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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 (Date of earliest event reported): October 1, 1999
ADAC LABORATORIES
(Exact Name of Registrant as Specified in Charter)
CALIFORNIA 0-9428 94-1725806
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
540 Alder Drive, Milpitas, California 95035
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (650) 321-9100
---------------------------
Not applicable
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 1, 1999, ADAC Laboratories ("ADAC") completed its
acquisition of UGM Medical Systems, Inc., a Pennsylvania corporation ("Medical
Systems"), pursuant to the Agreement and Plan of Merger, dated as of September
13, 1999 (the "Medical Systems Agreement"), by and among ADAC, Medical Systems,
UGMMS Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
ADAC ("UGMMS Acquisition Corp."), Gerd Muehllehner, Ph.D., and the shareholders
of Medical Systems listed on Schedule I thereto. ADAC acquired all of the
outstanding shares of common stock of Medical Systems through a merger of UGMMS
Acquisition Corp. with and into Medical Systems, with Medical Systems surviving
as a wholly owned subsidiary of ADAC. Medical Systems designs, manufactures and
services positron emission tomography (PET) scanners. PET scanners are used for
the diagnosis and monitoring of certain cancers, cardiac diseases and brain
disorders. For the past two years, ADAC has served as the distributor of the PET
scanners produced by Medical Systems.
In consideration for their shares, the shareholders of Medical Systems
received an aggregate of $12 million, which is subject to certain post-closing
adjustments. ADAC also granted the shareholders of Medical Systems, and Gerd
Muehllehner under an employment agreement with ADAC signed concurrently with the
closing of the merger, the right to receive for the first five years after the
merger a percentage of the revenues generated from incremental sales of certain
PET scanners over minimum annual thresholds, subject to an aggregate maximum of
$20 million in payments. ADAC obtained the funds used to pay the base $12
million consideration from its $75 million revolving credit facility with a bank
syndicate led by ABN AMRO Bank. The contingent payments to the shareholders of
Medical Systems and Gerd Muehllehner will be paid from the revenues generated
from the sales of the relevant PET scanners.
A copy of the Medical Systems Agreement is attached hereto as Exhibit
2.1 and is incorporated herein by reference. A copy of a press release relating
to the Medical Systems Agreement is attached hereto as Exhibit 99.1 and is also
incorporated herein by reference.
On October 1, 1999, ADAC also completed its acquisition of UGM
Laboratory, Inc., a Pennsylvania corporation ("Laboratory"), pursuant to the
Agreement and Plan of Merger, dated as of September 13, 1999 (the "Laboratory
Agreement"), by and among ADAC, Laboratory, UGML Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of ADAC ("UGML Acquisition Corp."),
and the shareholders of Laboratory listed on Schedule I thereto. ADAC acquired
all of the outstanding shares of common stock of Laboratory through a merger of
UGML Acquisition Corp. with and into Laboratory, with Laboratory surviving as a
wholly owned subsidiary of ADAC. Laboratory conducts research and development
with respect to nuclear medicine related technologies and licenses technologies
it develops to Medical Systems and ADAC. Several shareholders of Laboratory are
also shareholders in Medical Systems.
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In consideration for their shares, the shareholders of Laboratory
received an aggregate of $6 million. ADAC obtained the funds used to pay the $6
million consideration from its $75 million revolving credit facility with a bank
syndicate led by ABN AMRO Bank.
A copy of the Laboratory Agreement is attached hereto as Exhibit 2.2
and is incorporated herein by reference.
The consideration paid by ADAC to the shareholders of Medical Systems
and Laboratory and the terms of the acquisitions of Medical Systems and
Laboratory were determined in arm's length negotiations with Medical Systems,
Laboratory and their principal shareholders.
Statements made in this Current Report on Form 8-K concerning the
contents of any contract or other document are not necessarily complete. With
respect to each contract or other document filed as an exhibit hereto, reference
is hereby made to that document for a more complete description of the matter
involved and each such statement is hereby qualified in its entirety by such
reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
2.1 Agreement and Plan of Merger, dated as of September 13,
1999, by and among ADAC Laboratories, a California
corporation, UGMMS Acquisition Corp., a Delaware
corporation, UGM Medical Systems, Inc., a Pennsylvania
corporation, Gerd Muehllehner, Ph.D., and the
shareholders of UGM Medical Systems, Inc. listed on
Schedule I thereto.*
2.2 Agreement and Plan of Merger, dated as of September 13,
1999, by and among ADAC Laboratories, a California
corporation, UGML Acquisition Corp., a Delaware
corporation, UGM Laboratory, Inc., a Pennsylvania
corporation, and the shareholders of UGM Laboratory,
Inc. listed on Schedule I thereto.
99.1 Press Release dated September 14, 1999.
* Confidential treatment has been requested with respect to certain portions of
this exhibit. Omitted portions have been filed separately with the Securities
and Exchange Commission.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
ADAC LABORATORIES
Dated: October 18, 1999 By: /s/ Neil J. Laird
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Neil J. Laird
Chief Financial Officer
<PAGE>
EXHIBIT 2.1
*CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ADAC LABORATORIES,
UGM MEDICAL SYSTEMS, INC.
AND CERTAIN OTHER PARTIES
SEPTEMBER 13, 1999
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TABLE OF CONTENTS
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<S> <C>
1. DESCRIPTION OF TRANSACTION...................................................................................1
1.1 Merger of Sub into the Company......................................................................1
1.2 Effect of the Merger................................................................................1
1.3 Closing; Effective Time.............................................................................2
1.4 Articles of Incorporation and Bylaws; Directors and Officers........................................2
1.5 Conversion of Securities............................................................................2
1.6 Merger Consideration................................................................................3
1.7 Post-Closing Adjustment.............................................................................3
1.8 Contingent Merger Consideration.....................................................................5
1.9 No Further Ownership Rights in Capital Stock of the Company........................................12
1.10 Surrender of Certificates..........................................................................12
1.11 Dissenting Shares..................................................................................13
1.12 Further Action.....................................................................................13
1.13 Sellers' Representative............................................................................14
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS...............................................15
2.1 Organization; Subsidiaries.........................................................................15
2.2 Articles of Incorporation and Bylaws; Records......................................................15
2.3 Capitalization.....................................................................................16
2.4 Financial Statements; Absence of Liabilities.......................................................16
2.5 Absence of Certain Changes or Events...............................................................17
2.6 Title to Assets....................................................................................19
2.7 Bank Accounts; Receivables; Customers..............................................................20
2.8 Intellectual Property..............................................................................20
2.9 Contracts..........................................................................................25
2.10 Compliance with Legal Requirements.................................................................27
2.11 Governmental Authorizations; Regulatory Matters; Government Consents; No Conflicts.................28
2.12 Tax Matters........................................................................................29
2.13 Employee and Labor Matters; Benefit Plans..........................................................31
2.14 Litigation and Claims..............................................................................35
2.15 Environmental Matters..............................................................................35
2.16 Sale of Products; Performance of Services..........................................................36
2.17 Insurance..........................................................................................36
2.18 Complete Copies of Materials.......................................................................37
2.19 Related Party Transactions.........................................................................37
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TABLE OF CONTENTS
(CONTINUED)
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2.20 Financial Advisor..................................................................................37
2.21 Enforceability.....................................................................................37
2.22 Governmental Consents; No Conflicts................................................................38
2.23 Full Disclosure....................................................................................38
2.24 HSR Act............................................................................................39
2.25 Year 2000..........................................................................................39
3. REPRESENTATIONS AND WARRANTIES OF ADAC AND SUB..............................................................40
3.1 Authority; Binding Nature of Agreement.............................................................40
3.2 Financial Advisor..................................................................................40
4. CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; ADDITIONAL AGREEMENTS.....................................40
4.1 Information and Access.............................................................................40
4.2 Conduct of Business of the Company.................................................................41
4.3 Notification; Updates to Disclosure Schedule.......................................................43
4.4 FIRPTA Compliance..................................................................................44
4.5 Negotiation With Others............................................................................44
4.6 Regulatory Approvals...............................................................................44
4.7 Additional Agreements..............................................................................45
4.8 Company Shareholder Approval.......................................................................45
4.9 Public Announcements...............................................................................45
4.10 Taxes..............................................................................................46
4.11 Employment Agreements..............................................................................46
4.12 Employee Plans.....................................................................................46
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF ADAC AND SUB.........................................................47
5.1 Representations and Warranties Accurate............................................................47
5.2 Compliance With Covenants..........................................................................47
5.3 Shareholder Approval...............................................................................47
5.4 Consents...........................................................................................47
5.5 Agreements and Documents...........................................................................47
5.6 Employees..........................................................................................48
5.7 No Material Adverse Effect.........................................................................48
5.8 No Restraints......................................................................................48
5.9 No Legal Proceedings...............................................................................48
5.10 Confidentiality and Nondisclosure Agreements.......................................................48
5.11 Dissenters.........................................................................................49
5.12 Net Worth of the Company...........................................................................49
5.13 Governmental and Regulatory Approvals..............................................................49
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TABLE OF CONTENTS
(CONTINUED)
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5.14 Employment and Noncompete Agreements...............................................................49
5.15 Closing of UGM Laboratory, Inc.....................................................................49
5.16 Corporate Documents................................................................................49
5.17 Termination of 40l(k) Plan and Simplified Employee Pension Plan....................................50
5.18 Escrow Agreement...................................................................................50
5.19 Assignments........................................................................................50
6. CONDITIONS PRECEDENT TO THE COMPANY'S AND THE SELLERS' OBLIGATIONS..........................................50
6.1 Representations and Warranties Accurate............................................................50
6.2 Compliance With Covenants..........................................................................50
6.3 Certificate........................................................................................51
6.4 No Restraints......................................................................................51
6.5 Escrow Agreement...................................................................................51
6.6 Escrow Fund........................................................................................51
7. TERMINATION OF AGREEMENT....................................................................................51
7.1 Termination........................................................................................51
7.2 Effect of Termination..............................................................................52
7.3 Fees and Expenses..................................................................................52
8. INDEMNITY AND ESCROW........................................................................................52
8.1 Agreement to Indemnify.............................................................................52
8.2 Limitation and Expiration..........................................................................54
8.3 Claim Procedure....................................................................................56
8.4 Third Party Claims.................................................................................58
8.5 Release of the Escrow Amount to ADAC...............................................................58
8.6 Release of the Escrow Amount to Sellers' Representative............................................59
8.7 Survival of Representations and Warranties.........................................................59
8.8 Remedies...........................................................................................59
8.9 Right to Set Off...................................................................................59
9. MISCELLANEOUS...............................................................................................59
9.1 Non-Compete........................................................................................59
9.2 Amendment..........................................................................................61
9.3 Waiver.............................................................................................61
9.4 Severability.......................................................................................62
9.5 Entire Agreement; Counterparts; Applicable Law.....................................................62
9.6 Assignability......................................................................................62
9.7 Notices............................................................................................63
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TABLE OF CONTENTS
(CONTINUED)
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9.8 Cooperation........................................................................................64
9.9 Confidentiality....................................................................................64
9.10 Certain Terms......................................................................................64
9.11 Titles.............................................................................................67
9.12 Articles, Sections and Exhibits....................................................................67
9.13 Mutual Drafting....................................................................................68
9.14 Further Representations............................................................................68
9.15 Arbitration........................................................................................68
SCHEDULES
I ......................................................................................................I-1
II .....................................................................................................II-1
EXHIBITS
A Form of Plan of Merger................................................................................A-1
B Form of Escrow Agreement..............................................................................B-1
C Form of Employment Agreement (Gerd Muehllehner).......................................................C-1
D Form of Employment Agreement (Ursula Muehllehner).....................................................D-1
E Form of Employment Agreement (Michael Geagan).........................................................E-1
F Form of Consulting Agreement (Joel Karp)..............................................................F-1
G Form of Non-Competition Agreement.....................................................................G-1
H Form of Assignment....................................................................................H-1
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and entered
into as of September 13, 1999, by and among ADAC Laboratories, a California
corporation ("ADAC"); UGMMS Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of ADAC ("SUB"); UGM Medical Systems, Inc., a
Pennsylvania corporation (the "COMPANY"); and the shareholders of the Company
listed on Schedule I (collectively, the "SHAREHOLDERS") and Gerd Muehllehner,
Ph.D. (together with the Shareholders, the "SELLERS"). Certain capitalized terms
used in this Agreement are defined in Section 9.10 below.
BACKGROUND
A. ADAC, Sub and the Company intend to effect a merger of Sub into the
Company in accordance with this Agreement and the laws of the States of Delaware
and Pennsylvania (the "MERGER"). Upon consummation of the Merger, Sub will merge
into the Company and the separate existence of Sub will cease, and the Company
will become a wholly owned subsidiary of ADAC.
B. As of the Closing Date (as defined below), the shareholders of the
Company will own a total of 23,818 shares of the Company's voting common stock,
$1.00 par value per share (the "COMPANY COMMON STOCK"), comprising all of the
outstanding shares of the Company.
AGREEMENT
ADAC, Sub, the Company and the Sellers agree as follows:
1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF SUB INTO THE COMPANY. Upon the terms and subject to the
conditions set forth in this Agreement and in the Plan of Merger attached as
EXHIBIT A (the "PLAN OF MERGER"), at the Effective Time (as defined in Section
1.3), Sub shall be merged into the Company and the separate existence of Sub
shall cease. The Company shall be the surviving corporation in the Merger (the
"SURVIVING CORPORATION").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement, the Plan of Merger, the applicable provisions of the Delaware
General Corporation Law (the "DGCL") and the applicable provisions of the
Pennsylvania General Corporation Law (the "PGCL"). Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all
the property, rights, privileges, powers and franchises of the Company and
Sub shall vest in the Surviving Corporation, and all debts, liabilities,
obligations and duties of the Company and Sub shall become the debts,
liabilities, obligations and duties of the Surviving Corporation.
<PAGE>
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "CLOSING") shall take place at the
offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto,
California on the date on which each of the conditions set forth in Articles
5 and 6 has been fulfilled or waived or on such other date as may be jointly
designated by ADAC and the Company (the "CLOSING DATE"). As soon as
practicable after the Closing, a properly executed certificate of merger
conforming to the requirements of the DGCL shall be filed with the Delaware
Secretary of State and the Plan of Merger and articles of merger conforming
to the requirements of the PGCL shall be filed with the Pennsylvania
Secretary of State. The Merger shall become effective at the time the
certificate of merger is filed with the Delaware Secretary of State and the
Plan of Merger and articles of merger are filed with the Pennsylvania
Secretary of State (the "EFFECTIVE TIME").
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. The
Articles of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended. The Bylaws of the Company, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended. The officers and directors of Sub shall
be the officers and directors of the Surviving Corporation until their
respective successors are elected and qualified.
1.5 CONVERSION OF SECURITIES. At the Effective Time, by virtue of the
Merger and without any action on the part of ADAC, the Company, Sub or any
Sellers, the shares of capital stock of each of Sub and the Company shall be
converted as follows:
(a) CAPITAL STOCK OF SUB. Each share of the common stock, no par value
per share, of Sub outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share of Common
Stock of the Surviving Corporation.
(b) CANCELLATION OF CERTAIN SHARES OF CAPITAL STOCK OF THE COMPANY.
Each share of Company Common Stock owned by ADAC, Sub, the Company or any direct
or indirect wholly-owned subsidiary of ADAC or of the Company immediately prior
to the Effective Time shall be canceled and extinguished without any conversion
thereof.
(c) CONVERSION OF CAPITAL STOCK OF THE COMPANY. Subject to Section
1.6(c), each share of Company Common Stock that is issued and outstanding
immediately prior to the Effective Time (other than shares to be canceled
pursuant to Section 1.5(b)) shall automatically be canceled and extinguished and
converted, without any action on the part of the holder thereof, into the right
to receive at the time and in the amounts described in this Agreement an amount
of cash equal to (x) the Aggregate Consideration (as defined in Section 1.6(a)
below), subject to adjustment pursuant to Sections 1.6(c), 1.7 and 8.5, DIVIDED
BY (y) the number of shares (including without limitation shares issuable upon
exercise of outstanding options and warrants) of Company Common Stock
outstanding immediately prior to the Effective Time (other than shares to be
canceled pursuant to Section 1.5(b)). All such shares of Company Common Stock,
when so converted, shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder
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of a certificate representing any such shares shall cease to have any rights
with respect thereto, except the right to receive cash to be paid in
consideration therefor upon the surrender of such certificate in accordance
with Section 1.10 below.
1.6 MERGER CONSIDERATION.
(a) AGGREGATE CONSIDERATION. Except for any Contingent Merger
Consideration, the aggregate consideration to be paid by ADAC pursuant to the
Merger is TWELVE MILLION DOLLARS (U.S.$12,000,000) (the "AGGREGATE
CONSIDERATION"), and shall not exceed such amount. The Aggregate Consideration
has been calculated based upon several factors including the assumption that the
net worth of the Company, calculated in accordance with generally accepted
accounting principles ("GAAP") consistently applied, and as modified in
accordance with Schedule II, is equal to or greater than TWO MILLION TWO HUNDRED
THOUSAND DOLLARS (U.S.$2,200,000) (the "NET WORTH MINIMUM") as of the Closing.
(b) ADJUSTMENT TO AGGREGATE CONSIDERATION. If on the Closing Financial
Certificate (as defined in Section 5.5(c)), the Certified Closing Net Worth (as
defined in Section 5.5(c)) is less than the Net Worth Minimum, the Aggregate
Consideration to be delivered to the shareholders of the Company may, at ADAC's
election, be reduced either (i) at the Closing or (ii) after completion of the
Post-Closing Audit (as defined in Section 1.7), by the difference between the
Net Worth Minimum and the Certified Closing Net Worth set forth on the Closing
Financial Certificate.
(c) ESCROW AMOUNT. Upon the Closing, ONE MILLION EIGHT HUNDRED THOUSAND
DOLLARS (U.S.$1,800,000) (the "ESCROW AMOUNT") shall be withheld from the
Aggregate Consideration. ADAC shall deposit the Escrow Amount with Mellon Bank,
as escrow agent (the "ESCROW AGENT"), to be held in escrow following the Closing
in accordance with an escrow agreement in the form of EXHIBIT B hereto (the
"ESCROW AGREEMENT") to be entered into at Closing pursuant to Section 6.5. Such
Escrow Amount shall be available to satisfy indemnification claims under Section
8.1(a) of this Agreement and any post-Closing adjustment to the Aggregate
Consideration under Section 1.7 and shall be held and disbursed in accordance
with the Escrow Agreement.
1.7 POST-CLOSING ADJUSTMENT. The Aggregate Consideration shall be subject
to adjustment after the Closing Date as specified in this Section 1.7.
(a) Within ninety (90) days following the Effective Time, ADAC shall,
or shall cause PriceWaterhouseCoopers LLP or any successor accountant appointed
by ADAC ("ADAC'S ACCOUNTANT") to, audit the Company's books to determine the
accuracy of the information set forth on the Closing Financial Certificate (the
"POST-CLOSING AUDIT"). The parties acknowledge and agree that, for purposes of
determining the net worth of the Company as of the Closing Date, the value of
the assets of the Company shall, except with the prior written consent of ADAC,
be calculated as provided in the second sentence of Section 5.12. The Sellers
shall cooperate and shall use their
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reasonable efforts to cause the officers and employees of the Company to
cooperate with ADAC or ADAC's Accountant, as applicable, after the Closing
Date in furnishing information, documents, evidence and other assistance to
ADAC or ADAC's Accountant, as applicable, to facilitate the completion of the
Post-Closing Audit within the aforementioned time period. Without limiting
the generality of the foregoing, within two (2) weeks after the Closing the
Sellers, through the Sellers' Representative, as defined in Section 1.13,
shall provide ADAC or ADAC's Accountant, as applicable, with the information
and/or documents reasonably requested by ADAC or ADAC's Accountant, as the
case may be, in order to facilitate the completion of the Post-Closing Audit
by ADAC or ADAC's Accountant, as the case may be, within the aforementioned
time period. In the event that ADAC or ADAC's Accountant determines that the
actual Company net worth, calculated in accordance with GAAP consistently
applied, and as modified in accordance with Schedule II (the "ACTUAL COMPANY
NET WORTH"), as of the Closing Date was less than the Certified Closing Net
Worth, ADAC shall deliver a written notice (the "FINANCIAL ADJUSTMENT
NOTICE") to the Sellers' Representative setting forth (i) the determination
made by ADAC or ADAC's Accountant, as applicable, of the Actual Company Net
Worth and (ii) the maximum amount that the Aggregate Consideration could have
been reduced pursuant to Section 1.6(b) had the Actual Company Net Worth been
reflected on the Closing Financial Certificate instead of the Certified
Closing Net Worth (the "AGGREGATE CONSIDERATION ADJUSTMENT"). The Aggregate
Consideration Adjustment shall take account of the reduction, if any, to the
Aggregate Consideration already taken pursuant to clause (i) of Section
1.6(b).
(b) The Sellers' Representative shall have thirty (30) days from the
receipt of the Financial Adjustment Notice to notify ADAC if the Shareholders
dispute such Financial Adjustment Notice. If ADAC has not received notice of
such a dispute within such 30-day period, ADAC shall be entitled to receive from
the shareholders of the Company (which may, without limitation, at ADAC's sole
discretion, be offset against any Contingent Merger Amount or Contingent Payment
Amount (as defined in Section 9.10) or recovered from the Escrow Amount) the
Aggregate Consideration Adjustment. If, however, the Sellers' Representative has
delivered notice of such a dispute to ADAC within such 30-day period, then ADAC
and the Sellers' Representative shall mutually select in good faith an
independent accounting firm that has not represented any of the parties hereto
within the preceding two (2) years to review the Company's books, the Closing
Financial Certificate, the Financial Adjustment Notice and related information
to determine the amount, if any, of the Aggregate Consideration Adjustment. The
independent accounting firm shall be directed to consider only those books,
records, agreements, contracts, commitments or other documents (or summaries
thereof) that were either (i) delivered or made available to ADAC or ADAC's
Accountant in connection with the transactions contemplated hereby, or (ii)
reviewed by ADAC or ADAC's Accountant, as applicable, during the course of the
Post-Closing Audit. The independent accounting firm shall make its determination
of the Aggregate Consideration Adjustment, if any, within thirty (30) days of
its selection. The determination by the independent accounting firm of the
Aggregate Consideration Adjustment shall be final and binding on the parties
hereto, and upon such determination, ADAC shall be entitled to receive from the
shareholders of the Company (which may, without limitation, at ADAC's sole
discretion, be offset against any
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Contingent Merger Amount or Contingent Payment Amount or recovered from the
Escrow Amount) the Aggregate Consideration Adjustment. The costs of the
independent accounting firm shall be borne by the party (either ADAC or the
Shareholders as a group) whose determination of the Company's net worth,
calculated in accordance with GAAP consistently applied, and as modified in
accordance with Schedule II, as of the Closing was further from the
determination of the independent accounting firm, or equally by ADAC and the
Shareholders in the event that the determination by the independent
accounting firm is equidistant between the Certified Closing Net Worth and
the Actual Company Net Worth; PROVIDED, HOWEVER, that if ADAC's determination
of the Company's net worth, calculated in accordance with GAAP consistently
applied, and as modified in accordance with Schedule II, as of the Closing
was further from the determination of the independent accountant than the
Certified Closing Net Worth or equidistant with the Certified Closing Net
Worth from the determination of the independent accountant (and not closer),
in each case because of any book, record, agreement, contract, commitment or
other document (or summary thereof) that was either not (i) delivered or made
available to ADAC or ADAC's Accountant in connection with the transactions
contemplated hereby or (ii) reviewed by ADAC or ADAC's Accountant, as
applicable, during the course of the Post-Closing Audit, then the
Shareholders shall bear the full cost of the independent accounting firm.
1.8 CONTINGENT MERGER CONSIDERATION.
(a) In addition to the amounts described in Section 1.6 hereof, ADAC
shall pay to each shareholder of the Company his or her "pro rata share" of the
Contingent Merger Amount for each Payment Year; PROVIDED that Contingent Merger
Amounts relating to an installment sale shall be paid as such amounts are
actually Recorded (and not as such amounts are deemed recognized pursuant to the
definition of "Net Unit Revenue" below) including, if applicable and subject to
the limitations set forth in the definition of Contingent Merger Amount, after
the Payment Period. In addition, for the avoidance of doubt, the parties hereby
agree that no Contingent Merger Amount shall be paid with respect to Net Unit
Revenue Recorded prior to the first day of ADAC's first full fiscal year
following the Closing. Notwithstanding the foregoing, in no event shall the
total of all Contingent Merger Amounts payable under this Agreement exceed
EIGHTEEN MILLION DOLLARS (U.S.$18,000,000).
(b) For purposes of this section, the "PRO RATA SHARE" of each
shareholder of the Company shall equal (x) the number of shares including
without limitation shares subject to outstanding options and warrants held by
each such shareholder immediately prior to the Effective Time DIVIDED BY (y) the
aggregate number of shares including without limitation shares subject to
outstanding options and warrants held by all shareholders of the Company
immediately prior to the Effective Time.
(c) The "CONTINGENT MERGER AMOUNT" for each Payment Year shall equal
the sum of (x) the aggregate C-PET Payments with respect to Net Unit Revenue
Recorded in each such Payment Year for C-PET Unit sales PLUS (y) the aggregate
G-PET Payments with respect to Net Unit Revenue Recorded in each such Payment
Year for G-PET Unit sales; PROVIDED, HOWEVER, that the
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Contingent Merger Amount for the fifth Payment Year shall include C-PET
Payments and G-PET Payments, as applicable, Recorded within ninety (90) days
after the end of the fifth Payment Year with respect to Units shipped to
customers in the fourth quarter of the fifth Payment Year even if Net Unit
Revenue for such Units is not fully or partially Recorded in the fifth
Payment Year.
(d) The "C-PET PAYMENT" for each C-PET Unit and with respect to Net
Unit Revenue for such Unit shall equal (x) the Net Unit Revenue for such Unit
MULTIPLIED BY (y) the percentage of Net Unit Revenue listed in the table below
that corresponds to the level to which the Unit belongs:
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LEVEL PERCENTAGE OF NET UNIT REVENUE
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Level One Units 0%
Level Two Units 8.1%
Level Three Units 10.8%
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</TABLE>
In the event that market conditions change significantly and the Market
Price for the C-PET falls below SIX HUNDRED FIFTY THOUSAND DOLLARS
(U.S.$650,000.00), then each of the percentages set forth under Percentage of
Net Unit Revenue for Level One Units, Level Two Units and Level Three Units
shall be multiplied by 0.75.
(e) The "G-PET PAYMENT" for each G-PET Unit and with respect to Net
Unit Revenue for such Unit shall equal (x) the Net Unit Revenue for such Unit
MULTIPLIED BY (y) the percentage of Net Unit Revenue listed in the table below
that corresponds to the level to which the Unit belongs:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
LEVEL PERCENTAGE OF NET UNIT REVENUE
---------------------------------------------------------------------------------------
<S> <C>
Level One Units 0%
Level Two Units 6.7%
Level Three Units 8.3%
---------------------------------------------------------------------------------------
</TABLE>
In the event that market conditions change significantly and the Market Price
for the G-PET falls below NINE HUNDRED THOUSAND DOLLARS (U.S.$900,000.00), then
each of the percentages set forth under Percentage of Net Unit Revenue for Level
One Units, Level Two Units and Level Three Units shall be multiplied by 0.75.
(f) The following table sets forth the "LEVEL ONE UNITS", "LEVEL TWO
UNITS" and "LEVEL THREE UNITS" for each Payment Year. The Units indicated under
each Payment Year refer to the collective number of C-PET Units and G-PET Units
Recorded for each such Payment Year. The Unit numbers refer to the order in
which the Units were Recorded during a Payment Year (E.G., Unit 1 is the first
Unit Recorded during a Payment Year, Unit 2 is the second Unit Recorded during a
Payment Year, ETC.).
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
UNIT LEVEL PAYMENT YEAR 1 PAYMENT YEAR 2 PAYMENT YEAR 3 PAYMENT YEAR 4 PAYMENT YEAR 5 PAYMENT
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Level One Units Units 1-22 Units 1-26 Units 1-32 Units 1-38 Units 1-47
--------------------------------------------------------------------------------------------------------------
-6-
<PAGE>
Level Two Units Units 23-26 Units 27-30 Units 33-36 Units 39-42 Units 48-51
--------------------------------------------------------------------------------------------------------------
Level Three Units Unit 27 and Unit 31 and Unit 37 and Unit 43 and Unit 52 and
thereafter thereafter thereafter thereafter thereafter
--------------------------------------------------------------------------------------------------------------
</TABLE>
(g) Notwithstanding anything to the contrary contained in this Section
1.8, if (i) more than one Unit is Recorded in one day and (ii) the Units
Recorded on such day include Units from different unit levels (E.G., a Level Two
Unit AND two Level Three Units, such as Unit numbers 26, 27 and 28 in Payment
Year 1), then the applicable payment for each Unit Recorded on such day (the
"MIXED PAYMENT AMOUNT") shall be determined by taking the average of the
possible G-PET Payments or C-PET Payments, as applicable, that could be made for
such Unit for each Unit level to which the Units Recorded on that day relate.
For example, assume in Payment Year 1 that Units 26, 27 and 28 are Recorded
on the same day, and such Units consist of the following Units at the specified
Net Unit Revenue amounts:
<TABLE>
<CAPTION>
Net Unit Revenue
-------------------
<S> <C>
C-PET Unit 1 $1,100,000
C-PET Unit 2 $ 850,000
G-PET Unit $1,600,000
</TABLE>
Applying the above formula, the Mixed Payment Amount for each Unit
equals the average of the possible level two and level three C-PET Payments or
G-PET Payments, as applicable, that could be made for such Unit, as follows:
<TABLE>
<CAPTION>
Unit Level Two Unit Level Three
Scenario Scenario Mixed
Net Unit ---------------------- ----------------------- Payment
Revenue % Amount % Amount Amount
------------- ------- --------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
C-PET Unit 1 $1,100,000 8.1% $ 89,100 10.8% $118,800 $103,950
C-PET Unit 2 $ 850,000 8.1% $ 68,850 10.8% $ 91,800 $ 80,325
G-PET Unit $1,600,000 6.7% $107,200 8.3% $132,800 $120,000
</TABLE>
(h) As used in this Agreement
(i) "C-PET" means a full-ring positron emission tomography scanner
using sodium iodide crystals initially designed by the Company, including
subsequent versions thereof.
(ii) "C-PET UNIT" means one (1) C-PET.
(iii) "G-PET" means a full-ring positron emission tomography
scanner using a scintillator which is denser and has faster decay time than
sodium iodide crystals initially designed by the Company, including subsequent
versions thereof.
(iv) "G-PET UNIT" means one (1) G-PET.
-7-
<PAGE>
(v) "MARKET PRICE" means the average Net Unit Revenue for a C-PET
Unit or a G-PET Unit, as applicable, for worldwide sales in the relevant fiscal
quarter.
(vi) "NET UNIT REVENUE" means, with respect to a Unit and without
duplication, the Total Revenue Recorded upon the sale of such Unit (and the
license of any incorporated technology); PROVIDED that all revenue Recorded with
respect to an installment sale shall be deemed Recorded for the purposes of this
definition at the time revenue is initially Recorded with respect to such
installment sale. If ADAC, the Company or any affiliate thereof reverses any Net
Unit Revenue with respect to which a Contingent Merger Amount was paid
("REVERSED NET UNIT REVENUES"), then ADAC shall have the right to set-off the
amount of the Reversed Net Unit Revenue against other Net Unit Revenues for
purposes of determining unpaid or future Contingent Merger Amounts. ADAC shall
have no obligation to pay a Contingent Merger Amount with respect to the portion
of Net Unit Revenues set-off by Reversed Net Unit Revenues pursuant to the
preceding sentence.
The "Total Revenue" with respect to a Unit is calculated by subtracting the
Excluded Items from the Total Invoice Price, and by making such other
adjustments as provided herein.
"TOTAL INVOICE PRICE" means, with respect to a Unit, the final purchase
price which includes all deliverables to the customer; Total Invoice Price does
not include any sales or use taxes, excise taxes, value added taxes and any
other non-income taxes or duties paid or owed by ADAC, the Company or any
affiliate thereof.
"EXCLUDED ITEMS" means
(1) Peripherals for a C-PET or G-PET not defined by ADAC as "buy-outs",
E.G., workstations, printers, cardiac gates, ETC. (typically items for which
ADAC or an affiliate of ADAC has a part number), the exclusion for which shall
equal ADAC's standard cost of goods at a * gross margin;
(2) Ancillary options, consumables and miscellaneous items with respect
to a C-PET or G-PET defined by ADAC as "buy-outs", E.G., desks, printers,
personal computers, ETC. (typically items for which ADAC or an affiliate of ADAC
does not have a part number), the exclusion for which shall equal the vendor's
cost PLUS a * administration fee;
(3) "Pass through" items, E.G., marketing fees paid to Group Purchasing
Organizations, or GPOs, distributor/dealer charges (commissions), research and
development agreements, building modifications, ETC., the exclusion for which
shall equal the actual costs of the pass through which are included in the Total
Invoice Price;
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
-8-
<PAGE>
(4) Any service revenue included in the Total Invoice Price or
otherwise received by ADAC, the Company or any affiliate thereof in connection
with such Unit; such service revenues shall be excluded at the discounted price
as identified in the service contract item on the final quotation; where a
warranty is provided in addition to the standard twelve (12) months, service
revenue for such warranty shall be calculated at the twelve (12) month full
service contract rate multiplied by fifty percent (50%), prorated for the
additional months of warranty provided in the contract with the customer;
(5) Other products sold by ADAC, the Company or any affiliate thereof
or other third party suppliers (E.G., gamma cameras, networking, CT scanners and
all options associated with such products), the exclusion for which shall equal
a calculated average selling price for the unique configuration. The calculated
average selling price shall equal (x) the standard cost of goods for the
configuration for ADAC DIVIDED BY (y) (i) one MINUS (ii) the current quarter
gross margin for the product, for the geographic region, or
<TABLE>
<S><C>
ADAC standard cost of goods sold for the configuration
Calculated ----------------------------------------------------------------------
Average = (1 - current quarter gross margin for the product and geographic region)
Selling Price
</TABLE>
The following items shall not be subtracted from the Total Invoice
Price whether or not expressly included in the Total Invoice Price: software and
hardware optional items which are either essential to the operation of the C-PET
or G-PET scanner or are built into the scanner such as DICOM software or dual
controls, and warranty, installation, shipping, crating, insurance and site
planning costs (E.G., architect costs and radiation calculation costs).
For sales involving currencies other than the U.S. dollar, all prices
shall be calculated using the exchange rate between the U.S. dollar and the
applicable foreign currency or currencies on the date the applicable revenue is
Recorded. If the Unit is sold through a distributor, the Total Invoice Price
shall be (x) the transfer price charged by ADAC to the distributor PLUS (y) the
commission paid to a Territory Manager for the equivalent equipment as set forth
in the then current commission plan for the United States.
The geographic regions are defined as (i) the United States of America,
(ii) Canada, (iii) South America and Central America, (iv) Europe and Africa,
(v) Asia and Australia (excluding Japan) and (vi) Japan. For example, the
calculated average selling price for a Vertex camera in the United States of
America, assuming (i) a standard cost of goods of U.S.$ * and (ii) a current
quarter average gross margin in the United States of America of * %, would equal
(U.S.$ * /(1 - * )) or U.S.$ * .
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
-9-
<PAGE>
For example, if a U.S.$ * sale includes a U.S.$ * personal computer defined by
ADAC as a "buy-out", a U.S.$ * research agreement, an ADAC gamma camera and a
C-PET scanner, the Net Unit Revenue might equal:
<TABLE>
<S> <C>
Total Invoice Price U.S.$ *
Less the personal computer (U.S.$ * + (U.S.$* * * %)) *
Less the research agreement *
Subtotal, net revenue before
gamma camera exclusion U.S.$ *
Less gamma camera
Standard cost of goods *
Average gross margin *%
Gamma camera selling price *
Total Revenue U.S.$ *
</TABLE>
(vii) "PAYMENT PERIOD" means the period from and including the
first day of ADAC's first full fiscal year following the Closing to and
including the last day of the fifth full fiscal year following the Closing.
(viii) "PAYMENT YEAR" means each fiscal year of ADAC during the
Payment Period. The fiscal year end for ADAC is the Sunday closest to the end of
September.
(ix) "PRODUCTS" means the C-PET and the G-PET.
(x) "RECORDED" means recognized as revenue by ADAC, the Company or
any affiliate thereof in accordance with ADAC's then current revenue recognition
policy and, with respect to a Unit, means revenue was recognized for such Unit
by ADAC, the Company or any affiliate thereof in accordance with ADAC's then
current revenue recognition policy.
(xi) "UNIT" means a C-PET Unit or a G-PET Unit.
(i) Within ninety (90) days after each Payment Year, ADAC or ADAC's
Accountant shall determine the Contingent Merger Amount for such Payment Year
and deliver notice of such amount to the Shareholders (the "MERGER AMOUNT
NOTICE") with supporting documentation. The Shareholders (through the Sellers'
Representative (as defined in Section 1.13) or through a certified public
accountant selected by the Sellers' Representative and approved by ADAC, which
approval shall not be unreasonably withheld) shall have the right not more than
once every twelve (12) months to inspect, audit and make extracts from all of
the records, files and books of account of ADAC relating to sales and the
recording of Products and Net Unit Revenue for purposes of verifying the amount
of the consideration payable pursuant to this Section 1.8, at a reasonable time
during business hours, upon advance notice to ADAC.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
-10-
<PAGE>
(j) The Shareholders (through the Sellers' Representative) shall have
forty-five (45) days from the receipt of the Merger Amount Notice to notify ADAC
if they dispute the amount of the Contingent Merger Amount. If ADAC has not
received notice of any such dispute within such 45-day period, the Contingent
Merger Amount contained in the Merger Amount Notice shall be final. If, however,
the Shareholders (through the Sellers' Representative) have delivered notice of
such a dispute to ADAC within such 45-day period, then ADAC and the Sellers'
Representative shall mutually select in good faith an independent accounting
firm that has not represented any of the parties hereto within the preceding two
(2) years and is one of the five largest accounting firms in the United States
(a "NEW ACCOUNTING FIRM") to review the amount of the disputed Contingent Merger
Amount, Net Unit Revenue, the books of ADAC and the Merger Amount Notice (and
related information) for the related Payment Year to determine the amount, if
any, that the Contingent Merger Amount is in error. The New Accounting Firm
shall make its determination of the disputed Contingent Merger Amount (the
"REVISED CONTINGENT MERGER AMOUNT") within thirty (30) days of its selection.
The Revised Contingent Merger Amount shall be final and binding on the parties
hereto, and ADAC shall pay the Revised Contingent Merger Amount within ten (10)
days of its final determination; PROVIDED that if ADAC has already paid the
shareholders of the Company with respect to the Contingent Merger Amount for the
relevant Payment Year and the Revised Contingent Merger Amount is greater than
the Contingent Merger Amount as originally calculated, ADAC shall pay an amount
equal to (x) the Revised Contingent Merger Amount MINUS (y) the amount
previously paid with respect to the Contingent Merger Amount; PROVIDED, FURTHER,
that if ADAC has already paid the shareholders of the Company with respect to
the Contingent Merger Amount for the relevant Payment Year and the Revised
Contingent Merger Amount is less than the Contingent Merger Amount as originally
calculated, the shareholders of the Company shall pay to ADAC an amount equal to
(x) the amount paid by ADAC with respect to the Contingent Merger Amount MINUS
(y) the Revised Contingent Merger Amount. The costs of the New Accounting Firm
shall be borne by ADAC if the Revised Contingent Merger Amount exceeds the
Contingent Merger Amount as set forth on the Merger Amount Notice by more than
5%, and by the Shareholders in all other cases.
(k) The Contingent Merger Amount for each Payment Year, if any, shall
be paid to the shareholders of the Company PRO RATA in cash within ten (10) days
following the determination of the Contingent Merger Amount for each such
Payment Year, which shall be made not later than the date that is ninety (90)
days after the end of each such Payment Year unless the Shareholders dispute the
Contingent Merger Amount in accordance herewith (in which case, any payment
shall be made within ten (10) days after the final determination of the Revised
Contingent Merger Amount); PROVIDED that the Sellers' Representative shall have
provided ADAC with reasonable payment instructions for each shareholder of the
Company and all other information necessary to effect the payment of the
Contingent Merger Amount to the shareholders of the Company in accordance with
the terms hereof; PROVIDED, FURTHER, that if the Sellers' Representative fails
to provide any such instructions or information with respect to a shareholder of
the Company, ADAC shall pay the relevant amount of the Contingent Merger Amount
to the Sellers'
-11-
<PAGE>
Representative and the Sellers' Representative shall be responsible for
distributing to such shareholder his or her pro rata share of the Contingent
Merger Amount.
(l) All amounts payable under this Section 1.8 shall be subject to the
withholding and offset provisions set forth in Article 8.
1.9 NO FURTHER OWNERSHIP RIGHTS IN CAPITAL STOCK OF THE COMPANY. At the
Effective Time, holders of certificates representing shares of Company Common
Stock shall cease to have any rights as shareholders of the Company, and the
stock transfer books of the Company shall be closed with respect to all shares
of Company Common Stock outstanding immediately prior to the Effective Time. No
further transfer of any such shares of Company Common Stock shall thereafter be
made on such stock transfer books. If, after the Effective Time, a valid
certificate previously representing any of such shares of Company Stock (a
"COMPANY STOCK CERTIFICATE") is presented to ADAC, such Company Stock
Certificate shall be canceled and exchanged as provided in Section 1.10.
1.10 SURRENDER OF CERTIFICATES.
(a) At or as soon as practicable after the Effective Time, ADAC will
provide or mail to the holders of Company Stock Certificates (i) a letter of
transmittal in customary form and containing such provisions as ADAC may
reasonably require and (ii) instructions for use in effecting the surrender of
Company Stock Certificates in exchange for cash consideration as provided in
this Agreement. Upon surrender of a Company Stock Certificate to ADAC for
exchange, together with a duly executed letter of transmittal and such other
documents as may be reasonably required by ADAC, the holder of such Company
Stock Certificate shall be entitled to receive in exchange therefor the cash
consideration, in immediately available funds, that such holder has the right to
receive pursuant to the provisions of this Article 1 (after withholding the
Escrow Amount), and the Company Stock Certificate so surrendered shall be
canceled. Until surrendered as contemplated by this Section 1.10, each Company
Stock Certificate shall be deemed, from and after the Effective Time, to
represent only the right to receive upon such surrender cash consideration as
contemplated by this Article 1.
(b) ADAC shall not be liable to any holder or former holder of shares
of Company Common Stock with respect to any cash amounts issuable pursuant to
this Article 1 which is delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(c) In the event any certificate evidencing shares of Company Common
Stock shall have been mutilated, lost, stolen or destroyed, ADAC shall make
payment in exchange for such mutilated certificate or with respect to such lost,
stolen or destroyed certificate, in each case upon the making of an affidavit of
that fact by the holder thereof, of such cash as may be required pursuant to
this Article 1; PROVIDED, HOWEVER, that ADAC may, in its discretion and as a
condition precedent to payment with respect to such mutilated, lost, stolen or
destroyed certificate, require the owner of such mutilated, lost, stolen or
destroyed certificate to deliver a bond in such sum as ADAC may
-12-
<PAGE>
reasonably direct as indemnity against any claim that may be made against
ADAC with respect to the certificate alleged to have been mutilated, lost,
stolen or destroyed.
1.11 DISSENTING SHARES. Notwithstanding anything to the contrary contained
in this Agreement, holders of any shares of Company Common Stock that are
outstanding immediately prior to the Effective Time who did not vote in favor of
the Merger and who complied with the applicable provisions of the PGCL
("DISSENTING SHAREHOLDERS") shall be entitled only to such rights as may be
granted to such holder in the PGCL. From and after the Effective Time, a
Dissenting Shareholder shall not have and shall not be entitled to exercise any
of the voting rights or other rights of a shareholder of the Surviving
Corporation. If any Dissenting Shareholder shall fail to perfect or shall waive,
rescind, withdraw or otherwise lose such holder's right of appraisal under the
PGCL, then such shares shall automatically be converted into and shall represent
only the right to receive (upon the surrender of the certificate or certificates
representing such shares) such consideration as provided by Section 1.5(c). The
Company (i) shall give ADAC prompt written notice of any notice received by the
Company of a shareholder's intent to demand appraisal or dissenters' rights,
pursuant to the PGCL and of any other notice, demand or instrument delivered to
the Company pursuant to the PGCL and of any other communication relating to the
foregoing, and (ii) shall give ADAC's representatives the opportunity to
participate in all negotiations and proceedings with respect to any such notice,
demand or instrument. The Company shall not make any payment, settlement or
offer of payment or settlement with respect to any such notice or demand unless
ADAC shall have consented in writing to such payment, settlement or offer.
1.12 FURTHER ACTION. If at any time after the Effective Time any further
action is determined by ADAC to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Company as the Surviving Corporation
with the full right, title and possession of and to all assets, property,
rights, privileges, immunities, powers and franchises of the Company and Sub,
the officers and directors of the Company shall be fully authorized (in the name
of the Company and otherwise) to take such action.
1.13 SELLERS' REPRESENTATIVE.
(a) Each Seller, by signing this Agreement, designates Gerd
Muehllehner (or, in the event that Gerd Muehllehner is unable or unwilling to
serve, the Sellers shall collectively appoint, by a majority vote, a Seller
reasonably acceptable to the Company) to be the "SELLERS' REPRESENTATIVE" for
purposes of this Agreement. In the event that Gerd Muehllehner, as Sellers'
Representative, expects to be absent for any period of time (for example, if he
is travelling for an extended period), he shall have the right to appoint a
temporary Sellers' Representative to act in his stead during such time period
and each Seller agrees to such temporary assignment. The term "Sellers'
Representative" includes any such temporary appointee. The Sellers shall be
bound by any and all actions taken by the Sellers' Representative on their
behalf.
(b) Each of ADAC and Sub shall be entitled to rely upon any
communication or writings given or executed by the Sellers' Representative.
All communications or writings to be sent
-13-
<PAGE>
to Sellers pursuant to this Agreement may be addressed to the Sellers'
Representative and any communication or writing so addressed and sent shall
be deemed notice to all of the Sellers hereunder. The Sellers hereby consent
and agree that the Sellers' Representative is authorized to accept
deliveries, including any notice, on behalf of the Sellers pursuant hereto.
(c) The Sellers' Representative is hereby appointed and constituted
the true and lawful attorney-in-fact of each Seller, with full power in his
or her name and on his or her behalf to act according to the terms of this
Agreement (including, without limitation, pursuant to the terms of Section 8
hereof) and the other Transactional Agreements in the absolute discretion of
the Sellers' Representative; and in general to do all things and to perform
all acts including, without limitation, executing and delivering all
agreements, certificates, receipts, instructions and other instruments
contemplated by or deemed advisable in connection with this Agreement and the
other Transactional Agreements. This power of attorney and all authority
hereby conferred is granted subject to the interest of the other Sellers
hereunder and in consideration of the mutual covenants and agreements made
herein, and shall be irrevocable and shall not be terminated by any act of
any Seller, by operation of law, whether by such Seller's death or otherwise,
or by any other event.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS
Except as set forth in the disclosure schedule delivered to ADAC prior
to the execution of this Agreement, and signed by the President or any Vice
President of the Company, which schedule shall specifically refer to the section
numbers below and specify the disclosures and exception so made (the "DISCLOSURE
SCHEDULE"), the Company and the Sellers jointly and severally represent and
warrant to ADAC and agree as follows:
2.1 ORGANIZATION; SUBSIDIARIES.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania. The
Company has all necessary power and authority under applicable corporate law
and its organizational documents to own or lease its properties, to carry on
its business as presently conducted and to perform its obligations under all
contracts by which it is bound. The Company has not conducted any business
under or otherwise used for any purpose or in any jurisdiction any fictitious
name, trade name or other name. The Company does not own or hold, directly or
indirectly, any debt or equity securities of, or have any other interest in,
any corporation, partnership, joint venture or other entity, and the Company
has not entered into any agreement to acquire any such interest. The Company
has no subsidiaries.
(b) The Company is qualified to do business as a foreign
corporation and is in good standing under the laws of all jurisdictions where
the nature of its business requires such qualification, a list of which
jurisdictions is set forth on Part 2.1 of the Disclosure Schedule.
-14-
<PAGE>
2.2 ARTICLES OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered to ADAC accurate and complete copies of (1) the Company's articles of
incorporation and bylaws, including all restatements thereof and amendments
thereto and including any certificates of designation, (2) the stock records of
the Company and (3) the minutes and other records of the meetings and other
proceedings and actions (including any actions taken by written consent or
otherwise without a meeting) of the shareholders of the Company and the Board of
Directors of the Company and any committee thereof. There have been no meetings
or other proceedings or actions of the shareholders of the Company or the Board
of Directors of the Company or any committee thereof that are not fully
reflected in such minutes or other records. There has not been any violation of
any of the provisions of the Company's articles of incorporation or bylaws that
has not been cured so as to avoid any liability to the Company or of any
resolution adopted by the Company's shareholders or the Company's Board of
Directors or any committee thereof. The general ledger, stock records, minute
books and other material records of the Company have been provided to ADAC and
are accurate, up-to-date and complete in all material respects.
2.3 CAPITALIZATION. The authorized capital stock of the Company
consists of 50,000 shares of Company Common Stock, and no shares of Preferred
Stock. As of the Closing Date, 23,818 shares of the Company's Common Stock
will be issued and outstanding and all of such shares are owned by the
shareholders of the Company in the amounts set forth on Part 2.3 of the
Disclosure Schedule, free and clear of any liens, encumbrances and the like.
All the issued and outstanding shares of Company Common are validly issued,
fully paid, nonassessable and free of preemptive rights, and were issued in
compliance with state and federal securities laws, and none of such shares is
subject to any repurchase option or restriction on transfer (other than
restrictions on transfer imposed by virtue of applicable federal and state
securities laws). Except as set forth above, (i) there are no shares of
capital stock of the Company authorized, issued or outstanding; (ii) there
are no outstanding subscriptions, options, warrants, stock appreciation right
plans, calls, rights, convertible securities, stockholder rights plans (or
similar plans commonly referred to as "poison pills") or other agreements or
commitments of any character relating to issued or unissued capital stock or
other securities of the Company, or obligating the Company or any other party
to issue, transfer or sell any shares of the capital stock or other
securities of the Company; (iii) there are no other outstanding securities
convertible into, exercisable or exchangeable for or evidencing the right to
subscribe for any shares of the capital stock or other securities of the
Company or any successor corporation or controlling person of such successor
corporation; and (iv) there are no voting trusts or other voting agreements
with respect to such number of shares of Company Common Stock as is necessary
and as were voted to duly and validly authorize the Transaction Agreements
and the performance of the Company's obligations thereunder and, to the
knowledge of the Company and the Sellers, there are no voting trusts or other
voting agreements with respect to any shares of Company Common Stock.
(a) The Company does not own any ADAC Common Stock.
(b) Any shares of capital stock or other securities repurchased,
redeemed or otherwise reacquired by the Company were validly reacquired in
compliance with (i) the applicable
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<PAGE>
provisions of the PGCL and all other applicable Legal Requirements and (ii)
any requirements set forth in applicable contracts by which the Company is
bound.
2.4 FINANCIAL STATEMENTS; ABSENCE OF LIABILITIES.
(a) Part 2.4 of the Disclosure Schedule includes true, complete and
correct copies of (i) the Company's unaudited financial statements (balance
sheets, income statements and statements of cash flow) as of and for the
fiscal years ending December 31, 1996 and 1997, (ii) the Company's audited
financial statements (balance sheet, income statement and statement of cash
flow) as of and for the fiscal year ended December 31, 1998 and (iii) the
Company's unaudited financial statements (balance sheet, income statement and
statement of cash flow) as of and for the six month period ended June 30,
1999 (collectively, the "FINANCIAL STATEMENTS"). The Financial Statements (i)
were prepared in accordance with the books and records of the Company, (ii)
have been prepared in accordance with GAAP consistently applied, subject in
the case of interim Financial Statements (x) to normal year-end adjustments,
which individually or in the aggregate were not and will not be material, and
(y) to the omission of footnote information; and (iii) are accurate in all
material respects. The Financial Statements fairly present the Company's
financial condition and the results of its operations at the relevant dates
thereof and for the periods covered thereby. The balance sheet of the Company
as of June 30, 1999 is referred to as the "BALANCE SHEET" and the date of the
Balance Sheet is referred to as the "BALANCE SHEET DATE."
(b) The Company has no liability or obligation of any kind or
nature, secured or unsecured (whether absolute, accrued, contingent or
otherwise, and whether due or to become due) ("LIABILITIES"), except for (i)
Liabilities that are disclosed as such in the Balance Sheet, and (ii)
Liabilities incurred since the Balance Sheet Date in the ordinary course of
business, consistent with past practice, that are not, individually or in the
aggregate, material. Except as set forth in the Balance Sheet, the Company
has no Liabilities to any officer, director, shareholder, affiliate or
representative of the Company.
2.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance Sheet
Date,
(a) there has not been any loss, damage or destruction to, or any
interruption in the use of, any of the Company's assets (whether or not
covered by insurance);
(b) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares
of capital stock or other securities;
(c) the Company has not sold, issued or authorized the issuance
of (i) any capital stock or other security, (ii) any option, call, warrant or
right to acquire, or otherwise relating to, any capital stock or any other
security, or (iii) any instrument convertible into or exercisable or
exchangeable for any capital stock or other security;
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(d) except for the amendment to the Articles of Incorporation of
the Company filed on August 4, 1999, there has been no amendment to or
restatement of the Company's articles of incorporation or bylaws (including
by filing of a certificate of designation or otherwise), and the Company has
not effected or been a party to any acquisition transaction,
recapitalization, reclassification of shares, stock split, reverse stock
split or similar transaction;
(e) the Company has not formed any subsidiary or acquired any
equity interest or other interest in any other entity;
(f) there has not been any labor trouble or claim of wrongful
discharge or other unlawful labor practice or action;
(g) there has not been any increase in the salary or other
compensation payable or to become payable by the Company to any of its
officers, directors, employees, consultants or advisors, or the payment or
declaration, commitment or obligation of any kind for the payment, by the
Company, of a bonus or other additional salary or compensation to any such
person;
(h) there has not been any breach, amendment or termination of
any distribution agreement or any material contract, agreement or license to
which the Company is a party or by which it is bound other than termination
by the Company pursuant to the terms thereof as described in Part 2.5(h) of
the Disclosure Schedule;
(i) there has not been any commencement or notice or, to the best
knowledge of the Company and the Sellers, threat of commencement of any
lawsuit or proceeding against or investigation of the Company or its affairs;
(j) the Company has not made any capital expenditure which, when
added to all other capital expenditures made by the Company since the Balance
Sheet Date, exceeds $30,000 in the aggregate;
(k) the Company has not (i) entered into, or permitted any of the
assets owned or used by it to become bound by, any Material Contract (as
defined in Section 2.9(a)), except that the Company has renewed various
Material Contracts in the ordinary course of business, without materially
amending the terms thereof, or (ii) amended or prematurely terminated, or
waived any material right or remedy under, any Material Contract to which it
is or was a party or under which it has or had any rights or obligations;
(l) the Company has not (i) acquired, leased or licensed any right
or other asset from any other person or entity (other than immaterial rights
or other immaterial assets acquired, leased or licensed by the Company from
other persons or entities in the ordinary course of business and consistent
with the Company's past practices), (ii) sold or otherwise disposed of, or
leased or licensed, any right or other asset to any other person or entity
(other than immaterial rights or other immaterial assets disposed of or
leased or licensed by the Company to other persons or entities in the
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ordinary course of business and consistent with the Company's past
practices), or (iii) waived or relinquished any right (other than immaterial
rights waived or relinquished by the Company in the ordinary course of
business and consistent with the Company's past practices);
(m) the Company has not written off as uncollectible, or
established any extraordinary reserve with respect to, any account receivable
or other indebtedness;
(n) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any lien, pledge,
charge or other encumbrance, except for pledges of immaterial assets made in
the ordinary course of business and consistent with the Company's past
practices;
(o) the Company has not (i) lent money to any person or entity or
(ii) incurred or guaranteed any indebtedness for borrowed money;
(p) the Company has not (i) established, adopted or amended any
Employee Benefit Plan, except (A) for the termination of its 401(k) plan
and/or its Simplified Employee Pension Plan ("SARSEP") immediately prior to
Closing and (B) as required by law or an applicable government agency, or
(ii) made any profit-sharing or similar payment to any of its directors,
officers or employees;
(q) the Company has not changed any of its methods of accounting
or accounting practices in any respect;
(r) the Company has not made any tax election;
(s) the Company has not commenced or settled any legal proceeding
before any Governmental Body;
(t) the Company has not entered into any material transaction or
taken any other material action outside the ordinary course of business or
inconsistent with its past practices;
(u) the Company has conducted its business and operations in the
ordinary course and there has not been any material adverse change in the
Company's business, condition (financial or otherwise), assets, liabilities,
operations, results, profits, financial performance or prospects, and no
event has occurred that will, or to the knowledge of the Company and the
Sellers could reasonably be expected to, have a Material Adverse Effect on
the Company; and
(v) the Company has not agreed or committed to take any of the
actions referred to in clauses "(b)" through "(u)" above.
2.6 TITLE TO ASSETS.
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(a) Part 2.6 of the Disclosure Schedule sets forth a general
description of each parcel of real property currently owned or leased by the
Company, and, with respect to leases, the name of the lessor, the date and
term of the lease and each amendment thereto and the aggregate annual rental
and/or other fees payable under any such lease. The Company is in possession
of all real properties presently owned or leased by it. All leases with
respect to properties currently leased by the Company are in full force and
effect, are valid, legal and binding obligations of the parties thereto and
are enforceable in accordance with their respective terms (subject, as to the
enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting creditors' rights, and,
with respect to the remedy of specific performance, equitable doctrines
applicable thereto), and there is not, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default). Such current leases consist only of those
described in Part 2.6 of the Disclosure Schedule, complete and correct copies
of which have been provided by the Company to ADAC. None of the buildings,
structures or appurtenances located upon the real properties currently owned
or leased by the Company or the operation and maintenance thereof as now
operated or maintained, contravenes any zoning ordinance or other
administrative regulation (whether or not permitted because of prior
nonconforming use) or violates any restrictive covenant or any provision of
law, the effect of which would materially interfere with or prevent the
continued use of such properties for the purposes for which they are now
being used or would materially adversely affect the value thereof.
(b) The Company owns and has valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for
use in its business, including, without limitation, (i) all assets reflected
on the Balance Sheet; (ii) all of the Company rights under Material Contracts
and (iii) all other assets reflected in the Company's books and records as
being owed or leased by the Company. All of these assets are owned by the
Company free and clear of any liens or other encumbrances, except for any
liens for current taxes not yet due and payable.
2.7 BANK ACCOUNTS; RECEIVABLES; CUSTOMERS.
(a) Part 2.7(a) of the Disclosure Schedule provides an accurate
and complete list of each account maintained by or for the benefit of the
Company at any bank or other financial institution.
(b) All existing accounts receivable of the Company (including
those accounts receivable reflected on the Balance Sheet that have not yet
been collected and those accounts receivable that have arisen since the
Balance Sheet Date and have not yet been collected) (i) represent valid
obligations of customers of the Company arising from BONA FIDE transactions
entered into in the ordinary course of business and (ii) are current and will
be collected in full, without any counterclaim or set off, when due, net of
an allowance for doubtful accounts not to exceed $25,000 in the aggregate.
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(c) Part 2.7(c) of the Disclosure Schedule sets forth each
customer and each other Person with which the Company does business. The
Company has not received any notice or other communication indicating that
any customer or other Person with which the Company does business, or any
other person or entity identified in Part 2.7(c) of the Disclosure Schedule,
intends or expects to cease dealing with the Company or to effect a reduction
in the volume of business transacted by such Person with the Company below
historical or currently projected levels.
2.8 INTELLECTUAL PROPERTY.
(a) DEFINITIONS. For the purposes of this Agreement, the
following terms have the meanings set forth below. It is understood and
agreed by the parties, however, that the definitions do not include, and the
representations and warranties set forth in this Section 2.8 shall not apply
to, inbound "shrink wrap" and similarly publicly available commercial binary
code and end-user licenses and outbound "shrink wrap" licenses, including any
related trademark contracts, licenses and agreements.
(i) "COPYRIGHTS" means all registered copyrights, copyright
applications and unregistered copyrights, and all applications for any of the
foregoing which are in the process of being prepared throughout the world.
(ii) "DOCUMENTATION" means all documentation relating to
engineering, production, assembly, design, installation and other technical
drawings and specifications, process and technology development, manufacturing,
customer and supplier records, working notes and memos, laboratory books, market
studies, consultants' reports, research, product plans, products, services
plans, services, marketing, distribution and sales methods and systems,
technical and laboratory data, clinical trial data, engineering prototypes, and
any similar documentation, used or useful, in whole or in part, directly or
indirectly, in the operation of the business by the Company.
(iii) "INTELLECTUAL PROPERTY" means all Patents, Trademarks,
Maskworks, Software and Copyrights relating to the Business whether owned by,
licensed to or controlled by Company listed in Part 2.8 of the Disclosure
Schedule and all Know-How and Documentation relating to the Business whether
owned by, licensed to or controlled by Company.
(iv) "KNOW-HOW" means all know-how, trade secrets, inventions
(whether or not patentable), data, processes, techniques, procedures,
compositions, devices, methods, formulas, protocols and information, which are
not generally publicly known.
(v) "MASKWORKS" means all mask works, mask work registrations and
application therefore, and any equivalent or similar rights in semiconductor
masks, layout, architectures or topology.
(vi) "PATENTS" means all patents and patent applications, and all
patents issuing thereon (including utility, model and design patents and
certificates of invention), together
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with all reissue patents, patents of addition, divisions, renewals,
continuations, continuations-in-part, substitutions, additions, extensions
(including supplemental protection certificates), registrations,
confirmations, re-examinations and foreign counterparts of any of the
foregoing, and all applications for any of the foregoing which are in the
process of being prepared.
(vii) "SOFTWARE" means all works of authorship (as defined in 17
U.S.C. Section 101), including, without limitation, computer programs, source
code and executable code, whether embodied in software, firmware or otherwise,
documentation, designs, files, records, data and mask works.
(viii) "TRADEMARKS" means all registered trademarks, registered
service marks, trademark and service mark applications, unregistered trademarks
and service marks, logos and trade names, common law trademarks, World Wide Web
addresses and domain names, and all applications for any of the foregoing which
are in the process of being prepared.
(b) The Patents, Trademarks, Maskworks, Software and Copyrights
listed in Part 2.8 of the Disclosure Schedule constitute all of the Patents,
Trademarks, Maskworks, Software and Copyrights that are in use, or are under
development for use, or are necessary for the conduct of the business of the
Company as it currently is conducted or as it is currently planned or
contemplated to be conducted by the Company with respect to products
available for sale by the Company as of the Closing, including, without
limitation, the design, development, manufacture, use, import and sale of
products and technology and performances of services (including products,
technology or services currently under development).
(c) Except as set forth in Part 2.8 of the Disclosure Schedule,
Company owns by operation of law or by valid assignment, or has the lawful
right and license to use pursuant to a license, all of the Intellectual
Property used in or necessary to the conduct of Company's business as
presently conducted or currently contemplated to be conducted by the Company
with respect to products available for sale by the Company as of the Closing,
and Company has not transferred ownership of, or granted any exclusive
license of or right to use such Intellectual Property, and no third party
owns or has any right to any of the Intellectual Property, including
improvements thereto.
(d) Except as set forth in Part 2.8 of the Disclosure Schedule,
from and after the Closing, the Surviving Corporation shall have the lawful
right to all of the Intellectual Property held by the Company relating to the
C-PET, the G-PET and related peripherals necessary or critical to the
operation of the C-PET and the G-PET including, without limitation, all
rights relating thereto under licenses without restriction and without
payment of any kind to any third party.
(e) Except as set forth in Part 2.8 of the Disclosure Schedule,
neither the Company nor any Seller has received any notice of any claims and
there are no pending claims, and neither the Company nor any Seller otherwise
has any knowledge of any facts or circumstances of any threatened claims, by
any Person contesting the validity, enforceability, use or ownership of any
of the Intellectual Property. Without limiting the foregoing, the Company
knows of no information,
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materials, facts, or circumstances, including any information or fact that
would constitute prior art, that would render any of the Intellectual
Property registered by the Company ("COMPANY REGISTERED INTELLECTUAL
PROPERTY") invalid or unenforceable, or would adversely affect any pending
application for any Company Registered Intellectual Property and the Company
has not misrepresented, or failed to disclose, and the Company and each
Seller have no knowledge of any misrepresentation or failure to disclose, any
fact or circumstances in any application for any Company Registered
Intellectual Property that would constitute fraud or a misrepresentation with
respect to such application or that would otherwise affect the validity or
enforceability of any Company Registered Intellectual Property.
(f) Except as set forth in Part 2.8 of the Disclosure Schedule,
neither the Company nor any Seller has received any notice of, and the
Company and the Sellers otherwise have no knowledge of, the infringement or
misappropriation by any Person of the Intellectual Property.
(g) Except as set forth in Part 2.8 of the Disclosure Schedule, to
the knowledge of Company and the Sellers, all of the Intellectual Property
used in or necessary to the conduct of Company's business as presently
conducted or currently contemplated to be conducted by the Company with
respect to products available for sale by the Company as of the Closing does
not and will not when conducted by ADAC and/or Surviving Corporation in
substantially the same manner following the Closing, infringe upon,
misappropriate, or otherwise violate any rights or interests owned or claimed
by any other Person or constitute unfair competition or trade practices under
the laws of any jurisdiction, and the Company have not received any notice
thereof. Except as set forth in Part 2.8 of the Disclosure Schedule, to the
actual knowledge of the Company and the Sellers, all of the Intellectual
Property used in the G-PET as currently designed does not and will not when
used by ADAC and/or the Surviving Corporation from and after the Closing,
infringe upon, misappropriate, or otherwise violate any rights or interests
owned or claimed by any other person or constitute unfair competition of
trade practices under the laws of any jurisdiction, and the Company and the
Sellers have not received any notice thereof.
(h) Except as set forth in Part 2.8 of the Disclosure Schedule,
none of the Patents is the subject of any reissue, reexamination,
interference, opposition or similar proceeding.
(i) Except as set forth in Part 2.8 of the Disclosure Schedule,
none of the Trademarks is the subject of any opposition, cancellation or
similar proceeding.
(j) Except as set forth in Part 2.8 of the Disclosure Schedule, the
Company has not, in connection with the operation of the business of the
Company, entered into any agreement to indemnify, reimburse, hold harmless or
provide a right of rescission to any Person against, or to guarantee or
otherwise assume or incur any obligation or liability with respect to, any
charge of infringement or misappropriation of any intellectual property.
(k) Except as set forth in Part 2.8 of the Disclosure Schedule, to
the knowledge of the Company and the Sellers, there are no third party patent
applications which, if issued, would
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materially adversely affect the right of Company to use the Patents included
in the Intellectual Property.
(l) Except as set forth in Part 2.8 of the Disclosure Schedule,
there have been no, and Company has no reason to believe that there will be
any, (a) inventorship challenges with respect to any of the Patents included
in the Intellectual Property, or (b) ownership challenges with respect to any
of the Intellectual Property developed or created by (i) employees of the
Company, or (ii) third party consultants for which the Company has, directly
or indirectly, paid to develop or create intellectual property for the
Company.
(m) Part 2.8 of the Disclosure Schedule sets forth a listing of all
arbitrations, suits, litigations or, to the knowledge of the Company and the
Sellers, other similar type of proceedings ("LITIGATION") relating to the
Intellectual Property brought by or against Company, whether or not currently
pending, during the past three years before any court, tribunal (including
the United States Patent and Trademark Office (the "PTO") or equivalent
authority anywhere in the world).
(n) To the knowledge of the Company and the Sellers, (a) none of
the confidential information relating to the Business has been used, divulged
or appropriated for the benefit of any Person other than Company or otherwise
to the detriment of Company, (b) no employee or consultant of Company has
used any other Person's trade secrets or other information that is
confidential in the course of his or her work for Company, and (c) no
employee or consultant of Company is in default under any term of any
employment contract relating to such Intellectual Property or Documentation,
any confidentiality agreement or any other contract or any restrictive
covenant relating to such Intellectual Property or Documentation, or the
development or exploitation thereof. The Company is in compliance with the
provisions of applicable Legal Requirements relating to the assignability of
inventions.
(o) Except as set forth in Part 2.8 of the Disclosure Schedule,
none of the Intellectual Property was developed by or on behalf of or using
any grants of any Governmental Body.
(p) Each item of Company Registered Intellectual Property is valid
and subsisting, and all necessary registration, maintenance and renewal fees
in connection with such Company Registered Intellectual Property have been
paid and all necessary documents and certificates in connection with such
Company Registered Intellectual Property have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purposes of maintaining
such Registered Intellectual Property Rights. Except as set forth in Part 2.8
of the Disclosure Schedule, there are no actions that must be taken by the
Company within ninety (90) days of the Closing Date, including the payment of
any registration, maintenance or renewal fees or the filing of any responses
to PTO office actions, documents, applications or certificates for the
purposes of obtaining, maintaining, perfecting or preserving or renewing any
Company Registered Intellectual Property. In each case in which the Company
has acquired Intellectual Property from any person, the Company has obtained
a valid and
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enforceable assignment sufficient to irrevocably transfer all rights in such
Intellectual Property (including the right to seek past and future damages
with respect thereto) to the Company. To the maximum extent provided for by,
and in accordance with, applicable laws and regulations, the Company has
recorded each such assignment of a Company Registered Intellectual Property
assigned to the Company with the relevant Governmental Body, including the
PTO, the U.S. Copyright Office, or their respective equivalents in any
relevant foreign jurisdiction, as the case may be. Except as set forth in
Part 2.8 of the Disclosure Schedule, the Company has not claimed a particular
status in the application for any Intellectual Property, which claim of
status was not at the time made, or which has since become, inaccurate or
false or that will no longer be true and accurate as a result of the Closing.
(q) Except as set forth in Part 2.8 of the Disclosure Schedule,
neither the Company nor any Seller knows of any outstanding decrees, orders,
judgments or settlement agreements or stipulations that restrict in any
manner the validity, enforceability, use or ownership of any of the
Intellectual Property.
(r) To the knowledge of the Company and the Sellers, there are no
contracts, licenses or agreements between the Company and any other person
with respect to the Intellectual Property under which there is any dispute
regarding the scope of such agreement, or performance under such agreement
including with respect to any payments to be made or received by the Company
thereunder.
(s) The contracts, licenses and agreements listed in Part 2.8 of
the Disclosure Schedule include all material contracts, licenses and
agreements pursuant to which any person has licensed any Intellectual
Property to the Company. The Company is not in material breach of nor has the
Company failed to perform under, any of the foregoing contracts, licenses or
agreements and, to the knowledge of the Company and the Sellers, no other
party to any such contract, license or agreement is in breach thereof or has
failed to perform thereunder.
(t) Neither this Agreement nor the transactions contemplated by
this Agreement, including the assignment to ADAC or Sub by operation of law
or otherwise of any contracts or agreements to which the Company is a party,
will result in (i) either ADAC's or the Sub's granting to any third party any
right to or with respect to any Intellectual Property owned by, or licensed
to, either of them, (ii) either ADAC or the Sub's being bound by, or subject
to, any non-compete or other restriction on the operation or scope of their
respective businesses, or (iii) the Surviving Corporation being obligated to
pay any royalties or other amounts to any third party in excess of those
payable by the Company or Sub, respectively, prior to the Closing.
2.9 CONTRACTS.
(a) Part 2.9(a) of the Disclosure Schedule identifies each Company
Contract that constitutes a "Material Contract." For purposes of this
Agreement, each of the following shall be deemed to constitute a "Material
Contract":
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(i) any Contract relating to the employment or engagement of, or
the performance of services by, any employee, consultant or independent
contractor;
(ii) any Contract relating to the acquisition, transfer, use,
development, sharing or license of any Intellectual Property;
(iii) any Contract imposing any restriction on the Company's right
or ability (A) to compete with any other person or entity, (B) to acquire any
product or other asset or any services from any other person or entity, to sell
any product or other asset to or perform any services for any other person or
entity or to transact business or deal in any other manner with any other person
or entity, or (C) to develop or distribute any technology;
(iv) any Contract creating or involving any agency relationship,
distribution arrangement or franchise relationship;
(v) any Contract relating to the acquisition, issuance or transfer
of any securities;
(vi) any Contract creating or relating to the creation of any
lien, charge, pledge or other encumbrance with respect to any asset owned or
used by the Company;
(vii) any Contract involving or incorporating any guaranty, any
pledge, any performance or completion bond, any indemnity, any right of
contribution or any surety arrangement;
(viii) any Contract creating or relating to any partnership or
joint venture or any sharing of revenues, profits, losses, costs or liabilities;
(ix) any Contract relating to the purchase or sale of any product
or other asset by or to, or the performance of any services by or for, any
Related Party;
(x) any Contract to which any Governmental Body is a party or
under which any Governmental Body has any rights or obligations (including any
subcontract or other Contract between the Company and any contractor or
subcontractor to any Governmental Body);
(xi) any Contract entered into outside the ordinary course of
business;
(xii) any Contract that has a term of more than 60 days and that
may not be terminated by the Company (without penalty) within 60 days after the
delivery of a termination notice by the Company; and
(xiii) any Contract (not otherwise identified in clauses "(i)"
through "(xii)" of this sentence) that contemplates or involves (A) the payment
or delivery of cash or other
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consideration in an amount or having a value in excess of $10,000 in the
aggregate, or (B) the performance of services having a value in excess of
$10,000 in the aggregate).
(b) The Company has delivered to ADAC accurate and complete copies
of all Material Contracts of the Company, including all amendments thereto.
Each Material Contract of the Company is valid, legal and binding on the
parties thereto and in full force and effect, and is enforceable by the
Company in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies. In addition, the following is true:
(i) the Company has not violated or breached, or committed any
default under, any Company Contract, and, to the knowledge of the Company and
the Sellers, no other Person has violated or breached, or committed any default
under, any Company Contract;
(ii) to the knowledge of the Company and the Sellers, no event has
occurred, and no circumstance or condition exists, that (with or without notice
or lapse of time or both) will, or could reasonably be expected to, (A) result
in a violation or breach of any of the provisions of any Company Contract, (B)
give any person or entity the right to declare a default or exercise a remedy
under any Company Contract, (C) give any person or entity the right to
accelerate the maturity or performance of any Company Contract, or (D) give any
person or entity the right to cancel, terminate or materially modify any Company
Contract;
(iii) the Company has obtained all necessary consents, waivers and
approvals of parties to any Contract as are required in connection with the
Merger, or as are required or advisable in order that any such Contract remain
in effect without substantial and material modification after the Merger
("CONSENTS");
(iv) the Company has not received any notice or other
communication regarding, and does not otherwise have any knowledge of, (i) any
actual or possible violation or breach of, or default under, any Company
Contract, or (ii) any actual or possible termination of any Company Contract;
and
(v) the Company has not waived any of its rights under any
Contract.
(c) No person or entity is renegotiating, or has the right to
renegotiate, any amount paid or payable to the Company under any Company
Contract or any other term or provision of any Company Contract.
(d) The Contracts identified in Part 2.9(a) of the Disclosure Schedule
collectively constitute all of the Material Contracts necessary to enable the
Company to conduct its business in the manner in which its business is
currently being conducted.
(e) The Company has not made any unexpired offer or proposal (to any
customer, prospective customer or other Person) that would result in the
Company being bound by a Contract.
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2.10 COMPLIANCE WITH LEGAL REQUIREMENTS.
The Company is, and has at all times been, in compliance in all
material respects with all applicable Legal Requirements. The Company has not
received any notice or other communication from any Governmental Body or any
other Person regarding any actual or possible violation of, or failure to comply
with, any Legal Requirement.
2.11 GOVERNMENTAL AUTHORIZATIONS; REGULATORY MATTERS; GOVERNMENT
CONSENTS; NO CONFLICTS.
(a) AUTHORIZATIONS. Part 2.11 of the Disclosure Schedule
identifies each Governmental Authorization held by the Company, and the
Company has delivered to ADAC accurate and complete copies of all
Governmental Authorizations held by the Company. The Governmental
Authorizations identified in Part 2.11 of the Disclosure Schedule
collectively constitute all Governmental Authorizations necessary to enable
the Company to conduct its business in the manner in which its business is
currently being conducted. The Governmental Authorizations held by the
Company are valid and in full force and effect and the Company is, and at all
times since the date of incorporation has been, in compliance in all material
respects with the terms and requirements of the respective Governmental
Authorizations held by it. The Company has not received any notice or other
communication from any Governmental Body or any other Person regarding (a)
any actual or possible violation of or failure to comply with any term or
requirement of any Governmental Authorization or (b) any actual or possible
revocation, withdrawal, suspension, cancellation, termination or modification
of any Governmental Authorization.
(b) REGULATORY MATTERS.
(i) The Company and the operations associated with the
manufacture of the Company's products (the "OPERATIONS") are, and the
products sold by the Company and the Operations are, in compliance in all
material respects with all current applicable laws, statutes, rules,
regulations, standards, guides or orders administered, issued or enforced by
the Food and Drug Administration (the "FDA") or any other Governmental Body
having regulatory authority or jurisdiction over the products and operations
of the Company.
(ii) The Company is, and the Operations are, in compliance
in all material respects with all applicable laws, statutes, rules,
regulations, standards, guides or orders administered, issued or enforced by
the FDA or any other Governmental Body relating to the methods and materials
used in, and the facilities and controls used for, the design, manufacture,
processing, packaging, labeling, storage and distribution of the products
manufactured by the Company and the Operations, including applicable Quality
System Regulations, which incorporate current Good Manufacturing Practice
requirements. Further, to the Company's and the Sellers' knowledge no
governmental action has been taken or is in the process of being taken that
could slow, halt or enjoin the manufacturing operations of the Company and
the Operations or subject the manufacturing operations of the Company and the
Operations to regulatory enforcement action.
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(iii) The Company or the Operations have not received from
the FDA or any other Governmental Body, and none of them has knowledge of any
facts which would furnish any reasonable basis for, any notice of adverse
findings, FDA Form 483 inspectional observations, regulatory letters, notices
of violations, warning letters, Section 305 criminal proceeding notices under
the Federal Food, Drug and Cosmetic Act or other similar communication from
the FDA or other Governmental Body, and there have been no seizures conducted
or, to the knowledge of the Company and the Sellers, threatened by the FDA or
other Governmental Body, and no recalls, market withdraws, field
notifications, notifications of misbranding or adulteration, or safety alerts
conducted, requested or, to the knowledge of the Company and the Sellers,
threatened by the FDA or other Governmental Body relating to the Company or
the Operations or to the products sold by the Company or the Operations.
(iv) Each premarket approval ("PMA") and premarket
notification ("510(K)") submission and related documents and information for
each of the products of the Company and the Operations have been filed,
approved or cleared and maintained in compliance in all material respects
with applicable federal statutes, rules, regulations, standards, guides or
orders administered or promulgated by the FDA and all other Governmental
Bodies and all preclinical and clinical studies that support approval or
clearance of products have been conducted in compliance with all applicable
current Good Laboratory and Good Clinical Practices in all material respects.
No filing or submission to the FDA or any other Governmental Body, that is
the basis for any approval or clearance, contains any material omission or
material false information. The Company has disclosed in writing to ADAC a
complete and accurate list of all products of the Company and the Operations
indicating (i) which products are commercialized, marketed or placed in
interstate commerce under an approved or cleared FDA authority (E.G., PMA,
PMA supplement, 510(k), abbreviated or special 510(k) or Investigational
Device Exemption ("IDE")) and identifying such authority, and (ii) which
products are not marketed under an approved or cleared FDA authority, and
indicating the basis upon which such products are being commercialized,
marketed or placed in interstate commerce without such authority. Such
listing also contains a complete and accurate list of all PMA applications,
PMA supplements, 510(k)s, abbreviated or special 510(k) submissions and IDE
submissions of the Company or the Operations currently pending with the FDA.
(v) The Company and the Operations are not aware of any facts
that are reasonably likely to cause (i) the non-approval or non-clearance,
denial, withdrawal, recall or require suspension or additional approvals or
clearances of any products sold or intended to be sold by the Company or the
Operations, (ii) a change in the manufacturing, marketing classification,
labeling or intended use of any such products or (iii) a termination or
suspension of marketing of any such products.
(vi) None of the products manufactured, marketed or sold by
the Company or the Operations has been recalled or subject to a field safety
notification (whether voluntarily or otherwise), and the Company and the
Operations have not received notice (whether completed or pending) of any
proceeding seeking recall, suspension or seizure of any products sold or
proposed to be sold by the Company and the Operations.
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2.12 TAX MATTERS. Except as set forth in Part 2.12 of the Disclosure
Schedule,
(a) All Tax Returns required to be filed by or on behalf of the
Company with any Governmental Body on or before the Closing Date (the "COMPANY
RETURNS") (i) have been or will be filed when due, and (ii) have been, or will
be when filed, prepared accurately and completely in all material respects in
compliance with all applicable Legal Requirements. All amounts shown on the
Company Returns to be due on or before the Closing Date have been or will be
paid on or before the Closing Date. The Company has delivered to ADAC accurate
and complete copies of all Company Returns filed since its date of
incorporation.
(b) The Balance Sheet fully accrues all actual and contingent
liabilities for Taxes with respect to all periods through the dates thereof in
accordance with GAAP consistently applied. The Company shall establish, in the
ordinary course of business and consistent with its past practices, reserves
adequate for the payment of all Taxes for the period from the Balance Sheet Date
through the Closing Date, and the Company shall disclose the dollar amount of
such reserves to ADAC on or prior to the Closing Date.
(c) To the knowledge of the Company and the Sellers, no Company
Return has ever been examined or audited by any Governmental Body, and no
such examination or audit has been proposed or scheduled by any Governmental
Body. The Company has delivered to ADAC accurate and complete copies of all
audit reports and similar documents (to which the Company has access)
relating to the Company Returns. No extension or waiver of the limitation
period applicable to any of the Company Returns has been granted (by the
Company or any other Person), and no such extension or waiver has been
requested from the Company.
(d) No claim or Legal Proceeding is pending or, to the knowledge
of the Company and the Sellers, has been threatened against or with respect
to the Company in respect of any Tax. There are no unsatisfied liabilities
for Taxes (including liabilities for interest, additions to tax and penalties
thereon and related expenses) with respect to any notice of deficiency or
similar document received by the Company. There are no liens for Taxes upon
any of the assets of the Company, except liens for current Taxes not yet due
and payable. The Company has not been, and the Company will not be, required
to include any adjustment in taxable income for any tax period (or portion
thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions or
events occurring, or accounting methods employed, prior to the Closing.
(e) No audit or other examination of any Tax Return of the
Company is presently in progress, nor has the Company been notified of any
request for such an audit or other examination.
(f) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company.
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(g) The Company is not, and has never been, a party to or bound by
a tax sharing, tax indemnity or tax allocation agreement or similar Contract
nor does the Company owe any amount under any such agreement.
(h) The Company is not, and has not been at any time, a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(i) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is accurately reflected on the Company's tax books and records.
(j) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, considered individually or
considered collectively with any other such Contracts, will, or could reasonably
be expected to, give rise directly or indirectly to the payment of any amount
that would not be deductible pursuant to Section 280G or Section 162 of the
Code.
2.13 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.13(a)(1) of the Disclosure Schedule contains a list of
all employees of the Company as of the date of this Agreement, and correctly
reflects their salaries, any other compensation payable to them (including
compensation payable pursuant to bonus, deferred compensation or commission
arrangements), their dates of employment and their positions. Part 2.13(a)(2)
of the Disclosure Schedule contains a list of all employees of the Company as
of the date of this Agreement that the Company, in its reasonable judgment,
considers to be key employees. The Company is not a party to any collective
bargaining contract or other Contract with a labor union involving any of its
employees. To the knowledge of the Company and the Sellers, no work stoppage
or labor strike against the Company is pending or threatened. The Company
does not know of any activities or proceedings of any labor union to organize
any employees. Except as set forth in Part 2.13(a)(3), there are no actions,
suits, claims, labor disputes or grievances pending, or, to the knowledge of
the Company and the Sellers, threatened, relating to any labor, safety or
discrimination matters involving any employee, including, without limitation,
charges of unfair labor practices or discrimination complaints, which, if
adversely determined, would, individually or in the aggregate, result in any
material liability to the Company. Neither the Company nor any of its
subsidiaries has engaged in any unfair labor practices within the meaning of
the National Labor Relations Act.
(b) There is no employee of the Company who is not fully available
to perform work because of disability or other leave.
(c) Each salary, bonus, deferred compensation, incentive
compensation, deferred compensation, stock purchase, stock option, severance
pay, termination pay, hospitalization, medical, insurance, supplemental
unemployment benefits, profit-sharing, pension, retirement or fringe benefit or
other employee benefit plan, program, agreement, policy or other arrangement
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(individually referred to as a "PLAN" and collectively referred to as the
"PLANS") sponsored, maintained, contributed to or required to be contributed to
by the Company for the benefit of any current or former employee of the Company
is identified on Part 2.13(c) of the Disclosure Schedule.
(d) Except as described in Part 2.13(d) of the Disclosure
Schedule, the Company does not maintain, sponsor or contribute to, and the
Company has not at any time in the past maintained, sponsored or contributed to,
any employee pension benefit plan (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), whether or not
excluded from coverage under specific Titles or Merger Subtitles of ERISA) for
the benefit of employees or former employees of the Company (a "PENSION PLAN").
The Company has no group severance, separation or salary continuation plans,
programs or arrangements that are covered under ERISA.
(e) The Company does not maintain, sponsor or contribute to any
employee welfare benefit plan (as defined in Section 3(1) of ERISA, whether
or not excluded from coverage under specific Titles or Merger Subtitles of
ERISA) for the benefit of employees or former employees of the Company (a
"WELFARE PLAN") except for those Welfare Plans described in Part 2.13(e) of
the Disclosure Schedule, none of which is a multiemployer plan (within the
meaning of Section 3(37) of ERISA).
(f) Except as disclosed in Part 2.13(f) of the Disclosure
Schedule, with respect to each Plan, the Company has delivered to ADAC:
(i) an accurate and complete copy of such Plan (including
all amendments thereto);
(ii) an accurate and complete copy of the annual report (if
required under ERISA) with respect to such Plan for each of 1997 and 1998;
(iii) an accurate and complete copy of (A) the most recent
summary plan description, together with each Summary of Material
Modifications (if required under ERISA) with respect to such Plan and (B)
each material employee communication relating to such Plan;
(iv) if such Plan is funded through a trust or any third
party funding vehicle, an accurate and complete copy of the trust or other
funding agreement (including all amendments thereto) and accurate and
complete copies of the most recent financial statements thereof;
(v) accurate and complete copies of all Contracts relating
to such Plan, including service provider agreements, insurance contracts,
minimum premium contracts, stop-loss agreements, investment management
agreements, subscription and participation agreements and recordkeeping
agreements;
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(vi) an accurate and complete copy of the most recent
determination, advisory, notification or opinion letter received from the
Internal Revenue Service with respect to such Plan (if such Plan is intended to
be qualified under Section 401(a) of the Code);
(vii) all correspondence to or from any governmental agency
relating to any Plan;
(viii) all COBRA forms and related notices;
(ix) all policies pertaining to fiduciary liability insurance
covering the fiduciaries for each Plan;
(x) all discrimination tests for each Plan for the most
recent plan year; and
(xi) all registration statements, annual reports (Form 11-K
and all attachments thereto) and prospectuses prepared in connection with
each Plan.
(g) Except as described in Part 2.13(g) of the Disclosure
Schedule, the Company is not required to be, and the Company has never been
required to be, treated as a single employer with any other Person under Section
4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the Code. The Company
has never been a member of an "affiliated service group" within the meaning of
Section 414(m) of the Code. The Company has never made a complete or partial
withdrawal from a "multiemployer plan" (as defined in Section 3(37) of ERISA)
resulting in "withdrawal liability" (as defined in Section 4201 of ERISA),
without regard to subsequent reduction or waiver of such liability under either
Section 4207 or 4208 of ERISA.
(h) The Company does not have any plan or commitment to create any
new or additional Plan or to modify or change any existing Plan (other than
to comply with applicable law).
(i) No Welfare Plan provides death, medical or health benefits
(whether or not insured) with respect to any current or former employee of the
Company after any such employee's termination of service (other than (i) benefit
coverage mandated by applicable law, including coverage provided pursuant to
Section 4980B of the Code, (ii) deferred compensation benefits accrued as
liabilities on the Balance Sheet and (iii) benefits the full cost of which are
borne by current or former employees of the Company (or their beneficiaries)).
(j) With respect to each of the Welfare Plans constituting a group
health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of Section 4980B of the Code ("COBRA") have been complied with in
all material respects.
(k) Each of the Plans has been operated and administered in
all material respects in accordance with applicable Legal Requirements,
including ERISA and the Code, and the Company has performed in all material
respects all obligations required to be performed by it under, is not in default
or violation of, and has no knowledge of any default or violation by any other
party
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to each Plan, and each Plan has been established and maintained in all
material respects in accordance with its terms and in compliance with all
applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA and the Code. This Section 2.13(k) does not apply to the
401(k) plan or to the SARSEP of UGM Laboratory.
(l) Each of the Plans intended to be qualified under Section
401(a) of the Code has received a favorable determination, advisory,
notification or opinion letter from the Internal Revenue Service, and neither
the Company nor any of the Sellers is aware of any reason why any such
determination letter should be revoked. This Section 2.13(l) does not apply to
the 401(k) plan of the Company or the SARSEP of UGM Laboratory.
(m) There are no actions, suits or claims pending, or, to the
knowledge of the Company and the Sellers, threatened or reasonably anticipated
(other than routine claims for benefits) against any Plan or against the assets
of any Plan.
(n) Each Plan can be amended, terminated or otherwise discontinued
after the Closing in accordance with its terms, without liability to ADAC,
Sub, the Company or any of its ERISA Affiliates (other than ordinary
administration expenses).
(o) There are no audits, inquiries or proceedings pending or, to
the knowledge of the Company, the Sellers or any ERISA Affiliates, threatened
by the IRS or Department of Labor with respect to any Plan.
(p) Neither the Company nor any ERISA Affiliate is subject to any
penalty or tax with respect to any Plan under Section 502(i) of ERISA or
Sections 4975 through 4980 of the Code.
(q) Neither the execution, delivery or performance of this
Agreement, nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will result in any bonus payment, golden
parachute payment, severance payment or other payment to any current or former
employee, consultant or director of the Company (whether or not under any Plan),
or materially increase the benefits payable under any Plan, result in any
acceleration of the time of payment or vesting of any such benefits or the
forgiveness of any indebtedness.
(r) The Company is in compliance with all applicable Legal
Requirements and Contracts relating to employment, employment practices,
employee compensation, wages, bonuses and terms and conditions of employment.
The Company has paid all sums due and owing all employees and independent
contractors of the Company for all periods ending on or prior to the Closing
Date or has made an appropriate reserve therefor in the Financial Statements.
(s) The Company has good labor relations, and neither the Company
nor the Sellers has any knowledge of any facts indicating that (i) the
consummation of the Merger or any of the other transactions contemplated by
this Agreement will have an adverse effect on the Company's
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labor relations or (ii) any of the Company's employees intends to terminate
his or her employment with the Company (in connection with the Merger or
otherwise).
2.14 LITIGATION AND CLAIMS.
(a) There is no examination, review, investigation, arbitration,
suit, litigation or other proceeding (a "LEGAL PROCEEDING") pending or, to
the knowledge of the Company and the Sellers, threatened by or before any
court or Governmental Body in which the Company is a party or to which any of
the business or assets of the Company is subject, nor has any third party
made any claim against the Company which could result in any such Legal
Proceeding nor, to the Company's or any Seller's knowledge, is there any
reasonable basis (ascertainable at each time this representation and warranty
is made or deemed made) for any such claim or Legal Proceeding.
(b) The Company is not a party to any decree, order or arbitration
award (or agreement entered into in any Legal Proceeding) with respect to its
properties, assets, personnel or business activities.
(c) There are no Legal Proceedings pending or, to the knowledge
of the Company or any Seller, threatened (nor any reasonable basis
(ascertainable at each time this representation and warranty is made or
deemed made) therefor known to the Company or the Sellers) involving the
prior employment of any of the Company's employees, their use in connection
with the Company's business of any information or techniques allegedly
proprietary to any of their former employers or their obligations under any
agreements with prior employers.
2.15 ENVIRONMENTAL MATTERS. The Company is and has at all times been in
compliance in all material respects with all applicable Environmental Laws. The
Company possesses all permits and other Governmental Authorizations required
under applicable Environmental Laws, and the Company is and has at all times
been in compliance in all material respects with the terms and requirements of
all such Governmental Authorizations. The Company has not received any notice or
other communication (whether from a Governmental Body, citizens group, employee
or otherwise) that alleges that the Company is not in compliance with any
Environmental Law, and, to the best of the knowledge of the Company and the
Sellers, there are no circumstances that could reasonably be expected to prevent
or interfere with the Company's compliance with any Environmental Law in the
future. To the best of the knowledge of the Company and the Sellers, no current
or prior owner of any property leased or controlled by the Company has received
any notice or other communication (whether from a Governmental Body, citizens
group, employee or otherwise) that alleges that such current or prior owner or
the Company is not or was not in compliance with any Environmental Law. All
Governmental Authorizations currently held by the Company pursuant to
Environmental Laws are identified in Part 2.15 of the Disclosure Schedule. For
purposes of this Agreement, (i) "Environmental Law" means any federal, state,
local or foreign Legal Requirement relating to pollution or protection of human
health or the environment (including ambient air, surface water, ground water,
land surface or subsurface strata), including any law or regulation relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or
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otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Materials of
Environmental Concern; and (ii) "Materials of Environmental Concern" include
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substance that is now or in the future
regulated by any Environmental Law or that is otherwise a danger to health,
reproduction or the environment.
2.16 SALE OF PRODUCTS; PERFORMANCE OF SERVICES.
(a) The Company has not incurred and is not otherwise subject to,
and to the Company's and the Sellers' knowledge the Company will not incur or
otherwise become subject to, any liability arising from (i) any product,
system, program, Intellectual Property or other asset designed, developed,
manufactured, assembled, sold, supplied, installed, repaired, licensed or
made available by the Company on or prior to the Closing Date, or (ii) any
consulting services, installation services, programming services, repair
services, maintenance services, training services, support services or other
services performed by the Company on or prior to the Closing Date.
(b) No customer or other Person has asserted or, to the knowledge
of the Company or the Sellers, threatened to assert any claim against the
Company (other than claims that have been resolved satisfactorily at no
material cost to the Company) under or based upon (i) any warranty provided
by or on behalf of the Company or (ii) any services performed by the Company.
2.17 INSURANCE. Part 2.17 of the Disclosure Schedule provides an
accurate and complete list of each insurance policy and fidelity bond
maintained by, at the expense of or for the benefit of the Company and any
claims made thereunder. The Company has delivered to ADAC accurate and
complete copies of the insurance policies and bonds maintained by, at the
expense of or for the benefit of the Company. Each of the insurance policies
and bonds maintained by, at the expense of or for the benefit of the Company
is in full force and effect. The Company has not received any notice or other
communication regarding any actual or possible (a) cancellation or
invalidation of any insurance policy, (b) refusal of any coverage or
rejection of any claim under any insurance policy or (c) material adjustment
in the amount of the premiums payable with respect to any insurance policy.
All premiums due and payable under all such policies and bonds have been paid
and the Company is otherwise in compliance with the terms of such policies
and bonds (or other policies and bonds providing substantially similar
insurance coverage).
2.18 COMPLETE COPIES OF MATERIALS. The Company has delivered to ADAC
true and complete copies of each agreement, contract, commitment or other
document (or summaries of same) that is referred to in this Agreement
(including in any exhibit or schedule hereto) or that has been requested by
ADAC or its counsel.
2.19 RELATED PARTY TRANSACTIONS. (a) No Related Party has, and no
Related Party has had, any direct or indirect interest in any asset
(including any Intellectual Property) used in or otherwise relating to the
business of the Company; (b) no Related Party is indebted to the Company; (c)
no Related Party has entered into, or has had any direct or indirect
financial interest in, any
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Material Contract, transaction or business dealing involving the Company; (d) no
Seller, officer or director of the Company is competing directly or indirectly
with the Company and, to the knowledge of the Company and the Sellers, no other
Related Party is competing directly or indirectly with the Company; and (e) to
the knowledge of the Company and the Sellers, no Related Party has any claim or
right against the Company (other than rights to receive compensation for
services performed as an employee of the Company).
2.20 FINANCIAL ADVISOR. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger or any of the other transactions contemplated
hereby based upon arrangements made by or on behalf of the Company or any of
the Sellers.
2.21 ENFORCEABILITY. The Company has the corporate power and
authority to execute, deliver and perform each of the Transactional
Agreements (as defined below) to which it is or will become a party. The
execution and delivery of the Transactional Agreements and the performance of
the Company's obligations thereunder have been duly and validly authorized by
the vote of the Board of Directors of the Company and the shareholders of the
Company. No other corporate proceeding on the part of the Company is
necessary to authorize the Company's execution and delivery of, and the
performance of the Company of its obligations under, the Transactional
Agreements. Each Seller has the full legal right and capacity to execute,
deliver and perform each of the Transactional Agreements to which each such
Seller is or will become a party. The Transactional Agreements (a) have been
(or will be) duly executed and delivered by duly authorized officers of the
Company and the Sellers, as applicable, and (b) constitute (or, when executed
by the Company and the Sellers, as applicable, will constitute) legal, valid
and binding obligations of the Company and the Sellers, enforceable against
them in accordance with their terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, moratorium or other similar laws
affecting creditors' rights generally, and (ii) general principles of equity
relating to the availability of equitable remedies. For purposes of this
Agreement, (i) "TRANSACTIONAL AGREEMENTS" means this Agreement and each of
the other agreements and documents executed in connection with or
contemplated by this Agreement; and (ii) "TRANSACTIONS" means (A) the
execution, delivery and performance of the respective Transactional
Agreements and (B) each of the transactions contemplated by or otherwise
referred to in any of the Transactional Agreements (including the Merger).
2.22 GOVERNMENTAL CONSENTS; NO CONFLICTS. There is no
requirement applicable to the Company to make any filing with, or to obtain
any permit, authorization, consent or approval of, any Governmental Body as a
condition to the lawful consummation of any of the Transactions or the
performance of or compliance with the terms of the Transactional Agreements.
Neither the execution and delivery of this Agreement by the Company, the
consummation by the Company of any of the Transactions nor the performance of
or compliance with the terms of the Transactional Agreements will
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(a) conflict with, violate or result in any breach of any
provision of the articles of incorporation or bylaws (or comparable charter
documents) of the Company;
(b) result in a breach, default (or with notice or lapse of
time or both would result in a default), event of default or violation under, or
impair the rights of the Company or alter the rights or obligations of any third
party under, or require the Company to make any material payment or become
subject to any liability to any third party under, or give rise to any right of
termination, amendment, cancellation, acceleration, repurchase, put or call
under, any of the terms, conditions or provisions of any Contract;
(c) give rise to any right of termination, amendment,
cancellation, acceleration, repurchase, put or call under any of the terms,
conditions or provisions of any Contract;
(d) result in the creation of any liens, charges or
encumbrances on any of the assets of the Company;
(e) violate any law, order, judgment, rule, regulation,
decree or ordinance to which the Company or any Seller is subject or by which
the Company or any Seller is bound;
(f) conflict with or violate any law, statute, rule,
regulation, judgment, order, writ, injunction, decree or arbitration award
applicable to the Company or any of its assets (including, without limitation,
the HSR Act, together with all rules and regulations promulgated thereunder); or
(g) require the consent of any third party, except as set
forth on Schedule 3.3(e).
2.23 FULL DISCLOSURE. None of the representations or warranties
made by the Company or the Sellers, nor any document, written information,
statement, financial statement, certificate, schedule or exhibit prepared or
furnished by the Company, the Sellers or their representatives pursuant to
this Agreement or in connection with the transactions contemplated hereby, or
furnished in or in connection with any materials provided to shareholders in
connection with the approval of this Agreement and the transactions
contemplated hereby, contains or will contain at the Effective Time, any
untrue statement of a material fact, or omits or will omit at the Effective
Time to state any material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which
made, not misleading. There is no event, fact or condition that has resulted
in having, or to the actual knowledge of the Company and the Sellers would
reasonably be expected to have, a Material Adverse Effect that has not been
set forth in this Agreement. Any and all financial projections provided by
the Company to ADAC represent the Company's and the Sellers' reasonable best
estimate of the matters addressed therein and were prepared in good faith
based on reasonable assumptions, and to the best knowledge of the Company and
the Sellers, there is no event, fact or condition that renders any such
projections materially inaccurate.
2.24 HSR ACT
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(a) The Company is its own Ultimate Parent Entity (as defined
under the HSR Act, together with all rules and regulations promulgated
thereunder).
(b) The Company does not have ten million dollars
(U.S.$10,000,000) or more in total assets or ten million dollars
(U.S.$10,000,000) or more in total revenues as stated on its most recent
regularly prepared financial statements.
2.25 YEAR 2000. To the extent any of the Company's products
(including products currently under development) will record, store, process,
calculate and present calendar dates, and with respect to the operation of
parts of such products provided or to be provided by third party suppliers,
based upon reasonably diligent inquiries of such suppliers, to the knowledge
of the Sellers and to the knowledge of the Company upon reasonable and
diligent inquiry, all such products will record, store, process, calculate
and present calendar dates falling on and after (and if applicable, spans of
time including) January 1, 2000, and will calculate any information dependent
on or relating to such dates in the same manner, and with the same
functionality, data integrity and performance, as such products record,
store, process, calculate and present calendar dates on or before December
31, 1999, or calculate any information dependent on or relating to such
dates. To the knowledge of the Sellers and to the knowledge of the Company
upon reasonable and diligent inquiry, all of such products will lose no
functionality with respect to the introduction of records containing dates
falling on or after January 1, 2000.
3. REPRESENTATIONS AND WARRANTIES OF ADAC AND SUB
ADAC and Sub represent and warrant to the Company and the Sellers as
follows:
3.1 AUTHORITY; BINDING NATURE OF AGREEMENT. Each of ADAC and
Sub has the corporate power and authority to perform its obligations under
this Agreement. This Agreement has been duly and validly authorized by the
Board of Directors of each of ADAC and Sub. No vote of ADAC's stockholders is
needed to approve the Merger. This Agreement constitutes the legal, valid and
binding obligation of each of ADAC and Sub, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
(i) bankruptcy, insolvency, moratorium or other similar laws affecting
creditors' rights generally, and (ii) general principles of equity relating
to the availability of equitable remedies.
3.2 FINANCIAL ADVISOR. ADAC represents and warrants that no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger or any of the other
Transactions based upon arrangements made by or on behalf of ADAC.
4. CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; ADDITIONAL AGREEMENTS
4.1 INFORMATION AND ACCESS.
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(a) During the period from the date of this Agreement through
the Effective Time (the "PRE-CLOSING PERIOD"):
(i) the Company shall afford, and shall cause its
outside accountants, counsel and other advisors and representatives
(collectively, "REPRESENTATIVES") to afford, to ADAC and to ADAC's
Representatives, reasonable access upon reasonable notice during normal
business hours to the properties, books, records (including filed Tax
Returns, Tax Returns in preparation and the audit work papers and other
records of the independent auditors of the Company) and personnel of the
Company in order that ADAC and ADAC's Representatives may have a full
opportunity to make such investigation as ADAC reasonably desires to make of
the Company;
(ii) the Company shall permit ADAC and ADAC's
Representatives to make such reasonable inspections upon reasonable notice
during normal business hours of the Company and its operations as ADAC may
reasonably require from time to time; and
(iii) the Company shall furnish ADAC and ADAC's
Representatives with, and shall cause the Company's Representatives to
furnish ADAC with, such financial and operating data and other information
with respect to the business and properties of the Company as ADAC or ADAC's
Representatives may reasonably request from time to time.
(b) Without limiting the generality of Section 4.1(a),
during the Pre-Closing Period, the Company shall promptly provide ADAC with
copies of:
(i) all operating and financial reports prepared by the
Company for its senior management, including copies of the unaudited monthly
balance sheets of the Company and the related unaudited statements of
operations;
(ii) any written materials or written communications
sent by the Company to its shareholders generally in connection with their
status as such; and
(iii) any notice, report or other document filed with
or sent to any Governmental Authority in connection with any of the
Transactions.
(c) No investigation by ADAC or any of its Representatives
pursuant to this Section 4.1 shall limit or otherwise affect any
representation or warranty of the Company or the Sellers or any condition to
any obligation of ADAC.
4.2 CONDUCT OF BUSINESS OF THE COMPANY.
(a) Except as provided in Section 4.2(b) to the contrary,
during the Pre-Closing Period, the Company shall (i) conduct its business in the
ordinary and usual course consistent with past practice and (ii) use
commercially reasonable efforts to maintain and preserve intact its business
organization, to keep available the services of its officers and employees and
to maintain satisfactory
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relations with lessors, suppliers, contractors, distributors, customers and
others having business relationships with the Company.
(b) During the Pre-Closing Period,
(i) the Company shall keep in full force all insurance
policies identified in Part 2.17 of the Disclosure Schedule;
(ii) the Company shall (to the extent requested by
ADAC) cause its officers to report regularly (but in no event less frequently
than weekly) to ADAC concerning the status of the Company's business;
(iii) the Company shall not declare, accrue, set aside
or pay any dividend or make any other distribution in respect of any shares
of capital stock, and shall not repurchase, redeem or otherwise reacquire any
shares of capital stock or other securities;
(iv) the Company shall not sell, issue or authorize the
issuance of (A) any capital stock or other security, (B) any option, call,
warrant or right to acquire, or relating to, any capital stock or other
security, or (C) any instrument convertible into or exchangeable or
exercisable for any capital stock or other security;
(v) neither the Company nor any of the Sellers shall
amend or permit the adoption of any amendment to or restatement of the
Company's articles of incorporation or bylaws, or effect or permit the
Company to become a party to any Acquisition Transaction, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(vi) the Company shall not form any subsidiary or
acquire any equity interest or other interest in any other entity;
(vii) the Company shall not make any capital
expenditure, except for capital expenditures that, when added to all other
capital expenditures made on behalf of the Company during the Pre-Closing
Period, do not exceed $10,000 in the aggregate;
(viii) the Company shall not (i) enter into or become
bound by, or permit any of the assets owned or used by it to become bound by,
any Material Contract or (ii) amend or prematurely terminate, or waive any
material right or remedy under, any Material Contract;
(ix) the Company shall not (A) acquire or enter into or
commence any lease or license for any right or other asset from or with any
other Person, (B) sell or otherwise dispose of, or enter into or commence any
lease or license, for any right or other asset to any other Person, or (C)
waive or relinquish any right, except for immaterial rights acquired, leased,
licensed or disposed of by the Company pursuant to Contracts that are not
Material Contracts;
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(x) the Company shall not lend money to any person or
entity, or incur or guarantee any indebtedness;
(xi) the Company shall not (A) establish, adopt or
amend any Employee Benefit Plan, except (1) for the termination of its 401(k)
plan and/or SARSEP immediately prior to Closing and (2) as required by law or
an applicable government agency, (B) pay any bonus or make any profit-sharing
or similar payment to increase the amount of the wages, salary, commissions,
fringe benefits or other compensation or remuneration payable to, any of its
directors, officers, consultants or employees, or (C) hire any new employees.
(xii) the Company shall not change any of its methods
of accounting or accounting practices in any respect;
(xiii) the Company shall not make any Tax election;
(xiv) the Company shall not commence or settle or make
any offer of settlement with respect to any Legal Proceeding;
(xv) the Company shall not enter into any material
transaction or take any other material action outside the ordinary course of
business or inconsistent with its past practices;
(xvi) the Company shall not pledge any of its assets or
otherwise permit any of its assets to become subject to any lien, pledge,
charge or other encumbrance, except for pledges of immaterial assets made in
the ordinary course of business and consistent with the Company's past
practices; and
(xvii) the Company shall not agree or commit to take
any of the actions described in clauses "(iii)" through "(xvi)" of this
Section 4.2.
4.3 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, the Company and each
Seller, through the Sellers' Representative, as applicable, shall promptly
notify ADAC in writing of:
(i) the discovery by the Company or a Seller of any
event, condition, fact or circumstance that occurred or existed on or prior
to the date of this Agreement and that caused or constitutes an inaccuracy in
or breach of any representation or warranty made by the Company or the
Sellers in this Agreement;
(ii) any event, condition, fact or circumstance known,
or that becomes known, to the Company or any Seller that occurs, arises or
exists after the date of this Agreement and that would cause or constitute an
inaccuracy in or breach of any representation or warranty made by the Company
or the Sellers in this Agreement if (A) such representation or warranty had
been made as of the time of the occurrence, existence or discovery of such
event, condition, fact or
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circumstance or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement;
(iii) any breach of any covenant or obligation of the
Company or the Sellers; and
(iv) any event, condition, fact or circumstance known,
or that becomes known, to the Company or any Seller that would make the
timely satisfaction of any of the conditions set forth in Article 5 or
Article 6 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is
required to be disclosed pursuant to Section 4.3(a) requires any change in the
Disclosure Schedule, or if any such event, condition, fact or circumstance would
require such a change assuming the Disclosure Schedule were dated as of the date
of the occurrence, existence or discovery of such event, condition, fact or
circumstance, then the Company shall promptly deliver to ADAC an update to the
Disclosure Schedule specifying such change. No such update shall be deemed to
supplement or amend the Disclosure Schedule for the purpose of (i) determining
the accuracy of any of the representations and warranties made by the Company or
the Sellers in this Agreement, or (ii) determining whether any of the conditions
set forth in Article 6 has been satisfied.
4.4 FIRPTA COMPLIANCE. On the Closing Date, the Company shall
deliver to ADAC a properly executed statement in a form reasonably acceptable
to ADAC for purposes of satisfying ADAC's obligations under Treasury
Regulation Section 1.1445-2(c)(3).
4.5 NEGOTIATION WITH OTHERS.
(a) During the Pre-Closing Period, the Company shall not, and
it shall cause its officers, directors or employees not to, directly or
indirectly, (i) solicit, initiate, encourage or induce the making of any
Acquisition Transaction, (ii) furnish information regarding the Company in
connection with an Acquisition Proposal or potential Acquisition Transaction,
(iii) negotiate or engage in discussions with any third party with respect to
any Acquisition Transaction, (iv) approve, endorse or recommend any Acquisition
Transaction or (v) enter into any letter of intent, contract or other instrument
related directly or indirectly to any Acquisition Transaction or contracts with
advisors or consultants.
(b) During the Pre-Closing Period, the Sellers shall not,
directly or indirectly, (i) solicit, initiate, encourage or induce the making of
any Acquisition Transaction, (ii) furnish information regarding the Company in
connection with an Acquisition Transaction or potential Acquisition Transaction,
(iii) negotiate or engage in discussions with any third party with respect to
any Acquisition Transaction, (iv) approve, endorse or recommend any Acquisition
Transaction or (v) enter into any letter of intent, contract or other instrument
related directly or indirectly to any Acquisition Transaction or contracts with
advisors or consultants.
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(c) The Company and the Sellers shall immediately cease and
cause to be terminated any discussions or negotiations with any parties existing
as of the date of this Agreement and that relate to any Acquisition Transaction.
4.6 REGULATORY APPROVALS.
(a) The Company and ADAC shall use commercially reasonable
efforts to file as soon as practicable after the date of this Agreement all
notices, reports and other documents required by law to be filed with any
Governmental Body with respect to the Merger and the other Transactions and to
submit promptly any additional information requested by any such Governmental
Body.
(b) The Company and ADAC shall (i) give each other prompt
notice of the commencement of any Legal Proceeding by or before any court or
Governmental Body with respect to the Merger or any of the other Transactions,
(ii) keep each other informed as to the status of any such Legal Proceeding and
(iii) except as may be prohibited by any Governmental Body or by any law or
court order or decree, permit the other party to be present at each meeting or
conference relating to any such Legal Proceeding and to have access to and be
consulted in connection with any document filed or provided to any Governmental
Body in connection with any such Legal Proceeding.
4.7 ADDITIONAL AGREEMENTS. The Company, ADAC, Gerd Muehllehner
and Ursula Muehllehner agree to use commercially reasonable efforts to take,
or cause to be taken, all actions necessary to consummate the Merger and make
effective the other Transactions. Without limiting the generality of the
foregoing, the Company, ADAC, Gerd Muehllehner and Ursula Muehllehner shall
use all commercially reasonable efforts to (i) obtain the consent and
approval of each Governmental Body, lessor or other person whose consent or
approval is required (by virtue of any contractual provision or Legal
Requirement or otherwise) in order to permit the consummation of the Merger
or any of the other Transactions or in order to enable the Surviving
Corporation to conduct its business in the manner in which such business is
currently being conducted or is proposed to be conducted, (ii) effect all
registrations and filings necessary to consummate the Merger (including,
without limitation, any registration or filing required under the HSR Act)
and (iii) lift any restraint, injunction or other legal bar to the Merger.
4.8 COMPANY SHAREHOLDER APPROVAL. The Company shall, in
accordance with its articles of incorporation and bylaws and the applicable
requirements of the PGCL, seek the approval of its shareholders as promptly
as practicable to the Merger, the Plan of Merger and related articles of
merger and this Agreement. The Shareholders shall cause all shares of the
capital stock of the Company that are owned, beneficially or of record, by
the Shareholders on the record date for the Company Shareholders' Meeting to
be voted in favor of the Merger and this Agreement. The Shareholders agree to
execute all documents and take all actions they deem necessary or advisable
to effect the foregoing.
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4.9 PUBLIC ANNOUNCEMENTS.
(a) During the Pre-Closing Period, neither the Company nor the
Sellers shall (and the Company shall not permit any of its representatives to)
issue any press release or make any public statement regarding this Agreement or
the Merger, or regarding any of the other transactions contemplated by this
Agreement, without ADAC's prior written consent.
(b) During the Pre-Closing Period, ADAC will consult with the
Company prior to issuing any press release or making any public statement
regarding the Merger (unless ADAC reasonably determines that ADAC is required,
by virtue of any applicable Legal Requirement, to issue any such press release
or make any such public statement under circumstances that make it infeasible or
impractical to consult with the Company).
4.10 TAXES.
(a) The Company shall timely file all federal and state income
tax returns for taxable periods ending on or prior to the Effective Time and has
paid or will pay all Taxes attributable to such periods. Such returns shall be
prepared and filed in accordance with applicable law and in a manner consistent
with past practices and shall be subject to review and approval by ADAC. After
the Effective Time, ADAC and the Sellers shall make available to the other, as
reasonably requested, all information, records or documents relating to
liability for Taxes for all periods prior to or including the Effective Time and
will preserve such information, records or documents until the expiration of any
applicable statutes of limitations.
(b) The Sellers shall timely pay all transfer, documentary,
sales, use, stamp, registration and other Taxes and fees arising from or
relating to the Merger and the transactions contemplated by this Agreement, and
the Sellers shall, at their own expense, file all necessary tax returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration and other Taxes and fees. If required by applicable law,
ADAC and the Company shall join in the execution of any such tax returns and
other documentation.
4.11 EMPLOYMENT AGREEMENTS. Each of Gerd Muehllehner, Ursula
Muehllehner and Michael Geagan shall reasonably negotiate and enter an
employment agreement with ADAC substantially in the form of EXHIBIT C (for
Gerd Muehllehner), EXHIBIT D (for Ursula Muehllehner) and EXHIBIT E (for
Michael Geagan). Joel Karp shall reasonably negotiate and enter a consulting
agreement with ADAC in the form of EXHIBIT F.
4.12 EMPLOYEE PLANS. ADAC shall (i) procure that any
pre-existing condition requirements or waiting period requirements under its
employee benefit plans are waived with respect to employees that are
participants in the employee benefit plans of the Company immediately prior
to the Closing, (ii) procure that all employees who continue their employment
with the Surviving Corporation ("TRANSFERRED EMPLOYEES") and who were
participants in the employee benefit plans of the Company immediately prior
to the Closing receive credit for previous service for
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purposes of eligibility to participate and vesting under the Surviving
Corporation's employee benefit plans, and (iii) credit each Transferred
Employee with all accrued sick days and vacation days to the extent such sick
day and vacation day accruals are included on the Balance Sheet.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF ADAC AND SUB
The obligations of ADAC and Sub to effect the Merger and to otherwise
consummate the transactions contemplated hereby are subject to the fulfillment
at or prior to the Closing of each of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES ACCURATE. The
representations and warranties of the Company and the Sellers contained in
this Agreement and in each of the other instruments and documents delivered
to ADAC or Sub in connection with the transactions contemplated hereby shall
have been accurate in all material respects as of the date of this Agreement
and as of the Closing Date as if made on and as of the Closing Date.
5.2 COMPLIANCE WITH COVENANTS. The Company and the Sellers
shall have complied with and performed in all material respects each covenant
contained in this Agreement that is required to be performed by them on or
prior to the Closing Date.
5.3 SHAREHOLDER APPROVAL. The terms of the Merger, the Plan of
Merger and related articles of merger, this Agreement and the transactions
contemplated hereby shall have been duly approved by the affirmative vote of
at least 90% of the shares of Company Common Stock entitled to vote with
respect thereto (or such higher vote as may be required under the PGCL to
approve the terms of the Merger, the Plan of Merger and related articles of
merger, this Agreement and the transactions contemplated hereby).
5.4 CONSENTS. All consents required to be obtained in
connection with the Merger and the other transactions contemplated by this
Agreement (including the Consents identified in Parts 2.9 and 2.22 of the
Disclosure Schedule) shall have been obtained and shall be in full force and
effect.
5.5 AGREEMENTS AND DOCUMENTS. ADAC and Sub shall have received
the following agreements and documents, each of which shall be in full force
and effect:
(a) a legal opinion of Morgan Lewis & Bockius LLP, dated as of
the Closing Date, in form and substance satisfactory to ADAC's Representatives;
(b) certificates executed by each of the Company and the
Sellers certifying that each of the representations and warranties set forth in
Article 2 is accurate in all material respects as of the date of this Agreement
and as of the Closing Date as if made on the Closing Date and that the
conditions set forth in Sections 5.1, 5.2, 5.3, 5.4, 5.7 and 5.12 have been duly
satisfied (the "CLOSING CERTIFICATE");
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(c) a certificate (the "CLOSING FINANCIAL CERTIFICATE") executed by
the Company and the Sellers' Representative certifying the net worth of the
Company, calculated in accordance with GAAP consistently applied, and as
modified in accordance with Schedule II, as of the Closing Date (the
"CERTIFIED CLOSING NET WORTH"); and
(d) certificates executed by each of the Shareholders certifying that
each Shareholder has the due and valid authority to vote his or her shares
and that there are no voting trusts or other voting agreements with respect
to any of such Shareholder's shares of Company Common Stock.
5.6 EMPLOYEES. None of the employees of the Company listed in Part
2.13(a)(2) of the Disclosure Schedule shall have ceased to be employed by, or
expressed an intention to terminate his or her employment with, the Company.
5.7 NO MATERIAL ADVERSE EFFECT. There shall have occurred no Material
Adverse Effect.
5.8 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
5.9 NO LEGAL PROCEEDINGS. No person shall have commenced or, to the
knowledge of the Company, the Sellers or ADAC, threatened to commence any Legal
Proceeding challenging or seeking the recovery of a material amount of damages
in connection with the Merger or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with the Merger or any of the
other transactions contemplated by this Agreement.
5.10 CONFIDENTIALITY AND NONDISCLOSURE AGREEMENTS. Each employee of the
Company and each consultant to the Company, as of the date of the Closing, shall
have executed and delivered to the Company a Nondisclosure and Inventions
Agreement in the form previously supplied by ADAC to the Company.
5.11 DISSENTERS. No holder of Company Common Stock shall have exercised
dissenters' rights with respect to the transactions contemplated hereby.
5.12 NET WORTH OF THE COMPANY. The net worth of the Company, calculated in
accordance with GAAP consistently applied, and as modified in accordance with
Schedule II, at the Closing shall be no less than ONE MILLION SEVEN HUNDRED
THOUSAND DOLLARS (U.S.$1,700,000). The parties acknowledge and agree that for
purposes of determining the net worth of the Company under this Agreement, net
worth shall not reflect any increase in intangible assets (including without
limitation goodwill, franchises and intellectual property) accounted for after
December 31, 1998.
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5.13 GOVERNMENTAL AND REGULATORY APPROVALS. Each governmental,
regulatory or third party consent, permit, authorization, approval or filing
required to be obtained, made or received shall have been obtained, made or
received, as applicable, and all such consents, permits, authorizations,
approvals and filings shall be in full force and effect. Any waiting period
applicable to the consummation of the Merger, including under the HSR Act,
shall have expired or been terminated, and no action by the Department of
Justice or Federal Trade Commission challenging or seeking to enjoin the
consummation of the transactions contemplated hereby shall be pending.
5.14 EMPLOYMENT AND NONCOMPETE AGREEMENTS. Each of Gerd Muehllehner, Ursula
Muehllehner and Michael Geagan shall have entered respective employment
agreements with ADAC substantially in the form of EXHIBIT C (for Gerd
Muehllehner), EXHIBIT D (for Ursula Muehllehner) and EXHIBIT E (for Michael
Geagan). Joel Karp shall have entered a consulting agreement with ADAC
substantially in the form of EXHIBIT F. Richard Freifelder shall have entered
into a noncompete agreement substantially in the form of EXHIBIT G.
5.15 CLOSING OF UGM LABORATORY, INC. Acquisition. The conditions precedent
contained in the UGM Laboratory Agreement, other than any condition relating to
the satisfaction and fulfillment of the conditions precedent to the transactions
contemplated by this Agreement, shall have been satisfied and fulfilled.
5.16 CORPORATE DOCUMENTS. ADAC shall have received (a) a copy of the
Articles of Incorporation of the Company certified by an appropriate authority
in the state of its incorporation and (b) a copy of the Bylaws of the Company
certified by the Secretary of the Company, and such documents shall be in form
and substance reasonably satisfactory to ADAC.
5.17 TERMINATION OF 40L(k) PLAN AND SIMPLIFIED EMPLOYEE PENSION PLAN. The
Company and its ERISA Affiliates, as applicable, each agrees to terminate its
401(k) plan and/or its SARSEP immediately prior to Closing. The Company shall
provide ADAC with evidence satisfactory to ADAC that the Company's and each
ERISA Affiliate's (as applicable) 401(k) plan and/or SARSEP has been terminated
pursuant to resolutions of each such entity's Board of Directors (the form and
substance of which resolutions shall be subject to review and approval of ADAC),
effective as of the day immediately preceding the Closing.
5.18 ESCROW AGREEMENT. Each of the Sellers, ADAC and the Escrow Agent shall
have entered into the Escrow Agreement.
5.19 ASSIGNMENTS. The Company shall have obtained, and delivered to
ADAC, an assignment, substantially in the form attached hereto as EXHIBIT H,
from each consultant to the Company that has developed Intellectual Property
in his or her capacity as a consultant to the Company.
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6. CONDITIONS PRECEDENT TO THE COMPANY'S AND THE SELLERS' OBLIGATIONS
The obligations of the Company and the Sellers to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are subject
to the fulfillment, at or prior to the Closing, of the following conditions:
6.1 REPRESENTATIONS AND WARRANTIES ACCURATE. The representations and
warranties of ADAC and Sub contained in this Agreement and in each of the other
instruments and documents delivered to the Company and the Sellers'
Representative in connection with the transactions contemplated hereby shall
have been accurate in all material respects as of the date of this Agreement and
as of the Closing Date as if made on and as of the Closing Date.
6.2 COMPLIANCE WITH COVENANTS. ADAC and Sub shall have complied with and
performed in all material respects each covenant contained in this Agreement
that is required to be performed by ADAC or Sub, as the case may be, on or prior
to the Closing Date.
6.3 CERTIFICATE. ADAC shall have delivered to the Company and the Sellers'
Representative a certificate of an executive officer of ADAC evidencing
compliance with the conditions set forth in Sections 6.1 and 6.2.
6.4 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.5 ESCROW AGREEMENT. Each of the Sellers, ADAC and the Escrow Agent shall
have entered into the Escrow Agreement.
6.6 ESCROW FUND. ADAC shall have delivered the Escrow Amount upon Closing
to the Escrow Agent pursuant to the terms of the Escrow Agreement.
6.7 SHAREHOLDER APPROVAL. The terms of the Merger, the Plan of Merger
and related Articles of Merger, this Agreement and the transactions contemplated
hereby shall have been duly approved by the requisite vote of the shares of
Company Common Stock entitled to vote with respect thereto.
7. TERMINATION OF AGREEMENT
7.1 TERMINATION. This Agreement may be terminated prior to the Effective
Time:
(a) by mutual written consent of the respective Boards of Directors
of ADAC and the Company;
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(b) by either ADAC or the Company if the Merger shall not have
been consummated by October 31, 1999 (unless the failure to consummate the
Merger is attributable to a failure on the part of the party seeking to
terminate this Agreement to perform any material obligation required to be
performed by such party at or prior to the Effective Time);
(c) by either ADAC or the Company if a court of competent
jurisdiction or Governmental Authority shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger;
(d) by ADAC if any of the Company's or the Sellers'
representations and warranties contained in this Agreement shall be or shall
have become inaccurate in any material respect, or if any of the Company's or
the Sellers' covenants contained in this Agreement shall have been breached in
any material respect; PROVIDED, HOWEVER, that if an inaccuracy in the Company's
and the Sellers' representations and warranties or a breach of a covenant by the
Company or the Sellers is curable by the Company, the Company and the Sellers
shall have five (5) Business Days to cure such breach following notice of such
breach; or
(e) by the Company if any of ADAC's representations and
warranties contained in this Agreement shall be or shall have become inaccurate
in any material respect as of the date of this Agreement, or if any of ADAC's
covenants contained in this Agreement shall have been breached in any material
respect; PROVIDED, HOWEVER, that if an inaccuracy in ADAC's representations and
warranties or a breach of a covenant by ADAC is curable by ADAC, ADAC shall have
five (5) Business Days to cure such breach following notice of such breach.
7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 7.1, this Agreement shall be of no further
force or effect; PROVIDED, HOWEVER, that (i) this Section 7.2, Section 7.3,
Section 8 and Section 9.9 shall survive the termination of this Agreement and
shall remain in full force and effect and (ii) the termination of this Agreement
shall not relieve any party from any liability for any intentional breach of
this Agreement.
7.3 FEES AND EXPENSES. Each of ADAC, Sub, the Company and the Sellers
shall bear its own expenses in connection with the preparation, negotiation,
execution and performance of the Merger, the Transactions and the
Transactional Agreements.
8. INDEMNITY AND ESCROW
8.1 AGREEMENT TO INDEMNIFY.
(a) Subject to the limitations in Section 8.2, each Seller (as
defined in Section 9.10(q) below) hereby Severally (as defined in Section 9.10)
covenants and agrees to indemnify, defend, protect and hold harmless ADAC and
its affiliates (including Sub, the Surviving Corporation, UGM Labs Sub and the
Surviving Corporation under the UGM Laboratory
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Agreement), and each of their respective officers, directors, employees,
agents, shareholders, successors and assigns (collectively, the "INDEMNIFIED
PERSONS"), from, against and in respect of all claims, losses, liabilities,
damages, punitive damages, causes of action, lawsuits, administrative
proceedings (including informal proceedings), investigations, audits,
demands, assessments, adjustments, judgments, settlement payments,
deficiencies, penalties, fines, interest (including interest from the date of
such damages) and costs and expenses (including without limitation reasonable
attorneys' fees, expenses of investigation and disbursements of every kind,
nature and description) (each a "LOSS" and collectively, "LOSSES") suffered,
sustained, incurred or paid by any of them in connection with, resulting from
or arising out of, directly or indirectly, (i) any inaccuracy or breach of a
representation or warranty of the Company or the Sellers set forth in this
Agreement or any inaccuracy or breach of a representation or warranty of UGM
Laboratory in the UGM Laboratory Agreement and each of the other instruments
and documents delivered by the Company, the Sellers, UGM Laboratory and the
shareholders of UGM Laboratory in connection with the Transaction and the UGM
Laboratory Transaction, as applicable, (ii) any failure of the Company or the
Sellers to perform or comply with any covenant or agreement contained in this
Agreement or in any other Transactional Agreement to be complied with by them
and any failure of UGM Laboratory or the shareholders of UGM Laboratory to
perform or comply with any covenant or agreement contained in the UGM
Laboratory Agreement or in any other UGM Laboratory Transactional Agreement
to be complied with by them, (iii) the business, operations or assets of the
Company and UGM Laboratory on or prior to the Closing Date, including without
limitation all due and payable prior to the Closing Date, except as otherwise
disclosed and provided for in the Balance Sheet (with respect to the Company)
and the Balance Sheet, as defined in the UGM Laboratory Agreement (with
respect to UGM Laboratory); (iv) the actions or omissions of the Company's
and/or UGM Laboratory's directors, officers, shareholders, employees or
agents on or prior to the Closing Date; (v) the matters disclosed in Part 2.5
(Absence of Certain Changes or Events), Part 2.11 (Government Authorizations;
Regulatory Matters; Government Consents; Conflicts), Part 2.12 (Tax Matters),
Part 2.14 (Litigation and Claims) and Part 2.15 (Environmental Matters) of
the Disclosure Schedule and the comparable Parts of the Disclosure Schedule
for the UGM Laboratory Agreement, and fines, penalties, taxes and other
Losses relating to, arising under or caused by the 401(k) plan and/or SARSEP
for each of the Company and UGM Laboratory (to the extent such amount exceeds
the amounts accrued for such liability on the balance sheets of the Company
and UGM Laboratory (PROVIDED that such accrued amounts shall not exceed an
aggregate of U.S.$150,000)) or (vi) any and all Losses incident to any of the
foregoing or to the enforcement of this Section 8.1(a).
(b) Subject to the limitations in Section 8.2, ADAC covenants
and agrees to indemnify, defend and hold harmless the Sellers and the
shareholders of UGM Laboratory from and against any and all Losses sustained or
incurred by the Sellers and the shareholders of UGM Laboratory, as the case may
be, in connection with, resulting from or arising out of (i) any inaccuracy or
breach of a representation or warranty of ADAC and Sub set forth in this
Agreement or any inaccuracy or breach of a representation or warranty of ADAC or
UGM Labs Sub in connection with the UGM Laboratory Transaction and each of the
other instruments and documents delivered by ADAC, Sub and UGM Labs Sub in
connection with the Transaction and the UGM
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Laboratory Transaction, as applicable, or (ii) any failure of ADAC or Sub to
perform or comply with any covenant or agreement contained in this Agreement
or in any other Transactional Agreement to be complied with by them or the
failure of ADAC or UGM Labs Sub to perform or comply with any covenant or
agreement contained in the UGM Laboratory Agreement or in any other UGM
Laboratory Transactional Agreement.
8.2 LIMITATION AND EXPIRATION. Notwithstanding Section 8.1,
(a) There shall be no liability for indemnification under
Section 8.1(a) unless and until the aggregate amount of Losses specified in
Section 8.1(a) of this Agreement exceed TWENTY-FIVE THOUSAND DOLLARS
(U.S.$25,000) (the "UGM INDEMNIFICATION THRESHOLD"), after which the liability
for indemnification under Section 8.1(a) shall be for the full amount of all
Losses (without regard to the UGM Indemnification Threshold); PROVIDED, HOWEVER,
that the UGM Indemnification Threshold shall not apply to adjustments to
Aggregate Consideration as set forth in Section 1.6 and Section 1.7. There shall
be no liability for indemnification under Section 8.1(b) unless and until the
aggregate amount of Losses specified in Section 8.1(b) of this Agreement exceed
TWENTY-FIVE THOUSAND DOLLARS (U.S.$25,000) (the "ADAC INDEMNIFICATION
THRESHOLD"), after which the liability for indemnification under Section 8.1(b)
shall be for the full amount of all Losses (without regard to the ADAC
Indemnification Threshold).
(b) Subject to Section 8.2(c), the indemnification obligations
under this Article 8, or under any certificate or writing furnished in
connection herewith, shall terminate at the date that is the later of clause (i)
or (ii) of this Section 8.2(b):
(i) (A) except as to representations, warranties, agreements
and covenants specified in clause (i)(B) of this Section 8.2(b), the second
anniversary of the Closing Date, or
(B) with respect to representations and warranties
contained in Section 2.3 (Capitalization), Section 2.8 (Intellectual
Property), Section 2.12 (Tax Matters), Section 2.13 (Employee and Labor
Matters; Benefit Plans) and Section 2.15 (Environmental Matters) and the
comparable sections under the UGM Laboratory Agreement, and indemnification
pursuant to clauses (ii), (iii), (iv), (v) and (vi) of Section 8.1(a) (only
as such incidental Losses under clause (vi) relate to the representations and
warranties specified in this clause (B)), the date that is the later of (1)
the date ADAC no longer has an obligation to pay Contingent Merger Amounts
(including with respect to Net Unit Revenues relating to installment sales)
pursuant to Section 1.8 nor Contingent Payment Amounts pursuant to the Gerd
Employment Agreement and (2) the second anniversary of the Closing Date; or
(ii) the date of the final resolution of claims or demands
pending as of the relevant dates described in clause (i) of this Section
8.2(b) ("PENDING CLAIMS").
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(c) The aggregate amount of Sellers' liability under this
Article 8 shall not exceed the sum of (w) FOUR MILLION DOLLARS (U.S.$4,000,000)
(the "BASE INDEMNITY AMOUNT") PLUS (x) at any given time and from time to time,
twenty-five percent (25%) of the aggregate accrued and unpaid Contingent Merger
Amount PLUS (y) at any given time and from time to time, twenty-five percent
(25%) of the aggregate accrued and unpaid Contingent Payment Amounts payable
under the Gerd Employment Agreement (as defined in Section 9.10) PLUS (z) the
aggregate amount of any reduction or adjustment to the Aggregate Consideration
pursuant to Section 1.6(b) or 1.7 (the sum of clauses (w), (x), (y) and (z)
being the "UGM INDEMNITY MAXIMUM"); PROVIDED that after the first anniversary of
the Closing Date to and including the second anniversary of the Closing Date,
the Base Indemnity Amount shall be decreased to TWO MILLION TWO HUNDRED THOUSAND
DOLLARS (U.S.$2,200,000) for purposes of determining the UGM Indemnity Maximum;
PROVIDED, FURTHER, that after the second anniversary of the Closing Date and
thereafter, the Base Indemnity Amount shall be decreased to ZERO DOLLARS
(U.S.$0.00) for purposes of determining the UGM Indemnity Maximum and the UGM
Indemnity Maximum shall be determined solely with respect to clauses (x), (y)
and (z) of the first sentence of this Section 8.2(c). Notwithstanding the above,
the Sellers' liability for indemnification (i) pursuant to clause (ii) of
Section 8.1(a) with respect solely to covenants and agreements contained in
Sections 1.5(c), 4.5, 4.8, 9.1 (only with respect to Gerd Muehllehner, Ph.D.),
9.8 (only with respect to Gerd Muehllehner, Ph.D.) and 9.9 (only with respect to
Gerd Muehllehner) and the comparable sections under the UGM Laboratory Agreement
(as similarly restricted, if applicable), and the covenants and agreements in
the Gerd Employment Agreement relating to non-competition, confidentiality,
nondisclosure and proprietary rights and (ii) under this Article 8 for fines,
penalties, taxes, and other Losses relating to, arising under or caused by the
401(k) plan and/or SARSEP of each of the Company and UGM Laboratory (to the
extent such amount exceeds the amounts accrued for such liability on the balance
sheet of the Company and UGM Laboratory (provided that such accrued amounts
shall not exceed an aggregate of U.S.$150,000)) shall not be subject to such
limitation and shall not count toward the UGM Indemnity Maximum. Notwithstanding
the foregoing, the UGM Indemnity Maximum shall not be decreased pursuant to the
first sentence of this Section 8.2(c) with respect to claims that are pending at
the time the UGM Indemnity Maximum would otherwise have been decreased. The
parties acknowledge and agree that (i) the UGM Indemnity Maximum may vary from
time to time, (ii) the fact that the UGM Indemnity Maximum at any time is equal
to zero or is less than the Losses of ADAC and/or its affiliates does not in
itself terminate or invalidate a claim for Losses since the UGM Indemnity
Maximum may subsequently increase (E.G., as a result of the subsequent accrual
of Contingent Merger Amounts or Contingent Payment Amounts) and any such claims
for Losses shall continue until the indemnification obligations with respect
thereto terminate pursuant to Section 8.2(b) and (iii) the indemnification
obligations under this Article 8 for any and all claims for Losses shall only
terminate in accordance with Section 8.2(b).
(d) The aggregate amount of ADAC's liability under this
Article 8 shall not exceed FOUR MILLION DOLLARS (U.S.$4,000,000) (the "ADAC
INDEMNITY MAXIMUM"); PROVIDED that after the first anniversary of the Closing
Date to and including the second anniversary of the Closing Date, the ADAC
Indemnity Maximum shall be decreased to TWO MILLION TWO
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HUNDRED THOUSAND DOLLARS (U.S.$2,200,000); PROVIDED, FURTHER, that after the
second anniversary of the Closing Date and thereafter, the ADAC Indemnity
Maximum shall be decreased to ZERO DOLLARS (U.S.$0.00). Notwithstanding the
foregoing, the ADAC Indemnity Maximum shall not be decreased pursuant to the
first sentence of this Section 8.2(d) with respect to claims that are pending
at the time the ADAC Indemnity Maximum would otherwise have been decreased.
8.3 CLAIM PROCEDURE.
(a) Any party to this Agreement who desires to seek indemnification
under this Article 8 (an "INDEMNIFIED PARTY") shall give written notice (a
"CLAIM NOTICE") explaining in reasonable detail the nature of the Loss, the
amount of the Loss (the "CLAIM AMOUNT"), if known, and the parties known to
be involved, if applicable, to each party responsible or alleged to be
responsible for indemnification hereunder (an "Indemnitor"); PROVIDED that
each Seller shall be deemed to have received any Claim Notice delivered to
the Sellers' Representative. If ADAC wishes to withhold from any payment of
any Contingent Merger Amount or Contingent Payment Amount the aggregate
amount of any Claim Amounts (the "AGGREGATE POTENTIAL CLAIM AMOUNT"), then
ADAC may, pursuant to Section 9.7, so notify the Sellers' Representative in
the Claim Notice or otherwise and withhold from the Contingent Merger Amount
or Contingent Payment Amount, as applicable, an amount not to exceed the
Aggregate Potential Claim Amount (the "WITHHELD AMOUNT"), subject to the
limitation on Sellers' liability under this Article 8. If ADAC wishes to make
a claim against the Escrow Amount with respect to any matter set forth in
Section 8.1(a) above, then ADAC may deliver to the Escrow Agent a Claim
Notice signed by one or more of its officers.
(b) Within thirty (30) days after delivery of a Claim Notice
(the "RESPONSE PERIOD"), each Indemnitor shall deliver to the Indemnified Party
a written notice (a "RESPONSE NOTICE") as to the extent to which such Indemnitor
disputes the claim described in the Claim Notice. Notwithstanding the foregoing,
in the event a Claim Notice is delivered or deemed delivered to a Seller, the
Sellers' Representative shall deliver to ADAC and, at ADAC's instruction, to the
Escrow Agent within the Response Period a Response Notice containing:
(i) instructions to the effect that all or part of the Escrow
Amount and/or the Withheld Amount (collectively, the "RETAINED AMOUNT") in an
amount equal to the Claim Amount set forth in such Claim Notice has been or
should be released to ADAC and, if sent to the Escrow Agent at ADAC's
instruction, directing the Escrow Agent to release to ADAC in accordance with
ADAC's instructions all or part of the Escrow Amount in an amount not to exceed
the Claim Amount set forth in such Claim Notice (or, if the Escrow Amount is
less than such released amount, then an amount equal to the Escrow Amount); or
(ii) instructions to the effect that all or part of the Retained
Amount in an amount equal to a specified portion (but not the entire amount) of
the Claim Amount set forth in such Claim Notice has been or should be released
to ADAC and, if sent to the Escrow Agent at ADAC's instruction, directing the
Escrow Agent to release to ADAC all or part of the Escrow
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Amount in accordance with ADAC's instructions in an amount not to exceed such
specified portion of the Claim Amount (or, if the Escrow Amount is less than
such specified portion of the Claim Amount released by the Sellers'
Representative, then an amount equal to the Escrow Amount), together with a
statement that the remaining portion of such Claim Amount is being disputed;
or
(iii) a statement that the entire Claim Amount set forth in such
Claim Notice is being disputed.
If any Indemnitor fails to give a Claim Response within the Response
Period, such Indemnitor shall be deemed not to dispute the entire Claim Amount
described in the related Claim Notice. If an Indemnitor does not dispute all or
part of a Claim Amount described in a Claim Notice, whether by failing to give a
timely Response Notice in accordance with the terms hereof or otherwise, then
the amount of the Claim Amount not in dispute (the "UNDISPUTED CLAIM AMOUNT")
shall be conclusively deemed to be an obligation of such Indemnitor and, if the
Indemnitor is a Seller, then the Seller shall be deemed to have given
instructions to the Sellers' Representative, ADAC and the Escrow Agent that all
or part of the Retained Amount in an amount equal to the Undisputed Claim Amount
has been or should be released to ADAC. The parties acknowledge and agree that
no portion of the Retained Amount shall be released with respect to a Disputed
Amount (as defined in paragraph (c) below) unless and until such dispute has
been resolved in accordance with paragraph (c) below. Notwithstanding anything
to the contrary contained in this Article 8 and without limitation, ADAC may, in
its sole discretion, exercise its rights under this Article 8 by proceeding
directly against an Indemnitor, exercising its right of set-off against any
Contingent Merger Amount or Contingent Payment Amount or seeking recovery from
the Escrow Amount, in each case pursuant to the terms of this Agreement. In
addition, the parties agree that any payment received or to be received by a
party with respect to a claim under this Article 8 shall be reduced by any
insurance proceeds previously received by such party with respect to such claim.
(c) If a Response Notice delivered by the Indemnitor in response to a
Claim Notice contains a statement that all or a portion of the Claim Amount set
forth in such Claim Notice is being disputed (such disputed Claim Amount or the
disputed portion thereof being referred to as the "DISPUTED AMOUNT" ), the
parties shall promptly and reasonably attempt in good faith to resolve any
dispute arising out of or relating to the matter to which the Disputed Amount
relates by negotiations between Andrew Eckert, Ian Farmer or Robert Miller, or
if none of those individuals are available, the Chief Executive Officer of ADAC,
on the one hand, and the Sellers' Representative, on the other hand. If the
parties to such negotiation are unable to resolve such dispute within thirty
(30) days after delivery of such Response Notice, the dispute shall be submitted
to arbitration in accordance with Section 9.15.
8.4 THIRD PARTY CLAIMS. Promptly after receipt by an Indemnified Party
under this Article 8 of notice of a claim by a third party (a "THIRD PARTY
CLAIM"), such Indemnified Party will, if a claim in respect thereof is to be
made against an Indemnitor under this Article 8, notify the Indemnitor in
writing of such Third Party Claim; but the failure so to notify an Indemnitor
will not relieve it from liability under this Article 8 unless and to the extent
it did not otherwise learn of such
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claim and such failure results in the forfeiture by the Indemnitor of
substantial rights and defenses. The Indemnitor shall be entitled to assume
control of the defense of any action, suit or proceeding with respect to such
Third Party Claim with counsel of the Indemnitor's choice at the Indemnitor's
expense (in which case the Indemnitor shall not thereafter be responsible for
the fees and expenses of any separate counsel retained by an Indemnified
Party except as set forth below); PROVIDED, HOWEVER, that such counsel shall
be reasonably satisfactory to the Indemnified Party. Notwithstanding the
Indemnitor's election to appoint counsel to represent the Indemnified Party
in an action, suit or proceeding, the Indemnified Party shall have the right
to employ separate counsel (including local counsel), and the Indemnitor
shall bear the reasonable fees, costs and expenses of such separate counsel
if (i) the use of counsel chosen by the Indemnitor to represent the
Indemnified Party would present such counsel with a conflict of interest,
(ii) the actual or potential defendants in, or targets of, any such action,
suit or proceeding include both the Indemnified Party and the Indemnitor and
the Indemnified Party shall have reasonably concluded that there may be legal
defenses available to it and/or other Indemnified Parties which are different
from or additional to those available to the Indemnitor, (iii) the Indemnitor
shall not have employed counsel satisfactory to the Indemnified Party to
represent the Indemnified Party within a reasonable time after notice of the
institution of such action, suit or proceeding or (iv) the Indemnitor shall
authorize the Indemnified Party to employ separate counsel at the expense of
the Indemnitor. An Indemnitor will not, without the prior written consent of
each Indemnified Party, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought under this
Article 8 (whether or not the Indemnified Parties are actual or potential
parties to such claim, action, suit or proceeding) unless such settlement,
compromise or consent includes (i) an unconditional release of each
Indemnified Party from all liability arising out of such claim, action, suit
or proceeding and (ii) does not require the Indemnified Party to pay for any
amounts for which it is not to receive complete indemnification.
8.5 DISPUTED AMOUNT.
(a) If a Response Notice delivered by the Sellers' Representative
in response to a Claim Notice contains a statement that there is a Disputed
Amount, then, notwithstanding anything contained in Section 8.6, ADAC may
continue to hold (in addition to any other Withheld Amount permitted to be
retained, whether in connection with any other dispute or otherwise) up to an
amount of the Withheld Amount equal to the Disputed Amount; PROVIDED that
such amount shall not exceed the aggregate amount of Sellers' liability
pursuant to this Agreement.
(b) Any release of any Retained Amount to ADAC shall be an adjustment
in and reduction of the consideration due the shareholders of the Company as
set forth in Section 1.5(c) and Section 1.6.
8.6 RELEASE OF THE ESCROW AMOUNT TO SELLERS' REPRESENTATIVE. On the first
anniversary of the Closing Date, ADAC shall direct the Escrow Agent to release
the Escrow Amount then held by the Escrow Agent that is not the subject of a
Pending Claim.
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8.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made by the Company, the Sellers, ADAC and Sub in or pursuant to
this Agreement or in any document delivered pursuant hereto shall be deemed
to have been made on the date of this Agreement (except as otherwise provided
herein) and, if a Closing occurs, as of the Closing Date. The representations
and warranties made by the parties hereto in or pursuant to this Agreement or
in any document delivered pursuant hereto shall survive the Closing and shall
remain in effect until, and will expire upon, the termination of the
indemnification obligations with respect thereto as provided in Section 8.2.
8.8 REMEDIES. The remedies set forth in this Article 8 and in Section
1.6(b), Section 1.6(c) and Section 1.7 shall be the sole remedies of ADAC
under this Agreement from and after the Closing except with respect to (i)
the provisions of Section 9.1(d) (injunctive and similar relief) and (ii) the
fraud of a party hereto. The remedies set forth in this Article 8 shall be
the sole remedies of the Company and the Sellers under this Agreement except
with respect to the fraud of a party hereto.
8.9 RIGHT TO SET OFF. ADAC shall have the right, but not the
obligation, to (i) set off, in whole or in part, against any Contingent
Merger Amount, amounts finally determined to be owed to ADAC by the Sellers
pursuant to Article 8 and (ii) set off, in whole or in part, against the
Contingent Payment Amounts payable to Gerd Muehllehner under the Gerd
Employment Agreement, amounts finally determined to be owed to ADAC by Gerd
Muehllehner pursuant to Article 8.
9. MISCELLANEOUS
9.1 NON-COMPETE.
(a) Each of the Sellers, for a period of five (5) years from the
Effective Time, shall not, directly or indirectly, for himself or herself or
on behalf of or in conjunction with any other Person:
(i) engage, as an officer, director, shareholder, owner, partner,
member or joint venturer or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales representative, in
any business selling any products or services relating to the field of nuclear
medicine equipment and related software, including without limitation, products
or services relating to positron emission tomography scanners;
(ii) call upon any Person who is, at that time, an employee of the
Surviving Corporation or ADAC for the purpose or with the intent of enticing
such employee away from or out of the employ of Surviving Corporation or ADAC;
or
(iii) call upon any Person who or that is, at that time, or has
been, within one year prior to that time, a customer of the Company or ADAC for
the purpose of soliciting or selling products or services in direct competition
with the Surviving Corporation or ADAC.
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(b) The foregoing covenants shall not be deemed to prohibit the
Sellers from acquiring as an investment not more than one percent (1%) of the
capital stock of a competing business, whose stock is traded on a national
securities exchange or through the automated quotation system of a registered
securities association.
(c) For purposes of this Section 9.1, references to "ADAC"
shall mean ADAC Laboratories, together with its subsidiaries and affiliates.
(d) Because of the difficulty of measuring economic losses to
ADAC as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to ADAC for which it would
have no other adequate remedy, the Sellers agree that the foregoing covenants
may be enforced by ADAC in the event of breach by any such Sellers by
injunctions and restraining orders.
(e) The parties agree that the foregoing covenants in this Section
9.1 impose a reasonable restraint on the Sellers.
(f) The covenants in this Section 9.1 are severable and separate,
and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. If any provision of this Section 9.1
relating to the time period or geographic area of the restrictive covenants
shall be declared by a court of competent jurisdiction to exceed the maximum
time period or geographic area, as applicable, that such court deems
reasonable and enforceable, said time period or geographic area shall be
deemed to be, and thereafter shall become, the maximum time period or largest
geographic area that such court deems reasonable and enforceable and this
Agreement shall automatically be considered to have been amended and revised
to reflect such determination.
(g) All of the covenants in this Section 9.1 shall be construed as
an agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of any of the Sellers against Sub,
Surviving Corporation or ADAC, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Sub,
Surviving Corporation or ADAC of such covenants.
(h) The Company and the Sellers hereby agree that the covenants set
forth in this Section 9.1 are a material and substantial part of the
transactions contemplated by this Agreement, supported by adequate
consideration.
9.2 AMENDMENT. This Agreement may be amended with the approval of the
respective Boards of Directors of the Company and ADAC at any time; PROVIDED,
HOWEVER, that no amendment shall be made without the further approval of the
Sellers if such approval is required under applicable law. Notwithstanding
the foregoing, Section 1.8 shall only be amended with the approval of ADAC
and the Seller's Representative. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties hereto whose
approval is required pursuant to the preceding two sentences.
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9.3 WAIVER.
(a) No failure on the part of any party to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of
any party in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege
or remedy shall preclude any other or further exercise thereof or of any
other power, right, privilege or remedy.
(b) No party shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy
is expressly set forth in a written instrument duly executed and delivered on
behalf of such party; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
(c) The conditions to each party's obligations set forth in Article
5 and Article 6, as applicable, are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law. If a condition to any party's obligations is unsatisfied or
unfulfilled at the time of Closing and such party affirmatively waives such
condition in writing upon written notice thereof (including a reasonably
detailed description of the basis for the failure to satisfy the condition)
and elects to consummate the transactions contemplated by this Agreement,
then such party shall be deemed to have waived such condition to the extent
so specified in writing for purposes of its obligation to effect the Merger
and otherwise consummate the transactions contemplated by this Agreement and
shall have no claim against the other party for its failure to have satisfied
such condition unless it is actionable pursuant to Article 8 or Section 9.1
or otherwise under this Agreement. However, even if a claim is otherwise
actionable as described in the preceding sentence, it shall not be actionable
to the extent of such waiver if it relates to a breach of a representation,
warranty or covenant that to the knowledge of the Company and the Sellers was
not a breach as of the date of this Agreement. Any waiver of a condition
pursuant to the preceding sentence shall operate as a waiver of that
condition only, and shall not operate as a waiver of any other condition.
9.4 SEVERABILITY. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
9.5 ENTIRE AGREEMENT; COUNTERPARTS; APPLICABLE LAW. This Agreement and the
other agreements referred to herein constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral, among
or between any of the parties with respect to the
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subject matter hereof, including the letter agreement between the parties
dated April 12, 1999, as amended. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which
shall constitute one and the same instrument, and shall be governed in all
respects by the laws of the State of California as applied to contracts
entered into and to be performed entirely within California.
9.6 ASSIGNABILITY. This Agreement shall be binding upon: the Company and
its successors and assigns (if any); the Sellers and their respective personal
representatives, executors, administrators, estates, heirs, successors and
assigns (if any); Sub and its successors and assigns (if any); and ADAC and its
successors and assigns (if any). This Agreement shall inure to the benefit of
the Company, the Sellers, ADAC, Sub and the respective successors and assigns
(if any) of the foregoing. This Agreement shall not be assigned by operation of
law or otherwise except as otherwise specifically provided, except that each of
ADAC and Sub may assign its rights and delegate its obligations hereunder to its
affiliates.
9.7 NOTICES. All notices and other communications pursuant to this
Agreement shall be in writing and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized, overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to ADAC, to: ADAC Laboratories
540 Alder Drive
Milpitas, California 95035
Attention: General Counsel
with a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Fax: (650) 493-6811
Attention: Page Mailliard
If to Sub, to: UGMMS Acquisition Corp.
c/o ADAC Laboratories
540 Alder Drive
Milpitas, California 95035
Attention: General Counsel
with a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Fax: (650) 493-6811
Attention: Page Mailliard
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If to the Company, to: UGM Medical Systems, Inc.
3611 Market Street
Philadelphia, PA 19104
Fax: (215) 222-5578
Attention: Gerd Muehllehner
with a copy to: Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Fax: (215) 963-5299
Attention: Debra Poul
If to Sellers' Representative, to: Gerd Muehllehner
c/o UGM Medical Systems, Inc.
3611 Market Street
Philadelphia, PA 19104
Fax: (215) 222-5578
with a copy to: Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Fax: (215) 963-5299
Attention: Debra Poul
All such notices and other communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery,
(b) in the case of a telecopy, when the party receiving such telecopy shall
have confirmed receipt of the communication, (c) in the case of delivery by
nationally-recognized, overnight courier, on the Business Day following
dispatch and (d) in the case of mailing, on the fifth Business Day following
such mailing.
9.8 COOPERATION. Each of the Company, the Sellers, Sub and ADAC agrees
to cooperate fully with the other and to execute and deliver such further
documents, certificates, agreements and instruments and to take such other
actions as may be reasonably requested by the other to evidence or reflect
the Transactions and to carry out the intent and purposes of this Agreement.
9.9 CONFIDENTIALITY. The parties hereby agree that all information
about the other's business obtained by them pursuant to this Agreement or the
letter agreement dated April 12, 1999, shall be deemed confidential and shall
not be disclosed to any other party except as contemplated hereby and such
information will not be used for any purpose except evaluating the
desirability of the Merger. The foregoing shall not apply however to
information (i) known to a party prior to such disclosure to such party, (ii)
that becomes generally available to the public or to a party without
confidentiality restrictions after the date hereof, and (iii) required to be
disclosed by law or court order. Without limiting the generality of the
foregoing, on and at all times after the Closing Date, the Sellers shall keep
confidential, and shall not use or disclose to any other Person, any
non-public
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document or other non-public information in the Sellers' possession that
relates to the business of the Company or ADAC.
9.10 CERTAIN TERMS. As used in this Agreement:
(a) "ACQUISITION TRANSACTION" shall mean any proposal (other than
any proposal by ADAC) regarding (i) any merger, consolidation, share
exchange, business combination or other similar transaction or series of
related transactions involving the Company; (ii) any sale, lease, exchange,
transfer or other disposition of the assets of the Company or any subsidiary
of the Company constituting more than 10% of the consolidated assets of the
Company or accounting for more than 10% of the consolidated revenues of the
Company in any one transaction or in a series of related transactions; and
(iii) any offer to purchase, tender offer, exchange offer or any similar
transaction or series of related transactions made by any person involving
more than 10% of the outstanding shares of the capital stock of the Company.
(b) "BUSINESS DAY" shall mean any day that is not (i) a Saturday or
Sunday and (ii) a day on which banking institutions generally in the State of
California are authorized or obligated by law, regulation or executive order
to close.
(c) "CODE" shall mean the United States Internal Revenue Code of
1986, as amended.
(d) "COMPANY CONTRACT" shall mean any Contract: (a) to which the
Company is a party; (b) by which the Company or any of its assets is or may
become bound or under which the Company has, or may become subject to, any
obligation; or (c) under which the Company has or may acquire any right or
interest.
(e) "COMPANY'S KNOWLEDGE" and "KNOWLEDGE OF THE COMPANY" shall mean
the actual knowledge of any officer or director of the Company, or knowledge
any officer or director would have had after reasonable inquiry.
(f) "CONTINGENT PAYMENT AMOUNT" shall have the meaning ascribed to
that term in the Gerd Employment Agreement.
(g) "CONTRACT" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking
of any nature.
(h) "EMPLOYEE BENEFIT PLAN" shall have the meaning specified in
Section 3(3) of ERISA.
(i) "ERISA AFFILIATE" shall mean any other person or entity under
common control with the Company within the meaning of Section 414(b), (c),
(m) or (o) of the Code and the regulations issued thereunder.
-61-
<PAGE>
(j) "GERD EMPLOYMENT AGREEMENT" shall mean the Employment Agreement
to be entered by and between ADAC and Gerd Muehllehner, substantially in the
form attached hereto as EXHIBIT C.
(k) "GOVERNMENTAL AUTHORIZATION" shall mean any: (a) permit,
license, certificate, franchise, permission, clearance, registration,
qualification or authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
(l) "GOVERNMENTAL BODY" means any (i) nation, state, commonwealth,
province, territory, county, municipality, district or other jurisdiction of
any nature; (ii) federal, state, local, municipal, foreign or other
government; or (iii) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or entity and any court
or other tribunal).
(m) "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvement Act
of 1976, as amended.
(n) The words "INCLUDE" and "INCLUDING," and variations thereof,
shall not be deemed to be terms of limitation, but rather shall be deemed to
be followed by the words "without limitation."
(o) "LEGAL REQUIREMENTS" means any federal, state, local,
municipal, foreign or other law, statute, constitution, principle of common
law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
(p) "MATERIAL ADVERSE EFFECT", as it applies to the Company, means
an event, fact, condition or change that has resulted in or could reasonably
be expected to result in material adverse effect on the business, operations,
results, profits, condition (financial or otherwise), assets, liabilities,
financial performance or prospects of the Company.
(q) "PERSON" refers to any (i) individual, (ii) corporation,
partnership, company, limited liability company, business, group or other
entity, or (iii) Governmental Body;
(r) "RELATED PARTY" shall mean each of the following: (i) the
Sellers; (ii) each individual who is, or who has at any time been, an officer
or director of the Company; (iii) each individual who is, or who has at any
time been, a member of the immediate family of any of the individuals
referred to in clauses "(i)" and "(ii)" above; and (iv) any trust or other
Entity (other than the Company) in which any one of the individuals referred
to in clauses "(i)", "(ii)" and "(iii)" above holds (or in which more than
one of such individuals collectively hold), beneficially or otherwise, a
voting, proprietary or equity interest.
-62-
<PAGE>
(s) "SELLER" means each of the Shareholders and Gerd Muehllehner,
Ph.D.; PROVIDED HOWEVER, that with respect to Article 8, the term "Sellers"
also includes all other shareholders of the Company immediately prior to the
Closing.
(t) "SEVERALLY" shall mean in the case of a Shareholder, up to his
or her pro rata share of Losses (based upon such Shareholder's percentage
ownership of the Company) and in the case of Gerd Muehllehner, Ph.D., up to
an amount not exceeding 25% of the aggregate accrued and unpaid Contingent
Payment Amount payable under the Gerd Employment Agreement.
(u) "SELLERS' KNOWLEDGE" and "KNOWLEDGE OF THE SELLERS" shall mean
the actual knowledge of any Seller, or knowledge any Seller would have had
after reasonable inquiry.
(v) "TAX" shall mean any tax (including any income tax, franchise
tax, capital gains tax, gross receipts tax, value-added tax, surtax, excise
tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property
tax, business tax, withholding tax or payroll tax), levy, assessment, tariff,
duty (including any customs duty), deficiency or fee, and any related charge
or amount (including any fine, penalty or interest), imposed, assessed or
collected by or under the authority of any Governmental Body.
(w) "TAX RETURN" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment,
collection or payment of any Tax or in connection with the administration,
implementation or enforcement of or compliance with any Legal Requirement
relating to any Tax.
(x) "UGM LABORATORY" shall mean UGM Laboratory, Inc., a
Pennsylvania corporation.
(y) "UGM LABORATORY AGREEMENT" shall mean the Agreement and Plan of
Merger, dated as of even date herewith, by and among ADAC, UGML Acquisition
Corp., a Delaware corporation, UGM Laboratory and the shareholders of UGM
Laboratory.
(w) "UGM LABORATORY TRANSACTION" shall have the meaning ascribed to
the term "Transaction" in the UGM Laboratory Agreement.
(x) "UGM LABORATORY TRANSACTIONAL AGREEMENTS" shall have the
meaning ascribed to the term "Transactional Agreement" in the UGM Laboratory
Agreement.
(y) "UGM LABS SUB" shall have the meaning ascribed to the term
"Sub" in the UGM Laboratory Agreement.
-63-
<PAGE>
9.11 TITLES. The titles and captions of the Articles and Sections of this
Agreement are included for convenience of reference only and shall have no
effect on the construction or meaning of this Agreement.
9.12 ARTICLES, SECTIONS AND EXHIBITS. Except as otherwise indicated, all
references in this Agreement to "Articles," "Sections," "Schedules" and
"Exhibits" are intended to refer to Articles and Sections of this Agreement and
Exhibits and Schedules to this Agreement.
9.13 MUTUAL DRAFTING. This Agreement is the joint product of the parties
hereto, and each provision of this Agreement has been subject to the mutual
consultation, negotiation and agreement of each of the parties, and shall not be
construed for or against any party hereto.
9.14 FURTHER REPRESENTATIONS. Each party to this Agreement acknowledges and
represents that it has been represented by its own legal counsel in connection
with the transactions contemplated by this Agreement, with the opportunity to
seek advice as to its legal rights from such counsel. Each party further
represents that it is being independently advised as to the tax consequences of
the transactions contemplated by this Agreement and is not relying on any
representation or statements made by the other party as to such tax
consequences. The Company also represents that it has communicated the above to
the Sellers.
9.15 ARBITRATION
(a) Except as set forth in Section 1.7(b) and 1.8(j) any dispute,
claim or controversy arising from or related in any way to this Agreement or
the interpretation, application, breach, termination or validity thereof,
including any claim of inducement of this Agreement by fraud or otherwise,
will be submitted for resolution to arbitration pursuant to the commercial
arbitration rules then pertaining of the Center for Public Resources ("CPR"),
except where those rules conflict with these provisions, in which case these
provisions control. The arbitration will be held in New York, New York.
(b) The panel shall consist of three (3) arbitrators chosen from
the CPR Panels of Distinguished Neutrals each of whom is a lawyer
specializing in business litigation with at least 15 years experience with a
law firm of over 25 lawyers or was a judge of a court of general jurisdiction.
(c) The parties agree to cooperate (1) to obtain selection of the
arbitrators within thirty (30) days of initiation after the arbitration, (2)
to meet with the arbitrators within thirty (30) days after selection and (3)
to agree at that meeting or before upon procedures for discovery and as to
the conduct of the hearing which will result in the hearing being concluded
within no more than six (6) months after selection of the arbitrators and in
the award being rendered within sixty (60) days after the conclusion of the
hearings, or of any post-hearing briefing, which briefing will be completed
by both parties within twenty (20) days after the conclusion of the hearings.
In the event no such agreement is reached, the CPR will select arbitrators,
allowing appropriate strikes for reasons of conflict or other cause and three
peremptory challenges for each side. The arbitrators
-64-
<PAGE>
shall set a date for the hearing, commit to the rendering of the award
within sixty (60) days after the conclusion of the evidence at the hearing,
or of any post-hearing briefing (which briefing will be completed by both
sides in no more than twenty (20) days after the conclusion of the hearings),
and provide for discovery according to these time limits, giving recognition
to the understanding of the parties hereto that they contemplate reasonable
discovery, including document demands and depositions, but that such
discovery be limited so that the time limits specified herein may be met
without undue difficulty. In no event will the arbitrators allow either side
to obtain more than a total of forty (40) hours of deposition testimony from
all witnesses, including both fact and expert witnesses. In the event
multiple hearing days are required, they will be scheduled consecutively to
the greatest extent possible.
(d) The arbitrators shall render their judgment and award following
the substantive law of the State of California. The arbitrators shall render
an opinion setting forth findings of fact and conclusions of law with the
reasons therefor stated. A transcript of the evidence adduced at the hearing
shall be made and shall, upon request, be made available to either party.
(e) To the extent possible, the arbitration hearings and award will
be maintained in confidence.
(f) Any court of competent jurisdiction may enter judgment upon any
award. The parties consent to the jurisdiction of any such court for the
enforcement of these provisions and the entry of judgment on any such award.
(g) Each party has the right before or during the arbitration to
seek and obtain from the appropriate court provisional remedies such as
attachment, a preliminary injunction, a temporary restraining order,
replevin, ETC., to avoid irreparable harm, maintain the status quo or
preserve the subject matter of the arbitration.
(h) Each party hereto waives its right to trial of any issue by
jury.
(i) Each party hereto waives any claim to punitive, exemplary and
consequential damages from the other outside of the procedure specified in
Section 9.15.
(THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK.)
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan
of Merger as of the date first above written.
ADAC LABORATORIES,
a California corporation
By:
----------------------------
Name:
Title:
UGMMS ACQUISITION CORP.,
a Delaware corporation
By:
----------------------------
Name:
Title:
UGM MEDICAL SYSTEMS, INC.,
a Pennsylvania corporation
By:
----------------------------
Name:
Title:
[Signatures Continue]
(SIGNATURE PAGE FOR AGREEMENT AND PLAN OF MERGER)
<PAGE>
[Signatures Continued]
---------------------------------------------------
(Signature of Seller)
---------------------------------------------------
(Printed Name of Seller)
---------------------------------------------------
(Title, if signing on behalf of an entity)
(SIGNATURE PAGE FOR AGREEMENT AND PLAN OF MERGER)
<PAGE>
SCHEDULE I
David Mankoff
Joel Karp
Ursula Muehllehner
Tessa Muehllehner
Donya Geagan
Michael Geagan
Nancy Muehllehner
I-1
<PAGE>
SCHEDULE II
If and to the extent so specified in the Agreement and Plan of Merger,
dated as of September 13, 1999 (the "AGREEMENT"), by and among ADAC
Laboratories, a California corporation, UGMMS Acquisition Corp., a Delaware
corporation, UGM Medical Systems, Inc., a Pennsylvania corporation (the
"COMPANY"), and the shareholders of the Company listed on Schedule I thereto and
Gerd Muehllehner, Ph.D., the net worth of the Company shall be deemed increased
by $154,296 as more fully described below:
<TABLE>
<CAPTION>>
---------------------------------------------------------------------------------------
C-PET Unit Sale Adjustment Amount
---------------------------------------------------------------------------------------
<S> <C>
Dr. Froehling 57,832
---------------------------------------------------------------------------------------
Dr. Carreras 0
---------------------------------------------------------------------------------------
Val de Grace 42,018
---------------------------------------------------------------------------------------
Dr. Bruckner 38,306
---------------------------------------------------------------------------------------
Georgetown 5,329
---------------------------------------------------------------------------------------
Military Hospital (26,698)
---------------------------------------------------------------------------------------
Cedars (25,000)
---------------------------------------------------------------------------------------
Rui Jin 38,295
---------------------------------------------------------------------------------------
Tulsa X-Ray 24,214
---------------------------------------------------------------------------------------
Total 154,296
---------------------------------------------------------------------------------------
</TABLE>
II-1
<PAGE>
EXHIBIT A
A-1
<PAGE>
Microfilm Number Filed with the Department of State on
------------- ----------
Entity Number
---------------- -----------------------------------------------
Secretary of the Commonwealth
ARTICLES OF MERGER-DOMESTIC BUSINESS CORPORATION
DSCB: 15-1926 (REV 90)
In compliance with the requirements of 15 Pa.C.S. Section 1926
(relating to articles of merger or consolidation), the undersigned business
corporations, desiring to effect a merger, hereby state that:
1. The name of the corporation surviving the merger is: UGM Medical
Systems, Inc.
2. (Check and complete one of the following):
The surviving corporation is a domestic business corporation and the
--- (a) address of its current registered office in this Commonwealth or
(b) name of its commercial registered office provider and the county of
venue is (the Department is hereby authorized to correct the following
information to conform to the records of the Department):
(a) 3611 Market Street Philadelphia PA 19104 Philadelphia
-----------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
--------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office
provider, the county in (b) shall be deemed the county in which the
corporation is located for venue and official publication purposes.
The surviving corporation is a qualified foreign business corporation
--- incorporated under the laws of______ _____________and the (a) address
of its current registered office in this Commonwealth or (b) name of
its commercial registered office provider and the county of venue is
(the Department is hereby authorized to correct the following
information to conform to the records of the Department):
(a)
------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
--------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office
provider, the county in (b) shall be deemed the county in which the
corporation is located for venue and official publication purposes.
The surviving corporation is a nonqualified foreign business
--- corporation incorporated under the laws of
------------------------------------------------------------------
Number and Street City State Zip County
<PAGE>
DSCB: 15-1926 (Rev 90)-2
3. The name and the address of the registered office in this Commonwealth
or name of its commercial registered office provider and the county of
venue of each other domestic business corporation and qualified foreign
business corporation which is a party to the plan of merger are as
follows:
<TABLE>
<CAPTION>
Name of Corporation Address of Registered Office or Name of Commercial Registered Office Provider County
<S> <C> <C>
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
</TABLE>
4. (Check, and if appropriate complete, one of the following):
X The plan of merger shall be effective upon filing these Articles of
--- Merger in the Department of State.
The plan of merger shall be effective on ____________ at __________
--- Date Hour
5. The manner in which the plan of merger was adopted by each domestic
corporation is as follows:
Name of corporation Manner of adoption
UGM Medical Systems, Inc. Adopted by the directors and shareholders
pursuant to 15 Pa.C.S. Section 1924(a)
6. (Strike out this paragraph if no foreign corporation is a party to the
merger). The plan was authorized, adopted or approved, as the case may
be, by the foreign business corporation (or each of the foreign
corporations) party to the plan in accordance with the laws of the
jurisdiction in which it is incorporated.
7. (Check, and if appropriate complete, one of the following):
The plan of merger is set forth in full in Exhibit A attached
--- hereto and made a part hereof.
X Pursuant to 15 Pa.C.S. Section 1901 (relating to omission of
--- certain provisions from filed plans) the provisions, if any, of
the plan of merger that amend or constitute the operative Articles
of Incorporation of the surviving corporation as in effect
subsequent to the effective date of the plan are set forth in full
in Exhibit A attached hereto and made a part hereof. The full text
of the plan of merger is on file at the principal place of
business of the surviving corporation, the address of which is:
3611 Market Street Philadelphia PA 19104
----------------------------------------------------------------
Number and Street City State Zip
<PAGE>
DSCB: 15-1926 (Rev 90)-3
IN TESTIMONY WHEREOF, the undersigned corporation or each undersigned
corporation has caused these Articles of Merger to be signed by a duly
authorized officer thereof this ____________ day of ________________, 1999.
UGM Medical Systems, Inc.
-----------------------------------
(Name of Corporation)
BY:
-------------------------------
(Signature)
TITLE: President
----------------------------
UGMMS Acquisition Corp.
-----------------------------------
(Name of Corporation)
BY:
-------------------------------
(Signature)
TITLE: Vice-President
----------------------------
<PAGE>
CERTIFICATE OF MERGER OF
UGMMS ACQUISITION CORP.
WITH AND INTO
UGM MEDICAL SYSTEMS, INC.
October 1, 1999
UGM Medical Systems, Inc. ("UGM"), organized and existing under the
General Corporation Law of the Commonwealth of Pennsylvania, does hereby certify
as follows:
FIRST: The name and state of incorporation of each of the constituent
corporations (the "Constituent Corporations") to the merger are:
NAME STATE
UGM Medical Systems, Inc......................... Pennsylvania
UGMMS Acquisition Corp........................... Delaware
SECOND: An Agreement and Plan of Merger, dated as of September
13, 1999 (the "Merger Agreement"), among ADAC Laboratories, a California
corporation, UGMMS Acquisition Corp., a Delaware corporation ("Merger Sub"),
UGM, Gerd Muehllehner, Ph.D., and the shareholders of UGM listed on Schedule I
thereto, providing for the merger of Merger Sub with and into UGM (the
"Merger"), has been approved, adopted, certified, executed and acknowledged by
each of the Constituent Corporations in accordance with the requirements of
Section 252(c) of the General Corporation Law of the State of Delaware (the
"DGCL").
THIRD: The name of the surviving corporation is UGM Medical Systems,
Inc. (the "Surviving Corporation").
FOURTH: The certificate of incorporation of the Surviving Corporation
shall be the certificate of incorporation of the Company as in effect
immediately prior to the Merger.
FIFTH: The executed Merger Agreement is on file at the office of the
Surviving Corporation located at 3611 Market Street, Philadelphia, PA 19104.
SIXTH: A copy of the Merger Agreement will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder of either
of the Constituent Corporations.
SEVENTH: The Surviving Corporation agrees that it may be served with
process in the State of Delaware in any proceeding for enforcement of any
obligation of any Constituent Corporation of the State of Delaware, as well as
for enforcement of any obligation of the Surviving Corporation arising from the
Merger, including any suit or other proceeding to enforce the right of any
stockholders as determined in appraisal proceedings pursuant to section 262 of
the DGCL, and irrevocably appoints the Secretary of State of the State of
Delaware as its agent to accept service of process in any such suit or other
proceedings. The address to which a copy of such process shall be mailed by the
Secretary of State of the State of Delaware is: 3611 Market Street,
Philadelphia, PA 19104.
<PAGE>
IN WITNESS WHEREOF, UGM has caused this Certificate of Merger
to be duly executed in its corporate name as of the day and year first above
written.
UGM MEDICAL SYSTEMS, INC.
By:
---------------------------
Name:
Title:
(SIGNATURE PAGE TO CERTIFICATE OF MERGER)
<PAGE>
EXHIBIT B
B-1
<PAGE>
EXECUTION COPY
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "ESCROW AGREEMENT") is made and entered
into as of October 1, 1999 by and among ADAC Laboratories, a California
corporation ("ADAC"), Gerd Muehllehner, Ph.D., or such other person as may be
serving as Sellers' Representative under the Merger Agreement (as defined below)
(the "SELLERS' REPRESENTATIVE"), acting on behalf of the shareholders of UGM
Medical Systems, Inc., a Pennsylvania corporation ("MEDICAL SYSTEMS"), listed on
SCHEDULE A (the "FORMER SHAREHOLDERS"), and Mellon Bank, N.A., a national
association, as escrow agent (the "ESCROW AGENT").
RECITALS
A. ADAC, UGMMS Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of ADAC ("SUB"), Medical Systems, Gerd Muehllehner,
Ph.D., and certain shareholders of Medical Systems are parties to that certain
Agreement and Plan of Merger dated as of September 13, 1999 (the "MERGER
AGREEMENT"), providing for the merger (the "MERGER") of Sub with and into
Medical Systems, with Medical Systems becoming a wholly-owned subsidiary of ADAC
(the "SURVIVING CORPORATION"). Capitalized terms used but not defined herein
shall have the meanings ascribed to them in the Merger Agreement.
B. One of the conditions to the closing of the Merger, as set forth in
the Merger Agreement, is the execution and delivery of this Escrow Agreement.
C. Pursuant to Section 1.6(c) of the Merger Agreement, ADAC shall
deposit with the Escrow Agent ONE MILLION EIGHT HUNDRED THOUSAND DOLLARS
(U.S.$1,800,000) in immediately available funds (the "ESCROW AMOUNT") into an
escrow fund (the "ESCROW FUND") to be used to satisfy any potential
indemnification obligations of the Shareholders to any Indemnified Person for
Losses under Section 8.1(a) of the Merger Agreement.
D. This Escrow Agreement sets forth the basis on which the Escrow Agent
will receive and hold, and make disbursements from, the Escrow Fund and the
duties for which the Escrow Agent will be responsible.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties agree as follows:
1. APPOINTMENT. ADAC and the Sellers' Representative hereby appoint
Escrow Agent as escrow agent to serve in such capacity in accordance with the
terms and conditions set forth in this Escrow Agreement. Escrow Agent hereby
accepts such appointment.
2. MERGER AGREEMENT. The Escrow Agent acknowledges receipt of a copy
of the Merger Agreement; however, except for reference thereto for
definitions of certain words or terms
<PAGE>
not defined herein, the Escrow Agent is not charged with any duties or
responsibilities with respect to the Merger Agreement notwithstanding any
provision of the Merger Agreement to the contrary.
3. ESCROW AMOUNT. Immediately following the Effective Time, ADAC
shall deposit the Escrow Amount directly with the Escrow Agent, the receipt
of which Escrow Amount shall be acknowledged to ADAC and the Sellers'
Representative, and the same accepted by the Escrow Agent as escrow agent
hereunder. The Escrow Fund, as such term is used herein, shall include the
Escrow Amount deposited pursuant to this Section 3 and any interest earned
thereon, less any payments or distributions made hereunder.
4. INVESTMENT.
(a) The Escrow Amount placed in the Escrow Fund, together with all
interest accruing thereon, shall be invested by the Escrow Agent, without
distinction as to principal and income, upon receipt of written instructions
from the Sellers' Representative, in one or more of the following
investments: (i) interest bearing open-ended or time deposits of any domestic
bank with assets in excess of U.S.$500,000,000 (including deposit in the
Escrow Agent's bank money market deposit accounts), including one or more
accounts maintained in the commercial banking department (if any) of the
Escrow Agent; PROVIDED, HOWEVER, that any amount not invested in the Escrow
Agent's bank money market deposit accounts shall be invested, to the extent
reasonably possible, in accounts that are insured by the Federal Deposit
Insurance Corporation; (ii) short-term U.S. Department of Treasury bills, or
any short-term government obligation money market fund that includes similar
investments; or (iii) investments in the Dreyfus Money Market Reserves Class
R Fund and the Dreyfus U.S. Treasury Reserves Class R Fund (see SCHEDULE E);
PROVIDED that any such investments shall only be made upon receipt of written
instructions from the Sellers' Representative and any one of the officers of
ADAC set forth on SCHEDULE B hereto as reasonably agreed by the Sellers'
Representative and ADAC. Notwithstanding the foregoing, the Escrow Agent
shall have the power to sell or liquidate the foregoing investments whenever
the Escrow Agent shall be required to release all or any portion of the
Escrow Fund pursuant to Section 6 hereof. The Escrow Agent shall not be
liable for any loss resulting from any investment made pursuant to this
Escrow Agreement other than those losses resulting from its gross negligence
or willful misconduct or bad faith.
(b) The parties acknowledge that payment of any interest earned
on the funds invested in this escrow will be subject to backup withholding
penalties unless either a properly completed Internal Revenue Service Form W8
or W9 certification is submitted to Escrow Agent at the time of execution of
this Agreement.
5. SELLERS' REPRESENTATIVE.
(a) The Sellers' Representative represents and warrants that he
has been duly appointed by the Former Shareholders and authorized to enter
into this Agreement with full power and authority to bind the Former
Shareholders and to act hereunder in accordance with the terms hereof. Such
agency may be changed by the Former Shareholders listed as holding a majority
of the proportionate interest of Medical Systems (the "PROPORTIONATE
INTEREST") as set forth in SCHEDULE C
-2-
<PAGE>
from time to time upon not less than ten (10) days' prior written notice to
ADAC and the Escrow Agent. No bond shall be required of the Sellers'
Representative. Notices or communications to or from the Sellers'
Representative shall constitute notice to or from each of the Former
Shareholders.
(b) A decision, act, consent or instruction of the Sellers'
Representative, taken in the manner set forth in this Escrow Agreement, shall
constitute a decision, act, consent or instruction, as applicable, of all
Former Shareholders and shall be final, binding and conclusive upon each such
Former Shareholder, and the Escrow Agent and any Indemnified Person may rely
upon any decision, act, consent or instruction of the Sellers' Representative
taken in such manner as being the decision, act, consent or instruction of
each and every such Former Shareholder. The Escrow Agent and the Indemnified
Persons are hereby relieved from any liability to any person for any acts
done by them in accordance with such decision, act, consent or instruction of
the Sellers' Representative taken in such manner.
6. CLAIMS UPON ESCROW FUND.
(a) Upon receipt by the Escrow Agent of a certificate (a "CLAIM
NOTICE") signed by any one of the officers of ADAC set forth on SCHEDULE B
hereto providing notice of a claim for Losses and specifying in reasonable
detail the date such Losses were paid or incurred or otherwise arose, the
nature of the misrepresentation or breach to which such Losses are related,
the dollar amount of such Losses and the delivery instructions to be followed
by Escrow Agent in paying out such claim, including without limitation any
applicable wire transfer instructions of the payee and address to where a
check should be sent, the Escrow Agent shall, subject to the provisions of
Section 6(b) below, deliver pursuant to such instructions out of the Escrow
Fund, as promptly as practicable, an amount as indicated in the Claim Notice,
equal to such Losses as indemnity. The Escrow Agent shall be entitled to
conclusively rely on such Claim Notice and shall make such distributions from
the Escrow Fund only in accordance with the terms thereof and the terms of
this Escrow Agreement, including Section 6(b).
(b) At the time of delivery of any Claim Notice to the Escrow
Agent, a duplicate copy of such Claim Notice shall be delivered to the
Sellers' Representative by ADAC and for a period of thirty (30) days after
receipt of the Claim Notice by the Escrow Agent delivered in accordance with
Section 11, the Escrow Agent shall make no delivery of the cash from the
Escrow Fund pursuant to Section 6(a) above unless the Escrow Agent shall have
received written authorization from the Sellers' Representative to make such
delivery. After the expiration of such thirty (30) day period, the Escrow
Agent shall, without further notice or authorization of any kind, make
delivery of the amount of Losses from the Escrow Fund in accordance with
Section 6(a) above, provided that no such payment or delivery shall be made
to the extent the Sellers' Representative disputes in good faith the claim
set forth in the Claim Notice pursuant to a written notice to the Escrow
Agent and to ADAC received by each prior to the expiration of such thirty
(30) day period, with the basis for such dispute set forth in reasonable
detail. Thereafter, the Escrow Agent shall only disburse the disputed amount
from the Escrow Fund (i) in accordance with the instructions of a written
memorandum signed by ADAC and the Sellers' Representative, upon which the
Escrow Agent shall be entitled to conclusively rely, or (ii) in accordance
with the written decision of the
-3-
<PAGE>
arbitrators pursuant to Section 9.15 of the Merger Agreement delivered to the
Escrow Agent, upon which the Escrow Agent shall be entitled to act.
7. ESCROW PROVISIONS.
(a) The Escrow Agent may rely and shall be protected in acting or
refraining from acting upon any written notice, request, waiver, consent,
receipt or other paper or document from any duly authorized officer or agent
of ADAC or from the Sellers' Representative, not only as to its due execution
and the validity and effectiveness of its provisions, but also as to the
truth of any information therein contained that the Escrow Agent in good
faith believes to be genuine and as to which the Escrow Agent shall have no
actual notice of invalidity, lack of authority or other deficiency. ADAC and
Sellers' Representative shall notify the Escrow Agent in writing of the
Escrow Release Date and the final resolution of all Pending Claims.
(b) The Escrow Agent shall not be liable for any error of
judgment, or for any act done or step taken or omitted by it in good faith,
or for any mistake of fact or law, or for anything which it may do or refrain
from doing in connection therewith, except for any liability arising from its
own gross negligence, willful misconduct or bad faith.
(c) The Escrow Agent shall be entitled to consult with competent
and responsible counsel of its choice with respect to the interpretation of
the provisions hereof, and any other legal matters relating hereto, and shall
be fully protected in taking any action or omitting to take any action in
good faith in accordance with the advice of such counsel. The reasonable
counsel fees reasonably incurred pursuant thereto may be paid from the
principal of the Escrow Fund; PROVIDED that the Escrow Agent may not pay any
such counsel fees from the principal of the Escrow Fund if and to the extent
an aggregate of U.S.$5,000 in counsel fees has been paid from the principal
of the Escrow Fund.
(d) Except as provided in Section 7(f) below, ADAC and the
Sellers' Representative jointly and severally agree to indemnify and hold the
Escrow Agent harmless for any and all claims, liabilities, costs, payments
and expenses of Escrow Agent in connection with its performance of its duties
hereunder, including without limitation, fees and expenses of counsel (who
may be selected by the Escrow Agent) for court actions, or for anything done
or omitted by it in the performance of this Escrow Agreement, except as a
result of the Escrow Agent's own gross negligence, willful misconduct or bad
faith.
(e) All evidence of investment of funds in the Escrow Fund
(including, but not limited to, savings account passbooks, certificates,
notes and other similar items) shall be kept in a place of safekeeping at an
office of the Escrow Agent, or with a safe deposit company, including any
such safe deposit company owned in whole or in part by the Escrow Agent or by
any affiliate of the Escrow Agent. The Escrow Agent shall keep accurate
accounts of all income and interest earned by the funds in the Escrow Fund.
Within thirty (30) days after the close of each calendar quarter, Escrow
Agent shall provide ADAC and the Sellers' Representative a full written
accounting of the principal and interest in the Escrow Fund.
-4-
<PAGE>
(f) All fees and related expenses of the Escrow Agent for its
services hereunder (including fees and expenses of its legal counsel) shall
be paid by the Sellers' Representative. Such fees and expenses shall be
determined in accordance with the fee schedule attached hereto as SCHEDULE D
or as otherwise provided to the Sellers' Representative.
(g) None of the provisions contained in this Escrow Agreement
shall cause the Escrow Agent to advance or risk its own funds in the
performance of its duties herein described other than with respect to actions
in the ordinary course of business.
8. SUCCESSOR ESCROW AGENT. The Escrow Agent, or any successor, may
resign at any time upon giving written notice to ADAC and the Sellers'
Representative thirty (30) days before such resignation shall take effect. In
addition, ADAC and the Sellers' Representative may terminate the Escrow
Agent's appointment as escrow agent upon giving written notice (jointly
signed by ADAC and the Sellers' Representative) to the Escrow Agent thirty
(30) days before such termination shall take effect. If the Escrow Agent
shall resign, be terminated or be unable to serve, then it shall be succeeded
by such bank or trust company jointly named by ADAC and the Sellers'
Representative in such thirty (30) day period, or if no such appointment is
made by that time, then by a bank or trust company appointed by a court of
competent jurisdiction upon petition by any of Escrow Agent, ADAC or the
Sellers' Representative (in which action the other party or parties shall be
afforded a reasonable opportunity to participate) to appoint a successor
escrow agent. The Escrow Agent shall transfer the Escrow Fund and all books
and records with respect thereto and to this Escrow Agreement to its
successor and shall thereupon be discharged as escrow agent hereunder, and
the successor shall thereupon succeed to all of the rights, powers and duties
and shall assume all of the obligations of the Escrow Agent originally named
in this Escrow Agreement. If no successor escrow agent is appointed within
six (6) months of the giving of notice to resign by the Escrow Agent, Escrow
Agent may transfer the Escrow Fund into The Law Office of Robert Miller Trust
Account at Union Bank of California, San Francisco main branch.
9. PAYMENT OF TAXES. The Former Shareholders shall be treated as the
owner of the Escrow Fund for all tax purposes while and to the extent that
the Escrow Fund is held by the Escrow Agent. The Escrow Agent shall furnish
such information to the other parties hereto as shall be requested in writing
for tax preparation purposes by such parties.
10. TERMINATION.
(a) Unless extended in writing by the parties hereto, the escrow
provided for in this Escrow Agreement shall expire on the later of (i) one
year after the Effective Time and (ii) the final resolution of, and the final
disbursement of funds to satisfy, any and all Pending Claims (the
"TERMINATION DATE").
(b) Promptly following the Escrow Release Date and upon receipt of
instructions from ADAC and the Sellers' Representative, the Escrow Agent
shall, to the extent funds are available therefor in the Escrow Fund and in
the following order of priority:
-5-
<PAGE>
(i) withhold funds in the Escrow Fund in sufficient amount,
or to the extent funds are available therefor, to satisfy the maximum amount
of Losses estimated by ADAC in its written instructions relating to any and
all Pending Claims (which estimate shall be made in good faith by ADAC); and
(ii) distribute any funds remaining after the allocation
provided for in clause (i) above to the Former Shareholders in accordance
with their Proportionate Interests in the Escrow Fund, as shown on SCHEDULE C
hereto.
(c) Promptly following the Termination Date and upon receipt of
instructions from ADAC and the Sellers' Representative, the Escrow Agent
shall, to the extent funds are available therefor in the Escrow Fund,
distribute any funds remaining in the Escrow Fund to the Former Shareholders
in accordance with their proportionate interests in the Escrow Fund, as shown
on SCHEDULE C hereto.
11. NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given or delivered if delivered personally or
by express courier, mailed by registered or certified mail (return receipt
requested) first class mail, postage prepaid or sent by telecopy,
confirmation received, to the parties at the following addresses and telecopy
numbers (or at such other address or number for a party as shall be specified
by like notice):
(a) If to ADAC, to:
ADAC LABORATORIES
540 Alder Drive
Milpitas, California 95035
Attn: General Counsel
Telecopy No.: (408) 321-7435
Telephone No.: (408) 321-9100
with a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attn: Page Mailliard
Telecopy No.: (650) 493-6811
Telephone No.: (650) 493-9300
(b) If to the Sellers' Representative or to the Former
Shareholders:
Gerd Muehllehner, Ph.D.
c/o UGM MEDICAL SYSTEMS, INC.
3611 Market Street
Philadelphia, Pennsylvania 19104
Telecopy No.: (215) 222-5578
-6-
<PAGE>
Telephone No.: (215) 222-4999
with a copy to: Morgan Lewis & Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103
Attn: Debra Poul
Telecopy No.: (215) 963-5000
Telephone No.: (215) 963-5299
(c) If to the Escrow Agent:
Mellon Bank, N.A.
1735 Market Street
Philadelphia, PA 19103
Attn: Robert Chappelear, Vice President
Telecopy No.: (215) 553-4502
Telephone No.: (215) 553-2042
12. NONASSIGNABILITY. Notwithstanding anything to the contrary
contained herein, neither the Escrow Amount nor any beneficial interest
therein may be sold, assigned or otherwise transferred, including by
operation of law, by any Former Shareholder or be taken or reached by any
legal or equitable process in satisfaction of any debt or other liability of
such Former Shareholder. Any such attempted transfer in violation of this
Section shall be null and void.
13. SUCCESSORS AND ASSIGNS. Subject to Section 12, this Escrow
Agreement and all action taken hereunder in accordance with its terms shall
be binding upon and inure to the benefit of ADAC, its subsidiaries, and their
respective successors and assigns, the Escrow Agent and its successors, the
Former Shareholders and their respective successors, assigns, heirs,
executors, administrators and legal representatives, and the Sellers'
Representative and such agent's successors.
14. ENTIRE AGREEMENT. This Escrow Agreement constitutes the entire
agreement among the parties with the Escrow Agent, and among the other
parties with respect to this particular escrow except as set forth under the
Merger Agreement, and it supersedes all prior or concurrent arrangements or
understandings with respect thereto. The other parties hereby acknowledge and
agree that Escrow Agent's duties and obligations hereunder are limited, and
that Escrow Agent shall have no duties or obligations except as clearly
specified herein, and no implied duties or obligations shall be read into
this Escrow Agreement against the Escrow Agent, nor shall Escrow Agent have
any responsibility for the enforcement of the obligations of any parties
hereto.
15. WAIVERS. No waiver by any party hereto of any condition or of any
breach of any provision of this Escrow Agreement shall be effective unless in
writing. No waiver by any party of any such condition or breach, in any one
instance, shall be deemed to be a further or continuing waiver of any such
condition or breach or a waiver of any other condition or breach of any other
provision contained herein.
-7-
<PAGE>
16. COUNTERPARTS. This Escrow Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such
counterparts shall together constitute one and the same instrument.
17. GOVERNING LAW. This Escrow Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of California (without giving effect to its choice of law provisions),
except that the provisions of this Escrow Agreement relating to the rights,
duties and obligations of the Escrow Agent shall be governed in all respects
by the laws of the State of New York.
18. CONSEQUENTIAL DAMAGES. In no event shall the Escrow Agent be
liable for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Escrow
Agent has been advised of the likelihood of such loss or damage and
regardless of the form of action except with respect to any liability arising
from its own gross negligence, willful misconduct or bad faith.
19. JURISDICTION. All parties hereto agree to submit to the
jurisdiction of the federal and state courts of the State of California.
(THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK.)
-8-
<PAGE>
IN WITNESS WHEREOF, the parties have executed or caused this Escrow
Agreement to be duly executed as of the day and year first above written.
ADAC LABORATORIES
By:
---------------------------------
Name:
Title:
SELLERS' REPRESENTATIVE
on behalf of the Former Shareholders
------------------------------------
Gerd Muehllehner
MELLON BANK, N.A.
By:
---------------------------------
Name:
Title:
(SIGNATURE PAGE TO ESCROW AGREEMENT)
<PAGE>
SCHEDULE A
SHAREHOLDERS OF UGM MEDICAL SYSTEMS, INC.
David Mankoff
Joel Karp
Ursula Muehllehner
Tessa Muehllehner
Donya Geagan
Nancy Muehllehner
Michael Pustie
Richard Freifelder
Michael Geagan
York Haemisch
A-1
<PAGE>
SCHEDULE B
ADAC AUTHORIZED OFFICERS
<TABLE>
<CAPTION>
NAME AND TITLE SIGNATURE
- ------------------------------------------------------------------------------
<S> <C>
Andrew Eckert, Chief Executive Officer _________________________
Neil Laird, Chief Financial Officer _________________________
Robert Miller, General Counsel _________________________
Ian Farmer, Senior Vice President _________________________
</TABLE>
B-1
<PAGE>
SCHEDULE C
PROPORTIONATE INTERESTS OF FORMER SHAREHOLDERS
IN THE ESCROW FUND
<TABLE>
<CAPTION>
Former Amount Contributed Proportionate
Shareholder to Escrow Fund Interest
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
David Mankoff $320,203.80 17.7891%
Joel Karp $236,543.40 13.1413%
Ursula Muehllehner $311,511.60 17.3062%
Tessa Muehllehner $227,021.40 12.6123%
Donya Geagan $216,289.80 12.0161%
Michael Geagan $236,543.40 13.1413%
Nancy Muehllehner $216,138.60 12.0077%
Michael Pustie $ 11,336.40 00.6298%
Richard Freifelder $ 7,558.20 00.4199%
York Haemisch $ 16,853.40 00.9363%
Total U.S.$1,800,000.00 100.00%
</TABLE>
C-1
<PAGE>
SCHEDULE D
ESCROW AGENT FEE SCHEDULE
D-1
<PAGE>
EXHIBIT C
C-1
<PAGE>
CERTAIN INFORMATION IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT"), dated as of October 1,
1999, is made by and between Gerd Muehllehner, Ph.D. (the "EMPLOYEE") and ADAC
Laboratories, a California corporation (the "COMPANY").
BACKGROUND
A. By virtue of that certain Agreement and Plan of Merger (the
"AGREEMENT OF MERGER") among the Company, UGMMS Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of the Company ("SUB"), UGM Medical
Systems, Inc., a Pennsylvania corporation ("SELLER"), the shareholders of Seller
and Employee, the Company is acquiring Seller.
B. Employee and the Company desire to enter into an agreement to
provide for Employee's employment with the Company and to protect the investment
made by the Company and/or its affiliate in acquiring Seller.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, the parties agree as follows:
1. EMPLOYMENT: DUTIES. During the term of the Employment
Period (as defined in Section 2), and subject to the terms and conditions
hereof, the Company shall employ Employee as Chief Technology Officer, PET,
and the Employee shall perform such duties for the Company as are assigned or
delegated to Employee, consistent with Employee's knowledge, experience and
position with the Company. Employee accepts such employment and agrees to
render the services described herein to the Company. Employee agrees to
devote Employee's entire available business time, effort, skill and attention
exclusively to promote the best interests of the Company during the first
twelve months of the Employment Period. For the second and third twelve-month
periods during the Employment Period, Employee shall devote 80% of his entire
available business time, and for the fourth and fifth twelve-month periods of
the Employment Period, he shall devote 50% of his entire available business
time
2. EMPLOYMENT PERIOD. The term of Employee's employment under
this Agreement (the "EMPLOYMENT Period") shall commence on the closing date
of the transactions contemplated in the Agreement of Merger and shall end on
the fifth anniversary of such date, unless earlier terminated pursuant to
Section 6 hereof. To the extent Employee provides any services to the Company
after the expiration of the Employment Period, such services shall be
provided for an unspecified duration and
<PAGE>
shall be provided on an "at will" basis, which means that the employment
relationship may be terminated at any time, with or without good cause or any
cause, at the option of either the Company or the Employee, with or without
notice, and the parties hereby acknowledge and agree that the terms of
Sections 1 through 6 of this Agreement shall not be applicable thereto.
3. BASE SALARY. As compensation for the services to be
rendered by Employee during the first twelve months of the Employment Period,
the Company shall pay Employee an annual base salary of $135,000, payable
periodically consistent with the Company's normal payroll practices, less
such deductions and amounts to be withheld therefrom as may be required under
applicable law. Thereafter, the Company shall pay Employee a reasonable base
salary commensurate with the time commitment being made by Employee to the
Company
4. BONUS AND OTHER BENEFITS AND TERMS OF EMPLOYMENT. During
the Employment Period, the following benefits and other terms of employment
shall also apply:
(a) BONUSES. Employee shall be entitled to discretionary
bonuses on an annual basis in an amount equal to up to 40% of Employee's base
salary in accordance with the Company's standard company-wide bonus plan for
managers (referred to by the Company's management as the "MIT" or "Most
Important Task" bonus program). Such bonuses shall be subject to normal
withholding for all applicable federal and state taxes required to be withheld.
(b) EXPENSES. The Company shall reimburse Employee for
customary and necessary expenses reasonably incurred by Employee in the course
of performing those duties which he has been requested to perform by the
Company, all in accordance with the Company's reimbursement policies then in
effect.
(c) INSURANCE, OTHER BENEFITS. To the extent offered by the
Company, Employee may participate in employee health, hospitalization,
disability, group-term life and other benefit programs on the same basis as the
Company's other employees who are at the same level of responsibility as
Employee.
(d) VACATION AND HOLIDAYS. Employee shall be entitled to paid
vacation commensurate with the vacation available to similarly situated
employees of the Company. Vacation must be taken by Employee at such time or
times as approved by Employee's immediate manager. Employee will also be
entitled to the paid holidays set forth in the Company's policies. Vacation days
and holidays during any fiscal year that are not used by Employee during such
year may not be used in any subsequent fiscal year.
(e) STOCK OPTIONS. The Company agrees to grant Employee
options to purchase 17,500 shares of the common stock of the Company pursuant to
the Company's Long-Term Incentive Plan. Such options will be granted by the
Compensation Committee of the Board of Directors of the Company at the next
meeting of the Committee. The exercise price for such options shall be equal to
the fair market value of such common stock on the date of grant.
-2-
<PAGE>
(f) COMPANY CAR. Employee shall have the right to use for
[personal] [company] purposes the company car utilized by Employee while working
for UGM Laboratory, Inc., a Pennsylvania corporation ("UGM LABORATORY"), a 1998
Volvo V-70, and to purchase such car from the Company at its [book] [residual
fair market] value at any time during the Employment Period.
5. CONTINGENT COMPENSATION.
(a) In addition to the amounts described in Sections 3 and 4
hereof, the Company shall pay to Employee the Contingent Payment Amount for each
Payment Year; PROVIDED that a Contingent Payment Amount relating to an
installment sale shall be paid as such amounts are actually Recorded (and not as
such amounts are deemed recognized pursuant to the definition of "Net Unit
Revenue" below) including, if applicable and subject to the limitations set
forth in the definition of Contingent Payment Amount, after the Payment Period.
In addition, for the avoidance of doubt, the parties hereby agree that no
Contingent Payment Amount shall be paid with respect to Net Unit Revenue
Recorded prior to the first day of the Company's first full fiscal year
following the Closing. Notwithstanding the foregoing, in no event shall the
total of all Contingent Payment Amounts payable under this Agreement exceed an
aggregate of TWO MILLION DOLLARS (U.S. $2,000,000).
(b) The "CONTINGENT PAYMENT AMOUNT" for each Payment Year
shall equal the sum of (x) the aggregate C-PET Payments with respect to Net Unit
Revenue Recorded in each such Payment Year for C-PET Unit sales PLUS (y) the
aggregate G-PET Payments with respect to Net Unit Revenue Recorded in each such
Payment Year for G-PET Unit sales; PROVIDED, HOWEVER, that the Contingent
Payment Amount for the fifth Payment Year shall include C-PET Payments and G-PET
Payments, as applicable, Recorded within ninety (90) days after the end of the
fifth Payment Year with respect to Units shipped to customers in the fourth
quarter of the fifth Payment Year even if Net Unit Revenue for such Units is not
fully or partially Recorded in the fifth Payment Year.
(c) The "C-PET PAYMENT" for each C-PET Unit and with respect
to Net Unit Revenue for such Unit shall equal (x) the Net Unit Revenue for such
Unit MULTIPLIED BY (y) the percentage of Net Unit Revenue listed in the table
below that corresponds to the level to which the Unit belongs:
<TABLE>
<CAPTION>
LEVEL PERCENTAGE OF NET UNIT REVENUE
<S> <C>
Level One Units 0%
Level Two Units 5.4%
Level Three Units 8.1%
Level Four Units 0%
</TABLE>
In the event that market conditions change significantly and the Market Price
for the C-PET falls below SIX HUNDRED FIFTY THOUSAND DOLLARS (U.S. $650,000.00),
then each of the percentages set
-3-
<PAGE>
forth under Percentage of Net Unit Revenue for Level One Units, Level Two
Units, Level Three Units and Level Four Units shall be multiplied by 0.75.
(d) The "G-PET PAYMENT" for each G-PET Unit and with respect
to Net Unit Revenue for such Unit shall equal (x) the Net Unit Revenue for such
Unit MULTIPLIED BY (y) the percentage of Net Unit Revenue listed in the table
below that corresponds to the level to which the Unit belongs:
<TABLE>
<CAPTION>
LEVEL PERCENTAGE OF NET UNIT REVENUE
<S> <C>
Level One Units 0%
Level Two Units 5.0%
Level Three Units 6.7%
Level Four Units 0%
</TABLE>
In the event that market conditions change significantly and the Market Price
for the G-PET falls below NINE HUNDRED THOUSAND DOLLARS (U.S. $900,000.00), then
each of the percentages set forth under Percentage of Net Unit Revenue for Level
One Units, Level Two Units, Level Three Units and Level Four Units shall be
multiplied by 0.75.
(e) The following table sets forth the "LEVEL ONE UNITS",
"LEVEL TWO UNITS", "LEVEL THREE UNITS" and "LEVEL FOUR UNITS" for each Payment
Year. The Units indicated under each Payment Year refer to the collective number
of C-PET Units and G-PET Units Recorded for each such Payment Year. The Unit
numbers refer to the order in which the Units were Recorded during a Payment
Year (E.G., Unit 1 is the first Unit Recorded during a Payment Year, Unit 2 is
the second Unit Recorded during a Payment Year, ETC.).
<TABLE>
<CAPTION>
- ------------------------- ------------------- ------------------ ------------------- ------------------- -------------------
UNIT LEVEL PAYMENT YEAR 1 PAYMENT YEAR 2 PAYMENT YEAR 3 PAYMENT YEAR 4 PAYMENT YEAR 5
- ------------------------- ------------------- ------------------ ------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Level One Units Units 1-18 Units 1-21 Units 1-25 Units 1-28 Units 1-35
Level Two Units Units 19-20 Units 22-24 Units 26-30 Units 29-36 Units 36-45
Level Three Units Units 21-22 Units 25-26 Units 31-32 Units 37-38 Units 46-47
Level Four Units Unit 23 and Unit 27 and Unit 33 and Unit 39 and Unit 48 and
thereafter thereafter thereafter thereafter thereafter
</TABLE>
(f) Notwithstanding anything to the contrary contained in this
Section 5, if (i) more than one Unit is Recorded in one day, and (ii) the Units
Recorded on such day include Units from different unit levels (E.G., a Level Two
Unit AND two Level Three Units, such as Unit numbers 20, 21 and 22 in Payment
Year 1), then the applicable payment for each Unit Recorded on such day (the
"MIXED PAYMENT AMOUNT") shall be determined by taking the average of the
possible G-PET Payments or C-PET Payments, as applicable, that could be made for
such Unit for each Unit level to which the Units Recorded on that day relate.
For example, assume in Payment Year 1 that Units 20, 21 and 22
are Recorded on the
-4-
<PAGE>
same day, and such Units consist of the following Units at the specified Net
Unit Revenue amounts:
<TABLE>
<CAPTION>
Net Unit Revenue
------------------------
<S> <C>
C-PET Unit 1 $1,100,000
C-PET Unit 2 $ 850,000
G-PET Unit $1,600,000
</TABLE>
Applying the above formula, the Mixed Payment Amount for each
Unit equals the average of the possible level two and level three C-PET Payments
or G-PET Payments, as applicable, that could be made for such Unit, as follows:
<TABLE>
<CAPTION>
Unit Level Two Unit Level Three Mixed
Scenario Scenario Payment
Net Unit ------------------------ --------------------------
Revenue % Amount % Amount Amount
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
C-PET Unit 1 $1,100,000 5.4% $59,400 8.1% $89,100 $74,250
C-PET Unit 2 $ 850,000 5.4% $45,900 8.1% $68,850 $57,375
G-PET Unit $1,600,000 5.0% $80,000 6.7% $107,200 $93,600
</TABLE>
(g) As used in this Agreement
(i) "C-PET" means a full-ring positron emission
tomography scanner using sodium iodide crystals initially designed by the
Seller, including subsequent versions thereof.
(ii) "C-PET UNIT" means one (1) C-PET.
(iii) "G-PET" means a full-ring positron emission
tomography scanner using a scintillator which is denser and has faster decay
time than sodium iodide crystals initially designed by the Seller, including
subsequent versions thereof.
(iv) "G-PET UNIT" means one (1) G-PET.
(v) "MARKET PRICE" means the average Net Unit
Revenue for a C-PET Unit or a G-PET Unit, as applicable, for worldwide sales in
the relevant fiscal quarter.
(vi) "NET UNIT REVENUE" means, with respect to a
Unit and without duplication, the Total Revenue Recorded upon the sale of
such Unit (and the license of any incorporated technology); PROVIDED that all
revenue Recorded with respect to an installment sale shall be deemed Recorded
for the purposes of this definition at the time revenue is initially Recorded
with respect to such installment sale. If the Company, the Seller or any
affiliate thereof reverses any Net Unit Revenue with respect to which a
Contingent Payment Amount was paid ("REVERSED NET UNIT REVENUES"), then the
Company shall have the right to set-off the amount of the Reversed Net Unit
Revenue against other Net Unit Revenues for purposes of determining unpaid or
future Contingent Payment Amounts. The Company shall have no obligation to
pay a Contingent Payment Amount with respect to the portion of
-5-
<PAGE>
Net Unit Revenues set-off by Reversed Net Unit Revenues pursuant to the
preceding sentence.
The "TOTAL REVENUE" with respect to a Unit is calculated by
subtracting the Excluded Items from the Total Invoice Price, and by making such
other adjustments as provided herein.
"TOTAL INVOICE PRICE" means, with respect to a Unit, the final
purchase price which includes all deliverables to the customer; Total Invoice
Price does not include any sales of use taxes, excise taxes, value added taxes
and any other non-income taxes or duties paid or owed by the Company, the Seller
or any affiliate thereof.
"EXCLUDED ITEMS" means
(1) Peripherals for a C-PET or G-PET not defined by the Company as
"buy-outs", E.G., workstations, printers, cardiac gates, ETC. (typically items
for which the Company or an affiliate of the Company has a part number), the
exclusion for which shall equal the Company's standard cost of goods at a *
gross margin;
(2) Ancillary options, consumables and miscellaneous items with respect
to a C-PET or G-PET defined by the Company as "buy-outs", E.G., desks, printers,
personal computers, ETC. (typically items for which the Company or an affiliate
of the Company does not have a part number), the exclusion for which shall equal
the vendor's cost PLUS a * administration fee;
(3) "Pass through" items, E.G., marketing fees paid to Group Purchasing
Organizations, or GPOs, distributor/dealer charges (commissions), research and
development agreements, building modifications, ETC., the exclusion for which
shall equal the actual costs of the pass through which are included in the Total
Invoice Price;
(4) Any service revenue included in the Total Invoice Price or
otherwise received by the Company, the Seller or any affiliate thereof in
connection with such Unit; such service revenues shall be excluded at the
discounted price as identified in the service contract item on the final
quotation; where a warranty is provided in addition to the standard twelve (12)
months, service revenue for such warranty shall be calculated at the twelve (12)
month full service contract rate multiplied by fifty percent (50%), prorated for
the additional months of warranty provided in the contract with the customer;
(5) Other products sold by the Company, the Seller or any affiliate
thereof or other third party suppliers (e.g., gamma cameras, networking, CT
scanners and all options associated with such products), the exclusion for
which shall equal a calculated average selling price for the unique
configuration. The calculated average selling price shall equal (x) the
standard cost of goods for the configuration for the Company DIVIDED BY (y)
(i) one MINUS (ii) the current quarter gross margin for the product, for the
geographic region, or
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
-6-
<PAGE>
<TABLE>
<S> <C>
Standard cost of goods sold for the configuration for the Company
Calculated -----------------------------------------------------------------------------------------
Average = (1 - current quarter gross margin for the product and geographic region)
Selling Price
</TABLE>
The following items shall not be subtracted from the Total Invoice
Price whether or not expressly included in the Total Invoice Price: software and
hardware optional items which are either essential to the operation of the C-PET
or G-PET scanner or are built into the scanner such as DICOM software or dual
controls, and warranty, installation, shipping, crating, insurance and site
planning costs (E.G., architect costs and radiation calculation costs).
For sales involving currencies other than the U.S. dollar, all prices
shall be calculated using the exchange rate between the U.S. dollar and the
applicable foreign currency or currencies on the date the applicable revenue is
Recorded. If the Unit is sold through a distributor, the Total Invoice Price
shall be (x) the transfer price charged by the Company to the distributor PLUS
(y) the commission paid to a Territory Manager for the equivalent equipment as
set forth in the then current commission plan for the United States.
The geographic regions are defined as (i) the United States of America,
(ii) Canada, (iii) South America and Central America, (iv) Europe and Africa,
(v) Asia and Australia (excluding Japan) and (vi) Japan. For example, the
calculated average selling price for a Vertex camera in the United States of
America, assuming (i) a standard cost of goods of U.S. $ * and (ii) a current
quarter average gross margin in the United States of America of * %, would equal
(U.S. $ * /(1 - * )) or U.S. $ * .
For example, if a U.S. $ * sale includes a U.S. $ * personal computer defined by
the Company as a "buy-out", a U.S. $ * research agreement, a gamma camera of the
Company and a C-PET scanner, the Net Unit Revenue might equal:
<TABLE>
<CAPTION>
<S> <C>
Invoice price U.S. $ *
Less the personal computer (U.S. $ * + (U.S. $ * * *)) *
Less the research agreement *
Subtotal, net revenue before
gamma camera exclusion U.S. $ *
Less gamma camera
Standard cost of goods *
Average gross margin *
Gamma camera selling price *
Total Revenue U.S. $ *
</TABLE>
(vii) "PAYMENT PERIOD" means the period from and
including the first day of the Company's first full fiscal year following the
Closing to and including the last day of the fifth full fiscal year following
the Closing.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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<PAGE>
(viii) "PAYMENT YEAR" means each fiscal year of the
Company during the Payment Period. The fiscal year end for the Company is the
Sunday closest to the end of September.
(ix) "PRODUCTS" means the C-PET and the G-PET.
(x) "RECORDED" means recognized as revenue by the
Company, the Seller or any affiliate thereof in accordance with the Company's
then current revenue recognition policy and, with respect to a Unit, means
revenue was recognized for such Unit by the Company, the Seller or any
affiliate thereof in accordance with the Company's then current revenue
recognition policy.
(xi) "UNIT" means a C-PET Unit or a G-PET Unit.
(h) Within ninety (90) days after each Payment Year, the
Company or PriceWaterhouseCoopers LLP or any successor accountant appointed by
the Company (the "COMPANY'S ACCOUNTANT") shall determine the Contingent Payment
Amount for such Payment Year and deliver notice of such amount to Employee (the
"PAYMENT AMOUNT NOTICE") with supporting documentation. To the extent Employee
has not had access to such information, whether pursuant to the exercise by the
Shareholders (as defined in the Agreement of Merger) of their rights under
Section 1.8(i) of the Agreement of Merger or otherwise, Employee shall have the
right not more than once every twelve (12) months to inspect, audit and make
extracts from all of the records, files and books of account of the Company
relating to sales and the recording of Products and Net Unit Revenue for
purposes of verifying the amount of the consideration payable pursuant to this
Section 5, at a reasonable time during business hours, upon advance notice to
the Company.
(i) Employee shall have forty-five (45) days from the receipt
of the Payment Amount Notice to notify the Company if he disputes the amount of
the Contingent Payment Amount. If the Company has not received notice of any
such dispute within such 45-day period, the Contingent Payment Amount contained
in the Payment Amount Notice shall be final. If, however, Employee has delivered
notice of such a dispute to the Company within such 45-day period, then the
Company and Employee shall mutually select in good faith an independent
accounting firm that has not represented any of the parties hereto within the
preceding two (2) years (except in connection with the exercise of rights under
Section 1.8(j) of the Agreement of Merger) and is one of the five largest
accounting firms in the United States (a "NEW ACCOUNTING FIRM") to review the
amount of the disputed Contingent Payment Amount, Net Unit Revenue, the books of
the Company and the Payment Amount Notice (and related information) for the
related Payment Year to determine the amount, if any, that the Contingent
Payment Amount is in error; PROVIDED, HOWEVER, that the Company and Employee
agree to select the same independent accounting firm as selected pursuant to
1.8(j) of the Agreement of Merger, if applicable, absent a reasonable objection
by the Company or Employee. The New Accounting Firm shall make its determination
of the disputed Contingent Payment Amount (the "REVISED CONTINGENT PAYMENT
AMOUNT") within thirty (30) days of its selection. The Revised Contingent
Payment Amount shall be final and binding on the parties hereto, and the Company
shall pay the Revised Contingent Payment Amount within (10) days of its final
determination; PROVIDED that if the Company has already paid Employee with
respect to the Contingent Payment Amount for the relevant Payment Year and the
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<PAGE>
Revised Contingent Payment Amount is greater than the Contingent Payment Amount
as originally calculated, the Company shall pay an amount equal to (x) the
Revised Contingent Payment Amount MINUS (y) the amount previously paid with
respect to the Contingent Payment Amount; PROVIDED, FURTHER, that if the Company
has already paid Employee with respect to the Contingent Payment Amount for the
relevant Payment Year and the Revised Contingent Payment Amount is less than the
Contingent Payment Amount as originally calculated, Employee shall pay to the
Company an amount equal to (x) the amount paid by the Company with respect to
the Contingent Payment Amount MINUS (y) the Revised Contingent Payment Amount.
The costs of the New Accounting Firm shall be borne by the Company if the
Revised Contingent Payment Amount exceeds the Contingent Payment Amount as set
forth on the Payment Amount Notice by more than 5%, and by Employee in all other
cases.
(j) The Contingent Payment Amount for each Payment Year, if
any, shall be paid to Employee in cash within ten (10) days following the
determination of the Contingent Payment Amount for each such Payment Year, which
shall be made not later than the date that is ninety (90) days after the end of
each such Payment Year unless Employee disputes the Contingent Payment Amount in
accordance herewith (in which case, any payment shall be made within ten (10)
days after the final determination of the Revised Contingent Payment Amount).
(k) The Company shall have the right, but not the obligation,
to set off, in whole or in part, against the Contingent Payment Amounts payable
to Employee under this Agreement, amounts finally determined to be owed to the
Company by Employee pursuant to Article 8 of the Agreement of Merger.
6. TERMINATION. Subject to the provisions of Section 6(f) below, the
employment of Employee may be terminated as follows:
(a) DEATH. The Employment Period shall terminate upon the
Employee's death.
(b) DISABILITY. Subject to any limitations imposed under
applicable law, the Employment Period shall terminate upon Employee's
disability. Employee shall be regarded as disabled for purposes of this
Agreement if Employee has been unable, for physical or mental reasons, to
perform the duties required hereunder, in a manner consistent with past
practice, for a consecutive period of sixty (60) days or for ninety (90) days
during any twelve-month period during the Employment Period. In the event that
there should be any dispute between Employee and the Company as to whether
Employee is disabled within the meaning of this Agreement, such matter shall be
conclusively determined by the written report of a physician selected by the
Company, who is reasonably satisfactory to Employee. Employee agrees to submit
to examination by any such physician for the purpose of determining whether
Employee is disabled, and the parties agree that any determination with respect
to Employee's disability may be conclusively resolved in the sole judgment of
the Board of Directors of the Company if Employee should fail to comply with any
request by the Company to submit to such an examination.
-9-
<PAGE>
(c) FOR CAUSE. The Company may terminate the Employment Period
and discharge Employee for cause immediately upon giving notice to Employee of
such termination. The term "for cause" as used herein shall be defined to
include one or more of the following grounds: (i) Employer shall have sufficient
evidence from which it may reasonably conclude that Employee has misappropriated
money or other assets or property (tangible or intangible) of the Company or its
affiliates; (ii) Employee's refusal or failure to perform any reasonable duty
assigned to Employee, and such refusal or failure is not cured by the Employee
within three (3) days of receipt of written notice thereof from the Company;
(iii) conviction of or a guilty plea by Employee of any crime (felony or
misdemeanor) involving moral turpitude where the reputation or public image of
the Company may be adversely affected by Employee's crime; (iv) a material
breach of any of the provisions of this Agreement; (v) any use or being under
the influence of any alcohol or drugs during work hours other than at a Company
function where alcohol is served; or (vi) any unreasonably extended absenteeism
on the part of Employee for reasons other than the Employee's inability, for
physical or mental reasons, to perform the duties required hereunder; PROVIDED,
HOWEVER, that Employee will have no right to cure any default under clause (ii)
above if he has been notified twice earlier for other refusals or failures.
(d) AT THE ELECTION OF THE COMPANY FOR REASONS OTHER THAN FOR
CAUSE. The Company may terminate the Employment Period and Employee's employment
hereunder at any time during the term of this Agreement without cause by giving
sixty (60) days' advance written notice to the Employee of an election to
terminate.
(e) RESIGNATION; "GOOD REASON". Employee may terminate the
Employment Period and Employee's employment hereunder at any time after the date
of this Agreement, without "Good Reason" (as defined below), by giving
forty-five (45) days' advance written notice to the Company of Employee's
resignation. Employee may terminate the Employment Period and Employee's
employment hereunder at any time for "Good Reason" if any of the following has
occurred: (i) the Employee's participation in the Company's discretionary bonus,
profit sharing or employment benefit plans is materially reduced or adversely
affected or (ii) the Company breaches any of its material obligations under this
Agreement. In the event of a breach by the Company of any of its obligations
under Section 9, Employee's sole and exclusive remedy shall be to terminate the
Employment Period for Good Reason under this paragraph (e), and receive the
termination payments described in paragraph (f) below.
(f) EFFECT OF TERMINATION OR RESIGNATION - TERMINATION
PAYMENTS.
(i) GENERAL. Effective upon the termination
of the Employment Period and Employee'semployment under this Agreement, the
Company will be obligated to pay Employee (or, in the event of Employee's
death, Employee's designated beneficiary or estate as set forth below) only
such compensation as is provided in this Section 6 in lieu of all other
amounts and in settlement of and complete release of all claims Employee may
have against the Company. In the event of the termination of the Employment
Period for any reason, the Company shall be obligated to pay and shall
promptly pay Employee (i) any and all amounts due Employee through the date
of termination with respect to all accrued but unpaid salary, (ii) other
accrued but unpaid bonuses through the date of termination, (iii)
-10-
<PAGE>
compensation for earned but unused vacation time through the date of
termination and (iv) unpaid reimbursements for expenses described in Section
4(b) above incurred prior to the termination. If Employee is deceased, such
accrued payments shall be made to such individual or entity as Employee may
have designated in a writing submitted to the Company or, in the absence of
such written designation, to Employee's estate. Early termination shall not
affect any of Employee's obligations and duties under Sections 7 or 8 below
regardless of whether such termination requires termination payments as
provided below.
(ii) DEATH, DISABILITY, TERMINATION FOR CAUSE OR
RESIGNATION WITHOUT GOOD REASON. Except as set forth in Section 6(f)(i)
above, in the event the Employment Period is terminated pursuant to the
provisions of Section 6(a) (Death), Section 6(b) (Disability), Section 6(c)
(For Cause) or without Good Reason under Section 6(e), Employee shall not be
entitled to receive any termination benefits or payments; PROVIDED, HOWEVER,
that nothing herein shall preclude Employee from receiving standard death or
disability benefits under the Company's standard policy if provided to
Employee.
(iii) TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD
REASON. In the event the Company exercises its right to terminate the
Employee without cause under Section 6(d) or the Employee exercises his right
to resign with Good Reason under Section 6(e) during the first twelve months
of the Employment Period, the Company agrees to pay the Employee a severance
or termination payment equal to one hundred percent (100%) of the Employee's
current base salary for the balance of such twelve-month period
(collectively, the "SEVERANCE PAYMENTS"). Severance Payments shall be paid in
equal monthly installments for the balance of the severance period and shall
be subject to normal withholding for all applicable Federal and state taxes
required to be withheld.
7. COVENANTS OF THE EMPLOYEE.
(a) NONDISCLOSURE OBLIGATION. Employee agrees to hold in
confidence and not disclose to others, or use for Employee's own benefit,
either during or after the Employment Period, any Confidential Information
that Employee learns, obtains or creates during the Employment Period and any
subsequent period during which Employee is employed by the Company or any of
its affiliates, whether or not during working hours, except to the extent
otherwise authorized by the Company. For purposes of this Agreement,
"CONFIDENTIAL INFORMATION" means information designated or otherwise
considered by the Company or any of its affiliates to be confidential or
proprietary, non-public information not known by actual or potential
competitors of Company or any of its affiliates and confidential information
of the Company's or any affiliate's customers, suppliers, licensors and other
third parties with whom any of them does business, including all confidential
or proprietary information that any of them is required to keep confidential.
(b) ASSIGNMENT OF INVENTIONS. Employee agrees and understands
that the making of inventions is one of the incidents of Employee's
employment. Employee agrees to assign to the Company, without further
compensation, Employee's entire right, title and interest in and to all
Inventions that are conceived or reduced to practice by Employee. For
purposes of this Agreement,
-11-
<PAGE>
"INVENTIONS" means all products, designs, specifications, trademarks, service
marks, discoveries, formulae, processes, manufacturing techniques, trade
secrets, inventions, improvements and ideas, whether or not patentable, and
all copyrightable work prepared by Employee as an employee or contractor,
alone or jointly with others, within the scope of Employee's employment by
the Company or any of its affiliates or using any Confidential Information,
which shall be work made for hire owned by the Company. Also included in the
foregoing are all rights to obtain, register, perfect and enforce these
rights. Employee agrees to disclose in confidence all Inventions made by
Employee to the Company to permit a determination as to whether or not such
Inventions are covered by this Agreement. No rights are hereby conveyed in
Inventions, if any, made by Employee prior to the Employment Period, which
are identified in Appendix 1 hereto. Employee agrees to perform, during and
after the Employment Period, all acts deemed necessary or desirable by the
Company to permit and assist it, at its expense, in obtaining and enforcing
the full benefits, enjoyment, rights and title throughout the world in the
Inventions assigned hereby. Such acts may include execution of documents and
assistance or cooperation in legal proceedings.
(c) NON-SOLICITATION. Employee hereby agrees that during the
period of Employee's employment with the Company or any of its affiliates and
for a period of two years thereafter, and in all events for a period of not
less than five (5) years from the Effective Time (as defined in the Agreement
of Merger), without the prior written consent of the Company, Employee shall
not, either as an individual or as an employee, agent, consultant, advisor,
independent contractor, general partner, officer, director, shareholder or
investor of a third party, solicit or attempt to solicit any person who at
the time of such inducement is an employee of the Company or any of its
affiliates to perform work or services for any other person.
(d) RETURN OF PROPERTY, ETC. Upon termination of Employee's
employment with the Company or any of its affiliates, or upon earlier request
of the Company, Employee agrees to return or deliver to the Company all
property belonging to the Company and its affiliates and all tangible forms
of Confidential Information in Employee's possession or control, including
but not limited to drawings, specifications, documents, records, devices,
models or any other material and copies or reproductions thereof. Employee
will provide to the Company, at its request, written certification that
Employee has returned all property and Confidential Information to the
Company and that Employee will continue to honor Employee's confidentiality
obligations hereunder.
(e) OTHER AGREEMENTS REGARDING CONFIDENTIALITY. Employee
represents and warrants that Employee's performance of all of the terms of
this Agreement will not breach any agreement to keep in confidence the
proprietary information, knowledge or data of others acquired by Employee in
confidence or in trust prior to the Employment Period, and Employee agrees
not to disclose to the Company or any of its affiliates, or induce the
Company or any of its affiliates to use, any confidential or proprietary
information or material belonging to any previous employer or any other
person (other than the Seller or UGM Laboratory), and represents that
Employee does not have in Employee's possession or control any such
information or material. Employee represents and warrants
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<PAGE>
that Employee is not a party to any other agreement that would interfere with
Employee's full compliance with this Agreement.
(f) SURVIVAL. Except as otherwise expressly provided herein, this
Section 7 shall survive the expiration or termination of this Agreement and
Employee's employment or engagement by the Company or any of its affiliates
and shall inure to the benefit of the successors and assigns of the Company
and shall be binding upon Employee's heirs, assigns, administrators and
representatives.
(g) CONFLICTS. Employee agrees not to enter into any written or
oral agreement that conflicts with the provisions of this Section 7, and
acknowledges that any breach by Employee of this section may constitute
grounds for serious disciplinary action, up to and including termination of
employment with the Company or any of its affiliates.
(h) REMEDIES. Each party acknowledges that in the event of a
breach of this Agreement, the damage to the nonbreaching party would be
irreparable and extremely difficult to estimate, making any remedy at law or
in damages inadequate. Thus, in addition to any other right or remedy
available to it, a party shall be entitled to injunctive relief for breach of
any provisions of this Agreement.
(i) REFORMATION OF AGREEMENT. In the event that any of the
covenants contained in this Section 7 may be found by a court of competent
jurisdiction to be invalid or unenforceable as against public policy or
otherwise, the parties hereto expressly authorize such court to exercise its
discretion in rendering any such covenant to the end that the Employee shall
be subject to the greatest extent permissible to covenants that are
reasonable under the circumstances, enforceable by the Company and consistent
with the Company's legitimate interests, which are hereby acknowledged by the
parties hereto, in protecting the Company's and its affiliates' goodwill
associated with the experience, skills and loyalty of the Employee and in
protecting the value of its investment, through the acquisition of the assets
of Seller and otherwise, in the business and assets of the Seller or any of
its affiliates.
8. RESTRICTION ON COMPETITION.
(a) Unless otherwise agreed to in writing by the Company, during
the Employment Period and thereafter, if Employee continues to be employed by
the Company and/or any other entity owned by or affiliated with the Company
on an "at will" basis, for the duration of such period, and thereafter for a
period of two (2) years, and in all events for a period of not less than five
(5) years from the Effective Time (as defined in the Agreement of Merger),
Employee shall not, directly or indirectly, for Employee or on behalf of or
in conjunction with any other person, company, partnership, corporation,
business, group or other entity (each, a "PERSON"):
(i) engage, as an officer, director, shareholder, owner,
partner, member or joint venturer or in a managerial capacity, whether as an
employee, independent contractor, consultant
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<PAGE>
or advisor, or as a sales representative, in any business selling any
products or services relating to the field of nuclear medicine equipment and
related software, including without limitation, products or services relating
to positron emission tomography scanners;
(ii) call upon any Person who is, at that time, an employee
of the Company, UGM Laboratory or the Seller for the purpose or with the
intent of enticing such employee away from or out of the employ of the
Company, UGM Laboratory or the Seller; or
(iii) call upon any Person who or that is, at that time, or
has been, within one year prior to that time, a customer of the Company, UGM
Laboratory or the Seller for the purpose of soliciting or selling products or
services in direct competition with the Company, UGM Laboratory or the Seller.
(b) The foregoing covenants shall not be deemed to prohibit
Employee from acquiring as an investment not more than one percent (1%) of
the capital stock of a competing business, whose stock is traded on a
national securities exchange or through the automated quotation system of a
registered securities association.
(c) For purposes of this Section 8, references to "the Company"
shall mean ADAC Laboratories, together with its subsidiaries and affiliates.
(d) Because of the difficulty of measuring economic losses to the
Company as a result of a breach of the foregoing covenants, and because of
the immediate and irreparable damage that could be caused to the Company for
which it would have no other adequate remedy, Employee agrees that the
foregoing covenants may be enforced by the Company in the event of breach by
Employee by injunctions and restraining orders.
(e) The parties agree that the foregoing covenants in this
Section 8 impose a reasonable restraint on Employee in light of the
activities and business of the Company on the date of the execution of this
Agreement, assuming the completion of the transactions contemplated by the
Agreement of Merger, and the current plans of the Company.
(f) The covenants in this Section 8 are severable and separate,
and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. If any provision of this Section 8 relating
to the time period or geographic area of the restrictive covenants shall be
declared by a court of competent jurisdiction to exceed the maximum time
period or geographic area, as applicable, that such court deems reasonable
and enforceable, such time period or geographic area shall be deemed to be,
and thereafter shall become, the maximum time period or largest geographic
area that such court deems reasonable and enforceable and this Agreement
shall automatically be considered to have been amended and revised to reflect
such determination.
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<PAGE>
(g) All of the covenants in this Section 8 shall be construed as
an agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants; PROVIDED that
upon the failure of the Company to make any payments required under this
Agreement, Employee may, upon thirty (30) days' prior written notice to the
Company, and to the extent the Company continues to fail to make such
required payments, waive Employee's right to receive any additional
compensation pursuant to this Agreement and engage in any activity prohibited
by the covenants of this Section 8. It is specifically agreed that the two
(2) year and five (5) year periods stated at the beginning of this Section 8,
during which the agreements and covenants of Employee made in this Section 8
shall be effective, shall be computed by excluding from such computation any
time during which Employee is in violation of any provision of this Section 8.
(h) Employee has carefully read and considered the provisions of
this Section 8 and, having done so, agrees that the restrictive covenants in
this Section 8 impose a fair and reasonable restraint on Employee and are
reasonably required to protect the interests of the Company and its officers,
directors, employees and stockholders. It is further agreed that the Company
and Employee intend that such covenants be construed and enforced in
accordance with the changing activities, business and locations of the
Company throughout the term of these covenants.
(i) The parties hereby agree that the covenants set forth in this
Section 8 are a material and substantial part of the transactions
contemplated by this Agreement, supported by adequate consideration.
9. COVENANTS OF THE COMPANY.
(a) For a period of two (2) years after the effective date of
this Agreement, without the consent of Employee, which shall not be
unreasonably withheld, the Company agrees that, so long as the Company is
receiving orders for dedicated positron emission tomography scanners at the
rate of seventeen (17) systems per annum, eleven (11) of the engineers and
physicists employed at the Company's Philadelphia, Pennsylvania location may
work full-time on dedicated positron emission tomography scanner design and
development with respect to the Company's existing products, products under
development and next generation products such as a combined PET and other
modality scanner. Such work includes typical engineering, manufacturing
engineering and regulatory activities.
(b) For a period of two (2) years after the effective date of
this Agreement, the Company agrees that, in the event of a vacancy in the
position of general manager of ADAC--UGM, Employee shall have the right to
participate in the selection of a new general manager, and in the event
Employee reasonably disagrees with the Company's recommendation, the Company
and Employee shall use reasonable efforts to identify an alternate candidate.
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<PAGE>
(c) For a period of two (2) years after the effective date of
this Agreement, without the consent of Employee, which shall not be
unreasonably withheld, the Company agrees not to terminate any of the
original employees of Seller who become employees of the Company upon the
closing under the Agreement of Merger, except for cause or in connection with
a reduction in force.
(d) For a period of three (3) years after the effective date of
this Agreement or, if sooner, until such time as the Philadelphia,
Pennsylvania location is producing systems at a rate of forty (40) systems
per annum, without the consent of Employee, which shall not be unreasonably
withheld, the Company agrees that the placement of purchase orders,
engineering and manufacturing for the Philadelphia, Pennsylvania location
shall continue to be conducted at the Philadelphia, Pennsylvania location,
except that aspects of such functions can be centralized by the Company at
another location if the Company demonstrates costs savings, quality or other
advantages of doing so (such as manufacturing certain sub-assemblies (E.G.,
the patient table) in Milpitas, California or centralizing the purchase of
certain significant cost items (E.G., crystals) in Milpitas, California).
10. NONASSIGNABILITY/SUCCESSORS. This Agreement may not be assigned by
either the Company or Employee, except that the Company may assign all or any of
its rights under this Agreement to the Company's affiliates by means of
assignment, merger or otherwise; but no such assignment shall impair the rights
or obligations of the parties as provided herein. Notwithstanding anything to
the contrary contained herein, this Agreement shall not be terminated by any of
the following events, and the successor entity to the Company or recipient of
its assets and Employee shall be bound by the terms of this Agreement: (1) any
merger, consolidation or other combination in which the Company is not the
surviving entity, (2) any sale of all or substantially all of the Company's
assets or (3) any voluntary or involuntary liquidation of the Company.
11. MISCELLANEOUS.
(a) NOTICES. All notices and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to
have been duly given when delivered by hand, sent by overnight courier
service or facsimile transmission or dispatched by certified mail, postage
pre-paid, return receipt requested, to the parties at the following addresses
or to such other address for a party as such party may have designated to the
other in a prior notice given in accordance herewith:
If to the Company, to:
ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: General Counsel
Facsimile: 408-321-9593
If to Employee, to the address set forth below Employee's signature.
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<PAGE>
(b) ENTIRE AGREEMENT. This Agreement and, with respect to Section
5(k), the Agreement of Merger set forth the entire agreement and
understanding of the parties hereto concerning the subject matter hereof and
supersedes any prior understandings and agreements relating to the terms
hereof.
(c) AMENDMENTS; WAIVERS. This Agreement may be amended, modified,
superseded or canceled and the terms or covenants hereof may be waived, only
by a written instrument specifically referring to this Agreement and executed
by both of the parties hereto, or, in the case of a waiver, by the party
entitled to the benefit of such provision. The failure of the Company at any
time or from time to time to require performance of any of Employee's
obligations under this Agreement shall in no manner affect the Company's
right to enforce any provisions of this Agreement at a subsequent time, and
the waiver by the Company of any rights arising out of any breach shall not
be construed as a waiver of any right arising out of any subsequent breach.
(d) SEVERABILITY. If any provision of this Agreement, or the
application thereof to any person or circumstance, should, for any reason and
to any extent, be invalid or unenforceable, the remainder of this Agreement
and the application of such provision to other persons or circumstances shall
not be affected thereby, but rather shall be enforced to the greatest extent
permitted by law.
(e) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
applicable to contracts made and to be performed entirely within such State.
(f) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(g) HEADINGS. The section headings contained in this Agreement
are intended solely for convenience of reference and shall be given no effect
in the construction or interpretation of this Agreement.
(h) EFFECTIVENESS OF AGREEMENT. The Agreement shall become
effective upon the consummation of the merger of Sub and Seller pursuant to
the terms of the Agreement of Merger.
(i) PREVAILING PARTY. In the event of any claim, suit or legal
proceeding arising under or related to this Agreement, the prevailing party
shall be entitled to recover from the other party all of its attorneys' fees
and costs. The "PREVAILING PARTY" means the party who obtains substantially
the relief sought by such party in such claim, suit or proceeding, whether by
settlement, summary judgment, judgment or otherwise.
(THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK.)
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the date first written above.
ADAC LABORATORIES EMPLOYEE
By: By:
----------------------------------- ------------------------------
Name: Address:
--------------------------------- --------------------------
Title:
-------------------------------- --------------------------
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<PAGE>
APPENDIX 1
TO
EMPLOYMENT AGREEMENT
EMPLOYEE STATEMENT
-------------------
PRIOR INNOVATIONS. Except as set forth below, I acknowledge at this time that I
have not made or reduced to practice (alone or jointly with others) any
Inventions (if none, so state):
Conflicting Relationships:
<PAGE>
EXHIBIT D
D-1
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT"), dated as of October ___,
1999, is made by and between Ursula Muehllehner (the "EMPLOYEE") and ADAC
Laboratories, a California corporation (the "COMPANY").
BACKGROUND
A. By virtue of that certain Agreement and Plan of Merger (the
"AGREEMENT OF MERGER") among the Company, UGMMS Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of the Company ("SUB"), UGM Medical
Systems, Inc., a Pennsylvania corporation ("SELLER"), the shareholders of Seller
and Gerd Muehllehner, Ph.D., the Company is acquiring Seller.
B. Employee is considered a key employee of Seller and, following the
consummation of the transactions contemplated by the Agreement of Merger,
desires to be an employee of the Company.
C. Employee and the Company desire to enter into an agreement to
provide for Employee's employment with the Company and to protect the investment
made by the Company and/or its affiliate in acquiring Seller.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, the parties agree as follows:
1. EMPLOYMENT: DUTIES. During the term of the Employment Period (as
defined in Section 2), and subject to the terms and conditions hereof, the
Company shall employ Employee as Finance Director, PET, and the Employee shall
perform such duties for the Company as are assigned or delegated to Employee,
consistent with Employee's knowledge, experience and position with the Company.
Employee accepts such employment and agrees to render the services described
herein and to devote Employee's entire available business time, effort, skill
and attention exclusively to promote the best interests of the Company.
2. EMPLOYMENT PERIOD. The term of Employee's employment under this
Agreement (the "EMPLOYMENT PERIOD") shall commence on the closing date of the
transactions contemplated in the Agreement of Merger and shall end on the first
anniversary of such date, unless earlier terminated pursuant to Section 5
hereof. To the extent Employee provides any services to the Company after the
expiration of the Employment Period, which the Company and Employee fully expect
Employee will do, such services shall be provided for an unspecified duration
and shall be provided on an "at will" basis, which means that the employment
relationship may be terminated at any time, with or without good cause or any
cause, at the option of either the Company or the Employee, with or without
notice,
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<PAGE>
and the parties hereby acknowledge and agree that the terms of Sections 1
through 5 of this Agreement shall not be applicable thereto.
3. BASE SALARY. As compensation for the services to be rendered by
Employee during the Employment Period, the Company shall pay Employee an annual
base salary of $80,000, payable periodically consistent with the Company's
normal payroll practices, less such deductions and amounts to be withheld
therefrom as may be required under applicable law.
4. BONUS AND OTHER BENEFITS AND TERMS OF EMPLOYMENT. During the
Employment Period, the following benefits and other terms of employment shall
also apply:
(a) BONUSES. Employee shall be entitled to discretionary
bonuses on an annual basis in an amount equal to up to 20% of Employee's base
salary in accordance with the Company's standard company-wide bonus plan for
managers (referred to by the Company's management as the "MIT" or "Most
Important Task" bonus program). Such bonuses shall be subject to normal
withholding for all applicable federal and state taxes required to be withheld.
(b) EXPENSES. The Company shall reimburse Employee for
customary and necessary expenses reasonably incurred by Employee in the course
of performing those duties which he or she has been requested to perform by the
Company, all in accordance with the Company's reimbursement policies then in
effect.
(c) INSURANCE, OTHER BENEFITS. To the extent offered by the
Company, Employee may participate in employee health, hospitalization,
disability, group-term life and other benefit programs on the same basis as the
Company's other employees who are at the same level of responsibility as
Employee.
(d) VACATION AND HOLIDAYS. Employee shall be entitled to paid
vacation commensurate with the vacation available to similarly situated
employees of the Company. Vacation must be taken by Employee at such time or
times as approved by Employee's immediate manager. Employee will also be
entitled to the paid holidays set forth in the Company's policies. Vacation days
and holidays during any fiscal year that are not used by Employee during such
year may not be used in any subsequent fiscal year.
(e) STOCK OPTIONS. The Company agrees to grant Employee
options to purchase 7,500 shares of the common stock of the Company pursuant to
the Company's Long-Term Incentive Plan. Such options will be granted by the
Compensation Committee of the Board of Directors of the Company at the next
meeting of the Committee. The exercise price for such options shall be equal to
the fair market value of such common stock on the date of grant.
5. TERMINATION. Subject to the provisions of Section 5(f) below, the
employment of Employee may be terminated as follows:
(a) DEATH. The Employment Period shall terminate upon the
Employee's death.
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<PAGE>
(b) DISABILITY. Subject to any limitations imposed under
applicable law, the Employment Period shall terminate upon Employee's
disability. Employee shall be regarded as disabled for purposes of this
Agreement if Employee has been unable, for physical or mental reasons, to
perform the duties required hereunder, in a manner consistent with past
practice, for a consecutive period of sixty (60) days or for ninety (90) days
during any twelve-month period during the Employment Period. In the event that
there should be any dispute between Employee and the Company as to whether
Employee is disabled within the meaning of this Agreement, such matter shall be
conclusively determined by the written report of a physician selected by the
Company, who is reasonably satisfactory to Employee. Employee agrees to submit
to examination by any such physician for the purpose of determining whether
Employee is disabled, and the parties agree that any determination with respect
to Employee's disability may be conclusively resolved in the sole judgment of
the Board of Directors of the Company if Employee should fail to comply with any
request by the Company to submit to such an examination.
(c) FOR CAUSE. The Company may terminate the Employment Period
and discharge Employee for cause immediately upon giving notice to Employee of
such termination. The term "for cause" as used herein shall be defined to
include one or more of the following grounds: (i) Employer shall have sufficient
evidence from which it may reasonably conclude that Employee has misappropriated
money or other assets or property (tangible or intangible) of the Company or its
affiliates; (ii) Employee's refusal or failure to perform any reasonable duty
assigned to Employee, and such refusal or failure is not cured by the Employee
within three (3) days of receipt of written notice thereof from the Company;
(iii) conviction of or a guilty plea by Employee of any crime (felony or
misdemeanor) involving moral turpitude where the reputation or public image of
the Company may be adversely affected by Employee's crime; (iv) a material
breach of any of the provisions of this Agreement; (v) any use or being under
the influence of any alcohol or drugs during work hours other than at a Company
function where alcohol is served; or (vi) any unreasonably extended absenteeism
on the part of Employee for reasons other than the Employee's inability, for
physical or mental reasons, to perform the duties required hereunder; PROVIDED,
HOWEVER, that Employee will have no right to cure any default under clause (ii)
above if he or she has been notified twice earlier for other refusals or
failures.
(d) AT THE ELECTION OF THE COMPANY FOR REASONS OTHER THAN FOR
CAUSE. The Company may terminate the Employment Period and Employee's employment
hereunder at any time during the term of this Agreement without cause by giving
sixty (60) days' advance written notice to the Employee of an election to
terminate.
(e) RESIGNATION; "GOOD REASON". Employee may terminate the
Employment Period and Employee's employment hereunder at any time after the date
of this Agreement, without "Good Reason" (as defined below), by giving
forty-five (45) days' advance written notice to the Company of Employee's
resignation. Employee may terminate the Employment Period and Employee's
employment hereunder at any time for "Good Reason" if any of the following has
occurred: (i) the Company reduces Employee's base salary, (ii) the Employee's
participation in the Company's discretionary bonus, profit sharing, or
employment benefit plans is materially reduced or adversely affected or (iii)
the Company breaches any of its material obligations under this Agreement.
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<PAGE>
(f) EFFECT OF TERMINATION OR RESIGNATION - TERMINATION PAYMENTS.
(i) GENERAL. Effective upon the termination of the
Employment Period and Employee's employment under this Agreement, the Company
will be obligated to pay Employee (or, in the event of Employee's death,
Employee's designated beneficiary or estate as set forth below) only such
compensation as is provided in this Section 5 in lieu of all other amounts
and in settlement of and complete release of all claims Employee may have
against the Company. In the event of the termination of the Employment Period
for any reason, the Company shall be obligated to pay and shall promptly pay
Employee (i) any and all amounts due Employee through the date of termination
with respect to all accrued but unpaid salary, (ii) other accrued but unpaid
bonuses through the date of termination, (iii) compensation for earned but
unused vacation time through the date of termination and (iv) unpaid
reimbursements for expenses described in Section 4(b) above incurred prior to
the termination. If Employee is deceased, such accrued payments shall be made
to such individual or entity as Employee may have designated in a writing
submitted to the Company or, in the absence of such written designation, to
Employee's estate. Early termination shall not affect any of Employee's
obligations and duties under Sections 6 or 7 below regardless of whether such
termination requires termination payments as provided below.
(ii) DEATH, DISABILITY, TERMINATION FOR CAUSE OR
RESIGNATION WITHOUT GOOD REASON. Except as set forth in Section 5(f)(i)
above, in the event the Employment Period is terminated pursuant to the
provisions of Section 5(a) (Death), Section 5(b) (Disability) or Section 5(c)
(For Cause) or without Good Reason under Section 5(e), Employee shall not be
entitled to receive any termination benefits or payments; PROVIDED, HOWEVER,
that nothing herein shall preclude Employee from receiving standard death or
disability benefits under the Company's standard policy if provided to
Employee.
(iii) TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD
REASON. In the event the Company exercises its right to terminate the
Employee without cause under Section 5(d) or the Employee exercises his or
her right to resign with Good Reason under Section 5(e), the Company agrees
to pay the Employee a severance or termination payment equal to one hundred
percent (100%) of the Employee's current base salary for the balance of the
Employment Period (collectively, the "SEVERANCE PAYMENTS"). Severance
Payments shall be paid in equal monthly installments for the balance of the
severance period and shall be subject to normal withholding for all
applicable Federal and state taxes required to be withheld.
6. COVENANTS OF THE EMPLOYEE.
(a) NONDISCLOSURE OBLIGATION. Employee agrees to hold in confidence
and not disclose to others, or use for Employee's own benefit, either during
or after the Employment Period, any Confidential Information that Employee
learns, obtains or creates during the Employment Period and any subsequent
period during which Employee is employed by the Company or any of its
affiliates, whether or not during working hours, except to the extent
otherwise authorized by the Company. For purposes of this Agreement,
"CONFIDENTIAL INFORMATION" means information designated or otherwise
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<PAGE>
considered by the Company or any of its affiliates to be confidential or
proprietary, non-public information not known by actual or potential
competitors of Company or any of its affiliates and confidential information
of the Company's or any affiliate's customers, suppliers, licensors and other
third parties with whom any of them does business, including all confidential
or proprietary information that any of them is required to keep confidential.
(b) ASSIGNMENT OF INVENTIONS. Employee agrees and understands
that the making of inventions is one of the incidents of Employee's employment.
Employee agrees to assign to the Company, without further compensation,
Employee's entire right, title and interest in and to all Inventions that are
conceived or reduced to practice by Employee. For purposes of this Agreement,
"INVENTIONS" means all products, designs, specifications, trademarks, service
marks, discoveries, formulae, processes, manufacturing techniques, trade
secrets, inventions, improvements and ideas, whether or not patentable, and all
copyrightable work prepared by Employee as an employee or contractor, alone or
jointly with others, within the scope of Employee's employment by the Company or
any of its affiliates or using any Confidential Information, which shall be work
made for hire owned by the Company. Also included in the foregoing are all
rights to obtain, register, perfect and enforce these rights. Employee agrees to
disclose in confidence all Inventions made by Employee to the Company to permit
a determination as to whether or not such Inventions are covered by this
Agreement. No rights are hereby conveyed in Inventions, if any, made by Employee
prior to the Employment Period, which are identified in Appendix 1 hereto.
Employee agrees to perform, during and after the Employment Period, all acts
deemed necessary or desirable by the Company to permit and assist it, at its
expense, in obtaining and enforcing the full benefits, enjoyment, rights and
title throughout the world in the Inventions assigned hereby. Such acts may
include execution of documents and assistance or cooperation in legal
proceedings.
(c) NON-SOLICITATION. Employee hereby agrees that during the period
of Employee's employment with the Company or any of its affiliates and for a
period of two years thereafter, and in all events for a period of not less
than five (5) years from the Effective Time (as defined in the Agreement of
Merger), without the prior written consent of the Company, Employee shall
not, either as an individual or as an employee, agent, consultant, advisor,
independent contractor, general partner, officer, director, shareholder or
investor of a third party, solicit or attempt to solicit any person who at
the time of such inducement is an employee of the Company or any of its
affiliates to perform work or services for any other person.
(d) RETURN OF PROPERTY, ETC. Upon termination of Employee's
employment with the Company or any of its affiliates, or upon earlier request
of the Company, Employee agrees to return or deliver to the Company all
property belonging to the Company and its affiliates and all tangible forms
of Confidential Information in Employee's possession or control, including
but not limited to drawings, specifications, documents, records, devices,
models or any other material and copies or reproductions thereof. Employee
will provide to the Company, at its request, written certification that
Employee has returned all property and Confidential Information to the
Company and that Employee will continue to honor Employee's confidentiality
obligations hereunder.
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<PAGE>
(e) OTHER AGREEMENTS REGARDING CONFIDENTIALITY. Employee represents
and warrants that Employee's performance of all of the terms of this
Agreement will not breach any agreement to keep in confidence the proprietary
information, knowledge or data of others acquired by Employee in confidence
or in trust prior to the Employment Period, and Employee agrees not to
disclose to the Company or any of its affiliates, or induce the Company or
any of its affiliates to use, any confidential or proprietary information or
material belonging to any previous employer or any other person (other than
Seller or UGM Laboratory, Inc., a Pennsylvania corporation ("UGM
Laboratory")), and represents that Employee does not have in Employee's
possession or control any such information or material. Employee represents
and warrants that Employee is not a party to any other agreement that would
interfere with Employee's full compliance with this Agreement.
(f) SURVIVAL. Except as otherwise expressly provided herein, this
Section 6 shall survive the expiration or termination of this Agreement and
Employee's employment or engagement by the Company or any of its affiliates
and shall inure to the benefit of the successors and assigns of the Company
and shall be binding upon Employee's heirs, assigns, administrators and
representatives.
(g) CONFLICTS. Employee agrees not to enter into any written or
oral agreement that conflicts with the provisions of this Section 6, and
acknowledges that any breach by Employee of this section may constitute
grounds for serious disciplinary action, up to and including termination of
employment with the Company or any of its affiliates.
(h) REMEDIES. Each party acknowledges that in the event of a breach
of this Agreement, the damage to the nonbreaching party would be irreparable
and extremely difficult to estimate, making any remedy at law or in damages
inadequate. Thus, in addition to any other right or remedy available to it, a
party shall be entitled to injunctive relief for breach of any provisions of
this Agreement.
(i) REFORMATION OF AGREEMENT. In the event that any of the
covenants contained in this Section 6 may be found by a court of competent
jurisdiction to be invalid or unenforceable as against public policy or
otherwise, the parties hereto expressly authorize such court to exercise its
discretion in rendering any such covenant to the end that the Employee shall
be subject to the greatest extent permissible to covenants that are
reasonable under the circumstances, enforceable by the Company and consistent
with the Company's legitimate interests, which are hereby acknowledged by the
parties hereto, in protecting the Company's and its affiliates' goodwill
associated with the experience, skills and loyalty of the Employee and in
protecting the value of its investment, through the acquisition of the assets
of Seller and otherwise, in the business and assets of the Seller or any of
its affiliates.
7. RESTRICTION ON COMPETITION.
(a) Unless otherwise agreed to in writing by the Company,
during the Employment Period and thereafter, if Employee continues to be
employed by the Company and/or any other entity owned by or affiliated with the
Company on an "at will" basis, for the duration of such period, and
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<PAGE>
thereafter for a period of two (2) years, and in all events for a period of
not less than five (5) years from the Effective Time (as defined in the
Agreement of Merger), Employee shall not, directly or indirectly, for
Employee or on behalf of or in conjunction with any other person, company,
partnership, corporation, business, group or other entity (each, a "PERSON"):
(i) engage, as an officer, director, shareholder, owner,
partner, member or joint venturer or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services relating to
the field of nuclear medicine equipment and related software, including
without limitation, products or services relating to positron emission
tomography scanners;
(ii) call upon any Person who is, at that time, an employee of
the Company, the Seller or UGM Laboratory for the purpose or with the intent
of enticing such employee away from or out of the employ of the Company, the
Seller or UGM Laboratory; or
(iii) call upon any Person who or that is, at that time, or
has been, within one year prior to that time, a customer of the Company, the
Seller or UGM Laboratory for the purpose of soliciting or selling products or
services in direct competition with the Company, the Seller or UGM Laboratory.
(b) The foregoing covenants shall not be deemed to prohibit
Employee from acquiring as an investment not more than one percent (1%) of the
capital stock of a competing business, whose stock is traded on a national
securities exchange or through the automated quotation system of a registered
securities association.
(c) For purposes of this Section 7, references to "THE
COMPANY" shall mean ADAC Laboratories, together with its subsidiaries and
affiliates.
(d) Because of the difficulty of measuring economic losses to
the Company as a result of a breach of the foregoing covenants, and because of
the immediate and irreparable damage that could be caused to the Company for
which it would have no other adequate remedy, Employee agrees that the foregoing
covenants may be enforced by the Company in the event of breach by Employee by
injunctions and restraining orders.
(e) The parties agree that the foregoing covenants in this
Section 7 impose a reasonable restraint on Employee in light of the activities
and business of the Company on the date of the execution of this Agreement,
assuming the completion of the transactions contemplated by the Agreement of
Merger, and the current plans of the Company.
(f) The covenants in this Section 7 are severable and
separate, and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. If any provision of this Section 7 relating to
the time period or geographic area of the restrictive covenants shall be
declared by a court of competent jurisdiction to exceed the maximum time period
or geographic area, as applicable, that such court deems reasonable and
enforceable, such time period or geographic area
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<PAGE>
shall be deemed to be, and thereafter shall become, the maximum time period
or largest geographic area that such court deems reasonable and enforceable
and this Agreement shall automatically be considered to have been amended and
revised to reflect such determination.
(g) All of the covenants in this Section 7 shall be construed
as an agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants; PROVIDED, that upon
the failure of the Company to make any payments required under this Agreement,
Employee may, upon thirty (30) days' prior written notice to the Company, and to
the extent the Company continues to fail to make such required payments, waive
Employee's right to receive any additional compensation pursuant to this
Agreement and engage in any activity prohibited by the covenants of this Section
7. It is specifically agreed that the two (2) year and five (5) year periods
stated at the beginning of this Section 7, during which the agreements and
covenants of Employee made in this Section 7 shall be effective, shall be
computed by excluding from such computation any time during which Employee is in
violation of any provision of this Section 7.
(h) Employee has carefully read and considered the provisions
of this Section 7 and, having done so, agrees that the restrictive covenants in
this Section 7 impose a fair and reasonable restraint on Employee and are
reasonably required to protect the interests of the Company and its officers,
directors, employees and stockholders. It is further agreed that the Company and
Employee intend that such covenants be construed and enforced in accordance with
the changing activities, business and locations of the Company throughout the
term of these covenants.
(i) The parties hereby agree that the covenants set forth in
this Section 7 are a material and substantial part of the transactions
contemplated by this Agreement, supported by adequate consideration.
8. NONASSIGNABILITY/SUCCESSORS. This Agreement may not be assigned by
either the Company or Employee, except that the Company may assign all or any of
its rights under this Agreement to the Company's affiliates by means of
assignment, merger or otherwise; but no such assignment shall impair the rights
or obligations of the parties as provided herein. Notwithstanding anything to
the contrary contained herein, this Agreement shall not be terminated by any of
the following events, and the successor entity to the Company or recipient of
its assets and Employee shall be bound by the terms of this Agreement: (1) any
merger, consolidation or other combination in which the Company is not the
surviving entity, (2) any sale of all or substantially all of the Company's
assets or (3) any voluntary or involuntary liquidation of the Company.
9. MISCELLANEOUS.
(a) NOTICES. All notices and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand, sent by overnight courier service or
facsimile transmission or dispatched by certified mail, postage pre-paid,
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<PAGE>
return receipt requested, to the parties at the following addresses or to
such other address for a party as such party may have designated to the other
in a prior notice given in accordance herewith:
If to the Company, to:
ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: General Counsel
Facsimile: 408-321-9593
If to Employee, to the address set forth below Employee's
signature.
(b) ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding of the parties hereto concerning the subject
matter hereof and supersedes any prior understandings and agreements relating
to the terms of the Employee's employment by the Company.
(c) AMENDMENTS; WAIVERS. This Agreement may be amended, modified,
superseded, or canceled and the terms or covenants hereof may be waived, only
by a written instrument specifically referring to this Agreement and executed
by both of the parties hereto, or, in the case of a waiver, by the party
entitled to the benefit of such provision. The failure of the Company at any
time or from time to time to require performance of any of Employee's
obligations under this Agreement shall in no manner affect the Company's
right to enforce any provisions of this Agreement at a subsequent time, and
the waiver by the Company of any rights arising out of any breach shall not
be construed as a waiver of any right arising out of any subsequent breach.
(d) SEVERABILITY. If any provision of this Agreement, or the
application thereof to any person or circumstance, should, for any reason and
to any extent, be invalid or unenforceable, the remainder of this Agreement
and the application of such provision to other persons or circumstances shall
not be affected thereby, but rather shall be enforced to the greatest extent
permitted by law.
(e) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
applicable to contracts made and to be performed entirely within such State.
(f) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(g) HEADINGS. The section headings contained in this Agreement are
intended solely for convenience of reference and shall be given no effect in
the construction or interpretation of this Agreement.
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<PAGE>
(h) EFFECTIVENESS OF AGREEMENT. The Agreement shall become
effective upon the consummation of the merger of Sub and Seller pursuant to
the terms of the Agreement of Merger.
(i) PREVAILING PARTY. In the event of any claim, suit or legal
proceeding arising under or related to this Agreement, the prevailing party
shall be entitled to recover from the other party all of its attorneys' fees
and costs. The "PREVAILING PARTY" means the party who obtains substantially
the relief sought by such party in such claim, suit or proceeding, whether by
settlement, summary judgment, judgment or otherwise.
(THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK.)
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the date first written above.
ADAC LABORATORIES EMPLOYEE
By: By:
-------------------------------- ------------------------------
Name: Address:
---------------------------- -------------------------
Title:
------------------------- ------------------------
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<PAGE>
APPENDIX 1
TO
EMPLOYMENT AGREEMENT
EMPLOYEE STATEMENT
PRIOR INNOVATIONS. Except as set forth below, I acknowledge at this time that I
have not made or reduced to practice (alone or jointly with others) any
Inventions (if none, so state):
Conflicting Relationships:
<PAGE>
EXHIBIT E
E-1
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT"), dated as of October
___, 1999, is made by and between Michael Geagan (the "EMPLOYEE") and ADAC
Laboratories, a California corporation (the "COMPANY").
BACKGROUND
A. By virtue of that certain Agreement and Plan of Merger (the
"AGREEMENT OF MERGER") among the Company, UGMMS Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of the Company ("SUB"), UGM Medical
Systems, Inc., a Pennsylvania corporation ("SELLER"), the shareholders of
Seller and Gerd Muehllehner, Ph.D., the Company is acquiring Seller.
B. Employee is considered a key employee of Seller and, following
the consummation of the transactions contemplated by the Agreement of Merger,
desires to be an employee of the Company.
C. Employee and the Company desire to enter into an agreement to
provide for Employee's employment with the Company and to protect the
investment made by the Company and/or its affiliate in acquiring Seller.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement, the parties agree as follows:
1. EMPLOYMENT: DUTIES. During the term of the Employment Period (as
defined in Section 2), and subject to the terms and conditions hereof, the
Company shall employ Employee as Director of Engineering, and the Employee
shall perform such duties for the Company as are assigned or delegated to
Employee, consistent with Employee's knowledge, experience and position with
the Company. Employee accepts such employment and agrees to render the
services described herein and to devote Employee's entire available business
time, effort, skill and attention exclusively to promote the best interests
of the Company.
2. EMPLOYMENT PERIOD. The term of Employee's employment under this
Agreement (the "EMPLOYMENT PERIOD") shall commence on the closing date of the
transactions contemplated in the Agreement of Merger and shall end on the
first anniversary of such date, unless earlier terminated pursuant to Section
5 hereof. To the extent Employee provides any services to the Company after
the expiration of the Employment Period, which the Company and Employee fully
expect Employee will do, such services shall be provided for an unspecified
duration and shall be provided on an "at will" basis, which means that the
employment relationship may be terminated at any time, with or without
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<PAGE>
good cause or any cause, at the option of either the Company or the Employee,
with or without notice, and the parties hereby acknowledge and agree that the
terms of Sections 1 through 5 of this Agreement shall not be applicable
thereto.
3. BASE SALARY. As compensation for the services to be rendered by
Employee during the Employment Period, the Company shall pay Employee an
annual base salary of $90,000, payable periodically consistent with the
Company's normal payroll practices, less such deductions and amounts to be
withheld therefrom as may be required under applicable law.
4. BONUS AND OTHER BENEFITS AND TERMS OF EMPLOYMENT. During the
Employment Period, the following benefits and other terms of employment shall
also apply:
(a) BONUSES. Employee shall be entitled to discretionary
bonuses on an annual basis in an amount equal to up to 20% of Employee's base
salary in accordance with the Company's standard company-wide bonus plan for
managers (referred to by the Company's management as the "MIT" or "Most
Important Task" bonus program). Such bonuses shall be subject to normal
withholding for all applicable federal and state taxes required to be
withheld.
(b) EXPENSES. The Company shall reimburse Employee for
customary and necessary expenses reasonably incurred by Employee in the
course of performing those duties which he or she has been requested to
perform by the Company, all in accordance with the Company's reimbursement
policies then in effect.
(c) INSURANCE, OTHER BENEFITS. To the extent offered by the
Company, Employee may participate in employee health, hospitalization,
disability, group-term life and other benefit programs on the same basis as
the Company's other employees who are at the same level of responsibility as
Employee.
(d) VACATION AND HOLIDAYS. Employee shall be entitled to
paid vacation commensurate with the vacation available to similarly situated
employees of the Company. Vacation must be taken by Employee at such time or
times as approved by Employee's immediate manager. Employee will also be
entitled to the paid holidays set forth in the Company's policies. Vacation
days and holidays during any fiscal year that are not used by Employee during
such year may not be used in any subsequent fiscal year.
(e) STOCK OPTIONS. The Company agrees to grant Employee
options to purchase 8,000 shares of the common stock of the Company pursuant
to the Company's Long-Term Incentive Plan. Such options will be granted by
the Compensation Committee of the Board of Directors of the Company at the
next meeting of the Committee. The exercise price for such options shall be
equal to the fair market value of such common stock on the date of grant.
5. TERMINATION. Subject to the provisions of Section 5(f) below, the
employment of Employee may be terminated as follows:
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(a) DEATH. The Employment Period shall terminate upon the
Employee's death.
(b) DISABILITY. Subject to any limitations imposed under
applicable law, the Employment Period shall terminate upon Employee's
disability. Employee shall be regarded as disabled for purposes of this
Agreement if Employee has been unable, for physical or mental reasons, to
perform the duties required hereunder, in a manner consistent with past
practice, for a consecutive period of sixty (60) days or for ninety (90) days
during any twelve-month period during the Employment Period. In the event
that there should be any dispute between Employee and the Company as to
whether Employee is disabled within the meaning of this Agreement, such
matter shall be conclusively determined by the written report of a physician
selected by the Company, who is reasonably satisfactory to Employee. Employee
agrees to submit to examination by any such physician for the purpose of
determining whether Employee is disabled, and the parties agree that any
determination with respect to Employee's disability may be conclusively
resolved in the sole judgment of the Board of Directors of the Company if
Employee should fail to comply with any request by the Company to submit to
such an examination.
(c) FOR CAUSE. The Company may terminate the Employment
Period and discharge Employee for cause immediately upon giving notice to
Employee of such termination. The term "for cause" as used herein shall be
defined to include one or more of the following grounds: (i) Employer shall
have sufficient evidence from which it may reasonably conclude that Employee
has misappropriated money or other assets or property (tangible or
intangible) of the Company or its affiliates; (ii) Employee's refusal or
failure to perform any reasonable duty assigned to Employee, and such refusal
or failure is not cured by the Employee within three (3) days of receipt of
written notice thereof from the Company; (iii) conviction of or a guilty plea
by Employee of any crime (felony or misdemeanor) involving moral turpitude
where the reputation or public image of the Company may be adversely affected
by Employee's crime; (iv) a material breach of any of the provisions of this
Agreement; (v) any use or being under the influence of any alcohol or drugs
during work hours other than at a Company function where alcohol is served;
or (vi) any unreasonably extended absenteeism on the part of Employee for
reasons other than the Employee's inability, for physical or mental reasons,
to perform the duties required hereunder; PROVIDED, HOWEVER, that Employee
will have no right to cure any default under clause (ii) above if he or she
has been notified twice earlier for other refusals or failures.
(d) AT THE ELECTION OF THE COMPANY FOR REASONS OTHER THAN
FOR CAUSE. The Company may terminate the Employment Period and Employee's
employment hereunder at any time during the term of this Agreement without
cause by giving sixty (60) days' advance written notice to the Employee of an
election to terminate.
(e) RESIGNATION; "GOOD REASON". Employee may terminate the
Employment Period and Employee's employment hereunder at any time after the
date of this Agreement, without "Good Reason" (as defined below), by giving
forty-five (45) days' advance written notice to the Company of Employee's
resignation. Employee may terminate the Employment Period and Employee's
employment hereunder at any time for "Good Reason" if any of the following
has occurred: (i) the Company reduces
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Employee's base salary, (ii) the Employee's participation in the Company's
discretionary bonus, profit sharing, or employment benefit plans is
materially reduced or adversely affected or (iii) the Company breaches any of
its material obligations under this Agreement.
(f) EFFECT OF TERMINATION OR RESIGNATION - TERMINATION
PAYMENTS.
(i) GENERAL. Effective upon the termination
of the Employment Period and Employee's employment under this Agreement, the
Company will be obligated to pay Employee (or, in the event of Employee's
death, Employee's designated beneficiary or estate as set forth below) only
such compensation as is provided in this Section 5 in lieu of all other
amounts and in settlement of and complete release of all claims Employee may
have against the Company. In the event of the termination of the Employment
Period for any reason, the Company shall be obligated to pay and shall
promptly pay Employee (i) any and all amounts due Employee through the date
of termination with respect to all accrued but unpaid salary, (ii) other
accrued but unpaid bonuses through the date of termination, (iii)
compensation for earned but unused vacation time through the date of
termination and (iv) unpaid reimbursements for expenses described in Section
4(b) above incurred prior to the termination. If Employee is deceased, such
accrued payments shall be made to such individual or entity as Employee may
have designated in a writing submitted to the Company or, in the absence of
such written designation, to Employee's estate. Early termination shall not
affect any of Employee's obligations and duties under Sections 6 or 7 below
regardless of whether such termination requires termination payments as
provided below.
(ii) DEATH, DISABILITY, TERMINATION FOR CAUSE
OR RESIGNATION WITHOUT GOOD REASON. Except as set forth in Section 5(f)(i)
above, in the event the Employment Period is terminated pursuant to the
provisions of Section 5(a) (Death), Section 5(b) (Disability) or Section 5(c)
(For Cause) or without Good Reason under Section 5(e), Employee shall not be
entitled to receive any termination benefits or payments; PROVIDED, HOWEVER,
that nothing herein shall preclude Employee from receiving standard death or
disability benefits under the Company's standard policy if provided to
Employee.
(iii) TERMINATION WITHOUT CAUSE OR RESIGNATION
FOR GOOD REASON. In the event the Company exercises its right to terminate
the Employee without cause under Section 5(d) or the Employee exercises his
or her right to resign with Good Reason under Section 5(e), the Company
agrees to pay the Employee a severance or termination payment equal to one
hundred percent (100%) of the Employee's current base salary for the balance
of the Employment Period (collectively, the "SEVERANCE PAYMENTS"). Severance
Payments shall be paid in equal monthly installments for the balance of the
severance period and shall be subject to normal withholding for all
applicable Federal and state taxes required to be withheld.
6. COVENANTS OF THE EMPLOYEE.
(a) NONDISCLOSURE OBLIGATION. Employee agrees to hold in
confidence and not disclose to others, or use for Employee's own benefit,
either during or after the Employment Period, any
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Confidential Information that Employee learns, obtains or creates during the
Employment Period and any subsequent period during which Employee is employed
by the Company or any of its affiliates, whether or not during working hours,
except to the extent otherwise authorized by the Company. For purposes of
this Agreement, "CONFIDENTIAL INFORMATION" means information designated or
otherwise considered by the Company or any of its affiliates to be
confidential or proprietary, non-public information not known by actual or
potential competitors of Company or any of its affiliates and confidential
information of the Company's or any affiliate's customers, suppliers,
licensors and other third parties with whom any of them does business,
including all confidential or proprietary information that any of them is
required to keep confidential.
(b) ASSIGNMENT OF INVENTIONS. Employee agrees and
understands that the making of inventions is one of the incidents of
Employee's employment. Employee agrees to assign to the Company, without
further compensation, Employee's entire right, title and interest in and to
all Inventions that are conceived or reduced to practice by Employee. For
purposes of this Agreement, "INVENTIONS" means all products, designs,
specifications, trademarks, service marks, discoveries, formulae, processes,
manufacturing techniques, trade secrets, inventions, improvements and ideas,
whether or not patentable, and all copyrightable work prepared by Employee as
an employee or contractor, alone or jointly with others, within the scope of
Employee's employment by the Company or any of its affiliates or using any
Confidential Information, which shall be work made for hire owned by the
Company. Also included in the foregoing are all rights to obtain, register,
perfect and enforce these rights. Employee agrees to disclose in confidence
all Inventions made by Employee to the Company to permit a determination as
to whether or not such Inventions are covered by this Agreement. No rights
are hereby conveyed in Inventions, if any, made by Employee prior to the
Employment Period, which are identified in Appendix 1 hereto. Employee agrees
to perform, during and after the Employment Period, all acts deemed necessary
or desirable by the Company to permit and assist it, at its expense, in
obtaining and enforcing the full benefits, enjoyment, rights and title
throughout the world in the Inventions assigned hereby. Such acts may include
execution of documents and assistance or cooperation in legal proceedings.
(c) NON-SOLICITATION. Employee hereby agrees that during
the period of Employee's employment with the Company or any of its affiliates
and for a period of two years thereafter, and in all events for a period of
not less than five (5) years from the Effective Time (as defined in the
Agreement of Merger), without the prior written consent of the Company,
Employee shall not, either as an individual or as an employee, agent,
consultant, advisor, independent contractor, general partner, officer,
director, shareholder or investor of a third party, solicit or attempt to
solicit any person who at the time of such inducement is an employee of the
Company or any of its affiliates to perform work or services for any other
person.
(d) RETURN OF PROPERTY, ETC. Upon termination of Employee's
employment with the Company or any of its affiliates, or upon earlier request
of the Company, Employee agrees to return or deliver to the Company all
property belonging to the Company and its affiliates and all tangible forms
of Confidential Information in Employee's possession or control, including
but not limited to drawings,
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<PAGE>
specifications, documents, records, devices, models or any other material and
copies or reproductions thereof. Employee will provide to the Company, at its
request, written certification that Employee has returned all property and
Confidential Information to the Company and that Employee will continue to
honor Employee's confidentiality obligations hereunder.
(e) OTHER AGREEMENTS REGARDING CONFIDENTIALITY. Employee
represents and warrants that Employee's performance of all of the terms of
this Agreement will not breach any agreement to keep in confidence the
proprietary information, knowledge or data of others acquired by Employee in
confidence or in trust prior to the Employment Period, and Employee agrees
not to disclose to the Company or any of its affiliates, or induce the
Company or any of its affiliates to use, any confidential or proprietary
information or material belonging to any previous employer or any other
person (other than Seller or UGM Laboratory, Inc., a Pennsylvania corporation
("UGM Laboratory")), and represents that Employee does not have in Employee's
possession or control any such information or material. Employee represents
and warrants that Employee is not a party to any other agreement that would
interfere with Employee's full compliance with this Agreement.
(f) SURVIVAL. Except as otherwise expressly provided
herein, this Section 6 shall survive the expiration or termination of this
Agreement and Employee's employment or engagement by the Company or any of
its affiliates and shall inure to the benefit of the successors and assigns
of the Company and shall be binding upon Employee's heirs, assigns,
administrators and representatives.
(g) CONFLICTS. Employee agrees not to enter into any
written or oral agreement that conflicts with the provisions of this Section
6, and acknowledges that any breach by Employee of this section may
constitute grounds for serious disciplinary action, up to and including
termination of employment with the Company or any of its affiliates.
(h) REMEDIES. Each party acknowledges that in the event of
a breach of this Agreement, the damage to the nonbreaching party would be
irreparable and extremely difficult to estimate, making any remedy at law or
in damages inadequate. Thus, in addition to any other right or remedy
available to it, a party shall be entitled to injunctive relief for breach of
any provisions of this Agreement.
(i) REFORMATION OF AGREEMENT. In the event that any of the
covenants contained in this Section 6 may be found by a court of competent
jurisdiction to be invalid or unenforceable as against public policy or
otherwise, the parties hereto expressly authorize such court to exercise its
discretion in rendering any such covenant to the end that the Employee shall
be subject to the greatest extent permissible to covenants that are
reasonable under the circumstances, enforceable by the Company and consistent
with the Company's legitimate interests, which are hereby acknowledged by the
parties hereto, in protecting the Company's and its affiliates' goodwill
associated with the experience, skills and loyalty of the Employee and in
protecting the value of its investment, through the acquisition of the assets
of Seller and otherwise, in the business and assets of the Seller or any of
its affiliates.
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<PAGE>
7. RESTRICTION ON COMPETITION.
(a) Unless otherwise agreed to in writing by the Company,
during the Employment Period and thereafter, if Employee continues to be
employed by the Company and/or any other entity owned by or affiliated with
the Company on an "at will" basis, for the duration of such period, and
thereafter for a period of two (2) years, and in all events for a period of
not less than five (5) years from the Effective Time (as defined in the
Agreement of Merger), Employee shall not, directly or indirectly, for
Employee or on behalf of or in conjunction with any other person, company,
partnership, corporation, business, group or other entity (each, a "PERSON"):
(i) engage, as an officer, director,
shareholder, owner, partner, member or joint venturer or in a managerial
capacity, whether as an employee, independent contractor, consultant or
advisor, or as a sales representative, in any business selling any products
or services relating to the field of nuclear medicine equipment and related
software, including without limitation, products or services relating to
positron emission tomography scanners;
(ii) call upon any Person who is, at that time, an
employee of the Company, the Seller or UGM Laboratory for the purpose or with
the intent of enticing such employee away from or out of the employ of the
Company, the Seller or UGM Laboratory; or
(iii) call upon any Person who or that is, at that
time, or has been, within one year prior to that time, a customer of the
Company, the Seller or UGM Laboratory for the purpose of soliciting or
selling products or services in direct competition with the Company, the
Seller or UGM Laboratory.
(b) The foregoing covenants shall not be deemed to prohibit
Employee from acquiring as an investment not more than one percent (1%) of
the capital stock of a competing business, whose stock is traded on a
national securities exchange or through the automated quotation system of a
registered securities association.
(c) For purposes of this Section 7, references to "THE
COMPANY" shall mean ADAC Laboratories, together with its subsidiaries and
affiliates.
(d) Because of the difficulty of measuring economic losses
to the Company as a result of a breach of the foregoing covenants, and
because of the immediate and irreparable damage that could be caused to the
Company for which it would have no other adequate remedy, Employee agrees
that the foregoing covenants may be enforced by the Company in the event of
breach by Employee by injunctions and restraining orders.
(e) The parties agree that the foregoing covenants in this
Section 7 impose a reasonable restraint on Employee in light of the
activities and business of the Company on the date of
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the execution of this Agreement, assuming the completion of the transactions
contemplated by the Agreement of Merger, and the current plans of the Company.
(f) The covenants in this Section 7 are severable and
separate, and the unenforceability of any specific covenant shall not affect
the provisions of any other covenant. If any provision of this Section 7
relating to the time period or geographic area of the restrictive covenants
shall be declared by a court of competent jurisdiction to exceed the maximum
time period or geographic area, as applicable, that such court deems
reasonable and enforceable, such time period or geographic area shall be
deemed to be, and thereafter shall become, the maximum time period or largest
geographic area that such court deems reasonable and enforceable and this
Agreement shall automatically be considered to have been amended and revised
to reflect such determination.
(g) All of the covenants in this Section 7 shall be
construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of Employee
against the Company, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Company of such covenants;
PROVIDED, that upon the failure of the Company to make any payments required
under this Agreement, Employee may, upon thirty (30) days' prior written
notice to the Company, and to the extent the Company continues to fail to
make such required payments, waive Employee's right to receive any additional
compensation pursuant to this Agreement and engage in any activity prohibited
by the covenants of this Section 7. It is specifically agreed that the two
(2) year and five (5) year periods stated at the beginning of this Section 7,
during which the agreements and covenants of Employee made in this Section 7
shall be effective, shall be computed by excluding from such computation any
time during which Employee is in violation of any provision of this Section 7.
(h) Employee has carefully read and considered the
provisions of this Section 7 and, having done so, agrees that the restrictive
covenants in this Section 7 impose a fair and reasonable restraint on
Employee and are reasonably required to protect the interests of the Company
and its officers, directors, employees and stockholders. It is further agreed
that the Company and Employee intend that such covenants be construed and
enforced in accordance with the changing activities, business and locations
of the Company throughout the term of these covenants.
(i) The parties hereby agree that the covenants set forth
in this Section 7 are a material and substantial part of the transactions
contemplated by this Agreement, supported by adequate consideration.
8. NONASSIGNABILITY/SUCCESSORS. This Agreement may not be assigned
by either the Company or Employee, except that the Company may assign all or
any of its rights under this Agreement to the Company's affiliates by means
of assignment, merger or otherwise; but no such assignment shall impair the
rights or obligations of the parties as provided herein. Notwithstanding
anything to the contrary contained herein, this Agreement shall not be
terminated by any of the following events, and the successor entity to the
Company or recipient of its assets and Employee shall be bound
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by the terms of this Agreement: (1) any merger, consolidation or other
combination in which the Company is not the surviving entity, (2) any sale of
all or substantially all of the Company's assets or (3) any voluntary or
involuntary liquidation of the Company.
9. MISCELLANEOUS.
(a) NOTICES. All notices and other communications required
or permitted to be given hereunder shall be in writing and shall be deemed to
have been duly given when delivered by hand, sent by overnight courier
service or facsimile transmission or dispatched by certified mail, postage
pre-paid, return receipt requested, to the parties at the following addresses
or to such other address for a party as such party may have designated to the
other in a prior notice given in accordance herewith:
If to the Company, to:
ADAC Laboratories
540 Alder Drive
Milpitas, CA 95035
Attn: General Counsel
Facsimile: 408-321-9593
If to Employee, to the address set forth below Employee's
signature.
(b) ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding of the parties hereto concerning the subject
matter hereof and supersedes any prior understandings and agreements relating
to the terms of the Employee's employment by the Company.
(c) AMENDMENTS; WAIVERS. This Agreement may be amended,
modified, superseded, or canceled and the terms or covenants hereof may be
waived, only by a written instrument specifically referring to this Agreement
and executed by both of the parties hereto, or, in the case of a waiver, by
the party entitled to the benefit of such provision. The failure of the
Company at any time or from time to time to require performance of any of
Employee's obligations under this Agreement shall in no manner affect the
Company's right to enforce any provisions of this Agreement at a subsequent
time, and the waiver by the Company of any rights arising out of any breach
shall not be construed as a waiver of any right arising out of any subsequent
breach.
(d) SEVERABILITY. If any provision of this Agreement, or
the application thereof to any person or circumstance, should, for any reason
and to any extent, be invalid or unenforceable, the remainder of this
Agreement and the application of such provision to other persons or
circumstances shall not be affected thereby, but rather shall be enforced to
the greatest extent permitted by law.
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(e) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
applicable to contracts made and to be performed entirely within such State.
(f) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(g) HEADINGS. The section headings contained in this
Agreement are intended solely for convenience of reference and shall be given
no effect in the construction or interpretation of this Agreement.
(h) EFFECTIVENESS OF AGREEMENT. The Agreement shall become
effective upon the consummation of the merger of Sub and Seller pursuant to
the terms of the Agreement of Merger.
(i) PREVAILING PARTY. In the event of any claim, suit or
legal proceeding arising under or related to this Agreement, the prevailing
party shall be entitled to recover from the other party all of its attorneys'
fees and costs. The "PREVAILING PARTY" means the party who obtains
substantially the relief sought by such party in such claim, suit or
proceeding, whether by settlement, summary judgment, judgment or otherwise.
(THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK.)
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IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the date first written above.
ADAC LABORATORIES EMPLOYEE
By: By:
---------------------------------- --------------------------------
Name: Address:
---------------------------------- --------------------------------
Title:
------------------------------- --------------------------------
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APPENDIX 1
TO
EMPLOYMENT AGREEMENT
EMPLOYEE STATEMENT
PRIOR INNOVATIONS. Except as set forth below, I acknowledge at this time that
I have not made or reduced to practice (alone or jointly with others) any
Inventions (if none, so state):
Conflicting Relationships:
<PAGE>
EXHIBIT F
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[LOGO]
INDEPENDENT CONTRACTOR AGREEMENT
This INDEPENDENT CONTRACTOR AGREEMENT ("Agreement") is made as of _____________,
1999 between ADAC Laboratories, a California corporation with offices at 540
Alder Drive, Milpitas, CA 95035 ("ADAC") and Joel Karp, with an address of
________________________________ "Contractor").
RECITALS
A. ADAC requires the services of qualified individuals who possess
specialized skills and expertise to work on limited-term consulting projects or
other assignments from time to time.
B. Contractor is in the business of rendering specialized services to
clients such as ADAC on such consulting projects or other assignments.
C. ADAC desires to retain Contractor, and Contractor desires to be so
retained, to render services to ADAC on the terms and conditions specified in
this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. SERVICES. Subject to this Agreement, ADAC hereby retains Contractor to
perform the projects or other assignments during the time frame(s) and as
specified in EXHIBIT A.
2. TERM. This Agreement shall commence on the effective date of ADAC's
acquisition of UGM Medical Systems, Inc. and be effective for the period
specified in EXHIBIT A (the "Term"), unless sooner terminated due to (a)
completion of the services described in EXHIBIT A, or (b) pursuant to Section
10. In no event shall the Term exceed twelve (12) months.
3. TERMS OF ENGAGEMENT
(a) Contractor will determine the method, details and means of performing the
services specified in EXHIBIT A, and ADAC shall not direct, control or supervise
Contractor in this regard.
(b) Contractor shall perform the services set forth in EXHIBIT A at any place or
location and at such times as Contractor shall determine; provided, however,
that if the parties agree that the services to be provided by Contractor
necessitate that such services be performed on ADAC's premises, ADAC shall
furnish sufficient space for use by Contractor for such purpose. Contractor will
be responsible for supplying all tools and instrumentalities required to perform
the work specified in EXHIBIT A.
(c) During the Term, Contractor shall not render services in any capacity to any
company, division or business unit whose services or products are competitive
with any ADAC product or service. To the extent this Section 3(c) conflicts with
the terms of the Nondisclosure Agreement (as defined in Section 6 below), the
terms of this Section shall govern. Nothing in this agreement shall preclude
Contractor from fulfilling his employment obligations to the University of
Pennsylvania, provided that Contractor avoids to the maximum extent possible
within his employment at the University of Pennsylvania any activity which
directly benefits a company, division or business unit whose services or
products are competitive with any ADAC product or service.
<PAGE>
4. FEES. In consideration for services rendered pursuant to this Agreement,
ADAC shall pay Contractor the fees set forth in EXHIBIT A. Unless otherwise
agreed, Contractor will submit monthly invoices to ADAC in respect of
services rendered, and ADAC shall pay each such invoice within forty-five
(45) days of receipt.
5. EXPENSES. ADAC will reimburse Contractor for all out-of-pocket expenses
actually incurred by Contractor in rendering services under this Agreement so
long as such expenses are (a) necessary, reasonable and directly related to
work specified in EXHIBIT A, and (b) consistent with ADAC's then-current
expense reimbursement policies. Notwithstanding the foregoing, Contractor
shall be solely liable for payment of all fees, licenses, bonds, taxes or
other expenses required or imposed against Contractor as a cost of doing
business.
6. NONDISCLOSURE AGREEMENT. Upon execution of this Agreement, Contractor and
each Related Party (as defined in Section 7 below) shall be bound by the ADAC
Nondisclosure and Inventions Agreement ("Nondisclosure Agreement") which
Contractor shall execute as a condition to this Agreement becoming effective.
7. STATUS OF CONTRACTOR AND RELATED PARTIES. Contractor agrees and
acknowledges that neither Contractor nor any of Contractor's employees,
subcontractors or agents (each, a "Related Party"), shall be considered,
represented as, or deemed to be employees of ADAC. Accordingly, neither
Contractor nor any Related Party shall be eligible for any ADAC employee
benefits including, but not limited to, workers' compensation, disability
insurance or unemployment insurance. Contractor will be solely responsible
for properly reporting, withholding and paying all applicable taxes and other
fees with respect to (a) all amounts directly or indirectly paid by ADAC to
Contractor or any Related Party, and (b) all amounts paid by Contractor to
any Related Party.
8. RELATIONSHIP BETWEEN PARTIES. ADAC and Contractor shall be independent
contractors, and shall not be deemed to be partners, joint venturers or
co-employers of any Related Party, or for any other purpose. In addition to
all other indemnities provided herein, Contractor shall indemnify and hold
harmless ADAC and each Indemnitee (as defined in Section 11) from any and all
claims, suits, losses, damages, liabilities, awards, costs (including
attorneys' fees and costs) or other expenses of any kind or nature which
arise from or relate to any finding or assertion that (a) ADAC and Contractor
are other than independent contractors of one another, or (b) that any
Related Party is other than an independent contractor of ADAC
9. TERM AND TERMINATION.
(a) Except as otherwise provided in this Agreement, either party may terminate
this Agreement upon ten (10) days' written notice to the other party if such
party: (i) becomes the subject of any voluntary or involuntary bankruptcy or
insolvency proceeding under any applicable law; (ii) ceases to be actively
engaged in business; or (ii) breaches any material term or condition of this
Agreement and fails to remedy the breach within fifteen (15) days after
receiving written notice thereof; provided, however, that if such breach cannot
be cured within such fifteen (15) day period but (x) the breach is capable of
cure, (y) the breaching party begins to effect a cure within such fifteen (15)
day period, and (z) the breaching party diligently pursues such cure, such party
shall have so much time as is reasonably necessary to cure such default.
(b) Notwithstanding the foregoing, ADAC shall have the right to terminate this
Agreement immediately upon written notice to Contractor in the following
circumstances: (i) the death or disability (defined below) of Contractor (if
Contractor is an individual); (ii) the actual or alleged violation by Contractor
or any Related Party of any federal, state or local statute, regulation, law or
ordinance which, in ADAC's opinion, adversely affects the business or reputation
of ADAC, or Contractor's ability to perform Contractor's duties hereunder; (iii)
upon the absence or unavailability of Contractor or a Related Party assigned to
ADAC for any reason for a period in excess of ten (10) consecutive days without
the prior written approval of ADAC; (iv) material violation by Contractor or any
Related Party of any ADAC policy; or (v) breach by Contractor or any Related
Party of any provision of the Nondisclosure Agreement. "Disability" means a
physical or mental disability of a nature
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which, in ADAC's reasonable opinion, will prevent an individual from timely
performing work under this Agreement. ADAC may also terminate this Agreement
for any reason upon thirty (30) days prior written notice to Contractor.
(c) Termination of this Agreement shall become effective on the date specified
in the applicable notice. Upon termination, ADAC shall have no obligation to
Contractor other than the payment of fees and other amounts due with respect to
services actually rendered by Contractor prior to the effective date of such
termination. Notwithstanding termination of this Agreement for any reason,
Contractor shall continue to be bound by its obligations under the Nondisclosure
Agreement.
10. INDEMNIFICATION. Contractor shall indemnify and hold harmless ADAC and
each of its subsidiaries and each of their respective officers, directors,
employees and agents ("Indemnitees") from and against any and all claims,
suits, losses, damages, liabilities, awards, costs (including attorneys' fees
and costs) or other expenses of any kind or nature arising from or relating
to: (a) any wrongful act or omission by Contractor or any Related Party,
whether or not the same constitutes a breach of this Agreement or is
committed in the course of performing Contractor's duties hereunder,
including but not limited to those acts or omissions which are considered
tortious, discriminatory or otherwise unlawful under any applicable law; and
(b) any act or omission relating to Contractor's failure to properly report,
withhold or pay any applicable federal, state or local taxes or fees of any
kind. ADAC shall indemnify and hold harmless Contactor from and against any
and all claims, suits, losses, damages, liabilities, awards, costs (including
attorneys' fees and costs) or other expenses of any kind or nature arising
from or relating to any wrongful act or omission by ADAC , whether or not the
same constitutes a breach of this Agreement or is committed in the course of
performing ADAC's duties hereunder, including but not limited to those acts
or omissions which are considered tortious, discriminatory, or otherwise
unlawful under any applicable law.
11. CONTRACTOR'S REPRESENTATION AND WARRANTY. Contractor represents and
warrants to ADAC that: (a) performance of its services hereunder (whether
directly or in conjunction with any Related Person) will not result in the
breach or violation of any contract, arrangement or understanding which
Contractor may have with any third party; (b) Contractor's products and
services hereunder will conform to ADAC's specifications, if any; and (c)
Contractor and each Related Party rendering services hereunder is authorized
under the Immigration Reform and Control Act of 1986 (IRCA) to lawfully work
in the United States.
12. ALTERNATIVE DISPUTE RESOLUTION. The parties agree that except for an
action seeking injunctive relief relating to a breach of the Nondisclosure
Agreement, they will meet and negotiate in good faith to resolve any
controversy or claim between them arising under this Agreement before a
mutually agreed-upon neutral mediator. If negotiations do not resolve the
dispute within sixty (60) days of a written request by either party for
mediation, then the dispute shall be submitted to binding arbitration before
a single arbitrator in accordance with applicable rules of the American
Arbitration Association. The parties agree that appropriate venue for such
arbitration shall be the County of Santa Clara or the County of San
Francisco. This Section does not apply to any action or proceeding which may
be commenced by any third party against either Contractor or ADAC in
connection with this Agreement.
13. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without regard to conflict
of law rules. The parties shall submit to the jurisdiction of the state and
federal courts located within the counties of Santa Clara or San Francisco
within the State of California.
(b) NOTICE. All notices required or permitted hereunder shall be given in
writing and shall be deemed to have been given either: (i) upon personal
delivery or confirmed facsimile transmission; (ii) one (1) day after deposit
with a courier service for next day delivery; or (iii) five (5) days after
deposit in the U.S. Mail, registered mail-postage prepaid. In all cases, notices
shall be directed to the signatories below at the addresses and/or
-3-
<PAGE>
facsimile transmission numbers set forth at the beginning of this Agreement.
Either party may change its address or facsimile number upon written notice
to the other party in accordance with the terms of this subsection.
(c) ASSIGNMENT. Contractor may not assign any of its rights (except the right to
receive payment) or obligations hereunder by operation of law or otherwise
without the prior written consent of ADAC. ADAC may assign its rights or
delegate its obligations hereunder to any successor to its business without
Contractor's consent. Any assignment or attempted assignment in violation of
this Section shall be void and of no force or effect.
(d) SEVERABILITY. In the event that any of the terms or provisions herein shall
violate any statutory provision or may be otherwise unlawful or inoperative, it
is the intent and desire of the parties that this Agreement operate and be in
full force and effect insofar as it is otherwise lawful, and that the Agreement
be carried out as far as possible consistent with its tenor and effect.
(e) ATTORNEYS' FEES. In the event of any claim, suit or other legal proceeding
arising under or related to this Agreement, the prevailing party shall be
entitled to recover from the other party its reasonable costs incurred in such
proceeding, including without limitation attorneys' fees. The "prevailing party"
shall mean the party who obtains substantially the relief sought by such party
in such claim, suit or proceeding, whether by settlement, summary judgment,
judgment or otherwise. Notwithstanding this provision, the parties shall equally
share the costs of any mediation described in Section 13, however, that each
party shall bear the expense of its own attorneys' fees.
(f) ENTIRE AGREEMENT; MODIFICATION. This Agreement represents the entire
agreement of the parties and cancels and supersedes any prior or contemporaneous
agreements or understandings between them with respect to the subject matter
hereof. This Agreement may only be modified or amended by mutual written
agreement of the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first written above.
ADAC LABORATORIES CONTRACTOR
By: By:
-------------------------------- --------------------------------
Title: Title:
----------------------------- -----------------------------
Print Name: Print Name:
------------------------ ------------------------
-4-
<PAGE>
EXHIBIT A
1. SERVICES/ASSIGNMENTS TO BE PERFORMED:
UPON THE REASONABLE REQUEST OF ADAC, CONTRACTOR SHALL PARTICIPATE IN
SPEAKING ENGAGEMENTS AND PRESENTATIONS TO COMMUNICATE THE RESULTS OF DISCOVERIES
MADE AND WORK PERFORMED IN CONNECTION WITH HIS CONSULTING DUTIES MADE PURSUANT
TO THIS AGREEMENT. ADDITIONAL SERVICES/ASSIGNMENTS TO BE AGREED IN A
SUBSEQUENTLY EXECUTED EXHIBIT A.
2. TERM (specify in days or months not to exceed one year):
(a) days
--------------------
-or-
(b) 12 months from effective date
--------------------
3. FEES:
(a) Hourly Rate: $ /hour, not to exceed hours
--------- -----------
-or-
(b) Daily Rate: $ /8-hour-day, not to exceed days
--------- ------
-or-
(c) MILESTONE PAYMENTS (must obtain prior approval before using):
FEES NOT TO EXCEED $50,000
-5-
<PAGE>
PAYMENT MILESTONE
$
-------------------------
$
-------------------------
$
-------------------------
ADAC LABORATORIES CONTRACTOR
By: By:
-------------------------------- --------------------------------
Title: Title:
----------------------------- -----------------------------
Print Name: Print Name:
------------------------ ------------------------
Date: Date:
------------------------------ ------------------------------
-6-
<PAGE>
ADAC LABORATORIES
NONDISCLOSURE AND INVENTIONS AGREEMENT
In consideration of and as a condition of my employment or engagement
by ADAC Laboratories, its subsidiaries, affiliates or successors (collectively,
"ADAC"), I agree as follows:
1. I will hold in confidence and not disclose to others, or use for my
own benefit, either during or after my employment or engagement by ADAC, any
Confidential Information that I learn, obtain or create during the period of
my employment or engagement with ADAC, whether or not during working hours,
except to the extent otherwise authorized by ADAC. For purposes of this
Agreement, "Confidential Information" means information designated or
otherwise considered by ADAC to be confidential or proprietary, non-public
information not known by actual or potential competitors of ADAC, and
confidential or proprietary information of ADAC's customers, suppliers,
licensors, and other third parties with whom ADAC does business, including
all confidential or proprietary information that ADAC is required to keep
confidential; provided that such term shall not include information (i) that
was publicly known prior to the time I learn, obtain or create such
information or (ii) that subsequently becomes publicly known through no act
or omission by me or any third person or entity acting on my behalf or to
whom I provided such information.
This Agreement does not impede my right to publish information that I develop to
the extent such information is not Confidential Information and is not otherwise
restricted by this Agreement; provided that ADAC shall have the right to review
and approve any information prior to its submission for publication and its
publication and prior to any other presentation, whether written or oral, of
such information.
2. I understand that the making of Inventions is one of the incidents
of my employment and I agree to assign to ADAC, without further compensation,
my entire right, title, and interest in and to all Inventions that are
conceived or reduced to practice by me, or jointly with others, during the
period of my employment or engagement with ADAC or while using any
Confidential Information. For the avoidance of doubt, the right, title and
interest in and to all Inventions that are conceived or reduced to practice
jointly with unaffiliated third parties during the period of my employment or
engagement with ADAC or while using any Confidential Information are subject
to the rights of such unaffiliated third parties in connection therewith. The
foregoing shall not apply, however, to any Invention that is developed
entirely in connection with work unrelated to ADAC or its affiliates, such as
University sponsored research and development that does not involve ADAC or
its affiliates, and that qualifies fully under the provisions of Section 2870
of the California Labor Code, which provides as follows:
"(a) Any provision in an employment agreement which provides
that an employee shall assign, or offer to assign, any of his
or her rights in an invention to his or her employer shall not
apply to an invention that the employee developed entirely on
his or her own time without using the employer's equipment,
supplies, facilities, or trade secret information except for
those inventions that either:
(1) Relate at the time of conception or reduction to
practice of the invention to the employer's business or actual
or demonstrably anticipated research or development of the
employer; or
(2) Result from any work performed by the employee for the
employer.
(b) To the extent a provision in an employment agreement
purports to require an employee to assign an invention
otherwise excluded from
-7-
<PAGE>
being required to be assigned under subdivision (a), the
provision is against the public policy of this state and is
unenforceable."
For purposes of this Agreement, "Inventions" means all products, designs,
specifications, trademarks, service marks, discoveries, formulae, processes,
manufacturing techniques, trade secrets, inventions, improvements and ideas,
whether or not patentable, and all copyrightable work prepared by me as an
employee or contractor, alone or jointly with others, within the scope of my
employment or engagement by ADAC or using any Confidential Information, which
shall be work made for hire owned by ADAC. Also included in the foregoing are
all rights to obtain, register, perfect and enforce these rights.
I agree to disclose in confidence all Inventions made by me to ADAC to permit a
determination as to whether or not such Inventions are covered by this
Agreement.
No rights are hereby conveyed in Inventions, if any, made by me prior to my
employment or engagement by ADAC which are identified in Appendix 1 hereto. I
agree to perform, during and after my employment or engagement, all acts deemed
necessary or desirable by ADAC to permit and assist it, at its expense, in
obtaining and enforcing the full benefits, enjoyment, rights and title
throughout the world in the Inventions assigned hereby. Such acts may include
execution of documents and assistance or cooperation in legal proceedings.
3. Upon termination of my employment or engagement, or upon earlier
request of ADAC, I will return or deliver to ADAC all property belonging to
ADAC and all tangible forms of Confidential Information in my possession or
control, including but not limited to drawings, specifications, documents,
records, devices, models or any other material and copies or reproductions
thereof. I will provide to ADAC, at its request, written certification that I
have returned all property and Confidential Information to ADAC and that I
will continue to honor my confidentiality obligations hereunder.
4. I represent and warrant that my performance of all of the terms of
this Agreement as an employee, intern or contractor of ADAC does not and will
not breach any agreement to keep in confidence the proprietary information,
knowledge or data of others acquired by me in confidence or in trust prior to
my employment or engagement with ADAC, and I will not disclose to ADAC, or
induce ADAC to use, any confidential or proprietary information or material
belonging to any previous employer or any other person, and represent that I
do not have in my possession or control any such information or material. I
certify that I am not a party to any other agreement that would interfere
with my full compliance with this Agreement.
5. I acknowledge that this Agreement does not create an employment
agreement between me and ADAC. I understand and acknowledge that I am
employed for an unspecified term and that I have no right to continued
employment and that I am employed at-will. At-will employment means that
either ADAC or I can terminate the employment relationship with or without
cause and with or without notice at any time whatsoever. I further understand
and acknowledge that no employee, officer or representative of ADAC has the
authority to alter or modify my at-will status, unless the president of ADAC
makes such modification or alteration in writing with his signature.
6. This Agreement survives my employment or engagement by ADAC and
shall inure to the benefit of the successors and assigns of ADAC and shall be
binding upon my heirs, assigns, administrators and representatives.
7. In the event of any claim, suit or other legal proceeding arising
under or related to this Agreement, the prevailing party shall be entitled to
recover from the other party all of its attorneys' fees and costs. The
"prevailing party" means the party who obtains substantially the relief
sought by such party in such claim, suit or proceeding, whether by
settlement, summary judgment, judgment or otherwise.
-8-
<PAGE>
8. This Agreement shall be governed by and construed in accordance with
the laws of the State of California, without giving effect to principles of
conflicts of law.
9. I agree not to enter into any written or oral agreement that
conflict with the provisions of this Agreement, and I acknowledge that any
breach by me of this Agreement may constitute grounds for serious
disciplinary action, up to and including termination of my employment or
engagement with ADAC.
10. Each party acknowledges that in the event of a breach of this
Agreement the damage to the nonbreaching party would be irreparable and
extremely difficult to estimate, making any remedy at law or in damages
inadequate. Thus, in addition to any other right or remedy available to it, a
party shall be entitled to injunctive relief.
11. I CERTIFY THAT I HAVE CAREFULLY READ ALL OF THE PROVISIONS OF THIS
AGREEMENT AND THAT I UNDERSTAND AND WILL FULLY AND FAITHFULLY COMPLY WITH
SUCH PROVISIONS.
ADAC LABORATORIES EMPLOYEE OR CONTRACTOR
By: By:
------------------------------- -------------------------------
Print Name: Print Name:
----------------------- -----------------------
Title: Date:
---------------------------- -----------------------------
Date:
-----------------------------
-9-
<PAGE>
APPENDIX 1 TO
NONDISCLOSURE AND INVENTIONS AGREEMENT
List of Inventions (if no Inventions, write "none"):
<PAGE>
EXHIBIT G
-G-1-
<PAGE>
NON-COMPETITION AGREEMENT
This NON-COMPETITION AGREEMENT (this "AGREEMENT") is made and entered
into as of October 1, 1999, by and among ADAC Laboratories, a California
corporation ("ADAC"), and Richard Freifelder (the "SHAREHOLDER").
BACKGROUND
A. This Agreement is made in connection with and as contemplated by
that certain Agreement and Plan of Merger, dated as of September 13, 1999 (the
"MERGER AGREEMENT"), by and among ADAC, UGMMS Acquisition Corp., a Delaware
corporation, UGM Medical Systems, Inc., a Pennsylvania corporation (the
"COMPANY") and the shareholders of the Company listed on Schedule I thereto and
Gerd Muehllehner, Ph.D., pursuant to which ADAC is acquiring the Company.
B. ADAC and the Shareholder have agreed to enter into this Agreement to
protect the investment made by ADAC and/or its affiliate in acquiring the
Company.
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows (capitalized terms
used but not defined herein shall have the meanings ascribed to those terms in
the Merger Agreement):
SECTION 1
NON-COMPETITION
1.1 The Shareholder, for a period of two (2) years from the Effective
Time of the Merger, shall not, directly or indirectly, for himself or on
behalf of or in conjunction with any other Person:
(a) engage, as an officer, director, shareholder, owner, partner,
member or joint venturer or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales representative,
in any business selling any products or services relating to the field of
nuclear medicine equipment and related software, including without
limitation, products or services relating to positron emission tomography
scanners;
(b) call upon any Person who is, at that time, an employee of the
Surviving Corporation, UGM Laboratory or ADAC for the purpose or with the
intent of enticing such employee away from or out of the employ of Surviving
Corporation, UGM Laboratory or ADAC; or
(c) call upon any Person who or that is, at that time, or has
been, within one year prior to that time, a customer of the Company, UGM
Laboratory or ADAC for the purpose of soliciting or selling products or
services in direct competition with the Surviving Corporation, UGM Laboratory
or ADAC.
<PAGE>
1.2 The foregoing covenants shall not be deemed to prohibit the
Shareholder from acquiring as an investment not more than one percent (1%) of
the capital stock of a competing business, whose stock is traded on a
national securities exchange or through the automated quotation system of a
registered securities association.
1.3 For purposes of this Section 1, references to "ADAC" shall mean
ADAC Laboratories, together with its subsidiaries and affiliates.
1.4 Because of the difficulty of measuring economic losses to ADAC as a
result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to ADAC for which it would have
no other adequate remedy, the Shareholder agrees that the foregoing covenants
may be enforced by ADAC in the event of breach by the Shareholder by
injunctions and restraining orders.
1.5 The parties agree that the foregoing covenants in this Section 1
impose a reasonable restraint on the Shareholder.
1.6 The covenants in this Section 1 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of
any other covenant. If any provision of this Section 1 relating to the time
period or geographic area of the restrictive covenants shall be declared by a
court of competent jurisdiction to exceed the maximum time period or
geographic area, as applicable, that such court deems reasonable and
enforceable, said time period or geographic area shall be deemed to be, and
thereafter shall become, the maximum time period or largest geographic area
that such court deems reasonable and enforceable and this Agreement shall
automatically be considered to have been amended and revised to reflect such
determination.
1.7 All of the covenants in this Section 1 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of the Shareholder against Sub,
Surviving Corporation or ADAC, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Sub,
Surviving Corporation or ADAC of such covenants.
1.8 The parties hereby agree that the covenants set forth in this
Section 1 are a material and substantial part of the transactions
contemplated by the Merger Agreement, supported by adequate consideration.
SECTION 2
MISCELLANEOUS
2.1 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the Commonwealth of Pennsylvania
without regard to principles of conflicts of law.
2.2 NOTICES. To be effective, all notices and demands under this
Agreement must be in writing and must be given (a) by depositing the same in
the United States mail, postage prepaid, certified or registered, return
receipt requested, or (b) by delivering the same in person
-2-
<PAGE>
and receiving a signed receipt therefor, or (c) by facsimile. Notices to the
Shareholder shall be directed to the most recent address or facsimile number
given by the Shareholder to ADAC, which address and number initially are,
with respect to the Shareholder, Richard Freifelder, c/o UGM Medical Systems,
Inc., 3611 Market Street, Philadelphia, PA 19104, telefax number (215)
222-5578; notices to ADAC shall be directed to ADAC Laboratories, 540 Alder
Drive, Milpitas, CA 95035, telefax number: (408) 321-7435, Attention: General
Counsel. Notices mailed in accordance with the foregoing shall be deemed to
have been given and made when received. Any party may designate a different
address to which notices or demands shall thereafter be directed and such
designation shall be made by written notice given in the manner hereinabove
required.
2.3 PARTIES IN INTEREST. Except as expressly otherwise provided herein,
this Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties.
2.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the full
and entire understanding and agreement among the parties with regard to the
subjects hereof. Neither this Agreement nor any term hereof may be waived,
modified, amended, discharged or terminated other than by a written
instrument signed by ADAC and the Shareholder.
2.5 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to ADAC upon any
breach or default of the Shareholder under this Agreement, shall impair any
such right, power or remedy of ADAC nor shall it be construed to be a waiver
of any such breach or default, or any acquiescence therein, or of or in any
similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval
of any kind or character on the part of ADAC of any breach or default under
this Agreement, or any waiver on the part of ADAC of any provisions or
conditions of this Agreement, must be in writing and shall be effective only
to the extent specifically set forth in such writing. All remedies, either
under this Agreement or by law or otherwise afforded to ADAC, shall be
cumulative and not alternative.
2.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the parties
hereto, and all of which together shall constitute one instrument.
2.7 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing or interpreting this Agreement.
2.8 SEPARABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
2.9 INFORMATION CONFIDENTIAL. The Shareholder acknowledges that the
information received by him pursuant hereto may be confidential and for his
use only, and he will not use any such confidential information in violation
of applicable law or reproduce, disclose or disseminate
-3-
<PAGE>
such information to any other person (other than his employees or agents
having a need to know the contents of such information, and his attorneys),
except in connection with the exercise of rights under this Agreement, unless
ADAC has made such information available to the public generally or the
Shareholder is required to disclose such information by a governmental body.
(THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK.)
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
By:
----------------------------
Richard Freifelder
AGREED TO AND ACCEPTED:
ADAC LABORATORIES,
a California corporation
By:
-----------------------------------
Name:
Title:
-5-
<PAGE>
EXHIBIT H
H-1
<PAGE>
INTELLECTUAL PROPERTY ASSIGNMENT
THIS ASSIGNMENT ("Assignment") is made as of September _____, 1999 by
and between ____________________________________ ("Assignor"), and UGM Medical
Systems, Inc. ("UGM").
RECITALS
WHEREAS, Assignor has agreed in that certain Consultant Agreement dated
____________, ____, ______ between Assignor and UGM to assign to UGM, all
Assignor's right, title and interest to certain inventions and other
intellectual property rights specified therein, including patent applications
and registrations, and rights to apply therefor, and know-how; and
WHEREAS, Assignor desires to assign to UGM certain of such intellectual
property rights which Assignor has assisted in the development of pursuant to
such Consulting Agreement and wishes to transfer all proprietary rights thereto
to UGM, and UGM wishes to obtain these proprietary rights;
NOW THEREFORE, for the consideration referred to above, the parties
agree as follows:
1. DEFINITION OF INTELLECTUAL PROPERTY. "Intellectual Property"
shall mean any and all technologies, procedures, processes, designs,
inventions, discoveries, know-how, show-how and works of authorship, and
documentation thereof, conceived, solely, or jointly with others in
performance of or as a direct result of Assignor's activities under the
Consultant Agreement or within _____ (___) years after the termination of
Assignor's consulting relationship with UGM if based on UGM confidential
information. "Intellectual Property" includes, without limitation, all (i)
issued United States and foreign patents, utility models and the like, and
applications therefor pending before any relevant authority worldwide,
including any additions, continuations, continuations-in-part, divisionals,
reisssues, renewals or extensions based thereon; (ii) copyrights and other
rights in works of authorship; (iii) mask works rights, (iv) trade secrets;
and (v) any other intellectual property rights in existence at the date of
this Assignment.
2. ASSIGNMENT. Assignor hereby irrevocably assigns and transfers to
UGM any and all right, title and interest in and to the Intellectual
Property, and UGM hereby accept such assignment.
3. WARRANTIES OF TITLE. Assignor warrants to Assignees that (i)
Assignor has not granted any licenses or other rights to the Intellectual
Property to any third party; (ii) Assignor has not granted any liens,
encumbrances, security interests and restrictions on transfer relating to the
Intellectual Property; (iii) to the best of Assignors knowledge the
Intellectual Property does not infringe any patent, copyright, trademark,
trade secret or other proprietary right of any third party;
-1-
<PAGE>
and (iv) Assignor is aware of no legal actions, investigations, claims or
proceedings pending or threatened relating to the Intellectual Property.
4. FURTHER ASSURANCES. On and after the date of this Assignment,
Assignor will, without charge and promptly upon request by UGM, as may be
requested by UGM in order to effect and perfect the assignments and transfers
contained herein or to enable UGM to obtain the full benefits of this
Assignment and the transactions contemplated hereby, (i) deliver to UGM
records, data or other documents relating to the Intellectual Property that
are in Assignor's possession, (ii) execute and deliver assignments, licenses,
consents, documents or further instruments of transfer, and (iii) take other
actions, render other assistance and execute other documents.
5. CONFIDENTIALITY. All information relating to the Intellectual
Property is confidential information owned by UGM ("Confidential
Information"). Assignor may not use the Confidential Information except for
the benefit of UGM. Assignor will protect the Confidential Information from
disclosure with at least the same degree of care as that which he accords to
his own proprietary information, but in no event with less than reasonable
care. Assignor may not disclose the Confidential Information to third
parties. The foregoing restrictions will not apply to (i) information that is
in the public domain prior to the date hereof or becomes public hereafter
through no fault of Assignor; (ii) information provided to Assignor by a
third party who is not in violation of a duty of confidentiality with respect
to that information; or (iii) information approved for release by Company.
Any breach of these restrictions will cause irreparable harm to UGM and will
entitle UGM to injunctive relief in addition to all applicable legal remedies.
6. COUNTERPARTS. This Assignment may be executed in separate
counterparts. Each party hereto agrees that he will be bound by his own
facsimile signature and that he accepts the facsimile signature of the other
parties to this Assignment.
7. MISCELLANEOUS. This Assignment will inure to the benefit of and
bind UGM and Assignor and their successors, assigns, heirs and legal
representatives. This Assignment will be governed by the laws of the State of
California without giving effect to that jurisdiction's choice of law
principles. The parties agree that (i) the courts of the State of California
and United States federal courts sitting in the State of California will have
exclusive jurisdiction over any disputes arising under this Assignment and
(ii) they will submit to the jurisdiction of such courts.
ASSIGNOR UGM MEDICAL SYSTEMS, INC.
- ---------------------------------- -------------------------
- ----------------------------------
[Printed name of Assignor]
-------------------------
-2-
<PAGE>
EXHIBIT 2.2
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ADAC LABORATORIES,
UGM LABORATORY, INC.
AND CERTAIN OTHER PARTIES
SEPTEMBER 13, 1999
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. DESCRIPTION OF TRANSACTION...................................................................................1
1.1 Merger of Sub into the Company......................................................................1
1.2 Effect of the Merger................................................................................1
1.3 Closing; Effective Time.............................................................................1
1.4 Articles of Incorporation and Bylaws; Directors and Officers........................................2
1.5 Conversion of Securities............................................................................2
1.6 Merger Consideration................................................................................3
1.7 No Further Ownership Rights in Capital Stock of the Company.........................................3
1.8 Surrender of Certificates...........................................................................3
1.9 Dissenting Shares...................................................................................4
1.10 Further Action......................................................................................4
1.11 Shareholders' Representative........................................................................4
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS...........................................5
2.1 Organization; Subsidiaries..........................................................................5
2.2 Articles of Incorporation and Bylaws; Records.......................................................5
2.3 Capitalization......................................................................................6
2.4 Financial Statements; Absence of Liabilities........................................................7
2.5 Absence of Certain Changes or Events................................................................7
2.6 Title to Assets.....................................................................................9
2.7 Bank Accounts; Receivables; Customers..............................................................10
2.8 Intellectual Property..............................................................................11
2.9 Contracts..........................................................................................15
2.10 Compliance with Legal Requirements.................................................................17
2.11 Governmental Authorizations; Regulatory Matters; Government Consents; No Conflicts.................18
2.12 Tax Matters........................................................................................20
2.13 Employee and Labor Matters; Benefit Plans..........................................................21
2.14 Litigation and Claims..............................................................................25
2.15 Environmental Matters..............................................................................25
2.16 Sale of Products; Performance of Services..........................................................26
2.17 Insurance..........................................................................................26
2.18 Complete Copies of Materials.......................................................................26
2.19 Related Party Transactions.........................................................................27
2.20 Financial Advisor..................................................................................27
2.21 Enforceability.....................................................................................27
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TABLE OF CONTENTS
(CONTINUED)
2.22 Governmental Consents; No Conflicts................................................................27
2.23 Full Disclosure....................................................................................28
2.24 HSR Act............................................................................................29
2.25 Year 2000..........................................................................................29
3. REPRESENTATIONS AND WARRANTIES OF ADAC AND SUB..............................................................29
3.1 Authority; Binding Nature of Agreement.............................................................29
3.2 Financial Advisor..................................................................................29
4. CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; ADDITIONAL AGREEMENTS.....................................30
4.1 Information and Access.............................................................................30
4.2 Conduct of Business of the Company.................................................................31
4.3 Notification; Updates to Disclosure Schedule.......................................................32
4.4 FIRPTA Compliance..................................................................................33
4.5 Negotiation With Others............................................................................33
4.6 Regulatory Approvals...............................................................................34
4.7 Additional Agreements..............................................................................34
4.8 Company Shareholder Approval.......................................................................34
4.9 Public Announcements...............................................................................35
4.10 Taxes..............................................................................................35
4.11 Employee Plans.....................................................................................35
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF ADAC AND SUB.........................................................36
5.1 Representations and Warranties Accurate............................................................36
5.2 Compliance With Covenants..........................................................................36
5.3 Shareholder Approval...............................................................................36
5.4 Consents...........................................................................................36
5.5 Agreements and Documents...........................................................................36
5.6 Employees..........................................................................................37
5.7 No Material Adverse Effect.........................................................................37
5.8 No Restraints......................................................................................37
5.9 No Legal Proceedings...............................................................................37
5.10 Confidentiality and Nondisclosure Agreements.......................................................37
5.11 Dissenters.........................................................................................37
5.12 Governmental and Regulatory Approvals..............................................................37
5.13 Closing of UGM Medical Systems, Inc................................................................37
5.14 Corporate Documents................................................................................38
5.15 Termination of 40l(k) Plan and Simplified Employee Pension Plan....................................38
5.16 Assignments........................................................................................38
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TABLE OF CONTENTS
(CONTINUED)
6. CONDITIONS PRECEDENT TO THE COMPANY'S AND THE SHAREHOLDERS' OBLIGATIONS.....................................38
6.1 Representations and Warranties Accurate............................................................38
6.2 Compliance With Covenants..........................................................................38
6.3 Certificate........................................................................................38
6.4 No Restraints......................................................................................38
7. TERMINATION OF AGREEMENT....................................................................................39
7.1 Termination........................................................................................39
7.2 Effect of Termination..............................................................................39
7.3 Fees and Expenses..................................................................................40
8. MISCELLANEOUS...............................................................................................40
8.1 Non-Compete........................................................................................40
8.2 Tax Matters........................................................................................41
8.3 Amendment..........................................................................................42
8.4 Waiver.............................................................................................42
8.5 Survival of Representations and Warranties.........................................................43
8.6 Severability.......................................................................................43
8.7 Entire Agreement; Counterparts; Applicable Law.....................................................43
8.8 Assignability......................................................................................44
8.9 Notices............................................................................................44
8.10 Cooperation........................................................................................45
8.11 Confidentiality....................................................................................45
8.12 Certain Terms......................................................................................46
8.13 Titles.............................................................................................48
8.14 Articles, Sections and Exhibits....................................................................48
8.15 Mutual Drafting....................................................................................48
8.16 Further Representations............................................................................48
8.17 Arbitration........................................................................................48
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TABLE OF CONTENTS
(CONTINUED)
SCHEDULES
I ......................................................................................................I-1
EXHIBITS
A Form of Plan of Merger................................................................................A-1
B Form of Assignment....................................................................................B-1
</TABLE>
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and
entered into as of September 13, 1999, by and among ADAC Laboratories, a
California corporation ("ADAC"); UGML Acquisition Corp., a Delaware corporation
and a wholly owned subsidiary of ADAC ("SUB"); UGM Laboratory, Inc., a
Pennsylvania corporation (the "COMPANY"); and the shareholders of the Company
listed on Schedule I (collectively, the "SHAREHOLDERS"). Certain capitalized
terms used in this Agreement are defined in Section 8.12 below.
BACKGROUND
A. ADAC, Sub and the Company intend to effect a merger of Sub into the
Company in accordance with this Agreement and the laws of the States of Delaware
and Pennsylvania (the "MERGER"). Upon consummation of the Merger, Sub will merge
into the Company and the separate existence of Sub will cease, and the Company
will become a wholly owned subsidiary of ADAC.
B. As of the Closing Date (as defined below), the shareholders of the
Company will own a total of 2,316 shares of the Company's voting common stock,
$2.00 par value per share (the "COMPANY COMMON STOCK"), comprising all of the
outstanding shares of the Company.
AGREEMENT
ADAC, Sub, the Company and the Shareholders agree as follows:
1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF SUB INTO THE COMPANY. Upon the terms and subject to
the conditions set forth in this Agreement and in the Plan of Merger attached
as EXHIBIT A (the "PLAN OF MERGER"), at the Effective Time (as defined in
Section 1.3), Sub shall be merged into the Company and the separate existence
of Sub shall cease. The Company shall be the surviving corporation in the
Merger (the "SURVIVING CORPORATION").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set
forth in this Agreement, the Plan of Merger, the applicable provisions of the
Delaware General Corporation Law (the "DGCL") and the applicable provisions
of the Pennsylvania General Corporation Law (the "PGCL"). Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time,
all the property, rights, privileges, powers and franchises of the Company
and Sub shall vest in the Surviving Corporation, and all debts, liabilities,
obligations and duties of the Company and Sub shall become the debts,
liabilities, obligations and duties of the Surviving Corporation.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the
offices of Wilson Sonsini Goodrich & Rosati,
<PAGE>
650 Page Mill Road, Palo Alto, California on the date on which each of the
conditions set forth in Articles 5 and 6 has been fulfilled or waived or on
such other date as may be jointly designated by ADAC and the Company (the
"CLOSING DATE"). As soon as practicable after the Closing, a properly
executed certificate of merger conforming to the requirements of the DGCL
shall be filed with the Delaware Secretary of State and the Plan of Merger
and articles of merger conforming to the requirements of the PGCL shall be
filed with the Pennsylvania Secretary of State. The Merger shall become
effective at the time the certificate of merger is filed with the Delaware
Secretary of State and the Plan of Merger and articles of merger are filed
with the Pennsylvania Secretary of State (the "EFFECTIVE TIME").
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS.
The Articles of Incorporation of the Company, as in effect immediately prior
to the Effective Time, shall be the Articles of Incorporation of the
Surviving Corporation until thereafter amended. The Bylaws of the Company, as
in effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended. The officers and directors of
Sub shall be the officers and directors of the Surviving Corporation until
their respective successors are elected and qualified.
1.5 CONVERSION OF SECURITIES. At the Effective Time, by virtue of
the Merger and without any action on the part of ADAC, the Company, Sub or
any Shareholders, the shares of capital stock of each of Sub and the Company
shall be converted as follows:
(a) CAPITAL STOCK OF SUB. Each share of the common stock, no
par value per share, of Sub outstanding immediately prior to the Effective Time
shall be converted into one validly issued, fully paid and nonassessable share
of Common Stock of the Surviving Corporation.
(b) CANCELLATION OF CERTAIN SHARES OF CAPITAL STOCK OF THE
COMPANY. Each share of Company Common Stock owned by ADAC, Sub, the Company or
any direct or indirect wholly-owned subsidiary of ADAC or of the Company
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
(c) CONVERSION OF CAPITAL STOCK OF THE COMPANY. Each share of
Company Common Stock that is issued and outstanding immediately prior to the
Effective Time (other than shares to be canceled pursuant to Section 1.5(b))
shall automatically be canceled and extinguished and converted, without any
action on the part of the holder thereof, into the right to receive at the time
and in the amounts described in this Agreement an amount of cash equal to (x)
the Aggregate Consideration (as defined in Section 1.6 below) DIVIDED BY (y) the
number of shares (including without limitation shares issuable upon exercise of
outstanding options and warrants) of Company Common Stock outstanding
immediately prior to the Effective Time (other than shares to be canceled
pursuant to Section 1.5(b)). All such shares of Company Common Stock, when so
converted, shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive cash to be paid in consideration therefor
upon the surrender of such certificate in accordance with Section 1.8 below.
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1.6 MERGER CONSIDERATION. The aggregate consideration to be paid by
ADAC pursuant to the Merger is SIX MILLION DOLLARS (U.S.$6,000,000) (the
"AGGREGATE CONSIDERATION"), and shall not exceed such amount.
1.7 NO FURTHER OWNERSHIP RIGHTS IN CAPITAL STOCK OF THE COMPANY. At
the Effective Time, holders of certificates representing shares of Company
Common Stock shall cease to have any rights as shareholders of the Company,
and the stock transfer books of the Company shall be closed with respect to
all shares of Company Common Stock outstanding immediately prior to the
Effective Time. No further transfer of any such shares of Company Common
Stock shall thereafter be made on such stock transfer books. If, after the
Effective Time, a valid certificate previously representing any of such
shares of Company Stock (a "Company Stock Certificate") is presented to ADAC,
such Company Stock Certificate shall be canceled and exchanged as provided in
Section 1.8.
1.8 SURRENDER OF CERTIFICATES.
(a) At or as soon as practicable after the Effective Time,
ADAC will provide or mail to the holders of Company Stock Certificates (i) a
letter of transmittal in customary form and containing such provisions as ADAC
may reasonably require and (ii) instructions for use in effecting the surrender
of Company Stock Certificates in exchange for cash consideration as provided in
this Agreement. Upon surrender of a Company Stock Certificate to ADAC for
exchange, together with a duly executed letter of transmittal and such other
documents as may be reasonably required by ADAC, the holder of such Company
Stock Certificate shall be entitled to receive in exchange therefor the cash
consideration, in immediately available funds, that such holder has the right to
receive pursuant to the provisions of this Article 1, and the Company Stock
Certificate so surrendered shall be canceled. Until surrendered as contemplated
by this Section 1.8, each Company Stock Certificate shall be deemed, from and
after the Effective Time, to represent only the right to receive upon such
surrender cash consideration as contemplated by this Article 1.
(b) ADAC shall not be liable to any holder or former holder of
shares of Company Common Stock with respect to any cash amounts issuable
pursuant to this Article 1 which is delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
(c) In the event any certificate evidencing shares of Company
Common Stock shall have been mutilated, lost, stolen or destroyed, ADAC shall
make payment in exchange for such mutilated certificate or with respect to such
lost, stolen or destroyed certificate, in each case upon the making of an
affidavit of that fact by the holder thereof, of such cash as may be required
pursuant to this Article 1; PROVIDED, HOWEVER, that ADAC may, in its discretion
and as a condition precedent to payment with respect to such mutilated, lost,
stolen or destroyed certificate, require the owner of such mutilated, lost,
stolen or destroyed certificate to deliver a bond in such sum as ADAC may
reasonably direct as indemnity against any claim that may be made against ADAC
with respect to the certificate alleged to have been mutilated, lost, stolen or
destroyed.
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1.9 DISSENTING SHARES. Notwithstanding anything to the contrary
contained in this Agreement, holders of any shares of Company Common Stock
that are outstanding immediately prior to the Effective Time who did not vote
in favor of the Merger and who complied with the applicable provisions of the
PGCL ("Dissenting Shareholders") shall be entitled only to such rights as may
be granted to such holder in the PGCL. From and after the Effective Time, a
Dissenting Shareholder shall not have and shall not be entitled to exercise
any of the voting rights or other rights of a shareholder of the Surviving
Corporation. If any Dissenting Shareholder shall fail to perfect or shall
waive, rescind, withdraw or otherwise lose such holder's right of appraisal
under the PGCL, then such shares shall automatically be converted into and
shall represent only the right to receive (upon the surrender of the
certificate or certificates representing such shares) such consideration as
provided by Section 1.5(c). The Company (i) shall give ADAC prompt written
notice of any notice received by the Company of a shareholder's intent to
demand appraisal or dissenters' rights, pursuant to the PGCL and of any other
notice, demand or instrument delivered to the Company pursuant to the PGCL
and of any other communication relating to the foregoing, and (ii) shall give
ADAC's representatives the opportunity to participate in all negotiations and
proceedings with respect to any such notice, demand or instrument. The
Company shall not make any payment, settlement or offer of payment or
settlement with respect to any such notice or demand unless ADAC shall have
consented in writing to such payment, settlement or offer.
1.10 FURTHER ACTION. If at any time after the Effective Time any
further action is determined by ADAC to be necessary or desirable to carry
out the purposes of this Agreement or to vest the Company as the Surviving
Corporation with the full right, title and possession of and to all assets,
property, rights, privileges, immunities, powers and franchises of the
Company and Sub, the officers and directors of the Company shall be fully
authorized (in the name of the Company and otherwise) to take such action.
1.11 SHAREHOLDERS' REPRESENTATIVE.
(a) Each Shareholder, by signing this Agreement, designates
Gerd Muehllehner (or, in the event that Gerd Muehllehner is unable or unwilling
to serve, the Shareholders shall collectively appoint, by a majority vote, a
Shareholder reasonably acceptable to the Company) to be the "SHAREHOLDERS'
REPRESENTATIVE" for purposes of this Agreement. In the event that Gerd
Muehllehner, as Shareholders' Representative, expects to be absent for any
period of time (for example, if he is travelling for an extended period), he
shall have the right to appoint a temporary Shareholders' Representative to act
in his stead during such time period and each Shareholder agrees to such
temporary assignment. The term "Shareholders' Representative" includes any such
temporary appointee. The Shareholders shall be bound by any and all actions
taken by the Shareholders' Representative on their behalf.
(b) Each of ADAC and Sub shall be entitled to rely upon any
communication or writings given or executed by the Shareholders' Representative.
All communications or writings to be sent to Shareholders pursuant to this
Agreement may be addressed to the Shareholders' Representative and any
communication or writing so addressed and sent shall be deemed notice to
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<PAGE>
all of the Shareholders hereunder. The Shareholders hereby consent and agree
that the Shareholders' Representative is authorized to accept deliveries,
including any notice, on behalf of the Shareholders pursuant hereto.
(c) The Shareholders' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Shareholder, with full
power in his or her name and on his or her behalf to act according to the terms
of this Agreement and the other Transactional Agreements in the absolute
discretion of the Shareholders' Representative; and in general to do all things
and to perform all acts including, without limitation, executing and delivering
all agreements, certificates, receipts, instructions and other instruments
contemplated by or deemed advisable in connection with this Agreement and the
other Transactional Agreements. This power of attorney and all authority hereby
conferred is granted subject to the interest of the other Shareholders hereunder
and in consideration of the mutual covenants and agreements made herein, and
shall be irrevocable and shall not be terminated by any act of any Shareholder,
by operation of law, whether by such Shareholder's death or otherwise, or by any
other event.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS
Except as set forth in the disclosure schedule delivered to ADAC prior
to the execution of this Agreement, and signed by the President or any Vice
President of the Company, which schedule shall specifically refer to the section
numbers below and specify the disclosures and exception so made (the "DISCLOSURE
SCHEDULE"), the Company and the Shareholders jointly and severally represent and
warrant to ADAC and agree as follows:
2.1 ORGANIZATION; SUBSIDIARIES.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania. The Company has all necessary power and authority under applicable
corporate law and its organizational documents to own or lease its properties,
to carry on its business as presently conducted and to perform its obligations
under all contracts by which it is bound. The Company has not conducted any
business under or otherwise used for any purpose or in any jurisdiction any
fictitious name, trade name or other name. The Company does not own or hold,
directly or indirectly, any debt or equity securities of, or have any other
interest in, any corporation, partnership, joint venture or other entity, and
the Company has not entered into any agreement to acquire any such interest. The
Company has no subsidiaries.
(b) The Company is qualified to do business as a foreign
corporation and is in good standing under the laws of all jurisdictions where
the nature of its business requires such qualification, a list of which
jurisdictions is set forth on Part 2.1 of the Disclosure Schedule.
2.2 ARTICLES OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered to ADAC accurate and complete copies of (1) the Company's articles
of incorporation and bylaws,
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<PAGE>
including all restatements thereof and amendments thereto and including any
certificates of designation, (2) the stock records of the Company and (3) the
minutes and other records of the meetings and other proceedings and actions
(including any actions taken by written consent or otherwise without a
meeting) of the shareholders of the Company and the Board of Directors of the
Company and any committee thereof. There have been no meetings or other
proceedings or actions of the shareholders of the Company or the Board of
Directors of the Company or any committee thereof that are not fully
reflected in such minutes or other records. There has not been any violation
of any of the provisions of the Company's articles of incorporation or bylaws
that has not been cured so as to avoid any liability to the Company or of any
resolution adopted by the Company's shareholders or the Company's Board of
Directors or any committee thereof. The general ledger, stock records, minute
books and other material records of the Company have been provided to ADAC
and are accurate, up-to-date and complete in all material respects.
2.3 CAPITALIZATION. The authorized capital stock of the Company
consists of 5,000 shares of Company Common Stock, and no shares of Preferred
Stock. Of the Company's Common Stock 2,316 shares are issued and outstanding
and all of such shares are owned by the shareholders of the Company in the
amounts set forth on Part 2.3 of the Disclosure Schedule, free and clear of
any liens, encumbrances and the like. All the issued and outstanding shares
of Company Common are validly issued, fully paid, nonassessable and free of
preemptive rights, and were issued in compliance with state and federal
securities laws, and none of such shares is subject to any repurchase option
or restriction on transfer (other than restrictions on transfer imposed by
virtue of applicable federal and state securities laws). Except as set forth
above, (i) there are no shares of capital stock of the Company authorized,
issued or outstanding; (ii) there are no outstanding subscriptions, options,
warrants, stock appreciation right plans, calls, rights, convertible
securities, stockholder rights plans (or similar plans commonly referred to
as "poison pills") or other agreements or commitments of any character
relating to issued or unissued capital stock or other securities of the
Company, or obligating the Company or any other party to issue, transfer or
sell any shares of the capital stock or other securities of the Company;
(iii) there are no other outstanding securities convertible into, exercisable
or exchangeable for or evidencing the right to subscribe for any shares of
the capital stock or other securities of the Company or any successor
corporation or controlling person of such successor corporation; and (iv)
there are no voting trusts or other voting agreements with respect to such
number of shares of Company Common Stock as is necessary and as were voted to
duly and validly authorize the Transaction Agreements and the performance of
the Company's obligations thereunder and, to the knowledge of the Company and
the Shareholders, there are no voting trusts or other voting agreements with
respect to any shares of Company Common Stock.
(a) The Company does not own any ADAC Common Stock.
(b) Any shares of capital stock or other securities
repurchased, redeemed or otherwise reacquired by the Company were validly
reacquired in compliance with (i) the applicable provisions of the PGCL and all
other applicable Legal Requirements and (ii) any requirements set forth in
applicable contracts by which the Company is bound.
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2.4 FINANCIAL STATEMENTS; ABSENCE OF LIABILITIES.
(a) Part 2.4 of the Disclosure Schedule includes true,
complete and correct copies of (i) the Company's unaudited financial statements
(balance sheets, income statements and statements of cash flow) as of and for
the fiscal years ending December 31, 1996 and 1997, (ii) the Company's audited
financial statements (balance sheet, income statement and statement of cash
flow) as of and for the fiscal year ended December 31, 1998 and (iii) the
Company's unaudited financial statements (balance sheet, income statement and
statement of cash flow) as of and for the six month period ended June 30, 1999
(collectively, the "FINANCIAL STATEMENTS"). The Financial Statements (i) were
prepared in accordance with the books and records of the Company, (ii) have been
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied, subject in the case of interim Financial Statements (x) to
normal year-end adjustments, which individually or in the aggregate were not and
will not be material, and (y) to the omission of footnote information; and (iii)
are accurate in all material respects. The Financial Statements fairly present
the Company's financial condition and the results of its operations at the
relevant dates thereof and for the periods covered thereby. The balance sheet of
the Company as of June 30, 1999 is referred to as the "BALANCE SHEET" and the
date of the Balance Sheet is referred to as the "BALANCE SHEET DATE."
(b) The Company has no liability or obligation of any kind or
nature, secured or unsecured (whether absolute, accrued, contingent or
otherwise, and whether due or to become due) ("LIABILITIES"), except for (i)
Liabilities that are disclosed as such in the Balance Sheet, and (ii)
Liabilities incurred since the Balance Sheet Date in the ordinary course of
business, consistent with past practice, that are not, individually or in the
aggregate, material. Except as set forth in the Balance Sheet, the Company has
no Liabilities to any officer, director, shareholder, affiliate or
representative of the Company.
2.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance Sheet
Date,
(a) there has not been any loss, damage or destruction to, or
any interruption in the use of, any of the Company's assets (whether or not
covered by insurance);
(b) the Company has not declared, accrued, set aside or paid
any dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(c) the Company has not sold, issued or authorized the
issuance of (i) any capital stock or other security, (ii) any option, call,
warrant or right to acquire, or otherwise relating to, any capital stock or any
other security, or (iii) any instrument convertible into or exercisable or
exchangeable for any capital stock or other security;
(d) there has been no amendment to or restatement of the
Company's articles of incorporation or bylaws (including by filing of a
certificate of designation or otherwise), and the
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Company has not effected or been a party to any acquisition transaction,
recapitalization, reclassification of shares, stock split, reverse stock
split or similar transaction;
(e) the Company has not formed any subsidiary or acquired any
equity interest or other interest in any other entity;
(f) there has not been any labor trouble or claim of wrongful
discharge or other unlawful labor practice or action;
(g) there has not been any increase in the salary or other
compensation payable or to become payable by the Company to any of its officers,
directors, employees, consultants or advisors, or the payment or declaration,
commitment or obligation of any kind for the payment, by the Company, of a bonus
or other additional salary or compensation to any such person;
(h) there has not been any breach, amendment or termination of
any distribution agreement or any material contract, agreement or license to
which the Company is a party or by which it is bound other than termination by
the Company pursuant to the terms thereof as described in Part 2.5(h) of the
Disclosure Schedule;
(i) there has not been any commencement or notice or, to the
best knowledge of the Company and the Shareholders, threat of commencement of
any lawsuit or proceeding against or investigation of the Company or its
affairs;
(j) the Company has not made any capital expenditure which,
when added to all other capital expenditures made by the Company since the
Balance Sheet Date, exceeds $30,000 in the aggregate;
(k) the Company has not (i) entered into, or permitted any of
the assets owned or used by it to become bound by, any Material Contract (as
defined in Section 2.9(a)), except that the Company has renewed various Material
Contracts in the ordinary course of business, without materially amending the
terms thereof, or (ii) amended or prematurely terminated, or waived any material
right or remedy under, any Material Contract to which it is or was a party or
under which it has or had any rights or obligations;
(l) the Company has not (i) acquired, leased or licensed any
right or other asset from any other person or entity (other than immaterial
rights or other immaterial assets acquired, leased or licensed by the Company
from other persons or entities in the ordinary course of business and consistent
with the Company's past practices), (ii) sold or otherwise disposed of, or
leased or licensed, any right or other asset to any other person or entity
(other than immaterial rights or other immaterial assets disposed of or leased
or licensed by the Company to other persons or entities in the ordinary course
of business and consistent with the Company's past practices), or (iii) waived
or relinquished any right (other than immaterial rights waived or relinquished
by the Company in the ordinary course of business and consistent with the
Company's past practices);
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(m) the Company has not written off as uncollectible, or
established any extraordinary reserve with respect to, any account receivable or
other indebtedness;
(n) the Company has not made any pledge of any of its assets
or otherwise permitted any of its assets to become subject to any lien, pledge,
charge or other encumbrance, except for pledges of immaterial assets made in the
ordinary course of business and consistent with the Company's past practices;
(o) the Company has not (i) lent money to any person or entity
or (ii) incurred or guaranteed any indebtedness for borrowed money;
(p) the Company has not (i) established, adopted or amended
any Employee Benefit Plan, except (A) for the termination of its 401(k) plan
and/or its Simplified Employee Pension Plan ("SARSEP") immediately prior to
Closing and (B) as required by law or an applicable government agency, or (ii)
made any profit-sharing or similar payment to any of its directors, officers or
employees;
(q) the Company has not changed any of its methods of
accounting or accounting practices in any respect;
(r) the Company has not made any tax election;
(s) the Company has not commenced or settled any legal
proceeding before any Governmental Body;
(t) the Company has not entered into any material transaction
or taken any other material action outside the ordinary course of business or
inconsistent with its past practices;
(u) the Company has conducted its business and operations in
the ordinary course and there has not been any material adverse change in the
Company's business, condition (financial or otherwise), assets, liabilities,
operations, results, profits, financial performance or prospects, and no event
has occurred that will, or to the knowledge of the Company and the Shareholders
could reasonably be expected to, have a Material Adverse Effect on the Company;
and
(v) the Company has not agreed or committed to take any of the
actions referred to in clauses "(b)" through "(u)" above.
2.6 TITLE TO ASSETS.
(a) Part 2.6 of the Disclosure Schedule sets forth a general
description of each parcel of real property currently owned or leased by the
Company, and, with respect to leases, the name of the lessor, the date and term
of the lease and each amendment thereto and the aggregate annual rental and/or
other fees payable under any such lease. The Company is in possession of all
real properties presently owned or leased by it. All leases with respect to
properties currently leased
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by the Company are in full force and effect, are valid, legal and binding
obligations of the parties thereto and are enforceable in accordance with
their respective terms (subject, as to the enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium and similar
laws affecting creditors' rights, and, with respect to the remedy of specific
performance, equitable doctrines applicable thereto), and there is not, under
any of such leases, any existing default or event of default (or event which
with notice or lapse of time, or both, would constitute a default). Such
current leases consist only of those described in Part 2.6 of the Disclosure
Schedule, complete and correct copies of which have been provided by the
Company to ADAC. None of the buildings, structures or appurtenances located
upon the real properties currently owned or leased by the Company or the
operation and maintenance thereof as now operated or maintained, contravenes
any zoning ordinance or other administrative regulation (whether or not
permitted because of prior nonconforming use) or violates any restrictive
covenant or any provision of law, the effect of which would materially
interfere with or prevent the continued use of such properties for the
purposes for which they are now being used or would materially adversely
affect the value thereof.
(b) The Company owns and has valid title to, or, in the case
of leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for use
in its business, including, without limitation, (i) all assets reflected on the
Balance Sheet; (ii) all of the Company rights under Material Contracts and (iii)
all other assets reflected in the Company's books and records as being owed or
leased by the Company. All of these assets are owned by the Company free and
clear of any liens or other encumbrances, except for any liens for current taxes
not yet due and payable.
2.7 BANK ACCOUNTS; RECEIVABLES; CUSTOMERS.
(a) Part 2.7(a) of the Disclosure Schedule provides an
accurate and complete list of each account maintained by or for the benefit of
the Company at any bank or other financial institution.
(b) All existing accounts receivable of the Company (including
those accounts receivable reflected on the Balance Sheet that have not yet been
collected and those accounts receivable that have arisen since the Balance Sheet
Date and have not yet been collected) (i) represent valid obligations of
customers of the Company arising from BONA FIDE transactions entered into in the
ordinary course of business and (ii) are current and will be collected in full,
without any counterclaim or set off, when due, net of an allowance for doubtful
accounts not to exceed $25,000 in the aggregate.
(c) Part 2.7(c) of the Disclosure Schedule sets forth each
customer and each other Person with which the Company does business. The Company
has not received any notice or other communication indicating that any customer
or other Person with which the Company does business, or any other person or
entity identified in Part 2.7(c) of the Disclosure Schedule, intends or expects
to cease dealing with the Company or to effect a reduction in the volume of
business transacted by such Person with the Company below historical or
currently projected levels.
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2.8 INTELLECTUAL PROPERTY.
(a) DEFINITIONS. For the purposes of this Agreement, the
following terms have the meanings set forth below. It is understood and agreed
by the parties, however, that the definitions do not include, and the
representations and warranties set forth in this Section 2.8 shall not apply to,
inbound "shrink wrap" and similarly publicly available commercial binary code
and end-user licenses and outbound "shrink wrap" licenses, including any related
trademark contracts, licenses and agreements.
(i) "COPYRIGHTS" means all registered copyrights,
copyright applications and unregistered copyrights, and all applications for
any of the foregoing which are in the process of being prepared throughout
the world.
(ii) "DOCUMENTATION" means all documentation
relating to engineering, production, assembly, design, installation and other
technical drawings and specifications, process and technology development,
manufacturing, customer and supplier records, working notes and memos,
laboratory books, market studies, consultants' reports, research, product
plans, products, services plans, services, marketing, distribution and sales
methods and systems, technical and laboratory data, clinical trial data,
engineering prototypes, and any similar documentation, used or useful, in
whole or in part, directly or indirectly, in the operation of the business by
the Company.
(iii) "INTELLECTUAL PROPERTY" means all Patents,
Trademarks, Maskworks, Software and Copyrights relating to the Business
whether owned by, licensed to or controlled by Company listed in Part 2.8 of
the Disclosure Schedule and all Know-How and Documentation relating to the
Business whether owned by, licensed to or controlled by Company.
(iv) "KNOW-HOW" means all know-how, trade secrets,
inventions (whether or not patentable), data, processes, techniques,
procedures, compositions, devices, methods, formulas, protocols and
information, which are not generally publicly known.
(v) "MASKWORKS" means all mask works, mask work
registrations and application therefore, and any equivalent or similar rights
in semiconductor masks, layout, architectures or topology.
(vi) "PATENTS" means all patents and patent
applications, and all patents issuing thereon (including utility, model and
design patents and certificates of invention), together with all reissue
patents, patents of addition, divisions, renewals, continuations,
continuations-in-part, substitutions, additions, extensions (including
supplemental protection certificates), registrations, confirmations,
re-examinations and foreign counterparts of any of the foregoing, and all
applications for any of the foregoing which are in the process of being
prepared.
(vii) "SOFTWARE" means all works of authorship (as
defined in 17 U.S.C. Section 101), including, without limitation, computer
programs, source code and executable code, whether
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embodied in software, firmware or otherwise, documentation, designs, files,
records, data and mask works.
(viii) "TRADEMARKS" means all registered trademarks,
registered service marks, trademark and service mark applications,
unregistered trademarks and service marks, logos and trade names, common law
trademarks, World Wide Web addresses and domain names, and all applications
for any of the foregoing which are in the process of being prepared.
(b) The Patents, Trademarks, Maskworks, Software and
Copyrights listed in Part 2.8 of the Disclosure Schedule constitute all of the
Patents, Trademarks, Maskworks, Software and Copyrights that are in use, or are
under development for use, or are necessary for the conduct of the business of
the Company as it currently is conducted or as it is currently planned or
contemplated to be conducted by the Company with respect to products available
for sale by the Company as of the Closing, including, without limitation, the
design, development, manufacture, use, import and sale of products and
technology and performances of services (including products, technology or
services currently under development).
(c) Except as set forth in Part 2.8 of the Disclosure
Schedule, Company owns by operation of law or by valid assignment, or has the
lawful right and license to use pursuant to a license, all of the Intellectual
Property used in or necessary to the conduct of Company's business as presently
conducted or currently contemplated to be conducted by the Company with respect
to products available for sale by the Company as of the Closing, and Company has
not transferred ownership of, or granted any exclusive license of or right to
use such Intellectual Property, and no third party owns or has any right to any
of the Intellectual Property, including improvements thereto.
(d) Except as set forth in Part 2.8 of the Disclosure
Schedule, from and after the Closing, the Surviving Corporation shall have the
lawful right to all of the Intellectual Property held by the Company relating to
the C-PET, the G-PET and related peripherals necessary or critical to the
operation of the C-PET and the G-PET including, without limitation, all rights
relating thereto under licenses without restriction and without payment of any
kind to any third party.
(e) Except as set forth in Part 2.8 of the Disclosure
Schedule, neither the Company nor any Shareholder has received any notice of any
claims and there are no pending claims, and neither the Company nor any
Shareholder otherwise has any knowledge of any facts or circumstances of any
threatened claims, by any Person contesting the validity, enforceability, use or
ownership of any of the Intellectual Property. Without limiting the foregoing,
the Company knows of no information, materials, facts, or circumstances,
including any information or fact that would constitute prior art, that would
render any of the Intellectual Property registered by the Company ("COMPANY
REGISTERED INTELLECTUAL PROPERTY") invalid or unenforceable, or would adversely
affect any pending application for any Company Registered Intellectual Property
and the Company has not misrepresented, or failed to disclose, and the Company
and each Shareholder have no knowledge of any misrepresentation or failure to
disclose, any fact or circumstances in any application for any Company
Registered Intellectual Property that would constitute fraud or a
misrepresentation with
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respect to such application or that would otherwise affect the validity or
enforceability of any Company Registered Intellectual Property.
(f) Except as set forth in Part 2.8 of the Disclosure
Schedule, neither the Company nor any Shareholder has received any notice of,
and the Company and the Shareholders otherwise have no knowledge of, the
infringement or misappropriation by any Person of the Intellectual Property.
(g) Except as set forth in Part 2.8 of the Disclosure
Schedule, to the knowledge of Company and the Shareholders, all of the
Intellectual Property used in or necessary to the conduct of Company's business
as presently conducted or currently contemplated to be conducted by the Company
with respect to products available for sale by the Company as of the Closing
does not and will not when conducted by ADAC and/or Surviving Corporation in
substantially the same manner following the Closing, infringe upon,
misappropriate, or otherwise violate any rights or interests owned or claimed by
any other Person or constitute unfair competition or trade practices under the
laws of any jurisdiction, and the Company have not received any notice thereof.
Except as set forth in Part 2.8 of the Disclosure Schedule, to the actual
knowledge of the Company and the Shareholders, all of the Intellectual Property
used in the G-PET as currently designed does not and will not when used by ADAC
and/or the Surviving Corporation from and after the Closing, infringe upon,
misappropriate, or otherwise violate any rights or interests owned or claimed by
any other person or constitute unfair competition of trade practices under the
laws of any jurisdiction, and the Company and the Shareholders have not received
any notice thereof.
(h) Except as set forth in Part 2.8 of the Disclosure
Schedule, none of the Patents is the subject of any reissue, reexamination,
interference, opposition or similar proceeding.
(i) Except as set forth in Part 2.8 of the Disclosure
Schedule, none of the Trademarks is the subject of any opposition, cancellation
or similar proceeding.
(j) Except as set forth in Part 2.8 of the Disclosure
Schedule, the Company has not, in connection with the operation of the business
of the Company, entered into any agreement to indemnify, reimburse, hold
harmless or provide a right of rescission to any Person against, or to guarantee
or otherwise assume or incur any obligation or liability with respect to, any
charge of infringement or misappropriation of any intellectual property.
(k) Except as set forth in Part 2.8 of the Disclosure
Schedule, to the knowledge of the Company and the Shareholders, there are no
third party patent applications which, if issued, would materially adversely
affect the right of Company to use the Patents included in the Intellectual
Property.
(l) Except as set forth in Part 2.8 of the Disclosure
Schedule, there have been no, and Company has no reason to believe that there
will be any, (a) inventorship challenges with respect to any of the Patents
included in the Intellectual Property, or (b) ownership challenges with
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respect to any of the Intellectual Property developed or created by (i)
employees of the Company, or (ii) third party consultants for which the
Company has, directly or indirectly, paid to develop or create intellectual
property for the Company.
(m) Part 2.8 of the Disclosure Schedule sets forth a listing
of all arbitrations, suits, litigations or, to the knowledge of the Company and
the Shareholders, other similar type of proceedings ("LITIGATION") relating to
the Intellectual Property brought by or against Company, whether or not
currently pending, during the past three years before any court, tribunal
(including the United States Patent and Trademark Office (the "PTO") or
equivalent authority anywhere in the world).
(n) To the knowledge of the Company and the Shareholders, (a)
none of the confidential information relating to the Business has been used,
divulged or appropriated for the benefit of any Person other than Company or
otherwise to the detriment of Company, (b) no employee or consultant of Company
has used any other Person's trade secrets or other information that is
confidential in the course of his or her work for Company, and (c) no employee
or consultant of Company is in default under any term of any employment contract
relating to such Intellectual Property or Documentation, any confidentiality
agreement or any other contract or any restrictive covenant relating to such
Intellectual Property or Documentation, or the development or exploitation
thereof. The Company is in compliance with the provisions of applicable Legal
Requirements relating to the assignability of inventions.
(o) Except as set forth in Part 2.8 of the Disclosure
Schedule, none of the Intellectual Property was developed by or on behalf of or
using any grants of any Governmental Body.
(p) Each item of Company Registered Intellectual Property is
valid and subsisting, and all necessary registration, maintenance and renewal
fees in connection with such Company Registered Intellectual Property have been
paid and all necessary documents and certificates in connection with such
Company Registered Intellectual Property have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property Rights. Except as set forth in Part 2.8 of the
Disclosure Schedule, there are no actions that must be taken by the Company
within ninety (90) days of the Closing Date, including the payment of any
registration, maintenance or renewal fees or the filing of any responses to PTO
office actions, documents, applications or certificates for the purposes of
obtaining, maintaining, perfecting or preserving or renewing any Company
Registered Intellectual Property. In each case in which the Company has acquired
Intellectual Property from any person, the Company has obtained a valid and
enforceable assignment sufficient to irrevocably transfer all rights in such
Intellectual Property (including the right to seek past and future damages with
respect thereto) to the Company. To the maximum extent provided for by, and in
accordance with, applicable laws and regulations, the Company has recorded each
such assignment of a Company Registered Intellectual Property assigned to the
Company with the relevant Governmental Body, including the PTO, the U.S.
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Copyright Office, or their respective equivalents in any relevant foreign
jurisdiction, as the case may be. Except as set forth in Part 2.8 of the
Disclosure Schedule, the Company has not claimed a particular status in the
application for any Intellectual Property, which claim of status was not at
the time made, or which has since become, inaccurate or false or that will no
longer be true and accurate as a result of the Closing.
(q) Except as set forth in Part 2.8 of the Disclosure
Schedule, neither the Company nor any Shareholder knows of any outstanding
decrees, orders, judgments or settlement agreements or stipulations that
restrict in any manner the validity, enforceability, use or ownership of any of
the Intellectual Property.
(r) To the knowledge of the Company and the Shareholders,
there are no contracts, licenses or agreements between the Company and any other
person with respect to the Intellectual Property under which there is any
dispute regarding the scope of such agreement, or performance under such
agreement including with respect to any payments to be made or received by the
Company thereunder.
(s) The contracts, licenses and agreements listed in Part 2.8
of the Disclosure Schedule include all material contracts, licenses and
agreements pursuant to which any person has licensed any Intellectual Property
to the Company. The Company is not in material breach of nor has the Company
failed to perform under, any of the foregoing contracts, licenses or agreements
and, to the knowledge of the Company and the Shareholders, no other party to any
such contract, license or agreement is in breach thereof or has failed to
perform thereunder.
(t) Neither this Agreement nor the transactions contemplated
by this Agreement, including the assignment to ADAC or Sub by operation of law
or otherwise of any contracts or agreements to which the Company is a party,
will result in (i) either ADAC's or the Sub's granting to any third party any
right to or with respect to any Intellectual Property owned by, or licensed to,
either of them, (ii) either ADAC or the Sub's being bound by, or subject to, any
non-compete or other restriction on the operation or scope of their respective
businesses, or (iii) the Surviving Corporation being obligated to pay any
royalties or other amounts to any third party in excess of those payable by the
Company or Sub, respectively, prior to the Closing.
2.9 CONTRACTS.
(a) Part 2.9(a) of the Disclosure Schedule identifies each
Company Contract that constitutes a "MATERIAL CONTRACT." For purposes of this
Agreement, each of the following shall be deemed to constitute a "MATERIAL
CONTRACT":
(i) any Contract relating to the employment or
engagement of, or the performance of services by, any employee, consultant or
independent contractor;
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(ii) any Contract relating to the acquisition,
transfer, use, development, sharing or license of any Intellectual Property;
(iii) any Contract imposing any restriction on the
Company's right or ability (A) to compete with any other person or entity,
(B) to acquire any product or other asset or any services from any other
person or entity, to sell any product or other asset to or perform any
services for any other person or entity or to transact business or deal in
any other manner with any other person or entity, or (C) to develop or
distribute any technology;
(iv) any Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship;
(v) any Contract relating to the acquisition,
issuance or transfer of any securities;
(vi) any Contract creating or relating to the
creation of any lien, charge, pledge or other encumbrance with respect to any
asset owned or used by the Company;
(vii) any Contract involving or incorporating any
guaranty, any pledge, any performance or completion bond, any indemnity, any
right of contribution or any surety arrangement;
(viii) any Contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits, losses,
costs or liabilities;
(ix) any Contract relating to the purchase or sale of
any product or other asset by or to, or the performance of any services by or
for, any Related Party;
(x) any Contract to which any Governmental Body is a
party or under which any Governmental Body has any rights or obligations
(including any subcontract or other Contract between the Company and any
contractor or subcontractor to any Governmental Body);
(xi) any Contract entered into outside the ordinary
course of business;
(xii) any Contract that has a term of more than 60
days and that may not be terminated by the Company (without penalty) within
60 days after the delivery of a termination notice by the Company; and
(xiii) any Contract (not otherwise identified in
clauses "(i)" through "(xii)" of this sentence) that contemplates or involves
(A) the payment or delivery of cash or other consideration in an amount or
having a value in excess of $10,000 in the aggregate, or (B) the performance
of services having a value in excess of $10,000 in the aggregate).
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(b) The Company has delivered to ADAC accurate and complete
copies of all Material Contracts of the Company, including all amendments
thereto. Each Material Contract of the Company is valid, legal and binding on
the parties thereto and in full force and effect, and is enforceable by the
Company in accordance with its terms, subject to (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of
law governing specific performance, injunctive relief and other equitable
remedies. In addition, the following is true:
(i) the Company has not violated or breached, or
committed any default under, any Company Contract, and, to the knowledge of
the Company and the Shareholders, no other Person has violated or breached,
or committed any default under, any Company Contract;
(ii) to the knowledge of the Company and the
Shareholders, no event has occurred, and no circumstance or condition exists,
that (with or without notice or lapse of time or both) will, or could
reasonably be expected to, (A) result in a violation or breach of any of the
provisions of any Company Contract, (B) give any person or entity the right
to declare a default or exercise a remedy under any Company Contract, (C)
give any person or entity the right to accelerate the maturity or performance
of any Company Contract, or (D) give any person or entity the right to
cancel, terminate or materially modify any Company Contract;
(iii) the Company has obtained all necessary consents,
waivers and approvals of parties to any Contract as are required in
connection with the Merger, or as are required or advisable in order that any
such Contract remain in effect without substantial and material modification
after the Merger ("CONSENTS");
(iv) the Company has not received any notice or other
communication regarding, and does not otherwise have any knowledge of, (i)
any actual or possible violation or breach of, or default under, any Company
Contract, or (ii) any actual or possible termination of any Company Contract;
and
(v) the Company has not waived any of its rights
under any Contract.
(c) No person or entity is renegotiating, or has the right to
renegotiate, any amount paid or payable to the Company under any Company
Contract or any other term or provision of any Company Contract.
(d) The Contracts identified in Part 2.9(a) of the Disclosure
Schedule collectively constitute all of the Material Contracts necessary to
enable the Company to conduct its business in the manner in which its business
is currently being conducted.
(e) The Company has not made any unexpired offer or proposal
(to any customer, prospective customer or other Person) that would result in the
Company being bound by a Contract.
2.10 COMPLIANCE WITH LEGAL REQUIREMENTS.
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The Company is, and has at all times been, in compliance in all
material respects with all applicable Legal Requirements. The Company has not
received any notice or other communication from any Governmental Body or any
other Person regarding any actual or possible violation of, or failure to comply
with, any Legal Requirement.
2.11 GOVERNMENTAL AUTHORIZATIONS; REGULATORY MATTERS; GOVERNMENT
CONSENTS; NO CONFLICTS.
(a) AUTHORIZATIONS. Part 2.11 of the Disclosure Schedule
identifies each Governmental Authorization held by the Company, and the Company
has delivered to ADAC accurate and complete copies of all Governmental
Authorizations held by the Company. The Governmental Authorizations identified
in Part 2.11 of the Disclosure Schedule collectively constitute all Governmental
Authorizations necessary to enable the Company to conduct its business in the
manner in which its business is currently being conducted. The Governmental
Authorizations held by the Company are valid and in full force and effect and
the Company is, and at all times since the date of incorporation has been, in
compliance in all material respects with the terms and requirements of the
respective Governmental Authorizations held by it. The Company has not received
any notice or other communication from any Governmental Body or any other Person
regarding (a) any actual or possible violation of or failure to comply with any
term or requirement of any Governmental Authorization or (b) any actual or
possible revocation, withdrawal, suspension, cancellation, termination or
modification of any Governmental Authorization.
(b) REGULATORY MATTERS.
(i) The Company and the operations associated with
the manufacture of the Company's products (the "OPERATIONS") are, and the
products sold by the Company and the Operations are, in compliance in all
material respects with all current applicable laws, statutes, rules,
regulations, standards, guides or orders administered, issued or enforced by
the Food and Drug Administration (the "FDA") or any other Governmental Body
having regulatory authority or jurisdiction over the products and operations
of the Company.
(ii) The Company is, and the Operations are, in
compliance in all material respects with all applicable laws, statutes,
rules, regulations, standards, guides or orders administered, issued or
enforced by the FDA or any other Governmental Body relating to the methods
and materials used in, and the facilities and controls used for, the design,
manufacture, processing, packaging, labeling, storage and distribution of the
products manufactured by the Company and the Operations, including applicable
Quality System Regulations, which incorporate current Good Manufacturing
Practice requirements. Further, to the Company's and the Shareholders'
knowledge no governmental action has been taken or is in the process of being
taken that could slow, halt or enjoin the manufacturing operations of the
Company and the Operations or subject the manufacturing operations of the
Company and the Operations to regulatory enforcement action.
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(iii) The Company or the Operations have not received
from the FDA or any other Governmental Body, and none of them has knowledge
of any facts which would furnish any reasonable basis for, any notice of
adverse findings, FDA Form 483 inspectional observations, regulatory letters,
notices of violations, warning letters, Section 305 criminal proceeding
notices under the Federal Food, Drug and Cosmetic Act or other similar
communication from the FDA or other Governmental Body, and there have been no
seizures conducted or, to the knowledge of the Company and the Shareholders,
threatened by the FDA or other Governmental Body, and no recalls, market
withdraws, field notifications, notifications of misbranding or adulteration,
or safety alerts conducted, requested or, to the knowledge of the Company and
the Shareholders, threatened by the FDA or other Governmental Body relating
to the Company or the Operations or to the products sold by the Company or
the Operations.
(iv) Each premarket approval ("PMA") and premarket
notification ("510(K)") submission and related documents and information for
each of the products of the Company and the Operations have been filed,
approved or cleared and maintained in compliance in all material respects
with applicable federal statutes, rules, regulations, standards, guides or
orders administered or promulgated by the FDA and all other Governmental
Bodies and all preclinical and clinical studies that support approval or
clearance of products have been conducted in compliance with all applicable
current Good Laboratory and Good Clinical Practices in all material respects.
No filing or submission to the FDA or any other Governmental Body, that is
the basis for any approval or clearance, contains any material omission or
material false information. The Company has disclosed in writing to ADAC a
complete and accurate list of all products of the Company and the Operations
indicating (i) which products are commercialized, marketed or placed in
interstate commerce under an approved or cleared FDA authority (E.G., PMA,
PMA supplement, 510(k), abbreviated or special 510(k) or Investigational
Device Exemption ("IDE")) and identifying such authority, and (ii) which
products are not marketed under an approved or cleared FDA authority, and
indicating the basis upon which such products are being commercialized,
marketed or placed in interstate commerce without such authority. Such
listing also contains a complete and accurate list of all PMA applications,
PMA supplements, 510(k)s, abbreviated or special 510(k) submissions and IDE
submissions of the Company or the Operations currently pending with the FDA.
(v) The Company and the Operations are not aware of
any facts that are reasonably likely to cause (i) the non-approval or
non-clearance, denial, withdrawal, recall or require suspension or additional
approvals or clearances of any products sold or intended to be sold by the
Company or the Operations, (ii) a change in the manufacturing, marketing
classification, labeling or intended use of any such products or (iii) a
termination or suspension of marketing of any such products.
(vi) None of the products manufactured, marketed or
sold by the Company or the Operations has been recalled or subject to a field
safety notification (whether voluntarily or otherwise), and the Company and
the Operations have not received notice (whether completed or pending) of any
proceeding seeking recall, suspension or seizure of any products sold or
proposed to be sold by the Company and the Operations.
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2.12 TAX MATTERS. Except as set forth in Part 2.12 of the
Disclosure Schedule,
(a) All Tax Returns required to be filed by or on behalf of
the Company with any Governmental Body on or before the Closing Date (the
"COMPANY RETURNS") (i) have been or will be filed when due, and (ii) have been,
or will be when filed, prepared accurately and completely in all material
respects in compliance with all applicable Legal Requirements. All amounts shown
on the Company Returns to be due on or before the Closing Date have been or will
be paid on or before the Closing Date. The Company has delivered to ADAC
accurate and complete copies of all Company Returns filed since its date of
incorporation.
(b) The Balance Sheet fully accrues all actual and contingent
liabilities for Taxes with respect to all periods through the dates thereof in
accordance with GAAP consistently applied. The Company shall establish, in the
ordinary course of business and consistent with its past practices, reserves
adequate for the payment of all Taxes for the period from the Balance Sheet Date
through the Closing Date, and the Company shall disclose the dollar amount of
such reserves to ADAC on or prior to the Closing Date.
(c) To the knowledge of the Company and the Shareholders, no
Company Return has ever been examined or audited by any Governmental Body, and
no such examination or audit has been proposed or scheduled by any Governmental
Body. The Company has delivered to ADAC accurate and complete copies of all
audit reports and similar documents (to which the Company has access) relating
to the Company Returns. No extension or waiver of the limitation period
applicable to any of the Company Returns has been granted (by the Company or any
other Person), and no such extension or waiver has been requested from the
Company.
(d) No claim or Legal Proceeding is pending or, to the
knowledge of the Company and the Shareholders, has been threatened against or
with respect to the Company in respect of any Tax. There are no unsatisfied
liabilities for Taxes (including liabilities for interest, additions to tax and
penalties thereon and related expenses) with respect to any notice of deficiency
or similar document received by the Company. There are no liens for Taxes upon
any of the assets of the Company, except liens for current Taxes not yet due and
payable. The Company has not been, and the Company will not be, required to
include any adjustment in taxable income for any tax period (or portion thereof)
pursuant to Section 481 or 263A of the Code or any comparable provision under
state or foreign Tax laws as a result of transactions or events occurring, or
accounting methods employed, prior to the Closing.
(e) No audit or other examination of any Tax Return of the
Company is presently in progress, nor has the Company been notified of any
request for such an audit or other examination.
(f) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company.
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(g) The Company is not, and has never been, a party to or
bound by a tax sharing, tax indemnity or tax allocation agreement or similar
Contract nor does the Company owe any amount under any such agreement.
(h) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(i) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is accurately reflected on the Company's tax books and records.
(j) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, considered individually or
considered collectively with any other such Contracts, will, or could reasonably
be expected to, give rise directly or indirectly to the payment of any amount
that would not be deductible pursuant to Section 280G or Section 162 of the
Code.
(k) The Company has been an S Corporation within the
meaning of Section 1361 of the Code since its formation.
2.13 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.13(a)(1) of the Disclosure Schedule contains a list
of all employees of the Company as of the date of this Agreement, and correctly
reflects their salaries, any other compensation payable to them (including
compensation payable pursuant to bonus, deferred compensation or commission
arrangements), their dates of employment and their positions. Part 2.13(a)(2) of
the Disclosure Schedule contains a list of all employees of the Company as of
the date of this Agreement that the Company, in its reasonable judgment,
considers to be key employees. The Company is not a party to any collective
bargaining contract or other Contract with a labor union involving any of its
employees. To the knowledge of the Company and the Shareholders, no work
stoppage or labor strike against the Company is pending or threatened. The
Company does not know of any activities or proceedings of any labor union to
organize any employees. Except as set forth in Part 2.13(a)(3), there are no
actions, suits, claims, labor disputes or grievances pending, or, to the
knowledge of the Company and the Shareholders, threatened, relating to any
labor, safety or discrimination matters involving any employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in any material liability to the Company. Neither the Company
nor any of its subsidiaries has engaged in any unfair labor practices within the
meaning of the National Labor Relations Act.
(b) There is no employee of the Company who is not fully
available to perform work because of disability or other leave.
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(c) Each salary, bonus, deferred compensation, incentive
compensation, deferred compensation, stock purchase, stock option, severance
pay, termination pay, hospitalization, medical, insurance, supplemental
unemployment benefits, profit-sharing, pension, retirement or fringe benefit or
other employee benefit plan, program, agreement, policy or other arrangement
(individually referred to as a "PLAN" and collectively referred to as the
"PLANS") sponsored, maintained, contributed to or required to be contributed to
by the Company for the benefit of any current or former employee of the Company
is identified on Part 2.13(c) of the Disclosure Schedule.
(d) Except as described in Part 2.13(d) of the Disclosure
Schedule, the Company does not maintain, sponsor or contribute to, and the
Company has not at any time in the past maintained, sponsored or contributed to,
any employee pension benefit plan (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), whether or not
excluded from coverage under specific Titles or Merger Subtitles of ERISA) for
the benefit of employees or former employees of the Company (a "PENSION PLAN").
The Company has no group severance, separation or salary continuation plans,
programs or arrangements that are covered under ERISA.
(e) The Company does not maintain, sponsor or contribute to
any employee welfare benefit plan (as defined in Section 3(1) of ERISA, whether
or not excluded from coverage under specific Titles or Merger Subtitles of
ERISA) for the benefit of employees or former employees of the Company (a
"WELFARE PLAN") except for those Welfare Plans described in Part 2.13(e) of the
Disclosure Schedule, none of which is a multiemployer plan (within the meaning
of Section 3(37) of ERISA).
(f) Except as disclosed in Part 2.13(f) of the Disclosure
Schedule, with respect to each Plan, the Company has delivered to ADAC:
(i) an accurate and complete copy of such Plan
(including all amendments thereto);
(ii) an accurate and complete copy of the annual
report (if required under ERISA) with respect to such Plan for each of 1997
and 1998;
(iii) an accurate and complete copy of (A) the most
recent summary plan description, together with each Summary of Material
Modifications (if required under ERISA) with respect to such Plan and (B)
each material employee communication relating to such Plan;
(iv) if such Plan is funded through a trust or any
third party funding vehicle, an accurate and complete copy of the trust or
other funding agreement (including all amendments thereto) and accurate and
complete copies of the most recent financial statements thereof;
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(v) accurate and complete copies of all Contracts
relating to such Plan, including service provider agreements, insurance
contracts, minimum premium contracts, stop-loss agreements, investment
management agreements, subscription and participation agreements and
recordkeeping agreements;
(vi) an accurate and complete copy of the most recent
determination, advisory, notification or opinion letter received from the
Internal Revenue Service with respect to such Plan (if such Plan is intended
to be qualified under Section 401(a) of the Code);
(vii) all correspondence to or from any governmental
agency relating to any Plan;
(viii) all COBRA forms and related notices;
(ix) all policies pertaining to fiduciary liability
insurance covering the fiduciaries for each Plan;
(x) all discrimination tests for each Plan for the
most recent plan year; and
(xi) all registration statements, annual reports
(Form 11-K and all attachments thereto) and prospectuses prepared in
connection with each Plan.
(g) Except as described in Part 2.13(g) of the Disclosure
Schedule, the Company is not required to be, and the Company has never been
required to be, treated as a single employer with any other Person under Section
4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the Code. The Company
has never been a member of an "affiliated service group" within the meaning of
Section 414(m) of the Code. The Company has never made a complete or partial
withdrawal from a "multiemployer plan" (as defined in Section 3(37) of ERISA)
resulting in "withdrawal liability" (as defined in Section 4201 of ERISA),
without regard to subsequent reduction or waiver of such liability under either
Section 4207 or 4208 of ERISA.
(h) The Company does not have any plan or commitment to create
any new or additional Plan or to modify or change any existing Plan (other than
to comply with applicable law).
(i) No Welfare Plan provides death, medical or health benefits
(whether or not insured) with respect to any current or former employee of the
Company after any such employee's termination of service (other than (i) benefit
coverage mandated by applicable law, including coverage provided pursuant to
Section 4980B of the Code, (ii) deferred compensation benefits accrued as
liabilities on the Balance Sheet and (iii) benefits the full cost of which are
borne by current or former employees of the Company (or their beneficiaries)).
(j) With respect to each of the Welfare Plans constituting a
group health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of Section 4980B of the Code ("COBRA") have been complied with in all
material respects.
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(k) Each of the Plans has been operated and administered in
all material respects in accordance with applicable Legal Requirements,
including ERISA and the Code, and the Company has performed in all material
respects all obligations required to be performed by it under, is not in default
or violation of, and has no knowledge of any default or violation by any other
party to each Plan, and each Plan has been established and maintained in all
material respects in accordance with its terms and in compliance with all
applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA and the Code. This Section 2.13(k) does not apply to the 401(k)
plan of UGM Medical Systems or to the SARSEP of the Company.
(l) Each of the Plans intended to be qualified under Section
401(a) of the Code has received a favorable determination, advisory,
notification or opinion letter from the Internal Revenue Service, and neither
the Company nor any of the Shareholders is aware of any reason why any such
determination letter should be revoked. This Section 2.13(l) does not apply to
the 401(k) plan of UGM Medical Systems or the SARSEP of the Company.
(m) There are no actions, suits or claims pending, or, to the
knowledge of the Company and the Shareholders, threatened or reasonably
anticipated (other than routine claims for benefits) against any Plan or against
the assets of any Plan.
(n) Each Plan can be amended, terminated or otherwise
discontinued after the Closing in accordance with its terms, without liability
to ADAC, Sub, the Company or any of its ERISA Affiliates (other than ordinary
administration expenses).
(o) There are no audits, inquiries or proceedings pending or,
to the knowledge of the Company, the Shareholders or any ERISA Affiliates,
threatened by the IRS or Department of Labor with respect to any Plan.
(p) Neither the Company nor any ERISA Affiliate is subject to
any penalty or tax with respect to any Plan under Section 502(i) of ERISA or
Sections 4975 through 4980 of the Code.
(q) Neither the execution, delivery or performance of this
Agreement, nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will result in any bonus payment, golden
parachute payment, severance payment or other payment to any current or former
employee, consultant or director of the Company (whether or not under any Plan),
or materially increase the benefits payable under any Plan, result in any
acceleration of the time of payment or vesting of any such benefits or the
forgiveness of any indebtedness.
(r) The Company is in compliance with all applicable Legal
Requirements and Contracts relating to employment, employment practices,
employee compensation, wages, bonuses and terms and conditions of employment.
The Company has paid all sums due and owing all employees and independent
contractors of the Company for all periods ending on or prior to the Closing
Date or has made an appropriate reserve therefor in the Financial Statements.
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(s) The Company has good labor relations, and neither the
Company nor the Shareholders has any knowledge of any facts indicating that (i)
the consummation of the Merger or any of the other transactions contemplated by
this Agreement will have an adverse effect on the Company's labor relations or
(ii) any of the Company's employees intends to terminate his or her employment
with the Company (in connection with the Merger or otherwise).
2.14 LITIGATION AND CLAIMS.
(a) There is no examination, review, investigation,
arbitration, suit, litigation or other proceeding (a "LEGAL PROCEEDING") pending
or, to the knowledge of the Company and the Shareholders, threatened by or
before any court or Governmental Body in which the Company is a party or to
which any of the business or assets of the Company is subject, nor has any third
party made any claim against the Company which could result in any such Legal
Proceeding nor, to the Company's or any Shareholder's knowledge, is there any
reasonable basis (ascertainable at each time this representation and warranty is
made or deemed made) for any such claim or Legal Proceeding.
(b) The Company is not a party to any decree, order or
arbitration award (or agreement entered into in any Legal Proceeding) with
respect to its properties, assets, personnel or business activities.
(c) There are no Legal Proceedings pending or, to the
knowledge of the Company or any Shareholder, threatened (nor any reasonable
basis (ascertainable at each time this representation and warranty is made or
deemed made) therefor known to the Company or the Shareholders) involving the
prior employment of any of the Company's employees, their use in connection with
the Company's business of any information or techniques allegedly proprietary to
any of their former employers or their obligations under any agreements with
prior employers.
2.15 ENVIRONMENTAL MATTERS. The Company is and has at all times
been in compliance in all material respects with all applicable Environmental
Laws. The Company possesses all permits and other Governmental Authorizations
required under applicable Environmental Laws, and the Company is and has at
all times been in compliance in all material respects with the terms and
requirements of all such Governmental Authorizations. The Company has not
received any notice or other communication (whether from a Governmental Body,
citizens group, employee or otherwise) that alleges that the Company is not
in compliance with any Environmental Law, and, to the best of the knowledge
of the Company and the Shareholders, there are no circumstances that could
reasonably be expected to prevent or interfere with the Company's compliance
with any Environmental Law in the future. To the best of the knowledge of the
Company and the Shareholders, no current or prior owner of any property
leased or controlled by the Company has received any notice or other
communication (whether from a Governmental Body, citizens group, employee or
otherwise) that alleges that such current or prior owner or the Company is
not or was not in compliance with any Environmental Law. All Governmental
Authorizations currently held by the Company pursuant to Environmental Laws
are identified in Part 2.15 of the Disclosure Schedule.
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For purposes of this Agreement, (i) "ENVIRONMENTAL LAW" means any federal,
state, local or foreign Legal Requirement relating to pollution or protection
of human health or the environment (including ambient air, surface water,
ground water, land surface or subsurface strata), including any law or
regulation relating to emissions, discharges, releases or threatened releases
of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern; and (ii)
"MATERIALS OF ENVIRONMENTAL CONCERN" include chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products and
any other substance that is now or in the future regulated by any
Environmental Law or that is otherwise a danger to health, reproduction or
the environment.
2.16 SALE OF PRODUCTS; PERFORMANCE OF SERVICES.
(a) The Company has not incurred and is not otherwise subject
to, and to the Company's and the Shareholders' knowledge the Company will not
incur or otherwise become subject to, any liability arising from (i) any
product, system, program, Intellectual Property or other asset designed,
developed, manufactured, assembled, sold, supplied, installed, repaired,
licensed or made available by the Company on or prior to the Closing Date, or
(ii) any consulting services, installation services, programming services,
repair services, maintenance services, training services, support services or
other services performed by the Company on or prior to the Closing Date.
(b) No customer or other Person has asserted or, to the
knowledge of the Company or the Shareholders, threatened to assert any claim
against the Company (other than claims that have been resolved satisfactorily at
no material cost to the Company) under or based upon (i) any warranty provided
by or on behalf of the Company or (ii) any services performed by the Company.
2.17 INSURANCE. Part 2.17 of the Disclosure Schedule provides an
accurate and complete list of each insurance policy and fidelity bond
maintained by, at the expense of or for the benefit of the Company and any
claims made thereunder. The Company has delivered to ADAC accurate and
complete copies of the insurance policies and bonds maintained by, at the
expense of or for the benefit of the Company. Each of the insurance policies
and bonds maintained by, at the expense of or for the benefit of the Company
is in full force and effect. The Company has not received any notice or other
communication regarding any actual or possible (a) cancellation or
invalidation of any insurance policy, (b) refusal of any coverage or
rejection of any claim under any insurance policy or (c) material adjustment
in the amount of the premiums payable with respect to any insurance policy.
All premiums due and payable under all such policies and bonds have been paid
and the Company is otherwise in compliance with the terms of such policies
and bonds (or other policies and bonds providing substantially similar
insurance coverage).
2.18 COMPLETE COPIES OF MATERIALS. The Company has delivered to
ADAC true and complete copies of each agreement, contract, commitment or
other document (or summaries of same) that is referred to in this Agreement
(including in any exhibit or schedule hereto) or that has
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been requested by ADAC or its counsel.
2.19 RELATED PARTY TRANSACTIONS. (a) No Related Party has, and no
Related Party has had, any direct or indirect interest in any asset
(including any Intellectual Property) used in or otherwise relating to the
business of the Company; (b) no Related Party is indebted to the Company; (c)
no Related Party has entered into, or has had any direct or indirect
financial interest in, any Material Contract, transaction or business dealing
involving the Company; (d) no Shareholder, officer or director of the Company
is competing directly or indirectly with the Company and, to the knowledge of
the Company and the Shareholders, no other Related Party is competing
directly or indirectly with the Company; and (e) to the knowledge of the
Company and the Shareholders, no Related Party has any claim or right against
the Company (other than rights to receive compensation for services performed
as an employee of the Company).
2.20 FINANCIAL ADVISOR. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or any of the other transactions contemplated hereby based
upon arrangements made by or on behalf of the Company or any of the
Shareholders.
2.21 ENFORCEABILITY. The Company has the corporate power and
authority to execute, deliver and perform each of the Transactional
Agreements (as defined below) to which it is or will become a party. The
execution and delivery of the Transactional Agreements and the performance of
the Company's obligations thereunder have been duly and validly authorized by
the vote of the Board of Directors of the Company and the shareholders of the
Company. No other corporate proceeding on the part of the Company is
necessary to authorize the Company's execution and delivery of, and the
performance of the Company of its obligations under, the Transactional
Agreements. Each Shareholder has the full legal right and capacity to
execute, deliver and perform each of the Transactional Agreements to which
each such Shareholder is or will become a party. The Transactional Agreements
(a) have been (or will be) duly executed and delivered by duly authorized
officers of the Company and the Shareholders, as applicable, and (b)
constitute (or, when executed by the Company and the Shareholders, as
applicable, will constitute) legal, valid and binding obligations of the
Company and the Shareholders, enforceable against them in accordance with
their terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency, moratorium or other similar laws affecting creditors' rights
generally, and (ii) general principles of equity relating to the availability
of equitable remedies. For purposes of this Agreement, (i) "TRANSACTIONAL
AGREEMENTS" means this Agreement and each of the other agreements and
documents executed in connection with or contemplated by this Agreement; and
(ii) "TRANSACTIONS" means (A) the execution, delivery and performance of the
respective Transactional Agreements and (B) each of the transactions
contemplated by or otherwise referred to in any of the Transactional
Agreements (including the Merger).
2.22 GOVERNMENTAL CONSENTS; NO CONFLICTS. There is no requirement
applicable to the Company to make any filing with, or to obtain any permit,
authorization, consent or approval of, any Governmental Body as a condition
to the lawful consummation of any of the Transactions or the
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performance of or compliance with the terms of the Transactional Agreements.
Neither the execution and delivery of this Agreement by the Company, the
consummation by the Company of any of the Transactions nor the performance of
or compliance with the terms of the Transactional Agreements will
(a) conflict with, violate or result in any breach of any
provision of the articles of incorporation or bylaws (or comparable charter
documents) of the Company;
(b) result in a breach, default (or with notice or lapse of
time or both would result in a default), event of default or violation under, or
impair the rights of the Company or alter the rights or obligations of any third
party under, or require the Company to make any material payment or become
subject to any liability to any third party under, or give rise to any right of
termination, amendment, cancellation, acceleration, repurchase, put or call
under, any of the terms, conditions or provisions of any Contract;
(c) give rise to any right of termination, amendment,
cancellation, acceleration, repurchase, put or call under any of the terms,
conditions or provisions of any Contract;
(d) result in the creation of any liens, charges or
encumbrances on any of the assets of the Company;
(e) violate any law, order, judgment, rule, regulation, decree
or ordinance to which the Company or any Shareholder is subject or by which the
Company or any Shareholder is bound;
(f) conflict with or violate any law, statute, rule,
regulation, judgment, order, writ, injunction, decree or arbitration award
applicable to the Company or any of its assets (including, without limitation,
the HSR Act, together with all rules and regulations promulgated thereunder); or
(g) require the consent of any third party, except as set
forth on Schedule 3.3(e).
2.23 FULL DISCLOSURE. None of the representations or warranties
made by the Company or the Shareholders, nor any document, written
information, statement, financial statement, certificate, schedule or exhibit
prepared or furnished by the Company, the Shareholders or their
representatives pursuant to this Agreement or in connection with the
transactions contemplated hereby, or furnished in or in connection with any
materials provided to shareholders in connection with the approval of this
Agreement and the transactions contemplated hereby, contains or will contain
at the Effective Time, any untrue statement of a material fact, or omits or
will omit at the Effective Time to state any material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading. There is no event, fact or
condition that has resulted in having, or to the actual knowledge of the
Company and the Shareholders would reasonably be expected to have, a Material
Adverse Effect that has not been set forth in this Agreement. Any and all
financial projections provided by the Company to ADAC represent the
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Company's and the Shareholders' reasonable best estimate of the matters
addressed therein and were prepared in good faith based on reasonable
assumptions, and to the best knowledge of the Company and the Shareholders,
there is no event, fact or condition that renders any such projections
materially inaccurate.
2.24 HSR ACT
(a) The Company is its own Ultimate Parent Entity (as defined
under the HSR Act, together with all rules and regulations promulgated
thereunder).
(b) The Company does not have ten million dollars
(U.S.$10,000,000) or more in total assets or ten million dollars
(U.S.$10,000,000) or more in total revenues as stated on its most recent
regularly prepared financial statements.
2.25 YEAR 2000. To the extent any of the Company's products
(including products currently under development) will record, store, process,
calculate and present calendar dates, and with respect to the operation of
parts of such products provided or to be provided by third party suppliers,
based upon reasonably diligent inquiries of such suppliers, to the knowledge
of the Shareholders and to the knowledge of the Company upon reasonable and
diligent inquiry, all such products will record, store, process, calculate
and present calendar dates falling on and after (and if applicable, spans of
time including) January 1, 2000, and will calculate any information dependent
on or relating to such dates in the same manner, and with the same
functionality, data integrity and performance, as such products record,
store, process, calculate and present calendar dates on or before December
31, 1999, or calculate any information dependent on or relating to such
dates. To the knowledge of the Shareholders and to the knowledge of the
Company upon reasonable and diligent inquiry, all of such products will lose
no functionality with respect to the introduction of records containing dates
falling on or after January 1, 2000.
3. REPRESENTATIONS AND WARRANTIES OF ADAC AND SUB
ADAC and Sub represent and warrant to the Company and the Shareholders
as follows:
3.1 AUTHORITY; BINDING NATURE OF AGREEMENT. Each of ADAC and Sub
has the corporate power and authority to perform its obligations under this
Agreement. This Agreement has been duly and validly authorized by the Board
of Directors of each of ADAC and Sub. No vote of ADAC's stockholders is
needed to approve the Merger. This Agreement constitutes the legal, valid and
binding obligation of each of ADAC and Sub, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
(i) bankruptcy, insolvency, moratorium or other similar laws affecting
creditors' rights generally, and (ii) general principles of equity relating
to the availability of equitable remedies.
3.2 FINANCIAL ADVISOR. ADAC represents and warrants that no broker,
finder or investment banker is entitled to any brokerage, finder's or other
fee or commission in connection
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with the Merger or any of the other Transactions based upon arrangements made
by or on behalf of ADAC.
4. CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; ADDITIONAL AGREEMENTS
4.1 INFORMATION AND ACCESS.
(a) During the period from the date of this Agreement through
the Effective Time (the "PRE-CLOSING PERIOD"):
(i) the Company shall afford, and shall cause its
outside accountants, counsel and other advisors and representatives
(collectively, "REPRESENTATIVES") to afford, to ADAC and to ADAC's
Representatives, reasonable access upon reasonable notice during normal
business hours to the properties, books, records (including filed Tax
Returns, Tax Returns in preparation and the audit work papers and other
records of the independent auditors of the Company) and personnel of the
Company in order that ADAC and ADAC's Representatives may have a full
opportunity to make such investigation as ADAC reasonably desires to make of
the Company;
(ii) the Company shall permit ADAC and ADAC's
Representatives to make such reasonable inspections upon reasonable notice
during normal business hours of the Company and its operations as ADAC may
reasonably require from time to time; and
(iii) the Company shall furnish ADAC and ADAC's
Representatives with, and shall cause the Company's Representatives to
furnish ADAC with, such financial and operating data and other information
with respect to the business and properties of the Company as ADAC or ADAC's
Representatives may reasonably request from time to time.
(b) Without limiting the generality of Section 4.1(a), during
the Pre-Closing Period, the Company shall promptly provide ADAC with copies of:
(i) all operating and financial reports prepared by
the Company for its senior management, including copies of the unaudited
monthly balance sheets of the Company and the related unaudited statements of
operations;
(ii) any written materials or written communications
sent by the Company to its shareholders generally in connection with their
status as such; and
(iii) any notice, report or other document filed with
or sent to any Governmental Authority in connection with any of the
Transactions.
(c) No investigation by ADAC or any of its Representatives
pursuant to this Section 4.1 shall limit or otherwise affect any representation
or warranty of the Company or the Shareholders or any condition to any
obligation of ADAC.
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4.2 CONDUCT OF BUSINESS OF THE COMPANY.
(a) Except as provided in Section 4.2(b) to the contrary,
during the Pre-Closing Period, the Company shall (i) conduct its business in the
ordinary and usual course consistent with past practice and (ii) use
commercially reasonable efforts to maintain and preserve intact its business
organization, to keep available the services of its officers and employees and
to maintain satisfactory relations with lessors, suppliers, contractors,
distributors, customers and others having business relationships with the
Company.
(b) During the Pre-Closing Period,
(i) the Company shall keep in full force all
insurance policies identified in Part 2.17 of the Disclosure Schedule;
(ii) the Company shall (to the extent requested by
ADAC) cause its officers to report regularly (but in no event less frequently
than weekly) to ADAC concerning the status of the Company's business;
(iii) the Company shall not declare, accrue, set aside
or pay any dividend or make any other distribution in respect of any shares
of capital stock, and shall not repurchase, redeem or otherwise reacquire any
shares of capital stock or other securities;
(iv) the Company shall not sell, issue or authorize
the issuance of (A) any capital stock or other security, (B) any option,
call, warrant or right to acquire, or relating to, any capital stock or other
security, or (C) any instrument convertible into or exchangeable or
exercisable for any capital stock or other security;
(v) neither the Company nor any of the Shareholders
shall amend or permit the adoption of any amendment to or restatement of the
Company's articles of incorporation or bylaws, or effect or permit the
Company to become a party to any Acquisition Transaction, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(vi) the Company shall not form any subsidiary or
acquire any equity interest or other interest in any other entity;
(vii) the Company shall not make any capital
expenditure, except for capital expenditures that, when added to all other
capital expenditures made on behalf of the Company during the Pre-Closing
Period, do not exceed $10,000 in the aggregate;
(viii) the Company shall not (i) enter into or become
bound by, or permit any of the assets owned or used by it to become bound by,
any Material Contract or (ii) amend or prematurely terminate, or waive any
material right or remedy under, any Material Contract;
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(ix) the Company shall not (A) acquire or enter into
or commence any lease or license for any right or other asset from or with
any other Person, (B) sell or otherwise dispose of, or enter into or commence
any lease or license, for any right or other asset to any other Person, or
(C) waive or relinquish any right, except for immaterial rights acquired,
leased, licensed or disposed of by the Company pursuant to Contracts that are
not Material Contracts;
(x) the Company shall not lend money to any person
or entity, or incur or guarantee any indebtedness;
(xi) the Company shall not (A) establish, adopt or
amend any Employee Benefit Plan, except (1) for the termination of its 401(k)
plan and/or SARSEP immediately prior to Closing and (2) as required by law or
an applicable government agency, (B) pay any bonus or make any profit-sharing
or similar payment to increase the amount of the wages, salary, commissions,
fringe benefits or other compensation or remuneration payable to, any of its
directors, officers, consultants or employees, or (C) hire any new employees.
(xii) the Company shall not change any of its methods
of accounting or accounting practices in any respect;
(xiii) the Company shall not make any Tax election;
(xiv) the Company shall not commence or settle or make
any offer of settlement with respect to any Legal Proceeding;
(xv) the Company shall not enter into any material
transaction or take any other material action outside the ordinary course of
business or inconsistent with its past practices;
(xvi) the Company shall not pledge any of its assets
or otherwise permit any of its assets to become subject to any lien, pledge,
charge or other encumbrance, except for pledges of immaterial assets made in
the ordinary course of business and consistent with the Company's past
practices; and
(xvii) the Company shall not agree or commit to take
any of the actions described in clauses "(iii)" through "(xvi)" of this
Section 4.2.
4.3 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, the Company and each
Shareholder, through the Shareholders' Representative, as applicable, shall
promptly notify ADAC in writing of:
(i) the discovery by the Company or a Shareholder of
any event, condition, fact or circumstance that occurred or existed on or
prior to the date of this Agreement and that caused or constitutes an
inaccuracy in or breach of any representation or warranty made by the Company
or the Shareholders in this Agreement;
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(ii) any event, condition, fact or circumstance
known, or that becomes known, to the Company or any Shareholder that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty made
by the Company or the Shareholders in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance or (B)
such event, condition, fact or circumstance had occurred, arisen or existed
on or prior to the date of this Agreement;
(iii) any breach of any covenant or obligation of the
Company or the Shareholders; and
(iv) any event, condition, fact or circumstance
known, or that becomes known, to the Company or any Shareholder that would
make the timely satisfaction of any of the conditions set forth in Article 5
or Article 6 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is
required to be disclosed pursuant to Section 4.3(a) requires any change in the
Disclosure Schedule, or if any such event, condition, fact or circumstance would
require such a change assuming the Disclosure Schedule were dated as of the date
of the occurrence, existence or discovery of such event, condition, fact or
circumstance, then the Company shall promptly deliver to ADAC an update to the
Disclosure Schedule specifying such change. No such update shall be deemed to
supplement or amend the Disclosure Schedule for the purpose of (i) determining
the accuracy of any of the representations and warranties made by the Company or
the Shareholders in this Agreement, or (ii) determining whether any of the
conditions set forth in Article 6 has been satisfied.
4.4 FIRPTA COMPLIANCE. On the Closing Date, the Company shall
deliver to ADAC a properly executed statement in a form reasonably acceptable
to ADAC for purposes of satisfying ADAC's obligations under Treasury
Regulation Section 1.1445-2(c)(3).
4.5 NEGOTIATION WITH OTHERS.
(a) During the Pre-Closing Period, the Company shall not, and
it shall cause its officers, directors or employees not to, directly or
indirectly, (i) solicit, initiate, encourage or induce the making of any
Acquisition Transaction, (ii) furnish information regarding the Company in
connection with an Acquisition Proposal or potential Acquisition Transaction,
(iii) negotiate or engage in discussions with any third party with respect to
any Acquisition Transaction, (iv) approve, endorse or recommend any Acquisition
Transaction or (v) enter into any letter of intent, contract or other instrument
related directly or indirectly to any Acquisition Transaction or contracts with
advisors or consultants.
(b) During the Pre-Closing Period, the Shareholders shall not,
directly or indirectly, (i) solicit, initiate, encourage or induce the making of
any Acquisition Transaction, (ii) furnish information regarding the Company in
connection with an Acquisition Transaction or
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potential Acquisition Transaction, (iii) negotiate or engage in discussions
with any third party with respect to any Acquisition Transaction, (iv)
approve, endorse or recommend any Acquisition Transaction or (v) enter into
any letter of intent, contract or other instrument related directly or
indirectly to any Acquisition Transaction or contracts with advisors or
consultants.
(c) The Company and the Shareholders shall immediately cease
and cause to be terminated any discussions or negotiations with any parties
existing as of the date of this Agreement and that relate to any Acquisition
Transaction.
4.6 REGULATORY APPROVALS.
(a) The Company and ADAC shall use commercially reasonable
efforts to file as soon as practicable after the date of this Agreement all
notices, reports and other documents required by law to be filed with any
Governmental Body with respect to the Merger and the other Transactions and to
submit promptly any additional information requested by any such Governmental
Body.
(b) The Company and ADAC shall (i) give each other prompt
notice of the commencement of any Legal Proceeding by or before any court or
Governmental Body with respect to the Merger or any of the other Transactions,
(ii) keep each other informed as to the status of any such Legal Proceeding and
(iii) except as may be prohibited by any Governmental Body or by any law or
court order or decree, permit the other party to be present at each meeting or
conference relating to any such Legal Proceeding and to have access to and be
consulted in connection with any document filed or provided to any Governmental
Body in connection with any such Legal Proceeding.
4.7 ADDITIONAL AGREEMENTS. The Company, ADAC, Gerd Muehllehner and
Ursula Muehllehner agree to use commercially reasonable efforts to take, or
cause to be taken, all actions necessary to consummate the Merger and make
effective the other Transactions. Without limiting the generality of the
foregoing, the Company, ADAC, Gerd Muehllehner and Ursula Muehllehner shall
use all commercially reasonable efforts to (i) obtain the consent and
approval of each Governmental Body, lessor or other person whose consent or
approval is required (by virtue of any contractual provision or Legal
Requirement or otherwise) in order to permit the consummation of the Merger
or any of the other Transactions or in order to enable the Surviving
Corporation to conduct its business in the manner in which such business is
currently being conducted or is proposed to be conducted, (ii) effect all
registrations and filings necessary to consummate the Merger (including,
without limitation, any registration or filing required under the HSR Act)
and (iii) lift any restraint, injunction or other legal bar to the Merger.
4.8 COMPANY SHAREHOLDER APPROVAL. The Company shall, in accordance
with its articles of incorporation and bylaws and the applicable requirements
of the PGCL, seek the approval of its shareholders as promptly as practicable
to the Merger, the Plan of Merger and related articles of merger and this
Agreement. The Shareholders shall cause all shares of the capital stock of
the
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Company that are owned, beneficially or of record, by the Shareholders on the
record date for the Company Shareholders' Meeting to be voted in favor of the
Merger and this Agreement. The Shareholders agree to execute all documents
and take all actions they deem necessary or advisable to effect the foregoing.
4.9 PUBLIC ANNOUNCEMENTS.
(a) During the Pre-Closing Period, neither the Company nor the
Shareholders shall (and the Company shall not permit any of its representatives
to) issue any press release or make any public statement regarding this
Agreement or the Merger, or regarding any of the other transactions contemplated
by this Agreement, without ADAC's prior written consent.
(b) During the Pre-Closing Period, ADAC will consult with the
Company prior to issuing any press release or making any public statement
regarding the Merger (unless ADAC reasonably determines that ADAC is required,
by virtue of any applicable Legal Requirement, to issue any such press release
or make any such public statement under circumstances that make it infeasible or
impractical to consult with the Company).
4.10 TAXES.
(a) The Company shall timely file all federal and state income
tax returns for taxable periods ending on or prior to the Effective Time and has
paid or will pay all Taxes attributable to such periods. Such returns shall be
prepared and filed in accordance with applicable law and in a manner consistent
with past practices and shall be subject to review and approval by ADAC. After
the Effective Time, ADAC and the Shareholders shall make available to the other,
as reasonably requested, all information, records or documents relating to
liability for Taxes for all periods prior to or including the Effective Time and
will preserve such information, records or documents until the expiration of any
applicable statutes of limitations.
(b) The Shareholders shall timely pay all transfer,
documentary, sales, use, stamp, registration and other Taxes and fees arising
from or relating to the Merger and the transactions contemplated by this
Agreement, and the Shareholders shall, at their own expense, file all necessary
tax returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees. If
required by applicable law, ADAC and the Company shall join in the execution of
any such tax returns and other documentation.
(c) The Company shall maintain its tax status as an S
Corporation up to the Effective Time and the Shareholders shall not revoke or
otherwise terminate the election of the Company to be treated as an S
Corporation.
4.11 EMPLOYEE PLANS. ADAC shall (i) procure that any pre-existing
condition requirements or waiting period requirements under its employee
benefit plans are waived with respect to employees that are participants in
the employee benefit plans of the Company immediately
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prior to the Closing, (ii) procure that all employees who continue their
employment with the Surviving Corporation ("TRANSFERRED EMPLOYEES") and who
were participants in the employee benefit plans of the Company immediately
prior to the Closing receive credit for previous service for purposes of
eligibility to participate and vesting under the Surviving Corporation's
employee benefit plans, and (iii) credit each Transferred Employee with all
accrued sick days and vacation days to the extent such sick day and vacation
day accruals are included on the Balance Sheet.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF ADAC AND SUB
The obligations of ADAC and Sub to effect the Merger and to otherwise
consummate the transactions contemplated hereby are subject to the fulfillment
at or prior to the Closing of each of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES ACCURATE. The representations
and warranties of the Company and the Shareholders contained in this
Agreement and in each of the other instruments and documents delivered to
ADAC or Sub in connection with the transactions contemplated hereby shall
have been accurate in all material respects as of the date of this Agreement
and as of the Closing Date as if made on and as of the Closing Date.
5.2 COMPLIANCE WITH COVENANTS. The Company and the Shareholders
shall have complied with and performed in all material respects each covenant
contained in this Agreement that is required to be performed by them on or
prior to the Closing Date.
5.3 SHAREHOLDER APPROVAL. The terms of the Merger, the Plan of
Merger and related articles of merger, this Agreement and the transactions
contemplated hereby shall have been duly approved by the affirmative vote of
at least 90% of the shares of Company Common Stock entitled to vote with
respect thereto (or such higher vote as may be required under the PGCL to
approve the terms of the Merger, the Plan of Merger and related articles of
merger, this Agreement and the transactions contemplated hereby).
5.4 CONSENTS. All consents required to be obtained in connection
with the Merger and the other transactions contemplated by this Agreement
(including the Consents identified in Parts 2.9 and 2.22 of the Disclosure
Schedule) shall have been obtained and shall be in full force and effect.
5.5 AGREEMENTS AND DOCUMENTS. ADAC and Sub shall have received the
following agreements and documents, each of which shall be in full force and
effect:
(a) a legal opinion of Morgan Lewis & Bockius LLP, dated as of
the Closing Date, in form and substance satisfactory to ADAC's
Representatives;
(b) certificates executed by each of the Company and the
Shareholders certifying that each of the representations and warranties set
forth in Article 2 is accurate in all material
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respects as of the date of this Agreement and as of the Closing Date as if
made on the Closing Date and that the conditions set forth in Sections 5.1,
5.2, 5.3, 5.4 and 5.7 have been duly satisfied (the "CLOSING CERTIFICATE");
and
(c) certificates executed by each of the Shareholders
certifying that each Shareholder has the due and valid authority to vote his
or her shares and that there are no voting trusts or other voting agreements
with respect to any of such Shareholder's shares of Company Common Stock.
5.6 EMPLOYEES. None of the employees of the Company listed in Part
2.13(a)(2) of the Disclosure Schedule shall have ceased to be employed by, or
expressed an intention to terminate his or her employment with, the Company.
5.7 NO MATERIAL ADVERSE EFFECT. There shall have occurred no
Material Adverse Effect.
5.8 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
5.9 NO LEGAL PROCEEDINGS. No person shall have commenced or, to the
knowledge of the Company, the Shareholders or ADAC, threatened to commence
any Legal Proceeding challenging or seeking the recovery of a material amount
of damages in connection with the Merger or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with the Merger
or any of the other transactions contemplated by this Agreement.
5.10 CONFIDENTIALITY AND NONDISCLOSURE AGREEMENTS. Each employee of
the Company and each consultant to the Company, as of the date of the
Closing, shall have executed and delivered to the Company a Nondisclosure and
Inventions Agreement in the form previously supplied by ADAC to the Company.
5.11 DISSENTERS. No holder of Company Common Stock shall have
exercised dissenters' rights with respect to the transactions contemplated
hereby.
5.12 GOVERNMENTAL AND REGULATORY APPROVALS. Each governmental,
regulatory or third party consent, permit, authorization, approval or filing
required to be obtained, made or received shall have been obtained, made or
received, as applicable, and all such consents, permits, authorizations,
approvals and filings shall be in full force and effect. Any waiting period
applicable to the consummation of the Merger, including under the HSR Act,
shall have expired or been terminated, and no action by the Department of
Justice or Federal Trade Commission challenging or seeking to enjoin the
consummation of the transactions contemplated hereby shall be pending.
5.13 CLOSING OF UGM MEDICAL SYSTEMS, INC. Acquisition. The
conditions precedent contained in the UGM Medical Systems Agreement, other
than any condition relating to the
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satisfaction and fulfillment of the conditions precedent to the transactions
contemplated by this Agreement, shall have been satisfied and fulfilled.
5.14 CORPORATE DOCUMENTS. ADAC shall have received (a) a copy of the
Articles of Incorporation of the Company certified by an appropriate
authority in the state of its incorporation and (b) a copy of the Bylaws of
the Company certified by the Secretary of the Company, and such documents
shall be in form and substance reasonably satisfactory to ADAC.
5.15 TERMINATION OF 40L(k) PLAN AND SIMPLIFIED EMPLOYEE PENSION
PLAN. The Company and its ERISA Affiliates, as applicable, each agrees to
terminate its 401(k) plan and/or its SARSEP immediately prior to Closing. The
Company shall provide ADAC with evidence satisfactory to ADAC that the
Company's and each ERISA Affiliate's (as applicable) 401(k) plan and/or
SARSEP has been terminated pursuant to resolutions of each such entity's
Board of Directors (the form and substance of which resolutions shall be
subject to review and approval of ADAC), effective as of the day immediately
preceding the Closing.
5.16 ASSIGNMENTS. The Company shall have obtained, and delivered to
ADAC, an assignment, substantially in the form attached hereto as EXHIBIT B,
from each consultant to the Company that has developed Intellectual Property
in his or her capacity as a consultant to the Company.
6. CONDITIONS PRECEDENT TO THE COMPANY'S AND THE SHAREHOLDERS' OBLIGATIONS
The obligations of the Company and the Shareholders to effect the
Merger and otherwise consummate the transactions contemplated by this Agreement
are subject to the fulfillment, at or prior to the Closing, of the following
conditions:
6.1 REPRESENTATIONS AND WARRANTIES ACCURATE. The representations
and warranties of ADAC and Sub contained in this Agreement and in each of the
other instruments and documents delivered to the Company and the
Shareholders' Representative in connection with the transactions contemplated
hereby shall have been accurate in all material respects as of the date of
this Agreement and as of the Closing Date as if made on and as of the Closing
Date.
6.2 COMPLIANCE WITH COVENANTS. ADAC and Sub shall have complied
with and performed in all material respects each covenant contained in this
Agreement that is required to be performed by ADAC or Sub, as the case may
be, on or prior to the Closing Date.
6.3 CERTIFICATE. ADAC shall have delivered to the Company and the
Shareholders' Representative a certificate of an executive officer of ADAC
evidencing compliance with the conditions set forth in Sections 6.1 and 6.2.
6.4 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of
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competent jurisdiction and remain in effect, and there shall not be any Legal
Requirement enacted or deemed applicable to the Merger that makes
consummation of the Merger illegal.
6.5 SHAREHOLDER APPROVAL. The terms of the Merger, the Plan of Merger
and related Articles of Merger, this Agreement and the transactions contemplated
hereby shall have been duly approved by the requisite vote of the shares of
Company Common Stock entitled to vote with respect thereto.
7. TERMINATION OF AGREEMENT
7.1 TERMINATION. This Agreement may be terminated prior to the
Effective Time:
(a) by mutual written consent of the respective Boards of
Directors of ADAC and the Company;
(b) by either ADAC or the Company if the Merger shall not have
been consummated by October 31, 1999 (unless the failure to consummate the
Merger is attributable to a failure on the part of the party seeking to
terminate this Agreement to perform any material obligation required to be
performed by such party at or prior to the Effective Time);
(c) by either ADAC or the Company if a court of competent
jurisdiction or Governmental Authority shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger;
(d) by ADAC if any of the Company's or the Shareholders'
representations and warranties contained in this Agreement shall be or shall
have become inaccurate in any material respect, or if any of the Company's or
the Shareholders' covenants contained in this Agreement shall have been
breached in any material respect; PROVIDED, HOWEVER, that if an inaccuracy in
the Company's and the Shareholders' representations and warranties or a
breach of a covenant by the Company or the Shareholders is curable by the
Company, the Company and the Shareholders shall have five (5) Business Days
to cure such breach following notice of such breach; or
(e) by the Company if any of ADAC's representations and
warranties contained in this Agreement shall be or shall have become
inaccurate in any material respect as of the date of this Agreement, or if
any of ADAC's covenants contained in this Agreement shall have been breached
in any material respect; PROVIDED, HOWEVER, that if an inaccuracy in ADAC's
representations and warranties or a breach of a covenant by ADAC is curable
by ADAC, ADAC shall have five (5) Business Days to cure such breach following
notice of such breach.
7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 7.1, this Agreement shall be of no further
force or effect; PROVIDED, HOWEVER, that (i) this Section 7.2, Section 7.3
and Section 8.11 shall survive the termination of this Agreement and shall
remain in full force and effect and (ii) the termination of this Agreement
shall not relieve any party
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from any liability for any intentional breach of this Agreement.
7.3 FEES AND EXPENSES. Each of ADAC, Sub, the Company and the
Shareholders shall bear its own expenses in connection with the preparation,
negotiation, execution and performance of the Merger, the Transactions and
the Transactional Agreements.
8. MISCELLANEOUS
8.1 NON-COMPETE.
(a) Each of the Shareholders (provided that for purposes of
this Section 8.1 the term "Shareholders" excludes Richard Freifelder), for a
period of five (5) years from the Effective Time, shall not, directly or
indirectly, for himself or herself or on behalf of or in conjunction with any
other Person:
(i) engage, as an officer, director, shareholder, owner,
partner, member or joint venturer or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services relating to
the field of nuclear medicine equipment and related software, including
without limitation, products or services relating to positron emission
tomography scanners;
(ii) call upon any Person who is, at that time, an employee
of the Surviving Corporation or ADAC for the purpose or with the intent of
enticing such employee away from or out of the employ of Surviving
Corporation or ADAC; or
(iii) call upon any Person who or that is, at that time, or
has been, within one year prior to that time, a customer of the Company or
ADAC for the purpose of soliciting or selling products or services in direct
competition with the Surviving Corporation or ADAC.
(b) The foregoing covenants shall not be deemed to prohibit the
Shareholders from acquiring as an investment not more than one percent (1%)
of the capital stock of a competing business, whose stock is traded on a
national securities exchange or through the automated quotation system of a
registered securities association.
(c) For purposes of this Section 8.1, references to "ADAC" shall
mean ADAC Laboratories, together with its subsidiaries and affiliates.
(d) Because of the difficulty of measuring economic losses to ADAC
as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to ADAC for which it
would have no other adequate remedy, the Shareholders agree that the
foregoing covenants may be enforced by ADAC in the event of breach by any
such Shareholders by injunctions and restraining orders.
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(e) The parties agree that the foregoing covenants in this
Section 8.1 impose a reasonable restraint on the Shareholders.
(f) The covenants in this Section 8.1 are severable and separate,
and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. If any provision of this Section 8.1
relating to the time period or geographic area of the restrictive covenants
shall be declared by a court of competent jurisdiction to exceed the maximum
time period or geographic area, as applicable, that such court deems
reasonable and enforceable, said time period or geographic area shall be
deemed to be, and thereafter shall become, the maximum time period or largest
geographic area that such court deems reasonable and enforceable and this
Agreement shall automatically be considered to have been amended and revised
to reflect such determination.
(g) All of the covenants in this Section 8.1 shall be construed as
an agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of any of the Shareholders against
Sub, Surviving Corporation or ADAC, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Sub,
Surviving Corporation or ADAC of such covenants.
(h) The Company and the Shareholders hereby agree that the
covenants set forth in this Section 8.1 are a material and substantial part of
the transactions contemplated by this Agreement, supported by adequate
consideration.
8.2 TAX MATTERS.
(a) TAX RETURNS. The Shareholders shall be responsible for
timely filing all federal and state income tax returns of the Company for
taxable periods ending on or prior to the Effective Time and have paid or will
pay all income taxes attributable to the income of the Company for such periods.
Such returns will be prepared and filed in accordance with applicable law and in
a manner consistent with past practices and shall be subject to review and
reasonable approval by ADAC. After the Effective Time, ADAC and the Company, on
the one hand, and the Shareholders, on the other hand, will make available to
the other, as reasonably requested, all information, records or documents
relating to the liability for Taxes of the Company for all periods ending on or
prior to the Effective Time and will preserve such information, records or
documents until the expiration of any applicable statute of limitations or
extensions thereof.
(b) ELECTION UNDER SECTION 338(h)(10). Each of the
Shareholders shall join with ADAC in making a joint election on Form 8023 for
the Company under Section 338(h)(10) of the Code, under Treasury Regulation
Section 1.338(h)(10)-1(d) and under any applicable similar provisions of state
law with respect to the purchase of the Company Common Stock ("SECTION 338
ELECTION"). ADAC shall timely prepare IRS Form 8023 (and any required
attachments) and any similar state and local tax forms (and any required
attachments) required to make the Section 338 Election and each Shareholder
agrees to execute such forms.
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(c) INDEMNIFICATION REGARDING S STATUS. Except with respect to
any tax jurisdiction that does not recognize S corporations as pass-through
entities and to the extent any tax jurisdiction does not accord S corporation
tax treatment to nonresident shareholders, each Shareholder, Severally (as
defined in Section 8.12), hereby indemnifies and agrees to hold the Company
harmless from, against and in respect of any U.S. federal or state income Tax
liability (including interest and penalties), if any, resulting from the Company
failing to qualify as an S corporation under Section 1361(a)(1) of the Code (or
state counterpart) for every taxable year on or before the Closing Date as to
which the Company filed or files Tax Returns claiming status as an S
corporation.
(d) ALLOCATION. To the extent permitted by Sections 338 and
1060 of the Code, the parties hereby agree to allocate up to U.S.$200,000 of the
Aggregate Consideration to tangible assets and the remainder of the Aggregate
Consideration to goodwill in connection with the Section 338 Election. Sellers
shall have the right to review ADAC's determination of such purchase price
allocation and such allocation shall be subject to the Seller's approval which
shall not be unreasonably withheld, conditioned or delayed. Sellers shall
report, act and file in all respects and for all purposes consistent with such
allocation. In the event that following an audit of the Company the Internal
Revenue Service makes a determination that the allocation to tangible assets
should be increased above U.S.$200,000, or ADAC characterizes a portion of the
amount allocated to intangible assets as payable for intangible assets other
than goodwill and the Internal Revenue Service determines that the amount of the
increase or the allocation, respectively, are not paid in respect of capital
assets or Section 1231 assets, then ADAC agrees to indemnify the Shareholders
against the liability for the additional taxes (including any tax with respect
to any such indemnity payment as well as penalties and interest) attributable to
the determination referred to above.
8.3 AMENDMENT. This Agreement may be amended with the approval of the
respective Boards of Directors of the Company and ADAC at any time; PROVIDED,
HOWEVER, that no amendment shall be made without the further approval of the
Shareholders if such approval is required under applicable law. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto whose approval is required pursuant to the previous
sentence.
8.4 WAIVER.
(a) No failure on the part of any party to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
party in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No party shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy
is expressly set forth in a written instrument duly executed
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and delivered on behalf of such party; and any such waiver shall not be
applicable or have any effect except in the specific instance in which it is
given.
(c) The conditions to each party's obligations set forth in
Article 5 and Article 6, as applicable, are for the sole benefit of such party
and may be waived by such party in whole or in part to the extent permitted by
applicable law. If a condition to any party's obligations is unsatisfied or
unfulfilled at the time of Closing and such party affirmatively waives such
condition in writing upon written notice thereof (including a reasonably
detailed description of the basis for the failure to satisfy the condition) and
elects to consummate the transactions contemplated by this Agreement, then such
party shall be deemed to have waived such condition to the extent so specified
in writing for purposes of its obligation to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement and shall have no
claim against the other party for its failure to have satisfied such condition
unless it is actionable pursuant to Section 8.1 or otherwise under this
Agreement or actionable under the UGM Medical Systems Agreement. However, even
if a claim is otherwise actionable as described in the preceding sentence, it
shall not be actionable to the extent of such waiver if it relates to a breach
of a representation, warranty or covenant that to the knowledge of the Company
and the Shareholders was not a breach as of the date of this Agreement. Any
waiver of a condition pursuant to the preceding sentence shall operate as a
waiver of that condition only, and shall not operate as a waiver of any other
condition.
8.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by the Company, the Shareholders, ADAC and Sub in or
pursuant to this Agreement or in any document delivered pursuant hereto shall
be deemed to have been made on the date of this Agreement (except as
otherwise provided herein) and, if a Closing occurs, as of the Closing Date.
The representations and warranties made by the parties hereto in or pursuant
to this Agreement or in any document delivered pursuant hereto shall survive
the Closing and shall remain in effect until, and will expire upon, the
termination of the indemnification obligations with respect thereto as
provided in Article 8 of the UGM Medical Systems Agreement, PROVIDED that
such representations and warranties shall survive for the purposes of any
claim of fraud.
8.6 SEVERABILITY. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with
a valid and enforceable provision that will achieve, to the extent possible,
the economic, business and other purposes of such void or unenforceable
provision.
8.7 ENTIRE AGREEMENT; COUNTERPARTS; APPLICABLE LAW. This Agreement and
the other agreements referred to herein constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral,
among or between any of the parties with respect to the subject matter
hereof, including the letter agreement between the parties dated April 12,
1999, as
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amended. This Agreement may be executed in several counterparts, each of
which shall be deemed an original and all of which shall constitute one and
the same instrument, and shall be governed in all respects by the laws of the
State of California as applied to contracts entered into and to be performed
entirely within California.
8.8 ASSIGNABILITY. This Agreement shall be binding upon: the Company
and its successors and assigns (if any); the Shareholders and their
respective personal representatives, executors, administrators, estates,
heirs, successors and assigns (if any); Sub and its successors and assigns
(if any); and ADAC and its successors and assigns (if any). This Agreement
shall inure to the benefit of the Company, the Shareholders, ADAC, Sub and
the respective successors and assigns (if any) of the foregoing. This
Agreement shall not be assigned by operation of law or otherwise except as
otherwise specifically provided, except that each of ADAC and Sub may assign
its rights and delegate its obligations hereunder to its affiliates.
8.9 NOTICES. All notices and other communications pursuant to this
Agreement shall be in writing and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized, overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to ADAC, to: ADAC Laboratories
540 Alder Drive
Milpitas, California 95035
Attention: General Counsel
with a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Fax: (650) 493-6811
Attention: Page Mailliard
If to Sub, to: UGML Acquisition Corp.
c/o ADAC Laboratories
540 Alder Drive
Milpitas, California 95035
Attention: General Counsel
with a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Fax: (650) 493-6811
Attention: Page Mailliard
If to the Company, to: UGM Laboratory, Inc.
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<PAGE>
3611 Market Street
Philadelphia, PA 19104
Fax: (215) 222-5578
Attention: Gerd Muehllehner
with a copy to: Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Fax: (215) 963-5299
Attention: Debra Poul
If to Shareholders'
Representative, to: Gerd Muehllehner
c/o UGM Laboratory, Inc.
3611 Market Street
Philadelphia, PA 19104
Fax: (215) 222-5578
with a copy to: Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Fax: (215) 963-5299
Attention: Debra Poul
All such notices and other communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery, (b)
in the case of a telecopy, when the party receiving such telecopy shall have
confirmed receipt of the communication, (c) in the case of delivery by
nationally-recognized, overnight courier, on the Business Day following dispatch
and (d) in the case of mailing, on the fifth Business Day following such
mailing.
8.10 COOPERATION. Each of the Company, the Shareholders, Sub and ADAC
agrees to cooperate fully with the other and to execute and deliver such
further documents, certificates, agreements and instruments and to take such
other actions as may be reasonably requested by the other to evidence or
reflect the Transactions and to carry out the intent and purposes of this
Agreement.
8.11 CONFIDENTIALITY. The parties hereby agree that all information
about the other's business obtained by them pursuant to this Agreement or the
letter agreement dated April 12, 1999, shall be deemed confidential and shall
not be disclosed to any other party except as contemplated hereby and such
information will not be used for any purpose except evaluating the
desirability of the Merger. The foregoing shall not apply however to
information (i) known to a party prior to such disclosure to such party, (ii)
that becomes generally available to the public or to a party without
confidentiality restrictions after the date hereof, and (iii) required to be
disclosed by law or court order. Without limiting the generality of the
foregoing, on and at all times after the Closing Date, the Shareholders shall
keep confidential, and shall not use or disclose to any other Person, any non-
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<PAGE>
public document or other non-public information in the Shareholders'
possession that relates to the business of the Company or ADAC.
8.12 CERTAIN TERMS. As used in this Agreement:
(a) "ACQUISITION TRANSACTION" shall mean any proposal (other than
any proposal by ADAC) regarding (i) any merger, consolidation, share
exchange, business combination or other similar transaction or series of
related transactions involving the Company; (ii) any sale, lease, exchange,
transfer or other disposition of the assets of the Company or any subsidiary
of the Company constituting more than 10% of the consolidated assets of the
Company or accounting for more than 10% of the consolidated revenues of the
Company in any one transaction or in a series of related transactions; and
(iii) any offer to purchase, tender offer, exchange offer or any similar
transaction or series of related transactions made by any person involving
more than 10% of the outstanding shares of the capital stock of the Company.
(b) "BUSINESS DAY" shall mean any day that is not (i) a Saturday or
Sunday and (ii) a day on which banking institutions generally in the State of
California are authorized or obligated by law, regulation or executive order
to close.
(c) "CODE" shall mean the United States Internal Revenue Code of
1986, as amended.
(d) "COMPANY CONTRACT" shall mean any Contract: (a) to which the
Company is a party; (b) by which the Company or any of its assets is or may
become bound or under which the Company has, or may become subject to, any
obligation; or (c) under which the Company has or may acquire any right or
interest.
(e) "COMPANY'S KNOWLEDGE" and "KNOWLEDGE OF THE COMPANY" shall mean
the actual knowledge of any officer or director of the Company, or knowledge
any officer or director would have had after reasonable inquiry.
(f) "CONTRACT" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking
of any nature.
(g) "EMPLOYEE BENEFIT PLAN" shall have the meaning specified in
Section 3(3) of ERISA.
(h) "ERISA AFFILIATE" shall mean any other person or entity under
common control with the Company within the meaning of Section 414(b), (c),
(m) or (o) of the Code and the regulations issued thereunder.
(i) "GOVERNMENTAL AUTHORIZATION" shall mean any: (a) permit,
license, certificate, franchise, permission, clearance, registration,
qualification or authorization issued,
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<PAGE>
granted, given or otherwise made available by or under the authority of any
Governmental Body or pursuant to any Legal Requirement; or (b) right under
any Contract with any Governmental Body.
(j) "GOVERNMENTAL BODY" means any (i) nation, state, commonwealth,
province, territory, county, municipality, district or other jurisdiction of
any nature; (ii) federal, state, local, municipal, foreign or other
government; or (iii) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or entity and any court
or other tribunal).
(k) "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvement Act
of 1976, as amended.
(l) The words "INCLUDE" and "INCLUDING," and variations thereof,
shall not be deemed to be terms of limitation, but rather shall be deemed to
be followed by the words "without limitation."
(m) "LEGAL REQUIREMENTS" means any federal, state, local,
municipal, foreign or other law, statute, constitution, principle of common
law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
(n) "MATERIAL ADVERSE EFFECT", as it applies to the Company, means
an event, fact, condition or change that has resulted in or could reasonably
be expected to result in material adverse effect on the business, operations,
results, profits, condition (financial or otherwise), assets, liabilities,
financial performance or prospects of the Company.
(o) "PERSON" refers to any (i) individual, (ii) corporation,
partnership, company, limited liability company, business, group or other
entity, or (iii) Governmental Body;
(p) "RELATED PARTY" shall mean each of the following: (i) the
Shareholders; (ii) each individual who is, or who has at any time been, an
officer or director of the Company; (iii) each individual who is, or who has
at any time been, a member of the immediate family of any of the individuals
referred to in clauses "(i)" and "(ii)" above; and (iv) any trust or other
Entity (other than the Company) in which any one of the individuals referred
to in clauses "(i)", "(ii)" and "(iii)" above holds (or in which more than
one of such individuals collectively hold), beneficially or otherwise, a
voting, proprietary or equity interest.
(q) "SEVERALLY" shall mean each Shareholder's pro rata portion
(based on such Shareholder's percentage ownership of the Company) of a Tax
liability pursuant to Section 8.2(c).
(r) "SHAREHOLDERS' KNOWLEDGE" and "KNOWLEDGE OF THE SHAREHOLDERS"
shall mean the actual knowledge of any Shareholder, or knowledge any
Shareholder would have had after reasonable inquiry.
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<PAGE>
(s) "TAX" shall mean any tax (including any income tax, franchise
tax, capital gains tax, gross receipts tax, value-added tax, surtax, excise
tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property
tax, business tax, withholding tax or payroll tax), levy, assessment, tariff,
duty (including any customs duty), deficiency or fee, and any related charge
or amount (including any fine, penalty or interest), imposed, assessed or
collected by or under the authority of any Governmental Body.
(t) "TAX RETURN" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment,
collection or payment of any Tax or in connection with the administration,
implementation or enforcement of or compliance with any Legal Requirement
relating to any Tax.
(u) "UGM MEDICAL SYSTEMS" shall mean UGM Medical Systems, Inc., a
Pennsylvania corporation.
(v) "UGM MEDICAL SYSTEMS AGREEMENT" shall mean the Agreement and
Plan of Merger, dated as of even date herewith, by and among ADAC, UGMMS
Acquisition Corp., a Delaware corporation, UGM Medical Systems and the
shareholders of UGM Medical Systems.
8.13 TITLES. The titles and captions of the Articles and Sections of this
Agreement are included for convenience of reference only and shall have no
effect on the construction or meaning of this Agreement.
8.14 ARTICLES, SECTIONS AND EXHIBITS. Except as otherwise indicated, all
references in this Agreement to "Articles," "Sections," "Schedules" and
"Exhibits" are intended to refer to Articles and Sections of this Agreement
and Exhibits and Schedules to this Agreement.
8.15 MUTUAL DRAFTING. This Agreement is the joint product of the parties
hereto, and each provision of this Agreement has been subject to the mutual
consultation, negotiation and agreement of each of the parties, and shall not
be construed for or against any party hereto.
8.16 FURTHER REPRESENTATIONS. Each party to this Agreement acknowledges
and represents that it has been represented by its own legal counsel in
connection with the transactions contemplated by this Agreement, with the
opportunity to seek advice as to its legal rights from such counsel. Each
party further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to
such tax consequences. The Company also represents that it has communicated
the above to the Shareholders.
8.17 ARBITRATION
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<PAGE>
(a) Any dispute, claim or controversy arising from or related in
any way to this Agreement or the interpretation, application, breach,
termination or validity thereof, including any claim of inducement of this
Agreement by fraud or otherwise, will be submitted for resolution to
arbitration pursuant to the commercial arbitration rules then pertaining of
the Center for Public Resources ("CPR"), except where those rules conflict
with these provisions, in which case these provisions control. The
arbitration will be held in New York, New York.
(b) The panel shall consist of three (3) arbitrators chosen from
the CPR Panels of Distinguished Neutrals each of whom is a lawyer
specializing in business litigation with at least 15 years experience with a
law firm of over 25 lawyers or was a judge of a court of general jurisdiction.
(c) The parties agree to cooperate (1) to obtain selection of
the arbitrators within thirty (30) days of initiation after the arbitration, (2)
to meet with the arbitrators within thirty (30) days after selection and (3) to
agree at that meeting or before upon procedures for discovery and as to the
conduct of the hearing which will result in the hearing being concluded within
no more than six (6) months after selection of the arbitrators and in the award
being rendered within sixty (60) days after the conclusion of the hearings, or
of any post-hearing briefing, which briefing will be completed by both parties
within twenty (20) days after the conclusion of the hearings. In the event no
such agreement is reached, the CPR will select arbitrators, allowing appropriate
strikes for reasons of conflict or other cause and three peremptory challenges
for each side. The arbitrators shall set a date for the hearing, commit to the
rendering of the award within sixty (60) days after the conclusion of the
evidence at the hearing, or of any post-hearing briefing (which briefing will be
completed by both sides in no more than twenty (20) days after the conclusion of
the hearings), and provide for discovery according to these time limits, giving
recognition to the understanding of the parties hereto that they contemplate
reasonable discovery, including document demands and depositions, but that such
discovery be limited so that the time limits specified herein may be met without
undue difficulty. In no event will the arbitrators allow either side to obtain
more than a total of forty (40) hours of deposition testimony from all
witnesses, including both fact and expert witnesses. In the event multiple
hearing days are required, they will be scheduled consecutively to the greatest
extent possible.
(d) The arbitrators shall render their judgment and award following
the substantive law of the State of California. The arbitrators shall render
an opinion setting forth findings of fact and conclusions of law with the
reasons therefor stated. A transcript of the evidence adduced at the hearing
shall be made and shall, upon request, be made available to either party.
(e) To the extent possible, the arbitration hearings and award will
be maintained in confidence.
(f) Any court of competent jurisdiction may enter judgment upon any
award. The parties consent to the jurisdiction of any such court for the
enforcement of these provisions and the entry of judgment on any such award.
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<PAGE>
(g) Each party has the right before or during the arbitration to
seek and obtain from the appropriate court provisional remedies such as
attachment, a preliminary injunction, a temporary restraining order,
replevin, ETC., to avoid irreparable harm, maintain the status quo or
preserve the subject matter of the arbitration.
(h) Each party hereto waives its right to trial of any issue by
jury.
(i) Each party hereto waives any claim to punitive, exemplary and
consequential damages from the other outside of the procedure specified in
this Section 8.17.
(THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK.)
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan
of Merger as of the date first above written.
ADAC LABORATORIES,
a California corporation
By:
--------------------------------
Name:
Title:
UGML ACQUISITION CORP.,
a Delaware corporation
By:
--------------------------------
Name:
Title:
UGM LABORATORY, INC.,
a Pennsylvania corporation
By:
--------------------------------
Name:
Title:
[Signatures Continue]
(SIGNATURE PAGE FOR AGREEMENT AND PLAN OF MERGER)
<PAGE>
[Signatures Continued]
-----------------------------------------------
(Signature of Shareholder)
-----------------------------------------------
(Printed Name of Shareholder)
-----------------------------------------------
(Title, if signing on behalf of an entity)
(SIGNATURE PAGE FOR AGREEMENT AND PLAN OF MERGER)
<PAGE>
SCHEDULE I
SHAREHOLDERS
Richard Freifelder
Donya Geagan
Michael Geagan
Dr. Joel Karp
David Mankoff
Dr. Gerd Muehllehner
Nancy Muehllehner
Tessa Muehllehner
Ursula Muehllehner
I-1
<PAGE>
EXHIBIT A
PLAN OF MERGER
A-1
<PAGE>
<TABLE>
<S> <C>
Microfilm Number Filed with the Department of State on
---------------------------- ------------------------------
Entity Number
------------------------------- ------------------------------------------------------------------
Secretary of Commonwealth
</TABLE>
ARTICLES OF MERGER-DOMESTIC BUSINESS CORPORATION
DSCB: 15-1926 (REV 90)
In compliance with the requirements of 15 Pa.C.S. Section 1926
(relating to articles of merger or consolidation), the undersigned business
corporations, desiring to effect a merger, hereby state that:
1. The name of the corporation surviving the merger is: UGM LABORATORY,
INC.
2. (Check and complete one of the following):
The surviving corporation is a domestic business corporation and the
--- (a) address of its current registered office in this Commonwealth
or (b) name of its commercial registered office provider and the
county of venue is (the Department is hereby authorized to correct
the following information to conform to the records of the
Department):
(a) 3611 MARKET STREET PHILADELPHIA PA 19104 PHILADELPHIA
----------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
----------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office
provider, the county in (b) shall be deemed the county in which
the corporation is located for venue and official publication
purposes.
The surviving corporation is a qualified foreign business corporation
--- incorporated under the laws of______ _____________and the (a)
address of its current registered office in this Commonwealth or
(b) name of its commercial registered office provider and the
county of venue is (the Department is hereby authorized to correct
the following information to conform to the records of the
Department):
(a)
-------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
--------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office
provider, the county in (b) shall be deemed the county in which the
corporation is located for venue and official publication purposes.
The surviving corporation is a nonqualified foreign business
--- corporation incorporated under the laws of
----------------------------------------------------------------------
Number and Street City State Zip County
<PAGE>
DSCB: 15-1926 (Rev 90)-2
3. The name and the address of the registered office in this Commonwealth
or name of its commercial registered office provider and the county of
venue of each other domestic business corporation and qualified foreign
business corporation which is a party to the plan of merger are as
follows:
<TABLE>
<S><C>
Name of Corporation Address of Registered Office or Name of Commercial Registered Office Provider County
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
</TABLE>
4. (Check, and if appropriate complete, one of the following):
X The plan of merger shall be effective upon filing these Articles of
Merger in the Department of State.
The plan of merger shall be effective on ___________ at ____________
--- Date Hour
5. The manner in which the plan of merger was adopted by each domestic
corporation is as follows:
Name of corporation Manner of adoption
<TABLE>
<S> <C>
UGM LABORATORY, INC. ADOPTED BY THE DIRECTORS AND SHAREHOLDERS PURSUANT TO 15 PA.C.S. SECTION 1924 (A)
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
</TABLE>
6. (Strike out this paragraph if no foreign corporation is a party to the
merger). The plan was authorized, adopted or approved, as the case may
be, by the foreign business corporation (or each of the foreign
corporations) party to the plan in accordance with the laws of the
jurisdiction in which it is incorporated.
7. (Check, and if appropriate complete, one of the following):
The plan of merger is set forth in full in Exhibit A attached hereto
--- and made a part hereof.
X Pursuant to 15 Pa.C.S. Section 1901 (relating to omission of certain
--- provisions from filed plans) the provisions, if any, of the plan of
merger that amend or constitute the operative Articles of
Incorporation of the surviving corporation as in effect subsequent
to the effective date of the plan are set forth in full in Exhibit
A attached hereto and made a part hereof. The full text of the plan
of merger is on file at the principal place of business of the
surviving corporation, the address of which is:
3611 MARKET STREET PHILADELPHIA PA 19104
----------------------------------------------------------------
Number and Street City State Zip
<PAGE>
DSCB: 15-1926 (Rev 90)-3
IN TESTIMONY WHEREOF, the undersigned corporation or each undersigned
corporation has caused these Articles of Merger to be signed by a duly
authorized officer thereof this ____________ day of ________________, 1999.
UGM LABORATORY, INC.
-------------------------------------------
(Name of Corporation)
BY:
---------------------------------------
(Signature)
TITLE: PRESIDENT
------------------------------------
UGML ACQUISITION CORP.
------------------------------------------
(Name of Corporation)
BY:
---------------------------------------
(Signature)
TITLE: VICE-PRESIDENT
------------------------------------
<PAGE>
CERTIFICATE OF MERGER OF
UGML ACQUISITION CORP.
WITH AND INTO
UGM LABORATORY, INC.
October 1, 1999
UGM Laboratory, Inc. (the "Company"), organized and existing under the
General Corporation Law of the Commonwealth of Pennsylvania, does hereby certify
as follows:
FIRST: The name and state of incorporation of each of the constituent
corporations (the "Constituent Corporations") to the merger are:
NAME STATE
---- -----
UGM Laboratory, Inc.............................Pennsylvania
UGML Acquisition Corp........................... Delaware
SECOND: An Agreement and Plan of Merger, dated as of September 13,
1999 (the "Merger Agreement"), among ADAC Laboratories, a California
corporation, UGML Acquisition Corp., a Delaware corporation ("Merger Sub"),
the Company, and the shareholders of the Company listed on Schedule I
thereto, providing for the merger of Merger Sub with and into the Company
(the "Merger"), has been approved, adopted, certified, executed and
acknowledged by each of the Constituent Corporations in accordance with the
requirements of Section 252(c) of the General Corporation Law of the State of
Delaware (the "DGCL").
THIRD: The name of the surviving corporation is UGM Laboratory, Inc.
(the "Surviving Corporation").
FOURTH: The certificate of incorporation of the Surviving
Corporation shall be the certificate of incorporation of the Company as in
effect immediately prior to the Merger.
FIFTH: The executed Merger Agreement is on file at the office of the
Surviving Corporation located at 3611 Market Street, Philadelphia, PA 19104.
SIXTH: A copy of the Merger Agreement will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder of
either of the Constituent Corporations.
SEVENTH: The Surviving Corporation agrees that it may be served with
process in the State of Delaware in any proceeding for enforcement of any
obligation of any Constituent Corporation of the State of Delaware, as well
as for enforcement of any obligation of the Surviving
<PAGE>
Corporation arising from the Merger, including any suit or other proceeding
to enforce the right of any stockholders as determined in appraisal
proceedings pursuant to section 262 of the DGCL, and irrevocably appoints the
Secretary of State of the State of Delaware as its agent to accept service of
process in any such suit or other proceedings. The address to which a copy of
such process shall be mailed by the Secretary of State of the State of
Delaware is: 3611 Market Street, Philadelphia, PA 19104.
(REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
IN WITNESS WHEREOF, UGM has caused this Certificate of
Merger to be duly executed in its corporate name as of the day and year first
above written.
UGM LABORATORY, INC.
By:
--------------------------------
Name:
Title:
(SIGNATURE PAGE TO CERTIFICATE OF MERGER)
<PAGE>
EXHIBIT B
ASSIGNMENT
B-1
<PAGE>
INTELLECTUAL PROPERTY ASSIGNMENT
THIS ASSIGNMENT ("Assignment") is made as of September _____, 1999 by
and between ____________________________________ ("Assignor"), and UGM
Laboratory, Inc. ("UGM Labs").
RECITALS
WHEREAS, Assignor has agreed in that certain Consultant Agreement dated
____________, ____, ______ between Assignor and UGM Labs to assign to UGM Labs,
all Assignor's right, title and interest to certain inventions and other
intellectual property rights specified therein, including patent applications
and registrations, and rights to apply therefor, and know-how; and
WHEREAS, Assignor desires to assign to UGM Labs certain of such
intellectual property rights which Assignor has assisted in the development of
pursuant to such Consulting Agreement and wishes to transfer all proprietary
rights thereto to UGM Labs, and UGM Labs wishes to obtain these proprietary
rights;
NOW THEREFORE, for the consideration referred to above, the parties
agree as follows:
1. DEFINITION OF INTELLECTUAL PROPERTY. "Intellectual Property"
shall mean any and all technologies, procedures, processes, designs,
inventions, discoveries, know-how, show-how and works of authorship, and
documentation thereof, conceived, solely, or jointly with others in
performance of or as a direct result of Assignor's activities under the
Consultant Agreement or within _____ (___) years after the termination of
Assignor's consulting relationship with UGM Labs if based on UGM Labs
confidential information. "Intellectual Property" includes, without
limitation, all (i) issued United States and foreign patents, utility models
and the like, and applications therefor pending before any relevant authority
worldwide, including any additions, continuations, continuations-in-part,
divisionals, reisssues, renewals or extensions based thereon; (ii) copyrights
and other rights in works of authorship; (iii) mask works rights, (iv) trade
secrets; and (v) any other intellectual property rights in existence at the
date of this Assignment.
2. ASSIGNMENT. Assignor hereby irrevocably assigns and transfers to
UGM Labs any and all right, title and interest in and to the Intellectual
Property, and UGM Labs hereby accept such assignment.
3. WARRANTIES OF TITLE. Assignor warrants to Assignees that (i)
Assignor has not granted any licenses or other rights to the Intellectual
Property to any third party; (ii) Assignor has not granted any liens,
encumbrances, security interests and restrictions on transfer relating to the
Intellectual Property; (iii) to the best of Assignors knowledge the
Intellectual Property does not
1-
<PAGE>
infringe any patent, copyright, trademark, trade secret or other proprietary
right of any third party; and (iv) Assignor is aware of no legal actions,
investigations, claims or proceedings pending or threatened relating to the
Intellectual Property.
4. FURTHER ASSURANCES. On and after the date of this Assignment,
Assignor will, without charge and promptly upon request by UGM Labs, as may
be requested by UGM Labs in order to effect and perfect the assignments and
transfers contained herein or to enable UGM Labs to obtain the full benefits
of this Assignment and the transactions contemplated hereby, (i) deliver to
UGM Labs records, data or other documents relating to the Intellectual
Property that are in Assignor's possession, (ii) execute and deliver
assignments, licenses, consents, documents or further instruments of
transfer, and (iii) take other actions, render other assistance and execute
other documents.
5. CONFIDENTIALITY. All information relating to the Intellectual
Property is confidential information owned by UGM Labs ("Confidential
Information"). Assignor may not use the Confidential Information except for
the benefit of UGM Labs. Assignor will protect the Confidential Information
from disclosure with at least the same degree of care as that which he
accords to his own proprietary information, but in no event with less than
reasonable care. Assignor may not disclose the Confidential Information to
third parties. The foregoing restrictions will not apply to (i) information
that is in the public domain prior to the date hereof or becomes public
hereafter through no fault of Assignor; (ii) information provided to Assignor
by a third party who is not in violation of a duty of confidentiality with
respect to that information; or (iii) information approved for release by
Company. Any breach of these restrictions will cause irreparable harm to UGM
Labs and will entitle UGM Labs to injunctive relief in addition to all
applicable legal remedies.
6. COUNTERPARTS. This Assignment may be executed in separate
counterparts. Each party hereto agrees that he will be bound by his own
facsimile signature and that he accepts the facsimile signature of the other
parties to this Assignment.
7. MISCELLANEOUS. This Assignment will inure to the benefit of and
bind UGM Labs and Assignor and their successors, assigns, heirs and legal
representatives. This Assignment will be governed by the laws of the State of
California without giving effect to that jurisdiction's choice of law
principles. The parties agree that (i) the courts of the State of California
and United States federal courts sitting in the State of California will have
exclusive jurisdiction over any disputes arising under this Assignment and
(ii) they will submit to the jurisdiction of such courts.
ASSIGNOR UGM LABORATORY, INC.
---------------------- -------------------------
---------------------- -------------------------
[PRINTED NAME OF ASSIGNOR]
2-
<PAGE>
EXHIBIT 99.1
PRESS RELEASE DATED SEPTEMBER 14, 1999
ADAC TO ACQUIRE UGM MEDICAL SYSTEMS, INC.
Pioneer in PET Technology Joins the World Leader in Nuclear Medicine
Milpitas, CA and Philadelphia, PA -- September 14, 1999 -- ADAC Laboratories
(Nasdaq: ADAC) and UGM Medical Systems Inc. today announced that ADAC has agreed
to acquire privately-held UGM Medical Systems. The transaction is scheduled to
close next month. Terms were not disclosed.
"We are very pleased that UGM is joining ADAC," said R. Andrew Eckert, chairman
and chief executive officer, ADAC Laboratories. "UGM is a leading developer and
manufacturer of PET equipment and has been an important strategic partner for a
number of years. Our companies co-developed MCDPET-TM-, the first coincidence
detection technology, which enables our nuclear medicine systems to perform PET
imaging. In addition, ADAC is the exclusive distributor of UGM's C-PET-TM-, a
clinically optimized dedicated PET scanner. Together, our two companies have
established a leadership position in the burgeoning market for clinical PET
imaging. By forging an even closer partnership, this acquisition will enable
ADAC to accelerate its product leadership in all areas of PET imaging."
Gerd Muehllehner, Ph.D., founder and president of UGM, said, "The strategic
partnership between our two companies has grown exceptionally close over the
years. ADAC's dominant market position in nuclear medicine guarantees that
customers worldwide will have much broader access to our leading technology."
PET, or positron emission tomography, is an effective imaging technology used to
diagnose and monitor certain cancers, cardiac diseases and brain disorders. It
is an accurate, non-invasive method of determining malignancy and one of the few
such methods available to determine whether a cancer has metastasized or spread
beyond the original tumor site. Despite years of compelling clinical research,
PET scans have begun to find broader clinical acceptance only in the past few
years.
According to Frost & Sullivan, worldwide sales of PET scanners reached $86.4
million in 1998 and are expected to reach more than $135 million in 2000. Based
on Department of Health and Human Services projections of cancer incidence rates
and PET applicability, ADAC believes that the market could exceed $300 million
by 2003.
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Henry N. Wagner, Jr., MD, professor of Radiation Health Sciences, Johns Hopkins
University, and a recognized leader in nuclear medicine and PET, commented: "It
is now widely understood throughout the world that PET technology is critical to
providing diagnostic information about a number of cancers. Nuclear oncology is
now at a stage analogous to nuclear cardiology in the late 1980's and is sure to
achieve the same critical role nuclear cardiology plays today in patient
management." Professor Wagner added: "Gerd Muehllehner, a world-renowned leader
in diagnostic imaging, has made an important contribution to the field by
increasing the performance of UGM's PET scanner while greatly reducing its cost.
Having Dr. Muehllehner and his team as an integral part of ADAC represents an
important advance in PET imaging in particular and healthcare in general."
Historically, the cost of PET scanners and the lack of Medicare reimbursement
for their use in diagnosing most diseases limited the size of the market. ADAC
has been instrumental in driving market growth through its introduction of
innovative, lower cost PET solutions. Recent clinical research demonstrating the
cost-effectiveness of PET imaging is fueling reimbursement. Since the beginning
of 1998, the Health Care Financing Administration (HCFA) has authorized Medicare
reimbursement for PET scans in lung cancer, colorectal cancer, Hodgkins and
non-Hodgkins lymphomas, and melanoma. Breast, head-and-neck and other cancers,
as well as Alzheimer's disease and other cardiovascular and brain disorders, are
currently under HCFA review.
"We anticipate significant growth in the clinical use of PET imaging in the
United States as a result of HCFA's recent decisions to expand reimbursement
coverage," said Mr. Eckert. "HCFA leadership is clearly focused on the needs of
patients and has demonstrated a willingness to consider the favorable new data
that continues to emerge. ADAC is exceptionally well positioned to serve all
segments of the PET market as additional applications emerge. This is our
company's largest acquisition and it positions ADAC very well in what may be the
most rapidly growing segment of diagnostic imaging."
UGM Medical Systems, based in Philadelphia, was founded in 1983, and is
dedicated to designing and manufacturing PET scanners and instrumentation
tailored to clinical use.
ADAC Laboratories is the world market share leader in nuclear medicine and
radiation therapy planning systems and a technology leader in providing hospital
information systems, Picture Archiving Communications Systems (PACS) and
clinical workflow solutions in North America. ADAC is headquartered in Milpitas,
California with its HealthCare Information Systems Division based in Houston,
Texas.
This news release contains forward-looking statements, including statements
concerning the future market for PET systems, the Company's product leadership,
the benefits of the acquisition and the timing of the acquisition, which is
subject to the satisfaction of certain conditions. Factors that could materially
undermine such forward-looking statements include, but are not limited to, the
existence
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of significant competition in the PET market; risks related to obtaining and
maintaining Medicare and third party payor reimbursement; risks related to
acquisitions, including the inability to close the transaction, difficulties
in successfully integrating UGM and retaining key personnel, risks arising
from known and unknown liabilities of UGM; and risks related to intellectual
property, including the Company's continued ability to operate without
infringing the proprietary rights of third parties. Further information on
these and other factors is provided in the "Business Considerations" section
of the Company's most recent Form 10-K for the fiscal year ended September
27, 1998, including subsections headed "Competition", "Risks Related to
Acquisitions", "Health Care Reform, Reimbursement and Pricing Pressure", and
"Intellectual Property Rights". All forward-looking statements are based on
information available to the Company on the date hereof, and the Company
assumes no obligation to update such statements.
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