Date or are used by Seller prior to the Time of Closing to discharge the
Schedule 2.1 Liabilities.
Section 3.4. PURCHASE PRICE ALLOCATION. Seller and Buyer hereby agree that
the Purchase Price shall be allocated for purposes of this Agreement and for
federal, state and local tax purposes as set forth on Schedule 3.4. Buyer and
Seller shall file all federal, state, local and foreign tax returns, including
Internal Revenue Form 8594, in accordance with the allocation set forth on
Schedule 3.4.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
Section 4.1. Buyer represents and warrants to Seller that:
(a) ORGANIZATION AND STANDING. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
with full corporate power and authority to own, lease, use and operate its
properties and to conduct its business as and where now owned, leased, used,
operated and conducted. Buyer is duly qualified to do business and in good
standing in each jurisdiction in which the nature of the business conducted by
it or the property it owns, leases or operates, makes such qualification
necessary, except where the failure to be so qualified or in good standing in
such jurisdiction would not have a Material Adverse Effect (as defined in
Section 10.13) on Buyer. Buyer is not in default in the performance, observance
or fulfillment of any provision of its Certificate of Incorporation, as amended
and restated (the "Buyer Certificate"), or Bylaws, as amended and restated (the
"Buyer Bylaws").
(b) CORPORATE POWER AND AUTHORITY. Buyer has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement has been duly executed and delivered by Buyer, and constitutes the
legal, valid and binding obligation of Buyer enforceable against Buyer in
accordance with its terms.
(c) CONFLICTS, CONSENTS AND APPROVAL. Neither the execution and delivery
of this Agreement by Buyer nor the consummation of the transactions contemplated
hereby will:
(i) conflict with, or result in a breach of any provision of, the Buyer
Certificate or Buyer Bylaws;
(ii) violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with the giving of notice,
the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or
otherwise) to terminate, accelerate, modify or call a default under, or
result in the creation of any lien, security
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interest, charge or encumbrance upon any of the properties or assets of
Buyer or any of its subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
contract, undertaking, agreement, lease or other instrument or obligation to
which Buyer or any of its subsidiaries is a party;
(iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Buyer or any of its subsidiaries or their
respective properties or assets; or
(iv) require any action or consent or approval of, or review by, or
registration or filing by Buyer or any of its affiliates with, any third
party or any local, domestic, foreign or multi-national court, arbitral
tribunal, administrative agency or commission or other governmental or
regulatory body, agency, instrumentality or authority (a "Governmental
Authority"), except that which the failure to obtain would not, individually
or in the aggregate, have a Material Adverse Effect on Buyer or upon the
ability of Buyer to consummate the transactions contemplated hereby.
(d) BROKERAGE AND FINDER'S FEES. Neither Buyer nor any of its
shareholders, directors, officers or employees has incurred, or will incur, on
behalf of Buyer, any brokerage, finder's or similar fee in connection with the
transactions contemplated by this Agreement.
(e) BUYER'S FINANCIAL CONDITION. Buyer has, and at the Time of Closing
will have, the financial capacity to pay the Closing Date Payment, less any
deduction pursuant to Section 3.3(a) of this Agreement, and the Holdback Amount
as set forth in Section 3.2.
Section 4.2. Seller represents and warrants to Buyer that:
(a) ORGANIZATION AND STANDING. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Connecticut
with full corporate power and authority to own, lease, use and operate its
properties and to conduct its business as and where now owned, leased, used,
operated and conducted. Except as set forth on Schedule 4.2(a), Seller is duly
qualified to do business and in good standing in each jurisdiction listed on
Schedule 4.2(a), is not qualified to do business in any other jurisdiction and
neither the nature of the business conducted by it nor the property it owns,
leases or operates requires it to qualify to do business as a foreign
corporation in any other jurisdiction, except where the failure to be so
qualified or in good standing in such jurisdiction would not have a Material
Adverse Effect on Seller. Seller is not in default in the performance,
observance or fulfillment of any provision of its Articles of Incorporation (the
"Seller Articles"), or its By-laws, as in effect on the date hereof (the "Seller
By-laws"). Seller has heretofore furnished to Buyer a complete and correct copy
of the Seller Articles and the Seller By-laws.
(b) SUBSIDIARIES. Seller does not own, directly or indirectly, any equity
or other ownership interest in any corporation, partnership, joint venture or
other entity or enterprise. Seller is not subject to any obligation or
requirement to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any such entity.
(c) CORPORATE POWER AND AUTHORITY. Seller has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Seller, other
than the approval of its shareholders as required by the laws of the State of
Connecticut. Upon approval of this Agreement by Seller's shareholders as
required by the laws of the State of Connecticut, this Agreement shall be duly
executed and delivered by Seller and shall constitute the legal, valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms.
(d) CAPITALIZATION OF SELLER. As of July 28, 1999, Seller's authorized
capital stock consisted solely of 40,000,000 shares of common stock, no par
value ("Seller Common Stock"), of which (i) 14,201,402 shares were issued and
outstanding. Each outstanding share of Seller Common Stock is duly authorized
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and validly issued, fully paid and nonassessable, and has not been issued in
violation of any preemptive or similar rights. Except as set forth on Schedule
4.2(d), there are no outstanding subscriptions, options, warrants, puts, calls,
agreements, understandings, claims or other commitments or rights of any type
relating to the issuance, sale or transfer of any securities of Seller by Seller
or, to the knowledge of Seller, any other person or entity, nor are there
outstanding any securities which are convertible into or exchangeable for any
shares of Seller Common Stock, and Seller has no obligation of any kind to issue
any additional securities or to pay for securities of Seller or any predecessor.
The issuance and sale of all of the shares of Seller Common Stock have been in
compliance with federal and state securities laws.
(e) CONFLICTS; CONSENTS AND APPROVALS. Except as set forth in Schedule
4.2(e), and subject to the approval of this Agreement by the Seller's
shareholders as required by the laws of the State of Connecticut, neither the
execution and delivery of this Agreement by Seller nor the consummation of the
transactions contemplated hereby will:
(i) conflict with, or result in a breach of any provision of, the Seller
Articles or the Seller By-laws;
(ii) violate, in any material respect, or result in a material breach of
any provision of, or constitute a material default (or an event which, with
the giving of notice, the passage of time or otherwise, would constitute a
default) under, or entitle any party (with the giving of notice, the passage
of time or otherwise) to terminate, accelerate, modify or call a default
under, or result in the creation of any material lien, security interest,
charge or encumbrance upon any of the properties or assets of Seller under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, contract, undertaking, agreement, lease
or other instrument or obligation to which Seller is a party;
(iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Seller; or
(iv) require any action or consent or approval of, or review by, or
registration or filing by Seller or any of its affiliates with, any third
party or any Governmental Authority, other than (A) approval of this
Agreement and the transactions contemplated hereby by Seller's shareholders
at a special meeting of shareholders (the "Special Meeting"), and (B) the
filing of a proxy statement and other proxy materials with the United States
Securities and Exchange Commission ("SEC").
(f) ABSENCE OF CERTAIN CHANGES. Since December 31, 1998, and except as set
forth on Schedule 4.2(f) or in Seller's Form 10-QSB Quarterly Report under
Section 13 of 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), for the fiscal quarter ended June 30, 1999, a copy of which has
been made available to the Buyer through EDGAR (the "Seller's June 30, 1999
10-QSB"), there has not been:
(i) Any material adverse change in the business, operations, assets,
properties, customer base, rights or condition (financial or otherwise) of
Seller or any material adverse change relating to Seller's relationship with
any material customer.
(ii) Any declaration, setting aside or payment of any dividend or any
distribution (in cash or in kind) to any shareholder of Seller, or any
direct or indirect redemption, purchase or other acquisition by Seller of
any of its capital stock or any options, warrants, rights or agreements to
purchase or acquire such stock;
(iii) Any increase in amounts payable by Seller to or for the benefit
of, or committed to be paid by Seller to or for the benefit of, any
shareholder, director, officer or other consultant, agent or employee of
Seller whose total annual compensation exceeds $50,000 or any relatives of
such
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person, or any increase in any benefits granted under any bonus, stock
option, profit-sharing, pension, retirement, severance, deferred
compensation, group health, insurance, or other direct or indirect benefit
plan, payment or arrangement made to, with or for the benefit of any such
person;
(iv) Any material transaction entered into or carried out by Seller
other than in the ordinary and usual course of business consistent with past
practices;
(v) Any material borrowing or agreement to borrow funds by Seller, any
incurring by Seller of any other obligation or liability (contingent or
otherwise), except liabilities incurred in the usual and ordinary course of
Seller's business (consistent with past practices), or any endorsement,
assumption or guarantee of payment or performance of any loan or obligation
of any other person by Seller;
(vi) Any material change in Seller's method of doing business or any
change in its accounting principles or practices or its method of
application of such principles or practices;
(vii) Any material mortgage, pledge, lien, security interest,
hypothecation, charge or other encumbrance imposed or agreed to be imposed
on or with respect to the property or assets of Seller;
(viii) Any sale, lease or other disposition of, or any agreement to
sell, lease or otherwise dispose of any of the properties or assets of
Seller, other than sales in the usual and ordinary course of business for
fair equivalent value to persons other than directors, officers,
shareholders, or other affiliates of Seller;
(ix) Any purchase of or any agreement to purchase assets (other than
purchases in the ordinary course of business consistent with past practices)
for an amount in excess of $25,000 for any one purchase or $50,000 for all
such purchases made by Seller or any lease or any agreement to lease, as
lessee, any capital assets with payments over the term thereof to be made by
Seller exceeding an aggregate of $50,000;
(x) Any loan or advance made by Seller to any person other than loans
made to Seller's customers in the ordinary course of business consistent
with past practices not exceeding $50,000, in the aggregate;
(xi) Any modification, waiver, change, amendment, release, rescission or
termination of, or accord and satisfaction with respect to, any material
term, condition or provision of any contract, agreement, license or other
instrument to which Seller is a party, other than any satisfaction by
performance in accordance with the terms thereof in the usual and ordinary
course of business; or
(xii) Any labor dispute or disturbance adversely affecting the business
operations, prospects or condition (financial or otherwise) of Seller,
including, without limitation, the filing of any petition or charge of
unfair labor practice with any governmental or regulatory authority, efforts
to effect a union representation election, actual or threatened employee
strike, work stoppage or slow down.
(g) OFFICERS, EMPLOYEES AND COMPENSATION. Schedule 4.2(g) sets forth the
names of all directors, officers and employees of Seller, the total salary,
bonus, fringe benefits and perquisites each received from Seller in the year
ended December 31, 1998, and any changes to the foregoing which have occurred
subsequent to December 31, 1998. Except as disclosed in Schedule 4.2(g), there
are no other forms of compensation paid to any such director, officer or
employee of Seller. Except as disclosed in Schedule 4.2(g), the amounts accrued
on the books and records of Seller for vacation pay, sick pay, and all
commissions and other fees payable to agents, salesmen and representatives will
be adequate to cover Seller's liabilities for all such items. Except as set
forth in Schedule 4.2(g), Seller has not become obligated, directly or
indirectly, to any shareholder, director or officer of Seller or any person
related to such person by blood or marriage, except for current liability for
such compensation. Except as set forth in Schedule 4.2(g), to the knowledge of
Seller, no shareholder, director, officer, agent or
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employee of Seller or any person related to such person by blood or marriage
holds any position or office with or has any material financial interest, direct
or indirect, in any supplier, customer or account of, or other outside business
which has material transactions with, Seller. Seller has no agreement or
understanding with any shareholder, director, officer, employee or
representative of Seller which would influence any such person not to become
associated with Buyer from and after the Closing or from serving Buyer after the
Closing in a capacity similar to the capacity presently held.
(h) FINANCIAL STATEMENTS.
(i) Seller has furnished to Buyer the audited balance sheet of Seller as
of December 31, 1998, and the related statements of income, changes in
stockholders' equity, and cash flows for the period then ended, including,
in each case, the related notes (collectively, the "Audited Statements").
The Audited Statements have been made available to the Buyer through EDGAR,
have been prepared from and are in accordance with the books and records of
Seller, have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis, and fairly present the financial
condition of Seller as of the date stated and the results of operations of
Seller for the period then ended in accordance with such practices. The
Audited Statements have been prepared by Seller based on the assumption that
Seller will continue as a going concern.
(ii) When delivered in accordance with Section 5.12, the balance sheet
and the related statements of income for Seller as of the end of each
calendar month after the date hereof (the "Interim Statements") shall have
been prepared from and in accordance with the books and records of Seller,
shall be true and correct and shall fairly present the financial condition
of Seller as of such date and the results of operations of Seller for such
period in accordance with such practices.
(i) TAXES.
(i) Except as set forth in Schedule 4.2(i), Seller has duly filed all
federal, state, local and foreign income, franchise, excise, real and
personal property and other Tax Returns (as defined below in Section
4.2(i)(v)) and reports (including, but not limited to, those filed on a
consolidated, combined or unitary basis) required to have been filed by
Seller prior to the date hereof. All of the foregoing Tax Returns and
reports are true and correct, and Seller has paid or, prior to the Closing,
will pay all Taxes (as defined below in Section 4.2(i)(v)), interest and
penalties required to be paid in respect of the periods covered by such
returns or reports or otherwise due to any federal, state, foreign, local or
other taxing authority. The unpaid Taxes of Seller do not, as of the date
hereof and as of the Closing Date, exceed the reserve for Tax liability (as
distinguished from any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face of the
balance sheet of Seller included in the Audited Statements (as distinguished
from in any notes thereto). Seller will not have any liability for any Taxes
in excess of the amounts so paid or reserves so established and Seller is
not delinquent in the payment of any material Tax, assessment or
governmental charge and it has not requested or filed any document having
the effect of causing any extension of time within which to file any returns
in respect of any fiscal year which have not since been filed. No
deficiencies for any Tax, assessment or governmental charge have been
proposed in writing, asserted or assessed (tentatively or definitely), in
each case, by any taxing authority, against Seller for which there are not
adequate reserves. Except as set forth in Schedule 4.2(i), Seller is not the
subject of any Tax audit. As of the date of this Agreement, there are no
pending requests for waivers of the time to assess any such Tax, other than
those made in the ordinary course and for which payment has been made or
there are adequate reserves. Seller has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency. There are no liens with respect
to Taxes upon any of the properties or assets, real or personal, tangible or
intangible of
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Seller (other than liens for Taxes not yet due). No claim has ever been made
by an authority in a jurisdiction where Seller does not file Tax Returns
that Seller is or may be subject to taxation by that jurisdiction.
(ii) Except as set forth in Schedule 4.2(i), Seller is not obligated by
any contract, agreement or other arrangement to indemnify any other person
with respect to Taxes. Seller is not now nor has ever been a party to or
bound by any agreement or arrangement (whether or not written and including,
without limitation, any arrangement required or permitted by law) binding
Seller which (A) requires Seller to make any Tax payment to or for the
account of any other person, (B) affords any other person the benefit of any
net operating loss, net capital loss, investment Tax credit, foreign Tax
credit, charitable deduction or any other credit or Tax attribute which
could reduce Taxes (including, without limitation, deductions and credits
related to alternative minimum Taxes) of Seller, (C) requires or permits the
transfer or assignment of income, revenues, receipts or gains to Seller,
from any other person, or (D) otherwise requires Seller to indemnify any
other person in respect of Taxes.
(iii) Schedule 4.2(i) sets forth (A) a list of all jurisdictions
(whether foreign or domestic) to which any material Tax is or has been
properly payable by Seller, (B) all sales for which gain has been reported
under the installment method of accounting for Tax purposes and for which
gain has to be recognized for Tax purposes by Seller subsequent to the
Closing Date, (C) all rulings or determinations obtained by Seller from any
Governmental Authority responsible for the imposition of any Tax that may
affect Seller subsequent to the Closing Date, (D) all Seller returns with
respect to which the applicable period for assessment under Applicable Law
(as defined in Section 4.2(j)), after giving effect to extensions or
waivers, has not expired, (E) any material intercompany items (as described
in Treasury Regulations Section 1.1502-13(b)(2) or in similar state or local
income Tax provisions) resulting from any intercompany transaction to which
Seller is a party, (F) a list of all pending Tax audits or inquiries, and
(G) any Tax reserves included in the "Deferred Taxes" or similar line item
in the Audited Statements, separately identified and itemized by dollar
amount.
(iv) Except as set forth in Schedule 4.2(i), Seller has withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
shareholder or other third party.
(v) For purposes of this Agreement, "Tax Returns" means returns, reports
and forms required to be filed with any Governmental Authority of the United
States or any other jurisdiction responsible for the imposition or
collection of Taxes. "Tax" or "Taxes" means (A) all taxes (whether federal,
state, local or foreign) based upon or measured by income and any other tax
whatsoever, including, without limitation, gross receipts, profits, sales,
use, occupation, value added, ad valorem, transfer, franchise, withholding,
payroll, employment, excise, or property taxes, together with any interest
or penalties imposed with respect thereto and (B) any obligations under any
agreements or arrangements with respect to any taxes described in clause
(A) above.
(j) COMPLIANCE WITH LAW. Except as set forth in Schedule 4.2(j), Seller is
in compliance with, and at all times since December 31, 1995, has been in
compliance with, all applicable laws, statutes, orders, rules, regulations,
policies or guidelines promulgated, or judgments, decisions or orders entered by
any Governmental Authority (collectively, "Applicable Laws") relating to Seller
or its business or properties. Seller has heretofore made available to Buyer
copies of all material correspondence from and to all Governmental Authority and
inspectors since December 31, 1995.
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(k) INTELLECTUAL PROPERTY.
(i) Set forth in Schedule 4.2(k) is a true and complete list of all of
Seller's foreign and domestic patents, patent applications, invention
disclosures, trademarks, service marks, trade names, copyrights (and any
registrations or applications for registration for any of the foregoing) and
all material design rights, and all material agreements to which Seller is a
party which concern any of the Intellectual Property. "Intellectual
Property" shall mean all intellectual property or other proprietary rights
of every kind, including, without limitation, all domestic or foreign
patents, patent applications, inventions (whether or not patentable),
processes, products, technologies, discoveries, copyrightable and
copyrighted works, apparatus, trade secrets, trademarks and trademark
applications and registrations, service marks and service mark applications
and registrations, trade names, trade dress, copyright applications and
registrations, design rights, customer lists, marketing and customer
information, mask works rights, know-how, licenses, technical information
(whether confidential or otherwise), software, hardware, systems, databases,
models, methodologies and all documentation thereof necessary for the
conduct of the business of Seller as presently conducted. Other than the
Intellectual Property set forth in Schedule 4.2(k), no name, patent,
invention, trade secret, proprietary right, computer software (other than
software generally available to the public from third party sources),
trademark, trade name, service mark, logo, copyright, franchise, license or
sublicense of Intellectual Property, or other such right is necessary for
the operation of the business of Seller in substantially the same manner as
such business is presently or proposed to be conducted. Except as set forth
in Schedule 4.2(k), (A) Seller owns, free and clear of any liens, claims or
encumbrances, the Intellectual Property and has the exclusive right to bring
actions for the infringement thereof; (B) all of the patents, trademark
registrations, service mark registrations, trade name registrations, design
right registrations, and copyright registrations included in the
Intellectual Property are valid; (C) the Intellectual Property does not
infringe and has not infringed any now existing or subsequently issued
domestic or foreign patent, trademark, service mark, trade name, copyright,
design right or other intellectual property or proprietary right; (D) no
person or entity has asserted to Seller and Seller has no knowledge that,
with respect to the Intellectual Property, Seller or a licensee of Seller is
infringing or has infringed any domestic or foreign patent, trademark,
service mark, trade name, copyright or design right, or has misappropriated
or improperly used or disclosed any trade secret, confidential information
or know-how; (E) the Intellectual Property, and its use or operation, do not
infringe, and have not infringed, any foreign or domestic patent, trademark,
service mark, trade name, copyright or contractual right of any entity, and
have not involved the misappropriation or improper use or disclosure of any
trade secrets, confidential information or know-how of any entity; (F) all
working requirements and all fees, annuities, and other payments which are
due from Seller on or before the Closing Date for any of the Intellectual
Property, including, without limitation, all foreign or domestic patents,
patent applications, trademark registrations, service mark registrations,
tradename registrations, copyright registrations and any applications for
any of the preceding, have been met or paid; (G) the claims made in the
foreign or domestic patents and patent applications that are a part of the
Intellectual Property are not dominated by claims of patents owned by other
persons or entities; (H) the making, using, selling, manufacturing,
marketing, licensing, reproduction, distribution, or publishing of any
process, service, machine, manufacture, composition of matter, or material
pursuant to any part of the Intellectual Property, does not and will not
infringe any domestic or foreign patent, trademark, service mark, trade
name, copyright or other intellectual property right; (I) no unexpired
foreign or domestic patents or patent applications exist that are adverse to
the material interests of Seller; (J) the Intellectual Property is not the
subject of any pending Action as defined in Section 4.2(n); (K) no part of
the Intellectual Property was obtained through inequitable conduct or fraud
in the United States Patent and Trademark Office or any foreign governmental
entity; (L) Seller is not aware of any (1) prior act that would adversely
affect, void or invalidate any of the Intellectual
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Property or (2) conduct or use by Seller or any third party that would
adversely affect, void or invalidate any of the Intellectual Property; (M)
the execution, delivery and performance of this Agreement by Seller, and the
consummation of the transactions contemplated hereby, will not breach,
violate or conflict with any instrument or agreement governing or contained
within any of the Intellectual Property, will not cause the forfeiture or
termination or give rise to a right of forfeiture or termination of any of
the Intellectual Property or in any way impair the right of Buyer to use,
sell, offer to sell, license or dispose of, or to bring any action for the
infringement of, any Intellectual Property; (N) there are no royalties,
honoraria, fees or other payments payable to any third party by reason of
the ownership, use, license, sale or disposition of the Intellectual
Property; (O) no part of the source or object code, algorithms or structure
included in any of the Intellectual Property is copied from, based upon or
derived from any source or object code, algorithm or structure included in
any computer software product owned by any third party nor does any
substantial similarity of any of such source or object code, algorithms or
structure to any computer software product owned by any third party result
from such source or object code, algorithms or structure being copied from,
based upon or derived from any computer software product owned by any third
party; and (P) no software included in the Intellectual Property contains
any "Self-Help Code," i.e., any back door, time bomb, drop dead device, or
other software routine designed to disable a computer program automatically
with the passage of time or under the positive control of any unauthorized
person, or, to Seller's knowledge, any "Unauthorized Code," i.e., any virus,
Trojan horse, worm, or other software routines or hardware components
designed to permit unauthorized access, disable, erase, or otherwise harm
software, hardware, or data or to perform any other such actions.
(ii) Seller has taken all steps that are reasonably necessary and
appropriate to safeguard and maintain the secrecy and confidentiality of all
trade secrets contained in the Intellectual Property (including, without
limitation, entering into appropriate confidentiality, nondisclosure and
non-competition agreements with all officers, directors, employees and
third-party consultants of Seller).
(iii) Seller has taken all steps that are reasonably necessary and
appropriate to safeguard and maintain all copyrights and patents contained
in the Intellectual Property, including, without limitation, entering into
appropriate assignments with all current and former officers, directors,
employees and third party consultants of Seller.
(iv) Seller has taken all steps that are reasonably necessary and
appropriate to safeguard and maintain all trademarks and tradenames
contained in the Intellectual Property.
(l) TITLE TO AND CONDITION OF PROPERTIES.
(i) Except as set forth in Schedule 4.2(l), Seller has good, valid and
indefeasible title to all of its material assets and properties of every
kind, nature and description, tangible or intangible, wherever located,
which constitute all of the property now used in and necessary for the
conduct of its business as presently conducted (including, without
limitation, all material property and assets shown or reflected on the
Audited Statements or the Interim Statements, when delivered, except
inventory sold in the ordinary course of business). Except as set forth in
Schedule 4.2(l), all such properties are owned free and clear of all
mortgages, pledges, liens, security interests, encumbrances and restrictions
of any nature whatsoever, including, without limitation, (A) rights or
claims of parties in possession; (B) easements or claims of easements;
(C) encroachments, overlaps, boundary line or water drainage disputes or any
other matters; (D) any lien or right to a lien for services, labor or
material furnished; (E) special tax or other assessments; (F) options to
purchase, leases, tenancies, or land contracts; (G) contracts, covenants, or
reservations which restrict the use of such properties and (H) violations of
any Applicable Laws applicable to such properties. All such properties are
usable for their current uses without violating any Applicable
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Laws, or any applicable private restriction, and such uses are legal
conforming uses. Except as set forth in Schedule 4.2(l), no financing
statement under the Uniform Commercial Code or similar law naming Seller or
any of its predecessors is on file in any jurisdiction in which Seller owns
property or does business, and Seller is not a party to or bound under any
material agreement or legal obligation authorizing any party to file any
such financing statement. Schedule 4.2(l) contains a complete and accurate
list of the location of all real property which is owned, leased or operated
by Seller and describes the nature of Seller's interest in that real
property. With respect to any real property leased by Seller, Seller has a
valid leasehold interest in that real property.
(ii) Except as set forth in Schedule 4.2(l), all real property, plants
and structures and all machinery and equipment and tangible personal
property owned, leased or used by Seller and material to the operation of
its business are suitable for the purpose or purposes for which they are
being used (including full compliance with all Applicable Laws) and are in
good condition and repair, ordinary wear and tear excepted. EXCEPT AS
EXPRESSLY SET FORTH HEREIN, SELLER HAS NOT MADE, DOES NOT INTEND TO MAKE,
AND HEREBY EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED REPRESENTATIONS OR
WARRANTIES AS TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
Schedule 4.2(l) lists, and Seller has furnished or made available to Buyer,
copies of all engineering, geologic and environmental reports prepared by or
for Seller or with respect to the real property owned, leased or used by
Seller; provided, however, Seller has made no representation whatsoever
about the accuracy of such reports or the sufficiency thereof for Buyer's
purposes.
(m) ENVIRONMENTAL MATTERS.
(i) As used herein, the term "Environmental Laws" means all federal,
state, local or foreign laws relating to pollution or protection of human
health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or industrial,
toxic or hazardous substances or wastes (collectively, "Hazardous
Materials") into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials, as well as all authorizations, codes,
decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations issued,
entered, promulgated or approved thereunder.
(ii) Except as set forth in Schedule 4.2(m), there are, with respect to
Seller or any of its predecessors, no past or present violations of
Environmental Laws, releases of any material into the environment, actions,
activities, circumstances, conditions, events, incidents, or contractual
obligations relating to any property owned, leased or used by Seller and any
of its predecessors which may give rise to any common law environmental
liability or any liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 or similar federal, state, local or
foreign laws and Seller has not received any notice with respect to any of
the foregoing, nor is any Action pending or threatened in connection with
any of the foregoing. Notwithstanding anything in this Section 4.2(m) to the
contrary, Seller makes no representations regarding off-site releases of
Hazardous Materials by third parties, except that Seller represents that it
has no knowledge of any such releases.
(iii) Except as set forth in Schedule 4.2(m), no Hazardous Materials
were or are contained on or about any real property currently or previously
owned or leased by Seller and no Hazardous Materials were released on or
about any real property previously owned or leased by Seller during the
period the property was owned or leased by Seller or its predecessors,
except in amounts that do not violate Environmental Laws. To the extent
Seller and any of its predecessors currently uses or previously used real
property which Seller or any of its predecessors ever owned or leased, no
Hazardous Materials were or are contained on or about the portion of such
property currently or
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previously used by Seller and any of its predecessors and no Hazardous
Materials were released on or about any such portion of property previously
used by Seller and any of its predecessors during the period the property
was used by Seller or any of its predecessors, except in amounts that do not
violate Environmental Laws.
(iv) Except as set forth in Schedule 4.2(m), there are no underground
storage tanks on or under any real property currently or previously owned,
leased or used by Seller.
(n) LITIGATION. Except as set forth in Schedule 4.2(n), there is no suit,
claim, action, proceeding or investigation (an "Action") pending or, to the
knowledge of Seller (or its officers or directors), threatened against Seller or
any officer or director of Seller. Seller is not subject to any outstanding
order, writ, injunction or decree. Except as set forth in Schedule 4.2(n), since
December 31, 1995, (i) there has not been any Action asserted, or to the
knowledge of Seller, threatened against Seller relating to Seller's method of
doing business or its relationship with past, existing or future users or
purchasers of any goods or services of Seller, and (ii) Seller has not been
subject to any outstanding order, writ, injunction or decree relating to
Seller's method of doing business or its relationship with past, existing or
future customers, lessees, users, purchasers or licensees of any Intellectual
Property, goods or services of Seller.
(o) BROKERAGE AND FINDER'S FEES; EXPENSES. Neither Seller nor, to the
knowledge of Seller, any shareholder, director, officer or employee thereof, has
incurred or will incur on behalf of Seller, any brokerage, finder's or similar
fee in connection with the transactions contemplated by this Agreement.
(p) EMPLOYEE BENEFIT PLANS.
(i) For purposes of this Section 4.2(p), the following terms have the
definitions given below:
"Controlled Group Liability" means any and all liabilities under (A)
Title IV of ERISA, (B) Section 302 of ERISA, (C) Sections 412 and 4971 of
the Code, (D) the continuation coverage requirements of section 601 et
seq. of ERISA and Section 4980B of the Code, and (E) corresponding or
similar provisions of foreign laws or regulations, in each case other
than pursuant to the Plans.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"ERISA Affiliate" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section
4001(b)(1) of ERISA that includes the first entity, trade or business, or
that is a member of the same "controlled group" as the first entity,
trade or business pursuant to Section 4001(a)(14) of ERISA.
"Plans" means all employee benefit plans, programs, policies,
practices, and other arrangements providing benefits to any employee or
former employee or beneficiary or dependent thereof, whether or not
written, and whether covering one person or more than one person,
sponsored or maintained by Seller or to which Seller contributes or is
obligated to contribute. Without limiting the generality of the
foregoing, the term "Plans" includes all employee welfare benefit plans
within the meaning of Section 3(1) of ERISA and all employee pension
benefit plans within the meaning of Section 3(2) of ERISA.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan,
as those terms are defined in Part I of Subtitle E of Title IV of ERISA.
(ii) Schedule 4.2(p) lists all Plans of Seller. With respect to each
Plan, Seller has made available to Buyer a true, correct and complete copy
of: (A) each writing constituting a part of
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such Plan, including, without limitation, all plan documents, benefit
schedules, trust agreements, and insurance contracts and other funding
vehicles; (B) the most recent Annual Report (Form 5500 Series) and
accompanying schedule, if any; (C) the current summary plan description, if
any; (D) the most recent annual financial report, if any; and (E) the most
recent determination letter from the Internal Revenue Service, if any.
(iii) The Internal Revenue Service has issued a favorable determination
letter with respect to each Plan that is intended to be a "qualified plan"
within the meaning of Section 401(a) of the Code (a "Qualified Plan"), and
there are no existing circumstances nor any events that have occurred that
could adversely affect the qualified status of any Qualified Plan or the
related trust.
(iv) Buyer will not be responsible for any debt, obligation,
contribution, responsibility, withdrawal liability or other liability of
Seller or any of its ERISA Affiliates under any Plans, including, without
limitation, any penalty, fee or funding obligation related to any such Plan.
(v) Seller has complied and is in compliance with all provisions of
ERISA, the Code and all laws and regulations applicable to the Plans, and
each Plan has been operated in compliance with its terms. There is not now,
and there are no existing, circumstances that could give rise to the
imposition of any lien on the assets of Seller under ERISA or the Code.
(vi) No Plan is subject to Title IV or Section 302 of ERISA or Section
412 or 4971 of the Code. No Plan is a "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA (a "Multiemployer Plan") or a plan
that has two or more contributing sponsors at least two of whom are not
under common control, within the meaning of Section 4063 of ERISA (a
"Multiple Employer Plan"), nor has Seller or any of its respective ERISA
Affiliates, at any time within five years before the date hereof,
contributed to or been obligated to contribute to any Multiemployer Plan or
Multiple Employer Plan.
(vii) There does not now exist, and there are no existing, circumstances
that could result in, any Controlled Group Liability that would be a
liability of Seller following the Closing. Without limiting the generality
of the foregoing, neither Seller nor any of its respective ERISA Affiliates
has engaged in any transaction described in Section 4069 or Section 4204 of
ERISA.
(viii) Seller has provided or caused to be provided notice of the
availability of continuation health care coverage for those present or
former employees of Seller, and their dependents or any qualified
beneficiary of such employees or former employees in accordance with the
requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended or any applicable state law requiring continuing health care
coverage (hereinafter referred to as "Continuation Coverage") entitled to
such notice because of a qualifying event. All Continuation Coverage has
been provided prior to the date hereof, and all Continuation Coverage will
be provided up to and including the Closing Date.
(ix) Schedule 4.2(p) sets forth the only individual for whom Seller is
presently providing Continuation Coverage (the "Coverage Recipient").
Subject to Section 5.10(b), Seller's obligation to provide Continuation
Coverage to the Coverage Recipient will terminate as of the Closing Date.
(q) CONTRACTS.
(i) Schedule 4.2(q) lists all written or oral contracts, agreements,
guarantees, leases and executory commitments which are not terminable on
thirty (30) or fewer days notice without penalty or liability (each an
"Agreement") to which Seller is a party and which fall within any of the
following categories: (A) Agreements not entered into in the ordinary course
of Seller's business, (B) joint venture, partnership and similar agreements,
(C) Agreements which are service contracts or equipment leases involving
payments by Seller of more than $25,000 per year, (D) Agreements containing
covenants purporting to limit the freedom of Seller to compete in any
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line of business in any geographic area or to hire any individual or group
of individuals, (E) Agreements which after the Time of Closing would have
the effect of limiting the freedom of Buyer or its subsidiaries to compete
in any line of business in any geographic area or to hire any individual or
group of individuals, including any Agreements with distributors granting
any exclusive rights, (F) Agreements which contain minimum purchase
conditions or requirements or other terms that restrict or limit the
purchasing relationships of Seller or its affiliates, or any customer,
licensee or lessee thereof, (G) Agreements relating to any outstanding
commitment for capital expenditures in excess of $25,000, (H) Agreements
relating to the lease or sublease of or sale or purchase of real or personal
property involving any annual expense or price in excess of $25,000 and not
cancelable by Seller (without premium or penalty) within one month,
(I) Agreements with any labor organization, (J) indentures, mortgages,
promissory notes, loan agreements, guarantees of amounts in excess of
$25,000, letters of credit or other agreements or instruments of Seller or
commitments for the borrowing or the lending of amounts in excess of $25,000
by Seller or providing for the creation of any charge, security interest,
encumbrance or lien upon any of the assets of Seller, (K) Agreements which
are fixed price or other risk sharing agreements with customers not
cancelable by Seller (without premium or penalty) within one month;
(L) Agreements involving annual revenues or expenditures to the business of
Seller in excess of 3.0% of Seller's annual revenues, (M) Agreements
providing for "earn-outs" or other contingent payments involving more than
$25,000 over the term of the Agreement and (N) Agreements with or for the
benefit of any affiliate (as such term is defined in Rule 12b-2 promulgated
under the Exchange Act) of Seller or immediate family member thereof. All
such Agreements are valid and binding obligations of Seller and, to the
knowledge of Seller, the valid and binding obligation of each other party
thereto. Except as set forth in Schedule 4.2(q), neither Seller nor, to the
knowledge of Seller, any other party thereto is in violation of or in
default in respect of, nor has there occurred an event or condition which
with the passage of time or giving of notice (or both) would constitute a
default under or permit the termination of, any Agreement. Seller has
complied with and properly discharged the obligations of Seller arising
under any Agreements granting to third parties any rights of first refusal
or rights of negotiation as a result of the transactions contemplated by
this Agreement, and all such third parties have irrevocably waived any such
rights.
(ii) Except as set forth in Schedule 4.2(q) or as contemplated by the
transactions contemplated hereby, there are no Contracts or other
transactions between Seller, on the one hand, and any (A) officer or
director of Seller, (B) record or beneficial owner of five percent or more
of the voting securities of Seller or (C) affiliate of any such officer,
director or beneficial owner, on the other hand.
(iii) Except as set forth in Schedule 4.2(q), no consent, permission,
waiver or approval is required to be obtained, and no penalty, assessment or
special payment is required to paid to, any third party or governmental
authority in order to preserve for Seller after the Closing the benefits of
the Contracts.
(r) ACCOUNTS RECEIVABLE; INVENTORIES.
(i) Except as set forth in Schedule 4.2(r), all accounts receivable and
notes receivable (including lease and finance notes receivable) and accrued
interest receivable of Seller are fully collectible (after application of
the reserves in the balance sheet included in the Interim Statements) and
have arisen in the ordinary course of business and the accounts receivable
reserves reflected on the balance sheet included in the Audited Statements
and the Interim Statements will be as of the date thereof established in
accordance with GAAP, consistently applied, and will be adequate.
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(ii) The inventories reflected on the balance sheet included in the
Audited Statements and the Interim Statement have been (or will be) valued
in accordance with generally accepted accounting principles consistently
applied. No physical adjustments have been made since the date of the
Audited Statements. Such inventories (A) are carried at an amount not in
excess of the lower of cost or net realizable value, and (B) do not include
any inventory which is obsolete, surplus or not usable or saleable in the
lawful and ordinary course of business of Seller as heretofore conducted, in
each case net of reserves provided therefor. Such inventories consist of
items of quality and quantity that are adequate for the conduct of the
business of Seller and inventory levels are not in excess of normal
operating requirements of Seller.
(s) LABOR MATTERS. Except as set forth in Schedule 4.2(s), Seller does not
have any labor contracts, collective bargaining agreements or employment or
consulting agreements with any persons employed by Seller or any persons
otherwise performing services primarily for Seller (the "Seller Business
Personnel"). Seller has not engaged in any unfair labor practice with respect to
Seller Business Personnel, and there is no unfair labor practice complaint
pending or, to the knowledge of Seller, threatened, against Seller with respect
to Seller Business Personnel. There is no labor strike, dispute, slowdown or
stoppage pending or, to the knowledge of Seller, threatened against Seller, and
Seller has not experienced any labor strike, dispute, slowdown or stoppage or
other labor difficulty involving its employees since December 31, 1995.
(t) UNDISCLOSED LIABILITIES. Except (i) as and to the extent disclosed or
reserved against on the balance sheet of Seller included in the Audited
Statements, (ii) as incurred after the date thereof in the ordinary course of
business consistent with prior practice and not prohibited by this Agreement and
which in any event are not material, (iii) as set forth in Schedule 4.2(t), or
(iv) as expressly set forth in Seller's June 30, 1999 10-QSB, Seller does not
have any liabilities or obligations of any nature, whether known or unknown,
absolute, accrued, contingent or otherwise and whether due or to become due,
that, individually or in the aggregate, could have a Material Adverse Effect on
Seller.
(u) OPERATION OF SELLER'S BUSINESS; RELATIONSHIPS.
(i) Since December 31, 1998 through the date of this Agreement, and
except as expressly disclosed in Seller's June 30, 1999 10-QSB, Seller has
not engaged in any transaction which, if done after execution of this
Agreement, would violate Section 5.6 hereof except as set forth in Schedule
4.2(u). Schedule 4.2(u) describes each termination or non-renewal that has
occurred with respect to any Contract with any customer or supplier from
January 1, 1998 to the date of this Agreement.
(ii) No supplier of the Company has indicated that it shall stop, or
decrease the rate of, or substantially increase its fees for, supplying
products or services to Seller either prior to, or following the
consummation of the transactions contemplated by this Agreement. Schedule
4.2(u) sets forth a list of all customers which have terminated their
relationships with Seller since December 31, 1998, or have notified Seller
since December 31, 1998, that they intend to terminate their relationships
with Seller. Except as set forth in Schedule 4.2(u), Seller does not know of
any customers of Seller which have indicated to the Company that they are
considering or planning to (A) discontinue being customers of Seller,
(B) discontinue being customers of Seller after the Closing, or (C)
substantially decrease the amount of business that they conduct with Seller
or materially alter the terms of such business either before or after the
Closing.
(iii) No product produced by Seller or produced for Seller by a third
party has been recalled voluntarily or involuntarily since December 31,
1996, no such recall is being considered by Seller, and, to the knowledge of
Seller, no such recall is being considered by or has been requested or
ordered by any Seller customer, Governmental Authority or consumer group.
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(iv) Seller is and since February 5, 1996, has been engaged in the
development, manufacturing and marketing of mobile robotic systems and
component parts for mobile robotic systems, and except as disclosed in
Seller's June 30, 1999 10-QSB, Seller has engaged in no other business
whatsoever, except as may be incidental to the foregoing.
(v) Seller is in possession of all material franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, approvals and orders necessary to own, lease and
operate its properties and to carry on its business as it is now being
conducted (collectively, the "Seller Permits"), and there is no Action
pending or, to the knowledge of Seller, threatened regarding any of the
Seller Permits. Seller is not in conflict with, or in default or violation
of any of the Seller Permits, except for any such conflicts, defaults or
violations which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on Seller. During the period
commencing on January 1, 1996 and ending on the date hereof, Seller has not
received any notification with respect to possible conflicts, defaults or
violations of Applicable Laws, except for notices relating to possible
conflicts, defaults or violations, which conflicts, defaults or violations
could not have a Material Adverse Effect on Seller. No consent, approval,
registration or filing with any third party or Governmental Authority
pursuant to any Seller Permits is required as a result of the transactions
contemplated by this Agreement.
(v) PRODUCT WARRANTIES AND LIABILITIES. Schedule 4.2(v) lists all forms of
written warranties, guarantees or assurances of Seller's products and services
that are in effect or proposed to be used by it. Schedule 4.2(v) sets forth a
description of each pending or, to the knowledge of Seller, threatened Action
under any warranty or guaranty against Seller. Seller has not incurred, nor does
Seller know or have any reason to believe there is any basis for alleging, any
liability, damage, loss, cost or expense as a result of any defect or other
deficiency (whether of design, materials, workmanship, labeling instructions or
otherwise) ("Product Liability") with respect to any product sold or services
rendered by or on behalf of Seller (including any licensee thereof) after
July 1, 1992 and prior to the Closing, whether such Product Liability is
incurred by reason of any express or implied warranty (including, without
limitation, any warranty of merchantability or fitness), any doctrine of common
law (tort, contract or other), any statutory provision or otherwise and
irrespective of whether such Product Liability is covered by insurance. There
are no oral warranties, guarantees or assurances of Seller's products and
services that are in effect.
(w) BOARD RECOMMENDATION. The Board of Directors of Seller, at a meeting
duly called and held and at which a quorum was present, has by a unanimous vote
of those directors in attendance determined that this Agreement and the
transactions contemplated hereby, are fair to and in the best interests of the
shareholders of Seller, (ii) resolved to approve this Agreement and the
transactions contemplated herein, and (iii) resolved to recommend the approval
of this Agreement and the transactions contemplated herein to the shareholders
of Seller.
(x) INSURANCE. Schedule 4.2(x) sets forth Seller's current insurance
coverage.
(y) BOOKS OF ACCOUNT; RECORDS. Seller's general ledgers, minute books and
other material records relating to the assets, properties, contracts and
outstanding legal obligations of Seller, and to Seller's knowledge its stock
record books, are, in all material respects, complete and correct, and have been
maintained in accordance with good business practices and the matters contained
therein are appropriate and accurately reflected in the Audited Statements.
(z) YEAR 2000 COMPLIANCE. Except as set forth in Schedule 4.2(z),The
computer systems of Seller (including without limitation all software, hardware,
workstations and related components, automated devices, embedded chips and other
date sensitive equipment such as security systems, alarms, elevators and HVAC
systems) are Year 2000 Compliant. The term "Year 2000 Compliant" as used herein
means that the computer systems (i) are capable of recognizing, processing,
managing, representing,
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interpreting, and manipulating correctly date-related data for dates earlier and
later than January 1, 2000, including, but not limited to, calculating,
comparing, sorting, storing, tagging and sequencing, without resulting in or
causing logical or mathematical errors or inconsistencies in any user-interface
functionalities or otherwise, including data input and retrieval, data storage,
data fields, calculations, reports, processing, or any other input or output,
(ii) have the ability to provide date recognition for any data element without
limitation (including, but not limited to, date-related data represented without
a century designation, date-related data whose year is represented by only two
digits and date fields assigned special values), (iii) have the ability to
automatically function into and beyond the year 2000 without human intervention
and without any change in operations associated with the advent of the year
2000, (iv) have the ability to correctly interpret data, dates and time into and
beyond the year 2000, (v) have the ability not to produce noncompliance in
existing information, nor otherwise corrupt such data into and beyond the year
2000, (vi) have the ability to correctly process after January 1, 2000 data
containing dates before that date, and (vii) have the ability to recognize all
"leap years," including February 29, 2000. Except as set forth on Schedule
4.2(z), the computer systems of Seller have the ability to properly interface
and will continue to properly interface with internal and external applications
and systems of third parties with whom Seller exchanges data electronically
(including, without limitation, customers, clients, suppliers, service
providers, subcontractors, processors, converters, shippers, warehousemen,
outsourcers, data processors, regulatory agencies and banks) whether or not they
have achieved Year 2000 Compliance. Except as set forth on Schedule 4.2(z),
Seller has inquired of all such third parties whose lack of Year 2000 Compliance
would be materially or significantly adverse to Seller, and all such third
parties have represented that they are Year 2000 Compliant.
(aa) NEGOTIATION RIGHTS. Seller has complied with its obligations with
respect to the Negotiation Rights (as defined in Section 5.3 below) and each
party listed on Schedule 4.2(e) with whom Seller has a prior written obligation
to negotiate an Acquisition Proposal (as defined Section 5.3 below) or similar
arrangement has waived, in writing, its Negotiation Rights (each, a "Negotiation
Rights Waiver"). Each Negotiation Rights Waiver is legal, valid and binding on
the party from whom it was received.
(bb) GOVERNMENT AGREEMENTS. Seller represents and warrants that none of
the technology developed or conceived under the agreements described at Schedule
1.1(f), Item 4, Subitem 10 (the "Government Agreements") is incorporated into or
is otherwise a part of Seller's HelpMate, LabMate, LightRanger or BiSight
products. Seller has not received any notice from any Governmental Authority or
entity asserting any ownership rights in or otherwise evidencing an intent to
own any technology developed under any of the Government Agreements.
ARTICLE V. COVENANTS
Section 5.1. COVENANT AGAINST HIRING. Seller understands that in Buyer's
view it is essential to the successful operation of the business to be acquired
from Seller that Buyer retain substantially unimpaired (to the extent determined
by Buyer in its sole discretion) Seller's operating organization. Accordingly,
Seller shall assist and cooperate with Buyer in securing employment arrangements
acceptable to Buyer, in Buyer's sole discretion, between Buyer and the employees
of Seller listed on Schedule 5.1, and Seller shall not take any action which is
likely to induce any employee or representative of Seller not to become or
continue as an employee or representative of Buyer. Without limiting the
generality of the foregoing, Seller shall not, whether directly or indirectly,
employ, whether as an employee, officer, agent, consultant or independent
contractor, or enter into any partnership, joint venture or other business
association with, any person who was at any time during the twelve (12) months
preceding the Closing an employee, representative or agent of Seller for a
period of twelve (12) months after such person ceases or has ceased, for any
reason, to be an employee, representative or agent of Seller. At the Closing,
Seller shall deliver to Buyer the employee files of all employees listed on
Schedule 5.1 who are engaged for employment by Buyer. Nothing contained in this
Section 5.1 is
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intended to confer any benefit upon any person not a party to this Agreement. No
third party shall be deemed a third party beneficiary of this Section 5.1.
Section 5.2. COVENANT AGAINST DISCLOSURE. Except in the ordinary course of
Seller's business and consistent with past practice, from and after the date
hereof, Seller agrees not to (a) disclose to any person, association, firm,
corporation or other entity (other than Buyer or those designated in writing by
Buyer) in any manner, directly or indirectly, any proprietary information or
data relevant to the business of Seller, whether of a technical or commercial
nature, or (b) use, or permit or assist, by acquiescence or otherwise, any
person, association, firm, corporation or other entity (other than Buyer or
those designated in writing by Buyer) to use, in any manner, directly or
indirectly, any such information or data.
Section 5.3. EXCLUSIVE RIGHTS. Seller shall not without the prior written
consent of Buyer directly or indirectly solicit or encourage (including by way
of furnishing any non-public information concerning the business, properties or
assets of Seller), or enter into or participate in any negotiations or
discussions concerning, any Acquisition Proposal (as defined herein). Seller
shall notify Buyer promptly by telephone, and thereafter promptly confirm in
writing, if any such information is requested from, or any Acquisition Proposal
is received by, Seller. As used in this Agreement, "Acquisition Proposal" shall
mean any proposal received by Seller prior to the Closing for a merger or other
business combination involving Seller, or for the acquisition of Seller, or the
acquisition of an equity interest in, or a portion of the assets of, Seller,
other than the one contemplated by this Agreement. Buyer acknowledges that
Seller has contacted those parties listed on Schedule 4.2(e) with whom it has a
prior written obligation to negotiate an Acquisition Proposal or similar
arrangement ("Negotiation Rights") in order to request and negotiate the terms
of a waiver of such Negotiation Rights.
Section 5.4. INJUNCTIVE RELIEF. Seller acknowledges and agrees that
Buyer's remedy at law for any breach of any of Seller's obligations under
Sections 5.1, 5.2 or 5.3 hereof would be inadequate, and agrees and consents
that temporary and permanent injunctive relief may be granted in a proceeding
which may be brought to enforce any provision of Sections 5.1, 5.2 or 5.3
without the necessity of proof of actual damage or the posting of a bond or
other security.
Section 5.5. ACCESS TO PROPERTY; DUE DILIGENCE. Except as provided in the
next sentence, between the date hereof and the Time of Closing, Seller shall
provide Buyer and its representatives and agents with full access to the
properties and records of Seller during normal business hours and shall allow
Buyer and its representatives and agents to make copies of such documents,
records and other information as Buyer or such representatives and agents may
request. Without limiting the generality of the foregoing, Seller shall provide
Buyer and its representatives and agents with full access to all properties
owned, leased or used by Seller in the conduct of the business of Seller in
connection with the general due diligence of Buyer, as deemed necessary by Buyer
in its sole discretion. Any such inspection or review of property leased by
Seller shall be subject to the terms of Seller's lease of such property.
Promptly upon completion of any such review, Buyer shall return the property to
the condition it was in prior to the review. Buyer hereby agrees to defend,
indemnify and hold Seller harmless with respect to any liability, damage, loss,
cost or expense incurred by Seller as a result of Buyer's investigation of such
properties.
Section 5.6. CONDUCT OF BUSINESS PRIOR TO CLOSING. Seller agrees that
after execution of this Agreement and prior to the Time of Closing, Seller shall
operate its business and maintain the Property in the ordinary course of
business consistent with past practice. Seller shall not without the prior
written consent of Buyer, which consent shall not be unreasonably withheld or
delayed with respect to the matters set forth in subsections 5.6(k) and (m)
below:
(a) incur or become subject to, or agree to incur or become subject to, any
obligation or liability (absolute or contingent), except (i) sales of inventory
in the ordinary course of business and consistent with past practice, and
(ii) current liabilities incurred, and obligations under contracts entered into,
in
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the ordinary course of business consistent with past practice which do not
exceed $20,000 in respect of any individual contract or $60,000 with respect to
all such contracts;
(b) discharge or satisfy any lien or encumbrance or pay any obligation or
liability (absolute or contingent) other than (i) liabilities payable in the
ordinary course of business, (ii) royalties described in Section 5.19(b) of this
Agreement, and (iii) any accrued vacation pay payable by Seller to its
employees;
(c) mortgage, pledge or subject to lien, charge or any other encumbrance,
any of the Property or agree so to do;
(d) sell or transfer or agree to sell or transfer any of the Property, or
cancel or agree to cancel any debt or claim, except in each case in the ordinary
course of business consistent with past practice;
(e) consent or agree to a waiver of any right of substantial value;
(f) enter into any transaction other than in the ordinary course of business
consistent with past practice;
(g) directly or indirectly increase the compensation payable or to become
payable by Seller to any employee or agent of Seller over the compensation being
paid to them as of March 31, 1999, any such increase to be made only in the
ordinary course of business consistent with past practice;
(h) terminate any contract, agreement, license or other instrument to which
Seller is a party, the termination of which, either individually or in the
aggregate, would have a Material Adverse Effect on Seller;
(i) through negotiation or otherwise, make any commitment or incur any
liability or obligation to any labor organization;
(j) make or agree to make any accrual or arrangement for or payment of
bonuses or special compensation of any kind to any shareholder, director,
officer, employee or agent;
(k) terminate any employee or directly or indirectly pay or make a
commitment to pay any severance or termination pay to any employee or agent
except in the ordinary course of business consistent with past practice (or
except for termination for cause);
(l) introduce any new method of management, operation or accounting with
respect to the business of Seller or any of the assets, properties or rights
applicable thereto;
(m) offer or extend more favorable prices, discounts or allowances than were
offered or extended regularly on and prior to March 31, 1999, other than in the
ordinary course of business consistent with past practice or as reasonably
required by competitive conditions;
(n) incur any expense or make capital expenditures or commitments therefor
in excess of $25,000, except for repairs and maintenance in the ordinary course
of business consistent with past practice; or
(o) declare or pay any dividend or other distribution (whether in cash,
stock, property or any combination thereof) in respect of Seller's capital
stock; or purchase, acquire, redeem, split, combine or reclassify any shares of
the capital stock of Seller.
Section 5.7. FURTHER ASSURANCES. On and after the Time of Closing, Seller
shall prepare, execute and deliver, at Seller's expense, such further
instruments of conveyance, sale, assignment or transfer, and shall take or cause
to be taken such other or further action as Buyer or Buyer's counsel shall
reasonably request at any time or from time to time in order to perfect, confirm
or evidence in Buyer title to all or any part of the Property or to consummate,
in any other manner, the terms and conditions of this Agreement. On and after
the Time of Closing, Buyer shall prepare, execute and deliver, at Buyer's
expense, such further instruments, and shall take or cause to be taken such
other or
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further action as Seller or Seller's counsel shall reasonably request at any
time or from time to time in order to confirm or evidence Buyer's assumption of
the Assumed Liabilities or to consummate, in any other manner, the terms and
conditions of this Agreement.
Section 5.8. ANNOUNCEMENTS. Neither party to this Agreement shall make any
public announcements or disclosures with respect to this Agreement or the
transactions contemplated hereby without the written consent of the other party
hereto, except as required by law. To the extent any disclosure is required by
law, the party required to make such disclosure shall afford the other party the
opportunity to review and make comments to the content of such disclosure.
Section 5.9. CONSENTS. Seller agrees to use its best efforts to obtain all
permits, approvals, authorizations and consents of third parties necessary for
the consummation of the transactions contemplated hereby. Buyer shall provide
such information as may be reasonably required by such third parties and use its
best efforts to cooperate in Seller's efforts to obtain such permits, approvals,
authorizations and consents. With respect to the preceding sentence, Buyer shall
be responsible for only the direct costs of the provision of information
reasonably required by third parties. All other costs related to Buyer's
cooperation in Seller's efforts to obtain permits, approvals, authorizations and
consents shall be the responsibility of Seller.
Section 5.10. EMPLOYEE MATTERS. (a) Prior to the Closing, Buyer shall
enter into a retention agreement in the form of Exhibit 5.10 with each of the
employees listed on Schedule 5.10 (the "Retention Agreements").
(b) From and after the Closing Date, Buyer shall be responsible for
providing Continuation Coverage for the Coverage Recipient to the extent such
Continuation Coverage (i) is required by law and (ii) would be provided under a
group health plan (as defined in Code Section 4980B(g)) maintained by Buyer for
its eligible employees; provided, however, that Buyer's obligation to provide
such Continuation Coverage to the Coverage Recipient will terminate prior to the
second anniversary of the Closing Date. Notwithstanding anything in this
Agreement to the contrary, Seller shall be responsible for providing
Continuation Coverage for the Coverage Recipient to the extent such Continuation
Coverage is required by law but would not be provided under a group health plan
maintained by Buyer for its eligible employees.
(c) Nothing contained in this Section 5.10 is intended to confer any benefit
upon any person not a party to this Agreement. No third party shall be deemed a
third party beneficiary of this Section 5.10.
Section 5.11. ESCROW AGREEMENT. Contemporaneously with the Closing, Buyer
and Seller shall enter into the Escrow Agreement.
Section 5.12. UPDATED FINANCIAL STATEMENTS. During the period prior to the
Closing, with respect to each month following June 30, 1999, Seller shall
deliver to Buyer updated balance sheets and income statements for the month and
year to date period then ended. Such balance sheets and income statements shall
be prepared in accordance with the methods described in Section 4.2(h) and shall
be delivered by Seller to Buyer within fifteen (15) days following the last day
of each such month.
Section 5.13. PROXY MATERIALS. Seller shall, at its sole cost and expense,
take all action, make all necessary filings and prepare all materials (the
"Proxy Materials") required in connection with the solicitation of votes from
Seller's shareholders by virtue of the transactions contemplated by this
Agreement. Seller shall deliver the Proxy Materials to Buyer for its review and
comment prior to filing and no later than fourteen (14) days following the date
of this Agreement. All initial filings required under any applicable law in
connection with the Proxy Materials shall be made no later than twenty-one (21)
days following the date of this Agreement. Seller shall use commercially
reasonable efforts to commence the proxy solicitation no later than thirty-five
(35) days following the date of this Agreement, and, thereafter, shall use
commercially reasonable efforts to complete the proxy solicitation no later than
December 15, 1999. Buyer shall provide such information as may be reasonably
requested
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by Seller or as may be required by the Exchange Act and the rules and
regulations promulgated thereunder with respect to the Proxy Materials and use
commercially reasonable efforts to cooperate in Seller's efforts to respond to
any comments received by Seller from the SEC with respect to the Proxy Materials
and the approval of Seller's shareholders of the transactions contemplated by
this Agreement. With respect to the preceding sentence, Buyer shall be
responsible for only the direct costs of the provision of information reasonably
required by Seller or required by the Exchange Act. All other costs related to
Buyer's cooperation in Seller's efforts to respond to any comments received by
Seller from the SEC with respect to the Proxy Materials and the approval of
Seller's shareholders of the transactions contemplated by this Agreement shall
be the responsibility of Seller.
Section 5.14. NON-COMPETE.
(a) During the Restriction Period (as defined herein), the Seller shall not,
in the United States or any other country, engage, directly or indirectly,
whether individually on its own account, or as a shareholder, partner, joint
venturer, director, officer, employee, consultant, creditor and/or agent, of any
person, firm, corporation or other entity or otherwise, in any or all of the
following activities: (i) enter into or engage in any business which competes
with the business carried on by Seller on the date hereof, or by Buyer or any
Buyer Affiliates (as defined herein) (the "Business"); (ii) solicit customers or
business patronage which result in competition with the Business; or
(iii) promote or assist, financially or otherwise, any person, firm,
association, corporation or other entity engaged in any business which competes
with the Business; provided, however, the foregoing covenant shall not be deemed
to have been violated by the ownership of shares of any class of capital stock
of any publicly held corporation so long as the aggregate holdings represent
less than 3% of the outstanding shares of such class of capital stock.
(b) For purposes of this agreement: (i) "Buyer Affiliate" shall include
Buyer and all subsidiaries and affiliates of Buyer, and (ii) the "Restriction
Period" shall mean the period commencing on the Closing Date and continuing for
a period of five (5) years thereafter.
Section 5.16. POST CLOSING ASSISTANCE. After the Closing, upon the receipt
of reasonable prior written notice from Seller, Buyer shall make available to
Seller, without additional cost, the books and records of Seller relating to
periods prior to the Closing Date and the reasonable assistance of Seller's
former employees in order to facilitate the liquidation and winding up of
Seller's business.
Section 5.17. CONSULTING AGREEMENT. Prior to the Closing, Buyer shall
enter into a consulting agreement in the form of Exhibit 5.17 with Joseph F.
Engelberger (the "Consulting Agreement"). Nothing contained in this Section 5.17
is intended to confer any benefit upon any person not a party to this Agreement.
No third party shall be deemed a third party beneficiary of this Section 5.17.
Section 5.18. LEASE NEGOTIATION ASSISTANCE. Seller agrees that for the
period beginning on the date of execution of this Agreement and ending on the
Closing Date, Seller shall, at no cost to Seller, cooperate with Buyer and take
all action reasonably requested by Buyer in connection with negotiating the
termination or buy-out of the Lease dated February 1, 1998, between Seller and
Shelter Rock Business Center, L.L.C., a Connecticut limited liability company,
on terms and conditions acceptable to Buyer.
Section 5.19. OBLIGATIONS TO CONNECTICUT INNOVATIONS, INCORPORATED. At or
before the Time of Closing, Seller shall pay to Connecticut Innovations,
Incorporated, a Connecticut corporation ("CII"), pursuant to the Letter
Agreement dated October 5, 1999, between CII and Seller (the "CII Letter") the
sum of the following: (a) an amount equal to $100,000 of the Waiver and Release
Payment (as defined in the CII Letter); plus (b) an amount equal to all
royalties which are due and payable as of the Closing Date to CII by Seller
under the Development Agreement dated December 29, 1986, between CII and Seller;
plus (c) an amount equal to the Total Consideration Deficiency (as defined in
the CII Letter), if any.
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Section 5.20. REIMBURSEMENT FOR RETENTION BONUS INCREASES. Seller agrees
that it shall reimburse Buyer, solely out of the Holdback Amount, for the First
Anniversary Reimbursement Obligation (as defined in the Escrow Agreement) and
the Second Anniversary Reimbursement Obligation (as defined in the Escrow
Agreement) in accordance with the provisions of Article VIII of this Agreement
and Article III of the Escrow Agreement.
ARTICLE VI. CLOSING
Section 6.1. CLOSING. This transaction shall close (the "Closing") and all
deliveries to be made at the time of closing shall take place at 10:00 a.m., on
the third business day following the satisfaction or waiver of all conditions
set forth in Article VII of this agreement ("Closing Date"), at the offices of
Seller's counsel, Reid and Riege, P.C., One State Street, Hartford, Connecticut
06103, or at such other place or date as may be agreed upon from time to time in
writing by Seller and Buyer. The Closing Date will automatically be extended
from time to time until such time and date as all necessary governmental and
regulatory approvals have been obtained; provided, however, that the Closing
Date shall not be extended for the foregoing reason without the mutual agreement
of Seller and Buyer to any date after February 1, 2000; provided, however, that
if the Proxy Materials are reviewed by the SEC, such date shall be March 1,
2000. The point in time on the Closing Date at which the last of the conditions
precedent set forth in Sections 7.1 and 7.2 hereof has been satisfied (or waived
by the party for whose benefit such condition exists) is referred to herein as
the "Time of Closing".
Section 6.2. DELIVERIES BY SELLER. At or prior to the Time of Closing,
Seller shall deliver to Buyer, duly and properly executed, the following:
(a) A good and sufficient General Conveyance, Assignment and Bill of Sale,
in the form attached hereto as Exhibit 6.2(a), conveying, selling, transferring
and assigning to Buyer title to all of the Property free and clear of all
security interests, liens, charges, encumbrances or equities whatsoever, except
for those approved in writing by Buyer prior to the Closing;
(b) An Assignment and Assumption of the Personal Property Leases and the
Contracts, in the form attached hereto as Exhibit 6.2(b) and which shall
include, to the extent obtained, the written consents of all parties necessary
in order to duly transfer all of Seller's rights thereunder to Buyer (the
"Assignment and Assumption Agreement");
(c) A certificate of the Seller in accordance with Section 7.1(c), in the
form attached hereto as Exhibit 6.2(c);
(d) An Assignment of Trademark and Servicemark, in the form attached hereto
as Exhibit 6.2(d);
(e) An Assignment of the Patents, in the form attached hereto as Exhibit
6.2(e);
(f) A receipt of Seller with respect to amounts paid to or on behalf of
Seller pursuant to Article III in form and substance satisfactory to counsel to
Seller and Buyer;
(g) The Retention Agreements, executed by the employees listed on Schedule
5.10;
(h) The Escrow Agreement;
(i) A copy of the resolutions adopted by the board of directors of Seller
authorizing the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, certified by the Secretary of Seller;
(j) A certificate of the Secretary of State of the State of Connecticut
dated as of a recent date as to the legal existence of Seller in such State;
(k) An opinion of Reid & Riege, PC, counsel for Seller, addressed to Buyer
and dated the Closing Date, in the form attached hereto as Exhibit 6.2(k);
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(l) The Consulting Agreement, executed by Joseph F. Engelberger;
(m) UCC-3 Termination Statements executed by CII as the secured party
pertaining to the financing statements (filing numbers 20768ST, 0001632386 and
1632386) referenced as Items I.a., I.b. and I.c. in the attachment to Item 1 of
Schedule 4.2(l) of this Agreement;
(n) An Assignment and Assumption Agreement in the form attached hereto as
Exhibit 6.2(n) (the "LTI Assignment and Assumption Agreement"); and
(o) Such other separate instruments of sale, assignment or transfer that
Buyer may reasonably deem necessary or appropriate in order to perfect, confirm
or evidence title to all or any part of the Property.
Section 6.3. DELIVERIES BY BUYER. At or prior to the Time of Closing,
Buyer shall deliver to or for the account of Seller the Closing Date Payment,
less any deduction pursuant to Section 3.3(a) of this Agreement and in
accordance with Section 3.2, and shall deliver to Seller, all duly and properly
executed, the following:
(a) The Assignment and Assumption Agreement;
(b) A certificate of Buyer in accordance with Section 7.2(c), in the form
attached hereto as Exhibit 6.3(b);
(c) The Retention Agreements;
(d) The Escrow Agreement;
(e) A copy of the resolutions adopted by the board of directors of Buyer
authorizing the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, certified by the Secretary of Buyer; and
(f) A certificate of the Secretary of State of the State of Delaware dated
as of a recent date as to the good standing of Buyer in such State.
(g) An opinion of Baker & Hostetler LLP, counsel for Buyer, addressed to
Seller and dated the Closing Date, in the form attached hereto as Exhibit
6.3(g);
(h) The Consulting Agreement;
(i) The LTI Assignment and Assumption Agreement; and
(j) Such other documents, agreements and instruments which Seller may
reasonably deem necessary or appropriate in order to carry out the terms of this
Agreement.
ARTICLE VII. CONDITIONS PRECEDENT TO OBLIGATIONS
Section 7.1. CONDITIONS TO OBLIGATIONS OF BUYER. Each and every obligation
of Buyer to be performed at the Closing shall be subject to the satisfaction as
of or before the Time of Closing of the following conditions (unless waived in
writing by Buyer):
(a) REPRESENTATIONS AND WARRANTIES. Seller's representations and
warranties set forth in Section 4.2 of this Agreement shall have been true and
correct when made and shall be true and correct in all materials respects at and
as of the Time of Closing as if such representations and warranties were made as
of the Time of Closing.
(b) PERFORMANCE OF AGREEMENT. All covenants and other obligations under
this Agreement which are to be performed or complied with by Seller at or prior
to the Time of Closing shall have been fully performed and complied with in all
material respects.
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(c) CERTIFICATE. Seller shall have delivered to Buyer a certificate
executed by a duly authorized officer of Seller, dated the date of the Closing,
to the effect that the conditions set forth in subsections (a) and (b) of this
Section 7.1 have been satisfied.
(d) DAMAGE. Between the date hereof and the Time of Closing, (i) there
shall have been no material damage to any of the Property not covered by
insurance, (ii) there shall have been no disruption of Seller's business or
operations as a result of fire, flood, explosion, or other casualty, not covered
by insurance, or as a result of any strike or other form of labor disturbance,
and (iii) if there has been material damage to any of the Property or disruption
of Seller's business or operations as a result of fire, flood, explosion, or
other casualty which is covered by insurance, there shall have been no effective
assignment of the insurance proceeds to any third parties and Seller shall have
paid all applicable deductibles under the insurance policies.
(e) EMPLOYEES. Buyer shall have entered into a Retention Agreement with
each of the employees listed on Schedule 5.10.
(f) CONSENTS AND APPROVALS. Seller shall have obtained, at its sole cost
and expense, without any condition or modification adverse to Buyer, (i) all
consents required under any law, statute, rule, regulation, order or decree in
connection with the consummation of the transactions contemplated by this
Agreement, except where the failure to obtain any such consent would not have a
Material Adverse Effect on Buyer or the business of Seller, and (ii) the
consents listed on or described in Schedule 7.1(f).
(g) GOVERNMENTAL AUTHORITY; ACTIONS. No preliminary or permanent
injunction or other order, decree or ruling issued by any Governmental Authority
nor any statute, rule regulation or executive order promulgated or enacted by
any Governmental Authority shall be in effect which would (i) make the
consummation of the transactions contemplated hereby illegal, or (ii) otherwise
prevent the consummation of the transaction contemplated hereby. No Action which
seeks to prevent or enjoin the consummation of the transaction contemplated
hereby shall be pending or threatened at the Time of Closing.
(h) MATERIAL ADVERSE CHANGE. Between the date hereof and the Time of
Closing, there shall not have occurred any material adverse change in the
condition (financial or otherwise) of the business of Seller or the Property.
(i) SHAREHOLDER APPROVAL. Shareholders holding greater than 50% of the
voting power of Seller entitled to vote at the Special Meeting shall have
authorized the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby.
(j) CII LETTER. The CII Letter shall have been delivered to Seller and all
of the conditions therein shall have been satisfied or waived by CII at or prior
to the Time of Closing.
Section 7.2. CONDITIONS TO OBLIGATIONS OF SELLER. Each and every
obligation of Seller to be performed at the Closing shall be subject to the
satisfaction as of or before the Time of Closing of the following conditions
(unless waived in writing by Seller):
(a) REPRESENTATIONS AND WARRANTIES. Buyer's representations and warranties
set forth in Section 4.1 of this Agreement shall have been true and correct when
made and shall be true and correct at and as of the Closing as if such
representations and warranties were made as of the Time of Closing.
(b) PERFORMANCE OF AGREEMENT. All covenants and other obligations under
this Agreement which are to be performed or complied with by Buyer at or prior
to the Time of Closing shall have been fully performed and complied with in all
material respects.
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(c) CERTIFICATE. Buyer shall have delivered to Seller a certificate
executed by a duly authorized officer of Buyer, dated the date of the Closing,
to the effect that the conditions set forth in subsections (a) and (b) of this
Section 7.2 have been satisfied.
(d) GOVERNMENTAL AUTHORITY; ACTIONS. No preliminary or permanent
injunction or other order, decree or ruling issued by any Governmental Authority
nor any statute, rule regulation or executive order promulgated or enacted by
any Governmental Authority shall be in effect which would (i) make the
consummation of the transactions contemplated hereby illegal, or (ii) otherwise
prevent the consummation of the transaction contemplated hereby. No Action which
seeks to prevent or enjoin the consummation of the transaction contemplated
hereby shall be pending or threatened at the Time of Closing. (e) Shareholder
Approval. Shareholders holding greater than 50% of the voting power of Seller
entitled to vote at the Special Meeting shall have authorized the execution and
delivery of this Agreement and the consummation of the transaction contemplated
hereby.
(e) SHAREHOLDER APPROVAL. Shareholders holding greater than 50% of the
voting power of Seller entitled to vote at the Special Meeting shall have
authorized the execution and delivery of this Agreement and the consummation of
the transaction contemplated hereby.
(f) CII PAYMENT. Buyer shall have delivered to CII pursuant to the CII
Letter an amount equal to $300,000 of the Waiver and Release Payment (as defined
in the CII Letter).
(g) LTI PAYMENT. Buyer shall have delivered to Leasing Technologies
International, Inc., a Delaware corporation ("LTI"), the $25,000 payment
required to be paid to LTI by Buyer pursuant to the Agreement dated of even date
herewith between Buyer and LTI.
ARTICLE VIII. INDEMNIFICATION
Section 8.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. Notwithstanding any investigation conducted at any time with regard
thereto by or on behalf of Buyer or Seller, representations and warranties of
Buyer and Seller in this Agreement and in the Additional Documents (as defined
in Section 8.2(b)(ii)) shall survive the execution, delivery and performance of
this Agreement until the second anniversary of the Time of Closing and shall be
deemed to have been made again by Buyer and Seller at and as of the Time of
Closing. All statements contained in any Additional Document or Schedule or
Exhibit hereto or thereto shall be deemed representations and warranties of
Buyer or Seller set forth, as the case may be, in this Agreement within the
meaning of this Article VIII; provided, however, no statement, representation or
warranty of any matter in any contract, instrument, certificate, or agreement
described in any of the Schedules attached hereto shall be deemed a
representation or warranty by Seller within the meaning of this Article VIII.
Notwithstanding the foregoing, all covenants and agreements of Buyer and Seller
in this Agreement and in the Additional Documents shall survive the execution,
delivery and performance of this Agreement indefinitely or until such covenants
and agreements have been discharged in accordance with the terms of this
Agreement.
Section 8.2. INDEMNIFICATION.
(a) Subject to the limitations set forth in this Article VIII, Seller shall
defend, indemnify and hold harmless Buyer, its affiliates, shareholders,
officers, directors, agents and employees (each, a "Buyer Indemnified Party")
from and against any and all losses, liabilities, damages, demands, claims,
suits, actions, judgments or causes of action, assessments, costs and expenses
including, without limitation, interest, penalties, reasonable attorneys' fees,
any and all reasonable expenses incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation (collectively, "Damages"), asserted against, resulting to, imposed
upon, or incurred or suffered by any Buyer Indemnified Party, directly or
indirectly, as a result of or arising from any of the following (individually an
"Indemnifiable Claim" and
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collectively "Indemnifiable Claims" when used in the context of a Buyer
Indemnified Party as the Indemnified Party (as defined below)):
(i) Any breach of any of the representations or warranties made by
Seller in this Agreement;
(ii) Any misrepresentation in or any omission from, as the case may be,
any certificate, Schedule or Exhibit, or the documents furnished or to be
furnished by or on behalf of Seller pursuant to Section 6.2 of this
Agreement (collectively, "Seller's Additional Documents");
(iii) Any breach or non-performance of any covenant, agreement or
obligation to be performed by Seller pursuant to this Agreement or Seller's
Additional Documents;
(iv) Any liability or obligation imposed upon Buyer as transferee of the
business or operations of Seller or the Property, or otherwise relating to
the conduct of the business of Seller prior to the Closing, except to the
extent such liability or obligation is an Assumed Liability; or
(v) Any liability or obligation relating to the Retained Liabilities.
(b) Subject to the limitations set forth in this Article VIII, Buyer shall
defend, indemnify and hold harmless Seller and its affiliates, shareholders,
officers, directors, agents and employees (each, a "Seller Indemnified Party")
from and against any and all Damages asserted against, resulting to, imposed
upon, or incurred or suffered by any Seller Indemnified Party, directly or
indirectly, as a result of or arising from the following (individually an
"Indemnifiable Claim" and collectively "Indemnifiable Claims" when used in the
context of a Seller Indemnified Party as the Indemnified Party):
(i) Any breach of any of the representations or warranties made by Buyer
in this Agreement;
(ii) Any misrepresentation in or any omission from, as the case may be,
any certificate, Schedule or Exhibit, or the documents furnished or to be
furnished by or on behalf of Buyer pursuant to Section 6.3 of this Agreement
(collectively, "Buyer's Additional Documents" and, together with Seller's
Additional Documents, the "Additional Documents");
(iii) Any breach or non-performance of any covenant, agreement or
obligation to be performed by Buyer pursuant to this Agreement or Buyer's
Additional Documents;
(iv) Any liability or obligation imposed upon Seller as a result of
Buyer's conduct of the business of Seller after the Closing, except to the
extent such liability or obligation is a Retained Liability; or
(v) Any liability or obligation relating to the Assumed Liabilities.
Section 8.3. LIMITATIONS ON INDEMNIFICATION. Rights to indemnification
under this Article VIII are subject to the following limitations:
(a) Neither Seller nor Buyer shall be entitled to indemnification hereunder
with respect to an Indemnifiable Claim arising out of a breach of a
representation or warranty (or, if more than one such Indemnifiable Claim is
asserted, with respect to all such Indemnifiable Claims) unless the aggregate
amount of Damages with respect to such Indemnifiable Claim or Claims exceeds
$50,000 (the "Threshold") in which event Seller or Buyer, as the case may be,
shall be entitled to indemnification hereunder for Damages with respect to all
Indemnifiable Claims in excess of the Threshold. In no event shall any payments
required by Seller pursuant to Section 5.20 of this Agreement be subject to this
Section 8.3(a).
(b) The obligation of indemnity provided herein shall terminate on the
second anniversary of the Closing Date.
(c) The foregoing provisions of this Section 8.3 notwithstanding, if, prior
to the termination of any obligation to indemnify, written notice of a claimed
breach or other occurrence or matter giving rise to
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a claim of indemnification is given by the party seeking indemnification (the
"Indemnified Party") to the party from whom indemnification is sought (the
"Indemnifying Party"), or a suit or action based upon a claimed breach is
commenced against the Indemnifying Party, the Indemnified Party shall not be
precluded from pursuing such claimed breach, occurrence, other matter, or suit
or action, or from recovering from the Indemnifying Party (whether through the
courts or otherwise) on the claim, suit or action, by reason of the termination
otherwise provided for above.
(d) Seller's obligation to indemnify any of the Buyer Indemnified Parties
shall be reduced by the amount of the proceeds of any insurance policy actually
paid to such Buyer Indemnified Party as a result of the matter giving rise to
the claim for indemnification against Seller. Buyer's obligation to indemnify
any of the Seller Indemnified Parties shall be reduced by the amount of the
proceeds of any insurance policy actually paid to such Seller Indemnified Party
as a result of the matter giving rise to the claim for indemnification against
Buyer.
Section 8.4. PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD-PARTY
CLAIMS.
(a) If the Indemnified Party determines to seek indemnification under this
Article VIII with respect to Indemnifiable Claims resulting from the assertion
of liability by third parties, it shall give notice to the Indemnifying Party
within 45 calendar days of the Indemnified Party's becoming aware of any such
Indemnifiable Claim or of facts upon which any such Indemnifiable Claim will be
based; the notice shall set forth such information with respect thereto as is
then reasonably available to the Indemnified Party. If any such liability is
asserted against the Indemnified Party, and the Indemnified Party notifies the
Indemnifying Party thereof, the Indemnifying Party will be entitled, if it so
elects by written notice delivered to the Indemnified Party within 20 calendar
days after receiving the Indemnified Party's notice, to assume the defense
thereof with counsel satisfactory to the Indemnified Party. Notwithstanding the
foregoing (i) the Indemnified Party shall also have the right to employ its own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of the Indemnified Party; (ii) the Indemnified Party shall not have
any obligation to give any notice of any assertion of liability by a third party
unless such assertion is in writing; and (iii) the rights of the Indemnified
Party to be indemnified hereunder in respect of Indemnifiable Claims resulting
from the assertion of liability by third parties shall not be adversely affected
by its failure to give notice pursuant to the foregoing unless, and, if so, only
to the extent that the Indemnifying Party is materially prejudiced thereby. With
respect to any assertion of liability by a third party that results in an
Indemnifiable Claim, the parties hereto shall make available to each other all
relevant information in their possession material to any such assertion.
(b) In the event that the Indemnifying Party, within 20 days after receipt
of the aforesaid notice of an Indemnifiable Claim, fails to assume the defense
of the Indemnified Party against such Indemnifiable Claim, the Indemnified Party
shall have the right to undertake the defense, compromise or settlement of such
action on behalf of and for the account and risk of the Indemnifying Party.
(c) Notwithstanding anything in this Section 8.4 to the contrary, the
Indemnifying Party will not be entitled to assume control of the defense of an
Indemnifiable Claim, and will pay the reasonable fees and expenses of legal
counsel retained by the Indemnified Party, if:
(i) the Indemnified Party reasonably believes that an adverse
determination of such proceeding could be detrimental to or injure the
Indemnified Party's reputation or future business prospects;
(ii) the Indemnified Party reasonably believes that there exists or
could arise a conflict of interest which, under applicable principles of
legal ethics, could prohibit a single legal counsel from representing both
the Indemnified Party and the Indemnifying Party in such proceeding;
(iii) a court of competent jurisdiction rules that the Indemnifying
Party has failed or is failing to prosecute or defend vigorously such claim;
or
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(iv) the amount of such indemnification claim, together with the amount
of all other pending indemnification claims made by the Indemnified Party,
as reasonably estimated in good faith in each case by the Indemnified Party
in its reasonable discretion, exceeds the then remaining balance of any
funds or securities held pursuant to the Escrow Agreement.
(d) The Indemnifying Party shall not, without such Indemnified Party's prior
written consent, settle or compromise any Indemnifiable Claim or consent to
entry of any judgment in respect of any Indemnifiable Claim unless such
settlement, compromise or consent includes, as an unconditional term, the giving
by the claimant or the plaintiff to such Indemnified Party (and all its
affiliates) a release from all liability in respect of such Indemnifiable Claim.
Section 8.5. PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO NON-THIRD-PARTY
CLAIMS. In the event that the Indemnified Party asserts the existence of an
Indemnifiable Claim (but excluding claims resulting from the assertion of
liability by third parties), it shall give written notice to the Indemnifying
Party specifying the nature and amount of the claim asserted. If the
Indemnifying Party, within 30 days after receiving the notice from the
Indemnified Party, shall not give written notice to the Indemnified Party
announcing its intent to contest such assertion of the Indemnified Party, such
assertion shall be deemed accepted and the amount of claim shall be deemed a
valid Indemnifiable Claim. During the time period set forth in the preceding
sentence, the Indemnified Party shall cooperate fully with the Indemnifying
Party in respect of such Indemnifiable Claim.
Section 8.6. HOLDBACK. Subject to the terms and conditions of the Escrow
Agreement, any rights of any of the Buyer Indemnified Parties to (i)
indemnification under Section 8.2, or (ii) reimbursement under Section 5.20,
shall be satisfied solely out of the Holdback Amount, and none of the Buyer
Indemnified Parties shall make any claim against any of the other assets or
property of Seller.
Section 8.7. SELLER SHAREHOLDER REPRESENTATIVE.
(a) At least ten (10) days prior to adopting any plan or liquidation or
dissolution, Seller shall irrevocably appoint an individual, who shall be a
resident of the United States (the "Seller Representative") to act on behalf of
Seller with respect to all matters relating to this Agreement and the Additional
Documents, including without limitation in considering and certifying the amount
of any Indemnifiable Claim hereunder, in communicating with the shareholders of
Seller, in appointing a successor Escrow Agent under the Escrow Agreement, in
considering and acting with respect to any amendment or termination of this
Agreement, and generally in performing all acts expressly required or permitted
to be performed by Seller pursuant hereto and pursuant to the Additional
Documents. At such time as the Seller Representative is appointed by Seller,
Seller shall give written notice to Buyer and the Escrow Agent specifying the
name, address, telephone number and facsimile number of the Seller
Representative (the "Appointment Notice"). From and after the date of receipt of
the Appointment Notice, Buyer and the Escrow Agent shall have the right to deal
exclusively with the Seller Representative with respect to all matters under
this Agreement and Additional Documents and neither Buyer nor the Escrow Agent
shall have any liability to Seller or any of its shareholders for any acts or
omissions of the Seller Representative, or any acts or omissions taken or not
taken by Buyer or the Escrow Agent at the direction of the Seller
Representative, including, without limitation, the transferring or the failure
to transfer any funds released from escrow. Upon a distribution of funds to the
Seller Representative (or to one or more of the shareholders of Seller upon
written instruction of the Seller Representative) in accordance with this
Agreement, the Escrow Agent and Buyer shall be deemed to have fully satisfied
any and all obligations to Seller or the shareholders of Seller under this
Agreement and the Escrow Agreement with respect to the amount of such
distribution. If Seller fails to appoint the Seller Representative in accordance
with this Section 8.7(a), either Buyer or the Escrow Agent may petition any
court of competent jurisdiction to appoint an individual to act as the Seller
Representative for and on behalf of Seller.
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(b) The Seller Representative will have no liability to Seller or the
shareholders of Seller with respect to actions taken or omitted to be taken in
its capacity as Seller Representative, except with respect to any liability
resulting primarily from the Seller Representative's gross negligence or willful
misconduct. The Seller Representative shall be entitled to rely upon any
directions received from the shareholders holding a majority of Seller's common
shares at the Time of Closing (the "Majority Holders"); provided, however, that
the Seller Representative shall not be required to follow any such direction,
and shall be under no obligation to take any action in its capacity as the
Seller Representative, unless the Seller Representative has been provided with
funds, security or indemnities which, in the sole determination of the Seller
Representative, are sufficient to protect the Seller Representative against the
costs, expenses and liabilities which may be incurred by the Seller
Representative in responding to such direction or taking such action. The Seller
Representative shall be entitled to engage such counsel, experts and other
agents and consultants as it shall deem necessary in connection with exercising
its powers and performing its function hereunder and (in the absence of bad
faith on the part of the Seller Representative) shall be entitled to
conclusively rely on the opinions and advice of such persons. The Seller
Representative shall be entitled to reimbursement by the shareholders of Seller
for all reasonable expenses, disbursements and advances (including fees and
disbursements of its counsel, experts and other agents and consultants) incurred
by the Seller Representative in such capacity, and for indemnification, by the
shareholders of Seller, against any loss, liability or expenses arising out of
actions taken or omitted to be taken in its capacity as the Seller
Representative (except for those arising primarily out of the Seller
Representative's gross negligence or willful misconduct), including the costs
and expenses of investigation and defense of claims.
(c) Notwithstanding the foregoing provisions of this Section 8.7, nothing in
this Section 8.7 shall in any way effect or derogate from any obligation or
liability of Seller to Buyer hereunder.
Section 8.8. EXCLUSIVE REMEDY.
(a) The provisions of this Article VIII shall be the exclusive remedy
available to any of the Buyer Indemnified Parties with respect to any of the
matters set forth in Section 8.2(a)(i), (ii), (iii), (iv) or (v), except for
claims based on fraud or intentional misrepresentation.
(b) The provisions of the Article VIII shall be the exclusive remedy
available to any of the Seller Indemnified Parties with respect to any of the
matters set forth in Section 8.2(b)(i), (ii), (iii), (iv) or (v), except for
claims based on fraud or intentional misrepresentation.
Section 8.9. NOTICE AND CURE. Notwithstanding anything in this Agreement
to the contrary, if after the execution of this Agreement, but prior to the Time
of Closing, Buyer determines that Seller has breached any covenant or agreement
contained in this Agreement or any Additional Document, Buyer shall give Seller
written notice of such breach and ten (10) days to cure such breach. If Buyer
fails to give such notice to Seller, then no claim for indemnification under
this Article VIII shall be made against Seller for such breach. The provisions
of this Section 8.9 do not apply to a breach by Seller of any representation or
warranty contained in this Agreement or any Additional Document.
ARTICLE IX. TERMINATION
Section 9.1. TERMINATION BY EITHER PARTY.
(a) This Agreement may be terminated and canceled at any time prior to the
Time of Closing by Buyer upon written notice to the Seller if: (i) any of the
representations or warranties of Seller contained herein or in any Additional
Document is inaccurate or untrue; (ii) any covenant, obligation, term or
condition to be performed, kept or observed by Seller hereunder has not been
performed, kept or observed in any material respect at or prior to the time
specified in this Agreement; or (iii) the Closing has not occurred on or before
February 1, 2000 (except as a result of the failure of shareholders holding
greater than 50% of the voting power of Seller entitled to vote at the Special
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Meeting, to have authorized the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby); provided, however, that
if the Proxy Materials are reviewed by the SEC, such date shall be March 1,
2000; and provided, further, that in each such case Buyer is not then in default
in any material respect in the performance of any obligation, term or condition
to be performed, kept or observed by Buyer and no representation or warranty of
Buyer contained herein or in any Schedule attached hereto is inaccurate or
untrue in any material respect. If Buyer terminates this Agreement, Buyer shall
not be deemed to have waived and Buyer shall retain all rights with respect to
any claim that Buyer may have against Seller for a breach under this Agreement.
(b) This Agreement may be terminated and canceled at any time prior to the
Time of Closing by Seller upon written notice to Buyer if: (i) any of the
representations or warranties of Buyer contained herein or in any Schedule
attached hereto is inaccurate or untrue; (ii) any covenant, obligation, term or
condition to be performed, kept or observed by Buyer hereunder has not been
performed, kept or observed in any material respect at or prior to the time
specified in this Agreement; (iii) the Closing has not occurred on or before
February 1, 2000 (except as a result of the failure of shareholders holding
greater than 50% of the voting power of Seller entitled to vote at the Special
Meeting, to have authorized the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby); provided, however, that
if the Proxy Materials are reviewed by the SEC, such date shall be March 1,
2000; and provided, further, that in each such case Seller is not then in
default in any material respect in the performance of any obligation, term or
condition to be performed, kept or observed by Seller and no representation or
warranty of Seller contained herein or in any Schedule attached hereto is
inaccurate or untrue in any material respect. If Seller terminates this
Agreement, Seller shall not be deemed to have waived and Seller shall retain all
rights with respect to any claim that Seller may have against Buyer for a breach
under this Agreement.
(c) This Agreement may be terminated and canceled by Seller or Buyer within
seven (7) days after the Special Meeting upon written notice to the other party
if at the Special Meeting, shareholders of Seller holding greater than 50% of
the voting power of Seller entitled to vote at the Special Meeting do not
approve this Agreement and the transactions contemplated by this Agreement.
Section 9.2. EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 9.1(a), (b) or (c), this Agreement, except
for the provisions of Article VIII, the last sentence of Section 5.5, this
Section 9.2 and Section 10.12, shall become void and have no effect, without any
liability on the part of any party or its directors, officers, shareholders or
agents; provided, however, that a termination under Section 9.1(a), (b) or (c)
shall not relieve the non-terminating party of liability for a material breach
of any provision of this Agreement. Notwithstanding the immediately preceding
sentence, if (i) it shall be judicially determined that termination of this
Agreement resulted from an intentional breach of this Agreement by Seller, (ii)
this Agreement is terminated by reason of Seller's failure to perform any
covenant or obligation under this Agreement and such failure has been the cause
of or resulted in the failure of the transaction contemplated by this Agreement
to be consummated on or before February 1, 2000 (or March 1, 2000, if the Proxy
Materials are reviewed by the SEC), or (iii) at any time prior to a termination
pursuant to Section 9.1(c) there shall have been made to Seller or publicly
disclosed a bona fide Acquisition Proposal with respect to Seller, then Seller
shall pay to Buyer by wire transfer of immediately available funds to an account
designated by Buyer (x) a non-accountable, liquidated expense reimbursement of
$500,000, and (y) a termination fee equal to $1,500,000. Upon the termination of
this Agreement in connection with (i), (ii) or (iii) above, Seller shall be
prohibited for a period of two hundred seventy (270) days from the date of such
termination of this Agreement from directly or indirectly soliciting or
encouraging (including by way of furnishing any non-public information
concerning the business, properties or assets of Seller), or entering into or
participating in any negotiations or discussions concerning, or consummating,
any Competing Transaction. For purposes of this Section 9.2, a "Competing
Transaction" means any contemplated transaction resulting from an Acquisition
Proposal.
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<PAGE>
ARTICLE X. MISCELLANEOUS PROVISIONS
Section 10.1. NOTICE. All notices and other communications required or
permitted under this Agreement shall be deemed to have been duly given and made
if in writing and if served either by personal delivery to the party for whom
intended (which shall include delivery by Federal Express or similar service) or
three (3) business days after being deposited, postage prepaid, certified or
registered mail, return receipt requested, in the United States mail bearing the
address shown in this Agreement for, or such other address as may be designated
in writing hereafter by, such party:
<TABLE>
<S> <C>
If to Seller: Helpmate Robotics, Inc,
1 Shelter Rock Lane
Danbury, Connecticut 06810
Attention: Joseph F. Engelberger
with a copy to: Reid and Riege, P.C.
One State Street
Hartford, Connecticut 06103
Attention: Craig L. Sylvester, Esq.
If to Buyer: Pyxis Corporation
3750 Torrey View Court
San Diego, California 92121
Attention: Stephen S. Thomas
with a copy to: Cardinal Health, Inc.
7000 Cardinal Place
Dublin, Ohio 43017
Attention: General Counsel
and with a copy to: Baker & Hostetler LLP
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
Attention: Ronald A. Stepanovic
</TABLE>
Section 10.2. ENTIRE AGREEMENT. This Agreement, the Additional Documents,
the Exhibits and Schedules hereto, the documents referred to herein, the
Confidentiality Agreement dated June 29, 1999, between Seller and Cardinal
Health, Inc. and the Confidentiality Agreement dated February 19, 1999, between
Seller and Buyer, embody the entire agreement and understanding of the parties
hereto with respect to the subject matter hereof, and supersede all prior and
contemporaneous agreements and understandings, oral or written, relative to said
subject matter.
Section 10.3. BINDING EFFECT; ASSIGNMENT. This Agreement and the various
rights and obligations arising hereunder shall inure to the benefit of and be
binding upon Seller and its successors and permitted assigns, and Buyer and its
successors and permitted assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be transferred or assigned (by
operation of law or otherwise) by any of the parties hereto without the prior
written consent of the other party except that Buyer shall have the right to
assign its rights, interests and obligations hereunder to an affiliate of Buyer,
provided such assignment does not adversely affect the satisfaction of any of
the conditions set forth in Section 7.2. Any such assignment shall not relieve
Buyer of any of its obligations under this Agreement. Any transfer or assignment
of any of the rights, interests or obligations hereunder in violation of the
terms hereof shall be void and of no force or effect.
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<PAGE>
Section 10.4. CAPTIONS. The Article and Section headings of this Agreement
are inserted for convenience only and shall not constitute a part of this
Agreement in construing or interpreting any provision hereof.
Section 10.5. EXPENSES OF TRANSACTION. Except as otherwise specifically
provided herein, Seller shall pay all costs and expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby, and
will make all necessary arrangements so that the Property will not become
subject to any lien or encumbrance as a result of any non-payment of any such
cost or expense. Buyer shall pay all costs and expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby. The
liability for sales, real estate transfer and/or documentary taxes (but not
income or similar type taxes) in connection with the consummation of the
transactions contemplated hereby shall be the responsibility of Seller.
Section 10.6. WAIVER; CONSENT. This Agreement may not be changed, amended,
terminated, augmented, rescinded or discharged (other than by performance), in
whole or in part, except by a writing executed by the parties hereto, and no
waiver of any of the provisions or conditions of this Agreement or any of the
rights of a party hereto shall be effective or binding unless such waiver shall
be in writing and signed by the party claimed to have given or consented
thereto. Except to the extent that a party hereto may have otherwise agreed in
writing, no waiver by that party of any condition of this Agreement or breach by
the other party of any of its obligations or representations hereunder or
thereunder shall be deemed to be a waiver of any other condition or subsequent
or prior breach of the same or any other obligation or representation by the
other party, nor shall any forbearance by the first party to seek a remedy for
any noncompliance or breach by the other party be deemed to be a waiver by the
first party of its rights and remedies with respect to such noncompliance or
breach.
Section 10.7. NO THIRD PARTY BENEFICIARIES. Nothing herein, expressed or
implied, is intended or shall be construed to confer upon or give to any person,
firm, corporation or legal entity, other than the parties hereto, any rights,
remedies or other benefits under or by reason of this Agreement.
Section 10.8. COUNTERPARTS. This Agreement may be executed simultaneously
in multiple counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
Section 10.9. GENDER. Whenever the context requires, words used in the
singular shall be construed to mean or include the plural and vice versa, and
pronouns of any gender shall be deemed to include and designate the masculine,
feminine or neuter gender.
Section 10.10. REMEDIES OF BUYER. The Property is unique and not readily
available. Accordingly, Seller acknowledges that, in addition to all other
remedies to which Buyer is entitled, Buyer shall have the right to enforce the
terms of this Agreement by a decree of specific performance.
Section 10.11. SEVERABILITY. With respect to any provision of this
Agreement finally determined by a court of competent jurisdiction to be
unenforceable, Seller and Buyer hereby agree that such court shall have
jurisdiction to reform such provision so that it is enforceable to the maximum
extent permitted by law, and the parties agree to abide by such court's
determination. In the event that any provision of this Agreement cannot be
reformed, such provision shall be deemed to be severed from this Agreement, but
every other provision of this Agreement shall remain in full force and effect.
Section 10.12. GOVERNING LAW. This Agreement shall in all respects be
construed in accordance with and governed by the laws of the State of Delaware.
Section 10.13. MATERIAL ADVERSE EFFECT. For the purposes of any provision
of this Agreement, a "Material Adverse Effect" with respect to any party shall
mean a material adverse effect on the assets, liabilities, results of
operations, prospects or condition (financial or otherwise) of such party and
its subsidiaries taken as a whole.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
<TABLE>
<S> <C>
BUYER:
PYXIS CORPORATION
By:
Name:
Title:
SELLER:
HELPMATE ROBOTICS, INC.
By:
Name:
Title:
</TABLE>
A-35
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES
- ---------
<C> <S>
1.1(a) Personal Property
1.1(b) Inventory
1.1(c) Permits
1.1(d) Proprietary Rights
1.1(e) Personal Property Leases
1.1(f) Contracts
1.1(g) Accounts Receivable
1.1(h) Seller's Claims
1.1(i) Vehicles
1.1(x) Excluded Assets
2.1 Assumed Liabilities
3.4 Purchase Price Allocation
4.2(a) Organization and Standing
4.2(d) Capitalization of Seller
4.2(e) Conflicts, Consent and Approvals
4.2(f) Changes in Operations
4.2(g) Officers, Employees and Compensation
4.2(i) Taxes
4.2(j) Compliance with Law
4.2(k) Intellectual Property
4.2(l) Title to Property
4.2(m) Environmental Matters
4.2(n) Litigation
4.2(p) Employee Benefit Plans
4.2(q) Contracts
4.2(r) Accounts Receivable; Inventories
4.2(s) Labor Matters
4.2(t) Undisclosed Liabilities
4.2(u) Conduct of the Business
4.2(v) Product Warranties and Liabilities
4.2(x) Insurance
4.2(z) Year 2000 Compliance
5.1 Employee Arrangements
5.10 Key Employees
7.1(f) Consents and Approvals
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
- --------
<C> <S>
3.2(b) Escrow Agreement
3.3(b) Accountant's Letter Agreement
5.10 Retention Agreements
5.17 Consulting Agreement
6.2(a) General Conveyance, Assignment and Bill of Sale
6.2(b) Assignment and Assumption Agreement
6.2(c) Certificate of Seller
6.2(d) Assignment of Trademark and Servicemark
6.2(e) Assignment of the Patents
6.2(k) Opinion of Reid & Riege PC
6.2(n) LTI Assignment and Assumption Agreement
6.3(c) Certificate of Buyer
6.3(g) Opinion of Baker & Hostetler LLP
</TABLE>
A-37
<PAGE>
APPENDIX B
ESCROW AGREEMENT
This Escrow Agreement (this "Agreement") is made and entered into as of
, 1999, among Pyxis Corporation, a Delaware corporation ("Pyxis"),
HelpMate Robotics, Inc., a Connecticut corporation ("HRI"), and Bank One Trust
Company, NA, a national banking association, as escrow agent (the "Escrow
Agent").
RECITALS:
A. Pyxis and HRI have simultaneously herewith entered into an Asset Purchase
Agreement (the "Asset Purchase Agreement"), providing for, among other things,
Pyxis' acquisition of substantially all of the assets of HRI in accordance with
the terms and conditions of the Asset Purchase Agreement.
B. Capitalized terms used but not otherwise defined herein shall have the
respective meanings given them in the Asset Purchase Agreement.
C. Pursuant to the Asset Purchase Agreement, HRI is obligated to indemnify
Pyxis for certain damages and to reimburse Pyxis for certain amounts paid by
Pyxis to its employees pursuant to certain retention bonus agreements.
D. The Asset Purchase Agreement provides for the deposit into escrow of One
Million Two Hundred Fifty Thousand Dollars ($1,250,000) of the Purchase Price
otherwise to be paid to HRI in order to secure the indemnification and
reimbursement obligations of HRI (the "Holdback Amount").
E. Pyxis and HRI desire to secure the services of the Escrow Agent, and the
Escrow Agent is willing to provide such services, pursuant to the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained, the parties hereto hereby agree as follows:
ARTICLE I
APPOINTMENT OF ESCROW AGENT; RESIGNATION AND SUCCESSOR
Section 1.1. APPOINTMENT OF ESCROW AGENT. The Escrow Agent is hereby
appointed, and accepts its appointment and designation, as Escrow Agent pursuant
to the terms and conditions of this Agreement.
Section 1.2. RESIGNATION OF ESCROW AGENT; APPOINTMENT OF SUCCESSOR. The
Escrow Agent acting at any time hereunder may resign at any time by giving at
least 30 days' prior written notice of resignation to Pyxis and HRI, such
resignation to be effective on the date specified in such notice. Upon receipt
of such notice, Pyxis shall, unless otherwise agreed between Pyxis and HRI,
appoint a bank or trust company with a combined capital and surplus of at least
$100 million as successor Escrow Agent, by a written instrument delivered to
such Escrow Agent and HRI, whereupon such successor Escrow Agent shall succeed
to all the rights and obligations of the retiring Escrow Agent as of the
effective date of resignation as if originally named herein. Upon such
assignment of this Agreement, the retiring Escrow Agent shall duly transfer and
deliver the remaining portion of the Holdback Amount at the time held by the
retiring Escrow Agent, provided that, if no successor Escrow Agent shall have
been appointed on the effective date of resignation of the resigning Escrow
Agent hereunder, the resigning Escrow Agent may transfer and deliver the
remaining portion of the Holdback Amount into a court of competent jurisdiction.
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<PAGE>
ARTICLE II
ESCROW ARRANGEMENTS
Section 2.1. LIABILITY SECURED BY THE HOLDBACK AMOUNT. This Agreement has
been executed and delivered and the Escrow Account (as defined in
Section 2.2(b) of this Agreement) is hereby established, to facilitate any
indemnification which may be owed to Pyxis pursuant to Article VIII of the Asset
Purchase Agreement and to facilitate any reimbursement which may be due Pyxis
pursuant to Section 5.20 of the Asset Purchase Agreement. The Holdback Amount
deposited into the Escrow Account will be available to satisfy claims of Pyxis
in accordance with Section 3.1 hereof.
Section 2.2. DELIVERY OF THE HOLDBACK AMOUNT.
(a) On the Closing Date, Pyxis shall deliver to the Escrow Agent the
Holdback Amount. The parties agree that all distributions of additional property
made to HRI in respect of the Holdback Amount including, without limitation, all
such interest and all other income earned on the Holdback Amount shall be
interest and income of HRI and shall be reported for federal, state and local
tax purposes as for the account of HRI.
(b) The Escrow Agent shall hold the Holdback Amount in an escrow account
(the "Escrow Account") for the benefit of HRI. Neither the Holdback Amount nor
the Escrow Account shall be subject to any lien or attachment of any creditor,
and shall be used solely for the purposes and subject to the conditions set
forth in this Agreement and the Asset Purchase Agreement.
Section 2.3. INVESTMENT OF THE HOLDBACK AMOUNT. The Escrow Agent is hereby
authorized and directed to invest the Holdback Amount in the following
obligations (collectively, the "Permitted Investments"):
(a) obligations of the United States of America or obligations fully
guaranteed by the United States of America as to timely payment of principal and
interest;
(b) such money market funds as are agreed to from time to time by Pyxis and
HRI; and
(c) certificates of deposit with any bank or trust company organized under
the laws of the United States of America or any agency or instrumentality
thereof or under the laws of any state thereof which has a combined capital and
surplus of at least $100,000,000.
Subject to the foregoing limitations, the Escrow Agent shall invest the
Holdback Amount in accordance with written instructions delivered to it by HRI
from time to time. Except to satisfy any Indemnification Obligation (as defined
in Section 3.1(a) hereof), any First Anniversary Reimbursement Obligation (as
defined in Section 3.1(e) hereof), any Second Anniversary Reimbursement
Obligation (as defined in Section 3.1(f) hereof) or as provided above, the
Escrow Agent shall have no power or duty to invest the Holdback Amount or to
make substitutions therefor or to sell, transfer or otherwise dispose of
investments acquired hereunder.
ARTICLE III
RELEASE OF THE HOLDBACK AMOUNT
Section 3.1. DISTRIBUTIONS FOR INDEMNIFICATION; RETENTION BONUSES.
(a) At any time prior the second anniversary of the Closing Date, Pyxis may
deliver to the Escrow Agent (with a copy to HRI) a certificate (a "Notice of
Claim") (i) stating that Pyxis believes that it is entitled to indemnification
pursuant to Article VIII of the Asset Purchase Agreement (an "Indemnification
Obligation"), (ii) stating the aggregate amount (the "Claim Amount") of such
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<PAGE>
Indemnification Obligation (or, in the case of an unliquidated or uncertain
Indemnification Obligation, a good faith and reasonable estimate thereof), and
(iii) specifying in reasonable detail the nature of such Indemnification
Obligation, including the specific provision or provisions of the Asset Purchase
Agreement pursuant to which indemnification is being sought. Any Notice of Claim
delivered pursuant to this Section 3.1 with respect to any unliquidated
Indemnification Obligation may be supplemented by a later Notice of Claim
specifying in greater detail the applicable Claim Amount or any other items set
forth therein. Upon delivery of any such Notice of Claim, the Escrow Agent
shall, within three business days of receipt thereof, deliver a written notice
together with a copy of such Notice of Claim to HRI.
(b) If HRI shall object to the Indemnification Obligation or the Claim
Amount specified in such Notice of Claim, HRI shall, within ten (10) business
days after delivery of the written notice containing a copy of any such Notice
of Claim, deliver to the Escrow Agent a certificate (a "Reply Certificate")
(i) specifying each such objection, and (ii) specifying in reasonable detail the
nature and basis for such objection. Within three (3) business days after
delivery to the Escrow Agent of a Reply Certificate, the Escrow Agent shall
deliver a copy of such Reply Certificate to Pyxis. Pyxis and HRI shall negotiate
in good faith for a period of twenty (20) business days after delivery of such
Reply Certificate to Pyxis to reach a written resolution of any objections
raised in the Reply Certificate.
(c) If no Reply Certificate is delivered with respect to any Notice of Claim
within ten (10) business days after delivery of the Notice of Claim, then HRI
shall be deemed to have delivered a Payment Authorization (as defined below)
acknowledging Pyxis' right to receive the Claim Amount specified in such Notice
of Claim with respect to the applicable Indemnification Obligation and the
Escrow Agent shall transfer to Pyxis a portion of the Holdback Amount equal to
such Claim Amount, all in accordance with the procedures set forth in
Section 3.1(g).
(d) If the Escrow Agent receives a Reply Certificate in a timely manner with
respect to any Notice of Claim, the Claim Amount referred to in such Notice of
Claim shall be held by the Escrow Agent and shall not be released to Pyxis
except upon Pyxis' delivery to the Escrow Agent of either (i) joint written
instructions signed by an authorized officer of Pyxis and by HRI directing the
Escrow Agent as to the disposition of the Claim Amount (or any other amount
mutually agreed upon by such parties), or (ii) a final, non-appealable judgment
of a court of competent jurisdiction as to the disposition of the
Indemnification Obligation referred to in such Notice of Claim (either of
(i) or (ii) being a "Payment Authorization"), at which date the Claim Amount (or
such other amount as set forth in the Payment Authorization) shall promptly be
disbursed to Pyxis pursuant to the Payment Authorization.
(e) Within ten (10) days following the first anniversary of the Closing
Date, Pyxis shall deliver to HRI and the Escrow Agent a certificate (the "First
Anniversary Retention Bonus Notice") setting forth the names of the individuals
to whom Pyxis has, as of the first anniversary of the Closing Date, paid a
retention bonus in accordance with the Retention Agreement (as defined in the
Asset Purchase Agreement) pertaining to such individual. The First Anniversary
Retention Bonus Notice shall state that Pyxis is entitled to reimbursement with
respect to each such individual for the amount of the retention bonus increase
set forth on SCHEDULE 1 attached hereto opposite such individual's name
(collectively, all such retention bonus increases referenced on the First
Anniversary Retention Bonus Notice are hereinafter referred to as the "First
Anniversary Reimbursement Obligation"). Within three (3) business days after
delivery of the First Anniversary Retention Bonus Notice, the Escrow Agent shall
transfer to Pyxis a portion of the Holdback Amount equal to the amount of the
First Anniversary Reimbursement Obligation, all in accordance with the
procedures set forth in Section 3.1(g).
(f) Within ten (10) days following the second anniversary of the Closing
Date, Pyxis shall deliver to HRI and the Escrow Agent a certificate (the "Second
Anniversary Retention Bonus Notice") setting forth the names of the individuals
to whom Pyxis has, as of the second anniversary of the Closing Date, paid, in
accordance with the Retention Agreement pertaining to such individual, a
retention bonus with respect to the twelve (12) calendar month period
immediately preceding the second anniversary of the
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<PAGE>
Closing Date. The Second Anniversary Retention Bonus Notice shall state that
Pyxis is entitled to reimbursement with respect to each such individual for the
amount of the retention bonus increase set forth on SCHEDULE 2 attached hereto
opposite such individual's name (collectively, all such retention bonus
increases referenced on the Second Anniversary Retention Bonus Notice are
hereinafter referred to as the "Second Anniversary Reimbursement Obligation").
Within three (3) business days after delivery of the Second Anniversary
Retention Bonus Notice, the Escrow Agent shall transfer to Pyxis a portion of
the Holdback Amount equal to the amount of the Second Anniversary Reimbursement
Obligation, all in accordance with the procedures set forth in Section 3.1(g).
(g) The Escrow Agent shall pay all payments required to made to Pyxis
pursuant to Section 3.1 of this Agreement by wire transfer to the bank account
or accounts designated by Pyxis to the Escrow Agent in writing not less than one
(1) business day prior to the date of such payment.
Section 3.2. RELEASE OF ESCROW.
(a) On the second anniversary of the Closing Date (the "Escrow Termination
Date"), the Escrow Agent shall distribute the remainder of the Holdback Amount,
less the aggregate amount of the retention bonuses set forth on SCHEDULE 2
attached hereto (the "Maximum Second Anniversary Reimbursement Obligation"), to
HRI. Notwithstanding the foregoing, if the Escrow Agent shall have received a
Notice of Claim from Pyxis prior to the Escrow Termination Date with respect to
an indemnification claim (an "Unresolved Claim") for which the Escrow Agent has
not received a subsequent Payment Authorization or written notification signed
by Pyxis and HRI informing the Escrow Agent of the termination or other
resolution of such claim or claims (each, a "Claim Termination Notice"), then
(i) the Escrow Agent shall retain a portion of the Holdback Amount sufficient
for the payment of all Claim Amounts with respect to all such Unresolved Claims
(but not in excess of the remainder of the Holdback Amount), and (ii) the Escrow
Agent shall release to HRI the portion of the Holdback Amount in the Escrow
Account not otherwise retained in accordance with this Section 3.2(a).
(b) Upon the resolution of any Unresolved Claim, the Escrow Agent shall
(i) release any portion of the Holdback Amount retained in respect of such
Unresolved Claim (A) to Pyxis in accordance with any Payment Authorization
received by the Escrow Agent in respect of such Unresolved Claim, or (B) to HRI
in accordance with any Claim Termination Notice received by the Escrow Agent in
respect of such Unresolved Claim, and (ii) if no other Unresolved Claims remain
outstanding, release the remainder of the Holdback Amount to HRI, less the
Maximum Second Anniversary Reimbursement Obligation to the extent Pyxis has not
yet received payment of a portion of the Holdback Amount to discharge the Second
Anniversary Reimbursement Obligation. Upon payment to Pyxis of the portion of
the Holdback Amount equal to the amount of the Second Anniversary Reimbursement
Obligation in accordance with Section 3.1, the Escrow Agent shall release to HRI
the remainder of the portion of the Holdback Amount retained pursuant to
Section 3.2(a) in respect of the Maximum Second Anniversary Reimbursement
Obligation, if any.
(c) The Escrow Agent shall pay all payments required pursuant to
Section 3.2 of this Agreement by wire transfer to the bank account or accounts
designated by Pyxis or HRI, as the case may be, to the Escrow Agent in writing
not less than one (1) business day prior to the date of such payment.
ARTICLE IV
ESCROW AGENT
Section 4.1. FEES. For its services hereunder, the Escrow Agent shall
receive (i) upon execution of this Agreement, an acceptance fee One Thousand Two
Hundred Fifty Dollars ($1,250) as payment for initiating the transaction,
(ii) commencing on the Closing Date and then annually thereafter until it
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<PAGE>
has delivered all of the Holdback Amount pursuant to Article III hereof, an
administrative fee of Two Thousand Five Hundred Dollars ($2,500) as payment in
advance for each calendar year of its service under this Agreement (not prorated
for partial years; provided, however, if the entire Holdback Amount has not been
delivered pursuant to Article III hereof as of the Escrow Termination Date
solely as a result of Pyxis' assertion that it is entitled to reimbursement
pursuant to Section 3.3(f) hereof for the Second Anniversary Reimbursement
Obligation, the Escrow Agent shall receive an administrative fee prorated based
on a 365-day year for its services rendered during the period of time beginning
on the Escrow Termination Date and ending the date that the remainder of the
Holdback Amount is delivered pursuant to Article III hereof), and (iii) the
transaction fees set forth on SCHEDULE 3 attached hereto. The Escrow Agent shall
be reimbursed for all reasonable out-of-pocket expenses incurred by the Escrow
Agent necessary to perform such services (other than taxes imposed in respect of
the receipt of the fees referred to in the preceding sentence). The fees,
expenses and reimbursements referred to in the foregoing two sentences shall be
shared equally by Pyxis and HRI.
Section 4.2. RESPONSIBILITIES OF ESCROW AGENT. The Escrow Agent's
acceptance of its duties under this Agreement is subject to the following terms
and conditions, which the parties hereto agree shall govern and control with
respect to its rights, duties, liabilities and immunities:
(a) Except as to its due execution and delivery of the Agreement, it makes
no representation and has no responsibility as to the validity of this Agreement
or of any other instrument referred to herein, or as to the correctness of any
statement contained herein, and it shall not be required to inquire as to the
performance of any obligation under the Asset Purchase Agreement.
(b) The Escrow Agent shall be protected in acting upon any written notice,
request, waiver, consent, receipt or other paper or document, not only as to its
due execution and the validity and effectiveness of its provisions, but also as
to the truth of any information therein contained, which it in good faith
believes to be genuine and what it purports to be.
(c) The Escrow Agent shall not be liable for any error of judgment, or for
any act done or step taken or omitted by it in good faith, or for any mistake of
fact or law, or for anything which it may do or refrain from doing in connection
therewith, except its own gross negligence or misconduct.
(d) The Escrow Agent may consult with competent and responsible legal
counsel selected by it, and it shall not be liable for any action taken or
omitted by it in good faith in accordance with the advice of such counsel.
(e) The Escrow Agent shall have no discretion whatsoever with respect to the
management, disposition or investment of the Escrow Account and is not a trustee
or fiduciary to Pyxis or HRI. Pyxis and HRI acknowledge and agree that all
investments made pursuant to this section shall be for the account and risk of
Pyxis and HRI and any losses associated with investments shall be borne solely
by Pyxis and HRI.
(f) Pyxis and HRI agree to jointly and severally indemnify and hold the
Escrow Agent and its directors, employees, officers, agents, successors and
assigns (collectively, the "Indemnified Parties") harmless from and against any
and all losses, claims, damages, liabilities and expenses (collectively,
"Damages"), including, without limitation, reasonable costs of investigation and
counsel fees and expenses which may be imposed on the Escrow Agent or incurred
by it in connection with its acceptance of this appointment as the Escrow Agent
hereunder or the performance of its duties hereunder. Such indemnity includes,
without limitation, Damages incurred in connection with any litigation (whether
at the trial or appellate levels) arising from this Escrow Agreement or
involving the subject matter hereof. The indemnification provisions contained in
this paragraph are in addition to any other rights any of the Indemnified
Parties may have by law or otherwise and shall survive the termination of this
Agreement or the resignation or removal of the Escrow Agent. Notwithstanding any
provision to the contrary in this Escrow Agreement, Pyxis and HRI shall have no
liability to the
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Indemnified Parties with respect to any Damages that result, directly or
indirectly, from the gross negligence or misconduct of the Escrow Agent.
(g) The Escrow Agent shall have no duties or responsibilities except those
expressly set forth herein, and it shall not be bound by any modification of
this Agreement unless in writing and signed by Pyxis and HRI or their respective
successors in interest.
(h) The Escrow Agent shall have no responsibility in respect of the validity
or sufficiency of this Escrow Agreement or of the terms hereof. The recitals of
facts in this Escrow Agreement shall be taken as the statements of Pyxis and
HRI, and the Escrow Agent assumes no responsibility for the correctness of the
same.
(i) The Escrow Agent shall be protected in acting upon any notice,
resolution, request, consent, order, certificate, report, opinion, bond or other
paper or document reasonably believed by it to be genuine and to have been
signed and presented by the proper party or parties. Whenever the Escrow Agent
shall deem it necessary or desirable that a matter be proved or established
prior to taking or suffering any action under this Escrow Agreement, such matter
may be deemed conclusively proved and established by a certificate signed by
Pyxis and HRI, and such certificate shall be full warranty for any action taken
or suffered in good faith under the provisions of this Escrow Agreement.
(j) In the event of a dispute between the parties hereto sufficient in the
discretion of Escrow Agent to justify its doing so, the Escrow Agent shall be
entitled, after providing written notice to Pyxis and HRI, to tender the
Holdback Amount into the registry or custody of any court of competent
jurisdiction, to initiate such legal proceedings as it deems appropriate, and
thereupon to be discharged from all further duties and liabilities under this
Agreement. Any such legal action may be brought in any such court as Escrow
Agent shall determine to have jurisdiction over the Holdback Amount. The filing
of any such legal proceedings shall not deprive Escrow Agent of its compensation
hereunder earned prior to such filing. Any expenses relating to the tendering of
the Holdback Amount into the registry or custody of any court of competent
jurisdiction or filing any such legal proceedings shall be paid out of the
Holdback Amount.
(k) Except as specifically set forth above, the Escrow Agent does not have
any interest in the Holdback Amount but is serving as escrow agent only and
having only possession thereof. This Section 4.2(k) shall survive
notwithstanding any termination of this Agreement or the resignation of the
Escrow Agent.
ARTICLE V
CERTAIN TRANSACTIONS
Section 5.1. MERGER, ETC. OF PYXIS. Nothing contained in this Escrow
Agreement shall prevent any merger, liquidation or consolidation of Pyxis or HRI
with or into another corporation or corporations, or successive consolidations
or mergers in which Pyxis or HRI or their respective successors shall be a party
or parties, or any sale or other conveyance of all or substantially all of the
property of Pyxis or HRI to another corporation.
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ARTICLE VI
MISCELLANEOUS
Section 6.1. HRI REPRESENTATIVE. At least ten (10) days prior to adopting
any plan of liquidation or dissolution, HRI shall irrevocably appoint an
individual, who shall be a resident of the United States (the "HRI
Representative"), to act on behalf of HRI with respect to all matters relating
to this Agreement and Article VIII of the Asset Purchase Agreement, including
without limitation, in considering and certifying the amount of any
indemnification hereunder, in appointing a successor Escrow Agent hereunder, in
considering and acting with respect to any amendment or termination of this
Agreement, and generally in performing all acts expressly required or permitted
to be performed by HRI pursuant hereto and pursuant to the Asset Purchase
Agreement. At such time as the HRI Representative is appointed by HRI, HRI shall
give written notice to Pyxis and the Escrow Agent specifying the name, address,
telephone number and facsimile number of the HRI Representative (the
"Appointment Notice"). From and after the date of receipt of the Appointment
Notice, Pyxis and the Escrow Agent shall have the right to deal exclusively with
the HRI Representative with respect to all matters under this Agreement and
neither Pyxis nor the Escrow Agent shall have any liability to HRI for any acts
or omissions of the HRI Representative, or any acts or omissions taken or not
taken by Pyxis or the Escrow Agent at the direction of the HRI Representative,
including, but not limited to the transferring of or the failure to transfer any
portion of the Holdback Amount released from escrow. Upon a distribution of the
Holdback Amount to the HRI Representative in accordance with this Agreement, the
Escrow Agent and Pyxis shall be deemed to have fully satisfied any and all
obligations to HRI under this Agreement and the Asset Purchase Agreement with
respect to the amount of such distribution. If HRI fails to appoint the HRI
Representative in accordance with this Section 6.1, either Pyxis or the Escrow
Agent may petition any court of competent jurisdiction to appoint an individual
to act as the HRI Representative for and on behalf of HRI.
Section 6.2. AMENDMENT AND TERMINATION This Agreement may be amended or
terminated by the written agreement of Pyxis and the HRI Representative, or
shall terminate automatically at such time as all funds from the Holdback Amount
have been paid or distributed in accordance with the terms of this Agreement and
the Escrow Agent has received all fees as described in Section 4.1 hereto.
Notwithstanding the foregoing, all provisions concerning the indemnification of
the Escrow Agent shall survive any termination of this Agreement.
Section 6.3. NOTICES. All notices, requests, demands, letters, waivers and
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if
(i) delivered personally, (ii) mailed, certified or registered mail with postage
prepaid, (iii) sent by next-day or overnight mail or delivery, or (iv) sent by
fax, as follows:
To HRI:
HelpMate Robotics, Inc.
Shelter Rock Lane
Danbury, Connecticut 06810
Attention: Joseph F. Engelberger
Fax: (203) 791-1082
With a copy to:
Reid and Riege, P.C.
One State Street
Hartford, Connecticut 06103
Attention: Craig L. Sylvester
Fax: (860) 240-1002
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To Pyxis:
Pyxis Corporation
3750 Torrey View Court
San Diego, California 92121
Attention: Stephen S. Thomas
Fax: (858) 480-6329
With a copy to:
Cardinal Health, Inc.
7000 Cardinal Place
Dublin, Ohio 43017
Attention: General Counsel
Fax: (614) 757-8919
And with a copy to:
Baker & Hostetler LLP
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
Attention: Ronald A. Stepanovic
Fax: (216) 696-0740
To the Escrow Agent:
Bank One Trust Company, NA
Corporate Trust Department
100 East Broad Street, OH1-0181
Columbus, Ohio 43271-0181
Attention: Michael Dockman
Fax: (614) 248-5195
or to such other person or address as any party shall specify by notice in
writing to the party entitled to notice. All such notices, requests, demands,
letters, waivers and other communications shall be deemed to have been received
(w) if by personal delivery on the day after such delivery, (x) if by certified
or registered mail, on the fifth business day after the mailing thereof, (y) if
by next-day or overnight mail or delivery, on the day delivered, or (z) if by
fax, on the next day following the day on which such fax was sent, provided that
a copy is also sent by certified, registered or overnight mail.
Section 6.4. GOVERNING LAW. This Agreement shall be construed, performed
and enforced in accordance with the laws of the State of Ohio.
Section 6.5. MISCELLANEOUS. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and assigns. The headings in
this Agreement are for convenience of reference only and shall not define or
limit the provisions hereof. This Agreement may be executed in several
counterparts, each of which is an original but all of which together shall
constitute one instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PYXIS CORPORATION
By:___________________________________
Name:_________________________________
Title:________________________________
HELPMATE ROBOTICS, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
BANK ONE TRUST COMPANY, NA
By:___________________________________
Name:_________________________________
Title:________________________________
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APPENDIX C
DISSENTERS' RIGHTS
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 33-855. DEFINITIONS.
As used in sections 33-855 to 33-872, inclusive: (1) "Corporation" means the
issuer of the shares held by a dissenter before the corporate action or the
surviving or acquiring corporation by merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from corporate
action under section 33-856 and who exercises that right when and in the manner
required by sections 33-860 to 33-868, inclusive. (3) "Fair value", with respect
to a dissenter's shares, means the value of the shares immediately before the
effectuation of the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the corporate action.
(4) "Interest" means interest from the effective date of the corporate action
until the date of payment, at the average rate currently paid by the corporation
on its principal bank loans or, if none, at a rate that is fair and equitable
under all the circumstances. (5) "Record shareholder" means the person in whose
name shares are registered in the records of a corporation or the beneficial
owner of shares to the extent of the rights granted by a nominee certificate on
file with a corporation. (6) "Beneficial shareholder" means the person who is a
beneficial owner of shares held in a voting trust or by a nominee as the record
shareholder. (7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 33-856. RIGHT TO DISSENT.
(a) A shareholder is entitled to dissent from, and obtain payment of the
fair value of his shares in the event of, any of the following corporate
actions: (1) Consummation of a plan of merger to which the corporation is a
party (A) if shareholder approval is required for the merger by section 33-817
or the certificate of incorporation and the shareholder is entitled to vote on
the merger or (B) if the corporation is a subsidiary that is merged with its
parent under section 33-818; (2) Consummation of a plan of share exchange to
which the corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan; (3) Consummation
of a sale or exchange of all, or substantially all, of the property of the
corporation other than in the usual and regular course of business, if the
shareholder is entitled to vote on the sale or exchange, including a sale in
dissolution, but not including a sale pursuant to court order or a sale for cash
pursuant to a plan by which all or substantially all of the net proceeds of the
sale will be distributed to the shareholders within one year after the date of
sale; (4) An amendment of the certificate of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares; (B) creates, alters
or abolishes a right in respect of redemption, including a provision respecting
a sinking fund for the redemption or repurchase, of the shares; (C) alters or
abolishes a preemptive right of the holder of the shares to acquire shares or
other securities; (D) excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights; or
(E) reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional share so created is to be acquired for cash under
section 33-668; or (5) Any corporate action taken pursuant to a shareholder vote
to the extent the certificate of incorporation, bylaws or a resolution of the
board of directors provides that voting or nonvoting shareholders are entitled
to dissent and obtain payment for their shares. (b) Where the right to be paid
the value of shares is made available to a shareholder by this section, such
remedy shall be his exclusive remedy as holder of such shares against the
corporate transactions described in this section, whether or not he proceeds as
provided in sections 33-855 to 33-872, inclusive.
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SEC. 33-857. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders. (b) A beneficial shareholder may assert
dissenters' rights as to shares held on his behalf only if: (1) He submits to
the corporation the record shareholder's written consent to the dissent not
later than the time the beneficial shareholder asserts dissenters' rights; and
(2) he does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.
SECS. 33-858 AND 33-859. RESERVED FOR FUTURE USE.
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 33-860. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under
section 33-856 is submitted to a vote at a shareholders' meeting, the meeting
notice shall state that shareholders are or may be entitled to assert
dissenters' rights under sections 33-855 to 33-872, inclusive, and be
accompanied by a copy of said sections. (b) If corporate action creating
dissenters' rights under section 33-856 is taken without a vote of shareholders,
the corporation shall notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in section 33-862.
SEC. 33-861. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under
section 33-856 is submitted to a vote at a shareholders' meeting, a shareholder
who wishes to assert dissenters' rights (1) shall deliver to the corporation
before the vote is taken written notice of his intent to demand payment for his
shares if the proposed action is effectuated and (2) shall not vote his shares
in favor of the proposed action. (b) A shareholder who does not satisfy the
requirements of subsection (a) of this section is not entitled to payment for
his shares under sections 33-855 to 33-872, inclusive.
SEC. 33-862. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under
section 33-856 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of section 33-861. (b) The dissenters' notice shall be sent no
later than ten days after the corporate action was taken and shall: (1) State
where the payment demand must be sent and where and when certificates for
certificated shares must be deposited; (2) Inform holders of uncertificated
shares to what extent transfer of the shares will be restricted after the
payment demand is received; (3) Supply a form for demanding payment that
includes the date of the first announcement to news media or to shareholders of
the terms of the proposed corporate action and requires that the person
asserting dissenters' rights certify whether or not he acquired beneficial
ownership of the shares before that date; (4) Set a date by which the
corporation must receive the payment demand, which date may not be fewer than
thirty nor more than sixty days after the date the subsection (a) of this
section notice is delivered; and (5) Be accompanied by a copy of sections 33-855
to 33-872, inclusive.
SEC. 33-863. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in section 33-862 must
demand payment, certify whether he acquired beneficial ownership of the shares
before the date required to be set forth in the dissenters' notice pursuant to
subdivision (3) of subsection (b) of said section and deposit his
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certificates in accordance with the terms of the notice. (b) The shareholder who
demands payment and deposits his share certificates under subsection (a) of this
section retains all other rights of a shareholder until these rights are
cancelled or modified by the taking of the proposed corporate action. (c) A
shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the dissenters' notice, is not entitled to
payment for his shares under sections 33-855 to 33-872, inclusive.
SEC. 33-864. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under section 33-866. (b) The
person for whom dissenters' rights are asserted as to uncertificated shares
retains all other rights of a shareholder until these rights are cancelled or
modified by the taking of the proposed corporate action.
SEC. 33-865. PAYMENT.
(a) Except as provided in section 33-867, as soon as the proposed corporate
action is taken, or upon receipt of a payment demand, the corporation shall pay
each dissenter who complied with section 33-863 the amount the corporation
estimates to be the fair value of his shares, plus accrued interest. (b) The
payment shall be accompanied by: (1) The corporation's balance sheet as of the
end of a fiscal year ending not more than sixteen months before the date of
payment, an income statement for that year, a statement of changes in
shareholders' equity for that year and the latest available interim financial
statements, if any; (2) a statement of the corporation's estimate of the fair
value of the shares; (3) an explanation of how the interest was calculated;
(4) a statement of the dissenter's right to demand payment under
section 33-860; and (5) a copy of sections 33-855 to 33-872, inclusive.
SEC. 33-866. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within sixty days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares. (b) If after returning deposited
certificates and releasing transfer restrictions, the corporation takes the
proposed action, it must send a new dissenters' notice under section 33-862 and
repeat the payment demand procedure.
SEC. 33-867. AFTER-ACQUIRED SHARES.
(a) A corporation may elect to withhold payment required by section 33-865
from a dissenter unless he was the beneficial owner of the shares before the
date set forth in the dissenters' notice as the date of the first announcement
to news media or to shareholders of the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under subsection
(a) of this section, after taking the proposed corporate action, it shall
estimate the fair value of the shares, plus accrued interest, and shall pay this
amount to each dissenter who agrees to accept it in full satisfaction of his
demand. The corporation shall send with its offer a statement of its estimate of
the fair value of the shares, an explanation of how the interest was calculated
and a statement of the dissenter's right to demand payment under
section 33-868.
SEC. 33-868. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment of
his estimate, less any payment under section 33-865, or reject the corporation's
offer under section 33-867 and demand payment of the fair value of his shares
and interest due, if: (1) The dissenter believes that the amount paid under
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section 33-865 or offered under section 33-867 is less than the fair value of
his shares or that the interest due is incorrectly calculated; (2) The
corporation fails to make payment under section 33-865 within sixty days after
the date set for demanding payment; or (3) The corporation, having failed to
take the proposed action, does not return the deposited certificates or release
the transfer restrictions imposed on uncertificated shares within sixty days
after the date set for demanding payment. (b) A dissenter waives his right to
demand payment under this section unless he notifies the corporation of his
demand in writing under subsection (a) of this section within thirty days after
the corporation made or offered payment for his shares.
SECS. 33-869 AND 33-870. RESERVED FOR FUTURE USE.
JUDICIAL APPRAISAL OF SHARES
SEC. 33-871. COURT ACTION.
(a) If a demand for payment under section 33-868 remains unsettled, the
corporation shall commence a proceeding within sixty days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the sixty-day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded. (b) The corporation shall commence the proceeding in the
superior court for the judicial district where a corporation's principal office
or, if none in this state, its registered office is located. If the corporation
is a foreign corporation without a registered office in this state, it shall
commence the proceeding in the superior court for the judicial district where
the registered office of the domestic corporation merged with or whose shares
were acquired by the foreign corporation was located. (c) The corporation shall
make all dissenters, whether or not residents of this state, whose demands
remain unsettled parties to the proceeding as in an action against their shares
and all parties must be served with a copy of the petition. Nonresidents may be
served by registered or certified mail or by publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) of this section is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings. (e) Each
dissenter made a party to the proceeding is entitled to judgment (1) for the
amount, if any, by which the court finds the fair value of his shares, plus
interest, exceeds the amount paid by the corporation, or (2) for the fair value,
plus accrued interest, of his after-acquired shares for which the corporation
elected to withhold payment under section 33-867.
SEC. 33-872. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under section 33-871
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously or not
in good faith in demanding payment under section 33-868. (b) The court may also
assess the fees and expenses of counsel and experts for the respective parties,
in amounts the court finds equitable: (1) Against the corporation and in favor
of any or all dissenters if the court finds the corporation did not
substantially comply with the requirements of sections 33-860 to 33-868,
inclusive; or (2) against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously or not in good faith with
respect to the rights provided by sections 33-855 to 33-872, inclusive. (c) If
the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
SECS. 33-873 TO 33-879. RESERVED FOR FUTURE USE.
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Exhibit 99.1
PROXY
HELPMATE ROBOTICS INC.
22 Shelter Rock Lane, Danbury, Connecticut 06810
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON December 15, 1999
The undersigned stockholder hereby appoints JOSEPH F. ENGELBERGER and FRED T.
CORDANO, and each of them, with full power of substitution, as proxies to vote
all shares which the undersigned is entitled to vote at the Special Meeting of
HelpMate Robotics Inc. (the "Company") to be held at the offices of the Company,
22 Shelter Rock Lane, Danbury, Connecticut 06810 on Wednesday, December 15, 1999
at 10:00 a.m. or any adjournment or postponement thereof, and directs said
proxies to vote as instructed on the matters set forth below AND OTHERWISE AT
THEIR DISCRETION.
UNLESS OTHERWISE INDICATED BELOW, THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED "FOR" PROPOSAL ONE.
[Continued on reverse side - please complete and sign on back]
Proposal One. To approve the sale for cash (the "PROPOSED SALE") to Pyxis
Corporation (the "BUYER") of substantially all of the assets, and the assumption
by Buyer of certain specified liabilities, of the Company pursuant to the Asset
Purchase Agreement between the Company and the Buyer dated as of October 14,
1999, the full text of which is attached as Appendix A to the accompanying proxy
statement.
- ----------------------- ------------------------ --------------------------
/_/ FOR /_/ AGAINST /_/ ABSTAIN
- ----------------------- ------------------------ --------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL ONE.
Receipt of a copy of the Notice of the Special Meeting and the accompanying
Proxy Statement is hereby acknowledged. This proxy revokes all prior proxies
given by the undersigned.
----------------------------
Signature
----------------------------
Signature, if held jointly
----------------------------
Title
, 1999
---------------- ---
Date
IMPORTANT - PLEASE DATE, SIGN AND RETURN PROMPTLY.
Note: When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, or guardian, please give full title
as such. If a corporation, please sign in full corporate name by president or
other authorized officer. If a partnership, please sign in partnership name by
an authorized person.
