<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report January 20, 1994
(Date of earliest event reported)
CORDIS CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA
(State or other jurisdiction of incorporation)
0-3274 59-0870525
(Commission File Number) (IRS Employer
Identification Number)
14201 N. W. 60th Avenue, Miami Lakes, Florida 33014
(Address of principal executive offices) (Zip Code)
(305) 824-2000
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events
On January 20, 1994, Cordis Corporation (Cordis) entered into a
definitive agreement to acquire Webster Laboratories, Inc.
(Webster) in a stock-for-stock transaction pursuant to which
Webster will become a wholly-owned subsidiary of Cordis. Webster
is a privately held California corporation that develops and
markets electrophysiology catheters. The transaction is structured
as a tax-free reorganization of Webster and is expected to be
accounted for as a pooling of interests.
Under the terms of the agreement, the outstanding shares of common
stock and common stock equivalents of Webster would be converted
into the right to receive between 1,634,008 and 1,997,203 shares of
Cordis common stock depending on the average trading price of
Cordis common stock during the 20 consecutive trading days prior to
the third trading day before the closing date. The acquisition is
subject to approval by shareholders of Webster and the satisfaction
of various other terms and conditions. The transaction is expected
to close in the first calendar quarter of 1994.
Item 7. Financial Statements and Exhibits
(c) Exhibit Index
Exhibit No. Description
2 Agreement and Plan of Reorganization By and
Among Cordis Corporation, Cordis Acquisition,
Inc., Webster Laboratories, Inc. and certain
of the Shareholders of Webster Laboratories,
Inc. Dated as of January 20, 1994
20 News Release dated January 21, 1994
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SIGNATURES
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.
CORDIS CORPORATION
Date: January 28, 1994 By ALFRED J. NOVAK
Alfred J. Novak
Vice President, Treasurer
and Chief Financial Officer
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CORDIS CORPORATION,
CORDIS ACQUISITION, INC.,
WEBSTER LABORATORIES, INC.,
and
CERTAIN OF THE SHAREHOLDERS OF
WEBSTER LABORATORIES, INC.
Dated as of January 20, 1994
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TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. 1
SECTION 1.02. Effective Time. 2
SECTION 1.03. Effect of the Merger. 2
SECTION 1.04. Articles of Incorporation;
By-Laws. 3
SECTION 1.05. Directors and Officers. 3
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE
OF CERTIFICATES
SECTION 2.01. Conversion of Securities. 3
SECTION 2.02. Exchange of Certificates. 5
SECTION 2.03. Stock Transfer Books. 9
SECTION 2.04. Stock Options. 9
SECTION 2.05. Dissenting Shareholders. 10
SECTION 2.06. Post-closing Adjustment. 10
SECTION 2.07. Closing. 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
SECTION 3.01. Organization and Qualification. 12
SECTION 3.02. Articles of Incorporation and By-
Laws. 13
SECTION 3.03. Capitalization; Subsidiaries. 13
SECTION 3.04. Authority. 15
SECTION 3.05. No Conflict; Required Filings and
Consents. 15
SECTION 3.06. Permits; Compliance. 16
SECTION 3.07. Financial Information; Books and
Records. 17
SECTION 3.08. Absence of Undisclosed
Liabilities. 17
SECTION 3.09. Absence of Certain Changes or
Events. 18
SECTION 3.10. Absence of Litigation. 19
SECTION 3.11. Contracts; No Default. 19
SECTION 3.12. Employee Benefit Plans; Labor
Matters. 21
SECTION 3.13. Taxes. 22
SECTION 3.14. FDA and Other Regulatory
Compliance. 24
SECTION 3.15. Customers. 25
SECTION 3.16. Certain Business Practices and
Regulations. 25
SECTION 3.17. Insurance. 26
SECTION 3.18. Potential Conflicts of Interest. 26
SECTION 3.19. Accounting and Tax Matters. 27
SECTION 3.20. Receivables; Inventories. 28
SECTION 3.21. Real Property; Leases. 29
SECTION 3.22. Books and Records. 31
SECTION 3.23. Title to Assets. 31
SECTION 3.24. No Infringement or Contest. 31
SECTION 3.25. Board Recommendation. 32
SECTION 3.26. Vote Required. 32
SECTION 3.27. Banks; Attorneys-in-fact. 32
SECTION 3.28. Affiliate Agreements. 33
SECTION 3.29. Brokers. 33
SECTION 3.30. Environmental Matters. 33
SECTION 3.31. Disclosure. 35
SECTION 3.32. Company Shareholders. 35
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY SHAREHOLDERS 36
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE SCHEDULE 2 SHAREHOLDERS 36
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF ACQUIROR AND ACQUIROR SUB
SECTION 6.01. Organization and Qualification;
Subsidiaries. 36
SECTION 6.02. Articles of Incorporation and By-
Laws. 37
SECTION 6.03. Authority. 37
SECTION 6.04. No Conflict; Required Filings and
Consents. 37
SECTION 6.05. Absence of Litigation. 38
SECTION 6.06. Ownership of Acquiror Sub; No
Prior Activities. 39
SECTION 6.07. Brokers. 39
SECTION 6.08. SEC Reports. 39
SECTION 6.09. Acquiror Common Stock. 40
SECTION 6.10. Taxes. 40
ARTICLE VII
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 7.01. Affirmative Covenants. 40
SECTION 7.02. Negative Covenants of the Company. 41
SECTION 7.03. Negative Covenants of Acquiror. 44
SECTION 7.04. Access and Information. 44
ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.01. Registration Statement; Proxy
Statement. 45
SECTION 8.02. Meeting of Shareholders. 47
SECTION 8.03. Appropriate Action; Consents;
Filings; Other. 47
SECTION 8.04. Unaudited Financial Information. 48
SECTION 8.05. Letters of Accountants. 49
SECTION 8.06. Update Disclosure; Breaches. 49
SECTION 8.07. Affiliates; Accounting and Tax
Treatment. 49
SECTION 8.08. Public Announcements. 50
SECTION 8.09. NASD Listing. 50
SECTION 8.10. Employee Matters. 50
SECTION 8.11. Assumption of Agreements. 50
SECTION 8.12. Benefit Arrangements. 50
SECTION 8.13. Principal Offices. 51
SECTION 8.14. Obligations of Acquiror Sub;
Assets of Acquiror Sub. 51
SECTION 8.15. Approval of Merger. 51
SECTION 8.16. Tax Returns. 52
SECTION 8.17. Indemnification. 52
SECTION 8.18. Procedures; Conditions of
Indemnification. 53
SECTION 8.19. Agreement with Brentwood. 54
SECTION 8.20. Condition of Wilton Webster. 54
ARTICLE IX
CLOSING CONDITIONS
SECTION 9.01. Conditions to Obligations of
Acquiror and the Company Under This
Agreement. 55
SECTION 9.02. Additional Conditions to
Obligations of Acquiror. 56
SECTION 9.03. Additional Conditions to
Obligations of the Company. 58
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.01. Termination. 60
SECTION 10.02. Effect of Termination. 61
SECTION 10.03. Expenses. 61
SECTION 10.04. Amendment. 62
SECTION 10.05. Waiver. 62
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Survival of Representations,
Warranties and Agreements After
Effective Time. 63
SECTION 11.02. Limitation of Liability of Company
Shareholders and Schedule 2
Shareholders. 63
SECTION 11.03. Notices. 64
SECTION 11.04. Certain Definitions. 65
SECTION 11.05. Headings. 66
SECTION 11.06. Severability. 66
SECTION 11.07. Entire Agreement. 66
SECTION 11.08. Assignment. 67
SECTION 11.09. Parties in Interest. 67
SECTION 11.10. Mutual Drafting. 67
SECTION 11.11. Governing Law. 67
SECTION 11.12. Counterparts. 67
EXHIBITS
EXHIBIT A FORM OF AGREEMENT OF MERGER
EXHIBIT B FORM OF ESCROW AGREEMENT
EXHIBIT C FORM OF AFFILIATE AGREEMENT
EXHIBIT D FORM OF BRENTWOOD AGREEMENT
EXHIBIT E-1 FORM OF WEBSTER EMPLOYMENT AGREEMENT
EXHIBIT E-2 FORM OF BROWN EMPLOYMENT AGREEMENT
<PAGE>
Index of Defined Terms
Section
Acquiror PREAMBLE
Acquiror Common Stock SECTION 2.01(a)(i)
Acquiror Disclosure Schedule ARTICLE VI PREAMBLE
Acquiror Material Adverse Effect SECTION 6.01
Acquiror Option SECTION 2.04
Acquiror Sub PREAMBLE
Acquiror Sub Common Stock SECTION 2.01(c)
Acquiror SEC Reports SECTION 6.08
Adjustment Date SECTION 2.06(a)(i)
Adjustment Escrow Shares SECTION 2.06(a)
Adjustment Property SECTION 2.06(a)(i)
affiliate SECTION 11.04(a)
Affiliate Agreement SECTION 3.28
Agreement PREAMBLE
Agreement of Merger SECTION 1.02
Amended Articles SECTION 1.04
Amended By-Laws SECTION 1.04
approvals SECTION 3.14
Assets SECTION 3.21(g)
Audited Balance Sheets SECTION 3.07(a)
Audited Statements SECTION 3.07(a)
Average Trading Price SECTION 2.01(a)(i)
beneficial owner SECTION 11.04(b)
best efforts SECTION 11.04(c)
Blue Sky Laws SECTION 3.05(a)
Bona Fide Proposal SECTION 7.02(g)
Brentwood SECTION 3.03
business day SECTION 11.04(d)
California Law PREAMBLE
Claim Amount SECTION 2.06(a)(iii)
Certificates SECTION 2.02(b)
Claims SECTION 8.18
Closing SECTION 2.07
Closing Date SECTION 2.07
Code PREAMBLE
Company PREAMBLE
Company Affiliates SECTION 3.28
Company Benefit Plans SECTION 3.12(a)
Company Common Stock SECTION 2.01(a)(i)
Company Contracts SECTION 3.11(a)
Company Disclosure Schedule ARTICLE III PREAMBLE
Company Material Adverse Effect SECTION 3.01
Company Options SECTION 2.04
Company Permits SECTION 3.06(a)
Company Preferred Stock SECTION 3.03
Company Shareholders PREAMBLE
Company Stock Plan SECTION 2.04
Competing Transaction SECTION 7.02(g)
Confidentiality Agreement SECTION 7.02(g)
control SECTION 11.04(e)
Damages SECTION 8.17
Disability SECTION 2.01(a)(iii)
Dissenting Shares SECTION 2.01(a)(i)
Dissenting Shareholder SECTION 2.05
Documents SECTION 3.21(g)
Effective Time SECTION 1.02
employee benefit plan SECTION 3.12(a)
Encumbrances SECTION 3.21(g)
Environmental Laws SECTION 3.30(h)
ERISA SECTION 3.12(a)
Escrow Agent SECTION 2.02(h)
Escrow Agreement SECTION 2.02(h)
excess parachute payment SECTION 3.12(b)
Exchange Act SECTION 3.05(a)
Exchange Agent SECTION 2.02(a)
Exchange Fund SECTION 2.02(a)
Exchange Ratio SECTION 2.01(a)(i)
FDA SECTION 3.14
Financial Statements SECTION 8.04
GAAP SECTION 3.07(b)
Governmental Entities SECTION 3.05(a)
group SECTION 7.02(g)
Hazardous Discharge SECTION 3.30(h)
Hazardous Materials SECTION 3.30(h)
Holders SECTION 2.06(a)(iii)
HSR Act SECTION 3.05(a)
Indemnification Amount SECTION 2.06(a)(ii)
Indemnified Person or Indemnified Persons SECTION 8.17
IRS SECTION 3.12(a)
knowledge SECTION 11.04(f)
Laws SECTION 3.05(a)
Maximum Liability Amount SECTION 11.02
MDRs SECTION 3.14
Merger PREAMBLE
NASD SECTION 3.05(a)
NASDAQ/NMS SECTION 2.01(a)(i)
Other Agreements SECTION 3.21(g)
PCBs SECTION 3.30(h)
person SECTION 11.04(g)
Plan SECTION 3.19(b)
PMA SECTION 3.14
Post-closing Adjustment Period SECTION 2.06(a)(i)
Pre-Merger Period SECTION 3.19(a)
Proxy Statement SECTION 8.01(a)
Real Property SECTION 3.21(g)
Recomputed Exchange Ratio SECTION 2.01(a)(ii)
Registration Rights Agreement SECTION 3.03
Registration Statement SECTION 8.01(a)
Representative SECTION 2.02(h)
Returns SECTION 3.13(d)
Review Period SECTION 8.15
Sale SECTION 3.19(b)
Schedule 2 Shareholders ARTICLE V
SEC SECTION 3.28
Securities Act SECTION 3.05(a)
Series A Preferred Stock Purchase
Agreement SECTION 3.03
Shareholders' Meeting SECTION 8.01(b)
Significant Subsidiary or Significant
Subsidiaries SECTION 11.04(h)
subsidiary or subsidiaries SECTION 11.04(i)
Surviving Corporation SECTION 1.01
Tax or Taxes SECTION 3.13(d)
Unaudited Balance Sheets SECTION 8.04
Unaudited Statements SECTION 8.04
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION, dated as of January 20,
1994 (this "Agreement"), among CORDIS CORPORATION, a Florida
corporation ("Acquiror"), CORDIS ACQUISITION, INC., a California
corporation ("Acquiror Sub") and a wholly owned subsidiary of
Acquiror, WEBSTER LABORATORIES, INC., a California corporation (the
"Company"), and each of the shareholders of the Company as named on
Schedule 1 hereto (the "Company Shareholders").
WHEREAS, Acquiror Sub, upon the terms and subject to the
conditions of this Agreement and in accordance with Sections 1100
et seq. of the Corporations Code of the State of California
("California Law"), will merge with and into the Company (the
"Merger");
WHEREAS, the Board of Directors of the Company has (i)
determined that the Merger is fair to the holders of Company
Common Stock (as defined in Section 2.01(a)) and Company
Preferred Stock (as defined in Section 3.03) and is in the best
interests of such shareholders and (ii) approved and adopted this
Agreement and the transactions contemplated hereby and
recommended approval and adoption of this Agreement by the
shareholders of the Company;
WHEREAS, the Board of Directors of Acquiror has determined
that the Merger is in the best interests of Acquiror and its
stockholders and the Boards of Directors of Acquiror and Acquiror
Sub have approved and adopted this Agreement and the transactions
contemplated hereby;
WHEREAS, for federal income tax purposes, it is intended
that the Merger shall qualify as a tax-free reorganization under
the provisions of Section 368(a) of the United States Internal
Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the
Merger shall be accounted for as a "pooling of interests"
pursuant to APB Opinion No. 16, Staff Accounting Releases 130 and
135 and Staff Accounting Bulletins No. 65 and No. 76;
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth in this Agreement, the parties hereto agree as follows:
<PAGE>
ARTICLE I
THE MERGER
SECTION 1.01. The Merger.
Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with California Law, at the
Effective Time (as defined in Section 1.02) Acquiror Sub shall be
merged with and into the Company. As a result of the Merger, the
separate corporate existence of Acquiror Sub shall cease and the
Company shall continue as the surviving corporation of the Merger
(the "Surviving Corporation").
SECTION 1.02. Effective Time.
As promptly as practicable after the Closing (as defined in
Section 2.07), the parties hereto shall cause the Merger to be
consummated by filing the Agreement of Merger substantially in
the form attached hereto as Exhibit A (the "Agreement of Merger")
and the officers' certificates required to be filed therewith
with the Secretary of State of the State of California, in such
form as required by, and executed in accordance with the relevant
provisions of, California Law (the date and time of such filing
being the "Effective Time").
SECTION 1.03. 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, the Surviving Corporation shall possess, and
succeed without other transfer to, all the rights, privileges,
powers, franchises and property as well of a public as of a
private nature, and be subject to all the restrictions,
disabilities and duties, of each of Acquiror Sub and the Company;
and all and singular, the rights, privileges, powers and
franchises of each of Acquiror Sub and the Company, and all
property, real, personal and mixed, and all debts due to either
Acquiror Sub or the Company on whatever account, as well as for
share subscriptions as all other things in action or belonging to
each of such corporations shall be vested in the Surviving
Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest, shall be thereafter
as effectually the property of the Surviving Corporation as they
were of Acquiror Sub and the Company, and the title to any real
estate vested, by deed or otherwise, under the laws of the State
of California or of any other state, in Acquiror Sub or the
Company, shall not revert or be in any way impaired by reason of
the California General Corporation Law; but all rights of
creditors and all liens upon any property of Acquiror Sub or the
Company shall be preserved unimpaired, and all debts, liabilities
and duties of Acquiror Sub and the Company shall thenceforth
attach to the Surviving Corporation (and the Surviving
Corporation shall be subject thereto) and may be enforced against
it to the same extent as if said debts, liabilities and duties
had been incurred or contracted by it. Any action or proceeding
pending by or against Acquiror Sub may be prosecuted to judgment,
which shall bind the Surviving Corporation, or the Surviving
Corporation may be proceeded against or substituted in its place.
The Surviving Corporation shall continue its corporate existence
under the laws of the State of California, and its name shall be
Cordis-Webster, Inc. (or a variation thereof as reasonably
determined by Acquiror).
SECTION 1.04. Articles of Incorporation; By-Laws.
At the Effective Time, the Articles of Incorporation and the
By-Laws of the Company, as amended as provided in the Agreement
of Merger (the "Amended Articles" and the "Amended By-Laws,"
respectively), shall be the articles of incorporation and the
by-laws of the Surviving Corporation, subject to any subsequent
amendment.
SECTION 1.05. Directors and Officers.
The directors of Acquiror Sub immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation,
each to hold office in accordance with the Amended Articles and
Amended By-Laws, and the officers of the Company immediately
prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified, or until
their earlier death, resignation or removal.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities.
At the Effective Time, as provided in the Agreement of Merger, by
virtue of the Merger and without any action on the part of the
Acquiror Sub, the Company or the holders of any of the following
securities:
(a)(i) Each share of common stock, no par value per share,
of the Company ("Company Common Stock") issued and outstanding
immediately prior to the Effective Time (other than any shares
of Company Common Stock to be canceled pursuant to Section
2.01(b) or shares ("Dissenting Shares") held by any Company
shareholder who elects to exercise appraisal rights under
Sections 1300 et seq. of California Law) shall be converted,
subject to Section 2.02(e), into the right to receive that
number of shares of common stock, par value $1.00 per share
("Acquiror Common Stock") of Acquiror determined by dividing
$12.81364 by the Average Trading Price (as defined below) of
a share of Acquiror Common Stock; provided, however, if the
Average Trading Price is greater than $52.02, such number
shall be deemed to be 0.246321 and if the Average Trading
Price is less than $42.56, such number shall be deemed to be
0.301072. Such number as so determined, including any
adjustments thereto made as provided below in this
Section 2.01(a)(i), shall be referred to as the "Exchange
Ratio". Based on the Exchange Ratio, the minimum and maximum
numbers of shares of Acquiror Common Stock issuable pursuant
to the Merger as contemplated under this Agreement (assuming
the conversion prior to the Effective Time of all shares of
Company Preferred Stock into Company Common Stock as
contemplated hereunder and assuming the issuance prior to the
Effective Time of all shares of Company Common Stock issuable
pursuant to Company Options (as defined in Section 2.04))
shall be 1,634,008 and 1,997,203, respectively. All such
shares of Company Common Stock shall no longer be outstanding
and shall automatically be canceled and retired and shall
cease to exist, and each certificate previously representing
any such shares shall thereafter represent the right to
receive a certificate representing the shares of Acquiror
Common Stock into which such Company Common Stock was
converted in the Merger. Certificates previously representing
shares of Company Common Stock shall be exchanged for
certificates representing whole shares of Acquiror
Common Stock issued in consideration therefor upon the
surrender of such certificates in accordance with the
provisions of Section 2.02, without interest. No fractional
share of Acquiror Common Stock shall be issued, and, in lieu
thereof, a cash payment shall be made pursuant to Section
2.02(e) hereof. In any event, if between the date of this
Agreement and the Effective Time the outstanding shares
Acquiror Common Stock, Company Common Stock or Company
Preferred Stock (as defined in Section 3.03) shall have been
changed into a different number of shares
or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Exchange Ratio shall be
correspondingly adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split,
combination or exchange of shares. As used in this Agreement,
the term "Average Trading Price" shall mean the average of the
reported closing prices of a share of Acquiror Common Stock on
the NASDAQ National Market System ("NASDAQ/NMS") as reported
by NASDAQ for the 20 consecutive trading days immediately
preceding the third trading day before the date of the Closing
Date (as defined in Section 2.07).
(ii) Notwithstanding any other provision of this
Agreement, if between the date of this Agreement and the
Effective Time, Mr. Wilton Webster shall have died or suffered
a Disability (as defined below) based upon the notice
procedures described below in Section 2.01(a)(iii), the
Recomputed Exchange Ratio (as defined below) shall be used for
purposes of the Merger, this Agreement and the Agreement of
Merger so that wherever the term "Exchange Ratio" appears or
applies for such purposes, such term shall be deemed replaced
by the term "Recomputed Exchange Ratio." The Recomputed
Exchange Ratio shall be determined by dividing $12.05969 by
the Average Trading Price of a share of Acquiror Common Stock;
provided, however, if the Average Trading Price is greater
than $52.02, such number shall be deemed to be 0.231828, and
if the Average Trading Price is less than $42.56, such number
shall be deemed to be 0.283357, subject to adjustments of the
type described in the next-to-last sentence of Section
2.01(a)(i). Based on the Recomputed Exchange Ratio, the
minimum and maximum numbers of shares of Acquiror Common Stock
issuable pursuant to the Merger as contemplated under this
Agreement (assuming the conversion prior to the Effective Time
of all shares of Company Preferred Stock into Company Common
Stock as contemplated hereunder and assuming the issuance
prior to the Effective Time of all shares of Company Common
Stock issuable pursuant to Company Options (as defined in
Section 2.04)) shall be 1,537,805 and 1,879,669, respectively.
(iii) For purposes of Section 2.01(a)(ii) above, Mr.
Webster shall be deemed to have suffered a "Disability" if (A)
Mr. Webster would be unable to perform services for the Company
consistent with past practice and as contemplated under the
Employment Agreement referred to in Section 8.10 after the
Effective Time by virtue of a mental or physical condition and
either (B) Acquiror provides written notice to the Company of
Acquiror's belief that Mr. Webster has such mental or
physical condition and the Company fails to contest such
belief in a written notice to Acquiror provided by the Company
within two days of receipt of such notice from Acquiror or (C)
the Company contests such belief by written notice to Acquiror
within the period specified in clause (B) and a physician to
be selected by mutual agreement of Acquiror and the Company
or, if not mutually agreed to within 24 hours of Acquiror's
receipt of the Company's notice, by the chairperson of the
Department of Internal Medicine at the Stanford Medical
School, after examining Mr. Webster, confirms in writing to
the Company and Acquiror as promptly as practicable following
such examination that Mr. Webster suffers from a mental or
physical condition that in such physician's reasonable
judgment makes it reasonably likely that Mr. Webster
would be unable to perform services for the Company as
described in clause (A) after the Effective Time.
(b) Any shares of Company Common Stock or Company
Preferred Stock held in the treasury of the Company and any
shares of Company Common Stock or Company Preferred Stock
owned by Acquiror or any direct or indirect wholly owned
subsidiary of Acquiror or of the Company immediately prior to
the Effective Time shall be canceled and extinguished without
any conversion thereof and no payment shall be made with
respect thereto.
(c) Each share of common stock, par value $0.01 per
share, of Acquiror Sub ("Acquiror Sub Common Stock") issued
and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one newly and validly
issued, fully paid and non-assessable share of common stock of
the Surviving Corporation.
SECTION 2.02. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Acquiror
shall deposit, or shall cause to be deposited, with a bank or
trust company designated by Acquiror (the "Exchange Agent"), for
the benefit of the holders of shares of Company Common Stock, for
exchange in accordance with this Article II, through the Exchange
Agent, certificates representing the whole shares of Acquiror
Common Stock (such certificates for shares of Acquiror Common
Stock, together with any dividends or distributions with respect
thereto, being hereafter referred to as the "Exchange Fund")
issuable pursuant to Section 2.01 (excluding the Adjustment
Escrow Shares (as defined in Section 2.06) which Acquiror shall
deliver to the Escrow Agent (as defined in Section 2.02(h))
pursuant to Section 2.06 hereof) in exchange for outstanding
shares of Company Common Stock and cash in an amount sufficient
to permit payment of the cash payable in lieu of fractional
shares pursuant to Section 2.02(e) hereof; it being understood
that all outstanding shares of Company Preferred Stock shall have
been converted to Company Common Stock prior to the Closing
provided the Merger occurs. The Exchange Agent shall, pursuant
to irrevocable instructions, deliver the Acquiror Common Stock
contemplated to be issued pursuant to Section 2.01 out of the
Exchange Fund. Except as contemplated by Section 2.02(e) hereof,
the Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. Promptly after the
Effective Time, Acquiror shall instruct the Exchange Agent to
mail to each holder of record of a certificate or certificates
which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Certificates")
(i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the
Exchange Agent and shall be in customary form) and (ii)
instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of
Acquiror Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other documents as may be
required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Acquiror
Common Stock which such holder has the right to receive in respect
of the shares of Company Common Stock formerly represented by such
Certificates (after taking into account all shares of Company
Common Stock then held by such holder), less a number of shares
of Acquiror Common Stock constituting such holder's proportionate
interest of the shares held in escrow pursuant to Section 2.02(h)
hereof (based on such holder's respective proportionate interest
immediately following the Effective Time in the Acquiror Common
Stock into which the outstanding shares of Company Common Stock
have been converted, pursuant to Section 2.01 hereof) as set
forth in Schedule 2.01 together with cash in lieu of fractional
shares of Acquiror Common Stock to which such holder is entitled
pursuant to Section 2.02(e) and any dividends or other
distributions to which such holder is entitled pursuant to
Section 2.02(c), and the Certificates so surrendered shall
forthwith be canceled. In addition, the holder of such
Certificate subsequently may receive shares of Acquiror Common
Stock and other property after the post-closing adjustment
described in Section 2.06 hereof. In the event of a transfer of
ownership of shares of Company Common Stock which is not
registered in the transfer records of the Company, a certificate
representing the proper number of shares of Acquiror Common Stock
may be issued to a transferee if the Certificates representing
such shares of Company Common Stock are presented to the Exchange
Agent, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated
by this Section 2.02, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to
receive upon such surrender the certificate representing shares
of Acquiror Common Stock, cash in lieu of any fractional shares
of Acquiror Common Stock to which such holder is entitled
pursuant to Section 2.02(e) and any dividends or other
distributions to which such holder is entitled pursuant to
Section 2.02(c).
(c) Distributions with Respect to Unexchanged Shares
of Acquiror Common Stock. No dividends or other distributions
declared or made after the Effective Time with respect to
Acquiror Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Acquiror Common Stock represented
thereby, and no cash payment in lieu of fractional shares shall
be paid to any such holder pursuant to Section 2.02(e), until the
holder of such Certificate shall surrender such Certificate.
Subject to the effect of escheat, tax or other applicable Laws
(as defined in Section 3.05(a)), following surrender of any such
Certificate, there shall be paid to the holder of the
certificates representing whole shares of Acquiror Common Stock
issued in exchange therefor, without interest, (i) promptly, the
amount of any cash payable with respect to a fractional share of
Acquiror Common Stock to which such holder is entitled pursuant
to Section 2.02(e) and the amount of dividends or other
distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Acquiror
Common Stock, including Adjustment Escrow Shares (as defined in
Section 2.06(a)), subject to the provisions of Section 2.06
hereof, and (ii) at the appropriate payment date, the amount of
dividends or other distributions, with a record date after the
Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole
shares of Acquiror Common Stock, including Adjustment Escrow
Shares, subject to the provisions of Section 2.06 hereof.
(d) No Further Rights in Company Common Stock. All
shares of Acquiror Common Stock issued upon conversion of the
shares of Company Common Stock in accordance with the terms
hereof (including any cash paid pursuant to Sections 2.02(c) or
(e)) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Company Common Stock.
(e) No Fractional Shares. No fractional shares of
Acquiror Common Stock shall be issued, but in lieu thereof each
holder of shares of Company Common Stock who would otherwise be
entitled to receive a fraction of a share of Acquiror Common
Stock, after aggregating all shares of Acquiror Common Stock to
which such holder would be entitled to receive under
Section 2.01(a), shall receive an amount in cash equal to the
Average Trading Price (provided, however, that for purposes of
this subparagraph (e), if the Average Trading Price is greater
than $52.02, the Average Trading Price shall be deemed to be
$52.02, and if the Average Trading Price is less than $42.56, the
Average Trading Price shall be deemed to be $42.56) multiplied by
the fraction of a share of Acquiror Common Stock to which such
holder would otherwise be entitled. Such payment in lieu of
fractional shares shall be administered by the Exchange Agent
pursuant to the procedures set forth in Section 2.02(b).
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of
Company Common Stock for one year after the Effective Time shall
be delivered to Acquiror, upon demand, and any holders of Company
Common Stock who have not theretofore complied with this Article
II shall thereafter look only to Acquiror for the shares of
Acquiror Common Stock, any cash in lieu of fractional shares of
Acquiror Common Stock to which they are entitled pursuant to
Section 2.02(e) and any dividends or other distributions with
respect to Acquiror Common Stock to which they are entitled
pursuant to Section 2.02(c).
(g) No Liability. Neither Acquiror nor the Company
shall be liable to any holder of shares of Company Common Stock
for any such shares of Acquiror Common Stock (or dividends or
distributions with respect thereto) delivered to a public
official pursuant to any abandoned property, escheat or similar
Law.
(h) Escrowed Shares. At the Effective Time, ten
percent of the shares of Acquiror Common Stock issuable pursuant
to Section 2.01 hereof to the holders of Company Common Stock
theretofore outstanding shall be deposited by Acquiror with the
escrow agent pursuant to the Escrow Agreement to be entered into
by the Company, Acquiror, Acquiror Sub, the escrow agent
thereunder (the "Escrow Agent") and the representative of the
Company Shareholders (the "Representative") substantially in the
form attached hereto as Exhibit B (the "Escrow Agreement") to
provide for the post-closing adjustment described in Section 2.06
hereof (the execution and delivery of the Escrow Agreement
constituting a condition of this Agreement). The Acquiror, the
Company, Acquiror Sub and the Representative shall enter into the
Escrow Agreement with the Escrow Agent at the Closing. In the
event the person initially appointed as the Representative under
Section 2.06(a) shall be unable or unwilling to execute and
deliver the Escrow Agreement as required hereunder, the Company
Shareholders shall appoint another person or entity for such
purpose.
(i) Lost, Stolen or Destroyed Certificates. In the
event any certificates evidencing shares of Company Common Stock
shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed
certificates, upon the making of an affidavit of that fact by the
holder thereof, such shares of Acquiror Common Stock and cash for
fractional shares, if any, as may be required pursuant to this
Article II; provided, however, that Acquiror may, in its
reasonable discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or
destroyed certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made
against Acquiror, the Surviving Corporation, or the Exchange
Agent with respect to the certificates alleged to have been lost,
stolen or destroyed.
SECTION 2.03. Stock Transfer Books.
At the Effective Time, the stock transfer books of the Company
shall be closed and there shall be no further registration of
transfers of shares of Company Common Stock or Company Preferred
Stock thereafter on the records of the Company. From and after
the Effective Time, the holders of certificates representing
shares of Company Common Stock or Company Preferred Stock
outstanding immediately prior to the Effective Time shall cease
to have any rights with respect to such shares of Company Common
Stock or Company Preferred Stock except as otherwise provided
herein or by Law. On or after the Effective Time, any
Certificates presented to the Exchange Agent or Acquiror for any
reason shall be converted into shares of Acquiror Common Stock,
any cash in lieu of fractional shares of Acquiror Common Stock to
which the holders thereof are entitled pursuant to Section
2.02(e) and any dividends or other distributions to which the
holders thereof are entitled pursuant to Section 2.02(c).
SECTION 2.04. Stock Options.
Prior to the Effective Time, the Company and Acquiror shall take
such action as may be necessary or appropriate for the Acquiror,
at its option, to assume or to issue a substitute option with
respect to each outstanding unexpired and unexercised option to
purchase shares of Company Common Stock (collectively, the
"Company Options") under the Company's 1992 Stock Plan (the
"Company Stock Plan"), so that at the Effective Time each Company
Option will become or be replaced by an option (an "Acquiror
Option") to purchase a number of whole shares of Acquiror Common
Stock equal to the number of shares of Company Common Stock that
could have been purchased (assuming full vesting) under the
Company Option multiplied by the Exchange Ratio (and eliminating
any fractional share), at a price per share of Acquiror Common
Stock equal to the per-share option exercise price specified in
the Company Option divided by the Exchange Ratio. Each
substituted Acquiror Option shall otherwise be subject to the
same terms and conditions as apply to the related Company Option.
The date of grant of each substituted Acquiror Option for
purposes of such terms and conditions shall be deemed to be the
date on which the corresponding Company Option was granted. As
to each assumed Company Option, at the Effective Time (i) all
references to the Company in the stock option agreements with
respect to the Company Options being assumed shall be deemed to
refer to Acquiror; (ii) Acquiror shall assume all of the
Company's obligations with respect to the related Company Option;
and (iii) Acquiror shall issue to each holder of a Company Option
a document evidencing the foregoing assumption by Acquiror.
Nothing in this Section 2.04 shall affect the schedule of vesting
with respect to the Company Options in accordance with the terms
of the Company Stock Plan. It is the purpose and intention of
the parties that, subject to applicable Law, the assumption of
Company Options or the substitution of Acquiror Options for
Company Options shall meet the requirements of Section 424(a) of
the Code and that each assumed Company Option or the substituted
Acquiror Option shall qualify immediately after the Effective
Time as incentive stock options as defined in Section 422 of the
Code to the extent that the related Company Option so qualified
immediately before the Effective Time and the foregoing
provisions of this Section 2.04 shall be interpreted to further
such purpose and intention. The Company represents and warrants
that the assumption of Company Options or substitution of
Acquiror Options therefor, as contemplated by this Section 2.04,
may be effected pursuant to the terms of the Company Options and
the Company Stock Plan without the consent of any holder of a
Company Option and without liability to any such holder.
SECTION 2.05. Dissenting Shareholders.
Subject to the terms and conditions hereof, at and after the
Effective Time, any holder of shares of Company Common Stock and
Company Preferred Stock who complies with Sections 1300 et seq.
of the California Law (a "Dissenting Shareholder") shall be
entitled to obtain payment from the Surviving Corporation of the
fair value of his shares of Company Common Stock or Company
Preferred Stock as determined pursuant to Sections 1300 et seq.
of the California Law; provided, however, that no such payment
shall be made unless and until such Dissenting Shareholder has
surrendered to the Exchange Agent the Certificate representing
the shares of Company Common Stock or Company Preferred Stock for
which payment is being made. The Company shall give Acquiror
prompt notice of any demands for appraisal or withdrawals of
demands for appraisal received by the Company and any other
documents obtained by the Company pursuant to the provisions of
Section 1300 et seq. of the California Law and, except with the
prior written consent of Acquiror, which shall not unreasonably
be withheld, shall not settle or offer to settle any such
demands.
SECTION 2.06. Post-closing Adjustment.
(a) The shares of Acquiror Common Stock held in escrow
pursuant to Section 2.02(h) hereof (the "Adjustment Escrow
Shares"),
(i) together with any property ("Adjustment Property")
that would have been distributed to the holders of such
Adjustment Escrow Shares as a result of any non-taxable stock
dividend, stock split, recapitalization, merger, combination
or similar transaction occurring during the period (the "Post-
closing Adjustment Period") beginning at the Effective Time
and ending on the date (the "Adjustment Date") that ends one
year after the Effective Time,
(ii) less any Adjustment Escrow Shares (determined
pursuant to Section 2.06(b)), and any Adjustment Property
distributed with respect thereto, that have been applied as
provided in Section 2.06(b) hereof and the Escrow Agreement in
satisfaction of any amounts owing to any Indemnified Persons
(as defined in Section 8.17) (an "Indemnification Amount"),
and
(iii) less any Adjustment Escrow Shares (determined
pursuant to Section 2.06(b)), and any Adjustment Property
distributed with respect thereto, determined pursuant to the
Escrow Agreement to be necessary to provide for any claim or
claims for Damages (as defined in Section 8.17) asserted in
writing by one or more of the Indemnified Persons pursuant
hereto during the Post-closing Adjustment Period but not finally
determined as provided in Section 2.06(b) hereof and the
Escrow Agreement (a "Claim Amount"),
shall be delivered as soon as practicable after the Adjustment
Date (and in any event within 90 days after the Adjustment Date)
as set forth in the Escrow Agreement to the Representative of the
Company Shareholders other than Dissenting Shareholders (such
non-Dissenting Shareholders are hereinafter referred to as the
"Holders"), or otherwise in accordance with written instructions
provided by such Representative, for redelivery to the Holders
based on each such Holder's proportionate interest immediately
following the Effective Time in the Acquiror Common Stock as set
forth in Schedule 2.01. Notwithstanding such delivery, any
remaining Adjustment Escrow Shares (and any Adjustment Property
distributed with respect thereto) held in escrow pursuant to
clause (iii) above shall continue to be held by the Escrow Agent
under the Escrow Agreement in accordance with the provisions of
the Escrow Agreement. By their execution and delivery of this
Agreement, the Company Shareholders hereby appoint David W.
Chonette as Representative of the Company Shareholders (other
than Dissenting Shareholders) for purposes of this Section 2.06.
(b) The procedure set forth in the Escrow Agreement
shall be used for the application of the Adjustment Escrow Shares
to satisfy indemnification obligations to Indemnified Persons
hereunder. The number of Adjustment Escrow Shares to which an
Indemnified Person shall be entitled in respect of an
Indemnification Amount or Claim Amount shall be determined by
dividing (i) the Indemnification Amount or Claim Amount, as the
case may be, by (ii) the Average Trading Price (provided,
however, that for purposes of this subparagraph (b), if the
Average Trading Price is greater than $52.02, the Average Trading
Price shall be deemed to be $52.02, and if the Average Trading
Price is less than $42.56, the Average Trading Price shall be
deemed to be $42.56). Any portion of the Adjustment Escrow
Shares applied to satisfy any indemnification obligations to
Indemnified Persons hereunder shall be delivered to the
Indemnified Persons (together with any Adjustment Property
distributed with respect thereto) as set forth in the Escrow
Agreement.
(c) If the Adjustment Escrow Shares (together with any
Adjustment Property distributed with respect thereto) are
insufficient to cover the full amount of the adjustments made
pursuant to Section 2.06(b) hereof, the Acquiror shall have
available such other remedies as may exist at law or in equity to
satisfy any claim or claims for Damages, subject to the
provisions of Sections 11.01 and 11.02.
(d) During the Post-closing Adjustment Period, the
Escrow Agent under the Escrow Agreement shall (to the extent
legally permissible) vote the Adjustment Escrow Shares and any
other shares of stock included in the Adjustment Property in
accordance with the written instructions of the Holders who would
receive such shares if all of the Adjustment Escrow Shares and
any other shares of stock included in the Adjustment Property
were delivered to the Holders pursuant to Section 2.06(a) hereof.
(e) Acquiror shall show the Adjustment Escrow Shares
as issued and outstanding on its balance sheet after the
Effective Time and such shares shall be duly authorized and
validly issued under applicable state law.
(f) Cash dividends paid with respect to the Adjustment
Escrow Shares shall be distributed as, if and when paid to the
Holders in proportion to each such Holder's proportionate
interest immediately following the Effective Time in the Acquiror
Common Stock as set forth in Schedule 2.01, subject to the
provisions of Section 2.02(b) and (c).
SECTION 2.07. Closing.
Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place as soon as
practicable after satisfaction of the latest to occur or, if
permissible, waiver of the conditions set forth in Article IX
hereof (the "Closing Date"), at the offices of Hogan & Hartson,
Columbia Square, 555 13th Street, N.W., Washington, D.C. 20004,
unless another date or place is agreed to in writing by the
parties hereto; provided, however, that the Closing Date shall in
no event be less than thirty (30) days from the initial filing of
the Registration Statement (as defined in Section 8.01(a)).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule delivered by the
Company to Acquiror prior to the execution and delivery of this
Agreement (the "Company Disclosure Schedule"), which shall
identify exceptions by specific Section references, the Company
hereby represents and warrants to Acquiror and Acquiror Sub as
follows:
SECTION 3.01. Organization and Qualification.
The Company is a corporation duly organized, validly existing and
in good standing under the Laws of the State of California, has
all requisite corporate or other power and authority to own,
lease and operate its properties and to carry on its business as
it is now being conducted and is duly qualified and in good
standing to do business in each jurisdiction in which the nature
of the business conducted by it or the ownership or leasing of
its properties makes such qualification necessary, other than
where the failure to do so would not have a Company Material
Adverse Effect. The term "Company Material Adverse Effect" as
used in this Agreement shall mean any change or effect that,
individually or when taken together with all other such changes
or effects, is or is reasonably likely to be materially adverse
to the financial condition, business, results of operations or
prospects of the Company. Section 3.01 of the Company Disclosure
Schedule sets forth a list of the jurisdictions where the Company
is duly qualified to do business as a foreign corporation.
SECTION 3.02. Articles of Incorporation and By-Laws.
The Company has heretofore furnished to Acquiror a complete and
correct copy of the Articles of Incorporation and the By-Laws of
the Company, each as amended or restated and currently in effect.
The Company is not in violation of any of the provisions of its
Articles of Incorporation or By-Laws.
SECTION 3.03. Capitalization; Subsidiaries.
The authorized capital stock of the Company consists of (i)
10,000,000 shares of Company Common Stock of which: (w) 4,680,234
shares of Company Common Stock are issued and outstanding, all of
which are duly authorized, validly issued, fully paid and non-
assessable and not subject to preemptive rights created by
statute, the Company's Articles of Incorporation or By-Laws or
any agreement to which the Company is a party or is bound; (x) no
shares of Company Common Stock are or were held in the treasury
of the Company; and (y) 753,666 shares of Company Common Stock
were reserved for future issuance pursuant to outstanding
employee stock options under the Company Stock Plan and (ii)
4,000,000 shares of serial preferred stock, no par value per
share ("Company Preferred Stock"), of which 1,200,000 shares are
issued and outstanding, all of which are duly authorized, validly
issued, fully paid and non-assessable and not subject to
preemptive rights created by statute, the Company's Articles of
Incorporation or By-Laws, or any agreement to which the Company
is a party or is bound. Except as described in this Section
3.03, no shares of Company Common Stock are reserved for any
other purpose. Since November 30, 1993, no shares of Company
Common Stock have been issued by the Company, except pursuant to
the exercise of outstanding options in accordance with their
terms, and no shares of Company Preferred Stock have been issued
since such date. Except as contemplated by this Agreement, there
have been no changes in the terms of outstanding options since
November 30, 1993. Each of the outstanding shares of capital
stock of the Company were issued in compliance with all
applicable federal and state laws concerning the issuance of
securities, and, to the Company's knowledge, such shares are
owned by the Company Shareholders free and clear of all security
interests, liens, claims, pledges, agreements, limitations on
voting rights, charges or other encumbrances of any nature
whatsoever. Except as set forth in clause (i) above, there are
no options, warrants or other rights (including registration
rights), agreements, arrangements or commitments to which the
Company is a party of any character relating to the issued or
unissued capital stock of, or other equity interests in, the
Company or obligating the Company to grant, issue or sell any
shares of the capital stock of, or other equity interests in, the
Company, by sale, lease, license or otherwise. The names and
addresses of, and number of shares held by, all holders of
Company Common Stock and Company Preferred Stock as well as
similar information relating to the holders of all options,
warrants or rights to purchase Company Common Stock or Company
Preferred Stock are set forth in Section 3.03 of the Company
Disclosure Schedule. There are no obligations, contingent or
otherwise, of the Company to (x) repurchase, redeem or otherwise
acquire any shares of Company Common Stock or Company Preferred
Stock; or (y) provide funds to, or make any investment (in the
form of a loan, capital contribution or otherwise), or provide
any guarantee with respect to the obligations of, any other
person. The Company does not directly or indirectly own, nor has
the Company agreed to purchase or otherwise acquire, any of the
capital stock of, or other equity interests in, or any interest
convertible into or exchangeable or exercisable for, capital
stock of, or other equity interests in, any corporation,
partnership, joint venture or other business association or
entity. There are no agreements, arrangements or commitments
of any character (contingent or otherwise)
pursuant to which any person is or may be entitled to receive any
of the revenues or earnings, or any payment based thereon or
calculated in accordance therewith, of the Company. The Company
has no subsidiaries or equity or other interest in any entity
other than those listed in Section 3.03 of the Company Disclosure
Schedule. The outstanding shares of Company Preferred Stock as
of the date hereof are convertible into 1,200,000 shares of
Company Common Stock and no event or transaction has occurred or
is expected to occur between the date hereof and the Effective
Time that would increase or otherwise modify such number of
shares of Company Common Stock into which such shares of Company
Preferred Stock are convertible. The 1,200,000 shares of Company
Preferred Stock issued and outstanding on the date hereof will be
converted into an aggregate of 1,200,000 shares of Company Common
Stock prior to the Effective Time in accordance with the
agreement among the Company, Acquiror and Brentwood Associates V,
L.P. ("Brentwood") referred to in Section 8.19. The Company has
not declared any dividends on the Company Preferred Stock since
the date of issuance thereof and the Conversion Price of the
Company Preferred Stock (as defined in the Articles of
Incorporation of the Company) is $1.67 per share, and there has
been no adjustment to or readjustment of the Conversion Price or
event or circumstance that would cause any such adjustment or
readjustment. The Company has not engaged in any transactions
that have given rise to the right of first offer set forth in
Section 7.6 of the Series A Preferred Stock Purchase Agreement
dated as of July 17, 1992, between the Company and the purchasers
listed on Exhibit A thereto (the "Series A Preferred Stock
Purchase Agreement"). Brentwood is the only record and, to the
Company's knowledge, beneficial owner of the Company Preferred
Stock and, to the Company's knowledge, is the only person or
entity entitled to exercise and possess rights under the Series A
Preferred Stock Purchase Agreement and the Registration Rights
Agreement dated as of July 17, 1992 referred to therein and
executed and delivered by the parties in connection therewith
(the "Registration Rights Agreement").
SECTION 3.04. Authority.
The Company has the requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate
action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby (other than, with
respect to the approval and adoption of this Agreement, by the
holders of a majority of the outstanding shares of Company Common
Stock and the holders of a majority of the outstanding shares of
Company Preferred Stock in accordance with California Law and the
Company's Articles of Incorporation and By-Laws). This Agreement
has been duly executed and delivered by the Company and, assuming
the due authorization, execution and delivery by Acquiror,
Acquiror Sub and each of the Company Shareholders, constitutes a
legal, valid and binding obligation of the Company, enforceable
in accordance with its terms, except as such enforceability may
be subject to the effect of any applicable bankruptcy, insolvency
(including, without limitation, all Laws relating to fraudulent
transfers), reorganization, moratorium or similar Laws affecting
creditors' rights generally and subject to the effect of general
principles of equity (whether considered in a proceeding in
equity or at law). To the Company's knowledge, this Agreement
has been duly executed and delivered by each of the Company
Shareholders and, to the Company's knowledge, constitutes a legal
and binding obligation of each Company Shareholder enforceable in
accordance with its terms, subject to the exceptions described in
the immediately preceding sentence.
SECTION 3.05. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the
Company shall not, (i) conflict with or violate the Articles of
Incorporation or By-Laws of the Company, (ii) subject to (x)
obtaining the requisite approval and adoption of this Agreement
by the holders of a majority of the outstanding shares of the
Company Common Stock and the holders of a majority of the
outstanding shares of Company Preferred Stock in accordance with
California Law and the Company's Articles of Incorporation and
By-Laws; (y) obtaining the consents, approvals, authorizations
and permits of, and making filings with or notifications to, any
governmental, quasi-governmental or regulatory authority,
domestic or foreign ("Governmental Entities"), pursuant to the
applicable requirements, if any, of the Securities Act of 1933,
as amended, and the rules and regulations thereunder (the
"Securities Act"), the Securities Exchange Act of l934, as
amended, and the rules and regulations thereunder (the "Exchange
Act"), state securities laws and the rules and regulations
thereunder ("Blue Sky Laws"), the National Association of
Securities Dealers, Inc. (the "NASD"), the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations thereunder (the "HSR Act"), and the filing and
recordation of appropriate transaction documents as required by
California Law; and (z) obtaining the consents, approvals,
authorizations or permits described in Section 3.05(b) of the
Company Disclosure Schedule, to the Company's knowledge, conflict
with or violate any foreign or domestic federal, state or local
law, statute, ordinance, rule, regulation, order, judgment or
decree (collectively, "Laws") applicable to the Company or by
which any of its properties is bound, or (iii) result in any
breach of or constitute a default (or an event that with notice
or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company
pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument
or obligation to which the Company is a party or by which the
Company or any of its properties is bound or affected except for
any such conflicts or violations described in clause (ii) or
breaches or defaults described in clause (iii) (other than any
relating to Company Contracts as defined in Section 3.11(a)) that
would not have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by
the Company do not, and the performance of this Agreement by the
Company shall not, require any consent, approval, authorization
or permit of, or filing with or notification to, any Governmental
Entities, except (i) for applicable requirements, if any, of the
Securities Act, Exchange Act, Blue Sky Laws, the NASD, the HSR
Act, the consents, approvals, authorizations or permits described
in Section 3.05(b) of the Company Disclosure Schedule and the
filing and recordation of appropriate transaction documents as
required by California Law or (ii) where the failure to obtain
such consents, approvals, authorizations or permits, or to make
such filings or notifications, would not adversely affect the
ability of the Company to consummate, or prevent or delay the
consummation of, the transactions contemplated by this Agreement
and where such failure would not result in losses to Acquiror or
any of its affiliates (after the Effective Time) or the Company
or any of its affiliates (before the Effective Time) in excess of
$10,000.
SECTION 3.06. Permits; Compliance.
(a) The Company is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary
for the Company to own, lease and operate its properties or to
carry on its business as it is now being conducted (the "Company
Permits") except where the failure to possess such Company Permits
would not have a Company Material Adverse Effect. To the Company's
knowledge, all Company Permits are valid, and no suspension or
cancellation of any of the Company Permits is pending or, to the
knowledge of the Company, threatened. To the Company's
knowledge, the Company is not in conflict with, or in default or
violation of, (i) any Law applicable to the Company or by which
any of its properties is bound or affected or (ii) any of the
Company Permits. To the Company's knowledge, the Company has not
failed to remedy any such previously existing conflict, default
or violation. Since December 1, 1991, the Company has not
received written, or, to the knowledge of the Company, oral
notice from any Governmental Entity of any such conflict, default
or violation.
(b) The Company has filed all forms, reports,
statements, and other documents required to be filed with any
Governmental Entities, including, without limitation, state
insurance and health regulatory authorities, except where the
failure to file such forms, reports, statements or other
documents under this clause (b) would not have a Company Material
Adverse Effect except for matters addressed in Section 3.12 or
3.13, which shall be governed by such Section 3.12 or 3.13,
respectively.
SECTION 3.07. Financial Information; Books and Records.
(a) The Company has caused to be prepared audited
balance sheets, as of November 30, 1993 and 1992, of the Company
(the "Audited Balance Sheets") and the related audited statement of
earnings and shareholders' equity and audited statement of cash
flows of the Company for each of the three fiscal years ended
November 30, 1993, 1992 and 1991 (the Audited Balance Sheets and
such statements of earnings and shareholders' equity and audited
statements of cash flows and any related notes and schedules are
hereinafter referred to collectively as the "Audited
Statements"), in each case, audited by Deloitte & Touche, in
accordance with generally accepted auditing standards. A true
and complete copy of each of the Audited Statements has been
delivered to Acquiror and is included as Section 3.07 to the
Company Disclosure Schedule.
(b) The Audited Statements (i) are complete and
correct in all material respects and have been prepared from the
books and records of the Company and (ii) fairly present the
financial position of the Company and the results of its
operations and its cash flows as of and for the respective time
periods in conformity with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis.
(c) The financial books and records of the Company are
complete and correct and have been maintained in accordance with
reasonable business practices.
SECTION 3.08. Absence of Undisclosed Liabilities.
The Company has no liabilities or obligations (whether accrued,
absolute or contingent), including but not limited to liabilities
for Taxes (as defined in Section 3.13(d)), that are not reflected
on, or reserved against in, the Audited Statements except (a) as
described in Section 3.08 of the Company Disclosure Schedule or
(b) for liabilities or obligations incurred since November 30,
1993 in the ordinary course of business and consistent with past
practice.
SECTION 3.09. Absence of Certain Changes or Events.
Except as disclosed in Section 3.09 of the Company Disclosure
Schedule, (a) since November 30, 1992, the Company has conducted
its business only in the ordinary course and in a manner
consistent with past practice, and (b) since November 30, 1992,
there has not been: (i) any damage, destruction or loss (not
covered by insurance) with respect to any material assets of the
Company; (ii) any change by the Company in its accounting
methods, principles and practices, except any such change after
the date of this Agreement required by a change in GAAP adopted
after the date of this Agreement; (iii) any declaration, setting
aside or payment of any dividends or distributions in respect of
shares of Company Common Stock or Company Preferred Stock or any
redemption, purchase or other acquisition of any of the Company's
securities or any payment by the Company to any of its
affiliates; (iv) any increase in the benefits under, or the
establishment or amendment of, any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock
option, (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards, or
restricted stock awards), stock purchase or other employee
benefit plan, or any other increase in the compensation payable
or to become payable to directors, officers or employees of the
Company, except for increases in salaries or wages payable or to
become payable in the ordinary course of business and consistent
with past practice to employees of the Company who are not
directors or officers of the Company; (v) any transaction or
contract material to the Company or any commitment to do the
same, entered into by the Company other than in the ordinary
course of business and consistent with past practice; (vi) any
transfer, mortgage, pledge, encumbrance or disposition by the
Company of any of its assets, other than in the ordinary course
of business and consistent with past practice and not material in
the aggregate; (vii) any cancellation or writing off as worthless
and uncollectible any inventory, debt, note or account receivable
of the Company, except where previously reserved against in the
Audited Statements; (viii) any receipt by the Company of written
or, to the knowledge of the Company, oral notice that any
material contract, agreement or arrangement to which it is a
party has been or will be canceled; (ix) any issuance by the
Company of any share of stock, bond, note, option, warrant or
other corporate security; (x) any individual capital expenditure
by the Company or commitment to make such capital expenditure in
excess of $10,000; (xi) any payment or incurring of liability to
pay any Taxes, assessments, fees, penalties, interest or other
governmental charges, other than those arising and discharged or
to be discharged in the ordinary course of business and
consistent with past practice; (xii) any loans in excess of
$10,000 made by the Company to any person or entity, including
but not limited to, any employee, officer or director of the
Company; (xiii) any incurring of indebtedness by the Company for
borrowed money or commitment by the Company to borrow money other
than in the ordinary course of business, consistent with past
practice; (xiv) a Company Material Adverse Effect; or (xv)
authorization, approval, agreement or commitment by the Company
to take any action described in clauses (i) through (xiii) above.
SECTION 3.10. Absence of Litigation.
(a) There is no claim, action, suit, litigation,
proceeding, arbitration or, to the knowledge of the Company,
investigation of any kind to which the Company is a party, at law
or in equity (including actions or proceedings seeking injunctive
relief), pending or, to the knowledge of the Company, threatened
nor, to the knowledge of the Company, is there any reasonable
basis therefor; and (b) the Company is not subject to any consent
decree, settlement agreement or other similar written agreement
with, or, to the knowledge of the Company, continuing order or
investigation by, any Governmental Entity, or any judgment,
order, writ, injunction, decree or award of any Governmental
Entity or arbitrator, including, without limitation, cease-and-
desist or other orders, in each case in this clause (b) relating
to the business conducted by the Company or otherwise applicable
to the Company or any of its officers or directors in connection
with the business conducted by the Company.
SECTION 3.11. Contracts; No Default.
(a) Section 3.11(a) of the Company Disclosure Schedule
sets forth as of the date of this Agreement a list of each contract
or agreement of the Company including, without limitation,
contracts or agreements between the Company, on the one hand, and
one or more persons who are affiliates of each other, on the other
hand (together with the contracts and agreements listed in Section
3.11(b) of the Company Disclosure Schedule, the "Company
Contracts"):
(i) involving an aggregate payment or commitment per
contract or agreement on the part of the counterparty or
counterparties thereto of more than $50,000 during the
12-month period ending November 30, 1993 or $50,000 during the
remaining term thereof from and after the date hereof;
(ii) with an individual or entity rendering
professional health care services as an employee of or
contractor to the Company under which, during the 12
month-month period ending November 30, 1993, the Company was
obligated or became committed to pay in excess of $50,000 or
under which, during the next 12 months, the Company is
reasonably expected to pay or to become obligated to pay in
excess of $50,000;
(iii) concerning a partnership or joint venture with
another person;
(iv) concerning employment or consulting arrangements
with the Company's directors, officers or employees (which
arrangements, in the case of employees other than the officers
and directors of the Company, provide for annual compensation
in excess of $50,000 to such persons), or providing for
severance payments to any such directors, officers or
employees.
(v) involving agreements or commitments with any
Governmental Entity or with any labor union;
(vi) involving any contract with independent
contractors or consultants (or similar arrangements) involving
a reasonably expected aggregate payment or commitment of more
than $50,000 for the 12-month period ended November 30, 1993
or $50,000 during the remaining term thereof from and after
the date of the Agreement or which are not cancelable without
penalty or without payment;
(vii) involving any sales agency, data processing or
insurance brokerage agreements which are not cancelable
without penalty upon thirty or fewer days' notice;
(viii) involving commitments for capital expenditures in
excess of $10,000 for any single project;
(ix) involving agreements or instruments relating to
the extension of credit not in the ordinary course of business
and consistent with past practice;
(x) involving agreements of guaranty in respect of any
obligation for borrowed money or otherwise;
(xi) involving agreements with any affiliate of the
Company;
(xii) with a supplier or distributor of the Company; and
(xiii) involving all other contracts, agreements,
commitments, or arrangements (including arrangements with sole
source suppliers) whether or not made in the ordinary course
of business which are material to the Company or the conduct
of its business or the absence of which would have a Company
Material Adverse Effect.
The Company has made available to Acquiror, or given access to
Acquiror to inspect, copies of all written Company Contracts
(including all amendments thereto). Section 3.11(a) of the
Company Disclosure Schedule includes a description of all
material terms of all unwritten Company Contracts.
(b) Section 3.11(b) of the Company Disclosure Schedule
lists each contract or agreement to which the Company or any of
its affiliates is a party limiting the right of the Company or
any of its affiliates prior to the Effective Time, or Acquiror or
any of its affiliates at or after the Effective Time, to engage
in, or to compete with any person in, any business, including
each contract or agreement containing exclusivity provisions
restricting the geographical area in which, or the method by
which, any business may be conducted by the Company or any of its
affiliates prior to the Effective Time, or Acquiror or any of its
affiliates after the Effective Time.
(c) Each Company Contract, and each other contract or
agreement of the Company which would have been required to be
disclosed in Section 3.11(a) of the Company Disclosure Schedule
had such contract or agreement been entered into prior to the
date of this Agreement, is, to the Company's knowledge, in full
force and effect and is a legal, valid and binding contract or
agreement and there is (i) no default (or any event which, with
the giving of notice or lapse of time or both, would be a
default) by the Company or, to the Company's knowledge, any other
party, in the timely performance of any obligation to be
performed or paid under any of the Company Contracts or any such
other contract or agreement, (ii) to the knowledge of the
Company, no threat of cancellation or termination of any Company
Contract, or (iii) no written or oral modification or amendment
or reasonably expected change to any Company Contract, except as
specifically described in Section 3.11(a) of the Company
Disclosure Schedule.
SECTION 3.12. Employee Benefit Plans; Labor Matters.
(a) Section 3.12(a) of the Company Disclosure Schedule
lists each employee benefit plan, program, arrangement and
contract (including, without limitation, any "employee benefit
plan", as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), applicable to
employees of the Company to which the Company has contributed or
under which the Company has any material liability (the "Company
Benefit Plans"). The Company has delivered to Acquiror a true
and correct copy of (i) the three most recent annual reports
(Form 5500 series) filed with the United States Internal Revenue
Service (the "IRS") with respect to each Company Benefit Plan,
(ii) each such Company Benefit Plan document, (iii) each trust
agreement or other funding vehicle relating to each such Company
Benefit Plan, (iv) the most recent summary plan description for
each Company Benefit Plan for which a summary plan description is
required, and (v) the most recent determination letter issued by
the IRS with respect to any Company Benefit Plan qualified under
Section 401(a) of the Code.
(b) Except as set forth in Section 3.12(a) of the
Company Disclosure Schedule: (i) the terms of, and benefits
provided under, the Company Benefit Plans have not been changed
since December 1, 1992, except as required by Law or by the terms
of the Company Benefit Plans as in effect on December 1, 1992;
(ii) none of the Company Benefit Plans is a multiemployer pension
plan as defined in Section 3(37) of ERISA; (iii) none of the
Company Benefit Plans promises or provides for medical or life
insurance benefits to any person after termination of employment
other than as required by Sections 601 through 608 of ERISA;
(iv) as to each Company Benefit Plan intended to be qualified
under Section 401(a) of the Code, the Company has received a
favorable determination letter from the IRS to the effect that
such Company Benefit Plan is so qualified and nothing has
occurred since the date of such letter to affect the qualified
status of such Company Benefit Plan; (v) no plan or arrangement
of the Company (including the Company Benefit Plans) in effect on
the date hereof provides, separately or in the aggregate, for any
payment that would constitute an "excess parachute payment"
within the meaning of Section 280G of the Code, or for which the
Company would not be entitled to a deduction under the Code,
assuming closing of the transactions contemplated by this
Agreement; (vi) each Company Benefit Plan has been operated in
all material respects in accordance with its terms and the
requirements of applicable Law and has been funded, or adequately
reserved or provided for in the Audited Statements, with respect
to all accrued benefits thereunder; (vii) except for the payment
of benefits provided for under the terms of the Company Benefit
Plans, the Company has not incurred, and does not reasonably
expect to incur, any material liability under the terms of such
Company Benefit Plans or any other applicable Law; and
(viii) none of the Company Benefit Plans is subject to Title IV
of ERISA, and the Company has not incurred, and does not
reasonably expect to incur, any direct or indirect liability
under or by operation of Title IV of ERISA.
(c) Section 3.12 (c) of the Company Disclosure Schedule
lists, as of the date of this Agreement, all collective bargaining
or other labor union contracts to which the Company is a party or
by which it is bound that are applicable to persons employed by the
Company. There is no pending or, to the knowledge of the Company,
threatened labor dispute, strike or work stoppage against the
Company which may interfere with the business activities of the
Company. To the Company's knowledge, neither the Company nor its
representatives or employees has committed any unfair labor
practices (as defined in 29 U.S.C. Section 158(a)) in connection with
the operation of the business of the Company, and there is no
pending or, to the knowledge of the Company, threatened charge or
complaint against the Company by the National Labor Relations
Board or any comparable state agency.
SECTION 3.13. Taxes.
(a) (i) All Returns (as defined below) in respect of
Taxes (as defined below) required to be filed by or on behalf of
the Company prior to the date hereof and any state Tax return that
includes the Company on a consolidated, combined or unitary basis
have been timely filed, and no extension of time within which to
file any such Return has been requested, which Return has not
since been filed; (ii) all Taxes required to be shown on such
Returns or otherwise due or payable by the Company prior to the
date of this Agreement have been timely paid and all payments of
estimated Taxes required to be made by or on behalf of the
Company under Section 6655 of the Code or any comparable
provision of state, local or foreign law prior to the date of
this Agreement for the current taxable years of the Company have
been made; (iii) all such Returns are true, correct and complete;
(iv) no adjustment relating to any of such Returns has been
proposed in writing by any Tax authority and, to the Company's
knowledge, no basis exists for any such adjustment; (v) there are
no outstanding subpoenas with respect to any Returns of the
Company or the Taxes reflected on such Returns; (vi) there are no
pending or threatened actions or proceedings for the assessment
or collection of Taxes against the Company or, to the Company's
knowledge, any corporation that was included in the filing of a
Return with the Company on a consolidated, combined or unitary
basis with respect to any period for which such corporation was
so included; (vii) the Company does not have and never has had
any subsidiaries or other corporate affiliates; (viii) no consent
under Section 341(f) of the Code has been filed with respect to
the Company; (ix) there are no Tax liens on any assets of the
Company other than liens for Taxes not yet due or payable or
which the Company is contesting in good faith through appropriate
proceedings which are disclosed in Section 3.13(a) of the Company
Disclosure Schedule; (x) neither the Company nor any affiliate of
the Company is a party to any agreement or arrangement that would
result, separately or in the aggregate, in the payment of any
"excess parachute payment" within the meaning of Section 280G of
the Code; (xi) the Company has not been at any time a member of
any partnership or joint venture or the holder of a beneficial
interest in any trust for a period for which the statute of
limitations for any Tax potentially applicable as a result of
such membership or holding has not expired; (xii) the Company has
not been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the
Code; (xiii) the Company does not owe any amount pursuant to any
Tax sharing agreement or arrangement, and the Company will not
have any liability after the date hereof in respect of any Tax
sharing agreement or arrangement executed or agreed to prior to
the date hereof with respect to any company that has been sold or
disposed of by the Company, whether any such agreement or
arrangement is written or unwritten; (xiv) all Taxes required to
be withheld, collected or deposited by the Company have been
timely withheld, collected or deposited and, to the extent
required prior to the date hereof, have been paid to the relevant
Tax authority; (xv) any adjustment of Taxes of the Company made
by the IRS that is required to be reported to any state, local or
foreign Tax authority timely has been so reported; and (xvi) the
books and records of the Company reflect reserves that are
adequate for the payment of all Taxes not yet due and payable
that are properly accruable thereon as of the date hereof
(including Taxes being contested), and there is no difference
between the amounts of the book basis and the tax basis of assets
(net of liabilities) that is not accounted for by an accrual on
the books for federal income tax purposes.
(b) (i) There are no outstanding waivers or
agreements extending the statute of limitations for any period
with respect to any Tax to which the Company may be subject;
(ii) the Company has not participated in or cooperated with an
international boycott within the meaning of Section 999 of the
Code; (iii) the Company has not had any income reportable for a
period ending after the Closing but attributable to a transaction
(e.g., an installment sale) occurring in or a change in
accounting method made for a period ending at or prior to the
Closing which resulted in a deferred reporting of income from
such transaction or from such change in accounting method (other
than a deferred intercompany transaction involving in excess of
$50,000 in any case); and (iv) there are no written requests for
rulings currently outstanding that could affect the Taxes of the
Company, or any similar matters pending with respect to any Tax
authority.
(c) (i) Section 3.13(c) of the Company Disclosure
Schedule lists all income, franchise and similar Returns
(federal, state, local and foreign) filed on behalf of the
Company for taxable periods ended on or after January 1, 1989,
indicates the most recent income, franchise or similar Return for
each relevant jurisdiction for which an audit has been completed
and indicates all Returns that currently are the subject of
audit; (ii) the Company has made available and, when requested,
has delivered to Acquiror correct and complete copies of all
federal, state and foreign income, franchise, sales and use, and
real and personal property Tax Returns and made available all
other Returns, elections relating to Taxes of the Company,
examination reports, and statements of deficiencies assessed
against or agreed to by the Company since January 1, 1989;
(iii) the Company has delivered to Acquiror a true and complete
copy of any Tax sharing or allocation agreement or arrangement to
which the Company is a party and a true and complete description
of any such agreement or arrangement that is unwritten or
informal; (iv) Section 3.13(c) of the Company Disclosure Schedule
sets forth information with respect to the Company as of the most
recent practicable date (and, in each case, specifying such date)
regarding the aggregate tax basis of the Company in its assets.
(d) For purposes of this Agreement, "Tax" or "Taxes"
shall mean any and all taxes, charges, fees, levies, and other
governmental assessments and impositions of a similar kind,
payable to any federal, state, local or foreign governmental
taxing authority or agency, including, without limitation, (i)
income, franchise, profits, gross receipts, minimum, alternative
minimum, estimated, ad valorem, value added, sales, use, service,
real or personal property, capital stock, license, payroll,
withholding, disability, employment, social security, workers
compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premiums, windfall
profits, transfer and gains taxes, (ii) customs duties, imposts,
charges, levies or other similar assessments of any kind, and
(iii) interest, penalties and additions to tax imposed with
respect thereto; and "Returns" shall mean any and all returns,
reports, and information statements with respect to Taxes
required to be filed with the IRS or any other Governmental
Entity or Tax authority or agency, whether domestic or foreign,
including without limitation, consolidated, combined and unitary
tax returns.
SECTION 3.14. FDA and Other Regulatory Compliance.
Schedule 3.14 of the Company Disclosure Schedule sets forth a
complete and accurate list, referencing relevant records and
documents, for the last five years, of (a) all Food and Drug
Administration ("FDA") and any other Governmental Entity
inspector lists of observations or similar documents made at
inspections, including, but not limited to, Form(s) FDA-483, with
respect to the Company; (b) Regulatory or Warning Letters,
Notices of Adverse Findings or Section 305 notices issued by the
Food and Drug Administration or any similar letters or notices
issued by any other Governmental Entity to the Company; (c) all
United States Pharmacopoeia product problem reporting program
complaints or reports and MedWatch FDA forms 3500, device
experience network complaints received by the Company and Medical
Device Reports ("MDRs") filed by the Company; (d) all product
recalls and safety alerts conducted by or issued to the Company;
(e) any civil penalty actions begun by FDA or any other
Governmental Entity against the Company and known about by the
Company; and (f) all 510(k) substantial equivalence letters or
premarket approval ("PMA") letters (hereinafter jointly referred
to as "approvals") for devices sold by the Company and all
assurances, written and/or oral, that any modifications to
devices subject to such 510(k)s or PMAs remain covered by such
FDA and any other Governmental Entity approvals. The Company has
delivered to Acquiror copies of all documents referred to in
Section 3.14 of the Company Disclosure Schedule. The Company has
obtained all consents, approvals, certifications, authorizations
and permits of, and has made all filings with, or notifications
to, all Governmental Entities pursuant to applicable requirements
of all FDA laws, rules and regulations, and all corresponding
state and, to the Company's knowledge, foreign laws, rules and
regulations applicable to the Company and relating to its medical
device business. To the Company's knowledge, the Company is in
compliance with all FDA laws, rules and regulations, and all
corresponding state and, to the Company's knowledge, foreign
laws, rules and regulations (including Good Manufacturing
Practices) relating to medical device manufacturers and
distributors or otherwise applicable to the Company's business
and the Company has no reason to believe that any of its
consents, approvals, authorizations, registrations,
certifications, permits, filings or notifications which it has
received or made to operate its business have been or are being
revoked or questioned. To the Company's knowledge, there is no
investigation or inquiry pending or threatened relating to the
operation of the Company's business and its compliance with
applicable Laws relating to its medical device business.
SECTION 3.15. Customers.
To the Company's knowledge, the relationships of the Company with
its customers are good commercial working relationships. During
the 12 months prior to the date of this Agreement, no customer of
the Company which accounted for in excess of $50,000 of the
revenues of the Company during such 12 months has canceled or
otherwise terminated its relationship with the Company.
SECTION 3.16. Certain Business Practices and Regulations.
Neither the Company, nor any of its officers, directors, or to
the Company's knowledge, its shareholders, employees or agents
has (i) made or agreed to make any contribution, payment or gift
to any customer, supplier, governmental official, employee or
agent where either the contribution, payment or gift or the
purpose thereof was illegal under any Law, (ii) established or
maintained any unrecorded fund or asset for any purpose or made
any false entries on its books and records for any reason,
(iii) made or agreed to make any contribution, or reimbursed any
political gift or contribution made by any other person, to any
candidate for federal, state or local public office in violation
under any Law, or (iv) engaged in any activity constituting fraud
or abuse under the Laws relating to healthcare, insurance or the
regulation of professional corporations. In addition, to the
Company's knowledge, it has (a) complied in all material respects
with all applicable Laws relating to employee and civil rights
and relating to employment opportunities and (b) filed in a
timely manner all reports and documents required to be filed with
Governmental Entities (and the information contained therein was
correct and complete in all material respects) under applicable
Law.
SECTION 3.17. Insurance.
Section 3.17 of the Company Disclosure Schedule lists all
policies of title, asset, fire, hazard, casualty, liability,
life, worker's compensation and other forms of insurance of any
kind owned or held by the Company. All such policies: (a) are
with insurance companies reasonably believed by the Company to be
financially sound and reputable; (b) are, to the Company's
knowledge, in full force and effect; (c) are sufficient for
compliance by the Company with all requirements of law and of all
material agreements to which the Company is a party; (d) are, to
the Company's knowledge, valid and outstanding policies
enforceable against the insurer; (e) insure against risks of the
kind customarily insured against by companies engaged in similar
businesses and provide adequate insurance coverage for the
businesses and assets of the Company; and (f) provide that they
will remain in full force and effect through the respective dates
set forth in Section 3.17 of the Company Disclosure Schedule.
SECTION 3.18. Potential Conflicts of Interest.
None of the officers or directors of the Company, or any entity
controlled by any of the foregoing or any member of the immediate
family of any of the foregoing and, with respect to subparagraphs
(b), (c), (d), (e) and (f), none of the other employees of the
Company with salaries in excess of $60,000 and/or a member of
their immediate families:
(a) owns, directly or indirectly, any interest in (except
for stock holdings not in excess of two percent (2%) held
solely for investment purposes in securities which are listed
on a national securities exchange or which are regularly
traded in the over-the-counter market), or is an owner, sole
proprietor, stockholder, partner, director, officer, employee,
provider, consultant or agent of any person which is a
competitor, lessor, lessee or customer of, or supplier of
goods or services to, the Company, except where the value to
such individual of any such arrangement with the Company has
been less than $10,000 in the last 12 months;
(b) owns directly or indirectly, in whole or in part,
any real property, leasehold interests, tangible property or
intangible property with a fair market value of $10,000 or
more which the Company currently uses in its business;
(c) to the Company's knowledge, has any cause of action
or other suit, action or claim whatsoever against, or owes any
amount to the Company, except for claims in the ordinary
course of business, such as for accrued vacation pay, accrued
benefits under Company Benefit Plans and similar matters; or
(d) has sold to, or purchased from, the Company any
assets or property for consideration in excess of $10,000 in
the aggregate since January 1, 1990;
(e) is a party to any contract or participates in any
arrangement, written or oral, pursuant to which the Company
provides office space to any such individual or entity, or
provides services of any nature to any such individual or
entity, except where such individual is an employee of the
Company, in each case, where the amount involved has been
greater than $10,000 in the last 12 months or is reasonably
expected to be greater than $10,000 in the 12 months following
the date hereof;
or
(f) has, since January 1, 1990, engaged in any other
material transaction with the Company (other than in
connection with such person's employment relationship, if
any).
As used in this Section 3.18, a person's immediate family shall
mean such person's spouse, parents, children, siblings, mothers and
fathers-in-law, sons and daughters-in-law, and brothers and
sisters-in-law.
SECTION 3.19. Accounting and Tax Matters.
(a) At least ninety percent (90%) of the fair market
value of the net assets and at least seventy percent (70%) of the
fair market value of the gross assets held by the Company
immediately prior to the Merger will be held by the Company at the
Effective Time. For the purpose of determining the percentage of
the Company's net and gross assets held by the Company at the
Effective Time, the following assets will be treated as property
held by the Company immediately prior to but not at the Effective
Time: (i) assets disposed of by the Company prior to the Merger
and in contemplation thereof (including without limitation any
asset disposed of by the Company, other than in the ordinary
course of business, pursuant to a plan or intent existing during
the period ending at the Effective Time and beginning with the
commencement of negotiations (whether formal or informal) with
the Acquiror regarding the Merger (the "Pre-Merger Period")),
(ii) assets used by the Company to pay shareholders perfecting
dissenters' rights or other expenses or liabilities incurred in
connection with the Merger and (iii) assets used to make
distributions, redemptions or other payments in respect of the
Company Common Stock or Company Preferred Stock or rights to
acquire such stock (including payments treated as such for tax
purposes but excluding regular, normal dividends) that are made
in contemplation of the Merger or related thereto.
(b) The Company has no knowledge of, and believes that
there does not exist, any plan or intention on the part of the
Company's shareholders (a "Plan") to engage in a sale, exchange,
transfer, distribution (including, without limitation, a
distribution by a partnership to its partners or by a corporation
to its shareholders), pledge, disposition or any other
transaction which results in a reduction in the risk of ownership
or a direct or indirect disposition (a "Sale") of a number of
shares of Acquiror Common Stock to be issued to such shareholders
in the Merger, which would reduce the Company's shareholders'
ownership of Acquiror Common Stock to a number of shares having
an aggregate fair market value, as of the Effective Time of the
Merger, of less than fifty percent (50%) of the aggregate fair
market value, immediately prior to the Merger, of all outstanding
shares of Company Common Stock. For purposes of this paragraph,
shares of Company Common Stock (i) with respect to which a
Company Shareholder receives consideration in the Merger other
than Acquiror Common Stock (including, without limitation, cash
received pursuant to the exercise of dissenters' rights or in
lieu of fractional shares of Acquiror Common Stock) and/or
(ii) shares of Company Common Stock or Company Preferred Stock
with respect to which a Sale occurs prior to and in contemplation
of the Merger, shall be considered shares of outstanding Company
Common Stock exchanged for Acquiror Common Stock in the Merger
and then disposed of pursuant to a Plan.
(c) No shares of Company Common Stock or Company
Preferred Stock have been owned during the past five years by
Acquiror.
(d) The Company is not an investment company as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(e) As of the Effective Time, the fair market value of
the assets of the Company will exceed the sum of its liabilities,
plus the amount of liabilities, if any, to which its assets are
subject.
(f) The Company is not under the jurisdiction of a
court in a Title 11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
(g) The Company has not taken or agreed to take any
action that would prevent the transactions contemplated by this
Agreement from being effected as a pooling of interests.
SECTION 3.20. Receivables; Inventories.
The accounts receivable of the Company shown on the Audited
Balance Sheets or thereafter acquired by the Company, have been
collected or are collectible in amounts not less than the amounts
thereof carried on the books of the Company, without right of
recourse, defense, deduction, counterclaim, offset or setoff on
the part of the obligor, and can reasonably be expected to be
collected within 120 days of the date incurred, except for an
allowance of $36,000 for doubtful accounts plus an additional
$25,000. Except as set forth in Section 3.20 of the Company
Disclosure Schedule, the accounts receivable of the Company
acquired after November 30, 1993 have been collected or are
collectible in amounts not less than the face amount thereof less
an allowance of $36,000 for doubtful accounts plus an additional
$25,000, without right of recourse, defense, deduction,
counterclaim, offset or setoff on the part of the obligor, and
can reasonably be expected to be collected within 120 days of the
date incurred. The inventories reflected in the Financial
Statements and those inventories held by the Company on the date
hereof are in good, merchantable and usable condition and have
been reflected in the Financial Statements at the lower of cost
or market, in accordance with GAAP, and include no obsolete or
discontinued items, except to the extent reserved against in the
Financial Statements or except as disclosed in Section 3.20 of
the Company Disclosure Schedule.
SECTION 3.21. Real Property; Leases.
(a) Section 3.21(a) of the Company Disclosure Schedule
lists all of the Real Property (as defined below) currently used
by the Company and its officers and directors in the course of
the Company's business, and all such Real Property is suitable
and adequate for the uses for which it is currently devoted. The
Company does not own any Real Property except to the extent that
its leasehold interests constitute ownership.
(b) To the Company's knowledge, all buildings,
structures, fixtures and other improvements on the Real Property
are in good repair, free of defects (latent or patent), and fit
for the uses to which they are currently devoted. To the
Company's knowledge, all such buildings, structures, fixtures and
improvements on the Real Property conform to all Laws. To the
Company's knowledge, the buildings, structures, fixtures and
improvements on each parcel of the Real Property lie entirely
within the boundaries of such parcel of the Real Property as set
forth in Section 3.21(a) of the Company Disclosure Schedule, and
no structures of any kind encroach on the Real Property.
(c) To the Company's knowledge, none of the Real
Property is subject to any Other Agreement (as defined below) or
other restriction of any nature whatsoever (recorded or
unrecorded) preventing or limiting the Company's right to use it.
(d) To the Company's knowledge, no portion of the Real
Property or any building, structure, fixture or improvement
thereon is the subject of, or affected by, any condemnation,
eminent domain or inverse condemnation proceeding currently
instituted or pending, and the Company has no knowledge that any
of the foregoing are, or will be, the subject of, or affected by,
any such proceeding.
(e) The Real Property has direct and unobstructed
access to adequate electric, gas, water, sewer and telephone
lines, and public streets, all of which are adequate for the uses
to which the Real Property is currently devoted.
(f) Section 3.21(f) of the Company Disclosure Schedule
lists and briefly describes all leases and Other Agreements under
which the Company is lessee or lessor of any Asset (as defined
below), or holds, manages or operates any Asset owned by any
third party, or under which any Asset owned by the Company is
held, operated or managed by a third party. The Company is the
owner and holder of all the leasehold estates purported to be
granted by the Documents (as defined below) described in the
Company Disclosure Schedule to it and is the owner of all
equipment, machinery and other Assets thereon or in buildings and
structures thereon, in each case free and clear of all
Encumbrances (as defined below). Each such lease and Other
Agreement is in full force and effect and constitutes
a legal, valid and binding obligation of, and is
legally enforceable against, the respective parties thereto and
grants the leasehold estate it purports to grant free and clear
of all Encumbrances. All necessary governmental approvals with
respect thereto have been obtained, all necessary filings or
registrations therefor have been made, and there have been no
threatened cancellations thereof and there are no outstanding
disputes thereunder. The Company has in all material respects
performed all obligations thereunder required to be performed by
it to date. To the Company's knowledge, no party is in default
in any material respect under any of the foregoing, and, to the
Company's knowledge, there has not occurred any event which
(whether with or without notice, lapse of time or the happening
or occurrence of any other event) would constitute such a
default. All of the Assets subject to such leases are in good
operating condition and repair, normal wear and tear excepted.
(g) "Real Property" means the real property owned or
used by the Company as of November 30, 1993, and any additional
real property owned or used since that date and set forth on
Section 3.21(a) of the Company Disclosure Schedule; "Encumbrance"
means any mortgage, lien, pledge, encumbrance, security interest,
deed of trust, option, encroachment, reservation, order, decree,
judgment, condition, restriction, charge, Other Agreement, claim
or equity of any kind; "Other Agreements" means any concurrence
of understanding and intention between two or more persons (or
entities) with respect to their relative rights and/or
obligations or with respect to a thing done or to be done
(whether or not conditional, executory, express, implied, in
writing or meeting the requirements of contract), including,
without limitation, contracts, leases, promissory notes,
covenants, easements, rights of way, covenants, commitments,
arrangements and understandings; "Assets" means assets of every
kind and everything that is or may be available for the payment
of liabilities (whether inchoate, tangible or intangible),
including, without limitation, real and personal property; and
"Documents" means any paper or other material (including, without
limitation, computer storage media) on which is recorded (by
letters, numbers or other marks) information that may be used,
including, without limitation, legal opinions, mortgages,
indentures, notes, instruments, leases, Other Agreements,
insurance policies, reports, studies, financial statements
(including, without limitation, the notes thereto), other written
financial information, schedules, certificates, charts, maps,
plans, photographs, letters, memoranda and all similar materials.
SECTION 3.22. Books and Records.
The books of account, stock records, minute books and other
records of the Company are complete and correct and have been
maintained in accordance with good business practices, and the
matters contained therein are appropriately and accurately
reflected in the Financial Statements.
SECTION 3.23. Title to Assets.
Except as otherwise noted in Section 3.23 of the Company
Disclosure Schedule, the Company is the sole owner of and has,
and at the Effective Time will have, good title to all of its
assets, free and clear of all liens, mortgages, security
interests, encumbrances, restrictions, agreements, defects or
equities of any kind. All material tangible assets of the
Company are in good operating condition and repair, normal wear
and tear excepted.
SECTION 3.24. No Infringement or Contest.
Section 3.24 of the Company Disclosure Schedule (i) identifies
each fictitious business name, trademark, service mark, trade
name, copyright and all registrations and applications for any of
the foregoing owned or used by the Company; (ii) lists each
patent, invention, industrial model, process, design and all
registrations and applications for any of the foregoing owned or
used by the Company; and (iii) lists all contracts and other
agreements to which the Company is a party, either as licensee or
licensor, for each such item of intangible personal property.
Using its best efforts, the Company has delivered to Acquiror a
list of all trade secrets of the Company and certain related
information. None of the Company's affiliates, including any of
its shareholders, has any interest in, owns, possesses or
otherwise holds in any manner any patent, invention, industrial
model, process, design, registration, application, know-how, or
other technical data, trade secret or other business information
used by the Company. To the Company's knowledge, all patents,
copyrights, trademarks, state, federal and foreign registrations
and applications, and other rights and property listed in
Section 3.24 of the Company Disclosure Schedule are valid and in
full force and effect and are not subject to any taxes,
maintenance fees, or actions falling due within ninety (90) days
after the date hereof. The Company owns or has the irrevocable
right to use all patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks,
trade names, trade dress, labels and logos developed or used in
connection with the business now operated by it. The Company has
taken all reasonable security measures to protect the secrecy,
confidentiality and value of its trade secrets. To the Company's
knowledge, all trade secrets of the Company are presently valid
and protectible, and are not part of the public knowledge or
literature, nor to the knowledge of the Company have they been
used, divulged, or appropriated for the benefit of any person other
than the Company or to the detriment of the Company. The Company
has not received any notice of infringement of or conflict with
asserted rights of others with respect to any of the foregoing, and
there is no claim, action, suit or proceeding pending or, to the
knowledge of the Company, threatened or reasonably anticipated
against the Company with respect thereto. Except as set forth in
Section 3.24 of the Company Disclosure Schedule, the Company is
not required to pay any royalty to anyone with respect to any
such patent, patent right, license, invention, copyright, know-
how, trademark, service mark, trade name, trade dress, label or
logo owned or used by the Company. The Company irrevocably
possesses the right to use all such trademarks, service marks,
trade names, trade dress, labels and logos necessary for the
conduct of its business and, to the Company's knowledge, such use
has not and will not conflict with, infringe upon, or violate any
patent or other proprietary right of any other person, and the
Company has not infringed or is not now infringing any
proprietary rights belonging to any other person.
SECTION 3.25. Board Recommendation.
At a meeting duly called and held in compliance with
California Law, the Board of Directors of the Company has adopted
by unanimous vote a resolution (i) determining that the Merger is
fair to the holders of Company Common Stock and Company Preferred
Stock and is in the best interests of such Company Shareholders
and (ii) approving and adopting this Agreement and the Agreement
of Merger and the transactions contemplated hereby and thereby
and recommending approval and adoption of this Agreement and the
Agreement of Merger and the transactions contemplated hereby and
thereby by the shareholders of the Company.
SECTION 3.26. Vote Required.
The affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock and the holders of a
majority of the outstanding shares of Company Preferred Stock are
the only votes of the holders of any class or series of capital
stock of the Company necessary to approve the transactions
contemplated under this Agreement and the Agreement of Merger.
SECTION 3.27. Banks; Attorneys-in-fact.
Section 3.27 of the Company Disclosure Schedule sets forth a
complete list showing the name of each bank or other financial
institution in which the Company has accounts (including a
description of the names of all persons authorized to draw thereon
or to have access thereto). Such list also shows the name of
each person holding a power of attorney from the Company and a
brief description thereof.
SECTION 3.28. Affiliate Agreements.
In accordance with Section 8.07, the officers, directors and
certain shareholders of the Company specified in Section 3.28 of
the Company Disclosure Schedule ("Company Affiliates") have
agreed to execute and deliver the affiliate agreements in
substantially the form attached hereto as Exhibit C (the
"Affiliate Agreements") and each such Affiliate Agreement, when
so executed and delivered, will, to the knowledge of the Company,
constitute a legal, valid and binding obligation of the
respective Company Affiliate who is a party thereto, enforceable
against such Company Affiliate in accordance with its terms.
Except as set forth in Section 3.28 of the Company Disclosure
Schedule, there are no affiliates of the Company as of the date
hereof as that term is used in Securities and Exchange Commission
(the "SEC") Accounting Series Release Nos. 130 and 135 and SEC
Rule 145.
SECTION 3.29. Brokers.
No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with
the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
SECTION 3.30. Environmental Matters.
(a) The Company has complied and is in compliance with,
and the Real Property and all improvements thereon during the
Company's occupation of the Real Property are in compliance with,
all Environmental Laws (as defined below), except where the
failure to comply would not have an Environmental Adverse Effect
(as defined below).
(b) There are no pending or, to the Company's
knowledge, threatened actions, suits, claims, legal proceedings
or other proceedings based on, and neither the Company, nor any
officer, director or, to the Company's knowledge, any Company
Shareholder has directly or indirectly received any formal or
informal notice of, any complaint, order, directive, citation,
notice of responsibility, notice of potential responsibility, or
information request from any governmental authority or any other
person or entity or knows of any incidents which are reasonably
likely to form the basis for any such actions or notices arising
out of or attributable to: (i) the current or past presence at
any part of the Real Property of Hazardous Materials (as defined
below) or any substances that pose a hazard to human health or an
impediment to working conditions; (ii) the current or past
release or threatened release by the Company into the environment
from the Real Property (including, without limitation, into any
storm drain, sewer, septic system or publicly owned treatment
works) of any Hazardous Materials or any substances that pose a
hazard to human health or an impediment to working conditions;
(iii) the off-site treatment or disposal of Hazardous Materials
by or for the Company, its businesses or Assets; (iv) any
facility operations, procedures or designs of the Company which
do not conform to requirements of the Environmental Laws; or (v)
any violation of Environmental Laws at any part of the Real
Property during the Company's occupation thereof or otherwise
arising from the Company's activities involving Hazardous
Materials, in each case other than those which would not have an
Environmental Adverse Effect.
(c) The Company has been duly issued, and currently
has and will maintain through the Effective Time, all permits,
licenses, certificates and approvals required under any
Environmental Law. A true and complete list of such permits,
licenses, certificates and approvals, all of which are, to the
knowledge of the Company, valid and in full force and effect, is
set out in Section 3.30(c) of the Company Disclosure Schedule.
Except in accordance with such permits, licenses, certificates
and approvals, there has been no discharge by the Company of any
other material regulated by such permits, licenses, certificates
or approvals, nor any other Hazardous Discharge (as defined
below).
(d) To the Company's knowledge, the Real Property
contains no underground storage tanks, or underground piping
associated with such tanks, used currently or in the past for the
storage, throughput or other management of Hazardous Materials.
(e) The Company has furnished to Acquiror accurate and
complete information in the Company's possession pertaining to
the operations of the Company and compliance with Environmental
Laws by the Company.
(f) The Company will promptly furnish to Acquiror
written notice of any Hazardous Discharge or of any actions or
notices described in Section 3.30(b) occurring after the date
hereof and prior to the Effective Time which are not disclosed on
the Company Disclosure Schedule.
(g) To the Company's knowledge, neither PCBs (as
defined below) nor asbestos-containing materials are present on
or in the Real Property.
(h) "Environmental Laws" means any Laws (including,
without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act), including any regulations or
orders promulgated pursuant to such Laws previously in effect or
in effect at the Effective Time, relating to the protection of
human health or the environment, to noise control, or to the
generation, production, use, storage, treatment, transportation,
disposal, release, spilling, leaking, discharging or emitting of
Hazardous Materials; "Environmental Adverse Effect" means any
situation involving compliance and/or non-compliance with
Environmental Laws that, individually or when taken with all
other such situations, could result in any losses, costs,
damages, liabilities, expenses or payments by the Company (before
the Effective Time) or by the Surviving Corporation (after the
Effective Time) in connection with the remediation of any such
situation and/or any fines, taxes, assessments, fees, penalties,
losses, costs, damages, liabilities, expenses or other payments
related thereto in excess of $50,000; "Hazardous Materials" means
any wastes, substances or materials (whether solids, liquids or
gases) that are deemed hazardous, toxic, pollutants or
contaminants, including, without limitation, substances defined
as "hazardous wastes," "hazardous substances," "toxic
substances," "radioactive materials," or other similar
designations in, or otherwise subject to regulation under, any
Environmental Laws, and includes PCBs, asbestos, lead-based
paints, and petroleum and petroleum products (including, without
limitation, crude oil or any fraction thereof);
"Hazardous Discharge" means any emission, spill, release or
discharge (whether on Real Property, on property adjacent to the
Real Property, or at any other location or disposal site) into or
upon the air, soil or improvements, surface water or ground
water, or the sewer, septic system, or waste treatment, storage
or disposal systems servicing the Real Property, in each case of
Hazardous Materials used, stored, generated, treated or disposed
of at the Real Property; and "PCBs" means polychlorinated
biphenyls.
SECTION 3.31. Disclosure.
(a) None of the information supplied by the Company
expressly for inclusion (and so included or relied on for
information included) in (i) the Registration Statement (as
defined in Section 8.01(a)) and (ii) the Proxy Statement (as
defined in Section 8.01(a)), at the respective times that (i) the
Registration Statement is filed with the SEC, (ii) the
Registration Statement becomes effective, (iii) the Proxy
Statement is mailed and (iv) any meeting of shareholders (and any
adjournment thereof) is held to consider, or written consents are
effective with respect to approval of, the transactions
contemplated by this Agreement, shall contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
(b) All facts of material importance to the business
and prospects of the Company have been fully and truthfully disc-
losed to Acquiror in this Agreement. No representation or
warranty by the Company, and no document, statement, certificate,
schedule or exhibit furnished or to be furnished to Acquiror
pursuant to this Agreement or otherwise in connection therewith,
contains or will contain any untrue statement of a material fact
or omits or will omit to state any material fact necessary in
order to make the statements contained therein not misleading.
The Company has previously provided to the Acquiror its current
business plan, which was prepared in good faith and on the basis
of reasonable assumptions, which have been fully disclosed to
Acquiror, and, to the Company's knowledge, no events or
circumstances have occurred that would lead the Company and its
officers and directors to believe that any changes are required
in the assumptions underlying such business plan.
SECTION 3.32. Company Shareholders.
Except as set forth in Section 3.32 of the Company Disclosure
Schedule, all holders of Company Common Stock and Company
Preferred Stock are residents of the State of California.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY SHAREHOLDERS
Except as set forth in the Company Disclosure Schedule delivered
to Acquiror by the Company prior to the execution and delivery of
this Agreement, which shall identify exceptions by specific
Section references, each of the Company Shareholders hereby
severally but not jointly represent and warrant to the Acquiror
and Acquiror Sub that to such Company Shareholder's knowledge, no
representation or warranty by the Company, and no document,
statement, certificate, schedule or exhibit furnished or to be
furnished to Acquiror pursuant to this Agreement or otherwise in
connection therewith, contains or will contain any untrue
statement of a material fact or omits or will omit to state any
material fact necessary in order to make the statements contained
therein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE SCHEDULE 2 SHAREHOLDERS
Except as set forth in the Company Disclosure Schedule delivered
to Acquiror by the Company prior to the execution and delivery of
this Agreement, which shall identify exceptions by specific
Section references, those shareholders of the Company named on
Schedule 2 hereto (the "Schedule 2 Shareholders") hereby
severally but not jointly represent and warrant to Acquiror and
Acquiror Sub that the representations and warranties contained in
Sections 3.07, 3.08, 3.22, 3.31(a) and the first and third
sentences of Section 3.31(b) are true and correct.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF ACQUIROR AND ACQUIROR SUB
Except as set forth in the Disclosure Schedule delivered by
Acquiror and Acquiror Sub to the Company prior to the execution
and delivery of this Agreement (the "Acquiror Disclosure
Schedule"), which shall identify exceptions by specific Section
references, Acquiror and Acquiror Sub hereby jointly and
severally represent and warrant to the Company as follows:
SECTION 6.01. Organization and Qualification; Subsidiaries.
Each of Acquiror, Acquiror Sub and Acquiror's Significant
Subsidiaries (as defined in Section 11.04(h)) is a corporation
duly organized, validly existing and in good standing under the
Laws of the jurisdiction of its incorporation or organization,
has all requisite corporate or other power and authority to own,
lease and operate its properties and to carry on its business as
it is now being conducted and each of Acquiror and its
Significant Subsidiaries is duly qualified and in good standing
to do business in each jurisdiction in which the nature of the
business conducted by it or the ownership or leasing of its
properties makes such qualification necessary, other than where
the failure to do so would not have an Acquiror Material Adverse
Effect. The term "Acquiror Material Adverse Effect" as used in
this Agreement shall mean any change or effect that, individually
or when taken together with all such other changes or effects, is
or is reasonably likely to be materially adverse to the financial
condition, business or results of operations of Acquiror and its
subsidiaries, taken as a whole.
SECTION 6.02. Articles of Incorporation and By-Laws.
Acquiror has heretofore furnished to the Company a complete and
correct copy of the Articles of Incorporation and the By-Laws, as
amended or restated, of each of Acquiror and Acquiror Sub.
Neither Acquiror nor Acquiror Sub is in violation of any of the
provisions of its Articles of Incorporation or By-Laws.
SECTION 6.03. Authority.
Each of Acquiror and Acquiror Sub has the requisite corporate
power and authority to execute and deliver this Agreement, to
perform its obligations hereunder, and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement by Acquiror and Acquiror Sub, and the consummation
by Acquiror and Acquiror Sub of the transactions contemplated
hereby, have been duly authorized by all necessary corporate
action and no other corporate proceedings on the part of Acquiror
or Acquiror Sub are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Acquiror and Acquiror Sub
and, assuming the due authorization, execution and delivery by
the Company and the Company Shareholders, constitutes a legal,
valid and binding obligation of Acquiror and Acquiror Sub in
accordance with its terms, except as such enforceability may be
subject to the effect of any applicable bankruptcy, insolvency
(including, without limitation, all Laws relating to fraudulent
transfers), reorganization, moratorium or similar Laws affecting
creditors' rights generally and subject to the effect of general
principles of equity (whether considered in a proceeding in
equity or at law).
SECTION 6.04. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by
Acquiror and Acquiror Sub do not, and the performance of this
Agreement by Acquiror and Acquiror Sub shall not, (i) conflict
with or violate the Articles of Incorporation or By-Laws or
equivalent organizational documents of Acquiror, Acquiror Sub or
any of Acquiror's Significant Subsidiaries, (ii) subject to
(x) obtaining the consents, approvals, authorizations and permits
of, and making filings or notifications to, any Governmental
Entities pursuant to the applicable requirements, if any, of the
Securities Act, the Exchange Act, Blue Sky Laws, the NASD, the
HSR Act and the filing and recordation of appropriate merger
documents as required by California Law and (y) obtaining the
consents, approvals, authorizations or permits described in
Section 6.04(b) of the Acquiror Disclosure Schedule, conflict
with or violate any Laws applicable to Acquiror, Acquiror Sub or
any of Acquiror's Significant Subsidiaries or by which any of
their respective properties is bound or affected, or (iii) result
in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration
or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Acquiror,
Acquiror Sub or any of Acquiror's Significant Subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument
or obligation to which Acquiror, Acquiror Sub or any of
Acquiror's Significant Subsidiaries is a party or by which
Acquiror, Acquiror Sub or any of Acquiror's Significant
Subsidiaries or any of their respective properties is bound or
affected, except for any such conflicts or violations described
in clause (ii) or any breaches or defaults described in clause
(iii) that would not have an Acquiror Material Adverse Effect.
(b) The execution and delivery of this Agreement by
Acquiror and Acquiror Sub do not, and the performance of this
Agreement by Acquiror and Acquiror Sub shall not, require any
consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entities, except (i) for
applicable requirements, if any, of the Securities Act, the
Exchange Act, Blue Sky Laws, the NASD, the HSR Act, the consents,
approvals, authorizations or permits described in Section 6.04(b)
of the Acquiror Disclosure Schedule and the filing and
recordation of appropriate merger documents as required by
California Law or (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or
notifications, would not adversely affect the ability of Acquiror
to consummate, or prevent or delay the consummation of, the
transactions contemplated by this Agreement.
SECTION 6.05. Absence of Litigation.
(a) There is no claim, action, suit, litigation,
proceeding, arbitration, or, to the knowledge of Acquiror,
investigation of any kind to which Acquiror or any of its
Significant Subsidiaries are a party, at law or in equity
(including actions or proceedings seeking injunctive relief),
pending or, to the knowledge of Acquiror, threatened, except for
claims, suits, litigations, proceedings, arbitrations or
investigations which individually or in the aggregate cannot
reasonably be expected to have an Acquiror Material Adverse
Effect; and (b) neither Acquiror nor any of its Significant
Subsidiaries is subject to any continuing order of, consent
decree, settlement agreement or other similar written agreement
with, or, to the knowledge of Acquiror, continuing investigation
by, any Governmental Entity, or any judgment, order, writ,
injunction, decree or award of any Governmental Entity or
arbitrator, including, without limitation, cease-and-desist or
other orders, except for such matters which are not reasonably
expected to have an Acquiror Material Adverse Effect.
SECTION 6.06. Ownership of Acquiror Sub; No Prior Activities.
(a) Acquiror Sub was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement.
(b) As of the Effective Time, all of the outstanding
capital stock of Acquiror Sub will be owned directly by Acquiror.
As of the Effective Time, there will be no options, warrants or
other rights (including registration rights), agreements,
arrangements or commitments to which Acquiror Sub is a party of
any character relating to the issued or unissued capital stock
of, or other equity interests in, Acquiror Sub or obligating
Acquiror Sub to grant, issue or sell any shares of the capital
stock of, or other equity interests in, Acquiror Sub, by sale,
lease, license or otherwise. There are no obligations,
contingent or otherwise, of Acquiror Sub to repurchase, redeem or
otherwise acquire any shares of the capital stock of Acquiror
Sub.
(c) As of the date hereof and the Effective Time,
except for obligations or liabilities incurred in connection with
its incorporation or organization and the transactions
contemplated by this Agreement, Acquiror Sub has not and will not
have incurred, directly or indirectly, through any subsidiary or
affiliate, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered
into any agreements or arrangements with any person.
SECTION 6.07. Brokers.
No broker or finder (other than Grayson & Co.) or investment
banker (other than Cowen & Company) is entitled to any brokerage,
finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Acquiror.
SECTION 6.08. SEC Reports.
Acquiror has filed all forms, reports, statements and other
documents required to be filed with the SEC since January 1, 1991
by Acquiror, including, without limitation, (A) all Annual
Reports on Form 10-K, (B) all Quarterly Reports on Form 10-Q, (C)
all proxy statements relating to meetings of shareholders
(whether annual or special), (D) all reports on Form 8-K, (E) all
other reports or registration statements and (F) all amendments
and supplements to all such reports and registration statements
(collectively, the "Acquiror SEC Reports"). As of their
respective filing dates the Acquiror SEC Reports complied as to
form in all material respects with the requirements of the
Exchange Act and the Securities Act. To the Acquiror's
knowledge, the Acquiror SEC Reports did not at the time they were
filed contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
SECTION 6.09. Acquiror Common Stock.
Acquiror Common Stock, when issued and delivered to the
shareholders of the Company pursuant to the Merger, will be duly
authorized, validly issued, fully paid and non-assessable.
SECTION 6.10. Taxes.
(a) Acquiror has no present plan or intention following
the Effective Time to cause the Company to issue additional shares
of stock that would result in Acquiror losing control of the
Company within the meaning of Section 368(c)(1) of the Code.
(b) Acquiror has no present plan or intention
following the Effective Time to reacquire any shares of Acquiror
Common Stock issued in the Merger.
(c) Acquiror has no present plan or intention
following the Effective Time to liquidate the Company, merge the
Company with or into another corporation, sell or otherwise
dispose of the stock of the Company (except for transfers of
stock to corporations controlled by Acquiror) or cause the
Company to sell or otherwise dispose of any of its assets or of
any of the assets acquired by it from Acquiror Sub, except for
dispositions made in the ordinary course of business or transfers
of assets to corporations controlled by the Company.
(d) Acquiror and Acquiror Sub are not investment
companies as defined in Section 368(a)(2)(F)(iii) and (iv) of the
Code.
ARTICLE VII
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 7.01. Affirmative Covenants.
The Company hereby covenants and agrees that, from the date of
this Agreement until the Effective Time, unless otherwise
expressly contemplated by this Agreement or consented to in
writing by Acquiror, the Company will:
(a) operate its business only in the usual and
ordinary course consistent with past practice;
(b) use its best efforts to preserve intact its
business organization and assets, maintain its rights and
franchises, retain the services of its officers and key
employees and maintain the relationships with its customers
and suppliers; and
(c) use its best efforts to keep in full force and
effect liability and other insurance and bonds comparable in
amount and scope of coverage to that currently maintained.
SECTION 7.02. Negative Covenants of the Company.
Except as expressly contemplated by this Agreement, as set forth
in Section 7.02 of the Company Disclosure Schedule or otherwise
consented to in writing by Acquiror, from the date of this
Agreement until the Effective Time the Company shall not do any
of the following:
(a) (i) increase the compensation payable or to
become payable to any director, officer or employee, except
for increases in salary or wages payable or to become
payable in the ordinary course of business and consistent
with past practice to employees of the Company who are not
directors or officers of the Company; (ii) grant any
severance or termination pay (other than pursuant to the
normal severance policy of the Company or as required under
an existing agreement listed in Section 7.02 of the Company
Disclosure Schedule in effect on the date of this Agreement)
to, or enter into any severance agreement with, any
director, officer or employee, or enter into any employment
agreement with any director, officer or employee of the
Company; or (iii) establish, adopt, enter into or amend any
employee benefit plan or arrangement, except as may be
required to comply with applicable Law;
(b) declare or pay any dividend on, or make any other
distribution in respect of, outstanding shares of capital
stock;
(c) (i) redeem, purchase or otherwise acquire any
shares of its capital stock or any securities or obligations
convertible into or exchangeable for any shares of its
capital stock, or any options, warrants or conversion
or other rights to acquire any shares of its capital stock or
any such securities or obligations; (ii) effect any
reorganization or recapitalization; or (iii) split, combine or
reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in
lieu of or in substitution for, shares of its capital stock
(except for the issuance of shares upon the exercise of
options or warrants in accordance with their terms);
(d) issue, deliver, award, grant or sell, or authorize
the issuance, delivery, award, grant or sale (including the
grant of any security interests, liens, claims, pledges,
limitations in voting rights, charges or other encumbrances)
of, any shares of any class of its capital stock (including
shares held in treasury), any securities convertible into or
exercisable or exchangeable for any such shares, or any
rights, warrants or options to acquire, any such shares
(except for the issuance of shares upon the exercise of
outstanding options or warrants in accordance with their
terms), or amend or otherwise modify the terms of any such
rights, warrants or options the effect of which shall be to
make such terms more favorable to the holders thereof;
(e) except as contemplated by agreements, arrangements
or letters of intent which have been identified in Section
7.02 of the Company Disclosure Schedule, acquire or agree to
acquire, by merging or consolidating with, by purchasing an
equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership,
association or other business organization or division
thereof, or otherwise acquire or agree to acquire any assets
of any other person (other than the purchase of assets from
suppliers or vendors in the ordinary course of business and
consistent with past practice);
(f) sell, lease, exchange, mortgage, pledge, transfer
or otherwise dispose of, or agree to sell, lease, exchange,
mortgage, pledge, transfer or otherwise dispose of, any of
its assets, except for dispositions in the ordinary course
of business and consistent with past practice;
(g) initiate, solicit or encourage (including by way
of furnishing information or assistance), or take any other
action to facilitate, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to
lead to, any Competing Transaction (as such term is defined
below), or enter into discussions or furnish any information
or negotiate with any person or entity or otherwise
cooperate in any way in furtherance of such inquiries or to
obtain a Competing Transaction, or agree to or endorse any
Competing Transaction, or authorize any of the officers,
employees, agents, representatives or directors of the
Company to take any such action, and the Company shall
direct and instruct and use its best efforts to cause the
directors, officers, employees, agents and representatives
of the Company (including, without limitation, any
investment banker, financial advisor, attorney or accountant
retained by the Company) not to take any such action, and
the Company shall promptly notify Acquiror if any such
inquiries or proposals are received by the Company or any of
its or their respective officers, directors, employees,
agents, investment bankers, financial advisors, attorneys,
accountants or other representatives, and the Company shall
promptly inform Acquiror as to the material terms of such
inquiry or proposal and, if in writing, promptly deliver or
cause to be delivered to Acquiror a copy of such inquiry or
proposal, and the Company shall keep Acquiror informed, on a
current basis, of the nature of any such inquiries and the
status and terms of any such proposals; provided, however,
that nothing contained in this subsection (g) shall prohibit
the Board of Directors of the Company from (i) furnishing
information to, or entering into discussions or negotiations
with, any person or entity that makes an unsolicited bona
fide proposal to acquire the Company pursuant to a merger,
consolidation, share exchange, business combination or other
similar transaction (a "Bona Fide Proposal"), if, and only
to the extent that, (A) the Board of Directors of the
Company, after consultation with and based upon the written
advice of independent legal counsel (a copy of which is
furnished to Acquiror), determines in good faith that the
Bona Fide Proposal is financially superior to the Merger, is
otherwise in the best interests of the shareholders of the
Company and is reasonably financeable and that accordingly
such action is required for the Board of Directors of the
Company to comply with its fiduciary duties to shareholders
imposed by California Law, (B) prior to furnishing such
information to, or entering into discussions or negotiations
with, such person or entity, the Company provides written
notice to Acquiror to the effect that it is furnishing
information to, or entering into discussions or negotiations
with, such person or entity, (C) prior to furnishing such
information to such person or entity, the Company receives
from such person or entity an executed confidentiality
agreement with terms no less favorable to the Company than
those contained in the nondisclosure agreement, dated
October 22, 1993, between Acquiror and the Company (the
"Confidentiality Agreement") and (D) the Company keeps
Acquiror informed, on a current basis, of the status of any
such discussions or negotiations; or (ii) complying with
Rule 14e-2 promulgated under the Exchange Act with regard to
a Competing Transaction. For purposes of this Agreement,
"Competing Transaction" shall mean any of the following
involving the Company (other than the transactions
contemplated by this Agreement): (i) any merger,
consolidation, share exchange, business combination, or
other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of ten
percent or more of the assets of the Company or issuance of
ten percent or more of the outstanding voting securities of
the Company in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for
ten percent or more of the outstanding shares of capital
stock of the Company or the filing of a registration
statement under the Securities Act in connection therewith;
(iv) any solicitation of proxies in opposition to approval
by the Company's shareholders of the Merger; (v) any person
shall have acquired beneficial ownership or the right to
acquire beneficial ownership of, or any "group" (as such
term is defined under Section 13(d) of the Exchange Act)
shall have been formed which beneficially owns or has the
right to acquire beneficial ownership of, ten percent or
more of the then outstanding shares of capital stock of the
Company; or (vi) any agreement to, or public announcement by
the Company or any other person of a proposal, plan or
intention to, do any of the foregoing;
(h) adopt any amendments to its Articles of
Incorporation or By-Laws;
(i) (A) change any of its methods of accounting in
effect at November 30, 1993 or (B) make or rescind any
express or deemed election relating to taxes, settle or
compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to
taxes, or change any of its methods of reporting income or
deductions for federal income tax purposes from those
employed in the preparation of the federal income tax
returns for the taxable year ending November 30, 1992,
except in either case as may be required by Law, the IRS or
generally accepted accounting principles;
(j) incur any obligation for borrowed money or
purchase money indebtedness, whether or not evidenced by a
note, bond, debenture or similar instrument, except for
additional borrowings made with the prior written consent of
Acquiror;
(k) take any action or fail to take any action which
could reasonably be expected to have a Company Material
Adverse Effect prior to or after the Effective Time or an
Acquiror Material Adverse Effect after the Effective Time,
or that could reasonably be expected to adversely effect the
ability of the Company prior to the Effective Time, or
Acquiror or any of its subsidiaries after the Effective Time,
to obtain consents of third parties or approvals of
Governmental Entities required to consummate the transactions
contemplated in this Agreement; or
(l) agree in writing or otherwise to do any of the
foregoing.
SECTION 7.03. Negative Covenants of Acquiror.
Except as expressly contemplated by this Agreement or otherwise
consented to in writing by the Company, from the date of this
Agreement until the Effective Time, Acquiror shall not do, and
shall not permit any of its subsidiaries to do, any of the
following:
(a) amend any of the material terms or provisions of
Acquiror's securities, except for any such amendments which
affect equally all shares of Acquiror Common Stock;
(b) knowingly take any action which would result in a
failure to maintain the trading of Acquiror Common Stock on
NASDAQ/NMS without causing such stock to be listed for
trading on a national securities exchange at or prior to the
termination of its trading on NASDAQ/NMS;
(c) agree in writing or otherwise to do any of the
foregoing.
SECTION 7.04. Access and Information.
(a) For so long as this Agreement is in effect, the
Company and Acquiror shall (and shall cause their respective
subsidiaries to) afford to each other and their respective
officers, employees, accountants, consultants, legal counsel and
other representatives reasonable access during normal business
hours to all information concerning the business, properties,
contracts, records and personnel of the Company or Acquiror, as
the case may be, or their respective subsidiaries as such other
party may reasonably request.
(b) The parties and their respective officers,
employees, accountants, consultants, legal counsel and other
representatives will comply with all of their respective
obligations under the Confidentiality Agreement.
ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.01. Registration Statement; Proxy Statement.
(a) As promptly as practicable after the execution of
this Agreement, Acquiror shall prepare and file with the SEC a
registration statement on Form S-4 (the registration statement
together with the amendments thereto being the "Registration
Statement"), containing a proxy statement/prospectus, in
connection with the registration under the Securities Act of the
Acquiror Common Stock, the vote of the Company's shareholders
with respect to the Merger (such proxy statement/prospectus,
together with any amendments thereof or supplements thereto, in
each case in the form or forms mailed to the Company's
shareholders, being the "Proxy Statement") and the other
transactions contemplated by this Agreement. Each of Acquiror
and the Company will use all reasonable efforts to have or cause
the Registration Statement to become effective as promptly as
practicable, and shall take any action required to be taken under
any applicable federal or state securities laws in connection
with the issuance of shares of Acquiror Common Stock in the
Merger. Each of Acquiror and the Company shall furnish all
information concerning it and the holders of its capital stock as
the other may reasonably request in connection with such actions.
As promptly as practicable after the Registration Statement shall
have become effective, the Company shall mail the Proxy Statement
to its shareholders. The Proxy Statement shall include the
recommendation of the Company's Board of Directors to
shareholders to vote in favor of the Merger unless otherwise
required by the applicable fiduciary duties of the directors of
the Company, as determined by such directors in good faith after
consultation with and based upon the written advice of
independent legal counsel under the circumstances described in
the proviso in Section 7.02(g).
(b) The information supplied by the Company for
inclusion in the Registration Statement shall not, at the time
the Registration Statement is declared effective, contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make
the statements therein not misleading. The information supplied
by the Company for inclusion in the Proxy Statement to be sent to
the shareholders of the Company in connection with the meeting of
the Company's shareholders to consider the Merger (the
"Shareholders' Meeting") shall not, at the date the Proxy
Statement (or any amendment thereof or supplement thereto) is
first mailed to shareholders, at the time of the Shareholders'
Meeting or at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are
made, not misleading. If at any time prior to the Effective Time
any event or circumstance relating to the Company or any of its
affiliates, or its or their respective officers or directors,
should be discovered by the Company which should be set forth in
an amendment to the Registration Statement or a supplement to the
Proxy Statement, the Company shall promptly inform Acquiror. All
documents that the Company is responsible for filing with the SEC
in connection with the transactions contemplated herein will
comply as to form and substance in all material respects with the
applicable requirements of the Securities Act and the rules and
regulations thereunder and the Exchange Act and the rules and
regulations thereunder.
(c) The information supplied by Acquiror for inclusion
in the Registration Statement shall not, at the time the
Registration Statement is declared effective, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading. The information supplied by
Acquiror for inclusion in the Proxy Statement to be sent to the
shareholders of the Company in connection with the Shareholders'
Meeting shall not, at the date the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to
shareholders, at the time of the Shareholders' Meeting or at the
Effective Time, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event
or circumstance relating to Acquiror or any of its respective
affiliates, or its or their respective officers or directors,
should be discovered by Acquiror which should be set forth in an
amendment to the Registration Statement or a supplement to the
Proxy Statement, Acquiror shall promptly inform the Company. All
documents that Acquiror is responsible for filing with the SEC in
connection with the transactions contemplated herein will comply
as to form and substance in all material respects with the
applicable requirements of the Securities Act and the rules and
regulations thereunder and the Exchange Act and the rules and
regulations thereunder.
(d) The Company and Acquiror each hereby (i) consents
to the use of its name and, on behalf of its subsidiaries and
affiliates, the names of such subsidiaries and affiliates and to
the inclusion of financial statements and business information
relating to such party and its subsidiaries and affiliates (in
each case, to the extent required by applicable securities laws)
in any registration statement or proxy statement prepared by the
Company or the Acquiror, (ii) agrees to use its best efforts to
obtain the written consent of any person or entity retained by it
which may be required to be named (as an expert or otherwise) in
such registration statement or proxy statement; and (iii) agrees
to cooperate, and agrees to use its best efforts to cause its
subsidiaries and affiliates to cooperate, with any legal counsel,
investment banker, accountant or other agent or representative
retained by any of the parties specified in clause (i) in
connection with the preparation of any and all information
required, as determined after consultation with each party's
counsel, to be disclosed by applicable securities laws in any
such registration statement or proxy statement.
SECTION 8.02. Meeting of Shareholders.
The Company shall promptly after the date of this Agreement take
all action necessary in accordance with California Law and its
Articles of Incorporation and By-Laws to convene the
Shareholders' Meeting, and the Company shall consult with
Acquiror in connection therewith. The Company shall use its best
efforts to solicit from the shareholders of the Company proxies
or consents in favor of the Merger and shall take all other
actions necessary or advisable to secure the vote or consent of
shareholders required by California Law to approve the Merger,
unless otherwise required by the applicable fiduciary duties of
directors of the Company, as determined by such directors in good
faith after consultation with and based upon the written advice
of independent legal counsel under the circumstances described in
the proviso in Section 7.02(g).
SECTION 8.03. Appropriate Action; Consents; Filings; Other.
(a) The Company and Acquiror shall use best efforts to
(i) take, or cause to be taken, all appropriate action, and do, or
cause to be done, all things necessary, proper or advisable under
applicable Law or otherwise to consummate and make effective the
transactions contemplated by this Agreement as promptly as
practicable, (ii) obtain from any Governmental Entities any
consents, licenses, permits, waivers, approvals, authorizations
or orders required to be obtained or made by Acquiror or the
Company or any of their subsidiaries in connection with the
authorization, execution and delivery of this Agreement and the
consummation of the transactions contemplated herein, including,
without limitation, the Merger, and (iii) make all necessary
filings, and thereafter make any other required submissions, with
respect to this Agreement and the Merger required under (A) the
Securities Act and the Exchange Act, and any other applicable
federal or state securities laws, (B) the HSR Act and (C) any
other applicable Law; provided that Acquiror and the Company
shall cooperate with each other in connection with the making of
all such filings, including providing copies of all such
documents to the non-filing party and its advisors prior to
filing and, if requested, to accept all reasonable additions,
deletions or changes suggested in connection therewith. The
Company and Acquiror shall furnish to each other all information
required for any application or other filing to be made pursuant
to the rules and regulations of any applicable Law (including all
information required to be included in the Proxy Statement and
the Registration Statement) in connection with the transactions
contemplated by this Agreement.
(b) (i) The Company and Acquiror shall give
(or shall cause their respective subsidiaries to give) any
notices to third parties, and use, and cause their respective
subsidiaries to use, best efforts to obtain any third party
consents, (A) necessary, proper or advisable to consummate the
transactions contemplated in this Agreement, (B) disclosed or
required to be disclosed in the Company Disclosure Schedule or
the Acquiror Disclosure Schedule, as the case may be, or (C)
required to prevent a Company Material Adverse Effect from
occurring prior to or after the Effective Time or an Acquiror
Material Adverse Effect from occurring after the Effective Time.
(ii) In the event that either party
shall fail to obtain any third party consent described in
subsection (b)(i) above, such party shall use best efforts, and
shall take any such actions reasonably requested by the other
party hereto, to minimize any adverse effect upon the Company and
Acquiror, their respective subsidiaries, and their respective
businesses resulting, or which could reasonably be expected to
result after the Effective Time, from the failure to obtain such
consent.
(c) From the date of this Agreement until the
Effective Time, the Company shall promptly notify Acquiror in
writing of any pending or, to the knowledge of the Company,
threatened action, proceeding or investigation by any
Governmental Entity or any other person (i) challenging or
seeking damages in connection with the Merger or the conversion
of the Company Common Stock into Acquiror Common Stock pursuant
to the Merger or (ii) seeking to restrain or prohibit the
consummation of the Merger or otherwise limit the right of
Acquiror or, to the knowledge of the Company, its subsidiaries to
own or operate all or any portion of the businesses or assets of
the Company.
(d) The Company shall take the actions called for by
Section 8.03(d) of the Company Disclosure Schedule with respect
to certain oral and written agreements.
SECTION 8.04. Unaudited Financial Information.
The Company will cause to be prepared (and furnish to Acquiror)
as promptly as possible on a monthly basis unaudited balance
sheets, beginning as of December 31, 1993, and quarterly
unaudited balance sheets beginning as of February 28, 1994, of
the Company (the "Unaudited Balance Sheets") and the related
unaudited statement of earnings and shareholders' equity and
statement of cash flow to the Company for the respective one-
month and three-month periods (such statements of earnings and
shareholders' equity and statements of cash flows, together with
the Unaudited Balance Sheets, are referred to in this Agreement
as the "Unaudited Statements" and, together with the Audited
Statements, as the "Financial Statements"). The Unaudited
Statements will be complete and correct in all material respects
and will be prepared from the books and records of the Company
and will fairly present the financial position of the Company and
the results of its operations and its cash flows as of and for
the respective time periods in conformity with GAAP applied on a
consistent basis, except as noted thereon and subject to normal
and recurring year-end adjustments.
SECTION 8.05. Letters of Accountants.
The Company shall use its best efforts to cause to be
delivered to Acquiror "cold comfort" letters of Deloitte &
Touche, its independent public accountant, dated the date on
which the Registration Statement shall become effective and as of
the Effective Time, respectively, and addressed to Acquiror, in
form and substance reasonably satisfactory to Acquiror and
reasonably customary in scope and substance for letters delivered
by independent public accountants in connection with registration
statements similar to the Registration Statement and transactions
such as those contemplated by this Agreement.
SECTION 8.06. Update Disclosure; Breaches.
From and after the date of this Agreement until the Effective
Time, each party hereto shall promptly notify the other party
hereto by written update to its Disclosure Schedule of (i) the
occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which would be likely to cause any condition
to the obligations of any party to effect the Merger and the
other transactions contemplated by this Agreement not to be
satisfied, or (ii) the failure of the Company or Acquiror, as the
case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it pursuant to this
Agreement which would be likely to result in any condition to the
obligations of any party to effect the Merger and the other
transactions contemplated by this Agreement not to be satisfied;
provided, however, that the delivery of any notice pursuant to
this Section 8.06 shall not cure any breach of any representation
or warranty requiring disclosure of such matter prior to the date
of this Agreement or otherwise limit or affect the rights and
remedies available hereunder to the party receiving such notice,
subject to the provisions of Section 8.17; provided, further,
that the delivery of any notice pursuant to this Section 8.06
shall be deemed accepted by the party to whom it is addressed as
an updated disclosure for purposes of Sections 8.17 and 11.02
only if the Closing occurs hereunder.
SECTION 8.07. Affiliates; Accounting and Tax Treatment.
Prior to the Effective Time, the Company shall obtain
Affiliate Agreements from each person listed in Section 3.28 of
the Company Disclosure Schedule and any person who may be deemed
to have become an affiliate of the Company (under SEC Rule 145 of
the Securities Act or otherwise under applicable SEC accounting
releases with respect to pooling-of-interests accounting
treatment) after the date of this Agreement and on or prior to
the Effective Time, provided that the Company shall use its best
efforts to obtain Affiliate Agreements from each such person as
soon as practicable after the date of this Agreement or the date
on which such person attains such status, as the case may be.
Each party hereto, including Company Shareholders, as the case
may be, shall use their best efforts to cause the Merger to
qualify, and shall not take any actions which could prevent the
Merger from qualifying, for pooling-of-interests accounting
treatment and as a reorganization qualifying under the provisions
of Section 368(a) of the Code.
SECTION 8.08. Public Announcements.
Acquiror and the Company shall consult with each other before
issuing any press release or otherwise making any public
statements with respect to the Merger and shall not issue any
such press release or make any such public statement prior to
such consultation, except as may be required by Law or any
listing agreement with the NASD.
SECTION 8.09. NASD Listing.
Acquiror shall use all reasonable efforts to cause the shares of
Acquiror Common Stock to be issued in the Merger to be approved
for listing on the NASDAQ/NMS prior to the Effective Time.
SECTION 8.10. Employee Matters.
The Company and Acquiror shall offer to and endeavor to enter
into employment agreements at the Effective Time with the
officers and employees of the Company listed in Section 8.10 of
the Company Disclosure Schedule on terms reasonably satisfactory
to Acquiror and summarized therein. By their execution and
delivery of this Agreement, the Company and each of Wilton
Webster and Tony Brown acknowledge having been advised by
Acquiror that the execution and delivery by Messrs. Webster and
Brown of such employment agreements at the Closing are material
inducements to Acquiror to consummate the Merger as contemplated
under this Agreement because of the importance of Messrs. Webster
and Brown to the future operating and financial performance and
future prospects of the Surviving Corporation.
SECTION 8.11. Assumption of Agreements.
The Surviving Corporation shall execute written consents, where
required, to assume the obligations of the Company, which
consents shall be in form and substance reasonably satisfactory
to Acquiror and the Company.
SECTION 8.12. Benefit Arrangements.
Except as otherwise expressly contemplated in Section 8.12 of the
Company Disclosure Schedule, to which Acquiror and the Company
hereby agree, for a period of one year from and after the
Effective Time or until such employee benefit plans or
arrangements are integrated with Acquiror's employee benefit
plans and arrangements, whichever is earlier, Acquiror shall
endeavor to, or shall endeavor to cause the Surviving Corporation
to, provide employee benefit plans and arrangements for the
benefit of the employees of the Surviving Corporation that are
reasonably comparable in the aggregate to the employee benefit
plans and arrangements of the Company as in effect on the date
hereof; provided, however, that Acquiror reserves the right to
make any changes to such employee benefit plans and arrangements
as are necessary to comply with, or respond to changes in,
applicable Law or are otherwise deemed reasonably appropriate by
the Acquiror as being in the best interests of Acquiror and the
Surviving Corporation. Except in the sole discretion of Acquiror
or as otherwise set forth in Section 8.12 of the Company
Disclosure Schedule, the Acquiror shall not give full credit for
eligibility, vesting or benefit accrual for each participant's
period of service with the Company prior to the Effective Time.
SECTION 8.13. Principal Offices.
As of the Effective Time, the principal offices of the Surviving
Corporation shall be located at the current principal offices of
the Company in Baldwin Park, California.
SECTION 8.14. Obligations of Acquiror Sub; Assets of
Acquiror Sub.
Acquiror shall take all action necessary to cause Acquiror Sub to
perform its obligations under this Agreement and to consummate
the Merger on the terms and conditions set forth in this
Agreement.
SECTION 8.15. Approval of Merger.
Subject to the rights of each such shareholder to terminate the
voting agreement as to such shareholder hereafter described in
this Section, each of the Company Shareholders listed in
Section 8.15 of the Company Disclosure Schedule shall vote all
shares of Company Common Stock and Company Preferred Stock owned
by him or her in favor of approval of the Merger on the terms and
conditions set forth herein, and each such shareholder that is a
member of the Board of Directors of the Company, shall (subject
to any fiduciary obligations to the contrary) recommend that the
shareholders of the Company approve the Merger on the terms and
conditions set forth herein, when the same is presented to the
shareholders of the Company for consideration. After Acquiror
and the Company shall have delivered to the shareholders of the
Company the Proxy Statement prior to the Shareholders' Meeting or
any action by written consent approving the Merger described in
Section 8.01(b) hereof, the Company Shareholders listed in
Section 8.15 of the Company Disclosure Schedule shall have the
right to cancel the aforementioned voting agreement by written
notice delivered to Acquiror within the period (the "Review
Period") beginning on the date of his or her initial receipt of
such Proxy Statement and ending on the earlier of (i) five days
after such initial receipt or (ii) the meeting of the
shareholders of the Company held to consider the Merger or any
action by written consent of shareholders of the Company
approving the Merger. This right to so cancel the aforementioned
voting agreement shall irrevocably terminate after the expiration
of the Review Period; provided, however, that if Acquiror
updates, amends or supplements the Proxy Statement, a new Review
Period shall commence, beginning on the date of the Company
Shareholders' initial receipt of such update, amendment or
supplement and ending on the earlier of (i) five days after
receipt of such update, or (ii) the meeting of the shareholders
of the Company held to consider the Merger or any action by
written consent of shareholders of the Company approving the
Merger.
SECTION 8.16. Tax Returns.
(a) To the extent permitted under applicable tax laws,
the Merger shall be reported as a "reorganization" within the
meaning of Section 368(a)(1)(A) and Section 368(a)(2)(E) of the
Code in all federal, state and local tax returns filed after the
Effective Time. Notwithstanding any other provision of this
Agreement, the obligations set forth in this Section 8.16 shall
survive the Effective Time without limitation as to time or in
any other respect.
(b) Acquiror will cause the Company to hold following
the Merger at least 90% of the fair market value of its net
assets and, assuming the accuracy of the representation in
Section 3.19 hereof, at least 70% of the fair market value of its
gross assets, and at least 90% of the fair market value of
Acquiror Sub's net assets and 70% of the fair market value of
Acquiror Sub's gross assets held immediately prior to the Merger.
For purposes of this subsection (b), amounts paid by the Company
or Acquiror Sub to dissenters, to shareholders who receive cash
or other property, to pay reorganization expenses, and in
connection with redemptions and distributions (except for
regular, normal distributions) will be treated as assets of the
Company or Acquiror Sub, respectively, immediately prior to the
Merger.
(c) Following the Merger, Acquiror will cause the
Company to continue its historic business or use a significant
portion of its business assets in a business.
SECTION 8.17. Indemnification.
From time to time after the Effective Time, the Company
Shareholders shall jointly and severally indemnify and hold
harmless Acquiror, the Surviving Corporation and their respective
officers and directors, and each person, if any, who controls or
may control Acquiror or the Surviving Corporation within the
meaning of the Securities Act (all such persons hereinafter are
referred to individually as an "Indemnified Person" and
collectively as "Indemnified Persons," but in no event shall any
shareholder of the Company be such an Indemnified Person), from
and against any and all losses, costs, damages, liabilities and
expenses, including attorneys' fees and expenses, ("Damages")
actually suffered (after giving effect to any insurance proceeds)
and arising out of the breach of the representations, warranties,
covenants and agreements given or made by the Company and the
Company Shareholders in this Agreement, in the Agreement of
Merger or in the Exhibits or Schedules hereto or in any
certificate or document delivered by or on behalf of the Company
pursuant hereto, after giving effect to any updated disclosure
made pursuant to Section 8.06 hereof. The indemnity obligation
of the Company Shareholders under this Section 8.17 shall be
satisfied through the application by Acquiror of the Adjustment
Escrow Shares held in escrow pursuant to this Agreement to
amounts owing to Indemnified Persons pursuant to this
Section 8.17, and the maximum liability of the Company
Shareholders for indemnification under this Section 8.17 shall be
limited to an amount equal to the number of Adjustment Escrow
Shares multiplied by the Average Trading Price (provided,
however, that for purposes of this Section 8.17, if the Average
Trading Price is greater than $52.02, the Average Trading Price
shall be deemed to be $52.02, and if the Average Trading Price is
less than $42.56, the Average Trading Price shall be deemed to be
$42.56), provided, further, that Company Shareholders shall have
no liability under this Section 8.17 or the Escrow Agreement to
the extent claims for Damages hereunder do not exceed $250,000;
provided, however, that if such Damages exceed $250,000, then the
indemnification provided for hereunder shall apply to all
Damages without regard to the $250,000 threshold provided for
above. It shall be a condition of the right of each Indemnified
Person to indemnification pursuant to this Section 8.17 that such
Indemnified Person shall assert a claim for such indemnification
on or prior to the Adjustment Date. Notwithstanding the
foregoing, or anything in this Agreement to the contrary, the
application by Acquiror of the Adjustment Escrow Shares held in
escrow pursuant to this Agreement to amounts owing to Indemnified
Persons shall not be the exclusive remedy pursuant to which
Acquiror may satisfy claims for Damages as defined in this
Section 8.17 against the Company Shareholders and the Schedule 2
Shareholders but shall be the exclusive remedy for satisfying the
indemnity obligation under this Section 8.17. Such other
remedies shall be subject to the provisions of Sections 11.01 and
11.02 hereof and shall give effect to any updated disclosure made
under Section 8.06 hereof.
SECTION 8.18. Procedures; Conditions of Indemnification.
With respect to any indemnification provided pursuant to this
Agreement, the Indemnified Person agrees to give prompt written
notice to the indemnifying party of any claim or other assertion
of liability by third parties (hereinafter called collectively
"Claims"), it being understood that the failure to give such
notice shall not affect the Indemnified Person's right to
indemnification and the indemnifying party's obligation to
indemnify as set forth in this Agreement, unless that
indemnifying party's rights with respect to such Claim are
thereby demonstrably and materially prejudiced.
The obligations and liabilities of the parties hereto with
respect to their respective indemnities pursuant to this
Agreement resulting from any Claim shall be subject to the
following terms and conditions:
(a) The indemnifying party shall have the right to
undertake, by counsel or other representatives of its own
choosing, the defense of such Claim.
(b) In the event that the indemnifying party shall
elect not to undertake such defense, or within a reasonable time
after notice of any such Claim from the Indemnified Person shall
fail to defend, the Indemnified Person (upon further written
notice to the indemnifying party) shall have the right to
undertake the defense, compromise or settlement of such Claim, by
counsel or other representatives of its own choosing, on behalf
of and for the account and risk of the indemnifying party
(subject to the right of the indemnifying party to assume defense
of such Claim at any time prior to settlement, compromise or
final determination thereof).
(c) Anything in this Section 8.18 to the contrary
notwithstanding, (i) if the Indemnified Person notifies the
indemnifying party that the Indemnified Person has concluded that
a Claim may materially and adversely affect the Indemnified
Person other than as a result of money damages or other money
payments, the Indemnified Person shall have the right, at its own
cost and expense to participate in the defense, compromise or
settlement of the Claim, (ii) the indemnifying party shall not,
without the Indemnified Person's written consent, settle or
compromise any Claim or consent to entry of any judgment that
does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Indemnified Person of a
release from all liability in respect of such Claim, and (iii) in
the event that the indemnifying party undertakes defense of any
Claim, the Indemnified Person, by counsel or other representative
of its own choosing and at its sole cost and expense, shall have
the right to consult with the indemnifying party and its counsel
or other representatives concerning such Claim and the
indemnifying party and the Indemnified Person and their
respective counsel or other representatives shall cooperate with
respect to such Claim.
(d) Notwithstanding any other provision of this
Section 8.18, the Indemnified Person may at any time assume full
control over the responsibility for any Claim, by written notice
to the indemnifying party releasing the indemnifying party from
any further indemnity obligation pursuant to this Agreement with
respect to said Claim.
SECTION 8.19. Agreement with Brentwood.
Upon execution and delivery of this Agreement, Brentwood, the
Company and the Acquiror shall have entered into an agreement in
substantially the form attached hereto as Exhibit D. Brentwood
and the Company shall perform their obligations under such
agreement.
SECTION 8.20. Condition of Wilton Webster.
Within 30 days after the date of execution and delivery of this
Agreement, Wilton Webster shall submit to be examined by a
physician or physicians, selected by Acquiror, at a convenient
time and place in order to assess the insurability of Mr. Webster
and his condition generally. Mr. Webster agrees to submit to be
examined by a physician or physicians and otherwise to cooperate
in good faith in order to facilitate implementation of the
procedures set forth in Section 2.01(a)(iii).
ARTICLE IX
CLOSING CONDITIONS
SECTION 9.01. Conditions to Obligations of Acquiror and the
Company Under This Agreement.
The respective obligations of Acquiror and the Company to effect
the Merger and the other transactions contemplated herein shall
be subject to the satisfaction at or prior to the Effective Time
of the following conditions, any or all of which may be waived,
in whole or in part, to the extent permitted by applicable Law:
(a) Effectiveness of the Registration Statement. The
Registration Statement shall have been declared effective by
the SEC under the Securities Act. No stop order suspending
the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose
shall have been initiated or, to the knowledge of Acquiror
or the Company, threatened by the SEC. Acquiror shall
have received all other federal or state securities permits
and other authorizations necessary to issue Acquiror Common
Stock in exchange for Company Common Stock and to consummate
the Merger.
(b) Shareholder Approval. This Agreement, the
Agreement of Merger and the Merger shall have been approved
and adopted by the requisite vote of the shareholders of the
Company.
(c) No Order. No Governmental Entity or federal or
state court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, judgment, injunction or
other order (whether temporary, preliminary or permanent),
in any case which is in effect and which prevents or
prohibits consummation of the Merger or any other
transactions contemplated in this Agreement; provided,
however, that the parties shall use their best efforts to
cause any such decree, judgment, injunction or other order
to be vacated or lifted.
(d) HSR Act. The applicable waiting period, together
with any extensions thereof, under the HSR Act shall have
expired or been terminated.
(e) Other Approvals. All consents, waivers, approvals
and authorizations required to be obtained, and all filings
or notices required to be made, by Acquiror and the Company
prior to consummation of the transactions contemplated in
this Agreement (other than the filing of merger documents in
accordance with California Law) shall have been obtained
from and made with all required Governmental Entities.
(f) Escrow Agreement. The Escrow Agent shall execute
and deliver the Escrow Agreement with the other parties
thereto.
SECTION 9.02. Additional Conditions to Obligations of Acquiror.
The obligations of Acquiror to effect the Merger and the other
transactions contemplated herein are also subject to the
following conditions, any or all of which may be waived, in whole
or in part, to the extent permitted by applicable Law:
(a) Representations and Warranties. Each of the
representations and warranties of the Company, Company
Shareholders and Schedule 2 Shareholders contained in this
Agreement, without giving effect to any update to the
Company Disclosure Schedule under Section 8.06, shall be
true and correct as of the date of this Agreement and shall
be true and correct in all material respects (except that
where any statement in a representation or warranty
expressly includes a standard of materiality, such statement
shall be true and correct in all respects giving effect to
such standard) as of the Effective Time as though made as of
the Effective Time, except that those representations and
warranties which address matters only as of a particular
date shall remain true and correct in all material respects
(except that where any statement in a representation or
warranty expressly includes a standard of materiality, such
statement shall be true and correct in all respects giving
effect to such standard) as of such date. Acquiror shall
have received a certificate of the Chief Executive Officer
or Chief Financial Officer of the Company and from each
Company Shareholder and Schedule 2 Shareholder to that
effect.
(b) Agreements and Covenants. The Company, each
Company Shareholder and each Schedule 2 Shareholder shall
have performed or complied in all material respects with all
agreements and covenants required by this Agreement to be
performed or complied with by them on or prior to the
Effective Time. Acquiror shall have received a certificate
of the Chief Executive Officer or Chief Financial Officer of
the Company, each Company Shareholder and each Schedule 2
Shareholder to that effect.
(c) Consents Under Agreements. The Company shall have
obtained the consent or approval of each person whose
consent or approval shall be required in connection with the
Merger under all loan or credit arrangements, notes,
mortgages, indentures, leases or other agreements or
instruments to which it is a party.
(d) Opinion of Counsel. Acquiror shall have received
from independent counsel to the Company reasonably
satisfactory to Acquiror one or more opinions dated the
Effective Time, in form and substance reasonably
satisfactory to Acquiror, covering the matters set forth in
the form of opinion delivered to such counsel prior to
execution of this Agreement.
(e) Fractional Shares; Dissenters. The aggregate of
(i) the fractional share interests in Acquiror Common Stock
to be paid in cash pursuant to Section 2.02(e) of this
Agreement and (ii) the shares of Acquiror Common Stock that
otherwise would be issuable by virtue of the Merger with
respect to the shares of Company Common Stock outstanding on
the record date for the Shareholders' Meeting that will not
be converted into Acquiror Common Stock due to the
shareholders of the Company demanding an appraisal of the
fair value of such shares pursuant to Section 1300 et seq.
of California Law and Section 2.05 hereof, if applicable,
shall not be more than 2% of the maximum aggregate number of
shares of Acquiror Common Stock which could be issued as a
result of the Merger.
(f) No Challenge. There shall not be pending any
action, proceeding or investigation by any Governmental
Entity (i) challenging or seeking material damages in
connection with the Merger or the conversion of Company
Common Stock into Acquiror Common Stock pursuant to the
Merger or (ii) seeking to restrain or prohibit the
consummation of the Merger or otherwise limit the right of
Acquiror or its subsidiaries to own or operate all or any
portion of the business or assets of the Company.
(g) Accountant Letters. Acquiror shall have received
from the Company "cold comfort" letters of Deloitte & Touche
dated the date on which the Registration Statement shall
become effective and the Effective Time, respectively, and
addressed to Acquiror, in form and substance satisfactory to
Acquiror, and reasonably customary in scope and substance
for letters delivered by independent public accountants in
connection with registration statements similar to the
Registration Statement and transactions such as those
contemplated by this Agreement.
(h) Pooling Opinion. Acquiror shall have received the
opinion of Deloitte & Touche, dated as of the date on which
the Registration Statement shall become effective and the
Effective Time, to the effect that the Merger qualifies for
pooling-of-interests accounting treatment if consummated in
accordance with this Agreement.
(i) Affiliate Agreements. Acquiror shall have
received from each person listed in Section 3.28 of the
Company Disclosure Schedule and any other person who may be
deemed to have become an affiliate of the Company (under SEC
Rule 145 of the Securities Act or otherwise under applicable
SEC accounting releases with respect to pooling-of-interests
accounting treatment) after the date of this Agreement and
on or prior to the Effective Time a signed Affiliate
Agreement.
(j) Fairness Opinion. The opinion of Cowen & Company,
dated January 20, 1994 to the effect that the consideration
to be paid by Acquiror in the Merger pursuant to this
Agreement is fair from a financial point of view to the
holders of Acquiror Common Stock has not been modified or
withdrawn.
(k) Conversion of Company Preferred Stock. Brentwood
shall have converted the Company Preferred Stock into
Company Common Stock in accordance with the provisions of
the agreement among Brentwood, the Company and Acquiror
referred to in Section 8.19.
(l) Employment Agreements. Acquiror shall have
received executed copies of employment agreements in
substantially the forms attached hereto as Exhibits E-1 and
E-2 with the individuals listed in Section 8.10 of the
Company Disclosure Schedule.
(m) Company Material Adverse Effect. Since
November 30, 1993, there shall not have been a Company
Material Adverse Effect; it being understood that the death
or disability of Wilton Webster shall not be deemed a
Company Material Adverse Effect for purposes of this
subparagraph (m), subject to the implementation of Section
2.01(a)(iii) hereof.
(n) Additional Company Actions. The Company shall
have taken the actions with respect to certain oral and
written agreements called for by Section 8.03(d) of the
Company Disclosure Schedule.
SECTION 9.03. Additional Conditions to Obligations of the
Company.
The obligations of the Company to effect the Merger and the other
transactions contemplated in this Agreement are also subject to
the following conditions any or all of which may be waived, in
whole or in part, to the extent permitted by applicable Law:
(a) Representations and Warranties. Each of the
representations and warranties of Acquiror contained in this
Agreement, without giving effect to any update to the
Acquiror Disclosure Schedule under Section 8.06, shall be
true and correct in all material respects (except that where
any statement in a representation or warranty expressly
includes a statement of materiality, such statement shall be
true and correct in all respects giving effect to such
standard) as of the Effective Time, as though made on and as
of the Effective Time, except that those representations and
warranties which address matters only as of a particular
date shall remain true and correct in all material respects
(except that where any statement in a representation or
warranty expressly includes a standard of materiality, such
statement shall be true and correct in all respects giving
effect to such standard) as of such date. The Company shall
have received a certificate of the Chief Executive Officer
or Chief Financial Officer of Acquiror to that effect.
(b) Agreements and Covenants. Acquiror shall have
performed or complied in all material respects with all
agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the
Effective Time. The Company shall have received a
certificate of the Chief Executive Officer or Chief
Financial Officer of Acquiror to that effect.
(c) Opinion of Counsel. The Company shall have
received from the General Counsel to the Acquiror one or
more opinions dated the Effective Time, in form and
substance reasonably satisfactory to the Company, covering
the matters set forth in the form of opinion delivered to
such counsel prior to execution of this Agreement.
(d) No Challenge. There shall not be pending any
action, proceeding or investigations by any Governmental
Entity (i) challenging or seeking material damages in
connection with the Merger or the conversion of Company
Common Stock and Company Preferred Stock into Acquiror
Common Stock pursuant to the Merger or (ii) seeking to
restrain or prohibit the consummation of the Merger or
otherwise limit the right of Acquiror or its subsidiaries to
own or operate all or any portion of the businesses or
assets of the Company, which in either case is reasonably
likely to have an Acquiror Material Adverse Effect after the
Effective Time.
(e) Acquiror Material Adverse Effect. Since
September 30, 1993, there shall not have been an Acquiror
Material Adverse Effect; it being understood that the
matters described in the Acquiror Disclosure Schedule shall
not be deemed an Acquiror Material Adverse Effect for
purposes of this subparagraph (e).
(f) Quotation of Acquiror Common Stock on NASDAQ/NMS.
The Company shall have received from Acquiror or NASDAQ/NMS
evidence reasonably satisfactory to the Company that the
shares of Acquiror Common Stock to be issued to Company
Shareholders in the Merger shall be quoted on NASDAQ/NMS
immediately after the Effective Time.
(g) Tax Representations. The representations,
warranties and covenants of Acquiror and Acquiror Sub
contained in Sections 6.10 and 8.16 shall be true and
correct in all material respects at all times from the date
of this Agreement through the Effective Time.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.01. Termination.
This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of this
Agreement, the Agreement of Merger and the Merger by the
shareholders of the Company:
(a) by mutual written consent of Acquiror and the
Company;
(b) (i) by Acquiror, if there has been a breach by
the Company, Company Shareholders or the Schedule 2
Shareholders of any of their representations, warranties,
covenants or agreements contained in this Agreement, or any
such representation and warranty shall have become untrue,
in any such case such that Section 9.02(a) or Section
9.02(b) will not be satisfied and such breach or condition
has not been promptly cured within 10 days following receipt
by the Company of written notice of such breach;
(ii) by the Company, if there has been a breach by
the Acquiror of any of its representations, warranties,
covenants or agreements contained in this Agreement, or any
such representation and warranty shall have become untrue,
in any such case such that Section 9.03(a) or Section
9.03(b) will not be satisfied and such breach or condition
has not been promptly cured within 10 days following receipt
by Acquiror of written notice of such breach;
(c) by either Acquiror or the Company if any decree,
permanent injunction, judgment, order or other action by any
court of competent jurisdiction or any Governmental Entity
preventing or prohibiting consummation of the Merger shall
have become final and nonappealable;
(d) by either Acquiror or the Company if the Merger
shall not have been consummated by May 15, 1994; provided,
however, that this Agreement may be extended not more than
60 days by either party by written notice to the other party
if the Merger shall not have been consummated as a direct
result of the other party having failed by such date to
receive all regulatory approvals or consents required to be
obtained by such party with respect to the Merger; provided
further, however, that the right to terminate this Agreement
under this Section 10.01(d) shall not be available to any
party whose willful failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such
date;
(e) by either Acquiror or the Company if the Agreement
shall fail to receive the requisite vote for approval and
adoption by the shareholders of the Company at the
Shareholders' Meeting;
(f) by Acquiror, if the Board of Directors of the
Company shall have recommended to the shareholders of the
Company any Bona Fide Proposal or resolved to do so under
the circumstances described in the proviso in
Section 7.02(g);
(g) by the Company, if the Board of Directors of the
Company shall have recommended to the shareholders of the
Company any Bona Fide Proposal or resolved to do so under
the circumstances described in the proviso in
Section 7.02(g); provided that any termination of this
Agreement by the Company pursuant to this Section 10.01(g)
shall not be effective until the close of business on the
second full business day after notice thereof to Acquiror;
and
(h) by either Acquiror or the Company if circumstances
arise which make it impossible, in the reasonable judgment
of either Acquiror or the Company, as the case may be, for a
condition to such party's obligation to effect the Merger
and the other transactions contemplated herein, as set forth
in Article IX, to be satisfied prior to May 15, 1994;
provided, however, that the right to terminate this
Agreement under this Section 10.01(h) shall not be available
to any party whose act or failure to act or whose breach of
any obligation under this Agreement is responsible for such
circumstances arising.
SECTION 10.02. Effect of Termination.
In the event of termination of this Agreement by either Acquiror
or the Company as provided in Section 10.01, this Agreement shall
forthwith become void and there shall be no liability or
obligation on the part of Acquiror, Acquiror Sub, the Company
Shareholders, the Schedule 2 Shareholders or the Company or any
of their respective officers or directors except (i) as set forth
in Sections 10.03 and 11.01 hereof, (ii) nothing herein shall
relieve any party from liability for any breach hereof,
(iii) each party shall be entitled to any remedies at law or in
equity for such breach and (iv) this Section 10.02 and
Sections 7.04(b), 10.03 and Article XI shall remain in full force
and effect and survive any termination of this Agreement.
SECTION 10.03. Expenses.
(a) Subject to subsection (b) of this Section 10.03,
whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement, the Agreement of
Merger and the transactions contemplated hereby and thereby shall
be paid by the party incurring such expense, except that expenses
incurred in connection with printing the documents distributed to
shareholders (including the Proxy Statement) and the Registration
Statement, registration and filing fees incurred in connection
with the Registration Statement and the listing of additional
shares pursuant to Section 8.09 and fees, costs and expenses
associated with compliance with applicable state securities laws
in connection with the Merger shall be shared equally by Acquiror
and the Company.
(b) If this Agreement is terminated pursuant to
Section 10.01(f) or (g), then the Company shall promptly pay to
Acquiror a termination fee of (i) $2 million in cash plus
(ii) 35% of the difference, if any, between the value of the
consideration offered to the Company in the Bona Fide Proposal,
in cash, and $85 million plus (iii) reasonable fees and expenses
incurred by Acquiror in connection with this Agreement and the
Agreement of Merger and the transactions contemplated hereby and
thereby, not to exceed $500,000.
(c) If this Agreement is terminated pursuant to
Section 10.01(e), then the Company shall promptly pay to Acquiror
a termination fee of $2 million plus reasonable fees and expenses
incurred by Acquiror in connection with this Agreement and the
Agreement of Merger and the transactions contemplated hereby and
thereby, not to exceed $500,000.
SECTION 10.04. Amendment.
This Agreement may be amended by the parties hereto by action
taken by or on behalf of their respective Boards of Directors at
any time prior to the Effective Time; provided, however, that,
after approval of the Merger by the shareholders of the Company,
no amendment may be made which would reduce the amount or change
the type of consideration into which each share of Company Common
Stock shall be converted pursuant to this Agreement upon
consummation of the Merger. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 10.05. Waiver.
At any time prior to the Effective Time, any party hereto may (a)
extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties of the other party
contained herein or in any document delivered pursuant hereto and
(c) waive compliance by the other party with any of the
agreements or conditions contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be found thereby.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Survival of Representations, Warranties and
Agreements After Effective Time.
The representations and warranties of the Company contained in
Article III hereof shall survive the Effective Time; it being
understood that the only remedy available for a breach by the
Company of such representations and warranties in such Article
III are the post-closing adjustment provisions contained in
Section 2.06 hereof and the indemnification provisions contained
in Section 8.17 hereof. The representations and warranties of
the Company Shareholders contained in Article IV and of the
Acquiror contained in Article VI shall survive the Effective Time
for a period of three years. The representations and warranties
of the Schedule 2 Shareholders contained in Article V shall
survive the Effective Time for a period of 18 months. Any claim
for Damages resulting from a breach of any representations and
warranties of the Company Shareholders contained in Article IV
and the Schedule 2 Shareholders contained in Article V shall be
subject to the limitations contained in this Section 11.01 and
Section 11.02 hereof.
SECTION 11.02. Limitation of Liability of Company Shareholders
and Schedule 2 Shareholders.
In the event of any claim for Damages made against Company
Shareholders or Schedule 2 Shareholders for breaches of
representations or warranties contained in Articles IV and V
hereunder, each Company Shareholder or Schedule 2 Shareholder, as
the case may be, shall have maximum liability for such breaches
in an amount ("Maximum Liability Amount") not to exceed the sum
of (i) the number of shares of Acquiror Common Stock received by
such Company Shareholder or Schedule 2 Shareholder at the Closing
plus (ii) the number of Adjustment Escrow Shares to which each
such Company Shareholder or Schedule 2 Shareholder is entitled
(after giving effect to claims made against Adjustment Escrow
Shares pursuant to Section 2.06 hereof), multiplied by the
Average Trading Price (provided, however, that for purposes of
this Section 11.02, if the Average Trading Price is greater than
$52.02, the Average Trading Price shall be deemed to be $52.02,
and if the Average Trading Price is less than $42.56, the Average
Trading Price shall be deemed to be $42.56); provided, further,
however, that in the case of a Schedule 2 Shareholder, the
maximum liability shall not exceed 95% of the Maximum Liability
Amount. In the event Acquiror seeks to recover amounts for
breaches of representations and warranties contained in Articles
III, IV or V, Acquiror shall first make claims against the
Adjustment Escrow Shares, to the extent such shares are available
and to the extent permitted under the terms of this Agreement and
the Escrow Agreement.
SECTION 11.03. Notices.
All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered, mailed or transmitted,
and shall be effective upon receipt, if delivered personally,
mailed by registered or certified mail (postage prepaid, return
receipt requested) to the parties at the following addresses (or
at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the
telecopier number specified below:
(a) If to Acquiror or Acquiror Sub:
Cordis Corporation
14201 N.W. 60th Avenue
Miami Lakes, FL 33014
Telecopier No.: (305) 824-2440
Attention: Daniel Hall, Esq. - Vice President, Legal Affairs,
Secretary and General Counsel
With a copy (which shall not constitute notice) to:
Hogan & Hartson
Columbia Square
555 Thirteenth Street, N.W.
Washington, DC 20004
Telecopier No.: (202) 637-5910
Attention: Howard I. Flack, Esq.
(b) If to the Company:
Webster Laboratories, Inc.
5114 Commerce Drive
Baldwin Park, CA 91706
Telecopier No.: (818) 960-7463
Attention: Tony Brown, Ph.D.
With a copy (which shall not constitute notice) to:
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Telecopier No.: (415) 854-1121
Attention: Michael W. Hall
<PAGE>
SECTION 11.04. Certain Definitions.
For purposes of this Agreement, the term:
(a) "affiliate" means a person that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first
mentioned person;
(b) "beneficial owner" means with respect to any
shares of Company Common Stock or Acquiror Common Stock a person
who shall be deemed to be the beneficial owner of such shares (i)
which such person or any of its affiliates or associates
beneficially owns, directly or indirectly, (ii) which such person
or any of its affiliates or associates (as such term is defined
in Rule 12b-2 of the Exchange Act) has, directly or indirectly,
(A) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise
of conversion rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement,
arrangement or understanding, (iii) which are beneficially owned,
directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates has any
agreement, arrangement or understanding for the purpose of
acquiring, holding voting or disposing of any such shares or (iv)
pursuant to Section 13(d) of the Exchange Act and any rules or
regulations promulgated thereunder;
(c) "best efforts" shall mean, as to a party hereto,
an undertaking by such party to perform or satisfy an obligation
or duty or otherwise act in a manner reasonably calculated to
obtain the intended result by action or expenditure not
disproportionate or unduly burdensome in the circumstances, which
means, among other things, that such party shall not be required
to (i) expend funds other than for payment of the reasonable and
customary costs and expenses of employees, counsel, consultants,
representatives or agents of such party in connection with the
performance or satisfaction of such obligation or duty or other
action or (ii) institute litigation or arbitration as a part of
its best efforts.
(d) "business day" shall mean any day other than a day
on which banks in the State of Florida are authorized or
obligated to be closed;
(e) "control" (including the terms "controlled by" and
"under common control with") means the possession, directly or
indirectly or as trustee or executor, of the power to direct or
cause the direction of the management or policies of a person,
whether through the ownership of stock or as trustee or executor,
by contract or credit arrangement or otherwise;
(f) "knowledge" will be deemed to be present (i) with
respect to the Company or Acquiror, when the matter in question
was brought to the attention of or, if due diligence had been
exercised, would have been brought to the attention of, any
officer or responsible employee of the Company or Acquiror, as
the case may be; and (ii) with respect to a Company Shareholder
or a Schedule 2 Shareholder, as the case may be, when the matter
was brought to the attention of, or should have been reasonably
known to, the Company Shareholder or Schedule 2 Shareholder, as
the case may be, in each case in light of, among other things,
the particular circumstances applicable to such Company
Shareholder or Schedule 2 Shareholder.
(g) "person" means an individual, corporation,
partnership, association, trust, unincorporated organization,
other entity or group (as defined in Section 13(d) of the
Exchange Act);
(h) "Significant Subsidiary" or "Significant
Subsidiaries" means any subsidiary of the Acquiror disclosed in
its most recent Annual Report on Form 10-K, and any other
subsidiary that would constitute a "Significant Subsidiary" of
such party within the meaning of Rule 1-02 of Regulation S-X of
the SEC; and
(i) "subsidiary" or "subsidiaries" of the Company,
Acquiror, the Surviving Corporation or any other person, means
any corporation, partnership, joint venture or other legal entity
of which the Company, Acquiror, the Surviving Corporation or such
other person, as the case may be (either alone or through or
together with any other subsidiary), owns, directly or
indirectly, 50% or more of the stock or other equity interests
the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of
such corporation or other legal entity.
SECTION 11.05. Headings.
The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 11.06. Severability.
If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 11.07. Entire Agreement.
This Agreement (together with the Exhibits, the Company and
Acquiror Disclosure Schedules and the other documents delivered
pursuant hereto) and the Confidentiality Agreement constitute the
entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the
parties, or any of them, with respect to the subject matter
hereof and, except as otherwise expressly provided herein, are
not intended to confer upon any other person any rights or
remedies hereunder.
SECTION 11.08. Assignment.
This Agreement shall not be assigned by operation of law or
otherwise.
SECTION 11.09. Parties in Interest.
This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement,
express or implied, other than the right to receive the
consideration payable in the Merger pursuant to Article II, is
intended to or shall confer upon any other person any right,
benefit or remedy of any nature whatsoever under or by reason of
this Agreement.
SECTION 11.10. Mutual Drafting.
Each party hereto has participated in the drafting of this
Agreement, which each party acknowledges is the result of
extensive negotiations between the parties.
SECTION 11.11. Governing Law.
This Agreement shall be governed by, and construed in accordance
with, the Laws of the State of Florida, regardless of the Laws
that might otherwise govern under applicable principles of
conflicts of law.
SECTION 11.12. Counterparts.
This Agreement may be executed and delivered in one or more
counterparts, and by the different parties hereto in separate
counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall
constitute one and the same agreement.
IN WITNESS WHEREOF, Acquiror, Acquiror Sub and the Company
have caused this Agreement to be executed and delivered, and each
Company Shareholder has executed and delivered this Agreement in
their name and on their behalf, as of the date first written
above.
CORDIS CORPORATION
By:/s/ Robert C. Strauss
Name: Robert C.Strauss
Title: President and
Chief Executive Officer
CORDIS ACQUISITION, INC.
By:/s/ Robert C. Strauss
Name: Robert C. Strauss
Title: President, Chief
Executive Officer and
Chief Financial
Officer
WEBSTER LABORATORIES, INC.
By:/s/ Tony R. Brown
Name: Tony R. Brown
Title: President and Chief
Executive Officer
COMPANY SHAREHOLDERS:
BRENTWOOD ASSOCIATES V, L.P.
By:Brentwood V Ventures, L.P.,
its General Partner
By:/s/ David W. Chonette
Title: General Partner
/s/ Wilton W. Webster, Jr.
Company Shareholder
/s/ Helen E. Webster
Company Shareholder
/s/ Tony R. Brown
Company Shareholder
/s/ Richard B. Webster
Company Shareholder
/s/ Alec J. Webster
Company Shareholder
/s/ James R. Tyberg
Company Shareholder
/s/ Theodore M. Joyce
Company Shareholder
Company Shareholder
<PAGE>
SCHEDULE 1
Shareholders
Tony R. Brown
Ted Joyce
James R. Tyberg
Alec J. Webster
Richard B. Webster
Wilton W. Webster, Jr.
Helen E. Webster
Brentwood Associates V, L.P.
<PAGE>
SCHEDULE 2.01
Proportionate
Shares of Interest in
Shareholders Company Common Company Common
Stock* Stock*/**
Tony R. Brown 266,667 0.045350
Ted Joyce 10,400 0.001769
James R. Tyberg 400,000 0.068024
Alec J. Webster 200,000 0.034012
Richard B. Webster 200,000 0.034012
Wilton W. Webster, Jr.
and Helen E. Webster, as
community property 3,600,000 0.612221
Yvette Hill 3,167 0.000539
Brentwood Associates V,L.P.* 1,200,000 0.204073
Total* 5,880,234
* After giving effect to conversion of Company Preferred Stock
into Company Common Stock
**These percentages will be amended if options are exercised
between signing and closing.
<PAGE>
SCHEDULE 2
Shareholders
Tony R. Brown
Alec J. Webster
Richard B. Webster
Wilton W. Webster, Jr.
Helen E. Webster
SCHEDULE 2.01
<PAGE>
Cordis Letterhead
NEWS RELEASE
Chick McDowell (94-7)
Vice President, Corporate Relations
and Assistant Secretary
(305) 824-2821
For Immediate Release: January 21, 1994
Cordis Corporation Announces Agreement To Acquire
Webster Laboratories
Miami (Jan 21)--Cordis Corporation (NASDAQ:CORD) announced
today that it has entered into a definitive agreement to acquire
Webster Laboratories, Inc., a privately held California
corporation, in a stock-for-stock transaction. Webster
Laboratories is a pioneer and leader in the market for
electrophysiology catheters. The transaction is structured
as a tax-free reorganization of Webster and is expected to be
accounted for as a pooling of interests.
Under terms of the agreement, the outstanding shares of
common stock and common stock equivalents of Webster Laboratories
would be converted into the right to receive between 1,634,008
and 1,997,203 shares of Cordis common stock depending on the
average trading price of Cordis common stock during the 20
consecutive trading days prior to the third trading day before the
closing date. The acquisition is subject to approval by
shareholders of Webster Laboratories and various other terms and
conditions. The transaction is expected to close in the
first calendar quarter of 1994.
Robert C. Strauss, Cordis president and chief executive
officer, described the transaction as "a significant development
in positioning the company in new markets in which we can leverage
our existing technology, manufacturing and distribution strengths.
As one of healthcare's fastest-growing markets," he continued,
"electrophysiology offers us a unique opportunity to expand our
coverage among both cardiologists and electrophysiologists. We
are delighted to align ourselves with one of the premiere firms in
the industry, which will be renamed Cordis Webster, Inc."
Similarly, Webster's founder and chairman, Wilton W. Webster,
Jr., called the agreement "a major step forward for our employees,
stockholders and company." He went on to state that "Cordis's
leadership in catheter technology and strong presence in cardiac
catheterization labs worldwide will help to open new horizons and
opportunities for our technology and people."
Electrophysiology involves the diagnosis and management of
cardiac arrhythmias through the use of catheter-based technology.
When compared with other arrhythmia management techniques, this
technology holds out the promise of improved outcomes in terms of
a better quality of life for patients and reduced costs. The
market for electrophysiology catheters is projected to grow
significantly during the next several years.
Webster Laboratories, based in Baldwin Park, California,
reported revenues of $14.5 million with net income of $2.7 million
for its fiscal year ended November 30, 1993. The comparable 1992
figures were $9.0 million and $1.85 million, respectively.
Cordis Corporation manufactures and markets a variety of
medical devices and systems for the angiographic and
neuroscience markets.
