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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): APRIL 27, 1999
COHERENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 5255 94-1622541
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
5100 PATRICK HENRY DRIVE
SANTA CLARA, CA 95054
(408) 764-4000
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(ADDRESS, INCLUDING ZIP CODE, OF PRINCIPAL EXECUTIVE OFFICERS)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(408) 764-4000
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NOT APPLICABLE
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 27, 1999, we acquired all of the outstanding capital stock of
Star Medical Technologies, Inc., a California corporation ("Star"), from Palomar
Medical Technologies and several other shareholders of Star for $65 million in
cash. We completed the acquisition by means of a merger of our wholly-owned
subsidiary, Medical Technologies Acquisition, Inc., with and into Star, with
Star remaining as the surviving corporation.
The purchase price was paid to shareholders of Star in proportion to
their holdings of the capital stock of Star. We borrowed $65 million from Bank
of America National Trust and Savings Association pursuant to a bridge loan
facility to finance the purchase price.
Star is a maker of laser hair removal products. We intend for Star to
continue these operations.
The information that is set forth in our Press Release dated April 27,
1999, which is attached to this Current Report as an exhibit, is incorporated
herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS.
2.1 Agreement and Plan of Reorganization by and
among Coherent, Inc., Medical Technologies
Acquisition, Inc., Palomar Medical
Technologies, Inc., Star Medical Technologies,
Inc., Robert E. Grove, James Z. Holtz and David
C. Mundinger dated as of December 7, 1998.
10.1 Bridge Loan Facility by and between Coherent,
Inc. and Bank of America National Trust and
Savings Association dated as of April 23, 1999.
99.1 Text of Press Release, dated as of April 27,
1999.
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COHERENT, INC.
A Delaware Corporation
Dated: May 3, 1999 By: /s/ Robert J. Quillinan
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Robert J. Quillinan
Executive Vice President, and
Chief Financial Officer
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EXHIBIT INDEX
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Exhibit Number Description of Exhibit
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2.1 Agreement and Plan of Reorganization by and among Coherent,
Inc., Medical Technologies Acquisition, Inc., Palomar Medical
Technologies, Inc., Star Medical Technologies, Inc., Robert E.
Grove, James Z. Holtz and David C. Mundinger dated as of
December 7, 1998.
10.1 Bridge Loan Facility by and between Coherent, Inc. and Bank of
America National Trust and Savings Association dated as of
April 23, 1999.
99.1 Text of Press Release, dated April 27, 1999.
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Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
COHERENT, INC.
MEDICAL TECHNOLOGIES ACQUISITION, INC.
PALOMAR MEDICAL TECHNOLOGIES, INC.
STAR MEDICAL TECHNOLOGIES, INC.
ROBERT E. GROVE
JAMES Z. HOLTZ
AND DAVID C. MUNDINGER
DATED AS OF DECEMBER 7, 1998
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INDEX OF EXHIBITS AND SCHEDULES
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EXHIBIT DESCRIPTION
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Exhibit A Escrow Agreement
Exhibit B Merger Certificate
Exhibit C Fairness Opinion
Exhibit D Form of Legal Opinion
Exhibit E Patent License Agreement
Exhibit F Form of Legal Opinion of Counsel to Palomar and Star
SCHEDULES
Schedule 1.6
Schedule 5.19(a)(ii)
Schedule 7.2
DISCLOSURE SCHEDULE
2.1 2.3(a)
2.3(b) 2.5
2.6 2.8
2.10 2.11
2.13 2.12(b)(iii)
2.14(a) 2.14(b)
2.14(c) 2.14(f)
2.14(g) 2.15(a)
2.15(b) 2.15(c)
2.15(f) 2.15(g)
2.15(h) 2.15(l)
2.15(o) 2.15(p)
2.15(q) 2.16(a)
2.17 2.18
2.19 2.20
2.22(l) 2.23
2.24(b) 2.24(d)
2.24(g) 2.24(i)
2.24(j) 2.24(k)
2.25 7.1
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ARTICLE I THE MERGER.......................................................................................2
1.1 The Merger.......................................................................................2
1.2 Effective Time...................................................................................2
1.3 Effect of the Merger.............................................................................2
1.4 Articles of Incorporation; Bylaws................................................................2
1.5 Directors and Officers...........................................................................3
1.6 Effect of Merger on the Star Capital Stock.......................................................3
1.7 Dissenting Shares................................................................................4
1.8 Surrender of Certificates........................................................................5
1.9 No Further Ownership Rights in Star Capital Stock................................................5
1.10 Dissenting Shares After Payment of Fair Value....................................................6
1.11 Tax and Accounting Consequences..................................................................6
1.12 Taking of Necessary Action; Further Action.......................................................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF STAR AND PALOMAR...............................................6
2.1 Organization of Star.............................................................................6
2.2 Subsidiaries.....................................................................................7
2.3 Star Capital Structure...........................................................................7
2.4 Authority........................................................................................7
2.5 No Conflict......................................................................................8
2.6 Consents.........................................................................................8
2.7 SEC Filings; Financial Statements................................................................8
2.8 Star Financial Statements........................................................................9
2.9 Customer Information.............................................................................9
2.10 No Undisclosed Liabilities.......................................................................9
2.11 No Changes.......................................................................................9
2.12 Tax Matters.....................................................................................12
2.13 Restrictions on Business Activities.............................................................14
2.14 Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment .........................................................................14
2.15 Intellectual Property...........................................................................15
2.16 Agreements, Contracts and Commitments...........................................................19
2.17 Interested Party Transactions...................................................................21
2.18 Governmental Authorization......................................................................21
2.19 Litigation......................................................................................21
2.20 Accounts Receivable.............................................................................21
2.21 Minute Books....................................................................................22
2.22 Environmental Matters...........................................................................22
2.23 Brokers' and Finders' Fees; Third Party Expenses................................................25
2.24 Employee Benefit Plans and Compensation.........................................................25
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2.25 Insurance.......................................................................................29
2.26 Compliance with Laws............................................................................30
2.27 Fairness Opinion................................................................................30
2.28 Representations Complete........................................................................30
2.29 Fleet Bank Lien.................................................................................30
ARTICLE III REPRESENTATIONS AND WARRANTIES OF COHERENT AND
MERGER SUB......................................................................................30
3.1 Organization, Standing and Power................................................................31
3.2 Authority.......................................................................................31
3.3 Consents........................................................................................31
3.4 Consideration...................................................................................31
3.5 No Conflicts....................................................................................31
3.6 Sales Tax.......................................................................................32
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME.............................................................32
4.1 Conduct of Business of Star.....................................................................32
4.2 No Solicitation.................................................................................32
ARTICLE V ADDITIONAL AGREEMENTS...........................................................................34
5.1 Star Shareholder Approval.......................................................................34
5.2 Palomar Stockholder Approval....................................................................35
5.3 Access to Information...........................................................................35
5.4 Expenses........................................................................................35
5.5 Public Disclosure...............................................................................36
5.6 Consents........................................................................................36
5.7 FIRPTA Compliance...............................................................................37
5.8 Reasonable Efforts..............................................................................37
5.9 Notification of Certain Matters.................................................................37
5.10 Additional Documents and Further Assurances.....................................................37
5.11 Deleted.........................................................................................37
5.12 Employee Compensation...........................................................................37
5.13 HSR Filing......................................................................................38
5.14 Palomar Non-Competition.........................................................................38
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5.15 Coherent Non-Competition........................................................................38
5.16 Coherent Sales of LightSheer Diode Lasers.......................................................39
5.17 Palomar and Star Non-Solicit....................................................................39
5.18 Coherent Non-Solicit............................................................................39
5.19 Tax Matters.....................................................................................39
5.20 Public Offering.................................................................................42
5.21 Indemnification.................................................................................42
5.22 WARN Act........................................................................................42
5.23 Swiss Franc Debenture Litigation................................................................42
5.24 No Amendment of Opto Power Agreement............................................................42
5.25 Preparation of Star Financial Statements........................................................43
5.26 Delivery of Closing Balance Sheet...............................................................43
5.27 Fleet Bank Release..............................................................................43
ARTICLE VI CONDITIONS TO THE MERGER........................................................................43
6.1 Conditions to Obligations of Star and Palomar...................................................43
6.2 Conditions to the Obligations of Coherent and Merger Sub........................................45
6.3 Failure to Use Best Efforts.....................................................................47
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW..............................................47
7.1 Survival of Representations and Warranties......................................................47
7.2 Escrow Fund.....................................................................................47
7.3 Indemnification.................................................................................47
7.4 Procedures with respect to Third-Party Claims...................................................48
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER...............................................................49
8.1 Termination.....................................................................................49
8.2 Effect of Termination...........................................................................50
8.3 Amendment.......................................................................................51
8.4 Extension; Waiver...............................................................................51
ARTICLE IX DISPUTE RESOLUTION..............................................................................51
9.1 Negotiations Between Senior Party Representatives...............................................51
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9.2 Mediation.......................................................................................51
9.3 Litigation; Arbitration.........................................................................53
ARTICLE X GENERAL PROVISIONS .............................................................................53
10.1 Notices.........................................................................................53
10.2 Interpretation..................................................................................54
10.3 Counterparts....................................................................................54
10.4 Entire Agreement; Assignment....................................................................54
10.5 Severability....................................................................................55
10.6 Other Remedies..................................................................................55
10.7 Governing Law; Jurisdiction.....................................................................55
10.8 Rules of Construction...........................................................................55
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "AGREEMENT") is made and
entered into as of December 7, 1998 (the "AGREEMENT DATE") among Coherent, Inc.,
a Delaware corporation ("COHERENT"), Medical Technologies Acquisition, Inc., a
California corporation and a wholly owned subsidiary of Coherent ("MERGER SUB"),
Palomar Medical Technologies, Inc., a Delaware corporation ("PALOMAR"), Star
Medical Technologies, Inc., a California corporation and a consolidated
subsidiary of Palomar ("STAR"), Robert E. Grove, an individual residing at 28
Grey Eagle Court, Pleasanton, California 94566, ("GROVE"), James Z. Holtz, an
individual residing at 2405 Sheffield Drive, Livermore, California 94550,
("HOLTZ"), and David C. Mundinger, an individual residing at 1544 Frederick
Michael Way, Livermore, California 94550, ("MUNDINGER").
RECITALS
A. The Boards of Directors of each of Palomar, Star, Coherent and
Merger Sub believe it is in the best interests of each corporation and the
stockholders of each corporation that Coherent acquire Star through the
statutory merger of Merger Sub with and into Star (the "MERGER") and, in
furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, all of the issued and
outstanding shares of capital stock of Star (the "STAR CAPITAL STOCK") together
with all outstanding options to purchase Star Capital Stock shall be converted
into the right to receive the merger consideration (as set forth in Section 1.6
hereof).
C. A portion of the merger consideration otherwise payable by Coherent
in connection with the Merger shall be placed in escrow by Coherent, the release
of which amount shall be contingent upon certain events and conditions, as set
forth in this Agreement and the Escrow Agreement attached hereto as EXHIBIT A
(the "ESCROW AGREEMENT").
D. Star, Palomar, Coherent and Merger Sub desire to make certain
representations, warranties, covenants and other agreements in connection with
the Merger.
The parties hereby agree as follows:
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ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2
hereof) and subject to and upon the terms and conditions of this Agreement and
the applicable provisions of the General Corporation Law of California (the
"CALIFORNIA LAW"), Merger Sub shall be merged with and into Star, the separate
corporate existence of Merger Sub shall cease and Star shall continue as the
surviving corporation and as a wholly-owned subsidiary of Coherent. The
surviving corporation after the Merger is hereinafter sometimes referred to as
the "SURVIVING CORPORATION."
1.2 EFFECTIVE TIME. Unless this Agreement is earlier terminated
pursuant to Section 8.1 hereof, the closing of the Merger (the "CLOSING") will
take place as promptly as practicable, but no later than five (5) business days
following satisfaction or waiver of the conditions set forth in Article VI
hereof, at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road,
Palo Alto, California 94304-1050, or by exchange of original documentation by
each of the attorneys of the respective parties hereto via Federal Express or
similar overnight courier service, unless another place, manner or time is
agreed to in writing by Coherent and Palomar. The date upon which the Closing
actually occurs is herein referred to as the "CLOSING DATE." On the Closing
Date, the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger in substantially the form attached hereto as EXHIBIT B (or
like instrument) (the "MERGER CERTIFICATE") with the Secretary of State of
California, in accordance with the relevant provisions of applicable law (the
time of acceptance by the Secretary of State of California of such filing being
referred to herein as the "EFFECTIVE TIME").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of California Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises of
Star and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of Star and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 ARTICLES OF INCORPORATION; BYLAWS.
(a) Unless otherwise determined by Coherent prior to the
Effective Time, at the Effective Time, the Articles of Incorporation of Merger
Sub shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Articles of Incorporation;
PROVIDED, HOWEVER, that Article I of the Articles of Incorporation of the
Surviving Corporation shall be amended to read as follows: "The name of the
corporation is Star Medical Technologies, Inc."
(b) The Bylaws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
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1.5 DIRECTORS AND OFFICERS. The sole director of the Surviving
Corporation immediately after the Effective Time shall be Bernard Couillaud, who
shall hold office in accordance with the Articles of Incorporation and Bylaws of
the Surviving Corporation. The officers of the Surviving Corporation immediately
after the Effective Time shall be Bernard Couillaud as President and Chief
Financial Officer, and Scott H. Miller as Vice President and Secretary, each to
hold office in accordance with the Bylaws of the Surviving Corporation.
1.6 EFFECT OF MERGER ON THE STAR CAPITAL STOCK. At the Effective Time,
by virtue of the Merger and without any action on the part of Palomar, Star,
Merger Sub, Coherent or the holders of any shares of the Star Capital Stock, the
following shall take place:
(a) CONSIDERATION FOR STAR CAPITAL STOCK. Each share of the
Star Capital Stock issued and outstanding immediately prior to the Effective
Time (other than any Dissenting Shares, as defined in Section 1.7 and shares of
Star Capital Stock owned by Coherent, Merger Sub or held in the treasury of
Star) will be automatically canceled and extinguished and be converted
automatically into the right to receive, upon surrender of the certificate
representing such share of Star Capital Stock in the manner provided in Section
1.8, without interest, an amount of cash as calculated below upon the terms and
subject to the conditions set forth in this Agreement (including, without
limitation, the escrow provisions set forth in Article VII hereof) and in the
Escrow Agreement:
(i) CERTAIN DEFINITIONS. For purposes of this
Agreement, the following terms shall have the meanings set forth below:
(a) "MERGER CONSIDERATION" shall mean
$65,000,000.
(b) "ESCROW AMOUNT" shall mean $4,000,000.
(c) "OUTSTANDING SHARES" shall mean issued
and outstanding shares of Star Capital Stock on a fully diluted basis assuming
conversion of all securities convertible or exercisable for shares of Star
Capital Stock.
(d) "TOTAL OUTSTANDING SHARES" shall mean
all Outstanding Shares.
(ii) PAYMENT FOR STAR CAPITAL STOCK. At the Closing,
Coherent shall pay or cause to be paid to each shareholder of Star (each, a
"STAR SHAREHOLDER") and each holder of an option to purchase shares of Star
Common Stock (to the extent the shares subject to option are vested) (a "STAR
OPTION HOLDER") in cash, by wire transfer of immediately available funds an
amount equal to the product of (i) the sum of the Merger Consideration plus the
aggregate amount which would be necessary to exercise all of the outstanding
vested options to purchase Star Common Stock multiplied by (ii) the number of
Outstanding Shares owned by such Star Shareholder or Star Option Holder divided
by the Total Outstanding Shares; provided, that there shall be withheld from any
amount payable to each Star
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Option Holder an amount equal to the exercise price of all vested options to
purchase Star Common Stock held by such Star Option Holder and any amounts
required to be withheld from such Star Option Holder under applicable law;
provided further, that $89,100 shall be deducted from the amounts payable to
each of Grove, Holtz and Mundinger and $267,300 shall be added to the amount
payable to Palomar; provided further, that there shall be deducted from the
escrow amounts payable to Palomar, Grove, Holtz and Mundinger the amounts set
forth on Section 7.2 of the Disclosure Schedule. The amounts to be received by
each Star Shareholder and Star Option Holder as of the date hereof are set forth
on Schedule 1.6.
(b) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such shares shall continue
to evidence ownership of such shares of capital stock of the Surviving
Corporation.
1.7 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Star Capital Stock held by a holder who has exercised
and perfected appraisal rights for such shares in accordance with Chapter 13 of
the California Law and who, as of the Effective Time, has not effectively
withdrawn or lost such appraisal rights ("DISSENTING SHARES"), shall not
represent a right to receive the Merger Consideration as provided in Section
1.6, but the holder thereof shall only be entitled to such rights as are granted
by the California Law.
(b) Notwithstanding the provisions of subsection (a), if any
holder of Dissenting Shares shall effectively withdraw or lose (through failure
to perfect or otherwise) his or her appraisal rights, then, as of the later of
the Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive the
Merger Consideration to which such holder would otherwise be entitled under
Section 1.6, upon surrender of the certificate representing such shares.
(c) Palomar and Star shall give Coherent (i) prompt notice of
any written demand for appraisal received by Palomar or Star (as the case may
be) pursuant to the applicable provisions of the California Law and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
such demands. Star shall not, except with the prior written consent of Coherent,
voluntarily make any payment with respect to any such demands or offer to settle
or settle any such demands. To the extent that Coherent or Star makes any
payment or payments in respect of any Dissenting Shares, the Merger
Consideration payable under Section 1.6 hereof shall be reduced by an amount
equal to the aggregate consideration paid for Dissenting Shares.
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1.8 SURRENDER OF CERTIFICATES.
(a) COHERENT TO PROVIDE CASH; ESCROW FUNDING; EXCHANGE OF
CERTIFICATES. At the Closing, the shareholders of Star (the "STAR SHAREHOLDERS")
shall deliver to Coherent certificates representing all of the issued and
outstanding shares of Star Capital Stock duly endorsed for transfer to Coherent
against Coherent's wire transfer of immediately available funds in the aggregate
amount of the Merger Consideration (less the Escrow Amount as applicable) to the
Star Shareholders as set forth on Schedule 1.6. At the Closing, Coherent shall
provide the Star Shareholders with a copy of the payment and/or instructions
pursuant to which the Escrow Amount is delivered to the Escrow Agent.
(b) TRANSFERS OF OWNERSHIP. If any payment is to be made to a
person other than the holder in whose name the share certificate surrendered in
exchange therefor is registered, it will be a condition of the payment thereof
that the share certificate so surrendered will be properly endorsed and
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid.
(c) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
certificates evidencing shares of Star Capital Stock shall have been lost,
stolen or destroyed, Coherent shall make payment in exchange for such lost,
stolen or destroyed certificates, upon the making of an affidavit of that fact
by the holder thereof, in such amount, if any, as may be required pursuant to
Section 1.6 hereof; PROVIDED, HOWEVER, that Coherent may, in its sole discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificates to deliver an agreement (in form and
substance satisfactory to Coherent) to indemnify Coherent against any claim that
may be made against Coherent with respect to the certificates alleged to have
been lost, stolen or destroyed.
(d) NO LIABILITY. Notwithstanding anything to the contrary in
this Section 1.8, neither the Surviving Corporation nor any party hereto shall
be liable to a holder of shares of Star Capital Stock for any amount properly
paid to a public official pursuant to any applicable abandoned property, escheat
or similar law.
1.9 NO FURTHER OWNERSHIP RIGHTS IN STAR CAPITAL STOCK. The Merger
Consideration paid upon the surrender for exchange of shares of Star Capital
Stock in accordance with the terms hereof shall be deemed to be full
satisfaction of all rights pertaining to such shares of Star Capital Stock, and
there shall be no further registration of transfers on the records of the
Surviving Corporation of shares of Star Capital Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time, share
certificates representing Star Capital Stock are presented to the Surviving
Corporation for any reason, they shall be canceled and extinguished and be
converted automatically into the right to receive, upon surrender of the
certificate representing such share of Star Capital Stock in the manner provided
in Section 1.8, without interest, an amount of cash as provided in this Article
I.
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1.10 DISSENTING SHARES AFTER PAYMENT OF FAIR VALUE. Dissenting Shares,
if any, after payments of fair value in respect thereto have been made to
dissenting Star Shareholders pursuant to the California Law, shall be canceled.
1.11 TAX AND ACCOUNTING CONSEQUENCES. It is acknowledged by the parties
that the Merger shall constitute a taxable acquisition of the stock of the
Company under the Internal Revenue Code (the "CODE"), and may be treated as a
"purchase" of Star Capital Stock for financial and accounting purposes. Each
party has consulted with its own tax advisors and accountants with respect to
the tax and accounting consequences to them, respectively, of the Merger.
1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of Star and Merger Sub, the officers and directors of the
Surviving Corporation are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF STAR
AND PALOMAR
Subject to such exceptions as are specifically disclosed in the
disclosure schedule (referencing the appropriate section and paragraph numbers)
supplied by Star and Palomar to Coherent (the "DISCLOSURE SCHEDULE") and dated
as of the date hereof, that as of the date hereof and as of the Effective Time
(as though made at the Effective Time), each of Star and Palomar hereby, jointly
and severally, represents and warrants to Coherent and Merger Sub, as follows:
2.1 ORGANIZATION OF STAR.
(a) Star is a corporation duly organized, validly existing and
in good standing under the laws of the State of California. Star has the
corporate power to own its properties and to carry on its business as now being
conducted and as contemplated by the parties hereto. Attached to Section 2.1 of
the Disclosure Schedule are true and correct copies of the Articles of
Incorporation and Bylaws of Star, each as amended to date. Section 2.1 of the
Disclosure Schedule lists the directors and officers of Star. Except as set
forth in Section 2.1 of the Disclosure Schedule, the operations now being
conducted by Star have not been conducted under any other name.
(b) Star is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified could have a Material Adverse Effect. For all purposes of this
Agreement, the term "MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE
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CHANGE" means any change, event or effect, or any change, event or effect which
can reasonably be foreseen to be likely to result in a change, event or effect,
that is materially adverse to the business, assets (including intangible
assets), condition (financial or otherwise) or results of operations of Star,
excluding changes, events or effects proximately caused by Coherent's acts or
omissions.
2.2 SUBSIDIARIES. There are no subsidiaries of Star, or other entities
in which Star owns or has owned any shares in the capital of or any interest in,
or control, directly or indirectly of any corporation, partnership, association,
joint venture or other business entity (a "SUBSIDIARY").
2.3 STAR CAPITAL STRUCTURE.
(a) AUTHORIZED AND OUTSTANDING CAPITAL STOCK. The authorized
capital stock of Star consists of 2,000,000 shares of authorized Common Stock,
no par value per share, of which 786,300 shares are issued and outstanding as of
the date hereof. All of the Star Capital Stock is held by Palomar, except as set
forth in Section 2.3(a) of the Disclosure Schedule which sets forth the name and
addresses of any other shareholder. All outstanding shares of Star Capital Stock
are duly authorized, validly issued, fully paid and non-assessable and not
subject to preemptive rights created by statute, the Articles of Incorporation
or Bylaws of Star or any agreement and have been issued in compliance with
federal and state securities laws. There are no declared or accrued unpaid
dividends with respect to any shares of Star Capital Stock that would decrease
the net book value as determined in accordance GAAP (the "NET BOOK VALUE") of
Star to less than $0.00. Star has no other capital stock authorized, issued or
outstanding.
(b) STOCK OPTIONS. As of the date hereof, except as set forth
in Section 2.3(b) of the Disclosure Schedule, there are no options, warrants,
conversion privileges or other rights, agreements, arrangements or commitments
obligating Star to issue or sell any shares of, or make any payments based on
the value or appreciation of any, Star Capital Stock or securities or
obligations of any kind convertible into or exchangeable for any shares of Star
Capital Stock or any other person. The holders of outstanding shares of Star
Capital Stock are not entitled to any contractual or statutory preemptive or
other similar rights. Upon consummation of the Merger in accordance with the
terms of this Agreement, Coherent will own the entire equity interest in Star,
and there will be no options, warrants, conversion privileges or other rights,
agreements, arrangements or commitments obligating the Surviving Corporation to
issue or sell any shares of capital stock of the Surviving Corporation.
2.4 AUTHORITY. Each of Star and Palomar has all requisite power and
authority to enter into this Agreement to which it is a party and to consummate
the transactions contemplated hereby. 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 Star and
Palomar, and no further action is required on the part of Star and Palomar to
authorize the Agreement and the transactions contemplated hereby, subject only
to the approval of this Agreement by the holders of Star Capital Stock and
Palomar capital stock. This Agreement and the Merger have been unanimously
approved by both
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the Board of Directors of Star and the Board of Directors of Palomar. This
Agreement has been duly executed and delivered by Star and Palomar, as the case
may be, and, assuming the due authorization, execution and delivery by the other
parties hereto, constitutes the valid and binding obligation of Star and Palomar
enforceable in accordance with its terms, subject to the laws of general
application relating to bankruptcy, insolvency and the relief of debtors and to
rules of law governing specific performance, injunctive relief or other
equitable remedies.
2.5 NO CONFLICT. Except as set forth in Section 2.5 of the Disclosure
Schedule, the execution and delivery of this Agreement by either Star or Palomar
does not, and, the consummation of the transactions contemplated hereby will
not, conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation, modification or acceleration of any obligation or
loss of any benefit under (any such event, a "CONFLICT") (i) any provision of
the Articles of Incorporation and Bylaws of Star, (ii) any material mortgage,
indenture, lease, instrument of indebtedness, security interest, contract or
other agreement or instrument, permit, concession, franchise or license to which
Star or, to the extent it relates to Star's business, Palomar or any of their
respective properties or assets are subject, (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Star, or to the extent
it relates to Star's business, Palomar or their respective properties or assets,
or (iv) imposition of a security interest, lien, pledge, charge, claim,
restrictions on transfer, mortgage, security interests or other encumbrances of
any sort (collectively, "LIENS") or instrument, permit, concession, franchise or
license to Star's properties or assets.
2.6 CONSENTS. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or other foreign governmental
authority, instrumentality, agency or commission ("GOVERNMENTAL ENTITY") or any
third party, including a party to any agreement with Star or Palomar (so as not
to trigger any Conflict), is required by or with respect to Star or Palomar in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for (i) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable securities laws, Delaware law and the Hart
Scott Rodino Act (the "HSR ACT") thereby, (ii) the filing of the Merger
Certificate with the Secretary of State of the State of California, or (iii) the
consents set forth in Section 2.6 of the Disclosure Schedule.
2.7 SEC FILINGS; FINANCIAL STATEMENTS. Accurate and complete copies of
all registration statements, proxy statements and other statements, reports,
schedules, forms and other documents (other than Forms 4 and 5) filed by
Palomar, Star or their respective affiliates with the Securities and Exchange
Commission (the "SEC") since January 1, 1997 are available on the World Wide Web
at the SEC's website, the address of which is www.sec.gov, and Palomar will
notify Coherent within 24 hours following filing of any registration statements,
proxy statements and other statements, reports, schedules, forms and other
documents filed after the date of this Agreement and prior to the Effective Time
(collectively, the "PALOMAR SEC DOCUMENTS"). All statements, reports, schedules,
forms and other
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documents required to have been filed by Palomar or Star with the SEC have been
so filed. As of the time it was filed with the SEC (or, if amended or superseded
by a later filing, then on the date of such filing), none of the Palomar SEC
Documents as they relate to Star and its business contained any untrue statement
of material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2.8 STAR FINANCIAL STATEMENTS. Section 2.8 of the Disclosure Schedule
includes true, correct and complete copies of Star's unaudited balance sheets
for the year ended December 31, 1997, and the related unaudited statements of
income for the twelve-month period ended December 31, 1997 (the "STAR YEAR-END
FINANCIALS"), Star's audited balance sheet as of September 30, 1998 and the
related audited statements of income for the nine-month period ended September
30, 1998 (the "STAR NINE-MONTH FINANCIALS") (the Star Year-End Financials and
the Star Nine-Month Financials shall collectively be referred to as the "STAR
FINANCIALS"). The Star Financials have been prepared in accordance with GAAP,
and, except as set forth in Section 2.8 of the Disclosure Schedule, applied on a
basis consistent throughout the periods indicated and consistent with each
other. The Star Financials fairly present, in all material respects, the
consolidated financial condition, consolidated operating results and cash flows
of Star as of the dates and during the periods indicated therein and are
consistent with the books and records of Star.
2.9 CUSTOMER INFORMATION. Other than Coherent, Star and Palomar have
sole and exclusive ownership, free and clear of any Liens, of all customer files
and other customer information relating to Star's current and former customers
(the "CUSTOMER INFORMATION").
2.10 NO UNDISCLOSED LIABILITIES. Star has no liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of any type,
whether accrued, absolute, contingent, matured, unmatured or other (whether or
not required to be reflected in financial statements in accordance with GAAP),
except liabilities which (i) have been reflected in the Star Financials, (ii)
have arisen in the ordinary course of business consistent with past practices
since September 30, 1998, or (iii) have been set forth in Section 2.10 of the
Disclosure Schedule.
2.11 NO CHANGES. Except as set forth in Section 2.11 of the Disclosure
Schedule and other than as proximately caused by the acts or omissions of
Coherent, since September 30, 1998, there has not been, occurred or arisen any:
(a) capital expenditure, commitment or transaction or the
incurrence of any liability in excess of $25,000 on the part of Star, except in
the ordinary course of business as conducted on that date and consistent with
past practices or in connection with the consummation of the Merger;
(b) amendments to (or agreements to amend) Star's Articles of
Incorporation or Bylaws;
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(c) destruction of, damage to or loss of any material assets
or properties of Star, whether or not covered by insurance, materially and
adversely affecting its properties, assets, business, financial condition or
prospects;
(d) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action by Star;
(e) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by Star;
(f) revaluation by Star of any of its assets, including
without limitation writing down the value of inventory or writing off notes or
accounts receivable, other than in the ordinary course of business consistent
with past practices;
(g) except for dividends necessary to bring the Net Book Value
of Star to $0.00 following the payment of such dividends ("PERMITTED DIVIDENDS")
and except as otherwise agreed to by Coherent, declaration, set aside or payment
of any cash or stock dividend or other distribution in respect of capital, or
redemption or other acquisition of any of Star Capital Stock;
(h) increase, payment or authorization of payment of any
bonus, increased salary or special remuneration to any director, officer,
employee or independent contractor of Star, including any amounts for accrued
but unpaid salary or bonuses (other than normal amounts made on a regular basis,
consistent with past practices), or entering into any employment, retention,
severance or similar contract or arrangement by Star with any of the foregoing
persons, other than employment agreements with temporary contract employees,
none of whom is paid more than $25 per hour (exclusive of fees paid directly to
any temporary employee agency);
(i) adoption of, or increase in the payments to or benefits
under, any profit-sharing, bonus, deferred compensation, savings, insurance,
pension, retirement or other employee benefit plan for or with any employee of
Star;
(j) sale, lease, license, granting a lien on or other
disposition of (i) any Star Intellectual Property (as defined in Section
2.15(a)) or (ii) any of the assets or properties of Star, other than
dispositions of scrap material or sales of inventory in the ordinary course of
business and consistent with past practices and other than sales of assets
valued at less than $10,000 and other than Permitted Liens;
(k) execution, amendment, termination, violation by Star or
Palomar, or modification (or agreement to do so) of any material contract,
agreement or license to which Star is a party, by which it is bound or to which
it is a beneficiary, other than in the ordinary course of business consistent
with past practices;
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(l) loan by Star to any person or entity, guarantee by Star of
any material indebtedness, issuance or sale of any debt securities of Star,
indemnification of or surety for any obligation, or guarantee of any debt
securities of others, except for advances to employees for travel and business
expenses in the ordinary course of business, consistent with past practice;
(m) waiver or release of any right or claim of Star including
any write-off or other compromise of any account receivable of Star, other than
in the ordinary course of business consistent with past practices;
(n) the commencement of any lawsuit or proceeding or, to
Star's or Palomar's Knowledge, notice or investigation against Star or its
affairs or the Star Capital Stock or threat thereof. For purposes of the
Agreement, "KNOWLEDGE", when used with respect to Star, shall mean information
which would be within the actual knowledge of Grove, Holtz or Mundinger after
reasonable investigation and within the actual knowledge of Joseph P. Caruso,
Louis P. Valente, Michael H. Smotrich or Anthony D. Fiorillo and, when used with
respect to Palomar, shall mean information within the actual knowledge of Joseph
P. Caruso, Louis P. Valente, Michael H. Smotrich or Anthony D.
Fiorillo;
(o) notice of any claim or potential claim of ownership by any
person other than Star of the Star Intellectual Property or of infringement by
Star of any other person's Intellectual Property;
(p) issuance, grant, delivery or sale, or contract to issue or
sell, by Star of any shares of Star Capital Stock or securities exchangeable,
convertible or exercisable therefor, or any securities, warrants, options or
rights to purchase any of the foregoing;
(q) any event or condition of any character that has had a
Material Adverse Effect on Star;
(r) payment, discharge or satisfaction, in an amount in excess
of $25,000 (in any one case) or $50,000 (in the aggregate), of any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise) of Star other than (i) payments to Palomar, including the payment
of any debts owed by Star to Palomar or Permitted Dividends, in accordance with
this Agreement, or (ii) the payment, discharge or satisfaction of liabilities in
the ordinary course of business consistent with past practices;
(s) election or change by Star or Palomar of any material
election in respect of Taxes (as defined in Section 2.12 hereof), adoption or
change of any accounting method in respect of Taxes, entering into any closing
agreement, settlement of any claim or assessment in respect of Taxes, or consent
to any extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes with Star or with respect to Star's products or
assets;
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(t) encumbrance or permitting the encumbrance of (i) any of
Star's assets, except in the ordinary course of business consistent with past
practices and except for Permitted Liens, or (ii) Star's Capital Stock;
(u) failure to maintain Star's equipment or other material
assets in good working condition and repair according to the standards Star or
Palomar has maintained up to the Agreement Date;
(v) subdivision or combination of the outstanding shares of
any class or series of Star Capital Stock or entering into any recapitalization
affecting the number of outstanding shares of any class or series of Star
Capital Stock or affecting any other of its securities;
(w) any release by Star or its agents, employees or
contractors of any Contaminants (as defined in Section 2.22 hereof) to the
environment or any exposure of persons to a Contaminant as a consequence of the
acts or omissions of Star or its agents, employees and contractors, which in
either case violates any applicable Environmental Requirement;
(x) negotiation or agreement by Star or any officer or
employees thereof to do any of the things described in the preceding clauses (a)
through (w) (other than negotiations with Coherent and its representatives,
including without limitation, regarding the transactions contemplated by this
Agreement).
2.12 TAX MATTERS.
(a) DEFINITION OF TAXES AND TAX RETURNS. For the purposes of
this Agreement, "TAX" or, collectively, "TAXES", means: (i) any and all federal,
state, local and foreign taxes, assessments and other governmental charges,
duties, impositions and liabilities, including taxes based upon or measured by
gross receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts; (ii) any liability for the payment of any
amounts of the type described in clause (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any period; and (iii)
any liability for the payment of any amounts of the type described in clause (i)
or (ii) as a result of any express or implied obligation to indemnify any other
person or as a result of any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
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(b) TAX RETURNS AND AUDITS.
"TAX RETURNS" shall mean federal, state, local and
foreign returns, estimates, information statements and reports ("RETURNS")
relating to any and all Taxes concerning or attributable to Star or its
operations prior to the Effective Time and such Returns are true and correct and
have been completed in accordance with applicable law.
(i) Star has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in all material
respects. All Taxes owed by Star (whether or not shown on any Tax Return) have
been paid. Star is not currently the beneficiary of any extension of time within
which to file any Tax Return.
(ii) There is no material dispute or claim concerning
any Tax liability of Star either (A) claimed or raised by any authority in
writing or (B) as to which Palomar is aware.
(iii) Section 2.12(b)(iii) of the Disclosure Schedule
lists all federal, state, local, and foreign Tax Returns filed with respect to
Star for taxable periods ended on or after December 31, 1995, indicates those
Tax Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit. Palomar has delivered to the Buyer correct
and complete copies of all federal Tax Returns, examination reports, and
statements of deficiencies assessed against, or agreed to by Star since December
31, 1995. Neither Palomar nor Star has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(iv) Star has not filed a consent under Code
Section 341(f) concerning collapsible corporations. Star has not made any
material payments, is not obligated to make any material payments, and is not
a party to any agreement that could obligate it to make any material payments
that will not be deductible under Code Section 280G. Star has not been a
United States real property holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(iii). Star is not party to any tax allocation or sharing
agreement. Star has not been a member of an Affiliated Group filing a
consolidated federal Tax Return (other than a group the common parent of
which was Palomar) or has any liability for the taxes of any person (other
than any of Star) under Reg. Section 1.502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract, or
otherwise.
(v) The unpaid Taxes of Star (A) did not, as of
September 30, 1998, exceed by any material amount the reserve for Tax liability
(rather than any reserve for deferred taxes established to reflect timing
differences between book and tax ) set forth on the face of the balance sheet
contained in the Star Nine-Month Financials (rather than in any notes thereto)
and (B) will not exceed by any material amount that reserve as adjusted for
operations and transactions through the Closing Date in accordance with the past
custom and practice of Star in filing its Tax Returns.
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(vi) Star is (and will be at the Effective Time) a
member of the "selling consolidated group" of which Palomar is the common parent
within the meaning of Section 338(h)(10).
2.13 RESTRICTIONS ON BUSINESS ACTIVITIES. Except as set forth in
Section 2.13 of the Disclosure Schedule and other than agreements to which
Coherent is a party, there is no agreement (noncompete or otherwise),
commitment, judgment, injunction, order or decree to which Star or any of its
officers, directors or employees is a party or otherwise binding upon Star or
any of its officers, directors or employees which has or may have the effect of
prohibiting or impairing any material business practice of Star, any acquisition
of material property (tangible or intangible) by Star or the conduct of business
by Star. Without limiting the foregoing, neither Star nor, to the Knowledge of
Star or Palomar, any of Star's officers, directors, or employees has entered
into any agreement under which Star or such officer, director, or employee is
restricted from selling, licensing or otherwise distributing any of Star's
technology or products to or providing services to, customers or potential
customers or any class of customers, in any geographic area, during any period
of time or in any segment of the market except as set forth in Section 2.13 of
the Disclosure Schedule.
2.14 TITLE OF PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES;
CONDITION OF EQUIPMENT.
(a) REAL PROPERTY. Section 2.14(a) of the Disclosure Schedule
sets forth a list of all real property currently or previously owned and/or
leased by Star or at which the operations of Star is conducted (separately
designated as owned or leased currently or in the past), and, with respect to
currently leased property, the name of the lessor, the date of the lease and
each amendment thereto and, with respect to any current lease, the aggregate
annual rental and/or other fees payable under any such lease. All such current
leases are in full force and effect, are valid and effective in accordance with
their respective terms, and there is not, under any of such leases, any existing
material default or material event of default (or event which with notice or
lapse of time, or both, would constitute a material default) by Star or Palomar
or, to the Knowledge of Star and Palomar, by the Lessor, except as set forth in
Section 2.14(a) of the Disclosure Schedule.
(b) TITLE; LEASEHOLD INTEREST. Except as set forth in Section
2.14(b) of the Disclosure Schedule, Star has good and valid title to, or, in the
case of leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for use
in its business or reflected in its financial statements, free and clear of any
Liens, except as reflected in the Closing Balance Sheet and except for Liens for
Taxes not yet due and payable, the Liens and exceptions to title against the
owned real property of Star specified in Section 2.14(b) of the Disclosure
Schedule and such imperfections of title and encumbrances with respect to other
personal properties, which are not material in character, amount or extent, and
which do not detract from the value, or interfere with the present use, of the
property subject thereto or affected thereby ("PERMITTED LIENS").
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(c) EQUIPMENT. Section 2.14(c) of the Disclosure Schedule
lists all items of equipment (the "EQUIPMENT") owned or leased by Star or
required for the conduct of Star's business or reflected in its financial
statements (except for Equipment which individually has a value not exceeding
$50,000 and is otherwise immaterial to the operation of the business of Star as
presently conducted).
(d) REAL ESTATE LAW COMPLIANCE. To the Knowledge of Star and
Palomar, the real property owned or leased by Star, and the use thereof,
complies in all material respects with the laws, rules, regulations, zoning
ordinances, use permits, governmental orders and stipulations, and private
covenants, conditions, and restrictions applicable thereto ("REAL ESTATE LAWS")
and have been reasonably maintained consistent in all material respects with
standards generally followed by similar businesses and buildings, and are
sufficient for the conduct of Star's business as presently conducted in all
material respects.
(e) PROCEEDINGS. To the Knowledge of Star or Palomar, no
condemnation, environmental, zoning, land-use or other regulatory proceedings or
rule making procedures have been instituted or planned to be instituted with
respect to the owned or leased real property, personal property and, if
applicable, Equipment ("FACILITIES"), used by Star or for the conduct of Star's
business nor has Star or Palomar received notice of any proceedings to impose
any new Taxes or operating restrictions upon any of such Facilities or Star's
conduct of business therein. Star and Palomar shall notify Coherent promptly of
any such proceedings of which Star and/or Palomar become aware prior to the
Closing.
(f) DEMOLITION, ALTERATIONS AND IMPROVEMENTS. Except as set
forth in Section 2.14(f) of the Disclosure Schedule, on the Closing Date there
will be no outstanding written or oral contracts for any demolition, alterations
or improvements on or to Star's Facilities, which have not been fully paid and
performed.
(g) REQUIRED EQUIPMENT AND PROPERTY. Except as set forth in
Section 2.14(g) of the Disclosure Schedule, Star owns all of the tangible
property required to conduct its business as currently conducted, other than
tangible property which individually has value less than $10,000 and is readily
available from third parties, and all such property owned or leased by Star is
in good operating condition, regularly and properly maintained, subject to
normal wear and tear which does not interfere with the conduct of the business
of Star as presently conducted.
2.15 INTELLECTUAL PROPERTY.
(a) For the purposes of this Agreement, the following terms
have the following definitions:
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"INTELLECTUAL PROPERTY" shall mean any or all of the
following and all rights in, arising out of, or associated with: (i) all United
States, foreign and international patents and applications (including
provisional applications) therefor and all reissues, divisions, renewals,
extensions, continuations, and continuations-in-part thereof; (ii) all
inventions (whether patentable or not), invention disclosures, improvements,
trade secrets, proprietary information, know how, technology, technical data and
customer lists, and all documentation relating to any of the foregoing; (iii)
all copyrights, copyright registrations and applications therefor and all other
rights corresponding thereto throughout the world; (iv) all mask works, mask
work registrations and applications therefor; (v) all industrial designs and any
registrations and applications therefor throughout the world; (vi) all trade
names, logos, common law trademarks and service marks, trademark and service
mark registrations and applications therefor and all goodwill associated
therewith throughout the world, and all World Wide Web Internet addresses, sites
and domain names; (vii) all databases and data collections and all rights
therein throughout the world; (viii) any similar, corresponding or equivalent
rights to any of the foregoing; and (ix) all documentation related to any of the
foregoing.
"STAR INTELLECTUAL PROPERTY" shall mean any
Intellectual Property that is owned by Star, but does not include Palomar
Registered Intellectual Property. "PALOMAR REGISTERED INTELLECTUAL PROPERTY"
shall mean all Registered Intellectual Property of Palomar set forth on Section
2.15(a) of the Disclosure Schedule.
"COHERENT INTELLECTUAL PROPERTY" shall mean any
Intellectual Property that is owned by Coherent.
"REGISTERED INTELLECTUAL PROPERTY" shall mean all
United States, international and foreign: (i) patents, patent applications
(including provisional applications); (ii) registered trademarks, applications
to register trademarks, intent-to-use applications, or other registrations or
applications related to trademarks; (iii) registered copyrights and applications
for copyright registration; (iv) any mask work registrations and applications to
register mask works; and (v) any other Intellectual Property that is the subject
of an application, certificate, filing, registration or other document issued
by, filed with or recorded by, any state, government or other public legal
authority.
(b) Section 2.15(b) of the Disclosure Schedule lists all
Registered Intellectual Property owned in whole or in part by, or filed in the
name of, Star (the "STAR REGISTERED INTELLECTUAL PROPERTY") and lists any
proceedings or actions before any court, tribunal (including the United States
Patent and Trademark Office (the "PTO") or equivalent authority anywhere in the
world) related to any Star Registered Intellectual Property. Star has good and
exclusive title to each item of Star Registered Intellectual Property.
(c) Except as set forth in Section 2.15(c) of the Disclosure
Schedule, each item of Star Intellectual Property, including all Star Registered
Intellectual Property listed in Section 2.15(b) of the Disclosure Schedule and
all Intellectual Property licensed to Star, is free and clear of any Liens.
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(d) Except for patent licenses impliedly granted to customers
of Star to use products purchased from Star and except as provided in the Patent
License Agreement (as defined below), within the 12-month period immediately
preceding the Agreement Date, Star has not transferred ownership of or granted
any license of or right to use or authorized the retention of any rights to use
any Intellectual Property, which license, right, or authorization survives the
Closing, that is or was Star Intellectual Property, to Palomar, any Palomar
Subsidiary, or any third party.
(e) Other than "shrink-wrap" and similar widely available
commercial end-user licenses, the contracts, licenses and agreements listed in
Section 2.16(a) of the Disclosure Schedule include all contracts, licenses and
agreements currently in effect to which Star is a party with respect to any
Intellectual Property. No person who has licensed Intellectual Property to Star
has ownership rights or license rights to improvements made by Star in such
Intellectual Property which has been licensed to Star. Star is not in breach of,
nor has Star failed to perform under, any of such contracts, licenses or
agreements, and, to the Knowledge of Star, no other party to any such contract,
license or agreement is in breach of or has failed to perform under such
contract, license or agreement.
(f) Section 2.15(f) of the Disclosure Schedule lists all
contracts, licenses and agreements (other than those in which Coherent has acted
as Palomar's or Star's agent in the execution thereof) between Star and any
other person wherein or whereby Star has agreed to, or assumed, any material
obligation or duty to warrant, indemnify, reimburse, hold harmless, guaranty or
otherwise assume or incur any obligation or liability or provide a right of
rescission with respect to the infringement or misappropriation by Star or such
other person of the Intellectual Property of any person other than Star.
(g) Except for works of authorship authored by Coherent and
except as set forth in Section 2.15(g) of the Disclosure Schedule, Star owns
exclusively, and has good title to, all copyrighted works that are, or are a
part of, (i) Star products and (ii) other works of authorship that Star
otherwise purports to own.
(h) The operation of the business of Star as it currently is
conducted, including but not limited to Star's design, development, use, import,
branding, advertising, promotion, marketing, manufacture and sale of the
products, technology or services (including products, technology or services
currently under development as set forth on Section 2.15(h) of the Disclosure
Schedule) of Star does not, and will not, when conducted by Coherent in
substantially the same manner following the Closing, infringe or misappropriate
the Intellectual Property of any other person, violate the rights of any person
(including rights to privacy or publicity), or constitute unfair competition or
trade practices under the laws of any jurisdiction. Except as set forth in
Section 2.15(h) of the Disclosure Schedule, Star has not received notice from
any person claiming that such operation or any act, product, technology or
service (including products, technology or services currently under development)
of Star infringes or misappropriates any Intellectual Property of any person or
constitutes unfair competition or trade practices under the laws of any
jurisdiction (nor is Star or Palomar aware of any basis therefor).
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(i) All necessary registration, maintenance and renewal fees
in connection with such Star Registered Intellectual Property have been paid and
all necessary documents and certificates in connection with such Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States, international or foreign
jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property. In each case in which Star has acquired any
Intellectual Property from any person, Star has obtained a valid and enforceable
assignment sufficient to irrevocably transfer all rights in such Intellectual
Property (including the right to seek past and future damages with respect to
such Intellectual Property) to Star and, to the maximum extent provided for by
and in accordance with applicable laws and regulations, Star has recorded each
such assignment with the relevant governmental authorities, including the PTO,
the U.S. Copyright Office, or their respective equivalents in any relevant
foreign jurisdiction, as the case may be, except where failure to do so would
not and will not have a Material Adverse Effect.
(j) Star has not claimed "Small Entity" status or other
particular status in the application for any Registered Intellectual Property,
which claim of status (i) was not true and accurate at the time made or (ii) has
since become inaccurate or false.
(k) There are no contracts, licenses or agreements between
Star and any other person with respect to Star Intellectual Property under which
there is any dispute, to the Knowledge of Star or Palomar, regarding the scope
of such agreement, or performance under such agreement including with respect to
any payments to be made or received by Star thereunder.
(l) Star has taken all steps that are reasonably necessary
and/or consistent with standard industry practices to protect confidential
information and trade secrets of Star or provided by any other person to Star.
Without limiting the foregoing, Star has, and enforces, a policy requiring each
employee, consultant and contractor to execute proprietary information,
confidentiality and assignment agreements substantially in Star's standard
forms, and, except as set forth in Section 2.15(l) of the Disclosure Schedule,
all current and former employees, consultants and contractors of Star have
executed such an agreement.
(m) No Star Intellectual Property or product, technology or
service of Star is subject to any proceeding or outstanding decree, order,
judgment, agreement or stipulation that restricts in any manner the use,
transfer or licensing thereof by Star or may affect the validity, use or
enforceability of such Star Intellectual Property.
(n) All of Star's products (including products currently under
development) will record, store, process, calculate and present calendar dates
falling on and after (and if applicable, spans of time including) January 1,
2000, and will calculate any information dependent on or relating to such dates
in the same manner, and with the same functionality, data integrity and
performance, as the products record, store, process, calculate and present
calendar dates on or before December 31, 1999, or calculate any information
dependent on or relating to such dates.
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(o) Except as otherwise provided herein or as set forth in
Section 2.15(o) of the Disclosure Schedule, neither the consummation of the
transactions contemplated by this Agreement nor the transfer to Coherent in
connection therewith of any contract, license, agreement or Star Intellectual
Property (i) will cause or obligate Coherent to grant to any third party any
right or license with respect to any Intellectual Property, (ii) will cause or
obligate Coherent to pay any royalty or other amount in excess of that being
paid by Coherent prior to the Closing or (iii) will obligate Coherent not to
compete in any particular market or territory or will subject Coherent to any
other restriction relating to the conduct of its business.
(p) Except as set forth in Section 2.15(p) of the Disclosure
Schedule, all material Star Intellectual Property, including any item thereof,
will be fully transferable, alienable and licensable by, or between, Star and
Coherent without restriction and without payment of any kind being due to any
third party.
(q) Except as set forth in Section 2.15(q) of the Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not result in the loss of, or otherwise adversely affect, any ownership
rights of Star in any Star Intellectual Property or result in the breach or
termination of any contract, license or agreement to which Star is a party.
2.16 AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Except as specifically identified in the Star Financials
and as set forth in Sections 2.14(a), 2.15(f), or 2.16(a) of the Disclosure
Schedule, and other than agreements to which Coherent is a party, Star is not a
party to nor is it bound by:
(i) any material contract, license or agreement
currently in effect (A) with respect to Star Intellectual Property licensed or
transferred to any third party or (B) pursuant to which a third party or
employee has licensed or transferred any Intellectual Property to Star;
(ii) any employment or consulting agreement, contract
or commitment with an employee or individual consultant or salesperson or
consulting or sales agreement, contract or commitment with a firm or other
organization material to the conduct of Star's business as presently conducted,
which is not either immediately terminable at a cost of less than $10,000 or
terminable within 60 days without penalty;
(iii) any agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement;
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(iv) any lease of personal or real property having a
value individually in excess of $25,000 or $50,000 in the aggregate;
(v) any agreement, contract or commitment containing
any covenant limiting the freedom of Star to engage in any line of business or
to compete with any person;
(vi) any agreement, contract or commitment currently
in effect relating to capital expenditures and involving future payments in
excess of $25,000 individually or $50,000 in the aggregate;
(vii) any agreement, contract or commitment outside
the ordinary course of Star's business relating to the disposition or
acquisition of material assets or any interest in any business enterprise;
(viii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating to
the material borrowing of money or extension of credit;
(ix) any purchase order or contract for the purchase
of materials involving in excess of $25,000 individually or $50,000 in the
aggregate that is not cancelable without material penalty within sixty (60)
days;
(x) any material construction contracts in excess of
$200,000;
(xi) any material distribution, joint marketing or
development agreement;
(xii) any other agreement, contract or commitment
that involves $100,000 or more or is not cancelable without material penalty
within sixty (60) days; or
(xiii) any agreement to indemnify, or otherwise
perform any remedial activities, relating to Contaminants, which is likely to
result in a cost exceeding $100,000.
(b) Except as set forth in Section 2.16(b) of the Disclosure
Schedule, Star is in compliance with and has not breached, violated or defaulted
under, or received notice that it has materially breached, violated or defaulted
under, any of the terms or conditions of any material agreement, contract,
covenant, instrument, lease, license or commitment to which Star is a party or
by which it is bound or with respect to which Star is a beneficiary
(individually a "MATERIAL CONTRACT" and, collectively, "MATERIAL CONTRACTS"),
nor is Star or Palomar aware of any event that would constitute such a breach,
violation or default with the lapse of time, giving of notice or both. Each
Material Contract is in full force and effect and is not, to the Knowledge of
Star, subject to any default thereunder by any party obligated to Star pursuant
thereto. Star has obtained, or will use its commercially reasonable best efforts
to obtain prior to the Closing Date, all necessary consents, waivers and
approvals
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of parties to any Material Contract as are required thereunder in connection
with the Merger or for such Material Contracts to remain in effect without
modification after the Closing. Following the Effective Time, Star will be
permitted to exercise all of Star's rights under the Material Contracts without
the payment of any material additional amounts or consideration other than
ongoing fees, royalties or payments which Star would otherwise be required to
pay had the transactions contemplated by this Agreement not occurred.
2.17 INTERESTED PARTY TRANSACTIONS. Except for Palomar and its
subsidiaries and except as disclosed in Section 2.17 of the Disclosure Schedule,
no officer or director of Star or Palomar or Star Shareholder (nor any ancestor,
sibling, descendant or spouse of any of such persons, or any trust, partnership
or corporation in which any of such persons has or has had an interest), has or
has had directly or indirectly (i) an interest in any entity which furnished or
sold, or furnishes or sells, services, products or technology that Star
furnishes or sells, or proposes to furnish or sell, or (ii) any interest in any
entity that purchases from or sells or furnishes to Star any goods or services
or (iii) a beneficial interest in any Material Contract; PROVIDED, HOWEVER, that
ownership of no more than one percent (1%) of the outstanding voting stock of a
publicly traded corporation shall not be deemed an "interest in any entity" for
purposes of this Section 2.17.
2.18 GOVERNMENTAL AUTHORIZATION. Section 2.18 of the Disclosure
Schedule accurately lists each consent, license, permit, grant or other
authorization issued to Star or Palomar by a Governmental Entity (i) pursuant to
which Star currently operates or holds any interest in any of its properties or
(ii) which is required for the operation of Star's business or the holding of
any such interest (herein collectively called "STAR AUTHORIZATIONS"). The Star
Authorizations are in full force and effect and constitute all Star
Authorizations required to permit Star to operate or conduct its business as now
conducted or hold any interest in its properties or assets, except where the
failure to have any such Star Authorization would not constitute a Material
Adverse Effect on Star.
2.19 LITIGATION. Except as set forth in Section 2.19 of the Disclosure
Schedule, there is no action, suit, proceeding or governmental investigation of
any nature pending, or, to the Knowledge of Star or Palomar, threatened against
Star or Palomar, with respect to Star's past or present operations or its former
or present properties or any of its officers or directors. No Governmental
Entity has at any time challenged or questioned the legal right of Star to
conduct its operations as presently or previously conducted.
2.20 ACCOUNTS RECEIVABLE. All accounts receivable of Star set forth on
the Star Nine-Month Financials ("ACCOUNTS RECEIVABLE") arose in the ordinary
course of business, are carried at values determined in accordance with GAAP
consistently applied and are collectible except to the extent of reserves
therefor set forth on the Star Nine-Month Financials. Except as set forth in
Section 2.20 of the Disclosure Schedule, no person has any Lien on any of such
Accounts Receivable and no request or agreement for deduction or discount has
been made with respect to any of such Accounts Receivable other than in the
ordinary course of business consistent with past practices.
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2.21 MINUTE BOOKS. The minutes of Star made available to counsel for
Coherent are the only minutes of Star and contain a reasonably accurate summary
of all meetings of the Board of Directors (or committees thereof) of Star (the
"STAR BOARD") and Star Shareholders or actions by written consent since the time
of incorporation of Star.
2.22 ENVIRONMENTAL MATTERS.
(a) CONTAMINATION. Neither Palomar nor Star has at any
property that Star has at any time owned, operated, used, occupied or leased:
(i) operated any underground storage tanks; or (ii) released any amount of any
substance that has been designated by any Governmental Entity or by applicable
federal, state or local law to be radioactive, toxic, hazardous or otherwise a
danger to health or the environment, including, without limitation, PCBs,
asbestos and petroleum and all substances listed as hazardous substances
pursuant to CERCLA (as that term is defined in subsection (o) below), or defined
as a hazardous waste pursuant to the United States Resource Conservation and
Recovery Act of 1976, as amended, and the regulations promulgated pursuant to
said laws, but excluding typical office and janitorial supplies legally and
properly and safely maintained.
(b) PERMITS. Star has obtained and currently possesses all
permits and approvals required for the conduct of its business as presently
conducted under Environmental Requirements (as that term is defined in
subsection (o) below), including, without limitation, all material
environmental, health and safety permits, licenses, approvals, authorizations,
variances, agreements and waivers of federal, state and local governmental
authorities ("ENVIRONMENTAL PERMITS"), and all such Environmental Permits are in
good standing and Star is in material compliance with all terms and conditions
of such Environmental Permits.
(c) CONTAMINATION. No Contamination (as defined herein) is
present on, in or under any facility which Star currently owns, leases or
otherwise uses (a "STAR FACILITY") or, to the Knowledge of Star or Palomar, is
reasonably likely to migrate to a Star Facility from other property, and no
release of Contaminants has occurred or is occurring on or about any Star
Facility which has caused or is likely to cause Contamination on or about Star
Facilities or any other property in the vicinity thereof or any adverse health
effect to any person. As used herein the term "CONTAMINATION" means the presence
of any Contaminants in the soil, groundwater, surface water or ambient air of a
property in a concentration that (i) exceeds the concentrations allowed by
Environmental Requirements, (ii) requires investigation, remediation, removal,
or monitoring, or (iii) otherwise presents a significant risk to human health or
the environment.
(d) EMPLOYEE EXPOSURE. No Contamination present on any Star
Facility and no Hazardous Materials Activities conducted by Star, at any Star
Facility or elsewhere, has resulted in the exposure of any employee of Star or
any other person to a Contaminant in a manner which has, could or will cause an
adverse health effect to said employee or person.
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(e) STORAGE OF CONTAMINANTS. Other than Contaminants which are
reasonably necessary for the conduct of the business of Star as currently
conducted and are properly stored and properly contained in accordance with
applicable Environmental Requirements, no Contaminant will be present at Star
Facilities as of the Closing.
(f) ASBESTOS. Any asbestos-containing material which is on or
part of Star Facilities (excluding any raw materials used in the manufacture of
products or products themselves) is in good repair according to the current
standards and practices governing such material, and its presence or condition
does not violate any applicable Environmental Requirements.
(g) NO NOTICES OR REPORTS. Neither Star nor Palomar with
respect to Star business operations or Star Facilities, has filed or is required
to file, any notice or report under or pursuant to any Environmental Requirement
reporting a release of Contaminants or any violation of any Environmental
Requirement with any Governmental Entity or third party.
(h) DISCLOSURE AND TRANSFER OBLIGATIONS. Star has complied,
and on or before the Closing, will comply with all environmental disclosure and
property or business transfer obligations imposed upon Star with respect to this
transaction by applicable law.
(i) POTENTIALLY RESPONSIBLE PARTY; WRITTEN ORDERS AND
AGREEMENTS. Star has not received notice that it has been named as a potentially
responsible party nor is it subject to any outstanding written order from or
agreement with any federal, state or local governmental authority or other
person or to any judicial or docketed administrative proceeding involving any of
its currently or previously owned or leased property or operations inconsistent
with any (x) Environmental Requirements, (y) Remedial Action (as that term is
defined in subsection (o) below) or (z) any Environmental Liabilities and Costs
(as that term is defined in subsection (o) below).
(j) ENVIRONMENTAL LIABILITIES AND COSTS. Except as set forth
on Section 2.22(j) of the Disclosure Schedule, there are no conditions or
circumstances associated with Star's use of its currently or previously owned or
leased properties or operations of Star which are likely to give rise to
Environmental Liabilities and Costs.
(k) POTENTIAL CLAIMS. Star has not received any notice or
claim to the effect that it is or is reasonably expected to be liable to any
person as a result of a Release (as that term is defined in subsection (o)
below) or threatened Release or any notice letter or request for information
under CERCLA.
(l) ENVIRONMENTAL LIENS. No Environmental Lien (as that term
is defined in subsection (o) below) and no unrecorded Environmental Lien of
which Star has notice has attached to any property of Star.
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(m) DEFINITIONS. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
(i) "CONTAMINANT" means any waste, pollutant,
hazardous material, hazardous substance, toxic substance, hazardous waste,
special waste, petroleum or petroleum-derived substance or waste or other
material, substance, or organism regulated by any applicable Governmental Entity
as a threat to health or the environment, or any constituent of any such
pollutant material, substance or waste, including, without limitation, any
pollutant material, substance or waste regulated under any Environmental
Requirement.
(ii) "ENVIRONMENTAL REQUIREMENT" means all federal,
state, local and foreign laws or regulations, codes, orders, decrees, judgments
or injunctions issued, promulgated, approved or entered thereunder and all court
decisions, settlement agreements, and binding private agreements applicable to
Star relating to pollution or protection of the environment or occupational
health and safety, including the release or threatened release of any hazardous
material into the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Contaminants or the emission, or exposure of
humans, plants or animals to Contaminants. Environmental Requirements shall
include, without limitation, the Comprehensive Environmental Response,
Compensation Liability Act (42 U.S.C. Section 9601, ET. SEQ.), as amended or
supplemented from time to time ("CERCLA"), the Hazardous Material Transportation
Act (49 U.S.C. Section 1801, ET SEQ.), the Solid Waste Disposal Act (42 U.S.C.
Section 6901, ET SEQ.), the Federal Water Pollution Control Act (33 U.S.C.
Section 1251, ET SEQ.), the Clean Air Act (42 U.S.C. Section 7401, ET SEQ.), the
Toxic Substances Control Act (15 U.S.C. Section 2601, ET SEQ.), the Occupational
Safety and Health Act (29 U.S.C. Section 651, ET SEQ.), the Federal Insecticide
Fungicide and Rodenticide Act (7 U.S.C. Section 136, ET SEQ.), the Food, Drug
and Cosmetic Act (21 U.S.C. Section 301, ET SEQ.), the Medical Waste Tracking
Act of 1988, and the similar laws of the various states and nations, Pub. L. No.
100-582, 102 Stat. 2950 (1988), and the similar laws of the various states and
nations, as such laws have been amended or supplemented from time to time, and
any similar future federal, or present or future state, local or foreign,
statutes, ordinances or bylaws.
(iii) "ENVIRONMENTAL LIABILITIES AND COSTS" means all
liabilities, obligations, responsibilities, Remedial Actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, expert
and consulting fees and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim or demand,
whether based in contract, tort, implied or express warranty, strict liability,
criminal or civil statute, including, without limitation, any Environmental
Requirement, order, variance or agreement with a federal, state or local
governmental authority or other person, arising from Contamination located on or
about any facility now or previously owned, used, occupied or leased by Star or
from any environmental, health or safety conditions or a
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Release or threatened Release resulting from the past operations of Star (or any
of its predecessors in interest), or any release for which Star is otherwise
responsible under any Environmental Requirement.
(iv) "ENVIRONMENTAL LIEN" means any lien or similar
interest in favor of any federal, state or local governmental authority for
Environmental Liabilities and Costs.
(v) "HAZARDOUS MATERIALS ACTIVITIES" means any
disposition, transportation, manufacture or sale of any product containing a
Contaminant.
(vi) "RELEASE" means any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, pouring,
emptying, escaping, dumping, discarding, leaching or migration of a Contaminant
into the indoor or outdoor environment including the movement of Contaminants
through or in the air, soil, surface water, groundwater or property, including
the abandonment or discarding of barrels, containers and other closed
receptacles containing any Contaminant.
(vii) "REMEDIAL ACTION" means all actions necessary
to (i) clean up, remove, treat or in any other way address Contaminants in the
indoor or outdoor environment, (ii) prevent a Release or condition that is
reasonably likely to result in a Release or minimize further release of
Contaminants so they do not migrate or endanger or threaten to endanger present
or future public health or welfare or the indoor or outdoor environment or (iii)
perform pre-remedial studies and investigations and post-remedial monitoring and
care.
2.23 BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES. Except as set
forth in Section 2.23 of the Disclosure Schedule, Star has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with the
Agreement or any transaction contemplated hereby. Section 2.23 of the Disclosure
Schedule sets forth the principal terms and conditions of any agreement, written
or oral, with respect to such fees. Section 2.23 of the Disclosure Schedule sets
forth Star's current reasonable estimate of all fees and expenses of third
parties, including, but not limited to legal, accounting and financial advisory
services of Star expected to be incurred by Star in connection with the
negotiation and effectuation of the terms and conditions of this Agreement and
the transactions contemplated hereby.
2.24 EMPLOYEE BENEFIT PLANS AND COMPENSATION.
(a) DEFINITIONS. With the exception of the definition of
"Affiliate" set forth in Section 2.24(a)(i) hereof (which definition shall apply
only to this Section 2.24), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
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(i) "AFFILIATE" shall mean any other person or entity
under common control with Star within the meaning of Section 414(b), (c), (m) or
(o) of the Code and the regulations issued thereunder;
(ii) "COBRA" shall mean the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended;
(iii) "DOL" shall mean the Department of Labor;
(iv) "EMPLOYEE" shall mean any current or former
employee, consultant or director of Star;
(v) "EMPLOYEE AGREEMENT" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or other agreement, contract or understanding between Star or
any Affiliate and any Employee in such person's capacity as an Employee;
(vi) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended;
(vii) "FMLA" shall mean the Family Medical Leave Act
of 1993, as amended;
(viii) "IRS" shall mean the Internal Revenue Service;
(ix) "MULTIEMPLOYER PLAN" shall mean any "Pension
Plan" (as defined below) which is a "multiemployer plan," as defined in Section
3(37) of ERISA;
(x) "PBGC" shall mean the Pension Benefit Guaranty
Corporation;
(xi) "PENSION PLAN" shall mean each Star Employee
Plan which is an "employee pension benefit plan," within the meaning of Section
3(2) of ERISA; and
(xii) "STAR EMPLOYEE PLAN" shall mean any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, deferred compensation, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written or unwritten or otherwise,
funded or unfunded, including without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by Star or any Affiliate for
the benefit of any Employee in such person's capacity as an Employee, or with
respect to which Star or any Affiliate has or may have any liability or
obligation in connection with benefits for any Employee.
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(b) SCHEDULE. Section 2.24(b) of the Disclosure Schedule
contains an accurate and complete list of each Star Employee Plan and each
Employee Agreement under each Star Employee Plan or Employee Agreement. Star
does not have any plan or commitment to establish any new Star Employee Plan or
Employee Agreement, to modify any Star Employee Plan or Employee Agreement
(except to the extent required by law or to conform any such Star Employee Plan
or Employee Agreement to the requirements of any applicable law, in each case as
previously disclosed to Coherent in writing, or as required by this Agreement),
or to enter into any Star Employee Plan or Employee Agreement.
(c) DOCUMENTS. Star has provided to Coherent: (i) correct and
complete copies of all documents embodying each Star Employee Plan and each
Employee Agreement including (without limitation) all amendments thereto and all
related trust documents; (ii) the most recent annual actuarial valuations, if
any, prepared for each Star Employee Plan; (iii) the three (3) most recent
annual reports (Form Series 5500 and all schedules and financial statements
attached thereto), if any, required under ERISA or the Code in connection with
each Star Employee Plan; (iv) if the Star Employee Plan is funded, the most
recent annual and periodic accounting of Star Employee Plan assets; (v) the most
recent summary plan description together with the summary(ies) of material
modifications thereto, if any, required under ERISA with respect to each Star
Employee Plan; (vi) all IRS determination, opinion, notification and advisory
letters, and all material applications and correspondence to or from the IRS or
the DOL with respect to any such application or letter related to Star; (vii)
all material written agreements and contracts relating to each Star Employee
Plan, including, but not limited to, administrative service agreements, group
annuity contracts and group insurance contracts; (viii) all communications
material to any Employee or Employees relating to any Star Employee Plan and any
proposed Star Employee Plans, in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits, acceleration
of payments or vesting schedules or other events which would result in any
material liability to Star; (ix) all material correspondence to or from any
governmental agency relating to any Star Employee Plan; (x) all policies
pertaining to fiduciary liability insurance covering the fiduciaries for each
Star Employee Plan; (xi) all discrimination tests for each Star Employee Plan
for the most recent plan year; and (xii) all registration statements, annual
reports (Form 11-K and all attachments thereto) and prospectuses prepared in
connection with each Star Employee Plan.
(d) EMPLOYEE PLAN COMPLIANCE. Except as set forth on Section
2.24(d) of the Disclosure Schedule, (i) Star has performed in all material
respects all obligations required to be performed by it under, is not in default
or violation of, and has no Knowledge of any default or violation by any other
party to each Star Employee Plan, and each Star Employee Plan has been
established and maintained in all material respects in accordance with its terms
and in compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA or the Code; (ii) each Star
Employee Plan intended to qualify under Section 401(a) of the Code and each
trust intended to qualify under Section 501(a) of the Code has either received a
favorable determination, opinion, notification or advisory letter from the IRS
with respect to each such Plan as to its qualified status under
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the Code, including all amendments to the Code effected by the Tax Reform Act of
1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a letter and make any amendments necessary to obtain a favorable determination
as to the qualified status of each such Star Employee Plan; (iii) no "prohibited
transaction," within the meaning of Section 4975 of the Code or Sections 406 and
407 of ERISA, and not otherwise exempt under Section 408 of ERISA, has occurred
with respect to any Star Employee Plan; (iv) there are no actions, suits or
claims pending, or, threatened or reasonably anticipated (other than routine
claims for benefits) against any Star Employee Plan or against the assets of any
Star Employee Plan; (v) each Star Employee Plan can be amended, terminated or
otherwise discontinued after the Effective Time in accordance with its terms,
without liability to Coherent, Star or any of its Affiliates (other than
ordinary administration expenses); (vi) there are no audits, inquiries or
proceedings pending or, to the Knowledge of Star, Palomar or any Affiliates,
threatened by the IRS or DOL with respect to any Star Employee Plan; and (vii)
neither Star, Palomar nor any Affiliate is subject to any penalty or tax with
respect to any Star Employee Plan under Section 502(i) of ERISA or Sections 4975
through 4980 of the Code.
(e) PENSION PLAN. Neither Star nor an Affiliate has ever
maintained, sponsored, participated in or contributed to, nor does Star or any
Affiliate currently maintain, sponsor, participate in or contribute to, a
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(f) MULTIEMPLOYER PLANS. At no time has Star or any Affiliate
contributed to or been obligated to contribute to any Multiemployer Plan.
(g) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth in
Section 2.24(g) of the Disclosure Schedule, no Company Employee Plan provides,
or reflects or represents any liability to provide, retiree life insurance,
retiree health or other retiree employee welfare benefits to any person for any
reason, except as may be required by COBRA or other applicable statute, and Star
has never represented, promised or contracted (whether in oral or written form)
to any Employee (either individually or to Employees as a group) or any other
person that such Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by statute.
(h) COBRA. Neither Star nor any Affiliate has, prior to the
Effective Time and in any material respect, violated any of the health care
continuation requirements of COBRA, the requirements of FMLA or any similar
provisions of state law applicable to its Employees.
(i) EFFECT OF TRANSACTION.
(i) Except as set forth in Section 2.24(i) of the
Disclosure Schedule, the execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under
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any Star Employee Plan, Employee Agreement, trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(ii) Except as set forth in Section 2.24(i) of the
Disclosure Schedule, no payment or benefit which will or may be made by Star or
its Affiliates with respect to any Employee as a result of the transactions
contemplated by this Agreement or otherwise will be characterized as a
"parachute payment," within the meaning of Section 280G(b)(2) of the Code (but
without regard to clause (ii) thereof).
(j) EMPLOYMENT MATTERS. Star: (i) has withheld and reported
all amounts required by law or by agreement to be withheld and reported with
respect to wages, salaries and other payments to Employees; (ii) is not liable
for any arrears of wages or any taxes or any penalty for failure to comply with
any of the foregoing; (iii) is not liable for any payment to any trust or other
fund governed by or maintained by or on behalf of any governmental authority,
with respect to unemployment compensation benefits, social security or other
benefits or obligations for Employees (other than routine payments to be made in
the normal course of business and consistent with past practice); and (iv) has
issued all options and other rights to purchase shares of its capital stock at
the fair market value of such stock on the date of issuance of options and
rights. Except as set forth in Section 2.24(j) of the Disclosure Schedule, there
are no pending or, to the Knowledge of Star and Palomar, threatened or
reasonably anticipated claims or actions against Star under any worker's
compensation policy or long-term disability policy.
(k) LABOR. No work stoppage or labor strike against Star is
pending, threatened or reasonably anticipated. Star does not know of any
activities or proceedings of any labor union to organize any Employees. Except
as set forth in Section 2.24(k) of the Disclosure Schedule, there are no
actions, suits, claims, labor disputes or grievances pending, or, to the
Knowledge of Star and Palomar, threatened or reasonably anticipated relating to
any labor, safety or discrimination matters involving any Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in any material liability to Star. Star has not engaged in any
unfair labor practices within the meaning of the National Labor Relations Act.
Except as set forth in Section 2.24(k) of the Disclosure Schedule, Star is not
presently, nor has it been in the past, a party to, or bound by, any collective
bargaining agreement or union contract with respect to Employees and no
collective bargaining agreement is being negotiated by Star.
2.25 INSURANCE. Section 2.25 of the Disclosure Schedule lists all
insurance policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of Star. There is no
material claim by Star pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds. All premiums due and payable under all such policies and
bonds have been paid, and Star and its
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affiliates are otherwise in compliance with the terms of such policies and bonds
(or other policies and bonds providing substantially similar insurance
coverage).
2.26 COMPLIANCE WITH LAWS. Star has complied with, is not in violation
of, and neither Palomar nor Star has received any notices of violation with
respect to, any foreign, federal, state or local statute, law or regulation
except for such violations as would not cause or constitute a Material Adverse
Change.
2.27 FAIRNESS OPINION. Attached as EXHIBIT C hereto is a copy of the
fairness opinion regarding the Merger prepared for Palomar by its financial
advisors.
2.28 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by Star or Palomar (as modified by the Disclosure Schedule), nor
any statement made in any schedule or certificate furnished by Star or Palomar
pursuant to this Agreement or furnished in or in connection with documents
mailed or delivered to the stockholders of Palomar (the "PALOMAR STOCKHOLDERS")
and the Star Shareholders for use in soliciting their consent to this Agreement
and the Merger contains or will contain at the Effective Time, any untrue
statement of a material fact, or omits or will omit at the Effective Time to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
2.29 FLEET BANK LIEN. Notwithstanding any provision to the contrary in
this Agreement, upon payment to Fleet National Bank, including any affiliates or
transferees thereof ("FLEET BANK") at the Closing in the amount set forth on the
certificate provided to Coherent pursuant to Section 6.2(h) hereof, Coherent
shall own all of the assets (including, without limitation all of the Star
Intellectual Property (as such term is defined in Section 2.15 hereof)) of Star
free and clear of any Liens held by Fleet Bank and that the Star Guaranty (as
such term is defined in the letter agreement between Palomar and Fleet National
Bank dated November 16, 1998 (the "FLEET LETTER AGREEMENT")) will be released.
Notwithstanding any provision to the contrary in this Agreement or the
Disclosure Schedule, this Section 2.29 shall not be in any way modified or
limited by the Disclosure Schedule or any provision of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COHERENT AND MERGER SUB
As of the date hereof and as of the Effective Time (as though made at
the Effective Time), each of Coherent and Merger Sub hereby, jointly and
severally, represents and warrants to Palomar and Star, as follows:
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3.1 ORGANIZATION, STANDING AND POWER. Coherent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. Each of Coherent and
Merger Sub has the corporate power to own its properties and to carry on its
business as now being conducted and is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to be so qualified would
have a material adverse effect on the ability of Coherent and Merger Sub to
consummate the transactions contemplated hereby.
3.2 AUTHORITY. Each of Coherent and Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. 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 Coherent and Merger
Sub, and no further action is required on the part of Coherent or Merger Sub to
authorize this Agreement and the transactions contemplated hereby. This
Agreement and the Merger have been approved by the Board of Directors of
Coherent and the Board of Directors of Merger Sub. This Agreement has been duly
executed and delivered by Coherent and Merger Sub and constitutes the valid and
binding obligations of Coherent and Merger Sub, enforceable in accordance with
their terms, except as such enforceability may be limited by principles of
public policy and subject to the laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
3.3 CONSENTS. Except for (i) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable securities laws and the HSR Act thereby and (ii) the filing of the
Merger Certificate with the Secretary of State of the State of California, no
consent, waiver, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other federal, state, county, local or other foreign governmental authority,
instrumentality, agency or commission ("GOVERNMENTAL ENTITY") or any third
party, including a party to any agreement with Coherent (so as not to trigger
any Conflict), is required by or with respect to Coherent in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby and thereby.
3.4 CONSIDERATION. At the Effective Time of the Merger, Coherent shall
have available, sufficient cash to enable it to perform its obligations under
this Agreement.
3.5 NO CONFLICTS. The execution and delivery of this Agreement by
Coherent does not, and, the consummation of the transactions contemplated hereby
will not, (i) Conflict with any provision of the Certificate of Incorporation
and Bylaws of Coherent, (ii) Conflict with any material mortgage, indenture,
lease, instrument of indebtedness, security interest, contract or other
agreement or instrument, permit, concession, franchise or license to which
Coherent or any of its properties or assets are subject, (iii) Conflict with any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to
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Coherent or its properties or assets, or (iv) cause the imposition of a security
interest, or instrument, permit, concession, franchise or license to Coherent's
properties or assets.
3.6 SALES TAX. Coherent has collected and remitted all sales taxes,
which are now or in the past have become due and payable, for products that were
sold by Coherent pursuant to the Sales Agency, Development and License Agreement
between Coherent and Palomar dated as of November 17, 1997.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS OF STAR. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, each of Star and Palomar agree (except as
expressly contemplated by this Agreement and to the extent that Coherent shall
otherwise consent in writing and except for changes proximately caused by
Coherent's acts or omissions), to carry on Star's business in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted, to
pay the debts and Taxes of Star when due, consistent with past practices, to pay
or perform other obligations when due, and, to the extent consistent with such
business, use their commercially reasonable best efforts consistent with past
practice and policies to preserve intact Star's present business organizations,
keep available the services of Star's present officers and key employees and
preserve Star's relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with it, all with the
goal of preserving unimpaired Star's goodwill and ongoing businesses at the
Effective Time. Star and Palomar shall promptly notify Coherent of any event or
occurrence or emergency not in the ordinary course of business of Star and any
material event involving Star. Except as expressly contemplated by this
Agreement, and without limiting the generality of the foregoing, prior to the
Effective Time Star shall not, without the prior written consent of Coherent:
(i) take any of the actions set forth in Section 2.11 hereof, (ii) permit or
suffer any director, officer or employee of Star to do any of the actions set
forth in Section 2.11 (other than negotiations with Coherent and its
representatives regarding the transactions contemplated by this Agreement), or
(iii) take or agree in writing or otherwise to take any other action that would
prevent Star from performing or cause Star not to perform its covenants
hereunder.
4.2 NO SOLICITATION.
(a) IMPERMISSIBLE ACTIONS; INJUNCTION; FIDUCIARY DUTIES. Until
the earlier of the Effective Time or the date of termination of this Agreement
pursuant to the provisions of Section 8.1 hereof, neither Star nor Palomar shall
(nor will Star nor Palomar permit any of their respective officers, directors,
agents, representatives or affiliates to), directly or indirectly, take any of
the following actions with any party other than Coherent and its designees: (i)
solicit, encourage, initiate or participate in any
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negotiations or discussions with respect to any offer or proposal to acquire
all, substantially all or a significant portion of Star's business, properties
or technologies or any portion of Star Capital Stock (whether or not
outstanding) or assets whether by merger, purchase of assets, tender offer or
otherwise, or effect any such transaction, (ii) disclose any information to any
person concerning Star's business, technologies or properties or afford to any
person or entity access to its properties, technologies, books or records in
each case in connection with an Acquisition Proposal (as defined in Section
4.2(d)) or in connection with any inquiry regarding the making of an Acquisition
Proposal, (iii) assist or cooperate with any person to make any proposal to
purchase all or any part of Star Capital Stock or assets, (iv) enter into any
agreement with any person providing for the acquisition of all or any portion of
Star Capital Stock or assets, or (v) make or authorize any statement,
recommendation or solicitation in support of any possible acquisition of Star
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise) or any portion of Star Capital Stock or Star's assets (whether by way
of merger, purchase of assets, tender offer or otherwise). The parties hereto
agree that irreparable damage would occur in the event that the provisions of
this Section 4.2 were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed by the parties hereto that
Coherent shall be entitled to seek an injunction or injunctions to prevent
breaches of the provisions of this Section 4.2 and to enforce specifically the
terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which
Coherent may be entitled at law or in equity. Notwithstanding the foregoing
provisions (except for the notice provisions set forth in subsection (c) below),
if at any time prior to the Effective Time, the Board of Directors of Palomar
(the "PALOMAR BOARD") and the Star Board determine in good faith after
consultation with non-employee legal counsel and non-employee financial
advisors, that failure to take action set forth in (i), (ii), (iii), (iv) or (v)
above would result in a breach of such Board's fiduciary duties to the
stockholders of the applicable entity, under applicable law, Star, in response
to an Acquisition Proposal that (I) was unsolicited or that did not otherwise
result from a breach of this Section 4.2, and subject to compliance with Section
4.2(c) hereof, and (II) constitutes a Superior Proposal (as defined in Section
4.2(d) hereof), may (x) furnish non-public information with respect to Star to
the person or entity who made such Acquisition Proposal pursuant to a customary
and reasonable confidentiality agreement and (y) participate in negotiations
regarding such Acquisition Proposal. In addition, Palomar, Star and the
respective officers and directors of Palomar and Star (i) will not cause, allow,
permit, encourage, induce, persuade or suffer any investment banker, financial
advisor, attorney, accountant, consultant or other representative of Star or
Palomar consulted by Star, Palomar or any representative thereof in connection
with the transactions contemplated hereby to violate the restrictions set forth
in this Section 4.2 and (ii) will take reasonable precautions to prevent any
such person from violating the restrictions set forth in this Section 4.2.
(b) BOARD APPROVAL. Neither the Star Board, the Palomar Board
nor any committee thereof shall (i) withdraw or modify, or propose to withdraw
or modify, in a manner adverse to Coherent, the approval or recommendation by
the Star Board, the Palomar Board or such committee of this Agreement or the
Merger unless there is a Superior Proposal outstanding, (ii) approve or
recommend, or propose to approve or recommend, an Acquisition Proposal that is
not a Superior
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Proposal or (iii) cause Star or Palomar to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement (an
"ACQUISITION AGREEMENT") with respect to an Acquisition Proposal that is not a
Superior Proposal, unless, in each case, the Star Board and the Palomar Board
shall have determined in good faith, after consultation with non-employee legal
counsel, that failure to do so would result in a breach of its fiduciary duties
to the Star Shareholders or the Palomar Stockholders under applicable law.
(c) NOTICE. Star and/or Palomar shall promptly, but in any
event within 48-hours, advise Coherent orally and in writing of any Acquisition
Proposal or any inquiry regarding the making of an Acquisition Proposal
including any request for information which Star and/or Palomar reasonably
believes would lead to an Acquisition Proposal, the material terms and
conditions of such request, Acquisition Proposal or inquiry and the identity of
the person or entity making such request, Acquisition Proposal or inquiry. Star
and/or Palomar shall keep Coherent fully informed of the status and details,
including amendments or proposed amendments, of any such request, Acquisition
Proposal or inquiry.
(d) DEFINED TERMS. For purposes of this Agreement,
"ACQUISITION PROPOSAL" means any proposal or offer from any person relating to
any direct or indirect acquisition or purchase of 10% or more of the assets of
Star taken as a whole (measured in terms of Net Book Value) or 10% or more of
any class of outstanding equity securities of Star taken as a whole, any tender
offer or exchange offer that if consummated would result in any person
beneficially owning 10% or more of any class of equity securities of Star or any
merger, consolidation, business combination, sale of substantially all the
assets, recapitalization, liquidation, dissolution or similar transaction
involving Star, other than the transactions contemplated by this Agreement. For
purposes of this Agreement, "SUPERIOR PROPOSAL" means any bona fide proposal
made by a third party to acquire, directly or indirectly, 100% of the voting
power of the Star Capital Stock or all or substantially all the assets of Star
and otherwise on the terms which the Star Board and the Palomar Board determine
in good faith (based on the written opinion of Tucker Anthony Incorporated or
another non-employee financial advisor of similar standing (a copy of which
written financial opinion shall be provided to Coherent)) to be more favorable
to the Star Shareholders than the Merger and for which financing, to the extent
required by the terms of such proposal, is then committed or which, in the good
faith judgment of the Star Board and the Palomar Board, is reasonably capable of
being obtained by such third party.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 STAR SHAREHOLDER APPROVAL. Star shall promptly submit this
Agreement and the transactions contemplated hereby to the Star Shareholders for
approval and adoption as provided by California Law, its Articles of
Incorporation and Bylaws. Star and Palomar shall use their respective best
efforts to obtain the consent of the Star Shareholders sufficient to approve the
Merger and this Agreement and to enable the Closing to occur as soon as
possible. The materials submitted to the Star
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Shareholders shall have been subject to review and approval, which approval
shall not be unreasonably withheld, by Coherent and include information
regarding Star, Palomar, the terms of the Merger and this Agreement and the
unanimous recommendation of both the Star Board and the Palomar Board in favor
of the Merger and this Agreement. Palomar agrees that it shall vote in favor of
the Merger upon approval by the Palomar Stockholders.
5.2 PALOMAR STOCKHOLDER APPROVAL. Palomar shall promptly submit this
Agreement and the transactions contemplated hereby to the Palomar Stockholders
for approval and adoption as provided by Delaware law, its Certificate of
Incorporation and Bylaws. Palomar shall use its best efforts to obtain the
consent of the Palomar Stockholders sufficient to approve the Merger and this
Agreement and to enable the Closing to occur as soon as possible. The materials
submitted to the Palomar Stockholders shall have been subject to review by
Coherent and shall incorporate the revisions requested by Coherent, subject to
Palomar's right to reasonably exclude any of such revisions if Palomar believes
such revisions are contrary to the best interests of Palomar, and shall include
information regarding Star, Palomar, the terms of the Merger and this Agreement
and the unanimous recommendation of both the Star Board and the Palomar Board in
favor of the Merger and this Agreement.
5.3 ACCESS TO INFORMATION. Star and Palomar shall afford Coherent and
its accountants, counsel and other representatives, reasonable access during
normal business hours during the period prior to the Effective Time to (a) all
of Star's properties, books, contracts, commitments and records, (b) all other
information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of Star as Coherent may reasonably
request and (c) all key employees of Star as identified by Coherent or Star.
Star and Palomar agree to provide to Coherent and its accountants, counsel and
other representatives copies of internal financial statements (including returns
and supporting documentation) promptly upon request. Coherent shall provide Star
and Palomar with copies of such publicly available information about Coherent as
Star and Palomar may reasonably request. Upon request, Coherent shall provide
Palomar with such information concerning the business, properties and personnel
of Coherent as Palomar may be reasonably required to provide to the Palomar
Stockholders in connection with the submission of this Agreement and the
transactions contemplated hereby to the Palomar Stockholders for their approval.
After the Closing Date, Coherent shall also provide Palomar, upon request, with
such information concerning the business, properties and personnel of Coherent
and the Surviving Corporation as Palomar may be reasonably required to disclose
pursuant to federal and state securities laws. No information or knowledge
obtained in any investigation pursuant to this Section 5.3 shall affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties hereto to consummate the Merger.
5.4 EXPENSES.
(a) GENERAL. Except as set forth in this Section 5.4, all fees
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party
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incurring such expenses whether or not the Merger is consummated; PROVIDED,
HOWEVER, all accrued and unpaid expenses of Star will be reflected on the
Closing Balance Sheet of Star.
(b) BREAK-UP FEES.
(i) If (x) the Star Board or the Palomar Board shall
have withheld, withdrawn or modified in a manner adverse to Coherent its
recommendation in favor of adoption and approval of this Agreement and approval
of the Merger, or (y) the Star Board or the Palomar Board recommends a Superior
Proposal to the Star Shareholders or the Palomar Stockholders, Palomar shall pay
to Coherent an amount equal to $2,000,000 within ten business days following the
earlier to occur of (A) the termination of this Agreement pursuant to Section
8.1(b) herein, or (B) a Negative Vote (as defined in Section 5.4(b)(ii) hereof);
(ii) If no payment shall be required pursuant to
Section 5.4(b)(i) herein, and if (x) the vote of the Star Shareholders or the
Palomar Stockholders approving and adopting this Agreement approving the Merger
shall not have been obtained by reason of the failure to obtain the required
vote upon a vote taken at a meeting of Star Shareholders or Palomar Stockholders
duly convened therefor or at any adjournment thereof (a "NEGATIVE VOTE") and (y)
prior to such Negative Vote there shall have occurred an Acquisition Proposal
with respect to Star which shall have been publicly disclosed and not withdrawn
(a "COMPETING PROPOSAL") and (z) within 12 months following such Negative Vote,
Star or Palomar enter into a definitive agreement with respect to an Acquisition
Proposal with the party (or any affiliate of the party) that made the Competing
Proposal or an Acquisition Proposal with such party (or any such affiliate)
shall have been consummated, then Palomar shall pay to Coherent an amount equal
to $1,500,000 within one business day following the closing of a Competing
Proposal; and
(c) DAMAGES. Payment of the fees described in Sections 5.4(b)
hereof shall not be in lieu of damages incurred in the event of breach of this
Agreement.
5.5 PUBLIC DISCLOSURE. Unless otherwise required by law, prior to the
Effective Time, no disclosure (whether or not in response to an inquiry) of the
subject matter of this Agreement shall be made by any party hereto unless
approved by Coherent and Palomar prior to release, provided that such approval
shall not be unreasonably withheld. Notwithstanding anything to the contrary in
the foregoing sentence, the parties hereto agree to release a joint press
release in form and substance acceptable to Coherent, Palomar and Star following
the execution of this Agreement disclosing the subject matter of this Agreement.
5.6 CONSENTS. Star and Palomar shall use their respective commercially
reasonable efforts to obtain the consents, waivers, assignments and approvals
under any of the Material Contracts as may be required in connection with the
Merger (all of such consents, waivers and approvals are set forth in the
Disclosure Schedule) so as to preserve all rights of and benefits to Star
thereunder.
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5.7 FIRPTA COMPLIANCE. On the Closing Date, Star shall deliver to
Coherent a properly executed statement in a form reasonably acceptable to
Coherent for purposes of satisfying Coherent's obligations under Treasury
Regulation Section 1.1445-2(c)(3).
5.8 REASONABLE EFFORTS. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use commercially reasonable
efforts to take promptly, or cause to be taken, all actions, and to do promptly,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated hereby, to obtain all necessary waivers, consents and approvals and
to effect all necessary registrations and filings and to remove any injunctions
or other impediments or delays, legal or otherwise, in order to consummate and
make effective the transactions contemplated by this Agreement for the purpose
of securing to the parties hereto the benefits contemplated by this Agreement;
provided that Coherent shall not be required to agree to any divestiture by
Coherent or Star or any of Coherent's Subsidiaries or affiliates of shares of
capital stock or of any business, assets or property of Coherent or its
Subsidiaries or affiliates or of Star, its affiliates, or the imposition of any
material limitation on the ability of any of them to conduct their businesses or
to own or exercise control of such assets, properties and stock.
5.9 NOTIFICATION OF CERTAIN MATTERS. Coherent, Palomar and Star each
agree to promptly give notice to the other parties of (i) the occurrence or
non-occurrence of any event, the occurrence or non-occurrence of which is likely
to cause any representation or warranty of any party, contained in this
Agreement to be untrue or inaccurate at or prior to the Effective Time and (ii)
any failure of Coherent, Palomar or Star, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to
this Section 5.9 shall not limit or otherwise affect any remedies available to
the party receiving such notice. No disclosure by Star or Palomar pursuant to
this Section 5.9 shall be deemed to amend or supplement the Disclosure Schedule
or prevent or cure any misrepresentations, breach of warranty or breach of
covenant. In addition, no disclosure by Coherent pursuant to this Section 5.9
shall be deemed to amend or supplement the Coherent Disclosure Schedule or
prevent or cure any misrepresentations, breach of warranty or breach of
covenant.
5.10 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto, at
the request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
5.11 DELETED.
5.12 EMPLOYEE COMPENSATION. Each employee of Star who remains an
employee of Coherent after the Effective Time shall be eligible to receive
salary and benefits (such as medical benefits, 401(k)) consistent with
Coherent's standard human resource benefits and policies.
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5.13 HSR FILING. Coherent, Merger Sub, Star and Palomar shall each use
all commercially reasonable efforts to prepare and file a HSR Act pre-Merger
notification as promptly as possible after executing the Agreement and shall use
all commercially reasonable efforts to obtain early termination of the
applicable waiting period.
5.14 PALOMAR NON-COMPETITION. For the period commencing with the
Closing Date and ending twenty-four months later (the "PALOMAR RESTRICTED
PERIOD"), Palomar agrees that (i) it shall not engage in the Palomar Restricted
Business (as defined herein); (ii) it shall cause its Subsidiaries and
affiliates not to, individually or jointly with others, whether for their own
account or for that of any other person or entity, engage in Palomar Restricted
Business; and (iii) it shall not own or hold any debt interest in, or control or
otherwise participate in, or act as a partner or principal of any person or
entity that engages in, Palomar Restricted Business (except for ownership of one
percent (1%) or less of any entity whose securities have been registered under
the Securities Act of 1933, as amended, or Section 12 of the Securities Exchange
Act of 1934, as amended). For purposes of this Agreement, "PALOMAR RESTRICTED
BUSINESS" shall mean the commercial manufacture, marketing or sale of Restricted
Semiconductor Laser Devices. For the purposes of this Agreement, "RESTRICTED
SEMICONDUCTOR LASER DEVICES" shall mean any semiconductor laser device (and any
system that incorporates such devices) that operate in a continuous wave mode or
in quasi continuous wave mode that deliver more than 5 joules in any 50
millisecond period. No entity that succeeds to rights and obligations of Palomar
or its Subsidiaries hereunder as a result of a merger with, or an acquisition
of, Palomar or such Subsidiaries or otherwise (a "SUCCESSOR"), shall be bound by
the provisions of this Section 5.14 so long as the business of such Successor
and the business of Palomar are "held separate." As used in the foregoing
sentence, the business of Palomar or its Subsidiaries or affiliates is "HELD
SEPARATE" from the business of a Successor if (i) such Successor is not provided
with, and otherwise has no access to, the confidential information of Palomar or
its Subsidiaries or affiliates relating to the Palomar Restricted Business; (ii)
no director, officer or employee of Palomar or its Subsidiaries or affiliates
controls or directs the activities of such Successor relating to the Palomar
Restricted Business; and (iii) such Successor receives no, and has not received
any, license or transfer of any intellectual property right of Palomar or its
Subsidiaries or affiliates relating to the Palomar Restricted Business.
5.15 COHERENT NON-COMPETITION. For the period commencing with the
Closing Date and ending twenty-four months later (the "COHERENT RESTRICTED
PERIOD"), Coherent agrees that it shall not, and it shall cause its Subsidiaries
and affiliates not to, individually or jointly with others, whether for their
own account or for that of any other person or entity, engage in, or own or hold
any equity or debt interest in, or control or otherwise participate in, or act
as a partner or principal or any person or entity that engages in, the
manufacture, marketing or sale of ruby-powered lasers for hair removal anywhere
in the world; PROVIDED, HOWEVER that the foregoing shall not prevent Coherent
from marketing or selling ruby lasers manufactured by Palomar or from owning one
percent (1%) or less of any entity whose securities have been registered under
the Securities Act of 1933, as amended, or Section 12 if the Securities Exchange
Act of 1934, as amended.
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5.16 COHERENT SALES OF LIGHTSHEER DIODE LASERS. Within ten (10) days
following the Closing Date, Coherent agrees to pay Palomar an amount equal to
the LightSheer Margin (as hereinafter defined) for LightSheer units that were
(i) manufactured by Star prior to the Closing pursuant to Coherent's sales
forecast dated November 20, 1998 for the period commencing on the date hereof
and ending on the Closing Date (appropriately pro-rated) and (ii) not sold by
Coherent prior to the Closing. "LIGHTSHEER MARGIN" shall mean the amount that
Palomar would have received on account of such sales if they were made prior to
the Closing Date pursuant to the Sales Agency, License and Development Agreement
between Palomar and Coherent dated November 17, 1997 (assuming that such sales
would have been made at the average sales price for all sales of LightSheer
units by Coherent), less the inventory carrying value of such units reflected on
the Closing Balance Sheet.
5.17 PALOMAR AND STAR NON-SOLICIT. Should this Agreement terminate
prior to the Closing Date (the "TERMINATION DATE"), during the period beginning
on the Termination Date and ending on the second anniversary of the Termination
Date, neither Palomar, Star nor any of their respective affiliates or
Subsidiaries shall solicit to hire or solicit to employ any employee of Coherent
or induce or endeavor to induce any employee of Coherent to leave his or her
employment, other than as part of a general solicitation of employees not
directed specifically to employees of Coherent.
5.18 COHERENT NON-SOLICIT. During the period beginning on the
Termination Date and ending on the second anniversary of the Termination Date,
neither Coherent nor any of its affiliates or Subsidiaries shall solicit to hire
or solicit to employ any employee of Star or Palomar or induce or endeavor to
induce any employee of Star or Palomar to leave his or her employment, other
than as part of a general solicitation of employees not directed specifically to
employees of Star or Palomar.
5.19 TAX MATTERS.
(a) SECTION 338(H)(10) ELECTION.
(i) Palomar shall join with Coherent in making a
timely election under Section 338(h)(10) of the Code and any corresponding
elections under state and local tax laws (collectively, the "ELECTION") with
respect to the Acquisition of Star; PROVIDED, HOWEVER, that no election shall be
made for California tax purposes unless otherwise agreed to by the parties and
the parties shall take any steps required to elect out of Section 338(h)(10) for
California tax purposes unless such agreement is reached. Coherent and Palomar
shall, as promptly as practicable following the Closing Date, cooperate with
each other to take all actions necessary and appropriate (including filing such
forms, returns, elections, schedules and other documents as may be required) to
effect and preserve a timely Election in accordance with Section 338(h)(10) of
the Code or any successor provisions (and all corresponding state and local tax
laws). Coherent and Palomar shall report the Acquisition pursuant to this
Agreement consistent with the Election.
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(ii) In connection with the Election, within 90 days
after Closing, Coherent shall provide to Palomar Schedule 5.19(a)(ii), which
shall set forth the proposed allocation (the "ALLOCATION SCHEDULE") of that
portion of the Merger Consideration paid in connection with the Merger among the
assets of Star. Such allocations shall be made in accordance with Section
338(h)(10) of the Code and any applicable Treasury Regulations, which allocation
is set forth on Schedule 5.19(a)(ii).
(b) RETURNS; INDEMNIFICATION; LIABILITY FOR TAXES.
(i) Notwithstanding any other provision of this
Agreement, Palomar shall prepare and file (or cause to be prepared and filed) on
a timely basis all Tax Returns with respect to Star for all taxable periods
ending on or before the Closing Date ("STAR TAX RETURNS") and shall pay, and
shall indemnify and hold Coherent harmless against and from (i) all Taxes of
Star for all taxable years or periods which end on or before the Closing Date;
(ii) all Taxes for all taxable years or periods of all members of any affiliated
group of which Star is or has been a member prior to the Closing Date; and (iii)
with respect to any taxable period commencing before the Closing Date and ending
after the Closing Date (a "STRADDLE PERIOD") all Taxes of Star attributable to
the portion of the Straddle Period prior to and including the Closing Date (the
"PRE-CLOSING PERIOD"). For purposes of this Agreement, the portion of any Tax
that is attributable to the Pre-Closing Period shall be (i) in the case of a Tax
that is not based on net income, gross income, premiums or gross receipts, the
total amount of such Tax for the period in question multiplied by a fraction,
the numerator of which is the number of days in the Pre- Closing Period, and the
denominator of which is the total number of days in such Straddle Period, and
(ii) in the case of a Tax that is based on any of net income, gross income,
premiums or gross receipts, the Tax that would be due with respect to the
Pre-Closing Period if such Pre-Closing Period were a separate taxable period,
except that exemptions, allowances, deductions or credits that are calculated on
an annual basis (such as the deduction for depreciation or capital allowances)
shall be apportioned on a per diem basis. For purposes hereof, all Taxes which
are the subject of this Section 5.19 arising from the Merger, including Taxes
resulting from the Election, shall be deemed to be Taxes attributable to the
period ending on the Closing Date and shall be the responsibility of Palomar.
(ii) Coherent shall prepare and file (or cause to be
prepared and filed) on a timely basis all Tax Returns of Star relating to
periods ending after the Closing Date and shall pay, and shall indemnify and
hold Palomar harmless against and from (i) all Taxes of Star for any taxable
year or period commencing after the Closing Date; and (ii) all Taxes of Star for
any Straddle Period other than Taxes attributable to the Pre-Closing Period;
PROVIDED, HOWEVER, that any Straddle Period Tax Return shall be prepared in
accordance with applicable law and past practices consistently applied and
Palomar shall have the opportunity to review and approve the Tax Returns for any
Straddle Period prior to filing. To the extent the parties cannot reach
agreement as to the proper treatment of any item on a Tax Return for a Straddle
Period, the matter shall be referred to a mutually acceptable independent
accounting firm for resolution.
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(c) COOPERATION; REFUNDS AND CREDITS.
(i) All refunds or credits of Taxes for or
attributable to taxable years or periods of Star ending on or before the Closing
Date (or the Pre-Closing Period, in the case of a Straddle Period) shall be for
the account of Palomar; all other refunds or credits of Taxes, for or
attributable to Star shall be for the account of Coherent. Following the
Closing, Coherent shall cause Star to forward to Palomar any such refunds or
credits due Palomar pursuant to this section in the case of a refund, no later
than 10 business days after receipt of such refund, and in the case of a credit,
no later than 30 business days after the relevant taxing authority has paid such
credit, and Palomar shall forward (or cause to be forwarded) to Coherent any
refunds or credits due to Coherent pursuant to this section in the case of a
refund, no later than 10 business days after receipt of such refund, and in the
case of a credit, no later than 30 business days after the relevant taxing
authority has paid such credit.
(ii) If an audit examination of any Tax Return of
Palomar or its subsidiaries for any taxable period ending on or before the
Closing Date shall result (by settlement or otherwise) in any adjustment the
effect of which is to increase deductions, losses or tax credits or decrease
income, gains, premiums, revenues or recapture of tax credits ("CHANGES")
reflected on a Tax Return of Coherent or Star for any taxable period ending
after the Closing Date, Palomar will notify Coherent and provide it with all
necessary information so that it can reflect on the appropriate Tax Return of
Coherent any appropriate Changes. If as a result of such Changes, Coherent or
its subsidiaries enjoy a net Tax benefit from an increase in deductions, losses
or tax credits and/or a decrease in income, gains, premiums, revenues or
recapture of tax credits ("COHERENT BENEFITS") for taxable periods ending after
the Closing Date, Coherent shall pay to Palomar the amount of such Coherent
Benefit, as and when such Coherent Benefits are realized by Coherent.
(iii) If an audit examination of any Tax Return of
Coherent or its subsidiaries for taxable periods ending after the Closing Date
shall result (by settlement or otherwise) in any Change reflected on a Tax
Return of Palomar or its subsidiaries for any taxable periods ending on or
before the Closing Date, Coherent will notify Palomar and provide it with all
necessary information so that Palomar can reflect any appropriate Changes on its
Tax Return. If as a result of such Changes, Palomar or its subsidiaries enjoy a
net Tax benefit from an increase in deductions, losses or tax credits and/or a
decrease in the income, gains, premiums, revenues or recapture of tax credits
("PALOMAR BENEFITS") for taxable periods ending on or before the Closing Date,
Palomar shall pay to Coherent the amount of such Palomar Benefits as and when
such Palomar Benefits are realized by Palomar.
(d) CONDUCT OF AUDITS AND OTHER PROCEDURAL MATTERS. Coherent,
Palomar and Star shall, at their own expense, control any audit or examination
by any taxing authority, and have the right to initiate any claim for refund or
amended return, and contest, resolve and defend against any assessment, notice
of deficiency or other adjustment or proposed adjustment of Taxes
("PROCEEDINGS") for any taxable period for which that party is charged with
payment or indemnification responsibility under this Agreement. Each of
Coherent, Palomar and Star shall promptly forward to the other all
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written notifications and other written communications, including if available
the original envelope showing any postmark, from any taxing authority received
by such party or its affiliates relating to any liability for Taxes for any
taxable period for which such other party or any of its affiliates is charged
with payment or indemnification responsibility under this Agreement and each
such indemnifying party shall promptly notify, and consult with, each
indemnified party as to any action it proposes to take with respect to any
liability for Taxes for which it is required to indemnify another party and
shall not enter into any closing agreement or final settlement with any taxing
authority with respect to any such liability without the written consent of the
indemnified parties, which consent shall not be unreasonably withheld. In the
case of any Proceedings relating to any Straddle Period, Coherent shall control
such Proceedings and shall consult in good faith with Palomar as to the conduct
of such Proceedings. Palomar shall reimburse Coherent for such portion of the
costs, including legal costs, of conducting such Proceedings as is represented
by the portion of the Tax with respect to such Straddle Period for which Palomar
is liable pursuant to this Agreement. Each of Coherent, Palomar and Star shall,
at the expense of the requesting party, execute or cause to be executed any
powers of attorney or other documents reasonably requested by such requesting
party to enable it to take any and all actions such party reasonably requests
with respect to any Proceedings which the requesting party controls.
5.20 PUBLIC OFFERING. Coherent agrees that, within one year of the
Closing Date, it will not directly or indirectly initiate or participate in any
negotiations or discussions with respect to a public offering of the Surviving
Corporation's stock individually or as part of a larger offering that relates to
a subsidiary of Coherent engaged in a business substantially similar to that of
Star nor sell all or substantially all of the assets of the Surviving
Corporation in one or more transactions.
5.21 INDEMNIFICATION. Coherent and the Surviving Corporation agree that
all rights to indemnification now existing in favor of the employees, agents,
directors or officers of Star as provided in its charter or bylaws shall survive
the Merger and shall continue in full force and effect to the fullest extent
permitted by applicable law, for a period not less than three years from the
Closing Date with respect to matters occurring prior to the Closing Date.
5.22 WARN ACT. Within 60 days of the Effective Time, Coherent will not
take any action which triggers any notification requirements under the Worker
Adjustment and Retraining Notification Act.
5.23 SWISS FRANC DEBENTURE LITIGATION. Palomar agrees to indemnify Star
and Coherent for any Losses (as defined in Section 7.3 of this Agreement)
incurred by Star or Coherent arising from, related to, or as a result of any
dispute or claims made with respect to Palomar's 4.5% Subordinated Convertible
Debentures due 2003 denominated in Swiss Francs.
5.24 NO AMENDMENT OF OPTO POWER AGREEMENT. Palomar and Star agree not
to modify, amend or terminate the blanket purchase agreement dated April 8, 1997
with Opto Power Corporation without the prior written consent of Coherent.
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5.25 PREPARATION OF STAR FINANCIAL STATEMENTS. Palomar agrees that upon
the request of Coherent prior to or following the Closing, Palomar will promptly
provide Coherent with such financial information, schedules and audited
financial statements of Star prepared by Star or Palomar prior to Closing as
reasonably requested by Coherent in connection with Coherent's preparation of
any reports or filings required under the Securities and Exchange Act of 1934,
as amended.
5.26 DELIVERY OF CLOSING BALANCE SHEET. Palomar shall deliver a balance
sheet dated as of the Closing Date prepared by Star and audited by Palomar's
auditors within 60 days of the Effective Time (the "CLOSING BALANCE SHEET").
Such Closing Balance Sheet shall fairly present, in all material respects, the
financial condition of Star as of the Closing Date and shall be prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
basis consistent with Palomar's and Star's past practices. Palomar shall
immediately repay to Coherent that amount by which the Net Book Value of Star is
less than $0.00 as reflected on the Closing Balance Sheet, and Coherent shall
cause any Permitted Dividend reflected on the Closing Balance Sheet to be paid
directly to Palomar. Any such amounts to be paid by Palomar to Coherent shall
also include interest at 12% per annum for the period between the Closing and
the date of such payment. At the Closing, Coherent shall cause any amounts
borrowed by Palomar from Fleet Bank on behalf of Star to be paid directly to
Fleet Bank, which amounts shall not exceed $10 million and which amounts shall
be reflected on the Certificate provided by Palomar pursuant to Section 6.2(h)
hereof. Palomar shall pay any amounts in addition to the amounts that are paid
by Coherent that are required to be paid to Fleet Bank so that the Aggregate
Bank Liabilities (as such term is defined in the Fleet Letter Agreement) will
not exceed the Borrowing Base (as such term is defined in the Fleet Letter
Agreement) without reference to any Receivables of Star (as such term is defined
in the Fleet Letter Agreement). Any such amounts to paid by Coherent to Fleet
Bank at the Closing will be included as outstanding debt of Star in calculating
the Net Book Value.
5.27 FLEET BANK RELEASE. Palomar shall use all commercially reasonable
efforts to ensure that Fleet Bank releases any security interest or Liens that
it has in the assets of Star at the Closing and shall comply with all reasonable
requests made by Coherent or Fleet Bank in furtherance of obtaining such
release(s).
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF STAR AND PALOMAR. The obligations of
Star and Palomar to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, exclusively by Palomar:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of Coherent and Merger Sub in this Agreement
shall be true and correct in all material respects (i) when
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made on the date hereof and (ii) on and as of the Effective Time as though such
representations and warranties were made on and as of such time except for the
representations and warranties made as of a specific date which shall be true
and current in all material respects as of such date, and each of Coherent and
Merger Sub shall have performed and complied in all material respects with all
covenants and obligations of this Agreement required to be performed and
complied with by it as of the Effective Time, except for such breaches of
representations and warranties as shall not have a Material Adverse Effect on
Coherent.
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal.
(c) CERTIFICATE OF COHERENT. Palomar shall have been provided
with a certificate executed on behalf of Coherent by the Chief Executive Officer
of Coherent to the effect that, as of the Effective Time:
(i) all representations and warranties made by
Coherent and Merger Sub in this Agreement are true and correct in all material
respects (i) when made on the date hereof and (ii) on and as of the Effective
Time as though such representations and warranties were made on and as of such
time except for the representations and warranties made as of a specific date
which shall be true and current in all material respects as of such date; and
(ii) all covenants and obligations of this Agreement
to be performed by Coherent on or before such date have been so performed in all
material respects.
(d) HSR. The applicable waiting period under the HSR Act
relating to the Merger shall have expired or been terminated.
(e) LEGAL OPINION. Palomar shall have received a legal opinion
from legal counsel to Coherent, in the form attached hereto as EXHIBIT D.
(f) ESCROW. Coherent and Merger Sub shall have entered into
the Escrow Agreement.
(g) PATENT LICENSE AGREEMENT. Palomar and Coherent shall have
executed the Patent License Agreement attached hereto as EXHIBIT E (the "PATENT
LICENSE AGREEMENT").
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6.2 CONDITIONS TO THE OBLIGATIONS OF COHERENT AND MERGER SUB. The
obligations of Coherent and Merger Sub to consummate and effect this Agreement
and the transactions contemplated hereby shall be subject to the satisfaction at
or prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by Coherent:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of Star and Palomar in this Agreement shall be
true and correct in all material respects (i) when made on the date hereof and
(ii) on and as of the Effective Time as though such representations and
warranties were made on and as of such time except for the representations and
warranties made as of a specific date which shall be true and current in all
material respects as of such date, and each of Star and Palomar shall have
performed and complied in all material respects with all covenants and
obligations of this Agreement required to be performed and complied with by it
as of the Effective Time, except for such breaches of representations and
warranties (excluding breaches of the representations and warranties set forth
in Sections 2.1(a), 2.2, 2.3, 2.4, 2.5(i), 2.8, 2.11(b), 2.11(e), 2.11(j)(i),
2.11(o), 2.11(p), 2.11(t)(ii), 2.11(v), 2.12(b), (iv) and (vi), 2.13, 2.15 (o),
2.16(a)(i), (iii) & (v), 2.16(b), 2.21, 2.27 and 2.28), as shall not have a
Material Adverse Effect on Star or Palomar.
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or applicable to the
Merger, which makes the consummation of the Merger illegal.
(c) DELETED.
(d) LEGAL OPINION. Coherent shall have received a legal
opinion from legal counsel to Star and Palomar in the form attached hereto as
EXHIBIT F.
(e) PALOMAR STOCKHOLDER APPROVAL. Palomar Stockholders holding
a majority of Palomar's capital stock eligible to vote thereon shall have
approved this Agreement, the Merger and the transactions contemplated hereby and
thereby.
(f) STAR SHAREHOLDER APPROVAL. Star Shareholders holding at
least fifty-one percent (51%) of Star's Capital Stock shall have approved this
Agreement, the Merger and the transactions contemplated hereby and thereby and
no more than 5% of the Star Capital Stock shall qualify as Dissenting Shares.
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(g) STAR OPTION PLAN. The Star 1994 Option Plan shall have
been terminated, so that no options exercisable for Star Capital Stock and no
other rights to acquire Star Capital Stock shall be outstanding following the
Closing.
(h) CERTIFICATE OF STAR AND PALOMAR. Coherent shall have been
provided with a certificate executed on behalf of Palomar by its Chief Executive
Officer and executed on behalf of Star by its Chief Executive Officer as of the
Effective Time:
(i) to the effect that all representations and
warranties made by Star and Palomar in this Agreement are true and correct in
all material respects (i) when made on the date hereof and (ii) on and as of the
Effective Time as though such representations and warranties were made on and as
of such time except for the representations and warranties made as of a specific
date which shall be true and current in all material respects as of such date;
(ii) to the effect that all covenants and obligations
of this Agreement to be performed by Star or Palomar on or before such date have
been so performed in all material respects; and
(iii) to the effect that the provisions set forth in
Sections 6.2 (c), (f), (g), (h) , (i) and (j) hereof have been satisfied.
(iv) setting forth the amount borrowed by Palomar
from Fleet Bank on behalf of Star, the amount borrowed by Palomar from Fleet
Bank on its own behalf, the total amount borrowed by Palomar from Fleet Bank on
behalf of both Palomar and Star (which amount shall not exceed $10 million) and
the Aggregate Bank Liabilities, the Borrowing Base and the Receivables of Star
(as such terms are defined in the Fleet Letter Agreement).
(i) HSR. The applicable waiting period under the HSR Act
relating to the Merger shall have expired or been terminated.
(j) SHAREHOLDER CERTIFICATE. Each Star Shareholder shall have
executed and delivered to Coherent a shareholder certificate representing, in
the aggregate, all of the outstanding Star Capital Stock, a certificate
exercising and terminating any rights to acquire Star Capital Stock or an
affidavit and an indemnification agreement meeting the requirements of Section
1.8(c) of this Agreement.
(k) PATENT LICENSE AGREEMENT. Palomar and Coherent shall have
executed the Patent License Agreement.
(l) ESCROW. Palomar, Star, Grove, Holtz and Mundinger shall
have entered into the Escrow Agreement.
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(m) INTELLECTUAL PROPERTY PROTECTION. At the Closing, Palomar
and Star will provide Coherent with written notification of all actions that
must be taken by Star within sixty (60) days of the Closing Date, including the
payment of any registration, maintenance or renewal fees or the filing of any
documents, applications or certificates for the purposes of maintaining,
perfecting, continuing, persevering or renewing any Star Registered Intellectual
Property.
6.3 FAILURE TO USE BEST EFFORTS. No party may rely on the failure of a
condition in this Section 6 to be satisfied if such failure was caused, directly
or indirectly, by such party's failure to use its reasonable best efforts to
satisfy such condition and consummate the Merger and the other transactions
contemplated by this Agreement.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of Star's and
Palomar's representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Merger and continue until
11:59 p.m., California time, on the date which is one year following the Closing
Date except as provided in Section 7.1 to the Disclosure Schedule. The Closing
shall not be deemed a waiver of any breach by Palomar or Star of any of Star's
or Palomar's representations and warranties.
7.2 ESCROW FUND. As security for the indemnity provided for in Section
7.3 of this Agreement, the Star Shareholders listed on Schedule 7.2 hereto will
be deemed to have received and deposited with the Escrow Agent (as defined
below) the Escrow Amount, with each such Star Shareholder deemed to have
contributed the amount set forth opposite such Star Shareholder's name on
Schedule 7.2, and the Escrow Amount shall be deposited in the name of the Escrow
Agent in the Escrow Fund (as defined below). At or promptly following the
Effective Time, the Escrow Amount, without any act of any Star Shareholder, will
be deposited with Bank of America (or other institution acceptable to Coherent
and Palomar) as Escrow Agent (the "ESCROW AGENT"), such deposits to constitute
an escrow fund (the "ESCROW FUND") to be governed by the terms set forth herein
and in the Escrow Agreement. The portion of the Escrow Amount deemed to be
contributed on behalf of each Star Shareholder shall be its Pro Rata Portion (as
defined herein) of the Escrow Amount. "PRO RATA PORTION" shall mean, with
respect to each Star Shareholder listed on Schedule 7.2, the amount determined
at the Effective Time equal to the quotient obtained by dividing (x) the amount
deemed to be contributed by each such Star Shareholder to the Escrow Fund as set
forth on Schedule 7.2, by (y) the Escrow Amount.
7.3 INDEMNIFICATION.
(a) Star and Palomar jointly and severally indemnify and hold
Coherent, the Surviving Corporation and their officers, directors, affiliates,
lenders, successors and assigns (the
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"INDEMNITEES") harmless against all claims, losses, liabilities, damages,
deficiencies, costs and expenses, including without limitation reasonable
attorneys' and experts' fees and expenses of investigation and defense
(hereinafter individually a "LOSS" and collectively "LOSSES") incurred by
Coherent, the Surviving Corporation or any other Indemnitee directly or
indirectly as a result of or in connection with (i) any inaccuracy or breach of
a representation or warranty of Star and/or Palomar contained in this Agreement,
or (ii) any failure by Star or Palomar to perform or comply with any covenant or
other agreement or obligation contained in this Agreement or any agreement
attached hereto as an exhibit or entered into in connection with the Merger,
including, but not limited to, covenants set forth in Section 5.19 related to
tax matters. The Escrow Fund shall be available to compensate the Indemnitees
for any Loss. The Indemnitees shall not be entitled to receive any
indemnification unless and until Losses as identified in Officer's Certificates
(as defined in the Escrow Agreement), the aggregate amount of which exceeds
$500,000, have been delivered to the Escrow Agent as provided in the Escrow
Agreement within the time periods set forth in Section 7.1, in such case the
Indemnitees may (subject to the next sentence) recover all of their Losses in
excess of $500,000. Coherent's sole remedy for any Loss shall be the
indemnification set forth in this Article VII, and Palomar's indemnification
liability for Losses shall not exceed 25% of the Merger Consideration; PROVIDED,
HOWEVER, that nothing herein shall limit Palomar's liability for a claim by an
Indemnitee for fraud, intentional misrepresentation or gross negligence by
Palomar (or Star prior to the Effective Time). Palomar shall not have any right
of contribution from Star with respect to any Loss claimed by the Indemnitees
after the Closing. The foregoing limitations shall not apply to limit Palomar's
indemnification obligation for (A) Taxes required to be paid by Palomar (or
Losses attributable to the failure of Palomar to perform any covenants required
to be performed by Palomar) pursuant to Section 5.19 of this Agreement, (B)
Losses attributable to the breach of any representation or warranty contained in
Section 2.12 or (C) Palomar's obligations to repay that amount by which the Net
Book Value of Star is less than $0.00 as reflected on the Closing Balance Sheet,
and such indemnity shall not be limited by the Escrow Amount. Any claim for
indemnification shall be waived if not made in writing prior to the end of the
survival period for the relevant representation warranty.
(b) For purposes of this Section 7.3, the amount of any Loss
hereunder shall be calculated after taking into account any net tax benefit
actually realized by the Indemnitee as a result of the circumstances giving rise
to the indemnifiable event (and after taking into account the tax detriment
attributable to the receipt of any indemnity hereunder).
7.4 PROCEDURES WITH RESPECT TO THIRD-PARTY CLAIMS.
(a) In the event Coherent becomes aware of a third-party claim
which Coherent reasonably believes may result in an indemnification, Coherent
shall promptly notify the Shareholder Representative of such claim. The
Shareholder Representative (as defined in the Escrow Agreement) shall be
entitled, if the Shareholder Representative so elects by written notice within
20 days of being notified by Coherent of such claim, to assume the defense
thereof with counsel satisfactory to Coherent. Notwithstanding the foregoing,
(i) Coherent shall also have the right to employ its own counsel in any
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such case, but the fees and expense of such counsel shall be at the expense of
Coherent unless Coherent or its affiliates shall reasonably determine that there
is a conflict of interest between the Indemnitees and Star Shareholders with
respect to such claim, in which case the fees and expenses of such counsel will
be paid out of the Escrow Fund as additional Losses, (ii) Coherent shall have no
obligation to give any notice of any assertion of liability by a third party
unless such assertion is in writing (provided that Coherent may not collect any
sum from the Escrow Fund without giving notice to the Shareholder
Representative), and (iii) the rights of the Indemnitees to be indemnified
hereunder in respect of Losses resulting from the assertion of liability by
third parties shall not be adversely affected by the failure to promptly give
notice pursuant to the foregoing unless, and, if so, only to the extent, that
Palomar and the Star Shareholders are materially prejudiced by the delay in
giving such notice. With respect to any assertion of liability by a third party
that may result in a Loss, 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 Shareholder Representative, within
20 days after receipt of the aforesaid notice of a claim, fails to assume the
defense of the Indemnitees against such claim, Coherent or its affiliates shall
have the right to undertake the defense, compromise, or settlement of such
action on behalf of and for the account, expense, and risk of the Star
Shareholders.
(c) Notwithstanding anything in this Section 7.4 to the
contrary, if there is a reasonable probability that a claim may materially
adversely affect the Indemnitees, Coherent, or its affiliates shall have the
right to participate in such defense, compromise, or settlement and the
Shareholder Representative shall not, without Coherent's written consent (which
consent shall not be unreasonably withheld), settle or compromise any claim or
consent to entry of any judgment in respect thereof unless such settlement,
compromise, or consent includes as an unconditional term thereof the giving by
the claimant or the plaintiff to the Indemnitees a release from all liability in
respect of such claim.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. Except as provided in Section 8.2, this Agreement may
be terminated and the Merger abandoned at any time prior to the Effective Time:
(a) by mutual consent of Palomar, Star and Coherent;
(b) by Coherent, if the Star Board or Palomar Board recommends
a Superior Proposal to the Star Shareholders or Palomar Stockholders, or if the
Star Board or Palomar Board shall have withheld, withdrawn or modified in a
manner adverse to Coherent its recommendation in favor of adoption and approval
of this Agreement and approval of the Merger;
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(c) by Coherent or Palomar if: (i) the Effective Time has not
occurred by the date which is three (3) months from the date hereof; PROVIDED,
HOWEVER, that the right to terminate this Agreement under this Section 8.1(c)
shall not be available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the Merger to occur on or
before such date and such action or failure to act constitutes a breach of this
Agreement; (ii) there shall be a final nonappealable order of a federal or state
court in effect preventing consummation of the Merger; or (iii) there shall be
any statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity that would make consummation
of the Merger illegal;
(d) by Coherent if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity, which would: (i) prohibit
Coherent's or Merger Sub's ownership or operation of any material portion of the
business of Star or (ii) compel Coherent or Star to dispose of or hold separate
all or a significant portion of the business or assets of Star or Coherent as a
result of the Merger;
(e) by Coherent if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Star or Palomar which would be a failure of conditions set forth in
Section 6.2(a) and such breach has not been cured (i) within fifteen (15)
calendar days after written notice to Palomar if such breach is capable of cure
within 15 days or (ii) within a commercially reasonable time period after
written notice to Palomar if such breach is not capable of cure within 15 days;
PROVIDED, HOWEVER, that no cure period shall be required for a breach which by
its nature cannot be cured and that no cure period shall extend beyond the date
which is three (3) months from the date hereof;
(f) by Palomar if neither it nor Star is in material breach of
their respective obligations under this Agreement and there has been a material
breach of any representation, warranty, covenant or agreement contained in this
Agreement on the part of Coherent or Merger Sub which would be a failure of
conditions set forth in Section 6.2(b) and such breach has not been cured within
fifteen (15) calendar days after written notice to Coherent; PROVIDED, HOWEVER,
that no cure period shall be required for a breach which by its nature cannot be
cured and that no cure period shall extend beyond the date which is three (3)
months from the date hereof; or
Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 8.1 hereof, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of
Coherent, Merger Sub, Palomar or Star, or their respective officers, directors
or stockholders, provided that each party shall remain liable for breaches of
this Agreement by such
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party prior to its termination; provided further that, in such event the
provisions of Section 5.4, (Expenses), Section 5.5, (Public Disclosure), Section
5.17 (Palomar and Star Non-Solicit), Section 5.18, (Coherent Non-Solicit),
Article IX and this Section 8.2 shall remain in full force and effect and
survive any termination of this Agreement.
8.3 AMENDMENT. This Agreement may be amended by the parties hereto at
any time by execution of an instrument in writing signed on behalf of each of
the parties hereto, provided that the written agreement of the Escrow Agent (as
defined in the Escrow Agreement) and the Shareholder Representative (as defined
in the Escrow Agreement) shall be required to Sections 7.2, 7.3 and 7.4.
8.4 EXTENSION; WAIVER. At any time prior to the Effective Time,
Coherent and Merger Sub, on the one hand, and Star and Palomar, on the other
hand, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations of the other party hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE IX
DISPUTE RESOLUTION
9.1 NEGOTIATIONS BETWEEN SENIOR PARTY REPRESENTATIVES. The parties
shall attempt in good faith to resolve any controversy, claim or dispute arising
out of or relating to this Agreement or the construction, interpretation,
performance, breach, termination, enforceability or validity thereof, whether
such claim existed prior to or arises on or after the date of this Agreement (a
"DISPUTE"), promptly by negotiation between executives who have authority to
settle the Dispute ("SENIOR PARTY REPRESENTATIVES").
9.2 MEDIATION
(a) If the Dispute has not been resolved by negotiation
between Senior Party Representatives within 30 days of when notice of the
Dispute has been delivered by one party to another, the parties shall make a
good faith attempt to settle the Dispute by mediation pursuant to the provisions
of this Section 9.2 before resorting to arbitration, litigation or any other
dispute resolution procedure.
(b) Unless the parties agree otherwise, the mediation shall be
conducted in accordance with the Commercial Mediation Rules of the American
Arbitration Association then in effect by a mediator who (i) has the
qualifications and experience set forth in subsection (c) of this Section 9.2
and (ii) is selected as provided in subsection (d) of this Section 9.2.
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(c) Unless the parties agree otherwise, the mediator shall be
a neutral and impartial lawyer with excellent academic and professional
credentials (i) who is or has been practicing law for at least 15 years,
specializing in either general commercial litigation or general corporate and
commercial matters, and (ii) who has had both training and experience as a
mediator or (iii) who is a retired judge.
(d) After the period set forth in Section 9.2(c) has elapsed,
either party (the "INITIATING PARTY") may initiate mediation of the Dispute by
giving the other party (the "RECIPIENT PARTY") written notice (a "MEDIATION
NOTICE") setting forth a list of the names and resumes of qualifications and
experience of three impartial persons who the Initiating Party believes would be
qualified as a mediator pursuant to the provisions of subsection (c) of this
Section 9.2. Within 15 days after the delivery of the Mediation Notice, the
Recipient Party shall give a counter-notice (the "COUNTER-NOTICE") to the
Initiating Party in which the Recipient Party may designate a person to serve as
the mediator from among the three persons listed by the Initialing Party in the
Mediation Notice (in which event such designated person shall be the mediator).
If none of the persons listed in the Mediation Notice is designated by the
Recipient Party to serve as the mediator, the Counter-Notice should set forth a
list of the names and resumes of three impartial persons who the Recipient Party
believes would be qualified as a mediator pursuant to the provisions of
subsection (c) of this Section 9.2. Within 10 days after the delivery of the
Counter-Notice, the Initiating Party may designate a person to serve as the
mediator from among the three persons listed by the Recipient Party in the
Counter-Notice (in which event such designated person shall be the mediator). If
the parties cannot agree on a mediator from the three impartial nominees
submitted by each party, each party shall strike two names from the other
party's list, and the mediator shall be selected by lot between the two
remaining persons on both lists.
(e) Within 30 days after the mediator has been selected as
provided above, both parties and their respective attorneys shall meet with the
mediator for one mediation session of at least four hours, it being agreed that
each party representative attending such mediation session shall be a Senior
Party Representative with full authority to settle the Dispute. If the Dispute
cannot be settled at such mediation session or at any mutually agreed
continuation thereof, either party may give the other and the mediator a written
notice declaring the mediation process at an end, in which event then the
Dispute shall be resolved as provided in Section 9.3 hereof.
(f) All conferences and discussions which occur in connection
with the mediation conducted pursuant to this Agreement shall be deemed
settlement discussions, and nothing said or disclosed, nor any document
produced, which is not otherwise independently discoverable shall be offered or
received as evidence or used for impeachment or for any other purpose in any
current or future arbitration or litigation.
(g) The costs of the mediation shall be shared equally between
the parties.
(h) The mediation will take place in the county in which the
Recipient Party is located, or any other place by agreement of the parties.
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9.3 LITIGATION; ARBITRATION
If the Dispute has not been resolved by negotiations by
discussion or mediation as provided in Sections 9.1 and 9.2, then the parties
may proceed by litigation, or, should they agree, by any other method of dispute
resolution, including arbitration.
ARTICLE X
GENERAL PROVISIONS
10.1 NOTICES. Every notice, consent or other communication required or
permitted to be given by any provision of the Agreement shall be in writing.
Each such notice, shall be deemed to have been duly and properly given, served
or made for all purposes on the date such notice is (a) delivered personally or
(b) sent by registered or certified mail, return receipt requested, postage and
charges prepaid and addressed as follows:
(a) if to Coherent or Merger Sub, to:
Coherent, Inc.
5100 Patrick Henry Drive
Santa Clara, California 95054
Attention: Scott Miller, Vice President and General
Counsel
Telephone No.: (408) 764-4000
Facsimile No.: (408) 970-9998
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: Judith Mayer O'Brien, Esq.
Telephone No.: (415) 493-9300
Facsimile No.: (415) 493-6811
(b) if to Palomar or Star, to:
Palomar Medical Technologies, Inc.
45 Hartwell Avenue
Lexington, Massachusetts 02421
Attention: Chief Executive Officer and General
Counsel
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Telephone No.: (781) 676-7300
Facsimile No.: (781) 676-7330
with a copy to:
Foley, Hoag & Elliot LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: David A. Broadwin, Esq.
Telephone No.: (617) 832-1000
Facsimile No.: (617) 832-7000
(c) if to Grove, Holtz or Mundinger, to:
Robert Grove
1249 Quarry Lane, Suite 100
Pleasanton, CA 94566
Telephone: (952) 484-2140
Fax:
10.2 INTERPRETATION. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart. The Escrow Agent may execute the
Escrow Agreement following the date hereof and prior to the Effective Time, and
such later execution, if so executed after the date hereof, shall not affect the
binding nature of this Agreement as of the date hereof between the other
signatories hereto.
10.4 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the Exhibits hereto,
the Disclosure Schedule, and the documents and instruments and other agreements
among the parties hereto referenced herein: (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings both written and oral, among the parties
with respect to the subject matter hereof, PROVIDED HOWEVER that the
Confidentiality Agreement between Coherent and Star dated November 17, 1997 (the
"CONFIDENTIALITY AGREEMENT") shall remain in full force and effect as it relates
to the confidentiality and non-disclosure of Confidential Information (as
defined in the Confidentiality Agreement) provided by the parties; (b) except as
expressly provided
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herein are not intended to confer upon any other person any rights or remedies
hereunder; and (c) shall not be assigned by operation of law or otherwise,
except that Coherent and Merger Sub may assign their respective rights and
delegate their respective obligations hereunder to their respective affiliates.
10.5 SEVERABILITY. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
10.6 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
10.7 GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED AND ENFORCED IN ACCORDANCE WITH DELAWARE LAW.
10.8 RULES OF CONSTRUCTION. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefor, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE IMMEDIATELY FOLLOWS]
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The parties have caused this Agreement to be signed, all as of the day
and year first written above.
COHERENT, INC. PALOMAR MEDICAL TECHNOLOGIES, INC.
By: By:
------------------------------- ---------------------------------
Title: Title:
---------------------------- ------------------------------
MEDICAL TECHNOLOGIES
ACQUISITION, INC. STAR MEDICAL TECHNOLOGIES, INC.
By: By:
------------------------------- ---------------------------------
Title: Title:
---------------------------- ------------------------------
- ----------------------------------
Robert E. Grove
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James Z. Holtz
- ----------------------------------
David C. Mundinger
[SIGNATURE PAGE TO REORGANIZATION AGREEMENT]
<PAGE>
Exhibit 10.1
April 23, 1999
Coherent, Inc.
5100 Patrick Henry Drive
Santa Clara, CA 95054
Attention: Dennis Bucek, Treasurer
Re: BRIDGE LOAN FACILITY
Ladies/Gentlemen:
Bank of America National Trust and Savings Association ("LENDER") is pleased to
make available to Coherent, Inc., a Delaware corporation ("BORROWER") a bridge
facility on the terms and subject to the conditions set forth below. Terms not
defined herein have the meanings assigned to them in by reference in PARAGRAPH 4
hereof or in EXHIBIT A hereto.
1. THE FACILITY.
(a) THE COMMITMENT. Subject to the terms and conditions set forth
herein, Lender agrees to make available to Borrower a single
loan on the Closing Date (the "LOAN") in an aggregate
principal amount of $70,000,000, or such lesser amount as may
be requested by Borrower on the Closing Date (the
"COMMITMENT"). Once repaid or prepaid by Borrower, the Loan
may not be reborrowed.
(b) BORROWINGS, CONVERSIONS, CONTINUATIONS. Borrower may request
that the Loan be made as or converted to a Base Rate Loan or
Offshore Rate Loan by irrevocable notice to be received by
Lender not later than 8:00 a.m. on the Business Day of the
borrowing or conversion. If Borrower fails to give a notice of
conversion or continuation prior to the end of any Interest
Period in respect of any Offshore Rate Loan, Borrower shall be
deemed to have requested that such Loan be converted to a Base
Rate Loan on the last day of the applicable Interest Period.
Each Offshore Rate Loan shall be in a minimum principal amount
of $5,000,000 or a multiple of $100,000 in excess thereof.
(c) INTEREST. At the option of Borrower, the Loan or any part
thereof which is at least equal to the minimum amount set
forth above shall bear interest at a rate per annum equal to
(i) the Offshore Rate PLUS 1.50%; or (ii) the Base Rate.
Interest on Base Rate Loans when the Base Rate is determined
by Lender's "prime" or "reference" rate shall be calculated on
the basis of a year of 365 or 366 days and
<PAGE>
actual days elapsed. All other interest hereunder shall be
calculated on the basis of a year of 360 days and actual days
elapsed.
Borrower promises to pay interest on the Loan on the Maturity
Date. If the time for any payment is extended by operation of
law or otherwise, interest shall continue to accrue for such
extended period.
After the date any principal amount of the Loan is due and
payable (whether on the Maturity Date, upon acceleration or
otherwise), or after any other monetary obligation hereunder
shall have become due and payable, Borrower shall pay, but
only to the extent permitted by law, interest (after as well
as before judgment) on such amounts at a rate per annum equal
to the Base Rate plus 3%. Such interest shall be payable on
demand.
In no case shall interest hereunder exceed the amount that
Lender may charge or collect under applicable law.
(d) EVIDENCE OF LOANS. The Loan and all payments thereon shall be
evidenced by Lender's loan accounts and records; PROVIDED,
HOWEVER, that upon the request of Lender, the Loan may be
evidenced by a grid promissory note in the form of EXHIBIT B
hereto, instead of or in addition to such loan accounts and
records. Such loan accounts, records and promissory note shall
be PRIMA FACIE evidence of the amount of the Loan and payments
thereon. Any failure to record any Loan or payment thereon or
any error in doing so shall not limit or otherwise affect the
obligation of Borrower to pay any amount owing with respect to
the Loan.
(e) REPAYMENT. Borrower promises to pay to Lender the principal
amount of all Loans then outstanding on the Maturity Date.
Borrower shall make all payments required hereunder on the
date of payment in same day funds in United States Dollars at
the office of Lender located at 1850 Gateway Boulevard,
Concord, CA 94520 or such other address as Lender may from
time to time designate in writing.
All payments by Borrower to Lender hereunder shall be made to
Lender in full without set-off or counterclaim and free and
clear of and exempt from, and without deduction or withholding
for or on account of, any present or future taxes, levies,
imposts, duties or charges of whatsoever nature imposed by any
government or any political subdivision or taxing authority
thereof. Borrower shall reimburse Lender for any taxes imposed
on or withheld from such payments (other than taxes imposed on
Lender's income, and franchise taxes imposed on Lender, by the
jurisdiction under the laws of which Lender is organized or
any political subdivision thereof).
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(g) PREPAYMENTS. Borrower may, upon same-day notice, prepay the
Loan or a portion thereof on any Business Day; PROVIDED that
Borrower pays all Breakage Costs (if any) associated with such
prepayment on the date of such prepayment. Prepayments of
Offshore Rate Loans must be accompanied by a payment of
interest on the amount so prepaid. Prepayments of Offshore
Rate Loans must be in a principal amount of (i) at least
$5,000,000 or a multiple of $1,000,000 in excess thereof, or
(ii) if less, the entire amount of the outstanding Loan.
2. CONDITIONS PRECEDENT TO THE LOAN. As a condition precedent to
making the Loan hereunder, the following must have occurred:
(i) Lender shall have received from Borrower the enclosed
duplicate of this Agreement duly executed and
delivered on behalf of Borrower;
(ii) Lender shall have received from Borrower in form
satisfactory to Lender: (x) a certified borrowing
resolution or other evidence of Borrower's authority
to borrow; (y) a certificate of incumbency; and (z)
such other documents (including legal opinions) as
Lender may reasonably request;
(iii) If requested by Lender, Lender shall have received
from Borrower a promissory note as contemplated in
PARAGRAPH 1(d) above;
(iv) Borrower shall have paid to Lender a closing fee in
the amount agreed to by Borrower and Lender in a
letter agreement dated on or about April 20, 1999;
(v) Borrower and Lender shall have entered into an
amendment to the Credit Agreement in form and
substance satisfactory to Lender;
(vi) Borrower must furnish Lender with a notice of
borrowing in form and substance reasonably
satisfactory to Lender;
(vii) each representation and warranty set forth in
PARAGRAPH 3 below shall be true and correct in all
material respects as if made on the date of such
borrowing;
(viii) no Default or Event of Default shall have occurred
and be continuing on the date of such borrowing; and
(ix) the Closing Date shall have occurred on or before
April 23, 1999.
The notice of borrowing shall be deemed a representation and
warranty by Borrower that the conditions referred to in
clauses (vii) and (viii) above have been met.
2
<PAGE>
3. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants that:
(a) EXISTENCE AND QUALIFICATION; POWER; COMPLIANCE WITH LAWS. It
is a corporation duly organized or formed, validly existing
and in good standing under the laws of the state of its
organization or formation, has the power and authority and the
legal right to own and operate its properties, to lease the
properties it operates and to conduct its business, is duly
qualified and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of
properties or the conduct of its business requires such
qualification, and is in compliance with all applicable laws
except to the extent that noncompliance does not have a
Material Adverse Effect.
(b) POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The execution,
delivery and performance of this Agreement and the other Loan
Documents by Borrower are within its powers and have been duly
authorized by all necessary action, and this Agreement is and
the other Loan Documents, when executed, will be, legal, valid
and binding obligations of Borrower, enforceable in accordance
with their respective terms. The execution, delivery and
performance of this Agreement and the other Loan Documents are
not in contravention of law or of the terms of Borrower's
organic documents and will not result in the breach of or
constitute a default under, or result in the creation of a
lien under any indenture, agreement or undertaking to which
Borrower is a party or by which it or its property may be
bound or affected.
(c) FINANCIAL STATEMENTS; NO MATERIAL ADVERSE EFFECT. The audited
consolidated balance sheet and statements of earnings and cash
flow of Borrower and its Subsidiaries as of September 26,
1998, present fairly the consolidated financial condition of
Borrower and its Subsidiaries as of such date, and since such
date, there has been no event or circumstance that has a
Material Adverse Effect.
(d) NO MATERIAL LITIGATION. No litigation or governmental
proceeding is pending or, to the best knowledge of Borrower,
threatened by or against Borrower which, if adversely
determined, has a Material Adverse Effect.
(e) NO DEFAULT. No Default or Event of Default has occurred and is
continuing.
(f) USE OF PROCEEDS. The proceeds of the Loans will be used solely
to finance the acquisition of all of the shares or assets of
Star Medical Technologies, Inc. in compliance with the
provisions of the Loan Documents and of Regulation U of the
Board of Governors of the Federal Reserve Bank and any other
requirement of applicable law.
(g) ERISA. Each Plan is in compliance in all material respects
with the applicable provisions of ERISA, the Code, and other
Federal or state law, including all requirements under the
Code or ERISA for filing reports, and benefits have been
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<PAGE>
paid in accordance with the provisions of such Plan except
where the failure to be in compliance in all material respects
does not have a Material Adverse Effect.
(h) ENVIRONMENTAL MATTERS. All facilities owned or leased by
Borrower or its Subsidiaries have been and continue to be in
material compliance with all material environmental laws and
regulations.
(i) YEAR 2000. On the basis of a comprehensive review and
assessment of the Borrower's and its subsidiaries' systems and
equipment and inquiry made of the Borrower's and its
subsidiaries' material suppliers and vendors, the Borrower
reasonably believes that the Borrower's "Year 2000 problem"
(that is, the inability of computers, as well as embedded
microchips in non-computing devices, to perform properly
date-sensitive functions with respect to certain dates prior
to and after December 31, 1999), including costs of
remediation, will not result in a Material Adverse Effect. The
Borrower and its subsidiaries have developed feasible
contingency plans adequately to ensure uninterrupted and
unimpaired business operation in the event of failure of their
own or, to the extent reasonably foreseeable, a third party's
systems or equipment due to the Year 2000 problem, including
those of vendors and suppliers.
(j) FULL DISCLOSURE. No written statement made by Borrower to
Lender in connection with this Agreement, or in connection
with any Loan, contains any untrue statement of a material
fact or omits a material fact necessary to make the statement
made not misleading in any material respect.
4. COVENANTS. So long as principal of and interest on any Loan or any
other amount payable hereunder or under any other Loan Document remains
unpaid or unsatisfied or the Commitment has not been terminated,
Borrower shall comply with all the covenants and agreements applicable
to it contained in Articles 6 (Affirmative Covenants) and 7 (Negative
Covenants) of the Credit Agreement, it being agreed that such covenants
and agreements shall survive any termination, cancellation, discharge
or replacement of the Credit Agreement. Unless otherwise provided in
this Agreement or unless the context otherwise requires, all
capitalized terms used in such Articles 6 and 7 shall have the meanings
set forth in the Credit Agreement. The covenants and agreements of
Borrower contained in such Articles 6 and 7 (including all exhibits,
schedules and defined terms referred to therein) are hereby
incorporated herein by reference with appropriate substitutions,
including the following:
(a) all references to "this Agreement" shall be deemed to be
references to this Agreement;
(b) all references to "Bank" shall be deemed to be references to
Lender;
(c) all references to "Default" and "Event of Default" shall be
deemed to be references to a Default and an Event of Default,
respectively; and
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(d) all references to "Loans" shall be deemed to be references to
the Loan.
Borrower further covenants to Lender that it will give notice to Lender
of the occurrence of the Private Placement on the date thereof.
5. EVENTS OF DEFAULT. The following are "EVENTS OF DEFAULT:"
(a) Borrower fails to pay any principal of the Loan, or any other
amount payable hereunder or under any other Loan Document, as
and on the date when due; or
(b) Borrower fails to pay any interest on the Loan, or any
commitment fees due hereunder, or any portion thereof, within
three days after the date when due; or Borrower fails to pay
any other fees or amount payable to Lender under any Loan
Document, or any portion thereof, within five days after the
date due; or
(c) Any representation or warranty in any Loan Document or in any
certificate, agreement, instrument or other document made or
delivered by Borrower pursuant to or in connection with any
Loan Document proves to have been incorrect in any material
respect when made or deemed made; or
(d) Borrower fails to comply with any covenant or agreement
incorporated herein by reference pursuant to PARAGRAPH 4
above, subject to any applicable grace period and/or notice
requirement set forth in Article 8 of the Credit Agreement (it
being understood and agreed that any such notice requirement
shall be met by Lender's giving the applicable notice to
Borrower); or
(e) Any "Event of Default" specified in Article 8 of the Credit
Agreement occurs and is continuing.
Upon the occurrence of an Event of Default, Lender may declare the
Commitment to be terminated by written notice to Borrower, whereupon
the Commitment shall be terminated, and/or declare all sums outstanding
hereunder and under the other Loan Documents to be immediately due and
payable, together with all interest thereon, without other notice of
default, presentment or demand for payment, protest or notice of
nonpayment or dishonor, or other notices or demands of any kind or
character, all of which are hereby expressly waived; PROVIDED, HOWEVER,
that upon the occurrence of any event specified in Section 8.01(f)(ii)
or Section 8.01(g) of the Credit Agreement, the Commitment shall
automatically terminate, and all sums outstanding hereunder and under
each other Loan Document shall become immediately due and payable,
together with all interest thereon, without other notice of default,
presentment or demand for payment, protest or notice of nonpayment or
dishonor, or other notices or demands of any kind or character, all of
which are hereby expressly waived.
6. MISCELLANEOUS.
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(a) All financial computations required under this Agreement shall
be made, and all financial information required under this
Agreement shall be prepared, in accordance with generally
accepted accounting principles consistently applied.
(b) All references herein and in the other Loan Documents to any
time of day shall mean the local (standard or daylight, as in
effect) time of San Francisco, CA.
(c) All Breakage Costs shall be for the account of Borrower.
(d) If at any time Lender, in its sole discretion, determines that
(i) deposits in the amount of any requested Offshore Rate Loan
for any requested Interest Period are not available to Lender
in the offshore dollar interbank market, or (ii) the Offshore
Rate does not accurately reflect the funding cost to Lender of
lending such Loans, Lender's obligation to make Offshore Rate
Loans shall cease for the period during which such
circumstance exists.
(e) Borrower shall reimburse or compensate Lender, upon demand,
for all costs incurred, losses suffered or payments made by
Lender which are reasonably applied or allocated by Lender to
the transactions contemplated herein (all as determined by
Lender in its reasonable discretion) by reason of any and all
future reserve, deposit, capital adequacy or similar
requirements against (or against any class of or change in or
in the amount of) assets, liabilities or commitments of, or
extensions of credit by, Lender; and compliance by Lender with
any future directive, or requirements from any regulatory
authority, whether or not having the force of law.
(f) No amendment or waiver of any provision of this Agreement
(including any provision of the Credit Agreement incorporated
herein by reference pursuant to PARAGRAPH 4 above and any
waiver of PARAGRAPH 5(d) above) or of any other Loan Document
and no consent by Lender to any departure therefrom by
Borrower shall be effective unless such amendment, waiver or
consent shall be in writing and signed by a duly authorized
officer of Lender, and any such amendment, waiver or consent
shall then be effective only for the period and on the
conditions and for the specific instance specified in such
writing. No failure or delay by Lender in exercising any
right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise
of any other rights, power or privilege.
(g) Except as otherwise expressly provided herein, notices and
other communications to each party provided for herein shall
be in writing and shall be delivered by hand or overnight
courier service, mailed or sent by telecopy or electronic mail
to the address provided from time to time by such party. Any
such notice or other communication sent by overnight courier
service, mail or telecopy shall be effective on the earlier of
actual receipt and (i) if sent by overnight courier
6
<PAGE>
service, the scheduled delivery date, (ii) if sent by mail,
the fourth Business Day after deposit in the U.S. mail first
class postage prepaid, and (iii) if sent by telecopy, when
transmission in legible form is complete. All notices and
other communications sent by the other means listed in the
first sentence of this paragraph shall be effective upon
receipt. Notwithstanding anything to the contrary contained
herein, all notices (by whatever means) to Lender pursuant to
PARAGRAPH 1(b) hereof shall be effective only upon receipt.
(h) This Agreement shall inure to the benefit of the parties
hereto and their respective successors and assigns, except
that Borrower may not assign its rights and obligations
hereunder. Lender may at any time (i) assign all or any part
of its rights and obligations hereunder to any other Person,
except a competitor of Borrower, with the consent of Borrower,
such consent not to be unreasonably withheld, PROVIDED that no
such consent shall be required if the assignment is to an
affiliate of Lender or if a Default or Event of Default
exists, and (ii) grant to any other Person participating
interests in all or part of its rights and obligations
hereunder without notice to Borrower. Borrower agrees to
execute any documents reasonably requested by Lender in
connection with any such assignment. All information provided
by or on behalf of Borrower to Lender or its affiliates may be
furnished by Lender to its affiliates and to any actual or
proposed assignee or participant, subject to the
confidentiality requirements of PARAGRAPH 6(l) below.
(i) Borrower shall pay Lender, on demand, all reasonable
out-of-pocket expenses and legal fees (including the allocated
costs for in-house legal services) incurred by Lender in
connection with the enforcement of this Agreement or any
instruments or agreements executed in connection herewith.
(j) If any provision of this Agreement or any other Loan Document
shall be held invalid or unenforceable in whole or in part,
such invalidity or unenforceability shall not affect the
remaining provisions hereof or thereof. This Agreement
supersedes all prior agreements and oral negotiations with
respect to the subject matter hereof.
(k) This Agreement may be executed in one or more counterparts,
and each counterpart, when so executed, shall be deemed an
original but all such counterparts shall constitute but one
and the same instrument.
(l) Lender agrees to use and to cause its affiliates to use
reasonable efforts, in accordance with safe and sound banking
practices and its customary practices for handling non-public
information, to maintain the confidentiality of any non-public
information supplied to Lender by Borrower or any of
Borrower's subsidiaries in connection with this Agreement;
PROVIDED, that nothing in this PARAGRAPH 6(l) shall be
construed to limit the disclosure of any such information (i)
to the extent required by statute, rule, regulation or
judicial process, (ii) to counsel, accountants
7
<PAGE>
or other professional advisors to Lender, (iii) to bank
examiners, auditors or regulators of Lender, (iv) in
connection with any related litigation to which Lender is a
party, (v) to the extent necessary to enforce any right or
remedy of Lender hereunder, (vi) to any potential assignee or
participant who agrees to be bound by the provisions of this
PARAGRAPH 6(l), (vii) as such disclosure is expressly
permitted under the terms of any other document or agreement
regarding confidentiality to which Borrower or any of its
subsidiaries is party or is deemed party which Lender or an
affiliate of Lender; and (viii) to Lender's affiliates. -
(m) This Agreement and the other Loan Documents are governed by,
and shall be construed in accordance with, the laws of the
State of California and the applicable laws of the United
States of America. Borrower hereby submits to the nonexclusive
jurisdiction of the United States District Court and each
state court in the City of San Francisco for the purposes of
all legal proceedings arising out of or relating to any of the
Loan Documents or the transactions contemplated thereby.
Borrower irrevocably consents to the service of any and all
process in any such action or proceeding by the mailing of
copies of such process to Borrower at its address set forth
beneath its signature hereto. Borrower irrevocably waives, to
the fullest extent permitted by law, any objection which it
may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any
such proceeding brought in such a court has been brought in an
inconvenient forum.
(n) BORROWER AND LENDER EACH WAIVE THEIR RESPECTIVE RIGHTS TO A
TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
(o) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
8
<PAGE>
Please indicate your acceptance of the Commitment on the foregoing terms and
conditions by returning an executed copy of this Agreement to the undersigned
not later than April 23, 1999.
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: _______________________________
Name: Michael McCutchin
Title: Managing Director
ACCEPTED AND AGREED TO AS OF
THE DATE FIRST WRITTEN ABOVE:
COHERENT, INC.
By:____________________________
Name:__________________________
Title: ________________________
Date: April 23, 1999
9
<PAGE>
EXHIBIT A
DEFINITIONS
Agreement: This letter agreement, as amended, restated,
extended, supplemented or otherwise modified in
writing from time to time.
Base Rate: A fluctuating rate per annum equal to the higher of
(a) the Federal Funds Rate plus 1/2 of 1% and (b) the
rate of interest publicly announced from time to time
by Lender as its "prime" or "reference" rate. The
Lender's prime or reference rate is a rate set by
Lender based upon various factors including Lender's
costs and desired return, general economic conditions
and other factors, and is used as a reference point
for pricing some loans, which may be priced at,
above, or below such announced rate. Any change in
the prime or reference rate announced by Lender shall
take effect at the opening of business on the day
specified in the public announcement of such change.
Base Rate Loan: Any portion of the Loan which bears interest based on
the Base Rate.
Breakage Costs: Any loss, cost or expense incurred by Lender
(including any loss of anticipated profits and any
loss or expense arising from the liquidation or
reemployment of funds obtained by Lender to maintain
the relevant Offshore Rate Loan or from fees payable
to terminate the deposits from which such funds were
obtained) as a result of (i) any continuation,
conversion, payment or prepayment of any Offshore
Rate Loan on a day other than the last day of the
Interest Period therefor (whether voluntary,
mandatory, automatic, by reason of acceleration, or
otherwise); or (ii) any failure by Borrower (for a
reason other than the failure of Lender to make a
Loan when all conditions to making such Loan have
been met by Borrower in accordance with the terms
hereof) to prepay, borrow, continue or convert any
Offshore Rate Loan on a date or in the amount
notified by Borrower. The certificate of Lender as to
its costs of funds, losses and expenses incurred
shall be PRIMA FACIE evidence of the amount payable.
Business Day: Any day other than a Saturday, Sunday, or other
day on which commercial banks are authorized to close
under the laws of, or are in fact closed in, the
State of California and, if such day relates to any
Offshore Rate Loan, means any such day on which
dealings in dollar deposits are conducted by and
between banks in the offshore dollar interbank
market.
Closing Date: The date on which the conditions to making the Loan
set forth in PARAGRAPH 2 hereof have been satisfied
by Borrower or waived by Lender.
<PAGE>
Code: The Internal Revenue Code of 1986, as amended from
time to time.
Credit Agreement: The Credit Agreement, dated as of December 20, 1996,
between Borrower and Lender, as it may be amended
from time to time.
Default: Any event that, with the giving of any notice, the
passage of time, or both, would be an Event of
Default.
ERISA: The Employee Retirement Income Security Act of 1974
and any regulations issued pursuant thereto, as
amended from time to time.
Event of Default: Has the meaning set forth in PARAGRAPH 5 hereof.
Federal Funds Rate: For any day, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal
funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of
New York on the Business Day next succeeding such
day; PROVIDED that (a) if such day is not a Business
Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding
Business Day as so published on the next succeeding
Business Day, and (b) if no such rate is so published
on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate
charged to Lender on such day on such transactions as
determined by Lender.
<PAGE>
Interest Period: For each Offshore Rate Loan, (a) initially, the
period commencing on the date the Offshore Rate Loan
is disbursed or converted from a Base Rate Loan and
(b) thereafter, the period commencing on the last day
of the preceding Interest Period, and, in each case,
ending on the earlier of (x) the Maturity Date and
(y) seven to 30 days after the disbursement thereof
or the conversion thereinto, as requested by
Borrower; PROVIDED that:
(i) any Interest Period that would otherwise end
on a day that is not a Business Day shall be
extended to the next succeeding Business Day
unless such Business Day falls in another
calendar month, in which case such Interest
Period shall end on the next preceding
Business Day; and
(ii) any Interest Period which begins on the last
Business Day of a calendar month (or on a
day for which there is no numerically
corresponding day in the calendar month at
the end of such Interest Period) shall end
on the last Business Day of the calendar
month at the end of such Interest Period.
Loan Documents: This Agreement, and any promissory note, certificate,
fee letter, and other instrument, document or
agreement delivered in connection with this
Agreement.
Material Adverse Effect: Any set of circumstances or events
which (a) has or could reasonably be expected to have
any material adverse effect whatsoever upon the
validity or enforceability of any Loan Document, (b)
is or could reasonably be expected to be material and
adverse to the condition (financial or otherwise),
business operations or prospects of Borrower or (c)
materially impairs or could reasonably be expected to
materially impair the ability of Borrower to perform
its obligations and liabilities under this Agreement
or any other Loan Document.
Maturity Date: The date that is the earlier to occur of (i) the date
on which the Private Placement occurs, and (ii) the
date that is 30 days after the Closing Date.
Offshore Rate: For any Interest Period with respect to any Offshore
Rate Loan, a rate per annum determined pursuant to
the following formula:
Offshore Rate = OFFSHORE BASE RATE
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"OFFSHORE BASE RATE" means, for such Interest
Period:
<PAGE>
the rate per annum of interest at which deposits
in dollars in the approximate amount of the
Offshore Rate Loan to be made, continued, or
converted into and having a maturity comparable to
such Interest Period would by offered by Lender's
Grand Cayman Branch, Grand Cayman, British West
Indies (or such other office as may be designated
for such purpose by the Bank), to major banks in
the offshore interbank market upon request of such
banks at approximately 8:00 a.m. on the first day
of such Interest Period.
"EURODOLLAR RESERVE PERCENTAGE" means, for any day
during any Interest Period, the reserve percentage
(expressed as a decimal, rounded upward to the
next 1/100th of 1%) in effect on such day
applicable to Lender under regulations issued from
time to time by the Board of Governors of the
Federal Reserve System for determining the maximum
reserve requirement (including any emergency,
supplemental or other marginal reserve
requirement) with respect to Eurocurrency funding
(currently referred to as "Eurocurrency
liabilities"). The Offshore Rate for each
outstanding Offshore Rate Loan shall be adjusted
automatically as of the effective date of any
change in the Eurodollar Reserve Percentage.
Offshore Rate Loan: Any portion of the Loan bearing interest based on the
Offshore Rate.
Plan: Any employee benefit plan maintained or contributed
to by Borrower or by any trade or business (whether
or not incorporated) under common control with
Borrower as defined in Section 4001(b) of ERISA and
insured by the Pension Benefit Guaranty Corporation
under Title IV of ERISA.
Private Placement: The issuance of unsecured debt by Borrower to be
evidenced by unsecured senior notes of Borrower in
the aggregate principal amount of $70,000,000.
Subsidiary: A corporation, partnership, joint venture, limited
liability company or other business entity of which a
majority of the shares of securities or other
interests having ordinary voting power for the
election of directors or other governing body (other
than securities or interests having such power only
by reason of the happening of a contingency) are at
the time beneficially owned, or the management of
which is otherwise controlled, directly, or
indirectly through one or more intermediaries, or
both, by Borrower.
<PAGE>
EXHIBIT B
FORM OF PROMISSORY NOTE
$70,000,000 ______________, ____
FOR VALUE RECEIVED, the undersigned, COHERENT, INC., a Delaware
corporation ("BORROWER"), hereby promises to pay to the order of BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION ("LENDER") the principal sum of Seventy
Million Dollars ($70,000,000) or, if less, the aggregate unpaid principal amount
of all Loans made by Lender to Borrower pursuant to the letter agreement, dated
as of April 23, 1999 (such letter agreement, as it may be amended, restated,
extended, supplemented or otherwise modified from time to time, being
hereinafter called the "AGREEMENT"), between Borrower and Lender, on the
Maturity Date. Borrower further promises to pay interest on the unpaid principal
amount of the Loans evidenced hereby from time to time at the rates, on the
dates, and otherwise as provided in the Agreement.
Lender is authorized to endorse the amount and the date on which each
Loan is made or converted, the Interest Period therefor (if applicable) and each
payment of principal with respect thereto on the schedules annexed hereto and
made a part hereof, or on continuations thereof which shall be attached hereto
and made a part hereof; PROVIDED that any failure to so endorse such information
on such schedule or continuation thereof or any error in doing so shall not
limit or otherwise affect any obligation of Borrower under the Agreement or this
promissory note.
This promissory note is the promissory note referred to in, and is
entitled to the benefits of, the Agreement, which Agreement, among other things,
contains provisions for acceleration of the maturity of the Loans evidenced
hereby upon the happening of certain stated events and also for prepayments on
account of principal of the Loans prior to the maturity thereof upon the terms
and conditions therein specified.
Unless otherwise defined herein, terms defined in the Agreement are
used herein with their defined meanings therein. This promissory note shall be
governed by, and construed in accordance with, the laws of the State of
California.
COHERENT, INC.
By:______________________________
Name:____________________________
Title:___________________________
<PAGE>
SCHEDULE A TO NOTE
BASE RATE LOANS AND REPAYMENT OF BASE RATE LOANS
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Amount of Base Rate
Amount of Base Rate Loan Repaid or Unpaid Principal
Loan Made or Converted Converted to Offshore Balance of Base Notation
Date From Offshore Rate Loan Rate Loan Rate Loans Made By
---- ----------------------- --------- ---------- -------
<S> <C> <C> <C> <C>
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</TABLE>
<PAGE>
SCHEDULE B TO NOTE
OFFSHORE RATE LOANS AND REPAYMENT OF OFFSHORE RATE LOANS
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6)
Amount of Amount of
Offshore Rate Offshore Rate Unpaid Principal
Loan Made or Loan Repaid or Balance of
Converted from Converted to Base Offshore Rate Notation
Date Base Rate Loan Interest Period Rate Loan Loans Made By
---- -------------- --------------- --------- ----- -------
<S> <C> <C> <C> <C> <C>
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</TABLE>
<PAGE>
Exhibit 99.1
April 27, 1999
COHERENT, INC. COMPLETES ACQUISITION OF STAR MEDICAL TECHNOLOGIES
Coherent, Inc. (Santa Clara, CA) (Nasdaq:COHR) announced today it has
completed the acquisition of Star Medical Technologies, Inc. for $65 million in
cash from Palomar Medical Technologies, Inc. (Lexington, MA) (Nasdaq: PMTI) and
certain other Star employees. Star, based in Pleasanton, California,
manufactures the highly successful and reliable LightSheer(TM)Diode Laser
Systems.
The laser hair removal market is currently the fastest growing area of
the aesthetic market. Since the introduction of the LightSheer(TM) in March
1998, Star has shipped more than 350 units through the Coherent distribution
network to customers worldwide. Star is a leader in the hair removal market and
last week announced that the LightSheer(TM) Diode Laser System received
clearance from the U.S. Food and Drug Administration to claim that it achieves
"permanent hair reduction". This is the first such clearance to be granted to
the new generation diode based technology. The LightSheer(TM)Laser Diode System
is smaller in size than conventional systems, providing greater portability and
ease of use for physicians.
Bernard Couillaud, Coherent's President and Chief Executive Officer
commented, "While we are excited about owning the rights to the LightSheer(TM)
product, Star is not a one product company. We view Star as a semiconductor
laser company with proven laser diode technology that can easily be applied into
commercial and other medical markets. Star's proprietary technology will play a
long-term strategic role in the expansion of our Semiconductor Group's laser
diode markets. Star's stacking capabilities will broaden Coherent's laser diode
markets to other medical applications, to material processing such as soldering,
welding and thermal treating, laser pumping, and illuminators."
As part of the transaction, Coherent is acquiring all the intellectual
property related to Star's business, including four issued United States patents
and a pending application relating to high power semiconductor laser diode
arrays. Also, as part of the transaction, Coherent is licensed under the
Anderson hair removal patent.
The acquisition will be treated as a purchase. It is estimated that the
results for the third fiscal quarter ending July 3, 1999 will include a one time
In-Process R and D pre-tax and after tax charge of $16 million and $10.5 million
($.44 per diluted share), respectively. The remaining goodwill and other
intangibles of approximately $51 million will be amortized over useful lives
primarily ranging from 7 to 15 years.
"Safe Harbor" Statement Under the Private Securities Litigation Reform
Act : The statements in this press release that relate to future plans, events
or performance are forward-looking statements that involve risks and
uncertainties, including risks associated
<PAGE>
with uncertainties related to currency adjustments, contract cancellations,
manufacturing risks, competitive factors, uncertainties pertaining to customer
orders, demand for products and services, development of markets for the
Company's products and services and other risks identified in the Company's SEC
filings. Actual results, events and performance may differ materially. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. The Company undertakes no obligation to
release publicly the result of any revisions to these forward-looking statements
that may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events. Readers are encouraged to refer
to the risk disclosures described in the Company's reports on Form 10-K, 10-Q
and 8-K, as applicable.
Founded in 1966, Coherent, Inc. is a Standard & Poor's SmallCap 600
company and a world leader in the design and manufacture of lasers and systems
for medical, scientific and commercial applications. Please direct any questions
to Robert J. Quillinan, Executive Vice President and Chief Financial Officer at
(408) 764-4168. To receive a full text copy of this press release by fax, please
call (877) 329-2647 or (877) FAX COHR.
